News Column

Banco Sabadell posts 81.2 million euro in attributable net profit, 58.8% more than in the same period last year

April 25, 2014

ENP Newswire - 25 April 2014

Release date- 24042014 - Banco Sabadell posts 81.2 million euro in attributable net profit, 58.8% more than in the same period last year.

Net interest income increased by 17.5% year-on-year. Gross income was 87.3% higher and income before provisions increased by 167.6%, amply surpassing market consensus expectations.

The NPL ratio improved for the first time in six years, by six basis points, and the stockof problematic assets (excluding those covered by the APS) declined by EUR169 million.

Extraordinary gains on financial transactions enabled the bank to book an additional EUR811 million in provisions. Coverage of loan and real estate exposure stands at 14%, one of the highest levels in the sector.

Banco Sabadell and its group ended the first quarter of 2014 in line with the objectives of its 2014-2016 Triple Business Plan, having obtained net attributable profit of EUR81.2 million, 58.8% more than in the same period last year.

That figure, obtained after allocating EUR1,096.5 million in provisions for loan losses and other impairments (securities and real estate), including an extraordinary provision of EUR811 million, confirms the inflection point observed in the final quarters of 2013 and reflects Banco Sabadell's capacity to generate positive results and maintain solid growth based on its ordinary banking business.

The first quarter was characterised by a substantial improvement in margins, far outstripping the market consensus estimate; positive performance in customer acquisitions, customer funds on the balance sheet, and market shares; and the reduction (for the first time since the crisis began in 2008) of NPLs and foreclosed assets, additionally, integration of Banco Gallego and Lloyds Bank Espana in both accounting and technology terms, was completed during the quarter.

Balance sheet and bottom line

At the end of March 2014, the total assets of Banco Sabadell and its group amounted to EUR161,093.9 million.

Gross customer loans increased by 5.0% year-on-year, to EUR123,509.5 million, due mainly to additions to the consolidation scope.

Mortgage loans accounted for close to 46% of total gross lending, amounting to EUR56,264.6 million, up 3.1% with respect to the same period last year.Personal loans also increased, by 6.5% year-on-year, to EUR23,066.4 million.

New loans, for both individuals and businesses, also performed well, with notable year-on-year growth in mortgages (+47%), consumer finance (+30%), revolving credit (+8%) and other funding for companies (+12%).

Excluding Banco CAM assets covered by the Asset Protection Scheme, Banco Sabadell group had a 13.6% ratio of non-performing loans (NPLs) to total computable loans, i.e. a decline of 6 basis points in the last three months.

The coverage ratio, expressed with respect to total exposure to loans and real estate, was 14.0% (13.8% at the end of March 2013), one of the highest levels in the sector. Coverage with respect to total non-real estate exposure is 6.5%.

The excellent pace of real estate sales achieved in previous quarters was maintained, and with lower discounts than one year ago. Revenues from sales in the first quarter expanded by 42% year-on-year (EUR657 million) from the sale of 3,271 homes, 13% more than in the first quarter of 2013.

As of 31 March 2014, customer funds on the balance sheet amounted to EUR94,690.0 million, a 14.5% increase year-on-year.

Demand accounts performed particularly well, having expanded by 28.4% to EUR37,082.2 million, and time deposits also increased significantly, by 12.7% year-on-year, to EUR60,674.8 million.

The difference in growth in loans to customers and customer funds on the balance sheet improved the funding gap by EUR1,321.5 million and brought the loans/deposits ratio to 104.6% (from 116.6% a year earlier) during the first three months of the year, on track towards the Triple Plan objective of reducing that ratio to 100%.

Assets in collective investment vehicles totalled EUR12,318.1 million as of 31 March 2014, a 37.1% increase year-on-year. Assets in pension funds marketed by the Group amounted to EUR4,313.8 million, having increased by 15.6% year-on-year. Insurance sales increased by 9.7% year-on-year, to EUR7,972.9 million.

Total funds under management amounted to EUR150,200.5 million as of 31 March 2014, i.e. 12.4% more than a year ago.

