Banking on BBVA

Roger Guy and Guillaume Rambourg, co managers of the Gartmore European Selected Opportunities Fund and the Gartmore SICAV Continental European Fund, target Spanish bank Banco Bilbao Vizcaya Argentaria (BBVA) as a good investment candidate.

BBVA remains one of the core holdings of the Gartmore European Selected Opportunities Fund and the Gartmore SICAV Continental European Fund.

Investing in BBVA might appear counterintuitive say Roger and Guillaume, given that Spanish growth is severely under threat following years of robust expansion. However GESO favourite BBVA has consistently outperformed the wider European financial sector since the beginning of the credit crisis thanks to a lack of exposure to the flagging Spanish real estate sector and efficient diversification into high growth regions (34% of its earnings from Mexico and further 10% from rest of Latam region). Its Mexican business (BBVA Bancomer) is the leading banking franchise in Mexico.

"We remain underweight in the financials sector (relative to the benchmark) in this current environment, choosing instead to focus on banks where the risk/reward ratio is better. We expect some more bad news from the sector and have been selectively investing in stocks with high visibility and potential for further upside ".

Over the last few months, banks held on the Funds have typically exhibited either strong top line growth or effective cost control policies. Gartmore's European Selected Opportunities Fund and SICAV Continental European Fund are invested in financial companies which the Managers believe have dealt with their subprime exposure and which also boasts stronger balance sheets.

"We caution against calling the end of the credit crisis, but we believe certain banks, having replenished their capital, currently offer strong prospects whilst trading on depressed multiples".