Banco Sabadell

BoAML19th CEO Conference

London, 30 September 2014

Enhancing profitability in a low interest rate environment

Jaime GuardiolaConsejero Delegado

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. Spanish economy

2. Banco Sabadell’s current position

3. Business dynamics

4. New Business Plan

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2009 2010 2011 2012 2013 2014

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-8

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4

m/m change, % y/y change, % (right axis)

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Q2 12 Q4 12 Q2 13 Q4 13 Q2 14

-25

-20

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-5

0

5

10

2004 2006 2008 2010 2012 2014

3

The economic recovery is gaining traction in Spain …

Sources: Spanish Statistical Office (INE) and Ministry of Labour.

Industrial production (year-on-year variation in %, seasonally adjusted)

Social Security contributors (seasonally adjusted)

Real GDP (quarterly variation, %)

GDP increased in 2Q14 at its fastest pace since early 2008

-60

-40

-20

0

20

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

-35-30

-25-20

-15-10-5

05

1015

2008 2009 2010 2011 2012 2013 2014

-15

-10

-5

0

5

10

2007 2008 2009 2010 2011 2012 2013 2014

4Sources: Bank of Spain, Spanish Statistical Office (INE) and Ministry of Economy.

… supported by the improvement in domestic demand

Retail sales(year-on-year variation in %)

Investment in capital goods(year-on-year variation in %)

Apparent cement consumption(year-on-year variation in %, seasonally adjusted)

Domestic demand (contribution to GDP growth)

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

-4.3 -3.6 -2.1 -0.6 +0.7 +1.9

150

170

190

210

230

250

270

290

310

330

350

2011 2012 2013 2014

Registered portfolio Portfolio to maturity

0

50

100

150

200

250

300

350

400

2007 2008 2009 2010 2011 2012 2013 2014

0

100

200

300

400

500

600

700

2010 2011 2012 2013 2014

5

Spanish banks ECB usage Euros in billion

The recovery is finding supportin the more favourable financial conditions …

Sources: Bank of Spain and Bloomberg.

Non-resident holdings of Spanish Treasury debt Euros in billion

Spanish 10-year government bonds spread (b.p.)

Credit rating

Rating Outlook

S&P’s BBB Stable

Moody’s Baa2 Positive

Fitch BBB+ Stable

Moody‘s (Feb14), Fitch (Apr14) and S&P’s (May14) improved the rating of Spain by one notch

100

110

120

130

140

2000 2002 2004 2006 2008 2010 2012 2014Spain Euro area

0.8

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-12

-10

-8

-6

-4

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0

2

2000 2002 2004 2006 2008 2010 2012 Q214

202206

230

100

120

140

160

180

200

220

240

2002 2004 2006 2008 2010 2012 Q1 14

4

6

8

10

12

14

1995 1997 1999 2001 2003 2005 2007 2009 2011 2013

Spain Euro area6

Private sector debt (% of GDP)Current account balance (%of GDP)

Investment in housing (% of GDP)Unit labour cost (2000 = 100)

Sources: Bank of Spain, ECB, AMECO and INE.

… in the realised progress towardscorrecting past accumulated imbalances ...

Cumulative4 quarters

7

… and in the moderation in the intensity of the budgetary adjustment

Sources: European Commission and Ministry of Finance.Note: The impact on the deficit of the support for the financial sector is not considered.

Public sector balance (% of GDP)

Previous deficit targets

Current deficit targets

Public sector balance (% of GDP)

The expected deficit reduction path is feasibleThe expected deficit reduction path is feasible

The softening of the deficit reduction path results in a better balance between fiscal consolidation and boosting economic activity.

-11.1

-9.6-9.1

-6.8

-1.1

-6.6-5.5

-4.2

-2.8

-12

-10

-8

-6

-4

-2

0

2009 2010 2011 2012 2013 2014 2015 2016 2017

37.8 38.5 38.8 38.9 39

44.4 44.043.0

41.740.1

30

35

40

45

50

2013 2014 2015 2016 2017

Revenue Expenditure

25

30

35

40

45

50

55

60

2007 2008 2009 2010 2011 2012 2013 2014Manufacturing Services

8Sources: Bloomberg

The improvement in economicactivity is expected to continue going forward

Business sentiment(index) Activity will continue to be

supported by:� More benign financial conditions

� Lower fiscal effort

� Favorable evolution of exports

� Advance stage of the imbalances adjustment process

And also by:� An improved behaviour of the

construction sector

� Impact of structural reforms

� Normalisation of credit conditions

GDP forecasts (avg. yearly growth rate)

2013 2014e 2015e

Government -1.2 1.2 1.8

Bank of Spain = 1.3 2.0

Funcas consensus = 1.2 1.9

Banco Sabadell = 1.3 2.0

9

1. Spanish economy

2. Banco Sabadell’s current position3. Business dynamics

4. New Business Plan

10

The Spanish financial map has changed

Note: Refers to latest available financial disclosures by entity.

