Morningstar DBRS Changes Trend on BBVA's Long-Term Credit Ratings to Positive From Stable, Confirms Long-Term Issuer Rating at A (High)

Why It Matters

The Positive trend signals confidence in BBVA’s medium‑term profitability and capital strength, reassuring investors and creditors amid a volatile European banking landscape.

Key Takeaways

• Trend upgraded to Positive reflecting robust earnings
• Mexico franchise drives profit growth despite geopolitical risks
• Efficiency ratio improved to 38.8% in FY2025
• NPL ratio fell to 2.7%, net NPL 0.4%
• Liquidity coverage ratio stands at 143%

Pulse Analysis

Morningstar DBRS’s decision to move BBVA’s long‑term rating trend to Positive underscores the bank’s solid fundamentals in a sector where rating agencies are increasingly cautious. BBVA’s earnings have benefited from a higher interest‑rate environment in Spain, which lifted net interest margins, while its diversified geographic footprint—particularly the leading position in Mexico—provides a buffer against domestic economic headwinds. The agency highlighted the bank’s disciplined cost base, with the efficiency ratio tightening to 38.8%, and a strong capital position, evidenced by a fully loaded CET1 ratio of 12.7% and ample liquidity buffers.

The positive outlook also reflects BBVA’s proactive risk management. Non‑performing loans remain low at 2.7% of total loans, and the net NPL ratio of 0.4% is well below European peers, indicating effective provisioning and credit underwriting. Funding stability is reinforced by a deposit‑driven funding mix—77% of non‑equity funding—resulting in a net loan‑to‑deposit ratio of 95% and a liquidity coverage ratio of 143%. These metrics suggest BBVA can sustain credit growth and absorb potential shocks, especially in its high‑growth Mexican market where banking penetration remains modest.

For investors and market participants, the rating trend shift signals that BBVA is well‑positioned to navigate macro‑economic uncertainties, provided Spain’s sovereign rating stays stable. The agency warned that a downgrade of Spain’s rating or a significant dip in BBVA’s profitability could revert the trend to Stable. Nonetheless, the combination of strong earnings, diversified franchise, and robust capital and liquidity metrics makes BBVA a relatively resilient player in Europe’s banking sector, offering a degree of confidence to lenders and equity holders alike.