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IBERIAN DAILY 17 MAY + 1Q’22 RESULTS. HIGHLIGHTS (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: CAIXABANK, IBERDROLA.

At the end of today’s report, and during the entire results season, we will include a presentation with positive and negative results highlights and previews for the 1Q’22 results to be released over the coming days in Spain.

Peripheral debt outperforming core
Peripheral debt in Europe ended with slight gains, as opposed to core debt, which fell around -0.5% and dragged down the Euro STOXX (-0.5%), with the S&P 500 also affected by the weak macro data out of China and the US. In the Euro STOXX, the performance was a mixed bag, with Basic Materials and Utilities leading the gains compared to Technology and Autos, which fell the most. On the macro side, in the US the Empire manufacturing index fell unexpectedly into negative territory, although the 6-month expectations remained relatively solid. In the euro zone, the EC cut 2022-23 GDP growth to 2.7% and 2.3%, respectively, from the previous 4.0% and 2.8%, whereas inflation expected over this period was raised to 6.1% and 2.7% from the previous 2.4% and 1.4%. For Spain the organisation cut the forecast to 4.0% and 3.4% for 2022-23 from the previous 5.5% and 4.4%. On another note, according to the draft of the EU’s energy plan, 50% of energy would be renewable by 2030. On the geopolitical front, Putin would not take actions due to the Finland’s and Sweden’s entry into NATO provided that the military bases are not deployed.
What we expect for today
European stock markets would open with gains of around +0.5% and with a good performance of the technology sector. Currently, S&P futures are up +0.4% (the S&P 500 ended down -0.19% vs. the European closing bell). Volatility in the US fell (VIX 27.17). Asian markets are climbing (China’s CSI 300 +0.97% and Japan’s Nikkei +0.45%).
Today in the euro zone we will learn the preliminary 1Q’22 GDP and 1Q’21 employment, in the UK March’s employment data and in the US retail sales and industrial output for April.

COMPANY NEWS

CAIXABANK. Strategic Plan’22-24. RoTE’24 >12%. Accumulated capital =38% of market cap. Immediate € 1.8 Bn share buyback announced. BUY.
The company has announced its Strategic Plan’22-24, based on a base case scenario (i.e. interest rates raised to 1.5% by the end of 2023). Additionally, it has announced a € 1.8 Bn share buyback (7.6% yield). Targets in CAGR’22-24: (i) Increase Operating Income by +15% (vs. +10% consensus), based on +8% NII (vs. +5% consensus), +2% in fee revenues (vs. +3% expected); +11% in insurance (vs. +5% expected) and flat costs (vs. +1% consensus); (ii) CoR’22-24 would remain below 0.35% (vs. 0.35% consensus) and (iii) RoTE would reach >12% and €~9 Bn of excess capital would be generated (38% market cap) to pay out to shareholders (including the buyback’22), with FL CET1 above 12% over the 2022-24 period; (iv) Payout range maintained at 50-60% (vs. 60% consensus). In a conservative scenario (i.e. interest rates at 0.7% in 2023) RoTE would reach between +10% and +11% vs. ~9% RoTE’24 consensus. This would mean €~7 Bn of excess capital BS(e), or 29% of market cap. The plan should lead to estimates being raised, and thus it should be well received, despite the strong performance of the stock (+16% vs. IBEX YtD). Trading at 0.7x P/TE and yield >10% means we reiterate our BUY recommendation.