UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 6-K
 
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the nine months ended September 30, 2023
Commission file number: 1-10110
 
BANCO BILBAO VIZCAYA ARGENTARIA, S.A.
(Exact name of Registrant as specified in its charter)
BANK BILBAO VIZCAYA ARGENTARIA, S.A.
(Translation of Registrant’s name into English)
 
Calle Azul, 4
28050 Madrid
Spain
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F [X]Form 40-F [  ]





BANCO BILBAO VIZCAYA ARGENTARIA, S.A.
TABLE OF CONTENTS
This Form 6-K is incorporated by reference into BBVA’s Registration Statement No. 333-266391 on Form F-3 and Registration Statements Nos. 333-240248, 333-228053, 333-217073, 333‑208728, 333‑199835, 333-191625, 333-185538 and 333-178186 on Form S-8 filed with the Securities and Exchange Commission (“SEC”).




CERTAIN TERMS AND CONVENTIONS
The terms below are used as follows throughout this report:
BBVA”, the “Bank”, the “Company”, the “Group”, the “BBVA Group” or first person personal pronouns, such as “we”, “us”, or “our”, mean Banco Bilbao Vizcaya Argentaria, S.A. and its consolidated subsidiaries unless otherwise indicated or the context otherwise requires.
BBVA Mexico” means Grupo Financiero BBVA Bancomer, S.A. de C.V. and its consolidated subsidiaries, unless otherwise indicated or the context otherwise requires.
Consolidated Financial Statements” means our audited consolidated financial statements as of and for the years ended December 31, 2022, 2021 and 2020, presented in compliance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS-IASB”), as well as in accordance with the International Financial Reporting Standards endorsed by the European Union (“EU-IFRS”) applicable as of December 31, 2022, considering the Bank of Spain Circular 4/2017 (as defined herein), as well as its successive amendments, and any other legislation governing financial reporting which was applicable and with the format and mark-up requirements established in the EU Delegated Regulation 2019/815 of the European Commission.
Garanti BBVA” means Türkiye Garanti Bankası A.Ş., and its consolidated subsidiaries, unless otherwise indicated or the context otherwise requires.
Latin America” refers to Mexico and the countries in which we operate in South America and Central America.
Unaudited Condensed Interim Consolidated Financial Statements” means our unaudited condensed interim consolidated financial statements as of September 30, 2023 and December 31, 2022 and for the nine months ended September 30, 2023 and 2022 presented in accordance with International Accounting Standard 34 (IAS 34) as issued by the IASB and adopted by the European Union (“EU”) and included herewith.
2022 Form 20-F” means our Annual Report on Form 20-F for the year ended December 31, 2022 filed with the SEC on March 6, 2023.
In this report, “$”, “U.S. dollars”, and “dollars” refer to United States Dollars and “” and “euro” refer to Euro.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This report contains statements that constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the use of forward-looking terminology such as “believe”, “expect”, “estimate”, “project”, “anticipate”, “should”, “intend”, “probability”, “risk”, “VaR”, “target”, “goal”, “objective”, and “future” or by the use of similar expressions or variations on such expressions, or by the discussion of strategy or objectives. Forward-looking statements are based on current plans, estimates and projections, are not guarantees of future performance and are subject to inherent risks, uncertainties and other factors that could cause actual results to differ materially from the future results expressed or implied by such forward-looking statements. The accompanying information in this report, including, without limitation, the information under the items listed below, identifies important factors that could cause such differences:
Business Overview” and
Operating and Financial Review and Prospects.
Other important factors that could cause actual results to differ materially from those in forward-looking statements include the factors identified in “Item 3. Key Information—Risk Factors”, “Item 4. Information on the Company”, “Item 5. Operating and Financial Review and Prospects” and “Item 11. Quantitative and Qualitative Disclosures About Market Risk” in our 2022 Form 20-F.
Other important factors that could cause actual results to differ materially from those expressed or implied by forward-looking statements include, among others:
the deterioration of economic conditions or the alteration of the institutional environment of the countries in which we operate, especially Spain, Mexico and Turkey, including any adverse developments, or the perception that such developments may occur, regarding credit quality, public debt sustainability, economic or fiscal policy and sovereign ratings, particularly Spain’s, among other factors;
the intensity of geopolitical and economic risks in recent years as a result of, among other factors, the recent tensions in the Middle East, the war in Ukraine and the sanctions imposed against and by Russia, long-standing US-China trade tensions, Brexit and the rise of populism in several regions of the world. War in Ukraine led to significant disruption, instability and volatility in global markets, as well as higher inflation (including by contributing to increases in the prices of energy, oil and other commodities and further disrupting supply chains) and lower or negative economic growth. Such tendencies have been recently exacerbated by the recent tensions in the Middle East, which have led to a spike in energy prices. Furthermore, there is the risk of a sharp growth slowdown in China, which could lead to lower GDP expansion than currently expected in many geographies;
changes or volatility in interest rates, foreign exchange rates, asset prices, equity markets, commodity prices (including oil prices), inflation or deflation and, in particular, as of the date of this report on Form 6-K, the depreciation of the currencies of the non-euro geographical areas in which we operate, high inflation, stagflation due to more intense or prolonged supply crises, high interest rates in most of the geographical areas where we operate (which may impact default rates) and low real interest rates in Turkey (which may affect our margins);
the increased turbulence in the banking sector since March 2023, in particular, following the liquidity and other problems experienced by certain banks in the United States and Switzerland, which have led to increased concerns over the volatility and quality of banks’ deposits and their exposure to rising interest rates, and have adversely affected the valuations of certain banks. BBVA has significant exposure to the global banking sector. In addition, the recent actions by Swiss regulators have led to increased uncertainty regarding the potential actions to be adopted by the relevant authorities in connection with a bank’s failure. Moreover, regulatory changes are expected in the EU and, particularly, in Spain, in connection with the ranking of claims upon a bank’s insolvency, providing a preference to claims of all depositors relative to ordinary unsecured claims, which may adversely affect the risk profile and cost of banks’ debt securities. Further, there could be changes to the deposit guarantee schemes in certain jurisdictions, which could lead to changes in customer behavior and how banks manage their deposits portfolio;
adverse developments in emerging economies, in particular Latin America and Turkey, including unfavorable political and economic developments, social instability and changes in governmental policies, including expropriation, nationalization, exchange controls or other limitations on the distribution or repatriation of dividends, international ownership legislation, tax policies, interest rate caps, fee caps and other policies affecting the banking sector, including the “liraization” strategy in Turkey;
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political uncertainty in Spain since the general elections held in July 2023 could have an adverse impact on Spain’s economy;
downgrades in our credit ratings or in sovereign credit ratings, particularly Spain’s credit ratings;
the monetary, interest rate and other policies of central banks, and the trade, economic and other policies of governments, in the EU, Spain, Mexico, Turkey, the United States and elsewhere. In particular, central banks have increased interest rates in an attempt to tame inflation;
adjustments in the real estate markets in the geographical areas in which we operate, in particular in Spain, Mexico and Turkey;
the success of our acquisitions and investments, divestitures, mergers, joint ventures and strategic alliances;
the effects of competition in the markets in which we operate, which may be influenced by regulation or deregulation affecting us or our competitors, and our ability to implement technological advances;
our ability to comply with various legal and regulatory regimes and the impact of applicable laws and regulations on our operations, including capital, resolution, liquidity, provision and consumer protection requirements, and the increasing tax burden;
changes in consumer spending and savings habits, including changes in government policies which may influence spending, saving and investment decisions;
our ability to continue to access sources of liquidity and funding, including public sources of liquidity such as the funding provided by the European Central Bank (“ECB”) under its programs, and our ability to receive dividends and other funds from our subsidiaries;
our ability to hedge certain risks economically;
our ability to address physical, regulatory, reputational, transition and business risks associated with climate change and emerging and developing environmental, social and governance (“ESG”) standards, including our ability to meet any ESG expectations, targets or obligations and the cost thereof;
our ability to make payments on certain substantial unfunded amounts relating to commitments with personnel;
the performance of our international operations and our ability to manage such operations;
weaknesses or failures in our Group’s internal or outsourced processes, systems (including information technology systems) and security;
weaknesses or failures of our anti-money laundering or anti-terrorism programs, or of our internal policies, procedures, systems and other mitigating measures designed to ensure compliance with applicable anti-corruption laws and sanctions regulations;
security breaches, including cyber-attacks and identity theft;
the outcome of legal and regulatory actions and proceedings, both those to which the Group is currently exposed and any others which may arise in the future, including actions and proceedings related to former subsidiaries of the Group or in respect of which the Group may have indemnification obligations;
actions that are incompatible with our ethics and compliance standards, and our failure to timely detect or remedy any such actions;
uncertainty surrounding the integrity and continued existence of reference rates and the transition away from the Euro Interbank Offered Rate (EURIBOR), Euro OverNight Index Average (EONIA) and London Inter-bank Offered Rate (LIBOR) to new reference rates;
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our success in managing the risks involved in the foregoing, which depends, among other things, on the adequacy of our internal risk models and our ability to anticipate events that are not captured in the models we use; and
force majeure and other events beyond our control.
Readers are cautioned not to place undue reliance on such forward-looking statements, which speak only as of the date hereof. We undertake no obligation to release publicly the result of any revisions to these forward-looking statements which may be made to reflect events or circumstances after the date hereof, including, without limitation, changes in our business, strategy or expectations, including as a result of the occurrence of unanticipated events.
4


PRESENTATION OF FINANCIAL INFORMATION
Under Regulation (EC) no. 1606/2002 of the European Parliament and of the Council of July 19, 2002, all companies governed by the law of an EU Member State and whose securities are admitted to trading on a regulated market of any Member State must prepare their consolidated financial statements for the years beginning on or after January 1, 2005 in conformity with EU-IFRS. The Bank of Spain issued Circular 4/2017 of November 27, 2017 (“Circular 4/2017”), on Public and Confidential Financial Reporting Rules and Formats, which requires Spanish credit institutions to adapt their accounting system to the principles derived from the adoption of EU-IFRS.
There are no differences between EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2017 and IFRS-IASB as of the dates and for the periods presented in the Unaudited Condensed Interim Consolidated Financial Statements. The Unaudited Condensed Interim Consolidated Financial Statements are presented in accordance with International Accounting Standard 34 (IAS 34) as issued by the IASB and adopted by the EU.
For a description of our critical accounting policies, see Note 2 to our Unaudited Condensed Interim Consolidated Financial Statements, “Item 5. Operating and Financial Review and Prospects—Critical Accounting Policies” in our 2022 Form 20-F and Note 2.2 to our Consolidated Financial Statements.
The financial information as of December 31, 2022 and for the nine months ended September 30, 2023 included herein and in the Unaudited Condensed Interim Consolidated Financial Statements may differ from previously reported financial information as of such date and for such period in previously filed reports as a result of certain of the modifications referred to in the sections “—Changes in Accounting Policies” and “—Changes in Intra-Group Adjustments” herein.
We consider certain of our critical accounting policies to be particularly important due to their effect on the financial reporting of our financial condition and results of operations and because they require management to make difficult, complex or subjective judgments, some of which may relate to matters that are inherently uncertain. Our reported financial condition and results of operations are sensitive to accounting methods, assumptions and estimates that underlie the preparation of our consolidated financial statements. The nature of critical accounting policies, the judgments and other uncertainties affecting application of those policies and the sensitivity of reported results to changes in conditions and assumptions are factors to be considered when reviewing our Unaudited Condensed Interim Consolidated Financial Statements. For information on the estimates made by the Group in preparing the Unaudited Condensed Interim Consolidated Financial Statement, see Note 1.4 to our Unaudited Condensed Interim Consolidated Financial Statements.
Changes in Accounting Policies
IFRS 17 – Insurance contracts
IFRS 17 has superseded IFRS 4 for the recognition, measurement, presentation and disclosure of insurance contracts. The initial application date of IFRS 17 was January 1, 2023 and it has been applied to the nine months ended September 30, 2023, with transition date January 1, 2022. In order to make the information as of December 31, 2022 and for the nine months ended September 30, 2022 comparable with the information as of and for the nine months ended September 30, 2023, the balance sheet as of December 31, 2022 and the income statement for the nine months ended September 30, 2022 were restated (see Note 2.1 and Appendix I to our Unaudited Condensed Interim Consolidated Financial Statements for additional information on the application of IFRS 17).
IFRS 17 has introduced substantial changes in the accounting of insurance contracts with the aim of achieving greater homogeneity and increasing comparability among entities. With the implementation of IFRS 17, the valuation of insurance contracts is based on a model that uses updated assumptions for each reporting period.
The impact on equity of the first-time application of IFRS 17 as of January 1, 2023 on the BBVA Group includes the impact in transition and financial information from January 1, 2022 to December 31, 2022 as restated under IFRS 17. During 2022, a generalized neutral effect has been observed when comparing the results expressed under IFRS 4 with those restated under IFRS 17, except in specific cases, which has affected first-time application reserves.
The impact of the transition from IFRS 4 to IFRS 17 on accumulated other comprehensive income (loss) and retained earnings related mainly to long-term contracts. The impact on equity recognized at the date of entry into force of IFRS 17 was not significant for the consolidated financial statements of the BBVA Group.
5


Changes in Intra-Group Adjustments
Following the publication of our Consolidated Financial Statements, certain non-material balance sheet intra-group adjustments between the Corporate Center and the operating segments were reallocated to the corresponding operating segments. In addition, certain expenses related to global projects and activities were reallocated between the Corporate Center and the corresponding operating segments. In order to make the segment information as of December 31, 2022 and for the nine months ended September 30, 2022 comparable with the segment information as of and for the nine months ended September 30, 2023, segment information as of December 31, 2022 and for the nine months ended September 30, 2022 has been revised in conformity with these intra-group reallocations.
See Note 5 to our Unaudited Condensed Interim Consolidated Financial Statements for information on our operating segments.
2023 Share Buyback Programs
On March 17, 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 provisions of Regulation (EU) No. 596/2014 of the Parliament Commission and Council of April 16, 2014 on market abuse and Commission Delegated Regulation (EU) No. 2016/1052 of March 8, 2016, aimed at reducing BBVA’s share capital by a maximum monetary amount of €422 million. The execution was carried out internally by BBVA.
On April 21, 2023, BBVA announced the completion of the share buyback program upon reaching the maximum monetary amount, having acquired 64,643,559 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 announced that it had completed a reduction of BBVA’s share capital in a nominal amount of €31,675,343.91 and the consequent cancellation, charged to unrestricted reserves, of 64,643,559 BBVA shares of €0.49 par value each acquired derivatively by the Bank in execution of the share buyback program and which were held as treasury shares (see Notes 4 and 25 to our Unaudited Condensed Interim Consolidated Financial Statements). The share capital reduction was carried out pursuant to the resolution adopted by the Annual General Shareholders’ Meeting of BBVA held on March 17, 2023, under item 3 of the agenda.
On October 2, 2023, after receiving the required authorization from the ECB, BBVA announced that it would implement a new buyback program for the repurchase of own shares in accordance with the provisions of Regulation (EU) No. 596/2014 of the Parliament Commission and Council of April 16, 2014 on market abuse and Commission Delegated Regulation (EU) No. 2016/1052 of March 8, 2016, aimed at reducing BBVA’s share capital by a maximum monetary amount of €1,000 million, having acquired 60,000,000 shares between October 2 and October 27, 2023. The execution is being carried out internally by BBVA.
Designation of Turkey as a Hyperinflationary Economy
Since the second quarter of 2022, the Turkish economy has been considered hyperinflationary, resulting in the Group having applied hyperinflation accounting in accordance with IAS 29 “Financial reporting in hyperinflationary economies” in respect thereof with effect from January 1, 2022 with respect to the financial statements of the BBVA Group’s entities located in Turkey1. In addition, all the components of the financial statements of such entities (including income statement items) (in each case, for any period in which the Turkish economy was considered to be hyperinflationary) are converted at the relevant period-end exchange rate for inclusion in our consolidated financial statements, and the resulting conversion differences are recorded within “Accumulated other comprehensive income (loss)” as stated in IAS 21.
The net result derived from the application of IAS 29 and IAS 21 in Turkey for the nine months ended September 30, 2022 amounted to a loss of €2,205 million, of which €1,380 million was attributed to the parent company of the Group. This impact included the loss of the net monetary position, which amounted to a gross amount of €2,070 million and was recorded in the line “Other operating expense” in the consolidated income statement, partially offset by the positive impact of the revaluation of certain bonds linked to inflation, for a gross amount of €1,351 million, given that, under IAS 29, these types of bonds are considered protective assets.
1 IAS 29 does not apply to the operations outside Turkey of the Türkiye Garanti Bankası A.Ş. group of companies, and in particular to the financial statements of Garanti Bank S.A. in Romania and GarantiBank International N.V. in the Netherlands.
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The net result derived from the application of IAS 29 and IAS 21 in Turkey for the nine months ended September 30, 2023 amounted to a loss of €2,127 million, of which €1,830 million was attributed to the parent company of the Group. This impact included the loss of the net monetary position, which amounted to a gross amount of €1,820 million and was recorded in the line “Other operating expense” in the consolidated income statement, partially offset by the positive impact of the revaluation of certain bonds linked to inflation, for a gross amount of €1,060 million, given that, under IAS 29, these types of bonds are considered protective assets.
See Note 2.2.19 to our Consolidated Financial Statements for information on the application of IAS 29 and IAS 21 to hyperinflationary economies.
Statistical and Financial Information
The following principles should be noted in reviewing the financial information contained herein:
Unless otherwise stated, any reference to loans refers to both loans and advances.
Financial information with respect to segments or subsidiaries may not reflect consolidation adjustments.
Certain numerical information in this report on Form 6-K may not compute due to rounding. In addition, information regarding period-to-period changes is based on numbers which have not been rounded.


