2q16 results presentation - grupbancsabadell.com · 1q16 2q16 695.7 696.7 1q16 2q16 tsb euros in...
TRANSCRIPT
Sabadell2Q 2016 Results
July 22, 2016
12Q take-aways
2Profitability and efficiency
3Commercial activity
5TSB results
4Solvency and asset quality
2Q take-aways
Commercial activity
� Growing loan book without the need of an aggressive pricing strategy
� Continued improvement in lending mix
� Ongoing market share increase across products in Spain with high standards in service quality
� Leading innovation, simplifying processes and gaining efficiencies
� Sabadell has launched successfully its activities in Mexico and it is gaining momentum
Profitability and efficiency
� Continued revenue resilience, both in NII and fees
� Cost containment and capacity to further lever costs in a lower for longer rates environment
� We have continued to offset extraordinary income with higher provisions bar BCP €92M charge
� Sterling devaluation effect of -0.3%1 at group net income level
TSB
� Referendum result does not change Sabadell’s plans for the UK
� Lending growth YoY at +29% and deposits at +13% explained by natural market share gains
� Average mortgage book at 55% LTV and buy-to-letat 14% of production confirms low risk profile
� Migration plans are progressing as expected with target deadline of November 2017
Solvency and asset quality
� NPL ratio at 6.8%, the lowest rate since 1Q 2012
� Strong capital position with fully loaded CET1 standing at 11.8%
� Accelerated sale of real estate assets is a successful strategy that will continue
2Q take-aways
41 Impact assuming constant FX during 2Q 16.
Profitability and efficiency
Euros in million2Q 2015 1Q 2016 2Q 2016 %QoQ %QoQ
constant FX%YoY 1Q 2016 2Q 2016 %QoQ %YoY
Net interest income 655.9 973.9 968.6 -0.5% 0.1% 49.5% 695 .7 696.7 0.2% 7.2%
Equity method & dividends 16.9 21.6 27.3 26.3% 26.3% 78.9% 21.6 27.3 26.3% 78.9%Commissions 249.8 277.8 292.4 5.3% 5.5% 15.3% 245.9 257.9 4.9% 1.9%Trading income & forex 373.3 311.0 206.5 -33.6% -33.6% -55.2% 306.3 156.3 -49.0% -60.0%Other operating results -1.8 -16.7 -82.2 --- 393.4% --- -16.2 -65.9 --- ---Gross operating income 1,294.2 1,567.6 1,412.6 -9.9% -9. 5% 0.7% 1,253.2 1,072.2 -14.4% -21.4%
Personnel costs -314.5 -415.5 -413.1 -0.6% 0.0% 34.6% -306.7 -307.3 0.2% -0.3%Administrative costs -146.2 -249.2 -247.8 -0.6% 0.4% 69.9% -146.4 -145.8 -0.4% -0.1%Depreciation & amortisation -67.4 -97.2 -96.8 -0.4% 0.1% 35.2% -78.3 -78.0 -0.3% 8.9%Pre-provisions income 766.2 805.7 654.9 -18.7% -18.5% -23 .5% 721.9 541.1 -25.0% -33.8%
Total provisions & impairments -842.6 -434.9 -466.9 7.4% 7.4% -48.4% -434.9 -466.9 7.4% -48.4%Gains on sale of assets -12.9 -3.1 38.3 --- --- --- -3.1 38.3 --- ---Negative goodwill 207.4 0.0 0.0 --- --- -100.0% 0.0 0.0 --- -100.0%Profit before taxes 118.0 367.7 226.3 -38.5% -38.2% 63.4% 283.9 112.5 -60.4% 9.0%
Taxes and others 60.2 -114.4 -52.2 -54.4% -54.3% --- -92.3 -22.4 -75.7% ---Minority interest 0.6 1.3 0.8 -41.0% -41.0% 21.8% 1.3 0.8 -41.0% 21.8%
Attributable net profit 177.6 252.0 173.3 -31.2% -30.8% 2 0.7% 190.3 89.3 -53.1% -20.6%
Sabadell, ex-TSBSabadell group
Quarterly Income Statement
Note: The EURGBP exchange rate of 0.7782 used for the P&L is the daily average rate of 1H 2016.1 2015 commissions have been restated to include FX commissions, which were previously included in trading income and forex. Before this restatement, 2Q15 commissions amounted to €228.2M.2 %YoY calculated as the growth rate of 1H 2016 vs. 1H 2015.
Sustained revenue resilience continues to allow for additional provisioning effort
6
1
2 2
YoY growth: +49.5%
QoQ growth: -0.5%, +0.1% in constant FX
278.2 271.9
1Q16 2Q16
695.7 696.7
1Q16 2Q16
TSBEuros in million
Stabilising net interest income…
Group net interest income evolutionEuros in million
Sabadell, ex-TSBEuros in million
QoQ growth: +0.2%
Note: The EURGBP exchange rate of 0.7782 used for the P&L is the daily average rate of 1H 2016.1 %YoY calculated as the growth rate of 1H 2016 vs. 1H 2015.2 Assuming constant exchange rate.
