The Spanish banking sector: Time to overweight the sector
Aggregate results may amount to €3.7bn.
Spanish banks may post a 1.7% yoy decline on their 2Q18e aggregate net profit. We expect that operating trends will be pretty similar to 1Q18 but uneven through the sector. The new depreciation of emerging market currencies, the contribution to the SRF and some non–recurrent items are key to explain the evolution of the earnings. Be aware of the impact on the capital ratios of the lower unrealised gains on the fixed income portfolios!
Revision’s swing.
The aggregated 2018e net group profit of the Spanish banks has been revised downwards by a negligible –0.1% since December, 2017. Caixabank is the only institution whose estimates have been revised upwards both for 2018e and 2019e due to the good evolution seen in 1Q18 and the agreement to sale its real estate business.
Time to Overweight banks
In our January, 2018 sectorial report, we maintained our Neutral weighting for the Spanish banks because we believed that the positive impact of a future interest rates’ increase was too early anticipated. Since then, Spanish banks have underperformed both the Ibex 35 and their European index, due to the postponement of ECB’s rate increase and the fears of a new banking tax in Spain. Our four buy recommendations enjoy an upside potential that exceeds +20%, implying a positive mid–term evolution even if the new levy is finally implemented. Consequently, we modify our weighting for the sector to Overweight.
Banco Bilbao Vizcaya Argentaria is an international financial group, engaged primarily on providing banking services and consumer finance to private individuals and businesses in Spain and Portugal; providing real estate activity in Spain; providing services to international companies and investment banking, capital markets and treasury management services to clients; and providing the banking, insurance and pension businesses in Mexico and the U.S., as well as in South America.
Banco de Sabadell is a bank holding company. Through its subsidiaries, Co. provides a range of banking and financial services in Spain and internationally. Co.'s activities include investment banking, private banking, portfolio management, mortgage loans, commercial loans and other financial products and services, deposits and international banking operations. Co. is also engaged in life insurance underwriting and brokerage. Additionally, Co. is engaged in capital property and development, as well as investing in environmental projects. As of Dec 31 2014, Co. had total assets of Euro163,345,673,000 and total customer deposits of Euro98,208,370,000.
Banco Santander is a holding company, providing a range of financial products. Co.'s products and services include: retail banking business that covers all customer banking businesses; wholesale banking business; as well as asset management and insurance business. Co.'s principal operations are in Spain, the U.K., Portugal, Germany, Italy and Latin America. As of Dec 31 2014, Co.'s total assets amounted to Euro1,266,296,000,000 and total customer deposits amounted to Euro647,627,000,000.
Bankia is a financial institution based in Spain. Co. is primarily engaged in operations in the banking sector. Co.'s business operations are structured into seven areas: Retail Banking, Business Banking, Private Banking, Asset Management and Bancassurance, Capital Markets and Holdings. Co. offers financial products and services to various customer segments, such as individuals, small and medium enterprises, large corporations, as well as public and private institutions. As of Dec 31 2014, Co. had total assets and total customer deposits of Euro233,648,603,000 and Euro106,806,698,000 respectively.
Caixabank is an investment company based in Spain. Co. is involved in investment portfolio management activities across two areas: Services and Financial Business and Insurance. In the services area, Co. provides investment solutions for companies involved in the infrastructure, energy, services and entertainment sectors. In the financial business and insurance area, Co. is engaged in the investments for international banks, insurance and specialist financial services. Co. focuses most of its banking investments in India, China, the U.S., and Central and Eastern Europe with a particular interest in retail banking. Co. is also involved in the disinvestments activities.
Liberbank SA is a Spain-based company engaged in the commercial banking activities. It specializes in providing consumer loans. Furthermore, the Bank offers a range of services for entrepreneurs: savings accounts, loans, factoring, payments management, investment funds, import and export financing, guarantees, as well as commercial insurance, among others. The Bank operates through a chain of retail offices in Asturias, Cantabria, Castile La Mancha and Extremadura. It also manages such brands as Cajastur, Caja Extramadura, Caja Cantabria and CCM.
Unicaja Banco SA is a Spain-based financial institution (the Bank) engaged in the banking sector. The Bank offers services to individual and business customers. Its products and services range includes current and savings accounts, debit and credit cards, consumer and commercial loans, real estate credit, securities brokerage, funds management, leasing, factoring, pension plans, life and non-life insurance, international trade financing, money transfer, as well as treasury, among others. The Bank operates a number of branches in Spain and Morocco. The Bank is controlled by Fundacion Bancaria Unicaja.
Bankinter S.A. is a Spanish brokerage firm established in 1989. The company's line of business includes the provision of market research and trading services for Equity and Fixed Income products.
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