Banco Sabadell...Banco Sabadell is not nor can it be held responsible for the usage. valuations....

Banco Sabadell3Q14 Results

October 30th, 2014

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.

2

1. Quarterly highlights

2. AQR/Stress test results

3. 3Q14 Results

4. Commercial activity

5. Liquidity and ALCO portfolio

6. Risk and capital management

3

Quarterly highlights

� AQR and Stress test results confirm Sabadell’s strength in terms of capital and coverage

� Net interest income trend strengthens in the quarter leading to an upward revision of our NII target for 2014 to slightly above €2.2bn

� Commercial dynamics improving in the quarter with a pick up in SME loan demand, an improvement in activity in individual mortgages, increase of deposits and strong inflows in mutual funds

� Consolidating our position as the most valued bank by its customers

� The decline in the stock of NPAs continues

� Core capital ratio of 11.8%, maintaining high coverage levels on both loans and real estate assets

4



3. 3Q14 Results




5

The comprehensive assessment process in summary

� No AQR adjustments have arisen from the analysis

� The majority of the banking book has been reviewed

� 905 debtors have been reviewed of which 210 were tops by exposure in each

risk segment and asset class, and 695 were randomly selected

� Over 1,500 appraisals of real estate collateral were undertaken within the

scope of the assessment

� Over 250 Banco Sabadell employees, including legal, internal audit, financial,

risk, IT and Operations departments have been involved in the process for 11

months

6

Results of the AQR & Stress test in numbers

Main results from AQR & Stress test

CET1 Ratio at year end 2013 including retained earn ings / losses of 2013

10.26%

Aggregated adjustments due to the outcome of the AQR 0 bps

AQR adjusted CET1 Ratio 10.26%Aggregate adjustments due to the outcome of the baseline scenario of the joint EBA ECB Stress Test to lowest capital level over the period of 3 years

-10 bps

Adjusted CET1 Ratio after Baseline Scenario 10.16%

Aggregate adjustments due to the outcome of the adverse scenario of the joint EBA ECB Stress Testto lowest capital level over the period of 3 years

-183 bps

Adjusted CET1 Ratio after Adverse Scenario 8.33%

7

Stress test – adjusting factors

Common Equity Tier 1 ratio 2016e in the adverse sce narioIn percentage

CET1 ratio 2016e in the

adverse scenario

8.33% 1.05%

9.38%

Regulatory equivalent CET1 ratio 2016e in the adverse scenario

5.5%Threshold

10.26%

-1.93%

CET1 ratio 2013

Impact in the adverse

scenario of the stress

test

*Given that mandatory convertible bonds are not included in the scope of the stress test, they have been added back for illustrative purposes. Total mandatory convertible bonds of €860M (105bps) as of December 2013, of which the maturity calendar is: €17.6M in 2014, €755.6M in 2015, €68.6M in 2016 and €17.6M in 2017

Including mandatory

convertibles*

8

AQR & stress test ratios for Spanish banks

Note: Fully loaded except for sovereign debt (which reflects a 60% phase-in)

Banco Sabadell fully loaded ratio in the adverse scenar ioincluding mandatory convertible bonds is 8.8%

Group 2013AQR

Adjustments2013

adjusted

2016 in the adverse

scenario

Fully loaded 2016 in the

adverse scenario

Santander 10.4% -0.04% 10.3% 8.9% 7.3%BBVA 10.8% -0.21% 10.5% 9.0% 8.2%La Caixa 10.3% -0.04% 10.2% 9.3% 7.5%BFA - Bankia 10.7% -0.08% 10.6% 10.3% 8.6%Sabadell 10.3% 0.00% 10.3% 8.3% 7.8%Popular 10.6% -0.57% 10.1% 7.6% 6.4%Bankinter 12.0% -0.37% 11.7% 11.0% 10.5%

Ratio CET1 (%)

9



3. 3Q14 Results




10

September 2014 results

Note: 2014 includes BMN-Penedés network, Lloyds Spain and Banco Gallego. 2013 includes 4 months of BMN-Penedés and 3 months of Lloyds SpainEuros in million

Sep. 13 Sep. 14% var 14/13

Net Interest Income 1,317.0 1,650.0 25.3%

Equity Method & Dividends 13.1 -0.3 ---Commissions 549.9 629.6 14.5%Trading Income & Forex 1,276.2 1,389.5 8.9%Other Operating Results -143.8 -133.1 -7.5%Gross Operating Income 3,012.4 3,535.7 17.4%

