Banco Bilbao Vizcaya Argentaria, S.A. BBVA

Key data

The business

BBVA is a retail and commercial bank: it takes deposits, makes loans, runs cards and payments, and pockets the gap. What makes it unusual among European banks is where the money comes from. More than half of group profit is earned in Mexico, where BBVA (still Bancomer on the branch signs) is the largest bank in the country and interest rates run far above Europe's. That is why it earns a net interest margin of 3.29% and a return on tangible equity near 19%, roughly double the European average. Spain is the second engine, Turkey's Garanti and South America the volatile remainder. The moat is the Mexican deposit franchise: tens of millions of customers who bank through the app and leave cheap money on deposit, a position built over decades that a rival cannot buy. The bet and the risk are the same word.

The numbers

Two things move together here: profit that has nearly doubled in four years, and a share count the bank keeps shrinking. Start with the quarters, where the beats have been getting bigger.

The trend is clean acceleration: three beats in four quarters, and the size of the beat rising as Mexico and Spain both hold up. The full-year record shows why the stock re-rated.

Net income compounded about 19% a year from 2021 to 2025, and in the first half of 2026 net attributable profit reached €6.1B with second-quarter profit up 11.4%. Note the gap that matters most for a holder: EPS grew 15.2% in that quarter against 11.4% profit growth, and the difference is the buyback eating the share count. Capital funds it. CET1 sits at 12.90%, above the bank's own 11.5% to 12.0% target and far above the 8.98% regulators demand, so the surplus comes back through buybacks and a €0.60 dividend paid in April. Credit, the thing that sinks banks, is benign:

Bad loans as a share of the book fell from 2.9% to 2.6% and the impairment charge shrank quarter after quarter, which is the picture of a lender not yet in trouble. The one thing to watch is coverage, which slipped from 86% to 81% while the stock of bad loans ticked back up in the last two quarters, the earliest sign that the reserve cushion is thinning even as the ratio flatters. Cost of risk was 1.35% in H1 2026. Here is the variant view: the market has already paid for the 19% return, so the easy money, the re-rating from the 0.8-to-1.1-times book this stock fetched for most of a decade to 2.4 times today, is made. From here you own earnings and a fat shareholder yield, not another leg of multiple expansion, and the whole thing rests on Mexican return holding. Group ROTE and Mexico's profit over the next two prints settle it.

Management

Judge them on what they did with the capital. Buybacks have run every year, the third tranche is executing now against share redemption, and a further program was approved in December for about 75 basis points of capital. The revealing episode was Sabadell: management chased that domestic acquisition for over a year, the deal collapsed in October 2025, and rather than come back with a richer bid they turned the capital back to owners, a discipline that has held since with no renewed approach and buybacks uninterrupted. Guidance has been beaten in three of the last four quarters. There are no open-market insider buys or sells to read, expected for a foreign filer, so the record, not a Form 4, is the tell, and the record says: return capital, do not overpay.

How it fails or surprises you

Mexico is the whole story (and the memo's weakest spot). More than half of profit sits in one emerging market. A peso devaluation or a US tariff shock to Mexican growth hits the biggest engine directly, and a 2.4-times-book multiple assumes none of that. This is the fact the bullish read explains least well: a record price for earnings concentrated in one currency. Watch Mexico's quarterly profit and the peso.

The multiple has no cushion. At 2.4 times tangible book, richer than any point in twelve years and above the 1.7-times peer, the stock prices permanent 19% returns. A drift toward 15%, from a falling net interest margin as rates ease or a normalizing cost of risk, and the multiple has a long way down before earnings even matter. Watch group ROTE and coverage.

Capital-return compounding (right tail). If credit stays benign and the peso steadies, BBVA keeps earning 19% on equity while retiring 3% to 4% of its shares a year, so EPS compounds in the mid-teens even with only modest profit growth. The market treats the re-rate as finished. Watch the gap between EPS growth and profit growth, 3.8 points last quarter, widen.

Closing thoughts

Everyone can see the 19% return, the Mexican franchise, and the buyback, and they paid for it: the stock re-rated to a record 2.4 times book, more than it has cost at any point in twelve years. The person selling to you already captured that move up from the 0.8-to-1.1 times band this stock sat in for most of a decade, so the setup on offer is earnings growth and the yield, not another leg of multiple expansion. The left tail is fatter in the near term: at 2.4 times book there is no valuation cushion if Mexico or the peso wobbles, and coverage is quietly thinning. The right tail is real but slower, earned through capital return rather than a new story. If the downside linchpin breaks you lose the multiple, roughly a third of the price, before earnings fall a euro. If it holds you compound in the mid-teens and collect the yield.

The bet is still that Mexico keeps making BBVA rich, that Mexicans keep borrowing and paying BBVA back, and the peso holds. It breaks when Mexico's return fades, and the two numbers that tell you first are group ROTE slipping under the high teens and Mexico's quarterly profit rolling over. Until one of those turns, the record price is describing a real business, not a mistake.