BBVA Profit Beats Estimates After Turkey Offsets Spain Slump

Banco Bilbao Vizcaya Argentaria SA, Spain’s second-largest bank, reported quarterly profit that beat analyst estimates after a Turkish investment partly offset a slump in earnings in its home market.

Net income fell to 1.19 billion euros ($1.7 billion) in the three months to June 30, from 1.29 billion euros a year earlier, the Bilbao, Spain-based lender said in a filing to regulators today. That exceeded the 1.09 billion-euro average estimate of 13 analysts surveyed by Bloomberg.

Earnings from Spain, where the bank has about 60 percent of its lending, plunged 36 percent amid the country’s property crash. That was partly countered by higher profit from Mexico and the bank’s investment in Turkey. Newly defaulted loans totaled 3.7 billion euros in the quarter, BBVA said.

“It looks like a reasonable set of results and they’re still generating capital,” said Daragh Quinn, an analyst at Nomura International in Madrid, who has a reduce rating on BBVA stock. The big increase in new defaults “shows the scale of the challenge they still face in managing asset quality,” he said.

BBVA rose 1.7 percent to 7.37 euros in Madrid trading, paring this year’s decline to 2.5 percent. The 46-company Bloomberg Europe Banks and Financial Services Index has dropped 12 percent while larger Spanish rival Banco Santander SA, which yesterday reported a 38 percent decline in second-quarter profit, fell 7.1 percent over the same period.

Bad Loans

Bad loans as a proportion of BBVA’s total lending fell to 4 percent from 4.1 percent in March and 4.2 percent a year ago, the bank said. Impairment costs dropped 28 percent to 962 million euros.

Entries into default rose from 2.8 billion euros in the first quarter, while the net amount after recoveries climbed by a third to 1.23 billion euros. The bank wrote off 939 million euros of assets, compared with 1.14 billion in the first quarter. BBVA chose to classify 450 million euros of Spanish mortgage loans as in default, even though they’re still being paid off, President and Chief Operating Officer Angel Cano said on a webcast for analysts today.

Core capital, a measure of financial strength, was 9 percent compared with 8.9 percent in March.

Profit from Spain plunged to 419 million euros from 651 million euros a year earlier. Net lending in the country rose 2.8 percent from a year ago, BBVA said.

Borrowing costs have soared because of investor doubts about Spanish government finances.

Mexican Boost

Net interest income in Spain fell to 1.1 billion euros from 1.25 billion euros a year earlier and stabilized compared with the first quarter, BBVA said. The bank’s bad-loans ratio in Spain was 4.7 percent, down from 4.8 percent in March and 4.9 percent a year ago.

Earnings from Mexico, where BBVA owns the biggest bank, rose 4.1 percent to 455 million euros, the lender said.

Profit from Eurasia, a unit including BBVA’s businesses in Turkey and China and its operations in Europe outside Spain, jumped 71 percent to 251 million euros. That included the first full-quarter contribution from the bank’s 24.9 percent stake in Turkiye Garanti Bankasi.

Profit from the U.S., a franchise built on BBVA’s $9 billion acquisition of Compass Bancshares Inc. in 2007, fell to 72 million euros from 79 million euros a year earlier.


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