EUR 100.00 For Business Accounts Only

IBERIAN DAILY 13 JULY (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: CELLNEX, ELECTRICITY/BANKS SECTOR, IAG, REPSOL.


The Spanish Govt. announces new taxes on banks and energy companies
The European stock markets rose as the session progressed, ending with slight gains, except in the case of the Ibex, which was impacted by PM Sánchez’s announcement of a controversial temporary tax on electricity companies and banks in 2023 and 2024 that would allow the Govt. to raise €~7 Bn. Thus, within the Euro STOXX, most sectors posted gains, led by Retail and Basic Resources, vs. the worse relative performance of Energy and Banks. On the macro side, awaiting today’s US inflation data, in Germany, the ZEW index contracted more than expected in July, especially the expectations component. In the US, the IMF’s new forecasts that will be officially made public tomorrow will entail a GDP’22 cut to 2.3% vs. 2.9% previously.
What we expect for today
We expect a slightly bearish opening, with Energy stocks performing worse due to the drop in crude oil prices and Technology stocks rallying following yesterday’s corrections. Currently, S&P futures are up +0.16% (the S&P 500 ended -0.91% lower vs. the European closing bell). Volatility in the US increased (VIX 27.30). Asian markets are rising (China’s CSI 300 +0.5% and Japan’s Nikkei +0.4%).
Today we will learn in the Euro zone May’s industrial output, in Spain and Germany June’s final inflation, and in the US, June’s inflation and the Fed’s Beige Book. In debt auctions: Germany (€ 1.5 Bn in bonds due 2052) and Italy (€ 7 Bn in bonds due 2025, 2029 and 2038).


COMPANY NEWS

TAX ON THE ENERGY & BANKING SECTOR IN SPAIN. IMPACT ON STOCKS
Yesterday, the Spanish Prime Minister announced that he aims to create one-off taxes for large energy companies (already expected) and banks (completely new), which in principle will be in force in 2023 and 2024. For the energy companies, it seeks to raise € 2 Bn/year, and for the main operators in the electricity, gas and oil sectors (both listed and non-listed; we exclude pure renewable companies from this impact), this would mean an impact of 1.3% on Iberdrola’s market cap (22% of funds raised, € 870 M), 5.1% in Endesa (24%, € 968 Bn); 1.2% in Naturgy (8%, € 321 M), and 7% in Repsol (31% € 1.24 Bn). As this tax was expected, share prices did not see significant variations yesterday (with average drops of -0.6%), with the exception of Repsol (-5.7%), where this news was priced in to a lesser extent. We maintain our preference for Iberdrola, Ecoener, Acciona Energía and Repsol
In the banking sector, the target is to raise € 1.5 Bn/year over the next two years due to the profits stemming from the rate hike and the positive impact from ICO loans on lending. We estimate that the tax (€ 3 Bn in two years) would entail an annual cut of -6%/-8% to the total Net Profit in the sector (-12% annually excluding profits from the foreign subsidiaries of Santander and BBVA). This news led to strong corrections yesterday in Caixabank and Unicaja (-8.6% and -7.8%, respectively), followed by Bankinter (-5%) and Santander and BBVA to a lesser extent (around -3.5%), with the sector in our coverage universe losing € 5.39 Bn of joint market cap vs. a € ~-2.2 Bn one-off impact for this tax in two years (below the target to be collected, as we assume it would also affect savings banks, among others), widely pricing in this news and assuming that this tax would least several years. The weight on Net Profit’22e (assuming that this cost would not be passed onto clients or any other possible measures) would be -3% in Santander, -6% in BBVA and -19% in domestic banks, reducuing dividend payments by this percentage, but still leaving yields >5% on average (in addition to share buybacks). Considering the sector’s accumulated drop over the past month (-22% Santander & BBVA, -25% Bankinter and Caixabank), and our doubts on the success of this proposal, we expect a rally. Caixabank, Bankinter and Unicaja remain our top picks.