157

162

251

302

358

404

45

77

63

61

57

53

46

Restructuring of the savings banks:

from 45 to 11 entities

Total domestic assets of the main financial entitie s in Spain(Euros in billion)

11

Core Capital

Assets

Loans1

Deposits2

Branches

Employees

2007 2010 2Q 2014 2Q 2014/07

76,776 97,099 161,557

63,165 73,058 122,838

34,717 49,374 95,043

1,225 1,428 2,2473

10,234 10,777 16,9004

X 2.1

X 1.9

X 2.7

X 1.8

X 1.6

(Euros in million)

Loan to deposit

6.0% 8.2% 11.4%5

197% 135% 104%

X 1.9

X 0.5

Improving liquidity and solvency ratios

The bank managed to double in size during the financial crisis

1. Gross loans to customers excluding repos. 2. On-balance sheet customer funds. 3. 2014 forecast. 4. 2015 forecast. 5.2014 data under Basel III regulation vs 2007 and 2010 under Basel II.Note: Loan to deposit ratios is net of provisions and intermediary funding.

12

Taking advantage of inorganic growth opportunities

Total assets (Euros in billion)

Integration year

Recent integrations

2013

2012

2011

2010

2009

2008 €80 bn

€97 bn

€100 bn

€162 bn

€163 bn

€83 bn

13

Improving its position as the preferred entity to do banking with

Ranking of banking relationships*

Source: IFRS Inmark. * Percentage of respondents who value a certain bank as its main bank.

Respondents

Other entities

2012

2013

27,085 28,874 34,543 33,902 36,862 37,082 39,418

53,095 53,81958,408 57,953 57,635 57,608 55,625

8,5858,987

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

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

An ample customer base and strong growth in 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. Excludes repos.

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

Sight deposits On-balance sheet term funds

Mutual funds

Acceleration in the growth of AuM and current accounts

14

Million customers6.4

New Customers every week

9,000

Commercial push in the Madrid area to increase market share x2, with a new concept of flagship branches.

Opportunity to gain further market share organically

Identified regions with more room to grow

* Loans and deposits as of March 2014

Banco Sabadell market share* by region

3.1

4.314.7 2.2 4.9

3.44.0

3.13.5

15.0

3.4

2.11.014.7

8.616.4

3.4

15

There is still room to grow in certain regions

Spain Market Share(pro-forma)

7.8%

16

1. Spanish economy

2. Banco Sabadell’s current position

3. Business dynamics4. New Business Plan

Net interest income is showing a steady increase …

Net interest income evolutionEuros in million

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

451.2414.6

451.2497.7

530.0 545.9

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

� Net interest income 1H14:

+24.3% YoY

� Net interest income 1H14 like-for-like*:

+17.9% YoY

17

18

… as continued repricing of term deposits drives down the cost of the back book …

Contractual rates on term depositsIn percentage

Stock New production/renewals

New term deposits at 1%

3.26% 3.35%3.58%

3.36%3.13%

2.84%

2.37%2.16%

1.83%2.50%

3.06%

3.39%

2.16%1.85%

1.61%1.51%

1.29%1.05%

Jun-12 Dec-12 Jun-13 Dec-13 Jun-14

19

… at the same time as there is limited downward pressure on the loan yield

Evolution of loan spreads by segmentIn percentage

Spreads on new loan production remain significantly above the spreads on the back book

Back book

Front book

Back book

Front book

Back book

Front book

Mortgages to individuals 88 229 87 227 89 214

SME 269 526 270 500 277 492

Corporates 268 342 268 327 266 302

4Q13 1Q14 2Q14

25.9 28.6 31.4 37.5 39.7 48.6

52.4 53.8 53.3 52.8 53.455.3

90.1105.9 108.5

119.5 107.9109.6

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

20

Commission income is growing …

Commission income evolutionEuros in million

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

188.2

168.4

193.2209.8 201.0

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

213.5 � Commission income 1H14

+16.2% YoY

� Commission income 1H14 like-for-like*:

+8.3% YoY

2,760 2,953

3,081 3,417

4,4404,902

1,2471,531790

901

March 2014 June 2014

21

… driven by strong performance in mutual funds

Evolution by type of investment fund Euros in million

12,31813,705

Equity fundsBalanced funds

Fixed income funds Guaranteed funds

SICAV, External funds and Others

+11.3%

+10.9%

+7.0%

+10.4%

+22.8%

+14.1%

� Bias towards higher margin products

� Annualised growth rate of 53% in funds under management

59.4% 60.0% 61.0% 59.6%56.3% 55.6%

Mar.13 Jun.13 Sep.13 Dec.13 Mar.14 Jun.14

22

The cost to income ratio is improving: in line with the Triple business plan

*Adjusting operating income for non-recurrent trading income. Same criteria applies for all quarters.