7


BUSINESS OVERVIEW
The BBVA Group is a customer-centric global financial services group founded in 1857. Internationally diversified and with strengths in the traditional banking businesses of retail banking, asset management and wholesale banking, the Group is committed to offering a compelling digital proposition focused on customer experience.
For this purpose, the Group is focused on increasingly offering products online and through mobile channels, improving the functionality of its digital offerings and refining the customer experience, contributing to the delivery of its strategy in a sustainable and inclusive way. BBVA is committed to sustainability, which is impacting the banking business, as part of its daily activities, encompassing not only relations with customers but also internal processes.
Operating Segments
As of September 30, 2023, the structure of the operating segments used by the BBVA Group for management purposes remained the same as in 2022.
Set forth below are the Group’s current five operating segments:
Spain;
Mexico;
Turkey;
South America; and
Rest of Business.
In addition to the operating segments referred to above, the Group has a Corporate Center which includes those items that have not been allocated to an operating segment. It includes the Group’s general management functions, including costs from central units that have a strictly corporate function; management of structural exchange rate positions carried out by the Financial Planning unit; certain proprietary portfolios; certain tax assets and liabilities; certain provisions related to commitments with employees; and goodwill and other intangibles, as well as the financing of such asset portfolios. It also includes the results of the Group’s stake in the venture capital fund Propel Venture Partners.
For certain relevant information concerning the preparation and presentation of the financial information included in this report, see “Presentation of Financial Information”.
The breakdown of the Group’s total assets by each of BBVA’s operating segments and the Corporate Center as of September 30, 2023 and December 31, 2022 was as follows:
As of September 30, 2023As of December 31, 2022
(In Millions of Euros)
Spain437,757427,116
Mexico173,017142,557
Turkey69,27266,036
South America67,13661,951
Rest of Business55,74049,952
Subtotal Assets by Operating Segment802,923747,613
Corporate Center and Adjustments (1)(45,187)(35,521)
Total Assets BBVA Group757,736712,092
(1)Includes balance sheet intra-group adjustments between the Corporate Center and the operating segments (see “Presentation of Financial Information”).
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The following table sets forth information relating to the profit (loss) attributable to parent company for each of BBVA’s operating segments and the Corporate Center for the nine months ended September 30, 2023 and 2022. Such information is presented under management criteria; however, for the nine months ended September 30, 2023, there are no differences between the sum of the income statements of our operating segments and the Corporate Center (calculated in accordance with management criteria used to report segment financial information) and the consolidated income statement of the Group. For additional information on the profit (loss) attributable to parent company for each of BBVA’s operating segments and the Corporate Center, see “Operating and Financial Review and Prospects—Operating Results—Results of operations by operating segment for the nine months ended September 30, 2023 compared with the nine months ended September 30, 2022”.
Profit / (Loss) Attributable to Parent Company% of Profit / (Loss) Attributable to Parent Company
Nine months ended September 30,
2023202220232022
(In Millions of Euros)(In Percentage)
Spain2,1101,30429.024.3
Mexico3,9872,91854.854.4
Turkey3673335.06.2
South America4966256.811.7
Rest of Business3221824.43.4
Subtotal operating segments7,2825,361100.0100.0
Corporate Center(1,321)(566)
Profit attributable to parent company5,9614,795
The following table sets forth certain summarized information relating to the income of each operating segment and the Corporate Center for the nine months ended September 30, 2023 and 2022. Such information is presented under management criteria; however, for the nine months ended September 30, 2023, there are no differences between the sum of the income statements of our operating segments and the Corporate Center (calculated in accordance with management criteria used to report segment financial information) and the consolidated income statement of the Group. For additional information on the income of each of BBVA’s operating segments and the Corporate Center, see “Operating and Financial Review and Prospects—Operating Results—Results of operations by operating segment for the nine months ended September 30, 2023 compared with the nine months ended September 30, 2022”.
Operating Segments
SpainMexicoTurkeySouth AmericaRest of BusinessCorporate CenterTotal (1)
(In Millions of Euros)
September 2023
Net interest income / (expense)4,0538,1641,5813,892405(253)17,843
Gross income5,83310,4752,3103,577852(943)22,104
Operating profit / (loss) before tax3,0535,4721,0891,021410(1,558)9,487
Profit / (loss) attributable to parent company2,1103,987367496322(1,321)5,961
September 2022
Net interest income / (expense)2,6875,9221,9613,074243(97)13,790
Gross income4,6207,6612,3473,186584(144)18,255
Operating profit / (loss) before tax2,1073,8961,2051,148229(741)7,844
Profit / (loss) attributable to parent company1,3042,918333625182(566)4,795
(1)For information on the reconciliation of the sum of the income statements of our operating segments and the Corporate Center (calculated in accordance with management criteria used to report segment financial information) and the consolidated income statement of the Group for the nine months ended September 30, 2022, see “Operating and Financial Review and Prospects—Operating Results—Results of operations by operating segment for the nine months ended September 30, 2023 compared with the nine months ended September 30, 2022”.
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The following tables set forth summarized information relating to the balance sheet of the operating segments and the Corporate Center and adjustments as of September 30, 2023 and December 31, 2022:
As of September 30, 2023
SpainMexicoTurkeySouth AmericaRest of BusinessTotal Operating SegmentsCorporate Center and Adjustments (1)
(In Millions of Euros)
Total Assets437,757173,01769,27267,13655,740802,923(45,187)
Cash, cash balances at central banks and other demand deposits34,4619,78111,4937,2284,39567,358(499)
Financial assets at fair value (2)138,91360,9454,13411,5199,466224,978(16,953)
Financial assets at amortized cost214,59394,96050,31145,00041,296446,159(113)
Loans and advances to customers173,61986,72737,46642,11937,862377,794(1,458)
Total Liabilities423,327162,17262,75161,10851,674761,033(56,750)
Financial liabilities held for trading and designated at fair value through profit or loss104,05233,0632,0893,2098,598151,011(19,873)
Financial liabilities at amortized cost - Customer deposits212,72586,37351,10444,53510,204404,942(1,081)
Total Equity14,42910,8456,5216,0284,06641,89011,563
Assets under management93,02452,7417,8946,345480160,484
Mutual funds69,61048,5454,4846,345128,984
Pension funds23,4143,41048027,304
Other placements4,1964,196
(1)Includes balance sheet intra-group adjustments between the Corporate Center and the operating segments (see “Presentation of Financial Information”).
(2)Financial assets at fair value includes: “Financial assets held for trading”, “Non-trading financial assets mandatorily at fair value through profit or loss”, “Financial assets designated at fair value through profit or loss” and “Financial assets at fair value through other comprehensive income”.
As of December 31, 2022
SpainMexicoTurkeySouth AmericaRest of BusinessTotal Operating SegmentsCorporate Center and Adjustments (1)
(In Millions of Euros)
Total Assets427,116142,55766,03661,95149,952747,613(35,521)
Cash, cash balances at central banks and other demand deposits49,18513,2286,0617,6954,01580,184(428)
Financial assets at fair value (2)126,41346,5755,20310,7395,090194,020(10,174)
Financial assets at amortized cost204,52877,19151,62140,44840,425414,215207
Loans and advances to customers173,97171,23137,44338,43737,375358,456(1,105)
Total Liabilities413,993132,72659,32656,07745,604707,726(46,150)
Financial liabilities held for trading and designated at fair value through profit or loss84,61925,8402,1382,8134,397119,808(13,617)
Financial liabilities at amortized cost - Customer deposits221,01977,75046,33940,0429,827394,978(574)
Total Equity13,1249,8316,7115,8744,34839,88710,630
Assets under management86,75938,1966,93617,760520150,170
Mutual funds63,78635,6143,7315,804108,935
Pension funds22,9733,20511,95652038,653
Other placements2,5822,582
(1)Includes balance sheet intra-group adjustments between the Corporate Center and the operating segments (see “Presentation of Financial Information”).
(2)Financial assets at fair value includes: “Financial assets held for trading”, “Non-trading financial assets mandatorily at fair value through profit or loss”, “Financial assets designated at fair value through profit or loss” and “Financial assets at fair value through other comprehensive income”.
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Spain
This operating segment includes all of BBVA’s banking and non-banking businesses in Spain, other than those included in the Corporate Center. The primary business units included in this operating segment are:
Spanish Retail Network: including individual customers, private banking, small companies and businesses in the domestic market;
Corporate and Business Banking: which manages small and medium sized enterprises (“SMEs”), companies and corporations, and public institutions;
Corporate and Investment Banking: responsible for business with large corporations and multinational groups and the trading floor and distribution business in Spain; and
Other units: which includes the insurance business unit in Spain (BBVA Seguros) as well as the Group’s shareholding in Compañía de Seguros y Reaseguros, S.A., the Asset Management unit (which manages Spanish mutual funds and pension funds), lending to real estate developers and foreclosed real estate assets in Spain, as well as certain proprietary portfolios and certain funding and structural interest-rate positions of the euro balance sheet which are not included in the Corporate Center.
Cash, cash balances at central banks and other demand deposits amounted to €34,461 million as of September 30, 2023, a 29.9% decrease compared with the €49,185 million recorded as of December 31, 2022, mainly driven by a decrease in cash held at the Bank of Spain as a result of the partial repayment by BBVA of drawdowns under the ECB’s TLTRO III facilities.
Financial assets at fair value of this operating segment (which includes the following portfolios: “Financial assets held for trading”, “Non-trading financial assets mandatorily at fair value through profit or loss”, “Financial assets designated at fair value through profit or loss” and “Financial assets at fair value through other comprehensive income”) amounted to €138,913 million as of September 30, 2023, a 9.9% increase from the €126,413 million recorded as of December 31, 2022, mainly as a result of the increase in loans to credit institutions (through reverse repurchase agreements) recorded under “Financial assets held for trading”, partially offset by the decrease in Spanish sovereign debt securities recorded under “Financial assets at fair value through other comprehensive income”, mainly due to the maturity of a Spanish treasury bond.
Financial assets at amortized cost of this operating segment as of September 30, 2023 amounted to €214,593 million, a 4.9% increase compared with the €204,528 million recorded as of December 31, 2022. Within this heading, debt securities of this operating segment as of September 30, 2023 amounted to €30,286 million, a 34.3% increase compared with the €22,551 million recorded as of December 31, 2022, mainly as a result of an increase in Spanish sovereign debt securities, within a high interest rate environment. In addition, within this heading, loans and advances to customers amounted to €173,619 million as of September 30, 2023, a 0.2% decrease from the €173,971 million recorded as of December 31, 2022.
Financial liabilities held for trading and designated at fair value through profit or loss of this operating segment as of September 30, 2023 amounted to €104,052 million, a 23.0% increase compared with the €84,619 million recorded as of December 31, 2022, mainly due to the increase in deposits from credit institutions (through repurchase agreements).
Customer deposits at amortized cost of this operating segment as of September 30, 2023 amounted to €212,725 million, a 3.8% decrease compared with the €221,019 million recorded as of December 31, 2022, mainly due to the decrease in demand deposits within the retail portfolio, partially offset by an increase in time deposits. The decrease in demand deposits was due in part to the shift from demand deposits, mainly from households, towards higher profitability investments (including mutual funds), in a context where remuneration on deposits continues to be low, the positive effect of year-end compensation (including bonuses) paid by companies at the end of 2022 (which led to an increase in deposits) and the decreased savings capacity of customers as a result of inflation.
Off-balance sheet funds of this operating segment (which includes “Mutual funds” (including customers’ portfolios) and “Pension funds”) as of September 30, 2023 amounted to €93,024 million, a 7.2% increase compared with €86,759 million as of December 31, 2022, mainly due to the shift from demand deposits towards higher profitability investments, which resulted in an increase in private banking and mutual funds.
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This operating segment’s non-performing loan ratio (defined as non-performing loans divided by total credit risk and calculated as the sum of impaired loans and advances to customers, impaired guarantees to customers and other impaired commitments divided by the sum of loans and advances to customers, guarantees to customers and other commitments) increased to 4.0% as of September 30, 2023 from 3.9% as of December 31, 2022, mainly as a result of higher Stage 3 entries, in a context of increased refinancing operations within the retail portfolio, partially offset by the sale of a portfolio of non-performing loans mainly from the unsecured retail portfolios, and the positive evolution of the wholesale portfolios with negative net entries. This operating segment’s non-performing loan coverage ratio (defined as allowance for credit losses divided by non-performing loans and calculated as loss allowances on loans and advances divided by the sum of impaired loans and advances to customers, impaired guarantees to customers and other impaired commitments) was 55% as of September 30, 2023 and 61% as of December 31, 2022. The decrease was driven in part by the sale of the portfolio of non-performing loans referred to above, in respect of which significant loss allowances had been recorded.
Mexico
The Mexico operating segment includes the banking, insurance and asset management business conducted in Mexico by BBVA Mexico. It also includes BBVA Mexico’s agency in Houston.
The Mexican peso appreciated 12.7% against the euro as of September 30, 2023 compared with December 31, 2022, positively affecting the business activity of the Mexico operating segment as of September 30, 2023 expressed in euros. See “Operating and Financial Review and Prospects―Operating Results―Factors Affecting the Comparability of our Results of Operations and Financial Condition―Trends in Exchange Rates”.
Cash, cash balances at central banks and other demand deposits amounted to €9,781 million as of September 30, 2023, a 26.1% decrease compared with the €13,228 million recorded as of December 31, 2022, in particular, cash balances held at Mexican Central Bank (“BANXICO”) decreased as a result of the higher lending activity levels, partially offset by the appreciation of the Mexican peso.
Financial assets at fair value of this operating segment (which includes the following portfolios: “Financial assets held for trading”, “Non-trading financial assets mandatorily at fair value through profit or loss”, “Financial assets designated at fair value through profit or loss” and “Financial assets at fair value through other comprehensive income”) as of September 30, 2023 amounted to €60,945 million, a 30.9% increase from the €46,575 million recorded as of December 31, 2022, mainly due to the acquisition of sovereign debt securities recorded under “Financial assets held for trading” and “Financial assets at fair value through other comprehensive income” and the appreciation of the Mexican peso against the euro.
Financial assets at amortized cost of this operating segment as of September 30, 2023 amounted to €94,960 million, a 23.0% increase compared with the €77,191 million recorded as of December 31, 2022. Within this heading, loans and advances to customers of this operating segment as of September 30, 2023 amounted to €86,727 million, a 21.8% increase compared with the €71,231 million recorded as of December 31, 2022, mainly attributable to the appreciation of the Mexican peso against the euro, the positive performance of the retail portfolio (in particular, consumer loans, mortgage loans and credit cards loans) and, to a lesser extent, the wholesale portfolio (loans to enterprises), due to the favorable economic evolution.
Financial liabilities held for trading and designated at fair value through profit or loss of this operating segment as of September 30, 2023 amounted to €33,063 million, a 28.0% increase compared with the €25,840 million recorded as of December 31, 2022, mainly as a result of the increase in the value of derivatives recorded under the “Financial liabilities held for trading” portfolio, the appreciation of the Mexican peso against the euro and the increase in the fair value of unit-linked insurance plans.
Customer deposits at amortized cost of this operating segment as of September 30, 2023 amounted to €86,373 million, an 11.1% increase compared with the €77,750 million recorded as of December 31, 2022, primarily due to the appreciation of the Mexican peso against the euro, partially offset by the decrease in the volume of demand deposits within the portfolios of non-financial corporations and households, as a result of the increased competition from other banks for remunerated deposits.
Off-balance sheet funds of this operating segment (which includes “Mutual funds” (including customers’ portfolios) and “Other placements”) as of September 30, 2023 amounted to €52,741 million, a 38.1% increase compared with the €38,196 million as of December 31, 2022, mainly as a result of the continuing search by customers for higher profitability investments, which continued to boost mutual funds, supported by an improved product offer that includes funds linked to Environmental, Social and Governance (“ESG”) factors, and the appreciation of the Mexican peso against the euro.
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This operating segment’s non-performing loan ratio (as defined herein) stood at 2.6% as of September 30, 2023 compared to 2.5% as of December 31, 2022. The ratio was adversely affected by the increase in Stage 3 loans in the retail portfolio (mainly in consumer, credit cards and mortgages loans), which required additional credit allowances, and was positively affected by the growth in lending activity, both in the retail and the wholesale portfolios. This operating segment’s non-performing loan coverage ratio (as defined herein) decreased to 127% as of September 30, 2023 from 129% as of December 31, 2022.
Turkey
This operating segment comprises the activities carried out by Garanti BBVA as an integrated financial services group operating in the banking, insurance and asset management business in Turkey, including corporate, commercial, SME, payment systems, retail, private and investment banking, together with its subsidiaries in pension and life insurance, leasing, factoring, brokerage and asset management, as well as its international subsidiaries in Romania and the Netherlands.
On May 18, 2022, BBVA closed its voluntary takeover bid for the entire share capital of Garanti BBVA, which resulted in BBVA increasing its stake in Garanti BBVA from 49.85% to 85.97%. See “Operating and Financial Review and Prospects―Operating Results―Voluntary Takeover Bid for the Entire Share Capital of Türkiye Garanti Bankası A.Ş.”.
The Turkish lira depreciated 31.3% against the euro as of September 30, 2023 compared to December 31, 2022, adversely affecting the business activity of the Turkey operating segment as of September 30, 2023 expressed in euros. See “Operating and Financial Review and Prospects―Operating Results―Factors Affecting the Comparability of our Results of Operations and Financial Condition―Trends in Exchange Rates”.
Since the second quarter of 2022, the Turkish economy has been considered to be hyperinflationary as defined by IAS 29. See “Presentation of Financial Information—Designation of Turkey as a Hyperinflationary Economy” for information on the impact of hyperinflation accounting.
BBVA’s operations in Turkey are subject to regulation by Turkish national authorities. In general, the rules applicable to products and services that banks in Turkey offer to consumers are more stringent than rules applicable with respect to commercial and corporate banking customers. Since 2021, the regulations that were introduced in 2020 authorizing the Central Bank of the Republic of Turkey (“CBRT”) to impose restrictions regarding certain fees and commissions that may be charged to customers have been amended, establishing maximum limits with respect to loan allocation and loan disbursement fees (see “Item 4. Information on the Company—Business Overview—Supervision and Regulation—Principal Markets—Turkey” and “Item 4. Information on the Company—Competition—Turkey” in our 2022 Form 20-F).
In 2022, the CBRT unveiled an integrated policy framework seeking to stabilize the Turkish lira, including by permanently increasing the weight of Turkish lira-denominated assets and liabilities in the banking system. As part of such policy, the CBRT strengthened its macroprudential policy toolkit and revised the reserve requirement regulation, which used to apply to the liability side of balance sheets, and began to apply to the asset side of balance sheets as well, including Turkish lira-denominated commercial cash loans (subject to certain exceptions). In August 2022, the CBRT replaced the then-existing 20% reserve requirement ratio on Turkish lira-denominated loans with a requirement to maintain government bonds in an amount equivalent to 30% of such loans. In January 2023, the securities maintenance ratio that Turkish banks are required to apply to their foreign currency deposits was set at 10% (5% as amended on June 25, 2023) and is set to be in place until December 2023. Until August 2023, when it was repealed, the following requirement was in place: if the relevant bank’s ratio of Turkish lira deposits to total deposits was: (i) less than 57%, then such securities maintenance ratio was to be increased to 12%; and, (ii) greater than or equal to 70%, then such securities maintenance ratio was to be decreased to 3%. In May 2023 the CBRT required each Turkish bank (including Garanti BBVA) to hold additional Turkish lira-denominated securities issued by the Turkish government if the conversion rate from foreign currency deposits to Turkish lira deposits by July 28, 2023 was less than 10%, and if less than 30% they would have to hold additional government bonds from that date until the end of the year (in short, lenders are being mandated to convert such percentage of their foreign currency deposits into Turkish lira or increase their holdings of government bonds equivalent to the amount they failed to convert). This requirement will not apply to banks whose aggregate deposits fund size in foreign currency is below an amount determined by the CBRT from time to time. The CBRT continues to issue instructions to further clarify the implementation of these requirements on a regular basis.
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Additional amendments to the reserve requirement on foreign currency liabilities were announced in 2023, including, (i) a rate of 0% for Turkish lira deposit accounts with maturities longer than three months; (ii) a rate of 0%, until December 2023, for the increase in foreign currency-denominated liabilities with maturities longer than six months; (iii) an increase in the mandatory reserve ratios for foreign currency deposits by five basis points if the share of a Turkish bank’s Turkish lira deposits to be calculated for individuals and legal persons is less than 60% of total deposits (57% following the amendment announced in July 2023); and (iv) an increase from 25% to 29% in the required reserve ratio for foreign currency demand and time deposits with maturities of up to 1 month.
In September 2023, the required reserve ratio for foreign exchange protected deposits in Turkish lira with maturities of up to six months increased from 15% to 25% and, in the case of deposits with maturities of up to one year, it decreased from 15% to 5%.
Further, the CBRT extended the deadline for domestic legal entities to open, mandatorily, Turkish Lira Deposit and Participation Accounts with their existing balances already held at banks in other currencies between December 31, 2021 and March 31, 2023, until December 31, 2023.
The low interest rates set by the CBRT in a context of high inflation (despite the recent increases of interest rates from 8.5% in June 2023 to 35% in October 2023, which may continue to increase in an attempt to tame inflation), the policies affecting the banking sector (which have had the effect of increasing BBVA’s exposure to the Turkish lira and Turkish sovereign debt) and currency depreciation have affected and may continue to affect the Group’s results.
Following its publication in the Official Gazette on July 15, 2023, Law No. 7456 on Additional Motor Vehicle Tax and Amendments to Certain Laws as well as Decree Law No. 375, for Compensation of Economic Losses Caused by the Earthquakes on February 6, 2023, entered into force in Turkey. Among others, this Law provides for the modification of the general corporate income tax rate in Turkey from 20% to 25%. However, the general tax rate for banks and financial institutions has been increased from 25% (applicable since April 2022) to 30%. This change is applicable to profit generated in tax periods beginning on or after January 1, 2023 and has been considered in preparing the Unaudited Condensed Interim Consolidated Financial Statements. The impact of this change was not material to the results of the BBVA Group.
