Tuesday, December 7

BBVA rules out any other concentration process with Garanti

The opa to the totality on Guarantee from BBVA clearly clears the only question of great relevance that the financial community had about the Basque entity and that it was to find out what it was going to do Carlos Torres Vila with the capital gain generated by the sale of the subsidiary in the United States.

The entity received 9,700 million euros from the sale to PNC Financial Group Services and after subtracting the 3,500 million euros allocated to the repurchase of shares, BBVA had a capital gain of 3,400 million.

With this excess capital, BBVA will be able to finance itself to pay up to 2,249 million euros if it is done with the 50.15 percent that it does not control in Garanti. The Basque bank estimates that the takeover bid will raise earnings per share by 13.7 percent in 2022. Furthermore, the market assumes that the movement rules out a corporate operation with a third party such as Banso Sabadell.

The market moves away from the decision

In this sense, the analyst of KWB Daragh Quinn points out that, indeed, the operation will have “a strong impact on earnings per share in the short term, but it will moderate over time.”

Despite this, Investors respond with sales and BBVA shares fall 6 percent on the IBEX 35 during the first hour of trading. The market thus distances itself with a news that has puzzled both investors and experts.

“The news has surprised, it sounds even strange since everything indicated that BBVA I would use the excess for another concentration operation and that is how the market also discounted them ”, points out the analyst of Norbolsa Nagore Díaz.

Increased risk

The analyst of Bankinter Rafael Alonso points out that, with the operation, BBVA “Increases your risk profile” and “doubts” are generated due to the macroeconomic situation in Turkey. The same line followed by the Income 4 analyst Banco Nuria Álvarez when pointing to the “political and economic instability” of the country.

Despite this, Quinn states that the move “makes sense” because with the current control of 59.85 percent “I was already assuming all the implicit risk of Garanti and there is not much difference in going to control the totality ”.

Analysts Bloomberg Intelligence recalls that its exposure to Turkey has already led to a rating downgrade for the bank by S&P and that it is an “opportunistic” purchase for an attractive price.

Financial sense thanks to the price

Alonso points out that makes “financial sense” and Álvarez comments that lthe multiples are “reasonable”. The experts also share BBVA’s view that solvency remains practically intact.

The CET 1 “fully loaded” ratio closed September at 14.58 percent and the bank noted that it is “comfortably above” the regulatory requirements, 588 basis points more and the impact of Garanti will be 46 basis points.

The takeover makes sense compared to CET 1, which is of good quality and it is time to focus on that it is a good way to deploy part of the excess capital by improving EPS and showing that BBVA’s confidence in Turkey is real. In addition, it can help reduce dependence on Mexico that represented 44 percent of the earnings until September “, exposes the economist of Bloomberg Intelligence Jonathan Tyce.

No option to buy another entity

Of course, the market was focused on a concentration operation with a third party, Sabadell Bank mainly, and the experts consulted point out that this offer “eliminates the possibility of a corporate operation that the market was still discounting and that justified the positive behavior of the price”Says Álvarez.

Tyce also emphasizes that the “risk” of mergers and acquisitions in the Spanish market remains and that a “weak performance” of the price “restricts” financial flexibility of Torres Vila.

And it is that Barclays was the only investment entity in the world that indicated that BBVA could take advantage of the excess capital to increase its position in Garanti.

The purchase of a subsidiary reduces the risk of execution that can occur when buying a third party”, Díaz points out as positive about the takeover bid. Also on the positive side, experts believe that you will be able to continue with a good dividend and share buyback policy. Thus, it has bought half of Garanti for the price at which the complete acquisition of Banco Sabadell was valued.

The shares of Garanti, the most benefited

However, the Turkish entity is the most benefited from this operation if the reaction of its listing on the Istanbul Stock Exchange is taken into account.

The subsidiary’s shares are up more than 10 per cent, to 11.63 pounds, so allThey are still below that offered by BBVA, 12.20 pounds, and with the promotion has already recovered pre-pandemic levels.

The offer is similar to the average consensus target price of 12.57 euros, offering a premium of 15 percent compared to the closing of Garanti on Friday, 24 percent compared to the last 15 days and 34 percent weighted in the last six months. High premiums, the consensus understands, thanks to the depreciation of the Turkish lira.

“But We do not know how far the depreciation of the lira can go. Although it has now benefited BBVA to launch an attractive price, continues to negatively impact the business despite the improvement in the region’s profits through September”, Concludes Díaz.


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