News

- Net interest income increased by 25.3% year-on-year and by 5.1% quarter-on-quarter. Profit before provisions increased by 23.7% compared with the figure at 30 September 2013.

- The NPL ratio declined for the third consecutive quarter, to 12.92%. Coverage of loan and real estate exposure increased by 13.5%, still one of the highest levels in the sector.  

- The AQR and Stress Test revealed that Banco Sabadell does not need to adjust its capital ratio. In the most adverse scenario considered, it would have a CET1 ratio of 8.33%. In that same scenario, including mandatory convertible bonds would raise the ratio to 9.38%, or 8.8% fully loaded.  

Banco Sabadell and its group ended the third quarter of 2014 with €265.3 million in net attributable profit, 42.5% more than in the same period last year, after booking €1,725.0 million in provisions for non-performing exposures, securities and real estate.

The consolidated income statement maintained the trend of previous quarters and reflects sound performance, based on the increase in ordinary business volumes and the corresponding improvement in margins, in line with the 2014-2016 Triple Plan and, once again, exceeding market consensus expectations.

The third quarter was characterised by a progressive recovery in demand for loans from SMEs and individuals, the continued good pace of deposit-taking, and sharp growth in value-added products; Sabadell was also the bank most highly rated by customers in Spain and was recognised as the best Spanish company with online payment and e-commerce services.  

Proven strength and solvency
In the third quarter, Banco Sabadell passed the comprehensive assessment conducted by the European Central Bank (ECB) in the framework of the Single Supervisory Mechanism, which examined the 130 largest banks in the euro area in cooperation with the national authorities and in close collaboration with the European Banking Authority (EBA); the results were published recently.  

In the case of Banco Sabadell, the assessment concluded that the value of assets, collateral, and provisions were appropriate, confirming the bank's sound position in terms of capital and reserves. Moreover, it was the only Spanish bank, and one of only 15 in Europe, to not require any adjustment to its initial capital ratio, according to the Asset Quality Review (AQR).  

Overall, the ECB's comprehensive assessment revealed that Banco Sabadell's Common Equity Tier 1 (CET1) ratio is 10.26% and would be 8.33% in the most adverse scenario, amply exceeding the required minimum of 5.5%; in that extreme scenario, including mandatory convertible bonds (excluded from the comprehensive assessment), the ratio would be 9.38%, or 8.8% fully loaded.

Balance sheet
At 30 September 2014, the total assets of Banco Sabadell and its Group amounted to €162,785.1 million.  
Gross loans and advances to customers amounted to €121,611.9 million. Demand for credit is beginning to show signs of a revival, since net lending to companies rose for the second consecutive quarter, and the total amount of new mortgage loans arranged in the first nine months of 2014 exceeded the figure for all of 2013. In year-on-year terms, the number of new transactions increased by 57% (63% growth in terms of volume). Mortgage loans currently account for 45% of total gross lending, amounting to €55,169.9 million.  
Lending to companies also performed favourably: working capital finance increased by 9% and other lending to companies by 8%.New production in both categories increased by 12% and 25%, respectively, in the quarter compared with the same period last year.                        

Since the "Creer" (Believe) campaign was launched in February, which included a commitment to respond to loan applications in less than 7 days, more than 85,000 new financing operations for companies have been approved, an increase of 5% with respect to the same period of 2013. The average amount was €223,000 and the response time was 3.2 days.
Excluding Banco CAM assets covered by the Asset Protection Scheme, the ratio of non-performing loans (NPLs) to total computable loans declined to 12.92% at the end of the third quarter of 2014, an improvement of 71 basis points since the beginning of the year. Reclassification of assets as problematic continues to decline and reserve coverage with respect to total exposure to loans and real estate increased to 13.5% (9.3% excluding the APS), compared with 13.3% at 30 September 2013.  
Real estate sales totalled €1,876 million in the first nine months, 10.3% more than projected in the 2014-2014 Triple Plan for the period. 45% of properties were sold with Banco Sabadell funding (29% on the same date in 2013) and 42% of sales exceeded €100,000 (26% at the end of 3Q13).
Customer funds on the balance sheet expanded by 6.0% year-on-year to €97,374.7million. Demand accounts performed well, increasing by 28.8% in the last twelve months to €43,669.7 million. Term deposits amounted to €57,019.5 million.  
The bank's funding structure maintains the positive trend of previous quarters in terms of the loan-to-deposit ratio, which is 100.4%, having declined by 8.8 percentage points in one year. Recourse to the ECB declined by 76.5% year-on-year, to €4 billion.  
Off-balance sheet funds expanded by 30.2% in the last twelve months. Assets in funds and collective investment vehicles managed by the bank maintained the unbroken growth trend that began in 2013, to total €14,665.3 million as of 30 September 2014, an increase of 45.9% year-on-year.  
Assets in pension funds marketed by the Group increased by 12.5% year-on-year to €4,366.9 million at 30 September 2014. Insurance sales amounted to €7,824.3 million in the first nine months of 2014, a 7.3% increase year-on-year.  
Total funds managed on and off the balance sheet increased by 7.9% year-on-year in the first nine months of 2014, to €154,813.7 million.                  

