Investing.com — shares fell about 7% on Thursday after the bank reported fourth-quarter results that, while showing a modest rise in profit, left investors unsettled by weaker-than-expected capital levels, higher operating costs and what analysts described as a notably cautious outlook for 2026.
The headline figures were broadly solid, but the market reaction reflected concerns that the quality of the beat was not as strong as the headline profit growth suggested.
The bank posted fourth-quarter net profit of €2.53 billion, a 4% increase from a year earlier, supported by lending momentum in Spain and Mexico.
Full-year profit rose to €10.51 billion, up 19.2% at constant exchange rates, even after pressures from the Mexican peso’s depreciation against the euro.
Revenue trends were generally favourable: gross income grew 5.1% to €9.80 billion, and net interest income climbed nearly 10% to €7.03 billion.
Fees, however, slipped 4%, and analysts noted that the top-line performance leaned more heavily than expected on NII strength, rather than on a broader mix across business segments.
Where sentiment weakened was further down the income statement. Operating expenses increased sharply, rising more than 11% from the third quarter, driven by variable employee compensation and higher technology spending, items analysts said ran ahead of forecasts.
Provisions also jumped to €1.75 billion from €1.57 billion in the previous quarter, and while asset-quality indicators continued to improve, with the non-performing loan ratio falling to 2.7% and coverage rising to 85%, analysts flagged the guidance on future provisioning and cost trends as more conservative than anticipated.
Capital was another pressure point. BBVA’s common equity Tier 1 ratio dropped to 12.70% at year-end, down from 13.42% in September and below market expectations.
Management attributed the decline to the announced €3.96 billion share buyback, but analysts said the softer capital entry point contributed meaningfully to Thursday’s share-price reaction, especially given the scale of ongoing shareholder distributions.
Alongside the buyback, BBVA proposed a final dividend of €0.60 per share for 2025, bringing total annual cash distribution to €0.92.
Regional performance remained robust. Spain generated €4.18 billion in net profit for the year, up 11.3%, helped by stronger loan and deposit growth and lower provisions.
Mexico delivered €5.26 billion, rising 5.7% at constant exchange rates, with net interest income and fees outperforming even as provisions came in higher. Turkey also contributed positively, with net profit rising nearly 32% to €805 million.
Despite these gains, analysts described the bank’s outlook as “conservative,” particularly in Spain and Mexico, where management’s expectations for revenue growth, costs and cost of risk for 2026 came in below some sell-side forecasts.
The return on tangible equity slipped slightly to 19.3%, while the efficiency ratio improved to 38.8%. Performing loans grew 16.2% to €472.7 billion, and customer funds rose 17.7% to €726.88 billion, underscoring the continued expansion of BBVA’s core franchise.
Total assets reached €859.58 billion, up 11.3% from a year earlier. The bank also noted it had completed a €993 million buyback in December 2025, acquiring 54.3 million shares.
The overall earnings picture was therefore one of strong franchise momentum but tempered by near-term concerns over capital absorption, cost discipline and the tone of management’s guidance.
While the quarterly profit beat provided a positive headline, investors appeared more focused on the underlying trends, and the more cautious signals, which ultimately overshadowed the bank’s otherwise solid operating performance.