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TRANSCRIPT
Sabadell 3Q 2016 Results
October 28, 2016
Disclaimer
2
This presentation (the "Presentation") has been prepared and is issued by, and is the sole responsibility of Banco de Sabadell, S.A. ("Banco Sabadell" or "the Company"). For the purposes hereof, the Presentation shall mean and include
the slides that follow, any prospective oral presentations of such slides by the Company, as well as any question-and-answer session that may follow that oral presentation and any materials distributed at, or in connection with, any of the
above.
The information contained in the Presentation has not been independently verified and some of the information is in summary form. No representation or warranty, express or implied, is made by Banco Sabadell or any of its affiliates
(Banco Sabadell Group), nor by their directors, officers, employees, representatives or agents as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or opinions expressed
herein. None of Banco Sabadell nor any of its affiliates, nor their respective directors, officers, employees, representatives or agents shall have any liability whatsoever (in negligence or otherwise) for any direct or consequential loss,
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liability whether direct or indirect, express or implied, contractual, tortious, statutory or otherwise, in connection with the accuracy or completeness of the information or for any of the opinions contained herein or for any errors, omissions
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Banco Sabadell cautions that this Presentation may contain forward looking statements with respect to the business, financial condition, results of operations, strategy, plans and objectives of the Banco Sabadell Group. While these
forward looking statements represent Banco Sabadell Group judgment and future expectations concerning the development of its business, a certain number of risks, uncertainties and other important factors could cause actual
developments and results to differ materially from Banco Sabadell Group expectations. These factors include, but are not limited to, (1) general market, macroeconomic, governmental, political and regulatory trends; (2) movements in
local and international securities markets, currency exchange rate and interest rates; (3) competitive pressures; (4) technical developments; (5) changes in the financial position or credit worthiness of Banco Sabadell Group customers,
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adversely affect our business and financial performance and cause actual results to differ materially from those implied in the forward-looking statements.
The information contained in the Presentation, including but not limited to forward-looking statements, is provided as of the date hereof and is not intended to give any assurances as to future results. No person is under any obligation to
update, complete, revise or keep current the information contained in the Presentation, whether as a result of new information, future events or results or otherwise. The information contained in the Presentation may be subject to change
without notice and must not be relied upon for any purpose.
This Presentation contains financial information derived from Banco Sabadell´s unaudited financial statements for the three quarter 2016 and ninth-month period ended September 30, 2016. None of this financial information has been
audited by our auditors. Financial information by business areas is presented according to GAAP as well as internal Banco Sabadell group´s criteria as a result of which each division reflects the true nature of its business. These criteria
do not follow any particular regulation and can include forecasts and subjective valuations which could represent substantial differences should a different methodology be applied.
In addition to the financial information prepared in accordance with the International Financial Reporting Standards (IFRS), this document includes certain Alternative Performance Measures (APMs) as defined in the guidelines on
Alternative Performance Measures issued by the European Securities and Markets Authority on 5 October 2015 (ESMA/2015/1415es) (the "ESMA guidelines”). This report uses certain APMs, which are performance measures that have
been calculated using the financial information from Banco Sabadell Group but that are not defined or detailed in the applicable financial framework and therefore have not been audited. These APMs are been used to allow for a better
understanding of the company's financial performance but should be considered only as additional disclosures and in no case as a replacement of the the financial information prepared under IFRS. Moreover, the way the Group defines
and calculates these measures may differ to the way these are calculated by other companies, and therefore they may not be comparable. Please refer to the quarterly report (https://www.grupbancsabadell.com/
INFORMACION_ACCIONISTAS_E_INVERSORES/INFORMACION_FINANCIERA/INFORMES_TRIMESTRALES) for further details of the APMs used, including its definition or a reconciliation between any applicable management
indicators and the financial data presented in the consolidated financial statements prepared under IFRS.
Market and competitive position data in the Presentation has generally been obtained from industry publications and surveys or studies conducted by third-party sources. Peer firm information presented herein has been taken from peer
firm public reports. There are limitations with respect to the availability, accuracy, completeness and comparability of such data. Banco Sabadell has not independently verified such data and can provide no assurance of its accuracy or
completeness. Certain statements in the Presentation regarding the market and competitive position data are based on the internal analyses of Banco Sabadell, which involve certain assumptions and estimates. These internal analyses
have not been verified by any independent source and there can be no assurance that the assumptions or estimates are accurate. Accordingly, undue reliance should not be placed on any of the industry, market or Banco Sabadell’s
competitive position data contained in the Presentation.
