MADRID – On Thursday, BBVA (NYSE: BBVA) beat forecasts with a 26% year-on-year rise in third-quarter net profit thanks to a solid performance in Spain, where it aims to buy smaller rival Sabadell. However, profit in Mexico declined amid economic uncertainty.
The group’s lending income also came under pressure from lower interest rates and the negative impact from hyperinflation accounting in Argentina.
BBVA shocked Spain in May when it turned hostile in its pursuit of Sabadell with an all-share bid – worth more than 12 billion euros ($12.8 billion) at the time – after Sabadell’s board rejected the offer.
Despite some currency depreciation in South American markets, BBVA booked a net profit of 2.63 billion euros in July-September, above the 2.37 billion euros expected by analysts polled by Reuters.
However, net interest income (NII), or earnings on loans minus deposit costs, fell 9% year-on-year to 5.87 billion euros, below analysts’ average forecast of 6.13 billion euros.
Lending income was hit in part by a 41% fall in margins at BBVA’s Argentinian unit due to hyperinflation adjustments and the devaluation of the peso.
BBVA (NYSE: BBVA), Spain’s second-biggest lender, relies on Mexico for more than half of its profit, and combining with Sabadell would allow it to lift revenues and increase lending to small and medium-sized companies in Spain, just as the boost from higher interest rates begins to fade.
In Spain, net profit rose 23.4% year-on-year in the quarter, while net interest income was up 7.3%. Against the previous quarter, NII rose 0.5%.
Net profit in Mexico fell 2.4% year-on-year due to the depreciation of the Mexican peso, while NII was down 3.7%. Against the previous quarter, NII was down 5.9%.
($1 = 0.9320 euros)
(Source: Reuters)
