BBVA Reports Another Strong Earnings Beat in Q3, but Cost Pressure Is Building

Narrow-moat Banco Bilbao Vizcaya Argentaria reported net attributable profit of EUR 1.4 billion for the third quarter of 2021 compared with EUR 1.1 billion in the same period a year ago and 30% ahead of the EUR 1.1 million the consensus of analysts polled by BBVA’s investor relations expected for the quarter. Revenue came in 5% ahead of consensus expectations, while loan-loss provisions came in 32% lower than expected, which were the two major drivers of the earnings beat. Quarterly revenue grew by a robust enough 7% year on year, but operating expenses grew 10%, without any material one-off items distorting it. One should be careful to make too much out of one quarter’s cost growth overshooting, but it is a number that stands out and we will keep an eye on it in future results. BBVA also confirmed that it has received regulatory approval to buy back EUR 3.5 billion of its own shares. We maintain our narrow moat rating and EUR 6.10 fair value estimate.