Spanish Banks: 2Q Preview: Strong operating trends, but competitive differentiation is increasing

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Spanish Banks: 2Q Preview: Strong operating trends, but competitive differentiation is increasing

or BBVA, the core revenue backdrop

remains supportive, although reported trends may be modestly affected by Argentina and

Turkey FX. Investor focus is likely to centre on cost delivery, which we see as the key risk to

results; we see the potential announcement of a new €1.8bn buyback in the quarter, which

would likely be taken positively. Finally, we expect Unicaja's NII and earnings to come in

modestly below current Bbg consensus expectations. See 2Q26 expectations by Bank and

estimates revisions.

We are moving Unicaja to Underweight. While we continue to view the operational outlook as

broadly stable, with resilient asset quality, a strong capital position and limited downside risk to

consensus earnings, we increasingly struggle to justify the current valuation. While Unicaja’s

P/TBV valuation appears broadly consistent with other Spanish banks (although ahead of the

EU Banks sector,Figure 1) when viewed against its profitability, and shareholder dividend

distributions remain supportive (FY27e c.6% dividend yield vs sector average of c.5%), we

believe the recent re-rating has left the stock looking increasingly demanding on a P/E versus

EPS growth basis (EPS FY2026-27e aggregate growth of 19% broadly, somewhat below our

coverage universe at c. 22%, while trading at 11.6x P/E FY27e with the sector median at c.10.1x,

Figure 2). While takeover optionality remains part of the investment case, we believe the recent

rerating has raised the economic hurdle for a potential transaction. Relative valuation has

become less compelling, while the increased size of the franchise makes a domestic acquisition

more demanding from a capital allocation perspective.