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BBVA Restructures Loans to ‘Help’ 105,000 Clients Keep Paying

Banco Bilbao Vizcaya Argentaria SA, Spain’s second-biggest lender, has restructured loans to 105,000 customers in financial difficulties since 2008 to “help” them keep making payments.

BBVA has restructured 900 million euros ($1.2 billion) of loans this year alone, the Bilbao, Spain-based bank said in a news release dated Nov. 28, saying it was adjusting customers’ repayments to their ability to pay. Among the solutions BBVA is offering its clients is delaying the payment of 30 percent of the capital until the end of a loan or increasing the terms on mortgages to 40 years.

“They studied the issue with numbers and it was seen it was possible to go ahead and in effect it was done -- extend the debt so that what had to be amortized in five years is amortized in seven and there it is,” said Francisco Sebastian, a BBVA client in Madrid who appears in a video posted on the bank’s website along with the news release. “The payment has dropped a bit and, of course, there’s the relaxation of not having to pay things so urgently.”

BBVA’s disclosure that it has “helped” customers by adjusting credit terms coincides with a debate about how accurate loan-default data is in Spain because of the lack of clarity about the quantity of loans in danger of defaulting that are being restructured or refinanced. Spanish banks, including BBVA, are fighting to stem further loan losses after the Bank of Spain predicted the country’s economy may contract in the final quarter and the Organization for Economic Cooperation and Development cut its forecast for 2012 growth to 0.3 percent on Nov. 28 from the 1.6 percent it estimated in May.

Refinanced Loans

BBVA executives have been saying for 18 months defaults have peaked even as growth stalls in a Spanish economy that accounts for about 60 percent of the bank’s lending. Of the 105,000 families helped, 45,000 had mortgages, 44,000 had consumer loans and 15,000 business loans, the bank said.

A BBVA spokesman, who asked not to be named in line with company policy, declined to comment in a phone interview.

The bank has about 11 billion euros of bad loans in Spain, equivalent to 4.9 percent of its lending in the country with provisions set aside to cover 42 percent of that amount. That compares to a bad-loans ratio for the Spanish banking industry as a whole of 7.16 percent in September, according to Bank of Spain figures.

Aristobulo de Juan, a former head of banking supervision who helped tackle a banking crisis in the 1980s that caused the collapse of 50 banks, said in Nov. 17 column in Expansion newspaper that a BBVA estimate that the banking industry may face a further 60 billion euros in unprovisioned losses may be far short of the mark because of “systematic refinancing” of bad loans.

“Refinancing loans is a normal banking practice,” said Daragh Quinn, an analyst at Nomura International in Madrid. “It’s a win-win situation if you think there’s a good chance that your clients can keep making their payments over the medium term.”

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