IBERIAN DAILY 23 MARCH (ANÃLISIS BANCO SABADELL)
NEWS SUMMARY: ACERINOX, BANKING SECTOR, CAF, FERROVIAL, GRIFOLS, IAG, IBERDROLA, TALGO.MARKETS YESTERDAY AND TODAY
Stock markets attempt to recover from lows, but futures are falling
The support measures from Central Banks and the fiscal stimulus measures taken by Governments in the past few days helped markets rally on Friday, although gains were softened somewhat towards the end of the session. Within the Euro STOXX, Travel & Leisure, Construction and Energy were the best-performing sectors vs. Media, Pharma and Utilities, which were the worst relative performers. The president of the EC, Ursula von der Leyen, left the door open to issuing common EU bonds (coronabonds) to aid EU countries to mitigate the economic disruption caused by the coronavirus outbreak, which in Spain, where the alert state has been extended by another 15 days (to 13 April), was also demanded by PM Pedro Sánchez, as well as a joint fiscal plan to tackle the crisis. In the US, Congress did not reach an agreement on the fiscal stimulus package proposed by Trump, even though it was meant to be expanded, whereas the G20 did not make any progress in this regard either. On the macro side, in the US, February’s new home sales came in above expectations. The democrat leader warned that the US’ GDP might fall as much as -30% in 2Q’20. Separately, Bullard, from the Fed, stated once again that unemployment could reach levels of 30%.
What we expect for today
We expect European stock markets to see a bearish opening. Currently, S&P futures are down -3.53% (the S&P 500 was down -3.40% vs. its price at the closing bell in Europe). Volatility in the US dropped (VIX 66%). The Asian markets that are open are mixed (Japan +2.02% and Hong Kong -4.13%).
Today we will learn in the US, the Chicago Fed national activity index for February. In debt auctions: Belgium (5Y, 10Y and 30Y bonds), France (3M, 5M and 11M T-bills) and Germany (4M T-bills).
COMPANY NEWS
BANKING SECTOR– The ECB softens NPL criteria
Last Friday, the ECB increased the measures for the banking sectors. For state-guarantee loans that turn into non-performing loans and for their treatment in capital: (i) the bank will be flexible in their classification as “unlikely to payâ€; (ii) no coverage will be demanded over the first 7 years; and (iii) it recommends the EC to similarly modify the accounting of provisions. Additionally, it recommends banks (i) to accept the transitory period of IFRS9 (around +20bps of capital BS(e) in our coverage universe, with the exception of SAN that has already accepted it) and (ii) moderate the impact from the macroeconomic deterioration on the calculation of the Expected Loss, which will entail lower pressure on the CoR. The bank calculates that these measures, along with the release of P2G and the anticipation of art.104 CRD, will release € 12 Bn of capital, equivalent to the additional lending capacity of € 1.8 Trillion. We believe this underpins the sector to a great extent, mainly regarding the treatment of Covid-19 NPL, with Spanish and Italian banks being the main beneficiaries given the higher NPL levels and the greater impact on the economy. The EC must now ratify these measures so that in addition to the limited impact on capital the impact on 2020-22 earnings is also limited. Our main bets are SAN and CABK.
Acerinox is the parent company of a group engaged in the manufacture and sale of flat and long stainless steel products, and stainless steel wires. Co.'s major products include slabs, billets, black coils, plates, hot-rolled coils, hot-rolled sheets, flat bars, hot-rolled re-bars, hot-rolled black bars, engraved sheets, cold-rolled coils, cold-rolled sheets and circles. Co. also provides long stainless steel products, such as wire rods, angles, hot rolled flat bars, hot rolled re-bars, reinforced bars in coils, cold rolled re-bars, hot rolled black bars, cold drawn bars, and smooth turned bars. In addition, Co. offers wires, welding wire bars, and bars for electrodes.
Fauji Cement is engaged in the manufacturing and marketing of cement.
Ferrovial is a transportation company based in Spain. Co. is engaged in operations in the transportation sector. Co. specializes in the design, construction, management, administration and maintenance of transport infrastructures. Co.'s services range also includes the maintenance of parking lots, and land-, sea- and air-based transport networks. Co. is also engaged in the promotion and operation of short-stay parking lots, parking regulation and management services and promotion and sale of residents' parking.
Fomento de Construcciones y Contratas is the parent company of a group engaged in sanitation services, cleaning, maintaining, purification and distribution of water, construction of highways, hydraulic works, marine works, air and rail transport infrastructure, urban developments, housing, non-residential buildings, office buildings, toll highways, parking garages, marinas and water treatment plants. Co. is also engaged in the manufacture and sale of cement and cement infrastructures, such as precast concrete elements; and in the financial markets, and real estate development, leasing and tourism.
Iberdrola is a holding company. Through its subsidiaries, Co. operates in four segments: network business, which includes all the energy transmission and distribution activities, and other regulated activity originated in Spain, the U.K., the U.S. and Brazil; deregulated business, which includes electricity generation and sales businesses as well as gas trading and storage businesses carried on by Co. in Spain, Portugal, the U.K. and North America; renewable business, with activities related to renewable energies in Spain, the U.K., the U.S. and the rest of the world; and other businesses, including the engineering and construction businesses and the non-power businesses.
International Airlines Group is an international scheduled airline and global premium airlines. Co.'s principal place of business is London with significant presence at Heathrow, Gatwick and London City airports.
Talgo is engaged in designing, manufacturing, repairing and maintaining the railway rolling stock, as well as the manufacturing, assembling, repairing and maintaining the engines, machinery and parts of the railway systems. Co. has an industrial presence in seven countries: Spain, Germany, Kazakhstan, Uzbekistan, Russia, Saudi Arabia and U.S.A. Co. has an active fleet in Europe, Asia and North America that comprises of 94 high-speed trains and more than 1,400 Talgo tilting passenger cars. Also, Co. purchases, redesigns, constructs, leases and sells all types of real estate.
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