Spain's BBVA tops forecasts, boosted by emerging markets

By Jesús Aguado

MADRID (Reuters) -Spain's BBVA beat forecasts on Friday with a 36.4% year-on-year rise in first quarter net profit, driven by a strong performance in emerging markets, while competitor Caixabank suffered some pressure on lending income.

Net profit at BBVA came in at 1.65 billion euros ($1.74 billion) in the January to March period, more than the 1.24 billion euros forecast by analysts polled by Reuters.

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 point to risks from its exposure to current macroeconomic uncertainty in Turkey.

With inflation in Turkey hitting 61.14% in March, BBVA Chief Executive Onur Genc told analysts in a call the bank could start applying "hyperinflation accounting as early as in the second quarter".

This could be positive for capital, but result in a hit to earnings there, Genc said.

BBVA's Chief Financial Officer Rafael Salinas said the bank so far owned more than 60% of Turkish lender Garanti following its takeover offer. The acceptance period for the offer ends on May 18.

Shares in BBVA rose 4.2% after brokers such as RBC highlighted solid results in all its geographies and after the bank said better-than-expected operating trends would lead to an improvement in net interest income in 2022 in Spain and Mexico.

A strong performance in Mexico, Turkey and South America due to increases in interest rates there in 2021 and the first quarter of 2022 had started to show in the results, the bank said in a statement.

Both Mexico and Turkey were among areas BBVA highlighted in its strategic plan in mid-November.

In Mexico, where BBVA makes around 50% of its earnings, net profit rose 59% from the same quarter a year ago, while net profit in Turkey, responsible for 15% of earnings, rose 30.6% year-on-year.

Lending income in both countries was up around 30% year-on-year in the quarter.

JP Morgan said overall higher revenues and lower than expected costs and loan losses were behind BBVA's better-than-expected results.

The group's net interest income, earnings on loans minus deposit costs, rose 20.5% to 4.16 billion euros, above the 3.89 billion euros forecast by analysts.

In Spain, responsible for more than a third of its earnings, quarterly net profit leapt 62% year-on-year, though net interest income fell 0.8%, still pressured by low interest rates.

At Spanish competitor Caixabank, lending income was down 5.4%.

BBVA ended March with a core tier-1 fully loaded ratio, the strictest measure of solvency, of 12.70% compared with 12.75% at end-December.

($1 = 0.9493 euros)

(Reporting by Jesús Aguado; additional reporting by Emma PinedoEditing by Inti Landauro and Mark Potter)