The strong pace of deposit-taking, notable growth in market share and the progressive normalisation of our various banks' commercial operations drove the group's notable growth in the third quarter, when italso successfully increased capital by 1,383 million euro.
As of 30 September 2013, the total assets of Banco Sabadell and its group amounted to 168,525.3 million euro, a 2.5% increase year-on-year.
Gross loans and advances to customers totalled 118,550.9 million euro. Mortgage loans expanded by 2.8% with respect to 30 September 2012 (-11.1% excluding BMN-Penedès and Lloyds España).
Excluding Banco CAM assets covered by the Asset Protection Scheme, Banco Sabadell group had a 12.61% ratio of non-performing loans (NPLs) to total computable loans at the end of 3Q13. The NPL coverage ratio expressed with respect to total exposure to loans and real estate is 13.34%.
Banco Sabadell ended the third quarter with lower net real estate exposure compared with the rest of the industry (9,575 million euro ex. APS) and a growing pace of sales in its real estate portfolio, much faster than the rest of the market. In the first nine months, the group sold 12,615 units for a total of 1,909 million euro, a 63% increase year-on-year.
As of 30 September 2013, customer funds on the balance sheet amounted to 91,854.9 million euro, a 22.4% increase year-on-year (10.0% excluding BMN-Penedès and Lloyds). That increase was observed in both demand (+24.3%) and time (+17.0%) deposits.
Gross new customer acquisitions continued at a good pace (8,100 per week), with the result that the customer base increased by 88,337 individuals and 17,919 companies in the last three months. As a result of this growth and increased cross-selling of products and services, the group'sincreased market share in both private individuals and companies.
As of 30 September, our share of private individuals' transaction (cheques, transfers, direct debits, bills of exchange) had increased by 76 basis points year-on-year, providing a market share of 7.19%. Banco Sabadell was also the largest arranger of business loans under ICO credit lines (companies, entrepreneurs, international, exports), with 26.72% of the market in the period, i.e. more than twice the September 2012 figure (12.31%).
As growth in customer funds on the balance sheet exceeded the increase in customer loans, the funding gap reached 9,004.8 million euro in the first nine months of 2013, after adjusting for the effect of the change in consolidation scope (inclusion of BMN-Penedès and Lloyds España in June 2013).
Assets in mutual funds and investment companies totalled 10,051.9 million euro, 17.4% more than at the end of September 2012.
Assets in pension funds marketed by the Group amounted to 3,882.8 million euro at 30 September 2012, an 8.6% increase year-on-year. Insurance sales amounted to 7,294.2 million euro.
Total funds under management amounted to 143,496.9 million euro at 30 September 2013, an increase of 10.1% with respect to the figure of 130,349.0 million euro one year before (+2.3% excluding BMN-Penedès and Lloyds España).
Margins and profits
Net interest income performed as expected, expanding by 8.8% with respect to the previous quarter, to 1,317.0 million euro, and confirming the turning point reached in June and the start of a progressive recovery.
Net interest income declined by 4.6% year-on-year. Strict management of customer spreads, the higher margin on the fixed-income portfolio and the consolidation of the balances from Banco CAM, BMN-Penedès and Lloyds España only partly offset the effect of the decline in the yield curve and narrowing customer spreads.
Net fees and commissions totalled 549.9 million euro, a 21.3% increase year-on-year. Service fees increased by 34.8% while fees from the management and sale ofmutual funds, collective investment vehicles and insurance products rose 13.0%. These positive figures are attributable to the good performance by the Bank's own business and to the integration of Banco CAM, BMN-Penedès and Lloyds España.
Income from financial transactions amounted to1,227.6 million euro, compared with 363.8 million euro in the same period of 2012. Contributions with respect to the Bank's deposit base amounted to 118.0 million euro. As a result, gross income increased by 39.9%, to 3,012.4 million euro.
Operating expenses totalled 1,240.5 million euro in the first nine months of 2013. Assuming a constant consolidation scope (i.e. including Banco CAM since the beginning of 2012, BMN-Penedès since 1 June and Lloyds since 1 July), recurrent operating expenses in the first nine months of 2013 were 12.0% lower than in the same period of 2012, due to the operating efficiency measures applied.
This rigorous operating cost containment policy, together with the favourable gross income performance in the period, provided an efficiency (cost/income) ratio of 48.17% at 30 September 2013, i.e. notably better than at 30 September 2012 (49.70%).
Consequently, net income before provisions amounted to 1,610.9 million euro at 30 September 2013, 66.0% higher than in the same period of 2012.
Provisions for loan losses and other impairments (primarily real estate and financial assets) amounted to 1,334.3 million, including an extraordinary generic provision of 321.1 million euro booked in the second quarter to cover the additional reserves required as a result of reclassifying refinanced loansin the Sabadell-Banco CAM segment.
After booking capital gains on asset sales (15.3 million euro) and deducting income tax and minority interests, net income attributed to the group amounted to 186.1 million euro in the first nine months of 2013, i.e. 105.4% higher than in the same period of 2012.
Banco Sabadell's capital ratios are currently among the highest in the European banking sector. Equity amounts to 10,247.5 million euro, an 11.2% increase. The core capital ratio is 11.40% (10.09% one year ago). The BIS ratio was 12.08%, i.e. higher than in September 2012 (10.66%) and well above the required minimum (8%).
Other key developments in 3Q12
Capital increase amounting to 1,383 million euro
Banco Sabadell successfully completed a capital increase transaction in the third quarter amounting to 1,383 million euro, through two consecutive placements and the issuance of 1,032 million new shares with a par value of 0.125 euro/share.
The first placement, aimed at institutional investors and amounting to 650.0 million euro, was carried out in the form of an accelerated bookbuild of 366.3 million new shares and 30 million existing shares. As a result, on 10 September, strategic international investors such as US fund manager Fintech Investment Limited and banker Jaime Gilinksi became shareholders. Those shares began trading on 11 September last.
The second capital increase, amounting to 732.7 million euro and aimed at bank shareholders with pre-emptive subscription rights, concluded on 3 October. This capital increase consisted of 666.1 million new shares, with a par value of 0.125 euro/share. Those new shares commenced trading on 8 October.
This transaction enabled Banco Sabadell to adjust its capital ratio following the recent acquisitions in Spain and to rank among Europe's soundest banks, with an EBA Core Tier 1 ratio of 11.27%.
Sale of 953 properties
In the third quarter, and in line with its strategy to monetise its real estate portfolio, Banco Sabadell sold an entire issue of asset-backedbonds whose underlying is a portfolio of 953 properties to a consortium of international institutional investors. This transaction, backed by a portfolio valued at 88.9 million euro acquired as part of the Banco CAM acquisition, resulted in the consequent transfer of risk.
The special characteristics of this operation, conducted through the sale of bonds, enabled the bank to maximise value compared with a direct sale of the same portfolio.The agreement, which was reached following a competitive tender, will enable Banco Sabadell to continue to manage the portfolio and to sell the transferred properties through Solvia, the group's real estate arm.