QoQ growth: -2.3%-0.2% in GBP2
7
655.9
941.3 962.5 973.9 968.6
2Q15 3Q15 4Q15 1Q16 2Q16
1
… as a result of the lower for longerinterest rate environmentNet interest margin evolutionIn percentage
Customer loan yield and cost of fundsIn percentage
Customer spread
Customer spread, ex-TSB
Net interest margin as % of ATANet interest margin as % of ATA, ex TSB
Customer loan yield
Customer loan yield, ex-TSB
Cost of customer funds
Cost of customer funds, ex-TSB
Euribor 12M8
2.22% 2.29% 2.35% 2.44% 2.47%2.67% 2.75% 2.84% 2.81%
2.47%2.59% 2.68% 2.68%
1.62% 1.65% 1.72% 1.72%1.36% 1.40% 1.49% 1.57% 1.59%1.83% 1.83% 1.91% 1.88%
2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16
3.47%3.20%
3.06% 3.08% 3.06% 2.99%
0.59%0.49% 0.38% 0.31%
0.57%0.44% 0.33% 0.25% 0.17% 0.16% 0.09% 0.01% -0.02%
3.47% 3.39% 3.32% 3.32%3.20% 3.29% 3.28% 3.28% 3.21%
1.25%1.10%
0.97% 0.88%0.73% 0.62% 0.53% 0.44% 0.40%
2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16
1 Quarterly average.
1
31.9 34.6
1Q16 2Q16
61.6 70.2 81.4 73.6 80.3
54.283.0
82.1 79.3 79.3
134.0
142.5 134.1124.9
132.9
249.8
295.7 297.6 277.8
292.4
2Q15 3Q15 4Q15 1Q16 2Q16
245.9
257.9
1Q16 2Q16
Asset Mgmt3
Positive evolution in commissions
Note: The EURGBP exchange rate of 0.7782 used for the P&L is the daily average rate of 1H 2016.1 %YoY calculated as the growth rate of 1H 2016 vs. 1H 2015.2 2015 commissions have been restated to include FX commissions, which were previously included in trading income and forex. Before this restatement, 2Q15 commissions amounted to €228.2M, 3Q15 commissions amounted to €274.2M and 4Q15 amounted to €275.1M.3 Includes mutual funds commissions and pension funds, insurance brokerage and wealth management.4 Assuming constant exchange rate.
QoQ growth: +8.4%+10.8% in GBP4
Sabadell, ex-TSBEuros in million
YoY growth: +15.3%
QoQ growth: +5.3%
Group commission income evolutionEuros in million
QoQ growth: +4.9%
Investment Services
TSBEuros in million
2 2 2
9
1
102.8 102.1
6.1 3.7
1Q16 2Q16
295.3
407.6 419.1 402.7 401.8
19.2
9.2 5.9 12.8 11.3
2Q15 3Q15 4Q15 1Q16 2Q16
300.0 299.7
6.7 7.5
1Q16 2Q16
TSBEuros in million
Stable personnel expenses...
Note: The EURGBP exchange rate of 0.7782 used for the P&L is the daily average rate of 1H 2016.1 %YoY calculated as the growth rate of 1H 2016 vs. 1H 2015.2 Assuming constant exchange rate.
Recurrent QoQ growth: -0.6%, +1.5% in GBP2
YoY growth: +34.6%
QoQ growth: -0.6%
Group personnel expenses evolutionEuros in million
Recurrent QoQ growth: -0.1%
314.5
416.8 425.0 415.5 413.1
306.7 307.3
108.9 105.9
Recurrent Non-recurrent
Recurrent Non-recurrentRecurrent Non-recurrent
Sabadell, ex-TSBEuros in million
10
1
101.196.9
1.7 5.0
1Q16 2Q16
145.0
264.2 250.8 247.5 242.7
1.2
1.0 20.71.7 5.0
2Q15 3Q15 4Q15 1Q16 2Q16
Sabadell, ex-TSBEuros in million
146.4 145.8
1Q16 2Q16
TSBEuros in million
... and reduction in administrative expenses
Note: The EURGBP exchange rate of 0.7782 used for the P&L is the daily average rate of 1H 2016.1 %YoY calculated as the growth rate of 1H 2016 vs. 1H 2015.2 Assuming constant exchange rate.
