Banco Sabadell's net interest income improved and its net income before provisions in the first nine months of 2011 (Euros 924.6 million) was just 1.3% lower year-on-year.
After booking Euros 767.3 million in provisions and writedowns, net attributable profit amounted to Euros 207.4 million, i.e. 39% less than in the same period of 2010.
- Customer funds on the balance sheet increased by 20.6%, and time deposits by 22.5%. Gross loans and advances to customers expanded by 12.2% year-on-year.
- The core capital ratio stands at 9.1% (7.84% at 30 September 2010) and the Tier I capital ratio is 9.95% (8.93% at 30 September 2010).
- The bank added over 250,000 new customers in the first nine months of the year, with the result that new customer additions are up 46% year-on-year in the category of private individuals and 39% in the company category. Total customer numbers now exceed 2.6 million.
In a difficult economic situation amid persisting uncertainty, in the third quarter of 2011 Banco Sabadell maintained the upward trend of previous quarters and fulfilled the priority targets of improving margins, expanding the customer base and market share, cutting costs, strengthening capital and diversifying internationally that it set in its CREA 2011-2013 plan.
Once again this quarter, the bank focused basically on selling services and actively managing its capital. The bank again evidenced its ability to further strengthen liquidity organically, by expanding spreads in the banking business and increasing services revenues while also strengthening reserves.
After booking Euros 767.3 million in provisions and writedowns in the first nine months of the year, the Banco Sabadell consolidated group reported Euros 207.4 million in net attributable profit, i.e. 39.0% less than in the same period of 2010.
Balance sheet
At 30 September 2011, Banco Sabadell and its group's total assets had increased by 11.7% year-on-year to Euros 95,706.7 million.
Gross loans and advances to customers increased by 12.2% year-on-year to Euros 72,469.9 million (+0.5% including Banco Guipuzcoano figures in 2010). In particular, mortgage loans increased by 9.7% and commercial loans by 14.3%.
The ratio of non-performing loans (NPLs) to total computable loans was 5.72%, i.e. still far below the Spanish financial sector average. Coverage of doubtful assets was 50.50% (120.22% including mortgage collateral).
Customer funds on the balance sheet had increased by 20.6% at the end of the third quarter of 2011, to Euros 51,388.4 million. In particular, time deposits increased by 22.5% year-on-year to Euros 31,638.8 million. Demand deposits totalled Euros 18,452.8 million, up 16.9% in the last twelve months. Including the balances from Banco Guipuzcoano in 2010, customer funds on the balance sheet would have increased by 8.3%.
A total of Euros 8,216.5 million were under management in mutual funds and investment companies (-2.1% year-on-year), while assets in insurance and pension funds marketed by the group increased by 1.3% year-on-year to Euros 8,474.9 million.
Total funds under management at 30 September 2011 increased by 13.7% to Euros 93,474.2 million. Including the balances from Banco Guipuzcoano in 2010, funds under management would have increased by 3.5% year-on-year.
New customer additions accelerated and, after nine months of the new CREA 2011-2013 business plan, customer numbers exceed 2.6 million. New customer additions increased by 46% in the category of private individuals (+208,200) and by 39% in the company category (+41,900).
Margins and profits
Detailed proactive management of customer spreads in the context of intense competition in the industry enabled the bank to improve banking spreads substantially; as a result, net interest income increased by 2.4% year-on-year in the first nine months of 2011 to Euros 1,153.2 million (-7.8% including Banco Guipuzcoano in 2010).
Equity-accounted affiliates contributed Euros 41.8 million in income in the period.
Net fees and commissions increased by 12.5% to Euros 424.1 million (+3.4% including Banco Guipuzcoano in 2010). Fees and commissions on services to customers performed particularly well, rising 16.3%, while commissions on the sale of pension plans and insurance products increased by 7.3%.
Income from financial transactions amounted to Euros 186.9 million, including extraordinary gains of Euros 87.1 million on the debt-for-equity transaction performed in February 2011, which was applied in full to reserves for loan losses and other impairments. As a result, the gross margin amounted to Euros 1,865.4 million, a 3.5% year-on-year increase.
In like-for-like terms (i.e. excluding the impact of integrating Banco Guipuzcoano and Lydian Private Bank and of the sale and leaseback transaction in April 2010), operating expenses declined by 3.2% year-on-year to Euros 847.1 million. The cost/income ratio, excluding non-recurrent expenses, was 46.16%.
Net income before provisions amounted to Euros 924.6 million in the first nine months of 2011, i.e. just 1.3% lower year-on-year.
Provisions for loan losses and other impairments (primarily real estate and financial assets) amounted to Euros 767.3 million (Euros 813.9 million at 30 September 2010).
After deducting income tax and minority interests, the group's net attributable income amounted to Euros 207.4 million.
Strengthened capital ratios
In 2011, the bank maintained its efforts to strengthen its balance sheet organically so as to enhance its already sound capital ratios.
In the first nine months of the year, active capital management (a priority under the CREA 2011-2013 plan) enabled the bank to boost the core capital ratio by 126 basis points to 9.10% (from 7.84% at 30 September 2010), and the Tier I capital ratio by 102 basis points to 9.95% (8.93% at 30 September 2010).
Other key developments in 3Q11
Banco Sabadell passed the EBA's stress tests
The results of the stress tests performed by the European Banking Authority (EBA) on European banks were released in July. Banco Sabadell passed the tests comfortably; in the adverse scenario, its Tier I capital was well above the required 8% threshold, including outstanding convertible subordinated bonds and available general-purpose reserves.
Adjudication of Lydian Private Bank in Florida
On 19 August, Sabadell United Bank, a Banco Sabadell subsidiary in Miami, Florida, was designated as successful bidder for Lydian Private Bank, which was in administration at the time, in a process organised by the Federal Deposit Insurance Corporation (FDIC).
Lydian Private Bank contributed 3.6 billion dollars in business volume, boosting the Sabadell group's total in Florida by 51% to 10.7 billion dollars (3.4 billion in loans and 7.3 billion in funds). Lydian's six branches were added to Sabadell United Bank's 19. The deal enabled Sabadell to strengthen its position in Florida, especially in the west coast cities of Tampa, Sarasota and Naples; it is now the state's seventh-largest local bank in terms of deposits.
The acquisition of Lydian Private Bank further enhanced Sabadell's banking franchise in Florida. It is Sabadell's fourth acquisition in the region in just five years, following TransAtlantic Bank in 2007, BBVA's private banking business in 2008, and Mellon United National Bank in 2010.
Rapid placement of a non-convertible bond issue
In September, Banco Sabadell launched a Euros 300 million bond issue, marketed through the branch network, at a nominal yield of 4.25% (4.32% IRR), maturing in 18 months (29 March 2013) and paying quarterly coupons. The issue was aimed at both institutional and retail investors.
The issue was fully subscribed on 14 September, two weeks ahead of schedule. Slightly over 27% of the issue was subscribed by institutional investors (mostly mutual and pension funds, insurance companies and other financial institutions) and the other 73% was sold through the group's branch network under the SabadellAtlántico, SabadellGuipuzcoano, Banco Urquijo and Banco Herrero brands.
