BBVA plans $1 billion share buyback and expects Sabadell bid approval

By Jesús Aguado

MADRID (Reuters) -BBVA plans to pay over 5 billion euros ($5.2 billion) to shareholders, it said on Thursday after its fourth-quarter net profit beat forecasts, while its chairman said he expected its takeover of smaller rival Sabadell to go ahead.

BBVA said it would buy back shares worth 993 million euros ($1 billion) after the Spanish market supervisor lifted restrictions on new repurchase plans it had imposed following BBVA's takeover bid for Sabadell.

To reduce its reliance on Mexico, its main market where net profit fell in the quarter, BBVA announced in May a hostile takeover bid for Sabadell valuing it then at more than 12 billion euros ($12.84 billion).

The government has opposed the takeover, which is undergoing a longer phase 2 antitrust review.

BBVA Chairman Carlos Torres told a news conference he expected the deal to be approved in the coming weeks with "acceptable remedies" and that a full merger would take place.

But even without a full merger, where the bank would be left with a majority of voting rights in Sabadell, Torres said the deal would "still make sense" as most of the 850 million euros in targeted savings would be preserved.

The government cannot stop Sabadell shareholders from swapping their shares for those of BBVA, but it can block a full merger.

Torres said that BBVA has good relations with both the government and the antitrust watchdog and did not "contemplate any scenario ... where there could be a veto, because we believe that isn't within the scope of what's possible."

RECORD 2024 NET PROFIT

BBVA recorded a net profit of 2.43 billion euros in the quarter, above the 2.23 billion euros expected by analysts polled by Reuters. It forecast a ROTE, a measure of profitability, in the high teens for 2025, similar to the 19.7% level at the end of 2024.

Overall, net profit jumped 25% to a record 10.05 billion euros last year, buoyed by higher interest rates.

Analysts at Barclays described the results as solid, especially in Spain, and said they expected investors to view the profitability guidance and share buyback plan positively.

Following the results, BBVA said it would distribute 5.03 billion euros against 2024 earnings to shareholders, which represents 0.87 euros per share and a payout of 50%.

At 1339 GMT, shares in BBVA and Sabadell were up about 1%.

LENDING INCOME COULD COME UNDER PRESSURE

As interest rates rose, Spanish banks benefited from higher lending rates and limited deposit payouts.

As interest rates start to decline and the positive impact fades, BBVA rival Caixabank forecast on Thursday a decline in net interest income (NII) in 2025, as did BBVA for its Spanish market.

In Mexico, net profit fell 7% due to the depreciation of the peso when the country is braced for possible U.S. tariffs that could worsen its economic outlook.

In Spain, net profit rose 44% and NII was up 2.4% year on year, but down 1% against the previous quarter.

Overall, lending income grew 22% in the quarter to 6.4 billion euros supported by lower inflation rates applied in its hyperinflation accounting in South America, especially Argentina, and Turkey, where net profit rose 10% while lending almost doubled.

($1 = 0.9605 euros)

(Reporting by Jesús Aguado; Additional reporting by Emma Pinedo; Editing by Inti Landauro, Shri Navaratnam, Emelia Sithole-Matarise, Mark Porter and Barbara Lewis)