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BBVA's first-quarter profit falls nearly 10 percent, hit by Turkey

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BBVA's first-quarter profit falls nearly 10 percent, hit by Turkey
FILE PHOTO: The headquarters of the Spanish bank BBVA are seen in Madrid, Spain, June 12, 2018. REUTERS/Juan Medina/File Photo GLOBAL BUSINESS WEEK AHEAD   -   Copyright  Juan Medina(Reuters)
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By Jesús Aguado

MADRID (Reuters) – Spanish bank BBVA reported a 9.8 percent drop in first-quarter profit on Monday as a depreciating lira hit earnings at its Turkish unit and it booked higher impairments in the United States.

They offset a strong performance in Mexico, its main market.

Spain’s second-largest bank said net profit totalled 1.16 billion euros (£1.01 billion) for January-March, just above an average forecast of 1.15 billion euros in a Reuters poll of analysts.

Like domestic rival Santander, BBVA makes most of its profit overseas, a model that helped it withstand two recessions at home in recent years.

However, economic recession and political instability in Turkey, its fourth- biggest market, have dented the group’s profitability.

First-quarter net profit in Turkey, which accounts for around 10 percent of group earnings, fell 29 percent to 142 million euros, it said.

The lira tumbled nearly 30 percent in 2018 when a currency crisis tipped Turkey’s economy into recession, and ebbed another 10 percent this year.

Overall, BBVA’s net interest income (NII), a measure of earnings on loans minus deposit costs, rose 3 percent to 4.42 billion euros from the same period a year ago, but was down 5.8 percent against the previous quarter. NII was in line with analysts’ estimates.

Ultra-low interest rates, fierce competition for lending in the Spanish market and the negative impact on margins of new international accounting rules squeezed the bank’s margins.

(Reporting by Jesús Aguado, editing by Andrei Khalip and Susan Fenton)

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