BBVA in Turkey: how unrest could harm the Spanish bank

Some brokers interested in Spanish bank BBVA are following the evolution of the protests in Turkey with concern. They fear that unrest will go worse and end up impacting negatively on the country’s economy. Although the market has not been especially affected yet, the risks for BBVA have gone up, since it has a 24.9% stake in the first Turkish bank, Garantí, which it acquired in November 2010 for 4.1 billion euros.

As some market makers say, even if BBVA’s stake value in Garantí Bank has undoubtedly appreciated since the acquisition, given the favorable evolution experienced by the first Turkish bank accounts, this couls change if the Istanbul Stock Exchange suffers another stock sink as June 3rd’s.

Istanbul Bist 100 index fell on Monday by 10.47%, its biggest collapse in 10 years. Thus, although we will need to see the evolution of events, the risks of the BBVA have increased in recent days indeed. The contribution of Garanti Bank has fallen 21% since its annual maximum on May 22 at 11.25 lire to 8.88 lire on June 4, when it rose more than 5%, a percentage similar to what the 100 Bist gained. However, investors claimed this rebound was technical, and insisted we should follow the evolution of social protests in the coming days.

In the first quarter of the year, Garanti Bank made a profit of 426 million euros, with an increase of 16.4% over the same period of the previous year. I.e., between January and March, the Turkish entity brought around 100 million euros to the consolidated results of BBVA group, amounting to little more than 5% of its results in this period (1,734 million euros). Moreover, BBVA shares closed on Tuesday at 7.278 euros, with a revaluation in the session of 1.34% and 4.5% in the year.