…Chief Executive Officer of the Group; and Jaime Sáenz de Tejada, BBVA Group CFO. As in previous quarters, Onur will begin with a presentation of group results and 2020 achievements, and then Jaime will review the business areas. We will move straight to the live Q&A session after that. Onur Genç: Thank you, Gloria. Good morning to everyone. Welcome and thank you for joining our call. I will now be saying it for the 4 quarters in a row now, but I really hope that everyone is safe and sound. You and your families are all healthy and safe. I'll start by highlighting some of the key achievements of the year. So I'm on Page number 3. We have successfully, in our view, navigated through the crisis by focusing on the right things. For example, by extending €63 billion of support to our clients through various means; second, I think it was a year that has reaffirmed our strategy. Our leadership in digital, we have been putting so much focus on to this for so many years, in our view, it has given us an edge in this environment. For example, again, as noted in the page, 56% digital client acquisition increase in 1 year. Third, in terms of financials, we have been able to deliver excellent financial results in our view, in these extraordinary times. 11.7% increase in our operating income in constant euros versus 2019. And lastly, in this page, it is important, very important to note our ample strategic optionality after the sale of BBVA USA. After the deal, €8.5 billion of capital generation that will be in our books when we complete the deal. So all of this in our view will allow us to offer sizable distributions to our shareholders in 2021 and beyond, which…

Thank you, Onur. We are now ready to move into live Q&A session. So first question, please.

Our first question comes from Francisco Riquel of Alantra. Francisco, please go ahead.

Yes, hello. So thank you for the presentation. I will start with capital allocation. So first, if you can update, please, on the capital impact that we should expect for 2021, I mean, regulatory you have front-loaded, what hotels, immigration, staging, also the corporate transactions, an update on the capital gains from the U.S.? And second, if you can elaborate a bit more, you have already mentioned in the presentation your views about the potential uses for the excess capital beyond the share buyback, if you're still open to the M&A with Sabadell. What about buying minorities in guarantee? What about the cost-cutting plans? And lastly, just a clarification, if I may, if you can please clarify on the time horizon over which you plan to execute the share buyback? Thank you. Onur Genç: Okay. So, Francisco, thank you for the questions on the capital. For 2021, you are asking for our expectations, especially on the regulatory and supervisory side. A few things on this one. The TRIM on low-default portfolios, we have not received the final letter yet. But the preliminary impact that we are expecting is now around 30 bps. As you might have seen in the results or in the explanations of other banks in Europe in general. The impact on this one has slightly - it has increased from what we have shared with you previously. So the best estimate at the moment that we have is around 30 bps on the TRIM on low-default portfolios. The EBA guidelines on PDs, LGDs, and also the new definition of default is very little in terms of impact. The EBA guidelines on PDs, LGDs, our expectation is going to be around 10 bps. And there is this standardized approach to counterparty credit risk, regarding implementation. It is expected…

Thank you, Paco.

Our next question… Jaime Sáenz de Tejada: I think you ask about the updated impact of the U.S. sale. The current capital gain from the sale of the U.S. business to PNC stands at €280 million, that will mean a CT1 impact of 285 basis points. The main reason for the difference versus the previously announced impact comes from the changes in the book value from the announcement to the closing as they belong to the buyer. So the net attributable profit generated in the U.S. this quarter reduces the expected capital gain of the transaction.

Okay. Jaime Sáenz de Tejada: But the beauty of that deal, as you all know, is the capital generated €8.5 billion capital generated through that deal with 19 PE, it was - the key fundamental point to me was the capital generation. Gloria?

Thank you. Thank you, Paco, for your questions. Next question, please.

Our next question comes from Benjamin of RBC. Benjamin, the line is yours.

