28th January 2010
FY09 Results
Banco Sabadell
2
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.
3
Agenda
1. 2009 in summary
2. FY09 Results
3. Commercial activity and liquidity
4. Risk management
5. Strategy and guidance
4
-50
-40
-30
-20
-10
0
10
1998 2000 2002 2004 2006 2008-8-6
-4-2
02
46
8
20
30
40
50
60
70
1998 2000 2002 2004 2006 2008-6-4-202468
Business confidence (by levels) andreal GDP (YoY in %)
Source: Banco Sabadell*Numbers according to forecasts
Private consumption (rhs)
Consumer confidence
Consumer confidence (by levels) and Private consumption (YoY in %)
GDP (rhs)
Business confidence
Source: Bloomberg
The behaviour of the Spanish economy relies on five key drivers:
Export sectorDomestic demandPublic deficitReal Estate Unemployment rate
2008 2009* 2010*
GDP 0.9 -3.6 0.2
The Spanish economy: The stabilisation process has begun
5
90
140
190
240
290
1995 1998 2000 2003 2006 2009Spain Germany France Italy
-8-6-4-202468
1997 1999 2001 2003 2005 2007 2009
The export sector: Main driver of growth
Exports (real terms, 2Q95 = 100)
Source: EurostatSource: Bank of Spain
Domestic demand
Foreign demand
PIB growth contribution(percentage points)
Going forward, exports should be supported by the improvement in international trade. In fact, in the last two quarters, exports were positive in quarterly terms.
6
6
10
14
18
22
ene-96 ene-98 ene-00 ene-02 ene-04 ene-06 ene-08
Saving rate (as % of gross available income)Unemployment rate (as % of active population)
85
90
95
100
105
1 5 9 13 17 21 25 29 33 37
Domestic demand: Less negative tone
Employment in current and previous economic downturns (100 = peak previous to the recession)
3Q07
4Q91
4Q77
Source: INE
Although weak in relative terms, private consumption and investment in fixed capital are expected to show a more favourable evolution.
Households savings rate and unemployment rate
7
Public finances: Significant imbalances to remain
Source: Ministerio de Economía y Hacienda
Public debt (as % of the GDP)
Source: European Commission
-3.0-5.2-8.1-9.5-4.11.92.02012201120102009200820072006
General government balance (as % of the GDP)
0
20
40
60
80
100
120
140
Spain Euro zone Germany France Italy
2007 2008 2009 2010 2011
An elevated public deficit is likely to persist in 2010. However, the Government has recently announced steps to contain the deficit in the medium term.
Public debt, as a percentage of the GDP, is likely to stay below that of the Euro zone during the next couple of years.
8
-4
-3
-2
-1
0
Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09
-50
-30
-10
10
30
50
2005 2006 2007 2008 2009
Real estate: Adjustments to continue but at a milder pace
House prices (% QoQ)Number of mortgaged homes(moving three months average, YoYvariation, in %)
The adjustment in real estate is expected to continue due to excess supply. However, as some indicators already show, the pace of contraction is easing.
Source: INE Source: Ministerio Vivienda
9
Real estate: The impact on unemployment
Source: Eurostat
Employment (1Q08 = 100) Employment excl. construction (1Q08 = 100)
Source: Labour Force Survey (Eurostat)
Significant role of the construction sector in the reduction of employment
90
95
100
105
Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09Spain Germany France Italy United Kingdom
90
95
100
105
Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09Spain Germany France Italy United Kingdom
Spain Euro zone Spain Euro zone1995-1998 17.0 10.4 3.9 2.91999-2007 10.3 8.5 3.8 2.22008-2009 14.6 8.4 -1.1 -1.7
Averages during the period (%)
Unemployment rate Annual GDP growthLabour Force Survey (2Q09)
Spain 41.3Germany 47.1France 40.2Italy 38.6United Kingdom 46.7
Employed vs total population (in %)
10
2009 in summary
