The banking sector closes a year marked by increases in interest rates as a general boost to results. BBVA has been the most awarded on the Stock Market, with a revaluation of 46.2%. It is also the entity with the best evolution since the pandemic, accumulating an increase of almost 290% since the minimum of 2020. This year it has made history in its stock market history by not having any sales advice. “The rise of the Ibex in 2023 is explained by the banks, which have had the tailwind of rates. BBVA has also benefited from Mexico, and is expected to continue to maintain the advantage next year,” says Alberto Roldán, general director of Metagestion.
The bank has had a profit growth of 24% as of September (38% more in constant euros, without taking into account the currency effect), and Mexico and Spain have been the main drivers of the group's profits, since they contributed the 55% and 29%, respectively. Furthermore, Turkey is no longer a burden and has accounted for 5% of the balance. Citi has precisely placed BBVA on its list of favorite stocks for 2024, and among the attractions it contemplates is “the good evolution of the Mexican market and better-than-expected performance of the business in Spain.”
Meanwhile, Morgan Stanley considers that BBVA “may be close to making a peak in these countries, which together with higher RWA [activos ponderados por riesgo]could limit the repurchase of shares starting next year”, which is why it maintains the recommendation the same as the market.
More generally, Moody's highlights the bank's positive aspects after confirming the A3 rating and stable outlook. Its decision is due to “the strength of its business model, supported by geographical diversification in markets with different credit cycles and rates, and by its business mix, highly oriented towards retail and commercial banking, which results in a sustainable generation of profits and low volatility thereof throughout the cycle.”
The rating agency is confident that “the accumulation of problematic loans will likely remain contained for the group,” despite the deterioration in household purchasing power due to the increase in rates and inflation, as well as corporate margins. “BBVA's asset quality ratios have been much stronger than initially anticipated, and solvency levels have steadily improved in recent years, supported by strong internal capital generation and benefiting from considerable capital gains from the sale of its US unit in 2021″.
In line with what Moody's stated, Santander Corporate & Investment analysts say that, “apart from the positive impact of the cyclical boost to profitability due to higher rates, we believe that BBVA's performance is supported by a good efficiency ratio, which we value as a competitive advantage.” The firm's overweight advice reflects that “credit risk management is conservative and results in comparatively robust asset quality ratios,” which provides “strength to face a possible deterioration in economic conditions in some of its main markets.
For its part, Barclays points to “a pause” in the sector for 2024 due to the foreseeable drop in the price of money and the extension of the Government tax. For BBVA, it has the recommendation of overweighting Mexico and Turkey and “disciplined shareholder remuneration.” Among the possible risks are a greater than expected impact on the bank's results due to inflation in Argentina and Turkey, and the victory of Javier Milei, which may “have consequences on the way it operates in the country.”
More than 10,200 million distributed among its shareholders since 2021
Remuneration. Last October, BBVA paid an interim dividend against 2023 results of 0.16 euros, 33% more than the previous year. It also represents the largest cash payment on account in the bank's history. The entity has established a pay out of between 40% and 50% of the profit. Also in October it launched the execution of a new share buyback program of 1,000 million, which ended at the beginning of this month and which is considered “extraordinary remuneration; that is, in addition to the ordinary dividend distribution.” Since 2021, it has distributed more than 10.2 billion to its nearly 800,000 shareholders, including the latest payments. With the current price it offers a coupon of 5.71%. The securities have a potential increase of 16% over the target price of 9.58 euros established by analysts.
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