Personnel Costs -808.6 -906.5 12.1%Administrative Costs -431.8 -431.4 -0.1%Depreciations -161.0 -206.0 27.9%Pre-provisions Income 1,610.9 1,991.9 23.7%

Total Provisions & Impairments -1,334.3 -1,725.0 29.3%Gains on sale of assets 15.3 85.3 456.6%Profit before taxes 291.9 352.2 20.6%Taxes and others -105.8 -86.9 -17.9%

Attributable Net Profit 186.1 265.3 42.5%

11

Further increase in net interest income

Net interest income evolutionEuros in million

*Excludes BMN-Penedés network, Lloyds Spain and Banco Gallego

Net interest income 9M14:+25.3% YoY

Net interest income 9M14 like-for-like*:+21.1% YoY

+5.1% QoQ

3.94%3.66% 3.49% 3.51% 3.50% 3.47% 3.39%

2.19% 2.07%1.87%

1.65%1.44%

1.25%1.10%

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14

1.75%

1.59%1.62%

1.86%

2.06%

2.22%2.29%

1.14%1.00% 1.05%

1.17%1.29%

1.36% 1.40%

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14

12

Continued improvement in customer spreads in a low interest rate environment

Margin evolutionIn percentage

Customer spread

Net interest margin Cost of customer funds

Customer loan yield

Customer loan yield and cost of customer funds In percentage

13

Main driver being the repricing of term deposits …

Contractual rates on term depositsIn percentage

Stock New production/renewals

New term deposits at

0.75%

3.35%3.58%

3.36%3.13%

2.84%

2.37%2.16%

1.83%1.67%

3.06%3.39%

2.16%

1.85%1.61% 1.51%

1.29%1.05%

0.75%

Sep-12 Mar-13 Sep-13 Mar-14 Sep-14

14

… expected to continue over the course of 2015 and 2016

Maturities of term deposits: volume and average int erest rate costEuros in million and in percentage

4Q14 1Q15 2Q15 3Q15 4Q15

Current interest rate level of renewals of term deposits

1Q16 >1Q16The size represents the volume of term deposits maturing every quarter.The percentage number is the current average interest rate paid on the term deposits

196 177 182 188 189 188 186 187 186

372 374 354385 389 372 378

337315

3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14

15

Limited downward pressure on the loan yield

Evolution of loan spreads by segmentIn percentage

Loan book mix and customer franchise allow Sabadell to maintain overall spreads

Evolution of loan spreadsIn basis points

Back book

Front book

Back book

Front book

Back book

Front book

Back book

Front book

Mortgages to individuals 88 229 87 227 89 214 90 209

SME 269 526 270 500 277 492 282 494

Corporates 268 342 268 327 266 302 260 297

4Q13 1Q14 2Q14 3Q14

Stock New production/renewals

25.9 28.6 31.4 37.5 39.7 48.6 48.9

52.4 53.8 53.3 52.8 53.455.3 53.6

90.1105.9 108.5

119.5 107.9109.6 112.7

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14

16

Commission income is growing in a traditionally soft quarter…

Commission income evolutionEuros in million

Asset Mgmt1 ServicesLending1 Includes mutual funds commissions and pension funds and insurance brokerage

188.2

168.4

193.2209.8

Commission income 9M14:+14.5% YoY

201.0

Commission income 9M14 like-for-like*:+9.0% YoY

*Excluding BMN-Penedés network, Lloyds Spain and Banco Gallego

213.5 215.1

2,474 3,254

2,7883,542

4,305

5,178867

1,678

585

1,013

December 2013 September 2014

17

… with outperformance in mutual funds

Volume evolution YTD, by type of fund Euros in million

� Bias towards higher margin products

� An increase of 33.1% in funds under management since December 2013

11,019

14,665

Equity fundsBalanced funds

Fixed income funds Guaranteed funds

SICAV, External funds and Others

+33.1%

+27.0%

+31.5%

+20.3%

+93.7%

+73.2%

258.4 261.1 283.5 287.7 292.8 286.0 295.0

1.9 3.50.2 1.9 6.0

24.91.8

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14

18

Personnel costs are well contained …

Personnel expenses evolutionEuros in million

*Including BMN-Penedés network, Lloyds Spain and Banco Gallego in 2013 and excluding non-recurrent costs.

260.3 264.6

Personnel expenses 9M14 on a like-for-like basis*:

-1.8% YoY

283.7

Recurrent Non-recurrent

289.5 298.8

Personnel expenses 9M14:

+12.1% YoY

310.9296.8

147.1 138.1 146.6 149.2 148.1 139.4 137.9

6.8 3.82.2

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14

19

… and general expenses are being reduced

General expenses evolutionEuros in million

General expenses 9M14:

-0.1% YoY

General expenses 9M14 on a like-for-like basis*:

-10.8% YoY

147.1138.1

146.6

156.0

Recurrent Non-recurrent

151.9

*Including BMN-Penedés network, Lloyds Spain and Banco Gallego in 2013 and excluding non-recurrent costs.

141.6137.9

20

Sale of the recovery unit to Lindorff leads to further cost reductions going forward

Partial externalisation

Partial externalisation

In-house workIn-house work

Branches

From …

Specialised unit in Corporate Center

+

€162M capital gain to be booked in the fourth quart er 2014

A change in how we manage the recoveriesA change in how we manage the recoveries

A B C

Externalised

… toTo …

21



3. 3Q14 Results




22

Improving balance sheet dynamics

Customer funds and loans evolutionEuros in million

1 Other on-balance sheet term funds include term deposits and other funds placed in the retail network. Exclude reposNote: Organic variation excludes Banco Gallego.

Sep-13 Jun-14 Sep-14% Var.

YoY% Org.

YoY% Var.

QoQ

Total assets 168,525 161,557 162,785 -3.4% -5.3% 0.8%Of which:

Gross loans to customers ex repos 122,839 122,838 121,612 -1.0% -2.6% -1.0%ALCO Portfolio 28,551 21,858 23,993 -16.0% -16.0% 9.8%

Total liabilities 158,991 150,719 151,455 -4.7% -6.7% 0.5 %Of which:

On-balance sheet customer funds 91,855 95,043 97,375 6.0% 3.6% 2.5%Other on-balance sheet term funds1

57,953 55,625 53,705 -7.3% -9.9% -3.5%Sight deposits 33,902 39,418 43,670 28.8% 26.6% 10.8%

Wholesale funding 25,297 24,369 23,972 -5.2% -5.2% -1.6%ECB Funding 17,000 5,500 4,000 -76.5% -76.5% -27.3%

Off-balance sheet funds 22,778 28,597 29,664 30.2% 27.7% 3.7%Of which:

Mutual funds 10,052 13,705 14,665 45.9% 40.3% 7.0%Pension funds 3,883 4,375 4,367 12.5% 12.5% -0.2%Third party insurance products 7,294 7,916 7,824 7.3% 7.3% -1.2%

23

Consolidating the position as the most valued bank

Banco Sabadell voted best company in Spain for poin t of sales payments and e-commerce *

* According to e-show survey as of October 2014

Level of service quality Evolution of Sabadell quality index vs sector

Source: STIGA, EQUOS “RCB Análisis de Calidad Objetiva en Redes Comerciales Bancarias (3T 2014)”

7.54

7.217.32

7.20 7.24

6.90 6.89 6.907.03

7.21

6.956.77

6.61

6.11 6.06 6.01 6.036.23 6.28

6.15

2007 2008 2009 2010 2011 2012 2013 1Q14 2Q14 3Q14

Sabadell Sector

Most valued by customersRanking of entities in Spain according to quality index

7.217.17

7.107.00

6.946.88

6.626.47

6.025.97

5.865.845.835.82

5.745.73

5.385.23

5.06

SabadellEntity 1Entity 2Entity 3Entity 4Entity 5Entity 6Entity 7Entity 8Entity 9

Entity 10Entity 11Entity 12Entity 13Entity 14Entity 15Entity 16Entity 17Entity 18

28,910

27,885

28,319

28,603

Dec-13 Mar-14 Jun-14 Sep-14

24

Loan growth is being reactivated

SME and company loans evolutionEuros in million

Cumulative monthly residential mortgage productionEuros in million

In September 2014 new residential mortgage production above full year 2013 level

Second consecutive quarter of growth in SME and company loans book

Jun-14

Note: SME and company loans include loans to SMEs, corporates and public sector and exclude NPLs

