MADRID October 25, 2004 - Spain's second-biggest bank Banco Bilbao Vizcaya Argentaria (BBVA) on Monday announced it was setting up a private equity fund for US-based Latinos.

BBVA said it would hold a 24.9 percent stake in the Palladium Equity Partners III fund, aimed at investments in Spanish-speaking small and medium-sized enterprises (SMEs) based in the United States with turnover of between 25 and 500 million dollars (19.6 and 391.2 million euros).

Start-up capital will total 290 million dollars, BBVA said.

Speaking on the day the bank unveiled a sharp rise in net profit for January to September, BBVA director general Jose Ignacio Goirigolzarri meanwhile said he was also looking to earmark potential opportunities in China.

"But nobody should expect a spectacular operation there in the short term," Goirigolzarri told reporters.

In a further foray into the US market, BBVA last month said it was buying Texan bank Laredo National Bancshares for 850 million dollars, reinforcing its efforts to attract retail banking customers in the US Spanish-speaking community.

BBVA also announced in September plans for a 360-million-dollar acquisition of Mexico's number one mortgage bank Hipotecaria Nacional, which has clients on both sides of the Mexican-US border.

Earlier, BBVA said net profit for the first nine months of 2004 rose 18.4 percent to 2.059 billion euros ($2.62 billion) from 1.739 billion a year earlier, driven by a strong performance from Mexico, where net profit nearly doubled to 580 million euros.

In a separate development, Goirigolzarri said his company had not asked the Bank of Italy's permission to increase its 14.9 percent stake in Italian bank Banca Nazionale del Lavoro, saying that the Spanish company was an "institutional shareholder" in the latter.

Media reports said BBVA was looking to increase its stake to 20 percent.