Banco Sabadell — Annual Report 2011 — 130th year

Transcription

—Banco
Sabadell
—Annual
Report
2011
— 130th
year
—
—
Annual Report 2011
130th year
—Index
—
—
—
—
—
—
—
—
—
— Annual Report 2011
—
—
5
— The Banco Sabadell group in 2011 –
financial highlights
9
— Chairman’s letter
12
— Financial and share performance information
35
— Group businesses
65
— Excellence
74
— Risk management
87
— Board of Directors and
Senior Management Team
90
— Report of the Audit and Control Committee
102
— Report on Directors’ remuneration
109
— Corporate Social Responsibility
117
— Statutory information
— Directors’ statement of responsibility
— Auditor’s report
— Annual accounts
— Report of the directors
258
— Banco Sabadell group contact details
—
—
—
—
—
—
—
—
—
—The
Banco
Sabadell
group
in 2011–
financial
highlights
—
—
€'000
Financial highlights
2011
2010
% 11/10
6,276,160
5,978,412
5.0
100,437,380
97,099,209
3.4
73,635,342
73,057,928
0.8
Gross loans and advances to customers
74,922,073
76,190,720
(1.7)
On-balance sheet deposits and issued securities
78,119,863
77,164,193
1.2
52,827,042
49,374,406
7.0
8,024,185
8,852,797
(9.4)
8,784,677
8,742,691
0.5
96,061,962
95,998,199
0.1
Net interest income
1,537,263
1,459,116
5.4
Gross income
2,506,722
2,331,339
7.5
Profit before impairment and other provisions
1,230,710
1,136,304
8.3
231,902
380,040
(39.0)
1,382
1,467
10,675
10,777
Own funds
Total assets
The Banco Sabadell group
in 2011 – financial highlights
ex reverse repos
Customer deposits ex repos
Assets held in mutual funds
Assets held in pension funds
and insurance policies sold
Deposits and assets under management
€'000
Income and earnings performance
Banco Sabadell Annual Report 2011
Net attributable profit
Resources
Number of branches
Number of employees
6
%
Ratios
2011
2010
ROA (Net profit / average total assets)
0.24
0.44
ROE (Net attributable profit / average shareholders' equity)
3.82
7.32
47.32
46.20
10.30
8.20
Tier I
9.80
9.36
Total
10.81
11.08
Loan loss ratio
5.95
5.01
Loan loss coverage ratio
48.5
56.6
115.8
112.5
1,391,048,717
1,263,630,834
127,310
126,263
2.934
2.950
0.17
0.32
0.15
0.28
Profitability and efficiency ratios:
BIS capital ratios:
Core capital*
The Banco Sabadell group
in 2011 – financial highlights
Cost:income (general administrative expenses / gross income)
Risk management:
Loan loss coverage ratio including mortgage security
*The 2011 figure includes a €718 million buyback of preferred securities in exchange for ordinary shares.
Number of shares
Number of shareholders
Quoted share price (€)
Attributable earnings per share (€)
Share data
Attributable earnings per share allowing for effect of
mandatorily convertible bonds (€)
7
—Chairman’s
letter
—
Dear Shareholder,
Chairman’s letter
10
Banco Sabadell ended 2011, its 130th year of operation, with across-the-board increases
in business margins, a comfortable liquidity position and, with the help of an active capital
management strategy, an improved core capital ratio. All this was achieved in a highly
challenging environment marked by a prolonged bout of economic weakness and continuing
financial market turbulence.
Operating conditions were overshadowed by the euro zone sovereign debt crisis which
worsened significantly in the second half of 2011. Notwithstanding the measures taken by
the European authorities to mitigate financial instability and improvements in economic and
fiscal governance, Greece’s financial position became ever more precarious, political problems
erupted in Italy and doubts remained over the efficacy of the bail-out mechanisms that had
been put in place. As a result, the sovereign debt of European countries lost its risk-free status,
particularly in systemic countries like Spain and Italy, exacerbating the negative feedback loop
between funding problems in the government sector and in the banking sector.
From the summer onwards, risk premiums in the inter-bank markets increased significantly,
almost to the heights seen in late 2008. Many of the funding markets tapped by banks and
other lending institutions remained closed. The risk premium on the sovereign debt of Spain
and a number of other countries rose to levels not seen since the inception of European
monetary union, with spreads rising on occasion to more than 450 basis points and impacting
on borrowing costs and the pricing of new loans. The European Central Bank became the
principal source of funding for the banking system and the counterparty of a large number
of financial institutions. Europe’s supreme monetary authority, which had increased official
interest rates on two occasions earlier in the year, not only reversed its interest rate policy but
began to grant loans with very long maturities (36 months) in an effort to ease stressed bank
funding conditions.
The Spanish economy remained virtually flat throughout 2011, with activity actually falling
in the last part of the year. Domestic demand was affected by factors such as fiscal tightening,
a deteriorating labour market and global financial market instability. However, the imbalances
that had built up during the cyclical boom period continued to be addressed. Structural reforms
continued and changes to the law were made to reinforce the country’s commitment to maintain
healthy public accounts in the medium and long term. A sound approach to managing the
Spanish economy will be critical to an early resolution of the current difficulties.
The restructuring of Spain’s financial sector continued throughout 2011 and minimum
capital requirements for banks were increased by a new Law on Strengthening the Financial
System (Royal Decree-Law 2011), which raised the capital adequacy threshold for financial
institutions.
The process of recapitalizing the banks to meet the requirements of the new law was
completed in September, with a number of institutions receiving capital injections from the Fund
for Orderly Bank Restructuring (FROB).
All this made it necessary for banks to actively manage their capital and to allocate large
amounts of funds to cleaning up their balance-sheets, putting further pressure on their profit
margins.
Against this backdrop, Banco Sabadell saw good revenue growth and increased margins
across all earnings metrics. Resolute asset and liability management and determined sales
efforts at branch level made it possible to end the year with a 5.4% increase in net interest
income, with gross operating income rising by 7.5% compared with the previous year. The profit
before provisions totalled €1,230.7 million, up 8.3% on the year (or 2.7% on a comparable
basis, with the effect of the Banco Guipuzcoano merger included). This was achieved despite
difficult operating conditions, rising borrowing costs and poor credit accessibility.
After balance-sheet strengthening allocations of €1,048.9 million in loan impairment and
other provisions – 8.4% more than in the previous year – Banco Sabadell posted a net profit of
€231.9 million at the close of 2011.
A highly proactive strategy made 2011 a year of record-breaking achievement for the Bank,
both in terms of increased deposits and winning new customers. Strong organic growth led
to gains in market share and pushed up the Bank’s customer base to over 2.7 million with
342,096 new customers being added during the year, ensuring that targets were met.
José Oliu Creus
Chairman
Chairman’s letter
The Bank continued to enjoy a comfortable liquidity position, thanks in large measure to
its success in attracting deposits and the effectiveness of its branch network, which enabled
it to continue to generate a significant surplus of deposits over loans of almost €4,000
million.
Core capital was substantially strengthened during the year. The Bank carried out two
capital-bolstering exercises: the first of these, in February, was an issue and offering of new
shares for the purpose of redeeming various issues of subordinated and preferred debt; the
second, in December 2011, was an offer to buy back preferred securities by exchanging them
for new shares. These transactions resulted in the Bank’s core capital ratio reaching 10.3% by
the close of the year.
The second quarter of the year saw the completion of the integration of Banco
Guipuzcoano into the Banco Sabadell group. The integration was carried out in a period of
barely five months and underscores the Bank’s record of solid achievement, expertise and
technical capability in executing integration processes. As a result Banco Sabadell is now the
fourth largest financial institution in the Basque Country and Navarre regions, trading under
the new SabadellGuipuzcoano local brand.
In August Sabadell United Bank, Banco Sabadell’s subsidiary in Miami, was granted
permission to take over Lydian Private Bank, a local institution which had until then been
under administration by the US authorities. As a result of this transaction the total revenue of
Banco Sabadell’s Florida subsidiary increased by 51%, strengthening its position in the state
of Florida and making it the state’s seventh largest local bank by deposits.
In a further development, on 7 December 2011 Banco Sabadell acquired Banco CAM S.A.
in a competitive bidding process organized by the Fund for Orderly Bank Restructuring (FROB)
following the reorganization of the Caja de Ahorros del Mediterráneo (CAM). The take-over
agreement, which is subject to approval by the Spanish regulator and the EU competition
authorities, incorporates certain financial conditions and risk limitations. The deal will
substantially extend the Bank’s existing franchise in Alicante, Murcia, Valencia and the
Balearic Islands.
The take-over offer was drawn up according to parameters set out in the bidding conditions
and included an application for additional capital, over and above the FROB’s €2,800 million
commitment, amounting to €5,249 million. The arrangements also include an asset
protection scheme (APS) under which the Deposit Guarantee Fund (DGF) will cover up to 80%
of losses incurred over a period of ten years. A defined portfolio of assets valued at €24,660
million will enjoy protection in relation to capital consumption and impairment loss if and when
the assets are sold off. Finally, the take-over agreement includes FROB guarantees of liquidity
support amounting to an additional €12,500 million.
The Banco CAM acquisition represents a transformative leap for Banco Sabadell. It will
enable it to contemplate a future that assures it of a place among Spain’s top banking groups,
and this at a crucial time when Spain’s financial system has been subjected to stress and
under intense pressure to consolidate.
This annual report contains accurate and detailed information on the key developments
that have marked the year 2011 and on the group’s performance in a highly challenging
economic and financial environment. The data it provides testifies to the resilience of the
Bank’s core business and its determined efforts to continue to strengthen its balance-sheet.
It also bears witness to the sturdy professionalism of a highly experienced management
team, supported by a diligent workforce that is committed to the future vision of today’s
Banco Sabadell.
11
—Financial
and share
performance
information
—
—
—
—
—
—
— Macroeconomic environment
—
—
Financial and share
performance information
The euro zone sovereign debt crisis continued to be the focus of
attention in 2011. Advances in the area of economic and fiscal
governance and improved mechanisms of financial support were
not sufficient to resolve the situation. Rather, financial instability in
the region worsened significantly in the second half of the year as
contagion spread to the systemic countries.
In the first half of the year, the main factors giving rise
to instability were fiscal and political issues in Greece and
discussions among European policymakers on the possibility of
voluntary private sector participation in an exchange of Greek
government debt. In April, Portugal asked for international
assistance after an internal political crisis erupted in the country.
The agreements reached at the European Council meeting of
21 July failed to prevent a resumption of financial turbulence in
the summer months and contagion soon spread to the sovereign
debt markets of countries like Spain and Italy. At the July European
Summit agreement was reached on: (i) providing a further package
of assistance to Greece linked, finally, to an orderly restructuring
of public debt in the hands of the private sector; (ii) less stringent
conditions for providing aid to countries in need of rescue,
and (iii) increased flexibility for support mechanisms, allowing
institutions to act on the basis of a precautionary programme
and buy government debt on the secondary market. Growing
financial instability was caused by doubts over the implementation
of bailout mechanisms, given the increasingly critical situation in
Greece and rumours of a downgrading of France’s credit rating.
Fears of global economic recession and the removal of the US’s
triple-A status by Standard & Poor’s only made the problem worse.
In response, Spain and Italy took additional corrective measures
and the European Central Bank reactivated its asset purchase
programme and began buying Spanish and Italian government
debt.
14
— ECB Government bond purchases (€Bn.)
250
200
150
100
50
0
e
Jun 0
1
20
r
er
be
mb
tem 10
p
ce 2010
e
20
Se
D
rch
Ma 11
20
e
Jun 1
1
0
2
er
er
mb 0
mb 11
e
e
t
c
1
p
De 20
20
Se
Financial and share
In the fourth quarter, the European Council meeting of 26 October
once again highlighted the difficulty of reaching agreements within
the euro zone and the announced measures failed to convince
the financial markets. In particular, the summit agreed to require
Europe’s major banks to strengthen their capital bases in line
with their exposure to European sovereign debt, causing banks
to reduce that exposure. This, combined with the lack of any firm
agreement at the November G-20 meeting and political crises
brewing in Italy and Greece, made the financial turmoil even worse
and the debt crisis began to affect countries like France. European
countries saw their sovereign debt lose its risk-free status, risk
premiums in the inter-bank markets returned to their end-2008
levels, and credit institutions again found many of their funding
markets being closed off. The European Council of 9 December
approved a new budget pact and strengthened coordination of
economic policies; this was judged by observers to be a step in
the right direction but still insufficient to bring the euro area’s
sovereign debt crisis to an end.
— Risk premiums on 12-month euro inter-bank rates (basis points)
250
200
150
50
0
er
mb
ce 2007
e
D
r
e
be
Jun 8
em 008
0
c
0
e
2
2
D
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be
Jun 9
em 009
0
c
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e
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2
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Jun 0
em 010
1
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be
Jun 1
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1
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2
D
In addition to the crisis brought on by sovereign debt problems in
the euro zone, a series of additional shocks occurred during the
year and contributed to weaken prospects for global economic
growth. First, geopolitical tensions in North Africa and the Middle
East caused a substantial rise in oil prices in the first quarter. A
natural disaster struck Japan in March, causing severe disruption
to global supply chains. A rising level of political polarization in
the United States obstructed measures to stimulate the economy.
Finally, restrictive economic policies being adopted in the emerging
countries to combat the risk of overheating contributed to an
economic slowdown in these economies in the second half
of the year.
In the case of Spain, throughout the year economic activity
remained virtually flat and actually showed a decline towards the
end of the year. Domestic demand was weighed down by such
factors as tight fiscal policies, a worsening labour market and
financial instability in the international markets. However, Spain
continued to implement structural reforms, including changes
to the pension and collective bargaining systems and plans to
strengthen the financial sector. On the fiscal front, limits to the
100
15
— IFO business confidence survey - expectations
115
110
105
100
95
90
85
80
75
r
be
em 007
c
De 2
Financial and share
16
r
e
be
Jun 8
0 ecem 008
0
2
2
D
r
e
be
Jun 9
em 009
0
c
0
2
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Jun 0
em 010
1
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be
Jun 1
em 011
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2
De 2
structural deficit were inserted into the Spanish Constitution and
rules were made to restrict the growth of public expenditure for
both central government and the larger municipal councils. In the
political arena, the 20 November general election saw the Popular
Party win with an absolute majority.
Against this backdrop, monetary policy pursued by central
banks in major developed countries continued to be highly
accommodative and included concerted action to boost liquidity.
In particular the European Central Bank, having pushed up its
benchmark rate in April and July in pursuit of its primary aim of
controlling inflation, reduced rates again to 1.00% in the last
quarter in response to economic weakness. The ECB also took
unconventional measures to resolve liquidity problems in the
financial system and to relieve the shortage of collateral, such as
introducing 36-month refinancing loans, broadening the range of
eligible collateral, reducing reserve requirements, and reactivating
the covered bond purchasing programme. In the US, the Federal
Reserve held discount rates unchanged at 0.00%-0.25% and
indicated that economic conditions would probably ensure that
they remained at exceptionally low levels until mid-2013. The
Fed also adopted additional unorthodox monetary measures to
reduce long-term interest rates and provide support for mortgage
market activity. Elsewhere, the Bank of Japan kept its benchmark
rate unchanged in a range of 0.00% - 0.10% and increased its
unconventional monetary programmes. Finally, the Bank of
England allowed base rates to remain at 0.50% and, in the last
quarter, decided to increase assets acquired under its asset
purchase programme by GBP 75 billion to GBP 275 billion.
In the long-term bond markets, yields in Germany and the US
fell back sharply, falling to all-time lows. German and US bonds
became a refuge as European financial instability persisted,
garnering further support as global economic activity declined.
For the peripheral economies in the euro zone, risk premiums
generally saw sharp upward movements, reaching highs not seen
since the euro area came into being. In the fourth quarter, indeed,
as the sovereign debt crisis spread throughout the region, interest
rate spreads on the debt of countries such as France or Austria
over the German benchmark reached their highest levels since the
launch of the single European currency. In these conditions, the
main rating agencies continued to take actions which impacted
negatively on the sovereign debt of the peripheral countries. The
ratings of Portuguese and Irish debt were downgraded to junk
status. Moreover, the agencies’ doubts over progress in resolving
the sovereign debt crisis led them to review the ratings of every
country in the euro zone as the year came to an end. In the
currency markets, the euro ended the year lower against the dollar.
In the early months of the year, the single currency was helped
by improvements to the European financial support mechanisms
and by European Central Bank pronouncements in preparation for
rate increases. It then stabilized but sank lower from September
onwards because of uncertainty over the resolution of sovereign
debt problems in the euro zone, the changing discourse emanating
from the ECB and political convulsions in Greece and Italy. One of
the few factors supporting the European currency at this time was
the repatriation of capital by European banks.
600
Financial and share
— Risk premiums on 10-year sovereign bonds over German Bund
(basis points)
— Spain
— Italy
— France
500
400
300
200
100
r
be
em 007
c
De 2
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e
be
Jun 8
em 008
0
c
0
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De 2
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Jun 9
em 009
0
c
0
2
De 2
r
e
be
Jun 0
em 010
1
c
0
2
De 2
r
e
be
Jun 1
em 011
1
c
0
2
De 2
Meanwhile, the yen appreciated against the dollar over the year
despite interventions in the currency markets by the Japanese
authorities. The currency derived support from global financial
instability.
Equity markets, after remaining relatively stable throughout the
first half of the year, fell back sharply in the summer months as
financial turbulence returned and the global economy weakened.
In the year as a whole, the EURO STOXX 50 index declined by
17.1%, while the Spanish IBEX did so by 13.1%. In the US, the S&P
index recovered after the summer and was able to end the year
practically unchanged, having been less severely affected by the
European debt crisis. In euro terms, the S&P index ended the year
with a rise of 3.1% as a result of the weakening European currency.
0
17
—
— Share performance
—
—
Financial and share
In the first 11 months of the year Banco Sabadell's share price
moved in line with the IBEX 35 index and the European equity
markets, which remained relatively stable in the first half. In the
second half of the year the Bank's share price, along with those
of its peers, suffered a considerable decline. This was caused
mainly by financial turmoil in European markets from the summer
onwards. In December, however, Banco Sabadell shares rallied
strongly, rising by more than 40% in just three weeks. A strong
performance by Spanish banking industry shares in December,
combined with the 7 December announcement by Spain's Fund
for Orderly Bank Restructuring (FROB) that Banco CAM had been
taken over by Banco Sabadell, were factors driving the rally.
—
—A sharp rally in the last month of the year shows
the markets’ positive view of the announced
Banco CAM take-over
—
—
There were three key elements to the CAM take-over: (1) an
asset protection scheme; (2) a cash injection; and (3) liquidity
support. The deal has cemented Banco Sabadell’s position
among the leading Spanish banking groups, increased its market
share and given it a more balanced national presence. The
announcement was very well received by the investor community,
which showed a healthy interest in the details of the transaction.
—Comparative share performance
— Banco Sabadell
—Comparable Spanish banks (*)
— IBEX 35
— DJ STOXX 600
130
18
120
110
100
90
80
70
60
.10
.12
31
.11
.11
.03
31
.06
30
30
.09
.11
.11
.12
31
(*) Includes Caixabank, Banco Popular, Banesto and Bankinter for the whole of 2011, plus Bankia from 20 July 2011 onwards.
— Monthly share price movements - 2011
Month
Maximum
(€)
Minimum
(€)
Average daily
trading volume
('000 shares)
3.494
3.146
3.087
2.993
2.983
2.850
2.609
2.754
2.685
2.610
2.490
2.934
3.709
3.370
3.215
3.187
3.055
3.006
2.968
2.754
2.783
2.730
2.573
3.237
2.779
3.025
3.000
2.920
2.799
2.750
2.450
2.236
2.438
2.526
2.217
2.467
8,600
20,862
9,072
6,555
5,179
5,962
8,606
5,989
3,726
2,890
2,869
4,989
— Earnings per share and book value per share 2007-2011
2007
2008
2009
2009*
2010
2010**
2011
2011***
Mn
¤Mn.
¤
¤Mn.
¤
Number
of shares
Net attributable
profit
Net attributable
earnings per share
Shareholders'
equity
Book value
per share
1.224
1.200
1.200
1.300
1.264
1.457
1.391
1.584
782
674
522
522
380
380
232
232
0,64
0,56
0,44
0,41
0,32
0,28
0,17
0,15
4.501
4.627
5.226
5.226
5.978
5.978
6.276
6.276
3,68
3,86
4,36
4,02
4,73
4,10
4,51
3,96
*Includes the dilution effect of 100,340,000 additional shares resulting from an issue of convertible bonds.
**Includes the dilution effect of 100,010,000 and 93,600,000 additional shares resulting from issues of convertible bonds.
***Includes the dilution effect of 99,690,000 and 92,870,000 additional shares resulting from issues of convertible bonds.
— Ratios
Share price at 31.12.11
P/E ratio 2011*
P/B ratio 2011
Dividend yield 2011
€2.934
19.34 x
0.74 x
3.75%
*Allowing for conversion of mandatorily convertible subordinated bonds.
With the share price at €2.934 at the close of the year, Banco
Sabadell's year-end market capitalization was €4,078 million,
making it Spain's sixth largest banking group by market value as
well as on most other financial measures.
Two dividend payments were made during the year: a final
dividend for the year 2010 of €0.06 per share and an interim
dividend for 2011 of €0.05 per share. This is equivalent to a
dividend yield of 3.75% on Banco Sabadell shares in the year
2011. Combined with the 2011 final dividend of €0.05 per share,
payable in bonus shares from the Bank's stock of treasury shares,
which will be recommended for approval by the General Meeting,
the overall dividend for the year will be €0.10 per share.
On 31 January 2011 Banco Sabadell’s Board of Directors took
the decision to increase the capital of the Bank by the issue and
sale of 126,363,082 shares amounting to 10% of the total shares
outstanding. This capital-raising exercise was carried out by private
placement aimed exclusively at qualified investors in Spain and
Financial and share
January
February
March
April
May
June
July
August
September
October
November
December
Closing
price
(€)
19
Financial and share
abroad, using an accelerated bookbuild procedure. At the same
time the Bank launched a cash offer to buy back a number of debt
issues (preferred securities and subordinated notes). The overall
effect of the simultaneous capital increase and buyback offer was
to enhance the composition of Banco Sabadell's capital and to
raise its core capital ratio to a satisfactory level. As a result of the
transaction the ratio increased by 68 basis points.
Early in December 2011 the decision was taken to make
a buyback offer to the holders of preferred securities issued
by different Banco Sabadell group undertakings and sold to
private investors. The preferred securities were to be exchanged
for ordinary shares of Banco Sabadell. The buyback process
was completed on 3 January 2012 and met with a weighted
acceptance rate of 93.8%. The offer price at which 90% of the
nominal value of the repurchased preferred shares would be paid
was fixed at the sum of €2.6461 per share. Under the terms of the
offer, the remaining 10% of the nominal value of the repurchased
preferred shares, plus 2% of the overall nominal value of the
preferred shares, will be paid once the Bank has satisfied itself
that investors have fulfilled the requirement to continue to hold
without interruption, until 14 December 2012 inclusive, all ordinary
shares of the Bank acquired by them under the terms of the offer.
The offer was carried out for the dual purpose of giving holders
of preferred shares the opportunity to liquidate their positions in
these securities and replace them with Banco Sabadell ordinary
shares, while at the same time building up the Bank’s consolidated
capital structure.
— Analysis of shareholdings at 31 December 2011
Size of holding
Number of
shareholders
Number of
shares
% of total
share capital
12.000 or less
From 12.001 to 120.000
From 120.001 to 240.000
From 240.001 to 1.200.000
From 1.200.001 to 18.000.000
More than 18.000.000
117,172
9,255
491
318
66
8
196,181 ,482
287,787 ,225
81,696 ,265
149,718 ,911
238,411 ,006
437,253 ,828
14.10%
20.70%
5.87%
10.76%
17.14%
31.43%
TOTAL
127,310
1,391 ,048 ,717
100.00%
Number of
shareholders
Number of
shares
% of total
share capital
12.000 or less
From 12.001 to 120.000
From 120.001 to 240.000
From 240.001 to 1.200.000
From 1.200.001 to 15.000.000
More than 15.000.000
116,080
9,259
520
334
63
7
193,854,327
288,800,666
86,360,656
154,314,086
226,950,198
313,350,901
15.34%
22.85%
6.83%
12.21%
17.96%
24.81%
TOTAL
126,263
1,263,630,834
100.00%
20
— Analysis of shareholdings at 31 December 2010
Size of holding
Banco Sabadell has a Shareholder Relations Desk and an
Investor Relations Department whose functions are to provide
detailed information on the performance of the group and respond
to enquiries, suggestions and views of existing or potential
shareholders, whether private or institutional, on any aspect
related to the Bank and its performance.
Financial and share
The total number of shares of the Bank to be issued or sold
as a result of the application by preferred shareholders of a cash
sum equivalent to 90% of the nominal value of the repurchased
preferred shares, less any fractional amounts, was 271,179,763
(of which 48,000,000 were treasury shares and 223,179,763
were new shares representing 13.83% of the ordinary share
capital of the Bank as increased by the offer). A notarial instrument
formally executing the new share issue was filed with the
Barcelona Mercantile Registry on 4 January 2012.
On 12 January 2012 the Board of Directors of Banco Sabadell
decided to call an Extraordinary General Meeting of the Company
to be held on 23 February 2012.
On the agenda for the meeting was an increase in capital in a
nominal amount of €86,476,525,625 by the issue and allotment
of 691,812,205 ordinary shares payable in cash with a nominal
value of €0.125 each, subject to a right of preferential subscription
and to the possibility of the issue not being fully subscribed, with
powers being granted to the Board of Directors, including the
power of substitution, to carry out the increase in capital and to
decide on the terms thereof except as specifically determined by
the Meeting.
The Board of Directors was also authorized to increase the
share capital on one or more occasions and, if thought fit, to
withdraw preferential subscription rights.
21
—
—Financial review
—
—
—
—Laying the foundations for future growth
— Robust asset and liability management
— Strong growth in customer numbers
—
—
Financial and share
€'000
Assets
2011
2010
% 11/10
1,290,678
1,253,600
3.0
2,273,131
13,268,170
76,282,944
3,628,914
72,654,030
696,934
1,106,881
1,022,161
4,496,481
1,962,652
10,830,629
76,725,432
2,744,614
73,980,818
813,492
1,081,549
831,301
3,600,554
15.8
22.5
(0.6)
32.2
(1.8)
(14.3)
2.3
23.0
24.9
100,437,380
97,099,209
3.4
2011
2010
% 11/10
Liabilities held for trading and derivatives
Financial liabilities at amortized cost
Deposits from central banks
Deposits from credit institutions
Deposits from other creditors
Debt certificates including bonds
Subordinated liabilities
Other financial liabilities
Liabilities under insurance contracts
Provisions
Other liabilities
2,011,411
91,586,490
4,040,717
8,128,791
58,444,050
17,643,095
1,859,370
1,470,467
173,348
350,203
381,784
1,716,500
88,710,738
32,997
10,300,991
55,092,555
19,507,497
2,386,629
1,390,069
177,512
367,662
438,254
17.2
3.2
-(21.1)
6.1
(9.6)
(22.1)
5.8
(2.3)
(4.7)
(12.9)
Total liabilities
94,503,236
91,410,666
3.4
2011
2010
% 11/10
Own funds
Valuation adjustments
Non-controlling interests
6,276,160
(389,228)
47,212
5,978,412
(323,735)
33,866
5.0
20.2
39.4
Total equity
5,934,144
5,688,543
4.3
100,437,380
97,099,209
3.4
2011
2010
% 11/10
Contingent exposures
Contingent commitments
8,347,022
11,657,865
8,310,022
16,133,441
0.4
(27.7)
Total off-balance sheet items
20,004,887
24,443,463
(18.2)
Cash and deposits with central banks
Assets held for trading. derivatives and other
financial assets
Available-for-sale financial assets
Loans and receivables
Loans and advances to credit institutions
Loans and advances to customers
Equity investments
Tangible assets
Intangible assets
Other assets
Total assets
Liabilities
Equity
22
Total liabilities and equity
Off-balance sheet items
Capital management
—
—Boosting our core capital ratio
— Actively managing our capital
—
— BIS capital ratios
€'000
2010
% 11/10
173,881
5,171,378
814,620
53,239
(1,151,809)
157,954
4,777,188
818,714
39,294
(829,717)
10.1
8.3
(0.5)
35.5
38.8
5,061,309
4,963,433
2.0
9.01
8.20
520,711
699,490
(25.6)
5,582,020
5,662,923
(1.4)
9.94
9.36
567,164
1,041,663
1.01
1.72
Capital base
6,149,184
6,704,586
BIS ratio (%)
10.95
11.08
Minimum capital requirement
4,493,377
4,842,011
(7.2)
Capital surplus
1,655,807
1,862,575
(11.1)
56,167,208
60,525,138
(7.2)
Capital
Reserves
Convertible bonds
Deductions
Core capital
Core capital ratio (%)
Preference shares and deductions
Primary capital
Tier I capital ratio (%)
Secondary capital
(45.6)
(8.3)
Tier II capital ratio (%)
Financial and share
2011
Memorandum item:
Risk-weighted assets (RWA)
*Core capital reached 10.30% in 2011. This includes a €718 million buyback of preferred securities in exchange for ordinary shares of the Bank.
Balance sheet management
23
Total assets of the Banco Sabadell group stood at €100,437.4
million at the end of 2011, a rise of €3,338.2 million compared
with the year-end figure for group assets for 2010. The
percentage increase during the year was 3.4%.
—
—A good inflow of deposits thanks to a strong branch
presence and an active ALM strategy
—
—
Gross loans and advances to customers excluding reverse
repos totalled €73,635.3 million at 31 December 2011, up from
€73,057.9 million at the close of 2010, a 0.8 % increase. Of the
various components of gross loans and advances to customers,
the "other loans and receivables" category performed particularly
well, increasing by €1,783.3 million. Other loans also saw good
growth with a rise of €1,020.9 million.
