Banco Sabadell Financial information bulletin First quarter 2005

Transcription

1 Banco Sabadell Financial information bulletin First quarter 2005

2 Index 1.- Introduction 2.- Main figures 3.- General Information 4.- Evolution of the profit and loss account 5.- Evolution of the balance sheet and changes in net assets 6.- Evolution of the businesses 7.- Shares First quarter 2005 Page 2

3 Disclaimer Banco Sabadell warns that this financial information bulletin may contain forecasts or estimations relating to the business evolution, the banks financial results or the evolution of the macroeconomic environment. Such forecasts or estimations constitute our opinion and future expectations, so certain risks, uncertainties and other major factors may signify that the real results significantly differ from the above forecasts or estimations. These factors include, but are not limited to, (1) market situation, macroeconomic factors, regulatory, policy or governmental guidelines, (2) movements on the national and international securities markets, exchange rates and interest rates, (3) competitive pressure, (4) technological changes, (5) alterations of the financial situation, the credit capacity or solvency of our customers, debtors or counterparties. The above factors may have an adverse effect on our business and the behaviour of the results which appear in the presentations and reports, both future and present, including those registered with the National Securities Commission (CNMV). The distribution of this document in other jurisdictions may be forbidden and the parties possessing this document must be aware of such restrictions and abide by them. By accepting this report you undertake to be bound by the above limitations. This document does not constitute an offer or invitation to subscribe or acquire any security, nor to take or cease to take an any type of economic decision, and neither this document no its content shall be the basis for a any form of contract or commitment. 1.- Introduction Macroeconomic environment General economic situation The global economy shows a favorable evolution, despite the moderated pace of growth. This moderation is linked to high oil prices and tighter economic policies. In United States, the Gross Domestic Product (GDP) of the fourth quarter of 2004 grew by an annual +3.9%, a similar pace to that of the economy during the second half of the nineties. Both private consumption and real estate investment have developed strongly. As far as inflation is concerned, the underlying consumer price index has continued to rise and in February reached 2.4% a year, the highest rate since August In the Euro zone, the economy shows modest growth beneath its potential. The GDP of the fourth quarter grew by an annual +1.6%, three tenths less than the previous quarter, as of the slowdown in exports and negative contribution of inventories. As regards taxation, the ministers of finance of the European Union have agreed to increase the flexibility of the Stability and Growth Pact (SGP). In the United Kingdom, the economy grew by an annual +2.9% in the fourth quarter, two tenths less than the previous quarter. The weakened industrial sector contracts with the favorable evolution of the services sector. In Japan, the economy disappointed during the fourth quarter of last year as a result of various natural disasters. Its GDP grew by a mere +0.1% a quarter, after having declined in the previous two quarters. First quarter 2005 Page 3

4 Evolution of GDP in United States and Eurozone 7,0 6,0 5,0 4,0 3,0 2,0 1,0 0,0-1,0-2,0-3,0 ene-92 ene-93 ene-94 ene-95 ene-96 ene-97 ene-98 ene-99 ene-00 ene-01 ene-02 ene-03 ene-04 ene-05 US GDP Eurozone GDP Evolution of GDP in United States and Eurozone 4,5 4,0 3,5 3,0 2,5 2,0 1,5 1,0 0,5 ene-92 ene-93 ene-94 ene-95 ene-96 ene-97 ene-98 ene-99 ene-00 ene-01 ene-02 ene-03 ene-04 ene-05 US GDP Eurozone GDP Official interest rates In United States, the Federal Reserve (Fed) has raised reference interest rates on two occasions, a quarter of a point each, up to 2,75%. In the last press release, the Fed appears more concerned by inflation, although it reiterated that the laxer monetary policy will probably be withdrawn in a limited manner. In the Euro zone, the Central European Bank (CEB) has kept the official interest rate unchanged at 2% since June of 2003 and this has occurred in a context in which economic growth is still sustained and inflation has been contained. The CEB has recently, however, placed more emphasis on excesses of liquidity associated with lower interest rates and on the increased price of assets. In the United Kingdom, the Bank of England (BoE) has kept the key interest rate unchanged at 4.75%. In the meeting in March, however, two of the nine members voted in favor of a quarter of a point increase. Lastly, the Bank of Japan has maintained an unchanged monetary policy. First quarter 2005 Page 4

5 Official interest rates in United States and Eurozone 7,5 6,5 5,5 4,5 3,5 2,5 1,5 0,5 ene-99 ene-00 ene-01 ene-02 ene-03 ene-04 ene-05 Eurozone: Official interest rates US: Official interest rates Long-term interest rates The long-term public debt markets have again evolved differently to the United States and the Euro zone. In United States, the ten-year bond interest rate has ended the quarter at 4.48%, above the 4.22% at the end of December. The strength of its economic activity, the surprising price increases and the change contained in the last release of the Fed explain this behavior. In the Euro zone, however, the German bond interest rate with the same maturity has stood at 3.62%, lower than the 3.68% at the end of the fourth quarter of The slower growth rate of the economy and controlled inflation keep down the interest rates of the longest sections of the curve. Evolution of long-term interest rates in United States and Eurozone 7,5 6,5 5,5 4,5 3,5 2,5 ene-99 ene-00 ene-01 ene-02 ene-03 ene-04 ene-05 Bond-10 US Bond-10 German Currency markets First quarter 2005 Page 5

