BBVA’s Q2 profit beats forecasts on Mexico and lending income

By Jesús Aguado

MADRID (Reuters) – Spain’s BBVA on Friday said its second quarter net profit more than doubled from the same quarter of 2021 on a strong performance in income from lending and in its main market of Mexico, offsetting a downturn in Turkey.

The country’s second biggest lender by market value booked a net profit of 1.675 billion euros ($1.71 billion) in the April to June period, compared with 701 million euros in the same period a year ago and far above analysts’ 994 million euro forecast in a Reuters poll.

For years, banks across Europe have been under pressure from record low interest rates, but that is beginning to change even in developed markets as rising rates are expected to boost lenders’ income.

Overall, net interest income, earnings on loans minus deposit costs, rose 31.1% to 4.6 billion euros, above the 4.11 billion euros forecast by analysts.

Like larger Spanish rival Santander, BBVA has been expanding in emerging economies as it struggles to boost income in more mature markets, though some analysts have cited risks from its exposure to economic uncertainty in Turkey.

At 0720 GMT, shares in BBVA rose more than 4%, outperforming a rise of 1.4% rise in Spain’s leading index Ibex-35.

Madrid-based brokerage Renta 4 welcomed upbeat results in Mexico, Spain and even Turkey, where the consensus of analysts expected the lender to book a quarter loss of 14 million euros following hyperinflationary accounting in this market.

Last month, the bank said that the new accounting in Turkey would erode its local lender Garanti’s contribution in 2022.

In the second quarter, Garanti booked a profit of 137 million euros, down 29% from the same quarter last year, but net interest income rose 31% against the same period a year ago.

Net profit in Mexico, which accounted for 60% of its earnings, jumped 66% year on year, while NII rose 38%.

BBVA said second quarter earnings were also driven by a good evolution of risk indicators after cost of risk in June, which measures the cost of managing credit risks and potential losses for the bank, stayed around the same level of 81 basis points from the previous quarter.

In Spain, net interest income rose 1% year on year but was already up 5.% against the previous quarter. At its Spanish competitor Caixabank, which also beat net profit forecasts, lending income fell 1.8% in the second quarter versus a year ago though was up 3.6% against the previous quarter.

Shares in Caixabank rose more than 1%.

BBVA’s results also showed a decline in its solvency levels following different extraordinary and regulatory impacts.

The bank’s core tier-1 fully loaded capital ratio, the strictest measure of solvency, fell to 12.45% in June from 12.70% in the previous quarter or from 12.89%, including the positive impact on solvency from hyperinflation accounting.

However, the increase of its stake in Garanti to 86% also had a negative impact of 23 basis points.

($1 = 0.9793 euros)

(Reporting by Jesús Aguado; additional reporting by Emma Pinedo; editing by Inti Landauro and Tomasz Janowski)