Banco Popular (BPESF) stock fell sharply Thursday after first-quarter results from a key competitor brought investors' attention to net interest income levels in the Spanish market, which is an Achilles heel for the country's fifth-largest lender.

The decline follows first quarter results from rival BBVA (BBVA) - Get Report  , the country's second-largest lender, which showed Spanish net interest income, on which Popular is highly dependent, under continued pressure as years of record low interest rates bite deeper into the underbelly of banking sector profitability.

International diversification, substantial trading businesses and fixed-fee income pools has helped both BBVA and its larger rival, Banco Santander (SAN) - Get Report , to still post strong numbers at the group level in recent days.

However, Banco Popular has very little international diversification and is more reliant on net interest income in its home market than many of its peers.

It is also the weakest among Spanish lenders from a regulatory capital perspective, with new chairman Emilio Saracho having told investors earlier this month that the bank cold look to tap the market for new equity over the coming months.

Banco Popular shares were down more than 5% in Madrid Thursday to change hands at €0.64, extending its year to date loss to nearly 30%. BBVA shares dropped 3% to change hands at €7.38, reducing their year to date gain to 18%.

Investors had already given the banking sector a cold shoulder ahead of the latest interest rate announcement and press conference from the European Central Bank but the downward leg for Popular and BBVA far outstripped the 0.67% loss of the Stoxx Europe 600 Banks index.

Despite the adverse reaction from the market, BBVA delivered what was roundly a positive set of results. First quarter revenues rose 3% to 6.3 billion, while earnings were more than 10% ahead of the consensus, at 1.19 billion.

The beat was the result of stronger income from trading and fee based services having offset a weak performance on net-interest income, which fell 1% during the period. Spanish net income fell 4% for the quarter.

A similar trend was born out in Santander results Wednesday with the lender having seen international exposure and a swell in its substantial domestic trading and fee income pools offset weakness in net interest income.