6 In the currency markets, the dollar has ceased to depreciate as a result of the strength of the macroeconomic data and the Fed s change of direction. In particular, the dollar has appreciated against the euro, with a price at the end of March of USD/EUR, as against the USD/EUR at the end of the previous quarter. The yen has also depreciated against the dollar and has ended the quarter at JPY/USD, as against JPY/USD at the end of December. Exchange rate: Dollar/Euro and Yen/Dollar 1, , , , , , ,8 ene-99 ene-00 ene-01 ene-02 ene-03 ene-04 ene USD/EUR JPY/USD Latin America The Mexican economy continues to show signs of strength. GDP grew by an annual +4.9% over the last quarter of 2004, up from the previous +4.6%, driven by both internal demand and by exports. Inflation slowed in February, to an annual 4.3%, but is still higher than the Bank of Mexico s target. The highest Mexican monetary authority has continued to tighten its monetary policy. Moody's and Standard & Poor's have raised the credit rating of the sovereign Mexican debt as a result of the continued drop in indicators of external vulnerability and the greater strength of the economy in the face of external. In Brazil, the central bank has raised interest rates at the three meetings during the quarter a total of one and a half percentage points, up to 19.25%. The minutes of the last meeting, however, show that the cycle of interest rate hikes is nearing its end. On the other hand, in terms of economic growth recent developments have been positive. GDP grew by an annual +4.9% over the last quarter of 2004, following the spectacular +6.1% of the third quarter. For 2004 as a whole, activity grew by +5.2%, at a pace not seen since Lastly, Argentina has succeeded in considerably improving the profile of its public debt after over 76% of its creditors resorted to restructuring the securities which were in a state of suspended payments as of December GDP grew an annual +9% in 2004, two-tenths more than in 2003 and the highest figure for the past twelve years Variable income In March, the variable income markets have corrected part of the gains from the beginning of the year and have finished the quarter with uneven results. Investors have focused on those factors which could take the market into a restriction of liquidity (macroeconomic data on activity and inflation). In this respect, the declarations of the Federal Reserve have been significant when expressing greater concern about inflation. No less important was the spike in oil prices, up 34.48%, marking new First quarter 2005 Page 6

7 historical maximum prices. This is due to the fear that the strong demand could not be properly catered for. In United States, Standard & Poor s 500 has gained +1.83% in euros and the NASDAQ has lost 3.93%. The announcements of corporate moves are again to the fore, amongst which a noted case is Procter & Gamble s bid for Gillette, and SBC Communications for AT&T. As regards corporate results for the fourth quarter, the have exceed the agreed expectations though forecasts for 2005 have been more cautious than the market expected. Over the past month, information has also been released about the first quarter results of certain companies. Investment banks showed major results which have been a positive surprise. On the downside, General Motors has had to make a major reduction in its profits forecast which has negatively impacted the sector. In Europe, the Dow Jones STOXX 50 was up +3.29%. The fourth quarter results, as in the United States, made a surprising upturn. The differential factor was the impact of the appreciation of the euro, which has placed pressure on companies margins. In Spain, the Ibex 35 saw a revaluation of +1.96%. In the corporate sector, noted events were the bids by BBVA for the Italian bank BNL, and Telefónica s for the Czech operator Cesky Telecom. In Latin America, the main indices have shown major gains. The Brazilian index gained +5.28% in euros, driven by the strength of the macroeconomic data. The index of the Mexican exchange ended with an increase in euros of +2.36%. The rise of +8.40% in euros of the Argentine index is a result of investor optimism given the restructuring of the debt carried out by the government. Lastly, in Japan, the NIKKEI 300 gained in euros +1.21% during the quarter. Evolution of the business At the end of the first quarter, the consolidated profit and loss account of Banco Sabadell, which is presented for the first time adapted to the new accounting standards as stipulated in Circular 4/2004 of the Bank of Spain, shows a net attributed profit of million euros, an increase of 52.9% over that obtained in the same period of 2004, after adjusting it also to the new consolidation perimeters and accounting criteria for standardized comparison. After the first three months of the year, which coincide with the first months of the post-integration of Banco Atlántico, the interannual data show a favorable evolution of the various lines of business and priority segments, with strict cost control and stringent risk management, in accordance with the sustainable growth objectives of the business and improvement of the ratios set out in the three-year master plan (ViC07). Investment Credit investment in customers totaled 35, million euros, 14.2% up over the same date of the previous year. A notable feature under this heading of the balance sheet is the quality of the investment, the growth of the mortgage portfolio which to March had increased an interannual 20.9% and the increase in company financing, especially in leasing, factoring and confirming operations. Strict analysis and monitoring of credit risk have enabled the bank to improve its already low delinquency levels. The delinquency ratio over total credit investment stands at 0.54% (0.60% at 31 March 2004). Provisions increase to 363% the coverage for doubtful and late risks. Net funding for credit insolvencies were considerably lower than the previous year. At 31 March 2005, specific funding was 1.34 million euros, 93.6% less than the previous year, which stood at 20.9 million eu ros. The new generic funding, as a result of the criteria introduced in Circular 4/2004 of the del Bank of Spain, was 30.6 million euros, 32.8% down on that of the same date of the previous year. First quarter 2005 Page 7

