Bad loans rise in third quarter at BBVA and Caixabank

The legacy of the Spanish property collapse continued to weigh on BBVA and Caixabank as the two lenders reported a rise in bad loans and higher provisions for the third quarter.

BBVA, Spain's second-biggest lender by assets, said it was cutting its shareholder payout for this year and would place a limit of 40 per cent on cash payouts from next year, with the rest paid in shares.

The move came as net non-performing loans at the bank for the quarter came in at €5.1bn, of which €3.8bn was a result of the reclassification of loans in Spain, with the ratio of non-performing loans out of the total rising from 5.5 per cent to 6.7 per cent year on year.

At the same time Caixabank, the Barcelona-based lender which by Spanish assets alone is the country's largest bank, said its total NPL ratio rose slightly from the quarter before from 11.2 per cent to 11.4 per cent as net income fell from €73m to €50m.

The collapse of Spain's property bubble forced its banks to set aside billions of euros against soured loans, and the wider crisis meant large swaths of the country's savings banks had to be rescued by the state.

BBVA and Santander, Spain's biggest bank by assets, have managed over recent years to find some shelter from their problems at home through their divisions in fast growing emerging markets such as Brazil and Mexico, but in recent quarters growth in these markets has begun to slow.

BBVA's results showed that net profit fell in many of the bank's main operations outside of Spain, including in Turkey falling by 51 per cent compared to the same quarter last year, and in South America dropping by 4 per cent. Mexico however was a brighter spot, with profits growing by 16 per cent.

Following the results BBVA shares fell by 1.8 per cent to €8.89. "We expect these results will lead to significant downward revisions of estimates and recommendations [for BBVA]," said analysts at Mirabaud.

BBVA said overall net interest income, roughly the margin between what it pays to finance itself and how much it lends out money for, fell by 3 per cent quarter on quarter to €3.55bn.

Net profit for the quarter fell by 83 per cent compared to the second quarter to €194m, lower than analysts' expectations of about €600m as a result of the higher provisions in Spain.

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