Annual Report (ESEF) • Feb 9, 2024
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Download Source FileThousands of Euros
| Issued capital | Share premium | Equity instruments issued other than capital | Other equity interest | Retained earnings | Revaluation surplus | Other reserves | Treasury shares | Profit attributable to owners of parent | Interim dividends | Accumulated other comprehensive income | Accumulated other comprehensive income - non-controlling interest | Other non-controlling interest items | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance at 1 January 2022 | 4,515,267 | 27,519,000 | 6,835 | 0 | 27,511,480 | 864,510 | 1,295,633 | (17,917) | 2,451,797 | (1,914,281) | 312,205 | 108,523 | 8,472 |
| Profit attributable to owners of parent | 2,365,796 | 2,365,796 | |||||||||||
| Other comprehensive income | (156,320) | 346,298 | 192,790 | (23,795) | (1,793) | ||||||||
| Total comprehensive income | 2,365,796 | (156,320) | 346,298 | 2,365,796 | 192,790 | (23,795) | (1,793) | ||||||
| Transactions with owners | |||||||||||||
| Dividends paid | (1,914,281) | (1,914,281) | |||||||||||
| Share-based payments | 49,000 | 45,000 | |||||||||||
| Reclassification of items from OCI to retained earnings | 36,763 | (36,763) | |||||||||||
| Balance at 31 December 2022 | 4,515,267 | 27,568,000 | 6,835 | 0 | 28,044,758 | 671,430 | 1,641,931 | (17,917) | 4,817,593 | 0 | 505,000 | 84,728 | 6,679 |
| Profit attributable to owners of parent | 4,451,938 | 4,451,938 | |||||||||||
| Other comprehensive income | 341,319 | 47,766 | (376,513) | 8,402 | 550 | ||||||||
| Total comprehensive income | 4,451,938 | 341,319 | 47,766 | 4,451,938 | (376,513) | 8,402 | 550 | ||||||
| Transactions with owners | |||||||||||||
| Dividends paid | (1,914,281) | (1,914,281) | |||||||||||
| Share-based payments | 27,600 | 64,000 | |||||||||||
| Balance at 31 December 2023 | 4,515,267 | 27,595,600 | 6,835 | 0 | 30,646,415 | 1,012,749 | 1,689,697 | (17,917) | 7,355,250 | 0 | 128,487 | 93,130 | 7,229 |
Thousands of Euros
| Issued capital | Share premium | Equity instruments issued other than capital | Other equity interest | Retained earnings | Revaluation surplus | Other reserves | Treasury shares | Profit attributable to owners of parent | Interim dividends | Accumulated other comprehensive income | Accumulated other comprehensive income - non-controlling interest | Other non-controlling interest items | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance at 1 January 2021 | 4,515,267 | 27,519,000 | 6,835 | 0 | 26,173,122 | 864,510 | 1,184,710 | (17,917) | 2,013,069 | (1,914,281) | 272,155 | 95,691 | 7,795 |
| Profit attributable to owners of parent | 1,972,546 | 1,972,546 | |||||||||||
| Other comprehensive income | 137,075 | (27,789) | (65,937) | 12,832 | 677 | ||||||||
| Total comprehensive income | 1,972,546 | 137,075 | (27,789) | 1,972,546 | (65,937) | 12,832 | 677 | ||||||
| Transactions with owners | |||||||||||||
| Dividends paid | (1,914,281) | (1,914,281) | |||||||||||
| Share-based payments | 0 | 41,673 | |||||||||||
| Reclassification of items from OCI to retained earnings | 10,000 | (10,000) | |||||||||||
| Balance at 31 December 2021 | 4,515,267 | 27,519,000 | 6,835 | 0 | 26,283,040 | 991,585 | 1,156,921 | (17,917) | 3,985,615 | 0 | 206,218 | 108,523 | 8,472 |
| Profit attributable to owners of parent | 2,365,796 | 2,365,796 | |||||||||||
| Other comprehensive income | (156,320) | 346,298 | 192,790 | (23,795) | (1,793) | ||||||||
| Total comprehensive income | 2,365,796 | (156,320) | 346,298 | 2,365,796 | 192,790 | (23,795) | (1,793) | ||||||
| Transactions with owners | |||||||||||||
| Dividends paid | (1,914,281) | (1,914,281) | |||||||||||
| Share-based payments | 49,000 | 45,000 | |||||||||||
| Reclassification of items from OCI to retained earnings | 36,763 | (36,763) | |||||||||||
| Balance at 31 December 2022 | 4,515,267 | 27,568,000 | 6,835 | 0 | 28,044,758 | 671,430 | 1,641,931 | (17,917) | 4,817,593 | 0 | 505,000 | 84,728 | 6,679 |
Thousands of Euros
| Issued capital | Share premium | Equity instruments issued other than capital | Other equity interest | Retained earnings | Revaluation surplus | Other reserves | Treasury shares | Profit attributable to owners of parent | Interim dividends | Accumulated other comprehensive income | Accumulated other comprehensive income - non-controlling interest | Other non-controlling interest items | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance at 1 January 2021 | 4,515,267 | 27,519,000 | 6,835 | 0 | 26,173,122 | 864,510 | 1,184,710 | (17,917) | 2,013,069 | (1,914,281) | 272,155 | 95,691 | 7,795 |
| Profit attributable to owners of parent | 1,972,546 | 1,972,546 | |||||||||||
| Other comprehensive income | 137,075 | (27,789) | (65,937) | 12,832 | 677 | ||||||||
| Total comprehensive income | 1,972,546 | 137,075 | (27,789) | 1,972,546 | (65,937) | 12,832 | 677 | ||||||
| Transactions with owners | |||||||||||||
| Dividends paid | (1,914,281) | (1,914,281) | |||||||||||
| Share-based payments | 0 | 41,673 | |||||||||||
| Reclassification of items from OCI to retained earnings | 10,000 | (10,000) | |||||||||||
| Balance at 31 December 2021 | 4,515,267 | 27,519,000 | 6,835 | 0 | 26,283,040 | 991,585 | 1,156,921 | (17,917) | 3,985,615 | 0 | 206,218 | 108,523 | 8,472 |
| Profit attributable to owners of parent | 2,365,796 | 2,365,796 | |||||||||||
| Other comprehensive income | (156,320) | 346,298 | 192,790 | (23,795) | (1,793) | ||||||||
| Total comprehensive income | 2,365,796 | (156,320) | 346,298 | 2,365,796 | 192,790 | (23,795) | (1,793) | ||||||
| Transactions with owners | |||||||||||||
| Dividends paid | (1,914,281) | (1,914,281) | |||||||||||
| Share-based payments | 49,000 | 45,000 | |||||||||||
| Reclassification of items from OCI to retained earnings | 36,763 | (36,763) | |||||||||||
| Balance at 31 December 2022 | 4,515,267 | 27,568,000 | 6,835 | 0 | 28,044,758 | 671,430 | 1,641,931 | (17,917) | 4,817,593 | 0 | 505,000 | 84,728 | 6,679 |
| Profit attributable to owners of parent | 4,451,938 | 4,451,938 | |||||||||||
| Other comprehensive income | 341,319 | 47,766 | (376,513) | 8,402 | 550 | ||||||||
| Total comprehensive income | 4,451,938 | 341,319 | 47,766 | 4,451,938 | (376,513) | 8,402 | 550 | ||||||
| Transactions with owners | |||||||||||||
| Dividends paid | (1,914,281) | (1,914,281) | |||||||||||
| Share-based payments | 27,600 | 64,000 | |||||||||||
| Balance at 31 December 2023 | 4,515,267 | 27,595,600 | 6,835 | 0 | 30,646,415 | 1,012,749 | 1,689,697 | (17,917) | 7,355,250 | 0 | 128,487 | 93,130 | 7,229 |
Thousands of Euros
| Issued capital | Share premium | Equity instruments issued other than capital | Other equity interest | Retained earnings | Revaluation surplus | Other reserves | Treasury shares | Profit attributable to owners of parent | Interim dividends | Accumulated other comprehensive income | Accumulated other comprehensive income - non-controlling interest | Other non-controlling interest items | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance at 1 January 2021 | 4,515,267 | 27,519,000 | 6,835 | 0 | 26,173,122 | 864,510 | 1,184,710 | (17,917) | 2,013,069 | (1,914,281) | 272,155 | 95,691 | 7,795 |
| Profit attributable to owners of parent | 1,972,546 | 1,972,546 | |||||||||||
| Other comprehensive income | 137,075 | (27,789) | (65,937) | 12,832 | 677 | ||||||||
| Total comprehensive income | 1,972,546 | 137,075 | (27,789) | 1,972,546 | (65,937) | 12,832 | 677 | ||||||
| Transactions with owners | |||||||||||||
| Dividends paid | (1,914,281) | (1,914,281) | |||||||||||
| Share-based payments | 0 | 41,673 | |||||||||||
| Reclassification of items from OCI to retained earnings | 10,000 | (10,000) | |||||||||||
| Balance at 31 December 2021 | 4,515,267 | 27,519,000 | 6,835 | 0 | 26,283,040 | 991,585 | 1,156,921 | (17,917) | 3,985,615 | 0 | 206,218 | 108,523 | 8,472 |
| Profit attributable to owners of parent | 2,365,796 | 2,365,796 | |||||||||||
| Other comprehensive income | (156,320) | 346,298 | 192,790 | (23,795) | (1,793) | ||||||||
| Total comprehensive income | 2,365,796 | (156,320) | 346,298 | 2,365,796 | 192,790 | (23,795) | (1,793) | ||||||
| Transactions with owners | |||||||||||||
| Dividends paid | (1,914,281) | (1,914,281) | |||||||||||
| Share-based payments | 49,000 | 45,000 | |||||||||||
| Reclassification of items from OCI to retained earnings | 36,763 | (36,763) | |||||||||||
| Balance at 31 December 2022 | 4,515,267 | 27,568,000 | 6,835 | 0 | 28,044,758 | 671,430 | 1,641,931 | (17,917) | 4,817,593 | 0 | 505,000 | 84,728 | 6,679 |
| Profit attributable to owners of parent | 4,451,938 | 4,451,938 | |||||||||||
| Other comprehensive income | 341,319 | 47,766 | (376,513) | 8,402 | 550 | ||||||||
| Total comprehensive income | 4,451,938 | 341,319 | 47,766 | 4,451,938 | (376,513) | 8,402 | 550 | ||||||
| Transactions with owners | |||||||||||||
| Dividends paid | (1,914,281) | (1,914,281) | |||||||||||
| Share-based payments | 27,600 | 64,000 | |||||||||||
| Balance at 31 December 2023 | 4,515,267 | 27,595,600 | 6,835 | 0 | 30,646,415 | 1,012,749 | 1,689,697 | (17,917) | 7,355,250 | 0 | 128,487 | 93,130 | 7,229 |
Thousands of Euros
| Issued capital | Share premium | Equity instruments issued other than capital | Other equity interest | Retained earnings | Revaluation surplus | Other reserves | Treasury shares | Profit attributable to owners of parent | Interim dividends | Accumulated other comprehensive income | Accumulated other comprehensive income - non-controlling interest | Other non-controlling interest items | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance at 1 January 2021 | 4,515,267 | 27,519,000 | 6,835 | 0 | 26,173,122 | 864,510 | 1,184,710 | (17,917) | 2,013,069 | (1,914,281) | 272,155 | 95,691 | 7,795 |
| Profit attributable to owners of parent | 1,972,546 | 1,972,546 | |||||||||||
| Other comprehensive income | 137,075 | (27,789) | (65,937) | 12,832 | 677 | ||||||||
| Total comprehensive income | 1,972,546 | 137,075 | (27,789) | 1,972,546 | (65,937) | 12,832 | 677 | ||||||
| Transactions with owners | |||||||||||||
| Dividends paid | (1,914,281) | (1,914,281) | |||||||||||
| Share-based payments | 0 | 41,673 | |||||||||||
| Reclassification of items from OCI to retained earnings | 10,000 | (10,000) | |||||||||||
| Balance at 31 December 2021 | 4,515,267 | 27,519,000 | 6,835 | 0 | 26,283,040 | 991,585 | 1,156,921 | (17,917) | 3,985,615 | 0 | 206,218 | 108,523 | 8,472 |
| Profit attributable to owners of parent | 2,365,796 | 2,365,796 | |||||||||||
| Other comprehensive income | (156,320) | 346,298 | 192,790 | (23,795) | (1,793) | ||||||||
| Total comprehensive income | 2,365,796 | (156,320) | 346,298 | 2,365,796 | 192,790 | (23,795) | (1,793) | ||||||
| Transactions with owners | |||||||||||||
| Dividends paid | (1,914,281) | (1,914,281) | |||||||||||
| Share-based payments | 49,000 | 45,000 | |||||||||||
| Reclassification of items from OCI to retained earnings | 36,763 | (36,763) | |||||||||||
| Balance at 31 December 2022 | 4,515,267 | 27,568,000 | 6,835 | 0 | 28,044,758 | 671,430 | 1,641,931 | (17,917) | 4,817,593 | 0 | 505,000 | 84,728 | 6,679 |
| Profit attributable to owners of parent | 4,451,938 | 4,451,938 | |||||||||||
| Other comprehensive income | 341,319 | 47,766 | (376,513) | 8,402 | 550 | ||||||||
| Total comprehensive income | 4,451,938 | 341,319 | 47,766 | 4,451,938 | (376,513) | 8,402 | 550 | ||||||
| Transactions with owners | |||||||||||||
| Dividends paid | (1,914,281) | (1,914,281) | |||||||||||
| Share-based payments | 27,600 | 64,000 | |||||||||||
| Balance at 31 December 2023 | 4,515,267 | 27,595,600 | 6,835 | 0 | 30,646,415 | 1,012,749 | 1,689,697 | (17,917) | 7,355,250 | 0 | 128,487 | 93,130 | 7,229 |
Thousands of Euros
| Issued capital | Share premium | Equity instruments issued other than capital | Other equity interest | Retained earnings | Revaluation surplus | Other reserves | Treasury shares | Profit attributable to owners of parent | Interim dividends | Accumulated other comprehensive income | Accumulated other comprehensive income - non-controlling interest | Other non-controlling interest items | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance at 1 January 2023 | 4,515,267 | 27,568,000 | 6,835 | 0 | 28,044,758 | 671,430 | 1,641,931 | (17,917) | 4,817,593 | 0 | 505,000 | 84,728 | 6,679 |
| Profit attributable to owners of parent | 4,451,938 | 4,451,938 | |||||||||||
| Other comprehensive income | 341,319 | 47,766 | (376,513) | 8,402 | 550 | ||||||||
| Total comprehensive income | 4,451,938 | 341,319 | 47,766 | 4,451,938 | (376,513) | 8,402 | 550 | ||||||
| Transactions with owners | |||||||||||||
| Dividends paid | (1,914,281) | (1,914,281) | |||||||||||
| Share-based payments | 27,600 | 64,000 | |||||||||||
| Balance at 31 December 2023 | 4,515,267 | 27,595,600 | 6,835 | 0 | 30,646,415 | 1,012,749 | 1,689,697 | (17,917) | 7,355,250 | 0 | 128,487 | 93,130 | 7,229 |
Thousands of Euros
| Issued capital | Share premium | Equity instruments issued other than capital | Other equity interest | Retained earnings | Revaluation surplus | Other reserves | Treasury shares | Profit attributable to owners of parent | Interim dividends | Accumulated other comprehensive income | Accumulated other comprehensive income - non-controlling interest | Other non-controlling interest items | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance at 1 January 2023 | 4,515,267 | 27,568,000 | 6,835 | 0 | 28,044,758 | 671,430 | 1,641,931 | (17,917) | 4,817,593 | 0 | 505,000 | 84,728 | 6,679 |
| Profit attributable to owners of parent | 4,451,938 | 4,451,938 | |||||||||||
| Other comprehensive income | 341,319 | 47,766 | (376,513) | 8,402 | 550 | ||||||||
| Total comprehensive income | 4,451,938 | 341,319 | 47,766 | 4,451,938 | (376,513) | 8,402 | 550 | ||||||
| Transactions with owners | |||||||||||||
| Dividends paid | (1,914,281) | (1,914,281) | |||||||||||
| Share-based payments | 27,600 | 64,000 | |||||||||||
| Balance at 31 December 2023 | 4,515,267 | 27,595,600 | 6,835 | 0 | 30,646,415 | 1,012,749 | 1,689,697 | (17,917) | 7,355,250 | 0 | 128,487 | 93,130 | 7,229 |
Thousands of Euros
| Issued capital | Share premium | Equity instruments issued other than capital | Other equity interest | Retained earnings | Revaluation surplus | Other reserves | Treasury shares | Profit attributable to owners of parent | Interim dividends | Accumulated other comprehensive income | Accumulated other comprehensive income - non-controlling interest | Other non-controlling interest items | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance at 1 January 2021 | 4,515,267 | 27,519,000 | 6,835 | 0 | 26,173,122 | 864,510 | 1,184,710 | (17,917) | 2,013,069 | (1,914,281) | 272,155 | 95,691 | 7,795 |
| Profit attributable to owners of parent | 1,972,546 | 1,972,546 | |||||||||||
| Other comprehensive income | 137,075 | (27,789) | (65,937) | 12,832 | 677 | ||||||||
| Total comprehensive income | 1,972,546 | 137,075 | (27,789) | 1,972,546 | (65,937) | 12,832 | 677 | ||||||
| Transactions with owners | |||||||||||||
| Dividends paid | (1,914,281) | (1,914,281) | |||||||||||
| Share-based payments | 0 | 41,673 | |||||||||||
| Reclassification of items from OCI to retained earnings | 10,000 | (10,000) | |||||||||||
| Balance at 31 December 2021 | 4,515,267 | 27,519,000 | 6,835 | 0 | 26,283,040 | 991,585 | 1,156,921 | (17,917) | 3,985,615 | 0 | 206,218 | 108,523 | 8,472 |
| Profit attributable to owners of parent | 2,365,796 | 2,365,796 | |||||||||||
| Other comprehensive income | (156,320) | 346,298 | 192,790 | (23,795) | (1,793) | ||||||||
| Total comprehensive income | 2,365,796 | (156,320) | 346,298 | 2,365,796 | 192,790 | (23,795) | (1,793) | ||||||
| Transactions with owners | |||||||||||||
| Dividends paid | (1,914,281) | (1,914,281) | |||||||||||
| Share-based payments | 49,000 | 45,000 | |||||||||||
| Reclassification of items from OCI to retained earnings | 36,763 | (36,763) | |||||||||||
| Balance at 31 December 2022 | 4,515,267 | 27,568,000 | 6,835 | 0 | 28,044,758 | 671,430 | 1,641,931 | (17,917) | 4,817,593 | 0 | 505,000 | 84,728 | 6,679 |
| Profit attributable to owners of parent | 4,451,938 | 4,451,938 | |||||||||||
| Other comprehensive income | 341,319 | 47,766 | (376,513) | 8,402 | 550 | ||||||||
| Total comprehensive income | 4,451,938 | 341,319 | 47,766 | 4,451,938 | (376,513) | 8,402 | 550 | ||||||
| Transactions with owners | |||||||||||||
| Dividends paid | (1,914,281) | (1,914,281) | |||||||||||
| Share-based payments | 27,600 | 64,000 | |||||||||||
| Balance at 31 December 2023 | 4,515,267 | 27,595,600 | 6,835 | 0 | 30,646,415 | 1,012,749 | 1,689,697 | (17,917) | 7,355,250 | 0 | 128,487 | 93,130 | 7,229 |
Note 1. Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
Note 2. Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
GLOSSARY
CONSOLIDATED MANAGEMENT REPORT
DISCLAIMER
3 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
Consolidated balance sheets as of December 31, 2023, 2022 and 2021
ASSETS
(Millions of Euros)
| Notes | 2023 | 2022 ⁽¹⁾ | 2021 ⁽¹⁾ | |
|---|---|---|---|---|
| CASH, CASH BALANCES AT CENTRAL BANKS AND OTHER DEMAND DEPOSITS | 9 | 75,416 | 79,756 | 67,799 |
| FINANCIAL ASSETS HELD FOR TRADING | 10 | 141,042 | 110,671 | 123,493 |
| Derivatives | 34,293 | 39,908 | 30,933 | |
| Equity instruments | 4,589 | 4,404 | 15,963 | |
| Debt securities | 28,569 | 24,367 | 25,790 | |
| Loans and advances to central banks | 2,809 | 1,632 | 3,467 | |
| Loans and advances to credit institutions | 56,599 | 25,231 | 31,916 | |
| Loans and advances to customers | 14,182 | 15,130 | 15,424 | |
| NON-TRADING FINANCIAL ASSETS MANDATORILY AT FAIR VALUE THROUGH PROFIT OR LOSS | 11 | 8,737 | 6,888 | 6,086 |
| Equity instruments | 7,963 | 6,511 | 5,303 | |
| Debt securities | 484 | 129 | 128 | |
| Loans and advances to customers | 290 | 247 | 655 | |
| FINANCIAL ASSETS DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS | 12 | 955 | 913 | 1,092 |
| Debt securities | 955 | 913 | 1,092 | |
| FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME | 13 | 62,205 | 65,374 | 60,421 |
| Equity instruments | 1,217 | 1,198 | 1,320 | |
| Debt securities | 60,963 | 64,150 | 59,074 | |
| Loans and advances to credit institutions | 26 | 26 | 27 | |
| FINANCIAL ASSETS AT AMORTIZED COST | 14 | 451,732 | 414,421 | 372,676 |
| Debt securities | 49,462 | 36,639 | 34,781 | |
| Loans and advances to central banks | 7,151 | 4,401 | 5,681 | |
| Loans and advances to credit institutions | 17,477 | 16,031 | 13,276 | |
| Loans and advances to customers | 377,643 | 357,351 | 318,939 | |
| DERIVATIVES - HEDGE ACCOUNTING | 15 | 1,482 | 1,891 | 1,805 |
| FAIR VALUE CHANGES OF THE HEDGED ITEMS IN PORTFOLIO HEDGES OF INTEREST RATE RISK | 15 | (97) | (148) | 5 |
| JOINT VENTURES AND ASSOCIATES | 16 | 976 | 916 | 900 |
| Joint ventures | 93 | 100 | 152 | |
| Associates | 883 | 816 | 749 | |
| INSURANCE AND REINSURANCE ASSETS | 23 | 211 | 183 | 269 |
| TANGIBLE ASSETS | 17 | 9,253 | 8,737 | 7,298 |
| Properties, plant and equipment | 9,046 | 8,441 | 7,107 | |
| For own use | 8,295 | 7,911 | 6,874 | |
| Other assets leased out under an operating lease | 751 | 530 | 233 | |
| Investment properties | 207 | 296 | 191 | |
| INTANGIBLE ASSETS | 18 | 2,363 | 2,156 | 2,197 |
| Goodwill | 795 | 707 | 818 | |
| Other intangible assets | 1,568 | 1,449 | 1,379 | |
| TAX ASSETS | 19 | 17,501 | 16,725 | 15,850 |
| Current tax assets | 2,860 | 1,978 | 932 | |
| Deferred tax assets | 14,641 | 14,747 | 14,917 | |
| OTHER ASSETS | 20 | 2,859 | 2,586 | 1,934 |
| Insurance contracts linked to pensions | — | — | — | |
| Inventories | 276 | 325 | 424 | |
| Other | 2,583 | 2,260 | 1,510 | |
| NON-CURRENT ASSETS AND DISPOSAL GROUPS CLASSIFIED AS HELD FOR SALE | 21 | 923 | 1,022 | 1,061 |
| TOTAL ASSETS | 3 / 6 | 775,558 | 712,092 | 662,885 |
⁽¹⁾ Presented for comparison purposes only (see Note 1.3). The Notes and Appendices are an integral part of the consolidated balance sheet as of December 31, 2023.
4 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
Consolidated balance sheets as of December 31, 2023, 2022 and 2021 (continued)
LIABILITIES AND EQUITY
(Millions of Euros)
| Notes | 2023 | 2022 ⁽¹⁾ | 2021 ⁽¹⁾ | |
|---|---|---|---|---|
| FINANCIAL LIABILITIES HELD FOR TRADING | 10 | 121,715 | 95,611 | 91,135 |
| Derivatives | 33,045 | 37,909 | 31,705 | |
| Short positions | 15,735 | 13,487 | 15,135 | |
| Deposits from central banks | 6,397 | 3,950 | 11,248 | |
| Deposits from credit institutions | 43,337 | 28,924 | 16,176 | |
| Customer deposits | 23,201 | 11,341 | 16,870 | |
| FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS | 12 | 13,299 | 10,580 | 9,683 |
| Deposits from central banks | — | — | — | |
| Deposits from credit institutions | — | — | — | |
| Customer deposits | 717 | 700 | 809 | |
| Debt certificates issued | 3,977 | 3,288 | 3,396 | |
| Other financial liabilities | 8,605 | 6,592 | 5,479 | |
| Memorandum item: Subordinated liabilities | — | — | — | |
| FINANCIAL LIABILITIES AT AMORTIZED COST | 22 | 557,589 | 529,172 | 487,893 |
| Deposits from central banks | 20,309 | 38,323 | 47,351 | |
| Deposits from credit institutions | 40,039 | 26,935 | 19,834 | |
| Customer deposits | 413,487 | 394,404 | 349,761 | |
| Debt certificates issued | 68,707 | 55,429 | 55,763 | |
| Other financial liabilities | 15,046 | 14,081 | 15,183 | |
| Memorandum item: Subordinated liabilities | 15,867 | 12,509 | 14,808 | |
| DERIVATIVES - HEDGE ACCOUNTING | 15 | 2,625 | 3,303 | 2,626 |
| FAIR VALUE CHANGES OF THE HEDGED ITEMS IN PORTFOLIO HEDGES OF INTEREST RATE RISK | 15 | — | — | — |
| LIABILITIES UNDER INSURANCE AND REINSURANCE CONTRACTS | 23 | 12,110 | 10,131 | 10,865 |
| PROVISIONS | 24 | 4,924 | 4,933 | 5,889 |
| Pensions and other post-employment defined benefit obligations | 2,571 | 2,632 | 3,576 | |
| Other long term employee benefits | 435 | 466 | 632 | |
| Provisions for taxes and other legal contingencies | 696 | 685 | 623 | |
| Commitments and guarantees given | 770 | 770 | 691 | |
| Other provisions | 452 | 380 | 366 | |
| TAX LIABILITIES | 19 | 2,554 | 2,935 | 2,413 |
| Current tax liabilities | 878 | 1,415 | 644 | |
| Deferred tax liabilities | 1,677 | 1,520 | 1,769 | |
| OTHER LIABILITIES | 20 | 5,477 | 4,909 | 3,621 |
| LIABILITIES INCLUDED IN DISPOSAL GROUPS CLASSIFIED AS HELD FOR SALE | 21 | — | — | — |
| TOTAL LIABILITIES | 720,293 | 661,575 | 614,125 |
⁽¹⁾ Presented for comparison purposes only (see Note 1.3). The Notes and Appendices are an integral part of the consolidated balance sheet as of December 31, 2023.
5 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
Consolidated balance sheets as of December 31, 2023 , 2022 and 2021 (continued)
LIABILITIES AND EQUITY (Continued)
(Millions of Euros)
| Notes | 2023 | 2022 ⁽¹⁾ | 2021 ⁽¹⁾ | |
|---|---|---|---|---|
| SHAREHOLDERS’ FUNDS | 67,955 | 64,535 | 60,383 | |
| Capital | 26 | 2,861 | 2,955 | 3,267 |
| Paid up capital | 2,861 | 2,955 | 3,267 | |
| Unpaid capital which has been called up | — | — | — | |
| Share premium | 27 | 19,769 | 20,856 | 23,599 |
| Equity instruments issued other than capital | — | — | — | |
| Other equity | 40 | 63 | 60 | |
| Retained earnings | 28 | 36,237 | 32,711 | 31,841 |
| Revaluation reserves | — | — | — | |
| Other reserves | 28 | 2,015 | 2,345 | (1,857) |
| Reserves or accumulated losses of investments in joint ventures and associates | (237) | (221) | (247) | |
| Other | 2,252 | 2,566 | (1,610) | |
| Less: treasury shares | 29 | (34) | (29) | (647) |
| Profit or loss attributable to owners of the parent | 8,019 | 6,358 | 4,653 | |
| Less: Interim dividends | 4 | (951) | (722) | (532) |
| ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | 30 | (16,254) | (17,642) | (16,476) |
| Items that will not be reclassified to profit or loss | (2,105) | (1,881) | (2,075) | |
| Actuarial gains (losses) on defined benefit pension plans | (1,049) | (760) | (998) | |
| Non-current assets and disposal groups classified as held for sale | — | — | — | |
| Share of other recognized income and expense of investments in joint ventures and associates | — | — | — | |
| Fair value changes of equity instruments measured at fair value through other comprehensive income | (1,112) | (1,194) | (1,079) | |
| Hedge ineffectiveness of fair value hedges for equity instruments measured at fair value through other comprehensive income | — | — | — | |
| Fair value changes of financial liabilities at fair value through profit or loss attributable to changes in their credit risk | 55 | 72 | 2 | |
| Items that may be reclassified to profit or loss | (14,148) | (15,760) | (14,401) | |
| Hedge of net investments in foreign operations (effective portion) | (2,498) | (1,408) | (146) | |
| Foreign currency translation | (11,419) | (13,078) | (14,988) | |
| Hedging derivatives. | ||||
| Cash flow hedges (effective portion) 133 (447) (533) | ||||
| Fair value changes of debt instruments measured at fair value through other comprehensive income (357) (809) 1,274 | ||||
| Hedging instruments (non-designated items) — — — | ||||
| Non-current assets and disposal groups classified as held for sale — — — | ||||
| Share of other recognized income and expense of investments in joint ventures and associates (8) (18) (9) | ||||
| MINORITY INTERESTS (NON-CONTROLLING INTERESTS) 3,564 3,623 4,853 | ||||
| Accumulated other comprehensive income (loss) (3,321) (3,109) (8,414) | ||||
| Other items 6,885 6,732 13,267 | ||||
| TOTAL EQUITY 55,265 50,517 48,760 | ||||
| TOTAL EQUITY AND TOTAL LIABILITIES 775,558 712,092 662,885 |
MEMORANDUM ITEM (OFF-BALANCE SHEET EXPOSURES)
(Millions of Euros)
| Notes | 2023 | 2022 (¹) | 2021 (¹) |
| ----- | ------- | -------- | -------- |
| 33 | 152,868 | 136,920 | 119,618 |
| 33 | 18,839 | 16,511 | 11,720 |
| 33 | 42,577 | 39,137 | 34,604 |
Loan commitments given
Financial guarantees given
Other commitments given
(1) Presented for comparison purposes only (see Note 1.3). The Notes and Appendices are an integral part of the consolidated balance sheet as of December 31, 2023.
6 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
Consolidated income statements for the years ended December 31, 2023, 2022 and 2021
CONSOLIDATED INCOME STATEMENTS
(Millions of Euros)
| Notes | 2023 | 2022 (¹) | 2021 (¹) |
| ----- | ------- | -------- | -------- |
| | 47,850 | 31,432 | 23,015 |
| | 3,098 | 3,110 | 1,880 |
| | 38,328 | 25,258 | 18,364 |
| | 6,424 | 3,064 | 2,770 |
| 37.1 | | | |
Interest and other income
Financial assets at fair value through other comprehensive income
Financial assets at amortized cost
Other interest income
| 37.2 | (24,761)| (12,309) | (8,329) |
Interest expense
| | 23,089 | 19,124 | 14,686 |
NET INTEREST INCOME
| 38 | 118 | 123 | 176 |
Dividend income
| 39 | 26 | 21 | 4 |
Share of profit or loss of entities accounted for using the equity method
| 40 | 9,899 | 8,260 | 6,997 |
Fee and commission income
| 40 | (3,611) | (2,888) | (2,232) |
Fee and commission expense
| 41 | 76 | 64 | 134 |
Gains (losses) on derecognition of financial assets and liabilities not measured at fair value through profit or loss, net
| 41 | 8 | 27 | — |
Financial assets at amortized cost
| 41 | 35 | 56 | 106 |
Other financial assets and liabilities
| 41 | 1,352 | 562 | 341 |
Gains (losses) on financial assets and liabilities held for trading, net
| | — | — | — |
Reclassification of financial assets from fair value through other comprehensive income
| | — | — | — |
Reclassification of financial assets from amortized cost
| | 1,352 | 562 | 341 |
Other gains (losses)
| 41 | 337 | (67) | 432 |
Gains (losses) on non-trading financial assets mandatorily at fair value through profit or loss, net
| | — | — | — |
Reclassification of financial assets from fair value through other comprehensive income
| | — | — | — |
Reclassification of financial assets from amortized cost
| | 337 | (67) | 432 |
Other gains (losses)
| 41 | 96 | 150 | 335 |
Gains (losses) on financial assets and liabilities designated at fair value through profit or loss, net
| 41 | (17) | (45) | (214) |
Gains (losses) from hedge accounting, net
| 41 | 339 | 1,275 | 883 |
Exchange differences, net
| 42 | 619 | 528 | 661 |
Other operating income
| 42 | (4,042) | (3,438) | (2,041) |
Other operating expense
| 43 | 3,081 | 2,622 | 2,593 |
Income from insurance and reinsurance contracts
| 43 | (1,821) | (1,547) | (1,685) |
Expense from insurance and reinsurance contracts
| | 29,542 | 24,743 | 21,066 |
GROSS INCOME
| | (10,905)| (9,373) | (8,296) |
Administration costs
| 44.1 | (6,530) | (5,601) | (5,046) |
Personnel expense
| 44.2 | (4,375) | (3,773) | (3,249) |
Other administrative expense
| 45 | (1,403) | (1,328) | (1,234) |
Depreciation and amortization
| 46 | (373) | (291) | (1,018) |
Provisions or reversal of provisions
| 47 | (4,428) | (3,379) | (3,034) |
Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss or net gains by modification
| | (4,386) | (3,303) | (3,017) |
Financial assets measured at amortized cost
| | (42) | (76) | (17) |
Financial assets at fair value through other comprehensive income
| | 12,432 | 10,372 | 7,484 |
NET OPERATING INCOME
| 48 | (9) | 42 | — |
Impairment or reversal of impairment of investments in joint ventures and associates
| 49 | (54) | (27) | (221) |
Impairment or reversal of impairment on non-financial assets
| | (16) | 53 | (161) |
Tangible assets
| | (26) | (25) | (19) |
Intangible assets
| | (12) | (55) | (41) |
Other assets
| | 28 | (11) | 24 |
Gains (losses) on derecognition of non-financial assets and subsidiaries, net
| | — | — | — |
Negative goodwill recognized in profit or loss
| 50 | 22 | (108) | (40) |
Gains (losses) from non-current assets and disposal groups classified as held for sale not qualifying as discontinued operations
| | 12,419 | 10,268 | 7,247 |
PROFIT (LOSS) BEFORE TAX FROM CONTINUING OPERATIONS
| 19 | (4,003) | (3,505) | (1,909) |
Tax expense or income related to profit or loss from continuing operations
| | 8,416 | 6,763 | 5,338 |
PROFIT (LOSS) AFTER TAX FROM CONTINUING OPERATIONS
| 21 | — | — | 280 |
Profit (loss) after tax from discontinued operations
| | 8,416 | 6,763 | 5,618 |
PROFIT (LOSS)
| 31 | 397 | 405 | 965 |
ATTRIBUTABLE TO MINORITY INTERESTS (NON-CONTROLLING INTERESTS)
| | 8,019 | 6,358 | 4,653 |
ATTRIBUTABLE TO OWNERS OF THE PARENT
(1) Presented for comparison purposes only (see Note 1.3).
7 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
Consolidated income statements for the years ended December 31, 2023, 2022 and 2021 (continued)
EARNINGS (LOSSES) PER SHARE (Euros)
| Notes | 2023 | 2022 (¹) | 2021 (¹) |
| ----- | ---- | -------- | -------- |
| 5 | 1.29 | 0.98 | 0.67 |
EARNINGS (LOSSES) PER SHARE (Euros)
| | 1.29 | 0.98 | 0.63 |
Basic earnings (losses) per share from continuing operations
| | 1.29 | 0.98 | 0.63 |
Diluted earnings (losses) per share from continuing operations
| | — | — | 0.04 |
Basic earnings (losses) per share from discontinued operations
| | — | — | 0.04 |
Diluted earnings (losses) per share from discontinued operations
(1) Presented for comparison purposes only (see Note 1.3). The Notes and Appendices are an integral part of the consolidated income statement for the year ended December 31, 2023.
8 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
Consolidated statements of recognized income and expense for the years ended December 31, 2023, 2022 and 2021
CONSOLIDATED STATEMENTS OF RECOGNIZED INCOME AND EXPENSE
(Millions of Euros)
| 2023 | 2022 (¹) | 2021 (¹) |
| ---- | -------- | -------- |
| 8,416 | 6,763 | 5,618 |
PROFIT (LOSS) RECOGNIZED IN INCOME STATEMENT
| 1,175 | 789 | (3,977) |
OTHER RECOGNIZED INCOME (EXPENSE)
| (223) | 190 | 358 |
ITEMS NOT SUBJECT TO RECLASSIFICATION TO INCOME STATEMENT
| (358) | 354 | 218 |
Actuarial gains (losses) from defined benefit pension plans
| — | — | (3) |
Non-current assets and disposal groups held for sale
| — | — | — |
Share of other recognized income and expense of entities accounted for using the equity method
| 100 | (121) | 189 |
Fair value changes of equity instruments measured at fair value through other comprehensive income, net
| — | — | — |
Gains (losses) from hedge accounting of equity instruments at fair value through other comprehensive income, net
| (24) | 100 | 33 |
Fair value changes of financial liabilities at fair value through profit or loss attributable to changes in their credit risk
| 59 | (143) | (80) |
Income tax related to items not subject to reclassification to income statement
| 1,398 | 599 | (4,335) |
ITEMS SUBJECT TO RECLASSIFICATION TO INCOME STATEMENT
| (1,095)| (1,172) | (117) |
Hedge of net investments in foreign operations (effective portion)
| (1,095)| (1,172) | (117) |
Valuation gains (losses) taken to equity
| — | — | — |
Transferred to profit or loss
| — | — | — |
Other reclassifications
| 1,379 | 3,413 | (2,256) |
Foreign currency translation
| 1,378 | 3,413 | (2,239) |
Translation gains (losses) taken to equity
| 1 | — | (17) |
Transferred to profit or loss
| — | — | — |
Other reclassifications
| 832 | 72 | (691) |
Cash flow hedges (effective portion)
| 832 | 91 | (553) |
Valuation gains (losses) taken to equity
| — | (19) | (137) |
Transferred to profit or loss
| — | — | — |
Transferred to initial carrying amount of hedged items
| — | — | — |
Other reclassifications
| 752 | (2,498) | (1,139) |
Debt securities at fair value through other comprehensive income
| 757 | (2,528) | (1,082) |
Valuation gains (losses) taken to equity
| (5) | 30 | (57) |
Transferred to profit or loss
| — | — | — |
Other reclassifications
| — | — | (663) |
Non-current assets and disposal groups held for sale
| — | — | (30) |
Valuation gains (losses) taken to equity
| — | — | (633) |
Transferred to profit or loss
| — | — | — |
Other reclassifications
| 12 | (7) | 8 |
Entities accounted for using the equity method
| (482) | 791 | 523 |
Income tax relating to items subject to reclassification to income statements
| 9,591 | 7,552 | 1,640 |
TOTAL RECOGNIZED INCOME (EXPENSE)
| 184 | 1,352 | (500) |
Attributable to minority interests (non-controlling interests)
| 9,407 | 6,200 | 2,141 |
Attributable to the parent company
(1) Presented for comparison purposes only (see Note 1.3). The Notes and Appendices are an integral part of the consolidated statement of recognized income and expense for the year ended December 31, 2023.
9 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56).
```# CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Millions of Euros)
| Capital (Note 26) | Share Premium (Note 27) | Equity instruments issued other than capital | Other Equity | Retained earnings (Note 28) | Revaluation reserves | Other reserves (Note 28) | (-) Treasury shares (Note 29) | Profit or loss attributable to owners of the parent | (-) Interim dividends (Note 4) | Accumulated other comprehensive income (loss) (Note 30) | Minority interests | Total | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | |||||||||||||
| Accumulated other comprehensive income (loss) (Note 31) | |||||||||||||
| Other (Note 31) | |||||||||||||
| Balances as of January 1, 2023 ⁽¹⁾ | 2,955 | 20,856 | — | 63 | 32,536 | — | 2,345 | (29) | 6,420 | (722) | (17,432) | (3,112) | 50,615 |
| Effect of changes in accounting policies (Note 1.3) | — | — | — | — | 175 | — | — | — | (62) | — | (210) | 4 | (98) |
| Adjusted initial balance | 2,955 | 20,856 | — | 63 | 32,711 | — | 2,345 | (29) | 6,358 | (722) | (17,642) | (3,109) | 50,517 |
| Total income/expense recognized | — | — | — | — | — | — | — | — | 8,019 | — | 1,388 | (213) | 9,591 |
| Other changes in equity | (94) | (1,087) | — | (22) | 3,526 | — | (331) | (5) | (6,358) | (228) | — | 1 | (4,842) |
| Issuances of common shares | — | — | — | — | — | — | — | — | — | — | — | — | — |
| Issuances of preferred shares | — | — | — | — | — | — | — | — | — | — | — | — | — |
| Issuance of other equity instruments | — | — | — | — | — | — | — | — | — | — | — | — | — |
| Settlement or maturity of other equity instruments issued | — | — | — | — | — | — | — | — | — | — | — | — | — |
| Conversion of debt on equity | — | — | — | — | — | — | — | — | — | — | — | — | — |
| Common Stock reduction | (94) | (1,087) | — | — | 75 | — | (316) | 1,422 | — | — | — | — | — |
| Dividend distribution | — | — | — | — | (1,857) | — | — | — | — | (951) | — | (263) | (3,071) |
| Purchase of treasury shares | — | — | — | — | — | — | — | (2,166) | — | — | — | — | (2,166) |
| Sale or cancellation of treasury shares | — | — | — | — | — | — | 1 | 739 | — | — | — | — | 741 |
| Reclassification of other equity instruments to financial liabilities | — | — | — | — | — | — | — | — | — | — | — | — | — |
| Reclassification of financial liabilities to other equity instruments | — | — | — | — | — | — | — | — | — | — | — | — | — |
| Transfers among components of equity | — | — | — | 2 | 5,651 | — | (17) | — | (6,358) | 722 | 1 | (1) | — |
| Increase/Reduction of equity due to business combinations | — | — | — | — | — | — | — | — | — | — | — | — | — |
| Share based payments | — | — | — | (41) | — | — | — | — | — | — | — | — | (41) |
| Other increases or (-) decreases in equity | — | — | — | 17 | (344) | — | 2 | — | — | — | — | 20 | (305) |
| Balance as of December 31, 2023 | 2,861 | 19,769 | — | 40 | 36,237 | — | 2,015 | (34) | 8,019 | (951) | (16,254) | (3,321) | 55,265 |
(1) Balances as of December 31, 2022 as originally reported in the Consolidated Financial Statements for the year 2022. The Notes and Appendices are an integral part of the consolidated statement of changes in equity for the year ended December 31, 2023.
10
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
| Capital (Note 26) | Share Premium (Note 27) | Equity instruments issued other than capital | Other Equity | Retained earnings (Note 28) | Revaluation reserves | Other reserves (Note 28) | (-) Treasury shares (Note 29) | Profit or loss attributable to owners of the parent | (-) Interim dividends (Note 4) | Accumulated other comprehensive income (loss) (Note 30) | Minority interests | Total | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | |||||||||||||
| Accumulated other comprehensive income (loss) (Note 31) | |||||||||||||
| Other (Note 31) | |||||||||||||
| Balances as of January 1, 2022 ⁽²⁾ | 3,267 | 23,599 | — | 60 | 31,841 | — | (1,857) | (647) | 4,653 | (532) | (16,476) | (8,414) | 48,760 |
| Effect of changes in accounting policies | — | — | — | — | 178 | — | — | — | — | (186) | 1 | (6) | (12) |
| Adjusted initial balance | 3,267 | 23,599 | — | 60 | 32,019 | — | (1,857) | (647) | 4,653 | (532) | (16,662) | (8,413) | 48,748 |
| Total income/expense recognized | — | — | — | — | — | — | — | — | 6,358 | — | (158) | 947 | 7,552 |
| Other changes in equity | (313) | (2,743) | — | 3 | 692 | — | 4,202 | 617 | (4,653) | (190) | (822) | 4,358 | (5,783) |
| Issuances of common shares | — | — | — | — | — | — | — | — | — | — | — | — | — |
| Issuances of preferred shares | — | — | — | — | — | — | — | — | — | — | — | — | — |
| Issuance of other equity instruments | — | — | — | — | — | — | — | — | — | — | — | — | — |
| Settlement or maturity of other equity instruments issued | — | — | — | — | — | — | — | — | — | — | — | — | — |
| Conversion of debt on equity | — | — | — | — | — | — | — | — | — | — | — | — | — |
| Common Stock reduction | (313) | (2,743) | — | — | 250 | — | (355) | 3,160 | — | — | — | — | — |
| Dividend distribution | — | — | — | — | (1,463) | — | — | — | — | (722) | — | (185) | (2,370) |
| Purchase of treasury shares | — | — | — | — | — | — | — | (2,966) | — | — | — | — | (2,966) |
| Sale or cancellation of treasury shares | — | — | — | — | — | — | 9 | 423 | — | — | — | — | 432 |
| Reclassification of other equity instruments to financial liabilities | — | — | — | — | — | — | — | — | — | — | — | — | — |
| Reclassification of financial liabilities to other equity instruments | — | — | — | — | — | — | — | — | — | — | — | — | — |
| Transfers among components of equity | (3) | — | — | — | — | 2,231 | 2,712 | — | (4,653) | 532 | (822) | 4,358 | (4,358) |
| Increase/Reduction of equity due to business combinations | — | — | — | — | — | — | — | — | — | — | — | — | — |
| Share based payments | — | — | — | (22) | — | — | — | — | — | — | — | — | (22) |
| Other increases or (-) decreases in equity | (3) | — | — | 25 | (326) | — | 1,836 | — | — | — | — | (2,392) | (857) |
| Balance as of December 31, 2022 | 2,955 | 20,856 | — | 63 | 32,711 | — | 2,345 | (29) | 6,358 | (722) | (17,642) | (3,109) | 50,517 |
(1) Presented for comparison purposes only (see Note 1.3).
(2) Balances as of December 31, 2021 as originally reported in the Consolidated Financial Statements for the year 2021.
(3) The headings "Transfers among components of equity" and "Other increases or decreases in equity" include the effects of the application of IAS 29 "Financial Reporting in Hyperinflationary Economies" in the subsidiaries in Turkey (see Note 2.2.18) for amounts of €1,873 million in "Retained earnings", €1,862 million in "Accumulated other comprehensive income (loss)" and, under the heading of "Minority interests" include, €1,621 million in "Other" and €1,480 million in "Accumulated other comprehensive income (loss)".
The Notes and Appendices are an integral part of the consolidated statement of changes in equity for the year ended December 31, 2023.
11
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
| Capital (Note 26) | Share Premium (Note 27) | Equity instruments issued other than capital | Other Equity | Retained earnings (Note 28) | Revaluation reserves | Other reserves (Note 28) | (-) Treasury shares (Note 29) | Profit or loss attributable to owners of the parent | (-) Interim dividends (Note 4) | Accumulated other comprehensive income (loss) (Note 30) | Minority interests | Total | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2021 | |||||||||||||
| Accumulated other comprehensive income (loss) (Note 31) | |||||||||||||
| Other (Note 31) | |||||||||||||
| Balances as of January 1, 2021 ⁽²⁾ | 3,267 | 23,992 | — | 42 | 30,508 | — | (164) | (46) | 1,305 | — | (14,356) | (6,949) | 50,020 |
| Total income/expense recognized | — | — | — | — | — | — | — | — | 4,653 | — | (2,512) | (1,465) | 1,640 |
| Other changes in equity | — | (393) | — | 17 | 1,333 | — | (1,693) | (600) | (1,305) | (532) | 391 | — | (2,900) |
| Issuances of common shares | — | — | — | — | — | — | — | — | — | — | — | — | — |
| Issuances of preferred shares | — | — | — | — | — | — | — | — | — | — | — | — | — |
| Issuance of other equity instruments | — | — | — | — | — | — | — | — | — | — | — | — | — |
| Settlement or maturity of other equity instruments issued | — | — | — | — | — | — | — | — | — | — | — | — | — |
| Conversion of debt on equity | — | — | — | — | — | — | — | — | — | — | — | — | — |
| Common Stock reduction | — | — | — | — | — | — | — | — | — | — | — | — | — |
| Dividend distribution | — | (393) | — | — | — | — | — | — | — | (532) | — | (119) | (1,045) |
| Purchase of treasury shares | — | — | — | — | — | — | — | (1,022) | — | — | — | — | (1,022) |
| Sale or cancellation of treasury shares | — | — | — | — | — | — | 17 | 421 | — | — | — | — | 438 |
| Reclassification of other equity instruments to financial liabilities | — | — | — | — | — | — | — | — | — | — | — | — | — |
| Reclassification of financial liabilities to other equity instruments | — | — | — | — | — | — | — | — | — | — | — | — | — |
| Transfers among components of equity | — | — | — | — | 1,693 | — | (780) | — | (1,305) | — | 391 | — | — |
| Increase/Reduction of equity due to business combinations | — | — | — | — | — | — | — | — | — | — | — | — | — |
| Share based payments | — | — | — | (11) | — | — | — | — | — | — | — | — | (11) |
| Other increases or (-) decreases in equity | — | — | — | 28 | (360) | — | (930) | — | — | — | — | 1 | (1,260) |
| Balance as of December 31, 2021 | 3,267 | 23,599 | — | 60 | 31,841 | — | (1,857) | (647) | 4,653 | (532) | (16,476) | (8,414) | 48,760 |
(1) Presented for comparison purposes only (see Note 1.3).
(2) Balances as of December 31, 2020 as originally reported in the Consolidated Financial Statements for the year 2020.
The Notes and Appendices are an integral part of the consolidated statement of changes in equity for the year ended December 31, 2023.
12
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
| Notes | 2023 | 2022 ⁽¹⁾ | 2021 ⁽¹⁾ | |
|---|---|---|---|---|
| A) CASH FLOWS FROM OPERATING ACTIVITIES | (721) | 23,718 | (1,242) | |
| Of which hyperinflation effect from operating activities | 2.2.18 | 1,884 | 2,692 | — |
| Profit for the year | 8,416 | 6,763 | 5,618 | |
| Adjustments to obtain the cash flow from operating activities | 12,150 | 11,746 | 7,688 | |
| Depreciation and amortization | 1,403 | 1,328 | 1,234 | |
| Other adjustments | 10,747 | 10,418 | 6,454 | |
| Net increase/decrease in operating assets | (77,408) | (42,900) | (38,267) | |
| Financial assets held for trading | (27,884) | 14,658 | (17,031) | |
| Non-trading financial assets mandatorily at fair value through profit or loss | (1,288) | (421) | (908) | |
| Other financial assets designated at fair value through profit or loss | (42) | 179 | 25 | |
| Financial assets at fair value through other comprehensive income | 2,512 | (1,014) | 7,116 | |
| Financial assets at amortized cost | (51,182) | (55,754) | (28,062) | |
| Other operating assets | ||||
| ## A) CASH FLOWS FROM OPERATING ACTIVITIES | ||||
| ### Net increase/decrease in operating liabilities | ||||
| :----------------------------------------------------------- | :---- | :----- | :---- | |
| Financial liabilities held for trading | 24,435 | 2,907 | 6,479 | |
| Other financial liabilities designated at fair value through profit or loss | 2,003 | 293 | (837) | |
| Financial liabilities at amortized cost | 36,127 | 48,161 | 19,682 | |
| Other operating liabilities | (1,092) | (17) | (58) | |
| Collection/payments for income tax | (5,353) | (3,234) | (1,546) | |
| Net increase/decrease in operating liabilities | 61,473 | 51,343 | 25,266 |
| Of which hyperinflation effect from investing activities 2.2.18 | 772 | 759 | — |
| Investment | (1,912) | (4,506) | (12,472) |
| Tangible assets | (1,129) | (1,812) | (396) |
| Intangible assets | (690) | (630) | (550) |
| Investments in joint ventures and associates | (93) | (81) | (50) |
| Subsidiaries and other business units | — | (1,389) | — |
| Non-current assets classified as held for sale and associated liabilities 21 | — | (594) | (11,476) |
| Other settlements related to investing activities | — | — | — |
| Divestments | 492 | 596 | 10,838 |
| Tangible assets | 92 | 29 | 78 |
| Intangible assets | — | — | — |
| Investments in joint ventures and associates | 58 | 127 | 80 |
| Subsidiaries and other business units | 21 | — | 10 |
| Non-current assets classified as held for sale and associated liabilities 21 | 321 | 440 | 10,670 |
| Other collections related to investing activities | — | — | — |
| Cash flows from investing activities | (1,419) | (3,911) | (1,634) |
| Of which hyperinflation effect from financing activities 2.2.18 | — | — | — |
| Payments | (7,224) | (7,996) | (4,786) |
| Dividend distribution (shareholders remuneration) | (2,808) | (2,185) | (926) |
| Subordinated liabilities | (1,629) | (2,258) | (2,301) |
| Treasury share amortization | (94) | (313) | — |
| Treasury share acquisition | (2,072) | (2,670) | (1,022) |
| Other items relating to financing activities | (622) | (571) | (538) |
| Collections | 5,383 | 434 | 438 |
| Subordinated liabilities | 4,672 | — | — |
| Treasury shares increase | — | — | — |
| Treasury shares disposal | 711 | 434 | 438 |
| Other items relating to financing activities | — | — | — |
| Cash flows from financing activities | (1,842) | (7,563) | (4,349) |
| (357) | (288) | (1,864) |
| (4,339) | 11,957 | (9,089) |
| 79,756 | 67,799 | 76,888 |
| 75,416 | 79,756 | 67,799 |
| Notes | 2023 | 2022 ⁽¹⁾ | 2021 ⁽¹⁾ |
|---|---|---|---|
| Cash | 7,751 | 6,533 | 6,877 |
| Balance of cash equivalent in central banks | 60,750 | 67,314 | 55,004 |
| Other financial assets | 6,916 | 5,909 | 5,918 |
| Less: Bank overdraft refundable on demand | — | — | — |
| TOTAL CASH AND CASH EQUIVALENTS AT END OF THE YEAR | 75,416 | 79,756 | 67,799 |
(1) Presented for comparison purposes only (see Note 1.3).
(2) In 2021 it includes the balance of the Group's businesses in the United States included within the scope of the USA Sale (see Note 3).
The Notes and Appendices are an integral part of the consolidated statement of cash flows for the year ended December 31, 2023.
13
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
Banco Bilbao Vizcaya Argentaria, S.A. (hereinafter “the Bank”, “BBVA" or “BBVA, S.A.”) is a private-law entity subject to the laws and regulations governing banking entities operating in Spain. It carries out its activity through branches and agencies across the country and abroad. The Bylaws and other public information are available for inspection at the Bank’s registered address (Plaza San Nicolás, 4 Bilbao) as noted on its web site (www.bbva.com). In addition to the activities it carries out directly, the Bank heads a group of subsidiaries, joint ventures and associates which perform a wide range of activities and which together with the Bank constitute the Banco Bilbao Vizcaya Argentaria Group (hereinafter the “Group” or the “BBVA Group”).
In addition to its own separate financial statements, the Bank is required to prepare Consolidated Financial Statements comprising all consolidated subsidiaries of the Group. As of December 31, 2023, in addition to the Bank, the BBVA Group had 196 consolidated entities and 45 entities accounted for using the equity method (see Notes 3 and 16 and Appendices I to V).
The Consolidated Financial Statements of the BBVA Group for the year ended December 31, 2022 were approved by the shareholders at the Annual General Shareholders' Meeting (“AGM”) held on March 17, 2023. BBVA Group’s Consolidated Financial Statements and the Financial Statements for the Bank and the majority of the other entities within the Group have been prepared for the year ended December 31, 2023 , and are pending approval by their respective AGMs. However, the Board of Directors of the Bank believes that said financial statements will be approved without significant changes.
The BBVA Group’s Consolidated Financial Statements are presented in compliance with IFRS-IASB (International Financial Reporting Standards as issued by the International Accounting Standards Board), as well as in accordance with the International Financial Reporting Standards endorsed by the European Union (hereinafter “EU-IFRS”) applicable as of December 31, 2023, considering the Bank of Spain Circular 4/2017, as well as its successive amendments, and with any other legislation governing financial reporting which is applicable and with the format and mark-up requirements established in the EU Delegated Regulation 2019/815 of the European Commission.
The BBVA Group’s Consolidated Financial Statements for the year ended December 31, 2023 were prepared by the Group’s Directors (through the Board of Directors meeting held on February 6, 2024) by applying the principles of consolidation, accounting policies and valuation criteria described in Note 2, so that they present fairly the Group’s total consolidated equity and financial position as of December 31, 2023, together with the consolidated results of its operations and cash flows generated during the year ended December 31, 2023.
These Consolidated Financial Statements were prepared on the basis of the accounting records kept by the Bank and each of the other entities in the Group. Moreover, they include the adjustments and reclassifications required to harmonize the accounting policies and valuation criteria used by the Group (see Note 2.2). All applicable accounting standards and valuation criteria with a significant effect on the Consolidated Financial Statements were applied in their preparation.
The amounts reflected in the Consolidated Financial Statements are presented in millions of euros, unless it is more appropriate to use smaller units. Some items that appear without a balance in these Consolidated Financial Statements are due to how the units are expressed. Also, in presenting amounts in millions of euros, the accounting balances have been rounded up or down. It is therefore possible that the totals appearing in some tables are not the exact arithmetical sum of their component figures. The percentage changes in amounts have been calculated using figures expressed in thousands of euros.
14
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
The information included in the consolidated financial statements for the years ended December 31, 2022 and 2021, is presented in accordance with the applicable regulation, for the purpose of comparison with the information for the year ended December 31, 2023.
As of January 1, 2023, IFRS 17 "Insurance Contracts" replaced IFRS 4 in the accounting treatment of insurance contracts. IFRS 17 is mandatory for financial years beginning on January 1, 2023, therefore such standard has been applied in these Consolidated Financial Statements for the first time with comparative information for at least one year, that is, for the BBVA Group, from January 1, 2022 to December 31, 2022 has been restated accordingly (see Note 2.3 and Appendix XIII).
The nature of the most significant activities carried out by the BBVA Group’s entities is mainly related to typical activities carried out by financial institutions, and are not significantly affected by seasonal factors within the same year.
The information contained in the BBVA Group’s Consolidated Financial Statements is the responsibility of the Group’s Directors. Estimates were required to be made at times when preparing these Consolidated Financial Statements in order to calculate the recorded or disclosed amount of some assets, liabilities, income, expense and commitments. These estimates relate mainly to the following:
In general, the BBVA Group is working to consider and include in its financial analysis models how climate risk and other climate-related matters can affect the financial statements, cash flows and financial performance of the group. Where these risks are being considered, the relevant estimates and judgments, to the extent that they are material, are also being considered when preparing the financial statements of the BBVA Group and they are disclosed in the corresponding Notes to the Consolidated Financial Statements. The prevailing geopolitical and economic uncertainties (see Note 7.1) entail a greater complexity in developing reliable estimations and applying judgment. Estimates have been made on the basis of the best available information on the matters analyzed as of December 31, 2023. However, it is possible that events may take place subsequent to such date, which could make it necessary to amend these estimations (upward or downward), which would be carried out prospectively, recognizing the effects of the change in estimation in the consolidated financial statements. During 2023 there have been no significant changes in the estimates made as of December 31, 2022 and 2021, other than those indicated in these Consolidated Financial Statements.
BBVA Group’s Consolidated Financial Statements are prepared under an Internal Control over Financial Reporting (ICFR) model. It provides reasonable assurance with respect to the reliability and the integrity of the consolidated financial statements. It is also aimed to ensure that the transactions are processed in accordance with the applicable laws and regulations. The ICFR model is compliant with the control framework established in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission (hereinafter "COSO"). The COSO 2013 framework sets out five components that constitute the basis of the effectiveness and efficiency of the internal control systems:
The ICFR model is a dynamic model that continuously evolves over time to reflect the reality of the BBVA Group’s businesses and processes, as well as the risks and controls designed to mitigate them. It is subject to a continuous evaluation by the internal financial control units located in the different entities of BBVA Group. In order to ensure the necessary independence of the aforementioned internal financial control units, they are integrated within the Regulation & Internal Control area, whose head reports to the Board of Directors through its Committees, and defines and coordinates the Group's entire internal control model, based on two pillars:
The RCA and RCS Finance (Internal Financial Control) units comply with a common and standard methodology established at the Group level, as set out in the following diagram:
The ICFR model includes both the controls related to the financial information generation processes, as well as those of a broader scope, designed to improve the Group's general control environment (ELC or Entity Level Control). Both types of controls are assessed on a regular basis by the Group's Control areas and by the Group's Internal Audit unit. It is also supervised by the Audit Committee of the Bank’s Board of Directors.
The BBVA Group also complies with the requirements of the Sarbanes-Oxley Act (“SOX”) for the preparation of the consolidated Financial Statements, as a company with securities registered with the U.S. Securities and Exchange Commission (“SEC”). The main senior executives of the Group are involved in the design and implementation of the internal control model with the aim of making it effective and to ensure the quality and accuracy of the financial information. The description of the ICFR model is included in the Corporate Governance Annual Report within the Management Report accompanying the Consolidated Financial Statements for the year ended December 31, 2023.
The Glossary includes the definition of some of the financial and economic terms used in Note 2 and subsequent Notes of the Consolidated Financial Statements.
In terms of its consolidation, the Financial Statements of the BBVA Group are comprised of four types of entities: subsidiaries, joint ventures, associates and structured entities, defined as follows:
There are certain entities that, although the Group holds less than 50% of the voting rights in them, are considered to be subsidiaries because the Group has the ability to exercise control over them (see Appendix I). The financial statements of the subsidiaries are fully consolidated with those of the Bank through the full consolidation method, which consists of the aggregation of assets, liabilities and equity, income and expenses, of a similar nature, shown in their individual financial statements. Intragroup assets and liabilities, equity, income and expenses and cash flows related to intragroup transactions are eliminated in consolidation. The share of non-controlling interests from subsidiaries in the Group’s consolidated total equity is presented under the heading “Minority interests (Non-controlling interests)” in the consolidated balance sheet. Their share in the profit or loss for the period or year is presented under the heading “Attributable to minority interests (non-controlling interests)” in the consolidated income statement (see Note 31). Note 3 includes information related to the main subsidiaries in the Group as of December 31, 2023. Appendix I includes other significant information on all entities.
Joint ventures
Joint ventures are those entities for which there is a joint control arrangement with third parties other than the Group (for definitions of joint arrangement, joint control and joint venture, refer to Glossary). The investments in joint ventures are accounted for using the equity method (see Note 16). Appendix II shows the main figures for the main joint ventures accounted for using the equity method as of December 31, 2023.
Associates
Associates are entities in which the Group is able to exercise significant influence (for definition, see Glossary), but not control or joint control. Significant influence is deemed to exist when the Group owns 20% or more of the voting rights of an investee directly or indirectly, unless it can be clearly demonstrated that this is not the case. The Group evaluates the existence of significant influence, not only based on the voting rights but also qualitative factors such as presence on the board of directors, participation in decision-making processes, exchange of management personnel, as well as access to technical information.# Regarding joint agreements, in addition to evaluating the rights and obligations of the parties thereto, other facts and circumstances are considered to determine whether an agreement is a joint venture or a joint operation. When the sale or contribution of a controlled business to an associate or joint venture occurs, the Group recognizes any retained interest at fair value. The difference between the book value of the business contributed and the fair value of the retained investment plus the corresponding disposal is fully recognized in the income statement. Certain entities in which the Group owns 20% or more of the voting rights are not included as Group associates, since the Group does not have the ability to exercise significant influence over these entities. Investments in these entities are classified as “Non-trading financial assets mandatorily at fair value through profit or loss” (see Note 11) or "Financial assets at fair value through other comprehensive income" (see Note 13). 17 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails In contrast, some investments in entities in which the Group holds less than 20% of the voting rights are accounted for as Group associates, as the Group is considered to have the ability to exercise significant influence over these entities. As of December 31, 2023, these entities are not significant to the Group. Associates are valued for by the equity method. These entities are initially recognized at cost and subsequently adjusted according to the changes in the Group's share of the net assets of such entities after their acquisition (see Note 16). The Group's income statement reflects the proportion of the results generated by associates in the line "Results of entities accounted for using the equity method". The main figures of the most significant entities are shown in Appendix II.
A structured entity (see Glossary) is an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when the voting rights relate to administrative matters only and the relevant activities are directed by means of contractual arrangements. In those cases where the Group sets up entities or has a holding in such entities, in order to allow its customers access to certain investments, to transfer risks or for other purposes, in accordance with internal criteria and procedures and with applicable regulations, the Group determines whether control over the entity in question actually exists and therefore whether it should be subject to consolidation. Such methods and procedures determine whether there is control by the Group, considering how the decisions are made about the relevant activities, assessing whether the Group has control over the relevant elements, exposure to variable returns from involvement with the investee and the ability to use control over the investee to affect the amount of the investor’s returns.
To determine if a structured entity is controlled by the Group, and therefore should be consolidated into the Group, the existing contractual rights (different from the voting rights) are analyzed. For this reason, an analysis of the structure and purpose of each investee is performed and, among others, the following factors will be considered:
a. Evidence of the current ability to manage the relevant activities of the investee according to the specific business needs (including any decisions that may arise only in particular circumstances).
b. Potential existence of a special relationship with the investee.
c. Implicit or explicit Group commitments to support the investee.
d. The ability to use the Group´s power over the investee to affect the amount of the Group’s returns.
These types of entities include cases where the Group has a high exposure to variable returns and retains decision-making power over the investee, either directly or through an agent. The main structured entities of the Group are the asset securitization funds, to which the BBVA Group transfers loans and advances, and other vehicles, which allow the Group’s customers to gain access to certain investments or to allow for the transfer of risks or for other purposes (see Appendices I and V). The BBVA Group maintains the decision-making power over the relevant activities of these vehicles and financial support through contracts, as is standard in the securitization market. The most common ones are investment positions in equity tranches of notes; funding through subordinated debt; credit enhancements through derivative instruments or liquidity lines; management rights of defaulted securitized assets; “clean-up” call derivatives; and asset repurchase clauses by the grantor. For these reasons, the loans and receivable portfolios related to the vast majority of the securitizations carried out by the Bank or Group subsidiaries are not derecognized in the books of said entity and the issuances of the related debt securities are recorded as liabilities within the Group’s consolidated balance sheet. For additional information on the accounting treatment for the transfer and derecognition of financial instruments, see Note 2.2.2. “Transfers and derecognition of financial assets and liabilities”.
The Group owns other vehicles also for the purpose of allowing customers access to certain investments, to transfer risks, and for other purposes, but without the Group having control of the vehicles, which are not consolidated in accordance with IFRS 10 – “Consolidated Financial Statements”. The balance of assets and liabilities of these vehicles is not material in relation to the Group’s Consolidated Financial Statements. 18 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails As of December 31, 2023, 2022 and 2021 there was no material financial support from the Bank or its subsidiaries to non-consolidated structured entities. The Group does not consolidate any of the mutual funds it manages since the necessary control conditions are not met. Particularly, the BBVA Group does not act as arranger but as agent since it operates the mutual funds on behalf and for the benefit of investors or parties (arranger or arrangers) and, for this reason it does not control the mutual funds when exercising its authority for decision making. The mutual funds managed by the Group are not considered structured entities (generally, retail funds without corporate identity over which investors have participations which gives them ownership of said managed equity). These funds are not dependent on a capital structure that could prevent them from carrying out activities without additional financial support, being in any case insufficient as far as the activities themselves are concerned. Additionally, the risk of the investment is absorbed by the fund participants, and the Group is only exposed when it becomes a participant, and as such, there is no other risk for the Group.
In all cases, the operating results of equity method investees acquired by the BBVA Group in a particular period only include the period from the date of acquisition to the financial statements date. Similarly, the results of entities disposed of during any year only include the period from the start of the year to the date of disposal. The consolidated financial statements of subsidiaries, associates and joint ventures used in the preparation of the Consolidated Financial Statements of the Group have the same presentation date as the Consolidated Financial Statements. If financial statements at those same dates are not available, the most recent will be used, as long as these are not older than three months, and adjusted to take into account the most significant transactions. As of December 31, 2023, financial statements as of December 31 of all Group entities were utilized except in the case of the consolidated financial statements of six associates deemed non-significant for which financial statements as of November 30, 2023 were used.
A business combination is a transaction, or any other deal, by which the Group obtains control over one or more businesses, accounting for by applying the “acquisition method”. According to this method, the acquirer has to recognize the assets acquired and the liabilities and contingent liabilities assumed, including those that the acquired entity had not accounted for. The method involves the measurement of the consideration received for the business combination and its allocation to the assets, liabilities and contingent liabilities measured according to their fair value, at the purchase date, as well as the recognition of any non-controlling participation (minority interests) that may arise from the transaction. In a business combination achieved in stages, in which the Group starts with an investment, an associate (investee) or a joint venture, the acquirer shall measure its previously held equity interest in the acquiree at its acquisition-date fair value and recognize the resulting gain or loss, if any, in profit or loss under the heading “Gains (losses) on derecognition of non-financial assets and subsidiaries, net” of the consolidated income statements. In prior reporting periods, the acquirer may have recognized changes in the value of its equity interest in the acquiree.# 2.2 Accounting principles and policies and applied valuation methods
The accounting principles and policies and the valuation methods applied in the preparation of the consolidated financial statements may differ from those used, at the individual level, by some of the entities that are part of the BBVA Group; This is why, in the consolidation process, the necessary adjustments and reclassifications are made to standardize such principles and criteria among themselves and bring them into line with the EU-IFRS.
In preparing the Consolidated Financial Statements, the following accounting principles and policies and assessment criteria have been applied:
IFRS 9 became effective as of January 1, 2018 and replaced IAS 39 regarding the classification and measurement of financial assets and liabilities, the impairment of financial assets and hedge accounting. However, the Group has chosen to continue applying IAS 39 for accounting for hedges as permitted by IFRS 9.
IFRS 9 contains three main categories for financial assets classification: measured at amortized cost, measured at fair value with changes through other comprehensive income, and measured at fair value through profit or loss.
The classification of financial instruments in the categories of amortized cost or fair value depends on the business model with which the entity manages the assets and the contractual characteristics of the cash flows, commonly known as the "solely payments of principal and interest" criterion (hereinafter the "SPPI").
The assessment of the business model should reflect the way the Group manages groups of financial assets and does not depend on the intention for an individual instrument. Thus, for each entity within the BBVA Group there are different business models for managing assets. In order to determine the business model, the following aspects are taken into account:
In this sense, the Group has established policies and has developed procedures in each geographical area to determine when the sales of financial assets classified in the amortized cost category are considered infrequent (even when significant), or are insignificant (even when frequent), to ensure compliance with such business model. Furthermore, it is considered that any sales that may occur because the financial asset is close to maturity, due to an increase in credit risk, or to satisfy liquidity needs, are compatible with the amortized cost model.
Regarding the SPPI test, the analysis of the cash flows aims to determine whether the contractual cash flows of the assets correspond only to payments of principal and interest on the principal amount outstanding at the beginning of the transaction. Interest is understood here as the consideration for the time value of money; and for the credit risk associated with the principal amount outstanding during a specific period; and for financing and structure costs, plus a profit margin.
The most significant judgments used by the Group in evaluating compliance with the conditions of the SPPI test are the following:
The main criteria taken into account in the analysis are:
a. Early termination clauses: generally a contractual clause that permits the debtor to prepay a debt instrument before maturity is consistent with SPPI when the prepayment amount substantially represents unpaid amounts of principal and interest on the principal amount outstanding (which may include reasonable additional compensation for the early termination of the contract).
b. Instruments with an interest rate linked to contingent events:
* An instrument whose interest rate is reset to a higher rate if the debtor misses a particular payment may meet the SPPI criterion because of the relationship between missed payments and an increase in credit risk.
* An instrument with contractual cash flows that are indexed to the debtor’s performance – e.g. net income or is adjusted based on a certain index or stock market value would not meet the SPPI criterion.
c. Perpetual instruments: to the extent that they can be considered instruments with continuous (multiple) extension options, they meet the SPPI test if the contractual flows meet it. When the issuer can defer the payment of interest, if such payment would affect their solvency, they would meet the SPPI test if the deferred interest accrues additional interest, while if they do not, they would not meet the test.
* Non-recourse financial instruments: In the case of debt instruments that are repaid primarily with the cash flows of specific assets or projects and the debtor has no legal responsibility, the underlying assets or cash flows are evaluated to determine whether the contractual cash flows of the instrument are consistent with payments of principal and interest on the principal amount outstanding.
a. If the contractual terms do not give rise to additional cash flows to payments of principal and interest on the amount of principal outstanding or limitations to these payments, the SPPI test is met.
b. If the debt instrument effectively represents an investment in the underlying assets and its cash flows are inconsistent with principal and interest (because they depend on the performance of a business), the SPPI test is not met.
* Contractually linked instruments: a look-through analysis is carried out in the case of transactions that are set through the issuance of multiple financial instruments forming tranches that create concentrations of credit risk in which there is an order of priority that specifies how the flows of cash generated by the underlying set of financial instruments are allocated to the different tranches. The debt tranches of the instrument will comply with the requirement that their cash flows represent only payment of principal and interest on the outstanding principal if:# NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (Continuation)
Financial assets and financial liabilities are recognized in the consolidated balance sheet when the BBVA Group becomes party to the contractual provisions of the financial instrument. From this date, the Group classifies them based on their characteristics and the business model for managing them.
The classification and valuation of financial assets depend on the business model established by the Group for managing those assets and the characteristics of the contractual cash flows of the financial assets.
The Group classifies its financial assets in one of the following three portfolios:
a. Financial assets at amortized cost: The contractual terms of the tranche being assessed for classification (without looking through to the underlying pool of financial instruments) give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding, b. The underlying pool of financial instruments comprises instruments with cash flow that are solely payments of principal and interest on the principal amount outstanding, and c. The exposure to credit risk in the underlying pool of financial instruments inherent in the tranche is equal to or lower than the exposure to credit risk of the underlying pool of financial instruments (for example, the credit rating of the tranche being assessed for classification is equal to or higher than the credit rating that would apply to a single tranche that funded the underlying pool of financial instruments). In any event, the contractual conditions that, at the time of the initial recognition, have a minimal effect on cash flows or depend on the occurrence of exceptional and highly unlikely events do not prevent compliance with the conditions of the SPPI test. Based on the above characteristics, financial assets will be classified and valued as described below. A debt instrument will be classified in the amortized cost portfolio if the two following conditions are fulfilled:
* The financial asset is managed within a business model whose purpose is to maintain the financial assets to maturity, to receive contractual cash flows; and
* The contractual conditions of the financial asset give rise to cash flows that are only payments of principal and interest.
21 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
b. Financial assets at fair value with changes through other comprehensive income: A debt instrument will be classified in the portfolio of financial assets at fair value with changes through other comprehensive income if the two following conditions are fulfilled:
* The financial asset is managed with a business model whose purpose combines collection of the contractual cash flows and sale of the assets, and
* The contractual characteristics of the instrument generate cash flows which only represent the return of the principal and interest.
c. Financial assets at fair value through profit or loss: A debt instrument will be classified at fair value with changes in profit and loss provided that the entity's business model for their management or the contractual characteristics of its cash flows do not require classification into one of the portfolios described above. In general, equity instruments will be measured at fair value through profit or loss. However the Group may make an irrevocable election, at initial recognition to present subsequent changes in the fair value through “other comprehensive income”.
Financial assets will only be reclassified when BBVA Group decides to change the business model. In this case, all of the financial assets assigned to this business model will be reclassified. The change of the objective of the business model should occur before the date of the reclassification.
All financial instruments are initially recognized at fair value, plus, those transaction costs which are directly attributable to the issue of the particular instrument, with the exception of those financial assets which are classified at fair value through profit or loss.
All changes in the value of financial assets due to the interest accrual and similar items are recorded in the headings "Interest and other income" or "Interest expense", of the consolidated income statement of the year in which the accrual occurred (see Note 37), except for trading derivatives that are not economic and accounting hedges. The changes in fair value after the initial recognition, for reasons other than those mentioned in the preceding paragraph, are treated as described below, according to the categories of financial assets.
Financial assets are recorded under the heading “Financial assets held for trading” if the objective of the business model is to generate gains by buying and selling these financial instruments or generate short-term results. The financial assets recorded in the heading “Non-trading financial assets mandatorily at fair value through profit or loss” are derived from a business model which objective is to obtain the contractual cash flows and / or to sell those instruments but its contractual cash flows do not comply with the requirements of the SPPI test. Financial assets are classified in “Financial assets designated at fair value through profit or loss” only if it eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from recognizing or measuring such financial assets on different bases.
The assets recognized under these headings of the consolidated balance sheet are measured upon acquisition at fair value and changes in the fair value (gains or losses and foreign exchange differences) are recognized as their net value, when applicable, under the headings “Gains (losses) on financial assets and liabilities held for trading, net”, “Gains (losses) on non-trading financial assets mandatorily at fair value through profit or loss, net” and “Gains (losses) on financial assets designated at fair value through profit or loss, net” in the consolidated income statement (see Note 41).
– Debt instruments
Assets recognized under this heading in the consolidated balance sheets are measured at their fair value. This category of valuation implies the recognition of the information in the income statement as if it were an instrument valued at amortized cost, while the instrument is valued at fair value in the balance sheet. Thus, both interest income on these instruments and the exchange differences and impairment that arise in their case are recorded in the profit and loss account, while subsequent changes in its fair value (gains or losses) are recognized temporarily (by the amount net of tax effect) under the heading “Accumulated other comprehensive income (loss) - Items that may be reclassified to profit or loss - Fair value changes of debt instruments measured at fair value through other comprehensive income” in the consolidated balance sheets (see Note 30).
The amounts recognized under the headings “Accumulated other comprehensive income (loss) - Items that may be reclassified to profit or loss - Fair value changes of debt instruments measured at fair value through other comprehensive income” continue to form part of the Group's consolidated equity until the corresponding asset is derecognized from the consolidated balance sheet or until a loss allowance is recognized on the corresponding financial instrument. If these assets are sold, these amounts are derecognized and included under the headings “Gains (losses) on derecognition of financial assets and liabilities not measured at fair value through profit or loss, net” in the consolidated income statements (see Note 41). The net loss allowances in “Financial assets at fair value through other comprehensive income” over the year are recognized under the heading “Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss or net gains by
22 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
modification - Financial assets at fair value through other comprehensive income” (see Note 47) in the consolidated income statement for the year. Interest income on these instruments is recorded in the consolidated profit and loss account (see Note 37). Changes in foreign exchange rates are recognized under the heading “Exchange differences, net" in the consolidated income statements (see Note 41).
– Equity instruments
At the time of initial recognition of specific investments in equity instruments, the BBVA Group may make the irrevocable decision to present subsequent changes in fair value in other comprehensive income. Subsequent changes in this valuation will be recognized in "Accumulated other comprehensive income - Items that will not be reclassified to profit or loss - Fair value changes of equity instruments measured at fair value through other comprehensive income" (see Note 30). Dividends received from these investments are recorded in the heading "Dividend income" in the consolidated income statement (see Note 38). These instruments are not subject to the impairment model of IFRS 9.
The assets under this category are subsequently measured at amortized cost, after initial recognition, using the "effective interest rate" method. In the case of floating rate instruments, including inflation-linked bonds, the periodic updates of cash flows to reflect the movement of interest rates and inflation impact the effective interest rate prospectively. Net loss allowances of assets recorded under these headings arising in each year, calculated using the IFRS 9 model, are recognized under the heading “Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss or net gains by modification – Financial assets measured at amortized cost” in the consolidated income statement for such year (see Note 47).# Classification and measurement of financial liabilities
Financial liabilities are classified in the following categories:
– Financial liabilities at amortized cost;
– Financial liabilities that are held for trading, including derivatives, are financial instruments which are recorded in this category when the Group’s objective is to generate gains by buying and selling these financial instruments or generate short-term results; and
– Financial liabilities that are designated at fair value through profit or loss on initial recognition under the Fair Value Option.
The Group has the option to designate irrevocably, on the initial moment of recognition, a financial liability at fair value through profit or loss provided that doing so results in the elimination or significant reduction of measurement or recognition inconsistency, or if a group of financial liabilities, or a group of financial assets and financial liabilities, has to be managed, and its performance evaluated, on a fair value basis in accordance with a documented risk management or investment strategy.
Financial liabilities are initially recorded at fair value, less transaction costs that are directly attributable to the issuance of instruments, except for financial instruments that are classified at fair value through profit or loss. Variations in the value of financial liabilities due to the interest accrual and similar items are recorded in the headings “Interest and other income” or “Interest expense”, of the consolidated income statement for the year in which the accrual occurred (see Note 37), except for trading derivatives that are not economic and accounting hedges. The changes in fair value after the initial recognition, for reasons other than those mentioned in the preceding paragraph, are treated as described below, according to the categories of financial liabilities.
The subsequent changes in the fair value (gains or losses) of the liabilities recognized under these headings of the consolidated balance sheets are recognized as their net value under the headings “Gains (losses) on financial assets and liabilities held for trading, net” and “Gains (losses) on financial assets and liabilities designated at fair value through profit or loss, net” in the consolidated income statements (see Note 41).
The changes in the own credit risk of the liabilities designated under the fair value option is presented in “Accumulated other comprehensive income (loss) – Items that will not be reclassified to profit or loss – Fair value changes of financial liabilities at fair value through profit or loss attributable to changes in their credit risk”, unless this treatment brings about or increases an asymmetry in the income statement.
The liabilities under this category are subsequently measured at amortized cost, using the “effective interest rate” method.
23 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
When a financial liability contains an embedded derivative, the Group analyzes whether the economic characteristics and risks of the embedded derivative and the host instrument are closely related. If the characteristics and risks of the host and the derivative are closely related, the instrument as a whole will be classified and measured according to the general rules for financial liabilities. If, on the other hand, the economic characteristics and risks of the embedded derivative are not closely related to the economic characteristics and risks of the host, its terms meet the definition of a derivative and the hybrid contract is not measured at fair value with changes in fair value recognized in profit or loss, the embedded derivative shall be separated from the host and accounted for as a derivative separately at fair value with changes in profit and loss and the host instrument classified and measured according to its nature.
The Group uses financial derivatives as a tool for managing financial risks, mainly interest rates and exchange rates (See Note 7). When these transactions meet certain requirements, they are considered "hedging instruments". Hedging financial derivatives are used to hedge changes in the value of assets and liabilities, changes in cash flows, or the net investment in a foreign business. Fair value hedging is established for fixed rate financial instruments, and cash flow hedges are used for variable rate financial instruments. The Group also carries out exchange risk hedging operations. Hedging accounting follows IAS 39, and the effectiveness of hedges is evaluated both retrospectively and prospectively, so that they remain within a range between 80% and 125%. The ineffectiveness of hedges, defined as the difference between the change in value of the hedging instrument and the hedged item in each period, attributable to the hedged risk, is recognized in the income statement. This includes both the amount of the ineffectiveness of the hedges established to manage interest rate risk in the period, as well as the ineffectiveness of the hedges established to manage exchange risk, which is mainly attributable to the temporary value of hedges established to manage exchange rate risk (see Notes 15 and 41).
Changes occurring subsequent to the designation of the hedging relationship in the measurement of financial instruments designated as hedged items as well as financial instruments designated as hedge accounting instruments are recognized as follows:
– In fair value hedges, the changes in the fair value of the derivative and the hedged item attributable to the hedged risk are recognized under the heading “Gains (losses) from hedge accounting, net” in the consolidated income statement, with a corresponding offset under the headings where hedging items ("Hedging derivatives") and the hedged items are recognized, as applicable, except for interest-rate risks hedges (which are almost all of the hedges used by the Group), for which the valuation changes are recognized under the headings “Interest and other income” or “Interest expense”, as appropriate, in the consolidated income statement (see Note 37).
– In fair value hedges of interest rate risk of a portfolio of financial instruments (portfolio-hedges), the gains or losses that arise in the measurement of the hedging instrument are recognized in the consolidated income statement, with the corresponding offset on the headings “Derivatives-Hedge Accounting” and the gains or losses that arise from the change in the fair value of the hedged item (attributable to the hedged risk) are also recognized in the consolidated income statement (in both cases under the heading “Gains (losses) from hedge accounting, net”, using, as a corresponding offset, the headings "Fair value changes of the hedged items in portfolio hedges of interest rate risk" in the consolidated balance sheets, as applicable).
– In cash flow hedges, the gain or loss on the hedging instruments relating to the effective portion is recognized temporarily under the heading “Accumulated other comprehensive income (loss) - Items that may be reclassified to profit or loss - Hedging derivatives. Cash flow hedges (effective portion)” in the consolidated balance sheets, with a corresponding offset under the heading “Hedging derivatives” of the assets or liabilities of the consolidated balance sheets as applicable. These differences are recognized in the consolidated income statement at the time the gains or losses of the hedged item are recorded in the income statement, at the time the forecast transaction is executed or at the maturity date of the hedged item. Almost all of the cash flow hedges carried out by the Group relate to interest rate risk and inflation risk of financial instruments, so their valuation changes are recognized under the heading "Interest and other income" or "Interest expense” in the consolidated income statement (see Note 37).
– The changes in value of the hedging items corresponding to the ineffective portions of cash flow hedges are recognized directly in the heading “Gains (losses) from hedge accounting, net” in the consolidated income statement (see Note 41).
– In hedges of net investments in foreign businesses, the valuation changes attributable to the effective portions of hedging items are recognized temporarily under the heading "Accumulated other comprehensive income (loss) - Items that may be reclassified to profit or loss – Hedging of net investments in foreign operations (effective portion)" in the consolidated balance sheets with a corresponding offset under the heading “Hedging derivatives” of the assets or liabilities of the consolidated balance sheets, as applicable. These valuation changes will be recognized in the consolidated income statement when the investment in a foreign business is disposed of or derecognized (see Note 41).
24 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
The “expected losses” impairment model is applied to financial assets valued at amortized cost, debt instruments valued at fair value with changes in accumulated other comprehensive income, financial guarantee contracts and other commitments.# All financial instruments valued at fair value through profit or loss are excluded from the impairment model. The standard classifies financial instruments into three categories, which depend on the evolution of their credit risk from the moment of initial recognition and which establish the calculation of the credit risk allowance.
Financial assets which are not considered to have significantly increased in credit risk have loss allowances measured at an amount equal to the expected credit loss that arises from all possible default events within 12 months following the presentation date of the financial statements (12 month expected credit losses).
When the credit risk of a financial asset has increased significantly since the initial recognition, the loss allowances of that financial instrument is calculated as the expected credit loss during the entire life of the asset. That is, they are the expected credit losses that result from all possible default events during the expected life of the financial instrument.
When there is objective evidence that the instrument is credit-impaired, the financial asset is transferred to this category in which the provision for losses of that financial instrument is calculated, as in Stage 2, as the expected credit loss during the entire life of the asset.
When the recovery of any recognized amount is considered remote, such amount is written-off on the consolidated balance sheet, without prejudice to any actions that may be taken in order to collect the amount until the rights extinguish in full either because it is time-barred debt, the debt is forgiven, or other reasons.
The BBVA Group has applied the following definitions:
An asset is credit-impaired (stage 3) if one or more events have occurred and they have a detrimental impact on the estimated future cash flows of the asset. Historically, the definition of credit-impaired asset under IFRS 9 has been substantially aligned with the definition of default used by the Group for internal credit risk management, which is also the definition used for regulatory purposes. In 2021 the Group updated its definition of default to conform to that set forth in the European Banking Authority (hereinafter EBA) Guidelines, in compliance with article 178 of Regulation (EU) No 575/2013 (CRR). The Group consequently updated the definition of credit-impaired asset (stage 3), considering it a change in accounting estimates, re-establishing the consistency with the definition of default and guaranteeing the integration of both definitions in credit risk management.
The determination of an asset as impaired and its classification in stage 3 is based exclusively on the risk of default, without considering the effects of credit risk mitigating measures such as guarantees and collaterals.
Specifically, the following financial assets are classified in stage 3:
a. Impaired assets for objective reasons or delinquency: when there are unpaid amounts of principal or interest for more than 90 days. According to IFRS 9, the 90-days past due default is a presumption that can be rebutted in those cases where the entity considers, based on reasonable and supportable information, that it is appropriate to use a longer term. As of December 31, 2023, the Group has not used terms exceeding 90 days past due.
b. Impaired assets for subjective reasons (other than delinquency): when circumstances are identified that show, even in the absence of defaults, that it is not probable that the debtor will fully comply with its financial obligations. For this purpose, the following indicators are considered, among others:
* Significant financial difficulties of the issuer or the borrower.
* Granting by the lender or lenders to the borrower, for economic or contractual reasons related to the latter's financial difficulties, of concessions or advantages that they would not have otherwise granted.
* Breach of contractual clauses, such as events of default or default.
* Increasing probability that the borrower will go into bankruptcy or some other situation of financial reorganization.
25 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
* Disappearance of an active market for the financial asset due to financial difficulties.
* Others that may affect the committed cash flows such as the loss of the debtor's license or that it has committed fraud.
* Generalized delay in payments. In any case, this circumstance exists when, during a continuous period of 90 days prior to the reporting date, a material amount has remained unpaid.
* Sales of credit exposures of a client with a significant economic loss will imply that the rest of its operations are considered impaired.
Relating to the granting of concessions due to financial difficulties, it is considered that there is an indicator of unlikeliness to pay, and therefore the client must be considered impaired, when the refinancing or restructuring measures may result in a diminished financial obligation caused by a forgiveness or material deferral of principal, interest or fees. Specifically, unless proven otherwise, transactions that meet any of the following criteria will be reclassified to the category of impaired assets:
a. Irregular repayment schedule.
b. Contractual clauses that delay the repayment of the loan through regular payments. Among others, grace periods of more than two years for the amortization of the principal will be considered clauses with these characteristics.
c. Amounts of principal or interest written off from the balance sheet as its recovery is considered remote.
In any case, a restructuring will be considered impaired when the reduction in the net present value of the financial obligation is greater than 1%.
Credit risk management for wholesale counterparties is carried out at the customer (or group) level. For this reason, the classification of any of a client's material exposures as impaired, whether due to more than 90 days of default or due to any of the subjective criteria, implies the classification as impaired of all the client's exposures.
Regarding retail clients, which are managed at the individual loan level, the scoring systems review their score, among other factors, in the event of a breach in any of their operations or incurring generalized delays in payments, which also triggers the necessary recovery actions. Among them are the refinancing measures that, where appropriate, may lead to all the client's operations being considered impaired. Furthermore, given the granularity of the retail portfolios, the differential behavior of these clients in relation to their products and collateral provided, as well as the time necessary to find the best solution, the Group has established as an indicator that when a transaction of a retail client is in default in excess of 90 days or shows a general delay in payments and this represents more than 20% of the client's total balance, all its transactions are considered impaired.
When operations by entities related to the client fall into stage 3, including both entities of the same group and those with which there is a relationship of economic or financial dependence, the transactions of the holder will also be classified as stage 3 if after the analysis it is concluded that there are reasonable doubts about the full payment of the loans.
The stage 3 classification will be maintained for a cure period of 3 months from the disappearance of all indicators of impairment during which the client must demonstrate good payment behavior and an improvement in their credit quality in order to corroborate the disappearance of the causes that motivated the classification of the debt as impaired. In the case of refinancing and restructuring, the cure period is one year (see Note 7.2.7 for more details).
These criteria are aligned in all the geographical areas of the Group, maintaining only minor differences to facilitate the integration of management at the local level.
The objective of the impairment requirements is to recognize lifetime expected credit losses for financial instruments for which there have been significant increases in credit risk since initial recognition considering all reasonable and supportable information, including that which is forward-looking. The model developed by the Group for assessing the significant increase in credit risk has a two-prong approach that is applied globally (for more detail on the methodology used, see Note 7.2.1):
Quantitative criterion: the Group uses a quantitative analysis based on comparing the current expected probability of default over the life of the transaction with the original adjusted expected probability of default, so that both values are comparable in terms of expected default probability for their residual life.
Qualitative criterion: most indicators for detecting significant risk increase are included in the Group's systems through rating and scoring systems or macroeconomic scenarios, so the quantitative analysis covers the majority of circumstances. The Group uses additional qualitative criteria to identify significant increase in credit risk and thus, to include circumstances
26 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
that are not reflected in the rating/score systems or macroeconomic scenarios used. Such qualitative criteria are the following:
a. More than 30 days past due.According to IFRS 9, default of more than 30 days is a presumption that can be rebutted in those cases in which the entity considers, based on reasonable and documented information, that such non-payment does not represent a significant increase in risk. As of December 31, 2023, the Group has not considered periods higher than 30 days.
b. Watch List: They are subject to special watch by the Risk units because they show negative signs in their credit quality, even though there may be no objective evidence of impairment.
c. Refinance or restructuring that does not show evidence of impairment, or that, having been previously identified, the existence of significant increase in credit risk may still exist.
Although the standard introduces a series of operational simplifications, also known as practical solutions, for analyzing the increase in significant risk, the Group does not use them as a general rule. However, for high-quality assets, mainly related to certain government institutions and bodies, the standard allows for considering that their credit risk has not increased significantly because they have a low credit risk at the presentation date. This possibility is limited to those financial instruments that are classified as having high credit quality and high liquidity to comply with the liquidity coverage ratio (hereinafter, "LCR"). This does not prevent these assets from being assigned the credit risk coverage that corresponds to their classification as stage 1 based on their credit rating and macroeconomic expectations.
The measurement of expected losses must reflect:
Expected losses are measured both individually and collectively. The individualized estimate of credit losses results from calculating the difference between the expected cash flows discounted at the effective interest rate of the transaction and the carrying amount of the instrument (see Note 7.2.1).
For the collective measurement of expected losses the instruments are classified into groups of assets based on their risk characteristics. Exposure within each group is grouped according to credit risk common characteristics, which indicate the payment capacity of the borrower according to the contractual conditions. These risk characteristics have to be relevant in estimating the future flows of each group. The characteristics of credit risk may consider, among others, the following factors (see Note 7.2.1):
The estimated losses are derived from the following parameters:
At the BBVA Group, the calculated expected credit losses are based on internal models developed for all portfolios within the IFRS 9 scope, except for the cases that are subject to individual analysis. The calculation and recognition of expected credit losses includes exposures with governments and credit institutions, for which, despite having a reduced number of defaults in the information databases, internal models have been developed, considering, as sources of information, the data provided by external rating agencies or other observed in the market, such as changes in bond yields, prices of credit default swaps or any other public information on them.
IFRS 9 requires incorporation of present, past and future information to detect any significant increase in risk and measure expected loss, which must be carried out on a weighted probability basis. The standard does not require identification of all possible scenarios for measuring expected loss. However, the probability of a loss event occurring and the probability it will not occur have to be considered, even though the possibility of a loss may be very low.
To achieve this, the Group generally evaluates the linear relationship between its estimated loss parameters (PD, LGD and EAD) with the historical and future forecasts of the macroeconomic scenarios. Additionally, when there is no linear relation between the different future economic scenarios and their associated expected losses, more than one future economic scenario must be used for the measurement. The approach taken by the Group consists of using a methodology based on the use of three scenarios. The first is the most probable scenario (base scenario) that is consistent with that used in the Group's internal management processes, and two additional ones, one more positive and the other more negative. The combined outcome of these three scenarios is calculated considering the weight given to each of them. The main macroeconomic variables that are valued in each of the scenarios for each of the geographies in which the Group operates are the Gross Domestic Product (GDP), the real estate price index, interest rates and the unemployment rate. The main goal of the Group's approach is seeking the greatest predictive capacity with respect to the first two variables (see Note 7.2.1).
Debt instruments are classified as written-off once, after being analyzed, it is reasonably considered that their recovery is remote due to the notorious and irrecoverable deterioration of the solvency of the holder of the operation. Based on their procedures and particularities, the Group entities recognize operations as a write-off where, following their analysis, there are no reasonable expectations of recovery of the debt, taking into account aspects such as: the time elapsed since the classification as doubtful operations due to delinquency, the coverage levels achieved, type of portfolio or product, bankruptcy status of the holder and the existence of guarantees, their valuation and execution capacity. In those cases where the guarantee is significant, there is the possibility of making partial write-offs on the non-guaranteed portion. The classification of an operation as written-off, entails the recognition of losses for the carrying amount of the related debt and results in a derecognition in the same amount from the balance sheet (see Note 7.2.5).
The accounting treatment of transfers of financial assets is determined by the form in which risks and benefits associated with the financial assets involved are transferred to third parties. Financial assets are only derecognized from the consolidated balance sheet when the cash flows that they generate are extinguished, when their implicit risks and benefits have been substantially transferred to third parties or when the control of financial asset is transferred even in case of no physical transfer or substantial retention of such assets. In the latter case, the financial asset transferred is derecognized from the consolidated balance sheet, and any right or obligation retained or created as a result of the transfer is simultaneously recognized.
Similarly, financial liabilities are derecognized from the consolidated balance sheet only if their obligations are extinguished or acquired (with a view to subsequent cancellation or renewed placement). The Group is considered to have transferred substantially all the risks and benefits if such risks and benefits account for the majority of the risks and benefits involved in ownership of the transferred financial assets.
The securitizations funds to which the Group entities transfer their credit portfolios are consolidated entities of the Group. For more information, refer to Note 2.1 “Principles of consolidation”.
The Group considers that the risks and benefits of the securitizations are substantially retained if the subordinated bonds are held and/or if subordination funding has been granted to those securitization funds, which means that the credit loss risk of the securitized assets will be assumed. Consequently, the Group is not derecognizing those transferred loan portfolios.# 2.2.3 Financial guarantees
Financial guarantees are considered to be those contracts that require their issuer to make specific payments to reimburse the holder of the financial guarantee for a loss incurred when a specific borrower breaches its payment obligations on the terms – whether original or subsequently modified – of a debt instrument, irrespective of the legal form it may take. Financial guarantees may take the form of a deposit, bank guarantee, insurance contract or credit derivative, among others.
In their initial recognition, financial guarantees are recognized as liabilities in the consolidated balance sheet at fair value, which is generally the present value of the fees, commissions and interest receivable from these contracts over the term thereof, and the Group simultaneously recognizes a corresponding asset in the consolidated balance sheet for the amount of the fees and commissions received at the inception of the transactions and the amounts receivable at the present value of the fees, commissions and interest outstanding.
Financial guarantees, irrespective of the guarantor, instrumentation or other circumstances, are reviewed periodically so as to determine the credit risk to which they are exposed and, if appropriate, to consider whether a provision is required for them. The credit risk is determined by application of criteria similar to those established for quantifying loss allowances on debt instruments measured at amortized cost (see Note 2.2.1).
The provisions recognized for financial guarantees are recognized under the heading “Provisions - Provisions for contingent risks and commitments” on the liability side in the consolidated balance sheets (see Note 24). These provisions are recognized and reversed with a charge or credit, respectively to “Provisions or reversal of provision” in the consolidated income statements (see Note 46).
Income from financial guarantees is recorded under the heading “Fee and commission income” in the consolidated income statement and is calculated by applying the rate established in the related contract to the nominal amount of the guarantee (see Note 40).
Synthetic securitizations made by the Group to date meet the requirements of the accounting regulations for accounting as guarantees.
Tangible assets are classified according to their nature:
Property, plant and equipment for own use
This heading includes the assets under ownership or acquired under lease terms (right to use), intended for future or current use by the Group and that it expects to hold for more than one year. It also includes tangible assets received by the Group in full or partial settlement of receivables from third parties which are expected to be held for continuing use.
Investment properties
Includes the value of land, buildings and other structures that are held either for rental or for capital gain on sale, and which are not expected to be used in the ordinary course of business and are not intended for own use.
Assets leased out under an operating lease
Includes assets for which the Group has granted the right of use to another company through an operating lease contract.
In general, and as an accounting policy option, tangible assets are recorded in the balance sheets under the cost model, i.e., at acquisition cost, less the related accumulated depreciation and, if applicable, the estimated impairment losses resulting from comparing the net book value of each item with its corresponding recoverable value (see Note 17). The Group uses the straight-line method to calculate depreciation over the estimated useful life of the asset. The depreciation charge for tangible assets is recorded under "Depreciation and amortization" in the income statement (see Note 45) and is the result of using the following depreciation rates:
29 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
| Type of assets | Annual Percentage |
|---|---|
| Buildings for own use | 1% - 4% |
| Furniture | 8% - 10% |
| Fixtures | 6% - 12% |
| Office supplies and hardware | 8% - 25% |
| Lease use rights | The lesser of the lease term or the useful life of the underlying asset |
At each reporting date, the Group analyzes whether there are indicators that a tangible asset may be impaired and, if any, adjusts the carrying amount to its recoverable amount, modifying future depreciation charges in accordance with its revised remaining useful life. Similarly, if there is indication that the value of a tangible asset that was previously impaired has been recovered, the Group estimates the recoverable amount of the asset and recognizes in the income statement the reversal of the impairment loss recognized in previous years and thus, adjusts the future depreciation charges. Any impairment or reversal of impairment will be recognized with the offsetting entry recorded to the heading “Impairment or reversal of impairment of non-financial assets - Intangible assets” of the consolidated income statement (see Note 49).
In the BBVA Group, most of the buildings held for own use are assigned to the different Cash Generating Units (hereinafter, "CGUs") to which they belong. The corresponding impairment analyses are performed for these CGU to determine whether sufficient cash flows are generated to support the value of the assets comprised within.
Operating and maintenance expenses relating to tangible assets for own use are recognized in the year in which they are incurred under "Administrative expenses - Property, plant and equipment" in the income statement (see Note 44.2). Additionally, for those geographical areas with subsidiaries where the Group applies IAS 29 "Financial Reporting in Hyperinflationary Economies", this type of asset is adjusted, at each balance sheet date, to show variations in the purchasing power of the currency due to inflation from the date of acquisition or inclusion in the consolidated balance sheet (see Note 2.2.18).
In general, the Group will record assets and liabilities for lease contracts by recording a right of use (right to use the leased asset) under ''Tangible assets - Property, plant and equipment'' and ''Tangible assets - Investment property'' (see Note 17), and a lease liability (its obligation to make lease payments) under ''Financial liabilities at amortized cost - Other financial liabilities'' (see Note 22.5). The BBVA Group applies two exceptions in the case of short-term leases and leases whose underlying asset is of low value. In these cases, lease payments are recognized under "Other operating expense" (see Note 42) in the consolidated income statement over the term of the lease.
At the initial date of the lease, the lease liability is equal to the present value of all lease unpaid payments. Subsequently, it is valued at amortized cost. The right to use assets is initially recorded at cost and is subsequently reduced by accumulated amortization and accumulated impairment. The Group has decided to calculate depreciation using the straight-line method. Depreciation of tangible assets is recorded under "Depreciation and amortization" in the consolidated statement of income (see Note 45). The interest expense on the lease liability is recorded under the heading “Interest expense” (see Note 37.2). Variable payments not included in the initial measurement of the lease liability are recorded under the heading “Administration costs – Other administrative expense” (see Note 44.2).
Operating lease and sublease incomes are recognized in the consolidated income statements under the headings “Other operating income” (see Note 42).
On the other hand, when the Group acts as a lessor, it classifies leases as finance or operating leases. In finance leases, the sum of the present values of the amounts received plus the guaranteed residual value is recorded as financing provided to third parties and is included under "Financial assets at amortized cost" in the consolidated balance sheet (see Note 14). In operating leases, the acquisition cost of the leased assets is presented under "Tangible assets - Property, plant and equipment - Assigned under operating leases" in the consolidated balance sheet (see Note 17). These assets are depreciated in accordance with the policies adopted for similar tangible assets for own use and the income and expenses arising from the lease contracts are recognized in the consolidated income statement on a straight-line basis under "Other operating income" and "Other operating expense", respectively (see Note 42).
If a fair value sale and leaseback results in a lease, the profit or loss generated from the effectively transferred part of the sale is recognized in the consolidated income statement at the time of sale (only for the effectively transmitted part). The assets leased out under operating lease contracts to other entities in the Group are treated in the consolidated financial statements as for own use, and thus rental expense and income is eliminated in consolidation and the corresponding depreciation is recognized.
30 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56).In the event of a discrepancy, the Spanish-language version prevails. Additionally, for those geographical areas with subsidiaries where the Group applies IAS 29 "Financial Reporting in Hyperinflationary Economies", this type of asset is being adjusted to show changes in the purchasing power of the currency due to inflation from the date of acquisition or inclusion in the consolidated balance sheet (see Note 2.2.18).
This heading includes the carrying amount of individual items or items integrated in a group ("disposal group") or that form part of a significant business line or geographical area that is intended to be disposed of (“discontinued operation”) whose sale is highly probable to take place under the current conditions within a period of one year from the date to which the financial statements refer. Additionally, it includes assets that were expected to be disposed of within one year, but for which disposal there is a delay caused by events and circumstances beyond the Group's control, and there is sufficient evidence that the Group remains committed to its plan for sale (see Note 21), in particular, regarding real estate assets or other assets received to cancel, in whole or in part, the payment obligations of debtors for credit operations.
These assets are not amortized as long as they remain in this category. With respect to valuation, in general, foreclosed real estate assets or assets received in payment of debts are recognized both at the date of acquisition and subsequently, at the lower of their fair value less estimated costs to sell and their carrying amount, with the possibility of recognizing an impairment or reversal of impairment for the difference, if applicable. When the amount of the sale less estimated costs to sell exceeds the carrying amount, the gain is not recognized until the time of disposal and derecognition. The applicable carrying value of the financial asset is updated at the time of foreclosure, treating the foreclosed property as collateral and taking into account the corresponding credit risk hedges at the time prior to delivery. The fair value of foreclosed assets is based mainly on appraisals or valuations performed by independent experts with a maximum age of one year, or less if there are indications of impairment; in addition, by appraisal, evaluating the need to apply a discount on the asset based on its specific conditions or market conditions for such type of assets is evaluated and in any case, the entity’s estimated sale costs are deducted.
Gains/losses on disposal of these assets and impairment losses are recognized under "Gains (losses) on non-current assets and disposal groups classified as held for sale not qualifying as discontinued operations" in the consolidated income statement (see Note 50). Other income and expenses are classified in the income statement items according to their nature. The income and expenses of discontinued operations generated in the year, even if they were generated prior to their classification as discontinued operations, are presented, net of the tax effect, as a single amount under "Profit (loss) after tax from discontinued operations" in the consolidated income statement. This caption also includes the results obtained on disposal (net of the tax effect).
Additionally, for those geographical areas with subsidiaries where the Group applies IAS 29 "Financial Reporting in Hyperinflationary Economies", this type of assets is being adjusted to show changes in the purchasing power of the currency due to inflation from the date of acquisition or inclusion in the consolidated balance sheet (see Note 2.2.18).
Goodwill represents the advance payment made by the entity for future economic benefits, from assets that have not been individually identified nor separately recognized in a business combination. Goodwill is allocated to one or more cash-generating units (CGU) that are expected to be the beneficiaries of the synergies derived from the business combinations. CGUs represent the smallest identifiable groups of assets that generate cash flows for the Group. Goodwill is not amortized and is periodically tested for impairment (see Note 18), comparing the carrying amount of that CGU - adjusted by the amount of goodwill attributable to minority interests, in the event that the Group has not chosen to measure minority interests at fair value, with its recoverable amount. The recoverable amount of a CGU is equal to the fair value less sale costs or its value in use, whichever is greater. Value in use is calculated as the discounted value of the cash flow projections that the unit’s management estimates and is based on the latest budgets approved for the coming years. The main assumptions used in its calculation are: a growth rate to extrapolate the cash flows indefinitely, and the discount rate used to discount the cash flows, which is equal to the cost of the capital assigned to each CGU, and equivalent to the sum of the risk-free rate plus a risk premium inherent to the CGU being evaluated for impairment. If the carrying amount of the CGU exceeds the related recoverable amount, the Group recognizes an impairment loss. Impairment losses on goodwill are recorded under "Impairment or reversal of impairment of non-financial assets - Intangible assets" (see Note 49).
These assets may have an indefinite useful life if it is concluded that there is no foreseeable limit to the period over which the asset is expected to generate net cash flows for the consolidated entities. In all other cases they have a finite useful life (see Note 18.2). Intangible assets with indefinite useful lives are not amortized but are tested for impairment at least annually.
31 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Intangible assets with a finite useful life are amortized according to the duration of this useful life, using methods similar to those used to depreciate tangible assets. Finite useful life intangible assets consist mainly of IT applications acquisition costs which have a useful life, in general, of 5 years. Internally developed software is recognized as an intangible asset when, among other requirements, it has the capacity to be used or sold, it is identifiable and its capacity to generate economic benefits in the future can be demonstrated. The amortization charge of these assets is recognized in the consolidated income statements under the heading "Depreciation and amortization" (see Note 45). Any impairment losses on the carrying amount of these assets will be recognized under the heading “Impairment or reversal of impairment on non-financial assets- Intangible assets” in the consolidated income statements (see Note 49). The criteria used to recognize the impairment losses on these assets and, where applicable, the recovery of impairment losses recognized in prior years, are similar to those used for tangible assets.
Additionally, for those geographical areas with subsidiaries where the Group applies IAS 29 "Financial Reporting in Hyperinflationary Economies", this type of asset is being adjusted to show changes in the purchasing power of the currency due to inflation from the date of acquisition or inclusion in the consolidated balance sheet (see Note 2.2.18).
The Group has applied IFRS 17 to "insurance contracts" as from January 1, 2023. IFRS 17 superseded IFRS 4 as the accounting standard applicable to the recognition, measurement and presentation of contracts that transfer significant insurance risk, retrospectively revised since January 1, 2022.
The assets and liabilities of the BBVA Group’s insurance subsidiaries are recognized according to their nature under the corresponding headings of the consolidated balance sheet. The heading “Insurance and reinsurance assets” in the consolidated balance sheets includes the amounts that the consolidated insurance subsidiaries are entitled to receive under the reinsurance contracts entered into by them with third parties and, more specifically, the value of reinsurance covers in respect of the insurance liabilities recognized by the consolidated subsidiaries. The heading “Liabilities under insurance and reinsurance contracts” in the consolidated balance sheets includes the liabilities recognized due to insurance contracts recorded by the consolidated subsidiaries in accordance with IFRS 17 (see Note 23).
The income or expense reported by the BBVA Group’s consolidated insurance subsidiaries on their insurance activities is recognized, in accordance with their nature, in the corresponding items of the consolidated income statements.
The Group evaluates whether a significant insurance risk from a third party is being accepted in its contracts, when agreeing to compensate the policyholder if a specified uncertain future event adversely affects the policyholder. Thus, it identifies those insurance contracts that fall within IFRS 17. This evaluation was already carried out by the Group under IFRS 4 for the classification of its contracts between insurance contracts and financial liabilities.
The BBVA Group groups insurance contracts considering the following aspects:
There is the possibility of defining three or more onerous groups. Article 2 of Regulation (EU) 2021/2036 of the Commission of November 19, 2021.
The initial recognition date has been established as the earliest of: the beginning of the coverage period of the group of contracts, the date when the first payment from an insurance policyholder in the group became due, or in the case of a group of onerous contracts, when the group becomes onerous. From that date, the insurance and reinsurance contracts have been reflected in the consolidated financial statements and valued in accordance with the provisions of IFRS 17. The Group derecognizes insurance contracts when the contract expires, that is, upon expiration of the contract or upon settlement of all the benefits of the contract or upon its cancellation; or when a modification is made to the terms of the contract that gives rise to derecognition.
The Group has carried out an analysis of the limits of insurance and reinsurance contracts under IFRS 17, separately, applying the General Model (Building Block Approach) by default to all contracts, except those eligible to be valued by the Simplified Model (Premium Allocation Approach), or the Variable Fee Approach.
The General Model requires that insurance contracts be initially valued for the total of:
Subsequently, the amount recognized in the consolidated balance sheet for each group of insurance contracts measured under this model comprises the liability for remaining coverage, which includes the aforementioned fulfillment cash flows and the contractual service margin, and the liability for incurred claims, which includes the cash flows from related to claims that have occurred, but have not been paid, discounted to reflect the time value of money, the financial risk associated with future cash flows, and a risk adjustment for non-financial risk that would represent the compensation required by the uncertainty associated with the amount and timing of the expected cash flows.
The Group uses the General Model for the valuation of liabilities under insurance and reinsurance contracts that correspond to long-term commitments, a portfolio that represents the majority of what is recorded in the balance sheet.
The Group used the Simplified Model in the valuation of the liability for remaining coverage of contracts with a coverage period of one year or less, or in those contracts with a duration of more than one year but which are not expected to have a valuation significantly different from that of the General Model. Under this Simplified Model, the liability for remaining coverage is made up of the premiums received (collected), less the cash flows for the acquisition of the insurance paid, plus or minus the premiums or expected acquisition cash flows recorded in the income statement, respectively. The income statement recording is carried out on a linear basis throughout the coverage period of the contract, in the event that the accrual of income is also accrued. By default, the Group has chosen to defer acquisition expenses, although there is an option to recognize such expenses when they are incurred. In turn, the groups of contracts valued under this model have a liability for incurred claims calculated in a manner similar to that of the General Model.
The Group has valued direct insurance contracts whose coverage period is less than one year, using the Simplified Model, the same method used for the valuation of assets for the reinsurance ceded. This model has also been used by the Group when the valuation under this Simplified Model does not differ significantly from that which would be produced by applying the General Model.
The amount of the contracts valued following the Variable Fee Approach is residual in the Group.
The BBVA Group has defined and identified for each group of contracts the hedging units to be used for the release to profit or loss of the contractual service margin, in accordance with IFRS 17, and subsequent interpretations issued by the Transition Resource Group for IFRS 17 and the IFRIC. The adjustments made to the contractual service margin in the subsequent measurement are those established in paragraph 44 of IFRS 17. Furthermore, the Group has chosen the accounting policy option of not changing the treatment of accounting estimates made in previous interim closings.
The methodology used to obtain the discount rate differs according to the entity and portfolio to which it is applied, highlighting mainly the cases of the companies in Spain and Mexico, where the Group has greater presence (see Note 23). In the first case, the top-down approach has been mainly applied and it has been verified that the Internal Rate of Return (hereinafter “IRR”) of the entity’s asset portfolio converges with the IRR of a reference portfolio from which the European Insurance and Occupational Pensions Authority (hereinafter “EIOPA”) fundamental spread is discounted for. In the second case, the top-down approach has been used for immunized portfolios (see Glossary), eliminating the spread for credit risk through the EIOPA fundamental spread. However, in non- immunized portfolios, the bottom-up approach has been used, using the swap curve as the risk-free rate.
The risk adjustment for non-financial risk represents the compensation required for bearing uncertainty about the amount and timing of the associated cash flows. To estimate the non-financial risk adjustment, the Group has used its own methodologies based on 33 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails. calculations of the Value at Risk (VaR) of the commitments associated with the Life and Non-Life businesses, using in the case of Spain a confidence level of 80% and in the case of Mexico 70%.
An insurance contract is onerous at the date of initial recognition if the fulfilment cash flows allocated to the contract, any previously recognized insurance acquisition cash flows and any cash flows arising from the contract at the date of initial recognition in total are a net outflow. The Group has classified the contracts valued under the General Model into onerous groups, considering the fulfillment cash flows, acquisition expenses and any other attributable cash flow. The evaluation is carried out, in general terms, contract by contract, except in those cases where it is possible to group into sets of homogeneous contracts. Contracts valued under the Simplified Model, by default, are assumed to be non-onerous at their initial recognition, unless there are facts and circumstances that indicate otherwise, where the Group relies on information from existing internal reports (ratios and indicators) for monitoring business performance, adjusted to the criteria of IFRS 17, as well as market evolution expectations based on expert judgment. The granularity to carry out this evaluation may be the same as that used to monitor the business through the abovementioned internal reports. In the same way as the contractual service margin represents the estimated future benefit of the insurance contract, the loss component is the estimated loss of the onerous contract.## 2.2.8 Insurance contracts
The accounting record of these two concepts has a different temporality: while the margin is deferred throughout the duration of the contract according to the contractual limits, the loss component is recognized in the income statement as soon as it is known, which will result in the carrying amount of the group's liability being equal to the fulfilment cash flows and the group's contractual service margin being equal to zero. Throughout the life of a contract, the assumptions used to project future cash flows may change and, consequently, the expected return on a contract may increase or decrease. This means that a group of contracts initially classified as onerous may become more onerous, or on the contrary, in the subsequent measurement the assumptions used to estimate the cash flows may change so much that the previously recognized loss could be reversed.
Reinsurance
In general, the Group values reinsurance covers under the Simplified Model, valuing the asset for remaining coverage of contracts with a coverage period of one year or less, or in those contracts with a duration of more than one year, but which are not expected to produce a valuation significantly different from that of the General Model. This method also includes the asset for incurred claims.
Effect on results
In general, for the presentation of the financial income or expenses from insurance contracts that arise as a result of the change in the discount rate, both due to the effect of the time value of money as well as the effect of financial risk, the Group has chosen the accounting policy option of disaggregating these financial income or expenses from insurance contracts between recording them in the "Net interest income" and in "Accumulated other comprehensive income (loss)", in order to minimize accounting asymmetries in the valuation and recognition of financial investments under IFRS 9 and insurance contracts under IFRS 17. The Group has chosen to disaggregate the changes in the risk adjustment between financial and non-financial, so that the change in the value of the risk adjustment derived from the effect of the time value of money, and changes in it, is recorded as a financial income or expense from insurance contracts. Insurance revenue is recognized over the period the entity provides insurance coverage, excluding any investment component. The loss component, in the case of onerous contracts, corresponds to the losses attributable to each group of contracts, both at initial recognition and at a later time.
Information as of and for the year ended December 31, 2021 is presented following the policies and valuation criteria established by IFRS 4, which was applicable as of December 31, 2021. Pursuant to IFRS 4, the consolidated insurance entities of the BBVA Group recognized the amounts of the premiums written and a charge for the estimated cost of the claims that would be incurred at their final settlement to their consolidated income statements. At the close of the year, the amounts collected and unearned, as well as the costs incurred and unpaid, were accrued. The most significant provisions recorded by consolidated insurance entities with respect to insurance policies issued by them, according to the type of product, could be as follows:
Expenses on corporate income tax applicable to the BBVA Group’s Spanish entities and on similar income taxes applicable to consolidated foreign entities are recognized as an expense for the period in the consolidated income statement, except when they result from transactions on which the profits or losses are recognized directly in equity, in which case the related tax effect is also recognized in equity. The total corporate income tax expense is calculated by aggregating the current tax arising from the application of the corresponding tax rate as per the tax base for the year (after deducting the tax credits or discounts allowable for tax purposes) and the change in deferred tax assets and liabilities recognized in the consolidated income statement. Deferred tax assets and liabilities include temporary differences, the carryforward of unused tax losses and carryforward of unused tax credits or discount carry forwards. These amounts are calculated by applying to each temporary difference the tax rates that are expected to apply when the asset is realized or the liability settled (see Note 19).
The "Tax Assets" line item in the consolidated balance sheets includes the amount of all the assets of a tax nature, broken down into: "Current” (amounts of tax recoverable in the next twelve months) and "Deferred" (which includes the amount of tax to be recovered in future years, including those arising from tax losses or credits for deductions or rebates that can be compensated).
The "Tax Liabilities" line item in the consolidated balance sheets includes the amount of all the liabilities of a tax nature, except for provisions for taxes, broken down into: "Current” (income tax payable on taxable profit for the year and other taxes payable in the next twelve months) and "Deferred" (the amount of corporate tax payable in subsequent years).
Deferred tax liabilities attributable to taxable temporary differences associated with investments in subsidiaries, associates or joint venture entities are recognized as such, except where the Group can control the timing of the reversal of the temporary difference and it is unlikely that it will reverse in the future. Deferred tax assets are only recognized to the extent that it is probable that the consolidated entities will generate enough taxable profits to make deferred tax assets effective and do not correspond to those from initial recognition (except in the case of business combinations), which also does not affect the fiscal outcome. The deferred tax assets and liabilities recognized are reassessed by the consolidated entities at each balance sheet date in order to ascertain whether they still qualify as deferred tax assets and liabilities, and if it is necessary to make adjustments on the basis of the findings of the analyses performed. In those circumstances in which it is unclear how a specific requirement of the tax law applies to a particular transaction or circumstance, and the acceptability of the definitive tax treatment depends on the decisions taken by the relevant taxation authority in future, the entity recognizes current and deferred tax liabilities and assets considering whether it is probable or not that a taxation authority will accept an uncertain tax treatment. Thus, if the entity concludes that it is not probable that the taxation authority will accept an uncertain tax treatment, the entity uses the amount expected to be paid to (recovered from) the taxation authorities. The income and expense directly recognized in consolidated equity that do not increase or decrease taxable income are accounted for as temporary differences.
The heading “Provisions” in the consolidated balance sheets includes amounts recognized to cover the BBVA Group’s current obligations arising as a result of past events. These are certain in terms of nature but uncertain in terms of amount and/or settlement date. The settlement of these obligations is deemed likely to entail an outflow of resources embodying economic benefits (see Note 24).
The provisions are recognized in the consolidated balance sheets when each and every one of the following requirements is met:
The value of common stock issued by the BBVA Group’s entities and held by them - basically, shares and derivatives on the Bank’s shares held by some consolidated entities that comply with the requirements to be recognized as equity instruments - are recognized as a decrease to net equity, under the heading "Shareholders’ funds - Treasury shares " in the consolidated balance sheets (see Note 29). These financial assets are recognized at acquisition cost, and the gains or losses arising on their disposal are credited or debited, as appropriate, to the heading “Shareholders’ funds - Retained earnings” in the consolidated balance sheets (see Note 28). In the event of a contractual obligation to acquire treasury shares, a financial liability is recorded as the present value of the amount committed (under the heading "Financial liabilities at amortized cost - Other financial liabilities") and the corresponding recognition in net equity (under the heading “Equity - Other Reserves) (see Notes 22.5 and 28).
Equity–settled share-based payment transactions, provided they constitute the delivery of such equity instruments once completion of a specific period of services has occurred, are recognized as an expense for services being provided by employees, with a corresponding entry under the heading “Shareholders’ funds – Other equity” in the consolidated balance sheet. These services are measured at fair value for the employees services received, unless such fair value cannot be calculated reliably. In such case, they are measured by reference to the fair value of the equity instruments granted, taking into account the date on which the commitments were granted and the terms and other conditions included in the commitments. When the initial compensation agreement includes what may be considered market conditions among its terms, any changes in these conditions will not be reflected in the consolidated income statement, as these have already been accounted for in calculating the initial fair value of the equity instruments. Non-market vesting conditions are not taken into account when estimating the initial fair value of equity instruments, but they are taken into account when determining the number of equity instruments to be issued. This will be recognized on the consolidated income statement with the corresponding increase in total consolidated equity.
Below we provide a description of the most significant accounting policies relating to post-employment and other employee benefit commitments assumed by BBVA Group entities (see Note 25).
Benefits for current active employees which are accrued and settled during the year and for which a provision is not required in the entity´s accounts. These include wages and salaries, social security charges and other personnel expense. Costs are charged and recognized under the heading “Administration costs – Personnel expense – Other personnel expense” of the consolidated income statement (see Note 44.1).
The Group sponsors defined-contribution plans for the majority of its active employees. The amount of these benefits is established as a percentage of remuneration and/or as a fixed amount. The contributions made to these plans in each year by BBVA Group entities are charged and recognized under the heading “Administration costs – Personnel expense– Defined-contribution plan expense” of the consolidated income statement (see Note 44.1).
36 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Some Group entities maintain pension commitments with employees who have already retired or taken early retirement, certain closed groups of active employees still accruing defined benefit pensions, and in-service death and disability benefits provided to most active employees. These commitments are covered by insurance contracts, pension funds and internal provisions. In addition, some of the Spanish Group entities have offered certain employees the option to retire before their normal retirement age, recognizing the necessary provisions to cover the costs of the associated benefit commitments, which include both the liability for the benefit payments due as well as the contributions payable to external pension funds during the early retirement period. Furthermore, certain Group entities provide welfare and medical benefits which extend beyond the date of retirement of the employees entitled to the benefits. All of these commitments are quantified based on actuarial valuations, with the amounts recorded under the heading “Provisions – Provisions for pensions and similar obligations” in the consolidated balance sheet and determined as the difference between the value of the defined-benefit commitments and the fair value of plan assets at the date of the consolidated financial statements (see Note 25). Current service cost is charged and recognized under the heading “Administration costs – Personnel expense – Defined-benefit plan expense” of the consolidated income statement (see Note 44.1). Interest credits/charges relating to these commitments are charged and recognized in net terms under the headings “Interest and other income” or, where appropriated, “Interest expense” of the consolidated income statement (see Note 37). Past service costs arising from benefit plan changes as well as early retirements granted during the year are recognized under the heading “Provisions or reversals of provisions” of the consolidated income statement (see Note 46).
In addition to the above commitments, certain Group entities provide long-term service awards to their employees, consisting mainly of monetary amounts or periods of vacation granted upon completion of a number of years of qualifying service. This heading also includes the commitments related to the termination of employment contracts according to the collective layoff procedure carried out in BBVA, S.A. in 2021. These commitments are quantified based on actuarial valuations and the amounts recorded under the heading “Provisions – Other long-term employee benefits” of the consolidated balance sheet (see Note 24).
The present value of these commitments is determined based on individual member data. Active employee costs are determined using the “projected unit credit” method, which treats each period of service as giving rise to an additional unit of benefit and values each unit separately. In establishing the actuarial assumptions we take into account that:
The BBVA Group recognizes actuarial gains (losses) relating to early retirement benefits, long service awards and other similar items under the heading “Provisions or reversal of provisions” of the consolidated income statement for the period in which they arise (see Note 46). Actuarial gains (losses) relating to pension and medical benefits are directly charged and recognized under the heading "Accumulated other comprehensive income (loss) – Items that will not be reclassified to profit or loss – Actuarial gains (losses) on defined benefit pension plans" of equity in the consolidated balance sheet (see Note 30).## 2.2.14 Termination benefits
Termination benefits are recognized in the financial statements when the BBVA Group agrees to terminate employment contracts with its employees or from the time the costs for a restructuring that involves the payment of compensation for the termination of contracts with its employees are recorded. This happens when there is a formal and detailed plan in which the fundamental modifications to be made are identified, and whenever said plan has begun to be executed or its main characteristics or objective facts about its execution have been publicly announced. The collective layoff procedure carried out at BBVA, S.A. in 2021 complies with these conditions.
37 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
The most significant policies used by the BBVA Group to recognize its income and expense are as follows.
– Interest income and expense and similar items: As a general rule, interest income and expense and similar items are recognized on the basis of their accrual using the effective interest rate method. In the particular case of inflation-indexed bonds, interest income also includes the effect of real inflation experienced in the period. They shall be recognized within the consolidated income statement according to the following criteria, independently from the financial instruments’ portfolio which generates the income or expense:
a. The interest income past-due before the initial recognition and pending to be received will be added to the gross carrying amount of the debt instrument.
b. The interest income accrued after the initial recognition will be added to the gross carrying amount of the debt instrument until it will be received.
In the event that a debt instrument is considered impaired, interest income will be calculated by applying the effective interest rate to the amortized cost (that is, adjusting for any impairment loss) of the financial asset.
– Income from dividends received: Dividends shall be recognized within the consolidated income statement according to the following criteria, independently from the financial instruments’ portfolio which generates this income:
a. When the right to receive payment has been declared before the initial recognition and when the payment is pending to be received, the dividends will not be added to the gross carrying amount of the equity instrument and will not be recognized as income. Those dividends are accounted for as financial assets separately from the net equity instrument.
b. If the right to receive payment is received after the initial recognition, the dividends from the net equity instruments will be recognized within the consolidated income statement at the time the right to receive them arises, which is the time of the official announcement of receipt of the payment by the appropriate governing body of the entity. If the dividends correspond to the profits of the issuer before the date of initial recognition, they will not be recognized as income but as reduction of the gross carrying amount of the equity instrument because it represents a partial recuperation of the investment. Amongst other circumstances, the generation date can be considered to be prior to the date of initial recognition if the amounts distributed by the issuer as from the initial recognition are higher than its profits during the same period.
– Income from commissions collected/paid: Financial fees are an integral part of the actual performance of a financing transaction and are collected in advance. They can be:
a. Fees charged for the origination or acquisition of financing transactions that are not measured at fair value through profit or loss, such as those charged for the evaluation of the borrower's financial condition, for the analysis and recording of various collateral, as well as those charged for negotiating the terms of transactions or preparing and processing documentation and the closing of transactions, will be deferred and recognized over the life of the transaction as an adjustment to the performance of the transaction. These fees, forming part of the effective rate of the loans, will be deferred and recognized over the life of the transaction as an adjustment to the performance of the transaction.
b. Fees agreed as compensation for the commitment to grant financing when it is not measured at fair value through profit or loss and it is probable that the Group will enter into a specific loan agreement, are deferred and recognized over the life of the transaction as an adjustment to the performance of the transaction. If the commitment expires before the entity makes the loan such fee is recognized as revenue at the time of expiration.
Non-financial commissions derived from the provision of financial services other than financing transactions may be:
a. Related to the performance of a service rendered over time (e.g. account administration fees or fees collected in advance for the issuance or renewal of credit cards), in which case they are recognized over time based on the degree of progress in providing the service.
b. Related to the performance of a service rendered at a specific time (e.g. underwriting of securities, currency exchange, advice or syndication of a loan), in which they are recognized in the income statement at the time of collection.
38 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
– Non-financial income and expense: As a general rule, they are recognized on an accrual basis, that is, as the contractually committed goods or services are delivered or rendered and recognized as revenue over the life of the contract. In the event that consideration is received or there is a right to receive consideration without delivery of the contractually committed goods or services, a liability is recognized in the balance sheet until it is recognized in the income statement. In the case of collections and payments deferred over time, they are recognized for accounting purposes at the amount resulting from discounting the expected cash flows at market rates.
– Commissions, fees and similar items: Income and expense relating to commissions and similar fees are recognized in the consolidated income statement using criteria that vary according to the nature of such items. The most significant items in this regard are:
a. Those relating to financial assets and liabilities measured at fair value through profit or loss, which are recognized immediately in the income statement.
b. Those arising from transactions or services that are provided over a period of time, which are recognized over the life of these transactions or services.
c. Those relating to a singular transaction, which are recognized when this singular transaction is carried out.
– Deferred collections and payments: These are recognized for accounting purposes at the amount resulting from discounting the expected cash flows at market rates.
The heading “Other operating income” in the consolidated income statements includes the proceeds of the sales of assets and income from the services provided by the Group entities that are not financial institutions. In the case of the Group, these entities are mainly real estate and service entities (see Note 42).
The currency in which the Financial Statements of the BBVA Group are presented is the euro. As such, all balances and transactions denominated in currencies other than the euro are deemed to be expressed in “foreign currency”. Conversion to euros of the balances held in foreign currency is performed in two consecutive stages:
– Conversion of the foreign currency to the entity’s functional currency (currency of the main economic environment in which the entity operates); and
– Conversion to euros of the balances held in the functional currencies of the entities whose functional currency is not the euro.
Conversion of the foreign currency to the entity’s functional currency
Transactions denominated in foreign currencies carried out by the consolidated entities (or entities accounted for using the equity method) are initially accounted for in their respective currencies. Subsequently, the monetary balances in foreign currencies are converted to their respective functional currencies using the exchange rate at the close of the financial year. In addition,
– Non-monetary items valued at their historical cost are converted to the functional currency at the exchange rate applicable on the purchase date.
– Non-monetary items valued at their fair value are converted at the exchange rate in force on the date on which such fair value was determined.
– Monetary items are converted to the functional currency at the closing exchange rate.
– Income and expense are converted at the period’s average exchange rates for all the operations carried out during the year, except in those geographical areas where IAS 29 “Financial Reporting in Hyperinflationary Economies” applies (see Note 2.2.18).
When applying this criterion the BBVA Group considers whether significant variations have taken place in exchange rates during the year which, owing to their impact on the statements as a whole, may require the application of exchange rates as of the date of the transaction instead of such average exchange rates.# NOTE 2.2.18 Entities and branches located in countries with hyperinflationary economies
In accordance with the criteria established in IAS 29 "Financial Reporting in Hyperinflationary Economies”, to determine whether an economy has a high inflation rate the country's economic situation is examined, analyzing whether certain circumstances are fulfilled, such as whether the population prefers to keep its wealth or savings in non-monetary assets or in a relatively stable foreign currency, whether prices can be set in that currency, whether interest rates, wages and prices are pegged to a price index or whether the accumulated inflation rate over three years approaches or exceeds 100%. The fact that any of these circumstances is fulfilled will not be a decisive factor in considering an economy hyperinflationary, but it does provide some reasons to consider it as such.
Since 2009 and 2018, the economies of Venezuela and Argentina, respectively, have been considered hyperinflationary under the above criteria. As a result, the financial statements of the BBVA Group’s entities located in such geographies have, therefore, been adjusted to correct for the effects of inflation. Additionally, since the first half of 2022, Turkey's economy has been considered highly inflationary according to the aforementioned criteria. Consequently, the financial statements of the BBVA Group entities located in Turkey have also been adjusted to correct them for the effects of inflation in accordance with IAS 29 "Financial Reporting in Hyperinflationary Economies", with retrospective application from January 1, 2022. The figures for years prior to 2022 have not been modified since the Group's presentation currency is the euro.
As a consequence of the application of IAS 29 "Financial Reporting in Hyperinflationary Economies", the Group applies the following criteria in the financial statements of the Group companies that operate in these three geographies:
The combined result derived from the application of the above criteria amounts to a loss of €2,610 million in 2023, of which €2,242 million is attributable to owners of the parent (€1,793 million attributable to owners of the parent in 2022). This impact includes mainly the loss of the net monetary position, which amounts to a gross amount of €2,118 million and is recorded in the line “Other operating expense” in the consolidated income statement (€2,323 million in 2022), partially offset by the positive impact of the revaluation of certain bonds linked to inflation, for a gross amount of €1,202 million (€1,490 million in 2022), given that, under IAS 29 "Financial Reporting in Hyperinflationary Economies", these types of bonds are considered protective assets (see Note 42).
During 2023 the impact on equity of Group entities located in Turkey derived from the application of IAS 29 and the conversion to the euro (IAS 21) amounted to €-355 million, of which €-306 million have been recorded within “Equity – Accumulated other comprehensive income (loss)”, and €-49 million within “Minority interests – Accumulated other comprehensive income (loss)” (see Note 30). In 2022 the impact on equity of Group entities located in Turkey derived from the retrospective application of IAS 29 "Financial Reporting in Hyperinflationary Economies" since January 1, 2022, in the Turkish subsidiaries which led to an increase in equity of €130 million, mainly the result of the revaluation of tangible assets and inflation-linked bonds.
According to the Turkish Statistical Institute (Turkstat), accumulated inflation in 2023 stood at 64.8% (64.3% and 36.1% in 2022 and 2021, respectively) and the exchange rate used as of December 31, 2023 was 32.65 Turkish lira per euro (19.96 and 15.23 in 2022 and 2021, respectively).
The combined result derived from the application of the above criteria amounted to a loss of €2,314 million, of which €1574 million is attributable to owners of the parent in 2023 (€694 million and €258 million attributable to owners of the parent in 2022 and 2021, respectively).This impact includes mainly the loss of the net monetary position, which amounts to a gross amount of €1,062 million and is recorded in the line “Other operating expense” in the consolidated income statement in 2023 (€822 million and €394 million in 2022 and 2021, respectively). Furthermore, during 2023, 2022 and 2021 the impact on equity of Group entities located in Argentina derived from the application of IAS 29 and the conversion to the euro (IAS 21) amounted to €-634 million, €242 million and €337 million, respectively, of which €-428 million, €157 million and €225 million, respectively, have been recorded within “Equity – Accumulated other comprehensive income (loss)”, and €-206 million, €84 million and €112 million, respectively, within “Minority interests – Accumulated other comprehensive income (loss)” (see Note 30). Accumulated inflation estimated by the National Census Institute of Argentina (Indec) and BBVA Research for the year 2023 was 215% (97.0% and 50.7% in 2022 and 2021, respectively) and the exchange rate used as of December 31, 2023 was 892.81 Argentine pesos per euro (188.51 and 116.37 in 2022 and 2021, respectively).
Venezuela
The combined result derived from the application of the above criteria amounted to a loss of €18 million, of which €10 million is attributable to owners of the parent in 2023 (€6 million and €6 million attributable to owners of the parent in 2022 and 2021, respectively). This impact includes mainly the loss of the net monetary position, which amounts to a gross amount of €28 million and is recorded in the line “Other operating expense” in the consolidated income statement in 2023 (in 2022 and 2021 this result amounted to €28 and €14 million, respectively). During 2023, 2022 and 2021 the impact on equity of Group entities located in Venezuela derived from the application of hyperinflation (IAS 29) and the conversion to the euro (IAS 21) was not material for the Group.
41 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
Accumulated inflation for the year 2023, as estimated by BBVA Research, was 111% (292% and 333% in 2022 and 2021, respectively) and the exchange rate used as of December 31, 2023 was 43.23 Venezuelan bolivars per euro (19.79 and 5.36 in 2022 and 2021, respectively).
In 2023, various amendments to the IFRS standards or their interpretations or modifications (hereinafter “IFRIC” or "interpretation") became effective, among which the following should be highlighted:
The Group has applied IFRS 17 to "Insurance contracts", and subsequent amendments, as of January 1, 2023. As IFRS 17 requires at least one year of comparative information, the financial information has been restated from January 1, 2022 to December 31, 2022 (see Appendix XIII). IFRS 17 has superseded IFRS 4 as the accounting standard applicable to the recognition, measurement and disclosure of contracts that transfer significant insurance risk, based on a model that uses updated assumptions at each reporting period, with the objective of achieving greater homogeneity and increase comparability between entities.
BBVA Group has developed an accounting policy on insurance contracts under IFRS 17 and an operational guide to govern the calculation process, which seeks to ensure adequate control in the preparation of the consolidated financial information. Note 2.2.8 of this consolidated financial statements includes a non-exhaustive summary of the main judgments and estimates, as well as the accounting policy options applied.
The application of IFRS 17 has not had a significant impact on the consolidated financial statements of the BBVA Group (see Appendix XIII). The main differences in accounting with respect to the previous standard come from long-term contracts, and have been recorded in "Accumulated other comprehensive income (loss)" and "Retained earnings". In short-term contracts there are no significant differences in their accounting with respect to the previous regulations, nor a significant equity impact in initial application. The impact on the Group´s onerous products has been not significant.
During 2022, a generalized neutral effect has been observed in the results, comparing those expressed under IFRS 4 with those restated under IFRS 17, except in specific cases, the impact of which has been recorded in "Retained earnings". For its part, the evolution of interest rates throughout the year 2022 included, in "Accumulated other comprehensive income (loss)", the net effect of the change in the fair value of the liabilities under insurance and reinsurance contracts and the associated financial assets. All insurance contracts that were under the scope of IFRS 4 met the definition of an insurance contract under the new standard and therefore, the introduction of IFRS 17 has not led to any reclassification, with the exception of certain products of BBVA Seguros, S.A de Seguros y Reaseguros, which do not transfer significant insurance risk, and therefore, are valued under IFRS 9.
Among the liabilities under insurance contracts held as of the transition date, January 1, 2022, those corresponding to long-term commitments to which the General Model has been applied, were valued in transition using the fair value approach, given the impracticability of applying IFRS 17 retroactively, given the disproportionate cost and difficulty of obtaining the historical data necessary to apply a full retrospective approach given the age of these products on the consolidated balance sheet and their remaining duration. The fair value approach contemplates the determination of the contractual service margin or the loss component of the liability for the remaining coverage, based on the difference between the fair value based on the requirements of IFRS 13 "Fair value measurement" and the present value of the fulfillment cash flows based on IFRS 17. The application of the fair value in transition criteria allows contracts issued more than one year apart to be included in the same group and therefore not to differentiate by cohorts, an option that the Group has opted for. On the other hand, short-term contracts valued under the Simplified Model have been valued, in transition, using the full retrospective approach.
On the date of initial application of IFRS 17, as the BBVA Group was already applying IFRS 9, it has accepted the option of reassessing the classification of financial assets associated with insurance contracts within the scope of IFRS 17, redesignating as of January 1, 2022 certain financial assets previously classified in the portfolio of "Financial assets at amortized cost" to "Financial assets at fair value through other comprehensive income (loss)", considering that the business model that best suited the objectives of the insurance contracts to which these investments are subject is to obtain the contractual cash flows and sell such financial assets (see Appendix XIII).
In February 2021 the International Accounting Standards Board (hereinafter "IASB") issued amendments to this IAS with the aim of improving the quality of the disclosures in relation to the accounting policies applied by the entities with the ultimate aim of providing useful and material information in the financial statements. The amendments to IAS 1 require entities to disclose accounting policies that are material rather than significant accounting policies and provide guidance to help apply the concept of materiality in financial statement disclosures. The amendments to IAS 8 introduce clarifications to distinguish between the concept of accounting estimate and that of accounting policy. The amendments have entered into force on January 1, 2023, with no significant impact on the consolidated financial statements of the BBVA Group.
The IASB issued an amendment to IAS 12 to clarify that entities should recognize deferred tax arising on transactions such as leases or decommissioning obligations. The amendment requires entities to recognize a deferred tax asset and liability separately when the temporary differences arising in the recognition of an asset and a liability are the same, not being possible to apply the initial recognition exception provided for in the standard. The purpose of the amendments has been to reduce the diversity in the presentation of information on deferred taxes in said transactions. The modification entered into force on January 1, 2023, although its early application was allowed, with no significant impact on the consolidated financial statements of the BBVA Group.
On December 20, 2021, the OECD published an international tax initiative which sets forth a framework of rules (“GloBE -Global Anti- Base Erosion Rules”) for the application of the “Pillar Two Model Rules”, establishing a supplementary tax system that makes the effective rate of taxation, in those jurisdictions where certain multinational groups are present, reach the minimum rate of 15%.In May 2023, the IASB published an amendment to IAS 12 to clarify the accounting treatment of this initiative on the results arising from tax legislation enacted or substantively enacted in relation to Pillar Two in those jurisdictions where the aforementioned groups are present. This amendment states the following:
These amendments to IAS 12 came into force on January 1, 2023, and have had no impact on the consolidated financial statements of the BBVA Group, since the Pillar Two legislation was not in force at the date of presentation of these financial statements. In any case, the BBVA Group will apply the mandatory exception to the recognition and disclosure of deferred tax assets and liabilities in relation to Pillar Two.
Notwithstanding the foregoing, the information required by IAS 12 on the exposure that the Group expects to derive from this new regulation once it comes into force is provided below.
On December 22, 2022, the Council of the European Union adopted Directive 2022/2523 (hereinafter "the Directive"), incorporating the Model Standards into the European legal framework. The Directive incorporates, with some exceptions, the content of the aforementioned Standards and sets December 31, 2023 as the deadline for their transposition by the Member States. It also stipulates that the corresponding provisions must enter into force for financial years beginning on or after that date.
As a result, affected groups (those with consolidated net sales of EUR 750 million or more in two of the last four years) must calculate their effective tax rate for Pillar Two purposes for each jurisdiction in which they operate. In those cases in which the effective rate, calculated in accordance with the provisions of the Directive, is less than 15%, they will have to pay a Complementary Tax in order to reach that 15%.
At the date of preparation of these financial statements, the process of transposition of the Directive into Spanish legislation is still in progress. However, in line with the provisions of the Preliminary Draft Bill submitted for public information, it is expected to take effect for tax periods beginning on or after December 31, 2023 and, therefore, with respect to the BBVA Group, from the next tax year beginning on January 1, 2024.
In the remaining jurisdictions of greater relevance to the Group (Mexico and Turkey), the corresponding legislation is still pending and there is no certainty, at the date of preparation of these financial statements, as to whether such processing will take place and, if so, what will be the effective date of the resulting legislation.
At year-end 2023, the Group is in the process of assessing its exposure to the Pillar Two legislation. At the date of preparation of these financial statements, this assessment has been carried out as a preliminary exercise of the Group's exposure to Pillar Two based on the consolidated figures of the Group in each of its constituent jurisdictions and the analysis of the Transitional Safe Harbor envisaged by the OECD, which is also contemplated in the Preliminary Draft Bill mentioned above.
As a result of this preliminary assessment, the effective tax rate in most of the jurisdictions in which the Group operates, with the exception of a small number of non-significant countries representing a small percentage of the BBVA Group's pre-tax profit, exceeds 15%. In accordance with the above, based on the analysis carried out, at year-end 2023 the Group does not anticipate substantial economic impacts derived from the Complementary Tax that would arise as a consequence of the application of Pillar Two, once the 43 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails corresponding legislation enters into force. The foregoing is without prejudice to the significant increase in the administrative burden derived from the formal compliance with this new tax regulation. It should also be noted that the Group continues to monitor legislative developments in the jurisdictions where it is present, as well as to analyze the implications derived from the regulations, and is currently immersed in the Pillar Two implementation project.
The following new International Financial Reporting Standards and Interpretations or Modifications had been published at the date of preparation of the consolidated financial statements, but are not mandatory as of December 31, 2023. The Group is currently evaluating the potential effects of each of these new standards or amendments. Although in some cases the IASB allows early application of new standards, interpretations and amendments before their effective date, the BBVA Group has not proceeded with this option for any such changes.
The IASB has issued an amendment to IFRS 16 that clarifies the requirements for sale-and-leaseback transactions. The new requirements established that the seller-lessee shall determine ‘lease payments’ or ‘revised lease payments’ in a way that the seller- lessee would not recognize any amount of the gain or loss that relates to the right of use retained by the seller-lessee. The amendments will be effective for annual reporting periods beginning on or after January 1, 2024, with early application permitted. No significant impact is expected on the BBVA Group´s consolidated financial statements.
On August 15, 2023, the IASB issued a series of amendments to IAS 21 - The effect of changes in exchange rates. The standard has a double objective, on the one hand to provide guidance on when one currency is convertible into another and, second, how to determine the exchange rate to be used in accounting when it is concluded that such convertibility does not exist. In relation to the first objective, one currency is convertible into another when an entity can obtain the other currency within a time frame that allows for a normal administrative delay; and through markets or exchange mechanisms in which an exchange transaction creates enforceable rights and obligations. If the entity determines that there is no convertibility between currencies, it must estimate an exchange rate. The standard does not establish a specific estimation technique for them, but rather establishes guidelines for their determination, allowing the use of an observable type without adjusting or using an estimation technique. The modification to the standard will come into force on January 1, 2025. Early application is permitted, although the BBVA Group has not adopted it as of December 31, 2023. The Group has been applying since 2015 an estimated exchange rate (see Note 2.2.17 of these consolidated Financial Statements) analogous to the determination process described in this standard for the financial statements of the Group's companies located in Venezuela given the lack of convertibility of its currency.
The BBVA Group is an international diversified financial group with a significant presence in retail banking, wholesale banking and asset management. The Group also operates in the insurance sector.
The following information is detailed in the appendices of these consolidated financial statements of the Group for the year ended December 31, 2023:
The following table sets forth information related to the Group’s total assets as of December 31, 2023, 2022 and 2021, broken down by the Group’s entities according to their activity:
| Contribution to Consolidated Group total assets. Entities by main activities (Millions of Euros) | 2023 | 2022 ⁽¹⁾ | 2021 |
|---|---|---|---|
| Banking and other financial services | 737,971 | 678,809 | 631,683 |
| Insurance and pension fund managing companies | 34,520 | 30,066 | 29,657 |
| Other non-financial services | 3,068 | 3,217 | 1,545 |
| Total | 775,558 | 712,092 | 662,885 |
(1) Balances corresponding to 2022 have been restated according to IFRS 17 (see Notes 1.3 and 2.3).
44 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
The total assets and results of operations broken down by operating segments are included in Note 6.
The BBVA Group’s activities are mainly located in Spain, Mexico, Turkey and South America, with active presence in the rest of Europe, the United States and Asia:
During the year 2023 no significant corporate transactions have been carried out.
On February 14, 2022, BBVA announced the agreement with the company Neon Payments Limited (the "Company" in this section) for the subscription of 492,692 preference shares, representing approximately 21.7% of its share capital, through a share capital increase and in consideration of approximately USD 300 million (equal to approximately €263 million, using the applicable 1.14 EUR/ USD exchange rate as of February 11, 2022). The Company, which is incorporated and domiciled in the United Kingdom, is the owner of 100% of the shares of the Brazilian company Neon Pagamentos S.A. As of February 14, 2022, BBVA was already the indirect owner of approximately 10.2% of the share capital of the Company through companies where BBVA owns more than 99% of the share capital. As of December 31, 2022, BBVA held, directly and indirectly, 29.2% of the share capital of the Company (30.1% as of December 31, 2023). Despite owning more than 20% of the share capital, BBVA's ability to influence the Company´s financial and operating decisions policies is very limited, so the investment is recognized under the heading "Non-trading financial assets mandatorily at fair value through profit or loss" (see Note 11).
On November 15, 2021, BBVA announced a voluntary takeover bid (hereinafter "VTB") addressed to the 2,106,300,000 shares 3 not controlled by BBVA, which represented 50.15% of the total share capital of Türkiye Garanti Bankası A.Ş (hereinafter "Garanti BBVA"). BBVA submitted for authorization an application of the VTB to the supervisor of the securities markets in Turkey (Capital Markets Board, hereinafter "CMB") on November 18, 2021.
45 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
3 All references to “shares” or “share” shall be deemed made to lots of 100 shares, which is the trading unit in which Garanti BBVA shares are listed at Borsa Istanbul.
On March 31, 2022, CMB approved the offer information document and on the same day BBVA announced the commencement of the VTB acceptance period on April 4, 2022. On April 25, 2022 BBVA informed of an increase of the cash offer price per Garanti BBVA share from that initially announced (12.20 Turkish lira) to 15.00 Turkish lira. On May 18, 2022, BBVA announced the finalization of the offer acceptance period, with the acquisition of 36.12% of Garanti BBVA’s share capital. The total amount paid by BBVA was approximately 22,758 million Turkish lira (equivalent to approximately €1,390 million 4 including the expenses associated with the transaction and net of the collection of the dividends corresponding to the stake acquired). The transaction resulted in a capital gain of approximately €924 million (including the impacts after the application of IAS 29 "Financial Reporting in Hyperinflationary Economies", see Note 2.2.18). An amount of €3,609 million was recorded under the heading “Other reserves” and there was a reclassification to “Accumulated other comprehensive income (loss)” corresponding to the 36.12% acquired from minority interests to “Accumulated other comprehensive income (loss)” of the parent company for an amount of €-2,685 million. The total derecognition associated with the transaction of the heading “Minority interests” considering “Other items” and “Accumulated other comprehensive income (loss)” amounted to €-2,541 million. The percentage of total share capital of Garanti BBVA owned by BBVA (after the completion of the VTB on May 18, 2022) is 85.97%. In relation to the rest of the effects of the application of IAS 29 "Financial Reporting in hyperinflationary economies" on the entities of the Group in Turkey, see Note 2.2.18 to these Consolidated Financial Statements.
On June 1, 2021, after obtaining all the required authorizations, BBVA completed the sale to The PNC Financial Services Group, Inc. of 100% of the capital stock of its subsidiary BBVA USA Bancshares, Inc., which in turn owned all the capital stock of the bank, BBVA USA. The consideration received in cash by BBVA, as a consequence of the referred sale, amounted to approximately USD 11,500 million (price provided in the agreement minus the agreed closing price adjustments) equivalent to approximately €9,600 million (with an exchange rate of 1.20 EUR / USD). The accounting of both the results generated by BBVA USA Bancshares, Inc. since the announcement of the transaction and of its closing had an aggregate positive impact on the BBVA Group's Common Equity Tier 1 (fully loaded) ratio of approximately 294 basis points, which includes the generation of capital contributed by the subsidiary to the Group until the closing of the transaction (on June 1, 2021) and a profit net of taxes of €582 million. The calculation of the impact on Common Equity Tier 1 was made taking into account the amount of the transaction in euros and BBVA Group's financial statements as of June 2021. The BBVA Group continues to develop the institutional and wholesale business in the United States that it currently carries out through its broker-dealer BBVA Securities Inc. and its branch in New York. BBVA also maintains its investment activity in the fintech sector through its participation in Propel Venture Partners US Fund I, L.P.
On January 22, 2021, once the mandatory authorizations were obtained, BBVA completed the sale of its direct and indirect shareholding of 100% of the capital stock of Banco Bilbao Vizcaya Argentaria Paraguay, S.A. (“BBVA Paraguay”) to Banco GNB Paraguay S.A., a subsidiary of the Gilinski Group. This transaction was originally agreed in 2019. The total amount received by BBVA amounted to approximately USD 250 million (approximately €210 million). The transaction generated a capital loss net of taxes of approximately €9 million. This transaction had a positive impact on the Common Equity Tier 1 (fully loaded) of the BBVA Group of approximately 6 basis points, which is reflected in the capital base of the BBVA Group in the fiscal year 2021.
In the context of the COVID-19 pandemic BBVA notified on January 29, 2021, by means of an Inside Information filing with the CNMV (hereinafter, “Inside Information”), that it intended to resume its shareholder remuneration policy announced on February 1, 2017, by means of Relevant Information number 247679 in 2021, contingent upon the repealing of recommendation ECB/2020/62 and the absence of further restrictions or limitations.
46 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
4 Using the effective exchange rate of 16.14 Turkish lira per euro.
The Annual General Shareholders' Meeting held on April 20, 2021 approved, in the third item of its agenda, a cash distribution from the share premium account of BBVA of €0.059 gross for each of the Bank's outstanding shares which are entitled to participate in the aforementioned distribution, all this in compliance with recommendation ECB/2020/62 on dividend payments during the COVID-19 pandemic , which was paid on April 29, 2021. The total amount was €393 million and was recognized under the heading “Total Equity – Shareholder's Funds – Share Premium” of the consolidated balance sheet as of December 31, 2021 (see Note 27).On July 23, 2021, the European Central Bank (hereinafter "ECB") published the approval of recommendation ECB/2021/31 repealing recommendation ECB/2020/62 from September 30, 2021, whereby the ECB indicated that it would assess capital, dividend distribution and share buyback plans of each financial institution in the context of its ordinary supervisory process, eliminating the remaining restrictions on dividend and share buyback related matters established in recommendation ECB/2020/62.
In line with the above, BBVA communicated by means of an Inside Information on September 30, 2021 that the Board of Directors of BBVA had approved the payment of a cash interim dividend of €0.08 gross (€0.0648 net of withholding tax) per each outstanding BBVA share on account of the 2021 dividend. The total amount paid to shareholders on October 12, 2021, excluding dividends paid in respect of treasury shares held by the Group's companies, amounted to €532 million and is recognized under the heading "Shareholder’s funds - Total equity- Interim dividends" of the consolidated balance sheet as of December 31, 2021.
BBVA's Board of Directors announced by means of Relevant Information, on November 18, 2021, the amendment of the Group's shareholder remuneration policy (announced on February 1, 2017 by means of Relevant Information), establishing as a policy to distribute annually between 40% and 50% of the consolidated ordinary profit for each year (excluding amounts and items of an extraordinary nature included in the consolidated income statement), compared to the previous policy that established a distribution between 35% and 40%.
This policy is implemented through the distribution of an interim dividend for the year (which is expected to be paid in October of each year) and a final dividend or final distribution (which is expected to be paid at the end of the year and once the application of the result is approved, foreseeably in April of each year), with the possibility of combining cash distributions with share buybacks, all subject to the corresponding authorizations and approvals applicable at any given time.
During the 2022 financial year, the Annual General Shareholders' Meeting and the Board of Directors approved the payment of the following cash amounts:
During the 2023 financial year, the Annual General Shareholders' Meeting and the Board of Directors approved the payment of the following cash amounts:
47 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
The forecasted financial statement, drawn up in compliance with the applicable legal requirements, which evidenced the existence of sufficient liquidity to distribute the abovementioned amount approved by the Board of Directors of BBVA on September 27, 2023 was the following:
| August 31, 2023 | |
|---|---|
| Profit of BBVA, S.A., after the provision for income tax | 3,946 |
| Maximum amount distributable | 3,946 |
| Amount of proposed interim dividend | 954 |
| BBVA cash balance available to the date | 40,855 |
On January 30, 2024, it was announced that a cash distribution in the amount of €0.39 gross per share to be paid in April as a final dividend for the year 2023 and the execution of a share buyback program of BBVA for an amount of €781 million were planned to be proposed to the corresponding corporate bodies for consideration as ordinary remuneration to shareholders for 2023, subject to obtaining the corresponding regulatory authorizations and the communication of the specific terms and conditions of the program before its execution.
On October 26, 2021, BBVA obtained the pertinent authorization from the ECB to buy back up to 10% of its share capital for a maximum of €3,500 million, in one or several tranches and over the course of a 12-month period (the “Authorization”).
Upon receiving the Authorization and making use of the delegation conferred by the BBVA Annual General Shareholders' Meeting held on March 16, 2018, at its meeting of October 28, 2021, BBVA Board of Directors resolved to carry out a share buyback program scheme in compliance with Regulation (EU) no. 596/2014 of the European Parliament and the Council of April 16, 2014 on market abuse and Commission Delegated Regulation (EU) no. 2016/1052 of the Commission, of March 8, 2016 (the “Regulations”), executed in various tranches up to a maximum of €3,500 million, with the aim of reducing BBVA's share capital (the “Program Scheme”), notwithstanding the possibility of terminating or cancelling the Program Scheme at an earlier date where advisable due to the concurrence of a series of specific circumstances, as well as to carry out a first share buyback program within the scope of the Program Scheme (the "First Tranche") for the purpose of reducing BBVA's share capital, which was notified by means of Inside Information on October 29, 2021.
On November 19, 2021, BBVA notified by means of Inside Information that the First Tranche would be executed externally, starting on November 22, 2021, through J.P. Morgan AG as lead manager, for a maximum amount of €1,500 million, for the purchase of a maximum of 637,770,016 shares representing, approximately, 9.6% of BBVA's share capital.
By means of Other Relevant Information filing dated March 3, 2022, BBVA announced the completion of the execution of the First Tranche upon reaching the maximum monetary amount of €1,500 million, having acquired 281,218,710 own shares representing, approximately, 4.22% of BBVA's share capital as of that date.
On June 15, 2022, BBVA notified the partial execution of the share capital reduction resolution adopted by the Annual General Shareholders’ Meeting of BBVA held on March 18, 2022, through the reduction of BBVA’s share capital in a nominal amount of €137,797,167.90 and the consequent redemption, charged to unrestricted reserves, of 281,218,710 own shares of €0.49 par value each acquired derivatively by the Bank in execution of the First Tranche and which were held in treasury shares (see Notes 26, 27, 28 and 29).
On February 3, 2022, BBVA notified by means of Inside Information that its Board of Directors had agreed, within the scope of the Program Scheme, to carry out a second buyback program for the repurchase of own shares (the “Second Tranche”) aimed at reducing BBVA’s share capital, for a maximum amount of €2,000 million and a maximum number of shares to be acquired equal to the result of subtracting from 637,770,016 own shares (9.6% of BBVA’s share capital at that date) the number of own shares finally acquired in execution of the First Tranche (unfinished as of that date).
As a continuation of the previous communication, on March 16, 2022 BBVA informed by means of Inside Information that it had agreed to execute the Second Tranche: i) through the execution of a first segment for an amount of up to €1,000 million, and with a maximum number of shares to be acquired of 356,551,306 shares (the "First Segment"), externally through Goldman Sachs International as lead manager, who would execute the purchase transactions through the broker Kepler Cheuvreux, S.A.; and (ii) once execution of the First Segment had been completed, through the execution of a second segment that would complete the Framework Program (the "Second Segment").By means of Other Relevant Information dated May 16, 2022, BBVA announced the completion of the execution of the First Segment upon reaching the maximum monetary amount of €1,000 million, having acquired 206,554,498 shares representing, approximately, 3.1% of BBVA's share capital as of said date. On June 28, 2022, BBVA communicated through Inside Information the agreement to complete the Program Scheme by executing the Second Segment, for a maximum amount of €1,000 million and a maximum number of own shares to be acquired of 48 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails 149,996,808. The execution of the Second Segment took place through Citigroup Global Markets Europe AG as lead manager, as BBVA informed through Inside Information on June 29, 2022. By means of Other Relevant Information dated August 19, 2022, BBVA announced the completion of the execution of the Second Segment upon reaching the maximum number of shares (149,996,808) representing, approximately, 2.3% of BBVA's share capital as of said date (which amounted to approximately €660 million). On September 30, 2022, BBVA notified through Other Relevant Information an additional partial execution of the share capital reduction resolution adopted by the Annual General Shareholders’ Meeting of BBVA held on March 18, 2022, through the reduction of BBVA’s share capital in a nominal amount of €174,710,139.94 and the consequent redemption, charged to unrestricted reserves, of 356,551,306 own shares of €0.49 par value each acquired derivatively by the Bank in execution of the First Segment and Second Segment of the share buyback program scheme and which were held in treasury shares (see Notes 26, 27, 28 and 29). The Program Scheme was considered as an extraordinary shareholder distribution and was therefore not included in the scope of the shareholder remuneration policy described above.
Share buyback programs in 2023
On February 1, 2023, BBVA announced, among others, that it was planned to submit for the consideration of the corresponding BBVA governing bodies the execution of a €422 million share buyback program as ordinary distribution in relation to the 2023 results, subject to obtaining the corresponding regulatory authorizations and to the communication of the specific terms and conditions of the share buy-back program before its execution, as an ordinary distribution of 2023. On March 17, 2023, after receiving the required authorization from the ECB, BBVA announced through an Inside Information notice the execution of a time-scheduled 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 €422 million. The execution was carried out internally by BBVA, executing the trades through BBVA. By means of an Other Relevant Information notice dated April 21, 2023, BBVA announced the completion of the share buyback program upon reaching the maximum monetary amount of €422 million, 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. On June 2, 2023, BBVA notified through an Other Relevant Information notice a partial execution of the share capital reduction resolution adopted by the Annual 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 (see Notes 26, 27, 28 and 29). On July 28, 2023, BBVA communicated through Inside information its request to the ECB for the correspondent supervisory authorization in order to carry out a share buyback program up to €1,000 million, subject to the authorization requested being granted, to the adoption of the corresponding corporate resolutions and to the communication of the specific terms and conditions of the share buyback program before its execution. This share buy-back program was considered as an extraordinary shareholder distribution. 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. The execution was carried out internally by BBVA, executing the trades through BBVA. By means of an Other Relevant Information notice dated November 29, 2023, BBVA announced the completion of the share buyback program upon reaching the maximum monetary amount of €1,000 million, having acquired 127,532,625 own shares, between October 2 and November 29, 2023, representing, approximately, 2.14% of BBVA's share capital as of said later date. On December 19, 2023, BBVA notified through an Other Relevant Information notice the second partial execution of the share capital reduction resolution adopted by the Annual 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 €62,490,986.25 and the consequent redemption, charged to unrestricted reserves, of 127,532,625 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 (see Notes 26, 27, 28 and 29).
Proposal on allocation of earnings for 2023
Below is included a breakdown of the distribution of the Bank´s earnings for financial year 2023, which the Board of Directors will submit to the Annual General Shareholders' Meeting for approval.
| Allocation of earnings (Millions of Euros) | 2023 |
|---|---|
| Profit (loss) for the year | 4,807 |
| Distribution | |
| Interim dividends | 952 |
| Final dividend | 2,277 |
| Reserves / Accumulated gains | 1,579 |
49 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
Basic and diluted earnings per share are calculated in accordance with the criteria established by IAS 33 "Earnings per share". For more information see Glossary. The calculation of earnings per share is as follows:
| Basic and Diluted Earnings per Share | 2023 | 2022 ⁽¹⁾ | 2021 |
|---|---|---|---|
| Numerator for basic and diluted earnings per share (millions of euros) | |||
| Profit attributable to parent company | 8,019 | 6,358 | 4,653 |
| Adjustment: Additional Tier 1 securities ⁽²⁾ | (345) | (313) | (359) |
| Profit adjusted (millions of euros) (A) | 7,675 | 6,045 | 4,293 |
| Profit (loss) from continued operations (net of remuneration of Additional Tier 1 capital instruments) | 7,675 | 6,045 | 4,014 |
| Profit (loss) from discontinued operations (net of non-controlling interests) (B) | — | — | 280 |
| Denominator for basic earnings per share (number of shares outstanding) | |||
| Weighted average number of shares outstanding | 5,988 | 6,424 | 6,668 |
| Average treasury shares | (5) | (9) | (12) |
| Share buyback program ⁽³⁾ | (28) | (225) | (255) |
| Adjusted number of shares - Basic earnings per share (C) | 5,954 | 6,189 | 6,401 |
| Adjusted number of shares - diluted earnings per share (D) | 5,954 | 6,189 | 6,401 |
| Earnings (losses) per share | 1.29 | 0.98 | 0.67 |
| Basic earnings (losses) per share from continuing operations (Euros per share) A-B/C | 1.29 | 0.98 | 0.63 |
| Diluted earnings (losses) per share from continuing operations (Euros per share) A-B/D | 1.29 | 0.98 | 0.63 |
| Basic earnings (losses) per share from discontinued operations (Euros per share) B/C | — | — | 0.04 |
| Diluted earnings (losses) per share from discontinued operations (Euros per share) B/D | — | — | 0.04 |
(1) Balances corresponding to 2022 have been restated according to IFRS 17 (see Notes 1.3 and 2.3).
(2) Remuneration in the year related to perpetual contingent convertible securities, recognized in equity (see Note 22.4).
(3) For the calculation of earnings per share: (i) in 2023 the average number of shares takes into account the two redemptions made corresponding to the shares buyback programs announced in that year; (ii) in 2022 the average number of shares takes into account the two redemptions made corresponding to the shares buyback program announced in that 2021; and (iii) in the year 2021, the average number of shares takes into account 112 million shares acquired under the shares buyback program and the estimated number of shares pending to be acquired under the first tranche as of December 31, 2021 (see Note 4). As of December 31, 2023, 2022 and 2021 , there were no other financial instruments or share option commitments to employees that could potentially affect the calculation of the diluted earnings per share for the years presented. For this reason, basic and diluted earnings per share are the same.
Operating segment reporting represents a basic tool in the oversight and management of the BBVA Group’s various activities. The BBVA Group compiles reporting information on disaggregated business activities. These business activities are then aggregated in accordance with the organizational structure determined by the BBVA Group's Management and, ultimately, into the reportable operating segments themselves. As of December 31, 2023, the structure of the information by operating segments reported by the BBVA Group remains the same as that as of the closing of the 2022 financial year. The BBVA Group's areas or operating segments are summarized below:
– Spain includes mainly the banking, insurance and asset management businesses that the Group carries out in Spain.– Mexico includes the banking, insurance and asset management businesses in this country as well as the activity that BBVA Mexico carries out through its agency in Houston.
50 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
– Turkey reports the activity of the Garanti BBVA group that is mainly carried out in this country and, to a lesser extent, in Romania and the Netherlands.
– South America includes the banking, finance, insurance and asset management businesses carried out mainly in Argentina, Chile, Colombia, Peru, Uruguay and Venezuela.
– Rest of Business mainly includes the wholesale activity carried out in Europe (excluding Spain), the United States and (through BBVA branches located therein) Asia.
The Corporate Center performs centralized Group functions, including: the costs of the head offices with a corporate function, management of structural exchange rate positions; portfolios whose management is not linked to customer relationships, such as financial and industrial holdings; stakes in Funds & Investment Vehicles in tech companies; certain tax assets and liabilities; funds for employee commitments; goodwill and other intangible assets, as well as the financing of such portfolios and assets.
Additionally, the results obtained by the Group's businesses in the United States until the sale to PNC on June 1, 2021, are presented in a single line under the heading "Profit (loss) after tax from discontinued operations" in the condensed consolidated income statement of the Corporate Center.
Finally, the costs related to the Banco Bilbao Vizcaya Argentaria, S.A. collective layoff procedure and closing of the offices carried out in Spain in 2021, recorded in the lines "Provisions", "Provisions or reversal of provisions", "Impairment or reversal of impairment on non-financial assets" and "Gains (losses) from non-current assets and disposal groups classified as held for sale not qualifying as discontinued operations", respectively (see Notes 24, 46, 49 and 50).
The breakdown of the BBVA Group’s total assets by operating segments as of December 31, 2023, 2022 and 2021 is as follows:
| 2023 | 2022 ⁽¹⁾ | 2021 | |
|---|---|---|---|
| Spain | 457,624 | 427,116 | 413,430 |
| Mexico | 173,489 | 142,557 | 118,106 |
| Turkey | 68,329 | 66,036 | 56,245 |
| South America | 64,779 | 61,951 | 56,124 |
| Rest of Business | 64,274 | 49,952 | 40,328 |
| Subtotal assets by operating segments | 828,495 | 747,613 | 684,233 |
| Corporate Center and adjustments | (52,936) | (35,520) | (21,348) |
| Total assets BBVA Group | 775,558 | 712,092 | 662,885 |
(1) Restated balances according to IFRS 17 - Insurance contracts, which had no material impacts as of that date (see Notes 1.3 and 2.3).
51 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
The following table sets forth certain summarized information relating to results of each operating segment and Corporate Center for the years ended December 31, 2023, 2022 and 2021:
| Operating Segments | BBVA Group | Spain | Mexico | Turkey | South America | Rest of Business | Corporate Center and adjustments (1) |
|---|---|---|---|---|---|---|---|
| 2023 | |||||||
| Net interest income | 23,089 | 5,620 | 11,054 | 1,869 | 4,394 | 539 | (386) |
| Gross income | 29,542 | 7,888 | 14,267 | 2,981 | 4,331 | 1,103 | (1,029) |
| Operating profit (loss) before tax | 12,419 | 3,947 | 7,359 | 1,325 | 1,206 | 479 | (1,898) |
| Net attributable profit (loss) (2) | 8,019 | 2,755 | 5,340 | 528 | 613 | 389 | (1,607) |
| 2022 ⁽³⁾ | |||||||
| Net interest income | 19,124 | 3,774 | 8,378 | 2,611 | 4,138 | 332 | (109) |
| Gross income | 24,743 | 6,112 | 10,734 | 3,172 | 4,265 | 790 | (329) |
| Operating profit (loss) before tax | 10,268 | 2,610 | 5,620 | 1,636 | 1,434 | 277 | (1,309) |
| Net attributable profit (loss) (2) | 6,358 | 1,667 | 4,131 | 505 | 738 | 240 | (922) |
| 2021 | |||||||
| Net interest income | 14,686 | 3,501 | 5,836 | 2,370 | 2,859 | 283 | (163) |
| Gross income | 21,066 | 5,890 | 7,603 | 3,422 | 3,162 | 776 | 212 |
| Operating profit (loss) before tax | 7,247 | 2,075 | 3,505 | 1,952 | 940 | 346 | (1,571) |
| Profit (loss) after tax from discontinued operations | 280 | — | — | — | — | — | 280 |
| Net attributable profit (loss) (2) | 4,653 | 1,548 | 2,551 | 739 | 476 | 276 | (938) |
(1) Adjustments include: (I) the impact of the purchase of offices in Spain in 2022 in the transaction with Merlin Properties (see Note 17); and (II) the costs associated with the collective layoff procedure and the closing of offices in 2021 (see Note 24).
(2) See Note 55.2.
(3) Restated according to IFRS 17 - Insurance contracts, which had no material impacts for such period (see Notes 1.3 and 2.3).
The accompanying Consolidated Management Report presents the consolidated income statements and the consolidated balance sheets by operating segments.
The BBVA Group has processes in place for identifying risks and analyzing scenarios in order to enable the Group to manage risks in a dynamic and proactive way. The risk identification processes are forward looking to seek the identification of emerging risks and take into account the concerns of both the business areas, which are close to the reality of the different geographical areas, and the corporate areas and senior management. Risks are identified and measured consistently using the methodologies deemed appropriate in each case. Their measurement includes the design and application of scenario analyses and stress testing and considers the controls to which the risks are subjected.
As part of this process, a forward projection of the Risk Appetite Framework (hereinafter "RAF") variables in stress scenarios is conducted in order to identify possible deviations from the established thresholds. If any such deviations are detected, measures are taken to seek to keep the variables within the target risk profile.
In this context, there are a number of emerging risks that could affect the evolution of the Group’s business, including the below:
– Macroeconomic and geopolitical risks
The Group is sensitive to the deterioration of economic conditions, the alteration of the institutional environment of the countries in which it operates, and the Group is exposed to sovereign debt especially in Spain, Mexico and Turkey. The global economy is currently facing a number of extraordinary challenges. The war in Ukraine and the sanctions imposed against and by Russia have led to significant disruption, instability and volatility in global markets, as well as higher inflation and lower economic growth, mostly due to higher energy prices, which have stabilized more recently.
52 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Although oil and gas prices have reduced and financial volatility has eased, there is still a risk that geopolitical tensions lead to additional increases in input prices and financial instability, particularly following the tensions triggered by the armed conflict in the Middle East, including the recent disruptions to maritime trade routes in the Red Sea. Another global macroeconomic risk is the possibility of a sharp growth slowdown in China, which could lead to lower GDP expansion than currently expected in many geographies. Although it may be possible to offset part of the expected growth slowdown through the adoption of certain fiscal, monetary and regulatory measures by the authorities, there are risks related to tensions in the real estate markets and the possible effects of the United States economic sanctions, among others.
Geopolitical and economic risks have also increased in recent years as a result of trade tensions between the United States and China, Brexit, and the rise of populism, among other factors. Growing tensions may lead, among other things, to a deglobalization of the world economy, an increase in protectionism, a general reduction of international trade in goods and services and a reduction in the integration of financial markets, any of which could materially and adversely affect the Group’s business, financial condition and results.
Moreover, the world economy could be vulnerable to other factors, such as a restrictive monetary policy, in a context of relatively high inflationary pressures, which could cause a significant growth slowdown - and, even, a sharp economic recession - as well as new episodes of financial stress. The Group’s results of operations have been particularly affected by the increases in interest rates adopted by central banks in an attempt to tame inflation, contributing to the rise in both interest revenue and interest expenses. In addition, the persistence of high interest rates could adversely affect the Group by reducing the demand for credit and leading to an increase in the default rate of its borrowers and other counterparties. On the other hand, the process of reducing interest rates has already begun in many geographies and could begin by mid-2024 in the United States and the Eurozone as well. Moreover, the Group’s results of operations have been affected by the high inflation in all countries in which BBVA operates, especially Turkey and Argentina.The Group is exposed, among others, to the following general risks with respect to the economic and institutional environment in the countries in which it operates: a deterioration in economic activity in the countries in which it operates, including recession scenarios; more persistent inflationary pressures, which could trigger a more severe tightening of monetary conditions; stagflation due to more intense or prolonged supply crises; changes in exchange rates; an unfavorable evolution of the real estate market; a significant increase in oil and gas prices, which would have a negative impact on disposable income levels in areas that are net energy importers, such as Spain or Turkey, to which the Group is particularly exposed; changes in the institutional environment of the countries in which the Group operates, which could give rise to sudden and sharp drops in GDP and/or changes in regulatory or government policy, including in terms of exchange controls and restrictions on the distribution of dividends or the imposition of new taxes or charges; growth in the public debt or in the external deficit could lead to a downward revision of the credit ratings of the sovereign debt and even a possible default or restructuring of such debt; and episodes of volatility in the financial markets, which could cause significant losses for the Group.
In particular, in Argentina, the risk of economic and financial turbulence persists in a context of regulatory, economic and political uncertainty, and in which the adjustments announced by the new government to correct the high economic distortions, including a strong fiscal adjustment and a significant exchange rate depreciation, have further reinforced short-term inflationary pressures.
In Spain, political, regulatory and economic uncertainty has also increased since the July general elections; there is a risk that policies could have an adverse impact on the economy.
In Mexico, uncertainty is related mainly to the June 2024 elections and the possible policies of the new government.
Finally, in Colombia and Peru, climatic factors and greater social conflict could eventually have a negative impact on the economy. Any of these factors may have a significant adverse impact on the Group’s business, financial condition and results of operations.
In May 2022, the Group increased its shareholding stake in Garanti BBVA (Turkey) from 49.85% to 85.97% following the completion of a voluntary takeover bid (see Note 3). There are increasing signs of normalization in economic policy in general, and monetary policy in particular, since the general elections held in May 2023, which may lead to a gradual correction of the current distortions.
Despite the gradual improvement of macroeconomic conditions, the situation remains relatively unstable, characterized by a gradual depreciation of the Turkish lira, high inflation, a significant trade deficit, low central bank’s foreign reserves and high external financing costs. The earthquakes of February 2023 deepened Turkey's economic struggles. In addition to the vast human losses caused by it, the earthquakes added pressure on inflation as well as the external and fiscal balances.
Continuing unfavorable economic conditions in Turkey may result in a potential deterioration in the purchasing power and creditworthiness of the clients of the Group (both individuals and corporations). In addition, the relatively low official interest rates (despite the recent upward adjustments) in a context of still high inflation, the regulatory and macroprudential policies affecting the banking sector and currency depreciation have affected and may continue to affect the Group’s results.
Additionally, certain geopolitical factors, such as the war in Ukraine and the armed conflict in the Middle East, and internal political developments, generate uncertainty about the evolution of the economy and could trigger scenarios of greater instability. There can be no assurance that these and other factors will not have an impact on Turkey and will not cause further deterioration of the Turkish economy, which may have a material adverse effect on the Turkish banking sector and the Group’s business, financial condition and results of operations in Turkey.
53 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Financial institutions are exposed to a complex and ever-changing regulatory environment defined by governments and regulators. Regulatory activity in recent years has affected multiple areas, including changes in accounting standards; strict regulation of capital, liquidity and remuneration; bank charges and taxes on financial transactions; regulations affecting mortgages, banking products and consumers and users; recovery and resolution measures; stress tests; prevention of money laundering and terrorist financing; market abuse; conduct in the financial markets; anti-corruption; and requirements as to the periodic publication of information.
Governments, regulatory authorities and other institutions continually make proposals to strengthen the resistance of financial institutions to future crises. Further, there is an increasing focus on the climate-related financial risk management capabilities of banks. Any change in the Group’s business that is necessary to comply with any particular regulations at any given time, especially in Spain, Mexico or Turkey, could lead to a considerable loss of income, limit the Group’s ability to identify business opportunities, affect the valuation of its assets, force the Group to increase its prices and, therefore, reduce the demand for its products, impose additional costs on the Group or otherwise adversely affect its business, financial condition and results of operations.
The financial sector is under ever closer scrutiny by regulators, governments and society itself. In the course of activities, situations which might cause relevant reputational damage to the Group could arise and might affect the regular course of business.
Developments in the digital world and in information technologies pose significant challenges for financial institutions, entailing threats (new competitors, disintermediation, etc.) but also opportunities (new framework of relations with customers, greater ability to adapt to their needs, new products and distribution channels, etc.). Digital transformation is a priority for the Group as it aims to lead digital banking of the future as one of its objectives.
The Group is exposed to new threats such as cyber-attacks, theft of internal and customer databases, fraud in payment systems, etc. that require major investments in security from both the technological and human point of view. The Group gives great importance to the active operational and technological risk management and control. Any attack, failure or deficiency in the Group’s systems could, among other things, lead to the misappropriation of funds of the Group’s clients or the Group itself and the unauthorized disclosure, destruction or use of confidential information, as well as prevent the normal operation of the Group and impair its ability to provide services and carry out its internal management.
In addition, any attack, failure or deficiency could result in the loss of customers and business opportunities, damage to computers and systems, violation of regulations regarding data protection and/or other regulations, exposure to litigation, fines, sanctions or interventions, loss of confidence in the Group’ s security measures, damage to its reputation, reimbursements and compensation, and additional regulatory compliance expenses and could have a significant adverse impact on the Group ’s business, financial condition and results of operations.
The financial sector faces an environment of increasing regulatory and litigious pressure, and thus, the various Group entities are frequently party to individual or collective judicial proceedings (including class actions) resulting from their activity and operations, as well as arbitration proceedings. The Group is also party to government procedures and investigations, such as those carried out by the antitrust authorities in certain countries which, among other things, have in the past and could in the future result in sanctions, as well as lead to claims by customers and others.
In addition, the regulatory framework in the jurisdictions in which the Group operates is evolving towards a supervisory approach more focused on the opening of sanctioning proceedings while some regulators are focusing their attention on consumer protection and behavioral risk. In Spain and in other jurisdictions where the Group operates, legal and regulatory actions and proceedings against financial institutions, prompted in part by certain judgments in favor of consumers handed down by national and supranational courts (with regards to matters such as credit cards and mortgage loans), have increased significantly in recent years and this trend could continue in the future. Legal and regulatory actions and proceedings faced by other financial institutions in relation to these and other matters, especially if such actions or proceedings result in favorable resolutions for the consumer, could also adversely affect the Group.All of the above may result in a significant increase in operating and compliance costs or even a reduction of revenues, and it is possible that an adverse outcome in any proceedings (depending on the amount thereof, the penalties imposed or the procedural or management costs for the Group) could damage the Group's reputation, generate a knock-on effect or otherwise adversely affect the Group. It is difficult to predict the outcome of legal and regulatory actions and proceedings, both those to which the Group is currently exposed and those that may arise in the future, including actions and proceedings relating to former Group subsidiaries or in respect of which the Group may have indemnification obligations. Any of such outcomes could be significantly adverse to the Group. In addition, a decision in any matter, whether against the Group or against another credit entity facing similar claims as those faced by the Group, could give rise to other claims against the Group. In addition, these actions and proceedings attract resources from the Group and may occupy a great deal of attention on part of the Group's management and employees. As of December 31, 2023, the Group had €696 million in provisions for the proceedings it is facing (included in the line "Provisions for taxes and other legal contingencies" in the consolidated balance sheet) (see Note 24), of which €539 million correspond to legal contingencies and €158 million to tax related matters. However, the uncertainty arising from these proceedings (including those for which no provisions have been made, either because it is not possible to estimate them or for other reasons) makes it impossible to guarantee that the possible losses arising from these proceedings will not exceed, where applicable, the amounts that the Group currently has provisioned and, therefore, could affect the Group's consolidated results in a given period.
54 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
As a result of the above, legal and regulatory actions and proceedings currently faced by the Group or to which it may become subject in the future or otherwise affected by, individually or in the aggregate, if resolved in whole or in part adversely to the Group's interests, could have a material adverse effect on the Group’s business, financial condition and results of operations.
Spanish judicial authorities are investigating the activities of Centro Exclusivo de Negocios y Transacciones, S.L. (“Cenyt”). Such investigation includes the provision of services by Cenyt to BBVA. On July 29, 2019, BBVA was named as an investigated party (investigado) in a criminal judicial investigation (Preliminary Proceeding No. 96/2017 – Piece No. 9, Central Investigating Court No. 6 of the National High Court) for alleged facts which could constitute bribery, revelation of secrets and corruption. Certain current and former officers and employees of the Group, as well as former directors, have also been named as investigated parties in connection with this investigation. Since the beginning of the investigation, BBVA has been proactively collaborating with the Spanish judicial authorities, including sharing with the courts information obtained in the internal investigation hired by the entity in 2019 to contribute to the clarification of the facts. As at the date of this Annual Report, no formal accusation against BBVA has been made. By order of the Criminal Chamber of the National High Court, the pre-trial phase ended on January 29, 2024. It is not possible at this time to predict the possible outcomes or implications for the Group of this matter, including any fines, damages or harm to the Group’s reputation caused thereby.
Climate change, which is resulting in an increase in the intensity and frequency of extreme weather events and environmental degradation, presents both short, medium and long-term risks to the Group and its customers and counterparties, with the risks expected to increase over time. Risks posed by climate change may be classified into transition and physical risks.
Transition risks refer to changes in, among others, regulations, technologies and market preferences linked to the transition toward a less carbon-dependent economy, including the following:
Legal and regulatory changes related to how banks are required to manage climate risk or otherwise affecting banking practices or disclosure of climate-related information may result in higher compliance, operational and credit risks and costs. Further, legal and regulatory changes may result in legal uncertainty and the existence of overlapping or conflicting regulatory or other requirements. The Group or its customers or counterparties may be unable to meet any new requirements on a timely basis or at all. Further, changes in law, including new product and service specifications, may result in the sudden devaluation of certain assets. Any of these risks may affect the Group and its customers and counterparties. In addition, in the case of banks, new regulation could include requirements related to lending, investing, capital and liquidity adequacy and operational resilience. The incorporation of climate risks in the existing prudential framework is still developing and may result in increased risk weighting of high-carbon-related assets. Moreover, there are significant risks and uncertainties inherent in the development of adequate climate change-related risk assessment and modelling capabilities and the collection of customer, third party and other data, which may result in the Group’s systems or frameworks (or those of its customers and counterparties, where applicable) being inadequate, inaccurate or susceptible to incorrect customer, third party or other data, any of which could adversely affect the Group’s disclosure and financial reporting. Further, increased regulation arising from climate change could result in increased litigation and regulatory investigations and actions.
Certain of the Group’s customers and counterparties may be adversely affected by the progressive transition to a low-carbon economy and/or risks and costs associated with new low-carbon technologies. If our customers and counterparties fail to adapt to the transition to a low-carbon economy, or if the costs of doing so adversely affect their creditworthiness, this could adversely affect the Group’s relevant loan portfolios.
The Group and certain of the Group’s customers and counterparties may be adversely affected by changes in market preferences due to, among others, increasing climate change awareness. Further, the funding costs of businesses that are perceived to be more exposed to climate change could increase. Any of this could result in the reduced creditworthiness of such customers and counterparties, adversely affecting the Group’s relevant loan portfolios. The Group and its customers and counterparties could also be adversely affected by changes in prices resulting from shifts in demand or supply brought by climate change, including prices of energy and raw materials, or by their inability to foresee or hedge any such changes.
The perception of climate change as a risk by society, shareholders, customers, governments and other stakeholders continues to increase, including in relation to the financial sector’s activities. This may result in increased scrutiny of the Group’s activities, as well as its climate change-related policies, goals and disclosure. The Group’s reputation and ability to attract or retain customers may be harmed if its efforts to reduce environmental and social risks are deemed to be insufficient or if a perception is generated among the different stakeholders that the Group's statements, actions or disclosure do not fairly reflect the underlying sustainability profile of the Group, its products, services, goals and/or policies. The Group may elect not to undertake lending or investing activities that would otherwise have been profitable in order to avoid reputational harm. Further, divergent views on ESG policies may also have a negative impact on the Group’s reputation. Increased scrutiny of the Group’s activities, as well as its climate change-related policies, goals and disclosure may result in litigation and regulatory investigations and actions. The Group has disclosed certain aspirational climate- related goals and such goals, which are being pursued over the long-term, may prove to be considerably more costly or
55 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
difficult than currently expected, or even impossible, to achieve, including as a result of changes in environmental and energy regulation and policy, the pace of technological change and innovation and the actions of governments, Group’s customers and competitors.
The physical risk arising from climate change could result from increased frequency and/or severity of adverse weather events or the impact of climate change over the long term. The activities of the Group or those of its customers or counterparties could be adversely affected by the physical risks arising from climate change.# For example, extreme weather events may damage or destroy the properties and other assets of the Group or those of its customers or counterparties, result in increased costs, or otherwise disrupt their respective operations (for example, if supply chains are disrupted as a result), diminishing –in the case of the Group’s customers or counterparties - their repayment capacity and, if applicable, the value of assets pledged as collateral to the Group. The Group is also exposed to potential long-term risks arising from climate change, such as increases in credit-related costs due to deteriorating macroeconomic conditions, which may be caused in part by an increase in infectious diseases or other ailments resulting from climate change. The Group could also be adversely affected by declines in asset values as a result of climate change or climate change-related risks, reduced availability of insurance and significant interruptions to business operations, and may be required to change its business models in response to the foregoing. Any of these factors may have a material adverse effect on the Group’s business, financial condition and results of operations.
Credit risk is the potential loss assumed by the Group as a result of the failure by the Group´s counterparties to meet their contractual obligations. The general principles governing credit risk management in the BBVA Group are:
– Risks taken should comply with the general risk policy established by the Board of Directors of BBVA.
– Risks taken should be in line with the level of equity and generation of recurring revenue of the BBVA Group prioritizing risk diversification and avoiding relevant concentrations.
– Risks taken should be identified, measured and assessed and there should be management and monitoring procedures, in addition to sound mitigation and control mechanisms.
– Risks should be managed in a prudent and integrated manner during their life cycle and their treatment should be based on the type of risk. In addition, portfolios should be actively managed on the basis of a common metric (economic capital).
– The main criterion when granting credit risks is the capability of the borrower or obligor to fulfill on a timely basis all financial obligations with its business income or source of income without depending upon guarantors, bondsmen or pledged assets.
– Improve the financial health of our clients, help them in their decision making and in the daily management of their finances based on personalized advice.
– Help our clients in the transition towards a sustainable future, with a focus on climate change and inclusive and sustainable social development.
Credit risk management in the Group has an integrated structure for all its functions, allowing decisions to be taken objectively and independently throughout the life cycle of the risk.
– At Group level: frameworks for action and standard rules of conduct are defined for handling risk, specifically, the channels, procedures, structure and supervision.
– At the business area level: they are responsible for adapting the Group's criteria to the local realities of each geographical area and for direct management of risk according to the decision-making channel:
a. Retail risks: in general, the decisions are formalized according to the scoring tools, within the general framework for action of each business area, with regard to risks. The changes in weighting and variables of these tools must be validated by the Global Risk Management (hereinafter "GRM") area.
b. Wholesale risks: in general, the decisions are formalized by each business area within its general framework for action with regard to risks, which incorporates the delegation rule and the Group's corporate policies.
The risk function has a decision-making process supported by a structure of committees with a solid governance scheme, which describes their purposes and functioning for a proper performance of their tasks.
56 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
Since the beginning of the pandemic, the Group offered support measures to its customers in all the geographical areas where it operates, consisting of both deferrals on existing loans and new public-guaranteed lending. Deferral support schemes have expired in all geographical areas. The measures adopted in 2022 which remained in force in 2023 were limited to Spain. In Peru, the deadline for requesting extensions of the Reactiva program ended on September 30, 2023 and to the date of the preparation of these Consolidated Financial Statements no extension has been published. In addition in Spain, in March 2022, the Council of Ministers (RDL 6/2022) approved a line of financing with public guarantees of 70% and 80% of the principal amount of loans for self-employed and enterprises in order to alleviate the liquidity tensions due to increases in energy prices and raw materials, available until December 2023. Finally, the Code of Good Practices, regulated by Royal Decree Law 6/2012, as well as its successive amendments, establishes a Code of Good Practices that eases the impact of interest rates hikes on mortgage loans related to primary residences and provides for other structural measures aiming to ease access to lending. As of the date of the preparation of these Consolidated Financial Statements, the number and amount of the transactions granted to clients in accordance with the Code of Good Practices have been low.
IFRS 9 requires determining the Expected Credit Loss (hereinafter "ECL") of a financial instrument in a way that reflects an unbiased estimation removing any conservatism or optimism, including the time value of money and a forward-looking perspective (including the economic forecast), all this based on the information that is available at a certain point in time and that is reasonable and bearable with respect to future economic conditions. Therefore, the recognition and measurement of ECL is highly complex and involves the use of significant analysis and estimation including formulation and incorporation of forward-looking economic conditions into the ECL model. The modeling of the ECL calculation is subject to a governance system that is common to the entire Group. Within this common framework, each geographical area makes the necessary adaptations to capture its particularities. The methodology, assumptions and observations used by each geographical area are reviewed annually, and after a validation and approval process, the outcome of this review is incorporated into the ECL calculations.
Expected losses can be estimated both individually and collectively. Regarding the collective estimate, the instruments are distributed in homogeneous groups (segments) that share similar risk characteristics. Following the guidelines established by the Group for the development of models under IFRS 9, each geographical area performs the grouping based on the information available, its representativeness or relevance and compliance with the necessary statistical requirements. Depending on the portfolio or the parameter being estimated, one risk driver or another will apply and different segments will reflect differences in PDs and LGDs. Thus, in each segment, changes in the level of credit risk will respond to the impact of changing conditions on the common range of credit risk drivers. The effect on the Group’s credit risk in response to changes in forward-looking information will be considered as well. Macroeconomic modeling for each segment is carried out using some of the shared risk characteristics. These segments share credit risk characteristics such that changes in credit risk in a part of the portfolio are not concealed by the performance of other parts of the portfolio. In that sense, the methodology developed for ECL estimation indicates the risk drivers that have to be taken into account for PD segmentation purposes, depending on whether the estimation is for retail or wholesale portfolios. As an example of the variables that can be taken into consideration to determine the final models, the following stand out:
– PD – Retail: Contractual residual maturity, credit risk scoring, type of product, days past due, forbearance, time on books, time to maturity, nationality of the debtor, sale channel, original term, indicator of credit card activity, percentage of initial drawn balance in credit cards.
– PD – Wholesale: Credit Risk Rating, type of product, watch-list level, forbearance (client), time to maturity, industry sector, updated balance (y/n), written off, grace period.
– LGD – Retail: credit Risk Scoring, segment, type of product, secured / unsecured, type of collateral, sales channel, nationality, business area, debtor’s commercial segment, forbearance (account) EAD (this risk driver could be correlated with the time on books or the LTV so, before including it, an assessment should be done in order to avoid a double counting effect), time on default of the account (for defaulted exposures), geographical location.
– LGD – Wholesale: credit Risk Rating, geographical location, segment, type of product, secured / Unsecured, type of collateral, business area, forbearance (client), debtor’s commercial segment time on default of the deal (for defaulted exposures).
57 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56).# In the event of a discrepancy, the Spanish-language version prevails
In the BBVA Group, the expected losses calculated are based on the internal models developed for all the Group's portfolios, unless clients are subject to individualized estimates. Low Default Portfolios, which include portfolios with high credit quality such as exposures to other credit institutions, sovereign debt or corporates and small client's portfolios with high exposures such as specialized lending or fixed income, are characterized by a low number of defaults, so the Group's historical bases do not contain sufficiently representative information to build impairment models based on them. However, there are external sources of information that, based on broader observations, are capable of providing the necessary inputs to develop models of expected losses. Therefore, based on the rating assigned to these exposures and taking into account the inputs obtained from these sources, the calculations of expected losses are developed internally, including their projection based on the macroeconomic perspectives.
The Group periodically and individually reviews the situation and credit rating of its customers, regardless of their classification, taking into consideration the information deemed necessary to do so. It also has procedures in place within the risk management framework to identify the factors that may lead to increased risk and, consequently, to a greater need for provisions. The monitoring model established by the Group consists of continuously monitoring the risks to which it is exposed, which guarantees their proper classification in the different categories of IFRS 9. The original analysis of the exposures is reviewed through the procedures for updating the rating tools (rating and scoring), which periodically review the financial situation of clients, influencing the classification by stages of exposures.
Within this credit risk management framework, the Group has procedures that seek to guarantee the review, at least annually, of all its wholesale counterparties through the so-called financial programs, which include the current and proposed positioning of the Group with the customer in terms of credit risk. This review is based on a detailed analysis of the client's up-to-date financial situation, which is complemented by other information available in relation to individual perspectives on business performance, industry trends, macroeconomic prospects or other public data. As a result of this analysis, the preliminary rating of the client is obtained, which, after undergoing the internal procedure, can be revised down if deemed appropriate (for example, general economic environment or evolution of the sector). These factors in addition to the information that the client can provide are used to review the ratings even before the scheduled financial plan reviews are conducted if circumstances so warrant.
Additionally, the Group has established procedures to identify wholesale customers in the internal Watch List category, which is defined as that risk in which, derived from an individualized credit analysis, an increase in credit risk is observed, either due to economic or financial difficulties or because they have suffered, or are expected to suffer, adverse situations in their environment, without meeting the criteria for classification as impaired risk. Under this procedure, all a customer's Watch List exposures are considered stage 2 regardless of when they originated, if as a result of the analysis the customer is considered to have significantly increased risk.
Finally, the Group has Workout Committees, both local and corporate, which analyze not only the situation and evolution of significant clients in Watch List and impaired situations, but also those significant clients in which, although not on Watch List, may present some stage 2 rated exposure for a quantitative reason (PD comparison from origination). This analysis is carried out in order to decide if, derived from this situation, all the client's exposures should be considered in the Watch List category, which would imply the migration of all the client's operations to stage 2 regardless of the date on which they originated. With this, the Group ensures an individualized review of the credit quality of its wholesale counterparties, identifying the situations in which a change in the risk profile of these clients may have occurred and proceeding, where appropriate, to estimate individualized credit losses.
Along with this review, the Group individually estimates the expected losses of those clients whose total exposure exceeds certain thresholds, including those that part of their operations may be classified in stage 1 and part in stage 2. In setting thresholds, each geographical area determines the minimum amount of a client's exposure whose expected losses must be estimated individually taking into account the following:
Regarding the methodology for the individual estimation of expected losses, it should be mentioned, firstly, that these are measured as the difference between the asset’s carrying amount and the estimated future cash flows discounted at the financial asset’s effective interest rate. The estimated recoverable amount should correspond to the amount calculated under the following method:
58 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
The estimated future cash flows depend on the type of approach applied, which can be:
e. Insufficient information is available to perform a going concern analysis.
Significant increase in credit risk
As indicated in Note 2.2, the criteria for identifying the significant increase in risk are applied consistently throughout the Group, distinguishing between quantitative reasons or by comparison of probabilities of default and qualitative reasons (more than 30 days of default, watch list consideration or non-impaired refinancing). To manage credit risk, the Group uses all relevant information that is available and that may affect the credit quality of the exposures. This information may come mainly from the internal processes of admission, analysis and monitoring of operations, from the strategy defined by the Group regarding the price of operations or distribution by geographies, products or sectors of activity, from the observance of the macroeconomic environment, from market data such as interest rate curves, or prices of the different financial instruments, or from external sources of credit rating. This set of information is the basis for determining the rating and scoring (see Note 7.2.4 for more information on rating and scoring systems) corresponding to each of the exposures and which are assigned a probability of default (PD) that, as already mentioned, is subject to an annual review process that assesses its representativeness (backtesting) and is updated with new observations. Furthermore, the projection of these PDs over time has been modeled based on macroeconomic expectations, which allows obtaining the probabilities of default throughout the life of the operations.
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
Based on this common methodology, and in accordance with the provisions of IFRS 9 and the EBA guidelines on credit risk management practices, each geographical area has established absolute and relative thresholds for identifying whether the expected changes in the probabilities of default have increased significantly compared to the initial moment, adapted to the particularities of each one of them in terms of origination levels, product characteristics, distribution by sectors or portfolios, and macroeconomic situation.
To establish the aforementioned thresholds, a series of general principles are considered, such as:
The identification of the significant increase in risk from the comparison of the probabilities of default should be the main reason why exposures in stage 2 are recognized. Specifically, a contract will be transferred to stage 2 when the following two conditions are met by comparing the current PD values and the origination PD values:
(Current PD) / (Origination PD) - 1*100 >Relative Threshold (%)
and
Current PD – Origination PD > Absolute threshold (bps)
These absolute and relative thresholds are consistently established for each geographical area and for each portfolio, taking into account their particularities and based on the principles described. The thresholds set by each geographical area are included within the annual review process and, generally speaking, are in the range of 130% to 250% for the relative threshold and from 30 to 100 basis points for the absolute threshold. Specifically, in BBVA, S.A.'s wholesale portfolio the relative threshold is from 180% to 200% and the absolute threshold ranges from 30 to 100 basis points; in the retail portfolio the relative threshold is 200% while the absolute threshold ranges between 50 and 100 basis points. For BBVA Mexico, the relative threshold for the wholesale portfolio is between 180% and 200% and the absolute threshold is between 30 basis points and 75 basis points. For the majority of the retail portfolio, the relative threshold is in the range of 170% and 250% and the absolute threshold between 10 and 100 basis points.
The establishment of absolute and relative thresholds, as well as their different levels, comply with the provisions of IFRS 9 when it indicates that a certain change, in absolute terms, in the risk of a default will be more significant for a financial instrument with a lower initial risk of default compared to a financial instrument with higher initial risk of default.
For existing contracts before the implementation of IFRS 9, given the limitations in the information available on them, the thresholds are calibrated based on the PDs obtained from the prudential or economic models for calculating capital.
Risk Parameters Adjusted by Macroeconomic Scenarios
Expected Credit Loss (ECL) must include forward looking information, in accordance with IFRS 9, which states that the comprehensive credit risk information must incorporate not only historical information but also all relevant credit information, also including forward-looking macroeconomic information. BBVA uses the typical credit risk parameters PD, LGD and EAD in order to calculate the ECL for the credit portfolios.
BBVA methodological approach in order to incorporate the forward looking information aims to determine the relation between macroeconomic variables and risk parameters following three main steps:
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
How economic scenarios are reflected in the calculation of ECL
The forward looking component is added to the calculation of the ECL through the introduction of macroeconomic scenarios as an input. Inputs highly depend on the particular combination of region and portfolio, so inputs are adapted to available data regarding each of them.
Based on economic theory and analysis, the main indicators most directly relevant for explaining and forecasting the selected risk parameters (PD, LGD and EAD) are:
BBVA Group approximates these variables by using a proxy indicator from the set included in the macroeconomic scenarios provided by the BBVA Research. Only a single specific indicator for each of the three categories can be used and only one of the following core macroeconomic indicators should be chosen as first option:
Real GDP growth is given priority over any other indicator not only because it is the most comprehensive indicator of income and economic activity but also because it is the central variable in the generation of macroeconomic scenarios.
Multiple scenario approach
IFRS 9 requires calculating an unbiased probability weighted measurement of ECL by evaluating a range of possible outcomes, including forecasts of future economic conditions.# BBVA Research produces forecasts of the macroeconomic variables under the baseline scenario, which are used in the rest of the related processes of the Group, such as budgeting, ICAAP and risk appetite framework, stress testing, etc. Additionally, BBVA Research produces alternative scenarios to the baseline scenario so as to meet the requirements under the IFRS 9 standard.
– BBVA Research produces three scenarios for each of the macro-financial variables.
– BBVA Research tracks, analyzes and forecasts the economic environment to provide a consistent forward looking assessment about the most likely scenario and risks that impact BBVA’s footprint. To build economic scenarios, BBVA Research combines official data, econometric techniques and expert judgment.
– Each of these scenarios corresponds to the expected value of a different area of the probabilistic distribution of the possible projections of the economic variables.
– The non-linearity overlay is defined as the ratio between the probability-weighted ECL under the alternative scenarios and the baseline scenario, where the scenario’s probability depends on the distance of the alternative scenarios from the base one.
– BBVA Group establishes equally weighted scenarios, being the probability 34% for the baseline scenario, 33% for the unfavorable alternative scenario and 33% for the favorable alternative scenario. The approach in the BBVA Group consists on using the scenario that is the most likely scenario, which is the baseline scenario, consistent with the rest of internal processes (ICAAP, Budgeting, etc.) and then applying an overlay adjustment that is calculated by taking into account the weighted average of the ECL determined by each of the scenarios. This effect is calculated taking into account the average weight of the expected loss determined for each scenario. It is important to note that in general, it is expected that the effect of the overlay is to increase the ECL. It is possible to obtain an overlay that does not have that effect, whenever the relationship between macro scenarios and losses is linear.
61 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
On the other hand, the BBVA Group also takes into account the range of possible scenarios when defining its significant increase in credit risk. Thus, the PDs used in the quantitative process to identify the significant increase in credit risk will be those that result from making a weighted average of the PDs calculated under the three scenarios.
