Banco Sabadell1Q14 Results
April 24th, 2014
Disclaimer
Banco Sabadell cautions that this presentation may contain forward looking statements with respect to the business. financial condition. results of operations. strategy. plans and objectives of the Banco Sabadell Group. While these forward looking statements represent our judgement and future expectations concerning the development of our business. a certain number of risks. uncertainties and other important factors could cause actual developments and results to differ materially from our expectations. These factors include. but are not limited to. (1) general market. Macroeconomic. governmental. political and regulatory trends. (2) movements in local and international securities markets. currency exchange rate. and interest rates. (3) competitive pressures. (4) technical developments. (5) changes in the financial position or credit worthiness of our customers. obligors and counterparts. These risk factors could adversely affect our business and financial performance published in our past and future filings and reports. including those with the Spanish Securities and Exchange Commission (Comisión Nacional del Mercado de Valores).
Banco Sabadell is not nor can it be held responsible for the usage. valuations. opinions. expectations or decisions which might be adopted by third parties following the publication of this information.
Financial information by business areas is presented according to GAAP as well as internal Banco Sabadell group´s criteria as a result of which each division reflects the true nature of its business. These criteria do not follow any particular regulation and can include forecasts and subjective valuations which could represent substantial differences should another methodology be applied.
The distribution of this presentation in certain jurisdictions may be restricted by law. Recipients of this presentation should inform themselves about and observe such restrictions.
These slides do not constitute or form part of any offer for sale or subscription of or solicitation or invitation of any offer to buy or subscribe to any securities nor shall they or any one of them form the basis of or be relied on in connection with any contract or commitment whatsoever.
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1. Quarterly highlights
2. 1Q14 Results
3. Commercial activity and liquidity
4. Risk and capital management
5. Managing real estate assets
Index
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4
1. Quarterly highlights
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5
Quarterly highlights
� Quarterly sequential growth in net interest income yet again with the main driver being the continued reduction in the cost of customer funds
� Extraordinary trading income driven by proactive asset and liability management
� Non recurrent results have been booked as extraordinary provisions, increasing coverage levels and accelerating the reduction of the future cost of risk
� Strengthening of the coverage level of loans and real estate assets, reaching 14.0% on a group level and 10.1% excluding the Asset Protection Scheme
� Second consecutive quarter of reduction of the stock of NPLs. Total NPAs are also lower and the NPL ratio declines for the first time since the economic downturn started
� Continued increase in real estate sales, generating lower losses
� The technological integration of Gallego and Lloyds Spain has been completed and group costs are declining on a like-for-like basis
444444
6
2. 1Q14 Results
555555
1Q14 results
Note: 2014 includes BMN-Penedés network, Lloyds Spain and Banco GallegoEuros in million 7666666
Mar. 13 Mar. 14% var 14/13
Net Interest Income 451.2 530.0 17.5%
Equity Method & Dividends -6.3 0.0 ---Commissions 168.4 201.0 19.3%Trading Income & Forex 292.8 946.7 223.3%Other Operating Results -26.3 -29.7 12.8%Gross Operating Income 879.8 1,648.0 87.3%
