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Rating Action:

Moody's affirms BBVA's ratings; outlook stable

19 Jun 2019

Madrid, June 19, 2019 -- Moody's Investors Service ("Moody's") has today affirmed the long-term deposit and senior unsecured debt ratings of Banco Bilbao Vizcaya Argentaria, S.A. (BBVA) at A2 and A3 respectively. The outlook on both ratings remains stable. At the same time, Moody's has affirmed the bank's baseline credit assessment (BCA) and adjusted BCA at baa2. Short-term deposits and debt programme ratings were affirmed at Prime-1 and (P)Prime-2 respectively as well as the bank's commercial paper at Prime-2.

The rating affirmation reflects the resilience of BBVA's credit profile to the deterioration of the operating environment in Turkey, with any expected negative developments in the bank's Turkish subsidiary being offset by the stronger performance of other of the bank's units, particularly its domestic business.

A full list of affected ratings can be found at the end of this press release.

RATINGS RATIONALE

-- RATIONALE FOR AFFIRMING THE RATINGS WITH STABLE OUTLOOK

Today's ratings affirmation reflects Moody's assessment that BBVA's credit profile is resilient to the expected weaker performance of its operations in Turkey, and follows Moody's lowering of Turkey's Macro Profile to Very Weak + from Weak- and the downgrade of BBVA's Turkish subsidiary, Turkiye Garanti Bankasi A.S. (Garanti BBVA), long-term local currency deposit and senior unsecured debt ratings to B2 from B1 on 18 June 2019 (Moody's downgrades 18 Turkish banks; outlooks remain negative; https://www.moodys.com/research/--PR_402300).

The affirmation of BBVA's ratings takes into account the group's leading market positions in several major and relatively uncorrelated markets that result into a widely diversified balance sheet. This underpins BBVA's low earnings volatility and the bank's proven sustained internal capital generation even in times of stress. As such, Moody's would only expect an adverse impact in BBVA's BCA in the event of a significant deterioration in Garanti BBVA's asset quality and profitability well beyond Moody's current estimates. At end of 2018, Turkey represented 10% of the group's loan book and net profits. The rating agency expects that BBVA's geographical diversification will remain a positive credit driver.

Although BBVA's current BCA continues to reflect the rating agency's expectation for a sustained improvement in the group's asset quality and profitability metrics primarily driven by the stronger performance of its domestic franchise, the bank's standalone assessment also captures more conservative prospects for these two factors owing to the anticipated deterioration in the Turkish operations.

BBVA's capital also shows a strong resilience to negative developments in Turkey. Any negative impact from foreign-exchange risk is limited as BBVA hedges regulatory capital and expected profit contribution. Specifically, Moody's understands that a 10% depreciation of the Turkish lira would have a minor impact of two basis points in the bank's CET1 capital and 30% of expected earnings for 2019 are hedged. Moreover, according to Moody's estimations, in an extreme scenario in which BBVA lost its equity investment at Garanti BBVA, the impact on the bank's CET1 ratio at end of March 2019 would be a decline of 15 basis points to 11.2%, which is still amply above its SREP requirement from 1 March 2019 (9.26%).

Moody's likewise expects a limited impact in terms of liquidity and funding, with any contagion being limited by BBVA's internal policies, which stipulate that all subsidiaries must be fully managed locally and be self-sufficient in terms of liquidity. While recent market turmoil is likely to increase the pricing of wholesale funding, Moody's expects BBVA to have broad access to wholesale markets as has been the case in past stress episodes.

The affirmation of BBVA's long-term deposit at A2 and senior unsecured debt ratings at A3 with a stable outlook also reflects: (1) The result from the rating agency's Advanced Loss-Given Failure (LGF) analysis, which results in an unchanged three notches of uplift for the deposit ratings and two notches of uplift for the senior debt ratings; and (2) Moody's assessment of a moderate probability of government support for BBVA (which nevertheless results in no further uplift given that BBVA's Preliminary Rating Assessments (PRAs) are already exceeding the sovereign rating).

WHAT COULD CHANGE THE RATING UP

BBVA's deposit and senior debt ratings could be upgraded if the bank's BCA is upgraded. An upgrade of the deposit rating would, however, also require the upgrade of Spain's sovereign rating given that the current A2 deposit rating already exceeds the sovereign rating by two notches and are constrained at that level under Moody's methodology. The senior debt rating could also be upgraded if Moody's forward-looking LGF analysis results in a higher notching.

The bank's BCA could be upgraded as a consequence of a sustained recovery in profitability, that will also lead to stronger Tangible Common Equity levels, while asset risk continues to improve.

WHAT COULD CHANGE THE RATING DOWN

Downward pressure on BBVA's BCA could develop as a result of (1) inadequate risk-absorption capacity; (2) evidence of the bank's inability to withstand our liquidity stress test; (3) a lower share of recurring earnings; or (4) evidence of a weaker-than-expected performance in the bank's international activities, particularly a deterioration in Garanti BBVA's asset quality beyond Moody's current estimates.

