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LIBERBANK: 3Q’20 RESULTS (ANÁLISIS BANCO SABADELL)

3Q'20 vs. 3Q'19 Results
N.I.I.: € 125.0 M (+7.8% vs. +5.2% BS(e) and +4.3% consensus);
Total Revenues: € 171.0 M (+7.5% vs. +7.5% BS(e) and +7.5% consensus);
Operating Profit: € 77.0 M (+28.3% vs. +26.7% BS(e) and +25.0% consensus);
Net Profit: € 18.0 M (-25.0% vs. -45.8% BS(e) and -25.0% consensus);
3Q'20 vs. 2Q'20 Results
N.I.I.: € 125.0 M (+2.5% vs. 0.0% BS(e) and -0.8% consensus);
Total Revenues: € 171.0 M (-21.9% vs. -21.9% BS(e) and -21.9% consensus);
Operating Profit: € 77.0 M (-34.7% vs. -35.6% BS(e) and -36.4% consensus);
Net Profit: € 18.0 M (-18.2% in 2Q'20 vs. -40.9% BS(e) and -18.2% consensus);

The company’s Net Profit came in at € 18 M, in line with the consensus (and vs. € 14 M BS(e)), with strong improvement in Operating Income (€ 77 M; +28% vs. 3Q’19 and vs. around +26.7% BS(e) and +25% consensus). This better performance was achieved thanks to NII, which increased by +7.8% vs. 3Q’19 (vs. +5.2% BS(e) and +4% consensus) and costs, which were reduced by -5% (vs. around -3% expected) driven by a sharp cut to administration costs (-11% vs. 3Q’19 and vs. -2.5% in staff costs). On the provisions level, the CoR of 54bps was in line with the consensus estimate (vs. 63bps BS(e)) and the guidance for the full year. Lending quality improved, with the underlying CoR (excl. Covid-19 provisions) decreasing by -4bps to 16bps (vs. 20bps in 2Q’20 and 27bps in 3Q’19).
As for capital, the CET1 ratio improved to 14.14% (+14bps vs. 2Q’20), as expected, fuelled by regulatory changes in the accounting of intangible deductions (+10bps), which we expect to see in the rest of banks in 4Q’20.
Thus, the company’s performance was strong, and we expect a neutral/positive share price reaction. We believe that the key will lie in the guidance provided in the presentation (at 09:30 CET), where LBK might raise its NII guidance. We reiterate BUY. T.P. Under Revision.