Spanish bank BBVA said on Tuesday that the application of hyperinflationary accounting at its Turkish subsidiary Garanti reduced the group’s attributable net profit by 324 million euros ($341 million) in the first quarter.
The impact of the update of the figures adjusted for inflation as of January 1 will be reflected in BBVA’s second quarter results.
As a result of the new accounting, BBVA readjusted its net profit in the first quarter to 1,326 million euros.
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 figures will not be significant, and capital and tangible book value will be positively affected in the coming quarters. .
BBVA has recently increased its stake in its Turkish credit institution Garanti to 86%.
Like its Spanish rival Santander, BBVA has been expanding in emerging economies while trying to boost revenues in more developed markets, although some analysts cite risks from its exposure to macroeconomic uncertainty in Turkey.
According to international accounting standards, the need to adopt hyperinflationary accounting depends on the economic environment. One of the criteria is cumulative inflation of more than 100% over a three-year period, which Turkey has met since February 2022, BBVA said on Tuesday.
With monthly inflation in Turkey reaching 73.5% in May, BBVA officials had publicly said the bank could start applying “hyperinflationary accounting as early as the second quarter.”
The accounting technique has had a positive impact of 19 basis points on BBVA’s Tier-1 basic capital ratio at the end of March, which has risen to 12.89%, and has increased its book value by 254 million euros , said.
On Tuesday, BBVA affirmed its financial targets for 2024.
It also said it will start executing on July 1 the last tranche of a €1 billion share buyback to wrap up its €3.5 billion program.