20
1Q09
In the first quarter of 2009 the market continued to hold
a negative view of economic conditions. Various factors
suggested that stock exchanges had reached a bottom
but the market appeared to be waiting for an
improvement in cyclical indicators before accepting a
turnaround. Investors are still concerned about the risks
in the economic cycle and are seeking refuge in stocks
with strong balance sheets. Nonetheless the fiscal plans
at global level, the short-term interest rate policies and
the government aid to stabilise the financial system
appear to have limited –at least temporarily– investors’
perception of the risks. This favoured the rally in the
equities markets in March.
In this environment the main European indices closed
the first quarter with new declines: the Stoxx50 fell
12.9% and the British FTSE dropped 10.2%. The USA
market performed in a similar fashion, with the S&P
500 losing 11.7%. The IBEX35 retreated even further
than the Stoxx 50 and S&P 500, dropping 15.0%
during the quarter.
In terms of the banking sector, investors continued to
focus on capital adequacy, on asset quality and therefore
on the strength of banks’ balance sheets although there is
persistent concern about the low visibility of future
earnings. As a result, share prices in this sector hit all-
time lows during the first two months of the year.
Together with signs of improvement in the first quarter
earnings of American banks and the announcement of
new measures, this sentiment appears to explain the
Share price index
(31-03-08 = 100)
BBVA
Stoxx 50
Europe
Stoxx Banks
110
100
90
80
70
60
50
40
30
20
The BBVA share
upward trend in March, which however was insufficient
to offset the falls in January and February. In fact, the
European bank index, Stoxx Banks, fell 17.7% in the
first quarter. The decline was even greater in Britain,
where the FTSE Banks Index dropped 27.4%. In the
United States the financial entities index, S&P Financials,
declined 29.5% and the index of regional banks, S&P
Regional Banks, was down 43.4%.
In these conditions BBVA’s share price fell 29.4% in the
first quarter, underperforming the European banking
index. However over the last 12 months BBVA (down
56.2%) has performed better than Stoxx Banks (down
63.8%).
Compared to the sharp falls in profit and substantial
losses at some banks, BBVA’s earnings in 2008 set it
apart from the rest of the sector and were viewed
favourably by most analysts. They noted the
considerable strength of recurrent income despite the
deteriorating conditions. Furthermore they took a
positive view of the size of the profit, which was the
second highest among private-sector banks worldwide.
This is even more impressive in the context of the BBVA
Group’s relatively small balance sheet. The
announcement that the final dividend against 2008
earnings would be paid in shares and that the payout
for 2009 will be reduced to 30% was also received
favourably. Both measures are considered appropriate to
strengthen the Group’s capital base. Lastly, we would
like to point out that the BBVA Group is one of the few
31-3-08 30-6-08 30-9-08 31-12-08
31-3-09
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