CABK.MC

Summary

Caixabank is a dominant player in the Spanish banking oligopoly, demonstrating strong profitability (15.4% ROE) and a sustainable dividend backed by a conservative payout ratio. While its past dividend record is inconsistent, recent performance post-merger suggests improved stability and strong business momentum. The current price of €10.14 is attractive, trading within our fair value range of €6.68-€12.52 and offering potential upside. Worth considering for new positions for investors seeking a solid yield from a leading European bank.

Sector Context

As a bank, a high Debt/Equity ratio is a normal part of the business model (taking deposits). Key metrics are strong: ROE is excellent at 15.4% (well above the 10% target), and the payout ratio is conservative. The analysis should focus on profitability and asset quality rather than standard industrial debt metrics.

✓ Why We Like It

• • Dominant market position as part of the Spanish banking oligopoly, providing a strong competitive moat.
• • Excellent profitability for a bank, with a Return on Equity (ROE) of 15.4%, well above the 10% target for quality.
• • The dividend appears sustainable with a conservative Payout Ratio of 45.66% and a solid 4.29% yield.
• • Valuation is reasonable with a P/E of 12.14, sitting within the strategy's ideal 8-15x range.
• • Recent news indicates strong business momentum, with leadership in investment funds and record sales.

⚠ What to Watch

• • Highly inconsistent dividend history with multiple cuts over the last decade, reflected in a low consistency score of 45/100. The 2017 cut was flagged as a chronic issue.
• • Reputational and potential regulatory risk from social issues, as highlighted by recent news regarding housing protests.
• • The deep value opportunity has partially passed; the P/E has normalized upwards from 7.7 in the last analysis to 12.14 now.