2nd UPDATE: BBVA 1Q Profit Up 0.2% On Lending, Trading Profit

Banco Bilbao Vizcaya Argentaria SA (BBVA) Wednesday posted slightly higher first-quarter net profit from a year earlier, as growing lending income and higher trading profits offset a rise in loan-loss provisions.

Spain's second-largest bank by assets behind Banco Santander SA (STD) reported net profit of EUR1.24 billion in the first three months of the year, compared with EUR1.238 billion a year earlier.

Investors have slammed BBVA's shares ever since it shocked markets in the fourth quarter by posting sharply lower earnings, taking hefty write-downs and loan-loss provisions. This quarter there weren't any surprises.

Net interest income--the difference between what a bank pays for deposits and what it charges for loans--rose to EUR3.39 billion from EUR3.27 billion a year earlier, backed by higher lending margins. Lending volume remained weak, however, with total loans down 0.8% on the year.

A Dow Jones Newswires survey of 10 analysts forecast quarterly net profit of EUR1.23 billion, and net interest income of EUR3.40 billion.

Results were helped by a 74% increase in trading profit to EUR633 million. BBVA said it had benefited in the quarter from better trading flows and from the effect of the devaluation of the Venezuelan bolivar in certain positions.

BBVA set aside EUR1.08 billion in the first quarter against non-performing loans, up 18% from a year earlier. The NPL ratio remained unchanged from December at 4.3%, but was up sharply from 2.8% a year earlier.

BBVA's Spanish division in particular has come under increased scrutiny from investors after the bank in the fourth quarter made hefty loan-loss provisions and recognized more bad loans than expected. BBVA said net profit in Spain fell 6.5% to EUR587 million. The NPL ratio in Spain remained unchanged from the fourth quarter, at 5.1%, BBVA said.

Mexico, the bank's second-largest market, reported net profit of EUR347 million in the quarter, down 4.2% on the year, as higher taxes weighed on earnings.

BBVA owns the biggest bank in Mexico, has the second-biggest banking network in Latin America, and has built a sizable franchise in the Southern U.S. through a string of acquisitions.

In the U.S., where BBVA also took a significant hit in the fourth quarter, it said net profit fell 22% to EUR54 million as the bank continued to set aside more cash to cover bad loans.

Results were stronger at BBVA's South American and wholesale banking divisions. The South American network contributed EUR233 million to net profit, up 14%, while wholesale banking and asset management profit was up 20% at EUR284 million.

BBVA's stock fell in early trade even though analysts said the numbers looked robust. At 0713 GMT, it was trading down 2%, or EUR0.20, at EUR9.89. Banks were lower for a second day after credit rating agency Standard & Poor's cut Greece's sovereign debt rating junk status and slashed Portugal's rating by two notches.

Company Web site: www.bbva.com

-By Christopher Bjork, Dow Jones Newswires; +34 91 395 81 23, christopher.bjork@dowjones.com

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