EARNINGS PREVIEW: BBVA, Santander Seen Steady In 3Q
23 Outubro 2009 - 2:19PM
Dow Jones News
TAKING THE PULSE: In a tough environment for commercial banks,
Spain's two largest banks are expected to show a steady performance
in the third quarter as they rely on strong lending margin growth
to smooth out rising in loan loss provisions.
Being big and sturdy is helpful in an economic slump, and Banco
Bilbao Vizcaya Argentaria SA (BBV) and Banco Santander SA (STD)
likely continued in the third quarter to attract clients looking to
bank with two of the strongest banks in the world. Both banks also
recently made progress in their capital-raising efforts, easing
concern about their ability to digest the growing pool of
problematic loans.
ANALYST PICKS: Despite a strong run year-to-date by both stocks
– Santander is up 74% and BBVA is up 51% - most analysts continue
to see value in holding both names. Brokers including Morgan
Stanley, JP Morgan, Citi and Nomura reiterated outperform ratings
ahead of results.
*Banco Bilbao Vizcaya Argentaria SA (BBV) -- (Oct. 27)
MARKET EXPECTATIONS: BBVA is expected to report a 6.1% drop in
third-quarter net profit, to EUR1.31 billion, according to a Dow
Jones Newswires poll of 10 analysts, as its loan book continues to
deteriorate. Analysts expect the bank to set aside more funds to
cover loan losses than in the second quarter, reflecting prolonged
recessions in Spain and Mexico.
Iberian operations are expected to remain fairly resilient,
while Latin American operations could post a small increase in
profits. Mexico likely will continue to weigh on earnings and the
contribution from the U.S. will be limited by high impairments. Net
interest income is seen up 10% to EUR3.36 billion, boosted by wider
lending margins and a positive repricing effect.
MAIN FOCUS: After BBVA recently took over failed U.S. bank
Guaranty, investors are wondering whether the bank will stop there
or if this is only the beginning. Tuesday will also be the first
time BBVA's recently appointed chief executive Angel Cano speaks to
analysts and reporters for the first time.
*Banco Santander SA (STD)--(Oct. 28)
MARKET EXPECTATION: Analysts expect Santander to post an 0.2%
decline in third-quarter net profit, to EUR2.2 billion. The bank
likely benefited from its strong position compared to weaker peers
in markets like the U.K. and Spain. In Latin America, weaker local
currencies versus the euro will mask otherwise robust growth.
Brazil is likely to have benefited from cost cutting following the
merger of its assets there, while Mexico is expected to have been
weak.
A Dow Jones Newswires poll of eight analysts calls net interest
income of EUR6.636 billion, up 21% on the year.
MAIN FOCUS: Some further clarification on dividend policy is
expected, following recent press speculation that Santander may
consider a special dividend next year. Investors will also be
looking for an update on the progress of cos-cutting in Brazil and
on the integration of recent purchases in the U.K.
-By Christopher Bjork, Dow Jones Newswires, +34 913958123,
christopher.bjork@dowjones.com
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