— Gross loans and advances to customers
(ex reverse repos) (€ Mn.)
73,058
Financial and share
— Loans and advances to customers
31.12.2010
— Loans and advances to customers
31.12.2011
1 Overdrafts and sundry accounts 2%
2 Mortgage loans and credit
52%
3 Other secured loans
and receivables
6%
4 Commercial loans
8%
5 Other loans
20%
6 Other receivables
8%
7 Finance leases
4%
1 Overdrafts and sundry accounts 3%
2 Mortgage loans and credit
49%
3 Other secured loans
and receivables
5%
4 Commercial loans
8%
5 Other loans
23%
6 Other receivables
8%
7 Finance leases
4%
1
10
20
73,635
11
20
1
7
7
6
6
5
5
2
24
4
2
4
3
3
€'000
2011
2010
% 11/10
Secured loans
Commercial loans
Other loans and receivables
Other loans
37,910,786
5,454,772
20,889,437
9,380,347
40,015,744
5,576,618
19,106,137
8,359,429
(5.3)
(2.2)
9.3
12.2
ex reverse repos
73,635,342
73,057,928
0.8
1,286,731
3,132,792
(58.9)
Loans and advances to customers - gross
74,922,073
76,190,720
(1.7)
Provisions for bad and doubtful debts and country risk
(2,268,043)
(2,209,902)
2.6
Loans and advances to customers - net
72,654,030
73,980,818
(1.8)
Memorandum item: Total securitized assets
Of which: Securitized mortgage assets
Other securitized assets
10,150,163
6,834,319
3,315,844
9,976,654
6,410,041
3,566,613
1.7
6.6
(7.0)
Of which: Securitization issues after 01.01.04
Of which: Securitized mortgage assets
10,019,153
6,705,180
3,313,973
9,771,286
6,219,586
3,551,700
2.5
7.8
(6.7)
Reverse repos
The loan loss ratio (bad and doubtful loans as a proportion of
total qualifying loans and advances), at 5.95%, was once again
below the average for the Spanish financial sector. The loan loss
coverage ratio was 48.5%. The loan loss coverage ratio with
mortgage security included was 115.8%.
€'000
2010
% 11/10
4,876,554
4,073,951
19.7
Gross loans and advances to customers ex reverse repos
Contingent liabilities
73,635,342
8,347,022
73,057,928
8,310,022
0.8
0.4
Total credit risk
81,982,364
81,367,950
0.8
Specific provisions
Generic provisions
1,532,895
831,799
1,880,605
424,788
(18.5)
95.8
Provisions for bad and doubtful debts
2,364,694
2,305,393
2.6
Loan loss ratio (%)
5.95
5.01
Loan loss coverage ratio (%)
48.5
56.6
Total bad and doubtful debts
In 2011 the Banco Sabadell group saw the value of its investment
portfolio increase by 20.1% compared with the previous year to
reach a year-end total of €14,382.9 million.
Banco Sabadell's portfolio of fixed-income investments is held,
first, as part of its arrangements for macro-hedging the group's onbalance sheet interest rate risk; second, as a source of interest
returns to boost net interest income, subject always to complying
strictly with the established limits for interest rate risk; and third,
as part of a treasury management strategy of investing cash
surpluses in the securities markets.
The Bank ensures that the credit quality of overall asset
positions held in its fixed-income portfolio is of the highest order
and that it invests in assets with the highest ratings awarded by
rating agencies.
Financial and share
2011
€'000
2011
Government securities
Treasury bills
Other government securities
Fixed-income securities
Doubtful assets
2010
% 11/10
25
1,175,162
6,764,342
4,348,994
8,281
1,405,113
5,015,834
3,452,212
7,933
(16.4)
34.9
26.0
4.4
12, 296, 779
9, 881, 092
24.4
Shares and equity investments
Credit institutions
Other private sector issuers
Equity investments in unconsolidated companies
117,301
1,271,865
696,934
158,769
1,119,631
813,492
(26.1)
13.6
(14.3)
Total shares and equity investments
2,086,100
2,091,892
(0.3)
14,382,879
11,972,984
20.1
Total fixed-income securities
Total investment portfolio
Customer funds on the liability side of the balance sheet at the
end of the year stood at €78,119.9 million, up from €77,164.2
million at the end of 2010 (+1.2%).
Customer deposits grew by 6.1%. Time deposits did particularly
well, reaching a year-end total of €32,819.8 million (+9.1%).
Demand deposits (current accounts plus savings accounts)
showed an overall increase of 2.5%.
Debt securities and other negotiable instruments together with
subordinated liabilities totalled €19,502.5 million, down from the
previous year’s figure of €21,894.1 million, a 10.9% fall.
Financial and share
€'000
2011
2010
% 11/10
Current accounts
Savings accounts
Time deposits
Repurchase agreements
Accrued expenses and deferred income
Adjustments due to hedging derivatives
15,365,426
3,374,545
32,819,805
6,297,269
505,230
81,775
15,439,685
2,844,818
30,091,528
6,249,332
356,101
111,091
(0.5)
18.6
9.1
0.8
41.9
(26.4)
Customer deposits
58,444,050
55,092,555
6.1
Debt securities and other negotiable instruments
17,643,095
19,507,497
(9.6)
1,859,370
2,386,629
(22.1)
173,348
177,512
(2.3)
78,119,863
77,164,193
1.2
Total on-balance sheet deposits and issued securities
— Customer deposits (*)
31.12.2010
— Customer deposits (*)
31.12.2011
1 Current accounts
2 Savings accounts
3 Time deposits
4 Repurchase agreements
28%
5%
55%
11%
1 Current accounts
2 Savings accounts
3 Time deposits
4 Repurchase agreements
27%
6%
56%
11%
4
4
1
1
26
2
2
3
3
(*) Before time period and hedging adjustments.
The value of assets in collective investment schemes (CIS’s) at
the end of the year was €8,024.2 million. This was 9.4% below the
figure for 2010 and was in line with market trends in the period.
€'000
2010
% 11/10
Managed collective investment schemes (CIS's)
Equity funds
Balanced funds
Fixed-income funds
Guaranteed funds
Real estate funds
Open-end investment companies (OEICs)
6,737,188
339,122
434,449
1,658,223
2,035,260
1,000,706
1,269,428
7,421,903
448,969
504,681
2,127,417
1,855,775
1,079,171
1,405,890
(9.2)
(24.5)
(13.9)
(22.1)
9.7
(7.3)
(9.7)
Mutual funds and OEICs distributed by the group
1,286,997
1,430,894
(10.1)
Collective investment schemes
8,024,185
8,852,797
(9.4)
Individual
Company
Group
1,767,125
1,067,101
24,073
1,827,383
1,159,427
29,008
(3.3)
(8.0)
(17.0)
Pension funds
2,858,299
3,015,818
(5.2)
10,882,484
11,868,615
(8.3)
Total CIS's and pension funds
Financial and share
2011
Assets held in pension funds sold by the group totalled
€2,858.3 million, down 5.2% compared with the year before, while
insurance policies sold and liabilities under insurance contracts, at
€6,099.7 million were up by 3.3% on the year.
Overall, customer deposits and assets under management
amounted to €96,062.0 million at the close of the year, similar to
last year's figure of €95,998.2 million.
€'000
2010
% 11/10
Creditors - general government
Creditors - resident sector
Creditors - non-resident sector
Accrued expenses and deferred income
Adjustments due to hedging derivatives
Debt securities and other negotiable instruments
Collective investment schemes
Pension funds
Insurance policies sold and liabilities under insurance contracts
Wealth management
2,983,741
49,161,785
5,711,519
505,230
81,775
17,643,095
1,859,370
8,024,185
2,858,299
6,099,726
1,133,237
1,282,570
48,229,930
5,112,863
356,101
111,091
19,507,497
2,386,629
8,852,797
3,015,818
5,904,385
1,238,518
132.6
1.9
11.7
41.9
(26.4)
(9.6)
(22.1)
(9.4)
(5.2)
3.3
(8.5)
Total customer deposits and assets under management
96,061,962
95,998,199
0. 1
2011
2010
% 11/10
Capital
Reserves
Other equity instruments
Less: Treasury shares
Net attributable profit
Less: Dividends and similar payments
173,881
5,299,712
814,620
(174,439)
231,902
(69,516)
157,954
4,761,117
818,714
(25,686)
380,040
(113,727)
10.1
11.3
(0.5)
-(39.0)
(38.9)
Own funds
6,276,160
5,978,412
5.0
(389,228)
(323,735)
20.2
47,212
33,866
39.4
5,934,144
5,688,543
4.3
2011
€'000
Total equity
27
Liquidity management and funding
In a climate of worsening financial market turmoil across the globe
fuelled by the sovereign debt crisis and the seizing up of capital
markets, especially in the euro area, the Bank's funding policy
continued to focus on attracting deposits and other funds through
the branch network.
As far as its wholesale market funding activities are concerned
the Bank, like the rest of the banking sector, saw its ratings
downgraded by the three major rating agencies, very largely
in response to lower sovereign credit ratings on the Kingdom
of Spain.
Financial and share
— Ratings awarded to Banco Sabadell debt securities
Rating agency
Fitch
Moody's
Standard & Poor's
28
Long-term
debt
Short-term
debt
BBB+
A3
BBB
F2
Prime 2
A2
The group has a number of short- and long-term funding
programmes in place, giving it a range of funding sources and an
appropriate diversity of products, maturities and investors. Its
short-term funding arrangements include a Spanish commercial
paper (pagarés) issuance programme with an upper limit of
€5,000 million and a Euro Commercial Paper (ECP) programme
with a nominal value of up to €3,500 million; in addition, Banco
Guipuzcoano has its own pagaré issuance programme with a limit
of €1,000 million. All these programmes are aimed at qualified
and unqualified investors. The value of commercial papers,
which are offered mainly on the domestic market, outstanding
at 31 December showed a slight increase over the year and
stood at €2,240 million. The group's ECP programme, aimed at
global qualified investors, saw a progressive contraction and by
31 December 2011 no issues under the ECP programme were
outstanding.
As part of its longer-term funding, in 2011 Banco Sabadell
issued bonds totalling €2,217 million under its Nonparticipating
Securities Issuance Programme. This included a public offering
of 2-year mortgage covered bonds (cédulas hipotecarias)
totalling €1,200 million, five issues of mortgage covered bonds
underwritten by the European Investment Bank with an aggregate
value of €600 million and maturities of between eight and ten
years, a private placement of ordinary bonds with a value of €77
million maturing in one year and a bond issue offered to the
general public with a total value of €300 million and a term of 18
months.
In addition to these sources of funds, the Bank holds a reserve
of liquid assets —cash and assets realizable in the short-term—
which would enable it to face any liquidity contingency. In the
course of 2011, Banco Sabadell continued to strengthen its liquid
asset base, mainly by creating a positive gap between deposits
Mortgage
covered
bonds
Public sector
covered
bonds
Aaa
Aa2
Other
ratings
Support 3
Strength C-
— Each year a funding plan is drawn up based on the funding
needs identified for each business unit and the amount to
be raised on the capital markets, spread over a range of
long- and short-term funding programmes.
—Regular checks are made to see that the funding plan is
being adhered to and any deviations from the plan are
identified for each business unit and the funding plan
updated accordingly.
—The Bank's short-term commitments, treasury position and
future projections are reviewed periodically to ensure that
the Bank has sufficient liquidity to meet its financing needs
in the long and short term.
—Banco Sabadell regularly updates its liquidity contingency
plan to ensure that it has sufficient liquid assets available to
respond effectively to any liquidity stress scenario that could
arise.
Financial and share
and loans via its branch network and through such initiatives as
setting up a new securitization fund with a total value of €1,500
million, issuing public sector covered bonds (cédulas territoriales)
and state-backed ordinary bonds amounting to €500 million and
€1,500 million respectively, and adding new loans totalling more
than €678 million to its eligible collateral for its credit facility
with the Bank of Spain. At the close of the year Banco Sabadell's
eligible liquid asset base amounted to more than €10,400 million.
At 31 December Banco Sabadell had borrowings with the European
Central Bank totalling €4,154 million following an ECB auction
of 3-year liquidity on 22 December 2011. Banco Sabadell's
participation in the auction amounted to €4,000 million, which
covers the full amount of the group's capital market debt maturing
in the year 2012.
Banco Sabadell's liquidity management policy seeks to ensure
that its lending can be financed at a reasonable cost and within
a reasonable time so that liquidity risk is kept to a minimum. Its
standard liquidity management procedures are as follows:
Profit performance in 2011
Despite challenging economic and financial conditions, the Banco
Sabadell group ended the year 2011 with a net attributable profit
of €231.9 million after net provisions for loan defaults, securities
revaluations and real estate writedowns amounting to €1,048.9
million, 8.4% higher than the figure for 2010.
At the close of 2011, net interest income totalled €1,537.3
million, rising by 5.4% year-on-year. With data for Banco
Guipuzcoano included for the whole of the year 2010 (although
for accounting purposes results for Banco Guipuzcoano were only
integrated from December 2010 onwards), the change on the year
would have been a 4.4% fall due to adverse movements in interest
rates, although this was partly offset by careful management
of interest spreads and returns on the Bank's ALCO-managed
portfolio of fixed-interest securities.
Profits of group undertakings consolidated by the equity
method totalled €37.7 million and included substantial
contributions from the group’s insurance and pension associates
29
(€14.3 million), and good results from affiliate banks in Latin
America (Banco del Bajío and Centro Financiero BHD), which
together contributed a total of €21.1 million.
Net fee and commission income was €573.6 million and
increased by €57.1 million (up 11.1%) on the year (up 3.1% with
Banco Guipuzcoano included for the whole of 2010). Income
categories showing particularly good growth were fees for
securities-related services, card fees and loan syndication fees.
Financial and share
30
—
—Good revenue growth
—Significant like-for-like cost reductions
— Using sustained generation of exceptional profits
to strengthen our provision buffer
—
—
Net income from trading totalled €271.2 million, including
a profit of €87.1 million on a debt-for-equity swap offer in the
first quarter of the year (the issue and sale of 126 million Banco
Sabadell shares in a buyback offer for preferred shares and
discounted subordinated securities). In 2010 this income category
also included a one-off gain of €89.0 million on a transaction
involving a preferred share and subordinated bond exchange offer
in the second quarter of the year. Also included in net income
from trading for 2011 were profits of €139.0 million in the trading
book and €45.3 million on sales of available-for-sale fixed-income
assets. Operating expenses for 2011 were €1,145.1 million, of
which €38.1 million consisted of non-recurring costs (employee
severance payments and restructuring costs related to the
acquisition of Banco Guipuzcoano). Non-recurring expenses in
2010 totalled €22.6 million. On a like-for-like basis (that is, with
Banco Guipuzcoano included for the whole of 2010 and excluding
the impact of the integration of Lydian Private Bank in the second
half of 2011 and the sale and leaseback deal in April 2010),
operating expenses for the year 2011 were down by 3.7% on
the year before. The cost: income ratio with non-recurring costs
excluded was 45.75%.
The resulting operating profit (before impairment and other
provisions) for the year 2011 was €1,230.7 million, up 8.3% on
the previous year.
Net provisions for loan losses totalled €512.4 million, up
from €383.9 million the previous year. Additional provisions of
€536.6 million were also set aside to cover impairment losses
on real estate and financial assets. Of the total net provisions
for 2011, €186 million resulted from the appropriation of
extraordinary profits generated by the debt-for-equity swap carried
out in February 2011 and by the gross impact of the Tax Agency
ruling on the tax deductibility of certain goodwill. This tax impact
is explained in the note on income tax and resulted in a net tax
rebate of €69.4 million.
Profits on asset sales during the year were not significant,
amounting to just €5.7 million for the year 2011 compared with
€296.1 million a year earlier. The figure for 2010 was boosted by
an exceptional gain of €250.0 million on the sale and leaseback
deal executed in April that year, and also by a €29.0 million profit
on the sale of a property in the Paseo de Gracia, Barcelona.
The net attributable group profit was €231.9 million, down from
€380.0 million in 2010. The Tier l capital ratio was 9.94%, up from
9.36% at the end of the previous year. The core capital ratio was
9.01% compared with 8.20% in 2010.
Financial and share
€'000
%/ATA
2010
%/ATA
% 11/10
3,394,082
(1,856,819)
3.52
(1.93)
2,644,787
(1,185,671)
3.04
(1.36)
28.3
56.6
1,537,263
1.60
1,459,116
1.67
5.4
8,752
37,650
573,593
271,246
69,999
8,219
0.01
0.04
0.60
0.28
0.07
0.01
16,282
70,867
516,462
204,065
58,655
5,892
0.02
0.08
0.59
0.23
0.07
0.01
(46.2)
(46.9)
11.1
32.9
19.3
39.5
Gross income
2,506,722
2.60
2,331,339
2.68
7.5
Personnel expenses
Other general administrative expenses
Depreciation and amortization
(742,600)
(402,491)
(130,921)
(0.77)
(0.42)
(0.14)
(679,721)
(356,334)
(158,980)
(0.78)
(0.41)
(0.18)
9.3
13.0
(17.6)
Profit before impairment and other provisions
1,230,710
1.28
1,136,304
1.30
8.3
Loan loss and other provisions
Profit on disposal of assets
Profit from discontinued operations (net of tax)
Income tax
(1,048,916)
5,672
0
48,406
(1.09)
0.01
0.00
0.05
(968,074)
296,111
0
(81,419)
(1.11)
0.34
0.00
(0.09)
8.4
(98.1)
---
235,872
0.24
382,922
0.44
(38.4)
Interest and similar income
Interest expense and similar charges
Net interest income
Returns on equity instruments
Net income from equity-accounted undertakings
Net fees and commissions
Income from trading (net)
Exchange differences (net)
Other operating income and expense
2011
ATA: Average total assets
31
Consolidated profit for the year
Attributable to non-controlling interests
Net attributable profit
3,970
2,882
37.8
231,902
380,040
(39.0)
Net interest income
Financial and share
Net interest income increased by 5.4% on the figure for 2010.
The increase resulted mainly from the acquisition of Banco
Guipuzcoano and Lydian Private Bank. Average loans and
advances to customers for the year were up by 10.0% while
average customer deposits increased by 21.4%; this was mainly
due to the acquisitions mentioned above and campaigns by the
group to attract deposits. The group's reduced need for capital
market funding was reflected in lower average volumes, which
declined by €772.2 million.
Interest receivable on loans and advances to customers was
up from 3.54% in 2010 to 4.05% in 2011, an increase of 51 basis
points. On the other hand, capital market funding costs rose by 78
basis points and the cost of customer deposits by 47 basis points.
This improvement in loan-deposit spreads was driven by
interest rate rises during 2011, with the 3-month EURIBOR rate
for the year averaging 1.39% compared with 0.81% in 2010.
Interest spreads were also helped by differential rates on loans
and advances to customers. However, total net interest income
diminished as a proportion of average total assets as the cost
of capital market funds increased, falling from 1.67% in 2010 to
1.60% in 2011.
The drive to increase customer deposits did, however, achieve
a better balance of on-balance sheet funding by increasing the
proportion of funding obtained from deposits, which rose from
46.4% of total borrowed funds in 2010 to 51.0% in 2011.
€'000
32
Average
volume
Rate
2011
Income/
expense
Average
volume
Rate
2010
Income/
expense
Cash. central banks and other credit
institutions
Loans and advances to customers
Fixed-income investments
Equity investments
Tangible and intangible assets
Other assets
2,441,323
70,162,479
13,143,326
2,090,937
2,025,523
6,433,921
1.60
4.05
3.31
--1.22
38,955
2,841,394
435,211
0
0
78,522
1,987,021
63,761,381
11,575,412
2,057,497
1,642,656
6,104,824
1.14
3.54
2.72
--0.82
22,628
2,257,141
314,738
0
0
50,280
Total capital employed
96,297,509
3.52
3,394,082
87,128,791
3.04
2,644,787
Credit institutions
Customer deposits
Capital market
Other liabilities
Shareholders' equity
7,386,781
49,068,198
22,785,085
5,313,818
5,772,118
5,971,509
(2.41)
(2.04)
(2.34)
(1.48)
(1.18)
--
(177,704)
(999,142)
(533,081)
(78,796)
(68,096)
0
6,582,361
40,421,970
23,557,319
5,198,364
5,713,119
5,655,658
(1.41)
(1.57)
(1.56)
(0.70)
(0.96)
--
(92,735)
(635,022)
(366,496)
(36,572)
(54,846)
0
Total funds
96,297,509
(1.93)
(1,856,819)
87,128,791
(1.36)
(1,185,671)
1.60
1,537,263
1.67
1,459,116
Net interest income
Fees and commissions
Financial and share
Net fee and commission income reached a year-end total of
€573.6 million, up 11.1% on the figure for 2010. This was due
in large measure to the growth of service-related fees which
increased by 21.6% overall, driven mainly by a very substantial
59.8% rise in fees for services related to securities and sizeable
increases in fees for other services. Fees and commissions
on loans and guarantees increased by 7.4% year-on-year, with
good growth in fees related to avals and other guarantees which
rose by 10.3%. There was also growth, albeit more modest, in
commissions on sales of pension funds and insurance (3.6%),
while fees and commissions on mutual funds fell by 6.2%,
reflecting current market conditions.
€'000
2011
2010
% 11/10
Lending-related fees
Avals and other guarantees
Paid to other banks
103,105
87,160
(3,693)
97,829
79,034
(3,144)
5.4
10.3
17.5
Fees and commissions on loans and guarantees
186,572
173,719
7.4
69,165
38,525
70,895
34,730
54,205
63,285
35,448
44,358
33,243
43,597
9.3
8.7
59.8
4.5
24.3
267,520
219,931
21.6
73,812
45,689
78,731
44,081
(6.2)
3.6
Fees and commissions related to mutual funds.
pension funds and Insurance
119,501
122,812
(2.7)
Total net fees and commissions
573,593
516,462
11.1
33
Payment cards
Money transfers
Securities
Current account charges
Other services
Fees and commissions for services
Mutual funds
Commissions on sales of pension funds and insurance
General administrative expenses
Financial and share
General administrative expenses for 2011 totalled €1,145.1
million. This included non-recurring wage and salary costs of €29.0
million and a further €9.1 million in non-recurring conversion costs
arising from the acquisition of Banco Guipuzcoano. As to recurring
costs, personnel expenses rose by 8.6%. On a like-for-like basis,
however (that is, with Banco Guipuzcoano included for the whole of
2010 and excluding the impact of the integration of Lydian Private
Bank in the second half of 2011), recurring personnel expenses
were down 3.0% on the year thanks to actions being implemented
under the group’s operating efficiency programme. Other recurring
administrative expenses increased by 10.4%; however, cost
control initiatives ensured that, on a like-for-like basis and ignoring
the effect of the April 2010 sale and leaseback transaction, these
other recurring expenses were reduced by 4.9% compared with the
previous year.
€'000
2011
2010
% 11/10
Wages and salaries
Social welfare costs
Other staff-related costs
(538,109)
(113,017)
(91,474)
(500,147)
(100,290)
(79,284)
7.6
12.7
15.4
Personnel expenses
(742,600)
(679,721)
9.3
IT and systems
Communications
Advertising
Premises. fittings and equipment
Printed material and office supplies
Taxes
Other expenses
(58,007)
(20,277)
(35,585)
(111,763)
(7,013)
(61,962)
(107,884)
(56,976)
(21,828)
(30,919)
(95,396)
(7,681)
(54,271)
(89,263)
1.8
(7.1)
15.1
17.2
(8.7)
14.2
20.9
Other administrative expenses
(402,491)
(356,334)
13.0
(1,145,091)
(1,036,055)
10.5
2011
2010
% 11/10
(530,670)
(208,945)
0
142,325
(239,841)
(114,254)
(43,050)
(37,166)
(750,866)
(202,000)
120,000
177,605
(492,958)
(88,363)
0
(46,748)
(29.3)
3.4
(100.0)
(19.9)
(51.3)
29.3
-(20.5)
(1,031,601)
(1,283,330)
(19.6)
(17,315)
315,256
--
(1,048,916)
(968,074)
8.4
Total general administrative expenses
Net provisions and impairment charges
€'000
34
Specific provisions
Exceptional appropriations
Additions due to new Bank of Spain rules (Circular 3/2010)
Sub-standard risks
Real estate
Banco Comercial Português
Impairment losses in guaranteed return funds
Other impairment losses
Sub-total
Generic provisions
Total net provisions and impairment charges
—Group
businesses
—
—
—
—
—
—
—
Group businesses
Banco Sabadell is at the head of Spain's sixth largest banking
group. The group offers a full range of banking and financial
services through its different banks, brands, subsidiaries and
associates. The group's development objectives are strongly
focused on profitable growth and the generation of shareholder
value through a strategy of business diversification based on
high returns, efficiency and quality of service together with a
conservative risk profile, while maintaining high standards of
ethics and professional conduct combined with sensitivity to
stakeholders' interests.
The Bank has a business model that fosters long-term
customer relationships through constant efforts to promote
customer loyalty and by adopting an initiative-based, proactive
approach. The Bank offers a comprehensive range of products and
services, competent, highly qualified personnel, an IT platform with
ample capacity to support future growth and a relentless focus on
quality.
The group has four main areas of business: Commercial
Banking; Corporate Banking and Global Operations; Markets and
Private Banking, and BS America. It has seven regional divisions
with full responsibility for their areas, and several businessfocused support teams.
Commercial Banking
36
Commercial Banking is the largest of the group's business lines. It
focuses on providing financial products and services to large and
medium-sized businesses, SMEs, retailers and sole proprietors,
individuals and professional groupings. Its high degree of market
specialization ensures that customers receive a personalized
service of the highest quality tailored to their needs, whether from
expert staff throughout its extensive branch network or via other
channels provided to support the customer relationship and give
access to remote banking services.
SabadellAtlántico is the group's flagship brand with a footprint
covering most of the country except for Asturias and León, an
area served by the group's Banco Herrero brand. In the Basque
Country, Navarre and La Rioja, the group is represented chiefly
through its SabadellGuipuzcoano network. Its SabadellSolbank
brand is primarily aimed at meeting the needs of Spanish-resident
foreigners from other European countries. It does this through
a chain of specialist branches located throughout the Canary
Islands, the Balearic Islands and the country's southern and
south-eastern coastal areas. Finally, ActivoBank is there to serve
customers who prefer to do their banking exclusively by telephone
or online.
Corporate Banking and Global Businesses
Corporate Banking and Global Businesses offers a range of
products and services to large corporates and financial institutions
in Spain and abroad. Its activities embrace corporate banking,
structured finance, corporate finance, development capital,
international trade and consumer finance.
Group businesses
The Bank’s major clients are served by a team of expert
managers working from offices in Madrid, Barcelona, London,
Paris and Miami. Its business model is based on a comprehensive
offering of specialized financing services and solutions, ranging
from transaction banking to more sophisticated, tailor-made
solutions in such areas as financing, treasury services and
corporate finance.
In the area of structured finance Banco Sabadell has a team
operating from offices in Madrid, Barcelona, the Basque country
and Miami with more than 20 years' experience in developing and
structuring long-term financing packages, mainly by participating in
loan syndications along with other banks.
Sabadell Corporate Finance is a group subsidiary that
specializes in advising on mergers and acquisitions. It advises
corporate transactions such as company sales and acquisitions,
mergers and MBOs, assists companies in finding new or
replacement partners and provides independent value appraisals.
Its capital markets business includes advising company flotations,
including new listings on MAB, Spain's alternative investment
market.
Banco Sabadell's development capital business focuses on
two main areas: taking temporary equity positions in non-financial
companies; and investing in energy projects, with the accent on
renewable forms of energy.
In its international business the Bank aims to be present in the
markets that are of most interest to companies actively engaging
in foreign trade. It does this by having a network of foreign
branches, subsidiaries and associates to support its customers'
operations in other countries, and by maintaining working
arrangements with more than 2,800 correspondent banks, thus
ensuring a genuinely global coverage.
Sabadell Fincom is a group subsidiary specializing in consumer
finance. Its principal business is providing point-of-sale finance to
purchasers of cars, computer equipment, domestic appliances,
health accessories and other products.
Markets and Private Banking
Banco Sabadell offers a comprehensive array of products and
services to customers who entrust their savings and investments
to its care. These range from researching investment alternatives
to executing trades in securities and the active management
and custody of asset portfolios. The unit combines a number of
integrated areas of activity: Banco Urquijo; BS Banca Privada;
Investment, Products and Research; Treasury and Capital Markets;
Securities and custodian services; and Bancassurance.
Markets and Private Banking is thus well equipped to offer high
value products and services designed to secure the best possible
returns for customers through optimized investment processes,
rigorous analysis and high quality, professional management.
The Bank has a process for generating and approving products
and services to ensure that the full range of offerings available
to customers more than meets their requirements in terms of
quality, profitability and ability to meet market needs. Procedures
and practices to identify customer risk profiles are kept under
constant review, thus ensuring that any offer that is made and the
37
way assets are managed are appropriate to each risk profile and
comply with all rules for the protection of customers under the
EU Directive on Markets in Financial Instruments (MiFID) and its
transposition into Spanish law.
The Bank’s determination to bring its product and service
offering into line with customers’ needs enabled it to strengthen
and improve its position in the securities brokerage business
and as a manager of collective investment schemes, as well as
in pension and retirement products, an effort that gained it the
Euromoney magazine "best Spanish private bank" award
for Banco Urquijo.
Group businesses
BS America
The BS America operation comprises a number of business units,
associated undertakings and representative offices which together
handle the provision of financial services in the corporate banking,
private banking and commercial banking areas. The business is
managed from Miami, where Banco Sabadell has a full-service
international branch which has been in operation since 1993.
During the year 2011 Banco Sabadell continued to pursue its
aim of consolidating its domestic banking operation in the state
of Florida. In August it took over the assets and liabilities of Lydian
Private Bank after it went into receivership. The take-over will help
to consolidate the local banking business model in Florida. It is the
Bank's fourth corporate action in that state in a five-year period
which has seen the acquisition of TransAtlantic Bank in 2007, the
take-over of BBVA's private banking business in 2008, and the
purchase of Mellon United National Bank in 2010.
