Banco Bilbao Vizcaya Argentaria, S.A. ($BBVA)

So good morning, and thank you for joining this session with BBVA. We are really delighted to have Luisa Gomez Bravo here this morning. She's CFO of BBVA, a role that she has held since 2023. Luisa joined BBVA more than 2 decades ago, and she has had several leadership positions within BBVA, including the Global Head of CIB.

So maybe with that, we just start with the first question around your strategy. So you had a return on tangible equity at almost 22% in the first quarter of '26. You target EUR 48 billion of net income between 2025 and '28. So maybe if you could just talk about the levers that will allow BBVA to sustain an average return on tangible equity of around 22%. And how do you kind of think about the potential upside risk to your targets? And what would kind of potentially drive any upgrades to your medium-term targets?

Okay. Well, thank you very much, Sofie, for your questions and for having me here in the conference. First of all, maybe let me start by saying that we are very confident in the trends that we're seeing in terms of our performance, and we feel very committed to being able to deliver on our midterm goals, as you mentioned, the 22% average RoTE at the end of '28 for the 4 years. And we're seeing, as you mentioned, good performance, obviously, on the back of 2025, but also a very strong performance in the first quarter, which allowed us to increase our guidance in terms of profitability for the year from the circa 22%, above 20%, which is, I think, also relevant considering the uncertain scenarios that we live in. So we definitely think that the sustainability of the bank's profitability is there. But maybe going underneath that and how do we foresee or see that sustainability RoTE going forward. I think it's basically on the back of several -- 4 levers that are structural, I think, for BBVA. The first one has to do with activity growth. So we've always mentioned that BBVA is a growth bank. We grew our activity in the first quarter of the year by 17% year-on-year in constant terms, 15.5% in currency terms. So definitely, that versus European peers, which grew their books around 5%, 6%, is definitely something quite significant in terms of supporting profitability. But we have always also been very disciplined in terms of where we are growing. And as you know, we favor those portfolios where we see that there's more advantages in terms of risk-reward profiles like the SME businesses or some retail portfolios as we continue to be very disciplined in terms of growth. So we obviously look at profitable growth going forward, and we are seeing good dynamics overall, not just in the first quarter, but also what we're seeing today. So I think that's going to be a very relevant, I would say, the key relevant item in terms of sustainability is activity growth for BBVA. The second thing that I think is relevant is that going forward, we also see margins becoming more resilient. As you know, in our core markets like Spain and Mexico, even this year, 2026 could be considered somewhat of a transition year because we are still expecting that overall, the average customer spread this year versus last year, it will still be lower. So activity growth is compensating part of that still compression in margins on average. But what we're seeing going forward, again, with our rate environment and purview is that, that margin is going to be stabilizing. And therefore, going forward, we will see that activity growth flowing directly into revenues much better. So the second thing is the resilience and stability of margins going forward will be supportive of continued growth. I would say that the third thing that we're focusing a lot on is diversifying our revenue sources. We've been very vocal in our latest strategic plan in making sure that we prioritize fee-generating and capital-light businesses. We've seen that already in the first quarter already from last year, where we've seen growth in fees coming from CIB, from payments. I think asset management and insurance are 2 areas where I think that we do have untapped potential. And we're putting a lot of focus, management focus on developing these areas in order to diversify those revenues. And fourth lever, which I think is at the core also of the DNA of BBVA is operational excellence. As you know, we are one of the banks that has the best efficiency ratio amongst European players, below 38% this year. We've guided in our midterm goals for that 35% goal, which is for a bank our scale and our size, I think, quite significant. And we are committed to delivering that cost-to-income ratio on the back of operational leverage. So that means that it's not just about being disciplined on costs. Really, it's about investing, continue to invest to ensure that we have the right leverage. We focus a lot on positive jaws structurally when we look at our businesses and how we prioritize capital and investments. And this is part of the way we allocate resources to investments is ensuring that they are going to be delivering operational leverage going forward. So I think that, that is, in conclusion, the supporting evidence regarding the sustainability of the RoTE going forward. And I think with regards to the guidance, as you know, we haven't changed the guidance, neither on the midterm goals. We had a macro view last year when we delivered our guidance. Despite the uncertainty that we're seeing on the macro side today, and it's still uncertain today because it's still not fully resolved, I would say, we do continue to be confident in being able to achieve those midterm goals.

