EUR 850.00 For Business Accounts Only

Morningstar | BBVA has a solid leadership position in Spain.

Banco Bilbao Vizcaya Argentaria is heavily leveraged to the fortunes of Spain and Mexico, which make up about 60% of earnings. The bank seeks a balance between emerging- and developed-markets deposits and has expanding opportunities in the United States and Turkey. In Mexico, we consider the market to have strong growth prospects, and BBVA is well positioned to increase loans at double-digit rates. The country benefits from the ongoing economic strength in the U.S. Furthermore, we believe this market is one of the least penetrated banking systems in the world, with a loan/GDP ratio in the 30s. We expect penetration levels to increase over the next five years, thanks to continued pressure by the government to encourage lending growth and further market consolidation. BBVA has a world-class efficiency ratio in the 30s in the market and is earning a return on equity of 30%-plus.In Spain, we see the environment as improving. We still expect falling loan volume to be largely offset by wide net interest margins. In our view, bank lending volume should stabilize, and earnings should improve as impairments ease on the real estate lending portfolio. We anticipate incremental upside on net interest margin, thanks to lower funding costs, as new Spanish deposits are being funded at 0.2%. Finally, we expect BBVA's Spanish real estate portfolio to be run off within the next few years, ridding the bank of EUR 9 billion in unprofitable assets.The U.S. and Turkey remain solid opportunities for the bank. The U.S. economy is in the midst of a solid recovery, providing opportunities for BBVA to lower its cost structure, as its U.S. operations have an efficiency ratio about 64%. In Turkey, lending and deposits are growing at double-digit rates, and the bank is highly efficient, with a 40% efficiency ratio. BBVA will need to continue inbounding deposits to match its lending, as obtaining capital from the markets for Turkey may become more challenging in the near term.