Company Reports

SpaceX has filed for one of the largest IPOs in history, with Anthropic and OpenAI expected to follow in the most significant fundraising cycle in years. No European bank holds a lead equity arranger role; that honor belongs to five US banks.

We believe that Banco Bilbao Vizcaya Argentaria will generate higher midcycle profitability than its peers, supported by its market-leading positions in attractive banking jurisdictions, notably Mexico. Due to its significant emerging market presence, investors often perceive BBVA as riskier than other European banks. There are, however, several mitigating factors for any higher country risk. First, BBVA tends to hold a dominant position in the countries it operates in, with significant market shares in low-cost demand deposits, supporting profitability. Second, BBVA is a retail and commercial bank with limited exposure to volatile investment banking activities. Third, diversification across different geographies reduces earnings volatility, and BBVA's earnings have historically been more stable than those of most other European banks we cover. We also highlight that BBVA's decentralized funding model limits its exposure to the equity investment in each subsidiary.

BBVA’s third-quarter earnings fell 4% year on year, but stripping out currency hedging, underlying performance was stronger. Stronger-than-expected loan growth lifted net interest income despite margin pressure from lower interest rates. Credit costs rose, driven by higher provisions in Turkey.

We believe that Banco Bilbao Vizcaya Argentaria will generate higher midcycle profitability than its peers, supported by its market-leading positions in attractive banking jurisdictions, notably Mexico. Due to its significant emerging market presence, investors often perceive BBVA as riskier than other European banks. There are, however, several mitigating factors for any higher country risk. First, BBVA tends to hold a dominant position in the countries it operates in, with significant market shares in low-cost demand deposits, supporting profitability. Second, BBVA is a retail and commercial bank with limited exposure to volatile investment banking activities. Third, diversification across different geographies reduces earnings volatility, and BBVA's earnings have historically been more stable than those of most other European banks we cover. We also highlight that BBVA's decentralized funding model limits its exposure to the equity investment in each subsidiary.

Banco Sabadell shareholders will have the opportunity to decide on BBVA's offer from Sept. 8 after it cleared the last regulatory obstacles. BBVA updated its offer to adjust for dividends paid since it made the initial offer. The offer now also includes a small cash component.

Banco Bilbao Vizcaya Argentaria delivered generally positive second-quarter results and modestly raised full-year guidance. While quarterly net income declined year over year, first-half earnings were 9% higher than the comparable 2024 period. Shares rose nearly 9% at the market open on July 31.

The Spanish government has approved Banco Bilbao Vizcaya Argentaria’s takeover of Sabadell—but only under strict terms: both banks must remain legally and operationally separate for at least three years, no layoffs are allowed, and branch networks must be preserved.

We believe that Banco Bilbao Vizcaya Argentaria will generate higher midcycle profitability than its peers, supported by its market-leading positions in attractive banking jurisdictions, notably Mexico. Due to its significant emerging market presence, investors often perceive BBVA as riskier than other European banks. There are, however, several mitigating factors for any higher country risk. First, BBVA tends to hold a dominant position in the countries it operates in, with significant market shares in low-cost demand deposits, supporting profitability. Secondly, BBVA is a retail and commercial bank with limited exposure to volatile investment banking activities. Thirdly, diversification across different geographies reduces earnings volatility and BBVA's earnings have historically been more stable than most other European banks we cover. We also highlight that BBVA's decentralised funding model limits its exposure to the equity investment in each subsidiary.

BBVA booked a 23% increase in net attributable profit for the first quarter of 2025, 11% ahead of its consensus. Healthy fee growth, strong trading results, and good cost control offset a 2% decline in net interest income.

We believe that Banco Bilbao Vizcaya Argentaria will generate higher midcycle profitability than its peers, supported by its market-leading positions in attractive banking jurisdictions, notably Mexico. Due to its significant emerging market presence, investors often perceive BBVA as riskier than other European banks. There are, however, several mitigating factors for any higher country risk. First, BBVA tends to hold a dominant position in the countries it operates in, with significant market shares in low-cost demand deposits, supporting profitability. Secondly, BBVA is a retail and commercial bank with limited exposure to volatile investment banking activities. Thirdly, diversification across different geographies reduces earnings volatility and BBVA's earnings have historically been more stable than most other European banks we cover. We also highlight that BBVA's decentralised funding model limits its exposure to the equity investment in each subsidiary.

