By Jesús Aguado
MADRID (Reuters) -BBVA's second-quarter net profit rose 24% against the same period last year on higher lending income in Mexico, its main market, and Spain, a trend the lender expects to continue this year, offsetting some weakness in Turkey.
The Spanish bank also announced a 1 billion euro ($1.1 billion) share buyback programme. It follows a smaller additional buyback earlier this year and a 3.2 billion euro programme in 2022.
Rival Caixabank, Spain's biggest lender by domestic assets, also announced a share buyback plan of 500 million euros.
In the April to June second quarter, BBVA (BME:BBVA) booked a net profit of 2.03 billion euros, beating the 1.83 billion euros forecast by analysts polled by Reuters.
Higher earnings helped push BBVA's return on tangible equity ratio (ROTE), a measure of profitability, to 16.9% in June from 16.3% in March. It forecast a high-teens ROTE for 2024.
Jefferies analysts welcomed the results, highlighting they "expect to see significant loan growth in Mexico in the coming years."
At Caixabank, net profit rose 48% year-on-year in the quarter, also beating forecasts.
Shares in BBVA were up 2.7%, while Caixabank's climbed 2%.
BBVA CEO Onur Genc said the bank could undertake additional share buybacks in future.
The bank has around 2.3 billion euros of excess capital, above the upper end of its 11.5-12% capital target, taking into account a pro-forma core tier-1 fully loaded capital ratio, the strictest measure of solvency, of 12.67% at the end of June.
NII SUPPORTS RESULTS
European banks are benefiting from higher interest rates.
At a group level, BBVA's net interest income (NII), or earnings on loans minus deposit costs, rose 25.5% year on year to 5.8 billion euros, in line with analysts' forecasts.
In Mexico, the bank's net profit rose 32% while NII climbed 38% and Genc told analysts he still expected NII to grow further in Mexico and achieve growth of 20% in 2023.
In Spain, net profit more than tripled from a year earlier, while NII was up 51%. For 2023, BBVA raised its NII growth guidance in Spain to 40-45% from 30% before, as it does not see any pressure on deposits costs until the first quarter of 2024.
Margins in its home market were also helped by higher customer spreads as yields on loans rose 53 basis points (bps) to 3.64%, while rates on deposits climbed just 16 bps to 0.53%.
This widened the customer spread in Spain to 311 bps compared with 274 bps in the first quarter.
In Turkey, where BBVA shifted to hyperinflation accounting in 2022, the lender booked a profit of 248 million euros. That was up 83.7% year-on-year but down 10.5% on the first quarter, affected by the strong depreciation of the Turkish lira.
Net interest income in Turkey fell 46.5% against the previous quarter on higher funding costs.
($1 = 0.9114 euros)