News

• Excluding TSB, net profit amounts to €190.3 million, a 9.0% increase.
• Net interest income increased by 8.2% year-on-year (excluding TSB).
• The Group’s NPL ratio was reduced to 7.50%, reaching single figures (excluding TSB): 9.45%, down from 9.86% at 2015 year-end.
• Fully-loaded CET1 was 11.8%, well above the regulator’s capital requirement of 9.25%.

The Banco Sabadell group ended the first quarter 2016 with a 44.3% increase in attributable net profit, reaching €252.0 million, more than the market consensus forecast. Excluding TSB, the group’s attributable net profit amounted to €190.3 million, a 9.0% increase.

The activity of TSB during the first three months of 2016 is particularly noteworthy, significantly contributing to the group’s income. There has been a solid increase in assets and deposits, and net interest income has been boosted by intermediary activities and the contribution of the UKAR portfolio. The process of migrating TSB to a new technological platform is progressing on schedule.

Net interest income increased during the quarter in a low interest rate environment, boosted by the reduced cost of funding (both customer deposits and capital markets), reaching €973.9 million at the end of the first quarter 2016 (+51.4% year-on-year and +1.2% quarter-on-quarter). Excluding TSB, net interest income increased by 8.2% year-on-year and 0.8% quarter-on-quarter. The customer spread in the first quarter 2016 stood at 2.84% (2.75% in 4Q15). Excluding TSB, the customer spread was 2.68% (2.59% in 4Q15).

Strong capital position and one-digit NPL ratio

Phase-in Common Equity Tier 1 (CET1) was 11.9% as of 31 March 2016, and fully-loaded CET1 was 11.8%, well above the regulator’s capital requirements of 9.25%. This requirement issued by the European Central Bank (ECB) is the second lowest requirement issued to Spanish banks, indicating that the ECB has allocated a low-risk status to Banco Sabadell.

The group’s NPL ratio continues to decline. The NPL ratio has fallen by 29 basis points over the last three months, and by 418 basis points over the last 12 months, reaching 7.50% at group-level. Excluding TSB, this ratio also exhibited single digit figures and continued its downwards trend, reaching 9.45% as of 31 March 2016, down from 9.86% as of 2015 year-end.

This downwards trend is possible thanks to the continuous reduction in problem assets during the first quarter 2016. Doubtful assets have declined by €670.2 million during the first three months of the year, and by €3,188.8 million year-on-year. As of 31 March 2016, the balance of doubtful exposures amounted to €11,674.1 million. Problem assets declined by €711.1 million during the first three months of the year and by €3,054.9 million year-on-year. At the end of the first quarter 2016, the balance of problem assets stood at €20,867.5 million.

The Spanish real estate market is experiencing a positive momentum, as shown by the increase of prices in high demand areas and the increase in property sales. 4,025 units were sold during the first three months of the year, compared with 2,164 sold over the same period last year. In total, property sales between January and March 2016 amounted to €805 million, compared with €329 million during the first quarter of 2015.

Provisions in the first quarter 2016 amounted to €434.9 million, a 52.0% reduction compared with the same period in the previous year, when provisions amounted to €906.5 million. Extraordinary gains from financial transactions during the first quarter have been neutralised through additional provisions.

Results from financial transactions (net) at the end of the first quarter 2016 amounted to €308.1 million (€303.4 million excluding TSB), compared with €736.2 million in 1Q15. Income from net fees and commissions increased by 13.5% year-on-year with TSB, and remained stable with a 0.4% increase excluding TSB. The growth in income from fees and commissions associated with insurance and pension funds is particularly noteworthy, as together they increased by 68.6% compared with 1Q15.

On-balance customer funds increased by 38.3% year-on-year (2.7% excluding TSB), amounting to €131,290.1 million (€97,492.6 million excluding TSB) and remained stable compared with the previous quarter (increasing by 1.3% excluding TSB).

Off-balance sheet customer funds totalled €37,107.5 million at the end of the first quarter 2016, an 8.5% increase compared with the previous year. Within this item, the uninterrupted growth of mutual funds is particularly noteworthy, amounting to €21,153.1 million as of 31 March 2016, a 13.3% increase year-on-year.