We increase our fair value estimate for narrow-moat Banco Bilbao Vizcaya Argentaria, or BBVA, by 26% to EUR 14.50 from EUR 11.50, primarily due to a 1% reduction in our estimated cost of capital to 11%. This adjustment reflects a lower country risk premium for BBVA's Turkish business as we see signs of inflation normalization and anticipate a gradual economic recovery. However, we have raised our Morningstar Uncertainty Rating to High from Medium as we are concerned about the impact of higher tariffs on the Mexican economy. BBVA derives over 50% of its profits from Mexico. BBVA’s bid for Spanish rival Banco Sabadell complicates the picture further.

We believe that Banco Bilbao Vizcaya Argentaria will generate higher midcycle profitability than its peers, supported by its market-leading positions in attractive banking jurisdictions, notably Mexico. Due to its significant emerging market presence, investors often perceive BBVA as riskier than other European banks. There are, however, several mitigating factors for any higher country risk. First, BBVA tends to hold a dominant position in the countries it operates in, with significant market shares in low-cost demand deposits, supporting profitability. Secondly, BBVA is a retail and commercial bank with limited exposure to volatile investment banking activities. Thirdly, diversification across different geographies reduces earnings volatility and BBVA's earnings have historically been more stable than most other European banks we cover. We also highlight that BBVA's decentralised funding model limits its exposure to the equity investment in each subsidiary.

Narrow-moat Banco Bilbao Vizcaya Argentaria continued its strong performance in fourth-quarter 2024, booking an exceptional 2024. The bank reported a record net attributable profit of EUR 10.1 billion, a 25% increase from 2023 and exceeding our expectations, despite a 7% sequential decline in the fourth quarter. Full-year profit growth was driven by strong lending activity (14% year over year) while the nonperforming loan ratio improved to 3% from 3.4% over the previous two years. Efficiency gains also played a role as increased digitalization and branch closures contributed to a 226-basis-point improvement in the group’s efficiency ratio, bringing it down to 40%. We maintain our EUR 11.50/share fair value estimate and see shares as slightly undervalued.

Banco Bilbao Vizcaya Argentaria is in a strong position, benefiting from a solid customer spread as interest rates remain high, while lending activity shows signs of a recovery. Spanish consumer and midsize companies demonstrated healthy activity, driving 1.5% loan growth in Spain compared with negative numbers last year and resulting in a 23% year-over-year increase in net attributable income for Spain in constant currency (euros). In Mexico, net attributable income accounted for 55% of total income this quarter, with a 10% year-over-year increase in constant currency (euros), driven by 12% loan growth and a low cost/income ratio of 30%. Together, Mexico and Spain generated approximately 90% of net attributable income over the past three quarters and BBVA maintains an optimistic outlook for both regions with favorable growth prospects. Third-quarter results exceeded most of consensus estimates compiled by the company and we maintain our fair value estimate of EUR 11.50 per share, viewing shares as undervalued.

Narrow-moat Banco Bilbao Vizcaya Argentaria reported an excellent second quarter of 2024 with net attributable profit reaching nearly EUR 2.8 billion, up 29% quarter over quarter and 37% year over year in constant euros and also 14% ahead of the consensus estimate of analysts polled by the bank. However, the earnings beat was primarily driven by exchange-rate hedges. Operating results were in line with expectations. BBVA's Spanish operation is performing better than expected, and management has slightly increased revenue guidance. BBVA is confident it can replicate its first-half performance in the second half of 2024, implying a net profit of nearly EUR 10 billion, 14%, and consensus. We wholeheartedly agree with management that a valuation equal to its tangible book value falls far short of reflecting the 20% return on tangible equity that BBVA generated for the first half of 2024. We continue to view BBVA as undervalued. We were puzzled by the market's adverse reaction to the results, with the shares trading down nearly 5% on the day.

