Research that is free to access for all investors. Companies commission these providers to write research about them.
Brokers who write research on their corporate clients and make it available through our main bundle offering.
Research that is paid for directly by asset managers. Only accessible to institutional investors permissioned for access.
Event in Progress:
View the latest research on other companies in the sector.
We have adjusted our estimates. We do not consider the changes to be material; our rating is unchanged.
Banco debadell Banco de Sabadell SA
Several misses but a strong beat on provisions Sabadell posted relatively weak 4Q23 results, missing NII by 2%, at EUR1.2bn, also ending 2023 below their 25% YoY growth guidance. Fees were 3% below expectations on the back of weak customer activity, in a usually good quarter seasonally. Provisions were a 20% beat and Sabadell provided a comforting 2024 outlook - this is the bright spot in the PandL. Capital also came in strong, at a 13.2% ratio, with a largely expected EUR340m buyback as part of the organic distribution process. TSB NII was EUR273m, down 8% QoQ and Sabadell called it the bottom before gradual improvements in 2024 and beyond as structural hedge tailwinds commence. Sensible guidance Sabadell targets low-single digit NII growth (and a small decline in TSB), a mid-single digit fees decline after the Payments business sale, 2.5% clean cost growth and some improvement on the 2023 CoR (55bps). Basel IV impact is expected to be 50bps, pro forma of this any excess capital above a 13% threshold will be distributed. We believe Sabadell will deliver on capital, albeit not massively and for FY24 we include EUR200m extraordinary buyback at the end of the year. While today''s results are rather weak and the guidance remains unexciting, the one clear positive news is the performance and outlook on asset quality and the new cost initiative at TSB, which is pushing our net profit upwards for 2024-26e by 3% on average for the period. Not enough upside risk, we remain Neutral with a EUR1.35TP We are now modelling the buybacks explicitly for formal EPS forecast purposes but this does not impact our valuation as we had already taken account of the capital return in our TP. +5 topics to discuss with management inside the note
NII drives the beat... Sabadell has posted a strong bottom-line beat (20%) ahead of consensus underpinned by a solid revenue beat supported by NII, which was 4% ahead of consensus. Costs were in line with consensus, distorted by a small one-off in depreciation. The cost of risk is better than expected and aligned with the management guidance. On the balance sheet, Sabadell''s loan book was down 1.4% QoQ while the deposit base dropped 0.5% QoQ, allowing a small improvement in loan to deposit ratio in the quarter. Credit quality remains pretty solid and coverage improved slightly in the quarter to 56.5%. The strong improvement in profitability supported a 26bp build-up in the quarter, taking the ET-1 ratio to 13.1%. ... and supports the upgrade in guidance The bank has upgraded its guidance again for RoTE in the year from 10.5% to 11.5%, largely underpinned by an improvement in NII, which has been raised from above 20% to 25% in 2023. The bank expects the lending yield to continue increasing until 2Q24 at least. Regarding deposit costs, an increase should be expected but the management is confident it can further improve the customer spread. Sabadell''s management has been quite vocal in the reduction of the contribution to the SRF and DGS in Spain, which we covered in our report IBERIAN BANKS: Taxes sting, but rates look unstoppable. Upgrading estimates once more. New TP at EUR1.4 We have upgraded our estimates for 2023-25e on the back of the solid set of results posted today. We have increased NII low single digit for the next three years, which alongside marginally lower provisions, supports a c9% EPS upgrade for 2023-24e. For 2025e, we have raised our numbers 4%, keeping our more prudent stance in provisions. Overall, we raise our TP to EUR1.4/share, keeping our Neutral rating. + key topics to discuss with management team inside the note
The third quarter results showed an ongoing profitability recovery. Contrary to the market’s fears, the latter seems largely structural as confirmed by the management’s confidence for 2024.
The group posted a good set of results driven by stronger revenues and lower impairments, thus enabling the management to upgrade its full-year guidance to slightly above the consensus. More importantly, contrary to expectations, profitability is expected to improve further in 2024 thus pointing to more sustainable and maybe a more structural profitability recovery.
