MADRID: BBVA beat analyst expectations with a 32 per cent jump in full year net profits, despite political and currency turmoil in Mexico, the bank’s most important market, and a one-off charge linked to mortgage mis-selling in Spain.
Spain’s second-largest lender by value earned €3.48bn over the course of 2016, up from €2.64bn the year before. The increase was the result of tight cost controls, lower provisions and revenue growth in BBVA’s emerging markets operations. Net interest income, the profits a bank makes on its core lending activities, rose 15 per cent to €17.1bn.
Mexico accounts for almost half the bank’s net profits — prompting investor concerns about the impact of the apparent shift in policy under the new US administration. President Donald Trump has called for the construction of a border wall, a spike in import tariffs and a renegotiation of the Nafta trade deal that covers the US, Mexico and Canada. Fears about a protectionist backlash have triggered a drop in the Mexican peso, hurting profits at BBVA’s Mexican operations in the final quarter.
“The situation in the US has already had an impact on Mexico, mainly because of the depreciation of the peso,” Carlos Torres Villa, BBVA chief executive, told analysts in a conference call. But he predicted that the US and Mexico would continue to enjoy close economic ties — and that the Mexican market itself would continue to generate “solid growth” despite the political climate.
“There are uncertainties but there are also bright lights ahead [in Mexico], given the size and the youth of the economy, and its vibrancy,” Mr Torres Villa said.
In Spain, BBVA suffered a setback in the final quarter of 2016, after a European court ruled that Spanish banks had to compensate their clients in full for losses they suffered as a result of illegal mortgage contracts. BBVA said it made a gross provision of €577m to cover for expected claims, reducing net earnings by €404m.