Cash, cash balances at central banks and other demand deposits amounted to €11,493 million as of September 30, 2023, an 89.6% increase compared with the €6,061 million recorded as of December 31, 2022, mainly due to the increase in cash held at the CBRT as a result in part of the increases in funding through customer time deposits and demand deposits in Turkish lira, in a context of contained loan growth and the abovementioned increase in the required reserve ratio established by the CBRT in order to reduce excess liquidity of the Turkish lira in the market, partially offset by the depreciation of the Turkish lira against the euro.
Financial assets at fair value of this operating segment (which includes the following portfolios: “Financial assets held for trading”, “Non-trading financial assets mandatorily at fair value through profit or loss”, “Financial assets designated at fair value through profit or loss” and “Financial assets at fair value through other comprehensive income”) as of September 30, 2023 amounted to €4,134 million, a 20.5% decrease from the €5,203 million recorded as of December 31, 2022, mainly due to the depreciation of the Turkish lira against the euro, partially offset by increases in sovereign debt securities, as a result of the increase in local currency-denominated government bonds mainly due to the abovementioned increase in the securities maintenance ratio established by the CBRT, and, to a lesser extent, the value of exchange rate derivatives in foreign currency positions.
Financial assets at amortized cost of this operating segment as of September 30, 2023 amounted to €50,311 million, a 2.5% decrease compared with the €51,621 million recorded as of December 31, 2022, due to the depreciation of the Turkish lira against the euro and the decrease in loans and advances to credit institutions. Within this heading, loans and advances to customers of this operating segment as of September 30, 2023 amounted to €37,466 million, a 0.1% increase compared with the €37,443 million recorded as of December 31, 2022, mainly due to the increase in Turkish lira-denominated credit card loans (which is the type of loan where there is greater competition) and loans to enterprises, both attributable to Türkiye Garanti Bankası A.Ş., due, in part, to the abovementioned measures adopted by the Turkish authorities to encourage Turkish lira-denominated loans. In addition, within this heading, debt securities of this operating segment as of September 30, 2023 amounted to €6,758 million, a 21.4% increase compared with the €5,564 million recorded as of December 31, 2022, as a result of the increase in local currency-denominated government bonds mainly due to the abovementioned increase in the securities maintenance ratio established by the CBRT.
Financial liabilities held for trading and designated at fair value through profit or loss of this operating segment as of September 30, 2023 amounted to €2,089 million, a 2.3% decrease compared with the €2,138 million recorded as of December 31, 2022, mainly due to the depreciation of the Turkish lira against the euro, partially offset by the increase in debt securities and, to a lesser extent, the value of exchange rate derivatives recorded under the “Financial liabilities held for trading” portfolio.
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Customer deposits at amortized cost of this operating segment as of September 30, 2023 amounted to €51,104 million, a 10.3% increase compared with the €46,339 million recorded as of December 31, 2022, mainly due to the increase in time deposits in Turkish lira (transferred, in part, from time deposits in U.S. dollars) and, to a lesser extent, demand deposits in Turkish lira, as a result in part of the abovementioned measures announced by the Turkish authorities to encourage and protect deposits denominated in Turkish lira and prevent further dollarization of deposits, which include increased reserve requirement and the obligation by banks to buy local currency-denominated government bonds if less than a particular percentage of their deposits are denominated in Turkish lira, partially offset by the depreciation of the Turkish lira against the euro.
Off-balance sheet funds of this operating segment (which includes “Mutual funds” and “Pension funds”) as of September 30, 2023 amounted to €7,894 million, a 13.8% increase compared with the €6,936 million as of December 31, 2022, mainly due to increases in mutual funds as a result of the shift towards higher profitability investments, partially offset by the depreciation of the Turkish lira against the euro.
The non-performing loan ratio (as defined herein) of this operating segment decreased to 3.8% as of September 30, 2023 from 5.1% as of December 31, 2022, mainly as a result of the increased loan activity (in particular, credit card loans and loans to enterprises in Turkish lira) and the positive dynamics and recoveries in the wholesale portfolio. This operating segment’s non-performing loan coverage ratio (as defined herein) increased to 100% as of September 30, 2023 from 90% as of December 31, 2022 mainly due to the higher recoveries from Stage 3 and the change in the staging of certain loans from Stage 1 to Stage 2, due to the impact of the earthquakes in February 2023 which resulted in the recording of allowances (see Note 6.1 to our Unaudited Condensed Interim Consolidated Financial Statements).
South America
The South America operating segment includes the Group’s banking, finance, insurance and asset management business mainly in Argentina, Chile, Colombia, Peru, Uruguay and Venezuela. It also includes representative offices in Sao Paulo (Brazil) and in Santiago (Chile).
The main business units included in the South America operating segment are:
Retail and Corporate Banking: includes banks in Argentina, Colombia, Peru, Uruguay and Venezuela.
Insurance: includes insurance businesses in Argentina, Colombia and Venezuela.
As of September 30, 2023, the Colombian peso and the Peruvian sol appreciated against the euro by 18.5% and 1.5%, respectively, compared to December 31, 2022. On the other hand, the Argentine peso depreciated against the euro by 49.2%. Overall, changes in exchange rates resulted in a slightly negative exchange rate effect on the business activity of the South America operating segment as of September 30, 2023 expressed in euros. See “Operating and Financial Review and Prospects― Operating Results―Factors Affecting the Comparability of our Results of Operations and Financial Condition―Trends in Exchange Rates”.
As of September 30, 2023 and December 31, 2022, the Argentine and Venezuelan economies were considered to be hyperinflationary as defined by IAS 29. See “Presentation of Financial Information”. See also Note 2.2.19 to our Consolidated Financial Statements for information on the application of IAS 29 to hyperinflationary economies.
Cash, cash balances at central banks and other demand deposits as of September 30, 2023 amounted to €7,228 million, a 6.1% decrease compared with the €7,695 million recorded as of December 31, 2022, mainly due to the depreciation of the Argentine peso, partially offset by the increase in cash balances held at the central bank of Peru, as a result of the increase in funds from customer deposits.
Financial assets at fair value for this operating segment (which includes the following portfolios: “Financial assets held for trading”, “Non-trading financial assets mandatorily at fair value through profit or loss”, “Financial assets designated at fair value through profit or loss” and “Financial assets at fair value through other comprehensive income”) as of September 30, 2023 amounted to €11,519 million, a 7.3% increase compared with the €10,739 million recorded as of December 31, 2022, mainly due to the increase in sovereign debt securities, partially offset by the depreciation of the Argentine peso.
Financial assets at amortized cost of this operating segment as of September 30, 2023 amounted to €45,000 million, an 11.3% increase compared with the €40,448 million recorded as of December 31, 2022. Within this heading, loans and advances to customers of this operating segment as of September 30, 2023 amounted to €42,119 million, a 9.6% increase compared with the €38,437 million recorded as of December 31, 2022, mainly as a result of the increase in the retail portfolio (in particular, credit card loans and consumer loans in Argentina), and, to a lesser extent, in loans to enterprises in Argentina and Colombia, in each case in local currency, and the appreciation of the currencies of the main countries where the BBVA Group operates within the region against the euro (excluding the Argentine peso), partially offset by the decrease in loans to enterprises in Peru, due to early repayments under loans granted under the Reactiva program.
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Financial liabilities held for trading and designated at fair value through profit or loss of this operating segment as of September 30, 2023 amounted to €3,209 million, a 14.1% increase compared with the €2,813 million recorded as of December 31, 2022, mainly due to the appreciation of the currencies of the main countries where the BBVA Group operates within the region against the euro (excluding the Argentine peso) and, to a lesser extent, the increase in deposits from central banks recorded under the “Financial assets held for trading” portfolio, as a result of the evolution of repurchase agreements.
Customer deposits at amortized cost of this operating segment as of September 30, 2023 amounted to €44,535 million, an 11.2% increase compared with the €40,042 million recorded as of December 31, 2022, mainly as a result of the increase in time deposits (in particular, in the wholesale portfolio in Colombia and in the retail portfolios in Peru and Argentina) and the increase in demand deposits in Argentina (in the wholesale portfolio), in a context of a high interest rate environment, partially offset by the depreciation of the Argentine peso.
Off-balance sheet funds of this operating segment (which includes “Mutual funds” (including customers’ portfolios in Colombia and Peru) and “Pension funds”) as of September 30, 2023 amounted to €6,345 million, a 64.3% decrease compared with the €17,760 million as of December 31, 2022, mainly due to the mandatory transfer of the private pension funds in Bolivia, including those managed by the BBVA Group, to the Bolivian social security public authority, and, to a lesser extent, the depreciation of the Argentine peso, partially offset by the increase in mutual funds in Argentina.
The non-performing loan ratio (as defined herein) of this operating segment increased to 4.6% as of September 30, 2023 from 4.1% as of December 31, 2022, as a result of the Stage 3 new entries in the retail portfolio in all geographies (mainly related to consumer and credit cards and, in Peru, also SMEs), partially offset by the effect of increased loan activity, in particular, in Argentina and write-offs in Peru. This operating segment’s non-performing loan coverage ratio (as defined herein) decreased to 93% as of September 30, 2023, from 101% as of December 31, 2022.
Rest of Business
This operating segment mainly includes the wholesale activity carried out by the Group in Europe (excluding Spain), the United States and (through BBVA branches located therein) Asia.
The U.S. dollar appreciated 0.7% against the euro as of September 30, 2023 compared to December 31, 2022, slightly positively affecting the business activity of the Rest of Business operating segment as of September 30, 2023 expressed in euros. See “Operating and Financial Review and Prospects―Operating Results―Factors Affecting the Comparability of our Results of Operations and Financial Condition―Trends in Exchange Rates”.
Cash, cash balances at central banks and other demand deposits as of September 30, 2023 amounted to €4,395 million, a 9.5% increase compared with the €4,015 million recorded as of December 31, 2022, mainly due to the increase in cash balances held at central banks within this operating segment.
Financial assets at fair value for this operating segment (which includes the following portfolios: “Financial assets held for trading”, “Non-trading financial assets mandatorily at fair value through profit or loss”, “Financial assets designated at fair value through profit or loss” and “Financial assets at fair value through other comprehensive income”) as of September 30, 2023 amounted to €9,466 million, an 86.0% increase compared with the €5,090 million recorded as of December 31, 2022, mainly due to the increase in loans and advances recorded under “Financial assets held for trading”, as a result of increased activity of BBVA Securities Inc., our broker-dealer in the United States, as macroeconomic indicators in the United States began to partially shift in early 2023.
Financial assets at amortized cost of this operating segment as of September 30, 2023 amounted to €41,296 million, a 2.2% increase compared with the €40,425 million recorded as of December 31, 2022. Within this heading, loans and advances to customers of this operating segment as of September 30, 2023 amounted to €37,862 million, a 1.3% increase compared with the €37,375 million recorded as of December 31, 2022, mainly due to increased activity in the New York branch and, to a lesser extent, in Europe, partially offset by the decreased wholesale loan activity in the branches located in Asia.
Financial liabilities held for trading and designated at fair value through profit or loss of this operating segment as of September 30, 2023 amounted to €8,598 million, a 95.5% increase compared with the €4,397 million recorded as of December 31, 2022, mainly due to an increase in deposits recorded under “Financial liabilities held for trading”, as a result of an increase in the activity of the broker-dealer BBVA Securities Inc. as macroeconomic indicators in the United States began to partially shift in early 2023.
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Customer deposits at amortized cost of this operating segment as of September 30, 2023 amounted to €10,204 million, a 3.8% increase compared with the €9,827 million recorded as of December 31, 2022, mainly as a result of the increase in time deposits from wholesale customers in the branches located in Asia and, to a lesser extent, in the New York branch, partially offset by the decrease in demand and time deposits in the branches located in Europe.
Off-balance sheet funds of this operating segment as of September 30, 2023 amounted to €480 million, a 7.7% decrease compared with the €520 million recorded as of December 31, 2022, due to the decrease in pension funds in the branches located in Europe.
The non-performing loan ratio (as defined herein) of this operating segment increased to 0.6% as of September 30, 2023 from 0.4% as of December 31, 2022 mainly as a result of new Stage 3 wholesale loan entries related mainly to the transportation sector in the third quarter of 2023. As a result thereof, this operating segment’s non-performing loan coverage ratio (as defined herein) decreased to 82% as of September 30, 2023, from 131% as of December 31, 2022.
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OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Operating Results
Factors Affecting the Comparability of our Results of Operations and Financial Condition
Trends in Exchange Rates
We are exposed to foreign exchange rate risk in that our reporting currency is the euro, whereas certain of our subsidiaries and investees have different functional and accounting currencies, principally the Mexican peso, Turkish lira, Argentine peso, Colombian peso, Peruvian sol and U.S. dollar. For example, if these currencies depreciate against the euro, when the results of operations of our subsidiaries in the countries using these currencies are included in our consolidated financial statements, the euro value of their results declines, even if, in local currency terms, their results of operations and financial condition have remained the same. By contrast, the appreciation of these currencies against the euro would have a positive impact on the results of operations of our subsidiaries in the countries using these currencies when their results of operations are included in our consolidated financial statements. Accordingly, changes in exchange rates may limit the ability of our results of operations, stated in euro, to fully show the performance in local currency terms of our subsidiaries.
Except with respect to hyperinflationary economies, where all the components of the financial statements (including income statement items) of the relevant subsidiaries (in each case, for any period in which the relevant economy was considered to be hyperinflationary) are converted at the relevant period-end exchange rate, the assets and liabilities of our subsidiaries which maintain their accounts in currencies other than the euro have been converted to the euro at the period-end exchange rates for inclusion in our Unaudited Condensed Interim Consolidated Financial Statements, and income statement items have been converted at the average exchange rates for the period. See Note 2.2.19 to our Consolidated Financial Statements for information on the application of IAS 29 to hyperinflationary economies. The following table sets forth the exchange rates of the currencies of the main non-euro regions where we operate against the euro, expressed in local currency per €1.00 as averages for the nine months ended September 30, 2023 and September 30, 2022, and as period-end exchange rates as of September 30, 2023 and as of December 31, 2022 according to the ECB.
Average Exchange RatesPeriod-End Exchange Rates (1)
For the nine months ended September 30, 2023For the nine months ended September 30, 2022As of September 30, 2023As of December 31, 2022
Mexican peso19.286721.555118.503020.8560
Turkish lira29.051419.9649
U.S. dollar1.08341.06401.05941.0666
Argentine peso370.8165188.5144
Colombian peso4,777.63254,323.62114,328.25295,130.5593
Peruvian sol4.03324.05183.99654.0572
(1)The period-end exchange rate as of September 30, 2022 of the Turkish lira and the Argentine peso against the euro was 18.0841 and 143.3833, respectively.
During the nine months ended September 30, 2023, the Mexican peso and the Peruvian sol appreciated against the euro in average terms compared with the average exchange rates in the same period of the prior year. On the other hand, the Colombian peso and the U.S. dollar depreciated against the euro in average terms compared with the same period of the prior year. In terms of period-end exchange rates, the Mexican peso, the Colombian peso, the Peruvian sol and the U.S. dollar appreciated against the euro. On the other hand, the Turkish lira and the Argentine peso depreciated against the euro in terms of period-end exchange rates. The overall effect of changes in exchange rates was slightly negative for the period-on-period comparison of the Group’s income statement (mainly due to the depreciation of the period-end exchange rates of the Turkish lira and the Argentine peso used to convert income statement items) and balance sheet.
When comparing two dates or periods in this report on Form 6-K we have sometimes excluded, where specifically indicated, the impact of changes in exchange rates by assuming constant exchange rates. In doing this, with respect to income statement amounts, we have used the average exchange rate for the more recent period for both periods (except with respect to hyperinflationary economies, where we have used the closing exchange rate of the more recent period for both periods) and, with respect to balance sheet amounts, we have used the closing exchange rate of the more recent period for both period ends.
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Voluntary takeover bid for the entire share capital of Türkiye Garanti Bankası A.Ş.
On November 15, 2021, BBVA announced a voluntary takeover bid (“VTB”) addressed to the holders of the 2,106,300,000 shares2 of Garanti BBVA not controlled by BBVA, which represented 50.15% of Garanti BBVA’s total share capital. BBVA submitted for authorization an application for the VTB to the supervisor of the securities markets in Turkey (Capital Markets Board of Turkey, “CMB”) on November 18, 2021.
On March 31, 2022, CMB approved the relevant information memorandum and on the same day BBVA announced the start of the VTB acceptance period on April 4, 2022. 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 million3 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). 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 amounting to a loss 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 a loss of €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%.
Purchase of Tree Inversiones Inmobiliarias, SOCIMI, S.A.
On June 15, 2022, BBVA completed the acquisition of Tree Inversiones Inmobiliarias, SOCIMI, S.A., a real estate vehicle, from Merlin Properties for an amount of €1,988 million. The transaction resulted in a €201 million loss (net of taxes) which has been recognized under the headings “Gains (losses) from non-current assets and disposal groups classified as held for sale not qualifying as discontinued operations” (€134 million loss) and “Tax expense or income related to profit or loss from continuing operations” (€67 million expense) of the BBVA Group and in the line item “Profit / (loss) from discontinued operations, net and Other” of the Spain operating segment (see Note 17 to our Consolidated Financial Statements).
Macroeconomic and geopolitical conditions
The Group is sensitive to the deterioration of economic conditions or the alteration of the institutional environment of the countries in which it operates, and especially Spain, Mexico and Turkey. Additionally, the Group is exposed to sovereign debt, especially in these geographical areas.
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. The economic effects include higher commodity prices, mainly of energy commodities. While certain of these tendencies moderated in recent months, they have recently been exacerbated, and may be further exacerbated, by the recent tensions in the Middle East, which have led to a spike in energy prices and may exert further downward pressure on growth and upward pressure on inflation.
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 in China through the adoption of certain fiscal, monetary and regulatory measures, there are risks related to tensions in the real estate markets and the possible effects of U.S. economic sanctions, among others. Further, the collapse of Silicon Valley Bank and UBS’s agreement to takeover Credit Suisse in early 2023 led to increased volatility, especially in the stock and interest rate markets, and have given rise to global banking concerns, including with respect to the concentration and quality of bank deposits and the debt holdings of certain banks.
2 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.
3 Using the effective exchange rate of 16.14 Turkish lira per euro.
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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, which have led to a rise in both interest revenue and expenses and a shift from deposits towards higher profitability investments (including mutual funds). These increases in interest rates could adversely affect the Group by generating mark-to-market losses on securities portfolios, reducing the demand for credit, limiting the Group’s ability to generate credit for its clients, leading to an increase in the default rate of its borrowers and other counterparties, adversely affecting the amount of deposits if remuneration thereof is not increased accordingly and otherwise affecting margins. In particular, the United States Federal Reserve (the “Fed”) and the ECB have increased their benchmark interest rates over the last two years. Although uncertainty is high, policy rates (refinancing rates in the case of the ECB) may remain high, around 5.50% in the United States and 4.50% in the Eurozone, for a relatively long period of time. Furthermore, the liquidity reduction measures by the Fed and the ECB, following the liquidity and other problems experienced by certain banks in the United States and Switzerland, are expected to continue to contribute to the monetary tightening process.
Further, the Group’s results of operations have been affected by the high inflation in all countries in which BBVA operates, especially Turkey and South America. In particular, the Turkish economy has been considered hyperinflationary since the first half of 2022. See “Presentation of Financial Information—Designation of Turkey as a Hyperinflationary Economy”. Inflation has led to higher expenses and its effects have been considered on the macroeconomic forecasts used to calculate expected credit losses of the BBVA Group for the nine months ended September 30, 2023. On the other hand, inflation-linked bonds in Turkey have positively contributed to the results of operations of the BBVA Group during the nine months ended September 30, 2023 (although to a lesser extent than during the nine months ended September 30, 2022). The CBRT has strengthened its macroprudential policy toolkit and revised the reserve requirement regulation. With this new regulation, reserve requirements, which used to apply to the liability side of balance sheets, also applies to the asset side of balance sheets, including Turkish lira-denominated commercial cash loans (subject to certain exceptions). For additional information on measures adopted by the CBRT, see “Business Overview—Turkey”.
There are increasing signs of changes 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 macroeconomic distortions, especially the high external financing needs. Nonetheless, the situation remains unstable, characterized by a strong 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 have deepened Turkey’s economic struggles. In addition to the vast human losses, the earthquakes and the government’s response thereto have added pressure on inflation as well as the external and tax balances. Continuing unfavorable economic conditions in Turkey may result in a potential deterioration in the purchasing power and creditworthiness of our clients (both individuals and corporations). In addition, the still low official interest rates set by the CBRT in a context of continued high inflation (despite the recent increases of rates carried out between June and September 2023), the policies affecting the banking sector (which have had the effect of increasing BBVA’s exposure to the Turkish lira and Turkish sovereign debt) and currency depreciation have affected and may continue to affect the Group’s results.
There can be no assurance that adverse developments in the Turkish economy and institutional and regulatory environment will not have a material adverse effect on the Group’s business, financial condition and results of operations in Turkey.
In Argentina, overall macroeconomic conditions have continued to deteriorate, increasing the risk of economic and financial turbulence in the context of presidential elections in the last quarter of the year.
In Spain, political uncertainty since the general elections held in July 2023 could have an adverse impact on Spain’s economy.
In Mexico, the economy continues to expand at a relatively high rate 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 and the impact of higher public spending on the construction sector, amid improved growth prospects in the United States.
20


