CAIXABANK: ROOM FOR SURPRISES (ANÃLISIS BANCO SABADELL)
Room for surprises. T.P. € 3.26/sh. (+17%upside). BUY.CABK’s share price may be underpinned in the 1H’20 by three levers: (i) lower tension in the interest rate curve, with CABK being one of the most highly-leveraged banks (+8% in our T.P. for every +10bps in the Euribor rate); (ii) possible estimate upgrades: the consensus’ estimate for Operating Income’20 hints at a drop of -6% vs. 2019 (-4.1% BS(e)), which is far from CABK’s target of achieving neutral jaws in 2020. Performance in revenues’20 will be difficult, but the bank has leeway and flexibility in terms of costs. We believe it is likely to improve its costs target’18-21 of +3% CAGR (vs. +2.4% BS(e) and +2.8% consensus), which would have a positive impact on our T.P. (+2.5% for every -1% in the costs base annually); (iii) we continue to see potential for re-rating, given the higher Ke implied in the stock’s trading levels (12% vs. 11% BS(e) in peers). The discount should decrease if the CJEU’s ruling on IRPH clauses (expected for 1Q’20) confirms, as we expect, the opinion issued by the advocate general. We revise our estimates for 2019-21 marginally (-1.7% on average in Net Profit), without an impact on our T.P. (€ 3.26/sh., +13% upside). We reiterate BUY.
Caixabank is an investment company based in Spain. Co. is involved in investment portfolio management activities across two areas: Services and Financial Business and Insurance. In the services area, Co. provides investment solutions for companies involved in the infrastructure, energy, services and entertainment sectors. In the financial business and insurance area, Co. is engaged in the investments for international banks, insurance and specialist financial services. Co. focuses most of its banking investments in India, China, the U.S., and Central and Eastern Europe with a particular interest in retail banking. Co. is also involved in the disinvestments activities.
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