April 27, 2018 / 6:20 AM / 6 months ago

UPDATE 2-Spanish banks beat forecasts despite lending challenges

* BBVA Q1 net profit 1.34 bln vs 1.19 bln forecast

* Caixabank 704 mln vs 560 mln forecast

* Bankia 229 mln vs 223 mln forecast

* Lending under pressure but bad loans improve (Adds detail, shares)

By Jesús Aguado

MADRID, April 27 (Reuters) - Spanish banks BBVA, Caixabank beat first-quarter net profit forecasts helped by overseas markets which offset a squeeze on lending income at home.

BBVA reported a 12 percent rise in net profit to 1.34 billion euros ($1.62 billion) thanks to Mexico, its main market, where it makes 35 percent of its profits, and a solid performance in the United States.

That topped the 1.19 billion euros expected by analysts.

Caixabank, which bought Portugal’s second-biggest lender BPI in February 2017, posted a net profit of 704 million euros, exceeding the 560 million expected by analysts.

BBVA shares rose 1.8 percent and Caixabank slipped 0.4 percent while the European banking index gained 0.1 percent.

BBVA managed to increase its net profit in Mexico by 5.5 percent, by 17 percent in Spain and by 51 percent in the United States, where its makes 12 percent of its profit.

“Region-wise, results were good across the board but were particularly strong in the U.S. on lower costs,” Goldman Sachs said in a note to analysts.

Shares in state-controlled Bankia fell 1.4 percent after it posted a 24.5 percent fall in net profit to 229 million euros on lower trading earnings, though that topped the 223 million euros expected by analysts in a Reuters poll.

Lender are struggling to lift earnings on loans in Spain as interest rates remain at historic lows.

At BBVA net interest income, or earnings on loans minus deposit costs, fell 6 percent quarter on quarter to 4.29 billion euros, short of the 4.34 billion expected by analysts.

Caixabank’s lending net income rose 0.6 percent quarter on quarter to 1.2 billion euros, in line with analysts’ forecasts.

Bankia also saw higher lending income, buoyed by the integration of smaller state-lender BMN.

All three lenders managed to keep their non-performing loans under control and reduce provisioning against soured property loans.

Spain’s economic recovery and a property rebound has allowed most of banks to tackle toxic balance sheets faster than rivals in Italy.

BBVA struck a deal in November to sell 80 percent of its real estate business to U.S. fund Cerberus for a net value of 4 billion euros.

$1 = 0.8596 euros Reporting by Jesús Aguado; editing by Jason Neely

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