Monday, December 6

Barclays doubts BBVA’s ability to meet targets

Barclays questions the ability to BBVA to meet its objectives after the announcement of the entity to add 10 million new clients at the end of the strategic plan in 2024.

The analysis department of the British entity estimates that this goal implies reaching the completion of the plan with a profit generation of 6,200 million euros compared to the 4,995 million established by the consensus of Bloomberg.

“The objective is an increase from the estimated levels of 24 percent and initially it seems difficult to meet”, said the entity in a note where it analyzed the Investor Day of BBVA.

Possible takeover bids in Latin America

Barclays also focused on the options BBVA has on the table to use existing liquidity.

The target capital ratio of 11-12 percent implies an excess of capital of 6,000 million euros, discounting the repurchase of shares, the tender offer Guarantee, the ‘pay out’ of 40-50 percent and the annual complementary dividend.

The London entity considers that it can be given “A potential purchase from minorities in the markets of Latin America”, given the growth that the country registers in geographies such as Mexico where it hopes to grow in double digits.

A restructuring of 800 million euros

Barclays’ forecast is in line with the consensus. Bloomberg Intellignce highlighted that, by not increasing the solvency objective, “Capital outflow can be gradual with room for more special payments or mergers and acquisitions”.

BBVA announced a target for the cost-income ratio of 45 percent at the conclusion of the strategic plan. Based on this, Barclays calculates a restructuring that could reach 800 million euros.

The greatest impact would be seen in Spain, estimate Barclays, with an amount before tax of between 500 and 600 million euros to which could be added another 50 million reduction in corporate headquarters.

Citi coup to Garanti

Investors were more critical than investment entities regarding the purchase of Garanti and since the announcement sales have followed one another in value with each decline in the Turkish lira.

Investment firms saw potential in Garanti by estimating that with the 49.9 percent that BBVA currently controls, it was already assuming a high risk without fully controlling the entity.

The explanation did not convince the shareholders and now Citi agrees with them. The bank’s analysis team has lowered its recommendation on the country’s entities because of currency volatility.

In the case of Garanti, the analyst Simon Nellis cut his recommendation from “buy” to “neutral” in a context where the levels of monthly volatility of the lira are at their highest level in three years.

The short term hits BBVA

The fall of the Turkish currency in the quarter is 30 percent and according to the calculations of Bloomberg the nation’s six largest banks could have lost capital of $ 3 billion in the quarter.

Morgan Stanley refers this situation to BBVA and explains that the actions of the Spanish entity “They could underperform in the short term” due to the volatility of the lira, which makes Garanti’s valuation in euros “more uncertain”.

The declines in the lira and the intervention of President Erdogan in monetary policy, with constant lowering of interest rates, has triggered inflation to 30 percent.

The purchasing power of the Turks falls and this reduces the options for citizens to reduce their purchases and avoid credits. It is political and monetary instability and the lack of purchasing power that investors cling to in order to position themselves against the analysis of investment entities.

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