The following is a summary of the Banco De Sabadell, S.A. (BNDSF) Q1 2024 Earnings Call Transcript:

Financial Performance:

• Banco de Sabadell reported a Q1 net profit of €308 million, showcasing solid financial performance.

• The Net Interest Income (NII) grew by 1.7% quarter-on-quarter with customer margin increasing by 10 basis points, standing at 3.09%.

• Asset quality improved with the group's total cost of risk at 50 basis points, representing an improvement of 5 basis points on the quarter.

• The bank's common equity Tier 1 fully loaded ratio was reported at 13.3% and return on tangible equity at 12.2%.

• There was predicted decreased in NII for 2025 because of a larger downward trend in loan yield. However, positive contributions are expected to NII from ALCO, wholesale funding, and excess liquidity in the same year.

• Recurring costs rose by 2.9% YoY before savings from TSB efficiency plan.

• The fully loaded CET1 ratio stands at 13.3% with a focus on lower balance sheet sensitivity to interest rates and maturities reinvested at higher fixed rates.

• The bank plans to launch a €340 million buyback program in 2023.

• The cost of deposits is reduced, linked to deposit rate evolution, contributing to the increase in EBITDA, nearing 1%.

Business Progress:

• The bank is implementing strategic measures such as customer segmentation, increasing preapproved loans and specialization of risk analysts and relationship managers to improve lending growth and reduce cost of risk.

• There has been improvement in the mortgage business with increased mortgage applications indicating a positive future momentum.

• In the UK market, new mortgage lending increased by 14% and 41% year-on-year showing positive dynamics.

• An agreement is imminent with Nexi for support operations, set to bring significant capital gains.

• Plans for ROE development in 2024 and improvements in TSB's net profits in the second half of 2024 and in 2025.

• The bank is focusing on loan growth in Spain, emphasizing on pre-approved clients which are expected to reduce cost of risk.

• The bank forecasts lower cost of risk in 2024 with a further decrease in 2025, primarily in consumer finance, mortgage, SME, and corporate books.

• Banco De Sabadell reported around €2.5 billion have been repriced in Q1 with another €5.5 billion expected throughout 2024.

• Bank's sensitivity to rates has decreased due to management actions on the ALCO book and wholesale funding.

• TSB, the UK unit, repaid GBP 0.9 billion this quarter and plans for more repayments in future quarters.

• The bank is growing in corporate and SME sectors, and has expansion strategies into Mexico with a profitable franchise in Miami.

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