Good morning. Thank you for taking my questions. Just firstly, on the CET1 ratio, can you just talk through why you've increased your target to the regulatory requirement? Do you think you need a 341 bps buffer? And then secondly, on the group level, can you give some more color on the guidance, cost of risk in 2021? I know you said, it is expected to be below 2020 levels. But what's the kind of net effect of all the guidance you've given in each of the geographies? Thank you. Onur Genç: Thank you, Benjamin, on both questions. On the first one, do you need 341 bps? Why are we increasing the capital target? As I mentioned, during the presentation, it's a balance. We don't like structurally high buffers, because it does have an implication, obviously, on profitability, on returns. So we don't like structurally high buffers. But we have also heard a lot from the market, from all of you, from many stakeholders on the fact that some additional buffer, especially in these time periods might be helpful. So it's a balance of different objectives. In the context that we are in, we thought it's wise to improve the target. On this one, given you asked the question, I have to share my frustration. I mean, we are seeing all these charts from many stakeholders out there ranking the banks from top to bottom on capital, saying that BBVA is at the end of the curve with the old goal that we have and so on. Nobody looks into the requirement. We have a different business model than many other banks that we are being compared against. And in our business model, it's not us. An independent authority, which is the most official and formal authority that you can…

Thank you, Ben. Next question, please.

Our next question comes from Alvaro Serrano of Morgan Stanley. Alvaro, please go ahead.

Good morning. It's actually 2 follow-ups really. First on provisions that you've just touched on, I mean, if I look at the second half of 2020, it does feel like - I mean, there's obviously difference by regions and Turkey, it might be an outlier, but the provision looks pretty much normalized to me. And your guidance seems to build in some degree of buffer that they might pick up versus the second half. Is that appreciation correct? And maybe can you speak to the visibility you have today? Are you building that buffer, because we're not out of the woods yet? Or would you expect naturally - was Q4 and Q3 too low? Maybe a bit of color and a bit of - on that and visibility. And second, on the deployment of capital. Again, you mentioned that you're going to now say something in the first half around costs in Spain. But just wondering the scale of that. When we think about that €1 billion excess capital that you have over your target, obviously, €2.5 billion or so will go to the share buybacks you've indicated. Is the cost cutting of the magnitude and the investment in the cost cutting of the magnitude that - maybe can you give a bit of color on that? And if that's not going to be enough to deploy the full €8 billion? Presumably not. And given the difficulties of making things happen in your footprint, you've ruled out a few options, would you consider something buying outside your footprint, your existing footprint? Thank you. Onur Genç: Thank you, Alvaro. On the provisions, as compared to third quarter and the fourth quarter, we are sharing numbers a bit higher than the third and fourth quarter. So are we having a buffer in…

Thank you, Alvaro. Next question, please.

Our next question comes from Marta Sanchez Romero of Bank of America. Marta, please go ahead.

Thank you very much. My first question is could you remind us what's the rationale of having a 50% stake in Turkey? Could you sell if the right offers come along? My second question is related to costs in Spain. Would buying back your branches from Merlin help cut costs faster? And if I may, one last question. Can you elaborate a bit more on how you get to the minus 1%, minus 2% NII in Spain for 2021? What's your risk appetite for loan growth and in what segments? What's your appetite to increase your bond portfolio? Thank you. Onur Genç: I mean, I take the first and the third, you take the Merlin one, okay. So on the rationale or having a 50% of a bank in Turkey, it goes back to the criteria that I listed before. It's a great market. It's a great market in terms of fundamentals for the long term. The average age is 31. The leverage in the country in general is lower than many other countries. It is right next to Europe. It is the manufacturing hub for Europe. So macro-wise, despite the fluctuations and the short-term implications, we are long-term investors. We do think the country has the potential to grow and to grow especially in banking, because in certain areas of the industry, there's clear room for more leverage. In that context, it's a good market to be in. And then, we have the best bank in the country. As we keep saying, any metric that you take, pre-provision profit divided by assets, it's 6% for guarantee BBVA versus 4.7% of all the other big private banks. And it's much lower for the rest of the industry. So we are the most profitable bank, highly capitalized. Great market, great bank.…

Thank you, Marta, for your questions. Next question, please?

