Solvency
Capital base
The BBVA Group's strong results during the quarter, which exceeded those of the first quarter, contributed to the consolidated CET1 fully-loaded ratio to reach 12.99% as of June 30, 2023, which allows to maintain a large management buffer over the Group's CET1 requirement (8.76% at the date of release of this report)4,5, and also above the Group's established target management range of 11.5-12.0% of CET1.
During the second quarter of the year, the CET1 ratio was reduced by 14 basis points. The strong profit generation, net of dividends and the remuneration of AT1 instruments, generated a contribution of 27 basis points to the CET1 ratio, which absorbed the growth in risk-weighted assets (RWA) resulting from the growth in activity over the quarter (26 basis points consumption), in line with the Group's strategy of promoting profitable growth. Thus, among other impacts, it should be noted those associated with the trend of the market variables, in particular the valuation of some exchange rate hedge instruments.
Fully-loaded RWA decreased by approximately €1,100m in the quarter, mainly as a result of the currency effect. Excluding the currency effect, RWA associated with activity grew by around €7 billion.
The consolidated fully-loaded additional Tier 1 capital (AT1) stood at 1.78% as of June 30, 2023, resulting in a 29 basis point increase from the previous quarter, mainly due to the issuance in June of a contingent convertible bond with a face value of €1 billion.
For its part, the consolidated fully-loaded Tier 2 ratio at the end of June 2023 stood at 2.02%, with an increase of 34 basis points in the quarter, mainly due to the issuance of two subordinated bonds in Spain and Mexico, for €750m and USD1 billion, respectively. The total fully-loaded capital ratio stands at 16.79%.
It is worth mentioning that, with effect from January 1, 2023, the application of part of the transitional effects applied by the Group in the determination of the phased-in ratio has ended, so that as of June 30, 2023, this ratio coincides with the fully-loaded ratio.
FULLY-LOADED CAPITAL RATIOS (PERCENTAGE)
CAPITAL BASE (MILLIONS OF EUROS)
| CRD IV phased-in | CRD IV fully-loaded | |||||
|---|---|---|---|---|---|---|
| 30-06-23 (1) (2) | 31-12-22 | 30-06-22 | 30-06-23 (1) (2) | 31-12-22 | 30-06-22 | |
| Common Equity Tier 1 (CET1) | 45,153 | 42,738 | 41,563 | 45,153 | 42,484 | 41,181 |
| Tier 1 | 51,324 | 47,931 | 46,828 | 51,324 | 47,677 | 46,445 |
| Tier 2 | 7,021 | 5,930 | 6,819 | 7,021 | 6,023 | 6,818 |
| Total capital (Tier 1 + Tier 2) | 58,344 | 53,861 | 53,647 | 58,344 | 53,699 | 53,263 |
| Risk-weighted assets | 347,488 | 337,066 | 330,871 | 347,488 | 336,884 | 330,642 |
| CET1 (%) | 12.99 | 12.68 | 12.56 | 12.99 | 12.61 | 12.45 |
| Tier 1 (%) | 14.77 | 14.22 | 14.15 | 14.77 | 14.15 | 14.05 |
| Tier 2 (%) | 2.02 | 1.76 | 2.06 | 2.02 | 1.79 | 2.06 |
| Total capital ratio (%) | 16.79 | 15.98 | 16.21 | 16.79 | 15.94 | 16.11 |
(1) The difference between the phased-in and fully-loaded ratios arises from the temporary treatment of certain capital items, mainly of the impact of IFRS 9, to which the BBVA Group has adhered voluntarily (in accordance with article 473bis of the CRR and the subsequent amendments introduced by the Regulation (EU) 2020/873). As of June 30, 2023, there are no differences between phased-in and fully-loaded ratios due to the aforementioned temporary treatment.
(2) Preliminary data.
Regarding shareholder remuneration, as approved by the General Shareholders' Meeting on March 17, 2023, in its first item on the agenda, on April 5, 2023, a cash payment of €0.31 gross per each outstanding BBVA share entitled to receive such amount was made against the 2022 results, as an additional shareholder remuneration for the financial year 2022. Thus, the total amount of cash distributions for 2022, taking into account the €0.12 gross per share that was distributed in October 2022, amounted to €0.43 gross per share.
Total shareholder remuneration includes, in addition to the cash payments mentioned above, the remuneration resulting from the execution of the share buyback programs that the Group could execute. Regarding BBVA's buyback program announced past February 1, 2023 for an amount of €422m, on April 21, 2023, BBVA announced the completion of this share buyback program, having acquired 64,643,559 own shares between March 20 and April 20, 2023, representing approximately 1.07% of BBVA's share capital as of said date.
BBVA requested on July 27, 2023 to the European Central Bank the correspondent supervisory authorization in order to carry out a buyback program of BBVA shares up to €1,000 million. Its execution, if the authorization requested is finally granted, would be subject to the adoption of the correspondent corporate resolutions and to the communication of the specific terms and conditions of the share buyback program before its execution. This share buyback program would be considered to be an extraordinary shareholder distribution and is therefore not included in the scope of the ordinary distribution policy.
As of June 30, 2023, BBVA's share capital stood at €2,923,081,772.45 divided into 5,965,473,005 shares, at €0.49 par value each, once the Group has carried out the partial execution, announced on June 2, 2023, of the share capital reduction resolution adopted by the Ordinary General Shareholders' Meeting of BBVA held on March 17, 2023, under item 3 of the agenda, with the redemption, charged to unrestricted reserves, of 64,643,559 own shares of €0.49 par value each acquired derivatively by BBVA in execution of the share buyback program scheme and which were held in treasury shares.
