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Banco Sabadell2Q12 Results
July 25th, 2012
Disclaimer
2
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
1. Quarterly highlights
2. 2Q12 Results
3. Banco CAM consolidation
4. Banco CAM – commercial reactivation
5. New structure – Asset Management Division
6. Conclusions
Index
4
1. Quarterly highlights
5
Quarterly highlights
Consolidation of Banco CAM
Increased coverage levels
Launch of exchange offer of Banco CAM preference shares
Creation of a “bad bank” structure
Launch of new brand:
Continued improvement in market share
Strong level of income generation
Balance sheet clean-up in line with the requirements of the Royal Decrees
6
2. 2Q12 Results
June 2012 Results
7
*Jun. 11 Jun. 12 % var 12/11
Net Interest Income 764.6 854.3 11.7%Equity Method & Dividends 39.2 12.7 -67.6%Commissions 288.4 288.8 0.2%Trading Income & Forex 188.4 265.5 41.0%Other Operating Results 3.2 -54.2 --Gross Operating Income 1,283.6 1,367.1 6.5%Personnel Costs -370.9 -415.2 12.0%Administrative Costs -191.0 -209.2 9.5%Depreciations -62.6 -69.6 11.1%Pre-provisions Income 659.1 673.1 2.1%Total Provisions & Impairments -545.5 -1,889.3 --Gains on sale of assets 2.6 18.5 --Badwill 0.0 933.3 --Taxes and others 48.1 354.5 --
Attributable Net Profit 164.3 90.1 -45.1%
* Includes one month of Banco CAM.Euros in million
Steady NII generation …
8
Net interest income evolution(Euros in million)
Net interest income 1H12:+11.7 % YoY+6.2 % YoY excl. Banco CAM
404.8
42.2
1Q11 2Q11 3Q11 4Q11 1Q12 2Q12
385.4 388.6 384.1 407.3447.0
379.1
Banco Sabadell stand aloneBanco CAM
… driven by active price management in the BS portfolio …
9
Product Jun-11 Mar-12 Jun-12 Var QoQ Var YoY Jun-11 Mar-12 Jun-12 Var QoQ Var YoY
Credits 264 363 384 +21 +120 223 279 298 +19 +75Loans 247 278 356 +78 +109 194 216 219 +3 +25Mortgages to individuals 116 146 159 +13 +43 78 83 85 +2 +7Leasing 206 226 242 +16 +36 113 125 129 +4 +16Renting 473 525 595 +70 +122 281 345 368 +23 +87Commercial loans 290 368 407 +39 +117 309 404 430 +26 +121Confirming 225 270 293 +23 +68 237 280 293 +13 +56Forfaiting 225 349 582 +233 +357 215 382 532 +150 +317Total loans 230 287 335 +48 +105 157 182 188 +6 +31
Term deposit 1 month 86 85 87 +2 +1 69 70 87 +16 +18Term deposit 3 months 103 137 100 -37 -3 69 106 127 +21 +58Term deposit 6 months 107 163 158 -5 +51 113 125 147 +21 +34Term deposit 12 months 109 172 170 -2 +61 160 134 142 +8 -18Term deposit +12 months 161 180 206 +25 +45 189 187 182 -4 -7Total term deposits 116 155 143 -12 +27 157 148 152 +4 -5
Front book spreads Back book spreads
Total volume of re-priced assets in the quarter: € 12.3 bn*In basis points* New granted transactions with price change. Exluding Banco CAM
… and reduced cost of costumer funds
10
Margin evolution(In percentage)
1.42%
1.56%1.60%1.62%1.60%1.65%1.81%1.78%1.86%1.95%
2.06%1.98%1.85%
1.79%
1.83%
1.80% 1.47%1.61%
1.53%
2.16%
2.80% 2.84% 2.81% 2.81% 2.73% 2.72%2.52%
2.31%2.17%
2.05% 1.91%1.80%
2.06% 2.11%1.99%1.89%
2.16% 2.35%
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12
Net interest margin Net interest margin ex APSCustomer spread Customer spread ex APS
4.16%
2.00%
5.00%
3.57%
2.50%
3.35%
4.22%4.12%3.99%3.86%3.65%3.50%3.49%3.53%3.79%4.21%
4.93%5.56%