Our next question comes from Adrian Cighi of Credit Suisse. Adrian, please go ahead.

Hi, there. Thank you very much for your presentation and taking my questions. I have a few follow-up questions, please. The question on the timeline for reaching your new capital target, is this a 2, 3 year target for management? Or is it sort of a theoretical target? I'm just trying to square the amount of capital that BBVA generates on a normalized basis with the 35%, 40% that you have and sort of the capital that you're going to continue to build, even after accommodating for a healthy level of growth. What sort of drives this level of caution? Is it sort of further sort of capital headwinds down the line above the floor, you mentioned is being largely frontloaded, anything that you can maybe help us on that would be helpful? And then in terms of geographic mix, obviously, after the sale of the U.S. business, you're now even more emerging markets focused and given that growth differential going forward, it will only increase. How do you see the balance between emerging and developed markets sort of down the line? We've mentioned about sort of M&A and inorganic growth and new or existing footprints, but what do you see the right balance being for the group going forward? And maybe just 1 follow-up, if I may, on NII, Spain. Is your guidance assuming the current level of TLTRO or with a 10% increase according to the new terms give incremental upside to the guidance? Thank you. Onur Genç: Okay. I mean, you can take the last one if you like. On the timeline for reaching the capital target, we are already within the target. I mean 11.50% to 12%. And as you know, December number is 11.73%. So we are already there. And we are basically saying that…

Thank you very much. Very clear.

Thank you. Next question, please?

Our next question comes from Sofie Peterzens of JPMorgan. Sofie, please go ahead.

Yeah, hi. Here Sofie from JPMorgan. I have a question on disposals. You have done quite a few - we have seen Chile, Paraguay, U.S. How should we think about more digital results coming from BBVA? Are you done? Or would you consider potentially selling other assets as well going forward? And then my second question would be on the mobile customer penetration and digital sales. You have mobile customer penetration almost at 60% and digital sales above 64%. It is basically more than 3-fold in the past 3 years. I was just thinking kind of when do you expect that to go closer to 100%? And once it goes closer to 100%, do you really need any branches? What's the kind of value added from having branches if you reach close to 100% mobile customer and digital sales penetration? And then just a final question on - just a follow-up on the TLTRO. Just to clarify, you're accruing 100 basis points against this funding or less? Thank you. Onur Genç: Thank you, Sofie. On the sales, Chile, Paraguay, USA, are we done? Again, our perspective on this one is clear. We do believe on cost competitiveness in our business. So we have to be cost competitive in wherever we are. That cost competitiveness can be gained either through scale, because our business is becoming more and more of a technology business. When you look into the cost structure of banks, what you see is the technology spending is going up and up. And within technology, it's mostly development costs, that development cost is a fixed cost. So when you distribute that fixed costs to a larger customer base, it helps because you develop the app, the same app for 100 customers or 100,000 customers, it doesn't matter, you develop…

Thank you, Sofie. Next question, please? Onur Genç: Gloria, pick up some speed, so I will be a bit faster going forward. Okay, Carlos?

Our next question comes from Carlos Cobo of Société Générale. Carlos, please go ahead.

