Wednesday, August 17

The market harshly punishes BBVA’s commitment to Turkey

BBVA shares lost more than 13 percent in the last six sessions, after the presentation of the strategic plan and the takeover by Garanti. The collapse of the Turkish lira to new all-time lows has been the finishing touch that placed the titles against the ropes.

While the consensus of analysts has been moving upwards with their valuations on BBVA, the market does not finish seeing it clearly and the downward pressure continues to increase.

This dissonance between experts and investors is usually very frequent. In fact, it is the same that was seen with the results of Banco Santander or those of Repsol.

The biggest drop in the lira in two decades leaves BBVA trembling

The truth is that the market’s focus shifted again for the umpteenth time to the Turkish lira, which sank 13 percent and marked its biggest drop in two decades. So far this year, the currency is down 40 percent against the dollar.

“The actions of BBVA could underperform in the short term, as the increasing volatility of the Turkish lira makes Garanti’s euro valuation more uncertain, “said analysts at Morgan Stanley.

As explained to in Bloomberg Intelligence, the fall of the lira in this last quarter alone (which is around 30 percent) may have reduced the capital of the six largest Turkish banks by an average of 130 basis points, which is equivalent to about 3 billion dollars.

This is an added problem for all financial entities that operate in Turkey, but especially for BBVA, who redoubled his commitment to Guarantee at the worst possible moment from a macroeconomic point of view.

“The takeover has been a disappointment for many investors, who may not yet be able to see the potential that this acquisition could have. It is complex in a context of lower interest rates, “he said. Jesus Reglero, teacher of OBS Business School, in the closing markets podcast of

The effect on consumers

In the opinion of AdjustThe stock markets look at the short term and discount these circumstances, even when the bank’s bet is for the long term. The market does not even forgive that the bank has 75% hedging the impact of the currency on the profit and loss account.

In fact, no matter how many coverages there are, there are also reasonable grounds for concern. The entity can hedge the currency but cannot force Turkish consumers to borrow when they are increasingly impoverished by the currency and the rise in prices.

The downward spiral of interest rates driven by the president Erdogan Not only has it sunk the lira, it has also given free rein to inflation, which is already at 20 percent.

Lower volume of credits

“It is possible that with rising inflation purchasing power will be lost, since people will buy less and ask for fewer loans,” he admitted. Nuria Alvarez, Renta 4 Banco analyst. On the contrary, “the penetration of banking is not so great and there is a large part of the population that still does not have a bank account,” said this expert.

For this reason, the sources consulted assume that credit volumes will not be able to grow at the rate of 18 percent this year, but they will not collapse either. As calculated Alvarez, the volume of credit in 2022 will be 8 percent and 4 percent in 2023.

The underlying problem continues to be the lira and inflation, which will not give up. “Inflation will drive the depreciation of the lira. And a weaker lira will fuel inflation again. This is a spiral, ”he said. Ibrahim Turham, former governor of the Turkish central bank.

And it is not the best news for the market. “Despite the growth potential that Turkey presents as a region, political instability and the macroeconomic situation often generate uncertainty for investors,” recalled analysts from Rent 4 Bank.

BBVA defends critical media

After the falls of the last sessions, the price of BBVA takes a break this Wednesday and moves at 5.32 euros. But the bullish channel in which it has been moving since February is more than discussed.

In fact, the value tries to recover the lost support of 5.35 euros, an area that “is key for the evolution of the price in the short term,” he said. Jose Luis Herrera, Analyst at Global Investment Bank (BIG).

Just a few weeks ago, analysts saw the attack on 6.6 euros possible, given the strength shown by the trend of BBVA. Now, it’s time to rebuild the progress after the Turkish scare. For that, it will be important that the price tie the 5.35 euros in weekly closing.

With everything in Morgan Stanley consider that the actions of BBVA “will be under pressure” until the lira “shows some stability” or the result of the takeover by Garanti is clarified.

Following the falls, at 5.22 euros, there is the reference of the average of 200 sessions on the daily chart, the support reference that long-term investors look at the most. Losing it would complicate the picture, because all the sensitive areas are just around the corner.