RAROC profile and corporate credit pricing model derived from Pillar 3 disclosures.
BBVA is a Spain-based bank with approximately EUR 157bn of corporate credit exposure (EAD) under the F-IRB approach to credit risk capital. The numbers below come directly from BBVA's most recent Pillar 3 CR6 regulatory filings and are used to model how this bank prices corporate credit facilities.
BBVA's disclosed corporate PD sits above most euro-area peers, a direct consequence of Mexican and Turkish book consolidation rather than a signal of Spanish domestic risk. Stripping out the emerging-market entities, Spanish corporate pricing at BBVA is competitive with CaixaBank and Santander Spain on comparable obligors.
BBVA is a smaller corporate book by disclosed EAD (44 of 59). Its cost-to-income ratio of 38.2% is exceptionally lean (-11.6pp vs the 59-bank cross-section average of 49.8%). The corporate portfolio is mixed-grade, with an EAD-weighted average PD of 1.8% against a cross-bank average of 2.1%.
Under the foundation IRB approach, supervisory LGDs are applied rather than internal estimates, which generally inflates credit RWA versus A-IRB banks with the same obligor mix — a structural headwind this bank carries on every BBB+ term facility. Unsecured LGD disclosed at 38.3% is +1.4pp against the 36.8% cross-bank average, in line with the peer median.
On the standardised BBB+ EUR 25M 5-year term loan used across every bank profile, BBVA lands in the lower half of the pricing ranking (#57 of 59), with a RAROC of 6.20% and a minimum spread of 294bp to reach the 12% hurdle. Within Spain specifically, the bank ranks #3 of 3 on this same calculation.
| Parameter | Value | What it means |
|---|---|---|
| IRB approach | F-IRB | How the bank computes risk-weighted assets |
| Cost-to-income ratio | 38.2% | Operating cost share of net revenue |
| Effective tax rate | 34.0% | Applied to RAROC numerator after EL and funding |
| Average corporate PD | 1.76% | EAD-weighted probability of default |
| Avg LGD (unsecured) | 38.3% | Loss share if borrower defaults, no collateral |
| Avg LGD (secured) | 23.0% | Loss share with eligible collateral |
| Funding spread | 18bp | Bank's wholesale funding cost above risk-free |
| Corporate EAD | EUR 157bn | Total exposure at default to corporates |
On a representative BBB+ rated, 5-year term loan of EUR 25M at 150bp spread with a 20bp commitment fee, BBVA would generate an estimated RAROC of 6.20% against a typical 12% bank hurdle rate. To hit that hurdle on this exact deal, the bank would need a minimum spread of 294bp. This deal is significantly below target — the bank would either reprice it or decline.
| Component | Value |
|---|---|
| Annual revenue (spread + fees) | EUR 385,000 |
| Operating cost | EUR 154,000 |
| Expected loss (PD × LGD × EAD) | EUR 28,750 |
| Capital required (FPE) | EUR 2,451,320 |
| RAROC (after tax) | 6.20% |
| Min spread to hit 12% RAROC | 294bp |
Out of 59 banks in the OpenRAROC dataset, BBVA ranks #57 by RAROC on this sample deal.
| Rank | Bank | Country | RAROC | Min spread |
|---|---|---|---|---|
| 1 | Qatar National Bank | Qatar | 9.00% | 203bp |
| 2 | DBS Group | Singapore | 8.18% | 224bp |
| 3 | JP Morgan | United States | 8.12% | 231bp |
| 4 | ICBC | China | 8.06% | 233bp |
| 5 | China Construction Bank | China | 8.06% | 233bp |
| 56 | Commerzbank | Germany | 6.46% | 275bp |
| 57 | BBVA | Spain | 6.20% | 294bp |
| 58 | Itau Unibanco | Brazil | 5.79% | 294bp |
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