Hi. Yes, Carlos, here. Thank you very much for your time for the presentation. A couple of questions. First one, it's about your Stage 2 loans. The bucket, when you compare with other banks looks substantially larger. I mean, clearly understand that there is a degree of more cautious test in the way you recognize the Stage 2, but it's slightly higher than 10%. When the second highest Spanish peer is at 6.5-ish. And the rest - the domestics are between 2.2 and 5.5 of gross loans. Okay. All these numbers are so proportion of gross loans. I don't need you to check the numbers or discuss the right level. But I want to understand, why is it so high at BBVA when compared with peers? Is it something about the way you recognize restructured loans in Turkey - sorry, not restructured loans with the state guarantee or something like that? Just wanted to expand that a little bit better, because sometimes the comparison looks detrimental to BBVA, even when you also see that your coverage is higher than average. And secondly, on the exposure to Spanish mortgages, where the arrival plus the spread is likely to fall below 0%. What's your policy there? Are you planning to reimburse that negative spread to customers? If not, why shouldn't we think that is a litigation risk mounting from here, because we arrive at minus 50, there's going to be a sizable amount of Spanish mortgages that will be in that situation. Wanted to understand what's your strategy or your position here? And what could be the potential, well, if you could quantify? Sorry for the long question. What could be the annual net interest income that you could be accruing in excess of 0%, if you could quantify? Thank you. Onur…

But then, in some deposits with the client, for example, you're applying negative rates to customers, when they are the creditor in this space, so that will contradict that theory, right, which is not your own. Other banks are saying the same, but… Onur Genç: Carlos, it's a legal interpretation. Legal interpretation says that the contracts on both sides of this balance sheet are very different from each other.

Okay. Okay. I understood that side. Okay, thank you very much. Jaime Sáenz de Tejada: And then on the potential risk about the mortgage repricing. Carlos, the current deal of the mortgage portfolio in Spain is almost 100 basis points, only 12.5% of that portfolio is in at fixed rate. So the risk of potentially having to pay clients is currently relevant.

Okay. Thank you, Jaime.

Thank you, Carlos. Next question, please.

Our next question comes from Mario Ropero of Bestinver. Mario, please go ahead.

Hi, good morning. A couple of questions. The first one is on the noncredit charges in Spain, you booked another €100 million in the quarter, over €500 million in the year. What is this related to? And what you think we could expect in this line in 2021? And then also, you gave some guidance in quarter for most geographies into 2021. Unless I missed it, I think you didn't do so for South America, I understand that there is a bit of a mix of different countries. But perhaps if you could give some guidance on top-line and cost of risk, that would be very useful. Thank you. Onur Genç: Mario, if I got your first question about noncredit charges, you mean the other provisions, provisions and other gains. On this one, the key thing…

Yes, I mean, this line in Spain. Sorry, Onur, yeah, that one, in Spain. Onur Genç: Yeah. On this one, as you know that that line doesn't include the potential impairments that we might be realizing in unfunded lines. So the credit lines, not the funded ones, not the real euros funded in the balance sheet. But the commitments that we have clients, the provisioning for that credit product for CIB, for wholesale clients, as you know, which has increased a lot in the year, the provisioning for the lines go into that line. So the key increase or the key change is coming from that, again, credit related, but non-funded credit line related provisioning that we will be doing, plus the cost restructuring the closure of branches and so on. All - it all goes into that line. So those were the 2 key differences year-over-year. On the second, Jaime? South America? Jaime Sáenz de Tejada: What was the question? I didn't catch it.

Yeah, Jaime, I mean that, I think you gave guidance for 2021 for most geographies, but I don't think you mentioned about South America. So I wonder if you can give some color on top-line and cost of risk into 2021. Jaime Sáenz de Tejada: This year, we're only going to give guidance in South America on 2 things. First of all, on activity, we are going to - we expect to grow the long portfolio in the mid-single-digit range. And then second on cost of risk, we expect our service to be around 250 basis points, which is better than the 236 that we had in 2020.

Thank you, Mario, for your questions. Next question, please?

Our next question comes from Jernej Omahen of Goldman Sachs. Jernej, the line is yours.

