BBVA Stable outlook, no clear fundamental/valuation catalyst

Research evidence excerpt

BBVA Stable outlook, no clear fundamental/valuation catalyst

of hyperinflation accounting in Turkey looking increasingly unlikely as inflation gets

12/27E 2.19 2.23 2 2.27

stuck between 30-35%, this implies a >€0.7-0.8bn earnings shortfall vs guidance in

12/28E 2.37 2.46 4 2.52

Garanti is now being "replaced" by (i) moderately higher Spanish earnings as volume/

rate prospects improve, (ii) stronger Mexican earnings in Euro terms as BBVA's assumed Ignacio Cerezo

depreciation (EUR/MX 25.6 YE28E vs current c20m proves overly conservative, and (iii) Analyst

accelerating growth in the bank's rest of business (CIB) unit. All put together, and with ignacio.cerezo@ubs.com

Turkey still as the main missing link, we see BBVA's Group profits compounding at a +44-20-7568 4409

robust pace in the next 2-3 years (c13% CAGR vs sector's c12% average) Alvaro Fernandez-Garayzabal

Analyst

Distribution focus likely maintained in 2H as CET1 is run down to c12% alvaro.fernandez-garayzabal@ubs.com

+34-91-436 9622

After delivering a <90% payout in 25 (50% cash, <40% SBBs), we see a >75% payout

(50%, >25%) and 7% yield in 26e, with SBBs amounting to €3.1bn to be announced in

2H26E as the 4Q25 €4bn SBB is still under way (75% executed). With most of the excess

CET1 having been returned by YE 26E (12.2%), we see a more normalised c65% payout

in 27E and outer years, with strong growth (RWAs 7% p.a.) preventing the bank from

closing the relative gap (sector 75%). Overall, we stand a touch below the bank's

cumulative distribution target for 25-28E (>73%/€35.3bn vs 75%/€36bn).

Valuation: marginal P/E discount to European sector average

BBVA trades at 10.1x P/E27E, <2.1x PTBV for 21% ROTE 27E. SOP PT up to €22/share

(old €20.5) on 2% higher EPS, 3-month rollover and modestly higher SOP multiples.