2012 earnings: Banco Sabadell obtained Euros 81.9 million in attributable net profit after allocating Euros 2,540.6 million to provisions

8-2-2013 — /europawire.eu/ — Against an uncertain macroeconomic background marked by persisting instability in the financial markets and general economic difficulties, particularly in Spain because of the weak economy and severe adjustment of accumulated budget imbalances, Banco Sabadell attained its priority objectives in its 131st year of existence and obtained Euros 81.9 million in attributable net profit (64.7% less than in 2011) after booking Euros 2,540.6 million in writedowns and provisions for the securities and real estate portfolio (142.2% more than in 2011).

At the end of the year, Banco Sabadell was one of the soundest banks in Spain, with 10.42% core capital (9.01% at 2011 year-end)
Individual customer numbers expanded by 8,000 per week, or 18.2% (+338,830) in the year, while corporate customer numbers increased by 31.4% (+72,981) year-on-year. Customer numbers totalled 5.5 million at 31 December 2012
Customer funds expanded by 11% year-on-year in organic terms. Term deposits increased by 63.1% and demand deposits by 44.5%

Though an adverse year for the finance business, 2012 was a historic one for Banco Sabadell as it integrated Banco CAM and became one of the soundest systemic institutions in the Spanish financial system after successfully passing the stress tests applied to the entire Spanish banking sector by the European Central Bank and the European Banking Authority (EBA).

In 2012, Banco Sabadell once again evidenced the effectiveness of its growth strategy and business model together with its capacity to generate profits while expanding liquidity and strengthening the balance sheet.

Balance sheet performance

As of 31 December, the total assets of Banco Sabadell and its group amounted to Euros 161,547.1 million, having increased by 60.8% in the year.

Gross loans and advances to customers amounted to Euros 115,392.4 million,an increase of 56.7% in the year. In particular, mortgage loans expanded by 61.7% year-on-year.

Though loan delinquency continued to increase in the Spanish financial sector, Banco Sabadell’s ratio is below the system average. Excluding assets covered by the Asset Protection Scheme (APS), the NPL ratio is 9.33% (7.41% excluding Banco CAM). The gap between Banco Sabadell’s ratio and the system average has widened 2.6-fold in the last two years. Coverage is now 13.9% of total exposure on the group balance sheet.

As of year-end, customer funds on the balance sheet amounted to Euros 80,179.4 million, 50.3% more than at the end of 2011. Organic growth year-on-year was 11%. In particular, time deposits increased by 63.1% year-on-year to Euros 53,526.1 million, while demand deposits expanded by 44.5% year-on-year.

In 2012, Banco Sabadell increased customer numbers at a record pace: 8,000 new customers per week. The base of individual customers expanded by 18.2%year-on-year (+388,830 customers) and that of corporate customers by 31.4% (+72,981 customers). Customer numbers totalled 5.50 million at 31 December 2012.

The difference in growth in loans to customers and customer funds on the balance sheet provided a commercial gap or surplus of Euros 15,451.5 million in 2012.

Off-balance sheet funds expanded by 15.1% in the year to Euros 20,658.5 million. Assets in collective investment funds and companies totalled Euros 8,584.8 million, a 7.0% increase year-on-year. Assets in pension funds marketed by the group amounted to Euros 3,708.9 million, and insurance sales increased by 23.4% year-on-year to Euros 7,313.2 million.

Total funds under management increased by 37.1% in the year to Euros 131,654.6 million at year-end.

Margins and profits

At 2012 year-end, the contribution from Banco CAM since June 2012 together with active detailed management of customer spreads and the greater contribution by the fixed-income portfolio offset the negative impact on net interest revenues of the rising cost of funding in the capital markets and the higher volumes of deposits; as a result, this margin increased by 21.5% in 2012 to Euros 1,868.0 million.

Gains from capital instruments amounted to Euros 9.9 million in the year, having risen by 12.7%. Net fees and commissions totalled Euros 628.7 million, an increase of 9.6% year-on-year. In particular, service revenues increased by 19.5% year-on-year.

Income from financial transactions amounted to Euros 546.2 million, including capital gains on the fixed-income trading portfolio (Euros 270.3 million) and gains on redemption of own ABS and other securities (Euros 166.3 million).

As a result, and considering also the Euros 220.3 million contributed to the Deposit Guarantee Fund (Euros 29.8 million in 2011), gross income increased by 18.0% year-on-year to Euros 2,958.4 million.

Operating expenses amounted to Euros 1,511.6 million in 2012, including Euros 22.2 million in non-recurrent items. In like-for-like terms, recurrent operating expenses declined by a notable 5.9% in 2012 with respect to 2011. The cost/income ratio, excluding non-recurrent expenses, was 50.34%.

Consequently, net income before provisions amounted to Euros 1,289.9 million in 2012, a 4.8% increase with respect to 2011, exceeding market consensus estimates.

In 2012, a total of Euros 1,405.7 million of loan-loss provisions were booked in response to the higher coverage requirements imposed on the financial system; additionally, real estate and financial assets were written down by Euros 1,134.9 million.

Capital gains on asset disposals, including the sale of the stake in Banco del Bajío in March 2012, amounted to Euros 15.4 million.

The income statement for 2012 includes Euros 933.3 million of negative goodwill recognised in the acquisition of Banco CAM.

After deducting income tax and minority interests, net income attributed to the group amounted to Euros 81.9 million in 2012, compared with Euros 231.9 million in 2011.

As of 31 December 2012, the Tier 1 and core capital ratios were 10.42%, i.e. higher than at 2009 year-end (9.94% and 9.01%, respectively).

Managing real estate: unit sales increased 100%

In 2012, Banco Sabadell established an Asset Management Division to actively manage and monetise its real estate portfolio.

This imitative, a first in the industry, proved successful. Banco Sabadell’s real estate portfolio has outperformed the market,having exceeded initial projections by attaining Euros 2,234 million in sales, i.e. 1.6 times the sales booked in 2011 (Euros 1,414 million). A total of 13,777 units were sold in 2012, double the 2011 figure.

Through aligning prices with demand and conducting an intense sales campaign, the division sold 6,000 properties and signed firm reservations for another 1,300in the fourth quarter alone.

Banco Sabadell also contributed 250 homes to the Social Housing Fund promoted by the Spanish government.

Prospects for 2013

With regard to the outlook for 2013, Banco Sabadell Chairman Josep Oliu said: “In 2013, Banco Sabadell will give priority to generating profits, reaping revenue and cost synergies from the Banco CAM integration, expanding market share in terms of customers and business, and actively managing the real estate portfolio.”

Moreover, by mid-2013, Banco Sabadell expects to have completed the acquisition of Banco Mare Nostrum’s network and business in Catalonia and Aragon, which was agreed upon on 18 December as part of BMN’s restructuring plan.

This transaction will provide Banco Sabadell with an established network that complements its own, practically doubling its reach in Catalonia and expanding it by 30% in Aragon. The customers attached to the acquired branches will boost Banco Sabadell’s total customer base to over 6 million.

Josep Oliu: “Banco Sabadell has the capability to undertake additional acquisitions in the framework of the banking sector restructuring process provided that the conditions are favourable and the risks are sufficiently hedged.”