Banco Sabadell may have to increase capital; divestitures an option - report (translated)
Banco Sabadell's profit warning on 22 July could trigger a capital increase, El Confidencial reported citing a Societe Generale (SocGen) analyst report.
Sources from Sabadell denied any discussions at board level about a possible capital increase for the time being, the Spanish-language report said.
Other sources close to the bank said that rather than dilute the shareholders' stakes, the group could sell an asset such as its unit in the US, the report said.
The SocGen report places Sabadell's value at a record low, indicating that investors are noting its financial results rather than considering the real value of the bank. In analyst Carlos Garcia's opinion, taking into account Sabadell's estimated revenue and annual losses of EUR 100m on treasury shares deals, the book value of Sabadell would be EUR 1.97 per share.
But if the two major risks Sabadell faces are taken into account, the bank's book value would stand at somewhere between EUR 1.13 and EUR 1.51 per share. The variation depends on increasing the coverage of its portfolio of failed real estate assets and the final impact of the so-called floor clauses on mortgages.
For SocGen, Sabadell should increase to 55% from 54.1% the percentage of provisions on non-performing assets to be in line with the rest of the sector. The Catalan bank has EUR.9bn in problem assets, despite the efforts to sell EUR 1.039bn worth of non-performing portfolios between January and June this year.
According to SocGen, on ly increasing the coverage of non-performing loans would lead Sabadell to increase capital by EUR 1.6bn. After adding the cost of covering against Brexit - Sabadell obtains about a third of its revenue in the UK following its acquisition of TSB Lloyds - the analyst puts the value of Sabadell's stock at EUR 0.9, below the current market valuation of EUR 1.18.
El Confidencial