UPDATE: BBVA Swings To Loss On Hefty US Goodwill Charge

Banco Bilbao Vizcaya Argentaria SA (BBVA) said Thursday it swung to a fourth-quarter loss after taking a EUR1 billion charge on its U.S. operations and setting aside more cash to cover bad loans.

BBVA reported a net loss of EUR139 million after a profit of EUR939 million a year earlier. The bank had already announced the charge after writing down goodwill for the U.S. unit.

Analysts had expected a profit of EUR152 million, according to a Dow Jones Newswires survey of eight analysts. However, not all the analysts polled had included the charge in their earnings expectations.

BBVA, Spain's second-largest bank by assets behind Banco Santander SA (STD), said net interest income rose 11% to EUR3.49 billion, ahead of market expectations of EUR3.29 billion.

Full-year net profit fell to EUR3 billion from EUR4.61 billion in 2010, BBVA said.

BBVA increased the cash it set aside to cover loan losses in the fourth quarter by 24%, to EUR1.34 billion, but it did not frontload provisioning on its property portfolio to the same extent as main rival Santander.

Santander earlier this week said it had raised its provisioning on foreclosed properties to 50% from 31% a year earlier, while BBVA said it only raised loss coverage to 34% of the value, from 32% at the end of 2010. BBVA is sitting on EUR5.1 billion in properties it has foreclosed on since the Spanish downturn started in 2008.

The Spanish government is rolling out new banking rules Friday which will force the country's banks to increase their loan loss buffers on property related assets by a total of EUR50 billion.

BBVA's pool of bad debts stood at EUR15.87 billion or 4% of total loans, up marginally from EUR15.69 billion a year earlier. However the bank also completely wrote off some EUR4.1 billion of loans that appeared nonperforming.

The bank said it had covered all its liquidity needs for this year by borrowing EUR11 billion from the European Central Bank's long-term refinancing operation, or LTRO. The ECB offered the long-term funding in December for the first time in an effort to stem a deepening liquidity crunch in Europe.

The ECB funding is a "liquidity insurance," and doesn't mean the bank won't issue debt this year if market conditions improve, BBVA said.

BBVA also said it had nearly completed the capital raising needed to meet higher solvency requirements from the Europe's banking watchdog the European Banking Authority. It said it had raised EUR5.3 billion out of a shortfall of EUR6.3 billion.

-By Christopher Bjork, Dow Jones Newswires; +34913958123; christopher.bjork@dowjones.com

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