* BBVA Q2 profit falls 39 pct year on year
* Revenue also falls, but less than expected
* Weaker Latin American currencies partly behind falls
* Spain's Popular post Q2 profit down 1.5 pct
* BBVA shares up, Popular flat
(Adds analyst, CEO comment, shares, adds Popular results)
By Sarah White
MADRID, July 30 Spain's BBVA posted a
lower-than-expected drop in second-quarter lending revenue on
Wednesday, helped by resilience in its biggest markets Mexico
and improvements in other overseas markets such as Turkey.
BBVA, which makes most of its money outside its home market,
said net interest income (NII), or earnings on loans minus
deposit costs, fell just under 1 percent from a year ago to 3.65
billion euros ($4.9 billion). Overall revenues were also better
than forecast in a Reuters poll.
"The majority of the beat comes from Eurasia, which is some
comfort as we were concerned by the impact of Turkey," RBC
Capital Markets analyst Robert Noble said in a note. BBVA has a
25 percent stake in Turkey's Garanti Bank, and the country was
hit by political turmoil earlier this year.
Shares in BBVA were up 1 percent to 9.5 euros per share,
outperforming broader European banking stocks.
BBVA's relative weakness in Spain surprised some analysts.
Most Spanish banks are becoming more profitable again after
emerging from a financial crisis as lenders took huge writedowns
on soured property loans, while the economy is out of recession
after a six-year economic downturn which also ate into earnings.
BBVA and larger rival Santander, which had offset
woes at home with profits in Latin America, are keen to ride
that turnaround. BBVA recently made a show of confidence in
Spain by buying bailed-out local peer Catalunya Banc from the
But the bank's NII in Spain, a closely-watched measure of
the sector's recovery, was broadly flat in the second quarter
from the first, when local rivals such as Caixabank
reported quarterly gains.
Even smaller Banco Popular, which had struggled in
recent months to turn NII around, said in results on Wednesday
that its net lending income had improved nearly 6 percent
quarter on quarter.
BBVA Chief Executive Angel Cano said NII evolution would be
"flattish at best" in Spain this year. Still, BBVA's bad loans
are dropping in the country as the economy improves, echoing a
fall at Popular and peers.
ARGENTINA IN FOCUS
While BBVA's international units are still driving earnings,
there are also potential troubles spots abroad.
Profits in the first half were hit by unfavourable exchange
rates. The bank said this had subsided in the second quarter as
some emerging market currencies started rising against the euro,
even if BBVA is exposed to a major devaluation in Venezuela.
Net income in the first six months would have fallen 49
percent from a year ago at constant exchange rates, rather than
a 54 percent drop to 1.328 billion euros. One-off gains on asset
sales from a year ago also made for an unfavourable comparison.
The depreciating Argentine peso has also weighed on the
bank, while the country is struggling to reach a debt agreement
with some investors, also a headwind.
"If an agreement is not reached ... Argentina will also
face additional pressures, maybe in terms of further
devaluation," Cano told analysts. He added that he expected a
deal to be struck to avoid a default.
($1 = 0.7463 Euros)
(Additional reporting by Jesus Aguado, Editing by Julien