Spanish banking giant Banco Bilbao Vizcaya Argenteria said Tuesday that it expects to take a goodwill impairment charge of roughly $1.3 billion on its U.S. unit in the fourth quarter due to ongoing concerns about the pace of the economic recovery here.

In a news release Tuesday, BBVA said that it evaluates goodwill across its operations annually and opted to make the adjustment on its Birmingham, Ala.,-based U.S. unit, BBVA Compass, "due to a slower than anticipated economic recovery, an extended environment of low interest rates and the growing impact of new regulatory requirements."

Based on recent earnings trends, the adjustment is likely to wipe out the bulk of BBVA's fourth-quarter profit. In the quarter that ended Sept. 30, BBVA earned 840 million euros, or just over $1 billion U.S.

The company stressed that the adjustment would be a non-cash item and would have no impact on its dividend policy or its capital position. It also said that despite the weak operating environment in the U.S., its "commitment to its U.S. franchise remains intact."

BBVA entered the U.S. in 2005 when it bought two Texas banks and and struck its biggest deal in 2008 when it bought Compass Bank. Its U.S. franchise ranks among the 20 largest banks in the U.S., with $64 billion of assets and more than 700 branches in seven states.

Through the first nine months of 2011 BBVA Compass earned roughly $279 million, up 1.5% from the same period in 2010.

Tax benefits from the writedown will lift BBVA's core capital 400 million euros, or $509 million, Dow Jones Newswires reported. That pleased investors. Just before 9 a.m. Eastern in the U.S., BBVA's shares were up 4.4%, according to Bloomberg.com. They were outperforming the Stoxx Europe 600 banks index, which was up 1.7%.

"Everything that points away from a possible capital increase is good news," David Gualtieri, director of equity sales at Intermoney, told Dow Jones.

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