Banco Bilbao Vizcaya Argentaria, S.A. (BBVA) Presents at Bank of America 30th Annual Financials CEO Conference 2025 Transcript

BBVA CEO Onur Genç reiterated the bank's target of 22% average Return on Tangible Equity (RoTE) for 2025-2028, underpinned by a strong track record and structural advantages in diversified, high-growth markets like Mexico and Turkey, and significant digitalization. The bank anticipates generating EUR 48 billion in profits over the next four years, allocating EUR 13 billion for growth and EUR 36 billion for shareholder returns. Genç further defended the Sabadell tender offer, citing EUR 900 million in annual synergies and a 42% premium, while clarifying that government conditions do not impede the long-term value creation for shareholders.

Analysis

BBVA's management has presented a highly confident outlook for its 2025-2028 strategic plan, targeting an average Return on Tangible Equity (RoTE) of 22%. This guidance is anchored by a strong track record, having delivered a 20% RoTE in the prior 2021-2024 cycle, which positioned the bank as a leader in both profitability and growth among its 15 largest European peers. The plan projects the generation of EUR 49 billion in capital, primarily from EUR 48 billion in profits, which will fund EUR 13 billion in growth and a substantial EUR 36 billion in shareholder distributions. This financial strength is attributed to structural advantages, including a diversified footprint in low-leverage, high-growth countries and leading market positions, most notably in Mexico. The Mexico franchise, contributing circa 60% of group profits, is seen as a sustainable high-performer with a 27% RoE, well above the local industry average of 16%, supported by a positive macro outlook and near-shoring tailwinds. Further upside is anticipated from Turkey, where economic policy normalization is expected to remove the drag from hyperinflationary accounting by 2028 and unlock profit potential of EUR 2-3 billion annually.

The ongoing hostile tender offer for Banco Sabadell is framed as a significant, synergistic opportunity. Management highlights the industrial logic of in-market consolidation, estimating EUR 900 million in annual pre-tax synergies and justifying the 42% premium offered as superior to recent European bank M&A. The CEO directly addressed concerns, arguing BBVA's diversified model has historically produced superior tangible book value growth than Sabadell's. While Spanish government conditions impose a three-year prohibition on a full merger, management does not view this as a material impediment to the deal's long-term value, with synergy realization now planned to commence in 2029. The core thesis is that the combined entity's scale and efficiency gains will create significant intrinsic value for shareholders of both banks, with Sabadell shareholders specifically offered a 25% EPS accretion.

Key Decisions for Investors

• Investors should evaluate BBVA's standalone value based on its clear strategy to generate a 22% average RoTE and distribute EUR 36 billion to shareholders over the next four years, supported by robust performance in its core Mexico franchise.
• The Sabadell tender offer represents a major potential catalyst, promising EUR 900 million in annual synergies, but investors must weigh this against the delayed realization timeline to 2029 and the execution risks inherent in a hostile transaction.
• Closely monitor the macroeconomic and political developments in Mexico, specifically the USMCA renewal, as the country accounts for approximately 60% of group profit and is central to the bank's growth and profitability targets.
• Factor in the significant optionality from the normalization of Turkey's economy, as a successful transition away from hyperinflationary accounting could unlock an additional EUR 2-3 billion in annual profits, providing a material boost to future earnings.