Recurrent QoQ growth: -4.1%, -2.1% in GBP2
YoY growth: +69.9%
QoQ growth: -0.6%
Group general expenses evolutionEuros in million
Recurrent QoQ growth: -0.4%
102.8 101.9
146.2
265.2 271.5249.2 247.8
Recurrent Non-recurrent
Recurrent
Recurrent Non-recurrent11
1
Commercial activity
Total assets 203,959 204,021 207,891 1.9% 1.9% 2.7% 164,23 6 161,189 164,493 0.2% 2.0%Of which:Gross loans to customers ex repos 148,963 149,828 149,921 0.6% 0.1% 1.0% 118,416 115,087 116,043 -2.0% 0.8%
Performing loans 134,875 138,063 139,206 3.2% 0.8% 1.9% 104,581 103,518 105,506 0.9% 1.9%Fixed income portfolio 25,741 27,041 24,389 -5.3% -9.8% -9.5% 24,323 25,217 22,440 -7.7% -11.0%
Total liabilities 191,883 191,232 195,029 1.6% 2.0% 2.9% 1 54,769 150,939 154,129 -0.4% 2.1%Of which:
On-balance sheet customer funds 130,370 131,290 134,152 2.9% 2.2% 3.2% 95,345 97,493 100,100 5.0% 2.7%
Term funds1 49,584 48,039 45,723 -7.8% -4.8% -4.4% 45,276 43,381 40,573 -10.4% -6.5%Current & Saving accounts 80,786 83,251 88,429 9.5% 6.2% 7.7% 50,069 54,112 59,527 18.9% 10.0%0.0%
Wholesale funding 22,361 24,486 25,798 15.4% 5.4% 6.1% 21,786 20,438 21,428 -1.6% 4.8%ECB funding 11,000 11,000 10,676 -2.9% -2.9% -- 11,000 11,000 10,676 -2.9% -2.9%
Off-balance sheet funds 35,410 37,107 37,555 6.1% 1.2% 1. 2% 35,410 37,107 37,555 6.1% 1.2%Of which:
Mutual funds 20,230 21,153 21,131 4.5% -0.1% -0.1% 20,230 21,153 21,131 4.5% -0.1%Pension funds 4,362 4,194 4,147 -4.9% -1.1% -1.1% 4,362 4,194 4,147 -4.9% -1.1%Third party insurance products 7,083 7,981 8,735 23.3% 9.5% 9.5% 7,083 7,981 8,735 23.3% 9.5%
Sabadell, ex-TSB
Euros in million%YoY %QoQ %YoY %QoQJun-16Mar-16Jun-15 Jun-15 Mar-16 Jun-16%QoQ
constant FX
Sabadell group
Balance sheet dynamicsCustomer funds and loans evolution
Note: The EURGBP exchange rate of 0.826582 used for the balance sheet is the closing rate as of June 30 2016.1 Term funds include term deposits and other funds placed in the retail network. Exclude repos and deposits from institutional clients.
13
17,808 18,415
26,318
5,128
27,464
32,428 32,237
26,964
7,115
27,390
1Q16 New lending Attrition 2Q16
Corporates SMEs Mortgages Others
Balance sheet dynamics
14
Performing loans evolution by customer type - Sabade ll, ex-TSBEuros in million
1Q16 New lending Attrition 2Q16 Var. %Corporates 17,808 2,518 -1,911 18,415 3.41%SMEs 26,318 3,318 -2,172 27,464 4.35%Mortgages 32,428 560 -751 32,237 -0.59%Others 26,964 719 -294 27,390 1.58%Total 103,518 7,115 -5,128 105,506 1.92%
103,518 105,506
1 Refers to residential mortgages only.2 Others include other mortgages, loans to developers, construction sector, Real Estate sector and others.
2
1
21
LoansTotal export transactions
PoSinstalled Transact.
11.38% 12.84% 14.54% 9.81%
11.40% 12.26% 13.55% 9.76%
Market shares by product in Spain continue to increase …
Sources include ICEA (life insurance), BdE (loans, PoS installed, credit card turnover, household current acc.), Iberpay (transact.) y Swiftwatch (total export transactions).Note: 2016 data as of June 2016 or last month available. 1 Transaction calculated per volume.2 Insurance calculated per number of contracts.
Market shares by productIn percentage
Companies
Individuals
Jun- 16
Jun- 15
Credit card turnover Life insurance
Household current acc. Mutual funds
7.36% 5.27% 5.85% 5.95%
7.15% 4.90% 5.57% 5.72%
Jun- 16
Jun- 15
2222
1111
15
6.907.03
7.21
7.427.51
7.39
7.697.80 7.84
7.94
6.23 6.26
6.15
6.48
6.736.55
6.746.91 7.05
7.14
1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16
Sabadell Sector
Level of service qualityEvolution of Sabadell quality index vs. sector
… with high standards in quality of service
Source: STIGA, EQUOS (Objective Quality Analysis in Banking Networks, 2Q 2016).
Maintaining the quality gap versus the sector
16
We are wholeheartedly promoting the digital transformation …
∆ Efficiency
Transformation plan
“There, wherever you are”
Key milestones achieved during the Triple plan:
� 85% of transactions through remote channels� 18% of sales through digital channels� More than 15 monthly connections per client
through the Mobile App
∆ Productivity
∆ Client service
TripleClients - MobileThousands
Clients - Web
820
1,470
2013 2Q 2016
Thousands
1,5291,828
2013 2Q 2016
294 k Mobile Only customers
638 k Digital Signature adoption
+79% +19%
17
… leading innovation
� Increase remote product and customer contracting
Plan for 2016
� Kelvin e-commerce
Proteo Mobile
Kelvin Retail
Sabadell Mobile new version
� Increase remote contracting capabilities and mobile payment services
Launched in April 2016
Launched in April 2016
Launched in June 2016
• Remote banking services:� 3,500 tablets distributed in the network
� Aimed at business segment and personal and private banking
� Main features: sales visits, risk records, simulations, new customer registration
• Improved users’ experience on:� Commercial information of the main
products
� Opening new contracts process
Data service for businesses and freelance workers that makes
users' customised indicators available on their transactions and their customer profiles
18
New services for our clients based on Big Data - Kelvin Retail
Kelvin is an information system aimed at SME that provides users with customised indicators of their
operations and customers’ profile
� Statistics : sales, transaction, average sale,...
