BBAR & BMA: Hidden Value in Argentina’s Banking Sector
An in-depth Equity Research Report on BBAR & BMA
Introductory Note:
In a market where the headline narrative has been one of perpetual crisis, we uncover two polarizing opportunities in Argentina’s under‑loved banking sector.
While the MERVAL index sits flat in USD and investors await the next macro trigger, BBAR and BMA stand on divergent trajectories, one as a quality compounder delivering defensible double‑digit ROE and dividends, the other as a high‑beta, capital‑rich franchise poised for explosive earnings recovery.
This report not only dissects their financial turning points but also decodes the hidden brand equity powerhouses and risk catalysts that will drive the next leg of returns. If you’re looking to position ahead of the market’s inflection, this is your blueprint.
1. Macro Context – Why We Believe the Setup Is Attractive
Argentina is notorious for boom‑bust cycles, yet we see 2025–27 as a probable transition from crisis management to stabilisation. Below we frame the narrative and the data points that underpin our constructive stance.
1.1 Headline Indicators
Key takeaway:
In our opinion, a 500 bp+ reduction in sovereign spreads over the next 18 months is plausible; banks offer the most direct equity convexity to that macro repricing.
1.2 Why Banks Will Lead Any Recovery
Banks instantaneously monetise NIM expansion when policy rates fall faster than deposit rates adjust.
They capture operating leverage as fixed costs are largely peso‑denominated while revenues inflate.
Near‑term earnings volatility is already priced in: current P/B levels imply ROE well below cost of equity, a pessimism we believe is overdone.
2. Comparative Analysis: BBAR & BMA
2.1 Banco BBVA Argentina (BBAR)
We apply a 120 bp haircut to net interest margins (NIM) to reflect expected rate-cut pass-through effects. Even with this adjustment, BBAR’s fundamentals remain highly attractive.
Our view:
Thanks to its low-cost funding structure and strong digital scale, BBAR can sustain a return on equity (ROE) around 300 basis points above its cost of equity (COE). This supports a target valuation of ~2.0× P/B, with a stretch price range of $18–22 per ADR.
Key Operating Drivers:
Structural Funding Advantage
~63% of total deposits are in non-interest-bearing (sight) accounts, giving BBAR one of the cheapest funding bases in the market.Digital Scale = Cost Efficiency
~63% of all customer transactions now occur via mobile channels. Management is targeting a cost-to-income ratio below 50% by 2027, driving scalable operating leverage.Superior Asset Quality
BBAR maintains a non-performing loan (NPL) ratio of 1.8%, with coverage at 140%, the strongest among Argentine peers.NIM Resilience to Rate Cuts
Deposit repricing lags significantly. For every 100 bp cut in policy rates, BBAR’s NIM typically contracts by only ~40 bp, preserving margin strength through easing cycles.
2.2 Banco Macro (BMA)
(Values per ADR = 10 ordinary shares)
Context:
Following recent share buybacks and visible loan growth momentum, BMA is well-positioned for a valuation re-rating as profitability normalizes.
Our view:
With rapid brand-equity gains, strong provincial market share, and a surplus capital base, we see a base-case target of $95–100 per ADR once earnings begin to recover.
Key Operating Drivers:
Provincial SME Growth Engine
BMA holds a 74% branch share in fast-growing interior provinces, a structural advantage. Credit demand in these regions typically rebounds quickly when real interest rates fall.Capital Strength = Flexibility
With a CET1 ratio above 25%, BMA can simultaneously fund loan growth and execute additional buybackswithout compromising regulatory buffers.Explosive Brand Momentum
Ranked #4 overall in Brand Finance Argentina 10 (2025) and named the fastest-growing brand in the country, with brand value up +114% YoY to $622M.This momentum supports deposit stickiness and customer retention, two critical levers in a rising-rate recovery.
Margin Sensitivity Drives Earnings Torque
For every 100 bp rebound in NIM, BMA adds approximately $0.25 to EPS / ADR, making it highly leveraged to rate normalization.
2.3 Brand Power
We classify Argentine banks into A‑Tier and B‑Tier based on the latest Brand Finance Argentina 10 2025 rankings and brand‑value metrics, reflecting reputational strength as a strategic asset.
Why it matters:
A‑Tier banks command stronger brand equity, which correlates with customer loyalty, deposit stability, and pricing power, key advantages in a competitive recovery environment.
3. Valuation Framework
Our valuation thesis for BBAR and BMA is grounded in structural funding advantages, operating leverage, and asymmetric earnings torque as real rates normalize. Below are the key levers driving our valuation cases:
BBAR-Specific Levers
Low-Cost Funding Base
~63% of deposits are sight (non-interest-bearing), creating structurally cheap funding that enhances NIM sustainability.Digital Operating Leverage
~63% of transactions are digital. Management aims to reduce the cost-to-income ratio below 50% by 2027, improving efficiency as volumes scale.Superior Credit Quality
BBAR holds a 1.8% NPL ratio with 140% coverage, the strongest credit discipline among domestic peers.NIM Resilience to Rate Cuts
Deposits reprice slowly. A 100 bp policy-rate cut reduces NIM by just ~40 bp, limiting downside in easing cycles.
BMA-Specific Levers
Provincial Lending Advantage
~74% branch share in high-growth interior provinces positions BMA to capture credit demand quickly as real rates fall.Excess Capital = Flexibility
With CET1 above 25%, BMA has the capacity to fund both loan growth and buybacks simultaneously.Brand-Driven Deposit Stickiness
Ranked #4 in Brand Finance Argentina 10 (2025) and labeled “Fastest-Growing Brand” (+114% YoY to $622M). We view this as a forward-looking signal of customer retention and pricing power.Earnings Torque from NIM Recovery
Each 100 bp increase in NIM adds roughly $0.25 to EPS per ADR, giving BMA substantial upside if margins normalize.
3.1 Cost of Equity Inputs (USD)
3.2 Residual‑Income Model – Assumptions
Assuming a sustainable 17 % ROE for BBAR (was 16 %) and keeping COE at 24 %, the residual‑income valuation supports a 2.0× P/B profile.
4. Multi‑Year Financial Summary
4.1 Income Statement Trends (ARS bn)
4.2 Balance‑Sheet Evolution (ARS bn)
5. Risk Scorecard & Mitigants
6. Catalysts Timeline (What We Are Watching)
7. Conclusion – Why We’re Long BBAR & BMA
In our judgment, the market is pricing a permanent insolvency narrative that is inconsistent with the banks’ capital, liquidity, and demonstrated earnings power.
We see 40–60 % total‑return upside over 12 months, with the bulk of downside risk predicated on a sovereign event that the banks are better positioned to handle today than at any point since 2018.
Bottom line: We’d rather own well‑capitalised Argentine banks at 1.2–1.4× TBV, collect rich dividends in pesos (hedged via ADR), and wait for the sovereign risk premium to normalise, than chase stretched multiples elsewhere in LatAm.
Sources: Company reports (Q1 2025), S&P Capital IQ, Bloomberg, IMF, Fitch Ratings.
Disclosures
This report is for informational purposes only and does not constitute a recommendation to buy, sell, or hold any security. Aurelion Research is not registered with any financial authority and does not provide personalized investment advice. Readers should do their own due diligence and consult a licensed advisor before making investment decisions.
Information, forecasts, and opinions are based on publicly available sources we believe to be reliable, but we do not guarantee their accuracy or completeness. This content is subject to change without notice and is intended only for use where legally permitted.
About Aurelion Research
Aurelion Research provides independent equity analysis with a focus on underfollowed companies. We combine financial modeling with strategic insight to deliver clear, structured, and actionable research.
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