Banco Bilbao Vizcaya Argentaria S.A.

Hello everyone and welcome to BBVA's second quarter research presentation. Joining me today are our CEO, Onur Genc, and the group CFO, Luisa Gomez Bravo. As in previous quarters, Onur and Luisa will begin by reviewing the quarterly figures, after which we will open the line for the live Q&A session. With that, I turn it over to Onur.

Thank you, Patricia. Good morning to everyone. Welcome and thank you for joining BBVA's second quarter 2026 earnings webcast. Before we begin, I would like to say a few words about Luisa, as this is her last results presentation as the CFO of BBVA. and in very short few sentences. We are a 169 year old bank. 169 year old bank built by generations of exceptional professionals in my view. Exceptional professionals like you, Luisa. And over the past few years, We have delivered some of the best results in our history and I would like to recognize the fact that you have been one of the architects of that success. So I'm very pleased that you will continue to be connected to the bank as a board member of some of our most important subsidiaries so that we can continue to benefit from your experience and judgment. So, in short, Luisa, thank you for your leadership, your professionalism, everything you have done for this institution. It has been a true, true privilege to work with you. Now let me start with the quarterly results. In short, once again, we have demonstrated, in my view, the strength of BBVA's business model. We have delivered record earnings, industry-leading profitability, strong activity growth, exceptional activity growth, and capital generation, while reinforcing our competitive position across different geographies. So let me start with slide number three. One of the most important messages for the quarter, as always, we continue to deliver outstanding value creation for our shareholders. On the left-hand side of the page, you can see the strong evolution of tangible book value per share plus dividends, which increased by 17.3% year-over-year and 5.4% in the quarter. Very strong figures, which are even better if you exclude the impact of the share buybacks, then the growth goes up to 21.8% year-over-year, an outstanding figure. This strong value creation was mainly supported by the record earnings, obviously, together with a positive contribution from the exchange rates in the quarter, particularly the appreciation of the Mexican peso. On the right-hand side of the page are profitability ratios. They have further improved. Reaching a return on tangible equity of 22.2% and a return on equity of 21.1% for the first half of the year, placing BBVA as one of the most profitable large banks in Europe. On page number four, on the left-hand side, another record quarter, as we discussed, in net attributable profit, reaching €3.062 billion. Thank you very much. In cumulative terms, net attributable profit in the bubble, it reached 6 billion 51 million euros in the first half of the year. On the right-hand side, our CET1 capital ratio, it improved seven basis points during the quarter to 1290. Strong results and also SRT transactions more than compensate for the impact of exceptional loan growth and shareholder distributions. Moving to slide number five, this slide illustrates what I believe is BBVA's truly unique profile that we talk about from time to time, but our ability to combine strong growth with best-in-class profitability consistently along the years. On the left-hand side, since December 2020, our loan book, it has grown by 62% in current euros, compared with 10% for our European peers. Thank you very much. And importantly, this growth, we always pay attention to this and we always talk about this, but this growth has not come at the expense of returns. As shown on the right-hand side of the slide, starting at more or less the same initial point with the peers, we have widened the profitability gap versus our peers over the same period. As mentioned before, today our return on tangible equity stands at 22.2%, well above the 15.1% of the peers. Profitable growth is the best predictor of future value creation, and this is precisely what BBVA continues to deliver. Moving to page number six, this page summarizes the key financial messages of the quarter, which I will cover in more detail in the following slides, so let me move directly to the next page. Slide number seven, as usual, the summarized P&L for the quarter. If there is one thing to highlight, I would highlight the excellent performance of the core revenues in both annual and quarterly comparisons, serving as the main drivers behind our net attributable profit growth. Slide number 8, the summarized P&L for the first half of the year. Similar to quarterly evolution, as you can see, our solid revenue and core revenue growth, once again, are the main drivers behind the outstanding 6 billion 51 million euros of net attributable profit, double-digit growth, both in constant and current euros. As usual, some more light into the revenue breakdown on slide number nine. Both components, as I mentioned, the core revenues continue to contribute very positively to our results and in a very consistent manner. We call this chimenea in Spanish, the chimis. So they have been growing very nicely again in a very consistent fashion. So as you can