BBVA Compass’ profits spike on rising rates, energy sector recovery

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BBVA Compass reaped the benefits of rising interest rates, the energy sector’s recovery and cost cuts as its profits more than tripled from a year earlier in the first quarter.

Net income jumped to $121 million, compared with $39 million in last year’s first quarter. Total revenue climbed 5% year over year to $796 million at the Houston company, a unit of the Spanish bank BBVA.

The $87.7 billion-asset BBVA Compass attributed the rise in profits to a number of factors. Though the loan book atrophied, the company’s asset-sensitive balance sheet benefited from the rise in rates, while fee-based businesses generated growth.

In the first quarter of last year, delinquencies on loans to oil and gas companies spiked, the company had to boost loan-loss provisions accordingly and the bottom line suffered. Since then, BBVA has scaled back its energy exposure, to $2.9 billion in this year’s first quarter, or 4.8% of all loans, from 6.7% a year earlier. Over the same period, nonaccruals in the energy portfolio declined 29%.

"While our balance sheet was certainly well-positioned to benefit from an increase in interest rates, our results also demonstrate our efforts to manage loan and deposit spreads, effectively control expense growth and prudently manage our energy portfolio,” President and CEO Onur Genç said in a press release. “These factors, along with continuing on our path towards digital transformation and improving the client experience, remain our primary focus."

Net interest income increased 7% to $551 million, and the net interest margin expanded 35 basis points to 2.96%. Average total loans declined 3% to $60.3 billion, although BBVA Compass said it funded $3.5 billion in new customer loans during the first quarter.

Noninterest income was flat at $245 million, but the year-earlier period had included a one-time gain on the sale of mortgage loans. BBVA Compass did achieve growth in its fee-based businesses, such as service charges on deposit accounts and investment banking and advisory services.

Noninterest expenses declined 7% from 2016 to $549.3 million.

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