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1 3Q highlights
2 Profitability and efficiency
3 Commercial activity and digital transformation
5 TSB results
4 Solvency and asset quality
1 3Q highlights
3Q highlights
5
Commercial activity and digital transformation
Slight reduction in loans mainly affected by seasonality and strong
protection of spreads
Increasing transfer of deposits to off-balance sheet funds
Past acquisitions continue to yield market share gains and
improve positioning
At the forefront of innovation. Continued efficiency gains from
industrialisation of activities and digitalisation
Profitability and efficiency
Strong pre-tax profit (growth of c.+41% QoQ) on the back of
resilient interest income
Term deposits and wholesale funding continue to reprice
downwards
Flat commissions with services fees offsetting capital markets’
impact on asset management and investment commissions
Cost containment and capacity to further lever costs continues
TSB
Lending growth YoY at c.+28% and deposits at c.+14% mainly
driven by market share gains
TSB continues to see strong demand from home owners, with
franchise mortgage lending up c. +24% YoY and record
applications for remortgages received in the quarter
6.8% of customers opening a new bank account or switching
banks YtD chose TSB, which is well above our target of 6.0%
Average mortgage book LTV of 54.5%2, with buy-to-let at just
15% of total TSB mortgage balance, confirms low risk profile
Migration plans are progressing as expected
Solvency and asset quality
NPL ratio declines further to 6.60%
Proactive real estate asset sales has proven to be a
successfully strategy
NPA decreased by €634M in the quarter, including €158M
reduction in foreclosed real estate assets
Strong capital position with fully loaded CET1 standing at
12.0%1
1 Excluding 26 bps of AFS sovereign capital gains. 2 Refers to Franchise mortgages only.
2 Profitability and efficiency
Euros in million
2Q 2016 3Q 2016 %QoQ %QoQ constant FX
%YoY 2Q 2016 3Q 2016 %QoQ %YoY
Net interest income 968.6 948.4 -2.1% 0.0% 29.0% 696.7 696.9 0.0% 5.9%
Equity method & dividends 27.3 23.2 -14.8% -14.8% 77.8% 27.3 23.2 -14.8% 77.8%
Commissions 292.4 290.0 -0.8% 0.1% 8.9% 257.9 258.8 0.4% 1.8%
Trading income & forex 206.5 53.3 -74.2% -73.7% -52.1% 156.3 53.7 -65.6% -56.8%
Other operating results -82.2 -21.9 -73.3% -73.0% --- -65.9 -20.6 -68.7% ---
Gross operating income 1,412.6 1,293.0 -8.5% -6.8% 0.3% 1,072.2 1,012.0 -5.6% -15.6%
Personnel costs -413.1 -410.3 -0.7% 1.2% 20.0% -307.3 -307.1 0.0% 0.2%
Administrative costs -247.8 -251.1 1.3% 4.5% 34.1% -145.8 -145.2 -0.5% 0.0%
Depreciation & amortisation -96.8 -96.5 -0.3% 1.2% 23.8% -78.0 -79.0 1.2% 8.8%
Pre-provisions income 654.9 535.0 -18.3% -17.2% -18.0% 541.1 480.7 -11.2% -26.7%
Total provisions & impairments -466.9 -211.7 -54.7% -54.7% -43.0% -466.9 -211.7 -54.7% -43.0%
Gains on sale of assets 38.3 -3.3 --- --- --- 38.3 -1.3 --- ---
Negative goodwill 0.0 0.0 --- --- --- 0.0 0.0 --- ---
Profit before taxes 226.3 320.1 41.5% 47.1% 36.7% 112.5 267.7 138.1% 8.0%
Taxes -52.2 -97.0 86.0% 94.0% 203.8% -22.4 -74.4 232.4% 161.1%
Minority interest 0.8 1.5 100.3% 100.3% 56.3% 0.8 1.5 100.3% 56.3%
Attributable net profit 173.3 221.6 27.8% 32.8% 11.6% 89.3 191.8 114.7% -12.7%
Sabadell, ex-TSBSabadell group
Quarterly Income Statement
Note: The EURGBP exchange rate of 0.8496 used for the P&L of this quarter is the daily average rate of 3Q16. 1 %YoY calculated as the growth rate of accumulated results to Sept. 2016 vs. accumulated results to Sept 2015.
Strong pre-tax profit on the back of resilient net interest income
7
1
1
Euros in million
9M 2015 9M 2016 %YoY 9M 2015 9M 2016 %YoY
Net interest income 2,240.3 2,890.9 29.0% 1,973.1 2,089.2 5.9%
Equity method & dividends 40.5 72.1 77.8% 40.5 72.1 77.8%
Commissions 790.2 860.2 8.9% 749.0 762.6 1.8%
Trading income & forex 1,192.8 570.9 -52.1% 1,194.6 516.3 -56.8%
Other operating results -5.0 -120.8 --- -4.0 -102.8 ---
Gross operating income 4,258.8 4,273.2 0.3% 3,953.2 3,337.4 -15.6%
Personnel costs -1,032.3 -1,239.0 20.0% -919.5 -921.1 0.2%
Administrative costs -557.7 -748.1 34.1% -437.3 -437.4 0.0%
Depreciation & amortization -234.6 -290.5 23.8% -216.1 -235.3 8.8%
Pre-provisions income 2,434.2 1,995.6 -18.0% 2,380.3 1,743.6 -26.7%
Total provisions & impairments -1,955.2 -1,113.5 -43.0% -1,955.2 -1,113.5 -43.0%
Gains on sale of assets -17.5 32.0 --- -17.5 34.0 --
Negative goodwill 207.4 0.0 -100.0% 207.4 0.0 -100.0%
Profit before taxes 668.8 914.1 36.7% 614.9 664.1 8.0%
Taxes -86.8 -263.6 203.8% -72.4 -189.1 161.1%
Minority interest 2.3 3.6 56.3% 2.3 3.6 56.3%
Attributable net profit 579.8 646.9 11.6% 540.2 471.4 -12.7%
Sabadell, ex-TSBSabadell group
8
9M income statement
Note: The EURGBP exchange rate of 0.8006 used for the P&L is the daily average rate of 9M16. 1 2015 commissions have been restated to include FX commissions, which were previously included in trading income and forex. Before this restatement, Sabadell group’s 9M15 commissions amounted to €728M.
