Banco Bilbao Vizcaya Argentaria S.A.

Good morning. Buenos dias. Thank you very much for your interest. I'm joined today by Onur Ghent, our CEO, and Rafael Salinas, BBVA CFO. As in previous quarters, Onur will start reviewing the group figures, and then Rafa will go through the business units. Then we will move to the live Q&A session. And now I will turn it over to Onur.

Thank you, Patricia. Good morning to everyone. Welcome and thank you for joining our 2022 results audio webcast. I hope you have had a great start to the year. So let me just jump into it. Slide number three. So I'll start with that page by highlighting the outstanding results of the year. First, in going through the lines of the page, we have made significant progress in the execution of our strategy, focused on profitable growth. We are accelerating our profitable growth. At the same time, we are leading the digital and the sustainability space. We have ended the year having acquired more than 11 million gross new active clients, a new all-time record. 78% of our unit sales have been done digitally, another all-time high. And we are also at the front line of the industry in terms of sustainability. In 2022, we channeled 50 billion euros in sustainable business, again, another record. Second line, we have achieved the highest annual net attributable profit ever, 6.6 billion euros, an increase of 31% versus 2021, which represents also a 48% increase in our earnings per share. Third, we continue delivering on our commitment to profitable growth and value creation for our shareholders with return on tangible equity of 15.3% and an exceptional 19.5% increase of tangible book value per share plus dividends. All of this, obviously, is allowing us to significantly increase the distributions to our shareholders for a total amount of 3 billion euros, which is equivalent to 50 euro cents per share, while at the same time, our CET1 ratio continues comfortably, very comfortably, above our target of 11.5 to 12%, as you know, our target. These highlights are what I would be expanding upon in the coming pages, but just to reiterate, the common theme of all the numbers in this page is that we are growing, and we are growing in a profitable way. Moving to slide number four, new customer acquisition. So our relentless focus on this, growing our franchise, the healthiest way to grow our business. Our focus on this has allowed us to acquire 11.2 million gross new active clients in 2022, more than doubling the client acquisition that we had five years ago. And this has also allowed us to reach, at the bottom of the page, to reach more than 67 million active clients in stock in 2022. Additionally, the share of those acquired through digital channels has also increased from 7% as you see on the page in 2017 to 55% in 2022. This 55% we do think it's a clear differentiator versus most of our competitors out there. Moving to slide number five, our leadership in digital. It has also proven to be essential and differential, again, in serving our customer base. Let me again put some figures to this on the left-hand side of the page. You see that we have almost 50 million mobile customers, a figure almost three times higher than 2017, and the record 70% penetration rate of mobile. And at the same time, our digital sales, as I mentioned, it has reached 78% in terms of units and 61% in terms of value. This leadership in digital obviously translates into higher client satisfaction. As you can see on the right-hand side of the slide, the Net Promoter Score, it continues improving in the group with clear leadership positions across the main countries of the footprint, as you can again see on the page. And in the last year, we have improved our customer satisfaction by five percentage points, which is very strong. Slide number six, the other piece of our strategy that we put a lot of energy, a lot of effort on, sustainability. We are also, in our view, trendsetters in sustainability. We maintain the top-ranked European bank position in Dow Jones Sustainability Index. This is the third year in a row. And as you can see on the left-hand side of the page, we have set clear targets in our goal of achieving net zero by setting decarbonization targets in the key CO2-intensive industries. And we are very serious about this. How to achieve these goals? How to achieve these alignment goals? Obviously, by accompanying our clients in the process and supporting them with investments for decarbonization as such. We do think sustainability is also a great business opportunity. And again, as you see on the page, in 2022, we channeled more than 50 billion euros in sustainable business, totaling 136 billion cumulative since 2018. And we remain aligned with our increased target of channeling cumulative 300 billion euros to sustainability by 2025. Then, page number seven. I'm going to walk you through, starting from this page, through the financials. 