EUR 100.00 For Business Accounts Only

BANKIA: 1Q’20 RESULTS AND CHANGE OF T.P. TO UNDER REVISION (ANÁLISIS BANCO SABADELL)

1Q'20 vs. 1Q'19 Results
N.I.I.: € 458.0 M (-8.8% vs. -6.7% BS(e) and -5.8% consensus);
Total Revenues: € 823.0 M (+1.2% vs. +1.5% BS(e) and 0.0% consensus);
Operating Profit: € 361.0 M (+1.1% vs. +1.2% BS(e) and -2.0% consensus);
Net Profit: € 94.0 M (-54.1% vs. -26.2% BS(e) and -43.7% consensus).
1Q'20 vs. 4Q'19 Results
N.I.I.: € 458.0 M (-8.9% vs. -6.9% BS(e) and -6.0% consensus);
Total Revenues: € 823.0 M (+17.7% vs. +18.1% BS(e) and +16.3% consensus);
Operating Profit: € 361.0 M (+43.3% vs. +43.4% BS(e) and +38.9% consensus);
Net Profit: € 94.0 M (-34 in 4Q'19 vs. 151.3 BS(e) and 115.5 consensus).

The bank has released 1Q’20 Results in line with our expectations but better than the consensus through Operating Profit although with worse quality. The most unfavourable reading stems from NII, which fell by -9% vs. 1Q’19 and vs. -6% consensus and -7% BS(e) due to both volume and the strong NIM squeeze with greater negative Euribor levels. Thus, fee revenues, as outlined by the bank, fuelled revenues, which grew around 10%, in line with expectations and closer to the consensus estimates of +7%. Thus, total revenues totalled € 823 M, fully in line with our estimates and +1.2% vs. consensus. Costs came in better than expected, which rose by +1% vs. 1Q’19 and vs. +2% announced by the company due to some inflation after the integration of BMN that we and the consensus considered in our estimates. The recurring CoR came in at around 30bps, in line with expectations. The company has accounted € -125 M of provisions from Covid-19, placing CoR at around -70bps, which we consider a year-end level, that is, a preliminary range of between € 700-800 M of provisions for the full year.
CET1 stands at 12.95% vs. 13.02% as of 4Q’19, given the scant organic generation (due to the low Net Profit expected) and the high market volatility. Conference Call at 9:00 (CET). We expect a neutral/positive reaction in view of the further erosion of the P&L statement. SELL. Target Price: Under Revision
We place our T.P. Under Revision. In our scenario of a V-shaped recovery from the Covid-19 impact (two quarters of deep contraction followed by moderate recovery in the third quarter, strong recovery in the fourth and very strong the next year, with inertia carrying on even to the second year), we will cut Net Profit/EPS’20-21e by -50%, lowering our T.P. proportionally to around € 1.09/sh., which would still leave around +18% upside. However, due to the risk/reward ratio, we think there are other, more appealing options in the sector, and we reiterate our SELL recommendation. In our negative scenario of moderate U-shaped recovery (2 quarters of sharp recession followed by modest growth in 3Q and 4Q and strong recovery the next two years; recovery in 18-24 months), the additional cut would be -15%, bringing our T.P. to €~0.92/sh. (virtually without upside). Since the market high on 19/02, which is when the impact from Covid-19 began to be priced in, BKIA has fallen -48%, -16% vs. the IBEX and -3% vs. its sector.