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Banco Sabadell1Q12 Results
April 26 th, 2012
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.
22
1. Quarterly highlights
2. 1Q12 Results
3. Commercial activity and liquidity
4. Risk management
Index
33
1. Quarterly highlights
44
Quarterly highlights
�Positive evolution in net interest income
�Success in attracting new customers and improving market share
�Ongoing efforts in provisioning
�Successful capital increase in March
�Significant improvement in capital ratios
�Comfortable liquidity position
�Results in line with guidance
55
2. 1Q12 Results
66
1Q12 Results
Euros in million 77
1Q11 1Q12% var 12/11
Net Interest Income 379,1 407,3 7,4%
Equity Method & Dividends 18,1 5,6 -69,1%Commissions 135,7 133,5 -1,6%Trading Income & Forex 136,7 161,4 18,1%Other Operating Results 1,9 -15,6 --Gross Operating Income 671,6 692,2 3,1%
Personnel Costs -192,1 -188,0 -2,2%Administrative Costs -98,5 -94,2 -4,4%Depreciations -32,4 -32,0 -1,2%Pre-provisions Income 348,5 378,1 8,5%
Total Provisions & Impairments -330,1 -293,4 -11,1%Gains on sale of assets 1,1 28,0 --Profit before taxes 19,5 112,6 476,6%Taxes and others 64,7 -32,6 --Attributable Net Profit 84,2 80,0 -5,0%
Net interest income is improving ...
Net interest income 1Q12:+7.4 % YoY
Net interest income evolution(Euros in million)
1Q11 2Q11 3Q11 4Q11 1Q12
379.1 385.4 388.6 384.1407.3
88
… driven by active price management …
Total volume of re-priced assets in the quarter: € 10. 7 bn*
In basis points* New granted transactions with price change 99
Product Mar-11 Dec-11 Mar-12 Var QoQ Var YoY Mar-11 Dec-11 Mar-12 Var QoQ Var YoY
Credits 272 361 363 +2 +91 210 262 279 +17 +69Loans 256 329 278 -51 +22 186 210 216 +6 +30Mortgages to individuals 124 123 146 +23 +22 76 81 83 +2 +7Leasing 185 216 226 +10 +41 107 119 125 +6 +18Renting 390 462 525 +63 +135 257 321 345 +24 +88Commercial loans 309 341 368 +27 +59 328 355 404 +49 +76Confirming 246 252 270 +18 +24 225 243 280 +37 +55Forfaiting 266 365 349 -16 +83 222 317 382 +65 +160Total loans 248 285 287 +2 +39 154 173 182 +9 +28
Term deposit 1 month 105 95 85 -10 -20 91 75 70 -5 -21Term deposit 3 months 116 142 137 -5 +21 103 105 106 +1 +3Term deposit 6 months 133 148 163 +15 +30 138 106 125 +19 -13Term deposit 12 months 102 157 172 +15 +70 189 132 134 +2 -55Term deposit 18 months 147 218 205 -13 +58 200 191 184 -7 -16Term deposit +18 months 202 282 240 -42 +38 191 150 152 +2 -39Total term deposits 122 147 155 +8 +33 178 149 148 -1 -30
Front book spreads Back book spreads
… and a moderate increase in the cost of customer funds
Margin evolution(In percentage)
1.61%
1.47%1.80%
1.83%
1.79%
1.85% 1.98%2.06%
1.95% 1.86%1.78%1.81%
1.65% 1.60% 1.62% 1.60%1.56%
2.16%
1.89% 1.99%2.11%2.06%
1.80%1.91%2.05%
2.17%
2.31%2.52%
2.72%2.73%2.81%2.81%2.84%2.80%
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12
Net interest margin Customer spread
5.00%
3.57%
2.50%
4.28%
5.93% 6.06% 6.28% 6.29%
5.56%4.93%
4.21%
3.79% 3.53% 3.49% 3.50% 3.65% 3.86%3.99% 4.12% 4.22%
2.12%
3.13%
2.83%
3.22% 3.47% 3.48%
2.21%1.70% 1.48% 1.36%
1.44% 1.59%
1.85% 1.97% 2.00% 2.06% 2.11%
2.80%
1.83%
5.06%4.83%4.78%
2.40%2.14%2.03%2.01%
1.49%1.28%
2.79%
1.58% 1.48%
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12
Customer loan yield Cost of customer funds Cost of wholesale funding 1010
Stable commission levels
Commissions evolution(Euros in million)
30.9 31.7 27.9 29.1
45.8 45.4 46.4 49.0
59.1 63.5 61.4 57.4
26.1
47.5
59.9
14.012.1
1Q11 2Q11 3Q11 4Q11 1Q12
Asset Mgmt1 ServicesLending
1 Including mutual funds commissions and pension funds and non-life insurance brokerage
Commission income 1Q12:-1.6 % YoY135.7
152.6
135.7149.5
133.5
Commissions from fixed income issues
1111
Personnel expenses evolution(Euros in million)
179.0 176.0 179.6 179.0 182.2
13.12.8 4.2 5.89.0
1Q11 2Q11 3Q11 4Q11 1Q12
Recurrent No recurrent
Personnel expenses 1Q12:-2.2% YoY
Personnel expenses 1Q12 Like-for-like*:
Recurrent personnel expenses 1Q12:+1.8% YoY
+0.3% YoY
192.1178.7
* Including Lydian Bank in 2011 and excluding non-recurrent expenses
183.8 188.0 188.0
1212
Personnel expenses remain flat ...
