Spain's BBVA swings to net loss on U.S. writedown and COVID-19 provisions

MADRID (Reuters) - Spain's second biggest bank BBVA BBVA.MC reported a loss of 1.79 billion euros ($1.94 billion) in the first quarter after a writedown in the United States and provisions taken against the potential fallout from the coronavirus outbreak.

FILE PHOTO: The headquarters of the Spanish bank BBVA are seen in Madrid, Spain, June 12, 2018. REUTERS/Juan Medina

Banks worldwide have been taking measures to offset risk amid the crisis. On Thursday, BBVA's fellow Spanish lenders Caixabank CABK.MC and Sabadell SABE.MC also reported steep profit declines due to provisions taken against the pandemic.

BBVA said the goodwill impairment of 2.08 billion euros in the United States was mainly due to the economic damage of the COVID-19 pandemic though it did not affect its capital or liquidity.

The bank also set aside 1.43 billion euros in provisions to anticipate the coronavirus impact elsewhere in its business and BBVA’s chief executive officer, Onur Genç, told analysts during a call that it could book additional provisions if the crisis worsened.

BBVA’s fully loaded core tier-1 capital ratio also took a hit from front-loading the provisions and fell 90 basis points in the quarter to 10.84% at end-March, prompting the lender to revise downwards its capital targets to between 10.84% and 11.34% from a previous target of between 11.5% and 12%.

Its main competitor in Spain, Santander SAN.MC, which set aside 1.6 billion euros to cover expected loan losses caused by the COVID-19, reported a comparable core-tier 1 capital ratio of 11.33%.

Without taking into account the impairment on its U.S. business, BBVA’s profit fell 75.3%, the lender said.


On Thursday, Caixabank’s net profit fell over 88% after it set aside 400 million euros to cover expected credit losses, while Sabadell booked 213 million euros in provisions against the pandemic, triggering a 64% slump in net profit.

Shares in BBVA and Caixabank fell 2.6%, while Sabadell and Caixabank were up 3.4% and 1.6%, respectively.

BBVA said it would not pay any dividend against 2020 results until uncertainties over the coronavirus disappear.

BBVA was the only major Spanish bank that had so far not modified or cancelled its shareholder remuneration policies.

The European Central Bank had told lenders to skip dividend payments and share buybacks until October at the earliest and use profits to support the economy.

Overall, BBVA’s net interest income (NII), a measure of earnings on loans minus deposit costs, was 4.56 billion euros, up more than 3.6% from the same quarter last year boosted by lending growth in its Latin American business and Turkey. Analysts expected NII to come in at 4.42 billion euros.

However in Spain, where it booked a loss of 141 million euros on loan losses and credit card provisions, lending income remained under pressure due to low interest rates in the euro zone.

At its home market, BBVA’s NII rose 1.6% against the same period a year ago but fell 3.6% against the previous quarter.

At Caixabank, lending income declined 3% to 1.2 billion euros, while Sabadell’s NII fell 1.8% to 884 million euros. Both figures were in line with analysts’ forecasts.

Reporting by Jesús Aguado, additional reporting by Inti Landauro, Joan Faus and Emma Pinedo; Editing by Sonya Dowsett and Andrew Cawthorne