2022, obviously, it has been a great year. We delivered the highest annual recurrent and reported in both of them profits ever of our history. So we are very happy with that result. In the bars at the center of the slide, you can see the upward evolution of our annual results. So beyond the fact that it's the highest, the trend that you see in this page, in my view, is impressive. 2022, €6.6 billion of recurring profits, 31% higher than the €5.1 billion that we recorded in 2021, which was already, again, an exceptional level. And these results, it brings our earnings per share up to €1.05, with an increase of 48% year-over-year, obviously significantly higher than the growth of the profit, thanks to the share buyback that we have been executing in 2022. And lastly, let me note that for comparison purposes, all these figures, they exclude the non-recurring impacts reported on those respective years. But in any case, if you want to see them, we put those reported figures at the bottom of the page as well. And again, even on those numbers, we are posting our best ever reported profit. Slide number eight, our tangible book value per share plus dividends, it continue the outstanding evolution, closing at 779, a 19.5% increase year over year. I believe in this presentation we have a lot of impressive figures, but this growth, 19.5% growth in tangible book value per share plus dividends, it is one of the most impressive figures, in my view, in the presentation. And regarding profitability, on the right-hand side of the page, we continue to improve our excellent profitability metrics, reaching 14.6% in return on equity and 15.3% in ROTE. With these numbers, we believe at the end of the nine months, we have also compared it, but we believe we are still one of the most profitable European banks out there. In fact, again, the highest ROE bank in Europe among the 15 largest European banks. at the end of the third quarter. And we keep advancing. We keep advancing on these metrics. Slide number nine. I do think it's an important one. In managing our business, we always compare ourselves in every single geography, in every single business, to competition. Competitive success is what we are after. So how do our numbers at the group level, how do they compare with competition? So on slide number nine, we wanted to highlight, again, the exceptional comparative performance of our profitability and efficiency metrics. So on the left-hand side of the slide, our tangible book value per share plus dividends growth of 19.5% that I just explained, it compares with the 3.8% for the average of the peer group. And then peer group, you have it in the footnote, it's the largest 15 European banks. In the center of the slide, our mid-teens ROTE of 15.3, again, compares very favorably with the 7.4% for the peer group. And lastly, on the right-hand side, one of the key elements of our success in our view are strong efficiency levels. It stands out at 43.2% versus the 62.8% of our peers. So comparatively, also, we are creating a very good picture, as you can see on this page. Slide number 10, in terms of the details of the financials, I'm going to go very quickly from these and maybe just the headlines, as we are going to be looking into them in the next few pages. But the summary of the P&L and the financials and the results is, first, outstanding core revenues and activity growth, number one. Second, in the page, our improving and industry-leading efficiency ratio, as we just discussed. Third, highest annual operating income ever also. Fourth, very solid asset quality metrics with cost of risk clearly aligned with our guidance. And lastly, our strong capital position, very comfortably above our target range. So let's just jump into them. Slide number 11. Looking at the summarized P&L of the year, again, there are many numbers in this page, but I would like to highlight the excellent evolution of gross and operating income, improving 22.9% and 29.2% respectively, driven by strong core revenues evolution and positive jaws in the case of operating income. So very positive growth figures. Also in this page, it's important to note the evolution of impairments, very good evolution of impairments, with asset quality remaining solid in this profitable growth context. Slide number 12, you have the quarterly P&L. Year-over-year comparisons, the second column from the left is the year-over. What stands out is the impressive 47.5% increase in operating income, again driven by the strong core revenues and positive jobs, which then leads to an excellent net attributable profit growth of 29.8%. In terms of the quarterly evolution, which is the second to last column in the table on the right, Gross income and operating income, they increased 6.6% and 4.2% respectively versus the third quarter, despite, obviously, as you know, being negatively affected by the once-in-a-year deposit guarantee fund contribution in Spain. We do it at the fourth quarter, as you know. And given that, the quarterly comparisons at the revenue numbers is a