Active management of the net interest income through prices and hedging
Positive inflexion point in commissions
Excellent cost management: Optima plan consolidation
NPL entries showing a decreasing trend
High level of coverage ratio maintained
Outstanding capital and solvency ratios
11
Agenda
1. 2009 in summary
2. FY09 Results
3. Commercial activity and liquidity
4. Risk management
5. Strategy and guidance
12
2009 ResultsDec-08 Dec-09 09/08 (%)
Net Interest Income 1,452.8 1,600.6 10.2%Equity Method & Dividends 70.8 86.5 22.2%Commissions 557.7 511.2 -8.4%Trading Income & Forex 119.1 297.4 149.7%Other Operating Results 26.4 9.3 -64.6%Gross Operating Income 2,226.8 2,505.0 12.5%Personnel Costs -651.1 -715.3 9.9%Administrative Costs -328.0 -321.5 -2.0%Depreciations -133.1 -142.7 7.3%Pre-provisions Income 1,114.6 1,325.5 18.9%
Total Provisions & Impairments -879.7 -837.7 -4.8%Gains on sale of assets 24.9 83.6 235.2%Taxes and others -14.3 -48.9 240.6%Profit before Discontinued Results 245.5 522.5 112.9%Discontinued transactions Results 428.4 0.0 --Attributable Net Profit 673.8 522.5 -22.5%
13
6.67
0.62
1.442.49
1.70
7.66
2008 2009
BIS ratio (%)
Lower Tier I
Core Capital
Tier II
9.7810.80
Strong capital position
14
Margin evolution reflecting the interest rate environment …
1,600.61,452.8
Dec-08 Dec-09
+ 10.2 %
374.8
1,452.81,600.6
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09
347.1 363.0 367.9 394.6 418.6 402.3 385.2Dec-09
NII 1,600.6
Dividends 14.6
Equity Method 71.9
Commissions 511.2
Trading income 248.2
Forex 49.2
Other op. results 9.3
Gross Op. Income 2,505.0
Personnel exp. -715.3
Administration exp. -321.5
Deprec. & amort. -142.7
Pre-provision Op. Incom 1,325.5
Prov. for NPLs and others -836.9
Gains on sale of assets 83.6
Taxes and minority int. -49.6
Disc. transactions 0.0Attr. Net Profit 522.5
Euros in millions
15
2.73%2.81%2.80% 2.84% 2.81%
2.72% 2.52% 2.31%
3.79%
5.56%
6.28%5.93% 6.06% 6.29%
4.93%
4.21%
2.83%3.47%
3.13%
2.21%
3.22%3.48%
1.70%1.48%
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09
1.86%1.80% 1.83% 1.79% 1.85%1.98%
2.06%1.95%
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09
… but with a softened impact from hedging strategy and active price management
Customer loan yield
Cost of customer funds
Customer spread
Net Interest Margin
16
Commissions have started to recover…
43.7
54.7
37.040.8 33.3 34.1 28.6 31.229.8
61.5 52.251.2 52.852.1 51.960.6
40.4 42.345.338.146.5
48.544.447.9
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09
154.8
219.6
170.1
123.6
217.4
183.4
Dec-08 Dec-09
557.7 - 8.4%511.2
138.8 150.8 134.7 133.4 134.9 132.2 118.7 125.3
Euros in millions
Asset Mgmt1
Services
Lending
1 Including mutual funds commissions and pension funds and non-life insurance brokerage
Asset Mgmt1
Services
Lending
Dec-09
NII 1,600.6
Dividends 14.6
Equity Method 71.9Commissions 511.2
Trading income 248.2
Forex 49.2
Other op. results 9.3
Gross Op. Income 2,505.0
Personnel exp. -715.3
Administration exp. -321.5
Deprec. & amort. -142.7
Pre-provision Op. Incom 1,325.5
Prov. for NPLs and others -836.9
Gains on sale of assets 83.6
Taxes and minority int. -49.6
Disc. transactions 0.0Attr. Net Profit 522.5
17
… and show a clear improvement trend for the next quarters
-1,200
-1,000
-800
-600
-400
-200
0
200
400
600
4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09
Net outflows at BS Asset Management
2009*Number of qualified BS Funds
Number of other qualified Spanish Asset Managers Funds
*11 BS Funds over 21 qualified funds
Outstanding Mutual Funds
BanSabadell Inversión: top of class in mutual funds qualified by S&P
Sabadell BS América Latina Bolsa, FI best return in its category in 2009
Mutual Funds Profitability2009
Advantageversus
benchmarkRanking
