BBVA’s second-quarter profit beats Mexico forecast, offsetting decline in Turkey

A woman scans her phone outside a BBVA bank building in Madrid, Spain, November 15, 2021. REUTERS/Juan Medina

MADRID, July 29 (Reuters) – Spain’s BBVA (BBVA.MC) said on Friday its second-quarter net profit more than doubled from the same quarter of 2021 on the back of a strong performance in Mexico, its main market, and strong loan income, offsetting lower income in Turkey.

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

Like its big Spanish rival Santander (SAN.MC), BBVA has expanded in emerging economies as it strives to boost revenue in more mature markets, although some analysts have cited risks to its exposure to economic uncertainty in Turkey.

Last month, the bank said hyperinflation in Turkey would erode the contribution of its local lender Garanti (GARAN.IS) in 2022. read more

In the second quarter, Garanti recorded a profit of 137 million euros, down 29% compared to the same quarter last year, while net profit in Mexico increased by 66%.

BBVA said second-quarter earnings were driven by revenue, which rose 19.4% year-on-year in the quarter, and by healthy developments in risk indicators.

At the group level, the cost of risk in June, which measures the cost of managing credit risk and potential losses for the bank, remained around the same level of 81 basis points compared to the previous quarter.

Overall, net interest income – income on loans less deposit costs – rose 31.3% to 4.6 billion euros compared to a year ago, ahead of 4, 11 billion euros forecast by analysts.

The results also showed a drop in its solvency levels following various exceptional and regulatory impacts.

The bank’s Tier 1 base fully loaded capital ratio, the most stringent measure of solvency, fell to 12.45% in June from 12.70% in the prior quarter or 12.89% including the positive impact on solvency of accounting for hyperinflation.

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

($1 = 0.9793 euros)

Reporting by Jesús Aguado; edited by Inti Landauro and Tomasz Janowski

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