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IBERIAN DAILY 03 FEBRUARY + 4Q’21 RESULTS. HIGHLIGHTS AND REST OF PREVIEWS (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ACCIONA, BBVA, SIEMENS GAMESA, REPSOL, UNICAJA.

At the end of today’s report, and during the entire results season, we will include a presentation with positive and negative results highlights and previews for the 4Q’21 results to be released over the coming days in Spain.

Markets await the ECB’s meeting
The European stock markets remained stable ahead of the ECB’s meeting today and following the unexpected inflation bump in Europe, which erased part of the gains from the early session. Within the Euro STOXX, the best-performing sectors were Household Goods and Chemicals, whereas Retail and Energy saw the biggest drops. On the macro side, in the Euro zone, January’s preliminary inflation accelerated unexpectedly to 5.1%, whereas core inflation slowed less than expected to 2.3%. In the US, January’s ADP private employment survey showed an unexpected job destruction of over 300,000. In Brazil, the BCB raised the reference Selic rate by 150bps to 10.75% . As for the OPEC+, in a very brief meeting, the institution agreed to maintain the 400,000 barrels/day production increase agreed in July, meaning that there were few dissenting voices. With demand recovering, the agreed increase backs crude oil prices reaching US$ 90.00/barrel. In US business results, Dr. Horton, MetLife, QUALCOMM and T-Mobile, among others, beat expectations.
What we expect for today
The European stock markets would open with drops of around -0.5% awaiting the ECB’s decision, with the Technology sector dragged down by the Nasdaq and doubts about the outlook of companies such as Meta (Facebook). Currently, S&P futures are down -1% (the S&P 500 ended +0.57% higher vs. the European closing bell). Volatility in the US rose (VIX 22.09). Asian markets are sliding (China’s CSI 300 closed and Japan’s Nikkei -1.06%).
Today we highlight the ECB’s and BoE’s interest rates meeting. In the euro zone we will learn January’s final services PMI. In Mexico January’s consumer confidence, and in the US non-farm productivity from 4Q’21, weekly jobless claims, and factory orders for December. In US business results, Ford, Activision Blizzard, Amazon.com, Ralph Lauren, Estee Lauder, Merck, Snap-on and Westrock, among others, will release their earnings. Debt auctions: Spain (€ 6.75 Bn in bonds due 2025, 2032, 2037 and I/L due 2027) and France (€ 11.5 Bn in bonds due 2030, 2032, 2044 and 2053).


COMPANY NEWS
BBVA, SELL
The bank reported € 1.34 Bn of Net Profit (-4% vs. 4Q’20), ~+20% above expectations thank to higher core revenues (NIII ~+7% vs. expectations on Turkey; fee revenues ~+10% vs. expectations), higher trading revenues (x2 vs. consensus) and lower provisions (93bps CoR, in line with 9M’21 and vs. 100bps expected). On the negative side we stress (i) the strong rise in costs (+13%; ~+8% vs. expectations), with pressure in all regions; (ii) the lending deterioration in Turkey (rise in NPL and 133bps CoR’21 (>200bps in 4Q’21 BS(e)) and (iii) the lack of momentum in revenues in Spain (NII -0.6% vs. 3Q’21; -1.5% vs. expectations). On the positive side we see (i) the good performance of Mexico in all headings, with gradual recovery of revenues and reduction of CoR, (ii) the strong improvement in fee revenues in all regions and (iii) lower provisions for general risks. On the consolidated level, revenues improve by +20%, total revenues +28% and Net Profit +1.5% (+88% on a recurring basis), with RoTE standing at ~11%. The group ended 2021 with a 12.75% CET1 (vs. 12.86% BS(e ) and 13.25 consensus), a drop of -43bps on the quarter due to the FX impact and lower valuation adjustments, higher RWA and regulatory effects. The positive surprise was the announcement of a € 0.31/sh. DPS’21 (+14% vs. expectations; 5.3% yield and 46% payout) and the activation of the second buyback tranche (€ 2 Bn, 5% yield) when the current one comes to an end (€ 1.5 Bn, with around 60% already executed). As its 2022 expectations, the group outlined 100bps of CoR, double-digit revenue growth, 11.5%-12% CET1 and cost growth below inflation, which is not new and in line with expectations.
Mixed performance, with strong momentum of revenues, particularly in Mexico although with doubts on the sustainability of growth/lending quality in Turkey and momentum in Spain. We foresee a neutral/positive reaction bearing in mind the sustained shareholder remuneration and the better figures vs. expectations. The share price has climbed +10% YtD (+1% vs. sector and +10% vs. Ibex).
REPSOL BUY
According to the press, Crédit Agricole and Macquarie are the possible candidates to acquire 30% of REP Renovables. The valuations would stand at €~6 Bn (for 100% of equity), meaning that this 30% stake would be valued at € 1.8 Bn. Potential investors are expected to submit their bids in the coming weeks. REP’s strategy is to incorporate a partner in its renewables division and then list it on the stock market at the same time as it incorporates retail partners in wind and solar farms, such as the recent sale of 49% of the Delta wind farm to Pontegaeda at an EV/MW ratio of 1.49x (vs. 1.2x in our valuation). If confirmed, this would be positive news, given that the valuation of the subsidiary in this transaction (€ 6 Bn for 100%) would stand above our valuation (€ 3.47 Bn equity) and allow the company to reduce its NFD by ~-24%. Assuming the valuation mentioned in the transaction would add +5% to our T.P. This option would allow REP to enhance the value of its renewable assets (prior step for an IPO) and allocate these funds to finance the capex planned in renewables (€ 4.3 Bn to add +4.3 GW, with the objective of reaching 6 GW).

UNICAJA, BUY
The bank reported € -18 M of Net Profit in the 4Q’21 vs. € -242 M expected (-258 M consensus), as personnel restructuring expenses (€ -368 M) were directly accounted in equity (-110bps in CET1, already expected). Excluding this impact, the performance was slightly better than expected in revenues (-7% vs. 4Q’20 and vs. -9% BS(e ) and -11% consensus) on momentum in fee revenues (+20% vs. +14% expected) and higher trading revenues. With this in mind, the NII came in at € 235 M, a disappointing level, meaning a -6.5% drop vs. 3Q’21 and vs. -4% expected. Costs (-3.5% vs. 4Q’20) and the CoR (-41bps) were in line with expectations although we see a slight deterioration of the lending quality with a higher-than-expected rise in new NPL. CET1 12%, in line.
We foresee a neutral/negative reaction of the share price given the weakness of NII. The share price has climbed around +9% YtD (in line with the sector and around +10% vs. Ibex).