BBVA takes 1-billion-euros hit against value of US goodwill

Spain's second-biggest bank, BBVA, said Tuesday it would take a one-off charge against 2011 earnings of one billion euros as a result of a downward adjustment of goodwill on its US investments.

In a statement to the National Securities Commission, BBVA said the decision would have no impact on future cash flow and the liquidity of the group. It said that because of the tax treatment of goodwill, the move would in fact boost its core capital by about 400 million euros. The bank also said there would be no change to its dividend policy.

BBVA also wrote down the estimated book value of goodwill on its US assets by 704 million euros in 2009.

"For the US franchise, there is a potential goodwill adjustment due to a slower than anticipated economic recovery, an extended environment of low interest rates and the growing impact of new regulatory requirements," BBVA said.

The bank said that despite the slowdown in the US, BBVA's performance in the world's largest economy was positive last year. The US division made a net profit in the first nine months of the year of 218 million euros.

Through a series of acquisitions, BBVA has built up a banking franchise in the south of the United States grouped around Compass Bancshares, which it bought in 2007 for 6.65 billion euros in what was the bank's biggest investment in its 150-year history.