Barclays expects positive surprises for CaixaBank and Sabadell shareholders | Financial markets

The 2023 results season for Spanish banks begins next week and the market has already suggested that business profitability will show lower growth in the final period of the year. Barclays does not expect the annual results to lead to a significant improvement in earnings forecasts according to market consensus, but it does point to a positive surprise that could come from CaixaBank and Sabadell due to their excess capital and their return to shareholders.

Barclays did not change its recommendations or price targets for Spanish banks ahead of the release of fourth-quarter 2023 results. He maintains an overweight recommendation on BBVA and CaixaBank, his favorite Spanish bank stocks, and a neutral rating on Santander and Sabadell. . He does not expect market consensus to significantly change his profit forecasts for Spanish financial institutions as a result of the reports, but he points to possible positive announcements at CaixaBank and Sabadell that could be well received by the stock market on presentation day.

“We expect positive surprises for CaixaBank and Sabadell in terms of the return of excess capital, which could lead to shares higher on the day of the results presentation,” the British firm said in a report released today. Specifically, it envisages CaixaBank raising its CET1 capital ratio by 19 basis points in the fourth quarter to 12.35%, which could lead to the announcement of a €500 million distribution of excess capital to shareholders.

As for Sabadell, Barclays believes it can announce a share buyback for €500 million, equivalent to 20 basis points of its excess capital. The business is estimated to close the year with a CET 1 solvency ratio of 13.1%, which will remain unchanged during the fourth quarter of the year.

For the sector as a whole, interest margins are expected to expand less aggressively in the fourth quarter, trending towards a leveling off from the intense rate hike cycle that has now come to an end, and that asset quality will remain stable, with no further deterioration due to rising borrowing costs. Barclays also highlights the low cost of funding itself by Spanish banks compared to banks in other countries, largely due to its broad base of deposits and demand accounts.

For global Spanish banks Santander and BBVA, Barclays indicates that one of the main areas of focus will be the impact of the devaluation of the Argentine peso, which accelerated in the last quarter. Bankinter will be the first institution to announce its accounts on January 25, followed by BBVA on January 30 and Santander on January 31, Sabadell on February 1 and CaixaBank on February 2.

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