Bank of America Merrill Lynch 20th Annual Banking ... · Bank of America Merrill Lynch 20th Annual...
Transcript of Bank of America Merrill Lynch 20th Annual Banking ... · Bank of America Merrill Lynch 20th Annual...
SabadellBank of America Merrill Lynch20th Annual Banking, Insurance & Diversified Financ ials CEO Conference
Jaime GuardiolaCEO30 September 2015
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 forwardlooking statements represent our judgement and future expectations concerning the development of our business, acertain number of risks, uncertainties and other important factors could cause actual developments and results to differmaterially 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, currencyexchange rate. and interest rates. (3) competitive pressures. (4) technical developments. (5) changes in the financialposition or credit worthiness of our customers, obligors and counterparts. These risk factors could adversely affect ourbusiness and financial performance published in our past and future filings and reports, including those with the SpanishSecurities 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 whichmight 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´scriteria as a result of which each division reflects the true nature of its business. These criteria do not follow any particularregulation and can include forecasts and subjective valuations which could represent substantial differences shouldanother methodology be applied.
The distribution of this presentation in certain jurisdictions may be restricted by law. Recipients of this presentation shouldinform 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 tobuy or subscribe to any securities nor shall they or any one of them form the basis of or be relied on in connection with anycontract or commitment whatsoever.
1. Spanish economy2. Sabadell strategy update
3. Business dynamics
3
The pace of the economic recoveryis gaining momentum…
Source: Spanish Statistical Office (INE).
Real GDP QoQ, in percentage
EmploymentYoY change/contributions, in percentage
Spain will have a positive behaviour within the Eurozone
-0.1
0.1
0.3
1.0
0.3
0.5
0.7
0.9
0.5
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
Q2 13 Q4 13 Q2 14 Q4 14 Q2 15
-8
-6
-4
-2
0
2
4
6
2009 2010 2011 2012 2013 2014 2015
Agriculture Industry Construction
Services Total
4
… with the support of the Euro, oil prices and fiscal policy …
Source: Bloomberg.
Oil price(Brent,oil. USD per barrel)
Euro dollar evolution
Lower oil prices benefiting an oil intensive economy
Euro weakness gives support to export industry
Domestic demand is benefiting from a more neutral stance on fiscal policy
40
60
80
100
120
Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-151.00
1.10
1.20
1.30
1.40
Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15
5
90
100
110
120
130
140
2007 2008 2009 2010 2011 2012 2013 2014
Euro area Spain
... as well as the low interest rate environment
Source: Bank of Spain and ECB.
Relatively favourable financial conditions
Private sector has improved its financial situation
Structural reforms support the positive behaviour of the economy
Non-financial companies debt% of GDP
SMEs interest rate evolutionFrom 1 to 5 years, up to 1 million euros. In %
2
3
4
5
6
7
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Germany Spain
6
-60
-40
-20
0
20
40
Q1 09 Q1 10 Q1 11 Q1 12 Q1 13 Q1 14 Q1 15Companies Households, consumptionHouseholds, house purchase
Credit continues to normalise …
Source: Bank of Spain.
Demand for credit is recovering
Increase in lending flows
New credit operationsYoY change
Lending to households: consumption and other purposesSurvey. In percentage
Credit activity is improving, partly due to an improved financial situation of families and businesses , more favourable financing conditions , cyclical improvement of the economyas well as the stabilisation of housing prices
-60
-40
-20
0
20
40
2003 2005 2007 2009 2011 2013 2015
7
… and economic projections are positive
Source: Banco Sabadell
GDP forecast(Sabadell model, QoQ change in %)
2014 2015 2016
GDP (YoY, %) 1.4 3.3 2.7
Unemployment rate (%) 24.4 22.3 20.5
CPI (YoY, %) -0.2 -0.5 0.6
� The economy will maintain a favourable comparison within the Eurozone
� Growth will be more moderate as the positive impact of certain factors (e.g. fiscal reform) is reduced
� Internal demand will continue to be the main driver of GDP growth
� The main domestic risk is related to the political scene
� The main external risk would be the deterioration of the global financial conditions
0.7
0.91.0
0.90.8
0.70.6
0.0
0.2
0.4
0.6
0.8
1.0
1.2
Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16
GDP (QoQ change, %) Forecast
8
1. Spanish economy
2. Sabadell strategy update3. Business dynamics
9
10
Sabadell group structure
� Domestic business delivery
� Extract value from the acquired size
� SME focus
� Improve the value proposal in Private Banking
� Developing new productivity drivers
� Balance sheet normalisation
� Complete TSB integrationcalendar and follow business plan
� Current TSB business plan highlights :
� Double digit return in 5 years from 2014
� Increase PCA market share Grow loans by 40-50% in 5 years from 2014
� New SME capabilities
� Positive outlook for the US business
� Mexican commercial bankinglicense already obtained. The bank will initially focus on companies, and subsequently seek business with private individuals
� Starting activity through a representative office in Colombia and Peru
Sabadell
Spain AmericasUnited Kingdom75% 5%20%
Note: Percentage of assets as of June 2015.
