Banco Bilbao Vizcaya Argentaria SA reported higher costs and a surprise loss at its Turkish unit, denting earnings in a mixed quarter for Spain’s second-largest lender.
Operating expense jumped 18% from a year earlier while results in Turkey, one of BBVA’s key markets, were hit by an adjustment for hyperinflation and higher taxes, resulting in a third-quarter loss at the local unit of €158 million. Analysts had expected a small profit.
Net income for the group rose 13% from a year earlier, slightly better than expected, fueled by a jump in lending income in the bank’s home market Spain.
Shares of BBVA slumped the most since March as investors scaled back bets on a stock that had outperformed most peers as it benefited from rapid increases in borrowing costs. With several central banks nearing the end of rate increases, Chief Executive Officer Onur Genc is counting on the bank’s geographical diversification and digital expansion to boost profitability. But the loss in Turkey may revive debate over Genc’s decision two years ago to double down on that market.
Profit in Turkey “could stay pressured for the next few quarters as high inflation persists,” said Lento Tang, an analysts with Bloomberg Intelligence.
BBVA fell 1.2% at 9:44 a.m. in Madrid, paring earlier declines of as much as 6.1%. Before today, the stock had rallied 33% this year, outperforming the 8% gain in the Stoxx 600 Banks Index.
Inflation in Turkey is on track to end this year near 70%, putting pressure on the lira, which is down 34% this year against the US currency. Adjustments for hyperinflation in the country helped drive an €820 million hit in the third quarter, recorded as other operating income and expenses. That’s up from €372 million a year earlier.
Genc two years ago raised BBVA’s stake in Turkish lender Turkiye Garanti Bankasi AS, in a deal valued at around $2.6 billion at the time. BBVA has defended the investment, with Chairman Carlos Torres saying the transaction was “an absolute winner even if there is volatility.”
Earnings in Spain jumped 75% from a year earlier, boosted by a 62% increase in lending revenue. Mexico, another of BBVA’s key markets, saw a 21% increase in profit.
(Updates with expenses in second paragraph, shares from fourth.)
Author: Macarena Muñoz