According to analysts, the most important aspect of the results is the favourable evolution of Ordinary Net Attributable Profit and the capital surplus, the main catalyst for the share price in Q4 2021.
Key figures for 9M 2021 compared to consensus expectations (Bloomberg): Net Interest Income: €10.708bn (-3.7% vs -8.0% in H1 2021 vs €10.567bn e); Gross Margin: €15.589bn (-0.2% vs -3.6% in 6M 2021 vs €15. 530 bn e); Net Margin:€8.613 bn(-2.1% vs -5.3% in H1 2021 vs €8.441 bn e); Ordinary NAB: €3.727 bn (+84.9% vs +145.6% in H1 2021); Published NAB: €3.311 bn (vs -15 M€ in 9M 2021 vs €2.988 bn e).
According to Bankinter’s research team:
“We expect a positive share price reaction to the results, which beat expectations in the most important items (revenues, costs and provisions) in all geographies. We view positively: revenue performance (in Q3 2021 flat, net interest income up +5.6% and fee income +17.6%); cost management (efficiency ratio at 44.7%; -83 bps) and normalisation in Cost of Risk/CoR (-73.7% in provisions vs -55.8% in H1 2021). CoR falls to 0.92% vs 1.0% in Q2 2021) as NPLs decline to 4.0% (vs 4.2% in Q2 2021) with a lower NPL balance (€14.9bn vs €15.7bn in Q2 2021).
Moreover, profitability/Ordinary ROE is at pre-CV19 levels (11.7% vs 11.0% in Q2 2021 vs 6.5% in 2020) and the CET1 FL capital ratio rises to 14.48% (vs 14.17% in Q2 2021) with a comfortable pro-forma (post share buyback) ratio (13.18%) and above target (11.5%/12%).
Mexico remains the main source of earnings (NAB: €1.811bn, +47.4% vs +71.8% in H1 2021 vs €1.176bn e). South America (net attributable profit: €339m; +26.2% vs +37.2% in H1 2021 vs €326m e) maintained a good pace of activity. Turkey (NPLs: €583m; +48.4% vs. +44.3% in H1 2021 vs. €512m e) surprised positively thanks to fee income (+44.6%) and the decline in provisions, accompanied by a fall in NPLs (6.51% vs. 7.33% in Q2 2021) and higher coverage (77.8% vs. 69.2% in Q2 2021). In Spain (NPLs: €1.223 bn; +160.9% vs +592.3% in H1 2021 vs €1.176bn e), the rebound in fee income & NTI ́s offset the pressure on spreads (-1.9%). The normalisation of CoR (-43.7% in provisions) explains the strong increase in the lower part of the P&L income statement.