The forward-looking information incorporated in the calculation of expected losses is in line with the macroeconomic perspectives published by BBVA Research, which are quarterly updated. BBVA Research forecasts a maximum of five years for the macroeconomic variables. The following forecasts (positive base and negative scenarios) of the Gross Domestic Product (GDP) growth, unemployment rate and House Price Index (HPI), for the most relevant countries where they represent a significant factor, provided by BBVA Research, were used for the calculation of the ECL as of December 31, 2023:
| Date | Country | GDP | Unemployment | HPI |
|---|---|---|---|---|
| 2023 | Spain | 2.52 % | 11.84 % | (1.61) % |
| Mexico | 3.62 % | 2.80 % | 5.44 % | |
| Turkey | 5.54 % | 9.31 % | ||
| 2024 | Spain | 2.12 % | 10.32 % | 0.89 % |
| Mexico | 3.79 % | 3.11 % | 4.98 % | |
| Turkey | 7.11 % | 8.82 % | ||
| 2025 | Spain | 2.70 % | 9.58 % | 2.96 % |
| Mexico | 2.68 % | 3.07 % | 4.41 % | |
| Turkey | 4.33 % | 9.86 % | ||
| 2026 | Spain | 2.55 % | 8.81 % | 2.11 % |
| Mexico | 2.67 % | 3.04 % | 4.14 % | |
| Turkey | 3.92 % | 10.68 % | ||
| 2027 | Spain | 2.34 % | 8.22 % | 2.14 % |
| Mexico | 2.76 % | 2.99 % | 4.20 % | |
| Turkey | 3.58 % | 10.95 % | ||
| 2028 | Spain | 2.13 % | 7.67 % | 1.88 % |
| Mexico | 2.85 % | 2.87 % | 5.09 % | |
| Turkey | 3.58 % | 11.01 % |
| Date | Country | GDP | Unemployment |
|---|---|---|---|
| 2023 | Peru | 0.33 % | 6.85 % |
| Argentina | (1.82) % | 8.05 % | |
| Colombia | 1.59 % | 10.06 % | |
| 2024 | Peru | 4.57 % | 6.63 % |
| Argentina | 0.42 % | 9.46 % | |
| Colombia | 2.80 % | 10.99 % | |
| 2025 | Peru | 4.22 % | 6.54 % |
| Argentina | 6.93 % | 9.23 % | |
| Colombia | 2.59 % | 11.27 % | |
| 2026 | Peru | 2.88 % | 6.35 % |
| Argentina | 3.13 % | 8.34 % | |
| Colombia | 3.03 % | 11.03 % | |
| 2027 | Peru | 2.72 % | 6.32 % |
| Argentina | 2.11 % | 7.23 % | |
| Colombia | 3.24 % | 10.35 % | |
| 2028 | Peru | 2.51 % | 6.28 % |
| Argentina | 2.13 % | 6.11 % | |
| Colombia | 3.42 % | 9.90 % |
| Date | Country | GDP | Unemployment | HPI |
|---|---|---|---|---|
| 2023 | Spain | 2.36 % | 12.13 % | (1.93) % |
| Mexico | 3.40 % | 2.82 % | 5.47 % | |
| Turkey | 4.46 % | 9.63 % | ||
| 2024 | Spain | 1.48 % | 11.80 % | (0.92) % |
| Mexico | 2.91 % | 3.27 % | 4.90 % | |
| Turkey | 3.50 % | 10.28 % | ||
| 2025 | Spain | 2.47 % | 11.20 % | 1.94 % |
| Mexico | 2.41 % | 3.25 % | 4.24 % | |
| Turkey | 3.54 % | 10.85 % | ||
| 2026 | Spain | 2.53 % | 10.40 % | 1.74 % |
| Mexico | 2.60 % | 3.18 % | 4.14 % | |
| Turkey | 3.79 % | 11.05 % | ||
| 2027 | Spain | 2.34 % | 9.63 % | 1.69 % |
| Mexico | 2.74 % | 3.11 % | 4.18 % | |
| Turkey | 3.46 % | 11.15 % | ||
| 2028 | Spain | 2.13 % | 8.98 % | 1.43 % |
| Mexico | 2.83 % | 2.99 % | 5.07 % | |
| Turkey | 3.46 % | 11.20 % |
| Date | Country | GDP | Unemployment |
|---|---|---|---|
| 2023 | Peru | (0.36) % | 6.88 % |
| Argentina | (3.01) % | 8.28 % | |
| Colombia | 1.24 % | 10.11 % | |
| 2024 | Peru | 1.99 % | 6.82 % |
| Argentina | (4.04) % | 10.48 % | |
| Colombia | 1.47 % | 11.25 % | |
| 2025 | Peru | 3.48 % | 6.77 % |
| Argentina | 5.95 % | 10.15 % | |
| Colombia | 2.33 % | 11.56 % | |
| 2026 | Peru | 2.88 % | 6.55 % |
| Argentina | 3.03 % | 8.95 % | |
| Colombia | 3.03 % | 11.32 % | |
| 2027 | Peru | 2.72 % | 6.50 % |
| Argentina | 1.98 % | 7.70 % | |
| Colombia | 3.24 % | 10.60 % | |
| 2028 | Peru | 2.51 % | 6.46 % |
| Argentina | 2.00 % | 6.60 % | |
| Colombia | 3.42 % | 9.90 % |
62 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
| Date | Country | GDP | Unemployment | HPI |
|---|---|---|---|---|
| 2023 | Spain | 2.21 % | 12.40 % | (2.28) % |
| Mexico | 3.20 % | 2.85 % | 5.49 % | |
| Turkey | 3.37 % | 9.94 % | ||
| 2024 | Spain | 0.86 % | 13.23 % | (2.54) % |
| Mexico | 2.04 % | 3.45 % | 4.73 % | |
| Turkey | (0.33) % | 11.73 % | ||
| 2025 | Spain | 2.25 % | 12.77 % | 1.00 % |
| Mexico | 2.13 % | 3.43 % | 4.03 % | |
| Turkey | 2.58 % | 11.92 % | ||
| 2026 | Spain | 2.48 % | 11.98 % | 1.22 % |
| Mexico | 2.53 % | 3.33 % | 4.00 % | |
| Turkey | 3.71 % | 11.43 % | ||
| 2027 | Spain | 2.30 % | 11.34 % | 0.93 % |
| Mexico | 2.70 % | 3.25 % | 4.18 % | |
| Turkey | 3.39 % | 11.32 % | ||
| 2028 | Spain | 2.09 % | 10.57 % | 0.67 % |
| Mexico | 2.79 % | 3.13 % | 5.07 % | |
| Turkey | 3.39 % | 11.36 % |
| Date | Country | GDP | Unemployment |
|---|---|---|---|
| 2023 | Peru | (1.04) % | 6.91 % |
| Argentina | (4.16) % | 8.49 % | |
| Colombia | 0.87 % | 10.15 % | |
| 2024 | Peru | (0.60) % | 7.03 % |
| Argentina | (8.75) % | 11.46 % | |
| Colombia | 0.15 % | 11.51 % | |
| 2025 | Peru | 2.73 % | 7.02 % |
| Argentina | 4.77 % | 11.04 % | |
| Colombia | 2.03 % | 11.84 % | |
| 2026 | Peru | 2.88 % | 6.77 % |
| Argentina | 2.92 % | 9.54 % | |
| Colombia | 3.03 % | 11.59 % | |
| 2027 | Peru | 2.72 % | 6.71 % |
| Argentina | 1.82 % | 8.17 % | |
| Colombia | 3.24 % | 10.90 % | |
| 2028 | Peru | 2.51 % | 6.66 % |
| Argentina | 1.85 % | 7.08 % | |
| Colombia | 3.42 % | 10.29 % |
The estimate for the next five years of the following rates, used in the measurement of the expected loss as of December 31, 2022, consistent with the latest estimates made public at that date, was:
| Date | Country | GDP | Unemployment | HPI |
|---|---|---|---|---|
| 2022 | Spain | 4.90 % | 12.27 % | (2.96) % |
| Mexico | 2.97 % | 3.28 % | 0.84 % | |
| Turkey | 7.59 % | 10.00 % | ||
| 2023 | Spain | 1.85 % | 11.35 % | (0.61) % |
| Mexico | 1.45 % | 3.04 % | 4.23 % | |
| Turkey | 6.61 % | 8.85 % | ||
| 2024 | Spain | 3.60 % | 9.75 % | 1.58 % |
| Mexico | 2.33 % | 2.99 % | 3.07 % | |
| Turkey | (0.70) % | 10.76 % | ||
| 2025 | Spain | 3.00 % | 8.36 % | 1.67 % |
| Mexico | 1.91 % | 3.01 % | 4.18 % | |
| Turkey | 3.91 % | 11.78 % | ||
| 2026 | Spain | 2.95 % | 7.02 % | 2.20 % |
| Mexico | 1.78 % | 3.01 % | 3.26 % | |
| Turkey | 3.90 % | 11.81 % | ||
| 2027 | Spain | 2.93 % | 5.87 % | 2.31 % |
| Mexico | 1.81 % | 3.00 % | 4.39 % | |
| Turkey | 3.86 % | 11.81 % |
| Date | Country | GDP | Unemployment |
|---|---|---|---|
| 2022 | Peru | 4.00 % | 7.67 % |
| Argentina | 7.42 % | 11.97 % | |
| Colombia | 8.78 % | 11.41 % | |
| 2023 | Peru | 5.12 % | 7.28 % |
| Argentina | 3.86 % | 9.39 % | |
| Colombia | 2.04 % | 12.20 % | |
| 2024 | Peru | 3.15 % | 6.79 % |
| Argentina | (1.02) % | 7.68 % | |
| Colombia | 2.07 % | 12.77 % | |
| 2025 | Peru | 2.19 % | 6.60 % |
| Argentina | 2.79 % | 6.77 % | |
| Colombia | 2.44 % | 12.65 % | |
| 2026 | Peru | 2.21 % | 6.52 % |
| Argentina | 2.87 % | 6.89 % | |
| Colombia | 3.11 % | 12.15 % | |
| 2027 | Peru | 2.21 % | 6.49 % |
| Argentina | 3.62 % | 6.81 % | |
| Colombia | 3.28 % | 10.47 % |
63 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
| Date | Country | GDP | Unemployment | HPI |
|---|---|---|---|---|
| 2022 | Spain | 4.61 % | 12.78 % | (3.50) % |
| Mexico | 2.56 % | 3.32 % | 0.95 % | |
| Turkey | 5.47 % | 10.53 % | ||
| 2023 | Spain | 1.20 % | 12.83 % | (2.41) % |
| Mexico | 0.58 % | 3.20 % | 4.14 % | |
| Turkey | 3.02 % | 10.30 % | ||
| 2024 | Spain | 3.37 % | 11.38 % | 0.55 % |
| Mexico | 2.05 % | 3.17 % | 2.90 % | |
| Turkey | (1.50) % | 11.75 % | ||
| 2025 | Spain | 2.98 % | 9.95 % | 1.30 % |
| Mexico | 1.84 % | 3.15 % | 4.19 % | |
| Turkey | 3.78 % | 12.15 % | ||
| 2026 | Spain | 2.95 % | 8.58 % | 1.74 % |
| Mexico | 1.76 % | 3.14 % | 3.27 % | |
| Turkey | 3.78 % | 12.00 % | ||
| 2027 | Spain | 2.93 % | 7.18 % | 1.86 % |
| Mexico | 1.79 % | 3.13 % | 4.37 % | |
| Turkey | 3.74 % | 12.00 % |
| Date | Country | GDP | Unemployment |
|---|---|---|---|
| 2022 | Peru | 2.69 % | 7.72 % |
| Argentina | 5.00 % | 12.35 % | |
| Colombia | 8.05 % | 11.49 % | |
| 2023 | Peru | 2.54 % | 7.48 % |
| Argentina | (0.50) % | 10.40 % | |
| Colombia | 0.72 % | 12.45 % | |
| 2024 | Peru | 2.42 % | 7.03 % |
| Argentina | (2.04) % | 8.60 % | |
| Colombia | 1.81 % | 13.06 % | |
| 2025 | Peru | 2.19 % | 6.80 % |
| Argentina | 2.70 % | 7.38 % | |
| Colombia | 2.44 % | 12.94 % | |
| 2026 | Peru | 2.21 % | 6.70 % |
| Argentina | 2.73 % | 7.38 % | |
| Colombia | 3.10 % | 12.43 % | |
| 2027 | Peru | 2.21 % | 6.68 % |
| Argentina | 3.49 % | 7.30 % | |
| Colombia | 3.28 % | 10.65 % |
| Date | Country | GDP | Unemployment | HPI |
|---|---|---|---|---|
| 2022 | Spain | 4.33 % | 13.26 % | (4.13) % |
| Mexico | 2.17 % | 3.37 % | 1.03 % | |
| Turkey | 3.35 % | 11.04 % | ||
| 2023 | Spain | 0.58 % | 14.26 % | (4.02) % |
| Mexico | (0.28) % | 3.38 % | 3.97 % | |
| Turkey | (0.79) % | 11.76 % | ||
| 2024 | Spain | 3.15 % | 12.95 % | (0.40) % |
| Mexico | 1.77 % | 3.35 % | 2.69 % | |
| Turkey | (2.49) % | 12.82 % | ||
| 2025 | Spain | 2.93 % | 11.53 % | 0.79 % |
| Mexico | 1.77 % | 3.30 % | 4.04 % | |
| Turkey | 3.70 % | 12.53 % | ||
| 2026 | Spain | 2.91 % | 10.14 % | 0.99 % |
| Mexico | 1.72 % | 3.27 % | 3.24 % | |
| Turkey | 3.70 % | 12.19 % | ||
| 2027 | Spain | 2.89 % | 8.77 % | 1.10 % |
| Mexico | 1.75 % | 3.26 % | 4.37 % | |
| Turkey | 3.66 % | 12.16 % |
| Date | Country | GDP | Unemployment |
|---|---|---|---|
| 2022 | Peru | 1.39 % | 7.77 % |
| Argentina | 2.66 % | 12.71 % | |
| Colombia | 7.30 % | 11.57 % | |
| 2023 | Peru | (0.05) % | 7.69 % |
| Argentina | (5.10) % | 11.38 % | |
| Colombia | (0.59) % | 12.71 % | |
| 2024 | Peru | 1.67 % | 7.27 % |
| Argentina | (3.29) % | 9.49 % | |
| Colombia | 1.50 % | 13.34 % | |
| 2025 | Peru | 2.19 % | 7.02 % |
| Argentina | 2.59 % | 7.97 % | |
| Colombia | 2.44 % | 13.21 % | |
| 2026 | Peru | 2.21 % | 6.91 % |
| Argentina | 2.57 % | 7.83 % | |
| Colombia | 3.10 % | 12.70 % | |
| 2027 | Peru | 2.21 % | 6.88 % |
| Argentina | 3.33 % | 7.78 % | |
| Colombia | 3.28 % | 10.86 % |
A sensitivity exercise has been carried out on the expected losses due to variations in the key hypotheses as they are the ones that introduce the greatest uncertainty in estimating such losses. As a first step, GDP and the House Price Index have been identified as the most relevant variables.These variables have been subjected to shocks of +/- 100 bps in their entire window with impact of the macro models. Independent sensitivities have been assessed, under the assumption of assigning a 100% probability to each determined scenario with these independent shocks. Variation in expected loss is determined both by re-staging (that is: in worse scenarios due to the recognition of lifetime credit losses for additional operations that are transferred to stage 2 from stage 1 where 12 months of losses are valued: or vice versa in improvement scenarios) as well as variations in the collective risk parameters (PD and LGD) of each financial instrument due to the changes defined in the macroeconomic forecasts of the scenario. The variation in the expected loss for the Group and the main portfolios and geographical areas is shown below:
64
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
Expected loss variation as of December 31, 2023
| BBVA Group | Spain | Mexico | Turkey | |
|---|---|---|---|---|
| GDP | ||||
| Total Portfolio | - 100 bps | 222 | 188 | 28 |
| Companies | 2 | 61 | 14 | |
| Retail | 47 | 94 | 2 | |
| Debt securities | 92 | 22 | 9 | |
| Total Portfolio | +100 bps | (191) | (165) | (23) |
| Companies | (2) | (58) | (13) | |
| Retail | (45) | (89) | (2) | |
| Debt securities | (87) | (21) | (9) | |
| Total Portfolio | ||||
| Companies | ||||
| Retail | ||||
| Housing price | - 100 bps | — | 32 | |
| Total Portfolio | +100 bps | — | (32) | |
| Companies | ||||
| Retail |
Expected loss variation as of December 31, 2022
| BBVA Group | Spain | Mexico | Turkey | |
|---|---|---|---|---|
| GDP | ||||
| Total Portfolio | - 100 bps | 223 | 151 | 67 |
| Companies | 3 | 118 | 54 | |
| Retail | 62 | 67 | 3 | |
| Debt securities | 63 | 19 | 5 | |
| Total Portfolio | +100 bps | (195) | (135) | (55) |
| Companies | (3) | (95) | (42) | |
| Retail | (52) | (63) | (3) | |
| Debt securities | (60) | (18) | (5) | |
| Total Portfolio | ||||
| Companies | ||||
| Retail | ||||
| Housing price | - 100 bps | 1 | 23 | 4 |
| Total Portfolio | +100 bps | (1) | (22) | (3) |
| Companies | ||||
| Retail |
The Group periodically reviews its individual estimates and its models for the collective estimate of expected losses as well as the effect of macroeconomic scenarios on them. In addition, the Group may supplement the expected losses to account for the effects that may not be included, either by considering additional risk factors, or by the incorporation of sectorial particularities or particularities that may affect a set of operations or borrowers, following a formal internal approval process established for this purpose, including the relevant Global Risk Management Committee (among the GRMC committees) as described in the general risk management and control model chapter of the Consolidated Management Report.
Thus, in Spain, during 2021 and 2022, the Loss Given Default (LGD) of certain specific operations considered unlikely to pay was reviewed upwards, with a remaining adjustment as of December 31, 2023 of €227 million, with a €161 million decrease compared with the end of the year 2022 mainly as a result of the annual model review process. In addition, due to the earthquakes that affected an area in the south of Turkey, during the month of February 2023 the classification of the credit exposure recorded in the five most affected cities was reviewed, which led to its reclassification to Stage 2. As of December 31, 2023 the amounts recorded in Stage 2 amounted to €273 million on-balance sheet and €406 million off-balance sheet exposure, with allowances for losses of approximately €25 million at contract level. On the other hand, as of December 31, 2023, the complementary adjustments pending allocation to specific operations or customers are not significant, after the utilization and/or release of most of the adjustments during 2023. As of December 31, 2022, the complementary adjustments pending allocation to specific operations or customers totaled €302 million, of which €170 million corresponded to BBVA, S.A., €92 million to Mexico, €25 million to Peru, €11 million to Colombia and €5 million to Chile.
65
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
BBVA Group’s credit risk exposure by headings in the consolidated balance sheets as of December 31, 2023, 2022 and 2021 is provided below. It does not consider the loss allowances and the availability of collateral or other credit enhancements to ensure compliance with payment obligations. The details are broken down by category of financial instruments:
Maximum credit risk exposure (Millions of Euros)
| Notes | December 2023 | Stage 1 | Stage 2 | Stage 3 |
|---|---|---|---|---|
| Financial assets held for trading | 106,749 | |||
| 10 | Equity instruments | 4,589 | ||
| 10 | Debt securities | 28,569 | ||
| 10 | Loans and advances | 73,590 | ||
| Non-trading financial assets mandatorily at fair value through profit or loss | 8,737 | |||
| 11 | Equity instruments | 7,963 | ||
| 11 | Debt securities | 484 | ||
| 11 | Loans and advances | 290 | ||
| 12 | Financial assets designated at fair value through profit or loss | 955 | ||
| Derivatives (trading and hedging) | 48,747 | |||
| Financial assets at fair value through other comprehensive income | 62,289 | |||
| 13 | Equity instruments | 1,217 | ||
| Debt securities | 61,047 | 60,255 | 771 | |
| 13 | Loans and advances to credit institutions | 26 | 26 | — |
| Financial assets at amortized cost | 463,130 | 410,590 | 38,061 | |
| Debt securities | 49,544 | 49,403 | 108 | |
| Loans and advances to central banks | 7,176 | 7,176 | — | |
| Loans and advances to credit institutions | 17,498 | 17,478 | 18 | |
| Loans and advances to customers | 388,912 | 336,533 | 37,935 | |
| Total financial assets risk | 690,606 | |||
| Total loan commitments and financial guarantees | 214,283 | 204,842 | 8,411 | |
| 33 | Loan commitments given | 152,868 | 147,376 | 5,326 |
| 33 | Financial guarantees given | 18,839 | 17,612 | 998 |
| 33 | Other commitments given | 42,577 | 39,854 | 2,087 |
| Total maximum credit exposure | 904,889 |
66
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
Maximum credit risk exposure (Millions of Euros)
| Notes | December 2022 ⁽¹⁾ | Stage 1 | Stage 2 | Stage 3 |
|---|---|---|---|---|
| Financial assets held for trading | 70,763 | |||
| 10 | Equity instruments | 4,404 | ||
| 10 | Debt securities | 24,367 | ||
| 10 | Loans and advances | 41,993 | ||
| Non-trading financial assets mandatorily at fair value through profit or loss | 6,888 | |||
| 11 | Equity instruments | 6,511 | ||
| 11 | Debt securities | 129 | ||
| 11 | Loans and advances | 247 | ||
| 12 | Financial assets designated at fair value through profit or loss | 913 | ||
| Derivatives (trading and hedging) | 53,101 | |||
| Financial assets at fair value through other comprehensive income | 65,497 | |||
| 13 | Equity instruments | 1,198 | ||
| Debt securities | 64,273 | 63,425 | 822 | |
| 13 | Loans and advances to credit institutions | 26 | 26 | — |
| Financial assets at amortized cost | 425,803 | 378,407 | 33,873 | |
| Debt securities | 36,730 | 36,463 | 237 | |
| Loans and advances to central banks | 4,420 | 4,420 | — | |
| Loans and advances to credit institutions | 16,066 | 15,997 | 69 | |
| Loans and advances to customers | 368,588 | 321,528 | 33,568 | |
| Total financial assets risk | 622,965 | |||
| Total loan commitments and financial guarantees | 192,568 | 181,427 | 9,993 | |
| 33 | Loan commitments given | 136,920 | 130,459 | 6,283 |
| 33 | Financial guarantees given | 16,511 | 15,214 | 1,015 |
| 33 | Other commitments given | 39,137 | 35,753 | 2,695 |
| Total maximum credit exposure | 815,533 | |||
| ⁽¹⁾ | Balances corresponding to 2022 have been restated according to IFRS 17 (see Notes 1.3 and 2.3). |
Maximum credit risk exposure (Millions of Euros)
| Notes | December 2021 | Stage 1 | Stage 2 | Stage 3 |
|---|---|---|---|---|
| Financial assets held for trading | 92,560 | |||
| 10 | Equity instruments | 15,963 | ||
| 10 | Debt securities | 25,790 | ||
| 10 | Loans and advances | 50,807 | ||
| Non-trading financial assets mandatorily at fair value through profit or loss | 6,086 | |||
| 11 | Equity instruments | 5,303 | ||
| 11 | Debt securities | 128 | ||
| 11 | Loans and advances | 655 | ||
| 12 | Financial assets designated at fair value through profit or loss | 1,092 | ||
| Derivatives (trading and hedging) | 43,687 | |||
| Financial assets at fair value through other comprehensive income | 60,495 | |||
| 13 | Equity instruments | 1,320 | ||
| Debt securities | 59,148 | 58,587 | 561 | |
| 13 | Loans and advances to credit institutions | 27 | 27 | — |
| Financial assets at amortized cost | 383,870 | 334,772 | 34,418 | |
| Debt securities | 34,833 | 34,605 | 205 | |
| Loans and advances to central banks | 5,687 | 5,687 | — | |
| Loans and advances to credit institutions | 13,295 | 13,285 | 10 | |
| Loans and advances to customers | 330,055 | 281,195 | 34,203 | |
| Total financial assets risk | 587,789 | |||
| Total loan commitments and financial guarantees | 165,941 | 152,914 | 12,070 | |
| 33 | Loan commitments given | 119,618 | 112,494 | 6,953 |
| 33 | Financial guarantees given | 11,720 | 10,146 | 1,329 |
| 33 | Other commitments given | 34,604 | 30,274 | 3,789 |
| Total maximum credit exposure | 753,730 |
67
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
The maximum credit exposure presented in the table above is determined by type of financial asset as explained below:
As of December 31, 2023, there are no financial assets classified as purchased or originated credit impaired in the consolidated balance sheets of the BBVA Group.The breakdown by geographical area and stage of the maximum credit risk exposure, the accumulated allowances recorded and the carrying amount of the loans and advances to customers as of December 31, 2023, 2022 and 2021 is shown below:
December 2023 (Millions of Euros)
| Gross exposure | Accumulated allowances | Carrying amount | |
|---|---|---|---|
| Total | 388,912 | (11,269) | 377,643 |
| Stage 1 | 336,533 | (2,087) | 334,446 |
| Stage 2 | 37,935 | (2,026) | 35,909 |
| Stage 3 | 14,444 | (7,156) | 7,287 |
| Spain (1) | 214,522 | (4,593) | 209,929 |
| Mexico | 91,086 | (3,049) | 88,037 |
| Turkey (2) | 39,058 | (1,641) | 37,416 |
| South America (3) | 43,151 | (1,976) | 41,175 |
| Others | 1,094 | (10) | 1,085 |
| Of which: individual | (1,665) | ||
| Of which: collective | (9,604) |
December 2022 ⁽¹⁾ (Millions of Euros)
| Gross exposure | Accumulated allowances | Carrying amount | |
|---|---|---|---|
| Total | 368,588 | (11,237) | 357,351 |
| Stage 1 | 321,528 | (2,014) | 319,513 |
| Stage 2 | 33,568 | (1,938) | 31,629 |
| Stage 3 | 13,493 | (7,284) | 6,208 |
| Spain (2) | 214,066 | (4,860) | 209,206 |
| Mexico | 73,729 | (2,496) | 71,233 |
| Turkey (3) | 39,547 | (2,105) | 37,443 |
| South America (4) | 40,199 | (1,768) | 38,431 |
| Others | 1,047 | (8) | 1,039 |
| Of which: individual | (2,164) | ||
| Of which: collective | (9,073) |
December 2021 (Millions of Euros)
| Gross exposure | Accumulated allowances | Carrying amount | |
|---|---|---|---|
| Total | 330,055 | (11,116) | 318,939 |
| Stage 1 | 281,195 | (1,964) | 279,231 |
| Stage 2 | 34,203 | (2,091) | 32,112 |
| Stage 3 | 14,657 | (7,061) | 7,596 |
| Spain (1) | 201,405 | (5,277) | 196,129 |
| Mexico | 57,847 | (2,038) | 55,809 |
| Turkey (2) | 33,472 | (2,058) | 31,414 |
| South America (3) | 36,335 | (1,736) | 34,599 |
| Others | 996 | (8) | 988 |
| Of which: individual | (2,528) | ||
| Of which: collective | (8,587) |
The breakdown by counterparty of the maximum credit risk exposure, the accumulated allowances recorded, as well as the carrying amount by stages of loans and advances to customers as of December 31, 2023, 2022 and 2021 is shown below:
December 2023 (Millions of Euros)
| Gross exposure | Accumulated allowances | Net amount | |
|---|---|---|---|
| Total | Stage 1 Stage 2 Stage 3 | Total | |
| Public administrations | 23,294 | 23,105 164 25 | (29) |
| Other financial corporations | 13,271 | 13,072 187 12 | (20) |
| Non-financial corporations | 175,337 | 154,519 15,299 5,520 | (4,274) |
| Households | 177,009 | 145,837 22,286 8,886 | (6,946) |
| Loans and advances to customers | 388,912 | 336,533 37,935 14,444 | (11,269) |
December 2022 ⁽¹⁾ (Millions of Euros)
| Gross exposure | Accumulated allowances | Net amount | |
|---|---|---|---|
| Total | Stage 1 Stage 2 Stage 3 | Total | |
| Public administrations | 20,922 | 20,582 302 38 | (30) |
| Other financial corporations | 12,802 | 12,548 238 17 | (37) |
| Non-financial corporations | 170,929 | 149,501 15,087 6,340 | (5,495) |
| Households | 163,936 | 138,896 17,941 7,098 | (5,675) |
| Loans and advances to customers | 368,588 | 321,528 33,568 13,493 | (11,237) |
December 2021 (Millions of Euros)
| Gross exposure | Accumulated allowances | Net amount | |
|---|---|---|---|
| Total | Stage 1 Stage 2 Stage 3 | Total | |
| Public administrations | 19,719 | 19,287 369 62 | (37) |
| Other financial corporations | 9,826 | 9,672 131 24 | (23) |
| Non-financial corporations | 146,797 | 120,140 19,366 7,290 | (5,804) |
| Households | 153,714 | 132,096 14,336 7,281 | (5,253) |
| Loans and advances to customers | 330,055 | 281,195 34,203 14,657 | (11,116) |
The breakdown by counterparty and product of loans and advances, net of loss allowances, as well as the gross carrying amount by type of product, classified in different headings of the assets, as of December 31, 2023, 2022 and 2021 is shown below:
December 2023 (Millions of Euros)
| Central banks | General governments | Credit institutions | Other financial corporations | Non-financial corporations | Households | Total | |
|---|---|---|---|---|---|---|---|
| Gross carrying amount | |||||||
| On demand and short notice | — | 6 | — | 73 | 1,933 | 1,028 | 3,040 |
| Credit card debt | 1 | — | 2 | 1,927 | 20,959 | 22,890 | 24,454 |
| Commercial debtors | 960 | 76 | 586 | 23,462 | 88 | 25,171 | 25,346 |
| Finance leases | — | 225 | — | 12 | 8,940 | 285 | 9,463 |
| Reverse repurchase loans | 1,345 | — | 5,786 | 92 | — | — | 7,223 |
| Other term loans | 4,878 | 21,662 | 5,329 | 9,300 | 134,024 | 147,491 | 322,683 |
| Advances that are not loans | 927 | 412 | 6,312 | 3,186 | 956 | 324 | 12,116 |
| LOANS AND ADVANCES | 7,151 | 23,265 | 17,502 | 13,251 | 171,241 | 170,175 | 402,586 |
| By secured loans | |||||||
| Of which: mortgage loans collateralized by immovable property | 271 | — | 526 | 24,829 | 96,772 | 122,397 | |
| Of which: other collateralized loans | 1,347 | 6,933 | 4,558 | 465 | 10,938 | 2,430 | 26,671 |
| By purpose of the loan | |||||||
| Of which: credit for consumption | 59,892 | 59,892 | |||||
| Of which: lending for house purchase | 97,555 | 97,555 | |||||
| By subordination | |||||||
| Of which: project finance loans | 7,181 | 7,181 |
December 2022 ⁽¹⁾ (Millions of Euros)
| Central banks | General governments | Credit institutions | Other financial corporations | Non-financial corporations | Households | Total | |
|---|---|---|---|---|---|---|---|
| Gross carrying amount | |||||||
| On demand and short notice | — | 6 | — | 352 | 2,810 | 933 | 4,101 |
| Credit card debt | — | 1 | 1 | 3 | 2,029 | 16,865 | 18,898 |
| Commercial debtors | 1,021 | 24 | 370 | 24,510 | 85 | 26,011 | 26,254 |
| Finance leases | — | 195 | — | 13 | 8,040 | 322 | 8,571 |
| Reverse repurchase loans | 302 | — | 5,251 | 102 | — | — | 5,655 |
| Other term loans | 3,802 | 19,438 | 4,009 | 7,995 | 126,949 | 139,925 | 302,118 |
| Advances that are not loans | 296 | 232 | 6,772 | 3,930 | 1,256 | 217 | 12,702 |
| LOANS AND ADVANCES | 4,401 | 20,892 | 16,057 | 12,765 | 165,593 | 158,348 | 378,056 |
70 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
December 2021 (Millions of Euros)
| Central banks | General governments | Credit institutions | Other financial corporations | Non-financial corporations | Households | Total | ||
|---|---|---|---|---|---|---|---|---|
| Gross carrying amount | ||||||||
| On demand and short notice | — | 6 | — | 321 | 2,339 | 495 | 3,161 | 3,345 |
| Credit card debt | — | — | — | 1 | 1,504 | 12,523 | 14,030 | 14,949 |
| Commercial debtors | 791 | — | 476 | 18,191 | 66 | 19,524 | 19,766 | |
| Finance leases | — | 191 | — | 14 | 7,388 | 317 | 7,911 | 8,256 |
| Reverse repurchase loans | 1,192 | — | 2,788 | 23 | — | — | 4,004 | 4,013 |
| Other term loans | 4,174 | 18,440 | 4,004 | 5,413 | 110,204 | 134,505 | 276,739 | 286,127 |
| Advances that are not loans | 315 | 394 | 6,510 | 3,554 | 1,805 | 630 | 13,208 | 13,263 |
| LOANS AND ADVANCES | 5,681 | 19,822 | 13,303 | 9,804 | 141,431 | 148,536 | 338,577 | 349,719 |
| By secured loans | ||||||||
| Of which: mortgage loans collateralized by immovable property | 324 | — | 220 | 21,531 | 94,821 | 116,897 | 119,980 | |
| Of which: other collateralized loans | 1,180 | 1,413 | 2,534 | 390 | 3,512 | 1,950 | 10,979 | 11,335 |
| By purpose of the loan | ||||||||
| Of which: credit for consumption | 42,294 | 42,294 | 45,236 | |||||
| Of which: lending for house purchase | 95,209 | 95,209 | 96,612 | |||||
| By subordination | ||||||||
| Of which: project finance loans | 8,863 | 8,863 | 9,423 |
In certain cases, maximum credit risk exposure is reduced by collateral, credit enhancements and other actions which mitigate the Group’s exposure. The BBVA Group applies a credit risk hedging and mitigation policy deriving from a banking approach focused on relationship banking. The existence of guarantees could be a necessary but not sufficient instrument for accepting risks, as the assumption of risks by the Group requires prior evaluation of the debtor’s capacity for repayment, or that the debtor can generate sufficient resources to allow the amortization of the risk incurred under the agreed terms. The policy of accepting risks is therefore organized into three different levels in the BBVA Group:
– Analysis of the financial risk of the transaction, based on the debtor’s capacity for repayment or generation of funds.
– The constitution of guarantees that are adequate, or at any rate generally accepted, for the risk assumed, in any of the generally accepted forms: monetary, secured, personal or hedge guarantees; and
– Assessment of the repayment risk (asset liquidity) of the guarantees received.
This is carried out through a prudent risk policy that consists of the analysis of the financial risk, based on the capacity for reimbursement or generation of resources of the borrower, the analysis of the guarantee, assessing, among others, the efficiency, the robustness and the risk, the adequacy of the guarantee with the operation and other aspects such as the location, currency, concentration or the existence of limitations. Additionally, the necessary tasks for the constitution of guarantees must be carried out - in any of the generally accepted forms (collaterals, personal guarantees and financial hedge instruments) - appropriate to the risk assumed.
The procedures for the management and valuation of collateral are set out in the corporate general policies (retail and wholesale), which establish the basic principles for credit risk management, including the management of collaterals assigned in transactions with customers. The criteria for the systematic, standardized and effective treatment of collateral in credit transaction procedures in BBVA Group’s wholesale and retail banking are included in the Specific Collateral Rules. The methods used to value the collateral are in line with the best market practices and imply the use of appraisal of real-estate collateral, the market price in market securities, the trading price of shares in mutual funds, etc. All the collaterals received must be correctly assigned and entered in the corresponding register. They must also have the approval of the Group’s legal units. The valuation of the collateral is taken into account in the calculation of the expected losses. The Group has developed internal models to estimate the realization value of the collaterals received, the time that elapses until then, the costs for their acquisition, maintenance and subsequent sale, from real observations based on its own experience. This modeling is part of the LGD estimation processes that are applied to the different segments, and is included within the annual review and validation procedures.
The following is a description of the main types of collateral for each financial instrument class:
– Debt instruments held for trading: The guarantees or credit enhancements obtained directly from the issuer or counterparty are implicit in the clauses of the instrument (mainly guarantees of the issuer).
– Derivatives and hedging derivatives: In derivatives, credit risk is minimized through contractual netting agreements, where positive- and negative-value derivatives with the same counterparty are offset for their net balance. There may likewise be other kinds of guarantees and collaterals, depending on counterparty solvency and the nature of the transaction (mainly collaterals).
71 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
The summary of the offsetting effect (via netting and collateral) for derivatives and securities operations as of December 31, 2023 is presented in Note 7.4.2.
– Other financial assets designated at fair value through profit or loss and financial assets at fair value through other comprehensive income: The guarantees or credit enhancements obtained directly from the issuer or counterparty are inherent to the structure of the instrument (mainly personal guarantees). As of December 31, 2023, 2022 and 2021, the BBVA Group had no significant credit risk exposure of impaired financial assets at fair value through other comprehensive income (see Note 7.2.2).
– Financial assets at amortized cost:
a. Loans and advances to credit institutions: These usually have the counterparty’s personal guarantee or pledged securities in the case of repos.
b. Loans and advances to customers: Most of these loans and advances are backed by personal guarantees extended by the customer. There may also be collateral to secure loans and advances to customers (such as mortgages, cash collaterals, pledged securities and other collateral), or to obtain other credit enhancements (bonds or insurances).
c. Debt securities: The guarantees or credit enhancements obtained directly from the issuer or counterparty are inherent to the structure of the instrument.
– Financial guarantees, other contingent risks and drawable by third parties: these have the counterparty’s personal guarantee or other types of collaterals.
The disclosure of impaired loans and advances at amortized cost covered by collateral (see Note 7.2.6), shown by type of collateral, as of December 31, 2023, 2022 and 2021, is the following:
Impaired loans and advances at amortized cost covered by collateral (Millions of Euros)
| Maximum exposure to credit risk | Of which secured by collateral | Residential properties | Commercial properties | Cash | Others | Financial | |
|---|---|---|---|---|---|---|---|
| December 2023 | 14,446 | 3,167 | 771 | 5 | 91 | 1,226 | |
| December 2022 | 13,493 | 2,537 | 849 | 3 | 52 | 984 | |
| December 2021 | 14,657 | 2,875 | 1,068 | 5 | 33 | 886 |
The value of guarantees received as of December 31, 2023, 2022 and 2021, is the following:
Guarantees received (Millions of Euros)
| 2023 | 2022 | 2021 | |
|---|---|---|---|
| Value of collateral | 136,141 | 125,963 | 117,362 |
| Of which: guarantees normal risks under special monitoring | 14,274 | 12,826 | 11,768 |
| Of which: guarantees non-performing risks | 4,035 | 3,440 | 3,981 |
| Value of other guarantees | 53,462 | 40,050 | 48,680 |
| Of which: guarantees normal risks under special monitoring | 4,864 | 4,963 | 7,404 |
| Of which: guarantees non-performing risks | 1,226 | 984 | 886 |
| Total value of guarantees received | 189,602 | 166,013 | 166,042 |
The maximum credit risk exposure of impaired financial guarantees and other commitments at December 31, 2023, 2022 and 2021 amounts to €1,030 million, €1,147 million and €957 million, respectively (see Note 7.2.2).
The BBVA Group has tools that enable it to rank the credit quality of its transactions and customers based on an assessment and its correspondence with the probability of default (“PD”) scales. To analyze the performance of PD, the Group has a series of tracking tools and historical databases that collect the pertinent internally generated information. These tools can be grouped together into scoring and rating models.
72 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
Scoring is a decision-making model that contributes to both the arrangement and management of retail loans: consumer loans, mortgages, credit cards for individuals, etc.# Scoring and Rating Tools
Scoring is the tool used to decide to originate a loan, what amount should be originated and what strategies can help establish the price, because it is an algorithm that sorts transactions by their credit quality. This algorithm enables the BBVA Group to assign a score to each transaction requested by a customer, on the basis of a series of objective characteristics that have statistically been shown to distinguish between the quality and risk of this type of transactions. The advantage of scoring lies in its simplicity and homogeneity: all that is needed is a series of objective data for each customer, and this data is analyzed automatically using an algorithm. There are three types of scoring, based on the information used and on its purpose:
Rating tools, as opposed to scoring tools, focus on the rating of customers: companies, corporations, SMEs, general governments, etc. A rating tool is an instrument that, based on a detailed financial study, helps determine a customer’s ability to meet his/her financial obligations. The final rating is usually a combination of various factors: on one hand, quantitative factors, and on the other hand, qualitative factors. It is a middle road between an individual analysis and a statistical analysis. The main difference between ratings and scorings is that the latter are used to assess retail products, while ratings use a wholesale banking customer approach. Moreover, scorings only include objective variables, while ratings add qualitative information. And although both are based on statistical studies, adding a business view, rating tools give more weight to the business criterion compared to scoring tools.
For portfolios where the number of defaults is low (sovereign risk, corporates, financial entities, etc.) the internal information is supplemented by “benchmarking” of the external rating agencies (Moody’s, Standard & Poor’s and Fitch). To this end, each year the PDs compiled by the rating agencies at each level of risk rating are compared, and the measurements compiled by the various agencies are mapped against those of the BBVA master rating scale.
The probability of default of transactions or customers is calibrated with a long-term view, since its purpose is to measure the risk quality beyond its time of estimation, seeking to capture information representative of the behavior of the portfolios during a complete economic cycle (a long-term average probability of default). This probability is mapped to the master scale developed by the BBVA Group in order to facilitate a homogeneous classification of its different risk portfolios. These different levels and their probability of default were calculated by using as a reference the rating scales and default rates provided by the external agencies Standard & Poor’s and Moody’s. These calculations establish the levels of probability of default for the BBVA Group’s Master Rating Scale. Although this scale is common to the entire Group, the calibrations (mapping scores to PD sections/Master Rating Scale levels) are carried out at tool level for each country in which the Group has tools available.
The table below outlines the distribution of the gross carrying amount of loans and advances to customers, contingent risk and commitments, in percentage terms, of the BBVA Group, based on their probability of default within 12 months and internal rating used in the calculation of the expected loss under IFRS 9, and their stages, as of December 31, 2023, 2022 and 2021:
73 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
| Probability of default (basis points) and internal rating | 2023 | | 2022 | | 2021 |
| :------------------------------------------------------- | :--- | :--- | :--- | :--- | :--- | :--- |
| | Subject to 12 month ECL (stage 1) | Subject to lifetime ECL (stage 2) | Subject to 12 month ECL (stage 1) | Subject to lifetime ECL (stage 2) | Subject to 12 month ECL (stage 1) | Subject to lifetime ECL (stage 2) |
| Internal rating PDs | % | % | % | % | % | % |
| AAA | 3.8 | — | 5.5 | 0.1 | 5.8 | — |
| AA+ to AA- | 10.7 | 0.2 | 19.4 | 0.3 | 15.7 | 0.1 |
| A+ to A- | 25.4 | 0.5 | 19.9 | 0.7 | 15.2 | 0.2 |
| BBB+ to BBB- | 21.7 | 1.3 | 18.7 | 0.8 | 18.7 | 0.6 |
| BB+ to BB- | 20.6 | 2.1 | 18.4 | 1.9 | 19.1 | 2.5 |
| B+ to B- | 8.7 | 2.2 | 9.0 | 2.5 | 12.2 | 3.8 |
| CCC+ to CCC- | 1.0 | 0.6 | 1.0 | 0.7 | 1.9 | 1.5 |
| CC+ to C | 0.5 | 0.8 | 0.5 | 0.8 | 0.8 | 1.9 |
| Total | 92.4 | 7.6 | 92.3 | 7.7 | 89.4 | 10.6 |
(1) Data corresponding to the year 2021, does not include commitments nor contingent liabilities.
The breakdown of loans and advances within financial assets at amortized cost by counterparties, including their respective gross carrying amount, impaired amount and accumulated impairment as of December 31, 2023, 2022 and 2021 is as follows:
December 2023 (Millions of Euros)
| Gross carrying amount | Impaired loans and advances | Accumulated impairment | Impaired loans and advances as a % of the total | |
|---|---|---|---|---|
| Central banks | 7,176 | — | (25) | —% |
| General governments | 23,294 | 25 | (29) | 0.1% |
| Credit institutions | 17,498 | 2 | (21) | —% |
| Other financial corporations | 13,271 | 12 | (20) | 0.1% |
| Non-financial corporations | 175,337 | 5,520 | (4,274) | 3.2% |
| Agriculture, forestry and fishing | 4,530 | 133 | (136) | 2.9% |
| Mining and quarrying | 4,924 | 27 | (30) | 0.6% |
| Manufacturing | 45,893 | 814 | (685) | 1.8% |
| Electricity, gas, steam and air conditioning supply | 15,801 | 444 | (454) | 2.8% |
| Water supply | 905 | 16 | (11) | 1.8% |
| Construction | 8,269 | 665 | (426) | 8.1% |
| Wholesale and retail trade | 32,080 | 1,241 | (883) | 3.9% |
| Transport and storage | 10,378 | 310 | (213) | 3.0% |
| Accommodation and food service activities | 7,957 | 329 | (208) | 4.1% |
| Information and communications | 7,545 | 71 | (54) | 0.9% |
| Financial and insurance activities | 7,828 | 187 | (122) | 2.4% |
| Real estate activities | 12,550 | 658 | (508) | 5.2% |
| Professional, scientific and technical activities | 4,053 | 178 | (124) | 4.4% |
| Administrative and support service activities | 4,449 | 151 | (111) | 3.4% |
| Public administration and defense; compulsory social security | 303 | 10 | (11) | 3.2% |
| Education | 586 | 30 | (21) | 5.0% |
| Human health services and social work activities | 2,171 | 129 | (48) | 6.0% |
| Arts, entertainment and recreation | 906 | 53 | (42) | 5.9% |
| Other services | 4,209 | 74 | (186) | 1.8% |
| Households | 177,009 | 8,886 | (6,946) | 5.0% |
| LOANS AND ADVANCES | 413,585 | 14,446 | (11,316) | 3.5% |
74 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
December 2022 ⁽¹⁾ (Millions of Euros)
| Gross carrying amount | Impaired loans and advances | Accumulated impairment | Impaired loans and advances as a % of the total | |
|---|---|---|---|---|
| Central banks | 4,420 | — | (19) | — % |
| General governments | 20,922 | 38 | (30) | 0.2 % |
| Credit institutions | 16,066 | — | (35) | — % |
| Other financial corporations | 12,802 | 17 | (37) | 0.1 % |
| Non-financial corporations | 170,929 | 6,340 | (5,495) | 3.7 % |
| Agriculture, forestry and fishing | 4,475 | 153 | (151) | 3.4 % |
| Mining and quarrying | 5,006 | 179 | (105) | 3.6 % |
| Manufacturing | 44,583 | 869 | (794) | 1.9 % |
| Electricity, gas, steam and air conditioning supply | 15,344 | 650 | (534) | 4.2 % |
| Water supply | 875 | 21 | (16) | 2.4 % |
| Construction | 8,349 | 784 | (537) | 9.4 % |
| Wholesale and retail trade | 30,974 | 1,184 | (945) | 3.8 % |
| Transport and storage | 11,051 | 319 | (343) | 2.9 % |
| Accommodation and food service activities | 8,003 | 451 | (329) | 5.6 % |
| Information and communications | 7,498 | 113 | (47) | 1.5 % |
| Financial and insurance activities | 7,446 | 200 | (188) | 2.7 % |
| Real estate activities | 11,349 | 718 | (527) | 6.3 % |
| Professional, scientific and technical activities | 3,948 | 169 | (151) | 4.3 % |
| Administrative and support service activities | 4,021 | 180 | (124) | 4.5 % |
| Public administration and defense, compulsory social security | 268 | 8 | (12) | 2.9 % |
| Education | 556 | 35 | (29) | 6.4 % |
| Human health services and social work activities | 2,108 | 138 | (53) | 6.6 % |
| Arts, entertainment and recreation | 927 | 68 | (79) | 7.3 % |
| Other services | 4,147 | 101 | (530) | 2.4 % |
| Households | 163,936 | 7,098 | (5,675) | 4.3 % |
| LOANS AND ADVANCES | 389,073 | 13,493 | (11,291) | 3.5 % |
(1) Balances corresponding to 2022 have been restated according to IFRS 17 (see Notes 1.3 and 2.3).
75 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56).In the event of a discrepancy, the Spanish-language version prevails December 2021 (Millions of Euros)
| Category | Gross carrying amount | Impaired loans and advances | Accumulated impairment | Impaired loans and advances as a % of the total |
|---|---|---|---|---|
| Central banks | 5,687 | — | (6) | — % |
| General governments | 19,719 | 62 | (37) | 0.3 % |
| Credit institutions | 13,295 | — | (19) | — % |
| Other financial corporations | 9,826 | 24 | (23) | 0.2 % |
| Non-financial corporations | 146,797 | 7,290 | (5,804) | 5.0 % |
| Agriculture, forestry and fishing | 4,077 | 125 | (154) | 3.1 % |
| Mining and quarrying | 4,889 | 222 | (130) | 4.5 % |
| Manufacturing | 35,058 | 1,003 | (867) | 2.9 % |
| Electricity, gas, steam and air conditioning supply | 13,718 | 570 | (489) | 4.2 % |
| Water supply | 782 | 22 | (21) | 2.9 % |
| Construction | 8,336 | 894 | (619) | 10.7 % |
| Wholesale and retail trade | 25,856 | 1,311 | (1,104) | 5.1 % |
| Transport and storage | 10,310 | 879 | (400) | 8.5 % |
| Accommodation and food service activities | 7,693 | 470 | (405) | 6.1 % |
| Information and communications | 6,533 | 117 | (56) | 1.8 % |
| Financial and insurance activities | 6,216 | 197 | (181) | 3.2 % |
| Real estate activities | 9,438 | 719 | (466) | 7.6 % |
| Professional, scientific and technical activities | 3,910 | 185 | (152) | 4.7 % |
| Administrative and support service activities | 3,046 | 181 | (132) | 5.9 % |
| Public administration and defense, compulsory social security | 203 | 9 | (11) | 4.5 % |
| Education | 582 | 43 | (34) | 7.4 % |
| Human health services and social work activities | 1,888 | 48 | (41) | 2.5 % |
| Arts, entertainment and recreation | 1,011 | 209 | (95) | 20.7 % |
| Other services | 3,250 | 84 | (447) | 2.6 % |
| Households | 153,714 | 7,281 | (5,253) | 4.7 % |
| LOANS AND ADVANCES | 349,037 | 14,657 | (11,142) | 4.2 % |
The changes during the years 2023, 2022 and 2021 of impaired financial assets and guarantees given are as follows:
(Millions of Euros)
| 2023 | 2022 | 2021 | |
|---|---|---|---|
| Balance at the beginning | 14,521 | 15,467 | 15,478 |
| Additions | 11,066 | 8,084 | 8,556 |
| Decreases (1) | (5,795) | (5,742) | (4,555) |
| Net additions | 5,272 | 2,342 | 4,001 |
| Amounts written-off | (3,770) | (2,771) | (3,613) |
| Exchange differences and other | (660) | (517) | (399) |
| Balance at the end | 15,362 | 14,521 | 15,467 |
(1) Reflects the total amount of impaired loans derecognized from the consolidated balance sheet throughout the period as a result of monetary recoveries as well as mortgage foreclosures and real estate assets received in lieu of payment.
76 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
The changes during the years 2023, 2022 and 2021 in financial assets derecognized from the consolidated balance sheet as their recovery is considered unlikely ("write-offs"), is shown below:
(Millions of Euros)
| Notes | 2023 | 2022 | 2021 | |
|---|---|---|---|---|
| Balance at the beginning | 22,595 | 21,990 | 22,001 | |
| Companies held for sale | — | — | — | |
| Increase | 3,841 | 2,871 | 3,709 | |
| Decrease: | (2,035) | (2,431) | (3,605) | |
| Re-financing or restructuring (1) | (1) | (2) | (1) | |
| Cash recovery | 47 | (369) | (390) | |
| Foreclosed assets (3) | (25) | (17) | — | |
| Sales (1) | (1,201) | (1,498) | (2,437) | |
| Debt forgiveness | (410) | (368) | (599) | |
| Time-barred debt and other causes | (51) | (147) | (129) | |
| Net exchange differences | 385 | 165 | (116) | |
| Balance at the end | 24,787 | 22,595 | 21,990 |
(1) Includes principal and interest.
As indicated in Note 2.2.1, although they have been derecognized from the consolidated balance sheet, the BBVA Group continues to attempt to collect on these written-off financial assets, until the rights to receive them are fully extinguished, either because it is a time-barred financial asset, the financial asset is forgiven, or other reason.
Movements, measured over a 12-month period, in gross accounting balances and accumulated loss allowances during 2023, 2022 and 2021 are recorded on the consolidated balance sheet as of December 31, 2023, 2022 and 2021 in order to cover the estimated impairment or reversal of impairment on loans and advances at amortized cost.
Year 2023 (Millions of Euros)
| Stage 1 | Stage 2 | Stage 3 | Total | |
|---|---|---|---|---|
| Balance at the beginning | 341,944 | 33,636 | 13,493 | 389,073 |
| Transfers of financial assets: | (11,647) | 10,463 | 1,184 | — |
| Transfers from stage 1 to stage 2 | (18,172) | 18,172 | — | — |
| Transfers from stage 2 to stage 1 | 7,639 | (7,639) | — | — |
| Transfers to stage 3 | (3,203) | (2,297) | 5,500 | — |
| Transfers from stage 3 | 2,089 | 2,226 | (4,316) | — |
| Net annual origination of financial assets | 34,334 | (5,233) | 2,663 | 31,764 |
| Becoming write-offs | (186) | (76) | (2,889) | (3,150) |
| Foreign exchange | (2,833) | (635) | (369) | (3,838) |
| Modifications that do not result in derecognition | (60) | (16) | 476 | 401 |
| Other | (365) | (187) | (112) | (665) |
| Balance at the end | 361,186 | 37,953 | 14,446 | 413,585 |
Year 2023 (Millions of Euros)
| Stage 1 | Stage 2 | Stage 3 | Total | |
|---|---|---|---|---|
| Balance at the beginning | (2,065) | (1,942) | (7,284) | (11,291) |
| Transfers of financial assets: | 73 | (336) | (2,527) | (2,790) |
| Transfers from stage 1 to stage 2 | 118 | (681) | — | (563) |
| Transfers from stage 2 to stage 1 | (113) | 323 | — | 210 |
| Transfers to stage 3 | 81 | 120 | (2,935) | (2,734) |
| Transfers from stage 3 | (13) | (97) | 408 | 297 |
| Net annual origination of allowances | (466) | (148) | (232) | (846) |
| Becoming write-offs | 147 | 71 | 2,853 | 3,071 |
| Foreign exchange | (52) | 44 | 169 | 160 |
| Modifications that do not result in derecognition | 3 | 49 | (304) | (252) |
| Other | 229 | 235 | 167 | 631 |
| Balance at the end | (2,131) | (2,026) | (7,158) | (11,316) |
For the year ended December 31, 2023, the impairment charges recognized under the heading “Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss or net gains by modification" amounted to €4,428 million (€3,379 million and €3,034 million for the years ended December 31, 2022 and 2021, respectively) (see Note 47).
Year 2022 (Millions of Euros)
| Stage 1 | Stage 2 | Stage 3 | Total | |
|---|---|---|---|---|
| Balance at the beginning | 300,167 | 34,213 | 14,657 | 349,037 |
| Transfers of financial assets: | (5,041) | 3,914 | 1,128 | — |
| Transfers from stage 1 to stage 2 | (12,726) | 12,726 | — | — |
| Transfers from stage 2 to stage 1 | 8,537 | (8,537) | — | — |
| Transfers to stage 3 | (1,941) | (1,831) | 3,773 | — |
| Transfers from stage 3 | 1,089 | 1,556 | (2,645) | — |
| Net annual origination of financial assets | 44,465 | (4,201) | 258 | 40,522 |
| Becoming write-offs | (63) | (35) | (2,432) | (2,530) |
| Methodological changes and adoption of new standards ⁽¹⁾ | (672) | — | — | (672) |
| Foreign exchange | 2,447 | 18 | (461) | 2,004 |
| Modifications that do not result in derecognition | (2) | 29 | 113 | 140 |
| Other | 643 | (301) | 231 | 573 |
| Balance at the end | 341,944 | 33,636 | 13,493 | 389,073 |
(1) The entire impact corresponds to the application of IFRS 17 (See notes 1.3 and 2.3).
Year 2022 (Millions of Euros)
| Stage 1 | Stage 2 | Stage 3 | Total | |
|---|---|---|---|---|
| Balance at the beginning | (1,990) | (2,091) | (7,061) | (11,142) |
| Transfers of financial assets: | 63 | 33 | (1,570) | (1,473) |
| Transfers from stage 1 to stage 2 | 110 | (397) | — | (287) |
| Transfers from stage 2 to stage 1 | (91) | 374 | — | 283 |
| Transfers to stage 3 | 51 | 204 | (1,917) | (1,662) |
| Transfers from stage 3 | (7) | (148) | 347 | 193 |
| Net annual origination of allowances | (406) | (273) | (663) | (1,342) |
| Becoming write-offs | 186 | 30 | 1,890 | 2,106 |
| Foreign exchange | (87) | 248 | — | 161 |
| Modifications that do not result in derecognition | — | 48 | (160) | (112) |
| Other | 168 | 64 | 279 | 511 |
| Balance at the end | (2,065) | (1,942) | (7,284) | (11,291) |
78 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
Year 2021 (Millions of Euros)
| Stage 1 | Stage 2 | Stage 3 | Total | |
|---|---|---|---|---|
| Balance at the beginning | 298,793 | 30,601 | 14,678 | 344,072 |
| Transfers of financial assets: | (10,785) | 8,640 | 2,145 | — |
| Transfers from stage 1 to stage 2 | (14,482) | 14,482 | — | — |
| Transfers from stage 2 to stage 1 | 4,905 | (4,905) | — | — |
| Transfers to stage 3 | (1,772) | (1,945) | 3,717 | — |
| Transfers from stage 3 | 564 | 1,009 | (1,573) | — |
| Net annual origination of financial assets | 17,876 | (4,729) | 1,217 | 14,364 |
| Becoming write-offs | (74) | (68) | (3,095) | (3,237) |
| Foreign exchange | (6,054) | (1,902) | (216) | (8,172) |
| Modifications that do not result in derecognition | 187 | 1,642 | 189 | 2,018 |
| Other | 224 | 29 | (261) | (8) |
| Balance at the end | 300,167 | 34,213 | 14,657 | 349,037 |
Year 2021 (Millions of Euros)
| Stage 1 | Stage 2 | Stage 3 | Total | |
|---|---|---|---|---|
| Balance at the beginning | (2,037) | (2,289) | (7,815) | (12,141) |
| Transfers of financial assets: | 187 | 441 | (2,521) | (1,893) |
| Transfers from stage 1 to stage 2 | 139 | (602) | — | (463) |
| Transfers from stage 2 to stage 1 | (60) | 307 | — | 247 |
| Transfers to stage 3 | 111 | 802 | (2,775) | (1,862) |
| Transfers from stage 3 | (3) | (66) | 254 | 185 |
| Net annual origination of allowances | (563) | (57) | (314) | (933) |
| Becoming write-offs | 45 | 56 | 2,694 | 2,795 |
| Foreign exchange | 70 | (270) | 719 | 519 |
| Modifications that do not result in derecognition | 12 | (79) | (122) | (189) |
| Other | 297 | 106 | 298 | 701 |
| Balance at the end | (1,990) | (2,091) | (7,061) | (11,142) |
The loss allowances recorded in the balance sheet to cover the impairment estimated in the debt securities amounted to €166, €214 and €126 million as of December 31, 2023, 2022 and 2021, respectively. The variation is mainly due to changes in credit risk variations, mainly in Garanti BBVA, BBVA, S.A. and BBVA Argentina. Additionally, the loss allowances recorded in the balance sheet to cover the impairment estimated in the commitments and guarantees given amounted to €770, €770 and €691 million as of December 31, 2023, 2022 and 2021, respectively (see Note 24).The variation is mainly driven by changes due to origination and acquisition in Garanti BBVA.
Refinancing and restructuring transactions (see definition in the Glossary) are carried out with customers who have requested such a transaction in order to meet their current loan payments if they are expected, or may be expected, to experience financial difficulty in making the payments in the future. The basic aim of a refinancing and restructuring transaction is to provide the customer with a situation of financial viability over time by adapting repayment of the loan incurred with the Group to the customer’s new situation of fund generation. The use of refinancing and restructuring for other purposes, such as to delay loss recognition, is contrary to BBVA Group policies.
The BBVA Group’s refinancing and restructuring policies are based on the following general principles:
– Refinancing and restructuring is authorized according to the capacity of customers to pay the new installments. This is done by first identifying the origin of the payment difficulties and then carrying out an analysis of the customers’ viability, including an updated analysis of their economic and financial situation and capacity to pay and generate funds. If the customer is a company, the analysis also covers the situation of the industry in which it operates.
– With the aim of increasing the solvency of the transaction, new guarantees and/or guarantors of demonstrable solvency are obtained where possible. An essential part of this process is an analysis of the effectiveness of both the new and original guarantees.
– This analysis is carried out from the overall customer or group perspective.
– Refinancing and restructuring transactions do not in general increase the amount of the customer’s loan, except for the expense inherent to the transaction itself.
– The capacity to refinance and restructure a loan is not delegated to the branches, but decided on by the risk units.
– The decisions made are reviewed from time to time with the aim of evaluating full compliance with refinancing and restructuring policies.
These general principles are adapted in each case according to the conditions and circumstances of each geographical area in which the Group operates, and to the different types of customers involved.
In the case of retail customers (private individuals), the main aim of the BBVA Group’s policy on refinancing and restructuring a loan is to avoid default arising from a customer’s temporary liquidity problems by implementing structural solutions that do not increase the balance of the customer’s loan. The solution required is adapted to each case and the loan repayment is made easier, in accordance with the following principles:
– Analysis of the viability of transactions based on the customer’s willingness and ability to pay, which may be reduced, but should nevertheless be present. Therefore, in all cases the customer shall at least make interest payments, in addition to certain limited exceptions where grace periods are afforded in respect of both principal and interest payments.
– Refinancing and restructuring of transactions is only allowed on those loans in which the BBVA Group originally entered into.
– Customers subject to refinancing and restructuring transactions are excluded from marketing campaigns of any kind.
In the case of non-retail customers (mainly companies, enterprises and corporates), refinancing/restructuring is authorized according to an economic and financial viability plan based on:
– Forecasted future income, margins and cash flows to allow entities to implement cost adjustment measures (industrial restructuring) and a business development plan that can help reduce the level of leverage to sustainable levels (capacity to access the financial markets).
– Where appropriate, the existence of a divestment plan for assets and/or operating segments that can generate cash to assist the deleveraging process.
– The capacity of shareholders to contribute capital and/or guarantees that can support the viability of the plan.
In accordance with the Group’s policy, the conclusion of a loan refinancing and restructuring transaction does not mean the loan is reclassified from "impaired" or "significant increase in credit risk" to normal risk. The reclassification to "significant increase in credit risk" or normal risk categories must be based on the analysis mentioned earlier of the viability, upon completion of the probationary periods described below.
The Group maintains the policy of including risks related to refinanced and restructured loans as either:
– "Impaired assets", as although the customer is up to date with payments, they are classified as unlikely to pay when there are significant doubts that the terms of their refinancing may not be met; or
– "Significant increase in credit risk" until the conditions established for their consideration as normal risk are met.
The assets classified as "Impaired assets" should comply with the following conditions in order to be reclassified to "Significant increase in credit risk":
– The customer has to have paid a significant part of the pending exposure.
– At least one year must have elapsed since the later of: i) the time at which the restructuring measures were extended, ii) the time when the exposure was classified as deteriorated, iii) the end of any grace period included in restructuring agreements.
– The customer does not have past due payments and objective criteria, demonstrating the borrower´s ability to pay, have been verified.
The conditions established for assets classified as “Significant increase in credit risk” to be reclassified out of this category are as follows:
– The customer must have paid past-due amounts (principal and interest) since the date of the renegotiation or restructuring of the loan or other objective criteria, demonstrating the borrower´s ability to pay, have been verified; none of its exposures is more than 30 days past-due.
– At least two years must have elapsed since completion of the renegotiation or restructuring of the loan or, if later, the date of reclassification from the deteriorated category. Regular payments must have been made during at least half of this probation period; and
– It is unlikely that the customer will have financial difficulties and, therefore, it is expected that the customer will be able to meet its loan payment obligations (principal and interest) in a timely manner.
Renewals and renegotiations are classified as normal risk, provided that there is no significant increase in risk. This classification is applicable initially, and in the event of any deterioration, the criteria established in the existing policy are followed. In this sense, the aforementioned conditions are considered, including, among others, the requirement that the facility is not more than 30 days past due and that it has not been identified as 'unlikely to pay'.
The BBVA Group’s refinancing and restructuring policy provides for the possibility of two modifications in a 24 month period for loans that are not in compliance with the payment schedule. The internal models used to determine allowances for loan losses consider the restructuring and renegotiation of a loan, as well as re- defaults on such a loan, by assigning a lower internal rating to restructured and renegotiated loans than the average internal rating assigned to non-restructured/renegotiated loans. This downgrade results in an increase in the probability of default (PD) assigned to restructured/renegotiated loans (with the resulting PD being higher than the average PD of the non- renegotiated loans in the same portfolios). In any case, a restructuring will be considered impaired when the reduction in the present net value of the financial obligation is greater than 1%.
For quantitative information on refinancing and restructuring transactions see Appendix X.
In order to prevent the build-up of excessive risk concentrations at the individual, sector, portfolio and geography levels, BBVA Group maintains updated maximum permitted risk concentration indices which are tied to the various observable variables related to concentration risk. Together with the limits for individual concentration, the Group uses the Herfindahl index to measure the concentration of the Group's portfolio and the banking group's subsidiaries. At the BBVA Group level, the index reached implies a "very low" degree of concentration. The limit on the Group’s exposure or financial commitment to a specific customer therefore depends on the customer’s credit rating, the nature of the risks involved, and the Group’s presence in a given market, based on the following guidelines:
– The aim is, as much as possible, to reconcile the customer's credit needs (commercial/financial, short-term/long-term, etc.) with the interests of the Group.
– Any legal limits that may exist concerning risk concentration are taken into account (relationship between risks with a customer and the capital of the shareholder´s entity that assumes them), the markets, the macroeconomic situation, etc.The aim is to seek inter and intra-sector diversification in coherence with the metrics defined in the RAF for the Group and for the banking group's subsidiaries.
The breakdown of the main figures in the most significant foreign currencies in the consolidated balance sheets is set forth in Appendix XI.
The identification, measurement, control and monitoring of risk associated with sovereign risk transactions is carried out by a centralized unit within the BBVA Group's Risk Area. Its basic functions are preparing reports (called financial programs) on the countries with which it maintains cross-border risks (i.e. risks taken in a foreign currency from outside the country with borrowers in the country, whether public or private) and sovereign risks (i.e. risks with the local Sovereign of the country where the risk-taking unit is located), monitoring those risks, establishing risk limits, assigning ratings to the countries analyzed and, in general, supporting the Group in any information request regarding this type of transaction. The risk policies established in the financial programs are approved by the relevant risk committees.
81 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
The country risk unit tracks the evolution of the risks associated with the various countries to which the Group are exposed (including sovereign risk) on an ongoing basis in order to adapt its risk and mitigation policies to any macroeconomic and political changes that may occur. Moreover, it regularly updates its internal ratings and forecasts for these countries. The methodology is based on the assessment of quantitative and qualitative parameters which are in line with those used by certain multilateral organizations (the International Monetary Fund (IMF), the World Bank, etc.) rating agencies and export credit organizations. For additional information on sovereign risk in Europe see Appendix XI.
BBVA Group has teams specializing in the management of the Real Estate Sector risk, given its economic importance and specific technical component. This specialization is not only in risk teams, but throughout the handling, commercial, problem risks and legal, etc. It also includes the research department of the BBVA Group (BBVA Research), which helps determine the medium/long-term vision needed to manage this portfolio. The policies established to address the risks related to the developer and real-estate sector, aim to accomplish, among others, the following objectives: to avoid concentration in terms of customers, products and regions; to estimate the risk profile for the portfolio; and to anticipate possible worsening of the portfolio within a sector is highly cyclical.
In the analysis of new transactions, the assessment of the commercial operation in terms of the economic and financial viability of the project has been one of the constant. The monitoring of the work, sales prospects and the legal situation of the project are essential aspects for the admission and follow-up of new real estate transactions. With regard the participation of the Risk Acceptance teams, they have a direct link and participate in the committees of areas such as Valuation, Legal, BBVA Research and Recoveries. This guarantees coordination and exchange of information in all the processes. In this context, and within the current Real Estate cycle, the strategy with clients is subject to an Asset Allocation limit and to an action framework that allows defining a target portfolio, both in volume and in credit quality.
The base information for analyzing the real estate portfolios is updated monthly. There is a systematic monitoring of developments under close monitoring with the evolution of works and sales.
The internal Rules on Real Estate Financing, which establish recommendations for financing a new housing development business, are reviewed and updated annually. The recommendations represent guidelines about how to manage the credit admission activity of BBVA Group entities based on best practices of markets in which this activity is performed. It is expected that a high percentage of the current transactions will be in compliance with the latter.
Currently, there is no risk concentration in the developer and real estate sector, taking into account that its weight in total wholesale risks in Spain is approximately 10%, while compared with the total risks in the portfolio (wholesale and retail), the Real Estate risk assumed would be around 3%. For quantitative information about the risk related to the developer and Real-Estate sector in Spain see Appendix XI.
The structural risks are defined, in general terms, as the possibility of suffering losses in the banking book due to adverse movements in market risk factors. In the Group, the following types of structural risks are defined, according to their nature: interest rate risk, credit spread risk, exchange rate risk and equity risk. The scope of structural risks in the Group excludes market risks in the trading book that are clearly delimited and separated and are part of the Market Risks category.
82 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
The Assets and Liabilities Committee (ALCO) is the main responsible body for the management of structural risks regarding liquidity/ funding, interest rate, credit spread, currency, equity and solvency. Every month, with the participation of the CEO and representatives from the areas of Finance, Risks and Business Areas, this committee monitors the structural risks and is presented with proposals with regard to action plans related with its management for its approval. These management proposals are made by the Finance area with a forward-looking focus, maintaining the alignment with the risk appetite framework, trying to guarantee the recurrence of results and financial stability, as well as to preserve the solvency of the entity. All balance sheet management units have a local ALCO, which is permanently attended by members of the Corporate Center, and there is a corporate ALCO where management strategies are monitored and presented in the Group's subsidiaries. The GRM area acts as an independent unit, ensuring adequate separation between the management and risk control functions, and is responsible for ensuring that the structural risks in the Group are managed according to the strategy approved by the Board of Directors. Consequently, GRM deals with the identification, measurement, monitoring and control of those risks and their reporting to the corresponding corporate bodies. Through the GRMC, it performs the function of control and risk assessment and is responsible for developing the strategies, policies, procedures and infrastructure necessary to identify, evaluate, measure and manage the significant risks that the BBVA Group faces. To this end, GRM, through the corporate unit of Structural Risks, proposes a scheme of limits that defines the risk appetite set for each of the relevant structural risk types, both at Group level and by management units, which will be reviewed annually, reporting the situation periodically to the Group's corporate bodies as well as to the GRMC. Additionally, both the management system and the control and measurement system for structural risks are necessarily adjusted to the Group's internal control model, complying with the evaluation and certification processes that comprise it. In this sense, the tasks and controls necessary for its scope of action have been identified and documented, supporting a regulatory framework which includes specific processes and measures for structural risks, from a broad geographical perspective. Within the three lines of defense scheme in which BBVA's internal control model is based according to the most advanced standards in terms of internal control, the first line of defense is maintained by the Finance area, which is responsible for managing the structural risk. As a second line of defense, GRM is in charge of identifying risks, and establishing policies and control models, periodically evaluating their effectiveness. In the second line of defense, there are also the Internal Risk Control units, which independently review the Structural Risk control, and Internal Financial Control, which carries out a review of the design and effectiveness of the operational controls over structural risk management. The third line of defense is represented by the Internal Audit area, an independent unit within BBVA Group, which is responsible for reviewing specific controls and processes.
The structural interest-rate risk (hereinafter, "IRRBB") is related to the potential impact that variations in market interest rates may have on an entity's earnings, through the impact on net interest income and on the valuation of instruments accounted for at fair value, as well as on the equity.# In order to properly measure IRRBB, BBVA Group takes into account all the main sources of this risk: repricing risk, yield curve risk, option risk and basis risk. Furthermore, the credit spread risk in the banking book ("CSRBB") arises from the potential impact on the entity´s earnings and/or the value of equity of the banking book produced by a variation in the level of market credit spreads that are not explained by default or migration risk or by movements in market interest rates. IRRBB and CSRBB management is carried out from a double perspective, the economic value of equity and earnings, including the management of net interest income and the monitorization of banking book instruments accounted at fair value with an impact on the income statement and/or on equity. In addition, the banking book instruments recorded based on their market value (fair value) are subject to specific monitoring, due to their impact on risk and on capital, through other comprehensive income or the income statement. The exposure of a financial entity to adverse interest rates and credit spreads movements is a risk inherent to the development of the banking business, which is also, in turn, an opportunity to create economic value. Therefore, these risks must be effectively managed so that they are limited in accordance with the entity’s equity and in line with the expected economic result. In BBVA, the purpose of IRRBB risk management is to maintain the recurrent generation of earnings in the event of market interest rate fluctuations, through the contribution to the net interest income and the control of the potential impacts on the mark-to-market of the fair value accounted portfolios, as well as to limit the capital consumption due to structural interest rate risk. Likewise, the spread risk management in banking book portfolios is aimed at limiting the impact on equity derived from changes in the valuation of fixed income instruments, which are used for balance sheet liquidity and interest rate risk management purposes in order to increase diversification, and maintaining the spread risk at levels aligned with the total volume of the investment portfolio and the equity of the Group, as well as limiting the impact on earnings when market credit spreads change. 83 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails These functions fall to the Global ALM (Asset & Liability Management) unit, within the Finance area, who, through ALCO, aims to guarantee the recurrence of results and preserve the solvency of the entity, always adhering to the risk profile defined by the management bodies of the BBVA Group. IRRBB management is decentralized, and is carried out independently in each entity included in the structural balance sheet (banking book) of the BBVA Group, keeping the exposure to interest rates and credit spreads movements aligned with the strategy and the target risk profile of the Group, and in compliance with the regulatory requirements according to the EBA guidelines.
Repricing risk arises due to the difference between the repricing or maturity terms of the assets and liabilities, and represents the most frequent interest rate risk faced by financial entities. However, other sources of risk such as changes in the slope and shape of the yield curve, the reference to different indexes and the optionality risk embedded in certain banking transactions, are also taken into account by the risk control system. BBVA's IRRBB and CSRBB in the banking book management and control process includes a set of metrics and tools that enable the capture of additional sources to properly monitor the risk profile of the Group, backed-up by assumptions that aim to characterize the behavior of the balance sheet items with the maximum accuracy. The IRRBB and CSRBB measurement is carried out on a monthly basis, and includes probabilistic measures based on simulation methods of interest rate curves and credit spread shocks. The corporate methodology enables to capture additional sources of risk to the interest rate parallel shifts, such as the changes in slope shape and the basis of yield curves. Additionally, sensitivity analysis to multiple parallel shocks of different magnitude are also assessed on a regular basis. The process is run separately for each currency to which the Group is exposed, considering, at a later stage, the diversification effect among currencies and business units. The risk measurement model is complemented by the assessment of ad-hoc scenarios, stress tests and reverse stress. Stress tests incorporate extreme scenarios both in market interest rates and in behavioral assumptions, in addition to the assessment of market scenarios by BBVA Research and the set of prescriptive scenarios defined according to EBA guidelines. The internal measurement systems and models are subjected to a process of review and continuous improvement in order to keep them aligned with EBA guidelines.
In order to measure structural interest rate risk, the setting of assumptions on the evolution and behavior of certain balance sheet items is particularly relevant, especially those related to products without an explicit or contractual maturity which characteristics are not established in their contractual terms and must be therefore estimated. The assumptions that characterize these balance sheet items must be understandable for the areas and bodies involved in risk management and control and remain duly updated, justified and documented. The modeling of these assumptions must be conceptually reasonable and consistent with the evidence based on historical experience, reviewed at least once a year and, if any, the behavior of the customers induced by the business areas. These assumptions are regularly subject to a sensitivity analysis to assess and understand the impact of the modelling on the risk metrics. The approval and update of the IRRBB behavioral models is subject to the corporate governance under the scope of GRM analytics. Thus, all the models must be duly inventoried and catalogued and comply with the requirements for their development, updating and changes management set out in the internal procedures. They are also subject to the corresponding internal validations and follow-up requirements established based on their relevance, as well as to backtesting procedures against experience to ratify the validity of the assumptions applied. In view of the heterogeneity of the financial markets, customers and products in the multiple jurisdictions, each one of the entities of the Group is responsible for determining the behavior assumptions to be applied to the balance sheet items, always under the guidelines and the applicability of the corporate models existing in the Group. The balance sheet behavioral assumptions stand out those established for the treatment of items without contractual maturity, mainly for demand customer deposits, and those related to the expectations on the exercise of interest rate options, especially relating to loans and deposits subject to prepayment risk. For the modelling of demand deposits, a segmentation of the accounts in several categories is previously carried out depending on the characteristics of the customer (retail / wholesale) and the product (type of account / transactionality / remuneration), in order to outline the specific behavior of each segment. In order to establish the remuneration of each segment, the relationship between the evolution of market interest rates and the interest rates of managed accounts is analyzed, with the aim of determining the translation dynamic (percentages and lags) of interest rates variations to the remuneration of the accounts. In this regard, consideration is given to the potential limitations in the repricing of these accounts in scenarios of low or negative rates, with special attention to retail customers, through the establishment of floors in the remuneration. 84 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails The behavior assigned to each category of accounts is determined by an analysis of the historical evolution of the balances and the probability of cancellation of the accounts. For this, the volatile part of the balance assigned to a short-term maturity is isolated, thus avoiding fluctuations in the level of risk caused by specific variations in the balances and promoting stability in the management of the balance. Once the stable part is identified, a medium / long term maturity model is applied through a decay distribution based on the average term of the accounts and the conditional cancellation probabilities throughout the life of the product. In addition, the behavior modeling incorporates, where appropriate, the relationship between the evolution of the balance of deposits and the levels of market interest rates, especially in low rate environments. Consequently, the effect of rate variations on the stability of the deposits as well as the potential migration between the different types of products (on demand and time deposits) in each interest rate scenario are incorporated. Equally relevant is the treatment of early cancellation options embedded in credit loans, mortgage portfolios and customer deposits. The evolution of market interest rates may condition, along with other variables, the incentive that customers have to prepay loans or deposits, modifying the future behavior of the balance amounts with respect to the forecasted contractual maturity schedule.The detailed analysis of the historical information related to prepayment data, both partial and total prepayment, combined with other variables such as interest rates, allows estimating future amortizations and, where appropriate, their behavior linked to the evolution of such variables through the relationship between the incentive of the customer to prepay and the early cancellation speed. The table below shows the profile of average structural interest rate risk and credit spread risk of the fixed income portfolio in the banking book classified as Held to Collect & Sale (HtC&S) in terms of sensitivities of the main currencies for the BBVA Group in 2023:
| Interest rate risk | Credit spread | |
|---|---|---|
| Impact on net interest income (1) | Impact on economic value (2) | |
| 100 basis point increase | 100 basis point decrease | |
| 100 basis point increase | ||
| 100 basis point decrease | ||
| Impact on economic value (2) | 100 basis point increase | |
| Euro | [0.5% , 1.5%] | [-1.5% , -0.5%] |
| Mexican peso | [0.5% , 1.5%] | [-1.5% , -0.5%] |
| U.S. dollar | [0.5% , 1.5%] | [-1.5% , -0.5%] |
| Turkish lira | [-0.5% , 0.5%] | [-0.5% , 0.5%] |
| Other | [-0.5% , 0.5%] | [-0.5% , 0.5%] |
| BBVA Group | [1.5% , 3.5%] | [-3.5% , -1.5%] |
(1) Percentage of "12 months" net interest income for the BBVA Group.
(2) Percentage of CET1 (Fully Loaded) for BBVA Group.
| Interest rate risk | Credit spread | |
|---|---|---|
| Impact on net interest income (1) | Impact on economic value (2) | |
| 100 basis point increase | 100 basis point decrease (3) | |
| 100 basis point increase | ||
| 100 basis point decrease (3) | ||
| Impact on economic value (2) | 100 basis point increase | |
| Euro | [1.5% , 3.5%] | [-1.5% , -0.5%] |
| Mexican peso | [0.5% , 1.5%] | [-1.5% , -0.5%] |
| U.S. dollar | [0.5% , 1.5%] | [-1.5% , -0.5%] |
| Turkish lira | [-0.5% , 0.5%] | [-0.5% , 0.5%] |
| Other | [-0.5% , 0.5%] | [-0.5% , 0.5%] |
| BBVA Group | [3.5% , 5.5%] | [-5.5% , -3.5%] |
(1) Percentage of "12 months" net interest income for the BBVA Group.
(2) Percentage of CET1 (Fully Loaded) for BBVA Group
(3) In Euro and Pound sterling (included in "Other"), negative interest rates scenarios are allowed up to plausible levels.
At an aggregate level, BBVA continues to maintain a moderate risk profile, in accordance with the established objective, having positive sensitivity to interest rate hikes in the net interest income.
Regarding relevant events in the financial markets in 2023, the first quarters of the year were characterized by a persistent high level of inflation in most of the countries where the Group operates and strong growth indicators. As a result thereof, both the ECB and the Fed have consolidated their hawkish messages of high interest rates for a longer time. This positioning from the monetary authorities 85 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails contributed negatively to the sovereign curves to certain rises on the valuation of the Group's debt portfolios. However, in the last quarter of the year, decreasing inflation data and expectancies converging towards central bank objectives, together with the weakening of some macroeconomic indicators may mean that the rate hike cycle has come to an end in Europe and in the United States and to the market discounting rate drops by mid-2024. This has triggered a fall in sovereign bond profitability and it has caused a positive performance in most debt portfolios of the Group. Other peripheral rate curve spreads remain supported. In Mexico, the rate hike cycle is also considered to be over, while in most countries of South America, interest rate cuts have started taking place. For the contrary, the Central Bank of Turkey has continued the tightening of its monetary policy launched in June with significant rate hikes.
The most relevant aspects related to the main geographical areas are the following:
Structural exchange rate risk, is defined as the possibility of impacts on solvency, equity value and results driven by fluctuations in the exchange rates due to exposures in foreign currencies. Structural exchange rate risk is inherent to the business of international banking groups, such as BBVA, that develop their activities in different geographies and currencies. At a consolidated level, structural exchange-rate risk arises from the consolidation of holdings in subsidiaries with functional currencies other than the euro. Its management is centralized in order to optimize the joint management of permanent foreign currency exposures, taking diversification into account. The purpose of structural exchange rate risk management is protecting solvency by limiting volatility of the consolidated CET1 ratio and income to consolidate denominated in a currency other the euro in the Group, as well as to limit the capital requirements under exchange rate fluctuations to which the Group is exposed due to its international diversification. The ALM Global corporate unit, through the ALCO, is responsible for the management of this risk all through an active hedging policy, deliberately taken for each objective, and fully aligned with the management strategy. 86 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56).In the event of a discrepancy, the Spanish-language version prevails. At the corporate level, the risk monitoring metrics included in the limits framework are aligned with the Risk Appetite Framework, and are targeted to control the effects on the solvency through the economic capital metric and the fluctuations in the Common Equity Tier I fully loaded (CET1 fully loaded) consolidated ratio, as well as the maximum deviation in the Group's attributable profit. The probabilistic metrics make it possible to estimate the joint impact of exposure to different currencies taking into account the different variability in exchange rates and their correlations. These metrics are supplemented with additional assessment indicators. The suitability of these risk assessment metrics is reviewed on a regular basis through backtesting exercises. The final element of structural exchange-rate risk control is the stress and scenario analysis aimed to assess the vulnerabilities of foreign currency structural exposure not contemplated by the risk metrics and to serve as an additional tool when making management decisions. The scenarios are based both on historical situations simulated by the risk model and on the risk scenarios provided by BBVA Research. The purpose of the exchange rate risk management of BBVA's long term investments, which arises mainly from its foreign franchises, is to preserve the capital ratios of the Group and to maintain the stability of the profits. The year 2023 was characterized by the recovery of the euro against the dollar (+3.5%), after the losses accumulated during the previous year. Among the emerging currencies, the Mexican peso appreciated strongly (11.4% against the euro) for the second year in a row, helped by the country's increasingly solid fundamentals. The lira was again penalized in 2023 (-38.9%), reflecting the imbalances in the Turkish economy. However, this year, economic policy is experiencing a gradual correction of the current macroeconomic imbalances that could have an impact in the coming years. As for the performance of South American currencies, the Colombian peso appreciated strongly against the euro (21.5%), the Peruvian sol weakened slightly (1.1%), while the Chilean peso depreciated by 6.2%. Finally, the Argentine peso experienced the largest depreciation among the area's currencies (-78.9%), affected by the measures implemented by the country's new government. BBVA maintains management policies for the main investments in emerging countries in respect of, in average terms, between 40% and 50% of the aggregate attributable profit in non-euro currencies expected to be generated by the group in the next twelve months and around 70% of the aggregate excess capital in non-euro currencies. In relation to the CET1 capital ratio, the estimated impact at the end of 2023 of a 10% depreciation in the relevant currency was as follows: Mexican peso (-9 basis points); Turkish lira (-4 basis points) and U.S. dollar (+17 basis points). For the years 2023, 2022 and 2021, the estimated sensitivities (in absolute terms) of the result attributable to the parent company are shown below, taking into account the coverage, against depreciations and appreciations of 1% of the average rate in the main currencies. To the extent that hedging positions are periodically modulated, the sensitivity estimate attempts to reflect an average (or effective) sensitivity in the year:
| Sensitivity to 1% change (Millions of Euros) | |||
|---|---|---|---|
| Currency | 2023 | 2022 | 2021 |
| Mexican peso | 25.8 | 19.1 | 14.0 |
| Turkish lira | 4.4 | 3.5 | 4.7 |
| Peruvian sol | 0.9 | 0.7 | 0.3 |
| Chilean peso | 0.2 | 0.4 | 0.6 |
| Colombian peso | 1.0 | 0.9 | 1.1 |
| Argentine peso | 1.3 | 1.9 | 0.6 |
Equity risk in the banking book refers to the possibility of suffering losses in the value of positions in shares and other equity instruments held in the banking book with long or medium term investment horizons due to fluctuations in the value of equity indexes or shares. BBVA Group's exposure to structural equity risk arises largely from minority shareholdings held on industrial and financial companies, and in new business (innovation). This exposure is modulated in some portfolios with positions held on derivative instruments on the same underlying assets, in order to adjust the portfolio sensitivity to potential changes in equity prices. The structural equity risk management is aimed at increasing the income-generating capacity of those shares held by the Group, limiting the capital requirements for equity risk and narrowing the impact on the solvency level through a proactive management of the portfolio using hedges. The function of managing the main structural equity portfolios is a responsibility of the specialized units of the corporate areas of Global ALM, Strategy & M&A and Client Solutions (Banking for Growth Companies). Their activity is subject to the corporate structural equity risk management policy, complying with the defined management principles and Risk Appetite Framework. The structural equity risk metrics, designed by GRM according to the corporate model, contribute to the effective monitoring of the risk by estimating the sensitivity and the capital necessary to cover the possible unexpected losses due to changes in the value of the shareholdings in the Group's investment portfolio, with a level of confidence that corresponds to the objective rating of the entity, taking into account the liquidity of the positions and the statistical behavior of the assets to be considered.
87 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56).
In the event of a discrepancy, the Spanish-language version prevails.
In order to analyze the risk profile in depth, stress tests and scenario analysis of sensitivity to different simulated scenarios are carried out. They are based on both past crisis situations and forecasts made by BBVA Research. These analyses are carried out regularly to assess the vulnerabilities of structural equity exposure not contemplated by the risk metrics and to serve as an additional tool when making management decisions. Backtesting is carried out on a regular basis on the risk measurement model used. Equity markets in Europe and the United States posted significant gains in 2023 due to higher economic growth than expected at the beginning of the year and falling inflation, leading a process of gradual relaxation of monetary conditions approximately towards mid-2024. In Europe, the banking sector was one of the best performers, managing to surpass pre-pandemic levels. The Spanish stock market outperformed both European stock market indices and the local indices of the main European countries. Finally, Telefónica, where the Group maintains a stake as equity in the banking book, rose slightly less than the indices but significantly more than the European telecommunications sector. Structural equity risk, measured in terms of economic capital, has raised during the last year due to the higher exposure taken. The aggregate sensitivity of the BBVA Group’s consolidated equity to a 1% fall in the price of shares of the companies making up the equity portfolio amounted to €-24 million as of December 31, 2023, same as of December 31, 2022. This estimation takes into account the exposure in shares valued at market prices, or if not applicable, at fair value (excluding the positions in the Treasury Area portfolios) and the net delta-equivalent positions in derivatives on the same underlyings.
The transition from IBOR to Risk Free Rate (hereinafter "RFR") was considered a complex initiative, which affected the BBVA Group in different geographical areas and business lines, as well as a multitude of products, systems and processes. The main risks to which the Group was exposed due to the transition were: (1) risk of litigation related to the products and services offered by the Group; (2) legal risks derived from changes in the documentation required for existing operations; (3) financial and accounting risks, derived from market risk models and from the valuation, hedging, cancellation and recognition of financial instruments associated with reference indices; (4) price risk, derived from how changes in the indices could impact the price determination mechanisms of certain instruments; (5) operational risks, as the reform could require changes to the Group's IT systems, business reporting infrastructure, operational processes and controls, and (6) conduct risks arising from the potential impact of customer communications during the transition period, which could lead to customer complaints, regulatory sanctions or reputational impact. Thus, the Group established a transition project, provided with a robust governance structure, taking into account the different transition approaches and deadlines to the new RFR when evaluating the various risks associated with the transition, as well as defining the lines of action in order to mitigate them. BBVA actively collaborated in the IBOR transition, supporting and participating in the sectorial working groups, and amending the contracts with its counterparties. In this regard, BBVA carried out a process of communication and contact with its counterparties to modify contract terms using different mechanisms: through the inclusion of addenda to the contracts, the adherence to industry standard protocols, the transition of operations by clearing house, the cancellation of contracts and subscription of new ones, and the transition through other legislative mechanisms. This process has been managed through the monitoring mechanisms and indicators that have been developed by the working groups within the Group.# In relation to the indices affected by the reform, the transition of the EONIA indices and LIBOR GBP, CHF, JPY and EUR has already been completed satisfactorily in the BBVA Group. In the case of the EURIBOR, the European authorities have promoted modifications in its methodology so that it meets the requirements of the European Regulation of Reference Indices, for which reason the cessation of this rate is not foreseen at the moment. Regarding USD LIBOR, the only rate to which BBVA had exposure as of December 31, 2023, BBVA is actively working to modify all its contracts referenced to this rate to the corresponding RFR (SOFR, Secured Overnight Financing Rate). The Financial Conduct Authority (FCA) has announced its decision to publish USD LIBOR under a "synthetic" methodology not representative for the 1, 3 and 6 months tenors until September 30, 2024.The BBVA Group's exposure to financial assets and liabilities pending transition to the new RFR is no significant.
Market risk originates from the possibility of experiencing losses in the value of positions held as a result of movements in market variables that affect the valuation of financial assets and liabilities. Market risk in the Group's trading portfolios stems mainly from the portfolios originated by Global Markets valued at fair value and held for the purpose of trading and generating short-term results. Market risk in the field of banking book is clearly and distinctly addressed and can be broken down into structural risks relating to interest rate and credit spread, exchange rate and equity (see Note 7.3).
The main risks in the trading portfolios can be classified as follows:
– Interest-rate risk: This arises as a result of exposure to movements in the different interest-rate curves involved in trading. Although the typical products that generate sensitivity to the movements in interest rates are money-market products (deposits, interest-rate futures, call money swaps, etc.) and traditional interest-rate derivatives (swaps and interest-rate options such as caps, floors, swaptions, etc.), practically all the financial products are exposed to interest-rate movements due to the effect that such movements have on the valuation of the financial discount.
88 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
– Equity risk: This arises as a result of movements in share prices. This risk is generated in spot positions in shares or any derivative products whose underlying asset is a share or an equity index. Dividend risk is a sub-risk of equity risk, arising as an input for any equity option. Its variation may affect the valuation of positions and it is therefore a factor that generates risk on the books.
– Exchange-rate risk: This is caused by movements in the exchange rates of the different currencies in which a position is held. As in the case of equity risk, this risk is generated in spot currency positions, and in any derivative product whose underlying asset is an exchange rate. In addition, the quanto effect (operations where the underlying asset and the instrument itself are denominated in different currencies) means that in certain transactions in which the underlying asset is not a currency, an exchange-rate risk is generated that has to be measured and monitored.
– Credit-spread risk: Credit spread is an indicator of an issuer's credit quality. Spread risk occurs due to variations in the levels of spread of both corporate and government issues, and affects positions in bonds and credit derivatives.
– Volatility risk: This occurs as a result of changes in the levels of implied price volatility of the different market instruments on which derivatives are traded. This risk, unlike the others, is exclusively a component of trading in derivatives and is defined as a first-order convexity risk that is generated in all possible underlying assets in which there are products with options that require a volatility input for their valuation.
The metrics developed to control and monitor market risk in the BBVA Group are aligned with market practices and are implemented consistently across all the local market risk units. Measurement procedures are established in terms of the possible impact of negative market conditions on the trading portfolio of the Group's Global Markets units, both under ordinary circumstances and in situations of heightened risk factors.
The standard metric used to measure market risk is Value at Risk (hereinafter “VaR”), which indicates the maximum loss that may occur in the portfolios at a given confidence level (99%) and time horizon (one day). This statistic value is widely used in the market and has the advantage of summing up in a single metric the risks inherent to trading activity, taking into account how they are related and providing a prediction of the loss that the trading book could sustain as a result of fluctuations in equity prices, interest rates, foreign exchange rates and credit spreads. Additionally, for certain positions, other risks need to be considered, such as a credit spread, base, volatility or correlation risk.
With respect to the risk measurement models used by the BBVA Group, the Bank of Spain has authorized the use of the internal market risk model to determine bank capital requirements deriving from risk positions on the BBVA, S.A. and BBVA Mexico trading book, which jointly accounted for around 76%, 63% and 77% of the Group’s trading-book market risk as of December 31, 2023, 2022 and 2021. For the rest of the geographical areas where the Group operates (applicable mainly to the Group´s South America subsidiaries and Garanti BBVA), bank capital for the risk positions in the trading book is calculated using the Standardized Approach defined by the Basel Committee on Banking Supervision (which is referred to herein as the "standard model”).
The current management structure includes the monitoring of market-risk limits, consisting of a scheme of limits based on specific metrics according to market activities, (VaR (Value at Risk), economic capital, as well as stop-loss limits for each of the Group’s business units).
The model used estimates VaR in accordance with the historical simulation methodology, which involves estimating losses and gains that would have taken place in the current portfolio if the changes in market conditions that took place over a specific period of time in the past were repeated. Based on this information, it predicts the maximum expected loss of the current portfolio within a given confidence level. This model has the advantage of reflecting precisely the historical distribution of the market variables and not assuming any specific distribution of probability. The historical period used in this model is two years.
VaR figures are estimated with the following methodologies:
– VaR without smoothing, which awards equal weight to the daily information for the previous two years. This is currently the official methodology for measuring market risks for the purpose of monitoring compliance with risk limits.
– VaR with smoothing, which gives a greater weight to more recent market information. This metric supplements the previous one.
The use of VaR by historical simulation methodology as a risk metric has many advantages, but also certain limitations, among which it is worth highlighting:
– The estimate of the maximum daily loss of the Global Markets portfolio positions (with a confidence level of 99%) depends on the market movements of the last two years, not picking up the impact of large market events if they have not occurred within that historical window
– The use of the 99% confidence level does not consider potential losses that can occur beyond this level. To mitigate this limitation, different stress exercises are also performed, as described later.
89 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
At the same time, and following the guidelines established by the Spanish and European authorities, BBVA incorporates metrics in addition to VaR with the aim of meeting the Bank of Spain's regulatory requirements with respect to the calculation of bank capital for the trading book. Specifically, the measures incorporated in the Group since December 2011 (stipulated by Basel 2.5) are:
– VaR: In regulatory terms, the VaR charge incorporates the stressed VaR charge, and the sum of the two (VaR and stressed VaR) is calculated. This quantifies the losses associated with the movements of the risk factors inherent to market operations (including interest-rate risk, exchange-rate risk, equity risk and credit risk, among others). Both VaR and stressed VaR are rescaled by a regulatory multiplier (between three and four) and by the square root of ten to calculate the capital charge.
– Specific Risk - Incremental Risk Capital (“IRC”). Quantification of the risks of default and changes of the credit ratings of the bond and derivative positions and debt funds with daily look-through or significant benchmark (correlation > 90%) in the trading portfolio. The IRC charge is exclusively applied in entities in respect of which the internal market risk model is used (i.e. BBVA, S.A. and BBVA Mexico). The IRC charge is determined based on the associated losses (calculated at 99.9% confidence level over a one year horizon under the hypothesis of constant risk) due to a rating change and/or default of the issuer with respect to an asset. In addition, the price risk is included in sovereign positions for the specified items.# 7.4 Market Risk
The Group’s market risk related to its trading portfolio remained in 2023 at low levels compared to other risks managed by BBVA, particularly credit risk. This is due to the nature of the business. In 2023, the average VaR was €31 million, above the figure of 2022, with a maximum level in the year reached on September 14, 2023 of €42 million.
The evolution in the BBVA Group’s market risk during 2023, measured as VaR without smoothing (see Glossary) with a 99% confidence level and a 1-day horizon (shown in Millions of Euros) is as follows:
By type of market risk assumed by the Group's trading portfolio, the main risk factor for the Group continued to be that linked to interest rates, with a weight of 69% of the total at December 31, 2023 (this figure includes the spread risk). The relative weight of this risk has increased 24% compared with the close of 2022. Exchange-rate risk accounted for 10% of the total risk, reducing its weight -55% with respect to December 2022, while equity, volatility and correlation risk has increased, with a weight of 7% and 14% respectively, which implies a variation of -45% and 55% respectively with respect to 2022.
As of December 31, 2023, 2022 and 2021 the VaR was €36 million, €29 million and €31 million, respectively, with the following breakdown:
| VaR by Risk Factor (Millions of Euros) ⁽¹⁾ | 2023 | 2022 | 2021 |
|---|---|---|---|
| VaR average in the year | 31 | 27 | 29 |
| VaR max in the year | 42 | 36 | 36 |
| VaR min in the year | 19 | 19 | 22 |
| End of period VaR | 36 | 29 | 31 |
Breakdown by Risk Factor:
| Risk Factor | 2023 | 2022 | 2021 |
|---|---|---|---|
| Interest/Spread risk | 36 | 33 | 33 |
| Currency risk | 8 | 8 | 10 |
| Stock-market risk | 2 | 3 | 2 |
| Vega/Correlation risk | 7 | 7 | 11 |
| Diversification effect ⁽²⁾ | (22) | (23) | (28) |
| Total | 31 | 27 | 29 |
VaR by Risk Factor (Millions of Euros) ⁽¹⁾
| Risk Factor | 2023 (Avg) | 2023 (Max) | 2023 (Min) | 2023 (End of Period) | 2022 (Avg) | 2022 (Max) | 2022 (Min) | 2022 (End of Period) | 2021 (Avg) | 2021 (Max) | 2021 (Min) | 2021 (End of Period) |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Interest/Spread risk | 36 | 43 | 23 | 41 | 33 | 35 | 25 | 32 | 33 | 32 | 27 | 34 |
| Currency risk | 8 | 6 | 9 | 6 | 8 | 12 | 10 | 13 | 10 | 13 | 9 | 9 |
| Stock-market risk | 2 | 17 | — | 4 | 3 | 2 | 2 | 7 | 2 | 4 | 1 | 5 |
| Vega/Correlation risk | 7 | 8 | 9 | 8 | 7 | 11 | 11 | 5 | 11 | 1 | 10 | 11 |
| Diversification effect ⁽²⁾ | (22) | (33) | (23) | (23) | (23) | (24) | (28) | (28) | (28) | (14) | (25) | (29) |
| Total | 31 | 42 | 19 | 36 | 27 | 36 | 19 | 29 | 29 | 36 | 22 | 31 |
(1) The figures correspond to the maximum and minimum total VaR obtained in the year, as well as the VaR figures by risk factor for the day on which said maximums and minimums occurred.
(2) The diversification effect is the difference between the sum of the average individual risk factors and the total VaR figure that includes the implied correlation between all the variables and scenarios used in the measurement.
The internal market risk model is validated on a regular basis by backtesting in both, BBVA, S.A. and Global Markets Mexico (in BBVA Mexico). The aim of backtesting is to validate the quality and precision of the internal market risk model used by BBVA Group to estimate the maximum daily loss of a portfolio, at a 99% level of confidence and a 250-day time horizon, by comparing the results of those entities and the risk measurements generated by the internal market risk model. These tests showed that the internal market risk model of both, BBVA, S.A. and Global Markets Mexico is adequate and precise.
Two types of backtesting have been carried out in 2023, 2022 and 2021:
In addition, each of these two types of backtesting was carried out at a risk factor or business type level, thus making a deeper comparison of the results with respect to risk measurements.
For the period between the year ended December 31, 2022 and the year ended December 31, 2023, the backtesting of the internal VaR calculation model was carried out, comparing the daily results obtained to the risk level estimated by the internal VaR calculation model. In that period, there was no negative exception neither in BBVA, S.A nor in BBVA Mexico as an entity. At the end of the year the comparison showed the internal VaR calculation model was working correctly, within the "green" zone (0-4 exceptions), thus validating the internal VaR calculation model, as has been the case each year since the internal market risk model was approved for the Group.
A number of stress tests are carried out on the BBVA Group's trading portfolios. First, global and local historical scenarios are used that replicate the behavior of an extreme past event, such as for example the collapse of Lehman Brothers or the "Tequilazo" crisis. These stress tests are complemented with simulated scenarios, where the aim is to generate scenarios that have a significant impact on the different portfolios, but without being anchored to any specific historical scenario. Finally, for some portfolios or positions, fixed stress tests are also carried out that have a significant impact on the market variables affecting these positions.
The historical benchmark stress scenario for the BBVA Group is Lehman Brothers, whose sudden collapse in September 2008 led to a significant impact on the behavior of financial markets at a global level. The following are the most relevant effects of this historical scenario:
Unlike the historical scenarios, which are fixed and therefore not suited to the composition of the risk portfolio at all times, the scenario used for the exercises of economic stress is based on resampling methodology. This methodology is based on the use of dynamic scenarios that are recalculated periodically depending on the main risks affecting the trading portfolios. On a data window wide enough to collect different periods of stress (data are taken from January 1, 2008 until the date of the assessment), a simulation is performed by resampling of historic observations, generating a distribution of losses and gains that serve to analyze the most extreme of births in the selected historical window. The advantage of this methodology is that the period of stress is not predetermined, but depends on the portfolio maintained at each time, and making a large number of simulations (10,000 simulations) allows a greater richness of information for the analysis of expected shortfall than what is available in the scenarios included in the calculation of VaR.
The main features of this approach are: a) the generated simulations respect the correlation structure of the data, b) there is flexibility in the inclusion of new risk factors and c) it allows the introduction of a lot of variability in the simulations (desirable for considering extreme events).
The impact of the stress test under multivariable simulation of the risk factors of the portfolio based on the expected shortfall (expected shortfall calculated at a 97.5% confidence level, 20 days) as of December 31, 2023 is as follows:
| Impact of the stress test (Millions of Euros) | Europe | Mexico | Peru | Venezuela | Argentina | Colombia | Turkey |
|---|---|---|---|---|---|---|---|
| Expected shortfall | (74) | (73) | (29) | — | (10) | (4) | (13) |
Financial assets and liabilities may be netted in certain cases. In particular, they are presented for a net amount on the consolidated balance sheet only when the Group's entities satisfy the provisions of IAS 32, so they have both the legal right to net recognized amounts, and the intention of settling the net amount or of realizing the asset and simultaneously paying the liability. In addition, the Group has presented as gross amounts assets and liabilities on the consolidated balance sheet for which there are master netting arrangements in place, but for which there is no intention of settling the net amount.The most common types of events that trigger the netting of reciprocal obligations are bankruptcy of the entity, surpassing certain level of indebtedness threshold, failure to pay, restructuring and dissolution of the entity. In the current market context, derivatives are contracted under different framework contracts being the most widespread the ones developed by the International Swaps and Derivatives Association (“ISDA”) and, for the Spanish market, the Framework Agreement on Financial Transactions (“CMOF”). Almost all portfolio derivative transactions have been concluded under these framework contracts, including in them the netting clauses mentioned in the preceding paragraph as "Master Netting Agreement", greatly reducing the credit exposure on these instruments. Additionally, in contracts signed with counterparties, the collateral agreement annexes called Credit Support Annex (“CSA”) in ISDA and Appendix III in CMOF are included, thereby minimizing exposure to a potential default of the counterparty. Moreover, many of the transactions involving assets purchased or sold under a repurchase agreement are transacted through clearing houses that articulate mechanisms to reduce counterparty risk, as well as through the signing of various master agreements for bilateral transactions, the most widely used being the Global Master Repurchase Agreement (GMRA), published by the International Capital Market Association (“ICMA”), to which the clauses related to the collateral exchange are usually added within the text of the master agreement itself.
92 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
A summary of the effect of offsetting (via netting and collateral) for derivatives and securities operations is presented below as of December 31, 2023, 2022 and 2021:
(Millions of Euros)
| Gross amounts recognized (A) | Gross amounts offset in the consolidated balance sheets (B) | Net amount presented in the consolidated balance sheets (C=A-B) | Financial instruments | Cash collateral received/ pledged | Net amount (E=C-D) | |
|---|---|---|---|---|---|---|
| December 2023 | ||||||
| Trading and hedging derivatives | 44,641 | 8,866 | 35,775 | Notes 10 / 15 | 24,948 | 9,949 |
| Reverse repurchase, securities borrowing and similar agreements | 80,227 | — | 80,227 | 81,050 | 956 | |
| Total assets | 124,869 | 8,866 | 116,003 | 105,998 | 10,905 | |
| Trading and hedging derivatives | 44,536 | 8,866 | 35,670 | Notes 10 / 15 | 27,131 | 8,755 |
| Repurchase, securities lending and similar agreements | 104,920 | — | 104,920 | 106,344 | 2,002 | |
| Total liabilities | 149,456 | 8,866 | 140,590 | 133,475 | 10,757 | |
| December 2022 | ||||||
| Trading and hedging derivatives | 52,354 | 10,554 | 41,800 | Notes 10 / 15 | 29,251 | 11,461 |
| Reverse repurchase, securities borrowing and similar agreements | 47,111 | — | 47,111 | 47,217 | 970 | |
| Total assets | 99,465 | 10,554 | 88,911 | 76,468 | 12,431 | |
| Trading and hedging derivatives | 51,767 | 10,554 | 41,213 | Notes 10 / 15 | 31,063 | 9,498 |
| Repurchase, securities lending and similar agreements | 54,382 | — | 54,382 | 53,439 | 586 | |
| Total liabilities | 106,149 | 10,554 | 95,594 | 84,502 | 10,084 | |
| December 2021 | ||||||
| Trading and hedging derivatives | 36,349 | 3,611 | 32,737 | Notes 10 / 15 | 22,524 | 8,758 |
| Reverse repurchase, securities borrowing and similar agreements | 54,296 | — | 54,296 | 55,010 | 2,213 | |
| Total assets | 90,645 | 3,611 | 87,034 | 77,534 | 10,971 | |
| Trading and hedging derivatives | 37,916 | 3,584 | 34,331 | Notes 10 / 15 | 22,524 | 10,119 |
| Repurchase, securities lending and similar agreements | 54,159 | — | 54,159 | 58,174 | 679 | |
| Total liabilities | 92,074 | 3,584 | 88,490 | 80,698 | 10,798 |
The amount of recognized financial instruments within derivatives includes the effect in case of compensation with counterparties with which the Group holds netting agreements, while, for repos, it reflects the market value of the collateral associated with the transaction.
93 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
Liquidity and funding risk is defined as the incapacity of a bank in meeting its payment commitments due to lack of funds or that, to face those commitments, should have to make use of funding under burdensome terms.
The BBVA Group is a multinational financial institution whose business is focused mainly on retail and commercial banking activities. In addition to the retail business model, which forms its core business, the Group engages in corporate and investment banking, through the global CIB (Corporate & Investment Banking) division. Liquidity and Funding Risk Management aims to maintain a solid balance sheet structure which allows a sustainable business model. The Group’s liquidity and funding strategy is based on the following pillars:
Liquidity and Funding Risk Management aims, in the short term, to prevent an entity from having difficulties in meeting its payment commitments in due time and form or that, to meet them, it has to resort to obtaining funds in burdensome conditions that deteriorate the image or reputation of the entity. In the medium term, its objective is to ensure the suitability of the Group's financial structure and its evolution, within the framework of the economic situation, the markets and regulatory changes. This management of structural and liquidity funding is based on the principle of financial self-sufficiency of the entities that comprise it. This approach helps prevent and limit liquidity risk by reducing the Group’s vulnerability during periods of high risk. This decentralized management prevents possible contagion from a crisis affecting only one or a few Group entities, which must act independently to meet their liquidity requirements in the markets where they operate.
Within this strategy, the BBVA Group is organized into eight LMU composed of the parent company and the bank subsidiaries in each geographical area, plus the branches that depend on them. In addition, the policy for managing liquidity and funding risk is also based on the model’s robustness and on the planning and integration of risk management into the budgeting process of each LMU, according to the liquidity and funding risk appetite that it decides to assume in its business. Liquidity and funding planning is part of the strategic processes for the Group’s budgetary and business planning. This objective is to allow a recurrent growth of the banking business with suitable maturities and costs within the established risk tolerance levels by using a wide range of instruments which allow the diversification of the funding sources and the maintenance of a high volume of available liquid assets.
The responsibility for liquidity and funding management in the development of normal business activity lies with the Finance area as a first line of defense in managing the risks inherent to this activity, in accordance with the principles established by the EBA and in line with the most demanding standards, policies, procedures and controls in the framework established by the governing bodies. Finance, through the Balance-Sheet Management area, plans and executes the funding of the structural long-term gap of each LMU and proposes to the Assets and Liabilities Committee (ALCO) the actions to be taken on this matter, in accordance with the policies established by the Risk Committee in line with the metrics of the Risk Appetite Framework approved by the Board of Directors. Finance is also responsible for preparing the regulatory reporting of liquidity, coordinating with the responsible areas in each LGU the necessary processes to cover the requirements at corporate and regulatory level, ensuring the integrity of the information provided. GRM is responsible for ensuring that the liquidity and financing risk in the Group is managed in accordance with the framework established by governing bodies. It also deals with the identification, measurement, monitoring and control of such risks and their communication to the relevant corporate bodies. In order to carry out this task properly, the Risk function in the Group has been configured as a single, global function, independent of the management areas.
94 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56).In the event of a discrepancy, the Spanish-language version prevails. Additionally, the Group has, in its second line of defense, an Internal Risk Control unit, which performs an independent review of the control of Liquidity and Funding Risk, and a Financial Internal Control Unit that reviews the design and effectiveness of the controls operations on liquidity management and reporting. As the third line of defense of the Group's internal control model, Internal Audit is in charge of reviewing specific controls and processes in accordance with a work plan that is drawn up annually.
The Group’s fundamental objectives regarding the liquidity and funding risk are determined through the Liquidity Coverage Ratio (LCR) and through the Loan-to-Stable Customer Deposits (LtSCD) ratio.
The LCR ratio is a regulatory metric that aims to guarantee the resilience of entities in a scenario of liquidity tension within a time horizon of 30 days. Within its risk appetite framework and system of limits and alerts, BBVA has established a required LCR compliance level for the entire Group and for each individual LMU. The internal levels required are aimed at efficiently meeting the regulatory requirement, at a level above 100% as a mitigation measure.
The LtSCD ratio measures the relationship between net lending and stable customer funds. The aim is to preserve a stable funding structure in the medium term for each of the LMU which make up the BBVA Group, taking into account that maintaining an adequate volume of stable customer funds is key to achieving a sound liquidity profile. In geographical areas with dual-currency balances, the indicator is also controlled by currency to manage the mismatches that might occur.
Stable customer funds are considered to be the financing obtained and managed from the LMU among their target customers. Those funds are characterized by their low sensitivity to market changes and by their less volatile behavior at aggregated level per operation due to the loyalty of the customer to the entity. The stable resources are calculated by applying to each identified customer segment a haircut determined by the analysis of the stability if the balances by which different aspects are evaluated (concentration, stability, level of loyalty). The main source of stable resources arises from wholesale funding and retail customer funds.
In order to establish the target (maximum) levels of LtSCD in each LMU and provide an optimal funding structure reference in terms of risk appetite, the corporate Structural Risks unit of GRM identifies and assesses the economic and financial variables that condition the funding structures in the different geographical areas.
Additionally, liquidity and funding risk management aims to achieve a proper diversification of the funding structure, avoiding excessive dependence on short-term funding by establishing a maximum level for the short-term funds raised, including both wholesale financing and the least stable proportion of customer funds.
In relation to long-term financing, the maturity profile does not present significant concentrations, which makes it possible to adapt the schedule of the planned issuance plan to the best financial conditions in the markets. Lastly, concentration risk is monitored at LMU level, with the aim of ensuring a correct diversification of both the counterparty and type of instrument.
One of the fundamental metrics within the general management framework of the liquidity and funding risk is the maintenance of a liquidity buffer consisting of high quality assets free of charges which can be sold or offered as collateral to obtain funding, either under normal market conditions or in stress situations. The Finance area is responsible for the collateral management and determining the liquidity buffer within the BBVA Group.
According to the principle of auto-sufficiency of the Group's subsidiaries, each LMU is responsible for maintaining a buffer of liquid assets which complies with the regulatory requirements applicable under each jurisdiction. In addition, the liquidity buffer of each LMU must be aligned with the liquidity and funding risk tolerance as well as the management limits set and approved for each case. In this context, the short-term resistance of the liquidity risk profile is promoted, to ensure that each LMU has sufficient collateral to deal with the risk of the closing of wholesale markets.
Basic capacity is the internal metric for the management and control of short-term liquidity risk, which is defined as the relationship between the explicit assets available and the maturities of wholesale liabilities and volatile resources, at different time periods up to one year, with special relevance at 30 and 90 days, with the objective of preserving the survival period above 3 months with the available buffer, without considering the balance inflows.
As a fundamental element of the liquidity and financing risk monitoring scheme, stress tests are carried out. They enable to anticipate deviations from the liquidity targets and the limits set in the appetite, and to establish tolerance ranges in the different management areas. They also play a major role in the design of the Liquidity Contingency Plan and the definition of specific measures to be adopted to rectify the risk profile if necessary.
For each scenario, it is checked whether BBVA has a sufficient stock of liquid assets to guarantee its capacity to meet the liquidity commitments/outflows in the different periods analyzed. The analysis considers four scenarios: one central and three crisis-related (systemic crisis; unexpected internal crisis with a considerable rating downgrade and/or affecting the ability to issue in wholesale markets and the perception of business risk by the banking intermediaries and the entity’s clients; and a mixed scenario, as a combination of the two aforementioned scenarios). Each scenario considers the following factors: existing market liquidity, customer behavior and sources of funding, the impact of rating downgrades, market values of liquid assets and collateral, and the interaction between liquidity requirements and the development of BBVA's credit quality.
The stress tests conducted on a regular basis by GRM reveal that BBVA maintains a sufficient buffer of liquid assets to deal with the estimated liquidity outflows in a scenario resulting from the combination of a systemic crisis and an unexpected internal crisis, during a period of longer than 3 months in general for the different LMU (including Turkey closing the year above 6 months), including in the scenario of a significant downgrade of the Bank’s rating by up to three notches.
95 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Together with the results of the stress tests and the risk metrics, the early warning indicators play an important role within the corporate model and the Liquidity Contingency Plan. They are mainly indicators of the funding structure, in relation to asset encumbrance, counterparty concentration, flights of customer deposits, unexpected use of credit facilities, and of the market, which help anticipate possible risks and capture market expectations.
Finance is the area responsible for the elaboration, monitoring, execution and update of the liquidity and funding plan and of the market access strategy to guarantee and improve the stability and diversification of the wholesale funding sources.
In order to implement and establish management in an anticipated manner, limits are set on an annual basis for the main management metrics that form part of the budgeting process for the liquidity and funding plan. This framework of limits contributes to the planning of the joint future performance of:
As a result of these funding needs, the BBVA Group plans the target wholesale funding structure according to the tolerance set in each LMU target. Thus, once the structural gap has been identified and after resorting to wholesale markets, the amount and composition of wholesale structural funding is established in subsequent years, in order to maintain a diversified funding mix and guarantee that there is not a high reliance on short-term funding (short-term wholesale funding plus volatile customer funds).
In practice, the execution of the principles of planning and self-funding at the different LMU results in the Group’s main source of funding being customer deposits, which consist mainly of demand deposits, savings deposits and time deposits.# As sources of funding, customer deposits are complemented by access to the interbank market and the domestic and international capital markets in order to address additional liquidity requirements, implementing domestic and international programs for the issuance of commercial paper and medium and long-term debt. The process of analysis and assessment of the liquidity and funding situation and of the inherent risks is a process carried out on an ongoing basis in the BBVA Group, with the participation of all the Group areas involved in liquidity and funding risk management. This process is carried out at both local and corporate level. It is incorporated into the decision- making process for liquidity and funding management, with integration between the risk appetite strategy and establishment and the planning process, the funding plan and the limits scheme.
The BBVA Group maintains a dynamic funding structure with a predominantly retail nature, where customer resources represent the main source of funding. During 2023, in an environment of lower liquidity in the systems as a result of the actions of the central banks, particularly with the repayment of an important part of the TLTRO program in Europe, liquidity conditions have remained comfortable in all the countries where the BBVA Group operates. 96 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
The performance of the indicators show that the funding structure remained steady during 2023, 2022 and 2021, in the sense that all LMU held self-funding levels with stable customer resources above the requirements.
| LtSCD by LMU | 2023 | 2022 | 2021 |
|---|---|---|---|
| Group (average) | 99 % | 96 % | 95 % |
| BBVA, S.A. | 100 % | 98 % | 98 % |
| BBVA Mexico | 102 % | 98 % | 93 % |
| Garanti BBVA | 78 % | 83 % | 81 % |
| Other LMU | 104 % | 96 % | 93 % |
With respect to LCR, the Group has maintained a liquidity buffer at both a consolidated and individual level in 2023. As a result, the ratio has remained comfortably above 100%, with the consolidated ratio as of December 31, 2023 standing at 149%. Although this requirement is only established at a Group level, for banks in the Eurozone, the minimum level required is comfortably exceeded in all subsidiaries. It should be noted that the calculation of the Consolidated LCR does not allow the transfer of liquidity between subsidiaries, so no excess liquidity may be transferred from these entities for the purpose of calculating the consolidated ratio. If the impact of these highly liquid assets was considered, the LCR would be 193%, or 44 basis points above the required level.
| LCR main LMU | 2023 | 2022 | 2021 |
|---|---|---|---|
| Group | 149 % | 159 % | 165 % |
| BBVA, S.A. | 178 % | 186 % | 190 % |
| BBVA Mexico | 192 % | 199 % | 245 % |
| Garanti BBVA | 212 % | 185 % | 211 % |
One of the key elements in BBVA's Group liquidity and funding management is the targeted maintenance of large high quality liquidity buffers in all business areas where the group operates. Each entity maintains a liquidity buffer at the individual level for BBVA, S.A. and for each of its subsidiaries, such as BBVA Mexico, Garanti BBVA and the Latin American subsidiaries. In this respect, the Group has maintained for the last 12 months an average volume of high quality liquid assets (HQLA) amounting to €130,770 billion, among which, 97% correspond to maximum quality assets (LCR Level 1).
The table below shows the liquidity available by instrument as of December 31, 2023, 2022 and 2021 for the most significant entities based on prudential supervisor’s information (Commission Implementing Regulations (EU) 2021/451 of December 17, 2020):
| BBVA, S.A. | BBVA Mexico | Garanti BBVA | Other | |
|---|---|---|---|---|
| 2023 | 2022 | 2021 | 2023 | |
| Cash and withdrawable central bank reserves | 43,931 | 48,271 | 35,258 | 9,712 |
| Level 1 tradable assets | 31,606 | 33,081 | 37,272 | 20,345 |
| Level 2A tradable assets | 919 | 3,450 | 5,234 | 246 |
| Level 2B tradable assets | 2,916 | 3,471 | 9,492 | 132 |
| Other tradable assets | 44,324 | 22,708 | 27,870 | 469 |
| Non tradable assets eligible for central banks | — | — | — | — |
| Cumulated counterbalancing capacity | 123,696 | 110,981 | 115,127 | 30,903 |
The Net Stable Funding Ratio (NSFR), defined as the result between the amount of stable funding available and the amount of stable funding required, requiring banks to maintain a stable financing profile in relation to the composition of their assets and off-balance sheet activities. This ratio should be at least 100% at all times. The NSFR ratio of the BBVA Group, stood at 131% as of December 31, 2023.
The NSFR of BBVA Group and its main LMU at December 31, 2023, 2022 and 2021, was the following:
97 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
| NSFR main LMU | 2023 | 2022 | 2021 |
|---|---|---|---|
| Group | 131 % | 135 % | 135 % |
| BBVA, S.A. | 120 % | 125 % | 126 % |
| BBVA Mexico | 140 % | 143 % | 149 % |
| Garanti BBVA | 178 % | 166 % | 162 % |
Below is a matrix of residual maturities by contractual periods based on supervisory prudential reporting as of December 31, 2023, 2022 and 2021:
| Demand | Up to 1 month | 1 to 3 months | 3 to 6 months | 6 to 9 months | 9 to 12 months | 1 to 2 years | 2 to 3 years | 3 to 5 years | Over 5 years | Total | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| ASSETS | |||||||||||
| Cash, cash balances at central banks and other demand deposits | 10,353 | 61,678 | — | — | — | — | — | — | — | — | 72,031 |
| Deposits in credit entities | — | 4,676 | 393 | 543 | 594 | 602 | 602 | 136 | 24 | 102 | 7,672 |
| Deposits in other financial institutions | — | 1,288 | 1,261 | 1,049 | 385 | 649 | 2,019 | 965 | 974 | 1,291 | 9,882 |
| Reverse repo, securities borrowing and margin lending | — | 42,407 | 21,683 | 6,890 | 3,398 | 2,596 | 3,319 | 3,817 | 2,133 | 139 | 86,382 |
| Loans and advances | — | 28,644 | 30,850 | 28,239 | 16,434 | 19,029 | 41,267 | 32,769 | 45,116 | 104,086 | 346,433 |
| Securities' portfolio settlement | — | 2,167 | 6,011 | 2,633 | 2,578 | 11,950 | 15,266 | 14,016 | 29,245 | 34,558 | 118,424 |
| LIABILITIES | |||||||||||
| Wholesale funding | — | 1,187 | 3,889 | 8,518 | 4,935 | 4,225 | 10,296 | 7,990 | 11,175 | 22,424 | 74,639 |
| Deposits from financial institutions | 2,092 | 3,669 | 1,076 | 715 | 119 | 605 | 795 | 46 | 198 | 695 | 10,011 |
| Deposits from other financial institutions and international agencies | 8,507 | 5,526 | 2,806 | 1,036 | 834 | 841 | 1,033 | 618 | 695 | 638 | 22,535 |
| Customer deposits | 304,096 | 44,745 | 16,225 | 11,855 | 3,905 | 5,500 | 1,753 | 1,029 | 758 | 1,092 | 390,959 |
| Security pledge funding | — | 86,908 | 30,028 | 6,107 | 2,274 | 1,821 | 2,630 | 1,111 | 2,060 | 677 | 133,615 |
| Derivatives, net | — | (21) | (30) | 6 | (62) | (267) | 69 | 45 | (135) | (2,616) | (3,009) |
| Demand | Up to 1 month | 1 to 3 months | 3 to 6 months | 6 to 9 months | 9 to 12 months | 1 to 2 years | 2 to 3 years | 3 to 5 years | Over 5 years | Total | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| ASSETS | |||||||||||
| Cash, cash balances at central banks and other demand deposits | 9,227 | 66,497 | — | — | — | — | — | — | — | — | 75,724 |
| Deposits in credit entities | — | 3,870 | 319 | 433 | 434 | 468 | 242 | 183 | 6 | 83 | 6,040 |
| Deposits in other financial institutions | 3 | 2,199 | 1,012 | 746 | 516 | 344 | 971 | 816 | 551 | 830 | 7,988 |
| Reverse repo, securities borrowing and margin lending | — | 31,049 | 5,743 | 3,368 | 1,432 | 1,127 | 4,582 | 1,354 | 2,400 | 289 | 51,343 |
| Loans and advances | 99 | 24,622 | 32,009 | 25,622 | 14,827 | 16,766 | 41,049 | 32,510 | 43,828 | 96,201 | 327,534 |
| Securities' portfolio settlement | 1 | 4,031 | 4,107 | 8,200 | 4,305 | 4,746 | 18,417 | 8,744 | 23,307 | 31,480 | 107,338 |
| LIABILITIES | |||||||||||
| Wholesale funding | — | 1,841 | 4,434 | 1,050 | 3,148 | 2,017 | 6,318 | 9,423 | 13,282 | 18,145 | 59,658 |
| Deposits from financial institutions | 2,176 | 7,885 | 628 | 806 | 56 | 694 | 648 | 211 | 396 | 399 | 13,899 |
| Deposits from other financial institutions and international agencies | 7,392 | 5,760 | 1,465 | 464 | 379 | 758 | 700 | 293 | 594 | 727 | 18,532 |
| Customer deposits | 302,667 | 38,951 | 18,542 | 6,776 | 2,575 | 2,870 | 1,476 | 1,276 | 798 | 273 | 376,203 |
| Security pledge funding | — | 51,638 | 14,543 | 17,736 | 866 | 1,503 | 8,136 | 1,524 | 3,493 | 575 | 100,013 |
| Derivatives, net | — | (253) | 24 | (1,010) | (23) | 175 | 40 | (153) | (466) | (3,717) | (5,383) |
| Demand | Up to 1 month | 1 to 3 months | 3 to 6 months | 6 to 9 months | 9 to 12 months | 1 to 2 years | 2 to 3 years | 3 to 5 years | Over 5 years | Total | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| ASSETS | |||||||||||
| Cash, cash balances at central banks and other demand deposits | 39,761 | 24,598 | — | — | — | — | — | — | — | — | 64,359 |
| Deposits in credit entities | — | 3,781 | 400 | 790 | 373 | 299 | 211 | 166 | 8 | 26 | 6,056 |
| Deposits in other financial institutions | 2 | 901 | 801 | 584 | 727 | 432 | 694 | 470 | 261 | 469 | 5,343 |
| Reverse repo, securities borrowing and margin lending | — | 33,856 | 11,611 | 2,945 | 1,063 | 1,692 | 2,188 | 2,239 | 1,118 | 739 | 57,451 |
| Loans and advances | 174 | 18,531 | 23,185 | 22,141 | 11,769 | 13,782 | 39,656 | 30,049 | 44,508 | 94,780 | 298,574 |
| Securities' portfolio settlement | 10 | 1,779 | 3,606 | 3,395 | 2,333 | 3,958 | 18,854 | 13,135 | 17,214 | 47,331 | 111,614 |
| LIABILITIES | |||||||||||
| Wholesale funding | — | 1,841 | 4,434 | 1,050 | 3,148 | 2,017 | 6,318 | 9,423 | 13,282 | 18,145 | 59,658 |
| Deposits from financial institutions | 2,176 | 7,885 | 628 | 806 | 56 | 694 | 648 | 211 | 396 | 399 | 13,899 |
| Deposits from other financial institutions and international agencies | 7,392 | 5,760 | 1,465 | 464 | 379 | 758 | 700 | 293 | 594 | 727 | 18,532 |
| Customer deposits | 302,667 | 38,951 | 18,542 | 6,776 | 2,575 | 2,870 | 1,476 | 1,276 | 798 | 273 | 376,203 |
| Security pledge funding | — | 51,638 | 14,543 | 17,736 | 866 | 1,503 | 8,136 | 1,524 | 3,493 | 575 | 100,013 |
| Derivatives, net | — | (253) | 24 | (1,010) | (23) | 175 | 40 | (153) | (466) | (3,717) | (5,383) |
| Demand | Up to 1 month | 1 to 3 months | 3 to 6 months | 6 to 9 months | 9 to 12 months | 1 to 2 years | 2 to 3 years | 3 to 5 years | Over 5 years | Total |
|---|---|---|---|---|---|---|---|---|---|---|
| LIABILITIES | ||||||||||
| Wholesale funding | — | 3,065 | 1,077 | 3,498 | 2,914 | 1,885 | 9,477 | 4,931 | 12,332 | 19,991 |
| Deposits from financial institutions | 1,936 | 4,257 | 415 | 825 | 183 | 924 | 496 | 146 | 146 | 579 |
| Deposits from other financial institutions and international agencies | 8,894 | 2,728 | 1,700 | 382 | 289 | 227 | 578 | 231 | 337 | 722 |
| Customer deposits | 281,812 | 28,806 | 11,814 | 4,867 | 1,717 | 1,520 | 1,740 | 578 | 863 | 416 |
| Security pledge funding | — | 52,437 | 6,858 | 2,485 | 1,513 | 8,252 | 29,954 | 5,527 | 4,755 | 1,490 |
| Derivatives, net | (33) | (395) | (176) | (326) | (66) | (641) | 100 | (122) | (155) | (66) |
With regard to the financing structure, the loan portfolio is mostly financed by retail deposits. The “demand” maturity bucket mainly contains the retail customer sight accounts whose behavior historically showed a high level of stability and little concentration. According to a behavior analysis which is done every year in every entity, this type of account is considered to be stable and for liquidity risk purposes receive a better treatment.
The most relevant aspects related to the main geographical areas are the following:
– BBVA, S.A. has repaid almost the entire TLTRO III program. During 2023, commercial activity has provided liquidity to the balance sheet mainly due to the good evolution of customer deposits in the last quarter of the year, with growth greater than that of lending activity. This performance is partially explained by the end of year seasonal component. On the other hand, in December 2022 the Bank started the repayment of the TLTRO III program (see Note 22.1), maintaining at all times the regulatory liquidity metrics well above the established minimums.
– BBVA Mexico continues to present an efficient management of the cost of funds in an environment of rising interest rates. During the year, however, commercial activity has drained liquidity due to a sustained loan growth that has been bigger than the fund growth. However, the change in the evolution of deposits, which had kept a negative performance during the year due to transfers to off-balance funds and which in the last quarter of the year show a significant increase mainly thanks to the seasonal inflows at the end of the year, 99 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
– In Turkey, during 2023, the lending gap in local currency has been reduced, due to a greater growth in deposits than in loans. The lending gap in foreign currency has increased due to higher reductions in deposits. Garanti BBVA continues to maintain a stable liquidity position. On the other hand, the Central Bank of Turkey has promoted a gradual change of the FX protected scheme to standard deposits in Turkish lira, especially in the second half of the year, as an additional step on the economy dedollarization process.
– In South America, the liquidity situation remains adequate throughout the region. In Argentina, liquidity in the system continues to increase, as well as in BBVA due to a higher growth in deposits than in loans in local currency, without significant variations in foreign currency. In BBVA Colombia, the credit gap declined due to a higher volume of deposits together with a slowdown in lending growth. BBVA Peru maintains its liquidity levels showing a reduction in the credit gap throughout the year.
The main wholesale financing transactions carried out by the BBVA Group during 2023 are listed below:
| Issuer | Type of issue | Date of issue | Nominal (millions) | Currency | Coupon | Early redemption | Maturity date |
|---|---|---|---|---|---|---|---|
| BBVA, S.A. | Senior non-preferred | Jan-23 | 1,000 | EUR | 4.625 % | — | Jan-30 |
| Covered bonds | Jan-23 | 1,500 | EUR | 3.125 % | — | Jul-27 | |
| Senior preferred | May-23 | 1,000 | EUR | 4.125 % | May-25 | May-26 | |
| Tier 2 | Jun-23 | 750 | EUR | 5.570% | Jun-Sep 28 | Sep-33 | |
| AT1 | Jun-23 | 1,000 | EUR | 8.375% | Dec-28 | Perpetual | |
| Tier 2 | Aug-23 | 300 | GBP | 8.250% | Aug-Nov 28 | Nov-33 | |
| AT1 | Sep-23 | 1,000 | USD | 9.375% | Sep-29 | Perpetual | |
| Tier 2 | Nov-23 | 750 | USD | 7.883% | Nov-33 | Nov-34 | |
| BBVA Mexico | Senior (Tranche 1) - Green bond | Feb-23 | 8,689 | MXN | TIIE day 1 + 32 basis points | — | Feb-27 |
| Senior (Tranche 2) | Feb-23 | 6,131 | MXN | 9.540% | — | Feb-30 | |
| Tier 2 | Jun-23 | 1,000 | USD | 8.450% | Jun-33 | Jun-38 | |
| Senior (Tranche 1) | Nov-23 | 9,900 | MXN | TIIE day 1 + 32 basis points | — | Apr-27 | |
| Senior (Tranche 2) | Nov-23 | 3,600 | MXN | 10.240% | — | Nov-30 |
Additionally, in June 2023, BBVA, S.A. completed a securitization of a portfolio of car loans for an amount of €804 million.
In Turkey, Garanti BBVA renewed in June a syndicated loan associated to environmental, social and corporate governance (ESG) criteria, consisting of two separate tranches of USD 199 million and €218.5 million, both maturing in one year. In December, Garanti BBVA announced the renovation of the 100% of the maturity of a syndicated loan of USD 259.5 million and €142.5 million with a maturity of 367 days, also linked to ESG criteria. The total loan cost was SOFR + 3.50% for the tranche in USD and Euribor + 3.25% for the tranche in euros.
As of December 31, 2023, 2022 and 2021, the encumbered (those provided as collateral for certain liabilities) and unencumbered assets are broken down as follows:
| Encumbered assets | Unencumbered assets | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Book value | Fair value | Book value | Fair value | |||||||
| 2023 | 2022 | 2021 | 2023 | 2022 | 2021 | 2023 | 2022 | 2021 | 2023 | |
| Assets | 78,586 | 92,916 | 114,336 | 696,972 | 619,177 | 548,548 | ||||
| Equity instruments | 592 | 819 | 307 | 592 | 819 | 307 | 13,176 | 11,293 | 22,280 | 13,176 |
| Debt securities | 51,458 | 33,533 | 31,557 | 50,818 | 32,291 | 29,527 | 88,976 | 92,665 | 89,307 | 88,976 |
| Loans and advances and other assets | 26,535 | 58,563 | 82,472 | 594,821 | 515,218 | 436,962 |
The committed value of "Loans and Advances and other assets" corresponds mainly to loans linked to the issue of covered bonds, territorial bonds or long-term securitized bonds (see Note 22.4) as well as, to a lesser extent, those used as a guarantee to access 100 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails certain funding transactions with central banks. Debt securities and equity instruments correspond to underlying that are delivered in repos with different types of counterparties, mainly clearing houses or credit institutions, and to a lesser extent central banks. Collateral provided to guarantee derivative transactions is also included as committed assets.
As of December 31, 2023, 2022 and 2021, collateral pledges received mainly due to repurchase agreements and securities lending, and those which could be committed in order to obtain funding are provided below:
| Fair value of encumbered collateral received or own debt securities issued | Fair value of collateral received or own debt securities issued available for encumbrance | Fair value of collateral received or own debt securities issued not available for encumbrance | |||||||
|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | 2021 | 2023 | 2022 | 2021 | 2023 | 2022 | 2021 | |
| Collateral received | 73,836 | 40,701 | 40,905 | 14,825 | 9,415 | 17,029 | 996 | 1,279 | 1,719 |
| Equity instruments | 1,019 | 323 | 289 | 51 | 759 | 265 | — | — | — |
| Debt securities | 72,817 | 40,378 | 40,616 | 14,774 | 8,656 | 16,764 | 996 | 1,279 | 1,719 |
| Loans and advances and other assets | — | — | — | — | — | — | — | — | — |
| Own debt securities issued other than own covered bonds or ABSs | — | — | — | 74 | 92 | 50 | — | — | — |
The guarantees received in the form of reverse repurchase agreements or security lending transactions are committed by their use in repurchase agreements, as is the case with debt securities.
As of December 31, 2023, 2022 and 2021, financial liabilities issued related to encumbered assets in financial transactions as well as their book value were as follows:
| Matching liabilities, contingent liabilities or securities lent | Assets, collateral received and own debt securities issued other than covered bonds and ABSs encumbered | |||||
|---|---|---|---|---|---|---|
| 2023 | 2022 | 2021 | 2023 | 2022 | 2021 | |
| Book value of financial liabilities | 151,766 | 122,400 | 137,242 | 149,853 | 128,628 | 151,275 |
| Derivatives | 15,895 | 15,950 | 15,368 | 13,756 | 16,699 | 15,191 |
| Deposits | 126,777 | 95,728 | 109,311 | 126,543 | 99,077 | 120,957 |
| Outstanding subordinated debt | 9,094 | 10,722 | 12,563 | 9,554 | 12,852 | 15,127 |
| Other sources | 1,066 | 731 | 620 | 2,568 | 4,989 | 3,966 |
The process for determining the fair value established in the Group seeks to ensure that financial assets and liabilities are properly recorded following the IFRS 13 principles, which defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal market or most advantageous market, at the measurement date. BBVA has established, at a geographic level, a structure of Risk Operational Admission and Product Governance Committees responsible for validating and approving new products or types of financial assets and liabilities before being contracted. Local management responsible for valuation, which are independent from the business (see Management Report - Risk) are members of these committees. These areas are required to ensure, prior to the approval stage , the existence of not only technical and human resources, but also adequate informational sources to measure the fair value of these financial assets and liabilities, in accordance with the rules established by the valuation global area and using models that have been validated and approved by the responsible areas complying with the governance of BBVA Group's official models.# Fair value hierarchy
All financial instruments, both assets and liabilities, are initially recognized at fair value, which at that point is equivalent to the transaction price, unless there is evidence to the contrary in the market. Subsequently, depending on the type of financial instrument, it may continue to be recognized at amortized cost or fair value through adjustments in the consolidated income statement or equity.
101 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
When possible, the fair value is determined as the market price of a financial instrument. However, for many of the financial assets and liabilities of the Group, especially in the case of derivatives, there is no market price available, so its fair value is estimated on the basis of the price established in recent transactions involving similar instruments or, in the absence thereof, by using mathematical measurement models that are sufficiently tried and trusted by the international financial community. The estimates of the fair value derived from the use of such models take into consideration the specific features of the asset or liability to be measured and, in particular, the various types of risk associated with such asset or liability. However, the limitations inherent in the measurement models and possible inaccuracies in the assumptions and parameters required by these models may mean that the estimated fair value of an asset or liability does not exactly match the price for which the asset or liability could be exchanged or settled on the date of its measurement. Additionally, for financial assets and liabilities that show significant uncertainty in inputs or model parameters used for valuation, criteria is established to measure said uncertainty and activity limits are set based on these. Finally, these measurements are compared, as much as possible, against other sources such as the measurements obtained by the business teams and/or those obtained by other market participants.
The process for determining the fair value requires the classification of the financial assets and liabilities according to the measurement processes used as set forth below:
As of December 31, 2023, the affected instruments at fair value accounted for approximately 0.57% of financial assets and 0.50% of the Group’s financial liabilities. Model selection and validation is undertaken by control areas outside the business areas.
102 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Below are the different elements used in the valuation technique of financial instruments.
BBVA considers an active market as a market that allows the observation of bid and offer prices representative of the levels to which the market participants are willing to negotiate an asset, with sufficient frequency and volume. Furthermore, BBVA considers as traded in an “Organized Market” quotations for assets or liabilities from Over The Counter (OTC) markets when they are obtained from independent sources, observable on a daily basis and fulfil certain conditions.
The fair value of the Group's financial instruments recognized at fair value in the consolidated balance sheets is presented below, broken down according to the valuation method used to determine their fair value, and their respective book value as of December 31, 2023, 2022 and 2021:
| Notes | Fair value | Book value | Level 1 | Level 2 | Level 3 |
|---|---|---|---|---|---|
| ASSETS | |||||
| Financial assets held for trading | 10 | 141,042 | 21,972 | 116,905 | 2,165 |
| Derivatives | 34,293 | 144 | 33,880 | 269 | |
| Equity instruments | 4,589 | 4,494 | 24 | 71 | |
| Debt securities | 28,569 | 17,333 | 11,081 | 155 | |
| Loans and advances | 73,590 | — | 71,921 | 1,669 | |
| Non-trading financial assets mandatorily at fair value through profit or loss | 11 | 8,737 | 7,028 | 493 | 1,216 |
| Equity instruments | 7,963 | 6,742 | 72 | 1,148 | |
| Debt securities | 484 | 286 | 132 | 66 | |
| Loans and advances to customers | 290 | — | 288 | 2 | |
| Financial assets designated at fair value through profit or loss | 12 | 955 | 908 | 47 | — |
| Debt securities | 955 | 908 | 47 | — | |
| Financial assets at fair value through other comprehensive income | 13 | 62,205 | 52,987 | 8,335 | 883 |
| Equity instruments | 1,217 | 1,026 | 52 | 139 | |
| Debt securities | 60,963 | 51,961 | 8,258 | 745 | |
| Loans and advances to credit institutions | 26 | — | 26 | — | |
| Derivatives – Hedge accounting | 15 | 1,482 | — | 1,482 | — |
| LIABILITIES | |||||
| Financial liabilities held for trading | 10 | 121,715 | 14,133 | 106,382 | 1,201 |
| Trading derivatives | 33,045 | 191 | 32,111 | 743 | |
| Short positions | 15,735 | 13,942 | 1,750 | 44 | |
| Deposits | 72,935 | — | 72,520 | 415 | |
| Financial liabilities designated at fair value through profit or loss | 12 | 13,299 | — | 11,073 | 2,227 |
| Deposits from credit institutions | — | — | — | — | |
| Customer deposits | 717 | — | 717 | — | |
| Debt certificates issued | 3,977 | — | 1,751 | 2,227 | |
| Other financial liabilities | 8,605 | — | 8,605 | — | |
| Derivatives – Hedge accounting | 15 | 2,625 | — | 2,586 | 39 |
103 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
| Notes | Fair value | Book value | Level 1 | Level 2 | Level 3 |
|---|---|---|---|---|---|
| ASSETS | |||||
| Financial assets held for trading | 10 | 110,671 | 22,710 | 85,636 | 2,325 |
| Derivatives | 39,908 | 795 | 38,140 | 974 | |
| Equity instruments | 4,404 | 4,369 | — | 34 | |
| Debt securities | 24,367 | 16,284 | 7,934 | 148 | |
| Loans and advances | 41,993 | 1,262 | 39,562 | 1,169 | |
| Non-trading financial assets mandatorily at fair value through profit or loss | 11 | 6,888 | 5,720 | 151 | 1,017 |
| Equity instruments | 6,511 | 5,457 | 40 | 1,014 | |
| Debt securities | 129 | 19 | 111 | — | |
| Loans and advances to customers | 247 | 245 | — | 3 | |
| Financial assets designated at fair value through profit or loss | 12 | 913 | 913 | — | — |
| Debt securities | 913 | 913 | — | — | |
| Financial assets at fair value through other comprehensive income | 13 | 65,374 | 53,248 | 11,537 | 589 |
| Equity instruments | 1,198 | 1,040 | 58 | 100 | |
| Debt securities | 64,150 | 52,182 | 11,479 | 489 | |
| Loans and advances to credit institutions | 26 | 26 | — | — | |
| Derivatives – Hedge accounting | 15 | 1,891 | 4 | 1,887 | — |
| LIABILITIES | |||||
| Financial liabilities held for trading | 10 | 95,611 | 20,611 | 73,871 | 1,129 |
| Trading derivatives | 37,909 | 746 | 36,161 | 1,002 | |
| Short positions | 13,487 | 13,354 | 133 | — | |
| Deposits | 44,215 | 6,511 | 37,577 | 127 | |
| Financial liabilities designated at fair value through profit or loss | 12 | 10,580 | — | 8,990 | 1,590 |
| Deposits from credit institutions | — | — | — | — | |
| Customer deposits | 700 | — | 700 | — | |
| Debt certificates issued | 3,288 | — | 1,698 | 1,590 | |
| Other financial liabilities | 6,592 | — | 6,592 | — | |
| Derivatives – Hedge accounting | 15 | 3,303 | 100 | 3,179 | 25 |
⁽¹⁾ Balances corresponding to 2022 have been restated according to IFRS 17 (see Notes 1.3 and 2.3).
104 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
| Notes | Fair value | Book value | Level 1 | Level 2 | Level 3 |
|---|---|---|---|---|---|
| ASSETS | |||||
| Financial assets held for trading | 10 | 123,493 | 32,371 | 87,736 | 3,386 |
| Derivatives | 30,933 | 3,954 | 26,732 | 247 | |
| Equity instruments | 15,963 | 15,925 | — | 37 | |
| Debt securities | 25,790 | 11,877 | 13,725 | 189 | |
| Loans and advances | 50,807 | 615 | 47,279 | 2,913 | |
| Non-trading financial assets mandatorily at fair value through profit or loss | 11 | 6,086 | 4,378 | 522 | 1,186 |
| Equity instruments | 5,303 | 4,158 | 394 | 751 | |
| Debt securities | 128 | — | 128 | — | |
| Loans and advances to customers | 655 | 220 | — | 435 | |
| Financial assets designated at fair value through profit or loss | 12 | 1,092 | 916 | 176 | — |
| Debt securities | 1,092 | 916 | 176 | — | |
| Financial assets at fair value through other comprehensive income | 13 | 60,421 | 52,157 | 7,545 | 719 |
| Equity instruments | 1,320 | 1,178 | 36 | 106 | |
| Debt securities | 59,074 | 50,952 | 7,509 | 613 | |
| Loans and advances to credit institutions | 27 | 27 | — | — | |
| Derivatives – Hedge accounting | 15 | 1,805 | 63 | 1,733 | 9 |
| LIABILITIES | |||||
| Financial liabilities held for trading | 10 | 91,135 | 26,215 | 64,305 | 615 |
| Trading derivatives | 31,705 | 4,755 | 26,560 | 389 | |
| Short positions | 15,135 | 15,124 | 11 | — | |
| Deposits | 44,294 | 6,335 | 37,733 | 226 | |
| Financial liabilities designated at fair value through profit or loss | 12 | 9,683 | 1 | 8,243 | 1,439 |
| Deposits from credit institutions | — | — | — | — | |
| Customer deposits | 809 | — | 809 | — | |
| Debt certificates issued | 3,396 | 1 | 1,956 | 1,439 | |
| Other financial liabilities | 5,479 | — | 5,479 | — | |
| Derivatives – Hedge accounting | 15 | 2,626 | 53 | 2,573 | — |
The following table sets forth the main valuation techniques, hypothesis and inputs used in the estimation of fair value of the financial instruments recorded at fair value classified under Levels 2 and 3, based on the type of financial asset and liability and the corresponding balances as of December 31, 2023, 2022 and 2021.
105 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56).# Fair Value of Financial Instruments by Levels
(Millions of Euros)
| Valuation techniques in Levels 2 and 3 | Observable inputs in Levels 2 and 3 | Unobservable inputs in Levels 2 and 3 |
|---|---|---|
| Financial assets held for trading | ||
| Equity instruments | Comparable pricing (Observable price in a similar market) Net asset value - Brokers quotes - Market operations - NAVs published - NAV provided by the administrator of the fund |
|
| Debt securities | Present-value method (Discounted future cash flows) Observed prices in non-active markets |
- Issuer´s credit risk - Current market interest rates - Non active markets prices - Prepayment rates - Issuer´s credit risk - Recovery rates |
| Loans and advances | Present-value method (Discounted future cash flows) | - Issuer´s credit risk - Current market interest rates - Funding interest rates observed in the market or in consensus services - Exchange rates - Prepayment rates - Issuer´s credit risk - Recovery rates - Funding interest rates not observed in the market or in consensus services |
| Derivatives | ||
| Interest rate | Interest rate products (Interest rate Swaps, Call money Swaps and FRA): Discounted cash flows Caps/Floors: Black 76 and SABR Bond options: Black 76 Swaptions: Black, SABR and LGM Other Interest rate Options: Black, SABR and Libor Market Model Constant Maturity Swaps: SABR |
- Exchange rates - Market quoted future prices - Market interest rates - Underlying assets prices: shares, funds, commodities - Market observable volatilities - Issuer credit spread levels - Quoted dividends - Market listed correlations - Beta - Implicit correlations between tenors - interest rates volatility |
| Equity | Future and Equity Forward: Discounted future cash flows Equity Options: Local Volatility, Momentum adjustment and Heston |
- Volatility of volatility - Implicit assets correlations - Long term implicit correlations - Implicit dividends and long term repos |
| Foreign exchange and gold | Future and Equity Forward: Discounted future cash flows Foreign exchange Options: Local volatility, momentum adjustment |
- Volatility of volatility - Implicit assets correlations - Long term implicit correlations |
| Credit | Credit Derivatives: Default model and Gaussian copula | - Correlation default - Credit spread - Recovery rates - Interest rate yield - Default volatility |
| Commodities | Commodities: Momentum adjustment and discounted cash flows | |
| Non-trading financial assets mandatorily at fair value through profit or loss | ||
| Equity instruments | Comparable pricing (Observable price in a similar market) Net asset value - Brokers quotes - Market operations - NAVs published - NAV provided by the administrator of the fund |
|
| Debt securities | Present-value method (Discounted future cash flows) | - Issuer credit risk - Current market interest rates - Prepayment rates - Issuer credit risk - Recovery rates |
| Loans and advances | Discounted future cash flows | - Prepayment rates - Interest rates |
| Financial assets designated at fair value through profit or loss | ||
| Debt securities | Present-value method (Discounted future cash flows) | - Issuer credit risk - Current market interest rates |
| Financial assets at fair value through other comprehensive income | ||
| Equity instruments | Comparable pricing (Observable price in a similar market) Net asset value - Brokers quotes - Market operations - NAVs published - NAV provided by the administrator of the fund |
|
| Debt securities | Present-value method (Discounted future cash flows) Observed prices in non-active markets |
- Issuer´s credit risk - Current market interest rates - Non active market prices - Prepayment rates - Issuer credit risk - Recovery rates |
| Hedging derivatives | ||
| Interest rate | Interest rate products (Interest rate Swaps, Call money Swaps and FRA): Discounted cash flows Caps/Floors: Black 76 and SABR Bond options: Black 76 Swaptions: Black, SABR and LGM Other Interest rate Options: Black, SABR and Libor Market Model Constant Maturity Swaps: SABR |
- Exchange rates - Market quoted future prices - Market interest rates - Underlying assets prices: shares, funds, commodities - Market observable volatilities - Issuer credit spread levels - Quoted dividends - Market listed correlations - Beta - Implicit correlations between tenors - interest rates volatility |
| Equity | Future and Equity Forward: Discounted future cash flows Equity Options: Local volatility, Black 76, Momentum adjustment and Heston |
- Volatility of volatility - Implicit assets correlations - Long term implicit correlations - Implicit dividends and long term repos |
| Foreign exchange and gold | Future and Equity Forward: Discounted future cash flows Foreign exchange Options: Black 76, Local Volatility, momentum adjustment |
- Volatility of volatility - Implicit assets correlations - Long term implicit correlations |
| Credit | Credit Derivatives: Default model and Gaussian copula | - Correlation default - Credit spread - Recovery rates - Interest rate yield - Default volatility |
| Commodities | Commodities: Momentum adjustment and Discounted cash flows |
106 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
| Valuation techniques in Levels 2 and 3 | Observable inputs in Levels 2 and 3 | Unobservable inputs in Levels 2 and 3 |
|---|---|---|
| Financial liabilities held for trading | ||
| Deposits | Present-value method (Discounted future cash flows) | - Interest rate yield - Funding interest rates observed in the market or in consensus services - Exchange rates - Funding interest rates not observed in the market or in consensus services |
| Derivatives | ||
| Interest rate | Interest rate products (Interest rate Swaps, call money Swaps and FRA): Discounted cash flows Caps/Floors: Black 76 and SABR Bond options: Black 76 Swaptions: Black 76, SABR and LGM Other Interest rate Options: Black, SABR and Libor Market Model Constant Maturity Swaps: SABR |
- Exchange rates - Market quoted future prices - Market interest rates - Underlying assets prices: shares, funds, commodities - Market observable volatilities - Issuer credit spread levels - Quoted dividends - Market listed correlations - Beta - Correlation between tenors - Interest rates volatility |
| Equity | Future and Equity forward: Discounted future cash flows Equity Options: Local volatility, momentum adjustment and Heston |
- Volatility of volatility - Assets correlation |
| Foreign exchange and gold | Future and Equity Forward: Discounted future cash flows Foreign exchange Options: Black 76, Local volatility, momentum adjustment |
- Volatility of volatility - Assets correlation |
| Credit | Credit Derivatives: Default model and Gaussian copula | - Correlation default - Credit spread - Recovery rates - Interest rate yield - Default volatility |
| Commodities | Commodities: Momentum adjustment and discounted cash flows | |
| Short positions | Present-value method (Discounted future cash flows) | - Prepayment rates - Issuer´s credit risk - Current market interest rates |
| Financial liabilities designated at fair value through profit or loss | ||
| Present-value method (Discounted future cash flows) | - Prepayment rates - Issuer´s credit risk - Current market interest rates - Prepayment rates - Issuer´s credit risk - Current market interest rates |
|
| Derivatives – Hedge accounting | ||
| Interest rate | Interest rate products (Interest rate Swaps, call money Swaps and FRA): Discounted cash flows Caps/Floors: Black 76 and SABR Bond options: Black 76 Swaptions: Black 76, SABR and LGM Other Interest rate Options: Black, SABR and Libor Market Model Constant Maturity Swaps: SABR |
- Exchange rates - Market quoted future prices - Market interest rates - Underlying assets prices: shares, funds, commodities - Market observable volatilities - Issuer credit spread levels - Quoted dividends - Market listed correlations - Beta - Implicit correlations between tenors - interest rates volatility |
| Equity | Future and Equity Forward: Discounted future cash flows Equity Options: Local volatility, momentum adjustment and Heston |
- Volatility of volatility - Implicit assets correlations - Long term implicit correlations - Implicit dividends and long term repos |
| Foreign exchange and gold | Future and Equity Forward: Discounted future cash flows Foreign exchange Options: Black 76, Local Volatility, momentum adjustment |
- Volatility of volatility - Implicit assets correlations - Long term implicit correlations |
| Credit | Credit Derivatives: Default model and Gaussian copula | - Correlation default - Credit spread - Recovery rates - Interest rate yield - Default volatility |
| Commodities | Commodities: Momentum adjustment and discounted cash flows |
The main techniques used for the assessment of the majority of the financial instruments classified in level 3, and its main unobservable inputs, are described below:
107 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56).In the event of a discrepancy, the Spanish-language version prevails – Comparable prices (similar asset prices): This input represents the prices of comparable financial instruments and benchmarks used to calculate a reference yield based on relative movements from the entry price or current market levels. Further adjustments to account for differences that may exist between financial instrument being valued and the comparable financial instrument may be added. It can also be assumed that the price of the financial instrument is equivalent to the comparable instrument. – Net asset value: This technique utilizes certain assumptions to use net asset value as representative of fair value, which is equal to the total value of the assets and liabilities of a fund published by the managing entity. – Gaussian copula: This model is used to integrate default probabilities of credit instruments referenced to more than one underlying CDS (Credit Default Swaps). The joint density function used to value the instrument is constructed by using a Gaussian copula that relates the marginal densities by a normal distribution, usually extracted from the correlation matrix of events approaching default by CDS issuers. – Black 76: variant of Black Scholes model, whose main application is the valuation of bond options, cap floors and Swaptions where the behavior of the Forward and not the Spot itself, is directly modeled. – Black Scholes: The Black Scholes model postulates log-normal distribution for the prices of securities, so that the expected return under the risk neutral measure is the risk free interest rate. Under this assumption, the price of vanilla options can be obtained analytically, so that inverting the Black- Scholes formula, the implied volatility for process of the price can be calculated. – Heston: This model, typically applied to equity OTC options, assumes stochastic behavior of volatility. According to which, the volatility follows a process that reverts to a long-term level and is correlated with the underlying equity instrument. As opposed to local volatility models, in which the volatility evolves deterministically, the Heston model is more flexible, allowing it to be similar to that observed in the short term today. – Libor market model: This model assumes that the dynamics of the interest rate curve can be modeled based on the set of forward contracts that compose the underlying interest rate. The correlation matrix is parameterized on the assumption that the correlation between any two forward contracts decreases at a constant rate, beta, to the extent of the difference in their respective due dates. The input “Credit default volatility” is a volatility input of the credit factor dynamic applied in rate/credit hybrid operative. The multifactorial frame of this model makes it ideal for the valuation of instruments sensitive to the slope or curve, including interest rate option. – Local Volatility: In the local volatility models, the volatility, instead of being static, evolves deterministically over time according to the level of moneyness (i.e. probability that the option has a positive value on its date of expiration) of the underlying, capturing the existence of volatility smiles. The volatility smile of an option is the empirical relationship observed between its implied volatility and its strike price. These models are appropriate for options whose value depends on the historical evolution of the underlying which use Monte Carlo simulation technique for their valuation.
108 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
Quantitative information of unobservable inputs used to calculate level 3 valuations is presented below as of December 31, 2023, 2022 and 2021.
| Financial instrument | Valuation technique(s) | Significant unobservable inputs | Min | Average | Max | Units |
|---|---|---|---|---|---|---|
| Debt Securities | Present value method | Credit spread | — | 136 | 4,369 | bp |
| Recovery rate | 0 % | 39 % | 40 % | % | ||
| Comparable Pricing | 0 % | 99 % | 237 % | % | ||
| Equity/Fund instruments (1) | Net Asset Value | |||||
| Comparable Pricing | ||||||
| Loans and advances | Present value method | Repo funding curve | 2.26 % | 3.74 % | 5.76 % | Abs Repo rate |
| Credit Derivatives | Gaussian Copula | Correlation default | 26 % | 60 % | 85 % | % |
| Black 76 | Price volatility | |||||
| Equity Derivatives | Option models on equities, baskets of equity, funds | Dividends (2) | (88 %) | 52 % | 99 % | % |
| Correlations | ||||||
| Volatility | 8.47 | 29.41 | 70.94 | Vegas | ||
| FX Derivatives | Option models on FX underlyings | Volatility | 4.31 | 10.24 | 18.52 | Vegas |
| IR Derivatives | Option models on IR underlyings | Beta | 3.00 % | 5 % | 11 % | % |
| Correlation rate/credit | (100 %) | 100 % | % | |||
| Correlation rate/inflation | 52 % | 60 % | 74 % | % |
(1) Due to the diversity of valuation models of equity valuations, we would not include all the unobservable inputs or the quantitative ranges of them.
(2) The range of unobservable dividends is too wide range to be relevant.
| Financial instrument | Valuation technique(s) | Significant unobservable inputs | Min | Average | Max | Units |
|---|---|---|---|---|---|---|
| Debt Securities | Present value method | Credit spread | — | 111 | 1,538 | bp |
| Recovery rate | 0 % | 39 % | 40 % | % | ||
| Comparable Pricing | 2 % | 94 % | 139 % | % | ||
| Equity/Fund instruments (1) | Net Asset Value | |||||
| Comparable Pricing | ||||||
| Loans and advances | Present value method | Repo funding curve | 0.71 % | 3.48 % | 5.52 % | Abs Repo rate |
| Credit Derivatives | Gaussian Copula | Correlation default | 26 % | 44 % | 58 % | % |
| Black 76 | Price volatility | — | — | — | Vegas | |
| Equity Derivatives | Option models on equities, baskets of equity, funds | Dividends (2) | (93 %) | 59 % | 99 % | % |
| Correlations | ||||||
| Volatility | 7.81 | 32.62 | 98.71 | Vegas | ||
| FX Derivatives | Option models on FX underlyings | Volatility | 5.32 | 11.93 | 20.73 | Vegas |
| IR Derivatives | Option models on IR underlyings | Beta | 0.25 % | 2 % | 18 % | % |
| Correlation rate/credit | (100 %) | 100 % | % | |||
| Correlation rate/inflation | 51% | 66% | 76% | % |
(1) Due to the diversity of valuation models of equity valuations, we would not include all the unobservable inputs or the quantitative ranges of them.
(2) The range of unobservable dividends is too wide range to be relevant.
109 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
| Financial instrument | Valuation technique(s) | Significant unobservable inputs | Min | Average | Max | Units |
|---|---|---|---|---|---|---|
| Debt securities | Present value method | Credit spread | 3 | 125 | 2,374 | bp |
| Recovery rate | 0 % | 37 % | 40 % | % | ||
| Comparable pricing | 0.1 % | 97 % | 144 % | % | ||
| Equity/Fund instruments (1) | Net asset value | |||||
| Comparable pricing | ||||||
| Loans and advances | Present value method | Repo funding curve | (2.71 %) | 1.16 % | 4.99 % | Abs Repo rate |
| Credit derivatives | Gaussian Copula | Correlation default | 35 % | 43 % | 53 % | % |
| Black 76 | Price volatility | — | — | — | Vegas | |
| Equity derivatives | Option models on equities, baskets of equity, funds | Dividends (2) | (88 %) | 60 % | 99 % | % |
| Correlations | ||||||
| Volatility | 5.57 | 26.30 | 62.00 | Vegas | ||
| FX derivatives | Option models on FX underlyings | Volatility | 3.96 | 9.71 | 16.34 | Vegas |
| IR derivatives | Option models on IR underlyings | Beta | 0.25 % | 2 % | 18 % | % |
| Correlation rate/credit | (100 %) | 100 % | % | |||
| Credit default volatility | — | — | — | Vegas |
(1) Due to the diversity of valuation models of equity valuations, we would not include all the unobservable inputs or the quantitative ranges of them.
(2) The range of unobservable dividends is too wide range to be relevant.
Under IFRS 13, the entity must estimate the value taking into account the assumptions and conditions that market participants would have when setting the price of the asset or liability on the valuation date. In order to comply with the fair value requirements, the entity applies adjustments to the fair valuation considering inherent and counterparties´ default criteria, funding valuation risk and valuation risks due to valuation uncertainty and related to the prudent valuation criteria. The above is aligned with the regulatory requirements (EBA CRR 105.10) and considers the model risk, liquidity risk (Bid / Offer) and price uncertainty risk.
The fair value of liabilities should reflect the entity's default risk, which includes, among other components, its own credit risk. Taking this into account, the Group makes valuation adjustments for credit risk in the estimates of the fair value of its assets and liabilities. These adjustments are calculated by estimating Exposure At Default, Probability of Default and Loss Given Default, which are based on the recovery levels for all derivative products on any instrument, deposits and repos at the legal entity level (all counterparties under a same master agreement), in which BBVA has exposure. Credit Valuation Adjustment (hereinafter “CVA”) and Debit Valuation Adjustments (hereinafter “DVA”) are included in the valuation of derivatives, both assets and liabilities, to reflect the impact on the fair value of the counterparty credit risk and its own, respectively. The Group incorporates in its valuation, for all exposures classified in any of the categories valued at fair value, both the counterparty credit risk and its own. In the trading portfolio, and in the specific case of derivatives, credit risk is recognized through such adjustments. As a general rule, the calculation of CVA is the sum of the expected positive exposure in time t, the probability of default between t-1 and t, and the Loss Given Default of the counterparty. Consequently, the DVA is calculated as the sum of the expected negative exposure in time t, the probability of default of BBVA between t-1 and t, and the Loss Given Default of BBVA. Both calculations are performed throughout the entire period of potential exposure.The calculation of the expected positive and negative exposure is done through a Montecarlo simulation of the market variables involved in all trades’ valuation under the same legal netting set. The information needed to calculate the probability of default and the loss given default of a counterparty comes from the credit markets. The counterparty’s Credit Default Swaps are used if liquid quotes are available. If a market price is not available, BBVA has implemented a mapping process based on the sector, rating and geography of the counterparty to assign probabilities of default and loss given default calibrated directly to market.
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
An additional adjustment for Own Credit Adjustment (OCA) is applied to the instruments accounted for by applying the Fair Value Option permitted by IFRS 9. The related amounts recognized in the consolidated balance sheet as of December 31, 2023 and 2022, related to OCA were €406 million and €333 million, respectively. The amounts recognized in the consolidated balance sheets as of December 31, 2023, 2022 and 2021 related to the valuation adjustments incorporated to the credit assessment derivative assets amounted to €-133 million €-158 million and €-121 million, respectively as Credit Valuation Adjustments (CVA), and amounted to €91 million, €135 million and €104 million, respectively as Debit Valuation Adjustment (DVA). The impact recorded under “Gains (losses) on financial assets and liabilities held for trading, net” in the consolidated income statement was €26 million for the year ended December 31, 2023 and €0 million in 2022 and 2021.
Valuation adjustments for financing risk
The fair value of the positions recorded at fair value must reflect the entity's financing risk. Taking into account the above, the Group makes adjustments for financing risk valuation (Funding Valuation Adjustment FVA) in the estimates of the fair value of its assets and liabilities. The adjustment to the valuation for financing risk incorporates the cost of financing implicit in the valuation of positions at fair value. This adjustment reflects the cost of funding for non-collateralized or partially collateralized operations. Additionally, as of December 31, 2023, 2022 and 2021, €-16 million, €-16 million and €-11 million related to the FVA were recognized in the consolidated balance sheet, being the impact on results €0 million, €-7 million and €-1 million, respectively.
Valuation adjustments for valuation uncertainty
The fair value of the positions recorded at fair value must reflect the valuation risk derived from the uncertainty in the valuation for concepts of pure uncertainty of prices, liquidity risk and model risks. This adjustment is aligned with the regulatory requirements for prudent valuation via valuation adjustments with an impact on CET1, and meets the requirements of EBA CRR 105.10 for this purpose. The adjustment to the valuation for liquidity incorporates an adjustment for Bid / Offer spreads in the valuation of positions that do not meet the necessary conditions to be considered a Market Maker operation. The adjustment to the valuation for model risk captures the uncertainty in the price associated with the products valued with the use of a valuation model ("Mark to Model") given the existence of more than one possible model applicable to the valuation of the product or the calibration of its parameters from the observations of inputs in the market. The adjustment to the valuation for price uncertainty includes the uncertainty associated with the dispersion in the values observed in the market for the prices taken in the valuation of assets or as inputs in the valuation models. The impact recorded under “Gains (losses) on financial assets and liabilities held for trading, net” in the consolidated income statement for the year ended December 31, 2023 corresponding to the mentioned adjustments was a net impact of € -54 million. An adjustment was also made as of December 31, 2023 on financial assets at fair value through other comprehensive income for a total of €-15 million (€-11 million in 2022).
Financial assets and liabilities classified as level 3
The changes in the balance of level 3 financial assets and liabilities included in the consolidated balance sheets are as follows:
Financial assets level 3:
| Changes in the year (Millions of Euros) | 2023 | 2022 | 2021 |
|---|---|---|---|
| Assets | Liabilities | Assets | |
| Balance at the beginning | 3,931 | 2,743 | 5,301 |
| Changes in fair value recognized in profit and loss | (2) | (7) | 113 |
| Changes in fair value not recognized in profit and loss | 21 | (1) | (62) |
| Acquisitions, disposals and liquidations | (3) | 27 | 374 |
| Net transfers to level 3 | 289 | 204 | (750) |
| Exchange differences and others | 3 | 34 | (64) |
| Balance at the end | 4,264 | 3,467 | 3,931 |
(1) Balances corresponding to 2022 have been restated according to IFRS 17 (see Notes 1.3 and 2.3).
(2) Profit or loss that is attributable to gains or losses relating to those financial assets and liabilities held as of December 31, 2023 , 2022 and 2021. Valuation adjustments are recorded under the heading “Gains (losses) on financial assets and liabilities (net)”.
(3) Of which, in 2021, the assets roll forward is comprised of €2,742 million of acquisitions and €211 million of disposals. The liabilities roll forward is comprised of €213 million of acquisitions and €57 million of sales.
In 2023, as a result of the implementation of the multifactor criteria in the classification, which considers all the risk factors of the exposures, their observability and uncertainty, there is a reduction in exposure to derivatives in Level 3, offset by an increase in exposure classified at level 3 in positions of repurchases agreements positions due to unobservability in the inputs applied in their valuation. Therefore, the increase in Level 3 exposure would be focused on cash positions of variable income and fixed income due to unobservability in their prices.
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
In 2022, the net volume of exposures classified as level 3 has been reduced. This reduction was mainly concentrated in repurchase agreements positions, derived from the rotation of the portfolio towards positions with better observability in the equity market of the inputs applied at their fair value. Additionally, the reduction in the volume of level 3 exposures of repurchase agreement positions was mitigated by the increase in the volume of level 3 exposures in derivatives, for which there was worse observability in the market of the inputs applied in their fair value. In 2021 there was an increase in the trading portfolio mainly due to the evolution of loans and advances and their corresponding funding with deposits. In line with this increase in the activity, and despite the improvement in the inputs used to value these assets in the market, there was an increase in the volume of exposures classified as level 3 which mainly corresponded to the temporary acquisitions of assets. For the years ended December 31, 2023, 2022 and 2021, the profit/loss on sales of financial instruments classified as level 3 recognized in the consolidated income statement was not material.
Transfers among levels
The Global Valuation Area, in collaboration with the Group, has established the rules for an appropriate financial instruments held for trading classification according to the fair value hierarchy defined by IFRS. On a monthly basis, derivative positions, deposits, loans and advances from the portfolio are classified, according to this criterion, by the subsidiaries. Then, there is a quarterly review of the portfolio in order to analyze the need for a change in classification of any of these assets. On a quarterly basis, the positions of equity instruments and debt securities are classified, following these criteria, by the local areas in coordination with Global Markets Valuation. The financial instruments transferred among the different levels of measurement for the years ended December 31, 2023 , 2022 and 2021 are at the following amounts in the consolidated balance sheets as of December 31, 2023, 2022 and 2021:
Transfers among levels.
| December 2023 (Millions of Euros) | From: Level 1 | From: Level 2 | From: Level 3 | To: Level 2 | To: Level 3 | To: Level 1 | To: Level 2 |
|---|---|---|---|---|---|---|---|
| ASSETS | |||||||
| Financial assets held for trading | 887 | 34 | 89 | 666 | — | 497 | |
| Non-trading financial assets mandatorily at fair value through profit or loss | 1 | 135 | — | 70 | — | — | |
| Financial assets designated at fair value through profit or loss | — | — | — | — | — | — | |
| Financial assets at fair value through other comprehensive income | 1,191 | 21 | 1,296 | 205 | 103 | 243 | |
| Derivatives – Hedge accounting | — | — | — | — | — | — | |
| Total | 2,079 | 190 | 1,385 | 941 | 103 | 740 | |
| LIABILITIES | |||||||
| Financial liabilities held for trading | 596 | 3 | 36 | 177 | 1 | 372 | |
| Financial liabilities designated at fair value through profit or loss | — | — | — | 660 | — | 262 | |
| Derivatives – Hedge accounting | — | — | — | — | — | — | |
| Total | 596 | 3 | 36 | 837 | 1 | 635 |
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56).In the event of a discrepancy, the Spanish-language version prevails Transfer among levels (Millions of Euros) 2022 2021
| From: | Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 |
|---|---|---|---|---|---|---|
| To: | ||||||
| Level 2 | 683 | 1 | 1,909 | 340 | ||
| Level 3 | 243 | 53 | 2 | |||
| Level 1 | 8 | |||||
| Level 3 | 14 | |||||
| Level 1 | 123 | |||||
| Level 2 | 23 | |||||
| Level 2 | 1,723 | 715 | 18 | 83 | ||
| Level 3 | 596 | 17 | 506 | |||
| Level 1 | 50 | |||||
| Level 3 | ||||||
| Level 1 | ||||||
| Level 2 | ||||||
| ASSETS | ||||||
| Financial assets held for trading | 683 | 1 | 1,909 | 340 | 24 | 911 |
| Non-trading financial assets mandatorily at fair value through profit or loss | — | — | 243 | — | 53 | 2 |
| Financial assets designated at fair value through profit or loss | — | — | 123 | — | — | — |
| Financial assets at fair value through other comprehensive income | 1,723 | — | 715 | — | 18 | 83 |
| Derivatives – Hedge accounting | — | — | — | — | — | — |
| Total | 2,407 | 1 | 2,990 | 340 | 95 | 996 |
| Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 | |
|---|---|---|---|---|---|---|
| LIABILITIES | ||||||
| Financial liabilities held for trading | 524 | — | 239 | 141 | — | 258 |
| Financial liabilities designated at fair value through profit or loss | — | — | — | 221 | — | 55 |
| Derivatives – Hedge accounting | — | — | — | 25 | — | — |
| Total | 524 | — | 239 | 387 | — | 313 |
| From: | Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 |
|---|---|---|---|---|---|---|
| To: | ||||||
| Level 2 | 924 | 2 | 35 | |||
| Level 3 | 184 | 10 | 637 | |||
| Level 1 | ||||||
| Level 3 | ||||||
| Level 1 | ||||||
| Level 2 | ||||||
| Level 2 | 1,528 | 19 | 542 | 234 | 24 | 665 |
| Level 3 | ||||||
| Level 1 | ||||||
| Level 3 | ||||||
| Level 1 | ||||||
| Level 2 | ||||||
| ASSETS | ||||||
| Financial assets held for trading | 924 | 2 | 35 | 184 | 10 | 637 |
| Non-trading financial assets mandatorily at fair value through profit or loss | 8 | — | — | 14 | 23 | — |
| Financial assets designated at fair value through profit or loss | — | — | — | — | — | — |
| Financial assets at fair value through other comprehensive income | 596 | 17 | 506 | 50 | — | — |
| Derivatives – Hedge accounting | — | — | — | — | — | — |
| Total | 1,528 | 19 | 542 | 234 | 34 | 637 |
| Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 | |
|---|---|---|---|---|---|---|
| LIABILITIES | ||||||
| Financial liabilities held for trading | 562 | — | 24 | 57 | 15 | 95 |
| Financial liabilities designated at fair value through profit or loss | — | — | — | 38 | — | 65 |
| Derivatives – Hedge accounting | — | — | — | — | — | — |
| Total | 562 | — | 24 | 95 | 15 | 160 |
The amount of the financial instruments at fair value portfolio that were transferred among the different valuation levels during 2023 correspond mainly, with respect to Level 1 to Level 2, to the review of the classification among levels due to the implementation of the short term maturities model valuation of the listed options for those positions for which it is guaranteed that the inputs applied from real OTC market transactions are complied with the corroboration criteria. Additionally, there is a transfer of exposure Level 1 to Level 2 in cash positions in debt securities and equities, partially netted by a transfer of exposure Level 2 to Level 1, all directly related to the observability of the inputs. The volume of positions transferred from Level 2 to Level 3 is partly offset by the transfer of certain positions from Level 3 to Level 2, mainly in cash positions in debt securities, equities and loans and advances. The amount of financial instruments that were transferred among levels of valuation during the year ended December 31, 2022 corresponds to the above changes in the classification among levels since such financial instruments modified some of their features. Specifically, transfers among Levels 1 and 2 occurred mainly in derivatives and debt securities. Transfers from Level 2 to Level 3 were mainly related to derivatives and deposits at fair value through profit or loss, and in relation to transfers from Level 3 to Level 2, this generally affected derivatives and loans and advances held for trading.
Sensitivity analysis is performed on financial instruments with significant unobservable inputs (financial instruments included in level 3), in order to obtain a reasonable range of possible alternative valuations. This analysis is carried out based on the criteria defined by the Global Valuation area in line with the official regulatory requirements for Prudent Valuation metrics, taking into account the nature of the methods used for the assessment and the reliability and availability of inputs and proxies used. In order to establish, with a sufficient degree of certainty, the valuation risk that is incurred in such assets without applying diversification criteria between them.
As of December 31, 2023 , the effect on profit for the year and total equity of changing the main unobservable inputs used for the measurement of level 3 financial instruments for other reasonably possible unobservable inputs, taking the highest (most favorable input) or lowest (least favorable input) value of the range deemed probable, would be as follows:
113 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
| Potential impact on consolidated income statement | Potential impact on other comprehensive income | |
|---|---|---|
| Most favorable hypothesis | Least favorable hypothesis | |
| 2023 | 2022 | |
| ASSETS | ||
| Financial assets held for trading | 21 | 33 |
| Loans and advances | 2 | 1 |
| Debt securities | 9 | — |
| Equity instruments | — | 25 |
| Derivatives | 9 | 6 |
| Non-trading financial assets mandatorily at fair value through profit or loss | 5 | 135 |
| Loans and advances | — | — |
| Debt securities | 3 | 17 |
| Equity instruments | 2 | 118 |
| Financial assets designated at fair value through profit or loss | — | — |
| Financial assets at fair value through other comprehensive income | — | — |
| Total | 26 | 168 |
| LIABILITIES | ||
| Financial liabilities held for trading | 13 | 7 |
| Total | 13 | 7 |
The valuation technique used to calculate the fair value of financial assets and liabilities carried at cost are presented below:
Loans to credit institutions which are not short-term and loans to customers: In general, the fair value of these financial assets is determined by the discount of expected future cash flows, using market interest rates at the time of valuation adjusted by the credit spread and taking all kind of behavioral hypothesis if it is considered to be relevant (prepayment fees, optionality, etc. ). Therefore, their valuations will be conditioned by the interest rates and spreads of the portfolios and their durations.
Financial liabilities
114 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
The table below shows the fair value of the Group's financial instruments recognized at amortized cost in the consolidated balance sheets, broken down according to the valuation method used to determine their fair value, and their respective book value, as well as the main valuation techniques and inputs used for financial instruments classified in level 2 and level 3 as of December 31, 2023, 2022 and 2021:
| Notes | Book value | Fair value | Total | Level 1 | Level 2 | Level 3 | Valuation techniques in Levels 2 and 3 | Main inputs used in Levels 2 and 3 | |
|---|---|---|---|---|---|---|---|---|---|
| ASSETS | |||||||||
| Cash, cash balances at central banks and other demand deposits | 9 | 75,416 | 75,416 | 75,114 | — | 303 | |||
| Financial assets at amortized cost | 14 | 451,732 | 446,371 | 47,515 | 14,216 | 384,640 | Present-value method (Discounted future cash flows) | - Credit spread - Prepayment rates - Interest rate yield |
|
| Debt securities | 49,462 | 48,952 | 41,950 | 6,244 | 759 | ||||
| Loans and advances to central banks | 7,151 | 7,152 | 5,534 | 1,347 | 272 | ||||
| Loans and advances to credit institutions | 17,477 | 17,500 | 32 | 5,662 | 11,805 | ||||
| Loans and advances to customers | 377,643 | 372,767 | — | 963 | 371,804 | - Credit spread - Interest rate yield |
|||
| LIABILITIES | |||||||||
| Financial liabilities at amortized cost | 22 | 557,589 | 555,913 | 56,831 | 300,531 | 198,550 | Present-value method (Discounted future cash flows) | - Issuer´s credit risk - Prepayment rates - Interest rate yield |
|
| Deposits from central banks | 20 | 20,309 | 20,179 | 13,911 | 6,003 | 265 | |||
| Deposits from credit institutions | 40,039 | 40,009 | — | 33,793 | 6,216 | ||||
| Customer deposits | 413,487 | 411,342 | 1,448 | 228,726 | 181,168 | ||||
| Debt certificates issued | 68,707 | 69,339 | 41,472 | 24,341 | 3,526 | ||||
| Other financial liabilities | 15 | 15,046 | 15,043 | — | 7,668 | 7,376 |
Fair value of financial instruments recognized at amortized cost by levels.# Fair value of financial instruments recognized at amortized cost by levels.
| Notes | Book value | Fair value | Total | Level 1 | Level 2 | Level 3 | Valuation techniques in Levels 2 and 3 | Main inputs used in Levels 2 and 3 |
|---|---|---|---|---|---|---|---|---|
| ASSETS | ||||||||
| Cash, cash balances at central banks and other demand deposits | 9 | 79,756 | 79,756 | 79,463 | — | 293 | ||
| Financial assets at amortized cost | 14 | 414,421 | 412,965 | 30,587 | 12,173 | 370,206 | Present-value method (Discounted future cash flows) | Debt securities |
| Credit spread | ||||||||
| Prepayment rates | ||||||||
| Interest rate yield | ||||||||
| Loans and advances to central banks | 4,401 | 4,401 | 4,259 | — | 142 | |||
| Loans and advances to credit institutions | 16,031 | 16,089 | 89 | 1,289 | 14,711 | |||
| Loans and advances to customers | 357,351 | 356,164 | — | 1,571 | 354,594 | Credit spread | ||
| Interest rate yield | ||||||||
| LIABILITIES | ||||||||
| Financial liabilities at amortized cost | 22 | 529,172 | 525,595 | 77,112 | 266,194 | 182,289 | Present-value method (Discounted future cash flows) | |
| Issuer´s credit risk | ||||||||
| Prepayment rates | ||||||||
| Interest rate yield | ||||||||
| Deposits from central banks | 38,323 | 38,312 | 38,012 | — | 300 | |||
| Deposits from credit institutions | 26,935 | 26,777 | — | 20,546 | 6,231 | |||
| Customer deposits | 394,404 | 392,805 | 1,158 | 230,821 | 160,826 | |||
| Debt certificates issued | 55,429 | 53,550 | 37,942 | 7,240 | 8,368 | |||
| Other financial liabilities | 14,081 | 14,151 | — | 7,587 | 6,564 |
(1) Balances corresponding to 2022 have been restated according to IFRS 17 (see Notes 1.3 and 2.3).
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
| Notes | Book value | Fair value | Total | Level 1 | Level 2 | Level 3 | Valuation techniques in Levels 2 and 3 | Main inputs used in Levels 2 and 3 |
|---|---|---|---|---|---|---|---|---|
| ASSETS | ||||||||
| Cash, cash balances at central banks and other demand deposits | 9 | 67,799 | 67,799 | 67,581 | — | 218 | ||
| Financial assets at amortized cost | 14 | 372,676 | 377,451 | 33,213 | 13,033 | 331,205 | Present-value method (Discounted future cash flows) | Debt securities |
| Credit spread | ||||||||
| Prepayment rates | ||||||||
| Interest rate yield | ||||||||
| Loans and advances to central banks | 5,681 | 5,682 | 5,682 | — | — | |||
| Loans and advances to credit institutions | 13,276 | 13,264 | 72 | 863 | 12,329 | |||
| Loans and advances to customers | 318,939 | 322,058 | 583 | 3,416 | 318,059 | Credit spread | ||
| Interest rate yield | ||||||||
| LIABILITIES | ||||||||
| Financial liabilities at amortized cost | 22 | 487,893 | 488,733 | 91,870 | 243,847 | 153,016 | Present-value method (Discounted future cash flows) | |
| Issuer´s credit risk | ||||||||
| Prepayment rates | ||||||||
| Interest rate yield | ||||||||
| Deposits from central banks | 47,351 | 47,352 | 47,052 | — | 300 | |||
| Deposits from credit institutions | 19,834 | 19,769 | — | 14,853 | 4,916 | |||
| Customer deposits | 349,761 | 349,277 | 2,129 | 209,345 | 137,803 | |||
| Debt certificates issued | 55,763 | 57,094 | 42,689 | 10,014 | 4,391 | |||
| Other financial liabilities | 15,183 | 15,242 | — | 9,636 | 5,606 |
The breakdown of the balance under the heading “Cash, cash balances at central banks and other demand deposits” in the consolidated balance sheets is as follows:
| Cash, cash balances at central banks and other demand deposits | Notes | 2023 | 2022 | 2021 |
|---|---|---|---|---|
| Cash on hand | 7,751 | 6,533 | 6,877 | |
| Cash balances at central banks | 60,750 | 67,314 | 55,004 | |
| Other demand deposits | 6,916 | 5,909 | 5,918 | |
| Total | 8.2 | 75,416 | 79,756 | 67,799 |
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
The breakdown of the balance under these headings in the consolidated balance sheets is as follows:
| Financial assets and liabilities held for trading (Millions of Euros) | Notes | 2023 | 2022 | 2021 |
|---|---|---|---|---|
| ASSETS | ||||
| Derivatives | 34,293 | 39,908 | 30,933 | |
| Equity instruments | 7.2.2 | 4,589 | 4,404 | 15,963 |
| Credit institutions | 277 | 317 | 816 | |
| Other sectors | 4,312 | 4,086 | 15,147 | |
| Debt securities | 7.2.2 | 28,569 | 24,367 | 25,790 |
| Issued by central banks | 740 | 821 | 936 | |
| Issued by public administrations | 24,766 | 20,703 | 21,946 | |
| Issued by financial institutions | 1,824 | 1,365 | 1,130 | |
| Other debt securities | 1,239 | 1,477 | 1,778 | |
| Loans and advances | 7.2.2 | 73,590 | 41,993 | 50,807 |
| Loans and advances to central banks | 2,809 | 1,632 | 3,467 | |
| Reverse repurchase agreement | 2,809 | 1,632 | 3,467 | |
| Loans and advances to credit institutions | 56,599 | 25,231 | 31,916 | |
| Reverse repurchase agreement (1) | 56,569 | 25,201 | 31,901 | |
| Loans and advances to customers | 14,182 | 15,130 | 15,424 | |
| Reverse repurchase agreement | 13,615 | 14,832 | 14,916 | |
| Total assets | 8.1 | 141,042 | 110,671 | 123,493 |
| LIABILITIES | ||||
| Derivatives | 33,045 | 37,909 | 31,705 | |
| Short positions | 15,735 | 13,487 | 15,135 | |
| Deposits | 72,935 | 44,215 | 44,294 | |
| Deposits from central banks | 6,397 | 3,950 | 11,248 | |
| Repurchase agreement | 6,397 | 3,950 | 11,248 | |
| Deposits from credit institutions | 43,337 | 28,924 | 16,176 | |
| Repurchase agreement (1) | 42,676 | 28,573 | 15,632 | |
| Customer deposits | 23,201 | 11,341 | 16,870 | |
| Repurchase agreement | 23,157 | 11,302 | 16,824 | |
| Total liabilities | 8.1 | 121,715 | 95,611 | 91,135 |
(1) The variation is mainly due to the evolution of "Reverse repurchase agreement" of BBVA, S.A. partially compensated with the evolution of "Repurchase agreement" of BBVA, S.A.
As of December 31, 2023, 2022 and 2021 “Short positions” include €14,914 million, €12,544 million and €14,298 million, respectively, held with general governments.
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
The derivatives portfolio arises from the Group’s need to manage the risks it is exposed to in the normal course of business and also to market products amongst the Group’s customers. As of December 31, 2023, 2022 and 2021, trading derivatives were mainly contracted in over-the-counter (OTC) markets, with counterparties, consisting primarily of credit institutions and other financial corporations, and are related to foreign-exchange, interest-rate and equity risk. Below is a breakdown by type of risk and market, of the fair value and notional amounts of derivatives recognized in the consolidated balance sheets, divided into organized and OTC markets:
| Derivatives by type of risk and by product or by type of market (Millions of Euros) | 2023 | 2022 | 2021 |
|---|---|---|---|
| Assets | Liabilities | Notional amount - Total | |
| Interest rate | 15,251 | 13,171 | 4,741,629 |
| OTC | 15,248 | 13,167 | 4,722,314 |
| Organized market | 3 | 4 | 19,315 |
| Equity instruments | 2,587 | 3,723 | 70,804 |
| OTC | 1,212 | 2,551 | 49,038 |
| Organized market | 1,375 | 1,172 | 21,767 |
| Foreign exchange and gold | 15,911 | 15,608 | 632,780 |
| OTC | 15,889 | 15,590 | 623,203 |
| Organized market | 22 | 18 | 9,577 |
| Credit | 543 | 542 | 31,478 |
| Credit default swap | 540 | 528 | 29,844 |
| Credit spread option | — | — | — |
| Total return swap | 3 | 14 | 1,475 |
| Other | — | — | 159 |
| Commodities | 1 | 1 | 169 |
| DERIVATIVES | 34,293 | 33,045 | 5,476,860 |
| Of which: OTC - credit institutions | 23,998 | 23,977 | 1,463,433 |
| Of which: OTC - other financial corporations | 5,042 | 4,412 | 3,815,162 |
| Of which: OTC - other | 3,854 | 3,461 | 147,310 |
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
The breakdown of the balance under this heading in the consolidated balance sheets is as follows:
| Non-trading financial assets mandatorily at fair value through profit or loss (Millions of Euros) | Notes | 2023 | 2022 | 2021 |
|---|---|---|---|---|
| Equity instruments (1) | 7.2.2 | 7,963 | 6,511 | 5,303 |
| Debt securities | 7.2.2 | 484 | 129 | 128 |
| Loans and advances to customers | 7.2.2 | 290 | 247 | 655 |
| Total | 8.1 | 8,737 | 6,888 | 6,086 |
(1) As of December 31, 2023, BBVA maintains a direct stake in Neon Payments Limited of 22.6% of its capital stock (see Note 3).
The breakdown of the balance under these headings in the consolidated balance sheets is as follows:
| Financial assets and liabilities designated at fair value through profit or loss (Millions of Euros) | Notes | 2023 | 2022 | 2021 |
|---|---|---|---|---|
| ASSETS | ||||
| Debt securities | 7.2.2 / 8.1 | 955 | 913 | 1,092 |
| LIABILITIES | ||||
| Customer deposits | 717 | 700 | 809 | |
| Debt certificates issued | 3,977 | 3,288 | 3,396 | |
| Other financial liabilities: Unit-linked products | 8,605 | 6,592 | 5,479 | |
| Total liabilities | 8.1 | 13,299 | 10,580 | 9,683 |
Within “Financial liabilities designated at fair value through profit or loss”, liabilities linked to insurance products where the policyholder bears the risk (unit-link) are recorded. Since the liabilities linked to insurance products in which the policyholder assumes the risk are valued the same way as the assets associated to these insurance products, there is no credit risk component borne by the Group in relation to these liabilities. In addition, the assets and liabilities are included in these headings to reduce inconsistencies (asymmetries) in the valuation of those operations and those used to manage their risk.# 13. Financial assets at fair value through other comprehensive income
The breakdown of the balance by the main financial instruments in the consolidated balance sheets is as follows:
| Financial assets at fair value through other comprehensive income (Millions of Euros) | Notes | 2023 | 2022 | 2021 |
|---|---|---|---|---|
| Equity instruments | 7.2.2 | 1,217 | 1,198 | 1,320 |
| Debt securities (1) | 60,963 | 64,150 | 59,074 | |
| Loans and advances to credit institutions | 7.2.2 | 26 | 26 | 27 |
| Total | 8.1 | 62,205 | 65,374 | 60,421 |
| Of which: loss allowances of debt securities | (84) | (123) | (74) |
(1) This includes redesignations from the heading "Financial assets at amortized cost" due to the application of IFRS 17 (see Notes 1.3 and 2.3 and Appendix XIII). During financial years 2023, 2022 and 2021, there have been no other significant reclassifications from the heading “Financial assets at fair value through other comprehensive income” to other headings or from other headings to “Financial assets at fair value through other comprehensive income”.
119 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
The breakdown of the balance under the heading "Equity instruments" of the consolidated financial statements as of December 31, 2023, 2022 and 2021 is as follows:
Financial assets at fair value through other comprehensive income. Equity instruments (Millions of Euros)
| 2023 | 2022 | 2021 | |
|---|---|---|---|
| Listed equity instruments | |||
| Spanish companies shares | 987 | 960 | 1,088 |
| Foreign companies shares | 111 | 138 | 125 |
| Mexico | 33 | 31 | 29 |
| The United States | 52 | 44 | 29 |
| Turkey | 6 | 7 | 5 |
| Other countries | 20 | 56 | 63 |
| Subtotal listed equity instruments | 1,098 | 1,098 | 1,214 |
| Unlisted equity instruments | |||
| Spanish companies shares | 12 | 12 | 11 |
| Foreign companies shares | 106 | 87 | 95 |
| Subtotal unlisted equity instruments | 119 | 100 | 107 |
| Total | 1,217 | 1,198 | 1,320 |
120 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
The breakdown of the balance under the heading “Debt securities” of the consolidated financial statements as of December 31, 2023, 2022 and 2021, broken down by issuers, is as follows:
Financial assets at fair value through other comprehensive income. Debt securities (Millions of Euros)
| 2023 | 2022 | ⁽¹⁾ 2021 | |
|---|---|---|---|
| Domestic debt securities | |||
| Government and other government agency | 13,757 | 17,429 | 16,544 |
| Central banks | — | — | — |
| Credit institutions | 901 | 854 | 1,176 |
| Other issuers | 454 | 495 | 635 |
| Subtotal | 15,111 | 18,779 | 18,355 |
| Foreign debt securities | |||
| Mexico | 21,714 | 16,819 | 10,769 |
| Government and other government agency | 20,364 | 15,452 | 10,141 |
| Central banks | — | — | — |
| Credit institutions | 886 | 777 | 118 |
| Other issuers | 464 | 590 | 510 |
| The United States | 6,344 | 5,202 | 3,926 |
| Government and other government agency | 3,174 | 2,716 | 1,744 |
| Central banks | — | — | — |
| Credit institutions | 88 | 93 | 116 |
| Other issuers | 3,082 | 2,393 | 2,065 |
| Turkey | 2,459 | 3,858 | 2,920 |
| Government and other government agency | 2,445 | 3,858 | 2,920 |
| Central banks | — | — | — |
| Credit institutions | — | — | — |
| Other issuers | 14 | — | — |
| Other countries | 15,336 | 19,493 | 23,105 |
| Other foreign governments and government agency | 8,961 | 10,340 | 14,960 |
| Central banks | 508 | 3,094 | 1,696 |
| Credit institutions | 1,895 | 2,167 | 2,448 |
| Other issuers | 3,971 | 3,892 | 4,001 |
| Subtotal | 45,852 | 45,372 | 40,719 |
| Total | 60,963 | 64,150 | 59,074 |
(1) Balances corresponding to 2022 have been restated according to IFRS 17 (see Notes 1.3 and 2.3).
The credit ratings of the issuers of debt securities as of December 31, 2023 , 2022 and 2021 are as follows:
Debt securities by rating
| Rating | 2023 | 2022 | ⁽¹⁾ 2021 | |||
|---|---|---|---|---|---|---|
| Fair value (Millions of Euros) | % | Fair value (Millions of Euros) | % | Fair value (Millions of euros) | % | |
| AAA | 1,000 | 1.6 % | 3,339 | 5.2% | 2,413 | 4.1% |
| AA+ | 3,685 | 6.0 % | 490 | 0.8% | 586 | 1.0% |
| AA | 384 | 0.6 % | 420 | 0.7% | 646 | 1.1% |
| AA- | 642 | 1.1 % | 501 | 0.8% | 327 | 0.6% |
| A+ | 1,798 | 3.0 % | 3,866 | 6.0% | 6,179 | 10.5% |
| A | 1,747 | 2.9 % | 1,725 | 2.7% | 1,676 | 2.8% |
| A- | 16,009 | 26.3 % | 20,350 | 31.7% | 18,760 | 31.8% |
| BBB+ | 22,854 | 37.5 % | 17,252 | 26.9% | 11,465 | 19.4% |
| BBB | 8,327 | 13.7 % | 7,470 | 11.6% | 10,961 | 18.6% |
| BBB- | 858 | 1.4 % | 1,111 | 1.7% | 1,310 | 2.2% |
| BB+ or below | 3,480 | 5.7 % | 7,366 | 11.5% | 4,379 | 7.4% |
| Unclassified | 178 | 0.3 % | 258 | 0.4% | 372 | 0.6% |
| Total | 60,963 | 100.0 % | 64,150 | 100.0 % | 59,074 | 100.0 % |
(1) Balances corresponding to 2022 have been restated according to IFRS 17 (see Notes 1.3 and 2.3).
121 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
The changes in the gains/losses (net of taxes) in 2023, 2022 and 2021 of debt securities recognized under the equity heading “Accumulated other comprehensive income (loss) – Items that may be reclassified to profit or loss – Fair value changes of debt instruments measured at fair value through other comprehensive income” and equity instruments recognized under the equity heading “Accumulated other comprehensive income (loss) – Items that will not be reclassified to profit or loss –Fair value changes of equity instruments measured at fair value through other comprehensive income” in the consolidated balance sheets are as follows:
Other comprehensive income - Changes in gains (losses) (Millions of Euros)
| Debt securities | Equity instruments | |||||
|---|---|---|---|---|---|---|
| 2023 | 2022 ⁽¹⁾ | 2021 | 2023 | 2022 ⁽¹⁾ | 2021 | |
| Balance at the beginning | (809) | 1,274 | 2,069 | (1,194) | (1,079) | (1,256) |
| Valuation gains and losses | 659 | (3,049) | (1,058) | 80 | (112) | 183 |
| Amounts transferred to income | 5 | 20 | (63) | |||
| Amounts transferred to Reserves | 2 | (2) | — | |||
| Income tax and other | (211) | 946 | 325 | (1) | (1) | (7) |
| Balance at the end | 30 | (356) | (809) | 1,274 | (1,112) | (1,194) |
(1) Balances corresponding to 2022 have been restated according to IFRS 17 (see Notes 1.3 and 2.3).
In 2023, 2022 and 2021, equity instruments presented an increase of €80 million, a decrease of €112 million and an increase of €183 million, respectively, in the heading “Gains and losses from valuation - Accumulated other comprehensive income - Items that will not be reclassified to profit and loss - Fair value changes of equity instruments measured at fair value through other comprehensive income”, mainly due to changes in Telefonica’s share price. Likewise, the valuations of debt securities have been affected by the evolution of interest rates.
122 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
The breakdown of the balance under this heading in the consolidated balance sheets, according to the nature of the financial instrument, is as follows:
Financial assets at amortized cost (Millions of Euros)
| Notes | 2023 | 2022 | 2021 | |
|---|---|---|---|---|
| Debt securities ⁽¹⁾ | 49,462 | 36,639 | 34,781 | |
| Central banks | 22 | 21 | 15 | |
| Government | 45,124 | 34,648 | 32,130 | |
| Credit institutions | 2,366 | 400 | 817 | |
| Other financial corporations | 923 | 602 | 525 | |
| Non-financial corporations | 1,027 | 967 | 1,295 | |
| Loans and advances to central banks | 7,151 | 4,401 | 5,681 | |
| Loans and advances to credit institutions | 17,477 | 16,031 | 13,276 | |
| Reverse repurchase agreement | 5,786 | 5,251 | 2,788 | |
| Other loans and advances | 11,690 | 10,780 | 10,488 | |
| Loans and advances to customers | 7.2.2 | 377,643 | 357,351 | 318,939 |
| Government | 23,265 | 20,892 | 19,682 | |
| Other financial corporations | 13,251 | 12,765 | 9,804 | |
| Non-financial corporations | 171,063 | 165,433 | 140,993 | |
| Other | 170,063 | 158,261 | 148,461 | |
| Total | 8.1 | 451,732 | 414,421 | 372,676 |
| Of which: impaired assets of loans and advances to customers | 7.2.2 | 14,444 | 13,493 | 14,657 |
| Of which: loss allowances of loans and advances | 7.2.5 | (11,316) | (11,291) | (11,142) |
| Of which: loss allowances of debt securities | (82) | (91) | (52) |
(1) This includes redesignations to the heading "Financial assets at fair value through other comprehensive income" due to the application of IFRS 17 (see Notes 1.3, 2.3 and Appendix XIII). During 2023, 2022 and 2021, there have been no other significant reclassifications from the heading “Financial assets at amortized cost” to other headings or from other headings to “Financial assets at amortized cost”.
123 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
The breakdown of the balance under the heading “Debt securities” in the consolidated balance sheets, according to the issuer of the debt securities, is as follows:
Financial assets at amortized cost. Debt securities. (Millions of Euros)
| 2023 | 2022 ⁽¹⁾ | 2021 | |
|---|---|---|---|
| Domestic debt securities | |||
| Government and other government agencies | 25,857 | 18,397 | 17,693 |
| Credit institutions | 1,028 | — | — |
| Other issuers | 230 | 144 | 337 |
| Subtotal | 27,114 | 18,541 | 18,031 |
| Foreign debt securities | |||
| Mexico | 6,277 | 4,222 | 8,464 |
| Government and other government agencies | 6,205 | 4,198 | 7,669 |
| Credit institutions | 72 | 24 | 614 |
| Other issuers | — | 181 | — |
| The United States | 2,229 | 2,215 | 93 |
| Government and other government agencies | 2,188 | 2,159 | 10 |
| Credit institutions | 19 | 25 | 26 |
| Other issuers | 21 | 31 | 57 |
| Turkey | 6,284 | 5,332 | 2,634 |
| Government and other government agencies | 6,167 | 5,325 | 2,628 |
| Credit institutions | 8 | 6 | 5 |
| Other issuers | 109 | — | — |
| Other countries | 7,558 | 6,328 | 5,559 |
| Other foreign governments and other agency | 4,707 | 4,568 | 4,144 |
| Central banks | 22 | 21 | — |
| Credit institutions | 1,239 | 345 | 171 |
| Other issuers | 1,591 | 1,394 | 1,243 |
| Subtotal | 22,348 | 18,097 | 16,750 |
| Total | 49,462 | 36,639 | 34,781 |
(1) Balances corresponding to 2022 have been restated according to IFRS 17 (see Notes 1.3 and 2.3).As of December 31, 2023, 2022 and 2021, the distribution according to the credit quality (ratings) of the issuers of debt securities classified as financial assets at amortized cost, was as follows:
Debt securities by rating
| | Carrying amount (Millions of Euros) | % | Carrying amount (Millions of Euros) | % | Carrying amount (Millions of Euros) | % |
| :-------------------------- | :---------------------------------- | :------ | :---------------------------------- | :------ | :---------------------------------- | :------ |
| | 2023 | 2023 | 2022 ⁽¹⁾ | 2022 | 2021 | 2021 |
| AAA | 1,829 | 3.7% | 3,068 | 8.4% | 143 | 0.4% |
| AA+ | 3,096 | 6.3% | 217 | 0.6% | 77 | 0.2% |
| AA | 142 | 0.3% | 82 | 0.2% | 76 | 0.2% |
| AA- | 60 | 0.1% | 76 | 0.2% | 69 | 0.2% |
| A+ | 25 | 0.1% | 13 | —% | 62 | 0.2% |
| A | 444 | 0.9% | 524 | 1.4% | 619 | 1.8% |
| A- | 24,739 | 50.0% | 17,050 | 46.5% | 16,312 | 46.9% |
| BBB+ | 6,615 | 13.4% | 4,710 | 12.9% | 9,336 | 26.8% |
| BBB | 4,551 | 9.2% | 4,091 | 11.2% | 3,853 | 11.1% |
| BBB- | 548 | 1.1% | 351 | 1.0% | 527 | 1.5% |
| BB+ or below | 6,642 | 13.4% | 5,789 | 15.8% | 3,120 | 9.0% |
| Unclassified | 772 | 1.6% | 667 | 1.8% | 587 | 1.7% |
| Total | 49,462 | 100.0%| 36,639 | 100.0%| 34,781 | 100.0%|
(1) Balances corresponding to 2022 have been restated according to IFRS 17 (see Notes 1.3 and 2.3).
124 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
The breakdown of the balance under this heading in the consolidated balance sheets, according to their nature, is as follows:
Loans and advances to customers (Millions of Euros)
| | 2023 | 2022 ⁽¹⁾ | 2021 |
| :---------------------------- | :------ | :------- | :------ |
| On demand and short notice | 3,040 | 4,101 | 3,161 |
| Credit card debt | 22,889 | 18,898 | 14,030 |
| Trade receivables | 25,096 | 25,987 | 19,524 |
| Finance leases | 9,463 | 8,571 | 7,911 |
| Reverse repurchase agreement | 92 | 102 | 23 |
| Other term loans | 312,186 | 294,059 | 268,047 |
| Advances that are not loans | 4,877 | 5,633 | 6,243 |
| Total | 377,643 | 357,351 | 318,939 |
(1) Balances corresponding to 2022 have been restated according to IFRS 17 (see Notes 1.3 and 2.3).
