BBVA stands out as one of Europe’s most resilient banks in latest EBA stress test
BBVA has once again stood out in the latest stress test carried out by the European Banking Authority (EBA). In the adverse scenario BBVA’s fully-loaded CET1 capital ratio at the end of the assessment period (2021-2023) would be reduced on 303 basis points (bps), an impact considerably lower than the 50 European banks average analyzed on the stress test (485 bps). BBVA is the bank with the second lowest impact on capital among comparable European peers. In the baseline scenario, BBVA would generate 128 bps of capital, to reach a fully-loaded CET1 capital ratio of 13 percent in 2023.
The EBA, in cooperation with the European Central Bank (ECB) and the European Systemic Risk Board (ESRB), has again examined Europe’s leading banks to a stress test under two scenarios: a baseline scenario and an adverse scenario. Just as in previous occasions, the stress test does not involve a pass or fail threshold, but rather it is designed to be used as a key source of information for the Supervisory Review and Evaluation Process (SREP). The results allow supervisory authorities to assess each bank’s capability to achieve the minimum capital levels and the additional own resource requirements established in each case, in a context of economic crisis and based on a common methodology and assumptions. In this sense, neither the stress test nor the results thereof should be interpreted as a forecast of the earnings of the institutions that undergo said tests.
According to the results of the stress test, in the adverse scenario BBVA would reach a fully-loaded CET1 ratio of 8.69 percent in 2023, which represents a negative impact of 303 basis points. This result compares favorably with the average capital consumption for the 50 European banks (485 bps). Within its group of comparable European entities that were part of the stress test¹, the average impact was 513 basis points and BBVA ranks as the second bank with the least impact.
¹ BBVA peer group of banks participating in the stress test includes: BNP Paribas, Commerzbank, Deutsche Bank, Groupe Crédit Agricole, Intesa Sanpaolo, Santander, Société Générale and Unicredit.
The stress test covers a three-year time horizon (2021-2023), and applies each institution’s static balance sheet as of 31 December 2020 as a point of departure, without considering any further business strategies or management actions beyond said date. Therefore, in the case of BBVA, it does not take into account neither the sale of the U.S. and Paraguay units, completed in 2021, nor the restructuring plan in Spain carried out this year. The aggregated impact of these operations on the CET1 capital ratio as of June 2021 accounts for +240 basis points.
In the base scenario, BBVA's fully-loaded CET1 ratio would increase 128 basis points to 13.00 percent in 2023.
This is the seventh stress test exercise carried out by the EBA since 2009. This edition saw the participation of 50 banks, covering 70 percent of the assets of the EU banking sector (plus Norway). Four of these banks are from Spain: BBVA, Santander, Sabadell and Bankinter.