BBVA included rate cuts in Turkey in its strategic plan | companies

BBVA Chairman Carlos Torres yesterday downplayed the interest rate cut announced the same day by the Central Bank of Turkey (TCMB) in the country by 100 basis points, down to 15%, and assured that ‘they counted on Such movements could occur in the design of the strategic plan presented, precisely, after the announcement of a public takeover bid on Garanti. “We had considered it,” he assured questions from analysts during Investor Day.

The drastic rate cut caused an immediate depreciation of the pound and is the third successive adjustment applied by the Turkish central bank since the 19% it had last September.

Torres explained that BBVA is aware of the “challenges associated with the Turkish market”, but that they are “long-term investors”, convinced of the growth potential of the economy and banking activity, and valuing acquaintances who have been more than a decade in private banking with the highest share. In addition, the banker and the CEO, the Turkish Onur Genç, assured that the supervisors had raised no objections to the formulation of the public tender offer for Garanti, which is already underway, with the intention of close it in the first quarter of next year. Although the operation does not yet have the necessary permissions.

Yesterday, in fact, BBVA officially requested permission from the Turkish stock market supervisor to carry out the public tender offer.

The offer to buy is for the 50.15% that BBVA does not control in Garanti and Torres acknowledged that they would like to reach 100%, but would also be happy to stay below if they managed to exceed 50% of the capital of the bank because it would allow them to continue to buy more shares thereafter without the need to launch a new tender offer.

BBVA’s share price fell on Monday’s tender offer announcement, despite what analysts think was good and industry logic, and fell again yesterday to 5.51%. For the banker, this is an overreaction and in the face of this, he underlined the resistance offered by the Garanti franchise in complicated environments.

In Turkey, the goal is to continue to be the best bank in the country, in terms of market share and profitability, according to Garanti boss Recep Bastug. The goal is to post double-digit revenue growth and reduce its cost of risk from 170 basis points to less than 150 basis points in 2024. .

Bastug explained that BBVA’s plans for Turkey call for long-term GDP growth of 3.5%, “a figure significantly higher than in Europe and relatively high compared to other emerging markets in which BBVA operates. “, assured the Turkish director. And he recalled that the debt of Turkish families is 17% of GDP, against 69% in the EU.

As for the Mexican subsidiary, the group’s main source of income, it anticipates double-digit growth in its income on average from 2021 to 2024, when the efficiency rate will approach 30%. According to the Vice President and General Manager of BBVA Mexico, Eduardo Osuna, there is a great opportunity for further growth in the banking sector.

The entity has let investors know that it will continue to focus on building leadership within the banking sector with the aim of remaining the benchmark bank in the country. In the group’s view, technological innovation makes BBVA Mexico a bank with a unique value proposition in the market, based on personalized and specialized customer service, with a total base of more than 24 million people.

The management of BBVA explained that the bank maintains reserves after the execution of the public tender offer on Garanti and the buyback of shares for 3,500 million euros (10% of the capital). Onur Genç explained that the bank has the capacity to add between 1,000 and 1,500 million additional euros of capital per year organically. For this calculation, it already takes into account the announced decision to increase shareholder compensation by increasing the payout from the current 30-40% to a range of 40-50%.

More funds to do other operations

capital cushion. BBVA President Carlos Torres Vila assured yesterday that the bank has a cushion of capital to carry out new share buybacks in addition to the announced program of 3,500 million euros, to expand in markets where it already exists or tackle “more mergers and acquisitions”. , without closing the door to Sabadell.

mergers. The possibility of resuming talks with Sabadell and carrying out merger or takeover operations was mentioned several times during the conference, as were the risks of the 100% takeover operation of Garanti in Turkey.

Origin of the piggy bank. The piggy bank for carrying out Garanti’s takeover bid, the share buyback or other possible corporate operations comes from the sale of the activity in the United States, which generated more than 8 billion euros in capital gains for BBVA.

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