EUR 100.00 For Business Accounts Only

IBERIAN DAILY 13 JANUARY (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: CAIXABANK, SANTANDER

MARKETS YESTERDAY AND TODAY

Markets in wait-and-see mode
Stability in stock markets in a session with low volume and awaiting the beginning of the US earnings session tomorrow. In the Euro STOXX, Utilities and Travel&Leisure were the best performers while Banks and Industrials saw the biggest drops. On the macroeconomic level, in Spain, industrial production climbed more than expected in November, leaving the YoY rate in positive territory. In the US, the non-farm job creation rose in December less than expected while wage gains were disappointing, easing below 3.0%. However, the unemployment rate remained near record lows of 3.5%.
What we expect for today
We expect lack of definition at today’s opening bell but with some bullish bias. Currently, S&P futures are unchanged (the S&P 500 closed -0.28% lower vs. its price at the closing bell in Europe). Volatility in the US rose (VIX 12.56%). The Asian markets that are open are climbing (Hong Kong +0.91%).
Today we will learn in the UK November’s industrial output, and in Mexico October’s fixed investment. In debt auctions, Germay will issue € 2 Bn of 3M T-bills and France € 4.5 Bn of 3M, 6M and 12M T-bills.

COMPANY NEWS

CAXABANK. Room for surprises. We reiterate BUY.
CABK’s share price may be underpinned in the 1H’20 by three levers: (i) lower tension in the interest rate curve, with CABK being one of the most highly-leveraged banks (+8% in our T.P. for every +10bps in the Euribor rate); (ii) possible estimate upgrades: the consensus’ estimate for Operating Income’20 hints at a drop of -6% vs. 2019 (-4.1% BS(e)), which is far from CABK’s target of achieving neutral jaws in 2020. Performance in revenues’20 will be difficult, but the bank has leeway and flexibility in terms of costs. We believe it is likely to improve its costs target’18-21 of +3% CAGR (vs. +2.4% BS(e) and +2.8% consensus), which would have a positive impact on our T.P. (+2.5% for every -1% in the costs base annually); (iii) we continue to see potential for re-rating, given the higher Ke implied in the stock’s trading levels (12% vs. 11% BS(e) in peers). The discount should decrease if the CJEU’s ruling on IRPH clauses (expected for 1Q’20) confirms, as we expect, the opinion issued by the advocate general. We revise our estimates for 2019-21 marginally (-1.7% on average in Net Profit), without an impact on our T.P. (€ 3.26/sh., +13% upside). We reiterate BUY.