8 Resources To March, the total customer resources managed increased 8.4% more than in the same month of last year, to a total of 47, million euros. Managed equity investment products grew by 8.6% to 8, million euros, headed by the variable and mixed income investment funds, which rose by 17.4% and 29.0% respectively. Managed pension plans grew by 10.6% and their total worth exceeded 2,305 million euros. Margins and results The dynamism of the different group businesses and sales activity of the first quarter have led to a favorable evolution of the margins, despite the still negative pressure of new entry prices, the result of low interest rates. Thus, the quarterly intermediation margin stood at million euros, 3.4% up over that obtained after the first quarter of last year. Revenues from investment fund, pension plan and insurance fees increased by 10.9% to a total of million euros. Net fees increased 2.7%, to million euros. Profits from financial operations totaled million euros, an increase of 8.5% over the first quarter of last year. The total business product or ordinary margin was mill on euros, representing an interannual increase of 3.4%. The containment and reduction of operating expenses, which fell by 1,3%, have had a highly positive effect on the evolution of the operating profit or consolidated operating margin, which was million euros, which represents a 13,0% increase compared to the first quarter of As a result, the efficiency ration now stands at 52.83%, an improvement of 2.55 percentage points over that recorded at 31 March 2004 and lower than 31 December 2004 (55.5%), and in line with the objectives. The return on equity (ROE) after the first quarter of 2005 stands at 14.90%, a considerable improvement over the rate of % during the first quarter of After deducting tax and the proportion of profits for minority shareholders, the net profit attributable to Banco Sabadell was 105,77 million euros, 52.9% over that recorded at 31 March Expansion and channels During this first quarter, the adaptation of the sales network to the new requirements defined in the three-year master plan has continued, and at 31 March 2005 the Banco Sabadell network comprised 1,088 branches, moving forward towards the objective of 1,100 agencies and branches at year end. During the first three months of the year ten new branches have opened to the public, eight specialized in corporate banking. With these new branches, the total number of branches dedicated solely to corporate operations is thirty one, which meets the expansion plan defined for 2005 which aims for forty-seven corporate branches by 31 December. In the distance banking channels at the end of March, compared with the same period of last year, the number of contracts signed totaled 643,161, an increase of 25%. At the same time, operations recorded via these channels increased an interannual 17% and exceeded 11.5 million operations. Evolution of the shares Yesterday, 10 May 2005, the share price of Banco Sabadell closed at euros, First quarter 2005 Page 8

9 15.93% up over the year end price of 2004, which was euros, and also higher than the revaluation of the IBEX-35, which recorded 0.72% over the same period. During this first quarter, and for the first time, the capitalization of Banco Sabadell has exceeded million euros. Average daily trading of Banco Sabadell shares during the first quarter of 2005 stood at shares. 2.- Main figures Balance sheet ( m) Total assets ,7 Gross loans and advances to customers ,2 Total deposits ,3 Customer deposits ,9 Mutual funds ,6 Pension funds ,6 Total funds under management ,4 Shareholders' equity ,9 Profit and loss account ( m) Net interest income ,4 Gross operating income ,4 Net operating income ,0 Profit before tax ,9 Group net profit ,9 Ratios (%) ROA 0,64 0,81 0,92 ROE 10,38 13,48 14,90 Basic efficiency 58,71 58,24 56,27 Efficiency 55,38 55,50 52,83 Ratio BIS 12, ,37 Tier I 8, ,48 Non performing loans Total risks ( m) Total provisions ( m) NPL/ Total Loans (%) 0,60 0,61 0,54 Coverage ratio (%) 324,78 326,80 363,01 Shareholders and shares (as of end of period) Shareholders Shares (m) Price ( ) 16,26 17,20 19,30 Market capitalisation ( thousand) EPS 0,90 1,19 1,38 PER 17,98 14,42 13,96 Book Value ( ) 9,39 10,14 10,19 P/BV 1,73 1,70 1,89 DPS ( ) -- 0,50 -- Dividend Yield -- 2,91% -- Pay-out ratio -- 41,92% -- Other data Branches (Spain) Employees (Spain) ATMs Growth YoY (%) First quarter 2005 Page 9