Update on the TSB takeover
� On 30 June 2015 Sabadell received approval from the PRA regarding the change of control of TSB and consequently the offer became wholly unconditional in all respects. This date also reflects the date of consolidation of TSB accounts
� On 8 July 2015 the acceptance level exceeded 90% and as a result Sabadell initiated the “squeeze out” process
� On 28 July 2015 Sabadell delisted TSB
� On 21 August 2015 Sabadell completed the acquisition procedure, reaching 100% of TSB shares
11
Steps since completion
� New corporate governance structure in place
� Project Management Office has been deployed in London
� IT protocol has been set up
� Joint workstreams have been kicked-off
� 100-day plan in motion
� Management off-site with TSB
March 20
“100-day plan”
Today
PRA approvalOffer declared unconditional in all respects
April 17
May 8 June 30
July 8
Offer unconditional as to acceptances
Recommended cash offer announcement
OfferDocument release
May 18Satisfaction of EU Merger Regulation Condition
90% threshold achieved
December 5
TSB delisted
July 28
August 21 Completion of compulsory acquisition process
12
Sabadell near term focus for TSB
� TSB is delivering on its business plan, with a commitment to growing further still as part of the Sabadell group
� The IT platform will be ready at the end of 2016 with integration expected to be completed in 4Q 2017
� During the migration period new features and applications will gradually become available, improving customer experience at TSB
� The new IT platform will have SME capacity built into it, preparing TSB for a new growth opportunity within the UK SME segment
� Pre-tax synergy target of c.GBP160M per year from IT optimisation in 2018 is maintained
� GBP450M contribution by Lloyds to TSB more than offsets implementation costs of IT migration
13
14
1. Spanish economy
2. Sabadell strategy update
3. Business dynamics
0
500
1,000
1,500
2,000
2,500
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Increased customer activity reflects the stronger economy …
New residential mortgagesNumber of contracts
15
2015
2014
2013
New consumer loansNumber of contracts
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2015
2014
2013
YTD+30%
YTD+29%
0
1,000
2,000
3,000
4,000
5,000
1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15
0500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
… with growth across most segments
16
New SME loansNumber of contracts
Point of Sales turnoverEuros in million
2015
2014
2013
2015
2014
2013
YTD+29%
YTD+27%
102,471101,807
102,250
103,811104,581
2Q14 3Q14 4Q14 1Q15 2Q15ex-TSB
We expect the overall loan book to continue to grow …
Performing loans evolution Euros in million
+0.7%QoQOrg
2Q15incl. TSB
134,875
17
28.9
27.9
28.328.6
29.4
29.930.1
Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15
… driven by SME loans
SME and company loans evolution, ex-TSBEuros in billion
SME and company loan demand in positive territory
Note: SME and company loans include loans to SMEs, corporates and public sector and exclude NPLs. 18
Improving market shares in companies …
Note: 2015 data as of June 2015 or last month available.
LoansExport docum.
creditPoS turnover
10.56% 29.79% 14.54%
10.74% 31.48% 15.88%Companies
Dec.14
2015
Spanish market shares by products
19
… and in individuals
Investment funds
Credit card turnover
Life Insurance
Household deposits
5.11% 7.64% 4.17% 5.31%
5.72% 7.89% 4.90% 5.49%Individuals
Dec.14
2015
Spanish market shares by products
20
1
Note: 2015 data as of June 2015 or last month available.1 According to Inverco. 2 Insurance calculated per number of contracts.
2
NII set to keep growing on a QoQ basis
Net interest income evolutionEuros in million
YoY growth :
+20.7%
+2.0% QoQ
545.9574.1
609.7643.1 655.9
2Q14 3Q14 4Q14 1Q15 2Q15
21
The cost of term deposits continues to be reduced …
Contractual rates on term depositsIn percentage
Stock New production/renewals
New term deposits at
c0.30%
3.58%3.36%
3.13%2.84%
2.37%2.16%
1.83%1.67%
1.52%1.38%
1.18%
3.39%
2.16%1.85%
1.61%1.51%
1.29%1.05%
0.75%0.60%0.49% 0.39%
Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15
22
… and so is the cost of wholesale funding …
Wholesale funding cost evolutionIn percentage
Recent wholesale maturitiesEuros in million
Recent wholesale issuancesEuros in million
Note: Wholesale issuances and maturities over €750M. GGB refers to senior debt issued with a specific guarantee from the Spanish Government.