Sabadell 2Q23 results strong beat but mainly due to lower quality items Sabadell posted a strong bottom-line beat in 2Q23, driven mainly by lower quality items such as other operating revenues, trading and provisions. NII was 2% better than consensus (1% better than BNPPEe) while fees and costs slightly missed consensus estimates. Cost of risk was c61bp in the quarter, which was better than expected thanks to some litigation provisions released at TSB. On the balance sheet, the performance was decent in lending, growing 1% QoQ but still showing a decline of 3% YoY, while deposits were flat QoQ but down 2% YoY. Credit quality remains solid, with a small improvement in the quarter both in the NPL ratio and the coverage of NPLs. Foreclosed assets were down 3% QoQ. CET-1 was in line with consensus at 12.9%. Upgrading 2023 guidance and an upbeat guidance for 2024 Management upgraded the guidance for net profit in 2023, on higher NII (now above 20% growth vs. ''very high teens'' before) and lower CoR and marginally better costs. Regarding fees, the bank now expects a mid-single digit decline vs. low-single digit decline previously. As a result, RoTE should be now above 10.5% vs. 9% before (1H23 at 10.8%). For 2024, Sabadell''s management provided upbeat guidance, supported by lower regulatory contributions (SRF and DGS amounted to cEUR200m), stronger NII and no credit quality deterioration in sight, which should allow additional expansion in RoTE. We are more prudent on CoR expectations for 2024-25e. Upgrading estimates high single digit. New TP at EUR1.3 keep our Neutral Following the results, we have upgraded our estimates to reflect the stronger revenues and better credit quality trends. Hence, we upgrade our estimates by c9% on average for the next three years, while increasing the go-to-capital ratio after the increase in the counter-cyclical buffer at TSB. We thus raise our TP to EUR1.3 (from EUR1.25) while keeping our Neutral rating for the...
Sabadell posted solid results overall Sabadell posted an impressive 45% beat to consensus on stronger revenues, better costs and much lower provisions. NII came in 1% above consensus expectations, driven mainly by Spain. Regarding domestic NII, Sabadell''s management provided a constructive outlook for the remainder of the year and was even supportive for 2024e. The bank expects sequential improvement QoQ, which should allow NII to grow in the ''very high'' teens YoY (vs. our 21.4%). Costs were also a positive surprise, coming in 1% below consensus, justifying an upgrade to cost guidance (up 3.5% YoY vs 4% previously). Below PPP, the bank reported much better provisions, adding up to a PBT 29% above expectations. But the attention is most likely to be on capital: Sabadell saw a 24bps increase QoQ in its CET1 ratio (to 12.78%) on lower RWAs and expects a buyback to be approved relatively soon (before 2Q23 in our view). Credit quality deteriorated slightly in the quarter, with the NPL ratio up 11bps QoQ (14bp in Spain), impacted by higher NPLs and the QoQ decline in the loan book. Solid capital provides flexibility The CET1 ratio came in at c12.8%, which equals cEUR500m excess capital if we take into consideration a 350bp buffer over MDA. As capital generation should continue gathering momentum, and with no material capital headwinds expected, we think that this excess capital could be used for improving efficiency, either by acquiring some of the JVs or pursuing additional restructuring. While Sabadell said they were not considering it at this point, we believe that this could be a good solution for the bank. The cEUR200m buyback request was placed some weeks ago, so it should be approved in coming months. Upgrading numbers, sticking to our Neutral rating Following the solid 1Q23 results and improved guidance, we upgrade our estimates for 2023e by c12% and mid-single digit for 24-25e. As a result, we upgrade our TP to EUR1.25, but leave our...
The first-quarter results came in above consensus expectations and fully in line with management’s full-year guidance, thus boding well for future earnings revisions.