1
941.3 962.5 973.9 968.6 948.4
3Q15 4Q15 1Q16 2Q16 3Q16
271.9 251.5
2Q16 3Q16
696.7 696.9
2Q16 3Q16
Net interest income continues to stabilise…
Group net interest income evolution Euros in million
Note: The EURGBP exchange rate of 0.8496 used for the P&L of this quarter is the daily average rate of 3Q16. 1 %YoY calculated as the growth rate of accumulated results to Sept. 2016 vs. accumulated results to Sept 2015. 9
1
Sabadell, ex-TSB Euros in million
TSB Euros in million
QoQ growth
0.0%
QoQ growth
-7.5%
-0.1% in
GBP
QoQ growth
-2.1%
0.0% in constant FX
YoY growth
+29.0%
… as a result of the lower for longer interest rate
environment
Net interest margin evolution In percentage
Customer loan yield and cost of funds In percentage
Customer spread
Customer spread,
ex-TSB
Net interest margin as % of ATA
Net 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 12M 10
1 Quarterly average.
1
Customer spread evolution In percentage
The best performance amongst Spanish peers
Sabadell
(ex-TSB)
Peer 1
Peer 3
Peer 6
Peer 4
Peer 2
+82bp
-4bp
+30bp
+17bp +56bp -14bp
+73bp
Var. 2Q16/4Q13
Peer 5
Note: for international banks includes business in Spain only. 4Q13 of peer 5 not available, 1Q14 has been considered instead.
2Q16
1.55%
1.75%
1.66% 1.71%
2.04%
2.37%
2.68%
1Q16 4Q15 3Q15 2Q15 1Q15 4Q14 4Q13
0.82%
1.58%
1.80%
1.15%
1.74%
2.41%
1.86%
+9bp
-13bp
-2bp
-1bp +1bp -3bp -6bp
Var. YtD
Sabadell ex-TSB 3Q16
customer spread is at 2.60%
11
Term deposits repricing continues…
Maturities of term deposits Euros in million
Stock New production/renewals
Contractual rates on term deposits, ex-TSB
In percentage
Note: Contractual rates and maturities for Euro term deposits.
Maturity Volume Average cost
4Q16 7,681 0.45%
1Q17 4,943 0.41%
2Q17 5,396 0.28%
3Q17 3,697 0.14%
4Q17 524 0.23%
>4Q17 1,375 0.27%
12
3.41%
3.05%
2.71%
2.56%
2.28%
2.28%
2.12%
1.93%1.91%
2.35%
2.27%
2.12%
1.89% 1.88%
Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16
Wholesale funding cost Wholesale funding cost, ex-TSB
Wholesale funding cost evolution
In percentage
… and so is the cost of wholesale funding
The size of the bubble represents the volume of maturities. The
percentage number is the current level of coupon payment
Upcoming wholesale maturities In percentage and euros in million
13
1,5%
2,0%
2,5%
3,0%
3,5%
4,0%
2016 2017 2018 2019 2020 2021 2022 >2022
1,049 1.61%
3,204 3.47%
1,678 3.49%
1,124 2.74%
2,590 2.03%
2,606 2.28%
1,144 3.15%
2,854 1.91%
Excludes the additional benefit from €10.0bn ECB funding
(TLTROII)
Sabadell continues to optimise wholesale funding
cost with its recent €1.0bn 7-year covered bond
14
Recently Sabadell has successfully tapped the markets raising EUR1.0bn with a 7yrs CB priced at one of the lowest yields1 ever in the periphery countries
Terms and conditions
Issuer Banco Sabadell
Instrument Covered bond
Rating Aa2 (Moodys)/ AA (DBRS)
Nominal amount €1,000M
Rate of interest 0.125%
Re-offer Spread MS + 10 bp
Re-offer Yield 0.214%
Re-offer Price 99.382%
Subscription date October 13, 2016
Issue and disbursement date October 20, 2016
Maturity date October 20, 2023
1 for an instrument with similar maturity profile.
34.6 31.2
2Q16 3Q16
257.9 258.8
2Q16 3Q16
70.2 81.4 73.6 80.3 74.4
83.082.1
79.3 79.3 76.5
142.5 134.1124.9 132.9 139.1
295.7 297.6277.8
292.4 290.0
3Q15 4Q15 1Q16 2Q16 3Q16
Asset Mgmt 3
Flat commissions with service fees offsetting capital
market impact
Note: The EURGBP exchange rate of 0.8496 used for the P&L of this quarter is the daily average rate of 3Q16. 1 %YoY calculated as the growth rate of accumulated results to Sept. 2016 vs. accumulated results to Sept 2015. 2 2015 commissions have been restated to include FX commissions, which were previously included in trading income and forex. Before this restatement, Sabadell group 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.
