Summary
BBAR is an established Argentinian bank with the third largest deposit base.
Because the country is in a deep crisis and financially isolated from the world, the financial system is not under heavy macro risk.
Because Argentina is an inflationary country, lender risk is also reduced.
However, BBAR trades at a small discount from its current earnings and an even bigger discount from historic earnings.
If the Argentinian economy continues to recover, BBAR’s earnings will return to historic averages.
JJFarquitectos/iStock Editorial via Getty Images Banco Bilbao Vizcaya Argentaria ( BBAR ), also known as BBVA or the French Bank in Argentina, is an Argentinian bank operating since the 19th century and the third-largest among Argentinian banks according to deposits.
Although the bank has little foreign exchange, liability, or lender risk, and has established income-generating operations, it trades at a substantial discount from its historical earnings prior to the last Argentinian crisis (2018).
Because the bank has low risk, and the Argentinian economy is showing signs of recovery, BBAR seems prepared to increase both its trading multiples and its earnings.
Note: Unless otherwise stated, all information presented below has been obtained from BBAR’s filings with the SEC and BBAR’s investor relations website . Argentina’s financial sector
Our opinion is that BBAR’s price is affected by the idea that the Argentinian financial sector is unstable and at risk of a major crisis.This fear is understandable given that Argentina comes from a financial crisis and that the banking industry is particularly sensitive to changes in the business cycle.In fact, BBAR’s earnings, equity, multiple, and price collapsed after the 2018 crisis. The company was trading at 33 times earnings and a market capitalization above $5 billion in 2018. Now, it trades at 4 times earnings and a market cap of $650 million. BBAR’s ADR price However, the circumstances that led to the 2018 crisis are not the same as the ones prevalent now. Although Argentina is not in a great economical or financial condition, its financial system is not under the same risk as it was when the company traded at such lofty prices. Argentina 2016-2019 What led to BBAR’s astonishing earnings multiple growth and later to its demise was a system of carry trade created by the Argentinian Central Bank (BCRA) and the Argentinian Treasury.The treasury asked for billions in dollar-denominated private debt. It used those dollars to finance the pesos fiscal deficit that […]
