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By Jesús Aguado
MADRID (Reuters) -BBVA's third-quarter net profit rose 22.7% on lower loan-loss provisions and a strong performance from Mexico, its main market, which offset pressure on lending income in Spain.
The Spanish bank also said its board had agreed a share buyback programme of up to 10% of its capital for up to 3.5 billion euros, which it expects to execute in 12 months.
Shares in BBVA rose almost 6% on the buyback, which will be one of Europe's biggest. Brokers such as Jefferies welcomed a solid set of results in Mexico.
Spanish banks, struggling to earn money from more mature markets in Europe, have been expanding in emerging markets where they see greater opportunities for growth.
On Friday, Santander said it had increased by 10.4% an offer to buy out the 8.3% stake it does not already own in its Mexican business.
BBVA reported a net profit of 1.4 billion euros ($1.63 billion) in the July to September period. Analysts polled by Reuters expected a net profit of 1.06 billion euros.
The results surpassed the bank's 1.23 billion euro net profit in the third quarter of 2019, before the pandemic.
The bank said 1.5 billion euros of the buyback will take place after an investor day, on November 18, and is expected to be implemented in the next three to four months.
To cope with the pandemic and ultra-low interest rates, BBVA last year sold its U.S. business, generating more than 8 billion euros to focus on cost cutting in Spain and strengthening shareholder returns.
In September, BBVA finished with a fully loaded core tier-1 capital ratio of 14.48%. With the share buy-back, BBVA's proforma capital ratio as of September stood at 13.18 compared with 12.89% in the previous quarter.
MEXICO BOOSTS GROUP'S NII
Overall, net interest income, a measure of earnings on loans minus deposit costs, rose 5.6% to 3.75 billion euros, above the 3.6 billion euros forecast by analysts, boosted by Mexico.
Net profit in Mexico, which accounts for more than 40% of profits, rose 24.5% in the quarter against the same quarter a year ago, while NII rose 14.4%.
In Turkey, which makes up around 14% of BBVA's results, net profit fell 16% year-on-year in the quarter and NII was down 10% against the backdrop of a plunge in the Turkish lira. Against the previous quarter NII was up 21.3%.
"Regarding Turkey, we are very conservative in growing our book, we are planning to reduce our balance on the FX (foreign exchange) book as we do think that the risks are more concentrated on the FX side", Onur Genc, BBVA's CEO told analysts.
BBVA has been actively hedging on the FX markets to protect its earnings and capital from potential headwinds in Turkey.
In Spain, NII fell 1.4% year-on-year in the quarter and was down 2.6% compared with previous quarter.
Rival Caixabank, which has bought Bankia to help it cope with ultra low interest rates in Spain, NII fell 7.3% against the same quarter in 2020 to 1.59 billion euros, below analysts' forecasts of 1.61 billion euros, triggering a decline of 2.8% in its shares.
($1 = 0.8567 euros)
(Reporting by Jesús Aguado; additional reporting Emma Pinedo and Andrés González; editing by Inti Landauro and Jane Merriman)