Group commission income evolution
Euros in million
Investment Services
2 2
15
QoQ growth
-0.8%
+0.1% in constant FX
YoY growth
+8.9%
QoQ growth
+0.4%
QoQ growth
-9.8%
-2.5% in
GBP
Sabadell, ex-TSB
Euros in million
1
TSB
Euros in million
Total non recurrent
expenses 16
Overall costs remained stable in the quarter
Group personnel and general expenses evolution
Euros in million
Sabadell, ex-TSB
Euros in million
Note: The EURGBP exchange rate of 0.8496 used for the P&L of this quarter is the daily average rate of 3Q16.
TSB
Euros in million
Recurrent personnel
expenses Recurrent general
expenses
QoQ growth
+0.1%
QoQ growth
-0.2%
QoQ growth
+0.6%
+8.7% in
GBP
Recurrent personnel
expenses
Recurrent general
expenses
Total non recurrent
expenses
Total non recurrent
expenses
Recurrent personnel
expenses
Recurrent general
expenses
3 Commercial activity and digital transformation
Balance sheet dynamics
Customer funds and loans evolution
Note: The EURGBP exchange rate of 0.8610 used for the balance sheet is the closing rate as of September 2016. 1 Including accruals adjustments. 2 Term funds include term deposits and other funds placed in the retail network. Exclude repos and deposits from institutional clients.
18
Total assets 205,141 207,891 205,843 0.3% -1.0% -0.1% 165,928 164,493 162,679 -2.0% -1.1%
Of which:
Gross loans to customers ex repos1
148,095 149,921 147,985 -0.1% -1.3% -0.3% 117,768 116,043 114,653 -2.6% -1.2%
Performing loans1
134,847 139,206 137,741 2.1% -1.1% 0.0% 104,743 105,506 104,579 -0.2% -0.9%
Fixed income portfolio 28,255 24,389 25,962 -8.1% 6.4% 6.8% 26,771 22,440 23,826 -11.0% 6.2%
Total liabilities 192,775 195,029 192,648 -0.1% -1.2% -0.3% 156,107 154,129 151,918 -2.7% -1.4%
Of which:
On-balance sheet customer funds 129,957 134,152 131,076 0.9% -2.3% -1.3% 95,576 100,100 97,437 1.9% -2.7%
Term funds2
47,231 45,723 43,190 -8.6% -5.5% -5.1% 42,831 40,573 38,187 -10.8% -5.9%
Current & Saving accounts 82,726 88,429 87,887 6.2% -0.6% 0.7% 52,745 59,527 59,251 12.3% -0.5%0 0.0% 0.000
Wholesale funding 22,169 25,798 24,583 10.9% -4.7% -4.1% 21,599 21,428 20,512 -5.0% -4.3%
ECB funding 11,450 10,676 10,762 -6.0% 0.8% -- 11,450 10,676 10,762 -6.0% 0.8%
Off-balance sheet funds 35,716 37,555 39,711 11.2% 5.7% 5.7% 35,716 37,555 39,711 11.2% 5.7%
Of which:
Mutual funds 20,390 21,131 22,220 9.0% 5.2% 5.2% 20,390 21,131 22,220 9.0% 5.2%
Pension funds 4,242 4,147 4,133 -2.6% -0.3% -0.3% 4,242 4,147 4,133 -2.6% -0.3%
Third party insurance products 7,314 8,735 9,756 33.4% 11.7% 11.7% 7,314 8,735 9,756 33.4% 11.7%
Sep-16
Sabadell, ex-TSB
Euros in million%YoY %QoQ %YoY %QoQJun-16Sep-15 Sep-15 Jun-16%QoQ
constant FX
Sabadell group
Sep-16
Slight reduction in loans mainly affected by seasonality…
19
Performing loans evolution by customer type, Sabadell ex-TSB Euros in million
105,506 104,579
Note: excludes repos and includes accruals adjustments.
1 Refers to residential mortgages to individuals within Spain only.
2 Others include other mortgages, loans to developers, construction sector, Real Estate sector and others.
2
1
2 1
2Q16 New lending Attrition 3Q16 Var. %
Corporates 18,415 2,211 -2,158 18,469 0.29%
SMEs 27,464 2,266 -2,680 27,050 -1.51%
Mortgages 32,237 763 -973 32,027 -0.65%
Others 27,390 246 -602 27,034 -1.30%
Total 105,506 5,486 -6,413 104,579 -0.88%
… and strong protection of spreads
Back book loan spreads by segment, ex-TSB In basis points
Evolution of loan spreads by key segments, ex-TSB In basis points
20
Back
book
Front
book
Back
book
Front
book
Back
book
Front
book
Back
book
Front
book
Back
book
Front
book
Mortgages to individuals 96 175 98 178 98 175 101 158 102 168
SME 282 414 281 401 281 412 284 386 284 381
Corporates 210 225 202 213 195 194 195 206 195 216
3Q163Q15 4Q15 1Q16 2Q16
SME
Corporates
Total
Mortgages to individuals
Loans
Total export
transactions
PoS
turnover Transact.
