Report
Esther Castro
EUR 100.00 For Business Accounts Only

BANKIA: 2Q’20 RESULTS (ANÁLISIS BANCO SABADELL)

2Q'20 vs 2Q'19 Results
N.I.I.: € 464.0 M (+1.3% vs. -0.1% expected and +0.9% expected by the market consensus);
Total Revenues: € 784.0 M (-4.7% vs. -4.8% expected and -4.7% expected by the market consensus);
Operating Profit: € 355.0 M (-11.0% vs. -20.0% expected and -15.3% expected by the market consensus);
Net Profit: € 48.0 M (-49.1% vs. -58.5% expected and -59.7% expected by the market consensus);
2Q'20 vs 1Q'20 Results
N.I.I.: € 464.0 M (-10.1% vs. -11.3% expected and -10.5% expected by the market consensus);
Total Revenues: € 784.0 M (-8.6% vs. -8.7% expected and -11.2% expected by the market consensus);
Operating Profit: € 355.0 M (-11.7% vs. -20% expected and -23.9% expected by the market consensus);
Net Profit: € 48.0 M (-75.4% in 1Q'20 vs. -80% expected and -80.5% expected by the market consensus);
The company has released better 2Q’20 results than expected in revenues and much better in costs. In revenues we highlight that NII fell -10.1% vs. 2Q’19 (slightly better than our estimate of -11.3% and -10.5% consensus), with the negative trend worsening (-8.7% in 1Q’20). Thus, neither the volume effect from ICO nor the lower negativisation of the Euribor have offset the drop in consumer lending (the most profitable with a yield of 8%) and the natural mortgage maturities (€ 1.5 Bn/quarter). All this has translated into a significant drop in the customer spread down to 1.46% (vs. 1.45% BS8e), 1.53% in 1Q’20 and closer to 1.60% average in 2019). Fee revenues continued to see strong growth (+9.9% vs. 2Q’19, far above the +4.4% from the consensus and more in line with our estimate of +7.4%), and for the time being speeding up vs. the +9% growth seen in 1Q’20 (all this coming against a backdrop of slowed economic activity). This is behind the better revenues performance.
Likewise, costs were surprisingly reduced by -5.9% vs. 2Q’19 and vs. 0% consensus and around +1% BS(e), which is far below the company’s guidance’20 of flat costs. Thus, the erosion of jaws was -3% vs. the double-digit figure expected (around -10%).
CoR came in at 93bps on the quarter. BKIA has accounted a Covid-19 provision of € 185 M, in addition to the € 125 M provision from 1Q’20. Thus, CoR exc. Covid-19 would total ~34bps. The Company has used the capital gains from Caser (some € 50 M) to increase the coverage ratio (as shown in our estimates). The key aspect to monitor in the results conference call (at 9:00 CET) is that, in order to maintain the guidance’20 of 70bps as of the end of the year, the implied CoR should be ~50bps in 3Q’20 and 4Q’20; otherwise, the guidance would have to be raised (which we do not expect).
Lastly, good performance of FL CET1, which reached 13.27% (+32%bps vs. 1Q’20; +15bps from organic generation and +17bps regulatory impacts) and vs. practically flat we expected. The bank announced potential adjustments of +41bps due to IFRS9 calendar, +19bps on software and +8bps on valuation adjustment, leaving a proforma level of 13.95%. In conclusion, we expected a good reaction to these results. BUY. Target Price: € 1.22/sh (upside 12.38%)
Underlying
Bankia S.A.

Bankia is a financial institution based in Spain. Co. is primarily engaged in operations in the banking sector. Co.'s business operations are structured into seven areas: Retail Banking, Business Banking, Private Banking, Asset Management and Bancassurance, Capital Markets and Holdings. Co. offers financial products and services to various customer segments, such as individuals, small and medium enterprises, large corporations, as well as public and private institutions. As of Dec 31 2014, Co. had total assets and total customer deposits of Euro233,648,603,000 and Euro106,806,698,000 respectively.

Provider
Sabadell
Sabadell

Analysts
Esther Castro

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