10 3.- General Information Under Regulation (EC) 1606/2002 of the European Parliament, all companies which are governed by the law of a member state shall, for the financial years starting as of 1 January 2005 inclusive, formulate their consolidated accounts in accordance with international accounting standards if on the closing date of the balance sheet their securities have been listed in a regulated market in any member state. In order to modify the accounting system of Spanish credit institutions by adapting it to the new accounting framework resulting from the adoption on the part of the European Union of the International Standards for Financial Information, the Bank of Spain published Circular 4/2004, dated 22 December on Standards of Public and Reserved Financial Information and Financial Statement forms. The Group s consolidated financial statements at 31 March 2005 which appear herein were formulated in accordance with the accounting principles and criteria of Circular 4/2004 dated 22 December of the Bank of Spain, These statements have not been audited. Main changes resulting from the new accounting standards Variations in the consolidation perimeter The new accounting standards do not imply the non-application of the global or proportional integration method when consolidating the financial statements of dependent or multi-group companies for engaging in a non-financial activity. The group companies, therefore, which to date consolidated by the equity method are not consolidated by global integration. The Group companies affected by this change are chiefly Grupo Landscape and BanSabadell Vida. Those listed companies with a holding of over 3%, but in which no significant influence is present, are to be treated as a portfolio of financial instruments available for sale instead of applying the equity method. This mainly affects the holding which the Group has in Banco Comercial Português. Analysis and credit risk coverage The philosophy behind the new accounting standards is to cover the impairment loss of credit risks. A specific provision is therefore in place for those assets classed as doubtful either due to customer delinquency or reasons other than this and a generic provision to cover the inherent loss (understood as a loss incurred on the date of the financial statements, calculated using statistical procedures and pending allocation to specific operations). The Bank of Spain, based on its experience and its information on the Spanish banking sector, has determined the method and amount of the parameters to be used by banks. The generic funding to be made in each year comprises three items: : the variation over the period of the amount of each class of risk by the appropriate α parameter, plus the balance at the end of the period of each class of risk by the appropriate β parameter, less the net amount funded for covering the specific global coverage throughout the period. The global balance of generic coverage has certain limits determined based on the balance of each class of risk at period end multiplied by coefficient α and multiplied by 125% for the upper limit and by 33% for the lower limit. This generic provision replaces any previous generic and statistical provisions. First quarter 2005 Page 10

11 The country risks for risks which require it continue to be provisioned Valuation and acknowledgement of pension commitments Irrespective of the outsourcing of pension plans, under the new accounting standards all postemployment remuneration commitments must appear on the balance sheet. In the case of obligations defined as a defined benefit plan changes are made with regard to the current standards. The new standards require that the calculation method of planned credit unit be used. Accrual of commission The new standards require that commissions paid or collected which form an integral part of the return or effective cost of a financial operations be recognized in the profit and loss account as deferred, except the related direct costs, and amortized over the expected life of the financing. Under the previous standards, these commissions were posted to the profit and loss account at the time the operations were arranged. Valuation of financial instruments The new standards modify the categories into which financial instruments are classed, together with the valuation and accounting system. For the purposes of valuation, financial assets are classified in accordance with the following portfolios: financial assets at fair value with changes in profit and loss, financial assets available for sale at fair value whose changes in valuation are attributed to the net equity until such time as they are effected, and thus posted in the results, held-to-maturity investment portfolio, which is valued at its amortized cost and credit investments also valued at amortized cost. Financial liabilities are classified for the purposes of valuation in the following portfolios: financial liabilities at fair value with changes in the profit and loss, financial liabilities at fair value with changes in net equity, and financial liabilities at amortized cost. Valuation of derivatives and hedge accounting All derivates must be included in the balance sheet at fair value. They will be classified and accounted inasmuch as they are trading or hedge derivatives, while also distinguishing this hedging of cash flow or net investment overseas at fair value. Treatment of goodwill Goodwill generated by business acquisitions shall cease to be systematically amortized under the new accounting standards. Their valuation will be periodically reviewed by conducting an impairment test and, should any impairment of value be detected, this shall be adjusted against the profit and loss. Capital as financial liability The cost of preference holdings with contractual periodic remuneration is accounted for as a financial cost. Under the previous standards, this financial cost was recorded as a result attributed to minority holders. First quarter 2005 Page 11

