Zacks.com: Analyst Blog

We are maintaining our Hold on Banco Bilbao Vizcaya Argentaria, S.A. or BBVA (AVP) but raising our target price to $23. In its fourth quarter report, BBVA posted net earnings before nonrecurring items of 1.4 billion, up 13% from the 1.3 billion earned in the comparable 2006 period and above our estimate, largely due to higher than expected net interest income growth and a lower tax rate.

Results reflected solid growth in retail banking activity and strong cost controls. Operating costs rose 13% year over year, lower than the 15% rate of net revenue growth, and was accompanied by an 80 basis-point improvement in the efficiency ratio.

On March 10, 2008, BBVA announced that it had received all necessary regulatory approvals to move forward with integrating its four United States subsidiary banks into one financial institution. The result of the mergers will make Compass Bank the Sunbelt region's largest financial institution and give BBVA a leadership position in a geographic region that continues to grow faster than the United States as a whole and whose economy continues to outperform other regions.

Net loan loss provisions rose 35% year-over-year, largely due to a growing loan book. We expect these trends to continue near term, and are estimating 2008 EPADS of $2.56. We believe the dividend is safe.

At its current price, BBVA trades at 9.1X the consensus 2008 earnings estimate, a 10% discount to the industry P/E median (versus a 16% discount at the time of our last report on January 18, 2008). BBVA's growth prospects are above average (15% compared to 12% for the industry median), as is its dividend yield (5% compared to the industry's 3.5%). We also recognize that its exposure to Latin America presents it with an above-average risk profile. Our $23 target price represents roughly a 9X multiple of 2008 estimated earnings of $2.56 per share.

Read the full analyst report on BBV.