bit misleading. But even with that, we have grown our revenues. All in all, fourth quarter 2022 reported NAP net attributable profit is 1,578,000,000 euros, as you see on the page. Slide number 13, there are too many numbers on this one, but as I said, one of the clear highlights of the year and of the quarter has been revenues. I don't want to dwell too much on the page on the details, but please, please do register the excellent trend in the revenues. I mean, the trend curve, for example, net interest income, quarter after quarter, quarter after quarter, we are increasing our revenues and we are breaking new revenue records, which I think is, again, very positive. Page number 14, let me do a quick deep dive on the net interest income growth, especially Spain and Mexico, so that you can also see why we continue to be quite optimistic for the quarters to come in 2023. So there are some signals of the future in this page for you. On the left-hand side of the slide, you can see the strong long growth for the group, which has accelerated, obviously, since last year. So 13.3% versus the 5.6%. of 2021, so very good growth in activity. And in the center of the slide, you can see the improvement in the customer spreads for Spain and for Mexico, our two core geographies. In the case of Spain, it has strongly picked up during fourth quarter to 221, Following, obviously, the recent increase in the interest rates, we have been telling you that it takes a bit of time in Spain to reflect the higher rates into the spreads. And that's clearly happening in Spain. And again, there is more to come. And for Mexico, again, in the center of the slide, interest rates have been increasing for several quarters. Lending yields and customer spreads, they have a longer track record of an increase in a very consistent manner. So you also see a very positive curve trend-wise. Quarter after quarter, there is an improvement in that number. As a result of all of this, obviously on the right-hand side of the slide, you can see the strong NII growth, both quarter-over-quarter and also year-over-year in both countries. 26% in Spain, 35% in Mexico in constant euros, and quarter-over-quarter numbers, 17% in Spain and 8.5% in Mexico. Very positive figures. Slide number 15 is around costs and the jaws. On this page, I would highlight the fact that once again, we end the year with positive jaws, with gross income growing obviously more than the costs. Costs are growing 15.5%. That also remains well below the blended inflation rate in our footprint. So as a result of all of this, you can see our efficiency ratio, the best among our European peers, further improving to 43.2% from the 46 levels of last year. Slide number 16, asset quality. It remains solid in this growing context. First of all, MPL ratio on the right at the bottom of the page. It continues to improve MPL, including the effect of a debt sale that we did in Spain in the fourth quarter, and also due to very good underlying performance of the portfolios. In this context, impairments increased in the quarter due to higher requirements from the macro models updates. I mean, as you do every quarter, we do the macro updates. and also as a consequence of cautiously setting additional provisions in certain portfolios, sectors more vulnerable to the macro situation, leading to this quarterly increase, but still resulting in a cost of risk of 91 basis points, which is within guidance and obviously below pre-COVID levels. Our coverage ratio, the other key number on the page, decreases slightly to 81%. This is, again, partially due to the aforementioned debt sale that we did in Spain in the fourth quarter. It was a highly provisioned sale and highly provisioned book that we sold. As a result, it had this impact, obviously, in the number. A part of the decrease is explained by this. Slide number 17, as we have repeatedly stated, we have a clear focus on value creation for our shareholders, which guides all of our decisions. In this regard, and in line with our payout policy, I'm quite happy to announce that the proposal to be sent to the next annual general meeting contemplates the distribution of a total amount of 3 billion euros for 2022. This payout is equivalent to a total shareholder remuneration of 50 cents per share, and it's split among a total cash dividend of 43. which is 39% higher than last year in terms of the cash dividend, which again also implies that 31 euro cents to be paid in April 2023, subject to the approval of the annual general meeting, obviously, and complementing the 12 euro cents per share cash dividend that we have already distributed back in October. In addition to this cash dividend of 43 cents per share, we will be proposing a new share buyback program of 422 million euros, equivalent to 1.1% of BBVA's market cap. I mean, we have been growing. We have been growing profitably. We have been generating capital organically. And as we have been saying consistently in the past few years, we