Banco Sabadell's Q3 2024 Results

Banco Sabadell has delivered a strong performance in the third quarter of 2024, as detailed in their recent earnings call. CEO César González-Bueno announced a net profit of €1.3 billion for the first nine months, with a record quarterly net profit exceeding €500 million.

The bank has seen a year-on-year growth in performing loans and a surge in mortgage origination in Spain. TSB, a subsidiary of Banco Sabadell, contributed significantly to the group's profits.

Looking ahead, the bank is focused on growth and profitability, with plans for shareholder remuneration and a stable cost of risk.

Key Takeaways

• Banco Sabadell's net profit reached €1.3 billion for the first nine months of 2024, with a record quarterly net profit of over €500 million.
• Performing loans grew by 2% year-on-year, and mortgage origination in Spain increased by 82% year-on-year.
• Net interest income (NII) slightly declined by 0.7% quarter-on-quarter, but net interest margin (NIM) increased.
• Non-performing assets (NPAs) decreased by 3% quarter-on-quarter, with improved asset quality.
• The Common Equity Tier 1 (CET1) ratio strengthened to 13.8%, and the bank anticipates a net profit of around €1.6 billion in 2025.
• TSB's return on tangible equity is expected to reach double digits in 2025, with a forecasted total cost decline of 3% for both 2024 and 2025.

Company Outlook

• Banco Sabadell expects mid-single-digit growth in NII and a total cost of risk around 45 basis points in 2024.
• The bank projects a return on tangible equity above 13% in 2025.
• Plans include €2.9 billion in total shareholder remuneration over 2024 and 2025.
• Potential opportunistic issuances of over €5 billion in capital instruments.

Bearish Highlights

• Core results showed a 3% quarter-over-quarter decline due to lower NII and inflation-related cost increases.
• A one-time expense of approximately €14 million was reported in Spain due to updated collective bargaining agreements and personnel costs.
• Net interest income (NII) is projected to slightly decline in Q4 2024 in the UK.

Bullish Highlights

• Asset quality improvement with a 3% reduction in NPAs and a total cost of risk of 44 basis points.
• TSB's NII grew by 3.5%, contributing to the group's NII resilience.
• Liquid assets increased to €46 billion, with a loan-to-deposit ratio of 95%.

Misses

• The bank experienced a slight decline in net interest income (NII) quarter-on-quarter.
• Total costs rose by 2.7% quarter-on-quarter, though aligned with annual guidance.

Q&A Highlights

• The banking tax is included in the forecasts for 2025 but is subject to change.
• Deposit costs in Spain are expected to remain stable or decrease, with a migration to term deposits.
• TSB's restructuring strategy aims for a 3% reduction in net costs for both 2024 and 2025, driven by a digital-first approach and automation.
• Securitizations are part of the capital strategy, with a €1 billion deal linked to corporate loans in Miami expected to close by year-end.

Banco Sabadell (BME: SAB) has shown resilience and strategic growth in its third-quarter performance, positioning itself for continued success in the upcoming year. The bank's focus on profitability, asset quality, and cost management is reflected in its solid financial results and optimistic outlook for 2025. Investors and stakeholders can look forward to further updates and detailed guidance in January 2024.

Full transcript – None (BNDSF) Q3 2024:

Gerardo Artiach: Good afternoon. Thank you for joining us on Banco Sabadell's Third Quarter 2024 Results Audio Webcast. Please be welcome. As in previous occasions, the presentation will be given by César and Leo. They will cover the main highlights and details of the commercial and financial performance in the third quarter of the year. The presentation will be followed up by a Q&A session. We are aware that it is a very busy day, so we will try to squeeze the whole session in one hour. With no further ado, let me hand it over to César. César the floor is yours.

César González-Bueno: Thank you, Gerardo. Good afternoon everyone and welcome to Sabadell's third quarter 2024 results presentation. Once again Sabadell has delivered a set of excellent results. Let's begin with the key messages on Slide 4. First of all, commercial activity has continued to show positive momentum during the year, despite the typical third quarter seasonality. As a result, performing loans have grown by 2% year-on-year and 3% year-to-date. Secondly, the structure of our balance sheet and our management actions provide for a relatively lower NII sensitivity to interest rates. So, as our NII remained resilient with a slight decline of 0.7% quarter-on-quarter, while NIM slightly increased by four basis points. Thirdly, asset quality metrics continue to improve with a remarkable 3% reduction in NPAs in just one quarter. Coverage has increased by 1 percentage point during this period. This positive trend in asset quality also reflects positively on the total cost of risk, currently stands at 44 basis points, 2 basis points less than the previous quarter. Fourthly, the group net profit reached €1.3 billion in the first nine months of 2024 with TSBs contributing €168 million. Our return on tangible equity considering the last 12 months, and this is important, stands at 13.2%. On the other hand, our common equity Tier 1 fully loaded ratio has reached 13.8% with an increase of 32 basis points over the quarter. As you can see in the bottom of slide, in Q3, we have delivered record quarterly net profit in the history of Bank Sabadell.

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