Fitch sees a better outlook for Argentine banks but flags rising risks at BBVA
The agency affirmed BBVA Argentina’s long-term foreign-currency rating at “B-” with a stable outlook, as improving macroeconomic conditions support the banking sector. But the lender’s non-performing loan ratio jumped to 6.5% in the first quarter of 2026 and profitability fell sharply, highlighting the risks that persist despite Argentina’s economic stabilisation.
Argentina’s banking sector is beginning to benefit from an improving macroeconomic environment, but the transition toward a more normalised financial system is exposing new vulnerabilities in credit quality and profitability.
That contrast is particularly visible at BBVA Argentina, the local subsidiary linked to Spanish banking group BBVA.
Fitch Ratings affirmed BBVA Argentina’s Long-Term Foreign Currency Issuer Default Rating (IDR) at “B-” with a stable outlook, while maintaining its Long-Term Local Currency IDR at “B” and its Viability Rating at “b-”.
At the same time, the rating agency upgraded its assessment of the operating environment for Argentine banks to “b-” with a stable outlook, citing improvements in the country’s macroeconomic conditions.
The positive sector view, however, comes with a significant warning for BBVA Argentina: its ratio of non-performing loans rose to 6.5% in the first quarter of 2026, compared with an average of just 2.5% between 2022 and 2025.
Profitability has also weakened sharply. Operating profit relative to risk-weighted assets fell to 2.9%, far below the 9.8% average recorded over the previous four years.
The figures illustrate a paradox emerging in Argentina’s banking industry: the macroeconomic environment is improving just as lenders are having to confront the consequences of rapidly expanding private-sector credit.
Argentina’s banking environment receives an upgrade
One of the most significant elements of Fitch’s assessment extends beyond BBVA itself.
The agency upgraded its operating environment score for Argentine banks to “b-”, reflecting an improvement in economic conditions that should gradually strengthen some of the fundamental indicators used to evaluate the financial system.
Argentine banks have also remained well capitalised despite extreme interest-rate volatility.
The change is important because the operating environment directly influences banks’ standalone credit profiles and has historically constrained their ratings.
However, Fitch does not expect the improvement to translate immediately into stronger earnings.
Higher funding and credit costs placed considerable pressure on banking-sector profitability during 2025, and the agency expects those factors to continue weighing on results during the first half of 2026.
Conditions could become more constructive during the second half of the year and beyond.
BBVA’s bad-loan ratio jumps to 6.5%
The clearest warning in Fitch’s report concerns asset quality.
BBVA Argentina’s non-performing loan ratio reached 6.5% at the end of the first quarter, up sharply from the 2.5% average recorded between 2022 and 2025.
The deterioration is broadly consistent with trends elsewhere in the Argentine banking industry, according to Fitch.
The main source of stress is the retail portfolio, particularly credit cards and consumer loans.
The development reflects the risks associated with Argentina’s rapid credit normalisation. After years in which private-sector lending remained extremely limited relative to the size of the economy, stabilisation has encouraged banks to expand financing to households and companies.
BBVA Argentina’s loans grew 5.7% in nominal terms during the first quarter of 2026.
More credit creates opportunities for banks, but it also increases exposure to borrowers at a time when household finances are still adapting to profound changes in inflation, interest rates, wages and economic policy.
Despite the increase in arrears, Fitch considers BBVA Argentina’s asset quality adequate for its current rating.
The bank also maintains loan-loss reserves above regulatory minimums. Allowances covered 77.4% of impaired loans at the end of the first quarter.
Profitability falls from 9.8% to 2.9%
The second major warning comes from earnings.
BBVA Argentina’s operating profit as a proportion of risk-weighted assets fell to 2.9% in the first quarter, compared with an average of 9.8% between 2022 and 2025.
Fitch expects profitability to remain within a range of approximately 2.5% to 2.8%, constrained by narrowing margins and the higher cost of risk associated with rising bad loans and organic credit expansion.
The decline reflects the changing nature of Argentina’s banking business.
For years, high inflation, elevated nominal interest rates and substantial exposure to public-sector and central-bank instruments created an unusual operating environment for financial institutions.
As the economy moves toward greater normalisation, traditional lending to households and businesses is regaining importance.
That potentially creates a healthier banking model over the longer term, but it can also mean lower extraordinary margins and greater conventional credit risk.
In BBVA Argentina’s case, the result is already visible: lending activity is expanding while profitability has moved substantially below its recent historical levels.
BBVA remains a major player in Argentina
Despite those pressures, Fitch highlights the bank’s strong competitive position.
BBVA Argentina operates as a universal commercial bank serving individuals as well as small, medium-sized and large companies.
At the end of the first quarter, it held approximately 12.2% of private-sector loans and 9.9% of deposits in Argentina.
Its average annual operating income over the past four years was approximately €2.9 billion, after converting the roughly $3.33 billion figure reported by Fitch into euros.
Nevertheless, the agency assigns the bank’s business profile a “b” score, below the “bb” level implied by some of its underlying metrics.
The reason is geographic concentration: virtually all of BBVA Argentina’s business remains exposed to an operating environment that Fitch continues to classify as high risk despite recent improvements.
Capital remains one of BBVA Argentina’s strengths
The balance sheet provides a significant buffer against the deterioration in asset quality.