Personnel Costs -260.3 -298.8 14.8%Administrative Costs -147.1 -151.9 3.2%Depreciations -50.4 -68.0 34.9%Pre-provisions Income 422.0 1,129.4 167.6%
Total Provisions & Impairments -324.9 -1,096.5 237.5%Gains on sale of assets -2.5 69.9 ---Profit before taxes 94.6 102.8 8.8%Taxes and others -43.4 -21.7 -50.1%
Attributable Net Profit 51.1 81.2 58.8%
530.0
451.2414.6
451.2497.7
1Q13 2Q13 3Q13 4Q13 1Q14
Another quarter of sequential growth in net interest income …
Net interest income 1Q14:+17.5% YoY
8
Net interest income 1Q14, like-for-like*:+10.4% YoY
* Excluding BMN-Penedés network, Lloyds Spain and Banco Gallego in 2014 777777
Net interest income evolutionEuros in million
3.94%3.66%
3.51% 3.50%
2.19% 2.07%1.87%
1.65%1.44%
3.49%
1Q13 2Q13 3Q13 4Q13 1Q14
1.75%
1.59%
1.86%
2.06%
1.14%1.00% 1.05%
1.17%1.29%
1.62%
1Q13 2Q13 3Q13 4Q13 1Q14
… with strong uptick in the customer spread …
Interest margins improving year on year
988Net interest margin ex-APS: 1.86%
8888
Margin evolutionIn percentage
Customer spread Net interest margin
Customer loan yield and cost of customer funds In percentage
Cost of customer fundsCustomer loan yield
10
3.32% 3.26% 3.35%3.58%
3.36%3.13%
2.84%
2.16%2.80%
2.50%
2.37%
1.29%1.51%
1.61%1.85%
3.06%
3.39%
2.16%
Mar-12 Sep-12 Mar-13 Sep-13 Mar-14
… driven by further reduction of term deposit costs
1010101099
Contractual rates on term depositsIn percentage
Share of sight deposits out of total customer fundsIn percentage
Stock New production/renewals Sight Other term funds
35% 39%
65% 61%
Mar 13 Mar 14
25.9 28.6 31.4 37.5 39.7
54.7 52.4 53.8 53.3 52.8
94.0 90.1105.9 108.5
119.5 107.9
26.6
53.4
4Q12 1Q13 2Q13 3Q13 4Q13 1Q14
Continued improvement in commission income
188.2
168.4
193.2209.8
Commission income 1Q14+19.3% YoY
201.0
11
Commission income on a like-for-like basis* 1Q14:+9.5% YoY
* Excluding BMN-Penedés network, Lloyds Spain and Banco Gallego in 2014 12121212
175.3
1010
Asset Mgmt1 ServicesLending
1 Including mutual funds commissions and pension funds and non-life insurance brokerage
Commission income evolutionEuros in million
12
258.4 261.1283.5 287.7 292.8
6.01.90.23.51.9
1Q13 2Q13 3Q13 4Q13 1Q14
Personnel expenses have been reduced on a like-for-like basis …
* Including BMN-Penedés network, Lloyds Spain and Banco Gallego in 2013 and excluding non-recurrent expenses.
260.3 264.6Personnel expenses 1Q14:
+14.8% YoY
Personnel expenses on a like-for-like basis* 1Q14:
-2.4% YoY
283.7 289.5 298.8
131313131111
Personnel expenses evolutionEuros in million
Recurrent Non-recurrent
13
147.1 138.1 146.6 149.2 148.1
3.86.8
1Q13 2Q13 3Q13 4Q13 1Q14
… and so have general expenses
General expenses 1Q14:
+3.2% YoY
General expenses in a like-for-like basis* 1Q14:
-11.6% YoY
147.1138.1
146.6
156.0 151.9
141414141212
General expenses evolutionEuros in million
Recurrent Non-recurrent
* Including BMN-Penedés network, Lloyds Spain and Banco Gallego in 2013 and excluding non-recurrent expenses.
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56.3%59.6%61.0%60.0%59.4%
Mar.13 Jun.13 Sep.13 Dec.13 Mar.141Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14
Optimising the network and improving the cost to income ratio
1,383
10,550
2,202
16,754
Banco CAM
16,413
2,204 1,898
15,59614,957
1,889
2,382
17,253
BMN-Penedésand Lloyds
Spain
* Adjusting operating income for non-recurrent trading income. Same criteria applies for every quarter
17,233
2,2542,418
18,077
B.Gallego
2,343
17,924
151515151313
Employee and branch evolutionIn number
Cost income evolution*In %
Branches Employees
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3. Commercial activity and liquidity
161616161414
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Customer funds and loans evolutionEuros in million
Strong balance sheet and growing in funds and insurance
1 Other on-balance sheet term funds include term deposits and other funds placed in the retail network. Excludes repos. 171717171515
Mar-13 Dec-13 Mar-14% Var.
