Banco Sabadell recorded a profit of €347 million in the first quarter of the year, a 29.1% reduction compared to the same period last year. This decrease was due to an anticipated performance in net interest income, lower commissions, and non-recurring costs from a new early retirement plan, according to a statement sent to the Comisión Nacional del Mercado de Valores (CNMV) on Tuesday.
The bank confirmed it is keeping its profitability and shareholder remuneration targets for this year and next. The early retirement plan had a €55 million impact but is expected to generate annual savings of €40 million from 2027. Additionally, the bank was affected by a €14 million gross sterling hedge linked to the sale of TSB.
César González-Bueno, the CEO, stated that the bank's risk profile is "good" and that it can generate capital organically while growing its volumes. "Our capacity for execution and delivery remains intact. For this reason, we are maintaining our profitability forecasts for this financial year and for the end of the strategic plan, and our commitment to shareholder remuneration," he said.
Sergio Palavecino, the chief financial officer, explained that the entity has "a strong balance sheet, and strong and healthy growth," which allows it to maintain its goal of reaching a 16% return on tangible equity (ROTE) by 2027. The group's ROTE stood at 14.1% on a recurring basis, excluding TSB and extraordinary impacts, and its fully-loaded CET1 solvency ratio rose to 13.2% at the end of March.
Commercial Activity Shows Growth
Commercial activity continued its "positive trend," with growth across all segments in Spain and a good performance from international businesses. Live credit, excluding TSB, stood at €121.587 billion at the end of March, a 5.6% increase.
In Spain, live mortgage credit grew by 4.1% to €39.8 billion, while consumer credit rose by 14.8% to €5.5 billion. Loans and credit to businesses increased by 2.1% to €44.8 billion. Customer funds, not including TSB, totalled €184.768 billion, up 5.9% year-on-year. Of this, on-balance sheet customer funds were €132.239 billion (+4.3%) and off-balance sheet funds were €52.539 billion (+10.4%).
Income and Costs Overview
Banco Sabadell's banking business income for the period was €1.187 billion, a 3.1% decrease without TSB. Net interest income was €872 million, down 3.5%, which the bank said was "in line with what was anticipated, due to the context of lower interest rates."
The bank expects net interest income to "gradually improve its trend" from this quarter, ending the year with growth exceeding 1%. This improvement is expected to be driven by a higher and more volatile interest rate environment, growth in business volumes, and a wider customer spread. Net commissions were €315 million, a 2.2% decrease due to lower service commission contributions.
Total costs rose to €624 million, with recurring costs increasing by 3.4%. This figure includes the impact of early retirements, which are projected to reach €90 million by the end of the year. The efficiency ratio, excluding TSB, was 52.2% at the end of March. Provisions grew by 4.6% year-on-year, and the cost of credit risk was 27 basis points, with the total cost of risk at 38 basis points.
Non-Performing Loans and Future Outlook
The non-performing loan ratio, excluding TSB, was 2.55% at the end of March, a 0.10 percentage point reduction from a year earlier. The Stage 3 coverage ratio with total provisions increased to 71%. The bank attributed the improvement in the non-performing loan rate to a €106 million reduction in problematic assets during the quarter, comprising an €80 million reduction in Stage 3 balances and a €26 million reduction in problematic real estate assets.
Looking ahead, Banco Sabadell will pay an extraordinary dividend of 50 cents per share on 29 May, following the sale of TSB. The final price of this transaction was €2.86 billion.