Excellent. And you touched on the operational excellence. And BBVA has also been one of the kind of banks talking the longest potentially about kind of technology and digitalization. So can you maybe just talk a little bit about your AI and what your kind of priorities here are when it comes to AI? And how do you plan to scale these gains across the organization? And should we see, in the medium term, any tangible benefits to your cost base from AI? And also maybe longer term, how should we think about the 35% cost-to-income ratio? Can it go any down?

It's like a 5-minute AI topic. So we do believe that AI is going to be very disruptive for banking, but in a positive way. We think that it is going to be really truly an engine of innovation and better value for our customers. And we obviously do believe that it's going to be a source of significant value for our shareholders as well. So we think the disruption from AI in banking is going to be very big. I think nobody now has any doubts that it is going to be disruptive. The question is how deep and how fast it will be and how quickly you can adapt to this AI transformation. And in this regard, we have really a positive view about AI, because we do believe that it is going to be significantly better for our customers. We think that banking clients are going to benefit significantly from the AI disruption, because you're going to be able to deliver a better understanding of the clients, going to be able to anticipate better their needs, personalize better the offer that you have. And actually, going forward, looking ahead, you're going to have an intelligent financial assistant embedded in your life, allowing you to make better decisions regarding money and regarding your life choices. So I think the future is, in that regard, very positive for banking. And the question, to your point, is who will win in this transformation. And with a lot of humility on our side, we do believe that BBVA is going to be one of the winners in the AI transformation. We do think that AI is going to be really a critical lever enabling us to strengthen our long-term competitive position in the market. And this is on the back of the work that we've been doing, very specifically, I would say, on 3 areas. The first one is adoption. It is very difficult to face a very relevant, significant and fast-paced transformation if your people don't believe in your vision. And in order for people to believe in the vision on a group-wide basis, and we have 127,000 employees, we do believe that it is very important that all our employees, all our colleagues understand these tools, understand what AI is about. And today, we have over 100,000 employees in the bank that are regular users of AI. So that is, again, very important when you're talking about not just a technology transformation, but overall, a cultural change in the bank. So the first topic is adoption. The second topic is the agenda. What is the agenda? What is the AI agenda? And in this regard, over a year ago, we already determined what we call The Eight, which is not a very fancy creative name, but it's called The Eight. And it basically touches base on 8 transversal areas where we are deploying AI in the group, basically centering around 3 topics. The first one is customer experience. So customer-facing AI, what does that mean? What do we do? That's one of the content topics of our Eight strategy. Then we have what we call the augmented employee. This is very relevant, because a lot of our employees, the employees that are commercial employees, that are sales-driven, still spend a lot of time bogged down in admin work. And so if you can really augment the sales productivity of these employees, the scope, again, on the revenue side, I think it can be significantly relevant in terms of the potential it has. And the third thing obviously has to do with operations, processes, things ranging from risk and risk underwriting, to claims management, to fraud, compliance, obviously, internal ops teams. So there's a lot of, obviously, work done on that side. So we're already seeing some interesting proof points, which I think are very common to other institutions talking about these things. We've seen, in some engineering teams, savings of around 50% in terms of coding and testing that they do. Also on the claims side, we've seen significant reductions of almost 80% reduction in claims registrations and management. We've seen some pilot cases that we have with our customer support services, where we are seeing that 60% of certain of these instances can be dealt directly by an AI assistant that the client chooses to speak with. So these things are early green shoots of what AI could mean on the back of the agenda. But if you ask me what really differentiates the winners from the losers, and why BBVA is going to be one of those winners, it's not just about the adoption, which is important; it's not just about the agenda, which again is important; it's really about how do you scale AI across the entire organization. And this is something that BBVA has already done with digital banking. And that's why we think that the playbook that we had is very applicable to this type of transformation, which is broader and faster. But in specific terms, scaling AI throughout the organization means going beyond The Eight. It means really industrializing at scale how you create, how do you deploy, how do you manage, how do you govern the agents across the board. And this is something that we already started doing with our partners, and we're building those capabilities out. And we think that in that regard, we have also started to change the organization. We've created a new area called AI transformation at the group. This is an area that integrates data, which is the main gold. What's the gold for AI? It's data, really that's the gold, and the challenge, by the way, it's data. So we integrated all data capabilities, some of the engineering and technology capabilities all under one roof to drive forward the AI transformation for the group. So what does that mean, to your point, in terms of impact? It's too early to say. I think it's very difficult, because just as we had in the digital banking transformation, a lot of investors asked us at the beginning of the time, what is going to be the impact, what's going to be the impact on cost and whatever. Obviously, there are going to be impacts. And within the 35% cost-to-income guidance that we gave, there were some back-ended productivity gains coming, partly on the AI discussion, although it was very early to pinpoint specifically. But I think really the potential of AI goes beyond the '28 number, and it really has to leverage more on the revenue side where we think that's going to be much more compelling for BBVA as a whole, aside from the cost efficiencies that are obviously going to be there as well. So we're very positive on the AI discussion, and we hope that we'll be, again, leading the way for banking industry as a whole.