A solid beat in the quarter... Sabadell posted net profit of EUR149m in 4Q22, beating consensus by 56% and our estimates by 14%. Revenues were 5% ahead of consensus, supported by strong NII and a lower impact from the TSB fine as the bank has started to recover part of the cost from the insurance policies. On the other hand, fee income and trading income missed expectations. Contrary to Bankinter, Sabadell has managed to deliver a flat cost base in the quarter at EUR720m, beating expectations by 3%. Below PPP, provisions came in ahead of expectations while the tax rate was lower than expected. On the balance sheet, customer loans and deposits were down QoQ but grew 1% YoY leaving the loan-to-deposit ratio stable at c97%. ... and a realistic outlook... The main guidelines provided by the bank for 2023 include: i) NII to grow by high-teens with a deposit beta that should expand from c5% currently to 20-25%, which is aligned with our new estimates; ii) fee income is expected to decline by low single digit, as we had in our numbers; iii) costs should be around EUR3bn, which we agree with; iv) in terms of credit quality, Sabadell expects provisions to remain stable and CoR to be below 65bps - this is the only difference to our estimates as we think that Sabadell''s current coverage ratio offers limited scope for positive surprises in the CoR. Overall, Sabadell expects its ROTE to be above 9% in 2023 (10.5% excl. bank tax), with further improvements in 2024; we are below this guidance on higher provisions. ...support the upgrade in estimates and recommendation to Neutral We have upgraded our EPS forecasts for 23-25e by c25% on the back of both better revenues and marginally lower provisions than before. We have rolled our valuation model into 2025, yielding a new target price of EUR1.2 (previously EUR1.0). Consequently, we upgrade our recommendation to Neutral (vs. Underperform previously). Having said this, we favour both CaixaBank (+) and Bankinter...
Not only did the Q4 results come in ahead of consensus but the group’s guidance for 2023 has confirmed the current forecasts. The strong share price reaction showed that these 2023 consensus expectations were far from being priced in. The time will nonetheless come to question the sustainability of the earnings recovery at a time when depositors and other claimant will likely begin to ask for higher remuneration.
A strong beat in revenues drove results Sabadell posted a very solid set of results with net profit 38% ahead of expectations after a strong beat across most of the PandL lines. Revenues were 9% ahead of consensus, supported by strong NII and quite impressive fee income growth (+6% QoQ in a seasonally weak quarter). Other revenue lines were also stronger than expected thanks to higher earnings from investees of BS Capital and trading. Costs were in line and provisions marginally below our estimates. On the balance sheet, lending grew 2% QoQ and deposits dropped 1% QoQ. Credit quality deteriorated slightly in Spain during the quarter (10bp) with a coverage ratio standing at 57%, the lowest amongst domestic players. Capital was flat in the quarter at 12.52% and pay-out increased to at least 40% for 2022. Solid revenue outlook reiterated NII will continue accelerating in the coming quarter despite the changes approved by the ECB in the TLTRO facility. Fee income performance in the quarter was quite strong but will be tough to maintain in 4Q22 given the strong contribution of performance fees in 4Q21. Hence, management left the low-single digit growth guidance for fees unchanged. On costs, the management reiterated its commitment to cost discipline. The bank does not see any sign of deterioration in credit quality but probably 4Q22 will include a small top-up due to the changes in macro assumptions. Overall, it was a solid call with encouraging guidance for NII which we think will be much higher for other players like Bankinter and CaixaBank. Upgrading estimates for 2022-23 We have upgraded our estimates for 2022e by 17% to incorporate the strong beat in the quarter and also the solid trends expected for 4Q22. Regarding 2023e we have also upgraded our estimates by 6% on stronger NII than anticipated. We have kept our ''24e estimates unchanged. + key points to discuss with management inside the note
The group enjoyed perfect operating conditions in the third quarter as it was able to fully capture the benefit of rapid interest rate hikes without having to share them with employees and depositors or use them to cover increased loan losses.
