Last year, Sabadell posted higher than expected profit growth, nearly reaching a historic record. But it was not thanks to the contribution of its subsidiary in the United Kingdom, TSB. The group’s British franchise, which was a real headache for the Catalan bank in 2020 and 2021, returned to quarterly losses. It faced a red number of 6 million euros in the last three months of 2022,
According to data collected by The Objective, TSB did not give negative result for two yearsDue to which the order of recovery is broken. There are three factors that have led Sabadell’s UK division to this position. The first is a fine imposed by regulators of 55 million euros in 2018 due to failures in the migration of operations to the group’s technology platform, which made it impossible for customers to access their accounts. has been another factor increase in provisions For loss in respect of 2021. and third, Changes in tax rules, which cost about 15 million.
With this, TSB’s contribution to Sabadell is substantially reduced. throughout the past year, Of the group’s 859 million profits, the British subsidiary contributes only 87 million, i.e. a little over 10% of the total. A level that is well below its weight in the business, which is 30%.
Sabadell rules out sale because of its “promising” future
This stumbling block will theoretically be momentary, because according to Sabadell’s CEO, Cesar Gonzalez-Bueno, TSB’s future is “promising” as its activity is improving and revenue is rising. Therefore, given the good prospects, the bank is not looking at revising its roadmap initiated in early 2021, following the breakdown of merger talks with BBVA, and Keeps doors closed for sale of this subsidiary,
On a recurring basis, various parties interested in acquiring the British Sabadell franchise emerge, as experts still believe that the Spanish entity will part with it in the medium term. González-Bueno pointed out this Thursday that the Council’s mandate in this regard is clear: “Neither buying nor selling, we are dedicated to managing the business.”
Quarterly loss cuts TSB’s annual results by 26%, in contrast to the 62% growth achieved by the group including activity in Mexico and Miami. and they became the reason Its profitability will halve to 4.2% in 2021, and 50% less than for the financial group as a whole, which was 8.7%. Without extraordinary effects, González-Bueno calculated that the return on tangible capital (RoTE) would be close to 8% globally.
for current practice If Sabadell is to meet the new targets, it will have to rely on a change in the United Kingdom’s contribution., because otherwise it would be very difficult to cross the 9% return set. Or 10.5%, excluding the extraordinary tax imposed by the government, for which you will have to pay some 140 million (350 million in two-year validity).
However, to reach this claim, Sabadell will have an exceptional ally, the increase in Euribor, which will allow an increase in interest margin of 15%. The entity expects its entire loan portfolio to be updated to the new interest rates in the coming months, leading to substantial growth in credit income. It should be taken into account that Euribor is over 3% and it is not ruled out that it will soon reach 4%.
In addition, Sabadell does not intend to significantly increase its financial costs. Refuses to enter into war for liabilities through hike in interest rates on fixed deposits, What’s more, they are confident that only a small portion of the increase in interest rates will be transferred to the savings of high-income customers.
The bank, like the rest of the main Spanish institutions, focusing its commercial policy on the sale of investment funds Instead of attracting traditional deposits because they believe they are more attractive to users. Especially those that have a guarantee.