6.29%6.28%6.06%5.93%
4.28% 4.34%
2.11%2.06%2.00%1.97%1.85%1.59%1.44%
1.36%1.48%1.70%2.21%
3.48%3.47%3.22%
2.83%
3.13%
2.12% 1.99%
1.48%1.58%
2.79%
1.28% 1.49%
2.01% 2.03% 2.14% 2.40%
4.78% 4.83% 5.06%
1.83%
2.80%3.29%
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 1Q12
Customer loan yield Customer loan yield ex APS Cost of customer funds
Cost of customer funds ex APS Cost of wholesale funding Cost of wholesale funding ex APS
Stable commissions levels
11
Commissions evolution(Euros in million)
30,9 31,7 27,9 29,1 24,8
45,8 45,4 46,4 49,0 48,2
59,1 63,5 61,4 57,4
8,5
26.1
47.5
73,859.9
12,114,0
1Q11 2Q11 3Q11 4Q11 1Q12 2Q12
Commission income 1H12:+0.2% YoY
-1.8% YoY, excl. Banco CAM and excl. impact from fixed income issues
135.7
152.6
135.7149.5
133.5
155.3
* Includes one month of Banco CAM: €9M
*
ServicesAsset Mgmt1 LendingCommissions from fixed income issues
1 Including mutual funds commissions and pension funds and non-life insurance brokerage
Personnel expenses remain flat …
12
Personnel expenses evolution(Euros in million)
179.0 176.0 179.6 179.0 182.2 181.6
13.12.8 4.2
39.9
5.8
5.89.0
1Q11 2Q11 3Q11 4Q11 1Q12 2Q12RecurrentBanco SabadellStand alone
Non-recurrent
Personnel expenses 1H12:+12.0% YoY (excl. Banco CAM: +1.2%)
Recurrent personnel expenses 1H12:+13.7% YoY (excl. Banco CAM: +2.5%)
192.1178.7 183.8 188.0 188.0
Personnel expenses 1H12 Like-for-like*:
+0.7% YoY
227.2
Banco CAM
* Including Lydian Bank in 2011 and excluding non-recurrent expenses. Excluding Banco CAM in 2012
… and general expenses are slightly down, like-for-like …
13
General expenses 1H12:+9.6% YoY (excl. Banco CAM: -0.2%)
Recurrent general expenses 1H12:+12.0% YoY (excl. Banco CAM: +1.8%)
92.3 92.5101.4 107.2
93.8 94.4
2.918.7
0.46.2
1.9
1Q11 2Q11 3Q11 4Q11 1Q12 2Q12
101.4
110.1
94.2
General expenses 1H12Like-for-like*:
-0.5% YoY
115.1
General expenses evolution(Euros in million)
98.592.5
RecurrentBanco SabadellStand alone
Non-recurrentBanco CAM
* Including Lydian Bank in 2011 and excluding non-recurrent expenses. Excluding Banco CAM in 2012
14
49.7%47.0% 47.6% 47.3%
40.8%43.2%
45.7%
Mar. 11 Jun. 11 Sep. 11 Dec. 11 Mar. 12 Jun. 12BS
Jun. 12BS+CAM
1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12
… as network optimisation continues
10,777
1,467
10,721
1,467
10,610
1,379
10,699
1,387
SUBAcquisition
B.GuipuzcoanoAcquisition
Lydian P. Bank
Acquisition
9,839 9,746
9,701
1,221 1,223 1,2221,383
10,67510,550
1,382
2,202
16,754
Banco CAMTransaction
Branches Employees
BS cost to income ratio ex non-recurrent items 2Q12: 42.2%
Employee and branch evolution(In number)
Cost income evolution(in %)
Banco Sabadell’s NPL ratio vs. the Spanish average continues to show improvement
15
Banco Sabadell vs. sector NPL ratio In %
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 2Q12
System NPL BS NPL
*
Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 dic-11 Mar-12 Jun-12
BS NPL ratio 4,09% 4,38% 4,72% 5,01% 5,46% 5,55% 5,72% 5,95% 6,02% 6,24%
System NPL ratio 5,33% 5,35% 5,49% 5,81% 6,19% 6,69% 7,16% 7,61% 8,37% 8,95%
GAP BS vs system (bp) 124 97 77 80 73 114 144 166 235 271
* Spanish financial system NPL ratio as of May 2012. Note: Excluding Banco CAM. NPL ratio BS+Banco CAM excl. APS = 7.8% Source: Bank of Spain
16
June 11 June 12 % Var.
