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BANKINTER: MESSAGES FROM THE CONFERENCE CALL ON LDA’S LISTING (ANÁLISIS BANCO SABADELL)

Below we explain the main messages from the Conference Call just held for analysts on LDA’s listing:
 Accounting adjustments of the deal. The bank has explained that the impact from marking to market at reasonable levels (€ 1 Bn) the 17.4% stake to be still held in LDA generated by the deal will be accounted in equity. Thus, in the P&L statement, only the dividend to be received from LDA for the position outlined will be accounted (as evidenced in our estimates). At LDA’s CMD to be held on the 6th of April, all the details on payout will be given (we foresee around 50%, which we believe is reasonable based on its 210% S-II and business mix), as well as on the performance of the different combined ratios by business (motor, household, etc.). Similarly, the € 120 M to be received as one-off dividend before its listing will be fully accounted in BKT, not expected to be distributed among shareholders.
 There is no restriction to sell the 17.4% stake, although it is not one of its targets.
 Part of the surprise from this conference stems from the new targets’23 set by BKT. The bank has explained it plans to offset LDA’s contribution as early as in 2023 with the better performance expected in the banking business. Thus, it expects Net Profit to beat even slightly 2019 levels (a year ex Covid-19 and 100% LDA). This means >€ 550 M of Net Profiti vs. around € 484 M expected by the consensus and €~ 370 M BS(e). We assume that the dispersion between our estimates vs. those of the consensus is explained by the fact that the real percentage of LDA stake might not be adjusted (17.4%).
 In order to generate > € 550 M of Net Profit’23, the bank assumes the following hypotheses: (i) speeding up NII+fee revenues in the new businesses acquired by Evo Banco, in Ireland and Luxembourg. In this regard, in the absence of the breakdown by regions, our estimates assume a ~+1% CAGR’20-23 in NII (+2.1% consensus) and +5.1% in fee revenues (+4% consensus), (ii) expected economic recovery in Spain, (iii) positive jaws over the coming years (in line with BS(e) and the consensus); (iv)