� Consumer behaviour : frequency, loyalty, profile (i.e. gender, age, nationality),...
“It is the one servicetruly differential in SME
Banking”
“It has helped me tobetter understand my
business and mycustomers”
ClientManager
Increasecustomers’ loyalty
DATA BASE
Analyse &take decisions
IncreaseSales
+
+
+
19
Kelvin Retail
� Manage 230,000 customers with the new model
� Increase digital capabilities to support remote management
� Reduce the average sign up time by 15%
Active Management
Credit process
Simplifying and gaining efficiency
Simplebank � Simplify contract process to more products
• Manage our customers closer and more efficiently:
� Increased management capacity (x2 portfolio size)
� Customer satisfaction (90% customers more satisfied than with their usual branch)
• Simplification and optimisation of mortgage processes:
� Redesigned and transformed operating model
� Integrated and automated end to end process transparent to customers
• Offer a simpler registration process to new customers:
� New registration process for customers (Pack Cuenta Expansion):
� Shorten contract from 40 to 4 pages� Simplify process from 7 to 3 signatures� Reduce time from 15 to 5 minutes
Plan for 2016
20
Project size and implementation Excellent market reaction
Strong presence
• Record timing in the unfolding of the banking project, starting from scratch…
3 milestones for
Mexico
1 2
3
• …taking advantage of the Group’s technology and expertise in managing complex projects
• Significantly surpassed the expected growth in volumes…
• …validating our value proposition, which is based on achieving a higher service quality
• Banco Sabadell aspires to be a relevant player in the Mexican market with ambitious plans for future expansion and growth
Banco Sabadell has successfully launched its activities in Mexico…
Record timing in obtaining the licence
New technology platform to support growth
MXN 23,735M loan portfolio
Top 7 in Corporate Banking’s portfolio growth in 2016
144 employees1 6 SME centers and 3 corporate centers
146 corporate clients1
Note: Data as of June 30th 2016.1 Including aggregate data from Banco Sabadell and Sofom. 21
…achieving very strong momentum
97
1,341
Dec-14 Jun-15 Dec-15 Jun-16
391
755
1,158
1,348
YTD placement volumeUSD in million
� Sabadell positioned as Top 7 in terms of Corporate and SME loan portfolio growth (from Jul-14 to Dec-15)
� High quality portfolio focused on Tier 1 and Tier 2 companies with high credit ratings
+957M+245%
Corporate
SME
22
Solvency and asset quality
Common Equity Tier 1 phase-in evolutionIn percentage
Strong capital position
Common Equity Tier 1 fully-loaded (June-16) at 11.8%
11.5% 11.6% 11.5% 11.9% 11.9%
Jun-15 Sep-15 Dec-15 Mar-16 Jun-16
24
Wholesale lending activity
New issues and maturities in 2016Euros in million
Recent issues by product
� Wholesale funding plans for 2016 havebeen front loaded
� Sabadell will tap the market accordingto investors’ interests and grouprequirements
25
2,185
967
280
1,155
650
2,277
0
500
1,000
1,500
2,000
2,500
1Q16 2Q16 3Q16 4Q16
Maturities New issues
Euros in million 1Q16 2Q16Covered Bonds 650 1,050Subordinated debt 0 500Securitisation (incl. TSB) 0 727Total 650 2,277
8.51%
7.79%7.50%
6.83%
10.98%10.38%
9.86%9.45%
8.54%
NPL continues to decline and stands at 6.8%
Note: NPL ratio is calculated including contingent risk and 20% of the APS.
Sabadell, ex-TSBIn percentage
Sabadell groupIn percentage
NP
L co
vera
geN
PL
ratio
NPL ratio has come down to 6.83% from 13.63% since December 2013
52.8%54.5%
53.1%54.4% 53.9%
2Q15 3Q15 4Q15 1Q16 2Q16
55.3%53.6% 54.7% 54.1%
3Q15 4Q15 1Q16 2Q16
26
25,878 25,860 25,347 24,75823,922
23,18922,350
21,57920,867
19,900
1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16
17,727 17,386 16,777 15,910 14,863 13,962 13,122 12,344 11,674 10,635
1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16
8,151 8,474 8,569 8,848 9,059 9,227 9,228 9,234 9,193 9,265
1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16
Discipline in NPL reduction continues
NPL evolution, ex-TSB Euros in million
On-balance sheet RE assets evolution, ex-TSBEuros in million
Note: NPLs include contingent risk. Data includes 20% of APS.
