August 14, 2022

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BBVA will assume the impact of 324 million euros from Turkey’s hyperinflation By Reuters

© Reuters. FILE PHOTO: A woman looks at her mobile phone in front of the building of Spain’s BBVA Bank in Madrid, Spain on November 15, 2021. REUTERS/Juan Medina

By Jesus Aguado

MADRID (Reuters) – Spain’s BBVA bank said on Tuesday that the application of high inflation accounting at its Turkish subsidiary Garanti (IS): reduced the group’s attributable net profit by 324 million euros (341 million euros). ) in the first quarter.

The impact of the inflation-adjusted figures update from January 1 will be reflected in the BBVA’s second quarter results.

As a result of the new accounting, BBVA revised its first-quarter net profit to €1,326 million.

BBVA said that taking into account the expected inflation for 2022 in Turkey, the contribution of results in the country to the parent company’s numbers will not be significant, and capital and tangible book value will be positively affected in the coming quarters.

BBVA recently increased its stake in its Turkish credit institution Garanti to 86%.

Like its Spanish rival Santander (BME:), BBVA is expanding in emerging economies while trying to increase its revenue in more developed markets, although some analysts point to risks from its exposure to macroeconomic uncertainty in Turkey.

According to international accounting standards, the need to adopt high inflation accounting depends on the economic environment. One of the criteria is cumulative inflation of more than 100% over three years, which Turkey has adhered to since February 2022, BBVA said on Tuesday.

With Turkey’s monthly inflation hitting 73.5% in May, BBVA officials have said publicly that the bank may start implementing “high inflation accounting as early as the second quarter.”

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The accounting technique had a positive impact of 19 basis points on the BBVA’s Tier 1 core capital ratio at the end of March, which rose to 12.89%, and increased its book value by €254 million, he said.

The BBVA, on Tuesday, confirmed its financial targets for 2024.

It also said it would start implementing the last tranche of its €1 billion share buyback on July 1 to end its €3.5 billion programme.

(1 dollar = 0.9503 euros)

(Reporting by Jesus Aguado; Editing by André Khalib and Richard Chang; Translated by Jose Muñoz for the Gdansk Newsroom)