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BANKINTER: 3Q’20 RESULTS (ANÁLISIS BANCO SABADELL)

3Q'20 vs. 3Q'19 Results
N.I.I.: € 314.52 M (+2.2% vs. +2.1% expected and +0.7% expected by the market consensus);
Total Revenues: € 433.01 M (-19.8% vs. -16.3% expected and -18.0% expected by the market consensus);
Operating Profit: € 224.93 M (-14.0% vs. -7.4% expected and -10.6% expected by the market consensus);
Net Profit: € 110.92 M (-18.0% vs. -23.8% expected and -22.4% expected by the market consensus);
3Q'20 vs. 2Q'20 Results
N.I.I.: € 314.52 M (+3.3% vs. +3.1% expected and +1.8% expected by the market consensus);
Total Revenues: € 433.01 M (+1.4% vs. +5.9% expected and +3.8% expected by the market consensus);
Operating Profit: € 224.93 M (+1.1% vs. +8.9% expected and +5.2% expected by the market consensus);
Net Profit: € 110.92 M (-21.15 in 2Q'20 vs. 103.1 expected and 105.0 expected by the market consensus);

The company has released results below our estimates and those of the consensus on all major banking business lines. On the Net Profit level the figures were better, thanks exclusively to LDA.
In the banking business, the most positive reading comes from NII, which was very much in line with our estimates and around +1.5% above the consensus. As we expected, lending volumes have grown +7.5% vs. 3Q’19, underpinned by the ICO loan and the worse NIM performance, which came in at 1.43% vs. 1.52% in 3Q’19, partly explained by the greater steepening of the Euribor curve. Fee revenues have fallen -0.5% vs. 3Q’19, but -5.4% vs. 2Q’20 and vs. the flat performance both we and the consensus expected. The worse performance is explained by those linked to collection and payments that reached a level not seen in the last few years and € -10 M below 2Q’20. This fact, along with lower trading revenues, explains the worse performance of Total Revenues. Costs performed in line with expectations (around -3% vs. 3Q’19) thanks to the lower operating leverage due to Covid-19.
The CoR reached around 54bps on the quarter (22bps structural, 32bps Covid-19), slightly below 65bps we expected. Thus, all indications suggest that the bank could end 2020 at the top end of its 2020 guidance, i.e. 70bps.
Thus, the Net Profit of the banking business came in at € 68 M (-36% vs. 3Q’19), in line with our estimates but -10% below those of the consensus.
The LDA’s contribution totalled € 43 M (€ +10 M vs. expectations), with a good CR of 83.3%, in line with expectations but with higher premium growth. Thus, LDA continue to bolster Net Profit on the consolidated level.
Very good performance of FL CET1 that reached 12% vs. around 11.85% BS(e) and 11,75% in 1H’20 due mainly to Management Actions (APR reduction).
We would expect some negative bias. Conference Call 9.00 (CET). SELL. Target Price: € 3.30/sh (-4.57% potential)