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BANKINTER: 4Q’20 RESULTS & T.P. UPGRADE (ANÁLISIS BANCO SABADELL)

4Q'20 vs 4Q'19 Results
N.I.I.: € 320.04 M (+1.6% vs. -0.6% expected and -1.6% expected by the market consensus);
Total Revenues: € 412.79 M (-19.0% vs. -21.0% expected and -22.1% expected by the market consensus);
Operating Profit: € 185.0 M (-18.0% vs. -15.8% expected and -17.7% expected by the market consensus);
Net Profit: € 97.06 M (-8.7% vs. -36.4% expected and -35.1% expected by the market consensus);
4Q'20 vs 3Q'20 Results
N.I.I.: € 320.04 M (+1.8% vs. -0.4% expected and -1.4% expected by the market consensus);
Total Revenues: € 412.79 M (-4.7% vs. -7.0% expected and -8.3% expected by the market consensus);
Operating Profit: € 185.0 M (-17.8% vs. -15.6% expected and -17.5% expected by the market consensus);
Net Profit: € 97.06 M (-12.5% in 3Q'20 vs. -39.0% expected and -37.8% expected by the market consensus);

The group has released better 4Q’20 Results in the banking+insurance businesses. In the former, the most positive reading stems from the better performance of core revenues (NII+fee revenues) that came in above expectations given the continuation of the commercial dynamism (with lending growing around +5.5% vs. 4Q’19, although slowing down in all of 2020 quarters YoY). This offset s the worse performance of costs. Thus, in terms of PPP, the result was slightly worse than our estimates but in line with the consensus. The surprise stems from the bottom line of the P&L statement with a CoR far below expectations at around 35bps (vs. 60bps expected). This means a CoR’20 slightly below 70bps (32bps recurring +35bps macro scenario due to Covid-19) and vs. around 80bps we expected. The key will lie in the guidance’21 to be unveiled against a backdrop where higher NPL is not materializing in the short-term (2.4% in 2020, even below 2019 levels). The FL CET1 stands at 12.29%, above 12.10% we expected and vs. 11.97% seen in 9M’20. We believe that BKT is not carrying out the dividend accrual this quarter, as that conducted in the 3Q’20 is higher than the level suggested by the ECB for dividend payment (around 15% payout). In the insurance business, we stress the positive performance although in line with our estimates (with a CR of around 81% in 4Q’20) and better than the consensus. Conference call at 9:00 (CET). We expect a positive reaction, awaiting the guidance on CoR and LDA.
After these results, we cut our Net Profit’21-22 estimates by -20%, explained in Operating Profit by the higher pressure in interest rates (-40bps over the period vs. a slight recovery we previously expected) and as we expect BKT to continue moving forward provisions given the delay in NPL creation in the short-term (thanks to the support from the ICO and the extension of moratoriums). Notwithstanding, and as we extend the valuation roll-over to 2021, our T.P. rises by around +25% to € 4.10/sh., as the flow in perpetuity (2022) is ~+20% higher (vs. 2021 previously) given the positive impact from vaccines on the macroeconomic level in the long-term. Thus, despite the Covid-19 outbreaks in the short-term, we now demand lower CoE bearing in mind also that the dividend payment prohibition has been lifted. The T.P. still lacks upside and thus we keep our SELL recommendation. Target Price: € 4.10/sh. (-14.11% potential).