BBVA Argentina reported a Common Equity Tier 1 ratio of 18.5% in the first quarter, which Fitch considers adequate for the current rating.
The agency expects that ratio to decline by the end of 2026 as lending expands and the subsidiary distributes dividends to its parent group.
Even so, Fitch expects capitalisation to remain consistent with the bank’s current credit profile.
The combination of capital strength and provisions is particularly relevant given the rapid increase in delinquency.
A higher NPL ratio becomes substantially more problematic when a bank lacks sufficient capital or reserves to absorb losses. Fitch’s assessment suggests BBVA Argentina currently maintains meaningful protection on both fronts.
Deposits provide a stable funding base
Fitch also improved its assessment of BBVA Argentina’s funding and liquidity profile to “b” from “b-”, with a stable outlook.
Customer deposits remain the institution’s principal funding source and accounted for 77% of total liabilities at the end of March.
However, credit expansion is changing the relationship between loans and deposits.
The loan-to-deposit ratio increased to 94.1%, considerably above its 69.6% average between 2022 and 2025.
This is another indication of the transformation taking place in Argentine banking: a larger share of deposits is being channelled toward lending rather than remaining in highly liquid financial assets.
Liquidity nevertheless remains sound.
BBVA Argentina reported a 118% liquidity coverage ratio and a 119% net stable funding ratio at the end of the first quarter.
Exposure to Argentina’s public sector falls into focus
BBVA Argentina’s exposure to public-sector assets represented 16.2% of total assets at the end of March.
The bank has increasingly directed investment toward lower-risk secured lending to the private sector as macroeconomic conditions stabilise, while continuing to hold securities and interest-bearing assets as part of its liquidity management.
This shift matters for Argentina’s wider economy.
One of the structural weaknesses of the country’s financial system has historically been its extremely low level of private credit.
A banking system increasingly oriented toward financing companies and consumers could support investment and economic activity.
But the rise in BBVA’s bad loans shows that the process will not necessarily be linear.
Banks must expand credit without allowing underwriting standards to deteriorate excessively.
The Spanish parent provides an additional layer of support
BBVA Argentina’s relationship with its Spanish parent is central to Fitch’s rating assessment.
The agency believes ordinary shareholder support would be available if necessary, given the financial strength of the ultimate parent and the relatively small size of the Argentine subsidiary within the wider group.
BBVA Argentina represents approximately 1.8% of the parent’s total assets and 4% of its total equity, making potential support manageable from the group’s perspective, according to Fitch.
That connection gives the story particular relevance for European investors.
A deterioration in the Argentine subsidiary would not occur in isolation: BBVA is one of Spain’s largest financial groups and has maintained a significant strategic presence across Latin America.
At the same time, the subsidiary’s relatively modest size limits the potential impact on the broader group.
Argentina’s sovereign ceiling remains the decisive constraint
The strength of the Spanish parent does not mean BBVA Argentina can automatically obtain a rating comparable to the wider group.
Its Long-Term Foreign Currency IDR remains capped by Argentina’s “B-” Country Ceiling.
In other words, the principal constraint is not solely the bank itself.
Argentina’s sovereign credit profile and the possibility of restrictions affecting access to foreign currency continue to limit the rating that a locally operating institution can achieve.
Fitch also affirmed BBVA Argentina’s Shareholder Support Rating at “b-”, again capped by the sovereign ceiling.
This means that further improvements in the bank’s international rating are closely tied to developments in Argentina itself.
An upgrade of the sovereign rating and a stronger operating environment could benefit BBVA Argentina’s standalone credit profile.
Conversely, renewed sovereign stress or policies that weaken the bank’s ability to meet its obligations could trigger negative rating action.
Government intervention remains a credit issue
Despite the macroeconomic improvement, Fitch continues to identify regulatory intervention as a relevant risk.
BBVA Argentina carries an ESG Relevance Score of 4 for Management Strategy, reflecting the historically high level of government intervention in the Argentine banking sector.
Interest-rate caps can limit banks’ ability to price loans according to risk, while restrictions on fees can reduce revenues and put pressure on profitability.
For a financial institution, those rules affect more than short-term earnings. They can constrain management’s ability to determine pricing, allocate capital and execute a commercial strategy independently.
The direction of financial-sector regulation will therefore remain an important factor as Argentina attempts to deepen private credit.
A stronger economy does not automatically mean lower banking risk
Fitch’s latest decision captures the complex transition underway in Argentina.
On one side, macroeconomic stabilisation has improved the operating environment and created conditions for banks to return to their traditional function of financing households and businesses.
On the other, that same credit expansion is producing a rapid increase in delinquency while the exceptionally high profitability of previous years is fading.
For BBVA Argentina, the contrast is particularly pronounced.
The bank remains well capitalised, has a significant market position, benefits from a stable deposit base and can potentially rely on support from its Spanish parent.
But non-performing loans have more than doubled relative to their recent historical average, while a key profitability measure has fallen from 9.8% to 2.9%.
Fitch’s stable outlook suggests that these pressures remain manageable within the current rating.
The broader message, however, extends beyond a single institution.
Argentina’s banking system may be entering a healthier and more conventional phase as the macroeconomy stabilises, but the transition from inflation-driven financial margins toward private-sector lending brings a different set of risks. BBVA Argentina’s rising bad loans provide one of the clearest early indications of that new reality.
