Bloomberg News

BBVA Posts Its First-Ever Quarterly Loss on U.S., Bad Loans

February 03, 2012

(Updates with executive comment on real estate in 11th paragraph.)

Feb. 2 (Bloomberg) -- Banco Bilbao Vizcaya Argentaria SA, Spain’s second-biggest bank, posted its first-ever quarterly loss after booking charges to write down goodwill at its U.S. unit and increasing provisions for bad loans.

The fourth-quarter loss was 139 million euros ($183.1 million), compared with net income of 939 million euros a year earlier, the Bilbao, Spain-based bank said in a filing today. The shares rose as operating income climbed to 2.86 billion euros from 2.62 billion euros a year ago.

BBVA took a 1 billion-euro charge for goodwill at its U.S. division, while profit in its home market plunged. The bank held back from booking extraordinary charges for Spain’s collapsed real-estate market, unlike its bigger rival Banco Santander SA, as the Spanish government prepares to today unveil new rules aimed at making banks recognize more losses on property piled up on their balance sheets.

“They’re behind the curve on the coverage of real estate,” said Andrea Filtri, an analyst at Mediobanca SpA in London. “Overall revenue is good.”

The net loss was worse than the average 88.2 million-euro loss estimate in a Bloomberg survey of 13 analysts.

Shares Rise

BBVA shares rose 0.9 percent to 6.95 euros at 11:27 a.m. in Madrid, as the pan-European Stoxx 600 Banks Index traded almost unchanged. The shares have risen about 4 percent this year, valuing the bank at 34 billion euros, after declining 12 percent in 2011.

Santander, which posted a 98 percent drop in fourth-quarter earnings on Jan. 31 because of one-time charges partly linked to a real-estate cleanup, has gained 5.5 percent this year.

BBVA’s net interest income rose 11 percent from the same quarter a year ago to 3.49 billion euros, a result that Citigroup Inc. analysts described as “very strong” in a note on the results today. Gross lending climbed 3.7 percent from a year ago and deposits increased 2.3 percent.

The lender, led by Chairman Francisco Gonzalez, 67, said on Jan. 10 it would take the U.S. goodwill charge to account for the outlook for growth and regulation in the country. Goodwill is the amount exceeding fair net book value paid at the time of an acquisition. BBVA had already taken a 704 million-euro writedown for U.S. goodwill against 2009 earnings after building up its business there with the $9 billion purchase of Compass Bancshares Inc. in 2007.

Real-Estate Provisions

The bank said it had 7.71 billion euros of foreclosed or acquired real estate, up from 6.63 billion euros in September, and provisions set aside to cover 34 percent of that property’s value, up from 33 percent. That contrasts with Santander, which boosted the provisioning level for its own 8.6 billion euros of real estate to 50 percent from 31 percent, and took 1.81 billion euros in pretax charges.

The bank didn’t boost its coverage of real estate ahead of the government announcement because it didn’t want to make a “partial” adjustment that would also risk confusing people, Angel Cano, BBVA’s president and chief operating officer, said on a webcast for analysts today.

“We hope this happens rapidly and in a decisive way,” said Cano, referring to the restructuring of financial system to be announced by the government, adding he hoped it would help restore “normal life” to the industry in Spain.

BBVA’s bad loans as a proportion of total loans fell to 4 percent from 4.1 percent in September. Loans newly classified as in default jumped to 3.61 billion euros from 2.92 billion euros in the third quarter.

Costs for asset impairments rose to 1.34 billion euros in the fourth quarter from 1.11 billion euros a year ago, as the bank said it took advantage of higher income in the period to increase its loan-loss reserves.

Spain, Latin America

Profit from Spain, which accounts for about 60 percent of the bank’s loans, fell 46 percent from a year earlier to 202 million euros in the quarter. Lending at its Spanish division dropped 1.7 percent as the bad loans ratio dipped to 4.8 percent from 4.9 percent in June. BBVA expects stable asset quality in Spain in 2012, even as the country dips into recession, Cano said.

Earnings from Mexico, BBVA’s biggest-earning division, climbed to 494 million euros from 440 million euros a year earlier.

Earnings from South America rose to 251 million euros from 187 million euros a year earlier. Profit from Eurasia, which includes BBVA’s businesses in Turkey and China and its operations in Europe outside Spain, rose to 322 million euros from 169 million euros a year ago.

BBVA finished 2011 with a core capital ratio under European Banking Authority criteria of 8.7 percent after adding 5.3 billion euros of capital in the last quarter of the year. BBVA will meet the 9 percent requirement by a June deadline “through organic means,” the bank said.

--With assistance from Emma Ross-Thomas in Madrid; Editors: Francis Harris, Jon Menon

To contact the reporter for this story: Charles Penty in Madrid at cpenty@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net


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