Banco Sabadell holds equity interests in two banks, BanBajío
and Banco BHD, which enjoy high reputations in the strategic
markets of Mexico and the Dominican Republic respectively.
Its representative offices in Mexico, Venezuela, Brazil and the
Dominican Republic are also available to offer assistance and
services to customers in the Americas region.
—
— Commercial Banking in 2011
—
—
38
In 2011, despite a highly complex operating environment, a major
promotional effort aimed at attracting new customers and deposits
resulted in increased market shares for the Bank.
—
— A record number of new customers signed up
—Driving up market shares in the individual and business
customer segments
— Generating a positive balance of deposits and loans
—
—
€'000
Net interest income
Fees and commissions (net)
Other income
Gross income
Operating expenses
Operating profit
Impairment losses
Profit before tax
Business volumes (€Mn.)
Loans and advances
Customer accounts
Securities
Other information
Employees
Branches in Spain
2010 1
Change
y.o.y. (%)
1,275,890
1,343,669
(5.0)
379,777
24,859
378,981
25,924
0.2
(4.1)
1,680,526
1,748,574
(3.9)
(886,451)
(946,009)
(6.3)
794,075
802,565
(1.1)
(404,316)
(327,390)
23.5
389,759
475,175
(18.0)
9.3%
52.7%
6.6%
48.0%
11.2%
54.1%
5.6%
55.7%
55,788
54,188
8,611
57,115
51,018
8,776
(2.3)
6.2
(1.9)
7,259
1,322
7,324
1,412
(0.9)
(6.4)
Group businesses
Ratios (%):
ROE
Cost:income ratio
Loan loss ratio
2011
1 For the sake of comparability, data for Banco Guipuzcoano have been included for the whole of 2010 (although for accounting purposes results for Banco Guipuzcoano
only began to be incorporated from December 2010 onwards).
Net interest income attributable to Commercial Banking totalled
€1,275.9 million in 2011, with pre-tax profits reaching €389.8
million. The ROE was 9.3% and the cost: income ratio was 52.7%.
Loans and advances totalled €55,788 million and customer funds
stood at €54,188 million.
Market segments
Companies, businesses, government and local authorities
A key aspect of the work of the Bank's branches in 2011, as
set out in the CREA master plan, was the campaign to win new
customers.
During the year 55,536 businesses were added as new
customers of Banco Sabadell, a number that was 40.2% up on
the figure for 2010. The "Expansión Negocios" package proved
to be a key aid to customer recruitment: since its launch in 2010
it has as been instrumental in capturing more than 97,000 new
business customers (retail establishments, sole proprietors and
micro-enterprises), increasing the relative importance of this subsegment by 23.4%. Expansión Negocios offers in a single product
a complete package of financial solutions on favourable terms for
business or professional people. It also offers an exclusive range
of services including a legal help line and an exclusive web site
offering goods and services for business or personal use.
39
€'000
2011
2010
Change
y.o.y. (%)
832,927
892,844
-6.7
Other profits/losses
Gross income
178,429
4,784
1,016,140
181,477
6,132
1,080,453
-1.7
-22.0
-6.0
Business volumes
Loans and advances (€Mn.)
Customer funds (€Mn.)
Securities (€Mn.)
41,911
25,987
4,640
43,341
24,367
4,679
-3.3
6.6
-0.8
7.87%
6.44%
Net interest income
Loan loss ratio
Group businesses
40
Banco Sabadell once again maintained its leading position
in serving large corporate clients, which accounted for 65.1% of
customers in the business and government segment – a clear sign
of the added value afforded by a network of dedicated business
branches.
A key priority in the group's sales efforts was attracting
deposits and other customer funds, which saw an increase of
€1,610.6 million, a rise of 8.7%. Time deposits showed excellent
growth, especially the "Depósito Flexible Empresas" and "Pagaré
BS" products for businesses.
Once again, business protection insurance was of key
importance in our drive to promote customer loyalty and
deepen customer relationships. During the year policies sold
to businesses and to retailers increased by 51.3% and 7.8%
respectively, compared with the previous year.
In the area of high value added working capital products for
businesses such as specialized finance, efforts were concentrated
on the small and medium-sized business segment, thanks to
which lending volumes grew more than 11.5% year-on-year.
With the aim of facilitating customers' access to sources
of finance, numerous agreements were concluded with official
bodies at both national and regional level, involving the granting
of loan finance amounting to €2,292.5 million overall. This
included participating in Official Credit Institute (ICO) schemes in
which the Bank secured a 10.2% share, making it the fifth largest
provider of funds under ICO schemes. The programmes with the
highest take-up were the ICO-sponsored Sustainable Investment,
Internationalization, Investment and Liquidity schemes, in which
the Bank participated with shares of 13.5%, 16.7%, 10.6% and
8.4% respectively. During the year agreements of a similar kind
were concluded with the European Investment Bank (EIB), the
Technological and Industrial Development Centre (CDTI) and a
number of Spanish regionally-based organizations.
The Bank also continued to work actively to promote
international trade and offer guidance to businesses. As part of
this effort it organized training days that were attended by over
3,000 firms. Activities of this kind reinforced the Bank's position
as a leader in foreign trade, with both existing and potential
customers. A good indication of this was the growth in its share of
the export and import documentary credit businesses compared
with 2010, with year-end market shares of 23.4% and 13.1%
respectively.
Individual customers
Group businesses
In 2011 Banco Sabadell was a leading provider of mediumand long-term finance, especially in the areas of leasing, sale and
leaseback, marine finance and finance for plant and equipment
expansion and renovation. It was particularly supportive of
any long-term finance linked to energy efficiency, such as by
encouraging the use of hybrid vehicles or energy-saving lighting in
its leasing and equipment hire businesses.
The year saw further development of a Banco Sabadell project
aimed at government agencies. A team of dedicated specialists
was set up to service central, regional and local government all
over the country, based on a targeted, high value-added service
offering. The results achieved were in line with targets for the year,
both in terms of the number of new customers recruited and the
amount of business generated.
2011 was the first year of the Bank's 3-year master plan, “CREA”,
a strategic programme setting ambitious growth and customer
service targets with the aim of enhancing Banco Sabadell's
attraction as the bank of choice for individual customers.
€'000
2010
Change
y.o.y. (%)
Net interest income
442,970
450,825
-1.7
Other profits/losses
Gross income
201,348
20,075
664,393
197,504
19,792
668,121
1.9
1.4
-0.6
Business volumes
Loans and advances (€Mn.)
Customer funds (€Mn.)
Securities (€Mn.)
13,877
28,201
3,971
13,774
26,651
4,097
0.7
5.8
-3.1
3.90%
3.80%
Loan loss ratio
In line with these aims, recruiting and developing multi-product
relationships with customers were key themes in the group's
promotional activities. A vital part of this, as in other years, was the
work done to enhance the Bank’s public profile. A good example
of this effort was an advertising campaign to promote the "Cuenta
Expansión" account, featuring football star Pep Guardiola. In the
fourth quarter of the year the emphasis shifted to a campaign
based on the theme "Talking about the future", featuring
personalities from different areas of activity and highlighting the
importance of saving for the long term. To support the campaign
the Bank launched a “virtual planner” tool designed to help
customers plan their long-term savings. The offer of a savings aid
of this kind was a first in the Spanish market.
The combination of these awareness-raising efforts and branch
level sales initiatives resulted in 2011 being the Bank’s most
successful year ever in terms of growing customer numbers: new
individual customers saw an increase of more than 286,500,
42.9% up on the figure for 2010.
In sales initiatives directed at the personal customer market
segment the emphasis was on capturing on-balance sheet
2011
41
Group businesses
42
deposits, which increased by 2.8% over the year. As in previous
years, major efforts were invested in the quality of service
provided by the personal banking team as evidenced by the
European Financial Advisor (EFA) certificate, an assurance of high
professional standards in consultancy and personal financial
advice.
For customers with middle-range incomes, the main focus
was on attracting new customers and increasing cross-sale ratios
based on the “Cuenta Expansión”, a feature-rich current account
to which account holders have their pay credited directly, and
offering transaction banking on highly competitive terms. The
attractions of this product resulted in 150,000 new accounts
being opened during the year and contributed to a 10.7% increase
in direct debit mandates as well as increased cross-sale ratios and
per-customer returns. New deposits became a central theme of
the Bank’s marketing programme. Overall deposits for this market
segment reached a year-end figure of €11,810 million, 25.4% up
on the figure for 2010.
The Bank was also a very active provider of mortgage finance,
both for property owners and for real estate investors and
developers (the latter accounting for 54.0% of the total). The
Bank’s share of this market increased by 17.4% year-on-year (data
for the year to September 2011).
Finally, as part of an initiative launched the previous year,
the Bank continued to promote the transfer (“subrogation”) of
mortgages from property developers to property buyers under the
“Adapta” and “Solvia” programmes, both of which offer finance to
property buyers on highly advantageous terms.
Short-term finance for individual customers received a boost
from the launch of “Línea Expansión”, a simple way of giving
customers access to cash advances. In the area of consumer
loans, a number of agreements were entered into with business
schools, including IESE, ESADE and the Instituto de Empresa, to
offer loans to persons wishing to study for Master’s degrees.
The credit and debit card business showed very significant
growth, with a 22.2% year-on-year increase in revenue and a 20.5%
increase in the number of cards in use, primarily on the back of
growing customer numbers. The Bank’s share of the EPOS market
was up by 39.2% on the previous year, reaching 7.64%.
A valuable new service offering for the Bank’s customers was
Finanzas Personales, a tool that lets users manage their own
banking information in a fast, simple and user-friendly way. This is
consistent with the Bank’s policy of making customers’ handling of
their day-to-day banking as easy and simple as possible.
Another service launched during the year, to be offered mainly
through the SabadellSolbank branches, was targeted at Spain’s
resident expatriate community. The “Regular Transfer Plan” is
exclusively for UK citizens, who make up 43% of the group’s foreign
customers, and is designed to make it easier for British residents
to have regular automatic transfers sent from the UK to their
accounts in Spain without having to make special arrangements
with their UK bank. At the end of the year SabadellSolbank had a
160,000-strong customer base (7% up on the year before) having
added 22,320 new customers during the year, and had grown the
assets under its management by over €3,940 million.
Finally, ActivoBank continued to focus on wealth management,
handling assets of more than €1,411.0 million. Deposits
and mortgage finance grew by 3.7% and 12.1% respectively.
ActivoBank clients at the close of the year numbered 49,240.
Banco Herrero
Group businesses
In 2011 Banco Herrero celebrated one hundred years of trading as
a commercial brand. It made its appearance in Oviedo, Asturias, in
1911, having started life as a banking house in the municipality of
Villafranca del Bierzo in the province of León. In 2011, the Herrero
brand was continuing to increase in strength and vitality a decade
after being merged with Banco Sabadell.
Activities to develop business resulted in 30,640 new
individual customers and 2,954 business customers, a rate
of new business development never previously achieved. New
customer sign-ups averaged 2,800 a month over the year thanks
to a powerful product and service offering, the superior quality of
service offered to customers, and the reputation and trust enjoyed
by the Banco Herrero brand among families and businesses in
Asturias and León.
Lending was up by 3.1%, reaching a year-end figure of €3,765
million. This was achieved despite a general pattern of reduced
lending in the market as a whole as financial institutions showed
less inclination to lend and demand remained lacklustre in a
challenging economic environment. Despite this, Banco Herrero
continued to support its customers in their business ventures
and to offer credit, but without any relaxation of its rigorous risk
analysis and selection procedures. A sign of this positive stance
was the sizable shares of ICO-subsidized loans arranged by Banco
Herrero in Asturias and León − 48% and 20% respectively. Its
loan-loss ratio at the end of the year was 2.9%, one of the lowest in
the Spanish banking industry.
Customer deposits were up by 7.5%, reaching a year-end total
of €6,668.5 million. Once again, in a context of financial market
turbulence time deposits were the most popular option, increasing
by 15.5% year on year.
The various events organized to coincide with the Banco
Herrero centenary clearly showed, once again, the high degree of
brand awareness and prestige enjoyed by the Herrero brand among
its customers and the wider community in Asturias and León.
For example, the Astorga Chamber of Commerce chose Banco
Herrero to receive its Gold Medal; the Marino Gutiérrez Foundation
awarded it its special annual prize, and the jury appointed by
Vivir Oviedo magazine chose it for the title of “Oviedo Personality
of the Year”.
A joint initiative by Banco Herrero and the APQ (Asturias Patria
Querida) Association during the year resulted in the setting up of
the “Álvarez-Margaride” prize for people, firms or organizations
whose business activities showed a close link with the Asturias
region over time. The first person to be awarded the prize was
Juan Albargonzález González, the head of a major Asturian group
of companies.
Other activities in the cultural and social spheres included four
new exhibitions at the Banco Herrero Hall in Oviedo, organized
as part of an agreement between the bank and the Asturian
Government’s Department of Culture. Each year the Banco Herrero
Foundation awards a prize to an economist below the age of 40
43
judged to have done outstanding work in the areas of economics or
business and social studies. The prize was won this year by Marta
Reynal, the holder of a PhD from the London School of Economics
and a lecturer at Barcelona’s Pompeu Fabra University.
Banco Guipuzcoano
Group businesses
During the year Banco Guipuzcoano was integrated into the Banco
Sabadell group. The operation made considerable demands
on the expert staff of both banks, who carried out a high-quality
exercise in organizational and technological terms and completed
the integration in record time. The integration involved a
reorganization of the Bank’s Central Services Division and the
roll-out of Banco Sabadell systems, processes and business
development tools to all Banco Guipuzcoano branches, resulting
in significant increases in promotional activities and customer
numbers.
Banco Guipuzcoano now operates under the
SabadellGuipuzcoano brand name. The brand was launched on
9 June in San Sebastián and has continued to serve its customer
franchise in the region comprising the Basque Country, Navarre
and La Rioja.
One of the most visible expressions of the bank’s historical
links with the region and the local community was its programme
of public relations and sponsorship in the cultural and social
arena. Thus, SabadellGuipuzcoano continued to host or
co-sponsor events such as lectures on cultural topics in
partnership with the Bilbao daily El Correo, a programme of
concerts with the Kursaal Foundation and the San Sebastián
“Quincena Musical” event. It also continued to work with the
Guipúzcoa Chamber of Commerce in sponsoring the “Faro
Internacional” trade promotion fair and the Guipúzcoa trade
prizes. New sponsorship initiatives included support for the
San Sebastián Gastronomy Fair, the Basque Enterprise Evening
in Bilbao and sporting events such as Guipúzcoa Basket.
Remote Channels
44
Banco Sabadell is a recognized leader in putting technology
to work in banking. New technology applications, however, will
not be successful unless realized entirely from a customer’s
perspective. The Bank is convinced that a paradigm shift has
taken place: interaction with customers used to be bilateral,
but now customers are talking about the Bank in blogs and on
social networking sites in a totally unrestricted way and producing
multiple interactions with a single click of the mouse. Customers
can connect to networks anytime, anywhere. And they can move
freely from one channel to another at any stage when considering
whether to approach a financial institution or sign up for a product.
Many of these interactions take place outside bank branches,
but a relationship based on trust, so important in the financial
services industry, is highly dependent on personal contact.
What customers want, therefore, is channels that mesh perfectly
together and are not over-impersonal. This has led Banco
Sabadell to re-think its customer relationship model while
Group businesses
safeguarding what is most essential to its value proposition:
quality of service.
Banco Sabadell is working to let customers experience a
new way of doing banking that embodies everything that the new
technologies have to offer and that customers are already using on
a daily basis, without allowing any distance or remoteness to come
between the customer and the Bank. Our slogan “it’s not remote
banking – it’s taking your bank with you” sums up how we have
transformed our way of staying in touch with customers. Our 2011
online campaign to explain the various options we are offering our
customers was recently described by Financial Brand magazine as
“one of the best representations of what banking should be in the
modern age, from the consumer’s point of view”. This is what we
have set out to achieve.
Banco Sabadell is continuing to work on improving the
customer experience with the use of new channels and integrating
them with traditional ones. We are working to convert our
branches into a multi-channel network so that employees and
customers can interact in a number of different ways; at the same
time, we are developing an easier, simpler kind of banking, where
service is what really makes the difference.
Branch Network
Banco Sabadell ended the year with a total of 1,382 branches.
Of these, 948 were operating under the SabadellAtlántico
name; 110 were SabadellGuipuzcoano branches in the Basque
Country, Navarre and La Rioja; 179 comprised the Banco Herrero
network in Asturias and León; 15 were Banco Urquijo; 83 were
SabadellSolbank; 2 were Corporate Banking branches and 2 were
ActivoBank customer service centres. The international network
comprised a total of 43 branches and offices.
45
Region
Province
Sabadell
Atlántico
Andalucía
Almería
Cádiz
Córdoba
Granada
Huelva
Jaén
Málaga
Seville
5
12
4
5
2
3
29
21
Banco Banco Sabadell
Sabadell
Herrero Herrero Solbank Guipuzcoano
Business
Banco ActivoBank Sabadell
Urquijo
Atlántico
Corporate
2
2
Total
1
2
1
1
1
27
1
1
7
15
4
8
3
3
58
23
4
34
2
121
1
Group businesses
Total, Andalucía
81
Aragón
6
1
17
1
1
6
1
19
24
1
1
26
Huesca
Teruel
Zaragoza
Total, Aragón
Asturias
Asturias
Total, Asturias
143
4
147
143
4
147
Balearic Islands Baleares
22
1
14
1
38
Total, Balearic Islands
22
1
14
1
38
Basque Country Álava
Guipúzcoa
Vizcaya
3
5
11
1
1
1
1
1
11
53
55
Total, Basque Country
19
3
95
8
5
1
6
7
15
12
13
1
13
27
4
1
5
4
1
5
Canary Islands Las Palmas
Tenerife
Total, Canary Islands
Cantabria
46
Sabadell
Atlántico
Business
Cantabria
Total, Cantabria
CastileLa Mancha
Albacete
Ciudad Real
Cuenca
Guadalajara
Toledo
Total, Castile-La Mancha
Castile -León
Ávila
Burgos
León
Palencia
Salamanca
Segovia
Soria
Valladolid
Zamora
Total, Castile-León
Catalonia
Total, Catalonia
Barcelona
Girona
Lleida
Tarragona
7
46
42
2
119
5
3
2
3
6
5
3
2
3
6
19
19
1
4
31
2
3
1
1
9
4
1
5
32
2
3
1
1
11
4
1
1
1
1
25
2
31
1
1
60
288
49
21
25
12
1
1
1
1
1
1
303
50
22
26
383
15
1
1
1
401
Region
Provence Sabadell
Atlántico
Community
of Valencia
Alicante
Castellón
Valencia
Total, Community of Valencia
Extremadura
Badajoz
Cáceres
Sabadell
Atlántico
Business
Banco Banco Sabadell
Sabadell
Herrero Herrero Solbank Guipuzcoano
Business
24
16
49
2
1
2
19
89
5
Banco ActivoBank Sabadell
Urquijo
Atlántico
Corporate
Total
1
1
1
45
18
53
20
2
116
2
1
Total, Extremadura
3
3
Galicia
7
6
3
9
2
25
A Coruña
Lugo
Ourense
Pontevedra
Total, Galicia
La Rioja
La Rioja
Total, La Rioja
Madrid
Madrid
Total, Madrid
Murcia
Murcia
Total, Murcia
Navarre
Navarra
Total, Navarre
Total, branches in Spain
1
10
6
3
10
3
1
29
4
1
4
9
4
1
4
9
161
9
2
1
1
174
161
9
2
1
1
174
18
1
2
1
22
18
1
2
1
22
10
1
11
1
23
10
1
11
1
23
900
48
110
15
1
174
5
83
2
2
Group businesses
2
1
1.339
Banking services targeted on professional and occupational
groupings and the use of agent partners and associates
continued to play a key role in winning customers in 2011, whether
individuals, retail establishments or professional practices. At the
close of the year a total of 1,349 partnership agreements were
in existence with professional associations and colleges, with a
combined membership of over 1,086,888, of whom 206,712 were
already customers of the Bank. The business associated with this
market amounted to €10,855 million.
Of particular significance was the signing up of 60,000
employees and senior managers of companies that were business
customers of the Bank, as well as more than 40,000 new
customers from the professions.
Banco Sabadell’s network of agent partners, particularly in the
role of “collaborating agent”, was once again a key channel for
winning new business. New customer introductions amounted to
over 18,000 at the end of the year.
Professional and occupational groups. Agent partners
47
International network
At 31 December 2011 Banco Sabadell's presence in foreign
markets was as follows.
Country
Europe
Andorra
France
Portugal
United Kingdom
Turkey
Group businesses
Americas
Brazil
Chile
Dominican Republic
Mexico
USA
Venezuela
Branch
Associate Subsidiary
1
2
1
1
1
1
1
1
1
1
1
1
1
1
Asia
China
Hong Kong
India
Singapore
United Arab Emirates
48
Representative
Office
2
1
1
1
1
Africa
Algeria
Morocco
1
Total
5
1
12
4
2
ATM network
In the course of the year more than 21.6 million transactions were
carried out on Banco Sabadell's network of 1,612 self-service
cash machines, including the Banco Guipuzcoano network. 81.6%
of cash withdrawals of less than €600 were made on ATMs, up
from 79% in 2010.
The Bank continued the ATM modernization programme it
began in 2009. This involved 422 separate interventions in which
187 machines were replaced and another 170 were upgraded.
The result was a continuous improvement in the service available
from the ATM network, whose latest-generation machines are
significantly more ergonomic and user friendly, featuring largeformat touch screens, headphone jacks and higher operating
speeds.
The year saw further operational and service improvements
being made to the ATM network, including speedy cash withdrawals
and the ability to apply for loan and insurance products directly via
the ATM.
Another development was the addition of a smart deposit
function to the Bank’s “Instant Bank” self-service tills. This
means that banknotes can be deposited directly into the machine
without having to be sorted or placed in envelopes. Finally, a pilot
scheme was carried out in which a number of special ATMs for
updating savings books were installed in the banking halls at eight
branches.
Remote Access Channels
Mobile banking – BS Móvil
Users of the group’s BS Móvil website increased by 170% and
totalled 128,000 by the end of the year. At the close of the year
more than 18% of active online banking users were also using
their mobiles to access the service.
The number of users of the SMS alerts service increased by
50%. SMS messages were received by more than 750,000 users
on their mobile phones and more than 18.5 million messages
were sent, an increase of 153.6% compared with the number sent
the previous year.
In 2011 the Bank continued with a plan to develop capabilities
in native applications for phone terminals and tablets running
on key platforms such as iPhone, iPad, Android, BlackBerry and
Windows Phone. A new “instant check” service was also launched,
allowing customers to pay in cheques by scanning them on their
mobile phones, and a Property Search feature was introduced to
help homebuyers locate suitable properties.
As part of its strategy of making mobile services more widely
available, the Bank launched a SoLVIA mobile application which
lets users view the properties being offered by SoLVIA that are
closest to where they are, and enable potential purchasers to get
information and arrange visits.
Group businesses
BS Online
At the end of 2011 more than 1,200,000 individual customers
and 275,000 businesses had signed up for the group’s online
banking service. The overall figure was more than 25% up on the
year before. A total of 350 million transactions were performed
online, an annual increase of 16%. The proportion of customers
using online services, at 81%, showed a considerable improvement compared with the 76.3% for the previous year, and BS
Online continued to contribute to improving the efficiency of the
Bank’s service to its customers.
In service availability, BS Online was again among the four
best online banking services according to measures produced by
Eurobits, the specialist online banking monitoring organization.
In the course of the year a number of new capabilities were
introduced. These included the Personal Finance service, a
tool allowing customers to keep close track of their household
economy with the help of graphical representations and
comparative charts, and Correspondence Online, a feature that
lets customers examine all documents recording their transaction
history with the Bank, offering speedy and secure access to
banking information. By the end of the year 46.5% of customers
were receiving most of their correspondence from the Bank by
this means. A number of actions were also taken to make certain
functions more user-friendly and to further develop our system for
confirming payment instructions by entering a second pin number
on a mobile phone, thus improving system security and fraud
prevention.
Halfway through the year the home pages of the Bank’s
websites were redesigned and given a new look by making use of
the possibilities offered by new video digital formats.
49
Group businesses
50
Branch Direct
The year 2011 saw further development of the plan to transform
the Contact Centre by extending its traditional role as a customer help and support centre and significantly expanding its
sales orientation. Thus, in the course of the year Branch Direct
increased the resources available for attracting new customers
and for signing them up for remote banking products; it also
opened up new channels on social networking sites, such as a
helpdesk on Facebook and a help page on Google+ with 24/7
availability as in the case of other Branch Direct customer
support services.
During the year Branch Direct received and handled more than
1,250,000 enquiries, up 12% on the previous year. The telephone
helpline achieved a service level (calls answered as a proportion
of calls received) of 95.3% and a response rate (calls answered
in less than 20 seconds) of 83.7%
Social Networks
Banco Sabadell continued with the strategy launched in 2010 of
maintaining an active presence on social networking sites with
the aim of exploiting these channels as points of contact
with customers. It also made use of them to support sales
campaigns and hold networking sessions.
In the course of the year new networks and services were
added, including a presence on Google+ (Banco Sabadell was
the first Spanish bank to open a service on this network) and the
“Can we help you?” service on Facebook (available 24 hours a day)
in addition to the channels introduced the previous year (Twitter,
Facebook, Customer Suggestions).
Banco Sabadell was also one of the first Spanish business
organizations to publish a guide on using social networks for its
employees. The guide can be viewed on the main group website,
which also provides links and information on the Bank’s social
networking activities (such as the BS Press blog, the video channel
in YouTube, an image gallery in Flickr, and The Banco Sabadell
Corporate Blog).
At the end of 2011 the Bank had 13,500 followers on social
networking sites. Banco Sabadell’s presence on the main social
networking sites can be viewed on socialmedia.bancsabadell.com.
—
— Corporate Banking and Global Businesses in 2011
—
—
Corporate Banking
Banco Sabadell continued to be one of the main banks actively
operating in this market and thus strengthening the group's
position among large corporate clients. The year 2011 saw activity being maintained at levels similar to those of previous years,
with a strong focus on deepening customer relationships while
controlling capital consumption, and on attracting new
customers while maintaining stringent criteria in approving/
renewing loan and credit facilities. From the point of view of geographic diversity, it is significant that for the second consecutive
year almost 20% of the income generated by the unit originated
from our branch teams outside Spain (Paris, London and Miami).
Continuing high levels of activity, combined with repricing of
existing credit risk in line with market conditions, ensured that we
were able to boost net interest income by as much as 8% as well
as achieve an excellent result in fee and commission generation.
This, along with lower costs, helped us to raise our operating
profit by 13%.
Group businesses
—
—Good revenue growth
— Increased market shares in international trade
—
—
Loan delinquency rates remained at the historically low levels
reached at the end of last year and loan loss provisions had
practically no impact on results. This made it possible to end
the year with a 68% increase in our pre-tax profit.
Structured finance
Banco Sabadell continued to take a leading role as a top Spanish
provider of structured financing solutions and was a participant in
most of the key financing deals completed in 2011. Many of these
2011
2010
Change
y.o.y. (%)
165,901
153,677
8.0
26,658
9,203
17,426
12,055
53.0
(23.7)
Gross income
201,762
183,158
10.2
Operating expenses
(21,066)
(23,352)
(9.8)
Operating profit
180,696
159,806
13.1
2,570
0
(50,991)
0
(105.0)
0.0
183,266
108,815
68.4
Net interest income
Other income
Impairment losses
Other gains/losses
Profit before tax
€'000
51
Ratios (%):
ROE
Cost:income ratio
Loan loss ratio
Loans and advances
Customer accounts
Securities
Other information
Employees
Branches in Spain
Branches abroad
16.3%
10.4%
0.7%
86.7%
9.7%
12.7%
1.1%
84.5%
11,344
4,207
444
10,923
4,261
1,106
3.9
(1.3)
(59.9)
94
2
2
89
2
2
5.6
0.0
0.0
Group businesses
were corporate operations or project finance deals, mainly in the
field of renewable energy,
In a further move to grow the group’s international footprint,
the year 2011 saw it expanding its presence in the US market,
especially in renewable energy and long-term infrastructure
developments for Spanish and foreign promoters. Growth plans
in Europe, France and the UK also continued apace with the Bank
taking part in project finance and corporate transactions.
Overall, structured finance deals in which the Bank took part
numbered 105, generating revenues that were up by 12% on the
year before.
In the last quarter of the year the Bank adopted the Equator
Principles (a series of voluntary guidelines to identify, evaluate
and manage social and environmental risks in project finance
transactions) and will be applying these principles in its financing
deals for new projects all over the world where the project capital
costs are more than USD 10 million.
Corporate Finance
52
Key developments for Banco Sabadell as a provider of advisory
services on mergers and acquisitions included the successful
negotiation of mandates in acquisition, sale and capital raising
transactions. As Spanish companies moved into foreign markets,
the Bank saw a growing number of cross-border transactions
of which more than 50% involved companies in other countries.
In its capital market advisory role, Banco Sabadell was a
successful participant in one of four IPOs on Spain’s Alternative
Stock Market (MAB).
Development capital
Aurica XXI, S.C.R., S.A.
Aurica XXI (a company subject to the “simplified regime” for
share issues by venture capital companies) is the vehicle
through which Banco Sabadell supports the growth of
well-managed non-financial companies with strong,
industry-leading positions and a good presence in foreign
markets, by providing temporary capital and active assistance.
The year 2011 saw active management of the existing portfolio,
with several of the company's investees expanding through
foreign acquisitions. New additions to the portfolio included
Aurica's first investment outside Spain: a 5% stake in Laboratoires
Dermatologiques d’Uriage, a French pharmaceuticals firm.
Sinia Renovables, S.C.R, S.A.
