On Friday, CFRA, a notable financial research firm, raised its price target on Banco Bilbao (NYSE:BBVA) Vizcaya Argentaria SA (BBVA:SM) (NYSE: BME:BBVA) to €10, up from the previous target of €8.50. The firm has retained a "Buy" rating on the stock. The adjustment reflects the bank's strong performance and robust return on equity (ROE), which stands out against its peers.
The revised price target is based on a price-to-book (P/B) ratio of 1.1 times, which is higher than the average P/B ratio of 0.69 times among BBVA's competitors. This increase is supported by BBVA's superior ROE profile. Alongside the price target change, CFRA also increased its earnings per share (EPS) estimate for 2024 to €1.35 from €1.22 and introduced an EPS forecast of €1.31 for 2025.
BBVA reported a significant surge in its Q4 2023 net income, which jumped 57% year-over-year at constant currency to reach €2.46 billion. This figure notably surpassed the S&P Capital IQ consensus estimate of €1.93 billion.
The impressive results were attributed to a robust top-line performance, with a 19% increase in net interest income and a 36% rise in net fees and commission income. These gains more than compensated for the higher operating expenses and loan loss provisions the bank faced.
Despite the positive income figures, BBVA's reported earnings were impacted by currency fluctuations, particularly due to the economic situations in Turkey and Argentina. Still, CFRA remains positive about BBVA's outlook for 2024, citing the strength of its noninterest income as a key factor.
BBVA also reported a Common Equity Tier 1 (CET1) capital ratio of 12.7%, which exceeds its target range of 11.5%-12.0%. This strong capital position suggests the potential for increased shareholder remuneration in the future, according to CFRA's analysis.
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