Spanish bank BBVA reported a fourth-quarter net profit of 2.06 billion euros, exceeding analyst expectations of 1.88 billion euros, and unveiled a new share buyback program. Despite strong performances in Spain and Mexico, lower lending income and challenges in South America impacted the bank’s overall results. BBVA’s shares rose 3.9% following the announcement, outperforming Spain’s blue-chip index.
The net profit for the October to December period marked a significant 32% increase, showcasing the bank’s resilience. BBVA’s Chief Executive, Onur Genç, highlighted the completion of a 1 billion euro buyback program in November and mentioned the possibility of more buybacks in the future. The bank concluded the quarter with a core Tier-1 fully loaded capital ratio of 12.67%.
In Mexico, BBVA’s largest market, net profit increased by 11.5%, driven by higher loan volumes supporting net interest income (NII). The performance in Spain was robust, with net profit seeing a substantial 78% uptick. The bank has particularly benefited from higher interest rates in Europe, though there is vigilance among investors regarding the sustainability of this boost.
Despite the overall positive results, BBVA’s net interest income (NII), a key indicator of earnings on loans minus deposit costs, experienced a 2% year-on-year decline to 5.25 billion euros. This figure fell short of forecasts, which expected NII to reach 5.6 billion euros. Additionally, NII was down by 18% compared to the previous quarter.
In Spain, while NII saw a remarkable 44% year-on-year increase, the growth was more moderate at 4% compared to the previous quarter. Looking ahead, BBVA projected mid-single-digit growth in NII for 2024. For the entirety of 2023, NII in the home market rose by 49%, in line with the anticipated growth, and the bank expressed confidence in achieving a return-on-tangible equity ratio (ROTE) above the 17% reported in 2023.
The full-year 2023 net profit reached a record 8.02 billion euros, reflecting a 26% increase. BBVA remained optimistic about sustaining net profit growth and achieving a robust ROTE, despite uncertainties in the macroeconomic environment.
BBVA’s loan loss provisions increased by 23% year-on-year in the fourth quarter, reaching 1.23 billion euros, slightly above forecasts. The cost of risk, measuring potential losses, rose to 115 basis points, up from 111 bps at the end of September. These figures underscored the bank’s cautious approach in navigating the uncertain economic landscape.
Challenges in South America, including an adjustment for hyperinflation and peso devaluation in Argentina, impacted BBVA’s results in the region. A decline of 10.8% against the previous quarter and a loss of 5 million euros in Argentina during the last three months of 2023 were contributing factors.
In Turkey, where BBVA adopted hyperinflation accounting in 2022, profit declined by 6%, and NII saw a substantial slump of over 55%. These challenges in Turkey added to the mixed regional performance for BBVA.
As BBVA charts its course for the future, the bank’s positive Q4 results, coupled with its strategic share buyback initiative, provide a foundation for navigating potential headwinds in different regions while continuing to deliver value to shareholders.