The following table sets forth a breakdown of the gross carrying amount "Loans and advances to customers" with maturity greater than one year by fixed and variable rate as of December 31, 2023, 2022 and 2021:
Loans and advances maturing in more than one year by fixed and variable rate (Millions of Euros)
| | 2023 | 2023 | 2023 | 2022 | 2022 | 2022 | 2021 | 2021 | 2021 |
| :----------------------------- | :------ | :------ | :------ | :------ | :------ | :------ | :------ | :------ | :------ |
| | Domestic| Foreign | Total | Domestic| Foreign | Total | Domestic| Foreign | Total |
| Fixed rate | 63,060 | 77,381 | 140,441 | 59,394 | 67,874 | 127,269 | 56,756 | 62,228 | 118,984 |
| Variable rate | 66,188 | 61,723 | 127,911 | 69,647 | 53,440 | 123,087 | 75,544 | 44,237 | 119,781 |
| Total | 129,248| 139,104| 268,352| 129,042| 121,314| 250,356| 132,300| 106,465| 238,765|
As of December 31, 2023, 2022 and 2021, 52%, 51% and 50%, respectively, of "Loans and advances to customers" with maturity greater than one year have fixed-interest rates and 48%, 49% and 50%, respectively, have variable interest rates.
This heading also includes some loans that have been securitized. The balances recognized in the consolidated balance sheets corresponding to these securitized loans are as follows:
Securitized loans (Millions of Euros)
| | 2023 | 2022 | 2021 |
| :---------------------- | :------ | :------ | :------ |
| Securitized mortgage assets | 20,406 | 23,290 | 23,695 |
| Other securitized assets| 8,493 | 5,495 | 6,547 |
| Total | 28,899 | 28,784 | 30,242 |
Furthermore, this heading includes a deposit with the Bank of France associated with the contribution to the Single Resolution Fund for the years 2018, 2017 and 2016, which was made in the form of an irrevocable payment commitment given its amount recoverable as of 31 December 2023. The resolution of the appeal filed by a financial institution outside the Group against the dismissal decision of the Court of Justice of the European Union in this regard is expected throughout 2024, which could lead to a claim by the Single Resolution Board. In any case, BBVA Group balance of this deposit as of December 31, 2023 is not significant.
The balance of these headings in the consolidated balance sheets is as follows:
Derivatives – Hedge accounting and fair value changes of the hedged items in portfolio hedge of interest rate risk (Millions of Euros)
| | 2023 | 2022 | 2021 |
| :------------------------------------------------------------------------------------------ | :---- | :---- | :---- |
| ASSETS | | | |
| Derivatives - Hedge accounting | 1,482 | 1,891 | 1,805 |
| Fair value changes of the hedged items in portfolio hedges of interest rate risk | (97) | (148) | 5 |
| LIABILITIES | | | |
| Derivatives - Hedge accounting | 2,625 | 3,303 | 2,626 |
| Fair value changes of the hedged items in portfolio hedges of interest rate risk | — | — | — |
125 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
As of December 31, 2023, 2022 and 2021, the main positions hedged by the Group and the derivatives designated to hedge those positions were:
Note 7 analyzes the Group’s main risks that are hedged using these financial instruments.
126 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
The details of the net positions by hedged risk of the fair value of the hedging derivatives recognized in the consolidated balance sheets are as follows:
Derivatives - Hedge accounting. Breakdown by type of risk and type of hedge (Millions of Euros)
| | Notes | 2023 | 2023 | 2022 | 2022 | 2021 | 2021 |
| :-------------------------------------------------------- | :---- | :------ | :------ | :------ | :------ | :------ | :------ |
| | | Assets | Liabilities| Assets | Liabilities| Assets | Liabilities|
| Interest rate | | 422 | 364 | 656 | 376 | 697 | 322 |
| OTC | | 422 | 364 | 656 | 376 | 697 | 322 |
| Organized market | | — | — | — | — | — | — |
| Equity | | — | — | — | — | — | — |
| OTC | | — | — | — | — | — | — |
| Organized market | | — | — | — | — | — | — |
| Foreign exchange and gold | | 221 | 31 | 259 | 83 | 463 | 135 |
| OTC | | 221 | 31 | 259 | 83 | 463 | 135 |
| Organized market | | — | — | — | — | — | — |
| Credit | | — | — | — | — | — | — |
| Commodities | | — | — | — | — | — | — |
| Other | | — | — | — | — | — | — |
| FAIR VALUE HEDGES | | 644 | 395 | 915 | 459 | 1,160| 457 |
| Interest rate | | 490 | 2,048 | 470 | 2,763 | 228 | 1,786 |
| OTC | | 483 | 2,048 | 454 | 2,763 | 226 | 1,786 |
| Organized market | | 7 | — | 16 | 2 | 2 | — |
| Equity | | — | — | — | — | — | — |
| Foreign exchange and gold | | 291 | 41 | 239 | 46 | 180 | 79 |
| OTC | | 291 | 41 | 239 | 45 | 180 | 79 |
| Organized market | | — | 1 | — | 1 | — | — |
| Credit | | — | — | — | — | — | — |
| Commodities | | — | — | — | — | — | — |
| Other | | — | — | — | — | — | — |
| CASH FLOW HEDGES | | 781 | 2,089| 708 | 2,809| 408 | 1,865|
| HEDGE OF NET INVESTMENTS IN A FOREIGN OPERATION | | 27 | 136 | 213 | 26 | 198 | 196 |
| PORTFOLIO FAIR VALUE HEDGES OF INTEREST RATE RISK | | 3 | 5 | 7 | 8 | 18 | 95 |
| PORTFOLIO CASH FLOW HEDGES OF INTEREST RATE RISK | | 27 | — | 48 | 1 | 21 | 13 |
| DERIVATIVES-HEDGE ACCOUNTING | 8.1 | 1,482| 2,625| 1,891| 3,303| 1,805| 2,626|
| of which: OTC - credit institutions | | 1,237 | 2,404 | 1,577 | 2,911 | 1,454 | 2,248 |
| of which: OTC - other financial corporations | | 237 | 221 | 297 | 391 | 349 | 378 |
127 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
Below there is a breakdown of the items covered by fair value hedges:
Hedged items in fair value hedges (Millions of Euros)
| | Carrying amount | Hedge adjustments included in the carrying amount of assets/ liabilities ⁽¹⁾ | Remaining adjustments for discontinued micro hedges including hedges of net positions ⁽¹⁾ | Hedged items in portfolio hedge of interest rate risk | Recognized ineffectiveness in profit or loss |
| :--- | :--- | :--- | :--- | :--- | :--- |
| | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
| ASSETS | | | | | | | | |
| Financial assets measured at fair value through other comprehensive income | 11,308 | 13,667 | (652) | (1,024) | 172 | 2 | — | (5) |
| Debt securities | 11,308 | 13,667 | (652) | (1,024) | 172 | 2 | — | |
| Interest rate | 11,308 | 13,601 | (652) | (1,024) | 172 | 2 | — | |
| Foreign exchange and gold | — | — | — | — | — | — | — | |
| Other | — | 66 | — | — | — | — | — | |
| Loans and advances | — | — | — | — | — | — | — | |
| Interest rate | — | — | — | — | — | — | — | |
| Foreign exchange and gold | — | — | — | — | — | — | — | |
| Other | — | — | — | — | — | — | — | |
| Financial assets measured at amortized cost | 3,248 | 4,838 | (114) | (485) | 685 | 13 | 936 | 1,179 |
| Debt securities | 2,304 | 4,164 | (119) | (397) | 685 | 13 | — | — |
| Interest rate | 2,304 | 4,164 | (119) | (397) | 685 | 13 | — | |
| Foreign exchange and gold | — | — | — | — | — | — | — | |
| Loans and advances | 944 | 675 | 5 | (88) | — | — | 936 | 1,179 |
| Interest rate | 944 | 672 | 5 | (88) | — | — | 936 | 1,179 |
| Foreign exchange and gold | — | 3 | — | — | — | — | — | |
| LIABILITIES | | | | | | | | |
| Financial liabilities measured at amortized costs | 47,180 | 34,898 | 509 | 1,299 | — | — | — | (20) |
| Debt securities issued | 37,916 | 33,447 | 600 | 1,372 | — | — | — | |
| Interest rate | 37,915 | 33,447 | 600 | 1,372 | — | — | — | |
| Foreign exchange and gold | 1 | — | — | — | — | — | — | |
| Deposits | 9,263 | 1,451 | (91) | (73) | — | — | — | (5) |
| Interest rate | 9,258 | 1,446 | (91) | (73) | — | — | — | |
| Foreign exchange and gold | 5 | 5 | — | — | — | — | — | (1) |
(1) The balance of discontinued hedges is not significant.# 128 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
The following is the breakdown, by their notional maturities, of the hedging instruments as of December 31, 2023:
Calendar of the notional maturities of the hedging instruments (Millions of Euros)
| Up to 3 months | From 3 months to 1 year | From 1 to 5 years | More than 5 years | Total | |
|---|---|---|---|---|---|
| FAIR VALUE HEDGES | 6,235 | 15,249 | 28,110 | 13,953 | 63,547 |
| Of which: Interest rate | 5,627 | 15,230 | 27,360 | 13,091 | 61,308 |
| CASH FLOW HEDGES | 7,819 | 9,691 | 14,635 | 4,963 | 37,107 |
| Of which: Interest rate | 7,819 | 9,683 | 13,232 | 2,843 | 33,577 |
| HEDGE OF NET INVESTMENTS IN A FOREIGN OPERATION | 11,391 | 1,343 | — | — | 12,735 |
| PORTFOLIO FAIR VALUE HEDGES OF INTEREST RATE RISK | 250 | 597 | 1,828 | 747 | 3,423 |
| PORTFOLIO CASH FLOW HEDGES OF INTEREST RATE RISK | — | — | 311 | 46 | 358 |
| DERIVATIVES-HEDGE ACCOUNTING | 25,695 | 26,881 | 44,884 | 19,709 | 117,169 |
In 2023, 2022 and 2021, there was no reclassification in the consolidated income statements of any amount corresponding to cash flow hedges that was previously recognized in equity (see Note 41). The amount for derivatives designated as accounting hedges that did not pass the effectiveness test in the years ended December 31, 2023, 2022 and 2021 were not material.
The breakdown of the balance of “Investments in joint ventures and associates” in the consolidated balance sheets is as follows:
Joint ventures and associates. Breakdown by entities (Millions of Euros)
| Joint ventures | Associates | Total | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | 2021 | 2023 | 2022 | 2021 | 2023 | 2022 | 2021 | 2023 | |
| Altura Markets, S.V., S.A. | 31 | 42 | 76 | |||||||
| RCI Colombia | 40 | 36 | 40 | |||||||
| Desarrollos Metropolitanos del Sur, S.L. | — | — | 18 | |||||||
| Other | 22 | 22 | 18 | |||||||
| Subtotal | 93 | 100 | 152 | |||||||
| Metrovacesa, S.A. | 259 | 259 | 259 | |||||||
| BBVA Allianz Seguros y Reaseguros, S.A. | 251 | 248 | 254 | |||||||
| Atom Holdco Ltd | 211 | 132 | 77 | |||||||
| Solaris SE | 34 | 66 | 61 | |||||||
| Cofides | 35 | 31 | 28 | |||||||
| Redsys servicios de procesamiento, S.L. | 22 | 20 | 19 | |||||||
| Servicios Electrónicos Globales S.A. de CV | 36 | 23 | 15 | |||||||
| Other | 37 | 37 | 35 | |||||||
| Subtotal | 883 | 816 | 749 | |||||||
| Total | 976 | 916 | 900 | 976 |
Details of the joint ventures and associates as of December 31, 2023 are shown in Appendix II.
The following is a summary of the changes in the years ended December 31, 2023, 2022 and 2021 under this heading in the consolidated balance sheets:
Joint ventures and associates. Changes in the year (Millions of Euros)
| Notes | 2023 | 2022 | 2021 | |
|---|---|---|---|---|
| Balance at the beginning | 916 | 900 | 1,437 | |
| Acquisitions and capital increases | 95 | 87 | 22 | |
| Disposals and capital reductions | (42) | (88) | (1) | |
| Transfers and changes of consolidation method | 4 | — | (559) | |
| Share of profit and loss | 39 | 39 | 26 | 20 |
| Exchange differences | 16 | 1 | (1) | 9 |
| Impairment / reversal of impairment ⁽¹⁾ | (9) | 42 | — | |
| Dividends, valuation adjustments and other | (30) | (44) | (9) | |
| Balance at the end | 976 | 916 | 900 |
(1) See Note 16.3.
During the years 2023 and 2022, the most significant changes under the heading "Investment in joint ventures and associates" correspond to capital increases in Atom Holdco Limited. During the year 2022 Atom Holdco Limited, the owner of 100% of the shares of Atom Bank PLC, was created. BBVA became a shareholder of Atom Holdco Limited under the same terms and conditions as those previously applicable under the agreement with Atom Bank PLC. During the year 2021, the most significant changes in the heading “Investment in joint ventures and associates” correspond to the reclassification of the 20% stake in Divarian Property, S.A.U. under the heading "Non-current assets and disposal groups classified as held for sale" in July 2021 and their subsequent sale in October 2021. Appendix III provides notifications on acquisitions and disposals of holdings in subsidiaries, joint ventures and associates, in compliance with article 155 of the Corporations Act and article 125 of the Securities Market Act 4/2015.
If these entities had been consolidated rather than accounted for using the equity method, the change in each of the lines of balance sheet and the consolidated income statement would not be significant. As of December 31, 2023, 2022 and 2021 there was no financial support agreement or other contractual commitment to associates and joint ventures entities from the holding or the subsidiaries that are not recognized in the financial statements (see Note 53.2). As of December 31, 2023, 2022 and 2021 there was no contingent liability in connection with the investments in joint ventures and associates (see Note 53.2).
As required by IAS 36, the book value of the associates and joint venture entities has been compared with their recoverable amount, with the latter being calculated as the higher between the value in use and the fair value minus the cost of sale. For the year ended December 31, 2023, an impairment was recorded for €9 million; for the year ended December 31, 2022, a reversal of impairment was recorded for €42 million; while for the year ended December 31, 2021, there was no impairment recorded in the Group's consolidated income statement (see Note 48).
The breakdown and movement of the balance and changes of this heading in the consolidated balance sheets, according to the nature of the related items, is as follows:
Tangible assets. Breakdown by type of assets and changes in the year 2023 (Millions of Euros)
| Notes | Land and buildings | Work in progress | Furniture, fixtures and vehicles | Right to use asset | Investment Properties | Assets leased out under an operating lease | Total | |
|---|---|---|---|---|---|---|---|---|
| Cost | ||||||||
| Balance at the beginning | 6,255 | 93 | 5,833 | 1,871 | 214 | 242 | 15,089 | |
| Additions | 270 | 190 | 549 | 499 | 10 | 39 | 1,795 | |
| Retirements | (19) | (4) | (117) | (195) | — | (10) | (349) | |
| Acquisition of subsidiaries in the year | — | — | — | — | — | — | — | |
| Disposal of entities in the year | — | — | — | — | — | — | — | |
| Transfers | 12 | 12 | (72) | 41 | (18) | 15 | — | (22) |
| Exchange difference and other | (113) | (8) | 118 | 55 | — | (115) | (79) | |
| Balance at the end | 6,405 | 199 | 6,424 | 2,212 | 238 | 156 | 16,432 | |
| Accrued depreciation | ||||||||
| Balance at the beginning | 1,064 | — | 4,204 | 653 | 70 | 23 | 6,066 | |
| Additions | 45 | 121 | — | 426 | 296 | 21 | 867 | |
| Additions transfer to discontinued operations | — | — | — | — | — | — | — | |
| Retirements | (9) | — | (73) | (26) | — | (1) | (111) | |
| Acquisition of subsidiaries in the year | — | — | — | — | — | — | — | |
| Disposal of entities in the year | — | — | — | — | — | — | — | |
| Transfers | (2) | — | (7) | (5) | 3 | 1 | (11) | |
| Exchange difference and other | 52 | — | 57 | (12) | — | (9) | 85 | |
| Balance at the end | 1,226 | — | 4,606 | 906 | 93 | 17 | 6,896 | |
| Impairment | ||||||||
| Balance at the beginning | 154 | — | — | 65 | 50 | 17 | 286 | |
| Additions | 49 | 15 | — | 1 | (14) | 12 | 16 | |
| Additions transfer to discontinued operations | — | — | — | — | — | — | — | |
| Retirements | — | — | — | — | — | — | — | |
| Acquisition of subsidiaries in the year | — | — | — | — | — | — | — | |
| Disposal of entities in the year | — | — | — | — | — | — | — | |
| Transfers | — | — | — | — | — | — | — | |
| Exchange difference and other | (3) | — | (1) | (11) | — | (3) | (18) | |
| Balance at the end | 166 | — | — | 40 | 61 | 15 | 283 | |
| Net tangible assets | ||||||||
| Balance at the beginning | 5,036 | 93 | 1,629 | 1,153 | 94 | 201 | 8,737 | |
| Balance at the end | 5,013 | 199 | 1,817 | 1,266 | 84 | 124 | 9,253 |
Tangible assets. Breakdown by type of assets and changes in the year 2022 (Millions of Euros)
| Notes | Land and buildings | Work in progress | Furniture, fixtures and vehicles | Right to use asset | Investment properties | Assets leased out under an operating lease | Total | |
|---|---|---|---|---|---|---|---|---|
| Cost | ||||||||
| Balance at the beginning | 4,350 | 67 | 5,388 | 3,154 | 162 | 147 | 13,535 | |
| Additions | 366 | 71 | 475 | 578 | 19 | 95 | 1,726 | |
| Retirements | (4) | — | (140) | (1,620) | (1) | (19) | (1,784) | |
| Acquisition of subsidiaries in the year | ⁽¹⁾ | 1,392 | — | — | — | — | — | 1,392 |
| Disposal of entities in the year | — | — | — | — | — | — | — | |
| Transfers | (21) | (54) | (40) | (274) | 33 | (4) | (360) | |
| Exchange difference and other | ⁽²⁾ | 171 | 9 | 150 | 32 | — | 23 | 580 |
| Balance at the end | 6,255 | 93 | 5,833 | 1,871 | 214 | 242 | 15,089 | |
| Accrued depreciation | ||||||||
| Balance at the beginning | 900 | — | 3,833 | 811 | 47 | 17 | 5,641 | |
| Additions | 45 | 108 | — | 393 | 295 | 18 | 818 | |
| Additions transfer to discontinued operations | — | — | — | — | — | — | — | |
| Retirements | (2) | — | (132) | (244) | — | (13) | (392) | |
| Acquisition of subsidiaries in the year | — | — | — | — | — | — | — | |
| Disposal of entities in the year | — | — | — | — | — | — | — | |
| Transfers | 11 | — | 52 | (220) | 6 | — | (139) | |
| Exchange difference and other | 47 | — | 59 | 11 | — | 2 | 138 | |
| Balance at the end | 1,064 | — | 4,204 | 653 | 70 | 23 | 6,066 | |
| Impairment | ||||||||
| Balance at the beginning | 114 | — | — | 427 | 34 | 21 | 596 | |
| Additions | 49 | (29) | — | 4 | (45) | 16 | (53) | |
| Additions transfer to discontinued operations | — | — | — | — | — | — | — | |
| Retirements | — | — | — | — | — | — | — | |
| Acquisition of subsidiaries in the year | — | — | — | — | — | — | — | |
| Disposal of entities in the year | — | — | — | — | — | — | — | |
| Transfers | (1) | — | — | (7) | — | 21 | 13 | |
| Exchange difference and other | 70 | — | (4) | (309) | — | — | (270) | |
| Balance at the end | 154 | — | — | 65 | 50 | 17 | 286 | |
| Net tangible assets | ||||||||
| Balance at the beginning | 3,336 | 67 | 1,555 | 1,916 | 81 | 109 | 7,298 | |
| Balance at the end | 5,036 | 93 | 1,629 | 1,153 | 94 | 201 | 8,737 |
(1) The variation in 2022 corresponds mainly to the closing of the transaction with Merlin Properties in which 100% of the shares of Tree Inversiones Inmobiliarias, SOCIMI, S.A. were acquired by BBVA Group.## Tangible assets. Breakdown by type of assets and changes in the year 2021 (Millions of euros)
| Land and buildings | Work in progress | Furniture, fixtures and vehicles | Own use | Investment properties | Investment properties | Assets leased out under an operating lease | Right to use asset | Total | |
|---|---|---|---|---|---|---|---|---|---|
| Cost | |||||||||
| Balance at the beginning | 4,380 | 52 | 5,515 | 3,061 | 123 | 201 | 345 | 13,677 | |
| Additions | 58 | 31 | 262 | 230 | 4 | — | — | 585 | |
| Retirements | (5) | (1) | (281) | (59) | — | (1) | — | (347) | |
| Acquisition of subsidiaries in the year | — | — | — | — | — | — | — | — | |
| Companies held for sale | — | — | — | — | — | — | — | — | |
| Transfers | (112) | (8) | (29) | (34) | 35 | 1 | — | (147) | |
| Exchange difference and other | 29 | (7) | (79) | (44) | — | (54) | (78) | (233) | |
| Balance at the end | 4,350 | 67 | 5,388 | 3,154 | 162 | 147 | 267 | 13,535 | |
| Accrued depreciation | |||||||||
| Balance at the beginning | 833 | — | 3,859 | 582 | 27 | 16 | 54 | 5,371 | |
| Additions | 45 | 79 | — | 358 | 284 | 15 | 4 | 740 | |
| Additions transfer to discontinued operations | — | — | — | — | — | — | — | — | |
| Retirements | (19) | — | (259) | (16) | — | (4) | — | (298) | |
| Acquisition of subsidiaries in the year | — | — | — | — | — | — | — | — | |
| Companies held for sale | — | — | — | — | — | — | — | — | |
| Transfers | (23) | — | (17) | (5) | 5 | 1 | — | (39) | |
| Exchange difference and other | 30 | — | (108) | (34) | — | — | (21) | (134) | |
| Balance at the end | 900 | — | 3,833 | 811 | 47 | 17 | 33 | 5,641 | |
| Impairment | |||||||||
| Balance at the beginning | 149 | — | — | 274 | 26 | 34 | — | 483 | |
| Additions ⁽¹⁾ | 49 | — | — | 1 | 151 | 8 | 1 | 161 | |
| Retirements | — | — | — | — | — | — | — | — | |
| Acquisition of subsidiaries in the year | — | — | — | — | — | — | — | — | |
| Companies held for sale | — | — | — | — | — | — | — | — | |
| Transfers | (24) | — | 17 | — | — | 2 | — | (5) | |
| Exchange difference and other | (11) | — | (18) | 2 | — | (16) | — | (43) | |
| Balance at the end | 114 | — | — | 427 | 34 | 21 | — | 596 | |
| Net tangible assets | |||||||||
| Balance at the beginning | 3,398 | 52 | 1,656 | 2,205 | 70 | 151 | 291 | 7,823 | |
| Balance at the end | 3,336 | 67 | 1,555 | 1,916 | 81 | 109 | 234 | 7,298 |
(1) In 2021, it includes allowances on right of use of the rented offices after the agreement with union representatives on the collective layoff procedure proposed for Banco Bilbao Vizcaya Argentaria, S.A. in Spain (see Notes 24 and 49).
The right to use asset consists mainly of the rental of commercial real estate premises for central services and the network branches located in the countries where the Group operates whose average term is between 5 and 20 years. The clauses included in rental contracts correspond to a large extent to rental contracts under normal market conditions in the country where the property is rented.
As of December 31, 2023, 2022 and 2021, the cost of fully amortized tangible assets that remained in use were €2,796, €2,443 and €2,318 million respectively while its recoverable residual value was not significant.
As of December 31, 2023, 2022 and 2021 the amount of tangible assets under financial lease schemes on which the purchase option is expected to be exercised was not material.
The main activity of the Group is carried out through a network of bank branches located geographically as shown in the following table:
| Area | 2023 | 2022 | 2021 |
|---|---|---|---|
| Spain | 1,882 | 1,886 | 1,895 |
| Mexico | 1,706 | 1,733 | 1,716 |
| South America | 1,395 | 1,418 | 1,434 |
| Turkey | 935 | 972 | 1,006 |
| Rest | 31 | 31 | 32 |
| Total | 5,949 | 6,040 | 6,083 |
The following table shows the detail of the net carrying amount of the tangible assets corresponding to Spanish and foreign subsidiaries as of December 31, 2023, 2022 and 2021:
| 2023 | 2022 ⁽¹⁾ | 2021 | |
|---|---|---|---|
| BBVA and Spanish subsidiaries | 4,183 | 4,285 | 3,873 |
| Foreign subsidiaries | 5,071 | 4,452 | 3,425 |
| Total | 9,253 | 8,737 | 7,298 |
(1) The variation in 2022 corresponds mainly to the closing of the transaction with Merlin Properties in which 100% of the shares of Tree Inversiones Inmobiliarias, SOCIMI, S.A. were acquired by BBVA Group.
Purchase of Tree Inversiones Inmobiliarias SOCIMI, S.A. (Tree) from Merlin Properties SOCIMI, S.A.
On June 15, 2022, BBVA acquired from Merlin Properties SOCIMI, S.A. the shares representing the entire share capital of Tree Inversiones Inmobiliarias SOCIMI, S.A. (hereinafter “Tree”) for an amount of €1,988 million. This company has 662 properties leased to BBVA that were part of the set of properties that BBVA sold between 2009 and 2010 under a sale and leaseback agreement. Prior to that date, these properties were registered as "Rights of use" in the consolidated balance sheet of the BBVA Group under the headings "Tangible assets - Property, plant and equipment" and "Tangible assets - Investment property", while the payment obligation was reflected under the heading "Financial liabilities at amortized cost – Other financial liabilities", in accordance with IFRS 16 Leases.
The Tree purchase transaction has been considered an asset purchase given that the Group has determined that it is not acquiring a set of activities that present elements that could constitute a business. After the closing of this transaction, the BBVA Group has once again become owner of the properties and recorded them at their acquisition price in the Group's consolidated financial statements as of June 30, 2022. The assets acquired that are not used for the Bank's activity are recorded under the heading "Non-current assets and disposal groups classified as held for sale and liabilities included in disposal groups classified as held for sale" (see Note 21).
The impact of the transaction amounted to €-201 million (losses net of taxes) which was registered under the headings "Gains (losses) from non-current assets and disposal groups classified as held for sale not qualifying as discontinued operations” for an amount of €-134 million and “Tax expense or income related to profit or loss from continuing operations” for an amount of €-67 million in the consolidated income statement of the BBVA Group.
The breakdown of the balance under this heading in the consolidated balance sheets, according to the CGU to which goodwill has been allocated, is as follows:
| Mexico | Turkey (1) | Colombia | Chile | Other | Total | |
|---|---|---|---|---|---|---|
| Balance as of December 31, 2020 | 478 | 254 | 143 | 27 | 8 | 910 |
| Additions | — | — | — | — | — | — |
| Exchange difference | 26 | (102) | (9) | (3) | — | (88) |
| Impairment | — | — | — | — | (4) | (4) |
| Companies held for sale | — | — | — | — | — | — |
| Balance as of December 31, 2021 | 504 | 152 | 134 | 24 | 4 | 818 |
| Additions | — | — | — | — | — | — |
| Exchange difference | 55 | — | (16) | 1 | 1 | 41 |
| Impairment | — | — | — | — | — | — |
| Companies held for sale | — | — | — | — | — | — |
| Other | — | (152) | — | — | — | (152) |
| Balance as of December 31, 2022 | 559 | — | 118 | 25 | 5 | 707 |
| Additions | — | — | — | — | — | — |
| Exchange difference | 64 | — | 25 | (1) | — | 88 |
| Impairment | — | — | — | — | — | — |
| Companies held for sale | — | — | — | — | — | — |
| Balance as of December 31, 2023 | 623 | — | 143 | 24 | 5 | 795 |
(1) As a result of the application of IAS 29 "Financial Reporting in Hyperinflationary Economies" as indicated in Note 2.2.18, the book value of the Turkish CGU exceeded the existing recoverable value as of December 31, 2021, and as a consequence the goodwill as well as other intangible assets (see Note 18.2) assigned to the Turkish CGU were derecognized.
There were no significant business combinations during 2023, 2022 and 2021.
As mentioned in Note 2.2.7, the CGU to which goodwill has been allocated, are periodically tested for impairment by including the allocated goodwill in their carrying amount. This analysis is performed at least annually and whenever there is any indication of impairment. Furthermore, it is analyzed whether certain changes in the valuation assumptions used could give rise to differences in the result of the impairment test.
The BBVA Group performs estimations on the recoverable amount of certain CGU by calculating the value in use through the discounted value of future cash flows method. The main hypotheses used for the value in use calculation are the following:
The focus used by the Group's management to determine the values of the assumptions is based both on its projections and past experience. These values are verified and use external sources of information, wherever possible.In the event of a discrepancy, the Spanish-language version prevails
Goodwill - Mexico CGU
The Group’s most significant goodwill corresponds to the CGU in Mexico, the main significant assumptions used in the impairment test of this CGU as of December 31, 2023, 2022 and 2021 are as follows:
Impairment test assumptions CGU goodwill in Mexico
| | 2023 | 2022 | 2021 |
| --------------- | --------- | --------- | --------- |
| Discount rate (1) | 12.4 % | 12.7 % | 14.5 % |
| Growth rate | 5.6 % | 6.3 % | 5.7 % |
(1) After tax discount rates.
In accordance with paragraph 33.c of IAS 36, as of December 31, 2023, the Group used a growth rate of 5.6% based on the real GDP growth rate of Mexico, the expected inflation rate and the potential growth of the banking sector in Mexico. The assumptions with a greater relative weight and whose volatility could have a greater impact in determining the present value of the cash flows starting on the fourth year are the discount rate and the growth rate. The table below shows, in a simplified way, the relative variation by which the CGU recoverable amount would increase (or decrease) as a result of a reasonable variation (in basis points) of each of the key assumptions, considered in isolation as of December 31, 2023, where, in each case, their value in use would continue to exceed their book value:
Sensitivity analysis for main assumptions - Mexico
| | Increase of 50 basis points (1) | Decrease of 50 basis points (1) |
| --------------------------------- | ------------------------------- | ------------------------------- |
| Discount rate | (6 %) | 7 % |
| Growth rate | 5 % | (4 %) |
(1) The use of very different discount or growth rates would be inconsistent with the macroeconomic assumptions under which the Unit builds its business plan, such as inflation assumptions or interest rate curves used to determine cash flows.
Goodwill - Turkey CGU
As a result of the application of IAS 29 "Financial Reporting in Hyperinflationary Economies" in 2022, as indicated in Note 2.2.18, the book value of the Turkish CGU exceeded the existing recoverable value as of December 31, 2021 and as a consequence the goodwill as well as other intangible assets (see Note 18.2) assigned to the Turkish CGU were derecognized in their entirety.
Goodwill - Other CGUs
The impairment tests carried out on the rest of the CGUs have not detected significant impairment. Likewise, the sensitivity analysis on the main assumptions carried out for the rest of the CGU of the Group indicate that their value in use would continue to exceed their book value.
The breakdown of the balance and changes of this heading in the consolidated balance sheets, according to the nature of the related items, is as follows:
Other intangible assets (Millions of Euros)
| | 2023 | 2022 | 2021 |
| ------------------------------------ | ----- | ----- | ----- |
| Computer software acquisition expense | 1,535 | 1,393 | 1,239 |
| Other intangible assets with an infinite useful life | 8 | 13 | 12 |
| Other intangible assets with a definite useful life | 25 | 43 | 128 |
| Total | 1,568 | 1,449 | 1,379 |
136 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
The changes of this heading during the years ended December 31, 2023, 2022 and 2021, are as follows:
Other intangible assets (Millions of Euros)
| | | Computer software | Other intangible assets | Total of intangible assets | | | | | | |
| --------------------------------------- | ----- | ----------------- | ----------------------- | -------------------------- | ----- | ----- | ----- | ----- | ----- | ----- |
| | Notes | 2023 | 2022 | 2021 | 2023 | 2022 | 2021 | 2023 | 2022 | 2021 |
| Balance at the beginning | | 1,396 | 1,239 | 1,202 | 56 | 140 | 233 | 1,453 | 1,379 | 1,435 |
| Additions | | 688 | 592 | 470 | 1 | — | — | 689 | 592 | 470 |
| Amortization in the year | | (518) | (490) | (446) | (19) | (20) | (48) | (536) | (510) | (494) |
| Amortization transfer to discontinued operations | | — | — | — | — | — | — | — | — | — |
| Exchange differences and other | | (6) | 80 | 29 | (5) | (63) | (45) | (11) | 17 | (16) |
| Impairment | | (26) | (25) | (15) | — | — | — | (26) | (25) | (15) |
| Balance at the end | | 1,535 | 1,396 | 1,239 | 33 | 56 | 140 | 1,568 | 1,453 | 1,379 |
As of December 31, 2023, 2022 and 2021, the cost of fully amortized intangible assets that remained in use were €4,214 million, €3,490 million and €2,992 million respectively, while their recoverable value was not significant.
Pursuant to current legislation, BBVA consolidated tax group in Spain includes the Bank (as the parent company) and its Spanish subsidiaries that meet the requirements provided for under Spanish legislation regulating the taxation regime for the consolidated profit of corporate groups. The Group’s non-Spanish banks and subsidiaries file tax returns in accordance with the tax legislation in force in each country.
As of December 31, 2023, the BBVA consolidated tax group in Spain was undergoing inspection in connection with the years 2018 to 2020, with respect to the main taxes applicable to it. The remainder of the Spanish consolidated entities in general have the last four years open for inspection by the tax authorities for the main taxes applicable, except for those in which there has been an interruption of the limitation period due to the start of an inspection. On the other hand, in relation to the main jurisdictions in which the Group is present and carries out its activity and in continuity with what is indicated in the Consolidated Financial Statements for the year 2022, in the case of Mexico during the year 2023, the inspection procedure corresponding to the year 2017 in BBVA Mexico, S.A. has been completed. The settlement issued by the Tax Administration Service (SAT), as a result of said inspection procedure, has been appealed by BBVA Mexico in administrative proceedings, which has not been resolved at the date of preparation of these financial statements. However, the Group and its tax advisors believe that, in the event that any such liability were to materialize, the resulting tax liability would not materially affect the Group's consolidated financial statements. In addition, BBVA México, S.A. is currently under inspection for income tax and value added tax for the year 2018. In view of the varying interpretations that can be made of some applicable tax legislation, the outcome of the tax inspections of the open years that may be conducted by the tax authorities in the future may give rise to contingent tax liabilities which cannot be reasonably estimated at the present time. However, the Group considers that the possibility of these contingent liabilities becoming actual liabilities is remote and, in any case, the tax charge which might arise therefore would not materially affect the Group’s consolidated financial statements.
137 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
The reconciliation of the Group’s corporate income tax expense resulting from the application of the Spanish corporation income tax rate and the income tax expense recognized in the consolidated income statements is as follows:
Reconciliation of taxation at the Spanish corporation tax rate to the tax expense recorded for the year (Millions of Euros)
| | 2023 | 2022 ⁽¹⁾ | 2021 |
| ---------------------------------------------------------------------------- | --------- | --------- | --------- |
| | Amount | Effective tax % | Amount | Effective tax % | Amount | Effective tax % |
| Profit or (-) loss before tax | 12,419 | | 10,268 | | 8,399 | |
| From continuing operations | 12,419 | | 10,268 | | 7,247 | |
| From discontinued operations | — | | — | | 1,152 | |
| Taxation at Spanish corporation tax rate 30% | 3,726 | | 3,080 | | 2,519 | |
| Lower/higher effective tax rate from foreign entities ⁽²⁾ | 2 | | 317 | | (332) | |
| Mexico | (194) | 27 % | (203) | 26 % | (109) | 27 % |
| Chile | (4) | 11 % | (8) | 13 % | (5) | 22 % |
| Colombia | (25) | 14 % | 24 | 37 % | — | 30 % |
| Peru | (55) | 20 % | (16) | 27 % | 5 | 31 % |
| Turkey | 314 | 57 % | 621 | 70 % | (125) | 23 % |
| USA | 5 | 33 % | 17 | 17 % | (62) | 19 % |
| Others | (39) | | (118) | | (36) | |
| Revenues with lower tax rate (dividends/capital gains) | (26) | | (25) | | (30) | |
| Equity accounted earnings | (8) | | (6) | | — | |
| USA Sale effect | — | | — | | 544 | |
| Other effects | 309 | | 139 | | 80 | |
| Income tax | 4,003 | | 3,505 | | 2,781 | |
| Of which: Continuing operations | 4,003 | | 3,505 | | 1,909 | |
| Of which: Discontinued operations | — | | — | | 872 | |
(1) Balances corresponding to 2022 have been restated according to IFRS 17 (see Notes 1.3 and 2.3).
(2) Calculated by applying the difference between the tax rate in force in Spain and the one applied to the Group’s earnings in each jurisdiction.
The effective income tax rate for the Group in the years ended December 31, 2023, 2022 and 2021 is as follows:
Effective tax rate (Millions of Euros)
| | 2023 | 2022 ⁽¹⁾ | 2021 |
| ---------------------------- | ----- | --------- | ----- |
| Income from: | | | |
| Consolidated tax group in Spain | 2,601 | 2,206 | 655 |
| Other Spanish entities | 6 | (462) | 5 |
| Foreign entities | 9,812 | 8,524 | 6,587 |
| Gains (losses) before taxes from continuing operations | 12,419 | 10,268 | 7,247 |
| Tax expense or income related to profit or loss from continuing operations | 4,003 | 3,505 | 1,909 |
| Effective tax rate | 32.2% | 34.1 % | 26.3 % |
(1) Balances corresponding to 2022 have been restated according to IFRS 17 (see Notes 1.3 and 2.3).
In 2023, in general terms, there have been no changes in the nominal corporate income tax rate in the main countries in which the Group is present compared to those existing in the previous period, except in the case of Turkey, where the applicable tax rate has increased from 25% to 30%, and Colombia, where the tax rate has increased from 38% to 40%. In the year 2022, out of the main countries in which the Group is present, there were changes in the nominal corporate income tax rate (compared to those existing in the previous year) in Colombia (from 34% to 38%).
In addition to the income tax expense recognized in the consolidated income statements, the Group has recognized the following income tax charges for these items in the consolidated total equity:
Tax recognized in total equity (Millions of Euros)
| | 2023 | 2022 ⁽¹⁾ | 2021 |
| -------------------- | ---- | --------- | ----- |
| Charges/credits to total equity | | | |
| Debt securities and others | 217 | 801 | (174) |
| Equity instruments | 68 | (56) | (33) |
| Total | 285 | 745 | (207) |
(1) Balances corresponding to 2022 have been restated according to IFRS 17 (see Notes 1.3 and 2.3).# 138 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
The balance under the heading "Tax assets" in the consolidated balance sheets includes the balances receivable from the tax authorities relating to current and deferred tax assets. The balance under the “Tax liabilities” heading includes the balances payable in respect of the Group’s various current and deferred tax liabilities. The details of the mentioned tax assets and liabilities are as follows:
| 2023 | 2022 | ⁽¹⁾ 2021 | |
|---|---|---|---|
| Tax assets | |||
| Current tax assets (2) | 2,860 | 1,978 | 932 |
| Deferred tax assets | 14,641 | 14,747 | 14,917 |
| Pensions | 445 | 422 | 416 |
| Financial Instruments | 1,069 | 1,478 | 1,408 |
| Loss allowances | 2,127 | 1,834 | 1,676 |
| Other | 1,467 | 1,261 | 1,101 |
| Secured tax assets | 8,534 | 8,689 | 9,304 |
| Tax losses | 999 | 1,063 | 1,012 |
| Total | 17,501 | 16,725 | 15,850 |
| Tax liabilities | |||
| Current tax liabilities (2) | 878 | 1,415 | 644 |
| Deferred tax liabilities | 1,677 | 1,520 | 1,769 |
| Financial Instruments | 761 | 557 | 1,124 |
| Other | 916 | 963 | 645 |
| Total | 2,554 | 2,935 | 2,413 |
(1) Balances corresponding to 2022 have been restated according to IFRS 17 (see Notes 1.3 and 2.3).
(2) The increase in current tax assets relates mainly to a higher tax receivable by the tax group in Spain for the refund of year 2023 corporate income tax as a result of the instalment payments made in the year. On the other hand, the decrease in current tax liabilities mainly corresponds to a lower tax payable in Mexico in relation to the estimated corporate income tax for the year 2023, due to the increase in its installment payments for the year.
The most significant variations of the deferred tax assets and liabilities in the years 2023, 2022 and 2021 were derived from the following items:
| 2023 | 2022 | ⁽¹⁾ | 2021 | |||
|---|---|---|---|---|---|---|
| Deferred assets | Deferred liabilities | Deferred assets | Deferred liabilities | Deferred assets | Deferred liabilities | |
| Balance at the beginning | 14,747 | 1,520 | 14,917 | 1,769 | 15,327 | 1,809 |
| Pensions | 23 | — | 6 | — | (23) | — |
| Financials instruments | (409) | 204 | 70 | (567) | 116 | 216 |
| Loss allowances | 293 | — | 158 | — | (7) | — |
| Others | 206 | (47) | 160 | 318 | 32 | (256) |
| Secured tax assets | (155) | — | (615) | — | (57) | — |
| Tax losses | (64) | — | 51 | — | (471) | — |
| Balance at the end | 14,641 | 1,677 | 14,747 | 1,520 | 14,917 | 1,769 |
(1) Balances corresponding to 2022 have been restated according to IFRS 17 (see Notes 1.3 and 2.3).
With respect to the changes in deferred tax assets and liabilities in 2023 contained in the above table, the following should be pointed out:
The very functioning of corporate income tax, due to the differences between accounting and taxation, produces constant movements in deferred taxes.
Of the deferred tax assets and liabilities contained in the table above, those included in Note 19.4 above have been recognized against the entity's equity, and the rest against earnings for the year or reserves. As of December 31, 2023, 2022 and 2021, the estimated amount of temporary differences associated with investments in subsidiaries, joint ventures and associates, which were not recognized as deferred tax liabilities in the consolidated balance sheets, amounted to €96, €88 and €93 million, respectively.
Of the deferred tax assets contained in the above table, the detail of the items and amounts guaranteed by the Spanish government, broken down by the items that originated those assets is as follows:
| 2023 | 2022 | 2021 | |
|---|---|---|---|
| Pensions | 1,622 | 1,622 | 1,759 |
| Loss allowances | 6,912 | 7,067 | 7,545 |
| Total | 8,534 | 8,689 | 9,304 |
As of December 31, 2023, non-guaranteed net deferred tax assets of the above table amounted to €4,430 million (€4,537 and €3,844 million as of December 31, 2022 and 2021, respectively), which broken down by major geographies is as follows:
With regard to Turkey, it should be noted that both its tax rate and its net deferred assets have been affected by the evolution of the country's tax regulations during 2023, which has entailed, on the one hand, (i) the revaluation, from a tax point of view, of certain non-monetary assets based on inflation, highlighting in this respect the positive impact generated in the first quarter of the year consisting of an initial credit to the corporate income tax expense in the consolidated financial statements of the BBVA Group, amounting to approximately 260 million euros, and on the other hand, (ii) the modification of the general corporate income tax rate, which increases from 20% to 25% (30% for banks and financial institutions) and which is applicable to profits generated in tax periods beginning on or after January 1, 2023. It has not had a material impact on the consolidated financial statements of the BBVA Group.
Based on the information available as of December 31, 2023, including historical levels of benefits and projected results available to the Group for the coming 15 years, the Group has carried out an analysis of its recovery of deferred tax assets and liabilities and it is considered that there is sufficient positive evidence, in excess of the negative evidence, that sufficient positive taxable income will be generated for the recovery of the aforementioned unsecured deferred tax assets when they become deductible in accordance with tax legislation.
On the other hand, the Group has not recognized for accounting purposes (or, as the case may be, has been subject to a valuation adjustment) certain deferred tax assets (tax loss carryforwards, deductions and temporary differences) for which, in general, there is no legal period for offsetting, amounting to approximately €2,398 million (in terms of quota), which mainly arise from the integration of Catalunya Banc in the case of Spain, in accordance with the following breakdown by each of of the jurisdictions in which the Group is located and carries on its business activities:
(i) Spain: €2,352,434 thousand;
(ii) United States: €27,268 thousand;
(iii) Portugal: €12,179 thousand;
(iv) Japan: €2,897 thousand;
(v) Peru: €2,549 thousand;
(vi) Netherlands: €683 thousand; and
(vii) China: €96 thousand.
In connection with the above, it should be noted that within the framework of the ongoing process of rationalization of the Group's corporate structure which, among other things, may provide for the future dissolution and liquidation of companies, the materialization of the aforementioned deferred tax assets not recognized for accounting purposes may take place in the Group company that is a shareholder of the entity being dissolved and liquidated, as a result of the disclosure of tax losses pending deduction associated with the shareholding of the company which, as the case may be, is dissolved and liquidated.
On December 28, 2022, the Law for the establishment of the temporary tax on credit institutions and financial credit establishments was published in the Official State Gazette.# This law establishes an obligation to pay a non-taxable equity benefit of public nature during the years 2023 and 2024 on those credit institutions that operate in Spain whose aggregate interest income and fee and commission income in 2019 was €800 million or more.
The amount of the non-taxable equity benefit to be paid is the result of applying the percentage of 4.8% to the sum of the net interest income and fee and commission income and expense derived from the activity carried out in Spain, as shown in the income statement of the tax consolidation group to which the credit institutions belongs, corresponding to the calendar year prior to the year in which the obligation to make such a payment arose. The payment obligation arises on the first day of the calendar year of fiscal years 2023 and 2024. The impact of the payment required to be made by BBVA on account of this benefit in 2023 amounted to €215 million and was recorded under "Other operating expense" in the consolidated income statement (see Note 42). The estimated impact corresponding to the year 2024 is €285 million and will be recorded on the first quarter of 2024 in such caption of the consolidated income statement.
The composition of the balance of these captions of the consolidated balance sheets is:
| Other assets and liabilities (Millions of Euros) | 2023 | 2022 ⁽¹⁾ | 2021 |
|---|---|---|---|
| ASSETS | |||
| Inventories | 276 | 325 | 424 |
| Transactions in progress | 41 | 93 | 131 |
| Accruals | 1,368 | 1,461 | 730 |
| Other items | 1,174 | 706 | 649 |
| Total | 2,859 | 2,586 | 1,934 |
| LIABILITIES | |||
| Transactions in progress | 133 | 44 | 48 |
| Accruals | 2,878 | 2,595 | 2,137 |
| Other items | 2,466 | 2,269 | 1,436 |
| Total | 5,477 | 4,909 | 3,621 |
(1) Balances corresponding to 2022 have been restated according to IFRS 17 (see Notes 1.3 and 2.3).
141 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
The composition of the balances under the headings “Non-current assets and disposal groups classified as held for sale” and “liabilities included in disposal groups classified as held for sale” in the consolidated balance sheets, broken down by the origin of the assets, is as follows:
| Non-current assets and disposal groups classified as held for sale and liabilities included in disposal groups classified as held for sale. Breakdown by items (Millions of Euros) | 2023 | 2022 | 2021 |
|---|---|---|---|
| ASSETS | |||
| Foreclosures and recoveries | 943 | 1,070 | 1,218 |
| Other assets from tangible assets (1) | 1,026 | 1,063 | 563 |
| Companies held for sale | 43 | 40 | 41 |
| Accrued amortization (2) | (84) | (93) | (112) |
| Impairment losses (1) | (1,005) | (1,057) | (650) |
| Total | 923 | 1,022 | 1,061 |
| LIABILITIES | |||
| Companies held for sale | — | — | — |
| Total | — | — | — |
(1) The variation in 2022 corresponds mainly to the reclassification of offices previously in own use and now closed after the closing of the transaction with Merlin Properties (see Note 17). In 2021, it includes the reclassification of owned offices and facilities from "tangible assets" to "non-current assets and disposal groups classified as held for sale" and the adjustments due to the closing of the owned offices and the decommissioning of facilities after the agreement with the union representatives on the collective layoff procedure proposed for Banco Bilbao Vizcaya Argentaria, S.A. in Spain (see Notes 24 and 50).
(2) Corresponds to the accumulated depreciation of assets before their classification as "Non-current assets and disposal groups classified as held for sale".
The changes in the balances of “Non-current assets and disposal groups classified as held for sale” in 2023, 2022 and 2021, are as follows:
| Notes | 2023 | 2022 | 2021 | 2023 | 2022 | 2021 | 2023 | 2022 | 2021 | 2023 | 2022 | |
| Cost (a) | ||||||||||||
| Balance at the beginning | 1,070 | 1,218 | 1,398 | 970 | 452 | 391 | 39 | 41 | 84,792 | 2,078 | 1,711 | |
| Additions | 190 | 211 | 245 | 2 | 1 | — | 2 | 522 | 192 | 214 | 768 | |
| Contributions from merger transactions | — | — | — | — | 592 | — | — | — | — | — | 592 | |
| Retirements (sales and other decreases) | (323) | (353) | (298) | (34) | (110) | (39) | — | (2) | (83,172) | (357) | (465) | |
| Transfers, other movements and exchange differences | 6 | (6) | (127) | 5 | 35 | 100 | 4 | (2) | (2,100) | 15 | 27 | |
| Disposals by companies held for sale | — | — | — | — | — | — | — | — | — | — | — | |
| Balance at the end | 943 | 1,070 | 1,218 | 943 | 970 | 452 | 43 | 39 | 41 | 1,928 | 2,078 | |
| Impairment (b) | ||||||||||||
| Balance at the beginning | 356 | 381 | 386 | 701 | 269 | 208 | — | — | — | 1,057 | 650 | |
| Additions | 50 | 16 | 64 | 36 | 27 | 158 | 62 | — | — | — | 42 | |
| Additions transfer to discontinued operations | — | — | — | — | — | — | — | — | — | — | — | |
| Contributions from merger transactions | — | — | — | — | — | — | — | — | — | — | — | |
| Retirements (sales and other decreases) | (89) | (102) | (65) | (22) | (46) | (13) | — | — | — | (111) | (148) | |
| Other movements and exchange differences | 16 | 13 | 24 | 1 | 320 | 12 | — | — | — | 17 | 333 | |
| Disposals by companies held for sale | — | — | — | — | — | — | — | — | — | — | — | |
| Balance at the end | 299 | 356 | 381 | 706 | 701 | 269 | — | — | — | 1,005 | 1,057 | |
| Balance at the end of net carrying value (a)-(b) | 644 | 714 | 837 | 236 | 269 | 183 | 43 | 39 | 41 | 923 | 1,022 |
(1) Net of accumulated amortization until assets were reclassified as “Non-current assets and disposal groups classified as held for sale”.
As indicated in Note 2.2.6, “Non-current assets and disposal groups held for sale” and “Liabilities included in disposal groups classified as held for sale” are valued at the lower amount between its fair value less costs to sell and its carrying amount. As of December 31, 2023, 2022 and 2021 practically all of the carrying amount of the assets recorded at fair value on a non-recurring basis equals their fair value.
142 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
As of December 31, 2023, 2022 and 2021, assets from foreclosures and recoveries, net of impairment losses, by nature of the asset, amounted to €460 million, €478 million and €608 million in assets for residential use; €154 million, €199 million and €202 million in assets for tertiary use (industrial, commercial or office) and €26 million, €34 million and €19 million in assets for agricultural use, respectively. As of December 31, 2023, 2022 and 2021, the average sale time of assets from foreclosures or recoveries was between 2 and 3 years. During the years 2023, 2022 and 2021, some of the sale transactions for these assets were financed by Group companies. The amount of loans granted to the buyers of these assets in those years amounted to €22 million, €43 million and €62 million, respectively; with an average financing of 61% of the sales price during 2023. As of December 31, 2023, 2022 and 2021, the amount of the profits arising from the sale of assets financed by Group companies that are not recognized in the consolidated income statement is not significant.
The breakdown of the balance under these headings in the consolidated balance sheets is as follows:
| Financial liabilities measured at amortized cost (Millions of Euros) | 2023 | 2022 ⁽¹⁾ | 2021 |
|---|---|---|---|
| Deposits | 473,835 | 459,662 | 416,947 |
| Deposits from central banks | 20,309 | 38,323 | 47,351 |
| Demand deposits | 159 | 205 | 8 |
| Time deposits and other | 12,203 | 33,534 | 41,790 |
| Repurchase agreement | 7,947 | 4,584 | 5,553 |
| Deposits from credit institutions | 40,039 | 26,935 | 19,834 |
| Demand deposits | 6,629 | 11,434 | 7,601 |
| Time deposits and other | 12,871 | 11,787 | 8,599 |
| Repurchase agreement | 20,539 | 3,714 | 3,634 |
| Customer deposits | 413,487 | 394,404 | 349,761 |
| Demand deposits | 317,543 | 316,082 | 293,015 |
| Time deposits and other | 91,740 | 76,063 | 55,479 |
| Repurchase agreement | 4,204 | 2,259 | 1,267 |
| Debt certificates issued | 68,707 | 55,429 | 55,763 |
| Other financial liabilities | 15,046 | 14,081 | 15,183 |
| Total | 557,589 | 529,172 | 487,893 |
(1) Balances corresponding to 2022 have been restated according to IFRS 17 (see Notes 1.3 and 2.3).
The amount recorded in "Deposits from central banks - Time deposits" includes the drawdowns of the TLTRO III facilities of the ECB, mainly by BBVA S.A., amounting to €3,660 million as of December 31, 2023 and €26,711 million as of December 31, 2022, having started the partial repayment of the TLTRO III program in December 2022 for an approximate amount of €35,000 million. As of December 31, 2021 it amounted to €38,692 million (see Note 7.5). The positive income generated by the drawdowns of the TLTRO III facilities has been recorded under the heading of "Interest and other income – Other income" in the consolidated income statements (see Note 37.1), while the negative remuneration generated by the drawdowns of the TLTRO III facilities has been recorded under "Interest expense" in the consolidated income statements.
143 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56).In the event of a discrepancy, the Spanish-language version prevails 22.2 Deposits from credit institutions
The breakdown by geographical area and the nature of the related instruments of this heading in the consolidated balance sheets is as follows:
Deposits from credit institutions (Millions of Euros)
| | Demand deposits | Time deposits and other (1) | Repurchase agreements | Total |
|---|---|---|---|---|
| December 2023 | | | | |
| Spain | 1,252 | 2,434 | 899 | 4,585 |
| Mexico | 789 | 642 | — | 1,431 |
| Turkey | 16 | 535 | 37 | 587 |
| South America | 416 | 2,242 | — | 2,659 |
| Rest of Europe | 3,011 | 2,742 | 19,344 | 25,097 |
| Rest of the world | 1,145 | 4,277 | 259 | 5,681 |
| Total | 6,629 | 12,871 | 20,539 | 40,039 |
| December 2022 | | | | |
| Spain | 1,215 | 1,429 | 67 | 2,709 |
| Mexico | 855 | 732 | — | 1,587 |
| Turkey | 10 | 633 | 29 | 672 |
| South America | 844 | 2,251 | — | 3,095 |
| Rest of Europe | 3,613 | 2,944 | 1,669 | 8,226 |
| Rest of the world | 4,897 | 3,797 | 1,949 | 10,645 |
| Total | 11,434 | 11,787 | 3,714 | 26,935 |
| December 2021 | | | | |
| Spain | 1,671 | 375 | — | 2,047 |
| Mexico | 444 | 558 | — | 1,002 |
| Turkey | 83 | 672 | 37 | 792 |
| South America | 532 | 1,225 | — | 1,757 |
| Rest of Europe | 1,841 | 3,110 | 2,549 | 7,500 |
| Rest of the world | 3,030 | 2,657 | 1,048 | 6,736 |
| Total | 7,601 | 8,599 | 3,634 | 19,834 |
(1) Subordinated deposits are included amounting to €35, €24 and €14 million as of December 31, 2023, 2022 and 2021, respectively.
144
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56).
In the event of a discrepancy, the Spanish-language version prevails
22.3 Customer deposits
The breakdown by geographical area of this heading in the consolidated balance sheets, by type of instrument is as follows:
Customer deposits (Millions of Euros)
| | Demand deposits | Time deposits and other | Repurchase agreements | Total |
|---|---|---|---|---|
| December 2023 | | | | |
| Spain | 179,825 | 17,952 | 4 | 197,780 |
| Mexico | 76,122 | 15,067 | 1,638 | 92,828 |
| Turkey | 20,423 | 21,485 | 1,331 | 43,239 |
| South America | 26,888 | 17,349 | — | 44,237 |
| Rest of Europe | 12,863 | 16,257 | 1,231 | 30,350 |
| Rest of the world | 1,422 | 3,630 | — | 5,052 |
| Total | 317,543 | 91,740 | 4,204 | 413,487 |
| December 2022 ⁽¹⁾ | | | | |
| Spain | 188,803 | 13,937 | 2 | 202,742 |
| Mexico | 64,671 | 12,916 | 630 | 78,217 |
| Turkey | 22,117 | 17,254 | 747 | 40,118 |
| South America | 27,083 | 14,505 | — | 41,587 |
| Rest of Europe | 11,670 | 14,224 | 880 | 26,774 |
| Rest of the world | 1,737 | 3,228 | — | 4,965 |
| Total | 316,082 | 76,063 | 2,259 | 394,404 |
| December 2021 | | | | |
| Spain | 181,565 | 10,407 | 2 | 191,974 |
| Mexico | 53,359 | 10,383 | 505 | 64,247 |
| Turkey | 19,725 | 13,644 | 6 | 33,376 |
| South America | 28,039 | 9,822 | — | 37,861 |
| Rest of Europe | 8,933 | 9,546 | 754 | 19,234 |
| Rest of the world | 1,393 | 1,677 | — | 3,070 |
| Total | 293,015 | 55,479 | 1,267 | 349,761 |
(1) Balances corresponding to 2022 have been restated according to IFRS 17 (see Notes 1.3 and 2.3).
145
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56).
In the event of a discrepancy, the Spanish-language version prevails
22.4 Debt certificates
The breakdown of the balance under this heading, by type of financial instrument and by currency, is as follows:
Debt certificates issued (Millions of Euros)
| | 2023 | 2022 | 2021 |
|---|---|---|---|
| In Euros | | | |
| Promissory bills and notes | 44,622 | 35,611 | 36,289 |
| Non-convertible bonds and debentures | 5,416 | 1,079 | 319 |
| Covered bonds | 16,256 | 16,979 | 15,712 |
| Hybrid financial instruments (1) | 6,734 | 7,665 | 9,930 |
| Securitization bonds | 800 | 959 | 366 |
| Wholesale funding | 2,168 | 2,501 | 2,302 |
| Subordinated liabilities | 6,182 | 139 | 438 |
| Convertible perpetual certificates | 7,066 | 6,289 | 7,221 |
| Other non-convertible subordinated liabilities | 3,000 | 3,000 | 3,500 |
| In foreign currencies | 4,066 | 3,289 | 3,721 |
| Promissory bills and notes | 24,086 | 19,819 | 19,475 |
| Non-convertible bonds and debentures | 336 | 351 | 579 |
| Covered bonds | 8,684 | 9,323 | 7,885 |
| Hybrid financial instruments (1) | 99 | 114 | 178 |
| Securitization bonds | 4,722 | 3,724 | 2,843 |
| Wholesale funding | — | — | 4 |
| Subordinated liabilities | 1,479 | 111 | 412 |
| Convertible perpetual certificates | 8,766 | 6,196 | 7,574 |
| Other non-convertible subordinated liabilities | 2,715 | 1,876 | 1,771 |
| Total | 6,051 | 4,320 | 5,803 |
| | 68,707 | 55,429 | 55,763 |
(1) Corresponds to structured note issuances with embedded derivatives that have been segregated according to IFRS 9.
22.4.1 Subordinated liabilities
The breakdown of this heading in the consolidated balance sheets is as follows:
Memorandum item: Subordinated liabilities at amortized cost (Millions of Euros)
| | 2023 | 2022 | 2021 |
|---|---|---|---|
| Subordinated deposits | 35 | 24 | 14 |
| Subordinated certificates | 15,832 | 12,485 | 14,794 |
| Compound convertible financial instruments | 5,715 | 4,876 | 5,271 |
| Other non-convertible subordinated liabilities | 10,117 | 7,609 | 9,523 |
| Total | 15,867 | 12,509 | 14,808 |
The balance variances are mainly due to the following transactions:
Perpetual Contingent Convertible Securities
The Annual General Shareholders' Meeting of BBVA held on April 20, 2021, resolved, under agenda item five, to authorize the Board of Directors of BBVA, with sub-delegation powers, to issue convertible securities, whose conversion is contingent and which are intended to meet regulatory requirements for their eligibility as capital instruments (CoCos), in accordance with the solvency regulations applicable from time to time, subject to the legal and statutory provisions that may be applicable at any time. The Board of Directors may make issues on one or several times within the maximum term of five years from the date on which this resolution was adopted, up to the maximum overall amount of €8 billion or its equivalent in any other currency. The Board of Directors may also resolve to exclude, either fully or partially, the pre-emptive subscription rights of shareholders within the framework of a concrete issuance, complying in all cases with the legal requirements and limitations established for this purpose at any given time.
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Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56).
In the event of a discrepancy, the Spanish-language version prevails
Under that delegation, BBVA has made the following contingently convertible issuances that qualify as additional tier 1 capital of the Bank and the Group in accordance with Regulation (EU) 575/2013:
– On June 21, 2023, BBVA carried out an issuance of perpetual contingent convertible securities with exclusion of shareholders' pre-emptive subscription rights, for a total nominal amount of €1 billion. This issuance is listed in the Global Exchange Market of Euronext Dublin and was targeted only at qualified investors, not being offered or sold to any retail clients.
– On September 19, 2023, BBVA carried out an issuance of perpetual contingent convertible securities with exclusion of shareholders' pre-emptive subscription rights, for a total nominal amount of USD 1 billion. This issuance is listed on the New York Stock Exchange and was targeted only at qualified investors, not being offered or sold to any retail clients.
These perpetual securities issued, where appropriate, must be converted into newly issued ordinary shares of BBVA if the CET 1 ratio of the Bank or the Group is less than 5.125%, in accordance with their respective terms and conditions. These type of issuances made by the Bank may be fully redeemed at BBVA's option only in the cases contemplated in their respective terms and conditions and, in any case, in accordance with the provisions of the applicable legislation.
In particular, throughout the financial years 2021, 2022 and 2023:
– On April 14, 2021, the Bank early redeemed the issuance of contingently convertible preferred securities (which qualified as additional tier 1 instruments) carried out by the Bank on April 14, 2016, for an amount of €1 billion on the First Reset Date of the issuance and once the prior consent from the Regulator was obtained.
– On May 24, 2022, the Bank early redeemed the contingently convertible preferred securities (which qualified as additional tier 1 instruments) issued by the Bank on May 24, 2017, for an amount of €500 million on the First Reset Date and once the prior consent from the Regulator was obtained.
– On September 24, 2023, the Bank early redeemed the issuance of contingently convertible preferred securities (which qualified as additional tier 1 instruments) carried out by the Bank on September 24, 2018, for an amount of €1 billion on the First Reset Date and once the prior consent from the Regulator was obtained.
Convertible Securities
The Annual General Shareholders' Meeting of BBVA held on March 18, 2022, resolved, under agenda item five, to confer authority on the Board of Directors of BBVA, with sub-delegation powers, to issue securities convertible into new BBVA shares (other than contingently convertible securities, envisaged to meet regulatory requirements for their eligibility as capital instruments (CoCos) referred to in the resolutions adopted by BBVA's Annual General Shareholders' Meeting held on April 20, 2021, under agenda item five), subject to provisions in the law and in BBVA's bylaws that may be applicable at any time, on one or several occasions within the maximum term of five years to be counted as from the date on which the resolution was adopted, up to a maximum total amount of €6 billion, or the equivalent in any other currency. The Board of Directors may also resolve to exclude, either fully or partially, the pre- emptive subscription rights of shareholders within the framework of a specific issuance, limiting this power to the extent that the nominal amount of the capital increases agreed or executed in order to satisfy conversion of the issues carried out excluing the pre- emptive subscription right by virtue of this power (without prejudice to anti-dilution adjustments) and any agreed or executed in use of the power under the item 4 of the Agenda of the same General Meeting, described in Note 26, excluding the pre-emptive subscription right, do not exceed a maximum aggregated nominal amount of 10% of BBVA's share capital at the time the resolution was adopted.As of the date hereof the Bank has not made use of the authority granted by the BBVA Annual General Shareholders' Meeting held on March 18, 2022.
The breakdown of the balance under this heading in the consolidated balance sheets is as follows:
| Other financial liabilities (Millions of Euros) | 2023 | 2022 ⁽¹⁾ | 2021 |
|---|---|---|---|
| Lease liabilities (2) | 1,507 | 1,398 | 2,560 |
| Creditors for other financial liabilities | 3,439 | 3,584 | 2,657 |
| Collection accounts | 3,642 | 3,426 | 3,839 |
| Creditors for other payment obligations | 6,458 | 5,673 | 6,127 |
| Total | 15,046 | 14,081 | 15,183 |
(1) Balances corresponding to 2022 have been restated according to IFRS 17 (see Notes 1.3 and 2.3).
(2) The variation in 2022 corresponds mainly to the closing of the transaction with Merlin Properties for which 100% of the shares of Tree Inversiones Inmobiliarias, SOCIMI, S.A. were acquired by BBVA Group (see Note 17).
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
A breakdown of the maturity of the lease liabilities, due after December 31, 2023 is provided below:
| Maturity of future payment obligations (Millions of Euros) | Up to 1 year | 1 to 3 years | 3 to 5 years | Over 5 years | Total |
|---|---|---|---|---|---|
| Leases | 236 | 264 | 182 | 824 | 1,507 |
The Group has insurance subsidiaries mainly in Spain, Latin America (mostly in Mexico) and Turkey. Specifically, the insurance entities located in Spain and Mexico together accounted for approximately 95% in terms of total liabilities under insurance and reinsurance contracts as of December 31, 2023. The main product offered by the insurance subsidiaries is life insurance to cover the risk of death (risk insurance) and life-savings insurance. Within life and accident insurance, a distinction is made between freely sold products and those offered to customers who have taken mortgage or consumer loans, which cover the principal of those loans in the event of the customer’s death. There are two types of savings products: individual insurance, which seeks to provide the customer with savings for retirement or other events, and group insurance, which is taken out by employers to cover their commitments to their employees.
The insurance business is affected by different risks, including those that are related to the BBVA Group such as credit risk, market risk, liquidity risk and operational risk and the methodology for risk measurement, control and follow-up applied in the insurance activity is similar (see Note 7 and Management Report - Risk management), although it has a differentiated management due to the particular characteristics of the insurance business, such as the coverage of contracted obligations and the long term of the commitments. Additionally, the insurance business generates certain specific risks, of a probabilistic nature:
The insurance activity is fully integrated into the BBVA Group's risk management framework. From the definition of the risk appetite to the management limits, the governance model, the admission process, the organizational scheme and the development of computer systems/models, everything is designed with a global approach and under consistent and homogeneous criteria, aligned with other financial business of the BBVA Group. This also means that control activities and information flow are fully integrated into internal processes, from local reporting to the corporate bodies of the BBVA Group.
The insurance industry is highly regulated in each geographical area. In this regard, it should be noted that the insurance industry is undergoing a gradual regulatory transformation through new accounting and risk-based capital regulations, which have already been published in several countries.
The amounts that the consolidated insurance entities are entitled to receive from reinsurance contracts they maintain with third parties are recognized under the heading “Assets under reinsurance and insurance contracts” in the consolidated balance sheets. As of December 31, 2023 and 2022, the balance under this heading amounted to €211 million and €183 million, respectively.
The heading “Liabilities under insurance and reinsurance contracts” in the consolidated balance sheets includes the liabilities recorded under insurance contracts of the consolidated insurance entities in accordance with IFRS 17 (see Note 2.2.8). The breakdown of the balance of this heading as of December 31, 2023 and 2022 is as follows:
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
| Liabilities under insurance and reinsurance contracts (Millions of Euros) | 2023 | 2022 ⁽¹⁾ |
|---|---|---|
| Insurances | 12,110 | 10,131 |
| Liabilities for remaining coverage | 10,900 | 9,157 |
| Estimates of the present value of cash flows | 9,361 | 7,745 |
| Risk adjustment | 171 | 155 |
| Cost service margin | 1,213 | 1,097 |
| Loss component | 1 | 1 |
| Premium reserve - Simplified Model | 154 | 159 |
| Liabilities for incurred claims | 1,210 | 974 |
| Estimates of the present value of cash flows | 1,191 | 959 |
| Risk adjustment | 19 | 15 |
| Reinsurances | — | — |
| Total | 12,110 | 10,131 |
(1) Balances corresponding to 2022 have been restated according to IFRS 17 (see Notes 1.3 and 2.3).
In addition, the breakdown of “Liabilities under insurance and reinsurance contracts” in the consolidated balance sheets by type of product as of December 31, 2023 and 2022 is shown in the table below:
| Liabilities under insurance and reinsurance contracts by type of product (Millions of Euros) | 2023 | 2022 ⁽¹⁾ |
|---|---|---|
| Liabilities for remaining coverage | 10,900 | 9,157 |
| Life insurance | 10,657 | 8,962 |
| Individuals life insurance ⁽²⁾ | 8,900 | 7,592 |
| Group insurance ⁽³⁾ | 1,757 | 1,370 |
| Non-life insurance | 243 | 195 |
| Liabilities for incurred claims | 1,210 | 974 |
| Total | 12,110 | 10,131 |
(1) Balances corresponding to 2022 have been restated according to IFRS 17 (see Notes 1.3 and 2.3).
(2) Provides coverage in the event of death, disability and serious illness.
(3) The insurance policies purchased by employers (other than BBVA Group) on behalf of their employees.
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
The variation in liabilities under insurance and reinsurance contracts analyzed by liability for the remaining coverage and liability for incurred claims for the years 2023 and 2022 is shown below:
Variation in liabilities under insurance and reinsurance contracts analyzed by liabilities for the remaining coverage and the liabilities for incurred claims.
December 2023 (Millions of Euros)
| Liability for remaining coverage | Liability for incurred claims | Total | |
|---|---|---|---|
| Excluding loss component | Loss component | ||
| Initial balance | 7,871 | 1,286 | 974 |
| Result from insurance service | (2,817) | (5) | 1,532 |
| Insurance revenue | (2,887) | (10) | — |
| Amounts related to changes in liability for remaining coverage | (995) | (10) | — |
| Recovery of insurance acquisition cash flows | (23) | — | — |
| Other | (1,869) | — | — |
| Insurance expense | 70 | 5 | 1,532 |
| Incurred claims and other expenses | — | — | 1,509 |
| Amortization of insurance acquisition cash flows | 70 | — | — |
| Changes to liability for incurred claims | — | — | 23 |
| Impairment (reversal) from loss component | — | 5 | — |
| Financial income/ expenses from insurance contracts | 495 | 68 | 1 |
| Exchange differences | 795 | 212 | 59 |
| Cash flows | 2,692 | 302 | (1,357) |
| Final balance | 9,036 | 1,864 | 1,210 |
Variation in liabilities under insurance and reinsurance contracts analyzed by liabilities for the remaining coverage and the liabilities for incurred claims.
December 2022 (Millions of Euros)
| Liability for remaining coverage | Liability for incurred claims | Total | |
|---|---|---|---|
| Excluding loss component | Loss component | ||
| Initial balance | 7,657 | 1,218 | 1,097 |
| Result from insurance service | (2,201) | (244) | 1,260 |
| Insurance revenue | (2,329) | (246) | — |
| Amounts related to changes in liability for remaining coverage | (828) | (246) | — |
| Recovery of insurance acquisition cash flows | (4) | — | — |
| Other | (1,497) | — | — |
| Insurance expense | 128 | 2 | 1,260 |
| Incurred claims and other expenses | — | — | 1,112 |
| Amortization of insurance acquisition cash flows | 116 | — | — |
| Changes to liability for incurred claims | — | — | 148 |
| Impairment (reversal) from loss component | 12 | 2 | — |
| Financial income/ expenses from insurance contracts | (749) | 55 | 2 |
| Exchange differences | 820 | 228 | 51 |
| Cash flows | 2,345 | 30 | (1,437) |
| Final balance | 7,871 | 1,286 | 974 |
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
Likewise, the variation of liabilities under insurance and reinsurance contracts, distinguishing between their different valuation components for the years 2023 and 2022 is shown below:
Variation in liabilities under insurance and reinsurance contracts analyzed by valuation component.Variation in liabilities under insurance and reinsurance contracts analyzed by valuation component.
December 2023 (Millions of Euros)
| Estimated present value of future cash flows | Risk adjustment | Contractual service margin ⁽¹⁾ | Total |
|---|---|---|---|
| Initial balance | 8,056 | 150 | 1,097 |
| Insurance service result | (384) | — | (23) |
| Changes that relate to current services | (749) | (26) | (185) |
| Contractual service margin release | — | — | (185) |
| Risk adjustment release | — | (26) | — |
| Experience adjustments | (749) | — | — |
| Changes that relate to future services | (189) | 26 | 163 |
| Changes in estimates that adjust the contractual service margin | 35 | (6) | (36) |
| Changes in estimates that result in losses (reversals) on onerous contracts | (6) | — | 4 |
| Contracts initially recognized in the year | (218) | 32 | 194 |
| Changes that relate to past services | 554 | — | — |
| Adjustments to liability for incurred claims | 554 | — | — |
| Financial income/ expenses from insurance contracts | 508 | 11 | 45 |
| Exchange rate differences | 935 | 6 | 94 |
| Cash flows | 623 | — | — |
| Contracts transferred to / from a third party | — | — | — |
| Final balance | 9,738 | 167 | 1,213 |
(1) In general the transitional approach for calculating the contractual service margin has been the fair value approach for long-term contracts and the full retrospective approach for short-term contracts (see Note 2.3).
December 2022 (Millions of Euros)
| Estimated present value of future cash flows | Risk adjustment | Contractual service margin ⁽¹⁾ | Total |
|---|---|---|---|
| Initial balance | 7,945 | 112 | 948 |
| Insurance service result | (606) | 46 | 49 |
| Changes that relate to current services | (750) | (14) | (144) |
| Contractual service margin release | — | — | (144) |
| Risk adjustment release | — | (14) | — |
| Experience adjustments | (750) | — | — |
| Changes that relate to future services | (270) | 60 | 193 |
| Changes in estimates that adjust the contractual service margin | (50) | 45 | 3 |
| Changes in estimates that result in losses (reversals) on onerous contracts | (15) | — | (3) |
| Contracts initially recognized in the year | (204) | 15 | 194 |
| Changes that relate to past services | 413 | — | — |
| Adjustments to liability for incurred claims | 413 | — | — |
| Financial income/ expenses from insurance contracts | (704) | (20) | 29 |
| Exchange rate differences | 1,009 | 11 | 72 |
| Cash flows | 412 | — | — |
| Contracts transferred to / from a third party | — | — | — |
| Final balance | 8,056 | 150 | 1,097 |
(1) In general the transitional approach for calculating the contractual service margin has been the fair value approach for long-term contracts and the full retrospective approach for short-term contracts (see Note 2.3).
(Millions of Euros)
| Maturity | Up to 1 year | 1 to 3 years | 3 to 5 years | Over 5 years | Total |
|---|---|---|---|---|---|
| 2023 | 1,356 | 962 | 2,425 | 7,367 | 12,110 |
| 2022 ⁽¹⁾ | 1,754 | 663 | 1,664 | 6,050 | 10,131 |
(1) Balances corresponding to 2022 have been restated according to IFRS 17 (see Notes 1.3 and 2.3).
The classification and valuation models used to calculate the liabilities under insurance and reinsurance contracts are detailed in Note 2.2.8 of these consolidated Financial Statements. In general, in estimating compliance flows valued under the General Model, the Group has used tables based on the companies' own experience to estimate discounted future cash flows for all units of account, except for those cases in which the entity has not had sufficient historical data for the construction of the assumptions, so in such cases, regulatory tables have been used. In relation to the assets and liabilities under insurance and reinsurance contracts falling under IFRS 4, which was applicable to 2021, the consolidated balance sheets for that year presented mathematical reserves of €9,495 million (of which €7,265 million related to individual life insurance and €2,230 million to group insurance), provisions for unpaid claims amounted to €706 million and provisions for unexpired risks and other provisions amounted to €664 million.
The breakdown of the balance under this heading in the consolidated balance sheets, based on type of provisions, is as follows:
(Millions of Euros)
| Notes | 2023 | 2022 | 2021 |
|---|---|---|---|
| Provisions for pensions and similar obligations | 25 | 2,571 | 2,632 |
| Other long term employee benefits (1) | 25 | 435 | 466 |
| Provisions for taxes and other legal contingencies | 7.1 | 696 | 685 |
| Provisions for contingent risks and commitments | 770 | 770 | |
| Other provisions (2) | 452 | 380 | |
| Total | 4,924 | 4,933 |
(1) In 2021 it included the collective layoff procedure that was carried out at Banco Bilbao Vizcaya Argentaria, S.A.
(2) Individually non-significant provisions, for various concepts and corresponding to different geographical areas.
The change in provisions for pensions and similar obligations for the years ended December 31, 2023, 2022 and 2021 is as follows:
(Millions of Euros)
| Notes | 2023 | 2022 ⁽¹⁾ | 2021 |
|---|---|---|---|
| Balance at the beginning | 2,632 | 3,576 | 4,272 |
| Charges to income for the year | 211 | 25 | 141 |
| Interest expense and similar charges | 133 | 75 | 37 |
| Personnel expense | 44.1 | 49 | 42 |
| Provision expense | 29 | (92) | |
| Charges (credits) to equity (2) | 25 | 314 | (433) |
| Transfers and other changes | (57) | 24 | (21) |
| Benefit payments | 25 | (424) | (492) |
| Employer contributions | 25 | (106) | (67) |
| Balance at the end | 2,571 | 2,632 | 3,576 |
(1) Balances corresponding to 2022 have been restated according to IFRS 17 (see Notes 1.3 and 2.3).
(2) Correspond to actuarial losses (gains) arising from certain post-employment defined-benefit commitments for pensions recognized in “Equity” (see Note 2.2.13).
(Millions of Euros)
| 2023 | 2022 | 2021 | |
|---|---|---|---|
| Balance at beginning | 1,065 | 990 | 1,091 |
| Additions (1) | 651 | 417 | 1,175 |
| Acquisition of subsidiaries | — | — | — |
| Unused amounts reversed during the year | (385) | (130) | (227) |
| Amount used and other variations (1) | (183) | (211) | (1,050) |
| Balance at the end | 1,148 | 1,065 | 990 |
(1) In 2021, it includes the initial recognition of the estimated cost of the collective layoff procedure that was carried out at Banco Bilbao Vizcaya Argentaria, S.A., and the subsequent reclassification from "Other provisions" to "Other long term employee benefits" for the remaining amount at the time of the reclassification.
On June 8, 2021, BBVA reached an agreement with the union representatives on the collective layoff procedure proposed for Banco Bilbao Vizcaya Argentaria, S.A. in Spain on April 13, 2021, which would affect a maximum of 2,935 employees. The agreement also included the closing of 480 offices. The cost of the process amounted to €994 million before taxes, of which €754 million corresponded to the collective layoff and €240 million to the closing of offices (see Notes 17, 21, 46, 49 and 50). By the time the procedure was over, 2,899 employees had accepted the agreement and effectively departed BBVA.
The financial sector faces an environment of increased regulatory pressure and litigation. In this environment, the various Group entities are often subject to lawsuits and involved in individual or collective legal proceedings and litigation arising from their activity and operations, including proceedings arising from their lending activity, from their labor relations and from other commercial, regulatory or tax issues, as well as in arbitration. On the basis of the information available, the Group considers that, as of December 31, 2023, the provisions made in relation to judicial proceedings and arbitrations, where so required, are adequate and reasonably cover the liabilities that might arise, if any, from such proceedings and arbitrations. Furthermore, on the basis of the information available and with the exceptions indicated in Note 7.1 "Risk factors", BBVA considers that the liabilities that may arise from such proceedings will not have, individually, a significant adverse effect on the Group's business, financial situation or results of operations.
As stated in Note 2.2.13, the Group has assumed commitments with employees including short-term employee benefits (see Note 44.1), defined contribution and defined benefit plans (see Glossary), healthcare and other long-term employee benefits. The Group sponsors defined-contribution plans for the majority of its active employees with the plans in Spain and Mexico being the most significant. Most defined benefit plans are closed to new employees with liabilities relating largely to retired employees, the most significant being those in Spain, Mexico and Turkey. In Mexico, the Group provides medical benefits to a closed group of employees and their family members, both in active service and retirement.The breakdown of the net defined benefit liability recorded on the balance sheet as of December 31, 2023, 2022 and 2021 is provided below:
| Notes | 2023 | 2022 | 2021 |
|---|---|---|---|
| Net defined benefit liability (asset) on the consolidated balance sheet (Millions of Euros) | |||
| Pension commitments | 3,849 | 3,661 | 4,218 |
| Early retirement commitments | 412 | 606 | 952 |
| Medical benefits commitments | 1,728 | 1,448 | 1,377 |
| Other long term employee benefits | 435 | 466 | 632 |
| Total commitments | 6,424 | 6,181 | 7,180 |
| Pension plan assets | 1,675 | 1,608 | 1,494 |
| Medical benefit plan assets | 1,744 | 1,476 | 1,494 |
| Total plan assets ⁽¹⁾ | 3,419 | 3,084 | 2,988 |
| Total net liability / asset | 3,006 | 3,097 | 4,193 |
| Of which: Net asset on the consolidated balance sheet (2) | — | (1) | (15) |
| Of which: Net liability on the consolidated balance sheet for provisions for pensions and similar obligations (3) | 2,571 | 2,632 | 3,576 |
| Of which: Net liability on the consolidated balance sheet for other long term employee benefits | 435 | 466 | 632 |
(1) In Turkey, the foundation responsible for managing the benefit commitments holds an additional asset of €153 million as of December 31, 2023 which, in accordance with IFRS regarding the asset ceiling, has not been recognized in the Consolidated Financial Statements, because although it could be used to reduce future pension contributions it could not be immediately refunded to the employer.
(2) Recorded under the heading “Other Assets - Other” of the consolidated balance sheet (see Note 20).
(3) Recorded under the heading “Provisions - Provisions for pensions and similar obligations” of the consolidated balance sheet.
The impact relating to benefit commitments charged to consolidated income statement for the years 2023, 2022 and 2021 is as follows:
| Notes | 2023 | 2022 | ⁽¹⁾ 2021 |
|---|---|---|---|
| Consolidated income statement impact (Millions of Euros) | |||
| Interest and other expense | 133 | 75 | 37 |
| Interest expense | 444 | 342 | 257 |
| Interest income | (311) | (267) | (220) |
| Personnel expense | 188 | 130 | 120 |
| Defined contribution plan expense | 44.1 | 139 | 87 |
| Defined benefit plan expense | 44.1 | 49 | 42 |
| Provisions or (reversal) of provisions | 46 | 31 | (89) |
| Early retirement expense | — | — | 100 |
| Past service cost expense | 36 | 34 | (28) |
| Remeasurements ⁽²⁾ | (7) | (126) | (16) |
| Other provision expense | 2 | 3 | 6 |
| Total impact on consolidated income statement: expense (income) | 352 | 116 | 218 |
(1) Balances corresponding to 2022 have been restated according to IFRS 17 (see Notes 1.3 and 2.3).
(2) Actuarial losses (gains) on remeasurement of the net defined benefit liability relating to early retirements in Spain and other long-term employee benefits that are charged to the income statements (see Note 2.2.12).
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The amounts relating to post-employment benefits charged to the consolidated balance sheet correspond to the actuarial gains (losses) on remeasurement of the net defined benefit liability relating to pension and medical commitments before income taxes as of December 31, 2023, 2022 and 2021 are as follows:
| Equity impact (Millions of Euros) | 2023 | 2022 | 2021 |
|---|---|---|---|
| Defined benefit plans | 302 | (363) | 52 |
| Post-employment medical benefits | 12 | (71) | (257) |
| Total impact on equity: debit (credit) | 314 | (433) | (206) |
In 2023, the aggregate impact of this heading amounted to a debit of €314 million driven by the variation in financial assumptions, losses of €71 million from commitments in Spain, and losses of €170 million for commitments in Mexico. These amounts are offset by other minor effects of actuarial experience in these geographical areas and financial, demographic and experience effects in other geographical areas.
In 2022, the aggregate impact of this heading amounted to a credit of €433 million driven by the variation in financial assumptions, gains of €558 million from commitments in Spain, and losses of €72 million for commitments in Mexico. These amounts are offset by other minor effects of actuarial experience in these geographical areas and financial, demographic and experience effects in other geographical areas.
In 2021, the aggregate impact of this heading amounted to a credit of €206 million driven by the variation in financial assumptions, gains of €171 million for the commitments in Mexico, and gains of €55 million for the commitments in Spain. These amounts are offset by other geographies and demographic and experience effects.
155
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
Defined benefit commitments relate mainly to employees who have already retired or taken early retirement, certain closed groups of active employees still accruing defined benefit pensions, and in-service death and disability benefits provided to most active employees. For the latter, the Group pays the required premiums to fully insure the related liability.
The change in these pension commitments during the years ended December 31, 2023, 2022 and 2021 is presented below:
| Defined benefits (Millions of Euros) | 2023 | 2022 | 2021 |
| :--------------------------------------------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- |
| | Defined benefit obligation | Plan assets | Net liability (asset) | Defined benefit obligation | Plan assets | Net liability (asset) | Defined benefit obligation | Plan assets | Net liability (asset) |
| Balance at the beginning | 5,715 | 3,084 | 2,632 | 6,547 | 2,988 | 3,560 | 7,348 | 3,092 | 4,256 |
| Current service cost | 52 | — | 52 | 45 | — | 45 | 53 | — | 53 |
| Interest income/expense | 425 | 311 | 114 | 333 | 267 | 65 | 253 | 220 | 33 |
| Contributions by plan participants | 10 | 10 | — | 10 | 10 | — | 5 | 5 | — |
| Employer contributions | — | 106 | (106) | — | 67 | (67) | — | 4 | (4) |
| Past service costs (1) | 36 | — | 36 | 34 | — | 34 | 75 | — | 75 |
| Remeasurements: | 375 | 68 | 307 | (741) | (240) | (501) | (406) | (184) | (223) |
| Return on plan assets (2) | — | 68 | (68) | — | (240) | 240 | — | (184) | 184 |
| From changes in demographic assumptions | (86) | — | (86) | (29) | — | (29) | (121) | — | (121) |
| From changes in financial assumptions | 248 | — | 248 | (812) | — | (812) | (259) | — | (259) |
| Other actuarial gains and losses | 212 | — | 212 | 100 | — | 100 | (27) | — | (27) |
| Benefit payments | (655) | (232) | (424) | (676) | (184) | (492) | (765) | (158) | (608) |
| Settlement payments | (76) | (75) | (1) | (4) | (4) | — | (1) | (1) | — |
| Business combinations and disposals | (1) | — | (1) | — | — | — | (2) | 1 | (3) |
| Effect on changes in foreign exchange rates | 124 | 153 | (29) | 161 | 180 | (20) | (24) | 8 | (32) |
| Conversions to defined contributions | — | — | — | — | — | — | — | — | — |
| Other effects | (15) | (7) | (8) | 7 | — | 7 | 13 | — | 13 |
| Balance at the end | 5,989 | 3,419 | 2,571 | 5,715 | 3,084 | 2,631 | 6,547 | 2,988 | 3,560 |
| Of which: Spain | 2,310 | 129 | 2,181 | 2,546 | 147 | 2,399 | 3,670 | 206 | 3,464 |
| Of which: Mexico | 2,988 | 2,702 | 286 | 2,426 | 2,329 | 97 | 2,150 | 2,149 | 1 |
| Of which: The United States | — | — | — | — | — | — | — | — | — |
| Of which: Turkey | 435 | 363 | 72 | 418 | 315 | 103 | 272 | 209 | 63 |
(1) Including gains and losses arising from settlements.
(2) Excluding interest, which is recorded under "Interest income or expense".
The balance under the heading “Provisions - Pensions and other post-employment defined benefit obligations” of the consolidated balance sheet as of December 31, 2023 includes €210 million relating to post-employment benefit commitments to former members of the Board of Directors and the Bank’s Management (see Note 54). The most significant commitments are those in Spain and Mexico and, to a lesser extent, in Turkey. The remaining commitments are located mostly in Portugal and South America. Unless otherwise required by local regulation, all defined benefit plans have been closed to new entrants, who instead are able to participate in the Group´s defined contribution plans. Both the costs and the present value of the commitments are determined by independent qualified actuaries using the “projected unit credit” method. In order to guarantee the good governance of these plans, the Group has established specific benefits committees. These benefit committees include members from the different areas of the business to ensure that all decisions are made taking into consideration all of the associated impacts.
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Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
The following table sets out the key actuarial assumptions used in the valuation of these commitments as of December 31, 2023, 2022 and 2021:
| Actuarial assumptions (%) | 2023 | 2022 | 2021 | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Spain | Mexico | Turkey | Spain | Mexico | Turkey | Spain | Mexico | Turkey | |
| Discount rate | 3.43 % | 10.44 % | 25.60 % | 3.91 % | 10.68 % | 17.79 % | 0.74 % | 9.68 % | 19.10 % |
| Rate of salary increase | — | 4.50 % | 23.44 % | — | 4.50 % | 15.86 % | — | 4.00 % | 16.60 % |
| Rate of pension increase | — | 4.14 % | 21.94 % | — | 4.41 % | 14.36 % | — | 2.95 % | 15.10 % |
| Medical cost trend rate | — | 8.04 % | 26.14 % | — | 8.04 % | 18.56 % | — | 7.00 % | 19.30 % |
| Mortality tables | PER 2020 | EMSSA09 | TUIK 2019 | PER 2020 | EMSSA09 | TUIK 2019 | PER 2020 | EMSSA09 | CSO2001 |
In Spain, the discount rate shown as of December 31, 2023, corresponds to the weighted average rate, the actual discount rates used are 3.25% and 3.5% depending on the type of commitment. Discount rates used to value future benefit cash flows have been determined by reference to high quality corporate bonds (Note 2.2.12) denominated in Euro in the case of Spain and Mexican peso for Mexico, and government bonds denominated in Turkish Lira for Turkey. The expected return on plan assets has been set in line with the adopted discount rate. Assumed retirement ages have been set by reference to the earliest age at which employees are entitled to retire, the contractually agreed age in the case of early retirements in Spain or by using retirement rates. Changes in the main actuarial assumptions may affect the valuation of the commitments.## 25. EMPLOYEE BENEFITS
The table below shows the sensitivity of the benefit obligations to changes in the key assumptions:
Sensitivity analysis (Millions of Euros)
| Basis points change | 2023 | 2022 | 2021 | |||
|---|---|---|---|---|---|---|
| Increase | Decrease | Increase | Decrease | Increase | Decrease | |
| Discount rate | (265) | 291 | (321) | 350 | (282) | 307 |
| Rate of salary increase | 4 | (4) | 1 | (1) | 2 | (2) |
| Rate of pension increase | 34 | (32) | 32 | (39) | 28 | (26) |
| Medical cost trend rate | 141 | (126) | 119 | (106) | 109 | (98) |
| Change in obligation from each additional year of longevity | 134 | — | 113 | — | 170 | — |
The sensitivities provided above have been determined at the date of these consolidated financial statements, and reflect solely the impact of changing one individual assumption at a time, keeping the rest of the assumptions unchanged, thereby excluding the effects which may result from combined assumption changes.
In addition to the commitments to employees shown above, the Group has other less material long-term employee benefits. These include leaves and long-service awards, which consist of either an established monetary award or some vacation days granted to certain groups of employees when they complete a given number of years of service. Additionally, this heading included a fund related to the collective layoff procedure that was carried out in Banco Bilbao Vizcaya Argentaria, S.A. in 2021. As of December 31, 2023, 2022 and 2021, the actuarial liabilities for the outstanding awards amounted to €435 million, €466 million and €632 million, respectively. These commitments are recorded under the heading "Provisions - Other long-term employee benefits" of the consolidated balance sheet (see Note 24).
These commitments relate mostly to pension payments, and which have been determined based on salary and years of service. For most plans, pension payments are due on retirement, death and long term disability. Additionally, there are commitments with early retired personnel from Spanish companies of the Group. These commitments include the compensation and indemnities due as well as the contributions payable to external pension funds during the early retirement period. As of December 31, 2023 , 2022 and 2021, the value of these commitments amounted to €412 million, € 606 million and €952 million, respectively.
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Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
The change in the benefit plan obligations and plan assets during the year ended December 31, 2023 was as follows:
Post-employment commitments (Millions of Euros)
| 2023 | Spain | Mexico | Turkey | Rest of the world | |
|---|---|---|---|---|---|
| Defined benefit obligation | |||||
| Balance at the beginning | 2,546 | 985 | 418 | 318 | |
| Current service cost | 3 | 9 | 17 | 3 | |
| Interest income or expense | 90 | 108 | 50 | 11 | |
| Contributions by plan participants | — | — | 9 | 2 | |
| Employer contributions | — | — | — | — | |
| Past service costs (1) | — | — | 33 | 3 | |
| Remeasurements: | 67 | 156 | 161 | (4) | |
| Return on plan assets (2) | — | — | — | — | |
| From changes in demographic assumptions | — | — | (14) | (2) | |
| From changes in financial assumptions | 78 | 114 | 10 | (10) | |
| Other actuarial gains and losses | (11) | 42 | 165 | 8 | |
| Benefit payments | (402) | (102) | (68) | (14) | |
| Settlement payments | — | (1) | — | (75) | |
| Business combinations and disposals | — | — | — | (1) | |
| Effect on changes in foreign exchange rates | — | 114 | (162) | 4 | |
| Conversions to defined contributions | — | — | — | — | |
| Other effects | 6 | — | (21) | — | |
| Balance at the end | 2,310 | 1,269 | 435 | 247 | |
| Of which: Vested benefit obligation relating to current employees | 64 | ||||
| Of which: Vested benefit obligation relating to retired employees | 2,246 | ||||
| Plan Assets | |||||
| Balance at the beginning | 147 | 853 | 315 | 293 | |
| Current service cost | — | — | — | — | |
| Interest income or expense | 5 | 91 | 41 | 9 | |
| Contributions by plan participants | — | — | 9 | 2 | |
| Employer contributions | — | 37 | 23 | 29 | |
| Past service costs (1) | — | — | — | — | |
| Remeasurements: | — | (19) | 129 | (25) | |
| Return on plan assets (2) | — | (19) | 129 | (25) | |
| From changes in demographic assumptions | — | — | — | — | |
| From changes in financial assumptions | — | — | — | — | |
| Other actuarial gains and losses | — | — | — | — | |
| Benefit payments | (23) | (102) | (25) | (12) | |
| Settlement payments | — | (1) | — | (74) | |
| Business combinations and disposals | — | — | — | — | |
| Effect on changes in foreign exchange rates | — | 99 | (122) | 3 | |
| Conversions to defined contributions | — | — | — | — | |
| Other effects | — | — | (7) | — | |
| Balance at the end | 129 | 958 | 363 | 224 | |
| Net liability (asset) | |||||
| Balance at the beginning | 2,399 | 132 | 103 | 25 | |
| Current service cost | 3 | 9 | 17 | 3 | |
| Interest income or expense | 85 | 17 | 8 | 2 | |
| Contributions by plan participants | — | — | — | — | |
| Employer contributions | — | (37) | (23) | (29) | |
| Past service costs (1) | — | — | 33 | 3 | |
| Remeasurements: | 67 | 175 | 32 | 21 | |
| Return on plan assets (2) | — | 19 | (129) | 25 | |
| From changes in demographic assumptions | — | — | (14) | (2) | |
| From changes in financial assumptions | 78 | 114 | 10 | (10) | |
| Other actuarial gains and losses | (11) | 42 | 165 | 8 | |
| Benefit payments | (379) | — | (43) | (1) | |
| Settlement payments | — | — | — | (1) | |
| Business combinations and disposals | — | — | — | (1) | |
| Effect on changes in foreign exchange rates | — | 15 | (40) | 1 | |
| Conversions to defined contributions | — | — | — | — | |
| Other effects | 6 | — | (14) | — | |
| Balance at the end | 2,181 | 311 | 72 | 23 |
(1) Including gains and losses arising from settlements.
(2) Excluding interest, which is recorded under "Interest income or expense".
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The change in net liabilities (assets) during the years ended December 31, 2022 and 2021 was as follows:
Post-employment commitments (Millions of Euros)
| 2022: Net liability (assets) | 2021: Net liability (assets) | |||||||
|---|---|---|---|---|---|---|---|---|
| Spain | Mexico | Turkey | Rest of the world | Spain | Mexico | Turkey | Rest of the world | |
| Balance at the beginning | 3,464 | 124 | 63 | 24 | 4,039 | 28 | 85 | 27 |
| Current service cost | 4 | 7 | 13 | 3 | 5 | 5 | 16 | 3 |
| Interest income or expense | 51 | 14 | 10 | 4 | 20 | 1 | 9 | 1 |
| Contributions by plan participants | — | — | — | — | — | — | — | — |
| Employer contributions | — | (41) | (22) | (3) | 11 | (2) | (11) | (1) |
| Past service costs (1) | — | 1 | 2 | 3 | 75 | — | 2 | 2 |
| Remeasurements: | (643) | 152 | 62 | (1) | (98) | 128 | 10 | (5) |
| Return on plan assets (2) | 34 | 45 | (104) | 121 | 8 | 49 | (11) | 19 |
| From changes in demographic assumptions | — | — | (37) | 8 | — | (4) | — | (2) |
| From changes in financial assumptions | (643) | 73 | 82 | (132) | (61) | 84 | (18) | (7) |
| Other actuarial gains and losses | (34) | 34 | 122 | 2 | (45) | (2) | 39 | (15) |
| Benefit payments | (484) | — | (6) | (1) | (599) | (1) | (6) | (1) |
| Settlement payments | — | — | — | — | — | — | — | — |
| Business combinations and disposals | — | (139) | — | — | — | (40) | — | (2) |
| Effect on changes in foreign exchange rates | — | 13 | (18) | (3) | — | 5 | (43) | 1 |
| Conversions to defined contributions | — | — | — | — | — | — | — | — |
| Other effects | 7 | — | — | — | 12 | — | — | — |
| Balance at the end | 2,399 | 132 | 103 | 25 | 3,464 | 124 | 63 | 24 |
(1) Includes gains and losses from settlements.
(2) Excludes interest which is reflected in the line item “Interest income and expense”.
In Spain, local regulation requires that pension and death benefit commitments must be funded, either through a qualified pension plan or an insurance contract. In the Spanish entities these commitments are covered by insurance contracts which meet the requirements of the accounting standard regarding the non-recoverability of contributions. However, a significant number of the insurance contracts are with BBVA Seguros, S.A. – a consolidated subsidiary and related party – and consequently these policies cannot be considered plan assets under IAS 19. For this reason, the liabilities insured under these policies are fully recognized under the heading "Provisions – Pensions and other post-employment defined benefit obligations" of the consolidated balance sheet (see Note 24), while the related assets held by the insurance company are included within the Group´s consolidated assets (recorded according to the classification of the corresponding financial instruments). As of December 31, 2023 the value of these separate assets was €1,631 million, (€ 1,656 and €2,326 million as of December 31, 2022 and 2021, respectively) representing direct rights of the insured employees held in the consolidated balance sheet, hence these benefits are effectively fully funded. On the other hand, some pension commitments have been funded through insurance contracts with insurance companies not related to the Group. In this case the consolidated balance sheet reflects the value of the obligations net of the fair value of the qualifying insurance policies. As of December 31, 2023, 2022 and 2021, the value of the aforementioned insurance policies (€130, €147 and €206 million, respectively) exactly match the value of the corresponding obligations and therefore no amount for this item has been recorded in the consolidated balance sheet. Pension benefits are paid by the insurance companies with whom BBVA has insurance contracts and to whom all insurance premiums have been paid. The premiums are determined by the insurance companies using cash flow matching techniques to ensure that benefits can be met when due, guaranteeing both the actuarial and interest rate risk.
In Mexico, there is a defined benefit plan for employees hired prior to 2001. Other employees participate in a defined contribution plan. External funds/trusts have been constituted locally to meet benefit payments as required by local regulation.
In 2008, the Turkish government passed a law to unify the different existing pension systems under a single umbrella Social Security system. Such system provides for the transfer of the various previously established funds. The financial sector is in this stage at present, maintaining these pension commitments managed by external pension funds (foundations) established for that purpose. The foundation that maintains the assets and liabilities relating to employees of Garanti BBVA in Turkey, as per the local regulatory requirements, has registered an obligation amounting to €193 million as of December 31, 2023 pending future transfer to the Social Security system.## 25.1.2 Medical benefit commitments
The change in defined benefit obligations and plan assets during the years 2023, 2022 and 2021 was as follows:
| Medical benefits commitments (Millions of Euros) | 2023 | 2022 | 2021 | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Defined benefit obligation | Plan assets | Net liability (asset) | Defined benefit obligation | Plan assets | Net liability (asset) | Defined benefit obligation | Plan assets | Net liability (asset) | |
| Balance at the beginning | 1,448 | 1,476 | (28) | 1,377 | 1,494 | (116) | 1,562 | 1,484 | 77 |
| Current service cost | 20 | — | 20 | 19 | — | 19 | 24 | — | 24 |
| Interest income or expense | 167 | 165 | 2 | 144 | 157 | (14) | 131 | 129 | 2 |
| Contributions by plan participants | — | — | — | — | — | — | — | — | — |
| Employer contributions | — | 17 | (17) | — | — | — | — | 1 | (1) |
| Past service costs | (1) | — | — | — | 28 | (28) | (5) | — | (5) |
| Remeasurements: | (5) | (17) | 12 | (215) | (144) | (71) | (377) | (119) | (257) |
| Return on plan assets | (2) | — | (17) | 17 | — | (144) | 144 | — | (119) |
| From changes in demographic assumptions | (70) | — | (70) | — | — | — | (115) | — | (115) |
| From changes in financial assumptions | 56 | — | 56 | (191) | — | (191) | (257) | — | (257) |
| Other actuarial gain and losses | 8 | — | 8 | (23) | — | (23) | (4) | — | (4) |
| Benefit payments | (70) | (70) | — | (60) | (60) | — | (49) | (48) | — |
| Settlement payments | — | — | — | — | — | — | — | — | — |
| Business combinations and disposals | — | — | — | — | (139) | 139 | — | (39) | 39 |
| Effect on changes in foreign exchange rates | 168 | 173 | (5) | 155 | 167 | (11) | 90 | 86 | 4 |
| Other effects | — | — | — | — | — | — | — | — | — |
| Balance at the end | 1,728 | 1,744 | (16) | 1,448 | 1,476 | (28) | 1,377 | 1,494 | (116) |
(1) Including gains and losses arising from settlements.
(2) Excluding interest, which is recorded under "Interest income or expense".
In Mexico, there is a medical benefit plan for employees hired prior to 2007. New employees from 2007 are covered by a medical insurance policy. An external trust has been constituted locally to fund the plan, in accordance with local legislation and Group policy. In Turkey, employees are currently provided with medical benefits through a foundation in collaboration with the Social Security system, although local legislation prescribes the future unification of this and similar systems into the general Social Security system itself. The valuation of these benefits and their accounting treatment follow the same methodology as that employed in the valuation of pension commitments.
As of December 31, 2023, the estimated benefit payments over the next ten years for all the entities in Spain, Mexico and Turkey are as follows:
| Estimated benefit payments (Millions of Euros) | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 - 2033 |
|---|---|---|---|---|---|---|
| Commitments in Spain | 477 | 325 | 279 | 242 | 210 | 697 |
| Commitments in Mexico | 206 | 216 | 226 | 236 | 246 | 1,409 |
| Commitments in Turkey | 17 | 16 | 19 | 22 | 27 | 272 |
| Total | 699 | 557 | 524 | 500 | 484 | 2,378 |
The majority of the Group´s defined benefit plans are funded by plan assets held in external funds/trusts legally separate from the Group sponsoring entity. However, in accordance with local regulation, some commitments are not externally funded and covered through internally held provisions, principally those relating to early retirements.
Plan assets are those assets which will be used to directly settle the assumed commitments and which meet the following conditions: they are not part of the Group sponsoring entities assets, they are available only to pay post-employment benefits and they cannot be returned to the Group sponsoring entity. To manage the assets associated with defined benefit plans, BBVA Group has established investment policies designed according to criteria of prudence and minimizing the financial risks associated with plan assets. The investment policy consists of investing in a low risk and diversified portfolio of assets with maturities consistent with the term of the benefit obligation and which, together with contributions made to the plan, will be sufficient to meet benefit payments when due, thus mitigating the plans‘ risks. In those countries where plan assets are held in pension funds or trusts, the investment policy is developed consistently with local regulation. When selecting specific assets, current market conditions, the risk profile of the assets and their future market outlook are all taken into consideration. In all the cases, the selection of assets takes into consideration the term of the benefit obligations as well as short-term liquidity requirements. The risks associated with these commitments are those which give rise to a deficit in the plan assets. A deficit could arise from factors such as a fall in the market value of plan assets, an increase in long-term interest rates leading to a decrease in the fair value of fixed income securities, or a deterioration of the economy resulting in more write-downs and credit rating downgrades.
The table below shows the allocation of plan assets of the main companies of the BBVA Group as of December 31, 2023, 2022 and 2021:
| Plan assets breakdown (Millions of Euros) | 2023 | 2022 | 2021 |
|---|---|---|---|
| Cash and cash equivalents | 86 | 169 | 24 |
| Debt securities (government bonds) | 2,818 | 2,270 | 2,394 |
| Mutual funds | — | — | 1 |
| Asset-backed securities | — | — | — |
| Structured debt | — | — | — |
| Insurance contracts | 21 | 183 | 148 |
| Total | 2,924 | 2,622 | 2,566 |
| Of which: Bank account in BBVA | 23 | 7 | 3 |
| Of which: Debt securities issued by BBVA | — | — | — |
| Of which: Property occupied by BBVA | — | — | — |
In addition to the above there are plan assets relating to the previously mentioned insurance contracts in Spain and the foundation in Turkey.
The following table provides details of investments in listed securities (Level 1) as of December 31, 2023, 2022 and 2021:
| Investments in listed markets (Millions of Euros) | 2023 | 2022 | 2021 |
|---|---|---|---|
| Cash and cash equivalents | 86 | 169 | 24 |
| Debt securities (Government bonds) | 2,818 | 2,270 | 2,394 |
| Mutual funds | — | — | 1 |
| Total | 2,904 | 2,439 | 2,418 |
| Of which: Bank account in BBVA | 23 | 7 | 3 |
| Of which: Debt securities issued by BBVA | — | — | — |
| Of which: Property occupied by BBVA | — | — | — |
The remainder of the assets are mainly invested in Level 2 assets in in accordance with the classification established under IFRS 13 (mainly insurance contracts). As of December 31, 2023, almost all of the assets related to employee commitments corresponded to fixed income securities.
Certain Group entities sponsor defined contribution plans. Some of these plans allow employees to make contributions which are then matched by the employer. Contributions are recognized as and when they are accrued, with a charge to the consolidated income statement in the corresponding year. No liability is therefore recognized in the consolidated balance sheet (see Note 44.1).
As of December 31, 2023 and 2022 BBVA’s share capital amounted to €2,860,590,786.20 and €2,954,757,116.36 divided into 5,837,940,380 and 6,030,116,564 shares, respectively; while as of December 31, 2021 BBVA’s share capital amounted to €3,267,264,424.20 divided into 6,667,886,580 shares. These decreases have been the result of the partial executions of the share capital reduction resolution adopted by the Ordinary Annual General Shareholders' Meeting of BBVA held on March 17, 2023, under item 3 of the agenda notified on June 2, 2023 and on December 19, 2023; and by the Annual General Shareholders' Meeting of BBVA held on March 18, 2022, under item seven of its agenda, which were notified by means of Other Relevant Information on June 15, 2022 and on September 30, 2022 (see Note 4). As of December 31, 2023, 2022 and 2021, the shares were fully subscribed and paid-up, of the same class and series, of €0.49 par value each, and represented through book-entry accounts. All of the Bank´s shares carry the same voting and dividend rights, and no single stockholder enjoys special voting rights. Each and every share is part of the Bank’s capital.
The Bank’s shares are traded on the stock markets of Madrid, Barcelona, Bilbao and Valencia through the Sistema de Interconexión Bursátil Español (Mercado Continuo), as well as on the London and Mexico stock markets. BBVA American Depositary Shares (ADSs) traded on the New York Stock Exchange under the ticker “BBVA”. Additionally, as of December 31, 2023, the shares of Banco BBVA Peru, S.A., BBVA Banco Provincial, S.A., Banco BBVA Colombia, S.A., Banco BBVA Argentina, S.A., and Garanti BBVA A.S., were listed on their respective local stock markets. Banco BBVA Argentina, S.A. was also quoted in the Latin American market (Latibex) of the Madrid Stock Exchange and the New York Stock Exchange. Also, the Depositary Receipts (“DR”) of Garanti BBVA, A.S. are listed in the London Stock Exchange. BBVA is also currently included, amongst other indexes, in the IBEX 35® Index, which is made up by the 35 most liquid securities traded on the Spanish Market and, technically, it is a price index that is weighted by capitalization and adjusted according to the free float of each company comprised in the index. As of December 31, 2023, State Street Bank and Trust Co., The Bank of New York Mellon SA NV and Chase Nominees Ltd in their capacity as international custodian/depositary banks, held 15.73%, 1.81%, and 9.20% of BBVA common stock, respectively.# Of said positions held by the custodian banks, BBVA is not aware of any individual shareholders with direct or indirect holdings greater than or equal to 3% of BBVA common stock outstanding. On April 18, 2019, Blackrock, Inc. reported to the Spanish Securities and Exchange Commission (CNMV) that, it had an indirect holding of BBVA common stock totaling 5.917%, of which 5.480% are voting rights attributed to shares and 0.437% are voting rights through financial instruments. On November 8, 2023, Capital Research and Management Company reported to the Spanish Securities and Exchange Commission (CNMV) that, it had an indirect holding of BBVA common stock totaling 3.010 %, of which 3.07% correspond to voting rights attributed to shares and 0.003% correspond to voting rights held through financial instruments. BBVA is not aware of any direct or indirect interests through which control of the Bank may be exercised. Furthermore, BBVA has not received any information on stockholder agreements including the regulation of the exercise of voting rights at its Annual General Shareholders' Meetings or restricting or placing conditions on the free transferability of BBVA shares. No agreement is known to BBVA that could give rise to changes in the control of the Bank. BBVA banking subsidiaries, associates and joint ventures worldwide, are subject to supervision and regulation from a variety of regulatory bodies in relation to, among other aspects, the satisfaction of minimum capital requirements. The obligation to satisfy such capital requirements may affect the ability of such entities to transfer funds in the form of cash dividends, loans or advances. In addition, under the laws of the various jurisdictions where such entities are incorporated, dividends may only be paid out through funds legally available for such purpose. Even when the minimum capital requirements are met and funds are legally available, the relevant regulators or other public administrations could discourage or delay the transfer of funds to the Group in the form of cash, dividends, loans or advances for prudential reasons.
BBVA's Annual General Shareholders' Meeting held on March 18, 2022 resolved, under agenda item four, to confer authority on the Board of Directors of BBVA to increase BBVA's share capital, on one or several occasions, within the legal term of five years to be counted as from the date on which this resolution was adopted, up to the maximum amount corresponding to 50% of BBVA's share capital at the time of this authorization. Likewise, the Annual General Shareholders' Meeting resolved to confer on the Board of Directors authority to totally or partially exclude shareholders' pre-emptive subscription rights within the framework of a specific issue of shares that may be made thereunder.
162 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
However, the power to exclude pre-emptive subscription rights was limited, such that the nominal amount of any share capital increases resolved or effectively carried out with the exclusion of pre-emptive subscription rights and those that may be resolved or carried out to cover the conversion of convertible issuances that may equally be made with the exclusion of pre-emptive subscription rights in use of the authority delegated to issue securities convertible (other than contingently convertible securities, envisaged to meet regulatory requirements for their eligibility as capital instruments (CoCos)) as resolved by BBVA's Annual General Shareholders' Meeting held on March 18, 2022 under agenda item five and which is described in Note 22.4.1 (without prejudice to anti-dilution adjustments), may not exceed the nominal maximum overall amount of 10% of BBVA's share capital at the time of this authorization. This authority repealed the authority conferred by the Annual General Shareholders' Meeting held on March 17, 2017 under its agenda item four, which BBVA did not use. As of the date of this document, the Bank has not exercised the authority conferred by the General Shareholders' Meeting.
BBVA's Annual General Shareholders' Meeting held on March 18, 2022 resolved, under agenda item seven, to approve the share capital reduction of BBVA by up to a maximum amount of 10% of the share capital on the date of this resolution, through the redemption of own shares acquired derivatively by BBVA, both those acquired by virtue of the authorization granted by the BBVA Annual General Shareholders' Meeting held on March 16, 2018 under item three of the agenda, and those that were acquired by virtue of the authorization granted by the General Shareholders' Meeting held on March 18, 2022 under item six of the agenda, from that date, through any mechanism whose objective or purpose is redemption. The implementation period of this resolution was determined until the date of the following Annual General Shareholders' Meeting, being rendered null and void from that date in respect of the amount not executed. The Annual General Shareholders' Meeting conferred authority on the Board of Directors of BBVA, with sub-delegation powers, to totally or partially execute the aforementioned share capital reduction, on one or more occasions, repealing the resolution adopted by the Annual General Shareholders' Meeting held on April 20, 2021 under agenda item six, which BBVA did not use.
In the execution of said resolution, (see Note 4), BBVA has executed the following share capital reductions:
BBVA's Annual General Shareholders' Meeting held on March 17, 2023 resolved, under agenda item three, to approve the share capital reduction of BBVA by up to a maximum amount of 10% of the share capital on the date of this resolution, through the redemption of own shares acquired derivatively by BBVA by virtue of the authorization granted by the General Shareholders' Meeting held on March 18, 2022 under item six of the agenda, through any mechanism whose objective or purpose is redemption, The implementation period of this resolution was determined until the date of the following Annual General Shareholders' Meeting, being rendered null and void from that date in respect of the amount not executed. The Annual General Shareholders' Meeting conferred authority on the Board of Directors of BBVA, with sub-delegation powers, to totally or partially execute the aforementioned share capital reduction, on one or more occasions, repealing the resolution adopted by the Annual General Shareholders' Meeting held on March 18, 2022, under agenda item seven, whose executions are described above.
In the execution of said resolution, (see Note 4), BBVA has executed the following share capital reductions:
Note 22.4 introduces the details of the convertible and/or exchangeable securities.
163 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
As of December 31, 2023, the balance under this heading in the consolidated balance sheets was €19,769 million. As of December 31, 2022 and 2021, the balance under this heading was €20,856 and €23,599 million, respectively (see Note 4). The amended Spanish Corporation Act expressly permits the use of the share premium balance to increase capital and establishes no specific restrictions as to its use (see Note 26).
The breakdown of the balance under this heading in the consolidated balance sheets is as follows:
| Retained earnings and other reserves | |
| :----------------------------------- | : |## 28. Reserves
| 2023 | 2022 ⁽¹⁾ | 2021 | |
|---|---|---|---|
| Legal reserve | 572 | 591 | 653 |
| Restricted reserve | 561 | 482 | 761 |
| Voluntary reserves | 5,478 | 3,906 | 3,994 |
| Total reserves holding company ⁽²⁾ | 6,612 | 4,979 | 5,409 |
| Consolidation reserves attributed to the Bank and subsidiary consolidated companies | 31,639 | 30,077 | 24,575 |
| Total | 38,251 | 35,056 | 29,984 |
(1) Balances corresponding to 2022 have been restated according to IFRS 17 (see Notes 1.3 and 2.3).
(2) Total reserves of BBVA, S.A. (See Appendix IX).
Under the amended Spanish Corporations Act, 10% of any profit made each year must be transferred to the legal reserve. The transfer must be made until the legal reserve reaches 20% of the common stock. The legal reserve can be used to increase the common stock provided that the remaining reserve balance does not fall below 10% of the increased capital. While it does not exceed 20% of the common stock, it can only be allocated to offset losses exclusively in the case that there are not sufficient reserves available.
As of December 31, 2023, 2022 and 2021, the Bank’s restricted reserves are as follows:
| 2023 | 2022 | 2021 | |
|---|---|---|---|
| Restricted reserve for retired capital | 495 | 400 | 88 |
| Restricted reserve for Parent Company shares and loans for those shares (2) | 65 | 80 | 672 |
| Restricted reserve for redenomination of capital in euros | 2 | 2 | 2 |
| Total | 561 | 482 | 761 |
Until 2021, the restricted reserve for retired capital resulted from the reduction of the nominal par value of the BBVA shares made in April 2000. In 2023 and 2022 the amount includes the partial executions of the capital reduction resolution adopted by BBVA's General Shareholders' Meeting held on March 17, 2023 and March 18, 2022, respectively (see Note 26). The second heading corresponds to restricted reserves related to the amount of shares issued by the Bank in its possession at each date, as well as the amount of customer loans outstanding at those dates that were granted for the purchase of, or are secured by, the parent company shares. The balance of 2021 is mainly due to the share buyback program (see Note 4). Finally, pursuant to Law 46/1998 on the Introduction of the Euro, a restricted reserve is recognized as a result of the rounding effect of the redenomination of the parent company common stock in euros.
164
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
The breakdown, by company or corporate group, under the headings “Retained earnings” and “other reserves” in the consolidated balance sheets is as follows:
| 2023 | 2022 ⁽¹⁾ | 2021 | |
|---|---|---|---|
| Retained earnings (losses), revaluation reserves and other reserves | |||
| Holding Company | 15,672 | 14,003 | 12,467 |
| BBVA Mexico Group | 15,705 | 14,042 | 13,894 |
| Garanti BBVA Group | 5,857 | 5,703 | 3,043 |
| BBVA Provincial Group | 1,758 | 1,720 | 1,721 |
| BBVA Argentine Group | 1,474 | 1,456 | 1,423 |
| BBVA Colombia Group | 1,573 | 1,489 | 1,393 |
| BBVA Perú Group | 1,158 | 1,065 | 1,031 |
| Forum Chile Group | 652 | 632 | 604 |
| BBVA Uruguay Group | 139 | 118 | 106 |
| BV America, S.L. | 374 | 299 | 270 |
| Corporación General Financiera, S.A. | 368 | 338 | 322 |
| BBVA Seguros, S.A. | 306 | 284 | 239 |
| Bilbao Vizcaya Holding, S.A. | 198 | 144 | 68 |
| BBVA Axial Tech S.A. de C.V. | 87 | 85 | 78 |
| Pecri Inversión, S.L. | (17) | 119 | 118 |
| Anida Operaciones Singulares, S.A. | (5,497) | (5,529) | (5,512) |
| Other Real State Spanish Companies (2) | (1,164) | (909) | (934) |
| Other | (155) | 217 | (101) |
| Subtotal (3) | 38,488 | 35,277 | 30,231 |
| Other reserves or accumulated losses of investments in joint ventures and associates | |||
| ATOM Bank PLC | (181) | (169) | (158) |
| Metrovacesa, S.A. | (84) | (84) | (84) |
| Other | 28 | 32 | (5) |
| Subtotal | (237) | (221) | (247) |
| Total | 38,251 | 35,057 | 29,984 |
(1) Balances corresponding to 2022 have been restated according to IFRS 17 (see Notes 1.3 and 2.3).
(2) Includes balances corresponding to Sociedades inmobiliarias CX, Anida Grupo Inmobiliario and Sociedades inmobiliarias Unnim.
(3) In 2021 includes the accounting for shares pending from buyback program (see Note 4) and the reclassification of items not subject to reclassification to income statement to by results for "Actuarial gains (losses) in defined benefit pension plans". For the purpose of allocating the reserves and accumulated losses to the consolidated entities and to the parent company, the transfers of reserves arising from the dividends paid and transactions between these entities are taken into account in the period in which they took place.
165
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
In the years ended December 31, 2023, 2022 and 2021 the Group entities performed the following transactions with shares issued by the Bank:
| 2023 | 2022 | 2021 | |
|---|---|---|---|
| Number of Shares | Millions of Euros | Number of Shares | |
| Balance at beginning | 5,485,414 | 29 | 127,633,399 |
| + Purchases | 301,882,728 | 2,166 | 598,457,024 |
| - Sales and other changes | (302,981,517) | (2,161) | (720,605,009) |
| +/- Derivatives on BBVA shares | — | — | — |
| +/- Other changes | — | — | — |
| Balance at the end | 4,386,625 | 34 | 5,485,414 |
| Of which: | |||
| Held by BBVA, S.A. | — | 3 | — |
| Held by Corporación General Financiera, S.A. | 4,354,004 | 31 | 5,454,516 |
| Held by other subsidiaries | 32,621 | — | 30,898 |
| Average purchase price in Euros | 7.18 | — | 4.96 |
| Average selling price in Euros (including other changes) | 7.14 | — | 4.99 |
| Net gains or losses on transactions (Shareholders' funds-Reserves) | 1 | 9 | 17 |
In 2023, 2022 and 2021 there were transactions included in the share buyback program (see Note 4).
The percentages of treasury shares held by the Group in the years ended December 31, 2023, 2022 and 2021 are as follows:
| Treasury Share | 2023 | 2022 | 2021 |
|---|---|---|---|
| Min | Max | Closing | |
| % treasury share | 0.038% | 2.214% | 0.075% |
The number of BBVA shares accepted by the Group in pledge of loans as of December 31, 2023, 2022 and 2021 is as follows:
| 2023 | 2022 | 2021 | |
|---|---|---|---|
| Number of shares in pledge | 17,492,194 | 23,437,363 | 29,372,853 |
| Nominal value (in Euros) | 0.49 | 0.49 | 0.49 |
| % of share capital | 0.29% | 0.39% | 0.44% |
The number of BBVA shares owned by third parties but under management of a company within the Group as of December 31, 2023, 2022 and 2021 is as follows:
| 2023 | 2022 | 2021 | |
|---|---|---|---|
| Number of shares owned by third parties | 13,258,994 | 18,686,027 | 17,645,506 |
| Nominal value (in Euros) | 0.49 | 0.49 | 0.49 |
| % of share capital | 0.23% | 0.31% | 0.26% |
166
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
The breakdown of the balance under this heading in the consolidated balance sheets is as follows
| Notes | 2023 | 2022 ⁽¹⁾ | 2021 | |
|---|---|---|---|---|
| Items that will not be reclassified to profit or loss | (2,105) | (1,881) | (2,075) | |
| Actuarial gains (losses) on defined benefit pension plans | (1,049) | (760) | (998) | |
| Fair value changes of equity instruments measured at fair value through other comprehensive income | 13.4 | (1,112) | (1,194) | (1,079) |
| Fair value changes of financial liabilities at fair value through profit or loss attributable to changes in their credit risk | 55 | 72 | — | 2 |
| Items that may be reclassified to profit or loss | (14,148) | (15,760) | (14,401) | |
| Hedge of net investments in foreign operations (effective portion) | (2,498) | (1,408) | (146) | |
| Mexican peso | (3,147) | (1,751) | (681) | |
| Turkish lira | 670 | 358 | 555 | |
| Other exchanges | (21) | (15) | (19) | |
| Foreign currency translation | (11,419) | (13,078) | (14,988) | |
| Mexican peso | (640) | (2,791) | (4,503) | |
| Turkish lira | (6,908) | (6,599) | (6,607) | |
| Argentine peso | (1,296) | (868) | (1,024) | |
| Venezuela Bolívar | (1,865) | (1,850) | (1,858) | |
| Other exchanges | (711) | (969) | (995) | |
| Hedging derivatives. Cash flow hedges (effective portion) | 133 | (447) | (533) | |
| Fair value changes of debt instruments measured at fair value through other comprehensive income | 13.4 | (357) | (809) | 1,274 |
| Share of other recognized income and expense of investments in joint ventures and associates | (8) | (18) | (9) | |
| Total | (16,254) | (17,642) | (16,476) |
(1) Balances corresponding to 2022 have been restated according to IFRS 17 (see Notes 1.3 and 2.3). The balances recognized under these headings are presented net of tax. The main changes in 2023 are explained by the appreciation against the euro of some of the currencies of the main geographies where the Group operates against the euro such as the Mexican peso (11.4%) and Colombian peso (21.4%), the depreciation of the Argentine peso (78.9%), the Turkish lira (38.9%) and the application of IAS 29 "Financial Reporting in Hyperinflationary Economies" in Turkey and Argentina (see Note 2.2.18).
The breakdown by groups of consolidated entities under the heading “Minority interests (non-controlling interests)” of total equity in the consolidated balance sheets is as follows:
As of December 31, 2023, 2022 and 2021, own funds is calculated in accordance to the applicable regulation of each year on minimum capital requirements for Spanish credit institutions –both as individual entities and as consolidated group– that establish how to calculate them, as well as the various internal capital adequacy assessment processes they should have in place and the information they should disclose to the market.
Regarding the minimum capital requirements, the ECB informed the Group that the Pillar 2 requirement would remain at 1.71% (of which at least 0.96% must be CET1) since January 1, 2023. Therefore, BBVA should maintain a CET1 capital ratio of 8.75% and a total capital ratio of 13.00% at a consolidated level 5, which once updated taking into account the countercyclical buffer as of September 30, 2023, are 8.78% and 13.03%, respectively.
In addition, after the latest SREP (Supervisory Review and Evaluation Process) decision, applicable as from January 1, 2024, the ECB has informed the Group that it must maintain a total capital ratio of 13.25% and a CET1 capital ratio of 9.09% at the consolidated level, which include the consolidated Pillar 2 requirement of 1.68% (at least 1.02% must be CET1), of which 0.18% is determined on the basis of the ECB's prudential provisioning expectation which, shall be satisfied with CET1.
The BBVA Group has set the objective of maintaining a fully-loaded CET1 ratio at a consolidated level between 11.5% and 12.0%. At closing of the financial year 2023, the fully-loaded CET1 ratio was above this target range.
5 Includes the update of the countercyclical capital buffer calculated on the basis of exposure as of December 31, 2022.
A reconciliation of the main figures between the accounting and regulatory own funds as of December 31, 2023, 2022 and 2021 is shown below:
| Eligible capital resources (Millions of Euros) | Notes | 2023 ⁽¹⁾ | 2022 ⁽²⁾ | 2021 |
|---|---|---|---|---|
| Capital | 26 | 2,861 | 2,955 | 3,267 |
| Share premium | 27 | 19,769 | 20,856 | 23,599 |
| Retained earnings, revaluation reserves and other reserves | 28 | 38,251 | 35,056 | 29,984 |
| Other equity instruments, net | 40 | 63 | 60 | |
| Treasury shares | 29 | (34) | (29) | (647) |
| Profit (loss) attributable to the parent company | 5 | 8,019 | 6,358 | 4,653 |
| Interim dividend | (951) | (722) | (532) | |
| Total equity | 67,955 | 64,535 | 60,384 | |
| Accumulated other comprehensive income (loss) | 30 | (16,254) | (17,642) | (16,476) |
| Minority interests | 31 | 3,564 | 3,623 | 4,853 |
| Shareholders' equity | 55,265 | 50,517 | 48,760 | |
| Goodwill and other intangible assets | (1,421) | (1,395) | (1,484) | |
| Differences from solvency and accounting perimeter | (137) | (123) | (130) | |
| Equity not eligible at solvency level | (137) | (123) | (130) | |
| Other adjustments and deductions | 3 | (7,603) | (6,262) | (7,197) |
| Common Equity Tier 1 (CET 1) | 46,104 | 42,738 | 39,949 | |
| Additional Tier 1 before Regulatory Adjustments | 6,033 | 5,193 | 5,737 | |
| Total Regulatory Adjustments to Additional Tier 1 | — | — | — | |
| Tier 1 | 52,138 | 47,931 | 45,686 | |
| Tier 2 | 8,182 | 5,930 | 7,383 | |
| Total Capital (Total Capital=Tier 1 + Tier 2) | 60,320 | 53,861 | 53,069 | |
| Total Minimum equity required | 47,418 | 43,111 | 39,275 |
⁽¹⁾ Provisional data.
⁽²⁾ Balances corresponding to 2022 have been restated according to IFRS 17 (see Notes 1.3 and 2.3).
⁽³⁾ Other adjustments and deductions includes, among others, the adjustment of non-eligible minority interests, the amount of repurchase of own shares up to the maximum limit authorized by the ECB for the BBVA Group in 2021 (see Note 4) and the amount of shareholders remuneration pending to be distributed.
The Group’s eligible own funds and risk-weighted assets (RWAs) in accordance with the aforementioned applicable regulation as of December 31, 2023, 2022 and 2021 are shown below:
| Amount of capital CC1 | 2023 ⁽¹⁾ | 2022 ⁽²⁾ | 2021 ⁽²⁾ |
|---|---|---|---|
| Capital and share premium | 22,629 | 23,810 | 26,866 |
| Retained earnings and equity instruments | 34,889 | 31,436 | 30,745 |
| Other accumulated income and other reserves | (12,872) | (13,952) | (17,200) |
| Minority interests | 1,864 | 1,853 | 2,800 |
| Net interim attributable profit ⁽³⁾ | 4,759 | 3,814 | 2,573 |
| Common Equity Tier I (CET1) before other regulatory adjustments | 51,269 | 46,962 | 45,784 |
| Goodwill and intangible assets | (1,421) | (1,395) | (1,484) |
| Direct, indirect and synthetic holdings in own Common Equity Tier I instruments ⁽⁴⁾ | (331) | (356) | (2,800) |
| Deferred tax assets | (988) | (1,057) | (1,009) |
| Other deductions and filters ⁽⁵⁾ | (2,425) | (1,416) | (542) |
| Total common equity Tier 1 regulatory adjustments | (5,165) | (4,223) | (5,835) |
| Common equity TIER 1 (CET1) | 46,104 | 42,738 | 39,949 |
| Capital instruments and share premium accounts classified as liabilities and qualifying as Additional Tier I | 5,715 | 4,875 | 5,265 |
| Qualifying Tier 1 capital included in consolidated AT1 capital issued by subsidiaries and held by third parties | 319 | 318 | 472 |
| Additional Tier 1 (CET 1) before regulatory adjustments | 6,033 | 5,193 | 5,737 |
| Transitional CET 1 adjustments | — | — | — |
| Total regulatory adjustments to additional Tier 1 | — | — | — |
| Additional Tier 1 (AT1) | 6,034 | 5,193 | 5,737 |
| Tier 1 (Common equity TIER 1+ additional TIER 1) | 52,138 | 47,931 | 45,686 |
| Capital instruments and share premium accounted as Tier 2 | 5,214 | 3,510 | 4,324 |
| Qualifying Tier 2 capital included in consolidated T2 capital issued by subsidiaries and held by third parties | 2,890 | 2,310 | 2,516 |
| Credit risk adjustments | 88 | 213 | 722 |
| Tier 2 before regulatory adjustments | 8,192 | 6,033 | 7,562 |
| Tier 2 regulatory adjustments | (10) | (103) | (179) |
| Tier 2 | 8,182 | 5,930 | 7,383 |
| Total capital (Total capital=Tier 1 + Tier 2) | 60,320 | 53,861 | 53,069 |
| Total RWA | 363,916 | 337,066 | 307,795 |
| CET 1 (phased-in) | 12.67 % | 12.68 % | 12.98 % |
| Tier 1 (phased-in) | 14.33% | 14.22% | 14.84% |
| Total capital (phased-in) | 16.58% | 15.98% | 17.24% |
⁽¹⁾ Provisional data.
⁽²⁾ In 2022 and 2021, the difference between the phased-in and fully-loaded ratios arises from the temporary treatment of certain capital items, mainly as a result of the impact of IFRS 9, to which the BBVA Group adhered voluntarily (in accordance with article 473bis of the CRR and the subsequent amendments introduced by the Regulation (EU) 2020/873). In 2023, there are no differences between phased-in and fully-loaded ratios due to the aforementioned temporary treatment.
⁽³⁾ The shareholder remuneration for each year corresponding to the cash dividend already paid is deducted. Likewise, for fiscal year 2023, the cash dividend provided for in accordance with the entity's dividend policy is deducted and subject to its approval at the General Shareholders' Meeting.
⁽⁴⁾ With respect to 2021, it includes mainly the amount of shares pending to be acquired under the share buyback program based on the maximum limit authorized by the ECB for the BBVA Group as of December 31, 2021 (see Note 4).
⁽⁵⁾ Includes the amounts of the share repurchase programs carried out. Likewise, for the 2023 financial year, the maximum amount foreseen is included subject to its approval at the General Shareholders' Meeting.
BBVA Group's earnings have contributed to achieving a consolidated fully-loaded CET1 ratio of 12.67% as of December 31, 2023, which allows it to maintain a large management buffer over the Group's CET1 requirement as of that date (8.78%), which is also above the Group's target management range of 11.5-12.0% CET1.
The fully-loaded CET1 ratio increased by 6 basis points, mainly explained by the generation of earnings in the year (+233 basis points) which, net of shareholder remuneration and payment of convertible contingent instrument coupons (CoCos), generated a positive contribution of +106 basis points. The growth of risk-weighted assets (RWAs) derived from the organic growth of activity, in constant terms has drained -132 basis points.Finally, the other elements that make up CET 1, apart from the extraordinary Share BuyBack (SBB), had a positive contribution of +64 basis points; these include the positive reversal of the NPL backstop, the effects of market evolution, the calculation of minority interests, regulatory impacts as well as the positive impact in "Other Comprehensive Income" equivalent to the net monetary position value loss in hyperinflationary economies registered in results. The aforementioned Buyback has had an effect of -32 basis points.
Consolidated fully-loaded Additional Tier 1 (AT1) capital fully loaded stood at 1.66% at December 31, 2023, 12 basis points lower than in 2022, mainly due to the issuance in June of €1.0 billion Contingent Convertible instruments by BBVA S.A. In addition, BBVA S.A. issued in September another AT1 instrument of $1.0 billion. Also in September, another contingent convertible issuance of €1.0 billion nominal value, was excluded after its redemption. The Tier 2 fully-loaded ratio stood at 2.25% which represents an increase of 46 basis points compared to 2022, mainly explained by the issuances by BBVA S.A, in June €750 million, one subordinated issuance of GBP 300 million in August and another of $750 million in November. In addition, BBVA Mexico issued $ 1.0 billion in June. As a result of the above, the total fully-loaded capital ratio stood at 16.58% as of December 31, 2023, and total phased-in ratio stood at 16.58%.
With regard to MREL (Minimum Requirement for own funds and Eligible Liabilities) requirements, on March, 8, 2022 BBVA disclosed the reception of a communication from the Bank of Spain regarding its minimum requirement for own funds and eligible liabilities, established by the Single Resolution Board (hereinafter "SRB"), which was calculated taking into account the financial and supervisory information as of June 30, 2021. In accordance with this communication, BBVA must maintain, as 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 a sub-consolidated level (hereinafter, the "MREL in RWA"), within this MREL in RWA, an amount equal to 13.50% of the RWA must be met with subordinated instruments (the "subordination requirement in RWA").The MREL in RWA and the subordination requirement in RWA do not include the combined capital buffer requirement which, according to applicable regulations and supervisory criteria, is 3.35%, considering the exposures subject to the calculation of the countercyclical buffer as of September 31, 2023. In addition, BBVA has to 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 equal to 7.27% (the “MREL in LR”) of which 5.61% in terms of the total exposure considered for calculating the leverage ratio shall be satisfied with subordinated instruments (the "subordination requirement in LR").
Given the own funds and eligible liabilities structure of the resolution group, as of December 31, 2023, the MREL in RWA provisional ratio stood at 26.36%, complying with the aforementioned requirement. Finally, the provisional MREL in LR was 10.94% and the provisional subordination ratios in terms of RWA and in terms of LR were 21.84% and 9.06%, respectively. On June 14, 2023 the Group disclosed the reception of a new communication from the Bank of Spain regarding its MREL requirement, established by the SRB, calculated taking into account the financial and supervisory information as of December 31, 2021. In accordance with this new communication, BBVA has to reach, starting January 1, 2024 a MREL in RWA equal to 22.11% and a subordination requirement in RWA equal to 13.50%. The MREL in RWA and the subordination requirement in RWA do not include the applicable combined capital buffer requirement which, according to applicable regulations and supervisory criteria, is at 3.35%, considering the exposures subject to the calculation of the countercyclical buffer as of September 31, 2023. Given the own funds and eligible liabilities structure of the resolution group, as of December 31, 2023 the MREL in RWA met the requirement.
The leverage ratio (LR) is a regulatory measure complementing capital designed to promote the financial strength of institutions in terms of indebtedness. This measurement can be used to estimate the percentage of the assets and off-balance sheet arrangements financed with Tier 1 capital, being the carrying amount of the assets used in this ratio adjusted to reflect the Group’s current or potential leverage of a given balance-sheet position (Leverage ratio exposure).
Breakdown of leverage ratio as of December 31, 2023, 2022 and 2021, calculated according to CCR, is as follows:
| Leverage ratio | 2023 ⁽¹⁾ | 2022 | 2021 |
|---|---|---|---|
| Tier 1 (millions of Euros) (a) | 52,138 | 47,931 | 45,686 |
| Exposure to leverage ratio (millions of Euros) (b) | 797,881 | 737,990 | 671,789 |
| Leverage ratio (a)/(b) (percentage) | 6.53 % | 6.49 % | 6.80 % |
(1) Provisional data.
Finally, as of December 31, 2023, the leverage ratio stood at 6,53%. Since March 2022, certain exposures to central banks are no longer excluded from the leverage ratio exposure in accordance with Regulation (EU) 2019/876 ("CRR-Quick fix").
The aim of capital management within BBVA and the Group is to ensure that both BBVA and the Group have the necessary capital at any given time to develop the corporate strategy reflected in the Strategic Plan, in line with the risk profile set out in the Group Risk Appetite Framework.
In this regard, BBVA's capital management is also part of the most relevant forward-looking strategic decisions in the Group's management and monitoring, which include the Annual Budget and the Liquidity and Funding Plan, with which it is coordinated — all with the aim of achieving the Group's overall strategy. Capital must be allocated optimally in order to meet the need to preserve the solvency of BBVA and the Group at all times. Together with the Group's solvency risk profile included in the Risk Appetite Framework (RAF), this optimal allocation serves as a guide for the Group's capital management and seeks a solid capital position that makes it possible to:
– Anticipate ordinary and extraordinary consumption that may occur, even under stress;
– Promote the development of the Group's business and align it with capital and profitability objectives by allocating resources appropriately and efficiently;
– Cover all risks—including potential risks—to which it is exposed;
– Comply with regulatory and internal management requirements at all times; and
– Remunerate BBVA shareholders in accordance with the Shareholder Remuneration Policy in force at any given time.
The areas involved in capital management in the Group shall follow and respect the following principles in their respective areas of responsibility:
– Ensuring that capital management is integrated and consistent with the Group's Strategic Plan, RAF, Annual Budget and other strategic-prospective processes, to help achieve the Group's long-term sustainability.
– Taking into account both the applicable regulatory and supervisory requirements and the risks to which the Group is—or may be—exposed when conducting its business (economic vision), when establishing a target capital level, all while adopting a forward-looking vision that takes adverse scenarios into consideration.
– Carrying out efficient capital allocation that promotes good business development, ensuring that expectations for the evolution of activity meet the strategic objectives of the Group and anticipating the ordinary and extraordinary consumption that may occur.
– Ensuring compliance with the solvency levels, including the minimum requirement for own funds and eligible liabilities (MREL), required at any given time.
– Compensating BBVA shareholders in an adequate and sustainable manner.
– Optimizing the cost of all instruments used for the purpose of meeting the target capital level at any given time
To achieve the aforementioned principles, capital management will be based on the following essential elements:
– An adequate governance and management scheme, both at the corporate body level and at the executive level.
– Planning, managing and monitoring capital properly, using the measurement systems, tools, structures, resources and quality data necessary to do so.
– A set of metrics, which is duly updated, to facilitate the tracking of the capital situation and to identify any relevant deviations from the target capital level.
– A transparent, correct, consistent and timely communication and dissemination of capital information outside the Group.
– An internal regulatory body, which is duly updated, including with respect to the regulations and procedures that ensure adequate capital management.
The breakdown of the balance under these headings in the consolidated balance sheets is as follows:
| Notes | 2023 | 2022 | 2021 |
|---|---|---|---|
| Loan commitments given | 152,868 | 136,920 | 119,618 |
| Of which: impaired | 165 | 177 | 171 |
| Central banks | — | — | — |
| General governments | 3,115 | 3,031 | 3,483 |
| Credit institutions | 15,595 | 15,407 | 16,085 |
| Other financial corporations | 7,063 | 5,895 | 4,583 |
| Non-financial corporations | 71,303 | 68,120 | 59,475 |
| Households | 55,791 | 44,467 | 35,991 |
| Financial guarantees given | 18,839 | 16,511 | 11,720 |
| Of which: impaired (1) | 229 | 281 | 245 |
| Central banks | — | — | — |
| General governments | 74 | 96 | 162 |
| Credit institutions | 978 | 475 | 312 |
| Other financial corporations | 2,177 | 1,263 | 1,026 |
| Non-financial corporations | 15,460 | 14,541 | 10,039 |
| Households | 150 | 135 | 181 |
| Other commitments given | 42,577 | 39,137 | 34,604 |
| Of which: impaired (1) | 636 | 689 | 541 |
| Central banks | — | — | 2 |
| General governments | 327 | 215 | 212 |
| Credit institutions | 3,607 | 4,134 | 4,266 |
| Other financial corporations | 1,837 | 1,758 | 1,753 |
| Non-financial corporations | 36,681 | 32,858 | 28,224 |
| Households | 125 | 171 | 147 |
| Total | 214,283 | 192,568 | 165,941 |
(1) Non-performing financial guarantees given amounted to €865, €970, and €786 million, respectively, as of December 31, 2023, 2022 and 2021. As of December 31, 2023 and 2022, the provisions for loan commitments, financial guarantees and other commitments given, recorded in the consolidated balance sheet amounted to €277, €190 and €303; and €243 million, €175 million and €353 million, respectively (see Note 24). Since a significant portion of the amounts above will expire without any payment being made by the consolidated entities, the aggregate balance of these commitments cannot be considered to be the actual future requirement for financing or liquidity to be provided by the BBVA Group to third parties. In the years 2023, 2022 and 2021, no issuance of debt securities carried out by associates of the BBVA Group, joint venture entities or non-Group entities have been guaranteed.
As of December 31, 2023, 2022 and 2021 there were no material contingent assets or liabilities other than those disclosed in the Notes to the consolidated financial statements.
The purchase and sale commitments of the BBVA Group are disclosed in Notes 10, 14 and 22. Future payment obligations mainly correspond to leases payable derived from operating lease contracts, as detailed in Note 22.5, and estimated employee benefit payments, as detailed in Note 25.1.3.
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
The details of the relevant transactions on behalf of third parties are as follows:
| 2023 | 2022 | 2021 |
|---|---|---|
| Financial instruments entrusted to BBVA by third parties | 430,377 | 352,139 |
| Conditional bills and other securities received for collection | 12,125 | 11,738 |
| Securities lending | 6,397 | 3,223 |
| Total | 448,899 | 367,100 |
The breakdown of the interest and other income recognized in the consolidated income statement is as follows:
| 2023 | 2022 | 2021 |
|---|---|---|
| Financial assets held for trading | 4,984 | 2,079 |
| Financial assets at fair value through other comprehensive income | 3,098 | 3,110 |
| Financial assets at amortized cost | 38,328 | 25,258 |
| Insurance activity | 1,052 | 1,309 |
| Adjustments of income as a result of hedging transactions | 91 | (825) |
| Other income (1) | 297 | 501 |
| Total | 47,850 | 31,432 |
(1) Includes, among others, the net interest income accrued from funds obtained through TLTRO III operations, which amounted to €177 million and €384 million for the years ended December 31, 2022 and 2021, respectively (see Note 22.1). The amounts recognized in consolidated equity in connection with hedging derivatives for the years ended December 31, 2023, 2022 and 2021 and the amounts derecognized from the consolidated equity and taken to the consolidated income statements during those years are included in the “Consolidated statements of recognized income and expense”.
The breakdown of the balance under this heading in the consolidated income statements is as follows:
| 2023 | 2022 (1) | 2021 |
|---|---|---|
| Financial liabilities held for trading | 3,834 | 1,140 |
| Financial liabilities designated at fair value through profit or loss | 130 | 58 |
| Financial liabilities at amortized cost | 19,164 | 9,985 |
| Adjustments of expense as a result of hedging transactions | 809 | (232) |
| Insurance activity (2) | 633 | 948 |
| Cost attributable to pension funds | 110 | 76 |
| Other expense | 80 | 333 |
| Total | 24,761 | 12,309 |
(1) Amounts corresponding to 2022 have been restated according to IFRS 17 (see Notes 1.3 and 2.3).
(2) 2021 presented in accordance with IFRS 4.
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
The balances for this heading in the consolidated income statements correspond to dividends on shares and equity instruments other than those from shares in entities accounted for using the equity method (see Note 39), as can be seen in the breakdown below:
| 2023 | 2022 | 2021 |
|---|---|---|
| Non-trading financial assets mandatorily at fair value through profit or loss | 11 | 15 |
| Financial assets at fair value through other comprehensive income (1) | 107 | 108 |
| Total | 118 | 123 |
(1) This dividend income corresponds mainly to investments held at the end of the year.
Results from “Share of profit or loss of entities accounted for using the equity method” resulted in a positive impact of €26 million for the year ended December 31, 2023, compared with the positive impact of €21 million and the positive impact of €1 million recorded for the years ended December 31, 2022 and 2021, respectively.
The breakdown of the balance under these headings in the consolidated income statements is as follows:
| 2023 | 2022 (1) | 2021 |
|---|---|---|
| Bills receivables | 24 | 26 |
| Demand accounts | 300 | 424 |
| Credit and debit cards and POS | 4,665 | 3,499 |
| Checks | 175 | 162 |
| Transfers and other payment orders | 862 | 812 |
| Insurance product commissions | 384 | 261 |
| Loan commitments given | 307 | 259 |
| Other commitments and financial guarantees given | 471 | 420 |
| Asset management | 1,407 | 1,228 |
| Securities fees | 345 | 266 |
| Custody securities | 207 | 193 |
| Other fees and commissions | 751 | 711 |
| Total | 9,899 | 8,260 |
(1) Amounts corresponding to 2022 have been restated according to IFRS 17 (see Notes 1.3 and 2.3).
The breakdown of fee and commission expense under these heading in the consolidated income statements is as follows:
| 2023 | 2022 (1) | 2021 |
|---|---|---|
| Demand accounts | 6 | 5 |
| Credit and debit cards | 2,337 | 1,884 |
| Transfers and other payment orders | 156 | 132 |
| Commissions for selling insurance | 40 | 54 |
| Custody securities | 111 | 92 |
| Other fees and commissions | 961 | 721 |
| Total | 3,611 | 2,888 |
(1) Amounts corresponding to 2022 have been restated according to IFRS 17 (see Notes 1.3 and 2.3).
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
The breakdown of the balance under this heading, by source of the related items, in the consolidated income statement is as follows:
| 2023 | 2022 | 2021 |
|---|---|---|
| Gains (losses) on derecognition of financial assets and liabilities not measured at fair value through profit or loss, net | 76 | 64 |
| Financial assets at amortized cost | 41 | 8 |
| Other financial assets and liabilities | 35 | 56 |
| Gains (losses) on financial assets and liabilities held for trading, net | 1,352 | 562 |
| Reclassification of financial assets from fair value through other comprehensive income | — | — |
| Reclassification of financial assets from amortized cost | — | — |
| Other gains (losses) | 1,352 | 562 |
| Gains (losses) on non-trading financial assets mandatorily at fair value through profit or loss, net | 337 | (67) |
| Reclassification of financial assets from fair value through other comprehensive income | — | — |
| Reclassification of financial assets from amortized cost | — | — |
| Other gains (losses) | 337 | (67) |
| Gains (losses) on financial assets and liabilities designated at fair value through profit or loss, net | 96 | 150 |
| Gains (losses) from hedge accounting, net | (17) | (45) |
| Subtotal gains (losses) on financial assets and liabilities and hedge accounting | 1,844 | 663 |
| Exchange differences, net | 339 | 1,275 |
| Total | 2,183 | 1,938 |
The breakdown of the balance (excluding exchange rate differences) under this heading in the income statements by the nature of the financial instrument is as follows:
The breakdown of the balance under the heading “Other operating income” in the consolidated income statements is as follows:
| Other operating income (Millions of Euros) | 2023 | 2022 | 2021 |
|---|---|---|---|
| Gains from sales of non-financial services | 347 | 284 | 301 |
| Other operating income | 272 | 244 | 360 |
| Total | 619 | 528 | 661 |
The breakdown of the balance under the heading “Other operating expense” in the consolidated income statements is as follows:
| Other operating expense (Millions of Euros) | 2023 | 2022 | 2021 |
|---|---|---|---|
| Change in inventories | 151 | 134 | 151 |
| Contributions to guaranteed banks deposits funds | 1,017 | 997 | 829 |
| Hyperinflation adjustment | 2,007 | 1,687 | 585 |
| Other operating expense ⁽²⁾ | 867 | 620 | 475 |
| Total | 4,042 | 3,438 | 2,041 |
(1) For the year ended December 31, 2023 it includes €916 million related to Turkey and €1,062 million related to Argentina. For the year ended December 31, 2022, it includes €832 million related to Turkey and € 822 million related to Argentina (see Note 2.2.18).
(2) For the year ended December 2023, it includes €215 million corresponding to the total annual amount disbursed under the temporary tax on credit institutions and financial credit establishments, according to Law 38/2022 of December 27, 2022 (see Note 19.6).
The balances of the headings “Income and expense from insurance and reinsurance contracts” in the consolidated income statements stem from the insurance activity and includes the following:
| Income and expense from insurance and reinsurance contracts (Millions of Euros) | 2023 | 2022 ⁽¹⁾ | 2021 ⁽²⁾ |
|---|---|---|---|
| Income from insurance and reinsurance contracts ⁽³⁾ | 3,081 | 2,622 | 2,593 |
| Expense from insurance and reinsurance contracts | (1,821) | (1,547) | (1,685) |
| Total | 1,261 | 1,075 | 908 |
(1) Balances corresponding to 2022 have been restated according to IFRS 17 (see Notes 1.3 and 2.3).
(2) 2021 presented in accordance with IFRS 4.
(3) In general the transitional approach for calculating the contractual service margin has been the fair value approach for long-term contracts and the full retrospective approach for short-term contracts (see Note 2.3).
The table below shows the contribution of each insurance product to the Group´s income for the years ended December 31, 2023, 2022 and 2021:
| Net income by type of product (Millions of Euros) | 2023 | 2022 ⁽¹⁾ | 2021 ⁽²⁾ |
|---|---|---|---|
| Life insurance | 617 | 649 | 622 |
| Individual | 590 | 573 | 583 |
| Group insurance | 27 | 76 | 39 |
| Non-Life insurance | 643 | 426 | 286 |
| Home insurance | — | — | — |
| Other non-life insurance products | 643 | 426 | 286 |
| Total | 1,261 | 1,075 | 908 |
(1) Balances corresponding to 2022 have been restated according to IFRS 17 (see Notes 1.3 and 2.3).
(2) 2021 presented in accordance with IFRS 4.
The breakdown of the balance under this heading in the consolidated income statements is as follows:
| Personnel expense (Millions of Euros) | Notes | 2023 | 2022 ⁽¹⁾ | 2021 |
|---|---|---|---|---|
| Wages and salaries | 5,068 | 4,310 | 3,933 | |
| Social security costs | 834 | 708 | 668 | |
| Defined contribution plan expense | 25 | 71 | 139 | 87 |
| Defined benefit plan expense | 25 | 49 | 42 | 49 |
| Other personnel expense | 440 | 454 | 325 | |
| Total | 6,530 | 5,601 | 5,046 |
(1) Balances corresponding to 2022 have been restated according to IFRS 17 (see Notes 1.3 and 2.3).
The amounts recognized under the heading “Administration costs - Personnel expense - Other personnel expense” in the consolidated income statements for the year ended December 31, 2023, 2022 and 2021, corresponding to the remuneration plans based on equity instruments in each year, amounted to €24 million, €32 million and €33 million, respectively. These amounts have been recognized with a corresponding entry under the heading “Shareholders’ funds - Other equity” in the consolidated balance sheets, net of tax effect. The characteristics of the Group's remuneration plans based on equity instruments are described below.
Variable remuneration in shares
BBVA has a specific remuneration scheme applicable to those employees whose professional activities have a material impact on the risk profile of BBVA and/or its Group (hereinafter “Identified Staff”) involving the delivery of BBVA shares or instruments linked to BBVA shares, designed within the framework of applicable regulations to credit institutions and considering best practices and recommendations at the local and international levels in this matter. Thus, according to the applicable remuneration policies, the variable remuneration for the Identified Staff members is subject, principally, to the following rules:
– The Annual Variable Remuneration for Identified Staff members for each financial year will not accrue or will be reduced upon accrual, if certain profit and capital ratio levels are not achieved.
– A maximum of 40% of the Annual Variable Remuneration for those members of the Identified Staff who receive particularly high amounts of variable remuneration and members of BBVA’s Senior Management and 60% for the rest of the Identified Staff (the “Upfront Portion” of the Annual Variable Remuneration) shall vest and be paid, provided the relevant conditions for payment are met, as a general rule, in the first quarter of the following financial year to which the Annual Variable Remuneration corresponds.
– The remaining amount, and at least 60% of the Annual Variable Remuneration for those members of the Identified Staff who receive particularly high amounts of variable remuneration and members of BBVA’s Senior Management, and 40% for the rest of the Identified Staff, will be deferred over a period of 4 years (the “Deferred Portion” of the Annual Variable Remuneration). However, for members of BBVA’s Senior Management the deferral period shall be 5 years. In both cases, the Deferred Portion will be paid, provided the relevant conditions are met, once each of the years of deferral has elapsed. In no event will this Deferred Portion be paid faster than in a proportionate way.
– Both the Upfront Portion and the Deferred Portion of the Annual Variable Remuneration of each member of the Identified Staff will be paid 50% in cash and 50% in BBVA shares or in instruments linked to BBVA shares. For members of BBVA’s Senior Management, the Deferred Portion will be paid 40% in cash and 60% in BBVA shares and/or in instruments linked to BBVA shares.
– Shares or instruments received as Annual Variable Remuneration shall be withheld for one year running from the date of delivery. The foregoing shall not apply to those shares that are sold, where appropriate, in order to meet the payment of tax obligations accruing on the delivery of the shares and/or instruments.
– The Deferred Portion of the Annual Variable Remuneration may undergo certain ex post risk adjustments, meaning that it will not vest, or may be reduced, if certain capital and liquidity thresholds are not met.
– Up to 100% of the Annual Variable Remuneration of each member of the Identified Staff corresponding to each financial year, both in cash and in shares or instruments, will be subject to arrangements for the reduction of variable remuneration (malus) and arrangements for the recovery of variable remuneration already paid (clawback), which will remain in effect during the applicable deferral and retention period, and will be applicable in the event of the occurrence of any of the circumstances expressly named in the remuneration policies.
– The cash amounts of the Deferred Portion of the Annual Variable Remuneration that ultimately vest will be updated by applying the consumer price index (CPI) measured as the year-on-year change in prices, or any other criteria established for that purpose by the Board of Directors.
– Identified Staff members may not use personal hedging strategies or insurance in connection with the Annual Variable Remuneration and the responsibility that may undermine the effects of alignment with prudent risk management.- If the members of the Identified Staff are entitled to receive any variable remuneration other than the Annual Variable Remuneration but which qualifies as variable remuneration, such variable remuneration shall be subject to the rules regarding accrual, award, vesting and payment in accordance with the type and nature of the remuneration component itself.
- The variable remuneration of the Identified Staff for a financial year (understood as the sum of all variable remuneration) shall be limited to a maximum amount of 100% of the fixed component (understood as the sum of all fixed remuneration) of the total remuneration, unless the BBVA General Shareholders’ Meeting resolves to increase this percentage up to a maximum of 200%.
- In this regard, the General Shareholders’ Meeting of BBVA held on March 17, 2023 resolved to increase this limit to a maximum level of 200% of the fixed component of the total remuneration for a given number of the Identified Staff members, in the terms indicated in the report issued for this purpose by the Board of Directors dated February 9, 2023.
- In 2023, this remuneration scheme is reflected in the following remuneration policies:
- BBVA Group General Remuneration Policy, approved by the Board of Directors on March 29, 2023, that applies to employees and BBVA Senior Management (excluding BBVA executive directors) and at Group companies with respect to which BBVA exercises control over management. This policy includes the specific rules applicable to the members of the Identified Staff, including BBVA Senior Management.
- BBVA Directors’ Remuneration Policy, approved by the General Shareholders’ Meeting of BBVA held on March 17, 2023, that is applicable to the members of the Board of Directors of BBVA. The remuneration system for executive directors corresponds, generally, with the applicable system to the Identified Staff, incorporating some particularities of their own, derived from their condition of directors.
The delivery of shares in 2023 to the members of the Identified Staff is derived from the settlement of the Annual Variable Remuneration for 2022 and deferred variable remuneration from previous years, which are subject to the vesting and payment rules established in the remuneration policies applicable in the year to which they correspond.
According to the remuneration policy applicable in 2022, during 2023 a total amount of 3,305,980 BBVA shares or instruments linked to BBVA shares, corresponding, mostly, to the Upfront Portion of 2022 Annual Variable Remuneration and other variable components of remuneration, were delivered.
In addition, according to the remuneration policy applicable in 2017, during 2023 a total amount of 106,072 BBVA shares, corresponding to the third and last payment of the Deferred Portion of 2017 Annual Variable Remuneration of the Chair and other members of BBVA's Senior Management, were delivered.
Additionally, according to the remuneration policy applicable in 2018, during 2023 a total amount of 147,871 BBVA shares, corresponding to the second payment of the Deferred Portion of 2018 Annual Variable Remuneration of the Chair and other members of BBVA's Senior Management, were delivered.
Likewise, according to the remuneration policy applicable in 2019, during 2023 a total amount of 4,348,742 BBVA shares were delivered, corresponding, mainly, to the first payment of the Deferred Portion of 2019 Annual Variable Remuneration of the executive directors and the rest of the members of BBVA's Senior Management and to the entire of the Deferred Portion of 2019 Annual Variable Remuneration of the rest of the Identified Staff, as well as to other variable components of remuneration.
Lastly, according to the remuneration policy applicable in 2021, during 2023 a total amount of 740,382 BBVA shares were delivered, corresponding, mainly, to the first payment of the Deferred Portion of 2021 Annual Variable Remuneration of the Identified Staff, among which executive directors and the rest of the members of BBVA's Senior Management are included, as well as to other variable components of remuneration.
Detailed information on the delivery of shares to executive directors and the rest of the members of BBVA's Senior Management who held this position as of December 31, 2023, is included in Note 54.
Lastly, in line with specific regulation applicable in Portugal and Brazil, BBVA IFIC and BBVA Brazil Banco de Investimento have identified (on an individual basis, respectively) the staff in these countries whose annual variable remuneration should be subject to a specific settlement and payment scheme established in their corresponding remuneration policies, more specifically:
According to this remuneration scheme, during financial year 2023 a total of 8,243 BBVA shares corresponding to the upfront portion of 2022 annual variable remuneration were delivered to the staff of BBVA Brasil Banco de Investimento.
With respect to the staff of BBVA IFIC, it should be noted that the exception provided for in the remuneration policy for said year corresponding to payment in shares has been applied to the annual variable remuneration for fiscal year 2022 in line with the provisions of the regulations in force. For this reason, during 2023, no BBVA shares corresponding to 2022 annual variable remuneration have been delivered to the staff of BBVA IFIC.
Additionally, during 2023 a total of 4,842 BBVA shares corresponding to the first third of the deferred portion of 2021 annual variable remuneration were delivered to the staff of BBVA IFIC and BBVA Brasil Banco de Investimento as well as a total of 795 euros as adjustments for updates (for shares delivered in Brazil), and a total of 3,517 BBVA shares corresponding to the second third of the deferred portion of 2020 annual variable remuneration and 889 euros as adjustments for updates (for shares delivered in Brazil), and a total of 4,422 BBVA shares corresponding to the last third of the deferred portion of 2019 annual variable remuneration and 1,347 euros as adjustments for updates (for shares delivered in Brazil).
The breakdown of the balance under this heading in the consolidated income statements is as follows:
| 2023 | 2022⁽¹⁾ | 2021 | |
|---|---|---|---|
| Technology and systems | 1,512 | 1,391 | 1,176 |
| Communications | 219 | 195 | 175 |
| Advertising | 349 | 266 | 207 |
| Property, fixtures and materials | 520 | 440 | 380 |
| Taxes other than income tax | 451 | 370 | 347 |
| Surveillance and cash courier services | 234 | 214 | 179 |
| Other expense | 1,090 | 897 | 786 |
| Total | 4,375 | 3,773 | 3,249 |
(1) Balances corresponding to 2022 have been restated according to IFRS 17 (see Notes 1.3 and 2.3).
The breakdown of the balance under this heading in the consolidated income statements for the years ended December 31, 2023, 2022 and 2021 is as follows:
| Notes | 2023 | 2022 | 2021 | |
|---|---|---|---|---|
| Tangible assets | 17 | 867 | 818 | 740 |
| For own use | 547 | 501 | 437 | |
| Right-of-use assets | 317 | 312 | 299 | |
| Investment properties and other | 3 | 5 | 3 | - |
| Intangible assets | 18.2 | 536 | 510 | 494 |
| Total | 1,403 | 1,328 | 1,234 |
For the years ended December 31, 2023, 2022 and 2021, the net provisions recognized in this income statement line item were as follows:
| Notes | 2023 | 2022 | 2021 | |
|---|---|---|---|---|
| Pensions and other post-employment defined benefit obligations | 25 | 31 | (89) | 61 |
| Commitments and guarantees given | 76 | 87 | 8 | |
| Pending legal issues and tax litigation | 171 | 210 | 135 | |
| Other provisions (1) | 95 | 84 | 814 | |
| Total | 373 | 291 | 1,018 |
(1) In 2021, it includes a provision for the agreement with the union representatives on the collective layoff procedure proposed for Banco Bilbao Vizcaya Argentaria, S.A. in Spain (see Note 24).
The breakdown of impairment or reversal of impairment on financial assets not measured at fair value through profit or loss or net gains by modification by the nature of those assets in the consolidated income statements is as follows:
| Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss or net gains by modification (Millions of Euros) | Notes | 2023 | 2022 | 2021 |
|---|---|---|---|---|
| Financial assets at fair value through other comprehensive income - Debt securities | 42 | 76 | 17 | |
| Financial assets at amortized cost | 4,386 | 3,303 | 3,017 | |
| Of which: recovery of written-off assets by cash collection | 7.2.5 | (369) | (390) | (423) |
| Total | 4,428 | 3,379 | 3,034 |
The heading “Impairment or reversal of the impairment of investments in joint ventures or associates" included an impairment of €9 million in the year ended 2023. This heading included a reversal of impairment of €42 million for the year ended December 31, 2022, and it did not include any impairment or reversal of impairment for the year ended December 31, 2021 (see Note 16.3).
The impairment losses on non-financial assets broken down by the nature of those assets in the consolidated income statements are as follows:
| Impairment or reversal of impairment on non-financial assets (Millions of Euros) | Notes | 2023 | 2022 | 2021 |
|---|---|---|---|---|
| Tangible assets (1) | 17 | 16 | (53) | |
| Intangible assets | 161 | 26 | 25 | |
| Others | 19 | 12 | 55 | |
| Total | 41 | 54 | 27 |
(1) In 2021, it includes the impairment due to the closing of rented offices after the agreement with the union representatives on the collective layoff procedure proposed for Banco Bilbao Vizcaya Argentaria, S.A. in Spain (see Notes 17 and 24).
The main items included in the balance under this heading in the consolidated income statements are as follows:
| Gains (losses) from non-current assets and disposal groups classified as held for sale not qualifying as discontinued operations (Millions of Euros) | Notes | 2023 | 2022 | 2021 |
|---|---|---|---|---|
| Gains on sale of real estate | 64 | 102 | 39 | |
| Impairment of non-current assets held for sale (1) | 21 | (42) | (221) | |
| Gains (losses) on sale of investments classified as non-current assets held for sale | — | 11 | 10 | |
| Gains on sale of equity instruments classified as non-current assets held for sale | — | — | 8 | |
| Total | 22 | (108) | (40) |
(1) In 2022 it includes the closing of the transaction with Merlin Properties in which 100% of the shares of Tree Inversiones Inmobiliarias, SOCIMI, S.A. were acquired by the BBVA Group (see Note 17). In 2021, it included the impairment due to the closure of owned offices and the decommissioning of facilities after the agreement with the union representatives on the collective layoff procedure proposed for Banco Bilbao Vizcaya Argentaria, S.A. in Spain (see Notes 21 and 24).
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
The variation between 2023, 2022 and 2021 of the financial liabilities from financing activities is the following:
| Liabilities from financing activities (Millions of Euros) | ||||||
|---|---|---|---|---|---|---|
| Liabilities at amortized cost: Debt certificates | ||||||
| Of which: Issuances of subordinated liabilities (1) | ||||||
| 2023 | 2022 | 2021 | 2023 | 2022 | 2021 | |
| Balance at the beginning | 55,429 | 55,763 | 61,780 | 12,485 | 14,794 | |
| Cash flows | 13,283 | (678) | (5,728) | 3,388 | (1,945) | |
| Non-cash changes | (5) | 344 | (289) | (40) | (364) | |
| Acquisition | — | — | — | — | — | |
| Disposal | — | — | — | — | — | |
| Disposals by companies held for sale | — | — | — | — | — | |
| Foreign exchange movement | (5) | 344 | (289) | (40) | (364) | |
| Fair value changes | — | — | — | — | — | |
| Balance at the end | 68,707 | 55,429 | 55,763 | 15,832 | 12,485 |
(1) There were €35, €24 and €14 million of subordinated deposits as of December 31, 2023, 2022 and 2021, respectively (see Note 22.4). In addition, there were coupon payments on subordinated liabilities for €345, €313 and €359 million in 2023, 2022 and 2021, respectively. Appendix VI details the outstanding subordinated debt issued by their nominal value.
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
The details of the fees for the services contracted by entities of the BBVA Group for the year ended December 31, 2023, with their respective auditors and other audit entities are as follows:
| Fees for Audits conducted and other related services (1) (Millions of Euros) | 2023 | 2022 |
|---|---|---|
| Audits of the companies audited by firms belonging to the EY worldwide organization and other reports related with the audit (2) | 28.5 | 24.8 |
| Other reports required pursuant to applicable legislation and tax regulations issued by the national supervisory bodies of the countries in which the Group operates, reviewed by firms belonging to the EY worldwide organization | 1.4 | 1.0 |
| Fees for audits conducted by other firms | 0.1 | 0.1 |
(1) Regardless of the billed year.
(2) Including fees pertaining to annual legal audits (€ 23.3 million as of December 31, 2023).
In the year ended December 31, 2023, certain entities in the BBVA Group contracted other services (other than audits) as follows:
| Other Services rendered (Millions of Euros) | 2023 | 2022 |
|---|---|---|
| Firms belonging to the EY worldwide organization | 0.2 | 0.1 |
This total of contracted services includes the detail of the services provided by Ernst & Young, S.L. to BBVA, S.A. or its controlled companies at the date of preparation of these consolidated financial statements as follows:
| Fees for audits conducted (1) (Millions of Euros) | 2023 | 2022 |
|---|---|---|
| Legal audit of BBVA,S.A. or its companies under control | 7.9 | 7.6 |
| Other audit services of BBVA, S.A. or its companies under control | 5.4 | 5.2 |
| Limited Review of BBVA, S.A. or its companies under control | 1.9 | 1.4 |
| Reports related to issuances | 1.0 | 0.4 |
| Assurance services and other required by the regulator | 0.8 | 0.8 |
(1) Services provided by Ernst & Young, S.L. to companies located in Spain, to the branch of BBVA in New York and to the branch of BBVA in London.
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
The services provided by the auditors meet the independence requirements of the external auditor established under Audit of Accounts Law (Law 22/2015) and under the Sarbanes-Oxley Act of 2002 adopted by the Securities and Exchange Commission (SEC).
As financial institutions, BBVA and other entities in the Group engage in transactions with related parties in the normal course of their business. These transactions are not significant and are carried out under normal market conditions. As of December 31, 2023, 2022 and 2021, the following are the transactions with related parties:
As of December 31, 2023, 2022 and 2021, there were no shareholders considered significant (see Note 26).
The balances of the main captions in the consolidated balance sheets arising from the transactions carried out by the BBVA Group with associates and joint venture entities accounted for using the equity method are as follows:
| Balances arising from transactions with entities of the Group (Millions of Euros) | 2023 | 2022 | 2021 |
|---|---|---|---|
| Assets | |||
| Loans and advances to credit institutions | 5 | 9 | 9 |
| Loans and advances to customers | 791 | 1,842 | 2,031 |
| Debt securities | 4 | 7 | 7 |
| Liabilities | |||
| Deposits from credit institutions | — | 1 | 1 |
| Customer deposits | 134 | 204 | 296 |
| Memorandum accounts | |||
| Financial guarantees given | 177 | 136 | 154 |
| Other commitments given | 595 | 751 | 1,056 |
| Loan commitments given | 119 | 10 | 11 |
The balances of the main captions in the consolidated income statements resulting from transactions with associates and joint venture entities that are accounted for under the equity method are as follows:
| Balances of consolidated income statement arising from transactions with entities of the Group (Millions of Euros) | 2023 | 2022 | 2021 |
|---|---|---|---|
| Income statement | |||
| Interest and other income | 44 | 20 | 16 |
| Interest expense | 4 | 2 | — |
| Fee and commission income | 4 | 5 | 8 |
| Fee and commission expense | 49 | 40 | 31 |
There were no other material effects in the consolidated financial statements arising from dealings with these entities, other than the effects from using the equity method (see Note 2.1) and from the insurance policies to cover pension or similar commitments (see Note 25) and the derivatives transactions arranged by BBVA Group with these entities, associates and joint ventures. In addition, as part of its normal activity, the BBVA Group has entered into agreements and commitments of various types with shareholders of subsidiaries and associates, which have no material effects on the consolidated financial statements.
The transactions entered into between BBVA or its Group companies with members of the Board of Directors and Senior Management of the Bank or their related parties were within the scope of the ordinary course of business of the Bank and were immaterial, defined as transactions the disclosure of which is not necessary to present a true and fair view of the Bank's equity, financial position and results, and were concluded on normal markets terms or on terms applicable to the rest of employees. The amount and nature of the main transactions carried out with members of the Board of Directors and Senior Management of the Bank, or their respective related parties, are shown below.# 184 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
Balance at 31st December of each year (thousands of Euros)
| 2023 | 2022 | 2021 | |
|---|---|---|---|
| Directors | Related parties of Directors | Senior Management (1) | |
| Loans and credits | 531 | 243 | 5,553 |
| Bank guarantees | _ | _ | 10 |
| Business credit | _ | _ | _ |
(1) Excluding executive directors
Information on remuneration paid and other benefits granted to members of the Board of Directors and Senior Management of BBVA is provided in Note 54.
The remuneration of the non-executive directors corresponding to the financial years 2023 and 2022 is as follows, individually and by remuneration item:
Remuneration of non-executive directors (thousands of Euros)
| 2023 | 2022 | |
|---|---|---|
| José Miguel Andrés Torrecillas | Jaime Caruana Lacorte | |
| Board of Directors | 129 | 129 |
| Executive Committee | 167 | 167 |
| Audit Committee | 132 | 99 |
| Risk and Compliance Committee | ─ | 107 |
| Remuneration Committee | ─ | ─ |
| Appointments and Corporate Governance Committee | 115 | ─ |
| Technology and Cybersecurity Committee | ─ | ─ |
| Other positions (2) | 50 | 50 |
| Total | 593 | 502 |
(1) Includes amounts corresponding to positions on the Board and its various Committees, the composition of which was modified on April 26, 2023, with effect from May 1, 2023.
(2) Amounts corresponding to the positions of Deputy Chair of the Board of Directors and Lead Director.
(3) Director appointed by the Annual General Shareholders' Meeting held on March 17, 2023. Remuneration in 2023 corresponding to the term of office in the financial year.
(4) Director who left office on March 17, 2023. Remuneration in 2023 corresponding to the term of office in the financial year.
(5) In addition, in financial years 2023 and 2022, the director Carlos Salazar Lomelín received €67 thousand and €90 thousand, as per diems for his membership of the management body of BBVA México, S.A. de C.V. and Grupo Financiero BBVA México, S.A. de C.V. and the BBVA México, S.A. de C.V. strategy forum. Likewise, during financial years 2023 and 2022, €123 thousand and €110 thousand were paid out, respectively, in healthcare and casualty insurance premiums for non-executive director.
BBVA has a fixed remuneration system with deferred delivery of shares for its non-executive directors, which was approved by the Annual General Shareholders' Meeting held on March 18, 2006 and extended by resolutions of the Annual General Shareholders' Meetings held on March 11, 2011 and March 11, 2016 for a further five-year period in each case, by the Annual General Shareholders' Meeting held on April 20, 2021 for a further three-year period and by the Annual General Shareholders' Meeting held on March 17, 2023 for a further four-year period. This system consists on the annual allocation to non-executive directors of a number of theoretical shares of BBVA equivalent to 20% of the total annual fixed allowance in cash received by each director in the previous financial year, calculated according to the average closing price of the BBVA share during the 60 trading sessions prior to the dates of the Annual General Shareholders' Meetings approving the corresponding financial statements for each financial year.
The BBVA shares, in a number equivalent to the theoretical shares accumulated by each non-executive director, will be delivered to each beneficiary, where applicable, after they leave their positions as directors for any reason other than serious dereliction of their duties. During the financial years 2023 and 2022, the following theoretical shares derived from the remuneration system with deferred delivery of shares have been allocated to the non-executive directors, in an amount equivalent to 20% of the total annual fixed allowance in cash received by each of them in the financial years 2022 and 2021, respectively:
| 2023 | 2022 | |
|---|---|---|
| Theoretical shares allocated (1) | Theoretical shares accumulated as of December 31 | |
| José Miguel Andrés Torrecillas | 16,023 | 134,048 |
| Jaime Caruana Lacorte | 17,255 | 94,960 |
| Sonia Dulá (2) | 0 | 0 |
| Raúl Galamba de Oliveira | 10,091 | 29,768 |
| Belén Garijo López | 10,603 | 101,192 |
| Connie Hedegaard Koksbang (3) | 3,263 | 3,263 |
| Lourdes Máiz Carro | 7,237 | 71,593 |
| José Maldonado Ramos | 10,397 | 146,874 |
| Ana Peralta Moreno | 7,237 | 42,329 |
| Juan Pi Llorens | 13,943 | 148,542 |
| Ana Revenga Shanklin | 8,035 | 24,214 |
| Susana Rodríguez Vidarte (4) | 13,648 | 0 |
| Carlos Salazar Lomelín | 5,218 | 17,130 |
| Jan Verplancke | 6,521 | 35,772 |
| Total | 129,471 | 849,685 |
(1) The number of theoretical shares was calculated according to the average closing price of the BBVA share during the 60 trading sessions prior to the dates of the Annual General Shareholders' Meetings of March 17, 2023 and March 18, 2022, which were € 6.58 and €5.47 per share, respectively.
(2) Director appointed by the Annual General Shareholders' Meeting held on March 17, 2023, therefore the allocation of theoretical shares is not due until 2024.
(3) Director appointed by the Annual General Shareholders' Meeting held on March 18, 2022, therefore the first allocation of theoretical shares was made in 2023.
(4) Director who left office on March 17, 2023. In application of the system, she received a total of 191,423 BBVA shares after leaving office, which is equivalent to the total of theoretical shares accumulated up to that date.
The remuneration of the executive directors corresponding to financial years 2023 and 2022 is the result of the application of the remuneration policies approved by the Annual General Shareholders' Meeting on March 17, 2023 and April 20, 2021, respectively. In accordance with said policies, the remuneration of executive directors corresponding to financial years 2023 and 2022 is indicated below, individually and by remuneration item.
Annual Fixed Remuneration (thousands of Euros)
| 2023 | 2022 | |
|---|---|---|
| Chair | 2,924 | 2,924 |
| Chief Executive Officer | 2,179 | 2,179 |
| Total | 5,103 | 5,103 |
In addition, in accordance with the conditions established contractually and in the BBVA Directors' Remuneration Policy, during the 2023 and 2022 financial years, the Chief Executive Officer received €654 thousand each year as "cash in lieu of pension" (equivalent to 30% of his Annual Fixed Remuneration) as he does not have a retirement pension (see the "Pension commitments with executive directors" section of this Note), and €600 thousand as mobility allowance.
Likewise, during the financial years 2023 and 2022, executive directors received remuneration in kind, which includes insurance premiums and others, for an amount of €213 thousand and €283 thousand in the case of the Chair and €131 thousand and €155 thousand in the case of the Chief Executive Officer, respectively.
With regard to variable remuneration, the main change introduced by the new Directors’ Remuneration Policy approved by the Annual General Shareholders' Meeting in 2023 is that it establishes a new model pursuant to which the Annual Variable Remuneration ("AVR") of the executive directors for financial year 2023, now consists of two components: a Short-Term Incentive (“STI”) and a Long-Term Incentive (“LTI”). The award of both incentives is contingent upon the achievement of the minimum profit and capital ratio thresholds approved by the Board of Directors for this purpose. The sum of the STI and the LTI constitutes the AVR for the year of each executive director. The STI will be awarded once the annual indicators’ measurement year is closed, and its amount will be determined based on its result, taking into account the targets, scales of achievement and weightings established for each of them, and may range between 0% and 150% of the “Target STI” (which represents the amount of the STI if 100% of the pre-established targets for these indicators are met).For its part, once the aforementioned minimum profit and capital ratio thresholds are reached, the right to the LTI will arise, the final amount of which, ranging between 0% and 150% of the “Target LTI” (which represents the amount of the LTI if 100% of the pre- established targets for the long-term indicators approved for its calculation are met), will be determined, once the last financial year for measuring long-term indicators is closed and based on its results, taking into account the targets, scales of achievement and weightings established for each of them. A percentage not exceeding 40% of the AVR will be vested and paid, provided that the required conditions are met, as a general rule, in the first quarter of the year following the one to which it corresponds (the "Upfront Portion"), in equal parts in cash and BBVA shares. The remaining amount, and at least 60% of the AVR, will be deferred over a period of 5 years and paid, if the required conditions are met, once each of the 5 years of deferral has elapsed, 40% in cash and 60% in BBVA shares and/or instruments linked to BBVA shares (the "Deferred Portion" or the "Deferred AVR"). Within said deferral period, the payment of the LTI payment will only begin after the expiration of the measurement period of the targets set for the long term indicators, to the result of which its final amount is subject, thus, being part of the Deferred Portion of the AVR of the executive directors. In accordance with the above, in financial year 2023 the executive directors accrued a Short-Term Incentive in the amount of €2,871 thousand in the case of Chair and €2,147 thousand in the case of Chief Executive Officer. Likewise, the executive directors have generated the right to a Long-Term Incentive for a maximum theoretical amount of €1,929 thousand in the case of Chair and €1,443 thousand in the case of Chief Executive Officer, which is equivalent, in both cases, to 150% of their “Target LTI”. Upon expiration of the measurement period of the long-term indicators established for their calculation (once 2026 has ended), its final amount will be determined, which could range between 0% and 150% of the “Target LTI”. Therefore, if 100% of the pre-established objectives are achieved, the LTI will amount to €1,286 thousand in the case of Chair and €962 thousand in the case of Chief Executive Officer. Taking into account the above, the Upfront Portion of the AVR for the financial years 2023 and 2022 of the executive directors, due for payment, respectively, once each of said years has ended, in equal parts in cash and BBVA shares, is indicated below.
| 2023 (1) | 2022 (2) | |||
|---|---|---|---|---|
| In cash (thousands of Euros) | In shares | In cash (thousands of Euros) | In shares | |
| Chair | 897 | 107,835 | 926 | 158,169 |
| Chief Executive Officer | 671 | 80,650 | 712 | 121,646 |
| Total | 1,568 | 188,485 | 1,639 | 279,815 |
(1) The Initial Portion of the Annual Variable Remuneration, which represents the first payment of the Short-Term Incentive for fiscal year 2023 and will be paid during the first quarter of fiscal year 2024, in equal parts in cash and BBVA shares. The remaining amount of the Annual Variable Remuneration for fiscal year 2023 (which includes the Long-Term Incentive for fiscal year 2023) will be deferred (40% in cash and 60% in shares and/or share-linked instruments) over a five-year period. The amount of the Deferred Portion will depend on the result of the long-term indicators that will be used to calculate the Long-Term Incentive for fiscal year 2023. Likewise, and as an ex-post risk adjustment mechanism, the Deferred Portion may be reduced if the capital and liquidity thresholds established to guarantee that payment only occurs if it is sustainable, taking into account the Bank's payment capacity, are not reached. In addition, the remaining rules applicable to the Annual Variable Remuneration of the executive directors established in the BBVA Directors’ Remuneration Policy approved by the Annual General Shareholders' Meeting on March 17, 2023 will apply to the Annual Variable Remuneration for fiscal year 2023, which include: (i) a withholding period of one year after delivery of the BBVA shares or instruments linked to BBVA shares received; (ii) the prohibition of hedging strategies or insurance that may undermine the effects of alignment with prudent risk management; (iii) update of the Deferred Portion in cash that finally vests in accordance with the CPI; (iv) malus and clawback arrangements during the whole periods of deferral and withholding of shares or instruments ; and (v) the 187 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails limitation of variable remuneration up to a maximum amount of 200% of the fixed component of the total remuneration, as resolved by the Annual General Shareholders' Meeting held on 2023.
(2) 40% of the Annual Variable Remuneration for fiscal year 2022 that was paid in 2023. Annual Variable Remuneration for financial year 2022 is subject to the rules on deferral, vesting and payment and to the remaining conditions established in the BBVA Directors' Remuneration Policy approved by the Annual General Shareholders' Meeting of April 20, 2021.
| 2023 (1) | 2022 (2) | |||
|---|---|---|---|---|
| In cash (thousands of Euros) | In shares | In cash (thousands of Euros) | In shares | |
| Chair | ||||
| 2022 | 229 | 56,941 | — | — |
| 2021 | 222 | 57,325 | 215 | 57,325 |
| 2020 | 0 | 0 | — | — |
| 2019 | 176 | 45,529 | 513 | 136,587 |
| 2018 | 132 | 35,795 | 128 | 35,795 |
| 2017 | — | — | 154 | 27,898 |
| Subtotal | 760 | 195,590 | 1,011 | 257,605 |
| Chief Executive Officer | ||||
| 2022 | 176 | 43,793 | — | — |
| 2021 | 169 | 43,552 | 164 | 43,552 |
| 2020 | 0 | 0 | — | — |
| 2019 | 158 | 40,858 | 460 | 122,572 |
| 2018 | — | — | — | — |
| 2017 | — | — | — | — |
| Subtotal | 503 | 128,203 | 624 | 166,124 |
| Total | 1,263 | 323,793 | 1,635 | 423,729 |
(1) Deferred remuneration to be paid after 2023 year-end. Payment thereof to the Chair and/or the Chief Executive Officer will be made in 2024 in accordance with the vesting and payment rules established in the remuneration policies applicable in each financial year:
* 2022 Deferred AVR: first payment (20% of the Deferred Portion) is due to executive directors, including the update of its cash portion. Thereafter, 80% of the 2022 Deferred AVR will be deferred for both executive directors, which, if the conditions are met, will be paid in 2025, 2026, 2027 and 2028.
* 2021 Deferred AVR: second payment (20% of the Deferred Portion) is due to executive directors, including the update of its cash portion. Thereafter, 60% of the 2021 Deferred AVR will be deferred for both executive directors, which, if the conditions are met, will be paid in 2025, 2026, and 2027.
* 2020 Deferred AVR: given the exceptional circumstances arising from the COVID-19 crisis, executive directors voluntarily waived the accrual of the whole of their AVR for 2020 financial year.
* 2019 Deferred AVR: second payment (20% of the Deferred Portion) is due to executive directors, including the update of its cash portion. Thereafter, 20% of the 2019 Deferred AVR will be deferred for both executive directors, which, if the conditions are met, will be paid in 2025.
* 2018 Deferred AVR: third and final payment (20% of the Deferred Portion) is due to the Chair, including the update of its cash portion. Thereafter, the payment to the Chair of the 2018 Deferred AVR will be completed. This remuneration is associated with his former position as Chief Executive Officer.
(2) Deferred remuneration to be paid after 2022 year-end. Payment thereof to the Chair and Chief Executive Officer was made in 2023 in accordance with the vesting and payment rules established in the remuneration policies applicable in each financial year:
* 2021 Deferred AVR: in 2023, the first payment (20% of the Deferred Portion) to the executive directors was made, including the update of its cash portion.
* 2019 Deferred AVR: in 2023, the first payment (60% of the Deferred Portion) to the executive directors was made, including the update of its cash portion.
* 2018 Deferred AVR: in 2023, the second payment (20% of the Deferred Portion) to the Chair was made, including the update of its cash portion. This remuneration is associated with his former position as Chief Executive Officer.
* 2017 Deferred AVR: in 2023, the third and final payment (20% of the Deferred Portion) to the Chair was made, including the update of its cash portion. After this, the payment to the Chair of the 2017 Deferred AVR was completed. This remuneration was associated with his former position as Chief Executive Officer.
188 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
The Bank has not assumed any pension commitments with non-executive directors. With regard to the executive directors, the BBVA Directors' Remuneration Policy establishes a pension framework whereby, in the case of the Chair, he is entitled to receive a retirement pension, paid in either income or capital, when he reaches the legally established retirement age, provided that he does not leave his position as a result of serious dereliction of his duties. The amount of this pension will be determined by the annual contributions made by the Bank, together with their corresponding accumulated yields at that date. The agreed annual contribution to cover the retirement contingency under the defined contribution system established for the Chair in the BBVA Directors' Remuneration Policy is €439 thousand. The Board of Directors may update this amount during the term of the Policy, in the same manner as it may update the Annual Fixed Remuneration, pursuant to the terms established therein.15% of this annual contribution will be based on variable components and considered “discretionary pension benefits” and will, therefore, be subject to the conditions regarding delivery in shares, withholding and clawback established in the applicable regulations, as well as any other conditions concerning variable remuneration that may be applicable in accordance with the BBVA Directors' Remuneration Policy. In the event that the Chair's contractual relationship is terminated before he reaches retirement age for reasons other than serious dereliction of duties, the retirement pension payable to the Chair upon him reaching the legally established retirement age will be calculated based on the funds accumulated through the contributions made by the Bank up to that date, as per the terms set out, plus the corresponding accumulated yield, with no additional contributions to be made by the Bank as of the time of termination. With respect to the commitments assumed with the Chair to cover the death and disability contingencies, the Bank shall pay the corresponding annual insurance premiums, in order to top up the coverages for these contingencies. In accordance with the foregoing, in the financial year 2023, an amount of €458 thousand was registered, comprising the annual contribution to cover the retirement contingency, which is €439 thousand, and an amount of €19 thousand corresponding to the upward adjustment of the "discretionary pension benefits" for the financial year 2022, which were declared once that year had ended and which had to be contributed to the accumulated fund in 2023. Likewise, an amount of €322 thousand has been paid in insurance premiums for the death and disability contingencies. As of December 31, 2023, the total accumulated fund to meet the retirement commitments with the Chair amounted to €24,759 thousand. 15% of the annual contribution for the retirement contingency corresponding to the 2023 financial year (€66 thousand) was registered in said financial year as “discretionary pension benefits”. Following the end of the financial year, this amount was adjusted by applying the same criteria used to determine the Short-Term Incentive that is part of the Chair's Annual Variable Remuneration for the 2023 financial year and was determined to amount to €83 thousand, which represents an upward adjustment of €17 thousand. These “discretionary pension benefits” will be contributed to the accumulated fund in the 2024 financial year and will be subject to the conditions established for them in the BBVA Directors' Remuneration Policy. Regarding the Chief Executive Officer, in accordance with the provisions of the BBVA Directors' Remuneration Policy and those in his contract, the Bank has not undertaken any retirement commitments, although he is entitled to an annual cash sum instead of a retirement pension (cash in lieu of pension) equal to 30% of his Annual Fixed Remuneration. In accordance with the above, in the 2023 financial year, the Bank paid the Chief Executive Officer the amount of fixed remuneration relating to "cash in lieu of pension", as described in the "Remuneration of executive directors" section of this Note. However, the Bank has undertaken commitments to cover the death and disability contingencies with the Chief Executive Officer, for which the corresponding annual insurance premiums are paid. To this end, in 2023, €230 thousand have been recognized for this concept.
| Contributions (1) | Funds accumulated | Death and disability | |
|---|---|---|---|
| Retirement | |||
| 2023 | 2022 | 2023 | |
| Chair | 458 | 451 | 322 |
| Chief Executive Officer | — | — | 230 |
| Total | 458 | 451 | 552 |
(1) Contributions recognized to meet pension commitments to executive directors in financial years 2023 and 2022. In the case of the Chair, these correspond to the sum of the annual retirement pension contribution and the adjustment made to the "discretionary pension benefits" for the financial years 2022 and 2021, the contribution to which was to be made in the financial years 2023 and 2022, respectively, and with the death and disability premiums. In the case of the Chief Executive Officer, the contributions recognized correspond exclusively to the insurance premiums paid by the Bank in 2023 and 2022 to cover the contingencies of death and disability, given that, in his case, the Bank has not undertaken any commitments to cover the retirement contingency.
189 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
In accordance with the BBVA Directors' Remuneration Policy, the Bank has no commitments to pay severance indemnity to executive directors.
The remuneration of all Senior Management, excluding executive directors, for the financial years 2023 and 2022 (15 and 16 members with such status at December 31, of each financial year, respectively, excluding executive directors), are the result of the application of the remuneration policies approved by the Board of Directors (on June 30, 2021 and March 29, 2023, respectively). In accordance with the provisions established in said policies, the remuneration of the entire Senior Management corresponding to financial years 2023 and 2022 is indicated below, by remuneration item.
| 2023 | 2022 | |
|---|---|---|
| Senior Management Total (1) | 18,187 | 18,149 |
(1) 15 members at December 31, 2023 and 16 members at December 31, 2022, excluding executive directors in both cases.
During 2023 and 2022 financial years, all members of Senior Management (15 members as of December 31, 2023 and 16 members at December 31, 2022, excluding executive directors in both cases) have received remuneration in kind, which includes insurance premiums and others, for a total joint amount of €904 thousand and €1,093 thousand, respectively.
Regarding variable remuneration, the main change of the new BBVA Group General Remuneration Policy approved by the Board of Directors in 2023, in line with the changes of the Directors’ Remuneration Policy approved by the Annual General Shareholders' Meeting on March 17, 2023, is that it establishes a new model pursuant to which the Annual Variable Remuneration (AVR) of Senior Management members for financial year 2023, as that of executive directors, now consists of two components: a Short-Term Incentive (STI) and a Long-Term Incentive (LTI). The award of both incentives is contingent upon the achievement of the minimum profit and capital ratio thresholds approved by the Board of Directors for this purpose. The sum of the STI and the LTI constitutes the AVR for the year of each member of the Senior Management. Pursuant to this model, and in the same terms applicable to executive directors set out above, in financial year 2023 all members of the Senior Management, excluding executive directors, have accrued a Short-Term Incentive for a combined total of €7,122 thousand. Likewise, members of the Senior Management, excluding the executive directors, have generated the right to a Long-Term Incentive for a joint maximum theoretical amount of €4,711 thousand, which is equivalent to the sum of 150% of each beneficiary's “Target LTI”. Upon expiration of the measurement period of the long-term indicators established for their calculation (once 2026 has ended), the final amount of each beneficiary's LTI will be determined which could range between 0% and 150% of the “Target LTI”. Therefore, if 100% of the pre-established targets are met, the LTI will amount to a joint total of €3,141 thousand. Taking into account the above, the total sum of the Upfront Portion of the AVR for the financial years 2023 and 2022 of the members of the Senior Management, excluding the executive directors, due for payment, respectively, once each of said financial years has ended, in equal parts in cash and BBVA shares, is indicated below.
| 2023 (1) | 2022 (2) | |
|---|---|---|
| In cash (thousands of Euros) | In shares | |
| Senior Management Total (3) | 2,226 | 267,550 |
(1) Initial Portion of the Annual Variable Remuneration, which represents the first payment of the Short-Term Incentive for fiscal year 2023 and will be paid during the first quarter of fiscal year 2024, in equal parts in cash and BBVA shares. The remaining amount of the Annual Variable Remuneration for fiscal year 2023 (which includes the Long-Term Incentive for fiscal year 2023) will be deferred (40% in cash and 60% in shares or share-linked instruments) over a five-year period (the Deferred Portion). The amount of the Deferred Portion will depend on the result of the long-term indicators that will be used to calculate the Long-Term Incentive for fiscal year 2023. Likewise, and as an ex-post risk adjustment mechanism, the Deferred Portion may be reduced if the
190 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
capital and liquidity thresholds established to guarantee that payment only occurs if it is sustainable, taking into account the Bank's payment capacity, are not reached.In addition, the remaining rules applicable to the Annual Variable Remuneration of the members of the Senior Management established in the BBVA Group General Remuneration Policy approved by the Board of Directors on March 29, 2023 will apply to the Annual Variable Remuneration for fiscal year 2023, which include: (i) a withholding period of one year after delivery of the BBVA shares or instruments linked to BBVA shares received; (ii) the prohibition of hedging strategies or insurance that may undermine the effects of alignment with prudent risk management; (iii) update of the Deferred Portion in cash that finally vests in accordance with the CPI; (iv) malus and clawback arrangements during the whole periods of deferral and withholding of shares or instruments; and (v) the limitation of variable remuneration up to a maximum amount of 200% of the fixed component of the total remuneration, as resolved by the Annual General Shareholders' Meeting held on 2023. (2) 40% of the Annual Variable Remuneration for fiscal year 2022 that was paid in 2023. Annual Variable Remuneration for fiscal year 2022 is subject to the rules on deferral, vesting and payment and to the remaining conditions established in the BBVA Group General Remuneration Policy approved by the Board of Directors of June 30, 2021. (3) 15 members at December 31, 2023 and 16 members at December 31, 2022, excluding executive directors in both cases.
| Senior Management | 2023 | 2022 |
|---|---|---|
| Deferred AVR In cash (thousands of Euros) | In shares | |
| Total (3) | ||
| 2022 | 493 | 122,566 |
| 2021 | 456 | 116,528 |
| 2020 | 1,484 | 289,020 |
| 2019 | 302 | 77,447 |
| 2018 | 138 | 36,454 |
| 2017 | — | — |
| Total | 2,873 | 642,015 |
(1) Deferred remuneration to be paid after 2023 year-end. Payment thereof to the members of the Senior Management who are beneficiaries will take place in 2024 in accordance with the vesting and payment rules established in the remuneration policies applicable in each financial year:
* 2022 Deferred AVR: first payment (20% of the Deferred Portion), including the update of its cash portion. Thereafter, 80% of the 2022 Deferred AVR will be deferred, and if the conditions are met, it will be paid in 2025, 2026, 2027 and 2028.
* 2021 Deferred AVR: second payment (20% of the Deferred Portion), including the update of its cash portion. Thereafter, 60% of the 2021 Deferred AVR will be deferred, and if the conditions are met, it will be paid in 2025, 2026 and 2027.
* 2020 Deferred AVR: given the exceptional circumstances arising from the COVID-19 crisis, all members of Senior Management voluntarily waived the accrual of the whole of their AVR for 2020 financial year. Without prejudice to the above, two members of the Senior Management, executives of BBVA USA at that moment, are entitled to the payment of the Deferred Portion of a Success Bonus on the sale of BBVA USA. Of this Deferred Portion, the whole of it is payable in one case and the 60% of it in the other one, in accordance with the vesting and payment schedule applicable in each case pursuant to the remuneration policy applicable in that financial year.
* 2019 Deferred AVR: second payment (20% of the Deferred Portion) to the members of Senior Management that are beneficiaries, including the update of its cash portion. Thereafter, 20% of the 2019 Deferred AVR will be deferred, which, if the conditions are met, will be paid in 2025. In addition, it includes the second payment (20%) of the Deferred Portion of a retention plan to be made to a member of Senior Management.
* 2018 Deferred AVR: third and final payment (20% of the Deferred Portion) to the members of Senior Management that are beneficiaries, including the update of its cash portion. Thereafter, the payment of the 2018 Deferred AVR to its beneficiaries will be completed.
(2) Deferred remuneration to be paid after 2022 year-end. Payment thereof to the members of Senior Management who were beneficiaries was made in 2023 in accordance with the vesting and payment rules established in the remuneration policies in force in each financial year:
* 2021 Deferred AVR: in 2023, the first payment (20% of the Deferred Portion) was made to the members of the Senior Management, including the update of its cash portion.
* 2019 Deferred AVR: in 2023, the members of Senior Management who were beneficiaries were paid the amounts that corresponded in each case (either 60% of the Deferred Portion or the whole of it) in accordance with the payment schedule established in the remuneration policies applicable in 2019, including the update of its cash portion. In addition, two members of the Senior Management were paid the Deferred Portion of a retention plan pursuant to the vesting and payment rules established in the remuneration policy applicable to that financial year.
* 2018 Deferred AVR: in 2023, the second payment (20% of the Deferred Portion) was made to the members of the Senior Management who were beneficiaries, including the update of its cash portion.
* 2017 Deferred AVR: in 2023, the third and final payment (20% of the Deferred Portion) was paid to the members of the Senior Management who were beneficiaries, including the update of its cash portion. Thereafter, the payment of the 2017 Deferred AVR to its beneficiaries was completed.
(3) 15 members as of December 31, 2023 and 16 members at December 31, 2022, excluding executive directors in both cases.
In the 2023 financial year, an aggregate total amount of €3,829 thousand was registered to cover pension commitments with members of Senior Management (15 members with such status as of December 31, 2023, excluding executive directors), which corresponds to the annual contribution agreed to cover the retirement contingency, increased by an amount of €144 thousand corresponding to the upward adjustment of the "discretionary pension benefits" for the financial year 2022, which were declared once that year had ended and which had to be contributed to the accumulated fund in 2023. Likewise, a total joint amount of €1,102 thousand has been paid in insurance premiums for death and disability contingencies. As of December 31, 2023, the total accumulated fund to meet the retirement commitments with members of Senior Management amounted to €34,069 thousand. As in the case of executive directors, 15% of the agreed annual contributions to cover the contingency of retirement for members of Senior Management, will be based on variable components and considered "discretionary pension benefits", and will, therefore, be subject to the conditions regarding delivery in shares, withholding and clawback established in the applicable regulations, as well as to any other conditions concerning variable remuneration as may be applicable to them in accordance with the remuneration policy applicable to members of Senior Management. For these purposes, of the annual contribution for the retirement contingency corresponding to the 2023 financial year, a total combined amount of €551 thousand was registered in said financial year as "discretionary pension benefits". Following the end of the financial year, as in the case of the Chair, this amount was adjusted by applying the same criteria used to determine the Short-Term Incentive that is part of the Annual Variable Remuneration of the members of Senior Management for the 2023 financial year. As a result, the "discretionary pension benefits" for the year, corresponding to all members of Senior Management, have been determined at a total combined amount of €701 thousand, which represents an upward adjustment of €150 thousand. These “discretionary pension benefits” will be contributed to the accumulated fund in the 2024 financial year and will be subject to the conditions established for them in the remuneration policy applicable to members of Senior Management, in accordance with the regulations applicable to the Bank on this matter.
| Senior Management Total (2) | Contributions (1) | Funds accumulated |
|---|---|---|
| 2023 | 2022 | |
| 3,829 | 3,694 | 1,102 |
(1) Contributions recognized to meet pension commitments with all Senior Management in 2023 and 2022, which correspond to the sum of the annual retirement pension contributions and the adjustments made to the "discretionary pension benefits" for 2022 and 2021 whose contribution was to be made in 2023 and 2022, respectively, and to the insurance premiums paid by the Bank for death and disability contingencies.
(2) 15 members at December 31, 2023 and 16 members at December 31, 2022, excluding executive directors in both cases
Regarding Senior Management, excluding the executive directors, the Bank paid during the 2023 financial year a total of €2,802 thousand derived from the termination of the contractual relationship of a member of the Senior Management which corresponds to the legal severance payment and notice payment in accordance with the provisions of this Senior Manager's contract. In this sense, the Senior Management contracts include the right to receive the corresponding legal severance payment, provided that removal is not pursuant to a willful decision, retirement, disability or serious dereliction of duties, the amount of which will be calculated in accordance with the provisions in the applicable labor regulations, as well as a clause of notice.Likewise, the contract establishes a post-contractual non-compete agreement for a one-year term from removal for any reason other than retirement, disability or serious dereliction of duties. In compensation for this agreement, the aforementioned member of Senior Management received an amount of €110 thousand during 2023. These payments comply with the conditions set out in the regulations applicable to the group of employees with a material impact on the risk profile of BBVA and its Group, to which members of BBVA's Senior Management belong.
192 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
Given the activities BBVA Group entities engage in, the Group has no environmental liabilities, expenses, assets, provisions or contingencies that could have a significant effect on its consolidated equity, financial situation and profits. Consequently, as of December 31, 2023, there is no item included in the Consolidated Financial Statements that requires disclosure in an environmental information report pursuant to Ministry JUS/616/2022, of June 30, by which the new model for the presentation of consolidated annual accounts in the Commercial Register is approved. The accompanying Consolidated Management Report presents in more detail the BBVA Group's management of environmental impacts and risks.
The table below presents the dividends per share paid in cash during 2023, 2022 and 2021 (cash basis dividend, regardless of the year in which they were accrued). For a complete analysis of all remuneration awarded to the shareholders in 2023, 2022 and 2021 (see Note 4).
| Paid Dividends | % Over nominal | Euros per share | Amount (Millions of Euros) | % Over nominal | Euros per share | Amount (Millions of Euros) | % Over nominal | Euros per share | Amount (Millions of Euros) |
|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | 2021 | |||||||
| Ordinary shares | 95.92% | 0.47 | 2,812 | 71.43% | 0.35 | 2,190 | 16.33% | 0.08 | 533 |
| Total dividends paid in cash | 95.92 % | 0.47 | 2,812 | 71.43 % | 0.35 | 2,190 | 16.33 % | 0.08 | 533 |
| Dividends with charge to income | 95.92% | 0.47 | 2,812 | 24.49% | 0.12 | 724 | 16.33% | 0.08 | 533 |
| Dividends with charge to reserve or share premium | —% | — | — | 46.94% | 0.23 | 1,467 | — | — | — |
| Dividends in kind | — | — | — | — | — | — | — | — | — |
| Flexible payment | — | — | — | — | — | — | — | — | — |
The detail of the consolidated ordinary income and profit for each operating segment is as follows as of December 31, 2023, 2022 and 2021:
| Ordinary income and attributable profit by operating segment (Millions of Euros) | Income from ordinary activities (1) | Profit/ (loss) (2) |
|---|---|---|
| 2023 | 2022 ⁽³⁾ | |
| Spain | 16,665 | 9,357 |
| Mexico | 22,822 | 16,446 |
| Turkey | 10,674 | 7,860 |
| South America | 10,913 | 8,689 |
| Rest of Business | 3,053 | 1,357 |
| Subtotal operating segments | 64,127 | 43,710 |
| Corporate Center and adjustments ⁽⁴⁾ | (717) | (81) |
| Total | 63,410 | 43,629 |
(1) The line comprises interest income; dividend income; fee and commission income; gains (losses) on derecognition of financial assets and liabilities not measured at fair value through profit or loss, net; gains (losses) on financial assets and liabilities held for trading, net; gains (losses) on non-trading financial assets mandatorily at fair value through profit or loss, net; gains (losses) on financial assets and liabilities designated at fair value through profit or loss, net; gains (losses) from hedge accounting, net; other operating income; and income from insurance and reinsurance contracts.
(2) See Note 6.
(3) Restated balances according to IFRS 17 - Insurance contracts, which had no material impacts to that date (see Notes 1.3 and 2.3).
(4) Adjustments include: (I) the impact of the purchase of offices in Spain in 2022 in the transaction with Merlin Properties (see Note 17) and (II) the costs associated with the collective layoff procedure in 2021 (see Note 24).
