2q09 english presentation...1q08 2q08 3q08 4q08 1q09 2q09 347.1 363.0 367.9 394.6 418.6 jun-09 nii...
TRANSCRIPT
23rd July 2009
2Q09 Results
Banco Sabadell
2
Disclaimer
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 our judgement and future expectations concerning the development of our business. a certain number of risks. uncertainties and other important factors could cause actual developments and results to differ materially from our 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 our customers. obligors and counterparts. These risk factors could adversely affect our business and financial performance published in our past and future filings and reports. including those with the Spanish Securities and Exchange Commission (Comisión Nacional del Mercado de Valores).
Banco Sabadell is not nor can it be held responsible for the usage. valuations. opinions. expectations or decisions which might be adopted by third parties following the publication of this information.
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 another methodology be applied.
The distribution of this presentation in certain jurisdictions may be restricted by law. Recipients of this presentation should inform themselves about and observe such restrictions.
These slides do not constitute or form part of any offer for sale or subscription of or solicitation or invitation of any offer to buy or subscribe to any securities nor shall they or any one of them form the basis of or be relied on in connection with any contract or commitment whatsoever.
3
Agenda
1. Quarterly highlights
2. Capital management
3. 2Q09 Results
4. Commercial activity and liquidity
5. Risk management
6. Optima program
7. Appendices
4
Strong net interest income due to active pricing and hedging
Improving capital ratios further
NPLs entries slowing down and recovery trend confirmed
Coverage ratio remains at the top of the range
Proved capacity to issue senior debt without government guarantees
Second quarter 2009
5
Agenda
1. Quarterly highlights
2. Capital management
3. 2Q09 Results
4. Commercial activity and liquidity
5. Risk management
6. Optima program
7. Appendices
6
Active capital management (I)
Financial Impact
February 2009
May 2009
July 2009
Issuance of € 500 M preferred shares
Repurchase of preferred shares issued in 2006
ca. 152 M tendered
Issuance of € 500 M mandatory subordinated convertible bond
+ 58 bp additional Tier 1
Capital gain: ca. € 96 M+ 11 bp additional Core Tier 1
+ 84 bp additional Core Tier 1
September2008
Zurich acquires 50% of Sabadell insurance business Capital gain ca. € 512 M
7
6,60
1,34 1,161,16
2,31 2,272,27
7,456,63
1Q09 2Q09 2Q09 (Incl. €500M ConvertibleBond)
BIS ratio (%)
Lower Tier I
Core Capital
Tier II
10.24 10.0510.88
Active capital management (II)
8
Active capital management (III)
NOTE: The size of the circle represents the amount of gross loans to customers. BS core capital ratio including repurchase of preferenceshares and convertible bond issue. Numbers as of March 2009
4%
5%
6%
7%
8%
9%
30% 40% 50% 60% 70% 80% 90% 100%
NPL Coverage ratio
Cor
e ca
pita
l
NPL ratio above system average
System average(NPL coverage)
NPL ratio below system average
Systemaverage
(core capital)
9
Theoretical stress scenarios
2009 2010 2011
GDP growth -3,5% -0,8% 1,1%
Unemployment rate 19,2% 21,0% 18,2%
Housing price change -11,0% -5,5% -3,0%
Base case scenario
Even in a hypothetical adverse scenario with the NPL ratio reaching 8.3%, the core capital ratio would still stay above 6.5%
2009 2010 2011
-4,5% -2,6% 0,1%
21,4% 26,2% 24,3%
-15,0% -10,0% -6,0%
Adversely stressed scenario
2011e:
NPL ratio 5,7%NPL coverage > 59%Core capital > 7,5% Tier I > 8,4%
2011e:
NPL ratio 8,3%NPL coverage > 52%Core capital > 6,5% Tier I > 7,5%
Spain
10
Agenda
1. Quarterly highlights
2. Capital management
3. 2Q09 Results
4. Commercial activity and liquidity
5. Risk management
6. Optima program
7. Appendices
11
Jun-08 Jun-09 09/08 (%)
Net interest income 710,2 813,1 14,5%
Dividends and equity method income 34,1 42,2 23,6%Net fees and commissions 289,6 267,1 -7,8%Trading income and Forex 65,5 185,7 183,6%Other operating income/expense 14,5 3,7 -74,1%Gross operating income 1.113,9 1.311,9 17,8%
Operating expenses -467,1 -523,2 12,0%Depreciation and amortization -65,6 -69,0 5,2%Pre-provision operating income 581,2 719,7 23,8%
Provisions for NPLs -104,8 -245,1 133,9%Other impairments 21,7 -109,0 ***Gains on sale of assets 23,6 28,9 22,2%Taxes and others -104,3 -62,4 -40,2%Discontinued transactions 11,0 0,0 ***
Adjusted attributable net profit 428,5 332,0 -22,5%
1H results ...
