Banco Sabadell slows down the pace of mortgage lending
The entity earned 29% less in the first quarter, down to 347 million, due to the impact of the early retirement plan and the reduction in the interest margin, which it expects to improve for the rest of the year
BarcelonaBanco Sabadell has reduced the pace of mortgage lending to adapt to lower profitability of this type of loans for home purchases. The CEO, César González-Bueno, who will leave his post after tomorrow's shareholders' meeting to hand over to Marc Armengol, former head of the British subsidiary, TSB, sold to Banco Santander, explained that mortgage prices (interest rates) "are very strained" and there is a lower pace of production and also of amortization.
González-Bueno assured that they have reduced their share of the Spanish mortgage market, which at times of greater profitability was 9%, to around 6% and could rise to 7% or 8%. He justified that the entity had to adapt its share in this market to more adjusted prices. The volume of new mortgages has fallen by 24% compared to a year ago and 26% compared to the previous quarter, but it maintains a total mortgage volume that increases by 4.1% year-on-year, to 39,000 million, he added. "This is not a fall," he said when asked during what was his last quarterly results presentation after more than five years in office.
The bank has started the year with a net profit of 347 million in the first quarter, a decrease of 29% compared to a year ago due to the impact of measures such as the early retirement plan, which involves about 300 people, and the already foreseen reduction in the interest margin (resulting from the difference between what it charges for loans and what it pays for deposits) due to the drop in rates.
The entity highlights the increase in credit volume in all business segments. It highlights, for example, that for consumption, with a rise of 14.8%, to 5,500 million; and it includes mortgages, with 4.1%, to 39,800 million, which represents a slowdown in lending; and that for SMEs and large companies, with 2.1%, to 44,800 million. The bank expects that in the second quarter, capital gains from the sale of TSB will have a positive effect on the accounts and it will have a more focused strategy, centered on the Spanish market.
González-Bueno states that the entity maintains its forecasts. Among these, it highlights reaching a profitability of 16% next year, at the end of the 2025-2027 strategic plan, and also for the current fiscal year. It also continues with the commitment to shareholder remuneration of approximately 6,450 million until 2027, which includes the 50 cents extraordinary dividend per share to be paid on the 29th of this month for the sale of the British subsidiary for 3,300 million euros, in addition to a share buyback program. When asked, he also ruled out a merger between banks in Spain in the near future, given that all entities are in a "very sweet moment".
Lower commissions
the bank's hard core are the small shareholders who are also clientsThe other variable that has affected profits –55 million for the new early retirement plan in Spain– will have a total cost of 90 million this year. This measure, the bank adds, will allow for annual savings of 40 million gross from 2027 onwards, but one-third of this amount will already be achieved this year, according to the entity.
The CET1 ratio fully loaded, the main metric of financial strength, which essentially includes basic capital –mainly ordinary shares and reserves–, stands at 13.2% at the close of March. The non-performing loan ratio excluding TSB is reduced to 2.55%, compared to 2.65% a year ago.
Farewell of González-Bueno
González-Bueno has taken advantage of his latest results presentation to make a brief assessment of the more than five years he has been at the helm of the entity and which he now leaves in the hands of Marc Armengol. It has been a period of growth by reducing the cost of risk and capital generation, he explained. He also highlighted the commitment to the transformation of processes and risk granting improvement models.
He assured that he leaves "extraordinarily satisfied", after disembarking at the bank at a delicate moment, shortly after the pandemic. He also highlighted the role of the entire organization and recalled that BBVA's takeover bid, which failed, united the bank's team even more. And he reiterated that, after the offensive by the Basque entity, it has been shown that "the hard core of the bank is the small shareholders who are also clients.