Sabadell. 1Q 2016 Results. April 22, 2016

Transcription

1 Sabadell 1Q 2016 Results April 22, 2016

2 Disclaimer This presentation (the "Presentation") has been prepared and is issued by, and is the sole responsibility of Banco de Sabadell, S.A. ("Banco Sabadell" or "the Company"). For the purposes hereof, the Presentation shall mean and include the slides that follow, any prospective oral presentations of such slides by the Company, as well as any question-and-answer session that may follow that oral presentation and any materials distributed at, or in connection with, any of the above. The information contained in the Presentation has not been independently verified and some of the information is in summary form. No representation or warranty, express or implied, is made by Banco Sabadell or any of its affiliates (Banco Sabadell Group), nor by their directors, officers, employees, representatives or agents as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or opinions expressed herein. 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While these forward looking statements represent our judgment and future expectations concerning the development of our business, a certain number of risks, uncertainties and other important factors could cause actual developments and results to differ materially from our expectations. These factors include, but are not limited to, (1) general market, macroeconomic, governmental, political and regulatory trends; (2) movements in local and international securities markets, currency exchange rate and interest rates; (3) competitive pressures; (4) technical developments; (5) changes in the financial position or credit worthiness of our customers, obligors and counterparts. These and other risk factors published in our past and future filings and reports, including those with the Spanish Securities and Exchange Commission ( CNMV ) and available to the public both in Banco Sabadell s website ( and in the CNMV s website ( as well as other risk factors currently unknown or not foreseeable, which may be beyond Banco Sabadell's control, could adversely affect our business and financial performance and cause actual results to differ materially from those implied in the forward-looking statements. The information contained in the Presentation, including but not limited to forward-looking statements, is provided as of the date hereof and is not intended to give any assurances as to future results. No person is under any obligation to update, complete, revise or keep current the information contained in the Presentation, whether as a result of new information, future events or results or otherwise. The information contained in the Presentation may be subject to change without notice and must not be relied upon for any purpose. This Presentation contains financial information derived from Banco Sabadell s unaudited financial statements for the three-month period ended March 31, None of this financial information has been audited by our auditors. Financial information by business areas is presented according to GAAP as well as internal Banco Sabadell group s criteria as a result of which each division reflects the true nature of its business. These criteria do not follow any particular regulation and can include forecasts and subjective valuations which could represent substantial differences should a different methodology be applied. Market and competitive position data in the Presentation has generally been obtained from industry publications and surveys or studies conducted by third-party sources. Peer firm information presented herein has been taken from peer firm public reports. There are limitations with respect to the availability, accuracy, completeness and comparability of such data. Banco Sabadell has not independently verified such data and can provide no assurance of its accuracy or completeness. Certain statements in the Presentation regarding the market and competitive position data are based on the internal analyses of Banco Sabadell, which involve certain assumptions and estimates. These internal analyses have not been verified by any independent source and there can be no assurance that the assumptions or estimates are accurate. Accordingly, undue reliance should not be placed on any of the industry, market or Banco Sabadell s competitive position data contained in the Presentation. The distribution of this Presentation in certain jurisdictions may be restricted by law. Recipients of this Presentation should inform themselves about and observe such restrictions. 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3 1Q take-aways Profitability and efficiency Commercial activity Solvency and asset quality TSB results and integration update 2

4 1Q take-aways Profitability Continued resilience of NII, which grew in both Spain and UK despite increased pressure Commission revenue fell QoQ mainly driven by market conditions impact in AuM Operating costs decreased QoQ Extraordinary trading gains resulted in an increase in extraordinary provisions Commercial activity Continued improvement in lending mix and stable performing loan book Ongoing market share increase across products in Spain Digitalisation of product platform continued, including key distinctive initiatives i.e. Sabadell Wallet, Proteo Mobile, etc. Asset quality & solvency TSB Sustained reduction in NPL ratio, reaching single digits at 9.45% Strong capital position with fully loaded CET1 increasing to 11.8% Solid TSB performance, which continues to grow faster than scheduled in the business plan Costs reduced QoQ, as a result of point-in-time actions Integration on track, both in terms of costs and timing 3

