CAIXABANK/BANKIA: THE M&A SEASON KICKS OFF (ANÃLISIS BANCO SABADELL)
The M&A season kicks off. We maintain BUY for both. We place our T.P. for BKIA Under Revision.Friday's market reaction to the merger news was positive (+12% CABK, +30% BKIA), pricing in ~75% of the synergies that could be created in 2021 in the former(minimum of 30% of BKIA's cost base BS(e)), and a ~30% premium vs. last Thursday's closing price (03 Sep) in the second. All indications suggest that the badwill (some € 9 Bn) could be used for impairments (restructuring costs, DTAs, NPLs) and therefore, a post merger rights issue would not be necessary. The advantages of the deal are unquestionable: i) the impact on CABK's EPS'21 would be double-digit, even with a 50% premium vs. BKIA (with respect to 03 Sep's closing price), ii) the FROB would reduce its stake by ~15% (vs. ~61% currently), iii) the merged bank's NPLs'21 pro forma would stand at 6%, which would be reduced to 5% in a very conservative scenario, using part of the badwill generated, and iv) 30% of CABK's dividend policy of a 30% payout could be maintained in 2021. Aside from all these factors, the M&A season kicks off. The banks benefitting the most would be Liberbank and Unicaja (we have a BUY recommendation for both, and have placed our T.P. for both Under Revision), but also BBVA (SELL) and Santander (BUY). As for Bankinter, we see a more difficult fit (due to its Spanish business model) and we maintain SELL.
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.
Caixabank is an investment company based in Spain. Co. is involved in investment portfolio management activities across two areas: Services and Financial Business and Insurance. In the services area, Co. provides investment solutions for companies involved in the infrastructure, energy, services and entertainment sectors. In the financial business and insurance area, Co. is engaged in the investments for international banks, insurance and specialist financial services. Co. focuses most of its banking investments in India, China, the U.S., and Central and Eastern Europe with a particular interest in retail banking. Co. is also involved in the disinvestments activities.
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