BBVA Posts $1.15 Billion Loss on China Bank Stake Charge

Banco Bilbao Vizcaya Argentaria SA (BBVA), Spain’s second-biggest bank, posted a smaller-than-expected 849 million-euro ($1.15 billion) fourth-quarter loss as Latin America gains offset a charge for cutting its China investment.

BBVA’s loss compared with a 20 million-euro profit a year earlier, the bank said in a filing to regulators today. The loss was lower than the average 946 million-euro deficit predicted in a Bloomberg survey of 14 analysts.

Chairman Francisco Gonzalez, 69, is counting on economic recovery in the company’s home country and growth in key markets such as Mexico to boost earnings after the bank bolstered capital and cleaned up soured real estate loans in Spain. A risk for BBVA, which like Spain’s biggest lender Banco Santander SA has relied on income from emerging markets to support its earnings, is that weakening currencies in countries such as South America and Turkey may create headwinds to growth.

“There are definitely some things that the market will like with Mexico coming in better than expected -- people have been waiting for that for a long time,” Benjie Creelan-Sandford, an analyst at Macquarie Bank Ltd. in London, said in a phone interview. “Spain is still obviously loss-making and a drag on earnings for the group.”

Photographer: Angel Navarrete/Bloomberg

Banco Bilbao Vizcaya Argentaria Chairman Francisco Gonzalez speaks during a news conference to announce company fourth-quarter earnings in Madrid. Close

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Photographer: Angel Navarrete/Bloomberg

Banco Bilbao Vizcaya Argentaria Chairman Francisco Gonzalez speaks during a news conference to announce company fourth-quarter earnings in Madrid.

China Citic

BBVA said in October it triggered a 2.3 billion-euro charge for reducing its stake in China Citic Bank Corp. to below 10 percent to soften the impact of Basel III capital rules. Gains from the sale of its Panama unit and a stake in its Chilean pension administrator helped reduce one-time charges for corporate transaction in the quarter were 1.25 billion euros, the bank said.

BBVA shares rose 0.2 percent to 8.86 euros at close in Madrid today, paring declines this year to 1 percent. That compares with 1.2 percent gain this year for the 44-member Bloomberg Europe Banks and Financial Services Index. Santander, which yesterday said fourth-quarter net income more than doubled on fewer provisions for bad loans, has fallen 1.5 percent this year.

Net interest income, or the excess revenue from interest earned on assets compared with that paid on deposits, fell 3.8 percent from a year earlier to 3.76 billion euros and rose from 3.55 billion euros in the third quarter, the bank said. Gross lending declined 4.7 percent from a year ago, BBVA said.

Mexico Results

Bad loans as a proportion of total loans rose to 6.8 percent from 6.7 percent in September and 5.1 percent a year ago, the bank said.

Net newly defaulted loans fell to 993 million euros in the quarter from 5.14 billion euros in the previous quarter when the bank reclassified 3.9 billion euros of refinanced loans as non-performing. Entries into default reached more “normalized” levels in the fourth quarter, Chief Operating Officer Angel Cano said on a webcast for analysts today.

Asset impairment charges declined to 1.21 billion euros in the quarter from 1.85 billion euros in the third quarter and 2.68 billion euros a year ago. BBVA closed the year with a core capital ratio fully adjusted to Basel III rules of 9.8 percent.

Profit from Mexico, the biggest contributor to BBVA’s earnings climbed to 532 million euros from 421 million euros in the third quarter and 457 million euros a year ago in constant currency terms as net lending jumped an annual 8.4 percent. South America profit jumped to 384 million euros from 252 million euros a year earlier and 330 million euros in the third quarter.

Profit from the Spanish banking business fell to 106 million euros compared with a 129 million-euro profit a year ago and a 265 million-euro loss in the third quarter.

The default ratio at the division rose to 6.4 percent from 6.2 percent in September and 4.1 percent a year ago. Net lending fell an annual 8.5 percent. BBVA’s Spanish real estate business posted a 1.25 billion-euro full-year loss compared with a 4 billion-euro loss a year ago.

Earnings from Eurasia, a division that pools BBVA’s businesses in Turkey and China and operations in Europe outside Spain, fell to 42 million euros from 70 million euros in the third quarter, BBVA said.

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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