Saying that the banking sector is going through a period of instability and with some concern from investors is a reality. For its main representatives as they are BBVA, Santander or Caixabank. It cannot be forgotten that the profits of these entities have been limited as a consequence of the decrease in the margins of their financial accounts. Partly due to the lower collection that financial institutions are obtaining in their main lines of credit: loans, mortgages and other sources of financing.
This scenario has been caused by the drop in the price of money that has led to the monetary policy developed by the European Central Bank (ECB). And that has led to money in the euro zone being at historic lows, specifically at 0%. Something that has not happened in many decades and that has been a factor that has generated that the benefits in the low have moderated significantly. A fact that has been transferred to the financial results of these companies in recent years.
But they are doubtful that an alarm signal in the financial markets has come from the analysis by the experts of the investment banks. Until has drastically lowered the target price of some of the main national banks. Something that is filled with joy to many small and medium investors. Precisely those who are far from their values. While on the contrary, those who are positioned are showing more nerves than usual. It is not strange, then, that they even consider selling their shares.
BBVA: drops of up to 40%
In any case, one of the most striking news in recent days is that of the entity chaired by Francisco González. Because the German investment bank Berenberg has recommended to its main clients the sale of BBVA shares. Because in effect, in their report they allude to the fact that "hope exceeds reality" with regard to the stock market situation of the Spanish bank.
They also show that the target price of their shares will drop to four euros. In practice, this new scenario that arises represents a drop of 48%. From around 7,50% euros in which it is trading during the last sessions of national equities. A drop that can scare a good part of the shareholders who are present in the company today. With the doubt about what they have to do. If you continue in your positions current or if, on the contrary, the strategy of a massive sale of their shares will be more beneficial for them. Or at least partially in the most defensive profiles.
Has structural problems
One of the problems revealed by the German analysis bank is its weakness when it comes to its business accounts. Specifically, he adds that BBVA "currently has structural problems that are represented by a business model that is excessively leveraged." This incidence would be the trigger for this collapse in the price of its shares from now on. It would also be conditioned by its high exposure to the markets of Turkey and Mexico. Where the presence of the Spanish bank is too high. In addition, another factor to reach this conclusion stems from the high expectations in the income that is being generated in Spain.
On the other hand, it is also of certain importance the strong tensions that the values of this sector may suffer, as a consequence of the uncertainties that are being generated from the European Community (EU). Where the banks are the ones that are developing greater volatility in the evolution of their prices. With the purely political problemstics of the general elections in some countries (Italy, Germany, Austria, etc.) as a background. It is not exactly an encouraging outlook for your interests. To the extent that it can give reason to the predictions of the German entity.
Accounts: earn 70% more
This report, on the other hand, is contradictory to the latest data generated in your business accounts. Because in effect, BBVA closed the first quarter of 2017 with an increase of almost 70% in its net profit, which was close to 1.200 million euros thanks to the contribution of recurring income and the reduction of provisions and also to more moderate expenses. As a result of the bank restructuring in recent years.
Where precisely, its positioning in the Aztec country has been responsible for the business figures provided by BBVA in the last quarter. With profits close to 1.200 million euros, something that had not happened in the preceding seven years. Although it is also revealed in their official accounts that the brick represents their main problem. Because it is still counting money to the financial institution and that according to its managers believe that it will be a situation that will still last "about two or three more years."
From the financial institution they think that these are excellent results since grow in all business areas and that even exceed the expectations created. Where the group's gross credit stood at 431.899 million, 0,8% more, while non-performing loans fell to 4,8% compared to 5,3% in March 2016.
Stable situation on the stock market
Regarding its evolution in financial markets, it is maintaining a moderate upward trend. Moving in a range that goes from seven to eight euros per share. With a fixed and guaranteed distribution of dividends that constitutes one of the best guarantees to convince small and medium investors. With an annual return on savings close to 4%. With payments every quarter of the year and that will go to the current account of the shareholders of the financial institution. But in any case, it maintains a certain stability in national equities and in complete harmony with the evolution of the benchmark index, the Ibex 35.
It is not a security characterized by its high volatility. With differences between its maximum and minimum prices that are not particularly appreciable. Especially if compared with other more aggressive values. For example, the representatives of oil companies, steel industries or telecos, among the most relevant sectors of international equities. Although the abrupt changes are acquiring greater notoriety as a result of the conjunctural panorama of the banking of the old continent. Not surprisingly, Spain is one of the countries most exposed to this trend.
After collapsing in the stock market at the beginning of the economic crisis, its trend has stabilized in recent months. Although they are reaching previous levels, accounted for slightly above the barrier of nine euros per share. But still, has recovered more than 50% of the value of the financial institution. Now it remains to be seen whether you really will be in a position to get the old price.
How can clipping affect?
The drop in its real price can have an undesired effect on the company's shares. Some investors may decide to sell their units (shares) to avoid falling into negative positions. In any case, it will depend on each particular case. And very especially of the term to which the investments are directed: short, medium or long. Because depending on these variables, the strategy to be used will be substantially different. As well as the objectives that investors may consider.
On the contrary, if the predictions of the German entity were confirmed and its shares depreciated by up to 40%, there would be no choice but to vary investor strategy. To the point that BBVA shares would give a clear buy signal. At least if the terms are intended for medium and long periods of stay. Even through aggressive purchases. Because in effect, it would be a real business opportunity in a stable value and that distributes dividends among its shareholders. Another very different thing is that this situation in the end. In this sense, only time will be the judge that gives and takes away reasons.
Buying opportunity
Because the shares of this financial institution below six euros per share is an opportunity that cannot be missed. Not even if the business results do not follow during the next quarters. It cannot be forgotten, on the other hand, that many financial analysts have issued a recommendation to buy shares. They even see this bank as one of the most favorable from the entire sector. Ahead of Santander or Caixabank, among the most relevant.
From this scenario that BBVA can present, one of the best scenarios is to open positions in the lowest tranches of its price. Because in the current ones, they do not allow you to generate a really attractive revaluation potential. Rather, it needs corrections to be made so that buyers re-enter the financial markets.