BBVA Takes $1.3 Billion Charge for U.S. Goodwill Adjustment

Banco Bilbao Vizcaya Argentaria SA, Spain’s second-biggest lender, plans to take a charge of about 1 billion euros ($1.3 billion) to 2011 earnings after adjusting for goodwill at its U.S. business.

The adjustment won’t affect the bank’s generation of cash flow or its liquidity position and dividend payments, the Bilbao, Spain-based lender said in a filing to regulators today. It will boost core capital by 400 million euros because of the tax treatment of goodwill, the bank said.

BBVA, which made a 704 million-euro writedown for U.S. goodwill against 2009 earnings, said the new charge reflected the growth outlook and banking regulatory environment in the country. It follows moves by other lenders including Italy’s UniCredit SpA, which announced an 8.7 billion-euro impairment in November after acquisitions at home and in eastern Europe.

“It doesn’t look good when you do it for a second time,” said Andrea Williams, who helps manage about $1 billion, including BBVA shares, as head of European equities at Royal London Asset Management. The “big picture” for all Spanish banks is the need to recognize losses on real estate, she said.

BBVA shares rose 3.7 percent to 6.20 euros as of 1:24 p.m. in Madrid trading, paring the stock’s decline over the past 12 months to 10 percent.

Second Impairment

BBVA has built a 745-branch business in the southern U.S. through acquisitions, including its $9 billion purchase of Compass Bancshares Inc. in 2007.

“They did pay an awful lot for it and it’s the second time they’ve impaired it,” said John Raymond, an analyst at CreditSights Inc. in London.

The bank may report 2011 net income of 4.18 billion euros, according to the average estimate out of 22 analyst forecasts compiled by Bloomberg. BBVA’s 2010 profit was 4.61 billion euros.

“Even though during 2011 there has been a positive evolution of profits and activity in this unit, compared to the previous year, the latest forecasted economic growth for the U.S. and the impact of the new regulatory framework in the financial industry have slowed down the forecasted growth in future profits,” the bank said in its filing.

The U.S. business posted a 218 million-euro profit in the first nine months of 2011, down from 223 million euros in the year-earlier period. Goodwill is the amount exceeding fair net book value paid at the time of an acquisition.

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