BBVA, Spain's second-biggest lender, is expected to report sharply lower earnings on Friday as growing income from emerging markets will not be enough to offset losses from soured property assets at home.
And smaller Spanish banks reporting results on Friday will fall into the red or see 2012 earnings practically wiped out on provisions for real estate losses.
Profit for 2012 at BBVA is set fall 44 percent to 1.67 billion euros ($2.3 billion), according to a Reuters poll of 10 analysts.
Along with bigger peer Santander, BBVA has been able to better weather Spain's economic turmoil and real estate crash than many other local lenders, helped by stronger overseas businesses, in the likes of Mexico and Turkey.
The bank derives 30 percent of its gross income from Spain and Europe, while South America and Mexico make up 50 percent.
BBVA's big exposure to Mexico, in particular, where it runs BBVA Bancomer, the country's biggest bank, should help income. Bad loans in Mexico have not risen as much as in other parts of Latin America, such as Brazil, where the economy is cooling.
Rising non-performing loans in Brazil have weighed on Santander, whose 2012 profits more than halved after a spike in provisions.
BBVA will not escape problems at home, however, and it still has 1.6 billion euros of losses to absorb in the fourth quarter from provisions against Spanish real estate assets, which are likely to virtually wipe out quarterly profits, analysts said.
Yearly profits at its domestic business will also suffer.
"In Spain, we expect losses of around 700 million euros because of the big rise in writedowns on bad loans," analysts at Keefe, Bruyette & Woods said.
Spain's government enforced a clean-up of its banks last year after a property bubble burst in 2008, though deep provisions against rotten assets forced weaker lenders to seek state aid. Four nationalised banks, meanwhile, took 40 billion euros in European rescue funds.
Spain's economy is mired in recession and unemployment is rising, with 26 percent of the population now out of work.
Banks whose business is concentrated in Spain will feel the pain more. Banco Popular, Spain's sixth-biggest lender, is expected to post a record loss on Friday, while Barcelona-based Caixabank could see profits fall 74 percent, analysts predicted. ($1 = 0.7367 euros)
