UPDATE 4-BBVA property provisions trip sector alarms

* 2009 provisions 6.6 bln euros

* Bank reclassifies 1.8 bln euros of property assets doubtful

* Bad loans rise nearly 1 percent point in Q4 vs Q3

* FY net down 16 percent on provisions, meets forecasts

* Shares down more than 6 percent, underperform market

(Adds more analyst comments after conference call, comments from chairman, updates share price)

By Judy MacInnes

MADRID, Jan 27 (Reuters) - BBVA (BBVA.MC) shocked investors on Wednesday with higher than expected provisions, raising broader doubts about Spanish banks' ability to absorb a property market crash.

Spain's second-largest bank, with significant loan exposure to struggling developers, said it set aside 6.6 billion euros ($9.28 billion) in provisions in 2009 for potential bad debts which now make up 4.3 percent of total loans.

A writedown on some U.S. assets was flagged by some analysts ahead of results but alarm bells rang when the bank unveiled it had re-classified as doubtful assets 1.8 billion euros of consumer and real-estate developer loans.

"BBVA's fourth quarter results were a major negative surprise and are credit negative," Unicredit analysts said, adding that they heightened doubts about Spanish banks' ability to cope with a reported 325 billion euros in loans to property developers -- about a third of Spanish GDP.

"This is the first major bad news from a Spanish bank after the collapse of savings bank Caja Castilla La Mancha in March 2009," they added. [ID:MDT006230]

BBVA shares closed down 6.61 percent at 11.23 euros, one of the biggest fallers on the FTSEurofirst 300 .FTEU3 index of top European shares.

Shares in Spain's biggest bank, Santander (SAN.MC), were dragged down 5.06 percent on worries it would follow BBVA's lead.

Smaller peers Banesto (BTO.MC) and Popular (POP.MC) have already announced substantial provisions this earnings season, but up until now analysts had seen Spain's big two banks as a much safer bet.

BBVA, Europe's first major lender to report quarterly earnings, saw net profit evaporate to 30 million euros in the fourth quarter from 1.38 billion in the third mainly due to a widely expected one-off goodwill impairment related to the bank's U.S. acquisitions.

BAD LOANS NEAR PEAK?

BBVA justified its heavy provisioning as anticipating future credit deterioration, but said bad loans were nearing their peak, particularly in Mexico.

"What we are trying to do is anticipate the future as much as we can," Chairman Francisco Gonzalez told reporters.

BBVA's exposure to real estate developers totals some 17.7 billion euros.

The hefty provisions overshadowed solid revenue growth, boosted by the contribution from Latin American operations.

"Net interest income was ahead of forecasts, with a good performance from fees and other revenues," Espirito Santo analysts said.

While expecting a negative market reaction to BBVA's results, BPI analysts said its investment case for the bank remains unchanged.

"BBVA is well positioned to benefit from the recovery of the Mexican economy and should continue to post a resilient earnings performance in Spain, while enjoying enviable capital positions."

NO CAPITAL HIKE PLANS

With a core capital ratio of 8 percent at the end of 2009, BBVA chief executive Angel Cano said the bank has no plans to raise capital this year.

While having the capital base to embark on further small acquisitions in the United States -- a move which many analysts expect -- Cano was tight lipped about further expansion plans.

Gonzalez said BBVA has no acquisition plans for 2010 but is still focusing on the United States and Asia. (For a ReutersBreakingview column, click on [ID:nLDE60Q2D1]

(Editing by David Cowell)