BBVA Banco Frances provides financial services to corporations, companies and individuals. Its focuses are financial services, traditional banking and insurance. Primarily, the bank operates in Argentina. The bank has a market capitalization of $3.5 billion. Its stock is trading at $19.23.
One of the first things that you would notice about this bank is that it is in Argentina, a country that has its share of stability problems. In the 1990s, the country almost defaulted on its debt entirely. This prompted a massive devaluation in its currency. Afterwards, the country pegged its currency to the U.S. dollar. This brought in necessary stability and the country’s inflation problems evaporated. However, Argentina could not keep up with the peg and more instability occurred. Since then, however, the country has worked diligently to maintain a stable economic environment with moderate amounts of inflation.
Is it safe to invest in Argentina?
After all of the problems in this country the stability that has been seen has evened out. Now, the country is returning back to moderate amounts of inflation and growth levels. This presents an opportunity to get into a country that has growth potential as well as a company that is one of the leaders in banking in the country.
And, the numbers on this company are impressive. Here is a look at the assets, liabilities and interest income, respectively, over the past four years;
2012: $9,110 / $8,042 / $800
2013: $8,979 / $7,854 / $906
2014: $8,776 / $7,523 / $927
2015: $8,558 / $7,472 / $1,011
As you can see, assets have remained relatively at the same level, but they have been increasing. Also, liabilities are in lockstep, but have been declining over the past several years. Interest income has been increasing as well, albeit modestly. What is interesting is the increase in interest income with a simultaneous decline in both assets and liabilities. The bank is getting more effective at earning income.
Then there is net income and earnings per share. Both of these, respectively in the listing below, have been increasing as well over the same time period:
2012: $277 / $1.55
2013: $367 / $2.05
2014: $390 / $2.18
2015: $405 / $2.26
These increases reiterate that while assets and liabilities are simultaneously declining the bank is able to provide consistent growth in earnings per share. All the while, the earnings per share ratio is well under 10-times making this bank a bargain at the price it is trading currently. This goes back to Argentina’s economic challenges they have faced. No one wants to get into the company. But, those earnings are real and are likely to continue to improve.
Granted, Argentina’s problems have been troublesome. But, looking at the earnings per share over the past few years, there is stability within this bank, at a minimum. The entire world is gearing up for continued economic growth, led by the United States. Argentina, if its economy is precarious in any way, will see the same economic expansion. This will only add more opportunity to BBVA.
But, these concerns could be set aside as the earnings per share that BBVA has is similar to other banks even in the United States. In my research, I have found a lot of various banks that are trading at 10-times earnings whereas the bigger banks are trading at much higher ratios. This is because of the economic turmoil of 2008. The sector has been left behind in the general market move of late. If the banking sector, along wth BBVA were to move up to merely average, then BBVA’s stock would be sitting at $34.00 per share, a move of well over 50%.
There are a lot of reasons to put BBVA into your portfolio. This present a solid wealth creation opportunity for you.