5 1Q take-aways Profitability and efficiency Commercial activity Solvency and asset quality TSB results and integration update 4

6 Income statement Sabadell group Sabadell, ex-tsb 1Q Q Q 2016 %QoQ %YoY 4Q Q 2016 %QoQ %YoY Net Interest Income % 51.4% % 8.2% Equity method & dividends Commissions % 13.5% % 0.4% 1 Trading income & forex % -60.3% % -60.9% Other operating results % 10.7% % 7.6% Gross operating income 1, , , % -5.9% , % -24.8% Personnel costs % 38.0% % 1.9% Administrative costs % 70.3% % 0.1% Depreciation & Amortization % 27.8% % 2.9% Pre-provisions Income 1, % -29.5% % -36.8% Total provisions & impairments % -52.0% % -52.0% Gains on sale of assets Negative goodwill Profit before taxes % 49.8% % 15.6% Taxes and others % 64.0% % 32.3% Minority interest % 16.1% % 16.1% Attributable net profit % 44.3% % 9.0% * Note: Euro millions. The EURGBP exchange rate of 0.77 used for P&L corresponds to the daily average rate of 1Q commissions have been restated to include FX commissions, which were previously included in trading income and forex. Before this restatement, 1Q15 commissions amounted to EUR225.8mm and 4Q15 commissions amounted to EUR275.1mm. 5

7 NII maintains its positive trend Group net interest income evolution Euro millions Sabadell, ex-tsb Euro millions QoQ growth: +0.8% Q15 2Q15 3Q15 4Q15 1Q16 YoY growth: +51.4% QoQ growth: +1.2% 4Q15 TSB Euro millions 1Q QoQ growth: +2.1% +9.0% in GBP 1 Note: The EURGBP exchange rate of 0.77 used for P&L corresponds to the daily average rate of 1Q Assuming constant exchange rate. 4Q15 1Q16 6

8 Resilience in net interest margin Net interest margin evolution In percentage Customer loan yield and cost of funds In percentage 3.50% 3.47% 3.39% 3.32% 3.32% 3.20% 3.29% 3.28% 3.28% 2.67% 2.75% 2.84% 3.06% 3.08% 3.06% 2.06% 2.22% 2.29% 2.35% 2.44% 2.47% 2.68% 1.82% 1.83% 1.91% 1.44% 1.25% 1.10% 0.97% 1.29% 1.36% 1.40% 1.49% 1.57% 1.59% 1.62% 1.65% 1.72% 0.56% 0.57% 0.44% 0.33% 0.88% 0.73% 0.62% 0.53% 0.44% 0.59% 0.49% 0.38% 0.25% 0.17% 0.16% 0.09% 0.01% 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 Customer spread Net interest margin as % of ATA Customer loan yield Customer loan yield, ex-tsb Customer spread, ex-tsb Net interest margin as % of ATA, ex TSB Cost of customer funds Euribor 12M Cost of customer funds, ex-tsb 7

9 Commissions reflect a lower contribution mainly driven by market volatility Group commission income evolution 3 Euro millions Sabadell, ex-tsb 3 Euro millions QoQ growth: -5.4% Q15 1Q16 1Q15 2Q15 3Q15 4Q15 1Q16 Asset Mgmt 1 Lending YoY growth: +13.5% QoQ growth: -6.6% Services TSB Euro millions Note: The EURGBP exchange rate of 0.77 used for P&L corresponds to the daily average rate of 1Q Includes mutual funds commissions and pension funds, insurance brokerage and wealth management. 2 Assuming constant exchange rate commissions have been restated to include FX commissions, which were previously included in trading income and forex. Before this restatement, 1Q15 commissions amounted to EUR225.8mm and 4Q15 commissions amounted to EUR275.1mm Q Q16 QoQ growth: -15.2% -9.4% in GBP 1 8

