Madoff Mess Haunts BBVA - BBVA Spain's Second largest Bank-Madoff Victim

Madoff Mess Haunts BBVA
Javier Espinoza, 01.28.09, 09:40 AM EST
Spanish bank will have to pay almost $400M for losses related to the Ponzi scheme.
Banco Bilbao Vizcaya Argentaria, S.A.

The Spanish bank posted an 18.0% drop in net profit on Wednesday due to a payment of 300.0 million euros ($398.8 million) for losses related to the alleged Bernard Madoff fraud, as well as early retirement payments at its Spanish operations valued at 602.0 million euros ($800.3 million).

Banco Bilbao Vizcaya Argentria (nyse: BBV - news - people ) said it is targeting a "more prudent" dividend policy in this year to strengthen its solvency ratios without a capital hike. The bank said it planned to pay out 30.0% of earnings to shareholders in 2009, which would generate an additional 80 basis points of capital.

"Given the volatility of the financial markets, it's hard to say what's the real impact of the Madoff fraud to BBVA's stock price," said Alejandro Ruyra, an analyst with Kepler Capital Markets.

Diego Barron, an analyst with Fortis Bank, said most analysts had already considered the Madoff effect in their calculations and that the long-term impact on the bank should be "limited."

BBVA said it would pay a final dividend against 2008 results in shares, adding that shareholders would be offered one additional share for every 62 they already hold. Total lending rose 7.1% to 340.4 billion euros ($452.6 billion), while deposits climbed 1.6% to 493.3 billion euros ($655.9 billion).

It was not all bad news though. Its chairman, Francisco Gonzalez, said Compass Bank, a U.S. unit of Spain's second-largest bank, will earn more this year than in 2008 despite the financial crisis. Compass said last week that it would cut 1,200 jobs or 10.0% of its workforce. It has $61.5 billion in assets and 577 branches in the U.S.

BBVA isn't the only Spanish bank with exposure to the alleged Ponzi-scheme. Santander said on Wednesday it was to compensate investors affected by their exposure to Madoff funds. Santander (nyse: STD - news - people ) will pay 1.38 billion euros (1.28 billion pounds) worth of preference shares in the bank.

The two Spanish banks join a number of banks, funds and charities around the world that have lost billions of dollars through Madoff's alleged fraud. U.S. authorities are still assessing the full extent of the losses; Madoff is currently under house arrest in his Manhattan apartment and his assets have been frozen.

Reuters contributed to this article.