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BBVA: Rebalancing risks

Sale of non-core assets could help bolster its balance sheet and open up new options

Capital-boosting asset sales in the autumn of 2017 were welcome news for BBVA’s investors, especially given its exposure to the new geopolitical hotspots.

The bank certainly has an unusual array of political headaches. 

President Donald Trump’s revision of trade and immigration policy could hurt its biggest business in Mexico and along the border, where BBVA’s US operations are concentrated. In Turkey, where it increased its stake in Garanti to almost 50% in 2017, politics is also shaking relations with key trading partners. Finally, the bank is more exposed to Catalonia than close peer Santander.

Nevertheless, Mexican unit BBVA Bancomer saw profits increase by 15% during the first nine months of 2017. Garanti’s profits saw an even bigger jump. 

“Mexico, Spain and Turkey have all delivered results in line or above our expectations and those of the market,” says CFO Jaime Sáenz de Tejada.

Despite the Catalan separatist crisis, Spain remains one of the fastest-growing economies in Europe. The timing and extent of new loan growth in the country may still be uncertain, but brighter economic prospects helped BBVA offload its remaining €13 billion Spanish real estate portfolio for €5 billion to a joint venture, 80% owned by private equity firm Cerberus, in November.

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