Gross loans and advances to customers, excluding repos, non-performing loans and accrual adjustments amounted to €138,254.6 million at the end of the first quarter 2016. This represents a 33.0% increase year-on-year, including TSB. Excluding TSB, gross loans and advances to customers, excluding repos, non-performing loans and accrual adjustments, amounted to €103,724.2 million as of 31 March 2016, remaining stable compared with the same period in the previous year and with the previous quarter

Market shares continued to improve in the main items during the first quarter, particularly in terms of documentary credit, where the Banco Sabadell market share stood at 33.58% as of 31 March 2016 compared with 29.83% one year previously.

Customer service quality standards continue to be high, maintaining a gap compared with the rest of the sector, standing at 7.84, compared with the sector average of 7.05, according to STIGA and EQUOS data. Banco Sabadell has placed customer experience as one of its strategic pillars and, in terms of NPS, it is becoming a leader in this market.

Commitment to digital transformation in Spain and the UK

As a result of placing customer experience as one of Banco Sabadell’s strategic pillars, the bank has developed a series of digital capacities over the last three months to extend its digital services and is working on new initiatives such as the deployment of digital signatures to companies. The group already has 3.4 million digital customers, 19% more than when the TRIPLE Plan was launched, of which transformation is one of the pillars. With a focus on efficiency and productivity, 85% of transactions are carried out through remote channels and the Sabadell Móvil mobile app registers more than 15 connections per customer per month.

Projects have been launched such as Digital & Agile Lab, a newly formed laboratory in the corporate centre at Sant Cugat del Vallès that serves as a platform for the development of fintech tools. Proteo Mobile was also launched, which brings account managers to customers’ homes, both individual customers and companies. Managers have been given 3,500 tablets to conduct these visits, during which the bank hopes to attract 16,000 new companies.　

Other significant events

Closure of commitments for the restructuring of Banco CAM

The Monitoring Trustree report on commitments to the European Commission and Spanish authorities regarding the restructuring of Banco CAM was received in April and gives details of the satisfactory result of the verifications conducted on these commitments. The Commission congratulated Banco Sabadell on the results of its restructuring plan and for its efforts over the last three years to achieve its divestment targets that have involved various departments of the bank.

BStartup: €69.2 million in loans to startups over the two years since the launch of the programme

BStartup, the Banco Sabadell programme for entrepreneurs, has approved the award of a total of €69.2 million in loans to startups over the two years since the launch of this programme. In total, over 1,000 new technological companies have received funding and specific services in the BStartup specialised branches.

General Meeting of Shareholders

The General Meeting of Shareholders of Banco Sabadell, held on 31 March with 66.27% of capital stock, approved with a majority the management and results of the 134^th year of the bank and agreed to the proposal to distribute €708.4 million in profits obtained at 2015 year-end. It also agreed to allocate close to €271 million to shareholder remuneration in flexible remuneration (scrip dividend) at €0.05 per share, which will be complemented by the delivery of treasury shares at €0.02 per share. Total gross shareholder remuneration is therefore €0.07 per share, and will be carried out in April.

Start of operations in Mexico

In December, Banco Sabadell completed the certification procedure of the Comisión Nacional Bancaria y de Valores de México (Mexican Banking and Securities Commission) in line with Bank of Mexico requirements. The new bank in Mexico, which was awarded a banking licence last August, has been carrying out corporate and business banking operations since 4 January, and will launch a personal banking service at the end of 2016. In 2016, Sabadell aims to capture over 200 customers in its business banking service, through the award of USD 105 million in business banking loans and USD 1.5 billion in corporate banking loans. The multi-purpose financial company (SOFOM) Sabadell Capital has already allocated over USD 1.2 billion in funding across various sectors of the Mexican economy.

Sabadell Wallet

Since February, Banco Sabadell customers have had access to Sabadell Wallet, an innovative solution that converts mobile phones into a payment method that can be used in any shops and establishments equipped with a contactless POS terminal throughout Spain. This app allows customers to use their smartphone to make purchases, by simply unlocking their mobile and placing it on the contactless POS screen for a few seconds until the payment is confirmed.

Transfer of Dexia for €52.39 million

On 13 April 2016, Banco Sabadell announced the transfer of its full holding (20.994% of its share capital) in Dexia Sabadell, S.A. to Dexia Crédit Local, S.A. (Dexia), at a price of €52,390,600.50, representing gross gains for Banco Sabadell in the same amount, under the terms ratified by the arbitration award. The transfer of shares by Banco Sabadell and their acquisition by Dexia occurred after having sent the relevant communications to the corresponding regulatory authorities.