see, net interest income growth remains very strong, increasing by 17.8% year over year, and 2.1% quarter over quarter, supported by very robust activity growth. Net fees and commissions continued their excellent trajectory, up by 16.2% versus the same quarter last year, driven by payments, asset management, and the higher contribution from CIB. Net trading income increased by 13% year over year, yet, as you can see in the page, declined quarter over quarter due to a more normalized contribution from the global markets following the exceptionally strong performance in the first quarter. And also, as you can imagine, we are benefiting in general in a major way from the currencies, but then you get a small hit out of this in the net trading income, so there were some losses from the FX hedges, especially related to the Mexican peso appreciation. All in, gross income is increasing by 15.7% year over year and broadly stable versus the previous quarter. Moving to slide number 10, I like these pages because they give signals about the future as well. So let me focus on activity and long growth, which remain as the key drivers of NAI. Thank you very much. Talking about growth, it's worth mentioning once again that from time to time we highlight this, but we have deployed micro capital planning tools to all of our geographies in the past few years. Using these tools, we maintain, as we grow, a strict profitability discipline around growth by measuring, I'm not sure whether there's any global bank to do it at this level of detail, but we are measuring the return on capital metric on a loan-by-loan basis in any part of the world. So when Peru originates a loan, immediately we see what the return on capital metric on that one is, and we have clear mechanisms to manage that process. But going back to the slide, In Spain, loan growth accelerated to 7.4% year-over-year, while in Mexico it remained close to 10%. In both markets, growth is being driven by the key profitable segments, consumer and credit cards on the retail side. and private enterprises on the wholesale segment. And as shown in the center of the page, the growth for these profitable segments is clearly above the total loan growth. As a result of all of this, net interest income growth in Spain is at 4.5% year-over-year and 8.9% in the case of Mexico at constant euros. Moving to slide number 11. In continuing with the deep dive in Spain and Mexico, this page shows how our growth goes beyond the overall industry growth in a consistent manner once again and gives positive signals for the future. On the left-hand side of the slide, in Spain, we have increased our total loan market share by 84 basis points since the end of 2020. and the improvement as you can see on the page has been even stronger in those key segments that I mentioned with gains of 276 basis points in consumer, 249 basis points in enterprises. And on the right side of the page, BBVA Mexico Thank you very much. Again, this is particularly noteworthy, let me not go through the numbers, but all the key segments we are gaining basically market share. And this is even more important in the context of fintech players in the market. Despite newcomers, despite very aggressive competition, we have continued to improve our market position. Moving to slide number 12, on efficiency, on the left side of the slide, gross income grew by 16.9% year over year in the first half, while expenses increased by 17.9%. But it is important to note that growth rate for expenses, we have discussed about this in the previous quarters, but it is impacted by two non-recurring impacts. The voluntary redundancies implemented in the first quarter, especially in Spain and the holding. The effect was mainly in those two areas. And then the extraordinary VAT regularization booked last year in the second quarter and a remaining amount this quarter also. Excluding these effects, you see it in the bubble, cost growth rate would have been 14.5%. Again, maintaining our positive jobs, which is important to us. On the right side of the slide, our efficiency ratio stood at 37.8%, clearly better than our guidance for the year. And excluding the mentioned non-recurring effects, the two of them, the VAT and the redundancies, the ratio actually would have improved by 77 basis points in the first half. In short, we continue to deliver industry-leading efficiency ratio while investing on growth and transformation. Turning to slide number 13, asset quality. Asset quality metrics, they remain very sound during the quarter, despite the context of macro uncertainty, strong activity growth, especially, as I mentioned, in the most profitable segments. Despite all that, very sound asset quality metrics. Starting with the cost of risk on the bottom left, it stood at 143 basis points for the first half of the year, improving from 154 basis points in the last quarter. This improvement was supported partially by a portfolio sale that we did in Spain, but overall underlying provisioning requirements remained broadly stable, even better than expectations in most geographies, except for retail portfolios in Turkey and in Argentina. And even in those situations, we see some elevated levels, but some contained stable levels. Looking ahead, based on the underlying trends, we expect cost of risk to remain around current levels