A good print in 2Q22... Sabadell has printed a 46% bottom line beat in 2Q22 results, supported by strong NII and trading revenues as well as by slightly lower provisions while costs and fees were in line with consensus. The strong NII was underpinned by a larger than anticipated contribution from the bond portfolio in Spain. Credit quality showed a remarkable improvement after the portfolio disposal, taking the NPL ratio in Spain to 4% (-50bp QoQ) and coverage stable at 55.7%. Capital was flat QoQ at 12.48%. ... with improved outlook... The solid print and the better outlook from higher rates, led the bank to upgrade their NII guidance for the year from flattish to mid-single digit growth. On provisions, the bank expects 2H22 provisions to be below 1H22, improving the CoR guidance. As a result, RoTE for 2022 should be at 7%. On shareholder remuneration, the management flagged the strong board commitment to improve the shareholder remuneration getting closer to c50% as profitability improves. We have upgraded our pay-out ratio for 2023-24. ... overshadowed by the new levy from the government While it is early to include the tax in our estimates given the still heightened uncertainties on the final details of the levy we want to flag that the high operating leverage that Sabadell has magnifies the bottom impact of the new levy passed by the government. Upgrading estimates but retaining UP rating We have upgraded our 2022 estimates to reflect the strong beat in today''s results and also fine-tuned our estimates for 2023-24e driven by higher NII. Our target price remains unchanged at EUR0.90 and we keep our UP, reiterating our preference for Bankinter and CaixaBank. + key topics to discuss with management inside the note
The group posted stronger-than-expected quarterly results. However, we suspect that the beat was largely attributable to overly-cautious guidance from the IR team whereas the operating trends proved to be broadly stable qoq. Although we see strong upgrade potential for the consensus expectations at the operating level, the final move will depend on whether the Spanish government implements its proposed windfall profits tax.
A PandL beat due to non-recurrent items but a strong ET-1 ratio Sabadell has printed a 32% bottom-line beat in 1Q22 results. The good bottom line has been driven by much lower provisions, better costs and non-recurrent revenues. Recurrent revenues were in line with slower activity levels than expected both in Spain and in the UK. The softer activity and higher earnings generation translated into a very strong capital print in the quarter, which came in at 12.45%. Non recurrent revenues were impacted by the revaluation of a stake in the bank''s venture capital funds, which was partially offset with higher minorities. Trading profit was substantially ahead of our estimates, mainly thanks to derivatives trading (EUR33m vs. EUR16m for consensus and EUR13m for BNPPEe). 2022 outlook reiterated. Further colour on cost-cutting The bank has reiterated the main targets for the year, aiming to achieve a 6% ROTE in 2022 with flat NII and low single digit fee growth, costs down including the savings from the restructuring plan and cost of risk between 2019-2021 levels. The bank expects RoTE to continue improving beyond 2022 as rates increase and improve the underlying profitability of the Spanish and UK franchises. On costs, Sabadell''s management flagged that the bank has achieved cEUR13m of savings from the headcount cuts during the quarter but an additional cEUR15m of savings should be seen in 2Q22 QoQ, making the total savings cEUR110m. The cost base of the bank should be cEUR2.86-2.88bn based on these assumptions. Strong upgrades in 2022 but over a low profit base. Underperform reiterated We have updated our estimates following the strong bottom line to incorporate the stronger trading and other income performance. Additionally, we have reduced our CoR expectations and incorporated the cost guidance. Hence, we upgrade our EPS by an impressive 30% in 2022 and by 9% on average for 2023-24. As a result of these upgrades, our new target price goes up from...
The group posted reassuring results, enabling the management to reiterate its full-year guidance. The lack of an upgrade confirms that, although the group is geared to interest rate hikes, they will percolate through to the top-line only progressively.
The fourth-quarter operating results came in above expectations, driven by above-guidance fee income generation. Management upgraded its guidance for this year, largely on the back of accelerated cost of risk normalisation but without drawing on the stock of COVID-19-related provisions. However, the return to a decent profitability level remains a distant objective, leaving the speculative appeal intact.
A bottom-line beat driven by fees and lower quality items Sabadell has reported a very strong bottom-line beat on stronger fee income generation and high equity method revenues. The bank also booked cEUR55m tax recoveries, which took net profit to EUR161m vs. EUR34m for consensus and EUR41m BNPPEe. On the balance sheet, the loan book was stronger than expected, growing 2% QoQ underpinned by strong corporate lending. Credit quality was weaker than anticipated with NPL ratio increasing 14bp QoQ and coverage declined to 56%. NPL formation in the quarter was strong with gross entries representing 2.2% of the Spanish loan book. Capital was pretty much in line with expectations at 12.2%. Outlook for 2022 driven by lower cost of risk Optimistic on provisions: Sabadell has provided very constructive guidance in 2022, bringing forward the RoTE target of above 6% by one year to 2022 (vs. 2023 previously). We prefer to take a more conservative view given the trends seen on credit quality in 4Q21 (which are certainly not positive) and the decline in the coverage ratio, which in our view is not good either. Regarding NII, the bank has guided for it to be flattish in the year as the good news in the UK is offset by lower NII in Spain due to the end of the TLTRO. On fees, the bank expects low single digit growth for 2022 supported by strong AM and insurance fees. On costs, the implicit guidance points to cEUR2.87bn of costs (down EUR110m YoY), which is pretty much aligned with our estimates. Upgrading TP but keeping our Underperform We have upgraded our estimates materially, although from a very low base, to incorporate the better outlook for NII in the UK as higher rates should support the performance of TSB. We have marginally raised our cost of risk estimates for 22-24e. As a result, we upgrade our EPS for 2022-23 by c.30% and c 10% for 2024e. Hence, our new TP stands at EUR0.58 vs. EUR0.50 before. We stick to our Underperform rating and keep our...
