Berenberg sees 25% upside for CaixaBank shares amid resilient revenue growth

On Thursday, Berenberg maintained its Buy rating on CaixaBank SA (CABK:SM) (OTC: OTC:) stock and increased the shares target to EUR6.40, up from the previous EUR6.20.

The firm highlighted the bank’s robust financial performance despite the current economic environment with lower short-term interest rates.

The bank’s revenue resilience is attributed to its less interest-rate-sensitive net interest income (NII) and a significant contribution from fees and insurance income. This financial stability is particularly notable when compared to CaixaBank’s domestic counterparts.

Berenberg projects that CaixaBank could sustain a Return on Tangible Equity (RoTE) of 14-15% in the coming years. This forecast includes the ongoing effects of the Spanish windfall tax, which the firm expects to be applied perpetually. The analyst believes that the total yields could reach approximately 12% per year.

The firm also commented on CaixaBank’s valuation, noting that the current 1.14 times tangible book value (TBV) should not be seen as a peak for the bank’s share price. With the new price target, Berenberg suggests there is about a 25% upside potential for CaixaBank’s shares.

InvestingPro Insights

In line with Berenberg’s optimistic outlook on CaixaBank SA, current data from InvestingPro shows a strong financial standing for the bank’s OTC listing, CAIXY. The market capitalization stands at a robust $41.23 billion, reflecting the bank’s significant presence in the market. Moreover, CAIXY is trading at an attractive P/E ratio of 7.5, which, when adjusted for the last twelve months as of Q2 2024, is even lower at 7.16, suggesting that the stock may be undervalued relative to its earnings.

The bank’s dividend policy is also noteworthy, with a commendable track record of raising its dividend for three consecutive years and maintaining dividend payments for 17 consecutive years. This consistency is complemented by a dividend yield of 5.42%, which is particularly appealing to income-focused investors. Additionally, with a price uptick of 39.75% over the last six months and a year-to-date price total return of 43.84%, CAIXY has demonstrated strong performance in the market.

InvestingPro Tips further reinforce the investment case for CAIXY, highlighting that the bank is trading at a low P/E ratio relative to near-term earnings growth and that the valuation implies a strong free cash flow yield. These insights, among others, are part of a broader set of metrics available on InvestingPro, which includes additional tips for investors seeking a deeper analysis.

For a more comprehensive understanding of CAIXY’s investment potential, visit https://www.investing.com/pro/CAIXY to explore the full suite of InvestingPro Tips, where a total of 11 valuable insights are available to guide investment decisions.

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