11.07% 13.18% 14.31% 10.23%
11.33% 12.39% 13.31% 10.14%
Market position in Spain strengthens again…
Sources include ICEA (life insurance), BdE (loans, PoS turnover, credit card turnover, household current acc.), Iberpay (transact.) y Swiftwatch (total export transactions).
Note: 2016 data as of September 2016 or last month available. 1 Transaction calculated per volume. 2 Insurance calculated per number of contracts.
Market shares by product
In percentage
Companies
Individuals
Sep- 16
Sep- 15
Credit card
turnover Life insurance
Household
current acc. Mutual funds
7.59% 5.41% 6.05% 6.07%
7.11% 5.10% 5.60% 5.86%
Sep- 16
Sep- 15
2
1
21
Level of service quality
Evolution of Sabadell quality index vs. sector
… with high standards in quality of service
1 Source: STIGA, EQUOS (Objective Quality Analysis in Banking Networks, 3Q 2016). 2 Source: Report Benchmark NPS Accenture. Considers peer group entities. Data as last available month.
Sabadell continues to have a service quality gap vs. the sector and is Top ranked by SMEs and
large companies
22
Net promoter score
Evolution of Sabadell quality index vs. sector
2016 Ranking ▲from
2013
Large companies
(turnover > €5 M) 29% 1st + 14pp
SMEs
(turnover < €5 M) 17% 1st + 14pp
Personal banking 29% 2nd + 33pp
Retail banking -4% 2nd + 18pp
1 2
7.66
6.96
#1 vs. peer
group
652
1,599
2013 Sept 2016
Mill
on
es
86% of transactions1 are executed through remote channels
23
19%
of sales are done through digital channels
Active Web users In thousands
1,529 1,754
2013 Sept 2016
Mill
on
es
+15%
Active Mobile users In thousands
+145%
Strongly committed to our digital transformation
Note: data as of September 30,2016 or last month available. 1 Refers to any commercial activity, both servicing and contracts.
Quarterly follow-up of our main digital and commercial
transformation initiatives
Digital Signature Replaces codes cards by
sending a unique password
to our customer’s mobile
that can be used to
complete securely a
banking transaction
Proteo Mobile Brings our banking services
and products to our
customer’s homes through
mobile devices
Simplebank Simplification of commercial
and operating processes
Lead Indicator
973K #users
72% of total
individual
customers enrolled
QoQ growth (%)
>53% active users
New enrollment of
clients grew 4x in the
last 4 weeks of
September
Launch date
December, 2015
April, 2016 (client
enrollment launched
in July, 2016)
3,500 tablets
spread over our
commercial network
New initiative:
Sabadell Wallet - Bizum
Launch of Bizum in
October 3
Bizum is a system that
allows our clients to make
instant payments by only
knowing the mobile number
Bizum has been already
integrated in our Wallet
app
September, 2016 1 single contract
for all type of client
deposits products
Has moved from 7 to 1
single contract
24
4 Solvency and asset quality
11.6% 11.5%11.9% 11.9% 12.1%
Sep-15 Dec-15 Mar-16 Jun-16 Sep-16
Common equity Tier 1 phase-in evolution In percentage
Strong capital position
Common Equity Tier 1 fully-loaded (Sep-16) at 12.0% 26
Note: Excludes 26 bps of AFS sovereign portfolio valuation adjustment.
NPL continues to decline and stands at 6.60%
Note: NPL ratio is calculated including 20% of the APS.
Sabadell, ex-TSB In percentage
Sabadell group In percentage
NP
L
co
ve
rag
e
NP
L
rati
o
27
NPL ratio has come down to 6.6% from 13.6% since December 2013
Discipline in NPL reduction continues: foreclosed
assets down in 3Q
NPL evolution, ex-TSB Euros in million
Foreclosed assets evolution, ex-TSB
Euros in million
Note: Includes contingent risk and 20% of APS. 1 Reduction since 4Q2013.
Total problematic assets, ex-TSB Euros in million
€477M further reduction of NPLs during 3Q16
Foreclosed asset reduction of €158M during 3Q16
NPAs decreased by €634M in 3Q16
-€6,763M1
28
4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16
Note: data as of Banks analyst ‘s results presentations. Sabadell: Data includes 20% of APS. For international banks. Includes problematic assets from real estate activity and banking activity in Spain. Figures include Caixa Catalunya acquisition in 2Q 2015, Barclays acquisition in 1Q 2015 and Barclays Portugal acquisition in 2Q 2016.
32,976 32,847
22,690
19,900
15,460
38,649
34,303
33,984
28,478
26,028
24,120
Sabadell
(ex-TSB)
Peer 1
Peer 2
Peer 3
Peer 4
Peer 5
Var. 2Q16/4Q13
Var. YtD
-2.3%
-14.7%
-23.5%
-4.2%
-20.3%
-35.9%
0.7%
-3.6%
-7.8%
-6.9%
-6.4%
-8.4%
Euros in million
Consistent top performance in problematic assets sales
29
Sabadell ex-TSB 3Q16 NPAs amount to €19,265M. This implies a reduction in NPAs of
€6,763M since Dec-13
33,199
Problematic exposures have fallen faster than planned
NPL reduction, ex-TSB Euros in billion
NPA reduction, ex-TSB Euros in billion
At the end of 2015, after two
years of faster than
anticipated disposals, we
increased our Triple plan
NPL and NPA reduction
guidance
YtD our NPA reduction is
above the new Triple plan
guidance and we are close
to achieving our NPL target
as well
30
7.7 Original
guidance
8.0 Revised
guidance
7.8 2013 to YtD
reduction
>6.5 Revised
guidance
6.8 2013 to YtD
reduction
4.4 Original
guidance
Recovery in the Spanish real estate market...
