BBVA Compass reported strong loan growth in the first quarter, but its net income fell sharply from the same period last year as weak energy prices forced the company to substantially boost its loan-loss reserves.
The Birmingham, Ala., company said Thursday that its provision for loan losses hit $113.2 million in the quarter, up 169% from the first three months of 2015. This result was a 76% drop in net income year over year, to $34.5 million.
Like many banks with operations on the Gulf Coast, the $92 billion-asset BBVA Compass has seen a spike in delinquencies on loans to oil and gas companies in recent quarters. While revenue ticked up year over year and total loans increased 6%, to $62.2 billion, nonperforming loans as a percentage of total loans nearly doubled, to 1.41%, in this year’s first quarter.
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First-quarter net income at the $22 billion-asset company fell 6.4% to $69 million year over year and earnings per share fell 6.7% to 98 cents.
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Some banks in Texas and Oklahoma are likely to start scouting acquisitions in states such as Colorado and California so that their fortunes are not so tied to the energy sector.
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BOK Financial continued to diversify its lending, booking strong increases in health care, manufacturing and commercial real estate credits. Progress on that front, however, was overshadowed by ongoing deterioration in its energy portfolio.
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"The prolonged period of low energy prices and continued stress on the energy industry clearly impacted our results in the first quarter," Manolo Sánchez, the chairman and chief executive of BBVA Compass, said in a news release. He described the increase in reserves for loan losses as "a decisive and prudent decision that appropriately reflects the current operating environment."
BBVA Compass is now carrying $906 million of nonperforming assets, more than twice the $450.7 million it registered in the first quarter of 2015.
The bank's noninterest income fell 9.2% from the first quarter of 2015, to $226 million, dragged down by losses in mortgage banking and reduced fees for investment banking and advisory services. Revenue increased 1%, to $735 million.
BBVA Compass’ results contributed to what was a disappointing quarter for the bank's Spanish parent, Banco Bilbao Vizcaya Argentaria. BBVA posted earnings of about $803 million, well below the approximately $950 million that analysts had expected for the quarter, according to a FactSet poll. Investors punished the bank in morning trading, with shares falling more than 6.8% by noon Eastern time.
Also on Thursday, BBVA Compass announced that in March it received a “satisfactory” rating on its most recent Community Reinvestment Act examination after it committed more than $2.5 billion in loans and investments to low- and moderate-income neighborhoods. The Federal Reserve Bank of Atlanta had given the bank a “needs to improve” rating on its previous exam.