TSB drove the beat... Sabadell has posted better than expected results, supported by stronger NII and fees as well as lower provisions, thanks to some releases in the UK. On costs, the bank missed consensus expectations by 3% but this is explained by higher restructuring charges. When adjusted for these one-offs, underlying costs were slightly higher than expected. Overall, net profit was a 23% beat on the bottom line. On the balance sheet, the performance was in line with expectations and ET-1 ratio came in at 12.1%, in line with expectations. The only negative note was credit quality, where domestic NPLs increased in the quarter. Coverage ratio in Spain improved 1pp to 59%. ... but some negatives from the call The strong NII performance was somewhat overshadowed in the call by two issues that will impact it going forward: i) the bond portfolio disposal will have a slightly larger impact than expected (EUR80m vs. EUR50m previously guided); ii) the impact from higher rates in the UK should be offset by additional margin pressure in mortgages. The management updated the interest rate sensitivity in the UK and flagged that after 24 months NII will go up by 16% for every 50bp and (6% after 12 months). In terms of capital, the only headwind expected next year will come from the EBA guidelines, leading to a 15bp reduction in the ET-1 ratio. On credit quality, the management is confident on the Spanish portfolio and does not expect any substantial deterioration to impact provisions, in fact they expect CoR in 2022 to be below 2021. Upgrading 2021 after the strong beat, leaving 2022 and 2023 unchanged Following 3Q21 results, we have updated our estimates for 2021-23 and we have upgraded our net profit for 2021 by 43% over a very low base, while we have left our estimates for 2022 and 2023 virtually unchanged. We leave our TP at EUR0.50 and keep our Underperform rating on the stock. We prefer Bankinter amongst domestic banks, on its strong...
The third quarter showed stronger-than-expected net interest margin resilience and enjoyed ongoing efficiency gains. Asset quality trends remained supportive and the group has secured extra cost savings.
Strong bottom-line beat driven by UK provisions, taxes and better fees Sabadell has posted a strong bottom-line beat, driven by provisions. Net profit was EUR147m vs. EUR84m expected by consensus. The bulk of the beat came from lower provisions in the UK. Operating trends were solid on fees, with a strong beat underpinned by service fees and a small beat in NII, again driven by the UK. Other revenues missed and costs were marginally better than consensus, although less good than our forecasts. The tax rate was lower than anticipated due to some DTA recovery in the UK following recent tax hikes. On the balance sheet, the NPL ratio declined but the coverage ratio was flattish in the quarter. ET-1 ratio came in at 12%, in line with 1Q21 and 10bp ahead of our forecasts, boosted by stronger net profit thanks to the gains from the depositary business (EUR73m). The bank has confirmed a 30% pay-out ratio for 2021 earnings. Reiterating revenue guidance and CoR outlook (slightly) better The management team has reiterated its constructive guidance on revenues after the solid performance in fees. We are more sceptical regarding NII guidance. The bank expects ''low single digit'' growth while we see it down YoY as we have a more conservative view regarding volume growth, given Euribor headwinds and the lower contribution from the ALCO book. On provisions, TSB drove the beat on provisions and management expects that trend to continue in 2H21 with similar provisions to those in 1H21. We continue to believe that Spain is where the bank faces the largest challenges, as provisioning efforts are being dedicated to pursue the reduction of legacy assets, while most of its competitors are increasing their coverage ratios. Upgrading 2021 EPS after the beat in provisions but fine-tuning 2022-23 We have upgraded our estimates for 2021 after the lower provisioning effort in the quarter and lower taxes in the UK. Regarding 2022 earnings, we have upgraded our estimates...
