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IBERIAN DAILY 09 MAY + 1Q’24 RESULTS. HIGHLIGHTS AND REST OF PREVIEWS (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: BANKING SECTOR, CAF, REPSOL, TELEFÓNICA.


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’24 results to be released over the coming days in Spain.

Europe continues to rally
Another session of gains in Europe (except in Italy, which fell slightly), driven by the results campaign and despite the fact that sovereign debt yields widened after several days of tightening. In the STOXX 600, Food and Insurance led the gains, whereas Autos and Basic Materials ended with the worst relative performance, falling more than -1%. On the macro side, in Spain March’s industrial output fell -1.2% YoY vs. the previous 1.3%. In Germany, the German Economic Institute expects 0.0% growth for 2024 vs. 0.1% previously due to the weakness in the manufacturing and construction sectors. In the US, the Atlanta’s Fed GDPnow indicator suggests 4.2% growth vs. 3.3% the previous week. In Brazil, March’s retail sales slowed less than expected. Meanwhile, the Central Bank of Brazil, as expected, cut the benchmark Selic rate by -25bps to 10.25%. In China, April’s trade surplus came in lower than expected in view of the significant rise in exports. In US business results, Uber released earnings below expectations, Fox and Airbnb beat expectations.
What we expect for today
Stock markets would open with slight profit taking in view of symptoms of overbuying in the very short term. Currently, S&P futures are down -0.12% (the S&P 500 ended up +0.10% vs. the European closing bell). Asian stock markets are rising (China’s CSI 300 +0.84%, Japan’s Nikkei +0.03%).
Today in the UK the BoE will meet, in the US we will learn weekly jobless claims and in Mexico April’s inflation and the BoM will meet. In US business results, Warner Bros, Viatris and Constellation Energy, among others, will release their earnings.


COMPANY NEWS

BANKING SECTOR. New capital requirements
According to the press, the Bank of Spain could announce over the coming days a new capital requirement of 50bps in 2025 and additional 50bps in 2026 as anticyclical buffer, which would mean € 6.4 Bn for Santander, € 3.8 Bn for BBVA, € 2.32 Bn for Caxibank, € 390 M for Bankinter and € 290 M for Unicaja. This reserve could be released in the future if not needed. The confirmation of this news would not come as a surprise, as it is being massively used in Europe: 23 countries have already activated this mechanism or announced the decision of activating it over the coming months with additional requirements ranging between 50bps and 250bps, and thus this announcement was partially expected. In principle, we see a limited impacted, as if draw a comparison between CET1 2026e and the current SREP requirements adding the 100bps it would remain far above: (i) 13.8% CET1 Santander/ 210bps above and 320 if CET1’24 is considered. (ii) 12,2% CET1 BBVA/ 211bps above and 231 if CET1’24 is considered. (iii) 12,1% CET1 Caixabank/ 352bps above and 282 if CET1’24 is considered. (iv) 14,1% CET1 Bankinter/ 530bps above and 440 if CET1’24 is considered. (v) and 16.3% CET1 Unicaja/ 703bps above and 593bps if CET1’24 is considered. However, this buffer coming into force could generate noise and doubts surrounding the continuity/size of the share buyback programmes. We believe this should not impact the sector.

TELEFÓNICA. 1Q’24 results beating expectations in sales and adjusted EBITDA. Agreement with DIGI announced. BUY
The 1Q’24 results beat expectations in sales (+0.9% vs. +0.5% BS(e) and +0.2% consensus), due to Brazil (already known, 25% of group revenues) and also in adjusted EBITDA (+1.9% vs. +0.9% BS(e) and +1% consensus). The domestic market came in slightly below expectations. FCF is in negative territory (€ -11 M vs. € 74 BS(e) and € 111 M consensus), on a seasonally weak quarter although the company outlined that the performance is in line with expectations. Furthermore, the company has announced it has reached a non-binding wholesale agreement with DIGI (TEF’s current customer) to provide mobile network, which was a source of uncertainty after the merger of Orange-MásMóvil. We expect this announcement to add some positive slant to today’s market reaction.