10 We have reduced personnel cost this quarter Group personnel expenses evolution Euro millions Sabadell, ex-tsb Euro millions Recurrent QoQ growth: +1.1% Q15 Recurrent TSB Euro millions 1Q16 Non-recurrent 1Q15 2Q15 3Q15 4Q15 1Q16 Recurrent Non-recurrent YoY growth: +38.0% QoQ growth: -2.2% Note: The EURGBP exchange rate of 0.77 used for P&L corresponds to the daily average rate of 1Q Assuming constant exchange rate Q15 Recurrent Q16 Non-recurrent Recurrent QoQ growth: -14.1% -8.2% in GBP 1 9

11 and there is also an overall reduction in general expenses across the group Group general expenses evolution Euro millions Sabadell, ex-tsb Euro millions Recurrent QoQ growth: +0.5% Q15 2Q15 3Q15 4Q15 1Q16 Recurrent YoY growth: +70.3% QoQ growth: -8.2% Non-recurrent Note: The EURGBP exchange rate of 0.77 used for P&L corresponds to the daily average rate of 1Q Assuming constant exchange rate. 4Q15 Recurrent TSB Euro millions Q15 Recurrent 1Q16 Non-recurrent Q16 Non-recurrent Recurrent QoQ growth: -9.6% -3.4% in GBP 1 10

12 1Q take-aways Profitability and efficiency Commercial activity Solvency and asset quality TSB results and integration update 11

13 Balance sheet dynamics Customer funds and loans evolution Euro millions Sabadell group Sabadell, ex-tsb Mar-15 Dec-15 Mar-16 %YoY %QoQ Mar-15 Dec-15 Mar-16 %YoY %QoQ Total assets 167, , , % -2.2% 167, , , % -2.5% Of which: Gross loans to customers ex repos 118, , , % -1.9% 118, , , % -1.3% Fixed income portfolio 27,259 25,413 27, % 6,4% 27,259 23,692 25, % 6.4% Total liabilities 155, , , % -2.4% 155, , , % -2.7% Of which: On-balance sheet customer funds 94, , , % -0.2% 94,899 96,227 97, % 1.3% Term funds 1 49,419 46,953 48, % 2.3% 49,419 42,377 43, % 2.4% Savings accounts 12,680 33,647 32, % -4.1% 12,680 14,445 14, % 0.3% Current accounts 32,800 50,889 50, % 0.2% 32,800 39,405 39, % 0.5% Wholesale funding 22,340 27,068 24, % -9.5% 22,340 22,569 20, % -9.4% ECB funding 8,900 11,551 11, % -4.8% 8,900 11,551 11, % -4.8% Off-balance sheet funds 34,215 37,381 37, % -0.7% 34,215 37,381 37, % -0.7% Of which: Mutual funds 18,674 21,427 21, % -1.3% 18,674 21,427 21, % -1.3% Pension funds 4,529 4,305 4, % -2.6% 4,529 4,305 4, % -2.6% Third party insurance products 7,220 7,647 7, % 4.4% 7,220 7,647 7, % 4.4% Our performing loan book (ex-tsb) remained stable when adjusting for APS payment 2 1 Term funds include term deposits and other funds placed in the retail network. Exclude repos and deposits from institutional clients. 2 1Q 2016 gross loans have been reduced to reflect the 825 million payment received regarding Banco CAM Asset Protection Scheme. Note: Exchange rate EURGBP used for Balance Sheet data of (as of 31-Mar-16). 12

14 Market shares by product in Spain continued to increase Market shares by by products 2 Companies Mar.15 Mar.16 Individuals Mar.15 Mar.16 1 Source: Sabadell estimates and Inverco. Note: 2016 data as of March 2016 or last month available. 1 Insurance calculated per number of contracts. 2 PoS market share has been adjusted to include international transactions. 13

15 with high standards in quality of service Level of service quality Evolution of Sabadell quality index vs. sector Sabadell Sector Maintaining the quality gap versus the sector Source: STIGA, EQUOS (Objective Quality Analysis in Banking Networks, 1Q 2016). 14

16 We are engaged with the digital transformation Transformation plan There, wherever you are Client service Key milestones achieved during the Triple plan: 85% of transactions through remote channels 18% of sales through digital channels More than 15 monthly connections per client through the Mobile App Clients - Mobile Clients - Web Thousands Thousands +60% +19% 1,312 1,820 1, Productivity Efficiency Q Q 2016 TSB contributes an additional c.1.6mm digital customers as of 1Q