0

200

400

600

800

1,000

1,200

1,400

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2013 2014

€ 1,153M

€ 1,035M

+63% YoY

€ 706M

-31.1%

-12.6%

-4.9%

-4.7%

-2.8%

-1.6%

1.1%

1.1%

1.1%

3.0%

4.4%

5.8%

7.9%

11.0%

Telecoms

Real estate developers

Utili ties

Construction

Chemicals

Real estate investments

Textile and foodwear

Transport

Autos

Travel and leisure

Metallurgy

Food and beverage

Business services

Paper and wood industry

25

With loan growth reflecting economic recoveryChange of loans by sector, ex-APSJune 2014 vs December 2013, in percentage

28,87434,543 33,902 36,862 37,082 39,418 43,670

53,819

58,408 57,95357,635 57,608 55,625 53,705

8,987

9,693 10,05211,019 12,318 13,705

14,665

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14

26

Strong increase in customer funds

Note: On-balance sheet term funds include term deposits and other funds placed in the retail network: preference shares, mandatory convertible bonds, senior debt, commercial paper and other. Exclude repos. Loan to deposit ratio excludes provisions and third party loans

Evolution of customer funds and off-balance sheet funds Euros in million

Continued increase in off-balance sheet customer funds

Loan to deposit ratioIn percentage

Sight deposits On-balance sheet term funds

Mutual funds/investment funds

121.9%

116.6%

111.0%109.2%

107.3%104.6%

103.6%100.4%

4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14

27



3. 3Q14 Results




28

Maintaining a balanced funding structure …

Group funding structure Group wholesale funding brea kdown

Covered bonds 60.0%

Senior debt 4.0%

Prefs + Subordinated

3.9%

ECP7.7%

Securitisation 15.8%

GGB8.6%

Deposits70.8%

Retail issues 0.7%

Repos5.5%

ICO financing 5.2%

Wholesale funding17.8%

4Q14 2015 2016 2017 2018 2019 >2020 Outst. AmountCovered Bonds (CH) 1,322 3,059 2,867 1,937 1,563 924 2,697 14,369GGB 1,005 0 0 1,066 0 0 0 2,071Senior Debt 0 0 672 0 100 57 25 854Preferred Shares and Subordinated Debt 0 0 318 66 0 0 480 864Other mid- and long-term financial instruments 70 0 0 0 18 0 18 105Total 2,397 3,059 3,857 3,069 1,681 981 3,219 18,263

2,397

3,059

3,857

3,069

1,681

981

3,219

0

1,000

2,000

3,000

4,000

5,000

4Q14 2015 2016 2017 2018 2019 >2020

29

… and efficiently managing liquidity

Group wholesale funding maturitiesEuros in million

ECB liquidity positionEuros in million

Maturity by product type Euros in million

23,650

18,000

8,8005,500

4,000

Dec 2012 Jun 2013 Dec 2013 Jun 2014 Sep 2014

18.7 15.612.1 13.6

7.9

4.17.5

8.1

2.4

2.0 2.32.3

Jun-13 Dec-13 Jun-14 Sep-14

30

Fixed income portfolio remains unchanged

Fixed income portfolio evolutionEuros in billion

Spanish public debt Other

Life insurance portfolio (Mediterráneo Vida)

21.726.6

19.7 19.6

ALCO portfolioEuros in billion and in percentage

The ALCO portfolio contribution is stable

Jun-13 Dec-13 Jun-14 Sep-14

ALCO portfolio 26.6 19.7 19.6 21.7

% of total assets 15.6% 12.1% 12.1% 13.3%

Duration (in years) 3.8 4.9 5.0 5.7

Yield 3.3% 3.9% 3.5% 3.3%

ECB liquidity position 18.0 8.8 5.5 4.0

Spanish Government

Debt40.1%

Other Goverments

Debt26.0%

Corporates&

Financials11.2%

Agencies22.7%

31

High resilience of the ALM contribution …

Alco portfolio compositionIn %

Evolution of Alco portfolio in run-off scenario Euros in billion, yield in %

Contribution of the ALCO portfolio would continue t o be significant even in a run-off scenario

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

0.0

2.5

5.0

7.5

10.0

12.5

15.0

17.5

20.0

22.5

Sep 14 Dec 14e Dec 16e

Yield (right axis)Portfolio volume (left axis)

Sep 14 Dec 14e Dec 16eVolume (€bn) 21.7 21.3 20.7

Yield (%) 3.3% 3.2% 3.2%

32

… with almost no impact on our NII target for 2016

Net interest income evolution, 2014e – 2016e Rebased to 100

2016eWholesalefunding

Repricingof deposits

ContributionALCO

portfolio

Loan yield

Reduction of non-yielding

assets

2014e

136

100

- 15

- 1+4

+16

+31

+1

New loan production

Main drivers for the NII going forward are the repricing of deposits and lower cost of wholesale funding

