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LIBERBANK: 1Q’20 RESULTS AND CHANGE OF T.P. TO UNDER REVISION (ANÁLISIS BANCO SABADELL)

1Q'20 vs. 1Q'19 Results:
N.I.I.: € 137.0 M (+20.2% vs. +14.9% BS(e) and +17.5% consensus);
Total Revenues: € 177.0 M (+18.0% vs. +14.7% BS(e) and +17.3% consensus);
Operating Profit: € 82.0 M (+60.8% vs. +45.1% BS(e) and +56.9% consensus);
Net Profit: € 19.0 M (-9.5% vs. -9.5% BS(e) and 0.0% consensus);
1Q'20 vs. 4Q'19 Results:
N.I.I.: € 137.0 M (+13.2% vs. +8.3% BS(e) and +10.7% consensus);
Total Revenues: € 177.0 M (+24.6% vs. +21.1% BS(e) and +23.9% consensus);
Operating Profit: € 82.0 M (+54.7% vs. +39.6% BS(e) and +50.9% consensus);
Net Profit: € 19.0 M (+26.7% in 4Q'19 vs. +26.7% BS(e) and +40.0% consensus);

The 1Q’20 results were better than expected in all lines. In provisions, the company has made a € 31 M provision for loans (vs. € 33 M BS(e) and consensus), with € 16 M stemming from Covid-19. Thus, the total CoR came in at 49bps in 1Q’20, and for the time being the company has not given a guidance for 2020. We expect the bank to provide further details in the results presentation. We estimate a CoR of 60bps for the full year, 40bps corresponding to Covid-19. CET1 stood at 13% (+0% vs. 2019), beating expectations (12.8% BS(e)), and LBK expects a positive impact in 2020 (+17bps from the sale of Caser). If there is approval of intangible assets from software not being deducted, the effect could be significant, as this currently represents -71bps on CET1. We expect the share price to react positively to these results. We place our T.P. Under Revision. In our Covid-19 scenario of V-shaped recovery (two quarters of deep recession followed by moderate recovery in the third quarter, strong recovery in the fourth and very strong recovery in the next year, with momentum that could even last until the second year), we will cut our Net Profit/EPS’20-21e by -35%, reducing our T.P. -40% to around € 0.26/sh., which would still yield +43% upside. We reiterate our BUY recommendation. In our negative scenario of moderate U-shaped recovery (two quarters of deep recession followed by modest growth in 3Q and 4Q and strong recovery the next year and the second one; recovery in 18-24 months), we would cut our estimates by another -15%, bringing our T.P. to € 0.56/sh. (+17% upside). Since market highs on 19 February, when the Covid-19 impact began to be felt, LBK has fallen -43%, -12% vs. Ibex and -2% vs. the sector. There will be a conference call at 10:30 (CET).