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Ratings 04 Jul 2019

Fitch upgrades BBVA's senior preferred debt rating to A

Credit rating agency Fitch has upgraded BBVA’s senior preferred debt long-term rating by one notch to A from A-. Fitch has also affirmed the Group’s long-term Issuer Default Rating at A- with a negative outlook, thanks to the strength of the bank in Spain and the resilience of its Mexican franchise.

“The ratings reflect BBVA’s solid retail franchise in its main markets in Spain, the U.S., Mexico, Turkey and a number of South American countries, resilient earnings generation capacity, improved asset quality and satisfactory capitalization and funding and liquidity profile,” according to the agency’s press release. Fitch also underscores that the ratings take into account BBVA’s track record operating in emerging markets (more volatile) and its Multiple Point of Entry (MPE) model, with self-sustaining franchises in terms of capital and liquidity.

In upgrading the senior preferred debt long-term rating to A, Fitch has factored in the Group’s loss-absorbing capital buffers, such as senior non preferred debt, which are considered to be sufficient to “materially” reduce the risk of default of the bank’s senior preferred debt.

Fitch underscores the resilience shown by the bank in Mexico, despite the country’s economic slowdown

Also, Fitch has affirmed the Group’s long-term Issuer Default Rating at A-, with a negative outlook, as it considers that the uncertainty in Turkey would be offset by higher profits in other core markets. Specifically, the agency expects Spain’s profitability to improve, driven by a number of factors, including lower credit provisions and the operating cost-containment efforts.

Additionally, the rating agency considers that the U.S. franchise’s positive contribution to the Group’s earnings will continue, and underscores the resilience shown by the bank in Mexico, despite the country’s economic slowdown.

Fitch’s decision arrives just a few weeks after Moody’s affirmed BBVA’s rating (A3) with a stable outlook. In its press release, Moody’s highlighted “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”.

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