News

The third ODDO BHF Iberian forum, the first since our partnership with BBVA, was held the 6 & 7 October and gathered 40 Iberian issuers and 189 institutional investors in more than 360 meetings. It is one of the largest dedicated Iberian conferences held this year.

Rising inflation, especially in energy prices, and rising interest rates were among the key topics.

Banking & insurance: The main topics were trends in key operating metrics ahead of Q3 2021 results against the backdrop of an expected end to the Covid crisis. The ongoing pressure on net interest income (~60% of total bank revenues) due to a negative repricing impact and weak volumes is still impacting the sector, but with the fourth quarter generally seen as a ‘floor’. The discussions confirmed a focus and proactive approach on cost control and resilient asset quality as well as a likely lower cost of risk. Capital positions and expected shareholder returns also featured prominently, marking renewed investor interest in the theme.

Real estate: Two key messages were delivered. First, market conditions were satisfactory in Q3 and the companies should be well positioned to reach their guidance at year-end. Second, as regards the outlook, Colonial should continue to benefit from the recovery of the market in offices around central locations as well as in efficient and green offices and is not afraid of a slight potential increase in interest rates. On the other hand, some players will encounter a much more uncertain legal and political environment due to the recently announced Spanish housing bill that will be debated shortly in parliament and we have increased our risk premium on both stocks as a result.

Utilities: The main investor focus was political interference in the context of the energy price surge. On top of a fiscal approach, via VAT and tax reductions, as in the other main European countries, the Spanish government’s decision to significantly tax utilities in three ways (CO2 and gas clawbacks, production sold at discounted prices) has damaged the visibility offered by sector players. 2021 and 2022 figures for the conventional utilities are set to be impacted but there are pathways to smooth these decisions: the EU review of the Spanish case and upcoming toolbox of measures to be adopted, political lobbying, negotiations with the government and reallocation of capex outside Spain (mainly in renewables).

Infrastructure: Regarding inflation, the message from the companies focused mostly on their ability to cope thanks to contractual price revision schemes (except for the cement industry) and their ability to handle higher interest rates through existing fixed-cost debt structures. On volume growth, the message was upbeat across the board.

Industry & healthcare: Concerning cost inflation (energy, raw materials), many players are reassuring because they can raise prices, albeit with delays in some cases, or because contracts/supplies for major projects are secure.

Tourism and leisure: We noted generally positive comments on the trend in leisure demand over the summer season. Looking ahead, the next few months will be a real test for the various operators with the preponderance of corporate demand, but the initial trends are already good and the central scenario of a recovery to 2019 levels between 2023-2024 remains intact.