BBVA's Q3 net profit falls 3.7% from same period a year ago

BBVA reported a 3.7% year-on-year decline in third-quarter net profit to 2.53 billion euros, missing analyst expectations, primarily due to the Mexican peso's depreciation and reduced trading gains in Spain. However, the bank's net interest income surged 13.2% to 6.64 billion euros, surpassing forecasts, driven by strong underlying loan growth. This performance follows BBVA's unsuccessful 16.32 billion euro bid for Sabadell, with the bank now focusing on a four-year plan to achieve 48 billion euros in accumulated profits through loan growth in Mexico and Spain.

Analysis

BBVA reported a 3.7% year-on-year decline in third-quarter net profit to €2.53 billion, falling short of analyst expectations of €2.57 billion. This underperformance was primarily attributed to the depreciation of the Mexican peso and lower trading gains in Spain.

Despite the net profit miss, Net Interest Income (NII) surged 13.2% year-on-year to €6.64 billion, surpassing analyst forecasts of €6.43 billion. This robust NII growth was driven by solid underlying loan growth dynamics, indicating strength in core banking operations.

The earnings report follows BBVA's recently failed €16.32 billion hostile takeover bid for Sabadell, shifting the bank's strategic focus. BBVA has now outlined a four-year plan targeting €48 billion in accumulated profits, relying on organic loan growth in Mexico and Spain.

The bank's market value recently exceeded €100 billion, positioning it as the euro zone's second-largest lender. However, the mixed sentiment and slightly negative per-ticker sentiment for BBVA reflect the contrasting impacts of strong NII versus currency headwinds and the strategic pivot post-Sabadell.

Key Decisions for Investors

• Monitor BBVA's execution of its four-year organic growth plan, especially loan growth in Mexico and Spain, following the failed Sabadell acquisition.
• Assess the ongoing impact of currency fluctuations, particularly the Mexican peso, on future earnings given its significant drag on Q3 net profit.
• Re-evaluate BBVA's long-term growth prospects and valuation based on its revised standalone strategy and strong core NII performance.