Through its subsidiary Sinia Renovables (a company subject to the
“simplified regime” for share issues by venture capital companies),
Banco Sabadell takes temporary shareholdings in companies in
the renewable energy sector. Banco Sabadell is firmly committed to
renewable energy and particularly wind farm developments, where
Group businesses
it is considering greater geographical diversification of its activity.
It is also looking to invest in other renewable sources of electricity
generation such as thermosolar, photovoltaic, cogeneration or mini
hydro-electric plants.
Key new investments in 2011 included taking a 50%
shareholding in Eólica Mirasierra S.L., in Palencia; a complete
buyout of Parque Eólico Loma del Capón S.L., in Granada; and a
62.1% stake in Eólica Sierra Sesnández, S.L. in Zamora. The latter
purchase was made through Emte Renovables, a private equity
company owned jointly with the infrastructure group Comsa Emte.
Other developments in 2011 included the formation of a
new company, Atalanta Catalonia 2011, S.L., to finance the
development of mini-wind farms in Catalonia, with Banco Sabadell
taking a 25% stake; and the acquisition of an additional 19%
holding in Hidrodata as a result of a merger in which Hidrodata
absorbed its sister companies in the EISSL group, bringing Sinia's
shareholding to 45.75%.
International trade
Consumer Finance: Sabadell Fincom
Business activity at BanSabadell Fincom continued to expand
in 2011, with increases over previous years in both net revenue
and operating income, the latter rising by as much as 33%. It
also made further progress in making its debt recovery more
efficient, thus reducing loan delinquencies and ensuring that
doubtful loans were fully provided for.
In 2011, as in previous years, the group's international trade
business continued at a high level, with operations involving
direct links with more than 250 correspondent banks across
five continents. Cross-border payments handled during the year
amounted to some €1,472 million. Based on data for
transactions handled via SWIFT, good market shares were
achieved of 16.4% in import documentation from remitting
correspondent banks and 23.5% in export documentary credits,
representing increases of 71 and 13 basis points, respectively,
compared with the figures at the end of 2010.
The Bank's international branches continued to focus on and
tailor their operations in markets of special interest to Spanish
companies actively engaging in foreign trade, whether in the
import/export field or as part of their foreign investment activities.
The Bank's Casablanca branch, the first to be opened by a
Spanish bank in Morocco, made good progress during the year.
It is ideally positioned to assist Moroccan businesses with
share-owning interests or trading links in Spain by providing
them with transaction banking and financial solutions of
the first order.
Banco Sabadell has long been a pioneer in building a presence
in key foreign markets such as China (where it has two offices, in
Beijing and Shanghai), India, Singapore, Turkey, the United Arab
Emirates and Algeria.
Its representative offices have become key reference points
for Spanish businessmen in all these markets.
53
During the year a total of 56,000 new loans were arranged
at 4,000 points of sale all over the country. This new business
resulted in top-line revenues for 2011 of €250 million.
The company continued to deliver efficiency improvements
thanks to highly skilled personnel, upgraded technology tools and
success in managing down operating costs. All this helped the
company to bring its cost:income ratio down to below 37%.
Group businesses
54
—
— Markets and Private Banking in 2011
—
—
Banco Urquijo
Banco Urquijo is one of the most highly regarded and wellestablished names in the Spanish banking market. With its
private banking-centred business model, it is characterized by
its focus on the customer and by its specialist advisory and
integrated wealth management services.
In 2011 it further strengthened its leading position as Spain's
best specialist private bank, as confirmed by its successful
candidature for the Best Private Banking Awards conferred
each year by Euromoney magazine to institutions specializing
in the management of large fortunes. The magazine once again
acknowledged the success of the Urquijo business model and paid
tribute to the quality of its services within its specialist market.
For the second time Banco Urquijo won the highest accolades as
Best Spanish Private Bank and for the Best Global Private Banking
Service.
—
—Banco Urquijo – another year of leadership as Spain's
best specialist private bank
—
During the year it successfully responded to the needs
of the market and earned a pre-tax profit of €19.3 million, a
40.5% increase on the previous year's figure. Top-line revenues
were €8,710 million, with customer deposits and funds under
management totalling €7,911 million and loans and advances
of €799 million. The loan loss ratio fell to 0.91%.
BS Banca Privada
Banco Sabadell caters for the needs of its Private Banking
clients by delivering a high quality, highly specialized and
personalized service and by proposing investment solutions
to suit their risk profile.
Assets under management totalled €17,727 million, with the
Madrid and Catalan regions accounting for 59% of this amount.
Client numbers increased to reach 15,000 at the close of the year.
€'000
2010
Change
y.o.y. (%)
Net interest income
27,753
26,888
3.2
Other income
15,978
6,598
19,173
3,503
(16.7)
88.4
Gross income
50,329
49,564
1.5
(32,632)
(35,029)
(6.8)
17,697
14,535
21.8
1,583
86
(41)
(125)
(191)
(466)
--(91.2)
Profit before tax
19,325
13,753
40.5
Ratios (%):
ROE
Cost:income ratio
Loan loss ratio
6.2%
53.7%
0.9%
219.7%
4.6%
59.7%
2.3%
79.6%
799
2,956
4,955
1,029
3,252
5,146
(22.4)
(9.1)
(3.7)
207
15
219
14
(5.5)
7.1
Operating expenses
Operating profit
Provisioning expense (net)
Impairment losses
Other gains/losses
Loans and advances
Customer accounts
Securities
Other information
Employees
Branches in Spain
Investment, Products and Research
Banco Sabadell has a team of experts specializing in financial
market research and analysis and in drawing up asset allocation
strategies to guide investment decisions, planning and
developing investment products and researching the various
types of asset in which customers may wish to invest.
During the year product development at Banco Sabadell
continued to focus on offering customers high-yielding investment
The Bank focused on growing its business in different market
segments by boosting its service capabilities in each segment.
Significant progress was made, for example, in the Institutional
and Corporate Client segment, to which it aims to bring a unified,
organized, comprehensive approach and a well-coordinated range
of available services, so as to position Banco Sabadell as a market
leader serving more than 1,200 clients. Other important segments
addressed were Sports & Entertainment, serving elite members of
the sporting and entertainment worlds, Religious Institutions, and
Company Pension/Retirement Plans.
Wealth management advice acquired a special importance as
wealth taxes were reintroduced in some of Spain's autonomous
regions for the years 2011 and 2012. An initiative that was
welcomed by the private banking team was the launch of BP
Learning, a virtual community whose aim is to foster and reward
the sharing of knowledge and experience within the team.
Group businesses
2011
55
Group businesses
products based on views informed by asset allocation strategy.
Activity was intensified in the design of new products and the
review of existing ones. A new system for tracking business activity
in different products was put into operation. In the latter part of the
year a study group was set up to seek out new product ideas and
ways of positioning the Banco Sabadell product catalogue in the
medium and long term.
In the area of research, the team’s stock market research
capabilities were expanded and its work was extended to include
the credit markets. There was further enhancement of the reports
service, which provides customers with Banco Sabadell's view of
stock market trends and business sectors to enable them to take
informed investment decisions.
The group’s asset management business, which is carried
on by the units responsible for managing collective investment
schemes (CIS's), combines asset management with the selling
and operation of CIS's; it also manages investments for other
Banco Sabadell businesses that hold portfolios of assets.
The gross income attributable to asset management totalled
€29.1 million in 2011 and a pre-tax profit was posted of €9.7
million. The ROE was 14.7% and the cost: income ratio was 66.6%.
€'000
2011
2010
Change
y.o.y. (%)
29,122
32,942
(11.6)
(19,410)
(18,651)
4.1
9,712
14,291
(32.0)
0
(13)
--
Profit before tax
9,712
14,278
(32.0)
Ratios (%):
ROE
14.7%
24.5%
Cost:income ratio
66.7%
56.6%
Assets under management in CIS's
Total assets in CIS's including schemes sold but not managed
6,737
8,024
7,422
8,853
(9.8)
(9.5)
153
--
158
--
(3.2)
--
Gross income
Operating expenses
Operating profit
Other gains/losses
56
Other information
Employees
Branches in Spain
In product distribution, revenues and profit levels remained stable in 2010, despite difficult operating conditions.
There were further changes in the product mix compared
with earlier years as the group continued to diversify its income
sources. While activity and profit performance in such areas as
foreign exchange, derivatives and structured products remained
broadly unchanged from 2010, the fixed-income business
Treasury and Capital Markets
Group businesses
At the close of 2011 total assets under management by the
Spanish-domiciled mutual fund industry as a whole, including real
estate investment funds, totalled €132,266.5 million. The volume
of Spanish-domiciled mutual fund assets under management by
the Banco Sabadell group stood at €5,193.5 million at the close
of the year.
The group’s offering of guaranteed return funds was maintained
during the year and return guarantees were issued in respect
of nine guaranteed funds totalling €1,176.9 million at 31
December 2011. Guaranteed funds as a whole accounted for
€2,030.5 million worth of assets at the close of the year. Assets
in guaranteed funds increased in importance relative to the total
value of financial assets under management in funds subject to
Spanish jurisdiction, rising to 48.3% from 40.1% the year before.
Sabadell BS Inmobiliario FII, a real estate fund launched in
early 2004, ended the year with assets of €990.2 million and
16,389 fundholders. It remains a Spanish market-leading vehicle
for investment in real estate assets.
In 2011 Banco Sabadell mutual funds earned a number of
accolades and distinctions. InverSabadell 70, F.I. was awarded an
A quality rating by rating agency and mutual fund analysts Standard
and Poor’s for management quality, while Sabadell BS Rendimiento
Institutional, F.I. and Sabadell BS España Bolsa, F.I. earned praise
for consistently good results over the last five years and were
again given an A rating. Standard and Poor’s also reviewed and
confirmed its “high” rating for quality of management for mutual
funds which had already been quality rated. A total of eight funds
managed by BanSabadell Inversion were rated high quality. Four of
these also earned a rating for 5-year Long-Term Fund Management.
BanSabadell Inversión reinforced its position as an acknowledged
leader among Spanish fund managers, having received 67%
(2010: 58%) of the quality ratings awarded by Standard & Poor’s
to Spanish-domiciled mutual funds overall.
During the year a total of 17 mutual funds and 17 investment
companies (OEICs) were added to the range of investment vehicles
as a result of the merger of Banco Guipuzcoano. Seven mergers
took place in which seven funds were absorbed by others with the
same investment objectives, having regard always to investors'
best interests. Two OEICs were also merged. Three mutual funds,
two fixed-return guaranteed funds and one balanced fund were set
up and registered with the Spanish securities market regulator
(CNMV). At the close of the year the group's Spanish-domiciled
collective investment schemes numbered 264, with management
split between BanSabadell Inversión, S.A., S.G.I.I.C. Sociedad
Unipersonal (125 schemes), Urquijo Gestión, S.A., S.G.I.I.C. (138
schemes), and Guipuzcoano, S.G.I.I.C., S.A. (1 scheme).
57
Group businesses
increased twofold with increases in all product lines. This was
especially true of retail products, boosted by high levels of
issuance by autonomous regional governments in which the Bank
was a very active participant.
Trading saw high levels of activity during the year, both in
the management of spread movements and in proactive cash
management, increasingly involving the use of central clearing
houses such as LCH. Trading also moved into new areas of activity
such as a sovereign debt portfolio and long-term interest rate
management.
The year 2011 saw a further boost being given to Banco
Sabadell´s capital market involvement. In its institutional clientfocused business, it serviced 102 clients in a range of fixedincome investments (government, corporate and structured
bonds). In the primary fixed-income market Banco Sabadell not
only increased its involvement in wholesale market issues but
acted as an underwriter in a number of issues targeted at retail
investors.
Bancassurance
Profit before sales commissions and tax was €169.3 million, an
8% increase on 2010. The net profit from the Bancassurance
business totalled €62.4 million, a rise of 28%.
This performance was achieved thanks to active and diligent
management of margins throughout the year, resulting in a gross
income of €201.5 million, a 10% rise on 2010.
At 31December 2011 the overall volume of savings under
management by Bancassurance stood at €8,888.8 million, with
total premium income of €1,429.6 million.
—
—Bancassurance – a dependable source of income
that keeps growing
—
—
These results once again confirm the positive impact that the
alliance with the Zurich insurance group has had on sales
of insurance and pension plans.
58
BanSabadell Vida
Total premium income in life insurance for the year 2011 was
€1,346.8 million, giving BanSabadell Vida a number five ranking
in the league table of Spanish life offices according to recent
data published by ICEA, a research organization for the
insurance and pension industries.
Premiums in protection-only life insurance were €90.5 million,
up 12% on the year-end figure for 2010. Against a background
of lower mortgage lending to support linked life-with-protection
insurance, freestanding life policies performed well, particularly
the Life Care policy which generated €31.8 million in premium
income, a rise of 28%.
BanSabadell Vida savings/life insurance products ended the
year with total savings under management of €6,030.5 million,
making BanSabadell Vida the Spanish insurance industry’s sixth
largest provider according to recent ICEA published data.
BanSabadell Vida posted a profit before sales commissions
and tax of €135.8 million, 11% more than in 2010. The net profit
was €54.5 million, a 34% increase.
BanSabadell Pensiones
Group businesses
Funds under management by BanSabadell Pensiones reached
a year-end total of €2,567.5 million. €1,500.4 million of
these funds related to individual and group pension plans and
€1,067.1 million to occupational schemes.
These totals rank BanSabadell Pensiones in eleventh place in
the industry as a whole according to recent data from INVERCO,
an investment and pension fund association.
A major development in 2011 was the introduction of
guaranteed pension plans, which sold well for most of the year and
particularly during the end-of-year sales campaign. Another was the
integration of Banco Guipuzcoano which resulted in a significant
addition – €104 million – to pension funds.
BanSabadell Pensiones posted a profit before commissions
and tax of €17 million. The net profit for the year was €4.0 million.
BanSabadell Seguros Generales
The group's general insurance provider writes and distributes
home and payment protection insurance and also distributes
insurance for other underwriters, mainly the Zurich Group.
The company's premium income for 2011, at €82.9 million,
was up by 8%. The year saw increased business in store and small
business protection insurance, with premium income rising by 29%
for store insurance and 30% for SMEs.
The company reported a profit before sales commissions and
tax of €16.5 million, up 39% on the figure for 2010, with a net
profit of €3.9 million, bettering the previous year’s performance.
59
BanSabadell Previsión, EPSV
BanSabadell Previsión, a voluntary social insurance society,
distributes pension/retirement plans within the Basque
Country and is held in high regard by branch personnel and
by customers.
The society reported a total of €290.8 million in savings under
its management at the close of the year. A large part of this was
additional savings resulting from the merger of Banco Guipuzcoano
(€243 million) and from sales of guaranteed pension and
retirement plans during the pensions campaign.
Group businesses
60
Securities and custodian services
In the course of 2011 Banco Sabadell gained an increasingly
prominent role as a licensed broker on the Spanish stock
market. With a 4.64% market share it ranked seventh out
of a total of 61 stock exchange members.
As a provider of custodian and depository services the Bank
was able, despite adverse market conditions and falling asset
values, to increase revenues, win new customers and broaden its
product and service offering.
—
— BS America in 2011
—
—
The volume of business being handled by Banco Sabadell is
now more than USD 7,000 million. Assets of USD 3,700 million
make it Florida's seventh largest local bank by total assets. It is
one of the few financial institutions in the area with the capability and experience to provide a full range of banking services,
ranging from highly complex and sophisticated products for large
corporate clients, including structured project finance, to
products for individual customers as well as a full range of
products and services for professional people or companies
of any size.
—
— Acquisition of Lydian Private Bank
—Sabadell wins the Miami Chamber of Commerce Prize
for International Business Leadership
—
—
In November Banco Sabadell and Sabadell United Bank
were winners of the Miami Chamber of Commerce International
Business Leadership Award. The Bank was awarded the prize for
business retention and expansion.
Banco Sabadell Miami Branch
Group businesses
At the close of the year Banco Sabadell's operating branch in
Miami had more than USD 2,509 million in deposits and funds
under management. Client wealth management was up 3%.
Loans and advances were up 20% and reached USD 1,251
million, as the bank responded to the needs of international
businesses for working capital and medium- and long-term
finance.
In 2011 Banco Sabadell Miami branch continued to expand
its structured finance business by diversifying its range of loan
products. The Bank was once again an active promoter of wind
generation (funding five new projects) and a leading player in the
North American wind generation market. It also entered other
energy markets, such as gas and solar energy, for the first time.
All projects financed in 2011 were in the USA and Mexico.
Sabadell United Bank
Sabadell Securities
Sabadell Securities USA, Inc. is a firm of stockbrokers and
investment advisors registered with the Securities and Exchange
Commission (SEC). The business has a key role in supporting and
driving forward the BS America strategy.
Sabadell Securities provides investment and wealth
management services to commercial banking customers
as well as personal banking, corporate banking and private
banking clients. Its business strategy is based on meeting the
The year saw Sabadell United Bank acquire virtually all the
assets and some of the liabilities of Florida-based Lydian Private
Bank in a take-over supervised by the Federal Deposit Insurance
Corporation (FDIC). The acquisition came with the guarantee of
an active protection scheme, with the FDIC agreeing to absorb
80% of the losses due to any possible impairment of certain
loans acquired in the take-over.
Sabadell United Bank took over assets amounting to some
USD 1,600 million at a discount of USD 176 million and assumed
liabilities of some USD 1,600 million, including customer deposits
totalling USD 1,200 million.
Lydian Private Bank’s six branches were added to Sabadell
United Bank’s 19-branch chain, making a total of 25 branches.
Sabadell United thus saw its position in the state of Florida being
considerably strengthened, especially on the West Coast (Tampa,
Sarasota and Naples), and is now the seventh largest local bank in
terms of deposits.
The new addition resulted in a Wealth Management division
being set up within Sabadell United Bank, to be known as Sabadell
Bank & Trust. The division will focus on private banking and wealth
management services.
As 2011 drew to a close, Sabadell United Bank was managing
assets of some USD 3,500 million. It held deposits of more than
USD 2,600 million and loans and advances approaching USD
2,000 million. It was servicing over 45,000 customers.
61
financial needs of customers by advising them on capital market
investments.
Sabadell Securities is a member of the Financial Industry
Regulatory Authority (FINRA) and the Securities Investor Protection
Corporation (SIPC). It uses the services of Pershing LLC, a
Bank of New York Mellon subsidiary, for clearing, custody and
administrative services.
BanBajío
Group businesses
62
Headquartered in León, Mexico, BanBajío is a bank whose
mission is to be an engine of economic development in the
parts of the country where it operates. It has a strong focus on
the small and midsize business sector, the food and agriculture
industry and other markets showing potential such as consumer
and mortgage loans.
BanBajío is Mexico's eighth largest bank in terms of assets,
which stood at 94,000 million Mexican pesos at the close
of the year, with deposits and assets under management of
51,000 million pesos and more than 310,000 customers
served by 270 branches. In 2011 it made a net profit of 862
million pesos.
BanBajío's equity capital is owned as to 70% by local
businessmen, with the rest in the hands of private sector investors
such as Banco Sabadell, which holds 20% of the equity and plays
a key role in BanBajío's growth. The remaining 10% of the capital
is owned by the International Finance Corporation (IFC), the World
Bank's private sector investment arm.
In 2011 BanBajío strengthened its position as a major
lender to the agrarian sector (a key industry in Mexico), a role it
had played for the previous seven years. It set up a dedicated
structured finance department with the aim of participating in the
infrastructure development business, and it joined the Global Trade
Finance Program set up by the International Finance Corporation to
give local small and midsize enterprises more access to credit for
external trade (exports and imports). BanBajío also confirmed its
leading position as a provider of finance to SMEs.
Additional services are provided through a number of
subsidiaries: Financiera Bajío, which provides factoring, leasing
and valuation services; Sinca Bajío, a regulated private equity
company; and Afore Afirme Bajío, which manages pension funds in
partnership with Grupo Financiero Afirme. BanBajío has a strategic
alliance with Afirme which means that the branches and ATMs of
each partner are able to operate in an integrated way.
BanBajío was recently named as Mexico's fastest growing
enterprise in the period 2000-2009 and is well known as being
highly attractive to those wishing to pursue a career in banking; all
this testifies to its strong commitment to investing in productive
activities.
Centro Financiero BHD
Banco Sabadell owns a 20% equity interest in Centro Financiero
BHD, the second largest privately-owned financial services group
in the Dominical Republic. It comprises Banco BHD and nine other
Group businesses
subsidiaries providing stockbroking, insurance, pension fund and
other services.
Banco BHD is itself the Republic's second largest bank and as
of September 2011 was holding 15.21% of all the assets in the
country's banking system. Its AA-(dom) positive outlook rating was
again affirmed by Fitch Ratings, making it the Dominican Republic’s
most highly rated bank. Banco BHD was also described by Fitch as
having the most advanced system of corporate governance of any
Dominican financial company.
At the close of 2011 Banco BHD's assets totalled 107,051
million Dominican pesos. Its loans and advances stood at 56,694
million pesos and customer accounts were 87,204 million. Its
net worth amounted to 11,217 million pesos and it posted a net
profit of 3,016 million. Banco BHD once again outperformed the
rest of the Dominican banking industry in growth, loan quality and
profitability. It has 92 branches giving it nationwide coverage, and
advanced online and telephone banking channels. It is a provider
of financial services to more than 445,000 customers. Centro
Financiero BHD reported a net profit for 2011 of USD 99.5 million.
—
— Other businesses in 2011
—
—
SoLVIA
—
— Property sales on a rising trend
—Sale prices are on a par with book values
—
—
In 2011 Banco Sabadell made determined efforts to turn its
repossessed real estate assets into cash. To do this it has
followed a policy of actively marketing, leveraging and managing
its properties with the aim of disposing of them as a matter of
priority. The work of managing these assets, which are not being
used for or by the banking business and are available for sale, is
being undertaken by the SoLVIA group. This has resulted in sales
leading to a €414.7 million reduction in the value of the real
estate portfolio.
As an investor, the SoLVIA group ended the year with €2,903.5
million in assets under management net of provisions. This
included real estate assets acquired from Banco Guipuzcoano
(€234.1 million) when that entity was integrated into the Banco
Sabadell group in 2011.
Of the total assets under SoLVIA's management, 21.6%
was development land. Plots prepared for development and
developments under construction made up 35.8% of the portfolio
and the remaining 42.5% was split between rental property and
real estate developments for sale. 76.5% of the assets were
63
Group businesses
64
residential properties. 34.4% of the assets were located in
Catalonia, mainly in the city and metropolitan area of Barcelona;
another 18.8% were situated in the Madrid region. The remaining
properties were spread over a number of locations in other parts
of Spain.
By the end of 2011 SoLVIA had sold 46.0% of its inventory of
completed new build residential units. The sold units numbered
600 out of a total of 1,304 offered on the market, at an average
discount of 22.1%. Apart from significant price reductions and the
availability of finance to new buyers on highly advantageous terms,
factors that boosted property sales in 2011 were introductions of
potential purchasers by Banco Sabadell branches and an enlarged
external sales force. The Solvia.es real estate web site, along with
SoLVIA and Banco Sabadell communication channels (both online
and offline) also proved to be effective in generating enquiries from
customers.
As part of the group’s overall strategy of divesting real estate
assets, programmes were under way in 2011 to realize €296.2
million worth of equity in building plots ready for development
and suitable for immediate sale. Some of these programmes
were targeted at real estate developers and others at investors.
Schemes designed for real estate developers resulted in a total of
54 agreements being concluded for the development of 2,308 new
housing units all over the country. Developing residential units for
letting was another aspect of SoLVIA's real estate activity. SoLVIA
currently has nine developments under construction with 251
social housing units available for rent and due for delivery in 2012
and 2013. SoLVIA's programme for investors involved structuring
investments in special-purpose vehicles for subsequent transfer
to institutional investment funds. One example of this was an
agreement with a UK fund to develop 20,000 square metres of
office space in the 22@ district in Barcelona.
BancSabadell d’Andorra
BancSabadell d’Andorra was set up in the Principality of Andorra
in the year 2000. Banco Sabadell holds a 50.97% interest, with
the remaining shares divided among more than 800 Andorran
private investors. It is currently the only bank in Andorra with a
non-Andorran shareholder and this, combined with the sizeable
number of private Andorran shareholders, gives this bank a
clear edge over its competitors. The bank’s target customers
are medium- and high-income individuals and larger companies
operating in the principality.
The bank has six branches. Deposits and customer funds
under management were in excess of €1,200 million at the
end of the year, with loans and advances to customers totalling
€400 million.
The bank posted a year-end profit of €6.5 million. The ROE at
the end of the year was in excess of 12% and the liquidity ratio,
according to criteria set by the Principality's supervisory body,
the Andorran National Finance Institute, was over 85% (the legal
minimum is 40%). The loan loss ratio was 0.62%. Regulatory
capital as of 31 December 2011 exceeded €59 million. The
bank's capital adequacy ratio was 20%, considerably above
the regulatory minimum of 10%.
—Excellence
—
—
—
—
—
—
—
—
—
— Operations
—
—
In 2011, the Bank concentrated its efforts on launching the CREA
plan to drive forward the transformation of the operational model
that had been initiated under the 2008-2010 “Optima” plan, and
to carry out a reorganization of sales and marketing to bring about
a significant increase in productivity and prepare for anticipated
growth. In addition, the Bank’s renowned quality of service was
further enhanced.
Excellence
—
— Plan CREA – new capacity created under Plan Óptima
being put to good use
— A focus on new market segments
—
The implementation of this transformative plan coincided with
the April 2011 integration of Banco Guipuzcoano, an operation that
was carried out with great efficiency and in record time.
Operational and organizational transformation
As part of the reorganization of its internal capabilities, the Bank
continued the process of setting up “operational factories” by
opening a new Regional Administrative Centre in San Sebastián.
This new centre, together with the existing facilities in Madrid,
Barcelona and Oviedo, is now handling 92% of the processing
for service products and 80% of the processing for lending
products.
— Number of Commercial Banking customers per branch employee
2010=100
66
Merger of BG
109
100
20
10
Jan
11
Feb
11
1
1
1
1
1
1
1
1
1
1
r 1 pr 1
y 1 un 1 Jul 1
v 1 ec 1
g 1 ept 1 Oct 1
A
J
Au
No
D
Ma
S
Ma
—Lending
100
—Service
-17%
100
83
-32%
68
10
20
11
20
10
20
Data are correct as of November 2011
20
11
Excellence
— Unit costs at Regional Administrative Centres
Cost per transaction in euros. 2010: base 100
In 2011 new tasks were transferred to the operational factories
and a start was made on transferring the production of loan and
credit documentation. This is expected to be completed in the
course of 2012. As a result, more time is being freed up for
sales and marketing, as the record volumes of new business
demonstrate.
The role of the Bank’s administrative centre in Argentina was
expanded with the aim of improving unit costs and releasing
resources to accommodate the growth envisaged by the CREA
Plan. The centre is now handling more than half the transactions
carried out by operational factories. Transactions allowing the
highest levels of automated processing and in which there are
fewest exceptions have been transferred to the centre.
The Regional Administrative Centres, along with the Superdex
centres that handle international operations, the Global Services
Centre and the IFOS facility, are processing more than 350,000
transactions each month. Unit costs in lending have been reduced
by 17% and in servicing by 29%. The operations centres have
enhanced the Bank’s capacity for growth by providing a platform
that will enable it to absorb the expected increase in transactions.
The ongoing programme to reorganize sales and marketing
has led to a sharper focus on sales and promotion throughout the
branch network and greater efficiency in developing new business.
Actions under the programme have been launched in three areas:
process, people and channels, all of them focused on sales.
In the first of these areas, major improvements have been
achieved in the processes associated with selling and sales
support. The introduction of digital signature pads at branches, for
example, means that branches no longer have to print out and file
more than 10 million transaction slips each year. This innovation,
together with the digitization factory soon to be rolled out, will
eliminate physical files from branches altogether. A centralized
telephone answering service is being set up for branches; this
ensures that branch personnel can have face-to-face meetings with
customers without being interrupted by phone calls. An initiative
has also been launched to reorganize the group’s Central Services
so as to increase the number of staff working on sales-related
tasks.
In the people-focused part of the programme, a new incentive
system is enabling branch personnel to be rewarded for sales
achievement based on simple, transparent metrics. The system
makes success in selling more visible and provides an incentive to
sell. This year more than 80% of branch employees achieved sales
that were at least equivalent to five new individual customers.
Finally, channels have also been incorporated into the sales
and marketing process. This has increased sales opportunities
threefold and improved success rates.
These developments in the organization of sales and marketing
have been accompanied by improved back office processes, which
have led to a 17% increase in productivity, quality enhancements
and reduced operational risk.
A redesign project was carried out on the Bank’s real estate
operations. The project involved a reorganization of work
processes associated both with the financing and the selling
of real estate, and this is increasing the efficiency of sales and
marketing in the real estate area.
67
Technology
Excellence
In technology the focus continued to be on providing a more
efficient and business-oriented infrastructure. Improvements
in systems and user equipment in previous years made it
possible to develop a new virtualized banking platform, currently
in the roll-out phase, which will lead to greater job mobility. Job
virtualization will make it possible for employees to access their
desktops from any terminal, even when they are away from the
office, thus substantially reducing energy usage and helping to
eliminate contaminating emissions.
To make the sales and marketing orientation still more effective
a new corporate desktop, Proteo 3.0, was developed. This
integrates the full range of systems and tools used by branches on
a single front end. The new front end will be rolled out in the early
months of 2012 and delivers increased systems usability
with reduced maintenance costs. All of these initiatives are
being pursued in such a way as to assure the highest levels of
security.
— IT and communications costs
2006=100
— No. of customers
— IT & comms costs
143
119
103
105
107
100
95
88
84
06
20
07
20
08
20
20
09
83
20
10
83
11
20
Cost management
68
In 2010 the Bank introduced a new integrated expense approval
and management system. The system was extended and
developed in 2011 and resulted in a saving of €20 million on the
initial allocation for cost items covered by the system.
integration processes
The year 2011 saw the successful integration of Banco
Guipuzcoano into the group. The Banco Sabadell systems
architecture treats integration as an ordinary activity without any
loss of business focus. It allows newly acquired organizations
to be mapped into the different functional categories that guide
the integration process. This architecture, coupled with the
experience gained from previous mergers, means that integration
can be completed in even less time. The Bank has become an
acknowledged industry leader in the execution of mergers.
