BBVA Advances as Profit Tops Estimates, Spain Improves

Banco Bilbao Vizcaya Argentaria SA rose for a sixth day in seven in Madrid trading after reporting profit that beat analysts’ estimates and signaling an improvement in doubtful loans in Spain.

BBVA climbed as much as 2 percent to the highest in almost four weeks, and was up 1.9 percent to 9.59 euros by 3 p.m. local time. Net income of 704 million euros ($943.8 million) in the second quarter compared with the 697.2 million-euro average estimate in a Bloomberg survey of 13 analysts.

BBVA, based in Bilbao, is counting on efficiency gains from investments in technology, its U.S. banking franchise and an economic rebound in Spain to increase earnings over the medium term. For now, losses from real estate and the impact of currency declines in markets including Venezuela have weighed on profit, even as Chairman Francisco Gonzalez is betting on a Spanish recovery with the 1.19 billion-euro purchase of nationalized Catalunya Banc SA, announced last week.

The results contain “more positives than negatives,” Hammer Partners said in a research note today, adding that BBVA’s valuation is starting to look “stretched.” The firm cut its recommendation for the bank to “underperform” from “outperform.”

Net interest income, or the difference between what a bank charges for loans and pays for its funding, fell to 3.65 billion euros from 3.68 billion euros a year earlier, BBVA said. Even so, it exceeded the 3.48 billion-euro estimate in a survey of seven analysts.

Spain Recovery

Bad loans as a proportion of total lending fell to 6.4 percent from 6.6 percent in March. Gross lending decreased 2.9 percent from a year earlier, the bank said. Recoveries of bad loans in Spain outpaced loans newly classified as in default by 3 million euros, the first time that measure has turned positive since the start of the financial crisis, Chief Operating Officer Angel Cano said.

Profit from BBVA’s Spanish banking business rose to 222 million euros from 178 million euros a year earlier as the bad-loan ratio dropped to 6.3 percent from 6.4 percent in March.

BBVA’s Spanish real estate business posted a first-half loss of 446 million euros compared with a 628 million-euro loss a year earlier as net exposure to assets including foreclosed properties and developer loans dropped to 13.8 billion euros from 14.2 billion euros in March.

Earnings from BBVA’s unit in Mexico, where it owns the country’s biggest bank, rose 10 percent from a year earlier to 443 million euros, in constant currency terms.

First-half profit from South America fell 12 percent to 483 million euros, hurt by weaker currencies in Argentina and Venezuela.

Earnings from Eurasia, a division that pools BBVA’s investments in Turkey and China and operations in Europe outside Spain, jumped 21 percent from a year ago to 255 million euros. That beat estimates, Nomura’s Quinn said.

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