EUR 100.00 For Business Accounts Only

IBERIAN DAILY 16 NOVEMBER (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ARCELOR, BBVA, LIBERBANK, UNICAJA, SIEMENS GAMESA.


MARKETS YESTERDAY AND TODAY

Value stocks continue to fuel rises
Following Thursday’s profit taking, the positive trend resumed in both European and US markets, with the Ibex standing out in Europe and ending its best week in 20 years, with a +13% rise. Thus, in the Euro STOXX, most sectors rose, with Banks and Financial Services leading gains vs. Household and Travel&Leisure that were the worst relative performers. On the macroeconomic level, in the euro zone, the 3Q’20 GDP growth was cut by -0.1% to -4.4% YoY. On another note, the IMF kept Spain’s growth at 7.2% in 2021, raising its 2022 forecast to 4.5%. From the ECB, M. Muller announced ultra cheap loans (TLTRos) for December’s stimulus package. In Japan, the 3Q’20 GDP grew above expectations. In China, October’s industrial output rose more than expected retail sales recovered less than expected.
What we expect for today
European stock markets would open with gain of as much as +1.0% with the good relative performance of value despite the fact that Covid-19 cases continue to increase in the US and talks for fiscal stimulus remain at a standstill. Currently, S&P futures are up +0.9% (the S&P 500 closed practically unchanged vs. its price at the closing bell in Europe). Volatility in the US dropped (VIX 23.10%). Asian markets are climbing (Hong Kong +0.6%, Japan +2%).
Today, in the euro zone we will learn November’s Empire Manufacturing index. Germany will issue 6M T-bills (€ 1.5 Bn) and France 3, 6, 9 & 12M-bills (€ 7.2 Bn).


COMPANY NEWS

BBVA. Sells its US subsidiary. We change our recommendation to BUY.
BBVA has reached an agreement with PNC Financial Services over the sale of its US subsidiary BBVA USA Banchshares, for US$ 11.6 Bn (€ 9.7 Bn), to be paid in cash (and vs. the consensus’ valuation of € 3.8 Bn and € 2.6 Bn BS(e)). The agreement, which does not include the sale of the CIB and BBVA Securities businesses, is expected to be closed by mid 2021 and to generate net capital gains totalling € 580 M, with a positive impact of 300bps on CET1 (current CET1 11.52%). This price means a valuation of ~20x P/E’19 and 1.4x BV and ~50% of BBVA’s market cap vs. a ~10% contribution to Net Profit’19, and ~13% of total assets. The funds raised will give the company leeway to strengthen its footprint in other markets and/or raise shareholder remuneration via a possible share buyback programme once restrictions are lifted by the ECB. This would be very positive news as (i) it will have a significant impact on valuation (around €+1.50/sh. BS(e); +45% vs. T.P. of € 2.75/sh.), considering the sale price, although this would depend on the funds will be used; and (ii) the sale of the US subsidiary was an option highly demanded by the market, given the subsidiary’s low yields and the lack of alternatives for BBVA to improve it. We place our T.P. Under Revision and change our recommendation to BUY (from SELL). Presentation at 09:30 (CET).