RBC Capital Markets on Wednesday lowered its recommendation on Banco Bilbao Vizcaya Argentaria SA to "sector perform" from "outperform," arguing that the Spanish lender’s market rating already embeds much of its strengths. The brokerage simultaneously nudged up its price target to €19.75 from €19.25, but noted that the shares still traded at elevated levels and offered little near-term upside. BBVA shares slipped by over 2% following the move.
The analysts pointed to the bank’s strong operating performance while stressing that valuation appears full. BBVA is quoted at 2.1x tangible book value per share for fiscal 2026 - a level RBC describes as "full-ish" when compared with other European peers. That multiple, the firm says, makes further notable gains in BBVA’s share price harder to achieve despite top-tier metrics.
RBC highlighted that BBVA’s valuation premium over domestic rival Banco Santander has widened significantly. On a one-year forward price-to-tangible book value basis the gap stands at 0.40x, the largest differential in more than a decade according to the brokerage. Reflecting that view, RBC shifted its relative preference to Santander, which carries a Sector Perform rating and an €8.50 price target. "Going into 2026, our preference is for SAN, where we think there is lower hanging fruit," the analysts said.
Management targets and consensus
BBVA’s management has set out fiscal 2025-28 guidance that includes an average return on tangible equity of 22%, total distributions of €36 billion and a mid-teens compound annual growth rate for tangible book value per share plus dividends per share. By contrast, consensus expectations sit slightly higher in some areas: consensus ROTE exceeds 21%, projected distributions total €37 billion and analysts forecast 15% growth for the combined tangible book value and dividends metric.
RBC said these top-quartile operating parameters help justify BBVA’s relative valuation premium, but added that such dynamics now appear largely reflected in consensus forecasts, limiting the scope for further rerating.
Geographic profit mix and political considerations
BBVA’s earnings mix further complicates valuation. The bank generates roughly 10% of its profits from Turkey, a market whose political calendar introduces uncertainty - elections are scheduled for May 2028. RBC applied a 20% divisional cost of equity for Turkey when assessing the impact on overall valuation and concluded the country contributes about 5% to its price target.
Other regional profit contributions for fiscal 2025, per RBC’s summary, are: Mexico at 50% of net attributable profit amounting to €5.2 billion; Spain at 35% with €4.1 billion; Turkey at 8% or €909 million; South America at 7% with €759 million; and Rest of Business at 6% with €643 million.
Costs, earnings and model assumptions
On cost control, BBVA has targeted a cost-to-income ratio of 35% by fiscal 2028, versus a consensus view of 36%. Management describes cost discipline as keeping expense growth below weighted average inflation of 7% year-over-year for fiscal 2026. For comparison, Santander has guided for costs that are flat to down.
RBC’s own estimates for fiscal 2026 assume net interest income of €27.9 billion, up roughly 7% from €26.1 billion in fiscal 2025, and adjusted net attributable profit of €11.4 billion, which translates into earnings per share of €2.06.
Valuation underpinned RBC’s view as well: the brokerage applied a sum-of-the-parts framework using a 13.8% cost of equity to arrive at its fair value for BBVA.
Downside risks highlighted by RBC
RBC identified several downside risks that could weigh on BBVA’s outlook. These include political uncertainty in Turkey, the potential for U.S. tariffs to affect markets or operations, and the possibility of regulatory caps on retail banking fees in Mexico.
The combination of a perceived full valuation, material exposure to markets with political or regulatory uncertainty, and management targets that look to be baked into consensus estimates led RBC to conclude that BBVA’s stock offers limited upside from current levels, prompting the move to a sector perform rating and a reallocation of preference toward Santander.