By Jesús Aguado
MADRID (Reuters) - BBVA (BME:BBVA) on Wednesday posted a 38% jump in net profit to a record 6.42 billion euros ($6.98 billion) for 2022 powered by a double-digit increase in lending income and a strong performance in Mexico, a trend the bank expects to continue this year.
Net profit in the fourth quarter at Spain's second-biggest lender by market value rose 17.6% to 1.58 billion euros.
Both the full-year and quarterly profit came in slightly above market forecasts.
Like larger rival Santander (BME:SAN), BBVA has been expanding in emerging economies where it has seen greater opportunities for growth as it struggled to boost income in more mature markets.
In Mexico, which accounted for more than 60% of its net earnings in 2022, net profit rose 64%, while income from lending increased by 44%.
For 2023, BBVA said it expected to achieve a mid-teens growth in lending income and a double digit growth in loans in Mexico.
At 0820 GMT, shares in BBVA rose more than 2% after having risen more than 14% so far this year.
Broker Jefferies welcomed a solid set of results, particular in Mexico, on fourth-quarter trends and 2023 outlook.
Banks across Europe are also beginning to benefit from higher borrowing costs despite fears of recession.
In the final quarter, net interest income (NII), earnings on loans minus deposit costs, rose 34% to 5.34 billion euros, above the 5.26 billion forecast by analysts, while rising 30% in 2022.
In an uncertain economic environment, loan-loss provisions rose 20% to 998 million euros in the quarter.
That was below analysts' forecasts of 1.07 billion euros.
BBVA's cost of risk, which measures the cost of managing credit risks and potential losses for the bank, rose to 91 basis points from 86 bps at the end of September. For 2023, the bank expects a cost of risk of around 100 basis points.
Despite its strong franchise in Mexico, some analysts have cited risks from its exposure to Turkey and higher prices in Latin America.
Inflation effects, particularly in emerging markets, led to an increase of around 11% year-on-year in personnel costs in the fourth quarter at a group level.
In Turkey, where BBVA has started to implement hyperinflationary accounting, net profit rose 11%, while NII fell 9%.
In Spain, net profit rose 2% year-on-year in the quarter, while NII increased by more than 25%, with the bank forecasting growth at low twenties for this year in its home market.
The bank proposed a final cash dividend of 0.31 euros per share and announced a share buy-back plan of 422 million euros.
Its total distribution will reach 3.02 billion euros, 47% of the net profit and 0.50 euros per share, including the interim cash dividend 0.12 euros per share already paid, BBVA said.
BBVA finished with a reported core tier-1 fully loaded capital ratio, the strictest measures of solvency, of 12.61% compared to 12.45% at end-September.