At the end of the first quarter of 2014, Banco Sabadell had strong capital ratios, with equity up by 13.0% year-on-year to EUR10,185.9 million, a core capital ratio (Basel III) of 10.4%, and a BIS capital ratio of 12.3% (11.4% at 31 March 2013), i.e. well above the 8% minimum requirement.

Income and profit performance

The change in trend and improvement in net interest income, already visible in the final quarters of 2013, were confirmed at the end of March 2014. Judicious management of customer spreads and the lower impact of the yield curve on loan repricing, together with the lower cost of funding in the capital markets and expansion of the consolidation scope, drove the improvement in net interest income, which amounted to EUR530.0 million, 17.5% more than in the same period last year.

Dividends received and results from equity-accounted affiliates increased by EUR6.3 million year-on-year.

The intense focus on selling more profitable products substantially improved net fees and commissions (mainly from the provision of services, management of mutual and pension funds, and sale of insurance), which amounted to EUR201.0 million, a 19.3% increase with respect to the first quarter of 2013.

Income from financial transactions and exchange differences totalled EUR946.7 million and include EUR868.9 million in gains on the sale of available-for-sale fixed-income financial assets.

Contributions to the Deposit Guarantee Fund totalled EUR43.5 million in the first quarter of 2014.

As a result, gross income reflected the strength of revenues and amounted to EUR1,648.0 million in the quarter, 87.3% more than in the same period of 2013.

Operating expenses amounted to EUR450.6 million in the first quarter of 2014 and remained stable following the impact of consolidating Banco Gallego and Lloyds Bank Espana. In like-for-like terms (including BMN-Penedes, Lloyds Bank Espana and Banco Gallego in the first quarter of 2013), underlying operating costs declined by 5.7% year-on-year in the first quarter of 2014.

The increase in gross income coupled with the operating cost containment policy provided a notably better efficiency (cost/income) ratio of 56.33%, an improvement of 309 basis points with respect to the same quarter of 2013.

Consequently, net income before provisions amounted to EUR1,129.4 million euro in 1Q14, 167.6% higher than in the same period of last year.

Provisions for loan losses and other impairments (primarily real estate and financial assets) amounted to EUR1,096.5 million, including extraordinary provisions for NPLs, real estate and financial assets amounting to EUR811.0 million.

At 31 March, after booking gains on the sale of current assets (EUR69.9 million) and deducting income tax (EUR18.7 million) and minority interests, net income attributed to the group amounted to EUR81.2 million, up 58.8% with respect to the same period of 2013.

Other key developments in 1Q14

Integration of Lloyds Bank and Banco Gallego

Banco Sabadell successfully completed the integration of Lloyds Banking Group Espana and Banco Gallego into the group in the first quarter of 2014. As a result of integrating Lloyds, SabadellSolbank-Banco Sabadell's brand specialising in foreign non-resident customers-increased its business volume by 26% to EUR7,300 million, and its number of clients in that segment by 15% to over 400,000. With a a network of 108 branch offices, SabadellSolbank has increased its market share among non-resident foreigners to 21%, strengthening its leading position in this segment. The Banco Gallego merger, completed in just five months, allowed Banco Sabadell to increase its share of branch offices in Galicia to 7% and obtain a business volume of EUR4,200 million, with 210,000 customers.

Reinsurance contract signed by Mediterraneo Vida

Banco Sabadell's insurance subsidiary Mediterraneo Vida, Sociedad Anonima de Seguros y Reaseguros (Mediterraneo Vida) signed an agreement in 1Q14 to sell its individual death benefit insurance portfolio as of 31 December 2013 to Irish reinsurance company SCOR Global Life Reinsurance. Mediterraneo Vida will collect a reinsurance fee of approximately EUR82 million, providing Banco Sabadell with gross extraordinary income of a similar amount after deducting the associated transaction expenses.

Campaign to promote business financing

Since February, Banco Sabadell responds to companies' loan applications within a maximum period of 7 days. It is the first bank to adopt and announce such a quick response time. In 2014, Banco Sabadell expects to lend 50.2% (EUR15,000 million) more to businesses compared with 2013. Currently, 30.5% of Spanish industry has a loan from Banco Sabadell and the bank is also a leader in ICO loans, with an 18.15% share.

For more stories on investments and markets, please see HispanicBusiness' Finance Channel

Source: ENP Newswire