Solvency

Capital base

BBVA Group's fully-loaded CET1 ratio stood at 14.17% at June 30, 2021 and includes the one-off effects of the sale of BBVA USA with an impact of +260 basis points on the capital position at the end of June 2021, and the impacts of the restructuring process of -25 basis points.

During the second quarter of 2021, the evolution of the consolidated fully-loaded CET 1 ratio continued to be supported by a high generation of earnings, with an impact of +38 basis points (which excludes the impact on the results of the two effects mentioned above), which mostly covers the prudential accrual for shareholder remuneration and the remuneration of Contingent Convertible bonds (hereinafter CoCos), -11 basis points as a whole, as well as the growth of organic risk-weighted assets (RWAs in the following) in the quarter which have detracted -6 basis points.

Apart from these effects, there is also an impact of -14 basis points that corresponds to the implementation of regulatory impacts on RWAs, among which the most notably is the entry into force of the new counterparty risk calculation framework. Finally, in the rest of the items that affect the evolution of the consolidated CET1 fully-loaded ratio, a negative impact of -13 basis points is recorded, mainly explained by a lower computation of non-controlling interests.

Consolidated fully-loaded RWAs decreased in the quarter by approximately €49,000m, which is explained by the exclusion of BBVA USA after the closing of the sale agreement to PNC on June 1. Excluding this singular effect, RWAs registered a slight increase of approximately €1,920m.

The consolidated fully-loaded additional Tier 1 capital (AT1) stood at 1.87% as of June 30, 2021, which results in a significant growth compared to the previous quarter of +25 basis points and which is supported by the reduction of RWA for the aforementioned exclusion of BBVA USA.

It should be noted that on April 14, BBVA carried out the early amortization of an issue of preferred securities that can be converted into BBVA ordinary shares (CoCos) dating from 2016 for €1,000m with a 8.875% coupon and whose impact was already included in the Group's capital ratios as of March 31, 2021.

The consolidated fully-loaded Tier 2 ratio as of June 30, 2021 stood at 2.44%, its growth in the quarter (+20 basis points) is mainly explained by the effect of the RWA reduction due to the exclusion of BBVA USA.

The phased-in CET1 ratio, on consolidated terms, stood at 14.37% as of June 30, 2021, taking into account the transitory effect of the IFRS 9 standard. AT1 reached 1.86% and Tier 2 reached 2.52%, resulting in a total capital adequacy ratio of 18.75%.

Regarding shareholder remuneration, on April 29, 2021, a cash amount of €0.059 was distributed for each of the Bank's shares, charged to BBVA's share premium account, in accordance with what was approved in the General Shareholders' Meeting of April 20, 2021. A cash distribution was also approved against the distribute items of BBVA of up to €533.4m, subject to the corresponding regulatory authorizations. Likewise, in order to be able to effectively implement a share buy-back program, the reduction of BBVA's share capital was approved to a maximum corresponding to 10% of the current share capital through the amortization of treasury shares acquired through any mechanism with the objective of being amortized. The execution of the buyback program and the amortization of the shares acquired will be subject to the obtaining of the corresponding regulatory authorizations and being also subject, among other factors, to the price of the share. The European Central Bank (hereinafter ECB) published on July 23, 2021, a new recommendation ECB/2021/31 repealing recommendation ECB/2020/62 as of September 30, 2021. Recommendation ECB/2021/31 states that the ECB will assess banks’ capital trajectories and dividends or share buyback plans on an individual basis with a careful forward-looking assessment of capital plans in the context of the normal supervisory cycle, and repeals any further restrictions on dividends and share buybacks contained in recommendation ECB/2020/62. Once recommendation ECB/2021/31 has been released, BBVA intends to reintroduce its dividend policy announced on February 1, 2017 by the release of relevant information, that consist in the distribution of an annual payout of between 35% and 40% of the profits obtained in each financial year fully in cash in two different payments (expected for October and April, subject to the applicable authorizations) as from September 30, 2021.