SHAREHOLDER STRUCTURE (30-06-23)
| Shareholders | Shares issued | |||
|---|---|---|---|---|
| Number of shares | Number | % | Number | % |
| Up to 500 | 323,964 | 41.6 | 60,703,923 | 1.0 |
| 501 to 5,000 | 355,729 | 45.7 | 632,576,417 | 10.6 |
| 5,001 to 10,000 | 53,127 | 6.8 | 373,028,716 | 6.3 |
| 10,001 to 50,000 | 41,431 | 5.3 | 791,436,405 | 13.3 |
| 50,001 to 100,000 | 2,954 | 0.4 | 201,610,444 | 3.4 |
| 100,001 to 500,000 | 1,328 | 0.2 | 239,961,745 | 4.0 |
| More than 500,001 | 277 | 0.04 | 3,666,155,355 | 61.5 |
| Total | 778,810 | 100 | 5,965,473,005 | 100 |
With regard to MREL (Minimum Requirement for own funds and Eligible Liabilities) requirements, BBVA must maintain, from January 1, 2022, an amount of own funds and eligible liabilities equal to 21.46% of the total RWA of its resolution group, on sub-consolidated6 level (hereinafter, the "MREL in RWA"). This MREL in RWA does not include the combined capital buffer requirement which, according to applicable regulations and supervisory criteria, would be estimated at 3.32%, considering the exposures subject to the calculation of the countercyclical buffer as of June 2023. Given the own funds and eligible liabilities structure of the resolution group, as of June 30, 2023, the MREL in RWA ratio stands at 28.05%7,8 complying with the aforementioned requirement.
In addition, BBVA must reach, by January 1, 2022, an amount of own funds and eligible liabilities in terms of the total exposure considered for calculating the leverage ratio of 7.27% (the “MREL in LR”) of which 5.61% in terms of the total exposure considered for calculating the leverage ratio shall be met with subordinated instruments (the "subordination requirement in LR").
With the aim of reinforcing compliance with these requirements, BBVA has made several debt issues during the first half of 2023. For more information on this and other issues, see "Structural risks" section within the "Risk management"- chapter.
It should be noted that on June 14, 2023 the Group disclosed the receipt of a new communication from the Bank of Spain regarding its MREL requirement, established by the Single Resolution Board (hereinafter "SRB"). In accordance with this communication, BBVA has to reach, starting January 1, 2024, an MREL in RWA equal to 22.11% This MREL in RWA does not include the applicable combined capital buffer requirement which, according to current regulations and supervisory criteria, would be estimated at 3.32%, considering the exposures subject to the calculation of the countercyclical buffer as of June 2023. Given the own funds and eligible liabilities structure of the resolution group, as of June 30, 2023 the MREL in RWA would already comply with the aforementioned requirement.
Lastly, as of June 30, 2023, the Group's fully-loaded leverage ratio stood at 6.5%9.
Ratings
During the first half of the year 2023, BBVA’s rating has continued to show its strength and all agencies have maintained their rating in the A category. In March, DBRS communicated the result of its annual review of BBVA, affirming the rating at A (high) with a stable outlook. S&P, Moody's and Fitch maintained BBVA's ratings unchanged in the first half of the year at A, A3 and A-, respectively, all three with a stable outlook. The following table shows the credit ratings and outlook assigned by the agencies:
Ratings
| Rating agency | Long term (1) | Short term | Outlook |
|---|---|---|---|
| DBRS | A (high) | R-1 (middle) | Stable |
| Fitch | A- | F-2 | Stable |
| Moody’s | A3 | P-2 | Stable |
| Standard & Poor’s | A | A-1 | Stable |
(1) Ratings assigned to long term senior preferred debt. Additionally, Moody’s and Fitch assign A2 and A- rating, respectively, to BBVA’s long term deposit.
4 Includes the update of the countercyclical capital buffer calculated on the basis of exposure at end March 2023.
5 The Bank of Spain communicated to BBVA a resolution draft on the identification of BBVA as Other Systemically Important Institution (hereinafter referred to as O-SII) and the corresponding capital buffer established. According to this resolution draft, subject to the final resolution content, the O-SII capital buffer would increase by 25 basis points compared to the current applicable buffer, which stands at 100 basis points (1%) by January 1, 2024. This increase is consistent with the methodology review to evaluate the minimum buffer established by the European Central Bank (ECB) within the Banking Union scope.
6 In accordance with the resolution strategy MPE (“Multiple Point of Entry”) of the BBVA Group, established by the SRB, the resolution group is made up of Banco Bilbao Vizcaya Argentaria, S.A. and subsidiaries that belong to the same European resolution group. As of June 30, 2023, the total RWA of the resolution group amounted to €207,087m and the total exposure considered for the purpose of calculating the leverage ratio amounted to €516,459m.
7 Own resources and eligible liabilities to meet, both, MREL and the combined capital buffer requirement applicable.
8 As of June 30, 2023, the MREL ratio in terms of Leverage Ratio Exposure stands at 11.25% and the subordination ratios in terms of RWA and in terms of Leverage Ratio Exposure, stand at 22.90% and 9.18%, respectively, being preliminary data.
9 The Group’s leverage ratio is provisional at the date of release of this report.