BBVA 2011 net profit falls 34.8 pct

Spain's second-biggest bank BBVA announced on Thursday a 34.8% decline in 2011 net profit dented by provisions and a one-off charge, but with its core business showing signs of stability in a tough environment.

Net profit stood at 3.00 billion euros, falling shy of expectations for 3.18 billion euros in a Reuters poll of 11 analysts. Bad debts declined slightly to 4.0% of total loans versus 4.1% in September.

Last month BBVA anticipated it would take a 1 billion euro charge on 2011 net profit due to an adjustment in goodwill, boosting capital by 400 million euros.

The bank said it was on target to meet the European Banking Authority's 9% core capital target by June 2012. BBVA's core capital level was 8.7% at December.

The group said it made the most of higher revenues in Q4 to set aside more provisions, which rose 5.7% over the year. It also wrote down 665 million euros worth of foreclosed assets, taking its coverage of those assets to 30%.

In draft legislation set to be approved on Friday, the Spanish government will force lenders to re-price foreclosed property and provision billions of euros against unrecoverable loans to bankrupt developers. Spanish banks in the fourth quarter attempted to anticipate that by boosting provisions.

The government hopes to clean overpriced property assets from banks' balance sheets and, eventually, stimulate lending four years after a housing crash which is still being felt. The economy is expected to re-enter recession this quarter.

Earlier this week BBVA's bigger rival Santander took 3.2 billion euros in provisions, anticipating the government's demands.

The bank's business broadly speaking performed healthily, with overall loans up 4.3% and Mexican unit Bancomer alone outpacing that rate with 8% loan growth and 2% profit growth.

BBVA holds a conference call at 0830 GMT.