Fixed incomeSabadell BS RendimientoInstitucional, FI +4.5% +3.2% 14 / 349Sabadell BS Financial Capital, FI +26.3% +8.7% 5 / 73Equity incomeSabadell BS España Bolsa, FI +38.9% +10.9% 8 / 122Sabadell BS Euroacción, FI +31.3% +12.0% 19 / 170
Euros in millions
18
We continue to take advantage of revenues to apply non-recurrent charges
153.6 155.8 160.0 162.7 158.1 157.2 159.6 153.7
23,631.6 10.65.3 20.97.2 6.5
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09
628.7632.1
19.1 86.6
Dec-08 Dec-09
651.1 715.3
- 0.5%
Recurrent Non-recurrent
153.6
+ 9.9%
163.0 166.5 168.0 189.7 180.8
- 0.9%Life-for-like*
170.2 174.6 Dec-09
NII 1,600.6
Dividends 14.6
Equity Method 71.9
Commissions 511.2
Trading income 248.2
Forex 49.2
Other op. results 9.3
Gross Op. Income 2,505.0Personnel exp. -715.3
Administration exp. -321.5
Deprec. & amort. -142.7
Pre-provision Op. Incom 1,325.5
Prov. for NPLs and others -836.9
Gains on sale of assets 83.6
Taxes and minority int. -49.6
Disc. transactions 0.0Attr. Net Profit 522.5
Euros in millions. * Including Fincom, Tecnocredit and BBVA Miami in 2008
19
Good performance of administrative expenses
78.2 73.7 78.996.1
81.572.2 80.8 88.0
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09
328.0 321.5
Dec-08 Dec-09
328.0 321.5
- 2.0%
- 2.9%like-for-like*
- 8.4%Dec-09
NII 1,600.6
Dividends 14.6
Equity Method 71.9
Commissions 511.2
Trading income 248.2
Forex 49.2
Other op. results 9.3
Gross Op. Income 2,505.0
Personnel exp. -715.3Administration exp. -321.5
Deprec. & amort. -142.7
Pre-provision Op. Incom 1,325.5
Prov. for NPLs and others -836.9
Gains on sale of assets 83.6
Taxes and minority int. -49.6
Disc. transactions 0.0Attr. Net Profit 522.5
Euros in millions. * Including Fincom, Tecnocredit and BBVA Miami in 2008
20
The transformation plan continues to move forward …
FTEs* administrative by branch
1.251.37
1.591.67
2.25
2.00 1.95
1.541.44
2004 2006 2007 2008 1Q09 2Q09 3Q09 4Q09 2010P
2009FYD -348 FTE
The operating efficiency program continues to reduce back office time at the branch level
*FTE= Full Time Equivalents
Cost reduction measures
Supply management and implementation of right-sourcing
Improved management of the use of internal resources and travel.
Adjustment and optimisation of marketing campaigns
21
… and positive impact on efficiency
Number of branchesNumber of employees
9,668
10,015
10,18910,178
9,929
9,615 9,5599,466
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09
1,229
1,2601,257 1,2561,247
1,2301,223
1,214
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09
22
Total provisions and impairments
Maintaining a high coverage ratio driven by conservative policy
Solid coverage ratio of 69.0% Including the guarantees the coverage ratio would be 125.1%
Euros in millions
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 2008 2009
Specific 28.1 29.3 109.4 110.7 105.9 148.4 168.5 141.0 277.5 563.8 of which: NPLs entry 13.2 6.5 55.4 46.1 11.0 16.2 14.5 4.1 121.2 45.8 Calendar effect 14.8 37.1 48.6 56.9 80.8 121.7 155.2 174.8 157.4 532.5Substandar 0.2 10.1 214.0 85.3 41.9 87.5 258.7 3.4 309.6 391.5Metrovacesa 0.0 0.0 0.0 0.0 0.0 46.7 43.4 94.3 0.0 184.3Real estate assets 0.0 0.0 0.0 78.9 0.3 57.0 67.1 57.2 78.9 181.6BCP 0.0 0.0 0.0 100.0 0.0 0.0 0.0 210.0 100.0 210.0Goodwill and others -8.4 -0.2 68.3 52.0 1.0 -0.3 9.1 53.5 111.9 63.2
Subtotal 19.9 39.2 391.8 427.0 149.1 339.2 546.8 559.4 877.8 1,594.4
Generic 20.2 3.8 -10.1 -12.0 0.0 -129.4 -315.5 -311.8 1.9 -756.7
Total prov. and impair. 40.1 43.0 381.7 415.0 149.1 209.8 231.3 247.6 879.7 837.7
23
Agenda
1. 2009 in summary
2. FY09 Results
3. Commercial activity and liquidity
4. Risk management
5. Strategy and guidance
24
Commercial activity improvement throughout the year
64,704 65,013+ 4.9%
36,134 38,131 +5.5%
Dec-08 Dec-09 Var.