Total problematic assets, ex-TSBEuros in million
€1,039M further reduction of NPLs during 2Q16
NPAs decreased by €968M in 2Q16
€-6bn
27
775,300
552,080
413,388 439,584359,824
319,058 311,414 319,389354,132
117,651 134,312
2007 2008 2009 2010 2011 2012 2013 2014 2015 Cum. Abr-15
Cum. Abr-16
Recovery in the Spanish real estate market...
Source: INE, CIS (Consumer confidence index).
Market situation
Reduction of NAV discounts and overall price increases are signs of a recovering cycle
� Ongoing symptoms of a new real estate cycle with improvement in prices and sales units.
� Prices continue to show a moderate recovery both in new construction and resale
� Upward trend in city centers such as Madrid and Barcelona, the Mediterranean coast and the islands.
� Ongoing growth on home sale transactions has continued, although still at low levels.
� Home sale numbers have raised for 9 consecutive months.
New property transaction evolutionIn units
-29% -25% +6% -18% -11% +3% +11%-2% +14%
% YoYgrowth
Price expectations for individuals% of surveyed individuals who think house prices will fall, hold or raise (CIS survey)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Jun-12 Nov-12 Apr-13 Sep-13 Feb-14 Jul-14 Dec-14 May-15 Oct-15 Mar-16
Rise
Hold/NA
Fall
28
Jun-16
… leads to an improvement in real estate assets salesNumber of foreclosed assets soldIn units
Significant institutional sales
Foreclosed assets soldEuros in million
29
409 374
515 499
475165
307
2Q15 3Q15 4Q15 1Q16 2Q16
2,9162,428
2,807 2,750
2,8071,095 1,275
2Q15 3Q15 4Q15 1Q16 2Q16
3,902 4,025
680
805
TSB results
� Sabadell is fully committed to its investment in the UK
� The short term synergies for TSB are driven by the migration, which is an endogenous process and independent of the referendum results
� Migration plans are progressing as expected with target deadline of November 2017
� The evolution of the British pound since the EU referendum would imply a -0.3%1 net income impact at the group level
Plans for TSB are evolving positively
31
1 Impact assuming constant FX during 2Q 16.
TSB continues to perform ahead of budget
1 NPS is based on the question “On a scale of 0-10, where 0 is not at all likely and 10 is extremely likely, how likely is it that you would recommend TSB to a friend or colleague?”2 By market research company, BDRC, in an independent benchmark study covering all major banks.
Strong first half of the year
� Solid asset and deposit growth driven by franchise business
� Quarterly net profit adjusted to reflect lower for longer interest rate environment
� Reduction in costs have mitigated the impact of a more challenging trading environment
� PCA’s market share at 7.0% of new accounts in the first half, well ahead of the 6.0% target
� Positive NPS1 progress, which increased to its highest rate ever at a 24 score
� Recently been voted Britain’s Most Recommended High Street Bank2
32
The integration and migration plan continues to be on track
33
TSB income statement
1 Franchise comprises the retail banking business carried out in the UK which offers a broad range of retail financial services.2 Mortgage Enhancement is a separate portfolio of mortgage assets which was assigned to TSB with effect from 28 February 2014. This segment was established in response to a review by the Office of Fair Trading of the effect on competition of the divestment of TSB and is designed to enhance TSB’s profitability.3 Acquired UKAR Assets is a £2.7 billion portfolio of former UKAR mortgages and unsecured loans for which beneficial interest was acquired from Cerberus Capital Management group with effect from 7 December 2015.4 %YoY calculated as the growth rate of 1H 2016 vs. 1H 2015.
� Net Interest Income remained flat QoQ as a result of lower interest rates , partially offset by strong mortgage lending growth and strong new business margins
� Lower operating expenses due to more point-in-time actions
� Impairments continue to be aligned with previous quarters
� One-offs include capital gains on TSB Share of Visa Europe Sale proceeds
34
GBP in million1Q 2016 2Q 2016 1H 2015 1H 2016 %QoQ %YoY
Franchise1 183.2 184.1 346.2 367.3 0.5% 6.1%
Mortgage enhancement2 14.8 13.6 39.0 28.4 -8.1% -27.2%
Portfolio UKAR3 20.5 19.4 0.0 39.9 -5.4% --
Net Interest Income 218.5 217.1 385.2 435.6 -0.6% 13.1%
Franchise1 28.6 29.6 66.1 58.2 3.5% -12.0%
Mortgage enhancement2 -2.2 -1.8 -5.3 -4.0 -18.2% -24.5%
Portfolio UKAR3 -1.9 -0.8 0.0 -2.7 -57.9% --
Other operating income 24.5 27.0 60.8 51.5 10.2% -15.3%
Total income 243.0 244.1 446.0 487.1 0.5% 9.2%
Total operating expenses (excl. one-offs) -164.0 -175 .0 -362.5 -339.0 6.7% -6.5%
Franchise1 -18.5 -19.5 -39.5 -38.0 5.4% -3.8%
Mortgage enhancement2 0.0 0.0 0.0 0.0 -- --
Portfolio UKAR3 -0.6 -1.8 0.0 -2.4 200.0% --
Impairment on loans & advances -19.1 -21.3 -39.5 -40.4 11.5% 2.3%
Management profit (excl. one-offs) 59.9 47.8 44.0 107.7 -20.2% 144.8%
One-offs and others -7.3 25.0 -20.8 17.7 -- --
Tax income -13.4 -18.5 -3.5 -31.9 38.1% --
Statutory Profit after Tax 39.2 54.3 19.7 93.5 38.5% 374. 6%
1Q 2016 2Q 2016 1H 2015 1H 2016 %QoQ %YoYFranchise NIM 3.38% 3.24% 3.69% 3.31% -0.14 pp -0.38 pp
4
4
TSB balance sheet
Note: Customer lending and customer deposits exclude fair value hedge accounting adjustment.
