20
2Q09
Stocks recovered in the second quarter of 2009,
showing that markets believe the measures taken by
central banks and governments have notably reduced
the risk of a crisis in the financial system. The
current outlook for inflation and interest rates is
radically different from a year earlier when
inflationary pressures caused the European Central
Bank (ECB) to raise rates. In June prices in the euro
zone fell for the first time ever, pushing short-term
interest rates to record lows. Also in June the ECB
injected more liquidity into the system by means of a
highly significant auction, providing banks with
ample long-term finance at very favourable rates.
Following this, corporate debt spreads fell although
they are still higher than in previous financial crises.
In summary, financial conditions have improved but
the global economy remains weak and the
macroeconomic outlook continues uncertain.
After various quarters of declines the main European
equity indices ended the second quarter in positive
territory: the Stoxx50 rose 15.5% and the UK FTSE,
9.5%. The US market performed in similar fashion
with the S&P 500 advancing 15.2%. In Spain the
Ibex35 rose 25.2% in the quarter, outperforming the
Stoxx50 and S&P 500 by a substantial margin. In
the first half the Ibex increased 6.4% compared to
0.7% for the Stoxx50 and 1.8% for the S&P 500.
Banking sector shares have stabilised in recent
months mainly because the sector’s future is now
Share price index
(30-06-08 = 100)
BBVA
Stoxx 50
Europe
Stoxx Banks
120
110
100
90
80
70
60
50
40
30
20
The BBVA share
clearer following the stress tests in America,
supported by government aid to reduce risk in the
financial system and improved earnings. The sector’s
recovery in the second quarter set new records,
especially in Europe. The European banking index
(Stoxx Banks) surged 43.7%. In the case of British
banks the FTSE Banks index gained 34.9%. The
improvement in the United States was also highly
positive. The S&P Financials Index rose 35.1% and
the S&P Regional Banks index increased 25.5%.
BBVA’s share price rose 46.3% in the quarter,
outperforming the European banking sector and the
Ibex35. However despite this improvement its
performance over the last 12 months is still negative
although less so than other banks. During this
period BBVA’s share price fell 26.5% and the Stoxx
Banks index, 37.4%.
Despite general pessimism regarding profitability, in
the first quarter banks presented earnings that
pointed to a general recovery, especially in
investment banking. This helped to improve market
perception of the sector.
In fact, BBVA’s first quarter earnings for 2009 were
higher than analysts’ expectations. They took special
note of its ability to generate recurrent earnings and
the high level of profit before provisions, which
amply offset weaker asset quality. The income
statement reflects the growth of net interest income
30-6-08 30-9-08 31-12-08 31-3-09
30-6-09
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