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UPDATE 1-BBVA Q4 net profit falls 90 pct due to one-offs, Mexico shines

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MADRID, Feb 1 (Reuters) - Spain's BBVA on Thursday posted a 90 percent fall in fourth quarter net profit against the same period a year earlier after a billion-euro writedown on its Telefonica stake, which offset a solid performance in its main market Mexico.

Spain's second largest bank reported a profit of 70 million euros ($86.8 million) in the October to December period, compared to analyst forecasts in a Reuters poll of a loss of 139 million euros.

Not taking into account the 1.1-billion-euro Telefonica writedown, BBVA reported a 10-percent increase in net profit in the last quarter year-on-year to 1.2 billion euros compared to a forecast of 957 million euros.

Net interest income (NII), a measure of earnings on loans minus deposit costs, was 4.6 billion euros in the quarter, up 3.9 percent from a year earlier and up 3.6 percent against the previous quarter.

Analysts had forecast a NII of 4.4 billion euros.

However, in Spain, NII fell 2.7 percent to 946 million euros compared to the same quarter last year.

Spanish banks are struggling to lift earnings from loans, as interest rates hover at historic lows and increasing competition erodes margins.

To offset pressure at home, Spanish banks have been expanding abroad in search of higher revenues.

At the bank's Mexican unit, which accounts for around 40 percent of group profits, net profit increased 6 percent to 571 million euros. ($1 = 0.8067 euros) (Reporting By Jesús Aguado; Editing by Paul Day and Adrian Croft)