The quarter enjoyed the promised cost savings and, with little surprise, accelerated cost of risk normalisation. Management intends to resume capital distribution on a relatively cautious stance.
Sabadell''s strategic plan: Ambitious on revenues... Sabadell targets 6% RoTE in 2023 (vs.c3% for EBNPPe), driven by ambitious revenue targets. The bank envisages a low-single digit CAGR for NII and mid-single digit growth in fees. We agree on fee income growth but are more cautious on NII. The main difference with our forecasts is on loan growth, mainly in Spain. Hence, we expect NII to drop by low-single digits over 21-23e. ...conservative on costs... On costs, Sabadell aims to achieve new savings of EUR100m in Spain (c5% of the domestic cost base). These savings would be added to EUR140m already announced in Spain and cEUR70m at TSB. This cost-cutting exercise will be funded with additional sales in the bond portfolio, which will have EUR50m negative impact on NII from 3Q21 onwards. The bank expects the overall cost base in 2023e to be at EUR2.9bn assuming a 2% inflation rate per annum. As we flagged in the note SPANISH BANKS: Necessity is the mother of invention, we believe Sabadell could achieve cEUR350m cost savings domestically, but we only include EUR250m in our forecasts. We believe current capital levels probably explain a conservative approach on cost reduction. ... and aggressive on cost of risk The bank targets a CoR in 2023e of c60bp, which for some market participants may look conservative but we are slightly more cautious as we find that Sabadell has used most of the provisions built in 2020 to cover the legacy portfolio rather than to prepare for future deterioration. Incorporating cost savings and NII headwinds leading to a TP of EUR0.5 We have added cEUR300m of trading revenues from the sale of the bond portfolio and booked the same amount in restructuring charges. Regarding operating trends, we have incorporated the cEUR100m of cost savings in Spain - fully visible in 2023e - as well as the NII headwinds from the bond portfolio sale, which is fully visible in 2022e. Following these changes, we upgrade our EPS in 2022...
Although the updated three-year business plan confirms our view that consensus expectations were too pessimistic, it also confirms that the return to decent profitability levels remains a distant objective.
Sabadell 1Q21 PandL was ahead but credit quality raises some questions Sabadell beat consensus net income by 47%, driven by a solid revenue performance. Recurrent revenues were better than expected, with NII beating consensus by 1% and our estimates by 2%, supported by strong volume growth both in Spain and the UK. In Spain, the strong lending growth was driven by large corporates and the public sector, with new production growing 32% QoQ, while mortgages and SMEs delivered a solid performance. Revenues were also supported by stronger-than-expected equity-method revenues, which were positively impacted by the revaluation of several stakes in the venture capital portfolio. On the negative side, the bank recorded c.EUR320m of NPL inflows in the quarter (+5% QoQ) driven by a reclassification in TSB in order to reflect the new definition of defaults on the mortgage portfolio. Regarding capital, the strong growth in lending impacted the ET-1 ratio, which was stable due to stronger RWA growth than expected. Constructive outlook ahead of the strategy update The bank has provided a constructive outlook ahead of the strategy update, which will take place on 28th May. Sabadell''s new management team have provided a constructive outlook for NII, which they expect to grow sequentially from 1Q21 levels, thanks to the abovementioned lending growth, the higher contribution from TLTRO III and lower wholesale funding costs at TSB. Regarding potential asset disposals, Sabadell''s management has reiterated the message that TSB and Sabadell Mexico are core assets and there is no intention to sell them. Regarding cost cutting, the management expects to provide an update at the forthcoming investors'' day. We continue to believe that bank''s capital ratios limit its ability to achieve aggressive cost reduction plans or foster substantial lending growth. Upgrading estimates materially from a low base We are upgrading our estimates to reflect the better performance...
The quarterly performance was in line with expectations, on the way towards a progressive normalisation. However, the return to decent profitability levels remains a distant objective.
Share: