Banco Sabadell is a repeat offender in surprising the big funds that are trading low on the Spanish stock market. He already did it in mid-2022 with Robert Pohly’s ‘hedge fund’ Samlyn Capital and now he has repeated with the investor at the top of the markets: Kenneth Griffin’s Citadel. The most successful manager of 2022, according to the LCH ranking, has made a mistake that could cost him money by being positioned with a stock that he continues to rise.
The Catalan bank has scored 20% on the stock market in the last five days, up to 1.16 euros, in its best week since January 2022. It is also the eighth best in its history and, with two sessions to go, Sabadell is going on track to close its biggest monthly rise since August 2012 with 32%. In this case, it would be the second best month since it went public in 2001.
Given this scenario, short positions -which appreciate in falls and depreciate in rises in the underlying- have left damaged. Two firms in Griffin’s orbit have chosen to close positions. Citadel Advisors Europe Limited has cut from 0.51% to 0.49% of Sabadell’s capital, so it no longer has the obligation to notify future movements. In turn, Citadel Advisors LLC has reduced from 0.54% to 0.36% in the short term. Both entities appear more than 1% of the bank, valued at 58 million.
The catalyst for the latest upward spurt of the entity led by César González-Bueno appears silkscreened in its 2022 results report. First, its annual net profit shot up 61.9% year-on-year, to 859 million euros. Second, the bank has decided to raise the ‘pay-out’ (percentage of earnings earmarked for dividends) from 31% to 50%, thereby raising its dividend and sweetening it with a share buyback.
In addition, the entity has recorded a general increase in its margins in all its business units as a result of the drastic rise in interbank interest rates that have been repricing its entire credit portfolio since last summer. Its shares soared nearly 11% on Thursday and a further 4.7% on Friday.
The jump in profitability was rewarded by investors who noticed the discount of almost 50% with respect to its book value, as published by ‘La Información’. In this way, the bank begins to get out of a generalized situation up to now due to the low profitability of its typical business of lending and custodian of money. All because of the negative rates that it has survived due to the injections of liquidity from the ECB below the official rate, the continuous cost cuts in staff structure and offices.
It surpasses Bankinter by size on the stock market
After the euphoric week of Sabadell in the heat of its results, the bank’s shares give continuity to the large-scale rally that it has already recorded. In 2022 it was the second most bullish value of the Ibex 35 behind Caixabank and ahead of Repsol. Its market capitalization has exceeded 6,200 million euros and once again unseats Bankinter for the first time since the beginning of 2022 as the fourth largest bank on the Ibex 35.
Until now, it traded with a lower value despite the fact that its dimension is three times greater in terms of volume of assets. However, profitability was well below its rival. Now Sabadell is making up ground under the leadership of González-Bueno. Since the arrival of the former ING and Abanca, the bank’s price has done nothing but go up on the stock market.
The landing of the manager as a replacement for Jaime Guardiola also occurred at a key moment, shortly after the announcement of the first vaccine against Covid at the end of 2020 and after the breakdown of talks with BBVA. Sabadell was then experiencing the worst moment in its history and, in fact, reached a record low of 0.255 euros on October 29, 2020. In just over two years, the value has multiplied almost five times to 1.16.