SKN | BBVA Sees Sustainable Growth as Mexico Drives Profitability and Capital Returns

Key Takeaways:

• BBVA generated a 22.2% return on tangible equity in the first half of the year, reinforcing management’s view that profitability can remain sustainable.
• The bank’s lending book has expanded 62% since early 2021, significantly above the 13% average growth cited for the other 15 largest European banks.
• Mexico remains BBVA’s principal growth engine, supported by exports to the United States, low banking leverage, infrastructure and energy investment, and the bank’s strong local franchise.
• Turkey remains the principal near-term pressure point, with higher inflation and interest-rate expectations weighing on BBVA’s roughly €1 billion profit outlook.

BBVA is positioning its current growth model as sustainable, with Chief Executive Onur Genç pointing to strong profitability, expanding lending and disciplined capital allocation. The bank’s strategy is increasingly defined by the combination of strong local franchises and targeted technology investment, with Mexico providing the clearest foundation for continued expansion.

BBVA’s Returns Are Supported by Stronger Lending Growth

BBVA reported a 22.2% return on tangible equity for the first half of the year, a level that management views as evidence that the bank can sustain attractive profitability while continuing to expand its balance sheet.

The lending trajectory is particularly notable. Since the beginning of 2021, BBVA has increased its lending book by 62%. Genç contrasted this with an average growth rate of 13% among the other 15 largest European banks, highlighting the differentiated expansion of BBVA’s operating markets.

For a global wealth holder, the significance is less about headline loan growth and more about whether BBVA can maintain disciplined returns while expanding. Strong growth becomes strategically valuable when the bank can convert additional balance-sheet capacity into recurring earnings without compromising capital efficiency.

Mexico Remains the Core Growth Engine

Mexico sits at the center of BBVA’s growth thesis. The bank sees support from rising exports to the United States, relatively low banking leverage, planned infrastructure and energy investment, and the strength of its existing market position.

BBVA’s established franchise gives it a significant platform from which to capture this activity. At the same time, increasing fintech competition means technology investment remains essential to protecting customer relationships and maintaining efficiency as financial services become increasingly digital.

This combination of local scale, technology and capital discipline is central to BBVA’s strategy. Rather than relying exclusively on balance-sheet expansion, the bank is seeking to reinforce the infrastructure that supports long-term customer and lending growth.

Turkey Creates a Clearer Near-Term Risk

Turkey represents a different part of the BBVA equation. The bank has raised its inflation and interest-rate forecasts and no longer expects to exit hyperinflation accounting in 2028. That change creates additional uncertainty around the contribution of the Turkish business.

Management now expects downward pressure on an approximately €1 billion profit outlook for the country. The issue is therefore not the underlying importance of Turkey to BBVA, but the visibility of earnings and capital returns while the macroeconomic environment remains difficult.

What BBVA’s Strategy Means for Long-Term Capital

BBVA’s current model rests on a relatively clear formula: high returns on tangible equity, sustained lending expansion, strong local franchises and disciplined reinvestment. Mexico provides the growth platform, while technology spending is intended to preserve competitiveness as banking becomes more digital.

The key variable for sophisticated investors is whether these advantages remain durable rather than cyclical. Monitoring return on tangible equity, loan growth, capital allocation and the evolving contribution from Mexico and Turkey will provide a clearer measure of whether BBVA can sustain its current profitability profile.

For a confidential discussion regarding your cross-border banking structure, international banking exposure or global wealth strategy, contact our senior advisory team.