YoY% Var.
YoY
Total assets 161,430 163,441 161,094 -0.2% -1.4%Of which:
Gross loans to customers ex repos 117,677 124,615 123,510 5.0% -0.9%ALCO Portfolio 27,615 21,743 20,624 -25.3% -5.1%
Total liabilities 152,211 153,036 150,529 -1.1% -1.6%Of which:
On-balance sheet customer funds 82,692 94,497 94,690 14.5% 0.2%Other on-balance sheet term funds1
53,819 57,635 57,608 7.0% 0.0%Sight deposits 28,874 36,862 37,082 28.4% 0.6%
Capital Markets 24,167 21,167 19,778 -18.2% -6.6%ECB Funding 20,500 8,800 5,500 -73.2% -37.5%
Off-balance sheet funds 21,173 25,370 26,866 26.9% 5.9%Of which:
Mutual funds 8,987 11,019 12,318 37.1% 11.8%Pension funds 3,731 4,356 4,314 15.6% -1.0%Third party insurance products 7,270 8,067 7,973 9.7% -1.2%
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5,476 5,9176,6965,9176,215
0.0
1,000.0
2,000.0
3,000.0
4,000.0
5,000.0
6,000.0
7,000.0
8,000.0
1Q13 2Q13 3Q13 4Q13 1Q14
2,851 3,2063,1842,462
3,660
0.0
500.0
1,000.0
1,500.0
2,000.0
2,500.0
3,000.0
3,500.0
4,000.0
4,500.0
5,000.0
1Q13 2Q13 3Q13 4Q13 1Q14
206302305
226241
0.0
100.0
200.0
300.0
400.0
1Q13 2Q13 3Q13 4Q13 1Q14
203264255
187241
0.0
100.0
200.0
300.0
400.0
1Q13 2Q13 3Q13 4Q13 1Q14
171718181616
New lending production shows positive signs
New production
Retail mortgages Euros in million
Household loans Euros in million
Working capital SMEs and corporatesEuros in million
SME and corporateloansEuros in million
+ 47% + 30%
+ 12%+ 8%
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116.6%
111.0%109.2% 107.3%
104.6%
131.0%
121.9%
3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14
33,902 36,862
47,774
57,953
34,54328,87427,08527,284
37,082
57,60857,635
53,095 53,819
58,408
10,0529,693
8,9878,5858,561
12,31811,019
3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14
Note: on-balance sheet term funds include term deposits and other funds placed in the retail network: preference shares, mandatory convertible bonds, senior debt, commercial paper and other. Excludes repos. 181819191717
Evolution of customer funds and off-balance sheet funds Euros in million
Loan to deposit ratioIn percentage
Sight deposits On-balance sheet term funds
Mutual funds
Increasing customer funds,with strong growth in AuM
Growth in Mutual Funds and current
accounts continues
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14.218.7
15.610.8
7.0
7.9
7.74.1
2.12.3
2.4
2.0
Dec-12 Jun-13 Dec-13 Mar-14
0%
5%
10%
15%
20%
2001 2004 2007 2010 2013
0%
1%
2%
3%
4%
5%
Evolution of fixed income portfolioEuros in billion
Spanish government debt Other
Life insurance portfolio (Mediterráneo Vida)
21.226.6
19.7
Fixed income portfolio/assets vsEuribor12M In percentage
18.5
Fixed income portfolio / BS Assets Euribor 12 months (right axis)
1 Percentage of fixed income portfolio/system assets: source Bank of Spain. Last available data as of August 2013
Fixed income portfolio / System Assets1
191920201818
Fixed income portfolio management
Fixed income portfolio has been reduced since June 2 013
Currently, the size of the ALCO portfolio reflects its f unction as a structural interest rate macro hedge
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Senior debt 3.5%
Covered bonds 62.0%
Prefs + Subordinated
3.6%
ECP 6.6%
Securitisation 16.4%
GGB 7.9%
Deposits 69.4%
ICO financing 5.0%
Repos 4.7%
Retail issues 1.2%
Wholesale funding 19.7%
Maintaining a balanced funding structure …
Group funding structure
202021211919
Group wholesale funding breakdown
