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IBERIAN DAILY 23 MAY (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: CAIXABANK, SANTANDER, SIEMENS GAMESA.

Recession fears increase volatility in stock markets
It was a week of volatility for European stock markets due to recession fears in the light of the tighter monetary policies implemented by central banks. Thus, the ECB minutes showed the debate on the pace to tighten the monetary policy and the need of a faster normalisation process to avoid further rises in inflation expectations. Thus, the Ibex35 ended the week with gains close to 2% and near the technical reference of 8,500 points (the best-performing index after Portugal), whereas the Dax shed -0.5% and the Euro STOXX 50 -1.3%. In the Euro STOXX, Utilities and Basic Resources were the best-performing sectors whereas Consumer Goods and Food were the worst relative performers. On the macro side, there were few references, in the euro zone May’s consumer confidence dropped less than expected, and in the UK April’s retail sales rose unexpectedly. On the geopolitical front, Russia cut the gas supply to Finland during the weekend.
What we expect for today
European stock markets would open with gains of up to +1.0%, with balanced performance between growth and value and with oil companies underpinned by the rally from Brent crude. Currently, S&P futures are up +0.8% (the S&P 500 ended up +0.89% vs. the European closing bell). Volatility in the US rose (VIX 29.43). Asian markets are mixed (China’s CSI 300 -1.1% and Japan’s Nikkei +0.53%).
Today in Germany we will learn May’s IFO, in the EMU Eurogroup meeting, in the US April’s Chicago Fed activity index and in Brazil March’s economic activity index. In US Results, Nordson and Advance Auto Parts, among others, will release their earnings. As for auctions, Germany will issue € 6 Bn in 6 & 12M T-bills and France € 5.4 Bn in 3, 6 & 12M T-bills.

COMPANY NEWS

CAIXABANK. 2022-24 Strategic Plan, ROTE, FL CET and yield >12%. New T.P. € 4.00/sh. (+5% vs. previous T.P.).
CABK would pay out €~9 Bn (40% market cap) through 2024: (i) 2022, with a pay-out ranging between 50% and 60% + € 1.8 Bn share buyback’22 (joint yield >12) and (ii) pay-out’23-24 >50% + every excess of FL CET1 >12%. In CABK’s base-case scenario of 2023 interest rates (1.5% vs. 0.8% conservative scenario), RoTE’24 would stand >12%, implicitly meaning ~+12% in Net Profit’23-24 vs. BS(e) and +14%/+30% vs. consensus in 2023-24. With our hypotheses (interest rates at 1% in 2023), CABK would generate € 8.2 Bn to distribute to shareholders (around -10% vs. CABK), leaving a ~10.7% RoTE’24 (in line with CABK’s conservative scenario). We revise Net Profit’22-24 (virtually unchanged) and with the share buyback our T.P. stands at € 4.00/sh. (+5% vs. previous and +30% upside). CABK is our top pick among domestic banks, trading at 0.8x P/TE’23, with a 9% RoTE’23 and 12% yield’22, and we reiterate our BUY recommendation.

SIEMENS GAMESA. Siemens Energy launches a TOB. ACCEPT THE BID
Last Saturday, Siemens Energy (35.1% SIE) launched a voluntary TOB on the 33% stake not held in SGRE at € 18.05/sh. in cash (+27.7% vs. 17/05 closing price; +7.5% vs. Friday’s close and vs. average trading price over the past 6 months of € 18.01/sh.). The company plans its delisting either through squeeze out or by urging a voluntary delisting if it does not get hold of the necessary level. The price offered means adding to our valuation post the latest profit warning (around € 16.00/sh.) the cost synergies announced (€ 300 M), which we deem reasonable. We place our T.P. at the TOB price (€ 18.05/sh.) and change our recommendation to ACCEPT THE BID (from SELL). Although we cannot rule out the possibility of a higher price, we do not see levels above € 20.00/sh.