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Banco Bilbao May Post Quarterly Loss on Goodwill Charge in U.S.

February 01, 2012

Feb. 1 (Bloomberg) -- Banco Bilbao Vizcaya Argentaria SA, Spain’s second-biggest bank, may post a loss in the fourth quarter on charges for goodwill at its U.S. unit and provisions for cleaning up bad loans.

BBVA may report a net loss of 90.9 million euros ($119 million), compared with a profit of 939 million euros a year earlier, according to the average estimate in a Bloomberg survey of 10 analysts. The Bilbao-based company is due to report earnings tomorrow before the stock market opens in Madrid.

BBVA and other Spanish lenders are under pressure from the government to recognize more losses on real-estate assets in Spain, where a recession is sapping demand for credit and driving more loans into default. Banco Santander SA, Spain’s biggest bank, said Jan. 31 it was boosting its provisions to cover real estate acquired during the country’s property crash, a step that puts pressure on rivals including BBVA to follow suit, said Juan Pablo Lopez, an analyst at Banco Espirito Santo SA in Madrid.

“Santander has played its card with provisions and it’s putting a bit of pressure on the other banks, including BBVA,” Lopez said by telephone. “The goodwill charge in the U.S. means they might not even break even.”

BBVA has gained 1.1 percent this year in Madrid trading, valuing the bank at 33 billion euros. Santander, which reported a 98 percent drop in fourth-quarter earnings on Jan. 31 because of one-time charges, has gained 2.6 percent.

Goodwill Charge

BBVA said Jan. 10 it would take a charge of about 1 billion euros against 2011 earnings after adjusting for goodwill at its U.S. unit 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. The bank will take a loss of 1.73 billion euros in the fourth quarter for the U.S. goodwill charge and on costs to clean up its real-estate assets, according to a report by Citigroup Inc.

The bank reported 15.3 billion euros of assets linked to real-estate development in September, of which 4 billion euros was land and 2.8 billion euros was unfinished buildings. BBVA had 6.63 billion euros of foreclosed or acquired real-estate assets on its books, with provisions to cover 33 percent of that amount.

Santander Provisions

Santander said yesterday it was boosting the provisioning level for its own 8.6 billion euros of real estate accumulated on its balance sheet to 50 percent from 31 percent previously. The pretax amount of provisions allocated by Santander against real estate in the fourth quarter was 1.81 billion euros.

BBVA’s bad loans as a proportion of total lending may have remained little changed at 4.07 percent in the fourth quarter, according to estimates from Antonio Ramirez and Marta Sanchez Romero, analysts at Keefe, Bruyette & Woods in London. Chief Operating Officer Angel Cano said in April 2010 that asset quality was probably going to be “stable from now on.”

Profit from Spain, which accounts for about 60 percent of the bank’s loans, may have dropped to 317 million euros from 374 million euros a year earlier, according to Citigroup. Earnings from Mexico, the unit that contributes most to BBVA’s profit, may have fallen 5.6 percent to 427 million euros, Keefe, Bruyette & Woods said.

--Editors: Stephen Taylor, Steve Bailey

To contact the reporter for this story: Charles Penty in Madrid at

To contact the editor responsible for this story: Frank Connelly at

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