Large European banks like BBVA (NYSE:BBVA),
and large banks in general, have an interesting dilemma these days.
There are definite benefits of scale in banking and almost equally
definite benefits from the diversification that comes from operating
across multiple geographies, but regulators are increasingly looking to
make the biggest banks pay a price for their size and importance in the
form of higher capital ratios (which depress earnings and returns over
time). With that, I believe large multinationals like BBVA, Santander (NYSE:SAN), Societe Generale (OTCPK:SCGLY), and UniCredit (OTCPK:UNCFF)
have to be increasingly on top of the risks and benefits of their
various operations and more willing to pull the weeds to let the flowers
have more space.
A year ago I wasn't very keen about the valuation on BBVA's ADRs,
and the shares have dropped about 25% since then (the local shares are
down about 7%). That said, I did like BBVA quite a bit better than
Santander, and the latter has been even weaker (down about a third over
the same period). With that valuation reset, I'm definitely more
favorably inclined toward BBVA but I wouldn't say that the value makes
it a can't-miss prospect.
Read the full article here:
BBVA's Improving Performance No Longer Fully Reflected In The Price
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