are determined and clearly dedicated to share that profitable growth with our shareholders in terms of higher remuneration. As you can see here, you are seeing clear growth in the remuneration to our shareholders. Slide number 18, our capital, our CT1 fully loaded as of December 22, remains at a very strong level of 1261. Needless to say, again, much above, comfortably above our target range of 11.5 to 12%. In terms of the change in the quarter following the waterfall, main impacts. First, Obviously, our strong results generation that contributes 47 basis points to the ratio. Second, the dividend and the 81s, it detracts 20 basis points. And then the third, 25 basis points due to a relatively contained RWA's growth. and lost the bucket of others of 14 basis points it's positive positively impacted by in the quarter by the market related impacts and especially by the credit in the ocs due to hyperinflation and these positives are more than absorbing around 20 basis points negative impact due to the final batch of so-called regulatory impacts model updates and others for the year so we have compensated for the 20 basis points impact and as you if you remember we have done a 10 basis points throughout the year in 2022 so the 30 basis points impact of regulation and model updates is basically already incorporated into our capital figures in january 2023 The second box, second bar from the right, we have a relevant positive one-off due to a release generated by the reversal of the MPL backstop deduction for 19 basis points, which would increase our CT1 ratio to 12, 80% pro forma. So you see that pro forma number also on the page. At this point and in a full year view, let me stress that once again our ability to generate organic capital is impressive in my view. It has allowed us to keep financing the desired profitable growth. We have grown a lot in the year. It has allowed us to remunerate our shareholders with an increasing momentum. And we still ended up the year with a year-end CET1 ratio well above the upper part of our target range. It all goes back to the profitable growth mandate that we have had and that we have been sharing with you. And page number 19, I'm not going to go into it, but basically is telling us that all the long-term targets that we announced in the investor's day in November 2021, we are clearly in line to meet those goals. And now for the business update for the countries also, Rafa, I turn it to you.

Thank you, Honor. Good morning, everyone. As Sonu said, we are very happy to present outstanding results for the year 2022. I would like to highlight the excellent management and very positive contribution from all the franchises, focus on delivering on our commitments and to exceed the objectives set at the beginning of the year. We will now comment on the performance of our main franchises in the last quarter and will provide our guidance for 2023. Let me begin with Spain, slide number 21. Some business trends and strong result evolution continue in the fourth quarter, closing up an excellent year. A positive loan growth with significant market share gain in the year, both in consumer lending, 140 basis points, and in commercial, 76 basis points, continue shaping up a more profitable lending mix. That translates into very solid dynamics in terms of P&L. Pre-provision profit hits double-digit growth in 22, above 13%. The main driver here is the NII, which clearly accelerated in the fourth quarter, reaching high single-digit growth year-on-year above expectation. Interest rate increases are positively supporting the NII and more is expected to come in the following quarters, as you will see in our guidance. Despite the positive growth in banking services and insurance fees, total commissions are affected by lower asset management fees due to market evolution. Expenses decreased by 4.1% year-on-year, a figure that shows our cost-control commitment in a context of higher inflation and growth in activity. All in, significant improvement in our efficiency ratio to 47.5% in 2022 from the 51.7% last year. On the asset quality side, the cost of rates improved to 28 basis points in 2022, driven by solid underlying asset quality trends throughout the year, while higher impairments in the last quarter, as Onur mentioned, are mainly related to the macro scenario update and additional adjustment in certain portfolios after updating our level of conservatism in the models. To sum up, very strong results reaching close to $1.9 billion on a recurrent basis. For 2023, we expect similar positive dynamics. NII trend should accelerate further as a higher percentage of the portfolio resets its rates. In this context, we are updating our 2023 NII guidance to grow at low 20s, and fees will slightly grow subject to market volatility. After six years in a row of continued cost cutting in Spain, we are expecting expenses to increase around mid-single digit in 2023, while efficiency will continue to improve. Our expectation for the