193 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
The breakdown of the balance of “Interest income and similar income” in the consolidated income statements by geographical area is as follows:
| Interest income. Breakdown by geographical area (Millions of Euros) | Notes | 2023 | 2022 | 2021 |
|---|---|---|---|---|
| Domestic | 12,621 | 5,410 | 4,311 | |
| Foreign | 35,229 | 26,023 | 18,704 | |
| European Union | 1,149 | 473 | 315 | |
| Eurozone | 925 | 327 | 204 | |
| Not Eurozone | 224 | 146 | 112 | |
| Other countries | 34,081 | 25,550 | 18,388 | |
| Total | 37.1 | 47,850 | 31,432 |
The detail of the average number of employees is as follows as of December 31, 2023, 2022 and 2021:
| Average number of employees | 2023 | 2022 | 2021 |
|---|---|---|---|
| Men | 56,907 | 53,642 | 54,116 |
| Women | 62,078 | 59,389 | 62,169 |
| Total | 118,985 | 113,031 | 116,285 |
The breakdown of the average number of employees in the BBVA Group as of December 31, 2023, 2022 and 2021 is as follows:
| Average number of employees | 2023 | 2022 | 2021 |
|---|---|---|---|
| Spanish banks | |||
| Management Team | 1,722 | 1,509 | 1,406 |
| Managers | 9,582 | 8,863 | 8,783 |
| Other line personnel and clerical staff | 9,878 | 9,984 | 12,363 |
| Branches abroad | 1,131 | 1,041 | 981 |
| Subtotal | 22,313 | 21,397 | 23,533 |
| Banks abroad | |||
| Mexico | 42,834 | 39,471 | 35,845 |
| The United States | — | — | 4,032 |
| Turkey | 21,810 | 21,803 | 21,791 |
| Venezuela | 1,772 | 1,709 | 1,875 |
| Argentina | 5,771 | 5,674 | 5,773 |
| Colombia | 5,419 | 5,385 | 5,130 |
| Peru | 6,990 | 6,327 | 6,077 |
| Other | 650 | 644 | 831 |
| Subtotal | 85,245 | 81,013 | 81,354 |
| Pension fund managers | 258 | 469 | 469 |
| Other non-banking companies | 11,169 | 10,152 | 10,929 |
| Total | 118,985 | 113,031 | 116,285 |
194 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
The breakdown of the number of employees in the BBVA Group as of December 31, 2023, 2022 and 2021 by category and gender is as follows:
| Number of employees at the year end. Professional category and gender | 2023 | 2022 | 2021 |
|---|---|---|---|
| Male | Female | Male | |
| Management team | 3,557 | 1,886 | 3,425 |
| Managers | 20,741 | 19,986 | 19,361 |
| Other line personnel and clerical staff | 34,203 | 41,113 | 32,139 |
| Total | 58,501 | 62,985 | 54,925 |
In 2021, the agreement with the legal representation of the workers on the collective layoff procedure proposed for Banco Bilbao Vizcaya Argentaria, S.A. in Spain is considered in the figures (see Note 24).
On January 18, 2024, a press release from the Constitutional Court of Spain was published announcing the unanimous decision of the Plenary Session of this jurisdictional body declaring unconstitutional certain measures related to Corporate Income Tax introduced by the Royal Decree-Law 3/2016. On January 29, 2024, this ruling was published on the website of the Constitutional Court, although the publication in the Official State Gazette (BOE), as of the date of preparation of these Consolidated Annual Financial Statements remains pending. The effects of this ruling will depend on the resolution of each of the claims filed in relation to the affected financial years, so the calculation of its impact, both with regard to the quantification of the magnitudes affected, as well as regarding their timing, will depend on said execution process. It is expected that the impacts of the different execution processes could have a positive aggregate impact on the Group's total equity, allowing an acceleration in the use of tax credits and a possible recovery of cash from taxes paid in previous years, all subject to the decisions that, with respect to each financial year and as part of the execution process, the Group may adopt in this regard and without, in any case, said impact expected to exceed approximately 0.4% of the Group's total equity in the aggregate.
On January 30, 2024, it was announced that a cash distribution in the amount of €0.39 gross per share to be paid in April as a final dividend for the year 2023 and the execution of a share buyback program of BBVA for an amount of €781 million were planned to be proposed to the corresponding corporate bodies for consideration as ordinary remuneration to shareholders for 2023, subject to obtaining the corresponding regulatory authorizations and the communication of the specific terms and conditions of the program before its execution. (See Note 4).
From January 1, 2024 to the date of preparation of these Consolidated Annual Financial Statements, no other subsequent events not mentioned above in these financial statements have taken place that could significantly affect the Group’s earnings or its equity position.
These consolidated financial statements are presented on the basis of IFRS, as adopted by the European Union. Certain accounting practices applied by the Group that conform to EU-IFRS may not conform to other generally accepted accounting principles.
195 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
196 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
| Affiliate entity data | Location | Activity | % share of participation (1) | Millions of Euros (2) | |||
|---|---|---|---|---|---|---|---|
| Company | Direct | Indirect | Total | Net carrying amount 31.12.2023 | Equity excluding profit (loss) 31.12.2023 | ||
| ACTIVOS MACORP SL | SPAIN | REAL ESTATE | 50.64 | 49.36 | 100.00 | 3 | 3 |
| ADQUIRA MEXICO SA DE CV | MEXICO | SERVICES | — | 100.00 | 100.00 | 11 | 8 |
| ALCALA 120 PROMOC. Y GEST.IMMOB. S.L. | SPAIN | REAL ESTATE | — | 100.00 | 100.00 | 19 | 18 |
| ANIDA GRUPO INMOBILIARIO SL | SPAIN | INVESTMENT COMPANY | 100.00 | — | 100.00 | 1,188 | 1,198 |
| ANIDA INMOBILIARIA, S.A. DE C.V. | MEXICO | INVESTMENT COMPANY | — | 100.00 | 100.00 | 23 | 23 |
| ANIDA OPERACIONES SINGULARES, S.A. | SPAIN | REAL ESTATE | — | 100.00 | 100.00 | 1,136 | 1,142 |
| ANIDA PROYECTOS INMOBILIARIOS, S.A. DE C.V. | MEXICO | REAL ESTATE | — | 100.00 | 100.00 | 21 | 21 |
| ANIDAPORT INVESTIMENTOS IMOBILIARIOS, UNIPESSOAL, LTDA | PORTUGAL | REAL ESTATE | — | 100.00 | 100.00 | 24 | 15 |
| ANTHEMIS BBVA VENTURE PARTNERSHIP LLP | UNITED KINGDOM | INVESTMENT COMPANY | — | 100.00 | 100.00 | 11 | 16 |
| APLICA NEXTGEN OPERADORA S.A. DE C.V. | MEXICO | SERVICES | — | 100.00 | 100.00 | — | — |
| APLICA NEXTGEN SERVICIOS S.A. DE C.V | MEXICO | SERVICES | — | 100.00 | 100.00 | 1 | 1 |
| ARRAHONA IMMO, S.L. | SPAIN | REAL ESTATE | — | 100.00 | 100.00 | 53 | 114 |
| ARRAHONA NEXUS, S.L. | SPAIN | REAL ESTATE | — | 100.00 | 100.00 | 56 | 62 |
| ARRELS CT FINSOL, S.A. | SPAIN | REAL ESTATE | — | 100.00 | 100.00 | 59 | 75 |
| ARRELS CT PATRIMONI I PROJECTES, S.A. | SPAIN | REAL ESTATE | — | 100.00 | 100.00 | 22 | 22 |
| ARRELS CT PROMOU SA | SPAIN | REAL ESTATE | — | 100.00 | 100.00 | 17 | 24 |
| BANCO BBVA ARGENTINA S.A. | ARGENTINA | BANKING | 39.97 | 26.59 | 66.56 | 158 | 494 |
| BANCO BBVA PERÚ SA ⁽³⁾ | PERU | BANKING | — | 46.12 | 46.12 | 1,390 | 2,551 |
| BANCO BILBAO VIZCAYA ARGENTARIA URUGUAY SA | URUGUAY | BANKING | 100.00 | — | 100.00 | 110 | 242 |
| BANCO OCCIDENTAL SA | SPAIN | BANKING | 49.43 | 50.57 | 100.00 | 17 | 18 |
| BANCO PROVINCIAL OVERSEAS NV | CURAÇAO | BANKING | — | 100.00 | 100.00 | 51 | 45 |
| BANCO PROVINCIAL SA - BANCO UNIVERSAL | VENEZUELA | BANKING | 1.46 | 53.75 | 55.21 | 48 | 175 |
| BBV AMERICA SL | SPAIN | INVESTMENT COMPANY | 99.80 | 0.20 | 100.00 | — | 609 |
| BBVA (SUIZA) SA | SWITZERLAND | BANKING | 100.00 | — | 100.00 | 118 | 152 |
| BBVA AGENCIA DE SEGUROS COLOMBIA LTDA | COLOMBIA | INSURANCES SERVICES | — | 100.00 | 100.00 | — | — |
| BBVA AI FACTORY SL | SPAIN | SERVICES | — | 100.00 | 100.00 | 5 | 5 |
| BBVA ASSET MANAGEMENT ARGENTINA SAU SOCIEDAD GERENTE DE FONDOS COMUNES DE INVERSIÓN | ARGENTINA | INVESTMENT FUND MANAGEMENT | — | 100.00 | 100.00 | 13 | — |
| BBVA ASSET MANAGEMENT MEXICO SA DE CV , SOC.OPERADORA DE FONDOS DE INVERSION, GRUPO FRO. BBVA MEXICO | MEXICO | INVESTMENT FUND MANAGEMENT | — | 100.00 | 100.00 | 48 | 25 |
| BBVA ASSET MANAGEMENT SA SAF | PERU | INVESTMENT FUND MANAGEMENT | — | 100.00 | 100.00 | 7 | 6 |
| BBVA ASSET MANAGEMENT SA SGIIC | SPAIN | INVESTMENT FUND MANAGEMENT | 100.00 | — | 100.00 | 36 | (73) |
| BBVA ASSET MANAGEMENT SA SOCIEDAD FIDUCIARIA (BBVA FIDUCIARIA) | COLOMBIA | INVESTMENT FUND MANAGEMENT | — | 100.00 | 100.00 | 28 | 20 |
| BBVA AXIAL TECH SA DE CV | MEXICO | SERVICES | 100.00 | — | 100.00 | 231 | 281 |
| BBVA BOLSA SOCIEDAD AGENTE DE BOLSA S.A. | PERU | SECURITIES DEALER | — | 100.00 | 100.00 | 3 | 3 |
| BBVA BRASIL BANCO DE INVESTIMENTO SA | BRAZIL | BANKING | 100.00 | — | 100.00 | 16 | 21 |
| BBVA BROKER ARGENTINA SA | ARGENTINA | INSURANCES SERVICES | — | 99.96 | 99.96 | — | 2 |
| BBVA BROKER CORREDURIA DE SEGUROS Y REASEGUROS SA | SPAIN | FINANCIAL SERVICES | 99.94 | 0.06 | 100.00 | — | 3 |
| BBVA COLOMBIA SA | COLOMBIA | BANKING | 77.41 | 18.06 | 95.47 | 521 | 1,463 |
(1) In accordance with Article 3 of Royal Decree 1159/2010, of September 17, in order to determine the state, the voting power relating to subsidiaries was added to the voting power directly held by the parent. Therefore, the number of votes corresponding to the parent company (including indirect control subsidiaries), corresponds to each subsidiary holding a direct ownership interest.
(2) Amount without considering the interim dividends of the year, according to the provisional financial statements of each company, generally as of December 31, 2023 . In the carrying amount (net of provision and hedge in foreign operations), the Group´s ownership percentage has been applied, without considering the impairment of goodwill. Information on individual companies and foreign companies at exchange rate as of December 31, 2023. The data of the companies in Turkey and Argentina are prior to the application of hyperinflation accounting.
(3) Full consolidation method is used according to accounting rules (see Glossary).
197
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
| Affiliate entity data | Location | Activity | % share of participation (1) | Millions of Euros (2) | |||
|---|---|---|---|---|---|---|---|
| Company | Direct | Indirect | Total | Net carrying amount 31.12.2023 | Equity excluding profit (loss) 31.12.2023 | ||
| BBVA CONSUMER FINANCE ENTIDAD DE DESARROLLO A LA PEQUEÑA Y MICRO EMPRESA EDPYME SA (BBVA CONSUMER FINANCE - EDPYME) | PERU | IN LIQUIDATION | — | 100.00 | 100.00 | 4 | 4 |
| BBVA DISTRIBUIDORA DE SEGUROS S.R.L. | URUGUAY | FINANCIAL SERVICES | — | 100.00 | 100.00 | 7 | 3 |
| BBVA FUNDOS S.GESTORA FUNDOS PENSOES SA | PORTUGAL | PENSION FUND MANAGEMENT | 100.00 | — | 100.00 | 9 | 8 |
| BBVA GLOBAL FINANCE LTD | CAYMAN ISLANDS | OTHER ISSUANCE COMPANIES | 100.00 | — | 100.00 | — | 5 |
| BBVA GLOBAL MARKETS BV | NETHERLANDS | OTHER ISSUANCE COMPANIES | 100.00 | — | 100.00 | — | — |
| BBVA GLOBAL SECURITIES, B.V. | NETHERLANDS | OTHER ISSUANCE COMPANIES | 100.00 | — | 100.00 | — | — |
| BBVA GLOBAL WEALTH ADVISORS INC | UNITED STATES | FINANCIAL SERVICES | 100.00 | — | 100.00 | 6 | 7 |
| BBVA HOLDING CHILE SA | CHILE | INVESTMENT COMPANY | 61.22 | 38.78 | 100.00 | 158 | 291 |
| BBVA INSTITUIÇAO FINANCEIRA DE CREDITO SA | PORTUGAL | FINANCIAL SERVICES | 49.90 | 50.10 | 100.00 | 39 | 62 |
| BBVA LEASING MEXICO SA DE CV | MEXICO | FINANCIAL SERVICES | — | 100.00 | 100.00 | 51 | 258 |
| BBVA MEDIACION OPERADOR DE BANCA-SEGUROS VINCULADO, S.A. | SPAIN | FINANCIAL SERVICES | 99.99 | 0.01 | 100.00 | 11 | (14) |
| BBVA MEXICO SA INSTITUCION DE BANCA MULTIPLE GRUPO FINANCIERO BBVA MEXICO | MEXICO | BANKING | — | 100.00 | 100.00 | 17,545 | 12,979 |
| BBVA NEXT TECHNOLOGIES OPERADORA, S.A. DE C.V. | MEXICO | SERVICES | — | 100.00 | 100.00 | — | — |
| BBVA NEXT TECHNOLOGIES SLU | SPAIN | SERVICES | 100.00 | — | 100.00 | 44 | 40 |
| BBVA NEXT TECHNOLOGIES, S.A. DE C.V. | MEXICO | SERVICES | — | 100.00 | 100.00 | 1 | 1 |
| BBVA OP3N S.L. | SPAIN | SERVICES | — | 100.00 | 100.00 | 2 | 2 |
| BBVA OPERADORA MEXICO SA DE CV | MEXICO | SERVICES | — | 100.00 | 100.00 | 79 | 73 |
| BBVA PENSIONES MEXICO, S.A. DE C.V., GRUPO FINANCIERO BBVA MEXICO | MEXICO | INSURANCES SERVICES | — | 100.00 | 100.00 | 397 | 318 |
| BBVA PENSIONES SA ENTIDAD GESTORA DE FONDOS DE PENSIONES | SPAIN | PENSION FUND MANAGEMENT | 100.00 | — | 100.00 | 13 | 16 |
| BBVA PERU HOLDING SAC | PERU | INVESTMENT COMPANY | 100.00 | — | 100.00 | 112 | 1,184 |
| BBVA PREVISION AFP SA ADM.DE FONDOS DE PENSIONES | BOLIVIA | PENSION FUND MANAGEMENT | 75.00 | 5.00 | 80.00 | 2 | 5 |
| BBVA PROCESSING SERVICES INC. | UNITED STATES | FINANCIAL SERVICES | 100.00 | — | 100.00 | 1 | 1 |
| BBVA RE INHOUSE COMPAÑIA DE REASEGUROS, S.E. | SPAIN | INSURANCES SERVICES | 100.00 | — | 100.00 | 63 | 61 |
| BBVA SECURITIES INC | UNITED STATES | FINANCIAL SERVICES | 100.00 | — | 100.00 | 233 | 244 |
| BBVA SEGUROS ARGENTINA SA | ARGENTINA | INSURANCES SERVICES | 87.78 | 12.22 | 100.00 | 10 | 11 |
| BBVA SEGUROS COLOMBIA SA | COLOMBIA | INSURANCES SERVICES | 94.00 | 6.00 | 100.00 | 10 | 31 |
| BBVA SEGUROS DE VIDA COLOMBIA SA | COLOMBIA | INSURANCES SERVICES | 94.00 | 6.00 | 100.00 | 14 | 123 |
| BBVA SEGUROS MÉXICO SA DE CV GRUPO FINANCIERO BBVA MEXICO | MEXICO | INSURANCES SERVICES | — | 100.00 | 100.00 | 687 | 185 |
| BBVA SEGUROS SA DE SEGUROS Y REASEGUROS | SPAIN | INSURANCES SERVICES | 99.96 | — | 99.96 | 713 | 704 |
| BBVA SEGUROS SALUD MEXICO SA DE CV GRUPO FRO. BBVA MEXICO. | MEXICO | INSURANCES SERVICES | — | 100.00 | 100.00 | 26 | 14 |
| BBVA SERVICIOS ADMINISTRATIVOS MEXICO, S.A. DE C.V. | MEXICO | SERVICES | — | 100.00 | 100.00 | 8 | 6 |
| BBVA SERVICIOS CORPORATIVOS MEXICO, S.A. DE C.V. | MEXICO | SERVICES | — | 100.00 | 100.00 | 5 | 5 |
| BBVA SERVICIOS, S.A. | SPAIN | COMMERCIAL | — | 100.00 | 100.00 | — | — |
| BBVA SOCIEDAD TITULIZADORA S.A. | PERU | OTHER ISSUANCE COMPANIES | — | 100.00 | 100.00 | 1 | 1 |
| BBVA TRADE, S.A. | SPAIN | INVESTMENT COMPANY | — | 100.00 | 100.00 | 9 | 9 |
| BBVA VALORES COLOMBIA SA COMISIONISTA DE BOLSA | COLOMBIA | SECURITIES DEALER | — | 100.00 | 100.00 | 13 | 11 |
| BILBAO VIZCAYA HOLDING SAU | SPAIN | INVESTMENT COMPANY | 100.00 | — | 100.00 | 265 | 387 |
(1) In accordance with Article 3 of Royal Decree 1159/2010, of September 17, in order to determine the state, the voting power relating to subsidiaries was added to the voting power directly held by the parent. Therefore, the number of votes corresponding to the parent company (including indirect control subsidiaries), corresponds to each subsidiary holding a direct ownership interest.
(2) Amount without considering the interim dividends of the year, according to the provisional financial statements of each company, generally as of December 31, 2023. In the carrying amount (net of provision and hedge in foreign operations), the Group´s ownership percentage has been applied, without considering the impairment of goodwill. Information on individual companies and foreign companies at exchange rate as of December 31, 2023. The data of the companies in Turkey and Argentina are prior to the application of hyperinflation accounting.
198
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56).In the event of a discrepancy, the Spanish-language version prevails Additional information on subsidiaries and structured entities composing the BBVA Group as of December 31, 2023 (continued)
| % share of participation (1) | Millions of Euros (2) | Affiliate entity data | ||||
|---|---|---|---|---|---|---|
| Company | Location | Activity | Direct | Indirect | Total | Net carrying amount 31.12.2023 |
| CAIXA MANRESA IMMOBILIARIA ON | SPAIN | REAL ESTATE | 100.00 | — | 100.00 | 2 |
| CASA SL | ||||||
| CARTERA E INVERSIONES SA | SPAIN | INVESTMENT COMPANY | 100.00 | — | 100.00 | 92 |
| CASA DE BOLSA BBVA MEXICO SA DE CV | MEXICO | SECURITIES DEALER | — | 100.00 | 100.00 | 89 |
| CATALONIA PROMODIS 4, S.A. | SPAIN | REAL ESTATE | — | 100.00 | 100.00 | 1 |
| CATALUNYACAIXA IMMOBILIARIA SA | SPAIN | REAL ESTATE | 100.00 | — | 100.00 | 186 |
| CATALUNYACAIXA SERVEIS SA | SPAIN | SERVICES | 100.00 | — | 100.00 | 2 |
| CIDESSA DOS, S.L. | SPAIN | INVESTMENT COMPANY | — | 100.00 | 100.00 | 17 |
| CIERVANA SL | SPAIN | INVESTMENT COMPANY | 100.00 | — | 100.00 | 53 |
| COMERCIALIZADORA CORPORATIVA SAC | PERU | FINANCIAL SERVICES | — | 50.00 | 50.00 | — |
| COMERCIALIZADORA DE SERVICIOS FINANCIEROS, S.A. | COLOMBIA | SERVICES | — | 100.00 | 100.00 | 5 |
| COMPAÑIA CHILENA DE INVERSIONES SL | SPAIN | INVESTMENT COMPANY | 99.97 | 0.03 | 100.00 | 221 |
| CONSOLIDAR A.F.J.P SA | ARGENTINA | IN LIQUIDATION | 46.11 | 53.89 | 100.00 | 1 |
| CONTENTS AREA, S.L. | SPAIN | SERVICES | — | 100.00 | 100.00 | 5 |
| CONTINENTAL DPR FINANCE COMPANY BV | NETHERLANDS | FINANCIAL SERVICES | — | 100.00 | 100.00 | — |
| CONTRATACION DE PERSONAL, S.A. DE C.V. | MEXICO | SERVICES | — | 100.00 | 100.00 | 2 |
| CORPORACION GENERAL FINANCIERA SA | SPAIN | INVESTMENT COMPANY | 100.00 | — | 100.00 | 510 |
| CREA MADRID NUEVO NORTE SA | SPAIN | REAL ESTATE | — | 75.54 | 75.54 | 143 |
| DATA ARCHITECTURE AND TECHNOLOGY MEXICO SA DE CV | MEXICO | SERVICES | — | 100.00 | 100.00 | — |
| DATA ARQUITECTURE AND TECHNOLOGY OPERADORA SA DE CV | MEXICO | SERVICES | — | 100.00 | 100.00 | — |
| DEUTSCHE BANK MEXICO SA FIDEICOMISO F/1859 | MEXICO | FINANCIAL SERVICES | — | 100.00 | 100.00 | — |
| DEUTSCHE BANK MEXICO SA FIDEICOMISO F/1860 | MEXICO | FINANCIAL SERVICES | — | 100.00 | 100.00 | — |
| ECASA, S.A. | CHILE | FINANCIAL SERVICES | — | 100.00 | 100.00 | 37 |
| EMPRENDIMIENTOS DE VALOR S.A. | URUGUAY | FINANCIAL SERVICES | — | 100.00 | 100.00 | 3 |
| EUROPEA DE TITULIZACION SA SGFT . | SPAIN | FINANCIAL SERVICES | 88.24 | — | 88.24 | 2 |
| F/11395 FIDEICOMISO IRREVOCABLE DE ADMINISTRACION CON DERECHO DE REVERSION ⁽³⁾ | MEXICO | REAL ESTATE | — | 42.40 | 42.40 | — |
| F/253863 EL DESEO RESIDENCIAL | MEXICO | REAL ESTATE | — | 65.00 | 65.00 | — |
| FIDEICOMISO 28991-8 TRADING EN LOS MCADOS FINANCIEROS | MEXICO | FINANCIAL SERVICES | — | 100.00 | 100.00 | 5 |
| FIDEICOMISO F/29764-8 SOCIO LIQUIDADOR DE OPERACIONES FINANCIERAS DERIVADAS | MEXICO | FINANCIAL SERVICES | — | 100.00 | 100.00 | 57 |
| FIDEICOMISO F/403112-6 DE ADMINISTRACION DOS LAGOS | MEXICO | REAL ESTATE | — | 100.00 | 100.00 | — |
| FIDEICOMISO HARES BBVA BANCOMER F/ 47997-2 | MEXICO | REAL ESTATE | — | 100.00 | 100.00 | 3 |
| FIDEICOMISO INMUEBLES CONJUNTO RESIDENCIAL HORIZONTES DE VILLA CAMPESTRE | COLOMBIA | REAL ESTATE | — | 100.00 | 100.00 | — |
| FIDEICOMISO LOTE 6.1 ZARAGOZA | COLOMBIA | REAL ESTATE | — | 59.99 | 59.99 | — |
| FIDEICOMISO SCOTIABANK INVERLAT S A F100322908 | MEXICO | REAL ESTATE | — | 100.00 | 100.00 | 5 |
| FINANCIERA AYUDAMOS S.A. DE C.V., SOFOMER | MEXICO | IN LIQUIDATION | — | 100.00 | 100.00 | 7 |
| FOMENTO Y DESARROLLO DE CONJUNTOS RESIDENCIALES S.L. EN LIQUIDACION | SPAIN | IN LIQUIDATION | — | 60.00 | 60.00 | — |
| FORUM COMERCIALIZADORA DEL PERU SA | PERU | SERVICES | — | 100.00 | 100.00 | 1 |
| FORUM DISTRIBUIDORA DEL PERU SA | PERU | FINANCIAL SERVICES | — | 100.00 | 100.00 | 8 |
(1) In accordance with Article 3 of Royal Decree 1159/2010, of September 17, in order to determine the state, the voting power relating to subsidiaries was added to the voting power directly held by the parent. Therefore, the number of votes corresponding to the parent company (including indirect control subsidiaries), corresponds to each subsidiary holding a direct ownership interest.
(2) Amount without considering the interim dividends of the year, according to the provisional financial statements of each company, generally as of December 31, 2023. In the carrying amount (net of provision and hedge in foreign operations), the Group´s ownership percentage has been applied, without considering the impairment of goodwill. Information on individual companies and foreign companies at exchange rate as of December 31, 2023. The data of the companies in Turkey and Argentina are prior to the application of hyperinflation accounting.
(3) Full consolidation method is used according to accounting rules (see Glossary).
199
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56).
In the event of a discrepancy, the Spanish-language version prevails
Additional information on subsidiaries and structured entities composing the BBVA Group as of December 31, 2023 (continued)
| % share of participation (1) | Millions of Euros (2) | Affiliate entity data | ||||
|---|---|---|---|---|---|---|
| Company | Location | Activity | Direct | Indirect | Total | Net carrying amount 31.12.2023 |
| FORUM DISTRIBUIDORA, S.A. | CHILE | FINANCIAL SERVICES | — | 100.00 | 100.00 | 51 |
| FORUM SERVICIOS FINANCIEROS, S.A. | CHILE | FINANCIAL SERVICES | — | 100.00 | 100.00 | 234 |
| G NETHERLANDS BV | NETHERLANDS | INVESTMENT COMPANY | — | 100.00 | 100.00 | 393 |
| GARANTI BANK SA | ROMANIA | BANKING | — | 100.00 | 100.00 | 252 |
| GARANTI BBVA AS | TURKEY | BANKING | 85.97 | — | 85.97 | 5,038 |
| GARANTI BBVA DIJITAL VARLIKLAR ANONIM SIRKETI | TURKEY | FINANCIAL SERVICES | — | 100.00 | 100.00 | 14 |
| GARANTI BBVA EMEKLILIK AS | TURKEY | INSURANCES SERVICES | 84.91 | — | 84.91 | 93 |
| GARANTI BBVA FACTORING AS | TURKEY | FINANCIAL SERVICES | 81.84 | — | 81.84 | 43 |
| GARANTI BBVA FILO AS | TURKEY | SERVICES | — | 100.00 | 100.00 | 169 |
| GARANTI BBVA FINANSAL TEKNOLOJI ANONIM SIRKETI | TURKEY | FINANCIAL SERVICES | — | 100.00 | 100.00 | 11 |
| GARANTI BBVA LEASING AS | TURKEY | FINANCIAL SERVICES | — | 100.00 | 100.00 | 253 |
| GARANTI BBVA PORTFOY YONETIMI AS | TURKEY | INVESTMENT FUND MANAGEMENT | — | 100.00 | 100.00 | 22 |
| GARANTI BBVA YATIRIM AS | TURKEY | FINANCIAL SERVICES | — | 100.00 | 100.00 | 167 |
| GARANTI DIVERSIFIED PAYMENT RIGHTS FINANCE COMPANY | CAYMAN ISLANDS | OTHER ISSUANCE COMPANIES | — | 100.00 | 100.00 | — |
| GARANTI FILO SIGORTA ARACILIK HIZMETLERI A.S. | TURKEY | FINANCIAL SERVICES | — | 100.00 | 100.00 | — |
| GARANTI HOLDING BV | NETHERLANDS | INVESTMENT COMPANY | — | 100.00 | 100.00 | 615 |
| GARANTI KONUT FINANSMANI DANISMANLIK HIZMETLERI AS (GARANTI MORTGAGE) | TURKEY | SERVICES | — | 100.00 | 100.00 | — |
| GARANTI KULTUR AS | TURKEY | SERVICES | — | 100.00 | 100.00 | — |
| GARANTI ODEME SISTEMLERI AS (GOSAS) | TURKEY | FINANCIAL SERVICES | — | 100.00 | 100.00 | 10 |
| GARANTI ODEME VE ELEKTRONIK PARA HIZMETLERI ANONIM SIRKETI | TURKEY | PAYMENT ENTITIES | — | 100.00 | 100.00 | 7 |
| GARANTI YATIRIM ORTAKLIGI AS ⁽³⁾ ⁽⁴⁾ | TURKEY | INVESTMENT COMPANY | — | 3.61 | 3.61 | — |
| GARANTIBANK BBVA INTERNATIONAL N.V. | NETHERLANDS | BANKING | — | 100.00 | 100.00 | 833 |
| GESCAT GESTIO DE SOL SL | SPAIN | REAL ESTATE | 100.00 | — | 100.00 | 8 |
| GESCAT LLEVANT, S.L. | SPAIN | REAL ESTATE | — | 100.00 | 100.00 | 1 |
| GESCAT LLOGUERS SL | SPAIN | REAL ESTATE | 100.00 | — | 100.00 | 3 |
| GESCAT VIVENDES EN COMERCIALITZACIO SL | SPAIN | REAL ESTATE | 100.00 | — | 100.00 | 34 |
| GESTION DE PREVISION Y PENSIONES SA | SPAIN | PENSION FUND MANAGEMENT | 60.00 | — | 60.00 | 9 |
| GESTION Y ADMINISTRACION DE RECIBOS, S.A. - GARSA | SPAIN | SERVICES | — | 100.00 | 100.00 | 1 |
| GRAN JORGE JUAN SA | SPAIN | REAL ESTATE | 100.00 | — | 100.00 | 424 |
| GRUPO FINANCIERO BBVA MEXICO SA DE CV | MEXICO | FINANCIAL SERVICES | 99.98 | — | 99.98 | 9,826 |
| INMUEBLES Y RECUPERACIONES BBVA SA | PERU | REAL ESTATE | — | 100.00 | 100.00 | 37 |
| INVERAHORRO SL | SPAIN | INVESTMENT COMPANY | 100.00 | — | 100.00 | 130 |
| INVERSIONES ALDAMA, C.A. | VENEZUELA | IN LIQUIDATION | — | 100.00 | 100.00 | — |
| INVERSIONES BANPRO INTERNATIONAL INC NV ⁽³⁾ | CURAÇAO | INVESTMENT COMPANY | 48.00 | — | 48.00 | 16 |
| INVERSIONES BAPROBA CA | VENEZUELA | FINANCIAL SERVICES | 100.00 | — | 100.00 | — |
| INVERSIONES P.H.R.4, C.A. | VENEZUELA | INACTIVE | — | 60.46 | 60.46 | — |
| MADIVA SOLUCIONES, S.L. | SPAIN | SERVICES | — | 100.00 | 100.00 | 4 |
(1) In accordance with Article 3 of Royal Decree 1159/2010, of September 17, in order to determine the state, the voting power relating to subsidiaries was added to the voting power directly held by the parent. Therefore, the number of votes corresponding to the parent company (including indirect control subsidiaries), corresponds to each subsidiary holding a direct ownership interest.
(2) Amount without considering the interim dividends of the year, according to the provisional financial statements of each company, generally as of December 31, 2023. In the carrying amount (net of provision and hedge in foreign operations), the Group´s ownership percentage has been applied, without considering the impairment of goodwill. Information on individual companies and foreign companies at exchange rate as of December 31, 2023. The data of the companies in Turkey and Argentina are prior to the application of hyperinflation accounting.
(3) Full consolidation method is used according to accounting rules (see Glossary).
(4) The percentage of voting rights owned by the Group entities in this company is 99.97%.
200
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56).
In the event of a discrepancy, the Spanish-language version prevails
Additional information on subsidiaries and structured entities composing the BBVA Group as of December 31, 2023 (continued)
| % share of participation (1) | Millions of Euros (2) | Affiliate entity data | ||||
|---|---|---|---|---|---|---|
| Company | Location | Activity | Direct | Indirect | Total | Net carrying amount 31.12.2023 |
| MISAPRE, S.A. DE C.V. | MEXICO | IN LIQUIDATION | — | 100.00 | 100.00 | — |
| MOMENTUM SOCIAL INVESTMENT HOLDING, S.L. |
| Company | Location | Activity | % share of participation (1) | Millions of Euros (2) |
|---|---|---|---|---|
| Direct | Indirect | |||
| Total | Net carrying amount | |||
| SPAIN INVESTMENT COMPANY | SPAIN | INVESTMENT COMPANY | 100.00 | 100.00 |
| MOTORACTIVE IFN SA | ROMANIA | FINANCIAL SERVICES | 100.00 | 100.00 |
| MOTORACTIVE MULTISERVICES SRL | ROMANIA | SERVICES | 100.00 | 100.00 |
| MOVISTAR CONSUMER FINANCE COLOMBIA SAS | COLOMBIA | IN LIQUIDATION | 50.00 | 50.00 |
| MULTIASISTENCIA OPERADORA S.A. DE C.V. | MEXICO | INSURANCES SERVICES | 100.00 | 100.00 |
| MULTIASISTENCIA SERVICIOS S.A. DE C.V. | MEXICO | INSURANCES SERVICES | 100.00 | 100.00 |
| MULTIASISTENCIA, S.A. DE C.V. | MEXICO | INSURANCES SERVICES | 100.00 | 100.00 |
| OPCION VOLCAN, S.A. | MEXICO | REAL ESTATE | 100.00 | 100.00 |
| OPENPAY ARGENTINA SA | ARGENTINA | PAYMENT ENTITIES | 100.00 | 100.00 |
| OPENPAY COLOMBIA SAS | COLOMBIA | PAYMENT ENTITIES | 100.00 | 100.00 |
| OPENPAY PERÚ SA | PERU | PAYMENT ENTITIES | 100.00 | 100.00 |
| OPENPAY SA DE CV | MEXICO | PAYMENT ENTITIES | 100.00 | 100.00 |
| OPENPAY SERVICIOS S.A. DE C.V. | MEXICO | SERVICES | 100.00 | 100.00 |
| OPERADORA DOS LAGOS S.A. DE C.V. | MEXICO | SERVICES | 100.00 | 100.00 |
| OPPLUS OPERACIONES Y SERVICIOS SA | SPAIN | SERVICES | 100.00 | 100.00 |
| PECRI INVERSION SL | SPAIN | INVESTMENT COMPANY | 100.00 | 100.00 |
| PORTICO PROCAM, S.L. | SPAIN | REAL ESTATE | — | 100.00 |
| PROMOTORA DEL VALLES, S.L. | SPAIN | REAL ESTATE | — | 100.00 |
| PROMOU CT OPENSEGRE, S.L. | SPAIN | REAL ESTATE | — | 100.00 |
| PRONORTE UNO PROCAM, S.A. | SPAIN | REAL ESTATE | — | 100.00 |
| PROPEL EXPLORER FUND I LP | UNITED STATES | INVESTMENT COMPANY | — | 99.50 |
| PROPEL EXPLORER FUND II LP | UNITED STATES | INVESTMENT COMPANY | — | 99.50 |
| PROPEL VENTURE PARTNERS BRAZIL US LP | UNITED STATES | INVESTMENT COMPANY | — | 99.80 |
| PROPEL VENTURE PARTNERS GLOBAL US, LP | UNITED STATES | INVESTMENT COMPANY | — | 99.50 |
| PROPEL VENTURE PARTNERS US FUND I, L.P. | UNITED STATES | VENTURE CAPITAL | 99.50 | 99.50 |
| PROPEL XYZ I LP | UNITED STATES | INVESTMENT COMPANY | — | 99.40 |
| PRO-SALUD, C.A. | VENEZUELA | INACTIVE | — | 58.86 |
| PROVINCIAL DE VALORES CASA DE BOLSA CA | VENEZUELA | SECURITIES DEALER | — | 90.00 |
| PROVINCIAL SDAD.ADMIN.DE ENTIDADES DE INV.COLECTIVA CA | VENEZUELA | INVESTMENT FUND MANAGEMENT | — | 100.00 |
| PROVIVIENDA ENTIDAD RECAUDADORA Y ADMIN.DE APORTES, S.A. | BOLIVIA | PENSION FUND MANAGEMENT | 100.00 | 100.00 |
| PSA FINANCE ARGENTINA COMPAÑIA FINANCIERA SA | ARGENTINA | BANKING | 50.00 | 50.00 |
| RALFI IFN SA | ROMANIA | FINANCIAL SERVICES | — | 100.00 |
| RPV COMPANY | CAYMAN ISLANDS | OTHER ISSUANCE COMPANIES | 100.00 | 100.00 |
| SATICEM GESTIO SL | SPAIN | REAL ESTATE | 100.00 | 100.00 |
| SATICEM HOLDING SL | SPAIN | REAL ESTATE | 100.00 | 100.00 |
| SATICEM IMMOBLES EN ARRENDAMENT SL | SPAIN | REAL ESTATE | 100.00 | 100.00 |
| SEGUROS PROVINCIAL CA | VENEZUELA | INSURANCES SERVICES | — | 100.00 |
| SERVICIOS CORPORATIVOS DE SEGUROS, S.A. DE C.V. | MEXICO | SERVICES | — | 100.00 |
| SERVICIOS EXTERNOS DE APOYO EMPRESARIAL, S.A DE C.V. | MEXICO | SERVICES | — | 100.00 |
| SOCIEDAD DE ESTUDIOS Y ANALISIS FINANCIERO SA | SPAIN | SERVICES | 100.00 | 100.00 |
| SOCIEDAD PERUANA DE FINANCIAMIENTO SAC | PERU | FINANCIAL SERVICES | — | 50.00 |
| SPORT CLUB 18 SA | SPAIN | INVESTMENT COMPANY | 100.00 | 100.00 |
| TREE INVERSIONES INMOBILIARIAS SA | SPAIN | REAL ESTATE | 100.00 | 100.00 |
| TRIFOI REAL ESTATE SRL | ROMANIA | REAL ESTATE | — | 100.00 |
| UNNIM SOCIEDAD PARA LA GESTION DE ACTIVOS INMOBILIARIOS SA | SPAIN | REAL ESTATE | 100.00 | 100.00 |
| URBANIZADORA SANT LLORENC SA | SPAIN | INACTIVE | 60.60 | 60.60 |
| VOLKSWAGEN FINANCIAL SERVICES COMPAÑIA FINANCIERA SA | ARGENTINA | BANKING | — | 51.00 |
| Affiliate entity data | % share of participation (1) | Millions of Euros (2) | ||
|---|---|---|---|---|
| Direct | Indirect | |||
| Total | Net carrying amount | |||
| Equity excluding profit (loss) 31.12.2023 | ||||
| Profit (loss) 31.12.2023 | ||||
| SPAIN INVESTMENT COMPANY | SPAIN | INVESTMENT COMPANY | 100.00 | 100.00 |
| MOTORACTIVE IFN SA | ROMANIA | FINANCIAL SERVICES | 100.00 | 100.00 |
| MOTORACTIVE MULTISERVICES SRL | ROMANIA | SERVICES | 100.00 | 100.00 |
| MOVISTAR CONSUMER FINANCE COLOMBIA SAS | COLOMBIA | IN LIQUIDATION | 50.00 | 50.00 |
| MULTIASISTENCIA OPERADORA S.A. DE C.V. | MEXICO | INSURANCES SERVICES | 100.00 | 100.00 |
| MULTIASISTENCIA SERVICIOS S.A. DE C.V. | MEXICO | INSURANCES SERVICES | 100.00 | 100.00 |
| MULTIASISTENCIA, S.A. DE C.V. | MEXICO | INSURANCES SERVICES | 100.00 | 100.00 |
| OPCION VOLCAN, S.A. | MEXICO | REAL ESTATE | 100.00 | 100.00 |
| OPENPAY ARGENTINA SA | ARGENTINA | PAYMENT ENTITIES | 100.00 | 100.00 |
| OPENPAY COLOMBIA SAS | COLOMBIA | PAYMENT ENTITIES | 100.00 | 100.00 |
| OPENPAY PERÚ SA | PERU | PAYMENT ENTITIES | 100.00 | 100.00 |
| OPENPAY SA DE CV | MEXICO | PAYMENT ENTITIES | 100.00 | 100.00 |
| OPENPAY SERVICIOS S.A. DE C.V. | MEXICO | SERVICES | 100.00 | 100.00 |
| OPERADORA DOS LAGOS S.A. DE C.V. | MEXICO | SERVICES | 100.00 | 100.00 |
| OPPLUS OPERACIONES Y SERVICIOS SA | SPAIN | SERVICES | 100.00 | 100.00 |
| PECRI INVERSION SL | SPAIN | INVESTMENT COMPANY | 100.00 | 100.00 |
| PORTICO PROCAM, S.L. | SPAIN | REAL ESTATE | — | 100.00 |
| PROMOTORA DEL VALLES, S.L. | SPAIN | REAL ESTATE | — | 100.00 |
| PROMOU CT OPENSEGRE, S.L. | SPAIN | REAL ESTATE | — | 100.00 |
| PRONORTE UNO PROCAM, S.A. | SPAIN | REAL ESTATE | — | 100.00 |
| PROPEL EXPLORER FUND I LP | UNITED STATES | INVESTMENT COMPANY | — | 99.50 |
| PROPEL EXPLORER FUND II LP | UNITED STATES | INVESTMENT COMPANY | — | 99.50 |
| PROPEL VENTURE PARTNERS BRAZIL US LP | UNITED STATES | INVESTMENT COMPANY | — | 99.80 |
| PROPEL VENTURE PARTNERS GLOBAL US, LP | UNITED STATES | INVESTMENT COMPANY | — | 99.50 |
| PROPEL VENTURE PARTNERS US FUND I, L.P. | UNITED STATES | VENTURE CAPITAL | 99.50 | 99.50 |
| PROPEL XYZ I LP | UNITED STATES | INVESTMENT COMPANY | — | 99.40 |
| PRO-SALUD, C.A. | VENEZUELA | INACTIVE | — | 58.86 |
| PROVINCIAL DE VALORES CASA DE BOLSA CA | VENEZUELA | SECURITIES DEALER | — | 90.00 |
| PROVINCIAL SDAD.ADMIN.DE ENTIDADES DE INV.COLECTIVA CA | VENEZUELA | INVESTMENT FUND MANAGEMENT | — | 100.00 |
| PROVIVIENDA ENTIDAD RECAUDADORA Y ADMIN.DE APORTES, S.A. | BOLIVIA | PENSION FUND MANAGEMENT | 100.00 | 100.00 |
| PSA FINANCE ARGENTINA COMPAÑIA FINANCIERA SA | ARGENTINA | BANKING | 50.00 | 50.00 |
| RALFI IFN SA | ROMANIA | FINANCIAL SERVICES | — | 100.00 |
| RPV COMPANY | CAYMAN ISLANDS | OTHER ISSUANCE COMPANIES | 100.00 | 100.00 |
| SATICEM GESTIO SL | SPAIN | REAL ESTATE | 100.00 | 100.00 |
| SATICEM HOLDING SL | SPAIN | REAL ESTATE | 100.00 | 100.00 |
| SATICEM IMMOBLES EN ARRENDAMENT SL | SPAIN | REAL ESTATE | 100.00 | 100.00 |
| SEGUROS PROVINCIAL CA | VENEZUELA | INSURANCES SERVICES | — | 100.00 |
| SERVICIOS CORPORATIVOS DE SEGUROS, S.A. DE C.V. | MEXICO | SERVICES | — | 100.00 |
| SERVICIOS EXTERNOS DE APOYO EMPRESARIAL, S.A DE C.V. | MEXICO | SERVICES | — | 100.00 |
| SOCIEDAD DE ESTUDIOS Y ANALISIS FINANCIERO SA | SPAIN | SERVICES | 100.00 | 100.00 |
| SOCIEDAD PERUANA DE FINANCIAMIENTO SAC | PERU | FINANCIAL SERVICES | — | 50.00 |
| SPORT CLUB 18 SA | SPAIN | INVESTMENT COMPANY | 100.00 | 100.00 |
| TREE INVERSIONES INMOBILIARIAS SA | SPAIN | REAL ESTATE | 100.00 | 100.00 |
| TRIFOI REAL ESTATE SRL | ROMANIA | REAL ESTATE | — | 100.00 |
| UNNIM SOCIEDAD PARA LA GESTION DE ACTIVOS INMOBILIARIOS SA | SPAIN | REAL ESTATE | 100.00 | 100.00 |
| URBANIZADORA SANT LLORENC SA | SPAIN | INACTIVE | 60.60 | 60.60 |
| VOLKSWAGEN FINANCIAL SERVICES COMPAÑIA FINANCIERA SA | ARGENTINA | BANKING | — | 51.00 |
(1) In accordance with Article 3 of Royal Decree 1159/2010, of September 17, in order to determine the state, the voting power relating to subsidiaries was added to the voting power directly held by the parent. Therefore, the number of votes corresponding to the parent company (including indirect control subsidiaries), corresponds to each subsidiary holding a direct ownership interest.
(2) Amount without considering the interim dividends of the year, according to the provisional financial statements of each company, generally as of December 31, 2023. In the carrying amount (net of provision and hedge in foreign operations), the Group´s ownership percentage has been applied, without considering the impairment of goodwill. Information on individual companies and foreign companies at exchange rate as of December 31, 2023. The data of the companies in Turkey and Argentina are prior to the application of hyperinflation accounting.
201
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
Additional information on subsidiaries and structured entities composing the BBVA Group as of December 31, 2023 (continued)
| Affiliate entity data | Location | Activity | % share of participation (1) | Millions of Euros (2) |
|---|---|---|---|---|
| Direct | Indirect | |||
| Total | Net carrying amount | |||
| Equity excluding profit (loss) 31.12.2023 | ||||
| Profit (loss) 31.12.2023 | ||||
| SEGUROS PROVINCIAL CA | VENEZUELA | INSURANCES SERVICES | — | 100.00 |
| SERVICIOS CORPORATIVOS DE SEGUROS, S.A. DE C.V. | MEXICO | SERVICES | — | 100.00 |
| SERVICIOS EXTERNOS DE APOYO EMPRESARIAL, S.A DE C.V. | MEXICO | SERVICES | — | 100.00 |
| SOCIEDAD DE ESTUDIOS Y ANALISIS FINANCIERO SA | SPAIN | SERVICES | 100.00 | 100.00 |
| SOCIEDAD PERUANA DE FINANCIAMIENTO SAC | PERU | FINANCIAL SERVICES | — | 50.00 |
| SPORT CLUB 18 SA | SPAIN | INVESTMENT COMPANY | 100.00 | 100.00 |
| TREE INVERSIONES INMOBILIARIAS SA | SPAIN | REAL ESTATE | 100.00 | 100.00 |
| TRIFOI REAL ESTATE SRL | ROMANIA | REAL ESTATE | — | 100.00 |
| UNNIM SOCIEDAD PARA LA GESTION DE ACTIVOS INMOBILIARIOS SA | SPAIN | REAL ESTATE | 100.00 | 100.00 |
| URBANIZADORA SANT LLORENC SA | SPAIN | INACTIVE | 60.60 | 60.60 |
| VOLKSWAGEN FINANCIAL SERVICES COMPAÑIA FINANCIERA SA | ARGENTINA | BANKING | — | 51.00 |
| Company | Location | Activity | % share of participation (1) | Millions of Euros (2) |
|---|---|---|---|---|
| Direct | Indirect | |||
| Total | Net carrying amount | |||
| Equity excluding profit (loss) 31.12.2023 | ||||
| Profit (loss) 31.12.2023 | ||||
| SPAIN INVESTMENT COMPANY | SPAIN | INVESTMENT COMPANY | 100.00 | 100.00 |
| MOTORACTIVE IFN SA | ROMANIA | FINANCIAL SERVICES | 100.00 | 100.00 |
| MOTORACTIVE MULTISERVICES SRL | ROMANIA | SERVICES | 100.00 | 100.00 |
| MOVISTAR CONSUMER FINANCE COLOMBIA SAS | COLOMBIA | IN LIQUIDATION | 50.00 | 50.00 |
| MULTIASISTENCIA OPERADORA S.A. DE C.V. | MEXICO | INSURANCES SERVICES | 100.00 | 100.00 |
| MULTIASISTENCIA SERVICIOS S.A. DE C.V. | MEXICO | INSURANCES SERVICES | 100.00 | 100.00 |
| MULTIASISTENCIA, S.A. DE C.V. | MEXICO | INSURANCES SERVICES | 100.00 | 100.00 |
| OPCION VOLCAN, S.A. | MEXICO | REAL ESTATE | 100.00 | 100.00 |
| OPENPAY ARGENTINA SA | ARGENTINA | PAYMENT ENTITIES | 100.00 | 100.00 |
| OPENPAY COLOMBIA SAS | COLOMBIA | PAYMENT ENTITIES | 100.00 | 100.00 |
| OPENPAY PERÚ SA | PERU | PAYMENT ENTITIES | 100.00 | 100.00 |
| OPENPAY SA DE CV | MEXICO | PAYMENT ENTITIES | 100.00 | 100.00 |
| OPENPAY SERVICIOS S.A. DE C.V. | MEXICO | SERVICES | 100.00 | 100.00 |
| OPERADORA DOS LAGOS S.A. DE C.V. | MEXICO | SERVICES | 100.00 | 100.00 |
| OPPLUS OPERACIONES Y SERVICIOS SA | SPAIN | SERVICES | 100.00 | 100.00 |
| PECRI INVERSION SL | SPAIN | INVESTMENT COMPANY | 100.00 | 100.00 |
| PORTICO PROCAM, S.L. | SPAIN | REAL ESTATE | — | 100.00 |
| PROMOTORA DEL VALLES, S.L. | SPAIN | REAL ESTATE | — | 100.00 |
| PROMOU CT OPENSEGRE, S.L. | SPAIN | REAL ESTATE | — | 100.00 |
| PRONORTE UNO PROCAM, S.A. | SPAIN | REAL ESTATE | — | 100.00 |
| PROPEL EXPLORER FUND I LP | UNITED STATES | INVESTMENT COMPANY | — | 99.50 |
| PROPEL EXPLORER FUND II LP | UNITED STATES | INVESTMENT COMPANY | — | 99.50 |
| PROPEL VENTURE PARTNERS BRAZIL US LP | UNITED STATES | INVESTMENT COMPANY | — | 99.80 |
| PROPEL VENTURE PARTNERS GLOBAL US, LP | UNITED STATES | INVESTMENT COMPANY | — | 99.50 |
| PROPEL VENTURE PARTNERS US FUND I, L.P. | UNITED STATES | VENTURE CAPITAL | 99.50 | 99.50 |
| PROPEL XYZ I LP | UNITED STATES | INVESTMENT COMPANY | — | 99.40 |
| PRO-SALUD, C.A. | VENEZUELA | INACTIVE | — | 58.86 |
| PROVINCIAL DE VALORES CASA DE BOLSA CA | VENEZUELA | SECURITIES DEALER | — | 90.00 |
| PROVINCIAL SDAD.ADMIN.DE ENTIDADES DE INV.COLECTIVA CA | VENEZUELA | INVESTMENT FUND MANAGEMENT | — | 100.00 |
| PROVIVIENDA ENTIDAD RECAUDADORA Y ADMIN.DE APORTES, S.A. | BOLIVIA | PENSION FUND MANAGEMENT | 100.00 | 100.00 |
| PSA FINANCE ARGENTINA COMPAÑIA FINANCIERA SA | ARGENTINA | BANKING | 50.00 | 50.00 |
| RALFI IFN SA | ROMANIA | FINANCIAL SERVICES | — | 100.00 |
| RPV COMPANY | CAYMAN ISLANDS | OTHER ISSUANCE COMPANIES | 100.00 | 100.00 |
| SATICEM GESTIO SL | SPAIN | REAL ESTATE | 100.00 | 100.00 |
| SATICEM HOLDING SL | SPAIN | REAL ESTATE | 100.00 | 100.00 |
| SATICEM IMMOBLES EN ARRENDAMENT SL | SPAIN | REAL ESTATE | 100.00 | 100.00 |
(1) In accordance with Article 3 of Royal Decree 1159/2010, of September 17, in order to determine the state, the voting power relating to subsidiaries was added to the voting power directly held by the parent. Therefore, the number of votes corresponding to the parent company (including indirect control subsidiaries), corresponds to each subsidiary holding a direct ownership interest.
(2) Amount without considering the interim dividends of the year, according to the provisional financial statements of each company, generally as of December 31, 2023. In the carrying amount (net of provision and hedge in foreign operations), the Group´s ownership percentage has been applied, without considering the impairment of goodwill. Information on individual companies and foreign companies at exchange rate as of December 31, 2023. The data of the companies in Turkey and Argentina are prior to the application of hyperinflation accounting.
201
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
Most significant companies are included, which together represent 99.5% of the total investment in this group.
| Affiliate entity data | Location | Activity | % Legal share of participation | Millions of Euros (1) |
|---|---|---|---|---|
| Direct | Indirect | |||
| Total | Consolidated | |||
| Net carrying amount | ||||
| Assets 31.12.2023 | ||||
| Liabilities 31.12.2023 | ||||
| Equity excluding profit (loss) 31.12.2023 | ||||
| Profit (loss) 31.12.2023 | ||||
| ASSOCIATES | ||||
| ADQUIRA ESPAÑA, S.A. | SPAIN | SERVICES | — | 44.44 |
| ATOM HOLDCO LIMITED | UNITED KINGDOM | INVESTMENT COMPANY | 49.51 | — |
| AUREA, S.A. (CUBA) | CUBA | REAL ESTATE | — | 49.00 |
| BBVA ALLIANZ SEGUROS Y REASEGUROS, S.A. | SPAIN | INSURANCES SERVICES | — | 50.00 |
| COMPAÑIA ESPAÑOLA DE FINANCIACION DEL DESARROLLO SA | SPAIN | PUBLIC COMPANIES AND INSTITUTIONS | 16.67 | — |
| FIDEICOMISO F/00185 FIMPE - FIDEICOMISO F/00185 PARA EXTENDER A LA SOCIEDAD LOS BENEFICIOS DEL ACCESO A LA INFRAESTRUCTURA DE LOS MEDIOS DE PAGO ELECTRONICOS | PERU | ELECTRONIC MONEY ENTITIES | — | 28.50 |
| FRAUDFENSE SL | SPAIN | REAL ESTATE | — | 33.33 |
| METROVACESA SA | ARGENTINA | PAYMENT ENTITIES | 9.44 | 11.41 |
| REDSYS SERVICIOS DE PROCESAMIENTO SL | SPAIN | FINANCIAL SERVICES | 24.90 | — |
| ROMBO COMPAÑIA FINANCIERA SA | ARGENTINA | BANKING | — | 40.00 |
| SBD CREIXENT, S.A. | SPAIN | REAL ESTATE | — | 23.05 |
| SEGURIDAD Y PROTECCION BANCARIAS SA DE CV | MEXICO | SERVICES | 26.14 | — |
| SERVICIOS ELECTRONICOS GLOBALES SA DE CV | MEXICO | SERVICES | 46.14 | — |
| SERVIRED SOCIEDAD ESPAÑOLA DE MEDIOS DE PAGO SA | SPAIN | FINANCIAL SERVICES | 28.72 | — |
| SISTEMAS DE TARJETAS Y MEDIOS DE PAGO SA | SPAIN | PAYMENT ENTITIES | 20.61 | — |
| SOLARIS SE ⁽²⁾ | GERMANY | BANKING | — | 15.53 |
| TELEFONICA FACTORING ESPAÑA SA ⁽³⁾ | SPAIN | FINANCIAL SERVICES | 30.00 | — |
| TF PERU SAC | PERU | FINANCIAL SERVICES | — | 24.30 |
| VERIDAS DIGITAL AUTHENTICATION SOLUTIONS S.L. | SPAIN | SERVICES | — | 32.05 |
| JOINT VENTURES | ||||
| ALTURA MARKETS SOCIEDAD DE VALORES SA | SPAIN | SECURITIES DEALER | 50.00 | — |
| COMPAÑIA MEXICANA DE PROCESAMIENTO SA DE CV | MEXICO | SERVICES | — | 50.00 |
| CORPORACION IBV PARTICIPACIONES EMPRESARIALES, S.A. ⁽⁴⁾ | SPAIN | INVESTMENT COMPANY | — | 50.00 |
| F/ 5356 FIDEICOMISO IRREVOCABLE DE ADM. INMOBILIARIA CON DERECHO DE REVERSIÓN- FIDEICOMISO SELVA | MEXICO | REAL ESTATE | — | 42.40 |
| FIDEICOMISO 1729 INVEX ENAJENACION DE CARTERA ⁽⁴⁾ | MEXICO | REAL ESTATE | — | 44.09 |
| INVERSIONES PLATCO CA | VENEZUELA | FINANCIAL SERVICES | 50.00 | — |
| PROMOCIONS TERRES CAVADES, S.A. | SPAIN | REAL ESTATE | — | 39.11 |
| RCI COLOMBIA SA COMPAÑIA DE FINANCIAMIENTO | COLOMBIA | FINANCIAL SERVICES | — | 49.00 |
| Affiliate entity data | Millions of Euros (1) |
|---|---|
| Consolidated | |
| Net carrying amount | |
| Assets 31.12.2023 | |
| Liabilities 31.12.2023 | |
| Equity excluding profit (loss) 31.12.2023 | |
| Profit (loss) 31.12.2023 | |
| ASSOCIATES | |
| ADQUIRA ESPAÑA, S.A. | 4 |
| ATOM HOLDCO LIMITED | 211 |
| AUREA, S.A. (CUBA) | 5 |
| BBVA ALLIANZ SEGUROS Y REASEGUROS, S.A. | 251 |
| COMPAÑIA ESPAÑOLA DE FINANCIACION DEL DESARROLLO SA | 35 |
| FIDEICOMISO F/00185 FIMPE - FIDEICOMISO F/00185 PARA EXTENDER A LA SOCIEDAD LOS BENEFICIOS DEL ACCESO A LA INFRAESTRUCTURA DE LOS MEDIOS DE PAGO ELECTRONICOS | 1 |
| FRAUDFENSE SL | 2 |
| METROVACESA SA | 259 |
| REDSYS SERVICIOS DE PROCESAMIENTO SL | 22 |
| ROMBO COMPAÑIA FINANCIERA SA | 3 |
| SBD CREIXENT, S.A. | 1 |
| SEGURIDAD Y PROTECCION BANCARIAS SA DE CV | 1 |
| SERVICIOS ELECTRONICOS GLOBALES SA DE CV | 36 |
| SERVIRED SOCIEDAD ESPAÑOLA DE MEDIOS DE PAGO SA | 8 |
| SISTEMAS DE TARJETAS Y MEDIOS DE PAGO SA | 2 |
| SOLARIS SE ⁽²⁾ | 34 |
| TELEFONICA FACTORING ESPAÑA SA ⁽³⁾ | 5 |
| TF PERU SAC | 1 |
| VERIDAS DIGITAL AUTHENTICATION SOLUTIONS S.L. | 1 |
| JOINT VENTURES | |
| ALTURA MARKETS SOCIEDAD DE VALORES SA | 31 |
| COMPAÑIA MEXICANA DE PROCESAMIENTO SA DE CV | 7 |
| CORPORACION IBV PARTICIPACIONES EMPRESARIALES, S.A. ⁽⁴⁾ | 29 |
| F/ 5356 FIDEICOMISO IRREVOCABLE DE ADM. INMOBILIARIA CON DERECHO DE REVERSIÓN- FIDEICOMISO SELVA | 8 |
| FIDEICOMISO 1729 INVEX ENAJENACION DE CARTERA ⁽⁴⁾ | 12 |
| INVERSIONES PLATCO CA | 5 |
| PROMOCIONS TERRES CAVADES, S.A. | 1 |
| RCI COLOMBIA SA COMPAÑIA DE FINANCIAMIENTO | 40 |
| Affiliate entity data | Millions of Euros (1) |
|---|---|
| Consolidated | |
| Net carrying amount | |
| Assets 31.12.2023 | |
| Liabilities 31.12.2023 | |
| Equity excluding profit (loss) 31.12.2023 | |
| Profit (loss) 31.12.2023 | |
| ASSOCIATES | |
| ADQUIRA ESPAÑA, S.A. | 9 |
| ATOM HOLDCO LIMITED | 9,222 |
| AUREA, S.A. (CUBA) | 1 |
| BBVA ALLIANZ SEGUROS Y REASEGUROS, S.A. | 917 |
| COMPAÑIA ESPAÑOLA DE FINANCIACION DEL DESARROLLO SA | 218 |
| FIDEICOMISO F/00185 FIMPE - FIDEICOMISO F/00185 PARA EXTENDER A LA SOCIEDAD LOS BENEFICIOS DEL ACCESO A LA INFRAESTRUCTURA DE LOS MEDIOS DE PAGO ELECTRONICOS | 4 |
| FRAUDFENSE SL | 6 |
| METROVACESA SA | 2,482 |
| REDSYS SERVICIOS DE PROCESAMIENTO SL | 134 |
| ROMBO COMPAÑIA FINANCIERA SA | 39 |
| SBD CREIXENT, S.A. | 6 |
| SEGURIDAD Y PROTECCION BANCARIAS SA DE CV | 5 |
| SERVICIOS ELECTRONICOS GLOBALES SA DE CV | 77 |
| SERVIRED SOCIEDAD ESPAÑOLA DE MEDIOS DE PAGO SA | 56 |
| SISTEMAS DE TARJETAS Y MEDIOS DE PAGO SA | 487 |
| SOLARIS SE ⁽²⁾ | 2,013 |
| TELEFONICA FACTORING ESPAÑA SA ⁽³⁾ | 120 |
| TF PERU SAC | 6 |
| VERIDAS DIGITAL AUTHENTICATION SOLUTIONS S.L. | 17 |
| JOINT VENTURES | |
| ALTURA MARKETS SOCIEDAD DE VALORES SA | 1,808 |
| COMPAÑIA MEXICANA DE PROCESAMIENTO SA DE CV | 15 |
| CORPORACION IBV PARTICIPACIONES EMPRESARIALES, S.A. ⁽⁴⁾ | 62 |
| F/ 5356 FIDEICOMISO IRREVOCABLE DE ADM. INMOBILIARIA CON DERECHO DE REVERSIÓN- FIDEICOMISO SELVA | 19 |
| FIDEICOMISO 1729 INVEX ENAJENACION DE CARTERA ⁽⁴⁾ | 206 |
| INVERSIONES PLATCO CA | 11 |
| PROMOCIONS TERRES CAVADES, S.A. | 3 |
| RCI COLOMBIA SA COMPAÑIA DE FINANCIAMIENTO | 1,000 |
| Affiliate entity data | Millions of Euros (1) |
|---|---|
| Consolidated | |
| Net carrying amount | |
| Assets 31.12.2023 | |
| Liabilities 31.12.2023 | |
| Equity excluding profit (loss) 31.12.2023 | |
| Profit (loss) 31.12.2023 | |
| ASSOCIATES | |
| ADQUIRA ESPAÑA, S.A. | 13 |
| ATOM HOLDCO LIMITED | 8,756 |
| AUREA, S.A. (CUBA) | 1 |
| BBVA ALLIANZ SEGUROS Y REASEGUROS, S.A. | 377 |
| COMPAÑIA ESPAÑOLA DE FINANCIACION DEL DESARROLLO SA | 10 |
| FIDEICOMISO F/00185 FIMPE - FIDEICOMISO F/00185 PARA EXTENDER A LA SOCIEDAD LOS BENEFICIOS DEL ACCESO A LA INFRAESTRUCTURA DE LOS MEDIOS DE PAGO ELECTRONICOS | 1 |
| FRAUDFENSE SL | 1 |
| METROVACESA SA | 801 |
| REDSYS SERVICIOS DE PROCESAMIENTO SL | 48 |
| ROMBO COMPAÑIA FINANCIERA SA | 30 |
| SBD CREIXENT, S.A. | 1 |
| SEGURIDAD Y PROTECCION BANCARIAS SA DE CV | — |
| SERVICIOS ELECTRONICOS GLOBALES SA DE CV | — |
| SERVIRED SOCIEDAD ESPAÑOLA DE MEDIOS DE PAGO SA | 29 |
| SISTEMAS DE TARJETAS Y MEDIOS DE PAGO SA | 478 |
| SOLARIS SE ⁽²⁾ | 1,795 |
| TELEFONICA FACTORING ESPAÑA SA ⁽³⁾ | 103 |
| TF PERU SAC | 1 |
| VERIDAS DIGITAL AUTHENTICATION SOLUTIONS S.L. | 13 |
| JOINT VENTURES | |
| ALTURA MARKETS SOCIEDAD DE VALORES SA | 1,745 |
| COMPAÑIA MEXICANA DE PROCESAMIENTO SA DE CV | — |
| CORPORACION IBV PARTICIPACIONES EMPRESARIALES, S.A. ⁽⁴⁾ | 4 |
| F/ 5356 FIDEICOMISO IRREVOCABLE DE ADM. INMOBILIARIA CON DERECHO DE REVERSIÓN- FIDEICOMISO SELVA | — |
| FIDEICOMISO 1729 INVEX ENAJENACION DE CARTERA ⁽⁴⁾ | — |
| INVERSIONES PLATCO CA | 1 |
| PROMOCIONS TERRES CAVADES, S.A. | — |
| RCI COLOMBIA SA COMPAÑIA DE FINANCIAMIENTO | 919 |
| Affiliate entity data | Millions of Euros (1) |
|---|---|
| Consolidated | |
| Net carrying amount | |
| Assets 31.12.2023 | |
| Liabilities 31.12.2023 | |
| Equity excluding profit (loss) 31.12.2023 | |
| Profit (loss) 31.12.2023 | |
| ASSOCIATES | |
| ADQUIRA ESPAÑA, S.A. | 9 |
| ATOM HOLDCO LIMITED | 444 |
| AUREA, S.A. (CUBA) | 9 |
| BBVA ALLIANZ SEGUROS Y REASEGUROS, S.A. | 530 |
| COMPAÑIA ESPAÑOLA DE FINANCIACION DEL DESARROLLO SA | 187 |
| FIDEICOMISO F/00185 FIMPE - FIDEICOMISO F/00185 PARA EXTENDER A LA SOCIEDAD LOS BENEFICIOS DEL ACCESO A LA INFRAESTRUCTURA DE LOS MEDIOS DE PAGO ELECTRONICOS | 3 |
| FRAUDFENSE SL | 7 |
| METROVACESA SA | 1,706 |
| REDSYS SERVICIOS DE PROCESAMIENTO SL | 80 |
| ROMBO COMPAÑIA FINANCIERA SA | 2 |
| SBD CREIXENT, S.A. | 5 |
| SEGURIDAD Y PROTECCION BANCARIAS SA DE CV | 4 |
| SERVICIOS ELECTRONICOS GLOBALES SA DE CV | 58 |
| SERVIRED SOCIEDAD ESPAÑOLA DE MEDIOS DE PAGO SA | 27 |
| SISTEMAS DE TARJETAS Y MEDIOS DE PAGO SA | 5 |
| SOLARIS SE ⁽²⁾ | 240 |
| TELEFONICA FACTORING ESPAÑA SA ⁽³⁾ | 7 |
| TF PERU SAC | 4 |
| VERIDAS DIGITAL AUTHENTICATION SOLUTIONS S.L. | 14 |
| JOINT VENTURES | |
| ALTURA MARKETS SOCIEDAD DE VALORES SA | 48 |
| COMPAÑIA MEXICANA DE PROCESAMIENTO SA DE CV | 23 |
| CORPORACION IBV PARTICIPACIONES EMPRESARIALES, S.A. ⁽⁴⁾ | 58 |
| F/ 5356 FIDEICOMISO IRREVOCABLE DE ADM. INMOBILIARIA CON DERECHO DE REVERSIÓN- FIDEICOMISO SELVA | 19 |
| FIDEICOMISO 1729 INVEX ENAJENACION DE CARTERA ⁽⁴⁾ | 206 |
| INVERSIONES PLATCO CA | 12 |
| PROMOCIONS TERRES CAVADES, S.A. | 3 |
| RCI COLOMBIA SA COMPAÑIA DE FINANCIAMIENTO | 80 |
| Affiliate entity data | Millions of Euros (1) |
|---|---|
| Consolidated | |
| Net carrying amount | |
| Assets 31.12.2023 | |
| Liabilities 31.12.2023 | |
| Equity excluding profit (loss) 31.12.2023 | |
| Profit (loss) 31.12.2023 | |
| ASSOCIATES | |
| ADQUIRA ESPAÑA, S.A. | 1 |
| ATOM HOLDCO LIMITED | 22 |
| AUREA, S.A. (CUBA) | 1 |
| BBVA ALLIANZ SEGUROS Y REASEGUROS, S.A. | 10 |
| COMPAÑIA ESPAÑOLA DE FINANCIACION DEL DESARROLLO SA | 22 |
| FIDEICOMISO F/00185 FIMPE - FIDEICOMISO F/00185 PARA EXTENDER A LA SOCIEDAD LOS BENEFICIOS DEL ACCESO A LA INFRAESTRUCTURA DE LOS MEDIOS DE PAGO ELECTRONICOS | 1 |
| FRAUDFENSE SL | (2) |
| METROVACESA SA | (24) |
| REDSYS SERVICIOS DE PROCESAMIENTO SL | 7 |
| ROMBO COMPAÑIA FINANCIERA SA | 7 |
| SBD CREIXENT, S.A. | — |
| SEGURIDAD Y PROTECCION BANCARIAS SA DE CV | 1 |
| SERVICIOS ELECTRONICOS GLOBALES SA DE CV | 19 |
| SERVIRED SOCIEDAD ESPAÑOLA DE MEDIOS DE PAGO SA | — |
| SISTEMAS DE TARJETAS Y MEDIOS DE PAGO SA | 4 |
| SOLARIS SE ⁽²⁾ | (21) |
| TELEFONICA FACTORING ESPAÑA SA ⁽³⁾ | 10 |
| TF PERU SAC | 2 |
| VERIDAS DIGITAL AUTHENTICATION SOLUTIONS S.L. | (10) |
| JOINT VENTURES | |
| ALTURA MARKETS SOCIEDAD DE VALORES SA | 14 |
| COMPAÑIA MEXICANA DE PROCESAMIENTO SA DE CV | (8) |
| CORPORACION IBV PARTICIPACIONES EMPRESARIALES, S.A. ⁽⁴⁾ | — |
| F/ 5356 FIDEICOMISO IRREVOCABLE DE ADM. INMOBILIARIA CON DERECHO DE REVERSIÓN- FIDEICOMISO SELVA | 19 |
| FIDEICOMISO 1729 INVEX ENAJENACION DE CARTERA ⁽⁴⁾ | 206 |
| INVERSIONES PLATCO CA | (1) |
| PROMOCIONS TERRES CAVADES, S.A. | 3 |
| RCI COLOMBIA SA COMPAÑIA DE FINANCIAMIENTO | (1) |
(1) In foreign companies the exchange rate of December 31, 2023 is applied.
(2) The percentage of voting rights owned by the Group entities in this company is 22.22%.
(3) Financial Statements as of December 31, 2022.
(4) Classified as Non-current asset held for sale.
This Appendix is an integral part of Notes 3 and 16.1 of the consolidated financial statements for the year ended December 31, 2023.# APPENDIX III. Changes and notifications of participations in the BBVA Group in 2023
| Company | Type of transaction | Total voting rights controlled after the disposal | Effective date for the last transaction (or notification Date) |
|---|---|---|---|
| BBVA GLOBAL WEALTH ADVISORS INC | FOUNDING | 100.00 | 01-Jun-23 |
| GARANTI BBVA DIJITAL VARLIKLAR ANONIM SIRKETI | FOUNDING | 100.00 | 05-May-23 |
| GARANTI BBVA FINANSAL TEKNOLOJI ANONIM SIRKETI | FOUNDING | 100.00 | 30-Apr-23 |
(1) Variations of less than 0.1% have not been considered due to immateriality.
| Company | Type of transaction | Total voting rights controlled after the disposal | Effective date for the last transaction (or notification Date) |
|---|---|---|---|
| BAHIA SUR RESORT S.C. | LIQUIDATION | — | 16-May-23 |
| BBVA DISCOVERY INC | LIQUIDATION | — | 01-Nov-23 |
| BBVA INFORMATION TECHNOLOGY ESPAÑA SLU | MERGER | — | 01-Dec-23 |
| CDD GESTIONI S.R.L. IN LIQUIDAZIONE | LIQUIDATION | — | 12-Jan-23 |
| DATA ARCHITECTURE AND TECHNOLOGY S.L. | MERGER | — | 01-Dec-23 |
| FUTURO FAMILIAR, S.A. DE C.V. | LIQUIDATION | — | 01-Nov-23 |
| VERIDAS DIGITAL AUTHENTICATION SOLUTIONS MEXICO SACV | DILUTION PARTIC. | — | 06-Jun-23 |
| VERIDAS DIGITAL AUTHENTICATION SOLUTIONS USA LLC | DILUTION PARTIC. | — | 06-Jun-23 |
(1) Variations of less than 0.1% have not been considered due to immateriality.
| Company | Type of transaction | Total voting rights controlled after the disposal | Effective date for the last transaction (or notification Date) |
|---|---|---|---|
| F/ 5356 FIDEICOMISO IRREVOCABLE DE ADM. INMOBILIARIA CON DERECHO DE REVERSIÓN- FIDEICOMISO SELVA | FOUNDING | 42.40 | 01-Oct-23 |
| NUEVO MARKETPLACE, S.L. ( EN LIQUIDACIÓN) | CAPITAL INCREASE | 30.23 | 22-Nov-23 |
| PLAY DIGITAL SA | CAPITAL INCREASE | 11.06 | 31-Mar-23 |
| FRAUDFENSE SL | FOUNDING | 33.33 | 27-Jul-23 |
| ATOM HOLDCO LIMITED | CAPITAL INCREASE | 49.51 | 10-Nov-23 |
(1) Variations of less than 0.1% have not been considered due to immateriality.
| Company | Type of transaction | Total voting rights controlled after the disposal | Effective date for the last transaction (or notification Date) |
|---|---|---|---|
| CABAL URUGUAY, S.A. | DISPOSAL | — | 03-Jan-23 |
| VERIDAS DIGITAL AUTHENTICATION SOLUTIONS S.L. | DILUTION PARTIC. | 32.05 | 06-Jun-23 |
| COMPAÑIA PERUANA DE MEDIOS DE PAGO SAC (VISANET PERU) | DISPOSAL | 20.20 | 01-Oct-23 |
(1) Variations of less than 0.1% have not been considered due to immateriality.
This Appendix is an integral part of Notes 3 and 16.1 of the consolidated financial statements for the year ended December 31, 2023.
| % of voting rights controlled by the Bank | Company | Activity | Direct | Indirect | Total |
|---|---|---|---|---|---|
| BANCO BBVA PERÚ SA | BANKING | — | 46.12 | 46.12 | |
| BANCO PROVINCIAL SA - BANCO UNIVERSAL | BANKING | 1.46 | 53.75 | 55.21 | |
| INVERSIONES BANPRO INTERNATIONAL INC NV | INVESTMENT COMPANY | 48.00 | — | 48.00 | |
| PRO-SALUD, C.A. | NO ACTIVITY | — | 58.86 | 58.86 | |
| INVERSIONES P.H.R.4, C.A. | NO ACTIVITY | — | 60.46 | 60.46 | |
| BBVA PREVISION AFP SA | ADM.DE FONDOS DE PENSIONES | 75.00 | 5.00 | 80.00 | |
| COMERCIALIZADORA CORPORATIVA SAC | FINANCIAL SERVICES | — | 50.00 | 50.00 | |
| CREA MADRID NUEVO NORTE SA | REAL ESTATE | — | 75.54 | 75.54 | |
| GESTION DE PREVISION Y PENSIONES SA | PENSION FUND MANAGEMENT | 60.00 | — | 60.00 | |
| SOCIEDAD PERUANA DE FINANCIAMIENTO SAC | FINANCIAL SERVICES | — | 50.00 | 50.00 | |
| F/253863 EL DESEO RESIDENCIAL | REAL ESTATE | — | 65.00 | 65.00 | |
| VOLKSWAGEN FINANCIAL SERVICES COMPAÑIA FINANCIERA SA | BANKING | — | 51.00 | 51.00 | |
| FIDEICOMISO LOTE 6.1 ZARAGOZA | REAL ESTATE | — | 59.99 | 59.99 | |
| F/11395 FIDEICOMISO IRREVOCABLE DE ADMINISTRACION CON DERECHO DE REVERSION | REAL ESTATE | — | 42.40 | 42.40 | |
| MOVISTAR CONSUMER FINANCE COLOMBIA SAS IN LIQUIDATION | IN LIQUIDATION | — | 50.00 | 50.00 | |
| GARANTI BBVA EMEKLILIK AS | INSURANCES | — | 84.91 | 84.91 | |
| FOMENTO Y DESARROLLO DE CONJUNTOS RESIDENCIALES S.L. EN LIQUIDACION | IN LIQUIDATION | — | 60.00 | 60.00 | |
| PSA FINANCE ARGENTINA COMPAÑIA FINANCIERA SA | BANKING | — | 50.00 | 50.00 |
This Appendix is an integral part of Note 3 of the consolidated financial statements for the year ended December 31, 2023.
Millions of Euros
| Securitization fund (consolidated) | Company | Origination date | Total securitized exposures at the origination date | Total securitized exposures as of December 31, 2023 |
|---|---|---|---|---|
| TDA 19 | BANCO BILBAO VIZCAYA ARGENTARIA SA | 27-Feb-04 | 600 | 29 |
| TDA 22 | BANCO BILBAO VIZCAYA ARGENTARIA SA | 09-Dec-04 | 592 | 37 |
| Hipocat 9 | BANCO BILBAO VIZCAYA ARGENTARIA SA | 25-Nov-05 | 1,016 | 94 |
| Hipocat 10 | BANCO BILBAO VIZCAYA ARGENTARIA SA | 05-Jul-06 | 1,526 | 140 |
| AYT HIP MIXTO V | BANCO BILBAO VIZCAYA ARGENTARIA SA | 21-Jul-06 | 120 | 74 |
| TDA 27 | BANCO BILBAO VIZCAYA ARGENTARIA SA | 22-Dec-06 | 275 | 122 |
| TDA 28 | BANCO BILBAO VIZCAYA ARGENTARIA SA | 23-Jul-07 | 250 | 87 |
| BBVA RMBS 1 FT | BANCO BILBAO VIZCAYA ARGENTARIA SA | 19-Feb-07 | 2,500 | 523 |
| Hipocat 11 | BANCO BILBAO VIZCAYA ARGENTARIA SA | 09-Mar-07 | 1,628 | 157 |
| BBVA RMBS 2 FT | BANCO BILBAO VIZCAYA ARGENTARIA SA | 26-Mar-07 | 5,000 | 982 |
| BBVA Leasing 1 FT | BANCO BILBAO VIZCAYA ARGENTARIA SA | 24-Jun-07 | 2,500 | 87 |
| BBVA RMBS 3 FT | BANCO BILBAO VIZCAYA ARGENTARIA SA | 22-Jul-07 | 3,000 | 921 |
| TDA Tarragona 1 | BANCO BILBAO VIZCAYA ARGENTARIA SA | 30-Nov-07 | 397 | 50 |
| BBVA RMBS 5 FT | BANCO BILBAO VIZCAYA ARGENTARIA SA | 24-May-08 | 5,000 | 1,526 |
| GAT ICO-FTVPO1 | BANCO BILBAO VIZCAYA ARGENTARIA SA | 25-Jun-09 | 780 | 15 |
| BBVA RMBS 9 FT | BANCO BILBAO VIZCAYA ARGENTARIA SA | 18-Apr-10 | 1,295 | 537 |
| BBVA RMBS 14 FT | BANCO BILBAO VIZCAYA ARGENTARIA SA | 24-Nov-14 | 700 | 278 |
| BBVA RMBS 17 FT | BANCO BILBAO VIZCAYA ARGENTARIA SA | 21-Nov-16 | 1,800 | 868 |
| BBVA Consumer Auto 2020-1 | BANCO BILBAO VIZCAYA ARGENTARIA SA | 15-Jun-20 | 1,100 | 521 |
| BBVA Consumo 11 | BANCO BILBAO VIZCAYA ARGENTARIA SA | 12-Mar-21 | 2,500 | 845 |
| BBVA RMBS 20 FT | BANCO BILBAO VIZCAYA ARGENTARIA SA | 14-Jun-21 | 2,500 | 1,929 |
| BBVA RMBS 21 FT | BANCO BILBAO VIZCAYA ARGENTARIA SA | 17-Mar-22 | 12,400 | 9,975 |
| BBVA Consumer Auto 2022-1 | BANCO BILBAO VIZCAYA ARGENTARIA SA | 13-Jun-22 | 1,200 | 765 |
| BBVA RMBS 22 FT | BANCO BILBAO VIZCAYA ARGENTARIA SA | 28-Nov-22 | 1,400 | 1,281 |
| BBVA Consumo 12 | BANCO BILBAO VIZCAYA ARGENTARIA SA | 13-Mar-23 | 3,000 | 2,357 |
| BBVA Consumer Auto 2023-1 | BANCO BILBAO VIZCAYA ARGENTARIA SA | 08-Jun-23 | 804 | 718 |
| BBVA Leasing 3 FT | BANCO BILBAO VIZCAYA ARGENTARIA SA | 27-Nov-23 | 2,400 | 2,313 |
Nominal value. Millions of Euros
| Issuer entity and issued date | Currency | December 2023 | December 2022 | December 2021 | Prevailing Interest Rate as of December 31, 2023 | Maturity Date |
|---|---|---|---|---|---|---|
| Issues in Euros | ||||||
| BANCO BILBAO VIZCAYA ARGENTARIA S.A. | EUR | 125 | 125 | 125 | 6.03 % | March-33 |
| March-08 | EUR | — | 100 | 100 | 6.20 % | July-23 |
| July-08 | EUR | 1,000 | 1,000 | 1,000 | 6.00 % | Perpetual |
| March-19 | EUR | 1,000 | 1,000 | 1,000 | 6.00 % | Perpetual |
| July-20 | EUR | 1,000 | 1,000 | 1,000 | 3.50 % | February-27 |
| February-17 | EUR | 99 | 99 | 99 | 4.00 % | February-32 |
| February-17 | EUR | 65 | 65 | 65 | 4.00 % | February-32 |
| March-17 | EUR | — | — | 500 | — % | Perpetual |
| May-17 | EUR | 150 | 150 | 150 | 2.54 % | May-27 |
| May-17 | EUR | — | 1,000 | 1,000 | 5.88 % | Perpetual |
| September-18 | EUR | 750 | 750 | 750 | 2.58 % | February-29 |
| February-19 | EUR | 994 | 994 | 994 | 1.00 % | January-30 |
| January-20 | EUR | 741 | — | — | 5.75 % | May-33 |
| June-23 | EUR | 1,000 | — | — | 8.38 % | Perpetual |
| June-23 | EUR | 127 | 177 | 245 | —% | |
| Different issued | ||||||
| Total issued in Euros | EUR | 7,050 | 6,460 | 7,027 |
Nominal value. Millions of Euros
| Issuer entity and issued date | Currency | December 2023 | December 2022 | December 2021 | Prevailing Interest Rate as of December 31, 2023 | Maturity Date |
|---|---|---|---|---|---|---|
| Issues in foreign currency | ||||||
| BANCO BILBAO VIZCAYA ARGENTARIA S.A. | USD | 654 | 660 | 675 | 3.00% | Perpetual |
| Issuer entity and issued date | Currency | December 2023 | December 2022 | December 2021 | Prevailing Interest Rate as of December 31, 2022 | Maturity Date |
|---|---|---|---|---|---|---|
| BBVA COLOMBIA S.A. | ||||||
| September-11 | COP | 37 | 30 | 35 | 14.42 % | September-26 |
| February-13 | COP | — | 39 | 44 | 16.58 % | February-23 |
| February-13 | COP | 39 | 32 | 37 | 13.01 % | February-28 |
| November-14 | COP | 21 | 18 | 20 | 13.55 % | November-29 |
| November-14 | COP | 27 | 20 | 32 | 13.68 % | November-34 |
| Subtotal COP | 124 | 139 | 168 | |||
| April-15 | USD | 362 | 375 | 349 | 4.88 % | April-25 |
| Subtotal USD | 362 | 375 | 349 | |||
| BBVA BANCO CONTINENTAL S.A. | ||||||
| June-07 | PEN | 24 | 23 | 19 | 3.47 % | June-32 |
| November-07 | PEN | 21 | 21 | 17 | 3.56 % | November-32 |
| July-08 | PEN | — | 18 | 15 | 3.06 % | July-23 |
| September-08 | PEN | — | 20 | 16 | 3.09 % | September-23 |
| December-08 | PEN | 12 | 12 | 10 | 4.19 % | December-33 |
| Subtotal PEN | 57 | 93 | 77 | |||
| May-07 | USD | — | — | 18 | 6.00 % | May-27 |
| February-08 | USD | 18 | 19 | 18 | 6.47 % | February-28 |
| October-13 | USD | — | 43 | 40 | 6.53 % | October-28 |
| September-14 | USD | 267 | 270 | 272 | 5.25 % | September-29 |
| Subtotal USD | 285 | 332 | 349 | |||
| GARANTI BBVA AS | ||||||
| May-17 | USD | 667 | 698 | 645 | 7.30 % | May-27 |
| Subtotal USD | 667 | 698 | 645 | |||
| October-19 | TRY | 8 | 13 | 17 | 46.02 % | October-29 |
| February-20 | TRY | 23 | 38 | 49 | 51.55 % | February-30 |
| Subtotal TRY | 31 | 50 | 66 | |||
| Total Issues in other currencies | 8,851 | 6,326 | 7,398 |
(Millions of Euros)
December 2023
| U.S. Dollar | Mexican pesos | Turkish lira | Other foreign currencies | Total foreign currencies | |
|---|---|---|---|---|---|
| Assets | |||||
| Cash, cash balances at central banks and other demand deposits | 13,372 | 7,581 | 3,764 | 4,089 | 28,807 |
| Financial assets held for trading | 21,147 | 28,570 | 282 | 5,806 | 55,806 |
| Non-trading financial assets mandatorily at fair value through profit or loss | 1,292 | 6,596 | 5 | 186 | 8,079 |
| Financial assets at fair value through comprehensive income | 9,384 | 20,767 | 1,785 | 4,484 | 36,421 |
| Financial assets at amortized cost | 58,732 | 81,907 | 31,298 | 46,122 | 218,059 |
| Joint-ventures and associates | 5 | 19 | — | 590 | 614 |
| Tangible assets | 105 | 2,609 | 1,446 | 995 | 5,155 |
| Other assets | (1,049) | 6,872 | 1,761 | 2,346 | 9,930 |
| Total | 102,988 | 154,922 | 40,341 | 64,619 | 362,870 |
| Liabilities | |||||
| Financial liabilities held for trading | 21,204 | 17,829 | 207 | 2,705 | 41,946 |
| Financial liabilities at amortized cost | 78,365 | 95,685 | 30,127 | 50,900 | 255,076 |
| Other liabilities | 3,223 | 20,186 | 1,048 | 2,801 | 27,258 |
| Total | 102,792 | 133,700 | 31,382 | 56,406 | 324,280 |
December 2022 ⁽¹⁾
| U.S. Dollar | Mexican pesos | Turkish lira | Other foreign currencies | Total foreign currencies | |
|---|---|---|---|---|---|
| Assets | |||||
| Cash, cash balances at central banks and other demand deposits | 19,888 | 4,831 | 476 | 3,469 | 28,665 |
| Financial assets held for trading | 10,780 | 22,407 | 431 | 3,930 | 37,549 |
| Non-trading financial assets mandatorily at fair value through profit or loss | 987 | 5,205 | 5 | 82 | 6,280 |
| Financial assets at fair value through comprehensive income | 8,300 | 16,028 | 3,188 | 8,841 | 36,358 |
| Financial assets at amortized cost | 52,248 | 70,744 | 29,938 | 42,173 | 195,103 |
| Joint-ventures and associates | 5 | 17 | — | 333 | 354 |
| Tangible assets | 14 | 2,143 | 1,166 | 1,137 | 4,459 |
| Other assets | (365) | 4,609 | 1,789 | 3,070 | 9,103 |
| Total | 91,858 | 125,984 | 36,994 | 63,036 | 317,872 |
| Liabilities | |||||
| Financial liabilities held for trading | 9,722 | 18,110 | 234 | 1,499 | 29,564 |
| Financial liabilities at amortized cost | 77,697 | 75,029 | 24,567 | 48,984 | 226,277 |
| Other liabilities | 2,748 | 16,397 | 1,216 | 2,067 | 22,428 |
| Total | 90,167 | 109,535 | 26,016 | 52,549 | 278,268 |
December 2021
| U.S. Dollar | Mexican pesos | Turkish lira | Other foreign currencies | Total foreign currencies | |
|---|---|---|---|---|---|
| Assets | |||||
| Cash, cash balances at central banks and other demand deposits | 19,164 | 5,816 | 893 | 4,245 | 30,118 |
| Financial assets held for trading | 10,699 | 18,973 | 1,104 | 8,840 | 39,615 |
| Non-trading financial assets mandatorily at fair value through profit or loss | 1,039 | 4,114 | 2 | 83 | 5,239 |
| Financial assets at fair value through comprehensive income | 6,455 | 9,323 | 2,325 | 8,697 | 26,800 |
| Financial assets at amortized cost | 46,223 | 57,580 | 21,655 | 38,657 | 164,115 |
| Joint-ventures and associates | 5 | 15 | — | 263 | 283 |
| Tangible assets | 12 | 1,902 | 558 | 935 | 3,408 |
| Other assets | (204) | 3,607 | 1,046 | 1,248 | 5,697 |
| Total | 83,393 | 101,331 | 27,583 | 62,969 | 275,276 |
| Liabilities | |||||
| Financial liabilities held for trading | 10,448 | 13,784 | 450 | 1,312 | 25,994 |
| Financial liabilities at amortized cost | 67,306 | 60,570 | 14,946 | 43,859 | 186,681 |
| Other liabilities | 3,261 | 13,234 | 779 | 2,029 | 19,302 |
| Total | 81,015 | 87,588 | 16,175 | 47,200 | 231,977 |
(1) Balances corresponding to 2022 have been restated according to IFRS 17 (see Notes 1.3 and 2.3). This Appendix is an integral part of Notes 2.2.17 of the consolidated financial statements for the year ended December 31, 2023.
| Six months ended June 30, 2023 | Six months ended December 31, 2023 | Six months ended June 30, 2022 ⁽¹⁾ | Six months ended December 31, 2022 ⁽¹⁾ | |
|---|---|---|---|---|
| Interest and other income | 21,897 | 25,953 | 13,403 | 18,029 |
| Financial assets at fair value through other comprehensive income | 1,913 | 1,186 | 1,304 | 1,806 |
| Financial assets at amortized cost | 17,305 | 21,022 | 10,395 | 14,863 |
| Other interest income | 2,679 | 3,745 | 1,704 | 1,360 |
| Interest expense | (10,487) | (14,274) | (4,865) | (7,444) |
| NET INTEREST INCOME | 11,410 | 11,680 | 8,538 | 10,586 |
| Dividend income | 73 | 45 | 76 | 47 |
| Share of profit or loss of entities accounted for using the equity method | 14 | 12 | 15 | 6 |
| Fee and commission income | 4,498 | 5,400 | 3,964 | 4,296 |
| Fee and commission expense | (1,590) | (2,021) | (1,305) | (1,583) |
| Gains (losses) on derecognition of financial assets and liabilities not measured at fair value through profit or loss, net | (1) | 77 | 39 | 25 |
| Financial assets at amortized cost | 35 | 7 | 8 | — |
| Other financial assets and liabilities | (36) | 71 | 31 | 25 |
| Gains (losses) on financial assets and liabilities held for trading, net | 283 | 1,069 | 11 | 551 |
| Reclassification of financial assets from fair value through other comprehensive income | — | — | — | — |
| Reclassification of financial assets from amortized cost | — | — | — | — |
| Other gains (losses) | 283 | 1,069 | 11 | 551 |
| Gains (losses) on non-trading financial assets mandatorily at fair value through profit or loss, net | (35) | 371 | (35) | (32) |
| Reclassification of financial assets from fair value through other comprehensive income | — | — | — | — |
| Reclassification of financial assets from amortized cost | — | — | — | — |
| Other gains (losses) | (35) | 371 | (35) | (32) |
| Gains (losses) on financial assets and liabilities designated at fair value through profit or loss, net | 150 | (54) | 348 | (198) |
| Gains (losses) from hedge accounting, net | 73 | (90) | 16 | (61) |
| Exchange differences, net | 304 | 35 | 716 | 558 |
| Other operating income | 333 | 286 | 297 | 231 |
| Other operating expense | (1,944) | (2,098) | (1,803) | (1,634) |
| Income from insurance and reinsurance contracts | 1,645 | 1,436 | 1,343 | 1,280 |
| Expense from insurance and reinsurance contracts | (1,065) | (756) | (802) | (744) |
| GROSS INCOME | 14,148 | 15,394 | 11,417 | 13,327 |
| Administration costs | (5,262) | (5,643) | (4,371) | (5,002) |
| Personnel expense | (3,081) | (3,449) | (2,582) | (3,019) |
| Other administrative expense | (2,181) | (2,194) | (1,790) | (1,983) |
| Depreciation and amortization | (676) | (727) | (652) | (676) |
| Provisions or reversal of provisions | (129) | (245) | (112) | (179) |
| Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss or net gains by modification | (1,993) | (2,436) | (1,441) | (1,938) |
| Financial assets measured at amortized cost | (1,958) | (2,428) | (1,391) | (1,912) |
| Financial assets at fair value through other comprehensive income | (35) | (8) | (50) | (26) |
| NET OPERATING INCOME | 6,088 | 6,344 | 4,841 | 5,531 |
| Impairment or reversal of impairment of investments in joint ventures and associates | 10 | (19) | 19 | 24 |
| Impairment or reversal of impairment on non-financial assets | (13) | (40) | — | (27) |
| Tangible assets | 3 | (18) | 22 | 31 |
| Intangible assets | (10) | (16) | (5) | (20) |
| Other assets | (6) | (6) | (17) | (38) |
| Gains (losses) on derecognition of non-financial assets and subsidiaries, net | 8 | 20 | (15) | 4 |
| Negative goodwill recognized in profit or loss | — | — | — | — |
| Gains (losses) from non-current assets and disposal groups classified as held for sale not qualifying as discontinued operations | 29 | (8) | (120) | 13 |
| PROFIT (LOSS) BEFORE TAX FROM CONTINUING OPERATIONS | 6,122 | 6,297 | 4,724 | 5,544 |
| Tax expense or income related to profit or loss from continuing operations | (1,978) | (2,025) | (1,650) | (1,855) |
| PROFIT (LOSS) AFTER TAX FROM CONTINUING OPERATIONS | 4,144 | 4,272 | 3,074 | 3,689 |
| Profit (loss) after tax from discontinued operations | — | — | — | — |
| PROFIT (LOSS) | 4,144 | 4,272 | 3,074 | 3,689 |
| ATTRIBUTABLE TO MINORITY INTERESTS (NON-CONTROLLING INTERESTS) | 266 | 131 | 117 | 289 |
| ATTRIBUTABLE |
EARNINGS (LOSSES) PER SHARE (Euros)
| Six months ended June 30, 2023 | Six months ended December 31, 2023 | Six months ended June 30, 2022 ⁽¹⁾ | Six months ended December 31, 2022 ⁽¹⁾ | |
|---|---|---|---|---|
| EARNINGS (LOSSES) PER SHARE (Euros) | ||||
| Basic earnings (losses) per share from continuing operations | 0.62 | 0.67 | 0.44 | 0.54 |
| Diluted earnings (losses) per share from continuing operations | 0.62 | 0.67 | 0.44 | 0.54 |
| Basic earnings (losses) per share from discontinued operations | — | — | — | — |
| Diluted earnings (losses) per share from discontinued operations | — | — | — | — |
(1) Presented for comparison purposes only (see Note 1.3). 213 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
APPENDIX IX. Financial Statements of Banco Bilbao Vizcaya Argentaria, S.A.
ASSETS (Millions of Euros)
| 2023 | 2022 ⁽¹⁾ | |
|---|---|---|
| CASH, CASH BALANCES AT CENTRAL BANKS AND OTHER DEMAND DEPOSITS | 49,213 | 52,973 |
| FINANCIAL ASSETS HELD FOR TRADING | 116,828 | 91,391 |
| Derivatives | 32,937 | 35,023 |
| Equity instruments | 3,339 | 3,361 |
| Debt securities | 11,018 | 11,318 |
| Loans and advances to central banks | 2,808 | 1,632 |
| Loans and advances to credit institutions | 52,441 | 23,969 |
| Loans and advances to customers | 14,285 | 16,089 |
| NON-TRADING FINANCIAL ASSETS MANDATORILY AT FAIR VALUE THROUGH PROFIT OR LOSS | 730 | 546 |
| Equity instruments | 507 | 438 |
| Debt securities | 223 | 107 |
| Loans and advances to central banks | — | — |
| Loans and advances to credit institutions | — | — |
| Loans and advances to customers | — | — |
| FINANCIAL ASSETS DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS | — | — |
| FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME | 19,426 | 24,854 |
| Equity instruments | 1,019 | 977 |
| Debt securities | 18,407 | 23,877 |
| FINANCIAL ASSETS AT AMORTIZED COST | 261,765 | 246,950 |
| Debt securities | 34,905 | 25,313 |
| Loans and advances to central banks | — | 10 |
| Loans and advances to credit institutions | 13,074 | 9,329 |
| Loans and advances to customers | 213,786 | 212,297 |
| DERIVATIVES - HEDGE ACCOUNTING | 780 | 1,169 |
| FAIR VALUE CHANGES OF THE HEDGED ITEMS IN PORTFOLIO HEDGES OF INTEREST RATE RISK | (97) | (148) |
| INVESTMENTS IN SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES | 23,019 | 21,960 |
| Subsidiaries | 22,637 | 21,644 |
| Joint ventures | 24 | 36 |
| Associates | 358 | 280 |
| TANGIBLE ASSETS | 3,373 | 3,531 |
| Properties, plant and equipment | 3,285 | 3,432 |
| For own use | 3,285 | 3,432 |
| Other assets leased out under an operating lease | — | — |
| Investment properties | 87 | 99 |
| INTANGIBLE ASSETS | 894 | 855 |
| Goodwill | — | — |
| Other intangible assets | 894 | 855 |
| TAX ASSETS | 12,416 | 12,479 |
| Current tax assets | 2,145 | 1,629 |
| Deferred tax assets | 10,271 | 10,850 |
| OTHER ASSETS | 2,023 | 1,677 |
| Insurance contracts linked to pensions | 1,321 | 1,337 |
| Inventories | 132 | — |
| Other | 569 | 340 |
| NON-CURRENT ASSETS AND DISPOSAL GROUPS CLASSIFIED AS HELD FOR SALE | 512 | 651 |
| TOTAL ASSETS | 490,883 | 458,888 |
(1) Presented for comparison purposes only. 214 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
LIABILITIES AND EQUITY (Millions of Euros)
| 2023 | 2022 ⁽¹⁾ | |
|---|---|---|
| FINANCIAL LIABILITIES HELD FOR TRADING | 108,349 | 80,853 |
| Derivatives | 28,615 | 30,954 |
| Short positions | 11,849 | 11,408 |
| Deposits from central banks | 4,698 | 2,161 |
| Deposits from credit institutions | 42,710 | 28,107 |
| Customer deposits | 20,476 | 8,224 |
| Debt certificates | — | — |
| Other financial liabilities | — | — |
| FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS | 2,361 | 1,859 |
| Deposits from central banks | — | — |
| Deposits from credit institutions | — | — |
| Customer deposits | 2,361 | 1,859 |
| Debt certificates | — | — |
| Other financial liabilities | — | — |
| Subordinated liabilities | — | — |
| FINANCIAL LIABILITIES AT AMORTIZED COST | 339,476 | 335,941 |
| Deposits from central banks | 10,962 | 32,517 |
| Deposits from credit institutions | 33,563 | 20,020 |
| Customer deposits | 234,754 | 234,797 |
| Debt certificates | 50,132 | 38,511 |
| Other financial liabilities | 10,065 | 9,915 |
| Memorandum item: Subordinated liabilities | 11,741 | 9,106 |
| DERIVATIVES - HEDGE ACCOUNTING | 2,075 | 2,599 |
| FAIR VALUE CHANGES OF THE HEDGED ITEMS IN PORTFOLIO HEDGES OF INTEREST RATE RISK | — | — |
| PROVISIONS | 3,131 | 3,385 |
| Pensions and other post-employment defined benefit obligations | 1,871 | 2,085 |
| Other long term employee benefits | 404 | 433 |
| Provisions for taxes and other legal contingencies | 396 | 388 |
| Commitments and guarantees given | 240 | 280 |
| Other provisions | 221 | 198 |
| TAX LIABILITIES | 992 | 943 |
| Current tax liabilities | 197 | 190 |
| Deferred tax liabilities | 795 | 753 |
| OTHER LIABILITIES | 2,808 | 2,552 |
| LIABILITIES INCLUDED IN DISPOSAL GROUPS CLASSIFIED AS HELD FOR SALE | — | — |
| TOTAL LIABILITIES | 459,192 | 428,133 |
(1) Presented for comparison purposes only. 215 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
LIABILITIES AND EQUITY (Continued) (Millions of Euros)
| 2023 | 2022 ⁽¹⁾ | |
|---|---|---|
| STOCKHOLDERS’ FUNDS | 33,134 | 32,928 |
| Capital | 2,861 | 2,955 |
| Paid up capital | 2,861 | 2,955 |
| Unpaid capital which has been called up | — | — |
| Share premium | 19,769 | 20,856 |
| Equity instruments issued other than capital | — | — |
| Equity component of compound financial instruments | — | — |
| Other equity instruments issued | — | — |
| Other equity | 40 | 49 |
| Retained earnings | 7,416 | 5,453 |
| Revaluation reserves | — | — |
| Other reserves | (804) | (474) |
| Less: treasury shares | (3) | (3) |
| Profit or loss attributable to owners of the parent | 4,807 | 4,816 |
| Less: interim dividends | (952) | (724) |
| ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | (1,443) | (2,172) |
| Items that will not be reclassified to profit or loss | (1,212) | (1,215) |
| Actuarial gains (losses) on defined benefit pension plans | (54) | (32) |
| Non-current assets and disposal groups classified as held for sale | — | — |
| Fair value changes of equity instruments measured at fair value through other comprehensive income | (1,213) | (1,256) |
| Hedge ineffectiveness of fair value hedges for equity instruments measured at fair value through other comprehensive income | — | — |
| Fair value changes of equity instruments measured at fair value through other comprehensive income (hedged item) | — | — |
| Fair value changes of equity instruments measured at fair value through other comprehensive income (hedging instrument) | — | — |
| Fair value changes of financial liabilities at fair value through profit or loss attributable to changes in their credit risk | 55 | 72 |
| Items that may be reclassified to profit or loss | (230) | (957) |
| Hedge of net investments in foreign operations (effective portion) | — | — |
| Foreign currency translation | — | — |
| Hedging derivatives. Cash flow hedges (effective portion) | 45 | (492) |
| Fair value changes of debt instruments measured at fair value through other comprehensive income | (275) | (464) |
| Hedging instruments (non-designated items) | — | — |
| Non-current assets and disposal groups classified as held for sale | — | — |
| TOTAL EQUITY | 31,691 | 30,756 |
| TOTAL EQUITY AND TOTAL LIABILITIES | 490,883 | 458,888 |
MEMORANDUM ITEM - OFF BALANCE SHEET EXPOSURES (Millions of Euros)
| 2023 | 2022 ⁽¹⁾ | |
|---|---|---|
| Loan commitments given | 98,667 | 95,948 |
| Financial guarantees given | 18,784 | 16,305 |
| Other commitments given | 30,013 | 26,850 |
(1) Presented for comparison purposes only. 216 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
INCOME STATEMENTS (Millions of Euros)
| 2023 | 2022 ⁽¹⁾ | |
|---|---|---|
| Interest income | 14,569 | 5,903 |
| Financial assets at fair value through other comprehensive income | 399 | 498 |
| Financial assets at amortized cost | 11,653 | 5,416 |
| Other interest income | 2,517 | (11) |
| Interest expense | (9,005) | (2,083) |
| NET INTEREST INCOME | 5,564 | 3,821 |
| Dividend income | 3,483 | 3,470 |
| Fee and commission income | 2,689 | 2,612 |
| Fee and commission expense | (613) | (489) |
| Gains (losses) on derecognition of financial assets and liabilities not measured at fair value through profit or loss, net | 24 | 1 |
| Financial assets at amortized cost | — | — |
| Other financial assets and liabilities | 24 | 1 |
| Gains or (losses) on financial assets and liabilities held for trading, net | (12) | 438 |
| Reclassification of financial assets from fair value through other comprehensive income | — | — |
| Reclassification of financial assets from amortized cost | — | — |
| Other profit or loss | (12) | 438 |
| Gains (losses) on non-trading financial assets mandatorily at fair value through profit or loss, net | 200 | (51) |
| Reclassification of financial assets from fair value through other comprehensive income | — | — |
| Reclassification of financial assets from amortized cost | — | — |
| Other profit or loss | 200 | (51) |
| Gains (losses) on financial assets and liabilities designated at fair value through profit or loss, net | 16 | 128 |
| Gains (losses) from hedge accounting, net | (6) | — |
| Exchange differences, net | 23 | (122) |
| Other operating income | 455 | 339 |
| Other operating expense | (804) | (642) |
| GROSS INCOME | 11,020 | 9,503 |
| Administrative expense | (4,157) | (3,755) |
| Personnel expense | (2,425) | (2,217) |
| Other administrative expense | (1,733) | (1,538) |
| Depreciation and amortization | (651) | (638) |
| Provisions or reversal of provisions | (116) | (50) |
| Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss or net gains by modification | (677) | (521) |
| Financial assets measured at amortized cost | (682) | (504) |
| Financial assets at fair value through other comprehensive income | 6 | (16) |
| NET OPERATING INCOME | 5,419 | 4,539 |
| Impairment or reversal of impairment of investments in subsidiaries, joint ventures |
(Millions of Euros)
| 2023 | 2022 ⁽¹⁾ | |
|---|---|---|
| PROFIT RECOGNIZED IN INCOME STATEMENT | 4,807 | 4,816 |
| OTHER RECOGNIZED INCOME (EXPENSE) | 730 | (713) |
| ITEMS NOT SUBJECT TO RECLASSIFICATION TO INCOME STATEMENT | 3 | (40) |
| Actuarial gains (losses) from defined benefit pension plans | (24) | 32 |
| Non-current assets and disposal groups classified as held for sale | — | — |
| Fair value changes of equity instruments measured at fair value through other comprehensive income | 43 | (129) |
| Gains (losses) from hedge accounting of equity instruments at fair value through other comprehensive income, net | — | — |
| Fair value changes of financial liabilities at fair value through profit or loss attributable to changes in their credit risk | (24) | 100 |
| Other valuation adjustments | — | — |
| Income tax related to items not subject to reclassification to income statement | 9 | (43) |
| ITEMS SUBJECT TO RECLASSIFICATION TO INCOME STATEMENT | 727 | (673) |
| Hedge of net investments in foreign operations [effective portion] | — | — |
| Valuation gains (losses) taken to equity | — | — |
| Transferred to profit or loss | — | — |
| Other reclassifications | — | — |
| Other reclassifications | — | — |
| Cash flow hedges [effective portion] | 767 | 191 |
| Valuation gains (losses) taken to equity | 767 | 191 |
| Transferred to profit or loss | — | — |
| Transferred to initial carrying amount of hedged items | — | — |
| Other reclassifications | — | — |
| Hedging instruments [non-designated elements] | — | — |
| Valuation gains (losses) taken to equity | — | — |
| Transferred to profit or loss | — | — |
| Other reclassifications | — | — |
| Debt securities at fair value through other comprehensive income | 271 | (1,152) |
| Valuation gains (losses) taken to equity | 302 | (1,148) |
| Transferred to profit or loss | (31) | (4) |
| Other reclassifications | — | — |
| Non-current assets and disposal groups held for sale | — | — |
| Valuation gains (losses) taken to equity | — | — |
| Income tax relating to items subject to reclassification to income statements | (311) | 288 |
| TOTAL RECOGNIZED INCOME/EXPENSE | 5,537 | 4,102 |
(1) Presented for comparison purposes only.
218 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
(Millions of Euros)
| | 2023 | Capital | Share Premium | Equity instruments issued other than capital | Other Equity | Retained earnings | Revaluation reserves | Other reserves (-) | Treasury shares | Profit or loss attributable to owners of the parent | (-) Interim dividends | Accumulated other comprehensive income | Total |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Balances as of January 1, 2023 | | 2,955 | 20,856 | — | 49 | 5,453 | — | (474) | (3) | 4,816 | (724) | (2,172) | 30,756 |
| Total income/expense recognized | | — | — | — | — | — | — | — | — | 4,807 | — | 730 | 5,537 |
| Other changes in equity | | (94) | (1,087) | — | (9) | 1,963 | — | (330) | — | (4,816) | (228) | — | (4,602) |
| Issuances of common shares | | — | — | — | — | — | — | — | — | — | — | — | — |
| Issuances of preferred shares | | — | — | — | — | — | — | — | — | — | — | — | — |
| Issuance of other equity instruments | | — | — | — | — | — | — | — | — | — | — | — | — |
| Period or maturity of other issued equity instruments | | — | — | — | — | — | — | — | — | — | — | — | — |
| Conversion of debt on equity | | — | — | — | — | — | — | — | — | — | — | — | — |
| Common Stock reduction | | (94) | (1,087) | — | — | 75 | — | (316) | 1,422 | — | — | — | — |
| Dividend distribution | | — | — | — | — | (1,860) | — | — | — | — | (952) | — | (2,812) |
| Purchase of treasury shares | | — | — | — | — | — | — | (2,000) | — | — | — | — | (2,000) |
| Sale or cancellation of treasury shares | | — | — | — | — | — | — | (12) | 578 | — | — | — | 566 |
| Reclassification of financial liabilities to other equity instruments | | — | — | — | — | — | — | — | — | — | — | — | — |
| Reclassification of other equity instruments to financial liabilities | | — | — | — | — | — | — | — | — | — | — | — | — |
| Transfers between total equity entries | | — | — | 2 | 4,092 | — | (2) | — | (4,816) | 724 | — | — | — |
| Increase/Reduction of equity due to business combinations | | — | — | — | — | — | — | — | — | — | — | — | — |
| Share based payments | | — | — | (30) | — | — | — | — | — | — | — | — | (30) |
| Other increases or (-) decreases in equity | | — | — | 19 | (345) | — | — | — | — | — | — | — | (325) |
| Balances as of December 31, 2023 | | 2,861 | 19,769 | — | 40 | 7,416 | — | (804) | (3) | 4,807 | (952) | (1,443) | 31,691 |
219 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
(Millions of Euros)
| 2022 ⁽¹⁾ | Capital | Share Premium | Equity instruments issued other than capital | Other Equity | Retained earnings | Revaluation reserves | Other reserves (-) | Treasury shares | Profit or loss attributable to owners of the parent | (-) Interim dividends | Accumulated other comprehensive income | Total | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Balances as of January 1, 2022 | 3,267 | 23,599 | — | 49 | 6,436 | — | (1,026) | (574) | 1,080 | (533) | (1,461) | 30,836 | |
| Total income/expense recognized | — | — | — | — | — | — | — | — | 4,816 | — | (713) | 4,102 | |
| Other changes in equity | (313) | (2,743) | — | 1 | (983) | — | 553 | 572 | (1,080) | (190) | 1 | (4,182) | |
| Issuances of common shares | — | — | — | — | — | — | — | — | — | — | — | — | |
| Issuances of preferred shares | — | — | — | — | — | — | — | — | — | — | — | — | |
| Issuance of other equity instruments | — | — | — | — | — | — | — | — | — | — | — | — | |
| Settlement or maturity of other equity instruments issued | — | — | — | — | — | — | — | — | — | — | — | — | |
| Conversion of debt on equity | — | — | — | — | — | — | — | — | — | — | — | — | |
| Common Stock reduction | (313) | (2,743) | — | — | 250 | — | (355) | 3,160 | — | — | — | — | |
| Dividend distribution | — | — | — | — | (1,467) | — | — | — | — | (724) | — | (2,190) | |
| Purchase of treasury shares | — | — | — | — | — | — | (2,879) | — | — | — | — | (2,879) | |
| Sale or cancellation of treasury shares | — | — | — | — | — | — | (6) | 291 | — | — | — | 285 | |
| Reclassification of other equity instruments to financial liabilities | — | — | — | — | — | — | — | — | — | — | — | — | |
| Reclassification of financial liabilities to other equity instruments | — | — | — | — | — | — | — | — | — | — | — | — | |
| Transfers within total equity | — | — | 1 | 547 | — | (2) | — | (1,080) | 533 | 1 | — | — | |
| Increase/Reduction of equity due to business combinations | — | — | — | — | — | — | — | — | — | — | — | — | |
| Share based payments | — | — | — | — | — | — | — | — | — | — | — | — | |
| Other increases or (-) decreases in equity | — | — | — | (313) | — | 916 | — | — | — | — | — | 602 | |
| Balances as of December 31, 2022 | 2,955 | 20,856 | — | 49 | 5,453 | — | (474) | (3) | 4,816 | (724) | (2,172) | 30,756 |
(1) Presented for comparison purposes only.
220 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
(Millions of Euros)
| 2023 | 2022 ⁽¹⁾ | |
|---|---|---|
| A) CASH FLOWS FROM OPERATING ACTIVITIES (1+2+3+4+5) | (1,809) | 23,057 |
| 1.Profit (loss) for the year | 4,807 | 4,816 |
| 2.Adjustments to obtain the cash flow from operating activities: | 1,766 | (629) |
| Depreciation and amortization | 651 | 638 |
| Other adjustments | 1,115 | (1,268) |
| 3.Net increase/decrease in operating assets | (35,004) | 696 |
| Financial assets held for trading | (25,437) | 13,999 |
| Non-trading financial assets mandatorily at fair value through profit or loss | (184) | (109) |
| Other financial assets designated at fair value through profit or loss | — | — |
| Financial assets at fair value through other comprehensive income | 5,428 | 3,351 |
| Financial assets at amortized cost | (14,875) | (15,757) |
| Other operating assets | 65 | (788) |
| 4.Net increase/decrease in operating liabilities | 27,697 | 18,825 |
| Financial liabilities held for trading | 27,495 | 2,995 |
| Other financial liabilities designated at fair value through profit or loss | 501 | (379) |
| Financial liabilities at amortized cost | 506 | 15,480 |
| Other operating liabilities | (805) | 729 |
| 5.Collection/payments for income tax | (1,076) | (651) |
| B) CASH FLOWS FROM INVESTING ACTIVITIES (1+2) | (140) | (2,753) |
| 1.Investment | (906) | (3,937) |
| Tangible assets | (77) | (60) |
| Intangible assets | (382) | (360) |
| Investments in subsidiaries, joint ventures and associates | (447) | (3,516) |
| Other business units | — | — |
| Non-current assets and disposal groups classified as held for sale and associated liabilities | — | — |
| Other settlements related to investing activities | — | — |
| 2.Divestments | 765 | 1,184 |
| Tangible assets | 2 | 6 |
| Intangible assets | — | — |
| Investments in subsidiaries, joint ventures and associates | 557 | 852 |
| Other business units | — | — |
| Non-current assets classified as held for sale and associated liabilities | 207 | 326 |
| Other collections related to investing activities | — | — |
| C) CASH FLOWS FROM FINANCING ACTIVITIES (1 + 2) | (1,986) | (5,921) |
| 1. Payments | (6,307) | (6,190) |
| Dividends (shareholders remuneration) | (2,812) | (2,190) |
| Subordinated liabilities | (1,495) | (881) |
| Treasury share amortization | (94) | (313) |
| Treasury share acquisition | (1,906) | (2,567) |
| Other items relating to financing activities | — | (240) |
| 2. | ||
| Subordinated liabilities | 3,679 | — |
| Common stock increase | — | — |
| Treasury share disposal | 536 | 270 |
| Other items relating to financing activities | 106 | — |
| D) EFFECT OF EXCHANGE RATE CHANGES | 175 | (231) |
| E) NET INCREASE/DECREASE IN CASH OR CASH EQUIVALENTS (A+B+C+D) | (3,760) | 14,153 |
| F) CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR | 52,973 | 38,821 |
| G) CASH AND CASH EQUIVALENTS AT END OF THE YEAR (E+F) | 49,213 | 52,973 |
COMPONENTS OF CASH AND EQUIVALENTS AT END OF THE YEAR (Millions of Euros)
| 2023 | 2022 | |
|---|---|---|
| Cash | 990 | 972 |
| Balance of cash equivalent in central banks | 45,653 | 49,854 |
| Other financial assets | 2,570 | 2,147 |
| Less: Bank overdraft refundable on demand | — | — |
| TOTAL CASH AND CASH EQUIVALENTS AT END OF THE YEAR | 49,213 | 52,973 |
(1) Presented for comparison purposes only. This Appendix is an integral part of Notes 2.1 of the consolidated financial statements for the year ended December 31, 2023.
221
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
APPENDIX X. Quantitative information on refinancing and restructuring operations and other requirement under Bank of Spain Circular 6/2012
a. Quantitative information on refinancing and restructuring operations
The breakdown of refinancing and restructuring operations as of December 31, 2023, 2022 and 2021 is as follows:
December 2023
BALANCE OF FORBEARANCE (Millions of Euros)
| TOTAL | Unsecured loans | Secured loans | Accumulated impairment or accumulated losses in fair value due to credit risk | Maximum amount of secured loans that can be considered |
|---|---|---|---|---|
| Number of operations | Gross carrying amount | Number of operations | Gross carrying amount | |
| Credit institutions | — | — | — | — |
| General Governments | 50 | 31 | 24 | 7 |
| Other financial corporations and individual entrepreneurs (financial business) | 292 | 17 | 24 | 11 |
| Non-financial corporations and individual entrepreneurs (corporate non-financial activities) | 79,943 | 3,870 | 10,602 | 2,395 |
| Of which: financing the construction and property (including land) | 703 | 420 | 717 | 269 |
| Other households (1) | 242,532 | 1,390 | 63,320 | 4,642 |
| Total | 322,817 | 5,308 | 73,970 | 7,055 |
Of which: IMPAIRED
| TOTAL | Unsecured loans | Secured loans | Accumulated impairment or accumulated losses in fair value due to credit risk | Maximum amount of secured loans that can be considered |
|---|---|---|---|---|
| Number of operations | Gross carrying amount | Number of operations | Gross carrying amount | |
| Credit institutions | — | — | — | — |
| General Governments | 25 | 14 | 4 | 2 |
| Other financial corporations and individual entrepreneurs (financial business) | 206 | 5 | 17 | 4 |
| Non-financial corporations and individual entrepreneurs (corporate non-financial activities) | 59,133 | 2,409 | 6,483 | 1,323 |
| Of which: financing the construction and property (including land) | 491 | 417 | 540 | 196 |
| Other households (1) | 158,595 | 900 | 36,108 | 3,001 |
| Total | 217,959 | 3,329 | 42,612 | 4,330 |
(1) Number of operations does not include Garanti BBVA. Includes mortgage-backed real estate operations with loan to value ratio of greater than 1, and secured operations, other than transactions secured by real estate mortgage regardless of their loan to value ratio.
222
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
December 2022
BALANCE OF FORBEARANCE (Millions of Euros)
| TOTAL | Unsecured loans | Secured loans | Accumulated impairment or accumulated losses in fair value due to credit risk | Maximum amount of secured loans that can be considered |
|---|---|---|---|---|
| Number of operations | Gross carrying amount | Number of operations | Gross carrying amount | |
| Credit institutions | — | — | — | — |
| General Governments | 57 | 38 | 24 | 9 |
| Other financial corporations and individual entrepreneurs (financial business) | 303 | 10 | 22 | 6 |
| Non-financial corporations and individual entrepreneurs (corporate non-financial activities) | 75,713 | 5,882 | 8,687 | 2,792 |
| Of which: financing the construction and property (including land) | 460 | 479 | 819 | 383 |
| Other households (1) | 231,910 | 1,412 | 79,666 | 4,969 |
| Total | 307,983 | 7,343 | 88,399 | 7,778 |
Of which: IMPAIRED
| TOTAL | Unsecured loans | Secured loans | Accumulated impairment or accumulated losses in fair value due to credit risk | Maximum amount of secured loans that can be considered |
|---|---|---|---|---|
| Number of operations | Gross carrying amount | Number of operations | Gross carrying amount | |
| Credit institutions | — | — | — | — |
| General Governments | 26 | 20 | 23 | 9 |
| Other financial corporations and individual entrepreneurs (financial business) | 232 | 9 | 17 | 4 |
| Non-financial corporations and individual entrepreneurs (corporate non-financial activities) | 59,944 | 3,104 | 6,005 | 1,604 |
| Of which: financing the construction and property (including land) | 414 | 475 | 620 | 269 |
| Other households (1) | 124,228 | 871 | 37,043 | 2,514 |
| Total | 184,430 | 4,004 | 43,088 | 4,130 |
(1) Number of operations does not include Garanti BBVA. Includes mortgage-backed real estate operations with loan to value ratio of greater than 1, and secured operations, other than transactions secured by real estate mortgage regardless of their loan to value ratio.
223
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
December 2021
BALANCE OF FORBEARANCE (Millions of Euros)
| TOTAL | Unsecured loans | Secured loans | Accumulated impairment or accumulated losses in fair value due to credit risk | Maximum amount of secured loans that can be considered |
|---|---|---|---|---|
| Number of operations | Gross carrying amount | Number of operations | Gross carrying amount | |
| Credit institutions | — | — | — | — |
| General Governments | 59 | 63 | 32 | 22 |
| Other financial corporations and individual entrepreneurs (financial business) | 377 | 30 | 25 | 2 |
| Non-financial corporations and individual entrepreneurs (corporate non-financial activities) | 99,852 | 6,590 | 11,417 | 3,552 |
| Of which: financing the construction and property (including land) | 739 | 155 | 1,785 | 486 |
| Other households (1) | 275,927 | 1,813 | 96,312 | 5,877 |
| Total | 376,215 | 8,496 | 107,786 | 9,453 |
Of which: IMPAIRED
| TOTAL | Unsecured loans | Secured loans | Accumulated impairment or accumulated losses in fair value due to credit risk | Maximum amount of secured loans that can be considered |
|---|---|---|---|---|
| Number of operations | Gross carrying amount | Number of operations | Gross carrying amount | |
| Credit institutions | — | — | — | — |
| General Governments | 29 | 29 | 23 | 10 |
| Other financial corporations and individual entrepreneurs (financial business) | 255 | 11 | 17 | 1 |
| Non-financial corporations and individual entrepreneurs (corporate non-financial activities) | 74,054 | 3,701 | 7,423 | 1,799 |
| Of which: financing the construction and property (including land) | 592 | 148 | 1,229 | 320 |
| Other households (1) | 143,791 | 948 | 39,962 | 2,701 |
| Total | 218,129 | 4,689 | 47,425 | 4,512 |
(1) Number of operations does not include Garanti BBVA. Includes mortgage-backed real estate operations with loan to value ratio of greater than 1, and secured operations, other than transactions secured by real estate mortgage regardless of their loan to value ratio.
In addition to the restructuring and refinancing transactions mentioned in this section, loans that were not considered impaired or renegotiated have been modified based on the criteria set out in the accounting regulation that applies. These loans have not been classified as renegotiated or impaired, since they were modified for commercial or competitive reasons (for instance, to improve relationships with clients) rather than for economic or legal reasons relating to the borrower's financial situation.
The table below provides a breakdown by segments of the forbearance operations (net of provisions) as of December 31, 2023, 2022 and 2021:
Forbearance operations. Breakdown by segments (Millions of Euros)
| 2023 | 2022 | 2021 | |
|---|---|---|---|
| Credit institutions | — | — | — |
| Central governments | 32 | 39 | 74 |
| Other financial corporations and individual entrepreneurs (financial activity) | 22 | 9 | 26 |
| Non-financial corporations and individual entrepreneurs (non-financial activity) | 3,843 | 5,371 | 6,946 |
| Of which: Financing the construction and property development (including land) | 261 | 365 | 128 |
| Households | 4,354 | 4,780 | 6,068 |
| Total carrying amount | 8,251 | 10,200 | 13,114 |
| Financing classified as non-current assets and disposal groups held for sale | — | — | — |
| 224 | |||
| Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56).In the event of a discrepancy, the Spanish-language version prevails. |
The non-performing ratio of the renegotiated portfolio is defined as the impaired balance of renegotiated loans that shows signs of difficulties as of the closing of the reporting period, divided by the total payment outstanding in that portfolio. As of December 31, 2023 and December 31, 2022, the non-performing ratio for each of the portfolios of renegotiated loans is as follows:
| Ratio of impaired loans - past due | 2023 | 2022 |
|---|---|---|
| General governments | 42 % | 61 % |
| Commercial | 60 % | 54 % |
| Of which: Construction and developer | 89 % | 86 % |
| Other consumer | 65 % | 53 % |
December 2023 (Millions of Euros)
| Loans to customers. Loan to value | Total (1) | Mortgage loans | Secured loans | Less than or equal to 40% | Over 40% but less than or equal to 60% | Over 60% but less than or equal to 80% | Over 80% but less than or equal to 100% | Over 100% |
|---|---|---|---|---|---|---|---|---|
| General governments | 23,025 | 271 | 7,104 | 1,137 | 2,911 | 429 | 2,369 | 527 |
| Other financial institutions and individual entrepreneurs | 23,086 | 525 | 13,315 | 182 | 378 | 68 | 9,304 | 3,909 |
| Non-financial institutions and individual entrepreneurs | 183,279 | 24,472 | 10,791 | 11,930 | 7,260 | 4,556 | 4,230 | 7,287 |
| Construction and property development | 5,788 | 4,064 | 248 | 1,662 | 1,192 | 768 | 239 | 451 |
| Construction of civil works | 5,173 | 554 | 382 | 231 | 191 | 87 | 37 | 390 |
| Other purposes | 172,318 | 19,854 | 10,160 | 10,037 | 5,877 | 3,701 | 3,954 | 6,446 |
| Large companies | 111,122 | 7,360 | 5,744 | 4,092 | 2,071 | 1,479 | 1,882 | 3,579 |
| SMEs (2) and individual entrepreneurs | 61,196 | 12,494 | 4,416 | 5,944 | 3,806 | 2,222 | 2,072 | 2,867 |
| Rest of households and NPISHs (3) | 157,847 | 95,040 | 2,166 | 21,700 | 25,396 | 31,265 | 13,960 | 4,886 |
| Housing | 97,395 | 93,813 | 118 | 21,155 | 24,954 | 31,014 | 12,435 | 4,374 |
| Consumption | 56,520 | 475 | 1,879 | 230 | 291 | 137 | 1,423 | 273 |
| Other purposes | 3,933 | 753 | 169 | 315 | 152 | 114 | 102 | 239 |
| TOTAL | 387,238 | 120,308 | 33,376 | 34,949 | 35,944 | 36,319 | 29,864 | 16,609 |
| MEMORANDUM ITEM: Forbearance operations (4) | 8,251 | 4,894 | 240 | 1,050 | 1,072 | 1,001 | 953 | 1,058 |
(1) The amounts included in this table are net of loss allowances.
(2) Small and medium enterprises.
(3) Non-profit institutions serving households.
(4) Net of provisions.
225 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
December 2022 (Millions of Euros)
| Loans to customers. Loan to value | Total (1) | Mortgage loans | Secured loans | Less than or equal to 40% | Over 40% but less than or equal to 60% | Over 60% but less than or equal to 80% | Over 80% but less than or equal to 100% | Over 100% |
|---|---|---|---|---|---|---|---|---|
| General governments | 20,661 | 297 | 5,382 | 1,121 | 1,555 | 338 | 1,919 | 746 |
| Other financial institutions and individual entrepreneurs | 23,484 | 336 | 15,430 | 296 | 128 | 139 | 3,644 | 11,560 |
| Non-financial institutions and individual entrepreneurs | 172,854 | 25,454 | 6,829 | 9,902 | 6,972 | 4,495 | 2,958 | 7,956 |
| Construction and property development | 5,166 | 3,701 | 201 | 1,468 | 1,083 | 660 | 247 | 445 |
| Construction of civil works | 5,582 | 610 | 317 | 276 | 185 | 104 | 45 | 318 |
| Other purposes | 162,106 | 21,143 | 6,311 | 8,159 | 5,704 | 3,732 | 2,666 | 7,194 |
| Large companies | 105,852 | 7,509 | 3,771 | 3,308 | 1,839 | 1,218 | 1,358 | 3,557 |
| SMEs (2) and individual entrepreneurs | 56,254 | 13,634 | 2,540 | 4,851 | 3,866 | 2,514 | 1,307 | 3,637 |
| Rest of households and NPISHs (3) | 150,095 | 93,556 | 1,990 | 21,473 | 25,693 | 29,940 | 13,114 | 5,327 |
| Housing | 95,237 | 92,264 | 123 | 20,886 | 25,325 | 29,696 | 11,564 | 4,915 |
| Consumption | 50,295 | 461 | 1,660 | 266 | 166 | 111 | 1,403 | 176 |
| Other purposes | 4,564 | 831 | 208 | 321 | 202 | 133 | 147 | 235 |
| TOTAL | 367,095 | 119,644 | 29,632 | 32,792 | 34,348 | 34,911 | 21,636 | 25,589 |
| MEMORANDUM ITEM: Forbearance operations (4) | 10,200 | 5,685 | 174 | 1,351 | 1,130 | 1,167 | 884 | 1,327 |
(1) The amounts included in this table are net of loss allowances.
(2) Small and medium enterprises.
(3) Non-profit institutions serving households.
(4) Net of provisions.
December 2021 (Millions of Euros)
| Loans to customers. Loan to value | Total (1) | Mortgage loans | Secured loans | Less than or equal to 40% | Over 40% but less than or equal to 60% | Over 60% but less than or equal to 80% | Over 80% but less than or equal to 100% | Over 100% |
|---|---|---|---|---|---|---|---|---|
| General governments | 19,928 | 324 | 1,907 | 472 | 834 | 129 | 783 | 14 |
| Other financial institutions and individual entrepreneurs | 20,711 | 219 | 14,495 | 153 | 575 | 2,933 | 10,151 | 901 |
| Non-financial institutions and individual entrepreneurs | 146,988 | 22,945 | 3,842 | 8,074 | 6,361 | 4,679 | 2,407 | 5,266 |
| Construction and property development | 5,091 | 3,594 | 79 | 1,203 | 1,055 | 675 | 278 | 462 |
| Construction of civil works | 6,614 | 625 | 259 | 252 | 194 | 96 | 51 | 291 |
| Other purposes | 135,284 | 18,726 | 3,504 | 6,620 | 5,112 | 3,908 | 2,077 | 4,513 |
| Large companies | 84,147 | 6,208 | 2,197 | 2,327 | 1,420 | 1,680 | 632 | 2,346 |
| SMEs (2) and individual entrepreneurs | 51,137 | 12,518 | 1,307 | 4,292 | 3,692 | 2,228 | 1,445 | 2,167 |
| Rest of households and NPISHs (3) | 141,007 | 93,384 | 1,757 | 19,716 | 23,528 | 29,555 | 15,339 | 7,003 |
| Housing | 95,199 | 92,030 | 132 | 19,120 | 23,175 | 29,258 | 13,982 | 6,628 |
| Consumption | 41,798 | 416 | 1,421 | 245 | 172 | 119 | 1,176 | 126 |
| Other purposes | 4,010 | 938 | 203 | 352 | 181 | 178 | 181 | 250 |
| TOTAL | 328,635 | 116,872 | 22,001 | 28,415 | 31,298 | 37,295 | 28,679 | 13,185 |
| MEMORANDUM ITEM: Forbearance operations (4) | 13,114 | 7,513 | 98 | 1,611 | 1,460 | 1,600 | 1,176 | 1,765 |
(1) The amounts included in this table are net of loss allowances.
(2) Small and medium enterprises.
(3) Non-profit institutions serving households.
(4) Net of provisions.
226 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
December 2023 (Millions of Euros)
| TOTAL (1) | Spain | Rest of European Union | America | Other | |
|---|---|---|---|---|---|
| Credit institutions | 192,222 | 54,246 | 61,342 | 42,084 | 34,550 |
| General governments | 144,082 | 59,385 | 12,198 | 61,473 | 11,025 |
| Central Administration | 121,149 | 45,259 | 11,767 | 53,640 | 10,482 |
| Other | 22,933 | 14,125 | 431 | 7,833 | 543 |
| Other financial institutions and individual entrepreneurs | 54,064 | 9,564 | 18,279 | 18,097 | 8,124 |
| Non-financial institutions and individual entrepreneurs | 246,103 | 80,219 | 23,614 | 90,342 | 51,928 |
| Construction and property development | 9,256 | 2,888 | 640 | 2,573 | 3,156 |
| Construction of civil works | 9,524 | 5,988 | 885 | 1,558 | 1,093 |
| Other purposes | 227,323 | 71,344 | 22,089 | 86,211 | 47,679 |
| Large companies | 159,906 | 45,738 | 21,086 | 61,867 | 31,214 |
| SMEs and individual entrepreneurs | 67,417 | 25,606 | 1,003 | 24,344 | 16,464 |
| Other households and NPISHs | 158,344 | 88,561 | 2,477 | 58,686 | 8,620 |
| Housing | 97,395 | 70,073 | 1,302 | 24,899 | 1,120 |
| Consumer | 56,521 | 15,111 | 956 | 33,207 | 7,246 |
| Other purposes | 4,428 | 3,377 | 218 | 579 | 254 |
| TOTAL | 794,814 | 291,975 | 117,910 | 270,682 | 114,247 |
(1) The definition of risk for the purpose of this statement includes the following items on the public balance sheet: “Loans and advances to credit institutions”, “Loans and advances”, “Debt securities”, “Equity instruments”, “Other equity securities”, “Derivatives and hedging derivatives”, “Investments in subsidiaries, joint ventures and associates” and “Guarantees given”. The amounts included in this table are net of loss allowances.
December 2022 (Millions of Euros)
| TOTAL (2) | Spain | Rest of European Union | America | Other | |
|---|---|---|---|---|---|
| Credit institutions | 166,533 | 58,290 | 36,043 | 42,872 | 29,328 |
| General governments | 127,562 | 52,873 | 13,677 | 47,261 | 13,752 |
| Central Administration | 106,827 | 39,349 | 13,153 | 41,201 | 13,124 |
| Other | 20,736 | 13,524 | 524 | 6,060 | 628 |
| Other financial institutions | 49,608 | 9,884 | 16,254 | 15,090 | 8,380 |
| Non-financial institutions and individual entrepreneurs | 235,280 | 81,464 | 25,039 | 80,016 | 48,761 |
| Construction and property development | 8,590 | 2,636 | 659 | 2,149 | 3,146 |
| Construction of civil works | 9,361 | 5,942 | 1,078 | 1,037 | 1,304 |
| Other purposes | 217,329 | 72,886 | 23,302 | 76,830 | 44,311 |
| Large companies | 154,798 | 45,864 | 22,686 | 54,975 | 31,274 |
| SMEs and individual entrepreneurs | 62,531 | 27,023 | 616 | 21,855 | 13,038 |
| Other households and NPISHs | 150,496 | 88,548 | 2,591 | 48,756 | 10,602 |
| Housing | 95,238 | 70,901 | 1,483 | 21,455 | 1,398 |
| Consumer | 50,296 | 14,595 | 236 | 26,697 | 8,768 |
| Other purposes | 4,962 | 3,052 | 871 | 604 | 436 |
| TOTAL | 729,480 | 291,059 | 93,603 | 233,994 | 110,823 |
(1) Balances corresponding to 2022 have been restated according to IFRS 17 (see Notes 1.3 and 2.3).
(2) The definition of risk for the purpose of this statement includes the following items on the public balance sheet: “Loans and advances to credit institutions”, “Loans and advances”, “Debt securities”, “Equity instruments”, “Other equity securities”, “Derivatives and hedging derivatives”, “Investments in subsidiaries, joint ventures and associates” and “Guarantees given”. The amounts included in this table are net of loss allowances.
227 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
December 2021 (Millions of Euros)
| TOTAL (1) | Spain | Rest of European Union | America | Other | |
|---|---|---|---|---|---|
| Credit institutions | 153,178 | 46,282 | 35,157 | 37,840 | 33,898 |
| General governments | 122,518 | 53,621 | 15,822 | 41,510 | 11,564 |
| Central Administration | 101,719 | 38,601 | 15,451 | 36,397 | 11,269 |
| Other | 20,799 | 15,020 | 371 | 5,113 | 295 |
| Other financial institutions | 44,470 | 9,988 | 16,039 | 11,474 | 6,969 |
| Non-financial institutions and individual entrepreneurs | 211,437 | 77,227 | 25,485 | 64,123 | 44,602 |
| Construction and property development | 8,594 | 3,029 | 662 | 2,050 | 2,853 |
| Construction of civil works | 10,345 | 5,641 | 1,210 | 1,030 | 2,465 |
| Other purposes | 192,498 | 68,557 | 23,614 | 61,044 | 39,284 |
| Large companies | 136,229 | 42,462 | 23,133 | 40,931 | 29,703 |
| SMEs and individual entrepreneurs | 56,269 | 26,095 | 481 | 20,113 | 9,581 |
| Other households and NPISHs | 141,747 | 89,769 | 2,715 | 40,819 | 8,444 |
| Housing | 95,200 | 73,145 | 1,645 | 18,455 | 1,955 |
| Consumer | 41,799 | 13,431 | 745 | 21,399 | 6,224 |
| Other purposes | 4,749 | 3,193 | 325 | 966 | 265 |
| TOTAL | 673,350 | 276,887 | 95,218 | 195,768 | 105,477 |
(1) The definition of riskAPPENDIX XI. Additional information on risk concentration
The table below provides a breakdown of exposure to financial assets (excluding derivatives and equity instruments), as of December 31, 2023, 2022 and 2021: by type of counterparty and the country of residence of such counterparty. The below figures do not take into account accumulated other comprehensive income, loss allowances or loan-loss provisions:
Risk exposure by countries (Millions of Euros)
| Sovereign risk | 2023 | 2022 ⁽¹⁾ | 2021 |
| -------------- | ------ | -------- | ----- |
| Spain | 59,704 | 53,437 | 52,927 |
| Italy | 10,744 | 12,287 | 13,720 |
| Turkey | 9,284 | 9,934 | 5,868 |
| Portugal | 424 | 670 | 697 |
| Germany | 142 | 254 | 212 |
| France | 182 | 148 | 124 |
| Netherlands | 14 | 14 | 3 |
| Romania | 587 | 539 | 461 |
| Rest of Europe | 1,187 | 1,188 | 522 |
| Subtotal Europe | 82,268 | 78,470 | 74,534 |
| Mexico | 48,929 | 36,840 | 34,872 |
| The United States | 5,591 | 4,989 | 1,841 |
| Colombia | 3,540 | 2,657 | 2,676 |
| Peru | 1,526 | 1,108 | 805 |
| Argentina | 1,308 | 1,246 | 850 |
| Venezuela | — | — | — |
| Rest of countries | 1,782 | 3,726 | 5,871 |
| Subtotal rest of countries | 62,676 | 50,566 | 46,915 |
| Total exposure to financial instruments | 144,945 | 129,036 | 121,449 |
(1) Balances corresponding to 2022 have been restated according to IFRS 17 (see Notes 1.3 and 2.3).
The exposure to sovereign risk set out in the above table includes positions held in government debt securities in countries where the Group operates. They are used for ALCO’s management of the interest-rate risk on the balance sheets of the Group’s entities in these countries, as well as for hedging of pension and insurance commitments by insurance entities within the BBVA Group.
The table below provides a breakdown of the exposure of the Group’s credit institutions to sovereign risk as of December 31, 2023 by type of financial instrument and the country of residence of the counterparty, under EBA requirements:
Sovereign Risk by European Union Countries. December 2023 (Millions of Euros)
| | Debt securities | Loans and advances | Derivatives | Total | % |
| ---------------------------------- | --------------- | ------------------ | ----------- | ----- |---|
| | | | Total | | |
| | | | % | | |
| | | | Direct exposure | Indirect exposure | Notional value | Fair value + | Fair value - | Notional value | Fair value + | Fair value - | | |
| Spain | 33,631 | 12,394 | 213 | 57 | (14) | 402 | 1,612 | (1,316) | 46,978 | 40% |
| Italy | 7,513 | — | — | — | — | (256) | 1,269 | (1,014) | 7,512 | 6% |
| Portugal | (296) | 36 | 792 | 16 | — | — | — | — | 548 | —% |
| Germany | (1,045) | — | — | — | — | 29 | 7 | (1) | (1,010) | (1)% |
| France | (1,317) | 24 | 16 | — | (1) | 240 | 239 | (17) | (816) | (1)% |
| Netherlands | 10 | — | — | — | — | — | — | — | 10 | —% |
| Romania | 587 | — | — | — | — | — | — | — | 587 | 1% |
| Rest of European Union | 361 | 86 | — | 7 | (5) | 272 | 263 | — | 984 | 1% |
| Total Exposure to Sovereign Counterparties (European Union) | 39,444 | 12,539 | 1,021 | 80 | (20) | 688 | 3,390 | (2,350) | 54,793 | 47% |
| Mexico | 28,990 | 7,856 | 1,785 | 9 | (57) | — | 20 | (20) | 38,583 | 33% |
| The United States | 5,404 | — | 13 | 16 | (4) | — | — | — | 5,430 | 5% |
| Turkey | 8,702 | 496 | — | — | — | — | 10 | (10) | 9,197 | 8% |
| Rest of other countries | 5,248 | 2,575 | — | — | — | 335 | 52 | (54) | 8,156 | 7% |
| Total other countries | 48,344 | 10,927 | 1,797 | 25 | (61) | 335 | 81 | (83) | 61,366 | 53% |
| Total | 87,788 | 23,466 | 2,819 | 106 | (81) | 1,023 | 3,472 | (2,433) | 116,159 | 100% |
This table shows sovereign risk balances with EBA criteria. Therefore, sovereign risk of European Union countries of the Group’s insurance companies (€9,696 million as of December 31, 2023) is not included. Includes credit derivatives CDS (Credit Default Swaps) shown at fair value. This Appendix forms an integral part of Note 7.2.8 of the Consolidated Financial Statements for the year 2023.
Quantitative information on activities in the real-estate market in Spain
Lending for real estate development of the loans as of December 31, 2023, 2022 and 2021 is shown below:
Financing Allocated by credit institutions to Construction and Real Estate Development and lending for house purchase (Millions of Euros)
| | Gross amount | Drawn over the guarantee value | Accumulated impairment |
| ------------------------------------------------------------------------- | ------------ | ---------------------------- | ---------------------- |
| | 2023 | 2022 | 2021 | 2023 | 2022 | 2021 | 2023 | 2022 | 2021 |
| Financing to construction and real estate development (including land) (Business in Spain) | 2,105 | 1,861 | 2,123 | 482 | 350 | 455 | (115) | (157) | (197) |
| Of which: Impaired assets | 183 | 239 | 336 | 53 | 82 | 132 | (98) | (122) | (142) |
| Memorandum item: — — — | — | — | — | — | — | — | — | — | — |
| Write-offs | 2,097 | 2,086 | 2,155 | | | | | | |
| Memorandum item: — — — | — | — | — | — | — | — | — | — | — |
| Total loans and advances to customers, excluding the General Governments (Business in Spain) (book Value) | 168,660 | 172,880 | 168,734 | | | | | | |
| Total consolidated assets (total business) (book value) | 775,558 | 712,092 | 662,885 | | | | | | |
| Impairment and provisions for normal exposures | (4,752) | (4,622) | (4,610) | | | | | | |
The following is a description of the real estate credit risk based on the types of associated guarantees:
Financing allocated by credit institutions to construction and real estate development and lending for house purchase (Millions of Euros)
| | 2023 | 2022 | 2021 |
| ------------------------------------------------------------------ | ----- | ----- | ----- |
| Without secured loan | 359 | 232 | 248 |
| With secured loan | 1,746 | 1,629 | 1,875 |
| Terminated buildings | 857 | 898 | 1,172 |
| Homes | 685 | 710 | 936 |
| Other | 172 | 188 | 235 |
| Buildings under construction | 749 | 556 | 517 |
| Homes | 731 | 536 | 509 |
| Other | 18 | 21 | 8 |
| Land | 139 | 175 | 186 |
| Urbanized land | 92 | 119 | 124 |
| Rest of land | 47 | 56 | 62 |
| Total | 2,105 | 1,861 | 2,123 |
As of December 31, 2023, 2022 and 2021, 40.7%, 48.3% and 55.2%, of loans to developers were guaranteed with buildings (79.9%, 79.1% and 79.9% are homes), and only 6.6%, 9.4%, and 8.8% by land, of which 66.2%, 68.0%, and 66.6% are in urban locations, respectively.
The table below provides the breakdown of the financial guarantees given as of December 31, 2023, 2022 and 2021 :
Financial guarantees given (Millions of Euros)
| | 2023 | 2022 | 2021 |
| --------------- | ---- | ---- | ---- |
| Houses purchase loans | 36 | 54 | 56 |
| Without mortgage | 3 | 3 | 3 |
The information on the retail mortgage portfolio risk (housing mortgage) as of December 31, 2023, 2022 and 2021 is as follows:
Financing allocated by credit institutions to construction and Real Estate development and lending for house purchase. (Millions of Euros)
| | Gross amount | Of which: impaired loans |
| -------------------------- | ------------ | ------------------------ |
| | 2023 | 2022 | 2021 | 2023 | 2022 | 2021 |
| Houses purchase loans | 71,144 | 71,799 | 74,094 | 3,267 | 2,486 | 2,748 |
| Without mortgage | 1,415 | 1,539 | 1,631 | 10 | 8 | 13 |
| With mortgage | 69,729 | 70,260 | 72,463 | 3,257 | 2,477 | 2,735 |
The loan to value (LTV) ratio of the above portfolio is as follows:
LTV breakdown of mortgage to households for the purchase of a home (business in Spain) (Millions of Euros)
| | Total risk over the amount of the last valuation available (Loan to value-LTV) |
| ---------------------------------------------------- | ---------------------------------------------------------------------------- |
| | Less than or equal to 40% | Over 40% but less than or equal to 60% | Over 60% but less than or equal to 80% | Over 80% but less than or equal to 100% | Over 100% | Total Gross amount |
| December 31, 2023 | 17,201 | 20,302 | 22,850 | 5,856 | 3,519 | 69,729 |
| Of which: Impaired loans | 307 | 464 | 642 | 617 | 1,227 | 3,257 |
| December 31, 2022 | 16,981 | 20,060 | 22,255 | 6,794 | 4,171 | 70,260 |
| Of which: Impaired loans | 248 | 341 | 438 | 450 | 999 | 2,477 |
| December 31, 2021 | 15,189 | 18,107 | 22,782 | 9,935 | 6,449 | 72,463 |
| Of which: Impaired loans | 216 | 327 | 462 | 483 | 1,246 | 2,735 |
Outstanding home mortgage loans as of December 31, 2023, 2022 and 2021 had an average LTV of 42%, 43% and 46% respectively.
The breakdown of foreclosed, acquired, purchased or exchanged assets from debt from loans relating to business in Spain, as well as the holdings and financing to non-consolidated entities holding such assets is as follows:
Information about Assets Received in Payment of Debts (Business in Spain) (Millions of euros)
| | Gross Value ⁽¹⁾ ⁽²⁾ | Provisions | Of which: Valuation adjustments on impaired assets, from the time of foreclosure | Carrying amount |
| --- | --- | --- | --- | --- |
| | 2023 | 2022 | 2021 | 2023 | 2022 | 2021 | 2023 | 2022 | 2021 | 2023 | 2022 | 2021 |
| Real estate assets from loans to the construction and real estate development sectors in Spain | 398 | 539 | 654 | (307) | (389) | (407) | (183) | (229) | (214) | 92 | 150 | 247 |
| Terminated buildings | 72 | 125 | 196 | (44) | (72) | (94) | (24) | (38) | (44) | 28 | 54 | 102 |
| Homes | 31 | 49 | 87 | (16) | (25) | (39) | (7) | (11) | (17) | 15 | 24 | 48 |
| Other | 41 | 76 | 109 | (28) | (47) | (55) | (17) | (27) | (27) | 13 | 30 | 54 |
| Buildings under construction | 8 | 21 | 23 | (7) | (16) | (17) | (2) | (8) | (6) | 1 | 5 | 6 |
| Homes | 7 | 20 | 22 | (6) | (15) | (16) | (2) | (7) | (6) | 1 | 5 | 6 |
| Other | 1 | 1 | 1 | (1) | (1) | (1) | — | — | — | — | — | — |
| Land | 318 | 393 | 435 | (256) | (302) | (296) | (156) | (183) | (164) | 62 | 91 | 139 |
| Urbanized land | 299 | 366 | 406 | (242) | (285) | (281) | (145) | (170) | (153) | 57 | 81 | 125 |
| Rest of land | 19 | 27 | 29 | (14) | (17) | (15) | (11) | (12) | (11) | 5 | 10 | 14 |
| Real estate assets from mortgage financing for households for the purchase of a home | 544 | 736 | 970 | (299) | (410) | (520) | (99) | (134) | (154) | 245 | 327 | 450 |
| Rest of foreclosed real estate assets | 364 | 449 | 494 | (231) | (270) | | (99) | (134) | | | | |(264) (76) (80) (62) 133 179 230
Equity instruments, investments and financing to non-consolidated companies holding said assets ⁽³⁾
— 656 708 — (397) (449) — (358) (410) — 259 259
Total
1,306 2,381 2,826 (837) (1,466) (1,640) (358) (801) (840) 469 915 1,186
(1) Represents original loan value at the time of foreclosure.
(2) The value of real estate assets foreclosed or received in payment of debts should be initially recognized at the lower of the carrying amount of the financial assets and the fair value at the time of foreclosure less estimated sales costs. The gross value of the assets acquired in payment of debts is € 827 million and € 1,716 million as of December 31, 2023 and December 31, 2022, respectively.
(3) In 2023 stake in Metrovacesa, S.A. is excluded. Given its corporate purpose and the transformation and turnover of its assets, the assets of Metrovacesa, S.A. are not considered to come from foreclosures. As of December 31, 2023, 2022 and 2021, the gross book value of the Group’s real-estate assets from corporate financing of real-estate construction and development was €398 , €539 and €654 million, respectively, with an average coverage ratio of 77.0%, 72.2% and 62.2%, respectively. The gross book value of real-estate assets from mortgage lending to households for home purchase as of December 31, 2023, 2022 and 2021, amounted to €544, €736 and €970 million, respectively, with an average coverage ratio of 55.0%, 55.6% and 53.6%. As of December 31, 2023 , 2022 and 2021 , the gross book value of the BBVA Group’s total real-estate assets (business in Spain), including other real-estate assets received as debt payment, was €1,306, €1,725 and €2,118 million, respectively. The coverage ratio was 64.1%, 62.0% and 56.2%, respectively.
This Appendix is an integral part of Note 7 of the consolidated financial statements for the year ended December 31, 2023.
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c. Concentration of risk by geographical areas
Below is a breakdown of the balances of financial instruments registered in the consolidated balance sheets by their concentration in geographical areas and according to the residence of the customer or counterparty. As of December 31, 2023, 2022 and 2021 it does not take into account loss allowances or loan-loss provisions:
| Spain | Rest of Europe | Mexico | The United States | Turkey | South America | Rest of business | Total | |
|---|---|---|---|---|---|---|---|---|
| Derivatives | 3,688 | 17,106 | 2,017 | 7,487 | 51 | 2,956 | 987 | 34,293 |
| Equity instruments (1) | 1,424 | 2,999 | 6,418 | 2,399 | 76 | 206 | 246 | 13,768 |
| Debt securities ⁽²⁾ | 49,620 | 19,547 | 43,825 | 9,103 | 8,932 | 7,071 | 2,502 | 140,600 |
| Central banks | — | 15 | — | — | — | 1,179 | 80 | 1,274 |
| General governments | 46,667 | 12,359 | 40,982 | 5,584 | 8,789 | 4,647 | 967 | 119,995 |
| Credit institutions | 2,154 | 3,017 | 1,914 | 123 | 16 | 323 | 459 | 8,005 |
| Other financial corporations | 442 | 2,065 | 334 | 1,223 | 2 | 680 | 222 | 4,967 |
| Non-financial corporations | 357 | 2,091 | 596 | 2,173 | 125 | 242 | 773 | 6,357 |
| Loans and advances | 176,482 | 92,253 | 98,561 | 12,957 | 41,619 | 52,131 | 13,488 | 487,491 |
| Central banks | 201 | 2,199 | — | — | 5,316 | 1,590 | 680 | 9,985 |
| General governments | 12,394 | 145 | 7,856 | — | 496 | 2,082 | 492 | 23,466 |
| Credit institutions | 7,141 | 53,077 | 5,759 | 636 | 1,428 | 2,391 | 3,691 | 74,122 |
| Other financial corporations | 2,961 | 15,190 | 2,529 | 1,690 | 1,264 | 1,891 | 724 | 26,250 |
| Non-financial corporations | 59,083 | 18,905 | 38,001 | 10,604 | 19,591 | 22,542 | 7,820 | 176,546 |
| Households | 94,703 | 2,737 | 44,415 | 27 | 13,525 | 21,634 | 81 | 177,121 |
| Total risk in financial assets | 231,214 | 131,905 | 150,821 | 31,948 | 50,678 | 62,364 | 17,223 | 676,153 |
| Loan commitments given | 34,931 | 42,914 | 24,811 | 17,773 | 20,883 | 9,600 | 1,956 | 152,868 |
| Financial guarantees given | 2,694 | 5,542 | 69 | 2,338 | 6,587 | 991 | 618 | 18,839 |
| Other commitments given | 17,187 | 8,191 | 2,812 | 3,135 | 5,057 | 2,991 | 3,205 | 42,577 |
| Off-balance sheet exposures | 54,812 | 56,646 | 27,691 | 23,245 | 32,527 | 13,581 | 5,780 | 214,283 |
| Total risks in financial instruments | 286,026 | 188,551 | 178,512 | 55,193 | 83,205 | 75,946 | 23,002 | 890,436 |
(1) Equity instruments are shown net of valuation adjustment.
(2) The debt securities of the "Financial assets at fair value through other comprehensive income" portfolio do not include gains/losses.
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| Spain | Rest of Europe | Mexico | The United States | Turkey | South America | Rest of business | Total | |
|---|---|---|---|---|---|---|---|---|
| Derivatives | 5,222 | 20,494 | 1,824 | 7,679 | 128 | 3,493 | 1,068 | 39,908 |
| Equity instruments (2) | 1,342 | 3,068 | 5,012 | 2,026 | 145 | 225 | 294 | 12,113 |
| Debt securities ⁽³⁾ | 43,274 | 20,373 | 34,083 | 8,102 | 8,722 | 8,395 | 4,802 | 127,750 |
| Central banks | — | 16 | — | — | — | 3,843 | 89 | 3,948 |
| General governments | 41,324 | 13,869 | 31,713 | 5,229 | 8,700 | 3,460 | 3,041 | 107,336 |
| Credit institutions | 1,162 | 2,470 | 1,351 | 117 | 14 | 268 | 443 | 5,824 |
| Other financial corporations | 434 | 1,712 | 304 | 1,032 | 3 | 567 | 215 | 4,266 |
| Non-financial corporations | 354 | 2,306 | 715 | 1,724 | 5 | 257 | 1,015 | 6,375 |
| Loans and advances | 176,153 | 65,763 | 77,317 | 12,508 | 42,080 | 46,362 | 11,157 | 431,340 |
| Central banks | 713 | 1,060 | — | — | 3,898 | 370 | 10 | 6,051 |
| General governments | 11,500 | 269 | 6,301 | — | 585 | 1,771 | 495 | 20,922 |
| Credit institutions | 5,184 | 27,591 | 2,546 | 336 | 2,457 | 1,974 | 1,235 | 41,323 |
| Other financial corporations | 3,688 | 16,662 | 1,315 | 1,814 | 1,206 | 1,415 | 1,307 | 27,407 |
| Non-financial corporations | 60,459 | 17,290 | 32,294 | 10,325 | 21,678 | 21,559 | 8,008 | 171,613 |
| Households | 94,609 | 2,890 | 34,861 | 34 | 12,255 | 19,273 | 101 | 164,023 |
| Total risk in financial assets | 225,990 | 109,698 | 118,236 | 30,316 | 51,074 | 58,475 | 17,322 | 611,111 |
| Loan commitments given | 35,649 | 42,532 | 20,479 | 14,849 | 10,628 | 10,996 | 1,788 | 136,920 |
| Financial guarantees given | 3,020 | 4,372 | 7 | 1,397 | 6,169 | 1,011 | 536 | 16,511 |
| Other commitments given | 15,626 | 8,008 | 2,723 | 2,536 | 4,278 | 3,207 | 2,758 | 39,137 |
| Off-balance sheet exposures | 54,294 | 54,912 | 23,209 | 18,783 | 21,074 | 15,213 | 5,082 | 192,568 |
| Total risks in financial instruments | 280,285 | 164,610 | 141,445 | 49,098 | 72,149 | 73,689 | 22,403 | 803,678 |
(1) Balances corresponding to 2022 have been restated according to IFRS 17 (see Notes 1.3 and 2.3).
(2) Equity instruments are shown net of valuation adjustment.
(3) The debt securities of the "Financial assets at fair value through other comprehensive income" portfolio do not include gains/losses.
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| Spain | Rest of Europe | Mexico | The United States | Turkey | South America | Rest of business | Total | |
|---|---|---|---|---|---|---|---|---|
| Derivatives | 4,145 | 15,783 | 1,511 | 4,706 | 945 | 3,248 | 594 | 30,933 |
| Equity instruments (1) | 3,682 | 12,510 | 3,885 | 1,273 | 80 | 206 | 951 | 22,587 |
| Debt securities | 43,336 | 22,288 | 32,042 | 4,418 | 5,677 | 6,237 | 6,993 | 120,990 |
| Central banks | — | 15 | — | — | — | 2,527 | 106 | 2,648 |
| General governments | 40,653 | 15,608 | 29,771 | 1,839 | 5,669 | 2,813 | 5,156 | 101,508 |
| Credit institutions | 1,401 | 2,341 | 1,213 | 142 | 8 | 275 | 480 | 5,860 |
| Other financial corporations | 619 | 1,878 | 270 | 903 | 1 | 402 | 132 | 4,203 |
| Non-financial corporations | 662 | 2,447 | 788 | 1,535 | — | 220 | 1,118 | 6,770 |
| Loans and advances | 177,851 | 64,238 | 60,208 | 9,319 | 36,743 | 42,182 | 9,984 | 400,525 |
| Central banks | 865 | 2,832 | — | — | 3,991 | 1,442 | 24 | 9,154 |
| General governments | 12,542 | 256 | 5,102 | — | 236 | 1,733 | 490 | 20,359 |
| Credit institutions | 7,360 | 29,901 | 1,452 | 361 | 2,695 | 1,221 | 2,247 | 45,238 |
| Other financial corporations | 4,583 | 14,183 | 985 | 1,521 | 954 | 1,165 | 851 | 24,242 |
| Non-financial corporations | 56,643 | 13,993 | 24,930 | 7,403 | 19,500 | 19,024 | 6,250 | 147,743 |
| Households | 95,857 | 3,072 | 27,740 | 35 | 9,368 | 17,596 | 122 | 153,789 |
| Total risk in financial assets | 229,013 | 114,819 | 97,647 | 19,718 | 43,445 | 51,873 | 18,521 | 575,035 |
| Loan commitments given | 35,604 | 37,313 | 17,662 | 13,239 | 6,359 | 7,926 | 1,516 | 119,618 |
| Financial guarantees given | 2,426 | 3,363 | 16 | 451 | 4,163 | 993 | 308 | 11,720 |
| Other commitments given | 14,516 | 6,995 | 2,127 | 2,070 | 3,529 | 2,402 | 2,965 | 34,604 |
| Off-balance sheet exposures | 52,546 | 47,671 | 19,805 | 15,760 | 14,050 | 11,321 | 4,789 | 165,941 |
| Total risks in financial instruments | 281,559 | 162,489 | 117,451 | 35,477 | 57,496 | 63,194 | 23,309 | 740,976 |
(1) Equity instruments are shown net of valuation adjustment. The breakdown of the main figures in the most significant foreign currencies in the consolidated balance sheets is set forth in Appendix VII.
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The breakdown of loans and advances in the heading of “Loans and advances”, impaired by geographical area as December 31, 2023, 2022 and 2021.
| 2023 | 2022 | 2021 | |
|---|---|---|---|
| Spain | 8,068 | 7,468 | 8,143 |
| Rest of Europe | 99 | 93 | 104 |
| Mexico | 2,472 | 1,939 | 1,921 |
| South America | 2,176 | 1,721 | 1,744 |
| Turkey | 1,631 | 2,272 | 2,746 |
| Rest of business | — | — | — |
| IMPAIRED RISKS | 14,446 | 13,493 | 14,657 |
This Appendix is an integral part of Note 7.2.8 of the consolidated financial statements for the year ended December 31, 2023.
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Information in accordance with article 89 of Directive 2013/36/EU of the European Parliament and its application to Spanish Law through Law 10/2014
December 31, 2023 (Millions of Euros)
| Country | CIT payments cash basis | CIT expense consol | PBT consol | Gross margin | Nº employees (1) | Activity | Main Entity |
|---|---|---|---|---|---|---|---|
| Germany | 21 | 4 | 25 | 54 | 40 | Banking services | BBVA, S.A. |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Belgium | 1 | 1 | 5 | 8 | 19 | Banking services | BBVA, S.A. - Brussels Branch Office |
| Bolivia | 3 | 1 | 2 | 12 | 109 | Pensions | BBVA Previsión AFP S.A. |
| Brazil | 1 | — | 1 | 3 | Financial services | BBVA Brasil Banco de Investimento, S.A. | |
| Chile | 8 | 2 | 22 | 153 | 786 | Financial services | Forum Servicios Financieros, S.A. |
| China | 16 | 5 | 31 | 70 | 128 | Banking services | BBVA, S.A. - Shanghai Branch Office; BBVA,S.A. - Hong-Kong Branch Office |
| Cyprus | 3 | 4 | 18 | 19 | 111 | Banking services | Garanti BBVA AS - Nicosia Branch Office |
| Colombia | 281 | 23 | 159 | 968 | 6,762 | Finance, banking and insurance services | BBVA Colombia S.A. |
| Curaçao | — | — | 7 | 8 | 14 | Finance and banking services | Banco Provincial Overseas N.V. |
| Spain | 825 | 867 | 1,978 | 7,346 | 26,360 | Finance, banking and insurance services | BBVA, S.A. |
| United States | 68 | 53 | 228 | 184 | 401 | Finance and banking services | BBVA, S.A. - New York Branch Office |
| France | 27 | 17 | 79 | 110 | 73 | Banking services | BBVA, S.A. - Paris Branch Office |
| Italy | 50 | 32 | 95 | 122 | 65 | Banking services | BBVA, S.A. - Milan Branch Office |
| Japan | — | — | (3) | (1) | 6 | Banking services | BBVA, S.A. - Tokio Branch Office |
| Malta | 5 | 7 | 91 | 95 | 14 | Banking services | Garanti BBVA AS - La Valeta Branch Office |
| Mexico | 2,787 | 2,001 | 7,241 | 13,889 | 46,890 | Finance, banking and insurance services | BBVA México, S.A. |
| Netherlands | 26 | 37 | 139 | 188 | 226 | Finance and banking services | Garantibank BBVA International N.V. |
| Peru | 241 | 107 | 540 | 1,745 | 7,532 | Finance and banking services | BBVA Banco Continental S.A. |
| Portugal | 9 | 3 | 72 | 153 | 429 | Finance and banking services | BBVA, S.A. - Portugal Branch Office |
| United Kingdom | 19 | 23 | 99 | 194 | 154 | Banking services | BBVA, S.A. - London Branch Office |
| Romania | 12 | 6 | 34 | 120 | 1,197 | Finance and banking services | Garanti Bank S.A. |
| Singapore | 2 | 4 | 26 | 30 | 16 | Banking services | BBVA, S.A. - Singapore Branch Office |
| Switzerland | 7 | 2 | 9 | 49 | 123 | Finance and banking services | BBVA Switzerland S.A. |
| Taiwan | — | — | 13 | 12 | 12 | Banking services | BBVA, S.A. - Taipei Branch Office |
| Turkey | 732 | 649 | 1,046 | 2,559 | 20,452 | Finance, banking and insurance services | Garanti BBVA A.S. |
| Uruguay | 38 | 19 | 89 | 257 | 573 | Finance and banking services | BBVA Uruguay S.A. |
| Venezuela | 5 | 16 | 63 | 154 | 1,818 | Finance, banking and insurance services | BBVA Banco Provincial S.A. |
| Total | 5,196 | 4,003 | 12,419 | 29,542 | 119,895 |
(1) Full time employees. The 20 employees of representative offices are not included in the total number. The amounts of "Cash payments of corporate income tax" are highly conditioned and derive fundamentally from the methodology for calculating the instalment payments provided for in the regulations governing corporate income tax in the different geographical areas, producing differences between the instalment payments made in the current year and the refund of instalments from previous years that may result once the final tax returns have been filed. In this respect, it should also be noted that it is normal for there to be, differences between the amounts of "Corporate tax cash payments" and "Corporate tax expense", as the tax paid in the year is not necessarily directly related to the pre-tax profit existing in a jurisdiction, but takes into account the tax payments (and refunds) in respect of profits made in previous years, as well as the instalment payments made in the current year and the withholding of input tax. However, the "Corporate Income Tax Expense" for the current year is more directly related to the existing Profit before tax for a given year. The results of this breakdown of the branches are integrated in the financial statements of the parent companies on which they depend. As of December 31, 2023, the return of the Group’s assets calculated by dividing the “Profit” between “Total Assets” is 1.09%. In 2023 1, BBVA group has not received public aid for the financial sector which has the aim of promoting the carrying out of banking activities and which is significant. This statement is made for the purposes of article 89 of Directive 2013/36/EU of the European Parliament and of the Council of June 26 (on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms) and its transposition to Spanish legislation by means of Law 10/2014 on Monitoring, Supervision and Solvency of Credit Institutions of June 26. 238 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
1 BBVA disclosed by means of public relevant events: (i) on 07/27/2012 the closing of the acquisition of UNNIM Banc, S.A. and (ii) on 04/24/2015 the closing of the acquisition of Catalunya Banc, S.A.
| ASSETS (Millions of Euros) | December 31, 2021 disclosed | IFRS 17 Impact | Opening balance as of January 1, 2022 |
|---|---|---|---|
| Cash, cash balances at central banks and other demand deposits | 67,799 | — | 67,799 |
| Financial assets held for trading | 123,493 | — | 123,493 |
| Non-trading financial assets mandatorily at fair value through profit or loss | 6,086 | — | 6,086 |
| Financial assets designated at fair value through profit or loss | 1,092 | — | 1,092 |
| Financial assets at fair value through other comprehensive income | 60,421 | 5,812 | 66,233 |
| Financial assets at amortized cost | 372,676 | (6,054) | 366,622 |
| Derivatives - hedge accounting | 1,805 | — | 1,805 |
| Fair value changes of the hedged items in portfolio hedges of interest rate risk | 5 | — | 5 |
| Joint ventures and associates | 900 | — | 900 |
| Insurance and reinsurance assets | 269 | (45) | 224 |
| Tangible assets | 7,298 | — | 7,298 |
| Intangible assets | 2,197 | — | 2,197 |
| Tax assets | 15,850 | 251 | 16,101 |
| Other assets | 1,934 | (24) | 1,910 |
| Non-current assets and disposal groups classified as held for sale | 1,061 | — | 1,061 |
| TOTAL ASSETS | 662,885 | (60) | 662,825 |
| LIABILITIES AND EQUITY (Millions of Euros) | December 31, 2021 disclosed | IFRS 17 Impact | Opening balance as of January 1, 2022 |
|---|---|---|---|
| Financial liabilities held for trading | 91,135 | — | 91,135 |
| Financial liabilities designated at fair value through profit or loss | 9,683 | — | 9,683 |
| Financial liabilities at amortized cost | 487,893 | 592 | 488,485 |
| Derivatives - hedge accounting | 2,626 | — | 2,626 |
| Liabilities under insurance and reinsurance contracts | 10,865 | (893) | 9,972 |
| Provisions | 5,889 | — | 5,889 |
| Tax liabilities | 2,413 | 228 | 2,641 |
| Other liabilities | 3,621 | 25 | 3,646 |
| Liabilities included in disposal groups classified as held for sale | — | — | — |
| TOTAL LIABILITIES | 614,125 | (48) | 614,077 |
| SHAREHOLDERS’ FUNDS | 60,383 | 178 | 60,562 |
| Capital | 3,267 | — | 3,267 |
| Share premium | 23,599 | — | 23,599 |
| Other equity | 60 | — | 60 |
| Retained earnings | 31,841 | 178 | 32,019 |
| Other reserves | (1,857) | — | (1,857) |
| Less: Treasury shares | (647) | — | (647) |
| Profit or loss attributable to owners of the parent | 4,653 | — | 4,653 |
| Less: Interim dividends | (532) | — | (532) |
| ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | (16,476) | (186) | (16,662) |
| MINORITY INTERESTS (NON-CONTROLLING INTERESTS) | 4,853 | (5) | 4,848 |
| TOTAL EQUITY | 48,760 | (12) | 48,748 |
| TOTAL EQUITY AND TOTAL LIABILITIES | 662,885 | (60) | 662,825 |
239 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
| INCOME STATEMENTS (Millions of Euros) | December 31, 2022 disclosed | IFRS 17 Impact | December 31, 2022 restated ⁽¹⁾ |
|---|---|---|---|
| NET INTEREST INCOME | 19,153 | (30) | 19,124 |
| Dividend income | 123 | — | 123 |
| Share of profit or loss of entities accounted for using the equity method | 21 | — | 21 |
| Fee and commission income | 8,261 | — | 8,260 |
| Fee and commission expense | (2,907) | 19 | (2,888) |
| Net trading income and exchange difference, net | 1,938 | — | 1,938 |
| Other operating income and expense | (2,910) | — | (2,910) |
| Income from insurance and reinsurance contracts | 3,103 | (481) | 2,622 |
| Expense from insurance and reinsurance contracts | (1,892) | 345 | (1,547) |
| GROSS INCOME | 24,890 | (147) | 24,743 |
| Administration costs | (9,432) | 59 | (9,373) |
| Depreciation and amortization | (1,328) | — | (1,328) |
| Provisions or reversal of provisions | (291) | — | (291) |
| Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss or net gains by modification | (3,379) | — | (3,379) |
| NET OPERATING INCOME | 10,460 | (88) | 10,372 |
| Impairment or reversal of impairment of investments in joint ventures and associates | 42 | — | 42 |
| Impairment or reversal of impairment on non-financial assets | (27) | — | (27) |
| Gains (losses) on derecognition of non-financial assets and subsidiaries, net | (11) | — | (11) |
| Gains (losses) from non-current assets and disposal groups classified as held for sale not qualifying as discontinued operations | (108) | — | (108) |
| PROFIT (LOSS) BEFORE TAX FROM CONTINUING OPERATIONS | 10,356 | (88) | 10,268 |
| Tax expense or income related to profit or loss from continuing operations | (3,529) | 24 | (3,505) |
| PROFIT (LOSS) AFTER TAX FROM CONTINUING OPERATIONS | 6,827 | (64) | 6,763 |
| Profit (loss) after tax from discontinued operations | — | — | — |
| PROFIT (LOSS) | 6,827 | (64) | 6,763 |
| ATTRIBUTABLE TO MINORITY INTERESTS (NON-CONTROLLING INTERESTS) | 407 | (2) | 405 |
| ATTRIBUTABLE TO OWNERS OF THE PARENT | 6,420 | (62) | 6,358 |
(1) The restated information contained in this Appendix XIII is presented only and exclusively for comparison purposes with the information published in 2022.
240 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56).In the event of a discrepancy, the Spanish-language version prevails
| ASSETS (Millions of Euros) | December 31, 2022 disclosed | IFRS 17 Impact | December 31, 2022 restated ⁽¹⁾ |
|---|---|---|---|
| Cash, cash balances at central banks and other demand deposits | 79,756 | — | 79,756 |
| Financial assets held for trading | 110,671 | — | 110,671 |
| Non-trading financial assets mandatorily at fair value through profit or loss | 6,888 | — | 6,888 |
| Financial assets designated at fair value through profit or loss | 913 | — | 913 |
| Financial assets at fair value through other comprehensive income | 58,980 | 6,395 | 65,374 |
| Financial assets at amortized cost | 422,061 | (7,639) | 414,421 |
| Derivatives - hedge accounting | 1,891 | — | 1,891 |
| Fair value changes of the hedged items in portfolio hedges of interest rate risk | (148) | — | (148) |
| Joint ventures and associates | 916 | — | 916 |
| Insurance and reinsurance assets | 210 | (27) | 183 |
| Tangible assets | 8,737 | — | 8,737 |
| Intangible assets | 2,156 | — | 2,156 |
| Tax assets | 16,472 | 253 | 16,725 |
| Other assets | 2,614 | (29) | 2,586 |
| Non-current assets and disposal groups classified as held for sale | 1,022 | — | 1,022 |
| TOTAL ASSETS | 713,140 | (1,048) | 712,092 |
| LIABILITIES AND EQUITY (Millions of Euros) | December 31, 2022 disclosed | IFRS 17 Impact | December 31, 2022 restated ⁽¹⁾ |
|---|---|---|---|
| Financial liabilities held for trading | 95,611 | — | 95,611 |
| Financial liabilities designated at fair value through profit or loss | 10,580 | — | 10,580 |
| Financial liabilities at amortized cost | 528,629 | 543 | 529,172 |
| Derivatives - hedge accounting | 3,303 | — | 3,303 |
| Liabilities under insurance and reinsurance contracts | 11,848 | (1,717) | 10,131 |
| Provisions | 4,933 | — | 4,933 |
| Tax liabilities | 2,742 | 194 | 2,935 |
| Other liabilities | 4,880 | 29 | 4,909 |
| Liabilities included in disposal groups classified as held for sale | — | — | — |
| TOTAL LIABILITIES | 662,526 | (950) | 661,575 |
| SHAREHOLDERS’ FUNDS | 64,422 | 113 | 64,535 |
| Capital | 2,955 | — | 2,955 |
| Share premium | 20,856 | — | 20,856 |
| Other equity | 63 | — | 63 |
| Retained earnings | 32,536 | 175 | 32,711 |
| Other reserves | 2,345 | — | 2,345 |
| Less: Treasury shares | (29) | — | (29) |
| Profit or loss attributable to owners of the parent | 6,420 | (62) | 6,358 |
| Less: Interim dividends | (722) | — | (722) |
| ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | (17,432) | (210) | (17,642) |
| MINORITY INTERESTS (NON-CONTROLLING INTERESTS) | 3,624 | (1) | 3,623 |
| TOTAL EQUITY | 50,615 | (98) | 50,517 |
| TOTAL EQUITY AND TOTAL LIABILITIES | 713,140 | (1,048) | 712,092 |
⁽¹⁾ The restated information contained in this Appendix XIII is presented only and exclusively for comparison purposes with the information published in 2022.
241 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56).
In the event of a discrepancy, the Spanish-language version prevails
| Effect on redesignations of assets (Millions of Euros) | December 31, 2021 | Of which portfolio redesignations | Of which gains / losses | Opening balance as of January 1, 2022 |
|---|---|---|---|---|
| Financial assets at amortized cost | 372,676 | (5,549) | — | 366,622 |
| Of which debt securities | 34,781 | (5,549) | — | 29,231 |
| Financial assets at fair value through other comprehensive income | 60,421 | 5,549 | 152 | 66,233 |
| Of which debt securities | 59,074 | 5,549 | 152 | 64,774 |
| Deferred tax assets/liabilities | (46) | |||
| Accumulated other comprehensive income (loss) | 106 | 242 |
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56).
In the event of a discrepancy, the Spanish-language version prevails
Additional Tier 1 Capital
Includes: Preferred stock and convertible perpetual securities and deductions.
Amortized cost
The amortized cost of a financial asset or financial liability is the amount at which the financial asset or financial liability is measured at initial recognition minus the principal repayments, plus or minus, the cumulative amortization using the effective interest rate method of any difference between the initial amount and the maturity amount and, for financial assets, adjusted for any loss allowance.
Associates
Companies in which the Group has a significant influence, without having control. Significant influence is deemed to exist when the Group owns 20% or more of the voting rights of an investee directly or indirectly.
Baseline macroeconomic scenarios
IFRS 9 requires that an entity must evaluate a range of possible outcomes when estimating provisions and measuring expected credit losses, through macroeconomic scenarios. The baseline macroeconomic scenario presents the situation of the particular economic cycle.
Basic earnings per share
Calculated by dividing “Profit attributable to Parent Company” corresponding to ordinary shareholders of the entity by the weighted average number of shares outstanding throughout the year (i.e., excluding the average number of treasury shares held over the year).
Basis risk
Risk arising from hedging exposure to one interest rate with exposure to a rate that reprices under slightly different conditions.
Building Block Approach (BBA)
This is one of the three measurement models for the valuation of insurance and reinsurance contracts. This model is used by default and it applies to contracts with coverage periods of more than one year and not classified as contracts with direct participation, being mandatory except when the conditions to apply the other two methods are met: Variable Fee Approach or Premium Allocation Approach.
Business combination
A business combination is a transaction, or any other event, through which a single entity obtains the control of one or more businesses.
Business Model
The assessment as to how an asset shall be classified is made on the basis of both the business model for managing the financial asset and the contractual cash flow characteristic of the financial asset (SPPI Criterion). Financial assets are classified on the basis of its business model for managing the financial assets. The Group’s business models shall be determined at a level that reflects how groups of financial assets are managed together to achieve a particular business objective and generate cash flows.
Cash flow hedges
Those that hedge the exposure to variability in cash flows attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast transaction and could affect profit or loss.
Commissions
Income and expenses relating to commissions and similar fees are recognized in the income statement using criteria that vary according to their nature. The most significant income and expense items in this connection are:
* Fees and commissions relating linked to financial assets and liabilities measured at fair value through profit or loss, which are recognized when collected.
* Fees and commissions arising from transactions or services that are provided over a period of time, which are recognized over the life of these transactions or services.
* Fees and commissions generated by a single act are accrued upon execution of that act.
Consolidation method
Method used for the consolidation of the accounts of the Group’s subsidiaries. The assets and liabilities of the Group entities are incorporated line-by-line on the consolidate balance sheets, after conciliation and the elimination in full of intragroup balances, including amounts payable and receivable. Group entity income statement income and expense headings are similarly combined line by line into the consolidated income statement, having made the following consolidation eliminations:
a) income and expenses in respect of intragroup transactions are eliminated in full.
b) profits and losses resulting from intragroup transactions are similarly eliminated.
The carrying amount of the parent's investment and the parent's share of equity in each subsidiary are eliminated.
Contingencies
Current obligations of the entity arising as a result of past events whose existence depends on the occurrence or non-occurrence of one or more future events independent of the will of the entity.
Contingent commitments
Possible obligations of the entity that arise from past events and whose existence depends on the occurrence or non-occurrence of one or more future events independent of the entity’s will and that could lead to the recognition of financial assets.
Control
An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. An investor controls an investee if and only if the investor has all the following:
a. Power; An investor has power over an investee when the investor has existing rights that give it the current ability to direct the relevant activities, i.e. the activities that significantly affect the investee’s returns.
b. Returns; An investor is exposed, or has rights, to variable returns from its involvement with the investee when the investor’s returns from its involvement have the potential to vary as a result of the investee’s performance. The investor’s returns can be only positive, only negative or both positive and negative.
c. Link between power and returns; An investor controls an investee if the investor not only has power over the investee and exposure or rights to variable returns from its involvement with the investee, but also has the ability to use its power to affect the investor’s returns from its involvement with the investee.
243 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56).In the event of a discrepancy, the Spanish-language version prevails
Correlation risk is related to derivatives whose final value depends on the performance of more than one underlying asset (primarily, stock baskets) and indicates the existing variability in the correlations between each pair of assets.
An adjustment to the valuation of OTC derivative contracts to reflect the creditworthiness of OTC derivative counterparties.
Current service cost is the increase in the present value of a defined benefit obligation resulting from employee service in the current period.
Taxes recoverable over the next twelve months.
Corporate income tax payable on taxable profit for the year and other taxes payable in the next twelve months.
An adjustment made by an entity to the valuation of OTC derivative liabilities to reflect within fair value the entity’s own credit risk.
Obligations and other interest-bearing securities that create or evidence a debt on the part of their issuer, including debt securities issued for trading among an open group of investors, that accrue interest, implied or explicit, whose rate, fixed or benchmarked to other rates, is established contractually, and take the form of securities or book-entries, irrespective of the issuer.
An asset will be considered as defaulted whenever it is more than 90 days past due.
Taxes recoverable in future years, including loss carry forwards or tax credits for deductions and tax rebates pending application.
Income taxes payable in subsequent years.
Post-employment obligation under which the entity, directly or indirectly via the plan, retains the contractual or implicit obligation to pay remuneration directly to employees when required or to pay additional amounts if the insurer, or other entity required to pay, does not cover all the benefits relating to the services rendered by the employees when insurance policies do not cover all of the corresponding post-employees benefits.
Defined contribution plans are retirement benefit plans under which amounts to be paid as retirement benefits are determined by contributions to a fund together with investment earnings thereon. The employer's obligations in respect of its employees current and prior years' employment service are discharged by contributions to the fund.
Deposits of all classes, including loans and money market operations, received from the Bank of Spain and other central banks.
Deposits of all classes, including loans and money market operations received, from credit entities.
Redeemable cash balances received by the entity, with the exception of debt certificates, money market operations through counterparties and subordinated liabilities, which are not received from either central banks or credit entities. This category also includes cash deposits and consignments received that can be readily withdrawn.
The fair value in favor (assets) or again (liabilities) of the entity of derivatives not designated as accounting hedges.
Derivatives designated as hedging instruments in an accounting hedge. The fair value or future cash flows of those derivatives is expected to offset the differences in the fair value or cash flows of the items hedged.
Calculated by using a method similar to that used to calculate basic earnings per share; the weighted average number of shares outstanding, and the profit attributable to the parent company corresponding to ordinary shareholders of the entity, if appropriate, is adjusted to take into account the potential dilutive effect of certain financial instruments that could generate the issue of new Bank shares (share option commitments with employees, warrants on parent company shares, convertible debt instruments, etc.).
Dividend income collected announced during the year, corresponding to profits generated by investees after the acquisition of the stake.
Domestic balances are those of BBVA´s Group entities domiciled in Spain, which reflect BBVA´s domestic activities, being the allocation of assets and liabilities based on the domicile of the Group entity at which the relevant asset or liability is accounted for.
Employees that no longer render their services to the entity but which, without being legally retired, remain entitled to make economic claims on the entity until they formally retire.
Methods or practices that allow banks to consistently assess risk and attribute capital to cover the economic effects of risk-taking activities.
Discount rate that exactly equals the value of a financial instrument with the cash flows estimated over the expected life of the instrument based on its contractual period as well as its anticipated amortization, but without taking the future losses of credit risk into consideration.
All compensation accrued during the year in respect of personnel on the payroll, under permanent or temporary contracts, irrespective of their jobs or functions, irrespective of the concept, including the current costs of servicing pension plans, own share based compensation schemes and capitalized personnel expenses. Amounts reimbursed by the state Social Security or other welfare entities in respect of employee illness are deducted from personnel expenses.
244 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
The residual interest in an entity's assets after deducting its liabilities. It includes owner or venturer contributions to the entity, at incorporation and subsequently, unless they meet the definition of liabilities, and accumulated net profits or losses, fair value adjustments affecting equity and, if warranted, non-controlling interests.
An equity instrument that evidences a residual interest in the assets of an entity, that is after deducting all of its liabilities.
Includes equity instruments that are financial instruments other than “Capital” and “Equity component of compound financial instruments”.
Is a method of accounting whereby the investment is initially recognized at cost and adjusted thereafter for the post-acquisition change in the investor’s share of the investee’s net assets. The investor’s profit or loss includes its share of the investee’s profit or loss and the investor’s other comprehensive income includes its share of the investee’s other comprehensive income.
Exchange differences: Includes the earnings obtained in currency trading and the differences arising on translating monetary items denominated in foreign currency to the functional currency.
Exchange differences (valuation adjustments): those recorded due to the translation of the financial statements in foreign currency to the functional currency of the Group and others recorded against equity.
Expected credit losses are a probability-weighted estimate of credit losses over the expected life of the financial instrument. Hence, credit losses are the present value of expected cash shortfalls. The measurement and estimate of these expected credit losses should reflect:
1. An unbiased and probability-weighted amount.
2. The time value of money by discounting this amount to the reporting date using a rate that approximates the EIR of the asset, and
3. Reasonable and supportable information that is available without undue cost or effort.
The expected credit losses must be measured as the difference between the asset’s gross carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate or an approximation thereof (forward looking).
EAD is the amount of risk exposure at the date of default by the counterparty.
The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
Derivatives that hedge the exposure to changes in the fair value of assets and liabilities or firm commitments that have not be recognized, or of an identified portion of said assets, liabilities or firm commitments, attributable to a specific risk, provided it could affect the income statement.
Financial assets that do not meet the definition of financial assets designated at fair value through profit or loss and arise from the financial entities' ordinary activities to capture funds, regardless of their instrumentation or maturity.
Financial instruments with determined or determinable cash flows and in which the entire payment made by the entity will be recovered, except for reasons attributable to the solvency of the debtor. This category includes both the investments from the typical lending activity as well as debts contracted by the purchasers of goods, or users of services, that form part of the entity’s business. It also includes all finance lease arrangements in which the subsidiaries act as lessors.# Financial Dictionary
Contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs when a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument, irrespective of its instrumentation. These guarantees may take the form of deposits, technical or financial guarantees, insurance contracts or credit derivatives.
Transactions through which the entity guarantees commitments assumed by third parties in respect of financial guarantees granted or other types of contracts.
A financial instrument is any contract that gives rise to a financial asset of one entity and to a financial liability or equity instrument of another entity.
Financial liabilities that do not meet the definition of financial liabilities designated at fair value through profit or loss and arise from the financial entities' ordinary activities to capture funds, regardless of their instrumentation or maturity.
International balances are those of BBVA´s Group entities domiciled outside of Spain, which reflect our foreign activities, being the allocation of assets and liabilities based on the domicile of the Group entity at which the relevant asset or liability is accounted for.
Goodwill acquired in a business combination represents a payment made by the acquirer in anticipation of future economic benefits from assets that are not able to be individually identified and separately recognized.
Foreign currency hedge of a net investment in a foreign operation.
Financial assets and liabilities acquired or incurred primarily for the purpose of profiting from variations in their prices in the short term. This category also includes financial derivatives not qualifying for hedge accounting, and in the case of borrowed securities, financial liabilities originated by the firm sale of financial assets acquired under repurchase agreements or received on loan (“short positions”).
245 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
For the purposes of these Financial Statements, "International Reporting Standards" include International Accounting Standards (IAS), International Financial Reporting Standards (IFRS) and related interpretations (SIC interpretations/IFRIC interpretations), as may be developed or adopted by the International Accounting Standards Board (IASB, International Accounting Standard Board).
This is considered to be the portfolios on which "cash flow matching" is carried out, that is, balance sheet management with the aim of trying to mitigate the risk derived from the different maturities and interest rates between assets and liabilities.
An asset is credit-impaired according to IFRS 9 if one or more events have occurred and they have a detrimental impact on the estimated future cash flows of the asset. Evidence that a financial asset is credit-impaired includes observable data about the following events:
a. a significant financial difficulty of the issuer or the borrower,
b. a breach of contract (e.g. a default or past due event),
c. a lender having granted a concession to the borrower – for economic or contractual reasons relating to the borrower’s financial difficulty – that the lender would not otherwise consider,
d. it becoming probable that the borrower will enter bankruptcy or other financial reorganization,
e. the disappearance of an active market for that financial asset because of financial difficulties, or
f. the purchase or origination of a financial asset at a deep discount that reflects the incurred credit losses.
Dividends and income on equity instruments collected or announced during the year corresponding to profits generated by investees after the ownership interest is acquired. Income is recognized gross, i.e., without deducting any withholdings made, if any.
Type of filing with the CNMV communicating information which by its nature may affect the price of one or more securities, or the market as a whole, and which has not yet been the subject of publicity or dissemination.
The fair value of insurance contracts written to cover pension commitments.
Assets, other than financial instruments, under production, construction or development, held for sale during the normal course of business, or to be consumed in the production process or during the rendering of services. Inventories include land and other properties held for sale at the real estate development business.
Investment property is property (land or a building—or part of a building—or both) held (by the owner or by the lessee under a finance lease) to earn rentals or for capital appreciation or both, rather than for own use or sale in the ordinary course of business.
An arrangement of which two or more parties have joint control.
The contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.
A joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets of the arrangement and obligations for the liabilities. A joint venturer shall recognize the following for its participation in a joint operation:
a. its assets, including any share of the assets of joint ownership;
b. its liabilities, including any share of the liabilities incurred jointly;
c. income from the sale of its share of production from the joint venture;
d. its share of the proceeds from the sale of production from the joint venturer; and
e. its expenses, including any share of the joint expenses.
A joint venturer shall account for the assets, liabilities, income and expenses related to its participation in a joint operation in accordance with IFRS applicable to the assets, liabilities, income and expenses specific question.
A joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. A joint venturer shall recognize its interest in a joint venture as an investment and shall account for that investment using the equity method in accordance with IAS 28 Investments in Associates and Joint Ventures.
A lease is an agreement whereby the lessor conveys to the lessee in return for a payment or series of payments the right to use an asset for an agreed period of time, a stream of cash flows that is essentially equivalent to the combination of principal and interest payments under a loan agreement.
a) A lease is classified as a finance lease when it substantially transfers all the risks and rewards incidental to ownership of the asset forming the subject-matter of the contract.
b) A lease will be classified as operating lease when it is not a financial lease.
Lease that represents the lessee’s obligation to make lease payments during the lease term.
The balance of liabilities directly associated with assets classified as non-current assets held for sale, including those recognized under liabilities in the entity's balance sheet at the balance sheet date corresponding to discontinued operations.
The technical reserves of direct insurance and inward reinsurance recorded by the entities to cover claims arising from insurance contracts in force at period-end.
Loans and receivables, irrespective of their type, granted to third parties that are not credit entities.
It is the estimate of the loss arising in the event of default. It depends mainly on the characteristics of the counterparty, and the valuation of the guarantees or collateral associated with the asset.
246 Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
Financial asset or security created from mortgage loans and backed by the guarantee of the mortgage loan portfolio of the entity.
The balance of non performing risks, whether for reasons of default by customers or for other reasons, for exposures on balance loans to customers. This figure is shown gross: in other words, it is not adjusted for value corrections (loan loss reserves) made.
The net amount of the profit or loss and net assets of a subsidiary attributable to associates outside the group (that is, the amount that is not owned, directly or indirectly, by the parent), including that amount in the corresponding part of the earnings for the period.
A non-current asset or disposal group, whose carrying amount is expected to be realized through a sale transaction, rather than through continuing use, and which meets the following requirements:
a. it is immediately available for sale in its present condition at the balance sheet date, i.e. only normal procedures are required for the sale of the asset.
b. the sale is considered highly probable.Non-monetary assets: Assets and liabilities that do not provide any right to receive or deliver a determined or determinable amount of monetary units, such as tangible and intangible assets, goodwill and ordinary shares subordinate to all other classes of capital instruments.
Non-trading financial assets mandatorily at fair value through Profit or loss: The financial assets registered under this heading are assigned to a business model whose objective is achieved by obtaining contractual cash flows and / or selling financial assets but which the contractual cash flows have not complied with the SPPI test conditions.
Option risk: Risks arising from options, including embedded options.
Other financial assets/ liabilities at fair value through profit or loss: Instruments designated by the entity from the inception at fair value with changes in profit or loss. An entity may only designate a financial instrument at fair value through profit or loss, if doing so more relevant information is obtained, because:
a. It eliminates or significantly reduces a measurement or recognition inconsistency (sometimes called "accounting mismatch") that would otherwise arise from measuring assets or liabilities or recognizing the gains and losses on them on different bases. It might be acceptable to designate only some of a number of similar financial assets or financial liabilities if doing so a significant reduction (and possibly a greater reduction than other allowable designations) in the inconsistency is achieved.
b. The performance of a group of financial assets or financial liabilities is managed and evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the group is provided internally on that basis to the entity´s key management personnel.
These are financial assets managed jointly with “Liabilities under insurance and reinsurance contracts” measured at fair value, in combination with derivatives written with a view to significantly mitigating exposure to changes in these contracts' fair value, or in combination with financial liabilities and derivatives designed to significantly reduce global exposure to interest rate risk. These headings include customer loans and deposits effected via so-called unit-linked life insurance contracts, in which the policyholder assumes the investment risk.
Other Relevant Information: Type of filing with the CNMV communicating an event, news item or piece of information that may influence investors' decisions on a given security, with a consequent impact on the share price.
Other Reserves: This heading is broken down as follows:
i) Reserves or accumulated losses of investments in subsidiaries, joint ventures and associates: include the accumulated amount of income and expenses generated by the aforementioned investments through profit or loss in past years.
ii) Other: includes reserves different from those separately disclosed in other items and may include legal reserve and statutory reserve.
Other retributions to employees long term: Includes the amount of compensation plans to employees long term.
Own/treasury shares: The amount of own equity instruments held by the entity.
Past service cost: It is the change in the present value of the defined benefit obligation for employee service in prior periods, resulting in the current period from the introduction of, or changes to, post-employment benefits or other long-term employee benefits.
Post-employment benefits: Retirement benefit plans are arrangements whereby an enterprise provides benefits for its employees on or after termination of service.
Premium Allocation Approach (PAA): This is one of the three measurement models for the valuation of insurance and reinsurance contracts. This is a simplification of the general method (BBA) in the valuation of the provision for the remaining coverage, which can be adopted if the coverage period of the group of contracts is less than or equal to one year, according to the limits of the contract, or if the liability for the remaining coverage obtained does not differ materially from that produced under the general method.
Probability of default (PD): It is the probability of the counterparty failing to meet its principal and/or interest payment obligations. The PD is associated with the rating/scoring of each counterparty/transaction.
Property, plant and equipment/tangible assets: Buildings, land, fixtures, vehicles, computer equipment and other facilities owned by the entity or acquired under finance leases.
Provisions: Provisions include amounts recognized to cover the Group’s current obligations arising as a result of past events, certain in terms of nature but uncertain in terms of amount and/or cancellation date.
originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
Provisions for contingent liabilities and commitments: Provisions recorded to cover exposures arising as a result of transactions through which the entity guarantees commitments assumed by third parties in respect of financial guarantees granted or other types of contracts, and provisions for contingent commitments, i.e., irrevocable commitments which may arise upon recognition of financial assets.
Provisions for pensions and similar obligation: Constitutes all provisions recognized to cover retirement benefits, including commitments assumed vis- à-vis beneficiaries of early retirement and analogous schemes.
Provisions or (-) reversal of provisions: Provisions recognized during the year, net of recoveries on amounts provisioned in prior years, with the exception of provisions for pensions and contributions to pension funds which constitute current or interest expense.
Refinanced Operation: An operation which is totally or partially brought up to date with its payments as a result of a refinancing operation made by the entity itself or by another company in its group.
Refinancing Operation: An operation which, irrespective of the holder or guarantees involved, is granted or used for financial or legal reasons related to current or foreseeable financial difficulties that the holder(s) may have in settling one or more operations granted by the entity itself or by other companies in its group to the holder(s) or to another company or companies of its group, or through which such operations are totally or partially brought up to date with their payments, in order to enable the holders of the settled or refinanced operations to pay off their loans (principal and interest) because they are unable, or are expected to be unable, to meet the conditions in a timely and appropriate manner.
Repricing risk: Risks related to the timing mismatch in the maturity and repricing of assets and liabilities and off-balance sheet short and long-term positions.
Restructured Operation: An operation whose financial conditions are modified for economic or legal reasons related to the holder's (or holders') current or foreseeable financial difficulties, in order to enable payment of the loan (principal and interest), because the holder is unable, or is expected to be unable, to meet those conditions in a timely and appropriate manner, even if such modification is provided for in the contract. In any event, the following are considered restructured operations: operations in which a haircut is made or assets are received in order to reduce the loan, or in which their conditions are modified in order to extend their maturity, change the amortization table in order to reduce the amount of the installments in the short term or reduce their frequency, or to establish or extend the grace period for the principal, the interest or both; except when it can be proved that the conditions are modified for reasons other than the financial difficulties of the holders and, are similar to those applied on the market on the modification date for operations granted to customers with a similar risk profile.
Retained earnings: Accumulated net profits or losses recognized in the income statement in prior years and retained in equity upon distribution.
Right of use asset: Asset that represents the lessee’s right to use an underlying asset during the lease term.
Securitization fund: A fund that is configured as a separate equity and administered by a management company. An entity that would like funding sells certain assets to the securitization fund, which, in turn, issues securities backed by said assets.
Share premium: The amount paid in by owners for issued equity at a premium to the shares' nominal value.
Shareholders' funds: Contributions by stockholders, accumulated earnings recognized in the income statement and the equity components of compound financial instruments.
Short positions: Financial liabilities arising as a result of the final sale of financial assets acquired under repurchase agreements or received on loan.
Significant increase in credit risk: In order to determine whether there has been a significant increase in credit risk for lifetime expected losses recognition, the Group has developed a two-prong approach:
– Quantitative criterion: based on comparing the current expected probability of default over the life of the transaction with the original adjusted expected probability of default. The thresholds used for considering a significant increase in risk take into account special cases according to geographic areas and portfolios.
– Qualitative criterion: most indicators for detecting significant risk increase are included in the Group's systems through rating/scoring systems or macroeconomic scenarios, so quantitative analysis covers the majority of circumstances.The Group will use additional qualitative criteria when it considers it necessary to include circumstances that are not reflected in the rating/score systems or macroeconomic scenarios used.
Significant influence Is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control of those policies. If an entity holds, directly or indirectly (i.e. through subsidiaries), 20 per cent or more of the voting power of the investee, it is presumed that the entity has significant influence, unless it can be clearly demonstrated that this is not the case. Conversely, if the entity holds, directly or indirectly (i.e. through subsidiaries), less than 20 per cent of the voting power of the investee, it is presumed that the entity does not have significant influence, unless such influence can be clearly demonstrated. A substantial or majority ownership by another investor does not necessarily preclude an entity from having significant influence. The existence of significant influence by an entity is usually evidenced in one or more of the following ways:
a. representation on the board of directors or equivalent governing body of the investee;
b) participation in policy-making processes, including participation in decisions about dividends or other distributions;
b. material transactions between the entity and its investee;
c. interchange of managerial personnel; or
d. provision of essential technical information.
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
Solely Payments of Principle and Interest (SPPI)
The assessment as to how an asset shall be classified is made on the basis of both the business model for managing the financial asset and the contractual cash flow characteristic of the financial asset (SPPI Criterion). To determine whether a financial asset shall be classified as measured at amortized cost or FVOCI, a Group assesses (apart from the business model) whether the cash flows from the financial asset represent, on specified dates, solely payments of principal and interest on the principal amount outstanding (SPPI).
Stages
IFRS 9 classifies financial instruments into three categories, which depend on the evolution of their credit risk from the moment of initial recognition. The first category includes the transactions when they are initially recognized - without significant increase in credit risk (stage 1); the second comprises the operations for which a significant increase in credit risk has been identified since its initial recognition - significant increase in credit risk (stage 2) and the third one, the impaired operations Impaired (s tage 3). The transfer logic is defined in a symmetrical way, whenever the condition that triggered a transfer to stage 2 is no longer met, the exposure will be transferred to stage 1. In the case of forbearances transferred to stage 2, as long as the loan is flagged as forbearance it will keep its status as stage 2. However, when the loan is not flagged as forbearance it will be transferred back to stage 1.
Statements of cash flows
The indirect method has been used for the preparation of the statement of cash flows. This method starts from the entity’s profit and adjusts its amount for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments, and items of income or expense associated with cash flows classified as investment or finance. As well as cash, short-term, highly liquid investments subject to a low risk of changes in value, such as cash and deposits in central banks, are classified as cash and cash equivalents. When preparing these financial statements the following definitions have been used:
* Cash flows: Inflows and outflows of cash and cash equivalents.
* Operating activities: The typical activities of credit institutions and other activities that cannot be classified as investment or financing activities.
* Investing activities: The acquisition, sale or other disposal of long-term assets and other investments not included in cash and cash equivalents or in operating activities.
* Financing activities: Activities that result in changes in the size and composition of the Group’s equity and of liabilities that do not form part of operating activities.
Statements of changes in equity
The statements of changes in equity reflect all the movements generated in each year in each of the headings of the equity, including those from transactions undertaken with shareholders when they act as such, and those due to changes in accounting criteria or corrections of errors, if any. The applicable regulations establish that certain categories of assets and liabilities are recognized at their fair value with a charge to equity. These charges, known as “Valuation adjustments” (see Note 31), are included in the Group’s total equity net of tax effect, which has been recognized as deferred tax assets or liabilities, as appropriate.
Statements of recognized income and expense
The statement of recognized income and expenses reflect the income and expenses generated in each fiscal year, distinguishing between those recognized in the profit and loss accounts and the “Other recognized income and expenses”; which are recorded directly in the equity. The “Other recognized income and expenses” includes the variations that have occurred in the period in “accumulated other comprehensive income”, detailed by concepts. The sum of the variations recorded in the “accumulated other comprehensive income” caption of the equity and the profit for the year represents the “Total income and expenses”.
Structured credit products
Special financial instrument backed by other instruments building a subordination structure.
Structured Entities
A structured entity is an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when any voting rights relate to administrative tasks only and the relevant activities are directed by means of contractual arrangements. A structured entity often has some or all of the following features or attributes:
a. restricted activities.
b. a narrow and well-defined objective, such as to effect a tax-efficient lease, carry out research and development activities, provide a source of capital or funding to an entity or provide investment opportunities for investors and passing on risks and rewards associated with the assets of the structured entity to investors.
c. insufficient equity to permit the structured entity to finance its activities without subordinated financial support.
d. financing in the form of multiple contractually linked instruments to investors that create concentrations of credit or other risks (tranches).
Subordinated liabilities
Financing received, regardless of its instrumentation, which ranks after the common creditors in the event of a liquidation.
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
Subsidiaries
Companies over which the Group exercises control. An entity is presumed to have control over another when it possesses the right to oversee its financial and operational policies, through a legal, statutory or contractual procedure, in order to obtain benefits from its economic activities. Control is presumed to exist when the parent owns, directly or indirectly through subsidiaries, more than one half of an entity's voting power, unless, exceptionally, it can be clearly demonstrated that ownership of more than one half of an entity's voting rights does not constitute control of it. Control also exists when the parent owns half or less of the voting power of an entity when there is:
a. an agreement that gives the parent the right to control the votes of other shareholders;
b. power to govern the financial and operating policies of the entity under a statute or an agreement; power to appoint or remove the majority of the members of the board of directors or equivalent governing body and control of the entity is by that board or body;
c. power to cast the majority of votes at meetings of the board of directors or equivalent governing body and control of the entity is by that board or body.