BBVA's debt and deposit ratings are linked to the standalone BCA. As such, any change to the BCA would also likely affect these ratings. The bank's deposit and senior unsecured debt ratings could also change as a result of changes in the loss given failure that these securities face, in particular, if the bank fails to deliver on its funding plan.

LIST OF AFFECTED RATINGS

Issuer: Banco Bilbao Vizcaya Argentaria, S.A.

..Affirmations:

....Long-term Counterparty Risk Ratings, affirmed A2

....Short-term Counterparty Risk Ratings, affirmed P-1

....Long-term Bank Deposits, affirmed A2, outlook remains Stable

....Short-term Bank Deposits, affirmed P-1

....Long-term Counterparty Risk Assessment, affirmed A3(cr)

....Short-term Counterparty Risk Assessment, affirmed P-2(cr)

....Long-term Issuer Rating, affirmed A3, outlook remains stable

....Baseline Credit Assessment, affirmed baa2

....Adjusted Baseline Credit Assessment, affirmed baa2

....Senior Unsecured Regular Bond/Debenture, affirmed A3, outlook remains Stable

....Senior Unsecured Shelf, affirmed (P)A3

....Senior Unsecured Medium-Term Note Program, affirmed (P)A3

....Junior Senior Unsecured Regular Bond/Debenture, affirmed Baa2

....Junior Senior Unsecured Medium-Term Note Program, affirmed (P)Baa2

....Subordinate Regular Bond/Debenture, affirmed Baa3

....Subordinate Shelf, affirmed (P)Baa3

....Subordinate Medium-Term Note Program, affirmed (P)Baa3

....Preferred Stock Non-cumulative, affirmed Ba2(hyb)

....Commercial Paper, affirmed P-2

....Other Short Term, affirmed (P)P-2

..Outlook Action:

....Outlook remains Stable

Issuer: BBVA Capital Finance, S.A Unipersonal

..Affirmations:

....Backed Preferred Stock Non-cumulative, affirmed Ba3(hyb)

..No Outlook assigned

Issuer: BBVA Global Finance Ltd.

..Affirmation:

....Backed Subordinate Regular Bond/Debenture, affirmed Baa3

..No Outlook assigned

Issuer: BBVA Global Markets B.V.

..Affirmations:

....Backed Senior Unsecured Regular Bond/Debenture, affirmed A3, outlook remains Stable

....Backed Senior Unsecured Medium-Term Note Program, affirmed (P)A3

....Backed Other Short Term, affirmed (P)P-2

..Outlook Action:

....Outlook remains Stable

Issuer: BBVA International Limited

..Affirmation:

....Backed Preferred Stock Non-cumulative, affirmed Ba3(hyb)

..No Outlook assigned

Issuer: Banco Bilbao Vizcaya Argentaria, SA London Br

..Affirmations:

....Long-term Counterparty Risk Assessment, affirmed A3(cr)

....Short-term Counterparty Risk Assessment, affirmed P-2(cr)

....Long-term Counterparty Risk Ratings, affirmed A2

....Short-term Counterparty Risk Ratings, affirmed P-1

....Short-term Bank Deposits, affirmed P-1

....Commercial Paper, affirmed P-2

....Long-term Bank Deposits, affirmed A2, outlook remains Stable

..Outlook Action:

....Outlook remains Stable

Issuer: Banco Bilbao Vizcaya Argentaria, SA Paris Br

..Affirmations:

....Long-term Counterparty Risk Ratings, affirmed A2

....Short-term Counterparty Risk Ratings, affirmed P-1

....Long-term Bank Deposits, affirmed A2, outlook remains Stable

....Short-term Bank Deposits, affirmed P-1

....Long-term Counterparty Risk Assessment, affirmed A3(cr)

....Short-term Counterparty Risk Assessment, affirmed P-2(cr)

....Commercial Paper, affirmed P-2

..Outlook Action:

....Outlook remains Stable

Issuer: Banco Bilbao Vizcaya Argentaria,SA, New York

..Affirmations:

....Long-term Counterparty Risk Ratings, affirmed A2

....Short-term Counterparty Risk Ratings, affirmed P-1

....Long-term Bank Deposits, affirmed A2, outlook remains Stable

....Short-term Bank Deposits, affirmed P-1

....Long-term Counterparty Risk Assessment, affirmed A3(cr)

....Short-term Counterparty Risk Assessment, affirmed P-2(cr)

..Outlook Action:

....Outlook remains Stable

Issuer: Catalunya Banc SA (debts assumed by Banco Bilbao Vizcaya Argentaria, S.A.)

..Affirmations:

....Senior Unsecured Regular Bond/Debenture, affirmed A3, outlook remains Stable

..No Outlook assigned

PRINCIPAL METHODOLOGY

The principal methodology used in these ratings was Banks published in August 2018. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Maria Cabanyes
Senior Vice President
Financial Institutions Group
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Carola Schuler
MD - Banking
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Releasing Office:
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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