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CAIXABANK: 2Q’20 RESULTS (ANÁLISIS BANCO SABADELL)

2Q'20 vs. 2Q'19 Results
N.I.I.: € 1.225 Bn (-1.3% vs. -0.4% BS(e) and -2.3% consensus);
Total Revenues: € 2.134 Bn (-8.6% vs. -14.5% BS(e) and -13.5% consensus);
Operating Profit: € 976.0 M (+533.8% vs. +437.7% BS(e) and +444.8% consensus);
Net Profit: € 115.0 M (+29.2% vs. +136.0% BS(e) and +122.5% consensus);
2Q'20 vs. 1Q'20 Results
N.I.I.: € 1.225 Bn (+2.1% vs. +3.0% BS(e) and +1.1% consensus);
Total Revenues: € 2.134 Bn (+7.6% vs. +0.8% BS(e) and +1.9% consensus);
Operating Profit: € 976.0 M (+22.6% vs. +4.0% BS(e) and +5.4% consensus);
Net Profit: € 115.0 M (+27.8% in 1Q'20 vs. +133.3% BS(e) and +120.0% consensus);

Net Profit totalled € 115 M, -15% below expectations (~ € 200 M BS(e) and consensus), due to Covid-19 provisions being moved forward, as Operating Income came in +16% above expectations, with an increase of +23% vs. 1Q’20 (-53% vs. 2Q’19 adjusted for one-off restructuring costs). As for provisions, the company has moved Covid-19 provisions totalling € 755 M forward to 2Q’20 (€ 1.15 Bn in 1H’20), leaving the CoR at 127bps, above expected levels of ~85bps (90bps consensus). The company reiterates its guidance’20 of 60-90bps, clarifying that it will stand at the high end of the range and confirming that the 2H’20 CoR will be lower than that seen in 1H’20 (106bps).
On the revenues level, Total Revenues fell -9% vs. 2Q’19 and are around +7% above expectations thanks to the better performance of NII and fee revenues, as well as higher trading revenues. NII rose around +2% (vs. +3% BS(e) and +1% consensus) thanks to the larger contribution from the ALCO portfolio. Fee revenues fell -7.6% vs. 1Q’20 (-4.4% vs. 2Q’19) and are around +10% above our expectations (+7% vs. consensus), with solid performance from asset management fees (flat vs. 2Q’19) and from CIB. Insurance revenues were in line with expectations, stable vs. 1Q’20, a positive aspect given the lockdown. Lastly, € 162 M of trading revenues were generated, above the €~60 M we expected, as the bank was able to take advantage of the situation on the markets to rotate its portfolio, reducing the volume of the ALCO portfolio. That said, trading revenues came in around -25% below 2Q’19, and this explains the aforementioned YoY drop in Operating Income.
Costs were reduced by -3.9% vs. 2Q’19 (-2.6% vs. 1Q’20), around 1% better than we expected and around 2% better than the consensus. CABK has announced € 300 M of additional savings, allowing it to improve the guidance’20, now expecting a -2% drop in 2020 (vs. -1.5% BS(e) and -0.7% consensus).
In capital, CET1 improved 30bps to 12.3%, thanks basically to the transitory implementation of IFRS9 (+35bps in 2Q’20; +48bps in 1H’20) after the increase in Covid-19 provisions.
Lastly, it announced the sale of 29% of its payment subsidiary Comercia to Global Payments for € 493 M, which would allow it to generate € 410 M of capital gains with an impact of +19bps on CET1. Comercia is consolidated by the equity method, and the sale, expected to be closed in the 2H’20, will reduce Net Profit by around € 14 M (-1.2% BS(e)).
With this in mind, the performance of the activity, revenues and expenses was highly positive although it could be tarnished by the increase in provisions and the reliability of the CoR guidance