BBVA share price up, beats expectations on Spanish recovery

Banco Bilbao Vizcaya Argentaria reported on Wednesday quarterly performance that exceeded projections as the second-largest bank in Spain benefited from continued recovery at home.

The company stated net income of €689 million during the three months ended December 31, compared to a loss of €849 million in the fourth quarter of 2013. However, the below-zero result was mostly due to a charge BBVA took in relation to its stake sale in a Chinese bank. On average, analysts polled by Bloomberg were expecting a net income of €588 million.

Net interest income, or the difference between interest paid on deposits and the interest received on credits, jumped 13% to €4.2 billion compared to the €3.8 billion stated a year ago. Analyst had projected that figure to stand at €3.96 billion.

BBVA said it had benefited from lower cost of deposits and increased interest towards new loans, mortgages in particular. Consumer finance and loans requested by small and medium-sized enterprises also picked up in the quarter, the bank said.

The Bilbao-based bank has been dependent on its Latin American operations to drive profits higher during Europes recession period, but now BBVA is looking to focus on its domestic market as Spain is nearing full recovery.

The bank outlined an improvement in Spains banking system, it said the total figure of non-performing loans has fallen for a tenth consecutive month in November, citing the latest data available. Compared year-over-year BBVAs bad loans fell from 6.8% of overall lending to 5.8% in the fourth quarter.

Last July, BBVA beat domestic competitors in a state-manged auction to purchase nationalized Catalunya Banc in a €1.2-billion deal, outlining efforts to tap into the wealthy population of Catalonia. The bank said the deal is expected to close around April.

During the quarter BBVA increased its investment in Turkey, where profits have grown, and agreed to acquire additional shares at local bank Turkiye Garanti Bankasi to boost its stake to around 40%. In January, BBVA reduced it exposure to China, cutting down its stake in domestic bank Citic.

All-in-all BBVA stated full-year net income of €2.6 billion, or 25.7% better than 2013.

“It has been a difficult but good year,” said Chief Executive Francisco González, adding that BBVA is in an “astounding position to face a new cycle of growth and business transformation.”

BBVA gained 3.88% on Tuesday and closed at €7.93 in Madrid. On Wednesday the stock climbed 2.69% to €8.14 at 15:30 GMT, marking a one-year decrease of 5.84%. The company is valued at €49.38 billion.

According to the Financial Times, the 31 analysts offering 12-month price targets for BBVA have a median target of €8.80, with a high estimate of €11.80 and a low estimate of €6.10. The median estimate represents a 10.94% increase from the last closing price.