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

Employee and branch evolutionIn number

Cost income evolution *

In percentage

Branches Employees

2,202

16,754

14,957

1,889

2,382

17,253

2,418

18,077

2,336

17,698

Banco CAM BMN-Penedés & Lloyds Spain Banco Gallego

28,894

28,350

27,943 27,881 27,898 27,932

28,298

Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-140

20

40

60

80

100

120

140

160

180

Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14

23

Loan growth is being reactivated

SME and company loans evolutionEuros in million

Monthly residential mortgage productionEuros in million

* Excludes BMN-Penedés network, Lloyds Spain and Banco Gallego in 2014

Jun-14

Note: SME and company loans includes loans to SMEs, corporates and public sector

During the month of June the SME and company loans book grew by €366M; +1.5% QoQ

In 1H14 the number of new mortgages increased by 54% YoY with volume growth of 61% YoY(43% and 50% like-for-like*)

14.218.7 15.6

12.1

7.0

7.9

4.17.5

2.3

2.4

2.0 2.3

Dec-12 Jun-13 Dec-13 Jun-14

24

Fixed income portfolio remains unchanged

Fixed income portfolio evolutionEuros in million

Spanish government debt Other

Life insurance portfolio (Mediterráneo Vida)

21.226.6

19.7 19.6

ALCO portfolioEuros in billion and in percentage

The ALCO portfolio contribution is stable

Jun-13 Dec-13 Jun-14

ALCO portfolio 26.6 19.7 19.6

% of total assets 15.6% 12.1% 12.1%

Duration (in years) 3.8 4.9 5.0

Yield 3.3% 3.9% 3.5%

ECB liquidity position 18.0 8.8 5.5

25

Strong capital levels

Capital ratios. Core capital Basel III phase-inIn percentage

Note: According to “circular 2/2014”

11.1%11.4%

1Q14 2Q14

22,99422,825

22,673

4Q13 1Q14 2Q14

6,973 7,037 7,185

5,506 5,570 5,602

4Q13 1Q14 2Q14RE assets ex-APS RE assets APS

16,021 15,788 15,488

8,874 8,841 8,611

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

26

The stock of NPLs continues the downward trend …NPL evolution Euros in million

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

� €300M further reduction of NPLs, ex-APS, during 2Q14

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

2Q14 BS ex-APS APS Total

Real estate assets 40.5% 50.8% 45.0%

Real estate development loans 33.8% 47.4% 40.1%

Total real estate exposure 37.0% 48.9% 42.3%

Construction 12.2% 5.3% 10.3%

Large Corporates 6.5% 46.5% 8.2%

SME and small retailers and self-employed 8.5% 20.6% 9.6%

Individuals 3.8% 12.6% 4.2%

Rest of loan book 5.6% 20.2% 6.4%

Total 9.7% 39.5% 13.8%

27

… maintaining high coverage levels

Coverage by loan segment and real estate assetsSplit between asset protection scheme and rest

Comfortable coverage levels relative to expected loss levels

� 13.8% Global coverage of total loans and RE assets

� 9.7% Global coverage of total loans and RE assets, ex-APS

Real estate market turning signs

28

House price evolution In %

Source: Social research centre polls, INE, Public works Ministry

� Pick-up in transactions in 2014 (INE, Public works Ministry)

� Price increase in 10 regions in 2Q14 (INE)

� House price expectations are improvingThe proportion of people expecting house price declines has changed from over 50% in 2012 to below 25% in 2014 (Social research centre)

� Rental yields are improving (BoS)

-18

-15

-12

-9

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0

3

2008 2009 2010 2011 2012 2013 2014

29

Solvia has become a leader real estate company increasing its brand recognition

One of the largest sales platform in Spain

Commercialisation and servicing

Commercialisation and servicing

Real Estate BusinessReal Estate Business Asset ManagementAsset Management

Transformation (land transformation and development capabilities)

Transformation (land transformation and development capabilities)

Institutional SalesInstitutional SalesReal estate as an

investment product Real estate as an

investment product

Solvia S

� Launch of house rentals initiatives

� Third party servicing

� Institutional and retail sales

Solvia brand recognition is

improving and growing significantly

among potential house buyers

826

1,2371,319

1H2012 1H2013 1H2014

Maintaining good sales results

Sales evolutionEuros in million

30

Increase in sales in 1H14

Solvia12%market share in Spanish property sales

+50%

+7%

31

1. Spanish economy

2. Banco Sabadell’s current position

3. Business dynamics

4. New Business Plan

32

� Selective growth

� Increasing profitability

� Reducing problematic assets

� Improving efficiency levels

The new Business Plan focuses on:The new Business Plan focuses on:

Loan-to-deposits 2016100%

2016 profit€ 1bn

Credit growth (CAGR 13-16)

1%

Efficiency ratio 201640%

ROTE 201612%

Banco Sabadell Business Plan 2014-2016

25.428.6

33.5

2013 1H14 2016target

59.6% 55.6%

40.0%

2013 1H14 2016target

1.17%1.36%

1.76%

2013 1H14 2016target

760,0

1.000,0

2013 1H14 2016target

On track with the Triple business plan targets

Net interest marginIn %

CommissionsEuros in million

Efficiency ratioIn %

Off Balance sheet fundsEuros in billion

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33

760.0

1,000.0

Thank you for your attention