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BBVA Fourth-Quarter Profit Jumps, Helped by Mexico

BBVA Fourth-Quarter Profit Jumps
Pedestrians pass a Banco Bilbao Vizcaya Argentaria SA branch in Madrid. Photographer: Denis Doyle/Bloomberg

Banco Bilbao Vizcaya Argentaria SA, Spain’s second-largest bank, posted a 30-fold gain in fourth-quarter profit as Mexican earnings surged and it didn’t repeat writedowns in the U.S.

Net income rose to 939 million euros ($1.3 billion) from 31 million euros a year earlier, the Bilbao-based bank said today in a filing to regulators. That was less than the 962.9 million-euro average estimate in a Bloomberg survey of analysts.

Chairman Francisco Gonzalez agreed to pay $5.8 billion for 24.9 percent of Turkiye Garanti Bankasi AS in November to diversify into growth markets and away from Spain, which still accounts for almost half of earnings. Higher earnings from Mexico countered a profit slump in its home market.

“Diversification in Latin America and Asia has certainly helped BBVA, but they still have some homework to do in Spain,” said Pablo Garcia, head of equities at Oddo Sociedad de Valores in Madrid. “We don’t see much more potential for the stock for now.”

BBVA fell 1.3 cents, or 0.1 percent, to 9.29 euros in Madrid, valuing the lender at 41.7 billion euros. The stock has advanced 23 percent this year, about double the gain in the 48-member Bloomberg Europe Banks and Financial Services Index. Banco Santander SA, Spain’s largest bank, which is scheduled to publish earnings tomorrow, climbed 15 percent over the period.

Bad Loans

BBVA’s net interest income fell 13 percent to 3.14 billion euros in the fourth quarter. Bad loans were unchanged from three months earlier at 4.1 percent of total lending, and down from 4.3 percent a year earlier. Gonzalez said in a Madrid press conference today that the “worst was over” for the bank.

The company expects business volumes, loans and deposits to gain as much as 7 percent this year, with little change in Spain and the U.S. and 15 percent growth in Mexico and South America, said Angel Cano, the president and chief operating officer, on a webcast for investors.

The lender aims to increase its market share in Spain by 50 percent over three years as the nation’s savings banks restructure, Gonzalez said. BBVA will probably take advantage of opportunities to buy banking assets because “there will be lots of them,” he said.

BBVA had 16.6 billion euros of loans to Spanish property developers, or 8 percent of lending in the country. Of that total, 21 percent is in default, the company said. Loans newly entered into default climbed to 3.85 billion euros from 3.05 billion euros in the third quarter.

Mexico, South America

Profit from Spain and Portugal fell 20 percent to 383 million euros. Bad loans as a proportion of total lending at the unit was 5 percent, unchanged from September.

“At first glance, BBVA looks in line but Iberia shows weak net interest income and higher provisions,” said Andrea Williams, who helps manage about 600 million pounds ($970 million) at Royal London Asset Management in London.

Earnings from Mexico climbed 53 percent to 454 million euros, the bank said. Profit from South America rose 27 percent to 193 million euros, while U.S. earnings rebounded to 15 million euros.

Profit in the fourth quarter of 2009 was hurt by 1.05 billion euros of impairments and writedowns in the U.S.

BBVA’s core capital ratio, a measure of financial strength, rose to 9.6 percent on Dec. 31, from 8.2 percent at the end of the third quarter.

The bank said in a separate filing that it will propose giving shareholders the option of being paid two out of four quarterly dividends in shares.

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