No, that sounds very exciting. But maybe with that, we move to the countries and we start with Spain. You have seen very strong client acquisition in Spain. You also have one of the best cost-to-income ratios in Spain, around 34%. So how do you plan to sustain this profitability in Spain and at the same time, also grow volumes? And how do you see the competition, especially in mortgages and deposits, where it seems that it's quite intense?

Yes. Well, competition in Spain has always been pretty intense. But to your point, I think, yes, the BBVA Spain is quite, I would say, again, unique in the sense that it's a relevant bank in Spain that combines the ability to continue to grow and gain market share with a cost-to-income ratio that is below 34%, and one of the highest profitable banks in Spain as well. And this is, again, on the back of the strategy that we have for BBVA in Spain, a strategy that basically relies on the first thing very relevant is client acquisition. So we always talk about in Spain about mortgages and whatever, but really at the core of our strategy is acquiring clients. And this is different acquiring clients than in Mexico, where it's underbanked and you have low leverage. But in Spain, actually, the deleveraging that took place in Spain also has been significant. So really, it's about client acquisition. Over the past 2 years, since 2023, we've increased 2.8 million our client base. Last year alone, we grew around 1 million clients. So why is this relevant for us? And 60% of those were done digitally. And it's relevant for the short term and the long term. For the short term, it's relevant because what we see is that 6 months after we onboard clients, 70% of those clients become what we call highly engaged clients. And as a matter of fact, around 30% of those onboarded clients, after 6 months, bring either their pension or their payroll. So in the short term, it means that the capacity to grow our deposit base with an adequate very low cost of funding is very relevant. And that is a significant source of value for BBVA and profitability in Spain. So the focus on client acquisition on the short term has these impacts that are positive with regards to our margins. But the second thing I think more relevant, going to your question about long-term sustainability of profitability, is that what we see with these clients that we acquire, and we already have the history, is that 5 years down the road, they will be generating nearly 4x the income that we have today. So think about it, we grew 2.8 million clients. These clients are going to be generating increased revenues down the line as we further deepen the relationship with them. So it's a significant source of value, not just in the short term, but in the long term. And that's why the key focus of the strategy in Spain is client acquisition. The second focus, as you mentioned, is targeted and disciplined growth. As I mentioned before, we've been growing significantly in SMEs and consumer loans. In SMEs, we gained over the past 5 years, 260 basis points of market share, which is not a minor number, in especially a competitive market like Spain. Or in consumer loans, we grew 240 basis points. So those are key focus areas for us and will continue to be. We see a lot of value in those segments. On the mortgages, as you know, we don't see a lot of value. The mortgage market is intensifying, I would say, competitively. Over the last weeks, I was seeing that there are players that are becoming even more competitive than what they were just a month or 2 months ago. And there, we have a selective view on growth. We continue to grow, but we really look through the mortgage product to the client relationship and the value of that client relationship. And that's why we are being selective in growth on the mortgage side whilst the competitive dynamics remain in place. And on the deposit side, as you know, and I think this is across the franchises, we don't compete in chasing promotions or pricing campaigns. We really look through again on the client relationship. And what I can assure you is that we do compete on preserving the relationships that we care about in a targeted and personalized way to make sure that we keep those relationships within the bank. And that is a strategy that we've maintained going forward. So we are very positive in the dynamics in Spain, both in terms of growth and profitability going forward.

