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LIBERBANK: 2Q’20 RESULTS (ANÁLISIS BANCO SABADELL)

2Q'20 vs 2Q'19 Results
N.I.I.: € 122.0 M (+5.2% vs. +6.0% BS(e) and +4.3% consensus);
Total Revenues: € 219.0 M (+16.5% vs. +13.3% BS(e) and +12.8% consensus);
Operating Profit: € 118.0 M (+26.9% vs. +26.9% BS(e) and +23.7% consensus);
Net Profit: € 22.0 M (-57.7% vs. -69.2% BS(e) and -59.6% consensus);
2Q'20 vs 1Q'20 Results
N.I.I.: € 122.0 M (-10.9% vs. -10.2% BS(e) and -11.7% consensus);
Total Revenues: € 219.0 M (+23.7% vs. +20.3% BS(e) and +19.8% consensus);
Operating Profit: € 118.0 M (+43.9% vs. +43.9% BS(e) and +40.2% consensus);
Net Profit: € 22.0 M (+15.8% in 1Q'20 vs. -15.8% BS(e) and +10.5% consensus);
The company has released slightly better 2Q’20 results in core revenues (NII and fee revenues), which, added to increased revenues from EDP explain the improvement seen in gross revenues. The most positive reading comes from credit volumes, which grew +7.4% vs. 2Q’19 (+5.2% in Public Administrations vs. expected levels of ~4%), mitigating the fall in the yield on the portfolio to levels of 1.61% (due to lower consumption levels and strong growth in mortgages), lows of the past 8 quarters. Underlying fee revenues (that is excluding the € 38 M linked to the Caser deal) totalled € 48 M, +6.7% vs. 2Q’19, and only -4% vs. 1Q’20, with a very good performance in savings products and investment funds.
The sour note comes from costs, which rose +7% vs. 2Q’19 and vs. our estimate of a slight reduction and the consensus estimate of +1%. That said, this is due to a one-off adjustment of € 7 M (6% of personnel costs) stemming from workforce layoffs. Without this adjustment, costs would have fallen -1.2%. Even despite this, the jaws ratio remains positive and PPP has remained fully in line with our estimates (+3.3% vs. the consensus).
Good performance in CoR, which totalled 57bps in the 2Q’20, fully in line with its guidance of between 50bps-70bps, far from 122bps expected (as Caser’s capital gains have been fully earmarked to increase hedging) and vs. 49bps in 1Q’20. This fact explains the better performance of EBT (€ 26 M, +52% above expectations).
Lastly, we stress the good performance of FL CET1 that reached 14.01% (12.98% in 1Q’20) vs. 13.8% expected and 14.42% pro-forma of Covid-19+CRR adjustments (including +41bps: +29bps on IFRS9 calendar and +9bps software). We expect a positive reaction. The bank held a conference call at 11:30 (CET), where the key factors would be the approval of the IRB internal model (leaving additional +150bps in CET1 BS(e)). BUY, T.P. € 0.23/sh. (+36.46% upside).