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

3Q'20 vs 3Q'19 Results
N.I.I.: € 1.222 Bn (-1.6% vs. -0.4% BS(e) and -0.6% consensus);
Total Revenues: € 2.143 Bn (-1.0% vs. -4.2% BS(e) and -3.4% consensus);
Operating Profit: € 1.004 Bn (+2.9% vs. -6.3% BS(e) and -4.5% consensus);
Net Profit: € 522.36 M (-18.9% vs. -60.7% BS(e) and -51.2% consensus);
3Q'20 vs 2Q'20 Results
N.I.I.: € 1.222 Bn (-0.2% vs. +1.0% BS(e) and +0.8% consensus);
Total Revenues: € 2.143 Bn (+0.4% vs. -2.8% BS(e) and -2.0% consensus);
Operating Profit: € 1.004 Bn (+2.9% vs. -6.3% BS(e) and -4.5% consensus);
Net Profit: € 522.36 M (+354.2% in 2Q'20 vs. +120.0% BS(e) and +173.0% consensus);
The company has released 3Q’20 results with only one snag, the slight drop in NII vs. 2Q’20 vs. the gradual recovery that the consensus and we expected. This would be due to the client margin squeezing to levels of 1.90% vs. 1.97% in 2Q’20 and 2.20% in 3Q’19, which would be explained mainly by a lower yield on the portfolio (pressure on interest rates, deleveraging in consumer loans, etc.). In this regard, the company has reiterated that NII will remain at similar levels in 4Q’20, that is € 1.22 Bn (already priced into the consensus).
Performance was better in the rest of headlines (higher fee revenues, insurance revenues and lower costs), which explains the progress made in achieving wider positive jaws. In fee revenues, we highlight the greater dynamism seen in payments, insurance distribution (especially Life-Risk, which stands at pre-Covid-19 levels) and asset management, which more than offset CIB’s worse performance. Separately, costs fell by -4% vs. 3Q’19 and vs. -2% BS(e), in line with the consensus and the guidance.
We are surprised by the CoR figure, as the company made its Covid-19 provisions in 1H’20, and in 3Q’20 it stands at 40bps YoY vs. ~60bps BS(e), consistent with meeting the year-end guidance (of between 60-90bps). The NPL ratio remained stable at 3.5% (with the solid performance in consumer loans standing out, where the NPL ratio has gone from 5% in 1H’20 to 4.6% in 9M’20), with coverage levels rising (65%) and solid performance of loans at the expiry of moratoria. Pro-forma CET1 reached 12.7% (vs. 12.2% in 2Q’20), including the sale of Comercia. We expect a warm reception. There will be a conference call at 11:30 (CET). BUY. T.P. € 2.26/sh. (upside +43.29%).