12 Treatment of capital increase expenses Under the new accounting standards, these expenses are no longer entered as amortizable capitalized expense but must be directly deducted from the net capital. Provision of allocated assets The provision funded by allocated assets at 1 January 2004 must be deducted from the value of the assets. Other aspects Other changes introduced with the new accounting standards are the treatment of securitized assets, the valuation of leasing, activation of personnel costs due to IS applications developed internally, non activation of startup costs and classification of insurance contracts. Reconciliation of equity As this is the first publication of the financial information according to the new Circular, net equity reconciliation is shown according to the previous standards which corresponds to that published on different dates with the net equity as a result of this new Circular as at 1 January 2004, 31 March 2004 and 31 December ( m) Equity (Spanish GAAP) Minority interests Accrued capital increase Banco Atlántico merger fund's amortisation Interim dividend Capital with nature of financial liability New equity before adjustments Consolidation perimeter Deferred financial commissions Pension funds Derivatives and other financial assets Setup costs Taxes and other impacts Equity (IFRS) The main differences observed in all the periods are as follows: Minority interests: with the new standards, minority interest are part of the net worth. Capital as financial liability: in the form of an issue of preference shares which, under the new circular, is now considered capital of a financial nature and reduces the balance of Minority Interests. Differences due to change of perimeter: these differences come about as a result of ceasing to consolidate by the equity method listed companies with a percentage of over 3%. These investments are now considered financial assets available for sale, are valued at fair value with changes in net worth. Accrual of financial commission: this new accrual system amounts to a charge to the net worth for all commissions which were collected for operations active on each date and which are not accrued. Pensions: recognition of the accumulated actuarial profit and loss to date by the valuation of obligations due to pension commitments. First quarter 2005 Page 12

13 Derivatives: recognition at fair value of the group s portfolio of derivatives. Taxes and other impacts: in addition to the fiscal impact on the adjustments mentioned above, also included are the retrocession of the securities fluctuation fund, amortization of the fund for general banking risks, amortization of capital increase expenses and the impact of provisions for impairment of assets.. Situation at At 1 January 2004, we should note the following significant impacts. The capital increase carried out during the first quarter of 2004 is considered as performed in December 2003 and pending paying up by shareholders. The acquisition of Grupo Banco Atlántico is also considered as performed in December 2003 as the irrevocable purchase commitment was signed in this month. Thus, the amortization against the share issuance premium of the merger fund which was generated as a result of the merger between Banco de Sabadell, S.A. and Banco Atlántico, S.A. is also considered to have taken place in December Situation at In addition to the variations explained above, the amortization of the merger fund is maintained as a difference with respect to the details published under the previous standards. Situation at No significant variations observed at this date. Reconciliation of the Profit attributable to the Group As this is the fist publication of financial information in accordance with the new Circular, a reconciliation of the profit attributed to the Group is shown under the previous standards and which matches that published on different dates with the Profit attributed to the Group in accordance with the new Circular at 31 March 2004 and 31 December ( m) Group net profit from (Spanish GAAP) Deferred financial commissions Pension funds Derivatives and other financial assets Provision for asset losses Amortisation of capital increase costs Taxes and other impacts Group net profit (IFRS ) Situation at The chief impact on this date, if the result published under the previous standard is compared with the current result, corresponds to the funding of the provision for impairment of assets. In this case, there is a greater charge as a result of not having reached the maximum fund set out in the new standards. We should also note the retrocession of the revenue from commissions due to the new accruals currently carried out.. First quarter 2005 Page 13

14 Situation at The most significant impact is the lack of funding of the provisions for impairment of assets. At this date, and with the funding carried out during the year, the maximum fund has been reached, and there is therefore a saving with respect to the funding made under the previous standards. As a result of this, the charges in the profit and loss account are caused by increases in investment during the period. As in the previous period, also included is the retrocession of the commissions charged and which are now accrued. Because of the amortization against Reserves of the capital increase expenses, it includes the retrocession of the amortization against profits under this heading. Other aspects to be considered Changes in the Group composition During the first quarter of 2005 there have been no major changes in the composition of the Group compared to the last details published, except the changes mentioned above due to the new standards. Outstanding events subsequent to the close of the quarter and publication of results On 21 April 2005, the General Shareholders Meeting of Banco de Sabadell, S.A. was held which adopted, amongst others, the following resolutions: Approval of the annual accounts and management report of Banco de Sabadell, S.A. and of its consolidated group at 31 December 2004 and the application of the year s profits. The number of members of the Board of Directors is set at thirteen and two new independent directors are appointed. On 26 April 2005, a supplementary dividend for the year 2004 was paid out at 0.26 euros per share. There have been no other major events since the close of these financial statements and the publication of same, and these events were notified to the C.N.M.V. First quarter 2005 Page 14

15 4.- Evolution of the profit and loss account Profit and loss account ( m) 1Q 04 1Q 05 Interest and related income ,1 Interest and related charges ,9 Dividends ,5 Net interest income ,4 Income from equity method ,3 Fees and commissions received ,9 Fees and commissions paid ,8 Insurance activity ,1 Results from financial transactions (net) ,5 Foreign exchange (net) ,6 Gross operating income ,4 Revenues from non-financial operations ,6 Sales costs ,6 Other operating income ,9 Personnel expenses ,1 Other general expenses ,3 Amortisation ,1 Other operating costs ,0 Net operating income ,0 Assets losses ,3 Provisions ,8 Income from non-financial activities ,2 Costs from non-financial activities ,0 Other revenues ,1 Other losses ,5 Profit before tax ,9 Corporate taxes ,7 Consolidated net profit ,3 Net result from discontinued transactions Consolidated net profit ,4 Minority interests ,5 Group Net Profit ,9 Pro memoria: Average total assets ,3 Average shareholders' equity ,5 Basic earning per share 0,23 0,35 Diluted earning per share 0,23 0,35 Growth YoY (%) First quarter 2005 Page 15