Great. And maybe with that, we can move to Mexico, which is one of your cornerstones in the investment case for BBVA with very high growth and returns. So maybe if you could start by elaborating on the key drivers behind the upside risk to the high single-digit loan growth guidance that you have given for Mexico? And also if you could talk a little bit about your structural funding benefit in Mexico? And how do you see competition both from the incumbent banks, but also the neobanks, and what you're doing to defend your market shares in Mexico?

Yes. Well, as you know, we are very positive in Mexico, and we continue to be so. The reason why we increased the bias in Mexico towards that double-digit number in terms of loan growth is that we have been really seeing quite positive dynamics at the beginning of the year in Mexico, especially, I would say, on the retail side. So we were quite positively surprised about the resilience of demand in consumer side. We've seen double-digit growth in lending in all consumer portfolios. And therefore, we were quite positively supported. We grew our loan book in the first quarter, 8.4%. If you exclude the FX embedded in the dollar portfolios, the growth was above 10%. And so we see this dynamic of retail portfolios being quite resilient on the back of real wage growth primarily, that supports consumption and demand from retail clients. On the enterprise side, we were expecting an improvement in the enterprise growth going forward. The enterprise sector was slower to start off in the year, although the pipelines are still quite positive and they're still there. But really, we think that there's going to be 2 catalysts that are relevant and support the confidence in the growth in the enterprise segment. The first one is obviously clarity on the USMCA. As you know, discussions are taking place. Our base case scenario is that the USMCA will be renewed probably on an annual basis. And with that view in mind, which is primarily what we've seen in the past, is that the integration of Mexican and U.S. companies has not decreased. It has increased. The U.S. businesses advocate and support the USMCA within the U.S. government and talks with the trade administration. And therefore, if that's the case, I think that will support confidence in the SMEs and the enterprise sectors investing in Mexico going forward. And then the second topic aside from the USMCA is the Plan Mexico that Claudia Sheinbaum announced at the beginning of the year. Mexico, I think, recognizes and acknowledges that they need private investments. The fiscal situation in the country means that they need private public investments, especially they've announced significant efforts and investments on the energy infrastructure side, also to promote that nearshoring in the future in Mexico. And we do see that there is pipeline being built on the back of this Plan Mexico hopefully towards the second half of the year coming through. So despite a slower GDP growth in Mexico, we saw Banxico reducing GDP targets to 1.1% this year. Still, those growth rates are going to be higher than last year when Mexico last year grew at 0.8%. So even within that context, we do feel that the activity growth will be there in Mexico, and we've been able to grow market share again in March. For the first time, we were at 26.1% market share. For a bank of our scale, it's very significant. And so therefore, we do see that if Mexico grows and the leverage in the country is still very low, structurally speaking, you have a bank of that scale at BBVA being able to grow even at the same market share consistently on the back of growth of Mexico and bankarization of the population. So quite positive in that regard. With regards to the competitive dynamics, as you mentioned, especially there are 2 types of competitive dynamics, the incumbents and the neobanks. I think incumbents, we compete with them all across the board, in all products and segments, and different players are more aggressive on one side or the other. But typically, again, as I was mentioning, we've been growing market share both on the wholesale and the retail side. Specifically within neobanks, I think here, we've always said that the key structural strength of BBVA is its position and transactionality. It's the capability to have lower cost of funds versus our peers. We have 2.19% cost of funds. The peers have 3.4%, the incumbents. So the neobanks obviously have higher cost of funds. And in that segment, we've been able to preserve and gain also market share on the deposit side. Why? Again, on the back of the transactionality efforts that we have, the market shares in payrolls, and the client acquisition, which is quite significant in Mexico as well. We have always said that we are not going to chase pricing campaigns on the deposit side. It doesn't make sense for us. And what we do is very consciously and targetedly defend those kind of relationships, again, that we want to maintain in Mexico as a bank. And that has been quite successful. And what we've seen that as rates have come down from 11.25% in Mexico 2 years ago to 6.5% today, some of the neobanks have actually lost market share in deposits, which is something that we also anticipated as well. So the deposit side is something that we have no interest in competing. Again, we are the largest bank in terms of deposits, very granular deposits, and we will continue to address competition in a targeted way. On the asset side, however, we do compete head on. Neobanks especially have very attractive value props, very attractive customer experience. And we need to stay top of the game. We are the best fintech in Mexico. Over 80% of our clients are acquired end-to-end, and we continue to gain market share in credit cards, which is the main focus of products for some of the neobanks. So that is also a source of competitive dynamics that we are putting a lot of focus on. And we've been seeing that we're able to recapture clients that perhaps go and put balances on neobanks credit cards. 12 months later, we've regained back those balances from a targeted approach to defending our client base.

