BBVA's Q2 net profit rises 11.4% as growth in Mexico offsets higher provisions

Spain's BBVA on Thursday said its second-quarter net profit rose 11.4% year-on-year, supported by Mexico and overall higher lending income, which offset a rise in provisions.

The second-biggest bank in the euro zone by market value booked a net profit of €3.06 billion ($3.51 billion) in the April to June period, above the €2.96 billion expected by analysts polled by Reuters.

BBVA also announced a new €2 billion share buyback programme.

BBVA and rival Santander have relied in the past on Latin American markets to offset pressure from lower interest rates in the euro zone, but currency depreciations in emerging markets have sometimes impacted results. This time, the appreciation of the Mexican peso supported earnings.

In Mexico, net profit rose 22.8% year-on-year in the quarter, while net profit in Spain fell 3% due to lower trading income.

Overall, loan loss provisions rose 21.8% year-on-year in the quarter to €1.68 billion, below forecasts of €1.82 billion, following a rise in customer loans. However, the cost of risk, which measures potential losses, fell 11 basis points in the quarter to 1.43%.

A rise of 20.6% in revenues helped BBVA lift its return-on-tangible equity ratio (ROTE), a measure of profitability, to 22.2% from 21.7% at the end of March. Against that background, BBVA lifted its ROTE target for the end of 2026 to around 21% from above 20%.

At a group level, net interest income, the difference between earnings on loans and deposit costs, rose 22.9% year-on-year in the quarter, to €7.63 billion, reflecting solid underlying loan dynamics. Analysts expected NII to come in at €7.55 billion. NII rose 1.2% against the previous quarter.

The bank's core tier-1 capital ratio, however, rose 7 basis points in the quarter to 12.9%.