Tangible book value
Tangible Book Value represents the tangible equity's value for the shareholders as it does not include the intangible assets and the minority interests (non-controlling interests). It is calculated by discounting intangible assets, that is, goodwill and the rest of consolidated intangibles recorded under the public balance sheet (goodwill and intangible assets of companies accounted for by the equity method or companies classified as non-current assets for sale are not subtracted). It is also shown as ex-dividends.
Tax liabilities
All tax related liabilities except for provisions for taxes.
Territorial bonds
Financial assets or fixed asset security issued with the guarantee of portfolio loans of the public sector of the issuing entity.
Tier 1 Capital
Mainly includes: Common stock, parent company reserves, reserves in companies, non-controlling interests, deductions and others and attributed net income.
Tier 2 Capital
Mainly includes: Subordinated, preferred shares and non- controlling interests.
Unit-link
This is life insurance in which the policyholder assumes the risk. In these policies, the funds for the technical insurance provisions are invested in the name of and on behalf of the policyholder in shares of Collective Investment Institutions and other financial assets chosen by the policyholder, who bears the investment risk.# Value at Risk (VaR)
Value at Risk (VaR) is the basic variable for measuring and controlling the Group’s market risk. This risk metric estimates the maximum loss that may occur in a portfolio’s market positions for a particular time horizon and given confidence level.
VaR figures are estimated following two methodologies:
a. VaR without smoothing, which awards equal weight to the daily information for the immediately preceding last two years. This is currently the official methodology for measuring market risks vis-à-vis limits compliance of the risk.
b. VaR with smoothing, which weighs more recent market information more heavily. This is a metric which supplements the previous one.
c. VaR with smoothing adapts itself more swiftly to the changes in financial market conditions, whereas VaR without smoothing is, in general, a more stable metric that will tend to exceed VaR with smoothing when the markets show less volatile trends, while it will tend to be lower when they present upturns in uncertainty.
This is one of the three measurement models for the valuation of insurance and reinsurance contracts. Applies to those insurance contracts in which the requirements established by IFRS 17 par.B101 are met: fully identified underlying assets, significant participation of the policyholder in the profitability of the underlying assets and that the payment of future benefits is significantly related to the value of the underlying assets.
Watch List is defined as such risk that, derived from an individualized credit assessment, involves a significant increase in credit risk from the moment of origination, due to economic or financial difficulties or because it has suffered, or is estimated to suffer, adverse situations in its environment, without meeting the criteria for its classification as non performing.
When the recovery of any recognized amount is considered to be remote, this amount is removed from the balance sheet, without prejudice to any actions taken by the entities in order in order to collect the amount until their rights extinguish in full through expiry, forgiveness or for other reasons.
Risks arising from changes in the slope and the shape of the yield curve.
250
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails
Contents
Annual Corporate Governance Report 342
Annual Report on Directors' Remuneration 343
The figures in this BBVA Group Consolidated Management Report have been rounded. Therefore, it is possible that the amounts that appear in certain tables are not the exact arithmetic sum of the figures that precede them.
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
BBVA is a global financial group with a customer-centric vision, currently serving more than 71 millions active customers and having more than 121,000 employees. BBVA operates in more than 25 countries, has a leading position in the Spanish market, is the largest financial institution in Mexico and boasts leading franchises in South America and Turkey. It also has an important investment, transactional and capital markets banking business in the USA.
(1) Relative Product Value (RPV) as an indicator of the economic representation of the units sold.
| Gross income | Total assets | |
|---|---|---|
2
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
⁽¹⁾ Excludes the Corporate Center.
| (1) | (1) |
|---|---|
(1) Market share of loans as of October 2023 (Colombia), November 2023 (Spain, Mexico and Peru) and December 2023 (Turkey). Ranking considering main competitors in each country. Turkey only considering private banks.
The BBVA Group has always placed the customer at the center of its activity, as reflected in its Purpose: 'Bringing the age of opportunity to everyone':
In 2023, BBVA has made significant progress in executing its strategy while continuing to lead the transformation of the banking sector. All this has allowed BBVA to continue making progress in creating opportunities for customers, employees, shareholders, and society at large:
3
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
1 Using a more restrictive criterion on this ratio (limiting the LCRs of all BBVA, S.A.’s subsidiaries to 100%).
2 Includes €16 cents (gross) in October 2023 already paid, and €39 cents (gross) in April 2024 (pending approval from the governing bodies), and the Share Buyback Program for an amount of €781 million, equivalent to €13 cents/share (pending approval from the governing bodies and subject to mandatory regulatory approval).
BBVA's good performance in financial indicators contributes to generating greater returns for society, families, and businesses as well as own employees:
Ultimately, these results have allowed BBVA to advance in its strategic objectives and in its ambition to be a larger scale and more profitable bank, a differential bank for our customers with a unique value proposition, and to continue to lead in efficiency.
4
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.# BBVA Group strategy
The current environment continues to be marked by uncertainty with significant repercussions on geopolitics and the global economy. The Russia-Ukraine war, the Israeli-Palestinian conflict and increasing polarization between blocs are slowing economic growth and increasing risk aversion. The fight against inflation through the tightening of monetary policies is also not helping to boost economic activity in general, reducing credit demand and putting pressure on risk indicators.
The uncertainty of the short-term environment has in no way slowed down the consolidation of the long-term global trends on which BBVA´s strategy is based and which play a critical role in the transformation of the economy: digitalization, innovation and sustainability, both from a decarbonization and inclusive growth perspective:
BBVA's strategy encompasses these trends that are transforming the world. A strategy that revolves around a single Purpose: “To make the opportunities of this new era available to everyone”, always with the customer at the center of the BBVA Group's activity. Likewise, the Group is based on solid values: the customer comes first, we think big and we are a single team.
BBVA's values, and their associated behaviors, are integrated into the key models and levers that promote the Group's transformation, as well as in the global processes of people management: from the selection of new employees, role assignment processes, evaluation, people development and training to incentives for meeting annual objectives. These values, along with the Purpose and the strategic priorities, guide all decisions and are in the DNA of all the people who form part of the BBVA Group.
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
Guided by its Purpose and values, BBVA's strategy is structured around six strategic priorities:
During 2023, BBVA has made considerable progress in the execution of the strategy:
BBVA's Purpose is closely linked to having a positive impact on the lives of its customers. For this reason, BBVA has been developing functionalities, experiences and tools for years to accompany customers in their daily lives thanks to the use of new technologies, the responsible use of data and the solid experience of its human team.
BBVA wants customers to be aware of their income and expenses, classified by categories, so that they can set spending limits and track them, even anticipating information about next movements. Likewise, BBVA helps customers set savings goals and facilitates automatic rules to meet these objectives. In this way, the goal is to turn savings into a habit.
BBVA also offers updated information on your debt capacity, the maximum level allowed and the current status of your debt. In this way, customers can know what is the responsible and sustainable debt limit they can assume.
In short, BBVA helps customers plan to meet their goals and live with peace of mind throughout all stages of their lives through comprehensive advice and knowledge that allows for better wealth management.
The Group is already seeing the success of the different initiatives that seek to help improve the financial health of customers:
For more information about BBVA's customer strategy, see section “2.3.2 Customers” of this report.
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
Sustainability for BBVA is "helping our customers in the transition to a sustainable future" by promoting environmental protection, economic growth and social development. BBVA contributes to various SDGs through: the development of its business generating positive impact thanks to the multiplier effect of banking, the direct impact of its activity, as well as through its investment in the community.
Climate change requires the decarbonization of the economy, a fact that impacts all industries and the way in which customers move, consume or condition their homes, requiring significant investments that will last for decades to come. Additionally, climate change and human action are stressing natural capital (water, crops, raw materials...), making it increasingly relevant for clients to ensure the availability and continuous quality of essential resources for the production and provision of services.
Finally, there are still great inequalities in the world, which may be increased by the effects of the economic transformation implied by the efforts of decarbonization or the destruction of natural capital. BBVA can play a fundamental role in the development of inclusive growth through the banking penetration of the population and financial education.
BBVA's sustainability strategy has a roadmap with two clear objectives:
BBVA's leadership in the area of sustainability is reflected in the fact that, for the fourth consecutive year, it has obtained the best score in the Dow Jones Sustainability Index 2023 in the category of banks in the European region and the third best score globally (see section "2.6.4 ESG analysts and ratings"). BBVA's progress on its ESG strategy and objectives is detailed in section "2.1.1 ESG strategy and objectives" of this report.
BBVA seeks to grow by positioning itself wherever customers are, both through its own channels and through channels and agreements with third parties. All this without losing focus on profitable growth, focusing on the most relevant product verticals and value segments. Likewise, BBVA continues to make progress in its commitment to growth in new business models with a medium and long-term growth horizon. The main initiatives in customer acquisition (own and third-party channels, value verticals and innovation) and their progress in 2023 are:
During fiscal year 2023, the Group attracted 11.1 million new customers through its own channels. As a consequence of the improvement in digital capabilities, customer acquisition through these channels has continued to increase steadily in recent years and, in 2023, it broke another new historical record, reaching more than 7.2 million, which represents 65% of total new customers (+211% since 2019). For their part, mobile customers have grown by 84% since December 2019, reaching 53 million, 74% of the total. Digital sales already represent 79% of the total units sold. The strong growth in customers is accompanied by a high level of satisfaction, with an NPS in the top 3 in all geographies where BBVA is present.
7 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
3 It considers as a sustainable business channel any mobilization of financial flows, cumulatively, in relation to activities, customers or products considered sustainable or that promote sustainability in accordance with both internal and market standards, existing regulations and best practices. For more information, see section “2.1.3 Sustainability in business development - Channeling sustainable business”.
Customer growth and satisfaction translates into a greater volume of business thanks to greater cross-selling and therefore a strengthening of the relationship with customers. For example, in Spain, 73% of new customers become Target Customers 4 within six months. BBVA is also committed to attracting customers through third-party channels through Open Banking and integrated finance to facilitate a complete experience. To this end, BBVA has expanded the offering of financial services through Application Programming Interfaces (APIs - Application Program Interface) in Spain, Mexico and Peru. As an example, in 2023, 42 alliances with third parties via APIs have already been made in Spain.
In pursuit of profitable growth, BBVA focuses on acquiring customers in high-value segments and in relevant product verticals and divisions to drive the Group's results: small and medium-sized enterprises (SMEs), international corporate banking, payments, insurance, private banking and asset management, and the Group's Corporate & Investment Banking area. The main developments are described below:
Revenue generated in the SME segment has contributed more than 4 billion euros to the BBVA Group's gross margin (+42% compared to 2022) as a result of a compound annual growth rate (CAGR) of 15% over the last 4 years. All this, together with a growth of 234 thousand customers in the year, confirms the position of SMEs as a key segment. The Group is working on developing a global value proposition to improve the customer experience, focusing on the digitalization of services and facilitating online operations. Efforts have continued to drive risk models, as well as remote and digital capabilities. All this with a tangible impact:
The international Corporate Banking business continues to grow steadily, with a 50% increase in 2023 in the gross margin generated by companies and corporations outside their geography. This growth is the result of the BBVA Group's management model for this business, with specialized managers assigned to each of the companies, offering them high quality service and speeding up their entry into new markets. On the other hand, the BBVA Pivot ecosystem for managing the treasury of these companies and large corporations continues with strong growth in customers of 23% in the year. Companies that use these services simplify their treasury management and also leverage BBVA's footprint, generating synergies between businesses in all countries, and therefore creating a great connection with BBVA. It is one of the greatest levers of growth as demonstrated through different indicators: BBVA Pivot's gross margin and commissions for treasury management have grown by 60% and 7% respectively in the last year. These figures account 35% of the total fees from international Corporate & Investment Banking and Corporate Banking customers.
Payments is a strategic business for BBVA due to its contribution to revenue growth, as it is a key lever for linking and developing the financial relationship with customers, both for merchants through the acquiring business and for individuals through cards and other payment solutions. In 2023, BBVA maintained its strong growth, increasing revenues by 20% compared to the previous year and driving the launch of new payment solutions. With the acquiring business, BBVA seeks to be the partner of reference for merchants, with in-store payment solutions and also in digital/electronic commerce. Active commerce have grown by 11% and revenues by 25%. The following releases in 2023 are worth highlighting:
In the retail segment, BBVA continues to advance in its Aqua card strategy, the new generation of cards without printed numbers and with dynamic CVV that offer a differential experience and greater security compared to traditional cards. The number of Aqua cards has now reached 34.6 million, significantly reducing e-commerce fraud. BBVA also continues to lead the adoption of mobile payments with the launch of Google Pay in Argentina and Peru and soon in Mexico (Apple Pay was launched last year).
8 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
4 Target customers are those customers in which the Group wants to grow and retain, considering them to be of high value, either due to their level of assets, liabilities or transactionality with BBVA.
In addition, BBVA remains committed to the development of new payment channels that facilitate the digitization and reduction of cash payments, participating in various existing industry solutions in all its markets (Bizum in Spain, Dimo in Mexico, Plin in Peru, Modo in Argentina...), integrating new use cases for sending money between people, and QR payments in commerce, and providing its customers with the best payment experience in the app.
Insurance is a key product for providing comprehensive advice to customers and having an impact on their financial health. The Group is developing technical and service capabilities that allow it not only to serve customers better and better through innovation, but also to achieve sustained growth in premiums and net attributable profit. Proof of this is the deployment of advanced data analytics models that enable it to provide its customers with offers tailored to their specific needs at all times through its various channels. All in all, the estimated premium volume has grown by 26% in 2023 compared to 2022.
In the non-life line, in 2023, the Group continued to implement its strategic alliances with third parties in different countries (Allianz and Sanitas in Spain, BUPA in Mexico and Turkey, etc.). We have also launched modern and innovative servicing products and solutions in line with trends and best practices in the insurance industry, such as auto insurance with claims reporting and payment adjustment through digital channels, in SMEs offering protection against technological fraud in Spain, in health insurance in Mexico and Turkey with servicing through digital channels, as well as new home, auto and health insurance in Colombia, Peru and Argentina. On the other hand, new functionalities have been launched in the mobile application, such as "SOS", which provides immediate assistance for Auto and Home insurance claims, or claims appraisal solutions through the BBVA mobile application, which has led to a significant improvement in service times and satisfaction rates. Non-life premiums increased by 21.5% in the year.
In the life insurance business, the deployment and development of modular solutions adapted to customer needs continued in all geographic areas and the launch of new life and life savings products in the main markets, especially in Spain and Mexico.Life business premiums increased by 30.7% year-on-year.
5 In 2023, BBVA continued to strengthen and extend its model of personalized advice to Private Banking customers, mainly through three pillars:
1.## Development of an increasingly global experience.
Greater access to Private Banking solutions has been promoted through international platforms with a common advisory model, highlighting the case of Spain for international customers, and the development of a Private Banking unit in the United States to be launched in 2024.
For example, a new model for the Wealthy segment in Spain was rolled out in 2023, growing by 20 bankers, with a deeper and more personalized value offering and strengthening digital capabilities such as deferred signature for legal entities.
Likewise, Peru and Colombia have stood out in 2023 for the strengthening of their teams, value offerings and business models, in order to incorporate the highest-value customers of affluent banking into the Private Banking model. Thanks to these initiatives, the number of customers has grown by 37,241 during 2023 and assets under management by 11,153 million euros.
With regard to Asset Management, 2023 was a year of strong growth in activity in most countries, thanks to the good performance of the markets and commercial dynamism with customers, driven mainly by fixed-income solutions in a context of higher interest rates. Also, in the commitment to sustainability, sustainability factors have been progressively incorporated into the investment and risk processes of most of the Group's assets under management, and progress continues to be made towards decarbonization objectives following the Group's membership of Net Zero Asset Managers.
However, gross fees generated by Private Banking and Asset Management amounted to 1,550 million euros in 2023 (up 8.1% year- on-year).
During 2023, CIB has been one of the group's main growth vectors, developing its strategy through three fundamental pillars:
9 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail. 5 Private Banking and Asset Management quantitative data as of November 30, 2023, except December 2023 customer data.
Thus, by the end of 2023, CIB accounted for approximately 16% of the Group's total gross margin, increasing revenues by 35% in the last year.
One example of the importance of innovation in the profitable growth strategy is through purely digital banks to grow in new and attractive markets:
It is also worth highlighting the great advances of BBVA Spark in 2023, which BBVA launched in 2022 to be the bank for innovative companies with high growth rates that are defining the future, with a scalable, innovative and technology-based business model. BBVA Spark is already present in four geographies after expanding from Spain and Mexico to Colombia and Argentina in 2023. It has more than 800 customers, has facilitated more than 250 million euros in financing and has accumulated at the end of the year, 675 million euros committed in private equity funds:
BBVA is committed to providing the best customer experience with simple and automated processes while maintaining our focus on robust risk management and optimal capital allocation. BBVA continues to transform its relationship model to adapt to the change in customer behavior, with the aim of improving service, being more efficient and productive. To do this, it facilitates access to its products and services with simple processes. The role of the commercial network is increasingly focused on operations with greater added value for the customer, redirecting interactions with lower added value to self-service channels, which allows reducing unit costs and achieving greater productivity.
BBVA has reduced the number of branches by 21% in the last four years, 46% in Spain. The cost of service and sales per Target Customer has also been reduced by 12% annually over the last 3 years while productivity continues to improve with a 20% increase in sales in terms of value per employee.
The transformation of the relationship model is accompanied by a change in the operating model, which focuses on process reengineering, seeking greater automation and improved productivity, as well as the speed of delivery of new products and functionalities to the market. BBVA leverages its global reach to develop more efficient products and solutions that provide answers to customer needs. To this end, the Group has industrialized and homogenized the construction of the digital channel software in all the banks that are part of BBVA, allowing a solution created in one country to be quickly exported to the rest, which has significantly improved time-to-market. - market, the quality of the solutions, the efficiency (it is built once for all countries) and allows us to provide our customers with the same capabilities and experience in all the geographies in which the entity operates.
Two examples are the mobile application for retail customers in which 81% of the programming code has been reused or the mobile application for companies, which has been developed in less than a year reusing 80% of the components. In fact, it began by launching in Spain and the same leading app is now available in Mexico, Peru, Argentina, Colombia and Uruguay.
10 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
On the other hand, the Group continues with its commitment to the use of more efficient and scalable technologies. This focus on operational excellence has led the Group to consolidate for another year its leadership position in terms of efficiency ratio, with 41.7% at the end of 2023 (15 basis points better than in 2022, in constant terms) while the average of European competitors was 52.2% at the end of September 2023 (latest data available).
Optimal capital allocation is another critical component of operational excellence. To this end, BBVA prioritizes the allocation of capital to the most profitable business opportunities. In addition, the Bank has a model that links a dynamic pricing system with the allocation of capital per individual transaction.# 5. The best and most committed team
The team is a key factor for success in the strategy. A diverse team, with a distinctive culture, guided by the Purpose and values of BBVA and driven by a talent development model that puts the employee at the center, based on trust, empowerment and transparency. BBVA has a value proposition for employees around three pillars: Bank, Team and People, which in 2023 it has continued to promote through high-value initiatives for employees, which have allowed for continued positive progress in different areas of management of people. As an organization, the goal is to have the best and most committed team.
BBVA's people management strategy is based on three key principles:
In 2023, the Group has achieved an excellent result in the employee engagement survey (Gallup), exceeding the objective established for 2024 and improving the result for 2022 (4.43 and 76th percentile in 2023 compared to 4.37 and 72nd percentile in 2022).
BBVA remains firm in its commitment to inclusion and diversity, as demonstrated by the positive evolution of the percentage of women in management positions (34.7% as of December 2023 compared to 33.5% in 2022), aligned with the 2024 goal of 35%. Specific diversity initiatives have also been launched that have allowed the number of people with disabilities hired in the Group to increase by 38%.
During 2023, work has continued on strategic training on sustainability issues, to ensure that they have the necessary skills and knowledge for the proper execution of BBVA's strategy. The specific training programs for different groups of employees stand out with a total of more than 53,500 professionals having participated in training sessions on topics related to sustainability (see section “2.3.3 Employees”).
Data and technology are clear accelerators of strategy. The commitment to the development of advanced data analysis capabilities, such as artificial intelligence, together with secure and reliable technology, makes it possible to create differential solutions that help to create competitive advantages. The responsible use of data and new technologies also makes it possible to generate increasingly global processes that can be used in different geographies and are easily scalable, reducing the unit cost of processing.
BBVA is a "data driven" company in which the quality and advanced integration of data, together with Artificial Intelligence, are key accelerators to achieve the differential positive impact on customers' lives that summarizes our Purpose. The BBVA Group has a team of more than 5,400 data scientists, specialists and engineers, dedicated to developing this differential value proposition.
BBVA's data strategy is based on the following pillars:
Technology is a key element to enable the transformation strategy. The objective is to create differential solutions for customers while executing operations in the most efficient and safe way possible, using the most advanced technological capabilities available. New technologies allow to generate global solutions that can be replicated in the franchises, which helps BBVA scale better and be a more efficient bank.
During 2023, we have continued investing and working on the resilience of the infrastructure with a significant reduction in the number of relevant incidents, which has resulted in better service levels for customers, while continuing to work on maintaining a facility in operation with high availability to guarantee business continuity in the event of potential unavailability events.
In reference to the protection of the Group and its customers, BBVA has created the new Financial Crime Prevention unit with the aim of increasing synergies between the Group's areas in charge of fraud prevention and money laundering. Likewise, the Group wants to keep the level of relevant security incidents at a minimum and continue to reduce fraud per active customer.
Likewise, throughout 2023, the banking platform has continued to evolve and Core Banking has continued to be transformed to be able to build banking functionality more quickly and efficiently, and accelerate the technological transformation of digital channels globally to guarantee the best customer experience. In addition, the data platform is being built in the public cloud, which will allow BBVA to increase the capacity to generate advanced analytics using the most modern technologies and with higher levels of operational resilience.
At the end of 2023, transactions processed in low-cost 6 technologies already represent more than 58% of the total transactionality of Spain, Mexico, Peru and Colombia, which is allowing BBVA to keep our processing costs stable in an environment in which transactionality is has doubled in the last 4 years.
The software development function has also continued to transform to be more productive, with initiatives such as 'ONE', which seeks to reinvent the way in which software is developed, making more than 18,000 software engineers work seamlessly. more collaborative and coordinated, sharing the best practices of the bank and the industry to create the most appropriate solutions for the needs of customers.
Thanks to this commitment to cutting-edge technologies, BBVA continues to be a reference within the industry in technological capabilities, always adapted to the needs of its customers.
In order to monitor progress in the execution of strategic priorities, a set of strategic metrics or Key Performance Indicators (KPIs) have been defined. These are both financial indicators linked, for example, to net attributable profit, tangible book value per share (TBV per share) or the efficiency ratio, and non-financial indicators, such as those related to customer satisfaction (NPS), growth in the number of target customers or the sustainable channeling of business. These strategic KPIs are integrated into the Group's various management processes, such as the planning and budgeting process, in the prioritization of resources and investments, as well as for the purposes of the variable compensation system.
6 Considering only the transactions processed in our Global Data Centers: 66% in Spain, 67% in Peru, 56% in Mexico, 54% in Colombia, and 18% in Argentina. Transactions in Turkey are processed locally, 44% of which with low-cost technologies.
*Note: For the purposes of the Goal 2025, channeling is considered to be any mobilization of funds, cumulatively, towards activities, clients or products considered to be sustainable or promoting sustainability in accordance with internal standards inspired by existing regulations, market standards such as the Green Bond Principles, the Social Bond Principles and the Sustainability Linked Bond Principles of the International Capital Markets Association, as well as the Green Loan Principles, Social Loan Principles and the Sustainability Linked Loan Principles of the Loan Market Association, existing regulations, and best market practices. The foregoing is understood without prejudice to the fact that said mobilization, both at an initial stage or at a later time, may not be registered on the balance sheet. To determine the funds channeled to sustainable business, internal criteria is used based on both internal and external information, either from public sources, provided by customers or by a third party (mainly data providers and independent experts). Detailed information on the business areas is broken down in section “3.2 Business Areas” of chapter “3. Financial information".# Non-financial information report
In accordance with the provisions of the Commercial Code and the Capital Companies Law, this consolidated “Non-financial information report” includes, among other matters, the information needed to understand the performance, results, and position of the Group 7 ; and the impact of its activity on environmental and social issues, respect for human rights, and the fight against corruption and bribery matters, as well as employee matters.
For the publication of the non-financial performance key indicators the BBVA Group has followed, as an international information framework, the Global Reporting Initiative (hereinafter, GRI) guidelines, in accordance with the latest version updated in December 2021, as well as on European Commission Guidelines on non-financial reporting, the regulation relating to the European Taxonomy (Regulation (EU) 2020/852 and the Commission Delegated Regulations 2021/2139 and 2021/2178 as amended by the Delegated Regulations (EU) 2022/1214, 2023/2485 and 2023/2486).
To facilitate the location of the indicators, in section "2.5 Tables of Contents", the tables related to compliance with the requirements of Law 11/2018 and the GRIs are included, with reference to each of the sections of this Report of non-financial information where the information is found.
The information included in the consolidated “Non-financial information report” is verified by Ernst & Young Auditores, S.L., in its capacity as independent provider of verification services, with the scope indicated in its Verification Report.
It should be noted that this consolidated "Non-financial information report" includes certain information and metrics that are aligned with those required by other initiatives or international standards with which BBVA Group shows its support for transparency in terms of sustainability:
The alignment with these initiatives or international standards is detailed in the section "2.5.5 Alignment of BBVA Group's non- financial information to WEF-IBC and SASB standards” of the chapter “2.5 Tables of Contents”.
15 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
7 In those cases in which the perimeter of entities in the corresponding disclosure does not coincide with the total entities of BBVA Group, the perimeter used will be explicitly indicated. In general, all the breakdowns include the main countries where the Group operates (Spain, Mexico, Turkey, Colombia, Peru and Argentina).
Channeling sustainable business
Sustainability is governed by the principle of ensuring the needs of the present without compromising the needs of future generations, always without sacrificing environmental protection, economic growth and social development. In accordance with its General Sustainability Policy, BBVA faces the challenge of "sustainable development" (or "sustainability" in general) from a holistic perspective, taking into account environmental, social and governance (hereinafter "ESG") aspects. For more detailed description of the General Sustainability Policy, see section “2.1.6 Governance model.
BBVA aims to generate a positive impact through the activities of its customers, its own activity, as well as its relationship and support to society, to make its Purpose of "Making the opportunities of this new era available to all" and deliver on its strategic priority "Helping our customers in the transition to a sustainable future".
Environmental
The fight against climate change represents one of the greatest disruptions in history, with extraordinary economic consequences, to which all actors in our environment (governments, regulators, companies, consumers and society in general) must adapt. BBVA understands the environmental dimension of sustainability as the management of the impacts, risks and opportunities linked to the fight against climate change, the transition to a low-carbon economy and the protection and regeneration of natural capital.
Social
Companies are key players in the development and progress of societies. BBVA understands the social dimension of sustainability as the management of impacts, risks and opportunities in relation to its customers, employees, suppliers, communities affected by its activity and society in general.
Governance
Companies must conduct their business in strict compliance with the laws in force at all times, in a responsible manner and in accordance with strict canons of ethical behavior. BBVA understands the governance dimension of sustainability to be linked to business conduct, policies and regulatory and control frameworks on sustainability.
16 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
BBVA has defined sustainability as one of its six strategic priorities, focusing on the fight against climate change and the protection of natural capital, and inclusive growth. To make the Purpose of “Making all the opportunities of this new era within reach”, BBVA is committed to supporting its customers in the transition towards a more sustainable future.
The world lives in an era of unprecedented change and sustainability is a great short and long-term opportunity. Decarbonization requires a structural technological transformation and progressive changes in demand that affects all industries, with global and immediate impact, and is entailing an unprecedented investment cycle. It is estimated that global investments of 275 trillion US dollars will be necessary until 2050, equivalent to an annual investment of 8% of world GDP 8. Banks have a key role in financing this transformation and channeling funds towards decarbonization technologies that deliver long-term growth. Additionally, there are still large inequalities in the world, which may be increased by the effect of climate change and by efforts to achieve decarbonization. Banks can play a fundamental role in the development of inclusive growth through financial inclusion, infrastructure financing and the generation of a business network.
Being a pioneer provides a competitive advantage
Being a pioneer provides a competitive advantage because it allows capturing a greater share of incremental business by having expert positioning and knowledge and developing differential management of the risks associated with the sustainability. Capturing this opportunity requires years to carry out a deep transformation throughout the value chain: strategy, policies and processes, business capabilities and risk management.
Convinced of the importance of being a pioneer, BBVA has placed sustainability at the center of its strategy since 2019 and has made relevant decisions that have accelerated its transformation process:
Sustainability at the center of BBVA's strategy: sustainability objectives
Sustainability is a central aspect of BBVA's strategy. The execution of said strategy rests on the achievement of of the main objectives:
(1) Percentage calculated in terms of the volume of loans in the portfolio, which includes both drawn and undrawn financing (such as Loans, unused Revolving Credit Lines, Guarantees, ECA lines, among others). Data as of December 2023.
Corresponds to high-emission sectors that include oil and gas, power generation, autos, steel, cement and aviation at BBVA Group level. The percentage of the loan portfolio does not include the coal sector for which BBVA has defined a progressive exit plan for 2030 in developed countries and in 2040 globally (in the terms of the Environmental and Social Framework), nor the shipping sector.
Customers who are actively managing their transition are considered to be those classified as “Advanced”, “Robust” or “Moderate” according to internal transition assessment tools such as the Transition Risk Indicator (TRi).# considering its medium-term emissions reduction objectives and levers for the management of said emissions and its committed investments to execute its transition plan.
17 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
8 Source: “The net-zero transition: What it would cost, what it could bring”, McKinsey & Company, 2022
BBVA applies a holistic vision of sustainability that covers the following three dimensions in all the geographies where it operates:
BBVA promotes the creation of new business around sustainability with three priorities:
Additionally, BBVA, through BBVA Asset Management (hereinafter, BBVA AM) and its asset managers in the geographies where they operate, offers sustainable investment solutions for its customers. For more information on the above, see the breakdowns on sustainable products or products that promote sustainability in section “2.1.3 Sustainability in business development”.
It is worth noting that in 2023, 95% of the loan portfolio in sectors with high emissions has a Transition Risk Indicator (hereinafter TRi), of which 80%11 corresponds to customers who progress in their transition and that as of December 31, 2023, more than 68% of the risk team is trained in sustainability 12.
Furthermore, in the established remuneration system, Incentives linked to sustainable business are included for the commercial network and an annual variable remuneration linked to the promotion of sustainable business for all employees. From 2023, long-term variable remuneration is associated with decarbonization objectives for members of the identified group, including executive directors and senior management of BBVA. For more information on the inclusion of non-financial indicators in the calculation of annual variable remuneration, see the “Remuneration” section within the “2.3.3 Employees” section and the Annual Report on Remuneration of BBVA Directors.
In addition to financing the transition through its business, BBVA contributes to the development of new and innovative low-carbon technologies through investment commitments in climate funds focused on decarbonization. These funds invest globally in companies at the forefront of technological and climate innovation, seeking innovative solutions that help decarbonize the planet.
18 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
10 5.87% of the total exposure at BBVA Group level to sectors defined as High Transition Risk, with an exposure to this risk as high or very high (Oil and Gas, Power Generation, Autos, Steel, Cement, Coal mining and Transportation. Data as of 31 December 2023.
11 Percentage calculated in terms of the volume of loans in the portfolio, which includes both drawn and undrawn financing (such as Loans, unused Revolving Credit Lines, Guarantees, ECA lines, among others). Data as of December 2023. Corresponds to high-emission sectors that include oil and gas, power generation, autos, steel, cement and aviation at BBVA Group level. The percentage of the loan portfolio does not include the coal sector for which BBVA has defined a progressive exit plan for 2030 in developed countries and in 2040 globally (in the terms of the Environmental and Social Framework), nor the shipping sector. Customers who are actively managing their transition are considered to be those classified as “Advanced”, “Robust” or “Moderate” according to internal transition assessment tools such as the Transition Risk Indicator (TRi).
considering its medium-term emissions reduction objectives and levers for the management of said emissions and its committed investments to execute its transition plan.
12 For more information on training initiatives in the area of sustainability, see “Training” within the “2.3.3 Employees” section of this report.
Specifically, in 2023, BBVA has made the following investment commitments:
These investment commitments join the commitments made by BBVA in 2022:
BBVA has developed a decarbonization strategy for portfolio alignment and a management model for monitoring decarbonization objectives and capturing business growth potential through:
BBVA recognizes that meeting decarbonization goals also depends on governments, regulators and supervisory bodies, through their public and/or sectoral policies. Collaboration between the financial sector and these actors is key to achieving an effective and lasting shift towards a cleaner and more sustainable economy.
19 This English version is a translation of the original in Spanish for information purposes only.In case of a discrepancy, the Spanish original will prevail.
BBVA carries out a qualitative materiality analysis to identify those environmental, social and governance issues that are significant for the Group and its stakeholders, taking into account in the analysis the double perspective of materiality, which underlies the NFRD and Law 11/2018, as well as in the GRI guide (December 2021 version). BBVA, based on this double perspective on materiality, identifies issues related to its business that could be currently or potentially affected by sustainability issues (“outside-in” perspective also known as “financial materiality”), as well as the way in which its activities could currently or potentially affect society and the environment (“inside-out” perspective also known as “impact materiality”). There are considered material those topics that could have a high probability of generating a significant current or potential effect on both the performance of BBVA and its stakeholders and its broader environment. The results of this analysis are aligned with both the six strategic priorities and BBVA's Purpose and allow the identification and prioritization of BBVA's most significant internal and external issues for adequate monitoring and follow-up. The scope of this analysis includes the main geographic areas in which BBVA operates (Spain, Mexico, Turkey, Argentina, Colombia and Peru) and short, medium and long-term time horizons have been taken into account. The information regarding performance in these material matters and the rest of the matters identified for the BBVA Group is developed in the different chapters of this report.
As a result of this analysis, the issues with the most significant impact for BBVA's stakeholders and for BBVA are those that appear in the following matrix:
(1) Based on qualitative analysis conducted to recognize both the “outside-in” perspective also known as “financial materiality,” as well as the “inside-out” perspective also known as “impact materiality.”
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
The materiality analysis carried out in 2023 had as its starting point the year carried out in 2022 and represents an evolution of it. The most notable material issues in 2023 are the following:
Additionally, the analysis has identified four other issues that do not have the same relevance as the previous ones because it is considered, as a result of the analysis carried out, that they would have a lesser effect on the environment and BBVA's interest groups, or that the effect that the environment and its interest groups could have on BBVA's activity would be more limited:
It should be noted that, with respect to the materiality analysis published in 2022, the number of issues has been reduced to a total of nine, with the issues “Solvency and financial results” and “Corporate governance and adequate management of all risks” being deleted as they are cross-cutting aspects included in each and every one of the issues identified. Additionally, two 2022 customer issues “Simplicity, agility and self-service” and “Financial health and personalized customer advice” have been grouped into a single more holistic matter “Customers: Accessibility of commercial channels and financial health” and the two issues from 2022, related to employees “Commitment to employees” and “Diversity and conciliation” – have been included in a single issue “Employees” that encompasses issues related to measures aimed at properly managing people.
For more details on the sources used, the methodology used, as well as the indicators and objectives of these material matters for BBVA and its stakeholders, see section “2.6.1. Additional information on the materiality analysis” within chapter “2.6 Additional information”.
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
BBVA is promoting the development of sustainable products or that promote sustainability to capture the incremental business it represents, and takes a differentiated approach for each customer segment. These segments include wholesale customers (corporate and institutional), business customers, and retail customers, in addition to the offer of sustainable investment products aimed primarily at retail customers through BBVA AM and its asset managers in the geographies where they operate. The development of products and services is accompanied by constant interaction and dialogue with customers, the banking industry and the public sector, to help integrate sustainability into their financial decisions, identify best practices and take into account the regulatory trends. BBVA increased its 2025 Objective for channeling sustainable business in 2021 and 2022, tripling its initial objective and setting it at 300,000 million euros in the period 2018 - 2025.# Channeling sustainable business
Between 2018 and 2023, BBVA mobilized a total of 205,603 million euros in sustainable business, distributed as follows:
(1) In those cases where it is not feasible or sufficient information is not available to allow an exact distribution between the categories of climate change and inclusive growth, internal estimates are made based on the available information.
(2) Includes the activity of the BBVA Microfinance Foundation (BBVAMF), which is not part of the consolidated Group and which has channeled around 7,700 million euros in the period from 2018 to 2023 to support vulnerable entrepreneurs with microcredits.
(3) Investment products art.8 or 9 under SFDR or similar criteria outside the EU managed, intermediated or marketed by BBVA. includes deposits under the Sustainable Transaction Banking Framework until its replacement by the CIB Sustainable Products Framework (both frameworks published on the bank's website), insurance policies related to energy efficiency and inclusive growth, and electric vehicle autorenting, mainly.
(4) Bonds in which BBVA acts as bookrunner.
(5) It fundamentally includes products whose funds are allocated to activities considered sustainable (in accordance with both internal and market standards, existing regulations and best practices), as well as products linked to sustainability (in accordance with both internal and market and best practices), such as those linked to environmental and/or social indicators.
22
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23
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
(1) In those cases where it is not feasible or sufficient information is not available to allow an exact distribution between the categories of climate change and inclusive growth, internal estimates are made based on the available information.
(2) Includes the activity of the BBVA Microfinance Foundation (BBVAMF), which is not part of the consolidated Group and which has channeled around 1,450 million euros in 2023 to support vulnerable entrepreneurs with microcredits.
(3) It covers more than one area of action, but with the information available it is not possible to make an exact assignment.
(4) It fundamentally includes products whose funds are allocated to activities considered sustainable (in accordance with both internal and market standards, existing regulations and best practices), as well as products linked to sustainability (in accordance with both internal and market and best practices), such as those linked to environmental and/or social.
(5) Bonds in which BBVA acts as bookrunner.
(6) Investment products art.8 or 9 under SFDR or similar criteria outside the EU managed, intermediated or marketed by BBVA. includes deposits under the Sustainable Transaction Banking Framework until its replacement by the CIB Sustainable Products Framework (both frameworks published on the bank's website), insurance policies related to energy efficiency and inclusive growth, and electric vehicle autorenting, mainly.
(7) Includes insurance policies related to energy efficiency and inclusive growth.
For the purposes of the 2025 objective, channeling is considered as any mobilization of financial flows, on a cumulative basis, in relation to activities, customers or products considered sustainable or that promote sustainability primarily in accordance with internal standards inspired by existing regulations, market standards such as the Green Bond Principles, the Social Bond Principles and the Sustainability Linked Bond Principles of the International Capital Markets Association, as well as the Green Loan Principles, Social Loan Principles and Sustainability Linked Loan Principles of the Loan Market Association, existing regulations and best market practices. The foregoing is without prejudice to the fact that such mobilization, both initially and at a later time, may not be recorded in the balance sheet.
To determine the amount of sustainable business channeled, internal criteria are used based on both internal and external information, whether public, provided by customers or by a third party (mainly data providers and independent experts).
To determine the channeling, the following standards are taken into account:
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This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
In addition to internal and market standards and best practices, the existing regulations on the matter are taken into account (highlighting the Taxonomy Regulation 2020/852 and the Disclosure Regulation 2019/2088). Likewise, BBVA considers its customers' activities to comply with internal standards and applicable regulations, supported by external data providers and using company-level certifications of recognized prestige in the market.
The channeling of sustainable business referred to above is a metric that may differ from other metrics of a regulatory nature. In particular, this metric differs from the metrics to be broken down according to the European Taxonomy (Regulation 2020/852, Delegated Regulation 2021/2178, Delegated Regulation 2022/1214, Delegated Regulation 2023/2485 and Delegated Regulation 2023/2486) as well as the information to be disclosed under the implementing technical standards (ITS) on Pillar 3 information relating to environmental, social and governance risks 13. The reasons for these differences derive mainly from the different criteria used in the different metrics. In general, the following stand out:
(i) while channeling includes mobilization of financial flows in relation to activities, customers or products considered sustainable or promoting sustainability in accordance with existing regulations, internal and market standards and best practices, regulatory metrics are constructed based on environmentally sustainable economic activities in accordance with existing regulations;
(ii) while channeling includes mobilization of financial flows that may not be recorded on the balance sheet (e.g., certain transactional banking activity, mutual funds or bonds in which BBVA acts as bookrunner, etc.), regulatory metrics primarily include on-balance sheet exposures 14;
(iii) while the concept of channeling is cumulative (reflects accumulated balances originated since 2018) and includes the total flow mobilized at the time of origination, the regulatory metrics only include the current exposure, mainly on the balance sheet, as of the date on which the information of the exercise in question refers;
(iv) while the concept of channeling includes mobilization of flows that contribute to a purpose of a social nature such as inclusive growth and other environmental objectives, regulatory metrics only consider the contribution to an environmental purpose.
Among the sustainable business mobilization solutions aimed at contributing to the fight against climate change and promoting inclusive growth, the following stand out:
In 2023, the mobilization of sustainable business with wholesale customers amounted to around 61 billion euros, 51 million euros linked to climate change and almost 10 million linked to inclusive growth.# SUSTAINABLE FINANCING AND INVESTMENT
(1) It fundamentally includes products whose funds are allocated to activities considered sustainable (in accordance with both internal and market standards, existing regulations and best practices), as well as products linked to sustainability (in accordance with both internal and market standards and the best practices), such as those linked to environmental and/or social indicators. In 2023, BBVA has continued to be very active in financing sustainable projects, participating in the channeling of 1.63 billion euros (taken from BBVA) of sustainable business in the following main areas: – 1.52 billion euros in projects related to climate change (renewable energy, energy efficiency, sustainable mobility...), – 0.11 billion euros in projects related to inclusive growth (civil infrastructure sector, telecommunications sector as facilitators of access to new technologies, etc.). For example, BBVA has participated in unique operations in transportation infrastructure for the economic development of vulnerable regions, such as the “Vía 40 Express” project in Colombia, which connects Bogotá with the country's main port on the Pacific Ocean, benefiting more than one million people in 13 municipalities and will be an important source of job creation during its construction. In the field of financing and transactional banking activity, 48.28 billion euros have been channeled during the year 2023, 41.60 billion euros related to climate change and 6.68 billion euros linked to inclusive growth. Noteworthy:
25 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
13 Incorporated in Commission Implementing Regulation (EU) 2022/2453 of 30 November 2022 amending the technical implementing rules laid down in Implementing Regulation (EU) 2021/637.
14 According to the regulatory definition (FINREP) of exposure: outstanding risk on loans and advances, as well as bonds in the investment portfolio.
– 15.12 billion euros correspond to the financing and transactional banking activity linked to the performance of environmental and/or social indicators: 14.58 billion euros linked to climate change and 0.54 billion euros to inclusive growth. In this way, BBVA promotes the environmental and social behavior of companies, applying a price bonus for the achievement of established objectives in relation to environmental and/or social indicators, such as the reduction of scope 1 emissions, 2 and 3, the efficient use of resources such as water or waste, the increase in women occupying management positions or the reduction of workplace accidents. Of these 15.12 billion euros, 1.55 billion euros correspond to confirming linked to sustainability based on an evaluation and classification of suppliers based on sustainability criteria.
– 33.16 billion euros correspond to financing and finalist transactional banking activity: 26.48 billion euros related to climate change, where areas such as energy or mobility stand out, and 6.14 billion of millions related to inclusive growth, highlighting areas of actions like financial and social inclusion or infrastructure. In its transition towards sustainability (adaptation to climate change, mitigation or contribution to inclusive growth), it has also acted as bookrunner in issuances of green bonds (5.90 billion euros), social bonds (1.72 billion euros), and sustainable bonds -with both a green and social component- (2.24 billion euros) and bonds linked to environmental and/or social indicators (1.18 billion euros) from customers in the United States, Mexico, South America and Europe, including Spain. The total volume disintermediated by BBVA during 2023 amounts to 11 billion euros, where activity with European customers stands out. BBVA continues to support the development of the green and social bond market in Latin America and Europe, leading inaugural bond issues in these regions.
During 2023, BBVA's wholesale customer area has channeled around 40 billion euros, highlighting solutions that help drive improvement for its customers in aspects related to sustainability, focusing on three strategic lines:
– Confirming linked to sustainability, based on an evaluation and classification service of suppliers of corporate customers based on sustainability criteria. This allows them to offer better discount prices on their invoices to those who score higher in relation to those criteria. This solution also can help corporate customers reducing their scope 3 emissions.
– Financing of new clean technologies, focusing on the development of specialized knowledge to finance clean technologies such as batteries (for energy transportation or storage), green hydrogen, biofuels, with the aim of accompanying customers in the transformation of their production models.
– Promotion of the financing of renewable energy projects, especially solar and wind, with a special focus on the United States.
In 2023, the contribution of the Corporate and Business Banking (CBB) business area has been particularly relevant, by channeling approximately 20,9 billion euros, which represents 30% of the annual total, compared to the 21% it represented during 2022. This notable contribution has been achieved thanks to the support of three strategic levers:
Using advanced data analytics to develop consultation tools, such as the carbon footprint calculator for customers. This has allowed us to establish a richer strategic dialogue with customers, adopting a commercial approach focused on specific sectors of activity. In this context, the decarbonization strategy and sectoral plans have become a crucial axis. Specific sector plans are being developed, such as construction in almost all geographies, as well as in the agri-food sectors in Mexico, Spain and South America, and in areas such as the hotel sector, transportation and logistics, among others.
The integration of sustainability into the business model of the countries' commercial network of companies begins through good commercial planning, the incentive model and the network management model. At the same time, progress is being made in the adoption of a risk model that allows customers and operations to be analyzed with ESG criteria.
The creation of teams of product specialists and salespeople in all geographies, with the aim of increasing the capillarity of the business. These levers, during 2023, have begun to be taken to South American countries after the good results achieved in other geographic areas where the model was more consolidated, such as Spain and Mexico. This has increased the capillarity of the CBB business.
During 2023, the BBVA Group contributed to the channeling of sustainable business through various products for retail customers in a total of 8.6 billion euros 15, 2.8 billion euros linked to climate change and 5.8 billions linked to inclusive growth.
In 2023, within the scope of sustainable solutions for retail customers, BBVA has promoted personalized digital solutions aimed at the mass consumer market. These data-driven tools and solutions offer customers a vision of the potential savings they can obtain by adopting energy-saving measures in their homes and transportation. The objective is to promote more sustainable practices to contribute to the reduction of CO2 emissions.
26 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
15 Of these 8.6 billion euros, around 2.5 billion euros correspond to financing for small and medium-sized companies and 1.6 billion euros correspond to Consumer Finance.
Over the course of 2023, BBVA has channeled 162 million euros in solar panels, 43 million euros in financing for energy efficiency measures for households and 350 million euros for financing the acquisition of hybrid or electric vehicles. These solutions are being promoted transversally in the geographies in which the BBVA Group operates:
– Spain
Since 2021, BBVA in Spain uses data analytics to calculate the carbon footprint of individual customers, obtaining an approximate estimate of the amount of CO2 emissions to the atmosphere, based on gas and electricity bills and the expenses incurred on fuel and other means of transportation. The main purpose is to offer customers solutions focused on energy savings, based on this data. Thus, personalized solutions have been developed that calculate the possible savings on customers' energy bills when installing panels or purchasing an electric car. To this end, BBVA has established alliances with several companies dedicated to the installation of self-consumption products. Through the mobile application, the customer is offered the installation of the panels and a financing solution adapted to this product. As a result, during this year, around 16,500 solar panel installations have been financed. In relation to sustainable mobility, the customer is also offered demonstrations showing the potential savings they can obtain by purchasing a electric or hybrid vehicle. A catalog of vehicles from dealers associated with the consumer financing business is made available. In addition, through the mobile application, customers are also offered the possibility of leasing vehicles with various options for electric and hybrid models.– Mexico
From the beginning of 2023, the tool for calculating customers' carbon footprint is available. Additionally, BBVA is working with a strategic partner, one of the main installers of photovoltaic panels in the country, to make available to customers in 2024 the same solar panel acquisition experience developed in Spain. This will include simulators that will estimate savings when switching appliances for more efficient models, as well as the option to explore electric and hybrid vehicles.
– Rest of geographies
Turkey has a tool for retail customers to calculate their carbon footprint since 2022 and in Argentina it will be developed in 2024. Additionally, alliances have been developed to promote energy efficiency in homes in Colombia and Argentina as well as new alliances with large businesses for the financing of appliances with a high energy efficiency label, water savers and sustainable mobility in Argentina and Colombia. It is also worth mentioning that , the BBVA Group sells mortgages for homes with high energy ratings in all the geographies in which it operates, except in Mexico, where work is being done to offer it. During 2023, BBVA has channeled approximately 862 million euros in mortgages for homes with high energy ratings.
Solutions to promote entrepreneurship and financial inclusion
As part of its inclusive growth strategy, in 2023, BBVA has continued to promote entrepreneurship as a lever for social development. Among other significant actions, the financing of:
– Low-income entrepreneurs: through the activity of microfinance institutions supported by the BBVA Microfinance Foundation. In 2023, around 1,450 million euros have been channeled through productive microcredits that, during this year, have been delivered to more than 3.2 million entrepreneurs in situations of vulnerability or poverty.
– Women entrepreneurs: for example, through the Women Entrepreneurs program in Turkey, through which nearly 828 million euros have been channeled impacting around 20,000 female entrepreneurs.
– Other entrepreneurs and microbusinesses: for example, through support to PFAEs (Persons with Economic Activities) in Mexico, through loans and other products, channeling around 652 million euros during the year that have benefited almost 90,000 entrepreneurs and microenterprises.
During 2023, BBVA has also developed specific solutions and products to promote the financial inclusion of unbanked and underbanked people (segments such as people with disabilities, rural population, young people, seniors) in those geographies where the Group operates. Some examples of this are:
– In Mexico, a digital solution has been promoted for individuals who were previously unbanked, with a special focus on women and young people. In this way, the banking access of almost 230,000 people has been promoted.
– In Turkey, in July 2023, the program for the banking of women was launched, through which participants are supported with training for employability and financial education and are offered basic financial products such as a savings account, credit card at no cost or microcredits for entrepreneurship, among others.
– In Argentina, the marketing of BBVA VOS has been promoted, an account at no cost to the customer that, once the necessary objectives to access a Credit Card have been achieved, gives automatic access to it. In 2023, more than 82,000 BBVA VOS accounts were registered. 43% of those registrations activated the account by making money deposits and 68% of the activated accounts managed to reach the credit card. Through this product, in 2023, more than 9,500 people who initially could not access credit due to lack of credit history, were able to access it. The product includes financial and digital support and education.
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This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
The integration of sustainability in the BBVA Asset Management business
BBVA Asset Management (hereinafter BBVA AM), the Group's investment management unit that brings together all of its asset management activities around the world, has developed a governance model in which there is coordination with the GSA to ensure the alignment with the Group's strategy. The sustainability governance model has been structured around the Sustainability Governance Group (hereinafter, GGS), made up of global heads of Product, Investments, Risks, Control & Compliance and the person responsible for Sustainable Investments. The GGS, therefore, is the framework in which they are responsible for designing the sustainability strategy as well as the plans for its execution and, subsequently, presenting it to the global head of Asset Management and Private Banking and its steering committee, for approval.
BBVA AM's sustainability strategy has been structured around four pillars:
The model of integration of environmental factors (climate change, pollution, waste management and good practices for the preservation of the ecosystem, etc.), social factors (among others, human capital management and social responsibility in product creation) and good governance (good corporate governance practices) of BBVA AM focuses on the development of a internal rating model for the assets under management. To build the rating, BBVA AM applies its own methodology and relies on the information received from external providers and, thus, an ESG rating is granted to each company. This rating is available for stocks, corporate bonds, governments and funds managed by third parties, and currently covers a significant percentage of BBVA AM's investment universe. It has 3 levels and the ESG Risk Integration Policy establishes that investments cannot be made in the instruments with the lowest rating of the three levels. This policy applies to all vehicles and portfolios managed at AM in Europe and Mexico.
Exclusions are not the center of the sustainability strategy but are necessary to avoid investment in certain activities. These exclusions apply to all vehicles and portfolios that are managed and focus on companies that fail to comply with international treaties and standards linked to labor rights, anti-corruption policies and human rights, as well as companies that carry out activities that are considered inherently harmful to society ( such as controversial weapons; coal extraction, for companies with an exposure greater than 25% of their activity; and the exploration and production of oil and gas in the Arctic and in bituminous sands, for companies with an exposure greater than 10% of their activity). Investments in countries with UN arms embargoes and sanctions for money laundering are also excluded, and companies belonging to the tobacco, alcohol and gambling sectors are left out of the investment universe, in the case of sustainable products. . This policy applies to live investments made in AM Europe and AM Mexico.
By commitment, at BBVA AM we fundamentally understand the way in which it interacts with the companies in which it invests, with international and regulatory organizations, with other investors and other interest groups or interested parties. In practice, commitment is expressed in two ways: voting at shareholder meetings and engagement. In relation to voting activities, work has been done to expand the companies in which the right to vote is exercised, including, in addition to European companies, those from the United States and Canada, with the support of external advisors. Voting activities are carried out in vehicles and portfolios managed in Spain, Portugal, Luxembourg and Mexico. Commitment activities are manifested in adhering to a series of international commitments and initiatives that reflect the commitment to sustainability, responsible investment and involvement in future challenges such as the fight against climate change:
– UNPRI: United Nations Principles for Responsible Investment
– Net Zero Asset Managers Initiative
– Net Zero Engagement Initiative
At BBVA AM, the impact strategy is used to identify activities and investments and evaluate their impact, positive or negative, on social and/or environmental aspects. This allows us to check whether a company in the investing universe has an impact on any of the 17 SDGs established by the United Nations. An internal analysis methodology, which relies on information received from external providers, has been developed for the selection of investment strategies aligned with the SDGs and to identify and monitor instruments for financing sustainable projects. To do this, it is verified that the activities or investments have a positive impact on some SDG, meeting a series of minimum requirements in relation to minimum safeguards and no significant damage. This definition has been developed following the criteria established by EU regulations to define a sustainable investment. This criterion for identifying sustainable investments is used in the construction of portfolios of sustainable products, investment funds, pension plans and discretionary management portfolios.
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This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
BBVA AM established the objective of accompanying the companies and issuers in which it invests in their decarbonization objectives, to achieve net zero portfolios in the year 2050. During 2022, BBVA AM made public the following intermediate objectives for 2030 16 and the assets to those who have set the objectives:
ASSETS UNDER MANAGEMENT (BBVA ASSET MANAGEMENT): ALIGNMENT TARGETS
Initial commitment to decarbonize 22% of its portfolio of assets under management.These assets are part of the portfolios managed in Europe and Mexico and comprise Eurozone sovereign bonds (10% of total assets under management) and equities and corporate bonds (12%). Asset classes for which there is no reliable data or methods are outside the scope of the project for the time being. However, this is just an initial commitment. It will be reviewed in the coming years to widen its scope. Assets not included: Third party Funds, cash and equivalents, real estate and private equity, sovereign fixed income issued by agencies. (1) Weighted average carbon intensity. (2) Climate Change Performance Index. Sustainability and climate risk management, in particular, is integrated into BBVA AM's general risk management and control processes. During 2023, BBVA AM continued to expand the offering of sustainable products, that is, products that incorporate sustainability objectives or metrics in their investment policy in line with the SFDR; with 2 new pension plans in Spain and an investment fund in Turkey, so the total number of investment vehicles that incorporate sustainability objectives and metrics rose to 36 (33 in 2022). The assets managed in sustainable solutions at the end of 2023 are 7,438 million euros (in 2022, 7,020 million euros) and net deposits have been -316 million euros (in 2022, 976 million euros). In the retail banking segment, it stands out that 3,018 million euros correspond to funds that promote ESG characteristics (in 2022, 3,133 million euros), 109 million euros correspond to funds with a sustainable investment objective (in 2022, 108 million euros) and that 2,802 million euros correspond to pension plans that promote ESG characteristics (in 2022, 2,593 million euros).
| 2023 | 2022 | |
|---|---|---|
| Total assets under management | 147,444 | 124,602 |
| Europe | 83,077 | 74,599 |
| Mexico | 49,062 | 35,614 |
| South America | 7,614 | 7,384 |
| Turkey | 7,691 | 7,005 |
| 2023 | 2022 | |
|---|---|---|
| Exclusion (1) | 132,139 | 110,213 |
| Vote (2) | 132,139 | 110,213 |
| Integration (3) | 132,139 | 110,213 |
(1) The exclusion strategy, with the exclusion policy approved in 2022, applies to assets managed in Europe and Mexico.
(2) The voting strategy is applied to 100% of the assets under management in Europe for those instruments, in BBVA AM portfolios, that generate voting rights and their issuers are in the European and US geographical areas and in the business of AM México for those issuers that generate voting rights and their issuers are in the Mexican geographic area.
(3) The integration strategy is applied in SRI pension plans and mutual funds of the Europe business and, since 2022, AM Mexico.
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This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
16
The achievement and progressive advancement of decarbonization objectives will depend to a large extent on the actions of third parties, such as customers, governments and other stakeholders, and, therefore, may be materially affected by said actions, or by lack of it, as well as by other exogenous factors that do not depend on BBVA (including, but not limited to, new technological and regulatory developments, war conflicts, the evolution of the climate and energy crises, etc.). Consequently, these objectives may be subject to future revisions.
The following details how BBVA obtains information from its customers, analyzes it and proactively and constructively provides solutions to help them transition to a net zero emissions future, depending on the level of progress the customer is in their path towards decarbonization. This is consistent with its Net Zero 2050 strategy and its transition plan.
BBVA increases the knowledge related to sustainability of its wholesale customers through different processes:
– Sustainability questionnaires adapted to different industries that are applied in the development or renewal of the financial program. It allows risk managers and specialists to have greater knowledge of customers' environmental performance.
– Environmental and Social Framework: Based on the information included in the KYC (Know Your Client) form and that provided by an external advisor expert in ESG, BBVA supervises that new wholesale customers, covered by its Environmental and Social Framework, do not incur general exclusions or specific restrictions, foreseen for the sectors covered by the Framework: mining, agribusiness, energy, infrastructure and defense. On a biennial basis, BBVA carries out an evaluation of the groups belonging to the stock under the sectors of this Framework. At the end of 2023, more than 330 groups have been analyzed, having initiated a dialogue and support plan with 11 of them. To carry out its effective implementation, BBVA has the advice of an independent expert who carries out due diligence on the covered customers. The Framework (originally approved in 2020) is prepared and coordinated within the Global Sustainability Area and is approved by its manager.
– Equator Principles: Although financing projects in sectors such as energy, transportation and social services drives economic development and creates jobs, it also creates potential environmental and social impacts. Therefore, BBVA implements environmental and social risk assessment processes in this area to mitigate and prevent negative impacts, reinforcing the economic, social and environmental value of these financings. In 2004, BBVA adhered to the Equator Principles (hereinafter, EP), which establish standards for environmental and social risk management in project financing. Currently, in their fourth version (EP4), these principles are applied globally in all industrial sectors and cover five financial products related to projects: (I) financing advice; (II) financing; (III) corporate loans; (IV) bridge loans; and (V) refinancing and acquisition. In accordance with the EP, BBVA subjects each project under the scope of EP4 to an environmental and social due diligence analysis, considering impacts on climate change and human rights. This analysis is integrated into BBVA's internal operations structuring, admission and monitoring processes, aligning with its Environmental and Social Framework. Each operation is classified according to its risk level (categories A, B or C) and the documentation provided by the customer and independent advisors is reviewed. A specialized team at BBVA supervises and evaluates these projects, contributing to committee decisions and risk approvals. In addition, BBVA financing contracts include specific environmental and social obligations for the proper management of the project by the customer. Regarding the evaluation of human rights and according to the EP, BBVA requires due diligence on projects that may impact indigenous communities. In cases where this circumstance occurs, the free, prior and informed consent of these communities must be obtained, regardless of the geographical location of the project. It also requires, in accordance with the projects, liaison with the communities impacted by the projects. If potential risks are detected, the operation must include effective management of these risks as well as operational mechanisms for managing claims. Regarding climate impacts, in accordance with the EP, the impacts of the projects are evaluated considering scenarios as well as mitigation and management measures adopted. The data on the financed operations that were analyzed under the EP are included in section “2.6.5 Operations analyzed under the Equator Principles” in chapter “2.6 Additional information” of this report.
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This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
In 2023, BBVA has developed a procedure for managing environmental and social disputes with the objective of identifying the existing processes that prevent the materialization of disputes in addition to establishing the way of managing and resolving them in this area. This procedure covers environmental and social controversies associated with wholesale customers that are incorporated in the development of their programs.financial. BBVA has developed a “Guide to integrating ESG factors in wholesale credit analysis” where the most relevant environmental and social aspects are identified by industry and obtains metrics to monitor the performance of corporate customers. Additionally, BBVA has defined an internal taxonomy of transition risk in order to classify sectors based on their sensitivity to this type of risk. In the preparation and definition of the sectoral frameworks used in the admission of credit, the metrics are identified that allow the vulnerability of each customer to be assessed to transition risks and integrate this aspect into risk and support decisions. Additional information on this point is detailed in section “2.2.2 Management of risks associated with climate change and environmental factors - Integrating climate change into risk planning” of this report. Progress is also being made in developing internal customer classification capabilities based on their public information, low-carbon business profile and decarbonization plans. In the area of CBB, BBVA has used data analytics to calculate the carbon footprint of companies and uses it to offer valuable solutions to its customers.The carbon footprint calculator for companies provides information on the ESG profile of customers (footprint calculation, temporal evolution, comparison with the sector average and similar companies, etc.), which allows customers to be categorized and put into It carries out advisory actions and commercial actions that are directed, personalized and adapted to the profile of each customer. Recent updates have been implemented including the ability to set energy savings goals. In addition, alerts have been added that warn when the objective is being reached and a comparison of consumption compared to other companies in the same sector of activity (NACE), with a similar level of billing and equivalent number of employees on staff. This comparison shows the monthly spending percentile in relation to the rest of comparable companies. In addition, BBVA uses natural language processing techniques for the ESG categorization of large-scale corporate customers based on public information such as corporate customer websites, official records, news, etc. These techniques enrich constantly the commercial information provided and helps customers improve their environmental performance.
Retail customers BBVA identifies, accredits and documents the activity carried out by retail customers through KYC under a risk approach. This allows for better knowledge of customers, their operations, customer segmentation, products, channels, jurisdictions and transaction monitoring. As for individual customers, they have the possibility of calculating their carbon footprint thanks to their digital capabilities and data analytics. This service aims to raise awareness about the impact that their actions have on the environment and help them in the transition towards a more sustainable world. By adding the characteristics of the home (surface area, energy certification, etc.), BBVA can assess improvements in energy efficiency and offer information on simple and sustainable changes in habits that can help reduce the amounts on its customers' home bills. individuals. This service is available in Spain, Turkey and Mexico, and work is being done so that Argentine customers can also use it in 2024. On the other hand, in Spain it is already possible to visualize the potential savings when switching to an electric car or installing solar panels, as well as purchasing these items along with financing options offered by BBVA through its digital platforms. This has been possible thanks to the strategic agreements established with companies in the sector. Likewise, customers have the possibility of contracting one of the sustainable products provided by BBVA and using the Valora tool, which allows them to have an estimated and automatic valuation of their real estate and transportation assets.
Interaction and ESG dialogue with customers
Sustainability is part of the recurrent interaction and dialogue (engagement) with our wholesale customers and of the value proposition presented, both at a strategic and commercial level, and is integrated into the processes of admission, pricing and risk management processes. BBVA interacts and shares ESG knowledge and best practices with its wholesale customers through different mechanisms. In 2020, the ESG Advisory service was created to help global customers in their transition towards a more sustainable future in all sectors of activity. This is a data-based proposal aimed at facilitating the objectives that customers are assuming to align with the Paris Agreement and advance the United Nations 2030 Sustainable Agenda. The dialogue with customers on ESG aspects is based on:
– Overview of how sustainability is evolving in the political and financial context, explaining the main regulatory issues,reporting, financial market developments, ESG ratings, etc.
– Specialization in several industries that face the greatest challenges to the transition to a low-carbon economy: oil and gas, power generation, automobile and auto parts manufacturers, as well as other industries such as infrastructure, processed foods, beverages, cement, fintechs and pharmaceuticals. Customers are informed about the key challenges and opportunities for each industry and the dialogue focuses on each industry's roadmap to align with the Paris Agreement. BBVA provides information to its customers on regulation, technological improvements and best practices in each industry, as well as a comparative analysis on how similar companies are evolving in terms of ESG, different alternatives to improve their sustainable profile and how to set specific short and medium objectives. term.
31 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
– Specialization in topics such as Cleantech, biodiversity, ESG Rating, Carbon Markets and Natural Based Solutions, in which BBVA does specific advisory to customers with the idea of helping and, where appropriate, accelerating their transition with debt solutions but also equity.
– Support in the analysis customer scope 3 emissions and in turn the carbon footprint of its suppliers, in order to develop future strategies that reduce the environmental impact of value chains and increase their resilience.
– BBVA offers customers a list of sustainable products or products that promote sustainability (bonds, loans, transactional banking activity, etc.) that, in addition to meeting their financial needs, support their sustainable transformation.
BBVA provides direct support to its wholesale customers, both global and non-global, in incorporating ESG practices into their business strategies and operations. This is achieved through one-on-one meetings, mass outreach events and project consulting focused on initiatives such as energy efficiency, renewable energy, efficient construction and sustainable mobility. Sustainable practices are also promoted, covering efficient water management, the circular economy, waste management, environmental impact and care of biodiversity, among other aspects. Managers have information on sustainable solutions applicable to different sectors of the economy so that they can make more focused proposals for their customers. BBVA, in collaboration with a company specialized in managing European funds from the Next Generation EU program, approved by the European Commission, offers an information service to customers that promote Spanish business projects related to the ecological transition and sustainable mobility, among others. BBVA supports its SME customers in incorporating ESG practices through one-on-one meetings and visits, mass participation events or project advice with technology and consulting firms. BBVA provides information to its customers through digital channels and through the commercial branch network. A comprehensive service model that ranges from awareness raising, project design and public aid management. Likewise, customers have access to informative information and a catalog of sustainable products or products that promote sustainability through transactional web platforms and mobile banking apps. These resources are also provided by managers in the offices. The Group makes available to its customers information about the products, advice on sustainability and explains where it comes from, their impact on the environment (savings in consumption with an energy efficiency loan, fuel savings with a loan for fleet renewal of vehicles, etc.). The customer service model is complemented with external capabilities, which is reflected in the development of strategic alliances with third parties. These alliances are essential to contribute to supporting the sustainable transition of companies and individuals. Among them, the following stand out:
– The development of sustainable business in Spain, focused on the promotion of sustainable mobility, has allowed BBVA to close agreements with the association that makes up the vehicle dealer associations and the dealers collaborating in the vehicle business of consumer finance for the distribution of electric and plug-in hybrid cars and the renewal of fleets for companies.
– The promotion of solar self-consumption and the development of energy saving projects in the main geographical areas where BBVA is present has made it possible to build alliances and agreements with solar panel installation companies in Mexico, Spain, Argentina, Colombia and Peru.
– Agreements with multilateral organizations and development banks to promote sustainable businesses, such as the agreement with the International Finance Corporation in Peru and Colombia.
Finally, events have been organized with content related to sustainability: trends, sustainable finance, risks, opportunities, energy efficiency, renewable energy, sustainable transport and agriculture. In March 2023, the First Edition of the ESG Summit was also held in Mexico, where BBVA tried to convey the importance of integrating ESG criteria into the business model. And in October the “Image 23 BBVA Sustainability Summit” was held, in which strategies and experiences were shared to address climate change and inclusive growth. Garanti BBVA has held several conferences in different locations within the thematic program of events entitled "Sustainable future in exports", to explain the key points of the EU 'Green Deal' and the Carbon Border Adjustment Mechanism and offer concrete proposals to institutions and companies, especially SMEs, involved in exporting to the European Union. At the same time, in April 2023, the BBVA Sustainability Forum took place in Uruguay, which brought together authorities, experts and businessmen who analyzed the various initiatives to support the fight against climate change.
32 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.Metrics of interaction and dialogue with customers
From 2020, CIB bankers have visited more than 260 large corporate and investment banking customers and performed more than 470 pitches with the aim of maintaining a dialogue and discussion focused on sustainability (they represent approximately around 20% 17 of the corporate and institutional customer base). In total, visits have been made to customers from 30 different countries and of them, around 35% have been visited in more than one geographic area in which BBVA is present. In 2023, nearly 90 global customers have been contacted through the ESG Advisory service. Additionally, in 2023, in Spain alone, more than 400 commercial and ESG advisory visits were made to CBB customers, who were presented with a value proposition with ESG characteristics adapted to their needs and profile. In Mexico, around 500 commercial actions with a sustainable approach have been generated. BBVA has a network of experts in sustainable mobilization in Spain, Mexico and Peru (it is in the development phase in the rest of the countries), to support customers in their transition towards a greener future. The service offered by the Next Generation EU program aid portal, after its first two years, has accumulated more than 100,000 visits, generating 6,500 leads and has concluded more than 450 contracts for the processing support service.
Other actions to promote sustainability
In addition to initiatives aimed specifically at customers, BBVA also creates and disseminates information available and accessible to all its stakeholders. Specifically, BBVA has launched the BBVA Greenfluencers program, which improves understanding of the challenges faced by different industries in the field of sustainability. It aims to convey the messages of the activity, the global nature of the wholesale business and highlights the relationship with leading customers from different sectors and geographies. Almost 70% of subscribers open the newsletters of Greenfluencers and more than 50% of the chapters have been recorded in different geographies, reaffirming its global character. Likewise, in 2023, BBVA published more than 580 articles related to sustainability on its corporate website that have impacted almost 4.1 million users and account for more than 7.8 million page views, articles that add to those of more than 1,500 articles from the years 2012 and 2022. Of all of them, it is worth highlighting the dissemination work, specifically, in the Planet category 'Biodiversity Conservation' and 'Natural Capital'. BBVA offers the possibility of downloading monographs specialized in sustainability with one objective and to contribute to achieving a greener and more inclusive society and planet. Through these contents and others of an informative nature, the entity reinforces its intention to inform and raise awareness on this matter. Additionally, 6 new monographs have been published on right to energy, climate migrations, biodiversity, drought, natural capital and sustainable transition in SMEs. In total, 13 monographs have been published, generating more than 16,700 downloads. To help disseminate all this content, BBVA distributes a newsletter that has more than 11,900 subscribers and an opening rate greater than 35%. During this year, 59 podcasts have been made (more than 51 from "Aprendemos Juntos” and more than 8 from “Futuro Sostenible”) that have amounted to more than 4.2 million downloads. It is worth highlighting the launch of interviews in Sustainable Future expert talks, where topics of interest to citizens are addressed and key questions on sustainability issues are answered. In addition, more than 50 sustainable-themed videos were published on YouTube which, together with the existing ones, have more than 3.3 million views since 2020. Regarding the content shared on social networks, since the beginning of the sustainability content positioning project (January 2021), more than 8,500 publications have been generated that have generated more than 172 million impressions and more than 1 million interactions. Through social networks, BBVA reaches out to people, interacts and shares knowledge on ESG issues, seeking to generate a positive impact and raise awareness about how important it is to take action. Likewise “Aprendemos Juntos 2030”, BBVA's global project that aims to promote sustainability education to help people build a greener and more inclusive future, has been recognized by the United Nations for its contribution to the Goals. of Sustainable Development (SDG) and continues to garner views month after month, reaching more than 2,980 million views accumulated on the project.
33 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
17 Customer base updated with data as of October 2023, from a managed group proxy.
Interaction and dialogue with the industry and the public sector
For more than two decades, BBVA plays an active role in multiple global initiatives, seeking to redefine the financial system with sustainability as a key component in financial decisions, supporting the United Nations Global Compact, actively participating with various interest groups, from regulators and supervisors to investors, shareholders and civil society organizations.
Firstly, at a sector level, BBVA has been a member of UNEP-FI since 1998 and has chaired its steering committee from 2019 to December 2023. In addition, it was one of the founding banks of the Responsible Banking Principles, establishing a reference framework for sustainability in the banking sector. In the European Banking Federation, it chairs the group of experts on sustainable finance and at a global level he participates in working groups on sustainable finance at the IIF (International Institute of Finance). At the local level, it promotes sustainability committees in banking associations in several countries, sharing practices and methodologies on climate change management for banks. BBVA is a founding member of the Net Zero Banking Alliance and is part of its steering committee, within the Glasgow Finance Alliance for Net Zero (GFANZ). Likewise, BBVA, together with four other banks that signed the Katowice commitment, and with the support of the think tank 2 Degree Investing Initiative (2DII), has collaborated in the development of the PACTA (Paris Agreement Capital Transition Assessment) methodology for the decarbonization of credit portfolios of financial entities. BBVA is also a member of the Partnership for Carbon Accounting Financials (PCAF), whose objective is to establish an international methodology to measure and disclose greenhouse gas emissions financed by banks and investors. Since March 2023, BBVA has been a member of the Financial Industry Advisory Council of the International Energy Agency (IEA). This initiative aims to be an institutional channel between the agency, the financial community and those responsible for energy policies and promote dialogue on issues that affect energy investments, particularly those related to the transition to clean energy. In September, BBVA actively participated in UN Climate Week in New York and parallel events such as meetings within the framework of the WEF Sustainable Development Impact or the Net Zero Banking Alliance (NZBA).
In 2023, BBVA has maintained its active participation in discussions with public authorities at the community, global level and in the various jurisdictions where it operates. In particular, it is worth highlighting its work in monitoring and accompaniment with the European regulator on key sustainable finance issues, ranging from the Directive on environmental and human rights due diligence, the Green Bond Standard (EuGB), the development of standards of sustainability breakdowns (EFRAG, ISSB - where BBVA participates in the IFRS Advisory Council-), European regulatory reviews on capital requirements, the evolution of the European taxonomy and reviews of the emissions trading regime of the European Union (EU STD). BBVA also promotes sustainability and maintains a dialogue with European institutions through its active participation in associations. In 2023, BBVA has continued its support with CSR Europe, through initiatives such as the Leadership Hub and through webinars and workshops on different topics such as green taxonomy, ESG reports or sustainability due diligence.
A second area of relationship has been with banking supervisory bodies. During 2023, supervisory activities related to climate risk have focused on comply with the commitments (action plan) of the thematic review carried out in 2022. Additionally, this year 2023 a stress exercise ("2024 Fit-for-55 climate risk scenario analysis") has been announced for next year. This is a specific exercise in which all relevant banks will participate, in a "top-down" format and whose results will be published in aggregate form in the first quarter of 2025. The result of the exercise will not influence the annual evaluation process ( SREP). Beyond its own supervision activities, BBVA has actively participated in work sessions sharing its experiences with the European Central Bank, the Bank of Spain, the Bank's Association of Turkey and the Bank of Mexico, among others.
Thirdly, and beyond the financial regulatory sphere, BBVA has continued to promote initiatives to ask governments for more ambitious action on climate change and public policies.It is worth highlighting the calls to the G20 led by the WEF in Davos and at COP28, through the open letter of the Alliance of CEOs Leaders for Climate promoted by the World Economic Forum (WEF) of which BBVA is a member, calling on world leaders and participants in the United Nations Climate Change Conference in the United Arab Emirates to promote the necessary policies and actions at the government level and be able to comply with the Paris Agreement.Finally, a fourth area of action related to involvement with governments has to do with promoting sustainable finance in emerging countries. BBVA considers it a priority to close the sustainable mobilization gap in these countries, without which it will not be possible to achieve net zero emissions. As a member of the European Commission's High Level Expert Group (HLEG), BBVA actively participated in providing recommendations to the European Commission to boost sustainable financing in emerging countries and close the current financing gap for the SDGs (in the framework of the Strategy for Financing the Transition towards a Sustainable Economy), where BBVA is the only private bank in this group.
34 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
BBVA was one of the 28 founding banks of the Responsible Banking Principles promoted by the United Nations alliance with the financial sector (hereinafter, UNEP-FI). This is a reference framework based on six principles that aim to respond to the growing demand from different interest groups for a comprehensive framework that covers all dimensions of sustainable banking. Since 2020, BBVA has reported to UNEP-FI the progress and advances achieved in each of the six principles. For more information on the progress and advances reported, see section “2.5.4 Index of contents of the Principles of Responsible Banking UNEP-FI” of this report.
Within the framework of these principles:
– In 2021, BBVA was one of the founding banks of the Collective Commitment to Financial Health and Inclusion promoted by UNEP-FI (Collective Commitment to Financial Health and Inclusion) with the aim of promoting universal financial inclusion and fostering a banking sector that supports financial health of all customers.
– In terms of portfolio alignment with the Paris Agreement, in 2021 BBVA was a founding member of the UN Net-Zero Banking Alliance (NZBA). In 2023, BBVA was renewed as a member of the steering committee of this initiative as the only Spanish bank. BBVA participates in this international alliance whose objective is that the credit and investment portfolios of its members will be neutral in net emissions by 2050 as the deadline, in line with science and the most ambitious objectives of the Paris Agreement. BBVA participates in an NZBA working group that is defining the appropriate use of carbon credits of customers. Carbon credits can play a complementary role in BBVA's decarbonization path beyond carbon footprint reduction efforts. In relation to the use of carbon credits, the objective remains to achieve the greatest possible reduction of the carbon footprint. The purchase of carbon credits should be limited to cases where there are no technologically or financially viable alternatives.
Additionally, BBVA AM is a member of Net Zero Asset Managers, an initiative launched by a group of international asset managers to support the goal of reducing net greenhouse gas emissions to zero by 2050 or sooner. Furthermore, in 2023, BBVA AM's employment plan manager adhered to the CNMV's Code of Good Practices for Investors in Spain.
Since 2017, BBVA has been adopting the TCFD recommendations of the FSB and has been reporting TCFD reports online with its utmost support for transparency. In its TCFD 2022 report, BBVA incorporated elements of a Transition Plan for the first time following the guides and recommendations for financial institutions published by Glasgow Financial Alliance for Net Zero (GFANZ) in November 2022.
In addition, BBVA participates in the development of the Equator Principles, the Green Bond Principles, the Social Bonds Principles, the Green Loan Principles, the Social Loan Principles, the Sustainability Linked Bond Principles, the Sustainability Linked Loan Principles and other similar standards developed by the industry itself.
35 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
The issuance of green, social and sustainable bonds - with both a green and social component - plays a key role in achieving the previously mentioned objectives. The origination allows BBVA to support its customers' transition towards a low-carbon economy, and contributes to their progressive alignment with the objectives of the Paris agreement. Green, social and sustainable bonds and other debt financing instruments are effective instruments to channel funds to finance BBVA's business, customer projects in sectors such as renewable energy, energy efficiency, waste management, water treatment or access to essential needs and services such as housing or inclusive finance.
In April 2018, BBVA published its framework for the issuance of its own sustainable bonds, linked to the United Nations Sustainable Development Goals (SDGs). Under this framework, BBVA can issue three types of bonds:
– Green bonds: debt instruments whose funds will be used to finance new and/or existing green projects;
– Social bonds: debt instruments whose funds will be used to finance new and/or existing social projects;
– Sustainable bonds: debt instruments whose funds will be used to finance new and/or existing green and social projects.
This is a framework aligned with the Green and Social Bond Principles and the ICMA 2018 Sustainable Bond Guide, supported by strong governance and strict management and monitoring of net funds raised and is verified by an independent third party. The framework is public and available on the BBVA shareholders and investors website.
In 2022, a new global framework for the issuance of sustainable debt instruments was published (which replaces - except for current issues - the 2018 Bond Framework). The framework was updated to align it with the eligibility criteria for the environmental and inclusive growth categories provided for in BBVA's internal standards, based on the principle of substantial contribution provided for in the EU taxonomy for climate change, and to extend it to other debt instruments additional to the bonds. Like the previous one, the 2022 framework takes into account the best practices of the bond market, being aligned with the Green Bond Principles, Social Bond Principles and the Sustainability Bond Guidelines of the ICMA, and the possibility is open of adapting it to the EU Green Bond Standard when applicable. Likewise, it has independent verification by an independent third party and is available on the BBVA shareholders and investors website.
The green, social and sustainable bonds -with both a green and social component-, issued by any of the BBVA Group entities as of December 31, 2023 and outstanding, are:
| Entity | Category | Issue type (1) | Issue Year | Nominal (millions) | Currency | Purpose |
|---|---|---|---|---|---|---|
| BBVA S.A. | Green bond | SNP | 2018 | 1,000 | EUR | Projects related to energy efficiency (including green buildings, renewable energy, sustainable transportation, water, and waste management) to generate positive environmental impacts. |
| BBVA S.A. | Green bond | SNP | 2019 | 1,000 | EUR | |
| BBVA S.A. | Green bond | AT1 | 2020 | 1,000 | EUR | |
| BBVA S.A. | Green bond | SP | 2022 | 1,250 | EUR | |
| BBVA S.A. | Green bond | SP | 2022 | 215 | CHF | |
| BBVA S.A. | Green bond | SP | 2022 | 210 | CHF | |
| BBVA S.A. | Social bond | SP | 2020 | 1,000 | EUR | COVID-19 Social Bond: Support for mostly micro-enterprises. |
| BBVA Mexico | Sustainable bond | SP | 2022 | 10,000 | MXN | Projects associated with affordable housing, SME financing, microfinance, as well as energy efficiency and sustainable water and wastewater management. |
| BBVA Mexico | Green bond | SP | 2023 | 9 | MXN | Renewable energy, energy efficiency, and clean transportation projects. |
| BBVA Colombia | Green bond | 2023 | 50 | USD | Construction projects for water treatment plants and sewerage, preservation of oceans, and protection of lakes, highlands, and mangroves. | |
| BBVA Uruguay | Sustainable bond | Tier 2 | 2021 | 15 | USD | Emergency health assistance projects for SMEs affected by the COVID emergency and green loans focused on energy efficiency, sustainable construction, and smart agriculture. |
(1) SNP = Senior Non-Preferred / SP: Senior Preferred / AT1: Additional Tier 1.
In the field of green, social and sustainable bonds, business areas that mobilize products identified as such according to the applicable criteria, receive a bonus as long as the financing cost of this type of bonds is below conventional bonds, according to BBVA’s transfer pricing system (hereinafter FTP), that is reviewed within the scope of the corporate Asset Liability Committee and which represents the basis for the rest of the Group's geographic areas. The FTP is an essential part of BBVA's liquidity and financing management. The FTP is a tool to establish a price for the products offered by the bank that includes the cost of liquidity and financing for each transaction and serves as a main component for measuring profitability.
In addition to incorporating sustainability into its financing structure, BBVA is incorporating aspects related to sustainability in its day- to-day operations, both in its relationship with customers and in its internal processes, including its management control and reporting processes.
36 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
BBVA in Spain is integrating sustainability in its financial reports to senior management and business areas. These reports include analysis of the evolution of profitability and impact on the income statement and some decisions on the allocation of internal resources are derived from them.# 2.1.6 Governance model
BBVA has a corporate governance system, comprising a set of principles, rules and mechanisms that integrate and regulate the structures and operation of its corporate bodies, which are responsible, at the highest level, for the governance of the Bank (hereinafter, the "System" or the "Corporate Governance System"). This system is mainly governed by the provisions of the Bank's Articles of Association, the regulations of its various corporate bodies and certain general policies of the Bank.
In accordance with the regulations applicable to BBVA, as a listed credit institution, the Bank has a Board of Directors which, as the highest representative, administrative, management and supervisory body, performs both the functions of managing the Entity and those of supervising and controlling management. The Board of Directors also has a structure of specific Committees, which assist it in matters within its remit and which have been set up on the basis of an appropriate distribution of functions, as set out in their corresponding regulations (hereinafter, the "Corporate Bodies").
In the exercise of their functions, the Committees carry out an in-depth review of the matters and proposals submitted by the executive areas for consideration by the Corporate Bodies, thus becoming an essential element for the development of their corresponding functions.
This Corporate Governance System is aligned with BBVA's culture and values and is geared towards achieving the Bank's corporate interest and purpose. To ensure this, the Board monitors its effectiveness, adapting it, where necessary or appropriate, to the environment in which the Bank and its Group operate. In addition, the design of the system takes into account the regulatory and supervisory requirements applicable at any given time and industry best practices, as well as the opinion of the Bank's various stakeholders.
As part of this System, the Board of Directors has the power to approve the Entity's general policies and strategies. In implementation of the above, the Board has defined a common management and control framework, consisting of strategic decisions (including, inter alia, the strategic plan, the budget, the risk appetite framework) and general policies, which include the main management guidelines for the Group's various areas of activity.
For further information on BBVA's corporate governance system, please refer to the Corporate Governance Report 2023, which is attached by reference to the BBVA Group's consolidated Management Report.
Within the abovementioned context, the Board of Directors has incorporated sustainability as one of the Bank's strategic priorities, as reflected in the Group's 2019 strategic plan, and has approved the General Sustainability Policy, which defines and establishes the general principles, management and control objectives and guidelines to be followed by the Group in the area of sustainable development.
In accordance with the General Sustainability Policy, BBVA understands "sustainable development" (or "sustainability", which includes environmental, social and governance aspects, referred to as "ESG") as meeting the needs of the present generation without compromising the ability of future generations to meet their own needs. BBVA faces the challenge of sustainable development from a holistic perspective, being aware that, by making the Purpose of "Making the opportunities of this new era available to all" a reality, as well as the strategic priority of "helping our customers in the transition to a sustainable future", the Bank aims to generate a positive impact through the activities of its customers, its own activity, as well as its relationship with and support for society.
37
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
18
The figure includes information from Spain, Mexico, Turkey, Argentina, Colombia, Peru, Uruguay and Venezuela.
As an essential part of this approach, the Corporate Bodies promote the integration of sustainability in all the Group's businesses and activities. To this end, the Bank has a Global Sustainability Area (GSA), which has the competence, inter alia, for designing and promoting the implementation of the Group's strategic sustainability agenda (focusing on the fight against climate change, protection of natural capital and inclusive growth) and business development in this area; establishing the Group's objectives in these matters; and promoting and coordinating the different lines of work of the Group in this area, developed by the different areas; maintaining in all areas of the Group the objective of promoting integrity in the relationship with the different stakeholders.
In order to manage and supervise this area, the Board of Directors has adopted a governance model which, with the Board itself at the center, is supported by the specialized assistance of its Committees on matters within their respective areas of competence. In this way, the Committees of the Board support this body in the development of its functions in matters of sustainability, through the attribution of specific tasks in this area.
Through this governance model, the governing bodies define, supervise and monitor the implementation of the Group's sustainability strategy, on the basis of the reports received both from the Global Sustainability Area and from the different areas of the Group that incorporate sustainability into their reporting of their businesses and activities. These reports are submitted to the corporate bodies according to their competencies, on a regular or ad hoc basis. To this end, it should be noted that in 2023, the Corporate Bodies received, generally every two months, specific reports on sustainability matters from the Head of the Global Sustainability Area, the Head of the Talent and Culture Area or the Global Head of Risks, as well as the reports from the different areas of the Group in which sustainability-related issues were addressed.
To achieve the best performance of its functions in this area, the Board believes it necessary to have suitable knowledge and experience in sustainability matters. To this end, it continues to conduct initiatives that involve the recruitment, within the process of gradual replacement its members, of directors with extensive knowledge and experience in these matters, and in the extension of the continuous training program of its members to matters related to sustainability.
In 2022, the Board of Directors approved the update of the General Sustainability Policy, which integrates the previous Corporate Social Responsibility Policies and the General Sustainability Policy, and which defines and establishes the general principles, and the main management and control objectives and guidelines to be followed by the Group in terms of sustainable development with a focus on climate change, natural capital and inclusive growth.
38
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.# BBVA - 10-K FILING
Resilience of the strategy against climate change risks
Integrating climate change into risk planning
Identification, measurement and integration of climate change into risk management
Identification and measurement of other environmental risks
Sector alignment plans
Calculation of financed CO2e emissions
To carry out the process of identifying the risks and opportunities associated with climate change, BBVA has identified the sectors with the highest transition risks and/or the highest physical risks. These sectors face substantial transformation challenges that require (and are already requiring) large investments. They are also the sectors that will demand a deeper understanding and monitoring of risks. During this sector identification process, and for an understanding of their key risks and opportunities, the Group has relied on the support from external advisors. The results of the process have subsequently been checked with the guidelines of the Net Zero Banking Alliance (Guidelines for Climate Target Setting for Banks), where these sectors appear as the most intensive sectors in CO2e emissions. Likewise, in 2023, for identifying dependencies and impacts related to natural capital, the methodology employed was Encore, a tool developed by Global Canopy, UNEP FI and UNEP-WCMC (UN Environment Program World Conservation Monitoring Centre) that aids organizations in analyzing their exposure to nature-related risks, facilitating initial steps toward understanding dependencies and impacts on nature. Among the impact drivers, CO2e emissions feature prominently, with the analyzed sectors exhibiting high impact in this driver.
Climate change risks for BBVA
In the risk identification process, two types of risks impacting the Group’s businesses or its customers were identified:
Transition risks
These are the risks stemming from the transition to a low-carbon economy, and which arise from changes in legislation, the market, consumers, etc, to mitigate and address the requirements derived from climate change.
| TRANSITION RISKS | Risk subtype | Risks associated with climate change # Market Changes
Changes in demand caused by changes in consumer preferences can lead to falls in sales for BBVA clients and result in loss of profits and solvency ST Reduction in demand for certain products can cause price falls that affect the valuation of companies’ assets (crude oil reserves, fossil fuel cars, etc.) ST Increased demand for certain products or services may impact on the price of certain raw materials. While this may be reflected in prices, it may lead to lower profits or the loss of BBVA’s clients’ market share ST Risk of change in the Bank’s client preferences for not considering the Bank well positioned in the sustainable segment ST Uncertainty in market signals Difficulty or impediments to proper price formation or allocation of financing or investment sums ST Forecasts made by research agencies or services to dictate the strategy of entities may not be fulfilled due to abrupt changes in the market caused by changes in regulations or demand ST Increased cost of raw materials Sharp changes in the price of raw materials, resulting in changes in supply or energy cost, can lead to deteriorating liquidity and declining profits for clients. ST BBVA’s energy supply cost ST
Risk of a significant increase in the cost of financing clients with higher exposure to risks associated with climate change , in a way that affects their solvency by making it more difficult for them to cope with their credit commitments ST Risk of worsening the credit rating of clients with exposure to risks associated with climate change, with the associated adverse effects for BBVA ST
Change in consumer preferences Direct risk of client loss for not meeting what various stakeholders expect from BBVA as regards the climate change challenge ST Indirect risk of loss of business from our customers for not meeting the expectations of the various stakeholders in the challenge of climate change, ST Demand from clients to limit our operations’ direct impacts ST Stigmatization of a sector Risk of assets stranded by a sharp change in the perception of a sector, with loss of sales ST Exclusions in certain sectors due to market pressures Withdrawal from profitable deals due to reputational risk or industry regulations prohibiting or limiting it. ST Increased stakeholder scrutiny Risk derived from greater scrutiny of activities, policies, goals and the way in which aspects related to climate change are disclosed. The Group's reputation may be damaged if its efforts to reduce environmental and social risks are considered insufficient, including when certain public goals could be affected by exogenous elements, or if a perception is generated among the various stakeholders that the Group's statements, actions or communications are not in line with the sustainability profile of the Group, its products, services, goals and/or policies. Divergent views on climate change could have a negative impact on the Group's reputation. ST
(1) ST: Short Term, <4 years; MT: Medium Term, 4-10 years; LT: Long Term, >10 years. Likewise, operational transition risk has been incorporated into the entity's ordinary non-financial risk management model, establishing a Greenwashing Prevention Program at both product and entity level. The main lines of action of the Program include both quantitative risk analysis and the development of control frameworks and other mitigating actions for the main activities that generate this type of risk (advertising and external communication, distribution of products with sustainable characteristics, etc.).
42 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
Risks which arise from climate change and can originate from increased frequency and severity of extreme weather events or long- term weather changes, and which may imply physical damage to companies’ assets, disruptions in supply chains or increase in the expenses needed to face such risks.
| Risk subtype | Risks associated with climate change | Time horizon (1) |
|---|---|---|
| Acute risks | Increased severity of extreme weather events, such as cyclones and flooding | |
| Reduced revenue from decreased production capacity (e.g. transport difficulties and supply chain disruptions) | MT | |
| Direct losses from asset damage (BBVA and clients) | MT | |
| Increased cost of insurance | MT | |
| Business continuity problems Damage to BBVA facilities from environmental catastrophes that hinder normal service provision | MT | |
| Chronic risks | Changes in precipitation patterns and extreme variability weather patterns | |
| Loss of value of clients’ assets (guarantees) because they are located in areas with water supply problems (desertification) | MT | |
| Increases in clients’ operating costs (investments in agriculture) | MT | |
| Lower renewables production (hydro and wind) | MT | |
| Rising average temperatures | ||
| Population movements that can lead to depression in certain areas, accompanied by loss of business | LT | |
| Sea level rise Threats to client assets that can lead to loss of profits and their solvency | LT |
(1) ST: Short Term, <4 years; MT: Medium Term, 4-10 years; LT: Long Term, >10 years.
As well as the risks described above, a number of associated opportunities have arisen which BBVA is considering to use and position itself correctly with respect to the major disruption represented by climate change.
| Sector | Opportunity | Time Horizon (1) |
|---|---|---|
| Oil & Gas | Possibility of reusing oil & gas transport assets for biofuels and hydrogen | MT |
| Electrification of the oil and gas industry, and use of hydrogen | MT | |
| Chemicals | Carbon capture and storage through chemical separation of carbon dioxide for later reuse | ST |
| Electricity | Strong boost to renewable energy, electricity storage | ST |
| Energy efficiency services and hydrogen development | MT | |
| Development of nuclear fusion | LT | |
| Construction & infrastructures | Boostering the distribution of solar panels | ST |
| Renovation of buildings (headquarters, housing, premises, etc.) as well as industrial plants in need of energy-efficiency improvements because of the increased regulatory impact and self-consumption | ST | |
| Infrastructures to improve climate change adaptation: changes in cities, development of a smart grid, charging infrastructure for electric vehicles | ST | |
| Transportation | Efficient low-emission and mobility services (electrical, Liquefied natural gas -LNG- and hydrogen) | ST |
| Mining & metals | Production of metals to manufacture electric vehicles (copper, lithium, cobalt and nickel among others) | ST |
| Agriculture | Efficient irrigation systems, use of waste as a source of biogas | ST |
| Renewable energy use (solar) in agricultural plants | ST | |
| Development of new anti-drought products | ST | |
| Use of sustainable fertilizers and feed | ST | |
| Carbon markets | Creation of carbon credit markets | ST |
| Other sectors | Circular economy, recycling, waste and water treatment, tree planting, food industry, tourism industry conversion to carbon neutrality (fossil fuel change, etc) and natural capital | ST |
(1) ST: Short Term, <4 years; MT: Medium Term, 4-10 years; LT: Long Term, >10 years.
43 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
The concept of climate resilience implies that organizations develop the adaptive capacity to respond to climate change, taking advantage of opportunities and managing the associated transitional and physical risks. TCFD recommends that organizations describe the ability of their strategy to leverage opportunities related to climate change, consistent with a scenario of orderly transition to a low-carbon economy, but also their resilience to possible scenarios of increased climate risks. As mentioned earlier, BBVA's strategy may be affected by climate-related risks and opportunities. Therefore, BBVA is working on measuring the impact of different climate scenarios, both transition and physical risks, on its strategy and business. The first results, obtained within the framework of the Climate Stress Testing regulatory exercise promoted in 2022 by the European Central Bank, show immaterial impacts on both transition risk and physical risk. However, it is important to consider that methodological limitations, especially in terms of data and scenario design, could be underestimating the losses estimated by the financial system. BBVA is working to reinforce and strengthen bottom-up methodologies and analytical capabilities in order to obtain projections of customer financial statements and estimate impacts on collateral values based on different climate scenarios and over different time horizons. In addition, this year it is also planned to include the impact of a physical risk event in the capital self-assessment exercise (ICAAP), in this case for the Mexican economy. Finally, the resilience of the strategy in the face of different climate scenarios is reinforced by the fact that BBVA has set sustainability as one of its six strategic priorities, with a special focus on the fight against climate change, integrating its goal of aligning its financing portfolio with scenarios compatible with the Paris Agreement. It is also worth highlighting the intermediate targets for 2030 for CO2 emission reductions in the oil and gas, power generation, automobiles, steel, cement, coal 19, aviation and shipping sectors. On the business side, the analysis is ongoing and the available results point to a resilient situation, given the relatively low exposure to customers and sectors with higher weather-related risks.# 2.2.2 Management of risks associated with climate change and environmental factors
The risks associated with climate change, both transitional and physical, are considered additional factors that impact the risk categories already identified and defined in the BBVA Group. These risks are managed through the Group's risk management frameworks. As a result, the integration of climate-change related risks into the BBVA Group's risk management framework is based on their incorporation into the governance and processes already in place, taking into account regulatory and supervisory trends. Climate change risk management in BBVA is based on the risk planning process, which is marked by the defined risk appetite and is specified within the management frameworks that determine its treatment of these risks in day-to-day operations.
BBVA's Risk Appetite Framework (RAF), approved by the corporate bodies and applicable in all material geographic areas of the Group, determines the levels of risk that BBVA is willing to assume in order to achieve its objectives, considering the organic performance of the business. It is structured in a hierarchical manner, starting from the thresholds of the core metrics and metrics by type of risk, which result in a framework of management limits. This framework has a general statement that sets out the general principles of the risk strategy and the target risk profile. This statement underscores the commitment to sustainable development as a fundamental part of BBVA's business model, with emphasis on accompanying customers in their transition to a sustainable future. In addition, the climate component is incorporated into risk management. This statement is complemented and detailed by a quantification of the appetite through metrics and thresholds that provide clear and concise guidance to the maximum acceptable risk profile.
Since 2021, a classification of the activities most exposed to transition risk has been incorporated into the framework, using the quantitative metrics established by the Group. In this way, the Exposure at Default (EAD) of activities classified as High Transition Risk (High or Very High risk) is assessed. With respect to this classification, the Board of Directors of BBVA has approved thresholds at a Group and geographic area level, which determine the maximum appetite for this risk.
Additionally, since 2023, a new metric has been incorporated into the management limits called High Market Misalignment, which evaluates exposure to customers whose emissions intensity is above 30% of the market average. This metric has a transition risk management approach by focusing on customers with a clear level of misalignment with respect to the emissions intensity trajectories established by the International Energy Agency's Net Zero Emissions scenario for each of the sectors. The calculation perimeter is the lending portfolio of the autos, power generation, steel and cement sectors.
As part of the annual RAF review process, a new indicator has been included for 2024 linked to the degree of compliance with decarbonization targets for a number of sectors for which BBVA publishes specific targets. The definition of the levels of tolerance established in the Risk Appetite Framework are based on the Risk Assessment and Scenario analyses described below.
This section covers several key aspects. First, a self-assessment is made on how the different risk factors associated with climate change impact the main types of existing risks (credit, market, liquidity, etc.). Secondly, an analysis is carried out of the sectors that are most sensitive to this risk under the classification that establishes the different levels of transition risk. Finally, the methodology used to assess the climate vulnerability of the different relevant geographical areas in which the BBVA Group operates is described. These last two aspects, the analysis of sectors sensitive to climate change and the assessment of climate vulnerability in specific geographic areas, are integrated into management through processes such as admission frameworks or the establishment of risk limits. This implies that the information derived from these assessments is used to make decisions related to the admission of new customers or projects, as well as to establish risk limits in specific areas, ensuring a more informed and accurate management of the climate risks associated with BBVA operations.
As part of its General Risk Management and Control Model, the Group develops periodic risk identification and assessment processes to identify material risks that could have a negative impact on its risk profile and to manage those risks actively and proactively. These processes cover all types of risks faced by the Group, including those that are difficult to quantify. Since 2022, the General Risk Management and Control Model specifically considers sustainability an essential part of the Group's strategy. The Global Risk Assessment is a prospective exercise which updates at least twice a year, and allows a comparison between risk types, business activities and moments in time, facilitating the understanding of the Bank's positioning and its development, and identifying the material risks to cover with capital.
Since 2020, the Group conducts a, primarily qualitative, climate assessment to determine BBVA's vulnerability to transitional and physical risk. In 2023, progress has been made towards a quantitative approach in the development of the Climate Risk Assessment. A series of metrics have been defined that have allowed to objectively evaluate the levels of risk, both in terms of transition risk and physical risk, and in the case of physical risk, evaluating potential impacts for each of the hazards analyzed. In addition, progress has been made in estimating the impact of both transition risk and physical risk on BBVA's strategy and business model. The results are submitted to the highest executive risk committee (GRMC), as well as the corporate bodies, as this assessment is integrated into key corporate processes such as the Risk Appetite Framework and the Internal Capital Adequacy Assessment Process (ICAAP).
The climate change risk assessment process runs in parallel with the Group's global risk assessment, but with a broader time focus. An analysis is carried out for a short term (4 years), medium term (4-10 years) and long term (more than 10 years) horizon, which allows for a comprehensive consideration of expected impacts. The assessment of climate change risks includes, as for the other risks, the two perspectives of the global assessment:
Identification of risk events: Transition risk and physical risk are included in the identification of risk events that could have a significant impact on the Group. A matrix of risk events identified in 2023 is prepared and represented in figures according to their estimated impact on the BBVA Group and their assigned probability.
RISK MATERIALIZING IN THE SHORT TERM: TIME HORIZON 12-18 MONTHS
Since 2019, climate risk has been considered a material event in this inventory. Climate change risks are classified into physical and transitional risks. In the short term (12-18 months), an accelerated transition to a low-carbon economy is considered to be a medium-low impact risk event, although the probability given to this type of scenario is currently medium-low. Over a medium/long-term time horizon, the risk of physical climate change is incorporated into the inventory of emerging risks (those that could have an impact over a longer time horizon) and is assigned a medium risk.
Risk level assessment: This approach is based on an assessment of the profile of each type of risk, which is reflected in a heat map. In 2022 the analysis was extended to the six most relevant geographical areas of the BBVA Group (Spain, Mexico, Turkey, Argentina, Peru and Colombia), and during 2023 the business risk analysis was incorporated. This financial year incorporates various factors, such as the carbon footprint of customers, the energy efficiency of real estate collateral and financed emissions, among others. Work has also been done on the preliminary inclusion of quantitative metrics for certain risk factors, especially exposures to activities that are sensitive to transition risk. The conclusions of the assessment for 2023 suggest that the main risks emerge in medium- and long-term loan portfolios, with an earlier impact on transition risk in Spain given the speed of this geographic area in adopting decarbonization policies.# RISK ASSESSMENT CLIMATE CHANGE 2023
On the contrary, a lower risk derived from regulatory pressure is observed in emerging geographic areas. The factor with the biggest long-term impact on credit risk is that derived from investment in climate change which will have to be carried out by companies in the decarbonization process. With respect to the impact of physical risk on loan portfolios, the greater frequency/severity of extreme meteorological events and structural changes in climate patterns explains the deterioration shown in the assessment in the medium-long term. The impact of transition risk on liquidity risk is low due to the stability of the retail deposit base and the high asset quality of the liquid asset buffer. Market risk is also low, due to the diversification of the equity portfolio and low exposure to sectors sensitive to transition risk in the fixed-income portfolio. As for operational risk, there is a difference in the perceived risk in Spain (medium-low) and in the rest of the geographic areas (medium), due to the greater exposure of the latter to physical risk in the medium and long term.
47 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
| Spain | Rest of geographical areas | |
|---|---|---|
| ST | MT | |
| Transition risk | ||
| Credit | ||
| Liquidity and funding | ||
| Structural equities risk | ||
| Credit spread risk | ||
| Markets (trading) | ||
| Insurance | ||
| Operational | ||
| Reputational | ||
| Business | ||
| TOTAL | ||
| Physical risk | ||
| Credit | ||
| Liquidity and funding | ||
| Structural equities risk | ||
| Credit spread risk | ||
| Markets (trading) | ||
| Insurance | ||
| Operational | ||
| Business | ||
| TOTAL |
Temporary horizons definitions: ST: short term; up to 4 years (planning horizon) MP: medium term from 4 to 10 years LP: long term; more than 10 years
Low risk | Medium-low risk | Medium risk | Medium-high risk | High risk | Not applicable
The climate scenarios have been integrated into the governance of the BBVA Group's internal scenarios:
48 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
In October 2021, the ECB published the methodology for carrying out a stress test exercise on climate change risk, scheduled to run between March and July 2022. A total of 104 institutions participated in this exercise in full or in part, and of these, 41 institutions, including BBVA, carried out the full exercise. This exercise consisted of three distinct modules, each with specific focuses:
In order to comply with the methodology required by the ECB in this exercise, a sectoral layer was incorporated into the loss projection models. These models, together with the sectoral scenarios published by the ECB, allowed the projections to be made taking into account the idiosyncrasies of each sector. In this way, the possible differences in sensitivities to the risk of climate change in each of them were adequately reflected through differentiated impacts.
49 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
[20] The exercise focused on a list of 22 NACE sectors published by the ECB.
Along with incorporating climate change risk into risk planning and business strategy, its integration into decision-making at the customer and operation level is necessary. This involves the adaptation of standards, sectoral policies and processes, the development of tools and the availability of customer and transaction data that were not usually managed by financial entities. BBVA is developing the methodologies and tools it needs to identify and measure the different components of climate change risk, and the financial impact analysis of each of them for their subsequent integration into the management. These tools are based on the metrics of financed emissions, alignment with decarbonization pathways, analysis of the vulnerability and exposure to climate hazards of customers and their collaterals, and the analysis of climate scenarios that allow for a prospective view of risks, opportunities and their financial impacts.
The adaptation of policies and procedures focuses very particularly on the integration of transition risk in the Sector Frameworks (basic tool in defining the risk appetite in wholesale credit portfolios) where specific criteria are specified in the admission guidelines. During 2023, the sectoral analyzes of the risks derived from decarbonization have been updated and complemented according to reference scenarios. Compliance with the definition of appetite established in the Sector Frameworks is a condition that must be met, in turn, by the alignment plans that are prepared for each sector with emissions reduction objectives.
Since 2021, BBVA has had an internal sector classification of transition risk. Its main objective is to identify the vulnerability of sectors to transition risk and organize them based on this aspect. The estimation of the level of vulnerability to transition risk is carried out based on a qualitative analysis that evaluates the level of exposure of each sector to regulatory, technological and market changes motivated by decarbonization that may have a financial impact on companies in the sector. In this way, the sectors are categorized as having very high, high, moderate or low vulnerability. The activities most sensitive to transition risk, or HTR sectors, are identified as the energy generating or fossil fuel sectors (oil and gas, power generation, coal mining); basic emissions-intensive industries (steel, cement) and end-user activities of energy that generate emissions through their products or services (automobiles, aviation and shipping).
As a result of this exercise, with data as of December 31, 2023, 11.80% of the exposure (measured by EAD) of the wholesale portfolio has been identified (equivalent to 5.87% of the Group's portfolio) that corresponds to sectors that we define as HTR, with a high or very high level of exposure to this risk. This calculation has been carried out on a portfolio of 223,469 million euros (of the Group's total EAD of 449,418 million euros), corresponding to the EAD of the wholesale loan portfolio.
Below is the percentage of exposure measured by EAD of the sectors sensitive to transition risk of the wholesale portfolio over the EAD of the same portfolio as of December 31, 2023:
50 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
Prepared by BBVA.It includes the percentage of exposure (exposure at default) of activities defined internally as “transition risk sensitive” on the EAD of the wholesale portfolio as of December 31, 2023 (does not include subsidiaries of Garanti, Forum Chile, Uruguay, Venezuela and BPI).The “transition risk sensitive” portfolio includes energy or fossil fuel generating activities (oil and gas, power generation, excluding renewable generation and water treatment, waste and coal mining), basic industries with emissions-intensive processes (steel and cement), end-user activities of energy, through their products or services (automobiles, aviation and shipping), with a level of sensitivity to this risk, high or very high. Since 2022, this calculation was introduced for the small business sector (SMEs and the self-employed). The results obtained in 2023 indicate that the EAD associated with high or very high transition risk in this portfolio is limited, at around 3%, and is mainly concentrated in Spain and in the automobile components subsector. In sectors classified as HTR, the management criteria defined in the Sector Plans have been reinforced. This analysis leads, in certain cases, to establishing credit risk mitigation measures, such as limiting long-term exposure. The analysis of customers in the HTR sectors is supported by a score developed by BBVA called Transition Risk Indicator (hereinafter TRi), which allows the integration of the customer's low-carbon profile, the level of regulatory pressure in the geographical areas where it is present , its level of disclosure on climate management in line with the TCFD recommendations and the ambition and maturity of its decarbonization objectives. The result of the score is a valuable tool to classify customers by their level of exposure to transition risk and maturity in its management. This classification allows the risk mitigation policies established in the Sector Frameworks to be applied. Likewise, TRi is a valuable tool for customer segmentation in sectoral alignment plans for the portfolios that are part of BBVA’s objectives. During 2023, a version of the TRi has been developed for the auto parts sector, which joins the existing ones for the oil and gas, power generation, auto, steel and cement sectors. The number of customers for whom the transition score is available has significantly expanded. The following image shows the results of the transition score of the main customers in the portfolio (the size of the circles represents the number of customers in each category):
TRANSITION SCORE OF MAJOR CUSTOMERS BY SECTOR
*Original Equipment Manufacturer
In the chapter related to process integration the use of the Client Sustainability Toolkit has been implemented in 2023 in the corporate banking segment, a common front for the risk and business teams that allows the visualization of updated information on customers referring to sustainability, integrating information from external databases -among others, CO2 emissions, decarbonization objectives, ESG ratings, controversies-, the results of internal calculation engines - such as the level of alignment, financed emissions and the TRi - and Additionally, it allows manual data capture by the teams involved in customer review. The calculation of the TRi score is integrated into this work environment. During 2023, information has been collected regarding approximately 1,500 corporate customers from all the geographies where BBVA operates.
In the Retail portfolio, during 2023, progress has been made in the integration of sustainability issues, and in particular on those related to decarbonization, in the Action Frameworks for Mortgages, Small Businesses and Vehicle Loans. One of the main aspects that determine the transition risk of these portfolios is the financed carbon emissions associated with each of them. Therefore, the calculation of financed emissions serves as a lever to identify the portfolios most sensitive to changes in regulation, technology or energy or CO2 prices.
51 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
In turn, as a risk mitigation lever, BBVA acts as a facilitator of financing investments that are necessary for mitigation and adaptation to climate change with more sustainable ways of life and products. Based on the definition carried out in 2021 of the sustainability criteria to classify when a guarantee is considered sustainable, BBVA has applied differentiated prices to loans with sustainability content, such as in the “Efficient House Mortgage”, for homes with consumption letter A or B. As with mortgages, financing with sustainable products is encouraged when sustainability criteria are met, in this case, for electric cars or plug-in hybrids.
The availability of highly specific customer and operational data is an essential requirement for effective climate and environmental risk management. During 2023, the deployment of the sustainability data strategy has continued, reevaluating data needs, identifying data gaps, and developing a business process review plan to eliminate said gaps. Among the data considered are those that satisfy both regulatory and management needs, such as those necessary for the calculation of the TRi, energy efficiency certificates for properties taken as collateral, ESG ratings, greenhouse gas emissions, location of assets and collateral and specific sector metrics
In particular, BBVA continues to make progress in collecting data on real Energy Efficiency Certificates (EEC) of real estate assets in the geographies where this type of certificate exists. In the case of Spain, work is being done to integrate the CEE into mortgage origination. To this end, BBVA is actively participating in various sector forums, with the aim of eliminating the barriers that currently prevent the capture of the CEE in 100% of the operations and of standardizing methodologies for assessing transition risk in collateral at the European level, providing transparency to the market. In the rest of the regions where there is no legislative framework comparable to that of the European Union regarding the energy efficiency of buildings, BBVA carries out projects aimed at estimating energy consumption and financed emissions that are as close to reality as possible and allow their integration into risk processes.
Classification and measurement of physical risk
Physical risk is associated with the location of the assets and the vulnerability based on their activity and can materialize in credit risk through different transmission channels, impacting in multiple ways such as, for example, the purchasing power of customers, productivity. of business, market demand or asset value. During 2023, BBVA has experienced relevant learning in this field and its level of maturity and knowledge of the different methodologies for assessing physical risk has advanced considerably. These advances represent a first approximation due to the complexity of carrying out an evaluation of the exposure and impacts of physical risks. BBVA has continued to make progress in evaluating the materiality of chronic and acute risks in the different portfolios. The analysis of physical risk is structured around three pillars:
Regarding the threat, the methodology of the World Bank's Think Hazard tool has been followed. This tool indicates the risk levels of different natural hazards, both acute (cyclone, heat waves, forest fire and river flood) and chronic (drought and coastal flood), at a global level and with different details depending on the geographical area. of the planet. These risk levels are calculated based on the frequency of occurrence and intensity of the different natural threats. It is important to note that the information used is provided by a series of private, academic and public organizations. In addition, work has been done to increase the granularity of the risk levels offered by Think Hazard, using scientific and technical criteria, for the most relevant hazards in BBVA's geographic areas; specifically, tropical cyclones, coastal and river flooding, and forest fires.
For the exposure component, during 2023 the granularity of the analysis carried out has been increased by optimizing the relationship between the administrative levels of the Think Hazard tool and the postal codes available in the different BBVA portfolios. In addition, work has been done to make standardized and detailed information available on the locations of the guarantees and assets available in the databases to be able to convert between postal addresses and geographic coordinates.
For the vulnerability component, during 2023 the sectoral granularity of the analysis for wholesale banking and SMEs has been maintained. This analysis is carried out based on eight indicators that capture direct and indirect physical impacts, so that the sensitivity of each sector to climate hazards is indirectly evaluated by analyzing its sensitivity to these vulnerability indicators. This methodology follows best practices identified by the Taskforce on Climate-related Financial Disclosure (TCFD) and UNEP-FI. As a result, a qualitative classification of the sub-sectors is generated according to the potential impact on their business model and activity of chronic or acute changes in climate. Threat and vulnerability scores are applied at the contract level based on location to identify physical risk exposure. As a result, the sectors identified with the greatest vulnerability to physical risks have been Energy Generation, Basic Materials, Construction, Consumer and Real Estate.
52 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
EXPOSURE TO PHYSICAL RISK AS OF DECEMBER 31, 2023 (PERCENTAGE)
| (1) | (1) The breakdown includes the portfolios of Spain, Mexico, Turkey, Peru, Colombia and Argentina. |
|---|---|
During 2023, work has begun on having greater analytical and data capabilities, necessary to accurately evaluate and quantify the impacts of physical risk.# 2.1.5 Natural Capital
Specifically, work is underway to generate client-level projections of expected losses due to acute and chronic climate hazards. These projections are made according to different climate scenarios, including a RCP 7.0 greenhouse gas concentration scenario, and in different time horizons up to 2100. The work carried out has initially focused on Spain's mortgage portfolio based on information standardized locations of guarantees and in the wholesale portfolio for Corporate customers. During 2024, the implementation of these capabilities will continue in the rest of the portfolios and geographies.
The global effort to combat climate change cannot be effective without simultaneously addressing the natural capital challenge. To reflect this, the transition plans of companies should be improved to reflect their dependencies and impacts on nature and biodiversity and to include the just transition. Ensuring healthy ecosystems and combating climate change are intrinsically linked challenges. Global warming affects ecosystems directly, e.g., through their loss.
According to BBVA's General Sustainability Policy, Natural Capital comprises the earth's natural assets (soil, air, water, flora and fauna), and the ecosystems resulting from them, which make human life possible.
BBVA includes Natural Capital in its holistic vision of sustainability that covers all geographies. For more information on the strategy and objectives related to Natural Capital, see section "2.1.1 ESG strategy and objectives".
The General Sustainability Policy expressly includes the protection of natural capital as one of its main focuses of action. Specifically, BBVA recognizes the need to protect ecosystem services and natural assets as well as natural ecological species and processes, and considers biodiversity and natural capital in its relationship with its customers. For more information on the governance model and applicable policies, see section "2.1.6 Governance Model".
The Environmental and Social Framework specifically includes a series of prohibited activities related to biodiversity loss and combating deforestation:
If BBVA concludes that any of the circumstances described in the prohibited activities or general bans apply to a project, it will decline to participate in that project. In addition, the Equator Principles were updated in 2020, strengthening their focus on biodiversity. Signatories, one of them BBVA, are committed to supporting conservation, including the goal of improving the evidence base for biodiversity-related research and decisions.
Following international reference frameworks such as SASB's Materiality Map and rating agencies, BBVA has identified the sub- sectors of activity that it finances and the most relevant environmental and social factors of each one, including, in addition to climate change, aspects related to natural capital such as pollution and waste, biodiversity and land use or water resource management. This exercise is included in the "Sector Guide for the integration of sustainability factors in credit analysis", which defines the most common metrics and reference thresholds in relation to environmental aspects and is used as a support tool in the admission process.
Customer activity can affect natural capital (impacts) while the loss of natural capital can generate risks for the operations and business model of BBVA's customers (dependencies).
During 2023, BBVA updated the heat map of impacts and dependencies it conducted during 2022. The ENCORE (Exploring Natural Capital Opportunities, Risks and Exposure) tool methodology developed by the Natural Capital Finance Alliance in collaboration with UNEP-WCMC was predominantly used. It is also consistent with aspects contained in other reference tools such as the SBTN Materiality Screening Tool, developed by the Science Based Target Network (SBTN) and included, in a qualitative manner, the impacts and dependencies of the value chain (the dependencies and impacts of the upstream sector of each of the financed sectors have been included).
The circles included in the figure represent BBVA's exposure at subsector level as a percentage of total EAD excluding the exposure to sectors outside the scope of this financial year, like non-financial companies and institutions.
Sectors with high or very high dependence on natural capital account for 5.32% of wholesale banking EAD of the Group as of December 31, 2023 while those sectors with high or very high impact account for 27.39%. As a result of this analysis, seven sectors have been identified as having a significant impact and/or dependence on natural capital: (1) Agriculture, livestock and fishing (primary production); (2) Food, beverage and tobacco production (excluding primary production); (3) Construction; (4) Construction materials; (5) Hotel industry; (6) Mining; and (7) Power generation:
For the main customers these seven prioritized sectors relevant metrics have been identified and obtained.²¹ The evaluation of these metrics allows us to inform the client admission process, identifying those metrics to take into account in Know Your Client (KYC) and offering references both for the definition of risk mitigation criteria and for Advisory with wholesale customers.
Given the importance to BBVA's loan portfolio and dependence on water resources during 2023, the scope of water stress risk assessments at the customer level has been extended to major customers in the Power Generation and Cement sectors. This assessment was carried out using the World Resources Institute's (WRI) Aqueduct Water Risk Atlas tool, which identifies water risk at the locations of its customers' power generation plants. This tool identifies the water risk of the customer's assets today and in the year 2040 with a greenhouse gas concentration scenario RCP 8.5 (IPCC hot house scenario). The results of the assessment are a water stress risk score of the customer and of the assets. The results of this analysis show that approximately 23% of the total installed capacity of the customers analyzed of the Power generation sector has a high or very high risk of water stress and approximately 18% of the cement production plants of the customers analyzed of the Cement sector have a high or very high risk of water stress.
Furthermore, the water management strategies of the customers analyzed, the targets set and the historical performance of water consumption were analyzed. In this way, by combining water risk exposure based on asset locations and water management strategies, we can identify those customers who are making progress in water risk management.
In 2024, progress will continue to be made in assessing natural capital risks and their financial impacts in those sectors identified as priority sectors, with a special focus on water. In addition, integration will be systematically promoted in the customer analysis processes through the Sector Action Frameworks, which define the risk appetite at the sector level and risk management policies at the customer level.
²¹ These metrics are inspired by international reporting frameworks such as ISSB (International Sustainability Standards Board), ESRS (European Sustainability Reporting Standards), GRI or TNFD (Task Force on Nature-related Disclosure).# Opportunities
In line with its strategy, in 2023, BBVA launched new lines of work to strengthen solutions for business and corporate customers on water-related issues inspired by the Water Footprint Loan (first syndicated credit line linked to indicators related to water footprint reduction launched in 2022). In 2023, BBVA and the International Finance Corporation (IFC) launched the first blue bond in Colombia, aimed at supporting initiatives related to the protection of the country's water resources. BBVA has developed internal standards to promote the financing of sustainable fishing activities with the Marine Stewardship Council (MSC) and Aquaculture Stewardship Council (ASC) labels and also supports reforestation projects in the framework of purchase of carbon credits. As a member of the TNFD Forum (Task Force on Nature-Related Financial Disclosures or TNFD) since 2022, BBVA follows the publication of the different versions of the framework for the management and disclosure of nature-related risks and opportunities and the published guidelines. In 2023, BBVA also joined:
Spain's Water Footprint Loan and Colombia's brokered blue bond, mentioned in previous paragraphs, have been recognized as best practices in the aforementioned guide.
Achieving net zero emissions by 2050 includes addressing emissions from customers who receive financing from the Group. In order to support its customers in the transition towards a more sustainable future, BBVA intends to publish alignment objectives to 2030 alignment targets for the sectors defined in the Net Zero Banking Alliance's Target Setting Guide. These alignment objectives 22 involve establishing specific objectives for the different sectors that are considered the largest emitters. According to the aforementioned Guide, these objectives must be determined at the sector level, which implies that adapted and specific goals will be set for each economic sector, in order to reduce its carbon footprint and move towards emissions neutrality. This sectoral approach makes it possible to address the specific particularities and challenges of each industry on its path to environmental sustainability.
Considering the previous, BBVA announced in 2021 its objective of phasing out its thermal coal activities by 2030 in developed countries and by 2040 globally (under the terms of the Environmental and Social Framework). Likewise, in 2021, using the PACTA (Paris Agreement Capital Transition Assessment) methodology, BBVA published alignment objectives for 2030 for the power generation, automobile, steel and cement sectors. The Net Zero scenario of the International Energy Agency (IEA_NZE) and the Institute for Sustainable Futures Sectoral Pathways to Net Zero Emissions (ISF NZ) was used as a benchmark. In 2023, the International Energy Agency published an update to the net-zero emissions scenario for 2050. BBVA's interim 2030 decarbonization targets published in 2021 remain unchanged.
During 2022, BBVA published its alignment objective for the oil and gas sector. BBVA is participating in the definition within the NZBA of a specific guideline for this sector. However, given its relevance to global emissions, it was decided to publish a metric that would collect the largest amount of emissions given the information available. For the calculation, the PCAF methodology has been used and an absolute emissions reduction target of scope 1, 2 and 3 has been established for oil exploration and production.
In 2023, alignment objectives to 2030 have been published for the aviation and shipping sectors. The Net Zero scenario of the International Energy Agency (IEA_NZE) for aviation and the Strategy established in 2018 by the IMO (International Maritime Organization) on emissions reduction for maritime transport have been used as benchmarks.
The following table presents, for the sectors in which alignment objectives have been defined, the details of the metrics chosen , the scope of emissions considered, the scenario used, the business-as-usual metric, the methodology used, the decarbonization target by 2030 and the attributed CO2 emissions associated with the value chain in absolute terms:
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This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
22 The achievement and progressive advancement of decarbonization objectives will depend to a large extent on the actions of third parties, such as customers, governments and other interest groups, and, therefore, may be materially affected by said actions, or by lack of it, as well as by other exogenous factors that do not depend on BBVA (including, but not limited to, new technological and regulatory developments, war conflicts, the evolution of the climate and energy crises, etc.). Consequently, these objectives may be subject to future revisions.
| Sector | Metric | Emission scope | Scenario | Baseline (1) | 2030 target | Target Reduction | 2022 Market scenario Reduction | 2023 Market scenario Reduction | Methodology | Attributed emissions associated with the value chain (MTn CO2 e) (2) |
|---|---|---|---|---|---|---|---|---|---|---|
| Oil & Gas (upstream) | Absolute emissions upstream (million t) | 1&2&3 | IAE_NZE | 14 | 9.8 | (30)% | 12.5 | 10.6 | PCAF | n/a |
| Power (generation) | Emission intensity (Kg CO2e/MWh) | 1&2 | IAE_NZE | 221 | 107 | (52)% | 212 | 167 | PACTA | 5.1 |
| Autos (manufacturers) | Emission intensity (g CO2/v-km) | 3 | IAE_NZE | 205 | 110 | (46)% | 195 | 173 | PACTA | 0.9 |
| Steel (manufacturers) | Emission intensity (Kg CO2 /tonne steel) | 1&2 | ISF-NZ | 1,270 | 984 | (23)% | 1200 (3) | 1,181 | PACTA | 1.5 |
| Cement (manufacturers) | Emission intensity (Kg CO2 /tonne cement) | 1&2 | ISF-NZ | 700 | 579 | (17)% | 690 | 713 | PACTA | 1.6 |
| Coal (mining) | Total amount committed (€Mn) (4) | n/a | n/a | * | * | * | 1,701 | 1,552 | n/a | n/a |
| Aviation (airlines) | Emission intensity (Kg CO2e/PKM) (5) | 1 | IAE_NZE | 88 | (6) 72 | (18)% | 88 | 89 | PACTA | 0.28 |
| Shipping (operators) | Alignment delta | IMO | +6.8% | </=0% | 0.4 |
For more information on the alignment of the shipping sector, see section "8. Shipping" within the section "Sector alignment plans".
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This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
It is important to emphasize that the baseline of these metrics may vary, since the sources of information used 23 and the methodology are constantly evolving. BBVA's objective is to maintain the level of reduction ambition even though the baselines may change. Additionally, the fulfillment of these objectives is not expected as a linear process in the short term. To achieve these in the long term, it may be necessary to assume some deterioration in the alignment metric in the short term.# Following the climate target guide for banks published by the NZBA, during 2024, BBVA will continue working to establish decarbonization targets for the rest of the CO2-intensive sectors, such as aluminum, commercial and residential real estate, and agriculture. This planning will be carried out as long as there is a recognized methodology and data available to carry out said evaluation. The internal tools developed by BBVA are essential to integrating the management of reduction objectives into daily risk processes. These tools include:
– TRi, a tool to assess the current emissions profile and decarbonization strategies of each customer with a sectoral approach and based on the analysis of the most significant variables. This allows them to be categorized according to their transition risk and the maturity of their plans, allowing personalized advice on their decarbonization strategy.
– Sustainability Client Toolkit, a tool that gathers ESG information from large corporations and/or entities with public information necessary for management, and offers it in a single repository. This makes it easy for front-line teams to access and use.
These resources are essential for portfolio alignment management and contribute to defining the risk appetite included in the Sector Frameworks. They allow for a comprehensive and detailed view of customers' ESG metrics and their impact on risk management strategies.
According to the Net Zero Banking Alliance (NZBA) guidelines, within 12 months of the publication of sectoral targets, banks must publish, at a minimum, a high-level transition plan outlining the actions planned to be implemented in order to meet the targets (customer support, sectoral policies, capacity building, development of tools and products, strategy to increase the customer base, etc.). BBVA has translated this into a sectoral approach by developing sectoral alignment plans that make it possible to analyze the part of the portfolio with the highest CO2e emissions and deploy a decarbonization strategy to meet the goal of zero net emissions by 2050. Each plan includes a detailed analysis of each sector, assessing its role in the decarbonization of the economy, identifying opportunities and risks, and defining response strategies. The sector alignment plans include an analysis of the current state of the portfolio and the situation with respect to the target set by the BBVA Group for the sector. It also identifies the core areas for managing portfolio transition risk, including portfolio alignment metrics. The plans are based on risk considerations and on the identification of business opportunities with existing and new customers, expressed through different levels of appetite for customers in the sector. All this is reflected in the formulation of a sector specific strategic plan that defines a commercial strategy for:
– Guiding selective growth by financing and supporting existing and new customers who are making progress in their transition to net-zero emissions by 2050
– Monitoring progress in the alignment exercise, to meet the intermediate targets set for 2030.
– Mitigating risks related to decarbonization in the balance sheet.
The sector alignment plans have been developed by multidisciplinary working groups made up of teams from GRM, the Global Sustainability Area and Strategy. These groups have developed sector alignment plans, covering several key sectors such as oil and gas, power generation, automobiles, steel and cement, coal, aviation and shipping.
BBVA has developed specific tools to facilitate effective management and compliance with alignment objectives, such as:
– The alignment management dashboard: uses data provided by the internal calculation process based on the PACTA methodology to monitor progress on portfolio alignment and reduction targets by sector.
– The "What If" simulator. This allows real-time evaluation of the potential impact of transactions on the decarbonization curve of each customer, as well as on the BBVA Group's portfolio curve for the corresponding sector, enabling proactive and dynamic management of the loan portfolio.
In addition, these plans integrate risk considerations supported by tools such as the TRi, and the Sustainability Client Toolkit, thus ensuring responsible and sustainable management aligned with the objectives of the Paris Agreement. For more information on these tools, see "Alignment of the Loan Portfolio with the Paris Agreement" above.
Additionally, following the recommendations of GFANZ, in the annual update of the sector alignment plans, it is planned to incorporate part of the analysis of the dependencies and impacts on natural capital, as described in the “Integration of natural capital” section. Aspects related to a just transition are also planned, contemplating an equitable approach in the transformation process towards a more sustainable economy.
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23
The main supplier of information on emissions intensity is Asset Impact (formerly Asset Resolution), which provides asset information for the portfolio included in the calculation perimeter. The information coverage varies between 95% and 100%, depending on the sector analyzed.
In order to monitor the alignment objectives of the sectors for which targets have been set and supervise their compliance, BBVA created the Sustainability Alignment Steering Group (SASG) in 2022. Among the functions of the SASG are the following:
– Analyze and discuss the alignment objectives for 2030 prior to their approval.
– Evaluate the degree of compliance with the alignment objectives and their levers.
– Analyze and discuss the proposals for sectoral or aggregate alignment plans, and their updating, which will be submitted to the SASG by the business units, with the support of the technical teams from other participating areas.
– Promote the creation and deployment of the tools, methodologies and variables necessary for the operationalization of sector alignment plans in the management processes already existing in the business units.
– Analyze and learn about the best practices in the sector, promoting the integration of sustainable criteria in the day-to-day business.
BBVA's alignment governance model has been strengthened during 2023. In addition to the existing SASG, Global Sectoral Heads have been introduced in CIB for sectors with 2030 decarbonization targets. These sectoral leaders are responsible for leading the business strategy according to each sector, executing the actions defined in the sectoral alignment plans and implementing a support plan with customers in the sector to help them in their transition to a low-carbon economy. As part of this progress, an annual process has been incorporated to review key customer projections from a climate alignment perspective, which influences the development of the annual business plan. For more information see section “2.1.6. Governance model”.
Actions to manage portfolio alignment metrics include:
– Gather, evaluate and monitor the climate transition plans publicly disclosed by BBVA's customers.
– Assess the CO2 emissions and climate impact of all new transactions as part of the commercial business approval process through the use of tools.
– Generate strategic dialogue with customers on their transition strategies, seeking opportunities to support them through investment and financing proposals and solutions.
In order to promote knowledge of the best sectoral practices across the organization, specific training programs on sectoral alignment plans have been developed, complementing the sustainability training offered to all employees and specific programs on decarbonization for bankers and risk analysts.
In 2023, the BBVA Directors' Remuneration Policy and the BBVA Group's General Remuneration Policy included, as part of the Annual Variable Remuneration of the members of the Identified Staff, including executive directors and members of BBVA's Senior Management, a long-term incentive linked, for example, to the degree of compliance with the decarbonization targets of a number of sectors for which the Group publishes specific targets. For more information on the calculation of variable remuneration, see the "Remuneration" section under "2.3.3 Employees".
BBVA is an active part of several initiatives that focus on the previously mentioned alignment sectors, participating in the following initiatives:
– Member of the NZBA Steering Group
– Participant in the NZBA working group for the oil & gas sector.
– Member of the Spanish Group for Green Growth (GECV), which promotes public-private collaboration to jointly advance in environmental challenges such as natural capital, circular economy, energy efficiency, etc.
– Signatory to the Climate-Aligned Finance Agreement for Steel, which seeks to set joint standards for the decarbonization of the steel sector through a collective climate-aligned finance agreement.
– Member of the European Clean Hydrogen Alliance, focused on promoting the use of clean hydrogen in Europe.
In addition, BBVA is a founding member of the NZBA, as well as a member of the Financial Industry Advisory Council of the International Energy Agency (IEA). For more information on participation in other initiatives, see the section "2.1.4 Dialogue and discussions with customers, industry and the public sector".
During 2023, BBVA has reinforced its strategy aimed at raising awareness about the importance of having solid plans to address decarbonization. The Group has focused on supporting customers who require advice in defining and/or implementing transition strategies towards a more sustainable model.# However, BBVA recognizes that the success of decarbonization is also in the hands of governments, regulators and supervisory bodies, through their public and/or sectoral policies. Collaboration between the financial sector and these actors is key to achieving effective and lasting change towards a cleaner and more sustainable economy.
Among its strategic investments to support the decarbonization of the economy, BBVA has invested in decarbonization funds explained in the section “2.1.1 ESG strategy and objectives”. These projects allow BBVA to acquire a differential knowledge of the business opportunity and risks, as well as to offer differential solutions or proposals to its customers. For more details, see the ESG Strategy and Objectives section.
59 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
Below, the sector alignment plans and progress on customer transition plans are detailed for all those sectors for which BBVA has set a target.
BBVA has set a target to reduce absolute carbon emissions by 30% in the upstream oil & gas sector (exploration, drilling and extraction) between 2021 and 2030, measured in millions of tons of CO2e (Scope 1, 2 and 3).
| Indicator | Description |
|---|---|
| (1) | Alignment metric as of December 2023. For the Oil and Gas sector, the portfolio alignment metric is an absolute emissions metric with a baseline of 2021 and the target reduction is only associated with the financing available. |
| (2) | Variation in the upstream financing portfolio in millions of euros between 2021 and 2023 considering drawn and undrawn financing (such as loans, unused revolving credit lines, guarantees, ECA lines, among others). |
| (3) | Percentage calculated in terms of the volume of loans in the portfolio, which includes both drawn and undrawn financing (such as loans, unused revolving lines of credit, guarantees, ECA lines, among others). Data as of December 2023. |
Customers who are actively managing their transition are considered to be those classified as “Advanced”, “Robust” or “Moderate” according to internal transition assessment tools such as the Transition Risk Indicator. Indicator -TRi), considering its medium-term emissions reduction objectives and levers for the management of said emissions and its committed investments to execute its transition plan.
To calculate the emissions of this sector, BBVA has developed its own methodology, based on the PCAF methodology. The calculation was performed on the upstream business of the companies in the sector, accounting for the scope 1, 2 and 3 emissions of the barrels produced by the companies. For the attribution of these issues, the PCAF methodology (weight of the financing arranged on the global debt and capital profile of the different business groups) has been used. The emissions data were obtained from the Asset Impact database (the same used for the PACTA methodology) and, when necessary due to lack of information, an approximate calculation was made (score 5 PCAF) using economic emission factors.
The absolute financed emissions of the oil and gas sector have been 10.6 Mt CO2e as of December 2023, having been reduced by 24% compared to the base year 2021 and by 15% compared to 2022. This important reduction has been a consequence of proactive portfolio management that has reduced the financing available by 22% compared to the base year 2021 and 17% compared to 2022 and a prioritization of customers who actively manage their transition to support them in their commitments. Additionally, the portfolio has experienced an improvement in the emissions intensity factor 24 per euro financed, 3% lower compared to the base year 2021 (2% higher compared to 2022).
BBVA will also support customers in their transition to other forms of low-carbon energy generation by financing the necessary investments that facilitate their diversification and decarbonization.
60 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
24 Emissions intensity factor is the result of dividing the total financed emissions by the level of financing provided.
BBVA has set a target to reduce its carbon emissions intensity by 52% in the power generation sector between 2020 and 2030, measured in kilograms of CO2e/MWh (Scope 1 and 2).
| Indicator | Description |
|---|---|
| (1) | Alignment metrics as of December 2023. |
| (2) | Change in the financing portfolio in millions of euros between 2020 and 2023 considering drawn and undrawn financing (such as loans, unused revolving credit lines, guarantees, ECA lines, etc.). |
| (3) | Percentage calculated in terms of the volume of loans in the portfolio, which includes both drawn and undrawn financing (such as loans, unused revolving lines of credit, guarantees, ECA lines, among others). Data as of December 2023. |
Customers who are actively managing their transition are considered to be those classified as “Advanced”, “Robust” or “Moderate” according to internal transition assessment tools such as the Transition Risk Indicator. Indicator -TRi), considering its medium-term emissions reduction objectives and levers for the management of said emissions and its committed investments to execute its transition plan.
(4) Historical market data has been updated due to improvements in information sources.
The portfolio alignment metric for the power generation sector follows the PACTA methodology. The PACTA methodology is based on the identification of the Group's financing related to the customers' power generation activity.
The carbon emissions intensity of the power generation portfolio has been 167 Kg CO2/MWh as of December 2023, 60% lower than the average intensity of the market, and after having reduced by 21% in the last year and 24% compared to the base year 2020. This intensity of carbon emissions shows the strength of the quality of our financing portfolio, with strong support for clean energies, being a relevant axis of BBVA's strategy. The reduction in 2023 has been the consequence of a 34% growth in renewable energy projects, the improvement of the portfolio mix due to the improvement of customers' emissions intensities and the proactive management of the portfolio by promoting growth with customers who actively manage their transition..
61 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
BBVA has set a target to reduce its carbon emissions intensity by 46% in the automobile sector between 2020 and 2030, measured in grams of CO2/km-v (Scope 3).
| Indicator | Description |
|---|---|
| (1) | Alignment metrics as of December 2023. |
| (2) | Change in the financing portfolio in millions of euros between 2020 and 2023 considering drawn and undrawn financing (such as loans, unused revolving credit lines, guarantees, ECA lines, etc.). |
| (3) | Percentage calculated in terms of the volume of loans in the portfolio, which includes both drawn and undrawn financing (such as loans, unused revolving lines of credit, guarantees, ECA lines, among others). Data as of December 2023. |
Customers who are actively managing their transition are considered to be those classified as “Advanced”, “Robust” or “Moderate” according to internal transition assessment tools such as the Transition Risk Indicator. Indicator -TRi), considering its medium-term emissions reduction objectives and levers for the management of said emissions and its committed investments to execute its transition plan.
(4) Historical market data has been updated due to improvements in information sources.
The portfolio alignment metric for the automobile sector follows the PACTA methodology. The PACTA methodology is based on the identification of the Group's financing related to automobile manufacturing by customers. In the case of the automobile sector, the metric analyzes automobile manufacturers by measuring the emissions per km of the vehicles they produce.
The automobile portfolio (173 g CO2/v-km as of December 2023) narrows the existing gap with the market average. The curve advances with a level of CO2 emissions lower than that of 2022. The variations have been produced mainly by the progress in the transition of the portfolio's customers with a progressive increase in the penetration of electric vehicles in the different markets and an overweight of customers actively managing their transition. Additionally, BBVA supports the financing of new customers with purely electric production lines as they position themselves in the market, particularly in the context of their geographic expansion strategies.
BBVA has set a target to reduce its carbon emissions intensity by 23% in the steel sector between 2020 and 2030, measured in kilograms of CO2/ton of steel (Scope 1 and 2).
(1) The emissions intensity data for the steel sector corresponding to the 2022 financial year differs from that published in the 2022 Non-Financial Information Statement due to updates and additional verifications.
(2) Alignment metrics as of December 2023.
(3) Change in the financing portfolio in millions of euros between 2020 and 2023 considering drawn and undrawn financing (such as loans, unused revolving credit lines, guarantees, ECA lines, etc.).
(4) Percentage calculated in terms of the volume of loans in the portfolio, both drawn and undrawn. Data as of December 2023. Customers that are actively managing their transition are considered as "Advanced", "Robust" or "Moderate" according to internal transition assessment tools, such as TRi, considering medium-term emissions reduction targets, identification of levers for emissions management and commitment of associated investments to execute their transition plan.
(5) Electric Arc Furnaces (EAF).
(6) Direct Reduction of Iron with Hydrogen, for its acronym in English: H2-DRI (Hydrogen-based direct reduced iron).
(7) Historical market data has been updated due to improvements in information sources.
The portfolio alignment metric for the steel sector follows the PACTA methodology compatible with the Institute for Sustainable Futures Net-Zero Scenario by 2050 (ISF-NZ). The PACTA methodology is based on the identification of the Group's financing related to customers in steel manufacturing. The steel sector concentrates most of its emissions in the steel manufacturing process. PACTA focuses on this point in the value chain.
The steel portfolio (1,181 kg CO2/tonne of steel as of December 2023) has consistently performed better than the market as a whole in the last two years due to the weight of the financing of electric arc furnaces, of a much less intensive than blast furnaces. The curve experiences a lower level of emissions than in 2022 due to the incorporation of new electric arc customers, although mitigated to a certain extent by the growth in exposure to customers in the Turkish portfolio with high intensities today but with manufacturing processes which are expected to transition in line with BBVA's objectives.
BBVA has set a target to reduce its carbon emissions intensity by 17% in the cement sector between 2020 and 2030, measured in kilograms of CO2/ton of cement (Scope 1 and 2).
(1) Alignment metrics as of December 2023.
(2) Change in the financing portfolio in millions of euros between 2020 and 2023 considering drawn and undrawn financing (such as loans, unused revolving credit lines, guarantees, ECA lines, etc.).
(3) Percentage calculated in terms of the volume of loans in the portfolio, which includes both drawn and undrawn financing (such as loans, unused revolving lines of credit, guarantees, ECA lines, among others). Data as of December 2023. Customers who are actively managing their transition are considered to be those classified as “Advanced”, “Robust” or “Moderate” according to internal transition assessment tools such as the Transition Risk Indicator. Indicator -TRi), considering its medium-term emissions reduction objectives and levers for the management of said emissions and its committed investments to execute its transition plan.
The portfolio alignment metric for the cement sector follows the PACTA methodology compatible with the Institute for Sustainable Futures Net-Zero Scenario by 2050 (ISF-NZ). The PACTA methodology is based on the identification of the Group's financing related to customers in cement manufacturing. In the cement sector, the methodology measures emissions from the manufacture of cement, not its derivatives.
In the case of the cement portfolio (713 Kg CO2/tonne of cement as of December 2023), the increase is explained by improvements in the quality of the data and the incorporation of a new database for client emissions with data higher intensity levels for the entire portfolio. The emissions intensity of 2023 shows a moderate increase compared to 2020, resulting slightly above the global market. Portfolio management between 2022 and 2023 reflects exposure growth of 15% in the last 12 months resulting from growth with customers in the sector who are actively managing their transition in addition to the support of a less advanced client but who is making progress relevant according to internal transition assessment tools, such as the TRi.
In 2021, BBVA announced its objective to eliminate its exposure to coal-related activities by 2030 in developed countries and by 2040 globally (under the terms of the Environmental and Social Framework).
(1) Variation in the financing portfolio in millions of euros between 2022 and 2023 considering drawn and undrawn financing (such as loans, unused revolving credit lines, guarantees, ECA lines, among others).
(2) Percentage calculated in terms of the volume of loans in the portfolio, which includes both drawn and undrawn financing (such as loans, unused revolving credit lines, guarantees, ECA lines, among others) that corresponds to customers who are expected to transition in time to meet thermal coal phase-out target.
(3) In the terms provided in BBVA's published Environmental and Social Framework.
This decision, included in BBVA's Environmental and Social Framework, is configured as one of the main tools to identify customers and projects exposed to potential social and environmental controversies and is aligned with the main standards and best practices in the sector and in the geographies in which they operate. As established in BBVA's Environmental and Social Framework, coal customers are defined as those customers, both new and existing, with more than 5% of their revenues derived from thermal coal mining for power generation, or with revenues derived from power generation and more than 5% of installed capacity for power generation derived from thermal coal. The objective of gradual and orderly exit of exposure will fall on those customers with more than 25% of revenues from thermal coal mining for power generation or more than 25% of installed capacity for power generation derived from thermal coal. In the case of existing customers that exceed this threshold and do not have published coal phase-out targets, exposure to these customers will be phased out in an orderly and progressive manner as their commitments expire 25. For existing customers above this threshold whose published carbon phase-out targets do not meet BBVA's 2030 target in time, exposure will not be increased until the customer's target is aligned with BBVA's.
The coal portfolio has decreased by 9% compared to 2022, excluding the project financing business. This reduction is due to lower exposure to coal-related activities as customer financing matures.
25 The total amount of the financing portfolio weighted by revenues from thermal coal mining or installed capacity for thermal coal-fired power generation with coal customers (defined under the terms of the Environmental and Social Framework) amounts to 1,552 million euros as of December 31, 2023. The total amount of the financing portfolio weighted by revenues from thermal coal mining or installed capacity for thermal coal-fired power generation with coal customers that have limited expectations of making the transition in time to meet BBVA's coal phase out target as of the same date amounts to 225 million euros.
26 The financing portfolio considers drawn and undrawn financing (such as loans, unused revolving credit lines, guarantees, ECA lines, and others).
BBVA has set a target to reduce its carbon emissions intensity by 18% in the aviation sector between 2022 and 2030, measured in grams of CO2/PKM (Scope 1).
(1) Alignment metric as of December 2023. The gCO2/PKM metric of BBVA's portfolio is adjusted by the belly freight factor. Without considering this factor, the emissions intensity data in the base year 2022 is 103 gCO2/PKM and in the year 2023 it is 106 gCO2/PKM, according to disclosure of Pillar 3 as of December 2023.# Applying the reduction objective to 2030 on the base year without the belly freight factor, the emissions intensity objective to 2030 is 85 gCO2/PKM.
(2) Variation in the financing portfolio in millions of euros between 2022 and 2023 considering drawn and undrawn financing (such as loans, unused revolving credit lines, guarantees, ECA lines, among others); (3) Percentage calculated in terms of the volume of loans in the portfolio, which includes both drawn and undrawn financing (such as loans, unused revolving lines of credit, guarantees, ECA lines, among others). Data as of December 2023. Customers who are actively managing their transition are considered to be those classified as “Advanced”, “Robust” or “Moderate” according to internal transition assessment tools such as the Transition Risk Indicator. Indicator -TRi), considering its medium-term emissions reduction objectives and levers for the management of said emissions and its committed investments to execute its transition plan. The portfolio alignment metric for the aviation sector follows the PACTA methodology compatible with the International Energy Agency's Net Zero scenario (IEA_NZE). The PACTA methodology is based on the identification of the Group's airline-related financing. In the case of the aviation sector, the metric analyzes airlines by measuring emissions per passenger kilometer of flights operated.
The aviation portfolio (89 gCO2/PKM as of December 2023) increases slightly compared to 2022 but remains below the global market average. The variation is due to a change in the portfolio mix given the timely amortization of certain existing positions with customers. The portfolio mix is expected to recover throughout 2024 while BBVA continues to work with its customers in the design and execution of transition strategies in line with the maturity of this industry.
– The decarbonization of the aviation sector is closely linked to the industrial-scale transition to sustainable aviation fuels (SAF).
– Supporting the financing of fuel efficiency improvements, in particular through fleet renewal.
– Accompaniment to customers who are actively managing their transition, which currently represent 87% of the total amount of the airline-related financing portfolio.
66 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
BBVA has set a target in 2030 to match the trajectory set in 2018 by the International Maritime Organization (IMO).
(1) Alignment metrics as of December 2022. The portfolio alignment metric for the shipping sector is compatible with the IMO standard. This standard analyzes the financing to each vessel exceeding 5,000 tons and establishes a baseline according to the emissions of each type of vessel (Scope 1). The variables for calculating the Annual Efficiency Ratio (Annual Efficiency Ratio) expressed in g CO2/DWT-nm, include the deadweight tonnage (DWT), the nautical miles (nm) traveled in the year and the fuel type. In calculating the alignment, BBVA has calculated the percentage difference between the intensity of each financed ship and the decarbonization trajectory set by IMO for that particular ship type and for the year 2022. It is expressed as (+/-):
– A score of 0% represents a portfolio that is exactly in line with the decarbonization trajectory.
– A negative score indicates that the portfolio intensity is lower than that required by the decarbonization trajectory.
– A positive score indicates that the portfolio intensity is higher than that required by the decarbonization trajectory.
– Promote the adaptation of the fleet to ships with decarbonization trajectories lower than those established by the IMO.
– Supporting customers with transition plans aimed at making their fleet more efficient.
67 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
BBVA continues to work on the measurement of emissions financed in the retail and wholesale portfolios. To carry out this measurement, BBVA has adopted the PCAF (Partnership for Carbon Accounting Financials) methodology. This calculation will cover all the portfolios included in the scope of the PCAF standard (first edition) and the Group's significant geographical areas, providing a global view of the emissions financed. This will make it possible to identify in which portfolios and sectors these emissions are concentrated in order to subsequently define mitigation plans, and to evaluate the quality of the data available for these calculations.
In the defined roadmap, the calculation at the end of December 2023 includes the measurement of financed emissions in the scope of loans to companies, project financing, commercial real estate, mortgages and automotive in the scope of BBVA, S.A. (without the Portugal branch), BBVA México, BBVA Colombia and BBVA Perú. In parallel, the Group is working to incorporate the rest of the portfolios and geographical areas by June 2024, in accordance with the regulatory deadlines defined in relation to the publication of the financed issues.
The result of the estimation is expressed both in terms of absolute emissions financed and economic intensity (absolute emissions per million euros financed). In addition, the quality score is presented as defined in the PCAF methodology, which evaluates the availability and reliability of the data used in the calculation by the entities. This score ranges from 1 to 5, with 5 being the worst score assigned when using sector estimates or industry trends using emission factors provided by PCAF, and 1 being the best score when based on individual-level reported and verified emissions data of the counterpart.
Throughout 2023, two major lines of improvement in the calculation of financed emissions have been carried out. The first is the update of factors provided by PCAF to estimate financed emissions when reported data is not available (score 3 to 5). The second line of work has consisted of calculating, from emissions reported by customers, a greater part of the financed emissions (score 1 and 2). Due to the expansion of the geographical scope and the aforementioned lines of improvements, the results at the end of 2022 and at the end of 2023 are not directly comparable. On the other hand, the results of these improvements are reflected in a better calculation quality score.
The level of financed issues calculated at the end of 2022, which included only the lending portfolio in the BBVA S.A. perimeter. excluding branches in Portugal, it was 39.9 million tons of CO2e 27. The result of the calculation of the financed emissions for the same perimeter as of December 2023, after improvements in data, updating of factors and exposure variations, stands at 81.4 million tons of CO2e, originating most of the increase in emissions financed by methodological improvements and updating of emission factors.
For the total perimeter calculated in 2023, that is, BBVA S.A. lending portfolios (excluding the branches) in Portugal, Mexico, Colombia and Peru, a total calculation of financed emissions of 159.1 million tons of CO2e has been obtained, considering scope 1, 2 and 3 emissions, and 66 million tons of CO2e taking into account It counts only scopes 1 and 2, significantly reducing the risk of double counting that scope 3 entails and its lower quality in the available data.
The distribution by geography is as follows:
| Total emissions (Scope 1+2+3) | Emissions (Scope 1+2) | |
|---|---|---|
| (1) Data of BBVA S.A. without Portugal |
As indicated, throughout the year work has been done to include the calculation of financed emissions in BBVA México's lending portfolio, with the figure being equivalent to 34.5 million tons of CO2e in June 2023. The methodological and available data carried out in the second part of the year on portfolios of BBVA S.A. (excluding the branches in Portugal) and BBVA Mexico, and therefore not directly attributable to a change in portfolio positioning, lead to an increase in financed emissions of +18 million tons of CO2e. Additionally, the update of the emission factors provided by PCAF causes an increase in emissions of +36 million tons of CO2e in the perimeters of BBVA S.A. (excluding branches in Portugal) and BBVA Mexico. Finally, the inclusion in the calculation of the lending portfolios of BBVA Perú and BBVA Colombia in December 2023 provides an increase of +15.4 million tons of CO2e and 13.3 million tons of CO2e, respectively.
68 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
27 TCFD BBVA 2022 report published in March 2023 (34.5 MM tCO2e in terms of the prudential perimeter of Pillar 3 published in EINF 2022).
The following graph shows the impact of the different factors that explain the evolution of the calculation of financed emissions during 2023:
It is relevant to indicate that the emission factors updated by PCAF in 2023 have suffered a substantial increase in the level of emissions intensity compared to those used in the calculation in 2022. These factors generally present a comparatively higher emissions intensity. high in the geographies incorporated into the calculation in 2023 (Mexico, Colombia and Peru).# 2.2.4 Management of direct environmental impacts
As a financial entity, BBVA has a direct environmental impact through the use of natural resources. BBVA has a clear commitment to society and the environment. Thus, the global strategy for managing direct environmental impacts is structured around three main axes:
– (I) Calculation of the environmental footprint, including the expansion of the scope of carbon footprint calculation with new categories 28 reported by 2023:
– 3.1: Goods and services acquired, including credit card transportation and distribution, cash management services, and storage and logistics services.
– 3.2: Capital goods.
– 3.3: Activities related to the consumption of fuels and energy not accounted for in scope 1 or 2.
– 3.13: Downstream leased assets. Includes emissions from buildings owned by BBVA rented to third parties.
The rest of the Scope 3 categories not included in the footprint calculation (except for 3.15, corresponding to financed emissions, see "Calculation of financed emissions" in section "2.2.3 Alignment of the loan portfolio with the Paris Agreement") are considered either not material or not applicable due to the nature of the BBVA Group's business.
– (II) Reduction of environmental impact, including: the reduction of consumption through energy efficiency initiatives and water and paper consumption, the use of electricity from renewable sources, and the awareness and involvement of employees and other stakeholders on the path towards a low-carbon economy.
– (III) Purchase and retirement of carbon credits for an amount equivalent to Scope 1, 2 and part of Scope 3 emissions (category 5 waste, category 6 emissions from business travel and category 7 employee commuting to work) 29 in quality projects.
In addition, BBVA collaborates in the development of Voluntary Carbon Markets through its participation in initiatives with regulators and other stakeholders. Likewise, BBVA also contributes to the development of new and innovative low-carbon technologies through investments in climate capital funds with a focus on decarbonization, investing in technologies with enormous impact potential (more detail in the “Investment in climate funds” section within of section “2.1.1 ESG strategy and objectives”).
In terms of its own carbon footprint, BBVA's emissions are made up of:
– Scope 1 greenhouse gas emissions, comprising direct emissions from the combustion installations of the company's own buildings (including data centers), fuel for the vehicle fleet and refrigerant gases.
– Scope 2 greenhouse gas emissions, including indirect emissions related to the production of electricity purchased and consumed by buildings (including data centers) and branches.
– Scope 3 greenhouse gas emissions, which include other indirect emissions. In previous years it included emissions from business travels (by plane and train), emissions from waste management and emissions from employee commuting to the workplace. This year, BBVA has expanded the calculation of its footprint, reporting the rest of the material and applicable categories due to the nature of the Group's business.
Both Scope 1 and 2 emissions and Scope 3 emissions are calculated taking into consideration the GHG Protocol standard established by the WRI (World Resources Institute) and the WBCSD (World Business Council for Sustainable Development). The process of measuring and calculating the additional Scope 3 categories has been carried out with an external supplier, which follows the guidelines of the GHG Protocol Corporate Accounting and Reporting Standard and the Corporate Value Chain (Scope 3) Accounting and Reporting Standard.
28 The data for scope 3 emissions corresponding to purchased goods and services (3.1) and capital goods (3.2) are calculated based on the Group's total annual turnover and include those companies whose billing is recorded through the global technological platform that supports all phases of the supply process in the BBVA Group in Spain, Mexico, Peru, Colombia, Argentina, Venezuela and Uruguay, including the companies BBVA, S.A., BBVA México, S.A., Banco BBVA Perú, BBVA Colombia, SA, BBVA Banco Provincial, S.A., BBVA Banco Argentina, S.A. , BBVA Seguros México, S.A., BBVA Pensiones México, BBVA Seguros Salud México, BBVA México Foundation, BBVA México Brokerage House, BBVA Servs. Adm. México, BBVA Operadora México, BBVA Axial Tech S.A. de CV, Multiasistencia S.A. de CV, Gran Jorge Juan, S.A., COPESA, S.A., SEDAE, S.A., SECOSEG S.A. de CV, Banco Occidental, S.A., Aplica Nextgen Servicios, Aplica Nextgen Operadora, SECOBAN, S.A., Multiasistencia Operadora, Futuro Familiar S.A. de CV and Financiera Ayudamos, S.A.. The data for scope 3 emissions corresponding to activities related to the consumption of fuels and energy not accounted for in scope 1 or 2 (3.3) include the countries Spain, Mexico, Turkey, Peru, Colombia, Argentina, Uruguay and Portugal. Certain geographical areas (Venezuela, Chile, Bolivia, Switzerland, the United States, Brazil and BBVA branches outside Spain) and certain companies of the BBVA Group, which represent 5.3% of the total employees of the BBVA Group, are not included in the perimeter. BBVA Group. The data for scope 3 emissions corresponding to leased downstream assets (3.13) include the countries Spain, Mexico, Peru, Colombia, Argentina, Venezuela and Uruguay.
29 No carbon credits are purchased for an amount equivalent to the following Scope 3 categories defined in the GHG Protocol: Category 1 purchase of goods and services; Category 2 capital goods; Category 3 fuel and energy-related activities (not included in Scope 1 or 2); Category 4 upstream transportation and distribution; Category 8 upstream leased assets; Category 9 downstream transportation and distribution; Category 10 processing of products sold; Category 11 use of products sold; Category 12 end-of-life treatment of products sold; Category 13 downstream leased assets; Category 14 franchises; Category 15 investments. For information on Category 15 Investments, see the Calculation of Funded Emissions section of Section 2.2.3 Alignment of the loan portfolio with the Paris Agreement.
BBVA's environmental performance data obtained in 2023 and the evolution with respect to 2022 30 are shown in the following table:
| 2023 | 2022 (2) | ∆ 23-22 | |
|---|---|---|---|
| Scope 1 emissions (tons CO2e)(3) | 38,005 | 41,380 | (8)% |
| Emissions from fuels in facilities (t CO2e) | 10,280 | 12,233 | (16)% |
| Emissions from vehicle fleet fuels (t CO2e) | 10,315 | 9,874 | 4% |
| Emissions from refrigerant gases (t CO2e) | 17,409 | 19,273 | (10)% |
| Scope 2 emissions (tons CO2e) market-based method (4) | 6,981 | 11,507 | (39)% |
| Scope 2 emissions (tons CO2e) location-based method (5) | 203,407 | 202,770 | —% |
| Scope 1&2 emissions (tons CO2e) market-based method | 44,985 | 52,887 | (15)% |
| Scope 1&2 emissions (tons CO2e) location-based method | 241,412 | 244,150 | (1)% |
| Scope 3 emissions (t CO2e) (6) | 1,443,437 | 33,435 | n/a |
| 3.1 Emissions from purchased goods and services (t CO2e) (7) | 1,050,073 | * | n/a |
| 3.2 Emissions from capital goods (t CO2e) | 215,516 | * | n/a |
| 3.3 Emissions from fuel and energy related activities (t CO2e) | 69,447 | * | n/a |
| 3.5 Emissions from waste management (t CO2e) (8) | 878 | 654 | 34% |
| 3.6 Emissions from business travel (t CO2e) (9) | 29,128 | 14,460 | 101% |
| 3.7 Emissions from employees commuting (t CO2e) (10) | 73,779 | 18,321 | 303% |
| 3.13 Emissions from downstream leased assets | 4,616 | * | n/a |
| Total CO2e emissions (t CO2e) market-based method | 1,488,422 | 86,323 | n/a |
| Total CO2e emissions (t CO2e) location-based method | 1,684,849 | 277,586 | n/a |
| Impact of emissions (Scope 1&2) (€) (11) | 2,083,372 | 2,431,076 | (14)% |
n/a: not applicable
*: Data reported for the first time in 2023.
(1) Data for scope 1, 2 and scope 3 emissions corresponding to activities related to fuels and energy (3.3), waste management (3.5), business trips (3.6) and employee travel (3.7), include the countries Spain, Mexico, Turkey, Peru, Colombia, Argentina, Uruguay and Portugal.Certain geographical areas (Venezuela, Chile, Bolivia, Switzerland, the United States, Brazil and BBVA branches outside Spain) and certain companies of the BBVA Group, which represent 5.3% of the total employees of the BBVA Group, are not included in the perimeter. BBVA Group. Some of the data for 2023 are estimates since at the close of the report, complete information for the year was not yet available. The data for scope 3 emissions corresponding to purchased goods and services (3.1) and capital goods (3.2) are calculated based on the Group's annual turnover and include those companies whose turnover is recorded through the global technological platform that supports all phases of the supply process in the BBVA Group in Spain, Mexico, Peru, Colombia, Argentina, Venezuela and Uruguay, including the companies BBVA, S.A., BBVA México, S.A., Banco BBVA Perú, BBVA Colombia, SA, BBVA Banco Provincial, S.A., Banco BBVA Argentina, S.A., BBVA Seguros México, S.A., BBVA Pensiones México, BBVA Seguros Salud México, Fundación BBVA México, Casa de Bolsa BBVA México, BBVA Servs. Adm. México, BBVA Operadora México, BBVA Axial Tech S.A. de CV, Multiasistencia S.A. de CV, Gran Jorge Juan, S.A., COPESA, S.A., SEDAE, S.A., SECOSEG S.A. de CV, Banco Occidental, S.A., Aplica Nextgen Servicios, Aplica Nextgen Operadora, SECOBAN, S.A., Multiasistencia Operadora, Futuro Familiar S.A. de CV and Financiera Ayudamos, S.A.. The data for scope 3 emissions corresponding to leased downstream assets (3.13) include the countries Spain, Mexico, Peru, Colombia, Argentina, Venezuela and Uruguay. (2) 2022 data differ from those published in the previous Non-Financial Information Statement because the estimates included at the end of the 2022 financial year have been replaced by the actual consumption available after the publication of said report and have been modified. certain values according to the new data. (3) Emissions derived from direct energy consumption (fossil fuels) and calculated based on the emission factors of the 2006 IPCC Guidelines for National Greenhouse Gas Inventories. For its conversion to CO2 e, the IPCC Fifth Assessment Report and the IEA have been used as sources. Starting in 2021, emissions derived from the use of the vehicle fleet and refrigerant gas leaks at facilities were included in this scope, applying DEFRA emission factors for the calculation of CO 2e emissions in all geographical areas, including Turkey. (4) Emissions derived from electricity consumption and calculated based on contractual data and, failing that, on the latest available emission factors from the IEA for each country. (5) Emissions derived from electricity consumption and calculated based on the energy mix of each geographic area. The emission factors are the latest available according to IEA for each country. (6) Indirect emissions derived from business travel (plane and train), waste management and employee travel have been calculated using emission factors published by DEFRA in 2023. The rest of the Scope 3 categories have been calculated by a external provider following the guidelines of the GHG Protocol Corporate Accounting and Reporting Standard and the Corporate Value Chain (Scope 3) Accounting and Reporting Standard. (7) Issuances of purchased goods and services include the transportation and distribution of credit cards, cash management services, and storage and logistics services. (8) The data reported for 2022 on emissions from waste management differs from that published in the 2022 Non-Financial Information Statement due to a refinement of the data detailed in the Waste (Circular Economy) table in section II. Reduction of environmental impact. The annual increase in these emissions is due to the effect of the COVID-19 pandemic on fiscal year 2022. (9) The annual increase in emissions derived from business trips is due to the effect of the COVID-19 pandemic on fiscal year 2022. (10) The annual increase in emissions derived from the displacement of employees is due to the incorporation of emissions caused by the displacement of network employees in 2023 (in 2022 only the displacement of Central Services employees was taken into account). The 2022 data does not include emissions from SSCC employee posting in Turkey. (11) The impact of greenhouse gas emissions for 2023 is calculated using only Scope 1 and 2 emissions and using the social cost of CO2 factor based on a proportional estimate of the EPA's social cost of carbon for 2020 ( 51 $/tCO2) and for 2025 ($56/tCO 2), (discount rate of 3%, with exchange rate 1.166€/$).
71 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
30 Consumption associated with the first months of 2022 was affected by low attendance at corporate buildings as a result of the COVID19 pandemic.
| 2023 | 2022 (2) | ∆ 23-22 | |
|---|---|---|---|
| Total water consumption (cubic meters) | 1,579,399.2 | 1,654,133.8 | (5)% |
| Public water supply (cubic meters) | 1,516,881.6 | 1,593,152.3 | (5)% |
| Recycled water (cubic meters) | 62,517.6 | 60,981.5 | 3% |
| Paper (tons) | 2,917.3 | 3,716.9 | (22)% |
| Total Energy (Megawatt hour) (3) | 679,860.0 | 690,740.6 | (2)% |
| Energy from renewable sources (%) | 88.8% | 83.5% | 6% |
| Energy from non renewable sources (%) | 11.2% | 16.5% | (32)% |
(1) The data shown include Spain, Mexico, Turkey, Peru, Colombia, Argentina, Uruguay and Portugal. Certain geographical areas (Venezuela, Chile, Bolivia, Switzerland, the United States, Brazil and BBVA branches outside Spain) and certain BBVA Group companies, which represent 5.3% of total BBVA Group employees, are not included in the perimeter. Some of the data for 2023 are estimates since complete information for the year was not yet available at the publication date.
(2) Data for 2022 differ from those published in the previous Non-Financial Information Statement because the estimates included at year-end 2022 have been replaced by the actual consumption available after the publication of that report and certain values have been modified in accordance with the new data. Likewise, the consumption of recycled water has been modified due to a refinement in the 2022 data.
(3) It includes the consumption of electricity and fossil fuels (diesel oil, natural gas and LP gas), except fuels consumed in fleets. The renewable electricity figure for 2023 has reached 96% in BBVA Group.
Given the business activities in which the BBVA Group engages, it has no environmental liabilities, expenses, assets, provisions or contingencies that might be material with respect to its equity, financial position and results. For this reason, at December 31, 2023, the consolidated financial statements did not present any item that should be included in the environmental information document provided for in Order JUS/616/2022, of June 30, approving the new model for the filing with the Commercial Registry of the consolidated financial statements of the entities obliged to publish them.
31 In its objective to reduce environmental impacts within the framework of Goal 2025 (Goal), BBVA set two targets: (a) to reduce 68% of scope 1 and 2 CO2 emissions compared to 2015 and (b) to consume 70% of electricity from renewable sources by 2025, both already achieved in 2023. In addition, BBVA has been a member since 2018 of the RE100 initiative, through which the world's most influential companies are committed to ensuring that their electricity is 100% renewable by 2050, although BBVA has set a more ambitious internal target of reaching that goal by 2030.
72 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
31 To establish the goals for achieving the 2015-2025 Goal, the 2015 consumption data is taken as a reference. The 2015 and 2019 baseline data for scope 1 emissions have been subtracted, including the estimated emissions of Refrigerant Gases and Fleet Fuels, as their measurement has been incorporated in 2021.
32 In order to promote the reduction of direct impacts and the achievement of Goal 2025, in 2021 BBVA established a new Global Eco- efficiency Plan (PGE) for the period 2021-2025, defining more ambitious objectives, aligned with its climate strategy. With regard to the evolution of these indicators of the eco-efficiency plan, the Group's environmental footprint shows very positive data with respect to the base year 2019, exceeding in all areas the objectives defined for this time, with reductions of (16%) in electricity consumption, (18%) in energy consumption, (26%) in water consumption, (48%) in paper and (50%) in net waste (all of them per employee) and (82%) in scope 1 and 2 emissions (according to the market based method). The percentage of renewable electricity consumption reached 96%, and the percentage of environmentally certified surface area reached 61%.
| Values 2023 | Achievement 2023 (∆ 23-19) | 2023 interannual | GEP Goal 2025 | GEP Goal | |
|---|---|---|---|---|---|
| Renewable electricity | 96% | +58 p.p. | 75% | 77% | |
| Electricity consumption per employee (MWh/Employee) (2) | 5.58 | (16)% | (7)% | (10)% | |
| Energy consumption per employee (MWh/Employee) (3) | 6.06 | (19)% | (6)% | (7)% | |
| Water consumption per employee (m3/Employee) | 14.08 | (26)% | (5)% | (11)% | |
| Paper consumption per employee (kg/Employee) | 26.02 | (48)% | (9)% | (11)% | |
| Net waste per employee (t/Employee) (4) | 0.01 | (53)% | (3)% | (4)% | |
| Scope 1&2 carbon emissions (tCO2e) (5) | 44,985.4 | (82)% | (64)% | (67)% | |
| Environmentally certified area (6) | 61% | +20 p.p. | 44% | 45% |
(1) Data corresponding to the last months of 2023 are estimates.The 2023 Vs 2019 Achievement indicators corresponding to Renewable Electricity and Environmentally Certified Area are expressed as absolute value of achievement in 2023 in order to be able to compare with the Global Eco-efficiency Plan targets 23-19 and 25-19. In incremental terms over 2019, the Renewable Electricity indicator has reached 146%, while the Environmentally Certified Area indicator has reached 48%. (2) Includes the sum of renewable and non-renewable electricity (per employee). (3) Includes the consumption of electricity and fossil fuels (natural gas, liquefied petroleum gas (LPG), diesel and coal), except fuels consumed in fleets. (4) Net waste is the total waste generated minus the waste that is recycled. To obtain the 2022 achievement, the 2019 baseline data for net waste has been subtracted, including the estimate of recycled waste, since its measurement was not incorporated until 2020. (5) Includes Scope 1 (fuels in facilities and vehicle fleet and refrigerant gases), Scope 2 market-based. The 2015 and 2019 baseline data for Scope 1 emissions have been restated, including the estimate of emissions from Refrigerant Gases and Fleet Fuels, as their measurement has been incorporated in 2021. (6) Includes IS0 14001, ISO 50001, LEED, Edge and WWF Green Office and Zero Waste certifications. The achievement of these indicators has been possible thanks to the following 4 action vectors:
Finally, digitization and print centralization measures to reduce paper consumption, which is additionally recycled or environmentally certified in most geographic areas (Spain, Mexico, Turkey, Peru, Colombia, Argentina and Portugal) by 73% by 2023.
73 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
32 For the 2021-2025 Eco-efficiency Plan, 2019 is taken as the base, since the 2020 consumption values are affected by the effect of the COVID-19 pandemic. Corporate buildings recorded very low employee attendance due to the Group's conservative approach during the pandemic.
33 Certain geographical areas (Venezuela, Chile, Bolivia, Switzerland, the United States, Brazil and BBVA branches outside Spain) and certain BBVA Group companies, which represent 5.3% of total BBVA Group employees, are not included in the perimeter.
The circular economy
Waste generation is becoming a serious global problem, so part of BBVA's contribution to sustainable development includes moving from linear consumption practices to circular consumption practices. Thus, BBVA has been working for many years to reduce this impact through sustainable construction standards or with the implementation of Environmental Management Systems certified with ISO 14001 and additionally with the implementation of Aenor's Zero Waste certification in Ciudad BBVA, BBVA's headquarters in Spain and the Opplus building in Malaga. The objective is to minimize the amount of waste sent to landfills, which is why the Group's facilities have clearly differentiated and marked areas that allow for the correct segregation and subsequent recycling of waste.
WASTE (CIRCULAR ECONOMY) (BBVA GROUP)
| 2023 | 2022 (1) | |
|---|---|---|
| Hazardous waste (tons) | 329 | 570 |
| Recycled hazardous waste (tons) | 136 | 336 |
| Disposed hazardous waste (tons) | 193 | 234 |
| Non-hazardous waste (tons) | 2,339 | 2,523 |
| Non-hazardous waste (%) | 1,016 | 1,409 |
| Disposed non-hazardous waste (tons) | 1,323 | 1,114 |
| Donated IT equipment (units) | 5,659 | 1,154 |
(1) The data on hazardous waste disposed of and non-hazardous waste disposed of for 2022 differs from that published in the 2022 Non-Financial Information Statement due to a refinement of the data due to improvements in the waste measurement methodology.
Sustainable construction
Another objective is to guarantee the implementation of the best standards, both environmental and energy, in BBVA buildings, with the aim of achieving a large percentage of environmentally certified surface area. In this sense, BBVA facilities have several construction and management certifications. Within the construction certifications, there are 19 buildings and 10 branches of the Group with the prestigious LEED (Leadership in Energy and Environmental Design) standard for sustainable construction. Among these buildings are the Group's main headquarters in Spain, Mexico, Turkey and Argentina. In addition, three of them have received the highest category of certification, LEED Platinum. Additionally, there are 8 WWF Green Office badges in Turkey and 33 Edge in Peru, certifications that promote the reduction of the ecological footprint and carbon emissions. Regarding management certifications, BBVA has implemented an Environmental Management System based on the ISO 14.001:2015 Standard in different buildings, which is certified every year by an independent entity. Through this certification, the environmental performance in the operations of some of its buildings is controlled and evaluated. This system is implemented in 92 buildings and 1,044 branches in the main countries where the Group operates. In 2023, BBVA in Portugal increased the area certified under this management system by certifying its headquarters in Lisbon (10,519 m2). Finally, during 2023, BBVA achieved certification for 31 buildings and 1,924 branches with an Energy Management System also certified by an independent third party and meeting the ISO 50.001:2018 standard.
Carbon footprint
The reduction of the carbon footprint is one of the objectives established within Objective 2025, for which BBVA has implemented the following initiatives:
Suppliers: in 2023 BBVA implemented a sustainability module in the supplier evaluation process, which includes, among others, the management and measurement of their environmental impact. For more information on this module, see section "2.3.4 Suppliers" of this report.
74 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
BBVA purchases and retires carbon credits in an amount equivalent to its CO2 emissions from the categories over which it has direct management capacity (i.e., scopes 1, 2 and categories 5, 6 and 7 of scope 3) 34. In order to ensure the quality of these carbon credits, BBVA has established some requirements that the selected projects must meet, among which are the obligation that they have to be certified under the highest quality standards such as VCS (Verified Carbon Standard by Verra), Gold Standard, American Carbon Registry (ARC), Climate Action Reserve (CAR) and Plan Vivo; and that they are CO2 absorption or capture projects. Additionally, in 2023, BBVA developed an internal Voluntary Carbon Market standard, based on best practices, to evaluate high-quality carbon credit programs and types of credits that generate a real, additional and verifiable climate impact. The projects selected in 2023 have been a reforestation/afforestation project in Colombia (Cumare) and a set of improved forest management projects in Mexico developed by Bioforestal Innovación Sustentable S.C. (Ejido Atopixco, Ejido La Selva and Ejido Zacualtipán).
In addition to the purchase of carbon credits, BBVA is contributing to the development of carbon markets through the following initiatives:
* In regulated markets, BBVA participates in government auctions in the EU ETS and futures markets since January 2023.# 2.2.4 ESG STRATEGY AND OBJECTIVES
Additionally, in June 2023, BBVA inaugurated its trading desk for regulated carbon markets, allowing its customers to access the purchase and sale of credits.
BBVA is also involved in activities and initiatives such as participation in the development of reports such as the World Economic Forum's playbook on Voluntary Carbon Markets or participation in panels and forums such as the European Roundtable on Climate Change and Sustainable Transition. In addition, BBVA is present in the Advisory Board of EEX Global Carbon Index Family and LIFE COASE, a project co-founded by the EU Life Programme of the European Commission.
Likewise, BBVA also contributes to the development of new and innovative low-carbon technologies through investments in climate capital funds focused on decarbonization, investing in technologies with enormous potential impact (more details in the section "Investment in climate funds" in the section "2.1.1 ESG Strategy and Objectives").
75 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
34 No carbon credits are purchased for an amount equivalent to the following Scope 3 categories defined in the GHG Protocol: Category 1 purchase of goods and services; Category 2 capital goods; Category 3 fuel and energy-related activities (not included in Scope 1 or 2); Category 4 upstream transportation and distribution; Category 8 upstream leased assets; Category 9 downstream transportation and distribution; Category 10 processing of products sold; Category 11 use of products sold; Category 12 end-of-life treatment of products sold; Category 13 downstream leased assets; Category 14 franchises; Category 15 investments. For information on Category 15 Investments, see the Calculation of Financed Emissions section of "2.2.3 Alignment of the loan portfolio with the Paris Agreement".
35 Regulation (EU) 2020/852 of the European Parliament and of the Council, of June 18, 2020 (hereinafter, the Taxonomy Regulation), regarding the establishment of a framework to facilitate sustainable investments, has as its objective to establish the criteria to determine whether an economic activity is considered environmentally sustainable, in line with the objective of keeping global warming below 1.5 ºC compared to pre-industrial levels and with the European Green Deal.
Article 8 additionally establishes certain obligations of disclosure of non-financial information to companies subject to the Non- Financial Reporting Directive (hereinafter NFRD). Based on this, financial institutions must include in their Non-Financial Information Report certain indicators relating to sustainable economic activities according to the EU taxonomy.
The Taxonomy Regulation identifies six environmental objectives:
Based on these objectives, the regulation has also developed technical criteria to evaluate whether an activity is environmentally sustainable. The first step is to determine if an activity falls within those detailed as eligible by the EU taxonomy, which are those that can potentially contribute to one or more of the environmental objectives. An economic activity, to be considered eligible, must be included in the delegated acts that develop the European taxonomy, regardless of whether that economic activity does not meet any or all of the technical screening criteria established in those delegated acts and ultimately cannot be classified. as environmentally sustainable.
Subsequently, once eligibility has been determined, it has to be checked whether the activity is aligned according to the EU taxonomy, to this end, it should be verified that the following technical screening criteria are met:
The requirements to disclose information based on the EU taxonomy and the technical screening criteria, have been specified in successive regulatory developments and in notices on the interpretation and application of EU taxonomy delegated acts. These obligations establish a progressive calendar for the disclosure.
In this regard, as of December 31, 2023, the disclosure obligations for financial entities are the following:
It should be noted that those economic activities that are not included within the Taxonomy framework or that do not comply with all of their requirements should not be considered to be harmful or to have a negative impact on the environment, but only that they do not meet all the conditions to be part of this classification
76 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
35 The complete information defined in the templates of Annex VI of Delegated Act 2021/2178 on Disclosure of Article 8 is shown in section “5.3 Tables relating to Article 8 of the European Taxonomy” within chapter “5. Other information” of this consolidated Management Report.
The economic activities of credit institutions are reflected in the different products and services they offer to customers as well as in the investments they make to manage their equity and liquidity. These activities are considered aligned in accordance with the EU taxonomy to the extent that the activities that carry out certain counterparties of those products or investments are aligned considering the regulations.
To calculate the alignment of their activity, credit institutions shall consider whether the lending granted to a counterparty has a general purpose, or whether it responds to a specific purpose.
Non-financial companies that are subject to the NFRD Directive should have published for the first time, in their management reports as of end of the 2022 financial year, their indicators (KPIs)
36 related to the objectives of mitigation and adaptation to climate change: i) turnover and ii) its investments in fixed assets (CapEx) and operating expenses (OpEx). From 2024 onwards, the indicators corresponding to the rest of the environmental objectives will be added to these publications.
The information published by non-financial companies subject to the NFRD is necessary so that financial institutions can calculate the eligibility and alignment of certain exposures recorded in their assets. In this way, the information published by these counterparties is used to calculate the proportion of the general purpose exposure aligned with the EU taxonomy. The Group has obtained the data published by certain companies through an external provider and uses it to calculate the alignment of the general purpose financing granted to them. Likewise, public customer information has been used to more accurately reflect eligible activities, which represents an evolution of the granular information of the main EU customers.
The indicators (KPIs) established by the regulation for credit institutions offer an exhaustive breakdown of the bank's exposures to activities covered (eligible) by the EU taxonomy, and additionally those that are not only eligible, but that meet all the requirements. of the taxonomy to be considered sustainable (aligned).
The alignment with the EU taxonomy of the financing that is granted for a purpose or destination that the entity knows, must be analyzed taking into account all the requirements established by the aforementioned technical screening criteria (i) substantial contribution, ii) do significant harm and iii) minimum social safeguards.
In order to determine if a specific lending does not cause significant harm (DNSH), it must be demonstrated, based on requirements established by the regulation. that it does not harm the remaining environmental objectives. Thus, the financing granted to a company that contributes substantially to the climate change mitigation objective must also guarantee compliance with the DNSH criteria on the rest of the objectives.# Green Asset Ratio
The Green Asset Ratio (GAR) is an indicator to reflect the extent to which certain assets on the bank balance sheet are aligned with the EU taxonomy. This indicator has been prepared following the regulatory definitions of the European Commission. Currently, the EU taxonomy methodology does not allow financial institutions to include in the numerator of sustainability ratios those exposures to companies not subject to the Non-Financial Reporting Directive (NFRD). Therefore, exposures on companies domiciled in a third country outside the EU and those on EU companies that are not subject to said Directive, for example, the vast majority of SMEs are excluded from the numerator although they are part of the denominator. This implies, in In practice, any eligible economic activity that is being financed outside the EU will not be counted in the ratio (with limited exceptions). This structural characteristic of the GAR leads to large differences depending on each bank's business model, its customer base and its geographical footprint. All the EU taxonomy information is included in section 5.3 of this report in the format provided for by the regulations. 77 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail. 36 The template in Annex VI of the Delegated Disclosure Act of Article 8 is the reference for GAR disclosures: i) Covered assets (GAR, off-balance sheet), ii) GAR: information by sector, iii) Stock of GAR KPIs, iv) GAR KPI flow, v) Financial guarantees, assets and management. The original EU taxonomy tables and the necessary notes with details on the perimeter and methodology are found in section “5.3 Tables relating to Article 8 of the European Taxonomy” of this report. 37 In accordance with a conservative approach, only properties that meet the criterion of substantial contribution to climate change mitigation described in section 7.7 are included. “Acquisition and ownership of buildings” and that a non-inferred energy efficiency certificate is available.
| Climate Change (CCM) + (CCA) | TURNOVER | CAPEX | ||
|---|---|---|---|---|
| Total [gross] carrying amount | Of which towards taxonomy relevant sectors (Taxonomy- eligible) | Of which environmentally sustainable (Taxonomy-aligned) | Of which towards taxonomy relevant sectors (Taxonomy- eligible) | |
| Million € | % | Million € | % | |
| GAR - Covered assets in both numerator and denominator | 245,270 | 32.78% | 122,198 | 27.66% |
| Financial undertakings | 40,449 | 4,715 | ||
| Non-financial undertakings | 22,389 | 6,821 | ||
| Households | 177,287 | 109,728 | ||
| Of which loans collateralised by residential immovable property | 96,226 | 96,226 | ||
| Other assets (local administrations, foreclosed assets) | 5,144 | 934 | ||
| Assets excluded from the numerator for GAR calculation (covered in the denominator) | 196,518 | 26.26% | ||
| Non-financial undertakings | 160,448 | |||
| SMEs and NFCs (other than SMEs) not subject to NFRD disclosure obligations | 57,850 | |||
| Non-EU country counterparties not subject to NFRD disclosure obligations | 102,598 | |||
| Derivatives | 1,420 | |||
| On demand interbank loans | 7,085 | |||
| Cash and cash-related assets | 7,782 | |||
| Other categories of assets (e.g. Goodwill, commodities etc.) | 19,783 | |||
| Total GAR assets | 441,787 | 59.04% | ||
| Assets not covered for GAR calculation | 306,457 | 40.96% | ||
| Central governments and Supranational issuers | 96,465 | |||
| Central banks exposure | 68,488 | |||
| Trading book | 141,505 | |||
| Total assets | 748,244 | 100.00% | ||
| Financial guarantees | 18,782 | 1,083 | ||
| Assets under management | 179,338 | 1,024 | ||
| Of which debt securities | 53,240 | 474 | ||
| Of which equity instruments | 9,648 | 550 |
General note: this table does not include all the sections of Annex VI (1.Covered assets (GAR,off-bal) of the EU Taxonomy disclosure delegated regulation 2021/2178. The original EU taxonomy tables and the necessary notes with details on the scope and methodology are found in section “5.3 Tables relating to Article 8 of the European Taxonomy” of this report. 78 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
Commission Delegated Regulation (EU) 2022/1214 of March 9, 2022 establishes the requirements that are necessary for the economic activities of energy generation with natural gas and nuclear power plants to be included within the taxonomy of the EU, since they are considered transition activities. Nuclear energy, which is described as "low carbon" and "subject to strict environmental and safety conditions that ensure respect for the principle of do no significant harm, it can play a role in the transition towards climate neutrality." Regarding electricity generation with natural gas, it is considered less polluting than other alternatives, such as coal. The activities included in the Nuclear and Gas delegated act (European Union Taxonomy (EUT) Activity) are the following: – Nuclear Energy: – Pre-commercial phases of advanced technologies to produce energy from nuclear processes with minimal waste from the fuel cycle – Construction and safe operation of new nuclear power plants for the generation of electricity or heat, including the production of hydrogen, using the best available technologies. – Generation of electricity from nuclear energy in existing facilities – Energy from gaseous fossil fuels: – Generation of electricity from gaseous fossil fuels – High-efficiency cogeneration of heat/cooling and electricity from gaseous fossil fuels – Production of heat/cooling from gaseous fossil fuels in an efficient urban heating and cooling system
The BBVA Group's exposure to gas and nuclear power generation activities of NFRD customers (subject to EU non-financial reporting directive) amounts to 186.0 million euros, of which only 12.0 million are considered aligned in accordance with the taxonomy according to the turnover information, and 10.0 million in the case of investments in fixed assets (CapEx).
| 2023 | |
|---|---|
| Eligible activities according to the EU Taxonomy for energy generation with gas and nuclear from NFRD clients | 186 |
| Aligned activities with the EU Taxonomy for energy generation with gas and nuclear from NFRD clients | 12 |
Commission Delegated Regulation (EU) 2023/2486 of 27 June 2023 completes the EU taxonomy, establishing the technical selection criteria to determine economic activities that contribute to environmental objectives that had not already been included in the taxonomy: i) the sustainable use and protection of water and marine resources, ii) the transition to a circular economy, iii) the prevention and control of pollution, iv) the protection and recovery of biodiversity and ecosystems, and establishes new requirements for the disclosure of specific public information about these economic activities. In fiscal year 2023, credit institutions must publish the exposure to eligible economic activities included in the aforementioned delegated regulation. When an economic activity contributes substantially to multiple environmental objectives, for the purposes of the calculation, it is assigned to the most significant environmental objective (generally Climate Change Mitigation (CCM)), avoiding double counting at the same time. BBVA Group's exposure ratio to activities included in the delegated regulation of the 4 environmental objectives recently covered in the taxonomy is 0.45% and the exposure to non-eligible activities is 27%, taking into account all the environmental objectives published to date. To estimate eligibility, given that the delegated regulation is recently published and there has been no time for NFRD customers to publish their degree of eligibility, the customer's economic activity information that is used for internal risk management has been used. and which is based on the Statistical Nomenclature of Economic Activities of the European Community (NACE).# Trading portfolio
Global Markets is the area that manages BBVA's trading portfolio, and is part of the CIB business area which, as already mentioned, has developed a Sustainable Products framework. The trading portfolio mainly responds to two different activities. The first consists of promoting that customers have products to manage their own risks or make their investments and, the second, managing the risks inherent to the trading portfolio. The main activity carried out considering some ESG factor comes from facilitating the issuance of bonds (DCM) 38 with some ESG characteristics by customers. Customer demand for other types of trading book products to manage their own ESG risks has proven to be still limited and sporadic.
79 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
38 Debt Capital Markets
Regarding the management of the risks inherent to the trading portfolio, this is carried out under a strict risk-reward angle, where ESG factors do not currently represent a key factor (unless market dynamics or profitability are turn towards them). The exposure on the trading portfolio amounts to 18.5% of the total assets. In accordance with the deadlines established by Regulation (EU) 2020/852 and its delegated regulations, BBVA will disclose quantitative information on trading exposures that comply with the EU taxonomy, including the general composition, observed trends, objectives and politics for the first time at the end of the 2025 financial year.
80 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
Through its Purpose, values and strategic priorities, BBVA seeks to have a positive impact on the lives of people, companies and society as a whole. Financial institutions play a vital role in the economy, essential to guarantee the functioning of the rest of the system. Here lies the origin and main mission of BBVA: to act as a driving force of activity through the granting of credit to the real economy, to companies and families, financing long-term structural challenges (decarbonization, innovation, digitalization) to contribute to economic growth of society.
In addition to its main financing activity, BBVA supports the economic and social development of the communities where it is present through the following lines of action:
BBVA develops its relationships with society in general, its customers, employees and suppliers in accordance with its commitment to human rights. At the same time, the Group is promoting a just transition to create a more sustainable and inclusive world.
81 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
Beyond the positive impact generated by the banking business directly, BBVA also seeks to support society through its social action. This activity mainly materializes the social programs developed by the group and its foundations, but also includes contributions to foundations and non-profit entities as well as the promotion of a corporate culture of social and environmental support, facilitating the conditions so that its employees can carry out volunteer actions.
In the area of contributing to the inclusive growth of the societies in which the Group is present, BBVA has the Community Investment Goal 2025, whereby it will allocate 550 million euros between 2021 and 2025 to social initiatives to support the inclusive growth of these societies. The objective of this plan is for these initiatives to reach 100 million people by 2025. Specifically, it will support five million entrepreneurs, contribute to the financial literacy training of two million people and help more than three million people gain access to quality education.
This plan is structured around three main areas of action and aims to contribute to the achievement of certain Sustainable Development Goals (SDGs):
Additionally, in 2023, BBVA launched a social response plan after the earthquake, which took place in Turkey and Syria on February 7, in order to help alleviate the effects of the humanitarian emergency. Among the measures stand out: the donation of 650 million Turkish Liras (approximately 20 million euros) in favor of the AFAD (Presidency of Disaster and Emergency Management of the Ministry of the Interior of the Government of Turkey), the launch of a donation campaign in favor of the Red Cross that has channeled donations from employees, customers and non-customers in Spain worth 1.66 million euros through Bizum, as well as a donation campaign from customers of BBVA Mexico in favor of UNICEF in Turkey and Syria, with a collection of approximately 110 thousand euros.
In 2023, the BBVA Group earmarked 174 million euros for contribution to the community (131 million euros in 2022). This figure represents 2,17% of adjusted net attributable profit. 79.4 million people have benefited from this contribution. In particular, among the direct beneficiaries, 3,307,147 entrepreneurs have benefited from support, 749.565 people have been trained in financial literacy and 861,023 people have participated in educational programs.
BBVA puts this contribution to the community into practice through its local banks and foundations, as well as through support for other foundations, highlighting:
Additionally, in the area of contribution to the community, BBVA develops other relevant initiatives such as volunteer activities, alliances with environmental organizations, support for non-profit organizations, the promotion of corporate responsibility through its participation in different working groups and participation in initiatives (SDG 17) 39.
82 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
39 For more information, see the section "2.1.4 Dialogue and discussion with customers, industry and the public sector" of this report.# CONTRIBUTION TO THE COMMUNITY
Below is the contribution to the community in 2023 and 2022 within the framework of the 2025 Community Investment Goal by geographic area and corporate foundations:
| 2023 | % | 2022 | % | |
|---|---|---|---|---|
| Spain and corporate areas | 28.1 | 16 | 30.4 | 23 |
| Mexico | 84.0 | 48 | 60.5 | 46 |
| Turkey | 25.5 | 15 | 3.6 | 3 |
| South America | 3.8 | 2 | 3.4 | 3 |
| Foundations (2) | 32.6 | 19 | 33.1 | 25 |
| Total (3) | 174.0 | 100 | 131.0 | 100 |
(1) To calculate the Community Engagement investment figure, BBVA uses the Business for Societal Impact (B4SI) methodology, an international standard that provides a framework for measuring the social and environmental investment that companies make beyond their business. In 2023, this figure is broken down as a contribution in cash (83.03%), management and personnel costs (10.33%), time (0.3%) and in-kind (6.34%). Likewise, when we analyze the motivation of the cash contribution, this is the breakdown in 2023: 19.2% one-time contribution, 74.6% social investment and 6.2% initiatives aligned with the business.
(2) Includes the BBVA Foundation and the BBVA Microfinance Foundation, which are not part of the consolidated Group.
(3) The total figure is an estimate, of which 75.5% is the actual investment figure as of October 31, 2023 and 24.5% is an estimate of the investment made in November and December 2023.
The following is a breakdown of the investment and people reached (in percentage) of the contribution to the community in 2023 by focus areas, as described at the beginning of this section:
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
The following is a breakdown of the type of people reached of the Community Goal in 2023 and 2022 by focus areas:
| Focus area/Type of people reached | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
|---|---|---|---|---|---|---|
| Direct beneficiaries (2) | Indirect beneficiaries (3) | Unique users (4) | ||||
| Reduce inequalities and promote entrepreneurship | 4.3 | 5.4 | 7.2 | 7.2 | 0.2 | — |
| Create opportunities for all through education | 1.0 | 0.8 | 0.9 | 0.5 | 56.2 | 55.9 |
| Support research and culture | 2.9 | 2.6 | — | — | 6.7 | 5.5 |
(1) To calculate the number of direct beneficiaries in the Community Commitment, BBVA uses the Business for Societal Impact (B4SI) methodology, an international standard that provides a framework for measuring the social and environmental investment that companies make beyond their business. The people reached data are estimates; 80.7% of the figure is the actual number of people reached as of October 31, 2023 and 19.3% is an estimate of the number of people reached in November and December.
(2) Data on persons who participate directly in the programs and initiatives developed or promoted by BBVA and who therefore receive a direct benefit.
(3) Data on persons who are related to the participant of the initiatives and programs promoted and developed by BBVA and who receive an indirect benefit.
(4) Data on the number of people accessing free and quality content on different BBVA platforms.
Below are the objectives for 2025 and the progress since 2021 in relation to investment and people reached of the Community Commitment by focus area.
| Community investment(2) | People reached (3) | |
|---|---|---|
| 2025 Goal | 2021-2023 Progress | |
| Reduce inequalities and promote entrepreneurship | 155 | 66.2 |
| Create opportunities for all through education | 215.0 | 245.7 |
| Support research and culture | 180.0 | 86.6 |
| Total (4) | 550.0 | 398.5 |
| Other (5) | — | 12.8 |
| Total | 550.0 | 411.3 |
(1) To calculate the amount of investment and direct beneficiaries in the Contribution to the Community, BBVA uses the Business for Societal Impact (B4SI) methodology, an international standard that provides a framework for measuring the social and environmental investment that companies make beyond their business. The investment and people reached figures for 2023 are estimated figures. In relation to the investment figure, 75.5% is the actual figure as of October 31, 2023 and 24.5% is an estimate of the investment made in the months of November and December 2023. In relation to the people reached figure, 80.7% of the figure is the actual number of people reached as of October 31, 2023 and 19% is an estimate of the people reached in the months of November and December 2023.
(2) This progress chart considers community investment for the years 2021, 2022 and 2023 with a global scope.
(3) This progress table considers the net direct beneficiaries for the years 2021, 2022, 2023 and the net indirect beneficiaries for the years 2021, 2022 and 2023. For the calculation of net unique users, only the unique users of the current year are considered, as it is not possible to identify how many users from one year repeat the following year.
(4) This total figure shows the objectives and progress of investment and people reached within the framework of the Goal 2025 of the investment in the Community and its 3 focuses of action.
(5) This figure includes the target and progress of investment and people reached not aligned to the focuses of the Goal 2025 of the investment in the Community.
With regard to contributions to foundations and non-profit entities 40, the overall figure for these contributions in 2023 was 44.4 41 million euros (19.5 million euros in 2022). In 2023, the BBVA Group made:
The number of contributions presents a significant increase compared to 2022, mainly due to the donation of more than 20 million euros made by Garanti BBVA to alleviate the effects of the earthquake in Turkey.
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
40 Information provided in compliance with section IV of article one of Law 11/2018.
41 The number of contributions to foundations and non-profit entities is estimated. 85.6% of the figure corresponds to contributions made before October 31, 2023, while 14.4% is an estimate of the contributions expected to be made in November and December 2023.
In the General Sustainability Policy, BBVA states its willingness to promote a corporate culture of social and environmental support by facilitating the conditions for its employees to carry out volunteer actions. This policy is applied in all countries in which the Group is present. BBVA's corporate volunteering initiatives encourage employee collaboration to generate a relevant social impact, increase their sense of pride in belonging, satisfaction and productivity, and position BBVA as a benchmark company in corporate volunteering, thus increasing its attractiveness to both existing and potential employees.
Volunteering is a key element in developing the approaches and lines of work of the Community Investment Goal 2025 (explained above in the section "Contribution to the community"). In fact, this is in line with the Agenda for Sustainable Development 2030, which has explicitly recognized voluntary work as a vehicle for the sustainable development and voluntary work groups as actors for achieving the seventeen SDGs. In addition, volunteering activities are aligned with BBVA's Purpose and values.
Overall, 11,788 BBVA employees participated in volunteer initiatives during 2023 (8,637 in 2022), having dedicated more than 36,040 hours (57% during working hours and 43% outside working hours). The time spent by employees in 2023 is equivalent to a contribution of 527,830 euros (429,044 euros in 2022).
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
Within the framework of its "Customer First" value, which is part of BBVA's culture, the Group places customers at the center of its activities. The relationship with customers goes beyond the provision of services and is aimed at assisting them in their transition to sustainability, improving their financial health and, ultimately, meeting their life goals. To respond to the needs of its customers and maintain responsible conduct with them, BBVA has developed a differential value proposition to promote a transparent, clear and accessible customer experience, while strengthening and reinforcing security in the existing interactions between the customer and the Group.
Responsible conduct with the customers is developed through the following topics:
BBVA has an internal regulatory framework for customer protection.In addition to the Code of Conduct, which establishes guidelines for behavior with customers in line with the Group's values, BBVA has governance policies and procedures in place that establish the principles to be observed when evaluating the characteristics and risks of products and services, as well as when defining their distribution conditions in such a way that, based on customer insight, their interests must be taken into account at all times and they must be offered products and services in line with their financial needs. BBVA has also implemented processes geared toward the prevention, or, when this has not been possible, the management of potential conflicts of interest that may arise in the marketing of its products. Finally, BBVA has conduct indicators with customers in order to ensure management of the sources of risk and to facilitate the monitoring of their performance and/or the effectiveness of the control models applied in this area. During 2023, BBVA evolved and strengthened internal regulation, as well as mitigation, control and monitoring frameworks in the area of customer protection, while also considering the priorities of regulators and supervisors. The main lines of action include the updating of Group-wide standards in the area of customer protection, including the approval of the Product Governance Standard, which develops the product governance provisions that BBVA must comply with throughout the entire life cycle of the product or service, i.e., from the very moment they are conceived or designed, as well as during their distribution or marketing, and in the post- contract phase (follow-up and after-sales service). Also noteworthy is the approval of the Standard on Fees and Commissions, which establishes the reference framework applicable to the Group in matters concerning fees and commissions. It establishes guidelines in relation to the internal governance model for setting fees and commissions, the minimum obligations that must be met in relation to this matter throughout the life cycle of the products and services offered by BBVA, as well as guidelines to ensure their adequate parameterization in the automated processes. Both rules develop the General Policy on Customer Conduct and Product Governance approved in 2022, which encompasses and updates several internal policies in this area, reinforcing and harmonizing in a single general policy the principles and provisions that BBVA will take into account to adequately address the interests of customers during the offer, provision and, where appropriate, recommendation of products and services, thus providing the Group with a single framework of reference in terms of conduct with customers. During 2023, the customer protection training plan was also enhanced with the launch of a course on the General Policy on Customer Conduct and Product Governance, aimed at raising awareness of the general principles on which the relationship with customers is based when providing them with services or offering or recommending products, whatever the distribution channels, and also considering the life cycle of the product or service. Also noteworthy is the updated course on Conflicts of Interest, which provides information on how to recognize and manage situations in which conflicts of interest may arise in the marketing of products and provision of services to customers, as well as the measures to be taken into account to resolve them. Both courses are available at the training model of BBVA, Campus BBVA.
86 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail. Furthermore, the Group has continued working to embed the customer-protection vision in the development of marketing protocols, digital and advertising content and the design of digital contract formation processes, as well as in the development of new products and businesses, both retail and wholesale, from the outset of their design or creation, including modifications arising from regulatory developments in the field of sustainability.
Digital transformation and new emerging technologies mean an increase in potential threats and exposure to risk and new challenges affecting security, privacy and, in general, digital trust, which are key aspects for the better development and survival of the digital economy. For BBVA, information security is not only a fundamental part of ensuring operational resilience, but also one of the main elements within its strategy. Information security is organized into four fundamental pillars: (I) Cybersecurity, (II) Data Security, (III) Physical Security and (IV) Business Process Security and Fraud. For each of them, a program has been designed with the aim of reducing the risks to which the Group is exposed. These programs, which consider the best practices established in internationally recognized security standards, are reviewed periodically to assess progress and effective impact in mitigating the aforementioned risks. In 2023, the measures adopted have been further strengthened to guarantee effective protection of the information and assets which support the Group's business processes from a global perspective and an integrated approach, i.e., considering not only the technological area but also the areas of people, processes and security governance. Among these measures are those designed to: (I) ensure end-to-end protection of business processes, considering logical and physical security, privacy and fraud management; (II) ensure compliance of the principles of security and privacy by design for new products and services; and (III) improve access and authentication control for customers associated with the provision of online services, both from the point of view of security and customer experience.
Below are some of the initiatives that are being implemented globally or in specific geographic areas of the Group to improve the security and protection of customers:
These new initiatives help protect BBVA customers, alongside the use of robust customer authentication mechanisms in e- commerce, the possibility of turning cards on and off from the BBVA app, the sending of real-time notifications on payments or transfers made and the reinforcement of card security to prevent possible fraudulent use of card data, such as the use of the Aqua, which is the first card using a dynamic CCV (without numbering and without a printed CVV). Additionally, BBVA has continued performing the training and awareness initiatives related to security and privacy, performing training actions and awareness campaigns for BBVA’s employees, customers and society in general. Among the main campaigns, awareness-raising actions carried out and recommendations included in the application, in BBVA's online channels and in social networks in recent years, those related to information protection, secure password management, detection of social engineering (phishing 42, smishing 43, vishing 44), protection of devices (computers, cell phones, etc.), secure connections, detection of malware and other computer attacks, detection of cyber scams, security in online shopping and action in the event of a security incident could be highlighted. The subject matter of the different awareness campaigns is selected on the basis of a risk analysis focused on identifying the behaviors that imply a higher cybersecurity risk for the Entity, using sources such as ENISA's Threat Landscape. Other lines of action also include periodic performance of global and local simulation exercises in order to raise the level of training and awareness of key BBVA personnel and ensure an immediate and effective response in case of a security incident.
87 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
42 Social engineering technique consisting of sending fraudulent emails in which the cybercriminal impersonates the identity of legitimate companies and requests confidential information from the recipients.
43 Sending text messages with fraudulent links in which cybercriminals impersonate the identity of a public entity or body so that users access an illegitimate web page and provide confidential information.
44 Telephone scam in which cybercriminals pose as technical support teams or financial institutions to get the victim to reveal private information, or install malware on their device.
