Banco Bilbao Vizcaya Argentaria , Spain's second-largest bank, is expected to win a government-run auction of troubled Texas lender Guaranty Financial Group Inc , sources familiar with the situation said on Wednesday.

The Federal Deposit Insurance Corp (FDIC), which was managing Guaranty's sale, had set a bid deadline of Tuesday for Guaranty, whose investors include billionaire Carl Icahn, sources previously told Reuters.

Guaranty's shares, which closed up 5 cents, or 14.7 percent, at 39 cents on the New York Stock Exchange in regular trade, fell 18 percent to 32 cents in the aftermarket.

The FDIC usually announces the outcome of an auction shortly after the bid deadline. In such situations, regulators seize the troubled bank, typically on a Friday, and hand over its assets to the winning bidder.

A deal would help BBVA further build on its U.S. operations after a 2007 purchase of Birmingham, Alabama-based Compass Bank. BBVA bought Compass for $9.6 billion, more than tripling its U.S. branch base, especially in areas with large Spanish-speaking populations. Compass now operates 583 branches in Texas, Alabama, Arizona, Florida, Colorado and New Mexico, according to its website.

Austin-based Guaranty, which had about $14.4 billion in assets as of March 31, is considered attractive for its more than 150 branches in Texas and California. Guaranty Financial is the holding company for Guaranty Bank.

Other bidders for Guaranty included a consortium led by financial services executive Gerald Ford that includes several private equity firms, sources previously told Reuters. Media reports also cited US Bancorp as a bidder.

The Ford-led group included Blackstone Group , Carlyle Group , Oak Hill Capital and TPG , according to the sources.

The bid by the private equity consortium came despite the uncertainty around propsed FDIC guidelines for investments by such groups in failing institutions.

The FDIC provoked a backlash when it proposed tough guidelines in July, but is expected to soften the policy when it meets August 26.

BBVA could not immediately be reached for comment. An FDIC spokesman said the agency does not comment on open and operating institutions. The sources declined to be named because the auction has not been made public.

So far this year 77 banks have failed.

(Additional reporting by Karey Wutkowski, editing by Leslie Gevirtz)

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