Narrow-moat Banco Bilbao Vizcaya Argentaria confirmed on May 1 that it proposed a merger to the board of Banco Sabadell, Spain's fourth-largest bank. While we believe the strategic rationale for the deal is compelling, we think BBVA is offering a full price. We estimate that BBVA's all-share offer values Sabadell at 0.9 times its latest tangible book value. This valuation seems about right if we consider that PitchBook consensus expects a return on tangible equity of around 11% over the next three years. Still, it does not leave much on the table for BBVA shareholders. The upside to BBVA shareholders will primarily come from synergies. BBVA expects annual synergies but will incur EUR 1.5 billion in cumulative restructuring costs to achieve this. Our narrow moat rating for BBVA relies mainly on the strength of its highly profitable Mexican operation. One can argue that the dilution of the Mexican contribution narrows BBVA's moat. However, the deal will strengthen BBVA's competitive position in Spain significantly, which could force us to reconsider our previous view that BBVA does not possess a moat in its Spanish business. Until there is greater clarity, we will maintain our EUR 11.50 per share fair value estimate.

Narrow-moat Banco Bilbao Vizcaya Argentaria, or BBVA, reported a net attributable profit of EUR 2.2 billion for the first quarter of 2024, comfortably ahead of the EUR 2 billion that the consensus of analysts polled by BBVA expected. Contrary to our expectations, net interest income continued its upward trend. BBVA also increased its 2024 guidance as it now expects double-digit net attributable profit growth driven by higher-than-expected net interest income growth from its Spanish operations. We have increased our fair value estimate to EUR 11.50 per share from EUR 10.70 per share to reflect the better-than-expected results and higher guidance.

We believe that Banco Bilbao Vizcaya Argentaria will generate higher midcycle profitability than its peers, supported by its market-leading positions in attractive banking jurisdictions, notably Mexico. Due to its significant emerging market presence, investors often perceive BBVA as riskier than other European banks. There are, however, several mitigating factors for any higher country risk. First, BBVA tends to hold a dominant position in the countries it operates in, with significant market shares in low-cost demand deposits, supporting profitability. Secondly, BBVA is a retail and commercial bank with limited exposure to volatile investment banking activities. Thirdly, diversification across different geographies reduces earnings volatility and BBVA's earnings have historically been more stable than most other European banks we cover. We also highlight that BBVA's decentralised funding model limits its exposure to the equity investment in each subsidiary.

We believe that Banco Bilbao Vizcaya Argentaria will generate higher midcycle profitability than its peers, supported by its market-leading positions in attractive banking jurisdictions, notably Mexico. Due to its significant emerging market presence, investors often perceive BBVA as riskier than other European banks. There are, however, several mitigating factors for any higher country risk. First, BBVA tends to hold a dominant position in the countries it operates in, with significant market shares in low-cost demand deposits, supporting profitability. Secondly, BBVA is a retail and commercial bank with limited exposure to volatile investment banking activities. Thirdly, diversification across different geographies reduces earnings volatility and BBVA's earnings have historically been more stable than most other European banks we cover. We also highlight that BBVA's decentralised funding model limits its exposure to the equity investment in each subsidiary.

After incorporating Banco Bilbao Vizcaya Argentaria's strong finish to fiscal 2024 and better-than-expected guidance into our model, we raise our fair value estimate by 16% to EUR 10.70/share. We now believe that net interest margins will be more resilient, resulting in flat revenue growth despite our expectation of rate cuts in the second half of 2024. Banco Bilbao’s dynamic approach to managing interest-rate risk has paid off handsomely over the current interest-rate cycle. Its hedging strategy increased its interest-rate sensitivity when rates were low, allowing Banco Bilbao to benefit from increasing rates. With rates now set to decline, Banco Bilbao has lowered its interest rate sensitivity significantly, which should protect its NIM. We expect loan-loss provisions to increase somewhat, with Turkish credit losses set to normalize. However, we still view Banco Bilbao’s credit quality as sound. We do not foresee the cost/income ratio improving as revenue growth prospects are constrained. Banco Bilbao’s high profitability will continue to support robust organic capital generation and we bake in annual share buybacks of around EUR 2 billion over the next three years in our model.