BBVA's Raises $1.03 Billion From Citic Sale -- Update

By David Román in Madrid and Enda Curran in Hong Kong

Banco Bilbao Vizcaya Argentaria SA has agreed to sell a stake in a Hong Kong-based financial-services firm for EUR845 million ($1.03 billion), a move that will help bolster the balance sheet of Spain's second-largest bank.

BBVA said in a regulatory filing on Tuesday that it is selling a 29.7% stake in Citic International Financial Holdings Ltd. to the firm's parent, China Citic Bank Corp., already the owner of the remaining 70.3% stake.

BBVA has long been a partner of China Citic, but the Spanish bank has lowered its exposure to China in recent years. In October 2013, BBVA cut its stake in China Citic to just below 10%, as it sought to shore up its finances which were hit hard by the collapse of Spain's property market during the eurozone's financial crisis.

Like other foreign banks, BBVA has found it difficult to expand in China beyond the ownership of minority stakes in local lenders, and is facing tougher global capital rules that make it expensive to hold those stakes. That has made investments there disposable to pay for expansion plans elsewhere.

In the case of BBVA, Turkey has emerged as a key target after the Spanish lender said last month it will pay EUR1.99 billion to acquire additional shares in Turkiye Garanti Bankasi AS, Turkey's largest lender by market value--a move that represents a doubling-down of a bet on Turkish economic growth first made when BBVA bought an initial Garanti stake in 2010.

BBVA is anticipating that Turkey may help as another market for growth beyond its stronghold in Latin America and Spain, its home country but an overleveraged developed economy where lending opportunities are scarce.

In October, BBVA said net loans in Spain were down 7% from the first nine months of this year compared with a year earlier, as the rate at which borrowers pay down existing loans continues to outpace the rate at which they take out new loans.

For China Citic, the deal represents an opportunity to gain full control of Citic International amid an intense portfolio reshuffle. In recent months, the bank has mapped out plans to raise up to 11.9 billion yuan ($1.9 billion) from placing up to 2.46 billion shares to state-owned China National Tobacco Corp., the country's largest tobacco maker.

China Citic, which is 67% owned by Citic Ltd., said it sold the stake to boost its capital base. At the end of September, China Citic had a tier-one capital ratio of 9.35%. Beijing is pushing banks to boost tier-one capital adequacy ratios to at least 9.5% at big banks and 8.5% at smaller ones.

Write to David Román at david.roman@wsj.com and Enda Curran at enda.curran@wsj.com

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