1Q15 Results presentation - grupbancsabadell.com · Sabadell cautions that this presentation may...

Sabadell1Q15 Results

April 24th, 2015

Disclaimer

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 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).

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 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.

1. Quarterly highlights2. Recommended cash offer for TSB Banking Group

3. Rights issue

4. 1Q15 Results

5. Commercial activity

6. Liquidity and ALCO portfolio

7. Risk and capital management

2

Quarterly highlights

� Sabadell has launched a recommended cash offer for TSB Banking Group

� In April, Sabadell has successfully completed a rights issue of €1.6 billion

� Result highlights

� NII continues to grow on a quarterly basis driven by lower cost of funding

� Net fee income is resilient in a seasonally soft quarter

� High level of gains from financial operations related to the management of the ALCO portfolio. The extraordinary gains have been neutralised by additional impairments resulting in increased NPL coverage ratios

� Commercial dynamics continue to improve, with positive growth in performing loans led by SMEs and companies. Stable development of on-balance sheet customer funds

� Total NPLs fell by a record €1bn and NPL ratio is reduced to 11.7%

3

1. Quarterly highlights

2. Recommended cash offer for TSB Banking Group

3. Rights issue

4. 1Q15 Results



7. Risk and capital management 4

� Substantial pre-tax synergies of c.GBP160M from IT optimisation in the third year after completion

� GBP450M contribution by Lloyds to TSB more than offsets implementation costs of IT migration

� CET1 capital neutral post rights offering and medium term earnings enhancing

Strategic rationale

5

� Entering new markets is a key part of the Triple Business plan

� Stable financial system with attractive returns and prospects

� Fragmented challenger bank market with opportunities for growth

� Successfully delivery of all strategic plans to date

� Proven ability and IT know-howin integrating acquisitions onto Sabadell´s platform

Internationalisation UK marketManagementtrack record

� Pure-play retail focused UK bank , aligned with Sabadell´s expertise

� Sabadell’s expertise in SME lending in Spain provides a value added tool to develop efficient SME services in the UK market

TSB Financial returns

TSB financial highlights

6

Gross loans to customers

€27,900M

Customer deposits

€31,600M

Net profit

€167M

Employees

8,638

Total assets

€34,900M

Branches

631

Note: Data as of December 2014.



3. Rights issue4. 1Q15 Results



7. Risk and capital management7

� Amount size of the rights offering: €1,607 million

� Rights issue exchange ratio: 3 for every 11

� Subscription price: €1.48

� Theoretical ex-rights price (TERP): €2.1321 (discount to TERP: 30.6%)

� New shares will have the same right to receive dividends2 as the outstanding shares (€0.05)

� Number of shares post rights issue: 5,110,409,582

� During the rights trading period (27 March to 17 April), Sabadell’s share price increased by 5%

� New shares will start to trade on 28 April, 2015

newshares

outstandingshares

1Using the March 27th, 2015 closing price of €2.31 per share and adjusted for treasury shares.2The dividend is pending the approval by the AGM. 8

Sabadell successfully completed a capital increase of €1.6 billion



3. Rights issue

4. 1Q15 Results 5. Commercial activity



1Q15 results

*

10

Note: Following the early adoption of IFRIC 21 on levy liabilities, the payments related to the Deposit Guarantee Fund will now be reflected in the P&L as one single payment at the end of the year, instead of being accrued throughout the year. All numbers referring to the change year over year are on a comparable basis, as if the payments related to the DGF had been accrued.

Mar. 14 Mar. 15 Mar. 15 % var 15/14

as reported as reportedcomparable

basiscomparable

basis

Net Interest Income 530.0 643.1 643.1 21.3%

Equity Method & Dividends 0.0 10.4 10.4 ---Commissions 201.0 225.8 225.8 12.4%Trading Income & Forex 946.7 801.7 801.7 -15.3%Other Operating Results -29.7 -15.1 -61.5 ---Gross Operating Income 1,648.0 1,665.9 1,619.4 -1.7%

Personnel Costs -298.8 -301.0 -301.0 0.8%Administrative Costs -151.9 -146.3 -146.3 -3.6%Depreciations -68.0 -76.1 -76.1 11.9%Pre-provisions Income 1,129.4 1,142.4 1,096.0 -3.0%

Total Provisions & Impairments -1,096.5 -906.5 -906.5 -17.3%Gains on sale of assets 69.9 9.6 9.6 ---Profit before taxes 102.8 245.5 199.1 93.6%Taxes and others -21.7 -70.9 -56.9 ---

