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BBVA: What can be bad when so much is good?

With high profits, a low and declining cost/income ratio and an expansive global strategy, BBVA ought to be riding high in the stock markets. But some investors seem to think it is overstretching itself and have marked it down. Peter Koh reports on a success story that some in the market are not reading.

Taking technology a step further

Francisco González Rodríguez, chairman and CEO of BBVA

THE MARKET SEEMS to have fallen out of love with BBVA. Despite its continued strong performance and growth across the board, the bank’s stock no longer commands the premium it once did. Worse still, one or two analysts have even started to speculate that the bank could become a takeover target or even become a break-up candidate like ABN Amro.

Such speculation is hardly fair on Spain’s second-largest bank, which has more than doubled its shareholders’ money over the past five years and achieved the kind of efficiency ratios that most banks cannot even imagine. BBVA has a bold vision in retail banking, in which it is already among the most sophisticated players and it has forged an excellent position in Mexico, one of the world’s most promising banking markets. Having formed an alliance with and acquired a stake in China Citic Bank, the seventh-largest bank in China and its Hong Kong-based international business, in November 2006, BBVA is entering a new phase of international expansion.

BBVA’s share price has been languishing since it surprised the market with two capital increases in 2006, and in February 2007 announced its plan to acquire Compass, a Texan bank, at 20 times forward earnings and 3.4

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