In line with the sector, Bankia recovered its maximum levels of the summer of 2015 two years later. Nevertheless, since then, and in contrast with Alphavalue’s banks coverage, it has not managed to keep this level. Its performance is around -15% lower than the sector. With an annualised 7% ROTE, the group continued to destroy value in Q1’18 and the house’s experts don’t expect the situation to improve over the rest of the year.
It’s true the generation of net interest income was affected by the fact there were fewer days and the cost of risk was seasonally high. That said, at 40 bp, we can see this is in line with the level of the whole cycle. Meanwhile, the top line benefited from strong commercial earnings for a group which should not depend on this type of revenues.
Finally, but no less important, the quarter was not affected by the contributions to the resolution fund and the deposit guarantee fund. Analysts do not believe Bankia’s profitability problem is related to the lack of critical mass. One explanation which is less public could be the low level of customer loyalty. The management team recently unveiled a three-year business plan which forecasts a strong improvement in profitability, with ROTE (based on a 12% CET1) reaching 11% in 2020. Alphavalue’s weighted target price points to quite a valuable stock.