BBVA Group results of operations for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022
The table below shows the Group’s unaudited condensed interim consolidated income statements for the nine months ended September 30, 2023 and 2022.
For the nine months ended September 30,
20232022Change
(In Millions of Euros)(In %)
Interest and other income35,76622,15561.4
Interest expense(17,923)(8,366)114.2
Net interest income17,84313,79029.4
Dividend income7579(4.5)
Share of profit or loss of entities accounted for using the equity method201531.3
Fee and commission income7,2396,15217.7
Fee and commission expense(2,646)(2,108)25.5
Net gains (losses) on financial assets and liabilities (1)91748987.8
Exchange differences, net5131,180(56.5)
Other operating income4434078.8
Other operating expense(3,242)(2,592)25.1
Income on insurance and reinsurance contracts2,6252,07626.4
Expense on insurance and reinsurance contracts(1,685)(1,234)36.6
Gross income22,10418,25521.1
Administration costs(8,187)(6,836)19.8
Personnel expense(4,837)(4,053)19.3
Other administrative expense(3,350)(2,783)20.4
Depreciation and amortization(1,054)(990)6.4
Net margin before provisions (2)12,86310,42823.3
Provisions or reversal of provisions and other results(210)(241)(12.8)
Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss or net gains by modification(3,203)(2,380)34.6
Impairment or reversal of impairment on non-financial assets(17)(7)155.7
Gains (losses) on derecognition of non-financial assets and subsidiaries, net and Impairment or reversal of impairment of investments in joint ventures and associates171n.m. (3)
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 operations37(92)n.m. (3)
Operating profit / (loss) before tax9,4877,71023.1
Tax expense or income related to profit or loss from continuing operations(3,204)(2,655)20.7
Profit / (loss)6,2835,05424.3
Profit / (loss) attributable to parent company5,9614,79524.3
Profit / (loss) attributable to non-controlling interests32225924.1
(1)Comprises the following income statement line items contained in the Unaudited Condensed Interim Consolidated Financial Statements: “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” and “Gains (losses) from hedge accounting, net”.
(2)Calculated as “Gross income” less “Administration costs” and “Depreciation and amortization”.
(3)Not meaningful.
21


The changes in our unaudited condensed interim consolidated income statements for the nine months ended September 30, 2023 and 2022 were as follows:
Net interest income
Net interest income for the nine months ended September 30, 2023 amounted to €17,843 million, a 29.4% increase compared with the €13,790 million recorded for the nine months ended September 30, 2022, mainly as a result of the higher contribution from the wholesale and the retail portfolios (in terms of yield and volume) and the securities portfolio (in terms of volume) in Mexico, the higher yield and volume of the non-financial corporations loan portfolio in Spain and the increases in the volume of the commercial loan portfolio, credit card loans and the securities portfolio in Argentina, and, to a lesser extent, increases in yield in the securities portfolio in Argentina and Peru, supported by (with respect to yield increases) the overall higher interest rate environment, and the appreciation of the Mexican peso against the euro, partially offset by the significant increase in the cost of funding due to interest rate increases and the depreciation of the Turkish lira, the Argentine peso and the Colombian peso against the euro.
Fee and commission income
Fee and commission income increased by 17.7% to €7,239 million for the nine months ended September 30, 2023 from the €6,152 million recorded for the nine months ended September 30, 2022, primarily due to the increase in Mexico, as a result of the increased volume of transactions by credit card customers and asset management activities, the appreciation of the Mexican peso against the euro and, to a lesser extent, the increase in brokerage and payment systems fees in Turkey, partially offset by the depreciation of the Turkish lira, the Argentine peso and the Colombian peso against the euro.
Fee and commission expense
Fee and commission expense increased by 25.5% to €2,646 million for the nine months ended September 30, 2023 from the €2,108 million recorded for the nine months ended September 30, 2022, primarily due to the increased volume of transactions by credit card customers and asset management activities in Mexico, the increase in brokerage and payment systems fees in Turkey and the appreciation of the Mexican peso against the euro, partially offset by the depreciation of the Turkish lira, the Argentine peso and the Colombian peso against the euro.
Net gains (losses) on financial assets and liabilities
Net gains on financial assets and liabilities increased by 87.8% to €917 million for the nine months ended September 30, 2023 compared to the net gain of €489 million recorded for the nine months ended September 30, 2022, mainly due to the higher gains from the Global Markets units in Turkey and Mexico, the ALCO portfolio in Mexico and the New York branch, resulting from the overall increased interest rates and, to a lesser extent, the appreciation of the Mexican peso against the euro, partially offset by the negative impact of changes in exchange rates on foreign currency positions, which has been negative with respect to the U.S. dollar positions (though positive, to a significantly lesser extent, with respect to the Mexican peso positions).
Exchange differences, net
Exchange differences decreased by 56.5% to a €513 million gain for the nine months ended September 30, 2023 from a €1,180 million gain for the nine months ended September 30, 2022, mainly as a result of the negative exchange rate differences recognized in South America and Mexico.
22


Other operating income and expense, net
Other operating income for the nine months ended September 30, 2023 increased by 8.8% to €443 million from €407 million recorded for the nine months ended September 30, 2022, mainly as a result of the higher income from operating leases in Turkey, higher income from non-financial services related to real estate in Mexico and the appreciation of the Mexican peso against the euro, offset in part by the depreciation of the Turkish lira, the Argentine peso and the Colombian peso against the euro.
Other operating expense for the nine months ended September 30, 2023 amounted to €3,242 million, a 25.1% increase compared with the €2,592 million recorded for the nine months ended September 30, 2022, mainly driven by the adjustment for hyperinflation in Argentina, the payment, in Spain, of the temporary tax on credit institutions and financial credit establishments for the first time (totaling €215 million, which was paid in the nine months ended September 30, 2023), the greater contribution made to the Deposit Guarantee Fund of Credit Institutions in Mexico and Turkey and, to a lesser extent, the appreciation of the Mexican peso against the euro, partially offset by the lower contributions made to the ECB’s Single Resolution Fund, the lower net loss on the monetary position resulting from the adjustment for hyperinflation in Turkey (see “Presentation of Financial Information—Designation of Turkey as a Hyperinflationary Economy”) and the depreciation of the Turkish lira, the Argentine peso and the Colombian peso against the euro. As of September 30, 2023, BBVA had satisfied in full the amount to be paid by it at a global level under the ECB’s Single Resolution Fund.
Income and expense on insurance and reinsurance contracts
Income on insurance and reinsurance contracts for the nine months ended September 30, 2023 was €2,625 million, a 26.4% increase compared with the €2,076 million recorded for the nine months ended September 30, 2022, mainly due to the increase in insurance premiums, attributable in part to the appreciation of the Mexican peso against the euro and higher insurance sales in Mexico, partially offset by the depreciation of the Turkish lira, the Argentine peso and the Colombian peso against the euro.
Expense on insurance and reinsurance contracts for the nine months ended September 30, 2023 was €1,685 million, a 36.6% increase compared with the €1,234 million expense recorded for the nine months ended September 30, 2022, mainly as a result of the higher sales in Mexico (attributable in part to the appreciation of the Mexican peso). Expense on insurance and reinsurance contracts increased faster than income on insurance and reinsurance contracts due to the higher insurance premiums paid to third parties in Mexico, mainly driven by the increase in the volume of insurance sales, and a higher claim ratio.
Administration costs
Administration costs, which include personnel expense and other administrative expense, for the nine months ended September 30, 2023 amounted to €8,187 million, a 19.8% increase compared with the €6,836 million recorded for the nine months ended September 30, 2022, mainly as a result of the increase in personnel expenses mainly driven by salary increases (as a result of the loss of purchasing power due to inflation) and, to a lesser extent, the increased number of employees in Mexico and Spain, the increase in general expenses (technology and maintenance) driven to a great extent by the higher average inflation rate in the main countries where the BBVA Group operates and, to a lesser extent, the appreciation of the Mexican peso against the euro, partially offset by the depreciation of the Turkish lira, the Argentine peso and the Colombian peso against the euro.
Depreciation and amortization
Depreciation and amortization for the nine months ended September 30, 2023 was €1,054 million, a 6.4% increase compared with the €990 million recorded for the nine months ended September 30, 2022.
Provisions or reversal of provisions and other results
Provisions or reversal of provisions and other results for the nine months ended September 30, 2023 amounted to an expense of €210 million, a 12.8% decrease compared with the €241 million expense recorded for the nine months ended September 30, 2022, mainly as a result of the lower provisions for contingent risks and legal contingencies in Mexico and South America, higher gains from foreclosed assets sales in Mexico, the depreciation of the Turkish lira, the Argentine peso and the Colombian peso against the euro and the lower provisions for contingent risks and legal contingencies in Spain and Mexico, partially offset by the higher provisions for pensions and other employee benefit commitments in Spain and Turkey and the provisions recorded in connection with the February 2023 earthquakes in Turkey.
23


Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss or net gains by modification
Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss or net gains by modification for the nine months ended September 30, 2023 was an expense of €3,203 million, a 34.6% increase compared with the €2,380 million expense recorded for the nine months ended September 30, 2022, mainly due to an increase in credit impairments in the retail loan portfolios in Mexico and South America commensurate with the larger loan portfolio, the higher credit impairment requirements in Stage 3 retail loans in Peru as a result of the expiration of the grace period granted under the Reactiva program, the increase in credit impairments in credit card loans and in the securities portfolio in Argentina as a result in part of increased activity compared to the prior period, the additional credit impairment requirements in consumer loans in Stage 2 and Stage 3 in Colombia and higher additions to Stage 3 loans in Chile (as a result of the update in the definition of credit impaired assets), within an inflationary environment and overall unfavorable macroeconomic conditions in South America, partially offset by the decrease in the collective expected losses related to the wholesale portfolio in Turkey, as a result of the improved performance of companies which resulted in a lower default rate, and the depreciation of the Turkish lira, the Argentine peso and the Colombian peso against the euro.
Gains (losses) from non-current assets and disposal groups classified as held for sale not qualifying as discontinued operations
Gains from non-current assets and disposal groups classified as held for sale not qualifying as discontinued operations for the nine months ended September 30, 2023 amounted to €37 million, compared with the €92 million loss recorded for the nine months ended September 30, 2022. Losses from non-current assets and disposal groups classified as held for sale not qualifying as discontinued operations for the nine months ended September 30, 2022 related mainly to the acquisition by BBVA of Tree Inversiones Inmobiliarias, SOCIMI, S.A. from Merlin Properties in June 2022, which resulted in the recognition of a €134 million loss in this line item (see “Item 4. Information on the Company—History and Development of the Company—Capital Expenditures—2022—Purchase of Tree Inversiones Inmobiliarias, SOCIMI, S.A.” in our 2022 Form 20-F, Note 17 to our Consolidated Financial Statements and “―Factors Affecting the Comparability of our Results of Operations and Financial Condition―Purchase of Tree Inversiones Inmobiliarias, SOCIMI, S.A.”).
Operating profit / (loss) before tax
As a result of the foregoing, operating profit before tax for the nine months ended September 30, 2023 amounted to €9,487 million, a 23.1% increase compared with the €7,710 million recorded for the nine months ended September 30, 2022.
Tax expense or income related to profit or loss from continuing operations
Tax expense related to profit from continuing operations for the nine months ended September 30, 2023 amounted to €3,204 million, a 20.7% increase compared with the €2,655 million expense recorded for the nine months ended September 30, 2022, mainly due to the higher operating profit before tax, in particular in Mexico and Spain, partially offset by the revaluation for tax purposes of certain fixed assets and other depreciable assets of Garanti BBVA arising from the application of the temporary article no. 32 as well as paragraph (ç) of article no. 298 of the Tax Procedure Law no. 213. recognized in the Turkey operating segment. Amounts paid by BBVA under the temporary tax on credit institutions and financial credit establishments in Spain are a non-deductible expense for tax purposes.
24


Profit / (loss)
As a result of the foregoing, profit for the nine months ended September 30, 2023 amounted to €6,283 million, a 24.3% increase from the €5,054 million recorded for the nine months ended September 30, 2022.
Profit / (loss) attributable to parent company
As a result of the foregoing, profit attributable to parent company for the nine months ended September 30, 2023 amounted to €5,961 million, a 24.3% increase from the €4,795 million recorded for the nine months ended September 30, 2022.
Profit / (loss) attributable to non-controlling interests
Profit attributable to non-controlling interests for the nine months ended September 30, 2023 increased by 24.1% to €322 million, from the €259 million profit attributable to non-controlling interests recorded for the nine months ended September 30, 2022, as a result, in part, of the increase in profit in Turkey and Argentina in the period. The year-on-year change was also impacted by the increase in BBVA’s stake in Garanti BBVA (from 49.85% to 85.97%) following the completion of BBVA’s voluntary takeover bid for the entire share capital of Garanti BBVA on May 18, 2022 (see “―Factors Affecting the Comparability of our Results of Operations and Financial Condition―Voluntary Takeover Bid for the Entire Share Capital of Türkiye Garanti Bankası A.Ş.” herein).
25


Results of operations by operating segment for the nine months ended September 30, 2023 compared with the nine months ended September 30, 2022
The information contained in this section is presented under management criteria; however, for the nine months ended September 30, 2023, there are no differences between the sum of the income statements of our operating segments and the Corporate Center (calculated in accordance with management criteria used to report segment financial information) and the consolidated income statement of the Group. The tables set forth below show the income statement of our operating segments, the Corporate Center and the Group for the periods indicated. In addition, for the nine months ended September 30, 2022, the sum of the income statements of our operating segments and the Corporate Center (calculated in accordance with management criteria used to report segment financial information) and the consolidated income statement of the Group are reconciled.
For the nine months ended September 30, 2023
SpainMexicoTurkeySouth AmericaRest of BusinessCorporate CenterGroup
(In Millions of Euros)
Net interest income / (expense)4,0538,1641,5813,892405(253)17,843
Net fees and commissions1,6031,626630584192(40)4,594
Net gains (losses) on financial assets and liabilities and Exchange differences, net (1)309384798386251(697)1,430
Other operating income and expense, net (2)(132)300(699)(1,285)448(1,763)
Gross income5,83310,4752,3103,577852(943)22,104
Administration costs(2,015)(2,829)(935)(1,541)(409)(459)(8,187)
Depreciation and amortization(286)(346)(112)(136)(19)(155)(1,054)
Net margin before provisions (3)3,5327,3001,2641,900424(1,557)12,863
Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss or net gains by modification(405)(1,827)(84)(864)(25)1(3,203)
Provisions or reversal of provisions and other results(74)(1)(91)(15)10(2)(173)
Operating profit / (loss) before tax3,0535,4721,0891,021410(1,558)9,487
Tax expense or income related to profit or loss from continuing operations(941)(1,484)(658)(265)(88)232(3,204)
Profit / (loss)2,1123,988431756322(1,326)6,283
Profit / (loss) attributable to non-controlling interests(2)(1)(64)(260)5(322)
Profit / (loss) attributable to parent company2,1103,987367496322(1,321)5,961
(1)Includes “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” and “Exchange differences, net”.
(2)Includes “Dividend income”, “Share of profit or loss of entities accounted for using the equity method”, “Income/Expense on insurance and reinsurance contracts” and “Other operating income/expense”.
(3)“Net margin before provisions” is calculated as “Gross income” less “Administration costs” and “Depreciation and amortization”.
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For the nine months ended September 30, 2022
SpainMexicoTurkeySouth AmericaRest of BusinessCorporate CenterAdjustments (1)Group
(In Millions of Euros)
Net interest income / (expense)2,6875,9221,9613,074243(97)13,790
Net fees and commissions1,6351,176463608186(25)4,044
Net gains (losses) on financial assets and liabilities and Exchange differences, net (2)329324591355151(80)1,669
Other operating income and expense, net (3)(31)239(668)(851)559(1,248)
Gross income4,6207,6612,3473,186584(144)18,255
Administration costs(1,837)(2,152)(690)(1,363)(350)(444)(6,836)
Depreciation and amortization(307)(291)(96)(130)(17)(149)(990)
Net margin before provisions (4)2,4775,2181,5611,693217(737)10,428
Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss or net gains by modification (332)(1,277)(285)(482)(4)(1)(2,380)
Provisions or reversal of provisions and other results(37)(45)(71)(63)15(3)(134)(338)
Operating profit / (loss) before tax2,1073,8961,2051,148229(741)(134)7,710
Tax expense or income related to profit or loss from continuing operations(600)(978)(890)(241)(46)168(67)(2,655)
Profit / (loss) from continuing operations 1,5072,918315906182(574)(201)5,054
Profit / (loss) from discontinued operations, net and Other(201)201
Profit / (loss)1,3062,918315906182(574)5,054
Profit / (loss) attributable to non-controlling interests (3)(1)18(281)7(259)
Profit / (loss) attributable to parent company1,3042,918333625182(566)4,795
(1)Adjustments in the nine months ended September 30, 2022 correspond to the loss recorded in connection with the acquisition by BBVA of Tree Inversiones Inmobiliarias, SOCIMI, S.A. on June 15, 2022 amounting to €201 million, net of taxes. In this section, information relating to the Spain operating segment for the nine months ended September 30, 2022 has been presented under management criteria pursuant to which such losses have been recognized under the heading “Profit / (loss) from discontinued operations, net and Other”. However, for purposes of the Group financial statements, such losses are presented under the headings “Gains (losses) from non-current assets and disposal groups classified as held for sale not qualifying as discontinued operations”, which is included in “Provisions or reversal of provisions and other results” in the table above (€134 million loss), and “Tax expense or income related to profit or loss from continuing operations” (€67 million expense).
(2)Includes “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” and “Exchange differences, net”.
(3)Includes “Dividend income”, “Share of profit or loss of entities accounted for using the equity method”, “Income/Expense on insurance and reinsurance contracts” and “Other operating income/expense”.
(4)“Net margin before provisions” is calculated as “Gross income” less “Administration costs” and “Depreciation and amortization”.

27


SPAIN
For the nine months ended September 30,
20232022Change
(In Millions of Euros)(In %)
Net interest income4,0532,68750.8
Net fees and commissions1,6031,635(2.0)
Net gains (losses) on financial assets and liabilities and Exchange differences, net (1)309329(6.2)
Other operating income and expense, net (410)(301)35.9
Income and expense on insurance and reinsurance contracts2782702.9
Gross income5,8334,62026.3
Administration costs(2,015)(1,837)9.7
Depreciation and amortization(286)(307)(6.8)
Net margin before provisions (2)3,5322,47742.6
Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss or net gains by modification(405)(332)21.9
Provisions or reversal of provisions and other results(74)(37)100.4
Operating profit / (loss) before tax3,0532,10744.9
Tax expense or income related to profit or loss from continuing operations(941)(600)56.9
Profit from continuing operations2,1121,50740.1
Profit / (loss) from discontinued operations, net and Other(201)n.m. (3)
Profit2,1121,30661.7
Profit attributable to non-controlling interests(2)(3)(31.6)
Profit attributable to parent company2,1101,30461.9
(1)Includes “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” and “Exchange differences, net”.
(2)Calculated as “Gross income” less “Administration costs” and “Depreciation and amortization”.
(3)Not meaningful.
Net interest income
Net interest income of this operating segment for the nine months ended September 30, 2023 amounted to €4,053 million, a 50.8% increase compared with the €2,687 million recorded for the nine months ended September 30, 2022, mainly as a result of the higher yield and volume of the non-financial corporations loan portfolio, supported (with respect to the yield) by the higher interest rate environment, partially offset by significantly higher funding costs. Net interest income of this operating segment for the nine months ended September 30, 2023 and 2022 includes the interest accrued from funds obtained under the TLTRO III program. The repayment of the TLTRO III program was initiated in December 2022 (for an approximate amount of €35,000 million) and the outstanding balance of amounts drawn under the TLTRO III facilities totaled €3,660 million as of September 30, 2023. The net interest margin over average total assets of this operating segment amounted to 1.23% for the nine months ended September 30, 2023, compared with 0.86% for the nine months ended September 30, 2022.
Net fees and commissions
Net fees and commissions of this operating segment for the nine months ended September 30, 2023 amounted to €1,603 million, a 2.0% decrease compared with the €1,635 million recorded for the nine months ended September 30, 2022.
Net gains (losses) on financial assets and liabilities and Exchange differences, net
Net gains on financial assets and liabilities and Exchange differences of this operating segment for the nine months ended September 30, 2023 was a net gain of €309 million, a 6.2% decrease compared with the €329 million net gain recorded for the nine months ended September 30, 2022, mainly due to lower gains from the Asset Protection Scheme entered into in connection with BBVA’s acquisition of Unnim in 2012 (pursuant to which the Spanish Deposit Guarantee Fund agreed to assume 80% of any losses related to a particular asset portfolio for a period of 10 years, after making use of the then-existing provisions), partially offset by the positive performance of the Global Markets unit.
28


Other operating income and expense, net
Other operating income and expense, net of this operating segment for the nine months ended September 30, 2023 amounted to a €410 million expense, a 35.9% increase compared with the €301 million expense recorded for the nine months ended September 30, 2022, mainly due to the payment, in Spain, of the temporary tax on credit institutions and financial credit establishments for the first time (totaling €215 million, which was paid in the nine months ended September 30, 2023), partially offset by the lower contributions made to the ECB’s Single Resolution Fund compared to the nine months ended September 30, 2022. As of September 30, 2023, BBVA had satisfied in full the amount to be paid by it at a global level under the ECB’s Single Resolution Fund.
Income and expense on insurance and reinsurance contracts
Net income on insurance and reinsurance contracts of this operating segment for the nine months ended September 30, 2023 was €278 million, a 2.9% increase compared with the €270 million income recorded for the nine months ended September 30, 2022.
Administration costs
Administration costs of this operating segment for the nine months ended September 30, 2023 amounted to €2,015 million, a 9.7% increase compared with the €1,837 million recorded for the nine months ended September 30, 2022, mainly as a result of higher personnel expenses mainly driven by salary updates (as a result of the loss of purchasing power due to inflation) and, to a lesser extent, an increase in the number of employees and higher general expenses related to IT equipment, which were also affected by inflation.
Depreciation and amortization
Depreciation and amortization for the nine months ended September 30, 2023 was €286 million, a 6.8% decrease compared with the €307 million recorded for the nine months ended September 30, 2022, mainly due to decreases in the depreciation expense of right-of-use leased assets.
Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss or net gains by modification
Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss or net gains by modification of this operating segment for the nine months ended September 30, 2023 amounted to a €405 million expense, a 21.9% increase compared with the €332 million expense recorded for the nine months ended September 30, 2022, mainly due to the increase in credit impairments in the retail loan portfolio, with certain Stage 3 entries, as a result, in part, of the high interest rate environment, and lower recoveries.
Provisions or reversal of provisions and other results
Provisions or reversal of provisions and other results of this operating segment for the nine months ended September 30, 2023 was a €74 million expense compared with the €37 million expense recorded for the nine months ended September 30, 2022, mainly due to higher provisions for pensions and other employee benefit commitments and higher non-financial assets impairments, partially offset by lower provisions for contingent risks.
29


Operating profit / (loss) before tax
As a result of the foregoing, operating profit before tax of this operating segment for the nine months ended September 30, 2023 was €3,053 million, a 44.9% increase compared with the €2,107 million profit recorded for the nine months ended September 30, 2022.
Tax expense or income related to profit or loss from continuing operations
Tax expense related to profit from continuing operations of this operating segment for the nine months ended September 30, 2023 was an expense of €941 million, a 56.9% increase compared with the €600 million expense recorded for the nine months ended September 30, 2022, mainly due to the increase in operating profit before tax. Amounts paid by BBVA under the temporary tax on credit institutions and financial credit establishments in Spain are a non-deductible expense for tax purposes.
Profit / (loss) from discontinued operations, net and Other
Loss from discontinued operations, net and Other of this operating segment for the nine months ended September 30, 2023 was nil compared with the €201 million loss recorded for the nine months ended September 30, 2022. Loss from discontinued operations, net and Other for the nine months ended September 30, 2022 included the loss recorded in connection with the acquisition of Tree Inversiones Inmobiliarias, SOCIMI, S.A. from Merlin Properties in June 2022 (see “Item 4. Information on the Company—History and Development of the Company—Capital Expenditures—2022—Purchase of Tree Inversiones Inmobiliarias, SOCIMI, S.A.” in our 2022 Form 20-F, Note 17 to our Consolidated Financial Statements and “―Factors Affecting the Comparability of our Results of Operations and Financial Condition―Purchase of Tree Inversiones Inmobiliarias, SOCIMI, S.A.”).
Profit attributable to parent company
As a result of the foregoing, profit attributable to parent company of this operating segment for the nine months ended September 30, 2023 amounted to €2,110 million, a 61.9% increase compared with the €1,304 million profit recorded for the nine months ended September 30, 2022.
30


MEXICO
For the nine months ended September 30,
20232022Change
(In Millions of Euros)(In %)
Net interest income8,1645,92237.9
Net fees and commissions1,6261,17638.2
Net gains (losses) on financial assets and liabilities and Exchange differences, net (1)38432418.8
Other operating income and expense, net(236)(212)11.7
Income and expense on insurance and reinsurance contracts53745019.1
Gross income10,4757,66136.7
Administration costs(2,829)(2,152)31.4
Depreciation and amortization(346)(291)18.9
Net margin before provisions (2)7,3005,21839.9
Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss or net gains by modification(1,827)(1,277)43.1
Provisions or reversal of provisions and other results(1)(45)(97.4)
Operating profit / (loss) before tax5,4723,89640.4
Tax expense or income related to profit or loss from continuing operations(1,484)(978)51.8
Profit3,9882,91836.7
Profit attributable to non-controlling interests(1)(1)37.0
Profit attributable to parent company3,9872,91836.7
(1)Includes “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” and “Exchange differences, net”.
(2)“Net margin before provisions” is calculated as “Gross income” less “Administration costs” and “Depreciation and amortization”.
In the nine months ended September 30, 2023, the Mexican peso appreciated by 11.8% against the euro in average terms compared with the nine months ended September 30, 2022, resulting in a positive exchange rate effect on our consolidated income statement for the nine months ended September 30, 2023 and in the results of operations of the Mexico operating segment for such period expressed in euros. See “―Factors Affecting the Comparability of our Results of Operations and Financial Condition―Trends in Exchange Rates”.
Net interest income
Net interest income of this operating segment for the nine months ended September 30, 2023 amounted to €8,164 million, a 37.9% increase compared with the €5,922 million recorded for the nine months ended September 30, 2022, mainly as a result of the higher contribution from the wholesale and the retail portfolios (in terms of yield and volume) and the securities portfolio (in terms of volume), supported by the appreciation of the Mexican peso against the euro and (with respect to the yield) the higher interest rate environment, partially offset by the higher funding costs as a result of the increase in interest rates and the effect of the appreciation of the Mexican peso against the euro on interest expense. At constant exchange rates, there was a 23.3% increase in net interest income. The net interest margin over average total assets of this operating segment amounted to 6.85% for the nine months ended September 30, 2023, compared with 5.95% for the nine months ended September 30, 2022.
Net fees and commissions
Net fees and commissions of this operating segment for the nine months ended September 30, 2023 amounted to €1,626 million, a 38.2% increase compared with the €1,176 million recorded for the nine months ended September 30, 2022, mainly due to the increased volume of transactions by credit card customers and asset management activities, and the appreciation of the Mexican peso against the euro. At a constant exchange rate, there was a 23.6% period-on-period increase.
Net gains (losses) on financial assets and liabilities and Exchange differences, net
Net gains on financial assets and liabilities and Exchange differences, net, of this operating segment for the nine months ended September 30, 2023 were €384 million, a 18.8% increase compared with the €324 million gain recorded for the nine months ended September 30, 2022, mainly as a result of the higher gains from the Global Markets unit and from the ALCO portfolio in Mexico, resulting from the increased interest rates, and the appreciation of the Mexican peso against the euro.
31