Okay, good morning from my side as well. I'd like to ask 2 questions, please. So just taking a step back, BBVA had a great year, considering everything. You reported a strong Q4 with strong guidance on capital return and on credit losses yet the stock is down. And I suspect the stock is down for 2 reasons: 1, there's questions around the level of confidence that BBVA has on credit loss guidance; and 2, on the process for buybacks that you've announced for this year? So I'd like to ask a question on each. So the first one on credit losses, what gives you this level of confidence that the worst is behind us and that across geographies, you're going to see a decline. And the reason why I asked this, because I'm just looking at the long-term time series of loan losses for BBVA, in 2012, it was 220 basis points, followed by 170 basis points. This year, loan losses were around 160 basis point mark, which is 50 basis points higher than last year and 50 basis points higher than the year before. So we're looking here at an unprecedented GDP shock. The country being - most countries being locked down for half the year. And yet the message from you is all of these lock downs are going to cost 50 basis points of a loan book and that's it. I mean, what gives you the confidence that this, indeed, is it that there is no deterioration in your loan book on the horizon? And the second question I want you to ask is on capital return. So can you just confirm, I think that the ECB said that before banks communicate dividends, they have to get permission from the national supervisor and the ECB, so…

I get that, and I agree with you. But I would just like to ask a very short question on this. So just intuitively, what - your communication is this crisis will have less of an impact on BBVA from a credit loss perspective than either 2008, 2009, let alone the 2011, 2012, 2013. Is this accurate in your mind? Onur Genç: Please remember that in September 2012, we had to provision the decrease, okay? Provision €3.8 billion that particular month. Jernej, it was clearly set up from the impact from the baseline is very different. If you look into, for example, Spain, 1 of our core markets, the household debt over GDP and corporate debt over GDP was 30 percentage points higher, on average, in 2008 versus Europe than today. Today, Spain is less leveraged than Europe. In 2008, Spain was significantly more leveraged than Europe, that's a very different profile. In 2008, the government support programs that we are seeing, was not there in the sense. And I'm not saying that BBVA by the way, if that's what you were also asking between the lines, I'm not saying that BBVA would be less affected. That 160 - that 60 basis points gap that you were talking about 151 bps that we our cost of risk doing this year, as compared to peers, as compared to other European banks. If you do a simple regression on the amount, additional amount on the percentage increase in the provisioning is much higher. So we are not saying that we are going to be less affected. We are putting it in our numbers. What I'm saying is, it's a bit different than the other crisis. And the numbers that we have so far is showing some good signals. But we have to…

Perfect. Thank you very much and congratulations again on navigating this year. Thank you.

Thank you. Thank you, Jernej, for your questions. Next question, please.

Our next question comes from Benjie Creelan-Sandford of Jefferies. Benjie, please go ahead.

Yeah. Good morning, everyone. A couple of reasonably straightforward questions for myself. First of all, in terms of lending in Mexico, the mid-single-digit guidance for 2021, can you give us any more color around the mix within that? What are you seeing in terms of demand level across consumer mortgage and corporate? And how are you trying to position the book in Mexico in 2021? And the second question is just to return to capital. You've been very clear about the headwinds pending for 2021. Is there any guidance on headwinds beyond 2021? And, in particular, is there any updates around the eventual impact from Basel IV expected? Thank you. Jaime Sáenz de Tejada: Okay, I'll take the first question. On NII guidance, as I said during the call, we expect NII to grow at mid-single-digit, growing slightly above activity. So we expect activity to continue the trend that we've seen in the latter part of 2020. We've had strong retail production in the fourth quarter in Mexico, particularly in mortgages, but also in credit cards, also in the public sector portfolio. So we've been having a strong volume dynamics that have only been offset by a significant amount of prepayments in the corporate segment, which is something that has happened in pretty much every country in the footprint. So we will continue to accelerate that inertia as conditions normalize. As I said, during my presentation, we also expect GDP to improve significantly. And then, on the customer spread side, although we continue to expect maybe 2, 3 additional interest rate reductions in the country that could end the year at the level around 350 basis points, the worst of the impact from different - from the different rate reductions that we saw in 2020 have already gone through the…

Thank you.

All right, thank you.

Next question, please.

