Risk management

At a global level, uncertainty regarding the resolution of the geopolitical conflicts in the Middle East and Ukraine, with the resulting implications for the potential normalization of trade in the affected regions and its impact on energy input prices means that the balance of risks remains tilted to the downside. The evolution of these international tensions adds complexity to the global macroeconomic environment, and the duration and intensity of these factors could affect the geographical areas in which the Group operates to varying degrees, with differentiated impacts by country. Similarly, the occurrence of extreme weather events and the potential resurgence of the threat of interventionist actions by the U.S. administration also constitute sources of risk.

In Spain, economic activity maintained a favorable performance during the second quarter of 2026, with a positive outlook toward the end of the year. For its part, inflation recorded a significant uptick during the third quarter, although a gradual moderation is expected in the coming months. All of this took place in a context in which the financial system continues to show comfortable solvency and liquidity levels. In Mexico, the strong economic momentum in the second quarter has led to an upward revision of the growth forecast, in a context of moderating inflationary pressures, with a banking system that continues to show lending growth. 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, in an environment also subject to the severity of potential weather events, which have a particular impact on the region.

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, following a formal internal approval process established for this purpose.

As of September 30, 2026 and December 31, 2025, the Group had not recognized any material adjustment to the models used in the estimation of expected credit losses.

BBVA Group's credit risk indicators

The following chart shows the evolution of the Group's risk metrics from the first nine months 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 ensure a solid funding structure based on stable customer deposits, mainly retail (granular). As a result of this model, a high proportion of deposits is covered by deposit guarantee schemes 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 €132.1 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 nine months of 2026, the conflict in Iran has continued to generate volatility and disruptions in energy supply, intensifying inflationary pressures and risks to economic growth. Against this backdrop, central banks adopted a more restrictive monetary policy stance, driving an uptick in sovereign bond yields.

In this context, BBVA maintains an adequate liquidity position across its different geographical areas, with no significant tensions observed. As shown previously, the main liquidity indicators (LCR, NSFR, and internal metrics) remain above regulatory thresholds, albeit with varying levels of headroom. Likewise, active balance sheet management and the diversification of funding sources contribute to preserving the Group's liquidity position and its capacity to respond to adverse scenarios.

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

On the following page, the main wholesale financing transactions carried out by the BBVA Group during the first nine months of 2026 are detailed.

During the first nine months of 2026, BBVA, S.A. carried out the early redemption of four issuances. First, on January 15, 2026, it carried out the early redemption of a green AT1 issuance made on July 15, 2020, for a combined nominal amount of €1 billion. 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. On July 15, 2026, the early redemption of a subordinated bond issuance was carried out for a combined nominal amount of 300 million pounds sterling, and on September 22, it carried out the full early redemption of the public sector covered bond issuance made in March 2022 for an aggregate nominal amount of €540 million.

Foreign exchange

Exchange rate risk management aims to reduce the sensitivity of capital ratios to currency fluctuations, as well as the volatility of net attributable profit resulting from such movements.

During the third quarter of 2026, the Group's main currencies showed an uneven performance against the euro. Given its relevance to the Group, the performance of the Mexican peso is particularly noteworthy, depreciating by 3.3% against the euro. In the case of the US dollar, the currency registered a moderate appreciation of 0.3% against the euro. For its part, the Turkish lira and the Argentine peso depreciated by 4.5% and 2.5%, respectively, against the euro (although, in real terms, both currencies registered an appreciation against the euro). Regarding currencies of the main countries in South America, the performance was also mixed: the Peruvian sol depreciated by 0.5% and the Chilean peso likewise depreciated by 4.6%, while the Colombian peso appreciated by 3.4% 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: +13 basis points for the U.S. dollar, -13 basis points for the Mexican peso and -3 basis points for the Turkish lira¹³. 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 preserving positive sensitivity to interest rate rises in net interest income.

The first nine months of 2026 have been marked by the conflict in Iran and its repercussions on energy markets. Following the initial volatility, the persistence of oil prices at high levels has intensified inflationary pressures and conditioned expectations regarding the evolution of monetary policy. In this context, financial markets have priced in expectations of further monetary tightening, anticipating hikes in official reference interest rates, some of which have already materialized across different geographical areas. This dynamic has translated into a global rebound in yields across interest rate curves in the third quarter of the year. In this respect, the valuation of ALCO¹⁴ portfolios has shown a negative performance so far this year.

By geographical areas:

¹³ This sensitivity does not include the cost of capital hedges, which are currently estimated at 1 basis point per quarter for Mexican peso and 1 basis point per quarter for Turkish lira.

¹⁴ 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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