EUR 100.00 For Business Accounts Only

IBERIAN DAILY 30 JANUARY + 4Q’23 RESULTS. PREVIEWS (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ACS, BBVA, FERROVIAL.

At the end of today’s report, and during the entire results season, we will include a presentation with previews for the 4Q’23 results to be released over the coming days in Spain.

A key week for earnings in the US
The week kicked off with slight drops in Europe (worse in the IBEX, which fell below 9,900 points again) after the mounting geopolitical tensions in the Middle East and the doubts stemming from the real estate crisis in China. In addition to the Fed meeting (next Wednesday), this week will be marked by the earnings release of five of the “big seven”. Thus, in the STOXX 600 the best-performing sectors were Consumer Goods and Technology, whereas Telecoms and Banks were the worst performers. We saw mixed statements on rate cuts from the ECB: F. Villeroy suggested cutting rates starting from the next meetings, C. Lagarde stated that rate cuts could take place from June and Knot outlined that the wage data from 1Q’24 will need to be checked before cutting rates. Moreover, P. Kazimir admitted that rate cuts will come, since inflation is moving in the right direction, but more data is needed to assess it. In this regard, he believes it is more likely they will begin in June than in April. In the US, the US Secretary of Defense, L. Austin, promised that necessary measures will be taken to defend the country’s troops from the Iran-backed attack. In Japan, December’s unemployment rate fell -0.1% unexpectedly. In China, the deputy PM, He Lifeng, called for more support for listed companies in an effort to help stabilise capital markets. In US business results, Franklin Resources came in better than expected.
What we expect for today
European stock markets would recover part of the ground lost yesterday, underpinned by the ECB’s comments. Currently, S&P futures are flat (the S&P 500 ended +0.63% higher vs. the European closing bell). Asian stock markets are mixed (China’s CSI 300 -0.91%, Japan’s Nikkei +0.12%).
Today in the euro zone we will learn January’s economic confidence and the 4Q’23 GDP, in Spain January’s general and core inflation and in Mexico the 4Q’23 GDP. In US business results, Microsoft, Alphabet, Pfizer and General Motors, among others, will release their earnings.



COMPANY NEWS

BBVA, BUY
The company has obtained € 2.06 Bn of Net Profit (+31.7% vs. 4Q’22 and 17% implied RoTE), around +5% above the consensus (+5.5% vs. BS(e)) thanks to the dynamic fee revenues (+27% vs. 4Q’22; +9% vs. expected), and especially to higher trading revenues (+80% vs. consensus), with costs and CoR basically in line. NII slowed (-18.5% vs. 3Q’23) and is around -7% below the consensus, due to Mexico (-2% vs. consensus), Turkey (-40% vs. consensus) and LatAm (-10% vs. consensus). In Spain NII improved +4%, in line with expectations. Solid cost control (-1% vs. consensus; +7% vs. 4Q’22), with worse performance in Spain and Mexico, offset by the rest of the areas. In provisions, CoR came in at 115bps, in line with the guidance, but with credit quality deteriorating (+14% sequential in stage 2 loans; +3% in stage 3). No surprises in capital (12.67% CET1; -5bps vs. 3Q’22) nor in shareholder remuneration (50% payout, with 40% in cash, € 0.55/sh. DPS, and ~10% buyback, € 780 M), meaning a total yield of 8.5%.
For 2024 the bank expects improved Net Profit (in line with the consensus), keeping efficiency below 42% and RoTE in the high teens, with NII improving in Spain and Mexico.
With all this in mind, the performance was a mixed bag, with some areas showing strength (fee revenues, NII in Spain and the dividend), but with signs of pressure in others (slowdown in Mexico in revenues, costs, capital). We would expect a neutral or slightly negative reaction, bearing in mind the recent performance (-2% vs. +0% sector). Awaiting the 2024 targets in order to evaluate them, we place our T.P. Under Revision.