Company: BBVXF
Filing Date: 2025-02-21
Form Type: 20-F
Source: 0000842180-25-000010
Chunk: 8

Company: BANCO BILBAO VIZCAYA ARGENTARIA, S.A.
Filing Date: 2025-02-21
Form: 20-F
Item: Item 3
Chunk 8
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ies. In particular, the Group’s estimates of losses derived from its exposure to credit risk may prove to be inadequate or insufficient in the current environment of economic uncertainty, which could affect the adequacy of the provisions for insolvencies provided by the Group. An increase in non-performing or low-quality loans could significantly and adversely affect the Group’s business, financial condition and results of operations. 
The Group’s business is particularly vulnerable to interest rates
The Group’s results of operations are substantially dependent upon the level of its net interest income, which is the difference between interest income from interest-earning assets and interest expense on interest-bearing liabilities. Changes in market interest rates often affect the Group’s interest-earning assets differently from the Group’s interest-bearing liabilities. This, in turn, may lead to a reduction in the Group’s net interest margin, which could have a material adverse effect on its results. Moreover, changes in interest rates may affect the Group’s credit risk exposure (see “—The Group’s business is subject to inherent risks concerning counterparties’ credit quality and the value of collateral, particularly in Spain, that strengthens its lending portfolio”).
Interest rates are highly sensitive to many factors beyond the Group’s control, including fiscal and monetary policies of governments and central banks, regulation of the financial sector, domestic and international economic and political conditions and other factors. The Group’s results of operations have been positively affected by the increases in interest rates adopted by central banks in recent years in an attempt to tame inflation, contributing to a rise in net interest income that exceeded the corresponding rise in funding costs. Interest rates have begun to decline in most of the regions in which BBVA is present (including the Eurozone and the United States) driven by the central banks’ monetary policies in response to easing inflationary pressures. However, interest rates remain relatively high compared to prior years. The continued prevalence of high interest rates or any increase in interest rates in the future could adversely affect the Group by reducing the demand for credit, limiting its ability to generate credit for its clients and/or increasing the default rate of its counterparties (including borrowers). In particular, the repayment capacity of loans tied to variable interest rates is more sensitive to changes in interest rates. As of December 31, 2024, 2023 and 2022, 45.6%, 47.7% and 49.2%, respectively, of the Group’s gross exposure to loans and advances to customers with maturity greater than one year had floating-interest rates. Changes in interest rate policies may