BBVA reports loss on $3.8bn hit from virus

Bloomberg

Banco Bilbao Vizcaya Argentaria SA took a combined hit of 3.5 billion euros ($3.8 billion) for virus-related
provisions and a second consecutive charge at its US business to post its biggest-ever quarterly loss.
BBVA, which is focused on emerging markets in Latin America and Turkey, reported a first-quarter net loss of 1.8 billion euros. The virus impact alone accounted for about half of the 2.6 billion euros the bank set aside to cover loan losses.
The lender is joining other global banks in setting aside billions of dollars to deal with the future economic effects of the outbreak. BBVA already had one of the highest levels of provisions among European lenders, reflecting its exposure to volatile emerging markets.
Mexico, which accounts for almost half of group profit, was the largest contributor with a total of 773 million euros set aside. Spain, where BBVA expects the economy to contract by as much as 10.5%, saw the biggest rise in provisions, with 517 million euros for the virus on top of 143 million euros in recurring provisions.
In the US, the bank set aside 280 million euros for loan losses linked to the oil-and-gas industry. BBVA has an exposure of about $14 billion to oil-and-gas loans, according to JPMorgan Chase & Co.
The US unit, which normally accounts for about 10% of group profit, posted a loss of 100 million euros. The business has been a continual headache for the bank. BBVA booked writedowns in 2009 and 2011 and last year took a 162 million-euro impairment after a push into consumer lending backfired.
Profit in Mexico, normally the bank’s most consistent generator of income, fell 41% mainly due to provisions. But core revenue was also weak, with net interest income rising just 3% and fees declining by 1.4%
Turkey has proved to be BBVA’s most problematic investment in recent years after a currency crisis in 2018 triggered a mass of loan defaults. BBVA in recent years has been seeking to reduce its portfolio of soured loans, a remnant from the financial crisis that peaked in 2012 after Spain’s real estate market collapsed.
Spanish rival Banco Santander SA said it would set aside 3.9 billion euros for loan losses, the most in its history. The bank said 1.6 billion of those provisions were for Covid-19-related soured loans.