—
— Human Resources
—
—
Composition of group employees
Excellence
At the end of the year Banco Sabadell and its group were
employing a total of 10,675 employees, 102 less than at the end
of the previous year despite the addition of the 123 employees at
Lydian Bank, acquired in 2011. The average age of employees was
43.3 years and the average length of service was 17.8 years. The
gender split was 53.1% men and 46.9% women.
—
— 95% of employees participated in one or more
training events
— More employees are benefiting from our
strategic leadership scheme
—
— Employees – gender split
1 Women
2 Men
46.9%
53.1%
More than 95.0% of the group’s employees made use of one or
more of the training opportunities offered by the group. Training
courses comprised a total of 222,560 study hours with
employee participation averaging 7.1 courses per employee.
In 2011 the Bank continued its policy of incorporating learning
communities into its training programme within a collaborative
working environment affording opportunities for knowledge sharing
among peers and reducing travel and administrative costs to a
minimum.
The year also saw the completion of the second "Laude"
programme, an arrangement between the Bank and the University
of Barcelona under which the university awards qualifications for
in-service training completed by group employees. The scheme
produced 72 new graduates, 105.7% more than the number
graduating in the first round of the scheme. Seven of them
qualified with the "cum laude" distinction.
Human resources development
1
2
In 2011 the Bank continued to develop its Strategic Leadership
scheme, an intensive employee training programme involving all
senior management personnel and embodying innovative coaching
and skill appraisal techniques.
Employee training
69
Remuneration policy
To comply with new rules on remuneration from the Spanish and
European authorities, in 2011 the Bank introduced regulations
on the use of risk indicators and deferred payment of variable
compensation in senior managers’ remuneration systems so as to
increase transparency and ensure that the performance on which
remuneration is based does show a positive result.
Banco Guipuzcoano
Excellence
70
Banco Sabadell completed the full integration of the Banco
Guipuzcoano workforce, including the unifying of working
arrangements and employment conditions with those of
employees across the group. Meanwhile, it ensured that a
high-quality customer service was maintained and branch
services operated normally at all times. To help achieve this aim
a training plan involving a total of 53,560 hours’ instruction was
set up, with each Banco Guipuzcoano employee attending an
average of 16 courses.
In the course of the integration the administration of the
Banco Guipuzcoano staff payroll, which had been outsourced to
an external supplier, was brought back within the organization.
The integration process once again showed the capability
and scalability of the Bank's computerized human resources
management system, launched in 2010.
—
— Quality Management
—
—
For Banco Sabadell, quality is not just a strategic option; rather,
it is a whole approach to doing business, whether in delivering
value to stakeholders or in the execution of each and every
process forming part of that business. This natural affinity with
excellence helps to strengthen the Bank's capabilities in all
areas, transforming threats into strengths and challenges into
opportunities for the future.
—
—Leaders in quality of service
—For 95% of new customers, BS met or exceeded
expectations
—
—
A key benchmark against which to measure and improve
management practices is the European Foundation for Quality
Management (EFQM) model for excellence, on which the Bank
is independently assessed every two years. The most recent
assessment, carried out in 2010, resulted not only in the Bank’s
EFQM Seal of Excellence (+ 500 points) being renewed, but in its
Excellence
rating by these tough standards rising to above 600 points for the
first time.
Banco Sabadell continues to be the only Spanish lending
institution with 100% of its financial operations certified to the ISO
9001 standard, providing further proof of its customer-focused and
rigorous approach to process management. In 2011 the Bank's
certification was renewed for a further three years. Significantly,
the newly merged Banco Guipuzcoano was also covered by the
certification.
The year also saw a successful outcome in the annual
assessment required for the Bank to keep the “Madrid Excelente”
quality mark.
Banco Sabadell was a candidate in the Madrid Foundation for
Excellence annual awards for the best organizations operating
in the Community of Madrid, winning an award in the "large
corporate" category.
Quality in customer service
High-quality customer service has traditionally been one of the
key drivers of our strategic planning and a distinctive feature of
our positioning in the marketplace.
To make this possible, the Bank uses a set of indicators that
enables it to identify areas for improvement as they emerge, both
throughout the organization and for each individual branch, thus
providing it with an “instrument panel” to keep track of its progress
in meeting annual targets.
—-Objective quality audits. These use the mystery shopper
system to evaluate the quality achieved by branches in such
areas as courtesy, product knowledge, understanding the
customer’s needs, ability to give clear explanations, and the
information provided.
—- Industry benchmarking of quality metrics. The quality of
service offered by the Bank’s branches is benchmarked
against that of other lending institutions. Here again the
mystery shopper system is used; the quality surveys are
performed by an independent firm of assessors.
—- Perceived quality surveys. These take place continuously
throughout the year and are based on customer samples.
Data is collected for every one of the Bank's branches. The
surveys are of three types:
— General surveys: These are carried out on random
samples of customers, and use questionnaires for
each customer segment.
— Surveys conducted among new customers to
measure how far their perceptions matched
their initial expectations, once they have had the
opportunity to become familiar with the workings of
the Bank and of their branch.
— Surveys of customers using online banking and other remote
channels. These focus on the aspects of quality most
relevant to those channels.
Key quality indicators include the following:
71
Excellence
—- Customer claims and complaints. This is one of the
indicators that are of most value in making our processes
more efficient as it gives us precise information on
aspects that have given rise to customer dissatisfaction
and therefore require prompt attention. The information
relates to claims and complaints made through either of
the channels provided by the Bank to customers and users
of its services: the Customer Service Department and the
Customer and Stakeholder Ombudsman. In every year since
2002, Banco Sabadell has been the Bank with the lowest
ratio of complaints received by the Bank of Spain. The
latest report produced by the Bank of Spain's Complaints
Department, which has ceased to provide data on numbers
of complaints as a proportion of gross revenue, shows a
total of 101 complaints for Banco Sabadell. This is far below
the numbers reported for other large and medium-sized
banks, and ranks Banco Sabadell in 11th position based on
complaint numbers alone. This is a more favourable position
than would be the case if complaints/revenue ratios were
used. Based on internal information, the low number of
complaints received by the Bank of Spain would suggest that
once again Banco Sabadell was the bank with the lowest
ratio of complaints to revenue.
Indicator
2009
2010
2011
Scale
Objective quality audits
Industry benchmarking of quality metrics **
Banco Sabadell
Banking sector
Industry comparison
Perceived quality surveys –
satisfaction with branch
6.08
5.99*
5.85*
1–7
7.45
6.61
0.84
7.41
6.11
1.30
7.24
6.06
1.18
0 – 10
5.87
6.04
6.04
1–7
3,006
3,184
3,212
Customer claims and complaints
(total number handled)
* The scoring method has been changed and the values shown are therefore not comparable with those of earlier years. If the new scoring system had been applied to the data for 2009 the
score would have been 5.89, which would mean a 0.1% improvement in 2010.
** The survey provider has changed its scoring method and this has been applied retroactively for comparability with prior year data. For this reason, the scores for 2008 and 2009 are at
variance with those shown in the annual reports for those years.
72
In addition to the above indicators, Banco Sabadell makes use
of other sources of information to obtain additional insights into
our quality performance.
According to a market survey on the financial behaviour
of individuals in 2011 produced by FRS Inmark, a financial
consultancy firm, Banco Sabadell is the bank that is showing
the highest levels of satisfaction within the individual customer
segment. The research was carried out in the months of May and
July on a nationwide sample of 12,000 people aged 18 or over
in towns with more than 2,000 inhabitants. Similar feedback is
being received from business customers according to a recent
survey of SMEs carried out by the same consultancy firm based on
interviews with 2,525 businesses.
According to FRS Inmark, Banco Sabadell can not only boast
the highest levels of satisfaction among large corporate clients,
but is actually deepening relationships with them still further in
a situation where nearly all banks are losing business, and is
also the only bank with a net promoter score (promoters minus
detractors) that is positive.
Qualis Prizes for Excellence
Excellence
Established by the Bank in 2002, the Qualis Prizes for
Excellence are awarded to employees and working teams who
have been particularly noted for the excellence of their work
during the year.
The prizes presented in 2011 were awarded for performance
in 2010. Of particular interest are the prizes for the best
bank branches as examples of successful teamwork, and the
Qualis Prizes – Gold category, which are given in recognition of
achievement over an entire career.
Branches selected for the best branch award were Tudela;
Campollano industry park, Albacete; Manacor; Pedrosa industrial
estate, L’Hospitalet de Llobregat; and the Corporate Banking
branch at Cornellà de Llobregat. Qualis Gold prizes were awarded
to Montserrat Alicart, a staff member in the Chairman's Office, and
Jaume Puig, head of Commercial Banking.
Employee participation for improvement and innovation
To encourage employee participation, Banco Sabadell group employees have a special web site, BS Idea, which is part of Canal
BS, the corporate intranet.
The site provides a simple and user-friendly way for any
employee to use their creativity in putting forward suggestions for
improvements in working methods or in the range of products and
services.
A major advantage of this system is its transparency:
employees’ ideas are immediately visible to all other employees
and can be voted on or enriched with further opinions and ideas.
This helps to establish priorities for implementation, since the
number of votes in favour of an idea gives an excellent indication
of the benefits that it could bring to the organization.
In 2011 a total of 3,688 people posted messages on the site
and 2,317 ideas were put forward.
Security award
73
The Bank's Security Department was chosen as a 2011 winner
of the International Prize for Technology Innovation awarded by
Pacom, the Australian multinational, each year. The prize was
awarded in recognition of Banco Sabadell's contribution to
operating procedures and enhancements in relation to digital
security and alarm systems, affording higher levels of security to
bank branches and the banking industry generally.
—Risk
management
—
—
—
—
—
—
—
The chief categories of risk inherent in the business of
Banco Sabadell and its group are credit risk, market risk and
operational risk.
The accurate and efficient management and control of risk
is critical to realizing the aim of maximizing shareholder value
while ensuring an appropriate degree of financial strength. The
management and control of risk comprises a broad framework
of principles, policies, procedures and advanced evaluation
methodologies, integrated within an efficient decision-making
structure. All this is fully and clearly set out in the Annual Accounts,
the Report of the Directors, the Report on Corporate Governance
and the Basel II Pillar 3 Disclosure document, all of which can be
found on the group's web site.
Banco Sabadell complies with guidelines drawn up under the
Basel Capital Accord, a fundamental principle of which is that a
bank’s regulatory capital requirements should be more closely
related to risks incurred, based on internal risk measurement
models which have been independently validated.
Banco Sabadell has received supervisory authorization to use
its own internal models for companies, real estate developers,
specialized financing, retailers and sole proprietors, mortgages,
personal loans, credit facilities and personal credit cards, and in
estimating its regulatory capital requirements.
Based on the risk metrics provided by these new
methodologies, Banco Sabadell has a consolidated risk
measurement model based on an internal unit of measurement
in terms of allocated capital.
The assessment of risk in terms of an allocated capital
requirement means that risk can be related to return, from
individual customer up to business unit level. The group has
an analytical “risk-adjusted return on capital” (RaRoC) system in
place which provides this assessment and includes it as part of
the transaction pricing process.
Risk management
—
— Continuous improvement in risk approval, monitoring
and recovery processes
—Banco Guipuzcoano integration means unified risk
management procedures across the group
—
—
75
— Economic capital mapping –
allocation of economic capital
by type of risk
—1
—2
—3
—4
—5
Credit risk
Structural risk
Operational risk
Market risk
Other risks
— Overall risk profile by borrower category –
distribution of credit risk exposures
1 Large corporates
18.01%
2 Midsize businesses
17.69%
3 Small businesses
20.58%
4 Retailers & sole proprietors 2.15%
5 Mortgage loans
17.26%
6 Consumer loans
1.15%
7 Banks
4.25%
8 Sovereign debt
11.85%
9 Other
7.06%
78.4%
7.0%
8.2%
0.7%
5.7%
100.0%
100.0%
9
4
Risk management
5
3
1
8
2
7
6
2
5
1
3
4
—
— Credit risk
—
—
76
Credit risk is the possibility that losses may be incurred as a result
of borrowers failing to meet their obligations or through losses in
value due simply to deterioration in borrower quality.
Approval, monitoring and recovery
To maximize the business opportunities provided by each customer
and to guarantee an appropriate degree of security, responsibility
for monitoring risks is shared between the relationship manager
and the risk analyst, who by maintaining effective communication
are able to obtain a comprehensive view of each customer’s
individual circumstances.
The Board of Directors delegates powers or discretions to the
Risk Control Committee, which then sub-delegates authority at
each level. The addition of controls on these authority thresholds
to the loan approval management systems ensures that the
powers delegated at each level are appropriate to the expected
loss estimates for all loan applications by business customers.
By analysing indicators and early warning alerts, and by
conducting regular credit rating reviews, the quality of a risk can be
constantly monitored in an integrated way.
The establishment of effective processes for managing existing
risk exposures also benefits the process of managing past due
accounts, since the early identification of probable default cases
ensures that measures can be taken proactively. With an "early
warning" system based on quantitative modelling of indicators
22.58
2.78
2.85
5.69
3.43
3.65
s
rs
te
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es
red
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eto
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ivid
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La
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sf dt
er
ME
h
st
a
an late
t
S
n
o
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O
a
L re
en
Lo
m
op
vel
de
— Loan loss ratio by customer segment
and advanced alerts, the quality of a risk can be monitored in an
integrated way and risks transferred to recovery specialists who
are best equipped to determine the most suitable type of recovery
procedure in each case. Risks above a certain limit are grouped
into categories according to their expected loss ratios, so that they
can be treated in the most suitable way. Alerts are managed by the
account manager and the risk manager and are supplemented by
the experience of the account that comes from direct contact with
the customer.
— Loan loss and loan loss coverage ratios
— Loan loss ratio (%)
— Loan loss coverage ratio (%)
Risk management
466.6%
394.3%
383.1%
325.0%
299.5%
106.9%
0,66
69.0%
56.6%
0.66
03
04
20
0.49
05
20
0.39
06
20
0.47
07
20
2.35
08
20
3.73
09
20
5.01
10
20
48.49%
5.95
11
20
Credit rating
Credit risk exposures to corporate customers, special financing
projects, retailers and sole proprietors, financial institutions and
countries are assessed according to a system of credit ratings
based on internal estimates of the probability of default. The
system is based on factors that predict the probability of default
within one year and is designed for different customer
segments. The rating model is reviewed each year on the basis
of an analysis of actual default data.
Each rating score is assigned an anticipated default rate which
allows consistent comparisons to be made across segments and
with the ratings of independent rating agencies, according to a
master scale.
Credit scoring
Credit risk exposures to individual customers are classified
by means of scoring systems which make use of quantitative
modelling based on historical data to identify key predictive
factors. Two types of scoring are used:
— Behavioural scoring: a system in which all customers are
automatically classified according to their transaction
20
0.61
77
histories and data for each product in use. It is used
primarily for such purposes as granting loans, setting
limits on authorized overdrafts, targeting sales campaigns,
and for tracking and segmenting in claim and/or recovery
procedures.
— Application scoring: this is used to evaluate applications for
personal loans, mortgage loans and credit cards. When full
details of the application have been entered, the system
generates a result based on the estimated borrowing
capacity and financial position of the applicant and the
quality of any security or collateral.
Risk management
— Business loan portfolio - credit rating profile
— Credit quality from highest (9) to lowest (0)
— Exposure (%)
— Individual customer loan portfolio - credit rating profile
— Credit quality from highest (9) to lowest (0)
— Exposure (%)
45%
40%
30%
35%
25%
30%
20%
25%
15%
20%
15%
10%
10%
78
5%
0%
5%
9
8
7
6
5
4
3
2
1
0
Country risk
This is the risk associated with the debts of a country
analysed as a class on the basis of factors other than credit
risk. It manifests itself when a borrower is unable to meet his
foreign currency liabilities to external creditors because the
country will not allow access to, or transfers to be made in, that
currency, or where a recovery action against the borrower would
fail for reasons of sovereignty.
An overall exposure limit is set for each country, which applies
across the whole group. Country limits are approved by the Risk
Control Committee and are constantly monitored to ensure that
any deterioration in the political, economic or social situation in a
country can be detected and acted upon in good time. The rating
for each country provides an additional guide, both when setting
limits and in monitoring them once they have been set.
0%
9
8
7
6
5
4
3
2
1
0
— Credit risk – distribution
by geography
1 Spain
2 Other European Union
3 North America
4 Rest of world
5 Latin America
6 Other OECD
89.74%
4.85%
3.84%
0.69%
0.67%
0.21%
— Counterparty risk – distribution
by credit rating
— Counterparty risk – distribution
by geography
1 AAA/Aaa
2 AA+/Aa1
3 AA/Aa2
4 AA-/Aa3
5 A+/A1
6 A/A2
7 A-/A3
8 BBB/Baa1
9 BBB/Baa2
10 BBB-/Baa3
11 BB+/Ba1
12 Other ratings
1 Euro area
2 Other European
3 Other USA and Canada
4 US investment banks
5 Rest of world
6 Japan
4.30%
0.78%
8.78%
25.65%
29.53%
10.86%
3.35%
10.23%
0.16%
0.05%
0.08%
6.23%
6
11
5
10
5
2
12
3
8
4
1
2
4
2
3
9
Risk management
6
90.45%
4.96%
1.49%
2.73%
0.37%
0.00%
3
7
6
1
4
1
5
Credit risk in market trading
Credit risk due to market trading, or counterparty risk, is
exposure to other financial institutions arising from trading
operations. These may be cash transactions, where the amount
at risk is comparable to the nominal value of the transaction,
or transactions in derivative instruments not traded on organized
markets, where in the great majority of cases the transaction
amount is below the notional value.
Banco Sabadell has a system in place for the assessment
and management of counterparty risk, by which observance of
approved limits can be monitored and controlled in real time.
In addition, to mitigate exposure to counterparty risk Banco
Sabadell maintains a solid base of collateral agreements – credit
support annexes (CSAs) or global master repurchase agreements
(GMRAs) – negotiated with key counterparties. The collateral
provisions of these agreements mean that exposure to such
counterparties is significantly reduced.
79
—
—Market risk
—
—
Discretionary market risk
Risk management
80
Discretionary market risk arises from the possibility of loss in
the value of financial asset positions due to variations in any of
the factors affecting market risk (stock prices, interest rate or
exchange rate movements, implied volatilities, correlations, etc.).
It arises primarily from treasury and capital market positions
which, as they expire or mature at specified times, have risks
which are known and can be managed or limited by using
financial hedging products.
Discretionary market risk is measured by the VaR (Value at
Risk) method, which allows the risks on different types of financial
market transaction to be analysed as a single class. VaR provides
an estimate of the anticipated potential maximum loss on a
position that would result from an adverse, but normal, movement
in any of the market risk factors that have been identified. This
estimate is expressed in money terms and is calculated at a
specified date, to a specified confidence level and for a specified
time horizon. The estimate takes account of different levels of
market risk factors.
VaR limits are approved by the Risk Control Committee and are
assigned on the basis of an aggregate limit which is divided into
sub-limits for different business units and risk factors. These sublimits are further subdivided successively down to trading desk
or portfolio level. In some business units, other limits in addition
to VaR limits are used. These include sensitivity limits, nominal
value limits and stop-loss limits, which complement the view of risk
provided by VaR techniques.
Market risk is monitored on a daily basis and reports on current
risk levels and on compliance with the limits assigned to each
unit are sent to the risk control functions. This makes it possible
to track changes in exposure levels resulting from changes in the
market prices and volatilities of financial instrum
The reliability of the VaR methodology is validated by
backtesting techniques which are used to verify that the VaR
estimates are within a specified confidence level.
The following graph shows the movement of the 1-day VaR for
the group's treasury market operations in the year 2011 at a 99%
confidence level.
— Market risk (€Mn.)
— VaR
— Interest rate VaR
— Exchange rate VaR
— Equity VaR
— Credit spread VaR
Risk management
10.00
9.00
8.00
7.00
6.00
5.00
4.00
3.00
2.00
1.00
0.00
ry
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Jan
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Feb
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Techniques of this kind are supplemented by special simulation
exercises and extreme market scenarios (stress testing), the
purpose of which is to analyse different macroeconomic scenarios
and their possible impact on the trading portfolio. The following
table shows a stress analysis of this kind for the most significant
portfolio (equity securities).
Equity securities stress test result 2010 (¤Mn.)
Date
January
February
March
April
May
June
July
August
September
October
November
December
Portfolio
value
Stable
interest rates
Falling
interest rates
Rising
interest rates
74.12
60.11
67.00
57.81
58.26
69.63
65.03
78.41
58.88
73.42
74.42
79.18
2.84
1.10
3.59
1.09
4.11
5.32
9.68
16.43
16.04
20.22
22.94
24.94
(25.14)
(21.16)
(22.08)
(20.33)
(18.57)
(21.93)
(17.48)
(12.00)
(4.80)
(16.86)
(15.55)
(16.18)
(7.66)
(7.25)
(6.04)
(6.94)
(4.40)
(4.90
(0.51)
11.71
40.59
22.51
25.33
27.49
81
Structural interest rate and liquidity risk
Structural risk arises from ongoing customer-based commercial
and corporate banking operations and is divided into interest rate
risk and liquidity risk. Management of structural risk seeks to
ensure stability at the margin by maintaining appropriate levels of
liquidity and capital strength.
Interest rate risk
Risk management
Interest rate risk is caused by changes, as reflected in the position or the slope of the yield curve, in the interest rates to which
asset, liability and off-balance sheet positions are linked.
Gaps or mismatches arise between these items because of
differences in repricing and maturity dates so that rate changes
affect them at different times; this in turn affects the robustness
and stability of results.
The management of interest rate risk focuses on overall
financial exposure for the group as a whole and involves proposing
alternative business or hedging strategies that will meet business
objectives and are appropriate to market conditions and within the
exposure limits that apply across the group.
A number of methodologies are used to measure interest rate
risk. These include measuring the sensitivity of net interest income
to changes in interest rates over a one-year horizon. This is done
by means of static (gap analysis) or dynamic (simulation) tests
based, in the latter case, on different assumptions of balance
sheet growth and changes in the slope of the yield curve.
Another technique used is to measure the sensitivity of
shareholders' equity to changes in interest rates by duration gap
analysis. This measures the effect of interest rate changes over a
longer time horizon.
The bar chart on the right shows the sensitivity of net interest
income and shareholders' equity to a 100 basis point change in
interest rates for the years 2010 and 2011.
Liquidity risk
82
This can be defined as the possibility of the Bank’s being unable
to meet payment commitments, even if only temporarily, due to
a lack of liquid assets or of its being unable to access the
markets to refinance debts at a reasonable cost.
Liquidity risk may be caused by external factors such as a
financial market downturn, a systemic crisis or reputational issues,
or internally, by an excessive concentration of maturing liabilities.
Banco Sabadell keeps a close watch on day-to-day changes in
its liquid asset position and holds a diversified portfolio of such
assets. It also carries out projections to anticipate future needs.
In addition, liquidity gap analysis is used to manage
foreseeable mismatches between cash inflows and outflows over
a medium-term horizon. Systematic checks are made to verify that
the group’s ability to raise funds on the capital markets is sufficient
to satisfy its requirements in the medium and long term.
The group has a number of programmes in place to raise
finance on the medium- and long-term capital markets. Short-
— Structural interest rate risk
(Interest rate sensitivity)
— Sensitivity of net interest income (¤Mn.)
— Sensitivity of shareholders' equity (%)
5.86
4.49
18.42
10
20
37.59
11
20
Risk management
term commercial paper issuance programmes further diversify
its sources of funds. It is also an issuer of covered bonds and is
active in developing new sources of finance such as asset-backed
securities, which provide a further instrument for the management
of liquidity risk.
The Bank carries out regular liquidity stress testing to enable
it to assess inflows and outflows of funds and the impact of these
flows on its cash position under different scenarios. Based on this
analytical framework, the Bank has a contingency plan in place to
deal with unexpected scenarios that could cause an immediate
funding requirement.
Another type of liquidity stress testing being carried out is to
analyse the impacts that changes in market prices may have on
collateral deposited in cash, whether in the futures and options
markets or under collateral agreements (CSAs or GMRAs). To
gain an idea of these impacts a number of different market
risk scenarios are studied and the effects of these on liquidity,
individually and in combination, are analysed.
The contingency plan is constantly being updated and identifies
the Bank's assets that are most readily convertible to cash in
the short term; it also sets out action plans should it become
necessary to raise additional cash.
—
— Operational risk
—
—
Operational risk is the risk of loss resulting from inadequate
or failed internal processes, people and systems or from
unforeseen external events. Banco Sabadell pays particular
attention to operational risk and has implemented a
management, measurement and oversight framework that fulfils
the conditions necessary to opt for the use of an advanced
model for calculating regulatory capital charges for
operational risk.
Management of operational risk is decentralized and devolved
to process managers throughout the organization. The full range
of group processes is identified on a corporate process map,
thus facilitating the compiling of information in a way that reflects
the structure of the organization. The group has a specialized
central unit to manage operational risk, whose main functions
are to coordinate, supervise and drive forward the identification,
assessment and management of risks by process managers in
line with Banco Sabadell's process-based approach.
Senior managers and the Board of Directors play a direct,
hands-on role in managing operational risk by approving the
management framework and its implementation as proposed by
an Operational Risk Committee made up of senior managers from
different functional areas of the company; they also ensure that
regular audits are carried out on the management strategy being
applied, the reliability of the information being reported, and the
internal validation tests required by the operational risk model.
Management of operational risk is divided into two action areas:
83
Risk management
84
— The first action area is based on an analysis in which all
processes and any associated risks that involve potential
losses are identified, leading to a qualitative evaluation of
the risks and their associated control mechanisms. This is
done by process managers in conjunction with the central
operational risk unit. The result is an assessment that
allows future exposures to be recognized, tendencies to
be anticipated and mitigating action to be taken in an
informed way.
This is supplemented by a system for identifying,
monitoring and actively managing risk through the use of
key risk indicators. These can be used to trigger alerts in
response to increases in exposure, identify the causes of
that exposure and measure the effectiveness of the controls
in place and any improvements that are made.
Care is taken to ensure that all processes identified as
critical are protected by specific business continuity plans in
the event of a service failure.
The operational risks identified are also assessed from
the point of view of their reputational implications, should an
incident occur.
— The second action area is based on experience. It consists
of maintaining a database of all losses that occur in the
organization. This provides a store of information of actual
operational risk events for each business line and the
causes of those events, so that risks can be acted upon and
minimized. Loss information is also of use in measuring the
extent to which estimates of potential loss are consistent
with reality, both in terms of severity and frequency, so that
loss exposure estimates are constantly being updated and
improved in this way.
— Distribution of loss events due
to operational risk (by amount)
1 Customers, products
and business practices
2 Property damage
3 Process execution, delivery
and managment
4 External fraud
5 Internal fraud
6 Business disruption/
system failure
7 Staff relations and workplace
safety issues
— Distribution of loss events due
to operational risk (by number)
24.90%
4.33%
32.99%
22.99%
10.11%
1.67%
3.01%
1 Customers, products
and business practices
2 Property damage
3 Process execution, delivery
and managment
4 External fraud
5 Internal fraud
6 Business disruption/
system failure
7 Staff relations and workplace
safety issues
6
5
7
6
7
1
1
2
5
2
4
4
3
3
6.30%
10.27%
36.10%
40.33%
1.28%
1.56%
4.16%
The database contains historical records of actual
losses resulting from operational risk. It is continually
updated as information is received on losses and also on
recoveries, whether resulting from the Bank's own efforts or
from insurance provision. Since early 2002 a total of 7,958
events involving a total net loss of €65 million have been
logged on the database.
The direct impacts of regulatory nonconformance and the possible
imposition of penalties, or the indirect impacts arising from loss of
prestige in the eyes of regulators, markets, employees, customers
and the media have given rise in recent years to a vital need for
effective management of compliance risk. Compliance risk may
mean exposure to legal or administrative penalties, significant
financial loss or loss of reputation as a result of infringements of
laws, regulations, internal policies and codes of conduct applicable
to banking.
To cover against this risk the group has adopted a system
of regulatory compliance that is centrally managed within the
parent company, with some functions being devolved to domestic
and foreign subsidiaries and branches abroad. This is a flexible,
risk-focused approach which can be adapted to changes in group
strategy as they occur; it also makes use of synergies, especially
in cases involving complex, wide-ranging impacts requiring
technology solutions. The main challenge with this approach is
to achieve a uniform level of regulatory compliance across the
group by establishing minimum standards that must be observed
regardless of the type of business or the country where the
business is located.
The group uses a special methodology to ensure continuous
progress in compliance management. This comprises six main
areas:
—A technology solution to integrate compliance within the
group's operating processes so as to ensure high levels
of efficiency and conformity with legal requirements at
all times.
—Continuous training/instruction for relevant staff through
an annual training programme to raise awareness, highlight
and explain compliance issues of particular sensitivity or
involving the greatest risk.
—Clear procedures to ensure that all persons concerned know
how to act in any situation.
—Swift and effective channels of communication.
—Monitoring and control to ensure compliance with legal
and regulatory requirements.
—Involvement of Compliance in all approvals of new rules
and procedures, in the production or distribution of new
investment products, and in the work of identifying newly
introduced regulations and verifying that the changes
required by those regulations are properly implemented.
Risk management
—
— Compliance risk
—
—
85
Risk management
86
The Banco Sabadell group has an effective control
infrastructure in all areas where a compliance risk may be present,
such as prevention of money laundering and terrorist financing,
market abuse, internal codes of conduct and investor protection
legislation (MiFID). During the year the Bank's tracking systems
were upgraded and progress was made in putting remediation
plans in place to comply with the obligations imposed by Spain's
new anti-money laundering legislation.