Attributable Net Profit 81.2 174.6 142.1 75.2%

Increase in net interest income driven by lower cost of funding and slight volume pick-up

Net interest income evolutionEuros in million

YoY growth :

+21.3%

+5.5% QoQ

11

Continued improvement in customer spreads in a low interest rate environment

Margin evolutionIn percentage

Customer spread

Net interest margin Cost of customer funds

Customer loan yield

Customer loan yield and cost of customer funds In percentage

1.75%1.59%

1.62%

1.86%

2.06%2.22%

2.29%2.35%2.44%

1.14%1.00%1.05%

1.17%1.29%

1.36%1.40%1.49%

1.57%

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15

3.94%3.66%3.49%3.51%3.50%3.47%3.39%3.32%3.32%

2.19%2.07%1.87%

1.65%1.44%

1.25%1.10% 0.97%0.88%

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15

12

Term deposits are repricing at lower rates

Contractual rates on term depositsIn percentage

Stock New production/renewals

New term deposits at

0.49%

3.35%3.58%

3.36%3.13%

2.84%

2.37%2.16%

1.83%1.67%

1.52%1.38%

3.06%

3.39%

2.16%

1.85%1.61%

1.51%1.29%

1.05%0.75%

0.60% 0.49%

Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15

13

Gradual reduction of loan spreads

Evolution of loan spreads by segmentIn percentage

Our strong SME franchise allows Sabadell to cushion the impact of lower spreads

Back book loan spreads by segmentIn basis points

Mortgages to individualsTotal SMEs

Corporates

Back book

Front book

Back book

Front book

Back book

Front book

Back book

Front book

Back book

Front book

Mortgages to individuals 87 227 89 214 90 209 92 201 94 187

SME 270 500 277 492 282 494 285 445 284 459

Corporates 268 327 266 302 260 297 243 265 229 233

4Q14 1Q151Q14 2Q14 3Q14

14

186 187 186 184 181

87 89 90 92 94

270 277 282 285 284

268 266 260243

229

1Q14 2Q14 3Q14 4Q14 1Q15

39.7 48.6 48.9 53.0 55.6

53.455.3 53.6 57.0 54.2

107.9109.6 112.7

121.3 116.0

1Q14 2Q14 3Q14 4Q14 1Q15

Commission income is growing …

Commission income evolutionEuros in million

Asset Mgmt1 ServicesLending

1 Includes mutual funds commissions and pension funds and insurance brokerage.

201.0213.5 215.1

231.3 225.8

15

YoY growth :

+12.4%

2,7604,105

3,081

3,673

4,440

6,8211,247

2,860

790

1,215

March 2014 March 2015

… with mutual funds performing well

Volume evolution YoY, by type of fund Euros in million

� An increase of 51.6% in funds under management

� Higher margin products growing at a faster pace

12,318

18,674

Equity fundsBalanced funds

Fixed income funds Guaranteed funds

SICAV, External funds and Others

+51.6%

+19.2%

+48.7%

+53.6%

+129.3%

+53.8%

16

292.8 286.0 295.0 295.5 295.5

6.024.9 1.8

0.6 5.6

1Q14 2Q14 3Q14 4Q14 1Q15

Stable personnel costs …

Personnel expenses evolutionEuros in million

Recurrent Non-recurrent

298.8 310.9 296.8 296.1 301.0

17

YoY growth :

+0.8%

148.1 139.4 137.9 138.5 145.2

3.82.2 0.9 1.1

1Q14 2Q14 3Q14 4Q14 1Q15

… and general expenses are down YoY

General expenses evolutionEuros in million

Recurrent Non-recurrent

151.9141.6

137.9 139.3 146.3

18

YoY change :

-3.6%



3. Rights issue

4. 1Q15 Results

5. Commercial activity6. Liquidity and ALCO portfolio


Inflexion in lending has arrived

Customer funds and loans evolutionEuros in million

1 Other on-balance sheet term funds include term deposits and other funds placed in the retail network. Exclude repos. 20

Mar-14 Dec-14 Mar-15% Var.

YoY% Var.

