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Banc Sabadell triples its net profit in 2013

Banc Sabadell, the second largest banking company in Catalonia, has ended 2013 with a net profit of €247.8 million, three times more than in 2012, after consuming €1,736.6 million in provisions and allowances for non-payments of loans, impairment of property and other financial operations. Due to the new regulations of the Bank of Spain on credit repayment and the acquisitions of other banking companies, the percentage of delayed or unpaid loans has climbed to 13.63%, 46% more than in 2012. Without the refunding operations, it would have been fixed at 11.13 %. The bank’s core capital, which is the main solvency indicator, stood at 12% and, with the new Basel III, it was set at 10.1%. Jaume Guardiola, CEO of Sabadell, believes that this trend can be the “turning point” of a crisis that was first anticipated when the results for 2012 were announced.

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23 January 2014 07:23 PM

by

ACN

Barcelona (ACN).- Banc Sabadell, the second largest banking company in Catalonia has ended 2013 with a net profit of €247.8 million, three times more than in 2012, after consuming €1,736.6 million in provisions and allowances for non-payments of loans, impairment of property and other financial operations. Due to the acquisition and account consolidation of purchased banking companies, and because of the new regulations of the Bank of Spain on credit repayment, the percentage of delayed or unpaid loans has climbed to 13.63%, 46% more than in 2012. Without the refunding operations, it would have been fixed at 11.13%. The bank’s core capital, which is the main solvency indicator, stood at 12% and, with the new Basel III, it was set at 10.1%. Jaume Guardiola, Sabadell’s CEO, believes that this trend can be the “turning point” of a crisis that was first anticipated when the results for 2012 were announced. Referring to the possible acquisition of Catalunya Banc, the President of Sabadell, Josep Oliu, insisted that it “did not enter [the company’s] plans for the future” and that they were essentially looking to internationalise the bank rather than to acquire new companies. The bank’s plan for the 2014-2016 period will focus on increasing international activities and increasing the profitability of the assets.


Credit portfolio grows by 4.2%

The total assets consolidated by Sabadell amounted to €163,441.5 million, 1.2% more than the previous year. Out of these assets, credit portfolio provided for €124,614.9 million, a 4.2% increase in annual terms. This portfolio grew significantly because it included the figures from the branches of the former Caixa Penedès savings bank, which was bought from Banco Mare Nostrum (BMN), as well as the assets of Lloyds España and of Banco Gallego, acquired during the last quarter of the previous year.

Within this credit portfolio of €124,614 million, mortgage loans, amounted to just under 46 % of the loans (until the 31st of December), with a total amount of €57,580 million, 3.7 % more than in 2012. Despite this fact, the entire retail loan business increased by 7.5%. Jaume Guardiola announced that in 2014 the bank is intending to further increase business loans by 20%.

Possible “turning point”

Josep Oliu explained that the number of unpaid loans had risen at the end of 2013 to reach 13.63%, representing a 46 % increase over 2012 when it amounted to 9.33 %. The bank explained that such an unfavourable increase was due to two factors: firstly, to the Bank of Spain’s latest law requiring banks to refinance certain types of loans, and secondly, to the expansion of the scope of the bank with the additions of Caixa Penedès, Lloyds España and Banco Gallego.

However, the bank pointed out that the yearly outflow of money had dropped by €64 million, representing a “turning point” after four quarters of a “slowing-down” in the influx of potentially problematic assets in the bank’s stock. The coverage rate in relation to credit exposure ended the year at 13.61%, amongst the highest in the sector.

The bank has highlighted its success in the number of sales of foreclosed properties it had accumulated. In this regard, the group has sold 18,501 properties, representing 16% of the target budget with a value of €3,120 million. This amounts to an increase of 34 % over 2012 and 20% more than the target set for 2013.

Customer funds increased by 18%

Customer funds ended 2013 with a total of €94,497.2 million, representing an increase of 17.9% compared to 2012. This strong performance is mostly due to the increase in savings accounts (+36.1 %) and to an increase in deposits (+13.6 %). In 2013, Sabadell reached 6.5 million customers after a strong commercial activity that allowed the Catalan company to gain 116,849 new customers during the fourth quarter, representing a rate of 8,900 customers a week. Josep Oliu stressed that Sabadell had been able to triple its number of customers during the crisis, passing from 2.1 million to over 6.5 million, notably thanks to the acquisition of other companies.

Margins

The results highlighted the interest margin, which measures the ordinary activities of the bank, the difference in the cost of attracting money and marketing it. This margin, conditioned by very low interest rate set by the European Central Bank, ended the year with €1,814.7 million, 2.9% less than in 2012. However, the bank stressed that these were the results for the whole year and that if you only considered the second half, the margin grew by 10% compared with the first half, which marks a “change in tendencies” that should further improve in 2014.

Within this range of interests, revenues from commissions increased, providing €759.67 million, 20.8% more than in 2012.

Gross margin, the difference between revenue and financial costs, stood at €3,976 million in 2013, 34.4% more than the previous year. Operation costs have helped improving such a margin with a reduction of 12.5%. The efficiency ratio improved in 2013 to reach 47.64%, meaning that to receive €100, the company had to spend €47.64, while in 2012, it consumed €51.10.

Finally, the margin before provisions (revenue minus expenses) reached €2,062.3 million in 2013, 59.9 % more than in 2012.

Core capital

The capital ratio in terms of Tier 1 core capital, reached 12 % by the 31st of December 2013, whereas in 2012 it was at 10.4%. With this result, Sabadell anticipates Basel III regulations and the conditions of this new rule capital ratio are 10.1% above the Basel III minimum requirements.

A new strategic plan to encourage internationalisation

Josep Oliu referred to the new strategic plan for 2014-2016 which is currently being drafted and will be presented on the 11th of February. The bank’s President announced that the plan, entitled ‘Triple’, would replace the previous two, ‘Optima’ (2006) and ‘Create’ (2010). One of the goals of this strategic plan will be encouraging internationalisation. Oliu said that not purchasing any major companies between 2014 and 2016, would consolidate the trend to gain shares on the international market, something that “we would have liked to have already established before the start of the crisis, and it would have  allowed us to sail in a different direction” during the years of economic contraction in the domestic market, he explained.

So far in 2014, Sabadell should continue its internationalisation, initiated in the United States and Mexico where, in 2014, it will only work as an entity that grants loans but cannot take deposits. It is expected that the authorisation to operate as a bank in Mexico will be granted in 2015.

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  • Josep Oliu, President of the Banc Sabadell, announcing the 2013 results (by J. Molina)

  • Josep Oliu, President of the Banc Sabadell, announcing the 2013 results (by J. Molina)