3.54% 3.51%3.41%
3.05%
2.71%
2.56%
Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15
Instrument Amount Coupon Issue date
Covered bond 1,250 0.875% Nov-14Covered bond 750 0.375% Jun-15
Instrument Amount Coupon Maturity date
Covered bond 1,000 3.375% Oct-14GGB 1,065 3.000% Nov-14Covered bond 1,200 3.625% Feb-15Covered bond 1,500 3.250% Jun-15
23
… while credit spreads are beginning to stabilise
Evolution of loan spreads by segmentIn percentage
Our strong SME franchise allows Sabadell to partially cushion the impact of lower spreads
Back book loan spreads by segmentIn basis points
Mortgages to individualsTotal SMEs
Corporates
Back book
Front book
Back book
Front book
Back book
Front book
Back book
Front book
Back book
Front book
Back book
Front book
Mortgages to individuals 87 227 89 214 90 209 92 201 94 187 95 173
SME 270 500 277 492 282 494 285 445 284 459 282 417
Corporates 268 327 266 302 260 297 243 265 229 233 219 233
2Q151Q14 2Q14 3Q14 4Q14 1Q15
186 187 186 184 181 178
87 89 90 92 94 95
270 277 282 285 284 282
268 266 260243
229 219
1Q14 2Q14 3Q14 4Q14 1Q15 2Q15
24
27,947 32,007 31,099 32,800 36,54548,098
11,471 11,663 12,176 12,680 13,495
32,68855,625 53,705 51,186 49,419 45,305
49,58413,705 14,665 15,706 18,674 20,230
20,230
2Q14 3Q14 4Q14 1Q15 2Q15ex-TSB
2Q15incl.TSB
Improving overall position in on-balance sheet customer funds
Evolution of customer funds and mutual funds Euros in million
Current accounts On-balance sheet term funds
Mutual 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.
Stock of current accounts (ex-TSB):
+11.4% QoQ+30.8% YoY
Sabadell’s flagship product “Cuenta Expansión”is driving growth in current accounts
Savings accounts
25
With the highest standards in quality of service
Source: STIGA, EQUOS (Objective Quality Analysis in Banking Networks, 2Q 2015).
Sabadell stays well above the rest of the sector
Level of service quality Evolution of Sabadell quality index vs sector
26
7.54
7.217.32
7.20 7.24
6.90 6.89
7.167.39
6.956.77
6.61
6.11 6.06 6.01 6.036.29
6.55
2007 2008 2009 2010 2011 2012 2013 2014 2Q15Sabadell Sector
9.5 8.5
15.313.6
2.52.3
Mar-15 Jun-15
Actively managing ALCO portfolio in a volatile market and a steepening yield curve
Fixed income portfolio evolution (ex-TSB)Euros in billion
Spanish public debt Other
Life insurance portfolio
ALCO portfolio (ex-TSB)Euros in billion and in percentage
Yield 2.5%
Evolution of ALCO portfolio in run-off scenario (ex-TSB)Euros in billion, yield in %
ALCO portfolio
ALCO portfolio
2015e 2016e 2017e 2018eAmount (€bn ) 21.1 19.3 18.3 17.8Yield (%) 2.4% 2.3% 2.4% 2.5%
Mar-15 Jun-15
ALCO portfolio 24.8 22.0
% of total assets (ex-TSB) 14.8% 13.4%
Duration (in years) 5.2 3.6
ECB liquidity position 8.9 11.0
We actively manage interest rate sensitivity of the portfolio
27
NPL ratio has been reduced significantly from peak levels
Evolution of NPL ratio and coverage of NPLsIn percentage
Note: NPL ratio is calculated including contingent risk and 20% of the APS.
NPL ratio ex-TSB expected to drop below 10% by year-end
13.85% 13.44% 12.74% 11.68% 10.98%9.01%
53.8% 51.9%49.4% 51.4% 52.8% 53.7%
2Q14 3Q14 4Q14 1Q15 2Q15ex-TSB
2Q15
NPL ratio
NPL coverage
28
11.4%11.8% 11.7% 11.8% 11.5%
1.1%1.2% 1.1% 1.0% 1.5%
Jun.14 Sep.14 Dec.14 Mar.15 Jun.15
Comfortable capital position post TSB transaction
Common Equity Tier 1 and Tier II evolution
CET1 fully loaded at 11.2%
CET 1
Tier II
29
Uncertainty around DTCs has been eliminated
For any additional information, please contact:
+34 93 728 12 00
Investor Relations