BBVA's Quarterly Profit Seen Declining on South America

Banco Bilbao Vizcaya Argentaria SA (BBVA), Spain’s second-biggest bank, will probably say first-quarter profit fell, hit by a drop in South American earnings as one-time gains a year earlier weren’t repeated.

Net income fell to 618.6 million euros ($858 million) from 1.73 billion euros in the year-earlier period, according to the average estimate in a Bloomberg survey of 12 analysts. The Bilbao, Spain-based bank is scheduled to report earnings tomorrow before the stock market opens in Madrid.

Chairman Francisco Gonzalez, 69, is counting on the bank’s 850 million euros-a-year investment in technology, its U.S. operation and a recovery in Spain to help boost future revenue after it bolstered capital and cleaned up soured real estate. Even so, the lender, which like Banco Santander SA has relied on earnings from emerging markets through Spain’s property crash, has been hit by this year by a drop in South American profits after devaluation in Venezuela.

“For BBVA the focus will be on Latin America with a question mark hanging over Venezuela,” Benjie Creelan-Sandford, an analyst a Macquarie Bank Ltd. in London, who rates BBVA underperform, said in a telephone interview. For Spain, “evidence that non-performing loans are peaking, or credit contraction is turning, will be taken as a positive,” he said.

Shares in BBVA have fallen 1.2 percent this year compared with a 2.2 gain for the 43-member Bloomberg Europe Banks and Financial Services Index at yesterday’s close. Banco Santander, Spain’s biggest bank, has gained 8.8 percent.

South America

Profit from South America may drop 21 percent to 241 million euros from a year ago, Carlos Joaquim Peixoto, an analyst at Banco BPI SA in Porto, Portugal, said in a telephone interview. Last month, Venezuela allowed the bolivar to plunge on a new currency market in a step that hits foreign companies doing business in the country.

“We anticipate a big hit from foreign-exchange impact in Venezuela,” Antonio Ramirez and Marta Sanchez Romero, analysts at Keefe, Bruyette & Woods Ltd., said in an April 22 research note. “This effect overshadows otherwise sound operating trends” in the region.

BBVA’s Spanish business including real estate may post a 49 million-euro loss in the first quarter, compared with a profit of 223 million euros a year earlier, according Banco BPI. Earnings from Mexico, BBVA’s biggest-earning unit, may rise 8 percent from a year earlier, according to KBW estimates.

The bank may earn 98 million euros from the U.S. in the first quarter, up 3 percent from a year ago, according to estimates by Nomura Holdings Inc. BBVA’s earnings a year ago were inflated by the sale of a Mexican pension business and profit from a reinsurance agreement.

To contact the reporter on this story: Jon Menon in London at jmenon1@bloomberg.net

To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net Jon Menon, Steve Bailey

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