12
... include important adjustments …
Euros in millions
Jun-09 Adjustments
Net interest income 813.1 813.1 14.5%Dividends and equity method income 42.2 42.2 23.6%Net fees and commissions 267.1 267.1 -7.8%Trading income and Forex 185.7 -96.8 88.9 35.8%Other operating income/expense 3.7 3.7 -74.1%Gross operating income 1,311.9 1,215.1 9.1%Personnel expenses -370.5 55.2 -315.4 -0.4%Other general expenses -152.6 -152.6 1.5%Depreciation and amortization -69.0 -69.0 5.2%Adjusted pre-provision operating income 719.7 678.0 16.7%Provisions for NPLs and other impairments -354.2 262.2 -92.0 10.7%
Generic provision -132.8 132.8 0.0 --Substandard provision -129.4 129.4 0.0 --
Gains on sale of assets 28.9 28.9 22.2%Taxes and others -62.4 -106.2 -168.5 61.6%Discontinued transactions 0.0 0.0 --
Adjusted attributable net profit 332.0 446.4 4.2%
Jun-09 recurrent
09/08 (%)
13
446
114
332
Jun-09 Recurrent Adjustments Jun-09 Real
Maintaining a high coverage ratio of 89% vs. the sector average of 58%*
-22.5%
+4.2%
… due to our conservative policy
Euros in millions. * Sector average as of May 2009
70% 677 +58%
80% 472 +10%
82% 446 +4.2%
89% 332 -22.5%
Coverage (%) €m 09/08 (%)
Net profit
14
A sound margin evolution …
813.1710.2
Jun-08 Jun-09
+ 14.5 %
Euros in millions
374.8
710.2813.1
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09
347.1 363.0 367.9 394.6 418.6
Jun-09NII 813.1
Dividends 10.5
Equity Method 31.7
Commissions 267.1
Trading income 163.9
Forex 21.8
Other op. results 3.7
Gross Op. Income 1,311.9
Personnel exp. -370.5
Administration exp. -152.6
Deprec. & amort. -69.0
Pre-provision Op. Incom 719.7
Prov. for NPLs and others -354.2
Gains on sale of assets 28.9
Taxes and others -62.4
Disc. transactions 0.0Attr. Net Profit 332.0
15
… with increasing NIM
Net Interest Margin
We are well positioned for the current interest rate environment
Combined customer spread (*)
(*) Combined spread: Asset yield – (cost of customer funds + cost of wholesale funding). In percentage
1.80% 1.83% 1.79% 1.85%1.98%
2.06%
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09
2.07%2.10%2.02% 2.15%2.41%
2.60%
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09
16
We actively manage asset and liability spreads
Customer loan yield
Cost of customer funds
Customer spread
Customer spread remains flat
2.73%2.81%2.80% 2.84% 2.81%2.72%
5.56%6.28%5.93% 6.06% 6.29%
4.93%
2.83%3.47%
3.13%
2.21%
3.22%3.48%
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09
17
Commission income reflects market conditions
43,7
54,7
37,040,8 33,3 34,129,8
61,5 52,251,2 52,860,6
40,4 45,346,548,5
44,447,9
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09
84.5
116.2
89.7
63.9
113.4
89.0
Jun-08 Jun-09
289.6 - 7.8%267.1
Asset Mgmt1
Services
Lending
Euros in millions 1 Including mutual funds commissions and pension funds and non-life insurance brokerage
Asset Mgmt1
Services
Lending
138.8 150.8 134.7 133.4 134.9 132.2Jun-09
NII 813.1
Dividends 10.5
Equity Method 31.7Commissions 267.1
Trading income 163.9
Forex 21.8
Other op. results 3.7
Gross Op. Income 1,311.9
Personnel exp. -370.5
Administration exp. -152.6
Deprec. & amort. -69.0
Pre-provision Op. Incom 719.7
Prov. for NPLs and others -354.2
Gains on sale of assets 28.9
Taxes and others -62.4
Disc. transactions 0.0Attr. Net Profit 332.0
18
153,6 155,8 160,0 162,7 158,1 157,2
6,57,2 5,3 23.6
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09
315.4309.4
7.3 55.2
Jun-08 Jun-09
316.6 370.5
+ 1.9%
Recurrent Non-recurrent
Euros in millions. * Including Fincom, Tecnocredit and BBVA Miami in 2008.
153.6
+ 17.0%
163.0 166.5 168.0
We continue to take advantage of strong revenues to apply non-recurrent costs
189.7
31.6
180.8
+ 1.5%like-for-like*
Jun-09
NII 813.1
Dividends 10.5
Equity Method 31.7
Commissions 267.1
Trading income 163.9
Forex 21.8
Other op. results 3.7
Gross Op. Income 1,311.9Personnel exp. -370.5
Administration exp. -152.6
Deprec. & amort. -69.0
Pre-provision Op. Incom 719.7
Prov. for NPLs and others -354.2
Gains on sale of assets 28.9
Taxes and others -62.4
Disc. transactions 0.0Attr. Net Profit 332.0
19
Administrative expenses
78,2 73,7 78,996,1
81,572,2
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09
150.4 152.6
Jun-08 Jun-09
150.4 152.6
+ 1.5%
+ 0.5%like-for-like*
Euros in millions. * Including Fincom, Tecnocredit and BBVA Miami in 2008.
Jun-09
NII 813.1
Dividends 10.5
Equity Method 31.7
Commissions 267.1
Trading income 163.9
Forex 21.8
Other op. results 3.7
Gross Op. Income 1,311.9
Personnel exp. -370.5Administration exp. -152.6
Deprec. & amort. -69.0
Pre-provision Op. Incom 719.7
Prov. for NPLs and others -354.2
Gains on sale of assets 28.9
Taxes and others -62.4
Disc. transactions 0.0Attr. Net Profit 332.0
20Euros in millions
Provisions for credit risk (P/L):
Balance sheet provisions:
Continued extraordinary provisions reflect our conservative approach
We maintain a high coverage ratio of 88.8% Including guarantees the coverage ratio would be 141.3%
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09
Generic 20.2 3.8 -10.1 -12.0 0.0 -129.4
NPLs entry 13.2 6.5 55.4 46.1 11.0 16.2Calendar effect 14.8 37.1 48.6 56.9 80.8 121.7Extraordinary 0.2 10.1 214.0 85.3 41.9 87.5
Rest -4.6 3.5 11.9 3.0 8.2 7.3
Total 43.8 61.0 319.8 179.3 141.9 103.3
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09
Generic fund 1,184.2 1,192.0 1,183.7 1,170.4 1,170.4 1,040.1Specific fund 130.3 166.7 457.5 645.4 786.0 991.0
Total 1,314.5 1,358.6 1,641.3 1,815.8 1,956.4 2,031.1
21
Agenda
1. Quarterly highlights
2. Capital management
3. 2Q09 Results
4. Commercial activity and liquidity
5. Risk management
6. Optima program
7. Appendices
22
Deposit growth confirming customer confidence in BS
* Excluding repos and including preference shares placed in the retail network. June ’08 adjusted for the deconsolidation effect of the insurance group. Euros in millions.
Loans to customers 65,362 64,229 - 1.7%
On-balance sheet customer funds* 34,946 37,834 +8.3%
Positive commercial Gap
Jun-08 Jun-09 Var.