21
18,000
8,800
5,500
23,650
Dec 2012 Jun 2013 Dec 2013 Mar 2014
… and efficiently managing liquidity
212122222020
425765
2,410
3,060
3,848
3,069
1,679
903
3,053
0
1,000
2,000
3,000
4,000
5,000
2Q14 3Q14 4Q14 2015 2016 2017 2018 2019 >2020
2Q14 3Q14 4Q14 2015 2016 2017 2018 2019 >2020 Outst. AmountCovered Bonds (CH) 425 765 1,335 3,060 2,871 1,937 1,561 886 2,512 15,352GGB 0 0 1,005 0 0 1,066 0 0 0 2,071Senior Debt 0 0 0 0 678 0 100 17 25 820Preferred Shares and Subordinated Debt 0 0 0 0 299 66 0 0 498 864Other mid- and long-term financial instruments 0 0 70 0 0 0 18 0 18 105Total 425 765 2,410 3,060 3,848 3,069 1,679 903 3,053 19,211
Group wholesale funding maturities Euros in million
ECB liquidity position Euros in million
Maturity by product type Euros in million
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4. Risk and capital management
222223232121
23
10.3%11.6%12.0%
Core Capital 2013 Common Equity Tier 1 proforma2015 (phased in)
Core Capital "fully loaded" 1Q14
Strong capital levels
Capital ratiosIn percentage
* Including €860M of mandatory convertible bonds as of December 2013, of which the maturity calendar is: €17.6M in 2014, €755.6M in 2015, €68.6M in 2016 and €17.6M in 2017 232324242222
*
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4Q13 1Q14
Total NPLs ex-APS 16,021 15,788Of which:Ex-APS constant perimeter no sin reclasifications 11,079 10,731New perimeter 2,309 2,309Reclasified 2,632 2,747
Real estate assets ex-APS 6,973 7,037
Total problematic assets ex-APS 22,994 22,825
Confirming the turning point in the NPLs …
NPLs and RE assetsEuros in million
The stock of NPLs ex-APS was reduced by €233M
NPL ratio declines from 13.63% to 13.57%
25252626
Total problematic assets ex-APS decreasing by €169M
2323
Coverage levelsIn percentage
NPLs ratios ex-APSin percentage
4Q13 1Q14Global coverage of total loans and RE assets 13.6% 14.0%
Existing coverage of NPLs, excluding reclassified loans 50.1% 51.4%
Existing coverage of reclassified loans 25% 25%
4Q13 1Q14
Including reclassified loans 13.63% 13.57%
Excluding reclassified loans 11.13% 11.04%
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1Q13 2Q13 3Q13 4Q13 1Q14
Ordinary net entries 388 760 365 -12 -83Change in RE assets 394 1 218 400 64Net entries + Change in RE assets 782 761 583 388 -19
Write-offs 247 305 105 51 265
Re assets and NPL quarterly change 535 456 478 337 -284
… with like-for-like numbers showing a sequential decrease for the last two quarters
242425252424
Evolution of like-for-like NPLs and RE assets, exclu ding reclassified loansSabadell ex-APS. Euros in million
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1Q13 2Q13 3Q13 4Q13 1Q14
Real Estate development and/or construction purposes38.38% 42.99% 55.73% 62.98% 63.12%
Construction purposes non-related to real estate dev.5.96% 7.94% 9.84% 8.26% 8.32%
Large corporates 7.40% 7.48% 8.91% 6.05% 6.02%
SME and small retailers and self-employed 8.98% 9.81% 10.93% 13.33% 13.31%
Individuals with 1st mortgage guarantee assets8.07% 8.17% 8.78% 9.86% 9.84%
NPL ratio 9.69% 10.62% 12.61% 13.63% 13.57%
NPL ratios already improving
NPL ratio evolution, ex-APS
13.63%13.57%
+0.14% -0.20%
4Q13 1Q14
Impact from decreasing
stock of NPLs
Impact from
reduction in loans
26262727
The decreasing stock of NPLs explains 20bps of decline in the NPL ratio
2525
Evolution of NPL ratios by segment, ex-APSIn percentage
Note: NPL ratio is calculated including contingent risk.
