Banco de Sabadell (SAB) Q2 2024 earnings summary

Executive summary

• Net profit for H1 2024 reached €791M, up 40.3% year-over-year, marking a record high, with RoTE at 13.1% and upgraded guidance for 2024 and 2025 above 13%.

• Profitability and commercial activity improved, with strong loan growth across geographies and segments, and asset quality strengthened.

• Core results (NII plus fees minus costs) up 11% year-over-year, reflecting robust operational performance.

• Commitment to shareholder remuneration, with interim cash dividend and enhanced capital distribution plans, including a payout ratio increased to 60%.

• The Board rejected BBVA's merger proposal, citing undervaluation and confidence in standalone growth.

Financial highlights

• Net interest income grew 9.8% year-over-year and 2.5% quarter-over-quarter in H1 2024.

• Group net profit was €791M in H1 2024, with Q2 net profit at €483M, up 56.8% quarter-over-quarter.

• Fees declined 3.3% year-over-year, mainly due to a one-off in TSB; guidance for year-end revised to a 3% decline.

• Total costs increased 2.5% year-over-year and 1.7% quarter-over-quarter, in line with guidance.

• Asset quality improved: NPL ratio down to 3.2%, coverage ratio up to 60%.

Outlook and guidance

• Upgraded 2024 guidance: NII growth target raised to mid-single digit; RoTE guidance above 13% for 2024 and 2025.

• Cost of risk expected to remain below 50bps in both 2024 and 2025.

• 2025 NII expected to be higher than 2024, supported by commercial activity and interest rate environment.

• Fees expected to decline by around 3% in 2024, with cost growth reaffirmed at ~2.5%.

• The Board projects €2.4B in excess capital generation over 2024-2025, supporting ongoing shareholder distributions.