The press conference of presentation of results of Banco Sabadell has coincided with a real stock market shower: its shares fell by around 10% during the interventions of the president of the entity, Josep Oliu, and its CEO, Jaime Guardiola. It was he who explained to what the bank attributes the important punishment suffered on the stock market: «The results of the last quarter have an additional adjustment that was not expected and hence that movement in the market».
This adjustment is related to the asset sale operation that materialized at the end of last year worth 8,000 million euros and comprised of 60,000 assets. According to Guardiola, when the closures of these types of transactions occur, in addition to always entailing a cost, interpretations of their clauses must be made, which entails a review of the assets and an allocation of values of the components of the wallets And all this, in this case, has implied that adjustment that the market is seeing with such bad eyes.
According to the CEO of Sabadell, “the market has been surprised by the operation, which had to be closed and which has incorporated additional losses; That is why, perhaps, this adjustment is taking place. This is a ‘one-off’ (an isolated impact) ».
Guardiola said the bank, although it is currently comfortable with its portfolio of doubtful assets, because it compares well with the rest of the sector, states that The entity has the door open to more portfolio sales, “although this always has additional impacts,” which “are assumed in the forecasts.”
One of the focus of attention was on stock market behavior. Another, in the rumorology about corporate operations. Oliu, regarding the possibility that there are, explained: «In an environment of low interest rates, the reaction of all banks is to optimize costs and, in this environment, mergers are not disposable». But, at the same time, he said: “In our context, we do not contemplate a specific merger. It is not contemplated today. “Our current roadmap only contemplates what I just said,” said Oliu.
Regarding an eventual scenario in which the entity, if it does not take the step of buying, may be exposed to an acquisition by a third party, given the low multiples to which it is listed, Oliu said that “all banks are cheap” and who does not fear the possibility of a public tender offer.
As for a potential special tax for banks, Oliu said he does not expect additional pressure for the financial sector, because “it would be very counterproductive at the moment.” In addition, it was against the establishment of taxes differentiated by sectors: «All companies have to have the same taxes and banks are companies». Referring to the possibility of a fee on financial transactions, he stated that, either at the same level of coordination with the European Union, or it would be bad for Spain: «I don’t think there will be any measure that will discriminate against our financial system with respect to the rest of Europe», trusted Oliu.
The president of Sabadell was also skeptical about the collection power of some of the measures proposed by the Government.
Consequences of Brexit
The dome of the entity also had words to explain how Brexit sees: as the UK’s exit from the EU is already effective, they believe that the level of uncertainty has dropped and that the situation has improved. Now, they say, the British Government has one year to negotiate trade agreements, which may create small volatility events due to doubts that may arise regarding the progress of the negotiations.
Although, more than these circumstances, the relevant ones for Sabadell are the economic prospects of the United Kingdom. At the moment, the management team of the entity is not very worried, because the expectations of growth are of stagnation, not of fall: «It is a factor of uncertainty, but it is limited».
Regarding precisely TSB, the British bank of the Sabadell group, although in the last year it still did not have a positive contribution to the benefits, its contribution to the results is expected to be very significant as of the year 2021, as Oliu predicted. Therefore, “its sale is not contemplated.” “The computer transition was harder than expected,” he acknowledged, but “today the bank is fully stabilized.” In addition, he valued the new management team, which provides total trust and support.
And on the expectations for this 2020, for the entity as a whole it is expected low digit growth for banking business revenues, more biased towards commissions (where they face the challenge of growing them despite the sale of the fund manager) than towards the interest margin (due to low interest rates), a stable profitability and a capital ratio staying at the environment of 12%.