SHAREHOLDER STRUCTURE (31-06-2021)

FULLY-LOADED CAPITAL RATIOS (PERCENTAGE)

CAPITAL BASE (MILLIONS OF EUROS)

With regard to MREL (Minimum Requirement for own funds and Eligible Liabilities) requirements, on May 31, 2021, BBVA made public that it had received a new communication from the Bank of Spain on its minimum requirement for own funds and admissible liabilities (MREL) established by the Single Resolution Board (hereinafter SRB), calculated taking into account the financial and supervisory information as of December 31, 2019.

This communication on MREL replaces the one previously received and according to it, BBVA must reach, by January 1, 2022, an amount of own funds and eligible liabilities equal to 24.78%² of the total RWAs of its resolution group, at a sub-consolidated³ level (hereinafter, the "MREL in RWAs"). Also, of this MREL in RWAs, 13.50% of the total RWAs must be met with subordinated instruments (the "subordination requirement in RWAs"). This MREL in RWAs is equivalent to 10.25% in terms of the total exposure considered for the purposes of calculating the leverage ratio (the “MREL in LR”), while the subordination requirement in RWAs is equivalent to 5.84% in terms of the total exposure considered for calculating the leverage ratio (the "subordination requirement in LR"). In the case of BBVA, the requirement that is currently the most restrictive is that expressed by the MREL in RWAs. Given the structure of own funds and admissible liabilities of the resolution group, as of June 30, 2021, the MREL ratio in RWAs stands at 29.55%^4,5, complying with the aforementioned MREL requirement.

With the aim of reinforcing compliance with these requirements, in March 2021, BBVA carried out an issue of senior preferred debt for an amount of €1,000m, mitigating the loss of eligibility of two senior preferred issues and one senior non-preferred issue issued during 2017 and reaching their maturity in 2021. It should be noted that after the closing of the sale of BBVA USA, BBVA's position for MREL purposes has been strengthened.

Lastly, the Group's leverage ratio as of June 30, 2021, stood at 7.4% fully-loaded (7.5% phased-in) with a significant increase in the quarter of +90 basis points, which is mainly explained by the lower exposure after the exclusion of BBVA USA. These figures include the effect of the temporary exclusion of certain positions with the central bank foreseen in the “CRR-Quick fix”.

² Pursuant to the new applicable regulation, the MREL in RWAs and the subordination requirement in RWAs do not include the combined requirement of capital buffers. For these purposes, the applicable combined capital buffer requirement would be 2.5%, without prejudice to any other buffer that may be applicable at any given time.
³ In accordance with the resolution strategy MPE (“Multiple Point of Entry”) of the BBVA Group, established by the SRB, the resolution group is made up of Banco Bilbao Vizcaya Argentaria, S.A. and subsidiaries that belong to the same European resolution group. As of December 31, 2019, the total RWAs of the resolution group amounted to €204,218m and the total exposure considered for the purpose of calculating the leverage ratio amounted to €422,376m.
⁴ Own resources and eligible liabilities to meet, both, MREL and the combined capital buffer requirement, which would be 2.5%, without prejudice to any other buffer that may be applicable at any given time.
⁵ As of June 30, 2021, the MREL ratio in LR stands at 12.43% and the subordination ratios in terms of RWAs and in terms of exposure of the leverage ratio, stand at 26.84% and 11.29% , respectively.

Ratings

On June 24, 2021, in a joint review of several European banks, S&P changed BBVA's outlook to stable from negative (confirming its A- rating), acknowledging the benefits of the Group's geographic diversification, as well as its substantial capital reinforcement experienced after the BBVA USA sale. At the time this report is being released, the remaining agencies have maintained, both, BBVA's rating and outlook unchanged, proving its stability. Therefore, all the agencies evaluating BBVA confirm the Bank's A rating and a stable outlook, as the following table shows:

Ratings