By Jesús Aguado
MADRID (Reuters) -BBVA’s net profit rose 1.6% in the fourth quarter thanks to a strong performance in its biggest market Mexico though its capital ratio took a hit from a share buyback programme, the Spanish bank said on Thursday.
Like its bigger Spanish rival Santander, BBVA has been expanding in emerging economies where it see greater opportunities for growth as it struggles to boost income in more mature markets.
Analysts broadly welcomed the results but cast some doubt on the bank’s capital hit and BBVA shares fell as much as 5.3% before recovering to trade 3.2% lower at 0850 GMT.
“We were disappointed with capital as its fully loaded ratio ended 45 basis points below our estimate and consensus,” JB Capital said in a note, adding that the negative capital hit also came from risk-weighted asset price inflation.
BBVA finished 2021 with a core Tier-1 fully loaded capital ratio of 12.75% compared with 14.48% in September after deducting 3.5 billion euros ($3.95 billion), the full hit from its ongoing share buyback programme.
The bank, which targets a capital ratio within the range of 11.5% to 12%, said it would implement the remaining 2 billion euros of the programme by Oct. 15.
Overall, BBVA booked a net profit of 1.34 billion euros in the October to December period, above a 1.02 billion euro forecast by analysts in a Reuters poll.
EMERGING MARKETS
Mexico and Turkey are among the key regions BBVA is betting on to help meet higher profitability and cost targets under a 2022-2024 strategic plan outlined in mid-November.
In Mexico, which accounted for more than 50% of BBVA’s profit, a strong insurance performance helped boost net profit by 10.9% from the previous quarter and 36.2% from a year earlier. Net interest income a measure of earnings on loans minus deposit costs, rose 12.8% from a year ago.
BBVA said that in Turkey, which makes up about 12% of its results, net profit when translated into euros more than doubled in the quarter from a year earlier though it was down 21.6% compared with the previous three months. Net interest income in Turkey rose 27% from last year.
BBVA’s full-year net profit more than trebled compared with 2020 to 4.65 billion euros, surpassing the bank’s 3.51 billion net profit in 2019 before the coronavirus pandemic, as well as analyst expectations of 4.33 billion euros.
The group’s overall net interest income rose 14.4% to 3.98 billion euros, above the 3.75 billion euros forecast by analysts. Full-year results were also helped by a decline of more than 41% in total impairment charges.
BBVA announced a cash dividend of 0.23 euros per share, taking the total 2021 distribution to 0.31 euros, leaving its payout at 44% against full-year earnings – in line with its new policy of returning 40% to 50% to shareholders.
($1 = 0.8857 euros)
(Reporting by Jesus Aguado; Additional reporting by Emma Pinedo; Editing by Inti Landauro and David Clarke)
