BBVA Falls as Profit Misses Estimates on Trading, Capital

  • Mexico profit drops vs second quarter after peso plunges
  • Capital ratio falls to 9.8 percent from 10.4 percent in June

Banco Bilbao Vizcaya Argentaria SA, Spain’s second-largest lender, fell the most since Aug. 24 in Madrid trading after its third-quarter loss was bigger than expected on lower trading revenue and the capital ratio declined.

BBVA reported a loss of 1.06 billion euros ($1.16 billion) compared with a 601 million-euro profit a year earlier, as it wrote down a stake in a Turkish lender. Analysts had predicted a loss of 871 million euros, according to the average of six estimates compiled by Bloomberg. Profit excluding the one-time charge, rose 30 percent to 784 million euros.

Earnings were also hit by a plunge in trading income driven by unfavorable currency movements, volatile markets and BBVA’s increased holding in the Turkish bank. Net trading income dropped to 133 million euros from 444 million euros a year earlier and from 650 million euros in the second quarter.

BBVA shares were down 4.8 percent at 7.73 euros at 2 p.m. in Madrid and are 1.5 percent lower for the year. That compares with a 28 percent decline in the shares of Spain’s biggest lender, Banco Santander SA, which Thursday reported a 4.3 percent increase in third-quarter net income.

Trading Drop

“The main numbers were worse than expected, especially the foreign exchange and trading line, which is usually very volatile,” Carlos Joaquim Peixoto, an analyst at Banco BPI SA in Porto, Portugal, said by phone.

Net income in Mexico, BBVA’s largest market, rose 5 percent in the quarter from a year earlier. However, it was down 8.8 percent from the previous quarter, when the Mexican peso lost 7.2 percent of its value against the euro.

The fully loaded common equity Tier 1 ratio dropped to 9.8 percent at the end of September from 10.4 percent in June after the bank increased its stake in the Turkish lender and sold shares in a Chinese holding amid market volatility, BBVA said. The ratio increased by 20 basis points in October and the bank is maintaining its goal of achieving a 10 percent capital ratio by the end of the year, Chief Operating Officer Carlos Torres said in a conference call with analysts.

“This is a level many investors will view as too low, given the current regulatory environment,” Keefe Bruyette & Woods analysts Daragh Quinn and Hari Sivakumaran said in a note to clients. The ratio is lower than the 9.85 percent reported by Banco Santander Thursday and is the lowest among the 14 largest publicly traded European banks that have already reported third-quarter earnings.

Net interest income, or the difference between what a bank charges for loans and pays for funding, rose 17 percent from a year earlier to 4.49 billion euros and increased 16 percent from the second quarter, BBVA said. Bad loans as a proportion of total lending at the bank dropped to 5.6 percent from 6.1 percent at the end of June.

While BBVA is scaling back in China, Chairman Francisco Gonzalez is betting on growth in Turkey. The bank bought 25 percent of Turkiye Garanti Bankasi AS in 2010 and has since increased the stake to about 40 percent, making it the main shareholder. BBVA said in July it would take a one-time charge of about 1.8 billion euros to reflect the decline in the lira, about 35 percent, since it bought the Turkish lender in 2010.

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