In recent years there has been a rise in the number of cyber-attacks, accentuated by the presence of organized crime groups that specialize in the banking sector.## Risk Factors
In addition, the acceleration of digitization in the world has led to the emergence of new risks and new challenges for businesses, including those related to security in work-from-home arrangements, security in cloud environments, the increase in the risk exposure surface and the management of risks associated with service providers. Moreover, and especially since the onset of the COVID-19 pandemic, the scope of social engineering attacks carried out via email, SMS messages, instant messaging systems and social networks has increased. As cyber attacks evolve and become more sophisticated, the group has strengthened its prevention and monitoring efforts to ensure effective protection of its assets and customer information. The Computer Emergency Response Team (CERT) is the Group’s first line of detection and response to cyberattacks aimed at global users and the Group’s infrastructure, combining information on cyber threats from our Threat Intelligence Unit. The Global CERT, which is based in Madrid, operates 24 hours 7 days a week and provides services in all countries where BBVA operates, under a scheme of managed security services, with operation lines dedicated to fraud and cybersecurity. During 2023 the Bank has increased its system monitoring capabilities, paying special attention to critical assets that support business processes. Incident prevention, detection and response capabilities have also been strengthened through the use of integrated information sources, improved analytical capabilities and automated platforms. Moreover, work is being done on the development of new artificial intelligence and machine learning models which can predict and prevent cyberattacks against bank infrastructure, providing a more secure experience for customers. The measures implemented have improved information security management from a predictive and proactive approach, based on the use of digital intelligence and advanced analytical capabilities. The main objective of these measures is to ensure an immediate and effective response to any security incident that may occur, with the coordination of different business and support areas involved, while reducing the possible negative impact and, if necessary, reporting in a timely manner to the corresponding supervisory or regulatory authorities. A communication protocol has been established for those cases in which relevant incidents affecting BBVA customers occur. This protocol contemplates both the groups to be informed (employees, customers, media, etc.) and the communication channels to be used (social networks, call center, App messages, website, etc.) and the procedure for coordinating the messages to be transmitted, in order to ensure that communication is proactive and uniform and that it responds to the principles of honesty and transparency. In addition, in order to ensure that security is integrated into business processes, the security management model has been reinforced both in the software development life cycle and in the management of infrastructure, architecture and operations, which has strengthened the security culture in BBVA. The Threat Intelligence area has also been strengthened, adopting measures aimed at transforming detailed technical information into intelligence that can be used as a driver in decision-making related to risk management. The Threat Intelligence area continuously monitors the threats affecting the financial sector and analyzes risk trends in order to implement measures to minimize the security risks to which BBVA is exposed. In addition, together with the incident detection and response teams, it analyzes the attacks that have occurred and their origin, in order to adopt the necessary action plans. The analyses carried out consider both security trends and the type, frequency and origin of attacks on systems and information. In addition, in the search for excellence in the operating model, BBVA has taken measures in recent years to promote operational efficiency and automation, as well as to strengthen safety competencies, in order to ensure that the company has a team with the necessary knowledge and skills in a constantly changing environment. BBVA routinely reviews, reinforces and tests its security processes and procedures through simulation exercises in the areas of physical security and digital security. Specialized teams periodically perform security technical tests in order to detect and correct possible security vulnerabilities. These tests include both technical testing of the technology platforms and simulation of real attacks by malicious users (using the same techniques, tactics and procedures). The outcome of these exercises is essential to continuous improvement of the Group's safety strategy. BBVA's security strategy is based on internationally recognized security standards. It considers best practices and security measures established in standards such as ISO/IEC 27002 and the ISO 2700 family, COBIT 5 and NIST Cybersecurity Framework. BBVA has also obtained several certifications (TIER IV certification, ISAE 3402, etc.) in different countries. To maintain these certifications, external providers carry out external audits regularly, considering the specific requirements of each certification. The external auditors who perform these audits are selected from among the most recognized auditing firms in the specific areas of expertise applicable in each case. Additionally, the annual financial audit includes the review of several areas related to information security and cybersecurity in BBVA's internal platforms. Furthermore, and given that one of the main risks faced by organizations today are risks derived from third parties, during the year 2023 controls have continued to be strengthened to ensure adequate protection of information by third parties. BBVA requires that the service providers it works with have internationally recognized security certifications. 88 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail. In addition, security clauses are included in the contracts signed with service providers, in order to guarantee both an adequate level of security in relation to the services rendered and compliance with applicable legal requirements (with particular attention to current legislation on the protection of personal data). The effective implementation of these measures by the suppliers providing the most critical services is routinely verified.
Cybersecurity initiatives are always carried out in close coordination with fraud prevention initiatives, so that there are considerable interactions and synergies between the teams involved. The measures in place enable us to actively monitor fraud risks and mitigation plans, assess the impact of fraud risks on the Group's businesses and customers, and monitor relevant fraud facts, events and trends. As part of the efforts to actively support the deployment of appropriate anti-fraud policies and measures, and in an environment of increasing sophistication and regulatory focus on financial crime, the Financial Crime Prevention Unit has been created to perform a joint analysis of fraud and money laundering operations, as the former is often an underlying crime of the latter. This has made it possible to improve operational processes, increase Advanced Analytics, Artificial Intelligence and Machine Learning capabilities and, in short, strengthen fraud analytical capabilities by providing them with a more holistic vision. Both the Bank and the rest of the Group's subsidiaries have cybersecurity and fraud insurance, subject to certain loss limits, deductions and exclusions applicable, as the case may be.
In recent years, Business Continuity has continued to be strengthened from a comprehensive perspective, paying special attention to the Group's digital operational resilience. This consolidates the performance from a model fundamentally aimed at ensuring the uninterrupted delivery of products and services, in infrequent but plausible situations of great impact, towards a model that provides the organization with the ability to absorb and adapt to situations with operational impact due to disruptions of various kinds (such as pandemics, cybersecurity incidents, natural disasters or technological failures), which has resulted in an intense activity of the Business Continuity functions.
The main initiatives performed in this area are related to the adoption of measures to ensure that all BBVA's information assets are properly protected, limiting their use to the related processes and controlling access to them, considering the security guidelines established by the Group. All the initiatives are performed guaranteeing compliance of the security and privacy regulatory requirements applicable, especially those related to personal data protection. During 2023, there were no security incidents that had a significant impact on the BBVA Group. For more information about personal data protection, see the section “Personal data protection” in the "Compliance and conduct" chapter of this report.
BBVA has implemented an information security governance model to achieve its security objectives. The Corporate Security unit is organized as a system of committees and working groups to manage the different areas related to information security: security in operations, security related to technology, physical security, security in business processes, personnel-related security, etc. These working groups are responsible for supervising the execution of the information security strategy and effective implementation of the programs designed for each of its four constituent pillars.The main body of this governance model is the Technology and Cybersecurity Committee, whose functions include monitoring of the technology and cybersecurity strategy and cybersecurity risk management. This Committee assists the Board of Directors in monitoring the technological risks to which BBVA is exposed, current cybersecurity and technology trends, and any relevant technological security event that could affect the Group. During the year 2023, the security governance, legal compliance and corporate assurance models were updated in order to ensure their adaptation to an increasingly demanding and constantly evolving regulatory environment.
The differential value proposition, leveraged on an omnichannel strategy, with cell phones as the reference channel, bore fruit in 2023, a record year in customer acquisition and leadership in individual NPS, underpinned by a simplified and transparent catalog of services, with proactive and personalized proposals or solutions. BBVA occupies the leading positions in the Net Promoter Score (NPS), as reflected in its retention figures, which show a positive trend in the levels of customer drop-outs, and a greater commitment from digital customers, whose drop-out rate is 41% lower than that of non-digital customers.
89 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
The internationally recognized Net Promoter Score (NPS) methodology measures customers’ willingness to recommend a company and therefore, the level of satisfaction of BBVA’s customers with its products, channels and services. This information is vital for checking for alignment between customer needs and expectations and the initiatives that have been implemented, establishing plans that eliminate detected gaps and providing the best experiences. For years, the NPS has therefore been part of the strategic indicators that are monitored on a monthly basis by senior management, both at local and Group level. The Group’s consolidation and application of this methodology over the last twelve years provides a common language both internally and with customers that facilitates everyone’s involvement and the integration of the voice of customers in everything the Group does, from the outset. This translates into a constant increase in the trust of customers who recognize BBVA as one of the safest and most recommended banking entities in each of the countries in which it is present. Thus, in Spain in 2023 it reached the best historical figure of 18,9% for retail NPS.
In order to generate a positive impact on society, the accessibility and universal design of digital channels is fundamental to achieve this purpose, favoring financial inclusion. During the 2023 financial year, audits of the accessibility of the main functionalities of the digital solutions in Argentina and Peru were started in order to make them accessible to people with disabilities. At the same time, BBVA has continued with this audit, which it has been carrying out for some time in Spain. Also noteworthy is the participation in the protocol to guarantee the financial autonomy of people with disabilities in Spain within the framework of a collaborative agreement with the Spanish Banking Association (AEB) and other representative institutions. In addition, in response to the social demand related to senior citizens and with the aim of contributing to accelerating progress towards an inclusive economy in Spain, the Strategic Protocol for Social and Sustainable Commitment in Banking, which was reinforced in 2022 by the banking associations AEB (Spanish Banking Association), CECA (Spanish Confederation of Savings Banks) and UNACC (National Union of Credit Cooperatives), remains in force, and within its framework BBVA has established a series of measures to ensure that senior citizens receive personalized and satisfactory attention. Finally, it is important to highlight the sectoral agreement reached in Spain to ensure face-to-face access to banking services in all Spanish municipalities. The measures included in the "Roadmap to Ensure Financial Inclusion" will make it possible to cover 100% of the territory, by offering a physical access point to banking services even in municipalities that have never had one.
BBVA has a claims model based on two key aspects: the agile resolution of claims and, most importantly, the analysis and eradication of the origin of the causes that give rise to them. This model integrates at country level all the policies and guidelines set by the regulatory bodies, in compliance with the local regulations issued by them in relation to the attention, processing and resolution of claims (Ministerial Order ECO/734/2004, of March 11, of the Ministry of Economy in Spain; regulation PUSF - Protection of Financial Services Users, of 04/17/2023, of the BCRA in Argentina; Law for the Transparency and Regulation of Financial Services, of 03/9/2018, in Mexico; etc.). This model is considered to add value when it comes to improving the customer experience, generating peace of mind and strengthening the trust of customers, providing a quick resolution to their problems, through a simple and agile experience, and with a clear and personalized response.
In compliance with the above, the customer service teams in each of the countries attend to and resolve the complaints and claims received from customers in relation to the products and services marketed and contracted in the local BBVA financial entity, recording all the information in this regard, which subsequently allows identifying improvements both at the level of the management model itself and specific improvements in the response process, root cause analysis, etc. This information (evolution of the volume of claims, response times, main reasons and root causes, etc.) is periodically reported to the Senior Management of the geographic area for follow-up and action, as well as made available to the regulator. It is also integrated at Group level in half-yearly reports to the supervisors of the Bank of Spain and the European Central Bank, as well as in the annual report submitted to the BBVA Group Board of Directors.
In 2023, the Group's claims units 45 worked to keep up the response times achieved in 2022 and proactively identify potential new problems and eradicate the root causes of the most common types of complaints. This is especially true of fraud, which, following the completion of the integration of Visa and Mastercard claims in Argentina 46, accounts for 49% of all the Group's claims and which has increased in recent years as a result of the general growth in card transactions and the various and increasingly sophisticated techniques used to commit fraud. The security measures and communication and awareness-raising campaigns for customers have made it possible to reduce or contain these cases in Spain (with 32% fewer cases than in 2022), although compared to last year there has been an increase in, both, at country level and cases filed with the financial authorities in Colombia, Peru and Mexico for this reason.
90 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
45 The claims handled by these units cover the banking entities located in the geographic areas indicated in this section and include the retail and corporate banking (CBB) businesses.
46 This integration process is the result of a change in the perimeter of the information to be reported imposed by the local regulator with the objective of working together to eradicate them in 2022.
| 2023 | 2022 | |
|---|---|---|
| Number of claims before the banking authority for each 10.000 active customers | 12.39 | 10.67 |
| Average time for setting claims (natural days) | 8.46 | 7.41 |
| Claims settled by First Contact Resolution (FCR) (% over total claims) | 9.95 | 10.07 |
The slight increase in 2023 in the average time to resolve claims is mainly due to the aforementioned integration for the first full year of the claims handled by Visa and Mastercard into the internal process of BBVA Argentina, with which we began to collaborate in July 2022 in response to a requirement imposed by the local regulator with the aim of working together to eradicate these claims. In 2023, this has led to a 2.2-fold increase in the monthly volume of claims from Argentina since that date, with a significant impact on the average response time (beyond BBVA's control), both at local and Group level.
Claims filed with the supra-banking authorities (per 10,000 active customers) during the 2023 and 2022 financial years are as follows, with a slight increase in Mexico and Colombia due to fraud issues as mentioned above:
| 2023 | 2022 | |
|---|---|---|
| Spain | 2.56 | 3.66 |
| Mexico | 12.42 | 10.89 |
| Turkey | 9.35 | 10.96 |
| Argentina | 1.60 | 0.54 |
| Colombia | 104.09 | 66.17 |
| Peru | 3.10 | 1.87 |
| Venezuela | 0.03 | 0.07 |
| Uruguay | 0.63 | 0.39 |
| Portugal | 19.83 | 13.71 |
Scope: BBVA Group.
(1) The supra-banking authority refers to the external financial authority body in each country, where a customer can file a claim.
The average time to resolve claims in the Group stood at 8.46 days in 2023, higher than the 7.41 days in 2022, as a result of the aforementioned integration of Visa and Mastercard claims in Argentina (which increases the resolution time by 1 day, but is partly offset by the reduction of times in Turkey by increasing the ratio of claims resolved in FCR by 52% (representing 45% of total claims in this geography) and improvement in Peru. The increase in fraud claims in Colombia and Uruguay has impacted their resolution times by requiring longer resolution times.# 2.3.3 Employees
BBVA has one purpose: "To bring the age of opportunity to everyone". A purpose that seeks to help all stakeholders, customers, shareholders and also its employees, helping them to meet their life goals. The goal as an organization is to have the best and most engaged team, one of BBVA's six strategic priorities. Therefore, BBVA must be able to attract, motivate, train and retain the best talent, aligned with the Group's values.
BBVA's people management strategy is based on three principles:
These strategic principles are the basis of the employee value proposition, which BBVA develops and implements around three pillars: Bank, Team and People.
In 2023, BBVA continued to promote employee initiatives that have enabled progress in different areas of people management.
"Bank": 2023 was an excellent year in terms of employee engagement with the Group. During the year, work was done on the connection between personal purpose and Group purpose as well as on the "One Team" feeling, which was reflected, for instance, in the global initiative to support local teams following the earthquake in Turkey. In the Gallup survey, BBVA obtained an outstanding result in engagement, with an overall index of 4.43 -on a scale of 5-, which is +6 basis points above 2022, placing us in the 76th percentile compared to all companies in Gallup.
In order to continue driving the Agile transformation in the Group, BBVA developed its operational model around 3 areas: i) evolution of the organizational model, promoting autonomy and end-to-end empowerment; ii) promotion of multidisciplinary teams, advancing in the configuration of cross-functional teams and the Agile work methodology; and iii) development of the project prioritization model.
As part of the strategy to attract the best talent, BBVA rolled out a new global organizational model that aims to change the approach to the talent market, significantly increasing proactive searches for the passive candidate and the presence in specialized technology and investment banking niches.
"Team": the Group continued to promote the role of the manager as a fundamental element in BBVA's transformation, defining a good manager as one who achieves the established business objectives, embodies the values and fosters the development of his or her teams.
BBVA continues to firmly support diversity in its different areas. In terms of gender diversity, different initiatives were launched in all geographies and global areas that have enabled the ratio of women in management positions to increase to 34.7%, a growth that, if maintained, will make it possible to reach the target of 35% by 2024. Likewise, there was also a strong focus on the inclusion of people with disabilities, where the BBVA Group has increased the number of people hired by 38% in relation to 2022 (891 compared to 645 in 2022).
"People": BBVA continued to promote the training of its teams in key skills for the Group's transformation, with specific training plans in competencies such as sustainability, where more than 21,000 employees (of which more than 18,000 are business employees) completed at least one specialized training course.
The financial health of employees is one of the Group's strategic priorities. In line with the measures implemented in 2022, BBVA has continued to improve compensation conditions in the different geographies in order to maintain the purchasing power of its employees.In addition to the performance-based salary increase (merit) and salary updates in some high- inflation geographies, the Group also introduced other economic benefits for employees. For example, in Spain BBVA's minimum contribution to the employee's pension plan has been increased (+48%), the new long-term savings policy has also come into force, the agreement for the novation at a fixed rate has been signed of the social housing loans in force and the conditions of Health Insurance for employees have been improved. Another example is Mexico, where an improvement has been made in employee benefits and benefits, improving the conditions of the major medical expenses policy and which includes specific coverage for certain groups.
As at 31 December 2023, BBVA Group had 121,486 employees located in over 25 countries, an increase of 5% in the year. The growth in headcount is mainly due to the hiring of profiles associated with the Group's transformation, especially in the strategic areas of Engineering, Data and Customer Solutions, and to the hiring of teams in sales networks in geographies such as Mexico to keep pace with business growth.
Talent and Culture (T&C), as BBVA's people management area, has a governance model whose objective is the adequate definition and implementation of the talent management strategy in the BBVA Group, ensuring compliance with the legal framework in force in all labor areas. Periodically, and in accordance with established policies, standards and procedures, the global head of the area reports to the Board of Directors on the main strategic decisions regarding people management as well as the main advances in their implementation. The area has a series of committees in which both the global managers of the area's core and cross services and the T&C managers of the countries and business areas participate. These committees align and coordinate the global-local strategy based on priorities and a common agenda, taking market trends and internal best practices as a reference. These meetings are held at least monthly and are complemented by local people management committees.
In accordance with the BBVA Group's General Risk Management and Control Model detailed in chapter "4. Risk Management" in this report, BBVA has a second line of defense with a unit specializing in people risk control (People RCS), whose scope of responsibility includes a wide range of risks, classified into risks related to employee health and safety, labor rights and regulations, and talent management and corporate culture (among which are included: lack of specialization, talent drain, inadequate staff sizing, etc.).
AVERAGE TIME FOR SETTING CLAIMS BY COUNTRY (NATURAL DAYS)(1)
| Country | 2023 | 2022 |
| :-------- | :--- | :--- |
| Spain | 13 | 12 |
| Mexico | 5 | 4 |
| Turkey | 4 | 5 |
| Argentina | 16 | 15 |
| Colombia | 7 | 5 |
| Peru | 6 | 8 |
| Venezuela | 9 | 10 |
| Uruguay | 21 | 14 |
| Portugal | 4 | 6 |
n.a.: not applicable.
(1) The claims considered for the calculation of the average resolution time include those received and resolved during the same financial year. Claims resolved through the FCR model, which consists of resolving the incident at the time it occurs, thus providing a quality service and improving the customer experience, remained at 10% of total claims, thanks to the increase in the ratio in Turkey, which offset the slight drop in the ratio in Peru and Colombia (both with a high volume of FCR claims), as well as the impact of Visa and Mastercard in Argentina.
91 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
CLAIMS SETTLE BY FIRST CONTACT RESOLUTION (FCR. PERCENTAGE OVER TOTAL CLAIMS)
| | 2023 | 2022 |
| :--- | :--- | :--- |
| Spain (1) | n.a. | n.a. |
| Mexico | 10 | 10 |
| Turkey (2) | 45 | 30 |
| Argentina | 3 | 5 |
| Colombia (2) | 24 | 25 |
| Peru | 5 | 6 |
| Venezuela (1) | n.a. | n.a. |
| Uruguay | 4 | 8 |
| Portugal (1) | n.a. | n.a. |
n.a.: not applicable.
(1) In Spain, Portugal and Venezuela this type of procedure is not applied since claims are received on paper or by electronic means.
(2) In Colombia and Turkey, FCR is considered first level resolution, that is, by the Front in less than 48 hours.
Substantiated claims 47, related to privacy violations and loss of customer data filed with the relevant supra-bank authorities in the countries, have been reduced to 0.003% of total claims (0.004% in 2022), thanks to risk prevention and control policies and measures. The total volume of claims in 2023, the breakdown of which by country is shown in the table below, represents a 25% increase in the volume of claims compared to the 2022 figure derived, as mentioned above, from the increase in fraud cases related to card transactions (as in the case of Mexico, Peru, Uruguay and Colombia) and essentially from the incorporation of claims managed by Visa and Mastercard in Argentina (+400,000 claims per year), facts that blur the improvements implemented in the claims management process in the Group.
TOTAL VOLUME OF CLAIMS (BBVA GROUP. MILLIONS OF CLAIMS)
| Country | 2023 | 2022 |
| :-------- | :---- | :---- |
| Spain | 0.17 | 0.15 |
| Mexico | 1.22 | 1.05 |
| Turkey | 0.24 | 0.22 |
| Argentina | 0.81 | 0.5 |
| Colombia | 0.13 | 0.12 |
| Peru | 0.45 | 0.38 |
| Venezuela | 0.014 | 0.011 |
| Uruguay | 0.02 | 0.014 |
| Portugal | 0.0001 | 0.0001 |
For more information on the Customer Care Service and the Customer Ombudsman see the section "2.6.3 Additional information on customer complaints" in the chapter "2.6 Additional information" of this report.
92 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
47 Substantiated claims are considered to be those whose resolution has been in favor of the customer.For these risks there is a General Mitigation, Control and Monitoring Framework for which an annual self-assessment is carried out to evaluate the degree of implementation by the first line of defense, as well as continuous monitoring based on representative metrics to ensure compliance with the associated Risk Appetite Framework. The disclosure included in this chapter is complemented by quantitative information broken down in section “2.6.2 Additional information on employees” in chapter “2.6 Additional information”.
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
BBVA’s values and behaviors are the action guidelines for the employees in their day-to-day decision-making and help them accomplish the Groups' purpose "to bring the age of opportunity to everyone." Values and behaviors are the hallmark of all those who work in the Group and define BBVA's actions. BBVA's values are embedded in the key models and levers that promote the Group's transformation. They are also included in the global people management processes: from the selection of new employees to the procedures for allocating roles, assessment, people development, training, and even incentives for achieving annual goals.
In February 2023, after the earthquake that devastated Turkey, BBVA launched a global and voluntary initiative through which the Group's employees participated with financial donations to help affected employees and colleagues in Turkey. In this way, this global initiative complemented all the efforts made locally by Garanti BBVA to help and accompany impacted employees, being the best example of how values are lived at BBVA. This aid was implemented through a specific plan that included: the relocation of employees whose homes have been severely damaged; the conditioning and internal renovation of slightly damaged houses; and help for replacing furniture and purchasing clothing.
Likewise, in 2023, the sixth edition of Values Day was held, a day on which employees celebrate BBVA's culture and delve into the positive impact that the daily application of values has on stakeholders. This edition, with the motto "Connected by our purpose", worked on BBVA's purpose through the connection with the personal purpose of each of BBVA's employees, that which gives meaning to their lives. Aligning personal and professional purpose strengthens employee engagement. It was conducted in a mixed format of face-to-face and online activities in all of the Group's geographies and involved more than 100,000 employees globally.
BBVA conducts an annual Employee Engagement Survey, managed externally by Gallup. In 2023, the seventh listening process was carried out, in which almost 96% of employees participated. BBVA shows an outstanding performance in employee engagement with an overall rating of 4.43 (on a scale of 5), up 6 basis points from 2022, entering the top quartile of Gallup's customer base with 86.6% of employees showing an engagement rating equal to or higher than 4. These results are the consequence of the work of all the teams that develop action plans and other actions, with almost 86% of teams with specific plans having achieved this year.
The attached table shows the main commitment indicators:
| ENGAGEMENT INDICATORS (1) | 2023 | 2022 |
|---|---|---|
| Employee Engagement Index: GrandMean (scale 5) (2) | 4.43 | 4.37 |
| BBVA's engagement percentile compared to total companies | 76 | 72 |
| Employee satisfaction index (scale 5) | 4.52 | 4.47 |
| Engagement ratio (number of employees engaged versus number not engaged) | 16.56 | 12.95 |
(1) 2023 includes information from Turkey. Data for 2022 has been updated to align scope and differs from that published in the 2022 Statement of Non-Financial Information.
(2) By age group, the results for this year's engagement index were as follows: 4.51 points out of 5 among employees under 25 years of age; 4.43 points for the 25 to 34 age group; 4.42 points for 35 to 44 years of age; 4.44 points for 45 to 54 years of age; and 4.43 points for employees over 55 years of age. By gender, the results were similar for men (4.44) and women (4.42).
BBVA continues to promote a corporate culture of social and environmental commitment to help customers in the transition to a sustainable future, with a focus on climate change and inclusive and sustainable social development. Within this program, other actions include among other facilitating employees' access to community service activities. For more information on volunteer actions, see "Volunteering" in section "2.3.1 Society" of this report.
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
In 2023, BBVA consolidated its professional development model that makes employees the owners of their development and is structured in three modules: 1. know themselves better, 2. improve to grow and 3. explore new paths. This model is equipped with an ecosystem of tools that allows employees to make decisions about their professional career and take advantage of the opportunities that best align with their interests. The employee has also a team of Advisors dedicated to supporting and advising them throughout the entire process, as part of the framework of the T&C Relationship Model.
BBVA seeks to offer a unique value proposition through a common brand, in line with a global and digital entity.BBVA has a global reference model for attracting talent, with clear policies that strengthen transparency, trust and flexibility for all stakeholders involved in the process
Innovation and technology are the fundamental levers of BBVA's transformation. The Group has therefore reinforced its efforts to attract talent in strategic profiles with high demand through segmented measures and initiatives (differentiated and specific attraction measures depending on the profiles). In 2023, BBVA rolled out a new global organizational model in the area of talent attraction, which aims to change the approach to the market, significantly increasing proactive searches for the passive candidate and the presence in specialized niches, especially in technology and investment banking. Likewise, a profound technological and process transformation is underway to provide recruiting teams with tools that enhance this approach to the market, giving maximum relevance to the experience of candidates and the knowledge that the teams must have of the supply and demand of an increasingly dynamic and competitive market. With this transformation, BBVA aims to be at the forefront of talent acquisition, also incorporating attraction and branding capabilities that make the most of such a well-positioned brand.
| SIGNED CONTRACTS BY GENDER (BBVA GROUP. NUMBER) | ||||||
|---|---|---|---|---|---|---|
| Total | Male | Female | Total | Male | Female | |
| 2023 | 2022 | |||||
| Spain | 3,085 | 1,731 | 1,354 | 2,731 | 1,430 | 1,301 |
| Mexico | 9,570 | 5,295 | 4,275 | 11,908 | 6,213 | 5,695 |
| Turkey | 2,898 | 1,368 | 1,530 | 2,863 | 1,321 | 1,542 |
| South America | 4,115 | 1,770 | 2,345 | 4,750 | 2,095 | 2,655 |
| Rest | 260 | 163 | 97 | 254 | 170 | 84 |
| Total | 19,928 | 10,327 | 9,601 | 22,506 | 11,229 | 11,277 |
| Of which permanent contracts are (1): | ||||||
| Spain | 2,161 | 1,321 | 840 | 1,748 | 1,021 | 727 |
| Mexico | 1,003 | 519 | 484 | 3,214 | 1,785 | 1,429 |
| Turkey | 2,412 | 1,109 | 1,303 | 2,537 | 1,148 | 1,389 |
| South America | 3,178 | 1,442 | 1,736 | 3,024 | 1,546 | 1,478 |
| Rest | 211 | 142 | 69 | 204 | 139 | 65 |
| Total | 8,965 | 4,533 | 4,432 | 10,727 | 5,639 | 5,088 |
(1) Includes hires through consolidations. Talent hiring activity remained steady throughout the year.
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
| SIGNED CONTRACTS BY GENDER (BBVA GROUP. NUMBER) | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Total | Male | Female | Total | Male | Female | Total | Male | Female | |
| 2023 | 2022 | ||||||||
| Spain | 3,085 | 1,731 | 1,354 | 2,731 | 1,427 | 1,304 | |||
| Mexico | 9,570 | 5,295 | 4,275 | 11,908 | 6,556 | 5,352 | |||
| Turkey | 2,898 | 1,368 | 1,530 | 2,863 | 1,321 | 1,542 | |||
| South America | 4,115 | 1,770 | 2,345 | 4,750 | 2,072 | 2,678 | |||
| Argentina | 491 | 243 | 248 | 618 | 381 | 237 | |||
| Bolivia | 1 | — | 1 | 26 | 8 | 18 | |||
| Brazil | — | — | — | — | — | — | |||
| Colombia | 957 | 404 | 553 | 1,254 | 580 | 674 | |||
| Chile | 141 | 73 | 68 | 212 | 106 | 106 | |||
| Peru | 2,356 | 959 | 1,397 | 2,468 | 915 | 1,553 | |||
| Uruguay | 35 | 20 | 15 | 14 | 7 | 7 | |||
| Venezuela | 134 | 71 | 63 | 158 | 75 | 83 | |||
| Rest | 260 | 163 | 97 | 254 | 169 | 85 | |||
| Germany | 9 | 7 | 2 | 5 | 3 | 2 | |||
| Belgium | 1 | — | 1 | — | — | — | |||
| China (1) | 22 | 14 | 13 | 20 | 13 | 12 | |||
| South Korea | 1 | 1 | — | — | — | — | |||
| United Arab Emirates | — | — | — | — | — | — | |||
| The United States | 100 | 72 | 28 | 134 | 94 | 40 | |||
| France | 14 | 11 | 3 | 15 | 12 | 3 | |||
| India | — | — | — | — | — | — | |||
| Indonesia | — | — | — | — | — | — | |||
| Italy | 18 | 10 | 8 | 3 | 2 | 1 | |||
| Japan | 2 | 2 | — | 1 | 1 | — | |||
| Portugal | 29 | 14 | 15 | 15 | 8 | 7 | |||
| United Kingdom | 45 | 29 | 16 | 37 | 26 | 11 | |||
| Singapore | 4 | — | 4 | 5 | 2 | 3 | |||
| Switzerland | 15 | 8 | 7 | 21 | 12 | 9 | |||
| Taiwan | — | — | — | 2 | — | 2 | |||
| Total | 19,928 | 10,327 | 9,601 | 22,506 | 11,545 | 10,961 | |||
| (1) Includes employees of BBVA entities in China and Hong Kong. |
| SIGNED CONTRACTS BY AGE STAGES (BBVA GROUP. NUMBER) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Total | <30 | 30-39 | 40-49 | ≥50 | Total | <30 | 30-39 | 40-49 | ≥50 | |
| 2023 | 2022 | |||||||||
| Spain | 3,085 | 1,389 | 960 | 550 | 186 | 2,731 | 1,133 | 998 | 465 | 135 |
| Mexico | 9,570 | 5,801 | 2,972 | 609 | 188 | 11,908 | 6,475 | 4,340 | 844 | 249 |
| Turkey | 2,898 | 2,144 | 535 | 158 | 61 | 2,863 | 2,040 | 667 | 121 | 35 |
| South America | 4,115 | 2,551 | 1,244 | 273 | 47 | 4,750 | 2,725 | 1,612 | 334 | 79 |
| Rest | 260 | 92 | 77 | 56 | 35 | 254 | 87 | 75 | 56 | 36 |
| Total | 19,928 | 11,977 | 5,788 | 1,646 | 517 | 22,506 | 12,460 | 7,692 | 1,820 | 534 |
| Of which permanent contracts are (1): | ||||||||||
| Spain | 2,161 | 1,158 | 652 | 290 | 61 | 1,748 | 864 | 654 | 184 | 46 |
| Mexico | 1,003 | 611 | 331 | 52 | 9 | 3,214 | 1,586 | 1,298 | 250 | 80 |
| Turkey | 2,412 | 1,762 | 487 | 126 | 37 | 2,537 | 1,772 | 636 | 103 | 26 |
| South America | 3,178 | 1,811 | 1,074 | 255 | 38 | 3,024 | 1,449 | 1,215 | 295 | 65 |
| Rest | 211 | 73 | 64 | 43 | 31 | 204 | 78 | 61 | 39 | 26 |
| Total | 8,965 | 5,415 | 2,608 | 766 | 176 | 10,727 | 5,749 | 3,864 | 871 | 243 |
(1) Includes hires through consolidations.
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
BBVA's talent development and growth model is centered on the employee. It is a model based on the principles of trust, empowerment and transparency that govern the relationship between BBVA and people.Employees are responsible for their own professional development and rely on their manager as their main support in the bank to accompany and guide them throughout their career at BBVA. In 2023, BBVA continued to promote the figure of the manager as a key player in BBVA's transformation, defining the characteristics of a good manager and the key competencies he/she should have in order to evaluate them periodically and prepare and implement personalized growth plans that allow BBVA managers to continue to grow professionally. The role of the manager takes on a differential role, with three key factors at BBVA: someone who lives the Group's values, impacts the achievement of results and the development of people. It requires, therefore, skills, attitudes and behaviors to achieve it. A good manager impacts the development of teams by accompanying them as a reference, being a daily example on a daily basis from a professional point of view: setting objectives, promoting the achievement of results, participating in people's assessment processes and ensuring their well-being. professional development. But also from a personal perspective, promoting the culture of 'feedback', promoting people's well-being, motivation and commitment. BBVA has a growth model based on meritocracy and transparency. This model makes it possible to evaluate all employees with an established periodicity and objective and common criteria throughout the group, to determine the individual performance of each employee. In 2023, BBVA has promoted more than 18,000 employees globally.
| 2023 | 2022 | |||||
|---|---|---|---|---|---|---|
| Number of promoted employees | Male | Female | Number of promoted employees | Male | Female | |
| Spain | 3,430 | 1,636 | 1,794 | 3,092 | 1,463 | 1,629 |
| Mexico | 10,001 | 4,948 | 5,053 | 7,406 | 3,685 | 3,721 |
| Turkey | 3,218 | 1,395 | 1,823 | 2,755 | 1,122 | 1,633 |
| South America | 1,874 | 821 | 1,053 | 2,567 | 1,070 | 1,497 |
| Rest | 111 | 67 | 44 | 187 | 129 | 58 |
| Total | 18,634 | 8,867 | 9,767 | 16,007 | 7,469 | 8,538 |
The Group's development model has different tools and specific communication moments throughout the year that allow for development and performance conversations with employees. The opportunity to give and receive feedback is generated in an agile way through specific processes and initiatives such as the annual people assessment process, the quarterly Project Review process or in an ad hoc fashion, through the Hot Feedback initiative. BBVA continues to evolve the global ecosystem of tools that are part of its development model, expanding its scope and impact and focusing on the personalization of the service offering, as follows:
In 2023, BBVA continued to promote globality and internal mobility, where the percentage of vacant positions filled with internal candidates stood at 46% in 2023 (60% in 2022) and demonstrates the commitment to the global policy of prioritizing internal talent over external talent. In relation to globality, during the year, the group increased the total number of international placements made among employees from different geographies from 420 in 2022 to 652 in 2023 (+55%). These types of placements respond to a variety of strategic, business and professional growth needs, with very positive feedback from employees.
98 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
BBVA's training model provides employees with resources that make them the central players in their learning experience, using methodologies that are recognized as benchmarks in the market. Technological innovation also facilitates guided learning accompanied by personalized advice, enabling them to make the best career decisions. The advances in the implementation of the training model, BBVA Campus, and its solidity allow BBVA to anticipate and adapt with agility to the increasingly changing training needs in the midst of the transformation challenges in which the Group is immersed to shape its future. Campus BBVA makes it possible to respond to the needs of the Group, areas and people, supporting the achievement of strategic business objectives. Therefore, in 2023, the Group maintained its investment in training, which amounted to 421 euros per employee (+16% compared to 2022). The basic training data for 2023 and 2022 are shown below:
| 2023 | 2022 | |
|---|---|---|
| Investment in training (millions of euros) | 51.1 | 42.1 |
| Investment in training per employee (euros) (1) | 421 | 364 |
| Hours of training per employee (2) | 49.3 | 43.7 |
| Employees who have received training (%) (2) | 99.1 | 97.8 |
| Average participations per employee (3) | 33.9 | 31.9 |
| Satisfaction with the training (rating out of 10) | 9.6 | 9.7 |
| Amounts received from FORCEM for training in Spain (millions of euros) | 1.5 | 1.3 |
(1) Ratio calculated considering the total workforce of the Group at the end of each financial year.
(2) Ratio calculated by dividing the total training hours for the entire year by the Group's total workforce with access to the training platform at the end of the year.
(3) Ratio calculated by dividing the number of total training resources completed by the total number of the Group's workforce with access to the training platform at the end of the year.
BBVA offers employees a global learning platform with a training catalog that incorporates, on an ongoing basis, a selection of specific resources for professionals to acquire the knowledge and skills necessary for their development. It highlights the variety of formats that, due to their dynamism and flexibility, adapt to the employee's way of learning: MOOCs (Massive Open Online Courses), podcasts, videos, blogs, practical communities, portals structured by areas of knowledge or simulators, etc. In addition, for specialized technical profiles, access to external training platforms of recognized worldwide prestige and courses from leading educational institutions is offered. All of this has contributed to consolidating a culture of unparalleled continuous learning that employees integrate naturally into their daily routines. It enables employees to be trained when they need it and in the formats that suit them best to help them meet their business challenges. Online training has established itself as the employee's preferred learning methodology, as over the last 4 years, more than 94% of training has been conducted online (in 2023 it was 92%) with an average satisfaction index of 9,71 (out of 10), in 2023. As part of the Group's training offerings at Campus BBVA, "The Camp" is a gamified and digital experience that allows employees to boost and accelerate the development of the Group's strategic capabilities, both for their current and future roles. The BBVA Group's training catalog is organized into 4 major content groups: 1) business accelerators, 2) facilitating skills, 3) human skills and 4) technological capabilities. This structure seeks to facilitate the assimilation of knowledge at different levels of depth and to guarantee a positive impact on the personal and professional development of employees.
| Number of employees with training | Training hours (thousands) | |||||
|---|---|---|---|---|---|---|
| Total | Male | Female | Total | Male | Female | |
| Business accelerators | 92,032 | 43,434 | 48,598 | 1,601 | 799 | 802 |
| Enabler skills | 115,915 | 55,005 | 60,910 | 2,421 | 1,089 | 1,332 |
| Human skills | 115,167 | 55,178 | 59,989 | 1,390 | 651 | 739 |
| Tech capabilities | 111,315 | 54,068 | 57,247 | 518 | 302 | 216 |
(1) Data includes the Group's total workforce with access to the training platform at the end of the year.
| Number of employees with training | Training hours (thousands) | |||||
|---|---|---|---|---|---|---|
| Total | Male | Female | Total | Male | Female | |
| Business accelerators | 75,496 | 34,094 | 41,402 | 1,150 | 568 | 582 |
| Enabler skills | 111,194 | 52,526 | 58,668 | 2,352 | 1,058 | 1,295 |
| Human skills | 97,272 | 46,178 | 51,095 | 1,076 | 483 | 594 |
| Tech capabilities | 75,040 | 36,098 | 38,942 | 440 | 253 | 187 |
99 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
In order to provide the necessary knowledge for the Group's professionals to address sustainability as a key and strategic focus in their different areas of activity (as part of the business accelerators), in 2023, more than 90 new courses have been added to the training catalog. Throughout the year, more than 53,500 professionals have completed at least one sustainability course, adding a total of more than 112,000 hours of training on the subject. In relation to specialized training, in which more than 21,000 employees have participated, the following actions are noteworthy:
| Number of employees with training | Training hours (thousands) | |||||
|---|---|---|---|---|---|---|
| Total | Male | Female | Total | Male | Female | |
| Management team (2) | 5,377 | 3,509 | 1,868 | 210 | 129 | 81 |
| Managers | 40,463 | 20,616 | 19,847 | 2,339 | 1,199 | 1,139 |
| Rest of employees | 74,255 | 33,670 | 40,585 | 3,382 | 1,514 | 1,869 |
| Total | 120,095 | 57,795 | 62,300 | 5,931 | 2,842 | 3,089 |
(1) Data includes the Group's total workforce with access to the training platform at the end of the year.
(2) The management team includes the highest level of management in the Group.
| Number of employees with training | Training hours (thousands) | |||||
|---|---|---|---|---|---|---|
| Total | Male | Female | Total | Male | Female | |
| Management team (2) | 4,992 | 3,310 | 1,682 | 165 | 106 | 59 |
| Managers | 38,070 | 19,135 | 18,935 | 1,895 | 987 | 908 |
| Rest of employees | 70,028 | 31,157 | 38,871 | 2,959 | 1,269 | 1,690 |
| Total | 113,090 | 53,602 | 59,488 | 5,018 | 2,362 | 2,656 |
(1) Data includes the Group's total workforce with access to the training platform at the end of the year.
(2) The management team includes the highest level of management in the Group.
| Nationality | 2023 | 2022 | ||
|---|---|---|---|---|
| Number of employees with training | Training hours (thousands) | Number of employees with training | Training hours (thousands) | |
| Spanish | 26,668 | 1,425 | 24,734 | 1,294 |
| Mexican | 46,696 | 2,230 | 43,516 | 1,870 |
| Turkish | 20,553 | 1,084 | 20,122 | 1,008 |
| South American (1) | 23,495 | 1,139 | 22,089 | 779 |
| Rest of nationalities | 2,683 | 52 | 2,629 | 69 |
| Total | 120,095 | 5,931 | 113,090 | 5,019 |
(1) Includes Central America
| Total | Male | Female | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| <30 | 30-39 | 40-49 | ≥50 | <30 | 30-39 | 40-49 | ≥50 | |||
| Number of employees with training | 120,095 | 13,162 | 20,310 | 14,801 | 9,522 | 14,297 | 23,333 | 17,240 | 7,430 | |
| Training hours (thousands) | 5,931 | 912 | 970 | 604 | 356 | 977 | 1,056 | 763 | 293 |
(1) Data includes the Group's total workforce with access to the training platform at the end of the year.
| Total | Male | Female | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| <30 | 30-39 | 40-49 | ≥50 | <30 | 30-39 | 40-49 | ≥50 | |||
| Number of employees with training | 113,090 | 9,590 | 19,497 | 14,598 | 9,857 | 11,315 | 23,071 | 17,334 | 7,828 | |
| Training hours (thousands) | 5,019 | 614 | 839 | 583 | 325 | 710 | 944 | 718 | 286 |
| 2023 | 2022 | |||||
|---|---|---|---|---|---|---|
| Total | Male | Female | Total | Male | Female | |
| Management team (2) | 39.0 | 36.7 | 43.2 | 32.0 | 30.9 | 34.1 |
| Managers | 57.8 | 58.2 | 57.4 | 49.3 | 51.0 | 47.5 |
| Rest of employees | 45.6 | 45.0 | 46.0 | 41.1 | 39.5 | 42.3 |
(1) Data includes the Group's total workforce with access to the training platform at the end of the year.
(2) The management team includes the highest level of management in the Group.
| 2023 | 2022 | |||
|---|---|---|---|---|
| Number | % | Number | % | |
| Investment in training of payroll (1) | 1.01 | 0.97 | ||
| Increase in the capacity to generate income as a result of training (2) | 365.72 | 368.52 |
(1) Training investment / Wages and Salaries
(2) Return on investment in human capital; a. Total Revenue (EUR) - Gross Margin; b. Total Operating Expenses (EUR) - Administration costs; c. Total Training related expenses (EUR); d. Resulting HC ROI (a - (b-c)) / c
BBVA understands that diversity and inclusion are firmly aligned with its purpose and values, and works to ensure that its workforce is a true reflection and representative of the society in which it operates. BBVA's focus on diversity issues allows us not only to attract and retain the best talent, but also to better understand and meet the needs of our customers. In 2023, efforts were intensified in gender diversity, LGTBIQ+ inclusion, generational diversity, ethnic diversity and the integration of people with disabilities, recognizing that each individual brings unique perspectives that enrich the organization and society at large. BBVA works together with the Employee Resource Groups (hereinafter ERGs), which are internal working groups created and managed at the employees' own initiative. Their function is to promote diversity and foster professional relationships among people with common interests. Several ERGs have been established in different geographic areas, with which we cooperate in identifying the needs of our employees and implementing impact initiatives. In order to be a true reflection of the society in which it operates, BBVA is focusing on different types of diversity: gender, LGTBIQ+, people with disabilities, intergenerational and ethnic-cultural. In terms of gender diversity, in 2022, and after reaching the target of 40% women on the Board of Directors, BBVA took a further step towards gender equality and set a target of 35% women in management positions at the end of 2024, as a sign of its commitment to promoting equal opportunities. In 2023, work continued on defining and launching initiatives at a global level to achieve the target set. For instance, the "Yo Soy Talento Femenino" (I am Female Talent) program has been launched, an initiative through which a group of high-potential female BBVA employees has been identified and provided with various tools to help them develop to their full potential. These tools include:
– Specialized training: preferential access to management development programs (MDP) and scholarships in external training programs such as "Yo Soy Promociona" or "Yo Soy Progresa".
– Mentoring: includes the "Top Mentoring" program through which they are mentored by the top managers of their areas, including members of BBVA's Global Leadership.
– Coaching: prioritization in obtaining a place in internally organized coaching programs.
– Networking activities: participation in both internal and external activities with women from other companies, with the aim of establishing professional ties that will help them advance in their professional career.
By December 2023, the percentage of women in management positions stood at 34.7%, in line to reach the established target of 35% in 2024. In Spain, BBVA signed a new Equality Plan with 97.4% of union representatives, which aims to achieve real and effective equality of opportunities between men and women. The new Plan reinforces the Bank's current policy of ensuring equality and integrating the gender perspective in all areas. It also incorporates measures to move towards a balanced presence of women and men at all organizational levels. The agreement also addresses other important aspects, such as remuneration policy, culture and leadership, health from a gender perspective and inclusive communication. The agreement also includes BBVA's commitment to increase support for victims of gender-based violence and includes a protocol against sexual and gender-based harassment. The different reporting channels are noted, prevention and victim protection measures are implemented, and a catalog of best practices is included, including dissemination and awareness-raising among the workforce. In 2023, BBVA renewed its global partnership agreement with Inspiring Girls International, with the goal of continuing to support a better future for girls around the world. In addition, BBVA was awarded the "IT Pioneers" prize for its contribution to the promotion of female technological talent. The "Women Trader Academy" program was also launched, with the aim of raising awareness of trading to encourage female students and recent graduates to consider this option as a viable career path. In Mexico, breastfeeding rooms have been introduced in the commercial bank branch network, designed so that employees can express milk without being disturbed. Furthermore, an internal awareness-raising process has been carried out with the aim of eradicating biases and myths about breastfeeding. The Group has protocols for preventing and dealing with sexual harassment in the main geographical areas in which BBVA operates, expressly stating BBVA's rejection of any behavior of a sexual nature or connotation that has the intention or has the effect of violating a person's dignity, and is committed to the application of said agreement as a solution to prevent, detect, correct and punish this type of conduct within the company. Likewise, BBVA's Code of Conduct, which is applicable to the entire Group, expressly mentions the Group's non-acceptance of this type of conduct and its efforts to eradicate it.In terms of gender diversity, in 2023 and 2022 women accounted for:
REPRESENTATION OF WOMEN IN BBVA GROUP (PERCENTAGE)
| | 2023 | 2022 |
| :------------------------------------------------------ | :--- | :--- |
| Women in the Board of Directors | 40.0 | 40.0 |
| Women in Senior Management or Top Management | 23.5 | 22.2 |
| Women in the Management Team | 34.7 | 33.5 |
| Women in the Management Team (including office directors) | 42.2 | 39.6 |
| Women in Business Generation and Profit-Making Positions | 57.6 | 57.6 |
| Women in STEM Positions | 30.6 | 29.5 |
| Women in Middle Management Positions | 26.6 | 25.3 |
| Women in Junior Management Positions | 35.1 | 34.0 |
The distribution by age and gender of the Board of Directors and Senior Management for 2023 and 2022 is shown in the following tables:
DISTRIBUTION OF MEMBERS OF THE BOARD OF DIRECTORS AND SENIOR MANAGEMENT BY AGE STAGES (BBVA GROUP. PERCENTAGE)
| | <30 | 30-39 | 40-49 | ≥50 | <30 | 30-39 | 40-49 | ≥50 |
| :------------------------------------------------------ | :--- | :---- | :---- | :--- | :--- | :---- | :---- | :--- |
| | 2023 | 2023 | 2023 | 2023 | 2022 | 2022 | 2022 | 2022 |
| Board of Directors | — | — | 6.7 | 93.3 | — | — | 6.7 | 93.3 |
| Senior Management | — | — | 23.5 | 76.5 | — | — | 33.3 | 66.7 |
DISTRIBUTION OF MEMBERS OF THE BOARD OF DIRECTORS AND SENIOR MANAGEMENT BY GENDER (BBVA GROUP. PERCENTAGE)
| | Male | Female | Male | Female |
| :------------------------------------------------------ | :--- | :----- | :--- | :----- |
| | 2023 | 2023 | 2022 | 2022 |
| Board of Directors | 60.0 | 40.0 | 60.0 | 40.0 |
| Senior Management | 76.5 | 23.5 | 77.8 | 22.2 |
In the area of LGTBIQ+ diversity, the Agreement on measures to achieve equality for LGTBIQ+ people and the protocol on harassment due to sexual orientation, sexual identity and gender expression was signed in Spain with 100% of the legal representation of employees. This agreement reinforces the Bank's current policy of promoting plurality in the work environment and ensuring equal and inclusive treatment of all people. In addition, it includes a protocol for reporting cases of harassment motivated by sexual orientation, sexual identity and gender expression. Likewise, in Spain, BBVA holds the presidency of the Business Network for LGTBI Diversity and Inclusion (REDI), the first business association in Spain created to promote an inclusive and respectful environment in organizations, and globally celebrates LGTBIQ+ Pride Day. In Argentina, BBVA continues with its initiative for the insertion of trans and non-binary people in the labor market.
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48
For the purpose of diversity calculations, executive directors have been included in both the Board of Directors and Senior Management calculations.
In terms of diversity for people with disabilities, BBVA reaffirms its commitment to the labor integration of this group with the launching of different specific initiatives:
– BBVA Mexico held the first inclusive recruitment fair for people with disabilities, at which more than 1,500 résumés were received. Throughout the year, 180 people were hired through this event. We are also working to raise awareness and train the teams that receive employees with disabilities. In 2023, more than 21,000 employees received training in this area.
– In Spain, BBVA, together with the Adecco Foundation, has the Family Plan in place, which provides support to family members of employees with disabilities. Various volunteer activities have also been carried out with the NGO Special Olympics or with the ConectTEA Foundation (for more information on volunteer activities, see "Volunteering" in section "2.3.1 Society").
– Meanwhile, in Turkey, Garanti BBVA created a working group with students, experts, academics and bank employees with the aim of improving its position as an employer of people with disabilities.
As of December 31, 2023, BBVA had 891 people with disabilities on the Group's staff (645 in 2022), of whom 379 are located in Turkey, 263 in Mexico, 197 in Spain, 40 in South America and 12 in Portugal.
BBVA in Spain also favors inclusion and diversity by engaging services through "special employment centers" (CEEs, for its acronym in Spanish). These are sheltered employment companies where the labor integration of people with disabilities is promoted. During the 2023 financial year, the turnover of CEEs to the Bank amounted to approximately 2.5 million euros (as of December 31, 2022, turnover amounted to 1.9 million euros).
In relation to generational diversity, BBVA co-organized, together with the Transforma Foundation, the second edition of the Added Value Awards. The aim is to recognize those people who have contributed with their work and merits in the educational, scientific, technical, cultural, social and business areas to enhance the value of senior talent in Spain, especially if their greatest achievement has been attained during their senior years. In this line, the International Day for Intergenerational Diversity was marked with the launch of the Guide to Generational Diversity for Managers and the holding of the "A Look at Generational Diversity" event with a workshop for employees. In addition, various volunteer activities have been carried out for the elderly and to accompany people in nursing homes.
The Group has also carried out initiatives to promote ethno-cultural diversity in different geographic areas. BBVA Colombia carried out several initiatives to make ethnic diversity visible within the organization, including interviews with employees belonging to ethnic groups, as well as conferences and meetings on the subject. These activities seek to promote understanding and respect for the different cultures and ethnic groups present in the company.
Likewise, at BBVA, diversity has an important milestone, which is the annual celebration of "Diversity Days", internal days to promote diversity, inclusion and equity in the workforce through activities, conferences and events over the course of a week, which also aims to further explore projects promoted by the Group around the world in this area. The fourth edition of the event was held in 2023 with Peru as the host country. Over the course of these conferences, BBVA signed a declaration of principles against discrimination and harassment in the workplace that protects its employees against discriminatory behavior, as well as any unfavorable treatment related to nationality, race, ethnic origin, religion, gender, sexual orientation, sexual identity or gender expression, marital status, age, economic status, disability or family responsibility. The document dedicates a point to highlighting support for the LGTBIQ+ collective to make itself visible and identify itself, to the decisive promotion of a corporate culture that embraces differences, to the generation of an inclusive and safe work environment, and to committing to prevent, detect, correct and sanction any type of discriminatory conduct.
In conclusion, and in line with employee feedback, BBVA continues to make positive progress in terms of diversity as shown by the results of the Employee Engagement Survey (Gallup), specifically in the question "BBVA always values diversity", in which for yet another year, BBVA outperformed the previous year's score, with a score of 4.72 out of 5, up from 4.64 in 2022 and 4.53 in 2021. In addition, BBVA was included in the Bloomberg Gender Equality Index for the sixth consecutive year, a ranking of the world's companies with the best practices in gender diversity, and has been included in the Equileap index as one of the 100 best companies in the world in terms of gender equality. In Spain, BBVA once again holds the Distinction for Equality in the Company awarded by the Ministry of Equality for a period of 3 years. This recognizes the Bank's commitment to Equal Opportunities between men and women, with measures that promote productivity and the reconciliation of work and leisure time, dissemination and awareness-raising measures in the Bank and in society as a whole, including actions to give greater visibility to women who hold positions of responsibility in the organization, as well as initiatives that promote female vocations in careers in STEM. In keeping with this line, the Family-Responsible Company certificate has also been maintained.
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BBVA continues to make progress in its transformation process, anticipating and redefining the aspects which are key for motivating and protecting its teams, and making it easier for them to work together. Below are the actions and/or policies that the Group has in place in the area of working conditions and employee rights, work/life balance and occupational health and safety.
In 2023, and with the aim of continuing to drive the Agile transformation in the Group, BBVA developed the organizational and operational model around 3 areas:
– Development of the organizational model, promoting autonomy and end-to-end empowerment in the execution of processes.
– Promotion of multidisciplinary teams, advancing in the configuration of transversal teams and the Agile work methodology.
– Development of the project prioritization model.
BBVA consolidated the flexible work model implemented in 2022 in those functions in which it is feasible, with a general model that consists of working a minimum of 60% of the working day in person and a maximum of 40% remotely, although there are adaptations to this model motivated, among other issues, by the local legislation of each country or by the type of function performed. In 2023, BBVA promoted the remote work model in certain groups of the network, such as the Zona Contigo for remote management of customers in Spain. This voluntary work model, which is generally reversible for both BBVA and the employee, is based on flexibility, responsibility and trust in people. Respecting the flexibility to specify the days of remote work, it promotes the coordination of the people who make up the work teams to coincide in person, in the belief that the proximity between people is key to having solid and cohesive teams.# Digital disconnection
The right to digital disconnection is included in the internal regulations and policies of each country unit, and recognized as a fundamental element for achieving better organization of working time in order to respect private and family life, to improve the balance between personal, family and working life and to contribute to the optimization of workers' occupational health. To promote disconnection, initiatives have been carried out such as not sending e-mails or not calling meetings after certain hours in the evening or during weekends and holidays, or not calling meetings one afternoon a week in order to dedicate that time to planning tasks and individual work.
BBVA is committed to the welfare of its employees, complementing and expanding the benefits established at local level in the main geographical areas where it operates. In Spain, in order to safeguard the period of pregnancy and the care of the child, during pregnancy it is permitted to shorten working hours by reducing the midday break or by reducing the working day by one hour. The use of time off for infant care is improved, so that if it is taken in the form of a reduction of the working day, the time of the reduction is extended from half an hour to one hour; and if it is taken in the form of accumulated leave, the period for taking the leave is extended to twelve months of the child's life instead of nine months. During maternity or paternity leave, BBVA complements the economic benefits up to 100% of the usual salary and upon reincorporation, both the mother and the non-pregnant parent may convert the split workday into a continuous workday for up to twelve months of the child's life, a possibility that is also extended to cases of adoption of a child up to the age of five. The period during which a reduced working day may be taken is extended from the child's twelfth birthday until the end of the school year. Y in the event of the birth or adoption of a disabled child, employees may be granted a leave of twenty-two days, reduced working hours or additional flexibility in addition to the general working hours.
In Mexico and Colombia, BBVA extends parental leave by twenty working days and ten working days, respectively, in addition to the days provided for in local legislation. In Turkey, mothers who return to work after maternity leave have two hours a day of lactation leave until the child reaches the age of one year. They can use up this leave each day, combine the hours into one day of leave per week, or add them all together and extend their maternity leave by approximately one month. Mothers can also choose to extend their maternity leave with unpaid leave. With respect to paternity leave, paid paternity leave is extended by five extra days, in addition to the legally established five.
For employees in Peru and Argentina, BBVA extends paternity leave by twenty calendar days and thirty calendar days, respectively. In Argentina, in cases of premature birth, the mother is entitled to paid leave for the same number of days by which the birth is premature. Additionally, in the event of the birth or adoption of a disabled child, paternity and maternity leave is extended by sixty calendar days. In Uruguay, BBVA extends paternity leave by three working days in addition to the ten days provided for in the legislation, and in the case of mothers, it is extended by twenty-two calendar days which, together with the ninety-eight days provided for in the legislation, make a total of one hundred and twenty calendar days. In addition, mothers can opt for different teleworking arrangements for a period of six months after their return to work.
104 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
| 2023 | 2022 | |||||
|---|---|---|---|---|---|---|
| Total | Male | Female | Total | Male | Female | |
| Number of employees who have been entitled to parental leave | 3,691 | 1,585 | 2,106 | 3,715 | 1,592 | 2,121 |
| Number of employees who have taken parental leave | 3,691 | 1,585 | 2,106 | 3,603 | 1,516 | 2,085 |
| Number of employees who have returned to work in the reporting period after finishing their parental leave | 3,614 | 1,631 | 1,983 | 3,506 | 1,643 | 1,863 |
| Number of employees who have returned to work after finishing their parental leave and who were still employed 12 months after returning to work | 3,430 | 1,508 | 1,922 | 2,304 | 1,130 | 1,174 |
| The return-to-work rates of employees who took parental leave (%) | 98.8 | 98.5 | 99.1 | 98.4 | 99.0 | 97.9 |
Parental leave data for the geographic areas indicated above correspond to information provided by Spain, Mexico, Turkey, Peru, Colombia, Argentina, Uruguay, Venezuela, Chile, Bolivia, Portugal and Switzerland. The retention rate of employees who took parental leave in 2023 in the Group was 89%, being 90% for men and 87% for women (in 2022, these figures were 87%, 88% and 85% respectively).
In addition, BBVA offers its employees the possibility of taking certain leaves of absence to care for family members for health reasons, with varying degrees of coverage depending on the particularities of local legislation and public systems. For example, in the case of Spain there is a range of licenses/exemptions that can be used for this purpose with different levels of remuneration, as well as specific financial support.
In accordance with the different regulations in force in the countries in which BBVA operates, the labor conditions and rights of employees, such as freedom of association and union representation, are set forth in regulations, collective bargaining agreements and agreements entered into, where applicable, with the corresponding workers' representatives. Dialogue and negotiation are part of the Group's way of dealing with any differences or conflicts, for which there are specific procedures for consultation with union representatives in the different countries, including occupational health and safety aspects.
In Spain, employee representatives are elected every four years by personal, free, direct and secret suffrage and are informed of any relevant changes that may occur in the organization of work in the Bank under the terms provided for in the legislation in force. The banking industry collective agreement is applied to the 100% of the workforce (except for members of senior management), supplemented by employer-specific collective agreements which build upon and improve the provisions of the sector-wide agreement, and which are entered into with union representatives. All persons have the right to freely join trade unions and to engage in trade union activity, and any rule or decision that entails any type of discrimination on the grounds of membership or not of a trade union, or the exercise of trade union activities in general, is null.
In Mexico and Peru, the collective bargaining agreement ('Convenio Colectivo de Trabajo') regulates the working conditions of 100% of unionized workers. In Mexico in 2022, on the occasion of the 2019 reform to the Federal Labor Law, the union with representation in the Bank carried out a process to legitimize the collective bargaining agreement. Unionized workers voted voluntarily, freely, secretly, personally and directly on the continuity or not of the collective bargaining agreement governing labor relations at the Bank. The proceedings concluded with 95% of votes in favor of continuing with the same collective bargaining agreement and the union that represents it. In both countries, non-unionized workers' terms of employment are regulated by individual employment contracts and internal company policies on compensation and benefits. Thus, the working conditions of 100% of the workforce in both countries are regulated.
In Colombia, there are two types of collective bargaining agreements that regulate working conditions, which together cover 100% of the workforce. The 'Convención Colectiva' is the agreement between the Bank and unionized employees, while the 'Pacto Colectivo' is the agreement between the Bank and non-unionized employees, including Senior Management. Both groups of employees maintain a fluid and direct dialogue with the Bank.
In Argentina, Uruguay, Portugal and Venezuela, 100% of the workforce is covered by the collective bargaining agreement (except for members of senior management) maintaining fluid communication with the internal union committees at the local level and with the sections of the banking association at the national level. At BBVA Portugal, 100% of the workforce is covered by the collective bargaining agreement.
In Turkey, Chile and Bolivia, there is no union representation. Therefore, employees' working conditions are applied in accordance with the terms of their employment contracts and the Bank's internal policies.
105 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
BBVA considers the promotion of occupational health and safety as a basic principle that is addressed through the continuous improvement of working conditions.
The Group's occupational risk prevention model is regulated by local regulations, agreements and conventions in the geographical areas in which BBVA operates. In all cases, employees have the right to consultation and participation in these areas, which are exercised and developed through union representation or the interest groups in the different existing committees. BBVA's Occupational Risk Prevention Management System identifies and evaluates risks, establishes criteria, methods and resources to ensure the effectiveness of the management system, analyzes the results obtained and implements actions to improve processes and the system.# Occupational Risk Prevention
This Occupational Risk Prevention Management System is compliant with the requirements of OSHAS 18001:2007 and many geographies are certified in accordance with ISO 45001, which takes a proactive approach to risk assessment. As a cornerstone of this system, BBVA has an occupational risk prevention plan that integrates the company's preventive activity into its general management system and establishes its occupational risk prevention policy, which is implemented in an annual plan with specific objectives for action in this area. The actions by BBVA include: occupational risk assessments; specific evaluations of psychosocial risks; evaluations of particularly sensitive personnel and pregnant women; specific technical reports; training and information for workers; preparation and implementation of self-protection plans and emergency manuals; safety inspections, investigation and reporting of accidents; actions for the coordination of business activities in construction works and services; health surveillance through medical check-ups; preventive health campaigns as well as health examination satisfaction surveys.
Likewise, there is an emergency Action Plan that includes guidelines for dealing with possible emergencies, determines the people who are- organized and trained- to guarantee speed and efficiency in the actions to be taken, and provides information to all users of the facilities on how to act in the event of an emergency, and can also guarantee the necessary relations for coordination with external services.
The prevention service is divided into two lines of action:
In Spain, BBVA is governed by the Occupational Risk Prevention Act or the collective bargaining agreement on occupational health for the consultation and participation of workers in matters of occupational risk prevention. There are preventive policies that affect the 100% of the workforce of all the companies and which are carried out by the Occupational Risk Prevention Service, as well as a collective bargaining agreement that defines the instruments for employee participation in this matter. Likewise, the corresponding governing bodies are in place for its proper management: a State Health and Safety Committee, Health and Safety Committees of Large Centers and Territorial Prevention Delegates, which meet on a quarterly basis. The Prevention Service of BBVA, S.A. in Spain monitors the measures implemented. At the same time, and with the objective that prevention is integrated into the set of activities and at all hierarchical levels, the Bank has a periodic verification of the system, carried out by an independent auditor, in which a systematic, documented evaluation is carried out. and objective evaluation of the effectiveness of the occupational risk prevention system, with the results being favorable and highly qualified.
OPPlus in Spain also has a preventive policy that affects 100% of the workforce and is managed through a mixed model, consisting of its own Occupational Risk Prevention Service, with the specialties of Occupational Safety and Ergonomics and Psychosociology, and an external Prevention Service with the company Quirón Prevención, with the specialties of Health Surveillance and Industrial Hygiene.
In Mexico, the Legal Framework of the Occupational Health and Safety Management System is established in the Mexican Constitution, where the guiding principle is to safeguard occupational health and safety. From this constitutional precept, the Federal Labor Law, the Regulations and the Official Mexican Standards are derived as its Regulatory Law, which make up the legal framework in matters of Health and Safety for the benefit of workers. The scope of application of the Health and Safety management system is 100% of the workers, and of the work centers at its disposal. In addition to the Health and Safety Committee, BBVA has a Committee whose purpose is to analyze the various medical cases of prolonged incapacity or possible disability.
In Turkey, in accordance with legal requirements, quarterly Health and Safety Committee meetings are held at all sites with more than 50 employees. This committee is responsible for all matters related to the health and safety of workers, making its decisions by vote, with the participation of workers' representatives. The occupational health and safety management system is implemented within the framework of national law 6331 on Occupational Health and Safety, and international standards such as ISO 45001 (except in Turkey, where this certification is not available).
In Peru there is a Joint Occupational Health and Safety Committee that meets on a monthly basis. The responsibilities are described in the national legislation in relation to the approval of the evaluation of the Occupational Safety and Health (OSH) policy and Internal OSH Regulations.
Colombia has an Occupational Health and Safety Joint Committee in compliance with Colombian law. The Committee meets on a monthly or extraordinary basis and addresses different topics focused on the Occupational Health and Safety Management System, including the promotion of workers' health and safety, prevention of occupational accidents, occupational diseases, and other matters. The election of the committee is carried out by means of an open and public vote, which guarantees the participation of all employees.
Argentina has a Committee and a preventive policy that affects 100% of the workforce, structured along two lines of action: Hygiene and Safety (evaluation of occupational risks and follow-up of action plans, among others) and Occupational Health (medical reports, adaptation of work stations and preventive campaigns). In 2023, the company obtained ISO 45001 certification for occupational health and safety.
In Venezuela there is an Occupational Health and Safety Committee, a joint and collegiate participatory body for regular consultation on occupational health and safety policies, programs and actions. One of the responsibilities of this committee is to approve the Occupational Health and Safety Program, monitor health and safety conditions, as well as to be directly aware of the situation regarding the prevention of occupational diseases, occupational illnesses and promote the company's health.
In Chile, the Health and Safety Joint Committee is a labor participation body whose main objective is to promote and watch over the safety and health of workers in the workplace. Its function is to identify and prevent occupational hazards, propose safety measures, and collaborate in the implementation of policies and programs for the prevention of occupational accidents and diseases. Committee sessions are held quarterly or at the request of committee members. It is composed of 3 company representatives and 3 employee representatives.
In Uruguay, BBVA also has a labor welfare and working conditions committee that responds to local needs.
In coordination with the Training area, the Group plans different training actions in the area of Occupational Risk Prevention to raise awareness and provide employees with the necessary knowledge they need to perform their work. Online courses are available for all the workforce through the E-Campus platform and on-site courses are given by trainers from external entities who are highly specialized, with specialists from the Prevention Service also taking part in the training of some groups.
The BBVA Occupational Risk Prevention Training Plan includes courses such as: training in safety, health and well-being at work; first aid courses; defibrillator handling courses in centers that have them, psychosocial courses (Personal Risk Situations for new employees, initial support and hold-up protocol); specific emergency training courses for emergency teams; Contingency exercises for emergency management and practical fire courses for Personal Protective Equipment (PPE) and emergency management; road safety courses; CAE training for supervisors of external personnel.
In addition, a wide range of health and wellness training is available to all Group employees, both online and in person, including workshops and courses on sleep hygiene, emotional management, musculoskeletal prevention and healthy eating, among others.
The BBVA Group carries out medical check-ups for its employees to ensure their health and well-being, in accordance with local regulations in force. In 2023, for BBVA, S.A., more than 10,000 people were scheduled for medical examinations.In addition, ergonomic procedures have been carried out to adapt the workplace to the worker's pathology and more than 150 requests made by pregnant employees have been medically and ergonomically assessed. Medical and nursing care appointments are managed online to accommodate new flexible ways of working and allow for a more efficient management of services.
BBVA's Health and Well-being program is made up of two main lines of action: Work Better and Enjoy Life, and under the motto "You Move Us", where a set of initiatives are coordinated aimed at caring for the people who are part of BBVA, with the focus on empowering them to be the protagonists of their own health.
The "Work Better" axis fosters a culture based on commitment, trust and respect for the time of others to achieve the best productivity and efficiency and optimal use of working time. Digital disconnection, work flexibility, active listening and efficient meetings are promoted.
The "Enjoy Life" axis focuses on the integral health and well-being of the workforce, in line with the 2030 Agenda of the United Nations and the WHO, and has been implemented through two main pillars:
Informative conferences have been held with the participation of more than 10,000 employees, workshops and courses on emotional management, and a psychological support program has been implemented for employees and their family members, and were well received by the employees. Workshops have been held for anxiety management, support for digital disconnection, on positive psychology, mindfulness, book club, knitting, etc. In addition, adequate sleep hygiene has been promoted among employees through conferences, courses, workshops and sleep studies.
Awareness campaigns have been carried out with renowned speakers on cancer prevention, food and nutrition, prevention of neurodegenerative diseases, migraine in the workplace, diabetes prevention, flu and COVID vaccination, etc., with special emphasis on the celebration of World Health Days. In addition, in each of the countries, the initiatives have been complemented by local programs:
There are two platforms available to all employees for the dissemination of content related to health and well-being, demonstrating BBVA's commitment to promoting health and safety at work:
The portal also contains information on first aid and emergency procedures, as well as information on the specific risks associated with remote working and their prevention.
BBVA has semi-automatic defibrillators (DESA) in the main work centers in different geographical areas to assist in cardiopulmonary resuscitation in the event of cardiorespiratory arrest, thus forming part of the Cardioprotected spaces. Defibrillator operation and basic life support skills are part of the first aid training integrated into the emergency measures course.
By country, in 2023 and 2022, the following technical and preventive actions were carried out to improve working conditions:
| 2023 | 2022 | |
|---|---|---|
| Spain | 48,515 | 62,311 |
| Mexico | 46,271 | 43,314 |
| Colombia | 6,761 | 5,580 |
| Argentina | 2,438 | 2,476 |
| Peru | 500 | 156 |
| Venezuela | 219 | 84 |
| Uruguay | 456 | 471 |
| Turkey | 937 | 483 |
General note: The data corresponding to the financial year 2023 contain information from more entities than the data reported for 2022.
| 2023 | 2022 | |
|---|---|---|
| Spain | 49,137 | 61,103 |
| Mexico | 46,271 | 43,314 |
| Colombia | 6,761 | 1,898 |
| Argentina | 5,246 | 4,509 |
| Peru | 3,413 | 168 |
| Venezuela | 319 | 59 |
| Uruguay | 456 | 471 |
| Turkey | 937 | 462 |
General note: The data corresponding to the financial year 2023 contain information from more entities than the data reported for 2022.
Absenteeism data are shown below:
| 2023 | 2022 | |||
|---|---|---|---|---|
| Total | Male | Female | Total | |
| Number of withdrawn | 32,794 | 11,224 | 21,570 | 42,380 |
| Number of absenteeism hours (1) | 3,503,164 | 1,137,753 | 2,365,411 | 3,748,259 |
| Number of accidents with medical withdrawn | 564 | 227 | 337 | 281 |
| Frequency index (%) (2) | 2.6 | 2.1 | 2.9 | 1.4 |
| Severity index (%) (3) | 0.1 | 0.1 | 0.1 | 2.6 |
| Incidence rate (%) (4) | 4.8 | 4.0 | 5.5 | 2.5 |
| Absenteeism rate (%) (5) | 1.6 | 1.1 | 2.1 | 1.9 |
General note: The data corresponding to the financial year 2023 contain information from more entities than the data reported for 2022.
(1) Total hours of sick leave due to illness or accident during the year.
(2) Frequency of accidents in the workplace (%): number of accidents with sick leave x 1,000,000 / number of hours worked.
(3) Severity index (%): number of working days lost due to work-related accidents x 1000 / divided by number of hours worked.
(4) Incidence rate (%): number of accidents with sick leave x 1,000 / divided by number of workers.
(5) Absenteeism rate (%): Number of hours lost due to illness -except maternity- and work accident / divided by total number of hours) x 100.
In the Group, a total of 564 work accidents with medical leave were recorded in 2023 (281 in 2022) with 2 deaths (none in 2022).
| 2023 | 2022 | ||||
|---|---|---|---|---|---|
| Total | Male | Female | Total | ||
| Work-related accidents (number) | 266 | 91 | 175 | 89 | |
| Severity index for labor accidents (%) | 0.1 | 0.1 | 0.2 | 0.0 | |
| Frequency rate (%) | 2.7 | 1.8 | 3.6 | 0.8 |
In BBVA S.A. in Spain, a total of 266 work-related accidents were recorded in 2023 (89 in 2022), of which 99 were with sick leave (27 in 2022) and 167 without sick leave (62 in 2022). Most of the accidents occurred outside the workplace (in itinere / on the move). In the case of accidents in the work environment, most of them resulted from uncoordinated movements, falls of a person to the same level, and falls to a different level. The BBVA Group did not record any cases of occupational disease among internal personnel.# Remuneration
BBVA has a General Remuneration Policy, which applies to all Group employees, including BBVA's Senior Management - with the exception of BBVA's executive directors - (the "BBVA Group General Remuneration Policy") and a BBVA Directors' Remuneration Policy (which applies to both non-executive and executive directors), both designed within the framework of the specific regulations applicable to credit institutions, considering the best practices and recommendations in remuneration matters both locally and internationally (the "Remuneration Policies").
The Remuneration Policy for BBVA Directors applicable during the years 2023, 2024, 2025 and 2026 was approved by the General Shareholders' Meeting held on March 17, 2023. For its part, the Board of Directors, at the proposal of the Commission of Remuneration, also approved in March 2023, a new update of the General Remuneration Policy of the BBVA Group that is applicable to remuneration for the 2023 financial year and onwards.
Both policies are the result of the reflection carried out in 2022 on the Remuneration Policies, with special focus on the variable remuneration model of executive directors and the rest of the employees whose professional activities significantly affect the risk profile (the “Identified Group”), with the fundamental objective of strengthening the alignment of the remuneration of this group with the creation of value, long-term sustainable performance and adequate and effective risk management.
These Policies incorporate, as the main novelty, a change in the Annual Variable Remuneration scheme associated with the corporate model of the executive directors and the rest of the Identified Group, which, as of fiscal year 2023, has become composed of an Short-Term Incentive and a Long-Term Incentive.
Both Remuneration Policies are based on the same principles and are oriented toward the recurrent generation of value for the Group, the alignment of the interests of its employees and shareholders with prudent risk management and the implementation of the strategy defined by the Group. They are part of the elements devised by the Board of Directors as part of BBVA's Corporate Governance System to foster proper management and supervision in the Group and are based on the following principles:
These principles are specified in that the Policies:
The remuneration system generally applicable to all BBVA Group staff comprises the following:
As established in the Group's General Remuneration Policy, BBVA has a corporate model of variable remuneration which, in general, is applicable to the entire workforce, depending on their functions, consisting of the award of an incentive that reflects performance measured through the fulfillment of objectives associated with Group, Area and Individual financial and non-financial indicators, measured on an annual basis. These indicators take into account the strategic priorities defined by the Group as well as current and future risks and serve as management parameters to determine the payment of annual variable remuneration based on the degree of compliance with BBVA's strategy.
In 2023, the level of achievement of the Group's annual scope indicators (short-term component of Annual Variable Remuneration) was 126% (129% in 2022), based on the results obtained from each of the financial and non-financial indicators.
The level of achievement of the Group's annual financial indicators for incentive purposes is detailed below:
110 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
| Annual Financial Indicators | 2023 | 2022 | ||||||
|---|---|---|---|---|---|---|---|---|
| Weight (1) | Goal | Result (2) | Level of attainment | Weight (3) | Goal (4) | Result (2) | Level of attainment | |
| Attributed result | 20% | 7,124 mill. € | 8.019 mill. € | 138% | 10% | 4,661 mill. € | 6,381 mill. € | 150% |
| RORC | 20% | 16.55% | 18.06% | 123% | 10% | 12.56% | 15.26% | 150% |
| Efficiency ratio | 20% | 44.13% | 41.66% | 137% | 10% | 45.33% | 43.23% | 131% |
| Tangible book value per share (TBV per share) (5) | n.a. | n.a. | n.a. | n.a. | 10% | 7.28 € | 7.64 € | 115% |
| Gross margin | n.a. | n.a. | n.a. | n.a. | 10% | 20,182 mill € | 24,890 mill. € | 150% |
For annual non-financial indicators, the Group's level of achievement for incentive purposes is detailed below:
| Annual Non- financial Indicators | 2023 | 2022 | ||||||
|---|---|---|---|---|---|---|---|---|
| Weight (1) | Goal (2) | Result | Level of attainment | Weight (3) | Goal (2) | Result | Level of attainment | |
| Net Recommendation Score (NRS) | 15% | 100% | 109% | 109% | 10% | 100% | 108% | 108% |
| Mobilization of sustainable financing (4) | 10% | 55,004 mill. € | 68,218 mill. € | 150% | 10% | 32,146 mill. € | 40,643 mill. € | 150% |
| Target customers | 15% | 100% | 98% | 98% | 10% | 100% | 111% | 111% |
| Digital sales | n.a. | n.a. | n.a. | n.a. | 10% | 100% | 110% | 110% |
| Transactional engagement of corporate clients | n.a. | n.a. | n.a. | n.a. | 10% | 100% | 112% | 112% |
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
The indicators for calculating the long-term incentive include a portfolio decarbonization indicator that will measure the degree of compliance with the decarbonization goals of a series of sectors for which the Bank publishes specific goals, and will therefore be directly related to the BBVA Group's strategic priority of helping customers in the transition to a sustainable future and to the Bank's climate action goals. Additionally, a social indicator is included that will measure the performance of the percentage of women in management positions in the BBVA Group, which is fully aligned with the strategic priority of having the best, most engaged and diverse team, guided by the Bank's purpose and its values and behaviors, and with a talent development model that provides growth opportunities for all.
In particular, the approved indicators for the calculation of the long-term incentive for this group for the 2023 financial year are as follows:
LONG-TERM INDICATORS AVR 2023 (1) (BBVA GROUP, PERCENTAGE)
| | Peso |
| :------------------------------------- | :--- |
| Financial Indicators | |
| Tangible Book Value per share (TBV per share) | 40% |
| Relative Total Shareholder Return (Relative TSR) | 40% |
| Non-financial Indicators | |
| Decarbonization of the portfolio | 15% |
| Percentage of women in Management positions | 5% |
(1) Measurement as of December 31, 2026, taking into account the evolution of these indicators since January 1, 2023. For more information on the long-term indicators, see also the Annual Report on Remuneration of BBVA Directors.
The following tables show the average remuneration of BBVA Group employees as a whole and, individually, of BBVA, S.A. employees located in Spain, and of employees located in Mexico, Turkey, Colombia, Peru, Argentina, Venezuela, Chile and Uruguay:
| 2023 | 2022 | |
|---|---|---|
| Management team (2) | Managers | |
| < 30 years | ||
| Male | 79,593 | 23,543 |
| Female | 57,127 | 18,716 |
| 30-39 years | ||
| Male | 91,026 | 34,206 |
| Female | 74,746 | 26,429 |
| 40-49 years | ||
| Male | 120,250 | 45,033 |
| Female | 96,522 | 37,656 |
| ≥ 50 years | ||
| Male | 170,432 | 54,883 |
| Female | 120,719 | 47,473 |
General note: The data for 2022 differ from those published in the 2022 Consolidated Non-Financial Information Statement due to a change in the criteria for the remuneration considered. From 2023 onwards, in addition to the fixed remuneration, the salary supplements that were not included until now, with the exception of mobility, housing and expatriation allowances, will be taken into account. This represents 99% of the total fixed remuneration.
(1) Includes fixed remuneration and salary supplements (except for mobility, housing and expatriation allowances).
(2) This Group does not include the BBVA Top Management.
| 2023 | 2022 | |
|---|---|---|
| Management team(2) | Middle controls | |
| Spain (BBVA,S.A.) | ||
| Male | 142,187 | 57,124 |
| Female | 113,323 | 51,985 |
| Mexico | ||
| Male | 140,740 | 35,969 |
| Female | 104,911 | 32,328 |
| Turkey | ||
| Male | 95,371 | 22,026 |
| Female | 67,941 | 18,149 |
| Colombia | ||
| Male | 108,287 | 35,314 |
| Female | 73,094 | 30,093 |
| Peru | ||
| Male | 107,538 | 27,500 |
| Female | 70,683 | 22,132 |
| Argentina | ||
| Male | 63,006 | 24,086 |
| Female | 55,834 | 20,140 |
| Venezuela | ||
| Male | 17,083 | 1,377 |
| Female | 18,993 | 1,278 |
| Chile | ||
| Male | 118,689 | 36,592 |
| Female | 81,717 | 27,999 |
| Uruguay | ||
| Male | 175,750 | 96,390 |
| Female | 153,201 | 81,654 |
General note: The data for 2022 differ from those published in the 2022 Consolidated Non-Financial Information Statement due to a change in the criteria for the remuneration considered. From 2023 onwards, in addition to the fixed remuneration, the salary supplements that were not included until now, with the exception of mobility, housing and expatriation allowances, will be taken into account. This represents 99% of the total fixed remuneration.
(1) Includes fixed remuneration and salary supplements (except for mobility, housing and expatriation allowances).
(2) This Group does not include the BBVA Top Management.
The differences observed in the average remuneration of some professional categories derive from their varied composition and other factors such as seniority in the entity or in the position. The average remuneration of each category is influenced by aspects such as the different distribution of men and women in the highest paid positions or the higher proportion of women in countries with lower average remuneration. In general, the increases in average remuneration are due to generalized salary increases aimed at offsetting the high inflation rates in most of the geographical areas where the BBVA Group operates. These increases have not been offset by the depreciation of local currencies (average compensation data are expressed in current euros), which has been lower than the inflation rate in most of the Group's geographic areas, and has even appreciated in countries such as Mexico and Colombia.
In the case of executive directors and other members of BBVA Senior Management who held their positions on December 31, 2023, the information on their remuneration is included in Note 54 of the accompanying consolidated financial statements. The remuneration paid to executive directors is individualized and itemized, while for the other members of Senior Management the amounts are presented as an aggregate. The average total compensation of BBVA's senior management (excluding executive directors) in 2023 was 2.437 thousand euros for men (2,185 thousand euros in 2022) and 1,981 thousand euros for women (1,841 thousand euros in 2022).
Remuneration Policies are gender neutral, reflecting equal remuneration for the same functions or functions of equal value, and do not differentiate or discriminate on the basis of gender. The remuneration model takes into account the level of responsibility, the functions carried out and the professional career of each employee, ensuring internal equity and external competitiveness, as well as equal remuneration for men and women. This model defines a number of positions on which remuneration is based. Each of these positions has a unique theoretical value depending on different factors, such as the level of responsibility, the complexity of the function, the impact on results, and so on. Each position has a unique value linked to the achievement of previously established objectives.
The adjusted salary gap compares the total remuneration received by men and women in equal positions in the Group. For each of the positions described above, BBVA calculates the average total remuneration received by all the men and women who occupy these positions. BBVA calculates the job-adjusted salary gap as the percentage resulting from dividing the difference of the average of men's salaries minus the average of women's salaries by the average of men's salaries. BBVA Group's adjusted salary gap is calculated as the weighted average of the gaps obtained in each of the positions. Total remuneration includes fixed remuneration and target annual variable remuneration (target bonus) linked to objectives. BBVA does not include in its calculation elements such as per diems, social benefits, etc., the amount of which is very unrepresentative of total employee remuneration, and whose award criteria and amounts are clearly defined and do not discriminate between men and women.
Based on data for 2023 and 2022, the adjusted salary gap is as follows:
| 2023 | 2022 | |
|---|---|---|
| Spain (BBVA,S.A.) | 2.1 | 3.6 |
| Mexico | (0.7) | (0.6) |
| Turkey | 0.3 | (0.1) |
| Colombia | 1.2 | 0.6 |
| Peru | 1.4 | 1.1 |
| Argentina | 4.2 | 3.0 |
| Venezuela | 0.4 | (1.2) |
| Chile | (1.4) | (0.5) |
| Uruguay | 2.4 | 1.8 |
| BBVA Group | 0.5 | 0.7 |
General note: The adjusted gap calculation includes 90.9% of the Group's employees. The remaining employees cannot be included in the calculation because they are associated with positions in which there is no representation of both sexes.# 49
The median is used for this calculation, since this statistical indicator is less affected by the presence of biases in the distribution of extreme values and better represents the Group's real situation.
BBVA calculates the annual total remuneration ratio for BBVA, S.A. employees located in Spain, as well as for employees located in Mexico, Turkey, Peru, Colombia, Argentina, Uruguay and Chile. located in Spain, and for employees located in Mexico, Turkey, Peru, Colombia, Argentina, Uruguay and Chile, as the ratio of the annual total remuneration (fixed remuneration plus accrued variable remuneration and pension contributions) of the highest paid person in each of the geographic areas to the average annual total compensation (fixed remuneration plus accrued variable remuneration and pension contributions) of all employees in the same geographic area, taking the annualized full-time remuneration and excluding the highest paid person. The annual total remuneration ratios for 2023 and 2022 are as follows:
| 2023 | 2022 | |
|---|---|---|
| Spain (BBVA, S.A.) | 126.0 | 130.9 |
| Mexico | 252.1 | 259.5 |
| Turkey | 208.2 | 224.7 |
| Colombia | 89.2 | 116.8 |
| Peru | 125.4 | 113.5 |
| Argentina | 83.0 | 76.3 |
| Chile | 108.7 | 90.4 |
| Uruguay | 8.1 | 7.0 |
(1) The data for 2022 differ from those published in the 2022 Consolidated Non-Financial Information Statement as the amount of variable compensation has been updated using the final score applied for its calculation.
The standard initial category is the lowest full-time employment category. In BBVA, this category is established by level and by nature of the function to be performed, and does not distinguish by gender. The minimum local salary is the minimum legal amount established in each of the geographic areas which each employee has a right to be remunerated for services rendered. This minimum salary has been assumed as the Living Wage by the international UN body, the International Labor Organization (ILO). BBVA calculates the standard entry level wage ratio as the quotient of the entry level wage between the minimum wage in the geography. As shown in the table below, in the main geographic areas where the Group operates, BBVA's entry-level compensation is higher than the local legal minimum wage in the 2023 and 2022 financial years:
| 2023 | 2022 | |||
|---|---|---|---|---|
| Male | Female | Male | Female | |
| Spain (BBVA, S.A.) | 1.3 | 1.3 | 1.3 | 1.3 |
| Mexico | 1.1 | 1.1 | 1.2 | 1.2 |
| Turkey | 1.5 | 1.5 | 1.6 | 1.6 |
| Colombia | 2.3 | 2.3 | 2.3 | 2.3 |
| Peru | 1.5 | 1.5 | 1.3 | 1.3 |
| Argentina | 4.3 | 4.3 | 3.8 | 3.8 |
| Venezuela (1) | 6.3 | 6.3 | 2.3 | 2.3 |
| Chile | 1.1 | 1.1 | 1.3 | 1.3 |
| Uruguay | 3.2 | 3.2 | 3.3 | 3.3 |
(1) 2022 data differ from those published in the 2022 Statement of Non-Financial Information due to additional updates and checks.
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
BBVA has social welfare systems that are differentiated according to geographical areas and coverage offered to different groups of employees, with no differences based on gender or any other type of personal circumstances. In general, the social welfare system is a defined contribution system for retirement. The Group’s Pension Policy is compatible with the Company’s business strategy, objectives and long-term interests. Contributions to the social welfare systems of the employees of the Group will be carried out within the framework of the labor regulations, and of the individual or collective agreements of application in each entity, sector or geographical area.
Calculation criteria on which benefits are based (commitments for retirement, death and disability) reflect fixed annual amounts, with no temporary fluctuations derived from variable components or individual results being present. As for other benefits, the Group contemplates a local application framework, according to which each entity (in accordance with its sector of activity and the geographic area in which it operates) has a package of benefits for employees within its specific compensation scheme, without applying differences based on gender or any other type of personal differences.
In 2023, in Spain the Bank made a payment of 23.1 million euros (21.2 million euros in 2022) for savings contributions to pension plans and life and accident insurance premiums, of which 11.9 million euros related to contributions to men and 11.1 million euros to that of women (in 2022, 11.3 million euros and 9.8 million euros, respectively). On average, the contribution received by each employee is 1.095 euros in the year (1,179 euros for men and 1,017 euros for women) compared to 1,032 euros in 2022 (1,143 euros for men and 927 euros for women).
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
BBVA provides complete and transparent information to its suppliers in the procurement processes, ensuring compliance with the legal framework in force in all areas, including: tax, labor and environmental matters, human rights, and stimulating the demand for socially responsible products and services. As a part of the procurement process, BBVA suitably manages the impacts, both real and potential, that may be generated by its activity through a series of mechanisms and rules: the General Procurement Principles, a supplier evaluation process and the Corporate Rules for the Acquisition of Goods and the Contracting of Services. These impacts may be: environmental; caused by labor practices carried out in supplier companies; a result of the absence of freedom of association; or related to human rights.
The General Procurement Principles and the BBVA Code of Ethics for Suppliers establish the fundamental guidelines that must be followed by all suppliers with which any company or entity of the Group has dealings.
BBVA understands that integrating ethical, social and environmental factors into its supply chain is part of its responsibility. The purchasing function is based on three core pillars of the procurement model:
The following is the basic data on suppliers at the end of 2023 and 2022:
| 2023 | 2022 | |
|---|---|---|
| Number of third parties (1) | 3,956 | 3,548 |
| Volume provided by third parties (millions of euros) (1) | 7,862 | 6,292 |
| Suppliers satisfaction index (2) | 84 | n.a. |
| Number of evaluated suppliers (3) | 4,486 | 4,536 |
General note: A third party is a natural or legal person with whom there is a payment obligation. Supplier is a third party with whom the BBVA Group maintains a contractual relationship for the supply of goods and services.
General note: excludes Turkey. n.a.: not applicable.
(1) The figure includes payments made to third parties for amounts in excess of EUR 100,000.
(2) Obtained based on the results of a satisfaction survey carried out every 2 years on the Bank's suppliers with more than EUR 10,000 in awards and EUR 100,000 in turnover. It is calculated as the average of the responses to the question: “Would you recommend working with the BBVA Group Purchasing Department to a friend or family member?", base 100.
(3) In 2023, the figure includes suppliers with materiality of more than 12.100 euros (taxes included) evaluated within the GPS from: Spain, Mexico, Argentina, Colombia, Peru, Uruguay and Venezuela. Of a total of 4,886 suppliers evaluated: 4,486, 98% were deemed suitable and 105, 2%, were deemed unsuitable, with whom work is either stopped immediately or an exit plan is established, whenever possible, with a migration period to stop working with the supplier.
BBVA has technological platforms that support all phases of the Group's procurement process, from budgeting to recording and accounting for invoices. Moreover, BBVA has a supplier portal that facilitates the Group's online relationship with its suppliers.The BBVA Group's supplier evaluation process covers the review of several key aspects including financial, legal, labor, reputational, anti-corruption and anti-money laundering measures, concentration and country risks, sustainability, data protection and customer protection. The analysis of these aspects is aimed at mitigating potential risks in contracting with third parties, as well as verifying that they comply with their legal obligations, in turn allowing them to promote their civic responsibilities and validate that they share the same values as the Group in terms of social responsibility. In 2023, BBVA implemented a sustainability module as part of the supplier evaluation process. The module covers a broad spectrum of sustainability aspects evaluated: (I) compliance with environmental and social regulations, (II) management and measurement of environmental impacts, (III) human rights, (IV) control structures, (V) sustainability reporting, and (VI) ESG assessment of the supplier's own supply chain. During 2023, the model has been calibrated to adjust it to the different types of suppliers that the Group has.
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This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
Supplier evaluation is reviewed periodically and is subject to continuous monitoring. As of December 31, 2023, the percentage of contract awards made to evaluated suppliers reached 99,2%. As of December 31, 2023, 95.7% of the total number of BBVA third parties (representing 89.6% of total revenue) corresponds to local third parties. This makes it possible to contribute to the economic and social development of the countries in which the Bank is present. A local third party, in this context, is defined by the Group as one whose tax identification matches the country of the company receiving the goods or services. Finally, it is worth noting that in fiscal year 2022, the Internal Audit area conducted evaluations of suppliers regarding the procurement processes for goods and services in different areas and the service provided by certain suppliers, generally outsourcing suppliers. These are risk-based assessments, and reviews are carried out according to a defined internal methodology. The supplier evaluation process was audited with a favorable result and the recommendations fully implemented in 2022. The following tables contain other information related to suppliers at the end of 2023 and 2022:
| 2023 | 2022 | |
|---|---|---|
| Number of third parties | Annual turnover (millions of euros) | |
| Spain | 1,058 | 2,674 |
| Mexico | 1,674 | 3,771 |
| Argentina | 383 | 539 |
| Chile | 74 | 69 |
| Colombia | 227 | 291 |
| Peru | 361 | 403 |
| Venezuela | 68 | 46 |
| Uruguay | 67 | 48 |
| Portugal | 44 | 21 |
| Total | 3,956 | 7,862 |
| Total third parties (2) | Total third parties (2) | |||
|---|---|---|---|---|
| Spain | Mexico | |||
| 21,575 | 2,773 | 23,473 | 2,514 | |
| Argentina | Chile | |||
| 6,833 | 3,889 | 6,275 | 2,876 | |
| Colombia | Peru | |||
| 1,552 | 561 | 1,621 | 412 | |
| Venezuela | Uruguay | |||
| 361 | 74 | 353 | 61 | |
| Portugal | ||||
| 1,525 | 311 | 1,531 | 262 | |
| 1,922 | 427 | 1,931 | 359 | |
| 433 | 51 | 406 | 47 | |
| 617 | 55 | 564 | 44 | |
| 452 | 26 | 491 | 24 | |
| Total | 35,270 | 8,167 | 36,645 |
General note: A third party is a natural or legal person with whom there is a payment obligation. Supplier is a third party with whom the BBVA Group maintains a contractual relationship for the supply of goods and services.
General note: excludes Turkey.
(1) The figure includes payments made to third parties for amounts in excess of EUR 100,000. Payments made to suppliers on manageable accounts with amounts exceeding EUR 100,000, excluding payments to intragroup companies, amounted to EUR 3,914 million.
(2) Including all suppliers, creditors and third parties invoicing to BBVA without a limit to the amount.
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This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
BBVA supports respect for internationally recognized human rights and this is reflected in the relationships that it establishes with its customers, suppliers, employees and the communities in which it conducts its business and activities. This support is framed within the Group's General Sustainability Policy and is aligned with its Code of Conduct. It also takes the United Nations Guiding Principles on Business and Human Rights as a point of reference.
Since 2022, BBVA has adopted an active role within the ambit of future EU legal initiatives. Within the framework of its participation in the Working Groups on Sustainable Finance of the European Banking Federation (EBF), in the European Financial Markets Association and in the European Financial Services Roundtable, BBVA contributes to the development of sectorial positions on various community initiatives. We played an important role of dialogue and accompaniment with the European regulator in relation to the proposed directive on corporate due diligence in sustainability matters. BBVA also forms part of the EBF advisory group on diversity and inclusion.
BBVA identifies the social and labor risks derived from its activity in the different areas and countries in which it operates in order to manage their possible impacts through processes designed specifically for this purpose, or through already existing processes which integrate the human rights perspective. For additional information on the Equator Principles, see section "2.1.4. Dialogue and discussion with customers, industry and the public sector" of this report. Furthermore, the methodology for assessing BBVA's reputational risk mentioned in section "4.7 Reputational risk" in chapter "4. Risk management".
Since 2018, BBVA has been conducting global human rights due diligence processes to prevent, mitigate and remediate potential human rights impacts in line with the UN Guiding Principles on Business and Human Rights. The main objectives of this exercise were:
For more information, see section "4.6 Operational risk" in chapter "4. Risk Management" of this report.
In 2018 and 2021, global due diligence processes were replicated in Spain, Mexico, Turkey, Argentina, Colombia, Peru, Uruguay and Venezuela. In 2021, each country prioritized the issues with the highest impact and frequency based on the country's social and governmental practices and interviews with management areas and global risk control specialists, and as a result, each country developed its own action plan. To ensure an effective follow-up, a semi-annual evaluation of the action plans was carried out at the local level. Strategies adopted to mitigate risks included the strengthening of key procedures at local level in order to implement established global policies, in addition to interviews held with management areas and risk control specialists at global level. As a mitigation measure, key procedures were strengthened at local level to implement global policies. In addition, it is worth highlighting several specific strategies implemented at the national level, for example; in Peru, the #NoEsNormal Campaign ("ItsNotNormal"), an initiative focused on raising awareness about sexual harassment through informative talks and at the same time, in Spain, a Customer Service Training program was implemented for employees of the branch network.
In 2021, based on the topics examined in the previous due diligence review conducted in 2018, and taking into account recommendations, analysts' and investors' expectations, as well as other emerging issues, an internal catalog was developed consisting of 28 issues grouped into 6 thematic areas:
These 6 aspects cover crucial issues such as forced labor, child labor, freedom of association and collective bargaining, equal pay and discrimination. In addition, for each of the 28 issues, an assessment was made regarding the:
In this phase of identification and assessment, the potential negative impacts on stakeholders were taken into account, such as the employees themselves (with a focus on women), suppliers and subcontractors, customers, and the indigenous population and local communities.
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This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
Subsequently, within the framework of the current Non-Financial Risk Model, the global risk control specialists of each issue conducted a comparison of the results of the assessment and the adequacy of the action plans as mitigants. This test had a twofold objective: first, to move steadily toward an alignment of the two models (due diligence of human rights and the Non-Financial Risk Model); and second, achieve a greater systemization of the process.# Prevention and mitigation: Action Plan
In the course of the year 2023, there was an evaluation of the achievements obtained within the framework of the Human Rights Action Plan for the period 2021-2022. This review not only included an exhaustive analysis of the results achieved, but also an update of the year-end action plans. Of the 25 action plans established for the aforementioned period, 19 of them had a compliance rate of over 75%. Additionally, in 2023, the Human Rights Action Plan has been updated, comprising a total of 23 action plans grouped into the following main categories:
BBVA has a whistleblower channel that allows any stakeholder to report, confidentially and anonymously, if they prefer, any behavior that, according to their point of view, is directly or indirectly related to human rights. In 2023, the complaints received through this channel showed no evidence of human rights violations attributable to Group entities. For more information, see the section "Whistleblower Channel" in section "2.4.1 Compliance and Conduct" of this report.
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
Human Rights Action Plan 2021-22 and 2023 available on the shareholder and investor website.
A complaints mechanism is a formalized way established or facilitated by the company, through which individuals or groups can raise their concerns with respect to any impact of the company on their lives, including the consequences for human rights.
BBVA takes into account that the transition to a low-carbon economy must be just and fair and leaves no one behind, contributing from 3 perspectives: strategy, implementation and involvement with stakeholders.
Within the framework of the General Sustainability Policy, BBVA focuses its strategy in this area around two vectors: firstly, the fight against climate change and the protection of natural capital, and secondly, inclusive growth. In this second vector, it is very important to contribute to a just transition, leaving no one behind and making the opportunities of this new era available to all.
At implementation level, the just transition perspective has been integrated into different lines of work:
BBVA participates in international industry-specific initiatives in support of a just transition, such as the UNEP FI "Social and Human Rights Thematic Advisory Group (TAG)." In addition, it was part of the multi-sectoral working group of CSR Europe (The European Business Network for Corporate Sustainability and Responsibility) for an Inclusive Green Deal.
BBVA also understands the just transition in the framework of the relationship between developed and developing countries. A just transition cannot be undertaken without the inclusion of those economies that are already suffering the most from the impact of climate change and have the greatest financial and institutional challenges to address the transition. BBVA plays a leading role in promoting greater financial support for developing countries and participates in initiatives such as CFLI (Climate Finance Leadership Initiative) in Colombia or the HLEG (High-Level Expert Group on sustainable finance) of the European Commission for the promotion of sustainable finance in low and middle-income countries.
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
BBVA operates in compliance with its tax obligations and avoids any practice which represents illicit avoidance of its obligations to pay tax or harm to the public treasury.# BBVA's guiding principles on fiscal matters
The principles that guide BBVA's tax actions are not removed from its responsible and sustainable way of understanding finance and banking. In the tax area, in addition to providing legitimate added value to investors, BBVA's actions must also address other stakeholders and must align with the values and commitments that it has undertaken with society in order to bring the age of opportunities to everyone. As such, the principles that guide its action are:
The corporate principles described above are the basis on which the General Policy on BBVA's Tax Strategy is structured, the update of which was approved by the Board of Directors in November 2023, and made public on its website (www.bbva.com). In summary, BBVA's tax strategy includes:
In the BBVA Group, the Board of Directors is responsible for approving its tax strategy. Although the strategy is intended to be permanent, it is reviewed annually and will be updated when necessary to better express the Group's tax orientation and commitments in tax matters or upon the occurrence of any event that requires its modification. The strategy is universal in scope and affects all business units and all BBVA employees, regardless of the geographic area in which they are located. It is developed through a set of internal tax rules that are reviewed annually to ensure that they reflect best market practices and are fully aligned with the Group's strategy. In addition, the Board establishes in this General Policy the guidelines for monitoring compliance.
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This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
In compliance with United Kingdom regulations, BBVA makes its tax strategy public for its branch in that jurisdiction. This strategy reproduces the Group-wide strategy with the adaptations required by United Kingdom regulations, and is also subject to third party review and verification.
In addition to the above, it should be noted that Section 4.6.1 of BBVA's Code of Conduct requires its members to carry out their professional activity in such a way that BBVA adequately complies with its tax obligations, avoids any practices that involve illicit tax evasion or harm to the public treasury. The application of the Code is monitored by the Group's Compliance area and has its own communication and whistle-blowing channel. Accordingly, disciplinary and sanctioning procedures are fully applicable in the event of non-compliance. BBVA communicates and trains all staff in this matter.
BBVA is fully committed to transparency in tax matters and voluntarily publishes its overall tax contribution annually in the Tax Policy section of the shareholders and investors website. As a financial entity, BBVA also complies, through the corresponding areas, with reporting obligations to tax authorities arising from the Foreign Account Tax Compliance Act (FATCA), the Common Reporting Standard (CRS), the United States Qualified Intermediary (QI), and the country-by- country report.
In 2023, BBVA Group the BBVA Group has further adapted its internal processes to comply with the requirements established by Directive 2018/822, of 25 May, 2018, amending Directive 2011/16/EU, as regards mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements (known as DAC6).
The main characteristics of the Group's tax strategy are:
The BBVA Group has created a Tax Control Framework that is integrated with the rest of the BBVA Group's control model, and which complies with the requirements for the improvement of Corporate Governance that Law 31/2014 amending the Spanish Corporate Enterprises Act introduced in terms of control and management of tax risk for listed companies. The BBVA Group's Control Framework and, in short, the Group's entire tax risk management and control system, complies with the standards established by the UNE 19,602 standard, making BBVA the first financial institution in Spain to be certified as compliant following the corresponding AENOR audit.
The BBVA Group's Tax Control Framework is based on its tax strategy and is applicable to all the jurisdictions in which BBVA operates and to all the Group's various different areas and businesses. This allows the BBVA Group to carry out an integrated management of its tax positions and risks in a manner consistent and in conjunction with other risks.
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This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
The BBVA Group's Tax Control Framework is configured around three fundamental lines of action.
The Tax Control Framework, and in general the development and implementation of the strategy and compliance with the tax code, are based on technological tools that enable an adequate degree of automation, which mitigates operational risks and ensures connectivity with the tax administrations of the jurisdictions in which it operates.
BBVA's tax function carries out the process of evaluating and monitoring these indicators, which allows for:
In accordance with the provisions of the General Policy on the Group's tax strategy approved by the Board, and in the sense established by the UNE19602 standard, the Bank has a tax compliance body in charge of ensuring the correct operation and effectiveness of the tax risk management systems, without prejudice to the functions that by Law correspond to the corporate bodies.
As established by the Group's tax strategy, BBVA maintains a cooperative relationship with the tax administrations of the countries in which it operates based on the principles of transparency, mutual trust, good faith and loyalty.
In particular, and with regard to Spain, BBVA is subject to the Code of Best Tax Practices (Código de Buenas Prácticas Tributarias, CBPT) adopted by the Large Corporations Forum (of which it is an active member) on July 20, 2010. The Group has once again voluntarily submitted the Annual Tax Transparency Report for Companies Adhering to the Code of Best Tax Practices and its Corporate Income Tax declaration for the previous year, which included its performance and proposals to strengthen best practices on tax transparency, adopted in a plenary session of the Spanish Large Corporations Forum on December 20, 2016, or companies adhering to the Code.
In the aforementioned Transparency Report, the most significant criteria used to prepare the Corporate Income Tax Declaration are voluntarily explained to the Central Delegation of Major Contributors, and meetings are subsequently held with the tax authorities in order to further elaborate on any details that may be required. All of the above is before corresponding inspectorate actions commence.
In addition, in 2023 and within the framework of the cooperative relations that BBVA has with the Tax Authority, a Self Assessment Report of the Data Reported in the Country-by-Country Statement corresponding to 2021 has been submitted to the Agency. In the process of analyzing these data, BBVA Group has evaluated risks of a fiscal nature on the basis of indicators and ratios of a financial character identified by the OECD in its document "OECD (2017), BEPS Action 13 - Country-by-Country Reports: Manual on the effective use for the assessment of tax risk".
BBVA also adopted the Code of Practice on Taxation for Banks, a United Kingdom initiative that provides for the approach expected from financial institutions in terms of governance, tax planning and engagement with the British tax authorities, in order to promote the adoption of best practices in this area, which is published on the HM Revenue & Customs (HMRC) website.
In addition, this year, the branch of its Turkish subsidiary in the Netherlands has voluntarily acceded to that country's cooperative compliance program (Horizontal Monitoring).
Furthermore, BBVA is a collaborating financial institution in the collection processes of the geographic areas that request it. BBVA collaborates in the tax compliance of its customers, provides them with the necessary information for tax compliance, requires them to provide the tax compliance tests required by the regulations, and complies with the reporting provisions set forth in the DAC6 regulations. Under no circumstances does it advise or facilitate tax avoidance structures to its customers.
Finally, in order to obtain legal certainty and ensure that its understanding of tax code is in line with the spirit of the law, BBVA consults the tax authorities on any aspects that are controversial or raise doubts, when deemed necessary.
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BBVA is aware of how important taxes are for the progress and sustainability of the societies in which it operates, which is why it maintains mutually constructive dialog with various NGOs, universities, think tanks and other tax-related forums, in relation to the Group's tax contribution.
As a result of this dialogue, BBVA has been incorporating new transparency standards made public in the Total Tax Contribution Report (TTC), and has promoted initiatives that allow its extension to other multinationals, such as the European Business Tax Forum.
BBVA is currently recognized by the Haz Foundation (formerly the Commitment and Transparency Foundation) with the "t** " seal of tax transparency and responsibility, and its tax strategy has been recognized as best practice in the Best Practices for Good Tax Governance report issued in 2022 by the Tax Executive Council of the Conference Board, The B Team and the European Business Tax Forum itself.
Likewise, this way of understanding and approaching taxation has enabled BBVA to position itself as a benchmark in the tax sphere according to the DJSI, which has awarded in 2023 the highest possible score in tax sustainability for the sixth year in a row.
For the first time, the Dutch Association of Investors for Sustainable Development (VBDO) has included BBVA in its benchmark, placing the BBVA Group after its analysis as the first financial institution in fiscal transparency in Europe.
Furthermore, BBVA participates, along with other organizations, in the Spanish Banking Association's Tax Committee, and collaborates with this association in the tax working groups of the European Banking Federation. BBVA also participates in the main tax committees of the banking and trade associations of the jurisdictions in which it operates.
BBVA is committed to transparency in the payment of taxes and that is the reason why, for yet another year, it voluntarily discloses the total tax contribution in those countries in which it has a significant presence.
BBVA Group's Total Tax Contribution (TTC) includes own and third-party payments for corporate tax, VAT, local taxes and fees, income tax withholdings, Social Security payments, and payments made during the year due to tax litigation in relation to the aforementioned taxes. In other words, this includes both the taxes related to the BBVA Group companies (taxes that represent a cost to said companies and affect their results) and taxes collected on behalf of third parties.
The TTC Report provides all stakeholders with the opportunity to understand BBVA's tax payment and represents a forward-looking approach, as well as a commitment to corporate social responsibility, by which it assumes a leading position in fiscal transparency.
| 2023 | 2022 | |
|---|---|---|
| Own taxes | 7,668 | 5,023 |
| Third-party | 5,950 | 5,925 |
| taxes | ||
| Total tax | 13,618 | 10,948 |
| contribution |
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This English version is a translation of the original in Spanish for information purposes only.In case of a discrepancy, the Spanish original will prevail. Tax information by country TAX INFORMATION BY COUNTRIES (MILLIONS OF EUROS)
| 2023 | 2022 | ||||||
|---|---|---|---|---|---|---|---|
| CIT payments cash basis | CIT expense consol | Profit (loss) before CIT | Gross margin | CIT payments cash basis | CIT expense consol | Profit (loss) before CIT | |
| Germany | 21 | 4 | 25 | 54 | 19 | 10 | 30 |
| Argentina | 9 | 120 | 310 | 1,041 | 7 | -13 | 253 |
| Belgium | 1 | 1 | 5 | 8 | — | — | 2 |
| Bolivia | 3 | 1 | 2 | 12 | 3 | 4 | 16 |
| Brazil | 1 | — | 1 | 3 | — | 1 | 1 |
| Chile | 8 | 2 | 22 | 153 | 22 | 6 | 49 |
| China (2) | 16 | 5 | 31 | 70 | — | 5 | 34 |
| Cyprus | 3 | 4 | 18 | 19 | 3 | 3 | 12 |
| Colombia | 281 | 23 | 159 | 968 | 123 | 129 | 348 |
| Curaçao | — | — | 7 | 8 | — | — | 2 |
| Spain | 825 | 867 | 1,978 | 7,346 | 549 | 492 | 1,281 |
| United States | 68 | 53 | 228 | 184 | 24 | 18 | 67 |
| Finland | — | — | — | — | — | — | — |
| France | 27 | 17 | 79 | 110 | 25 | 13 | 51 |
| Italy | 50 | 32 | 95 | 122 | 11 | 33 | 110 |
| Japan | — | — | -3 | -1 | — | — | (1) |
| Malta | 5 | 7 | 91 | 95 | 4 | 3 | 41 |
| Mexico | 2,787 | 2,001 | 7,241 | 13,889 | 1,141 | 1,472 | 5,521 |
| Netherlands | 26 | 37 | 139 | 188 | 7 | 14 | 53 |
| Paraguay | — | — | — | — | — | — | — |
| Peru | 241 | 107 | 540 | 1,745 | 222 | 163 | 599 |
| Portugal | 9 | 3 | 72 | 153 | 6 | -1 | 45 |
| United Kingdom | 19 | 23 | 99 | 194 | 15 | 7 | 60 |
| Romania | 12 | 6 | 34 | 120 | 9 | 8 | 46 |
| Singapore | 2 | 4 | 26 | 30 | 3 | 3 | 20 |
| Switzerland | 7 | 2 | 9 | 49 | 5 | 2 | 9 |
| Taiwan | — | — | 13 | 12 | — | 1 | 1 |
| Turkey | 732 | 649 | 1,046 | 2,559 | 948 | 1,077 | 1,486 |
| Uruguay | 38 | 19 | 89 | 257 | 18 | 19 | 49 |
| Venezuela | 5 | 16 | 63 | 154 | 2 | 37 | 82 |
| Total | 5,196 | 4,003 | 12,419 | 29,542 | 3,166 | 3,505 | 10,268 |
General note: the results of this breakdown of the branches are integrated in the Consolidated Financial Statements of the parent companies on which they depend.
(1) IFRS 17 "Insurance Contracts" replaces IFRS 4 in the accounting treatment of insurance contracts. IFRS 17 is required to be applied as of January 1, 2023, with comparative information of at least one year, that is, from January 1, 2022, so the information referring to the balance of "Corporate tax expense", "Profit (loss) before corporate tax", and "Gross margin" as of December 31, 2022 have been restated.
(2) Includes Hong Kong and Shanghai branches
The amounts of "Corporate income tax cash payments" are highly conditioned and derive fundamentally from the methodology for calculating the installment payments provided for in the regulations governing corporate income tax in the different geographical areas, producing differences between the installment payments made in the current year and the refund of installment payments from previous years that may result once the definitive tax returns have been filed. In this respect, it should also be noted that it is normal for there to be differences between the amounts of "Corporate income tax cash payments" and "Corporate income tax expense", since the tax paid in the year is not necessarily directly related to the pre-tax profit existing in a jurisdiction, but takes into account the tax payments (and refunds) in respect of the profits obtained in previous years, as well as the installment payments made in the current year and the withholding of input taxes. However, the "Corporate income tax expense" for the current year is more directly related to the pre-tax profit for a given year.
In 2023, the BBVA Group has not received any significant public aid to the financial sector aimed at promoting the development of banking activity. This statement is made for the purposes of the provisions of Article 89 of Directive 2013/36/EU of the European Parliament and of the Council of 26 June (on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms) and its transposition into Spanish law through Law 10/2014 on the Regulation, Supervision and Solvency of Credit Institutions of 26 June.
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In addition, the following information is provided for the main countries where the BBVA Group operates:
TAX INFORMATION BY AREAS 2023 (MILLIONS OF EUROS, NUMBER OF EMPLOYEES)
| Gross margin (1) (2) | Profit (loss) before CIT (2) | CIT payments cash basis | CIT expense consol (2) | Nº employees (3) | Tangible assets other than cash | Third-parties | Related party | Total | |
|---|---|---|---|---|---|---|---|---|---|
| Argentina | 1,041 | (1) 1,040 | 310 | 9 | 120 | 5,585 | 409 | ||
| Colombia | 968 | (10) 958 | 159 | 281 | 23 | 6,762 | 133 | ||
| Spain | 6,550 | 652 7,202 | 1,978 | 825 | 867 | 26,360 | 4,954 | ||
| Mexico | 13,825 | 376 14,201 | 7,241 | 2,787 | 2,001 | 46,890 | 2,690 | ||
| Peru | 1,745 | (9) 1,736 | 540 | 241 | 107 | 7,532 | 399 | ||
| Turkey | 2,476 | 100 2,576 | 1,046 | 732 | 649 | 20,452 | 1,566 | ||
| Rest of Europe and Asia | 1,630 | (429) 1,201 | 733 | 198 | 145 | 2,613 | 139 | ||
| Rest of America | 1,307 | (242) 1,065 | 412 | 123 | 91 | 3,701 | 162 | ||
| Total | 29,542 | 437 29,979 | 12,419 | 5,196 | 4,003 | 119,895 | 10,452 |
(1) The fact that in certain geographical areas the business is conducted through branches (permanent establishments), the relationship of these branches with their parent company as well as the financial flows between the branches and their parent company, may condition the data reported in the geographies (both branches and parent company) specifically with regard to the gross margin with third parties and related entities.
(2) IFRS 17 "Insurance Contracts" replaces IFRS 4 in the accounting treatment of insurance contracts. IFRS 17 is required to be applied as of January 1, 2023, with comparative information of at least one year, that is, from January 1, 2022, so the information referring to the balance of "Corporate tax expense", "Profit (loss) before corporate tax", and "Gross margin" as of December 31, 2022 have been restated.
(3) Full time employees. The 20 employees of representative offices are not included in the total number.
TAX INFORMATION BY AREAS 2022 (MILLIONS OF EUROS, NUMBER OF EMPLOYEES)
| Gross margin (1) (2) | Profit (loss) before CIT (2) | CIT payments cash basis | CIT expense consol (2) | Nº employees (3) | Tangible assets other than cash | Third-parties | Related party | Total | |
|---|---|---|---|---|---|---|---|---|---|
| Argentina | 1,208 | — 1,208 | 253 | 7 | (13) | 5,421 | 621 | ||
| Colombia | 1,029 | (8) 1,021 | 348 | 123 | 129 | 6,623 | 92 | ||
| Spain | 6,298 | (59) 6,239 | 1,281 | 549 | 492 | 24,875 | 5,319 | ||
| Mexico | 10,239 | 375 10,614 | 5,521 | 1,141 | 1,472 | 43,500 | 2,239 | ||
| Peru | 1,484 | (10) 1,474 | 599 | 222 | 163 | 6,516 | 346 | ||
| Turkey | 2,872 | 37 2,909 | 1,486 | 948 | 1,077 | 20,201 | 1,242 | ||
| Rest of Europe and Asia | 901 | (80) 821 | 515 | 107 | 101 | 2,462 | 141 | ||
| Rest of America | 714 | 88 802 | 266 | 69 | 84 | 3,956 | 86 | ||
| Total | 24,743 | 343 25,086 | 10,268 | 3,166 | 3,505 | 113,554 | 10,086 |
(1) The fact that in certain geographical areas the business is conducted through branches (permanent establishments), the relationship of these branches with their parent company as well as the financial flows between the branches and their parent company, may condition the data reported in the geographies (both branches and parent company) specifically with regard to the gross margin with third parties and related entities.
(2) IFRS 17 "Insurance Contracts" replaces IFRS 4 in the accounting treatment of insurance contracts. IFRS 17 is required to be applied as of January 1, 2023, with comparative information of at least one year, that is, from January 1, 2022, so the information referring to the balance of "Corporate tax expense", "Profit (loss) before corporate tax", and "Gross margin" as of December 31, 2022 have been restated.
(3) Full time employees. The 39 employees of representative offices are not included in the total number.
Banking activity in Spain is carried out fundamentally through BBVA, S.A., which has a double dimension; on the one hand, the head of the banking business in Spain; and on the other, that of the parent entity or Holding of the BBVA Group. The main activity segments developed in Spain include commercial banking, business and corporation banking; and the insurance and Corporate and Investment Banking activities. In general terms, Spanish companies are integrated into a tax group, constituting for these purposes a single taxpayer in Corporate Tax. The nominal tax rate in Spain is 30%; However, there are certain effects and singularities of a fiscal and accounting nature due to the double dimension mentioned above, which may cause your effective tax rate to be different. For these purposes, in fiscal year 2023, its tax rate stands out, higher than 30%, motivated, among others, by the non-deductibility of the temporary tax on credit institutions, the effects derived from the limitation of the exemption of intragroup dividends, or the withholdings borne at source on the aforementioned intragroup dividends from abroad.
In Mexico, the BBVA Group's presence is developed through the BBVA Mexico Group, which is the country's leading financial institution and one of the driving forces of the BBVA Group. Its main activity segments include Commercial Banking and Business Banking, insurance activity and Corporate and Investment Banking.. The nominal tax rate in Mexico is 30% and its effective tax rate is below it, since there are certain effects and singularities of a fiscal and accounting nature that can cause its effective tax rate to be different from 30%. The most relevant being in 2023, the fiscal adjustment for inflation that contributes to the reduction of said rate.
In Argentina, the Group's presence is developed through BBVA Argentina, one of the country's main financial institutions. Its main activity segments include Commercial Banking and Business Banking, insurance activity and Corporate and Investment Banking. The nominal tax rate in Argentina is 35%. The fact of being considered a hyperinflationary economy and the consequent restatement of its financial statements generally causes a distortion in the country's fiscal pressure (without prejudice to the application of the fiscal adjustment for inflation), which explains a fiscal pressure of country above its nominal rate.
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In Colombia, the presence of the BBVA Group is developed through BBVA Colombia, one of the main financial institutions in the country.Its main activity segments include Commercial Banking and Business Banking, insurance activity and Corporate and Investment Banking. Following the tax reform that took place in December 2022, the nominal tax rate in Colombia is 40% (financial sector) for the years 2023 to 2027, both included, and 35% for subsequent years. The effective tax rate is lower given that, among other aspects, there are certain effects of a fiscal nature (such as exempt income for social interest loans, as well as some in the insurance field) and accounting that cause the effective tax rate to be different of the nominal, and it must be taken into account in this exercise that the BAI of the geography has been low and, therefore, the relative weight of certain tax and accounting effects increases.
In Peru, the BBVA Group's operations are conducted through BBVA Peru, one of the country's leading financial institutions. Its main business segments comprise Commercial and SME Banking and Corporate and Investment Banking. The nominal tax rate in Peru is 29.5% and in the 2023 financial year its effective tax rate is lower, mainly due to the weight of certain exempt income (i.e. exemption of interest on deposits in the Central Reserve Bank and interest on Treasury bonds).
In Turkey, the Group's activity is mainly conducted through Garanti BBVA Group, of which BBVA is the largest shareholder. Its main business segments comprise commercial and corporate banking, insurance, and corporate and investment banking. Commencing January 1, 2022, the Group agreed to apply IAS 29 ("Financial Reporting in Hyperinflationary Economies") to the Group's entities in Turkey. This accounting adjustment due to hyperinflation is not tax deductible. Despite Turkey's status as a hyperinflationary economy, the Turkish tax code does not provide for the application of any inflation adjustment for the 2023 financial year. On the other hand, the acceptance by Garanti BBVA AS and other Turkish subsidiaries of the regime approved in January 2023, which allows financial entities to tax revalue their real estate and other depreciable assets, has made it possible to mitigate some of the distortions to the increase in fiscal pressure that occurs due to Turkey being considered a hyperinflationary economy. In addition, at the beginning of the 2023 financial year, the nominal corporate income tax rate was 25%. However, in July 2023, the nominal tax rate in Turkey was reformed again and, as a result of this tax reform, the nominal tax rate for the financial sector became 30% in the 2023 financial year and subsequent years. Taking into account all of the above, in the 2023 financial year the effective tax rate was higher than the nominal rate of 30%, mainly due to the upward distortion of the tax burden resulting from the restatement of the financial statements due to the application of hyperinflation accounting and the impossibility of applying the tax adjustment for inflation.
Likewise, the Group is also present in the United States, Chile, Venezuela, Uruguay, Bolivia, Brazil and Curaçao, fundamentally carrying out retail and commercial banking activities, as in the rest of the jurisdictions. The relative weight of these countries in the Group's accounts is very limited; representing less than 3.5% of the Group's total consolidated Profit Before Taxes in 2023. The average applicable nominal rate has amounted in 2023 to 24.81% and the effective tax rate has been very aligned, being 22.09%.
Additionally, in the rest of Europe and Asia, the banking and financial entities located in Switzerland, the Netherlands, and Romania stand out, and on the other hand, the branches located in Frankfurt, Brussels, Paris, Milan, London, Portugal, Taipei, Tokyo, Hong Kong, Singapore, Shanghai, Malta and Cyprus, whose main activity falls within the field of Corporate and Investment Banking. The joint relative weight of these countries in the Group's accounts is limited, representing less than 6% of the total consolidated Profit Before Tax of the Group generated in 2023. The applicable average nominal rate amounted to 22.74%. In fiscal year 2023, the effective tax rate has risen to 19.78%, below the average nominal rate, among other reasons, due to the registration of tax assets in Portugal. The scope of the geographical areas described above can be consulted in Appendix I of the Consolidated Financial Statements.
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The Group has an express policy on activities in permanent establishments domiciled in offshore financial centers.
As of December 31, 2023, BBVA’s permanent establishments registered in offshore financial centers considered tax havens by both the OECD and Spanish regulations are securities companies: BBVA Global Finance, Ltd., Garanti Diversified Payment Rights Finance Company and RPV Company. During the first quarter of 2023, Continental DPR Finance Company was transferred to the Netherlands and is no longer domiciled in an offshore financial center. BBVA Group has three issuers registered in Grand Cayman, two of which belong to the Garanti Group.
| 2023 | 2022 | |
|---|---|---|
| Subordinated debts (1) | ||
| BBVA Global Finance LTD | 182 | 188 |
| Other debt securities | ||
| Garanti Diversified Payment Rights Finance Company | 281 | 461 |
| RPV Company | 1,395 | 1,438 |
| Total | 1,858 | 2,086 |
(1) Securities issued before the entry into force of Law 19/2003 dated July 4, 2003.
BBVA Group has established risk management policies and criteria for all its permanent establishments in offshore financial centers, as it has for the rest of the entities within the Group. BBVA's Internal Audit area conducts risk-based reviews of these BBVA Group establishments in offshore financial centers and carries out follow-ups on the action plans derived from such reviews. Similarly, under a risk-based approach, the Group's non-financial risk control model includes these establishments within its scope.
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This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
The Group is firmly committed to operating all its activities and businesses in strict compliance with the laws in force at all times and in accordance with strict standards of ethical conduct. To achieve this, it has a compliance system in place, the cornerstones of which are the Code of Conduct (published on BBVA's corporate website, www.bbva.com), the internal control model and the Compliance function.
The Code of Conduct establishes, for all members of the BBVA Group, the duty to act with integrity and responsibility, respecting applicable laws and regulations, with the prudence and professionalism that corresponds to the trust that customers and shareholders have placed in BBVA. In February 2022, the Board of Directors approved an update of BBVA's Code of Conduct to align it with new developments in the business and the environment in which BBVA operates, and to meet the expectations of the societies in which the Group is present. The new version of the Code of Conduct was communicated to all BBVA employees and made available on the corporate intranet and corporate website. In order to reinforce awareness and knowledge of the Code of Conduct, BBVA has a corporate course on the Code of Conduct that all BBVA employees are required to take. This course incorporates messages from members of Senior Management on aspects of conduct to be taken into consideration in the daily activities of BBVA employees showing the commitment and importance that the Bank's Senior Management gives to maintaining a high corporate culture of compliance in the Bank ("tone from the top"). At the end of December 2023, 96,103 employees have completed this Code of Conduct course. In this context, the work carried out in 2023 by the Compliance unit included ongoing advice on applying the Code of Conduct. Specifically, in the Group, 631 individual queries of different nature were formally addressed through the Consultation Channel (306 in 2022), relating, among other types, to the treatment of conflicts of interest (28.4%), the offer, delivery or acceptance of gifts and-or personal benefits, as well as the attendance and organization of promotional and leisure events (20.1%), the development of ohter professional activities (10.9%) or the selection, hiring and promotion of personnel (9.8%).
The BBVA Compliance function is a global unit integrated within the second line of defense that is entrusted by the Board of Directors with the role of promoting and supervising, with independence and objectivity, measures to ensure that BBVA acts with integrity, particularly in areas such as the prevention of money-laundering and anti-terrorist financing (AML/FT), conduct with customers, conduct in the securities market,personal data protection, the prevention of corruption and other aspects of corporate conduct. The Compliance function has its own Charter, approved by the Board of Directors after analysis by the Risk and Compliance Committee. The Charter is periodically reviewed, being last updated in 2023 by the aforementioned corporate bodies to keep it in line with the external and internal regulatory framework, as well as with changes in the Group's organizational structure and with the duties and responsibilities of the members of the function, and also with the expectations of the various stakeholders.# Mission and scope of action
The Compliance Unit is part of the Regulation and Internal Control area, which is responsible, among other matters, for the second line of defense functions for all risks to which the group is exposed. In order to reinforce its independence in the performance of its duties, the Area reports to the Board of Directors through the Risk and Compliance Committee, which supervises its activity on a regular basis, and is also subject to the supervision schemes of the competent authorities in this area.
The tasks of the Compliance function include:
– promote a culture of integrity and compliance within BBVA, as well as the knowledge by stakeholders of the external and internal rules and regulations applicable to the abovementioned matters, through the development of internal regulation, advisory, dissemination, training and awareness programs, fostering the proactive management of AML/FT and compliance and conduct risk; and
– specify and promote the implementation and full adherence of the Organization to the frameworks and measures for the prevention and management of risks related to these issues; this includes exercising control over the first line of defense.
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In order to suitably perform its functions, Compliance operates a configuration and internal organization systems in accordance with the principles of internal governance established by the relevant EU guidelines in these issues. In its structure and operation, the Compliance unit adheres to the principles established by the Bank for International Settlements (BIS) and to the leading standards applicable to AML/FT and Compliance and Conduct issues.
At BBVA, the Compliance function is of a global nature. It is made up of a corporate unit with a transversal scope for the entire Group, headed by a global manager, as well as local units that, sharing the mission entrusted to them and led by managers in each geography, perform the function in the countries in which BBVA operates. The Compliance function has persons in charge of the AML/FT and Compliance and Conduct issues, for the definition and articulation of the strategy and management model of the function or for the execution and ongoing improvement of the internal operational procedures of the area.
The main objective of the Compliance Function is to establish the framework for risk prevention and management, AML/FT and Compliance and Conduct, to follow up on such management as well as to report its level of implementation and the status of corrective action plans at the appropriate levels in the organization, and its main tasks include the following:
– Carrying out an AML/FT risk assessment and Compliance and Conduct inherent to the Group’s activity.
– Advising the Organization on the requirements to be complied with in relation to AML/FT and Compliance and Conduct matters for the management of the related risks.
– Developing and implementing internal regulations on its matters.
– Establishing mechanisms for the monitoring and verification of compliance with internal regulations that allow the measurement of the management of these risks and their adequate check.
– Management of whistleblowing channels in the different jurisdictions.
– Establishing systems, technological tools and data for these risk management.
– Regularly report related information on these issues to the different levels of the Group.
– Represent the Compliance function before regulatory and supervisory bodies on those matters.
The breadth and complexity of BBVA's activities and its international presence give rise to a wide range of regulatory requirements and expectations from supervisory bodies that must be addressed in relation to the management of the risks associated with these matters. This makes it necessary to have internal mechanisms that establish cross-cutting management programs for these risks in a uniform and integral manner.
For this purpose, Compliance has a global framework for prevention and management, which, with an integral and preventive approach, is evolving over time to reinforce the elements and pillars on which it is based and in order to anticipate the developments and initiatives that may arise in this area. The framework is based on the Code of Conduct, the Compliance Charter and Compliance Policies and it is supported by a range of specific programs as well as in technological infrastructure and cross-cutting data for better operationalization and efficiency in risk management. These include among others, a global Internal Regulation portal, a gift and event registry tool, a conflict of interest registry and management tool, tools for monitoring customers and market abuse, and a whistleblower channel management tool.
The strategic issues and the approval of the internal regulation of the function are defined and submitted to different committees at the executive level, which include among others, the Regulation and Internal Control Committee, the Global Compliance Committee and the Internal Control Body in the area of AML/FT.
The Compliance model has periodic cycles of identification and assessment of compliance risk, upon which its management strategy is based. This results in the review and updating of the multi-year strategy and its corresponding annual action lines, all of which are aimed at strengthening the applicable mitigation and control measures, as well as improving the model itself. These lines are incorporated into the annual Compliance plan, the content of which is reported to the Risks and Compliance Committee.
The basic pillars of the model are the following elements:
– A specific organizational structure with a clear assignment of roles and responsibilities throughout the Organization.
– A set of policies, standards and procedures (internal regulation) that establish the positions and requirements to be applied in the risk management.
– Mitigation and control processes aimed at compliance with such internal regulation.
– A technology and data infrastructure focused on monitoring and geared towards ensuring the previous objective.
– Communication and training actions, aimed at maintaining updated knowledge and awareness of risk prevention and management matters by the Group's professionals. These mechanisms are coordinated within the Compliance Culture Program.
– A set of indicators for supervising and monitoring the implementation of the model at a global level and for the proactive detection of potential risk situations.
– Independent periodic review of effective model implementation.
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This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
Throughout 2023, work continued on strengthening the documentation and management of this model. In this regard, the review and update of the Compliance Charter, which introduces some issues arising from the most recent regulations on AML, whistleblower protection and greenwashing, and other issues of internal organization, as well as the reinforcement of the indicator framework, integrated into the management of the operating and business units, in order to improve the early detection of these risks. In addition, we have continued to strengthen the framework of information reported to the corporate bodies.
The model is continuously reviewed and tested through extensive and diverse annual verification processes in each of the geographies, including inspections by supervisory bodies, internal and external audits and Compliance Testing activities carried out by dedicated teams in the Compliance units. In relation to this activity, efforts during 2023 have been particularly focused on the review of the AML/FT frameworks and risk management processes and related to customer conduct.
BBVA's Code of Conduct establishes standards for behavior with customers. For more information on the Group's conduct with its customers and the actions promoted by Compliance in this area, see the "Customer protection framework" section in the "2.3.2 Customers" chapter of this report.
Anti-money laundering and financing of terrorism (AML/FT) is an indispensable requirement for preserving corporate integrity and one of its main assets: the trust of the people and institutions with which the Group interacts (mainly customers, employees, shareholders and suppliers) in the different jurisdictions where it operates. BBVA pays special attention to compliance with AML/FT regulations and those relating to restrictions imposed by national and international bodies for operating with certain jurisdictions and individuals or corporations.
The BBVA Code of Conduct establishes the basic guidelines for action in this area. As a result of the above, as a global financial group with branches and subsidiaries operating in numerous countries, BBVA applies the compliance model described above for AML/FT risk management in all the entities that make up the Group. This model takes into account the local regulations of the jurisdictions in which BBVA is present and also the best practices of the international financial industry regarding this matter, and recommendations issued by international bodies such as the Financial Action Task Force (FATF).
The Group is continuously developing this risk management model. Thus, the risk analysis carried out annually make it possible to reinforce controls and establish, if necessary, additional mitigating measures to strengthen it. In 2023, the Group's affected counterparties carried out this AML/FT risk assessment exercise, under a common methodology and the supervision of the corporate AML/FT function.As part of the AML/FT Function’s Strategic Plan, in 2023, BBVA has created a global financial crime prevention unit, a pioneer in the Spanish banking industry. With a holistic vision, focused on prevention and the protection of its customers, the objective of this new unit is to reinforce the prevention of financial crime, integrating fraud responsibilities and AML/FT processes related to the identification, alert management and analysis of suspicious transactions, which must be managed by the first line of defense. In the belief that technology and data are essential to implement an effective AML/FT program and for the proactive protection of customers, the entity itself and society, the improvement of the technological infrastructure and the use of advanced analytical techniques and models constitute fundamental lines of work in the aforementioned Strategic Plan. With regard to technological infrastructure, in 2023, following the creation of the global financial crime prevention unit, a Strategic Plan was defined for the transformation of fraud prevention, money laundering and terrorism financing. As regards AML/FT, the monitoring tool implemented in Spain, Mexico and Turkey will be deployed in Argentina, Colombia and Peru in the short term. For the medium term, work has begun in two lines: to seek tools with even more advanced monitoring capabilities and to implement advanced analytics capabilities and artificial intelligence. In terms of data exploitation, the Group continues to develop different applications of new data-based technologies (artificial intelligence, business analytics, etc.) to complement the AML/FT processes in order to (I) enhance risk detection capabilities; (II) increase the efficiency of these processes; and (III) enhance analysis and investigation capabilities. Additionally, and leveraged on the creation of a global Compliance data model, during 2023 progress has been made in the creation of a global supervision model, which allows centralized analysis over the AML/FT processes.
During 2023, BBVA continued to tighten internal corporate regulations (including financial sanctions, risk assessment, customer admission and due diligence measures, Customer Risk Rating (allocation of AML risk to customers), cross-border correspondent banking or admission and maintenance of relationships with publicly accountable persons). The Internal Control Body, which BBVA has at the corporate level, meets periodically and supervises the implementation and effectiveness of the AML/TF risk management model in the Group. This supervision scheme is also replicated at the local level through the corresponding committees in each geographic area. Likewise, the assignment of greater powers to the Global Internal Control body and the creation of an Operational Internal Control Body, which globally manages more operational aspects, represent progress in improving governance and the traceability of the decisions adopted for the day-to-day AML/FT risk management.
In 2023, the BBVA Group resolved 167,269 investigation files that resulted in 105,845 suspicious transaction reports sent to the corresponding authorities in each country, which are mainly concentrated in jurisdictions such as Mexico, Turkey, Argentina, Colombia or Spain.
132 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
In terms of training related to AML/FT, each of the BBVA Group entities offers an annual training plan for employees. This plan, defined according to the needs identified, establishes training actions such as face-to-face or e-learning courses, videos, brochures, etc. for both new hires and employees on staff. Likewise, the content of each training action is adapted to the target group, including general concepts derived from the regulation of applicable AML/FT standards, both internal and external, as well as specific issues that affect the functions performed by the target group of the training. In 2023, 80,442 attendees participated in AML/FT training activities. This figure includes 12,826 employees belonging to the most sensitive groups from the perspective of AML/FT, who received an enhanced level of training.
The AML/FT risk management model is subject to continuous independent review, both by the Compliance Testing teams, as well as by internal and external audits and those carried out by local supervisory bodies, both in Spain and in the rest of the world. the jurisdictions. In accordance with Spanish regulations, an external expert conducts an annual review of the AML/FT program implemented in Spain. In 2023, this external expert concluded that "in general terms and taking into account the type of deficiencies detected, the BBVA Group's procedures in Spain are in line with current legislation and best market practices".
It should be noted that BBVA cooperates with the different government agencies and international organizations in this field: participation in various committees of the European Banking Federation (Executive Committee Financial Crime Strategy Group, Anti- Money Laundering & Financial Crime Committee and Financial Sanctions Expert Group), member of the KYC/RBA (Know Your Customer / Risk-based Approach) and Information Sharing working groups of the European Banking Federation, member of the AML Working Group of the Institute of International Finance (IIF), participation in initiatives and forums aimed at increasing and improving exchanges of information for AML/FT purposes, such as the Europol Financial Intelligence Public Private Partnership (EFIPPP), participation in the "UNODC (United Nations Office on Drugs and Crime) private sector dialogue on disruption of financial crimes related to forestry crimes" as well as contributions to public consultations issued by national and international bodies (Committee, European Commission, European Banking Authority and FATF-FATF (Financial Action Task Force), among others).
The BBVA Code of Conduct includes the basic principles for action aimed at preserving the integrity of the markets, setting the standards to be followed aimed at preventing market abuse, and guaranteeing transparency and free competition in the professional activity of the members of the BBVA Group. These basic principles are specifically developed in the Policy on Conduct in the Field of Securities Markets ("the Policy"), which applies to all the individuals who form a part of the BBVA Group. Specifically, this policy establishes the minimum standards that are to be respected with the activity carried out in the securities markets in terms of privileged information, prevention of market manipulation and conflicts of interest. The Policy is supplemented in each jurisdiction by a rule or Internal Code of Conduct (ICC) aimed at the target group with the greatest exposure in the markets. The ICC develops the contents established in the Policy, adjusting them, where appropriate, to local legal requirements. Both regulations are extended throughout the Group, with the implementation of tools in practically the entire Group, which are in continuous development, to manage them.
As part of the unit's routine activity, in 2023 Compliance supervised more than 60,000 own-account transactions of employees subject to the ICC, a group that at the end of that year totaled more than 7,000 people. In relation to the process of monitoring transactions in the securities markets, both of customers and those derived from the Group's own operations, in 2023 more than 100 suspicious transactions were reported to the various local supervisors in the geographical areas in which BBVA operates in the markets. Moreover, through the communications monitoring process, more than 5,000 communications alerted through the voice and electronic channels of the market areas were analyzed.
The internal regulation on market abuse has been reviewed, highlighting the update of the Standard on activities related to Benchmark Indices. In addition, the Procedure on Market Publications and the Standard for the Protection and Safeguarding of Confidential Information have been issued. In this context of market abuse prevention, the technological infrastructure for the detection of transactions that might constitute market abuse has continued to be reinforced, with a special focus on trading activities. In addition, during 2023, the training program on market abuse was updated with the launch of a new training activity on the Internal Code of Conduct Regulation.
With regard to the U.S. regulations known as the "Volcker Rule", the continuous training process for the areas involved has been maintained, with 233 employees receiving training in this area in 2023. In addition, training was sent to employees considered critical to compliance with the standard, reminding them of the basic principles of the standard. In addition, the buyback programs implemented by BBVA, which began in 2022 and continued in 2023, have been accompanied by the execution of the corresponding control framework by the business and compliance teams, and the results of the controls have been satisfactory throughout the year.
BBVA understands fiduciary risk as the possibility of failing to comply with the obligation to carry out with due diligence and in the best interest of its customers any advice, portfolio management or, in general, the distribution, through any service, of investment products and derivatives to customers. In 2023, the Fiduciary Risk function was reinforced with the creation of a corporate-level function which was integrated into the Compliance area with the objective of developing a global program for managing this risk, focusing on the risk assessment of products, seeking homogeneity in local approaches and reinforcing the approach to risk quantification for its proper management.# Progress has already been made in the preparation of a global report on positions in the different geographies, the purpose of which is to reinforce decision making by the responsible business and control areas.
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
The BBVA Group has privacy policies or notices in the different geographical areas where it operates in accordance with their own local legislation. These explain how the Group entities collect and process the personal data of their customers, suppliers, and employees, as well as other individuals whose personal data is processed by the corresponding Group entity, and how they can exercise their rights in this area. These privacy policies or notices are subject to periodic review and updating, based on the applicable regulations, as well as the BBVA Group's General Privacy and Data Protection Policy and the corporate standard on personal data protection.
During 2023, the Personal Data Protection unit, integrated in the Compliance area and led by the Data Protection Officer (DPO), continued to promote supervision and control processes throughout the Group to ascertain the degree of application of data protection regulations in each geographical area and, where appropriate, to promote the necessary actions for proper application. This has been implemented through (I) the reinforcement of the global regulatory framework, as well as rules and procedures of local application, and the review of personal data protection governance, (II) the development and adaptation of tools to help implement control and compliance processes in Spain and other countries (III) the review of relevant processes, as well as (IV) the follow-up and resolution of the recommendations resulting from the audit and Compliance Testing activities (carried out by specially dedicated teams in the Compliance units) carried out in this area.
Another key element in the management of Conduct risk at BBVA is the Group's General Anti-Corruption Policy (whose update was approved by the Board of Directors in 2023), which is the standard on which the Corruption Prevention Program is based and develops the principles and guidelines set out, mainly, in section 5.3 of the Code of Conduct. The Policy is in line with the spirit of national and international standards on the matter, taking into consideration the recommendations of international organizations for the prevention of corruption and those established by the International Organization for Standardization (ISO).
This Policy has been communicated again to 100% of the employees and to all members of the governing bodies of the main subsidiaries of the Group. Regarding the communication of the Anti-Corruption Policy to third parties, the Group released a public statement summarizing its contents through the shareholders' and investors' website. Additionally, BBVA makes the Code of Conduct available to its suppliers on the supplier portal, which in section 5.3 includes information on BBVA’s Anti-Corruption Policy. For more information on suppliers, see section "2.3.4 Suppliers" of this report.
The Group's General Anti-Corruption Policy is developed through various specific internal regulations that establish guidelines for action and precautions in cases in which the risk of corruption could eventually materialize (i.e. Standard for the Acquisition of Goods and Contracting of Services, Corporate Standard for Gifts and Events, regulations regarding the granting of donations and commercial sponsorships, for example). In line with the above, BBVA generally has a clause in its contracts in which suppliers undertake to comply with applicable anti-corruption legislation.
The BBVA anti-corruption framework is composed of the aforementioned regulatory body, and, in compliance with the crime prevention model, has a program that includes the following elements: (i) a risk map; (ii) a specific governance model; (iii) a set of mitigation measures aimed at reducing these risks; (iv) procedures for action in the event of the emergence of risk situations; (v) training and communication programs and plans; (vi) indicators aimed at understanding the situation of risks and their mitigation and control framework; (vii) a whistleblower channel; and (viii) a disciplinary regime.
In relation to the evaluation of corruption risk in the Group, several types of transactions were evaluated: (i) 167,269 operations out of a total of 171,364 (97.61%) in relation to AML&FT risk (for the number of communications made to the corresponding authorities, see previous section on " Anti-Money Laundering and Financing of Terrorism"); (ii) with respect to internal fraud risk, a total of 172,518 (97%) operations have been analyzed; and (iii) from the AML&FT and Corruption risk side, 4,485 out of a total of 4,486 third parties evaluated in the Group's procurement processes (99.98%) have been evaluated.
In addition, in recent years, anti-corruption risk assessments were conducted on banks in the main geographical areas in which the BBVA Group operates. According to the overall result of this analysis, it was concluded that the control framework for corruption risk in the BBVA Group is adequate.
In relation to the training program on the prevention of corruption, BBVA has a corporate online course in most of the jurisdictions in which BBVA is present, which is mandatory and recurrent for all BBVA employees. At the close of the 2023 financial year, this course had been taken by a total of 83,883 (95.3%) 52 employees broken down as follows:
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
52 This metric does not include Garanti Turkey.
| 2023 | 2022 | ||||
|---|---|---|---|---|---|
| Enrolled | Undertaken | % Undertaken | Enrolled | Undertaken | |
| Argentina | 6,016 | 5,988 | 99.5% | 5,834 | 5,785 |
| Management team | 219 | 217 | 99.1% | 198 | 196 |
| Managers | 1,411 | 1,405 | 99.6% | 1324 | 1,312 |
| Rest of employees | 4,386 | 4,366 | 99.5% | 4312 | 4,277 |
| Chile | 768 | 696 | 90.6% | 733 | 647 |
| Management team | 51 | 48 | 94.1% | 53 | 50 |
| Managers | 110 | 106 | 96.4% | 98 | 94 |
| Rest of employees | 607 | 542 | 89.3% | 582 | 503 |
| Colombia | 6,832 | 6,623 | 96.9% | 6,606 | 6,380 |
| Management team | 212 | 210 | 99.1% | 202 | 201 |
| Managers | 1,822 | 1,816 | 99.7% | 1,714 | 1,706 |
| Rest of employees | 4,798 | 4,597 | 95.8% | 4,690 | 4,473 |
| Spain | 21,703 | 21,073 | 97.1% | 20,817 | 20,181 |
| Management team | 1,831 | 1,769 | 96.6% | 1,686 | 1,622 |
| Managers | 10,083 | 9,922 | 98.4% | 9,395 | 9,209 |
| Rest of employees | 9,789 | 9,382 | 95.8% | 9,736 | 9,350 |
| Mexico | 41,847 | 38,999 | 93.2% | 38,415 | 35,729 |
| Management team | 1,487 | 1,447 | 97.3% | 1,350 | 1,313 |
| Managers | 13,676 | 12,686 | 92.8% | 12,369 | 11,460 |
| Rest of employees | 26,684 | 24,866 | 93.2% | 24,696 | 22,956 |
| Peru | 7,204 | 7,005 | 97.2% | 6,361 | 6,233 |
| Management team | 335 | 328 | 97.9% | 313 | 307 |
| Managers | 2,409 | 2,353 | 97.7% | 2,205 | 2,159 |
| Rest of employees | 4,460 | 4,324 | 97.0% | 3,843 | 3,767 |
| Switzerland | 123 | 123 | 100.0% | 115 | 115 |
| Management team | 19 | 19 | 100.0% | 16 | 16 |
| Managers | 72 | 72 | 100.0% | 65 | 65 |
| Rest of employees | 32 | 32 | 100.0% | 34 | 34 |
| Uruguay | 563 | 546 | 97.0% | 568 | 538 |
| Management team | 54 | 54 | 100.0% | 50 | 50 |
| Managers | 224 | 220 | 98.2% | 204 | 196 |
| Rest of employees | 285 | 272 | 95.4% | 314 | 292 |
| Venezuela | 1,743 | 1,672 | 95.9% | 1,738 | 1,558 |
| Management team | 60 | 48 | 80.0% | 61 | 43 |
| Managers | 489 | 466 | 95.3% | 651 | 581 |
| Rest of employees | 1,194 | 1,158 | 97.0% | 1,026 | 934 |
| Rest (2) | 1,224 | 1,158 | 94.6% | 1,120 | 1,040 |
| Management team | 304 | 298 | 98.0% | 258 | 245 |
| Managers | 452 | 432 | 95.6% | 422 | 401 |
| Rest of employees | 468 | 428 | 91.5% | 440 | 394 |
| Total general | 88,023 | 83,883 | 95.3% | 82,307 | 78,206 |
(1) The calculation criterion excludes those employees who are still within the deadline to complete the training.
(2) Since 2022 includes Germany, Belgium, Italy, France, Portugal, the United Kingdom, the United States, the United Arab Emirates, India, Indonesia, Japan, Korea, Singapore, Taiwan, and China (with Hong Kong).
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
53
Furthermore, the total number and percentage of members of the Boards of Directors of the main entities 54 comprising the Group who have received anti-corruption training since the 2020 financial year and up to the date of publication of this report is 80 (100%).
Moreover, in line with international standards on corruption prevention, BBVA has, in most of the geographical areas in which it operates, a corporate tool for registering gifts and events whose main purpose is to provide transparency and information on the receipt of this type of personal benefits by BBVA employees. The receipt of gifts or invitations to events is subject to the application of strict acceptance criteria.
Regarding antitrust, BBVA's competition policy was approved in July 2019, which extended to the entire Group, represented a step forward in the development of conduct standards in this regard. The update of this policy was approved by the Board of Directors of BBVA, S.A. in the 2023 financial year. The policy further develops principle 4.16 of the BBVA Code of Conduct on free competition and covers the most sensitive areas of risk identified by national and international organizations, agreements with competitors, agreements with non-competitors, as well as a possible position of dominance. This Policy has been communicated to BBVA employees and has been transposed in the main geographies in which the Group operates. Various training and awareness-raising activities have been carried out in this area in recent years.# Conflicts of interest
During 2023, a new corporate tool for registering and managing conflicts of interest in Spain has been implemented. During 2024, its implementation is expected to be extended to most of the geographic areas in which BBVA is present.
Additionally, in the 2023 financial year, various actions were carried out to raise awareness of conflicts of interest. BBVA has a general policy, applicable to the entire Group, which reinforces the principles and main measures that all members of BBVA must assume and follow to identify, prevent and manage conflicts of interest. The policy has been established in the context of the principles under which the BBVA Group operates, which include integrity, prudent risk management, transparency, the achievement of long-term sustainable business and compliance with applicable legislation. It also addresses several different aspects, such as specific measures that help prevent the emergence of conflicts, general guidelines for action should they emerge, or governance and monitoring mechanisms at various different levels of the organization.
A key mechanism for managing the Group's AML&FT and Compliance and Conduct risk is the Whistleblowing Channel. Through this channel, BBVA members as well as customers, suppliers or members of any other stakeholder group can confidentially and, if they wish, anonymously report any behavior that deviates from the Code or that violates applicable legislation, including complaints related to human rights. The Compliance function aims to ensure that complaints are handled diligently and promptly, guaranteeing the confidentiality of the investigation processes, the presumption of innocence, personal data protection and the absence of retaliation or any other adverse consequence of good faith communications.
The Whistleblowing Channel is available in Spanish and English, 24 hours a day, 365 days a year. During 2021, the BBVA Group implemented a global Whistleblowing Channel tool provided by an external supplier in most of the geographical areas in which it is present. This online platform is accessible to all employees through the corporate intranet. Third parties outside BBVA can access it through a public link available on the BBVA Group website (www.bkms-system.com/bbva). This global tool raises the standards of security, confidentiality and anonymity for whistleblowers and thus ensures their protection.
In the 2023 financial year, the BBVA Board of Directors approved the General Policy for the management of communications in the Whistleblowing Channel and whistleblower protection, which aligns internal regulations with the requirements of Law 2/2023, of February 20, regulating the protection of persons who report regulatory violations and the fight against corruption in Spain. This Policy has been communicated to BBVA employees and extended to the main BBVA subsidiaries in Spain and to the different geographies in which the Group is present. In addition, a statement has been published on the website for shareholders and investors.
This Policy governs whistleblower protection and the management of the Whistleblowing Channel. The Whistleblowing Channel is managed by the Compliance Unit. It covers different stages, from the receipt of the alert and acknowledgement of receipt to the complainant (within 7 days) to the verification of the facts and closure of the case on the basis of an objective, impartial and confidential investigation. The parties affected by the communication enjoy the presumption of innocence, the right to honor and defense as well as the right to information and to be heard.
In 2023, a total of 2,061 complaints were received in the Group, representing an increase of 29% over the previous year, mainly attributable to the awareness and knowledge of the Whistleblowing Channel carried out in the Group in recent quarters. The main issues are related to labor relations or labor complaints (1,037), discrimination or harassment (220) 55, customer conduct (347), conflicts of interest (129), fraud (190), potential asset laundering (48), privacy and information security (40) , and other typologies (50). These communications came from employees (69%) and third parties (8%). In the rest of the cases (23%), the informants did not provide this information.
| COMPLAINTS RECEIVED BY TYPE ( BBVA GROUP, 2023) | |
|---|---|
| Labor relations or labor complaints | 1037 |
| Discrimination or harassment | 220 |
| Customer conduct | 347 |
| Conflicts of interest | 129 |
| Fraud | 190 |
| Potential asset laundering | 48 |
| Privacy and information security | 40 |
| Other typologies | 50 |
| Total | 2061 |
136
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
53 With reference to the following geographic areas: Argentina, Chile, Colombia, Mexico, Peru, Spain, Switzerland, Turkey, Uruguay and Venezuela.
54 Number not including alternate directors.
55 For more information on cases of discrimination or harassment that activated specific action protocols in 2023, consult GRI 406-1 in section “2.5.3 Table of contents of the GRI Standards
A total of 1,546 complaints were processed in the 2023 financial year. Approximately 38.4% of complaints processed during the year ended with the imposition of disciplinary measures, of which 115 resulted in disciplinary dismissals. None of the complaints handled through the Whistleblowing Channel caused significant economic, criminal or reputational impacts.
Since the introduction in Spain of the criminal liability regime for legal entities, BBVA has been developing a criminal risk management model, based on the general risk management and control model, with the aim of implementing measures directly aimed at preventing the commission of crimes through a governance structure suited to this purpose. The crime prevention model is structured around three elements: a prevention system, a governance structure and a scheduled review of its application.
The prevention system is aimed at:
(I) identifying the activities carried out in BBVA that represent a risk of incurring criminal liability of the legal entity;
(II) identifying the elements of control, prevention and mitigation of such risks; and
(III) developing a specific risk management program for each type of crime that may attract liability for BBVA.
In this sense, a specialized control area (“assurance providers”) is designated for each of the identified criminal risks, as part of the criminal risk management program. For each of the identified criminal offenses, it draws up a map of risks and a series of mitigation measures and action plans.
The purpose of the governance structure is the supervision of operation, compliance and effectiveness of the model, the identification of the responsible units and the scheduled information to the BBVA governing bodies of the results of the monitoring of the system and of the incidents or possible relevant breaches.
This model, which is periodically subjected to independent review processes, is configured as a dynamic process in continuous development, so that experience in its application, changes in the Entity's activity and structure and, in particular, in its control model, as well as legal, economic, social and technological developments, are taken into account with a view to adapting and improving it. In this context, in 2022 BBVA renewed the AENOR (Spanish Association for Standardization and Certification) certificate, which certifies that its criminal compliance management system complies with the UNE 19601:2017 Standard.
137
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
Due to the nature of its operations, banking is one of the key sectors of the economy since a large part of savings, investment and financing is channeled through it. For this reason, banks are subject to specific regulation and supervision, with regulators and supervisors being an important stakeholder of the financial industry in general and BBVA in particular. Regulation aims to preserve the proper functioning of financial institutions, strengthen their resilience to adverse events and harmonize the interests of the parties directly affected (banks, savers and investors) with general interest.
In recent years, various authorities, both European (the European Banking Authority, EBA; the European Securities and Markets Authority, ESMA; the European Commission) and global (such as the Financial Stability Board, FSB; the Basel International Bank for Settlements, BIS; etc.) have developed a regulatory framework that improves the strength of the financial system and reduces the virulence and probability of future financial crises.
Given the importance of the regulatory and supervisory agenda, BBVA has maintained a constant dialogue with the different authorities. BBVA has a unit in charge of coordinating the relationship with the Single Supervisory Mechanism (SSM) and the Single Resolution Mechanism (SRM), as well as facilitating the relationship with other local supervisors from a global and unique point of view.
The supervision of the SSM is carried out through mixed groups, in the case of BBVA mainly formed by teams from the Bank of Spain located in Madrid and the European Central Bank (ECB) located in Frankfurt, known as JST or joint supervisory teams. The SRM is composed of the Single Resolution Board (SRB) established in Brussels and the National Resolution Authorities (NRA) which, in the case of Spain, are the Bank of Spain as the preventive resolution authority and the Fund for Orderly Bank Restructuring (FROB) as the executive resolution authority.
It should be noted that BBVA actively participates in the consultation processes on the regulation of financial institutions carried out by the different regulators or supervisors mentioned above. For more information on the regulatory and legal framework applicable to the entities forming part of the BBVA Group, see the "Regulatory Environment" chapter of this report.## 2.4.3 Other non financial risks
Spanish judicial authorities are investigating the activities of Centro Exclusivo de Negocios y Transacciones, S.L. (“Cenyt”). Such investigation includes the provision of services by Cenyt to BBVA. On July 29, 2019, BBVA was named as an investigated party (investigado) in a criminal judicial investigation (Preliminary Proceeding No. 96/2017 – Piece No. 9, Central Investigating Court No. 6 of the National High Court) for alleged facts which could constitute bribery, revelation of secrets and corruption. Certain current and former officers and employees of the Group, as well as former directors, have also been named as investigated parties in connection with this investigation. Since the beginning of the investigation, BBVA has been proactively collaborating with the Spanish judicial authorities, including sharing with the courts information obtained in the internal investigation hired by the entity in 2019 to contribute to the clarification of the facts. As at the date of this Annual Report, no formal accusation against BBVA has been made. By order of the Criminal Chamber of the National High Court, the pre-trial phase ended on January 29, 2024. It is not possible at this time to predict the possible outcomes or implications for the Group of this matter, including any fines, damages or harm to the Group’s reputation caused thereby.
138
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
56
Non-financial Information Report. Contents index of the Law 11/2018
| BBVA's Management Report 2023 | GRI reporting criteria | Page / Section |
|---|---|---|
| General information | ||
| Business model | ||
| Brief description of the group’s business model | GRI 2-6, GRI 2-7 | BBVA in brief/Who we are NFIS/Sustainability in the BBVA Group/Governance model |
| Geographical presence and Organization and Sturcture | GRI 2-1, GRI 2-6 | BBVA in brief/Who we are Other information/Organizational chart |
| Objectives and strategies of the organization | GRI 2-22 | BBVA in brief/BBVA Group strategy NFIS/Sustainability in the BBVA Group/ESG Strategy and objectives |
| Main factors and trends that may affect your future evolution | GRI 2-6 | BBVA in brief/BBVA Group strategy NFIS/Sustainability in the BBVA Group/ESG Strategy and objectives Financial information/BBVA Group/Macroeconomic and regulatory environment |
| General Reporting framework | ||
| Non-financial information statement | GRI 1 | NFIS/Sustainability in the BBVA Group/Governance model |
| Principle of materiality | GRI 3-1, GRI 3-2 | NFIS/Sustainability in the BBVA Group/Materiality analysis NFIS/Additional information/Additional information on materiality analysis |
139
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
56
Law 5/2021 once again modifies article 49 of the Commercial Code on social and personnel issues. Those modifications are included in this content index.
| Management approach | GRI reporting criteria | Page / Section |
|---|---|---|
| Description of the applicable policies | GRI 3-3, GRI 2-25 | NFIS/Sustainability in the BBVA Group/Governance model |
| The results of these policies | GRI 3-3, GRI 2-25 | NFIS/Environmental NFIS/Social NFIS/Governance Risk management |
| ## Total number and distribution of employees according to country, gender, age, country and professional classification | ||
| NFIS/Additional information/Additional information on employees | ||
| GRI 2-7, GRI 2-8, GRI 405-1 | ||
| 209-220 |
NFIS/Additional information/Additional information on employees
GRI 2-7, GRI 2-8
209-220
NFIS/Additional information/Additional information on employees
GRI 2-7, GRI 2-8
209-220
NFIS/Additional information/Additional information on employees
GRI 3-3, GRI 2-25, GRI 401-1 with respect to staff turn-over by sex, age and country
209-220
NFIS/Social/Employees/Remuneration
GRI 3-3, GRI 2-25, GRI 405-2 with respect to women remuneration compared to men's by professional category
110-116
NFIS/Social/Employees/Remuneration
GRI 3-3, GRI 2-25, GRI 405-2 with respect to women remuneration compared to men's by professional category
110-116
NFIS/Social/Employees/Remuneration/Wage gap
GRI 3-3, GRI 2-25, GRI 405-2 with respect to women remuneration compared to men's by professional category
114
NFIS/Social/Employees/Working environment/Work organization
GRI 3-3, GRI 2-25
104-105
NFIS/Social/Employees/Professional development/Diversity and inclusion
GRI 405-1
101-103
NFIS/Social/Employees/Working environment/Work organization
GRI 3-3, GRI 2-25
104-105
NFIS/Social/Employees/Working environment/Occupational safety and health
GRI 403-9
106-109
NFIS/Social/Employees/Working environment/Work organization
GRI 3-3, GRI 2-25
104-105
NFIS/Social/Employees/Working environment/Occupational safety and health
GRI 3-3, GRI 2-25, GRI 403-1, GRI 403-2, GRI 403-3, GRI 403-7 (2018)
106-109
NFIS/Social/Employees/Working environment/Occupational safety and health
GRI 403-9 (2018) with respect to labor accident injuries
106-109
NFIS/Social/Employees/Working environment/Occupational safety and health
GRI 403-10 (2018) with respect to recordable labor injuries
106-109
NFIS/Social/Employees/Working environment/Freedom of association and representation
GRI 3-3, GRI 2-25
105-105
NFIS/Social/Employees/Culture and values
NFIS/Social/Employees/Working environment/Freedom of association and representation
GRI 3 -3, GRI 2-25
95, 105-105
NFIS/Social/Employees/Working environment/Freedom of association and representation
GRI 2-30
105-105
NFIS/Social/Employees/Working environment/Occupational safety and health
GRI 403-4 (2018)
106-109
NFIS/Social/Employees/Professional development/Training
GRI 3-3, GRI 2-25, GRI 404-2
99-101
NFIS/Social/Employees/Professional development/Training
GRI 404-1
99-101
NFIS/Social/Employees/Professional development/Diversity and inclusion
GRI 3-3, GRI 2-25
101-103
NFIS/Social/Employees/Professional development/Diversity and inclusion
GRI 3-3, GRI 2-25
101-103
NFIS/Social/Employees/Professional development/Diversity and inclusion
GRI 3-3, GRI 2-25
101-103
NFIS/Social/Employees/Professional development/Diversity and inclusion
GRI 3-3, GRI 2-25
101-103
NFIS/Social/Employees/Professional development/Diversity and inclusion
GRI 3-3, GRI 2-25
101-103
NFIS/Social/Commitment to Human Rights
GRI 2-23, GRI 2-26
119-120
NFIS/Social/Commitment to Human Rights
GRI 3-3, GRI 2-25, GRI 406-1
119-120
NFIS/Social/Employees/Working environment/Freedom of association and representation
NFIS/Social/Commitment to Human Rights
GRI 3-3, GRI 2-25, GRI 407-1, GRI 408-1, GRI 409-1
105, 119-120
NFIS/Governance/Compliance and conduct
GRI 3-3, GRI 2-25, GRI 2-23, GRI 2-26, GRI 205-2, GRI 205-3
130-137
NFIS/Governance/Compliance and conduct
GRI 3-3, GRI 2-25, GRI 2-23, GRI 2-26, GRI 205-2, GRI 205-3
130-137
NFIS/Social/Society/Contribution to the Community
GRI 2-28, GRI 201-1 with respect to community investment
82-84
NFIS/Sustainability in the BBVA Group/Dialogue and discussion with customers, industry and the public sector
NFIS/Social/Society/Contribution to the community
GRI 3-3, GRI 2-25, GRI 203-2 with respect to significant indirect economic impacts, GRI 204-1
30-35, 82-84
NFIS/Sustainability in the BBVA Group/Dialogue and discussion with customers, industry and the public sector
NFIS/Social/Society/Contribution to the community
GRI 413-1, GRI 413-2
30-35, 82-84
NFIS/Sustainability in the BBVA Group/ ESG strategy and objectives
NFIS/Social/Employees/Working environment/Freedom of association and representation
NFIS/Social/Society/Contribution to the community
NFIS/Additional information/Additional information on materiality analysis
NFIS/Additional Information/Operations analyzed under the Equator Principles
GRI 2-29, GRI 413-1
17-19, 105, 82-84, 201-209, 223-224
NFIS/Social/Society/Contribution to the community
GRI 3-3, GRI 2-25, GRI 201-1 with respect to investments in the community
82-84
NFIS/Social/Suppliers
GRI 3-3, GRI 2-25
117-118
NFIS/Social/Suppliers
GRI 2-6, GRI 308-1, GRI 414-1
117-118
NFIS/Social/Suppliers
GRI 2-6, GRI 308-1, GRI 308-2, GRI 414-2
117-118
NFIS/Governance/Security and protection
NFIS/Social/Customers/Customer experience
NFIS/Social/Commitment to Human Rights
GRI 3-3, GRI 2-25, GRI 416-1
87-89, 89-90, 119-120
NFIS/Social/Customers/Customer care
NFIS/Additional information/Additional information on customer complaints
GRI 3-3, GRI 2-25, GRI 418-1
90-92, 221-223
NFIS/Social/Fiscal contribution and transparency
GRI 201-1, GRI 207-4 (2019) with respect to tax on corporate profit payed and tax on corporate profit
122-129
NFIS/Social/Fiscal contribution and transparency
GRI 201-1, GRI 207-4 (2019) with respect to corporate income tax paid and corporate income tax accrued on profit/ loss.# BBVA Group Management Report 2023
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
In accordance with the provisions of Law 7/2021, of May 20, on climate change and energy transition (hereinafter, Law 7/2021), BBVA incorporates its Climate Change Report into the Group's Management Report, which accompanies the Consolidated Annual Accounts corresponding to the financial year 2023 and includes, among others, the content provided for in article 32 of Law 7/2021 and its implementing regulations. The table of equivalences between the aforementioned contents related to the Climate Change Report provided for in Law 7/2021 and its location within the Group Management Report corresponding to the year 2023 is included below.
Non-financial Information Report. Contents index of the Law 7/2021, of May 20, about climate change and energetic transition
| Topic | Reporting criteria | Response included in BBVA Group's consolidated management report |
|---|---|---|
| Govern | Governance structure of organization, including the role that its various bodies perform, in relation to the identification, evaluation and management of risks and opportunities related to climate change. | 5. Other information/5.2 Organizational Chart |
| NFIS/2.1.6 Governance model | ||
| Strategy | Strategic approach, in terms of adaptation and mitigation of the entities to manage the financial risks associated with climate change, taking into account the current risks at the time of writing the report, and those that may arise in the future, identifying the actions necessary at that time to mitigate such risks. | NFIS/2.1.1 ESG strategy and objectives |
| Impacts | The real and potential impacts of risks and opportunities associated with climate change on the organization's activities and its strategy, as well as on its financial planning. | NFIS/2.1 Sustainability in BBVA Group |
| NFIS/2.2 Environmental | ||
| Risk management | The processes for identifying, evaluating, controlling and managing climate-related risks and how these are integrated into its global business risk analysis and its integration into the organization's global risk management. | NFIS/2.2.2 Management of risks associated with climate change and environmental factors |
| Metrics and goals | Metrics, scenarios and objectives used to assess and manage important risks and opportunities related to climate change and, if calculated, the scope 1, 2 and 3 of its carbon footprint and how its reduction is addressed. | NFIS/2.1 Sustainability in BBVA Group |
| NFIS/2.2 Environmental |
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
At the end of 2021, GRI has made adjustments to the standards for developing sustainability reports. The sections to be reported have been developed and expanded and the old GRI 101 (2016 version) have been replaced by GRI 1: Fondation; GRI 2 (version 2106) by GRI 2: General disclosure; and GRI 103 (2016 version) for GRI 3: Material topics. In this way, modifications have been applied in terms of the structure of the BBVA Group's content index with respect to that reported in fiscal year 2021 to adjust to the new requirements. The BBVA Group has reported in accordance with the GRI Standards for the period between January 1 and December 31, 2023.
| Indicator | Chapter | GRI |
|---|---|---|
| GRI 1: FOUNDATION | ||
| Reporting in accordance with the GRI Standards | ||
| Publish a GRI content index | GRI standards content index | |
| Provide a statement of use | Non-financial information report | |
| GRI 2: GENERAL DISCLOSURE | ||
| The organization and its reporting practices | ||
| 2-1 Organizational details | BBVA in brief Group financial information Annual Corporate Governance Report Consolidated Financial Statements (Note 1) |
|
| 2-2 Entities included in the organization’s sustainability reporting | Non-financial information report/Introduction | |
| 2-3 Reporting period, frequency and contact point | Annual. From January 1 to December 31, 2023. For contacts regarding sustainability and responsible banking see https://accionistaseinversores.bbva.com/negocio-responsable/contacto/ | |
| 2-4 Restatements of information | Regarding the financial information, restatements made during 2023 financial year are described in Notes 1 and 3 of the Consolidated Financial Statements. The changes with respect to the non-financial information published in 2022 have been duly indicated through their corresponding footnote in the sections: NFIS/Environmental/Management of direct environmental impacts NFIS/Social/Employees NFIS/Social/Tax contribution and transparency |
|
| 2-5 External assurance | Independent verification report | |
| 2-6 Activities, value chain, and other business relationships | BBVA in brief BBVA in brief/Who we are NFIS/Social/Suppliers Financial information/BBVA Group Financial information/Business areas Consolidated Financial Statements (Note 3) |
|
| 2-7 Employees | BBVA in brief NFIS/Social/Employees Financial information/BBVA Group Financial information/Business areas |
|
| In the breakdowns in which the number of employees is presented, the criterion of accounting for the number of people has been followed, except in those cases in which it is explicit that the data is expressed in full-time equivalent units (FTEs) or other measures. Age ranges: the ranges are reported according to the ranges of <30 years / between 30 and 39 years / between 40 and 49 years / ≥50 years. Professional Categories: based on the transversal role model established in 2022, BBVA maintains 3 professional categories: Management Team, Managers and Rest of Employees. |
||
| 2-8 Workers who are not employees | As of December 31, 2023, the number of external workers in the Engineering (Technology and Operations) area of the BBVA Group amounted to approximately 9,800 (approximately 400 less than as of December 31, 2022). These persons from external companies are hired to provide services related to computer infrastructure issues, or development/maintenance of software architectures and applications and platforms, or specialized cybersecurity services. The above number does not include external users registered in the systems that need user/access to BBVA buildings for the provision of services managed by the provider in which the number of persons is decided by the external company to satisfy the required level of service and it is, therefore, variable. | |
| Governance | ||
| 2-9 Governance structure and composition | NFIS/Sustainability in the BBVA Group/Governance model Annual Corporate Governance Report: - 5. Board of Directors, 5.1 Composition of the Board of Directors (table of the Board of Directors), 5.1.1 Profiles of the members of the Board of Directors, 5.1.3 Directors who make up the Board and 5.2.1 Selection policy, suitability and diversity of the Board of Directors - 6. Committees of the Board of Directors |
|
| 2-10 Nomination and selection of the highest governance body | Annual Corporate Governance Report: - 5.2.1 Selection, suitability and diversity policy of the Board of Directors; 5.2.2 Procedures for selection, appointment, re-election and dismissal of members of the Board of Directors |
|
| 2-11 Chair of the highest governance body | Annual Corporate Governance Report: - 5. Board of Directors; 5.1 Composition of the Board of Directors; 5.1.1: Profiles of the members of the Board of Directors and Subsection 5.1.2.1: Position of Directors in other Group companies - 6. Committees of the Board of Directors; 6.3 Permanent Delegate Commission - 12.3 Conflicts of interest |
|
| 2-12 Role of the highest governance body in overseeing the management of impacts | BBVA in summary/BBVA Group Strategy NFIS/Sustainability in the BBVA Group/Governance model Risk management Annual Corporate Governance Report: - 6. Committees of the Board of Directors - 13.1 Risk governance at BBVA |
|
| 2-13 Delegation of responsibility for managing impacts | NFIS/Sustainability in the BBVA Group/Governance model Annual Corporate Governance Report: - 5.1.1 Profiles of the members of the Board of Directors: Subsection President and CEO. - 6. Committees of the Board of Directors |
|
| 2-14 Role of the highest governance body in sustainability reporting | The non-financial information report is part of the Management Report and the Consolidated Financial Statements, which are prepared by the Board of Directors as responsible social body, in the meeting held on February 6, 2024, and will be subject to approval by the next General Shareholders' Meeting. | |
| 2-15 Conflicts of interest | NFIS/Governance/Compliance and conduct Annual Corporate Governance Report: - 6.7 Appointments and Corporate Governance Committee. - 12.3 Conflicts of interest |
|
| 2-16 Communication of critical concerns | NFIS/Social NFIS/Additional information/Additional information on materiality analysis Annual Corporate Governance Report: - 6. Committees of the Board of Directors |
|
| 2-17 Collective knowledge of the highest governance body | NFIS/Sustainability in the BBVA Group/Governance model Annual Corporate Governance Report: - 5. Formation of the board of directors - 5.2.1 Selection, suitability and diversity policy of the Board of Directors |
|
| 2-18 Evaluation of the performance of the highest governance body | Annual Corporate Governance Report: - 7. |
NFIS/Social/Employees/Remuneration
Consolidated Financial Statements (Notes 44.1 and 54)
BBVA in brief/BBVA Group strategy
NFIS/Social/Employees/Remuneration
Consolidated Financial Statements (Notes 44.1 and 54)
BBVA calculates the ratio of the percentage increase in total annual compensation as the relationship between the increase in total annual compensation (fixed remuneration plus accrued variable remuneration and pension contributions) of the highest paid person in each of the geographical areas and the percentage increase in the median annual total compensation (fixed remuneration plus accrued variable remuneration and pension contributions) of all employees in the same geographical area, taking the annualized full-time remuneration, excluding the highest paid person. In the case of BBVA, S.A. In Spain, for the year 2023, the increase in the total annual compensation of the highest paid person has been 3.3 times lower than the increase in the median annual total compensation of the rest of the employees. Regarding geographies, the increase in the total annual compensation of the highest paid person has been greater than the increase in the median annual total compensation of the rest of the employees in: Mexico by 1.7 times; in Turkey, in 1.1 times; and in Argentina, 1.1 times. For its part, the increase in the total annual compensation of the highest paid person has been lower than the increase in the median annual total compensation of the rest of the employees in: Colombia, by 2.1 times; in Chile, 4.5 times; and in Uruguay, 2 times. Finally, in Peru, while the total annual compensation of the highest paid person has increased, the total annual compensation of the rest of the employees has decreased.
Strategy, policies and practices
149
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
The non-financial information report is part of the Management Report and the Consolidated Financial Statements, which are prepared by the Board of Directors as responsible social body, in the meeting held on February 6, 2024, and will be subject to approval by the next General Shareholders' Meeting.
BBVA in brief/BBVA Group strategy
NFIS/Social/Employees/Culture and values
NFIS/Social/Commitment to Human Rights
The commitments and policies that the BBVA Group applies to the following aspects are indicated in their corresponding sections:
NFIS/Sustainability in the BBVA Group/Materiality analysis
NFIS/Additional information/Additional information on materiality analysis
NFIS/Social/Commitment to Human Rights
150
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
This metric reports monetary sanctions above a materiality threshold of 1 million euros per sanction, imposed in fiscal year 2023 (indicating whether said sanctions have been appealed), and non-monetary sanctions associated with the previous ones for breaches of the regulations specified below (1):
NFIS/Social/Society/Contribution to the community
NFIS/Governance/Compliance and conduct
NFIS/Social
NFIS/Governance/Regulators and supervisors
NFIS/Additional information/Additional information on materiality analysis
NFIS/Social/Employees/Work environment
151
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
NFIS/Sustainability in the BBVA Group/Materiality analysis
NFIS/Additional information/Additional information on materiality analysis
NFIS/Sustainability in the BBVA Group/Materiality analysis
NFIS/Additional information/Additional information on materiality analysis
(1) The information included in this metric covers entities comprising the BBVA Group as of December 31, 2023 on a fully consolidated basis (the "Entities").
152
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.# GRI 201: Economic Performance
The economic value generated during the 2023 financial year amounts to 29,538 million euros (2022: 24,550 million euros). The total distributed economic value is 19,733 million euros in the same period (2022: 19,185 million euros). As a result, the retained economic value (Economic value generated - Total distributed economic value) amounts to 9,837 million euros in 2023 (2022: 5,398 million euros). The amount of the distributed economic value corresponding to the financial year 2022 has been modified due to additional verifications.
NFIS/Environmental/The integration of sustainability in BBVA's financing structure
Global
Climate change
NFIS/Social/Employees/Remuneration
Consolidated Financial Statements (Notes 2.2.12 and 25)
Global
Employees
NFIS/Social/Fiscal contribution and transparency
Global
Inclusive growth
NFIS/Social/Employees/Remuneration
Global
Employees
The percentage of management team working in their country of birth in the countries where the Group operates is 92.2% on December 31, 2023 (92.4% in 2022).
Global
Employees
NFIS/Environmental
NFIS/Social/Society/Contribution to the community
Global
Inclusive growth
NFIS/Environmental
NFIS/Social/Society/Contribution to the community
Global
Inclusive growth
NFIS/Social/Suppliers
Global
Inclusive growth
NFIS/Governance/Compliance and conduct
NFIS/Social/Society/Contribution to the community
Global
Integrity and ethical behavior in business
NFIS/Governance/Compliance and conduct
Global
Integrity and ethical behavior in business
GRI 205-3(1) GRI 205-3 a), b) and c): There are no confirmed cases, that is, in which there is a firm sanction that entails its publication or final sentence in fiscal year 2023, against any of the Entities for acts related to corruption (understood to include acts of money laundering, according to the definition of the metric) attributable to the Entity. Excluded are those cases in which the entity is the victim of the unlawful conduct and those in which, because the law establishes a system of objective liability or some kind of liability for the actions of others, the Entity has to take over the amounts defrauded from a third party.
GRI 205-3 d): The information refers to public and well-known cases, filed or ongoing in fiscal year 2023, against the Entities for alleged acts related to corruption (in the sense indicated in the previous sections), in which no final judgment has been issued: (i) there is an ongoing process against BBVA, S.A. for alleged violations of Law 10/2010, of April 28, on the prevention of money laundering and the financing of terrorism, which led to the imposition of a sanction prior to the 2023 financial year in the amount of 13,127,004 euros, and which has not entailed payments for the entity in fiscal year 2023. The resolution is not final, a contentious-administrative lawsuit having been filed against it, prior to 2023; (ii) the Spanish judicial authorities are investigating the activities of Centro Exclusivo de Negocios y Transacciones, S.L. (“Cenyt”). Such investigation includes the provision of services by Cenyt to BBVA. On July 29, 2019, BBVA was named as an investigated party (investigado) in a criminal judicial investigation (Preliminary Proceeding No. 96/2017 – Piece No. 9, Central Investigating Court No. 6 of the National High Court) for alleged facts which could constitute bribery, revelation of secrets and corruption. Certain current and former officers and employees of the Group, as well as former directors, have also been named as investigated parties in connection with this investigation. Since the beginning of the investigation, BBVA has been proactively collaborating with the Spanish judicial authorities, including sharing with the courts information obtained in the internal investigation hired by the entity in 2019 to contribute to the clarification of the facts. As at the date of this Annual Report, no formal accusation against BBVA has been made. By order of the Criminal Chamber of the National High Court, the pre-trial phase ended on January 29, 2024. It is not possible at this time to predict the possible outcomes or implications for the Group of this matter, including any fines, damages or harm to the Group’s reputation caused thereby.
Global
Integrity and ethical behavior in business
It is reported that there are 8 ongoing civil or administrative judicial processes and 1 completed in fiscal year 2023, in which it is being investigated or has been investigated whether any of the Entities have participated in alleged anti-competitive agreements or abuses of a dominant position prohibited under the applicable competition regulations, such as the Spanish Competition Law, the competition provisions of the Treaty on the Functioning of the European Union, and equivalent regulations in other countries outside the EU. In 2023, no sanctions have been imposed in relation to these processes, nor have any monetary losses been incurred. The process completed in fiscal year 2023 has concluded with a favorable result for the Entity. Additionally, there are 4 civil procedures underway in fiscal year 2023 for alleged violation of unfair competition regulations and 2 administrative procedures completed (with a favorable result for the Entity) that have not led to payments by the Entities in 2023 (1) (2).
Global
Integrity and ethical behavior in business
NFIS/Social/Society/Fiscal contribution and transparency
Global
Integrity and ethical behavior in business
NFIS/Social/Society/Fiscal contribution and transparency
Global
Integrity and ethical behavior in business
NFIS/Social/Society/Fiscal contribution and transparency
Global
Integrity and ethical behavior in business
NFIS/Social/Society/Fiscal contribution and transparency
Consolidated Financial Statements (Appendix XII)
Global
Integrity and ethical behavior in business# GRI 301 Materials
NFIS/Environmental/Management of direct environmental impacts | Global | Natural capital
The paper that BBVA uses for consumption and that is reported in the Consumption Table is recycled or environmentally certified in most geographical areas (Argentina, Colombia, Spain, Mexico, Peru and Portugal) by 72.9%.
Global | Natural capital
Due to the economic activity of BBVA, the only products that could be considered in the report are those coming from the activity of the branches and the restaurants linked to them. As the volume of these products is small and the financial activity itself linked to BBVA's business is completely separated from them, this metric is considered non-material.
NFIS/Environmental/Management of direct environmental impacts | Global | Natural capital
Energy consumption outside the organization, coming from business trips (plane and train) and employee travel, is 1,054,732 Gigajoules (GJ) with the following breakdown:
The conversion factors used have been calculated based on factors provided by DEFRA.
Natural capital |
NFIS/Environmental/Management of direct environmental impacts(3) , Evolution of the Global Eco-efficiency Plan indicators | Table | Global | Natural capital
NFIS/Environmental/Management of direct environmental impacts(3) , Evolution of the Global Eco-efficiency Plan indicators | Table | Global | Natural capital
Given the nature of the products and services that BBVA sells, it is currently not possible to obtain the information about the reductions of these requirements, according to the defined reporting criteria by the standard. However, the entity reports the reductions in energy consumption inherent to its activity in which it has direct management capacity for the reduction.
157 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
Due to the economic activity of a financial entity like BBVA, water consumption is not intensive, being only for use by employees, and for the vegetation and air conditioning of some buildings. However, BBVA has installed gray water recycling systems and rainwater recirculation for irrigation of the headquarters in Spain and Mexico or the installation of dry urinals in some of the buildings in Spain. An analysis by geographic area (pessimistic 2030 scenario) of uses is carried out through the WRI tool: Aqueduct Projected Water Stress Country Rankings; with a result:
Global | Natural capital
Due to the fact that the economic activity of a financial entity such as BBVA, whose effluents are those of the activity of its offices and the restoration linked to them, this metric and its different breakdowns are considered non-material due to their low impact. Therefore, the discharges are considered insignificant and comply with the regulations of the areas in which they are made.
Due to the economic activity of a financial entity such as BBVA, no type of water extraction is carried out in any of its buildings
Due to the economic activity of a financial entity such as BBVA, it is considered that the discharge of water is the same as the water consumed.
Global | Natural capital
NFIS/Environmental/Management of direct environmental impacts | Global | Natural capital
158 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
The operations centers and / or offices owned, leased or managed by BBVA are located in urban areas far from protected areas or areas of great value for biodiversity. Therefore, it is considered that neither this metric nor its breakdowns are material at present, the entity undertakes to follow-up for its report in the future, if necessary.
The operations centers and / or offices owned, leased or managed by BBVA are located in urban areas, so the impacts of the entity's activities on biodiversity are considered not significant. Regarding its activity, within the Environmental and Social Framework, BBVA is committed to the loss of biodiversity and the fight against deforestation through its role as a financial intermediary between the economy, the environment and society. For more information on the Framework, the general exclusions and specific prohibited activities defined in this Framework, as well as the methodology that the BBVA Group uses to identify the levels of environmental impact and dependencies, see the NFIS/ Sustainability in BBVA Group/Dialogue and discussion with customers, industry and the public sector
Global | Natural capital
The metric describes the size of the protected or restored areas of habitats. BBVA's financial activity, as well as the activity of its offices, has no impact in this regard; therefore, this metric and its various breakdowns are currently considered non-material.
The total number of species that appear on the IUCN Red List and national conservation lists, whose habitats are in areas affected by the organization's operations, by level of extinction risk (critically endangered, endangered, vulnerable, near threatened and of concern less); it is not material, since BBVA's financial activity, as well as the activity of its offices, does not have an impact in this regard. Therefore, this metric and its various breakdowns are currently considered non-material.
NFIS/Environmental/Management direct environmental impacts. Carbon Footprint Table,Table of Evolution of the Global Eco-efficiency Plan Indicators. In addition to the published data on Scope 1 emissions in tCO2 e, the breakdown by other types of GHG is:
The emission factors used have been calculated based on the 2006 IPCC Guidelines for National Greenhouse Gas Inventories emission factors for GHG emissions from facility fuels and DEFRA emission factors are used for diesel and gasoline from vehicle fleets. Emissions from refrigerant gases are not included in this breakdown, since DEFRA's emission factors for the "Refrigerant & Other" category only indicate CO2 equivalent.
Global | Climate change | Natural capital
159 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
NFIS/Environmental/Management direct environmental impacts. Carbon Footprint Table, Table of Evolution of the Global Eco-efficiency Plan Indicators. In addition to the published data on Scope 2 emissions in tCO 2e, the breakdown by other types of GHG is:
MARKET-BASED:
LOCATION-BASED:
The emission factors used are calculated based on contractual data and, failing that, on the latest emission factors available from the IEA for each country.
Global | Climate change | Natural capital
NFIS/Environmental/Management environmental impacts. Carbon Footprint Table, Table of Evolution of the Global Eco-efficiency Plan Indicators.# 305-4 GHG emissions intensity
NFIS/Environmental/Management of risks associated with climate change and environmental factors
NFIS/Environmental/Management environmental impacts
Global Climate change
Natural capital
| (2)(4) In addition to the published data on Scope 3 emissions in tCO 2e, a breakdown is made only for the category of business travel by train and plane by the main types of GHG: - CO2 : 28,980.86 t CO2 - CH4 : 3.36 t CH4 - N2O: 144.13 t N2O For the rest of the scope 3 categories, no data is available for the breakdown into the main types of GHG. The emission factors used are those published by DEFRA in 2023 |
NFIS/Environmental/Management of risks associated with climate change and environmental factors
NFIS/Environmental/Management environmental impacts
Global Climate change
Natural capital
This metric includes ODS production, imports and exports in metric tons of CFC 11 (trichlorofluoromethane) equivalent and standards, methodologies, etc. necessary for its calculation. Since BBVA's economic activity is that of a financial institution, no substances that deplete the ozone layer are produced or exported and/or imported.
BBVA emissions of other types of pollutants into the atmosphere are:
- NOx: 12,624.38 t NOx
- SOx: 1,926.87 tSOx
These data only include emissions due to the use of fuels in the facilities of BBVA buildings. The factors used are those published by the European Environmental Agency: "EMEP/EEA air pollutant emission inventory guidebook 2019" for the "Commercial / institutional: stationary" sector, "Tier 1" typology for each of the types of fuels.
| Indicator | Chapter/Section | Scope | Material aspects identified and coverage |
|---|---|---|---|
| Waste | |||
| GRI 3 Material topics | 3-3 Management of material topics | NFIS/Environmental/Management environmental impacts. Carbon Footprint Table, Table of Evolution of the Global Eco-efficiency Plan Indicators. | Global |
| GRI 306 Waste | 306-1 Waste generation and significant waste-related impacts | NFIS/Environmental/Management environmental impacts. Carbon Footprint Table, Table of Evolution of the Global Eco-efficiency Plan Indicators. | Global |
| GRI 306-2 Management of significant waste-related impacts | NFIS/Environmental/Management environmental impacts. Carbon Footprint Table, Table of Evolution of the Global Eco-efficiency Plan Indicators. | Global | Natural capital |
| GRI 306-3 Waste generated | NFIS/Environmental/Management environmental impacts. Carbon Footprint Table, Table of Evolution of the Global Eco-efficiency Plan Indicators. | Global | Natural capital |
| GRI 306-4 Waste diverted from disposal | NFIS/Environmental/Management environmental impacts. Carbon Footprint Table, Table of Evolution of the Global Eco-efficiency Plan Indicators. | Global | Natural capital |
| GRI 306-5 Waste directed to disposal | NFIS/Environmental/Management environmental impacts. Carbon Footprint Table, Table of Evolution of the Global Eco-efficiency Plan Indicators. | Global | Natural capital |
| Supplier Environmental Assessment | |||
| GRI 3 Material topics | 3-3 Management of material topics | NFIS/Social/Suppliers Global Climate change | Natural capital |
| GRI 308. Supplier Environmental Assessment | 308-1 New suppliers that were screened using environmental criteria | NFIS/Social/Suppliers Global Climate change | Natural capital |
| GRI 308-2 Negative environmental impacts in the supply chain | and actions taken | NFIS/Social/Suppliers Global Climate change | Natural capital |
| Employment | |||
| GRI 3 Material topics | 3-3 Management of material topics | NFIS/Social/Employees/Professional development NFIS/Social/Employees/Working environment/Work organization | Global |
| GRI 401 Employment | 401-1 New employee hires and employee turnover | NFIS/Social/Employees/Professional development | Global |
| GRI 401-2 Benefits provided to full-time employees that are | not provided to temporary or part-time employees | ||
| Due to the low percentage of employees with part-time and temporary contracts that BBVA presents in the fiscal period, this metric and its | |||
| breakdown are considered non-material; since the conditions and benefits received by employees are regulated by collective agreements, | |||
| social agreements and other tools that guarantee fair treatment and conditions appropriate to the particular characteristics of the contracts | |||
| established with employees. However, the entity will monitor this metric to ensure that its annual report adjusts to the situation of the | |||
| period. | |||
| GRI 401-3 Parental leave | NFIS/Social/Employees/Working environment/Work organization | Global | Employees |
| Labor/Management relations | |||
| GRI 3 Material topics | 3-3 Management of material topics | NFIS/Social/Employees | Global |
| GRI 402 Labor/Management relations | 402-1 Minimum notice periods regarding operational changes | ||
| The significant organizational changes foreseen in the collective bargaining agreements are analyzed on a case-by-case basis, so the negative | |||
| impact on employees can be avoided or mitigated. | |||
| Global | Employees Human Rights | ||
| Occupational health and safety | |||
| GRI 3 Material topics | 3-3 Management of material topics | NFIS/Social/Employees/Working environment/Occupational safety and health | Global |
| GRI 403 Occupational health and safety | 403-1 Occupational health and safety management system | NFIS/Social/Employees/Working environment/Occupational safety and health | Global |
| GRI 403-2 Hazard identification, risk assessment, and | incident investigation | NFIS/Social/Employees/Working environment/Occupational safety and health | Global |
| GRI 403-3 Occupational health services | NFIS/Social/Employees/Working environment/Occupational safety and health | Global | Employees |
| GRI 403-4 Worker participation, consultation, and | communication on occupational safety and health | NFIS/Social/Employees/Working environment/Occupational safety and health | Global |
| GRI 403-5 Worker training on occupational safety and health | NFIS/Social/Employees/Working environment/Occupational safety and health | Global | Employees |
| GRI 403-6 Promotion of worker health | NFIS/Social/Employees/Working environment/Occupational safety and health | Global | Employees |
| GRI 403-7 Prevention and mitigation of occupational health | and safety impacts directly linked by business relationships | NFIS/Social/Employees/Working environment/Occupational safety and health | Global |
| GRI 403-8 Workers covered by an occupational health and | safety management system | NFIS/Social/Employees/Working environment/Occupational safety and health | Global |
| GRI 403-9 Work-related injuries | NFIS/Social/Employees/Working environment/Occupational safety and health | Spain | Employees |
| GRI 403-10 Work-related ill health | NFIS/Social/Employees/Working environment/Occupational safety and health | Spain | Employees |
| Given the nature of BBVA's activity, no high risk of serious diseases related to the workers' occupation has been identified | |||
| Training and education | |||
| GRI 3 Material topics | 3-3 Management of material topics | NFIS/Social/Employees/Professional development | Global |
| GRI 404 Training and education | 404-1 Average hours of training per year per employee | NFIS/Social/Employees/Professional development | Global |
| GRI 404-2 Programs for upgrading employee skills and | transition assistance programs | NFIS/Social/Employees/Professional development | Global |
| GRI 404-3 Percentage of employees receiving regular | performance and career development reviews | ||
| Performance evaluation is a continuous process carried out over the year, which analyzes the level of performance of each of the BBVA | |||
| Group employees, based on the level of execution of some previously established targets. In general, this process applies to all the | |||
| Group's employees. | |||
| Global | Employees | ||
| Diversity and equal opportunity | |||
| GRI 3 Material topics | 3-3 Management of material topics | NFIS/Social/Employees/Professional development Annual Corporate Governance Report NFIS/Social/Employees/Remuneration | Global |
| GRI 405 Diversity and equal opportunity | 405-1 Diversity of governance bodies and employees | NFIS/Social/Employees/Professional development Annual Corporate Governance Report | Global |
| The age groups into which the workforce details are broken down are: under 30 years old; between 30 and 39 years old; between 40 and 49 | |||
| years old; greater than or equal to 50 years. | |||
| ## Ratio of basic salary and remuneration of women to men | |||
| NFIS/Social/Employees/Remuneration |
| Indicator | Chapter/Section | Scope | Material aspects identified and coverage |
|---|---|---|---|
| Non-discrimination | GRI 3 Material topics | 3-3 Management of material topics | NFIS/Social/Employees/Professional development/Diversity and inclusion NFIS/Social/Commitment to Human Rights |
| Global Human Rights | Employees | GRI 406 | Non-discrimination |
| 406-1 Incidents of discrimination and corrective actions taken | During 2023, the sexual harassment protocol was activated in the Group on 25 occasions (in 2022, 13 occasions), with the existence of sexual harassment being confirmed in 22 cases (in 2022, 8 cases) that ended in the dismissal of the people reported. In 2023, the workplace harassment protocol has been activated on 2 occasions, and harassment has not been confirmed in any of them. | ||
| NFIS/Social/Employees/Professional development/Diversity and inclusion NFIS/Social/Commitment to Human Rights | Global Human Rights | Employees |
NFIS/Social/Suppliers NFIS/Social/Employees/Working environment/Freedom of association and representation
| Global Human Rights | Employees | GRI 407 | Freedom of association and collective bargaining |
|---|---|---|---|
| 407-1 Operations and suppliers in which the right to freedom of association and collective bargaining may be at risk | BBVA has not identified any operations or suppliers as having significant risk related to freedom of association and collective bargaining |
NFIS/Social/Suppliers
| Global Human Rights | GRI 408 | Child labor | |
|---|---|---|---|
| 408-1 Operations and suppliers at significant risk for incidents of child labor | BBVA has not identified any operations or suppliers as having significant risk related to child labor |
NFIS/Social/Suppliers
| Global Human rights | GRI 409 | Forced or compulsory labor | |
|---|---|---|---|
| 409-1 Operations and suppliers at significant risk for incidents of forced or compulsory labor | BBVA has not identified any operations or suppliers as having significant risk related to forced or compulsory labor |
NFIS/Social/Commitment to Human Rights
| Global Human Rights | GRI 410 | Security practices | |
| :--- | :--- | :--- | :---# Global Customers: Accessibility of commercial channels and financial health Integrity and ethical behavior in business
In 2023, no fines, sanctions or warnings issued by supervisory bodies have been identified publicly to BBVA Group entities as of December 31, as a result of non-compliance with regulations or voluntary codes related to the information and labeling of products and services.
In 2023, no fines, sanctions or warnings issued by supervisory bodies publicly to BBVA Group entities as of December 31 have been identified as a result of non-compliance with regulations or voluntary codes related to marketing communications.
| Chapter/Section | Scope | Material aspects identified and coverage |
|---|---|---|
| Customer privacy | GRI 3 Material topics 3-3 Management of material topics | NFIS/Social/Customers/Security and protection NFIS/Social/Customers/Customer care NFIS/Governance/Compliance and conduct |
| Global | Cibersecurity | Responsible use of data |
| Customers: Accessibility of commercial channels and financial health | GRI 418 Customer privacy 418-1 Substantiated complaints concerning breaches of customer privacy and losses of customer data | NFIS/Social/Customers/Security and protection NFIS/Social/Customers/Customer care NFIS/Governance/Compliance and conduct |
| Information related to judicial and administrative proceedings is included in: | SASB CF 220a.2 "Total amount of monetary losses as a result of legal proceedings related to customer privacy" | Global Cibersecurity Responsible use of data |
| Customers: Accessibility of commercial channels and financial health |
(1) The information included in this metric covers entities comprising the BBVA Group as of December 31, 2023 on a fully consolidated basis (the "Entities").
(2) The concept "monetary losses" includes the amounts paid, provisionally or definitively (without defense costs of the parties), by the entity in question, during the financial year 2023.
(3) The limitations on the scope of the indicator, the perimeter and the criteria followed in the estimates are detailed in the table referenced. The Global Eco-efficiency Plan Indicators have been calculated according to the number of employees of the buildings, understanding as such the sum of the average workforce and the estimation of the third parties that work in the Bank's facilities.
(4) It is only reported on operations analyzed in relation to compliance with the Equator Principles.
(5) The information refers to the systematized approval processes to which the products that the entities of the BBVA Group manufacture or distribute as of December 31, 2023, as well as other measures or lines of action promoted by said entities in the field of information transparency.
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| Reporting and Self-Assessment Requirements | High-level summary of the Bank's response | Reference(s)/Link(s) to full Bank's response/relevant information |
|---|---|---|
| Principle 1: Alignment Align the business strategy so that it is coherent and contributes to the needs of people and the objectives of society, as expressed in the Sustainable Development Goals, the Paris Climate Agreement and relevant national and regional frameworks. | ||
| 1.1. BUSINESS MODEL Describe (in detail) your bank's business model, including the main customer segments served, the types of products and services provided, the main sectors and classes of activities in the main geographic markets in which your bank operates or provides products and services. Also quantify the information disclosed, e.g., the distribution of your bank's portfolio (%) in terms of geographic markets, segments (ie, by balance and/or off-balance sheet) or by disclosing the number of clients served. | BBVA is a global financial group with a history of more than 165 years and a customer-focused vision, which currently has more than 71 million active customers and more than 121,000 employees. BBVA is present in more than 25 countries, has a leading position in the Spanish market, is the largest financial institution in Mexico and has leading franchises in South America and Turkey. At the end of 2023, BBVA had more than 775 billion in assets, 71.5 million active clients and 5,949 offices. BBVA focuses its business mainly on retail banking, business banking, and corporate and investment banking (Corporate & Investment Banking). | See section: "1. BBVA in brief" "1.1 Who we are" |
| 1.2. STRATEGY ALIGNMENT Does your corporate strategy identify and reflect sustainability as a strategic priority(s) for your bank? | ☒ Yes Please describe how your bank has aligned and/or plans to align its strategy so that it is consistent with the Sustainable Development Goals (SDGs), the Paris Climate Agreement, and relevant national and regional frameworks. In 2019 BBVA incorporated sustainability as one of its 6 strategic priorities at a global level, placing sustainability as a business strategy. The sustainability strategy focuses on: 1. Promote new business through sustainability. 2025 objective of channeling sustainable business for an amount of 300,000 million euros (to contribute to the fight against climate change and inclusive growth). 2. Achieve Zero Net Emissions in 2050 with the setting and management of intermediate decarbonization objectives by 2030 in the oil and gas, power generation, autos, steel, cement, coal, aviation and shipping sectors. See more detail in the sections indicated in this annual report. | See sections: "1. BBVA in brief" "1.2. BBVA Group strategy" "2.1. Sustainability in BBVA Group" |
| Does your bank also reference any of the following sustainability regulatory reporting requirements or frameworks in its strategic or policy priorities to implement them? | ☒ United Nations Guiding Principles on Business and Human Rights ☒ Fundamental Conventions of the International Labor Organization ☒ United Nations Global Compact ☒ United Nations Declaration on the Rights of Indigenous Peoples ☒ Any applicable regulatory reporting requirements on environmental risk assessments, e.g., on climate risk ☒ All applicable regulatory reporting requirements on social risk assessments, e.g., about modern slavery |
BBVA's commitment to human rights (published on the website) takes as a reference point the United Nations Guiding Principles on Business and Human Rights. Its purpose is to guide the entire organization in its strategic vision, in its operations and in the relationship with its interest groups. The commitment assumes the application of the content of: ▰ The Universal Declaration of Human Rights; ▰ The International Bill of Human Rights; ▰ The United Nations Global Compact; ▰ The United Nations Declaration on the Rights of Indigenous Peoples; ▰ The Principles for the Empowerment of Women: ▰ The OECD Guidelines for Multinational Enterprises; ▰ The fundamental conventions of the International Labor Organization (ILO); ▰ The Equator Principles; ▰ The United Nations Principles for Responsible Investment; In relation to regulatory information requirements on environmental and social risk assessments, it is worth mentioning the following European frameworks (approved or in negotiation phase) that require reporting or disclosure of ESG aspects and which BBVA is monitoring: ▰ CSRD (Corporate Sustainability Reporting Directive) and the sustainability reporting standards of EFRAG (European Financial Reporting Advisory Group) and ISSB (International Sustainability Standards Board). ▰ CSDDD (Corporate Sustainability Due Diligence Directive) - Taxonomy Regulation (art. 8 disclosures - GAR): in addition to art.8, art. 5 and 6 for financial products and in SFDR art. 8 and 9 and the RTS ▰ ITS (Implementing Technical Standards) de la EBA on Pillar 3 disclosures on Environmental, Social and Governance (ESG) risks ▰ SFDR (Sustainable Finance Disclosure Regulation) y RTS ▰ Law 7/2021 Climate Change Law in Spain Likewise, in 2017, BBVA committed to the FSB's TCFD recommendations and has been reporting TCFD reports in line with its commitment to transparency. In its TCFD 2022 report, BBVA incorporated elements of a Transition Plan for the first time following the guides and recommendations for financial institutions published by Glasgow Financial Alliance for Net Zero (GFANZ) in November 2022. |
| Principle 2: Impact and goal setting Continuously increase positive impacts while reducing negative impacts and manage risks to people and the environment resulting from activities, products and services. To this end, set and publish targets where you can have the most significant impacts. | ||
| 2.1 IMPACT ANALYSIS Demonstrate that your bank has conducted an impact analysis of your portfolio(s) to identify your most significant areas of impact and determine priority areas for targeting. | BBVA has carried out an analysis of the impact of its portfolio(s) to identify its most significant areas of impact and determine priority areas for establishing objectives. | 169 |
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.# a) Scope
In 2023, BBVA has updated the impact analysis using version 3 of the UNEP FI Portfolio Impact Analysis Tool for Banks. The business areas of Consumer Banking (retail portfolio) and Institutional Banking (wholesale portfolio) have been included. The Investing Banking business area has not been considered since it represents less than 1% of the BBVA Group's gross margin. The BBVA Group's Institutional Banking activity has been updated with 2023 values in Spain, Mexico, Peru, Colombia and Argentina; and the 2022 values have been maintained for the Group's activity in Turkey and in Consumer Banking. Activity in Chile, Uruguay and Venezuela and a small part of Turkey's corporate banking portfolio have not been considered, which are not significant.
Likewise, BBVA has carried out an evaluation of the dependencies and impacts in relation to natural capital using the ENCORE tool.
Furthermore, in line with the United Nations Guiding Principles on Business and Human Rights, since 2018 BBVA has carried out Human Rights due diligence processes with the aim of preventing, mitigating and remedying potential impacts on human rights. The results of the same are published in the Human Rights Action Plan 2021-22&23.
See section: "2.2. Environmental", especially "2.2.1. Risks and opportunities associated with climate change" and "2.3. Social", "2.3.5. Commitment to Human Rights" BBVA and Human Rights, available on the BBVA shareholders and investors website Human Rights Action Plan 2021-22 & 2023, available on the BBVA shareholders and investors website Financial information in addition to Impact Analysis Tool for Banks UNEP-FI.
Composition of the portfolio by geography by type of business, dividing it by type of product and type of client (in the case of Consumer Banking) and by NACE of financed activity sectors (in the case of Institutional Banking).
Geographic distribution of the portfolio: 58.62% Spain, 19.62% Mexico, 8.58% Turkey, 5.33% Peru, 5.27% Colombia and 1.49% Argentina. The most relevant products for low-income clients continue to be: Home loans/mortgages and Consumer loans & overdraft. The type of client has also been taken into account (low-income clients vs. other clients).
Geographic distribution of the portfolio: 59.9% Spain, 20.8% Mexico, 10.8% Turkey, 4.3% Peru, 3.3% Colombia and 0.9% Argentina. The most relevant sectors at the Exposure at Default level are:
* Public administration and defence; compulsory social security
* Electricity, gas, steam and air conditioning supply
* Wholesale trade, except of motor vehicles and motorcycles
* Real estate activities
As of the date of publication of this report, the Consumer Banking and Institutional Banking data of Turkey are data as of May 2022, while the Institutional Banking data of the rest of the countries are data as of July 2023. Impact Analysis Tool for Banks UNEP-FI.
