Seeking Alpha: BBVA's Improving Performance No Longer Fully Reflected In The Price

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.

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BBVA's Improving Performance No Longer Fully Reflected In The Price

Seeking Alpha: Santander Looks Pricey Relative To Its Capital And Growth Prospects

The economy in Spain has been looking a little better and that has led Spanish banking shares to do quite a lot better, with Bankia up close to 120%, CaixaBank up about 90% and the big boys BBVA (BBVA) and Santander (SAN) up around 60%. Credit recovery can be a powerful factor in bank stock appreciation and incoming bad credits in Spain are getting better for Santander. On the other hand, Santander Mexico (BSMX) hasn't been doing as well as I'd hoped, Santander Brasil (BSBR) is losing share, and the company's credit position is still quite weak relative to other large banks. These shares already seem to reflect a lot of optimism about improving interest spreads and loan growth and I don't see much value at these levels.

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Santander Looks Pricey Relative To Its Capital And Growth Prospects