21,250 22,150 +4.2%
+0.5%
500
700
900
1,100
1,300
1,500
1,700
1,900
1Q 2Q 3Q 4Q1,250
1,750
2,250
2,750
3,250
3,750
1Q 2Q 3Q 4Q
2008
2009
2008
2009
Loans Mortgages
Loans to customers
On-balance sheet customer funds*Fix-term deposits
Loans to customers excluding real estate
* Excluding repos and including preference shares placed in the retail network and convertible bond issue. Euros in millions
25
91,
790
1,00
530
1,20
01,
075
01,
630
1,28
990
028
020
080
1,50
050
00
500
0 020
00
1,50
00 0
1,75
042
034
850
1500
300
200
0 0 1317
0
0
500
1,000
1,500
2,000
1Q10
3Q10
1Q11
3Q11
1Q12
3Q12
1Q13
3Q13
1Q14
3Q14
1Q15
3Q15
1Q16
3Q16
1Q17
3Q17
1Q18
3Q18
FINANCIACIÓN
Emisiones en mercados de capitales (no incluye las titulizaciones)
€1,000m covered bond issue successfully at the beginning of the year
Wholesale funding maturity calendar
A well-balanced maturity calendar
26
FINANCIACIÓN
Emisiones en mercados de capitales (no incluye las titulizaciones)
Bonds
Covered bonds
Total capital market issues
Wholesale funding maturities
€ 989 m€ 1,775 m
Solid market image versus peer group
€ 2,873 m
€ 2,764 m
Wholesale market activity
No use of state backed guarantees available to BS (€5,313m)
27
7.717.667.827.657.317.436.736.63
6.216.53 6.80 6.73
7.09 7.24 7.08 6.94
2002 2003 2004 2005 2006 2007 2008 2009Banco Sabadell group Market
Service quality and awards
Ranking in service quality 1
The only Spanish financial institution with a global ISO
9001 quality certificate
Renewal of the Global Award of
European Excellence
Ranking in retail banking network independent quality surveys2
Source: 1 Bank of Spain, 4Q08 Bulletin 2 STIGA, “RCB Objective Quality in Retail Banking Networks” 4Q09
28
Agenda
1. 2009 in summary
2. FY09 Results
3. Commercial activity and liquidity
4. Risk management
5. Strategy and guidance
29
NPL ratio
Source: Bank of Spain
02468
10
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 mar-09
jun-09
sep-09
dic-09
System NPLs BS NPLs
* Banco Sabadell estimates
**
Continued NPL gap versus the rest of the sector
Mar-08 Jun-08 Sep-08 Dic-08 Mar-09 Jun-09 Sep-09 Dic-09
NPL ratio BS 0.62% 0.85% 1.59% 2.35% 2.82% 3.19% 3.47% 3.73%
NPL ratio system 1.20% 1.70% 2.63% 3.37% 4.27% 4.60% 4.86% 5.10%
GAP (bp) 58 85 104 102 145 141 139 137
30
750.0806.7
625.4
748.5823.7
735.7
531.9480.1
35.1
489.4
223.1
532.9
3Q08 4Q08 1Q09 2Q09 3Q09 4Q09
The improvement in the trend of new entries continuesEvolution of entries and recoveries
Entries
Recoveries
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09
Entries 213.2 244.0 625.4 748.5 806.7 823.7 750.0 735.7
Recoveries -59.9 -42.2 -35.1 -223.1 -480.1 -532.9 -531.9 -489.4
Write-offs -39.4 -24.5 -40.9 0.5 -1.7 -25.4 -9.2 -31.2
Quarterly change on NPLs 113.9 177.3 549.5 525.8 324.8 265.4 208.9 215.1
31
532
Recoveries analysis
Evolution of court and non-court file recoveries
162
391 42232461
89121 110
165
15
412
20
3Q08 4Q08 1Q09 2Q09 3Q09 4Q09
Real estate repossession
Cash
6%
23%
29%
42%
Court file recoveries (FY09)
63%
37%
Non-court file recoveries (FY09)
Guarantees and commercial discount
Real estate repossession
Cash + reactivation “pulling effect”
Cash + reactivation “pulling effect"
Court files Non-court files
The pulling effect* explains 87.5% of non-court filings* The “pulling effect” means that all the debt goes into NPL even if the unpaid instalment is only a fraction of the total debt.
