Banco Sabadell earned 205 million in the first quarter, 4% less than in the same period of 2022, as reported this Thursday to the National Securities Market Commission (CNMV). This setback is explained by the payment of the new extraordinary tax on banks, which for the entity means paying 157 million. Without this effect, profit would have reached almost 362 million euros, 69.4% more. The entity chaired by Josep Oliu, like the majority of the sector, has already appealed to the courts for considering it unconstitutional and for generating a comparative grievance with its European competitors. The market has received these numbers with a drop of more than 1% at the beginning of the session.
If these extraordinary expenses are removed (the tax will be paid two years and, in this year, the 157 million that it will pay in 2023 has already been noted), the entity makes a good assessment of the startup: the pure banking business of the entity showed the good performance of the activity and the fruits of the rise in interest rates, an improvement that already began to be noticed in the last quarterly results of 2022. The recurring margin, which indicates the interest margin plus commissions and subtracts costs, rose up to 720 million euros, 46.7%. Only the interest margin rose by 28%, up to 1,100 million (it is in this item that the effect of the ECB and Euribor rate hikes is best reflected). Meanwhile, income from commissions fell by 2.4%, in a situation that is happening in all entities: the worst behavior of these is offset by the rise in interest.
“We started the exercise well. Customer processes continue to improve, both in mortgages, accounts, vertical business solutions, business services… We delivered good results for yet another quarter”, highlights César González-Bueno, CEO of Sabadell.
Those figures, yes, are much higher than those registered in the business: outstanding credit fell 1.4% in the quarter (152,637 million), the mortgage portfolio rose 0.7% (38,894 million) and loans to companies fell by 0.7% (42,950 million), while consumer credit grew at a rate of 11.7%. The latter shows the strength with which commercial activity is advancing, influenced by price increases, since card billing rose 11% and store terminals 19%. In mortgages, the evolution continues to be positive, although as the CEO explained at a press conference, there has been a decline in new production in the first quarter of 19% compared to the same period in 2022, which is due according to the bank to the change in monetary policy. On the other hand, the result of financial operations of Sabadell has almost completely vanished (it has gone from 33 million to only one million).
The costs of the entity led by González-Bueno stood at 730 million euros, 0.7% more. This slight increase is explained by the rise in amortizations and general costs boosted by inflation. There was also a slight increase in the workforce, which went from 12,836 employees in March 2022 to 13,077 last March. The bank has maintained its policy of provisions for insolvencies, by reserving 236 million euros, slightly more than the 227 million of 2022.
Strong progress in the UK
The British subsidiary TSB has gone from being a headache for the entity years ago to a cylinder of oxygen. The business in the United Kingdom contributed a profit of 53 million euros to the perimeter of the Valles bank, almost 177% more in current euros (192% in constant euros, without taking into account the currency effect). TSB’s interest margin reached 303 million euros, 12% more than in the same period of the previous year, while net commissions fell almost 8% to 28 million.
At group level, the rise in interest rates has also allowed the volume of term deposits to increase, which reached 18,732 million euros, 19% more than a year ago and 13.8% more than the previous quarter . Spanish banks, for the moment, are being one of the least generous in Europe, partly due to the excess liquidity that exists in the sector (Sabadell’s LCR liquidity ratio is 220% at the end of March, more than double what is required). Another factor that influences this lower remuneration of savings is the ratio of loans to deposits, which stands at 95%. In other words, the Vallesan entity lends less than what it has in deposits.
Liquidity is one of the metrics that has been followed the most in banking in recent weeks, after the Silicon Valley Bank and Credit Suisse crises. In fact, the bank headed by Oliu has been one of the hardest hit on the stock market by these turbulences, although it still accumulates an advance of around 10% this year.
In a statement, Sabadell comments on an improvement in the bank’s capitalization, which stands at 12.78%, according to the CET1 ratio fully loaded, which represents the highest quality capital, 24 basis points more than three months ago. Despite the inherent risk of rising interest rates, the non-performing loan rate fell until March and stood at 3.52%. On the other hand, ROTE —return on tangible capital— stood at 9.9% in March (it would have been 11.4% without the effect of the bank tax).
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