Risk management

At a global level, the persistence of geopolitical tensions has increased uncertainty, representing a potentially significant risk factor. The evolution of these international tensions adds complexity to the global macroeconomic environment, potentially generating additional pressures on inflation, financial conditions, and economic activity. Therefore, the macroeconomic outlook of the geographical areas in which the Group operates could be influenced by the duration and intensity of these factors. In Spain, a moderation of growth is expected compared to the previous year, in a context where the evolution of inflation and interest rates will continue to be relevant, with a sound level of solvency and liquidity in the system. In Mexico, the economic environment remains influenced by the evolution of activity, inflation, and the monetary policy path, with a banking system that continues to show credit growth. Meanwhile, in Turkey, macroeconomic developments remain conditioned by inflation, the management of monetary and fiscal policies, and the volatility of the environment. Lastly, in South America, a heterogeneous performance across countries is expected, in a context of differing trends in growth, inflation, and interest rates.

Within this framework, the Group continuously monitors the evolution of the macroeconomic and geopolitical environment, as well as its potential impact on the evolution of credit risk, in accordance with the applicable accounting and prudential regulations.

Credit risk metrics

The Group periodically reviews its individual estimates and its models for collective estimates of expected losses, as well as the impact of macroeconomic scenarios considered for such purposes. It should be noted that, although these updates incorporate the best information available at the relevant time, they may not fully reflect the most recent developments in the economic environment, especially in contexts of high uncertainty and volatility, or with respect to very recent events still underway.

For the estimation of expected losses, the models include individual and collective estimates, taking into account the macroeconomic forecasts as established in IFRS 9. Thus, the estimate at the end of the quarter includes the effect on expected losses of updating macroeconomic forecasts. The Group may supplement these expected losses to account for effects that may not be included therein, either because it considers that there are additional risk factors, or to incorporate sectoral particularities or those that may affect a set of operations or borrowers, in accordance with a formal internal process established for this purpose.

In this regard, as of March 31, 2026, the Group has made an adjustment amounting to €98 million, motivated by the high geopolitical uncertainty associated with the conflict in the Middle East, particularly due to its duration and scope.

BBVA Group's credit risk indicators

The following chart shows the evolution of the Group's risk metrics from the first quarter of 2025:

NPL AND NPL COVERAGE RATIOS AND COST OF RISK (PERCENTAGE)

The evolution of the Group’s main credit risk indicators is summarized below:

NON-PERFORMING LOANS (MILLIONS OF EUROS)

PROVISIONS (MILLIONS OF EUROS)

Structural risks

Liquidity and funding

Liquidity and funding management at BBVA is aimed at driving sustained growth of the banking business, through access to a wide variety of alternative sources of funding and assuring optimal term and cost conditions. BBVA's business model, risk appetite framework and funding strategy are designed to reach a solid funding structure based on stable customer deposits, mainly retail (granular). As a result of this model, deposits have a high degree of insurance in each geographical area, close to 50% in Spain and Mexico. It is important to note that, given the nature of BBVA's business, lending is mainly financed through stable customer funds.

One of the key elements in the BBVA Group's liquidity and funding management is the maintenance of large high-quality liquidity buffers in all geographical areas. Thus, the Group has maintained during the last 12 months an average volume of high-quality liquid assets (HQLA) of €116.4 billion, of which 98% corresponded to maximum quality assets (level 1 in the liquidity coverage ratio, LCR).

Due to its subsidiary-based management model, BBVA is one of the few major European banks that follows a Multiple Point of Entry (MPE) resolution strategy: the parent company sets the liquidity policies, but the subsidiaries are self-sufficient and responsible for managing their own liquidity and funding (taking deposits or accessing the market with their own rating). This strategy limits the spread of a liquidity crisis among the Group's different areas and ensures the adequate transmission of the cost of liquidity and financing to the price formation process.

The BBVA Group maintains a solid liquidity position in every geographical area in which it operates, with ratios well above the minimum required:

The breakdown of these ratios in the main geographical areas in which the Group operates is shown below:

During the first quarter of 2026, the conflict in Iran has created an environment of greater uncertainty and volatility in the markets, with central banks maintaining a cautious stance regarding its potential implications.

In this context, BBVA maintains a solid liquidity position across all its geographic areas, with no signs of stress. As previously shown, the main liquidity indicators (LCR, NSFR, and internal metrics) remain at comfortable levels, well above regulatory thresholds. Furthermore, the active and prudent balance sheet management, together with the diversification of funding sources, strengthens the Group's ability to face different scenarios without compromising its liquidity position.

