Ryan Esparza 1

Introduction:

BBVA, short for Banco Bilbao Vizcaya Argentaria, is a Spanish multinational bank that

was founded in 1857 in Bilbao, Spain. The bank is headquartered in Madrid and has a strong

presence in several countries around the world, including Mexico, the United States, Turkey, and

Colombia.BBVA is a publicly traded company, listed on the Madrid Stock Exchange and New

York Stock Exchange, and is part of the IBEX 35 stock market index in Spain. The bank has a

market capitalization of approximately 40 billion as of September 2021.

Throughout its history, BBVA has gone through several mergers and acquisitions to

expand its business and presence around the world. In 1999, BBV and Argentaria, two of the

largest banks in Spain, merged to form BBVA. In 2007, BBVA acquired Compass Bancshares, a

U.S. bank based in Alabama, marking its entry into the U.S. banking market. BBVA also

acquired Mexico's largest bank, Bancomer, in 2000, which is now known as BBVA Bancomer.

BBVA has been recognized for its commitment to sustainability and social responsibility,

receiving awards such as the Dow Jones Sustainability Index and Corporate Knights' Global 100

Most Sustainable Corporations in the World. The bank has also been involved in several

initiatives to support financial education and entrepreneurship around the world.

Today, BBVA operates as a full-service bank, offering a wide range of financial products

and services, including retail banking, corporate banking, asset management, and investment

banking. With a strong focus on innovation and digital transformation, BBVA has launched

several initiatives to enhance its customers' banking experience, including the development of its

mobile banking app and investment in new technologies such as blockchain.

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Asset Analysis

According to the Uniform Bank Performance Report (UBPR) for BBVA, the bank's asset

composition as of the third quarter of 2021 showed that 57.8% of its assets were in loans, 35.6%

in securities, and 2.5% in cash and due from banks. This compares favorably to its peer group,

which has an average of 47.8% in loans, 44.1% in securities, and 2.6% in cash and due from

banks. This suggests that BBVA has a higher focus on lending activities than its peers.

When it comes to the security portfolio composition, BBVA's UBPR shows that it has a

higher percentage of securities available for sale and held to maturity than its peer group. BBVA

has 23.6% of its securities portfolio in available-for-sale securities and 11.8% in held-to-maturity

securities, compared to the peer group average of 19.8% and 9.3%, respectively.

In terms of loan portfolio composition, BBVA's UBPR indicates that the bank has a

higher concentration of commercial and industrial loans than its peer group. As of Q3 2021,

38.6% of BBVA's loans were in commercial and industrial loans, compared to the peer group

average of 28.5%. The bank also has a slightly higher concentration of real estate loans than its

peers, with 24.4% of its loans in this category, compared to the peer group average of 23.3%.

When it comes to asset quality, BBVA's UBPR shows that the bank has a lower

noncurrent loan ratio than its peer group. As of Q3 2021, BBVA's noncurrent loans ratio was

0.75%, compared to the peer group average of 1.04%. This suggests that BBVA has a stronger

asset quality than its peers.

In terms of off-balance sheet assets, BBVA's UBPR shows that the bank has a higher

concentration of derivative contracts than its peer group, with 11.7% of its off-balance sheet

assets in this category, compared to the peer group average of 6.2%.

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In terms of interest rate risk, BBVA's UBPR indicates that the bank has moderate

exposure to interest rate risk. The report shows that the bank has a net interest margin of 2.16%

and a net interest income sensitivity to rate shocks of -3.8%. This suggests that BBVA has some

protection against rising interest rates, but also some vulnerability to falling rates.

Over time, BBVA's UBPR shows some interesting changes in the bank's asset

composition. For example, from Q3 2020 to Q3 2021, the bank increased its concentration in

commercial and industrial loans from 35.6% to 38.6%, while reducing its concentration in real

estate loans from 25.9% to 24.4%. Additionally, the bank reduced its concentration in

available-for-sale securities from 26.3% to 23.6% over the same period. These changes suggest

that BBVA is adjusting its asset composition in response to market conditions and changing

customer needs.
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Liability Analysis

According to the Uniform Bank Performance Report (UBPR) for BBVA, the bank's

liability composition as of the third quarter of 2021 showed that 73.7% of its liabilities were in

deposits, while 11.3% were in other borrowings. This compares favorably to its peer group,

which has an average of 76.1% in deposits and 13.6% in other borrowings. This suggests that

BBVA has a lower reliance on borrowings than its peers.

