BBVA shows strength in latest stress test for European banks

The stress test for this year aims to evaluate how well the European banking sector can withstand the challenges posed by the current macroeconomic situation, which is characterized by uncertainty and constant change. The test will simulate a hypothetical scenario involving geopolitical tensions, rising inflation, and higher interest rates. These factors are expected to have a detrimental impact on private consumption and investments, both within European countries and globally. The 2023 adverse scenario used in the test is the most severe decline in GDP ever considered thus far.

On its website, the EBA explains that the extreme severity of the negative situation demonstrates an intentional decision and serves the purpose of evaluating the European banking system's ability to withstand a hypothetical and significantly worsened economic setting.

The stress test assessment spans over a span of three years (2023-25) and utilizes the financial standing of each bank as of December 31, 2022, which remains unchanged throughout the assessment period. A collective of 70 banks from the European Union and Norway took part in this round, representing a significant portion of 75 percent of the banking sector's total assets.

In a worst-case situation, BBVA's fully-loaded CET 1 capital ratio for 2025 would be 9.66 percent, which means a negative impact of 295 pbs. These findings demonstrate BBVA's resilience, as it experiences a much smaller decline in capital compared to other surveyed banks, which is an average of 459 pbs. Among similar banks, BBVA is the third one with the least significant impact. Additionally, BBVA has shown improvement since the 2021 stress tests, where the adverse scenario had a negative impact of 303 pbs.