16 Quarterly evolution of the profit and loss account ( m) 1Q 04 2Q 04 3Q 04 4Q 04 1Q 05 Growth YoY (%) Interest and related income ,1 Interest and related charges ,9 Dividends ,5 Net interest income ,4 Income from equity method ,3 Fees and commissions received ,9 Fees and commissions paid ,8 Insurance activity ,1 Results from financial transactions (net) ,5 Foreign exchange (net) ,6 Gross operating income ,4 Revenues from non-financial operations ,6 Sales costs ,6 Other operating income ,9 Personnel expenses ,1 Other general expenses ,3 Amortisation ,1 Other operating costs ,0 Net operating income ,0 Assets losses ,3 Provisions ,8 Income from non-financial activities ,2 Costs from non-financial activities ,0 Other revenues ,1 Other losses ,5 Profit before tax ,9 Corporate taxes ,7 Consolidated net profit ,3 Net result from discontinued transactions Consolidated net profit ,4 Minority interests ,5 Group Net Profit ,9 Pro memoria: Average total assets ,3 Average shareholders' equity ,5 Basic earning per share 0,23 0,28 0,31 0,39 0,35 Diluted earning per share 0,23 0,28 0,31 0,39 0,35 First quarter 2005 Page 16

17 Profit and loss account on ATA 1Q 04 2Q 04 3Q 04 4Q 04 1Q 05 Growth YoY (%) Interest and related income 3,50 3,46 3,40 3,44 3,52 0,02 Interest and related charges -1,44-1,42-1,51-1,47-1,52-0,08 Adjusted net interest income 2,06 2,04 1,90 1,97 2,01-0,05 Dividends 0,01 0,08 0,04 0,03 0,04 0,03 Net interest income 2,07 2,13 1,94 2,00 2,05-0,02 Income from equity method 0,03 0,00 0,02 0,01 0,02-0,01 Fees and commissions received 1,03 1,03 0,98 1,04 1,02-0,02 Fees and commissions paid -0,10-0,08-0,11-0,13-0,10 0,00 Insurance activity 0,09 0,08 0,08 0,11 0,09 0,00 Results from financial transactions (net) 0,10 0,08 0,05 0,06 0,10 0,00 Foreign exchange (net) 0,09 0,09 0,08 0,07 0,10 0,01 Gross operating income 3,31 3,32 3,03 3,15 3,28-0,03 Revenues from non-financial operations 0,55 0,81 0,99 0,75 0,35-0,20 Sales costs -0,41-0,71-0,75-0,51-0,21 0,21 Other operating income 0,07 0,06 0,06 0,08 0,08 0,01 Personnel expenses -1,25-1,18-1,16-1,12-1,17 0,08 Other general expenses -0,58-0,55-0,65-0,61-0,56 0,02 Amortisation -0,23-0,21-0,20-0,23-0,20 0,03 Other operating costs -0,03-0,03-0,02-0,02-0,02 0,00 Net operating income 1,42 1,51 1,29 1,49 1,54 0,12 Assets losses -0,49-0,44-0,13-0,19-0,19 0,30 Provisions 0,04-0,06 0,06-0,17 0,01-0,04 Income from non-financial activities 0,00 0,00 0,04 0,09 0,00 0,00 Costs from non-financial activities -0,02-0,03-0,06-0,13-0,04-0,02 Other revenues 0,13 0,14 0,01 0,61 0,16 0,03 Other losses -0,05-0,03-0,02-0,13-0,04 0,00 Profit before tax 1,04 1,08 1,20 1,57 1,44 0,40 Corporate taxes -0,40-0,33-0,39-0,55-0,51-0,12 Consolidated net profit 0,64 0,75 0,81 1,02 0,92 0,29 Net result from discontinued transactions 0,00 0,00 0,00 0,00 0,00 0,00 Consolidated net profit 0,64 0,75 0,81 1,02 0,92 0,29 Minority interests 0,01 0,00 0,00 0,00 0,00-0,01 Group Net Profit 0,63 0,75 0,81 1,02 0,92 0,29 Net interest income First quarter 2005 Page 17

