Loan-loss provision put crimp in 1Q at BBVA Compass

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Loans and deposits at BBVA Compass in Birmingham, Ala., grew in the first quarter, but its loan-loss provision tripled and took a bite out of the bottom line.

Net income for the $93 billion-asset BBVA Compass declined 32% year over year to $141 million. President and CEO Javier Rodriguez Soler said that the bank recorded a “meaningful increase” in its provision expense to cover “isolated, one-off issues” in its commercial and consumer loan portfolios.

The bank recorded a provision for loan losses of $182.3 million in the first quarter, compared with $57 million a year earlier. Net charge-offs totaled $101.5 million, up from $67.7 million. Net charge-offs represented about 0.63% of total loans compared with 0.44% a year earlier.

“Revenue growth was driven by a double digit increase in net interest income, and expense growth was well contained,” Soler said in a press release. “Loan growth was modest but, most importantly, was fully funded by deposit growth as we continued to successfully grow and deepen our deposit relationships. While provision levels in the quarter were elevated, the overall health of our loan portfolio remains strong.”

BBVA Compass said recently that it would rebrand sometime this year as simply BBVA. The tweak to its name is part of a broader change by its Spanish parent company Banco Bilbao Vizcaya Argentaria to unify its brand worldwide.

Net interest income rose 10% to $683 million in the first quarter, and the net interest margin widened 14 basis points to 3.41%. Total revenue grew 6% to $931.9 million.

Total loans rose 4% to $65 billion, driven by growth in its consumer loan portfolio. Direct consumer lending rose 36% to $2.5 billion, and credit cards rose 27% to $832 million.

Deposits grew 6% to $74.4 billion, although non-interest-bearing demand deposits fell 6% to $20.4 billion while interest-bearing deposits grew 11% to $54 billion.

Noninterest income was essentially flat at $258 million. The bank said growth in card and merchant processing fees, service charges on deposit accounts and money transfer fees offset declines in correspondent and investment sales, advisory fees and investment service sales.

Noninterest expenses rose 3% to $581.9 million.

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