Okay. And one final question for me before we open up for Q&A. So maybe if you could talk a little bit about your capital base. So you have the EUR 4 billion share buyback, which is ongoing. And you have also said that you plan to distribute all excess capital above 12%. Within what time frame would you like to reach a 12% core equity Tier 1? And also, if you could maybe discuss a little bit capital efficiency tools, how you think about regulation, M&A, any potential bolt-ons that you would consider?

Okay. Yes, very important question. So I think that, I would say, again, uniqueness of BBVA is that we can, on the back of the strong profitability, generate capital and what are the uses of that capital. So the first thing is obviously, capital generation is very important. But the first priority is to fund growth, fund our organic growth. We see our franchisees growing. We see the franchisees demanding capital for backing that growth. And again, at these levels of profitability, we're more than happy to continue to allocate capital to that profitable growth. The second question regarding M&A or not? Obviously, we don't discuss M&A. M&A is something that, as a bank of our size, we always look at, because it's in our responsibility, fiduciary responsibility to see if there are opportunities ahead. But we've also made very clear that we don't see any relevant tangible opportunities in M&A in our footprint. And therefore, there's nothing really relevant. Again, if there are things that make sense, bolt-on acquisitions or things like that, that is something that's always there. But structurally speaking, I would say, the growth of capital generation will be devoted to organic growth and will be devoted to returning capital to shareholders and continue to return capital, because we will be able to deploy capital in our franchises, and there's going to be plenty of capital to be returned to our shareholders above that 12% target that we have. In terms of timing, as you know, we are finalizing the last tranche of our close to EUR 4 billion share buyback that we announced last year. When that gets done and over with, we'll have the appropriate discussions at the Board as to how to continue with returning capital to shareholders. But I don't think there's a specific date in mind because, again, what we need to do is gradually see how the franchisees demand growth, how we generate that growth, demand growth, and then return growth on a gradual and recurring way, I would say. So this is going to be a recurring story of capital generation, organic growth deployment, and return of capital to shareholders.

That's very clear. And with that, we have a few minutes left. So if there are any questions in the audience, please raise your hand. I think we have a question in the back. It looks like there are no questions unless I'm missing anyone. So maybe then a final question for me. Maybe we could talk about Turkey, which both represents some upside and downside risk. So how do you balance the short-term volatility in Turkey? And how do you think about the longer-term strategic value of the franchise?

Right. So I do think that, and we've been, I think, saying this before, is that Garanti in Turkey is still an optional value for the group. The economy, we mentioned before, needs to normalize. It needs to continue on the disinflation trend. And as that normalization takes place, we will reap further value from the Turkish bank for BBVA shareholders. And that is a path that needs to continue in that regard. I think that, obviously, the Middle Eastern conflict, the Iran war has meant that Turkey is negatively impacted in terms of inflation, because it imports oil. So therefore, we do see that the disinflationary trend that we had expected to continue this year and going forward is going to be probably on pause during the year. We're now expecting inflation at the end of the year to be around 30%, which is a similar number of inflation that we had last year. And that's why, in the last quarter, we said that we were putting a negative bias on the EUR 1 billion bottom line profit that we had initially expected at the beginning of the year without the geopolitical situation. I think that in this context, as always, what we've been trying to do is preserve the value of the franchise in Turkey. Garanti is the best bank in the country, has a market share of close to 20%, and it has an outstanding profitability. It's achieved a 30% return on average equity and the peers are at 20%, very client focused, very innovative as well. And I think the best thing that we can do is continue to preserve value in the franchise and continue to see and expect that normalization trend to hopefully continue going forward in the country. The economic team, I think, has done everything that it needs to do to continue on the disinflationary path. They did the right things when the conflict broke out. They're very orthodox and disciplined, and that's what we need to continue to see, I think, in Turkey going forward.

Excellent. Thank you so much, Luisa, for a very good fireside chat.

Thank you very much.

Thank you, everyone, for joining.

Thank you.