QoQ

Total assets 161,094 163,346 167,480 4.0% 2.5%Of which:

Gross loans to customers ex repos 120,192 117,964 118,527 -1.4% 0.5%Fixed income portfolio 20,623 23,408 27,259 32.2% 16.5%

Total liabilities 150,529 152,130 155,901 3.6% 2.5%Of which:

On-balance sheet customer funds 94,690 94,461 94,899 0.2% 0.5%Other on-balance sheet term funds1 57,608 51,186 49,419 -14.2% -3.5%Sight deposits 37,082 43,275 45,480 22.6% 5.1%

Wholesale funding 24,701 23,085 22,340 -9.6% -3.2%ECB Funding 5,500 7,200 8,900 61.8% 23.6%

Off-balance sheet funds 26,866 30,379 34,215 27.4% 12.6%Of which:

Mutual funds 12,318 15,706 18,674 51.6% 18.9%Pension funds 4,314 4,335 4,529 5.0% 4.5%Third party insurance products 7,973 7,421 7,220 -9.4% -2.7%

28.9

27.928.3

28.6

29.4

29.9

Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-150

200

400

600

800

Jan Feb Mar Apr May Jun

Loan growth is confirmed

SME and company loans evolutionEuros in million

Cumulative monthly residential mortgage productionEuros in million

Fourth quarter in a row of growth in SME and company loans

Note: SME and company loans include loans to SMEs, corporates and public sector and exclude NPLs. 21

As of March 2015 new residential mortgage production 66% above 2014 level

2015

€ 508M

+66% YoY

2014

€ 305M

Performing loans grow for the second quarter in a row

Performing loans evolution Euros in million

+1.5%QoQ

22

37,082 39,418 43,670 43,275 45,480

57,608 55,625 53,70551,186 49,419

12,318 13,705 14,665 15,706 18,674

1Q14 2Q14 3Q14 4Q14 1Q15

Overall position in on-balance sheetcustomer funds maintainedEvolution of customer funds and mutual funds Euros in million

Sight deposits On-balance sheet term funds

Mutual funds

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. Exclude repos. *According to Inverco.

Evolution of market share in investment funds

Market share* 5.36%

Mar-15

4.53%

Mar-14

Growth rate in investment funds: +18.9% QoQ

23

With the highest standards in quality of service

Source: STIGA, EQUOS “RCB Análisis de Calidad Objetiva en Redes Comerciales Bancarias (1T 2015)”. 24

Sabadell has increased its score and stays well above the rest of the sector

Level of service quality Evolution of Sabadell quality index vs sector

7.54

7.217.32

7.20 7.24

6.90 6.89

7.16

7.51

6.956.77

6.61

6.11 6.06 6.01 6.036.29

6.73

2007 2008 2009 2010 2011 2012 2013 2014 1Q15

Sabadell Sector

Sabadell has obtained the highest mark on commercial performance

80.8% 79.0%

68.0%

50.3%43.2%

32.8%

Entity 1 Entity 2 Entity 3 Sabadell Entity 5 Entity 6

Sabadell has improved its brand recognition among core SME customers

25

31.0% 31.3%33.9%

42.4%

50.3%

2006 2008 2010 2012 2014

Brand recognition among Spanish SME customers (turnover €6-100M)

Sabadell brand recognition evolution among SME customers (turnover €6-100M)

Source: FRS Inmark “Financial behaviour on SMEs in Spain 2014”.Percentage of SME customers mentioning Sabadell among first 5 banks. Based on 913 interviews with SME customers with an annual turnover of 6 to 100 million.

+7.9pp+5.6pp

+4.6pp+3.2pp

+2.6pp

+1.3pp

2014 2012



3. Rights issue

4. 1Q15 Results


6. Liquidity and ALCO portfolio 7. Risk and capital management

26

Maintaining a balanced funding structure …

Group funding structure Group wholesale funding brea kdown

27

Deposits64.2%

Retail issues 1.7%

Repos7.6%

ICO financing 4.7%

Wholesale funding15.6%

ECB6.2%

Covered bonds 58.9%

Senior debt 4.9%

Prefs + Subordinated

4.1%

ECP12.0%

Securitisation 15.4%

GGB4.7%

… and efficiently managing liquidity

Group wholesale funding maturitiesEuros in million

ECB liquidity positionEuros in million

Maturity by product type Euros in million

2015 2018 2019 2020 202020172016

The size represents the volume of maturitiesThe percentage number is the current level of coupon payment

>20222021

8,800

5,5007,200

8,900

Dec-13 Mar-14 Dec-14 Mar-15

2Q15 3Q15 4Q15 2016 2017 2018 2019 2020 2021 2022 >2022 Outst. AmountCovered Bonds (CH) 1,550 0 255 2,874 1,937 1,563 924 476 2,014 1,119 439 13,152GGB 0 0 0 0 1,059 0 0 0 0 0 0 1,059Senior Debt 0 0 0 890 0 100 57 0 0 25 0 1,071Preferred Shares and Subordinated Debt 0 0 0 318 66 0 0 425 40 0 15 864Other mid- and long-term financial instruments 0 0 0 0 0 18 0 0 10 0 7 35Total 1,550 0 255 4,082 3,062 1,681 981 900 2,065 1,144 461 16,181

