By Jesús Aguado
MADRID (Reuters) -BBVA posted higher than expected fourth quarter net profit and announced a new share buyback on Tuesday, lifting its shares, although a strong Mexican showing was somewhat marred by lower lending income and a weaker performance in South America.
The Spanish bank, which is the fourth-biggest euro zone lender by market value, reported a 32% rise in net profit to 2.06 billion euros in the October to December period, above the 1.88 billion forecast by analysts.
BBVA (BME:BBVA) also announced a share buyback of 781 million euros following the completion in November of a 1 billion euro buyback programme and its Chief Executive Onur Genç told analysts more could come in the future, after finishing the quarter with a core Tier-1 fully loaded capital ratio of 12.67%.
Shares in BBVA rose 3.9%, compared to a rise of 1% in Spain's blue-chip index Ibex-35.
In Mexico, BBVA's main market, its net profit rose 11.5% thanks to higher loan volumes that supported net interest income (NII), while in Spain net profit was up 78%.
BBVA has benefited from higher European interest rates, but investors are watching closely to see if the boost has peaked as markets anticipate cuts in 2024.
BBVA's overall NII, or earnings on loans minus deposit costs, fell 2% year-on-year to 5.25 billion euros, below forecasts of 5.6 billion euros. NII was 18% lower on the previous quarter.
In Spain, NII rose 44% year-on-year but was up just 4% on the previous quarter. For the whole of 2023, NII rose 49% year-on-year in BBVA's home market, in line with expected growth of close to 50%, but for 2024 the bank said it expected NII to grow at a mid-single digit.
For the whole of 2023, overall net profit rose 26% to a record 8.02 billion euros, still supported by higher rates, and BBVA said it expected net profit to continue growing and to achieve a return-on-tangible equity ratio (ROTE), a measure of profitability, above the 17% reported in 2023.
BBVA said its loan loss provisions rose 23% year-on-year in the quarter to 1.23 billion euros, slightly above forecasts of 1.19 billion euros, while its cost of risk, which measures potential losses, rose to 115 basis points from 111 bps at end-September, in a still uncertain macroeconomic environment.
Its results in South America were hit by an hyperinflation adjustment and a peso devaluation in Argentina.
The region had already suffered a decline of 10.8% against the previous quarter as BBVA booked a loss of 5 million euros ($5.41 million) in Argentina in the last three months of 2023.
In Turkey, where BBVA shifted to hyperinflation accounting in 2022, profit fell 6%, while NII slumped by more than 55%.
($1 = 0.9241 euros)