Other operating income and expense, net
Other operating income and expense, net of this operating segment for the nine months ended September 30, 2023 was an expense of €236 million, an 11.7% increase compared with the €212 million expense recorded for the nine months ended September 30, 2022, mainly as a result of the appreciation of the Mexican peso against the euro and the higher contributions made to the Deposit Guarantee Fund, partially offset by the higher income from non-financial services related to real estate.
Income and expense on insurance and reinsurance contracts
Net income on insurance and reinsurance contracts of this operating segment for the nine months ended September 30, 2023 was €537 million, a 19.1% increase compared with the €450 million income recorded for the nine months ended September 30, 2022, mainly due to the increase in insurance premiums, attributable in part to the appreciation of the Mexican peso against the euro and higher insurance sales, partially offset by the higher insurance premiums paid to third parties in Mexico, mainly driven by the increase in the volume of insurance sales, and a higher claim ratio.
Administration costs
Administration costs of this operating segment for the nine months ended September 30, 2023 were €2,829 million, a 31.4% increase compared with the €2,152 million recorded for the nine months ended September 30, 2022, mainly as a result of the higher personnel expenses driven by salary updates (as a result of the loss of purchasing power due to inflation) and the increased number of employees, higher general expenses related to IT equipment and marketing as a result of the high inflation rate, and the appreciation of the Mexican peso against the euro. At a constant exchange rate, administration costs increased by 17.6%.
Depreciation and amortization
Depreciation and amortization for the nine months ended September 30, 2023 was €346 million, an 18.9% increase compared with the €291 million recorded for the nine months ended September 30, 2022, mainly due to the appreciation of the Mexican peso against the euro. At a constant exchange rate, depreciation and amortization increased by 6.4%.
Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss or net gains by modification
Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss or net gains by modification of this operating segment for the nine months ended September 30, 2023 was a €1,827 million expense, a 43.1% increase compared with the €1,277 million expense recorded for the nine months ended September 30, 2022, mainly due to higher Stage 3 entries in the retail loan portfolio (in particular, consumer and credit cards) commensurate with the larger loan portfolio and the appreciation of the Mexican peso against the euro, partially offset by certain recoveries from the wholesale portfolio and the change in staging of certain loans from Stage 2 to Stage 1.
Provisions or reversal of provisions and other results
Provisions or reversal of provisions and other results of this operating segment for the nine months ended September 30, 2023 were a €1 million expense, a 97.4% decrease compared with the €45 million expense recorded for the nine months ended September 30, 2022, mainly due to lower provisions for contingent risks and legal contingencies and to higher gains from foreclosed assets sales.
Operating profit / (loss) before tax
As a result of the foregoing, operating profit before tax of this operating segment for the nine months ended September 30, 2023 was €5,472 million, a 40.4% increase compared with the €3,896 million recorded for the nine months ended September 30, 2022.
Tax expense or income related to profit or loss from continuing operations
Tax expense related to profit from continuing operations of this operating segment for the nine months ended September 30, 2023 was €1,484 million, a 51.8% increase compared with the €978 million expense recorded for the nine months ended September 30, 2022, mainly as a result of the higher operating profit before tax.
Profit attributable to parent company
As a result of the foregoing, profit attributable to parent company of this operating segment for the nine months ended September 30, 2023 amounted to €3,987 million, a 36.7% increase compared with the €2,918 million recorded for the nine months ended September 30, 2022.
32


TURKEY
For the nine months ended September 30,
20232022Change
(In Millions of Euros)(In %)
Net interest income1,5811,961(19.3)
Net fees and commissions63046335.9
Net gains (losses) on financial assets and liabilities and Exchange differences, net (1)79859135.0
Other operating income and expense, net(745)(696)7.1
Income and expense on insurance and reinsurance contracts462767.4
Gross income2,3102,347(1.6)
Administration costs(935)(690)35.4
Depreciation and amortization(112)(96)16.4
Net margin before provisions (2)1,2641,561(19.0)
Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss or net gains by modification(84)(285)(70.4)
Provisions or reversal of provisions and other results(91)(71)28.3
Operating profit / (loss) before tax1,0891,205(9.7)
Tax expense or income related to profit or loss from continuing operations(658)(890)(26.1)
Profit43131536.7
Profit attributable to non-controlling interests(64)18n.m. (3)
Profit attributable to parent company36733310.2
(1)Includes “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” and “Exchange differences, net”.
(2)“Net margin before provisions” is calculated as “Gross income” less “Administration costs” and “Depreciation and amortization”.
(3)Not meaningful.
On May 18, 2022, BBVA closed its voluntary takeover bid for the entire share capital of Garanti BBVA, which resulted in BBVA increasing its stake in Garanti BBVA from 49.85% to 85.97%. See “―Factors Affecting the Comparability of our Results of Operations and Financial Condition―Voluntary Takeover Bid for the Entire Share Capital of Türkiye Garanti Bankası A.Ş.” herein.
As of September 30, 2023, the Turkish lira depreciated by 37.8% (considering the period-end exchange rates) against the euro compared to September 30, 2022, adversely affecting the results of operations of the Turkey operating segment for the nine months ended September 30, 2023 expressed in euros. See “―Factors Affecting the Comparability of our Results of Operations and Financial Condition―Trends in Exchange Rates”.
Since the second quarter of 2022, the Turkish economy has been considered to be hyperinflationary as defined by IAS 29. See “Presentation of Financial Information—Designation of Turkey as a Hyperinflationary Economy” for information on the impact of hyperinflation accounting.
The still low official interest rates set by the CBRT in a context of continued high inflation (despite the recent increases of rates carried out between June and September 2023), the policies affecting the banking sector (which have had the effect of increasing BBVA’s exposure to the Turkish lira and Turkish sovereign debt) and currency depreciation have affected and may continue to affect the Group’s results. See “Business Overview—Turkey” herein and “Item 4. Information on the Company—Business Overview—Supervision and Regulation—Principal Markets—Turkey” and “Item 4. Information on the Company—Competition—Turkey” in our 2022 Form 20-F.
Net interest income
Net interest income of this operating segment for the nine months ended September 30, 2023 amounted to €1,581 million, a 19.3% decrease compared with the €1,961 million recorded for the nine months ended September 30, 2022, as a result mainly of the depreciation of the Turkish lira against the euro and, to a lesser extent, lower swap funding costs. At a constant exchange rate, there was a 21.3% increase in net interest income, mainly as a result of the higher volume of Turkish lira-denominated loans (loans to enterprises, credit card loans and consumer loans) and the increase in volume of sovereign debt securities, as a result in part of the Turkish liraization strategy implemented by the CBRT (see “Business Overview—Turkey” herein and “Item 4. Information on the Company—Business Overview—Supervision and Regulation—Principal Markets—Turkey and Item 4. Information on the Company—Competition—Turkey” in our 2022 Form 20-F). The net interest margin over average total assets of this operating segment amounted to 3.06% for the nine months ended September 30, 2023, compared with 4.25% for the nine months ended September 30, 2022.
33


Net fees and commissions
Net fees and commissions of this operating segment for the nine months ended September 30, 2023 amounted to €630 million, a 35.9% increase compared with the €463 million recorded for the nine months ended September 30, 2022, mainly due to the increase in brokerage and payment systems fees, partially offset by the depreciation of the Turkish lira.
Net gains (losses) on financial assets and liabilities and Exchange differences, net
Net gains on financial assets and liabilities and Exchange differences, net, of this operating segment for the nine months ended September 30, 2023 amounted to €798 million, a 35.0% increase compared with the €591 million gain recorded for the nine months ended September 30, 2022, mainly driven by the positive results from the Global Markets unit and certain gains from portfolio sales.
Other operating income and expense, net
Other operating income and expense, net of this operating segment for the nine months ended September 30, 2023 was a €745 million net expense, a 7.1% increase compared with the €696 million net expense recorded for the nine months ended September 30, 2022, mainly due to the greater contribution made to the Deposit Guarantee Fund of Credit Institutions, offset in part by the lower net loss on the monetary position resulting from the adjustment for hyperinflation, the higher positive impact of the revaluation of bonds linked to inflation in the period and the depreciation of the Turkish lira.
Income and expense on insurance and reinsurance contracts
Net income on insurance and reinsurance contracts of this operating segment for the nine months ended September 30, 2023 was €46 million, a 67.4% increase compared with the €27 million income recorded for the nine months ended September 30, 2022, mainly due to increased insurance activity, partially offset by the depreciation of the Turkish lira. At a constant exchange rate, there was a 146.3% increase.
Administration costs
Administration costs of this operating segment for the nine months ended September 30, 2023 amounted to €935 million, a 35.4% increase compared with the €690 million recorded for the nine months ended September 30, 2022, mainly as a result of the increase in personnel expenses and general expenses (technology and maintenance) driven to a great extent by the higher average inflation rate and salary updates (as a result of the loss of purchasing power), partially offset by the depreciation of the Turkish lira. At a constant exchange rate, administration costs increased by 101.9%, which was above Turkey’s inflation rate for the period.
Depreciation and amortization
Depreciation and amortization for the nine months ended September 30, 2023 was €112 million, a 16.4% increase compared with the €96 million recorded for the nine months ended September 30, 2022, mainly due to increases in the depreciation expense related to IT equipment, partially offset by the depreciation of the Turkish lira. At a constant exchange rate, there was a 44.0% increase.
Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss or net gains by modification
Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss or net gains by modification of this operating segment for the nine months ended September 30, 2023 was a €84 million expense, a 70.4% decrease compared with the €285 million expense recorded for the nine months ended September 30, 2022, mainly as a result of the decrease in the collective expected losses related to the wholesale portfolio, as a result of the improved performance of companies which resulted in a lower default rate, and the depreciation of the Turkish lira against the euro, partially offset by the change in the staging of certain loans from Stage 1 to Stage 2, due to the impact of the earthquakes in February 2023 (which resulted in an impairment that amounted to €38 million as of September 30, 2023) and certain significant Stage 3 entries from the retail and wholesale portfolios. At a constant exchange rate, there was a 55.5% decrease.
Provisions or reversal of provisions and other results
Provisions or reversal of provisions and other results of this operating segment for the nine months ended September 30, 2023 were a €91 million expense, a 28.3% increase compared with the €71 million expense recorded for the nine months ended September 30, 2022, mainly due to provisions recorded in connection with the February 2023 earthquakes and, to a lesser extent, the update of provisions for pensions and other employee benefit commitments, partially offset by the depreciation of the Turkish lira against the euro.
34


Operating profit / (loss) before tax
As a result of the foregoing, operating profit before tax of this operating segment for the nine months ended September 30, 2023 was €1,089 million, a 9.7% decrease compared with the €1,205 million recorded for the nine months ended September 30, 2022.
Tax expense or income related to profit or loss from continuing operations
Tax expense related to profit from continuing operations of this operating segment for the nine months ended September 30, 2023 was €658 million, a 26.1% decrease compared with the €890 million expense recorded for the nine months ended September 30, 2022, as a result of the revaluation for tax purposes of certain fixed assets and other depreciable assets of Garanti BBVA arising from the application of the temporary article no. 32 as well as paragraph (ç) of article no. 298 of the Tax Procedure Law no. 213. The impact of this law led to a corporate income tax credit in the first quarter of the year amounting to approximately €260 million, due to the higher tax base of such assets, partially offset by the net loss on the monetary position resulting from the adjustment for hyperinflation in Turkey which, in turn, led to additional adjustments to the tax expense for the period due to the difference between accounting and taxable profit as a result of the application of IAS 29 (see “Presentation of Financial Information—Designation of Turkey as a Hyperinflationary Economy”) and the increase in the applicable tax rate from 23% to 25% since April 2022. In addition, current tax regulation in Turkey does not foresee a correction in order to reduce tax expense upon the existence of a loss linked to the net monetary position. Following its publication in the Official Gazette on July 15, 2023, Law No. 7456 on Additional Motor Vehicle Tax and Amendments to Certain Laws as well as Decree Law No. 375, for Compensation of Economic Losses Caused by the Earthquakes on February 6, 2023, entered into force in Turkey. Among others, this Law provides for the modification of the general corporate income tax rate in Turkey from 20% to 25%. However, the general tax rate for banks and financial institutions has been increased from 25% (applicable since April 2022) to 30%. This change is applicable to profit generated in tax periods beginning on or after January 1, 2023 and has been considered in preparing the Unaudited Condensed Interim Consolidated Financial Statements. The impact of this change was not material to the results of the BBVA Group.
Profit attributable to non-controlling interests
Profit attributable to non-controlling interests of this operating segment for the nine months ended September 30, 2023 amounted to €64 million, compared with the €18 million loss recorded for the nine months ended September 30, 2022, as a result, in part, of the increase in profit. In addition, the period-on-period change was affected by the increase in BBVA’s stake in Garanti BBVA (from 49.85% to 85.97%) following the completion of BBVA’s voluntary takeover bid for the entire share capital of Garanti BBVA on May 18, 2022 (see “―Factors Affecting the Comparability of our Results of Operations and Financial Condition―Voluntary Takeover Bid for the Entire Share Capital of Türkiye Garanti Bankası A.Ş.” herein).
Profit attributable to parent company
As a result of the foregoing, profit attributable to parent company of this operating segment for the nine months ended September 30, 2023 amounted to €367 million, a 10.2% increase compared with the €333 million recorded for the nine months ended September 30, 2022.
35


SOUTH AMERICA
For the nine months ended September 30,
20232022Change
(In Millions of Euros)(In %)
Net interest income3,8923,07426.6
Net fees and commissions584608(4.1)
Net gains (losses) on financial assets and liabilities and Exchange differences, net (1)3863558.7
Other operating income and expense, net(1,367)(940)45.4
Income and expense on insurance and reinsurance contracts8290(8.0)
Gross income3,5773,18612.3
Administration costs(1,541)(1,363)13.0
Depreciation and amortization(136)(130)4.7
Net margin before provisions (2)1,9001,69312.2
Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss or net gains by modification(864)(482)79.2
Provisions or reversal of provisions and other results(15)(63)(75.9)
Operating profit / (loss) before tax1,0211,148(11.0)
Tax expense or income related to profit or loss from continuing operations(265)(241)9.8
Profit756906(16.6)
Profit attributable to non-controlling interests(260)(281)(7.6)
Profit attributable to parent company496625(20.6)
(1)Includes “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” and “Exchange differences, net”.
(2)“Net margin before provisions” is calculated as “Gross income” less “Administration costs” and “Depreciation and amortization”.
In the nine months ended September 30, 2023, the Peruvian sol appreciated by 0.5%, against the euro in average terms, compared with the nine months ended September 30, 2022. The Argentine peso and the Colombian peso depreciated by 61.3% (considering the period-end exchange rates) and 9.5%, respectively, against the euro in average terms, compared with the nine months ended September 30, 2022. Overall, changes in exchange rates resulted in a negative exchange rate effect on our consolidated income statement for the nine months ended September 30, 2023 and in the results of operations of the South America operating segment for such period expressed in euros. See “―Factors Affecting the Comparability of our Results of Operations and Financial Condition―Trends in Exchange Rates”.
As of and for the nine months ended September 30, 2023 and 2022, the Argentine and Venezuelan economies were considered to be hyperinflationary as defined by IAS 29 (see “Presentation of Financial Information—Changes in Accounting Policies—Hyperinflationary economies - IAS 29” in our 2022 Form 20-F).
Net interest income
Net interest income of this operating segment for the nine months ended September 30, 2023 amounted to €3,892 million, a 26.6% increase compared with the €3,074 million recorded for the nine months ended September 30, 2022, mainly as a result of increases in the volume of the commercial loan portfolio, credit card loans and the securities portfolio in Argentina, and, to a lesser extent, increases in yield in the securities portfolio in Argentina and Peru, partially offset by significantly higher funding costs (particularly, in the wholesale portfolio in Colombia) as a result of increases in interest rates, and the depreciation of the Argentine peso and the Colombian peso against the euro, which had a greater impact on interest income than on interest expense. At constant exchange rates, there was a 67.6% increase in net interest income. The net interest margin over average total assets of this operating segment amounted to 8.01% for the nine months ended September 30, 2023, compared with 6.49% for the nine months ended September 30, 2022.
Net fees and commissions
Net fees and commissions of this operating segment for the nine months ended September 30, 2023 amounted to €584 million income, a 4.1% decrease compared with the €608 million income recorded for the nine months ended September 30, 2022 as result mainly of the depreciation of the Argentine peso and the Colombian peso against the euro. At a constant exchange rate, there was an 18.9% increase, mainly due to increases in payment systems-related fees in Argentina and, to a lesser extent, in Colombia.
36


