Weakness In Spain And The U.S. Continues To Weigh On BBVA

While Spain's BBVA (NYSE:BBVA) has looked undervalued for a while on the basis of what the company could earn in a long-term recovery scenario, it has been a value trap for a while as weakness in its Spanish and American businesses sap the momentum. The shares are down slightly from when I last wrote on them, slightly underperforming Santander (NYSE:SAN) and underperforming Canada's Bank of Nova Scotia (NYSE:BNS), which also has a large Latin American business, by a more significant amount.

Spain's real estate market seems to be improving and BBVA's Latin American markets should see growth improve in 2017, but the prospects for better rates, spreads and loan demand in Spain and the U.S. aren't great, and the bank's growth is likely to continue to depend heavily on Mexico. I've trimmed back my long-term assumptions again, reducing my long-term earnings growth target to 7-8%. With that, the fair value declines to around $7.25 and BBVA looks more like an "okay" prospect than a compelling pick.

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Weakness In Spain And The U.S. Continues To Weigh On BBVA