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BANKINTER: THE ECB AUTHORISES LDA’S LISTING (ANÁLISIS BANCO SABADELL)

 BKT has been authorised by the ECB to distribute in kind 100% of the issue premium among its shareholders (€ 1.184 Bn) through LDA shares as a preliminary step for the listing of the insurer.
 Note that the deal was approved at the latest AGM (March’20) and was expected to be carried out in the 2H’20. However, the outbreak of Covid-19 and the regulator’s subsequent ban on dividends for the banking sector meant it had to be delayed. Now, following the ECB’s approval, the deal is subject to the DGSFP (Directorate General for Insurance and Pension Funds) not opposing it (we assume there will be no opposition) and it being registered with the Spanish regulator. With all this in mind, the IPO is expected in late April.
 The terms of the deal remain unchanged:
- The valuation of LDA continued to be € 1.434 Bn, 82.6% of the capital will be distributed among BKT’s shareholders while the remaining 17.4% will be BKT’s stake (€ 249.7 M).
- The impact on BKT’s FL CET stands at around +8bps (12.29% in 2020).
 The novelty is the one-off dividend for BKT. During the month of April and prior to the IPO, LDA will pay to BKT € 120 M as a dividend, doubling what had been announced (€ 60 M), given that LDA did not pay out dividends in 2020 and in view of the insurer’s good operating trends (lower claims rate). In spite of this, LDA’s S-II ratio will stand above 210%.
 LDA’s initial share price will be € 1.318/sh. More details will be given in the conference call with analysts at 10:00 (CET).
MARKET IMPACT
Positive news, but in line with expectations. The larger dividend announced for BKT has a substantial weight (16%) on Net Profit’21 BS(e), with no apparent impact on the valuation (as it is valued with 2022e cash flows) or capital (~10bps). We think BKT share price should lead to a correction, as the stock has outperformed the sector by +6% since the beginning of the year, underpinned by the forecast shareholder remuneration that has now been confirmed. Our T.P. already reflects the ~17% stake in LDA, which would lead us to believe that once LDA is listed, the share price will tend towards a level of € 4.20/sh. (no upside).