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The group posted a strong set of results, once again driven by a further net interest margin recovery. Further out, the management is confident that the group will manage to protect its margin and grow the top line. This confirms our view that the improvement in the Spanish banks’ profitability is largely structural.
Companies: Bankinter (BKT:BME)Bankinter SA (BKT:MCE)
AlphaValue
The second quarter trends showed slower deposit repricing, better cost control and a stable cost of risk, translating into upgraded 2023 profits guidance. Further out, in the absence of management comments, we continue to expect profitability to normalise driven by net interest margin attrition. The commercial development in consumer finance and corporate lending should also translate into an above-inflation cost expansion as well as an increase in the though-the-cycle cost of risk.
As expected, the first quarter results confirmed that SVB-driven market fears were undeserved. Interest rate hikes have remained strongly supportive, and the group has increased its market share in deposits.
This strong set of results came as no surprise and the upbeat guidance for 2023 already seems largely factored in to the consensus expectations. The sustainability of the net interest margin in 2024 is a key question in our view. On the plus side, we can’t rule out a positive ruling on the windfall tax which has been challenged by the Spanish banks.
The quarter enjoyed a substantial increase in the net interest margin while efficiency remained under control and asset quality trends showed no signs of deterioration. It remains to be seen to what extent BKT and its peers will be able to secure such gains over the long term whereas the government has moved pre-emptively, and depositors will likely ask for their share.
BKT posted a strong set of results, enabling management to upgrade its full-year guidance for 2022. We see limited risks for 2023 even if the macro-economics have deteriorated. It remains to be seen if the Spanish government will draw its windfall profit tax. However, it is already priced in the share price.
The first-quarter results came in above expectations driven by a record low cost of risk. Management reiterated its guidance not only for 2022 but also for 2023. Not only is the Ukraine invasion not expected to derail the group’s profit trajectory but it could boost this on an 18/24-month perspective as interest rate hikes percolate through to the top line.
BKT managed to beat consensus expectations on stronger revenue generation and accessorily a lower tax rate. This year, the group is expected to enjoy ongoing strong top-line expansion, controlled costs inflation and likely stable cost of risk.
The Q3 operating trends suffered from seasonality but showed an accelerated cost of risk normalisation, thus enabling management to reiterate its mid-term guidance.
The quarter showed ongoing strong commercial momentum fuelled by market share gains and supportive capital markets, in a context of stable revenue margins and efficiency. On the other hand, the cost of risk did not enjoy provision recoveries, which could come as a disappointment.
We are initiating coverage of Bankinter with an Add recommendation. BKT is Spain’s sixth-largest bank. It was founded in 1965 as an industrial bank through a joint venture by Banco de Santander and Bank of America. It was listed on the Madrid stock exchange in 1972, at which time the bank became fully independent of its founders and transformed itself into a commercial bank.
Research Tree provides access to ongoing research coverage, media content and regulatory news on Bankinter SA. We currently have 0 research reports from 3 professional analysts.
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