Fix-term deposits 20,172 22,615 +12.1%
€ m
-3.000
-2.000
-1.000
0
1.000
2.000
2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09
23
Loans Mortgages
CrediGlobal Credit lines
Number of new contracts
2008
2009
20082009
2008200920082009
Product activity levels
1.250
1.750
2.250
2.750
3.250
3.750
Janu
aryFe
bruar
yMarc
h
April
May
June July
Augus
tSep
tembe
rOcto
ber
Novem
ber
Decem
ber
500
700
900
1,100
1,300
1,500
1,700
1,900
Janu
aryFe
bruar
yMarc
h
April
May
June July
Augus
tSep
tembe
rOcto
ber
Novem
ber
Decem
ber
150
250
350
450
550
650
750
850
950
1,050
Janu
aryFe
bruar
yMarc
h
April
May
June July
Augus
tSep
tembe
rOcto
ber
Novem
ber
Decem
ber
2,000
2,500
3,000
3,500
4,000
4,500
5,000
5,500
Janu
aryFeb
ruar
yMarc
h
April
May
June July
Augus
tSep
tembe
rOcto
ber
Novem
ber
Decem
ber
24
Factoring (€ m) Confirming (active contracts)
Market share 10.80% Market share 9.76%
We continue to increase our market share incommercial loans (7.48%)
2008
2009
20082009
Product activity levels
0
1,000
2,000
3,000
4,000
5,000
Janu
aryFe
bruar
yMarc
h
April
May
June July
Augus
tSep
tembe
rOcto
ber
Novem
ber
Decem
ber
1,150
1,200
1,250
1,300
1,350
1,400
Janu
aryFe
bruar
yMarc
h
April
May
June July
Augus
tSep
tembe
rOcto
ber
Novem
ber
Decem
ber
25
958
1.51
540
09
1.78
11.
000
193
1.20
01.
000
1.63
048
915
023
050 80
1.50
0
300
200
1.50
0
1.75
042
050
050
1.50
030
0
13 20
0
500
1.000
1.500
2.000
1Q09
3Q09
1Q10
3Q10
1Q11
3Q11
1Q12
3Q12
1Q13
3Q13
1Q14
3Q14
1Q15
3Q15
1Q16
3Q16
1Q17
3Q17
1Q18
3Q18
FINANCIACIÓN
Emisiones en mercados de capitales (no incluye las titulizaciones)
Wholesale funding maturity calendar
No major maturities until April 2010
Settled
*
* Overdue at 7th July 2009
A comfortable maturity calendar
26
Wholesale market activity
Bonds
Covered bonds
Total capital market issues (a)
Wholesale funding maturities (b)
Positive wholesale funding gap (a-b)
€ 589 m€ 825 m
€ 1.414m
Solid market image versus peer group
Year 2009 through to June
€ 958 m
€ 496 m
No use of state backed guarantees available to BS (€3.200M)
27
Agenda
1. Quarterly highlights
2. Capital management
3. 2Q09 Results
4. Commercial activity and liquidity
5. Risk management
6. Optima program
7. Appendices
28
NPL ratio
Source: Bank of Spain * Banco Sabadell estimates
*
*
Continued improvement of gap vs. the rest of the sector
Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09
NPL ratio BS 0.62% 0.85% 1.59% 2.35% 2.82% 3.19%
NPL ratio system 1.20% 1.70% 2.63% 3.37% 4.27% 4.78%
GAP (p.b) 58 85 104 102 145 159
%
024
68
10
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 Mar-09
Jun-09NPL ratio system NPL ratio BS
29
NPL ratio: New entries and recoveries by segments
NPL new entries Recoveries
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09
Entries 213.2 244.0 625.4 748.5 806.7 823.7
Recoveries -59.9 -42.2 -35.1 -223.1 -480.1 -532.9
Write-offs -39.4 -24.5 -40.9 0.5 -1.7 -25.4
Quarterly change on NPL 113.9 177.3 549.5 525.8 324.8 265.4
Individuals 12%
Companies 47%
Real Estate development
30%Other 4%Self-
employed 7%
Individuals 13%
Companies 39%
Real Estate development
39%
Other 2%Self-employed
7%
30
Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09
Companies 0.35% 0.52% 1.28% 2.02% 2.54% 2.89%
SME 0.84% 1.07% 1.37% 2.17% 2.18% 2.77%
Small retailers and self-employed 1.04% 1.10% 1.37% 1.68% 2.42% 2.93%
Real Estate development 0.42% 0.95% 2.99% 5.35% 7.34% 7.73%
Mortgages to individuals 0.47% 0.57% 0.75% 1.12% 1.48% 1.69%
Individuals others 1.88% 1.98% 2.44% 3.21% 4.24% 4.91%
Total 0.62% 0.85% 1.59% 2.35% 2.82% 3.19%