Net gains (losses) on financial assets and liabilities and Exchange differences, net
Net gains on financial assets and liabilities and Exchange differences of this operating segment for the nine months ended September 30, 2023 were €386 million, an 8.7% increase compared with the €355 million gain recorded for the nine months ended September 30, 2022, mainly due to the higher gains from the Global Markets unit in Argentina and trading transactions in Peru, partially offset by negative exchange rate differences in Colombia and the depreciation of the Argentine peso and the Colombian peso.
Other operating income and expense, net
Other operating income and expense, net of this operating segment for the nine months ended September 30, 2023 was a €1,367 million expense, a 45.4% increase compared with the €940 million expense recorded for the nine months ended September 30, 2022, mainly driven by the adjustment for hyperinflation in Argentina, partially offset by the depreciation of the Argentine peso and the Colombian peso. The line item “Other operating income and expense, net” mainly reflects the impact of the adjustment for hyperinflation in Argentina, which monetary loss for the nine months ended September 30, 2023 amounted to €953 million, compared to the €670 million monetary loss recorded for the nine months ended September 30, 2022.
Income and expense on insurance and reinsurance contracts
Net income on insurance and reinsurance contracts of this operating segment for the nine months ended September 30, 2023 was €82 million, an 8.0% decrease compared with the €90 million net income recorded for the nine months ended September 30, 2022 as result mainly of the depreciation of the Argentine peso and the Colombian peso against the euro. At constant exchange rates, there was a 37.9% increase, mainly as a result of higher income related to life insurance in Argentina and Colombia.
Administration costs
Administration costs of this operating segment for the nine months ended September 30, 2023 amounted to €1,541 million, a 13.0% increase compared with the €1,363 million recorded for the nine months ended September 30, 2022, mainly as a result of increases in personnel expenses, mainly driven by salary updates in Argentina (as a result of the loss of purchasing power due to inflation) and certain general expenses related to technology (affected by the high inflation) and, to a lesser extent, overall increases in Colombia and Peru, partially offset by the depreciation of the Argentine peso and the Colombian peso.
Depreciation and amortization
Depreciation and amortization for the nine months ended September 30, 2023 was a €136 million expense, a 4.7% increase compared with the €130 million expense recorded for the nine months ended September 30, 2022.
Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss or net gains by modification
Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss or net gains by modification of this operating segment for the nine months ended September 30, 2023 was an €864 million expense, a 79.2% increase compared with the €482 million expense recorded for the nine months ended September 30, 2022, mainly as a result of higher credit impairment requirements in Stage 3 retail loans in Peru as a result of the expiration of the grace period granted under the Reactiva program in September 2023, and, to a lesser extent, an increase in credit impairments in credit card loans and in the securities portfolio in Argentina as a result in part of increased activity compared to the prior period, additional credit impairment requirements in consumer loans in Stage 2 and Stage 3 in Colombia and higher additions to Stage 3 loans in Chile (as a result of the update in the definition of credit impaired assets), within an inflationary environment and overall unfavorable macroeconomic conditions, partially offset by the depreciation of the Argentine peso and the Colombian peso.
Provisions or reversal of provisions and other results
Provisions or reversal of provisions and other results of this operating segment for the nine months ended September 30, 2023 were a €15 million expense, a 75.9% decrease compared with the €63 million expense recorded for the nine months ended September 30, 2022, attributable mainly to lower provisions for legal contingencies.
Operating profit / (loss) before tax
As a result of the foregoing, operating profit before tax of this operating segment for the nine months ended September 30, 2023 was €1,021 million, an 11.0% decrease compared with the €1,148 million profit recorded for the nine months ended September 30, 2022.
37


Tax expense or income related to profit or loss from continuing operations
Tax expense related to profit from continuing operations of this operating segment for the nine months ended September 30, 2023 was €265 million, a 9.8% increase compared with the €241 million expense recorded for the nine months ended September 30, 2022, mainly as a result of a reduction in deferred tax liabilities and, to a lesser extent, the increase in the applicable tax rate in Colombia from 38% to 40% (effective as of January 1, 2023).
Profit attributable to non-controlling interests
Profit attributable to non-controlling interests of this operating segment for the nine months ended September 30, 2023 amounted to €260 million, a 7.6% decrease compared with the €281 million recorded for the nine months ended September 30, 2022.
Profit attributable to parent company
As a result of the foregoing, profit attributable to parent company of this operating segment for the nine months ended September 30, 2023 amounted to €496 million, a 20.6% decrease compared with the €625 million recorded for the nine months ended September 30, 2022.
38


REST OF BUSINESS
For the nine months ended September 30,
20232022Change
(In Millions of Euros)(In %)
Net interest income40524366.6
Net fees and commissions1921863.5
Net gains (losses) on financial assets and liabilities and Exchange differences, net (1)25115166.6
Other operating income and expense, net12(24.6)
Income and expense on insurance and reinsurance contracts23(19.4)
Gross income85258445.8
Administration costs(409)(350)16.9
Depreciation and amortization(19)(17)9.0
Net margin before provisions (2)42421795.4
Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss or net gains by modification(25)(4)n.m. (3)
Provisions or reversal of provisions and other results1015(33.0)
Operating profit / (loss) before tax41022979.2
Tax expense or income related to profit or loss from continuing operations(88)(46)89.2
Profit32218276.7
Profit attributable to non-controlling interests
Profit attributable to parent company32218276.7
(1)Includes “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” and “Exchange differences, net”.
(2)“Net margin before provisions” is calculated as “Gross income” less “Administration costs” and “Depreciation and amortization”.
(3)Not meaningful.
In the nine months ended September 30, 2023, the U.S. dollar depreciated by 1.8% against the euro in average terms, compared with the nine months ended September 30, 2022, resulting in a slightly negative exchange rate effect on our consolidated income statement for the nine months ended September 30, 2023 and in the results of operations of the Rest of Business operating segment for such period expressed in euros. See “―Factors Affecting the Comparability of our Results of Operations and Financial Condition―Trends in Exchange Rates”.
Net interest income
Net interest income of this operating segment for the nine months ended September 30, 2023 amounted to €405 million, a 66.6% increase compared with the €243 million recorded for the nine months ended September 30, 2022, mainly due to increased activity of the branches located in Europe and New York and higher yields, in particular, in Portugal, supported by the higher interest rate environment, partially offset by the lower contribution from the Global Markets unit in Asia. The net interest margin over average total assets of this operating segment amounted to 1.06% for the nine months ended September 30, 2023, compared with 0.72% for the nine months ended September 30, 2022.
Net fees and commissions
Net fees and commissions of this operating segment for the nine months ended September 30, 2023 amounted to €192 million, a 3.5% increase compared with the €186 million recorded for the nine months ended September 30, 2022 mainly due to increased commissions from the broker-dealer BBVA Securities Inc. in the United States and from the New York branch, which offset the lower fees generated by the Global Markets unit in Europe.
Net gains (losses) on financial assets and liabilities and Exchange differences, net
Net gains on financial assets and liabilities and Exchange differences of this operating segment for the nine months ended September 30, 2023 were €251 million, a 66.6% increase compared with the €151 million net gain recorded for the nine months ended September 30, 2022, mainly due to the higher gains from the New York branch and, to a lesser extent, from the Global Markets unit in Europe.
Other operating income and expense, net
Other operating income and expense, net of this operating segment for the nine months ended September 30, 2023 was €1 million income compared with the €2 million income recorded for the nine months ended September 30, 2022.
39


Administration costs
Administration costs of this operating segment for the nine months ended September 30, 2023 amounted to €409 million, a 16.9% increase compared with the €350 million recorded for the nine months ended September 30, 2022, mainly due to higher personnel expenses in the New York branch and in Europe.
Depreciation and amortization
Depreciation and amortization for the nine months ended September 30, 2023 amounted to €19 million compared with the €17 million recorded for the nine months ended September 30, 2022.
Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss or net gains by modification
Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss or net gains by modification of this operating segment for the nine months ended September 30, 2023 was a €25 million expense, compared with the €4 million expense recorded for the nine months ended September 30, 2022, mainly as a result of higher credit impairments in the retail portfolio in Portugal.
Provisions or reversal of provisions and other results
Provisions or reversal of provisions and other results of this operating segment for the nine months ended September 30, 2023 were a €10 million income, a 33.0% decrease compared with the €15 million income recorded for the nine months ended September 30, 2022.
Operating profit / (loss) before tax
As a result of the foregoing, operating profit before tax of this operating segment for the nine months ended September 30, 2023 was €410 million, a 79.2% increase compared with the €229 million recorded for the nine months ended September 30, 2022.
Tax expense or income related to profit or loss from continuing operations
Tax expense related to profit from continuing operations of this operating segment for the nine months ended September 30, 2023 was €88 million, an 89.2% increase compared with the €46 million expense recorded for the nine months ended September 30, 2022.
Profit attributable to parent company
As a result of the foregoing, profit attributable to parent company of this operating segment for the nine months ended September 30, 2023 amounted to €322 million, a 76.7% increase compared with the €182 million recorded for the nine months ended September 30, 2022.
40


CORPORATE CENTER
For the nine months ended September 30,
20232022Change
(In Millions of Euros)(In %)
Net interest income / (expense)(253)(97)159.8
Net fees and commissions(40)(25)59.8
Net gains (losses) on financial assets and liabilities and Exchange differences, net (1)(697)(80)n.m. (2)
Other operating income and expense, net4959(17.2)
Income and expense on insurance and reinsurance contracts(1)(1)50.9
Gross income(943)(144)n.m. (2)
Administration costs(459)(444)3.4
Depreciation and amortization(155)(149)3.9
Net margin before provisions (3)(1,557)(737)111.1
Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss or net gains by modification1(1)n.m. (2)
Provisions or reversal of provisions and other results(2)(3)(44.1)
Operating profit / (loss) before tax(1,558)(741)110.1
Tax expense or income related to profit or loss from continuing operations23216838.2
Profit / (loss)(1,326)(574)131.2
Profit / (loss) attributable to non-controlling interests57(36.3)
Profit / (loss) attributable to parent company(1,321)(566)133.4
(1)Includes “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” and “Exchange differences, net”.
(2)Not meaningful.
(3)“Net margin before provisions” is calculated as “Gross income” less “Administration costs” and “Depreciation and amortization”.
Net interest income / (expense)
Net interest expense of the Corporate Center for the nine months ended September 30, 2023 was €253 million compared with the €97 million net expense recorded for the nine months ended September 30, 2022, mainly due to significantly higher funding costs as a result of the increases in reference interest rates.
Net fees and commissions
Net fees and commissions of the Corporate Center for the nine months ended September 30, 2023 was an expense of €40 million, a 59.8% increase compared with the €25 million expense recorded for the nine months ended September 30, 2022, mainly as a result of the high fees paid in connection with the Annual General Meeting held in March 2023.
Net gains (losses) on financial assets and liabilities and Exchange differences, net
Net losses on financial assets and liabilities and Exchange differences of the Corporate Center for the nine months ended September 30, 2023 were €697 million, compared with the €80 million loss recorded for the nine months ended September 30, 2022, as a result of the negative impact of changes in exchange rates on foreign currency positions, which has been negative with respect to the U.S. dollar positions (though positive, to a significantly lesser extent, with respect to the Mexican peso positions).
Other operating income and expense, net
Other operating income and expense, net of the Corporate Center for the nine months ended September 30, 2023 was €49 million of net income, a 17.2% decrease compared with the €59 million net income recorded for the nine months ended September 30, 2022.
Administration costs
Administration costs of the Corporate Center for the nine months ended September 30, 2023 amounted to €459 million, a 3.4% increase compared with the €444 million recorded for the nine months ended September 30, 2022.
41


Depreciation and amortization
Depreciation and amortization of the Corporate Center for the nine months ended September 30, 2023 was €155 million, a 3.9% increase compared with the €149 million recorded for the nine months ended September 30, 2022.
Provisions or reversal of provisions and other results
Provisions or reversal of provisions and other results of the Corporate Center for the nine months ended September 30, 2023 were a €2 million expense compared to €3 million expense recorded for the nine months ended September 30, 2022.
Operating profit / (loss) before tax
As a result of the foregoing, operating loss before tax of the Corporate Center for the nine months ended September 30, 2023 was €1,558 million compared with the €741 million loss recorded for the nine months ended September 30, 2022.
Tax expense or income related to profit or loss from continuing operations
Tax income related to loss from continuing operations of the Corporate Center for the nine months ended September 30, 2023 amounted to €232 million, a 38.2% increase compared with the €168 million income recorded for the nine months ended September 30, 2022, mainly as a result of the higher operating loss before tax and the adjustment for the estimation of the annual tax rate for the BBVA Group.
Profit / (loss) attributable to parent company
As a result of the foregoing, loss attributable to parent company of the Corporate Center for the nine months ended September 30, 2023 was €1,321 million compared with the €566 million loss recorded for the nine months ended September 30, 2022.
42


Capital
As of September 30, 2023 and December 31, 2022, total capital is calculated in accordance with current regulations on minimum capital requirements for Spanish credit institutions on both an individual and consolidated basis. These regulations dictate how to calculate total capital levels, as well as the various internal capital adequacy assessment processes Spanish credit institution should have in place and the information such institutions should disclose to the market.
The minimum capital requirements established by the current regulations are calculated according to the Group’s exposure to credit and dilution risk, counterparty and liquidity risk relating to the trading portfolio, exchange-rate risk and operational risk. In addition, the Group must fulfill the risk concentration limits established in these regulations and internal corporate governance obligations.
With regard to minimum capital requirements, the ECB, in its announcement on March 12, 2020, allowed banks to use Additional Tier 1 and Tier 2 capital instruments to comply with the Pillar II (P2R) requirements, with the same levels of composition as Pillar I requirements, which is known as “Pillar 2 tiering”. Based on the results of the latest Supervisory Review and Evaluation Process (“SREP”), the ECB informed the Group that, from January 1, 2023 onwards, the “Pillar 2” requirement would be maintained at 1.5%, to be distributed according to the Pillar 2 tiering.
The consolidated total capital requirement as of September 30, 2023 is 13.00%, which includes: (i) the minimum capital requirement of Common Equity Tier 1 (CET1) of Pillar 1 (4.5%); (ii) the capital requirement of Additional Tier 1 (AT1) of Pillar 1 (1.5%); (iii) the capital requirement of Tier 2 of Pillar 1 (2%); (iv) the CET1 requirement of Pillar 2 (0.96%); (v) the AT1 requirement of Pillar 2 (0.28%); (vi) the capital requirement of Tier 2 of Pillar 2 (0.38%); (vii) the capital conservation buffer (2.5% of CET1); (viii) the capital buffer for Other Systemically Important Institutions (O-SIIs) (0.75% of CET1); and (ix) the Countercyclical Capital buffer of 0.06% of CET1. The CET1 ratio requirement is 8.77%.
According to a resolution from the Bank of Spain of September 2023, BBVA is an “Other Systemically Important Institution” (hereinafter referred to as O-SII). This resolution also sets the corresponding O-SII capital buffer, which was increased by 25 basis points compared to the buffer established in the previous year, standing at 100 basis points (1%) as from January 1, 2024. This increase is due to the adaptation of the Bank of Spain’s methodology for the determination of the O-SII capital buffers to the revision of the methodological framework on O-SII minimum buffers established by the ECB.
BBVA Group’s fully-loaded CET1 ratio stood at 12.73% as of September 30, 2023, which represents an increase of +12 basis points compared to December 31, 2022, and the consolidated phased-in CET1 stood also at 12.73%, which represents an increase of +5 basis points in the nine months ended September 30, 2023, since the transitory adjustments for the treatment of the impacts of IFRS 9 have no effect on capital ratios as of September 30, 2023.
These ratios include the period-on-period regulatory differences included during the first quarter of 2023 (see “Item 4. Information on the Company—Business Overview—Supervision and Regulation—Capital Requirements, MREL and Resolution” in our 2022 Form 20-F and Note 32 to our Consolidated Financial Statements), with an impact of -20 basis points on CET1. Additionally, since the deduction for the prudential hedging of non-performing exposures has been incorporated in the Group’s capital requirement, such deduction has been reversed from the CET1, resulting in an impact of +19 basis points. Excluding these effects, the fully-loaded CET1 ratio increased by +13 basis points compared to December 31, 2022.
Fully-loaded risk-weighted assets (RWA) increased in the nine months ended September 30, 2023 by approximately €21 billion, as a result, in part, of the increase in the loan portfolio and the increase in RWA for market risk, which was partially offset by the effect of changes in exchange rates.
The fully-loaded AT1 ratio stood at 1.72% as of September 30, 2023, which included the impact of the €1 billion CoCos issued at par value in June 2023, and the $1 billion CoCos issued in September 2023.
The fully-loaded Tier 2 ratio stood at 2.05% as of September 30, 2023, which represents an increase of +26 basis points compared to December 31, 2022, mainly due to the issuance of three series of subordinated bonds (€750 million in Spain in June 2023, $1 billion in Mexico in June 2023 and GBP 300 million issued by Banco Bilbao Vizcaya Argentaria, S.A. in September 2023).
As a result of the above, the total fully-loaded capital ratio stood at 16.51% as of September 30, 2023.
With effect from January 1, 2023, the application of part of the transitional effects applied by the Group in the determination of the phased-in ratio has ended, so that as of September 30, 2023 the phased-in ratios coincide with the fully-loaded ratios.
43