18 Average return on investment (simple) Figures adapted to new accounting regulation not audited ( m) Q 2Q 3Q 4Q Volume Rate % Profit Volume Rate % Profit Volume Rate % Profit Volume Rate % Profit Cash, deposits with Central Banks and financial institutions , , , , Loans to customers , , , , Fixed income , , , , Equity securities , , , , Subtotal , , , , Tangible and intangible assets Other assets , , , , Total , , , , Figures adapted to new accounting regulation not audited ( m) Q 2Q 3Q 4Q Volume Rate % Profit Volume Rate % Profit Volume Rate % Profit Volume Rate % Profit Cash, deposits with Central Banks and financial institutions , Loans to customers , Fixed income , Equity securities , Subtotal , Tangible and intangible assets Other assets , Total , Average cost of resources (simple): Figures adapted to new accounting regulation not audited ( m) Q 2Q 3Q 4Q Volume Rate % Profit Volume Rate % Profit Volume Rate % Profit Volume Rate % Profit Financial institutions , , , , Loans to customers , , , , Liabilities on negotiable securities , , , , Repo's , , , , Subordinated liabilities , , , , Subtotal , , , , Other liabilities , , , , Shareholders equity Total , , , , Figures adapted to new accounting regulation not audited ( m) 1Q 2Q 3Q 4Q Volume Rate % Profit Volume Rate % Profit Volume Rate % Profit Volume Rate % Profit Financial institutions , Loans to customers , Liabilities on negotiable securities , Repo's , Subordinated liabilities , Subtotal , Other liabilities , Shareholders equity Total , First quarter 2005 Page 18

19 4,28% 4,19% Quarterly financial information bulletin of Banco Sabadell 4,01% 4,05% 4,09% 3,18% 3,06% 2,86% 2,93% 2,98% 1,96% 2,12% 2,15% 2,16% 2,15% 1,10% 1,13% 1,15% 1,12% 1,11% 1Q04 2Q04 3Q04 4Q04 1Q05 Customer loan yield Cost of customer funds Customer Spread Euribor at 3 months 2,06% 2,04% 1,90% 1,97% 2,01% 1Q04 2Q04 3Q04 4Q04 1Q05 Adjusted net interest income Here we present the first comparative analysis by quarter of 2004 and the first quarter of 2005 of the evolution of returns and financial costs compared to the average balances after applying the new accounting standard. In this initial analysis, the balances have been formulated as an average of end of period position balances. Returns and costs of the various lines include the effect of the appropriate hedging instruments. The first quarter of 2005 shows an improvement in the intermediation margin, a trend which had commenced during the last quarter of When specifically compared to the fourth quarter of 2004 with simple data, there is a 4 pb increase in the return on Customer loans which, together with the improvement of 1 pb in customer resource costs, led to an increase of 5pb in customer margin. As regards the Credit institutions margin, there is also a major improvement of 31 pb compared to the last quarter of This improvement, however, is not reflected in the fixed income portfolio which, while staying at similar volumes during both periods, sees a drop in returns of 13pb. The temporary asset transfer, on the other hand, has improved considerably with a cost of under 5pb compared to the last quarter of An analysis of the issue of negotiable securities shows an increase in costs of just 3 pb, while subordinate liabilities show a significant improvement in cost with a drop of 31 pb In relative terms, therefore, the intermediation margin has improved 4 pb, compared to the fourth quarter of First quarter 2005 Page 19

20 Net fees ( m) 1Q 04 1Q 05 Growth YoY (%) Lending commissions ,2 Related to assets ,7 Guarantees ,4 Transferred to other entities ,6 Services commissions ,3 Cards ,6 Orders of payments ,7 Securities ,6 Customer accounts ,5 Foreing exchange ,1 Other transactions ,6 Asset management commissions ,9 Mutual funds ,7 Pension Funds ,1 Insurance brokerage ,0 Total ,7 The volume of fees shows an increase of 2.7%. Fees from risk operations show a drop of 5.7% due mainly to the fall in the volume of non-payments. Service fees increased 2.3%, as shown in the chart. During the first quarter of 2004 the bank carried out a capital increase. This, together with other market circumstances, generated customer activity in securities operations which meant a substantial increase in these fees. The sale of businesses in Europe from Banco Atlántico at the end of 2004 has had a significant effect on the interannual comparison between fees on securities on ceasing to receive fees for this item in these businesses. These factors explain why this quarter fees show an interannual drop of 9.6%. This decrease is more than offset by the increase in fees on sight accounts. There were significant increases in fees on investment funds, pensions and insurance, with rates of 6.7%, 28.1% and 10% respectively. Managed equity of investment funds shows an increase of 8.5%, exceeding the million euros at the end of this quarter, and including the increase in short-term fixed income investment funds (an increase of 8.2% in manage equity and 6,9% in fees) and the great success of real estate investment funds. We should also note the increase in fees on variable income investment funds and in guaranteed variable income funds with increases of 25% and 15% respectively. Among the reasons which explain the 28.1% increase in fees on pension plans is the great success of the Pentapensión product in the campaign during the fourth quarter of 2004, which received various awards over recent years in acknowledgement of its high return and leading position within its category. Lastly, fees on insurance are generated by the intermediation of protection products in general (non life) risks. This 10$ increase includes both home and company insurance products with highly significant increases of 20% in both cases. First quarter 2005 Page 20