Individuals 147,153 170,141 +15.6%
Companies 30,888 40,883 +32.4%
Growing the customer base …
Cuenta Expansión:101,793 new accounts
Cuenta Expansión Negocios: 58,624 new accounts
Remarkable success in gaining new customers
With two market-leading products paving the way
Note: Banco Sabadell stand alone
Evolution of total number of customers
1H11 1H12 % Var.
Total 2,580,762 2,828,229 +9.6%
Banco Sabadell stand alone
Banco Sabadell incl. Banco CAM
1H12 % Var. 5,411,361 +109.7%
… gaining market share both in individuals …
17
Credit card volumeHousehold term deposits
2.12%May. 11
May. 12
+188 bps (+25 bps excl. Banco CAM)
4.00%
2.99%Mar. 11
Mar. 12
+275 bps (+51 bps excl. Banco CAM)
5.74%
Payroll accounts Transactionality1
2.52%Jun. 11
Jun. 12
+260 bps (+39 bps excl. Banco CAM)
4.29%Jun. 11
Jun. 12
+200 bps (+51 bps excl. Banco
6.29%
CAM)
5.12%
1 Including cheques, transfers, SEPA transfers, receivables and promissory notes. Banco CAM numbers exclude SEPA transfers
… as well as companies …
18
Volume at BS card PoSSight deposits companies
6.98%
10.49%
May. 11
May. 12 9.71%
+363 bps (+132 bps excl. Banco CAM)
6.08%Mar. 11
Mar. 12
+351 bps (+88 bps excl. Banco CAM)
Corporate credit Export documentary credit
5.56%May.11
May, 12
23.52%Jun. 11
Jun. 128.63%
+307 bps (+37 bps excl. Banco CAM)
25.11%
+159 bps (+132 bps excl. Banco CAM)
… whilst maintaining the leading position in quality of service
19
7.277.297.54
7.217.32
7.20 7.247.08
6.17
6.076.066.11
6.616.77
6.956.78
2006 2007 2008 2009 2010 2011 1Q12 2Q12
Sabadell Market
Better33.9%
Similar29.9%
Much better30.9%
No opinion 1.1%Worse
4.2%
95% of new customers are valuing BS service better or similar to what they initially
expectedBanco CAM has improved service score by 11% to 4.59 in the last three months
New customer experience with BS compared with their expectations
Most valued by the customers
Source: STIGA “RCB Análisis de Calidad Objetiva en Redes Comerciales Bancarias” (2Q12) and FRS Inmark.
