Friday, December 21, 2018

BBVA Still Lacking Value-Creation Amidst Non-Stop Challenges

One of BBVA’s (BBVA) best attributes has also proven to be a seemingly never-ending source of challenges. With a diverse mix of banking operations, including strong exposure to multiple emerging markets, there is always something going on with BBVA, and more recently that has taken the shape of numerous challenges to the ongoing growth potential of the bank. While Spain may finally be turning, the U.S. bank cycle is fading, Turkey is in trouble, and BBVA’s very profitable Mexican operations may be facing a serious threat to a high-margin source of revenue.

BBVA is quite likely in better shape as a bank than its stock, which has been on basically a non-stop downward trajectory this year. While a rate hike cycle could be about to begin in Europe, BBVA’s exposure to Europe isn’t all that large and loan growth may prove disappointing irrespective of rates. I do believe these shares are still undervalued now, and perhaps significantly so, but you can find similar undervaluation with ING (ING) and increasingly with many U.S.-based banks and probably encounter less volatility.

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BBVA Still Lacking Value-Creation Amidst Non-Stop Challenges

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