Tuesday, January 18

JP Morgan surrenders to Caixabank’s dividend policy


Caixabank has been during 2021 the most attractive bank per PER in all of Europe, and now, its power of seduction with investors may increase if the estimates of JP Morgan.

The US financial entity has issued a forecast report where it models the expected growth for Caixabank, according to which the 50 percent payout announced by the company this year will increase to 60 percent from 2022 to 2024.

“We updated our model to align the payment estimates with their European counterparts. With a CET1 of 12.7 percent in the third quarter of 2021, we believe that Caixabank is well positioned to surprise positively in the payout“the report states.

From JP MorganFurthermore, it is predicted that the CET1 of Caixabank It will be 12.4 percent in 2024, while maintaining the target price of the share at 2.75 euros, slightly above the 2.36 euros with which it closed its price during the trading session on Thursday.

A giant with a good foundation

JP Morgan’s analysis builds his optimism about Caixabank in the solid progression of its core or basic income, those measured by the pure banking business, as well as in the good diversification of its general income.

The US financial institution also highlights Caixabank’s first position in Spain in terms of volume of assets, employees, offices and gross margin, in addition to “its attractive commissions, asset management and insurance operations.”

This first position of Caixabank has been consolidated after a merger with Bankia that has led the Catalan entity to earn 4,801 million euros from January to September, about seven times more than in the same period last year, when it reported profits of 726 million euros.

The fusion, JP Morgan also points out, is “called upon to reinforce the footprint of Caixabank and cross-selling opportunities. ”The process, however, also carries associated risks that slightly cool the spirits of the American institution.

Possible contingencies after the merger

One of the dangers associated with the merger on which JP Morgan emphasizes is that the income synergies between the two entities, estimated at around 290 million euros, will not materialize as planned.

The possibility of an erosion of income due to the loss of market share caused by the overlap between clients that occurred as a result of the merger is also considered.

“Although we have taken into account Caixabank’s forecasts of 940 million euros in cost synergies (as a result of the merger), in the long term we see risks derived from the persistence of wage and cost inflation,” the report states.

The latest factors on which JP Morgan remains on alert are the appearance of other higher than expected losses due to the additional provisions dedicated to foreclosed assets and litigation, and the risks of execution in the merger.

Consensus let time pass

The risks associated with becoming Caixabank assume that, despite optimism regarding the increase in the company’s payout, JP Morgan maintain a neutral buy recommendation with respect to the Spanish bank.

This position, in fact, is followed by 10 of the 25 experts of the consensus, within which another 14 analysts offer buy or overweight recommendations, and only one sell.

The consensus price target for the shares of Caixabank stands at 3.05 euros, providing a margin slightly higher than that granted by JP Morgan, and that it would imply a 29 percent improvement for the bank’s securities.

“CaixaBank’s capital position after the merger is stronger than initially expected,” they point out from Bloomberg Intelligence, emphasizing once again that obtaining Bankia’s synergies “could be key to dividend growth in 2022 .

JP Morgan trusts that the institution led by Gonzalo Gortázar will achieve this goal, despite the risks inherent to the new stage that it has begun.



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