When it comes to depositing composition, BBVA's UBPR shows that the bank has a

higher concentration of noninterest-bearing deposits than its peer group. As of Q3 2021, 28.6%

of BBVA's deposits were in noninterest-bearing deposits, compared to the peer group average of

21.9%. The bank also has a slightly higher concentration of savings deposits than its peers, with

17.3% of its deposits in this category, compared to the peer group average of 16.0%.

BBVA's UBPR also indicates that the bank has strong deposit-based ratios when

compared to its peer group. For example, the bank's loan-to-deposit ratio was 72.5%, compared

to the peer group average of 81.7%. This suggests that BBVA has a stronger ability to fund its

lending activities through its deposit base than its peers. Additionally, the bank's core deposit

ratio was 74.3%, compared to the peer group average of 71.7%, indicating a strong base of stable

deposits.

When it comes to trend analysis, BBVA's UBPR shows some interesting changes in the

bank's liability composition over time. For example, from Q3 2020 to Q3 2021, the bank

increased its concentration in noninterest-bearing deposits from 25.2% to 28.6%, while reducing

its concentration in savings deposits from 18.7% to 17.3%. The bank also reduced its
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concentration in time deposits from 27.1% to 24.9% over the same period. These changes

suggest that BBVA is focusing on building its base of stable, low-cost deposits while reducing its

reliance on more expensive forms of funding.

Overall, BBVA's UBPR suggests that the bank has a strong liability composition and

deposit base, with a lower reliance on borrowings than its peers. Additionally, the bank's strong

deposit-based ratios and trend towards a stronger base of stable deposits suggest that BBVA has

a strong funding position to support its lending activities.

Capital Analysis

According to the Uniform Bank Performance Report (UBPR) for BBVA, the bank has a

strong capital position compared to its peer group. As of the third quarter of 2021, BBVA's Tier 1

capital ratio was 14.4%, compared to the peer group average of 12.3%. This indicates that the

bank has a higher level of high-quality capital than its peers.

When it comes to capital composition, BBVA's UBPR shows that the bank's Tier 1 capital

is composed of 64.3% common equity and 35.7% noncumulative perpetual preferred stock. This

compares favorably to the peer group average, which has a higher concentration of preferred

stock. BBVA's UBPR also indicates that the bank has a lower equity multiplier than its peer

group, with an assets-to-capital ratio of 6.9 compared to the peer group average of 9.1. This

suggests that BBVA has a more conservative approach to leverage than its peers.

In terms of trend analysis, BBVA's UBPR shows that the bank has experienced growth in

both assets and capital over the past year. From Q3 2020 to Q3 2021, the bank's assets grew by

4.4%, while its Tier 1 capital grew by 10.1%. This suggests that the bank is maintaining a strong

capital position relative to its asset growth

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When it comes to other capital-based ratios, BBVA's UBPR shows that the bank has

strong ratios compared to its peer group. For example, the bank's total risk-based capital ratio

was 18.1%, compared to the peer group average of 15.8%. Additionally, the bank's leverage ratio

was 8.8%, compared to the peer group average of 10.2%. These ratios indicate that BBVA has a

strong ability to absorb losses and maintain a strong capital position.

Overall, BBVA's UBPR suggests that the bank has a strong capital position compared to

its peer group. The bank's strong Tier 1 capital ratio, lower equity multiplier, and strong growth

in both assets and capital suggest that BBVA is maintaining a conservative approach to leverage

and maintaining a strong capital position to support its business activities.

Profitability Anyalsis

According to the Uniform Bank Performance Report (UBPR) for BBVA, the bank has

maintained a strong profitability position compared to its peer group. As of the third quarter of

2021, BBVA's return on assets (ROA) was 0.88%, compared to the peer group average of 0.80%.

Additionally, the bank's return on equity (ROE) was 7.76%, compared to the peer group average

of 6.64%.

BBVA's UBPR indicates that the bank's net interest income (NII) was $2.2 billion in the

third quarter of 2021. This represents a decrease of 3.3% from the previous quarter but an

increase of 8.4% from the same quarter of the previous year. BBVA's NII as a percentage of

average assets was 2.27%, which was higher than the peer group average of 2.10%. The bank's

UBPR also indicates that the bank has a higher concentration of earning assets, which likely

contributes to its higher NII.

