UPDATE 2-BBVA Q4 profit falls on one-offs but Mexico, Turkey help

* Q4 net profit falls 90 pct, above forecasts

* Group net interest income up at group level

* Shares are up 1.7 pct (Adds details on Mexico, Turkey and share price)

MADRID, Feb 1 (Reuters) - Spain's BBVA writedown on its Telefonica stake overshadowed otherwise solid fourth quarter results boosted by its performance in Mexico and Turkey.

Spain's second largest bank reported a 90 percent fall in net profit to 70 million euros ($86.8 million) in the three months to December 31 but beat the loss of 139 million euros expected by analysts in a Reuters poll.

Analysts highlighted a strong set of underlying results in terms of higher revenue and costs control.

"BBVA reported strong fourth quarter earnings with revenues four percent ahead of company consensus, costs broadly in line and lower loan losses," JP Morgan said in a note to clients.

BBVA's share were up 1.7 percent at 0817 GMT, outpacing a 0.95 percent rise on the European STOXX banking index.

For the full year, revenues rose 2.5 percent to a record 25.3 billion euros and Executive Chairman Francisco Gonzalez said on Thursday in a written statement that 2018 would be even better thanks to the bank's digital transformation drive.

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

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.

Analysts had forecast a NII of 4.4 billion euros.

However, in Spain, NII fell 2.7 percent to 946 million euros. Spanish banks are struggling to raise earnings from loans, as interest rates remain at historic lows and increasing competition erodes margins.

In response, Spanish banks have been expanding abroad. At BBVA's Mexican unit, which accounts for around 40 percent of group profit, net profit increased 6 percent in constant euros in the quarter. It rose 1.3 percent when taking into account fluctuations in the Mexican peso.

In Turkey, which represents 15 percent of the group's earnings, net profit almost doubled in the last quarter.

BBVA ended December with a fully-loaded core capital target ratio of 11.08 percent versus 11.2 percent at the end of September.

The lender trimmed its non-performing loan ratio to 4.4 percent from 4.5 percent at end-September after it reduced 400 million euros of doubtful loans.

A rebound in the Spanish property market has also allowed banks to tackle toxic balance sheets faster than rivals in Italy. Banks in Europe are under pressure from the European Central Bank to reduce soured loans.

On Thursday, the lender proposed a final 2017 cash dividend gross payment of 0.15 euros to be paid in April.

($1 = 0.8067 euros) (Reporting By Jesús Aguado; editing by Paul Day and Jason Neely)