Friday, November 26

A cascade of upward valuations will take BBVA to 7 euros

The price of BBVA continued to stretch the bullish rally after reaching the annual highs thanks to the results. The value tied the psychological level of 6 euros and is preparing to accelerate the rally with a target of 7 euros, after receiving a cascade of improvements in its valuation.

Up to half a dozen brokers and investment firms revised the target price of the Basque bank upwards, in some cases above double digits. And that BBVA is the third value of the IBEX 35 in the year, with a rise of 52 percent. But the market sees further progress possible.

The largest increase in target price was calculated by analysts from HSBC, which placed BBVA’s valuation at 6.3 euros, 11 percent more than its previous estimate of 5.7 euros. 10 percent was the rise of General Society, up to 6.8 euros from the previous 6.2.

The group was joined by analysts from RBC and Deutsche Bank, with a target price increase of 8 and 7 percent respectively. What’s more, Barclays raised the price by 4 percent and Swiss credit I increased it by 2 percent.

An expected reaction after the strength shown by BBVA

This reaction from brokers and investment banks is expected after the strength shown by the entity with its results. As explained the same day of the presentation, the upward revision by the consensus of experts was imminent.

Now, the next step will be to adjust profit forecasts upwards. “We would expect improvements to the mid-single digit range,” JP Morgan analysts explained. In this sense, Citi analysts also predicted improvements by cost in net interest income.

In JP Morgan they raised the target price to 7.2 euros, one of the highest valuations for BBVA, which offers a potential upside of 17 percent.

Among the factors that stood out compared to BBVA’s figures is the decrease in the cost of risk for the entire group and the improvement in profits in Mexico.

Emerging markets respond

The impression among experts is that BBVA scored a high score for the performance in its emerging markets, especially Mexico. “Business in emerging markets is accelerating the strong momentum in net interest income,” analysts from Bloomberg Ingelligence.

For example, the growth of consumer finance is key in a high-margin market like Mexico. On Turkey, the growth of credit spreads and the expansionary effect of products linked to inflation also explained the improvement in the figures.

In addition to all these fundamental factors, the additional element that triggered the market euphoria is the announcement of the buyback of shares for 10 percent of the capital. The market took it very well, as there were certain doubts regarding the possibility of the ECB stopping the operation.

BBVA breaks short-term bearish guideline

After the last rebound, BBVA regained the zone of annual highs, a level that came to be in doubt after the collapse of the Turkish lira. Now, the rebound targets point to areas of 7 euros, as explained by analysts consulted by

In fact, the price has broken the passage of the long-term bearish guideline, Explain Eduardo Faus, Renta 4 Banco analyst

The implications for the medium and long term are “positive”, especially if the IBEX 35 manages to reach the area of ​​9,450 points, without ruling out possible corrective phases by the hypothetical path, adds Faus.

As an objective of the rebound, the sources consulted do not appreciate major obstacles until the area of ​​7-7.25 euros. Some of the latest upward revisions to the target price are already in line with this technical rebound target. Below, the key support is 5.17 euros.

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