27
Extraordinary provisions booked this quarter …
€811M of non recurrent results have been booked as extraordinary provisions, increasing
coverage levels and and accelerating the reduction of the cost of risk going forward
Provisions booked in 1Q14 Euros in million
303031312626
1Q14Ordinary provisions -286Credit and other extraordinary provisions -571RE assets extraordinay provisions -240Total provisions and impairments -1,097
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1Q14 BS ex-APS APS Total
Real estate assets 41.2% 50.4% 45.2%Real estate development loans 35.0% 45.8% 39.9%Total real estate exposure 37.8% 47.8% 42.3%
Construction 12.2% 32.2% 13.1%Large Corporates 6.6% 45.4% 8.4%SME and small retailers and self-employed 7.7% 19.2% 8.8%Individuals 4.3% 11.8% 4.7%Rest of loan book 5.7% 18.9% 6.5%
Total 10.1% 38.1% 14.0%
… strengthen the coverage levels
A level of global coverage higher than peers
27272828
14.0%global coverage
of total loans and RE assets
10.1% global coverage
of total loans and RE assets
ex-APS
2727
Coverage by loan segment and real estateSplit between asset protection scheme and rest
29
5. Managing real estate assets
313132322828
30
Commercialisation and servicing
Developing Solviais more valuable to BS
SOLVIA
Real Estate Business Asset Management
Transformation (land transformation and
development capabilities)
Institutional SalesReal estate as an
investment product
33333434
Since 2008, Solvia has become one of the main real estate companies in Spain, with a
benchmark sales platform2929
31
Commercial activity continues to improve
Sales evolution
1,992
2,882
3,271
1Q 12 1Q 13 1Q 14
657
463387
1Q 12 1Q 13 1Q 14
+42%
+13%
Increase in sales assuming lower losses than in 1Q1 3
Euros in million (€m) Number of units
(BS + B.CAM) (BS + B.CAM)
+20%+45%
343435353030
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Creating value in real estate assets
Developing distribution centre� Lease agreement with DHL for the
development of a distribution centre in Guadalajara in a 82,000 m2 land plot
� Logistic warehouse surface: 52,000 m 2
� Existing warehouse refurbishment: 24,000 m2
� New warehouse construction : 28,000 m 2
Vodafone headquarters� Sale of the complex in Madrid Parque
Empresarial Avenida América 115 (Vodafone southern Europe headquarters) to London & Regional Properties
� Office complex: 50,600 m2
� Sale price: €117M
353536363131
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Successfully developing promotions
Playa San Juan� 80 apartments� Prices between €120,000 - €190,000
� Foreign and domestic demand
� Occupation expected in 1H2014
Paracuellos de Jarama (Madrid)
� Increasing the price in 16 houses during the sale
� Prices between €200,000 - €250,000
� Occupation expected in summer 2014
100% sold under construction
In one and a half month 100% was sold
In 2013 we have started to sell properties under co nstruction benefiting from the recovery of the demand 363637373232
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“The victory is not in the winning, it is in the fighting along the way”
Rafael Nadal