Banco Sabadell has ruled out the group's interest in participating in a merger between entities in Spain and ensures that it has all its attention focused on dealing with the coronavirus crisis. The bank earned 145 million until June, 73% less than a year ago, weighed down by the allocations made to cover future insolvencies due to the recession and the slowdown in economic activity.

"We can continue on our own", CEO Jaime Guardiola has responded to the indications that give the group more ballots than anyone to participate in an integration with another entity to improve their profitability ratios.

The Catalan executive has focused on other measures aimed at improving its business figures and which go through digital transformation and cost savings. In this sense, Sabadell has accelerated its branch closure plan with respect to what was foreseen before the crisis and leaves the door open to reduce its workforce if the situation worsens.

"The crisis represents an opportunity to greatly reduce the operation by migrating services that have nothing to do with the sale to the remote channel. It remains to be seen how this affects human resources," Guardiola explained. The entity works in different alternatives and, for now, it is focused on the reduction of external contracts and the internal mobilization of personnel to the areas of greatest potential.

Apart from the provisions to cover insolvencies in the second half of the year, which will raise the non-performing loan ratio to around 5%, the group has seen its main business channels reduced: the interest margin it obtains from financial intermediation and commissions. Both fall 5.6% and 4.6% annually, respectively.

However, its outstanding loan portfolio grew by 2.4%, driven by the business credit programs launched during confinement to guarantee liquidity. Guardiola foresees a complex winter of refinancing and restructuring for companies that have seen their profits sink as their debt soars. Banks will play a key role here and will have to analyze very well which companies have a future and which, on the other hand, will have to opt for alternatives such as mergers or strong adjustment plans to continue accessing financing.

On the other hand, during the months of June and July, Sabadell observed a reactivation of the mortgage market after the months of economic slowdown. Entities such as Banco Santander have taken advantage of the increase in demand to apply a substantial reduction in rates and launch programs to attract mortgage clients from other entities. Is there room for a new mortgage war on the horizon? "I hope not. The margins are low and hopefully there will be good sense," said the CEO of Sabadell.

Regarding capital, the entity improves its CET1 ratio to 12.7% after the sale of the asset manager to Amundi in the first quarter of the year. Despite this improvement, the group rules out paying dividends this year in line with the ECB's recommendation.

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