17 and continue to innovate Digital Signature Launched in December 2015 Sabadell Wallet Launched in February 2016 Digital & Agile Lab Communicated to all retail customers - Code card is replaced by a pin code received in our clients mobile phone - use of mobile application Compliance with Central Bank regulations Available in main application stores Continuous improvements to increase usability Solution for any kind of mobile device Successfully launched in Barcelona Opened in 2015, provides an agile inhouse platform for the development of leading digital fintech tools Plan for 2016 Extension to business clients Instant payment capability Launch of new lab in London expected for this year 16

18 while improving customer experience Plan for 2016 Proteo Mobile Brings the bank to customers' homes Available to business, personal and private banking segments Main functions: Commercial visits, risk sanctions, simulations, registering of new clients ~ 3,500 tablets in use + 16,000 new businesses captured Hub & Spoke branch Spoke 1 HUB Spoke 2 Spoke 3 Implemented in 466 branches distributed throughout the territory: - Specialised management - Commercial productivity Expand to additional: branches reshaped + 2,000 employees impacted + 900,000 clients involved Launch of new TSB mobile app expected this year 17

19 Customer experience represents a key cornerstone in our strategy Customer segment Sabadell 1Q 2016 NPS Ranking* NPS improvement since 2013 Retail -9% p.p. Affluent 17% p.p. SMEs (< 5M turnover) Companies (> 5M turnover) 21% p.p. 32% p.p. We are positioning to be leaders in NPS in every single segment by 2019 Source: 2015 Accenture NPS benchmark report. * Ranking within the peer group. 18

20 1Q take-aways Profitability and efficiency Commercial activity Solvency and asset quality TSB results and integration update 19

21 Strong capital position Common Equity Tier 1 phase in evolution In percentage 11.8% 11.5% 11.6% 11.5% 11.9% CET1 fully loaded at 11.8%* Mar.15 Jun.15 Sep.15 Dec.15 Mar. 16 * CET1 fully loaded ratio does not include positive value adjustments, from sovereign debt AFS gains. If we were to include this adjustments CET1 fully loaded ratio would increase to 12.0%. 20

22 NPL ratio continues its downwards trend Evolution of NPL ratio and NPL coverage In percentage 51.4% 52.8% 54.5% 53.1% 54.4% 55.3% 53.6% 54.7% NPL coverage 11.68% 10.98% 10.38% 9.86% 9.45% 8.51% 7.79% 7.50% NPL ratio 1Q15 2Q15 3Q15 4Q15 1Q16 3Q15 4Q15 1Q16 Sabadell ex-tsb Sabadell group Note: NPL ratio is calculated including contingent risk and 20% of the APS. 21

23 Rapid reduction in NPA continues NPL evolution, ex-tsb Data includes 20% of APS. Euro millions 17,727 17,386 16,777 15,910 14,863 13,962 13,122 12,344 11,674 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 On-balance sheet RE assets evolution, ex-tsb Data includes 20% of APS. Euro millions 0.7bn further reduction of NPLs during 1Q16 NPAs decreased by 0.7bn in 1Q16 Total problematic assets, ex-tsb Data includes 20% of APS. Euro millions 25,878 25,860 8,151 8,474 8,569 8,848 9,059 9,227 9,228 9,234 9,193 25,347 24,758 23,922 23,189 22,350 21,579 20,867 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 Note: NPLs include contingent risk. 22

24 The positive momentum in the Spanish real estate market Market commentary Real Estate is growing as an investment niche given its larger profitability vs. other products Prices, transactions and rental yields continue to increase Increase in use of financial aid by first-time buyers Strong interest from international private and institutional buyers (record year) Land transactions and developers activity start to gain momentum New property sales evolution (in units) 775, , , , , , , , ,389 63,130 67, Cum. Cum. Feb-15 Feb-16-29% Price expectations for individuals % of surveyed individuals who think house prices will fall, hold or raise (CIS survey) % yoy growth -25% +6% -18% -11% -2% +3% +11% +6% Fall Symptoms of a new real estate cycle, with improvement in prices and sales units Hold / NA Rise Source: INE, CIS (Consumer confidence index). 23