cost of risk in Spain is to stand around 35 basis points in 2023, slightly higher in the new economic scenario, but a manageable increase taking into consideration the strong provision effort done during the pandemic, the degree of leverage of the economy, and our prudent new loan origination policies. Slide 22, turning now to Mexico. Once again, we are happy to share with you an outstanding set of results. Strong loan growth in the year, balance among retail and wholesale segments, benefiting from positive economic momentum in the retail segment and higher working capital needs in the commercial segments in an inflationary environment. In terms of P&L, fantastic year in Mexico. The net profit reaches a record figure exceeding 4 billion euros due to an impressive revenue growth close to 26% year-on-year, driven by a strong NII growth, supported by long growth and higher customer stress that has increased 71 basis points during the year, benefiting from an effective repricing of the asset sites, while the cost of deposit remains well-contained. Some performance in fees growing at high teens based on our higher volumes in credit cards and transaction ID and payment services. And a very positive use and improving efficiency to outstanding 31.7% efficiency ratio. And finally, very solid risk metrics, with the cost of risk improving to 247 basis points over the full year, while the NPL ratio continues to decline and the coverage level increases to almost 130%. For 2023, we expect activity dynamism to continue and the loan book to grow a double digit. We see clear opportunities to continue growing in the country, and we are well prepared to take advantage of them. Based on those solid dynamics and an effective price management in a context of higher rates, we are expecting the NII to grow mid-teens in 2023 above loan growth. Expenses will be growing a double digit in 2023, and we will continue investing in the country to reinforce our leadership in all states, products, and segments, but maintaining positive yields. On asset quality, although we expect some potential deterioration in the risk metrics, our sound starting point make us to estimate the cost of risk to stand below 300 basis points in 2023. Slide 23, regarding Turkey in terms of activity, I would like to point out the significant de-dollarization of the balance sheet during the year. The leverage of foreign currency loan continued, where Turkey's lira deposit grew strongly favored by the conversion of foreign currency deposits above the growth of the TL loans book. On the P&L, the net profit in the full year 2022 stands at €509 million, driven by good underlying business trends and a better-than-expected FX evolution. On the quarterly basis, the net profit continued to improve in constant terms in the fourth quarter, driven by the increase in trends in gross income thanks to higher core revenues, NII supported by activity growth in Turkish lira and fee growth mainly for payment service and brokerage, and a lower quarterly hyperinflation adjustment impacted by the depreciation of the Turkish lira during the last month of the quarter. Finally, asset quality trends improved throughout 2022. Progressive decline in the NPL ratio, thanks to the strong recoveries and limited provisions, and a higher recovery level over the year. Financial impairments increased in the quarter due to the macro update, while underlying trends remain sound. The cost of risk stands at 94 basis points for the full year, well-contained. Finally, for 2023, what can we expect going forward? The first is that we will continue to manage the bank following a prudent and anticipatory approach, as we have done since we took control in 2015. Our priority will continue to be to preserve the value of the franchise and its fundamentals, both from the capital and liquidity perspective. Having said this, in a highly uncertain environment, we expect guaranteed BVA to contribute to the P&L in 2022 in line with his contributions in 2022. And finally, in South America, slide 24. The regions maintain a solid performance in terms of revenues. NII growth is the main driver of the P&L in 22, with a strong growth throughout the year supported by sound loan growth and higher rates. A strong performance of fees supported by activity in the advertisements across the board. And despite the inflationary pressure and the increase in cost, efficiency continues to improving to 46.4% ratio at the end of the year. As in the rest of the geographies, growth indicators remain sound, with NPL and coverage improving in the year, and cost of REITs remained broadly flat at 170 basis points in 2022. All in, net profits in the region exceeded €700 million in the year, more than 80% as compared with last year's results. for 2023 our guidance we expect the cost of risk to be below 200 basis points in the region and we expect the efficiency to improve align with our long-term targets and now back to you honor for the highlights on my takeaways