EU FINANCIALS: Santander (SANTAN) - 4Q Results
Solid. Credit positive. Perhaps not quite as good as the equity market/headlines suggest, naturally reacting to the large buyback. Lots of moving parts. Core income better and expenses lower - if one offs can be kept to a minimum should be very good for capital generation.
- Net interest income increased 7.1% (€800m) vs Q3 at €12,116m. Net commission and fee income was up 4.9% (€155m) over the same period
- Non-interest expense kept up with earnings though and was €1026m higher at €8,134m, although part of this is 'other provisions' being c.€500m higher than Q3.
- Total provision expense increased by €173m to €3,120
- As a result OpInc was -6.7% lower than Q3 at €4,558
- From there a lower tax burden and less write downs helps net income of €3,265 beat Q3's number by €15m - or 52bps of RWA which is ultimately a really solid number.
- Cost of risk is 1.15%, 3bps lower than Q3 and NPL's edge lower as well. - Driven by improvements in Poland/Argentina/Brazil.
- CET1 increases to 12.8%, +0.3% vs Q3.
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EGB SYNDICATION: New 10-Year OLO: Mandate
"The Kingdom of Belgium (rated Aa3/AA/AA-; outlook negative/stable/negative) intends to issue a new EURO syndicated benchmark bond maturing 22 June 2035 (OLO 103) in the near future, subject to market conditions."
- "The Kingdom has mandated BNP Paribas Fortis, Crédit Agricole CIB, HSBC, J.P. Morgan and Morgan Stanley as joint bookrunners" (all details as per Bloomberg)
- We had pencilled in a 10-year Belgium syndication in our EGB Issuance, Redemption and Cash Flow Matrix publication for this week, with a size estimate of E7.0bln in line with what we have seen in the past two years with some upside risk.
OUTLOOK: Price Signal Summary - Trend Condition In Bunds Remains Bearish
- In the FI space, the trend cycle in Bund futures remains bearish and last Friday’s sell-off reinforces this theme. The contract has recently traded through 133.22, 76.4% of the Nov 6 - Dec 2 bull cycle. This has opened key support at 132.00, the Nov 6 low. Initial resistance is seen at 133.48, Friday’s high.
- The trend condition in Gilt futures is unchanged, it remains bearish and short-term gains are considered corrective - for now. The recent breach of 91.87, the Dec 19 low, confirmed a resumption of the downtrend. Sights are on 91.58 next, a 4.382 projection of the Dec 3 - 4 - 5 minor price swing. Initial resistance is at 92.08, the Jan 2 high. Resistance at the 20-day EMA, is at 93.16, and the average is seen as an important hurdle for bulls.
EURUSD TECHS: Corrective Bounce
- RES 4: 1.0825 High Nov 7
- RES 3: 1.0630 High Dec 06
- RES 2: 1.0543 50-day EMA
- RES 1: 1.0458 High Dec 30
- PRICE: 1.0425 @ 11:40 GMT Jan 6
- SUP 1: 1.0226 Low Jan 2
- SUP 2: 1.0201 61.8% of the Sep ‘22 - Jul ‘23 bull leg
- SUP 3: 1.0198 3.0% Lower Bollinger Band
- SUP 4: 1.0167 2.0% 10-dma envelope
The trend condition in EURUSD remains bearish and today’s strong gains are - for now - considered corrective. Last Thursday’s sharp sell-off reinforces current conditions and note too that moving average studies remain in a bear-mode position, highlighting a dominant downtrend. The 20-day EMA, at 1.0414, has been pierced. The next resistance to watch is 1.0458, the Dec 30 high. The bear trigger has been defined at 1.0226, the Jan 2 low.
