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BANKINTER: 1Q’20 RESULTS AND CHANGE OF T.P. TO UNDER REVISION (ANÁLISIS BANCO SABADELL)

1Q'20 vs. 1Q'19 Results
N.I.I.: € 307.83 M (+11.3% vs. +10.9% BS(e) and +11.0% consensus);
Total Revenues: € 436.3 M (-13.7% vs. +6.6% BS(e) and +6.4% consensus);
Operating Profit: € 247.26 M (-2.8% vs. +2.2% BS(e) and +2.3% consensus);
Net Profit: € 130.29 M (-10.1% vs. -13.2% BS(e) and -14.5% consensus);
1Q'20 vs. 4Q'19 Results
N.I.I.: € 307.83 M (-2.3% vs. -2.6% BS(e) and -2.5% consensus);
Total Revenues: € 436.3 M (-14.4% vs. +5.6% BS(e) and +5.5% consensus);
Operating Profit: € 247.26 M (+9.6% vs. +15.2% BS(e) and +15.3% consensus);
Net Profit: € 130.29 M (+22.6% in 4Q'19 vs. +18.5% BS(e) and +16.7% consensus);

The company has released good results in line with expectations in the main business lines. However, as expected, the company has taken LDA out of the scope of consolidation, meaning that our numbers and those of the consensus are not comparable to all of the headlines.
Nevertheless, looking at trends, we can see progress being made in quality revenues. Lending volumes grew +9.2% vs. 1Q’19, even with acceleration of the growth trend seen in 4Q’19 (+8.9%), despite the seasonality. This has allowed the greater drop in the Euribor to be offset. Likewise, the strong commercial situation has allowed the bank to see +7.55% growth in fee revenues vs. 1Q’19, above the consensus estimate of +6% and our estimate of +4.3%. Thus, Total Revenues grew +8.1% on a comparative level, more than offsetting the +5.5% growth in costs. On the provision level, CoR rose to 43bps in 1Q’20 vs. the marginal level in 1Q’19 (due to provision recovery in Portugal). Thus, the company would have already outlined that the normalisation of CoR (ex coronavirus) should be closer to 30bps (given the rise in NPL in consumer credit mainly), and as such, we assume that the 13bps (up to the 43bps mentioned) are explained by the effects of Covid-19. Thus, the total of provisions accounted total around € 67 M vs. € 100 M we estimate on a quarterly basis to adjust for Covid-19 (€ 480 M-500 M BS(e) of annual provisions), which would mean an average CoR closer to 70bps. Awaiting the comments of the conference call, we believe that we could see an increase in this regard.
The CET1 ratio stood at 11.47% in 1Q’20 (vs. 11.61% as of Dec 2019), where retained earnings were totally absorbed by fair value adjustments.
With this in mind, we place our T.P. Under Revision. In our base-case scenario for COVID-19 (two quarters of strong recession followed by moderate recovery in the third quarter, strong recovery in the fourth and very strong recovery next year, with a momentum that will probably expand into the following year), we will cut our Net Profit/EPS estimates’20-21e by -30%, thus reducing our T.P. by -50% (including the new scope of consolidation) to € 3.50/sh. (