- The CET1 phase-in ratio increases by 55bps in the quarter to 12.7% (12.1% fully-loaded(1))
- On-balance sheets funds increase by 4.0% and the Group’s performing loans record a 3.3%(2) growth year-on-year
- The Bank grants 9.3 billion euros of ICO-guaranteed loans and 2,527 million euros in payment holidays for mortgages and consumer loans
- 70% of customers who operates with Sabadell do so via digital channels
- Banco Sabadell launches framework for the issuance of bonds linked to sustainable development goals
Banco Sabadell Group has ended the first half of 2020 with a net attributable profit of 145 million euros, 72.7% lower in year-on-year terms, after allocating the required provisions of 1,089 million euros in total (968 million euros excluding TSB), due to the updates made to IFRS 9 model to incorporate the new macroeconomic scenarios in light of Covid-19.
These provisions entail a credit cost of risk of 107bps, in line with the guidance.
Core banking revenue (net interest income + net fees and commissions) amounted to 2,378 million euros, a year-on-year reduction of 5.3%, remaining strong in spite of the exceptional circumstances this quarter.
This quarter saw activity recover substantially in the last few weeks, resuming pre-Covid-19 levels, which has allowed Banco Sabadell to increase its market share in POS turnover, credit cards and insurance.
Net interest income amounted to 1,705 million euros as at the end of June 2020, declining by 5.6% year-on-year due to the effect of interest rates and the smaller contribution of the ALCO portfolio, which were partially offset by larger volumes, the lower cost of wholesale funding and TLTRO III. Additionally, it is worth noting the impact of the consumer loan securitisation carried out in the previous year. Net fees and commissions amounted to 673 million euros, 4.6% less than in the previous year, due to lower activity levels and the exceptional circumstances at the beginning of the quarter.
Cost containment and strong capital and liquidity position
Costs were contained and were 0.3% lower than in the previous year, falling to 1,562 million euros as at end-June. The cost-to-income ratio was 53.7% at the end of June 2020, representing a 107bps improvement compared to the same period in the previous year.
Banco Sabadell’s capital ratio puts it in a good position to face the current macroeconomic environment. The CET1 capital ratio improved, increasing by 55bps in the quarter to 12.7% (phase-in) and 11.9% (fully-loaded) as at the end of June 2020. The pro forma(1) CET1 ratio was 12.8% (phase-in) and 12.1% (fully-loaded).
In terms of liquidity management, the LCR (Liquidity Coverage Ratio) increased to 214% at Group level (234% excluding TSB and 247% in TSB) as at end-June 2020. The loan-to-deposit ratio as at the end of June 2020 was 99%, with a balanced retail funding structure.
Similarly, in the second quarter of 2020, 500 million euros of senior preferred notes have been issued.
Lending volumes rise and funds under management increase
Banco Sabadell has ended the first six months of 2020 with loan growth across all geographies. Gross performing loans ended June 2020 with a balance of 145,131 million euros (110,941 million euros excluding TSB), representing a year-on-year growth of 2.4% (2.9% excluding TSB).
Organic growth(2) of lending was 3.3% year-on-year (4.0% excluding TSB) and 1.4% in the quarter (2.4% excluding TSB).
In Spain, gross performing loans increased by 4.1% year-on-year and by 2.1% in the quarter, mainly driven by ICO-guaranteed loans granted to corporates, SMEs and the self-employed, as well as mortgages, which continued to show a resilient performance in year-on-year terms.
TSB recorded a year-on-year loan growth of 1.0%. Considering constant exchange rate, this item increased by 2.8% year-on-year and by 1.0% in the quarter, due to the increase of the mortgage book and the government’s coronavirus Bounce Back Loan Scheme for SMEs.
As at the end of June 2020, on-balance sheet customer funds amounted to 147,572 million euros (111,525 million euros excluding TSB), representing a year-on-year increase of 4.0% (2.7% excluding TSB) and a quarterly increase of 2.5% (1.9% excluding TSB), driven by the growth of sight accounts.
Sight account balances amounted to 123,888 million euros (90,776 million euros excluding TSB), representing an increase of 9.0% year-on-year (8.4% excluding TSB) and of 4.2% in the quarter (3.7% excluding TSB).
Term deposits amounted to 23,966 million euros (21,031 million euros excluding TSB), down by -15.3% compared to the previous year, and by -4.6% (-4.0% excluding TSB) in the quarter, as term deposits flowed into current accounts as a result of the low interest rate environment.
