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BBVA Profit Jumps as One-Time Gains Offset Property Loss

April 26 (Bloomberg) -- Banco Bilbao Vizcaya Argentaria SA, Spain’s second-biggest bank, said first-quarter profit rose 73 percent as one-time gains offset losses from Spanish real estate and charges for bad loans.

Net income was 1.73 billion euros ($2.25 billion), up from 1.01 billion euros in the same period a year earlier, the Bilbao, Spain-based lender said in a filing to regulators today. The earnings compared with the 1.76 billion-euro average estimate in a Bloomberg survey of 10 analysts.

BBVA and Banco Santander SA, Spain’s biggest bank, are predicting a climb in profits as they put the task of cleaning up losses from Spanish real estate behind them. The weak economy in Spain, where unemployment rose to 27 percent in the first quarter, still poses risks for BBVA even as asset sales and profit from emerging markets such as Mexico buoy earnings.

“The results are nothing to get too excited about,” Juan Pablo Lopez, an analyst at Espirito Santo Investment Bank in Madrid, said in a phone interview today. “Asset quality continues to deteriorate, showing that there are still pressures on their business from Spain.”

BBVA said earnings rose after it sold a Mexican pension business and booked profits from a reinsurance agreement. The sale of the pensions unit yielded a net gain of 800 million euros, while the reinsurance deal signed in March brought a gross gain of 630 million euros, according to company filings.

Shares Fall

BBVA fell 1.4 percent to 7.208 euros in Madrid today, paring gains this year to 3.5 percent. That compares with a rise of 4.4 percent for the 40-member Bloomberg Europe Banks and Financials Services Index. Santander, which yesterday reported a 26 percent drop in quarterly earnings that missed analysts’ estimates, has dropped 11 percent in 2013.

First-quarter net interest income rose 0.8 percent from a year ago to 3.62 billion euros as gross loans increased 4 percent, BBVA said. The result was held back by currency devaluation in Venezuela, which was the main factor in a 150 million-euro decline in net interest income compared with the fourth quarter, Chief Operating Officer Angel Cano said on a webcast for analysts today.

Bad loans as a proportion of total lending expanded to 5.3 percent from 5.1 percent in December. Net loans newly classed as in default climbed to 1.94 billion euros from 1.64 billion euros in the fourth quarter and 1.2 billion euros a year ago. Costs for covering asset impairments jumped to 1.38 billion euros from 1.09 billion euros a year earlier as charges for covering Spanish corporate loan losses increased, the bank said.

Spain Performance

Profit at the Spanish banking unit rose 54 percent to 569 million euros in the first quarter, boosted by trading gains that jumped 76 percent to 220 million euros. Net interest income fell 8.8 percent to 1.07 billion euros as deposits climbed 11 percent, outpacing a 2.3 percent rise in loans. Bad loans as a proportion of total lending rose to 4.3 percent from 4 percent in December and 3.1 percent in March 2012.

BBVA’s Spanish real estate business, whose results were reported separately for the first time, lost 346 million euros compared with 300 million euros a year earlier. Net real estate exposure fell to 15.4 billion euros from 15.6 billion euros in December, the bank said.

Earnings in Mexico climbed to 435 million euros from 430 million euros a year ago, BBVA said. Net interest income in the country rose 7.2 percent to 1.1 billion euros as net lending climbed 14 percent.

Profit in South America fell 6.9 percent to 348 million euros as a drop in earnings in Chile and Argentina offset rising profit in Venezuela. Net income at Eurasia, a division that pools BBVA’s businesses in Turkey and China and operations in Europe outside Spain, slumped 40 percent to 179 million euros, led by a lower contribution from its China, the bank said.

To contact the reporter on this story: Charles Penty in Madrid at cpenty@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net

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