Banco de Sabadell SA: Sabadell gains 213 million euros thanks to lower costs and improved all margins

  • Core results (net interest income + fees and commissions – recurring costs) up 20.9% year-on-year
  • Costs down 5.6% YoY and 4.3% in the quarter
  • The fully loaded CET1 capital ratio increases and now stands at 12.45%
  • The Bank achieves a ROTE of 6.5%, in line with the objectives set for this year
  • TSB achieves autonomous profit of £21 million and contributes positively to the Group’s results for the fifth consecutive quarter

Banco Sabadell Group closed the first quarter of 2022 with an attributable net profit of 213 million euros, compared to a profit of 73 million euros in the first quarter of 2021. The institution‘s basic results (net interest income + fees and commissions – recurring costs) increased by 20.9% year-on-year. The Bank achieved a ROTE of 6.5%, higher than the forecasts of the strategic plan.

After a year at the helm of the Bank, CEO César González-Bueno said that “we are starting the year improving our performance across all margins and we continue to reduce costs, having completed the efficiency plan. All this is accompanied by a consolidation of the positive contribution of TSB. Without a doubt , Banco Sabadell ends the quarter on a positive note and we are on track to achieve all the objectives we have set ourselves for this year”. According to Leopoldo Alvear, CFO of Sabadell, “We are seeing an increase of more than 20% in core results, stable default levels and a substantial improvement in the Bank’s capital ratios. Quarter by quarter, we are on track with our roadmap”.

Net interest income + fees and commissions

Basic banking income (net interest income + net fees and commissions) reached €1,217 million, up 3.6% year-on-year. Quarter-on-quarter, it fell by 3.5%. Net interest income increased by 3.0% year-on-year to EUR 858 million, mainly driven by loan volume growth, while quarter-on-quarter it decreased by 0.6% due to lower loan volumes days.

Net fees and commissions amounted to 359 million euros, up 5.0% year-on-year, thanks to the good performance of service fees and asset management fees. These decreased by 9.7% over the quarter mainly due to the positive seasonal effect in the last quarter of 2021, as well as a lower level of syndicated loan transactions and the impact of market volatility from capital on asset management.

Positive impact of the efficiency plan on costs

Total costs amounted to 726 million euros in March 2022 and decreased by -5.6% over the year, mainly thanks to savings on personnel expenses following the execution of efficiency plans, as well as to the reduction of overheads. Total costs also decreased by 4.3% in the quarter, and a further reduction is expected in successive quarters with estimated savings of €110 million in 2022 (€130 million per year from 2023).

Loans rise in Spain and the UK

The balance of Banco Sabadell healthy loans at the end of the first quarter of 2022 was 154,672 million euros (110,378 million euros excluding TSB). Loans increased by 3.1% year-on-year(1) mainly driven by the increase in the mortgage portfolio, where TSB’s growth particularly stands out.

New mortgages remained stable in Spain over the year and reached 1,261 million euros over the quarter. Consumer credit grew 11% year-on-year to €371 million in the quarter.

Mutual fund grew 6% year-on-year to €23,848 million, while credit card revenue increased 27% year-on-year to €4,793 million euros, and point-of-sale turnover increased by 36% over the same period, reaching 9,500 million euros.

End of March 2022, client funds on the balance sheet amounted to a total of 161,316 million euros (119,118 million euros excluding TSB), representing year-on-year growth of 4.9% (5.7% excluding TSB). They fell slightly over the quarter, by 0.4% (0.1% excluding TSB), due to the maturities of retail issues. Current account balances amounted to €146,520 million (€106,279 million excluding TSB), up 8.2% year-on-year (9.7% excluding TSB) and with a marginal decrease by 0.5% (0.3% excluding TSB) in the district.

Term deposits amounted to €15,386 million (€13,428 million excluding TSB), down 17.2% year-on-year (16.0% excluding TSB), as deposits moved to current accounts . They increased by 3.9% over the quarter (5.5% excluding TSB).

End of March 2022, off-balance sheet customer funds amounted to 40,624 million euros and increased by 2.9% over one year due to an increase in net subscriptions to UCITS, and despite the sale of BancSabadell d’Andorra. Excluding this impact, annual growth would be 4.9%.

That of the Group total assets amounted to €253,256 million (€200,441 million excluding TSB), representing an increase of 3.4% year-on-year and 0.5% for the quarter.

The equity ratio increased to 12.45%

the phased CET1 ratios amounted to 12.59% at the end of March and included 14 basis points of IFRS 9 transitional adjustments. CET1 ratio at full load, on the other hand, stood at 12.45%, up 27 basis points QoQ. The phased-in total capital ratio stood at 17.13% at the end of the quarter, above the regulatory requirement, with a MDA buffer of 413bps. In terms of cash management, the liquidity coverage ratio (LCR) reached 235% at Group level.

Stable NPL ratio and reduced CoR

Non-performing assets amounted to 7,508 million euros at the end of March 2022, including 6,210 million euros in bad debts and 1,299 million euros in seized assets. The NPA coverage ratio was 53%, the NPL coverage ratio (stage 3) including total provisions was 56% and the seized assets coverage ratio was 38.0%. The NPL ratio stands at 3.66%.

the cost of risk on loans decreased and stood at 41 basis points at the end of March 2022, 8 basis points lower than in the previous quarter, or a year-on-year improvement of 28 basis points.

Positive contribution from the TSB for the fifth consecutive quarter

TSB closed the month of March 2022 with a positive contribution to the results of the Banco Sabadell Group for the fifth consecutive quarterbringing 19 million euros on this occasion, against 2 million euros at the end of March 2021.

The British subsidiary obtained a standalone pre-tax profit 46 million pounds at the end of March, compared to 47 million pounds in the previous quarter, thus confirming the stability of TSB’s contribution to the Group’s results. net profit stood at £21 million at the end of March 2022.

Net interest income amounted to a total of 226 million pounds at the end of the first quarter and increased by 10.1% year-on-year due to strong growth in mortgage volumes during the year. Net fees and commissions grew 9.7% year-on-year to £25m, driven by higher service charges, particularly card fees.Costs stood at 189 million pounds and fell 7.9% year-on-year.

Robin Bulloch, new CEO

TSB’s Board of Directors has appointed Robin Bulloch as CEO. Bulloch has been acting as the bank’s interim head since December 2021 until today. Backed by its long experience in retail banking, Bulloch thus confirms its leadership of this subsidiary of Banco Sabadell so that it can continue to contribute to the Bank’s growth strategy.

New “commitment to sustainability”

Banco Sabadell presented its “Commitment to Sustainability”, an action framework that incorporates the Bank’s strategy and forward-looking vision for the period 2025-2050 in terms of environmental, social and governance commitments. Commitment to Sustainability establishes four strategic pillars: progress as a sustainable institution; support clients in the transition to a sustainable economy by mobilizing more than 65 billion euros in sustainable finance; provide investment opportunities that contribute to sustainability; and work towards the achievement of a sustainable and cohesive society.

Sabadell online account

Banco Sabadell has launched its new digital account: “Cuenta con todo“. A completely modular free online account, which also offers digital customers access to the entire branch network of the Bank and its managers. The account is 100% digital, without commission or contractual conditions, and it offers free wire transfers, debit and credit cards, and ATM cash withdrawals, which are also free.

(1)Excluding impact of CAM APS

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