Fitch Ratings maintains BBVA’s rating, at ‘BBB +’, with a stable outlook, after the presentation of the entity’s strategic plan for 2021-2024, as reported this Thursday. The rating agency believes that the purchase of Garanti by BBVA moderately raise your risk, but also its contribution to attributable net profit.
BBVA launched a Public Acquisition Offer (OPA) for the 50.15% that it does not control of Garanti, an operation that Fitch points out fits into the group’s strategy, betting on a market that the entity “knows well.” In that sense, he adds that “it does not change our assessment of BBVA’s business and risk profile”, which already reap the benefits of geographic and business diversification, as well as exposure to volatile emerging markets.
It estimates that the Garanti operation will moderately increase BBVA’s exposure to equities in Turkey, which could increase up to 15%, from 9.5% of its proforma CET1 capital ratio registered by the entity at the end of 2021. Furthermore, the contribution to the entity’s attributable net profit could increase by about 10 percentage points, to 25%.
Fitch notes that the new plan “does not fundamentally change” its view of the entity’s strengths and weaknesses, as it focuses, to a large extent, on leverage growth in its top three markets, Spain, Mexico and Turkey, both in the banking business, with a focus on consumer loans and SMEs, as well as low capital consumption and commissions.
BBVA also foresees enter new and attractive markets through digital investments, such as the launch of its digital banking in Italy, or with direct investments such as Atom or Solarisbank. However, Fith maintains that these investments “are still in an early stage and still require time to scale and become profitable businesses on a sustained basis.”
In general, it considers that this plan is “ambitious” and that it may include some additional remuneration to the shareholder, since the entity would not seek to operate with a CET1 ratio above the target range of between 11.5% and 12%. In this sense, he points out that the maximum impact of the takeover bid for Garanti on BBVA’s full-loaded CET1 ratio would be 46 basis points if finally there is a 100% acceptance of the rest of the shareholders of the Turkish bank. “Including this impact and the share buyback program worth 3,500 million euros, the proforma ratio would be around 12.7%,” according to Fitch.