Systems to monitor United Nations International Sanctions
were introduced and action was taken to place restrictions on
certain types of transaction and certain countries. The year also
saw further progress in the implementation of tools to detect
possible market abuse and tighter controls on compliance with
the Bank’s internal code of conduct for trading on the stock
markets. Furthermore, in line with its commitment to transparency
and legal and regulatory compliance, the Banco Sabadell group
adjusted its procedures to comply with new obligations imposed by
Spanish consumer credit legislation (Ley de Contratos de Crédito
al Consumo) so as to provide greater transparency for customers
in relation to consumer loans. It also introduced a system for the
prevention and control of criminal liability to help manage the
group's criminal liability risk.
—Board of
Directors
and Senior
Management
Team
—
—
—
—
Board of Directors
and Senior Management Team
88
— José Permanyer Cunillera
—
— José Oliu Creus
—
—Jaime Guardiola Romojaro
—
— José Luis Negro Rodríguez
—
—
— Board of Directors
—
—
— Chairman
José Oliu Creus
— Vice-Chairmen
Isak Andic Ermay
José Manuel Lara Bosch
José Javier Echenique Landiribar
— Directors
Miguel Bósser Rovira
Francesc Casas Selvas
Héctor María Colonques Moreno
Sol Daurella Comadrán
Joaquín Folch-Rusiñol Corachán
Maria Teresa Garcia-Milà Lloveras
Joan Llonch Andreu
José Ramón Martínez Sufrategui
José Permanyer Cunillera
Carlos Jorge Ramalho
dos Santos Ferreira
— Barcelona
Luis Buil Vall
General Manager
Assistant General Manager
— Operations and
Corporate Development
Miguel Montes Güell
— Northern Region
Pedro E. Sánchez Sologaistua
General Manager
Federico Rodríguez Castillo
— Southern Region & Canary Islands
Juan Krauel Alonso
— Commercial Banking
Carlos Ventura Santamans
— Banco Herrero
Pablo Junceda Moreno
Deputy General Manager
— Markets and Private Banking
Ramón de la Riva Reina
Cirus Andreu Cabot
— BS América
Fernando Pérez-Hickman
— Catalonia
José Canalias Puig
— Valencia, Murcia & Balearic Islands
Jaime Matas Vallverdú
—Madrid, Castile and Galicia
Blanca Montero Corominas
Board of Directors
and Senior Management Team
— Managing Director
Jaime Guardiola Romojaro
— Management Committee
— Chairman
José Oliu Creus
— Comptroller General
José Luis Negro Rodríguez
— Secretary General
María José García Beato
— Chief Financial Officer
Tomás Varela Muiña
— Other Central Service Divisions
— Internal Audit
Nuria Lázaro Rubio
— Compliance, CSR &
Corporate Governance
Gonzalo Barettino Coloma
— Corporate Banking and
Global Operations
Enric Rovira Masachs
— Deputy Secretary to the Board
— Honorary Director
Juan Corominas Vila (1)
¹ Honorary Group Chairman until
his death on 18 March 2012
—
— Executive Committee
—
— Human Resources
Javier Vela Hernández
— Risk
Rafael José García Nauffal
— Communication and
Institutional Relations
Ramon Rovira Pol
— Real Estate Management
Salvador Grané Terradas
— Chairman
José Oliu Creus
— Non-executive Director
— Secretary to the Committee
— Banking and other subsidiaries
— Banco Guipuzcoano
Pedro E. Sánchez Sologaistua
— Banco Urquijo
Ismael Picón García de Leaniz
— BancSabadell d’Andorra
Miquel Alabern Comas
— BanSabadell Fincom
Miguel Costa Sampere
— BanSabadell Inversión
Cirus Andreu Cabot
— BS Capital
Raúl Rodríguez Sabater
— Secretary to the Board
Miquel Roca i Junyent
— Corporate Operations
Joan M. Grumé Sierra
—
Jaume Puig Balsells
—
Ignacio Camí Casellas
89
—Report of
the Audit and
Control
Committee
—
—
—
—
—
—
— Introduction
—
—
Report of the Audit
and Control Committee
This report on the work of the Audit and Control Committee for
2011 is addressed to shareholders of Banco de Sabadell S.A.
and was signed off by the Committee at its meeting of 24 January
2012. It will be submitted to the Board of Directors of Banco de
Sabadell S.A. for approval at its meeting on 26 January 2012.
The Committee is regulated by article 59 bis of the Articles
of Association and article 13 of the Regulations of the Board of
Directors of Banco de Sabadell S.A.; it also has its own rules of
organization and procedure which are published on the Group
website, www.grupobancosabadell.com.
This regulatory structure ensures that the Audit and Control
Committee complies with the reporting requirements laid down
by Law 44/2002 of 22 November on Measures to Reform the
Financial System, and incorporates the main recommendations on
the working of Audit Committees contained in the Unified Code on
Corporate Governance approved by the CNMV in 2006.
As required by the Bank's articles and other regulations, the
Committee consists of four Directors appointed by the Board, one
of whom is appointed by the Board to chair the Committee. The
Chairperson may continue to perform that role for a maximum of
four years and cannot be re-appointed for at least one year after
the end of their four-year term. Additional Directors may be coopted to attend meetings without the right to vote in order to fill a
vacancy on the Committee or replace a member who is indisposed.
The Board also appoints a Secretary to the Committee, who
cannot be a Director. The Secretary takes minutes of every
meeting and these are approved at the end of the meeting itself
or at the next following meeting. A report of each meeting of the
Committee is read out at the immediately following meeting of the
Board of Directors.
As of 31 December 2011 the members of the Audit and Control
Committee were:
Chairman
Joan Llonch Andreu
Committee members
Secretary
Miquel Roca i Junyent
91
As required by its rules of procedure, all directors on the Audit and
Control Committee are non-executive, non-shareholder directors
and have the knowledge and experience required to perform the
duties assigned to the Committee by the Board of Directors.
The changes in the membership of the Audit and Control
Committee in 2011 were as follows:
Report of the Audit
92
— Joan Llonch i Andreu was appointed Chairman of the
Committee by a resolution of the Board of Directors at its
meeting of 30 June 2011 on a recommendation from the
Nomination and Remuneration Committee. The appointment
was made necessary by the expiry of the statutory 4-year
term of María Teresa Garcia-Milà Lloveras, who was
appointed to chair the Audit and Control Committee by a
resolution of the Board of Directors on 28 June 2007.
— María Teresa Garcia-Milà Lloveras continues to serve as a
member of the Audit and Control Committee and the other
members of the Committee were likewise reappointed to
serve on the Committee for another four years.
The Audit and Control Committee meets as often as necessary
and in any event not less than every three months. The Committee
may request the attendance at its meetings of such executives,
including executive Directors, as it sees fit. It may also seek
assistance from independent advisors in carrying out its duties.
This report summarizes the range of activities carried out by
the Audit and Control Committee in the course of the six meetings
that it held during the year 2011, from which it can be seen that
the Committee discharged the duties assigned to it in its rules of
procedure by the Board of Directors of Banco de Sabadell, S.A.
within its main areas of responsibility.
Together with the publication of an Annual Report on Corporate
Governance and the information available on the group’s website,
the distribution of this report at the Annual General Meeting
once again underlines Banco Sabadell's commitment to providing
shareholders and investors with the tools and resources they
need to keep themselves fully informed of the Company's
performance and to ensure that it is transparent in everything
that it does.
—
— Terms of reference
—
—
The Audit and Control Committee is responsible for:
— 1. Reporting to the General Meeting on all issues raised by
shareholders that are within its remit.
— 2. Making recommendations to the Board of Directors,
for submission to the General Meeting, regarding the
appointment of external auditors and their terms of
engagement, the scope of their professional mandate
and, if applicable, the termination or non-renewal of their
engagement; reviewing the performance of the auditing
As required by the Law on Measures to Reform the Financial
System, on 9 July 2003 the regulations of the Board of Directors
were amended by deed and new rules on the composition and
working of the Audit Committee came into being. These changes
took the form of amendments to certain articles of the Bank’s
Articles of Association that had been adopted by a resolution of
the Ordinary General Meeting on 24 April 2003.
By another deed executed on 9 July 2003 the Audit and Control
Committee was set up to replace the existing Audit and Budget
Control Committees, whose respective remits had been merged
following amendments to the Bank's Articles of Association and to
the Regulations of the Board of Directors.
On 20 October 2003 the Committee agreed new rules setting
out the principles that would govern the work of the Audit and
Control Committee of Banco de Sabadell S.A. and basic rules on
organization and procedure, within the framework of the Articles of
Association and the rules of procedure of the Board of Directors.
The rules were approved and confirmed by the Board of Directors
at a meeting on 30 October 2003 and were filed with the public
registry following the execution of a deed on 18 November 2003
before a notary in Sabadell, Javier Micó Giner.
On 28 April 2009 the Committee reviewed and reported
favourably on a proposed amendment to article 13.1 of the rules of
procedure of the Board of Directors to provide for the appointment
—
— Regulatory structure
—
—
Report of the Audit
agreement and ensuring that the opinion on the annual
accounts and the main findings of the Auditor's report are
expressed in a clear and precise way.
— 3. Reporting on the annual accounts and the quarterly
and half-yearly financial statements and any prospectuses
required to be filed with the regulatory or supervisory
authorities; monitoring regulatory compliance and ensuring
that accounting principles and standards have been
correctly applied.
— 4. Supervising the work of the Internal Audit function and
reviewing appointments and replacements of key Internal
Audit personnel.
— 5. Keeping up to date with the company’s financial reporting
process and internal control systems.
— 6. Liaising with the external auditors to receive reports on
any issues that could compromise their independence or
other matters related to the process of auditing accounts,
and any other reports required by the legislation, rules or
professional standards applicable to external audit.
— 7. Reporting on any issues referred to the Committee by the
Board of Directors that are within its terms of reference.
— 8. Any other matters for which the Committee is responsible
by law or under the Articles of Association or any regulations
made in accordance therewith, or under any generally
applicable rules on corporate governance.
93
Report of the Audit
of alternate committee members. It also resolved to amend article
7.1 of the rules of procedure of the Audit and Control Committee
accordingly. The amendments to article 13.1 of the rules of
procedure of the Board of Directors and article 7.1 of the rules of
procedure of the Audit and Control Committee were approved and
confirmed by the Board of Directors at a meeting on 27 May 2009
and filed with the public registry following the execution of a deed
on 11 June 2009 before the notary in Sabadell, Javier Micó Giner.
In 2010 article 59 bis of the Articles of Association and article
13.1 of the Rules of Procedure of the Board of Directors of Banco
de Sabadell, S. A. were amended to fix the number of members
of the Audit and Control Committee at a maximum of five in order
to keep the number of members of the Committee in the same
proportion with respect to the number of members of the Board.
The Committee also resolved to amend article 7.1 of its Rules of
Procedure so as to incorporate the said amendment concerning
the number of members.
—
— Activities
—
—
Six meetings were held by the Audit and Control Committee
in 2011 in accordance with the regulatory structure described
above. Four of these meetings were ordinary or routine in
character, while two were ad hoc meetings to discuss matters
of special interest. Meetings were regularly attended by the
Comptroller General and the head of Internal Audit. Meetings
were also attended by the Chief Financial Officer for pre-publication reviews of quarterly and half-yearly trading and financial
reports, and by other group senior executives when the nature
of the business on the Committee’s agenda made their
attendance desirable.
The Committee also maintained regular contacts with the
External Auditors to keep itself informed of progress in the auditing
of accounts.
These contacts and attendances ensured that the Committee
was able to obtain all the information it required to perform the
tasks delegated to it by the Board of Directors within its main
areas of responsibility, as follows:
94
Functions related to financial reporting, risk management
and internal control
The Committee carried out a review to verify that banking or
accounting best practice was being applied at all levels of the
organization. On the basis of External Audit or Internal Audit
reports and reports from the Comptroller General, the Committee
satisfied itself that suitable steps were being taken at General
Manager level and by other senior executive functions to ensure
that the group's main risks were being appropriately identified,
measured and controlled.
Supervision of internal controls on the group’s
offshore operations
Report of the Audit
The Committee paid particular attention to overseeing the
system of internal controls on the group's offshore operations.
This was in response to the Bank of Spain's Banking
Supervision Memorandum for 2003 setting out
recommendations on the policies of banks and other lenders
on the use of offshore locations to expand their overseas
operations. In carrying out this responsibility the Committee
reviewed the findings of audits carried out by official regulators,
audit reports prepared by Group Internal Audit, the results of
audits carried out by units with local internal audit functions and
auditors' reports prepared during the year 2011 on the accounts
of subsidiaries with offshore operations.
As a result of its review the Committee was able to conclude
that group operations conducted through offshore establishments
were being reduced and that adequate systems were in place
to ensure that offshore establishments were subject to internal
control by the parent company as required by the group's policy on
winding up any operations likely to give rise to legal or reputational
issues. A report on this area of the Committee's supervisory
duties was submitted to the Board of Directors on 22 March 2011.
Risk management and control systems
During the year the Committee reviewed the group's risk
management systems as described in reports prepared by
the Risk, Finance and Internal Audit departments.
In fulfilment of the group's market disclosure obligations and
as required by the Bank of Spain's Circular 3/2008 (the "Solvency
Circular"), at a meeting on 22 March 2011 the Committee
reviewed the contents of the document entitled "Basel II - Pillar 3
Disclosures" dated 31 December 2010, based on an internal audit
report provided for the purpose. At that meeting it also examined
information on the group's qualifying capital resources and capital
ratios and considered the degree to which they conformed to the
requirements of the Solvency Circular and the objectives set out in
the group's risk management policies. The Committee also carried
out a detailed review of all financial data necessary to provide a
clear view of the group's conservative risk profile in the different
categories of risk for which disclosure was required: credit and
dilution risk, market risk in the trading book, operational risk,
specific data on equity investments and equity instruments not
included in the trading book, and interest rate risk on non-trading
positions.
At its 24 January 2012 meeting the Committee reviewed a
report submitted by the Risk Department on risk governance,
management and control systems for the year 2011, and reached
the conclusion that these systems were appropriate to the group's
risk profile.
With regard to the organization-wide implementation of
internal ratings-based (IRB) credit risk assessment models, the
Committee reviewed the findings of internal audits carried out on
these models at the request of the Bank of Spain's Supervision
Department. These audits enabled the Committee to keep itself
95
informed of the action being taken to comply with requirements
specified by the Bank of Spain in its approval notices for the use of
Basel II risk assessment models.
From reports provided to it by Internal Audit during the year, the
Committee was also able to observe the significant progress being
made by the group in developing and rolling out advanced systems
for the management and measurement of operational risk and for
the control of market and counterparty risk.
Internal control systems in the preparation and presentation of
regulated financial information
Report of the Audit
96
At its 25 January 2011 meeting, the Audit and Control
Committee approved Internal Audit's Strategic Plan for 20112013 setting out a detailed programme for the supervision of
the group's system of internal controls over financial reporting
(ICFRs). The Plan provides for the carrying out of tests on areas
considered to be of key importance within the Banco Sabadell
group and the completion of tests in all areas within the three
years covered by the Plan, with the exception of certain areas
or processes considered to be of special significance; these
include critical controls of period-end closing procedures, reviews
of judgements and estimates and general controls on disclosure
systems subject to evaluation on an annual basis.
The reports provided by Internal Audit on the ICFR evaluation
tests were reviewed by members of the Audit and Control
Committee; any weaknesses identified in the reports were
evaluated and an action plan for correcting them was approved.
Functions related to auditing
The Committee's functions in relation to the auditing of
accounts include making recommendations to the Board
regarding the appointment of auditors and reviewing their terms
of engagement. At its meeting of 25 January 2011 the
Committee reviewed group policy on the engagement of auditors
and, on the basis of this review, recommended to the Board
that the firm of PricewaterhouseCoopers Auditores, S.L. be
re-appointed as auditors of the Bank's individual and
consolidated accounts for the year. The Board of Directors
resolved to submit the Committee's recommendation to the
Annual General Meeting of 14 April 2011 and the appointment
was duly approved by the General Meeting.
With regard to auditor remuneration, the Committee reviewed
and approved the Auditor's fees for 2011. Details of fees paid
to auditors can be found in the annual accounts for the year.
To comply with auditor independence requirements, the Audit
and Control Committee reviewed the main non-auditing services
provided by PricewaterhouseCoopers in 2011. These related
primarily to the production of reports required by the regulatory
authorities, which this year included reports on the protection of
customer assets as required by the CNMV's Circular 5/2009 of 25
November, the annual report of the external advisor on
anti-money laundering practices, and the capital adequacy reports
required by the Bank of Spain's Circular 3/2008 and by Royal
Report of the Audit
Decree-Law 2/2011 on measures to strengthen the financial
system. These non-auditing services also included advising the
group on its internal control practices in light of the requirements
set out by the CNMV in its document on internal control processes
relating to financial reporting (ICFRs) by listed companies, and
consultancy services on the group's crime prevention procedures
to comply with the new Corporate Criminal Liability Act [Ley de
Responsabilidad Penal para Personas Jurídicas]. In addition, tax
advice and other services of a non-recurring nature were provided
in relation to Sabadell United Bank's take-over of Lydian Private
Bank. All these tasks were carried out in compliance with the
independence requirements of Law 44/2002 on Measures to
Reform the Financial System and did not include any activities that
would be incompatible with the work of auditing accounts.
To verify the group's compliance with statutory limits on
concentrations of auditing business, the Committee reviewed the
proportional share of the fees paid to PricewaterhouseCoopers
by the group in the firm's total annual revenue. The share was
less than 0.01% of the total for the PricewaterhouseCoopers
worldwide organization, and less than 0.55% of the total for its
Spanish organization. From information provided by the auditors,
the Committee also reviewed the procedures and tools used by
the firm to ensure compliance with the auditor independence
requirements. Written confirmation of the firm's independence
with respect to the Banco Sabadell group was received by the
Committee on 24 January 2012. Based on the results of its
enquiries and verifications, the Committee submitted a report to
the Board of Directors, before the Auditor's Report on the accounts
had been issued, giving a favourable opinion on compliance with
the auditor independence requirements and concluding that
the work for which the auditors had been engaged satisfied the
independence requirements of Law 12/2011 amending Law
19/1988 on the Auditing of Accounts.
The Committee kept in constant touch with the Auditor
throughout the year to ensure that it was kept informed of any
significant accounting or financial reporting issues arising in the
course of his work.
In the area of external supervision and regulation, the external
auditors reported to the Committee, at its 13 December 2011
meeting, on the European Commission's audit policy green paper
and on the new disclosures to be made in the Report on Corporate
Governance under the CNMV's draft Circular on Risk Control,
Management and Internal Control Systems in relation to Financial
Reporting. The Committee also received a report on the proposed
draft of the group's annual report on Directors’ remuneration and
other information required by the Bank of Spain's Circular 4/2011
on company directors, senior managers, employees responsible
for risk-taking and employees exercising control functions.
As part of the Committee's oversight of the auditors'
performance of their terms of engagement, at its meeting of 19
July 2011 the auditors reported to the Committee on the results
of their review of the summary consolidated accounts for the first
half-year 2011 giving the accounts a clean bill of health.
The auditor also presented to the Committee, at its meeting
on 24 January 2012, a report on the individual and consolidated
annual accounts for the year 2011. The opinion expressed by
the Auditor on the accounts was that as in previous years they
97
Report of the Audit
presented a true and fair view, in all material respects, of the
consolidated financial position of the Bank and the group and
of the results of their operations and their cash flows for the
year as required by applicable financial reporting standards
and regulations and, in particular, the accounting principles and
practices embodied therein.
At the same meeting of the Committee on 24 January
2012, following a decision by the Board of Directors of Banco
Guipuzcoano, S.A. on 25 November 2010 that the functions of
the audit committee of Banco Guipuzcoano be taken over by the
Audit and Control Committee of the Banco Sabadell group, the
Auditor presented to the Committee the results of his review of
the individual and consolidated annual accounts of the Banco
Guipuzcoano group for the year 2011 and expressed the opinion
that, as in previous years, the accounts gave a true and fair view, in
all material respects, of the consolidated financial position of the
bank and the group.
Functions related to trading and financial reports
98
In the course of the year the Committee paid particular attention
to reviewing the Company's accounts and its quarterly and halfyearly trading and financial reports as well as other information
disclosed to the market, including the share prospectus, before
they were released for publication.
At its meetings of 22 March 2011 and 26 April 2011,
the Committee reviewed and reported favourably on share
prospectuses of Banco de Sabadell S.A. and Banco Guipuzcoano,
S.A. to be filed with the National Stock Market Commission
(CNMV) in accordance with EU Commission Regulation (EC)
809/2004 of 29 April 2004 which came into effect on 18
July 2005, implementing Directive 2003/71/EC as regards
information contained in prospectuses as well as the format,
incorporation by reference and publication of such prospectuses
and dissemination of advertisements.
At the Committee's meetings of 26 April, 19 July and 25
October 2011 and 24 January 2012, the Committee reported
favourably on the quarterly financial statements for the periods
ending on 31 March, 30 June, 30 September and 31 December
2011, respectively, prior to the their being approved by the Board of
Directors and released to the markets.
At its 19 July meeting the Audit and Control Committee
reported favourably on the summary consolidated half-year
financial statements of the Banco Sabadell group and the Banco
Guipuzcoano group for the first half year for filing with the National
Stock Market Commission (CNMV), finding them to have been
prepared and presented in accordance with IAS 34 on Interim
Financial Reporting as incorporated into IFRS-EU, with the detailed
disclosure requirements specified by the CNMV in its Circular
1/2008 of 30 January, and with article 12 of Royal Decree
1362/2007.
In undertaking this work the Committee received documents
and held meetings with the Comptroller General, the Finance
Director and the Auditor to satisfy itself that that the applicable
accounting principles had been properly applied.
Functions related to Internal Audit
— A report on the main internal auditing results for the fourth
quarter of 2010, at the meeting of 25 January 2011.
—A summary of Internal Audit's annual report on its activities
in 2010 and its proposed plan of activities for 2011, at the
meeting of 25 January 2011.
— A report on the main internal audit results for the first
quarter of 2011, at the meeting of 26 April 2011.
— A report on the main internal audit results for the second
quarter of 2011, at the meeting of 19 July 2011.
— A report on the main internal audit results for the third
quarter of 2011, at the meeting of 25 October 2011.
The Committee kept itself fully informed of progress in
implementing the recommendations of previous audit reports and
each meeting included the presentation of a report on the Audit
Department's monitoring of the group instrument panel of key
quality indicators.
All meetings held by the Committee were attended by the
Comptroller General and the head of Internal Audit. The following
reports were presented:
Report of the Audit
One of the Committee's tasks is to approve the plans and
methodologies of the Internal Audit department and assess the
extent to which the department's plans are being followed and
its recommendations are being implemented. This responsibility
was met largely through the approval and oversight of the
Internal Audit Year Plan.
The Internal Audit department submitted its Strategic Internal
Audit Plan for 2011-2013 to the Committee at its meeting of 25
January 2011. The plan was carried out on the basis of a review of
the processes, undertakings and activities comprising the Banco
Sabadell group and paid due regard to the strategic aims set out in
the CREA Master Plan for 2011-2013, the business risks caused
by the current economic climate and systems for measuring and
controlling these risks, as well as supervisory and regulatory
requirements. The Audit and Control Committee approved the
strategic plan as a basis for the oversight of group risks and
internal control for the coming three years; it also approved
Internal Audit's Year Plan for 2011 identifying individual tasks to
be completed in the course of the year.
In 2011 the work of Internal Audit concentrated on reviewing
the group's internal control systems to mitigate any financial risk,
credit risk, operational risk or accounting or regulatory risk to which
its operations are exposed. The implementation of the Internal
Audit Year Plan resulted in the production of over 400 audit reports
and the main findings of these reports, along with replies from
senior management to the recommendations contained in the
reports, were evaluated by the Committee.
99
Functions related to compliance with legal and regulatory
requirements on Corporate Governance
Report of the Audit
One aspect of the Committee's work in the area of corporate
governance was to review reports prepared by the Comptroller
General and the Internal Audit department on compliance with
applicable laws, internal rules and procedures and regulatory
requirements.
To comply with the requirements of Royal Decree 217/2008 for
regular reviews of compliance with the EU Directive on Markets in
Financial Instruments (MiFID) by investment services companies,
the Audit and Control Committee received information specifically
related to the implementation of the MIFID rules by the Banco
Sabadell group, based on an internal audit report prepared for
the purpose.
In addition, as required by the CNMV in its Circular 5/2009
of 25 November, the Committee reviewed the auditor's annual
report on the protection of customer assets held or managed by
Banco de Sabadell, S.A., Banco Guipuzcoano, S.A. and Banco
Urquijo Sabadell Banca Privada, S.A., from the point of view of the
effectiveness of the arrangements made by these undertakings to
comply with customer asset protection requirements. The findings
of these reports were satisfactory and no gaps or significant
weaknesses were identified in relation to the existence and
appropriateness of internal asset protection systems in any of the
undertakings.
At its meeting of 25 January 2011 the Committee decided to
make a favourable recommendation to the Board of Directors
regarding a report on Banco de Sabadell S.A. Corporate
Governance structure and practices that had been submitted
by the Executive Committee in 2010.
The Committee also examined half-yearly reports from
the group's Corporate Ethics Committee on action to ensure
compliance with the Banco Sabadell group’s Code of Conduct on
stock market trading, the group's general Code of Conduct, and
actions undertaken in the area of Corporate Social Responsibility
and other key areas.
Self-evaluation
100
In fulfilment of Corporate Governance guidelines, the Audit and
Control Committee carried out a self-evaluation and submitted
a report with an assessment of the Committee's performance
to the Board of Directors for consideration at its meeting of 13
December. The report found that the Committee had fully and
properly discharged the duties entrusted to it in its rules of
procedure by the Board of Directors of the Bank.
Reports from supervisory authorities
During the year the Committee was briefed on the main points
of reports put out by supervisory authorities in Spain and other
countries in which the group operates. From the information
provided the Committee was able to satisfy itself that the
recommendations of the supervisory authorities were being fully
implemented.
This report on the activities of the Audit and Control Committee in
the year 2011 was signed by the members of the Committee on 24
January 2012 for submission to the General Meeting.
The activities described in this report ensured that the Audit
and Control Committee was able fully to discharge the duties
assigned to it in its rules of procedure by the Board of Directors
of Banco de Sabadell, within its area of responsibility.
As a result of these activities the Committee was able to
give an assurance that the Annual Accounts to be signed off
by the Board of Directors provide a true and fair view of the
consolidated financial position of Banco Sabadell and the results
of its operations, and contain all information necessary for their
comprehension.
The Committee has, in addition, verified that all business,
financial and legal risks to which Banco de Sabadell S.A. and
its subsidiary undertakings may be exposed are clearly and
straightforwardly explained in the Annual Accounts and the Report
of the Directors. Finally, it has reviewed the contents of the
auditor's report to ensure that the opinion on the Annual Accounts
and the main findings of the auditor's report are expressed in a
clear and precise way.
Report of the Audit
—
— Conclusion
—
—
101
—Report on
Directors’
remuneration
—
—
—
—
—
—
—
— Report of the Board of Directors of Banco de Sabadell, S.A.
on Directors' remuneration, following a recommendation of the
Nomination and Remuneration Committee
—
—
1— Introduction
Report on Directors’ remuneration
This report on group policy on the remuneration of members of
the Board of Directors has been drawn up in accordance with the
Board's Rules of Procedure, Article 14.3.c) of which charges the
Nomination and Remuneration Committee with reporting to the
Board on policy on the remuneration of Board members.
Banco Sabadell's remuneration policy was drawn up in
accordance with Spanish legal requirements, including Law
6/2011 of 11 April and Royal Decree 771/2011. Attention was
also paid to European Commission recommendations and to
the interpretation guidelines issued by the Basel Committee on
Banking Supervision. This report has been prepared to comply with
Article 61 ter of Law 24/1988 of 28 July on the Stock Market as
amended by Law 2/2011 of 4 March on the Sustainable Economy.
The group’s policy on directors' remuneration was developed in
accordance with the Bank’s Articles of Association and the Rules
of Procedure of the Board of Directors.
The policy follows the recommendations of the Unified Code
on Corporate Governance for Listed Companies approved by the
Council of the National Stock Market Commission on 22 May
2006, specifically recommendations 8 and 35 to 39 of the Code.
Articles 217, 218 and 219 of the Spanish Companies Act
[Ley de Sociedades de Capital] (previously article 130 of the SA
Companies Act [Ley de Sociedades Anónimas]) provide basic
rules on the remuneration of directors and state specifically that
remuneration should be fixed by the Articles of Association.
Article 81 of Banco Sabadell’s Articles of Association requires
that directors' remuneration should consist of a share of not
more than 3% in the Bank’s net profits, and that within that limit
the Directors have discretion to fix their annual remuneration and
to distribute it among the members of the Board as they see fit.
Under the same article directors carrying out executive functions
may additionally, with the authority of a resolution of the General
Meeting, participate in approved incentive schemes for senior
executives of the Bank, consisting of compensation in the form
of shares, options over shares or compensation linked to the value
of shares.
In line with the foregoing rules and provisions, Article 22
of the Rules of Procedure of the Board of Directors provides
that directors are entitled to such remuneration as the Board
of Directors may determine in accordance with the Articles of
Association and with the recommendations of the Nomination and
Remuneration Committee.
103
2 —Banco de Sabadell S.A. policy on directors’ remuneration
— The remuneration of directors has been fixed in every case
having regard to their time commitment, experience and
responsibilities and to provide a suitable incentive, but so
that the amount of such remuneration does not in any way
compromise their independence.
— Remuneration criteria have been validated by the
Nomination and Remuneration Committee with guidance,
where necessary, from internal sources within the group
and taking account of circumstances in the compensation
market that could be regarded as comparable. Details of the
members of the Nomination and Remuneration Committee
and the Committee's duties and responsibilities can be
found in the Annual Report on Corporate Governance.
