BBVA's higher provisions offset brighter lending outlook in Mexico and Spain

By Jesús Aguado

MADRID, Feb 5 (Reuters) - Spain's BBVA BBVA.MC said on Thursday rising lending income in Mexico and Spain should underpin growth in 2026, but shares fell after higher-than-expected fourth-quarter provisions and a weaker performance in Turkey and Argentina offset otherwise solid results.

The second-biggest lender in the euro zone by market value reported a 4.1% year-on-year rise in net profit in the fourth quarter to 2.53 billion euros, broadly in line with the expectations of analysts polled by Reuters.

For 2025, net profit rose 4.5% to a record 10.51 billion euros, guiding for a 20% return-on-tangible equity ratio (ROTE), a measure of profitability, from 19.3% at end 2025.

BBVA has relied on Latin American markets to offset pressure from lower euro zone interest rates, but currency depreciations in emerging markets have sometimes impacted results.

At 0942 GMT, shares in BBVA were down 6.2% after having risen 112% last year and 9% so far this year.

Jefferies said in a note to clients that "beats in both core markets Mexico and Spain were offset by misses in Turkey and Argentina, on higher provisioning needs in retail, which we believe will raise some questions."

Loan loss provisions rose 19% year-on-year in the quarter to 1.75 billion euros, above forecasts of 1.66 billion euros, with the cost of risk, which manages potential losses, rising 4 basis points in the quarter to 1.39%.

HIGHER NII IN SPAIN AND MEXICO

Net interest income - earnings on loans minus deposit costs - rose 9.8% year-on-year in the quarter to 7.03 billion euros, above forecasts of 6.91 billion euros thanks to solid underlying loan growth dynamics.

In Spain, net profit rose 13.7% year-on-year in the quarter, while lending income rose 5.8%. For 2026, it guided for a low to mid single-digit growth in NII supported by an expected 5% growth in loans, after lending income rose 3.2% in 2025.

In Mexico, its main market, net profit and NII rose 10.8% and 8.5% in the quarter, respectively, but NII in 2025 fell 1.1%. The lender guided for a mid to high-single-digit growth this year on the back of high-single-digit growth in loans.

In Turkey, net profit in the quarter fell 11.3% year-on-year where authorities kept credit restrictions to tame inflation. Net profit rose 32% to 805 million euros in 2025 on better-than-expected inflation rates.

It had guided for net profit of below 1 billion euros last year, and now expects around a 1 billion euro net profit 2026.

BBVA also announced on Thursday a record gross dividend in cash of 0.92 per share, 31% higher than in 2024. In total, it will distribute 5.25 billion euros as ordinary remuneration or above 9 billion euros, including the 4 billion share buyback in December.

The bank's fully-loaded core-tier 1 capital ratio, the strictest measure of solvency, stood at 12.7% at end 2025 compared to 13.42% as of end-September or 12.42% on a pro forma level after deducting the buyback.

($1 = 0.8483 euros)