20
3. Banco CAM consolidation
Three key steps in the consolidation process of Banco CAM
21
FGD capital injection and
closing of transaction
1
Accounting considerations
pre-closing
2
30 May 2012Approval by the European CommissionCapital injected by the FGD (Fondo de Garantía de Depósitos)Signing of transaction contract
1 June 2012Restructuring charges: €-809M*Impacts from RDLs (2/2012 y 18/2012): €-2,986M* Asset Protection Scheme (APS) value from recovering 80% of realized provisions: €+3,766M*
Consolidation of Banco CAM
accounts
3 30 June 2012€+3,280M* of book value of APS coverage, reflecting future expected lossesBadwill, arising from the Banco CAM integration, is allocated
* Amounts are pre-tax
22
Step 1: FGD capital injection and closing of transaction
Approval of the transaction by the European Commission
Transfer of €2,449M (after tax) by the FGD, which in addition to the capital already transferred in December puts total funds received at €5,249 M (after tax)
Signing of transaction contract
23
Step 2: Accounting considerations pre-closing
Banco CAM balance sheet includes restructuring charges of a total amount of €809M (before tax)
It also incorporates realized provisions in order to comply with the Royal Decrees (2/2012 y 18/2012)
Considering all realized provisions, Banco CAM’s equity amounts to €3,500M. Following the payment of 1 euro, a badwill position of €3,500M is generated
24
Banco CAM’s equity
Evolution of Banco CAM’s equity before consolidationEuros in million
€3,500M (net) of badwill is generated after Banco Sabadell pays a price of 1 euro
3,766Value of APS
from the recovery of 80% of the
realized provisions
Post-tax Pre-taxCAM shareholders' equity 31/12/2011 1,899
FGD injection following approval of transaction 2,449
Provisions related to restructuring costs -566 -809Provisions related to Royal Decrees 2/2012 and 18/2012 -2,090 -2,986
FGD contribution to cover 80% of realized losses in APS portfolio 1,000 1,428FGD contribution to cover 80% of the APS related to Royal Decrees 2/2012 and 18/2012 1,637 2,338
Banco CAM Net Profit 01/01/2012-31/05/2012 -828 -1,183
CAM shareholders' equity 30/06/2012 3,500
Step 3: Consolidation of Banco CAM into the BS group
25
€193M net
Remaining value adjustments
€2,374M net
Provisions related to credit portfolio and RE assets
€933M net
Extraordinary positive contribution to the P&L 2Q12
Badwill: €3,500M net
In the consolidation process assets and liabilities are set at fair value, following accounting standards. An expected value of €+3,280M (before tax) related to the Asset Protection Scheme is booked
Badwill is allocated
Provisions buffer for expected loss not covered by the APS€3,391M gross
Euros in million
Total recognized provisions of €20.9 billion
26
Provisions Euros in billion
*
*
9.6
3.2
20,9
3.31.4
3.4
BS existingprovisions 2011
Banco CAMexisting
provisions at 1june 2012
EquityadjustmentBanco CAM
(Badwill)
Estimatedcoverage
related to theAPS
2012 P&Limpairments
Total provisions
*
*
* Provisional numbers based on estimates of the expected loss
Including Banco CAM, group NPL ratio is below the Spanish average …
27
NPL ratio by category In %
March 2012
Real Estate development and/or construction purposes 23.61% 49.24% 25.01% 23.63%
Construction purposes non-related to real estate dev. 3.95% 6.06% 4.14% 3.28%
Large corporates 2.92% 26.01% 6.51% 2.93%
SME and small retailers and self-employed 6.49% 22.31% 7.19% 6.31%
