BBVA(BBVA) Seeking Alpha·2024-09-04 12:34Core Thesis - BBVA Argentina's stock has returned 57% since April 2024, driven by Argentina's improving economy and inflation trends, with an updated price target of 112.9 billion, a 178.8% increase from Q1 2024 and a slight increase from Q2 2023 [2] - The bank achieved an inflation-adjusted average return on assets of 4.7% and an average return on equity of 19.5% in Q2 2024 [2] - The non-performing loan (NPL) ratio stood at 1.18% with a coverage ratio of 165.5%, indicating strong risk management [2] Operational Efficiency - The efficiency ratio improved to 55.3% in Q2 2024, a decrease of approximately 10% quarter-over-quarter, reflecting operational improvements amid declining inflation [3] - Allowances for loan losses increased by 30.4% in Q2 2024 due to growth in the loan portfolio, demonstrating prudent risk management [3] Consumer Confidence and Digital Growth - Retail digital sales and active digital clients are increasing, contributing to BBVA Argentina's reputation as a trustworthy bank [4] - The bank's loan portfolio grew significantly, with retail loans up 41.1%, commercial loans up 50.1%, and total loans up 45.8% in Q2 2024 [4] - Deposits increased by 2.6% quarter-over-quarter, driven by a 36% rise in time deposits, indicating improving consumer confidence [4] Privatization and Economic Reforms - Economic reforms under Milei have led to the privatization of state-owned assets, enhancing lending confidence in the private sector [5][6] - Private credit in pesos grew by 176% year-over-year, with BBVA Argentina's private loan portfolio increasing by 230% [5] Valuation and Future Outlook - The bank's earnings estimates suggest a forward P/E ratio of 3-4x is too low, indicating potential for significant upside through earnings growth and multiple expansion [7] - Assuming conservative EPS of 14 per share, reaffirming a bullish outlook [8]