Total off-balance sheet customer funds amounted to 41,718 million euros as at the end of June 2020, increasing by 4.2% in the quarter due to financial market performance.
Total funds under management amounted to 211,886 million euros (173,570 million euros excluding TSB), compared with 208,587 million euros (172,416 million euros excluding TSB) one year previously, representing an increase of 1.6% year-on-year (0.7% excluding TSB) and of 1.9% in the quarter (1.5% excluding TSB).
Mexico continues to perform remarkably well, growing by 8.0% year-on-year, and by 4.0% in the quarter.
Our top priority: help self-employed individuals, companies and households to overcome Covid-19
Banco Sabadell has acted on its ongoing commitment to provide support to the self-employed, companies and households, anticipating their needs and offering them solutions to help cushion the effects of the health crisis caused by the pandemic. The aforesaid commitment remains fully intact and continues to be a top priority for the Bank, as the provider of an essential service at this difficult time.
Sabadell has granted a total of 9.3 billion euros(3) of ICO-guaranteed loans to SMEs, the self-employed and corporates, and there are 1.7 billion euros in process to grant. It has also granted a further 9,978 million euros in business loans guaranteed by Banco Sabadell until June 2020.
Regarding its individual customers, Banco Sabadell has granted 2,326 million euros of mortgage payment holidays and 201 million euros in consumer loan payment holidays as at June 2020. Of these, 969 million euros correspond to the statutory moratorium established by Royal Decree, and 1,558 million euros correspond to sector moratorium.
Non-performing assets have been reduced in the past twelve months, and at the end of June 2020 their balance was 7,820 million euros, of which 6,359 million euros corresponded to non-performing loans and 1,460 million euros corresponded to foreclosed assets. This volume of problematic (non-performing) assets brings the ratio of net NPAs to total assets down to 1.6%, compared to 1.8% in the second quarter of the previous year.
The NPA coverage ratio stood at 51.8%, with the coverage of non-performing loans standing at 55.6% and the coverage of foreclosed assets at 35.2%.
The ratio of problematic assets in relation to gross loans plus real estate assets stood at 5.1%, down from 5.5% in the first half of 2019.
The Group’s NPL ratio stood at 3.95%, improving from the second quarter of the previous year, when it stood at 4.05%.
70% of customers who operates with the bank do so via digital channels and the number of Bizum users has doubled in one year
Throughout the pandemic, Banco Sabadell has demonstrated the robustness and resilience of its IT platform, proving that it has adequate digital capabilities in place to mobilise the entire organisation, enable staff to work from home and continue providing services to employees and customers as usual, with no service disruption.
70% of customers who operates with the bank do so through digital channels and 86% of ICO-guaranteed loans have been signed for digitally. The number of documents signed digitally has increased from 26% to 41%, and app signups were up by 13%.
Banco Sabadell has also registered 90,000 new users in its mobile app. The number of Sabadell Wallet users has increased by 110% year-on-year to over one million customers today. The number of Bizum users also rose to 650,000 – twice that of the same period in the previous year.
TSB rolls out its SME banking and achieves its highest NPS in two years
TSB has increased its business banking customer base, opening a total of 20,000 Business Current Accounts (BCAs) in the first half of the year.
Lending in TSB amounted to 34,190 million euros, increasing by 1.0%. Considering a constant exchange rate, this increase was 2.8% year-on-year, due to the increase of the mortgage book and the UK government’s Bounce Back Loan Scheme.
TSB has granted 38,000 mortgage payment holidays and 50,000 consumer loan payment holidays to support its customers during the pandemic.
On-balance sheet customer funds amounted to 36,047 million euros, representing an increase of 8.4%.
TSB has picked up the pace of its digitisation strategy. Transactions via digital channels had increased to 93% by June 2020. Around 70% of sales take place digitally. TSB has recorded a three-fold increase in the number of app registrations, reaching 3,500 daily signups.
As a result of these measures and thanks to the resilience of its IT platform, TSB has achieved its highest NPS (Net Promoter Score) of the last two years.
(1) Pro forma figure. Includes +6bps from the sale of the real estate developer and +36bps from the sale of the depositary business.
(2) Excludes CAM APS and the account receivable created for the right of first refusal associated with the NPA portfolio sales of €0.5bn in 1Q20 and €0.2bn in 2Q20.
(3) Data as at 24 July 2020