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IBERIAN DAILY 29 JANUARY + 4Q’20 RESULTS. HIGHLIGHTS AND REST OF PREVIEWS (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: AENA, BANKING SECTOR, BBVA, CAIXABANK, GRUPO C. OCCIDENTE, PRISA, TELECOM SECTOR.

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’20 results to be released over the coming days in Spain.

MARKETS YESTERDAY AND TODAY

Liquidity tensions in China might give rise to more profit-taking
Despite falling by more than -1%, the European stock markets turned around after the US opening and following the promising weekly jobless claims data, ignoring the disappointment in the 4Q’20 GDP. Within the Euro STOXX most sectors closed in positive numbers, with Construction and Banks showing the best relative performance vs. the drops in Telecoms and Household Goods. On the macro side, in the euro zone the economic confidence index for January fell less than expected, and in Spain the 4Q’20 unemployment rate rose less than expected. In the US, the number of weekly jobless claims contracted more than expected although the 4Q’20 GDP slowed more than expected (4.0% QoQ annualised vs. 4.2% expected) due to a poor contribution from private consumption. In Japan, December’s industrial output fell more tehan expected, whereas the unemployment rate remained unchanged vs. November. The minutes from the latest BoJ meeting show the possibility of allowing for more flexibility in the movement of debt. In US business results, Mastercard and American Airlines beat expectations, Excel Energy and McDonald’s came in below.
What we expect for today
We expect stock markets to open with losses of -1% amid liquidity tensions in the Chinese monetary market, where the overnight repo has increased by +38bps to 6-year highs. Currently, S&P futures are down -1.2% (the S&P 500 closed down -0.8% vs. its price at the closing bell in Europe). Volatility in the US fell (VIX 30.21%). Asian markets are falling (CSI 300 -0.6%, Japan -1.7%).
Today in Spain and Germany we will learn the 4Q’20 GDP, January’s inflation and December’s retail sales and in the US personal outlays and December’s home sales. In US business results, Alexandria and Vertex, among others, will release their earnings. In debt auctions: Germany (€ 6 Bn in 3M and 9M t-bills) and Netherlands (€ 2 Bn in 3M and 6M t-bills).


COMPANY NEWS

CAIXABANK. Very good results above expectations in margins and CET1. Positive share price reaction.
The company has released very good results above expectations in all activity margins, with a particularly good performance in Core revenues and cost reductions. Moreover, CoR stood at 75bps in 2020 (at the mid point of its guidance rage of between 60bps and 90bps) and vs. ~85bps expected. Very good performance in CET1, which came in at 13.1% (vs. 12% as of 9M’20) and ~12.5% BS(e). These results are not adjusted for TRIM. The company confirms that the merged company’s capital ratios will be higher than expected. It announces a DPS of 0.0268% (15% of CABK+BKIA’s Net Profit), in line with expectations. We expect a positive share price reaction. Conference Call at 12:00 (CET).

BBVA, BUY
The company has obtained € 1.32 Bn of Net Profit, around +21% above the consensus (+15% vs. BS(e)) due to lower provisions, stemming mainly from recoveries in the US and better performance in Turkey. On the Operating Income level (-22% vs. 4Q’20 vs. -18% consensus) the performance was weak in NII (-2% vs. 3Q’20; around -1% vs. expectations) due to the weakness in Spain, Mexico and Turkey, partially offset by the larger gain in fee revenues (+3% vs. 3Q’20 and vs. around -1% expected), which were in line in Spain and stronger in the rest of the countries. Costs were in line, meaning a -13% drop vs. 3Q’19 with inflationary pressure in Mexico, offset by the better performance in the rest of the areas, especially the corporate centre. In loan quality, provisions were around -30% below expectations, meaning a CoR’20 of 151bps, in the low end of the guidance’20 range (150-160bps). Here the performance was positive in the US and Turkey, but worse than expected in Mexico, where the NPL ratio rose +1pp on the quarter.
By countries, on the positive side we highlight the US, with revenues accelerating and better CoR. On the negative side is Mexico, where we see a slowdown in lending growth in 4Q’20, pressure on NII (around -1% vs. 3Q’20 and -3% vs. expectations) and a rise in NPLs. In Spain there is still weakness in NII, offset by the improvement in fee revenues and cost control.
In capital, CET1 totaled 11.73% (around +20bps), better than expected as it was in line with the consensus (11.83% BS(e)), but it includes -20bps from TRIM that we were not anticipating. The bank has announced a DPS’20 of € 0.059/sh. (15% payout, 1.5% yield), in line with expectations and the aim of buying back 10% of the capital (€~2.6 Bn, ~10% yield) starting in 3Q’20 after ECB authorisation and depending on the share price.
We expect a slightly positive reaction, given that despite the confirmation of the buyback, operating performance has been weak in Mexico, and with no improvements in Spain and Turkey, which could sow doubts.