Barclays Bank expects strong results for the second quarter from Spanish banks, with a strong brokerage margin that reflects the re-pricing of the credit portfolio at higher rates, and this is the reason why the British company raised its valuation of CaixaBank, its favorite. Kian Sabadell and BBVA. Barclays resumes coverage of Santander with a neutral advice and valuation of €4.4 per share.
Results season for Spanish banks is about to begin, with Bankinter as the first entity to present its accounts for the second quarter this Thursday. Between Wednesday and Friday next week, it will be Santander, Sabadell, BBVA and CaixaBank. This latter entity, in Barclays’ opinion, is best placed to present its results thanks to the strength of its brokerage margin. The company expects this title, which reflects the simpler banking business of attracting and lending money, to increase by 11% compared to the first quarter, compared to the 5.2% increase it expects on average for the group of Spanish banks it has under the hood.
Barclays bases its forecast on the positive impact of the new upward re-pricing of the loan portfolio, while offsetting liabilities are still awaiting, although it also expects a slight increase in commission income, by 1.6% on average quarterly.
The improvement in results that Barclays expects is in no way a reason to revise valuations upwards and the company is raising CaixaBank’s price target from €5 to €5.4 per share, which is 41%. Sabadell’s valuation improves from 1.2 to 1.4 euros, with a potential of 25%, and the BBVA valuation rises from 8.8 to 8.9 euros per share, which also means an increase of 25%. For Santander, the bank that appeals coverage with buy advice, the valuation is €4.4, which means a potential of 27% compared to the current price.
Despite its neutral advice, Barclays considers Santander to be trading cheap considering a price of 0.65 times book value and an expected ROTE of 12.7% for 2024. It warns of risks of a higher-than-expected deterioration in asset quality in Brazil or The United States and there is no significant capital surplus in sight. At Barclays they noted that “the complexity of the group, combined with exchange rate or regulatory risk, makes it difficult for us to have a full view of capital generation and to be more positive about future prospects.” The company estimates a fully loaded CET ratio of 12.7% in 2025, for a total shareholder return of 11.1%.
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