Friday, December 3

BBVA launches into Turkey due to poor business performance in Spain

BBVA you will have to convince your investors that you can correct the business performance in Spain to minimize your exposure to emerging markets.

So he considers it Bank of America in your last report on the bank prior to your Investor Day Thursday, November 18, and this seems to indicate it too the event agenda published on the website of BBVA.

The financial group led by Carlos Torres will close the event by talking about the acceleration of profitable growth in its main markets (Spain, Mexico and Turkey), but BofA emphasizes the first to maintain its recommendation to buy shares in the bank, to which it gives a target price of 7 euros.

Since announcing the takeover on Garanti on Monday, the values ​​of BBVA they have fallen 5.84 percent to 5.7 euros.

BBVA’s overexposure to volatile markets implies greater risk

The analysis carried out by Bank of America explain what BBVA’s assets in Spain They represent about two-thirds of the group’s total, while they only contribute 10 percent of its income in the next two years.

MexicoBy comparison, it currently accounts for 18 percent of the group’s total assets, contributing 62 percent of revenue.

“The overexposure of earnings per share of BBVA to emerging markets is due in part to the poor returns of the matrix, so we expect a greater focus on costs, “he says BofA in your report.

In the absence of high interest rates in Europe, BofA consider that BBVA it will have to rely on increasing its business volume, reducing costs and products with higher margins such as insurance and asset management to reverse this situation.

In addition, the investor expects that the investment management BBVA explain during the Investor Day how your digital strategy will translate into efficiency gains and market share.

“Financial repression and a firm competitive environment in Spain they keep their margins depressed, particularly when compared to highly beneficial markets for banks, such as Mexico, “the report concludes.

Despite hoping that BBVA detail how the performance of the Spanish market will improve during Thursday’s event, Bank of America expects profitability to remain suboptimal through 2024, improving 2-4 percent in return on assigned capital.

Total control of Garanti is not expected

If the news of the takeover on all of Guarantee surprised the markets, so does the opinion of the report carried out by BofA on the growth prospects of the shares of BBVA.

The financial community had doubts about what to do Carlos Torres Vila with the capital gain generated by the sale of the subsidiary of the USA a PNC Financial Group Services, for which the Basque entity entered 9,700 million euros.

After subtracting the 3,500 million euros allocated to the repurchase of shares, BBVA had a capital gain of 3,400 million of which it will invest 2,249 million in Garanti, which has led to the ruling out of any other concentration process.

BofAInstead, it thinks that full acceptance is unlikely, so BBVA will still have liquidity at the end of 2022 that it could invest in Latin america.

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