Tuesday, March 28

Mexico overwhelms the optimism of BBVA

The strong recovery in volumes and margins of the Mexican subsidiary of BBVA has led Credit Suisse analysts to raise the target price of the bank of Basque origin.

Specific, Credit Suisse has raised its target price from 5.2 euros to 5.4 euros and it has maintained its ‘neutral’ recommendation after the entity presented results this week that have beaten the market’s consensus perspectives.

Specifically, BBVA closed the year with profits of 4,653 million euros, well above the 1,305 of the previous year and also above the 3,512 of 2019, the year before the coronavirus crisis.

Looking ahead, BBVA has announced that it expects double-digit growth in core revenues due to the increase in volumes, an increase in operating expenses below inflation and a cost of risk of around 100 basis points. .

“We welcome the optimistic tone of the company’s managers regarding the prospects of main income and the strong recovery of volumes and margins in Mexico”, says the report published by Credit Suisse.

Optimism in the analysts who follow the action of BBVA

This is an optimistic view regarding BBVA accounts that coincides with that expressed by other experts.

“We believe that the dynamics of the evolution of the business are positive, both in what is seen in 2021 and what is forecast for 2022, with comfortable capital levels and reiterating the objective of organically creating capital of 1,100 million euros”, he points out. For her part, Nuria Álvarez, an analyst at Renta 4, in another report.

A similar music is played by Rafael Alonso, an expert at Bankinter: “The results are positively surprising in the most important metrics (activity, income and cost of risk) in the main geographical areas (Mexico, Spain, Turkey and South America). The most important of the results is that the ‘guidance’ of the management team for 2022 is positive and that the remuneration to shareholders is attractive”.

An attractive dividend

Specifically, the bank plans to submit to the approval of the general meeting of shareholders the payment in cash of a dividend of 0.23 euros gross per share, to be paid this spring.

This payment is added to the 0.08 euros that the bank paid in October 2021 to add a total of 0.31 euros for the 2021 financial year, the highest dividend per share in cash in the last ten years, which represents a payout 44 percent.

Likewise, BBVA also has a share repurchase plan underway for up to 3,500 million euros.

Credit Suisse analysts welcome this shareholder remuneration, so that their ‘pay-out’ forecast exceeds 40 percent for the 2022-2023 period and they anticipate an additional 10 percent share buyback program.

The market reacts with sales to BBVA’s results

Although, this optimism of the analysts contrasts with the bad reaction of the market to the results, where BBVA receives a strong punishment.

On Thursday, the bank dropped 2.06 percent and this Friday it fell an additional 1.44 percent.

This reduces the annual earnings on the stock market to 6.8 percent, after the 30 percent that the company was revalued in 2021.

In any case, Álvarez believes that the punishment was not due to the results but to the publication of Turkey’s inflation, which has registered levels of 48.7 percent (the highest since April 2002).

“It again raises doubts about the evolution of this franchise, an area that in 2021 contributed 13 percent of the group’s net profit compared to 46 percent in Mexico and 28 percent in Spain,” explains Álvarez.

Still, negative analysts on the stock remain few. 48.5 percent of the consensus recommends buying (16 experts); while 45.5 percent prefer to hold (15 analysts) and only 6.1 would choose to sell (2 professionals).

As for the target price, it stands at 6.53 euros, compared to a current price of 5.61 euros, which gives it an additional potential of 16.2 percent.