Banco Bilbao Vizcaya Argentaria SA reported fourth-quarter profits largely in line with analyst estimates. While revenue showed growth, this positive impact was partially offset by increased provisions in key markets such as Turkey and Mexico. The financial report indicated a 4.1% rise in net profit to 2.53 billion euros. Analyst estimates had projected 2.54 billion euros. Adjusted earnings per share reached 1.78 euros, up from 1.68 euros a year earlier. Net interest income amounted to 262.8 billion euros, marking a 4.0% year-on-year increase. Provisions surged by 19% compared to the same period last year, and a key capital strength metric also fell short of expectations.
Following the collapse of its plan to acquire smaller rival Banco de Sabadell in October, a deal pursued for over a year by Chairman Carlos Torres and CEO Onur Genç, BBVA is now concentrating on expanding its existing operations. Subsequently, the bank announced a 3.96 billion euro share buyback program aimed at returning excess capital to investors. Since the acquisition failed in mid-October, BBVA's stock has climbed approximately 40%, as investors have shown a preference for shareholder returns over a transaction laden with uncertainty and significant government-imposed conditions. The bank also declared a final dividend for 2025 of 0.60 euros per share on Thursday.
Benjamin Toms, an analyst at RBC, noted, "We expect it could be much more difficult for the share price to advance further. While it is hard to be negative on a bank with such an attractive financial profile, in our view this is already largely reflected in consensus." The failure of the Sabadell acquisition has reignited market concerns regarding BBVA's exposure to emerging markets. The bank maintains subsidiaries in South American nations like Venezuela, as well as in Turkey and Mexico. BBVA stated that the latter two countries were the primary drivers behind the increase in provisions.
The Spanish bank indicated that its return on equity, a measure of profitability, should improve to around 20% this year. The ratio stood at 19.3% last year. RBC's Toms suggested that this outlook incorporates cost guidance for Spain in the current year, which is "significantly above" current analyst expectations. He wrote, "We expect the focus on today's call will be on Spanish costs." One lever for enhancing profitability and capital for the Spanish bank is the utilization of significant risk transfers, which enable the bank to free up resources to underwrite more new business or increase dividends. Informed sources previously indicated that BBVA plans to issue two such transactions involving approximately 70 billion euros in assets.
Although investors welcomed the collapse of the Sabadell acquisition plan, it represented a significant setback for BBVA's CEO and Chairman. Their failure contrasts with a series of deals successfully concluded by its larger competitor, Banco Santander. Santander announced this week that it had agreed to acquire Webster Financial Corp. of the US for $12 billion. This follows the Spanish largest bank's announcement just six months prior regarding its acquisition of TSB Bank from Sabadell. Santander also reported better-than-expected fourth-quarter profits and announced a 5 billion euro share buyback program.
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