4th UPDATE: BBVA 4Q Net Profit -94% On Provisions, US Charges
January 27 2010 - 9:18AM
Dow Jones News
Banco Bilbao Vizcaya Argentaria SA(BBVA) Wednesday fueled
growing fears that Spanish banks face earnings pressure as it
shocked markets with much lower-than-expected fourth-quarter
results, taking a hit from hefty write-downs and provisions.
BBVA's fourth-quarter net profit plunged 94% to EUR31 million
from EUR519 million a year earlier, well below a EUR1.07 billion
average forecast from nine analysts polled by Dow Jones
Newswires.
Spain's second-largest bank by assets behind Banco Santander SA
(STD), set aside EUR1.79 billion in the fourth quarter against
non-performing loans that rose to 4.3% of total lending in
December, up from 3.4% in September and 2.3% a year earlier.
Revenue rose 16% in the fourth quarter to EUR5.29 billion from
EUR4.56 billion a year earlier.
"It was a great opportunity to clean up as much as we could, so
management could focus on the bank," BBVA Chairman Francisco
Gonzalez told reporters. "We have taken a great step to leave big
problems behind."
French bank Societe Generale SA (GLE.FR) set the negative tone
for European fourth-quarter bank results when it warned earlier
this month it will manage only a slight profit as write-downs and
provisions on real-estate linked assets, coupled with a slump in
investment banking activity, weighed on earnings.
Spain has been struggling with the worst downturn in decades,
fueled by the collapse of its once mighty construction and
real-estate sectors. The country has the highest unemployment rate
in the euro zone.
Spanish bank shares fell following BBVA's results. At 1320 GMT,
BBVA was leading European banks lower, down EUR0.66, or 5.6% at
EUR11.37, while chief rival Santander was down 3.3% at
EUR10.41.
"Stripping away the write-downs, the results were actually of
good quality," said David Gualtieri of Madrid-based Ibersecurities
brokerage. "The market will probably initially look at the bottom
figure and sell off on the back of it. However, don't be surprised
if it rebounds, as 'the cleaning of the slate' is something that
all the Spanish banks will eventually have to do, and being ahead
of the curve is always better."
BBVA's net interest income rose 16% to EUR3.59 billion from
EUR3.09 billion a year earlier, above market expectations of
EUR3.36 billion. BBVA said it was able to strengthen key solvency
ratios, raising its core capital ratio by 180 basis points from
2008 to 8%. Total provisions and charges for 2009 amounted to
EUR6.57 billion.
BBVA booked EUR1.05 billion in charges to adjust the value of
its U.S. banking franchise and set aside EUR533 million in
provisions to cover commercial real-estate loan losses at its BBVA
USA unit.
BBVA, which owns the biggest bank in Mexico and has the
second-biggest banking network in Latin America, has in recent
years bought four U.S. banks, developing a network of more than 700
branches, mostly across the U.S. southwest.
Having avoided many of the problems hitting the global financial
services industry by sticking to basic retail banking, the Spanish
bank was able to pick up assets from banks that fared worse. Last
year, it won a U.S. government auction for Guaranty Financial Group
Inc., a Texas bank that had been warning for months that it was on
the verge of collapse because of swelling losses.
However, BBVA now faces challenging economic conditions in all
of its main markets. Like local rival Banco Espanol de Credito SA
(BTO.MC), BBVA set aside funds to cover loan losses expected to
surface from the troubled real-state sector this year. Its
loan-loss provisions included EUR200 million for properties in
Spain, EUR164 million for consumer loans in Spain and Portugal and
EUR73 million for credit cards in Mexico.
Local brokerage Eurodeal said in a note to investors that the
banking sector "has started the year with a lot of uncertainty,
which would imply downward adjustments" for stocks.
Company web site: www.bbva.com
-By Leire Barrera and Santiago Perez, EFE Dow Jones Newswires;
(34) 395 8120; djmadrid@dowjones.com
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