Source: Spanish Statistical Office (INE).
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
Ongoing growth on home sale
transactions has continued, although
still at low levels
Home sale numbers have raised
for 9 consecutive quarters
Prices continue to show a moderate
recovery both in new and second-hand
housing
Upward trend in city centres such
as Madrid and Barcelona, the
Mediterranean coast and the
islands
Property transactions In units
-29% -25% +6% -18% -11% +2%
+12%
-2% % YoY
growth House price
Index 2007=100
Fall
31
+15%
New housing
Second-hand housing
Market situation
New housing
Second-hand housing
All properties
… leads to an improvement in real estate assets sales,
including sales to private individuals
Number of foreclosed assets sold In units
Institutional sales
Foreclosed assets sold Euros in million
32 Note: includes sales from foreclosed assets for Sabadell group only (excluding sales from Mexico subsidiary). Includes 100% of APS.
Private individuals sales
2,4322,807 2,750 2,808 2,802
1,095 1,275
594
2,432
3,9024,025
2,808
3,396
3Q15 4Q15 1Q16 2Q16 3Q16
375
515 499 475 495
165307
88
375
680
806
475
583
3Q15 4Q15 1Q16 2Q16 3Q16
5 TSB results
TSB has delivered its strategy successfully
Provide great
banking to
more people
Help more
People to
borrow well
Provide the kind
of banking people
want and deserve
1 Source: CACI Current and Savings Account Market Database (CSDB) which includes current, packaged, youth, student and basic bank accounts and new account openings excluding account upgrades. Data presented on a 2 month lag. 2 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 as YtD cumulative.
6.8%1 of all customers opening a bank account or switching banks
chose TSB YtD
Customer deposits grew to £29.0 billion (+14% growth YoY) reflecting
customers’ continued trust in TSB
Balance sheet growth remains strong, with lending growing to £28.6
billion – up +28% YoY
TSB continues to grow its mortgage offering with lending in the period
driven by the success of TSB mortgage broker service
Remortgage lending up +18% QoQ. TSB received its highest ever
number of applications during the month of August
To grow market share of bank
accounts by consistently taking
a greater than 6% share of
gross flow over 5 years
To grow TSB franchise
customer lending by 40% to
50% over a five-year period
from IPO
To deploy our strong digital
capability. Build greater
consideration of the TSB brand.
Deliver a differentiated
customer experience through
our Partners
Customers are more willing than ever before to recommend TSB to
friends and family as the Bank’s Net Promoter Score2 increased to 25
points over the quarter
TSB climbs 84 places in Nunwood’s 2016 UK Customer Experience
Excellence ranking – becoming the highest ranked high street bank
34
GBP in million2Q 2016 3Q 2016 9M 15 9M 16 %QoQ %YoY
Franchise 1
184.1 183.4 523.9 550.7 -0.4% 5.1%
Mortgage enhancement 2 13.6 12.9 57.1 41.3 -5.1% -27.7%
Whistletree 3
19.4 19.4 0.0 59.3 0.0% --
Net Interest Income 217.1 215.7 581.0 651.3 -0.6% 12.1%
Franchise 1 29.6 29.1 98.7 87.3 -1.7% -11.6%
Mortgage enhancement 2 -1.8 -1.3 -7.9 -5.3 -27.8% -32.9%
Whistletree 3 -0.8 -1.6 0.0 -4.3 100.0% --
Other operating income 27.0 26.2 90.8 77.7 -3.0% -14.4%
Total income 244.1 241.9 671.8 729.0 -0.9% 8.5%
Total operating expenses (excl. one-offs) -175.0 -179.0 -535.1 -518.0 2.3% -3.2%
Franchise 1 -19.5 -19.7 -60.3 -57.7 1.0% -4.3%
Mortgage enhancement 2 0.0 0.1 0.0 0.1 -- --
Whistletree 3 -1.8 -1.7 0.0 -4.1 -5.6% --
Impairment on loans & advances -21.3 -21.3 -60.3 -61.7 0.0% 2.3%
Management profit (excl. one-offs) 47.8 41.6 76.4 149.3 -13.0% 95.4%
One-offs and others 25.0 -5.4 -27.3 12.3 -- --
Tax income -18.5 -15.9 -9.5 -47.8 -14.1% --
Statutory Profit after Tax 54.3 20.3 39.6 113.8 -62.6% 187.4%
2Q 2016 3Q 2016 9M 15 9M 16 %QoQ %YoY
Franchise NIM 3.24% 3.08% 3.66% 3.23% -0.16 pp -0.43 pp
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 Whistletree Assets is a £2.6 billion portfolio of former Whistletree 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 accumulated results to Sept. 2016 vs. accumulated results to Sept 2015.