25 led to an improvement in real estate assets sales results Number of foreclosed assets sold Units Foreclosed assets sold Euro millions 2,164 2,916 2,428 3,902 4, Q15 2Q15 3Q15 4Q15 1Q16 1Q15 2Q15 3Q15 4Q15 1Q16 24

26 1Q take-aways Profitability and efficiency Commercial activity Solvency and asset quality TSB results and integration update 25

27 TSB continues to perform ahead of its business plan Strong contribution of TSB to the group s results NII continues to grow supported by strong intermediary growth and UKAR portfolio contribution Solid asset and deposit growth driven by franchise business Reduction in costs have mitigated the impact of lower for longer interest rate environment Strong management profit growth, up 75% year on year PCA s market share at 7.1% of new accounts, well ahead of the 6.0% target Positive NPS 1 progress, which increased to 20.8 from 16.6 Integration well advanced and migration planned developments well on track 1 NPS is based on the question On a scale of 0-10, where 0 is not at all likely and 10 is extremely likely, how likely is it that you would recommend TSB to a friend or colleague? NPS is the percentage of TSB customers who score 9-10 after subtracting the percentage who score

28 Integration on track, both in terms of cost and timing TSB migration program remains on track to be delivered by the end of 2017 Total costs in line with what was initially forecasted New TSB IT platform Design Phase has been completed successfully, IT&OPs Building Phase is progressing at full speed In parallel to the migration program, a new mobile banking app will be delivered this year Execution strategy and customer impact management plan already defined Key execution steps: Launch of a new TSB mobile app Implementation of a friends and family test pilot Capacity to launch a new online savings brand Migration event Proteo4UK fully operational 27

29 TSB income statement GBP in million 1Q Q Q 2016 %QoQ %YoY Franchise % 6.3% Mortgage enhancement % -26.0% Portfolio UKAR Net Interest Income % 13.6% Franchise % -13.6% Mortgage enhancement % -15.4% Portfolio UKAR % --- Other operating income % -19.7% Total income % 9.1% Total operating expenses (excl. one-offs) % -3.4% Franchise % -1.6% Mortgage enhancement Portfolio UKAR Impairment on loans & advances % 1.6% Management profit (excl. one-offs) % 75.1% 1Q Q Q 2016 %QoQ %YoY Franchise NIM 3.71% 3.45% 3.38% pp pp NII growth due to strong Franchise business volumes and contribution of UKAR portfolio Fees declining, as expected, due in part to lower interchange commissions and servicing costs of UKAR portfolio Improved fraud and impairment performance, benefiting from the economic environment and successful investment in detection processes Costs reduced QoQ, as a result of point-in-time actions Franchise NIM slightly reduced due to change of mix in asset portfolio towards lower margin secured lending 1 Franchise comprises the retail banking business carried out in the UK which offers a broad range of retail financial services. 2 Mortgage Enhancement is a separate portfolio of mortgage assets which was assigned to Total TSB with effect from 28 February This segment was established in response to a review by the Office of Fair Trading of the effect on competition of the divestment of TSB and is designed to enhance TSB s profitability. 3 Acquired UKAR Assets is a 3.0 billion portfolio of former UKAR mortgages and unsecured loans for which beneficial interest was acquired from Cerberus Capital Management group with effect from 7 December

30 TSB balance sheet GBP in million Mar 15 Dec 15 Mar 16 % YoY %QoQ Core mortgages 16,461 18,904 20, % 6.9% Mortgage enhancement 2,678 2,272 2, % -5.1% Portfolio UKAR --- 3,006 2, % Other net customer lending 2,242 2,215 2, % -0.7% Total Customer lending (Net) 21,381 26,397 27, % 3.9% Savings deposits 16,759 17,026 17, % 3.4% Current account deposits 7,031 7,872 8, % 4.1% Business banking deposits % -2.8% Total customer deposits 24,661 25,873 26, % 3.4% Mar 15 Dec-15 Mar 16 % YoY %QoQ Loan to deposit (Franchise) 75.8% 81.6% 83.8% 8.0 pp 2.2 pp Common Equity Tier 1 Capital ratio 19.8% 17.8% 17.7% -2.1 pp -0.1 pp Asset growth driven by strong Mortgage Intermediary business performance lending up c.4% QoQ and 28% YoY 1.9 billion of new mortgage applications in the quarter, maintaining the momentum from 2015 Strong customer deposits net inflow, particularly in savings, following recent rate increases Franchise loan to deposit ratio increased to 83.8% Strong capital position with CET1 at 17.7% Note: Customer lending and customer deposit exclude macro fair value hedge accounting adjustment. 29