Individuals with 1st mortgage guarantee assets 3.53% 8.48% 6.21% 3.29%
Individuals other 3.08% 5.87% 4.86% 3.10%
Total gross loans 6.24% 11.72% 7.82% 6.02%
BS
June 2012
BS stand alone
CAM ex-EPA
BS + CAM ex-EPA
28
… and an unprecedented coverage level of 15.6% of total exposure Exposure coverageIn %
46.3%
25.7%
40.8%
8.0%
15.6%
Doubtful andsubstandardRE loans andRE assets
PerformingRE loans
Total RE relatedexposure
Credit to Companies, SMEs
and individuals
Coverage oftotal exposure
Strong core capital level following the consolidation of Banco CAM …
29
9.3%
10.3% 10.0%
Jun. 11 Dec. 11 Jun. 12
Banco CAM preference shares exchange for ordinary shares equivalent to 171 bps of core capital
Core ratio according to EBA definition: 9.60%
* Proforma including Banco Sabadell preference shares exchange carried out between 14/12/2011 and 03/01/2012
** Proforma assuming an acceptance level of 90% in the exchange offer of Banco CAM preference shares and subordinated debt for a total amount of €1.6bn
***
Core capital evolutionIn %
Capital actions in 2Q12
… following successful capital raisings in 2012 …
30
Capital impact
January2012
BS preference shares exchange for ordinary shares (93.8% acceptance level)
€797M
March2012
Rights issue €903M
Banco CAM preference shares and subordinated debt exchange for ordinary shares
Jun/Jul 2012 €1,468M *
€3,168M
Banco Sabadell has raised €3.2bn of new capital in 2012
* Assuming an acceptance level of 90%
… with an acceptance level of BancoCAM exchange offer reaching 90%
31
Daily evolution of the acceptance level of Banco CAM preference shares and subordinated debt exchange offer for ordinary shares
0
200
400
600
800
1,000
1,200
1,400
1,600
21-jun 25-jun 27-jun 29-jun 03-jul 05-jul 09-jul 11-jul 13-jul 17-jul 19-jul 23-jul 25-jul 27-jul0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Acceptance in milion of euros Acceptance in %
90%
Positive commercial gap with customer funds growing
32
-2,000-1,000
01,0002,0003,0004,000
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12
1H12: €2,539M
Customer funds and loans evolution (Euros in million)
Change in commercial gap (Euros in million)
Jun-11 Dec-11 Jun-12% Var.
YoYOn-balance sheet customer funds 51,100 53,703 75,571 47.9%Other on-balance sheet term funds1 32,500 34,963 48,122 48.1%Sight deposits 18,600 18,740 27,449 47.6%
Off-balance sheet funds 18,563 17,942 20,478 10.3%Mutual funds 8,613 8,024 8,533 -0.9%Pension funds 2,903 2,858 3,184 9.7%Third party insurance products 5,691 5,926 7,742 36.0%
Total funds 69,663 71,645 96,049 37.9%Gross loans to customers ex repos and adjustments 72,244 73,540 123,435 70.9%Gross loans to customers ex repos and adjustments ex APS 107,115 48.3%
1 Other 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. Note: In 2012, changes in commercial funding cap include adjustments for capital increase and for the payment to local government suppliersJune numbers include Banco CAM
The group has completed several new issues in 2012 …
33
BS debt issues in 1H12(Euros in million)
Issues Amount MaturityCovered Bonds I/2012 1,200 16/02/2015Senior Debt February 2012 500 27/08/2013Senior Debt March I/2012 500 04/05/2013Senior Debt March II/2012 250 04/05/2014Structured Bond 8 19/06/2015Senior Debt May I/2012 300 29/06/2013Senior Debt May II/2012 300 29/12/2013Total 3,058
Banco CAM debt issues in 1H12(Euros in million)
