EUR 100.00 For Business Accounts Only

IBERIAN DAILY 19 MARCH (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: BANKING SECTOR, FERROVIAL, GRIFOLS, UNICAJA.

A week of Central Banks meetings
European stock markets closed unchanged, awaiting the Fed meeting. In the STOXX 600, Real Estate and Automobiles led gains, whereas defensive sectors such as Telecoms, followed by Financial Services, saw the biggest drops. On the macro side, in the euro zone, February’s final inflation confirmed the preliminary 2.6% YoY, with the core data at 3.1%. in the US, the real estate sector confidence index (NAHB) rose unexpectedly in March, standing at highs from Aug’23. On the geopolitical front, Israel will offer a six-week Gaza truce to Hamas for the release of 40 hostages. In Japan, the BoJ raised the benchmark rate to 0%/0.1% from -0.1% previously, putting an end to ETF purchases (stock market and real estate) and even though the control of the curve is split, the acquisition pace of sovereign bonds remains unchanged (approx. 6 Trillion Yen/month). On the business side, NVIDIA announced a new processor that widely exceeds that used for AI.
What we expect for today
European stock markets would open with slight losses of -0.3%. Currently, S&P futures are down -0.10% (the S&P 500 ended -0.12% lower vs. the European closing bell). Asian stock markets are mixed (China’s CSI 300 -0.6%, Japan’s Nikkei +0.66%).
Today in Germany we will learn March’s ZEW index and in the US February’s construction licences and housing starts.

COMPANY NEWS

BANKING SECTOR: The rerating will continue with the earnings delivery
Even admitting that the rerating has already started, which explains between 25-50% of the recent performance in the sector, and that we could see times of consolidation/partial profit taking, we believe that the rerating will continue. The rate of discount implied at current trading levels is excessively high: 14.4% (around 300bps above the usual 11-12%). Our investment case is based on the earnings delivery against a normalised interest rate backdrop of between 2-3% in the next 2/3 years. For this purpose, fears about seeing zero/negative rates again must be first dispelled, and secondly, investors must remain confident that the key is not facing high rates but managing the spread with normalised rates. We revise our T.P. for BBVA by +11%, that of Bankinter, Santander and Caixabank by +5/+6%, keeping Unicaja’s unchanged. We maintain our BUY recommendation for all of them except BBVA, which we cut to SELL. Our order of preference would be: (1) Santander, trading at very low ratios, not justified. (2) Caixabank: it has room to provide surprises vs. its 2024 guidance and to continue increasing earnings in 2024. (3) Unicaja: it could announce additional buybacks worth € 300 M (>11% capital). (4) Bankinter: is not expensive although its relative appeal is smaller. The share price will see a good performance but those banks trading at lower ratios will outperform it.