BBVA's target price is lowered to 4 euros

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Saying that the banking sector is going through a period of instability and with some concern on the part of investors is a reality. By its main representatives as they are BBVA, Santander or Caixabank. It should not be forgotten that the profits of these entities have been limited as a result of the reduction of 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.

But it is doubtful that a red flag in financial markets comes from the analysis of investment bank experts. until ha bajado drásticamente el precio target of some of the main national banks. Something that fills many small and medium investors with joy. Exactly those that stray 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 trading their stocks.

BBVA: falls of up to 40%

Sea cual sea el caso, una de las novedades más llamativas de los últimos días es la de la entidad que preside Francisco González. Debido a que el banco de inversión alemán Berenberg ha recomendado a sus principales clientes el sale of BBVA shares. Because in effect, in their report they allude to "hope exceeds reality" regarding 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 occurs represents a drop in the 48%. Desde alrededor del 7,50% de euros a los que se cotiza durante las últimas sesiones de renta variable nacional. Una caída que puede asustar a buena parte de los accionistas que hoy están presentes en la empresa. Con la duda sobre lo que disponen que hacer. Ya sea para continuar en sus posiciones actuales o si, por el contrario, la strategy de una venta masiva de sus acciones les resultará más beneficiosa. O al menos parcialmente en los perfiles más defensivos.

Has structural problems

One of the problems that the German analysis bank reveals is its weakness when it comes to its commercial accounts. Specifically, he adds that BBVA "today has structural problems that are represented by an excessively leveraged business model." 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. At the same time, another factor to reach this conclusion comes from the high expectations in the income that is being generated in Spain.

Por otra parte, además es de cierta relevance las fuertes tensiones que pueden sufrir los valores de este sector, como resultado de las incertidumbres que se están generando desde la Comunidad Europea (UE). Donde los bancos son los que están desarrollando mayor volatilidad en la evolución de sus precios. Con el purely political problemsgeneral elections in some countries (Italy, Germany, Austria, etc.) as a backdrop. It is not exactly an encouraging prospect for your interests. To the extent that you can give reason to the predictions of the German entity.

Accounts: earn one more 70%

This report, on the other hand, is contradictory with 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 decrease in provisions and also to more moderate expenses. As a consequence of the bank restructuring in recent years.

Donde exactamente, su positioning en el país azteca ha sido el responsable de las cifras de negocio aportadas por BBVA en el último trimestre. With profits close to 1,200 million euros, something that had not happened in the previous seven years. Even though it is also revealed in their official accounts that the brick represents their main problem. Because it continues to count 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 exceeds the expectations created. Where the group's gross credit stood at 431,899 million, 0.8% more, while delinquency fell to 4.8% compared to 5.3% in March 2016.

Stable situation in the stock market

Regarding its evolution in financial markets, it maintains a moderate upward trend. Moving in a range that goes from seven to eight euros per share. With a fixed and guaranteed dividend distribution 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 whatever the 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 fundamentally appreciable. Above all if compared to other more aggressive values. Como a modo de ejemplo, los representantes de las compañías petroleras, siderúrgicas o de telecomunicaciones, entre los sectores más relevantes de la renta variable internacional. Aún cuando los cambios bruscos están adquiriendo mayor notoriety como resultado del panorama coyuntural de la banca del viejo continente. No en vano, España es uno de los países más expuestos a esta tendencia.

After collapsing in the stock market at the beginning of the economic crisis, its trend has stabilized in recent months. Even though they are reaching previous levels, they are slightly above the barrier of nine euros per share. But still, has recovered more than 50% of value from the financial institution. Now it remains to be seen if it will truly be in a position to achieve the previous price.

How can clipping affect?

The fall in its real price can have an unwanted effect on the company's shares. Some investors may choose to trade their holdings (stocks) to avoid falling into negative positions. Whatever the case, it will depend on each particular case. And very fundamentally of the term to which the investments are directed: short, medium or long. Because depending on these variables, the strategy to use 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 the investment strategy. To the extent 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 true business possibility in a stable value and that distributes dividends among its shareholders. Another very different thing is that this situation in the end. For this purpose, only time will be the judge who gives and takes away reasons.

Possibility of purchase

Because the shares of this financial institution below six euros per share is a possibility that cannot be missed. Not even if business results don't follow for the next few quarters. On the other hand, it cannot be forgotten that many financial analysts have issued a recommendation to buy shares. They even see this bank as one of the most favorable of the whole sector. Ahead of Santander or Caixabank, among the most relevant.

Based on this scenario that BBVA can present, one of the best scenarios is to open positions in the lower price ranges. Because in the current ones they do not allow generating a truly attractive revaluation potential. Rather, it requires corrections to be made so that buyers regain access to financial markets.