BBVA profit boosted by Mexico, provisions raised due to Middle East conflict

By Jesús Aguado

MADRID, April 30 (Reuters) - BBVA BBVA.MC beat forecasts with a 10.8% year-on-year increase in first-quarter net profit on Thursday, as a strong performance in its main markets in Spain and Mexico offset higher provisions related to uncertainties stemming from the Iran war and a rise in costs.

The euro zone's second-biggest lender by market value posted a net profit of 2.99 billion euros ($3.49 billion) for January to March, above the 2.79 billion euros expected by analysts polled by Reuters.

Costs rose 13.7%, driven by 125 million euros in restructuring charges, mainly linked to voluntary redundancies, particularly in Spain. The measures resulted in a group reduction of 750 staff, including 230 roles in its home market.

Overall impairments rose 31% year-on-year to 1.82 billion euros, above analysts' forecast of 1.73 billion euros. Cost of risk, a gauge of managing potential losses, rose 15 basis points in the quarter to 1.54%.

The lender said it had made an adjustment of 98 million euros, motivated by "the high geopolitical uncertainty associated with the conflict in the Middle East, particularly due to its duration and scope."

The bank has relied on Latin American markets to offset pressure from lower interest rates in the euro zone, though currency depreciations in emerging markets have sometimes weighed on results. This quarter, however, appreciation of the Mexican peso supported earnings.

Net interest income, the difference between interest earned on loans and deposit costs, rose 17.8% year-on-year to 7.54 billion euros, driven by solid loan growth and above analysts' forecast of 7.23 billion euros.

At 1237 GMT, shares in BBVA rose more than 1%.

BANK STICKS TO POSITIVE TONE, DESPITE UNCERTAINTY

A 14% increase in revenue helped lift BBVA's return-on-tangible-equity ratio (ROTE), a key measure of profitability, to 21.7% from 19.3% at the end of December. It raised its ROTE forecast for 2026 to above 20% from previously around 20%.

In Mexico, net profit rose 9.3% with NII up 13%. For this year, it has guided for a mid- to high-single-digit growth on the back of high-single-digit growth in loans.

Net profit in Spain increased 8.1% year-on-year, supported by solid economic growth in its home market, keeping its low- to mid-single-digit growth guidance for 2026.

In Turkey, net profit in the first quarter rose 66% supported by lending growth and the bank stuck to its net profit forecast of around 1 billion euros by end of this year. It kept its cost of risk guidance of around 200 basis points by the end of 2026.

In Argentina, net profit fell 46% after provisions rose 88%.

BBVA also said it would launch a 1.46 billion euro share buyback early next week, the final tranche of a 4 billion euro repurchase programme.

It finished with a core tier-1 capital ratio of 12.83%, from 12.7% as of the end of December.

($1 = 0.8578 euros)