� Positive balance sheet trend continues with Franchise lending driven by Mortgage Intermediary growth supported by continuing deposit growth
� Franchise mortgage lending increased to £20.9bn (c.+4% QoQ) reflecting the continuing strength of the Mortgage Intermediary business
� Customer deposits grew by 5% QoQ to £28.1bn primarily due to continued growth in Savings balances . Encouragingly, net inflow has been stronger than expected post the EU referendum
� In addition, deposit growth has also been supported by current account balances , which continue to be above plan
� Healthy average LTV of 55% across the mortgage book
� Recently increased rental cover requirement for buy-to-letmortgages to 145% (from 125%)
� Strong capital position with CET1 at 17.2%
35
GBP in millionJun-15 Mar-16 Jun-16 % YoY % QoQ
Core mortgages 16,866 20,200 20,926 24.1% 3.6%
Mortgage enhancement 2,554 2,157 2,049 -19.8% -5.0%
Portfolio UKAR 0 2,873 2,733 --- -4.9%
Other net customer lending 2,235 2,200 2,213 -1.0% 0.6%
Total Customer lending (net) 21,655 27,430 27,921 28.9% 1.8%
Savings deposits 16,698 17,605 18,748 12.3% 6.5%
Current account deposits 7,284 8,191 8,397 15.3% 2.5%
Business banking deposits 922 948 988 7.2% 4.2%
Total Customer deposits 24,905 26,744 28,133 13.0% 5.2%
Jun-15 Mar-16 Jun-16 % YoY % QoQ
Common Equity Tier 1 Capital ratio 19.5% 17.7% 17.2% -2 .3 pp -0.5 pp
NPS evolution
More people than ever would recommend TSB
Note: Net Promoter Score (NPS) is based on the question “On a scale of 0-10, where 0 is not at all likely and 10 is extremely likely, how likely is it that you would recommend TSB to a friend or colleague?” NPS is the percentage of TSB customers who score 9-10 after subtracting the percentage who score 0-6. Reported 6 months period to date.
NPS improved 10 points from 14 (Jun 15) to 24 (Jun 16)
36
-9
14
24
-20
-10
0
10
20
30
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
2014 2015 2016
37
Annex
Euros in million1H 2015 1H 2016 %YoY 1H 2016 %YoY
Net interest income 1,299.0 1,942.5 49.5% 1,392.4 7.2%
Equity method & dividends 27.3 48.8 78.9% 48.8 78.9%Commissions 494.6 570.2 15.3% 503.8 1.9%Trading income & forex 1,156.0 517.5 -55.2% 462.5 -60.0%Other operating results -16.9 -98.9 --- -82.1 ---Gross operating income 2,960.0 2,980.2 0.7% 2,325.4 -21. 4%
Personnel costs -615.5 -828.7 34.6% -613.9 -0.3%Administrative costs -292.5 -497.0 69.9% -292.3 -0.1%Depreciation & amortization -143.5 -194.0 35.2% -156.3 8.9%Pre-provisions income 1,908.6 1,460.6 -23.5% 1,262.9 -33 .8%
Total provisions & impairments -1,749.1 -901.8 -48.4% -901.8 -48.4%Gains on sale of assets -3.3 35.3 --- 35.3 ---Negative goodwill 207.4 0.0 -100.0% 0.0 -100.0%Profit before taxes 363.5 594.0 63.4% 396.3 9.0%
Taxes and others -9.6 -166.6 --- -114.7 ---Minority interest 1.7 2.1 21.8% 2.1 21.8%
Attributable net profit 352.2 425.3 20.7% 279.6 -20.6%
Sabadell group Sabadell, ex-TSB
Half year income statement
Note: The EURGBP exchange rate of 0.7782 used for the P&L is the daily average rate of 1H 2016.1 2015 commissions have been restated to include FX commissions, which were previously included in trading income and forex. Before this restatement, 1H15 commissions amounted to €454M.
Sustained revenue resilience continues to allow for additional provisioning effort
39
1
Gross lending by product type
Sabadell, ex-TSBIn percentage
Sabadell groupIn percentage
40Note: Data as of June 2016.
Mortgages63%
Loans and credits
30%
Loans and credits with other
warranties1%
Working Capital4%
Leasing and renting
2%
Mortgages54%
Loans and credits37%
Loans and credits with
other warranties
2%
Working Capital5%
Leasing and renting
2%
Business mix by customer type
Sabadell, ex-TSBIn percentage
Sabadell groupIn percentage
41Note: Data as of June 2016.