Apart from the above, the most relevant aspects related to the main geographical areas are the following:

The main wholesale financing transactions carried out by the BBVA Group during the first quarter 2026 are listed below.

In addition, on January 15, 2026, BBVA, S.A. carried out the early redemption of a green AT1 issuance made on July 15, 2020, for a combined nominal amount of €1 billion, a decision that was communicated to market on December 17, 2025. Likewise, on March 24, 2026, BBVA, S.A. carried out the early redemption of a senior preferred bond issuance originally issued on March 24, 2021, for a total aggregate nominal amount of €1 billion, a decision that was disclosed to the market on February 11, 2026.

BBVA Mexico issued senior debt in the local market totaling MXN 15.272 billion (approximately €700 billion) in three tranches: the first for MXN 6.124 billion at a variable rate of TIEE plus 32 basis points with a maturity of 3.5 years, the second for MXN 8,876 billion at a fixed rate of 9.26% with a maturity of ten years, and the third for USD 16 million at a fixed rate of 4.19% with a maturity of 2.5 years. This issuance has been made to renew maturities.

In Turkey, USD 500 billion of senior debt (MTN) has been issued to renew maturities.

It is worth noting that, following the outbreak of the conflict in Iran, both BBVA Peru and BBVA Argentina tapped their local markets, demonstrating the Group's franchises' market access within a complex market environment. Peru carried out a Tier 2 issuance amounting PEN 300 million (approximately €75 million equivalent), while BBVA Argentina completed two senior debt issuances in the local market: one for USD 36.5 million at a rate of 5% and another for ARS 45.457 billion.

Foreign exchange

Foreign exchange risk management aims to reduce both the sensitivity of the capital ratios to currency movements, as well as the variability of profit attributed to currency movements.

During the quarter, the US dollar showed an irregular performance, depreciating until the end of January, recording a moderate appreciation during February, and finally appreciating sharply in March following the outbreak of the conflict in Iran, closing with an appreciation of 2.2% against the euro. For its part, the Mexican peso appreciated strongly (+2.0% against the euro), while the Turkish lira depreciated (-1.3% against the euro).

In relation to the hedging of capital ratios, BBVA aims to hedge between 50% and 70% of the capital excess of the currencies of its main subsidiaries. The sensitivity of the Group's CET1 ratio to 10% depreciations in major currencies is estimated at: +12 basis points for the U.S. dollar, -15 basis points for the Mexican peso and -2 basis points for the Turkish lira¹⁶. With regard to the hedging of results, BBVA hedges between 40% and 50% of the aggregate net attributable profit it expects to generate in the next 12 months. For each currency, the final amount hedged depends, among other factors, on its expected future evolution, the costs and the relevance of the income related to the Group's results as a whole.

Interest rate

Interest rate risk management seeks to limit the impact that BBVA may suffer, both in terms of results (short-term) and economic value (long-term), from adverse movements in the interest rate curves in the various currencies in which the Group operates. BBVA carries out this work through an internal procedure, pursuant to the guidelines established by the European Banking Authority (EBA), with the aim of analyzing the potential impact that could derive from a range of scenarios on the Group's different balance sheets.

Risk measurement is based on assumptions intended to realistically mimic the behavior of the balance sheet. The assumptions regarding the behavior of accounts with no explicit maturity and prepayment estimates are especially relevant. These assumptions are reviewed and adapted, at least once a year according to the evolution in observed behaviors.

At the aggregate level, BBVA continues to maintain a moderate risk profile in line with the target set in the changing interest rate cycle environment maintaining positive sensitivity to interest rate rises in net interest income.

The first quarter of 2026 has been influenced by the outbreak of conflict in Iran. Central banks, as well as other market participants, remain cautious about the potential impacts this could have on inflation and growth in different geographic areas. So far, the start of the conflict has led to high volatility and widespread spikes in yields across interest rate curves. In this respect, the valuation of ALCO¹⁷ portfolios had a negative performance in 2026.

By geographical areas:

¹⁶ This sensitivity does not include the cost of capital hedges, which are currently estimated at 1 basis point per quarter for Mexican peso and 2 basis points per quarter for Turkish lira.

¹⁷ Structural portfolio managed by the Asset and Liability Committee, designed to mitigate the sensitivity of the balance sheet to interest rate movements.

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