Net profit to amount to €1.3bn in 2Q18e.
BBVA will release its 2Q18 results on Friday, July 27th. An audio–webcast will be held at 8.30 am, on the BBVA Investor Relations webpage shareholdersandinvestors.bbva.com.
We estimate that the net group profit may amount to €1.3bn, 7.6% above the consensus figure. Net interest income may decline –2.8% yoy, to €4.4bn, fees may increase +3.6% yoy, to €1.3bn and gross income would fall –1.7% yoy, to €6.2bn, mainly due to lower trading gains and the larger payment to the Single Resolution Fund (€110–120mn). Costs may decline –6.9%, to €3.0bn leading to a pre–provision profit of €3.3bn, +8.6% above the consensus figure. Cost of risk will be approximately 0.9% of loans (annualised) or €0.9bn and non–recurrent items would amount to €0.1bn. All in, profit before taxes may increase +13.6% yoy, to €2.2bn and net group profit would finally rise +17.6% yoy, to €1.3bn. The group will book the €640 of capital gains from the Chilean bank divestment in 3Q18.
The never–ending story: Good operating results shadowed by the negative forex impact.
The story repeats itself once again: Both Turkey and Mexico are showing extremely healthy and strong operating trends but the evolution of the Turkish lira and the Mexican peso masks these trends. In average terms, the Mexican peso declined –11.7% yoy and –0.4% qoq, and the Turkish lira –24.4% yoy and –9.9% qoq. In addition, the macroeconomic adjustment in Turkey, where forecasts have been revised downwards, may penalise its cost of risk due to the IFRS 9 expected loss criterion.
Target price revised to €7.61
We have revised downwards both our earnings estimates and our December 2018e target price. Our 2018e net group profit has been cut by –7.2% to include a higher currencies depreciation than previously expected. 2019e and 2020e earnings have also been reduced by –0.5% and –2.2%, respectively. Consequently, our target price has been trimmed to €7.61 (from €8.18). We maintain our Buy recommendation because, even assuming a new tax in Spain, the potential upside is adequate. According to our estimates, a €100mn levy may erode a 2.0% of our target value.
Banco Bilbao Vizcaya Argentaria is an international financial group, engaged primarily on providing banking services and consumer finance to private individuals and businesses in Spain and Portugal; providing real estate activity in Spain; providing services to international companies and investment banking, capital markets and treasury management services to clients; and providing the banking, insurance and pension businesses in Mexico and the U.S., as well as in South America.
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