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Spanish banks downplay a crisis

"We've caught a cold but it's a long way from pneumonia," says José Sevilla, head of the Latin American financial management division of Banco Bilbao Vizcaya (BBVA), Spain's largest banking group. Sevilla was assessing the impact on the bank of its exposure to Argentina.

Jules Stewart

Two Spanish banks, BBVA and Banco Santander Central Hispano (BSCH), hold by far the largest positions in Latin America of any foreign banks and both have taken a painful hit from the Argentine debt crisis. BBVA and BSCH have over the past five years invested some $25 billion in a Latin spending spree, buying, upgrading and restructuring local banks.

For BSCH, the more exposed of the two, Latin America accounts for 33.5% of group profits compared with 20.4% for BBVA, after minorities in both cases. The only other foreign institution with major Latin American exposure is Dutch bank ABN Amro, with 14% of its profits coming from the region, although Brazil accounts for the bulk of its business.

So far the market has tended to play down any threat of a disaster. "Both banks hold very liquid balance sheets throughout the region, as lending has been subdued and the main focus has been on deposits and asset gathering," points out José Luís de Mora, European banks analyst at Merrill Lynch. "We understand BBVA's balance sheet in the region to be slightly more liquid than BSCH's." De Mora expresses confidence that BBVA and BSCH are likely to overcome an isolated problem in Latin America because of their diversification of risk across the region.

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