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Liberbank 2Q18 results preview: Maintaining the growth pace of revenues

 

2Q18e net profit to amount to €52mn

Liberbank will release its 2Q18 results on Monday, July 30th before market opens. The company will hold a video webcast at 09.00 CET that will be accessible from https://corporativo.liberbank.es/. We expect that 2Q18e net profit may amount to €52mn (+47.6% yoy and +72.5% qoq), implying a 1H18e net profit of €81mn (+20.4% yoy). We are slightly above the consensus that expects a net profit of €50mn.

Revenues should maintain its positive traction

We expect net interest margin to increase +10.8% yoy and +5.7% qoq, to €111mn, based on an increase on the performing loans book and a larger and more profitable fixed income portfolio. Fees may increase +2.7% qoq and +6.8% yoy, to €47mn, although this figure includes €5mn of a non–recurrent deal. Once included trading gains, dividends and other operating income, gross income should amount to €187mn, implying a +7.1% yoy growth and +9.1% qoq. 1H18e gross income may rise to €359mn (+1.6% yoy).

Good control of both operating costs and cost of risk.

Operating costs may decline –6.9% yoy and –0.1% qoq, to €100mn. The measures implemented are reaping its fruits. We expect the cost of risk to decline to 25bp (annualised). NPL ratio may decline to 6.9% (from 7.8% in 1Q18) with a c. 55% coverage ratio.

Meeting its 2018 targets

The 2018 targets were promising and 1Q18 confirmed that the bank was evolving in the right direction. The 10% increase in net interest revenue and the lower than €400mn operating costs are under reach, in our opinion.

Hold recommendation unchanged

After the fine–tuning of our estimates, our December 2018 target price is €0.51 (€0.50 previously). We recognize the positive trends of the institution since the capital increase of October 2017 and the clean–up process of the balance sheet. However, the upside potential is limited to +13.6%, a small amount compared to its peers. Hold.