BBVA Posts Profit Beat on Higher Lending Volumes Amid Sabadell Takeover Bid — Update

By Elena Vardon

Banco Bilbao Vizcaya Argentaria reported better-than-expected profit for the second quarter as strong activity boosted lending volumes, particularly in Spain, while Mexico--its largest market--showed signs of slowing growth.

The Spanish bank made a net profit of 2.79 billion euros ($3.02 billion) for the three months ended June 30 compared with EUR2.03 billion for the same period last year. This surpassed expectations of a EUR2.46 billion figure taken from a company-compiled consensus.

In Spain, the bank reported a 57% on-year increase in net profit and said that it remains fully confident that it will succeed it with its takeover offer of domestic lender Banco de Sabadell in a deal which would help it gain scale in its home market and lessen its reliance on Mexico. Earlier this month, BBVA shareholders approved the group's capital increase to fund the $12 billion-plus hostile takeover of its smaller peer.

"The takeover process is progressing positively in full accordance with the plan," BBVA Chief Executive Onur Genc said. Sabadell's board rejected the all-share bid on the grounds that it undervalued the group, before BBVA took the offer directly to its shareholders.

Sabadell reported a jump in second-quarter profits last week and promised to increase its shareholder payouts to EUR2.9 billion for 2024--compared with EUR2.4 billion previously--in a bid to defend its standalone prospects. The process is likely to drag on for months as approval from several regulators, including the competition authority, is needed before Sabadell shareholders are asked to vote on the transaction.

BBVA expects the potential combination to deliver EUR850 million in synergies, and specified on Wednesday that they are expected to be broken down into EUR450 million in administrative and technology savings, EUR300 million from personnel and EUR100 million from financing services.

For the second quarter, BBVA reported earnings ahead of market expectations in the rest of Latin America and in Turkey, while its performance in Mexico--which is considered its growth engine--was in line with estimates.

For the business as a whole, gross income--its top-line figure--rose to EUR9.23 billion from EUR7.19 billion and beat the consensus of EUR8.65 billion. Loan growth of 10.7% on a constant currency basis was the main income driver, leading net interest income--the difference between what banks earn on loans and what they pay clients for deposits--to climb to EUR6.48 billion from EUR5.77 billion, it said.

BBVA is Spain's second-biggest by market capitalization, though it generates more than half of its income from outside the country.

The lender's common equity Tier 1 ratio--a key measure of balance-sheet strength--stood at 12.75% at the end of the quarter, slightly short of expectations of 12.84%, but still above the 11.5% to 12% target range.

Shares in Madrid were down around 4% in early afternoon exchanges, with some analysts pointing to disappointment at the lack of guidance upgrade after the solid earnings beat. The stock has gained 19% since the start of the year.

"We will comfortably surpass the ambitious goals we set for ourselves for the 2021-2024 period," Genc said.

Write to Elena Vardon at elena.vardon@wsj.com

(END) Dow Jones Newswires

July 31, 2024 09:14 ET (13:14 GMT)

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