NPL ratio by segments
31
Solvia
Stock profile
Madrid & Metropolitan area21%
Barcelona & Metropolitan area
49%
Rest30%
118 current projectsNo rural land400 finished dwellings, of which 17% has been sold
Geographic distribution
Land under development
54%
Finished property10%
Real Estate under development
6%
Land30%
32
Agenda
1. Quarterly highlights
2. Capital management
3. 2Q09 Results
4. Commercial activity and liquidity
5. Risk management
6. Optima program
7. Appendices
33
The transformation plan is in its final stageBranch network
1.54 Back-office FTEs* per branch (1.95 in dec-07)
448 back-office personnel reduction since the beginning of the program, increasing our commercial capacity
Services Global CenterServices Global Center set up, concentrating headquarters’ activity for the branch network
Regional Administrative Centers (RAC)3 RACs open (Barcelona, Madrid and Oviedo): Service-related facility rolled out, asset-related facility in its final stage
Foreign trade facility streamlined down to 25 operational centers, from 63 previously.
* FTE= Full Time Equivalents
34
36%Efficiency improvement
due to Optima 09
Widespread implementation of digital processing, centralized workflowmanagement system and advanced tracking system have resulted in a 36% efficiency improvement in the businesess where these measures have beenapplied.
Digital processing
Advanced tracking tool
Workflow management system
Optima developing according to plan
35
Optima developing according to plan
Increase in commercial activity after Programa Activahas been rolled-out
2S08 1S09
57.178
146.977
Contacts with customers by the customer service personnel
+157%
36
Impact on headcount and number ofbranches
Number of branchesNumber of employees
9.668
10.015
10.189 10.178
9.929
9.615
1T08 2T08 3T08 4T08 1T09 2T09
1.229
1.2601.257 1.2561.247 1.230
1T08 2T08 3T08 4T08 1T09 2T09
37
Service quality and awards
7,56
6,95
7,877,667,827,65
7,317,43
6,736,63
6,216,53
6,80 6,737,09 7,24 7,08 7,00
2002 2003 2004 2005 2006 2007 2008 1Q09 2Q09
Banco Sabadell group Market
Ranking in retail banking networkindependent quality surveys2
Renewal of theGlobal Award of
EuropeanExcellence
Source: 1 Bank of Spain, 4Q08 Bulletin2 STIGA, “RCB Objective Quality in Retail Banking Networks” 2Q09.
Ranking in service quality 1
The only Spanish financialinstitution with a global ISO
9001 quality certificate
38
Agenda
1. Quarterly highlights
2. Capital management
3. 2Q09 Results
4. Commercial activity and liquidity
5. Risk management
6. Optima program
7. Appendices
39
Mellon United National Bank acquisition
Founded in 1978
A well established institution with professional management
Main activity: Very selective with its customer base, focused in professionals
15 branches in Miami-Dade, Broward and Palm Beach
352 employees (FTE*)
Main data: Deposits USD 1,613 M
Loans to customers USD 900 M
* Full Time Equivalents Data as of March 2009
Acquired amount
40
It will reinforce significantly the strategic positioning of BS in Florida
Solid growth platform
Gross cost synergies with TAB and BS Miami branch (USD 10 millions)
312
2.127
900915 449
2.243
4.305
1.613
Oficina BSMiami
TAB Mellon UnitedNational Bank
BS Miami
Investment rationale
+ =
Customer deposits
Assets
+
Dollars in millions
41
Transaction terms
Total consideration USD 142 M
Goodwill USD 42 M
Impact in core capital - 12 bp
Of which:
Acquisition of 100% of the shares
Selection of 60% of the loan portfolio (1)
(1) Sale of remaining 40% to BNYM
42
The Value of Trust