Corporates13%
SMEs21%
Individuals54%
Public Sector4%
Real Estate Developers
6%
Others2%
Corporates17%
SMEs27%
Individuals41%
Public Sector8%
Real Estate Developers
7%
Credit spreads evolution
Back book loan spreads by segment, ex-TSBIn basis points
SME
Corporates
Total
Mortgages to individuals
Evolution of loan spreads by key segments, ex-TSBIn basis points
178 176 175 175 178
95 96 98 98 101
282 282 281 281 284
219210 202 195 195
2Q15 3Q15 4Q15 1Q16 2Q16
42
Back book
Front book
Back book
Front book
Back book
Front book
Back book
Front book
Back book
Front book
Mortgages to individuals 95 173 96 175 98 178 98 175 101 158
SME 282 417 282 414 281 401 281 412 284 386
Corporates 219 233 210 225 202 213 195 194 195 206
3Q15 4Q15 1Q16 2Q162Q15
Deposits71.2%
Retail issues2.8%
Repos 3.0%
ICO funding2.9%
Wholesale funding14.2%
ECB5.9%
Funding structure, Sabadell group
Wholesale funding breakdownIn percentage
Funding structureIn percentage
Covered bonds48.0%
Senior debt5.5%
Preference + Subordinated
6.4%
ECP12.2%
Securitisation23.8%
GGB4.1%
43Note: Data as of June 2016.
1.19%0.99%
0.76%0.64%
0.45%0.37% 0.32% 0.34%
0.24%0.18%
Jun-15 Sep-15 Dec-15 Mar-16 Jun-16
Term deposits: contractual rates and maturities
Maturities of term depositsEuros in million
Stock New production/renewals
Contractual rates on term deposits, ex-TSBIn percentage
Maturity Volume Average cost
3Q16 8,853 0.69%4Q16 7,026 0.54%1Q17 5,232 0.51%2Q17 5,866 0.32%3Q17 569 0.57%
>3Q17 1,651 0.62%
44
Wholesale funding cost evolution
Wholesale funding cost evolutionIn percentage
Wholesale funding cost Wholesale funding cost, ex-TSB
3.51%
3.41%
3.05%
2.71%
2.56%
2.28%
2.28%
2.12%
1.93%
2.35%
2.27%
2.12%
1.89%
Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16
45
Note: Including TSB.
The size of the bubble represents the volume of maturities. The percentage number is the current level of coupon payment
Wholesale funding maturities
Maturity by product type, Sabadell group Euros in million
Wholesale funding maturities, Sabadell groupEuros in million
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
2016 2017 2018 2019 2020 2021 2022 >2022
1,326 1.44%
3,2033.48% 1,678
3.41%
1,1242.75%
2,590 2.05%
2,6252.31%
1,144 3.17%
2,854 1.91%
46
2016 2017 2018 2019 2020 2021 2022 >2022 Outst. Amount
Covered Bonds (CH) 0 2,022 1,560 1,124 2,165 2,108 1,119 2,314 12,413GGB 0 1,058 0 0 0 0 0 0 1,058Senior Debt 1,246 57 100 0 0 0 25 0 1,427Preferred Shares and Subordinated Debt 80 66 0 0 425 506 0 533 1,611Other mid- and long-term financial instruments 0 0 18 0 0 10 0 6 34
Total 1,326 3,203 1,678 1,124 2,590 2,625 1,144 2,854 16,543
ALCO portfolio
Fixed income portfolio evolutionEuros in billion
ALCO portfolio, Sabadell groupEuros in billion
ALCO portfolio, Sabadell, ex-TSBEuros in billion
ALCO portfolio, ex-TSB TSB
21.4 22.9 22.4
1.71.8 1.9
Dec-15 Mar-16 Jun-16
47
ALCO portfolio 21.4 22.9 22.4% of total assets 12.7% 14.2% 13.6%Duration (yrs) 3.5 3.6 3.7
Dec-15 Mar-16 Jun-16
ALCO portfolio 23.1 24.7 24.4% of total assets 11.1% 12.1% 11.7%Duration (yrs) 3.9 3.6 3.8
Dec-15 Mar-16 Jun-16
ALCO portfolio composition
ALCO portfolio composition evolution, Sabadell grou pEuros in billion
Spanish Public Debt 7.55 9.70 9.36Italian Government Debt 6.06 4.84 5.60US Government Debt 2.34 2.35 1.53UK Government Debt 1.69 1.79 1.95Other Government 1.54 1.93 2.17of which: Portuguese Government 0.68 0.78 0.99 Mexican Government 0.58 0.77 0.85 Netherlands Government 0.08 0.08 0.00Agencies 1.41 1.41 1.47Covered Bonds 0.66 0.65 0.35Corporates & Financials 1.82 2.00 1.96
Total 23.1 24.7 24.4
Jun-16Dec-15 Mar-16
48
Evolution of NPLs and RE assets
Evolution of NPLs and RE assets, ex-TSB Data includes 20% of APS. Euros in million
49
Gross entries 1,091 755 740 735 729 654 660Recoveries -1,660 -1,557 -1,471 -1,275 -1,273 -1,111 -1,629Ordinary net entries -569 -802 -731 -540 -544 -457 -969