at the end of the year. And on the bottom right, very quickly, our MPL ratio and the coverage ratio, they remained broadly stable year to date. Slide 14, the next page, on capital, we have generated seven basis points of CET1 during the quarter, driving the ratio to 1290, increasing the room for further capital remuneration. First on the left side, following the waterfall, main impacts of the quarter, strong results, 75 basis points. Dividend accrual and AT1 coupons minus 40 basis points, then minus 41 basis points due to the RWA's growth. This figure also includes the result of the several risk transfer transactions, SRTs, which positively contributed six basis points to the ratio in the quarter. Then we have a bucket of others on the page in the waterfall of 13 basis points, which comprises, among others, the market-related impacts and the credit in OC for the hyperinflationary countries. On shareholder remuneration, on the right-hand side, I want to highlight that we will be completing the 4 billion euro share buyback program approved at the end of last year in December in the next few days. We'll be finalizing the whole program in the next few days. August 3rd is the final date. and thanks to the strong results that we are presenting today and our solid capital position, we are announcing today the launch of a new 2 billion euro extraordinary share buyback program with the first tranche amounting to 1 billion euros which will begin on the 5th of August. Page 15, let me update you on the advances in the execution of our AI transformation strategy. Again, at BBVA, our DNA, it has innovation and transformation written all over it, and we are determined to lead the AI transformation in banking as we did in our view in digital transformation. On that path, the first step was to promote the adoption of artificial intelligence tools across the organization. Today, these tools are part of our team's daily work with more than 100,000 teammates already actively using AI within the guidelines obviously established by the bank. Then at the end of last year, you might remember, we introduced the eight, our top-down and bank-wide strategic roadmap on very specific initiatives. to embed artificial intelligence across the group's key areas and functions. And now we are taking the next step with the frame to create, deploy, and manage AI agents at scale. In our view, this is important. This is a key milestone in the industrialization of AI agents across BBVA. It will provide a common framework for governance, architecture, security, and performance measurement of agents, allowing us to accelerate implementation while maintaining rigorous control over risks, over costs and outcomes. We have also reinforced our organizational setup for AI. As you might have seen in the last few weeks, we have brought together the relevant capabilities together under an AI transformation unit represented at the highest level. And we will further provide details on all of this, on our AI strategy and progress, at the next BVA strategic talks, which is scheduled for October the 6th. Finally, moving to page number 16, regarding the evolution of our financial goals for the 2025-2028 period that we shared with you last year. I will not go through each one of them for time, but what I can say is that after 18 months of execution of the strategic plan which we launched in January 2025, in general, we are performing ahead of our original expectations in the key metrics. And now, for the business areas update, I turn it to Luisa.

Thank you, Onur, and thank you very much for your very kind words at the beginning of this presentation. Looking back at over 25 years with the ADA, I am profoundly grateful for the continued learning opportunities and the great people I have worked with. While I didn't anticipate stepping off the train at this particular station, I find myself looking forward with optimism toward the new journeys that lie ahead, including staying connected to the bank, as mentioned by you. Onur, the privilege has been mine. A word I use in its fullest sense to describe the profound respect and admiration I have for you as an exceptional leader, but more so as an amazing person, a unique combination. I also want to extend my heartfelt thanks to everyone on this call, sell-side and buy-side analysts, PMs, rating agencies. Your challenge has been a continuous source of self-improvement, never a dull moment. And before I get too emotional, the show must go on. So let me start with Spain on slide 18, where we delivered another strong quarter. Net profit reached 1.1 billion euros in the second quarter, bringing first half earnings to 2.2 billion, up 2.3% year on year. This performance was underpinned by another solid increase in net interest income, up 4.1% year on year, supported by strong commercial momentum and effective pricing. Thank you very much. Customer spread improved also in the quarter by three basis points, reflecting effective price management in a context of higher rates while maintaining the cost of deposits contained. Turning to fees, commissions increased by 2.2% year-on-year. The decrease you see in the quarter mainly reflected lower CIB-related fees after an exceptional strong first quarter. This was partly offset by continued growth in asset management and a solid contribution from