Issues Amount Maturity10th Covered Bonds (CH) 1,000 19/01/201511th Covered Bonds (CH) 500 17/08/20153rd Covered Bonds (CT) 500 30/04/20152nd Covered Bonds (CT) 450 17/08/201512th Government Guarantee Bonds 1,400 21/02/201513ª Government Guarantee Bonds 1,400 21/07/201614ª Government Guarantee Bonds 1,200 09/03/2017Total 6,450
… maintaining a balanced funding structure ……
34
BS funding structure
Banco CAM funding structure
BS wholesale breakdown
Banco CAM wholesale breakdown
Wholesale funding20.5%
ICO financing5.6%
Deposits61.9%
Repos5.5%
Preference shares0.1%Retail issues
6.4%
Covered bonds74.2%
Senior debt2.7%
Preference + Subordinated
5.9%
GGB2.5%Securitisation
7.2%ECP7.6%
Wholesale funding36.6%
ICO financing4.8%
Deposits50.5%
Repos3.5%
Preference shares4.1%
Retail issues0,5%
Securitisation33.3%
GGB19.7%
Preference + Subordinated
2.3%
Senior debt6.0%
Covered bonds38.7%
… after having absorbed maturities of more than €9bn in the first half
35
1,25
11,
068
0
797
250
138
2,93
31,
264
1,56
80 0
1,96
195
310
415
72,
607
424
200
0 160
113
2028
8
5,28
1
3,36
73,95
0
2,00
31,
442
197
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
4Q18
Res
to
2,319 3.642 4,118 2,832 3,175 3,231 581
3,761
2,2402,566
2,653
2,739
3,487
163%
87%
121%89%121%
96%
1Q11 2Q11 3Q11 4Q11 1Q12 2Q12
Outstanding amount commercial paper + ECP % renewal
BS+CAM wholesale funding maturitiesEuros in million
Short term fundingEuros in million and %
Maturity by product type, BS+CAM Euros in millionOutst. Amount 2H 2012 2013 2014 >2014
Covered bonds (CH) 17,428 1,317 3,087 2,579 10,445Senior debt 709 22 405 0 282GGB 3,239 500 0 1,539 1,200Preference and Subordinated 1,222 0 0 0 1,222Covered bonds (CT) 150 0 150 0 0Other mid- and long-term financial instruments 517 480 0 0 37TOTAL 23,265 2,319 3,642 4,118 13,186
36
4. Banco CAM –Commercial reactivation
37
Substantial increase in market share and number of customers
Loan market share in Spain1 (en %)
6.2%
3.7%
BS BS+CAM
Deposit market share in Spain2 (en %)
5.8%
3.6%
BS BS+CAM
Number of customers(In million)
Spanish branches(number)
1,8202,202
1,340
BS BS+CAMpro-forma
BS+ CAMpost
integración
5.4
2.5
BS BS+CAM1 Net customer credit2 Deposits including reposMarket shares proforma as of December 2011
With a strong customer franchise in the core region of Banco CAM …
38
Banco CAM has significant market penetration in individuals and companies in its original territory (Alicante, Murcia and Valencia)
BS CAM BS + CAM BS CAM BS + CAMAlicante 3.1% 44.3% 46.0% 17.5% 50.6% 59.2%Murcia 1.5% 45.4% 46.2% 10.3% 40.1% 46.3%Valencia 2.5% 19.9% 21.9% 15.8% 19.5% 32.2%Baleares y Canarias 2.0% 3.2% 5.1% 12.7% 6.5% 18.4%Cataluña y Aragón 7.8% 1.4% 9.1% 34.9% 3.0% 36.9%Centro y Norte 5.4% 0.7% 6.1% 16.7% 1.4% 17.9%Suroeste 1.6% 0.4% 2.0% 10.1% 2.1% 12.0%
TOTAL 4.3% 5.2% 9.3% 19.1% 6.3% 24.2%
Individuals Corporates
Numbers refer to % of client share. The total pro-forma number excludes customer overlap between BS and CAM and therefore does not coincide with addition of stand alones.Source: FRS InmarkData as of June 2011
38
39
… with potential to improve commission income …Net fee & commissions over ATA (in %)
Net commissions/number of customers (€/customer)
0.54%
0.19%
CAM BS
229
54
CAM BS
Life & Pension AuM over total customer funds (in %)
Mutual funds AuM over total customer funds (in %)
9.6%
1.8%
CAM BS
9.4%11.7%
CAM BSAs of June 2012
40
… as well as net interest income …
Customer loan yield
Cost of customer
funds
Customer spread
1.95%2.38%
CAM BS
2.22%1.65%
CAM BS
Potential to improve customer mix and price
