IBERIAN DAILY 28 JANUARY (ANÃLISIS BANCO SABADELL)
NEWS SUMMARY: BANKIA, IAG, RED ELÉCTRICA, TALGO, TELEFÓNICA.MARKETS YESTERDAY AND TODAY
Global profit taking
The high valuations along with the fears of a global pandemic led to sell-offs in risk assets, especially in stock markets and raw materials. In the Euro Stoxx, all the sectors posted losses, with Utilities and Telecoms performing the best due to the movement on debt markets, with cyclicals like Basic Resources and Technology being the worst performers. On the macro side, in Spain mortgage lending fell -3.5% in November. In Germany January’s IFO fell unexpectedly as a result of the falling expectations component. On the whole it suggests stagnating activity levels in 1Q’20 vs. the +0.1% expected by the consensus. From the ECB, Y. Mersch admitted that the unorthodox monetary policy has contributed to asset inflation, recommending a close watch for negative effects. In the US, new home sales were disappointing, with the previous data lowered sharply. In US business results, American Express and Dr. Horton beat expectations.
What we expect for today
We expect a more stable session following the strong sell-offs yesterday, although high-beta cyclicals like Autos and Basic Resources will continue to perform worse than quality sectors. Currently, S&P futures are up +0.63% (the S&P 500 closed -0.27% lower vs. its price at the closing bell in Europe). Volatility in the US rose (VIX 18.23%). The Asian markets that are open are sliding (Japan -0.55%).
Today in Spain we will learn the 4Q’19 unemployment rate, in the US December’s preliminary durable goods orders, January’s Richmond Fed index and January’s consumer confidence and in Mexico December’s trade balance. In US business results, Pfizer, Harley-Davidson, PACCAR, 3M and Starbucks, among others, will release their earnings. Debt auctions: Italy (€ 2.25 Bn in I/L bonds due 2023 and zero coupon due 2021).
COMPANY NEWS
BANKIA. Better results in NII due to lower costs, and worse in Net Profit as a result of greater provisions. SELL
The 4Q’19 results were better than expected in NII thanks to higher trading revenues and more synergies (€ 220 M vs. € 210 M announced). Thus, the Core margin was in line with the company’s guidance. The one sour note was the one-off provisions from larger impairments in order to clean up the real estate portfolio. FL CET1 performed well, standing at 13.02%. The best news was the payout being raised to 65% (6% yield vs. 50% BS(e)). As for the pledge to pay out € 2.5 Bn in DPS over the 2018-20 period, BKIA now specifies that it is linked to the payout of the excess capital generated above FL CET1 >12%, which would mean only € 1.5 Bn BS(e). This would be the key aspect to be clarified in the conference call at 9:00 (CET). We would expect a negative reception.
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.
International Airlines Group is an international scheduled airline and global premium airlines. Co.'s principal place of business is London with significant presence at Heathrow, Gatwick and London City airports.
Red Electrica is engaged in the transmission of electrical energy, the operation of the system and the management of the transmission network in the Spanish electricity system. In addition, through its subsidiaries, Co. is engaged in the acquisition, holding and management of foreign securities, co-ordination of international exchanges, provision of telecommunications services for third parties, provision of consultancy, engineering and construction services outside the Spanish electricity system, securing of funds, carrying out of financial transactions and provision of financial services.
Talgo is engaged in designing, manufacturing, repairing and maintaining the railway rolling stock, as well as the manufacturing, assembling, repairing and maintaining the engines, machinery and parts of the railway systems. Co. has an industrial presence in seven countries: Spain, Germany, Kazakhstan, Uzbekistan, Russia, Saudi Arabia and U.S.A. Co. has an active fleet in Europe, Asia and North America that comprises of 94 high-speed trains and more than 1,400 Talgo tilting passenger cars. Also, Co. purchases, redesigns, constructs, leases and sells all types of real estate.
Telefonica is engaged in the provision of public or private telecommunications services, including ancillary or complementary telecommunications services or related services. Co.'s fixed business includes: traditional fixed telecommunication services, Internet and broadband multimedia services, data and business-aplications services, and wholesale services for telecommunication operators. Co. also provides a range of mobile and related services and products to consumer and business customers, including mobile voice services, value added services, mobile data and Internet services, wholesale services, corporate services, roaming, fixed wireless, and, trunking and paging.
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