So many years waiting for a rate hike, and the rise was accompanied by fear of a recession and a specific tax for government banks. Although the effects of the rise in the price of money are still imperceptible (barely 3 million in the income statement), Banco Sabadell is already improving the profitability targets set in its strategic plan. The firm was aiming for a return on tangible equity (ROTE) of 6% by the end of 2023, but closed the half at 7%; half a point more than it looked in March. For this reason, it revised the data upwards and already placed it at 7% for the entire year. At least until you see how the Executive’s tax impacts you.
The entity directed by César González-Bueno presented its results for the first semester on Thursday, which resulted in a 78% rise in profits to 393 million. The improvement in the business served to once again exceed its profitability targets – it had already achieved this in the first quarter-; 7%, which will be the goal for December “not including the potential tax, the details of which are not known,” the manager pointed out.
He declined to make assumptions about a tax that will have a rate of 4.8% on income in Spain. He did ask that it be applied “neutrally” and warned that the main affected will be the shareholders. In the specific case of Sabadell, 50% of the capital is in less than “224,000 private shareholders”, whose median investment is 1,950 euros. The other 50% is made up of institutional investors.
The tribute arrives in full escalation of benefits, but without the entity having yet tasted the rise in interest rates. The increase in the price of money occurred in July and the rise in Euribor only reported 3 million euros to the bank account. Despite the revision of the profitability objective, González-Bueno stressed that “it does not cover the cost of capital” yet.
“The rate environment has been extraordinarily negative and is now on the way to normalization, but it is a downward normalization,” said Leopoldo Alvear, the financial director. In the last five years, the banking Ibex fell 50%, while the Ibex35 dropped only 25%, the energy Ibex grew 20% and the construction Ibex rose 30%.
“We continue to focus on the transformation of the entity and we are meeting all the objectives for this year,” settled the bank. Beyond the commitment to digitization, the other side of the transformation was the closure of offices and the ERE approved last fall for 1,380 people; the second in just two years, which boosted the cost reduction to 4.8%.
Banco Sabadell waits to see what happens in the fall
The entity trusts that the long-awaited rise in rates will allow “compensating for the deterioration in the quality of assets” that could cause a recession. So far there are no signs that defaults will rise after reviewing the portfolio, he maintains. The NPL ratio fell compared to comparable quarters and closed June at 3.31%. The data is especially relevant on this occasion, since throughout the second quarter the lack of anti-pandemic financing endorsed by the Official Credit Institute (ICO) ended.
In addition, the problematic 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 risk loans . Meanwhile, the company reached the historical record for mortgages in Spain in the last quarter, with 1,501 million euros, 19% more than the previous quarter. Consumer credit also grew (+17%), to 805 million, and card billing (16%) to 5,541 million.
Outstanding credit closed the first half with a balance of 158,074 million euros. Total assets managed by the group amounted to 257,229 million, a growth of 2.8% year-on-year and 1.6% in the quarter.