31 More people than ever would recommend TSB NPS evolution Mortgage Gross Lending NPS improved from 16.6 (Dec 15) to 20.8 (Mar 16) Dec-13 Sep-14 Jun-15 Mar-16 Note: Net Promoter Score (NPS) is based on the question On a scale of 0-10, where 0 is not at all likely and 10 is extremely likely, how likely is it that you would recommend TSB to a friend or colleague? NPS is the percentage of TSB customers who score 9-10 after subtracting the percentage who score

32 Appendix 31

33 Annex 32

34 Gross lending by product type Sabadell group In percentage Sabadell, ex- TSB In percentage Loans and credits 29% Mortgages 57% Loans and credits 36% Mortgages 66% Working Capital 4% Leasing and renting 1% Working Capital 5% Leasing and renting 2% Note: Data as of March

35 Business mix by customer type Sabadell group In percentage Sabadell, ex- TSB In percentage Individuals 54% Public Sector 4% Real Estate Developer 6% Individuals 40% Public Sector 5% Real Estate Developer 8% SME 20% Other 3% Corporates 13% SME 27% Corporates 16% Other 4% Note: Data as of March

36 Credit spreads evolution Back book loan spreads by segment, ex-tsb In basis points Q15 2Q15 3Q15 4Q15 1Q 16 Total Mortgages to individuals SMEs Corporates Evolution of loan spreads by key segments, ex-tsb In basis points 1Q15 2Q15 3Q15 4Q15 1Q 16 Back book Front book Back book Mortgages to individuals SME Corporates Front book Back book Front book Back book Front book Back book Front book 35

37 Funding structure Funding structure In percentage Wholesale funding breakdown In percentage Wholesale funding 13.8% ICO financing 2.8% Repos 3.3% Retail issues 2.8% ECB 6.2% Deposits 71.2% Securitisation 24.6% ECP 10.2% Prefs + Subordinated 5.6% GGB 4.3% Covered bonds 49.4% Senior debt 6.0% Note: Data as of March

38 Term deposits: contractual rates and maturities Contractual rates on term deposits, ex-tsb In percentage Maturities of term deposits Euro millions 1.40% 1.19% 0.47% 0.37% 0.99% 0.76% 0.32% 0.34% 0.64% 0.24% Maturity Volume Average interest rate cost 2Q16 10, % 3Q16 6, % 4Q16 6, % 1Q17 5, % 2Q % >2Q % Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Stock New production/renewals 37

39 Wholesale funding cost evolution Wholesale funding cost evolution In percentage 3.54% 3.51% 3.41% 3.05% 2.71% 2.56% 2.35% 2.28% 2.28% 2.12% 2.27% 2.12% Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Wholesale funding cost Wholesale funding cost, ex-tsb 38

40 Wholesale funding maturities Maturity by product type Euro millions >2022 Outst. Amount Covered Bonds (CH) 720 2,022 1,561 1,124 2,165 2,108 1,119 1,289 12,108 GGB 0 1, ,059 Senior Debt 1, ,434 Preferred Shares and Subordinated Debt ,338 Other mid- and long-term financial instruments Total 2,300 3,163 1,679 1,124 2,590 2,645 1,144 1,328 15,973 Wholesale funding maturities Euro millions 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 2, % 3, % 1, % 1, % 2, % 2, % 1, % 1, % >2022 The size of the bubble represents the volume of maturities. The percentage number is the current level of coupon payment Note: Including TSB. 39