At the end of the quarter, Banco Sabadell was rated among the best banks in Spain in terms of service quality by the Bank Branch Objective Quality Survey, and it was also the bank most highly rated by customers in Spain, as well as being ranked as the best Spanish company in online payment and e-commerce services.

Income and profit performance

Judicious management of retail savings, rising net revenues from services and value-added products and the reduction in recurrent operating costs enhanced profit from ordinary business with the result that Banco Sabadell continued to steadily improve margins in the third quarter, in line with its own guidance and again beating the market consensus estimates.
Lower funding costs and the increased consolidation scope resulted in steady growth in net interest income in the first nine months to €1,650.0 million, 25.3% more than in the same period of 2013.  

Good sales of off-balance sheet products and the inclusion in the consolidation scope of the businesses acquired in 2013 resulted in a 14.5% year-on-year increase in net fees and commissions in the first nine months of 2014, to €629.6 million.  
Income from financial transactions totalled €1,299.0 million. Net income from exchange differences increased by 86.3% year-on-year, to €90.4 million. Contributions to the Deposit Guarantee Fund totalled €129.3 million. As a result, gross income amounted to €3,535.7 million, a 17.4% increase year-on-year.

Operating costs amounted to €1,337.9 million. Underlying costs declined by 4.9% year-on-year in like-for-like terms.
Good operating profit performance coupled with containment of operating costs improved the efficiency (costs/income) ratio for the fourth quarter in a row: it declined by 624 basis points to 54.71% at 30 September 2014 (vs. 60.95% one year earlier), not counting non-recurrent income from financial transactions.  
As a result, the Banco Sabadell group ended the first nine months of its 133rd year with a pre-provision profit of €1,991.9 million, 23.7% more than in the same period of 2013.                      
Provisions for loan losses and other impairments (primarily real estate and financial assets) amounted to €1,725.0 million, including (for the second consecutive year) additional provisions charged against non-recurring income.  
Capital gains on asset disposals include extraordinary income of €80 million net from the signature of a reinsurance contract with SCOR Global Life for Mediterráneo Vida's individual death benefit insurance portfolio.  
After deducting income tax and minority interests, net income attributed to the group amounted to €265.3 million in the first nine months of 2014, i.e. 42.5% more than in the same period of 2013. 
At 30 September 2014, Banco Sabadell maintained its position among the soundest and best-capitalised banks in the sector, with a core capital ratio of 11.8% in accordance with Basel III (11.4% at 30 September 2013). The BIS ratio was 13.0%(12.1% at 30 September 2013). Net equity expanded by 18.8%, to €11,330.3 million.

Other key developments in 3Q14

Acquisition of JGB Bank

During the third quarter, once the pertinent authorisations had been obtained, Banco Sabadell's Miami subsidiary, Sabadell United Bank, N.A., acquired JGB Bank, N.A. for $49.6 million (approximately €36.4 million) and immediately absorbed the acquiree. This transaction further strengthened Sabadell United's position in Florida, where it manages $8 billion in business volume through a network of 27 branches, serving 40,000 clients.
    
Sale of the debt management and recovery unit

In the third quarter, Banco Sabadell reached an agreement to sell its debt management and recovery business to Lindorff España, S.L.U. The transaction includes an agreement to acquire debt management and recovery services for an initial period of 10 years. The sale price was set at €162 million.  
   
Sale of loan books

In the last three months, Banco Sabadell also signed a contract to sell a fully provisioned loan book totalling €554 million to Aiqon Capital (Lux), S.a.r.l. for €23.3 million.