Barclays lifts Spanish bank targets, backs BBVA as sector’s top pick

Investing.com -- Barclays kept a positive view on the Spanish banking sector and raised price targets across major lenders, citing resilient third-quarter performance, stable margins, and strong capital ratios. 

The research firm said Spanish banks are set for a “steady but catalyst-light quarter,” with net interest income (NII) expected to rise about 1% quarter-on-quarter and median net profit falling roughly 3% due to seasonal fee softness and slower deposit-cost relief.

Barclays lifted price targets for Banco Bilbao Vizcaya Argentaria SA (BBVA) to €18.5 from €18, Banco Santander SA (Santander) to €10 from €8.4, CaixaBank SA to €9.6 from €8.6, Banco de Sabadell SA to €3.4 from €3.2, Unicaja Banco SA to €2.5 from €2.3, and Bankinter SA to €14.3 from €12.6. 

The brokerage said the new valuations reflect updated 2027 forecasts and a higher European Central Bank terminal rate of 1.75%.

BBVA remained Barclays’ preferred name in Spain, supported by a strong capital base and potential for higher shareholder distributions. 

The analysts said BBVA’s CET1 ratio was estimated at 13.4%, about €3.5 billion above its 12.5% threshold, leaving room for a new share buyback in addition to a pending €1 billion program. 

Barclays projected BBVA’s shareholder yield at 10-11% for 2025, describing it as sustainable in the medium term. 

BBVA’s stock trades at 7.8x price-to-earnings, compared with the sector average of about 9x, and is forecast to deliver a 20% return on tangible equity (ROTE) in 2027, above the sector’s 15%.

“BBVA becomes our preferred Spanish bank, offering the strongest catalysts in the sector,” the brokerage said, citing capital strength, Mexico resilience, and a supportive U.S.-Mexico-Canada Agreement backdrop.

Barclays upgraded Bankinter to “equal weight” from “underweight,” pointing to steady fundamentals and improved earnings projections. 

Barclays lifted its 2026-27 earnings per share estimates by about 5%, reflecting efficiency gains and a stable rate environment. 

Bankinter’s CET1 ratio was expected at 12.69%, with cost growth of 5.5% year-over-year and provisions stable quarter-on-quarter.

Sabadell was maintained at “equal weight,” with Barclays noting its post-TSB sale position as stronger but execution-dependent.

The brokerage said Sabadell’s adjusted 2026 price-to-earnings ratio stood at 8.7x, aligned with the sector, and its 2027 return on tangible equity was estimated at 13.7%. Sabadell’s focus will remain on cost control and lending expansion under its 2024-27 plan.

Santander and CaixaBank were both kept at their existing ratings, with Santander’s “overweight” reaffirmed and CaixaBank’s “equal weight” unchanged. Unicaja also remained “equal weight.” 

Barclays said the sector showed resilient fundamentals, with provisions contained and costs following full-year guidance.

The report added that while near-term catalysts are limited, Spanish banks are entering year-end with stable profitability, sound asset quality, and moderate loan growth. 

“We see resilient fundamentals across Spanish banks, though near-term catalysts remain concentrated in BBVA,” the analysts said.