The Spanish banking sector has been a major focal point for investors lately, and for good reason. After a tumultuous 2020, the industry has seen a remarkable turnaround, with the share price of BBVA, one of Spain’s largest banks, more than tripling since late last year. This impressive performance has not only caught the attention of investors, but it has also highlighted a significant shift in the fortunes of Spanish banks, particularly between BBVA and its rival, Santander.
To fully understand this recent surge in BBVA’s share price, we must first look back at the challenges the banking sector faced in 2020. The COVID-19 pandemic wreaked havoc on the global economy, and Spain was one of the hardest hit countries in Europe. This had a direct impact on the banking sector, with both BBVA and Santander reporting significant losses in 2020. However, as the year progressed, it became clear that BBVA was handling the crisis much better than its competitor.
While Santander struggled with loan defaults and a significant decline in profits, BBVA managed to weather the storm by diversifying its revenue streams and focusing on its digital banking capabilities. This strategic move allowed BBVA to pivot quickly and adapt to the changing needs of its customers, who were increasingly turning to online banking services during the pandemic. As a result, BBVA was able to maintain its profitability and even outperformed market expectations in the last quarter of 2020.
Investors have taken notice of BBVA’s resilience and have rewarded the bank with a significant increase in its share price. In fact, since the end of 2020, BBVA’s stock has more than tripled, reaching its highest level in over two years. This has significantly narrowed the valuation gap between BBVA and Santander, with BBVA’s market value now sitting at around 37 billion euros, just slightly below Santander’s 39 billion euros. This is a remarkable turnaround, considering that at the beginning of 2020, BBVA’s market value was less than half of Santander’s.
So, what has been the key driver behind BBVA’s impressive rebound? As mentioned earlier, the bank’s focus on digital banking has played a crucial role. BBVA has been investing heavily in its digital capabilities for the past few years, and this investment has paid off during the pandemic. The bank’s digital banking platform has seen a significant increase in users, and its mobile banking app has been consistently ranked as one of the best in the world. This has not only allowed BBVA to retain its existing customers but has also attracted new ones, resulting in a steady increase in its customer base.
In addition to its digital banking prowess, BBVA’s strong presence in Latin America has also been a significant contributor to its success. Unlike Santander, which has a more global reach, BBVA has focused on building a strong presence in key Latin American markets such as Mexico, Colombia, and Peru. This has proven to be a smart move, as these markets have shown resilience during the pandemic, and BBVA’s operations there have remained profitable.
On the other hand, Santander’s heavy reliance on its European and UK operations has been a burden during the pandemic, as these markets have been severely impacted by the lockdowns and economic downturn. This has resulted in a significant decline in profits for Santander and has put the bank at a disadvantage when compared to BBVA’s more diversified revenue streams.
As we look towards the future, it seems that BBVA’s positive momentum is set to continue. The bank has recently announced its plans to merge its US operations with PNC Financial, one of the largest banks in the United States. This move will not only strengthen BBVA’s presence in the US but will also give the bank access to PNC’s advanced digital banking capabilities, providing a significant boost to its already impressive digital strategy.
In conclusion, the rapid increase in BBVA’s share price has been a remarkable success story in the Spanish banking sector. The bank’s ability to adapt to the challenges of the pandemic and its strategic focus on digital banking has paid off, and it has emerged as a strong competitor to Santander, traditionally seen as the leader of the Spanish banking sector. With its strong digital presence and a promising merger on the horizon, BBVA is well-positioned to continue its impressive performance and drive further growth for its investors.