In 2023, the context analysis carried out in 2022 for Argentina, Colombia, Peru, Spain, Turkey and Mexico carried out in the UNEP FI Portfolio Impact Analysis Tool for Banks "Context Module" has been maintained. This context module includes data sources such as the Sustainable Development Report 2021 and UN Global SDG Database, as well as indicators published by the World Health Organization, World Resources Institute, etc. This context analysis was contrasted in 2022 with the BBVA teams in each of the countries analyzed and has revealed the following as the main challenges and priorities in all the countries considered in the scope:
In this sense, the Group's General Sustainability Policy considers these issues as the main focuses of action in terms of sustainability. Impact Analysis Tool for Banks UNEP-FI. BBVA's global sustainability policy available on the BBVA shareholders and investors website
As a result of the analysis described in the previous sections, BBVA has prioritized 2 areas of impact where BBVA believes it can have a significant impact due to the activity it carries out:
BBVA has established:
See sections: "2.1.2. Materiality analysis" "2.1.3. Sustainability in business development" "2.2. Environmental" ("2.2.4. Management of direct environmental impacts") "2.3. Social" TCFD 2022 Report (fourth report) 170
BBVA has identified the sectors and types of clients or areas where the financing activity has a greater positive and negative impact, establishing objectives that it monitors on a recurring basis. When identifying these sectors and clients, the following has been taken into account.
(i) The main business areas: retail banking, business banking and corporate and investment banking (Corporate & Investment Banking)
(ii) The countries in which it operates.
(iii) The composition of the portfolio by sectors and the most relevant challenges and priorities in the environment.
(iv) The importance of the identified social, economic and environmental impacts resulting from the bank's activities in each country and impact area.
Impact Analysis Tool for Banks UNEP-FI.# SELF-ASSESSMENT SUMMARY
Which of the following components of the impact analysis has your bank completed, in order to identify the areas where your bank has its most significant (potential) positive and negative impacts?
What most significant impact areas have you identified for your bank, as a result of the impact analysis?
Climate Change and Inclusive Growth
How recent is the data used and disclosed in the impact analysis?
Up to 12 months before publication
Demonstrate that your bank has established and published a minimum of two targets that address at least two different areas of greatest impact that you identified in your impact analysis
BBVA has established specific, measurable (quantitative), achievable, relevant and time-bound (SMART) objectives, in line with science and the most ambitious objectives of the Paris Agreement, in two areas identified as "areas of most significant impact": "Climate Change" and "Inclusive Growth" in 2023.
Demonstrate that the selected indicators and targets are linked to and drive alignment and further contribution to the appropriate Sustainable Development Goals, Paris Agreement targets and other relevant international, national or regional frameworks.
"Target 1. Climate Change (decarbonization)
BBVA takes as reference the Net Zero scenario of the International Energy Agency (IEA_NZE) and the Institute for Sustainable Futures Sectoral Pathways to Net Zero Emissions (ISF NZ) and the IMO (International Maritime Organization) Strategy on emissions reduction for Shipping. BBVA will measure performance through the following units of measurement:
In 2023, BBVA has published the progress in the decarbonization of its clients to show progress in its own Transition Plan. In 2022, BBVA was one of the first in the world to apply the recommendations for defining its transition plan in accordance with the Glasgow financial alliance for net zero emissions (GFANZ).
"Target 2: Inclusive growth: Inclusion and Financial Health
In 2023, the BBVA Group establishes the objective of supporting 4.5 million entrepreneurs with little or no banking services until 2025, starting with a base of 2.5 million in 2021, based on UNEP's "Commitment to Financial Health and Inclusion". FI .Alignment of BBVA's business with the SDGs, specifically with: SDG 1 (End of poverty), SDG 5 (gender equality), SDG 8 (Decent work and economic growth), SDG 9 (Industry, Innovation and Infrastructure), SDG 10 (Reduced inequalities) and SDG 17 (Partnerships for the goals).
See sections: "1.2. BBVA Group Strategy" "2.1. Sustainability in BBVA Group" "2.2.2. Risk management associated with climate change and environmental factors" "2.2.3 Alignment of the loan portfolio with the Paris Agreement" "2.3. Social"
Indicate the indicators used, as well as the year of the baseline.
Target 1. Climate Change (decarbonization): In relation to its Climate Change objective, BBVA has established 2020 as the base year for calculating the decarbonization objective for 5 sectors (power generation, autos, steel, cement and coal) and the year 2021 for the oil and gas sector. In 2023, BBVA has announced decarbonization objectives in two additional sectors such as aviation and shipping based on year 2022.
Target 2:Inclusive growth: Inclusion and Financial Health
Base year 2021 to 2025
See sections: "2.2.2. Management of risks associated with climate change and environmental factors", "2.2.3 Alignment of the loan portfolio with the Paris Agreement" "2.3. Social"
171 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
Disclose the objectives for your first and second areas of greatest impact, if they already exist (as well as other areas of impact, if any). What KPI are you using to monitor progress toward achieving the goal? Disclose it.
Target 1. Climate Change (decarbonization).
Intermediate decarbonization objectives by 2030 for 8 sectors (oil and gas, power generation, autos, steel, cement, coal, aviation and shipping).
Target 2. Inclusive growth: Inclusion and Financial Health
See sections: "2.2.2. Management of risks associated with climate change and environmental factors", "Identification, measurement and integration of climate change in risk management" and "2.2.3 Alignment of the loan portfolio with the Paris Agreement" "2.3. Social"
Also demonstrate that your bank has analyzed and recognized significant (potential) indirect impacts of the objectives set within the impact area or other impact areas and has established relevant actions to avoid, mitigate or offset possible negative impacts.
Target 1. Climate Change (decarbonization).
Milestones and action plan. In order to monitor decarbonization objectives and supervise their compliance, the Bank has approved an integrated governance framework, among others, by those responsible for the Business, Risk, Sustainability and Strategy areas that report directly to senior management. and to the corporate bodies: the Sustainability Alignment Steering Group (SASG). In addition, BBVA has developed a series of internal tools that allow it to integrate the management of these objectives into the day-to-day operations of risk and business processes: Transition Risk Indicator, Client Toolkit, Alignment Dashboard and What if Simulator. Likewise, sectoral plans have been developed in the oil and gas, power generation, autos, steel, cement, coal, aviation and shipping sectors, which has made it possible to define strategies and business plans aimed at meeting decarbonization objectives. This work is an input for the definition of the risk appetite of the Sector Frameworks. The negative impact is mitigated and reduced through processes detailed in section 5.3. of this table (Environmental and Social Framework, Equator Principles and human rights due diligence process).
Target 2. Inclusive growth: Inclusion and Financial Health
milestones and action plan. Among the action plans, the development of technological solutions to bring financial services and training to small entrepreneurs stands out. In 2024, BBVA is exploring the viability of creating local financial inclusion plans in the Group's different geographies.
See sections: "2.2.2. Management of risks associated with climate change and environmental factors - and 2.2.3 Alignment of the loan portfolio with the Paris Agreement" "2.2.4. Management of direct environmental impacts" "2.3. Social"
Which of the following target setting components in line with PRB requirements has your bank completed or is currently in an assessment process for your first and second areas of greatest impact?
Demonstrate that your bank has implemented the actions that you had previously defined to meet the established objective
BBVA is implementing the necessary actions to meet the objectives of "Climate Change" and "Inclusive Growth".
For each goal separately:
Demonstrate that your bank has implemented the actions that you had previously defined to meet the established objective. Report on your bank's progress since the last report towards the achievement of each of the stated objectives and the impact of its progress, using the indicators and KPIs to monitor progress that you have defined in 2.2. Or in case of changes in the implementation plans (relevant only for the 2nd and subsequent reports): Describe the potential changes (changes in priority impact areas, changes in indicators, acceleration/ revision of objectives, introduction of new ones). milestones or revisions to action plans) and explain why those changes have become necessary.
Target 1. Climate Change (decarbonization)
This Annual Report includes, for the 8 sectors for which decarbonization objectives have been defined, the chosen metrics, the scope of emissions considered, the data for the base year, the data as of 31/12/2023 (degree of annual progress), the methodology used and the decarbonization objective for 2030 measured in percentage reduction over the base year.# Principles for Responsible Banking
Likewise, BBVA has published other ESG objectives related to its 2 areas of greatest impact:
See sections: "2.2.2. Risk management associated with climate change and environmental factors" and "2.2.3 Alignment of the loan portfolio with the Paris Agreement" "2.2.4. Management of direct environmental impacts" "2.3. Social"
Please provide your bank's conclusion/statement if you have met the requirements regarding Plans for Target Implementation and Monitoring
BBVA has carried out an analysis of the impact of its portfolio(s) to identify its most significant areas of impact and determine priority areas for establishing objectives. BBVA has established and published objectives that address 2 areas of greatest impact identified in its impact analysis, such as "Climate Change" and "Inclusive Growth". BBVA is implementing actions to meet both objectives.
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Working responsibly with customers to encourage sustainable practices and enable economic activities that create shared prosperity for current and future generations.
Please describe how your bank has worked and/or plans to work with its clients to promote sustainable practices and enable sustainable economic activities. It should include information on relevant policies, actions planned/implemented to support client transition, selected indicators of client engagement and, where possible, impacts achieved. This should be based on and in line with impact analysis, goal setting and action plans established by the bank.
This Annual Report details how the integration of ESG aspects is carried out in the relationship and involvement with clients, whether in ESG support and involvement with wholesale clients (corporate and institutional) and companies, or in ESG support and involvement. with retail clients. See references in the right column.
By the end of the financial year 2023, more than 330 groups have been analyzed under the Environmental and Social Framework and BBVA has initiated a dialogue and support plan with 11 groups.
See sections: "2.1.6 Governance Model" "2.1.3 Sustainability in business development"
Please describe what strategic business opportunities in relation to increasing positive impacts and reducing negative impacts your bank has identified and/or how it has addressed these in the reporting period. Please provide information on existing products and services, information on sustainable products developed in terms of value (in USD or local currency) and/or as a % of your portfolio, and on which SDGs or impact areas you strive to have a positive impact (e.g, green mortgages — climate, social bonds—financial inclusion, etc.).
Sustainability is a growth lever for BBVA and has a holistic approach, with a focus on climate action and inclusive growth, and covers all segments. To capture this opportunity, work is being done on five lines of growth as detailed in the sections indicated in this annual report and in the column on the right.
Between 2018 and 2023, BBVA has mobilized a total of 205,603 million euros in sustainable business. During 2023, BBVA has developed solutions and specific product offerings to promote financial inclusion and increase the banking coverage of individuals in those geographies where the Group operates, thus managing to channel 750 million euros this year.
See sections: "2.2.1. Risks and opportunities associated with climate change" "2.3.2. Customers" within the chapter "2.3. Social"
Please provide your bank's conclusion/statement if you have met the requirements regarding Principle 3 Clients
BBVA works responsibly with its clients to promote sustainable practices and enable economic activities that generate shared prosperity for current and future generations.
Proactively and responsibly consult, engage, and partner with relevant stakeholders to achieve societal objectives.
Please describe which stakeholders (or stakeholder groups/types) you have identified, consulted or involved or with which stakeholders you have collaborated or partnered in order to implement the Principles and enhance the impacts of your bank. This should include a high-level overview of how your bank has identified relevant stakeholders, what issues were addressed or what results were achieved, and how they contributed to the action planning process.
In accordance with the General Sustainability Policy, BBVA integrates into its businesses and activities the concerns of its interest groups (customers, employees, shareholders and investors, suppliers, regulators and supervisors and society in general), on social and environmental issues, on diversity, fiscal responsibility, respect for human rights and prevention of corruption and other illegal conduct.
Throughout this Annual Report, the progress and results relating to each of the aforementioned interest groups are mentioned, as well as specific consultation actions carried out (through recurring surveys of clients, non-clients, employees, suppliers, surveys and questions received from analysts and investors, civil society, etc...; human rights due diligence process, etc.)
In 2021, the active participation of interest groups in the human rights due diligence process was identified as an area to strengthen. In 2022, a consultation process has been carried out with key interest groups. The results obtained were integrated into the 2021-2022 Human Rights Action Plan itself.
For more than 20 years, BBVA has actively participated in different supranational initiatives and always in close collaboration with all interest groups, which revolve around various priority areas such as Universal Reference Frameworks, decarbonization in line with the Agreement of Paris, market standards, transparency and financial regulation.
See sections: "2.1.2. Materiality analysis" ""2.1.4 Dialogue and discussion with customers, industry and the public sector" "2.2.2. Risk management associated with climate change and environmental factors" "2.3.5. Commitment to Human Rights" within the chapter "2.3. Social"
Please provide your bank's conclusion/statement if you have met the requirements regarding Principle 4. Interested Parties
BBVA consults, participates and maintains a proactive and responsible dialogue with relevant stakeholders to achieve established objectives.
Implement commitment to these Principles through effective governance and a responsible banking culture
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Please describe the relevant governance structures, policies and procedures that your bank has put in place/ plans to put in place to manage significant (potential) positive and negative impacts and support the effective implementation of the Principles. This includes information about which committee has responsibility for the sustainability strategy, as well as the approval and monitoring of the targets (including information about the highest level of governance to which the PRBs are subject), details about the chair of the committee and the process and frequency for the board to monitor the implementation of the PRB (including corrective actions in the event that objectives or milestones are not met or unexpected negative impacts are detected), as well as remuneration practices linked to sustainability objectives.
The Global Sustainability Area is responsible for the implementation of the sustainability strategy and has the support of the corporate bodies. Reports directly to the president (in areas linked to strategy and transformation) and CEO and to the Board of Directors. The BBVA Board of Directors has approved the decarbonization objectives (Target 1.# 5.1 GOVERNANCE STRUCTURE FOR THE IMPLEMENTATION OF THE PRINCIPLES
The Corporate Bodies and Senior Management are involved in the oversight and implementation of the sustainability strategy. The Board of Directors approves and monitors the sustainability strategy. The Sustainability Committee of the Board of Directors is responsible for overseeing the sustainability strategy and the specific risks and opportunities associated with climate change. The Global Sustainability Area, reporting directly to the CEO and the President, is responsible for driving and coordinating the Group's sustainability strategy. The Sustainability Alignment Steering Group, chaired by the Global Sustainability Area, is responsible for driving the implementation of the sustainability strategy in the different business areas, as well as for defining the Group's sustainability policies and monitoring their implementation.
This governance model ensures that sustainability is integrated into the Group's decision-making processes and risk management. The Board of Directors receives regular information on the progress of the sustainability strategy, including the degree of compliance with climate change objectives and the identification and management of environmental and social risks. This information is provided by the Global Sustainability Area and other relevant areas of the Group.
In 2023, the Corporate Bodies have generally received, every two months, specific reports on sustainability matters, from the head of the Global Sustainability Area, the Head of the Talent and Culture Area or the Global Head of Risks, as well as various reports from the different areas of the Group in which issues related to sustainability have been addressed. In 2023, the Remuneration Policy for BBVA Directors and the General Remuneration Policy of the BBVA Group has included, as part of the Annual Variable Remuneration of the members of the Identified Group, including executive directors and members of Senior Management of BBVA, a long-term incentive linked, among others, to the degree of compliance with the decarbonization objectives of a series of sectors for which the Bank publishes specific objectives. See sections: "2.1.6 Governance model" "Remuneration” within the chapter “2.3.3 Employees”.
Please describe your bank's initiatives and measures to foster a culture of responsible banking among its employees (e.g., skills development, e-learning, sustainability training for customer-facing roles, inclusion in compensation structures and performance management and leadership communication, among others).
BBVA has a comprehensive sustainability training program for its employees at all levels, including senior management and members of the Board of Directors, with the aim of providing the necessary skills so that the Group's professionals can address sustainability from their different areas of activity. This report details the number of employees trained in sustainability and transition plans. In addition, the remuneration of all employees is linked to sustainability objectives. Specifically, the non-financial indicators used in 2023 to calculate the Annual Variable Remuneration of all employees include the Sustainable Business Mobilization indicator. Likewise, in the variable remuneration scheme for executive directors and senior management, an indicator linked to the decarbonization of a series of sectors for which the Bank publishes specific objectives (with a specific weight of 15%) has been included, which reinforces the support of both the president, the CEO, and senior management so that BBVA achieves its objectives, in line with the strategic priority of "Helping customers in the transition to a sustainable future." See section: "Training" section in the chapter "2.3.3 Employees"
Does your bank have policies that address environmental and social risks within its portfolio? Describe them.
Please describe what due diligence processes your bank has in place to identify and manage environmental and social risks associated with your portfolio. This may include aspects such as the identification of significant/ outstanding risks, the mitigation of environmental and social risks and the definition of action plans, the monitoring and reporting of risks and any existing grievance mechanisms, as well as the structures of governance that it has established to supervise these risks.
To address environmental and social risks, BBVA has the following frameworks for action:
Following international reference frameworks such as the Materiality Map of SASB and rating agencies, BBVA has identified the sub-sectors of activity it finances and the most relevant environmental and social factors of each one. This is used as a support tool in the admission process. In 2023, BBVA has updated the heat map of impacts and dependencies on natural capital that it carried out during 2022. It has been used predominantly the methodology of the ENCORE tool, which is also consistent with aspects contained in other reference tools such as the SBTN Materiality Screening Tool, developed by the Science Based Target Network (SBTN) and has been included, qualitatively, the impacts and dependencies of the value chain (the dependencies and impacts of the upstream sector of each of the financed sectors have been included).
Sectors that have a high or very high dependence on natural capital represent 5.32% of the EAD of wholesale banking December 31, 2023 while those sectors with a high or very high impact represent 27.39%. As a result of this analysis, five sectors have been identified as having an impact and/or dependence on natural capital. significant: (1) Agriculture, livestock and fishing (primary production) ; (2) Production of food, beverages and tobacco (excluding primary sector); (3) Construction and hotel sector; (4) Mining and (5) Electricity generation:
For the five prioritized sectors, the relevant metrics have been identified in accordance with the reporting frameworks. such as ISSB (International Sustainability Standards Board), ESRS (European Sustainability Reporting Standards), GRI or TNFD (Task Force on Nature- related Disclosure) and have been obtained these metrics for the main clients in each of those sectors. The evaluation of these metrics allows informing the client admission process, identifying those metrics to take into account in the Know Your Client (KYC) and offering references both for the definition of risk mitigation criteria and for advisory with clients. See sections: ""2.1.4 Dialogue and discussion with customers, industry and the public sector" "Identification and measurement of other environmental risks" of section "2.2.2. Risk management associated with climate change and environmental factors" "2.3.5. Commitment to Human Rights" in the chapter "2.3. Social"
174
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
Does the CEO or other senior executives have regular oversight over the implementation of the Principles through the bank's governance system?
Yes
Does the governance system include structures to oversee the implementation of the PRB (e.g., including impact analysis and target setting, actions to achieve these targets, and corrective action processes in case targets are not met?) /milestones or unexpected negative impacts are detected)?
Yes
Does your bank have measures to promote a culture of sustainability among employees (as described in 5.2)?
Yes
Please provide your bank's conclusion/statement if you have met the requirements regarding the Governance Structure for the implementation of the Principles:
The Board of Directors defines, promotes and monitors the sustainability and climate change strategy. With the creation of the new Global Sustainability Area reporting to the CEO and also reporting to the President, BBVA has reinforced its governance structure in order to ensure full compliance with these Responsible Banking Principles. A specific model has been created that monitors the degree of compliance with the Climate Change objective linked to decarbonization. Likewise, BBVA has measures to promote a culture of sustainability among employees and directors.
Periodically review our individual and collective implementation of these Principles and be transparent and accountable for the positive and negative impacts and contribution to the objectives of society.
Has this publicly disclosed information about your PRB commitments been guaranteed by an independent insurer?
Yes.
If applicable, include the link or description of the assurance statement
The information disclosed in sections Impact Analysis (2.1), Establishment of objectives (2.2), Implementation and monitoring of objectives (2.3) and Governance structure for the implementation of the Principles (5.1) has been verified by Ernst & Young Auditors, S. L., in its capacity as independent provider of verification services, with the scope indicated in its verification report. See section: Independent Assurance Report
Does your bank disclose sustainability information in any of the standards and frameworks listed below?
Among the different existing standards, BBVA includes its non-financial information in the Statement of Non-Financial Information. In addition to GRI, BBVA publishes progress in terms of ESG breakdowns in accordance with two of the most advanced standards on the market: Measuring Stakeholder Capitalism from the International Business Council (IBC) and the World Economic Forum (WEF) and the Sustainability Accounting Standards Board (SASB) . In its TCFD 2022 report, BBVA incorporated elements of a Transition Plan for the first time following the guides and recommendations for financial institutions published by Glasgow Financial Alliance for Net Zero (GFANZ) in November 2022. See section: "2.5.5.# Alignment of BBVA Group's non-financial information to WEF- IBC and SASB standards
What are the next steps your bank will take in the next 12- month reporting period (particularly with regard to impact analysis, target setting, and governance structure for PRB implementation)?
In the next 12 months BBVA plans to:
* Publish decarbonization objectives in other significant sectors according to the Net Zero Banking Alliance guidelines.
* Continue measuring annual progress on the degree of progress of decarbonization metrics.
* Develop plans for funding portfolio alignment for sectors for which you publish decarbonization targets.
* Update existing financing portfolio alignment plans, considering the impact and dependencies derived from natural capital.
* Continue measuring financed emissions from other portfolios and other geographic areas additional to Spain, Mexico, Colombia and Peru.
* Publish information on the risks and opportunities of climate change in accordance with the Task Force on Climate Financial Disclosures (TCFD) standard and incorporate elements of a Transition Plan following the guides and recommendations for financial institutions published by Glasgow Financial Alliance for Net Zero (GFANZ).
* Disclose in a consistent, reliable and standardized manner the essential environmental, social and governance aspects related to your business.
* Deepen the understanding of the risks and opportunities derived from natural capital.
* Monitor the Action Plans derived from the Human Rights due diligence process in the countries where it is present.
BBVA's progress in implementing these principles is published annually in the BBVA Group Annual Report. Additionally, the subsidiaries, BBVA Garanti (Turkey) and BBVA Mexico, as signatories of the Banking Principles Responsible locally, they also publish their annual progress reports.
This is a short section to learn about the challenges your bank may face in implementing the Principles for Responsible Banking. Your feedback will be helpful in contextualizing the collective progress of the PRB signatory banks.
What challenges have you prioritized to address when implementing the Principles for Responsible Banking? Choose what you consider to be the top three challenges your bank has prioritized addressing in the last 12 months (optional question). If you wish, you can explain the challenges and how you are addressing them:
Please provide your bank's conclusion/statement if you have met the requirements regarding progress in implementing the principles for responsible banking:
BBVA periodically reviews the implementation of these Principles and has published the positive and negative impacts and their contribution to society's objectives. BBVA has continued to reinforce transparency with the publication of its fourth TCFD report, SASB metrics and WEF/IBC Stakeholder Capitalism Metrics, as well as decarbonization objectives for its portfolio. It has also increased its goal of mobilizing sustainable finance to 300 billion euros, and has published new objectives and new sectors related to the decarbonization of its portfolio. It maintains its objective regarding its support for investment in the community. In addition, in 2023 BBVA has set objectives in the impact area of Inclusive Growth in 2023. To do so, it is using the guidelines for banks for the "Establishment of objectives for Inclusion and Financial Health" of UNEP-FI.
175 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
BBVA's objective is to disclose in a consistent, reliable and standardized manner the essential aspects of ESG (environmental, social and governance matters) related to its business. Among the different existing standards, BBVA includes its non-financial information in the Non-Financial Information Statement for the year 2023, included in this report, in accordance with the Global Reporting Initiative (GRI) guide. Additionally and voluntarily, as last year, BBVA has reported the WEF-IBC metrics as well as the SASB - Commercial Banks standards, SASB - Consumer Finance standards and SASB - Morgage Finance standards:
176 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
| Contents index of WEF-IBC. Core metrics | Topic | Metric | Reporting criteria | BBVA Group's response |
|---|---|---|---|---|
| PRINCIPLES OF GOVERNANCE | ||||
| Governing purpose | Setting purpose | The British Academy and Colin Mayer, GRI (2-12), Embankment Project for Inclusive Capitalism (World Economic Forum Integrated Corporate Governance - EPIC) and others. | BBVA in brief/BBVA Group strategy. Our objectives NFIS/Environmental | |
| Quality of governing body | Governing body composition | GRI (2-9), GRI (405-1a), IR 4B. | Annual Corporate Governance Report (hereinafter, IAGC): 5.1 Composition of the Board of Directors and 5.1.3 Directors who make up the Board | |
| Stakeholders engagement | Material issues impacting stakeholders | GRI (2-12), GRI (2-29, GRI (3-2). | NFIS/Sustainability in the BBVA Group/Materiality analysis NFIS/Additional information/Additional information on materiality analysis | |
| Ethical behavior | Anti-corruption: 1.Total percentage of governance body members, employees and business partners who have received training on the organization’s anti-corruption policies and procedures, broken down by region. 2. Total number and nature of incidents of corruption confirmed during the current year, but related to previous years; and 3.Total number and nature of incidents of corruption confirmed during the current year, related to this year. | GRI (205‑2), GRI (205‑3). | NFIS/Governance/ Compliance and conduct | |
| Protected ethics advice and reporting mechanisms: 1. Seeking advice about ethical and lawful behavior and organizational integrity; 2. Reporting concerns about unethical or unlawful behavior and lack of organizational integrity; 3. Discussion of initiatives and stakeholder engagement to improve the broader operating environment and culture, in order to combat corruption. | GRI (2-26). | NFIS/Governance/ Compliance and conduct | ||
| Risk and opportunity oversight | Integrating risk and opportunity into business process. | EPIC, GRI (2-16), World Economic Forum Integrated Corporate Governance, IR 4D. | NFIS/Sustainability in the BBVA Group/Sustainability in business development NFIS/Enrivonmental/Risks and opportunities associated with climate change NFIS/Environmental/Management of risks associated with climate change and environmental factors NFIS/Social/Customers NFIS/Social/Customers/Security and protection Risk management/General risk management and control model | |
| PLANET | ||||
| Climate change | Greenhouse gas (GHG) emissions | GRI (305:1-3), Task Force on Climate-Related Financial Disclosures (hereinafter, TCFD) recommendations, GHG Protocol. | NFIS/Environmental/Management of risks associated with climate change and environmental factors NFIS/Environmental/Management of direct environmental impacts.Carbon Footprint Table, Evolution of the Global Ecoefficiency Plan Indicators Table | |
| TCFD implementation | TCFD Recommendations; CDSB R01, R02, R03, R04 y R06; SASB 110; Science Based Targets initiative. | NFIS/Sustainability in BBVA Group NFIS/Environmental BBVA TCFD report 2022 | ||
| Nature loss | Land use and ecological sensitivity | GRI (304-1). | The operations centers and / or offices owned, leased or managed by BBVA are located in urban areas far from protected areas or areas of great value for biodiversity. For this reason, this metric is considered non-material at the present time, the entity undertakes to follow-up for its report in the future if necessary. | |
| Freshwater availability | Water consumption and withdrawal in water‑stressed areas. | SASB CG-HP-140a.1, Aqueduct water risk atlas tool, World Resources Institute (hereinafter, WRI). | NFIS/Environmental/Management of direct environmental impacts. |
177 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.# Carbon Footprint Table
An analysis by geographic area (pessimistic 2030 scenario) of uses is carried out through the WRI tool: Aqueduct Projected Water Stress Country Rankings; with the following result:
- 76% of the consumption has a high or extremely high extraction and demand ratio;
- 9.2% of the consumption has a medium extraction and demand ratio;
- 14.8% of the consumption has a low extraction and demand ratio.
GRI (405-1b). NFIS/Social/Employees/Professional development
GRI (405-2). NFIS/Social/Employees/Remuneration
Ratio of standard entry level wage by gender compared to local minimum wage.
GRI (202‑1), adapted from the Dodd-Frank Act, US SEC Regulations. NFIS/Social/Employees/Remuneration
GRI (408-1b), GRI (409-1). BBVA has not identified centers or suppliers likely to have significant risks in relation to episodes of forced labor. NFIS/Tables of Contents/GRI Standards content index
GRI:2018 (403-9 a y b), GRI:2018 (403-6). NFIS/Social/Employees/Working environment/Occupational safety and health
GRI (404-1), SASB HC 101-15. NFIS/Social/Employees/Professional development
Adapted from GRI (401-1 a and b) in order to include more metrics on diversity and inclusion. NFIS/Social/Employees/Professional development
GRI (201‑1), GRI (201‑4). NFIS/Tables of Contents/GRI Standards content index
Financial investment contribution:
1. Total capital expenditures (CapEx) minus depreciation.
2. Shares buybacks plus dividend payments
Aligned with IAS 7 and US GAAP ASC 230. The information that forms part of the indicator is collected in the Consolidated Financial Reports (for example in Notes 4, 17 and 18) and the Consolidated management report of BBVA Group.
178 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
US GAAP ASC 730. The total annual expense and investment in technological software development projects, including both the cost of external resources and the cost corresponding to the internal personnel of the teams dedicated to projects during the financial year 2023 amounted to 1,151 million euros (1,031 million euros in 2022).
The total global tax borne by the company, including corporate income taxes, property taxes, non-creditable VAT and other sales taxes, employer-paid payroll taxes, and other taxes that constitute costs to the company, by category of taxes.
GRI (201‑1) and GRI (207-4). NFIS/Social/Fiscal contribution and transparency
General note: For WEB - IBC standards the "Reporting criteria" column is included as they have been developed on the basis of other international standards. As a consequence of the update of the GRI Standards in 2021, the references indicated in the "Reporting Criteria" column have been adapted where necessary.
179 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
| Expanded metrics | Topic | Metric | Reporting criteria | BBVA Group's response |
|---|---|---|---|---|
| PRINCIPLES OF GOVERNANCE | Governing Purpose | Purpose-led management | GRI 2-12 NFIS/Sustainability in the BBVA Group/Governance model |
|
| Quality of governing body | Progress against strategic milestones EPIC | GRI 2-12 NFIS/Sustainability in the BBVA Group/ESG strategy and objectives |
||
| Remuneration | - How performance criteria in the remuneration policies relate to the highest governance body’s and senior executives’ objectives for economic, environmental and social topics. - Remuneration policies for the highest governance body and senior executives for the following types of remuneration: fixed pay and variable pay, sign-on bonuses or recruitment incentive payments, termination payments, clawbacks, retirement benefits. |
GRI 2-12 NFIS/Social/Employees/Remuneration NFIS/Sustainability in the BBVA Group/ESG strategy and objectives |
||
| Ethical behaviour | Alignment of strategy and policies to lobbying | GRI 415: Public Policy | The BBVA Group collaborates with organizations that share its vision and whose activities are aligned with its objectives. These include sectoral associations, employers' organizations, chambers of commerce, and prestigious Think Tanks that conduct studies on regulatory, financial, digital, sustainability, financial inclusion, and financial education matters in countries where the Group has relevant presence. BBVA endeavors to participate in sectoral representation forums in countries where it has a presence. It also collaborates with public-private institutions operating in its geographic scope, especially in Latin America, Spain, and Turkey, such as foundations or non-profit organizations. These Foundations aim to develop economic, cultural, educational, and rights-based relationships among countries. These collaborations add to the intellectual contribution aimed at promoting sector transformation, directly driven by the Group through its research activities and analysis development in its research department. These institutional activities are always conducted with utmost transparency, without interfering, conditioning, or influencing the political pluralism of the societies in which the Group operates. On the other hand, BBVA supports the Sustainable Finance Action Plan of the European Commission, which has been a very positive first step in guiding investments toward sustainable activities and projects. The bank has been involved in consultative processes and various activities with regulatory and supervisory bodies to promote sustainable financial regulation. As in previous exercises, it has taken an active role in the framework of future EU legal initiatives. | |
| Monetary losses from unethical behaviour | SASB 510a.1 | This metric reports monetary losses incurred by the Entities in fiscal year 2023 derived from judicial or administrative procedures, either due to bad practice or non-compliance with applicable regulations, in which the Entity is condemned for having caused acts of insider trading, price manipulation, anti-competitive agreements and abuses of dominant position, acts of corruption, fraud and money laundering attributable to the Entity. Excluded are those cases in which the entity is the victim of the unlawful conduct and those in which, because the law establishes a system of objective liability or some kind of liability for the actions of others, the Entity has to take over the amounts defrauded from a third party. There are no monetary losses incurred in 2023 by the Entities due to rulings imposed for acts of insider trading. In relation to market regulatory rules on the prevention of price manipulation, monetary losses of 22,625 euros were incurred in fiscal year 2023 derived from a sanction imposed by the Chicago Mercantile Exchange in accordance with the operating regulations of said market. For issues related to anti-competitive agreements and abuses of dominant position, please refer to the information included in the GRI 206 metric. For issues related to acts of corruption, fraud and money laundering attributable to the entity, please refer to the information included in the GRI 205-3 metric (1). | ||
| Risk and opportunity oversight | Economic, environmental and social topics allocation framework | CDSB REQ-02 NFIS/Sustainability in the BBVA Group/The integration of sustainability in BBVA's financing structure |
180 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
181 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
Define and report progress against time-bound science-based GHG emissions targets that are in line with the goals of the Paris Agreement – to limit global warming to well below 2°C above pre-industrial levels and pursue efforts to limit warming to 1.5°C.
Science Based Targets initiative
NFIS/Environmental/Management of risks associated with climate change and environmental factors
NFIS/Environmental/Management of direct environmental impacts
US EPA fact sheet on the Social Cost of Carbon (2016), Natural Capital Protocol (2016), ISO 14008: Monetary valuation of environmental impacts and related environmental aspects (2019), Value Balancing Alliance
NFIS/Environmental/Management of risks associated with climate change and environmental factors
NFIS/Environmental/Management of direct environmental impacts
Since BBVA is a financial entity, most of its suppliers are technological and there is no use of the land for forestry, agriculture or mining, this metric is considered non-material since the breakdowns included, land area used for the production of plants, animals or mineral products, are not applicable to BBVA's activity or its supply chain.# Impact of land and conversion
Natural Capital protocol (2016), ISO 14008 Monetary valuation of environmental impacts and related environmental aspects (2019), Value Balancing Alliance.
BBVA's economic activity and its products and services have no significant impact on biodiversity (neither positive nor negative), since its operations centers and/or offices are located in urban areas. For this reason, it is considered that this metric is not material at present, and the entity undertakes to follow up on its report in the future if necessary.
Impact of freshwater consumption and withdrawal
Natural Capital protocol (2016), ISO 14008 Monetary valuation of environmental impacts and related environmental aspects (2019), Value Balancing Alliance.
Due to the fact that the economic activity of a financial entity such as BBVA, whose consumption and extraction of water are those of the activity of its offices and its restoration, this metric is considered non-material, since both the extraction and consumption are considered insignificant.
Air pollution
GRI 305‑7
BBVA's emissions of other types of pollutants into the atmosphere are mainly:
These data only include emissions due to the use of fuels in the facilities of BBVA buildings and branches located in urban areas. The factors used are those published by the European Environmental Agency: "EMEP/EEA air pollutant emission inventory guidebook 2019" for the "Commercial / institutional: stationary" sector, "Tier 1" typology for each of the types of fuels.
Impact of air pollution
Natural Capital protocol (2016), ISO 14008 Monetary valuation of environmental impacts and related environmental aspects (2019), Value Balancing Alliance.
For BBVA, air pollution does not have a significant impact due to the activities it carries out. Despite this, its management is considered relevant, as reflected in the Global Eco-efficiency Plan. However, at the date of the report, there is no methodology or reliable data source that allows calculating the impact of air pollution linked to the company's own activity.
182 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
Nutrients
SASB CN0101‑11
Given that in the nature of BBVA's activities, no nitrogen, phosphorus or potassium is present in fertilizers, this is considered a non-material metric, since its activities do not cause ecological or public health problems in this regard.
Impact of water pollution
Natural Capital protocol (2016), ISO 14008 Monetary valuation of environmental impacts and related environmental aspects (2019), Value Balancing Alliance.
Due to the fact that the economic activity of a financial institution such as BBVA, whose effluents are those of the activity of its offices and its restoration, this metric and its different breakdowns are considered non-material, since the discharges are considered not significant and comply with the regulations of the areas in which they are located.
Single- use plastics
As a result of the initiatives carried out in previous years, the value is not reported as it is considered not relevant.
Impact of solid waste disposal
Natural Capital protocol (2016), ISO 14008 Monetary valuation of environmental impacts and related environmental aspects (2019), Value Balancing Alliance.
For BBVA, the generation and management of waste does not have a significant impact due to the activities it carries out. However, for BBVA it is important to properly manage them and this is reflected in their commitments in the Global Eco-efficiency Plan or in the ISO 14001 or zero waste certifications that they have implemented. Although there is currently no reliable methodology or source from which to take the impact values, work will continue in the coming years to advance in the dissemination of this metric.
Resource circularity
WBCSD Circular Transition Indicators Ellen MacArthur Foundation
Due to the economic activity of BBVA, the only products to which this metric refers and to which it can be alluded in the company, are those originating from the activity of the offices and the related restaurants. In this way, and since the volume of these products is not significant and that the financial activity related to BBVA's business is completely separated from them, this metric is considered non-material.
| Metric | Reporting Criteria | NFIS Reference |
|---|---|---|
| Pay gap (%, #) | - Mean pay gap of basic salary and remuneration of full-time relevant employees based on gender (women to men) and indicators of diversity -Ratio of the annual total compensation for the organization’s highest-paid individual in each country of significant operations to the median annual total compensation for all employees |
Adapted from UK Government guidance on gender and ethnicity pay gap reporting, GRI 2-21 NFIS/Social/Employees/Remuneration |
| Discrimination and harassment incidents (#) and the total amount of monetary losses ($) | GRI 406-1, Adapted from SASB FR-310a.4 | NFIS/Social/Employees/Professional development/Diversity and inclusion NFIS/Table of Contents/GRI Standards Content Index |
| Freedom of association and collective bargaining at risk (%) | SASB CN0401-17, GRI 407-1, WDI 7.2 | NFIS/Social/Employees/Working environment/Freedom of association and representation |
| Human rights review, grievance impact & modern slavery (#, %) | UN Guiding Principles, GRI 408-1a, Adapted from GRI 408-1a and GRI 409-1, WDI 7.5 | NFIS/Social/Commitment to Human Rights |
| Living wage (%) | MIT Living Wage Tool, EPIC | NFIS/Social/Employees/Remuneration |
183 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
| Metric | Reporting Criteria | NFIS Reference |
|---|---|---|
| Monetized impacts of work-related incidents on organization (#, $) | Adapted indicator based on European Commission, Safe Work Australia | BBVA is working to develop methodologies that allow calculating the monetary impacts of work-related incidents within the Organization, in order to be able to report this metric in the future financial years. |
| Employee well-being (#, %) | GRI:2018 403-10a&b, EPIC, Adapted from GRI:2016 403-2a | NFIS/Social/Employees/Working environment/Occupational safety and health |
| Metric | Reporting Criteria | NFIS Reference |
|---|---|---|
| Number of unfilled skilled positions (#, %) | WBCSD Measuring Impact Framework Methodology Version 1.0 (2008) | NFIS/Social/Employees/Professional development/Training |
| Monetized impacts of training – Increased earning capacity as a result of training intervention (%, $) | Adapted from OECD, WDI 5.5 | NFIS/Social/Employees/Professional development/Training |
Banking activities and the functions that derive from them require professionals trained in different areas of expertise and knowledge in certain essential disciplines for the operation of the company. BBVA has three main challenges when developing a talent strategy:
| Metric | Reporting Criteria | NFIS Reference |
|---|---|---|
| Infrastructure investments and services supported | GRI 203-1 | NFIS/Social/Society/Contribution to the community |
| Significant indirect economic impacts | GRI 203-2 | NFIS/Social/Society/Contribution to the community |
| Metric | Reporting Criteria | NFIS Reference |
|---|---|---|
| Social value generated (%) | Adapted from GRI (FiFS7 + FiFS8) and SASB FN0102-16.a, EPIC | BBVA is working to develop methodologies that allow it to calculate this ratio and to be able to report this metric in future financial years. |
| Vitality Index | Percentage of gross revenue from product lines added in last three (or five) years, supported by narrative that describes how the company innovates to address specific sustainability challenges Adapted from OECD Oslo Manual Section 8.3.1 | BBVA is working, through the involvement of different areas of the Company, to develop systems in order to indetify new product lines that allow addressing specific sustainability challenges and be able to report this metric in future financial years. |
| Metric | Reporting Criteria | NFIS Reference |
|---|---|---|
| Total Social Investment ($) | CECP Valuation Guidance | NFIS/Social/Society/Contribution to the community |
| Additional tax remitted | Adapted from GRI 201-1 | NFIS/Social/Society/Fiscal contribution and transparency |
| Total tax paid by country for significant locations | Adapted from GRI 201-1 | NFIS/Social/Society/Fiscal contribution and transparency |
General note: For WEB - IBC standards the "Reporting criteria" column is included as they have been developed on the basis of other international standards. As a consequence of the update of the GRI Standards in 2021, the references indicated in the "Reporting criteria" column have been adapted where necessary.
(1) The information included in this metric covers entities comprising the BBVA Group as of December 31, 2023 on a fully consolidated basis (referred to as the "Entities"). The concept "monetary losses" includes the amounts paid, provisionally or definitively (without defense costs of the parties), by the Entity concerned, during the year 2023, excluding those derived from purely internal claims (customer care services or customer ombudsman). The exchange rate applied is the Fixing Rate at 31/12/2023.
184 This English version is a translation of the original in Spanish for information purposes only.# SASB-Commercial Banks
| Topic | Metric | BBVA Group's response # FN- CB-550a.2 Financial information/BBVA Group/Solvency NFIS/Environmental/Management of risks associeated with climate change and environmental factors/ Integrating climate change into risk planning/ Analysis of scenarios and stress testing NFIS/Sustainability in the BBVA Group/ESG strategy and objectives
Activity metrics (1) Number and (2) value of checking and savings accounts by segment: (a) personal and (b) small business. FN-CB-000.A See table (1) below. Data includes information of BBVA Spain, BBVA Mexico, BBVA Colombia and BBVA Peru.
(1) Number and (2) value of loans by segment: (a) personal, (b) small business, and (c) corporate. FN-CB-000.B See table (2) below. Data includes information of BBVA Spain, BBVA Mexico and BBVA Peru.
(1) The concept "monetary losses" includes the amounts paid, provisionally or definitively (without defense costs of the parties), by the entity concerned, during the fiscal year 2023, excluding those arising from purely internal claims (customer services or customer ombudsman).
(NUMBER IN THOUSANDS, VALUES IN MILLIONS. EUROS)
| Number | Value |
|---|---|
| Personal 69,368 | 174,192 |
| SME 2,791 | 19,777 |
(NUMBER IN THOUSANDS, VALUES IN MILLIONS. EUROS)
| Number | Value |
|---|---|
| Personal 25,101 | 122,242 |
| SME 17,429 | 31,135 |
| Corporate 4,695 | 117,978 |
SASB. Consumer Finance Topic Metric BBVA Group's response
Number of account holders whose information is used for secondary purposes FN-CF-220a.1
As of December 31, 2023, 7.2 million customers have signed at least one of the following clauses that allow secondary uses of their data:
- Data processing to make (by BBVA) offers of third-party products (about 81% of these clients have signed this clause).
- Transfer of data to third parties for purposes other than BBVA's own, such as the transfer of customer data to third parties so that they can directly make offers for their products (about 81% of these customers have signed this clause).
- Data processing to improve prices (about 82% of these clients have signed this clause).
The customer data represents the number of account holders that have not been canceled for commercial banking and individuals over 18 years of age.
Total amount of monetary losses as a result of legal proceedings associated with customer privacy FN-CF-220a.2
It is reported monetary losses of 441,309.81 euros incurred in 2023 by BBVA Group banks as of December 31, 2023, as a result of court rulings (and settlement agreements reached in such legal proceedings), as well as 1,369,147.43 euros for administrative fines, imposed in proceedings relating to the privacy of individuals, including their right to honor. Excluded are those cases in which the entity is the victim of the unlawful conduct and those in which, because the law establishes a system of objective liability or some kind of liability for the actions of others, the Entity has to take over the amounts defrauded from a third party.
As a consequence of such court rulings, settlement agreements and administrative fines, the affected entities, in the ordinary course of their business, perform an analysis of the same and proceed to adopt a series of corrective measures, among which are the adaptation of documentation, adjustments to internal operations or the implementation of modifications to privacy policies.
(1) Number of data breaches, (2) percentage involving personally identifiable information (PII), (3) number of account holders affected FN-CF-230a.1
NFIS/Social/Customers/Security and protection
Card-related fraud losses from (1) card-not-present fraud and (2) card-present and other fraud FN-CF-230a.2
At Group level, during the financial year 2023, losses have been recorded for a value of 88.8 million euros (in 2022, 102.2 million euros), in case of fraud related to the absence of a card, and 26.8 million euros (in 2022, 25.3 million euros) with the presence of a card. Information that includes data from Argentina, Colombia, Spain, Mexico, Peru, Turkey, Uruguay and Venezuela.
Description of approach to identifying and addressing data security risks FN-CF-230a.3
NFIS/Social/Customers/Security and protection
Percentage of total remuneration for covered employees that is variable and linked to the amount of products and services sold FN-CF-270a.1
The General Remuneration Policy of the BBVA Group, in compliance with the applicable regulations on customer protection, includes the requirements and principles applicable to personnel who perform functions related to the sale of products and the provision of services to customers. In this sense, the design and establishment of the remuneration of this personnel in the BBVA Group ensures the protection of the interests of clients and the quality of the services provided, in such a way that:
- responsible business conduct and fair treatment of customers are encouraged;
- no incentives are established that could induce staff to put their own interests or those of the BBVA Group first, to the possible detriment of the interests of their clients;
- remuneration is not linked primarily or exclusively to the sale of a product or a specific category or type of products, such as those products that are more lucrative for the entity or the employee, there being others more in line with the client's needs, nor is it fixed such objective as the one with the greatest weight in remuneration; and
- an appropriate balance is maintained between the fixed and variable components of remuneration.
Approval rate for (1) credit and (2) pre-paid products for applicants with FICO scores above and below 660 FN-CF-270a.2
It is not applicable to BBVA's current business model because it does not have presence in the USA.
(1) Average fees from add-on products, (2) average APR, (3) average age of accounts, (4) average number of trade lines, and (5) average annual fees for pre-paid products, for customers with FICO scores above and below 660 FN-CF-270a.3
It is not applicable to BBVA's current business model because it does not have presence in the USA.
(1) Number of complaints filed with the Consumer Financial Protection Bureau (CFPB), (2) percentage with monetary or non-monetary relief, (3) percentage disputed by consumer, (4) percentage that resulted in investigation by the CFPB FN-CF-270a.4
In 2023, no customer complaints have been identified with the Consumer Financial Protection Bureau (CFPB). Currently, in the New York bank branch, as well as BBVA Securities Inc, there is no retail banking business associated with banking products related to it. In addition, the Houston Agency (BBVA exico's representative office) does not offer consumer products.
Total amount of monetary losses as a result of legal proceedings associated with selling and servicing of products FN-CF-270a.5
It is reported monetary losses of 3,578,059.56 euros, incurred in 2023 by BBVA Group banks as of December 31, 2023, as a result of court rulings arising from civil proceedings (and settlement agreements reached in such proceedings) or administrative fines, in which the entity is condemned for lack of transparency and/or vitiation of consent (but not for abusiveness when this is not preceded by an analysis of transparency) in the field of consumer financing (excluding microenterprises and self-employed when they do not act as consumers).
As a consequence of such judgments or fines (and settlement agreements), the affected entities, in the ordinary course of their business, carry out an analysis of the same and proceed to adopt a series of corrective measures, among which are the adaptation of the documentation or the adjustment of the conditions of the contracts.
Number of unique consumers with an active credit card account (1) and pre-paid- debit card account (2) FN-CF-000.A
BBVA will continue working on future exercises to advance in the dissemination of this metric.
Number of (1) credit card accounts and (2) pre-paid debit card accounts FN-CF-000.B
As of December 31, 2023, the Group-wide data amounts to 32,684 thousand credit cards (2022: 29,186 thousand) and 98,225 thousand debit cards (2022: 89,274 thousand cards). The data includes data from Spain, Mexico, Turkey, Argentina, Colombia, Peru and Uruguay.
(1) The concept "monetary losses" includes the amounts paid, provisionally or definitively (without defense costs of the parties), by the entity concerned, during the fiscal year 2023, excluding those arising from purely internal claims (customer services or customer ombudsman). The Fixing Rate at 31/12/2023 is applied as the exchange rate.
SASB. Mortgage Finance Topic Metric BBVA Group's response
(1) Number and (2) value of residential mortgages of the following types: (a) Hybrid or Option Adjustable-rate Mortgages (ARM), (b) Prepayment Penalty, (c) Higher Rate, (d) Total, by FICO scores above or below 660 FN-MF-270a.1
It is not applicable to BBVA's current business model because the group does not have presence in the United States.# FN-MF-270a.2: Monetary losses as a result of legal proceedings associated with communications to customers or remuneration of loan originators
It is not applicable to BBVA's current business model because the group does not have presence in the United States. Total amount of monetary losses as a result of legal proceedings associated with communications to customers or remuneration of loan originators
FN-MF-270a.3: Monetary losses associated with communications to customers or remuneration of loan originators
It is reported monetary losses of 16,451,365.72 incurred in 2023 by BBVA Group banks as of December 31, 2023, as a result of court rulings arising from civil proceedings (and settlement agreements reached in such proceedings) or administrative fines, in which the entity is condemned for lack of transparency and/or vitiation of consent (but not for abusivity when this is not preceded by an analysis of transparency, except as indicated in the following paragraph) in the area of mortgage financing to individuals when they mortgage their home, either as security for a loan for the purchase of the same or for the purchase of another property. Although these cases are not the object of the metric as the lack of transparency and/or defects in consent are not being discussed, but only abusiveness, as they are specific to the "Mortgage Finance" industry (i.e. mortgage financing to individuals), monetary losses of 13,690,988.12 euros incurred in 2023 by BBVA, S.A. as a result of legal proceedings arising from claims associated with the costs of mortgage financing to consumers are reported. As a consequence of such judgments or fines (and settlement agreements), the affected entities, in the ordinary course of their business, carry out an analysis of the same and proceed to adopt a series of corrective measures, among which are the adaptation of documentation, the adjustment of the conditions of the contracts or the modification or elimination of the clauses declared null and void (e.g. expenses clauses and floor clauses).
FN-MF-270a.4: Description of remuneration structure of loan originators
Their remuneration structure is that defined in BBVA Group's General Remuneration Policy for the other employees. The Policy has been approved and designed in compliance with applicable regulations on customer protection, taking into account alignment with best market practices and having included elements designed to reduce exposure to excessive risks, aligning remuneration to the business strategy, objectives, values and long-term interests of the Group. 191 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
Number, value, and weighted average Loan-to-Value (LTV) ratio of mortgages issued to (a) minority and (b) all other borrowers, by FICO scores above and below 660. It is not applicable to BBVA's current business model because the group does not have presence in the United States.
There are no monetary losses in 2023 incurred by BBVA Group banks as of December 31, 2023, as a result of court rulings or administrative sanctions imposed in proceedings related to discriminatory practices in the granting of mortgage financing to individuals when mortgaging their home, either as security for a loan for the acquisition of the same or for the acquisition of another property. For these purposes, discriminatory practices are understood as those conducts that favor the granting of mortgages to individuals on the basis of criteria that are not strictly based on objective credit risk conditions (2).
The General Retail Credit Risk Policy establishes that one of the general principles that govern retail credit risk management in the BBVA Group is respect for equality and diversity, preventing unfair biases in access to financial products due to reasons such as gender, color, ethnic origin, disability, religion, sexual orientation or political opinion. Additionally, the General Model Risk Management Policy establishes that in order to prevent unfair biases in access to financial products for reasons such as gender, color, ethnic origin, disability, religion, sexual orientation or political opinion; None of these variables will be included in the admission and pricing models.
Number and value of mortgage loans in 100-year flood zones. Among extreme weather phenomena, BBVA has identified flooding as an acute physical risk related to climate change. For more information, see: NFIS/Environmental/Risks and opportunities associated with climate change, and EINF/Environmental/Management of risks associated with climate change and other environmental factors. BBVA will continue working in the coming years to advance in the identification of these financial products in 100-year flood zones.
Total expected loss and Loss Given Default (LGD) attributable to mortgage loan default and delinquency due to weather-related natural catastrophes, by geographic region. BBVA is working on defining financial impact indicators associated with the physical risk of climate change on the mortgage portfolio, some of which are already being taken into account for the climate stress test exercise. For more information see: NFIS/Environmental/Management of risks associated with climate change and environmental factors/Integrating climate change into risk planning/Analysis of scenarios and stress testing.
NFIS/Environmental/Management of risks associated with climate change and environmental factors.
Number and value of mortgages originated by category: (a) residential and (b) commercial. See table (1) below. The data includes information from BBVA Spain, BBVA Mexico, BBVA Colombia (less commercial mortgages) and BBVA Peru.
Number and value of mortgages purchased by category: (a) residential and (b) commercial. Recently, BBVA has not carried out any type of significant activity related to the acquisition of mortgages and, therefore, this metric is considered non-material. Due to the possibility that this situation changes, BBVA will monitor and will report the information requested in this standard.
(1) The concept "monetary losses" includes the amounts paid, provisionally or definitively (without defense costs of the parties), by the entity concerned, during the fiscal year 2023, excluding those arising from purely internal claims (customer services or customer ombudsman). The Fixing Rate at 31/12/2023 is applied as the exchange rate.
(2) The concept "monetary losses" includes the amounts paid, provisionally or definitively (without defense costs of the parties), by the entity concerned, during the fiscal year 2023, excluding those derived from purely internal claims (customer service or customer ombudsman).
| Number (in thousands) | Value (in millions of Euros) | |
|---|---|---|
| Residential | 1,551 | 89,795 |
| Commercial | 53 | 9,811 |
193 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
The Sustainable Development Goals (SDGs) were adopted in 2015 within the framework of the United Nations 2030 Agenda for Sustainable Development and have been signed by 193 countries. The 17 goals seek to eradicate poverty, protect the planet and ensure prosperity for all. This initiative aspires to involve all interest groups, from governments to companies to civil society. Each of the objectives, stated with a specific purpose, in turn lists several goals to achieve it and each goal has its own indicators, which serve to determine the degree of achievement of each objective. BBVA mainly focuses on contributing to various SDGs through the development of its business, generating a greater positive impact by taking advantage of the multiplier effect of banking. Additionally, BBVA also contributes in a relevant way by generating direct impacts of its activity and through its investment in the community.
BBVA integrates the SDGs in its Sustainability Policy and in its Corporate Social Responsibility Policy, to contribute to them through its direct impact as a company, the development of its business, its social action and the alliances to which BBVA is attached. To report on this impact, methodological guidelines published by GRI, United Nation Global Compact and the World Business Council for Sustainable Development 57 and by the World Economic Forum have been used 58. Below is a breakdown of information within the framework of the SDGs as of December 31, 2023 and 2022:
194 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
57 GRI, the United Nations Global Compact and the World Business Council for Sustainable Development -WBCSD- (2016). SDG Compass. The guide for business action on the SDGs.
58 World Economic Forum (2020). Toward Common Metrics and Consistent Reporting of Sustainable Value Creation.
Impact of customer support
Financing of renewable energy projects (€ mill) | 1139 | 840
Carbon footprint calculator (number of enterprise users) | 295,620 | 166,912
Carbon footprint calculator (number of unique private users in Mexico)) | 1,463,730 | n/a
CO2 emissions avoided through green bond issuance (Tn of CO2) | n/a | 1,516,738
Renewable energy generated from the issuing of green bonds (GWh/year)(1) | n/a | 7,426
Direct impact
Environmentally certified area in m2 (%) (1) | 61% | 44%
Electricity usage per employee (MWh/occup) | 5.58 | 5.74
Reduction in electricity consumption per employee (%) (2) | (16)% | (14)%
Electricity from renewable sources (%) | 96% | 92%
CO2 emissions per employee (Tn CO2/employee) (3) | 1.33 | 0.82
Reduction in CO2 emissions per employee (Tn CO2/employee) (2) | (52)% | (0.70)
Energy consumption (megawatt-hour) | 683,215 | 688,158
Adherence to RE100 | ✔ | ✔
n/a: not available
(1) The following seals/certifications are considered: Leed, ISO 14001, ISO 51, EDGE, Zero Waste, WWF Green Office, Green Seal. Previously, this indicator was Employees in certified properties (%).
(2) Compared to the base year 2019
(3) Includes Scope 1 emissions (fuels in facilities, fleet and refrigerant gases), Scope 2 (electricity consumption; market-based method) and Scope 3 (waste management, business travel by air and rail and employee commuting).
Impact of customer support
Treated wastewater through green bond issuance (m3/year) | n/d | 25,641,813
Waste managed through green bond issuance (Tn/year) | n/d | 549,726
Financing for optimizing material use | 70 * |
Direct Impact
Reduction of water consumed per employee (%) (1) | (26)% | (12)%
Reduction of paper consumed per employee (%) (1) | (48)% | (31)%
Water consumption per employee (m3/employee) | 14.1 | 16.6
Paper consumption per employee (Kg/employee) | 26.0 | 34.1
Consumed water from public supply (million m3) | 1.51 | 1.73
Paper consumed (Tn) | 3,120 | 3,718
Hazardous waste (Tn) | 329 | 570
Non-hazardous waste (Tn) | 2,339 | 2,523
Waste recycled (Tn) | 1,152 | 1,745
% of contracts awarded to certified suppliers | 99% | 98%
% local suppliers/total suppliers | 86% | 90%
Impact on community investment
Training actions in relation to the efficient use of resources | ✔ | ✔
n/a: not available
* Information reported for the first time in 2023
(1) Regarding the base year 2019.
195
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
Impact of customer support
Green bonds issued (nominal in millions) | 8.689 mill MXN | 1.250 mill EUR | 225 mill CHF
Goal 2025: mobilization
Climat change (€ mill) | 54,202 | 40,643
Wholesale loan portfolio exposed to sectors sensitive to transition risk (%) | 13% | 7%
Total amount of operations analyzed under the Equator Principles (€ mill) | 49,857 | 45,995
Direct impact
Scope 1 emissions (tons of CO2e) (1) | 38,005 | 41,380
Scope 2 emissions (tons of CO2e) market-based method | 6,981 | 11,507
Scope 2 emissions (tons of CO2e) location-based method | 203,407 | 202,770
Scope 3 emissions (tons of CO2e) (2) | 1,443,437 | 33,435
(1) In 2021 scope 1 emissions, this scope was expanded and includes emissions derived from the use of fuels in the vehicle fleets and the refrigerant gases used in the air conditioning facilities.
(2) In Scope 3 emissions, this scope was expanded in 2023 to include emissions derived from waste management, business travel (including flights and train), and commuting of employees to their workplaces.
Impact of customer support
Financing to preserve terrestrial ecosystems (€ mill) | 226 | *
The impact of customer support
Blue bond issued in Colombia (million USD), also included in metric: Green bonds issued (nominal in millions) in SDG 13 | 117 | n/a
n/a: not not applicable.
196
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
Impact of customer support
Financing for financial inclusion (€ mill) | 631 | 609
Number of unbanked or underbanked clients (vulnerable segment) (millions) (1) | 17 | 9
Promotion of financial inclusion in rural areas (2) | ✔ | ✔
Number of companies benefiting from issued social bonds (3) | n/d | 32,406
Number of employees benefiting from issued social bonds (3) | n/d | 33,994
Direct impact
Financial value created: gross income (€ mill) | 29,542 | 24,743
Number of employees | 121,486 | 115,675
Number of employees with disabilities | 891 | 645
Number of third parties | 3,959 | 3,548
Billed volume by third parties (€ mill) | 8,218 | 6,292
Number of ATMs (units) | 30,301 | 29,807
Number of branches (units) | 5,949 | 6,034
Ratio of entry category salary to local minimum wage by gender greater than 1 | ✔ | ✔
% of total female employees with permanent or permanent full-time employment contract modality | 52% | 52%
% of total male employees with permanent or permanent full-time employment contract modality | 48% | 48%
Total number of employees entitled to parental leave | 2,302 | 3,715
Occupational accidents: number of accidents | 266 | 89
Occupational accidents: severity index | 0.12 | 0.04
Impact on community investment
Investment to support entrepreneurial initiatives (€ mill) | 8 | 7.5
People directly benefited from entrepreneurship support initiatives (million) | 3 | 2.9
Entrepreneurs receiving financial support (million) | 3.23 | 2.9
Entrepreneurs receiving non-financial support (number) | 77,168 | 9,338
n/a: not available
(1) The 2022 figure corresponds to Mexico. The 2023 figure includes, in addition to Mexico, also Spain, Turkey, Argentina, Colombia and Peru.
(2) BBVA, within the scope of the Spanish Banking Association (AEB), the Spanish Confederation of Savings Banks (CECA) and the National Union of Credit Cooperatives (Unacc), has adhered to the Strategic Protocol to strengthen the Commitment Social and Sustainable Banking, which includes measures to promote financial inclusion in rural areas.
(3) Data 2023 not available at the date of publication of this report.
Impact of customer support
Public transportation financing (€ million) | 126.0 | 26.0
Civil infrastructure financing (€ million) | 213 | 45
Telecommunications infrastructure financing (€ million) | 61 | 819
Arts and culture infrastructure financing (€ million) | 9 | 2
Social infrastructure financing: healthcare (€ million) | 1019 | 309
Social infrastructure financing: inclusive housing (€ million) | 269 | 161
Sanitation and sewerage infrastructure financing (€ million) | 82 | 114
Financing for reconstruction of infrastructure after natural disasters (€ million) | 319 | *
Impact on community investment
Investment in science and knowledge (€ million) | 22.8 | 23.29
People benefited by science and knowledge initiatives (million) (1) | 6.4 | 4.6
197
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
The impact of client support
Framework for social housing initiatives in Spain: active refinancing agreements (1) | More than 88,200 | More than 85,850
Social housing units granted to public entities | 800 | 1,000
Mortgage loans (€ million) | 93,358 | 91,569
Consumer loans (€ million) | 39,074 | 35,965
Credit card loans (€ million) | 21,609 | 17,382
Financing for energy efficiency in properties (€ million) | 1,032 | 4306
Financing for building accesibility (€ million) | 3 | 5
All metrics related to infrastructure financing included in SDG 9 INDUSTRY, INNOVATION, AND INFRASTRUCTURE are also applicable here.
Impact on community investment
Investment in cultural support initiatives (€ million) | 6.3 | 7.0
People benefited by cultural support initiatives (million) (2) | 3.2 | 2.0
(1) Data as of November 2023 (December closing not available at the date of publication of this report).
(2) Includes people reached directly and through content (single user).
Impact of customer support
Healthcare financing (€ mill) | 92 | 148
Funding to support health research (€ million) | 3.8 | *
Impact of customer support
% of digital clients using financial health features (Spain) | 62% | 60.0%
Direct impact
Investment in employee training (€ million) | 421 | 364
Training per employee (Hours per employee) | 49.3 | 43.74
Employees receiving training (% of total) | 99% | 98%
Number of employees trained in sustainability-related topics | more than 40,000 | more than 29,000
Impact on community investment
Investment in education programs (€ million) | 110.1 | 77.15
Beneficiaries education for society (million) | 1.0 | 0.4
Investment in financial education programs and initiatives (€ million) | 2.0 | 2.8
Beneficiaries of financial education programs (million) | 0.8 | 0.8
Beneficiaries of secondary, higher education, and vocational training | 0.3 | 0.1
Unique users on Financial Education web pages (million) | 29.1 | 29.6
Unique users who acquire open knowledge through ”Aprendemos juntos” (million) | 4.1 | 3.5
Unique users visiting sustainability-related content on www.bbva.com (million) (1) | 4.1 | 4.0
(1) Calculated now with the new GA4 tool, not comparable with the previously used Google web analytics tool called Google Analytics.
198
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
| 2023 | 2022 | |
|---|---|---|
| Impact of customer support | ||
| Loans to female entrepreneurs (€ mill) | 1,430 | 720 |
| Direct impact | % | % |
| % Women on the workforce | 52% | 53% |
| % Women board members | 40% | 40% |
| % Women in senior management positions | 24% | 22% |
| % Women in management positions | 35% | 34% |
| Promotions of women (% of total) | 52% | 53% |
| % New incorporations corresponding to women | 48% | 47% |
| Wage gap (%) | 50% | 70% |
| Impact on community investment | ||
| % of Microfinanzas Foundation Clients (women) | 61% | 59% |
| Bloomberg Gender-Equality Index | ✔ | ✔ |
| 2023 | 2022 | |
|---|---|---|
| Impact of customer support | ||
| Number of active clients (million) | 71.5 | 67.3 |
| % bancarization of the beneficiaries of remittances Mexico | 94.8% | More than 88% |
| Entrepreneurship financing (€ million) | 3,205 | 3,968 |
| Financing for social enterprises / foundations (€ million) | 209 | 20 |
| Impact on community investment | ||
| Total number of credit clients of the Microfinance Foundation by year-end (million) | 0.93 | 0.92 |
| % of Microfinance Foundation clients (rural) | 34% | 34% |
| % of Microfinance Foundation clients (at most primary education) | 31% | 32% |
| BBVA donation to respond to the humanitarian emergency of the earthquake in Turkey and Syria (million euros) | 1.0 | n/a |
The investment metrics (€ million) and beneficiaries (number) in financial education programs and initiatives included in SDG 4 QUALITY EDUCATION are also applicable here.
n/a: not not applicable.
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This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
| 2023 | 2022 | |
|---|---|---|
| Impact of customer support | ||
| Environmental and social framework sectors: energy, mining, defense, infrastructure and agribusiness | ✔ | ✔ |
| Human Rights Action Plan | ✔ | ✔ |
| Number of complaints to the banking authority for every 10,000 active customers | 12 | 11 |
| Average time to resolve complaints (calendar days) | 8 | 7 |
| Provisions of the Defense sector included in the BBVA Environmental and Social Framework considering that certain activities or products related to the defense industry go against BBVA's principles and business rules | ✔ | ✔ |
| Direct impact | ||
| Corporate purpose that connects the main business with benefiting society | ✔ | ✔ |
| Governance body with ESG competencies | ✔ | ✔ |
| Taxes paid (€ mill) | 13,618 | 10,948 |
| Anti-corruption policy | ✔ | ✔ |
| Supplier ethics code | ✔ | ✔ |
| BBVA and Human Rights | ✔ | ✔ |
| Corporate Social Responsibility Policy | ✔ | ✔ |
| Employees who have received code of conduct training | 96,103 | 85,329 |
| Employees who have received anti-corruption policy training | 83,883 | 79,706 |
| Complaints received through complaint channels | 2,061 | 1,597 |
| Employees who have received anti-money laundering training | 80,442 | 91,401 |
| Anti Money Laundering: No. of investigation files managed | 167,269 | 139,592 |
| Anti Money Laundering: No. of suspicious operations reported to the authorities. | 105,845 | 82,860 |
| Anti Money Laundering: Engagement with governmental agencies and international organizations | ✔ | ✔ |
| 2023 | 2022 | |
|---|---|---|
| Impact of customer support | ||
| Signatory of the Principles for Responsible Banking and the Principles for Responsible Investment | ✔ | ✔ |
| Promoter of Green Bond Principles and Social Bond Principles | ✔ | ✔ |
| Member of regional (EBF) and local (AEB, ABM Asobancaria, etc.) banking associations | ✔ | ✔ |
| Signatory of sectoral agreements: ANESE, Faconauto | ✔ | ✔ |
| Net Zero Banking Alliance | ✔ | ✔ |
| Net Zero Asset Managers | ✔ | ✔ |
| Collective Committment to Financial Education & Inclusion | ✔ | ✔ |
| Direct impact | ||
| RE 100; GECV | ✔ | ✔ |
| BBVA chairs REDI, the Business Network for LGTBI Diversity and Inclusion in Spain | ✔ | ✔ |
| ERG (Employee Resource Group) Be Yourself, joining the United Nations standards of conduct for the LGTBI community, joining REDI (Corporate Network for Diversity and Inclusion in Spain), Inspiring Girls | ✔ | ✔ |
| Impact on community investment | ||
| Number of volunteers (employees) | 11,788 | 8,637 |
| Volunteer hours (thousands of hours) | 36,040 | 24,262 |
| United Nations Global Compact | ✔ | ✔ |
| Member of the Thun Group of Banks on Human Rights | ✔ | ✔ |
| Signatory of the Equator Principles | ✔ | ✔ |
| Member of local, regional and international organizations that promote CSR (Seres, CSR Europe, CECP, etc.) | ✔ | ✔ |
200
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
The analysis was carried out in three phases:
– Phase 1 - Identification of issues that are significant for the Group and its stakeholders.
– Phase 2 - Qualitative identification of the effects (positive and negative), as well as risks and opportunities for each of the issues identified.
– Phase 3 - Assignment of weights and fixation of points in the materiality matrix.
The materiality matrix and issues are updated with the latest trends related to regulation, analysts and investors, expectations of interest groups and other aspects that impact BBVA's activity. The following were used to identify the different issues:
External sources:
– Reporting frameworks such as: GRI, SASB, World Economic Forum_IBC (Stakeholder Capitalism Metrics).
– Existing regulation and drafts of future reporting regulation (Law 11/2018, European Taxonomy Regulation, ESRS).
– Voluntary reporting frameworks: TCFD, TNFD, GFANZ Guides, etc.
– Analyst expectations and ESG Indices.
– Trend and context reports.
Internal sources:
– Materiality analysis of previous years.
– Results of the Human Rights due diligence process carried out by BBVA in 2021, as well as subsequent updates and extensions made to it.
– Portfolio Impact Analysis Tool for Banks – UNEP-FI.
– The ENCORE tool for natural capital matters.
– Consultations with stakeholders:
• Customers, with a total of 1.204 surveys conducted in six countries (Argentina, Colombia, Spain, Mexico, Peru and Turkey) and non-customers, with a total of 1.138 surveys conducted in six countries (Argentina, Colombia, Spain, Mexico, Peru and Turkey), evaluating expectations, as well as their relevance.
• Shareholders and investors: includes the issues in which they show interest, assigning a degree of relevance to each material issue according to their individual perspective, from a risk perspective and a trend based on the degree of relevance and growing interest;
• Employees, with a total of 12,106 surveys carried out in eight countries (Argentina, Colombia, Spain, Mexico, Peru, Turkey, Uruguay and Venezuela).
– BBVA Risk Assessment.
– BBVA reputational risk analysis.
For each of these issues, the possible positive and negative effects associated with the activity of the BBVA Group or its value chain that could affect society and the environment have been identified at a qualitative level (“from the inside out”). also known as “impact materiality”) as well as the risks and opportunities associated with sustainability issues that could affect the activity of the BBVA Group (“from the outside in” also known as “financial materiality”) in the short, medium and long term.
Potential positive and negative effects, as well as risks and opportunities are:
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| Issue | Description | Impact materiality (1) ## Environmental
– Reduction in the value of fixed assets (e.g., highly polluting assets).
– Increased costs and reduced demand for products and services due to fines and court rulings.
– Financing of new activities related to the energy transition (mitigation and adaptation):
• Reuse of oil and gas transportation assets for biofuels: MT;
• Electrification of the oil and gas industry and use of hydrogen: MT;
• Renewables, ST;
• Green hydrogen, MT;
• Nuclear fusion, LT;
• Distribution of solar panels in construction and infrastructure, ST;
• Building renovation, ST;
• Adaptation of infrastructure, ST;
• Low-emission electric transport, ST;
• Metals for electric vehicles, ST;
• Agricultural waste as biogas, ST;
• Energy in agricultural plants, MT;
• Anti-drought products, MT;
• Use of sustainable fertilizers and feed: ST;
• Carbon credits markets, ST;
• Circular economy: ST;
• Other sectors moving toward carbon neutrality, ST.
– Financing of sustainable activities, without pollution controversies.
Additional information related to measures taken to manage the issue, associated effects and monitoring of the effectiveness of the measures taken is included in the chapter:
– 2.2 Environmental
The KPIs linked to this issue are "Sustainable Business Chanelling" (see section "2.1.3 Sustainability in business development - "Sustainable Business Channeling" and "2.2.3 Alignment of the loan portfolio with the Paris Agreement"). In addition, these KPIs are used to calculate the RVA (see section "2.3.2 Employees - Remuneration").
| Issue Description | Impact materiality (2) | Financial materiality | Positive effects | Negative effects | Risks | Opportunities |
|---|---|---|---|---|---|---|
| Customers: accessibility of commercial channels and financial health | Offer a good experience for all customers, ensuring the simplicity, agility, speed and self- service of the channels, in addition to promoting innovation and digitization of the service. Likewise, offer proposals or solutions that promote the financial health of our customers, taking care of their finances and offering proposals or solutions on issues that are more complex or require greater specialization. | – Positive contribution to the health of the economy through access to quality and personalized financial services. – Positive contribution to the financial health and well-being of customers. – Positive contribution to consumer protection. – Financial education for customers and society in general; and specific for disadvantaged and/or vulnerable groups. – Contribution to the transformation toward a digital and connected economy. – Access to financing and financial services through the promotion of new channels, products and digital services. – Access to financing and financial services by facilitating accessibility, simplicity and agility in customer transactions. |
– Indirect negative impacts on access to financing and financial services due to the possible exclusion of certain vulnerable groups that may not be able to adapt to digitization (e.g. senior citizens). – Exclusion of groups with less adaptability to changes geared toward new technologies (e.g. the elderly, rural areas). – Negative effects on the health of the economy due to the lack of quality and personalization of financial services. – No contribution or negative contribution to the financial health and well-being of customers. – No contribution or negative contribution to consumer protection – Lack of adaptation or slow adaptation to digital transformation expectations. – Loss of business due to competition from digital players providing financial services. – Costs associated with investments resulting from the approach and facilitation of services. – Implementation of solutions, products or services perceived as inadequate.¡ – Inadequate design of the products and services catalog, due to lack of inclusion of products and services with ESG orientation. or lack of inclusion of ESG criteria in products and services associated with failure to meet customer needs). – Inadequate management of customer claims/complaints. |
– Development of new innovative and digital financial products and services. – Positioning and recognition by stakeholders, especially customers, as an innovative and digital company. – Positioning and recognition by stakeholders, especially customers, as a company that offers a simple, agile and fast service. – Positioning and recognition by stakeholders, especially customers, as a company that provides and facilitates access to people from vulnerable groups (people with disabilities, the elderly, etc.) to its facilities. – Positioning and recognition among customers as a trustworthy company that responds to their needs. |
Additional information related to measures taken to manage the issue, associated effects and monitoring of the effectiveness of the measures taken is included in the chapter:
– 2.3.2 Customers
The KPI linked to this issue is "Net Recommendation Index (IReNe)" (see section "2.3.2 Customesr - Responsible costumer conduct - Customer experience". In addition, this KPI is used to calculate the AVR (see section "2.3.3 Employees - Remuneration").
| Inclusive growth | | | – Promote access to financing sources for vulnerable or low-income people and small businesses/professionals with fewer resources and possibilities, all accompanied by financial and digital education actions to promote responsible banking and informed decision-making.
– Develop new products with the help of new technologies, which allow access to new markets previously inaccessible due to the risk factor.
– Support governments and companies to promote employment and local development of the territory and communities.
– Promote the development of society through the philanthropic activities carried out by the Group.
– Access to financing and financial services to people located in isolated or remote areas (e.g. rural areas).
– Access to financing and financial services for vulnerable and disadvantaged groups; through both the offer of financing in general and through the offer of products specifically designed for these groups.
– Increase in financial and digital education of customers and society in general, specifically that of disadvantaged and/or vulnerable groups.
– Accessible, affordable and useful financial products.
– Products aimed at SMEs and the self- employed with less access to financing and sustainable business models.
– Strong and lasting public-private alliances. | – Lack of access to finance and financial services in isolated or remote areas (e.g. rural areas).
– Lack of access to financing and financial services for vulnerable and disadvantaged groups by not facilitating access to the general financing offer or by not creating an offer of specific products for these groups.
– Reduced financial education of customers and society in general, specifically that of disadvantaged and/or vulnerable groups.
– Financial products not accessible, affordable or useful.
– Lack of products aimed at SMEs and the self-employed with less access to financing and sustainable business models.
– Lack of collaboration with the third sector or with the public sector. | – Reputational loss due to lack of or insufficient financial inclusion measures.
– Loss of business opportunities due to not serving new segments (not expanding the customer base).
– Loss of opportunities in the development of financial products (less innovation)
– Loss of competitiveness/income due to excessive focus on financial inclusion.
– Reputational risk due to lack of contribution or inadequate contribution to the requirements of the social environment. | – Positioning and recognition by stakeholders, especially customers, as a company that provides and facilitates access to financing for vulnerable groups, disadvantaged areas and promotes the revitalization of the local and regional economy.
– Expansion of the customer base.
– Innovation and development of new products and services aimed at disadvantaged and/or vulnerable groups or underserved areas.
– Positioning and recognition by stakeholders as a socially responsible company that contributes to the development of the societies in which it is present with its philanthropic activity. |
Additional information related to measures taken to manage the issue, associated effects and monitoring of the effectiveness of the measures taken is included in the chapter:
– 2.1.3 Sustainability in business development
– 2.3.1 Society
The KPI linked to this matter is "Sustainable Business Mobilization" (see section "2.1.3 Sustainability in business development - Sustainable business channeling"). In addition, this KPI is used to calculate the AVR (see section "2.3.3 Employees - Remuneration").
Measures aimed at guaranteeing the security of the entity at software and information security level to avoid theft, attacks or alterations of any kind, that could compromise the credibility and good work of the company.
– Positive contribution to the health of the economy through the protection of customers' finances.
– Cybersecurity education for customers and society in general; resulting from information campaigns.
– No contribution or negative contribution to the health of the economy due to lack of protection or inadequate protection of customers' finances.
– Loss of competitiveness/revenue due to failures in information systems and/or lack of protection against cyber-attacks; leaks of confidential information and security breaches.# GOVERNANCE
Excessive dependence on service providers for cybersecurity management.
Positioning and recognition by stakeholders, especially customers, as a company safe from cyber-attacks.
Development of solutions against cyber- attacks that can provide a competitive advantage in the market.
Additional information related to measures taken to manage the issue, associated effects and monitoring of the effectiveness of the measures taken is included in the chapter:
– 2.3.2 Customers - Security and protection
(2) The identified effects, both positive and negative, are potential; since they come mainly from the UNEP-FI tool that considers the potential effects of BBVA's portfolio.
| Issue Description # Defense of the human rights
Measures related to:
It includes issues such as: forced labor, child labor, freedom of association and collective bargaining, equal pay or discrimination;
impact on human rights derived from credit activity, with a focus on large corporate customers in sectors with great environmental or social impact (including local communities and indigenous populations);
fair hiring, control of suppliers and working conditions of its workers; discrimination, etc.
accessibility and service as well as safety and health and respect;
environmental protection and inclusive businesses;
– Positive contribution to the protection of the human rights of employees, customers, third parties and society in general:
– Financing of customers/ activities/sectors with a positive contribution to human rights (such as activities that provide access to services and commodities).
– Contracting suppliers that protect the human rights of their employees.
– Positive contribution to improving the protection of employees' rights.
– Positive contribution to the social development of the countries in which we operate, by contracting local suppliers.
– Sustainable transformation of suppliers through the introduction of contractual clauses that require progress in Human Rights issues.
– No contribution or negative contribution to the protection of human rights of employees, customers, third parties and society in general. For example:
• Financing of customers/ activities/sectors that violate human rights.
• Contracting suppliers that violate the human rights of its employees.
• Violation of the rights of direct employees.
– No contribution or negative contribution to the social development of the countries in which we operate, by contracting local suppliers.
– Failure to contribute to the sustainable transformation of suppliers as a result of bad practices in the supplier approval process (e.g. working conditions that do not respect human rights) or failure to include sustainability requirements.
– Reputational risk and litigation for non-compliance with employees' human and labor rights.
– Portfolio exposure to sectors/ customers/operations with a high risk of human rights violations.
– Poor practices or cases of violation of human rights by a third party that may be linked to the company or the sector.
– Poor practices in social and governance matters by a third party supplier or contractor that may be linked to the company or the sector.
– Unfair and abusive contractual conditions.
– Lack of social and environmental due diligence processes for hiring and retaining suppliers and contractors (including modern slavery, forced labor and child labor).
– Positioning and recognition by stakeholders as a company with a positive contribution to human rights.
– Promotion of the financing of activities that provide access to services and basic products, especially for populations or regions with difficult access.
– Strengthening relationships with suppliers by promoting the defense of human rights and establishing alliances.
Additional information related to measures taken to manage the issue, associated effects and monitoring of the effectiveness of the measures taken is included in the chapter:
– 2.3.5 Commitment to Human Rights
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– Measures to ensure the management and integration of individual differences within the company's stakeholders: implementation of discrimination, equality and diversity policies and plans; other initiatives aimed at ensuring equal opportunities, work-life balance, disconnection from work, and employee well-being.
– Talent management measures such as selection, attraction, retention and development of talent: Organization of working time; remuneration policies, competitive and fair wages; training policies and initiatives and career plans.
– Organization of social dialogue, including procedures for informing, consulting and negotiating with personnel: freedom of association, relationship with unions and collective bargaining agreements.
– Measures aimed at preventing occupational hazards and promoting the health (physical and mental) and safety of employees.
– Positive contribution to the objectives of ensuring equal opportunities.
– Contribution to the well-being of society.
– Generation of quality employment and the payment of decent wages.
– Positive contribution to employees' labor rights.
– Positive contribution to the safety, health and integrity of employees.
– Positive contribution to health and safety education.
– No contribution or negative contribution to the objectives of ensuring equal opportunities.
– Generation of employment with worsening quality.
– No contribution or negative contribution to the well-being of society.
– No contribution or negative contribution to employees' labor rights.
– No contribution or negative contribution to the safety, health and integrity of employees.
– No contribution or negative contribution to health and safety education.
– Reputational risk and litigation for cases of discrimination.
– Limitation of maternity/paternity rights, harassment at work or similar among employees.
– Poor practices in equality and work- life balance, or cases of discrimination by a third party that may be linked to the company or the sector.
– Lack of adaptation or slow adaptation of the company's strategy (and implementation of measures) to promote equality, diversity and conciliation that may affect the perception of employees and other stakeholders about the company.
– Reputational risk and litigation due to lack of fair and decent salary conditions.
– Lack of adaptation or slow adaptation of the company's strategy (and implementation of measures) to promote talent attraction and retention that may affect the perception of employees and other stakeholders about the company.
– Reputational risk or litigation due to limitations on freedom of association and collective bargaining; or perception of limitations to such rights.
– Lack of or insufficient measures related to the protection of the safety, health and well-being of employees.
– Positioning and recognition by stakeholders, especially employees, as a company that promotes equal opportunities and work-life balance.
– Increased productivity as a result of the implementation of actions to improve work-life balance.
– Positioning and recognition by stakeholders, especially employees, as a company that facilitates the career development of its employees.
– Positioning and recognition by stakeholders, especially employees, as a company that favors social dialogue.
– Positioning and recognition by stakeholders, especially employees, as a company that protects the health and safety of its employees.
Additional information related to measures taken to manage the issue, associated effects and monitoring of the effectiveness of the measures taken is included in the chapter:
– 2.3.3 Employees
The KPI linked to this issue is "Percentage of women in management positions" (see section "2.3.3 Employees - Diversity and inclusion". In addition, this KPI is used to calculate the AVR (see section "2.3.3 Employees - Remuneration").
(2) The effects identified, both positive and negative, are potential, as they come mainly from the UNEP-FI tool that considers the potential effects of BBVA's portfolio.
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BBVA's impact on the environment: in order to quantify BBVA's impact on the environment, the UNEP-FI impact identification tool (Portfolio Impact Analysis Tool for Banks) for both Consumer Banking and Institutional Banking has been used as a base source. The results obtained have been complemented with other sources such as the human rights due diligence process conducted in 2021 and the ENCORE tool (for natural capital issues). Weightings have been assigned to each of the sources and score. The higher the score, the greater the impact.
Environmental impact on BBVA: in order to quantify the impact that the environment has on BBVA, various sources have been used from the perspective of risks and opportunities of the issues, such as BBVA's risk assessment, BBVA's reputational risk analysis, customer, non-customer and employee surveys, and surveys of the investor relations area. The risk assessment has been carried out considering their impact and probability. Weightings have been assigned to each of the sources used and scores have been assigned. The higher the score, the greater the impact.
The issues have been ordered on the two axes of the matrix based on the score obtained, which has been contrasted and re-evaluated, where appropriate applying the expert criteria of the areas involved in this process. This allows us to identify which are the material issues (those that are located in the upper/right part of the double materiality matrix). The results of this phase give rise to the Group's materiality matrix shown in chapter "2.1.2 Materiality analysis".
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The information included in this chapter complements the breakdowns included in section “2.3.3 Employees” in chapter “2.3 Social”.
| 2023 | 2022 | |||||
|---|---|---|---|---|---|---|
| Number of employees | Male | Female | Number of employees | Male | Female | |
| Spain | 27,410 | 13,709 | 13,701 | 25,945 | 12,798 | 13,147 |
| Mexico | 46,891 | 23,122 | 23,769 | 43,511 | 21,082 | 22,429 |
| Turkey (1) | 22,016 | 9,761 | 12,255 | 21,684 | 9,528 | 12,156 |
| South America | 23,679 | 11,011 | 12,668 | 23,149 | 10,699 | 12,450 |
| Argentina | 5,996 | 3,181 | 2,815 | 5,869 | 3,149 | 2,720 |
| Bolivia | 109 | 48 | 61 | 466 | 175 | 291 |
| Brazil | 6 | 2 | 4 | 6 | 2 | 4 |
| Colombia | 6,830 | 2,886 | 3,944 | 6,678 | 2,819 | 3,859 |
| Chile | 786 | 374 | 412 | 767 | 363 | 404 |
| Cuba | 0 | 0 | — | 1 | 1 | — |
| Peru | 7,547 | 3,495 | 4,052 | 6,985 | 3,190 | 3,795 |
| Uruguay | 573 | 310 | 263 | 573 | 308 | 265 |
| Venezuela | 1,832 | 715 | 1,117 | 1,804 | 692 | 1,112 |
| Rest | 1,490 | 898 | 592 | 1,386 | 818 | 568 |
| Germany | 47 | 32 | 15 | 43 | 28 | 15 |
| Belgium | 19 | 11 | 8 | 21 | 13 | 8 |
| China (2) | 131 | 87 | 71 | 120 | 83 | 64 |
| South Korea | 2 | 1 | 1 | 2 | 1 | 1 |
| United Arab Emirates | 1 | 1 | — | 2 | 1 | 1 |
| The United States | 405 | 288 | 117 | 368 | 254 | 114 |
| France | 75 | 53 | 22 | 68 | 45 | 23 |
| India | 2 | 1 | 1 | 2 | 1 | 1 |
| Indonesia | 2 | 1 | 1 | 2 | 1 | 1 |
| Italy | 65 | 35 | 30 | 52 | 29 | 23 |
| Japan | 6 | 5 | 1 | 4 | 3 | 1 |
| Portugal | 429 | 222 | 207 | 427 | 216 | 211 |
| United Kingdom | 154 | 103 | 51 | 128 | 86 | 42 |
| Singapore | 16 | 4 | 12 | 15 | 5 | 10 |
| Switzerland | 124 | 71 | 53 | 120 | 69 | 51 |
| Taiwan | 12 | 4 | 8 | 12 | 4 | 8 |
| Total | 121,486 | 58,501 | 62,985 | 115,675 | 54,925 | 60,750 |
(1) Includes Garanti Group employees in all geographic areas.
(2) Includes employees of BBVA entities in China and Hong Kong.
| 2023 | 2022 | |||||||
|---|---|---|---|---|---|---|---|---|
| Average age | <30 | 30-39 | 40-49 | ≥50 | Average age | <30 | 30-39 | |
| Spain | 43.9 | 8.5 | 18.0 | 46.1 | 27.4 | 43.9 | 6.5 | 19.4 |
| Mexico | 34.5 | 32.2 | 44.3 | 15.6 | 7.9 | 34.4 | 33.3 | 43.5 |
| Turkey | 35.7 | 23.5 | 43.2 | 27.9 | 5.4 | 35.4 | 22.0 | 45.9 |
| South America | 38.1 | 23.9 | 36.2 | 22.8 | 17.1 | 38.0 | 24.1 | 36.2 |
| Rest | 44.2 | 13.0 | 20.5 | 30.4 | 36.1 | 44.7 | 10.0 | 21.2 |
| Total | 37.7 | 23.4 | 36.3 | 26.3 | 14.0 | 37.6 | 23.1 | 36.8 |
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| 2023 | 2022 | |||||
|---|---|---|---|---|---|---|
| Total | Male | Female | Total | Male | Female | |
| Spain | 15.9 | 15.1 | 16.7 | 16.3 | 15.8 | 16.7 |
| Mexico | 6.3 | 5.8 | 6.8 | 6.5 | 6.0 | 6.9 |
| Turkey | 9.7 | 9.6 | 9.8 | 10.0 | 10.0 | 9.9 |
| South America | 10.1 | 10.4 | 9.8 | 10.2 | 10.6 | 9.8 |
| Rest | 11.0 | 10.4 | 11.9 | 11.8 | 11.1 | 12.8 |
| Total | 9.9 | 9.5 | 10.2 | 10.1 | 10.0 | 10.3 |
| 2023 | 2022 | |||||
|---|---|---|---|---|---|---|
| On the total number of employees | Male | Female | On the total number of employees | Male | Female | |
| Spain | ||||||
| Management team (1) | 6.8 | 67.4 | 32.6 | 6.7 | 70.6 | 29.4 |
| Managers | 38.0 | 53.6 | 46.4 | 37.5 | 53.9 | 46.1 |
| Rest of employees | 55.2 | 45.4 | 54.6 | 55.9 | 43.7 | 56.3 |
| Mexico | ||||||
| Management team (1) | 3.2 | 66.0 | 34.0 | 3.1 | 66.1 | 33.9 |
| Managers | 31.4 | 57.0 | 43.0 | 30.6 | 55.9 | 44.1 |
| Rest of employees | 65.4 | 44.8 | 55.2 | 66.3 | 44.2 | 55.8 |
| Turkey | ||||||
| Management team (1) | 3.5 | 60.9 | 39.1 | 4.0 | 60.4 | 39.6 |
| Managers | 38.1 | 36.0 | 64.0 | 39.1 | 36.7 | 63.3 |
| Rest of employees | 58.4 | 48.7 | 51.3 | 57.0 | 47.8 | 52.3 |
| South America | ||||||
| Management team (1) | 4.1 | 60.5 | 39.5 | 3.9 | 61.6 | 38.4 |
| Managers | 28.0 | 50.9 | 49.1 | 27.8 | 50.3 | 49.7 |
| Rest of employees | 67.9 | 43.9 | 56.1 | 68.2 | 43.7 | 56.3 |
| Rest | ||||||
| Management team (1) | 23.0 | 75.2 | 24.8 | 21.3 | 77.0 | 23.1 |
| Managers | 37.3 | 64.0 | 36.0 | 37.5 | 62.7 | 37.3 |
| Rest of employees | 39.7 | 48.1 | 51.9 | 41.2 | 46.4 | 53.6 |
| Group average | ||||||
| Management team (1) | 4.5 | 65.3 | 34.7 | 4.5 | 66.5 | 33.5 |
| Managers | 33.5 | 50.9 | 49.1 | 33.3 | 50.3 | 49.7 |
| Rest of employees | 62.0 | 45.4 | 54.6 | 62.3 | 44.6 | 55.4 |
(1) The management team includes the highest range of the Group´s management.
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| 2023 | 2022 | |||||
|---|---|---|---|---|---|---|
| On the total number of employees | Male | Female | On the total number of employees | Male | Female | |
| Spain | ||||||
| Permanent employee. Full-time | 99.2 | 50.0 | 50.0 | 98.8 | 0.5 | 0.5 |
| Permanent employee. Part-time | 0.1 | 14.3 | 85.7 | 0.1 | 0.1 | 0.9 |
| Temporary employee | 0.7 | 49.8 | 50.2 | 1.2 | 0.4 | 0.6 |
| Mexico | ||||||
| Permanent employee. Full-time | 93.4 | 48.9 | 51.1 | 91.4 | 0.5 | 0.5 |
| Permanent employee. Part-time | — | — | — | — | 1.0 | — |
| Temporary employee | 6.6 | 54.8 | 45.2 | 8.6 | 0.5 | 0.5 |
| Turkey | ||||||
| Permanent employee. Full-time | 98.6 | 44.2 | 55.8 | 99.5 | 0.4 | 0.6 |
| Permanent employee. Part-time | 0.1 | 6.2 | 93.8 | 0.1 | 0.1 | 0.9 |
| Temporary employee | 1.3 | 56.8 | 43.2 | 0.4 | 0.6 | 0.4 |
| South America | ||||||
| Permanent employee. Full-time | 94.3 | 47.1 | 52.9 | 91.6 | 0.5 | 0.5 |
| Permanent employee. Part-time | 0.8 | 37.1 | 62.9 | 0.9 | 0.4 | 0.6 |
| Temporary employee | 4.9 | 36.0 | 64.0 | 7.5 | 0.3 | 0.7 |
| Rest | ||||||
| Permanent employee. Full-time | 99.5 | 60.4 | 39.6 | 99.4 | 59.1 | 40.9 |
| Permanent employee. Part-time | 0.1 | — | 100.0 | 0.1 | — | 100.0 |
| Temporary employee | 0.4 | 50.0 | 50.0 | 0.5 | 57.1 | 42.9 |
| Group average | ||||||
| Permanent employee. Full-time | 95.9 | 48.1 | 51.9 | 94.7 | 47.6 | 52.5 |
| Permanent employee. Part-time | 0.2 | 32.6 | 67.4 | 0.2 | 34.0 | 66.0 |
| Temporary employee | 3.9 | 50.1 | 49.9 | 5.1 | 46.8 | 53.2 |
(1) 2022 data differ from those published in the 2022 Statement of Non-Financial Information due to additional updates and checks.
| 2023 | 2022 | |||||
|---|---|---|---|---|---|---|
| Management team | Managers | Rest of employees | Management team | Managers | Rest of employees | |
| Spanish | 35.9 | 25.5 | 19.8 | 34.9 | 25.2 | 19.9 |
| Mexican | 26.7 | 36.0 | 40.7 | 25.7 | 34.5 | 40.0 |
| Turkish | 13.8 | 20.3 | 16.8 | 16.2 | 21.7 | 16.9 |
| South American (1) | 17.6 | 16.6 | 21.5 | 17.7 | 17.0 | 22.1 |
| Rest of nationalities | 5.9 | 1.6 | 1.1 | 5.5 | 1.6 | 1.1 |
| Total | 100 | 100 | 100 | 100 | 100 | 100 |
(1) Includes Central America
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| 2023 | 2022 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| On the total number of employees | <30 | 30-39 | 40-49 | ≥50 | On the total number of employees | <30 | 30-39 | 40-49 | ≥50 | |
| Spain | ||||||||||
| Permanent employee. Full-time | 99.2 | 8.0 | 18.0 | 46.4 | 27.6 | 98.8 | 5.8 | 19.3 | 50.1 | 24.8 |
| Permanent employee. Part-time | 0.1 | 4.8 | 9.5 | 52.4 | 33.3 | 0.1 | 11.1 | 16.7 | 55.6 | 16.7 |
| Temporary employee | 0.7 | 72.9 | 19.2 | 5.9 | 2.0 | 1.2 | 66.9 | 28.1 | 3.7 | 1.3 |
| Mexico | ||||||||||
| Permanent employee. Full-time | 93.4 | 30.1 | 45.2 | 16.3 | 8.4 | 91.4 | 30.4 | 44.9 | 16.4 | 8.4 |
| Permanent employee. Part-time | — | — | 100.0 | — | — | — | — | — | — | — |
| Temporary employee | 6.6 | 62.9 | 30.9 | 5.3 | 0.9 | 8.6 | 64.3 | 28.8 | 5.5 | 1.5 |
| Turkey | ||||||||||
| Permanent employee. Full-time | 98.6 | 22.7 | 43.7 | 28.2 | 5.4 | 99.5 | 22.0 | 45.9 | 27.5 | 4.6 |
| Permanent employee. Part-time | 0.1 | — | 12.5 | 31.3 | 56.2 | 0.1 | 15.4 | 15.4 | 23.1 | 46.2 |
| Temporary employee | 1.3 | 81.6 | 11.9 | 3.1 | 3.4 | 0.4 | 38.4 | 46.5 | 10.5 | 4.7 |
| South America | ||||||||||
| Permanent employee. Full-time | 94.3 | 21.5 | 36.6 | 23.8 | 18.1 | 91.6 | 20.0 | 37.1 | 24.6 | 18.2 |
| Permanent employee. Part-time | 0.8 | 41.9 | 43.0 | 12.4 | 2.7 | 0.9 | 37.1 | 46.0 | 14.4 | 2.5 |
| Temporary employee | 4.9 | 66.5 | 26.7 | 5.3 | 1.5 | 7.5 | 72.4 | 23.4 | 3.3 | 1.0 |
| Rest | ||||||||||
| Permanent employee. Full-time | 99.5 | 12.9 | 20.4 | 30.5 | 36.2 | 99.4 | 9.7 | 21.1 | 31.9 | 37.3 |
| Permanent employee. Part-time | 0.1 | — | 100.0 | — | — | 0.1 | — | 100.0 | — | — |
| Temporary employee | 0.4 | 50.0 | 33.3 | 16.7 | — | 0.5 | 71.4 | 28.6 | — | — |
| Group average | ||||||||||
| Permanent employee. Full-time | 95.9 | 21.7 | 36.6 | 27.2 | 14.5 | 94.7 | 20.7 | 37.3 | 28.3 | 13.7 |
| Permanent employee. Part-time | 0.2 | 35.3 | 37.9 | 17.4 | 9.4 | 0.2 | 34.0 | 42.1 | 17.9 | 6.0 |
| Temporary employee | 3.9 | 65.3 | 28.2 | 5.2 | 1.3 | 5.1 | 66.4 | 27.4 | 4.8 | 1.4 |
(1) 2022 data differ from those published in the 2022 Statement of Non-Financial Information due to additional update and checks.
213
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| 2023 | 2022 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| On the total number of employees | <30 | 30-39 | 40-49 | ≥50 | On the total number of employees | <30 | 30-39 | 40-49 | ≥50 | |
| Spain | ||||||||||
| Management team (1) | 6.8 | — | 4.1 | 47.1 | 48.8 | 6.7 | 0.2 | 4.9 | 51.8 | 43.1 |
| Managers | 38.0 | 1.6 | 16.3 | 56.0 | 26.1 | 37.5 | 0.9 | 17.2 | 60.2 | 21.7 |
| Rest of employees | 55.2 | 14.3 | 20.8 | 39.2 | 25.7 | 55.9 | 11.1 | 22.6 | 42.2 | 24.1 |
| Mexico | ||||||||||
| Management team (1) | 3.2 | 1.3 | 31.5 | 37.0 | 30.2 | 3.1 | 1.2 | 31.9 | 35.8 | 31.2 |
| Managers | 31.4 | 23.4 | 47.2 | 19.2 | 10.2 | 30.6 | 23.5 | 47.4 | 19.4 | 9.8 |
| Rest of employees | 65.4 | 38.0 | 43.4 | 12.8 | 5.8 | 66.3 | 39.3 | 42.3 | 12.6 | 5.8 |
| Turkey | ||||||||||
| Management team (1) | 3.5 | 0.1 | 22.9 | 49.9 | 27.1 | 4.0 | — | 24.2 | 53.4 | 22.4 |
| Managers | 38.1 | 2.7 | 47.5 | 44.0 | 5.8 | 39.1 | 2.5 | 50.4 | 42.0 | 5.1 |
| Rest of employees | 58.4 | 38.4 | 41.8 | 16.0 | 3.8 | 57.0 | 37.0 | 44.3 | 15.7 | 3.1 |
| South America | ||||||||||
| Management team (1) | 4.1 | 0.3 | 22.0 | 43.7 | 34.0 | 3.9 | 0.7 | 21.2 | 45.1 | 33.0 |
| Managers | 28.0 | 12.7 | 37.8 | 30.6 | 18.9 | 27.8 | 12.4 | 38.3 | 30.7 | 18.6 |
| Rest of employees | 67.9 | 30.0 | 36.2 | 18.4 | 15.4 | 68.2 | 30.2 | 36.2 | 18.5 | 15.1 |
| Rest | ||||||||||
| Management team (1) | 23.0 | 0.3 | 9.9 | 44.9 | 44.9 | 21.3 | — | 8.1 | 44.8 | 47.1 |
| Managers | 37.3 | 4.7 | 30.0 | 33.3 | 32.0 | 37.5 | 4.8 | 29.2 | 34.4 | 31.5 |
| Rest of employees | 39.7 | 28.3 | 17.8 | 19.3 | 34.6 | 41.2 | 19.8 | 20.7 | 22.6 | 37.0 |
| Group average | ||||||||||
| Management team (1) | 4.5 | 0.4 | 17.8 | 44.0 | 37.8 | 4.5 | 0.5 | 18.3 | 46.3 | 35.0 |
| Managers | 33.5 | 11.6 | 37.5 | 35.8 | 15.1 | 33.3 | 11.0 | 38.6 | 36.8 | 13.5 |
| Rest of employees | 62.0 | 31.5 | 36.9 | 19.9 | 11.7 | 62.3 | 31.1 | 37.2 | 20.5 | 11.3 |
(1) The management team includes the highest range of the Group´s management.
214
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| 2023 | 2022 (2) | |||||
|---|---|---|---|---|---|---|
| Permanent employee Full-time | Permanent employee Part-time | Temporary employee | Permanent employee Full-time | Permanent employee Part-time | Temporary employee | |
| Spain | ||||||
| Management team (1) | 1,866 | — | 1 | 1,727 | — | — |
| Managers | 10,419 | 2 | 2 | 9,714 | 2 | — |
| Rest of employees | 14,901 | 19 | 200 | 14,187 | 16 | 299 |
| Mexico | ||||||
| Management team (1) | 1,489 | — | 6 | 1,350 | — | 9 |
| Managers | 14,002 | — | 727 | 12,778 | 1 | 547 |
| Rest of employees | 28,311 | — | 2,356 | 25,659 | — | 3,167 |
| Turkey | ||||||
| Management team (1) | 772 | 1 | 1 | 858 | 1 | 2 |
| Managers | 8,385 | — | 1 | 8,472 | — | 1 |
| Rest of employees | 12,549 | 15 | 292 | 12,255 | 12 | 83 |
| South America | ||||||
| Management team (1) | 964 | — | — | 909 | — | — |
| Managers | 6,621 | — | 12 | 6,405 | — | 37 |
| Rest of employees | 14,737 | 186 | 1,159 | 13,899 | 202 | 1,697 |
| Rest | ||||||
| Management team (1) | 342 | — | 1 | 295 | — | — |
| Managers | 553 | 1 | 2 | 516 | 1 | 3 |
| Rest of employees | 588 | — | 3 | 567 | — | 4 |
| Group average | ||||||
| Management team (1) | 5,433 | 1 | 9 | 5,139 | 1 | 11 |
| Managers | 39,980 | 3 | 744 | 37,885 | 4 | 588 |
| Rest of employees | 71,086 | 220 | 4,010 | 66,567 | 230 | 5,250 |
(1) The management team includes the highest range of the Group's management.
(2) The data for 2022 differs from that published in the 2022 Non-Financial Information Statement due to additional updates and checks.
215
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
| 2023 | 2022 (2) | |||||
|---|---|---|---|---|---|---|
| Permanent employee Full-time | Permanent employee Part-time | Temporary employee | Permanent employee Full-time | Permanent employee Part-time | Temporary employee | |
| Spain | ||||||
| Management team (1) | 99.9 | — | 0.1 | 100.0 | — | — |
| Managers | 100.0 | — | — | 100.0 | — | — |
| Rest of employees | 98.6 | 0.1 | 1.3 | 97.8 | 0.1 | 2.1 |
| Mexico | ||||||
| Management team (1) | 99.6 | — | 0.4 | 99.3 | — | 0.7 |
| Managers | 95.1 | — | 4.9 | 95.9 | — | 4.1 |
| Rest of employees | 92.3 | — | 7.7 | 89.0 | — | 11.0 |
| Turkey | ||||||
| Management team (1) | 99.8 | 0.1 | 0.1 | 99.7 | 0.1 | 0.2 |
| Managers | 100.0 | — | — | 100.0 | — | — |
| Rest of employees | 97.6 | 0.1 | 2.3 | 99.2 | 0.1 | 0.7 |
| South America | ||||||
| Management team (1) | 100.0 | — | — | 100.0 | — | — |
| Managers | 99.8 | — | 0.2 | 99.4 | — | 0.6 |
| Rest of employees | 91.6 | 1.2 | 7.2 | 88.0 | 1.3 | 10.7 |
| Rest | ||||||
| Management team (1) | 99.7 | — | 0.3 | 100.0 | — | — |
| Managers | 99.4 | 0.2 | 0.4 | 99.2 | 0.2 | 0.6 |
| Rest of employees | 99.5 | — | 0.5 | 99.3 | — | 0.7 |
| Group average | ||||||
| Management team (1) | 99.8 | — | 0.2 | 99.8 | — | 0.2 |
| Managers | 98.2 | — | 1.8 | 98.5 | — | 1.5 |
| Rest of employees | 94.4 | 0.3 | 5.3 | 92.4 | 0.3 | 7.3 |
(1) The management team includes the highest range of the Group's management.
(2) 2022 data differ from those published in the 2022 Statement of Non-Financial Information due to additional update and checks. In 2023, the average annual proportion of full-time indefinite contracts, part-time indefinite contracts 59 and temporary contracts was 95.2%, 0.2% and 4.6%, respectively (in 2022, 94.6%, 0.9% and 4.5%, respectively 60). In absolute terms, the annual average for 2023, was 113,235 full-time permanent contracts, 226 part-time permanent contracts and 5,525 temporary contracts (in 2022, 106,937, 1,014 and 5,080, respectively 61).
216
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
59 Part-time employees include full-time contracts with reduced working hours.
60 The data for 2022 differs from that published in the 2022 Non-Financial Information Statement due to additional checks.
61 The data for 2022 differs from that published in the 2022 Non-Financial Information Statement due to additional checks.
| 2023 | 2022 | |||||
|---|---|---|---|---|---|---|
| Total | Male | Female | Total | Male | Female | |
| Spain | ||||||
| Retirement and early retirement | 162 | 97 | 65 | 187 | 117 | 70 |
| Voluntary redundancies | 28 | 17 | 11 | 7 | 5 | 2 |
| Resignations | 566 | 335 | 231 | 423 | 272 | 151 |
| Dismissals | 92 | 50 | 42 | 44 | 28 | 16 |
| Others (1) | 773 | 320 | 453 | 904 | 385 | 519 |
| Mexico | ||||||
| Retirement and early retirement | 272 | 146 | 126 | 298 | 149 | 149 |
| Voluntary redundancies | 884 | 511 | 373 | 174 | 101 | 73 |
| Resignations | 2,577 | 1,219 | 1,358 | 2,963 | 1,483 | 1,480 |
| Dismissals | 1,691 | 931 | 760 | 1,605 | 893 | 712 |
| Others (1) | 784 | 450 | 334 | 668 | 381 | 287 |
| Turkey | ||||||
| Retirement and early retirement | 2 | 1 | 1 | 126 | 55 | 71 |
| Voluntary redundancies | 163 | 81 | 82 | 83 | 42 | 41 |
| Resignations | 1,518 | 660 | 858 | 1,610 | 675 | 935 |
| Dismissals | 14 | 11 | 3 | 5 | 3 | 2 |
| Others (1) | 848 | 357 | 491 | 871 | 389 | 482 |
| South America | ||||||
| Retirement and early retirement | 43 | 17 | 26 | 29 | 13 | 16 |
| Voluntary redundancies | 45 | 17 | 28 | 195 | 105 | 90 |
| Resignations | 1,957 | 781 | 1,176 | 2,194 | 957 | 1,237 |
| Dismissals | 698 | 306 | 392 | 678 | 304 | 374 |
| Others (1) | 884 | 361 | 523 | 928 | 403 | 525 |
| Rest | ||||||
| Retirement and early retirement | 21 | 7 | 14 | 29 | 14 | 15 |
| Voluntary redundancies | 4 | 2 | 2 | 4 | 2 | 2 |
| Resignations | 60 | 28 | 32 | 97 | 72 | 25 |
| Dismissals | 37 | 26 | 11 | 13 | 8 | 5 |
| Others (1) | 24 | 12 | 12 | 29 | 16 | 13 |
| Total Group | 14,147 | 6,743 | 7,404 | 14,164 | 6,872 | 7,292 |
| Retirement and early retirement | 500 | 268 | 232 | 669 | 348 | 321 |
| Voluntary redundancies | 1,124 | 628 | 496 | 463 | 255 | 208 |
| Resignations | 6,678 | 3,023 | 3,655 | 7,287 | 3,459 | 3,828 |
| Dismissals | 2,532 | 1,324 | 1,208 | 2,345 | 1,236 | 1,109 |
| Others (1) | 3,313 | 1,500 | 1,813 | 3,400 | 1,574 | 1,826 |
(1) Others include permanent termination and death.
217
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
| 2023 | 2022 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Total | <30 | 30-39 | 40-49 | ≥50 | Total | <30 | 30-39 | 40-49 | ≥50 | |
| Spain | ||||||||||
| Retirement and early retirement | 162 | — | — | 5 | 157 | 187 | — | — | 5 | 182 |
| Voluntary redundancies | 28 | — | — | 7 | 21 | 7 | — | 2 | 2 | 3 |
| Resignations | 566 | 185 | 223 | 130 | 28 | 423 | 132 | 198 | 80 | 13 |
| Dismissals | 92 | 9 | 26 | 39 | 18 | 44 | 3 | 13 | 12 | 16 |
| Others (1) | 773 | 213 | 286 | 184 | 90 | 904 | 204 | 357 | 242 | 101 |
| Mexico | ||||||||||
| Retirement and early retirement | 272 | — | — | — | 272 | 298 | — | — | — | 298 |
| Voluntary redundancies | 884 | 386 | 412 | 76 | 10 | 174 | 85 | 77 | 9 | 3 |
| Resignations | 2,577 | 1,307 | 1,055 | 177 | 38 | 2,963 | 1,422 | 1,276 | 225 | 40 |
| Dismissals | 1,691 | 598 | 764 | 237 | 92 | 1,605 | 575 | 768 | 193 | 69 |
| Others (1) | 784 | 471 | 221 | 60 | 32 | 668 | 339 | 238 | 65 | 26 |
| Turkey | ||||||||||
| Retirement and early retirement | 2 | — | 1 | 1 | — | 126 | — | 3 | 48 | 75 |
| Voluntary redundancies | 163 | 20 | 51 | 53 | 39 | 83 | 9 | 25 | 36 | 13 |
| Resignations | 1,518 | 699 | 539 | 228 | 52 | 1,610 | 713 | 668 | 201 | 28 |
| Dismissals | 14 | 3 | 7 | 4 | — | 5 | — | 5 | — | — |
| Others (1) | 848 | 329 | 367 | 122 | 30 | 871 | 373 | 370 | 112 | 16 |
| South America | ||||||||||
| Retirement and early retirement | 43 | — | 2 | 1 | 40 | 29 | 2 | 1 | — | 26 |
| Voluntary redundancies | 45 | — | 7 | 4 | 34 | 195 | 11 | 46 | 43 | 95 |
| Resignations | 1,957 | 951 | 784 | 176 | 46 | 2,194 | 903 | 966 | 244 | 81 |
| Dismissals | 698 | 161 | 296 | 140 | 101 | 678 | 111 | 183 | 157 | 227 |
| Others (1) | 884 | 417 | 244 | 97 | 126 | 928 | 400 | 255 | 111 | 162 |
| Rest | ||||||||||
| Retirement and early retirement | 21 | — | — | — | 21 | 29 | — | — | — | 29 |
| Voluntary redundancies | 4 | 1 | — | 1 | 2 | 4 | — | 1 | 1 | 2 |
| Resignations | 60 | 12 | 20 | 18 | 10 | 97 | 29 | 28 | 25 | 15 |
| Dismissals | 37 | 2 | 12 | 11 | 12 | 13 | — | 4 | 2 | 7 |
| Others (1) | 24 | 2 | 11 | 4 | 7 | 29 | 2 | 6 | 8 | 13 |
| Total Group | 14,147 | 5,766 | 5,328 | 1,775 | 1,278 | 14,164 | 5,313 | 5,490 | 1,821 | 1,540 |
| Retirement and early retirement | 500 | — | 3 | 7 | 490 | 669 | 2 | 4 | 53 | 610 |
| Voluntary redundancies | 1,124 | 407 | 470 | 141 | 106 | 463 | 105 | 151 | 91 | 116 |
| Resignations | 6,678 | 3,154 | 2,621 | 729 | 174 | 7,287 | 3,199 | 3,136 | 775 | 177 |
| Dismissals | 2,532 | 773 | 1,105 | 431 | 223 | 2,345 | 689 | 973 | 364 | 319 |
| Others (1) | 3,313 | 1,432 | 1,129 | 467 | 285 | 3,400 | 1,318 | 1,226 | 538 | 318 |
(1) Others include permanent termination and death.
218
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
| 2023 | 2022 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Total | <30 | 30-39 | 40-49 | ≥50 | Total | <30 | 30-39 | 40-49 | ≥50 | |
| Spain | ||||||||||
| Management team (1) | 10 | — | 2 | 1 | 7 | 9 | — | — | 1 | 8 |
| Managers | 23 | — | 4 | 16 | 3 | 3 | — | — | 1 | 2 |
| Rest of employees | 59 | 9 | 20 | 22 | 8 | 32 | 3 | 13 | 10 | 6 |
| Mexico | ||||||||||
| Management team (1) | 26 | — | 9 | 9 | 8 | 21 | — | 5 | 9 | 7 |
| Managers | 769 | 253 | 378 | 103 | 35 | 704 | 218 | 378 | 80 | 28 |
| Rest of employees | 896 | 345 | 377 | 125 | 49 | 880 | 357 | 385 | 104 | 34 |
| Turkey | ||||||||||
| Management team (1) | — | — | — | — | — | — | — | — | — | — |
| Managers | 7 | — | 4 | 3 | — | — | — | — | — | — |
| Rest of employees | 7 | 3 | 3 | 1 | — | 5 | — | 5 | — | — |
| South America | ||||||||||
| Management team (1) | 25 | — | 2 | 7 | 16 | 16 | — | — | 7 | 9 |
| Managers | 163 | 22 | 55 | 50 | 36 | 229 | 19 | 59 | 68 | 83 |
| Rest of employees | 510 | 139 | 239 | 83 | 49 | 433 | 92 | 124 | 82 | 135 |
| Rest | ||||||||||
| Management team (1) | 9 | — | 2 | 2 | 5 | 3 | — | — | 1 | 2 |
| Managers | 17 | 1 | 3 | 8 | 5 | 4 | — | 1 | 1 | 2 |
| Rest of employees | 11 | 1 | 7 | 1 | 2 | 6 | — | 3 | — | 3 |
| Total Group | 2,532 | 773 | 1,105 | 431 | 223 | 2,345 | 689 | 973 | 364 | 319 |
| Management team (1) | 70 | — | 15 | 19 | 36 | 49 | — | 5 | 18 | 26 |
| Managers | 979 | 276 | 444 | 180 | 79 | 940 | 237 | 438 | 150 | 115 |
| Rest of employees | 1,483 | 497 | 646 | 232 | 108 | 1,356 | 452 | 530 | 196 | 178 |
(1) The management team includes the highest range of the Group´s management.
| 2023 | 2022 | |||||
|---|---|---|---|---|---|---|
| Total workforce turnover | Male | Female | Total workforce turnover | Male | Female | |
| Spain | 2.1 | 59.2 | 40.8 | 1.7 | 64.3 | 35.7 |
| Mexico | 5.7 | 47.3 | 52.7 | 7.1 | 50.1 | 50.0 |
| Turkey | 7.0 | 43.5 | 56.5 | 7.4 | 41.8 | 58.2 |
| South America | 8.3 | 39.9 | 60.1 | 9.6 | 43.6 | 56.4 |
| Rest | 4.2 | 46.7 | 53.3 | 7.2 | 74.2 | 25.8 |
| Total | 5.6 | 45.3 | 54.7 | 6.6 | 47.4 | 52.6 |
(1) Voluntary resignations = [Voluntary resignations (resignations) / average workforce for the period] * 100
| 2023 | 2022 | |||||
|---|---|---|---|---|---|---|
| Total employee turnover rate | Male | Female | Total employee turnover rate | Male | Female | |
| Spain | 8.8 | 9.6 | 8.0 | 8.5 | 9.0 | 8.0 |
| México | 17.4 | 19.3 | 15.5 | 21.1 | 23.3 | 18.9 |
| Turkey | 12.5 | 12.9 | 12.2 | 12.8 | 13.0 | 12.5 |
| South America | 16.5 | 14.9 | 17.9 | 19.2 | 19.8 | 18.7 |
| Rest | 14.1 | 13.9 | 14.6 | 15.9 | 16.6 | 15.0 |
| Total | 14.3 | 15.0 | 13.7 | 16.2 | 17.4 | 15.2 |
(1) Total turnover rate = ((total hires + discharges for the year)/(average number of employees2))100
219
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
| 2023 | 2022 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Total | <30 | 30-39 | 40-49 | ≥50 | Total | <30 | 30-39 | 40-49 | ≥50 | |
| Spain | 8.8 | 48.1 | 15.6 | 3.6 | 3.3 | 8.5 | 61.1 | 16.2 | 3.2 | 3.5 |
| México | 17.4 | 30.9 | 13.2 | 8.0 | 8.4 | 21.1 | 34.1 | 18.1 | 10.1 | 9.6 |
| Turkey | 12.5 | 31.2 | 8.0 | 4.7 | 7.7 | 12.8 | 32.8 | 8.6 | 4.3 | 8.3 |
| South America | 16.5 | 39.0 | 15.0 | 6.3 | 4.7 | 19.2 | 42.5 | 18.4 | 8.2 | 8.1 |
| Rest | 14.1 | 34.3 | 20.5 | 10.2 | 8.0 | 15.9 | 53.1 | 20.7 | 10.7 | 9.7 |
| Total | 14.3 | 33.8 | 12.7 | 5.4 | 5.2 | 16.2 | 37.0 | 15.7 | 5.8 | 6.6 |
(1) Total turnover rate = ((total hires + discharges for the year)/(average number of employees2))100
220
This English version is a translation of the original in Spanish for information purposes only.In case of a discrepancy, the Spanish original will prevail.
The activities of the Customer Care Service (SAC) and Customer Ombudsman in 2023 were carried out in accordance with the stipulations of Article 17 of the Ministerial Order (OM) ECO/734/2004, dated March 11, of the Ministry of the Economy, in compliance with the competences and procedures established in the Customer Protection Charter in Spain of BBVA Group, approved on July 23, 2004 by the Board of Directors of the Bank, with subsequent amendments (the latest on February 25, 2021). This regulation establishes in article 5 that the SAC and the Customer Ombudsman present,to the BBVA Board of Directors within the first quarter of each year, a joint or separate explanatory report of all BBVA Group entities included in the scope of this regulation, containing statistical summaries, the general criteria contained in the resolution of complaints regarding the most complained about matters and recommendations and suggestions to improve the service provided to customers and to avoid bad banking practices.
Based on the aforementioned regulations, the SAC is entrusted with the function of attending to and resolving claims and complaints received from customers in relation to the products and services marketed and contracted in Spanish territory by BBVA Group entities. In addition, in accordance with the aforementioned regulation, the Customer Ombudsman is made aware of and resolves, in the first instance, all claims and complaints submitted by the participants and beneficiaries of the pension plans. It also resolves those related to insurance and other financial products that BBVA Group Customer Care Service considers appropriate to transfer it, based on the amount or particular complexity, as established under article 4 of the Customer Protection Charter. In the second instance, it hears and resolves claims and complaints, within the quantitative limits established by the Regulations, which the customers decided to submit for its consideration after having obtained a rejection by the Customer Care Service.
At BBVA, customer protection is considered a top priority. It is recognized that, as in any human activity, banking can be affected by errors. Therefore, it is essential to anticipate the possibility of such errors occurring and proactively correct them. To this end, the pertinent protocols and delegations should be implemented to ensure that this process is as quick as possible without the need to file a claim. To this end, the SAC is responsible for internally transferring the criteria and recommendations made by regulators in their reports, promoting compliance with regulations on transparency and customer protection. The service also ensures compliance with good banking practices and usages applied at BBVA. To this end, it participates in the various internal communication channels aimed at the commercial network or in the committees that authorize the creation of new products and services, among many other forums.
In addition, the SAC is entrusted with the task of attending to and resolving complaints from customers of the BBVA Group in Spain in a timely and appropriate manner. As such, it serves as an early warning mechanism for problems arising from the marketing of products or services and/or the relationship between the entity and its customers. The management of these complaints results in actions aimed not only at solving the particular case, but also at detecting the causes that give rise to the specific case of the claim. The SAC analyzes complaints management data on an ongoing basis to identify and address recurring or systemic issues, and potential legal, operational and behavioral risks. As a result of this analysis and evaluation work, the SAC coordinates and heads various committees and working groups in which recurring, systemic or potential problems of the entity are highlighted and in which solutions are studied, assessed and promoted with a view to the continuous improvement of the service provided by BBVA. The SAC, in line with BBVA's values, provides coherence and meaning to all operations, playing an essential role in the relationship that BBVA establishes with its customers.
Complaints from BBVA Group users received at the BBVA Group Customer Service in Spain in 2023 amounted to 167,998 (151,246 in 2022) of which 138,827 were admitted ( 137,713 in 2022). On the other hand, 29,652 files were not admitted for processing because they did not comply with the requirements set forth in OM ECO/734 (including complaints pending at the end of 2022). In the same period, 133,233 were resolved by the SAC itself (including complaints pending at the end of 2022). 11,309 were pending analysis as of December 31, 2023. The increase in the inflow of complaints is mainly explained by the higher inflow of complaints related to mortgage loan formalization expenses. The main types of complaints received in 2023 were those related to current accounts and mortgage loans. Additional complaints data points as of December 31, 2023 and 2022 are provided below:
221
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
COMPLAINTS HANDLED BY THE CUSTOMER CARE SERVICE BY COMPLAINT TYPE (PERCENTAGE)
| Type | 2023 | 2022 |
|---|---|---|
| Resources | 24 | 31 |
| Active Products | 20 | 22 |
| Cards | 11 | 15 |
| Fraud | 23 | 12 |
| Quality of service and advice | 6 | 6 |
| Insurance | 4 | 5 |
| Services, receipts | 5 | 2 |
| Fixed and variable income securities | 1 | 1 |
| Other | 6 | 6 |
| Total | 100 | 100 |
COMPLAINTS HANDLED BY THE CUSTOMER CARE SERVICE ACCORDING TO RESOLUTION (NUMBER)
| 2023 | 2022 | |
|---|---|---|
| In favor of the person submiting the complaint | 43,633 | 45,318 |
| Partially in favor of the person submitting the complaint | 7,143 | 6,421 |
| In favor of the BBVA Group | 82,457 | 83,569 |
| Total | 133,233 | 135,308 |
Once again this year, the Customer Ombudsman maintained the common objective with the BBVA Group of unifying criteria and favoring the defense and security of customers, in order to make progress in promoting compliance with transparency and customer protection regulations. In order to effectively convey his/her thoughts and criteria on the matters submitted for his/her consideration, the Ombudsman organized several meetings with the Group's areas and units. In the 2023 financial year, 2,005 customer complaints were filed with the Customer Ombudsman's Office (1,817 in 2022). Of these, 22 were not admitted to processing due to a failure to comply with the requirements of OM ECO/734/2004 and 75 were pending as of December 31, 2023.
42.33% of customers who brought complaints before the Customer Ombudsman during the course of 2023 obtained some type of satisfaction, total or partial, by resolution of the Customer Ombudsman Office in 2023 (58.9% in 2022). Customers who are not satisfied with the Customer Ombudsman’s response can go to the official supervisory bodies (the Bank of Spain, the CNMV and General Directorate of Insurance and Pension Funds). 137 complaints were filed by customers to supervisory bodies in 2023 (112 in 2022).
BBVA continues making progress in the implementation of the different recommendations and suggestions of the Customer Ombudsman with regard to adapting products to the customer profiles and the need for transparent, clear and responsible information. Throughout 2023, due to the type of complaints received, the Ombudsman's suggestions focused on the need for measures to be taken to improve customer service protocols, especially in matters such as pension plans and blocking, and, as in previous years, to reinforce and improve the measures the Bank is taking to prevent and raise awareness among customers about cyber fraud.
The data on complaints handled by the Customer Ombudsman by type, at the close of 2023 and 2022, are set out below:
COMPLAINTS HANDLED BY THE CUSTOMER OMBUDSMAN OFFICE BY COMPLAINT TYPE (NUMBER)
| Type | 2023 | 2022 |
|---|---|---|
| Insurance and welfare products | 772 | 800 |
| Assets operations | 72 | 85 |
| Investment services | 24 | 36 |
| Liabilities operations | 73 | 38 |
| Other banking products (credit card, ATMs, etc.) | 482 | 582 |
| Collection and payment services | 362 | 174 |
| Other | 220 | 102 |
| Total | 2,005 | 1,817 |
The categorization of the complaints handled in the above table follows the criteria established by the Complaints Department of the Bank of Spain, in its requests for information. The data on complaints handled by the Customer Ombudsman by outcome, at the close of 2023 and 2022, are as follows:
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COMPLAINTS HANDLED BY THE CUSTOMER OMBUDSMAN OFFICE ACCORDING TO RESOLUTION (NUMBER)
| 2023 | 2022 | |
|---|---|---|
| Formal resolution | — | — |
| Estimate (in whole or in part) | 875 | 700 |
| Dismissed | 1,168 | 1,064 |
| Processing suspended | 2 | — |
| Total | 2,045 | 1,764 |
BBVA participates annually in the main sustainability analyses carried out by entities (non-financial rating agencies) that measure performance in environmental, social and corporate governance aspects. Based on the scores obtained from these evaluations, companies are selected to be part of specific sustainability indices.
(1) The inclusion of BBVA in any MSCI indices and the use of the logos, trademarks, service marks or index names does not constitute the sponsorship or promotion of BBVA by MSCI or any of its subsidiaries.The MSCI indices are the exclusive property of MSCI. MSCI and the MSCI indices and logos are trademarks or service marks of MSCI or its subsidiaries.
(2) Copyright © [2022] Morningstar Sustainalytics. All rights reserved. This report contains information developed by Sustainalytics (www.sustainalytics.com). Such information and data are proprietary of Sustainalytics and/or its third-party suppliers (Third Party Data) and are provided for informational purposes only. They do not constitute an endorsement of any product or project, nor an investment advice and are not warranted to be complete, timely, accurate or suitable for a particular purpose. Their use is subject to conditions available at https://www.sustainalytics.com/legal-disclaimers.
(3) Result on data reported as of 12/31/2021. As of the date of publication of this report, the assessment on data reported as of 12/31/2022 has not yet been published.
Additionally, since 2020, the Bank has been part of the Nasdaq Sustainable Bond Network (NSBN), a platform that brings together the different issuers of sustainable debt worldwide and serves as a clear reference for socially responsible investment.
The data of the financed operations that were analyzed under the Equator Principles (for more information on the application of these criteria, see “Sustainability policies and frameworks” within the section “2.1.4 Dialogue and discussion with customers, industry and the public sector) during the years 2023 and 2022 are detailed next:
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| Category A (1) | Category B (2) | Category C (3) | |||
|---|---|---|---|---|---|
| 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
| Number of transactions 5 | 4 | Number of transactions 25 | 12 | Number of transactions 13 | 9 |
| Total amount (millions of euros) 21,326 | 15,776 | Total amount (millions of euros) 12,675 | 14,281 | Total amount (millions of euros) 15,986 | 15,938 |
| Amount financed by BBVA (millions of euros) 957 | 604 | Amount financed by BBVA (millions of euros) 1,597 | 1,219 | Amount financed by BBVA (millions of euros) 1,020 | 994 |
(1) Category A: projects with potentially significant adverse social or environmental impacts that are irreversible or unprecedented.
(2) Category B: projects with potentially limited adverse social and environmental impacts that are few in number, generally site-specific, largely reversible and readily addressed through mitigation measures.
(3) Category C: projects with minimal or no social or environmental impacts.
Out of a total of 54 operations analyzed (100% of the operations under the scope of the Equator Principles, in 2022: 40), 43 were signed in 2023 (25 in 2022) and 11 deals were rejected on grounds related to business and risk (credit, environmental and social) of the deals (15 deals were rejected in 2022).
Of the operations signed in 2023, 53,5% were in the infrastructure sector, 32,6% in the power sector, 2,3%in the oil and gas sector and 11,6% in others sectors. By geographic area, 51,2% were located in Europe, Middle East and Africa (EMEA), 46,5% in the Americas and 2,3% in Asia.
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BBVA GROUP MAIN DATA (CONSOLIDATED FIGURES)
| 31-12-23 | ∆ % | 31-12-22 | 31-12-21 | |
|---|---|---|---|---|
| Balance sheet (millions of euros) ⁽¹⁾ | ||||
| Total assets | 775,558 | 8.9 | 712,092 | 662,885 |
| Loans and advances to customers (gross) | 388,912 | 5.5 | 368,588 | 330,055 |
| Deposits from customers | 413,487 | 4.8 | 394,404 | 349,761 |
| Total customer funds | 577,853 | 6.1 | 544,576 | 496,954 |
| Total equity | 55,265 | 9.4 | 50,517 | 48,760 |
| Income statement (millions of euros) ⁽¹⁾ | ||||
| Net interest income | 23,089 | 20.7 | 19,124 | 14,686 |
| Gross income | 29,542 | 19.4 | 24,743 | 21,066 |
| Operating income | 17,233 | 22.7 | 14,042 | 11,536 |
| Net attributable profit (loss) | 8,019 | 26.1 | 6,358 | 4,653 |
| Net attributable profit (loss) excluding non-recurring impacts ⁽¹⁾⁽²⁾ | 8,019 | 22.3 | 6,559 | 5,069 |
| The BBVA share and share performance ratios | ||||
| Number of shares outstanding (million) | 5,838 | (3.2) | 6,030 | 6,668 |
| Share price (euros) | 8.23 | 46.0 | 5.63 | 5.25 |
| Adjusted earning (loss) per share (euros) ⁽¹⁾⁽²⁾ | 1.32 | 26.8 | 1.04 | 0.71 |
| Earning (loss) per share (euros) ⁽¹⁾⁽²⁾ | 1.29 | 32.0 | 0.98 | 0.67 |
| Book value per share (euros) ⁽¹⁾⁽²⁾ | 8.86 | 13.9 | 7.78 | 6.86 |
| Tangible book value per share (euros) ⁽¹⁾⁽²⁾ | 8.46 | 13.9 | 7.43 | 6.52 |
| Market capitalization (millions of euros) | 48,023 | 41.4 | 33,974 | 35,006 |
| Dividend yield (dividend/price; %) ⁽²⁾⁽³⁾ | 5.7 | 6.2 | 2.6 | |
| Significant ratios (%) | ||||
| Adjusted ROE (net attributable profit (loss)/average shareholders' funds +/- average accumulated other comprehensive income) ⁽¹⁾⁽²⁾ | 16.2 | 14.4 | 11.4 | |
| Adjusted ROTE (net attributable profit (loss)/average shareholders' funds excluding average intangible assets +/- average accumulated other comprehensive income) ⁽¹⁾⁽²⁾ | 17.0 | 15.1 | 12.0 | |
| Adjusted ROA (profit (loss) for the period / average total assets - ATA) ⁽¹⁾⁽²⁾ | 1.12 | 0.99 | 0.94 | |
| Adjusted RORWA (profit (loss) for the period / average risk-weighted assets - RWA) ⁽¹⁾⁽²⁾ | 2.38 | 2.12 | 2.01 | |
| Efficiency ratio ⁽¹⁾⁽²⁾ | 41.7 | 43.2 | 45.2 | |
| Cost of risk ⁽¹⁾⁽²⁾ | 1.15 | 0.91 | 0.93 | |
| NPL ratio ⁽¹⁾⁽²⁾ | 3.4 | 3.4 | 4.1 | |
| NPL coverage ratio ⁽²⁾ | 77 | 81 | 75 | |
| Capital adequacy ratios (%) | ||||
| CET1 fully-loaded | 12.67 | 12.61 | 12.75 | |
| CET1 phased-in ⁽⁴⁾ | 12.67 | 12.68 | 12.98 | |
| Total ratio phased-in ⁽⁴⁾ | 16.58 | 15.98 | 17.24 | |
| Other information | ||||
| Number of active customers (million) | 71.5 | 6.3 | 67.3 | 60.8 |
| Number of shareholders ⁽⁵⁾ | 742,194 | (7.4) | 801,216 | 826,835 |
| Number of employees | 121,486 | 5.0 | 115,675 | 110,432 |
| Number of branches | 5,949 | (1.5) | 6,040 | 6,083 |
| Number of ATMs | 30,301 | 1.7 | 29,807 | 29,148 |
⁽¹⁾ Balances as of 31-12-2022 restated according to IFRS 17 - Insurance contracts.
⁽²⁾ For more information, see Alternative Performance Measures at the end of this report.
⁽³⁾ Calculated by dividing the dividends paid in the last twelve months by the closing price of the period.
⁽⁴⁾ Phased-in ratios include the temporary treatment on the impact of IFRS 9, calculated in accordance with Article 473 bis amendments of the Capital Requirements Regulation (CRR), introduced by the Regulation (EU) 2020/873. As of December 31, 2023, there are no differences between phased-in and fully-loaded ratios due to the aforementioned temporary treatment.
⁽⁵⁾ See the footnote of the shareholder structure table in the Solvency chapter of this report.
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Economic global growth has slowed down through 2023 and, particularly, during the last months, due to the high inflation, the tightening of monetary conditions and the gradual fading of the positive effects linked to the reopening after the COVID-19 pandemic. The slowdown has been, in general, less harsh than expected, and economic activity remains relatively dynamic, particularly in the Unites States, thanks to the dynamism of the labor markets, expansionary fiscal policies and the gradual fading of supply shocks triggered by the pandemic and the war in Ukraine.
Falling commodity prices compared to the levels seen in 2022 and the improvements in production process bottlenecks have contributed to a significant moderation of inflation. which, in annual terms, reached 3.4% in the United States and 2.9% in the Eurozone in December 2023, far below the levels registered at the end of 2022 (6.5% in the United States and 9.2% in the Eurozone).
In this context, the process of interest rate hikes launched approximately two years ago seems to have reached an end. According to BBVA Research, it is most likely that inflation will keep evolving favorably in the next months, enabling the start of a gradual process of relaxation of monetary conditions around mid-2024, which would take monetary policy interest rates to around 4.50% in the United States and 3.75% (in the case of refinancing operation rates) in the Eurozone by the end of 2024.
However, it cannot be ruled out that monetary policy benchmark rates might be reduced more quickly in the future, mainly if inflation evolves surprisingly on the downside. In any case, it is expected that both the U.S. Federal Reserve ("Fed") and the European Central Bank ("ECB") will continue taking liquidity reduction measures over 2024.
BBVA Research forecasts that global growth will be approximately 3.0% in 2024 (unchanged from the previous forecast and similar to the forecasted for the GDP growth in 2023).
In the United States, strong domestic demand supports a slightly upward revision of growth forecasts for 2023, from 2.3% to 2.4%, but the restrictive monetary conditions are likely to contribute to a growth deceleration in 2024, to 1.5%, without changes from the previous forecast.
In China, structural challenges to avoid a fast economic deceleration remain, but a series of stimulus measures have enabled a greater than expected dynamism of activity in the past few months, which supports an upward revision of the growth in 2023 from 4.8% to 5.2%. The GDP growth forecast for 2024 remains unchanged at 4.4%.
In the Eurozone, economic activity came to a standstill in the last months, reinforcing the low growth prospects; the forecast of the GDP expansion of the region remains at 0.4% for 2023 and it has been cut from 1.0% to 0.7% for 2024.
In this context of below potential growth and still high interest rates, aggregate demand moderation will probably favor an additional inflation reduction, which, however, would remain somewhat over the inflation targets in the United States and the Eurozone until the end of 2024. In any case, uncertainty remains high, and a number of factors could lead to more adverse scenarios unfolding.# Persistently high inflation and high interest rates, due to eventual supply shocks generated by the current geopolitical turbulence, and particularly by the recent maritime trade disruptions in the Red Sea, or other factors, could trigger a deep and widespread recession, as well as new bouts of financial volatility. Moreover, the slowdown in China could end up being more severe than expected. Finally, current geopolitical turbulence might contribute to higher energy prices and new disruptions in global supply chains.
| 2023 | 2024 | |||
|---|---|---|---|---|
| GDP | INFLATION | GDP | INFLATION | |
| World | 3.00 | 6.90 | 3.00 | 5.50 |
| Eurozone | 0.40 | 2.90 | 0.70 | 2.40 |
| Spain | 2.40 | 3.10 | 1.50 | 3.20 |
| The United States | 2.40 | 3.40 | 1.50 | 2.40 |
| Mexico | 3.40 | 4.70 | 2.90 | 3.50 |
| South America (1) | 1.40 | 38.10 | 0.80 | 31.40 |
| Turkey | 4.50 | 64.80 | 3.50 | 45.00 |
| China | 5.20 | -0.30 | 4.40 | 2.00 |
Source: BBVA Research estimates. Inflation end of period.
(1) It includes Argentina, Brazil, Chile, Colombia, Paraguay, Peru and Uruguay.
226 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
The performance of the Group's main currencies during 2023 has been very uneven. Due to its relevance for the Group, it should be noted the strength of the Mexican peso, which has appreciated (1.2)% against the euro. The other currency which stands out was the Colombian peso (2.5%). On the other hand, the depreciation of both the Turkish lira (-11.0%), mainly concentrated in June after the elections, and the Argentinian peso (-58.5%) intensified in the last quarter of the year after the measures enacted by the new government , stands out. In both cases, the currencies have been pressured by the negative dynamism of inflation. The rest of currencies evolved moderately during the year: the Peruvian sol (+-2.6%), the U.S. dollar (+(4.1)%) and the Chilean peso (-1.7%). For information on the BBVA Group's exchange rate risk management policies, see the "Risk Management" chapter of this report.
| Year-end exchange rates | ∆ % on 31-12-23 | ∆ % on 31-12-22 | Average exchange rates | ∆ % on 30-09-23 | ∆ % on 2023 | ∆ % on 2022 | |
|---|---|---|---|---|---|---|---|
| U.S. dollar | 1.1050 | (3.5) | (4.1) | 1.0815 | (2.6) | ||
| Mexican peso | 18.7231 | 11.4 | (1.2) | 19.1866 | 10.4 | ||
| Turkish lira ⁽¹⁾ | 32.6531 | (38.9) | (11.0) | — | — | ||
| Peruvian sol | 4.1042 | (1.1) | (2.6) | 4.0404 | (0.2) | ||
| Argentine peso ⁽¹⁾ | 892.81 | (78.9) | (58.5) | — | — | ||
| Chilean peso | 977.47 | (6.2) | (1.7) | 908.35 | 1.0 | ||
| Colombian peso | 4,223.37 | 21.5 | 2.5 | 4,679.22 | (4.5) |
⁽¹⁾ According to IAS 21 "The effects of changes in foreign exchange rates", the year-end exchange rate is used for the conversion of the Turkey and Argentina income statement.
During 2023, regulators have kept their previous lines of work, such as the implementation of the Basel III framework or the improvement of the bank recovery and resolution framework. In terms of sustainable finance, the developments have continued in promoting coordination between the different regulatory bodies, including risks related to environmental, social and governance (ESG) aspects in the prudential field and continuing to develop standards of reporting and disclosure requirements. Finally, the agenda in digital finance has been marked by the progress of the regulatory framework for crypto assets, data, artificial intelligence and the digital euro, among other issues.
At the global level, during 2023, the report published by the BCBS about financial turmoil is worthy of mention, in which it is concluded that three structural trends might have contributed indirectly to the bank failures: the increasing role of non-bank financial intermediation, the exposure to crypto assets concentrated in a small number of banks and the ability of clients to move their funds more quickly due to the increasing digitalization. This report complements those issued in the United States by the Federal Reserve Bank (FED) and the Federal Deposit Insurance Corporation (FDIC), institutions that, in April, published their findings on the facts, which the FDIC re-examined in August.
The BCBS also published a consultation on the review of the Core Principles for Effective Banking Supervision. This review mainly updates the core principles in order to reflect changes that have already been implemented to the regulatory framework through the Basel standards. Additionally, the BCBS has continued to evaluate the risks and vulnerabilities of the global banking system and to monitor the implementation of the Basel III regulatory reform.
Additionally, the BCBS published a public consultation document related to banks´disclosure of their exposure to crypto assets and another one related to the climatic risk disclosure framework under Pillar III.
In the European prudential area, the final agreement reached by the end of the year between the Council of the European Union (hereinafter, Council) and the European Parliament (hereinafter, EP), about the transposition of the international rules of capital requirements known as Basel III, is noteworthy. The proposal presented by the European Commission (hereinafter, Commission) by the end of 2021, the “Banking Package”, aims to boost the resilience of the banks that operate in the European Union (hereinafter, EU) and to strengthen its supervision and risk management, as well as to ease the transition towards climate neutrality. This package comprises the proposal for the Capital Requirements Directive (CRD VI, which amends the earlier CRD V) and the proposal for the Capital Requirements Regulation (CRR III, which amends the earlier CRR II).
In the agreement, regulators have agreed on how to implement the so-called “output floor”, which limits the variability of banks´ capital levels through internal models, as well as the provisional transitions so that entities have enough time to adapt. Regulators have also agreed to include technical improvements in the areas of credit risk, market risk and operational risk. Likewise, the agreement includes a harmonized framework suitable for the members of the institutions´ management bodies and of the key functions´ holders. In this package a prudential provisional transition for crypto assets and for the definition of different ESG-related risks, and adjustments to improve banks´management of these risks, have also been agreed. Likewise, it has been decided to harmonize the minimum requirements for branches of third country banks and the supervision of their activities in the EU.
The entry into force of these changes will be gradual and it is planned to take place 227 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail. from 2025 onwards. The EBA is already working to update the CRR III implementation standards (in December it published two consultations on the requirements of supervisory information and the outreach of Pillar III). Apart from the publications resulting from the future implementation of the banking package, the EBA published in December an update of the Guidelines on the specification and disclosure of systemic importance indicators, as well as modifications to the implementing technical standards of MREL and TLAC disclosure and reporting, which shall apply from June 2024.
The Bank of England, for its part, has delayed the implementation of Basel III for six months until July 1, 2025, but the transitional period will be reduced to 4.5 years, meaning that the framework will be fully implemented by January 1, 2030, in line with the EU. In the United States, the FED published in July a proposal to implement Basel III, with the full implementation of the standard by July 1, 2028. Along with this consultation, the FED published a proposal with specific changes to the buffer for global systemically important banks, known as G-SIB, with the main purpose of adjusting the buffer to entities´ risk profile.
Additionally, worthy of note are the publication from the European Banking Authority (EBA) of the proposal of modification of the reporting about interest rate risk in the investment portfolio and the publication of the public consultation about its project of technical standards of execution relative to the specific requirements of information presentation due to market risk. The EBA has also published its final RTS about securitization, in which conditions for the evaluation of the consistency of the underlying exposures are established in a number of simple, transparent and standardized (STS) securitization within the balance sheet. Lastly, the ECB also published a consultation about the revised Guide of internal models, which clarifies how credit entities must include in their models climatic and environmental relevant risks. It also offers clarifications for the banks that wish to return to the standard method to calculate their risk-weighted assets.
In September 2023, the Bank of Spain (BdE, for its acronym in Spanish) adapted its methodology of minimum floors to evaluate the OSIE (Other Systemically Important Entities) capital buffers to the standard published by the ECB in December 2022 and which shall be applicable from January 1, 2024. The new standard pretends to homogenize the establishment of these buffers in Europe, raising the minimums.
In terms of the crisis management framework, at the global level, the FSB consultation on financial resources and tools that could be used for the resolution of the central counterparty entities is worthy of mention.# In Europe the Commission presented a crisis management and deposit insurance (CMDI) framework reform proposal with the purpose of: i) making it more proportional, efficient and consistent in the management of the resolution or liquidation of any bank in the EU, ensuring the adequate funding of the process, and (ii) improving the synergies between crisis management and depositor protection, taking measures to complete the European banking union . In order to meet these goals, it is proposed to extend the scope of the resolution, clarifying and homogenizing other essential concepts. Moreover, it is intended to reinforce and extend the functions of the deposit guarantee funds (DGF) to, among other objectives, ease its use in resolution. At the moment, the EP and the Council are debating about the legislative package. For its part, the EBA has published the final document with the Guidelines on the overall recovery capacity (ORC) in recovery planning. The objective is to establish a consistent framework for the determination of the ORC in recovery plans and their respective assessments by the competent authorities. The EBA also published its final Guidelines directed towards the resolution authorities so that they publish their approach to applying the bail-in in order to provide more transparency to market participants. In Spain, the BdE has made the revised EBA Guidelines on methods for the calculation of contributions to deposit guarantee funds its own. In the United States, regulatory agencies published a series of proposals linked to bank resolution. First, they aim that banks with assets amounting to more than 100 billion dollars issue long-term debt in order to cover potential losses in times of stress (with a gradual implementation of the requirement). In addition, other requirements to improve bank separability or to adjust resolution plans (both in terms of publication frequency and of publication content) are included.
In 2023, regulatory activity in ESG matter for the banking system continued to progress in line with the previous years. Likewise, development in other geographical areas continued. At global level, it is important to highlight some initiatives driven by global institutions such as those of the International Sustainability Standards Board (ISSB), created in November 2021 by the International Financial Reporting Standards (IFRS) Foundation. In June 2023, the ISSB published the opening standards of disclosure about sustainability, IFRS S1 and IFRS S2. The IFRS S1 offers a number of disclosure requirements designed to enable companies to inform their investors about the sustainability-related risks and opportunities that they face in the short, medium and long term. The IFRS S2 establishes specific climate-related disclosures and it is designed to be used in conjunction with the IFRS S1. These standards include the recommendations of the Task Force on Climate- related Financial Disclosures (TCFD). The ISSB seeks the establishment of a global basis for the disclosure of sustainability-related financial information and will work together with jurisdictions and companies to promote its implementation. In July 2023, the International Organisation of Securities Commissions (IOSCO) announced its support to the ISSB standards.
In respect of the European banking system, regulatory activity continued to progress, in line with the renewed strategy of 2021 of sustainable finance. As a reflection of the importance of ESG issues in the supervision and, as will be discussed later, during 2023, supervisory activities related to climatic risk have focused in complying with the commitments (action plan) of the thematic review of 2022. Europe has continued to integrate ESG concepts in the prudential regulation, in the supervision and in the reporting requirements. In 228 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail. respect of the sustainability reporting standards, the entry into force, in January 2023, of the Corporate Sustainability Reporting Directive (CSRD) is worthy of mention. The Directive introduces more detailed obligations about environmental, social and governance issues than the earlier Non-Financial Reporting Directive (NFRD). For its development, the first package of European Sustainability Reporting Standards (ESRS) has been approved, prepared by the European Financial Reporting Advisory Group (EFRAG), advising body to the Commission. It comprises twelve ESRS with high level of detail and which extensively describe the both general and specific requirements about different sustainability factors, not only environmental, that entities shall observe when preparing information. In December, EFRAG published three implementation guides for consultation on materiality, value chain and datapoint analysis. The EC proposes to postpone the adoption of sectoral ESRS to June 30, 2026. In the same month, EFRAG and the Task Force on Nature-related Financial Disclosures (TNFD) signed an agreement of cooperation to tackle nature-related issues and improve the corporate transparency related to biodiversity and ecosystems.
On October 12, the EBA published its report on prudential treatment of environmental and social risks, after the discussion paper published in May 2022. This report reaffirms the need of maintaining a focus based on risks and the fact that at this point it does not consider necessary the introduction of adjustment factors that increase the capital requirement for brown exposures or that reduce it for green ones. On the contrary, it does propose a series of adjustments to the framework, with measures in the short and in the medium/long term.
In respect of taxonomy, in June 2023, the Commission announced a new measure package in order to boost and consolidate regulation on sustainable finance in the European Union. This package includes technical selection criteria to determine if an economic activity is aligned with the environmental goals of taxonomy that were pending: sustainable use and protection and recuperation of biodiversity and ecosystems. The estimated date for the application of these standards is January 1, 2024. After the adoption of the Regulation on European green bonds by the European Parliament, in October 2023, the Council formally adopted the Regulation. The Regulation establishes uniform requisites for the bond issuers that wish to use the denomination “European green bond” or “EuGB” for their sustainable bonds from the environmental point of view. The Regulation also establishes a registration system and a supervision framework for the EuGB external verifiers.
In June 2023, European Supervision Authorities (EBA, EIOPA and ESMA, ESAs) made their Progress Reports on greenwashing public. These reports provide a high level definition of what is considered to be greenwashing, applicable to market participants within their respective competencies; banking, insurance and pensions and financial markets. Final reports are expected by May 2024.
In December, an agreement was reached about the proposal of the Directive on corporate sustainability due diligence, proposed by the Commission in February 2022. This directive requires that companies of all sectors identify and prevent, end or mitigate the negative impact of their activities, as well as of their subsidiaries´ operations and of their supply chains, on human rights and the environment. Once the Directive is adopted, member States will have two years to integrate it into their national legislation. Moreover, on 1 December, the Fit-for-55 climate risk scenario analysis exercise started. The deadline set to submit information to authorities is March 25, 2024. This is an exercise in which all the relevant banks will take part with a top-down approach, and whose results will be published in an aggregated form in the first quarter of 2025. The result of the exercise will not affect the annual evaluation process (SREP). The focus of the exercise will be on the transition risk rather than the physical risk.
Europe continues to work towards the acceleration of the implementation of the Action Plan for the Capital Markets Union (CMU). For that matter, the following actions are worthy of mention:
In 2023, digitization continued to be a priority for European authorities, which have continued progressing in the implementation of the digital strategy defined by the Commission in 2020, and whose fundamental pillars are, among others, the strengthening of the use of data and the development and regulation of artificial intelligence.
In respect of the first pillar, the Commission adopted in July a new adequacy decision for the EU-United States transfer of data. In addition, the Council and the EP have finally reached an agreement on the new data Regulation concerning the access and deployment of data generated in the EU in all economic sectors, with special focus on the Internet of Things.
Another area which has drawn the most attention at the international level has been the development and regulation of artificial intelligence (AI). At the global level, the G7 leaders agreed in May an Action Plan to promote global interoperability among tools for a trustworthy AI. In this manner, they have embraced the main international guiding principles on IA and a voluntary code of conduct for AI developers, which will complement, at the international level, the standards that EU co-legislators are finalizing. In this international context, worthy of note is the EU-United States Joint Declaration of the Trade and Technology Council, where the commitment to develop a roadmap for a trustworthy AI and its risks management was restated, complementing the G7 process. At the European level, in December the political agreement regarding the new IA Regulation was reached, which will introduce specific requirements for the systems that use this technology according to the generated risk.
In the financial area, the Commission presented in mid-2022 a proposal for a regulation on financial data access (FIDA), which includes a new legal obligation so that financial entities share with authorized third parties certain data categories, such as data related to mortgages, credit and savings accounts and investment products.
In respect of other legislative initiatives, the Commission presented by the middle of the year two proposals to review the second directive of payment services (PSD2): a new Directive (PSD3), which contains the authorization requirements for payment and electronic money entities, and a new Payment Services Regulation (PSR), in which requirements applicable to the delivery of payment services in the EU are updated, with relevant changes in terms of fraud and account information and payment initiation from third parties services. Apart from that, the EP and the Council have reached a temporary agreement on the proposal of a new Regulation on instant payments to boost its use in all the EU.
Moreover, in June 2023, the EP and the Council reached a provisional agreement on the Regulation on electronic identification and trust services for electronic transactions (eIDAS), which establishes the creation of digital identity wallets.
At the global level, the Roadmap for Enhancing Cross-border Payments launched by the G20 in 2020 continues to advance, as shown in the third progress report published by the FSB. This report includes for the first time an estimate of the project Key Performance Indicators (KPIs), which show that the cost, speed, accessibility and transparency goals set for 2027 are still far from being achieved. However, the FSB is optimistic about the evolution in the coming years.
One of the topics that has drawn the most attention from international bodies and regulators in 2023 has been crypto-assets. At the global level, the FSB published in July the international regulatory framework for the crypto-assets activities, with general recommendations for the regulation, supervision and surveillance of their activities, as well as a revision of the high level recommendations for global stablecoins. Additionally, in May, IOSCO submitted a series of recommendations about crypto-assets to consultation in order to address the worries concerning market integrity and investor protection.
At the European level, the EP and the Council reached an agreement in April and approved the new Regulation on Markets in Crypto- assets (MiCA), which imposes a series of obligations for the issuers and providers of crypto-assets services and which will come into force in 2024. Once the regulation has been officially approved, both the ESMA and the EBA are working on the secondary legislation of the MiCA.
Furthermore, the European project for the possible issuance of a digital euro - a digital central bank currency for retail use - also saw process in 2023. On the one hand, the Commission proposed in June a legal framework for the possible digital euro, in which its features and distribution model were set, and whose negotiation began in the last quarter of 2023. On the other hand, the ECB - with whom lies the final decision of issuing a digital euro - finalized in October the research phase on the digital euro and initiated a preparation phase that will lay the foundations for a possible digital euro and which will have a initial duration of two additional years. Then, the ECB Governing Council will decide whether to give or not the green light to the next preparation phase in order to pave the way for the possible issuance.
The ecosystem of decentralized finance (DeFi) has also began to draw regulators´attention.
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
229Thus, last year the IOSCO submitted to consultation recommendations for decentralized finance, which pretend to address challenges such as market integrity and investor protection. In respect of the new European Digital Operative Resilience Act (DORA), which is aimed at ensuring that the EU financial sector can continue to function resiliently in the event of major operative disruption, the ESAs (EBA, ESMA and EIOPA) have been working on the development of the secondary legislation.
With regard to the money laundering regulation, in Europe the EBA Guidelines on money laundering and terrorist financing risk factors (ML/RF) were published, as well as the Guidelines on policies and controls for the effective management of ML/TF risks when providing access to financial services. In addition, the Guidelines on ML/TF risk factors have been submitted to consultation in order to include the crypto-asset services providers (CASP). Additionally, at the European level, on October 30, 2023, the Directive (EU) on credit agreements for consumers was published, and it came into force on 19 November, meaning that Member States will adopt and publish at the latest on November 20, 2025 the necessary legal, regulatory and administrative dispositions and will implement those measures form November 20, 2026 onwards. This new Directive broadens the scope of the current one, adapts the consumer credit concession to digital channels and introduces new requirements that will affect from the pre-contractual publicity and documentation, as well as consumer creditworthiness assessment and withdrawal periods, to the authorization process of certain creditors and credit intermediaries.
231
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
Unless expressly indicated otherwise, for a better understanding of the changes under the main headings of the Group's income statement, the rates of change provided below refer to constant exchange rates. When comparing two dates or periods in this report, the impact of changes in the exchange rates against the euro of the currencies of the countries in which BBVA operates is sometimes excluded, assuming that exchange rates remain constant. For this purpose, the average exchange rate of the currency of each geographical area of the most recent period is used for both periods, except for those countries whose economies have been considered hyperinflationary, for which the closing exchange rate of the most recent period is used.
The BBVA Group generated a net attributable profit of €8,019m between January and December of 2023, boosted by the performance of recurring income of the banking business, mainly the net interest income, which grew at a rate of 28.6%. This result means an increase of 35.4% compared to the previous year, excluding the net impact arisen from the purchase of offices in Spain in 2022 from the comparison. It should to be noted that 2023 results include the recording for the total annual amount paid for the temporary tax on credit institutions and financial credit institutions 62 for €215m, included in the other operating income and expenses line of the income statement. The estimated impact corresponding to the year 2024 is €285 million and will be recorded on the first quarter of 2024 in such caption of the consolidated income statement.
CONSOLIDATED INCOME STATEMENT: QUARTERLY EVOLUTION (MILLIONS OF EUROS)
| 2023 | 2022 | |||||||
|---|---|---|---|---|---|---|---|---|
| 4Q | 3Q | 2Q | 1Q | 4Q | 3Q | 2Q | 1Q | |
| Net interest income | 5,246 | 6,434 | 5,768 | 5,642 | 5,334 | 5,252 | 4,595 | 3,943 |
| Net fees and commissions | 1,694 | 1,685 | 1,470 | 1,439 | 1,328 | 1,385 | 1,413 | 1,247 |
| Net trading income | 753 | 658 | 334 | 438 | 269 | 573 | 516 | 580 |
| Other operating income and expenses | (255) | (820) | (383) | (561) | (443) | (372) | (501) | (374) |
| Gross income | 7,438 | 7,956 | 7,189 | 6,958 | 6,489 | 6,838 | 6,022 | 5,395 |
| Operating expenses | (3,068) | (3,303) | (2,922) | (3,016) | (2,875) | (2,803) | (2,618) | (2,406) |
| Personnel expenses | (1,693) | (1,756) | (1,530) | (1,551) | (1,547) | (1,471) | (1,344) | (1,238) |
| Other administrative expenses | (1,025) | (1,169) | (1,054) | (1,127) | (990) | (993) | (935) | (855) |
| Depreciation | (349) | (378) | (337) | (339) | (338) | (338) | (340) | (313) |
| Operating income | 4,370 | 4,654 | 4,267 | 3,942 | 3,614 | 4,035 | 3,404 | 2,989 |
| Impairment on financial assets not measured at fair value through profit or loss | (1,225) | (1,210) | (1,025) | (968) | (998) | (940) | (704) | (737) |
| Provisions or reversal of provisions | (163) | (81) | (115) | (14) | (50) | (129) | (64) | (48) |
| Other gains (losses) | (49) | 2 | 50 | (16) | (6) | 19 | (3) | 20 |
| Profit (loss) before tax | 2,932 | 3,365 | 3,178 | 2,944 | 2,559 | 2,985 | 2,634 | 2,225 |
| Income tax | (799) | (1,226) | (1,028) | (950) | (850) | (1,005) | (680) | (903) |
| Profit (loss) for the period | 2,133 | 2,139 | 2,150 | 1,994 | 1,709 | 1,980 | 1,954 | 1,321 |
| Non-controlling interests | (75) | (56) | (118) | (148) | (146) | (143) | (120) | 3 |
| Net attributable profit (loss) excluding non- recurring impacts | 2,058 | 2,083 | 2,032 | 1,846 | 1,563 | 1,838 | 1,834 | 1,325 |
| Discontinued operations and Other ⁽¹⁾ | — | — | — | — | — | — | (201) | — |
| Net attributable profit (loss) | 2,058 | 2,083 | 2,032 | 1,846 | 1,563 | 1,838 | 1,633 | 1,325 |
| Adjusted earning (loss) per share (euros) ⁽²⁾ | 0.34 | 0.34 | 0.34 | 0.30 | 0.25 | 0.29 | 0.29 | 0.21 |
| Earning (loss) per share (euros) ⁽²⁾ | 0.33 | 0.33 | 0.33 | 0.29 | 0.24 | 0.28 | 0.24 | 0.19 |
General note: 2022 figures have been restated according to IFRS 17 - Insurance contracts.
⁽¹⁾ Includes the net impact arisen from the purchase of offices in Spain in the second quarter of 2022 for €-201m.
⁽²⁾ Adjusted by additional Tier 1 instrument remuneration. For more information, see Alternative Performance Measures at the end of this report.
232
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
62 In compliance with Law 38/2022, of December 27, which establishes the obligation to pay a patrimonial benefit of a public and non-taxable nature during the years 2023 and 2024 for credit institutions that operate in Spanish territory whose sum of total interest income and fee and commission income corresponding to the year 2019 is equal to or greater than €800m.
CONSOLIDATED INCOME STATEMENT (MILLIONS OF EUROS)
| ∆ % at constant exchange rates | 2023 | ∆ % 2022 | Net interest income | 19,124 | |
|---|---|---|---|---|---|
| Net fees and commissions | 5,372 | ||||
| Net trading income | 1,938 | ||||
| Other operating income and expenses | (1,691) | ||||
| Gross income | 24,743 | ||||
| Operating expenses | (10,701) | ||||
| Personnel expenses | (5,601) | ||||
| Other administrative expenses | (3,773) | ||||
| Depreciation | (1,328) | ||||
| Operating income | 14,042 | ||||
| Impairment on financial assets not measured at fair value through profit or loss | (3,379) | ||||
| Provisions or reversal of provisions | (291) | ||||
| Other gains (losses) | 30 | ||||
| Profit (loss) before tax | 10,402 | ||||
| Income tax | (3,438) | ||||
| Profit (loss) for the period | 6,965 | ||||
| Non-controlling interests | (405) | ||||
| Net attributable profit (loss) excluding non- recurring impacts | 6,559 | ||||
| Discontinued operations and Other ⁽¹⁾ | (201) | ||||
| Net attributable profit (loss) | 6,358 | ||||
| Adjusted earning (loss) per share (euros) ⁽²⁾ | 1.04 | ||||
| Earning (loss) per share (euros) ⁽²⁾ | 0.98 |
| 2023 | 20.7 | 28.6 | 19,124 | |
|---|---|---|---|---|
| Net interest income | ||||
| Net fees and commissions | 6,288 | 17.0 | 21.3 | 5,372 |
| Net trading income | 2,183 | 12.6 | 31.8 | 1,938 |
| Other operating income and expenses | (2,018) | 19.4 | (4.9) | (1,691) |
| Gross income | 29,542 | 19.4 | 30.3 | 24,743 |
| Operating expenses | (12,308) | 15.0 | 19.7 | (10,701) |
| Personnel expenses | (6,530) | 16.6 | 22.2 | (5,601) |
| Other administrative expenses | (4,375) | 16.0 | 21.3 | (3,773) |
| Depreciation | (1,403) | 5.6 | 5.1 | (1,328) |
| Operating income | 17,233 | 22.7 | 39.1 | 14,042 |
| Impairment on financial assets not measured at fair value through profit or loss | (4,428) | 31.1 | 33.8 | (3,379) |
| Provisions or reversal of provisions | (373) | 28.3 | 64.8 | (291) |
| Other gains (losses) | (13) | n.s. | n.s. | 30 |
| Profit (loss) before tax | 12,419 | 19.4 | 40.0 | 10,402 |
| Income tax | (4,003) | 16.4 | 33.0 | (3,438) |
| Profit (loss) for the period | 8,416 | 20.8 | 43.6 | 6,965 |
| Non-controlling interests | (397) | (2.1) | n.s. | (405) |
| Net attributable profit (loss) excluding non- recurring impacts | 8,019 | 22.3 | 35.4 | 6,559 |
| Discontinued operations and Other ⁽¹⁾ | — | — | — | (201) |
| Net attributable profit (loss) | 8,019 | 26.1 | 40.1 | 6,358 |
| Adjusted earning (loss) per share (euros) ⁽²⁾ | 1.32 | 1.04 | ||
| Earning (loss) per share (euros) ⁽²⁾ | 1.29 | 0.98 |
General note: 2022 figures have been restated according to IFRS 17 - Insurance contracts.
⁽¹⁾ Includes the net impact arisen from the purchase of offices in Spain in the second quarter of 2022 for €-201m.
⁽²⁾ Adjusted by additional Tier 1 instrument remuneration. For more information, see Alternative Performance Measures at the end of this report.
The accumulated net interest income as of December 31, 2023 was higher than in the same period of the previous year (+28.6%), with increases in all business areas, with a customer spread improvement in the main areas and higher performing loan volumes. The good evolution in Spain, Mexico and South America is noteworthy. Positive evolution in the net fees and commissions line, which increased by 21.3% year-on-year due to favorable performance in payment systems and, to a lesser extent, asset management. By business areas, Turkey´s and Mexico´s contribution stands out.
233
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
NET INTEREST INCOME / AVERAGE TOTAL ASSETS (PERCENTAGE AT CONSTANT EXCHANGE RATES)
NET INTEREST INCOME PLUS NET FEES AND COMMISSIONS (MILLIONS OF EUROS AT CONSTANT EXCHANGE RATES)
+27.0% (1)
23,140
29,377
⁽¹⁾ At current exchange rates: +19.9%.
At the end of December 2023, NTI grew by 31.8%, with a positive performance of this line in all business areas, favored by the results of the Global Markets unit, which offset the negative results recorded on the Corporate Center. The other operating income and expenses line accumulated as of December 31, 2023, a result that compares negatively with last year, mainly due to the higher negative adjustment for hyperinflation in Argentina. This line also includes the contribution to the public protection schemes for bank deposits in Spain, which in 2023 was lower than the previous year's contribution, and the recording of €215m, corresponding to the total annual amount paid for the temporary tax on credit institutions and financial credit establishments, also in Spain.
GROSS INCOME (MILLIONS OF EUROS AT CONSTANT EXCHANGE RATES)
+30.3% (1)
22,673
29,542
⁽¹⁾ At current exchange rates: +19.4%.
On a year-on-year basis, operating expenses increased by 19.7% at the Group level.This increase is largely impacted by the inflation rates observed in the countries in which the Group operates, which, on the one hand, have been affected by the measures implemented by the Group in 2023 to compensate the loss of purchasing power of the workforce and, on the other hand, have had an effect in general expenses. Thanks to the remarkable growth in gross income (+30.3%), the efficiency ratio stood at 41.7% as of December 31, 2023, with an improvement of 370 basis points compared to the ratio recorded 12 months earlier, highlighting the evolution in Rest of Business and Spain.
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
+19.7% (1)
10,286
12,308
⁽¹⁾ At current exchange rates: +15.0%.
-370 Basis points
The impairment on financial assets not measured at fair value through profit or loss (impairment on financial assets) at the end of December 2023 was 33.8% higher than in the same period of the previous year, with lower requirements in Turkey, which were offset by higher provisioning needs, mainly in Mexico and South America, in a context of rising interest rates and growth in the most profitable segments, in line with the Group's strategy.
+39.1% (1)
12,387
17,233
⁽¹⁾ At current exchange rates: +22.7%.
+33.8% (1)
3,310
4,428
⁽¹⁾ At current exchange rates: +31.1%.
The provisions or reversal of provisions line (hereinafter, provisions) registered at the end of December 2023 higher provisions compared to the same period of the previous year, mainly originated from Spain and Turkey. On the other hand, the other gains (losses) line closed December 2023 with a balance of €-13m, which compares unfavorably with the positive result of the previous year.
As a result of the above, the BBVA Group generated a net attributable profit of €8,019m between January and December of the year 2023, which compares very positively with the result for the previous year (+35.4%, excluding the net impact arisen from the purchase of offices in Spain in 2022). These solid results are supported by the favorable evolution of the banking business recurring income, which offset higher operating expenses and the increase in provisions for impairment losses on financial assets. The cumulative net attributable profits, in millions of euros, at the end of December 2023 for the business areas that compose the Group were as follows: €2,755m in Spain, €5,340m in Mexico, €528m in Turkey, €613m in South America and €389m in Rest of Business.
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
+40.1% (1)
5,723
8,019
⁽¹⁾ At current exchange rates: +26.1%
+35.4% (1)
5,924
8,019
General note: non-recurring impacts include the net impact arisen from the purchase of offices in Spain in 2Q22.
⁽¹⁾ At current exchange rates: +22.3%.
The Group's excellent performance has also allowed to accelerate value creation, as reflected in the growth of the tangible book value per share and dividends, which at the end of December 2023 was 20.2% higher than in the same period of the previous year.
+20.2%
General note: replenishing dividends paid in the period. For more information, see Alternative Performance Measures at the end of this report.
General note: adjusted by additional Tier 1 instrument remuneration. Adjusted EPS excludes, in addition, the net impact arisen from the purchase of offices in Spain in 2Q22. For more information, see Alternative Performance Measures at the end of this report
⁽¹⁾ The accumulated EPS stands at €0.98 and €1.29 in 2022 and 2023, respectively.
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
⁽¹⁾ The ratio of 2021 excludes the results generated by BBVA USA and the rest of the companies in the United States until its sale to PNC on June 1, 2021 and the net cost related to the restructuring process. The ratio of 2022 excludes the net impact arisen from the purchase of offices in Spain.
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
The most relevant aspects related to the evolution of the Group's balance sheet and business activity as of December 31, 2023 are summarized below:
| 31-12-23 | ∆ % | 31-12-22 | |
|---|---|---|---|
| Cash, cash balances at central banks and other demand deposits | 75,416 | (5.4) | 79,756 |
| Financial assets held for trading | 141,042 | 27.4 | 110,671 |
| Non-trading financial assets mandatorily at fair value through profit or loss | 8,737 | 26.8 | 6,888 |
| Financial assets designated at fair value through profit or loss | 955 | 4.6 | 913 |
| Financial assets at fair value through accumulated other comprehensive income | 62,205 | (4.8) | 65,374 |
| Financial assets at amortized cost | 451,732 | 9.0 | 414,421 |
| Loans and advances to central banks and credit institutions | 24,627 | 20.5 | 20,431 |
| Loans and advances to customers | 377,643 | 5.7 | 357,351 |
| Debt securities | 49,462 | 35.0 | 36,639 |
| Investments in joint ventures and associates | 976 | 6.6 | 916 |
| Tangible assets | 9,253 | 5.9 | 8,737 |
| Intangible assets | 2,363 | 9.6 | 2,156 |
| Other assets | 22,878 | 2.8 | 22,259 |
| Total assets | 775,558 | 8.9 | 712,092 |
| Financial liabilities held for trading | 121,715 | 27.3 | 95,611 |
| Other financial liabilities designated at fair value through profit or loss | 13,299 | 25.7 | 10,580 |
| Financial liabilities at amortized cost | 557,589 | 5.4 | 529,172 |
| Deposits from central banks and credit institutions | 60,349 | (7.5) | 65,258 |
| Deposits from customers | 413,487 | 4.8 | 394,404 |
| Debt certificates | 68,707 | 24.0 | 55,429 |
| Other financial liabilities | 15,046 | 6.9 | 14,081 |
| Liabilities under insurance and reinsurance contracts | 12,110 | 19.5 | 10,131 |
| Other liabilities | 15,580 | (3.1) | 16,081 |
| Total liabilities | 720,293 | 8.9 | 661,575 |
| Non-controlling interests | 3,564 | (1.6) | 3,623 |
| Accumulated other comprehensive income | (16,254) | (7.9) | (17,642) |
| Shareholders’ funds | 67,955 | 5.3 | 64,535 |
| Total equity | 55,265 | 9.4 | 50,517 |
| Total liabilities and equity | 775,558 | 8.9 | 712,092 |
| Memorandum item: Guarantees given | 60,019 | 8.8 | 55,182 |
General note: 2022 figures have been restated according to IFRS 17 - Insurance contracts.
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
| 31-12-23 | ∆ % | 31-12-22 | |
|---|---|---|---|
| Public sector | 23,269 | 11.4 | 20,884 |
| Individuals | 168,123 | 7.2 | 156,838 |
| Mortgages | 93,358 | 2.0 | 91,569 |
| Consumer | 39,074 | 8.6 | 35,965 |
| Credit cards | 21,609 | 24.3 | 17,382 |
| Other loans | 14,082 | 18.1 | 11,921 |
| Business | 183,076 | 3.2 | 177,374 |
| Non-performing loans | 14,444 | 7.0 | 13,493 |
| Loans and advances to customers (gross) | 388,912 | 5.5 | 368,588 |
| Allowances ⁽¹⁾ | (11,269) | 0.3 | (11,237) |
| Loans and advances to customers | 377,643 | 5.7 | 357,351 |
⁽¹⁾ Allowances include valuation adjustments for credit risk throughout the expected residual life in those financial instruments that have been acquired (mainly originating from the acquisition of Catalunya Banc, S.A.). As of December 31, 2023 and December 31, 2022 the remaining amount was €142m and €190m, respectively.
+5.7% (1)
⁽¹⁾ At constant exchange rates: +7.9%.
+6.1% (1)
⁽¹⁾ At constant exchange rates: +8.6%.
| 31-12-23 | ∆ % | 31-12-22 | |
|---|---|---|---|
| Deposits from customers | 413,487 | 4.8 | 394,404 |
| Current accounts | 317,543 | 0.5 | 316,082 |
| Time deposits | 91,524 | 21.0 | 75,646 |
| Other deposits | 4,420 | 65.2 | 2,676 |
| Other customer funds | 164,367 | 9.5 | 150,172 |
| Mutual funds and investment companies and customer portfolios ⁽¹⁾ | 131,849 | 21.0 | 108,936 |
| Pension funds | 28,326 | (26.7) | 38,653 |
| Other off-balance sheet funds | 4,192 | 62.4 | 2,582 |
| Total customer funds | 577,853 | 6.1 | 544,576 |
⁽¹⁾ Includes the customer portfolios in Spain, Mexico, Colombia (preliminary data) and Peru.
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.# 3.1.5 Solvency Capital
BBVA Group's earnings have contributed to achieving a consolidated fully-loaded CET1 ratio of 12.67% as of December 31, 2023, which allows it to maintain a large management buffer over the Group's CET1 requirement as of that date (8.78%), which is also above the Group's target management range of 11.5-12.0% CET1. The fully-loaded CET1 ratio increased by 6 basis points, mainly explained by the generation of earnings in the year (+233 basis points) which, net of shareholder remuneration and payment of convertible contingent instrument coupons (CoCos), generated a positive contribution of +106 basis points. The growth of risk-weighted assets (RWAs) derived from the organic growth of activity, in constant terms has drained -132 basis points. Finally, the other elements that make up CET 1, apart from the extraordinary Share BuyBack (SBB), had a positive contribution of +64 basis points; these include the positive reversal of the NPL backstop, the effects of market evolution, the calculation of minority interests, regulatory impacts as well as the positive impact in "Other Comprehensive Income" equivalent to the net monetary position value loss in hyperinflationary economies registered in results. The aforementioned Buyback has had an effect of -32 basis points. Consolidated fully-loaded Additional Tier 1 (AT1) capital fully loaded stood at 1.66% at December 31, 2023, 12 basis points lower than in 2022, mainly due to the issuance in June of €1.0 billion Contingent Convertible instruments by BBVA S.A. In addition, BBVA S.A. issued in September another AT1 instrument of $1.0 billion. Also in September, another contingent convertible issuance of €1.0 billion nominal value, was excluded after its redemption. The Tier 2 fully-loaded ratio stood at 2.25% which represents an increase of 46 basis points compared to 2022, mainly explained by the issuances by BBVA S.A, in June €750 million, one subordinated issuance of GBP 300 million in August and another of $750 million in November. In addition, BBVA Mexico issued $ 1.0 billion in June. Regarding the minimum capital requirements, the ECB informed the Group that the Pillar 2 requirement would remain at 1.71% (of which at least 0.96% must be CET1) since January 1, 2023. Therefore, BBVA should maintain a CET1 capital ratio of 8.75% and a total capital ratio of 13.00% at a consolidated level 63, which once updated taking into account the countercyclical buffer as of September 30, 2023, are 8.78% and 13.03%, respectively. Following the latest SREP (Supervisory Review and Evaluation Process) decision, the ECB has informed to the Group that, with effect from January 1, 2024, it will have to maintain a total capital ratio of 13.25% and a CET1 capital ratio of 9.09% at the consolidated level, which includes the consolidated Pillar 2 requirement of 1.68% (of which at least 1.02% shall be met with CET1), of which 0.18% is determined on the basis of the ECB's prudential provisioning expectation and shall be met with CET1. As a result of the above, the total fully-loaded capital ratio stood at 16.58% as of December 31, 2023, and total phased-in ratio stood at 16.58%.
240 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail. 63 Includes the update of the countercyclical capital buffer calculated on the basis of exposure as of December 31, 2022.
| CRD IV phased-in | CRD IV phased-in | CRD IV phased-in | CRD IV fully-loaded | CRD IV fully-loaded | CRD IV fully-loaded | |
|---|---|---|---|---|---|---|
| 31-12-23 ⁽¹⁾ ⁽²⁾ | 31-12-22 | 31-12-21 | 31-12-23 ⁽¹⁾ ⁽²⁾ | 31-12-22 | 31-12-21 | |
| Common Equity Tier 1 (CET1) | 46,104 | 42,738 | 39,949 | 46,104 | 42,484 | 39,184 |
| Tier 1 | 52,138 | 47,931 | 45,686 | 52,138 | 47,677 | 44,922 |
| Tier 2 | 8,182 | 5,930 | 7,383 | 8,182 | 6,023 | 7,283 |
| Total capital (Tier 1 + Tier 2) | 60,320 | 53,861 | 53,069 | 60,320 | 53,699 | 52,205 |
| Risk-weighted assets | 363,916 | 337,066 | 307,795 | 363,916 | 336,884 | 307,335 |
| CET1 (%) | 12.67 | 12.68 | 12.98 | 12.67 | 12.61 | 12.75 |
| Tier 1 (%) | 14.33 | 14.22 | 14.84 | 14.33 | 14.15 | 14.62 |
| Tier 2 (%) | 2.25 | 1.76 | 2.40 | 2.25 | 1.79 | 2.37 |
| Total capital ratio (%) | 16.58 | 15.98 | 17.24 | 16.58 | 15.94 | 16.99 |
⁽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 December 31, 2023, there are no differences between phased-in and fully-loaded ratios due to the aforementioned temporary treatment.
⁽²⁾ Preliminary data.
With regard to MREL (Minimum Requirement for own funds and Eligible Liabilities) requirements, on March, 8, 2022 BBVA disclosed the reception of a communication from the Bank of Spain regarding its minimum requirement for own funds and eligible liabilities, established by the Single Resolution Board (hereinafter "SRB"), which was calculated taking into account the financial and supervisory information as of June 30, 2021. In accordance with this communication, BBVA must maintain, as 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 a sub-consolidated level (hereinafter, the "MREL in RWA"), within this MREL in RWA, an amount equal to 13.50% of the RWA must be met with subordinated instruments (the "subordination requirement in RWA").The MREL in RWA and the subordination requirement in RWA do not include the combined capital buffer requirement which, according to applicable regulations and supervisory criteria, is 3.35%, considering the exposures subject to the calculation of the countercyclical buffer as of September 31, 2023. In addition, BBVA has to 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 equal to 7.27% (the “MREL in LR”) of which 5.61% in terms of the total exposure considered for calculating the leverage ratio shall be satisfied with subordinated instruments (the "subordination requirement in LR"). Given the own funds and eligible liabilities structure of the resolution group, as of December 31, 2023, the MREL in RWA provisional ratio stood at 26.36%, complying with the aforementioned requirement. Finally, the provisional MREL in LR was 10.94% and the provisional subordination ratios in terms of RWA and in terms of LR were 21.84% and 9.06%, respectively.
On June 14, 2023 the Group disclosed the reception of a new communication from the Bank of Spain regarding its MREL requirement, established by the SRB, calculated taking into account the financial and supervisory information as of December 31, 2021. In accordance with this new communication, BBVA has to reach, starting January 1, 2024 a MREL in RWA equal to 22.11% and a subordination requirement in RWA equal to 13.50%. The MREL in RWA and the subordination requirement in RWA do not include the applicable combined capital buffer requirement which, according to applicable regulations and supervisory criteria, is at 3.35%, considering the exposures subject to the calculation of the countercyclical buffer as of September 31, 2023. Given the own funds and eligible liabilities structure of the resolution group, as of December 31, 2023 the MREL in RWA met the requirement.
In November 2015 (with effect from 1 January 2017) BBVA ceased to be part of the list of Global Systemically Important Banks (G- SIBs). This list is drawn up annually by the Financial Stability Board (FSB) on the basis of a set of quantitative indicators which are available, together with the assessment methodology, at www.bis.org/bcbs/gsib/. In November 2021, BBVA, at consolidated level, was again identified as an Other Systemically Important Institution (hereinafter referred to as O-SII) by the Bank of Spain, which imposes on BBVA the obligation to maintain Common Equity Tier 1 items as a buffer for O-SII for an amount equal to 0,75% of the total amount of its risk exposure on a consolidated basis. After the update of the list of institutions in November 2022, BBVA remains identified as O-SII. Similarly, following the mandatory annual review in July 2022 of the designations of the so-called O-SIIs, the Bank of Spain continues to require BBVA to maintain a capital buffer of 0.75% in 2023.To this respect it is worth mentioning that BBVA published on September 29, 2023 that it had received a resolution from the Bank of Spain related to the revision of the identification of BBVA as Other Systemically Important Institution (hereinafter referred to as O-SII) and the corresponding capital buffer establishment. 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.
Lastly, as of December 31, 2023, the Group's fully-loaded leverage ratio stood at 6,5% 64.
241 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail. 64 The Group’s leverage ratio is provisional at the date of release of this report.
During the year 2023, BBVA’s rating has continued to demonstrate its strength and all agencies have maintained their rating in the A category. DBRS in March, Fitch in September and Moody's in October confirmed the rating of BBVA at A (high), A- and A3, respectively, all three with a stable outlook. Additionally, S&P has maintained BBVA's ratings unchanged during the year at A, with a stable outlook.The following table shows the credit ratings and outlook assigned by the agencies:
| 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 deposits.
242
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
The main indices have shown a positive behavior in the year 2023. In Europe, the Stoxx Europe 600 index rose by 12.7% compared to the end of 2022, and in Spain, the Ibex 35 was revalued a 22.8% in the same time frame, showing a better relative performance. In the United States, the S&P 500 index also rose by 24.2%. With regard to the banking sector indices, their evolution in the year 2023 has been better than of general indices in Europe. The Stoxx Europe 600 Banks, which includes the banks of the United Kingdom, and the Euro Stoxx Banks, Eurozone´s banks index, rose by 20.3% and 23.5% respectively, while in the United States, the S&P Regional Banks sector index fell by 10.8% in the period. For its part, the price of the BBVA share grew by 46.0% in the year, above its sector index, closing the 2023 year at 8.23 euros.
BBVA SHARE EVOLUTION COMPARED WITH EUROPEAN INDEXES (Base index 100=31-12-22)
| 31-12-23 | 31-12-22 | |
|---|---|---|
| Number of shareholders (1) | 742,194 | 801,216 |
| Number of shares outstanding | 5,837,940,380 | 6,030,116,564 |
| Daily average number of shares traded | 16,584,287 | 22,956,058 |
| Daily average trading (millions of euros) | 116 | 115 |
| Maximum price (euros) | 8.73 | 6.12 |
| Minimum price (euros) | 5.67 | 3.97 |
| Variation of the maximum share price with respect to the minimum (%) | 54.0 | 54.2 |
| Closing price (euros) | 8.23 | 5.63 |
| Book value per share (euros) (2) | 8.86 | 7.78 |
| Tangible book value per share (euros) (2) | 8.46 | 7.43 |
| Market capitalization (millions of euros) | 48,023 | 33,974 |
| Yield (dividend/price; %) (3) | 5.7 | 6.2 |
(1) In the case of shares kept by investors through a custodian placed outside Spain, only the custodian will be considered as a shareholder, which is who appears registered in the accounting record of book entries, so the number of shareholders stated does not consider those indirect holders.
(2) Data as of 31-12-2022 have been restated according to IFRS 17 - Insurance contracts.
(3) Calculated by dividing shareholder remuneration over the last twelve months by the closing price of the period.
243
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
Stock market indexes
BBVA’s shares are included in the main stock market indexes. At the closing of December 2023, the weighting of BBVA shares in the Ibex 35, Euro Stoxx 50 and the Stoxx Europe 600 index, were 9.2%, 1.6% and 0.5%, respectively. They are also included in several sector indexes, including Stoxx Europe 600 Banks, which includes the United Kingdom, with a weighting of 5.7% and the Euro Stoxx Banks index for the eurozone with a weighting of 9.5%. In addition to these indexes, BBVA is part of the main sustainability indexes, such as the Dow Jones Sustainability Index (DJSI), the FTSE4Good and the MSCI ESG indexes. For more information on this subject, please refer to the “2.6.4 ESG analysts and ratings” section of this report.
Shareholders and investors
Shareholder structure
As of December 31, 2023, the Group had 5,837,940,380 shares outstanding (as of December 31, 2022 the figure was 6,030,116,564 shares), 61.66% of which were held by institutional investors and the remaining 38.34% by minority shareholders, all with the same voting and economic rights, with no differences in voting rights between shareholders. The reduction of 192,176,184 shares outstanding compared to the previous year is explained by the redemption of shares acquired as a result of the share buyback programs executed during the year.
SHAREHOLDER STRUCTURE (31-12-23)
| Shareholders | Shares outstanding | Number of shares | % | Number | % |
|---|---|---|---|---|---|
| Up to 500 | 315,389 | 42.5 | 58,447,373 | 1.0 | |
| 501 to 5,000 | 334,638 | 45.1 | 592,992,044 | 10.2 | |
| 5,001 to 10,000 | 49,539 | 6.7 | 347,292,314 | 5.9 | |
| 10,001 to 50,000 | 38,423 | 5.2 | 733,832,231 | 12.6 | |
| 50,001 to 100,000 | 2,720 | 0.4 | 185,938,321 | 3.2 | |
| 100,001 to 500,000 | 1,228 | 0.2 | 218,487,412 | 3.7 | |
| More than 500,001 | 257 | 0.03 | 3,700,950,685 | 63.4 | |
| Total | 742,194 | 100 | 5,837,940,380 | 100 |
Note: in the case of shares kept by investors through a custodian placed outside Spain, only the custodian will be considered as a shareholder, which is who appears registered in the accounting record of book entries, so the number of shareholders stated does not consider those indirect holders.
Shareholder remuneration
In November 2021, the Board of Directors of BBVA set as its shareholder remuneration policy the annual distribution of between 40% and 50% of the consolidated ordinary profit for each year, to be implemented through the distribution of an interim dividend for the year (expected to be paid in October of each year), and a final dividend (to be paid once the year has ended and the distribution of the profit has been approved, expected to be in April). It also established that cash distributions could be combined with share buybacks, subject to the applicable authorizations and approvals at any given time. In September 2023, the Board of Directors approved the distribution in cash of an interim dividend for the 2023 financial year in the amount of €0.16 gross per share, which was paid on October 11, 2023. This dividend was 33% higher than the dividend paid in October 2022 (€0.12 gross per share). In addition to these cash payment, an extraordinary distribution was made through a share buyback program of BBVA's own shares announced on July 28 and executed since October 2, 2023. As a result of this program, a total of 127,532,625 shares were acquired for an amount of €1,000m. Also regarding shareholder remuneration a cash gross distribution in the amount of €0.39 per share on April as final dividend of 2023 and the execution of a new Share Buyback Program of BBVA for an amount of €781m, subject to the corresponding regulatory authorizations and the communication with the program specific terms and conditions before its effective start, are expected to be submitted to the relevant governing bodies for consideration. Thus, the total distribution for the year 2023 will reach €4,010m, a 50% of the net attributable profit, which represents €0.68 gross per share, taking into account the payment in cash of €0.16 gross per share paid in October 2023 as interim dividend of the year. Finally, it should be noted that shareholder remuneration measured through TSR (Total Shareholder Return), which considers both the dividend payment, which is reinvested in the BBVA share, and the performance of the share price, has performed very positively, increasing by 57% in 2023, which exceeds the 28% average of the Stoxx Europe 600 Banks.
244
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
General Shareholders' Meeting
In 2023, BBVA held its General Shareholders' Meeting on March 17 at the Euskalduna Palace in Bilbao and set up the corresponding channels for remote attendance, as well as to follow it through streaming, with free access from the corporate website. The General Shareholders' Meeting had a quorum of 65.18%, approving by a large majority all the items on the agenda, including those relating to the annual financial statements, the management of the Company for the year, the proposal for shareholder remuneration and those relating to the appointment and re-election of directors. BBVA is committed to achieving carbon neutrality, minimizing negative environmental impacts and generating a benefit for the host community and all those involved in the process. Aligned with these objectives, the General Meeting was certified as a sustainable event by AENOR, according to the UNE-ISO 201221 standard, and offset the carbon emissions generated at the event. Lastly, on the occasion of the Annual General Meeting, and in order to contribute to inclusive and sustainable growth, BBVA made a solidarity contribution in Spain of €300,000 to various NGOs to finance projects in the areas of inclusive growth and the environment. The distribution of the funds was put to the vote of the shareholders in each of the four established purposes.
Shareholder and investor relations
Shareholders and investors, both national and international, represent a very relevant stakeholder group for BBVA. For this reason, the Group is in constant communication with them in order to keep them informed of the performance of the company and of all relevant issues that may be necessary for the proper exercise of their voting and decision-making rights. BBVA's Policy on Communication and Contact with Shareholders and Investors, aims to promote the transparency of the Bank's public information, and to do so on an ongoing basis. The Shareholder and Investor Relations area offers shareholders a wide variety of communication, participation and dialogue channels, including the following:
Conferences and meetings with shareholders and investors
The Shareholder and Investor Relations team periodically organizes informative meetings (meetings, conferences and other events), in person and online, in which representatives of the Bank meet with analysts, shareholders and investors to inform them of the Group's financial performance and other aspects of interest. During these meetings, their comments and questions are dealt with on a personal basis.# Shareholders and investors web page
BBVA has a web page especially aimed at its shareholders and investors (www.accionistaseinversores.bbva.com), which offers institutional and economic-financial information on the Group's activity, as well as other contents of interest to them. This information is also available on the Group's corporate website (www.bbva.com).
BBVA has a live broadcast channel for quarterly earnings presentations and other market-relevant communications, which allows shareholders, investors, analysts and anyone else who wishes to access them. This channel is also available on a delayed broadcast basis and is accessible through the shareholders' and investors' website.
In order to facilitate open and transparent communication with shareholders, the Bank maintains permanent communication channels (a telephone line and specific electronic mailboxes), through which requests for information, clarifications or questions and their corresponding answers are channeled. Lastly, BBVA offers its shareholders and the public in general, a subscription service that allows them to know in real time any news published on the corporate website, in relation to financial reports, relevant facts or economic-financial presentations. (accionistaseinversores.bbva.com/suscripcion).
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
This section presents the most relevant aspects of the Group's different business areas. Specifically, for each one of them, it shows a summary of the income statements and balance sheets, the business activity figures and the most significant ratios. The structure of the business areas reported by the BBVA Group as of December 31, 2023, is the same as the one presented at the end of 2022.
The composition of BBVA Group's business areas is summarized below:
The Corporate Center contains the centralized functions of the Group, including: the costs of the head offices with a corporate function; structural exchange rate positions management; portfolios whose management is not linked to customer relations, such as financial and industrial holdings; stakes in Funds & Investment Vehicles in tech companies; certain tax assets and liabilities; funds due to commitments to employees; goodwill and other intangible assets as well as portfolios and assets' funding. Finally, in the description of this aggregate, it is worth mentioning that the Corporate Center's tax expense includes for each period the difference between the effective tax rate in the period of each business area and the expected tax rate of the Group for the year as a whole.
In addition to these geographical breakdowns, supplementary information is provided for the wholesale business carried out by BBVA, Corporate & Investment Banking (CIB), in the countries where it operates. This business is relevant to have a broader understanding of the Group's activity and results due to the important features of the type of customers served, products offered and risks assumed.
The information by business areas is based on units at the lowest level and/or companies that make up the Group, which are assigned to the different areas according to the main region or company group in which they carry out their activity.
Regarding the shareholders' funds allocation, in the business areas, a capital allocation system based on the consumed regulatory capital is used. Finally, it should be noted that, as usual, in the case of the different business areas, that is, Mexico, Turkey, South America and Rest of Business, and, additionally, CIB, in addition to the year-on-year variations applying current exchange rates, the variations at constant exchange rates are also disclosed.
| Gross income | Operating income | Net attributable profit | |
|---|---|---|---|
| ⁽¹⁾ Excludes the Corporate Center. |
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
| Business areas | BBVA Group | Spain | Mexico | Turkey | South America | Rest of Business | ∑ Business areas | Corporate Center |
|---|---|---|---|---|---|---|---|---|
| 2023 | ||||||||
| Net interest income | 23,089 | 5,620 | 11,054 | 1,869 | 4,394 | 539 | 23,476 | (386) |
| Gross income | 29,542 | 7,888 | 14,267 | 2,981 | 4,331 | 1,103 | 30,571 | (1,029) |
| Operating income | 17,233 | 4,743 | 9,883 | 1,581 | 2,397 | 507 | 19,111 | (1,878) |
| Profit (loss) before tax | 12,419 | 3,947 | 7,359 | 1,325 | 1,206 | 479 | 14,317 | (1,898) |
| Net attributable profit (loss) excluding non-recurring impacts | 8,019 | 2,755 | 5,340 | 528 | 613 | 389 | 9,626 | (1,607) |
| Net attributable profit (loss) | 8,019 | 2,755 | 5,340 | 528 | 613 | 389 | 9,626 | (1,607) |
| 2022 | ||||||||
| ⁽¹⁾ Net interest income | 19,124 | 3,774 | 8,378 | 2,611 | 4,138 | 332 | 19,233 | (109) |
| Gross income | 24,743 | 6,112 | 10,734 | 3,172 | 4,265 | 790 | 25,072 | (329) |
| Operating income | 14,042 | 3,210 | 7,336 | 2,111 | 2,290 | 276 | 15,223 | (1,181) |
| Profit (loss) before tax | 10,402 | 2,610 | 5,620 | 1,636 | 1,434 | 277 | 11,577 | (1,175) |
| Net attributable profit (loss) excluding non-recurring impacts ⁽²⁾ | 6,559 | 1,868 | 4,131 | 505 | 738 | 240 | 7,482 | (922) |
| Net attributable profit (loss) | 6,358 | 1,667 | 4,131 | 505 | 738 | 240 | 7,280 | (922) |
| Business areas | BBVA Group | Spain | Mexico | Turkey | South America | Rest of Business | ∑ Business areas | Corporate Center | Deletions 31-12-23 |
|---|---|---|---|---|---|---|---|---|---|
| Loans and advances to customers | 377,643 | 173,169 | 88,112 | 37,416 | 41,213 | 39,322 | 379,231 | 230 | (1,819) |
| Deposits from customers | 413,487 | 216,198 | 92,564 | 50,651 | 42,567 | 13,056 | 415,037 | 181 | (1,732) |
| Off-balance sheet funds | 164,367 | 97,253 | 53,254 | 7,768 | 5,525 | 566 | 164,366 | 1 | — |
| Total assets/liabilities and equity | 775,558 | 457,624 | 173,489 | 68,329 | 64,779 | 64,274 | 828,495 | 23,074 | (76,011) |
| RWAs | 363,916 | 121,779 | 91,865 | 54,506 | 49,117 | 36,410 | 353,678 | 10,238 | — |
| 31-12-22 | |||||||||
| ⁽¹⁾ Loans and advances to customers | 357,351 | 173,971 | 71,231 | 37,443 | 38,437 | 37,375 | 358,456 | 278 | (1,383) |
| Deposits from customers | 394,404 | 221,019 | 77,750 | 46,339 | 40,042 | 9,827 | 394,978 | 187 | (760) |
| Off-balance sheet funds | 150,172 | 86,759 | 38,196 | 6,936 | 17,760 | 520 | 150,170 | 2 | — |
| Total assets/liabilities and equity | 712,092 | 427,116 | 142,557 | 66,036 | 61,951 | 49,952 | 747,613 | 22,719 | (58,239) |
| RWAs | 337,066 | 114,474 | 71,738 | 56,275 | 46,834 | 35,064 | 324,385 | 12,682 | — |
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
+47.7%
3,210
4,743
+65.3%
1,667
2,755
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
| 2023 | ∆ % | 2022 ⁽¹⁾ | |
|---|---|---|---|
| Net interest income | 5,620 | 48.9 | 3,774 |
| Net fees and commissions | 2,164 | 0.4 | 2,156 |
| Net trading income | 409 | 3.4 | 396 |
| Other operating income and expenses | (305) | 42.5 | (214) |
| Of which: Insurance activities | 360 | 1.3 | 355 |
| Gross income | 7,888 | 29.1 | 6,112 |
| Operating expenses | (3,145) | 8.4 | (2,901) |
| Personnel expenses | (1,778) | 10.6 | (1,608) |
| Other administrative expenses | (984) | 10.6 | (889) |
| Depreciation | (383) | (5.1) | (404) |
| Operating income | 4,743 | 47.7 | 3,210 |
| Impairment on financial assets not measured at fair value through profit or loss | (651) | 24.5 | (522) |
| Provisions or reversal of provisions and other results | (145) | 86.6 | (78) |
| Profit (loss) before tax | 3,947 | 51.2 | 2,610 |
| Income tax | (1,190) | 61.1 | (739) |
| Profit (loss) for the period | 2,757 | 47.3 | 1,872 |
| Non-controlling interests | (2) | (31.9) | (3) |
| Net attributable profit (loss) excluding non-recurring impacts | 2,755 | 47.5 | 1,868 |
| Net impact arisen from the purchase of offices in Spain | — | — | (201) |
| Net attributable profit (loss) | 2,755 | 65.3 | 1,667 |
| 31-12-23 | ∆ % | 31-12-22 ⁽¹⁾ | |
|---|---|---|---|
| Cash, cash balances at central banks and other demand deposits | 44,653 | (9.2) | 49,185 |
| Financial assets designated at fair value | 146,136 | 15.6 | 126,413 |
| Of which: Loans and advances | 70,265 | 67.6 | 41,926 |
| Financial assets at amortized cost | 216,334 | 5.8 | 204,528 |
| Of which: Loans and advances to customers | 173,169 | (0.5) | 173,971 |
| Inter-area positions | 42,919 | 10.3 | 38,924 |
| Tangible assets | 2,884 | (3.5) | 2,990 |
| This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail. |
According to the latest estimate from BBVA Research, GDP growth would converge to around 2.4% in 2023 (unchanged from the previous forecast) and 1.5% in 2024 (30 basis points lower than previously expected). Despite the relative resilience of activity, largely related to the dynamism of the services sector and the labor market, as well as the effect of the European recovery funds, growth is expected to continue to moderate in the next months, in line with the slowdown in growth in the Eurozone, in a context of higher uncertainty about internal policies.
Annual inflation, which fell from particularly high values in 2022 to 3.1% in December 2023, is expected to remain close to this level during 2024. As for the banking system, data at the end of October 2023 showed that the volume of credit to the private sector declined by 3.7% year-on-year. At the November close, household and non-financial corporate loan portfolios fell by 2.3% and 5.6% year-on-year, respectively. Customer deposits fell by 1.2% year-on-year as of the end of November 2023, due to a 6.2% reduction in demand deposits. This was not offset by the growth in time deposits (+81,1% year-on-year). The NPL ratio stood at 3.6% in October 2023, 16 basis points below the figure of the same month of the previous year. Furthermore, the system maintains comfortable solvency and liquidity levels.
The most relevant aspects related to the area's activity during 2023 were:
– Lending balances registered a slight decrease of 0.9% mainly due to the evolution of mortgage loans (-2.2%) and the deleveraging by large corporations (-5.4%). This evolution was partially offset by the performance of loans to the public sector (+7.8%), consumer loans (+5.9%, including credit cards) and loans to SMEs (+3.6%).
– With regard to asset quality, the NPL ratio increased by 16 basis points in the year and stood at 4.1%, mainly due to the increase of non-performing assets in mortgages amid tight interest rates, which has mitigated because of positive dynamics in the wholesale portfolio and the impact of the sale by the end of July of a default loans portfolio without collateral (non- performing and defaulters). For its part, the NPL coverage ratio fell by 597 basis points to 55% at the end of December 2023, due to the high level of coverage in the sold portfolio and to the aforementioned increase in the mortgage portfolio, with less coverage than the average because of its collateral.
– Total customer funds grew in the year (+1.7%). Lower demand deposit balances (-5.1%) were partially offset mainly by off- balance sheet funds growth (mutual and pension funds and managed portfolios, 12.1% overall), which increased mainly as a result of net contributions during the year and the effect of the market evolution.
Spain generated a net attributable profit of €2,755m in 2023, 65.3% higher than in the previous year, which included the net impact arisen from the purchase of offices to Merlin (-201 millions of euros). In 2023, the favorable evolution of the net interest income stands out, which continued to boost the gross income growth and comfortably offset the increase in expenses.
The most relevant aspects of the year-on-year changes in the area's income statement at the end of December 2023 were:
– Net interest income grew by 48.9% favored by the improvement in customer spreads derived from the successive interest rate hikes carried out by the ECB between July 2022 and September 2023 as well as and the cost of deposits, which remains contained.
– Net fees and commissions were in line with those of the previous year (+0.4%), favored by the contribution of the income linked to asset management, which offset the lower contribution of banking services fees.
– Increase in the year-on-year NTI contribution (+3.4%) driven by the favorable evolution of Global Markets.
– Other operating income and expenses compare negatively with the same period of the previous year, due to the €215m recorded on this line, corresponding to the total annual amount paid for the temporary tax on credit institutions and financial credit establishments. This was partially offset by a lower contribution to the public schemes of bank deposits guarantee, this is, to the Single Resolution Fund and to the Deposits Guarantee Fund (hereinafter FUR and FGD, both for their acronym in Spanish, respectively), which was lower than in the previous year overall. Lastly, the performance of the insurance business, also considered under this line item, improved compared to 2022.
– Operating expenses continued to increase (+8.4%), although well below the growth of gross income (+29.1%), which allowed a very significant improvement of the efficiency ratio by 760 basis points in the last year. The increase in expenses is due to both higher fixed remuneration to personnel, with additional measures that improve those of the sectoral wage increase agreement for 2023, and higher general expenses, affected by the inflation, especially higher IT expenses.
– Impairment on financial assets increased by 24.5% due to higher loan-loss provisions, mainly in the retail portfolio, which were affected by a higher rate environment, and together with some positive non-recurring items recorded on 2022. As a result of the above, the cumulative cost of risk at the end of December 2023 increased to 0.37%.
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
| (VARIATION AT CONSTANT EXCHANGE RATE COMPARED TO 31-12-22)⁽¹⁾ | |
|---|---|
| NET INTEREST INCOME / AVERAGE TOTAL ASSETS (PERCENTAGE AT CONSTANT EXCHANGE RATE) | |
| OPERATING INCOME (MILLIONS OF EUROS AT CONSTANT EXCHANGE RATE) | +22.0% (1) |
| 8,102 | |
| 9,883 | |
| ⁽¹⁾ At current exchange rate: +34.7%. | |
| NET ATTRIBUTABLE PROFIT (LOSS) (MILLIONS OF EUROS AT CONSTANT EXCHANGE RATE) | +17.1% (1) |
| 4,562 | |
| 5,340 | |
| ⁽¹⁾ At current exchange rate: +29.3%. |
⁽¹⁾ Excluding repos.
