Bankinter : NPLs remain stable despite the adverse denominator effect of the fall in the stock of credit (+0.03% month-on-month; -3.31% year-on-year; -2.99% YTD/2023).
Most importantly, the balance of non-performing loans stands at €42,081m (+0.05% month-on-month; -9.2% year-on-year) and accumulates a decline of -2.5% YTD/YTD (vs €43,159m in Dec 2022). This is good news because: (1) there is no significant deterioration in credit quality despite rate hikes and inflation. It should be recalled that the ECB has raised its benchmark interest rates +325 bp to 4.0% (deposit)/4.50% (credit) in the last 12 months and (2) the evolution of the volume of NPLs suggests a low cost of risk/CoR in 4Q 2023. Indeed, loan-loss provisions fell -7.8% YoY in Sept (-0.1% m/m).
Conclusion: We reiterate our strategic bet on Spanish banks because: (1) they are enjoying a good momentum in earnings (NAB: +22.7% in Sept.), (2) the sector’s fundamentals are solid (excess liquidity and solvency) and (3) valuation multiples are attractive. Our favourites are, in this order: BBVA (+48.9% in 2023/YTD), Sabadell (+50.5% YTD) and Caixabank (+13.1% YTD). These three entities have a significant weighting in our model equity portfolios.