21 Operating expenses ( m) 1Q 04 1Q 05 Growth YoY (%) Personnel expenses ,1 General expenses ,3 IT ,3 Communications ,9 Advertising ,4 Premises ,6 Stationery ,2 Taxes ,0 Others ,6 Total ,3 Personnel costs showed a considerable improvement, with a reduction of 2.1% compared to the same period of last year, due mainly to the reduction in the average workforce. We must also take into account the effect of the severance arrangements, which during the first quarter of 2004 totaled thousands of euros as against 8,949 thousands of euros this quarter. Disregarding this effect, Personnel costs show a drop of 3.8%. General expenses remain similar to those of the same period last year, with an increase of just 0,3%. The policy of containing expenses together with the cost synergies arising from the integration of Banco Atlántico explain this fact despite the considerable increase in volumes. Losses due to impairment of assets in Customer Investments and Contingent Liabilities ( m) 1Q 04 1Q 05 Growth YoY (%) Generic provisions ,8 Especific provisions ,6 Amortisation against results ,4 Recoveries ,2 Country risk Total ,6 Funding for impairment of credit investment assets (including contingent liabilities) show a fall of 63.6%. This sharp reduction is due to the fact that in the first quarter of 2004, the generic fund had not reached its upper limit. In the first quarter of 2005, however, it is constituted 100% in the parent company and in most of the affiliates, and therefore the generic funding is only occurring due to the increase in investment. This different situation represents less funding of the generic fund by 32.8%. Another notable point is the lower specific funding, with a drop of 93.6% compared to the first quarter of During this quarter of 2005 there have been major recoveries both from non-amortized delinquent payments (whose impact decreases the specific funding) and those already amortized. First quarter 2005 Page 21

22 Extraordinary profits ( m) 1Q 04 1Q 05 Growth YoY (%) Other revenues ,1 Other losses ,5 Total ,1 Other earnings includes mainly the profit obtained from the sale of various buildings, During the first quarter of 2004 a Banco Herrero building was sold in Seville, several offices as a result of the brand restructuring which took place at the end of During this first quarter of 2005 premises have been sold as a result of the merger between the offices of Banco Sabadell and Banco Atlántico, which had become available for sale. Other losses remain constant. First quarter 2005 Page 22

23 5.- Evolution of the balance sheet and changes in total equity ( m) Growth YoY (%) Cash and deposits with Central Banks ,8 Trading and derivatives portfolios and other financial assets ,7 Available for sale portfolio ,1 Loans ,9 Deposits financial institutions ,0 Loans to customers ,2 Debt securities ,0 Other financial assets ,3 Held to maturity portfolio Associated companies ,2 Property and equipment ,3 Intangible assets ,0 Other assets ,7 Total assets ,7 Trading and derivatives portfolios and other financial assets ,0 Financial liabilities at fair value with impact on equity Financial liabilities at amortised cost ,4 Due to Central Banks ,7 Due to financial institutions ,2 Customer deposits ,9 Liabilities on negotiable securities ,0 Subordinated liabilities ,3 Others ,1 Insurance contract liabilities ,1 Provisions ,5 Other liabilities ,0 Capital with nature of financial liability ,0 Subtotal liabilities ,6 Minority interests ,9 Valuation adjustments ,6 Shareholders' equity ,9 Total equity ,3 Total liabilities and equity ,7 Contingent risks ,0 Contingent liabilities ,3 Total memorandum accounts ,4 First quarter 2005 Page 23

24 Loans to Customers ( m) Growth YoY (%) Loans to the public sector ,7 Loans to the resident sector ,0 Mortgage loans ,7 Commercial loans ,0 Personal loans and credit accounts ,4 Leasing ,5 Factoring ,1 Confirming ,4 Overdrafts and sundry accounts ,2 Repo's ,1 Loans to the non-resident sector ,0 Mortgage loans ,6 Commercial loans ,9 Personal loans and credit accounts ,2 Leasing ,4 Factoring ,4 Confirming ,5 Overdrafts and sundry accounts ,5 Repo's Non performing loans ,0 Deferral adjustments ,9 Gross loans and advances to customers ,2 Provisions for NPLs ,3 Loans (net) ,2 Securitised loans before ,5 Repo's and other ,1 Loans to equity consolidated companies Provisions for NPLs ,3 Total gross loans and advances to customers ,0 Credit to resident sector as of Credit to resident sector as of Confirming 1% Leasing 8% Short term and sundry debts 2% Confirming 1% Leasing 8% Short term and sundry debts 2% Personal loans and other credits 29% Mortgage loans 47% Personal loans and other credits 28% Mortgage loans 50% Factoring 2% Commercial credit 11% Repo's 0% Factoring 2% Commercial credit 9% Repo's 0% First quarter 2005 Page 24