Solvency
Capital base
The BBVA Group's strong results during the quarter, which exceeded those of the second quarter, contributed to the consolidated CET1 fully-loaded ratio to reach 12.73% as of September 30, 2023, including the effect of the share buyback program launched on October 2, 2023 for a total amount of €1,000m (-32 basis points), which allows to keep maintaining a large management buffer over the Group's CET1 requirement (8.77%)4 and above the Group's established target management range of 11.5-12.0% of CET1.
During the third quarter of the year, the CET1 ratio increased by 6 basis points (excluding the share buyback program by -32 basis points). The strong generation of profit, net of dividends and remuneration of capital instruments, generated a contribution of 27 basis points in the CET1 ratio, which allowed it to partially absorb the growth of risk-weighted assets (RWA) derived from the increase in activity in the quarter (consumption of 39 basis points), in line with the Group's strategy of promoting profitable growth. For its part, among the other impacts, it is worth highlighting those associated with market variables, which have had a negative evolution in the quarter, especially in FX and portfolio valuation, although it is more than offset by the credit in equity due to the hyperinflation accounting.
Fully-loaded RWA increased by approximately €10,530m in the quarter, mainly as a result of activity growth. Excluding the currency effect, RWA associated with activity grew by around €10,211 billion.
The consolidated fully-loaded additional Tier 1 capital (AT1) stood at 1.72% as of September 30, 2023, resulting in a 6 basis points decrease from the previous quarter, mainly due to RWA increase. In the quarter, it should be noted that there was an issuance of a contingent convertible bond with a nominal value of USD1 billion and the amortization of an issuance with a nominal value of €1 billion. There was no impact in the quarter in the additional Tier 1 capital due to this movement.
On the other hand, the consolidated fully-loaded Tier 2 ratio at the end of September 2023 stood at 2.05%, with an increase of 4 basis points in the quarter, mainly due to the issuance of a subordinated bond in Spain for GBP300m. The total fully-loaded capital ratio stands at 16.51%.
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 September 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 | |||||
|---|---|---|---|---|---|---|
| 30-09-23 (1) (2) | 31-12-22 | 30-09-22 | 30-09-23 (1) (2) | 31-12-22 | 30-09-22 | |
| Common Equity Tier 1 (CET1) | 45,567 | 42,738 | 42,876 | 45,567 | 42,484 | 42,494 |
| Tier 1 | 51,735 | 47,931 | 42,281 | 51,735 | 47,677 | 47,899 |
| Tier 2 | 7,350 | 5,930 | 6,614 | 7,350 | 6,023 | 6,613 |
| Total capital (Tier 1+Tier 2) | 59,085 | 53,861 | 54,895 | 59,085 | 53,699 | 54,512 |
| Risk-weighted assets | 357,972 | 337,066 | 341,678 | 357,972 | 336,884 | 341,448 |
| CET1 (%) | 12.73 | 12.68 | 12.55 | 12.73 | 12.61 | 12.45 |
| Tier 1 (%) | 14.45 | 14.22 | 14.13 | 14.45 | 14.15 | 14.03 |
| Tier 2 (%) | 2.05 | 1.76 | 1.94 | 2.05 | 1.79 | 1.94 |
| Total capital ratio (%) | 16.51 | 15.98 | 16.07 | 16.51 | 15.94 | 15.96 |
(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 September 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, at the top of 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 and charged to the 2022 results, as final dividend 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. The Board of Directors of BBVA resolved on its meeting hold on September 27, 2023, the payment of a cash interim dividend of €0.16 gross per share on account of the 2023 dividend, which was paid on October 11, 2023. This dividend is already considered in the Group's capital adequacy ratios.
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 may 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.
Likewise, on October 2, 2023, after receiving the required authorization from the ECB, BBVA announced that it would implement a buyback program for the repurchase of own shares in accordance with the Regulations, aimed at reducing BBVA’s share capital by a maximum monetary amount of €1,000 million, having acquired 60,000,000 shares between October 2 and October 27, 2023. The execution is being carried out internally by the Company, executing the trades through BBVA. 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 September 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 through the reduction of BBVA’s share capital in a nominal amount of €31,675,343.91 and the consequent 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 (30-09-23)
| Shareholders | Shares issued | |||
|---|---|---|---|---|
| Number of shares | Number | % | Number | % |
| Up to 500 | 320,518 | 41.9 | 59,850,509 | 1.0 |
| 501 to 5,000 | 347,619 | 45.5 | 617,318,453 | 10.3 |
| 5,001 to 10,000 | 51,682 | 6.8 | 362,663,173 | 6.1 |
| 10,001 to 50,000 | 40,326 | 5.3 | 770,406,978 | 12.9 |
| 50,001 to 100,000 | 2,857 | 0.4 | 195,173,818 | 3.3 |
| 100,001 to 500,000 | 1,290 | 0.2 | 231,643,198 | 3.9 |
| More than 500,001 | 275 | 0.04 | 3,728,416,876 | 62.5 |
| Total | 764,567 | 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-consolidated5 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 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 September 30, 2023, the MREL in RWA ratio stands at 27.23%6,7 complying with the aforementioned requirement.
In addition, BBVA must reach, since 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 nine months of 2023. For more information on made 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 at 3.32%, considering the exposures subject to the calculation of the countercyclical buffer8 as of June 2023. Given the own funds and eligible liabilities structure of the resolution group, as of September 30, 2023 the MREL in RWA would already comply with the aforementioned requirement.
Lastly, as of September 30, 2023, the Group's fully-loaded leverage ratio stood at 6.59%9.
Ratings
During the first nine months of 2023, BBVA’s rating has continued to show its strength and all agencies have maintained their rating in the A category. DBRS in March, Fitch in September and Moody's in October communicated the result of its annual review of BBVA, affirming the rating at A (high), A- and A3, respectively, all three with a stable outlook. On the other hand, S&P has maintained BBVA's ratings unchanged since the beginning of the year at A, 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 This includes the update of the countercyclical capital buffer calculated on the basis of exposure at end June 2023.
5 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 September 30, 2023, the total RWA of the resolution group amounted to € m and the total exposure considered for the purpose of calculating the leverage ratio amounted to €500,586m.
6 Own resources and eligible liabilities to meet, both, MREL and the combined capital buffer requirement applicable.
7 As of September 30, 2023, the MREL ratio in terms of Leverage Ratio Exposure stands at 11.31% and the subordination ratios in terms of RWA and in terms of Leverage Ratio Exposure, stand at 22.50% and 9.35%, respectively, being preliminary data.
8 The Bank of Spain communicated to BBVA a resolution 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 the O-SII capital buffer would increase by 25 basis points compared to the previous year applicable buffer, which stands at 100 basis points (1%) by January 1, 2024. This increase is due to the adaptation of the Bank of Spain’s methodology for the determination of the OSII capital buffers in line with the revision of the methodological framework established by the European Central Bank.
9 The Group’s leverage ratio is provisional at the date of release of this report.