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IBERIAN DAILY 08 JANUARY (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: BANKING SECTOR.

Rising debt yields once again pressure stock markets
European stock markets rose early in the session but ended up reeling in part of those initial gains after a bearish opening for US markets. The main driver was the rising sovereign debt yields following the release of better US macro data and in view of investors selling bond to make room for the US treasury’s 10Y bond auction. In the STOXX 600, the best-performing sectors were once again Energy and those linked to consumption, with Consumer Goods and Household Goods leading the way, compared to the biggest drops in Real Estate and Construction (both sectors sensitive to rising interest rates). On the macro side, in the euro zone December’s inflation confirmed the preliminary data. In the US, December’s non-manufacturing ISM easily beat expectations, with the price subcomponent standing out, and November’s JOLTs job openings beat expectations. Separately, Donald Trump did not rule out the possibility of using military or economic action to seek acquisition of the Panama canal and Greenland as part of an expansionist agenda.
What we expect for today
Stock markets would open with losses of around -0.3%. Currently, S&P futures are up +0.2% (the S&P 500 ended -0.7% vs. the European closing bell). Asian markets are falling (China’s CSI 300 -0.45%, once again dragged down by fears of trade tension with the US and deflationary risks, and Japan’s Nikkei -0.3%).
Today in Germany we will learn industrial orders and retail sales for November, in the euro zone December’s economic confidence index and January’s consumer confidence, in the US December’s ADP private employment survey and the minutes from the Fed’s December meeting and in Brazil November’s industrial output.


COMPANY NEWS

BANKING SECTOR REPORT: little momentum until 2025 guidance is released in 4Q’24 results
Awaiting the guidance’25 releases in the 4Q’24 results, there is much caution and little appetite for the sector until panic scenarios can be ruled out, which in our view are unjustified. We expect an average drop in revenues of -3.3% in 2025 (vs. -1% consensus) and -10% in Net Profit (vs. -3% consensus) for a Euribor of 2.18%. We think there is still value in a sector with ample capital (13.3% CET1 on average), with a dividend yield of ~10% with buybacks, but the market wants confirmation through facts, and will be highly selective. Our top pick remains Santander, which is trading especially cheaply (0.8x P/TE’25e; 6.8x P/E’25e), and its geographical diversification means the sensitivity of its revenues to interest rates is less negative. We upgrade Caixabank’s recommendation to OVERWEIGHT following negative performance since its CMD (-6% vs. sector and -1% vs. IBEX), with +23% upside.