Turbulence in Turkey complicates BBVA’s return to the stock market

The new sources of economic instability in Turkey again endorses its bill to BBVA. Desde that the Spanish bank announces its intention to hacerse con el 100% de su filial en el Ottoman country, cada sobresalto that allí occurs tiene un efecto immediato en su cotización, que se topa con difficulties extra a la hora de encaminar su remontada en the park.

In the three weeks following the announcement of the takeover bid for Garanti Bank, declines reach 22%. Thus, in the last month alone, BBVA shares have lost 17% of their value. A level that also places it as the worst in its entire industry on the Spanish stock market in that time frame.

If the control period is extended to the last quarter, the presiding entity Charles Torres it is also placed in the caboose. With a wear of 12.5% ​​of its market capitalization, which currently revolves around 31,860 million euros, it is also the most penalized in its sector, the return of which includes several international brokers who have shown serious conviction.

boom damping

Contrary to those expectations, Turkey’s latest blow to BBVA’s stock performance came last week in the form of a macroeconomic benchmark. More specifically, with the November inflation datawhich rose to 21.3% and thus marked the highest of the last three years.

This loss of purchasing power of the Turkish lira implies, in turn, the deepening of the galloping depreciation than this currency is suffering in the international currency market. Currently, each Turkish Lira it is worth 38.8% less against the euro than a year ago. Bad news for an entity which, as is the case with BBVA, publishes its accounts in the community currency.

We analyze the behavior of BBVA shares

Eduardo Bolinches

Faced with this haemorrhage which has lasted for several years, analysts are expressing their reservations about the evolution of the Spanish financial institution. Especially in the short term and while the takeover bid on Garanti is still open.

And it is that, if today the activity of BBVA in Turkey represents 14% of its turnover, when the bank takes full control of its Turkish subsidiary this percentage will gain weight by 25%. Almost twice as much as today. A level which easily explains that any alarm signal in the Asian country also triggers the sirens among the shareholders of the entity.

The barrier of 5

At this point, it is understood that the last bearish episode the entity faced may have snatch the quota of 5 euros per share. A figure that BBVA had managed to defend during the last 136 days. In other words: it had been able to stay above this round number – and considered key by some technical analysts who follow the stock – since last July 20.

Throughout this recent downtrend, BBVA’s chart has been ahead of its medium-term moving average, as well as its low growing model. Two additional factors which, according to Eduardo Bolinches, an analyst at Invertia, mean that “it is not very clear that investors are going to bet because it has bottomed out and is starting to recover”.

In the analyst’s opinion, “losing the minimum of 4.67 euros per share is a race” for BBVA shareholders. An alert that goes off because “this is a technical deterioration that leaves nothing until around 4.31 euros”. Conversely, the signal that the rally is reaching some strength would come “with at least two closes above the pivot level of 4.83 euros per share”.

The shortage of volumes which usually accompanies the days around the holidays of the Constitution and the Immaculate Conception in the Spanish stock market makes things even more difficult. In the statements of Darío García, XTB analyst, for EL ESPAÑOL-Invertia, the definitive key is to respect the 4.5 euros per share, which “has been one of the main levels of support for BBVA over the past 15 years”.

follow the advice

Retreating below this level would therefore mean major words. “Although we know that Garanti is a bank very close to the street and therefore generates business thanks to the lira, the depreciation of this currency does not benefit it in any way when it comes to consolidating the group’s results in euros”. An obvious obstacle to which are also added, although for the moment with less perverse effects, the inflation also increasing in the euro zone and the measures that the European Central Bank (ECB) could take to deal with it.

With all of this, the market consensus continues purchase recommendation marking for BBVA shares. The problem addressed by traders The question is whether this is the most appropriate time or the storm will be even thicker in the medium term and it will then be the best time to take a position. Its consensus price target, at 6.45 euros per share, which is 29% more than its current price and depreciated.

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