Report
Research Department
EUR 100.00 For Business Accounts Only

IBERIAN DAILY 01 JUNE (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: BANKING SECTOR, IBERDROLA, INDITEX, SIEMENS GAMESA.

Inflation fears resurface
The EU’s embargo on Russian oil and Chinas reopening, suggesting higher demand, fuelled crude oil above US$ 120/barrel. This reactivated fears about further rises in inflation, which led to debt yield widenings and sales at both sides of the Atlantic. Thus, all sectors in the Euro STOXX, with the exception of Food, saw drops, led by Technology and Basic Resources. On the macro side, in the Euro zone, May’s inflation climbed above expectations to 8.1% from 7.5% YoY in April with the core data speeding up to 3.8% YoY. On another note, the IEA warned that worse energy supply problems than those seen in the 70’s are imminent in Europe. In the US, the Conference Board consumer confidence fell less than expected in May and the Dallas Fed manufacturing index dropped more than expected. In China, Caixin manufacturing PMI climbed in May, in line with expectations to 48.1. On the geopolitical front, OPEC would be studying the possibility of suspending Russia from the crude oil production agreement (OPEC+).
What we expect for today
European markets would open with some bullish bias with a defensive profile but with energy companies being the hardest hit by the drop in crude oil. Currently, S&P futures are up +0.07% (the S&P 500 ended unchanged vs. the European closing bell). Volatility in the US rose (VIX 26.19). Asian markets are mixed (China’s CSI 300 -0.09% and Japan’s Nikkei +0.7%).
Today in the euro zone we will learn April’s unemployment rate, and in the US May’s manufacturing ISM, April’s construction expenses and the Beige Book. In debt auctions: Greece (€ 625 M in 6M T-bills).

COMPANY NEWS

INDITEX. 1Q’22 Results Preview and T.P. Cut to € 27.70/sh. We maintain our BUY recommendation.
We expect a robust sales performance in the 1Q’22 (08/06), with~+28% on a quarter that would see a decreasing performance (reopenings in the 1Q’21, halt of operations in Russia/Ukraine and China’s restrictions) with a ~+5% price rise. This will allow the company to keep the gross margin practically stable (around -10bps) and ~+78% EBIT growth. The trading update (May/7-June) will be positive (although more moderate), and we expect the company to confirm its 2022 targets. We raise our estimates’22/27e by +4% and +7% in sales and EBIT, respectively, setting our T.P. at € 27.70/sh. (+24% upside and around -4% vs. previous) due to lower recurring growth. We maintain our BUY recommendation, as the stock is pricing in nil sales growth’22/27e, which is not reasonable given its business model.

BANKING SECTOR
The Supreme Court will rule today on the class action lawsuit brought by Adicae in 2010 against most financial institutions on the retroactivity of floor clauses. We recall that in June 2016 the ordinary courts convicted the 42 banks sued by Adicae to eliminate the clause and to refund the partial retroactive, since May 2013. Later, the CJEU, declared the retroactivity from the origin of mortgages and Adicae extended its lawsuit to include this ruling. In Nov’18, the Provincial Court of Madrid ruled in favour of Adicae in this lawsuit, which was appealed by the companies, and this will be discussed today at the Supreme Court.
Expected news without impact. Note that the BoS already forced banks to provision the total retroactive amount in the mortgages with floor clauses that could be annulled, and subsequently the Govt. initiated an arbitration to speed up the return. In this regard, today’s ruling only applies to the near 9,000 contracts included in the collective lawsuit, and the banks have enough funds provisioned to face the sentence: € 625 M Caixabank and € 161 M Unicaja, as the potentially most affected banks (and €~1 Bn for the entire sector). The total risk is difficult to estimate, although Adicae itself has estimated the amount for this collective suit at € 170-190 M. Separately, the ECJ maintains that in order to recover the extra money paid by consumers, they must sue the bank and obtain a firm ruling in their favour. Thus, we see no risk of all floor clauses still in force having to be eliminated automatically.
Underlyings
Iberdrola SA

Iberdrola is a holding company. Through its subsidiaries, Co. operates in four segments: network business, which includes all the energy transmission and distribution activities, and other regulated activity originated in Spain, the U.K., the U.S. and Brazil; deregulated business, which includes electricity generation and sales businesses as well as gas trading and storage businesses carried on by Co. in Spain, Portugal, the U.K. and North America; renewable business, with activities related to renewable energies in Spain, the U.K., the U.S. and the rest of the world; and other businesses, including the engineering and construction businesses and the non-power businesses.

SIEMENS GAMESA (SGRE SM)

Provider
Sabadell
Sabadell

Analysts
Research Department

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