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Banco de Sabadell shares target raised on quarterly perfomance

EditorNatashya Angelica
Published 04/26/2024, 12:21 PM

On Friday, CFRA, a financial research firm, raised the price target for Banco de Sabadell SA (SAB:SM) (OTC: BNDSF) to €2.00 from €1.80, while maintaining a Buy rating on the stock. The adjustment comes after the bank reported a significant 50% year-over-year increase in net profit for the first quarter of 2024, amounting to €308 million, which notably surpassed the S&P Capital IQ consensus estimate of €240 million.

The robust quarterly performance was attributed to a substantial rise in net interest income, which went up by 12%, supported by an expansion in the net interest margin to 2.08% from 1.79%. This substantial growth helped to counterbalance a decline in net fee and commission income, which fell by 3% due to decreased services and asset management fees. Moreover, the bank managed to control operating costs, which saw a modest increase of 3%.

The improved cost/income ratio, which dropped to 47.6% from the previous figure, combined with a 12% reduction in provisions, reflects Banco de Sabadell's enhanced credit quality. These factors have contributed to the bank's strong start to the year and have led CFRA to increase its earnings per share (EPS) forecasts for the bank.

The EPS estimate for 2024 has been raised to €0.24 from €0.22, and for 2025, the forecast has been increased to €0.26 from €0.21.

CFRA's revised price target is based on a price-to-book (P/B) ratio of 0.73x, which is significantly higher than the bank's five-year average P/B of 0.33x. The firm believes that the increased target price is justified by Banco de Sabadell's improving return on equity (ROE) profile.

The strong financial results and a favorable interest rate environment are expected to help the bank meet or exceed its guidance for 2024.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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