(Bloomberg) -- Banco Bilbao Vizcaya Argentaria SA reported higher than expected revenue from fees and commissions, helping the Spanish lender offset a slowdown in interest income as Europe’s rate-hike cycle ends.

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The Spanish lender announced a new €781 million share buyback program after net income jumped 32% from a year earlier to €2.06 billion. Fees rose 28% and trading revenue almost tripled from a year earlier, while interest income declined 1.6%.

Spanish banks have been among the largest beneficiaries of the tightening monetary policy, as they have a profile more centered on retail lending with a higher proportion of variable loans. Yet with the European Central Bank now pondering when to begin cutting rates again, lenders are relying more on charges for services including payments.

Shares of BBVA were 0.8% higher as of 9:25 a.m. in Madrid trading. They rallied 6% last year, outperforming the Stoxx 600 Banks Index, which advanced 20%.

“Whilst some will complain about the quality of these earnings, we think the results should be well-received because it confirms BBVA’s status as a strong compounder,” KBW analyst Hugo Cruz wrote in a note Tuesday.

The bank announced a , following on from an extraordinary €1 billion share buyback last year. The bank said it will propose paying a cash distribution of 0.39% gross per share dividend to be paid in April as final dividend for 2023.

BBVA said it sees net interest income in Spain growing mid-single digit this year, while in Mexico it’s expected to grow in the high single digits. The bank sees 2024 return on tangible equity — a key measure of profitability — growing in the high teens, above 2023 levels.



What Bloomberg Intelligence Says:

BBVA’s forecast of expansion in net attributable profit and high-teens return on tangible equity (ROTE) in 2024 suggests mid-single-digit upside to consensus net income, which looks credible to us. Despite a 7% miss on 4Q estimates of net interest income, fee income beat consensus by 9%. The €781 million share buyback was slightly less than we expected, though the CET1 ratio stayed solid at 12.67%

— Lento Tang, BI banking analyst. For the full note click here.

Profit in Spain met estimates, while Mexico, BBVA’s largest market, came in slightly below expectations. Earnings in the quarter were also hit by the depreciation of the Argentinian peso, following the election of President Javier Milei.

BBVA has a payout policy of returning between 40% to 50% of its profit to shareholders. From 2021 to 2023 the bank has paid €10.2 billion to its shareholders through dividends and shares buybacks.

(Updates with shares, comment in fourth paragraph.)

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