BBVA's quarterly profit rise partly overshadowed by higher provisions in Turkey

By Jesús Aguado

MADRID, Oct 29 (Reuters) - Spain's BBVA on Thursday reported a 19% rise in its third-quarter net profit, but a jump in loan provisions in Turkey and lower profits in its home market weighed on its shares, sending them down as much as 6%.

The euro zone's second-biggest bank by market value booked a net profit of €3.02 billion ($3.37 billion) in July-September, roughly matching analysts' forecasts in a Reuters poll, largely helped by solid performance in its top market Mexico.

BBVA and Spanish 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 have sometimes weighed on results.

This time, however, the strengthening of the Mexican peso against the euro compared with the same quarter last year supported earnings in that market.

In Turkey, however, a 45% rise in lending income and a 9% increase in the quarterly net profit to €258 million were accompanied by a 74% jump in loan-loss provisions, reflecting economic uncertainty fuelled by high inflation.

Spanish broker Renta 4, while noting BBVA's progress towards meeting its targets, highlighted a weak "read-across from Spain and the deterioration in credit quality in Turkey," despite the group's strong operating performance.

BBVA shares were down around 4.6% at 1055 GMT, wiping out part of the 12% gain they had made so far this year until the Wednesday close.

The group's CEO Onur Genç told analysts that he expected "higher cost of risk" in Turkey to be compensated by net interest income. "We are quite confident with the guidance we have for the year," he said.

BBVA has set a €1 billion 2026 net profit goal for its Turkish business, with "some downward bias."

Across the entire group, net interest income, the difference between earnings on loans and deposit costs, rose 22% year-on-year in the third quarter to €8.08 billion, above analysts' forecasts of €7.88 billion.

MEXICO IS DRIVER OF GROWTH

In Mexico, third-quarter net profit rose 19% year-on-year, supported by a rise in lending income and a strengthening of the peso. For this year, BBVA forecasts high-single-digit growth in lending income in this market, driven by an around 10% loan growth.

In Spain, its second biggest market, net profit fell 5.5% as trading income fell 94% and BBVA expects a low to mid single-digit growth in lending income for the full year.

A rise of 18% in revenue in the first nine months helped BBVA lift its return-on-tangible-equity ratio (ROTE), a measure of profitability, to 22% from 19.3% at the end of 2025, and above its 2026 guidance of around 21%.

Overall, loan-loss provisions rose 24% year-on-year in the quarter to €1.95 billion compared with analysts' forecasts of €1.86 billion.

BBVA's fully loaded core tier 1 capital ratio, the strictest measure of solvency, stood at 12.21% at the end of September compared with 12.41% in the previous quarter on a pro-forma level.

($1 = 0.8959 euros)

(Reporting by Jesús Aguado; additional reporting by Emma Pinedo; Editing by David Latona and Tomasz Janowski)