It is one of the classic questions asked by investors who want to open positions in the banking sector and that we are going to try to decipher. Two are the two large banks that are listed in the selective index of national equities and that maintain very similar constants. But that in recent months they have taken some paths with certain differences. To the point that they have almost equaled their valuation on the stock market.
There is another denominator between Santander and BBVA and that is that in both cases they pay dividends to their shareholders. With a profitability of approximately 5% through four annual payments and which are located in the middle scale of the values with these characteristics. For investors who want to build a portfolio of fixed income securities within equities and whatever happens in the equities markets. Being one of its hallmarks for many years.
While on the other hand, these two banks have led parallel lives that have led investors to have many doubts about which security to choose to integrate it into their portfolio. In either case, they are one of the most important blue chips on the Spanish stock market. With a high capitalization and where every day many titles move and change from one hand to another. That is, they have great liquidity, one of the highest within the Ibex 35.
BBVA and Santander: divergences
Stability in the conformation of prices has been the constant that Banco Santander has shown regularly. In recent years it has moved in a range that goes from 3,50 to 6 euros per share, offering greater stability to small and medium investors. Above other proposals offered by national equities. That is, there have been no major revaluations or major losses in value. With the exception of the last few weeks where it is heading towards levels of 3,50 euros after losing almost one unit of the euro in a very short space of time.
Within this context, it can be said that this bank value is more stable than BBVA. At a time when the banking sector is not in the best of positions as it is heavily punished as a result of the low interest rates in the euro zone, which has hurt its business results. Financial analysts even think that it can go down to 3,20 euros, at which levels it would be a real business opportunity. With a potential for revaluation that should be classified as excellent.
BBVA loses 50%
Another very different thing is what is happening to BBVA and that it has not stopped falling since it traded at levels close to 9 euros just a few years ago. In this period of time, 50% of its valuation on the stock market has been left behind. By trading at around 4,50 euros and approaching that of its competitor. Margins have, of course, narrowed and this means that BBVA can be more profitable in the medium and long term. Not surprisingly, it is one of the values that has developed the worst performance in the Ibex 35.
Another aspect that has played against him is the judicial issue in which he can be immersed as a result of the corruption cases that affected the previous leadership. And that without a doubt goes against the interests of the entity in the financial markets. Beyond its exposure to emerging markets, such as Mexico and Turkey, which have not yielded the desired results from investors. Where the selling current is clearly imposing on the buyer. Despite its specific weight that it has in Spanish banking.
Long-term profitable
On one thing both commercial banks do agree and that is that when the problems in the banking sector are resolved and interest rates rise again, they can do better than the rest of the values of the selective index of Spanish equities. But it may be that until this happens we will have to wait many months or even years. Because the two banks have been in a clearly downward trend for several months and it will take a lot of effort to get out of it. Although they are in a clear state of oversold and from this point of view they can be a business opportunity to revalue savings from now on.
They are also undervalued in their price and the good thing they have is they already have little downward journey. From this point of view they are more to buy than to sell. Despite the risk involved in their operations, especially in this general context, which is not very favorable for the banking sector. Where in the short term they can continue to fall and even with some intensity, as has happened this summer. In any case, there will be no choice but to put them on the radar to check when is the right time to open positions. With a volatility that has been another of its common denominators in recent months.
With a high capitalization and where every day many titles move and change from one hand to another. That is to say, they have great liquidity, one of the highest within the Ibex 35. But it may be that until this happens we will have to wait many months or even years.
Comparison in both banks
With respect to Banco Santander, during the first half of the year, the interest margin was 17.636 million euros, 4% more than in the same period of the previous year, while credit and customer funds grew 4% and 6%, respectively, in constant euros (that is, excluding the impact of exchange rates). In the second quarter, the bank increased the number of customers by one million, with Santander now serving 142 million, more than any other bank in Europe and America.
All digital services have been grouped into the new Santander Global Platform unit to drive the strategy. Digital adoption has continued to grow in the semester and there are already 34,8 million customers using digital services of Santander. On average, 240 customers access one of the bank's mobile or digital platforms every second, representing an increase of 28% in the last 12 months. Where, credit quality continued to improve, with a reduction in the delinquency rate of 11 basis points in the quarter, to 3,51%, while the cost of credit remained stable at 0,98%.
Costs in restructuring
With regard to the CET1 capital ratio, it is now 11,30%, 50 basis points more than a year ago, and Santander remains one of the most profitable and efficient banks in the world among its peers, with a return on ordinary tangible capital (RoTE) of 11,7%, and an efficiency ratio of 47,4%. Following the net charge of 108 million announced in the first quarter, the bank has recorded a new charge of 706 million in the second quarter, mainly for costs of restructuring planned in Spain and the United Kingdom (626 million euros), and additional provisions for payment protection insurance (PPI) in the United Kingdom (80 million euros).
These charges caused a fall in attributable profit in the second quarter of 18% year-on-year, up to 1.391 million euros. Excluding those charges, second quarter ordinary profit was 2.097 million euros, 5% more than the same quarter of the previous year: the highest quarterly ordinary profit since 2011, driven by strong credit growth in Latin America, an improvement continued profitability in North America as well as reduced costs in Europe.
BBVA results
As regards BBVA, it obtained a net profit of 2.442 million euros until the second quarter of 2, which represents a variation of -2019% compared to the same period of the previous year, as reported by the company to the National Securities Market Commission (CNMV). In a note, the bank explained that the result has been conditioned by a greater deterioration in financial assets, a consequence of the greater provisioning needs in the United States, Mexico and Turkey, especially in the first quarter.
However, the bank's CEO, Onur Genc, highlighted the "excellent results" obtained by the bank in the second quarter of the year, a period in which profits reached 1.278 million. In year-on-year terms, this quarterly profit was 2,6% more including BBVA Chile, which was sold by the entity in July 2018, although without taking into account the Chilean subsidiary, the result would be 6% higher. In data that have disappointed a large part of the investors who have opted to undo positions in this value of the selective index of national equities, the Ibex 35.
Santander bank is better