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BANKIA: 4Q’19 RESULTS (ANÁLISIS BANCO SABADELL)

4Q'19 vs. 4Q'18 Results
N.I.I.: € 503.0 M (-0.8% vs. +0.1% expected and -0.4% expected by the market consensus);
Total Revenues: € 699.0 M (+5.6% vs. +5.7% expected and +4.2% expected by the market consensus);
Operating Profit: € 252.0 M (+29.9% vs. +25.9% expected and +19.1% expected by the market consensus);
Net Profit: € -34.0 M (€ -40.0 M in 4Q'18 vs. € 20.29 M expected and € 11.0 M expected by the market consensus);
4Q'19 vs. 3Q'19 Results
N.I.I.: € 503.0 M (+0.2% vs. +1.1% expected and +0.6% expected by the market consensus);
Total Revenues: € 699.0 M (-20.1% vs. -20.0% expected and -21.1% expected by the market consensus);
Operating Profit: € 252.0 M (-39.6% vs. -41.4% expected and -44.6% expected by the market consensus);
Net Profit: € -34.0 M (176 in 3Q'19 vs. 20.3 expected and 11.0 expected by the market consensus);

The 4Q’19 results were better than expected in Operating Profit thanks to higher trading revenues and more synergies with BMN (€ 220 M vs. € 210 M announced). Thus, the Core margin was in line with the company’s guidance of € 1.285 Bn (in line with BS(e) but +1.4% above the consensus). We also stress that fee revenues grew +8% vs. 3Q’19, in line with our estimates but +3% above those of the consensus.
The one sour note was provisions mainly from larger impairments in order to clean up the lending portfolio (for a €1.5 Bn portfolio sale). This means incurring losses on the quarter vs. the marginal Net Profit expected. FL CET1 performed well, standing at 13.02%, thanks mainly to the € -3 Bn reduction to RWAs, due mostly to the higher impairments made.
The best news was the payout being raised to 65% (6% yield vs. 50% BS(e)), although with a complicated reading regarding the € 2.5 Bn initially pledged to be distributed over the 2018-20 period. BKIA now specifies that it will only distribute the excess capital generated above FL CET1 >12%, which would mean failing to meet the € 2.5 Bn, but € 1.5 Bn BS(e). This would be the key aspect to be clarified in the conference call at 9:00 (CET). In any case, we would expect a negative reception to these results and to the company’s message. SELL. Target Price: € 2.07/sh. (upside 24.38%)