EQUITY RESEARCH: BANCO DE SABADELL, S.A.

This research report provides an in-depth analysis of Banco de Sabadell, S.A. ('Banco Sabadell' or 'the bank'), a leading banking institution in Spain. The study evaluates the bank's financial performance, market position, and strategic initiatives to assess its investment potential. Based on this analysis, the report assigns a BUY recommendation for Banco Sabadell, with a projected year-end 2025 share price target of €2.09, derived using a Discounted Cash Flow to Equity (DCFE) model. This forecast reflects a potential upside of 17.26% over a 15-month period, compared to the closing share price of €1.78 as of October 1, 2024. It is important to note that this recommendation comes with a medium-risk factor. The rationale behind this recommendation primarily rests on three factors: The dependence of the bank of macroeconomically factors in Spain, in the United Kingdom, and Mexico; The bank’s strong position in the markets it operates in; The ongoing hostile takeover from BBVA. The bank has a strong position and a stable market share in the markets it operates in and the stock is currently trading at a discount. For this analysis, firstly, an exhaustive analysis of the bank’s markets, business, strategy, and risks was made. Then, multiple valuation methods were computed: the free cash-flow to equity, the residual income, the dividend discount model, and the multiples valuation model. Additionally, multiple sensitivity analyses were performed to understand the impact of key variables on the final valuation.