The icy response of Banco Sabadell shareholders to BBVA’s takeover offer last October put an end to one of the longest and most controversial strategic episodes in the recent history of the Basque bank. The market reacted with a clear message: relief. The stock rose to give it a historic capitalization of 115 billion euros, the focus returned to the results and the entity recovered a more recognizable narrative. With the noise dissipated, the question is no longer what happened to Sabadell, but what that closed chapter reveals about the direction BBVA is now taking. The answer points in a clear direction. BBVA is once again read as an autonomous story, based on high profitability, solid profit generation and financial discipline that the market especially values. More than twenty firms follow the value and the majority recommend buying its shares, with target prices between 19 and 23.6 euros. The common thesis is based on a key fact: the bank obtains a return on its capital of around 20%, much higher than the European average, and maintains double-digit earnings per share growth forecasts until 2028. Goldman Sachs has recently reinforced its support for the value by adding it to its European Conviction List, a reduced selection of the most differentiated investment options in Europe, based on its growth capacity, its operational efficiency and its high profitability; Bank of America has chosen it as its favorite entity in the country, highlighting that it combines growth and shareholder remuneration better than many competitors; and houses like Jefferies or Price Target Research agree that the value of the bank is explained, above all, by what it already does, not by what it could buy. Carlos Torres himself, president of the entity, revealed last week that it plans to generate capital of about 49,000 million euros until 2028 and that around three quarters of that amount (36,000 million) «we will dedicate to remuneration to our shareholder» once the growth needs are covered. organic.Analysts point to a combination of growing dividends and share buybacks. For firms like Jefferies, the closure of the corporate process frees up room to return to the shareholder a relevant part of the capital accumulated between 2025 and 2028. Price Target Research defines BBVA as a “great creator of value”, considering that its profitability far exceeds the cost of capital and that its revaluation potential does not depend on new corporate operations. This return to essentials is also beginning to be reflected in technical decisions, less visible but significant. A few weeks ago, the entity announced the early amortization of a hybrid capital instrument (a bond designed to absorb losses in adverse scenarios) worth 1,000 million, a decision that analysts interpret as a sign of balance sheet strength and normalization after the Sabadell episode. That the market has implied that BBVA does not need to buy other banks to create value does not mean that the entity is risk-free. On the contrary, it brings the group’s structural strengths and vulnerabilities back to the foreground, especially its international exposure in a less favorable sectoral context than in recent years. European banking enters a phase in which interest rates begin to fall and margins automatically stop benefiting. «We have an environment that will continue to be complex. We have seen continued geopolitical tensions these first days of the year, but the prospects are good in all our markets,» acknowledges its president. Mexico continues to be the main driver of results and the cornerstone of the investment thesis. Its contribution to the group’s profit is around 45% of the attributed result, and analysts carefully observe the evolution of the economic cycle, regulation and the exchange rate. A JP Morgan analysis focused on BBVA Mexico points to a gradual slowdown in the growth of its banking sector after several exceptionally favorable years. An increase in provisions and the cost of risk stands out, the money that banks reserve to cover possible defaults. BBVA México still maintains a higher profitability than its competitors, with efficiency levels better than those of Banorte. JP Morgan adds that the market continues to digest possible regulatory changes with an impact starting in 2026, from a greater effective tax burden to adjustments in deductions or in the treatment of VAT in certain financial products. None of these factors alone alter the investment thesis, but they do paint a less accommodating scenario. In this context, any relevant deviation in Mexico – whether due to regulation, cycle or exchange rate – would have an immediate impact on the group’s perception, because today there is no other market with the capacity to compensate for it in the short term. Turkey continues to be the most controversial element of the perimeter. The consensus assumes that the Garanti subsidiary, which contributes just over 7% of global profits, can become a relevant source of results in the medium term, but also recognizes that its contribution is subject to high volatility. Torres explained that “the normalization” of his macro situation “will increase his contribution to the group’s results.”
Position in Venezuela
Although with little relevance in the complete picture, BBVA maintains a unique position in one of the geopolitical hotspots of the moment: Venezuela. Through its subsidiary BBVA Provincial (55% owned), it is the only foreign entity with regular operations through one of its 160 offices and some 2,000 employees. However, its contribution to the group is marginal: the book value of this subsidiary is around 100 million, compared to 21,100 for the Mexican business. The president of BBVA has stressed that the presence in Venezuela is not due to a commitment to growth, but to the continuity of service to clients in an environment marked by economic and regulatory restrictions. This kind of return to the essence has served to test the distance between the strategic discourse and the market verdict and to clarify what is really valued today in a large European bank. BBVA faces a less ambitious stage than a major merger, but probably more demanding: maintaining benchmark profitability, carefully managing its key markets and returning capital in a sustained manner in a more complex environment. The market, for the moment, grants it credibility. Maintaining it will be another story.