— The remuneration of each director has been fixed by the
Board of Directors on the basis of recommendations from
the Nomination and Remuneration Committee in accordance
with the rules and within the limits set out in Article 81 of the
Articles of Association.
— In general, and especially where executive functions are
being performed, Banco Sabadell sees compensation as a
value-creating factor which can help to attract and retain the
best qualified people and should include a compensation
package that is competitively structured and may in certain
cases have a variable element linked to the attainment
of specified targets that are aligned with shareholders'
interests.
— Directors are not paid fees for attendance at meetings.
3—Remuneration paid to directors in 2011 in accordance with
the Articles of Association
The remuneration system approved for Banco Sabadell is governed
by the following rules:
A—Board of Directors:
— The Chairman of the Board of Directors receives a basic fee of
€252,000.
— Deputy Chairmen of the Board of Directors receive a basic fee of
€126,000.
— Other members of the Board of Directors receive a basic fee of
€108,000.
104
B—Board committees:
— Executive directors do not receive payment for chairing or sitting
on Board committees or serving on the boards of directors of
other group companies.
— Except in the case of the Executive Committee (for which no fee
is payable), members of Board Committees (the Risk Control
Committee, the Nomination and Remuneration Committee, the
Audit and Control Committee and the Strategy Committee) are
paid an additional fee of €18,000.
— Directors chairing board committees receive an additional
payment of €18,000.
— The member of the Risk Control Committee who chairs the
Credit Committee is entitled to an additional payment of
€18,000.
C— For serving on the boards of other group companies:
— Members of the Board of Directors of Banco Guipuzcoano
receive the following remuneration: the Chairman of the Board
is paid a fee of €120,000; the Deputy Chairman receives a
fee of €45,000, and other directors who are members of both
boards receive a fee of €30,000.
— The Chairman of the Board of Directors of BanSabadell Inversió
Desenvolupament, S.A.U. receives a fee of €60,000.
€'000
Director
José Oliu Creus
Isak Andic Ermay
José Manuel Lara Bosch
Javier Echenique Landiribar
Héctor María Colonques
Moreno
Joaquín Folch-Rusiñol
Corachán
M. Teresa Garcia-Milà
Lloveras
Joan Llonch Andreu
José Ramón Martínez
Sufrategui
Carlos Jorge Ramalho
Dos Santos Ferreira
Board
of
Directors
C
DC
DC
DC
M
M
M
252
126
126
126
108
108
108
Risk
Control
Committee
Nomination and
Remuneration
Committee
C
M
M
C
M 108
M
M 108
M 108
M
M
18
18
M 108
M 108
DC1
36
C: Chairman / DC: Deputy Chairman / M: Member
(1) Chair, Credit Committee
(2) Replaced in mid -2011
(3) Banco Guipuzcoano
(4) BanSabadell Inversió Desenvolupament, S.A.U.
Boards of
Strategy Executive other group
Committee Committee companies
C
M
M
M
M
18
18
M
M 108
M 108
M 108
Audit and
Control
Committee
M
18
M
18
0
18
18
18
0
C
M
C3 120
M3
36
18
M3
M
M2
C2
30
18
27
27
M
Total
Pension
2011 Contribution
252
162
162
264
108
108
126
37.8
18.9
18.9
144
156
18.9
144
18.9
105
DC3
45
153
198
18.9
C4
60
108
204
18.9
108
— Directors' remuneration 2011
D— Contributions in respect of pension commitments under
pre-existing agreements with certain members of the Board
are provided in the form of pension insurance policies and are
shown in the table below.
— Under the rules set out above, the remuneration payable to
members of the Board of Directors is as follows:
4— Anticipated remuneration payable to Directors under the
Articles of Association for the year 2012:
Fees expected to be paid to Directors under the Articles of
Association for the year 2012 will be the same as for the
year 2011.
5— Remuneration payable to executive directors for carrying
out executive functions
106
A—The principles governing the payment of compensation
to executive directors for performing executive duties are as
follows:
— Executive directors are entitled to additional fixed and variable
compensation for the specific posts they occupy. A suitable
balance has been struck between the fixed and variable
components of their remuneration.
— The performance and achievement metrics used to determine
fixed and variable compensation are the same as for senior
group executives and are designed to produce an overall
package that is competitive with packages for similar positions
in comparable companies, of which the variable component is a
significant part. Additional performance incentives may apply in
exceptional cases.
— Variable compensation has been set on the basis of a number
of factors and particularly the performance of the executive
concerned, rather than being determined simply on the basis of
the overall performance of the markets or business sectors in
which the Company operates or similar variables.
— Compensation policy has been aligned with the group's
business strategy, long-term objectives, values and interests,
and is consistent with the principle of safeguarding the interests
of customers and investors.
— Executive directors’ contracts have been drawn up having
regard to all standards and principles normally applicable to
relationships of this kind. Contract terms and conditions are in
line with generally accepted market practice.
— Compensation packages are supplemented by the Banco
Sabadell executive incentive scheme, detailed terms and
conditions of which were approved by the Annual General
Meeting on 25 March 2010.
B—Fixed compensation in 2011
The fixed element in executive directors’ compensation is set to
reflect the high levels of responsibility exercised by them and to
reward them for their contributions in the posts they hold and for
their leadership and managerial abilities. Comparable market
situations have been taken account of in fixing their
remuneration.
Fixed compensation includes the pay elements established
under the various workforce agreements that apply to all group
employees.
Fixed remuneration paid in 2011 was €1,362,672 for José Oliu
Creus and €851,197 for Jaime Guardiola Romojaro.
The Managing Director is paid, in addition, a fixed annual
amount of €400,000.
C— Variable compensation paid in 2011
The principles on which variable compensation is paid are the
following:
— Assessments take account of the individual's performance and
the overall performance of the group.
— Performance measurement takes account of the present and
future risks associated with performance as well as the cost of
capital employed and the liquidity requirement involved.
E— Deferred variable compensation
The compensation system includes an incentive scheme for all
Banco Sabadell senior executives, detailed terms and conditions
of which were approved by the Annual General Meeting on 25
March 2010.
Under the scheme, known as "Stock Appreciation Rights
2010-2013", the Chairman and the Managing Director have been
awarded 2,600,000 and 2,000,000 rights, respectively; according
to the scheme terms as currently drafted, however, no rights had
vested under the scheme as of the date of this report.
F— Other benefits
During the year amounts of €30,340 and €9,843 were assigned to
the Chairman and the Managing Director respectively by way of in
specie remuneration and other pay components.
D— Pension commitments - contributions in 2011
Contributions in respect of pension commitments were provided in
the form of insurance policies for amounts totalling €989,259.27
for José Oliu Creus and €2,079,040.34 for Jaime Guardiola
Romojaro. Contributions to pension plans were also made
amounting to €3,156.95 and €1,580.44 respectively.
The variable compensation paid in 2011, calculated on the
basis of performance in the year 2010, was paid in February
2011 prior to the publication of Law 6/2011 and Royal Decree
771/2011.
Variable compensation for the Chairman of the Board is fixed
by the Nomination and Remuneration Committee on the basis
of an objective measure such as the pre-tax profit attributable
to the consolidated group and other relevant aspects of group
performance during the year. This resulted in a total payment
of €525,200.
Similarly in the case of the Managing Director, variable
compensation was fixed on the basis of the group's profit
performance; given the nature of his responsibilities, however, a
differently weighted set of targets was used. These included the
attributable group profit before tax, the net increase in customers
and the group’s market shares in lending and deposit-taking.
These metrics produced a variable compensation amount of
€486,210.
The variable compensation calculated on performance in the
year 2011 will be paid in February 2012 and is expected to include
a deferral and a share-based element as described in section 6.
107
6— Anticipated remuneration payable to executive directors
for performing executive duties in 2012
108
Remuneration policy for executive directors for the year 2012
will be based on the same principles as for the year 2011 and
will comprise the same compensation elements as were payable
in that year and in the same amounts.
The schedule of payment, deferral and share awards under the
variable compensation scheme is compliant with the requirements
of Royal Decree 771/2011 of 3 June; half the variable
compensation will therefore be deferred over a period of three
years, with one-third of the deferred amount being payable in each
year of the period. In addition, 50% of the variable compensation
will be paid in shares of the Bank.
—Corporate
social
responsibility
—
—
—
—
—
—
— Summary Report on Corporate Social Responsibility 2011
—
—
Corporate social
responsibility
Banco Sabadell is observing the recent Communication from the
European Commission for 2011-2014 on the corporate social
responsibility of enterprises. In the Commission’s updated
approach, CSR is now defined as “the responsibility of enterprises
for their impacts on society”. Respect for applicable legislation
and for collective agreements between social partners is a
prerequisite for meeting that responsibility.
To fully meet their corporate social responsibility, enterprises
should progressively integrate social, environmental, ethical,
human rights and consumer concerns into their operations and
business strategy, in close collaboration with their stakeholders.
This with the aim of maximizing the creation of shared value for
their stakeholders and for identifying, preventing and mitigating
their possible adverse impacts on society.
In the course of the last decade, the group’s business mission
and values have undergone major processes of transformation,
innovation and shared value creation to align Banco Sabadell
with this new definition. The group is working with employees,
customers, consumers, suppliers, institutions and organizations,
both nationally and internationally, to create this shared value.
The Bank’s Compliance, CSR and Corporate Governance
Department is responsible for coordinating social responsibility
policies approved by the Board of Directors and has drawn up
special CSR programmes as part of the group’s CREA strategic
plan for 2011-2013.
Initiatives, alliances and commitments in relation
to stakeholders and the wider community
— Signatory of the United Nations Global Pact
The Global Compact International Network has described
the Banco Sabadell progress report for 2010 as being of an
“advanced level”.
— Signatory of the Equator Principles
— United Nations Principles for Responsible Investment – UNPRI
110
— Signature of the Carbon Disclosure Project
— Global Reporting Initiative
— Banco Sabadell has been using the ISO 26000 standard as
a guide to integrate social responsibility into its values and
practices.
— Since 2008 Banco Sabadell has been included in the FTSE4Good and FTSE4Good IBEX sustainable stock market indices
and a member of the Ethibel Investment Register.
— European Foundation for Quality Management (EFQM) Seal
of Excellence and “Madrid Excelente” quality mark
— ISO 9001 Certification for 100% of processes and operations
of the financial services group in Spain.
— ISO 14001 Certification for five Central Service office
buildings.
— LEED NC (New Construction) Sustainable Building Certification
for the new office building at the Banco Sabadell Centre.
— Member of the 2026 CAT Sustainable Development Strategy
Advisory Board.
Corporate social
responsibility
— Partner in the European Greenbuilding Programme for
the sustainable construction of the Polinyà logistics centre.
— Committee member, Chair of Applied Ethics, Ethos Ramon
Llull Foundation.
— Friend of the ICO-sponsored RSE-PYME Initiative and the
Global Compact Spanish Network to raise awareness
of corporate social responsibility among Spanish SMEs.
— Executive President of the Catalonia Club for Management
Excellence.
— Member of the advisory board of the Luis Vives Foundation
Corporate Social Responsibility Magazine.
— Member of the Environment Committee of the Spanish
Association for Quality (AEC).
— Member of the Madrid Excelente Foundation’s council
of experts.
— Member of the SECE Corporate Social Responsibility External
Committee.
Banco Sabadell publishes copious information on its economic,
social and environmental performance in its annual Report on
Corporate Social Responsibility, following the Global Reporting
Initiative (GRI) G3.1 international guidelines and its supplement
on the financial services industry. Once again, the report has been
verified by external auditors and received the maximum rating of
A+ from the GRI.
Some of the year’s most significant CSR highlights are briefly
described below. These are set out in more detail in the 2011
Report on Corporate Social Responsibility. The report is available
to stakeholders on the corporate website, together with the Report
on Corporate Governance for 2011.
Creating shared value
—In 2011 Banco Sabadell set a tough but stimulating challenge
for its employees, summarized in the phrase: “CREAting
the bank that we all want”. Fostering a spirit of innovation
111
and commitment on the part of employees is key to the
transformation that we are bringing about.
— Towards a new way of engaging with the customer and the
consumer - in 2011 the customer service account
@BancoSabadell was verified by Twitter.com and a help section
was set up on the Bank’s Facebook account. Any customer or
user can post their comments, suggestions and enquiries on
these social networking sites or on the specially created web
site, feedback.bancsabadell.com.
Corporate social
responsibility
Supporting sole proprietors and SMEs
— Banco Sabadell granted loans to SMEs and sole proprietors
totalling €1,934 million.
— The Confederation of Business Owners, Retailers, Sole
Traders and Services in the Community of Madrid (CECOMA)
awarded Banco Sabadell its prize for best financial institution
in 2011 in recognition of its work in promoting SME finance and
modernization.
The bank for the best in business. The bank for you.
— Banco Sabadell set up a Personal Finance service with the aim
of helping individual customers to organize and manage their
household economy.
— A campaign on the theme of “talking about the future” was
launched with the aim of encouraging customers and users to
think about how they can save and what will happen after they
retire. The group expanded its offering of pension plans and
created a savings planning simulator for the use of customers
and consumers.
112
A new way of engaging with customers
— Launch of Instant Check, a utility allowing customers to pay in
cheques in real time and capture an image of the cheque on their
mobile phone.
— A bigger role for the “Branch Direct” service as a sales support
tool. “It’s not remote banking, it’s taking your bank with you”:
Banco Sabadell customers can now do most of their banking
from their mobile phones, even when they are away from their
home or workplace – 24 hours a day, seven days a week.
Service quality
— A market survey on the financial behaviour of individual bank
customers in 2011 by FRS Inmark, a specialist consultancy firm,
named Banco Sabadell as the bank generating the highest levels
of satisfaction within the individual customer segment. Banco
Sabadell also maintained its long-standing position as a leader in
quality of service to business customers.
Leadership and training
— Professional development for managers was extended to the
Bank’s 300 top executives.
— Launch of a group-wide management programme for employees
taking on leadership roles for the first time, prospective heads of
department and newly appointed Central Services managers with
responsibility for people or equipment.
— Launch of the third round of the LAUDE programme. Under this
programme, bank employees can have their in-service training
with the Bank recognized in the form of academic qualifications
awarded by the University of Barcelona’s Continuous Training
Institute, which are compatible with the new European Higher
Education Area frameworks.
— Launch of a digital skills training kit, a series of six videos with
advice from an expert in social networking on how to make
effective use of the Internet.
Supporting innovation and research
Banco Sabadell undertakes community support and cultural
sponsorship activities through the Banco Sabadell Foundation, the
Banco Herrero Foundation and the Banco Sabadell Sponsorship
Committee. In 2011 these included the annual prizes and
awards listed below. Full information on the Foundations and their
activities can be found in the “Society” sections of the main group
website.
— Tenth Herrero Foundation Prize: awarded to the economist
Marta Reynal Querol for her research on the relations between
economics, ethnic diversity and civil conflict.
— Sixth Banco Sabadell Prize for biomedical research: awarded to
Dr. Óscar Fernández-Capetillo, head of the Genomic Instability
Group at the National Centre for Oncological Research (Spanish
initials: CNIO), in recognition of his work.
— Fourth UPF Emprèn Prize awarded by Pompeu Fabra University’s
Social Council and the Banco Sabadell Foundation. The prize,
which rewards initiative and business ability in undergraduates,
was won by the Finixer Sports Innovation project.
Sustainability and environmental management
— In 2011 Banco Sabadell earmarked more than €659 million to
finance renewable energy projects and became the fifth Spanish
bank to sign up to the Equator Principles.
— In April 2012 Banco Sabadell will be opening a new building
which earned the LEED-NC (New Construction) GOLD certificate
at the design stage.
— The Paperless Office: a new working culture at bank branches,
capturing customers’ electronic signatures on tablets and
eliminating paper files. The first transactions to be adapted for
the new equipment were cash deposits and withdrawals, these
being the most frequent transactions done at branches (some
12 million per year).
— Introduction of a virtual guide for employees entitled “Connect
with your environment”.
Corporate social
responsibility
Equality and integration
— Launch of an Equality Plan according to a timescale agreed with
employee representatives.
— To raise awareness of women’s managerial skills in the
business world, Banco Sabadell worked with the ESADE Alumni
Association to organize the Women and Leadership Forum.
113
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— Statutory
information
—
—
—
—
—
—
—
Directors’ statement
of responsibility
Statutory information
118
Auditor’s report
119
120
Consolidated Annual Accounts of the Banco Sabadell group for 2011 - Contents
Note
Title
Financial statements
Balance sheet
Income statement
Recognized income and expense
Statement of changes in equity
Cash flow statement
Notes to the Accounts
18
Report of the Directors
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
Annex I
Principal business and accounting policies and practices
Banco Sabadell group
Proposed distribution of profits and basic earnings per share
Equity instruments
Trading derivatives (assets and liabilities)
Loans and advances to other debtors
Issuers in the mortgage market and the special mortgage register
Financial asset transfers
Changes in the fair value of hedged items in portfolio hedges of interest rate risk
Hedging derivatives (assets and liabilities)
Non-current assets held for sale and liabilities associated with non-current assets held for sale
Investments
Tangible assets
Intangible assets
Other assets
Information on loans for construction and real estate development and anticipated capital
market funding requirements
Debt certificates including bonds
Other financial liabilities
Provisions
Fair value of financial assets and liabilities
Foreign currency transactions
Own funds
Minority interests
Off-balance sheet customer funds
Income statement
Taxation (income tax)
Segmental information
Financial risk management
The environment
Related party transactions
Agents
Customer Service Department
Remuneration paid to directors and senior management group
Directors’ duty of loyalty
Post-balance sheet events
Banco Sabadell group undertakings
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
121
Consolidated balance sheet of the Banco Sabadell group
As at 31 December 2011 and 31 December 2010
€’000
Assets
2011
2010 (*)
1,290,678
1,253,600
Held for trading
Debt securities (note 5)
Other equity instruments (note 6)
Trading derivatives (note 7)
Memorandum item: Loaned or advanced as collateral
1,682,120
0
0
205,931
38,517
1,437,672
0
1,297,596
0
0
118,203
33,168
1,146,225
0
173,326
0
0
0
173,326
0
177,492
0
0
0
177,492
0
Available-for-sale financial assets
Debt securities (note 5)
13,268,170
12,090,847
1,177,323
5,869,459
10,830,629
9,762,889
1,067,740
6,327,006
Loans and advances to credit institutions (note 4)
Loans and advances to other debtors (note 8)
Debt securities
76,282,944
3,628,914
72,654,030
0
1,541,697
76,725,432
2,744,614
73,980,818
0
3,953,483
Held-to-maturity investments
0
0
0
0
Reductions to financial assets because of macro-coverages (note 11)
0
0
Hedging derivatives (note 12)
417,685
487,564
Non current assets held for sale (note 13)
530,881
351,914
Investments (note 14)
Associates
Jointly controlled entities
696,934
694,957
1,977
813,492
811,497
1,995
Insurance contracts linked to pensions (note 25)
162,735
183,051
0
0
Tangible asset (note 15)
Tangible fixed assets
For own use
Leased out under operating leases
Investment property
Memorandum item: Acquired under a finance lease
1,106,881
877,935
792,694
85,241
228,946
0
1,081,549
900,519
804,980
95,539
181,030
0
Intangible asset (note 16)
Goodwill
Other intangible assets
1,022,161
823,815
198,346
831,301
748,622
82,679
Tax assets
Current
Deferred (note 35)
1,408,384
411,076
997,308
1,214,784
291,643
923,141
Other assets (note 17)
Inventories
Other
2,394,481
2,238,784
155,697
1,850,805
1,596,758
254,047
100,437,380
97,099,209
Other financial assets at fair value through profit or loss
Debt securities
Reinsurance assets
122
Total assets
(*) Presented for comparative purposes only.
€’000
Liabilities
1,451,021
0
0
0
0
1,451,021
0
0
1,161,121
0
0
0
0
1,161,121
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
91,586,490
4,040,717
8,128,791
58,444,050
17,643,095
1,859,370
1,470,467
88,710,738
32,997
10,300,991
55,092,555
19,507,497
2,386,629
1,390,069
Reductions to financial liabilities because of macro-coverages (note 11)
449,245
451,064
Hedging derivatives (note 12)
111,145
104,315
0
0
Liabilities under insurance contracts (note 24)
173,348
177,512
Provisions (note 25)
Provisions for pensions and similar obligations
Provisions for taxes and other regulatory contingencies
Provisions for contingent exposures and commitments
Other provisions
350,203
163,510
51,079
89,611
46,003
367,662
176,258
27,891
91,672
71,841
Tax liabilities
Current
Deferred (note 35)
202,133
71,466
130,667
184,833
87,297
97,536
Other liabilities
179,651
253,421
Total liabilities
94,503,236
91,410,666
Financial liabilities held for trading
Trading derivatives (note 7)
Short positions
Other financial liabilities at fair value through profit or loss
Financial liabilities measured at amortized cost
Deposits of credit institutions (note 19)
Deposits of the clientele (note 20)
Debits represented by negotiable securities (note 21)
Subordinated liabilities (note 22)
Other financial liabilities (note 23)
Liabilities associated with non current assets held for sale (note 13)
2010 (*)
2011
123
€’000
Equity
Equity (note 28)
Capital
Authorized
Less: Uncalled capital
Share premium account
Reserves
Accumulated reserves (losses)
Reserves (losses) of entities accounted for by the equity method
Equity component of compound financial instruments
Less: Treasury shares
Profit or loss for the year attributable to parent company
Less: Dividends and similar payments
Valuation adjustments (note 29)
Cash flow hedges
Hedges of net investments in foreign operations
Foreign exchange differences
Non-current assets held for sale
Entities accounted for by the equity method
Other valuation adjustments
Minority interests (note 30)
Other movements
Total equity
124
Total liabilities and equity
2011
2010 (*)
6,276,160
173,881
173,881
0
1,861,702
3,438,010
3,213,527
224,483
814,620
814,620
0
(174,439)
231,902
(69,516)
5,978,412
157,954
157,954
0
1,465,980
3,295,137
3,102,097
193,040
818,714
818,714
0
(25,686)
380,040
(113,727)
(389,228)
(277,573)
(30,374)
0
2,790
0
(85,062)
991
(323,735)
(327,492)
(3,934)
0
1,655
0
5,045
991
47,212
(6,150)
53,362
33,866
(5,689)
39,555
5,934,144
5,688,543
100,437,380
97,099,209
8,347,022
8,310,022
11,657,865
16,133,441
Memorandum item
Contingent exposures (note 31)
Contingent commitments (note 32)
Consolidated income statement of the Banco Sabadell group
For the years ended on 31 December 2011 and 2010
€’000
3,394,082
2,644,787
(1,856,819)
(1,185,671)
1,537,263
1,459,116
8,752
16,282
37,650
70,867
Fee and commission income (note 34.b)
637,624
570,695
Fee and commission expense (note 34.b)
(64,031)
(54,233)
Gains or losses on financial assets and liabilities (net) (note 34.c)
Held for trading
Other financial instruments to reasonable value through profit or loss
Financial instruments not measured at fair value through profit or loss
Other
271,246
139,025
0
126,056
6,165
204,065
62,324
(183)
123,166
18,758
Foreign exchange differences (net)
69,999
58,655
Other operating income (note 34.d)
Income from insurance and reinsurance contracts
Sales and income from non-financial services
Other operating income
99,429
34,912
3,563
60,954
100,151
27,848
23,907
48,396
(91,210)
(34,208)
(41)
(56,961)
(94,259)
(27,808)
(21,346)
(45,105)
2,506,722
2,331,339
(1,145,091)
(742,600)
(402,491)
(1,036,055)
(679,721)
(356,334)
(130,921)
(158,980)
(13,997)
5,318
(634,524)
(512,633)
(121,891)
(505,761)
(395,905)
(109,856)
582,189
635,861
Interest and similar income (note 34.a)
Interest expenses and similar charges (note 34.a)
Net Interest income
Share of profit or loss of equity-accounted entities
Other operating expenses (note 34.e)
Expenses from insurance and reinsurance contracts
Change in inventories
Other operating expenses
Gross income
Administrative expenses (note 34.f)
Personnel expenses
Other administrative expenses
Impairment losses (net) (note 34.g)
Other financial instruments not measured at fair value through profit or loss (note 6)
Operating profit or loss
2010 (*)
2011
125
Consolidated income statement of the Banco Sabadell group
€’000
2011
2010 (*)
(377,388)
(316)
(377,072)
(446,345)
(175)
(446,170)
5,672
296,111
0
0
Gains (losses) of non current assets held for sale not classified
for discontinued operations
(23,007)
(21,286)
Profit or loss before discontinued operations
187,466
464,341
48,406
(81,419)
235,872
382,922
0
0
235,872
382,922
231,902
3,970
380,040
2,882
0.17
0.32
0.15
0.28
0.15
0.28
Losses due to impairment of other assets (net)
Goodwill and another intangible asset (note 16)
Other assets (notes 13, 15 and 17)
Gains (losses) in derecognition of assets not classified as non-current
held for sale (note 34.h)
Negative goodwill arising in business combinations
Income tax (note 35)
Profit or loss for the year before discontinued operations
Profit or loss from discontinued operations (net)
Consolidated profit or loss for the period
Profit or loss attributable to the parent company
Proffit or loss attributable to minority interests (note 30)
Earnings per share (€)
Basic earnings per share after adjusting for conversion of
mandatory convertible bonds (€)
Diluted earnings per share (€)
126
Consolidated statement of recognised income and expense for the Banco Sabadell group
€’000
Consolidated profit or loss for the period
235,872
382,922
Other recognised income and expense
(65,954)
(369,299)
70,644
(21,472)
92,116
0
(37,771)
(42,930)
5,159
0
0
0
0
0
0
1,632
1,629
3
0
0
0
0
0
0
(90,107)
(90,107)
0
0
0
(10,352)
(551,630)
(601,651)
50,021
0
11,600
29,930
(18,330)
0
0
0
0
0
0
5,452
5,470
(18)
0
0
0
0
0
0
4,905
4,905
0
0
0
160,374
Total recognized income and expense
169,918
13,623
Attributable to parent company
Attributable to minority interests
166,409
3,509
12,649
974
Available-for-sale financial assets:
Revaluation gains/(losses)
Amounts transfered to income statement
Other reclassifications
Cash flow hedges:
Amounts transfered to initial carrying amount of hedged items
Hedges of net investments in foreign operations:
Foreign exchange differences:
Non-current assets held for sale:
Actuarial gains/(losses) on pension schemes
Entities accounted for by the equity method:
Other recognized income and expense
Income tax
The statement of income and charges in equity is made up of the consolidated statement of recognised
income and expense together with the consolidated statement of changes in total equity for the Banco Sabadell group.
2010 (*)
2011
127
Consolidated statement of changes in total equity for the Banco Sabadell group
€’000
Equity attributable to parent company
Own funds
Capital
Reserves
(losses)
of entities
Share Accumulated accounted for
Other
reserves by the equity
premium
equity
(losses)
account
method instruments
Profit or
loss for
the year
Less: attributable
Treasury to parent
shares
company
Total
Valuation
own
funds adjustments
Closing balance at 31.12.2010
Adjustments due to changes in accounting policy
Adjustments to correct errors
157,954
0
0
1,465,980
0
0
3,102,097
0
0
193,040
0
0
818,714
0
0
Adjusted opening balance
Other changes in equity
157,954
0
15,927
1,465,980
0
395,722
3,102,097
0
111,430
193,040
0
31,443
818,714
0
(4,094)
15,927
0
0
0
400,022
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
415,949
0
0
0
0
0
0
0
Reclassification of financial liabilities
to other equity instruments
0
0
0
0
0
0
0
0
0
Distribution of dividend and other
payments to shareholders
0
0
0
0
0
0
(197,127)
44,211
Trading in own equity instruments (net)
Transfers between equity items equity
0
0
0
0
7,183
151,470
0
31,443
(4,151)
0
(148,753)
0
0
(182,913)
0
0
Increases/reductions due to business
combinations
0
0
0
0
0
0
0
Discretionary transfer to welfare projects and
funds
0
0
0
0
0
0
Payments in equity instruments
Other increases (reductions) in equity
0
0
0
(4,300)
0
(47,223)
0
0
0
57
0
0
173,881
1,861,702
3,213,527
224,483
814,620
(174,439)
231,902
Increases in capital
Reductions in capital
Conversion of financial liabilities to equity
Increases in other equity instruments
(25,686)
0
0
Less:
Dividends
and similar
payments
Total
Minority
interests
Total
equity
380,040
0
0
(113,727) 5,978,412
0
0
0
0
(323,735) 5,654,677
0
0
0
0
33,866
0
0
5,688,543
0
0
(25,686) 380,040
0
231,902
(148,753) (380,040)
(113,727) 5,978,412
0
231,902
44,211
65,846
(323,735) 5,654,677
(65,493)
166,409
0
65,846
33,866
3,509
9,837
5,688,543
169,918
75,683
415,949
0
0
0
0
0
0
0
415,949
0
0
0
0
0
0
0
(152,916)
0
(152,916)
0
(152,916)
(145,721)
0
0
0
(145,721)
0
0
0
(145,721)
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
(51,466)
0
0
0
(51,466)
0
9,837
0
(41,629)
(69,516) 6,276,160 (389,228)
5,886,932
47,212
5,934,144
Total
Minority
interests
Total
equity
5,269,989
0
0
27,381
0
0
5,297,370
0
0
43,656 5,269,989
(367,391)
12,649
0
372,039
27,381
974
5,511
5,297,370
13,623
377,550
Consolidated statement of changes in total equity for the Banco Sabadell group
€’000
Equity attributable to parent company
Own funds
Capital
Profit or
loss for
the year
Less: attributable
Treasury to parent
shares
company
Less:
Dividends
and similar
payments
Total
Valuation
own
funds adjustments
Adjustments due to changes in accounting policy
Adjustments to correct errors
150,000
0
0
1,373,270
0
0
2,840,566
0
0
146,211
0
0
500,000
0
0
(138,203)
0
0
522,489
0
0
(168,000) 5,226,333
0
0
0
0
Adjusted opening balance
Other changes in equity
150,000
0
7,954
1,373,270
0
92,710
2,840,566
0
261,531
146,211
0
46,829
500,000
0
318,714
(138,203) 522,489
0
380,040
112,517 (522,489)
(168,000) 5,226,333
0
380,040
54,273
372,039
7,954
0
0
0
228,874
0
0
0
0
0
0
(30,083)
0
0
0
0
0
0
0
325,471
0
0
0
0
0
0
0
0
0
0
0
0
236,828
0
0
295,388
0
0
0
0
236,828
0
0
295,388
0
0
0
0
236,828
0
0
295,388
Reclassification of financial liabilities
to other equity instruments
0
0
0
0
0
0
0
0
0
0
0
0
0
Distribution of dividend and other
payments to shareholders
0
(93,392)
0
0
0
0
(168,000)
54,273
(207,119)
0
(207,119)
0
(207,119)
Trading in own equity instruments (net)
Transfers between equity items equity
0
0
0
0
8,179
307,660
0
46,829
(1,625)
0
112,517
0
0
(354,489)
0
0
119,071
0
0
0
119,071
0
0
0
119,071
0
Increases/reductions due to business
combinations
0
0
0
0
0
0
0
0
0
0
0
0
0
Discretionary transfer to welfare projects and
funds
0
0
0
0
0
0
0
0
0
0
0
0
0
Payments in equity instruments
Other increases (reductions) in equity
0
0
0
(42,772)
0
(24,225)
0
0
0
(5,132)
0
0
0
0
0
0
0
(72,129)
0
0
0
(72,129)
0
5,511
0
(66,618)
157,954
1,465,980
3,102,097
193,040
818,714
(25,686)
380,040
(323,735) 5,654,677
33,866
5,688,543
Increases in capital
Reductions in capital
Conversion of financial liabilities to equity
Increases in other equity instruments
128
Reserves
(losses)
of entities
Share Accumulated accounted for
Other
reserves by the equity
premium
equity
(losses)
account
method instruments
(113,727) 5,978,412
43,656
0
0
Presented for comparative purposes only
The statement of changes in equity is made up of the consolidated statement of recognized income and expense together with the consolidated statement of changes in total equity for the Banco Sabadell group.