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
| 2023 | ∆ % | ∆ % ⁽¹⁾ | 2022 ⁽²⁾ | |
|---|---|---|---|---|
| Net interest income | 11,054 | 31.9 | 19.5 | 8,378 |
| Net fees and commissions | 2,226 | 37.0 | 24.0 | 1,625 |
| Net trading income | 572 | 30.3 | 18.0 | 439 |
| Other operating income and expenses | 415 | 42.8 | 29.3 | 291 |
| Gross income | 14,267 | 32.9 | 20.4 | 10,734 |
| Operating expenses | (4,384) | 29.1 | 16.9 | (3,397) |
| Personnel expenses | (2,100) | 34.2 | 21.5 | (1,565) |
| Other administrative expenses | (1,816) | 26.6 | 14.6 | (1,434) |
| Depreciation | (469) | 17.9 | 6.8 | (398) |
| Operating income | 9,883 | 34.7 | 22.0 | 7,336 |
| Impairment on financial assets not measured at fair value through profit or loss | (2,499) | 47.6 | 33.7 | (1,693) |
| Provisions or reversal of provisions and other results | (25) | 5.0 | (4.9) | (24) |
| Profit (loss) before tax | 7,359 | 31.0 | 18.6 | 5,620 |
| Income tax | (2,018) | 35.6 | 22.8 | (1,488) |
| Profit (loss) for the period | 5,341 | 29.3 | 17.1 | 4,132 |
| Non-controlling interests | (1) | 29.9 | 17.7 | (1) |
| Net attributable profit (loss) | 5,340 | 29.3 | 17.1 | 4,131 |
| 31-12-23 | ∆ % | ∆ % ⁽¹⁾ | 31-12-22 ⁽²⁾ | |
|---|---|---|---|---|
| Cash, cash balances at central banks and other demand deposits | 10,089 | (23.7) | (31.5) | 13,228 |
| Financial assets designated at fair value | 60,379 | 29.6 | 16.4 | 46,575 |
| Of which: Loans and advances | 5,180 | 243.8 | 208.6 | 1,507 |
| Financial assets at amortized cost | 96,342 | 24.8 | 12.0 | 77,191 |
| Of which: Loans and advances to customers | 88,112 | 23.7 | 11.0 | 71,231 |
| Tangible assets | 2,387 | 21.2 | 8.8 | 1,969 |
| Other assets | 4,293 | 19.5 | 7.3 | 3,593 |
| Total assets/liabilities and equity | 173,489 | 21.7 | 9.3 | 142,557 |
| Financial liabilities held for trading and designated at fair value through profit or loss | 28,492 | 10.3 | (1.0) | 25,840 |
| Deposits from central banks and credit institutions | 8,739 | 98.5 | 78.2 | 4,402 |
| Deposits from customers | 92,564 | 19.1 | 6.9 | 77,750 |
| Debt certificates | 9,719 | 25.3 | 12.5 | 7,758 |
| Other liabilities | 22,756 | 34.0 | 20.3 | 16,976 |
| Regulatory capital allocated | 11,218 | 14.1 | 2.4 | 9,831 |
| 31-12-23 | ∆ % | ∆ % ⁽¹⁾ | 31-12-22 | |
|---|---|---|---|---|
| Performing loans and advances to customers under management ⁽³⁾ | 88,688 | 23.5 | 10.9 | 71,788 |
| Non-performing loans | 2,472 | 27.5 | 14.5 | 1,939 |
| Customer deposits under management ⁽³⁾ | 90,926 | 17.9 | 5.8 | 77,117 |
| Off-balance sheet funds ⁽⁴⁾ | 53,254 | 39.4 | 25.2 | 38,196 |
| Risk-weighted assets | 91,865 | 28.1 | 15.0 | 71,738 |
| Efficiency ratio (%) | 30.7 | 31.7 | ||
| NPL ratio (%) | 2.6 | 2.5 | ||
| NPL coverage ratio (%) | 123 | 129 | ||
| ⁽¹⁾ At constant exchange rate. | ||||
| ⁽²⁾ Balances restated according to IFRS 17 - Insurance contracts. | ||||
| ⁽³⁾ Excluding repos. | ||||
| ⁽⁴⁾ Includes mutual funds, customer portfolios and other off-balance sheet funds. |
253
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
The economy has expanded at a relatively high rate, faster than anticipated, during 2023 and, especially during the second half of the year due to the dynamism of private consumption, the resilience of the manufacturing sector, the effects on private investment of the prospects for nearshoring of industrial production outside of China and the impact of higher public spending on the construction sector, in a growth environment in the United States. According to BBVA Research, GDP could grow around 3.4% in 2023 and 2.9% in 2024 (respectively, 20 and 30 basis points above the previous forecasts).
Annual inflation eased through 2023, reaching 4.7% in December, and it will probably continue to gradually moderate in the coming quarters, remaining around 3.8% on average in 2024. Policy rates, which stood at 11.25% at the end of 2023, are expected to begin to be cut from the first quarter of 2024, reaching around 9.0% by the end of the year.
With respect to the banking system, at the end of November 2023, the volume of outstanding credit to the non-financial private sector increased by 10.1% in year-on-year terms, with a greater boost from the consumer portfolio (+17.7%), followed by mortgages (+9.2%) and businesses (+7.3%). Growth in total deposits remains at similar levels to those of total credit, with a year-on-year growth of 10.0% at the end of November 2023, with greater dynamism in time deposits (+18.6% year-on-year) than in demand deposits (+6.1 year-on-year). The industry's non-performing loans remained stable at around 2.45% and capital ratios are at comfortable levels.
Unless expressly stated otherwise, all the comments below on rates of change, for both activity and results, will be given at constant exchange rate. These rates, together with changes at current exchange rates, can be found in the attached tables of financial statements and relevant business indicators.
The most relevant aspects related to the area's activity during 2023 were:
– Lending activity (performing loans under management) grew by 10.9% between January and December 2023. By portfolios, the wholesale portfolio, which includes large companies and public sector, grew by 6.7%, highlighting the dynamism of the business segment (+5.4%), with a positive performance of the public sector segment during the year. On the other hand, the retail portfolio grew at a rate of 14.4%, which supports the trend observed since the beginning of the year. Within this segment, consumer loans grew by 15.8%, credit cards by 21.2%, loans to SMEs by 19.0%, and mortgage loans by 8.7%. The loan portfolio continued to show a favorable diversification, of which 47.6% of the total correspond to the wholesale portfolio and the remaining 52.4% to the retail portfolio.
– With regard to asset quality indicators, the NPL ratio stood at 2.6% at the end of December 2022, which represents .10 basis points increase compared to the previous year, mainly due to the increase of the non-performing balance in credit cards and, to a lesser extent, in consumer loans. For its part, the NPL coverage ratio stood at high levels, at 123%, at the end of December 2023, which represents a fall of 547 basis points compared to the end of 2022, including the impact of the annual revision of the parameters of the models of estimation of losses and, to a lesser extent, the effect of the partial release of previously constituted funds because of complementary adjustments not assigned to singular operations or clients due to the behavior observed in the portfolios linked to them.
– Customer deposits under management maintained a positive evolution between January and December of 2023 (+5.8%) despite a high rates environment and the liability cost containment policy implemented by BBVA in Mexico. The growth of off-balance sheet funds was very relevant, particularly in mutual funds, which increased at a rate of 23.7% between January and December 2023.
In Mexico, BBVA achieved a cumulative net attributable profit of €5,340m by the end of December 2023, representing an increase of 17.1% compared to the previous year, mainly as a result of the significant growth in net interest income, thanks to the strong boost of the activity and the improvement in the customer spread. The most relevant aspects of the year-on-year changes in the income statement at the end of December 2023 are summarized below:
– Net interest income recorded a significant growth (+19.5%), as a result of strong dynamism of lending activity and a price management efficiency (keeping the cost of deposits contained). Thus, customer spreads associated with a higher bias towards retail portfolio have been successfully maintained.
– Net fees and commissions, boosted by greater transactional banking, continued to increase at double digit (+24.0%), with growth in almost all commissions types, highlighting credit cards, those derived from mutual funds management and from wholesale activity.
– The contribution from NTI increased (+18.0%) mainly as a result of the good performance of Global Markets, with a significant contribution from the foreign currency operations, which offset the bond swap operation associated with balance-sheet management registered in the third quarter of 2023.
– The other operating income and expenses line grew by 29.3%, driven by the evolution of the insurance business.
– Operating expenses increased (+16.9%), with higher personnel expenses due to salary adjustments and an increase in the workforce in a context of strong activity growth, and an increase of general expenses linked to inflation, particularly marketing and technology. Despite the above, the efficiency ratio continued to evolve favorably, with a significant improvement of 92 basis points compared to twelve months earlier.
254
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
– Loan-loss provisions increased (+33.7%), mainly due to the higher provisioning needs of the retail portfolio, mainly in consumer and credit cards, partially affected by the strong increase of these segments. On the other hand, the cumulative cost of risk at the end of December 2023 stood at 2.96%, which is practically stable compared to the one registered at the end of September 2023 (+1 basis points).
255
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
Highlights
• The dedollarization of the balance sheet continues
• Progressive improvement of the NPL ratio in the year
• The cost of risk remains at low levels during 2023
• Net attributable profit improvement
BUSINESS ACTIVITY
⁽¹⁾ (VARIATION AT CONSTANT EXCHANGE RATE COMPARED TO 31-12-22)
⁽¹⁾ Excluding repos.
NET INTEREST INCOME / AVERAGE TOTAL ASSETS (PERCENTAGE AT CONSTANT EXCHANGE RATE)
. OPERATING INCOME (MILLIONS OF EUROS AT CURRENT EXCHANGE RATE)
| | -25.1 % (1) | 2,111 | 1,581 |
. NET ATTRIBUTABLE PROFIT (LOSS) (MILLIONS OF EUROS AT CURRENT EXCHANGE RATE)
| | +4.6 % | 505 | 528 |
256
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
| 2023 | ∆ % | ∆ % ⁽¹⁾ | 2022 ⁽²⁾ | |
|---|---|---|---|---|
| Net interest income | 1,869 | (28.4) | 8.0 | 2,611 |
| Net fees and commissions | 998 | 65.9 | 149.7 | 602 |
| Net trading income | 937 | 26.4 | 89.3 | 741 |
| Other operating income and expenses | (824) | 5.3 | (40.5) | (782) |
| Gross income | 2,981 | (6.0) | 140.3 | 3,172 |
| Operating expenses | (1,400) | 31.9 | 93.1 | (1,061) |
| Personnel expenses | (775) | 30.7 | 96.4 | (593) |
| Other administrative expenses | (475) | 40.0 | 110.0 | (340) |
| Depreciation | (150) | 16.4 | 43.7 | (129) |
| Operating income | 1,581 | (25.1) | 206.9 | 2,111 |
| Impairment on financial assets not measured at fair value through profit or loss | (118) | (69.4) | (53.9) | (387) |
| Provisions or reversal of provisions and other results | (137) | 55.4 | 138.2 | (88) |
| Profit (loss) before tax | 1,325 | (19.0) | n.s. | 1,636 |
| Income tax | (702) | (36.3) | (6.9) | (1,103) |
| Profit (loss) for the period | 623 | 17.0 | n.s. | 533 |
| Non-controlling interests | (95) | 243.9 | n.s. | (28) |
| Net attributable profit (loss) | 528 | 4.6 | n.s. | 505 |
| 31-12-23 | ∆ % | ∆ % ⁽¹⁾ | 31-12-22 ⁽²⁾ | |
|---|---|---|---|---|
| Cash, cash balances at central banks and other demand deposits | 9,700 | 60.0 | 161.7 | 6,061 |
| Financial assets designated at fair value | 3,692 | (29.0) | 16.1 | 5,203 |
| Of which: Loans and advances | 2 | (43.1) | (6.9) | 3 |
| Financial assets at amortized cost | 51,543 | (0.2) | 63.3 | 51,621 |
| Of which: Loans and advances to customers | 37,416 | (0.1) | 63.4 | 37,443 |
| Tangible assets | 1,496 | 23.4 | 86.0 | 1,213 |
| Other assets | 1,899 | (2.0) | 56.5 | 1,938 |
| Total assets/liabilities and equity | 68,329 | 3.5 | 68.9 | 66,036 |
| Financial liabilities held for trading and designated at fair value through profit or loss | 1,878 | (12.1) | 43.7 | 2,138 |
| Deposits from central banks and credit institutions | 2,306 | (19.7) | 31.3 | 2,872 |
| Deposits from customers | 50,651 | 9.3 | 78.8 | 46,339 |
| Debt certificates | 2,737 | (15.4) | 38.3 | 3,236 |
| Other liabilities | 4,319 | (8.9) | 45.1 | 4,741 |
| Regulatory capital allocated | 6,438 | (4.1) | 56.4 | 6,711 |
| 31-12-23 | ∆ % | ∆ % ⁽¹⁾ | 31-12-22 | |
|---|---|---|---|---|
| Performing loans and advances to customers under management ⁽³⁾ | 37,339 | 0.4 | 64.2 | 37,191 |
| Non-performing loans | 1,965 | (24.3) | 23.7 | 2,597 |
| Customer deposits under management ⁽³⁾ | 49,321 | 8.2 | 76.9 | 45,592 |
| Off-balance sheet funds ⁽⁴⁾ | 7,768 | 12.0 | 83.2 | 6,936 |
| Risk-weighted assets | 54,506 | (3.1) | 57.9 | 56,275 |
| Efficiency ratio (%) | 47.0 | 33.5 | ||
| NPL ratio (%) | 3.8 | 5.1 | ||
| NPL coverage ratio (%) | 97 | 90 | ||
| Cost of risk |
Since the general elections held in May 2023, there are increasing signs of normalization in economic policy in general, and monetary policy in particular, which point to a gradual reversal of the current macroeconomic distortions. Thus, benchmark interest rates were increased from 8.5% at the beginning of 2023 to 42.5% in December 2023, and they may continue to rise further in the coming months in order to curb inflation, which reached 64.8% in December on a year-on-year basis, and allowing for a greater stabilization of the Turkish lira.
Economic growth is expected to moderate to 4.5% in 2023 and 3.5% in 2024 (unchanged from the previous forecasts), supported by a still dovish fiscal policy. Given the high uncertainty, it is likely that the pace of GDP growth will slow down. Eventually, pressures on inflation will ease, although it will remain at relatively high levels.
As for the Turkish banking system, the effect of inflation remains strong. Total lending in the system increased 54.7% on a year-on-year basis at the end of November 2023, at similar levels to the previous months. The credit stock continued to be driven by the increase of consumer finance and credit cards (+79.3% year-on-year) while credit to businesses grew slightly less (+49.6% year-on-year).
Total deposits maintain their strength and increased at the end of November by 67.0% on a year-on-year basis. Turkish lira deposits continued to grow in the same month (+96.7%), while U.S. dollar deposits grew much more slowly (+36.5%). Dollarization decreased to 42% in November 2023 versus 50.6% a year earlier, boosted by regulatory measures put in place during the last months by the central bank.
The system's NPL ratio continued to fall in recent months and in November 2023 was 1.63% (69 basis points lower than in the same month of 2022). Capital indicators remained at more than comfortable levels on the same date.
Unless expressly stated otherwise, all comments below on rates of changes for both activity and results, will be presented at constant exchange rates. These rates, together with changes at current exchange rates, can be observed in the attached tables of the financial statements and relevant business indicators. For the conversion of these figures, the end of period exchange rate as of December 31, 2023 is used, reflecting the considerable depreciation by the Turkish lira in the last year, in particular during the second quarter of 2023, with a negative impact in the accumulated results at the end of December 2023. Likewise, the Balance sheet, the Risk-Weighted Asset (RWA) and the equity are affected.
The most relevant aspects related to the area’s 65 activity in 2023 were:
Turkey generated a net attributable profit of €528m during 2023, which compares positively with the accumulated result reached at the end of December 2022, both periods reflecting the impact of the application of hyperinflation accounting.
As mentioned above, the year-on-year comparison of the accumulated income statement at the end of December 2023 at current exchange rate is affected by the strong depreciation of the Turkish lira in the last year (-38.9%). Excluding this effect, the highlights of the results for the year at constant exchange rate are summarized below:
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
The variation rates of loans in Turkish lira and loans in foreign currency (U.S. dollars) only refer to Garanti Bank. Thus they exclude the subsidiaries of Garanti BBVA, mainly in Romania and Netherlands.
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
| (%) | ||
|---|---|---|
| ⁽¹⁾ (VARIATION AT CONSTANT EXCHANGE RATES COMPARED TO 31-12-22) | ||
| ⁽¹⁾ Excluding repos. |
| NET INTEREST INCOME / AVERAGE TOTAL ASSETS (PERCENTAGE AT CONSTANT EXCHANGE RATES) | OPERATING INCOME (MILLIONS OF EUROS AT CURRENT EXCHANGE RATES) |
|---|---|
| +4.7% (1) | 2,290 |
| 2,397 | |
| ⁽¹⁾ At constant exchange rates: +63.8%. |
| NET ATTRIBUTABLE PROFIT (LOSS) (MILLIONS OF EUROS AT CURRENT EXCHANGE RATES) |
|---|
| -16.9% (1) |
| 738 |
| 613 |
| ⁽¹⁾ At constant exchange rates: +43.2% |
| ⁽²⁾ The variation in customer funds under management is affected by the transfer of the pension funds managed by the Pension Fund Administrator that the BBVA Group maintains in Bolivia to the Public Long-Term Social Security Manager of Bolivia. |
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.# FINANCIAL STATEMENTS AND RELEVANT BUSINESS INDICATORS (MILLIONS OF EUROS AND PERCENTAGE)
| 2023 | ∆ % | ∆ % ⁽¹⁾ | 2022 | |
|---|---|---|---|---|
| Net interest income | 4,394 | 6.2 | 47.5 | 4,138 |
| Net fees and commissions | 700 | (10.1) | 12.3 | 778 |
| Net trading income | 633 | 41.7 | 73.5 | 447 |
| Other operating income and expenses | (1,395) | 27.2 | 45.8 | (1,097) |
| Gross income | 4,331 | 1.5 | 43.9 | 4,265 |
| Operating expenses | (1,934) | (2.1) | 25.0 | (1,976) |
| Personnel expenses | (904) | (4.4) | 25.1 | (946) |
| Other administrative expenses | (864) | 0.6 | 29.7 | (859) |
| Depreciation | (165) | (2.8) | 5.1 | (170) |
| Operating income | 2,397 | 4.7 | 63.8 | 2,290 |
| Impairment on financial assets not measured at fair value through profit or loss | (1,134) | 48.9 | 75.3 | (762) |
| Provisions or reversal of provisions and other results | (58) | (38.5) | (16.5) | (94) |
| Profit (loss) before tax | 1,206 | (15.9) | 61.3 | 1,434 |
| Income tax | (291) | (16.3) | 156.4 | (347) |
| Profit (loss) for the period | 915 | (15.8) | 44.3 | 1,087 |
| Non-controlling interests | (302) | (13.5) | 46.7 | (349) |
| Net attributable profit (loss) | 613 | (16.9) | 43.2 | 738 |
| 31-12-23 | ∆ % | ∆ % ⁽¹⁾ | 31-12-22 | |
|---|---|---|---|---|
| Cash, cash balances at central banks and other demand deposits | 6,585 | (14.4) | (2.8) | 7,695 |
| Financial assets designated at fair value | 10,508 | (2.1) | 21.9 | 10,739 |
| Of which: Loans and advances | 592 | 290.9 | 221.8 | 152 |
| Financial assets at amortized cost | 44,508 | 10.0 | 12.5 | 40,448 |
| Of which: Loans and advances to customers | 41,213 | 7.2 | 8.6 | 38,437 |
| Tangible assets | 939 | (13.7) | (3.4) | 1,088 |
| Other assets | 2,239 | 13.0 | 18.7 | 1,981 |
| Total assets/liabilities and equity | 64,779 | 4.6 | 12.0 | 61,951 |
| Financial liabilities held for trading and designated at fair value through profit or loss | 3,289 | 16.9 | (1.3) | 2,813 |
| Deposits from central banks and credit institutions | 5,140 | (8.4) | (9.8) | 5,610 |
| Deposits from customers | 42,567 | 6.3 | 14.7 | 40,042 |
| Debt certificates | 2,986 | 1.0 | 4.1 | 2,956 |
| Other liabilities | 4,502 | (3.3) | 35.0 | 4,655 |
| Regulatory capital allocated | 6,294 | 7.1 | 14.7 | 5,874 |
| 31-12-23 | ∆ % | ∆ % ⁽¹⁾ | 31-12-22 | |
|---|---|---|---|---|
| Performing loans and advances to customers under management ⁽³⁾ | 41,013 | 6.6 | 8.1 | 38,484 |
| Non-performing loans | 2,302 | 25.4 | 21.4 | 1,835 |
| Customer deposits under management ⁽⁴⁾ | 42,567 | 6.3 | 14.7 | 40,042 |
| Off-balance sheet funds ⁽⁵⁾ | 5,525 | (68.9) | (65.4) | 17,760 |
| Risk-weighted assets | 49,117 | 4.9 | 11.8 | 46,834 |
| Efficiency ratio (%) | 44.7 | 46.3 | ||
| NPL ratio (%) | 4.8 | 4.1 | ||
| NPL coverage ratio (%) | 88 | 101 | ||
| Cost of risk (%) | 2.51 | 1.69 |
⁽¹⁾ At constant exchange rates.
⁽²⁾ Balances restated according to IFRS 17 - Insurance contracts.
⁽³⁾ Excluding repos.
⁽⁴⁾ Excluding repos and including specific marketable debt securities.
⁽⁵⁾ Includes mutual funds, customer portfolios in Colombia and Peru and pension funds in Bolivia as of 31-12-2022.
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This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
SOUTH AMERICA. DATA PER COUNTRY (MILLIONS OF EUROS)
| Country | Operating income 2023 | ∆ % | ∆ % ⁽¹⁾ | 2022 | Net attributable profit (loss) 2023 | ∆ % | ∆ % ⁽¹⁾ | 2022 |
|---|---|---|---|---|---|---|---|---|
| Argentina | 483 | 3.0 | n.s. | 469 | 132 | (28.7) | n.s. | 185 |
| Colombia | 509 | (16.6) | (12.7) | 610 | 156 | (35.5) | (32.5) | 241 |
| Peru | 1,109 | 18.9 | 19.2 | 932 | 203 | (1.2) | (1.0) | 206 |
| Other countries ⁽³⁾ | 297 | 6.7 | 5.6 | 279 | 122 | 15.5 | 14.1 | 106 |
| Total | 2,397 | 4.7 | 63.8 | 2,290 | 613 | (16.9) | 43.2 | 738 |
⁽¹⁾ Figures at constant exchange rates.
⁽²⁾ Balances restated according to IFRS 17 - Insurance contracts.
⁽³⁾ Bolivia, Chile (Forum), Uruguay and Venezuela. Additionally, it includes eliminations and other charges.
SOUTH AMERICA. RELEVANT BUSINESS INDICATORS PER COUNTRY (MILLIONS OF EUROS)
| Argentina 31-12-23 | Argentina 31-12-22 | Colombia 31-12-23 | Colombia 31-12-22 | Peru 31-12-23 | Peru 31-12-22 | |
|---|---|---|---|---|---|---|
| Performing loans and advances to customers under management ⁽¹⁾ ⁽²⁾ | 2,259 | 809 | 16,951 | 16,134 | 17,179 | 16,747 |
| Non-performing loans ⁽¹⁾ | 39 | 13 | 892 | 729 | 1,202 | 1,042 |
| Customer deposits under management ⁽¹⁾ ⁽³⁾ | 4,060 | 1,470 | 17,875 | 15,855 | 16,939 | 16,035 |
| Off-balance sheet funds ⁽¹⁾ ⁽⁴⁾ | 1,444 | 486 | 2,506 | 2,485 | 1,572 | 1,436 |
| Risk-weighted assets | 4,997 | 8,089 | 19,467 | 15,279 | 18,825 | 17,936 |
| Efficiency ratio (%) | 53.6 | 61.3 | 47.1 | 40.4 | 36.4 | 37.2 |
| NPL ratio (%) | 1.6 | 1.6 | 4.8 | 4.2 | 5.5 | 4.9 |
| NPL coverage ratio (%) | 136 | 173 | 89 | 106 | 84 | 91 |
| Cost of risk (%) | 2.18 | 2.61 | 2.13 | 1.56 | 3.04 | 1.58 |
⁽¹⁾ Figures at constant exchange rates.
⁽²⁾ Excluding repos.
⁽³⁾ Excluding repos and including specific marketable debt securities.
⁽⁴⁾ Includes mutual funds and customer portfolios (in Colombia and Peru).
Unless expressly stated otherwise, all the comments below on rates of change, for both activity and results, will be given at constant exchange rates. These rates, together with the changes at current exchange rates, can be found in the attached tables of the financial statements and relevant business indicators.
The most relevant aspects related to the area's activity during 2023 were:
– Lending activity (performing loans under management) registered a variation of +8.1%, with growth focused on the retail portfolio, which grew more than the wholesale portfolio (+11.6% versus +4.8%), mainly favored by the evolution of consumer loans (+11.5%), and credit cards (+44.0%). On the other hand, corporate loans also increased (+4.8%).
– With regard to asset quality, the NPL ratio stood at 4.8% at the end of December 2023, which represents an increase of 73 basis points compared to the previous year, mainly due to non-performing loans increases within the retail portfolios in all countries which compose this aggregate, particularly in Colombia and Peru in a more complex macroeconomic environment and, to a lesser extent, due to the lower relative weight of Argentina, with a lower NPL ratio than the average. On the other hand, the NPL coverage ratio stood at 88% as of December 31, 2023, with a decrease of 13 percentage points compared to the previous year as a consequence of the non-performing loans increase and the higher write-offs volume in the year.
– Customer funds under management decreased (-9.3%) compared to the closing balances at the end of 2022, with an increase in both demand deposits (+7.4%) and time deposits (+28.7%) and a reduction of off-balance sheet funds (-65.4%) due to the transfer of pension funds managed by the Pension Fund Administrator that the BBVA Group maintains in Bolivia to the Public Long-Term Social Security Management Company of this country.
South America generated a cumulative net attributable profit of €613m at the end of the year 2023, which represents a year-on-year increase of +43.2%, driven by the good performance of recurring income (+41.4%) and the area's NTI, which offset the increase in expenses, in a highly inflationary environment throughout the region and higher provisioning needs for impairment on financial assets, mainly in Peru and, to a lesser extent, in Colombia, both affected by the worsening of macroeconomic environment.
The heading "Other operating income and expenses" mainly includes the impact of the adjustment for hyperinflation in Argentina, whose net monetary loss stood at €1,062m in the period January-December 2023, which is higher than the €822m registered in the period January-December 2022.
262
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
The new government since the elections in November 2023 has announced an adjustment plan in order to correct the strong macroeconomic distortions which, among other measures, includes a significant fiscal deficit reduction and a severe currency depreciation. In this context, it is likely that annual inflation will increase significantly from 211% at the end of 2023 and that GDP, which has fallen by around 3.0% in 2023 (50 basis points above the previous forecast), will contract significantly during the following months. The recent adjustments, despite their short term impacts and the high associated risks, eventually complemented with additional measures such as an interest rate hike, could lay the foundations for a gradual inflation decrease and a growth recovery from the second half of 2024 onward.
In a context of persistently high uncertainty, BBVA Research estimates that annual inflation will close 2024 around 175% and that GDP will fall around 4.0% this year (150 points above what was forecasted three months ago).
The banking sector continues to grow at a stable pace but feels the burden of high inflation. At the end of October 2023, total credit had grown by 130% compared to the same month in 2022, favored by both consumer and corporate portfolios, which reached year- on-year growth rates of 124% and 147%, respectively. On the other hand, deposits continued the trend of the previous months and at the end of October had grown by 122% year-on-year at the end of October. Finally, the NPL ratio decreased slightly to 2.8% at the end of October 2023 (28 basis points below the same month in 2022).
– Between January and December 2023, performing loans under management increased by 179.3%, showing growth in both the business portfolio (+221.3%) and the retail portfolio (+142.1%), highlighting in the latter the growth in credit cards (+154.4%) and consumer loans (+100.9%). With regard to asset quality, the NPL ratio stood at 1.6% and the NPL coverage ratio stood at 136% at the end of December 2023.
– Balance sheet funds grew by 176.1% between January and December 2023, with demand deposits increasing at a faster rate than time deposits (+248.0% versus +73.9%). On the other hand, mutual funds also increased (+196.9%).
– The cumulative net attributable profit at the end of December 2023 stood at €132m, well above the figure achieved in the same period of 2022.This is mainly explained by the favorable evolution of the net interest income, driven by both volume and price effects (mainly in the credit cards and business portfolio, together with an adequate liabilities cost management), as well as a higher profitability of the securities portfolios. This evolution was partially offset by a larger negative adjustment for hyperinflation (mainly reflected in the other operating income and expenses line), higher expenses -both in personnel due to salary revisions, as well as general expenses-, and higher loan-loan loss provisions, due to both the credit and the fixed income portfolios.
Economic activity lost momentum throughout 2023, in line with BBVA Research's expectations that maintain an unchanged GDP growth forecasts of 1.2% in 2023 and 1.5% in 2024. Lower growth in domestic demand is expected to favor a gradual moderation of inflation from 9.3% in December to around 6.9%, on average, in 2024. This will probably allow interest rates, currently at 13.0%, after a 25 basis points cut in December, to reach 7.0% by the end of this year. Total credit growth for the banking system stood at 4.0% year-on-year in October 2023, and continues to be driven by the growth in corporate lending at 5.6% and mortgages at 8.8%. Consumer credit deceleration stands out, as it slowed from a year-on-year growth rate of 20% during 2022 to a fall of 0.8% in October 2023. Total deposits showed a year-on-year growth rate of 10.4% at the end of October 2023, with a strong shift towards time deposits (up 36.5% year-on-year) and a fall in demand deposits. The NPL ratio of the system has climbed in recent months to 5.1% in October 2023, 142 basis points higher than in the same month of 2022.
263 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
In a context marked by adverse weather shocks and the effects of high inflation and a contractive monetary policy, economic activity showed weakness in 2023, in particular in the last months of the year. BBVA Research has therefore revised its forecast for GDP growth in 2023 from 0.4% to -0.4%. The moderation of inflation (which reached 3.2% in December 2023 and will reach an average of around 2.8% in 2024) as well as the rates cutting process (which have fallen in the last months 125 basis points to 6.50% and will fall to around 4.5% through 2024) will presumably support a recovery in activity and GDP growth of 2.0% in 2024 (30 basis points below the previous forecast). Total credit in the Peruvian banking system fell 2.4% year-on-year in November 20232.4. Performance by portfolio is uneven, with the biggest slowdown in corporate lending, with a year-on-year contraction of 7.7%. However, consumer finance remained buoyant, growing by 9.0% year-on-year in November 2023, while the mortgage portfolio maintained a stable growth rate of around 5.1% year- on-year, in line with previous months. Total deposits in the system remained stable at the end of November 2023, with a slight growth of 0.3% year-on-year, showing a continued shift towards time deposits (18.3% year-on-year) to the detriment of demand deposits (-8.0% year-on-year). The NPL ratio across the banking system rose very slightly to 4.38% since the end of 2022).
264 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
| OPERATING INCOME (MILLIONS OF EUROS AT CONSTANT EXCHANGE RATES) | NET ATTRIBUTABLE PROFIT (LOSS) (MILLIONS OF EUROS AT CONSTANT EXCHANGE RATES) | |
|---|---|---|
| +84.9% (1) | 274 | 238 |
| 507 | 389 | |
| ⁽¹⁾ At current exchange rates: +83.8%. | (1) At current exchange rates: 62.6%. | |
| +63.7% (1) |
⁽¹⁾ Excluding repos.
265 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
| 2023 | ∆ % ⁽¹⁾ | ∆ % | 2022 | |
|---|---|---|---|---|
| Net interest income | 539 | 62.3 | 63.6 | 332 |
| Net fees and commissions | 244 | 0.7 | 1.3 | 243 |
| Net trading income | 316 | 51.9 | 53.2 | 208 |
| Other operating income and expenses | 3 | (50.1) | (48.9) | 7 |
| Gross income | 1,103 | 39.7 | 40.7 | 790 |
| Operating expenses | (596) | 16.0 | 17.0 | (513) |
| Personnel expenses | (303) | 13.5 | 14.5 | (267) |
| Other administrative expenses | (267) | 19.1 | 20.1 | (224) |
| Depreciation | (26) | 15.1 | 15.1 | (23) |
| Operating income | 507 | 83.8 | 84.9 | 276 |
| Impairment on financial assets not measured at fair value through profit or loss | (28) | 107.4 | 113.1 | (13) |
| Provisions or reversal of provisions and other results | (1) | n.s. | n.s. | 14 |
| Profit (loss) before tax | 479 | 73.0 | 74.1 | 277 |
| Income tax | (90) | 140.0 | 140.8 | (37) |
| Profit (loss) for the period | 389 | 62.6 | 63.7 | 240 |
| Non-controlling interests | — | — | — | — |
| Net attributable profit (loss) | 389 | 62.6 | 63.7 | 240 |
| 31-12-23 | ∆ % ⁽¹⁾ | ∆ % | 31-12-22 | |
|---|---|---|---|---|
| Cash, cash balances at central banks and other demand deposits | 4,748 | 18.3 | 22.1 | 4,015 |
| Financial assets designated at fair value | 15,475 | 204.0 | 213.7 | 5,090 |
| Of which: Loans and advances | 14,783 | 249.5 | 261.8 | 4,230 |
| Financial assets at amortized cost | 43,363 | 7.3 | 8.2 | 40,425 |
| Of which: Loans and advances to customers | 39,322 | 5.2 | 6.2 | 37,375 |
| Inter-area positions | — | — | — | — |
| Tangible assets | 151 | 93.1 | 92.9 | 78 |
| Other assets | 537 | 56.3 | 58.9 | 343 |
| Total assets/liabilities and equity | 64,274 | 28.7 | 30.3 | 49,952 |
| Financial liabilities held for trading and designated at fair value through profit or loss | 14,831 | 237.3 | 249.3 | 4,397 |
| Deposits from central banks and credit institutions | 3,085 | 12.4 | 13.7 | 2,745 |
| Deposits from customers | 13,056 | 32.9 | 33.8 | 9,827 |
| Debt certificates | 1,413 | (9.4) | (8.5) | 1,561 |
| Inter-area positions | 26,476 | 1.6 | 2.8 | 26,060 |
| Other liabilities | 1,223 | 20.5 | 22.5 | 1,014 |
| Regulatory capital allocated | 4,191 | (3.6) | (2.6) | 4,348 |
| 31-12-23 | ∆ % ⁽¹⁾ | ∆ % | 31-12-22 | |
|---|---|---|---|---|
| Performing loans and advances to customers under management ⁽²⁾ | 39,202 | 4.7 | 5.7 | 37,431 |
| Non-performing loans | 368 | 91.0 | 91.0 | 192 |
| Customer deposits under management ⁽²⁾ | 13,056 | 32.9 | 33.8 | 9,827 |
| Off-balance sheet funds ⁽³⁾ | 566 | 8.8 | 8.8 | 520 |
| Risk-weighted assets | 36,410 | 3.8 | 4.9 | 35,064 |
| Efficiency ratio (%) | 54.0 | 65.0 | ||
| NPL ratio (%) | 0.7 | 0.4 | ||
| NPL coverage ratio (%) | 69 | 131 | ||
| Cost of risk (%) | 0.08 | 0.04 |
⁽¹⁾ At constant exchange rates.
⁽²⁾ Excluding repos.
⁽³⁾ Includes pension funds.
266 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
Unless expressly stated otherwise, all the comments below on rates of change, for both activity and results, will be given at constant exchange rates. These rates, together with the changes at current exchange rates, can be found in the attached tables of the financial statements and relevant business indicators. Comments that refer to Europe exclude Spain.## 3.2.6 Corporate Center
| 2023 | ∆ % | 2022 | |
|---|---|---|---|
| Net interest income | (386) | 253.3 | (109) |
| Net fees and commissions | (44) | 40.2 | (31) |
| Net trading income | (686) | 133.6 | (294) |
| Other operating income and expenses | 87 | (17.1) | 105 |
| Gross income | (1,029) | 212.7 | (329) |
| Operating expenses | (849) | (0.4) | (852) |
| Personnel expenses | (670) | 7.9 | (621) |
| Other administrative expenses | 31 | n.s. | (26) |
| Depreciation | (210) | 2.1 | (206) |
| Operating income | (1,878) | 59.0 | (1,181) |
| Impairment on financial assets not measured at fair value through profit or loss | 1 | n.s. | (2) |
| Provisions or reversal of provisions and other results | (21) | n.s. | 8 |
| Profit (loss) before tax | (1,898) | 61.6 | (1,175) |
| Income tax | 288 | 4.1 | 277 |
| Profit (loss) for the period | (1,610) | 79.3 | (898) |
| Non-controlling interests | 3 | n.s. | (25) |
| Net attributable profit (loss) | (1,607) | 74.2 | (922) |
| 31-12-23 | ∆ % | 31-12-22 | |
|---|---|---|---|
| Cash, cash balances at central banks and other demand deposits | 684 | (20.1) | 856 |
| Financial assets designated at fair value | 2,512 | 5.1 | 2,390 |
| Of which: Loans and advances | — | (100.0) | — |
| Financial assets at amortized cost | 3,622 | 11.0 | 3,262 |
| Of which: Loans and advances to customers | 230 | (17.2) | 278 |
| Inter-area positions | — | — | — |
| Tangible assets | 1,727 | (7.3) | 1,863 |
| Other assets | 14,530 | 1.3 | 14,349 |
| Total assets/liabilities and equity | 23,074 | 1.6 | 22,719 |
| Financial liabilities held for trading and designated at fair value through profit or loss | 125 | 15.6 | 108 |
| Deposits from central banks and credit institutions | 765 | 12.2 | 682 |
| Deposits from customers | 181 | (2.8) | 187 |
| Debt certificates | 380 | n.s. | (863) |
| Inter-area positions | 5,835 | (26.7) | 7,963 |
| Other liabilities | 3,554 | (11.4) | 4,011 |
| Regulatory capital allocated | (43,033) | 7.9 | (39,887) |
| Total equity | 55,265 | 9.4 | 50,517 |
General note: 2022 figures have been restated according to IFRS 17 - Insurance contracts.
Results
The Corporate Center recorded a net attributable profit of €-1,607m between January and December of 2023, compared with €-922m recorded on the same period of the previous year, mainly due to a negative contribution in the NTI line from exchange rate hedges as a result of a better than expected currency performance, in particular, the Mexican peso during the first half of the year.
Highlights
* Increase in lending activity
* Excellent performance of NTI and favorable evolution of recurring income
* Efficiency improvement
* Year-on-year increase in net attributable profit
BUSINESS ACTIVITY ⁽¹⁾ (VARIATION AT CONSTANT EXCHANGE RATES COMPARED TO 31-12-22)
⁽¹⁾ Excluding repos.
GROSS INCOME / AVERAGE TOTAL ASSETS (PERCENTAGE AT CONSTANT EXCHANGE RATES) . OPERATING INCOME (MILLIONS OF EUROS AT CONSTANT EXCHANGE RATES)
+42.6% (1)
2,485
3,544
⁽¹⁾ At current exchange rates: +25.5%.
NET ATTRIBUTABLE PROFIT (LOSS) (MILLIONS OF EUROS AT CONSTANT EXCHANGE RATES)
+44.5% (1)
1,559
2,253
⁽¹⁾ At current exchange rates: +32.2%.
| 2023 | ⁽¹⁾ ∆ % | ∆ % ⁽²⁾ | 2022 | |
|---|---|---|---|---|
| Net interest income | 2,102 | 7.7 | 19.5 | 1,952 |
| Net fees and commissions | 1,007 | 10.2 | 16.8 | 914 |
| Net trading income | 1,759 | 56.0 | 78.2 | 1,128 |
| Other operating income and expenses | (64) | 50.0 | 68.1 | (43) |
| Gross income | 4,804 | 21.6 | 34.6 | 3,950 |
| Operating expenses | (1,260) | 11.9 | 16.1 | (1,125) |
| Personnel expenses | (622) | 15.3 | 17.9 | (540) |
| Other administrative expenses | (531) | 10.3 | 17.6 | (481) |
| Depreciation | (107) | 2.2 | 1.1 | (105) |
| Operating income | 3,544 | 25.5 | 42.6 | 2,825 |
| Impairment on financial assets not measured at fair value through profit or loss | (11) | (89.8) | (82.7) | (104) |
| Provisions or reversal of provisions and other results | — | n.s. | n.s. | (12) |
| Profit (loss) before tax | 3,534 | 30.4 | 46.6 | 2,709 |
| Income tax | (1,006) | 31.6 | 47.8 | (764) |
| Profit (loss) for the period | 2,528 | 30.0 | 46.1 | 1,945 |
| Non-controlling interests | (275) | 14.2 | 60.5 | (241) |
| Net attributable profit (loss) | 2,253 | 32.2 | 44.5 | 1,704 |
| 31-12-23 | ∆ % | ∆ % ⁽²⁾ | 31-12-22 | |
|---|---|---|---|---|
| Cash, cash balances at central banks and other demand deposits | 5,036 | (8.8) | (10.1) | 5,524 |
| Financial assets designated at fair value | 159,379 | 35.1 | 33.4 | 117,958 |
| Of which: Loans and advances | 84,126 | 85.5 | 85.8 | 45,360 |
| Financial assets at amortized cost | 97,325 | 8.8 | 10.8 | 89,440 |
| Of which: Loans and advances to customers | 78,376 | 1.5 | 3.7 | 77,208 |
| Inter-area positions | — | — | — | — |
| Tangible assets | 141 | 171.6 | 170.6 | 52 |
| Other assets | 10,645 | n.s. | n.s. | 862 |
| Total assets/liabilities and equity | 272,526 | 27.4 | 27.6 | 213,836 |
| Financial liabilities held for trading and designated at fair value through profit or loss | 131,118 | 32.7 | 31.5 | 98,790 |
| Deposits from central banks and credit institutions | 28,161 | 34.2 | 33.7 | 20,987 |
| Deposits from customers | 59,094 | 22.7 | 25.5 | 48,180 |
| Debt certificates | 6,076 | 14.8 | 13.5 | 5,292 |
| Inter-area positions | 29,657 | 15.8 | 16.9 | 25,609 |
| Other liabilities | 7,367 | 78.6 | 60.3 | 4,124 |
| Regulatory capital allocated | 11,054 | 1.8 | 6.3 | 10,855 |
| 31-12-23 | ∆ % | ∆ % ⁽²⁾ | 31-12-22 | |
|---|---|---|---|---|
| Performing loans and advances to customers under management ⁽³⁾ | 77,532 | 0.3 | 2.5 | 77,291 |
| Non-performing loans | 905 | 20.1 | 70.7 | 753 |
| Customer deposits under management ⁽³⁾ | 53,545 | 13.3 | 16.0 | 47,270 |
| Off-balance sheet funds ⁽⁴⁾ | 4,189 | 139.4 | 262.6 | 1,750 |
| Efficiency ratio (%) | 26.2 | 28.5 |
⁽¹⁾ For the translation of the income statement in those countries where hyperinflation accounting is applied, the punctual exchange rate as of December 31, 2023 is used.
⁽²⁾ At constant exchange rates.
⁽³⁾ Excluding repos.
⁽⁴⁾ Includes mutual funds, customer portfolios and other off-balance sheet funds.
Unless expressly stated otherwise, all the comments below on rates of change, for both activity and results, will be given at constant exchange rates. For the conversion of these figures in those countries in which accounting for hyperinflation is applied, the end of period exchange rate as of December 31, 2023 is used. These rates, together with changes at current exchange rates, can be found in the attached tables of financial statements and relevant business indicators.
Activity
The most relevant aspects related to the area's activity in 2023 were:
– Lending activity (performing loans under management) was higher than at the end of December 2022 (+2.5%). Global Transaction Banking stands out, specially in the second half of the year, and by geographical areas, the performance in the United States and in Europe (excluding Spain) is noteworthy, both in Investment Banking & Finance.
– Customer funds continued to grow by 22.0% in 2023, maintaining the positive trend in price management.
Results
CIB generated a net attributable profit of €2,253m between January and December of 2023. These results, which do not include the application of hyperinflation accounting, represent an increase of 44.5% on a year-on-year basis and reflect the contribution of the diversification of products and geographical areas, as well as the progress of the Group's wholesale businesses in its strategy, leveraged on globality and sustainability, with the purpose of being relevant to its clients.The contribution by business areas, excluding the Corporate Center, to CIB's accumulated net attributable profit at the end of December 2023 was as follows: 15% Spain, 29% Mexico, 29% Turkey, 13% South America and 15% Rest of Business. All business line results have performed well, highlighting particularly the Global Transaction Banking (GTB) performance in all geographical areas, the contribution of Global Markets and Project Finance within Investment Banking & Finance (IB&F). The most relevant aspects of the year-on-year evolution in the income statement of this aggregate are summarized below:
– Net interest income was 19.5% higher than in last year. GTB stands out, which evolved favorably, especially in Spain and the American region.
– Net fees and commissions registered an increase of 16.8%, with positive evolution in all businesses, specially in the United States and Mexico.
– Excellent NTI performance (+78.2%), mainly due to the performance of the Global Markets due to the income generated by foreign currency operations in emerging markets. By geographical areas, all of them showed growth, except Spain, which fell slightly.
– The operating expenses increased by 16.1%, driven by higher personnel expenses, partly due to measures taken by the Group to compensate for the loss in purchasing power of the workforce and salary review processes, as well as the increase in the number of employees in the area. On the other hand, general expenses continue to be affected by inflation and higher technology-related expenses. Despite this, the efficiency ratio stood at 26.2%, which represents an improvement compared to the previous year.
– Provisions for impairment on financial assets stood below the previous year, partly due to releases in Mexico.
271 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
The BBVA Group has a general risk management and control model (hereinafter, the “Model”) that is appropriate for its business model, its organization, the countries where it operates and its corporate governance system. This model allows the Group to carry out its activity within the management and risk control strategy and policy defined by the corporate bodies of BBVA where sustainability is specifically considered, and the alignment to a changing economic and regulatory environment, facing this management at a global level and aligned to the circumstances at all times.
The Model, for which the Group’s Chief Risk Officer (CRO) is responsible and that must be updated or reviewed at least annually, is fully applied in the Group and it comprises the following basic elements:
– Governance and organization
– Risk Appetite Framework
– Assessment, monitoring and reporting
– Infrastructure.
The Group promotes the development of a risk culture that ensures a consistent application of the Model in the Group, and that guarantees that the risks function is understood and internalized at all levels of the organization.
The risk governance model in the BBVA Group is characterized by a special involvement of its corporate bodies, both in setting the risk strategy and in monitoring and supervising its implementation on an ongoing basis. Thus, and as explained below, the corporate bodies are responsible for approving the risk strategy and the general policies for the different types of risks. Global Risk Management (hereinafter, GRM) and Regulation & Internal Control (including, among other areas, Non-Financial Risks) are the functions responsible for its implementation and development, with the appropriate reporting to corporate bodies.
Responsibility for day-to-day management of risks falls on business and corporate areas, the activities of which adhere to the general policies, regulation, infrastructures and controls that, based on the framework set by corporate bodies, are defined by GRM and Regulation & Internal Control in their corresponding areas of responsibility.
To carry out this work adequately, the financial risks function in the BBVA Group has been set up as a single, global function and independent from business areas. The head of the financial risks function at an executive level, is the Group's Chief Risk Officer, who is appointed by the Board of Directors as a member of its senior management, and reports directly on the development of the corresponding functions to the corporate bodies. The Chief Risk Officer, for the best fulfilment of the functions, is supported by a structure consisting of cross- cutting risk units in the corporate area and specific risk units in the Group's geographical and/or business areas.
In addition, and with regard to non-financial risks and internal control, the Group has a Regulation & Internal Control area independent from the rest of units and whose head (Head of Regulation & Internal Control) is also appointed by the Board of Directors of BBVA and reports directly to corporate bodies on the performance of its functions. This area is responsible for proposing and implementing non- financial risks policies and the Internal Control Model of the Group, and it is composed by, among other, the Non-Financial Risks, Regulatory Compliance and Risk Internal Control units.
The Risk Internal Control unit, within the Regulation & Internal Control area and, therefore, independent from the financial risks function (GRM), acts as a control unit for the activities carried out by GRM. In this regard, and without prejudice to the functions performed in this regard by the Internal Audit area, Risk Internal Control checks that the regulatory framework, the models and processes and established measures are sufficient and appropriate for each type of financial risk. It also monitors its implementation and operation, and confirms that those decisions taken by GRM are taken independently from the business lines and, in particular, that there's an adequate segregation of functions between units.
272 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
Governance and organizational structure are basic pillars for ensuring an effective risk management and control. This section summarizes the roles and responsibilities of the corporate bodies in the risks area, of the Group's Chief Risk Officer and, in general, of the risks function, its interrelation and the parent-subsidiary relationship model in this area and the group of committees, in addition to the Risk Internal Control unit.
According to the corporate governance system of BBVA, the Board of Directors of the Bank has certain reserved competencies, concerning management, through the implementation of the corresponding most relevant decisions, and concerning supervision and control, through the monitoring and supervision of implemented decisions and management of the Bank. In addition, and to ensure adequate performance of the management and supervisory functions of the Board of Directors, the corporate governance system comprises different committees supporting the Board of Directors with regard to matters falling within their competence, and according to the specific charters of each committees. For this purpose, a coordinated work scheme between these corporate bodies has been established.
With regard to risks, the Board of Directors' competencies are those relating to establishing the policy for controlling and managing risk and the oversight and control of its implementation. In addition, and for an adequate performance of its duties, the Board of Directors is assisted by the Risk and Compliance Committee (CRC), on the issues detailed below, and by the Executive Committee (CDP), which is focused on the strategy, finance and business functions of the Group, for the purposes of which it monitors the risks of the Group. Additionally, and in a coordinated manner with the general supervision of financial and non-financial risks carried out by the Risk and Compliance Committee, the Audit Committee and the Technology and Cybersecurity Committee also assist the Board in the management and control of non-financial risks of an accounting, tax and reporting nature, and those of a technological nature, respectively.
The involvement of the corporate bodies of BBVA in the control and management of the risks of the Group is detailed below:
The Board of Directors is responsible for establishing the risk strategy of the Group and, in this role, it determines the control and risk management policy, through the following documents:
– The Risk Appetite Framework of the Group, which includes in the one hand the risk appetite statement of the Group, that is, the general principles governing the risk strategy of the Group and its target profile; and, on the other hand, and based on the above mentioned risk appetite statement, a set of quantitative metrics (core metrics, and their corresponding statements, and by type of risk metrics), reflecting the risk profile of the Group;
– the framework of management policies of the different types of risk to which the Bank is or could be exposed. They contain the basic lines for a consistent management and control of risks throughout the Group, and consistent with the Model and Risk Appetite Framework;
– and the General risk management and control model described above.All of the above in coordination with the rest of prospective-strategic decisions of the Bank, which includes the Strategic Plan, the Annual Budget, the Capital Plan and the Liquidity & Funding Plan, in addition to the rest of management objectives, whose approval is a responsibility of the Board of Directors. In addition to defining the risk strategy, the Board of Directors, in the performance of its risks monitoring, management and control tasks, also monitors the evolution of the risks of the Group and of each main geographical and/or business area, ensuring compliance with the Risk Appetite Framework of the Group; and also supervising the internal information and control systems. For the development of all these functions, the Board of Directors is supported by the CRC and the CDP, which are responsible for the functions detailed below.
The CRC is, according to its own charter, composed of non-executive directors and its main purpose is to assist the Board of Directors on the establishment and monitoring of the risk control and management policy of the Group. For this purpose, it assists the Board of Directors in a variety of risk control and monitoring areas, in addition to its analysis functions, based on the strategic pillars established at all times by both the Board of Directors and the CDP, the proposals on the strategy, control and risk management of the Group, which are particularly specified in the Risk Appetite Framework and in the “Model”. After the analysis, the Risk Appetite Framework and Model proposal is submitted to the Board of Directors for consideration and, where appropriate, approval purposes. In addition, the CRC proposes, in a manner consistent with the Risk Appetite Framework of the Group approved by the Board of Directors, the control and management policies of the different risks of the Group, and supervises the information and internal control systems. With regard to the monitoring of the evolution of the risks of the Group and their degree of compliance with the Risk Appetite Framework and defined general policies, and without prejudice to the monitoring task carried out by the Board of Directors and the CDP, the CRC carries out monitoring and control tasks with greater frequency and receives information with a sufficient granularity to achieve an adequate performance of its duties.
273
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
The CRC also analyzes all measures planned to mitigate the impact of all identified risks, should they materialize, which must be implemented by the CDP or the Board of Directors, as the case may be. The CRC also monitors the procedures, tools and measurement indicators of those risks established at a Group level in order to have a comprehensive view of the risks of BBVA and its Group, and monitors compliance with the regulation and supervisory requirements in terms of risks. The CRC is also responsible for analyzing those project-related risks that are considered strategic for the Group or corporate transactions that are going to be submitted to the Board of Directors of the CDP, within its scope of competence. In addition, it contributes to the setting of the remuneration policy, checking that it is compatible with an appropriate and effective management of risks and that it does not provide incentives to take risks breaching the level tolerated by the Bank. Lastly, the CRC ensures the promotion of the risk culture in the Group. In 2023, the CRC has held 22 meetings.
In order to have a comprehensive and complete vision of the progress of the Group's business and its business units, the CDP monitors the evolution of the risk profile and the core metrics defined by the Board of Directors, being aware of any potential deviation or breach of the metrics of the Risk Appetite Framework and implementing, when applicable, the appropriate measures, as explained in the Model. In addition, the CDP is responsible for proposing the basis for developing the Risk Appetite Framework, which will be established in coordination with the rest of prospective/strategic decisions of the Bank and the rest of management objectives. Lastly, the CDP is the committee supporting the Board of Directors in decisions related to business risk and reputational risk, according to the dispositions set out in its own charter.
IBBVA has an internal control model that is structured into three differentiated levels (“lines of defense”), which constitute the organizational structure of the Group's internal control model, whose objective is the integral management of the risk life cycle; all this, in accordance with the best practices developed both in the "Enterprise Risk Management - Integrated Framework" of COSO (Committee of Sponsoring Organizations of the Treadway Commission) and in the "Framework for Internal Control Systems in Banking Organizations" prepared by the Bank Basel International Settlements (BIS):
The Board, with the support of its Committees, supervises the effectiveness of the internal control model through periodic reports from those responsible for the different lines of defence. In particular, the heads of the Internal Regulation and Control and Internal Audit areas report at least quarterly to the Board of Directors on the most relevant issues of their control activity; and, in addition, they report monthly to the Risk and Compliance Committee and the Audit Committee, respectively, and with a greater level of detail, on the operation of the internal control model and on the independent reviews carried out of the different Bank processes. All of this is based on the annual plans for each of these functions, which are approved by the respective Board Committees and where the review of processes related to climate change risk and other sustainability issues is expressly incorporated.
274
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
In accordance with the provisions of the BBVA Group's General Corporate Governance Policy, for integrated management and supervision in the Group, the Group has a common management and control framework, consisting of basic guidelines (including strategic-prospective decisions) and General Policies, established by BBVA's corporate bodies for the Group. For the purpose of transferring the risk strategy and its management and control model to the different subsidiaries of the BBVA Group and their corresponding specific risk units, a parent-subsidiary relationship model has been designed within the scope of risk management and control in the BBVA Group. This relationship model implies a minimum catalog of decisions that must be adopted by the corporate bodies of the subsidiaries in terms of risks in order to provide them with an adequate governance model coordinated with the parent company. It will be the responsibility of the head of the Risk function (GRM) of each subsidiary to formulate the proposals that proceed to the corresponding corporate body for its consideration and, where appropriate, approval, according to the scope of functions that apply. The approval of these decisions by the corporate bodies of the subsidiaries obliges the risk units of the geographical areas to carry out a risk monitoring and control plan before their corporate bodies. Notwithstanding the foregoing, it is considered necessary that certain decisions regarding risks reserved for the consideration of the corresponding corporate bodies of the subsidiary for their approval, are also subject to the approval of the corporate bodies of BBVA, in accordance with what is established regulations at all times. In the specific case of BBVA, S.A., what is described in this document regarding the coordination of the local risk management function with the risk function of the parent company BBVA, S.A. is applicable (as in any subsidiary of the Group). And with regard to the decisions that the corporate bodies of the subsidiaries must adopt, in this case it is the responsibility of the head of the Risk function of BBVA, S.A.# Group Risk Management
The Group's Chief Risk Officer (CRO) is responsible for the management of all the financial risks of the Group with the necessary independence, authority, rank, experience, knowledge and resources. The CRO is appointed by the Board of Directors of BBVA and has direct access to its corporate bodies (Board of Directors, CDP and CRC), with the corresponding regular reporting on the risk situation in the Group. The GRM area has a responsibility as the unit transversal to all the businesses of the BBVA Group. This responsibility is part of the structure of the BBVA Group, which is formed by subsidiaries based in different jurisdictions, which have autonomy and must comply with their local regulations, but always according to the risk management and control scheme designed by BBVA as the parent company of the BBVA Group.
The Chief Risk Officer of the BBVA Group is responsible for ensuring that the risks of BBVA Group, within the scope of its functions, are managed according to the established model, assuming, among other, the following responsibilities:
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This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
For decision-making, the Group’s Chief Risk Officer has a governance structure for the role that culminates in a support forum, the Global Risk Management Committee (GRMC), which is established as the main executive-level committee on the risks within its remit. Its purpose is to develop the strategies, policies, regulations and infrastructures needed to identify, assess, measure and manage the material risks within its remit that the Group faces in its business activity. This committee is composed by the Chief Risk Officer, who chairs the meetings, and the heads of Core Services and Cross Services in the Corporate Area of GRM, of the Front for “South America and Turkey”, and “Risk Internal Control”; and by the heads of GRM in the three most important geographical units and in CIB.
The purpose of the GRMC is to propose and challenge, among other issues, the internal regulatory framework of GRM and the infrastructures required to identify, assess, measure and manage the risks faced by the Group in carrying out its businesses and to approve risk limits.
The GRMC carries out its functions assisted by various support committees which include:
Also:
The risks function is comprised of risk units from the corporate area, which carry out cross-cutting functions, and of risk units of the geographical/business areas.
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This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.– The risk units of the business and/or geographical areas develop and submit to the Chief Risk Officer of the geographical and/or business areas the Risk Appetite Framework proposal applicable in each geographical and/or business area, independently and always according to the Group's Risk Appetite Framework. In addition, they ensure the application of general policies and the rest of the internal regulations, with the necessary adaptations, when applicable, to local requirements, providing the appropriate infrastructures for risk management and control purposes, within the global risk infrastructure framework defined by the corporate areas, and reporting to the corresponding corporate bodies and senior management, as applicable. With regard to Non-financial risks, which are integrated in the Regulation & Internal Control area, the local risk units will coordinate, with the unit responsible for those risks, the development of the elements that should be integrated into the local Risk Appetite Framework. Thus, the local risk units work with the risk units of the corporate area with the aim of adapting themselves to the risk strategy at Group level and pooling all the information required to monitor the evolution of their risks. As previously mentioned, the risks function has a decision-making process supported by a structure of committees, and also a top-level committee, the GRMC, whose composition and functions are described in the section "Chief Risk Officer of the Group." Each geographical and/or business area has its own risk management committee(s), with objectives and contents similar to those of the corporate area. These committees perform their duties consistently and in line with general risk policies and corporate rules, and its decisions are reflected in the corresponding minutes. Under this organizational scheme, the risks function ensures the integration and application throughout the Group of the risk strategy, the regulatory framework, the infrastructures and standardized risk controls. It also benefits from the knowledge and proximity to customers in each geographical and/or business area, and conveys the corporate risk culture to the Group's different levels. Moreover, this organization enables the risks function to conduct and report to the corporate bodies an integrated monitoring and control of the risks of the entire Group.
Chief Risk Officers of geographical and/or business areas
The risks function is cross-cutting, i.e. it is present in all of the Group's geographical and/or business areas through specific risk units. Each of these units is headed by a Chief Risk Officer for the geographical and/or business area who, within the relevant scope of responsibility, carries out risk management and control functions and is responsible for applying the Model, the general policies and corporate rules approved at Group level in a consistent manner, adapting them if necessary to local requirements and with the subsequent reporting to local corporate bodies. The Chief Risk Officers of the geographical and/or business areas have functional reporting to the Group's Chief Risk Officer and hierarchical reporting to the head of their geographical and/or business area. This dual reporting system aims to ensure the independence of the local risks function from the operational functions and enable its alignment with the Group's general policies and goals related to risks.
Risk Internal Control
The Group has a specific Risk Internal Control unit, within the Regulation & Internal Control area, that, among other tasks, independently challenges and control the regulation and governance structure in terms of financial risks and its implementation and deployment in GRM, in addition to the challenge of the development and implementation of financial risks control and management processes. It is also responsible for the validation of risk models. For this purpose, it has 3 subunits: RIC-Processes, Risks Technical Secretariat and Risk Internal Validation.
– RIC-Processes. It is responsible for challenging an appropriate development of the functions of GRM units, and for reviewing that the functioning of financial risk management and control processes is appropriate and in line with the corresponding regulation, identifying potential opportunities for improvement and contributing to the design of the action plans to be implemented by the responsible units. In addition, it is the Risk Control Specialist (RCS) in the Group's Internal Control Model and, therefore, establishes the general mitigation and control frameworks for its risk area and contrasts them with those actually implemented.
– Risks Technical Secretariat. It is responsible for the definition, design and management of the principles, policies, criteria and processes through which the regulatory risk framework is developed, processed, reported and disclosed to the countries; and for the coordination, monitoring and assessment of its consistency and completeness. In addition, it coordinates the definition and structure of the most relevant GRM Committees, and monitors their proper functioning, in order to ensure that all risk decisions are taken through an adequate governance and structure, ensuring their traceability. It also provides to the CRC the technical support required in terms of financial risks for a better performance of its functions.
– Risk Internal Validation. It is responsible for validating the risks models. In this regard, it effectively challenges the relevant models used to manage and control the risks faced by the Group, as an independent third party from those developing or using the models in order to ensure its accuracy, robustness and stability. This review process is not restricted to the approval process, or to the introduction of changes in the models; it is a plan to make a regular assessment of those models, with the subsequent issue of recommendations and actions to mitigate identified weaknesses.
The Head of Risk Internal Control of the Group is responsible for the function and reports about his activities and work plans to the Head of Regulation & Internal Control and to the CRC, with the corresponding support in the issues required, and, in particular, challenging that GRM's reports submitted to the Committee are aligned with the criteria established at the time. In addition, the risk internal control function is global and transversal, it includes all types of financial risks and has specific units in all geographical and/or business areas, with functional reporting to the Head of Risk Internal Control of the Group.
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This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
The Risk Internal Control function must ensure compliance with the general risks strategy defined by the Board of Directors, with adequate proportionality and continuity. In order to comply with the control activity within its scope. Risk Internal Control is member of GRM's top-level committees (sometimes even assuming the Secretariat role), independently verifying the decisions that may be taken and, specifically, the decisions related to the definition and application of internal GRM regulation. Furthermore, the control activity is developed within a homogeneous methodological framework at a Group level, covering the entire life cycle of financial risk management and carried out under a critical and analytical approach. The Risk Internal Control team reports the results of its control function to the corresponding heads and teams, promoting the implementation of corrective measures and submitting these assessments and the resolution commitments in a transparent manner to the established levels. Lastly, and notwithstanding the control responsibility that GRM teams have in the first instance, Risk Internal Control teams promote a control culture in GRM, conveying the importance of having robust processes.
The Group's Risk Appetite Framework approved by the corporate bodies determines the risks and the risk level that the Group is willing to assume to achieve its business objectives considering the organic evolution of business. These are expressed in terms of solvency, liquidity and funding, and profitability, as well as recurrence of revenue, which are reviewed not only periodically but also if there are any substantial changes in the business strategy or relevant corporate transactions. The Risk Appetite Framework is expressed through the following elements:
– Risk appetite statement: sets out the general principles of the Group's risk strategy and the target risk profile: "The BBVA Group seeks to obtain a sound risk-adjusted profitability throughout the cycle through the development of a responsible universal banking business model, based on values, centered on our customers' needs, focused on sustainability as an opportunity, operational excellence and the preservation of adequate security and business continuity. BBVA intends to achieve these goals while maintaining a moderate risk profile, so the risk model established aims at sustaining a robust financial position, and facilitating its commitment with sustainable development, as the best way to face adverse environments without jeopardizing its strategy."# Risk management
Risk management at BBVA Group is based on prudent management, an integral and anticipatory view of all risks, that allows us to adapt to the disruptive risk inherent in the banking business and includes the climate driver, portfolio diversification by geography, asset classes and client segment, anti-money laundering and financing of terrorism prevention, and accompanying our clients in achieving their goals and in the transition towards a sustainable future, to promote profitable growth and recurrent value creation.
Each significant geographical area (that is, those representing more than 1% of the assets or operating income of the BBVA Group) has its own Risk Appetite framework, consisting of its local Risk Appetite statement, core statements and metrics, and metrics by type of risk, which must be consistent with those set at the Group level, but adapted to their own reality. These are approved by the corresponding corporate bodies of each entity. This Appetite Framework is supplemented by statements for each risk type and has a limit structure in line and consistent with the above. The corporate risks area works with the various geographical and/or business areas to define their Risk Appetite Framework, so that it is coordinated with, and integrated into, the Group's Risk Appetite Framework, making sure that its profile is in line with the one defined. Moreover, and for the purposes of monitoring at local level, the Chief Risks Officer of the geographical and/or business area regularly reports on the evolution of the metrics of the Local Risk Appetite Framework to the corporate bodies, as well as to the relevant top-level local committees, following a scheme similar to that of the Group, in accordance with its own corporate governance systems.
278 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
Within the issuing process of the Risk Appetite Framework, Risk Internal Control carries out, within the scope of the GRM area the effective challenge of the Framework proposal prior to its escalation to corporate bodies, which is also documented, and it is extended to the approval of the management limits under which it is developed, also supervising its adequate approval and extension to the different entities of the Group. Likewise, in each significant geographical area, the local Risk Internal Control unit, working in the Risk Management Committee (hereinafter, RMC), carries out an effective challenge of the local Risk Appetite Framework prior to its escalation to local corporate bodies, which is also documented, and extended to the local approval process of the management limits.
So that corporate bodies can develop the risk functions of the Group, the heads of risks at an executive level will regularly report (more frequently in the case of the CRC, within its scope of responsibility) on the evolution of the metrics of the Risk Appetite Framework of the Group, with the sufficient granularity and detail, in order to check the degree of compliance of the risks strategy set out in the Risk Appetite Framework of the Group approved by the Board of Directors. If, through the monitoring of the metrics and supervision of the Risk Appetite Framework by the executive areas, a relevant deviation or breach of the maximum appetite levels of the metrics is identified, that situation must be reported and, where applicable, the corresponding corrective measures must be submitted to the CRC. After the relevant review by the CRC, the deviation must be reported to the CDP (as part of its role in the monitoring of the evolution of the risk profile of the Group) and to the Board of Directors, which will be responsible, when applicable, for implementing the corresponding executive measures, including the modification of any metric of the Risk Appetite Framework. For this purpose, the CRC will submit to the corresponding corporate bodies all the information received and the proposals prepared by the executive areas, together with its own analysis. Notwithstanding the foregoing, once the information has been analyzed and the proposal of corrective measures has been reviewed by the CRC, the CDP may adopt, on grounds of urgency and under the terms established by law, measures corresponding the Board of Directors, but always reporting those measures to the Board of Directors in the first meeting held after the implementation for ratification purposes. In any case, an appropriate monitoring process will be established (with a greater information frequency and granularity, if required) regarding the evolution of the breached or deviated metric, and the implementation of the corrective measures, until it has been completely redressed, with the corresponding reporting to corporate bodies, in accordance with its risks monitoring, supervision and control functions.
The transfer of the Risk Appetite Framework to ordinary management is underpinned by three basic elements:
Assessment, monitoring and reporting is a cross-cutting function at Group level. This function ensures that the model has a dynamic and proactive vision to enable compliance with the Risk Appetite Framework approved by the Board of Directors, even in adverse scenarios. This process is integrated in the activity of the Risk units, both of the corporate area and in the geographical and/or business units, together with the units specialized in non-financial risks and reputational risk within the Regulation & Internal Control and Communications areas respectively, in order to generate a comprehensive and single view of the risk profile of the Group. This process is developed through the following phases:
279 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
complete and reliable information on the evolution of risks to corporate bodies and senior management, in accordance with the principles of accuracy, exhaustiveness, clarity and utility, frequency, and adequate distribution and confidentiality. The principle of transparency governs all the risk information reporting process.
For the implementation of the Model, the Group has the resources required for an effective management and supervision of risks and for achieving its goals. In this regard, the Group's risks function:
Within the risk functions, both the profiles and the infrastructure and data shall have a global and consistent approach. The human resources among the countries must be equivalent, within proportionality, ensuring a consistent operation of the risk function within the Group. However, they will be distinguished from those of the corporate area, as the latter will be more focused on the conceptualization of appetite frameworks, operating frameworks, the definition of the regulatory framework and the development of models, among other tasks. As in the case of the human resources, technological platforms must be global, thus enabling the implementation of the Risk Appetite Framework and the standardized management of the risk life cycle in all countries. The corporate area is responsible for deciding on the platforms and for defining the knowledge and roles of the human resources. It is also responsible for defining risk data governance. The foregoing is reported to the corporate bodies of BBVA so they can ensure that the Group has the appropriate means, systems, structures and resources.
Throughout the year, the persistent inflation, the Central Bank rates increases and the uncertainty surrounding economic growth have been the main factors that have impacted the markets, affecting to a greater or lesser extent depending on the region to the credit demand reduction and causing a strain on the payment capacity of families and companies. Uncertainty continues to be high, and the geopolitical turbulence at the time of drafting of this report could contribute to a rebound in energy prices, and therefore, increase the biases towards more negative scenarios, with higher interest rates, persisting inflation and a greater than expected economic slowdown.
By region, the evolution during the year has been uneven. In Spain, although economy continued slowing down during the year 2023, the level of household debt is far from its all-time highs, favored by the dynamism of the labor market. In Mexico, the improvements in the growth outlook due to the dynamism of private consumption and the effect of the relocation of industrial production (nearshoring) is positively impacting the labor market. The uncertainty in Turkey continues, although growth remains solid. Despite changes in economic policy, system quality indicators remain at low levels. Finally, in general, growth has been less dynamic in South America, in a context of high inflation and interest rates, negative effects related to the slowdown in China, as well as adverse climatic factors and social conflicts, affecting the economic situation of families and companies.
For the estimation of expected losses, the models include individual and collective estimates, taking into account the macroeconomic forecasts in accordance with IFRS 9. Thus, the estimate at the end of the year includes the effect on expected losses of updating macroeconomic forecasts, which take into account the current global environment. Additionally, the Group may complement the expected losses either by the consideration of additional risk drivers, the incorporation of sectorial particularities or that may affect a set of operations or borrowers, following a formal internal process established for the purpose.
280 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
Thus, in Spain, the severity of certain specific operations considered unlikely to pay was reviewed upwards because of different reasons to non-performing loans, with a remaining adjustment as of December 31, 2023 of €227 million, with a €161 million decrease compared with the end of the year 2022 mainly as a result of the annual model review process. In addition, due to the earthquakes that affected an area in the south of Turkey, during the month of February 2023 the classification of the credit exposure recorded in the five most affected cities was reviewed, which led to its reclassification to Stage 2. As of December 31, 2023 the amounts recorded in Stage 2 amounted to €273 million on-balance sheet and €406 million off-balance sheet exposure, with allowances for losses of approximately €25 million at contract level. On the other hand, as of December 31, 2023, the complementary adjustments pending allocation to specific operations or customers are not significant, after the utilization and/or release of most of the adjustments during 2023. As of December 31, 2022, the complementary adjustments pending allocation to specific operations or customers totaled €302m, of which €163m corresponded to Spain, €92m to Mexico, €25m to Peru, €6m to Rest of Business of the Group, €11m to Colombia and €5m to Chile.
The evolution of the Group’s main credit risk indicators is summarized below:
NON-PERFORMING LOANS AND PROVISIONS (MILLIONS OF EUROS)
| | Non-Performing loans | Provisions |
| :------------------------------------------ | :------------------- | :--------- |
| | +5.8% | 0.0% |
| – The NPL ratio rose to 3.4% as of December 31, 2023, which represents an increase of 7 basis points compared to the previous quarter, despite the stable evolution in the last twelve months. | | |
| – The NPL coverage ratio ended the quarter at 77%, 221 basis points below the previous quarter and 449 basis points lower than in the end of 2022, as a result of the non-performing loan increase throughout the year with coverage ratios that remain practically stable compared to those of the previous quarter (+0.1%) and of December 2022 (0.0%). | | |
| – The cumulative cost of risk as of December 31, 2023 stood at 1.15%, which is above the previous quarter, mainly due to the higher requirements in Spain, affected by the impact of the annual review exercise of models parameters for the losses estimation, and, to a lesser extent, in Colombia and Peru, which continue to be affected by the macroeconomic environment worsening. | | |
281 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
NPL AND NPL COVERAGE RATIOS AND COST OF RISK (PERCENTAGE)
CREDIT RISK ⁽¹⁾ (MILLIONS OF EUROS)
| 31-12-23 | 30-09-23 | 30-06-23 | 31-03-23 | 31-12-22 | |
|---|---|---|---|---|---|
| Credit risk | 448,840 | 444,984 | 436,174 | 428,423 | 423,669 |
| Stage 1 | 392,528 | 394,329 | 386,711 | 377,908 | 371,930 |
| Stage 2 ⁽²⁾ | 41,006 | 35,791 | 34,772 | 36,373 | 37,277 |
| Stage 3 (non-performing loans) | 15,305 | 14,864 | 14,691 | 14,141 | 14,463 |
| Provisions | 11,762 | 11,751 | 11,697 | 11,661 | 11,764 |
| Stage 1 | 2,142 | 2,143 | 2,107 | 2,062 | 2,067 |
| Stage 2 | 2,170 | 2,198 | 2,181 | 2,243 | 2,111 |
| Stage 3 (non-performing loans) | 7,450 | 7,410 | 7,409 | 7,357 | 7,586 |
| NPL ratio (%) | 3.4 | 3.3 | 3.4 | 3.3 | 3.4 |
| NPL coverage ratio (%) ⁽³⁾ | 77 | 79 | 80 | 82 | 81 |
⁽¹⁾ Includes gross loans and advances to customers plus guarantees given.
⁽³⁾ The NPL coverage ratio includes the valuation adjustments for credit risk throughout the expected residual life in those financial instruments that have been acquired (mainly originating from the acquisition of Catalunya Banc, S.A.). If these valuation corrections had not been taken into account, the NPL coverage ratio would have stood at 76% as of December 31, 2023 and 80% as of December 31, 2022.# NON-PERFORMING LOANS EVOLUTION (MILLIONS OF EUROS)
| 4Q23 (1) | 3Q23 | 2Q23 | 1Q23 | 4Q22 | |
|---|---|---|---|---|---|
| Beginning balance | 14,864 | 14,691 | 14,141 | 14,463 | 15,162 |
| Entries | 3,038 | 2,898 | 2,875 | 2,256 | 2,332 |
| Recoveries | (1,373) | (1,538) | (1,394) | (1,489) | (1,180) |
| Net variation | 1,665 | 1,360 | 1,481 | 767 | 1,152 |
| Write-offs | (983) | (830) | (877) | (1,081) | (928) |
| Exchange rate differences and other | (241) | (357) | (54) | (8) | (923) |
| Period-end balance | 15,305 | 14,864 | 14,691 | 14,141 | 14,463 |
| Memorandum item: Non-performing loans | 14,444 | 13,947 | 13,787 | 13,215 | 13,493 |
| Non performing guarantees given | 862 | 918 | 905 | 926 | 970 |
(1) Preliminary data.
For further information, see Note 7.4 of the Consolidated Financial Statements.
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
Liquidity and funding management at BBVA promotes the financing of the recurring growth of the banking business at suitable maturities and costs using a wide range of funding sources. BBVA's business model, risk appetite framework and funding strategy are designed to reach a solid funding structure based on stable customer deposits, mainly retail (granular). As a result of this model, deposits have a high degree of assurance in each geographical area, close to 55% in Spain and Mexico. It is important to note that, given the nature of BBVA's business, lending is mainly financed through stable customer funds.
One of the key elements in the BBVA Group's liquidity and funding management is the maintenance of large high-quality liquidity buffers in all geographical areas. In this respect, the Group has maintained during the last 12 months an average volume of high quality liquid assets (HQLA) of €130.77 billion, of which 97% corresponds to maximum quality assets (level 1 in the liquidity coverage ratio, LCR).
Due to its subsidiary-based management model, BBVA is one of the few major European banks that follows the Multiple Point of Entry (MPE) resolution strategy: the parent company sets the liquidity policies, but the subsidiaries are self-sufficient and responsible for managing their own liquidity and funding (taking deposits or accessing the market with their own rating). This strategy limits the spread of a liquidity crisis among the Group's different areas and ensures the adequate transmission of the cost of liquidity and financing to the price formation process.
The BBVA Group maintains a solid liquidity position in every geographical area in which it operates, with ratios well above the minimum required:
The breakdown of these ratios in the main geographical areas in which the Group operates is shown below:
| BBVA, S.A. | Mexico | Turkey | South America | All countries | |
|---|---|---|---|---|---|
| LCR | 178% | 192% | 212% | >100 | |
| NSFR | 120% | 140% | 178% | >100 |
In addition to the above, the most relevant aspects related to the main geographical areas are the following:
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
The main wholesale financing transactions carried out by the BBVA Group during 2023 are listed below:
| Issuer | Type of issue | Date of issue | Nominal (millions) | Currency | Coupon | Early redemption | Maturity date |
|---|---|---|---|---|---|---|---|
| BBVA, S.A. | Senior non-preferred | Jan-23 | 1,000 | EUR | 4.625 % | Jan-30 | |
| Covered bonds | Jan-23 | 1,500 | EUR | 3.125 % | — | Jul-27 | |
| Senior preferred | May-23 | 1,000 | EUR | 4.125 % | May-26 | ||
| Tier 2 | Jun-23 | 750 | EUR | 5.570% | Jun-Sep 28 | Sep-33 | |
| AT1 | Jun-23 | 1,000 | EUR | 8.375% | Dec-28 | ||
| Tier 2 | Aug-23 | 300 | GBP | 8.250% | Aug-Nov 28 | Nov-33 | |
| AT1 | Sep-23 | 1,000 | USD | 9.375% | Sep-29 | ||
| Tier 2 | Nov-23 | 750 | USD | 7.883% | Nov-33 | ||
| BBVA in Mexico | Senior (Tranche 1) - Green bond | Feb-23 | 8,689 | MXN | TIIE day 1 + 32 basis points | — | Feb-27 |
| Senior (Tranche 2) | Feb-23 | 6,131 | MXN | 9.540% | — | Feb-30 | |
| Tier 2 | Jun-23 | 1,000 | USD | 8.450% | Jun-33 | ||
| Senior (Tranche 1) | Nov-23 | 9,900 | MXN | TIIE day 1 + 32 basis points | — | Apr-27 | |
| Senior (Tranche 2) | Nov-23 | 3,600 | MXN | 10.240% | — | Nov-30 |
Additionally, in June 2023, BBVA, S.A. completed a securitization of a portfolio of car loans for an amount of €804m. In January 2024, BBVA, S.A. has carried out a public senior bond issue for €1,250m with a maturity of 10 years and a coupon of 3,875%. Moreover, BBVA, S.A. has announced its irrevocable decision to amortize an issue of Tier 2 subordinated bonds issued in February 2019, for an amount of €750m, on February 22, 2024. On the other hand, BBVA Mexico has issued Tier 2 bonds for USD 900m with a maturity of 15 years and early repayment option in 10 years with a coupon of 8,125%.
In Turkey, Garanti BBVA renewed in June a syndicated loan associated to environmental, social and corporate governance (ESG) criteria, consisting of two separate tranches of USD199m and €218.5m, both maturing in one year. In December, Garanti BBVA announced the renovation of the 100% of the maturity of a syndicated loan of USD 259.5m and €142.5m with a maturity of 367 days, also linked to ESG criteria. The total loan cost was SOFR + 3.50% for the tranche in USD and Euribor + 3.25% for the tranche in euros.
BBVA Colombia announced the launch of the first blue bond in Colombia, together with the International Finance Corporation (IFC), for an amount of USD 50m in its first tranche. Later, in October, the second tranche of the operation was disbursed for an amount of USD 67m.
Foreign exchange risk management aims to reduce both the sensitivity of the capital ratios and the net attributable profit variability to currency fluctuations. In relation to the hedging of the capital ratios, BBVA covers, in aggregate, 70% of its subsidiaries' capital excess. The sensitivity of the Group's CET1 fully-loaded ratio to 10% depreciations in major currencies is estimated at: +17 basis points for the U.S. dollar, -9 basis points for the Mexican peso and -4 basis points for the Turkish lira.
With regard to the hedging of results, BBVA hedges between 40% and 50% of the aggregate net attributable profit it expects to generate in the next 12 months. For each currency, the final amount hedged depends on its expected future evolution, the costs and the relevance of the incomes related to the Group's results as a whole.# Interest Rate Risk
Interest rate risk management seeks to limit the impact that BBVA may suffer, both in terms of net interest income (short-term) and economic value (long-term), from adverse movements in the interest rate curves in the various currencies in which the Group operates. BBVA carries out this work through an internal procedure, pursuant to the guidelines established by the European Banking Authority (EBA), with the aim of analyzing the potential impact that could derive from a range of scenarios on the Group's different balance sheets. The model is based on assumptions intended to realistically mimic the behavior of the balance sheet. The assumptions regarding the behavior of accounts with no explicit maturity and prepayment estimates are specially relevant. These assumptions are reviewed and adapted at least once a year, to take into account any changes in observed behavior.
This sensitivity does not include the cost of capital hedges, which are currently estimated at 3 basis points per quarter for Mexican peso and 3 basis points per quarter for Turkish lira. At the aggregate level, BBVA continues to have a positive sensitivity toward interest rate increases in the net interest income.
The first quarters of 2023 were characterized by a persistent high level of inflation, which, together with the strong growth indicators, served as reason for both the ECB and the Fed to consolidate their hawkish messages of high interest rates for a longer time. This positioning from monetary authorities contributed the sovereign curves to certain rises. However, in the last quarter of the year, decreasing inflation data and expectations converging towards central bank objectives, together with the weakening of some macroeconomic indicators, suggest that the rate hike cycle has come to an end in Europe and in the United States and have led the market to discount rate drops by mid-2024. This has triggered a fall in sovereign bond profitability and has caused a positive performance in most debt portfolios of the Group.
Other peripheral rate curve spreads remain supported. In Mexico, the rate hike cycle is considered to be over, while in most countries of South America, interest rate cuts have started taking place. On the contrary, the Central Bank of Turkey has continued the tightening of its monetary policy launched in June with significant rate hikes.
| 31-12-23 | 30-09-23 | 30-06-23 | 31-03-23 | 31-12-22 | 30-09-22 | 30-06-22 | 31-03-22 | |
|---|---|---|---|---|---|---|---|---|
| Official ECB rate | 4.50 | 4.50 | 4.00 | 3.50 | 2.50 | 1.25 | 0.00 | 0.00 |
| Euribor 3 months (1) | 3.94 | 3.88 | 3.54 | 2.91 | 2.06 | 1.01 | (0.24) | (0.50) |
| Euribor 1 year (1) | 3.68 | 4.15 | 4.01 | 3.65 | 3.02 | 2.23 | 0.85 | (0.24) |
| USA Federal rates | 5.50 | 5.50 | 5.25 | 5.00 | 4.50 | 3.25 | 1.75 | 0.50 |
| TIIE (Mexico) | 11.25 | 11.25 | 11.25 | 11.25 | 10.50 | 9.25 | 7.75 | 6.50 |
| CBRT (Turkey) | 42.50 | 30.00 | 15.00 | 8.50 | 9.00 | 12.00 | 14.00 | 14.00 |
(1) Calculated as the month average.
The risks related to climate change are considered as an additional factor which affects the risk categories already identified and defined in the BBVA Group and are therefore managed through the Groups risk management frameworks (credit, market, liquidity, operational and other non-financial risks). As a consequence, the BBVA Group’s climate change risk-related is based on their incorporation into the currently processes and governance established, considering the regulation and supervisory trends. The information on the management of risks associated with climate change required by Law 7/2021, of May 20, on climate change and energy transition, is described in the section “Index of contents of Law 07/2021” of the Chapter “Other information” of this report.
BBVA defines operational risk (“OR”) as any risk that could result in losses caused by human error; inadequate or flawed internal processes; undue conduct with respect to customers, markets or the institution; antimoney laundering and financing of terrorist activities; failures, interruptions or flaws in systems or communications; theft, loss or wrong use of information, as well as deterioration of its quality, internal or external fraud, including in any case those derived from cyberattacks; theft or harm to assets or persons; legal risks; risks derived from staff management and labor health; and defective service provided by suppliers; as well as damages from extreme climate events, pandemics and other natural disasters.
Operational risk management is oriented towards the identification of the root causes to avoid their occurrence and mitigate possible consequences. This is carried out through the establishment of control framework and monitoring and the development of mitigation plans aimed at minimizing resulting economic and reputational losses and their impact on the recurrent generation of results, and contributing the increase the quality, safety and availability of the provided service.
Operational risk management is integrated into the global risk management structure of the BBVA Group. This section addresses general aspects of operational risk management as the main component of non-financial risks. However, sections devoted to conduct and compliance risk and to cybersecurity risk management are also included in the non-financial information report.
The BBVA Group is committed to preferably applying advanced operational risk management models, regardless of the capital calculation regulatory model applicable at the time. Operational risk management at the BBVA Group shall:
This section addresses BBVA's management needs in terms of compliance with legislation, regulations and industry standards, as well as the decisions or positioning of BBVA's corporate bodies.
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This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
The operational risk management cycle at BBVA is similar to the one implemented for the rest of risks. Its elements are:
Operational risk forms part of the risk appetite framework of the Group and includes three types of metrics and limits:
The main purposes of the operational risk admission phase are the following:
The Corporate Non-Financial Risk Management Policy sets out the specific operational risk admission framework through different Operational Risk Admission and Product Governance Committees, both at a corporate and Business Area level, that follow a delegation structure based on the risk level of proposed initiatives.
The purpose of this phase is to check that the target operational risk profile of the Group is within the authorized limits. Operational risk monitoring considers 2 scopes:
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This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
This process is supported by a corporate Governance, Risk & Compliance tool that monitors the operational risk at a local level and its aggregation at a corporate level. In addition, and in line with the best practices and recommendations provided by the Bank for International Settlements (hereinafter, BIS), BBVA has procedures to collect the operational losses occurred both in the different entities of the Group and in other financial groups, with the appropriate level of detail to carry out an effective analysis that provides useful information for management purposes and to contrast the consistency of the Group's operational risks map. To that end, a corporate tool of the Group is used. The Group ensures continuous monitoring by each Area of the due functioning and effectiveness of the control environment, taking into consideration management indicators established for the Area, any events and losses that have occurred, as well as the results of actions taken by the second line of defense, the internal audit unit, supervisors or external auditors.
The Group promotes the proactive mitigation of the non-financial risks to which it is exposed and which are identified in the monitoring activities. In order to rollout common monitoring and anticipated mitigation practices throughout the Group, several cross-sectional plans are being promoted related to focuses from events, lived by the Group or by the industry, self-assessments and recommendations from auditors and supervisors in different geographies, thereby analyzing the best practices at these levels and fostering comprehensive action plans to strengthen and standardize the control environment.
Assurance is one of the possible options for managing the operational risk to which the Group is exposed, and mainly has two potential purposes:
The Group has a general framework that regulates this area, and allows systematizing risk assurance decisions, aligning insurance coverage with the risks to which the Group is exposed and reinforcing governance in the decision-making process of arranging insurance policies.
BBVA Group's operational risk governance model is based on two components:
Corporate Assurance establishes a structure of committees, both at local and corporate level, to provide senior management with a comprehensive and homogeneous vision of the main non-financial risks and significant situations of the control environment.
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This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
Each geographical area has a Corporate Assurance Committee chaired by the Country Manager and whose main functions are:
At the holding level there is a Global Corporate Assurance Committee, chaired by the Group's Chief Executive Officer. Its main functions are similar to those already described but applicable to the most important issues that are escalated from the geographies and the holding company areas.## 4.7 Reputational risk
Since 2016, BBVA disposes of a reputational risk assessment methodology. Through this methodology, the Bank defines and reviews regularly a map in which it prioritizes the reputational risks which have to be faced and the set of action plans to mitigate them. The prioritization is done based on two variables: the impact on the perception of the stakeholders and the strength of BBVA facing the risk. This exercise is performed annually in all countries where the Group has bank entities. As a result of the assessment carried out in 2021, in 2022, 29 mitigation action plans were identified. The 17 plans identified in 2021 as a result of the evaluation of the 2021 financial year have already been concluded.
The Reputation teams collaborate, together with the rest of the members of BBVA’s second defense line, in the different Committees of Admission of the Operational Risk, both at Group and the different geographical areas level. Those Committees perform the initial identification of potential reputational risks and mitigation controls are proposed.
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
The results of the annual assessment of the Reputational Risk are reported in each geographical area at the appropriate governance level. At Group level, these results are reported to the Global Corporate Assurance Committee and, since 2020, to the Board’s Executive Committee.
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
The BBVA Group has processes in place for identifying risks and analyzing scenarios in order to enable the Group to manage risks in a dynamic and proactive way. The risk identification processes are forward looking to seek the identification of emerging risks and take into account the concerns of both the business areas, which are close to the reality of the different geographical areas, and the corporate areas and senior management. Risks are identified and measured consistently using the methodologies deemed appropriate in each case. Their measurement includes the design and application of scenario analyses and stress testing and considers the controls to which the risks are subjected. As part of this process, a forward projection of the Risk Appetite Framework (hereinafter "RAF") variables in stress scenarios is conducted in order to identify possible deviations from the established thresholds. If any such deviations are detected, measures are taken to seek to keep the variables within the target risk profile. In this context, there are a number of emerging risks that could affect the evolution of the Group’s business, including the below:
The Group is sensitive to the deterioration of economic conditions, the alteration of the institutional environment of the countries in which it operates, and the Group is exposed to sovereign debt especially in Spain, Mexico and Turkey. The global economy is currently facing a number of extraordinary challenges. The war in Ukraine and the sanctions imposed against and by Russia have led to significant disruption, instability and volatility in global markets, as well as higher inflation and lower economic growth, mostly due to higher energy prices, which have stabilized more recently. Although oil and gas prices have reduced and financial volatility has eased, there is still a risk that geopolitical tensions lead to additional increases in input prices and financial instability, particularly following the tensions triggered by the armed conflict in the Middle East, including the recent disruptions to maritime trade routes in the Red Sea. Another global macroeconomic risk is the possibility of a sharp growth slowdown in China, which could lead to lower GDP expansion than currently expected in many geographies. Although it may be possible to offset part of the expected growth slowdown through the adoption of certain fiscal, monetary and regulatory measures by the authorities, there are risks related to tensions in the real estate markets and the possible effects of the United States economic sanctions, among others. Geopolitical and economic risks have also increased in recent years as a result of trade tensions between the United States and China, Brexit, and the rise of populism, among other factors. Growing tensions may lead, among other things, to a deglobalization of the world economy, an increase in protectionism, a general reduction of international trade in goods and services and a reduction in the integration of financial markets, any of which could materially and adversely affect the Group’s business, financial condition and results. Moreover, the world economy could be vulnerable to other factors, such as a restrictive monetary policy, in a context of relatively high inflationary pressures, which could cause a significant growth slowdown - and, even, a sharp economic recession - as well as new episodes of financial stress.
The Group’s results of operations have been particularly affected by the increases in interest rates adopted by central banks in an attempt to tame inflation, contributing to the rise in both interest revenue and interest expenses. In addition, the persistence of high interest rates could adversely affect the Group by reducing the demand for credit and leading to an increase in the default rate of its borrowers and other counterparties. On the other hand, the process of reducing interest rates has already begun in many geographies and could begin by mid-2024 in the United States and the Eurozone as well.
Moreover, the Group’s results of operations have been affected by the high inflation in all countries in which BBVA operates, especially Turkey and Argentina. The Group is exposed, among others, to the following general risks with respect to the economic and institutional environment in the countries in which it operates:
In particular, in Argentina, the risk of economic and financial turbulence persists in a context of regulatory, economic and political uncertainty, and in which the adjustments announced by the new government to correct the high economic distortions, including a strong fiscal adjustment and a significant exchange rate depreciation, have further reinforced short-term inflationary pressures. In Spain, political, regulatory and economic uncertainty has also increased since the July general elections; there is a risk that policies could have an adverse impact on the economy. In Mexico, uncertainty is related mainly to the June 2024 elections and the possible policies of the new government. Finally, in Colombia and Peru, climatic factors and greater social conflict could eventually have a negative impact on the economy.
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
Any of these factors may have a significant adverse impact on the Group’s business, financial condition and results of operations.
In May 2022, the Group increased its shareholding stake in Garanti BBVA (Turkey) from 49.85% to 85.97% following the completion of a voluntary takeover bid (see Note 3 of the attached Consolidated Financial Statements). There are increasing signs of normalization in economic policy in general, and monetary policy in particular, since the general elections held in May 2023, which may lead to a gradual correction of the current distortions. Despite the gradual improvement of macroeconomic conditions, the situation remains relatively unstable, characterized by a gradual depreciation of the Turkish lira, high inflation, a significant trade deficit, low central bank’s foreign reserves and high external financing costs. The earthquakes of February 2023 deepened Turkey's economic struggles.## Risks and Uncertainties
Continuing unfavorable economic conditions in Turkey may result in a potential deterioration in the purchasing power and creditworthiness of the clients of the Group (both individuals and corporations). In addition, the relatively low official interest rates (despite the recent upward adjustments) in a context of still high inflation, the regulatory and macroprudential policies affecting the banking sector and currency depreciation have affected and may continue to affect the Group’s results. Additionally, certain geopolitical factors, such as the war in Ukraine and the armed conflict in the Middle East, and internal political developments, generate uncertainty about the evolution of the economy and could trigger scenarios of greater instability. There can be no assurance that these and other factors will not have an impact on Turkey and will not cause further deterioration of the Turkish economy, which may have a material adverse effect on the Turkish banking sector and the Group’s business, financial condition and results of operations in Turkey.
Financial institutions are exposed to a complex and ever-changing regulatory environment defined by governments and regulators. Regulatory activity in recent years has affected multiple areas, including changes in accounting standards; strict regulation of capital, liquidity and remuneration; bank charges and taxes on financial transactions; regulations affecting mortgages, banking products and consumers and users; recovery and resolution measures; stress tests; prevention of money laundering and terrorist financing; market abuse; conduct in the financial markets; anti-corruption; and requirements as to the periodic publication of information. Governments, regulatory authorities and other institutions continually make proposals to strengthen the resistance of financial institutions to future crises. Further, there is an increasing focus on the climate-related financial risk management capabilities of banks. Any change in the Group’s business that is necessary to comply with any particular regulations at any given time, especially in Spain, Mexico or Turkey, could lead to a considerable loss of income, limit the Group’s ability to identify business opportunities, affect the valuation of its assets, force the Group to increase its prices and, therefore, reduce the demand for its products, impose additional costs on the Group or otherwise adversely affect its business, financial condition and results of operations. The financial sector is under ever closer scrutiny by regulators, governments and society itself. In the course of activities, situations which might cause relevant reputational damage to the Group could arise and might affect the regular course of business.
Developments in the digital world and in information technologies pose significant challenges for financial institutions, entailing threats (new competitors, disintermediation, etc.) but also opportunities (new framework of relations with customers, greater ability to adapt to their needs, new products and distribution channels, etc.). Digital transformation is a priority for the Group as it aims to lead digital banking of the future as one of its objectives.
The Group is exposed to new threats such as cyber-attacks, theft of internal and customer databases, fraud in payment systems, etc. that require major investments in security from both the technological and human point of view. The Group gives great importance to the active operational and technological risk management and control. Any attack, failure or deficiency in the Group’s systems could, among other things, lead to the misappropriation of funds of the Group’s clients or the Group itself and the unauthorized disclosure, destruction or use of confidential information, as well as prevent the normal operation of the Group and impair its ability to provide services and carry out its internal management. In addition, any attack, failure or deficiency could result in the loss of customers and business opportunities, damage to computers and systems, violation of regulations regarding data protection and/or other regulations, exposure to litigation, fines, sanctions or interventions, loss of confidence in the Group’s security measures, damage to its reputation, reimbursements and compensation, and additional regulatory compliance expenses and could have a significant adverse impact on the Group’s business, financial condition and results of operations.
The financial sector faces an environment of increasing regulatory and litigious pressure, and thus, the various Group entities are frequently party to individual or collective judicial proceedings (including class actions) resulting from their activity and operations, as well as arbitration proceedings. The Group is also party to government procedures and investigations, such as those carried out by the antitrust authorities in certain countries which, among other things, have in the past and could in the future result in sanctions, as well as lead to claims by customers and others. In addition, the regulatory framework in the jurisdictions in which the Group operates is evolving towards a supervisory approach more focused on the opening of sanctioning proceedings while some regulators are focusing their attention on consumer protection and behavioral risk.
292
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
In Spain and in other jurisdictions where the Group operates, legal and regulatory actions and proceedings against financial institutions, prompted in part by certain judgments in favor of consumers handed down by national and supranational courts (with regards to matters such as credit cards and mortgage loans), have increased significantly in recent years and this trend could continue in the future. Legal and regulatory actions and proceedings faced by other financial institutions in relation to these and other matters, especially if such actions or proceedings result in favorable resolutions for the consumer, could also adversely affect the Group. All of the above may result in a significant increase in operating and compliance costs or even a reduction of revenues, and it is possible that an adverse outcome in any proceedings (depending on the amount thereof, the penalties imposed or the procedural or management costs for the Group) could damage the Group's reputation, generate a knock-on effect or otherwise adversely affect the Group.
It is difficult to predict the outcome of legal and regulatory actions and proceedings, both those to which the Group is currently exposed and those that may arise in the future, including actions and proceedings relating to former Group subsidiaries or in respect of which the Group may have indemnification obligations. Any of such outcomes could be significantly adverse to the Group. In addition, a decision in any matter, whether against the Group or against another credit entity facing similar claims as those faced by the Group, could give rise to other claims against the Group. In addition, these actions and proceedings attract resources from the Group and may occupy a great deal of attention on part of the Group's management and employees.
As of December 31, 2023, the Group had € 696 million in provisions for the proceedings it is facing (included in the line "Provisions for taxes and other legal contingencies" in the consolidated balance sheet) (see Note 24), of which € 539 million correspond to legal contingencies and €158 million to tax related matters. However, the uncertainty arising from these proceedings (including those for which no provisions have been made, either because it is not possible to estimate them or for other reasons) makes it impossible to guarantee that the possible losses arising from these proceedings will not exceed, where applicable, the amounts that the Group currently has provisioned and, therefore, could affect the Group's consolidated results in a given period. As a result of the above, legal and regulatory actions and proceedings currently faced by the Group or to which it may become subject in the future or otherwise affected by, individually or in the aggregate, if resolved in whole or in part adversely to the Group's interests, could have a material adverse effect on the Group’s business, financial condition and results of operations.
Spanish judicial authorities are investigating the activities of Centro Exclusivo de Negocios y Transacciones, S.L. (“Cenyt”). Such investigation includes the provision of services by Cenyt to BBVA. On July 29, 2019, BBVA was named as an investigated party (investigado) in a criminal judicial investigation (Preliminary Proceeding No. 96/2017 – Piece No. 9, Central Investigating Court No. 6 of the National High Court) for alleged facts which could constitute bribery, revelation of secrets and corruption. Certain current and former officers and employees of the Group, as well as former directors, have also been named as investigated parties in connection with this investigation. Since the beginning of the investigation, BBVA has been proactively collaborating with the Spanish judicial authorities, including sharing with the courts information obtained in the internal investigation hired by the entity in 2019 to contribute to the clarification of the facts. As at the date of this Annual Report, no formal accusation against BBVA has been made. By order of the Criminal Chamber of the National High Court, the pre-trial phase ended on January 29, 2024.It is not possible at this time to predict the possible outcomes or implications for the Group of this matter, including any fines, damages or harm to the Group’s reputation caused thereby.
Climate change, which is resulting in an increase in the intensity and frequency of extreme weather events and environmental degradation, presents both short, medium and long-term risks to the Group and its customers and counterparties, with the risks expected to increase over time. Risks posed by climate change may be classified into transition and physical risks.
Transition risks refer to changes in, among others, regulations, technologies and market preferences linked to the transition toward a less carbon-dependent economy, including the following:
Legal and regulatory changes related to how banks are required to manage climate risk or otherwise affecting banking practices or disclosure of climate-related information may result in higher compliance, operational and credit risks and costs. Further, legal and regulatory changes may result in legal uncertainty and the existence of overlapping or conflicting regulatory or other requirements. The Group or its customers or counterparties may be unable to meet any new requirements on a timely basis or at all. Further, changes in law, including new product and service specifications, may result in the sudden devaluation of certain assets. Any of these risks may affect the Group and its customers and counterparties. In addition, in the case of banks, new regulation could include requirements related to lending, investing, capital and liquidity adequacy and operational resilience. The incorporation of climate risks in the existing prudential framework is still developing and may result in increased risk weighting of high-carbon-related assets. Moreover, there are significant risks and uncertainties inherent in the development of adequate climate change-related risk assessment and modelling capabilities and the collection of customer, third party and other data, which may result in the Group’s systems or frameworks (or those of its customers and counterparties, where applicable) being inadequate, inaccurate or susceptible to incorrect customer, third party or other data, any of which could adversely affect the Group’s disclosure and financial reporting. Further, increased regulation arising from climate change could result in increased litigation and regulatory investigations and actions.
Certain of the Group’s customers and counterparties may be adversely affected by the progressive transition to a low-carbon economy and/or risks and costs associated with new low-carbon technologies. If our customers and counterparties fail to adapt to the transition to a low-carbon economy, or if the costs of doing so adversely affect their creditworthiness, this could adversely affect the Group’s relevant loan portfolios.
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This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
The Group and certain of the Group’s customers and counterparties may be adversely affected by changes in market preferences due to, among others, increasing climate change awareness. Further, the funding costs of businesses that are perceived to be more exposed to climate change could increase. Any of this could result in the reduced creditworthiness of such customers and counterparties, adversely affecting the Group’s relevant loan portfolios. The Group and its customers and counterparties could also be adversely affected by changes in prices resulting from shifts in demand or supply brought by climate change, including prices of energy and raw materials, or by their inability to foresee or hedge any such changes.
The perception of climate change as a risk by society, shareholders, customers, governments and other stakeholders continues to increase, including in relation to the financial sector’s activities. This may result in increased scrutiny of the Group’s activities, as well as its climate change-related policies, goals and disclosure. The Group’s reputation and ability to attract or retain customers may be harmed if its efforts to reduce environmental and social risks are deemed to be insufficient or if a perception is generated among the different stakeholders that the Group's statements, actions or disclosure do not fairly reflect the underlying sustainability profile of the Group, its products, services, goals and/or policies. The Group may elect not to undertake lending or investing activities that would otherwise have been profitable in order to avoid reputational harm. Further, divergent views on ESG policies may also have a negative impact on the Group’s reputation. Increased scrutiny of the Group’s activities, as well as its climate change-related policies, goals and disclosure may result in litigation and regulatory investigations and actions. The Group has disclosed certain aspirational climate- related goals and such goals, which are being pursued over the long-term, may prove to be considerably more costly or difficult than currently expected, or even impossible, to achieve, including as a result of changes in environmental and energy regulation and policy, the pace of technological change and innovation and the actions of governments, Group’s customers and competitors.
The physical risk arising from climate change could result from increased frequency and/or severity of adverse weather events or the impact of climate change over the long term. The activities of the Group or those of its customers or counterparties could be adversely affected by the physical risks arising from climate change. For example, extreme weather events may damage or destroy the properties and other assets of the Group or those of its customers or counterparties, result in increased costs, or otherwise disrupt their respective operations (for example, if supply chains are disrupted as a result), diminishing –in the case of the Group’s customers or counterparties - their repayment capacity and, if applicable, the value of assets pledged as collateral to the Group. The Group is also exposed to potential long-term risks arising from climate change, such as increases in credit-related costs due to deteriorating macroeconomic conditions, which may be caused in part by an increase in infectious diseases or other ailments resulting from climate change. The Group could also be adversely affected by declines in asset values as a result of climate change or climate change-related risks, reduced availability of insurance and significant interruptions to business operations, and may be required to change its business models in response to the foregoing. Any of these factors may have a material adverse effect on the Group’s business, financial condition and results of operations.
294
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
BBVA presents its results in accordance with the International Financial Reporting Standards (EU-IFRS). Additionally, the Group also considers that some Alternative Performance Measures (hereinafter APMs) provide useful additional financial information that should be taken into account when evaluating performance. They are considered complementary information and do not replace the financial information drafted according to the EU-IFRS. These APMs are also used when making financial, operational and planning decisions within the Entity. The Group firmly believes that they give a true and fair view of its financial information. These APMs are generally used in the financial sector as indicators for monitoring the assets, liabilities and economic and financial situation of entities.
BBVA Group's APMs are given below. They are presented in accordance with the European Securities and Markets Authority (ESMA) guidelines, published on October 5, 2015 (ESMA/2015/1415en). The guideline mentioned before is aimed at promoting the usefulness and transparency of APMs included in prospectuses or regulated information in order to protect investors in the European Union.
In accordance with the indications given in the aforementioned guideline, BBVA Group's APMs:
When comparing two dates or periods in this management report, the impact of changes in the exchange rates against the euro of the currencies of the countries in which BBVA operates is sometimes excluded, assuming that exchange rates remain constant. This is done for the amounts in the income statement by using the average exchange rate against the euro in the most recent period for each currency 67 of the geographical areas in which the Group operates, and applying it to both periods; for amounts in the balance sheet and activity, the closing exchange rates in the most recent period are used.# Reconciliation of the Financial Statements of the BBVA Group
Below is the reconciliation between the income statements of the Consolidated Financial Statements and the consolidated management income statement, for the years 2022 and 2021. For the year 2023, no reconciliation is presented because there are no differences between the income statements of the Consolidated Financial Statements and the consolidated management income statement.
In 2022, the main difference between the two accounts is in the treatment of the impact of the purchase from Merlin of 100% of the shares of Tree, which in turn owns 662 offices in Spain. For management purposes, this impact is included in a single line, net of taxes, of the income statement called "Discontinued operations and Other", compared to the treatment in the Consolidated Financial Statements, which record the gross impact and its tax effect under the corresponding headings that are applicable to them.
In 2021, the main difference between them is the treatment of the cost related to the restructuring process carried out by the Group in 2021 which, for management purposes, are included in a single line, net of taxes, of the income statement called "Discontinued operations and Other", compared to the treatment in the consolidated Financial Statements, which record the gross impacts and their tax effect in the corresponding headings. In addition, in 2021 there is a difference in the positioning of the results generated in that year by BBVA USA and the rest of the companies sold to PNC on June 1, 2021. In the Consolidated Financial Statements, these results are included in the line "Profit (loss) after tax from discontinued operations" and are taken into account both for the calculation of the "Profit (loss) for the period" and for the profit (loss) "Attributable to the owners of the parent" whereas, for management purposes, they are not included in the "Profit (loss) for the period", as they are included below it, in the line "Discontinued operations and others", together with the aforementioned net restructuring costs for the year 2021, as can be seen in the reconciliation table for the year 2021.
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This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
67
With the exception of those countries whose economies have been considered hyperinflationary, for which the closing exchange rate of the most recent period will be used.
| CONSOLIDATED INCOME STATEMENT | ADJUSTMENTS | MANAGEMENT INCOME STATEMENT | |
|---|---|---|---|
| NET INTEREST INCOME | 19,124 | — | 19,124 |
| Net interest income | |||
| Dividend income | 123 ⁽¹⁾ | ||
| Share of profit or loss of entities accounted for using the equity method | 21 ⁽¹⁾ | ||
| Fee and commission income | 8,260 | 8,260 | |
| Fees and commissions income | |||
| Fee and commission expense | (2,888) | (2,888) | |
| Fees and commissions expenses | |||
| Net fees and commissions | 5,372 | — | 5,372 |
| Gains (losses) on derecognition of financial assets and liabilities not measured at fair value through profit or loss, net | 64 | ||
| Gains (losses) on financial assets and liabilities held for trading, net | 562 | ||
| Gains (losses) on non-trading financial assets mandatorily at fair value through profit or loss, net | (67) | ||
| Gains (losses) on financial assets and liabilities designated at fair value through profit or loss, net | 150 | ||
| Gains (losses) from hedge accounting, net | (45) | ||
| Exchange differences, net | 1,275 | ||
| Net trading income | — | 1,938 | |
| Other operating income | 528 | ||
| Other operating expense | (3,438) | ||
| Income from insurance and reinsurance contracts | 2,622 | ||
| Expense from insurance and reinsurance contracts | (1,547) | (1,691) | — |
| Other operating income and expenses | (1,691) | ||
| GROSS INCOME | 24,743 | — | 24,743 |
| Gross income | |||
| Administration costs | (9,373) | (10,701) | |
| Operating expenses ⁽²⁾ | |||
| Personnel expense | (5,601) | — | (5,601) |
| Personnel expenses | |||
| Other administrative expense | (3,773) | — | (3,773) |
| Other administrative expenses | |||
| Depreciation and amortization | (1,328) | — | (1,328) |
| Depreciation | |||
| Operating income | 14,042 | — | 14,042 |
| Provisions or reversal of provisions | (291) | — | (291) |
| Provisions or reversal of provisions | |||
| Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss or net gains by modification | (3,379) | — | (3,379) |
| Impairment on financial assets not measured at fair value through profit or loss | |||
| NET OPERATING INCOME | 10,372 | — | 10,372 |
| Impairment or reversal of impairment of investments in joint ventures and associates | 42 | ||
| Impairment or reversal of impairment on non-financial assets | (27) | ||
| Gains (losses) on derecognition of non - financial assets and subsidiaries, net | (11) | ||
| Gains (losses) from non-current assets and disposal groups classified as held for sale not qualifying as discontinued operations | (108) | (104) | |
| Other gains (losses) | 134 | 30 | |
| PROFIT (LOSS) BEFORE TAX FROM CONTINUING OPERATIONS | 10,268 | 134 | 10,402 |
| Profit (loss) before tax | |||
| Tax expense or income related to profit or loss from continuing operations | (3,505) | 67 | (3,438) |
| Income tax | |||
| PROFIT (LOSS) AFTER TAX FROM CONTINUING OPERATIONS | 6,763 | 201 | 6,965 |
| Profit (loss) for the period | |||
| Profit (loss) after tax from discontinued operations | — | — | |
| PROFIT (LOSS) FOR THE PERIOD | 6,763 | 201 | 6,965 |
| Profit (loss) for the period | |||
| ATTRIBUTABLE TO MINORITY INTEREST (NON- CONTROLLING INTERESTS) | (405) | — | (405) |
| Non-controlling interests | |||
| ATTRIBUTABLE TO OWNERS OF THE PARENT | 6,358 | 201 | 6,559 |
| Net attributable profit (loss) excluding non-recurring impacts | (201) | (201) | |
| Discontinued operations and Others | |||
| ATTRIBUTABLE TO OWNERS OF THE PARENT | 6,358 | — | 6,358 |
| Net attributable profit (loss) |
General note: 2022 figures have been restated according to IFRS 17 - Insurance contracts.
⁽¹⁾ Included within the Other operating income and expenses of the Management Income Statements
⁽²⁾ Depreciations included.
296
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
| CONSOLIDATED INCOME STATEMENT | ADJUSTMENTS | MANAGEMENT INCOME STATEMENT | |
|---|---|---|---|
| NET INTEREST INCOME | 14,686 | — | 14,686 |
| Net interest income | |||
| Dividend income | 176 ⁽¹⁾ | ||
| Share of profit or loss of entities accounted for using the equity method | 1 ⁽¹⁾ | ||
| Fee and commission income | 6,997 | 6,997 | |
| Fees and commissions income | |||
| Fee and commission expense | (2,232) | (2,232) | |
| Fees and commissions expenses | |||
| Net fees and commissions | 4,765 | — | 4,765 |
| Gains (losses) on derecognition of financial assets and liabilities not measured at fair value through profit or loss, net | 134 | ||
| Gains (losses) on financial assets and liabilities held for trading, net | 341 | ||
| Gains (losses) on non-trading financial assets mandatorily at fair value through profit or loss, net | 432 | ||
| Gains (losses) on financial assets and liabilities designated at fair value through profit or loss, net | 335 | ||
| Gains (losses) from hedge accounting, net | (214) | ||
| Exchange differences, net | 883 | ||
| Net trading income | — | 1,910 | |
| Other operating income | 661 | ||
| Other operating expense | (2,041) | ||
| Income from insurance and reinsurance contracts | 2,593 | ||
| Expense from insurance and reinsurance contracts | (1,685) | (295) | — |
| Other operating income and expenses | (295) | ||
| GROSS INCOME | 21,066 | — | 21,066 |
| Gross income | |||
| Administration costs | (8,296) | (9,530) | |
| Operating expenses ⁽²⁾ | |||
| Personnel expense | (5,046) | — | (5,046) |
| Personnel expenses | |||
| Other administrative expense | (3,249) | — | (3,249) |
| Other administrative expenses | |||
| Depreciation and amortization | (1,234) | — | (1,234) |
| Depreciation | |||
| Operating income | 11,536 | — | 11,536 |
| Provisions or reversal of provisions | (1,018) | 754 | (264) |
| Provisions or reversal of provisions | |||
| Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss or net gains by modification | (3,034) | — | (3,034) |
| Impairment on financial assets not measured at fair value through profit or loss | |||
| NET OPERATING INCOME | 7,484 | 754 | 8,238 |
| Impairment or reversal of impairment of investments in joint ventures and associates | — | ||
| Impairment or reversal of impairment on non-financial assets | (221) | ||
| Gains (losses) on derecognition of non - financial assets and subsidiaries, net | 24 | ||
| Gains (losses) from non-current assets and disposal groups classified as held for sale not qualifying as discontinued operations | (40) | (237) | |
| Other gains (losses) | 240 | 2 | |
| PROFIT (LOSS) BEFORE TAX FROM CONTINUING OPERATIONS | 7,247 | 994 | 8,240 |
| Profit (loss) before tax | |||
| Tax expense or income related to profit or loss from continuing operations | (1,909) | (298) | (2,207) |
| Income tax | |||
| PROFIT (LOSS) AFTER TAX FROM CONTINUING OPERATIONS | 5,338 | 696 | 6,034 |
| Profit (loss) for the period | |||
| Profit (loss) after tax from discontinued operations | 280 | (280) | |
| PROFIT (LOSS) FOR THE PERIOD | 5,618 | 416 | 6,034 |
| Profit (loss) for the period | |||
| ATTRIBUTABLE TO MINORITY INTEREST (NON- CONTROLLING INTERESTS) | (965) | — | (965) |
| Non-controlling interests | |||
| ATTRIBUTABLE TO OWNERS OF THE PARENT | 4,653 | 416 | 5,069 |
| Net attributable profit (loss) excluding non-recurring impacts | (416) | (416) | |
| Discontinued operations and Others | |||
| ATTRIBUTABLE TO OWNERS OF THE PARENT | 4,653 | — | 4,653 |
| Net attributable profit (loss) |
⁽¹⁾ Included within the Other operating income and expenses of the Management Income Statements
⁽²⁾ Depreciations included.
297
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
Explanation of the formula: the profit (loss) for the period is the profit (loss) for the period from the Group’s consolidated income statement, which comprises the profit (loss) after tax from continued operations and the profit (loss) after tax from discontinued operations which. If the described metric is presented on a date prior to the end of the year, it will be presented on an annualized basis.
Relevance of its use: this measure is commonly used, not only in the banking sectors, for homogeneous comparison purposes.# Profit (loss) for the period
| Jan.-Dec.2023 | Jan.-Dec.2022 | Jan.-Dec.2021 |
|---|---|---|
| (Millions of euros) | (Millions of euros) | (Millions of euros) |
| + Profit (loss) after tax from continued operations | 8,416 | 6,763 |
| + Profit (loss) after tax from discontinued operations ⁽¹⁾ | — | — |
| = Profit (loss) for the period | 8,416 | 6,763 |
⁽¹⁾ January-December 2021 only includes the results generated by BBVA USA and the rest of the companies in the United States included in the agreement until its sale to PNC as of June 1, 2021.
Explanation of the formula: the adjusted profit (loss) for the period is defined as the profit (loss) for the period from the Group’s consolidated income statement, excluding those non-recurring impacts that, for management purposes, are defined at any given moment. If the described metric is presented on a date prior to the end of the year, it will be presented on an annualized basis.
Relevance of its use: this measure is commonly used, not only in the banking sector, for homogeneous comparison purposes.
| Jan.-Dec.2023 | Jan.-Dec.2022 | Jan.-Dec.2021 |
|---|---|---|
| (Millions of euros) | (Millions of euros) | (Millions of euros) |
| + Profit (loss) after tax from continued operations | 8,416 | 6,763 |
| - Net cost related to the restructuring process | — | — |
| - Net impact arisen from the purchase of offices in Spain | — | (201) |
| = Adjusted profit (loss) for the period | 8,416 | 6,965 |
Explanation of the formula: the net attributable profit (loss) is the net attributable profit (loss) of the Group’s consolidated income statement from continued operations and the profit (loss) after tax from discontinued operations. If the described metric is presented on a date prior to the end of the year, it will be presented on an annualized basis.
Relevance of its use: this measure is commonly used, not only in the banking sector, for homogeneous comparison purposes.
| Jan.-Dec.2023 | Jan.-Dec.2022 | Jan.-Dec.2021 |
|---|---|---|
| (Millions of euros) | (Millions of euros) | (Millions of euros) |
| + Net attributable profit (loss) from continued operations | 8,019 | 6,358 |
| + Net attributable profit (loss) from discontinued operations ⁽¹⁾ | — | — |
| = Net attributable profit (loss) | 8,019 | 6,358 |
⁽¹⁾ January-December 2021 only includes the results generated by BBVA USA and the rest of the companies in the United States included in the agreement until its sale to PNC as of June 1, 2021.
Explanation of the formula: the adjusted net attributable profit (loss) is defined as the net attributable profit (loss) of the Group’s consolidated income statement excluding those non-recurring impacts that, for management purposes are defined at any given moment. If the described metric is presented on a date prior to the end of the year, it will be presented on an annualized basis.
Relevance of its use: this measure is commonly used, not only in the banking sector, for comparison purposes.
298 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
| Jan.-Dec.2023 | Jan.-Dec.2022 | Jan.-Dec.2021 |
|---|---|---|
| (Millions of euros) | (Millions of euros) | (Millions of euros) |
| + Net attributable profit (loss) from continued operations | 8,019 | 6,358 |
| - Net cost related to the restructuring process | — | — |
| - Net impact arisen from the purchase of offices in Spain | — | (201) |
| = Adjusted net attributable profit (loss) | 8,019 | 6,559 |
Explanation of the formula: the result is calculated excluding the Group’s non-recurring results amounts of the net attributable profit of the Group’s consolidated Income Statement. In addition, in 2022, the net attributable profit associated with the 36.12% acquired in the voluntary takeover bid of Garanti BBVA is deducted.
Relevance of its use: This metric is commonly used in the banking sector. In addition, it is one of the metrics used for the purposes of the Group’s AVR (Annual Variable Remuneration).
| Jan.-Dec.2023 | Jan.-Dec.2022 |
|---|---|
| (Millions of euros) | (Millions of euros) |
| + Net attributable profit (loss) (1) | 8,019 |
| - Net impact from the purchase from offices in Spain | — |
| - Impact generated by the voluntary takeover bid of Garanti BBVA | — |
| = Net attributable profit (loss) for AVR | 8,019 |
(1) The 2022 figure has not been restated according to IFRS 17 - Insurance contracts.
It is calculated as follows:
Net attributable profit (loss) / (Average shareholders' funds + Average accumulated other comprehensive income)
Explanation of the formula: the numerator is the net attributable profit (loss) of the Group's consolidated income statement. If the metric is presented on a date before the close of the fiscal year, the numerator will be annualized. Average shareholders' funds are the weighted moving average of the shareholders' funds at the end of each month of the period analyzed, adjusted to take into account the execution of the "dividend-option" at the closing dates on which it was agreed to deliver this type of dividend prior to the publication of the Group´s results. Average accumulated other comprehensive income is the moving weighted average of "Accumulated other comprehensive income", which is part of the equity on the Entity's balance sheet and is calculated in the same way as average shareholders’ funds (above).
Relevance of its use: this ratio is very commonly used not only in the banking sector but also in other sectors to measure the return obtained on shareholders' funds.
| Jan.-Dec.2023 | Jan.-Dec.2022 | Jan.-Dec.2021 |
|---|---|---|
| Numerator (Millions of euros) = Net attributable profit (loss) | 8,019 | 6,358 |
| Denominator (Millions of euros) + Average shareholders' funds | 65,907 | 61,517 |
| + Average accumulated other comprehensive income | (16,437) | (16,055) |
| = ROE | 16.2% | 14.0% |
299 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
The adjusted ROE (return on equity) ratio measures the return obtained on an entity's shareholders' funds plus accumulated other comprehensive income. It is calculated as follows:
Adjusted net attributable profit (loss) / (Average shareholders' funds + Average accumulated other comprehensive income)
Explanation of the formula: the numerator is the adjusted net attributable profit (loss) previously defined in these alternative performance measures. If the metric is presented on a date before the close of the fiscal year, the numerator will be annualized. The denominator items "Average shareholders' funds" and "Average accumulated other comprehensive income" are the same and they are calculated in the same way as that explained for ROE.
Relevance of its use: this ratio is very commonly used not only in the banking sector but also in other sectors to measure the return obtained on shareholders' funds.
| Jan.-Dec.2023 | Jan.-Dec.2022 | Jan.-Dec.2021 |
|---|---|---|
| Numerator (Millions of euros) = Adjusted net attributable profit (loss) | 8,019 | 6,559 |
| Denominator (Millions of euros) + Average shareholders' funds | 65,907 | 61,517 |
| + Average accumulated other comprehensive income | (16,437) | (16,055) |
| = Adjusted ROE | 16.2% | 14.4% |
The ROTE (return on tangible equity) ratio measures the accounting return on an entity's shareholders' funds, plus accumulated other comprehensive income, and excluding intangible assets. It is calculated as follows:
(Net attributable profit (loss)) / (Average shareholders' funds + Average accumulated other comprehensive income - Average intangible assets)
Explanation of the formula: the numerator "Net attributable profit (loss)" and the items in the denominator "Average intangible assets" and "Average accumulated other comprehensive income" are the same items and are calculated in the same way as explained for ROE. Average intangible assets are the intangible assets on the Group's consolidated balance sheet, including goodwill and other intangible assets. The average balance is calculated in the same way as explained for shareholders funds in ROE.
Relevance of its use: this metric is generally used not only in the banking sector but also in other sectors to measure the return obtained on shareholders' funds, not including intangible assets.
| Jan.-Dec.2023 | Jan.-Dec.2022 | Jan.-Dec.2021 |
|---|---|---|
| Numerator (Millions of euros) = Net attributable profit (loss) | 8,019 | 6,358 |
| Denominator (Millions of euros) + Average shareholders' funds | 65,907 | 61,517 |
| + Average accumulated other comprehensive income | (16,437) | (16,055) |
| - Average intangible assets | 2,254 | 2,119 |
| - Average intangible assets from BBVA USA | — | — |
| = ROTE | 17.0% | 14.7% |
The adjusted ROTE (return on tangible equity) ratio measures the return on an entity's shareholders' funds, plus accumulated other comprehensive income, and excluding intangible assets. It is calculated as follows:
Adjusted net attributable profit (loss) / (Average shareholders' funds + Average accumulated other comprehensive income - Average intangible assets)
300 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
Explanation of the formula: the numerator "Adjusted net attributable profit (loss)" is the same and is calculated in the same way as explained for adjusted ROE, and the items of the denominator "Average shareholders' funds" and " Average accumulated other comprehensive income" are the same and are calculated in the same way as explained for ROE. Average intangible assets are the intangible assets on the Group's consolidated balance sheet, which include goodwill and other intangible assets.The average balance is calculated in the same way as explained for shareholders' funds in the ROE. Relevance of its use: this metric is generally used not only in the banking sector but also in other sectors to measure the return obtained on shareholders' funds, not including intangible assets.
| Jan.-Dec.2023 | Jan.-Dec.2022 | Jan.-Dec.2021 | |
|---|---|---|---|
| Numerator (Millions of euros) | |||
| = Adjusted net attributable profit (loss) | 8,019 | 6,559 | 5,069 |
| Denominator (Millions of euros) | |||
| + Average shareholders' funds | 65,907 | 61,517 | 60,030 |
| + Average accumulated other comprehensive income | (16,437) | (16,055) | (15,396) |
| - Average intangible assets | 2,254 | 2,119 | 2,265 |
| = Adjusted ROTE | 17.0% | 15.1% | 12.0% |
The RORC (return on regulatory capital) measures the return on regulatory capital necessary to meet the CET1 fully-loaded target ratio 68. It is calculated as follows:
Net attributable profit (loss) excluding corporate transactions for AVR
Average regulatory capital of the Group
Explanation of the formula: The numerator is the net attributable profit (loss) for AVR, described above. The denominator is the average regulatory capital of the Group, defined as the Risk Weighted Assets multiplied by the CET1 fully-loaded target ratio plus regulatory deductions plus the perimeter differences between regulatory and accounting own funds less Solvency minority interests. If the described metric is presented on a date prior to the end of the year, the numerator will be presented on an annualized basis.
Relevance of its use: This metric is commonly used in the banking sector. In addition, it is one of the metrics used for the purposes of the Group’s AVR (Annual Variable Remuneration).
| Jan.-Dec.2023 | Jan.-Dec.2022 | |
|---|---|---|
| Numerator (Millions of euros) | ||
| = Net attributable profit (loss) for AVR | 8,019 | 6,381 |
| Denominator (Millions of euros) | ||
| = Average regulatory capital of the Group | 44,412 | 41,815 |
| = RORC for AVR | 18.06% | 15.26% |
General note: 2022 figures have not been restated according to IFRS 17 - Insurance contracts.
The ROA (return on assets) ratio measures the accounting return obtained on an entity's assets. It is calculated as follows:
Profit (loss) for the period
Average total assets
Explanation of the formula: the numerator is the profit (loss) for the period of the Group's consolidated income statement. If the metric is presented on a date before the close of the fiscal year, the numerator must be annualized. Average total assets are taken from the Group’s consolidated balance sheet. The average balance is calculated as explained for average shareholders' funds in the ROE.
Relevance of its use: this ratio is generally used not only in the banking sector but also in other sectors to measure the return obtained on assets.
| Jan.-Dec.2023 | Jan.-Dec.2022 | Jan.-Dec.2021 | |
|---|---|---|---|
| Numerator (Millions of euros) | |||
| Profit (loss) for the period | 8,416 | 6,763 | 5,618 |
| Denominator (Millions of euros) | |||
| Average total assets | 748,459 | 701,093 | 678,563 |
| = ROA | 1.12% | 0.96% | 0.83% |
The adjusted ROA (return on assets) ratio measures the return obtained on an entity's assets. It is calculated as follows:
Adjusted profit (loss) for the period
Average total assets
Explanation of the formula: the numerator is the adjusted profit (loss) for the period previously defined in these alternative performance measures. If the metric is presented on a date before the close of the fiscal year, the numerator will be annualized. Average total assets are taken from the Group's consolidated balance sheet. The average balance is calculated in the same way as explained for average equity in the ROE.
Relevance of its use: this ratio is generally used not only in the banking sector but also in other sectors to measure the return obtained on assets.
| Jan.-Dec.2023 | Jan.-Dec.2022 | Jan.-Dec.2021 | |
|---|---|---|---|
| Numerator (Millions of euros) | |||
| Adjusted profit (loss) for the period | 8,416 | 6,965 | 6,034 |
| Denominator (Millions of euros) | |||
| Average total assets | 748,459 | 701,093 | 640,142 |
| = Adjusted ROA | 1.12% | 0.99% | 0.94% |
The RORWA (return on risk-weighted assets) ratio measures the accounting return obtained on average risk-weighted assets. It is calculated as follows:
Profit (loss) for the period
Average risk-weighted assets
Explanation of the formula: the numerator "Profit (loss) for the period" is the same and is calculated in the same way as explained for ROA. Average risk-weighted assets (RWA) are the moving weighted average of the RWA at the end of each month of the period under analysis.
Relevance of its use: this ratio is generally used in the banking sector to measure the return obtained on RWA.
| Jan.-Dec.2023 | Jan.-Dec.2022 | Jan.-Dec.2021 | |
|---|---|---|---|
| Numerator (Millions of euros) | |||
| Profit (loss) for the period | 8,416 | 6,763 | 5,618 |
| Denominator (Millions of euros) | |||
| Average RWA | 353,139 | 327,998 | 324,819 |
| = RORWA | 2.38% | 2.06% | 1.73% |
The adjusted RORWA (return on risk-weighted assets) ratio measures the return obtained on an entity's assets. It is calculated as follows:
Adjusted profit (loss) for the period
Average risk-weighted assets
Explanation of the formula: the numerator "Adjusted profit (loss) for the period" is the same and is calculated in the same way as explained for adjusted ROA. Average risk-weighted assets (RWA) are the moving weighted average of the risk-weighted assets at the end of each month of the period under analysis.
Relevance of its use: this ratio is generally used not only in the banking sector but also in other sectors to measure the return obtained on assets.
| Jan.-Dec.2023 | Jan.-Dec.2022 | Jan.-Dec.2021 | |
|---|---|---|---|
| Numerator (Millions of euros) | |||
| Adjusted profit (loss) for the period | 8,416 | 6,965 | 6,034 |
| Denominator (Millions of euros) | |||
| Average RWA | 353,139 | 327,998 | 300,276 |
| = Adjusted RORWA | 2.38% | 2.12% | 2.01% |
The earning (loss) per share is calculated in accordance to the criteria established in the IAS 33 “Earnings per share”.
| Jan.-Dec.2023 | Jan.-Dec.2022 | Jan.-Dec.2021 | |
|---|---|---|---|
| (Millions of euros) | |||
| + Net attributable profit (loss) | 8,019 | 6,358 | 4,653 |
| (Millions of euros) | |||
| - Remuneration related to the Additional Tier 1 securities (CoCos) | 345 | 313 | 359 |
| Numerator (millions of euros) | |||
| = Net attributable profit (loss) ex.CoCos remuneration | 7,675 | 6,045 | 4,293 |
| Denominator (millions) | |||
| + Average number of shares outstanding | 5,988 | 6,424 | 6,668 |
| - Average treasury shares of the period | 5 | 9 | 12 |
| - Share buyback program (average) ⁽¹⁾ | 28 | 225 | 255 |
| = Earning (loss) per share (euros) | 1.29 | 0.98 | 0.67 |
⁽¹⁾ In 2023 the average number of shares is included taking into account the two redemptions made corresponding to the programs announced in that year. In 2022 the average number of shares is included, taking into account the two redemptions made corresponding to the program announced in 2021. In 2021 112 millons of shares acquired under the shares buyback program and the estimated number of shares pending to be acquired under the first tranche as of December 31, 2021 are included.
Additionally, for management purposes, earning (loss) per share is presented excluding the following non-recurring impacts: (I) the net cost related to the restructuring process recorded on the second quarter of 2021; and (II) the net impact from the purchase of offices in Spain in the second quarter of 2022.
| Jan.-Dec.2023 | Jan.-Dec.2022 | Jan.-Dec.2021 | |
|---|---|---|---|
| (Millions of euros) | |||
| + Net attributable profit (loss) ex. CoCos remuneration | 7,675 | 6,045 | 4,293 |
| (Millions of euros) | |||
| - Discontinued operations | — | — | 280 |
| (Millions of euros) | |||
| - Net cost related to the restructuring process | — | — | (696) |
| (Millions of euros) | |||
| - Net impact arisen from the purchase of offices in Spain | — | (201) | — |
| Numerator (millions of euros) | |||
| = Net Attributable profit (loss) ex.CoCos and non- recurring impacts | 7,675 | 6,246 | 4,709 |
| Denominator (millions) | |||
| + Number of shares outstanding | 5,838 | 6,030 | 6,668 |
| - Average treasury shares of the period | 5 | 9 | 12 |
| = Adjusted earning (loss) per share (euros) | 1.32 | 1.04 | 0.71 |
This measures the percentage of gross income consumed by an entity's operating expenses. It is calculated as follows:
Operating expenses
Gross income
Explanation of the formula: both "Operating expenses" and "Gross income" are taken from the Group’s consolidated income statement. Operating expenses are the sum of the administration costs (personnel expenses plus other administrative expenses) plus depreciation. Gross income is the sum of net interest income, net fees and commissions, net trading income dividend income, share of profit or loss of entities accounted for using the equity method, other operating income and expenses, and income from assets and expenses from liabilities under insurance and reinsurance contracts. For a more detailed calculation of this ratio, the graphs on "Results" section of this report should be consulted, one of them with calculations with figures at current exchange rates and another with the data at constant exchange rates.
Relevance of its use: this ratio is generally used in the banking sector. In addition, it is the metric for one of the six Strategic Priorities of the Group.# Efficiency ratio
| Jan.-Dec.2023 | Jan.-Dec.2022 | Jan.-Dec.2021 | |
|---|---|---|---|
| Numerator (Millions of euros) | |||
| + Operating expenses | 12,308 | 10,701 | 9,530 |
| Denominator (Millions of euros) | |||
| + Gross income | 29,542 | 24,743 | 21,066 |
| = Efficiency ratio | 41.7% | 43.2% | 45.2% |
Efficiency ratio for AVR
Explanation of the formula: The numerator “Operating expenses for AVR” and the denominator “Gross income” are the same and are calculated in the same way as explained for the efficiency ratio.
Relevance of its use: This metric is commonly used in the banking sector. In addition, it is one of the metrics used for the purposes of the Group’s AVR (Annual Variable Remuneration).
| Jan.-Dec.2023 | Jan.-Dec.2022 | |
|---|---|---|
| Numerator (Millions of euros) | ||
| = Operating expenses for AVR | 12,308 | 10,760 |
| Denominator (Millions of euros) | ||
| = Gross income | 29,542 | 24,890 |
| = Efficiency ratio for AVR | 41.7% | 43.2% |
General note: 2022 figures have not been restated according to IFRS 17 - Insurance contracts.
This is the remuneration given to the shareholders in the last twelve calendar months, divided by the closing price for the period. It is calculated as follows:
∑ Dividend per share over the last twelve months
Closing price
Explanation of the formula: the remuneration per share takes into account the gross amounts per share paid out over the last twelve months, both in cash and through the flexible remuneration system called "dividend option".
Relevance of its use: this ratio is generally used by analysts, shareholders and investors for companies that are traded on the stock market. It compares the dividend paid out by a company every year with its market price at a specific date.
| 31-12-23 | 31-12-22 | 31-12-21 | |
|---|---|---|---|
| Numerator (Euros) | |||
| ∑ Dividends | 0.47 | 0.35 | 0.14 |
| Denominator (Euros) | |||
| Closing price | 8.23 | 5.63 | 5.25 |
| = Dividend yield | 5.7% | 6.2% | 2.6% |
The book value per share determines the value of a company on its books for each share held. It is calculated as follows:
Shareholders' funds + Accumulated other comprehensive income
Number of shares outstanding - Treasury shares
Explanation of the formula: the figures for both "Shareholders' funds" and "Accumulated other comprehensive income" are taken from the balance sheet. Shareholders' funds are adjusted to take into account the execution of the "dividend-option" at the closing dates on which it was agreed to deliver this type of dividend prior to the publication of the Group´s results. The denominator includes the final number of outstanding shares excluding own shares (treasury shares) and excluding the shares corresponding to share buyback programs. In addition, the denominator is also adjusted to include the capital increase resulting from the execution of the dividend options explained above. Both the numerator and the denominator take into account period-end balances.
Relevance of its use: it shows the company's book value for each share issued. It is a generally used ratio, not only in the banking sector but also in others.
| 31-12-23 | 31-12-22 | 31-12-21 | |
|---|---|---|---|
| Numerator (Millions of euros) | |||
| + Shareholders' funds | 67,955 | 64,535 | 60,383 |
| + Accumulated other comprehensive income | (16,254) | (17,642) | (16,476) |
| Denominator (Millions of shares) | |||
| + Number of shares outstanding | 5,838 | 6,030 | 6,668 |
| - Treasury shares | 4 | 5 | 15 |
| - Share buyback program ⁽¹⁾ | — | — | 255 |
| = Book value per share (euros / share) | 8.86 | 7.78 | 6.86 |
⁽¹⁾ The redemption of 128 millions of shares corresponding to the share buyback program approved by the BBVA Board of Directors in July 2023 , whose execution started on October 2, 2023, was made on December 19, 2023. As of 31-12-21, 112 million shares acquired from the start of the share buyback program to the end of the period and the estimated number of shares pending from buyback as of December 31, 2021 of the first tranche, in process at the end of that date, were included.
The tangible book value per share determines the value of the company on its books for each share held by shareholders in the event of liquidation. It is calculated as follows:
Shareholders' funds + Accumulated other comprehensive income - Intangible assets
Number of shares outstanding - Treasury shares
Explanation of the formula: the figures for "Shareholders' funds", "Accumulated other comprehensive income" and "Intangible assets" are all taken from the balance sheet. Shareholders' funds are adjusted to take into account the execution of the "Dividend-option" at the closing dates on which it was agreed to deliver this type of dividend prior to the publication of the Group´s results. The denominator includes the final number of shares outstanding excluding own shares (treasury shares) and excluding the shares corresponding to share buyback programs which are deducted from the shareholders' funds. In addition, the denominator is also adjusted to include the result of the capital increase resulting from the execution of the dividend options explained above. Both the numerator and the denominator take into account period-end balances.
Relevance of its use: it shows the company's book value for each share issued, after deducting intangible assets. It is a generally used ratio, not only in the banking sector but also in others.
| 31-12-23 | 31-12-22 | 31-12-21 | |
|---|---|---|---|
| Numerator (Millions of euros) | |||
| + Shareholders' funds | 67,955 | 64,535 | 60,383 |
| + Accumulated other comprehensive income | (16,254) | (17,642) | (16,476) |
| - Intangible assets | 2,363 | 2,156 | 2,197 |
| Denominator (Millions of shares) | |||
| + Number of shares outstanding | 5,838 | 6,030 | 6,668 |
| - Treasury shares | 4 | 5 | 15 |
| - Share buyback program ⁽¹⁾ | — | — | 255 |
| = Tangible book value per share (euros / share) | 8.46 | 7.43 | 6.52 |
⁽¹⁾ The redemption of 128 millions of shares corresponding to the share buyback program approved by the BBVA Board of Directors in July 2023 , whose execution started on October 2, 2023, was made on December 19, 2023. As of 31-12-21, 112 million shares acquired from the start of the share buyback program to the end of the period and the estimated number of shares pending from buyback as of December 31, 2021 of the first tranche, in process at the end of that date, were included.
Tangible book value per share for AVR
Explanation of the formula: for the purposes of its calculation, and based on the metric "Tangible book value per share" described above, the following items are adjusted in order not to consider the results of non-recurring operations 69 in 2022, the capital gain from the voluntary takeover bid of Garanti BBVA in 2022. Tangible book value for AVR: in 2022, both, the aforementioned capital gain from the voluntary takeover bid of Garanti BBVA and the net impact arisen from the purchase of offices in Spain from Merlin on the tangible book value are excluded. On the other hand, on the concepts related to the system of remuneration to shareholders, the amounts distributed to them (which include the amounts distributed under the items “Share premium”, as well as the “Interim dividends”) are adjusted.
Relevance of its use: This indicator is commonly used in the banking sector. In addition, it is one of the indicators used for the purposes of the Group’s AVR (Annual Variable Remuneration 70).
| 31-12-23 | 31-12-22 | |
|---|---|---|
| Numerator (Millions of euros) | ||
| + Tangible book value for AVR | n.a. | 46,054 |
| Denominator (Millions of shares) | ||
| + Number of shares issued | n.a. | 6,030 |
| + Dividend-option | — | — |
| - Treasury shares | n.a. | 5 |
| - Share buyback program (1) | n.a. | — |
| = Tangible book value per share for AVR (euros) | n.a. | 7.64 |
General note: 2022 figures have not been restated according to IFRS 17 - Insurance contracts.
It is the ratio between the risks classified for accounting purposes as non-performing loans and the total credit risk balance. It is calculated as follows:
Non-performing loans
Total credit risk
Explanation of the formula: non-performing loans and the credit risk balance are gross, meaning they are not adjusted by associated accounting provisions. Non-performing loans are calculated as the sum of “loans and advances at amortized cost” and the “contingent risk” in stage 3 and the following counterparties:
• other financial entities
• public sector
• non-financial institutions
• households.
The credit risk balance is calculated as the sum of "Loans and advances at amortized cost" and "Contingent risk" in stage 1 + stage 2 + stage 3 of the previous counterparts. This indicator is shown, as others, at a business area level.
Relevance of its use: this is one of the main indicators used in the banking sector to monitor the current situation and changes in credit quality, and specifically, the relationship between risks classified in the accounts as non-performing loans and the total balance of credit risk, with respect to customers and contingent liabilities.
| 31-12-23 | 31-12-22 | 31-12-21 | |
|---|---|---|---|
| Numerator (Millions of euros) | |||
| NPLs | 15,305 | 14,463 | 15,443 |
| Denominator (Millions of euros) | |||
| Credit Risk | 448,840 | 423,669 | 376,011 |
| = Non-Performing Loans (NPLs) ratio | 3.4% | 3.4% | 4.1% |
General note: credit risk figures for 2022 periods have been restated according to IFRS 17 - Insurance contracts.NPL coverage ratio
This ratio reflects the degree to which the impairment of non-performing loans has been covered in the accounts via allowances. It is calculated as follows:
Provisions
Non-performing loans
Explanation of the formula: it is calculated as "Provisions" from stage 1 + stage 2 + stage 3, divided by non-performing loans, formed by “credit risk” from stage 3. This indicator is shown, as others, at a business area level.
Relevance of its use: this is one of the main indicators used in the banking sector to monitor the situation and changes in the quality of credit risk, reflecting the degree to which the impairment of non-performing loans has been covered in the accounts via value adjustments.
| NPL coverage ratio | 31-12-23 | 31-12-22 | 31-12-21 |
|---|---|---|---|
| Numerator (Millions of euros) | |||
| Provisions | 11,762 | 11,764 | 11,536 |
| Denominator (Millions of euros) | |||
| NPLs | 15,305 | 14,463 | 15,443 |
| = NPL coverage ratio | 77% | 81% | 75% |
Cost of risk
This ratio indicates the current situation and changes in credit-risk quality through the annual cost in terms of impairment losses (accounting loan-loss provisions) of each unit of loans and advances to customers (gross). It is calculated as follows:
Loan-loss provisions
Average loans and advances to customers (gross)
Explanation of the formula: "Loans to customers (gross)" refers to the "Loans and advances at amortized cost" portfolios with the following counterparts:
• other financial entities
• public sector
• non-financial institutions
• households, excluding central banks and other credit institutions.
Average loans to customers (gross) is calculated by using the average of the period-end balances of each month of the period analyzed plus the previous month. If the metric is presented on a date before the close of the fiscal year, the numerator will be annualized. By doing this, "Annualized loan-loss provisions" are calculated by accumulating and annualizing the loan-loss provisions of each month of the period under analysis (based on days passed). Loan-loss provisions refer to the aforementioned loans and advances at amortized cost portfolios. This indicator is shown, as others, at a business area level.
307
Relevance of its use: this is one of the main indicators used in the banking sector to monitor the situation and changes in the quality of credit risk through the cost over the year.
| Cost of risk | Jan.-Dec.2023 | Jan.-Dec.2022 | Jan.-Dec.2021 |
|---|---|---|---|
| Numerator (Millions of euros) | |||
| Loan-loss provisions | 4,345 | 3,252 | 3,026 |
| Denominator (Millions of euros) | |||
| Average loans to customers (gross) | 378,402 | 356,064 | 325,013 |
| = Cost of risk | 1.15% | 0.91% | 0.93% |
General note: average loans to customers (gross) figures for 2022 periods have been restated according to IFRS 17 - Insurance contracts.
308
5.2. Organizational chart
In 2023, the Group's organizational structure remains in line with the one approved by the BBVA Board of Directors at the end of 2018, a structure that meets the objective of continuing to promote the transformation and businesses of the Group, while advancing in the delimitation of executive functions. The main aspects of the organizational structure are:
– The Chair is responsible for the management and proper functioning of the Board of Directors, for the functions of management supervision, for the institutional representation of the entity, as well as for the leadership and promotion of the group's strategy and its transformation process. The areas that report to the Chair are those related to the key levers of transformation: Engineering, Talent & Culture and Data; those related to strategy: Strategy & M&A, Communications and the figure of the Senior Advisor to the Chair; and those related to the legal field and the Council: Legal and General Secretary.
– The Chief Executive Officer is responsible for the day-to-day management of the Group's businesses, reporting directly to the Board of Directors on his duties. The areas that report to the Chief Executive Officer are the business units in the different countries, Corporate & Investment Banking, Sustainability and Client Solutions, as well as the following global functions: Finance, which integrates accounting and tax functions, and Global Risk Management.
– Lastly, certain areas of control have a direct report of those responsible to the Board of Directors through the corresponding committees. These control areas are Internal Audit and Regulation & Internal Control, the area in charge of the relationship with supervisors and regulators, the monitoring and analysis of regulatory trends and the development of the Group's regulatory agenda, and the management of derived risks of regulatory compliance issues.
309
5.3 Tables related to Article 8 of the European Taxonomy
SUMMARY OF THE KPIs TO BE DISCLOSED BY CREDIT INSTITUTIONS
| Total environmentally sustainable assets (1) | KPI (2) | KPI (3) | % coverage (over total assets)(4) | |
|---|---|---|---|---|
| Green asset ratio (GAR) stock | 2,302 | 0.52% | 0.80% | 59.04% |
| Total environmentally sustainable activities | ||||
| KPI | KPI | % coverage (over total assets) | ||
| GAR (flow) | ||||
| Trading book | 380 | 2.02% | 5.51% | |
| Financial guarantees | ||||
| Assets under management | 285 | 0.16% | 0.34% | |
| Fees and commissions income (5) |
(1) The figure corresponding to the total environmentally sustainable assets (turnover), in line with the Pillar III ESG summary.
(2) based on the Turnover KPI of the counterparty.
(3) based on the CapEx KPI of the counterparty, except for lending activities where for general lending Turnover KPI is used.
(4) % of assets covered by the KPI over banks´ total assets.
(5) Fees and commissions income from services other than lending and AuM.
ASSETS FOR THE CALCULATION OF GAR - TURNOVER
| Million EUR | Disclosure reference date T | Total [gross] carrying amount | Climate Change Mitigation (CCM) | Climate Change Adaptation (CCA) | TOTAL (CCM + CCA) | Of which towards taxonomy relevant sectors (Taxonomy-eligible) | Of which towards taxonomy relevant sectors (Taxonomy-eligible) | Of which towards taxonomy relevant sectors (Taxonomy-eligible) | Of which environmentally sustainable (Taxonomy-aligned) | Of which environmentally sustainable (Taxonomy-aligned) | Of which environmentally sustainable (Taxonomy-aligned) | Of which specialised lending | Of which transitional | Of which enabling | Of which specialised lending | Of which adaptation | Of which enabling | Of which specialised lending | Of which transitional | Of which enabling | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| GAR - Covered assets in both numerator and denominator | |||||||||||||||||||||
| Loans and advances, debt securities and equity instruments not HfT eligible for GAR calculation | 245,270 | 121,137 | 2,180 | — | 120 | 789 | 1,062 | 122 | — | — | 9 | 122,198 | 2,302 | — | 120 | 798 | |||||
| Financial corporations | 4,153 | — | — | — | — | — | 562 | — | — | — | |||||||||||
| Credit institutions | 2,255 | — | — | — | — | — | 369 | — | — | — | |||||||||||
| Loans and advances | 1,629 | — | — | — | — | — | 155 | — | — | — | |||||||||||
| Debt securities, including UoP | 627 | — | — | — | — | — | 214 | — | — | — | |||||||||||
| Equity instruments | 9 | — | — | — | — | — | — | — | — | — | |||||||||||
| Other financial corporations | 1,898 | — | — | — | — | — | 193 | — | — | — | |||||||||||
| of which investment firms | 302 | — | — | — | — | — | 2 | — | — | — | |||||||||||
| Loans and advances | 302 | — | — | — | — | — | 2 | — | — | — | |||||||||||
| Debt securities, including UoP | — | — | — | — | — | — | — | — | — | — | |||||||||||
| Equity instruments | — | — | — | — | — | — | — | — | — | — | |||||||||||
| of which management companies | 18 | — | — | — | — | — | — | — | — | — | |||||||||||
| Loans and advances | 18 | — | — | — | — | — | — | — | — | — | |||||||||||
| Debt securities, including UoP | — | — | — | — | — | — | — | — | — | — | |||||||||||
| Equity instruments | — | — | — | — | — | — | — | — | — | — | |||||||||||
| of which insurance undertakings | 21 | — | — | — | — | — | 35 | — | — | — | |||||||||||
| Loans and advances | 21 | — | — | — | — | — | — | — | — | — | |||||||||||
| Debt securities, including UoP | — | — | — | — | — | — | 5 | — | — | — | |||||||||||
| Equity instruments | — | — | — | 30 | — | — | 30 | — | — | — | |||||||||||
| Non-financial corporations | 6,321 | 1,490 | — | 120 | 789 | 500 | 122 | — | — | 9 | 6,821 | 1,612 | — | 120 | 798 | ||||||
| NFCs subject to NFRD disclosure obligations | 6,116 | 1,408 | — | 115 | 736 | 474 | 119 | — | — | 8 | 6,590 | 1,527 | — | 115 | 744 | ||||||
| Loans and advances | 6,116 | 1,408 | — | 115 | 736 | 474 | 119 | — | — | 8 | 6,590 | 1,527 | — | 115 | 744 | ||||||
| Debt securities, including UoP | 131 | 67 | — | 6 | 38 | 3 | 3 | — | — | 2 | 134 | 69 | — | 6 | 40 | ||||||
| Equity instruments | 74 | 15 | — | 14 | 23 | — | — | — | — | — | 97 | 15 | — | 14 | — | ||||||
| Households | 109,728 | 690 | — | — | — | — | — | — | — | — | 109,728 | 690 | — | — | — | ||||||
| of which loans collateralised by residential immovable property | 96,226 | 690 | — | — | — | — | — | — | — | — | 96,226 | 690 | — | — | — | ||||||
| of which building renovation loans | 4,478 | — | — | — | — | — | — | — | — | — | 4,478 | — | — | — | — | ||||||
| of which motor vehicle loans | 9,024 | — | — | — | — | — | — | — | — | — | 9,024 | — | — | — | — | ||||||
| Local governments financing | — | — | — | — | — | — | — | — | — | — | |||||||||||
| Collateral obtained by taking possession: residential and commercial immovable properties | 934 | 1 | — | — | — | — | — | — | — | — | 934 | 1 | — | — | — | ||||||
| Other local government financing | — | — | — | — | — | — | — | — | — | — | |||||||||||
| Other assets excluded from the numerator for GAR calculation (covered in the denominator) | 196,518 | — | — | — | — | — | — | — | — | — | |||||||||||
| Non-financial corporations | 160,448 | ||||||||||||||||||||
| SMEs and NFCs (other than SMEs) not subject to NFRD disclosure obligations | 57,850 | ||||||||||||||||||||
| Loans and advances | 56,917 | ||||||||||||||||||||
| 310# ASSETS FOR THE CALCULATION OF GAR - CAPEX |
| Disclosure reference date | Total [gross] carrying amount | Climate Change Mitigation (CCM) Of which towards taxonomy relevant sectors (Taxonomy-eligible) Of which specialised lending Of which transitional Of which enabling | Climate Change Adaptation (CCA) Of which towards taxonomy relevant sectors (Taxonomy-eligible) Of which adaptation Of which enabling | TOTAL (CCM + CCA) Of which towards taxonomy relevant sectors (Taxonomy-eligible) Of which specialised lending Of which transitional Of which enabling | Of which environmentally sustainable (Taxonomy-aligned) | Of which environmentally sustainable (Taxonomy-aligned) | Of which environmentally sustainable (Taxonomy-aligned) |
|---|---|---|---|---|---|---|---|
| Million EUR | T | ||||||
| GAR - Covered assets in both numerator and denominator | |||||||
| Loans and advances, debt securities and equity instruments not HfT eligible for GAR calculation | 245,270 | 122,018 | 3,406 | — | 125 | 1,355 | 1,092 |
| Financial corporations | 40,449 | 4,198 | — | — | — | — | 573 |
| Credit institutions | 20,040 | 2,191 | — | — | — | — | 369 |
| Loans and advances | 16,634 | 1,594 | — | — | — | — | 155 |
| Debt securities, including UoP | 3,397 | 597 | — | — | — | — | 214 |
| Equity instruments | 9 | — | — | — | — | — | — |
| Other financial corporations | 20,409 | 2,007 | — | — | — | — | 204 |
| of which investment firms | 1,065 | 267 | — | — | — | — | 11 |
| Loans and advances | 998 | 267 | — | — | — | — | 11 |
| Debt securities, including UoP | 66 | — | — | — | — | — | — |
| Equity instruments | 1 | — | — | — | — | — | — |
| of which management companies | 448 | 18 | — | — | — | — | — |
| Loans and advances | 344 | 18 | — | — | — | — | — |
| Debt securities, including UoP | 19 | — | — | — | — | — | — |
| Equity instruments | 85 | — | — | — | — | — | — |
| of which insurance undertakings | 2,024 | 10 | — | — | — | — | 35 |
| Loans and advances | 738 | 10 | — | — | — | — | 10 |
| Debt securities, including UoP | 5 | — | — | — | — | — | 5 |
| Equity instruments | 1,281 | — | — | — | — | — | 30 |
| Non-financial corporations | 22,389 | 7,157 | 2,716 | — | 125 | 1,355 | 519 |
| NFCs subject to NFRD disclosure obligations | 19,775 | 6,809 | 2,464 | — | 114 | 1,284 | 500 |
| Loans and advances | 16,634 | 1,594 | — | — | — | — | 155 |
| Debt securities, including UoP | 1,266 | 311 | 230 | — | 10 | 58 | 4 |
| Equity instruments | 1,348 | 37 | 21 | — | 13 | 15 | — |
| Households | 177,287 | 109,728 | 690 | — | — | — | — |
| of which loans collateralised by residential immovable property | 96,226 | 96,226 | 690 | — | — | — | — |
| of which building renovation loans | 4,478 | 4,478 | — | — | — | — | — |
| of which motor vehicle loans | 9,024 | 9,024 | — | — | — | — | — |
| Local governments financing | 4,210 | — | — | — | — | — | — |
| Collateral obtained by taking possession: residential and commercial immovable properties | 934 | 934 | 1 | — | — | — | — |
| Other local government financing | 4,210 | — | — | — | — | — | — |
| Other assets excluded from the numerator for GAR calculation (covered in the denominator) | 196,518 | — | — | — | — | — | — |
| Non-financial corporations | 160,448 | ||||||
| SMEs and NFCs (other than SMEs) not subject to NFRD disclosure obligations | 57,850 | ||||||
| Loans and advances | 56,917 | ||||||
| of which loans collateralised by commercial immovable property | 8,875 | ||||||
| of which building renovation loans | 367 | ||||||
| Debt securities | 516 | ||||||
| Equity instruments | 417 | ||||||
| Non-EU country counterparties not subject to NFRD disclosure obligations | 102,598 | ||||||
| Loans and advances | 98,990 | ||||||
| Debt securities | 3,112 | ||||||
| Equity instruments | 497 | ||||||
| Derivatives | 1,420 | ||||||
| On demand interbank loans | 7,085 | ||||||
| Cash and cash-related assets | 7,782 | ||||||
| Other assets (e.g. Goodwill, commodities etc.) | 19,783 | ||||||
| Total GAR assets | 441,787 | 122,018 | 3,406 | — | 125 | 1,355 | 1,092 |
| Other assets not covered for GAR calculation | 306,457 | ||||||
| Sovereigns | 96,465 | ||||||
| Central banks exposure | 68,488 | ||||||
| Trading book | 141,505 | ||||||
| Total assets | 748,244 |
| | \theta_{L} = 0.026 \text{ rad}`# Customers' economic activities are classified as eligible or aligned in accordance with the Delegated Acts supplementing Regulation (EU) 2020/852 of the European Parliament and of the Council. Specifically, the economic activities covered by Delegated Regulations (EU) 2021/2139 on mitigation and adaptation to climate change have been taken into consideration.
Customers' economic activities are classified as eligible or aligned taking into account the modifications implemented by Commission Delegated Regulation (EU) 2022/1214 of March 9, 2022, which includes economic activities in certain energy sectors, and Commission Delegated Regulation (EU) 2023/2485 of 27 June 2023 establishing additional technical criteria.
The data includes the most significant BBVA Group entities that correspond to 96.5% of the total assets and represent in the best possible way the Group information required by current regulations. The financial assets analyzed correspond to the categories of financial instruments valued “At amortized cost”, “Fair Value with Changes in Other Comprehensive Income (FVOCI)”, “Fair Value with Changes in P&L” and “Non-negotiable at Fair Value with changes in result”.
NFRD counterparties are those subject to Directive 2014/95/EU (the Non-Financial Reporting Directive or NFRD), such as large listed companies, banks and insurance companies, with more than 500 employees. BBVA identifies NFRD counterparties mainly in two ways: i) review of the registered office in a country of the European Union and ii) more than 500 employees. In the event that the previous criterion is not met and if the client belongs to a business group, the same review is carried out at the parent company level.
Eligibility information for NFRD counterparties is obtained through an external reference provider in the sector, which obtains EU taxonomy KPI information directly from their corporate reports, EINF or equivalent. In the case of NFRD clients for whom the information has not been provided through the previous means, the information from their corporate reports is captured by BBVA or the client's main activity is analyzed to establish their eligibility.
Exposure to individuals includes self-employed workers, in which case the activity code (NACE) is reviewed to determine eligibility. The rest of the exposure corresponding to the individual segment is reviewed for the use of funds to be considered eligible, for example, in the case of housing loans. EU Taxonomy activity 7.7 Acquisition and ownership of buildings, EU Taxonomy activity 7.2 Renovation of independently existing buildings, or Cars: EUT 6.5 Transport by motorcycles, passenger cars and light commercial vehicles).
While exposures to governments and central banks are excluded from the GAR calculation symmetrically, from the numerator and denominator, financing to small and medium-sized enterprises that do not fall within the scope of the NFRD or financing outside EU (even if they meet the taxonomy criteria requirements) cannot qualify as aligned with the taxonomy. Furthermore, activities not covered by the EU taxonomy will be excluded from the numerator, but not from the denominator of GAR.
Breakdown by sector - NACE 4 digits level (code and label)
| Climate Change Mitigation (CCM) - Non-Financial corporates (Subject to NFRD) | Climate Change Mitigation (CCM) - SMEs and other NFC not subject to NFRD | Climate Change Adaptation (CCA) - Non-Financial corporates (Subject to NFRD) | Climate Change Adaptation (CCA) - SMEs and other NFC not subject to NFRD | TOTAL (CCM + CCA) - Non-Financial corporates (Subject to NFRD) | TOTAL (CCM + CCA) - SMEs and other NFC not subject to NFRD | |
|---|---|---|---|---|---|---|
| [Gross] carrying amount Mn EUR | [Gross] carrying amount Mn EUR | [Gross] carrying amount Mn EUR | [Gross] carrying amount Mn EUR | [Gross] carrying amount Mn EUR | [Gross] carrying amount Mn EUR | |
| Of which environmentally sustainable (CCM) | Of which environmentally sustainable (CCM) | Of which environmentally sustainable (CCA) | Of which environmentally sustainable (CCA) | Of which environmentally sustainable (CCM + CCA) | Of which environmentally sustainable (CCM + CCA) | |
| A.02.10 Silviculture and other forestry activities | 1 | — | — | — | 1 | 1 |
| B.05.10 Mining of hard coal | — | — | — | — | — | — |
| B.09.10 Support activities for petroleum and natural gas extraction | — | — | — | — | — | — |
| C.16.29 Manufacture of other products of wood; manufacture of articles of cork, straw and plaiting materials | 10 | — | — | — | 10 | — |
| C.17.11 Manufacture of pulp | — | — | — | — | — | — |
| C.17.12 Manufacture of paper and paperboard | 6 | — | — | — | 6 | — |
| C.17.21 Manufacture of corrugated paper and paperboard and of containers of paper and paperboard | — | — | — | — | — | — |
| C.17.23 Manufacture of paper stationery | — | — | — | — | — | — |
| C.17.29 Manufacture of other articles of paper and paperboard | — | — | — | — | — | — |
| C.20.11 Manufacture of industrial gases | — | — | — | — | — | — |
| C.20.13 Manufacture of other inorganic basic chemicals | 11 | 2 | 1 | 1 | 12 | 2 |
| C.20.14 Manufacture of other organic basic chemicals | 107 | — | — | — | 107 | — |
| C.20.15 Manufacture of fertilisers and nitrogen compounds | — | — | — | — | — | — |
| C.20.16 Manufacture of plastics in primary forms | 41 | — | — | — | 41 | — |
| C.20.52 Manufacture of glues | — | — | — | — | — | — |
| C.22.11 Manufacture of rubber tyres and tubes; retreading and rebuilding of rubber tyres | — | — | — | — | — | — |
| C.22.22 Manufacture of plastic packing goods | 71 | — | — | — | 71 | — |
| C.22.29 Manufacture of other plastic products | 6 | — | — | — | 6 | — |
| C.23.11 Manufacture of flat glass | 1 | — | — | — | 1 | — |
| C.23.12 Shaping and processing of flat glass | — | — | — | — | — | — |
| C.23.13 Manufacture of hollow glass | 1 | — | — | — | 1 | — |
| C.23.14 Manufacture of glass fibres | 4 | — | — | — | 4 | — |
| C.23.31 Manufacture of ceramic tiles and flags | 6 | — | — | — | 6 | — |
| C.23.43 Manufacture of ceramic insulators and insulating fittings | 10 | 4 | 1 | 1 | 11 | 5 |
| C.23.51 Manufacture of cement | 111 | — | — | — | 111 | — |
| C.23.61 Manufacture of concrete products for construction purposes | — | — | — | — | — | — |
| C.23.63 Manufacture of ready- mixed concrete | 4 | — | — | — | 4 | — |
| C.23.64 Manufacture of mortars | 1 | — | — | — | 1 | — |
| C.23.91 Production of abrasive products | 1 | — | — | — | 1 | — |
| C.23.99 Manufacture of other non- metallic mineral products n.e.c. | — | — | — | — | — | — |
| C.24.10 Manufacture of basic iron and steel and of ferro-alloys | 141 | 99 | 45 | 45 | 185 | 143 |
| C.24.20 Manufacture of tubes, pipes, hollow profiles and related fittings, of steel | — | — | — | — | — | — |
| C.24.32 Cold rolling of narrow strip | 1 | — | — | — | 1 | — |
| C.24.42 Aluminium production | 4 | — | — | — | 4 | — |
| C.24.51 Casting of iron | 9 | — | — | — | 9 | — |
| C.24.52 Casting of steel | — | — | — | — | — | — |
| C.25.11 Manufacture of metal structures and parts of structures | — | — | — | — | — | — |
| C.25.12 Manufacture of doors and windows of metal | — | — | — | — | — | — |
| C.25.50 Forging, pressing, stamping and roll-forming of metal; powder metallurgy | 19 | — | — | — | 19 | — |
| C.25.72 Manufacture of locks and hinges | 1 | — | — | — | 1 | — |
| C.25.73 Manufacture of tools | 1 | — | — | — | 1 | — |
| C.25.92 Manufacture of light metal packaging | — | — | — | — | — | — |
| C.25.99 Manufacture of other fabricated metal products n.e.c. | 5 | — | — | — | 5 | — |
| C.26.11 Manufacture of electronic components | — | — | — | — | — | — |
| C.26.30 Manufacture of communication equipment | 3 | — | — | — | 3 | — |
| C.26.51 Manufacture of instruments and appliances for measuring, testing and navigation | — | — | — | — | — | — |
| C.26.60 Manufacture of irradiation, electromedical and electrotherapeutic equipment | 140 | — | — | — | 140 | — |
| C.27.11 Manufacture of electric motors, generators and transformers | 149 | 9 | — | — | 149 | 9 |
| C.27.12 Manufacture of electricity distribution and control apparatus | — | — | — | — | — | — |
| C.27.20 Manufacture of batteries and accumulators | 2 | 1 | — | — | 2 | 1 |
| C.27.51 Manufacture of electric domestic appliances | — | — | — | — | — | — |
| C.27.90 Manufacture of other electrical equipment | 4 | — | — | — | 4 | — |
| C.28.11 Manufacture of engines and turbines, except aircraft, vehicle and cycle engines | 13 | — | — | — | 13 | — |
| C.28.15 Manufacture of bearings, gears, gearing and driving elements | — | — | — | — | — | — |
| C.28.22 Manufacture of lifting and handling equipment | 3 | — | — | — | 3 | — |
| C.28.29 Manufacture of other general-purpose machinery n.e.c. | 16 | — | — | — | 16 | — |
| C.28.91 Manufacture of machinery for metallurgy | 6 | — | — | — | 6 | — |
| C.28.99 Manufacture of other special-purpose machinery n.e.c. | 88 | — | — | — | 88 | — |
| C.29.10 Manufacture of motor vehicles | 809 | 90 | 4 | 4 | 813 | 94 |
| C.29.31 Manufacture of electrical and electronic equipment for motor vehicles | — | — | — | — | — | — |
| C.29.32 Manufacture of other parts and accessories for motor vehicles | 72 | — | — | — | 72 | — |
| C.30.20 Manufacture of railway locomotives and rolling stock | 36 | 36 | 36 | 36 | 71 | 71 |
| C.33.12 Repair of machinery | 86 | 22 | — | — | 86 | 22 |
| C.33.17 Repair and maintenance of other transport equipment | — | — | — | — | — | — |
| C.33.20 Installation of industrial machinery and equipment | — | — | — | — | — | — |
| D.35.11 Production of electricity | 1,119 | 333 | 27 | 19 | 1,146 | 352 |
| D.35.12 Transmission of electricity | 432 | 338 | — | — | 432 | 338 |
| D.35.13 Distribution of electricity | 28 | 9 | — | — | 28 | 9 |
| D.35.21 Manufacture of gas | 5 | — | — | — | 5 | — |
| D.35.22 Distribution of gaseous fuels through mains | 34 | — | — | — | 34 | — |
| D.35.30 Steam and air conditioning supply | 10 | 4 | — | — | 10 | 4 |
| E.36.00 Water collection, treatment and supply | 62 | 18 | 1 | 1 | 63 | 19 |
| E.37.00 Sewerage | 38 | 17 | 2 | 2 | 40 | 19 |
| Climate Change Mitigation (CCM) | Climate Change Adaptation (CCA) | TOTAL (CCM + CCA) | Non-Financial corporates (Subject to NFRD) | SMEs and other NFC not subject to NFRD | Non-Financial corporates (Subject to NFRD) | SMEs and other NFC not subject to NFRD | Non-Financial corporates (Subject to NFRD) | SMEs and other NFC not subject to NFRD |
|---|---|---|---|---|---|---|---|---|
| [Gross] carrying amount Mn EUR Of which environmentally sustainable (CCM) | [Gross] carrying amount Mn EUR Of which environmentally sustainable (CCM) | [Gross] carrying amount Mn EUR Of which environmentally sustainable (CCA) | [Gross] carrying amount Mn EUR Of which environmentally sustainable (CCA) | [Gross] carrying amount Mn EUR Of which environmentally sustainable (CCM + CCA) | [Gross] carrying amount Mn EUR Of which environmentally sustainable (CCM + CCA) | |||
| A.02.10 Silviculture and other forestry activities | 19 | 19 | 11 | 11 | 30 | 30 | ||
| B.05.10 Mining of hard coal | — | — | — | — | — | — | ||
| B.06.10 Extraction of crude oil and natural gas | — | — | — | — | — | — | ||
| B.09.10 Support activities for petroleum and natural gas extraction | — | — | — | — | — | — | ||
| C.11.01 Distilling, rectifying and blending of spirits | — | — | — | — | — | — | ||
| C.11.02 Manufacture of wine from grape | 2 | — | — | — | 2 | — |
| E.38.11 Collection of non-hazardous waste | 10 | 6 | — | — | 10 |
| E.38.21 Treatment and disposal of non-hazardous waste | 1 | 1 | — | — | 1 |
| E.38.32 Recovery of sorted materials | 31 | 7 | — | — | 31 |
| F.41.10 Development of building projects | 29 | — | — | — | 29 |
| F.41.20 Construction of residential and non-residential buildings | 803 | 49 | 1 | 1 | 804 |
| F.42.11 Construction of roads and motorways | 156 | 54 | 1 | 1 | 156 |
| F.42.12 Construction of railways and underground railways | 259 | 155 | — | — | 259 |
| F.42.91 Construction of water projects | 4 | 2 | — | — | 4 |
| F.42.99 Construction of other civil engineering projects n.e.c. | 31 | 18 | — | — | 31 |
| F.43.21 Electrical installation | 19 | 8 | — | — | 19 |
| F.43.22 Plumbing, heat and air conditioning installation | 2 | — | — | — | 2 |
| F.43.29 Other construction installation | — | — | — | — | — |
| F.43.32 Joinery installation | 1 | — | — | — | 1 |
| F.43.99 Other specialised construction activities n.e.c. | 2 | — | — | — | 2 |
| G.46.19 Agents involved in the sale of a variety of goods | — | — | — | — | — |
| G.46.69 Wholesale of other machinery and equipment | — | — | — | — | — |
| G.46.72 Wholesale of metals and metal ores | — | — | — | — | — |
| G.46.90 Non-specialised wholesale trade | 4 | 3 | — | — | 4 |
| G.47.19 Other retail sale in non- specialised stores | — | — | — | — | — |
| H.49.10 Passenger rail transport, interurban | 246 | 1 | — | — | 246 |
| H.49.20 Freight rail transport | — | — | — | — | — |
| H.49.31 Urban and suburban passenger land transport | 75 | — | — | — | 75 |
| H.49.32 Taxi operation | 61 | 2 | — | — | 61 |
| H.49.39 Other passenger land transport n.e.c. | 3 | — | — | — | 3 |
319
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
| H.49.41 Freight transport by road | 80 | — | — | — | 80 |
| H.49.50 Transport via pipeline | — | — | — | — | — |
| H.50.20 Sea and coastal freight water transport | 7 | 7 | — | — | 7 |
| H.50.30 Inland passenger water transport | — | — | — | — | — |
| H.51.10 Passenger air transport | — | — | — | — | — |
| H.51.21 Freight air transport | — | — | — | — | — |
| H.52.21 Service activities incidental to land transportation | 7 | — | — | — | 7 |
| H.52.22 Service activities incidental to water transportation | — | — | — | — | — |
| H.52.23 Service activities incidental to air transportation | — | — | — | — | — |
| H.52.24 Cargo handling | — | — | — | — | — |
| H.52.29 Other transportation support activities | 72 | 54 | — | — | 72 |
| H.53.20 Other postal and courier activities | 24 | — | — | — | 24 |
| I.55.10 Hotels and similar accommodation | — | — | — | — | — |
| J.59.11 Motion picture, video and television programme production activities | — | — | 37 | — | 37 |
| J.60.20 Television programming and broadcasting activities | — | — | 8 | 1 | 8 |
| J.61.90 Other telecommunications activities | — | — | 8 | 8 | 8 |
| J.62.01 Computer programming activities | — | — | — | — | — |
| J.62.02 Computer consultancy activities | 124 | — | — | — | 124 |
| J.62.09 Other information technology and computer service activities | 61 | 23 | 2 | 2 | 63 |
| J.63.11 Data processing, hosting and related activities | 98 | — | — | — | 98 |
| K.64.99 Other financial service activities, except insurance and pension funding n.e.c. | 1 | — | — | — | 1 |
| K.65.12 Non-life insurance | — | — | — | — | — |
| L.68.10 Buying and selling of own real estate | 228 | 101 | — | — | 228 |
320
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
| L.68.20 Renting and operating of own or leased real estate | — | — | — | — | — |
| M.70.22 Business and other management consultancy activities | — | — | — | — | — |
| M.71.11 Architectural activities | — | — | — | — | — |
| M.71.12 Engineering activities and related technical consultancy | 88 | 14 | — | — | 88 |
| M.71.20 Technical testing and analysis | — | — | — | — | — |
| M.72.11 Research and experimental development on biotechnology | — | — | — | — | — |
| M.72.19 Other research and experimental development on natural sciences and engineering | — | — | — | — | — |
| M.74.90 Other professional, scientific and technical activities n.e.c. | — | — | 57 | — | 57 |
| N.77.11 Renting and leasing of cars and light motor vehicles | 62 | 2 | — | — | 62 |
| N.77.12 Renting and leasing of trucks | — | — | — | — | — |
| N.77.39 Renting and leasing of other machinery, equipment and tangible goods n.e.c. | 2 | — | — | — | 2 |
| N.79.11 Travel agency activities | — | — | — | — | — |
| N.80.20 Security systems service activities | — | — | 129 | — | 129 |
| N.81.21 General cleaning of buildings | — | — | — | — | — |
| N.81.29 Other cleaning activities | — | — | — | — | — |
| N.82.99 Other business support service activities n.e.c. | — | — | — | — | — |
| O.84.11 General public administration activities | — | — | 105 | — | 105 |
| P.85.20 Primary education | — | — | — | — | — |
| P.85.59 Other education n.e.c. | — | — | — | — | — |
| Q.86.10 Hospital activities | — | — | 10 | — | 10 |
| Q.86.90 Other human health activities | — | — | 5 | — | 5 |
| Q.87.10 Residential nursing care activities | — | — | 3 | — | 3 |
| Q.87.20 Residential care activities for mental retardation, mental health and substance abuse | — | — | 1 | — | 1 |
321
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
| Q.87.30 Residential care activities for the elderly and disabled | — | — | 3 | — | 3 |
| Q.87.90 Other residential care activities | — | — | 13 | — | 13 |
| R.90.03 Artistic creation | — | — | 2 | — | 2 |
| R.91.04 Botanical and zoological gardens and nature reserves activities | — | — | — | — | — |
1. Exposures of the banking book to sectors covered (eligible) by the taxonomy (NACE sectors at the fourth level of detail), using the relevant NACE codes according to the economic activities of the counterparty.
2. The present information has been prepared in accordance with Commission Delegated Regulation (EU) 2021/2178, of July 6, 2021, which supplements Regulation (EU) 2020/852 of the European Parliament and of the Council by specifying the content and the presentation of information on environmentally sustainable economic activities.
3. Customers' economic activities are classified as eligible or aligned in accordance with the Delegated Acts supplementing Regulation (EU) 2020/852 of the European Parliament and of the Council. Specifically, the economic activities covered by Delegated Regulations (EU) 2021/2139 on mitigation and adaptation to climate change have been taken into consideration.
4. Customers' economic activities are classified as eligible or aligned taking into account the modifications implemented by Commission Delegated Regulation (EU) 2022/1214 of March 9, 2022, which includes economic activities in certain energy sectors, and Commission Delegated Regulation (EU) 2023/2485 of 27 June 2023 establishing additional technical criteria.
5. The data includes the most significant BBVA Group entities that correspond to 96.5% of the total assets and represent in the best possible way the Group information required by current regulations.The financial assets analyzed correspond to the categories of financial instruments valued “At amortized cost”, “Fair Value with Changes in Other Comprehensive Income (FVOCI)”, “Fair Value with Changes in P&L” and “Non-negotiable at Fair Value with changes in result.
6. NFRD counterparties are those subject to Directive 2014/95/EU (the Non-Financial Reporting Directive or NFRD), such as large listed companies, banks and insurance companies, with more than 500 employees. BBVA identifies NFRD counterparties mainly in two ways: i) review of the registered office in a country of the European Union and ii) more than 500 employees. In the event that the previous criterion is not met and if the client belongs to a business group, the same review is carried out at the parent company level.
7. Eligibility information for NFRD counterparties is obtained through an external reference provider in the sector, which obtains EU taxonomy KPI information directly from their corporate reports, EINF or equivalent. In the case of NFRD clients for whom the information has not been provided through the previous means, the information from their corporate reports is captured by BBVA or the client's main activity is analyzed to establish their eligibility.
8. While exposures to governments and central banks are excluded from the GAR calculation symmetrically, from the numerator and denominator, financing to small and medium-sized enterprises that do not fall within the scope of the NFRD or financing outside EU (even if they meet the taxonomy criteria requirements) cannot qualify as aligned with the taxonomy. Furthermore, activities not covered by the EU taxonomy will be excluded from the numerator, but not from the denominator of GAR.```markdown
— — — — — —
10 — — — 10 —
— — — — — —
6 — — — 6 —
— — — — — —
— — — — — —
— — — — — —
— — — — — —
— — — — — —
8 3 1 1 10 4
136 1 — — 136 1
— — — — — —
19 2 — — 19 2
— — — — — —
— — — — — —
71 — — — 71 —
6 — — — 6 —
1 — — — 1 —
— — — — — —
1 — — — 1 —
4 — — — 4 —
6 — — — 6 —
7 2 1 1 8 3
— — — — 106 — 323 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
— — — — — —
— — — — 4 —
— — — — 1 —
— — — — 1 —
— — — — — —
— — 45 45 163 128
— — — — — —
— — — — 1 —
— — — — 4 —
— — — — 9 —
— — — — — —
— — — — — —
— — — — — —
— — — — 19 —
— — — — 1 —
— — — — 1 —
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— — — — 5 —
— — — — — —
— — — — 3 —
— — — — — —
— — — — 140 —
— — 2 2 171 31
— — — — — —
— — — — 6 3 324 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
— — — — — —
— — — — — —
— — — — 4 —
— — — — 13 —
— — — — — —
— — — — 3 —
— — — — 30 —
— — — — 6 —
— — — — 88 —
— — 12 12 595 160
— — — — — —
— — — — 72 —
— — 36 32 71 64
— — — — 122 21
— — — — — —
— — — — — —
— — 10 8 2,100 1,509
— — — — 546 504
— — — — 14 1
— — — — 24 19
— — — — 35 11
— — — — — —
— — — — 10 7
— — 2 2 39 11
— — 3 3 18 14
— — — — 4 3 325 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
— — — — 7 7
— — — — 27 7
— — — — — —
— — — — 29 —
— — — — 488 16
— — — — 146 36
— — — — 96 25
— — — — 1 1
— — — — 2 —
— — — — 25 18
— — — — 14 3
— — — — 47 34
— — — — 1 —
— — — — — —
— — — — 1 —
— — — — 1 —
— — — — — —
— — — — — —
— — — — — —
— — — — 1 —
— — — — 2 —
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— — — — 3 — 326 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
— — — — — —
— — — — 237 2
— — — — — —
— — — — 77 —
— — — — 148 14
— — — — 3 —
— — — — 161 1
— — — — 1 1
— — — — 7 7
— — — — — —
— — — — — —
— — — — — —
— — — — 7 —
— — — — 3 —
— — — — — —
— — — — — —
— — — — 94 13
— — — — 24 —
— — — — — —
— — — — — —
— — — — 1 —
— — — — — —
— — 9 — 9 —
— — 22 — 22 —
— — — — — —
— — — — 124 —
— — 1 1 51 13
— — — — 42 —
— — — — — —
— — — — — — 327 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
— — — — 508 81
— — — — — —
— — — — — —
— — — — 98 24
— — — — — —
— — — — — —
— — — — — —
— — 57 — 57 —
— — — — 61 1
— — — — — —
```# GAR KPI STOCK - TURNOVER % (compared to total covered assets in the denominator)
| Disclosure reference date | Climate Change Mitigation (CCM) Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-eligible) | Climate Change Adaptation (CCA) Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-eligible) | TOTAL (CCM + CCA) Proportion of total assets covered | Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-aligned) |
|---|---|---|---|---|
| Of which specialised lending | Of which transitional | Of which enabling | Of which specialised lending | |
| GAR - Covered assets in both numerator and denominator | ||||
| Loans and advances, debt securities and equity instruments not HfT eligible for GAR calculation | 49.39 | 0.89 | — | 0.05 |
| 0.32 | 0.43 | 0.05 | — |
% (compared to total covered assets in the denominator)
| Disclosure reference date | Climate Change Mitigation (CCM) | Climate Change Adaptation (CCA) | TOTAL (CCM + CCA) |
|---|---|---|---|
| | Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-eligible) | Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-eligible) | Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-eligible) | Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-aligned) | Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-aligned) | Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-aligned) | Of which specialised lending | Of which transitional | Of which enabling | Of which specialised lending | Of which enabling | Of which specialised lending | Of which transitional | Of which enabling |
| GAR - Covered assets in both numerator and denominator | | | | | | | | | | | | | | |
| Loans and advances, debt securities and equity instruments not HfT eligible for GAR calculation | 49.75 | 1.39 | — | 0.05 | 0.55 | 0.45 | 0.05 | — | — | 0.01 | 50.19 | 1.44 | — | 0.05 | 0.56 |
| Proportion of total covered assets | 32.78 | | | | | | | | | | | | | | |
| Financial corporations | 10.38 | — | — | — | — | 1.42 | — | — | — | — | 11.80 | — | — | — | 5.41 |
| Credit institutions | 10.93 | — | — | — | — | 1.84 | — | — | — | — | 12.78 | — | — | — | 2.68 |
| Loans and advances | 9.58 | — | — | — | — | 0.93 | — | — | — | — | 10.51 | — | — | — | 2.22 |
| Debt securities, including UoP | 17.58 | — | — | — | — | 6.31 | — | — | — | — | 23.89 | — | — | — | 0.45 |
| Equity instruments | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — |
| Other financial corporations | 9.83 | — | — | — | — | 1.00 | — | — | — | — | 10.83 | — | — | — | 2.73 |
| of which investment firms | 25.05 | — | — | — | — | 1.04 | — | — | — | — | 26.09 | — | — | — | 0.14 |
| Loans and advances | 26.74 | — | — | — | — | 1.11 | — | — | — | — | 27.85 | — | — | — | 0.13 |
| Debt securities, including UoP | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — |
| Equity instruments | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — |
| of which management companies | 3.96 | — | — | — | — | — | — | — | — | — | 3.96 | — | — | — | 0.06 |
| Loans and advances | 5.15 | — | — | — | — | — | — | — | — | — | 5.15 | — | — | — | 0.05 |
| Debt securities, including UoP | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — |
| Equity instruments | — | — | — | — | — | — | — | — | — | — | — | — | — | — | 0.01 |
| of which insurance undertakings | 0.50 | — | — | — | — | 1.72 | — | — | — | — | 2.22 | — | — | — | 0.27 |
| Loans and advances | 1.36 | — | — | — | — | 0.03 | — | — | — | — | 1.39 | — | — | — | 0.10 |
| Debt securities, including UoP | — | — | — | — | — | 100.00 | — | — | — | — | 100.00 | — | — | — | — |
| Equity instruments | — | — | — | — | 2.34 | — | — | — | 2.34 | — | — | — | 0.17 |
| Non-financial corporations | 31.97 | 12.13 | — | 0.56 | 6.05 | 2.32 | 0.53 | — | — | 0.08 | 34.29 | 12.66 | — | 0.56 | 6.13 |
| NFCs subject to NFRD disclosure obligations | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — |
| Loans and advances | 34.43 | 12.46 | — | 0.58 | 6.49 | 2.53 | 0.59 | — | — | 0.07 | 36.96 | 13.05 | — | 0.58 | 6.56 |
| Debt securities, including UoP | 24.53 | 18.20 | — | 0.83 | 4.62 | 0.31 | 0.26 | — | — | 0.26 | 24.84 | 18.46 | — | 0.83 | 4.88 |
| Equity instruments | 2.77 | 1.56 | — | 0.98 | 1.10 | — | — | — | — | 3.87 | 1.57 | — | 0.98 | 0.18 |
| Households | 61.89 | 0.39 | — | — | — | — | — | — | — | — | 61.89 | 0.39 | — | — | 23.69 |
| of which loans collateralised by residential immovable property | 100.00 | 0.72 | — | — | — | — | — | — | — | — | 100.00 | 0.72 | — | — | 12.86 |
| of which building renovation loans | 100.00 | — | — | — | — | — | — | — | — | — | 100.00 | — | — | — | 0.60 |
| of which motor vehicle loans | 100.00 | — | — | — | — | — | — | — | — | — | 100.00 | — | — | — | 1.21 |
| Local governments financing | — | — | — | — | — | — | — | — | — | — | — | — | — | — | 0.56 |
| 331 | This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail. | | | | | | | | | | | | | | |
| Collateral obtained by taking possession: residential and commercial immovable properties | 100.00 | 0.06 | — | — | — | — | — | — | — | — | 100.00 | 0.06 | — | — | 0.12 |
| Other local government financing | — | — | — | — | — | — | — | — | — | — | — | — | — | — | 0.56 |
| Total GAR assets | 27.62 | 0.77 | — | 0.03 | 0.31 | 0.25 | 0.03 | — | — | — | 27.87 | 0.80 | — | 0.03 | 0.31 |
KPI OFF-BALANCE SHEET EXPOSURES - TURNOVER
% (compared to total eligible off- balance sheet assets)
| Disclosure reference date | Climate Change Mitigation (CCM) | Climate Change Adaptation (CCA) | TOTAL (CCM + CCA) |
|---|---|---|---|
| | Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-eligible) | Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-eligible) | Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-eligible) | Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-aligned) | Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-aligned) | Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-aligned) | Of which specialised lending | Of which transitional | Of which enabling | Of which specialised lending | Of which enabling | Of which specialised lending | Of which transitional | Of which enabling |
| Financial guarantees (FinGuar KPI) | 5.18 | 2.01 | — | 0.09 | 1.01 | 0.59 | 0.01 | — | — | 5.77 | 2.02 | — | 0.09 | 1.01 |
| Assets under management (AuM | | | | | | | | | | | | | | | |# KPI) 0.55 0.15 — 0.01 0.09 0.02 0.01 — — 0.57 0.16 — 0.01 0.09
332 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
| Disclosure reference date | Climate Change Mitigation (CCM) Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-eligible) | Climate Change Adaptation (CCA) Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-eligible) | TOTAL (CCM + CCA) Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-eligible) |
|---|---|---|---|
| Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-aligned) | Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-aligned) | Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-aligned) | |
| Of which specialised lending | Of which transitional | Of which enabling | |
| Of which specialised lending | Of which enabling | Of which specialised lending | |
| Of which transitional | Of which enabling | ||
| Financial guarantees (FinGuar KPI) | 8.28 | 5.50 | — |
| 0.17 | 1.46 | 0.62 | |
| 0.01 | — | — | |
| 8.90 | 5.51 | — | |
| 0.17 | 1.47 | ||
| Assets under management (AuM KPI) | 0.80 | 0.33 | — |
| 0.02 | 0.16 | 0.03 | |
| 0.01 | — | 0.01 | |
| 0.83 | 0.34 | — | |
| 0.02 | 0.17 |
The undertaking carries out, funds or has exposures to research, development, demonstration and deployment of innovative electricity generation facilities that produce energy from nuclear processes with minimal waste from the fuel cycle. NO
The undertaking carries out, funds or has exposures to construction and safe operation of new nuclear installations to produce electricity or process heat, including for the purposes of district heating or industrial processes such as hydrogen production, as well as their safety upgrades, using best available technologies. YES
The undertaking carries out, funds or has exposures to safe operation of existing nuclear installations that produce electricity or process heat, including for the purposes of district heating or industrial processes such as hydrogen production from nuclear energy, as well as their safety upgrades. YES
The undertaking carries out, funds or has exposures to construction or operation of electricity generation facilities that produce electricity using fossil gaseous fuels. YES
The undertaking carries out, funds or has exposures to construction, refurbishment, and operation of combined heat/cool and power generation facilities using fossil gaseous fuels. YES
The undertaking carries out, funds or has exposures to construction, refurbishment and operation of heat generation facilities that produce heat/cool using fossil gaseous fuels. YES
333 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
Amount and proportion (the information is to be presented in monetary amounts and as percentages)
| Economic Activities | CCM+CCA Amount | CCM+CCA % | Climate Change mitigation (CCM) Amount | Climate Change mitigation (CCM) % | Climate change Adaption (CCA) Amount | Climate change Adaption (CCA) % |
|---|---|---|---|---|---|---|
| Amount and proportion of taxonomy- aligned economic activity referred to in Section 4.26 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI | — | — | — | — | — | — |
| Amount and proportion of taxonomy- aligned economic activity referred to in Section 4.27 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI | — | — | — | — | — | — |
| Amount and proportion of taxonomy- aligned economic activity referred to in Section 4.28 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI | 10 | — | 10 | — | — | — |
| Amount and proportion of taxonomy- aligned economic activity referred to in Section 4.29 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI | — | — | — | — | — | — |
| Amount and proportion of taxonomy- aligned economic activity referred to in Section 4.30 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI | 2 | — | — | — | 2 | — |
| Amount and proportion of taxonomy- aligned economic activity referred to in Section 4.31 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI | — | — | — | — | — | — |
| Amount and proportion of other taxonomy-aligned economic activities not referred to in rows 1 to 6 above in the denominator of the applicable KPI | 2,290 | 0.52 | 2,170 | 0.49 | 120 | 0.03 |
| Total applicable KPI | 441,787 | 0.52 | 441,787 | 0.49 | 441,787 | 0.03 |
334 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
Amount and proportion (the information is to be presented in monetary amounts and as percentages)
| Economic Activities | CCM+CCA Amount | CCM+CCA % | Climate Change mitigation (CCM) Amount | Climate Change mitigation (CCM) % | Climate change Adaption (CCA) Amount | Climate change Adaption (CCA) % |
|---|---|---|---|---|---|---|
| Amount and proportion of taxonomy- aligned economic activity referred to in Section 4.26 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI | — | — | — | — | — | — |
| Amount and proportion of taxonomy- aligned economic activity referred to in Section 4.27 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI | 1 | — | 1 | — | — | — |
| Amount and proportion of taxonomy- aligned economic activity referred to in Section 4.28 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI | 9 | — | 9 | — | — | — |
| Amount and proportion of taxonomy- aligned economic activity referred to in Section 4.29 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI | — | — | — | — | — | — |
| Amount and proportion of taxonomy- aligned economic activity referred to in Section 4.30 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI | — | — | — | — | — | — |
| Amount and proportion of taxonomy- aligned economic activity referred to in Section 4.31 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI | — | — | — | — | — | — |
| Amount and proportion of other taxonomy-aligned economic activities not referred to in rows 1 to 6 above in the denominator of the applicable KPI | 2,290 | 0.80 | 3,396 | 0.77 | 119 | 0.03 |
| Total applicable KPI | 441,787 | 0.80 | 441,787 | 0.77 | 441,787 | 0.03 |
335 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
Amount and proportion (the information is to be presented in monetary amounts and as percentages)
| Economic Activities | CCM+CCA Amount | CCM+CCA % | Climate Change mitigation (CCM) Amount | Climate Change mitigation (CCM) % | Climate change Adaption (CCA) Amount | Climate change Adaption (CCA) % |
|---|---|---|---|---|---|---|
| Amount and proportion of taxonomy- aligned economic activity referred to in Section 4.26 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI | — | — | — | — | — | — |
| Amount and proportion of taxonomy- aligned economic activity referred to in Section 4.27 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI | — | — | — | — | — | — |
| Amount and proportion of taxonomy- aligned economic activity referred to in Section 4.28 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI | 10 | — | 10 | — | — | — |
| Amount and proportion of taxonomy- aligned economic activity referred to in Section 4.29 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI | — | — | — | — | — | — |
| Amount and proportion of taxonomy- aligned economic activity referred to in Section 4.30 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI | 2 | — | — | — | 2 | — |
| Amount and proportion of taxonomy- aligned economic activity referred to in Section 4.31 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI | — | — | — | — | — | — |
| Amount and proportion of other taxonomy-aligned economic activities not referred to in rows 1 to 6 above in the numerator of the applicable KPI | 2,290 | 99.00 | 2,170 | 94.00 | 120 | 5.00 |
| Total amount and proportion of taxonomy-aligned economic activities in the numerator of the applicable KPI | 2,302 | 100.00 | 2,180 | 95.00 | 122 | 5.00 |
336 This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.# TAXONOMY-ALIGNED ECONOMIC ACTIVITIES (NUMERATOR) - CAPEX
Amount and proportion (the information is to be presented in monetary amounts and as percentages)
| Economic Activities | CCM+CCA | Climate Change mitigation (CCM) | Climate change Adaption (CCA) |
|---|---|---|---|
| Amount | % | Amount | |
| Amount and proportion of taxonomy- aligned economic activity referred to in Section 4.26 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI | — | — | — |
| Amount and proportion of taxonomy- aligned economic activity referred to in Section 4.27 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI | 1 | — | 1 |
| Amount and proportion of taxonomy- aligned economic activity referred to in Section 4.28 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI | 9 | — | 9 |
| Amount and proportion of taxonomy- aligned economic activity referred to in Section 4.29 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI | — | — | — |
| Amount and proportion of taxonomy- aligned economic activity referred to in Section 4.30 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI | — | — | — |
| Amount and proportion of taxonomy- aligned economic activity referred to in Section 4.31 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI | — | — | — |
| Amount and proportion of other taxonomy-aligned economic activities not referred to in rows 1 to 6 above in the numerator of the applicable KPI | 3,515 | 100.00 | 3,396 |
| Total amount and proportion of taxonomy-aligned economic activities in the numerator of the applicable KPI | 3,525 | 100.00 | 3,406 |
337
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
Amount and proportion (the information is to be presented in monetary amounts and as percentages)
| Economic Activities | CCM+CCA | Climate Change mitigation (CCM) | Climate change Adaption (CCA) |
|---|---|---|---|
| Amount | % | Amount | |
| Amount and proportion of taxonomy- aligned economic activity referred to in Section 4.26 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI | — | — | — |
| Amount and proportion of taxonomy- aligned economic activity referred to in Section 4.27 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI | — | — | — |
| Amount and proportion of taxonomy- aligned economic activity referred to in Section 4.28 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI | — | — | — |
| Amount and proportion of taxonomy- aligned economic activity referred to in Section 4.29 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI | 171 | — | 171 |
| Amount and proportion of taxonomy- aligned economic activity referred to in Section 4.30 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI | 15 | — | 15 |
| Amount and proportion of taxonomy- aligned economic activity referred to in Section 4.31 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI | — | — | — |
| Amount and proportion of other taxonomy-eligible but not taxonomy-aligned economic activities not referred to in rows 1 to 6 above in the denominator of the applicable KPI | 119,710 | 27.00 | 118,770 |
| Total amount and proportion of taxonomy eligible but not taxonomy- aligned economic activities in the denominator of the applicable KPI | 119,896 | 27.00 | 118,956 |
338
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
Amount and proportion (the information is to be presented in monetary amounts and as percentages)
| Economic Activities | CCM+CCA | Climate Change mitigation (CCM) | Climate change Adaption (CCA) |
|---|---|---|---|
| Amount | % | Amount | |
| Amount and proportion of taxonomy- aligned economic activity referred to in Section 4.26 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI | — | — | — |
| Amount and proportion of taxonomy- aligned economic activity referred to in Section 4.27 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI | — | — | — |
| Amount and proportion of taxonomy- aligned economic activity referred to in Section 4.28 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI | — | — | — |
| Amount and proportion of taxonomy- aligned economic activity referred to in Section 4.29 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI | 34 | — | 34 |
| Amount and proportion of taxonomy- aligned economic activity referred to in Section 4.30 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI | 5 | — | 5 |
| Amount and proportion of taxonomy- aligned economic activity referred to in Section 4.31 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI | — | — | — |
| Amount and proportion of other taxonomy-eligible but not taxonomy-aligned economic activities not referred to in rows 1 to 6 above in the denominator of the applicable KPI | 119,546 | 27.00 | 118,573 |
| Total amount and proportion of taxonomy eligible but not taxonomy- aligned economic activities in the denominator of the applicable KPI | 119,585 | 27.00 | 118,612 |
339
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
| Economic Activities | Amount | % |
|---|---|---|
| Amount and proportion of economic activity referred to in row 1 of Template 1 that is taxonomy-non-eligible in accordance with Section 4.26 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI | — | — |
| Amount and proportion of economic activity referred to in row 2 of Template 1 that is taxonomy-non-eligible in accordance with Section 4.27 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI | — | — |
| Amount and proportion of economic activity referred to in row 3 of Template 1 that is taxonomy-non-eligible in accordance with Section 4.28 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI | — | — |
| Amount and proportion of economic activity referred to in row 4 of Template 1 that is taxonomy-non-eligible in accordance with Section 4.29 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI | — | — |
| Amount and proportion of economic activity referred to in row 5 of Template 1 that is taxonomy-non-eligible in accordance with Section 4.30 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI | — | — |
| Amount and proportion of economic activity referred to in row 6 of Template 1 that is taxonomy-non-eligible in accordance with Section 4.31 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI | — | — |
| Amount and proportion of other taxonomy-non-eligible economic activities not referred to in rows 1 to 6 above in the denominator of the applicable KPI | 319,589 | 72.00 |
| Total amount and proportion of taxonomy-non-eligible economic activities in the denominator of the applicable KPI | 319,589 | 72.00 |
| Economic Activities | Amount | % |
|---|---|---|
| Amount and proportion of economic activity referred to in row 1 of Template 1 that is taxonomy-non-eligible in accordance with Section 4.26 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI | — | — |
| Amount and proportion of economic activity referred to in row 2 of Template 1 that is taxonomy-non-eligible in accordance with Section 4.27 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI | — | — |
| Amount and proportion of economic activity referred to in row 3 of Template 1 that is taxonomy-non-eligible in accordance with Section 4.28 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI | — | — |
| Amount and proportion of economic activity referred to in row 4 of Template 1 that is taxonomy-non-eligible in accordance with Section 4.29 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI | — | — |
| Amount and proportion of economic activity referred to in row 5 of Template 1 that is taxonomy-non-eligible in accordance with Section 4.30 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI | — | — |
| Amount and proportion of economic activity referred to in row 6 of Template 1 that is taxonomy-non-eligible in accordance with Section 4.31 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI | — | — |
| Amount and proportion of other taxonomy-non-eligible economic activities not referred to in rows 1 to 6 above in the denominator of the applicable KPI | 318,677 | 72.00 |
| Total amount and proportion of taxonomy-non-eligible economic activities in the denominator of the applicable KPI | 318,677 | 72.00 |
340
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
6.## Subsequent Events
On January 18, 2024, a press release from the Constitutional Court of Spain was published announcing the unanimous decision of the Plenary Session of this jurisdictional body declaring unconstitutional certain measures related to Corporate Income Tax introduced by the Royal Decree-Law 3/2016. On January 29, 2024, this ruling was published on the website of the Constitutional Court, although the publication in the Official State Gazette (BOE), as of the date of preparation of these Consolidated Annual Financial Statements remains pending. The effects of this ruling will depend on the resolution of each of the claims filed in relation to the affected financial years, so the calculation of its impact, both with regard to the quantification of the magnitudes affected, as well as regarding their timing, will depend on said execution process. It is expected that the impacts of the different execution processes could have a positive aggregate impact on the Group's total equity, allowing an acceleration in the use of tax credits and a possible recovery of cash from taxes paid in previous years, all subject to the decisions that, with respect to each financial year and as part of the execution process, the Group may adopt in this regard and without, in any case, said impact expected to exceed approximately 0.4% of the Group's total equity in the aggregate.
On January 30, 2024, it was announced that a cash distribution in the amount of €0.39 gross per share to be paid in April as a final dividend for the year 2023 and the execution of a share buyback program of BBVA for an amount of €781 million were planned to be proposed to the corresponding corporate bodies for consideration as ordinary remuneration to shareholders for 2023, subject to obtaining the corresponding regulatory authorizations and the communication of the specific terms and conditions of the program before its execution.
From January 1, 2024 to the date of preparation of these Consolidated Financial Statements, no other subsequent events not mentioned above in these financial statements have taken place that could significantly affect the Group’s earnings or its equity position.
341
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
In accordance with the provisions established by Article 540 of the Spanish Corporate Act, the Board of Directors of BBVA, on the occasion of the preparation of the financial statements for 2023, approved the Annual Corporate Governance Report for that year (which is an integral part of the Management Report) in accordance with the contents set down in Order ECC/461/2013, dated March 20, and in Circular 5/2013, dated June 12, of Comisión Nacional del Mercado de Valores (CNMV), in the wording provided by Circular 3/2021, dated September 28, of CNMV. The Annual Corporate Governance Report is incorporated by reference in the Management Report and is published in CNMV´s website (www.cnmv.es) and in the Company´s corporate website (www.bbva.com).
342
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
In accordance with the provisions established by Article 541 of the Spanish Corporate Act, the Board of Directors of BBVA, on the proposal of the Remuneration Committee, and on the occasion of the preparation of the financial statements for 2023, approved the Annual Report on the Remuneration of BBVA Directors for that year (which is an integral part of the Management Report) in accordance with the contents set down in Order ECC/461/2013, dated March 20, and in Circular 4/2013, dated June 12, of Comisión Nacional del Mercado de Valores (CNMV), in the wording provided by Circular 3/2021, dated September 28, of CNMV. The Annual Report on the Remuneration of BBVA Directors is incorporated by reference in the Management Report and is published in CNMV´s website (www.cnmv.com) and in the Company's corporate website (www.bbva.com).
343
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
This document is for informative purposes only and is not intended to provide financial advice and, therefore, does not constitute, nor should it be interpreted as, an offer to sell, exchange or acquire, or an invitation for offers to acquire securities issued by any of the aforementioned companies, or to contract any financial product. Any decision to purchase or invest in securities or contract any financial product must be made solely and exclusively on the basis of the information made available to such effects by the company in relation to each specific matter. The information contained in this document is subject to and should be read in conjunction with all other publicly available information of the issuer.
This document contains forward-looking statements that constitute or may constitute “forward-looking statements” (within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995) with respect to intentions, objectives, expectations or estimates as of the date hereof, including those relating to future targets of both a financial and non-financial nature (such as environmental, social or governance (“ESG”) performance targets). Forward-looking statements may be identified by the fact that they do not refer to historical or current facts and include words such as “believe”, “expect”, “estimate”, “project”, “anticipate”, “duty”, “intend”, “likelihood”, “risk”, “VaR”, “purpose”, “commitment”, “goal”, “target” and similar expressions or variations of those expressions. They include, for example, statements regarding future growth rates or the achievement of future targets, including those relating to ESG performance.
The information contained in this document reflects our current expectations and targets, which are based on various assumptions and projections, including non-financial considerations such as those related to sustainability. Forward-looking statements are not guarantees of future results, and actual results may differ materially from those anticipated in the forward-looking statements as a result of certain risks, uncertainties and other factors. These factors include, but are not limited to, (1) market conditions, macroeconomic factors, domestic and international stock market movements, exchange rates, inflation and interest rates; (2) regulatory and oversight factors, political and governmental guidelines, social and demographic factors; (3) changes in the financial condition, creditworthiness or solvency of our clients, debtors or counterparties, such as changes in default rates, as well as changes in consumer spending, savings and investment behavior, and changes in our credit ratings; (4) competitive pressures and actions we take in response thereto; (5) performance of our IT, operations and control systems and our ability to adapt to technological changes; (6) climate change and the occurrence of natural or man-made disasters, such as an outbreak or escalation of hostilities; and (7) our ability to appropriately address any ESG expectations or obligations (related to our business, management, corporate governance, disclosure or otherwise), and the cost thereof.
In the particular case of certain targets related to our ESG performance, such as, decarbonization targets or alignment of our portfolios, the achievement and progress towards such targets will depend to a large extent on the actions of third parties, such as clients, governments and other stakeholders, and may therefore be materially affected by such actions, or lack thereof, as well as by other exogenous factors that do not depend on BBVA (including, but not limited to, new technological developments, regulatory developments, military conflicts, the evolution of climate and energy crises, etc.). Therefore, these targets may be subject to future revisions.
The factors mentioned in the preceding paragraphs could cause actual future results to differ substantially from those set forth in the forecasts, intentions, objectives, targets or other forward-looking statements included in this document or in other past or future documents. Accordingly, results, including those related to ESG performance targets, among others, may differ materially from the statements contained in the forward-looking statements. Recipients of this document are cautioned not to place undue reliance on such forward-looking statements. Past performance or growth rates are not indicative of future performance, results or share price (including earnings per share). Nothing in this document should be construed as a forecast of results or future earnings.
This document contains in addition to financial information, non-financial information ("NFI") at the individual and consolidated level of BBVA Group in order to comply with the requirements of Law 11/2018 of 28 December ("Law 11/2018"). The INF has been verified with a limited scope by a third party and therefore has not been audited by the external auditors of the entity. In its preparation, a number of estimates and assumptions have been made in various areas and have used measurement, data collection and verification practices and methodologies, both external and internal, which are substantially different from those applied to financial reporting and which, in many cases, are under development.BBVA does not intend, and undertakes no obligation, to update or revise the contents of this or any other document if there are any changes in the information contained therein, or including the forward-looking statements contained in any such document, as a result of events or circumstances after the date of such document or otherwise except as required by applicable law. This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish original will prevail.
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