33



3. 3Q14 Results




34

Strong capital levels

Common Equity Tier 1 phase-in In percentage

11.1%11.4%

11.8%

1Q14 2Q14 3Q14 Fully loaded 3Q14

11.3%

6,973 7,037 7,185 7,387

5,506 5,570 5,602 5,823

4Q13 1Q14 2Q14 3Q14

RE assets ex-APS RE assets APS

22,99422,825

22,673

22,335

4Q13 1Q14 2Q14 3Q14

16,021 15,788 15,488 14,948

8,874 8,841 8,611 8,263

4Q13 1Q14 2Q14 3Q14Total NPLs ex-APS Total NPLs APS

35

The stock of NPLs continues the downward trend …NPL evolution Euros in million €540M further reduction of

NPLs, ex-APS, during 3Q14

Third consecutive quarter showing a decline in total problematic assets, ex-APS

On-balance sheet RE assets evolution Euros in million

Total problematic assets, ex-APS Euros in million

24,895 24,629 24,099

12,479 12,607 12,787

Note: NPLs include contingent risk

23,211

13,210

36

… with improved dynamics in the last quarters, like-for-like

Evolution of NPLs and RE assets. (Excluding reclassified loans and acquisitions unti l 1Q14) Sabadell ex-APS. Euros in million

Total problematic assets ex-APS are reduced by €338 M in the third quarter

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14

Ordinary net entries 388 760 365 -12 -83 -203 -316Change in RE assets 394 1 218 400 64 148 202Net entries + Change in RE assets 782 761 583 388 -19 -55 -114

Write-offs 247 305 105 51 265 97 224

Re assets and NPL quarterly change 535 456 478 337 -284 - 152 -338

1,232

1,909 1,876

9M2012 9M2013 9M2014

Maintaining good Real Estate sales results

37

Sales evolutionEuros in million

+55%-2%

� Reducing discount levels

� Increasing number of real estate assets with a selling price above €100,000 (from 26% in 9M2013 to 42% in 9M2014)

� Increasing sales from the real estate development loan book

� Increase in number of transactions with mortgage funding (from 29% to 45%)

� Properties under construction sold at a good pace

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14

Real Estate development and/or construction purposes 38.38% 42.99% 55.73% 62.98% 63.12% 62.19% 61.15%

Construction purposes non-related to real estate dev. 5.96% 7.94% 9.84% 8.26% 8.32% 8.25% 8.24%

Large corporates 7.40% 7.48% 8.91% 6.05% 6.02% 6.01% 6.18%

SME and small retailers and self-employed 8.98% 9.81% 10.93% 13.33% 13.31% 13.31% 13.30%

Individuals with 1st mortgage guarantee assets 8.07% 8.17% 8.78% 9.86% 9.84% 9.73% 9.19%

NPL ratio 9.69% 10.62% 12.61% 13.63% 13.57% 13.35% 12.92%

38

NPL ratio improving at a higher pace …

Evolution of NPL ratios by segment, ex-APSIn percentage

Note: NPL ratio is calculated including contingent risk.

Third consecutive fall in the NPL ratio

3Q14 BS ex-

APSAPS Total

Real estate assets 38.9% 51.2% 44.3%Real estate development loans 32.2% 48.0% 39.6%Total real estate exposure 35.5% 49.5% 41.9%Construction 9.8% 17.8% 11.7%Large Corporates 5.3% 44.7% 6.5%SME and small retailers and self-employed 7.4% 20.9% 8.5%Individuals 3.5% 12.6% 4.0%Rest of loan book 5.3% 20.6% 6.1%

9.3% 40.2% 13.5%Total coverage of total loans and RE assets

39

… maintaining high coverage levels

Coverage by loan segment and real estate assetsSplit between asset protection scheme and rest. Euros in million and percentage

Comfortable coverage levels relative to expected lo ss levels

Coverage Ex-APS

52%Coverage of NPLs

Total coverage

Banco Sabadell...Banco Sabadell is not nor can it be held responsible for the usage. valuations....

Documents

Transcript of Banco Sabadell...Banco Sabadell is not nor can it be held responsible for the usage. valuations....