Market analysts have positively evaluated the half-year results BBVA presented yesterday. The general opinion is that BBVA Group reported solid results that confirm its ability to generate strong rates of growth throughout 2017. The results were better than expected in the principal income statement categories and business areas.
The results presented by BBVA exceeded market expectations in the principal income statement categories and in all business areas. Specifically, net income exceeded average analyst expectations by 7%. The analysts in particular highlighted the solidity and high quality of income, which demonstrates the Group’s ability to generate high rates of organic growth. Some experts have stated that they will increase their results estimates.
One analyst explained his preference for BBVA based on its “attractive franchising concept, ability to take advantage of a dynamic recovery of the Spanish banking system, and continued growth in Mexico and the Turkish banking sector”.
The following aspects of the results were highlighted by the analysts:
1. As regards the Group as a whole:
- Revenue performance, in particular interest rate margins, which exceeded market estimates. Fee income has performed as expected.
- They also highlighted the good loan-loss provision level, which was 6% better than average analyst expectations.
- The analysts saw credit quality performance as positive since the non-performing loan portfolio was reduced significantly.
- They pointed out that BBVA continues to generate capital solidly.
2. and as regards business areas:
- Spanish Banking Activity results (which grew by 8% during the first six months of the year) exceeded analyst expectations, principally due to good fee income performance, good performance in the other income line, and a reduction in write-offs. By contrast, net interest income in the area was below analyst expectations, although some analysts were confident that they will stabilise in the second half of the year.
- BBVA’s United States business was one of the areas most appreciated by the analysts. They emphasised net interest income, stating that good management of interest rate margins and the reduction in provisions were the main profit drivers in the quarter (EUR 166 million).
- Turkey (which had growth of 39.3% during the first six months of the year in constant terms) is another business area that has been well received. Its good net interest income, bolstered by dynamic activity, and the reduction in provisions during the quarter, were seen as especially positive. Analysts, however, remained cautious regarding future performance of the default rate given the complex environment.
- Once again, the analysts praised BBVA’s strength in Mexico. That franchise generated EUR 1.080 billion during the first six months of the year. They in particular applauded the performance of the operating income categories (especially costs) and that there were no signs of a deterioration in asset quality despite high interest rates.
- BBVA’s business in South American also exceeded analyst expectations. They emphasised good income performance, given that the gross margin increased by nearly 14% during the quarter in constant terms.
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