EUR 100.00 For Business Accounts Only

IBERIAN DAILY 30 DECEMBER (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: IAG, LIBERBANK, UNICAJA.


MARKETS YESTERDAY AND TODAY

Stock markets continue to be fuelled by the unlikely approval of additional stimulus in the US
European stock markets opened with gains with the excuse that the US Congress approved D. Trump’s proposal of raising the household check, however gains moderated in the afternoon when the Senate, mostly republican, rejected the proposal, as expected. Thus, in the Euro STOXX, Real Estate (after being the worst performer the previous session) stood out on the positive side vs. the drops, although minimum, of Insurance, Banks and Financial Services. On the macroeconomic level, no relevant references were released. In Europe, the investment agreement with China is expected to be approved today. In Spain, the government has decided not to raise the minimum wage for the time being.
What we expect for today
European stock markets would open with slight drops. Currently, S&P futures are up +0.3% (the S&P 500 closed -0.37% lower vs. its price at the closing bell in Europe). Volatility in the US rose (VIX 23.08). Asian markets are mixed (China +1.1%, Japan -0.45%).
Today in Spain we will learn December’s CPI and October’s current account balance, in the US wholesale inventories and pending home sales, both for November.


COMPANY NEWS

UNICAJA/LIBERBANK. Announcement of their merger agreement. We maintain BUY for both companies.
UNI and LBK have confirmed their merger, without surprises vs. the information assumed by the press in terms of corporate governance (chairman Manuel Azuaga, CEO Manuel Menéndez) and exchange ratio: 1 UNI share x 2.7705 LBK shares, meaning a valuation of 40.5%LBK/59.5% UNI (and vs. 41.8%/58.2% at current levels), and the issuance of 1,075 M shares by UNI (+68%). The merger will be executed in the 2Q/3Q’21 and will give rise to the 5th largest banks in terms of assets (around € 110 Bn), with significant geographical, culture and business complementarity and a reasonable NPA level (~€ 4.5 Bn, 67% of coverage). The project assumes synergies for 50% of LBK’s costs (around € 192 M before taxes), with an accretive impact on UNI’s EPS’23 of +67% and +270bps on RoTE’23 (up to ~6%) and a capital position >12.5% (vs. UNI’s current 13.8%). With this in mind, we calculate an impact on UNI’s T.P. of around +60% to ~€ 1.23/sh. (+72% upside). In the case of LBK, the valuation will be subject to the exchange ratio agreed, meaning a € 0.44/sh. T.P. (+64% upside). Both banks will hold a presentation of the merger this morning at 9:00 (CET).