The average cost of renewing term deposits improved by 31 basis points from 2.62% to 2.31% in the last three months
Room to improve customer spreads
4.17%4.02%
Banco CAM BS
41
… with the liquidation of the APS as an additional lever
APS portfolio €24.6bn
Starting point
APS funding
APS liquidation over time
Assets Liabilities Assets Liabilities
Freed up liquidity
For every 10 percentage points reduction in the APS assets, the group NIM increases by 4 basis points
Liquidation of the APS frees up funding and improves the net interest income of the group
42
Important synergies to be extracted …
Banco CAM synergies 2012e 2013e 2014eCost synergies 13 186 247Income synergies 7 46 84Total synergies 20 232 331% of achievement 6% 70% 100%Net of tax. Euros in million
…optimizing the network: Target of 1,820 branches
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TargetPro-forma 2011
27 13 40
121 41 162
3 3 6
22 148 170
116 389 505
38 54 92
400 81 481
19 12 31
173 58 231
26 6 3260 11 71
23 1 2429 6 35
9 1 10
119 6 125
5 1 6
147 3 150
0 1 1
BS CAM BS + CAM
1.337836
2.173BS + CAMCAM (1)
BS1.820Grupo BS
Sabadell Atlántico + Solbank Banco Herrero
Sabadell GuipuzcoanoBanco Urquijo
CAM
0 1 1
1. Does not include international branches (9): 8 Rep offices + 1 Branch (Miami)
44
The commercial launch is already under way …
Personalized letters sent to over 1.2 million customersMarketing campaign
With satisfactory results already being achieved
45
… already showing positive results …
Change in average current account amounts (in %)
Money transfers from other banks(Euros in million)
-228
-142-114 -103
-44
34 49
-29
Nov Dec Jan Feb Mar Apr May Jun
-14.8%
-10.9%
3.7%
Jun-11 Dic-11 Jun-122011 2012
… with a clear target to gain market share …
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BS+CAM current deposit market shares in Banco CAM’s original territory
39%
15%
7% 8%
Alicante Murcia Valencia &Castellón
Islas Baleares
To be the bank of reference in its markets
Recover historic market shares in deposits
Regain customer confidence
Converge to BancoSabadell’s commercial and operational model
Note: Market shares in other residential sectors and public administrations as of March 2012
47
First sign of improvement in the perception of Sabadell CAM brand
Quality of service improvement during the last three months, increasing the score from 4.47 to 4.59 (according to RCB Análisis de Objetiva en Redes Comerciales Bancarias)
Target to reach service quality levels of Banco Sabadell
… improving quality of service
Banco CAM Banco Sabadell
4.47 4.59
7.27
1Q12 2Q12 2Q12
Source: STIGA “RCB Análisis de Calidad Objetiva en Redes Comerciales Bancarias” (2Q12)
48
5. New structure –Asset ManagementDivision
Active management of property assets
49
Solvia, expertise over the development and construction cycle
2011 Optima Inmobiliaria program
Acquisition of Banco CAM, incl. APS
2012 regulatory changes: increased segregation of property assets
++
+
…2009
2011
2011
2012
Asset Management Division
Banco Sabadell is ahead of the new sector reality
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Setting up the Asset Management Division
Increased transparency:
ring-fencing of on non-core assets
All problematic assets and exposed to the property sector are grouped into the new division:
Core
banking
business
Foreclosed
Problematic risks from
construc. & develop.
Otherproblematic
risks
Non-prob. risks
construc. & develop.
