So many years of waiting for a rate hike, and this hike was accompanied by the fear of a recession and a specific tax for public banks. Although the effects of rise in the price of silver are still imperceptible (barely 3 million in the income statement), Banco Sabadell is already improving the profitability targets set in its strategic plan. The company was targeting a return on tangible equity (ROTE) of 6% by the end of 2023, but ended the half at 7%; half a point higher than it looked in March. For this reason, it has revised the data upwards and has already placed it at 7% for the full year. At least until you see how the executive tax affects you.
The entity headed by César González-Bueno presented its results for the first half of the year on Thursday, which ended in a 78% increase in profits up to 393 million. The improvement in activity enabled it to once again exceed its profitability objectives – it had already achieved this in the first quarter -; 7%, which will be the target for December “not counting the possible tax, the details of which are not known,” said the manager.
He refused to speculate on a tax that will have a rate of 4.8% on income in Spain. He asked that it be applied “in a neutral manner” and warned that the main concerned would be the shareholders. In the specific case of Sabadell, 50% of the capital is held by less than “224,000 private shareholders”, whose median investment is 1,950 euros. The remaining 50% are made up of institutional investors.
The tribute arrives in the midst of a profit escalation, but without the entity having yet tasted the rise in interest rates. The rise in the price of silver occurred in July and the rise in Euribor only brought in 3 million euros to the bank account. Despite the revision of the profitability target, González-Bueno pointed out that “it does not yet cover the cost of capital”.
“The rate environment has been extraordinarily negative and is now normalizing, but it’s a downward normalization,” said Leopoldo Alvear, chief financial officer. In the past five years, the bank ibex has fallen by 50%, while the ibex 35 has only fallen by 25%, the ibex of energy has increased by 20% and the construction ibex increased by 30%.
“We continue to focus on the transformation of the entity and we are achieving all the objectives for this year”, assured the bank. Beyond the commitment to digitization, the other side of the transformation has been the closure of offices and the ERE approved last fall for 1,380 people; the second in just two years, helping to reduce costs up to 4.8%.
Banco Sabadell is waiting to see what will happen in the fall
The entity hopes that the long-awaited rise in rates will “compensate for the deterioration in asset quality” which could cause a recession. So far, there are no signs that delinquencies will increase after the portfolio review, he maintains. The ratio of non-performing loans has been reduced compared to comparable quarters and closed the month of June at 3.31%. The data is particularly relevant on this occasion, since throughout the second quarter the lack of anti-pandemic financing approved by the Official Credit Institute (ICO) came to an end.
In addition, problem assets are reduced after the sale of the Austro portfolio, made up of 400 million unsecured loans, to the Norwegian fund Zolva. the bank has covered 52.3% of loans at risk. Meanwhile, the company reached an all-time high for mortgage loans in Spain last quarter, with 1,501 million euros, 19% more than in the previous quarter. Consumer credit also increased (+17%), to 805 million, and card billing (+16%) to 5,541 million.
Outstanding loans ended the first half with a balance of 158,074 million euros. Total assets managed by the group they amounted to 257,229 million, up 2.8% over one year and 1.6% over the quarter.