Sabadell completes the TSB migration
- The bank assumes €637.1 million of extraordinary costs and completes the balance sheet clean up.
- Net profit excluding one offs increases to €783.3 million, 9.6% higher.
- Performing loans grow by 3.2%* (6.0% exTSB) driven by the strong activity in Corporates and SMEs in Spain and growth in Mexico. Gross loans increased for the first time since the start of the crisis, by 0.5%* (1.8% exTSB)
- Proforma phase-in CET1 ratio (1) stands at 12.2% phase in and at 11.3% fully loaded
- The Board of Directors approves the payment of a final cash dividend for the amount of €0.01 per share, in addition to the €0.02 already paid
Banco Sabadell Group has ended 2018 with net attributable profit of €328.1 million, after completing the TSB migration and completing the balance sheet clean-up, which have led to one offs for a total of €637.1 million. Excluding these one-offs, net profit increased by 9.6% year-on-year (amounting to €783.3 million).
Core banking revenue (net interest income + net fees) shows the strength of the business, with an increase, ex-TSB of 4.1% year-on-year and 2.4% growth quarter-on-quarter.). At Group level, year-on-year growth stands at 2.9%.
Net interest income amounts to €3,675.2 million at the end of 2018, representing 0.7% growth. Ex-TSB, net interest income amounts to €2,675.5 million, representing 1.1% year-on-year and quarterly growth, driven by the increase in volumes.
Customer spread continues to remain strong, and at the end of the quarter it reached 2.73% at Group level (2.68% ex-TSB) thanks to the volumes growth strategy, defending prices.
Net fees and commissions continue growing strongly year-on-year, standing at 9.6% (11.3% ex-TSB) mainly thanks to the positive performance of service and asset management fees, which have shown an excellent performance in year-on-year terms.
Operating expenses amount to €2,920.4 million at the end of 2018 (€2,680.8 million in the previous year). Non-recurrent costs in the year amounted to €246.0 million, mainly due to TSB migration and post-migration. Recurrent costs amounted to €2,674.3 million.
Lending growth in Spain (+6%) and leaders in service quality
Group performing loans grew by 3.2%* year-on-year (6.0% exTSB) driven by the good performance of Corporates and SMEs in Spain and strong growth in Mexico. New lending to companies increased by 7%, up to €55,594 million; and new mortgage loans improved by 17.5% up to €4,024 million. Consumer financing also increased by 14.8% to €2,173 million (including Sabadell Consumer Finance).
Gross performing loans ended 2018 with a balance of €139,366 million (€105,732) million excluding TSB) and show year on year growth, considering a constant exchange rate, of 1.5% (3.5% excluding TSB).
At the end of 2018, on-balance sheet customer funds amounted to €137,343 million (€104.859 million excluding TSB), representing an increase of 4.2% (7.3% excluding TSB) year-on-year, and 1.8% quarter-on-quarter (2.7% excluding TSB) supported by the increase in sight and term deposits.
In terms of off balance sheet customer funds, these amounted to €44,034 million at the end of 2018. Total Group assets amounted to €222,322 million, representing a 0.6% increase year-on-year and 2.3% in the quarter.
In 2018, the acquisition of companies and individuals has been strong, with a total of 436,455 new customers. By segment, the Group has acquired 342,138 new individual customers and 93,802 companies. Furthermore, it is also worth highlighting that Sabadell has added 274,138 new salaries.
New loans and credit facilities to SMEs grew by 7% year-on-year, while new consumer and mortgage loans increased by 14%. The rate at which Expansión accounts are opened grew by 8%, and cards turnover increased by 14%, whilst new insurance premiums and POS turnover increased by 14% and 17% respectively.
This increase in customers is also coupled with an improvement in service quality, which exceeds the sector average. Banco Sabadell consolidates its leadership in SMEs and large enterprises. According to the results of the STIGA-EQUOS survey, Banco Sabadell has achieved a score of 8.17%, compared to the sector average which stands at 7.20%. The NPS indicator (Net Promoter Score) indicates that Banco Sabadell is #1 for large enterprises and SMEs and number #2 in Personal Banking.
The Board of Directors has approved the payment of a final cash dividend of €0.01 per share, in addition to the dividend already paid of €0.02 per share. In total, the dividend amounts to €0.03 per share, which represents a payout of 50%.
Successful risk management
At the end of 2018 a significant reduction has been achieved in the Group’s NPL ratio, which stands at 4.22% (5.04% ex-TSB).
Furthermore, it is worth highlighting the significant decline in non-performing assets, which have shown a reduction (ex-TSB) of €7,846 million in the year, after announcing the sale of institutional portfolios for the amount of €5,800 million. The organic reduction also stands out, amounting to €2,047 million in the year (€305 million in the quarter). NPA coverage reached 52.1%, whereas the NPL coverage ratio reached 54.1%.
All of this has led to a reduction in the Banco Sabadell Group net NPAs to total assets ratio, which stands at 1.8%. Thus it is anticipated that one of the main pillars of the Group's new strategic plan will be achieved in just one year.
With regards to the capital position, the proforma phase-in CET1 ratio(1) stands at 12.2% whilst the fully-loaded Proforma ratio stands at 11.3% at the end of 2018.
Growth in Mexico and a new chapter at TSB
The evolution of the business in Mexico continues to produce positive results, particularly with regard to the evolution of growth levels, both in the individuals as well as the companies segment. Thus, the volume of customer lending stands at 71,557 million pesos at the end of 2018, which represents a year-on-year increase of 36%. With regards to customer funds, these lie in excess of 28,000 million pesos, which represents a 327% increase compared to the previous year.
With regards to TSB, having overcome the incidents linked to the migration, a new chapter has been initiated in which the new platform will allow TSB to improve customer experience and develop the SMEs business. The new platform makes it possible for mortgage brokers to submit applications in half the time, compared to the old system.
Furthermore, it is now possible to open current accounts in branches in half of the time compared to pre-migration, and the launch of key savings products in the online channel in the middle of the last quarter has helped to increase inflows
It is also worth highlighting that 140,000 customers moved to TSB, compared to 80,000 customers who moved away from TSB, which consolidates the franchise, having overcome the migration incidents.
NOTE 1: Information calculated on a like-for-like basis, assuming constant FX and excluding Sabadell United Bank, Mediterráneo Vida and TSB’s Mortgage Enhancement portfolio. * Excludes the impact of the APS NPL run-off (the APS run-off refers to 80% of the APS problematic exposure, the risk of which is assumed by the DGF, as well as the change in the net loans and receivables account). The APS NPL run-off as at Dec-18 refers only to the DGF receivable account. (1) Proforma data considers RWAs released from institutional NPA sales announced in Q2 (+19bps), the capital gains from the sale of Solvia (+15bps) and the IFRS16 impact (-16bps).
NOTE 2: Information calculated on a like-for-like basis, assuming constant FX and excluding Sabadell United Bank, Mediterráneo Vida and TSB’s Mortgage Enhancement portfolio. * Excludes the impact of the APS NPL run-off (the APS run-off refers to 80% of the APS problematic exposure, the risk of which is assumed by the DGF, as well as the change in the net loans and receivables account). The APS NPL run-off as at Dec-18 refers only to the DGF receivable account.
(1) Proforma data considers RWAs released from institutional NPA sales announced in Q2 (+19bps), the capital gains from the sale of Solvia (+15bps) and the IFRS16 impact (-16bps).