April 29, 2024 06:40 GMT
BBVA Results Spread Positive, Strong Revenues
FINANCIALS
BBVA (A3/A/A-) 1Q24 results are positive with a good earnings upgrade on strong revenues, we feel. Credit metrics are more mixed but NPLs are stable and, in banks showing double-digit growth, balance sheet seasoning can be tough to predict.Spreads are c.30bp tighter YTD (c.7bp weaker than €IG banks) whereas the equity has broadly tracked its industry peers. So, without huge expectations already in the spread performance, we can see today being a spread positive.
- Key credit metrics: CET1 is 15bp above expectations (and Dec-23 level, at 12.82%) but loan losses are 5% weaker than expectations and have continued the weakening trend of the prior two quarters (now at 139bp, from 115bp in 4Q23). Mexico, Turkey and LatAm are the big movers here. Non-performers are broadly stable at inline at 3.4%.
- Overall: revenues are around 6% ahead of expectations (around half of the beat is trading profits) and costs are only 4% ahead meaning that weaker loan loss figure is easily absorbed, and net profits still beat by 13%. The beat is geographically broad-based.
- Outlook: this looks positive, overall. Efficiency and returns are ahead of FY24 figures (but 1Q is seasonally strong for most banks) and the slides include the term “on track to clearly exceed” FY24 goals. This appears to be at least a 5% earnings upgrade, in our view. Guidance is now for “double-digit growth” in net profit – consensus is only implying low single-digit.
Conf call is 0830 (London time) at https://streamstudio.world-television.com/gaia/bbva/20240429/en/index.html
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