Asset management business
Asset classes included in RDL
The new structure confirms BS commitment to transparency
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Banco Sabadell: two clearly defined management focus
Core banking business
Asset management business
Asset risk
Risk Department
Customer risk
Commercial Banking
Territories
General Manager
OficinasOficinasBranches
Property developers
network
Solvia
Recoveries
Liquidation of assets
Different management team
Different focus
Different incentives
Specialized support by the Risk Division
Improves commercial focus
Risk Department
To accelerate asset exit and maximize
value
To grow the core business
52
Organisation structure of the Asset Management Division
Asset Management Div.
Recoveries Solvia
Portfolio management
Specific network focused on property
developers
Financial Planning
• Portfolio structuring• Wholesale• Managing stakes in
subsidiaries
• APS management• Information consolidation• Control and reporting
• Recoveries of doubtful assets from households, companies and property developers
• Managing property developer risk
• Construction and development
• Retail sales
Integrated asset, risk and financial management
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Leveraging on the existing know-how of Solvia …
Value (M€)Transactions Units
2nd hand
houses
New houses
1Q11 1Q12
Market
21.055
45,725
13.721
50,325
(Evolution January-June)
66,78064,046
-35%
+10%
-4,10% Jan-Jun 2011 = 100Jan-Jun 2011 = 100
Source: Ministerio de Fomento
118
256
2011 2012
+117%
527
824
2011 2012
+56%
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… reflected in sales
RE assets BS. Quarterly changesEuros in million
Foreclosed RE assets BS+CAM. Coverage evolutionEuros in million
245
638
308462 501 464
-95-247
-106 -150-67-118
1Q11 2Q11 3Q11 4Q11 1Q12 2Q12
1Q12BS stand
aloneBS with
Banco CAM
Gross portfolio 4,401 4,715 10,459
Total provisions 1,288 1,715 5,275
Net portfolio 3,113 3,000 5,184
Coverage 29% 36% 50%
2Q12
Foreclosed Sales
Sales in 1H 2012: €451M*FY 2012 sales target for the group: €1,193M*
* Pre-provision cost (Including BS and Banco CAM from January 2012)
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Success case example: Second home coastal property
€47.3M of developer financing with a mortgage on the
properties
2 aparthotels
596 apartments
senior housing and service apartments
+
• 1st block of apartments sold in one month
• 2nd block of apartments sold at 10% higher price
• Contract with service provider– 120 apartments for senior
housing– 60 service apartments
Key drivers• Change of use (from aparthotel to
individual tourist apartments)
• Capacity to reach market in a short period of time
+ Value
+ Demand
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Success case example: Second home coastal property
2009
2010
May 2012
Jun 2012
• BS provided €47.3M of financing for 2 aparthotels in Canet d’En Berenguer with a mortgage on the properties
• In July BS acquires the aparthotels and senior residence in the same location, thus canceling the financing and another mortgage held by a savings bank
• Legal approval to change the use of the properties from aparthotel to individual tourist apartments thereby enhancing the value of 600 properties
• The first building is put up for sale: 308 apartments- 100% sold in a month- 78.000€ average sale price
• Second building put up for sale: 289 apartments- 100% sold in 3 weeks- Average price 10% higher
Guillem de Castro
Arnau de Vilanova
2011
57
Success case example: Second home coastal propertyPunta Paloma
July 2012. Another success story
127 apartmentsSouth coast of Spain, close to Málaga97% sold in one week
Average price of €90,000
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6. Conclusions
59
Conclusions
Banco Sabadell becomes Spain’s fourth largest private financial entity
The Sabadell CAM brand will be launched in September 2012 and the new franchise is being incorporated into the Banco Sabadell group structure with a positive momentum
The new business unit specialised in management of real estate loans and assets has been created in order to improve transparency and crystallise value, anticipating regulatory changes
Banco Sabadell complies with a new market reality in an environment with increased supervision and more stringent requirements on capital, liquidity and solvency
Banco Sabadell reaches an unprecedented-in-the-sector coverage level of 15.6% of total exposure (loans and RE assets)
A core capital level of 10% following successful capital raisings of €3.2bn in 2012
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