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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 in recent months they have taken some paths with certain differences. To the point that they have almost matched 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 that 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 his hallmarks for many years.
Mientras que por otra parte, estos dos bancos han llevado vidas paralelas que han llevado a los inversores a tener muchas dudas sobre qué valor seleccionar para integrarlo en su cartera. Sea cual sea el caso, son uno de los blue chips más importantes de la Bolsa española. Con una alta capitalización y donde cada día se mueven y cambian muchos títulos de una mano a otra. Dicho de otra forma, disponen una gran liquidez, una de las más altas del Ibex 35.
BBVA and Santander: divergences
In this context, it can be said that this bank value is more stable than that of BBVA. At a time when the banking sector is not in the best position as it is heavily hit by 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, levels at which it would be a real business possibility. With upside potential that should be rated excellent.
BBVA loses the 50%
Another very different thing is what is happening to BBVA and that it has not stopped falling since it was trading at levels close to 9 euros just a few years ago. In this period of time, the 50% of its stock valuation has fallen by the wayside. At this time, it is trading at around 4.50 euros and approaching that of its competitor. Margins have definitely 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 may be immersed as a result of the corruption cases that affected the previous leadership. And that undoubtedly 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 imposed on the buyer. Despite the specific weight it has in Spanish banking.
Long-term profitable
Both commercial banks do agree on one thing 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 securities in the selective index of Spanish equities. But it may take many months or even years for this to happen. Because the two banks have been in a clear downward trend for several months and it will take a lot of effort to get out of it. Even when they are in a clear state of oversold and from this point of view they can be a business possibility to revalue the savings from now on.
They are also undervalued in their price and the good thing they have is that they already have little way down. From this point of view they are more to buy than to market. Despite the risk involved in its operations, mainly in this general environment, which is not very favorable for the banking sector. Where in the short term they can continue to fall and even with a certain intensity, as has happened this summer. Whatever the 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. In other words, 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 on both banks
Regarding Banco Santander, throughout the first semester of the year, the interest margin was 17,636 million euros, 4% more than in the same period of the previous year, while loan and customer resources 4% and 6% grew, respectively, in constant euros (in other words, excluding the impact of exchange rates). In the second quarter, the bank increased the number of clients by one million, and Santander now serves 142 million, more than any other bank in Europe and America.
Todos los servicios digitales se han agrupado en la nueva unidad Santander Global Platform para mejorar la strategy. La adopción digital ha seguido creciendo en el semestre y ya hay 34,8 millones de clientes que usan digital services of Santander. On average, 240 clients 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 decrease in the delinquency rate of 11 basis points in the quarter, to 3.51%, while the cost of credit remained stable at 0.98%.
Restructuring costs
Regarding the capital ratio, CET1 now stands at 11.30%, 50 basis points more than a year ago, and Santander continues to be one of the most profitable and efficient banks in the world among its competitors, with a return on capital Ordinary tangible (RoTE) of 11.7% and an efficiency ratio of 47.4%. After 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 expenses of restructuring planned in Spain and the United Kingdom (626 million euros), and supplementary provisions for payment protection insurance (PPI) in the United Kingdom (80 million euros).
These charges led to a fall in attributable profit in the second quarter of 181T1T 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 last year: the highest quarterly ordinary profit since 2011, driven by strong credit growth in Latin America, a continuous improvement of 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 2019, which represents a variation of -3,71% compared to the same period of the previous year, as reported by the company to the National Commission of the Stock Market (CNMV). In a note, the bank explained that the result has been conditioned by a greater deterioration in financial assets, as a consequence of the greater supply needs in the United States, Mexico and Turkey, mainly 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 the profit 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, even though without taking into account the Chilean subsidiary, the result would be a higher 6%. 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.