General expenses evolution(Euros in million)
Recurrent
General expenses 1Q12:-4.4% YoY
Recurrent general expenses 1Q12:+1.6% YoY
Non-recurrent
98.5
92.3 92.5101.4 107.2
93.8
2.9
6.2 0.4
1Q11 2Q11 3Q11 4Q11 1Q12
92.5
101.4
* Including Lydian Bank in 2011 and excluding non-recurrent expenses
110.1
94.2
1313
General expenses 1Q12 Like-for-like*:
-0.7% YoY
… and general expenses are slightly down, like-for-like …
49.7%47.0% 47.6% 47.3%
40.8%
Mar. 11 Jun. 11 Sep. 11 Dec. 11 Mar. 12
1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12
Employee and branch evolution(In number)
Cost income evolution(in %)
10,777
1,467
Cost to income ratio ex non-recurrent items 1Q12: 39.9%Branches Employees
10,721
1,467
10,610
1,379
10,699
1,387
SUBAcquisition
B.GuipuzcoanoAcquisition
Lydian P. BankAcquisition
9,8399,746
9.701
1,221 1,223 1,222
1,383
10,67510,550
1,382
1414
… as the network optimisationcontinues
More efforts in provisions
Evolution and breakdown of provisions and write-dow ns (Euros in million)
*
**
* Includes extraordinary provisions from capital gains generated in the quarter (€186.2m) due to the debt-for-equity transaction and the goodwill fiscal deductibility recovery ** Includes guaranteed funds write-down (€43.1m)
1515
1Q11 2Q11 3Q11 4Q11 1Q12
Specific 328.4 143.4 158.6 109.3 118.2Substandard -32.8 -52.2 -53.2 -4.1 -14.4Metrovacesa 0.0 0.0 0.0 0.0 40.3Real estate assets 30.0 62.4 41.2 106.3 142.4BCP 1.2 34.7 46.5 31.9 0.0Goodwill and others 0.8 9.3 12.1 58.0 8.1
Subtotal 327.6 197.6 205.2 301.4 294.6
Generic 2.5 17.9 16.6 -19.8 -1.2
Total provisions and impairments 330.1 215.5 221.8 281. 6 293.4
Significant increase in the corecapital ratio
Core capital evolutionIn %
9.4% 9.3% 9.1% 9.0%
11.9%
Mar. 11 Jun. 11 Sep. 11 Dec. 11 Mar. 12
Capital actions in 1Q12
� Preference shares exchange forordinary shares equivalent to 128 bp of core capital (€718 million*)
� Capital increase in CAM context CAM equivalent to 161 bp of core(€903 millions).