Our consolidated ratios as of September 30, 2023 and December 31, 2022 were as follows:
CAPITAL BASE (MILLIONS OF EUROS)
CRD IV phased-inCRD IV fully-loaded
September 30, 2023 (1)
December 31, 2022 (2)
September 30, 2023 (1)
December 31, 2022 (2)
Common Equity Tier 1 (CET1)45,56742,73845,56742,484
Tier 151,73547,93151,73547,677
Tier 27,3505,9307,3506,023
Total capital (Tier 1 + Tier 2) 59,08553,86159,08553,699
Risk-weighted assets 357,972337,066357,972336,884
CET1 (%)12.7312.6812.7312.61
Tier 1 (%)14.4514.2214.4514.15
Tier 2 (%) 2.051.762.051.79
Total capital ratio (%) 16.5115.9816.5115.94
(1)Preliminary data.
(2)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 application 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 September 30, 2023, there were no differences between phased-in and fully-loaded ratios due to the temporary nature of such treatments.
With regard to MREL (Minimum Requirement for own funds and Eligible Liabilities) requirements, on March 8, 2022, BBVA announced that it had received a communication from the Bank of Spain regarding its minimum requirement for own funds and eligible liabilities, established by the Single Resolution Board (“SRB”), calculated taking into account the financial and supervisory information as of June 30, 2021. In accordance with this MREL 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 sub-consolidated level (the “MREL in RWA”). Within this MREL in RWA, an amount equal to 13.50% of the RWA of the resolution group shall 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, would be 3.32%, considering exposures subject to the calculation of the countercyclical buffer as of June 30, 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 September 30, 2023, the MREL in RWA ratio stood at 27.23%, complying with the aforementioned requirement. In addition, as of September 30, 2023, the MREL in LR was 11.31% and the subordination ratios in terms of RWA and in terms of LR were 22.50% and 9.35%, respectively.
On June 14, 2023 BBVA announced that it had received a new communication from the Bank of Spain regarding its MREL requirement, established by SRB, calculated taking into account the financial and supervisory information as of December 31, 2021. In accordance with this new MREL communication, BBVA has to reach, as from 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 combined capital buffer requirement which, according to applicable regulations and supervisory criteria, would be 3.32% as of September 30, 2023, considering exposures subject to the calculation of the countercyclical buffer as of June 30, 2023. Given the own funds and eligible liabilities structure of the resolution group as of September 30, 2023, the MREL in RWA met the requirement.
Finally, as of September 30, 2023, the fully-loaded leverage ratio stood at 6.59% compared to 6.46% as of December 31, 2022, mainly due to the increase in Tier 1 capital.
44



Unaudited Condensed Interim Consolidated Financial Statements as of and for the nine months ended September 30, 2023




Contents
UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
F-9
F-10
F-14
F-15
F-15
F-16
F-21
F-23
F-23
F-23
F-24
F-24
F-24
F-24
F-25
F-25
F-26
F-26
F-27
F-27
F-28
F-29
F-29
F-29
F-29
F-30
F-30
F-31
F-31
F-31
F-32
F-32
F-1


APPENDIX


F-2


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Unaudited condensed consolidated balance sheets as of September 30, 2023 and December 31, 2022
ASSETS (Millions of Euros)
NotesSeptember
2023
December
2022
Cash, cash balances at central banks and other demand deposits866,85979,756
Financial assets held for trading9134,804110,671
Non-trading financial assets mandatorily at fair value through profit or loss108,4906,888
Financial assets designated at fair value through profit or loss11939913
Financial assets at fair value through other comprehensive income1263,79265,374
Financial assets at amortized cost13446,046414,421
Derivatives - hedge accounting1,5961,891
Fair value changes of the hedged items in portfolio hedges of interest rate risk(135)(148)
Joint ventures and associates14926916
Insurance and reinsurance assets21198183
Tangible assets159,3858,737
Intangible assets 162,3102,156
Tax assets1717,79916,725
Other assets 183,7132,586
Non-current assets and disposal groups classified as held for sale 191,0131,022
TOTAL ASSETS757,736712,092
LIABILITIES AND EQUITY (Millions of Euros)
NotesSeptember
2023
December
2022
Financial liabilities held for trading 9118,27695,611
Financial liabilities designated at fair value through profit or loss 1112,86210,580
Financial liabilities at amortized cost 20544,853529,172
Derivatives - hedge accounting3,2043,303
Liabilities under insurance and reinsurance contracts 2111,26010,131
Provisions224,7604,933
Tax liabilities 173,1602,935
Other liabilities 185,9084,909
Liabilities included in disposal groups classified as held for sale19
TOTAL LIABILITIES704,283661,575
SHAREHOLDERS’ FUNDS65,96364,535
Capital242,9232,955
Share premium20,51420,856
Other equity3463
Retained earnings2536,28532,711
Other reserves251,2492,345
Less: Treasury shares(51)(29)
Profit or loss attributable to owners of the parent5,9616,358
Less: Interim dividends(952)(722)
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)26(16,213)(17,642)
MINORITY INTERESTS (NON-CONTROLLING INTERESTS)273,7033,623
TOTAL EQUITY53,45350,517
TOTAL EQUITY AND TOTAL LIABILITIES757,736712,092
MEMORANDUM ITEM (OFF-BALANCE SHEET EXPOSURES) (Millions of Euros)
NotesSeptember
2023
December
2022
Loan commitments given28155,636136,920
Financial guarantees given2817,29916,511
Other commitments given2841,99639,137
The Notes are an integral part of the unaudited condensed interim consolidated financial statements.
F-3


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Unaudited condensed consolidated income statements for the nine months ended September 30, 2023 and 2022
CONDENSED CONSOLIDATED INCOME STATEMENTS (Millions of Euros)
NotesSeptember
2023
September
2022
Interest and other income29.135,76622,155
Financial assets at fair value through other comprehensive income3,0542,214
Financial assets at amortized cost28,22017,208
Other interest income4,4932,734
Interest expense29.2(17,923)(8,366)
NET INTEREST INCOME17,84313,790
Dividend income 307579
Share of profit or loss of entities accounted for using the equity method 2015
Fee and commission income 317,2396,152
Fee and commission expense31(2,646)(2,108)
Gains (losses) on derecognition of financial assets and liabilities not measured at fair value through profit or loss, net32(16)50
Gains (losses) on financial assets and liabilities held for trading, net32766141
Gains (losses) on non-trading financial assets mandatorily at fair value through profit or loss, net32(50)(27)
Gains (losses) on financial assets and liabilities designated at fair value through profit or loss, net32167360
Gains (losses) from hedge accounting, net 3251(36)
Exchange differences, net325131,180
Other operating income 33443407
Other operating expense33(3,242)(2,592)
Income from insurance and reinsurance contracts342,6252,076
Expense from insurance and reinsurance contracts34(1,685)(1,234)
GROSS INCOME22,10418,255
Administration costs35(8,187)(6,836)
Depreciation and amortization36(1,054)(990)
Provisions or reversal of provisions37(210)(241)
Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss or net gains by modification38(3,203)(2,380)
NET OPERATING INCOME9,4507,807
Impairment or reversal of impairment of investments in joint ventures and associates1013
Impairment or reversal of impairment on non-financial assets39(17)(7)
Gains (losses) on derecognition of non-financial assets and subsidiaries, net6(12)
Gains (losses) from non-current assets and disposal groups classified as held for sale not qualifying as discontinued operations 4037(92)
PROFIT (LOSS) BEFORE TAX FROM CONTINUING OPERATIONS9,4877,710
Tax expense or income related to profit or loss from continuing operations(3,204)(2,655)
PROFIT (LOSS) AFTER TAX FROM CONTINUING OPERATIONS6,2835,054
Profit (loss) after tax from discontinued operations19
PROFIT (LOSS)6,2835,054
ATTRIBUTABLE TO MINORITY INTERESTS (NON-CONTROLLING INTERESTS)27322259
ATTRIBUTABLE TO OWNERS OF THE PARENT5,9614,795
September
2023
September
2022
EARNINGS (LOSSES) PER SHARE (Euros)0.960.73
Basic earnings (losses) per share from continuing operations0.960.73
Diluted earnings (losses) per share from continuing operations 0.960.73
Basic earnings (losses) per share from discontinued operations
Diluted earnings (losses) per share from discontinued operations
The Notes are an integral part of the unaudited condensed interim consolidated financial statements.
F-4


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Unaudited condensed consolidated statements of recognized income and expense for the nine months ended September 30, 2023 and 2022
CONDENSED CONSOLIDATED STATEMENTS OF RECOGNIZED INCOME AND EXPENSE (Millions of Euros)
September
2023
September
2022
PROFIT (LOSS) RECOGNIZED IN INCOME STATEMENT6,2835,054
OTHER RECOGNIZED INCOME (EXPENSE)1,4061,767
ITEMS NOT SUBJECT TO RECLASSIFICATION TO INCOME STATEMENT(59)213
Actuarial gains (losses) from defined benefit pension plans(236)303
Non-current assets and disposal groups held for sale
Share of other recognized income and expense of entities accounted for using the equity method
Fair value changes of equity instruments measured at fair value through other comprehensive income, net177(120)
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(41)180
Income tax related to items not subject to reclassification to income statement41(150)
ITEMS SUBJECT TO RECLASSIFICATION TO INCOME STATEMENT1,4651,554
Hedge of net investments in foreign operations (effective portion)(975)(1,534)
Valuation gains (losses) taken to equity(975)(1,534)
Transferred to profit or loss
Other reclassifications
Foreign currency translation2,4835,280
Translation gains (losses) taken to equity2,4835,280
Transferred to profit or loss
Other reclassifications
Cash flow hedges (effective portion)543(517)
Valuation gains (losses) taken to equity543(546)
Transferred to profit or loss29
Transferred to initial carrying amount of hedged items
Other reclassifications
Debt securities at fair value through other comprehensive income(583)(2,677)
Valuation gains (losses) taken to equity(672)(2,727)
Transferred to profit or loss8950
Other reclassifications
Non-current assets and disposal groups held for sale
Valuation gains (losses) taken to equity
Transferred to profit or loss
Other reclassifications
Entities accounted for using the equity method141
Income tax relating to items subject to reclassification to income statements(17)1,001
TOTAL RECOGNIZED INCOME (EXPENSE)7,6896,821
Attributable to minority interests (non-controlling interests)
3061,380
ATTRIBUTABLE TO THE PARENT COMPANY7,3835,441
The Notes are an integral part of the unaudited condensed interim consolidated financial statements.
F-5


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Unaudited condensed consolidated statements of changes in equity for the nine months ended September 30, 2023 and 2022
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Millions of Euros)
Capital
(Note 24)
Share Premium Equity instruments issued other than capitalOther EquityRetained earnings
(Note 25)
Revaluation reservesOther reserves
(Note 25)
Treasury sharesProfit or loss attributable to owners of the parent
Interim dividend
 (Note 4)
Accumulated other comprehensive income
(Note 26)
Minority interestsTotal
September 2023Accumulated other comprehensive income
(Note 27)
Other
(Note 27)
Balances as of January 1, 2023 ⁽¹⁾2,95520,8566332,5362,345(29)6,420(722)(17,432)(3,112)6,73650,615
Effect of changes in accounting policies (Note 1.3)175(62)(210)4(4)(98)
Adjusted initial balance2,95520,8566332,7112,345(29)6,358(722)(17,642)(3,109)6,73250,517
Total income (expense) recognized5,9611,422(16)3227,689
Other changes in equity(32)(342)(29)3,574(1,096)(22)(6,358)(230)7(226)(4,753)
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(32)(342)25(74)422
Dividend distribution (shareholder remuneration)(1,857)(952)(227)(3,036)
Purchase of treasury shares(1,510)(1,510)
Sale or cancellation of treasury shares(2)1,0651,063
Reclassification of other equity instruments to financial liabilities
Reclassification of financial liabilities to other equity instruments
Transfers among components of equity25,648(21)(6,358)7227
Increase/Reduction of equity due to business combinations
Share based payments(41)(41)
Other increases or (-) decreases in equity10(242)(998)1(1,229)
Balances as of September 30, 20232,92320,5143436,2851,249(51)5,961(952)(16,213)(3,125)6,82853,453
(1) Balances as of December 31, 2022 as originally reported in the consolidated financial statements for the year 2022.
The Notes are an integral part of the unaudited condensed interim consolidated financial statements.
F-6


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Unaudited condensed consolidated statements of changes in equity for the nine months ended September 30, 2023 and 2022
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Millions of Euros)
Capital
(Note 24)
Share Premium Equity instruments issued other than capitalOther EquityRetained earnings
(Note 25)
Revaluation reservesOther reserves
(Note 25)
Treasury sharesProfit or loss attributable to owners of the parent
Interim dividend
 (Note 4)
Accumulated other comprehensive income
(Note 26)
Minority interestsTotal
September 2022Accumulated other comprehensive income
(Note 27)
Other
(Note 27)
Balances as of January 1, 2022 ⁽1
3,26723,5996031,841(1,857)(647)4,653(532)(16,476)(8,414)13,26748,760
Effect of changes in accounting policies (Note 1.3)178(186)1(6)(12)
Adjusted initial balance3,26723,5996032,019(1,857)(647)4,653(532)(16,662)(8,413)13,26148,748
Total income (expense) recognized4,7956461,1212596,821
Other changes in equity(313)(2,743)(6)7834,186598(4,653)(190)(822)4,255(6,831)(5,736)
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 (shareholder remuneration)(1,463)(722)(184)(2,369)
Purchase of treasury shares(2,915)(2,915)
Sale or cancellation of treasury shares8353361
Reclassification of other equity instruments to financial liabilities
Reclassification of financial liabilities to other equity instruments
Transfers among components of equity (2)
2,2442,698(4,653)532(822)4,255(4,255)
Increase/Reduction of equity due to business combinations
Share based payments(22)(22)
Other increases or (-) decreases in equity (2)
16(248)1,834(2,393)(791)
Balances as of September 30, 20222,95520,8565432,8022,329(48)4,795(722)(16,838)(3,037)6,68949,833
(1) Balances as of December 31, 2021 as originally reported in the consolidated financial statements for the year 2021.
(2) The headings "Transfers among components of equity" and "Other increases or decreases in equity" include the effects of the application of IAS 29 in the subsidiaries in Turkey 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 are an integral part of the unaudited condensed interim consolidated financial statements.
F-7


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Unaudited condensed consolidated statements of cash flows for the nine months ended September 30, 2023 and 2022
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Millions of Euros)
September
2023
September
2022
CASH FLOWS FROM OPERATING ACTIVITIES (1)(11,809)28,679
Of which hyperinflation effect from operating activities1,9582,590
Profit for the period6,2835,054
Adjustments to obtain the cash flow from operating activities9,2118,783
Depreciation and amortization1,054990
Other adjustments8,1577,792
Net increase/decrease in operating assets/liabilities(23,514)16,782
Financial assets/liabilities held for trading(935)17,229
Non-trading financial assets mandatorily at fair value through profit or loss(930)(405)
Other financial assets/liabilities designated at fair value through profit or loss1,37171
Financial assets at fair value through other comprehensive income412(3,063)
Financial assets/liabilities at amortized cost(22,678)4,130
Other operating assets/liabilities(754)(1,180)
Collection/Payments for income tax(3,790)(1,941)
CASH FLOWS FROM INVESTING ACTIVITIES (2)(1,247)(3,888)
Of which hyperinflation effect from investing activities768606
Tangible assets(992)(1,656)
Intangible assets(456)(447)
Investments in joint ventures and associates2932
Subsidiaries and other business units6(1,389)
Non-current assets/liabilities held for sale166(428)
Other settlements/collections related to investing activities
CASH FLOWS FROM FINANCING ACTIVITIES (3)(376)(6,720)
Of which hyperinflation effect from financing activities
Dividends(1,857)(1,463)
Subordinated liabilities2,451(2,183)
Common stock amortization/increase(31.675)(313)
Treasury stock acquisition/disposal(444)(2,256)
Other items relating to financing activities(495)(505)
EFFECT OF EXCHANGE RATE CHANGES (4)5352,207
NET INCREASE/DECREASE IN CASH AND CASH EQUIVALENTS (1+2+3+4)(12,896)20,277
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD79,75667,799
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD66,85988,076
COMPONENTS OF CASH AND EQUIVALENT AT END OF THE PERIOD (Millions of Euros)
NotesSeptember
2023
September
2022
Cash on hand86,8666,640
Cash balances at central banks853,67170,913
Other demand deposits86,32310,523
Less: Bank overdraft refundable on demand
TOTAL CASH AND CASH EQUIVALENTS AT END OF THE PERIOD866,85988,076
The Notes are an integral part of the unaudited condensed interim consolidated financial statements.
F-8


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Notes to the condensed interim consolidated financial statements as of and for the nine months ended September 30, 2023
1.Introduction, basis for the presentation of the condensed interim consolidated financial statements and other information
1.1.Introduction
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.
The consolidated financial statements of the BBVA Group for the year ended December 31, 2022 were authorized for issue on March 6, 2023.
1.2.Basis for the presentation of the condensed interim consolidated financial statements
The BBVA Group’s condensed interim consolidated financial statements (hereinafter the “Consolidated Financial Statements”) as of and for the nine-month period ended September 30, 2023 are presented in accordance with the International Accounting Standard 34 “Interim Financial Reporting” (hereinafter “IAS 34”) and have been approved by the Board of Directors at its meeting held on October 30, 2023. In accordance with IAS 34, the interim financial information is prepared solely for the purpose of updating the last annual consolidated financial statements, focusing on new activities, events and circumstances that occurred during the period without duplicating the information previously published in those consolidated financial statements.
Therefore, the Consolidated Financial Statements do not include all information required by a complete set of consolidated financial statements prepared in accordance with International Financial Reporting Standards endorsed by the European Union (“EU-IFRS”), consequently for an appropriate understanding of the information included in them, they should be read together with the consolidated financial statements of the Group as of and for the year ended December 31, 2022.
The aforementioned annual 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 (“EU-IFRS”) applicable as of December 31, 2022, 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 Consolidated Financial Statements were prepared applying principles of consolidation, accounting policies and valuation criteria, which, as described in Note 2, are the same as those applied in the consolidated financial statements of the Group as of and for the year ended December 31, 2022, except for the new Standards and Interpretations that became effective from January 1, 2023 (see Note 2.1), so that they present fairly the Group’s consolidated equity and financial position as of September 30, 2023, together with the consolidated results of its operations and the consolidated cash flows generated by the Group during the nine months ended September 30, 2023.
The Consolidated Financial Statements and Notes were prepared on the basis of the accounting records kept by the Bank and each of the other entities in the Group. They include the adjustments and reclassifications required to harmonize the accounting policies and valuation criteria used by the entities in the Group.
All effective accounting standards and valuation criteria with a significant effect in 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. Therefore, some items