Our next question comes from Andrea Filtri of Mediobanca. Andrea, please go ahead.

Yes, most of my questions have already been answered. I'll just be quick. You said that post-buyback you are considering around - being around 13.4% for the CET1, with just Basel IV at the horizon as hurdle and BBVA actually building capital from there. So, over what timeframe are you considering to converge down to the newly guided 11.5% to 12% CET1, so that we can adjust our expectations on eventual further growth or capital repayment or if you do M&A? Thank you. Onur Genç: Okay, so, Andrea, 13 point whatever to 12%. If the question is when are we going to be going back to the upper end of that target range that we have. We're talking about 2 to 3 years. If we - and we will start with this initial share buyback program, we can continue with more share buyback or extraordinary distributions, but we will use multiple levers to be able to get back to our target range in 2- to 3-year timeframe. And as you said, you also have to factor in the organic capital generation that we are doing every single year.

Thank you. Onur Genç: Maybe we take 1 final question and then we wrap up.

Okay, next question, please.

Our final question comes from Daragh Quinn of KBW.

Hi, good morning. It's Daragh from KBW. Just a question on loan growth, just going back to Mexico, and just want to be clear about the drivers that you're expecting for recovery in 2021. And then, in Spain, I guess the question really is, have you been losing market share on purpose? And then, what is your risk appetite for 2021? And do you expect that situation to change? And then, the second question is on just the potential cost restructuring in Spain. And if we look at your - the size of or the number of employees in Spain has been kind of relatively stable at around 30,000 employees over the last few years versus the kind of high-single-digit reduction in the rest of the sector. Just given the pretty impressive digital numbers that you present, I mean, it would seem that there's huge scope for a reduction in employees in the Spanish business. Is that the magnitude of the change we should be considering in Spain? Or would we think it'd be a more kind of gradual progression? Thanks. Jaime Sáenz de Tejada: Okay. Thank you, Daragh. On the first one, in Mexico, you see it in the page regarding Mexico as well, if you look into the loan growth, why is it basically minus 0.6%, relatively flat this year versus many other years? It goes back to the 3 products, especially the 3 products that you see there: consumer, credit cards and SMEs. It's minus 6%, minus 6.2%, minus 5.3% reduction in the stock. Why? It goes back to what I said. We want to be - we are not here for a very short term. We are here for creating value. And we cutback our - for example, in unsecured consumer lending, in Mexico, it's 15% less new production as compared to 2020 - 2019, 2020 versus 2019. The reason is, we wanted to be careful. We wanted to be careful. So the key thing is profile, especially unsecured products in SME in consumer. We wanted to be a bit on the cautious side. Regarding Spain, are we losing market share on purpose? I don't like losing market share on purpose terminology for some reason, but we were very cautious, in general, again, 23% reduction in new production of unsecured consumer lending. We wanted to be a bit on the cautious side. Regarding cost structuring, is this going to be gradual and so on? What we meant today is we are exploring all the alternatives, including a fast-restructuring program. So everything is on the table, whatever we will come up with, we will be announcing and starting executing in the first half of 2021. Gloria?

So… Jaime Sáenz de Tejada: Well, in 2009, which was the last year in which we also saw a significant decrease in GDP in Mexico, loan growth was also flat. Only to recover the following year in a significant fashion. So that's more or less what we are also expecting for this 2021. Onur Genç: But overall in Mexico, by the way, in 2020, we did gain market share. Why? Because mortgages, you see here the growth and so on. Overall lending we gained market share, but on the products, that we thought more safe.

Okay, so thank you. Thank you, Daragh, for your questions. I am afraid we are running out of time, because we have a press conference. So thank you very much for participating in this call and let me remind you that, of course, the entire IR team will remain available to answer any questions that you may have. Onur Genç: Perfecto. Thank you so much, Gloria, and to all of you for listening in and for dialing in, and stay safe. Thank you. Bye-bye.

Thank you.