card fees this quarter. Costs remain well under control. Operating expenses increased by 10.3% in the first half of the year, mainly reflecting the one-off items already mentioned by Onur. Excluding the impact of the one-offs, underlying costs increased by 5% year-on-year and 3.8% quarter-on-quarter. Our efficiency ratio remains best-in-class at 33.6%. Asset quality also continued to improve. This quarter, supported by the sale of a mortgage portfolio, the NPL ratio declined further to a new historical low of 2.86%, while coverage increased to 71%. Cost of risk stood at 31 basis points in the first half of the year, fully in line with our low 30s basis points guidance. Overall, Spain delivered another very strong quarter with strong commercial momentum, continued revenue growth, disciplined cost management, and very solid asset quality metrics. Turning to Mexico on slide 19. Once again, BBVA Mexico delivered an excellent quarter. Net attributable profit reached 3 billion in the first half of the year, increasing 8.2% year-on-year and 3.4% quarter-on-quarter in constant euros. Net interest income increased by 2.7% quarter-on-quarter, supported by solid loan growth across both retail and wholesale businesses, and a higher contribution from the ALCA portfolio, which largely offset the customer spread compression in the current easing rate cycle. NIM remains broadly stable both quarter-on-quarter and year-on-year. Fee income continued to perform well, supported by higher activity in asset management, as well as solid performance in credit card and CIB-related fees. Overall, strong gross revenues performance supports an outstanding efficiency ratio of 30.8% while we continue to invest in future growth. As equality remained also very sound, impairments declined during the quarter supported by solid underlying credit trends along with a small positive one-off impact. As a result, cost of risk improved to 326 basis points. Based on this performance, we now expect the cost of risk to the end of the year below 335 basis points ahead of our initial expectations. Overall, Mexico continues to deliver a very strong performance. Based on this performance, we are upgrading our full-year guidance. We now expect loan growth of around 10%, net interest income growth at high single-digit, and cost of risk, as I mentioned before, to end below 335 basis points. Moving now to Turkey on slide 20. BBVA Turkey delivered resilient results in the second quarter, supported by strong fees and lower impairments. Net profit reached €269 million. First half earnings reached €532 million. Looking first at revenues, net interest income declined on a quarterly basis, mainly reflecting a significantly tighter TL customer spread as funding costs remained elevated. This was partly offset by strong growth in fees and commissions supported by continued business activity, particularly in payment systems. The other income line benefited from a stronger contribution from the insurance business, while the hyperinflation adjustment remained broadly stable quarter on quarter. Turning to asset quality, cost of risk stood at 236 basis points year-to-date, reflecting still elevated provisioning needs in the retail portfolio, as Onur mentioned, in a higher-for-longer interest rate environment. Underlying asset quality trends remain broadly in line with our expectations. However, the normalization of the retail portfolio is taking longer than previously expected due to the current macro environment. As a result, we are updating our full year cost of risk guidance to around 220 basis points with an expected better second half of the year, but still above our previous guidance of 200 basis points. Let's turn now to South America on slide 21. The region delivered another very strong quarter. Net attributable profit reached 308 million in current euros. First half earnings totaled 556 million euros, up 33.6% year-on-year in current euros. Thank you very much. Strong revenue growth of 21.6% year-on-year continued to translate into solid positive jobs, driving the efficiency ratio down to 41.5% in the first half of the year. Thank you very much. Overall, the region is performing ahead of our expectations. As a result, we are upgrading our four-year guidance for gross revenues to grow at high teens. And finally, let me turn to the rest of business on slide 22. The rest of business delivered another strong quarter, with net attributable profit reaching 271 million, increasing by 14.5% quarter over quarter. First half earnings amounted to 508 million euros. Thank you very much. On costs, operating expenses continue to reflect ongoing investment to support future growth. At the same time, we continue to deliver positive jobs on a year on year basis. Asset quality remained very strong. The NPL ratio increased, driven by some specific clients migrating to Stage 3, which had already been largely provisioned in the first quarter. Costs of risk declined to 14 basis points in the first half. Overall, the rest of business continues to deliver strong profitable growth, supported by strong commercial momentum. Taken together, our business units delivered another excellent set of results, a reflection of the strength and resilience of our franchises across all our core markets. And now, back to Onur for the final remarks on the quarter.