Upping Hold-Rated Banco Bilbao

We are maintaining our Hold on Banco Bilbao Vizcaya Argentaria, S.A. (or BBVA), (BBV). In its first quarter, BBVA posted net earnings before non-recurring items of 1.4 billion, up 15% and broadly in line with our estimate. Results reflected solid growth net interest income, due to higher volumes and improved margins. Non-interest expense rose 17% year over year, while loan loss provisions rose 49%, largely due to a growing loan book.

We are increasing our 2008 EPADS estimate to $2.60 from $2.56, mainly due to changing FX [foreign exchange] assumptions from recent US$ depreciation against the euro. Our initial 2009 estimate is $2.95. We expect recent operating trends to continue near term. We believe the recently increased dividend is safe.

We believe the implementation of the consumer-focused business model will continue to benefit BBVA’s bottom line. Specifically, BBVA is concentrating on fast-growing retail businesses in Spain, consumer finance, cards, and small and medium-sized enterprises, where the bank is benefiting from the rising GDP levels and should increase market share.

At its current price, BBVA trades at 7.5X the consensus 2009 earnings estimate, a 17% discount to the industry P/E median. Our $23 target price represents roughly a 7 ¾X multiple of 2009 estimated earnings of $2.95 per share.

Read the full analyst report on BBV

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