Latin American Middle Class And Digital Banking Will Ignite Prosperity

Key Takeaways

• BBVA is poised for profit outperformance through market share gains in lending, strong capital flexibility, and rapid digital transformation driving operational efficiencies.
  
• Its leadership in emerging markets and innovation in sustainable finance positions the bank for superior long-term revenue growth and enhanced earnings quality.
  
• Persistent exposure to fragile emerging markets and slow digital adaptation expose BBVA to rising volatility, margin compression, and long-term threats from fintech and regulatory disruption.

Catalysts

Provides retail banking, wholesale banking, and asset management services primarily in Spain, Mexico, Turkey, South America, rest of Europe, the United States, and Asia.

• Analyst consensus expects strong loan growth in Mexico and Spain to drive net interest income, but this likely underestimates the effect of BBVA's double-digit loan growth and accelerating market share gains in higher-yielding SME and consumer segments; as lending activity flows through with stabilizing rates, this could deliver upside surprises in both top-line and bottom-line profitability from 2026 onward.
  
• While consensus sees BBVA's capital position as a source of earnings stability and buybacks, the recent approval of IRB model simplification and Basel IV changes could structurally unlock 40 to 50 basis points of CET1 – sharply narrowing the RWA gap versus peers – thereby offering substantial room for higher sustainable shareholder distributions and further rerating of BBVA's valuation.
  
• BBVA's digital transformation is expected to transcend efficiency gains, as large-scale adoption of AI-driven productivity enhancements and cloud banking in engineering and operations could materially drive down cost-to-income ratios below 35% by 2028, leading to structurally higher net margins than peers constrained by legacy systems.
  
• The bank's entrenched leadership in high-growth emerging markets positions it uniquely to capture the expanding financial needs of a rising middle class in Latin America, suggesting loan origination, fee income, and asset gathering will consistently outpace both local GDP and sector benchmarks, fueling robust long-term revenue compounding.
  
• Dynamic expansion in open banking, embedded finance, and sustainability-linked financial products-areas where BBVA commands an early-mover advantage-hold potential to unlock new fee streams, deeper cross-sell, and increased institutional flows, supporting both recurring revenues and further premiumization of BBVA's earnings profile through 2028 and beyond.

Banco Bilbao Vizcaya Argentaria Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Banco Bilbao Vizcaya Argentaria compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Banco Bilbao Vizcaya Argentaria's revenue will grow by 10.2% annually over the next 3 years.
• The bullish analysts assume that profit margins will shrink from 32.2% today to 30.4% in 3 years time.
• The bullish analysts expect earnings to reach €12.8 billion (and earnings per share of €2.43) by about August 2028, up from €10.1 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 10.6x on those 2028 earnings, up from 9.4x today. This future PE is greater than the current PE for the US Banks industry at 10.1x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.36%, as per the Simply Wall St company report.

Banco Bilbao Vizcaya Argentaria Future Earnings Per Share Growth

Risks

• BBVA's persistent exposure to emerging markets, particularly Mexico and Turkey, creates significant earnings and revenue volatility from elevated currency risk and geopolitical instability, especially as the long-term plan assumes only moderate depreciation even though these economies remain fragile and sensitive to shocks.
  
• Accelerating digital disruption and increasing competition from agile fintech and digital-only banks threaten to erode BBVA's traditional banking margins and could drive customer attrition, putting sustained pressure on both revenue growth and net margin as customer needs and behaviors change.
  
• BBVA's slower digital transformation and reliance on legacy technology systems, relative to global peers, risks leading to higher operating costs and ongoing challenges in operational leverage, negatively impacting cost-to-income ratios and overall net margins into the future.
  
• Structural declines in sector profitability across BBVA's key geographies, due to rising regulatory compliance burdens (including ESG, anti-money laundering and future capital requirements), could compress earnings and require significant expense management, potentially offsetting top-line gains and limiting bottom line growth.
  
• Increasing global adoption of alternative payment systems and decentralized finance models may reduce BBVA's fee income and transaction-related revenue streams over time, presenting a growing risk to revenue stability and future earnings against a changing industry backdrop.

Valuation

• The assumed bullish price target for Banco Bilbao Vizcaya Argentaria is €18.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Banco Bilbao Vizcaya Argentaria's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €18.0, and the most bearish reporting a price target of just €11.7.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be €42.0 billion, earnings will come to €12.8 billion, and it would be trading on a PE ratio of 10.6x, assuming you use a discount rate of 9.4%.
  
• Given the current share price of €16.45, the bullish analyst price target of €18.0 is 8.6% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.