The financial destiny of BBVA It has been linked to the future of the Turkish economy for some time, but after its commitment to take over 100 percent of Garanti, this connection is even more important for its business. And with a view to 2022, Fitch does not expect the context facing the Spanish bank to be more stable than it has experienced so far.
The credit rating agency has published a forecast report for Turkish banks in 2022 in which it augurs a context of risks for macroeconomic and financial stability.
And despite the fact that investors have shown in recent weeks their acclimatization to the ups and downs coming from Turkey by remaining firm in their commitment to BBVA, the Spanish financial entity will have to face major challenges in the Eurasian country during 2022.
The Turkish lira and interventionism continue to threaten BBVA
The report published by Fitch on the outlook for Turkish banks in 2022 states that “the challenging Turkish operating environment, deteriorating domestic confidence and the potential weakness of the Turkish lira amid the uncertainty of monetary policy and the high inflation creates risks to macroeconomic and financial stability. “
In this context, the agency considers that the credit profiles of banks may be negatively affected, by increasing the probability that the Turkish government will intervene in the system, thus cementing the “deteriorating” perspective that Fitch gives to the country’s banking sector.
“Turkish banks are vulnerable to exchange rate volatility due to significant refinancing needs and the dollarization of deposits, which create risks to foreign currency liquidity,” the agency explains in its report.
The bullish rally gives way to depreciation again
As you remember Fitch In its report, the Turkish currency fell 50 percent against the US dollar from early 2021 to mid-December, mainly following cuts of 500 basis points in the central bank’s official interest rate.
This decline was momentarily interrupted after the currency appreciated significantly following the announcement of the Erdogan government, carried out on December 20, of measures to support the lira that included a program to compensate depositors in local currency for exchange rate losses.
The Turkish lira, however, has resumed the downward path this week and traded during the session on Wednesday with falls of 5 percent to reach an exchange rate of 12.36 dollars, thus losing 15 percent in the last five days and causing efforts to boost lira deposits to fall on deaf ears.
The market and experts get used to risk
Despite the warnings to sailors that continue to jump on BBVA’s financial calendar in 2022, the bank is ending the year on a positive note, improving about 3.9 percent in recent days, and increasing this climb to 18, 6 percent when compared to the first few bars of the exercise.
BBVA shares have risen to 5.2 euros from the 4 euros with which they started the year on the stock market, and analysts trust that they will continue this improvement for next year.
The 12-month target price for BBVA securities stands at 6.46 euros, with 17 out of 33 consensus analysts maintaining buy or overweight recommendations on the Spanish bank’s securities, in contrast to the 14 that maintain a neutral recommendation and the only 2 bears who advocate selling them.
Thus, BBVA seems to have convinced the market of its commitment to Turkey, despite the fact that the country’s prospects in the future draw a scenario of instability very similar to the one that frightened investors in the moments immediately after the announcement of the takeover of Garanti .