On July 30 BBVA reported a €1.29 billion profit in the 2Q of 2021, excluding non-recurring impacts. This figure is 35 percent higher than consensus estimates by analysts, who view the strong set of results and forecast improvements, particularly for CoR in main business areas, as upbeat.
All operating units recorded results above analysts’ expectations in the second quarter, especially Spain (thanks to a higher recurring income and a lower cost of risk), Mexico and Turkey (mainly due to a lower than expected CoR). In general, analysts note the Group's solid second quarter results, the forecasts for fee income improvement in Spain and the CoR in Spain, Mexico and Turkey. Analysts are increasing their EPS estimates as a result of this.
Regarding the cost of risk, the positive biases that emerged three months ago have been confirmed with the indicator's good performance in the second quarter of the year. The bank's management now expects it to be around 110 basis points at Group level for 2021, with estimated levels below 40 basis points in Spain (compared to the previous estimate of around 50 basis points), around 300 basis points in Mexico (compared to the previously estimated 380) and below 150 in Turkey (around 180 basis points forecasted three months ago).
In the case of recurring revenues in Spain, its semester growth at 4 percent stands out compared to the same period last year. This solid performance, largely supported by commissions linked to the area's activity, justifies that BBVA's forecast for net commissions has risen from a high single-digit growth environment (somewhat below 10 percent) to a medium double-digit one ( around 15 percent) for 2021. However, the forecast for net interest income is maintained, with an estimated decrease of between 1 percent and 2 percent for the year.
Analysts point to management's confidence for recurring revenue in Mexico thanks to the dynamism of cards and commercial activity, as well as the positive impact of interest rates that will become more significant in 2022. In Turkey, analysts noted the strong activity in the second quarter and the upward bias to the current mid-teens TL loan growth guidance.
Regarding capital, analysts highlight the message from the bank's management that regulatory impacts are not expected on the fully-loaded CET1 ratio for the remainder of 2021, and that they would be limited in 2022 and 2023.
Moving beyond the excess capital after the sale of the US business to PNC and the up to 10 percent buyback of the Group's shares¹, expected to start in the fourth quarter of the year, analysts reflect on the words of BBVA CEO Onur Genç affirming that the objective in all cases is to create value for the shareholder.
The share price's evolution after the results presentation has been positive, continuing an improved performance in the Stoxx Europe 600 Banks index. On the day of results presentation (July 30) BBVA experienced a better relative performance (BBVA, -0.02 percent; Stoxx Banks, -0.93 percent), which lasted for subsequent sessions, with a BBVA increase of 2.92 percent, compared to a 0.11 percent decrease in Stoxx Banks between July 30 and August 3. As for value activities, which have been low as in the rest of the sector, volumes have rebounded to average levels for the year.
¹ Any decision on a repurchase of ordinary shares would require supervisor and governing bodies authorization. The final percentage of shares subject to the buyback (up to a maximum of 10%) will be determined depending on different factors, including BBVA share price during the buyback period.
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