28

9.0 9.5

12.015.3

2.4

2.5

Dec-14 Mar-15

The ALCO portfolio contribution is stable …

Fixed income portfolio evolutionEuros in billion

Spanish public debt Other

Life insurance portfolio

ALCO portfolioEuros in billion and in percentage

29

Yield 3.0%

Evolution of ALCO portfolio in run-off scenario Euros in billion, yield in %

Dec-14 Mar-15

ALCO portfolio 21.0 24.8

% of total assets 12.9% 14.8%

Duration (in years) 5.2 5.2

ECB liquidity position 7.2 8.9

2015e 2016e 2017e 2018eAmount (€bn ) 25.4 23.1 21.7 20.8Yield (%) 2.9% 2.9% 2.9% 2.9%

ALCO portfolio

ALCO portfolio

… with increased diversification

Fixed income portfolio composition evolutionEuros in billion

The ALCO portfolio has followed an active strategy and is today more diversified

30

Dec 14 Mar-15

Spanish Government 9.7 10.6Italian Government 4.7 6.1US Government 1.5 2.8Other Government 1.7 1.6

of which:

Portuguese Government 0.8 0.9Mexican Government 0.6 0.6Netherlands Government 0.1 0.1

Agencies 1.5 1.7Covered Bonds 2.0 1.9Corporates & Fin 2.3 2.6

TOTAL 23.4 27.3

Note: All numbers refer to ALCO portfolio plus life insurance portfolio.



3. Rights issue

4. 1Q15 Results




Higher capital ratios

Common Equity Tier 1 phased-in In percentage

11.7%

11.1%11.4%

11.8% 11.7% 11.8%

1Q14 2Q14 3Q14 4Q14 1Q15

32

Fully loaded1Q15

25,878 25,86025,347

24,75823,922

1Q14 2Q14 3Q14 4Q14 1Q15

8,151 8,474 8,569 8,848 9,059

1Q14 2Q14 3Q14 4Q14 1Q15

17,727 17,386 16,777 15,910 14,863

1Q14 2Q14 3Q14 4Q14 1Q15

The stock of NPLs continues the downward trend …NPL evolution Data include 20% of APS. Euros in million €1bn further reduction of

NPLs during 1Q15

The decline in total problematic assets accelerates

On-balance sheet RE assets evolution Data include 20% of APS. Euros in million

Total problematic assetsData include 20% of APS. Euros in million

Note: NPLs include contingent risk. 33All figures refer to ex-APS perimeter and 20% of AP S

… with improved dynamics in the last quarters

Evolution of NPLs and RE assets Data include 20% of APS. Euros in million

Total problematic assets are reduced by €836M

1Q14 2Q14 3Q14 4Q14 1Q15

Ordinary net entries 25 -244 -385 -569 -802Change in RE assets 77 323 96 279 211Net entries + Change in RE assets 102 79 -289 -290 -591

Write-offs 265 97 224 298 245

Re assets and NPL quarterly change -163 -18 -513 -588 -8 36

34

1Q14 2Q14 3Q14 4Q14 1Q15

Real Estate development and/or construction purposes 52.56% 52.11% 51.47% 52.17% 49.21%

Construction purposes non-related to real estate dev. 8.38% 7.41% 7.35% 8.08% 9.03%

Large corporates 6.19% 6.13% 6.30% 6.46% 6.55%

SME and small retailers and self-employed 13.08% 13.08% 13.11% 12.60% 12.20%

Individuals with 1st mortgage guarantee assets 9.85% 9.75% 9.23% 9.25% 9.12%

NPL ratio 13.94% 13.85% 13.44% 12.74% 11.68%

NPL ratio improvement is accelerating with high coverage levels

Evolution of NPL ratios by segmentIn percentage

Note: NPL ratio is calculated including contingent risk and 20% of the APS. 35

NPL ratio is reduced by more than 100bps to 11.68%

Coverage of NPL’s: 51.4%

Maintaining good real estate sales results

Number of units sold

36

1,992

2,8823,271 3,123

1Q12 1Q13 1Q14 1Q15

Solvia has become one of the main servicers of the Spanish market

For any additional information, please do not hesitate to contact us .

[email protected]

+34 93 728 12 00

Investor Relations

1Q15 Results presentation - grupbancsabadell.com · Sabadell cautions that this presentation may...

Documents

Transcript of 1Q15 Results presentation - grupbancsabadell.com · Sabadell cautions that this presentation may...