Which European Bank is Most Exposed to Fallout in Turkey?

Doubling down on Emerging Market bets.

Once upon a time, Spain’s second biggest bank, Banco Bilbao Vizcaya Argentaria (BBVA), was a distinguished member of the global club of systemically important financial institutions (SIFI). It was, officially speaking, too big to fail. That all changed in November last year, when it was decided that BBVA had “declining systemic importance.” It lost its SIFI status and was relegated to mere mortal status, now presumably allowed to fail.

BBVA makes most of its money outside Spain. Its two main overseas profit centers are Mexico, where the bank owns a majority stake in the second biggest bank, Bancomer, and Turkey, where it recently consolidated its control of Garanti, the country’s third biggest bank. The acquisition of 40% of the bank’s shares gave BBVA control of the board and a huge presence in what was a very important — and lucrative — emerging market.

In the good times, BBVA’s investment in Turkey paid off handsomely. Even in the tumultuous first quarter of 2016, BBVA received 21% of its operating income and 13% of its net profits from Garanti’s operations. The country also accounts for roughly 5% of the group’s loans.

But now, the times appear to have changed

Continue reading the article at WOLF STREET

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