* BBVA cuts 2013 dividend, caps payout at 40 pct from 2014
* Move piles pressure on Spanish rivals to cut dividends
* Nine-month net profit surges, misses forecast on bad loans
* Caixabank 9-mth net profit up 165 pct on lower provisions (Writes through, adds analyst comment, share price, details)
By Sarah White and Julien Toyer
MADRID, Oct 25 BBVA, Spain's second-biggest bank, is cutting its 2013 dividend and capping payouts as of next year to 40 percent of profits, piling pressure on local rivals to cut handouts as they face a tough time ramping up earnings.
The move comes as a reminder that Spanish lenders still face tough times as, like euro zone peers, they are bolstering capital before a Europe-wide asset review and preparing to come under the supervision of the European Central Bank next year.
It puts the spotlight on local rivals like Santander , the euro zone's biggest bank, which maintained handouts at the same level in recent years while most European banks cut theirs.
BBVA, which also on Friday posted a 3.2 percent fall in nine-month net lending income, reported a 86 percent surge in nine-month profit to 3.1 billion euros ($4.3 billion) as property provisions subsided.
Barcelona-based Caixabank, Spain's third-biggest bank by market value, also announced results showing nine-month net profit more than doubled to 458 million euros, benefiting like peers from lower bad debt charges.
Spanish banks are recovering from a real estate crash and a deep economic crisis which ate into earnings and pushed up the amount of profits paid out to shareholders.
BBVA's profits fell over 44 percent in 2012 and payouts as a percentage of profits reached 136 percent, according to Reuters calculations based on BBVA figures. Santander's payout ratio was 276 percent of profit in 2012.
The Bank of Spain said in June banks should cap cash dividend payouts to no more than 25 percent of profits, and some analysts had expected lenders to pay more of their dividends in shares as a result. But BBVA said it was moving to dividends solely in cash, rather than a mix of cash and shares or "scrip" dividends.
"Maintaining a high dividend in scrip just because banks don't want to cut it is not sustainable, when you can't afford it. It was inevitable," Daragh Quinn, an analyst at Nomura in Madrid said. "With euro zone banks moving to a new supervisor it was also going to be tough to present all these banks with high payout ratios."
Spanish banks booked steep provisions last year against losses on soured property loans and assets, which gutted earnings and left some in need of a European bailout. Spain is now hoping to exit the EU aid program at the end of the year.
BBVA shares were down 1.9 percent to 8.8 euros by 0830 GMT, while Caixabank fell 1.25 percent to 3.7 euros. However, the shares are up 34 percent and 53 percent respectively this year.
Although Spanish banks' net profits have benefited from lower provisions, underlying earnings at many have faltered this year, as low interest rates and falling credit squeeze net interest income, or earnings from loans minus deposit costs.
Even at BBVA, which makes almost half its revenue in South America, nine-month net interest income was down just over 3 percent from a year ago to 10.85 billion euros, in line with expectations. Rises in key hubs such as Mexico failed to offset a 20 percent fall in net interest income in Spain.
Bad debt as a percentage of total credit also grew from 5.5 percent at the end of June to 6.7 percent three months later, as BBVA reclassified 3.9 billion euros of refinanced credits in Spain as bad loans. Fresh charges on those loans in the third quarter caused it to miss profit expectations.
Spain is forecast to have exited a two-year recession in the third quarter of 2012 and banks' earnings should slowly recover, though growth will be weak. At Caixabank, which has integrated several acquisitions in the past few years, net interest income improved slightly from the second quarter to the third.
Despite the pressures, some Spanish banks have been reluctant to alter dividends. Bankinter said it did not think it needed to restrict cash payments and would fight any imposition by the Bank of Spain to do so.
Santander, which pays about 85 percent of its dividend in shares, said on Thursday it was not modifying its 2013 dividend policy and did not comment on plans for 2014.
In July, Caixabank said it would make one of its quarterly dividend payments in shares rather than the cash payment that had been due, but the value was left unchanged.
BBVA said it would cancel a cash payment due in January and will instead increase the last 2013 dividend payment due in April and made up of both cash and shares. But the changes will effectively spell a cut from a handout of 0.42 euros per share to 0.37 euros for the year.
The bank has been paying 0.42 euros per share since 2009, when its payout ratio had been around 37.4 percent. It said on Friday it was aiming to hand out between 35 percent and 40 percent of profits annually. ($1 = 0.7245 euros) (Additional reporting by Jesus Aguado in Madrid and Steve Slater in London; Editing by David Holmes)