* € 718 million (€850m * 90% * 93.8%)1616
Succesful capital increasecarried out in March
Capital increase main terms
• Issue of 684 million of new shares, issue ratio 3:7 (3 new shares for every 7 existing ones)
• New share issue price 1.32€
Capital increase results
• Preferred tranche subscription: 99.95%
• Capital increase 4.4x oversubscribed
Banco Sabadell Share price, March 1-15th 2012(€)
Evolution of the share during the subscription period: +11.7%
(Ibex35: -0.5%)
1.60
1.80
2.00
2.20
2.40
2.60
01/03 02/03 05/03 06/03 07/03 08/03 09/03 12/03 13/03 14/03 15/03
1.60
1.80
2.00
2.20
2.40
2.60
Cierre Mínimo Máximo Evol. esperada por el mercado1717
Closing Minimum Maximum Typical market trend
3. Commercial activityand liquidity
1818
Maintaining a steady inflow of newcustomers …
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
Jan Feb Mar Apr May Jun Jul Ago Sep Oct Nov Dec
2010 2011 2012
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
Jan Feb Mar Apr May Jun Jul Ago Sep Oct Nov Dec
2010 2011 2012
+13.5% YoY +36.3% YoY
1919
Monthly new individual customers Monthly new company customers
In line with the CREA plan
1Q11 1Q12 Change
Individuals 72,975 82,804 +13.5%
Companies 15,356 20,923 +36.3%
… with total customers in excess of 2.7 million
Cuenta Expansión:62,552 new accounts
Cuenta Expansión Negocios: 29,184 new accounts
2020
Evolution of total number ofcustomers
1Q11 1Q12 Change
Total 2,523,728 2,757,134 +9,2%
Remarkable success in customer gathering
With two market-leading products paving the way in 1Q12
2.82%
3.32%
Dec. 10
Dec. 11
+50 bps
2.31%
2.57%
Mar. 11
Mar. 12
+26 bps
2.09%
2.25%
Feb. 11
Feb. 12
+16 bps
Credit card volume
… achieving market share gains both in individuals …
4.02%
4.84%
Mar. 11
Mar. 12
+82 bps
2121
Household term deposits
Payroll accounts Transactionality 1
1 Including cheques, transfers, SEPA transfers, receivables and promissory notes
… as well as companies …
6.81%
7.53%
Feb. 11
Feb. 12
+72 bps
Corporate credit
21.84%
22.41%Feb. 11
Feb. 12
-57 bps
5.49%
7.03%
Dec. 10
Dec. 11
+154 bps
5.55%
5.78%
Feb. 11
Feb. 12
+23 bps
Volume at BS card PoS
2222
Sight deposits companies
Export documentary credit
… whilst maintaining the leading position in quality of service
7.087.247.20
7.327.21
7.547.29
6.78 6.95 6.776.61
6.116.06 6.07
2006 2007 2008 2009 2010 2011 1Q12
Sabadell Market
*
2323
New customer experience with BS compared with their expectations
Most valued by the customers
95% of new customer are valuing BS service better or similar to
what they initially expected
Source: STIGA “RCB Análisis de Calidad Objetiva en Redes Comerciales Bancarias” (1Q12) and FRS Inmark. * Note: Without BG, the ranking increases up to 7.20
Worse4.2%
No Opinion
1.1%
Much better30.9%
Similar29.9%
Better33.9%
Change in commercial gap (Euros in million)
-2,000
-1,000
0
1,000
2,000
3,000
4,000
1T08 2T08 3T08 4T08 1T09 2T09 3T09 4T09 1T10 2T10 3T10 4T10 1T11 2T11 3T11 4T11 1T12
1Q12: €602 million*
Customer funds and loans evolution (Euros in million)
Positive commercial gap with customer funds growing
2424
1 Excluding repos, including sight and fixed-term deposits, preference shares and mandatory convertible bond placed in the retail networkNote: Changes in commercial funding cap include commercial paper placed in the retail network as of 4Q11. 1Q12 adjusts for capital increase.Euros in million
Mar-11 Dec-11 Mar-12% Var.
YoY
On-balance sheet customer funds 52,131 53,703 53,795 3.2%Other on-balance sheet term funds1
33,379 34,963 34,453 3.2%Sight deposits 18,752 18,740 19,343 3.1%
Off-balance sheet funds 18,685 17,942 18,345 -1.8%Mutual funds 8,733 8,024 8,295 -5.0%Pension funds 2,935 2,858 2,929 -0.2%Third party insurance products 5,787 5,926 5,780 -0.1%
Total funds 70,816 71,645 72,140 1.9%
Gross loans to customers ex repos 72,017 73,540 74,123 2.9%
Deposits62.0%
ICO financing
5.3%
Retail issues4.0%
Repos5.6%
Preference shares0.1%
Covered bonds66.2%
Senior debt7.0%
Preference + Subordinated
5.3%
GGB2.2%Securitisation
8.0%
ECP11.3%
BS has a balanced funding structure …
BS fulfilled debt issue in 1Q12(Euros in million)
2525
** Placed with retail investors (30%) and institutional investors (70%)
Funding structure(In %)
Wholesale market breakdown(In %)
Amount Issue date Coupon Maturity
Covered Bonds I/2012 1,200 16/02/12 4.0% 3 yearsSenior debt Feb. 12 500 27/02/12 4.2% 1,5 years
Wholesale funding23.0%
1,15
145
01,
148
0 0 020
092
01,
495
0 01,
683
664
0 501,
407
300
200
0 0 13 20 100
1,87
3
0
797
1,44
2
900
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
4Q18
Per
pet
ual
… with a comfortable maturity calendar
2,2402,566
2,6532,739
1,442
3,76187%
121%
89%
121%75%
163%
4Q10 1Q11 2Q11 3Q11 4Q11 1Q12
Outstanding amount commercial paper + ECP
% renewal2,501 2,591 997 2,415 2,397 1,907 133
2626
Wholesale funding maturity calendarEuros in million
Short term fundingEuros in million and %
Maturity by product type Euros in million
Outst. Amount 2012 2013 2014 >2014Covered bonds 12,310 1,099 2,591 927 7,693Senior debt 847 772 -- -- 75GGB 400 400 -- -- --Preference and Subordinated 935 0 -- -- 935Other mid- and long-term financial instruments 322 230 -- 70 22TOTAL 14,814 2,501 2,591 997 8,725
4. Risk management
2727
Maintaining the gap vs. the system
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 1Q12
System NPL BS NPL
*Nota: Spanish financial system NPL ratio as of February 2012 (8.16%).
