EUR 100.00 For Business Accounts Only

UNICAJA: 4Q’19 RESULTS (ANÁLISIS BANCO SABADELL)

4Q'19 vs. 4Q'18 Results
N.I.I.: € 142.0 M (-4.7% vs. -4.0% expected and -3.4% expected by the market consensus);
Total Revenues: € 223.0 M (-15.5% vs. -31.1% expected and -29.9% expected by the market consensus);
Operating Profit: € 72.9 M (-33.7% vs. -72.7% expected and -70.9% expected by the market consensus);
Net Profit: € 0.0 M (n/a vs. +131.0% expected and +360.0% expected by the market consensus);
4Q'19 vs. 3Q'19 Results
N.I.I.: € 142.0 M (-1.4% vs. -0.7% expected and 0.0% expected by the market consensus);
Total Revenues: € 223.0 M (-23.4% vs. -37.5% expected and -36.4% expected by the market consensus);
Operating Profit: € 72.9 M (-47.6% vs. -78.4% expected and -77.0% expected by the market consensus);
Net Profit: € 0.0 M (n/a in 3Q'19 vs. -45.8% expected and +8.0% expected by the market consensus);
The 4Q’19 results were weaker than expected on the operating level, with NII (-1% vs. expected) and lending coming in worse than expected, offset by higher trading revenues and investee revenues. Costs (+0.3% vs. 4Q’18 and -2% in 2019) were in line. Net Profit (€ 0 M vs. € 23 M BS(e) and € 57 M consensus) is affected by the € -190 M of provisions and impairments (vs. € 80 M BS(e),, ahead of the restructurings expected in the new 2020-22 Plan that widely offsets the capital gains from the sale of Ausol.
As expected, the FL CET1 ratio improved 20bps to 14%, allowing the bank to raise its payout to 45% and to increase DPS by 25% (DPS’19 € 0.048/sh.; 2x expected; 5.1% yield).
The bank has announced a new 2020-22 Strategic Plan, with a +10% annual target in Net Profit (vs. around +5% BS(e) and consensus) and >5% ROE. To accomplish this UNI will cut costs by € -70 M (-11.5% vs. costs’19 and +30% in average Net Profit’20-21 BS(e)), it will continue to reduce NPAs (target of € -600 M; -57% vs. NPA’19) and will raise the payout to 50% with a target of CET1>13%. All the targets are above our expectations and those of the consensus which imply a ROE’20-21 of ~4%, and thus we see room for the estimates to be improved. According to our estimates, the cost cutting alone has a positive impact on Net Profit of around +30%, explaining the +10% annual improvement expected. That said, for the plan to be well received, UNI will have to explain the levers to improve/maintain revenues during the presentation at 10:30 (CET). We expect volatility in the share price, but the reaction should be positive. BUY. Target Price: € 1.28/sh (upside 36.17%)