BBVA Quarterly Profit Slumps Amid Real Estate Cleanup

Banco Bilbao Vizcaya Argentaria SA, Spain’s second-biggest bank, said third-quarter profit fell 82 percent as it continued to purge soured real estate assets.

Net income dropped to 146 million euros ($190 million) from 804 million euros in the year-earlier period, the Bilbao, Spain-based bank said in a filing today. That missed the average 186.4 million-euro estimate in a Bloomberg survey of 11 analysts.

BBVA said it has completed two-thirds of the provisioning charges needed to comply with government orders to Spanish banks to recognize losses on real estate that piled up on their balance sheets after the property market crashed. Higher profit from Mexico and South America helped to cushion a 532 million-euro nine-month loss from Spain, which still accounts for about 60 percent of BBVA’s lending.

“I liked the results from Spain on an operational level and if they’d been better from Mexico you could have said they would have been very good earnings,” said Juan Pablo Lopez, an analyst at Espirito Santo Investment Bank in Madrid.

BBVA closed 1.8 percent higher in Madrid trading at 6.44 euros, paring this year’s decline to 3.6 percent. That compares with a 15 percent gain for the 38-member Bloomberg Europe Banks and Financial Services Index. Larger Spanish rival Banco Santander SA, which reported a 94 percent drop in quarterly profit on Oct. 25, has declined 1.4 percent this year.

Dividend Policy

Greater clarity on the outlook for earnings as uncertainty over its real estate loan book diminishes may allow the bank to “take decisions” over the dividend in future, BBVA President and Chief Operating Officer Angel Cano said on a webcast today.

He said the bank doesn’t have reason to change its dividend policy, which involves a commitment to pay at least 42 cents per share.

Bad loans as a percentage of total lending rose to 4.8 percent from 4 percent in June, BBVA said. Net loans newly classified as in default rose to 1.76 billion euros in the quarter from 1.63 billion euros in the preceding three months, the lender said.

BBVA’s core capital ratio, a comparison between its core equity capital and total risk-weighted assets, was 10.8 percent, the same as in June, it said.

Third-quarter net interest income climbed 18 percent to 3.88 billion euros as lending rose 7 percent from a year ago, BBVA said. Deposits increased 2.4 percent.

Unnim Integration

The bad-loans ratio at BBVA’s Spanish business jumped to 6.5 percent from 5.1 percent in June after the lender incorporated Unnim, a bank acquired earlier this year. Excluding Unnim, formed from a merger of Catalan savings banks, the bad-loans ratio was 5.7 percent, BBVA said.

The default rate for developer loans hit 42 percent, up 14.1 percentage points from December, as the rate for company loans jumped to 8.2 percent, up 2.5 points, Cano said.

Third-quarter earnings from Mexico, where BBVA runs the nation’s biggest bank, rose 7.4 percent to 423 million euros. Profit from South America, where the bank runs lenders from Colombia to Chile, jumped 23 percent to 303 million euros, BBVA said.

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