Banco Bilbao Arg (NYSE:BBV)
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Banco Bilbao Vizcaya Argentaria SA (BBV) on Tuesday reported a 1% dip in third-quarter net profit, as a sharp rise in impairments for loan losses countered revenue growth at its Iberian and Latin American operations.

BBVA - Spain's second-biggest bank by assets behind Banco Santander SA (STD) - said net profit in the quarter edged down to EUR1.38 billion from EUR1.39 billion, above an average EUR1.31 billion forecast in a Dow Jones Newswires poll of 10 analysts.

"The quarters up until now have been positive and better than we expected - in the fourth quarter, we don't expect any surprises because we are seeing some economic growth already," Chief Executive Angel Cano told reporters.

At 1333 GMT, BBVA shares were flat at EUR12.49 in an overall higher Spanish market.

"BBVA's results are slightly better than we expected and show the company's ability to generate new business," Banesto said in a note. "The shares should perform better than the market average in the near future."

Net interest income rose 13% to EUR3.43 billion from EUR3.04 billion a year earlier. Analysts had forecast EUR3.36 billion.

BBVA has managed to avoid the worst of the global financial crisis, having for the most part stayed way from trading in complex derivatives and toxic instruments that battered many banking giants.

Still, BBVA's loan book deteriorated further in the quarter, with non-performing loans rising to 3.4% of total loans from 1.7% a year earlier. The bank is coping with prolonged recessions in its two biggest markets of Spain and Mexico. The bank set aside EUR1.74 billion to cover loan losses in the quarter, up from EUR917 million a year earlier.

BBVA has moved recently to bolster its capital ratios with a EUR2 billion mandatory convertible and a sale-and-leaseback property deal. The company had said earlier this year the deals would move its core Tier 1 ratio well ahead of its internal target of a core capital ratio of 7% by the end of this year.

BBVA's core capital ratio was 8% at the end of September, up from 6.7% a year earlier.

Despite pressure on its bottom line, the bank had another strong boost to lending income, as BBVA took advantage of the weakness of other banks to attract new clients and as it charged more for loans.

Costs were kept under control through early retirement and branch closures. Total operating costs were down 4% in the third quarter at EUR2.02 billion, BBVA said.

Its shares closed Monday at EUR12.49. The stock is up 54% in the year to date, as investors bet that it will do better through the downturn than most rivals. Shares in its main rival, Santander, which is due to publish third-quarter earnings Wednesday, have gained 76%.

-By Jason Sinclair and Leire Barrera, Dow Jones Newswires, +34 91 395 81 27, jason.sinclair@dowjones.com