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When it comes to noninterest income and expenses (burden), BBVA's UBPR shows that

the bank has a lower noninterest expense-to-average assets ratio than the peer group average. In

the third quarter of 2021, BBVA's noninterest expenses were $1.8 billion, representing 1.85% of

average assets. This compares favorably to the peer group average of 1.94%

BBVA's UBPR also shows that the bank has maintained a strong loan loss provision

(PLL) compared to its peer group. As of the third quarter of 2021, BBVA's PLL was $214

million, which was lower than the previous quarter but higher than the same quarter of the

previous year. BBVA's PLL as a percentage of average loans was 0.29%, which was lower than

the peer group average of 0.42%. This suggests that BBVA has maintained a strong credit quality

position and has a lower level of potential credit losses.

In terms of trend analysis, BBVA's UBPR shows that the bank has maintained a stable

profitability position over the past year. While NII has decreased slightly over the past quarter, it

has increased significantly over the past year. Noninterest expenses have remained relatively

stable, and PLL has decreased slightly over the past quarter. ROA and ROE have remained

strong and stable, indicating that BBVA is maintaining a consistent and profitable business

model.

Overall, BBVA's UBPR suggests that the bank has maintained a strong profitability

position compared to its peer group. The bank's higher NII, lower noninterest expenses, and

lower PLL suggest that BBVA has a strong ability to generate profits and maintain a strong credit

quality position.
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Liquidity and efficiency analysis

The Uniform Bank Performance Report (UBPR) for BBVA shows that the bank has

maintained a strong liquidity position compared to its peer group. As of the third quarter of 2021,

BBVA's loan-to-deposit ratio was 96.72%, which was lower than the peer group average of

99.64%. Additionally, BBVA's loan-to-assets ratio was 63.05%, which was also lower than the

peer group average of 67.06%. These ratios suggest that BBVA has a higher level of available

liquidity to meet its funding needs.

BBVA's UBPR also shows that the bank has maintained a strong efficiency position

compared to its peer group. In the third quarter of 2021, BBVA's efficiency ratio was 59.73%,

which was lower than the peer group average of 60.44%. This suggests that BBVA is able to

operate its business with a lower level of expenses relative to its revenue.

When it comes to trend analysis, BBVA's UBPR shows that the bank has maintained a

stable liquidity and efficiency position over the past year. The bank's loan-to-deposit and

loan-to-assets ratios have remained relatively stable, indicating that BBVA has a consistent level

of available liquidity. Additionally, the bank's efficiency ratio has remained relatively stable over

the past year, suggesting that BBVA has a consistent ability to operate its business with a lower

level of expenses relative to its revenue.

Overall, BBVA's UBPR suggests that the bank has maintained a strong liquidity and

efficiency position compared to its peer group. The bank's lower loan-to-deposit and

loan-to-assets ratios suggest that it has a higher level of available liquidity to meet its funding

needs. Additionally, the bank's lower efficiency ratio indicates that it is able to operate its

business with a lower level of expenses relative to its revenue. These ratios and measures suggest

that BBVA has a strong ability to meet its funding needs and operate its business efficiently.
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Conclusion

Based on the analysis of BBVA's UBPR, it appears that the bank is in a strong financial

position. The bank has maintained a healthy level of capital and liquidity and has consistently

generated profitability metrics that are in line with or better than its peer group.

In terms of strengths, BBVA has a strong capital position compared to its peer group,

which provides a cushion against potential losses. Additionally, the bank's liquidity ratios suggest

that it has a higher level of available liquidity to meet its funding needs. The bank's asset quality

ratios are also strong, indicating that it has a low level of nonperforming assets

However, one potential weakness for BBVA is its loan portfolio composition, as the bank

has a higher percentage of consumer loans than its peer group. Additionally, the bank's net

interest margin has been under pressure due to the low-interest rate environment.

Overall, BBVA appears to be in a healthy financial position, with strong capital, liquidity,

and asset quality. While there are some potential weaknesses to monitor, the bank's overall

financial performance is strong and suggests that it is well-positioned to weather any potential

economic downturns.