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CAIXABANK: 4Q’20 RESULTS (ANÁLISIS BANCO SABADELL)

4Q'20 vs. 4Q'19 Results:
N.I.I.: € 1.253 Bn (+1.8% vs. -0.6% BS(e) and -1.0% consensus);
Total Revenues: € 2.149 Bn (+7.7% vs. -2.8% BS(e) and -2.5% consensus);
Operating Profit: € 1.055 Bn (+28.7% vs. -2.6% BS(e) and -5.9% consensus);
Net Profit: € 655.0 M (+48.9% vs. +1.1% BS(e) and +25.5% consensus);
4Q'20 vs. 3Q'20 Results:
N.I.I.: € 1.253 Bn (+2.5% vs. +0.1% BS(e) and -0.2% consensus);
Total Revenues: € 2.149 Bn (+0.3% vs. -9.5% BS(e) and -9.2% consensus);
Operating Profit: € 1.055 Bn (+5.0% vs. -20.4% BS(e) and -23.1% consensus);
Net Profit: € 655.0 M (+25.4% in 3Q'20 vs. -14.8% BS(e) and +5.7% consensus);

The 4Q’20 Results show a very positive Reading in Core Result (NII+Fee revenues-Expenses), which grew by around +10.4% vs. 4Q’19 and vs. -4.5% expenses thanks to both NII+fee revenues and the performance of costs. Specifically, NII rose by +2.5% vs. 3Q’20 and vs. flat expected, benefiting from the TLTRO accrual, with the customer spread standing at 1.89% (-1bps vs. 3Q’20 and -30bps vs. 4Q’19 given the more negative Euribor). Fee venues came in +3% above expectations, with the performance of insurance and asset management providing the best reading, which remained at similar levels or even slightly higher than those seen in the 4Q’19. Thus, only fee revenues in wholesale banking fared worse given the current situation. Moreover, as expected in the 4Q, Telefónica’s partial dividend was accounted (vs. fully accounted in the 2Q’19). Lastly, the earn out of SegurCaixa Adeslas came in at €135 M, far above the € 79 M seen in 2019 and around € 50 M we expected. This explains the better performance of total revenues.
Costs performed very solidly, falling around -6.7% vs. 4Q’19 and even beating the trend seen in 3Q’20 (-4.1%) and vs. -1.7% expected. All this translates into an efficiency ratio of ~55% in 4Q’20 vs. ~57.5% in 4Q’19.
In provisions, the YoY CoR was also a surprise, standing at ~75bps vs. ~85bps BS(e), in the middle of the guidance range (between 60-90bps). NPL levels fell to below those seen in 9M’20 (3.5%), with a slight drop in all segments (personal, corporate and public sector). In 4Q’20 the bank also made a cautious adjustment in order to get ahead of migrations within the healthy loan portfolio. Thus, Covid-19 provisions in Stage 2 rose around +70% vs. 9M’20, and 5.9% of the total portfolio is still in moratorium (6.7% in 9M’20), with 65% expiring in 1H’21.
On the bottom line, as expected the € 420 M stemming from the partial sale of Comercia was put on the books, mitigating the impairment of € -311 M for Erste Group Bank (unexpected).
The improvement in PPP and the better CoR performance explain Net Profit coming in around +18% above the consensus estimate.
Very good news in capital. The company generated +55bps organically on the quarter (thanks to Net Profit and lower APRs in our view), in addition to +52bps from the performance of markets and others (Comercia, deterioration of Erst and +10bps in software), which brought the FL CET1 ratio to levels of 13.1% vs. 12.5% BS(e) and ~12% as of 9M’20. TRIM adjustments might come in 1Q’21.
It announces a payout of 15% of Net Profit (CABK+Bankia), as expected, in tune with the indications given by the regulator. Specifically, the DPS would stand at € 0.0268/sh. (~5% yield). The stock is rising by around +3% with these results vs. the sector’s ~-1.5% drop. This results in a flat performance by the stock thus far this year. The positive slant of these results, as well as Bankia’s yesterday, and the higher capital generation expected for the merged company (~11.6%) might give rise to estimate upgrades that we do not think will be highly significant, given that we will not have visibility into the integration adjustments before 1Q’21. In any event, our preliminary and tentative T.P. for the new company would stand at levels of €>2.70/sh. (around +30% upside). BUY. T.P. Under Revision. Conference call at 12:00 (CET).