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Banco Bilbao Posts Quarterly Profit as Cleanup Concludes

Banco Bilbao Vizcaya Argentaria SA (BBVA), Spain’s second-biggest bank, posted a 20 million-euro ($27.3 million) fourth-quarter profit as a revenue boost helped offset costs of completing a cleanup of Spanish real estate assets.

BBVA’s net income compared with a loss of 139 million euros a year earlier when the Bilbao, Spain-based bank took a 1 billion-euro charge for goodwill at its U.S. division. Analysts in a Bloomberg survey had forecast the company to post a loss of 2.9 million euros, the average of 12 estimates shows.

BBVA has counted on earnings from Mexico and Latin America to cushion the blow of provisioning charges for real estate in Spain, a market that has accounted for about 60 percent of the bank’s lending. Chairman Francisco Gonzalez said in Davos, Switzerland, last week that the Spanish economy would start to see “some light at the end of the tunnel” this year as funding conditions for banks “change dramatically.”

“Asset quality is still an issue but not an incremental issue,” said Daragh Quinn, a Madrid-based analyst at Nomura International with a buy rating on the shares. “Growth in net- interest income shows the resilience of their model and how their businesses in Latin America and Mexico can compensate for weakness elsewhere.”

Shares Drop

The shares slipped 0.2 percent to 7.31 euros at close of trading in Madrid. They have risen 5.1 percent this year, lagging behind an 8 percent gain for the 38-company Bloomberg Europe Banks and Financial Services Index. Banco Santander SA, Spain’s biggest bank, which reported quarterly earnings yesterday, has decreased 1.1 percent in that period.

Net interest income, the difference between what a bank earns from lending and what it pays on deposits, climbed 12 percent from a year ago to 3.9 billion euros as gross lending increased 1.7 percent, the bank said. Bad loans as a proportion of lending rose to 5.1 percent from 4.8 percent in the third quarter and up from 4 percent a year earlier.

Loans newly classified as in default climbed to 4 billion euros in the quarter from 3.7 billion euros in the third quarter and 3.6 billion euros a year ago. President and Chief Operating Officer Angel Cano said the bank will return half of the about 30 billion euros it took in emergency three-year loans, including those from Unnim, a lender it acquired last year, from the European Central Bank in the current quarter. Chairman Gonzalez said the Spanish economy would reach an “an inflection point” toward the end of this year.

Bad Loans

The bad-loans ratio for Spain rose to 6.9 percent from 6.5 percent in the third quarter. Net lending in the country fell 4.3 percent from a year ago, BBVA said. The lender sold 12,000 properties in 2012 at an average discount of 40 percent and still has a another 41,000 on its books, Cano said.

BBVA posted a 1.27 billion-euro full-year loss from Spain, compared with a 1.35 billion-euro profit a year earlier as it booked 5.7 billion euros in provisioning charges to complete a cleanup of real estate ordered by the government.

Fourth-quarter profit from Mexico, the biggest contributor to earnings, rose to 518 million euros from 497 million euros a year ago, the bank said. Lending in the country climbed 14 percent last year as full-year net interest income rose 10 percent to 4.2 billion.

Quarterly profit from South America jumped to 337 million euros from 275 million euros a year ago. Full-year profit from the U.S. increased to 475 million euros compared with a 691 million-euro loss a year ago because of the goodwill charge.

MetLife Inc. (MET), the largest U.S. life insurer, today agreed to buy Chilean pension manager AFP Provida SA from BBVA in a deal valued about $2 billion. BBVA said the transaction will generate a net gain of 500 million euros from the sale that will conclude in the second half of this year.

To contact the reporter on 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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