Scope Ratings has today assigned a rating of BB+ with a stable outlook to BBVA’s 6.75% EUR 1.5bn additional Tier 1 notes. This rating is in line with the previous ratings assigned by Scope to BBVA’s earlier AT1 capital instruments (issued in 2013 and 2014).

Similar to the previously rated instruments, the terms and conditions of the 6.75% EUR 1.5bn notes have double triggers for conversion to equity – set at 5.125% - based on both the group’s and the parent bank’s CET1 ratio calculated on a transitional basis.

The BB+ rating implies a five-notch difference with the Issuer Credit-Strength Rating (ICSR) of BBVA, including the minimum four notches required by Scope’s capital instruments methodology plus one additional notch due to the presence of a double trigger. Scope highlights that the distance-to-trigger is likely to remain reassuringly comfortable both at group and at parent bank level.

Scope has not applied any further notching for coupon cancellation risk, as the agency estimates that BBVA has sufficient distributable items and ample distance to its combined buffer requirement.

BBVA’s ICSR of A with Stable Outlook is based to a considerable extent on the strength and reliability of BBVA’s retail and commercial banking franchises in several geographies, with good market positions. This geographic diversification has helped BBVA deliver good profits, despite the stressed operating environment in Spain, and enabled it to generate capital organically. The rating agency expects ongoing economic recovery in Spain to support group’s asset quality and regain profitability in the coming years. One area of focus for Scope is the material exposure to Spanish sovereign risk.

The BB+ rating was not solicited by the issuer and is based solely on public information .