Risk management

Credit risk

In a volatile global context, whose evolution will continue to be highly conditioned by the uncertainty represented by the United States administration's policies implemented in recent months, economic activity in the countries where BBVA operates continued to reflect a generally good dynamic in terms of economic growth, as well as in the indicators of the financial system. In Spain, the growth forecast for 2025 has been revised upwards (+3.0%), five tenths above the previous forecast and inflation could remain at moderate levels, with a comfortable level of solvency and liquidity in the system. In Mexico, the acceleration of the economic activity, as a result of the dynamics of external demand, has contributed to an upwards revision of the GDP growth, which is expected to be around +0.7% by 2025, in a context of relatively moderated inflation, with expectations of additional interest rate cuts and with credit in the banking system growing at double digits (+10.1% year-on-year, with data at the end of July). Turkey, on the other hand, has shown significant growth in recent months, with inflation moderating and banking system risk indicators at contained levels, although pending political and social tensions. Finally, in South America, while in Colombia and Peru the positive dynamics in terms of economic activity will continue, in a context of contained inflation and gradual interest rate cuts, in Argentina the outlook for economic growth has deteriorated in the last quarter as a result of political uncertainty, high interest rates, and exchange rate pressures.

For the estimation of expected losses, the models include individual and collective estimates, taking into account the macroeconomic forecasts in accordance with IFRS 9. Thus, the estimate at the end of the quarter includes the effect on expected losses of updating macroeconomic forecasts, which take into account the global environment, although 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. Additionally, the Group may complement the expected losses either by considering additional risk drivers, or by incorporating sectorial particularities or those that may affect a set of operations or borrowers, following a formal internal process established for the purpose.

BBVA Group's credit risk indicators

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

NON-PERFORMING LOANS (MILLIONS OF EUROS)

PROVISIONS (MILLIONS OF EUROS)

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

Structural risks

Liquidity and funding

Liquidity and funding management at BBVA is aimed at driving the 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, being 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 €128.7 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 the 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:

In addition to 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 nine months of 2025 are listed below.

Also, on May 10, 2025, BBVA redeemed early and entirely, all senior preferred bonds issued in May 2023 for €1 billion; in March it redeemed in full a USD 1 billion AT1 issued in 2019 and in January it redeemed early and in full a €1 billion Tier 2 issued in January 2020 maturing in 2030. In addition, on June 25, BBVA announced that the Board of Directors of BBVA had approved an issue of Contingent Convertible Preferred Securities (AT1) into new ordinary shares of BBVA for a maximum amount of €1.5 billion (pending execution as of 30 September 2025) excluding the preferential subscription rights of the shareholders. The specific terms of this issue will be communicated by BBVA at the time it is decided, if applicable, to carry out its execution. On September 14, 2025, BBVA redeemed early and entirely an issue of senior non-preferred notes executed in September 2022 for USD 1 billion.

In February 2025, BBVA Mexico issued a Tier 2 subordinated debt for USD 1 billion with a coupon of 7.625%, and a maturity in February 2035 (with an early redemption date in February 2030). In March 2025, an issue was made in the local market for 15 billion Mexican pesos, in two tranches, the first, BBVAMX 25, was placed for a term of three and a half years with a variable rate of TIIE overnight funding plus 32 basis points, while the second tranche, BBVAMX 25-2, closed at a fixed rate of 9.67% for a term of seven years. Lastly, BBVA Mexico issued in September the equivalent of €800m in a local senior bond in 3 tranches: the first, for 9.711m Mexican pesos with a variable rate of TIIE overnight funding plus 32 basis points for a term of three and a half years, the second for 4,723m Mexican pesos at a fixed rate of 8.72% and a term of seven years and the third for an amount of USD 158m at a fixed rate of 4.35% for a term of three years.

Between January and September of 2025, Garanti BBVA issued a total of USD 2,657m of short-term senior MTNs (Medium term notes) in order to roll over maturities and generate liquidity. In June 2025, it renewed a sustainable syndicated loan in two tranches: one of USD 95.75m and €99.275m with a term of 367 days, and another of USD 191.5m and €36m with a term of 734 days. The total cost of the agreement is SOFR+1.60% for the US dollar tranches and Euribor +1.35% for the 367-day euro tranches, and SOFR+2.00% for US dollars and Euribor +1.75% for the 734-day euro tranche. In July 2025 Garanti BBVA completed the issuance of subordinated bonds with a 10.5 year maturity, an early redemption option at 5.5 years and an aggregate principal amount of USD 500m. In October 2025, another subordinated bond issue was released with the same maturity structure and redemption option for an amount of USD 700m. Both transactions were structured in accordance with Basel III and offered to institutional investors abroad.

In the first nine months of the year, BBVA Argentina issued a total of 181 billion Argentine pesos and USD 142m. The equivalent amount in euros of these issues stands at €236m.

In April 2025, the subordinated biodiversity bond subscribed by BBVA Colombia with the International Finance Corporation (IFC) for an amount of USD 45m was disbursed.

In Peru, BBVA issued USD 200m in the form of gender-based social bonds targeting women entrepreneurs, executed in two tranches in the first and third quarters, in partnership with BID Invest, FMO (Netherlands Development Bank) and COFIDE (Corporación Financiera de Desarrollo S.A.).

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.

The performance of the main currencies of the Group against the euro during the first nine months of 2025 has been uneven. Due to its relevance for the Group, it is important to highlight the performance of the Mexican peso, which appreciated slightly by 0.1% against the euro. As for other currencies, the Argentine peso stands out, as depreciated the most against the euro (-31.9% in the first nine months of the year), with the establishment in the month of April of a currency band system. In addition, the Turkish lira fell by -24.8% with a less pronounced depreciation in the third quarter. In the case of the American dollar the currency was depreciated by 11.5% between January and September of 2025.

In relation to the hedging of capital ratios, BBVA aims to cover in aggregate, between 60% and 70% of its subsidiaries' capital excess. The sensitivity of the Group's CET1 fully loaded ratio to 10% depreciations in major currencies is estimated at: +14 basis points for the US dollar, -9 basis points for the Mexican peso and -3 basis points for the Turkish lira¹⁴. 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 limited 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 nine months of 2025 have been influenced by geopolitical events, such as increased US tariffs, as well as developments and expectations regarding inflation and central bank actions. The US and European yield curves diverged. While the sovereign curve fell in the United States due to the deceleration signs and greater prospects for cuts by the Fed, in Europe a rebound in the long trenches was observed due to the change of course in Germany's fiscal policy, while the short tranches fell. The peripheral curves are still supported. In Turkey, yield curves were more volatile as a result of the political situation; nevertheless, it is worth noting the positive performance of credit default swaps (CDS) and sovereign bonds denominated in hard currency since the events of March. Meanwhile, in Mexico, the sovereign curve fell, (due to the United States) and in South America there were generalized growth profitability in Argentina, mixed performance in Colombia and moderate falls in Peru. All in all, the Group's fixed-income portfolios have had a positive performance during the year, except for Argentina.

By geographical areas:

¹⁴ This sensitivity does not include the cost of capital hedges, which are currently estimated at 2 basis points per quarter for Mexican peso and 2 basis points per quarter for Turkish lira.

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