Net Interest Income stabilised QoQ as a result
of lower interest rates, partially offset by strong
mortgage lending growth and strong new
business margins
Operating expenses remained contained
Management profit before tax and one-offs
rose to £149.3 million in the nine months, an
increase of 95.4% compared to £76.4 million
reported for the same period in 2015
One-off tax items totalling £7 million in the
quarter mainly related to disallowable expenses
35
4
4
As it was initially announced, IT outsourcing
fees paid to Lloyds should increase by more
than £100M as a one-off cost in 2017 before
migration is completed. The new platform, when
fully deployed in late 2017, will reduce TSB’s IT
costs considerably and enable it to become
more innovative and nimble than before
We should also see a reduction in the income
received from the Mortgage enhancement
portfolio as it rolls off during 2018
TSB balance sheet
Note: Customer lending and customer deposits exclude fair value hedge accounting adjustment. 1 Refers to Franchise mortgages only.
Positive balance sheet trend continues
with Franchise lending driven by
Mortgage Intermediary growth supported
by continuing deposit growth
Total customer lending rose to £28.6
billion, up +2.5% QoQ, with TSB
mortgage franchise lending up +4.5% at
£21.9 billion
Remortgage lending was up 18% in the
three months to September 2016, and we
received record number of applications
during the month of August
Customer deposits grew to £29.0
billion, up c. +2,9% QoQ, reflecting the
trust that customers have in TSB as a
safe haven for their savings
Healthy average LTV of 54.5%1 across
the mortgage book
Strong capital position with CET1 at
17%
36
GBP in millionSep-15 Jun-16 Sep-16 % YoY % QoQ
Core mortgages 17,678 20,926 21,866 23.7% 4.5%
Mortgage enhancement 2,420 2,049 1,944 -19.7% -5.1%
Whistletree 0 2,733 2,608 -- -4.6%
Other net customer lending 2,230 2,221 2,212 -0.8% -0.4%
Total Customer lending (net) 22,328 27,929 28,630 28.2% 2.5%
Savings deposits 16,817 18,750 19,100 13.6% 1.9%
Current account deposits 7,608 8,397 8,826 16.0% 5.1%
Business banking deposits 958 988 1,030 7.5% 4.3%
Total Customer deposits 25,383 28,135 28,956 14.1% 2.9%
Sep-15 Jun-16 Sep-16 % YoY % QoQ
Common Equity Tier 1 Capital ratio 20.1% 17.2% 17.0% -3.1 pp -0.2 pp
The new Mobile app for TSB represents the first
milestone of the migration plan
37
The new Mobile app will bring TSB closer to the UK digital ecosystem
1Q 2017
The new app offers:
Up-to-date visual interface
Simplified access using biometrics for iOS and Samsung
Advanced transactions: Standing orders, Direct Debits, etc.
Seamless experience for Payments: Transfers, PayM, etc.
Mobile-first Sales journeys
Messenger with Customer care team
Interaction with the branches: Mortgage appointment
Launcher with contextual services: Branch locator,
Currency converter tool, Integration with Expensify
Simplification
of processes
User
friendly
Speed of
service
…without
loosing the
human touch
We are here…
+
+
+
Annex
Gross lending by product type
Sabadell group In percentage
40 Note: Data as of September 2016.
Sabadell, ex-TSB In percentage
Business mix by customer type
Sabadell, ex-TSB In percentage
Sabadell group In percentage
41 Note: Data as of September 2016.
Funding structure, Sabadell group
Wholesale funding breakdown In percentage
Funding structure In percentage
42 Note: Data as of September 2016.
Wholesale funding maturities and new issues
Maturity by product type, Sabadell group Euros in million
43
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 12,413
GGB 0 1,059 0 0 0 0 0 0 1,059
Senior Debt 1,049 57 100 0 0 0 25 0 1,230
Preferred Shares and Subordinated Debt 0 66 0 0 425 488 0 533 1,512
Other mid- and long-term financial instruments 0 0 18 0 0 10 0 6 34
Total 1,049 3,204 1,678 1,124 2,590 2,606 1,144 2,854 16,248
Fixed income portfolio
44
ALCO portfolio, ex-TSB TSB
Fixed income portfolio evolution Euros in billion
ALCO portfolio, Sabadell group Euros in billion
ALCO portfolio, Sabadell ex-TSB Euros in billion
ALCO portfolio 22.9 22.4 23.8
% of total assets 14.2% 13.6% 14.6%
Duration (yrs) 3.6 3.7 3.4
Mar-16 Jun-16 Sep-16
ALCO portfolio 24.7 24.4 26.0
% of total assets 12.1% 11.7% 12.6%
Duration (yrs) 3.3 3.4 3.1
Mar-16 Jun-16 Sep-16
ALCO portfolio composition
ALCO portfolio composition evolution, Sabadell group Euros in billion
45
Spanish Public Debt 9.70 9.36 10.78
Italian Government Debt 4.84 5.60 6.10
US Government Debt 2.35 1.53 1.28
UK Government Debt 1.79 1.95 2.14
Other Government 1.93 2.17 2.04of which:
Portuguese Government 0.78 0.99 1.00
Mexican Government 0.77 0.85 0.72
Netherlands Government 0.08 0.00 0.00
Agencies 1.41 1.47 1.37
Covered Bonds 0.65 0.35 0.34
Corporates & Financials 2.00 1.96 1.91
Total 24.7 24.4 26.0
Sep-16Mar-16 Jun-16
Evolution of NPLs and foreclosed assets
Evolution of NPLs and foreclosed assets, ex-TSB Euros in million
46 Note: Data includes 20% APS.
Gross entries 755 740 735 729 654 660 547
Recoveries -1,557 -1,471 -1,275 -1,273 -1,111 -1,629 -880
Ordinary net entries -802 -731 -540 -544 -457 -969 -333
Gross entries (foreclosed assets) 412 710 243 487 364 362 248
Sales -201 -543 -242 -480 -404 -290 -406
Change in RE assets 211 167 1 7 -41 71 -158
Net entries + Change in RE assets -591 -564 -539 -537 -498 -898 -490
Write-offs 245 170 300 234 213 70 144
Real estate and NPL quarterly change -836 -734 -839 -771 -711 -968 -634
3Q162Q161Q15 2Q15 3Q15 4Q15 1Q16
NPL ratio breakdown
NPL ratios by segment, ex-TSB In percentage
Note: NPL ratio is calculated including 20% of the APS NPLs. 47
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% 11.68%
2Q15 3Q15 4Q15 1Q16 2Q16 3Q16
Real Estate development and/or construction purposes 47.21% 47.84% 38.81% 37.01% 33.29% 31.99%
Construction purposes non-related to real estate dev. 8.74% 8.58% 14.36% 12.18% 11.76% 11.62%
Large corporates 6.14% 5.41% 4.62% 4.58% 3.89% 3.84%
SME and small retailers and self-employed 11.96% 11.38% 10.83% 10.23% 9.39% 8.71%
Individuals with 1st
mortgage guarantee assets 8.76% 8.27% 7.83% 7.82% 7.47% 7.43%
NPL ratio, Sabadell ex-TSB 10.98% 10.38% 9.86% 9.45% 8.54% 8.25%
Overview of coverage ratios, Sabadell Group
48
Coverage ratios evolution Euros in million
Note: includes 20% of APS.
3Q15 4Q15 1Q16 2Q16 3Q16
NPL evolution 13,345 12,561 11,870 10,812 10,328
Provisions 7,385 6,738 6,488 5,847 5,468
Coverage ratio (%) 55.3% 53.6% 54.7% 54.1% 52.9%
3Q15 4Q15 1Q16 2Q16 3Q16
RE foreclosed assets evolution 9,228 9,234 9,193 9,265 9,107
Provisions 4,071 4,045 3,928 3,997 3,911
Coverage ratio (%) 44.1% 43.8% 42.7% 43.1% 42.9%
3Q15 4Q15 1Q16 2Q16 3Q16
Total problematic assets 22,572 21,795 21,064 20,077 19,435
Provisions 11,457 10,783 10,417 9,845 9,380
Coverage ratio (%) 50.8% 49.5% 49.5% 49.0% 48.3%
80%
20%
9,3017,602 6,138 6,073 6,077
7,480
5,819
3,893 3,031 2,859
8,096
8,848
9,2349,265 9,107
24,877
22,269
19,26518,369 18,043
Dec-13 Dec-14 Dec-15 Jun-16 Sep-16
Sabadell real estate exposure
Balance sheet (real estate exposure), ex-TSB Euros in million
Note: Date as of September 2016. Contingent exposures included. 1 Unsecured assets or with pledge, personal or 2nd mortgage guarantees.
Mortgage guarantee (1st mortgage)
Other guarantees1
From No RED
From RED
Foreclosed assets Developer credit (Performing)
Developer credit (Non Performing)
49
16,781 13,421
10,031 9,104
86%
14%
8,936
Sep-2016 %
Developer loans 8,936 50%
Normal 5,560 62%
Substandard 517 6%
Non performing 2,859 32%
Real Estate exposure
Real estate portfolio break-down, ex-TSB Euros in million (gross value)
Developer loans break-down, ex-TSB Euros in million (gross value)
Note: Data as of September 2016.Contingent exposures included. 1 Other guarantees.
50
Foreclosed assets 9,107
Finished property 52%
Under construction 5%
Land 43%
Developer loans 8,936
Finished property 58%
Under construction 5%
Land 24%
Others1 14%
Total RE related exposure 18,043
55%
5%
34%
6%
Sep-16
Real Estate portfolio breakdown by asset class and
region
Portfolio breakdown by maturity, ex-TSB In percentage
Portfolio breakdown by region
Note: Data as of September 2016. 1 Other guarantees.
>80% of finished properties in coastal areas
and Madrid
Finished
product
Under
construction
Land
Others 1
51
REOs/Foreclosed assets segmentation
Foreclosed assets by use, ex-TSB In percentage
Foreclosed assets by location, ex-TSB In percentage
52 Note: Data as of September 2016.
Residential75%
Industrial9%
Commercial6%
Hotels2%
Others8%
Catalonia32%
Center17%
Levante35%
South15%
Centre
There, wherever you are
For any additional information,
please contact:
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Investor Relations