35 223 480 533 489
32
NPL ratio: New entries and recoveries by segments
NPL new entries Recoveries
Individuals 16%
Companies 54%
Real estate 24%
Self-employed 7%
Self-employed 7% Real estate
26%
Companies 56%
Individuals 11%
33
NPL by segments
Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09
Companies 0.35% 0.52% 1.28% 2.02% 2.54% 2.89% 2.97% 2.85%
SME 0.84% 1.07% 1.37% 2.17% 2.18% 2.77% 3.12% 3.07%
Small retailers and self-employed 1.04% 1.10% 1.37% 1.68% 2.42% 2.93% 3.59% 3.93%
Real estate development 0.42% 0.95% 2.99% 5.35% 7.34% 7.73% 8.05% 9.33%
Mortgages to individuals 0.47% 0.57% 0.75% 1.12% 1.48% 1.69% 1.99% 1.95%
Individual others 1.88% 1.98% 2.44% 3.21% 4.24% 4.91% 5.53% 5.43%
Total 0.62% 0.85% 1.59% 2.35% 2.82% 3.19% 3.47% 3.73%
34
NPL by segments
0
50
100
150
200
250
2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09-20
0
20
40
60
80
100
Individuals
TOTAL
SMEs
Real estate (LHS)
Quarterly cost of risk evolution
35
931 1,025 x.xxx1.1121,025
Dic-08 Mar-09 Jun-09 Sep-09 01/12/yy
-68
Solvia. Real estate assets
Portfolio evolution and writedowns
Euros in millions
Acquisition
Repossession
SalesWritedowns
931 1,275 1,442 1,661 1,742
-59 -59-129 -193
-43
250460
617
Dic-08 Mar-09 Jun-09 Sep-09 Dic-09
714
-244
-84
1,112
Significant real estate provisioning effort, with a net value of €1,498m
36
Solvia assets appraisal by type
17.9%
15.9%
13.6%
11.5%
8.5%
23.0%
5.6% 0.7%
Land under development
Land
Finished property
Real estate underdevelopment
2007-2009
Value loss in the first appraisal as percentage of July 2007 value
Accumulated provisions as percentage of the first value
Real estate assets appraisal analysis by type
6.3%
24.4%
29.4%
36.6%
The potential additional provision needs are already reflected in our financial forecasts
37
Madrid & Metropolitan area
23%
Barcelona & Metropolitan area
48%
Rest29%
BS manages actively its real estate assets through Solvia
Assets by type Geographic distributionAssets by useOther4%
Industrial12%
Residential75%
Tertiary9%
Land under development
52%
Finished property
8%
Real Estate under
development7%
Land33%
142 projectsNone of Solvia’s land is pending reclassification; all of it is “buildable” land 232 finished dwellings for sale (212 dwellings sold during 2009)
38
Agenda
1. 2009 in summary
2. FY09 Results
3. Commercial activity and liquidity
4. Risk management
5. Strategy and guidance
39
Domestic strategy Consolidate our SME and personal banking franchise
Leverage our know-how to expand into retail-focused segment
Increase the network to 1,800 branches
M&A
Well-positioned for future consolidation in the retail market
Trend towards fewer and more solid entities, in Spain as well as in Europe
Spain: consolidation and positioning
A clearly defined strategy for the group
40
US strategy
Leverage existing local banking presence
Merge Mellon &TAB operations, increasing critical mass
Extend expertise from private banking into affluent and SME segments
Sustainable growth history (AuM)
0
1
2
3
4
5
1.7
1.3
0.50.9
30%
20%
11%
39%
100%
$B 4.3+68%
CAGR
2007 Acquisition
TAB
2008 Acquisition
BBVA
2009 Acquisition
MUNB
2009BS Miami
2006BS Miami*
A clearly defined strategy for the group
41
Net interest income to decline mid-single digit with an improvement starting from 3Q10
Commissions increasing mid-single digit
Continued effort in costs (recurrent costs flat)
NPLs to peak at a level not higher than 5% in 3Q10
Growth in volumes and market share increase in loans and deposits
Continued leadership in balance sheet and capital management
Maintaining a favourable gap in NPLs and coverage ratio versus the peer group and the system
2010 will be a challenging year, but to a lesser degree than what the market is forecasting
Guidance 2010
42
The value of trust