41 ALCO portfolio Fixed income portfolio evolution Euros in billion ALCO portfolio, Sabadell group Euros in billion Sep-15 Dec-15 Mar ALCO portfolio % of total assets 12.6% 11.1% 12.1% Duration (yrs) ALCO portfolio, Sabadell, ex- TSB Euros in billion Sep-15 Dec-15 Mar-16 Sep-15 Dec-15 Mar-16 ALCO portfolio, ex-tsb TSB Life insurance portfolio ALCO portfolio % of total assets 14.7% 12.7% 14.2% Duration (yrs)

42 ALCO portfolio composition ALCO portfolio composition evolution, Sabadell group Euros in billion sep-15 dic-15 mar-16 Spanish Public Debt Italian Government Debt US Government Debt UK Government Debt Other Government of which: Portuguese Government Mexican Government Netherlands Government Agencies Covered Bonds Corporates & Financials TOTAL

43 Evolution of NPLs and RE assets, ex-tsb Evolution of NPLs and RE assets, ex-tsb Data include 20% of APS. Euro millions 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 Gross entries 1, Recoveries -1,660-1,557-1,471-1,275-1,273-1,111 Ordinary net entries Change in RE assets Net entries + Change in RE assets Write-offs Real estate and NPL quarterly change

44 NPL ratios NPL ratios by segment, ex-tsb In percentage 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 Real Estate development and/or construction purposes 52.56% 52.11% 51.47% 52.17% 49.21% 47.21% 47.84% 38.81% 37.01% Construction purposes non-related to real estate dev. 8.38% 7.41% 7.35% 8.08% 9.03% 8.74% 8.58% 14.36% 12.18% Large corporates 6.19% 6.13% 6.30% 6.46% 6.55% 6.14% 5.41% 4.62% 4.58% SME and small retailers and self-employed 13.08% 13.08% 13.11% 12.60% 12.20% 11.96% 11.38% 10.83% 10.23% Individuals with 1 st mortgage guarantee assets 9.85% 9.75% 9.23% 9.25% 9.12% 8.76% 8.27% 7.83% 7.82% NPL ratio ex-tsb 13.94% 13.85% 13.44% 12.74% 11.68% 10.98% 10.38% 9.86% 9.45% Note: NPL ratio is calculated including contingent risk and 20% of the APS. 43

45 Sabadell real estate exposure Balance sheet (real estate exposure) Euro millions 24,877 22,269 From No RED 8,096 19,265 18,987 From RED 8,848 7,480 9,301 16,781 5,819 7,602 13,421 9,234 9,193 3,893 3,624 10,031 6,138 6,170 9,794 Other guarantees 1 Mortgage guarantee (1 st mortgage) Dec13 Dec14 Dec15 Mar16 Developer credit (Non Performing) Foreclosed assets² Developer credit (Performing) Note: Contingent exposures included. Unsecured assets or with pledge, personal or 2 nd mortgage guarantees. It does not include capital instruments. 1 Unsecured assets or with pledge, personal or 2 nd mortgage guarantees. 2 It does not include capital instruments. Euro millions and %. 44

46 Real Estate portfolio breakdown by asset class Real estate portfolio break-down Data as of March Euro millions (gross value) Developer credit break-down Data as of March Euro millions (gross value) Foreclosed assets 1 9, % Finished property 54% Under construction 6% Land 40% Developer loans 9, % Finished property 58% Under construction 5% Land 25% Others 2 12% March 2016 Developer loans 9,794 51% Normal 5,574 57% Substandard 596 6% Doubtful 3,624 37% % Total RE related exposure 18,987 Note: Contingent exposures Included. It does not include capital instruments. First mortgage guarantees and other guarantees. 1 It does not include capital instruments. 2 Other guarantees. 45

47 Real Estate portfolio breakdown by asset class and region Portfolio breakdown by maturity In percentage Portfolio breakdown by region Others 1 Land Under construction Finished product March 2016 >80% of finished properties in coastal areas and Madrid 1 Other guarantees. Note: Data as of March

48 REOs/Foreclosed assets segmentation Foreclosed assets by use In percentage Foreclosed assets by location In percentage Note: Data as of March

49 For any additional information, please contact: Investor Relations