Source: Bank of Spain2828
*
Banco Sabadell vs. sector NPL ratio In %
Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dic-11 Mar -12
BS NPL ratio 4.09% 4.38% 4.72% 5.01% 5.46% 5.55% 5.72% 5.95% 6.02%
System NPL ratio 5.33% 5.35% 5.49% 5.81% 6.19% 6.69% 7.16% 7.61% 8.16%
GAP BS vs system (bp) 124 97 77 80 73 114 144 166 214
Credit exposure and NPLsaccording by purpose
2929
*Including off-balance sheet items
1 Including caption 4: public entities; caption 8:other assets and deferral adjustments
Euros in million
Dec-11
Real Estate development and/or construction purpose s 8,921 1,452 2,102 23.63% 22.58%Construction purposes non-related to real estate de v. 756 0 49 3.28% 2.78%Large corporates 24,067 202 849 2.93% 2.85%SME and small retailers and self-employed 18,394 234 1 ,223 6.31% 5.69%
Individuals wit 1st mortgage guarantee assets 17,100 1 562 3.29% 3.43%Of which
Purchase of 1st residence 14,142 1 400 2.83% 2.89%Other real guarantees assets 2,958 0 162 5.48% 5.59%
Individuals with other guarnatees 349 0 3 0.95% 0.61%Individuals other 1,709 0 55 3.10% 4.21%
Subtotal gross loans to customers 71,296
Other gross loans to customers 1 5,587
Total gross loans 76,883 6.02% 5.95%
Total
Mar-12
NPL ratio*
NPL ratio*
NPLSubst.
Maintaining coverage level of problematic assets …
3030
Coverage level of Real Estate exposure (Euros in million and %)
Dec-12
Gross amount
Provisions Coverage Coverage
NPLs 2,102 462 22%Substandard 1,452 225 15%Acquired and repossessed RE assets 4,401 1,288 29%Write-offs 117 117 100%Generic 788Potentially problematic exposure 8,071 2,880 36% 36%
Global coverage ratio 2,102 1,475 70% 73%
Mar-12
… and keeping new entries under control
500
700
900
1,100
1,300
1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12
Gross entries
Recoveries
3131
NPL entries and recoveries evolution (Euros in million)
1Q11 2Q11 3Q11 4Q11 1Q12
Gross entries 1,092 1,260 1,166 1,123 1,048
Recoveries -708 -698 -781 -834 -856
Write-offs -335 -213 -240 -30 -93
Subtotal 49 349 145 259 99
Non performing real estate assets in process of repossession 265 -265
Quarterly change on NPLs 314 83 145 259 99
Sales of RE assets improving YoY
245
638
308462 501
-95-247
-106-67-118
1Q11 2Q11 3Q11 4Q11 1Q12
Repossessions Sales
Sales in 1Q12: € 106 million*2012 sales target: € 650 million*
3232
Real estate assetsevolution of coverage levels(Euros in million)
Real estate assets Quarterly additions and sales (Euros in million)
* Pre-provision cost
4Q11 1Q12
Gross portfolio 4,006 4,401
Total fund 1,158 1,288
Net portfolio 2,848 3,113
Coverage 29% 29%
2009 2010 2011 1Q12
Sales price 42 174 376 75
Pre-provision cost 55 228 527 110
Discount to pre-provision costs 23% 24% 29% 32%Provisions built up 12% 23% 23% 26%
% of sales price not covered by provisions 11% 1% 6% 6%
Real estate assets are sold at prices in line with current book value
3333
BS real estate asset sales evolution (Euros in million and %)
* Pre-provision cost
Conclusions
� Strong income generation by active management of prices and spreads
� Customer inflows and positive commercial dynamics in line with CREA targets
Businesstrends
Liquidity � Ample liquidity following capital markets issues and an improved commercial gap
Coverage
Capital
� New NPL entries held back and coverage levels maintained
� High solvency levels� Fulfilling CAM transaction, successfully completing
a rights issue of €903 million and absorbing the new provisioning requirements in 2012e
3434