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UPDATE 2-Spain's BBVA, Caixabank report profit bounce, calm worries about new markets
July 29, 2016 / 6:31 AM / a year ago

UPDATE 2-Spain's BBVA, Caixabank report profit bounce, calm worries about new markets

* BBVA Q2 profit up 58 pct, Caixabank’s up 34 pct

* BBVA says no impact on Turkish business since coup

* Caixabank says still focused on BPI takeover bid

* Net interest income at both banks unchanged (Adds details from analyst calls, news conferences)

By Jesús Aguado and Angus Berwick

MADRID, July 29 (Reuters) - Spanish lenders BBVA and Caixabank both reported stronger than expected profit growth on Friday and said they were committed to new businesses outside their core markets as they seek higher margins.

BBVA and Caixabank, Spain’s second- and third-biggest banks respectively, bounced back from a tough first quarter when profits fell sharply. BBVA’s second-quarter profit rose 58 percent, above analysts’ estimates in a Reuters poll, while Caixabank’s rose 34 percent over the same period.

BBVA said it was committed over the long term to its business in Turkey, where it has a majority stake in lender Garanti, after a failed military coup earlier this month cast uncertainty over the country’s future. The Turkish arm accounts for almost 14 percent of the group’ profits.

The July 15 coup had not affected its business activity or its asset quality, the bank’s CEO Carlos Torres said on a conference call with analysts, adding the bank had insurance against currency variations that protect its balance sheet.

But he said that if Moody’s followed fellow rating agency Standard and Poor’s in downgrading Turkey, which would mean the loss of its investment-grade status, BBVA’s core capital ratio would shrink by 15 basis points.

Caixabank, meanwhile, said it was still focused on its snarled takeover of Portugal’s Banco BPI, a major step outside its core Spanish market where record low interest rates and fierce competition have pressured its margins.

However, CEO Gonzalo Gortazar said it could withdraw the offer if BPI’s shareholders do not scrap a voting rights cap that would give Caixabank only 20 percent of the vote despite a 45-percent stake. A decision on whether to remove the cap has been suspended until Sept. 6 due to an injunction.

“I think it will be completed, it is a delay... We are 100 percent focused on this acquisition which is very important for us,” Gortazar told a news conference in Barcelona.


BBVA and Caixabank have contrasting business models with the former drawing the majority of its revenue from abroad and the latter chiefly focused on Spain. But they face a similar challenge in raising earnings from loans.

The two lenders are currently busy closing branches and cutting jobs to reduce costs. Caixabank also said it may sell down its portfolio of real estate assets.

Shares in Caixabank were up 5.6 percent while BBVA’s were up 4.2 percent at 1200 GMT, outperforming domestic and European peers and leading the Ibex index.

Net interest income - measuring earnings of loans minus deposit costs - was flat at both banks, although they reported higher earnings from fees in a sign of how banks are seeking more profitable business areas.

BBVA’s second-quarter profit of 1.12 billion euros ($1.24 billion) was due to one-off gains from the sale of its stake in credit card company Visa Europe, dividend income, higher fees and lower provisions against bad loans.

The bank, the fifth largest in the euro zone in terms of market value, also pointed to strong growth in Mexico, which makes up over 40 percent of its business, and in its other Latin American markets.

Caixabank’s net profit was 365 million euros on the back of lower bad debt provisions and falling costs. First-half profit against last year fell 10 percent, less than forecast.

Spanish banks are expected to do well in a European banking stress test later on Friday, although there are persisting worries over mid-sized Banco Popular which reported a near 100 percent profit loss on Friday and fired its CEO. ($1 = 0.9029 euros) (Additional reporting by Sam Edwards in Barcelona; Editing by Julien Toyer and Susan Thomas)

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