Banco Bilbao Earnings: Revenue Growth Ahead of Expectations, but So Were Expenses and Loan Losses

Narrow-moat Banco Bilbao reported a net income of EUR 2.1 billion for the third quarter of 2023, which was 13% higher than it reported a year earlier and slightly ahead of the company-compiled consensus. Revenue is still growing ahead of expectations, with net interest margins expanding as the pass-through of higher interest rates to depositors remains below expectations. The healthy growth in fee income is a pleasing development as we believe that the tailwind from higher interest rates will increasingly subside and European banks will need other avenues to drive revenue growth. Banco Bilbao saw negative operating leverage for the quarter, with operating expenses growing ahead of revenue and consensus expectations. The hyperinflationary situation in Turkey does distort matters somewhat, but Banco Bilbao still saw positive operating leverage in its two largest markets, Mexico and Spain. There was a slight deterioration in asset quality metrics for the quarter, and loan loss provisions came in ahead of consensus.