EUR 100.00 For Business Accounts Only

IBERIAN DAILY 27 AUGUST (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: BANKIA, BANKING SECTOR, LIBERBANK, PRISA.


MARKETS YESTERDAY AND TODAY

Stock markets reverted losses
The initial losses from yesterday’s opening bell eased, with stock markets ending with gains close to +1.0%. In the Euro STOXX, most sectors saw gains, led by Basic Resources and Technology, while Utilities and Telecoms were the only sectors ending in negative territory. On the macroeconomic level, July’s durable goods orders climbed in July more than expected, even the core component. In Mexico, the 2Q’20 GDP was raised slightly to -18.7% YoY from -18.9% preliminary. In China, the recovery pattern continued in July’s industrial earnings, climbing 19.6% YoY vs. 11.5% previously. India announced the greatest number of confirmed Covid-19 cases in one day (76,000 yesterday) and more than 1,000 deaths (60,000 in total, the fourth highest rate in the world). In US Results NetApp came in better than expected.
What we expect for today
European stock markets would open without a clear direction in Europe. Currently, S&P futures are down -0.2% (the S&P 500 ended up +0.5% vs. its price at the closing bell in Europe). Volatility in the US rose (VIX 23.30%). Asian markets are sliding (Japan -0.4% and Hong Kong -0.8%).
Today in the US we will see Jackson Hole meeting along with the 2Q’20 GDP and July’s pending holes sales, in the euro zone July’s M3. As for auctions, Italy will issue 6M T-bills. In US Results, Tiffany, Gap and HP, among others, will release its earnings.

COMPANY NEWS

BANKING SECTOR
According to Bloomberg, the ECB is having conversations with financial institutions to inform them that it would be considering the possibility of allowing the accrual of restructuring expenses derived from the merger process over a period of between 3 and 5 years and therefore not having to charge it at the time of the transaction. In this way, capital consumption would be implicitly benefited (by the gradually adjustment). Very positive news to be confirmed and that would come to support the merger process in the sector advocated by the ECB. This measure, together with the resolution of the ECB guidelines on the treatment of badwill and whose conclusions will be know in October, will be the true game changer of the sector. We recall that our vision is that we see difficult the M&A to succeed in 2020 due to the low visibility we still have in the final NPLs ratios. However, when uncertainty will vanish together with all flexibilities granted by ECB related to M&A, mergers (mainly national) would occur with a high probability in 2021.