A view shows the headquarters of Spanish bank BBVA in Madrid, Spain, November 17, 2020. REUTERS/Juan Medina/File Photo
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- Q1 net profit 1.65 billion euros, above market forecasts
- Mexico’s Net Profit Up 59%; Turkey up 31%
- BBVA has so far secured more than 60% of Turkish lender Garanti
- Could apply hyperinflation calculation in Turkey as early as Q2
- Total net interest income is up 20.5% year-on-year
MADRID (Reuters) – Spain’s BBVA (BBVA.MC) on Friday beat forecasts with a 36.4% year-on-year increase in first-quarter net profit, driven by a strong performance in emerging markets, while rival Caixabank (CABK .MC) suffered from some pressure on loan yields.
BBVA’s net income for the January-March period was 1.65 billion euros ($1.74 billion), more than the 1.24 billion euros forecast by analysts polled by Reuters.
Like larger Spanish rival Santander (SAN.MC), BBVA has expanded into emerging markets as it struggles to boost earnings in more mature markets, although some analysts have pointed to risks arising from Turkey’s current macroeconomic uncertainty.
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As inflation hit 61.14% in Turkey in March, BBVA chief executive Onur Genc told analysts in a call that the bank could start applying “hyperinflation accounting” as early as the second quarter.
This could be positive for capital, but could result in a drop in profits there, Genc said.
Rafael Salinas, BBVA’s chief financial officer, said that the bank has so far owned more than 60% of Turkish lender Garanti following its takeover bid. The acceptance period for the offer ends on May 18th.
BBVA shares rose 4.2% after brokers including RBC highlighted solid results across their regions and after the bank said better-than-expected operational trends would translate into an improvement in net interest income in 2022 in Spain and Mexico.
Strong performance in Mexico, Turkey and South America on interest rate hikes there in 2021 and the first quarter of 2022 has begun to show in results, the bank said in a statement.
Both Mexico and Turkey were among the areas highlighted by the BBVA in its strategic plan in mid-November. Continue reading
In Mexico, where BBVA generates about 50% of its revenue, net income rose 59% from the year-ago quarter, while net income in Turkey, which accounted for 15% of revenue, rose 30.6% year over year.
Loan revenues in both countries rose about 30% year over year in the quarter.
JP Morgan said overall higher revenues and lower-than-expected expenses and credit losses were behind BBVA’s better-than-expected results.
The group’s net interest income, loan income less deposit costs, rose 20.5% to 4.16 billion euros, ahead of analysts’ forecast of 3.89 billion euros.
In Spain, which accounts for more than a third of its revenue, quarterly net income rose 62% year-on-year, although net interest income fell 0.8%, still weighed down by low interest rates.
At Spanish competitor Caixabank, loan income fell 5.4%.
BBVA ended March with a Core Tier 1 Full Loaded Ratio, the most stringent measure of solvency, of 12.70%, compared to 12.75% at the end of December.
($1 = 0.9493 euros)
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Reporting by Jesús Aguado; additional reporting by Emma Pinedo Editing by Inti Landauro and Mark Potter
Our standards: The Thomson Reuters Trust Principles.
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