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

2Q'20 vs. 2Q'19 Results
N.I.I.: € 137.0 M (-7.4% vs. -6.4% expected and -6.8% expected by the market consensus);
Total Revenues: € 274.0 M (+16.1% vs. +9.3% expected and +8.9% expected by the market consensus);
Operating Profit: € 134.0 M (+57.6% vs. +27.1% expected and +28.2% expected by the market consensus);
Net Profit: € 15.0 M (-71.5% vs. -71% expected and -71% expected by the market consensus);
2Q'20 vs. 1Q'20 Results
N.I.I.: € 137.0 M (-2.1% vs. -1.1% expected and -1.4% expected by the market consensus);
Total Revenues: € 274.0 M (+7.9% vs. +1.6% expected and +1.2% expected by the market consensus);
Operating Profit: € 134.0 M (+27.6% vs. +2.9% expected and +3.8% expected by the market consensus);
Net Profit: € 15.0 M (-67.4% in 1Q'20 vs. -67.5% expected and -67.5% expected by the market consensus);
The bank generated € 15 M of Net Profit, in line with expectations, with better performance in Operating Profit (+58% vs. around +28% expected), offset by higher generic provisions. Total Revenues grew +16% vs. 2Q’19 (around +6% vs. expected level), driven by trading revenues, as both NII (-2% vs. 1Q’20 and -1% expected) and fee revenues (-15% vs. 1Q’20, in line) were weak. Costs fell -6.5% vs. 1Q’20 (and vs. -1% expected) due to lower operating expenses, with all the core headings being hit by the lockdown.
Good performance of credit quality, without an increase in new NPL and with a 90bps CoR as of 1H’20 (in line), of which around 15bps recurring and around 75bps from Covid-19 upfront. Note that UNI obtained around € 48 M from the sale of Caser in the 2Q’20, earmarked to reinforced provisions. The NPL ratio fell to 4.5% (-10bps vs. 1Q’20) and the coverage improved by 5bps to 60.9% (62% in repossessed assets). Note that its CoR 2020 guidance stands at 50-90bps and after the improvement seen this quarter, we expect lower levels in the 2H’20, which will be confirmed at the presentation to be held at 10:00 (CET).
In capital we see an improvement of around 30bps in CET1 to 14.4%, in line with expectations. Around 10bps of this improvement stem from regulatory changes (SME supporting factor), with organic generation also accounting for ~10bps.
No surprises in these results, with some weakness in revenues and activity and good performance of credit quality and balance sheet ratios. We expect a neutral share price reaction. BUY. Target Price: € 0.65/sh (upside 38.04%)