Change in RE assets 279 211 167 1 7 -41 71Net entries + Change in RE assets -290 -591 -564 -539 -5 37 -498 -898
Write-offs 298 245 170 300 234 213 70
Real estate and NPL quarterly change -588 -836 -734 - 839 -771 -711 -968
2Q164Q14 1Q15 2Q15 3Q15 4Q15 1Q16
NPL ratio breakdown
NPL ratios by segment, ex-TSBIn percentage
Note: NPL ratio is calculated including contingent risk and 20% of the APS. 50
2Q15 3Q15 4Q15 1Q16 2Q16Real Estate development and/or construction purposes 47.21% 47.84% 38.81% 37.01% 33.29%Construction purposes non-related to real estate dev. 8.74% 8.58% 14.36% 12.18% 11.76%Large corporates 6.14% 5.41% 4.62% 4.58% 3.89%SME and small retailers and self-employed 11.96% 11.38% 10.83% 10.23% 9.39%
Individuals with 1st mortgage guarantee assets 8.76% 8.27% 7.83% 7.82% 7.47%
NPL ratio, Sabadell ex-TSB 10.98% 10.38% 9.86% 9.45% 8.5 4%
1Q14 2Q14 3Q14 4Q14 1Q15
Real Estate development and/or construction purposes 52.56% 52.11% 51.47% 52.17% 49.21%Construction purposes non-related to real estate dev. 8.38% 7.41% 7.35% 8.08% 9.03%Large corporates 6.19% 6.13% 6.30% 6.46% 6.55%SME and small retailers and self-employed 13.08% 13.08% 13.11% 12.60% 12.20%
Individuals with 1st mortgage guarantee assets 9.85% 9.75% 9.23% 9.25% 9.12%
NPL ratio, Sabadell ex-TSB 13.94% 13.85% 13.44% 12.74% 1 1.68%
Overview of coverage ratios, Sabadell Group
51
NPL evolutionEuros in million
2Q15 3Q15 4Q15 1Q16 2Q16
NPL evolution 14,215 13,345 12,561 11,870 10,812Provisions 7,627 7,385 6,738 6,488 5,847Coverage ratio (%) 53.7% 55.3% 53.6% 54.7% 54.1%
RE assets evolutionEuros in million
2Q15 3Q15 4Q15 1Q16 2Q16
RE assets evolution 9,227 9,228 9,234 9,193 9,265Provisions 3,995 4,071 4,045 3,928 3,997Coverage ratio (%) 43.3% 44.1% 43.8% 42.7% 43.1%
Total problematic assets evolutionEuros in million
2Q15 3Q15 4Q15 1Q16 2Q16
Total problematic assets 23,442 22,572 21,795 21,064 20,077Provisions 11,622 11,457 10,783 10,417 9,845Coverage ratio (%) 49.6% 50.8% 49.5% 49.5% 49.0%
Note: includes 20% of APS.
80%
20%
9,301 7,602 6,138 6,073
7,4805,819
3,893 3,031
8,096
8,848
9,234 9,265
24,87722,269
19,265 18,369
Dec-13 Dec-14 Dec-15 Jun-16
Sabadell real estate exposure
Balance sheet (real estate exposure), ex-TSBEuros in million
Note: Date as of June 2016. Contingent exposures included. 1 Unsecured assets or with pledge, personal or 2nd mortgage guarantees.2 It does not include capital instruments.
Mortgage guarantee(1st mortgage)
Other guarantees1
From No RED
From RED
Foreclosed assets²Developer credit (Performing)
Developer credit (Non Performing)
52
16,78113,421
10,031 9,104
87%
13%
Real Estate portfolio breakdown by asset classReal estate portfolio break-down, ex-TSBEuros in million (gross value)
Developer credit break-down, ex-TSB Euros in million (gross value)
Note: Data as of June 2016.Contingent exposures included. It does not include capital instruments. First mortgage guarantees and other guarantees. 1 It does not include capital instruments.2 Other guarantees. 53
Foreclosed assets 1 9,265 100%
Finished property 53%
Under construction 5%
Land 42%
Developer loans 9,104 100%
Finished property 57%
Under construction 5%
Land 25%
Others2 13%
Total RE related exposure 18,369
June 2016 %
Developer loans 9,104 50%
Normal 5,544 61%
Substandard 530 6%
Non performing 3,031 33%
56%
5%
34%
5%
Jun-16
Real Estate portfolio breakdown by asset class and regionPortfolio breakdown by maturity, ex-TSBIn percentage
Portfolio breakdown by region
Note: Data as of June 2016.1 Other guarantees.
>80% of finished properties in coastal areas and Madrid
Finished product
Under construction
Land
Others1
54
Residential76%
Industrial9%
Commercial6%
Hotels2%
Others8%
REOs/Foreclosed assets segmentation
Foreclosed assets by use, ex-TSBIn percentage
Foreclosed assets by location, ex-TSBIn percentage
55Note: Data as of June 2016.
Catalonia31%
Center17%
Levante36%
South16%
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