Consolidated cash flow statement for the Banco Sabadell group
€’000
Cash flows from operating activities
740,332
(484,177)
Consolidated profit for the year
235,872
382,922
Adjustments to obtain cash flows from operating activities
Other adjustments
39,198
130,921
(91,723)
(165,420)
158,980
(324,400)
Net increase/decrease in operating assets
Financial assets held for trading
Other operations assets
2,149,207
384,525
(4,166)
2,288,321
(845,205)
325,732
4,350,695
86,338
(4,674)
1,384,651
3,010,579
(126,199)
Net increase/decrease in operating liabilities
Financial assets held for trading
Other financial liabilities at fair value through profit or loss
Other operations liabilities
2,691,687
289,900
0
2,385,750
16,037
3,672,656
(31,171)
0
3,723,241
(19,414)
(77,218)
(23,640)
(343,412)
128,914
361,944
246,604
93,933
21,407
0
0
0
0
323,375
130,915
48,766
26,352
117,342
0
0
0
18,532
11,645
0
6,887
0
0
0
0
452,289
441,843
751
9,695
0
0
0
0
Paid/received in respect of income tax
Cash flows from investing activities
Payments made
(-) Tangible assets
(-) Intangible assets
(-) Investments
(-) Subsidiaries and other business units
(-) Non-current assets and associated liabilities held for sale
(-) Held-to-maturity investments
(-) Other payments related to investment activities
Payments received
(+) Tangible assets
(+) Intangible assets
(+) Investments
(+) Subsidiaries and other business units
(+) Non-current assets and associated liabilities held for sale
(+) Held-to-maturity investments
(+) Other payments related to investment activities
2010 (*)
2011
129
Consolidated cash flow statement for the Banco Sabadell group
€’000
2011
2010 (*)
(360,977)
(215,103)
1,173,869
152,916
480,559
2,553
504,009
33,832
629,808
113,936
0
0
492,359
23,513
812,892
40,400
410,052
362,440
0
414,705
11,409
0
403,296
0
1,135
3,809
37,078
(566,557)
Cash and cash equivalents at beginning of period
1,253,600
1,820,157
Cash and cash equivalents at end of period
1,290,678
1,253,600
239,346
1,051,332
0
0
233,819
1,019,781
0
0
0
0
Cash flows from financing activities
Payments made
(-) Dividends
(-) Subordinated liabilities
(-) Redemption of own equity instruments
(-) Acquisition of own equity instruments
(-) Other payments related to financing activities
Payments received
(+) Subordinated liabilities
(+) Issuance of own equity instruments
(+) Disposal of own equity instruments
(+) Other payments related to financing activities
Effects of changes in exchange rates
Net increase/decrease in cash and cash equivalents
Memorandum item
Components of cash and cash equivalents at end of period
(+) Cash and banks
(+) Cash equivalents at central banks
(+) Other financial assets
(-) Less: Banking overdrafts rayable on demand
Total cash and cash equivalents at end of period
of which: held by consolidated entities but not available to the group
130
Notes to the consolidated annual accounts of the Banco Sabadell group
For the years ended on 31 December 2011 and 31 December 2010.
Note 1. Principal business, accounting policies and practices
Basis of presentation
On 1 January 2005, under Regulation (EC) No 1606/2002 of the European Parliament and of the Council of 19
July, it became mandatory for companies to prepare their consolidated annual accounts in accordance with the
International Financial Reporting Standards adopted by the European Union (“IFRS-EU”) if, at their balance sheet
date, their securities were admitted to trading on a regulated market of any Member State.
This was followed by the publication of the Bank of Spain’s Circular 4/2004 with the English title of “Credit
Institutions - Public and Confidential Financial Reporting Rules and Formats”, and subsequent amendments thereto,
changing the accounting rules applicable to banks to bring them into line with IFRS-EU.
The consolidated annual accounts of the group for the year 2011 have been prepared in accordance with IFRSEU to give a true and fair view of the consolidated equity and financial position of the group, the consolidated
results of its operations, recognized income and expense, changes in consolidated equity and consolidated cash
flows. The consolidated annual accounts do not contain significant differences with respect to the accounts that
would be obtained if prepared in accordance with Bank of Spain Circular 4/2004. There is no obligatory accounting
principle, standard or valuation policy having a material effect that has not been applied in preparing the accounts.
A summary statement of the most significant accounting principles, standards and valuation procedures that have
been applied in these consolidated annual accounts is provided in this note.
The information provided in these consolidated annual accounts is the responsibility of the directors of the
parent company of the group. The consolidated annual accounts for the year 2011 were signed off by the directors
of Banco Sabadell at a meeting of the Board on 26 January 2012 and will be submitted to the Annual General
Meeting for approval. It is expected that the Meeting will approve the accounts without significant changes.
Unless otherwise indicated, these consolidated annual accounts are expressed in thousands of euros and all
figures are rounded to the nearest thousand euros (€’000).
Principal business
The corporate object of Banco de Sabadell, S.A. whose registered office is at Plaza de Sant Roc, 20, Sabadell,
Spain (also referred to as “Banco Sabadell” or the “Bank”) is to carry on business as a provider of banking
services. As such, it is subject to the laws and regulations applicable to all banks operating in Spain.
The Bank is the parent company of a group of financial services undertakings (see Annex I) whose activities it
controls directly or indirectly and which, together with the Bank, make up the Banco Sabadell group (the “group”).
Standards and interpretations issued by the International Accounting Standards Board (the “IASB”) coming into
effect in 2011
The following amendments to the International Financial Reporting Standards (“IFRSs”) and interpretations
(“IFRICs”) came into effect in the course of 2011. The adoption of these amended standards and interpretations
across the group has had no material impact on these consolidated financial statements.
131
Standards and amendments to standards
For mandatory adoption in 2011
IAS 24 (amended)
IAS 32 (amended)
IFRS 1 (amended)
Disclosures on related parties
Financial instruments: presentation – classification of rights issues
Limited exemption from comparative IFRS 7 disclosures for first-time adopters
IFRIC 14 (amended)
The limit on a defined benefit asset, minimum funding requirements and their
interaction
IFRIC 19
Improvements to IFRS
Extinguishing financial liabilities with equity
Third annual IFRIC improvements project (May 2010)
IASB-issued standards and interpretations not yet in effect
The following standards and interpretations which could apply to the group had been published by the IASB at
31 December 2011 but were not yet in effect, either because their effective dates came after the date of the
consolidated financial statements or because they had not yet been approved by the European Union.
The group carried out an assessment of the impacts this would have and decided not to exercise its option to
adopt early where this was feasible, in view of the non-materiality of the impacts.
Standards and amendments
to standards
IAS 12 (amended) (1)
IAS 1 (amended) (1)
IAS 19 (1)
IFRS 13 (1)
IAS 28 (1)
IAS 27 (1)
IFRS 7 (amended)
IFRS 10 (1)
IFRS 11 (1)
IFRS 12 (1)
IFRS 13 (1)
IAS 32 (amended) (1)
IFRS 9 (2)
Adoption mandatory as from
Deferred taxes: recovery of underlying assets
Presentation of statement of recognised income and expense
Employee benefits
Fair value measurement
Investments in associates and joint ventures
Separate financial statements
Disclosures of Transfers of Financial Assets
Consolidated financial statements
Joint arrangements
Disclosure of Interests in Other Entities
Fair value measurement
Classification of rights issues
Financial instruments
2012
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
2014
2015
(1) Standards and interpretations not adopted by the EU on 31 December 2011.
(2) Awaiting endorsement.
Accounting principles and policies applied
The most significant principles, accounting standards and valuation policies that have been applied in preparing
these consolidated annual accounts are as follows:
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(a) Consolidation principles
In the consolidation process three types of entity are distinguished: subsidiaries, jointly controlled entities and
associates.
Subsidiaries are entities over which the Bank is able to exercise control and which therefore constitute, together
with the Bank, a decision-making unit. The ability to exercise control is generally, but not exclusively, manifested
through the direct or indirect holding of an interest giving the holder more than 50% of the voting rights in the
subsidiary. Control means the power to determine the financial and operating policies of the subsidiary so as to
profit from its activities, and may be exercised even when a majority interest is not held.
The group therefore includes all subsidiary undertakings that constitute a decision-making unit together with
the Bank. These undertakings have been consolidated by the full consolidation method. Interests held by third
parties in group shareholders’ equity are shown in the balance sheet under minority interests and the share of the
profit or loss for the year attributable to these shareholders is shown in the income statement under profit or loss
attributable to minority interests.
Profits or losses generated by entities acquired by the group during the year are consolidated solely on the basis
of the profits or losses generated in the period between the date of acquisition and the end of the year. Similarly,
profits or losses generated by entities disposed of by the group during the year are consolidated solely on the basis
of the profits or losses generated in the period between the beginning of the year and the date of disposal.
Jointly controlled entities are those which are controlled jointly by the group and one or more other entity
or entities not related to the group. Entities of this kind undertake operations and maintain assets in such
a way that any strategic decision of a financial or operational nature concerning the entity requires the
unanimous consent of all interest holders. Jointly controlled entities have been consolidated by the proportional
consolidation method.
Associates are entities over which the group is able to exercise a significant influence which is generally, but not
exclusively, manifested through a direct or indirect interest that gives the group 20% or more of the voting rights.
In the consolidated accounts associates are accounted for by the equity method, that is, according to the fraction
of the equity represented by the group’s shareholding, after taking account of any dividends received from the
associate and other eliminations.
In the consolidation process all significant balances and transactions between group undertakings have been
eliminated in such proportion as may be appropriate, depending on the consolidation method being applied.
Details of the most significant acquisitions and disposals made by the group during the year are provided in
note 2.
(b) Accrual principle
These annual accounts (with the exception of certain items of the consolidated cash flow statements) have been
prepared based on real movements of goods and services, regardless of the date on which payment was made or
received.
- Impairment losses on certain financial assets (notes 1(e), 4, 5, 6, 8 and 13).
- Assumptions used in actuarial estimates of liabilities and commitments in respect of post-employment
benefits, and in estimates of liabilities under insurance contracts (notes 1(q), 1(s), 24 and 25).
- The useful lives of tangible and intangible assets (notes 1(j), 1(m), 15 and 16).
- The valuation of goodwill on consolidation (notes 1(m) and 16).
- The fair values of financial assets for which market prices are not available (notes 1(d), 5 and 6).
- The fair values of real estate assets held on the balance sheet (notes 1(h), 1(j), 1(n), 13, 15 and 17).
(c) Use of judgements and estimates in preparing the financial statements
The preparation of the consolidated annual accounts requires that certain estimates be made. It also requires
the exercise of judgement by senior managers in applying the group’s accounting policies. Such estimates may
affect the carrying value of assets and liabilities and the classification of contingent assets and liabilities at the
date of the annual accounts, as well as income and expenditure items in the period covered by the accounts. Key
estimates relate to the following:
Although estimates are based on the best information available to senior managers on present and foreseeable
circumstances, final outcomes may be at variance with these estimates.
• Financial instruments held for trading
Financial assets/liabilities are classified as held for trading if they have been acquired or issued to be sold
or repurchased in the near term, or form part of a portfolio of financial instruments that are managed together
and in which there has been recent action for short-term profit taking, or are instruments that do not fit the
definition of a financial guarantee contract and have not been designated as hedging instruments for accounting
purposes.
Financial instruments of this type are measured at fair value. The fair value of a financial asset on a given date is
defined as the amount for which the asset could be exchanged between knowledgeable, willing parties in an arm’s
length transaction. The best evidence of fair value of an asset is the price being quoted for the asset on an actively
traded market where the market is organized, transparent and of reasonable depth.
Where there is no market price for a particular financial asset, the fair value can be estimated from the values
established for similar assets in recent transactions or, failing that, by using suitably tested valuation models. Any
peculiarities specific to the financial asset being valued are also taken into account, particularly the different types
of risk that may be associated with it. However, the limitations inherent in the valuation models that have been
developed and possible inaccuracies in the assumptions required by these models may result in the estimated
fair value of a financial asset not precisely matching the price at which the asset could be bought or sold as of the
valuation date.
Changes in fair value are taken directly to profit or loss. For non-derivative instruments, the gain or loss
attributable to the returns accruing on the instrument are treated differently from the other gains or losses, with the
former being recorded as interest or dividends as appropriate, and the latter as gains or losses on financial assets
and liabilities.
(d) Valuation and recording of financial instruments
As a general rule, regular way sales and purchases of financial assets are recognized in the balance sheet using
settlement date accounting.
Financial instruments are divided into the following categories according to the valuation method that is applied
to them:
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• Other financial assets and liabilities at fair value through profit or loss
This category includes financial instruments which on original recognition are designated as hybrid financial
instruments and are measured entirely on a fair value basis. It also includes financial assets which are managed
together with liabilities under insurance contracts measured at fair value or with financial derivatives
which have the purpose and effect of significantly reducing exposure to changes in fair value, or which are
managed in combination with financial liabilities and derivatives for the purpose of significantly reducing
overall exposure to interest rate risk. These are valued and recorded in the same way as for financial assets/
liabilities held for trading. The category does not include equity instruments whose fair value cannot be reliably
estimated.
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• Available-for-sale financial assets
This category includes debt securities and equity instruments that are not designated as held-to-maturity
investments or financial assets at fair value through profit or loss, loans and receivables, or financial
assets/liabilities held for trading or of entities that are not subsidiaries or associates of, or jointly controlled by,
the group.
Available-for-sale financial assets are measured at their fair value. Changes in value are temporarily recorded,
net of tax, under valuation adjustments in consolidated equity, unless they are due to foreign exchange differences
arising on monetary financial assets. Amounts recorded as valuation adjustments continue to be included in
consolidated equity until the asset from which they have originated is derecognized on the balance sheet, when
they are charged or credited to profit or loss.
• Loans and receivables
Loans and receivables are financial assets not traded on an active market or required to be designated as
at fair value, the cash flows on which are of a fixed or determinable amount and whose cost to the group will
be recovered in full, except for reasons related to borrower solvency. This category comprises investments
associated with normal bank lending and includes amounts loaned to customers and not yet repaid; deposits
placed with other financial institutions, regardless of the legal arrangements under which the funds were
provided; unquoted debt securities; and any debts incurred by purchasers of goods or services forming part of
the group’s business.
Loans and receivables are recorded at their amortized cost, where “amortized cost” means the acquisition
cost of a financial asset less any repayments of principal and the cumulative amortization (as shown in the
income statement using the effective interest rate method) of the difference between the initial cost and the
repayment amount at maturity, and less any reduction in value due to impairment, whether recognized directly
as a write-down of the asset or through a provisioning account. Where loans and receivables are covered by fair
value hedges, any change in their fair value is recorded where the change is associated with the risk or risks
covered by the hedge.
The effective interest rate is the discount rate that exactly equates the value of a financial instrument to the
estimated cash flows over the remaining life of the instrument, based on the contract terms of the instrument
including any early repayment option but disregarding future losses due to credit risk. For a fixed-rate instrument
the effective interest rate is the same as the contract interest rate agreed at the time the instrument was acquired
plus any fees or commissions that qualify for treatment as interest. In the case of a variable-rate instrument the
effective interest rate is the same as the rate of return in respect of interest and fees on the instrument, until the
first date on which the base rate comes up for review.
Interest is determined by the effective interest rate method and recorded in the income statement under interest
and similar income.
• Financial liabilities at amortized cost
This category comprises those financial liabilities that cannot be classified under any other balance sheet heading
and are associated with the normal deposit-taking activity of a financial institution, regardless of the term and other
arrangements under which the deposit is set up.
Also included in this category is capital having the nature of a financial liability. This reflects the value of
financial instruments issued by the group which, although treated as capital for legal purposes, do not qualify for
classification as equity. These instruments consist mainly of issued shares that do not carry voting rights and on
which a dividend is paid based on a fixed or variable rate of interest.
For financial instruments the fair value measurements disclosed in the financial statements are classified
according to the following fair value hierarchy:
- Level I: Fair values are obtained from the (unadjusted) prices quoted on active markets for the same instrument.
- Level II: Fair values are obtained from the prices being quoted on active markets for similar instruments, the
prices of recent transactions, expected flows or other valuation techniques for which all significant inputs are
based on directly or indirectly observable market data.
- Level III: Fair values are obtained by valuation techniques for which some significant inputs are not based on
observable market data.
• Financial assets carried at amortized cost
Portfolios of debt instruments, contingent exposures and contingent commitments, regardless of the obligor,
the contractual arrangements or the security/collateral, are analysed to determine the credit risk to which
the group is exposed and to estimate the impairment provision required. In preparing the consolidated financial
statements the group classifies its lending transactions on the basis of credit risk, with customer insolvency risk
being analysed separately from any country risk to which transactions may be exposed.
Objective evidence of impairment is determined individually for all debt instruments that are individually
significant, and individually or collectively for groups of debt instruments that are not individually significant.
When an instrument cannot be included in any group of assets with similar credit risk features, it is analysed
solely on an individual basis to determine whether it is impaired and, if so, to estimate the impairment loss.
Such instruments are classified into the following categories, on the basis of the insolvency risk attributable
to the customer or to the transaction: standard, sub-standard, doubtful due to customer arrears, doubtful
for reasons other than customer arrears, and write-off. For debt instruments not classified as standard risks,
the required provisions for impairment are estimated having regard to the age of past-due accounts, the type
and value of any collateral or other security provided and the financial situation of the customer and any
guarantors. These estimates are made on the basis of a default schedule drawn up by the Bank of Spain from
its knowledge and experience of the Spanish banking industry in accordance with the Bank of Spain’s Circular
3/2010.
Similar estimates are also made to determine the credit risk on these instruments that is attributable to
country risk. Country risk means the risk associated with customers resident in a specific country that arises from
circumstances other than normal commercial risk.
The period of arrears on an instrument does not cease to run when the instrument is extended or renegotiated.
Where an instrument has been classified as a doubtful risk before extension or renegotiation, it will not be
reclassified as standard or sub-standard unless there is reasonable certainty that the customer can make payment
on schedule, or additional good security is provided and, in either case, unless the overdue ordinary interest, at
least, is paid (apart from any interest for late payment).
In addition to these specific provisions, the group makes provision for latent losses on debt instruments
classified as standard risks by providing for impairment loss on a portfolio-wide basis. The collective provision is
made from historical impairment experience and other circumstances known at the time of the risk assessment,
and covers latent losses incurred at the balance sheet date, calculated using statistical procedures, but not
identified with specific transactions.
Since the group’s own historical and statistical data are not sufficient for this purpose, when making
these provisions it relies on parameters set by the Bank of Spain. This method of determining provisions
for latent loss due to impairment of debt instruments involves the use of percentages which vary according
to how debt instruments classified as standard risk are assessed. The sub-categories into which standard risk
instruments are classified are: negligible risk, low risk, medium-low risk, medium risk, medium-high risk and
high risk.
(e) Impairment of financial assets
In general, adjustments to the carrying value of financial assets are recognized in the income statement where
there is objective evidence that an impairment loss has occurred. In the case of debt instruments, that is,
loans and debt securities, an impairment loss is considered to have occurred when, after initial recognition of
the instrument, a single event or a combination of events causes a negative impact on its future cash flows. In
the case of equity instruments, an impairment loss is deemed to have occurred when, after initial recognition,
a single event or a combination of events makes it likely that the carrying value of the instrument will not be
recovered.
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Transactions classified as sub-standard are analysed to determine the provision coverage required. This
will of necessity be greater than the generic provision that would apply if the risk was classified as standard.
Furthermore, net impairment charges made in the period in which a transaction is classified as sub-standard will
be greater than the charges that would have been made if the transaction had continued to be classified as a
standard risk.
Interest recorded at contractual rates ceases to be recognized in the income statement for all debt instruments
that have been individually classified as impaired or for which impairment losses have been collectively calculated
as a result of there being accounts more than three months in arrears.
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• Available-for-sale financial assets
Impairment losses on debt securities and equity instruments classified as available-for-sale financial assets are
equal to the positive difference between their acquisition cost net of any repayment of principal, and their fair value
less any impairment loss previously recognized in the consolidated income statement.
Where there is objective evidence that a diminution in the fair value of an asset is due to impairment, the
unrealized losses recognized directly in equity as valuation adjustments are recorded immediately in the income
statement. If all or part of the impairment losses are subsequently recovered, the amount is recognized, in the
case of debt securities, in the income statement for the period in which the recovery occurs; in the case of equity
instruments, the recovery is recognized in equity as a valuation adjustment.
In reaching a conclusion on whether there is objective evidence of impairment in debt instruments, whether
quoted or unquoted, the group considers any potential loss events that have occurred. In particular, it analyses
any significant financial difficulty being faced by the issuer or obligor; any breaches of contract terms, such
as a default or delinquency in interest or principal payments; whether the holder of the debt instrument, for
economic or legal reasons relating to the borrower’s financial difficulty, grants to the borrower a concession that
the holder would not otherwise consider; any increased probability that the borrower will enter bankruptcy or
other financial reorganization; or the disappearance of an active market for the financial asset in question as a
result of financial difficulties and a downgrading of its credit rating that would be indicative of impairment when
considered in conjunction with other available information.
Any likely impairment due to the group’s exposure to sovereign debt is assessed by tracking market movements
caused mainly by fluctuating risk premiums, together with a continuous review of the solvency of each State.
In the case of quoted instruments, the group will consider whether a prolonged or significant fall in the
fair value of the investment below its cost is objective evidence of impairment. In estimating valuation
adjustments in equity, the valuation is generally taken as the quoted price. When determining whether there is
objective evidence that a fall in the quoted price is due to impairment, where there are manifestly exceptional
circumstances in the markets on which prices are set, the effects of wider market movements on the quoted
price are analysed separately from those movements that reflect factors specific to the issuer of the instrument
under consideration. Where there are no exceptional market circumstances but there have been falls in the
quoted price of the instrument, an assessment is made of whether the period for which the quoted price has
remained below the carrying value of the instrument by a significant percentage should be considered as
objective evidence of impairment. If there is no principle that is more specifically applicable, the practice is to
take a standard reference period (18 months) and percentage (40%). An analysis is also made, even where
no exceptional market circumstances are present, of whether there are objective reasons to consider that the
quoted price of the instrument does not reflect its fair value and is therefore not a valid quantity from which
to assess any potential impairment. Such objective reasons may be related to a free float that is very limited,
prolonged speculative activity on the share value and other circumstances, any of which may distort the price of
the instrument.
Where exceptional market circumstances are present, market factors that will be analysed separately include
whether there have been widespread changes in risk aversion or in the valuation methods used by analysts
and investors; whether there have been major changes in the multipliers implicit in asset prices; or whether
cross-impacts are occurring between bond and equity markets and affecting quoted market prices. If such
circumstances are present an attempt is made to gauge the extent to which the instrument is responding
differently with respect to its sector or to the market as a whole. To do this a discounted cash flow analysis
is used based on known data of the issuer of the instrument and an assessment is made of how the issuer’s
future profitability will be affected by the new development. This analysis is carried out as soon as the
exceptional circumstances are detected, rather than waiting for any set standard period. If, in addition, there
is structural impairment already on the balance sheet, whether apparent or latent, a full adjustment for this is
made to the value resulting from the analysis described above.
Another method used to value this type of instrument, where there are exceptional market conditions of the kind
referred to above, is based on the use of directly observable market variables and/or data such as a published net
asset value.
For unquoted instruments the analysis undertaken to reach a conclusion on the need to adjust for impairment is
based on the use of comparable data and sector multiples for similar issuers operating in the market.
• Other equity instruments
Impairment losses on equity instruments carried at acquisition cost are accounted for as the difference between
the carrying amount and the present value of the expected future cash flows discounted at the market rate of return
for similar securities. These impairment losses are recognized in the income statement for the period in which
they occur, as a direct write-down in the value of the instrument; this cannot be subsequently reversed other than
through the sale of the asset.
In the case of investments in jointly controlled entities and associates, the group estimates impairment loss
by comparing the amount recoverable with the carrying value of the investments. Impairment losses are
recognized in the income statement for the period in which they occur; subsequent reversals of previously
recognized impairment losses are recognized in the income statement for the period in which recovery takes
place.
(f) Transfer and derecognition of financial instruments
Financial assets are only derecognized on the balance sheet when the cash flows generated by the assets
have ceased or when substantially all of their risks and rewards have been transferred. Similarly, financial
liabilities are derecognized only when the obligations generated by the liabilities have expired or are acquired for
settlement or resale.
Details of asset transfers that were in effect at the close of the years 2011 and 2010, including those that did
not result in assets being derecognized from the balance sheet, are given in note 10.
- It must cover exposure to changes in the values of assets and liabilities caused by interest rate and/or
exchange rate movements (fair value hedge); exposure to changes in the estimated cash flows from financial
assets and liabilities and from commitments and transactions forecast as highly probable (cash flow hedge);
or the exposure associated with net investments in foreign operations (hedge of the net investment in a
foreign operation).
- It must effectively eliminate a risk that is inherent in the hedged item or position over the expected term of the
hedge. This means that the derivative must be effective both prospectively, at the date on which it is entered
into under normal circumstances, and retrospectively, based on reasonable evidence that the hedge will
remain effective throughout the life of the item or position to be hedged.
- Suitable documentation must be available to show that the financial derivative has been entered into
specifically to provide a hedge for certain balances or transactions and to show how effective coverage is to
be achieved and assessed (such assessment necessarily being consistent with the group’s management of
its own exposures).
g) Derivatives
Derivatives are instruments which, in addition to providing a gain or a loss, may under certain conditions offset
all or part of the credit and/or market risk associated with balances or transactions. The underlyings used in
derivatives may be interest rates, specified indices, the prices of specified securities, cross-currency exchange
rates or other similar benchmarks. The group uses derivatives traded on organized markets or traded bilaterally with
counterparties on the over-the-counter (OTC) market.
Derivatives may be used as part of the service to customers when they so require, or to manage risks associated
with the group’s own exposures (hedging derivatives), or to realize gains as a result of price movements. Financial
derivatives that do not qualify for designation as hedging instruments are classified as trading derivatives. To be
designated as a hedging instrument, a financial derivative must satisfy the following conditions:
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138
The effectiveness of the coverage provided by derivatives designated as hedging instruments is documented
by effectiveness testing. This is used to verify that divergences due to changes in the fair value of the hedged
item and the hedging instrument remain within reasonable limits over the life of the transaction and that the
intended effect of the derivative contract at inception has been fulfilled. If at any time this condition is not met,
all associated transactions in the hedging group are reclassified as held-for-trading and recognized accordingly in
the balance sheet.
A micro-hedge is considered to be highly effective if, at inception of the hedge and during its life, it is anticipated
prospectively that any changes in the fair value or cash flows of the hedged item that are attributable to the hedged
risk are almost entirely offset by changes in the fair value or cash flows of the hedging instrument. The micro-hedge
is deemed retrospectively to have been highly effective if the gains or losses on the hedging instrument are within a
range of 80% to 125% of the gains or losses on the hedged item.
In the case of a portfolio hedge or macro-hedge, effectiveness is assessed by comparing the overall net
amount of assets and liabilities in each time period with the hedged amount designated for each one of them.
The hedge will only be ineffective where it is found, on examination, that the net amount of assets and liabilities
is less than the hedged amount, in which case the ineffective portion must be recognized immediately in the
income statement.
Hedges may be associated with individual items or balances (micro-hedges) or with portfolios of financial assets
and liabilities (macro-hedges). In the latter case, all financial assets and liabilities being collectively hedged will
involve the same types of risk; this requirement is considered to be satisfied when the interest rate sensitivities of
the individual hedged items are similar.
Derivatives embedded in other financial instruments or other primary contracts are recorded separately as
derivatives where the risk and other characteristics of the derivative are not closely related to those of the primary
contract and the primary contract is not classified as held for trading or as other financial assets or liabilities at fair
value through profit or loss.
• Valuation
The fair value of a financial derivative quoted on an active market is determined from the daily market price.
In the case of instruments for which quoted prices cannot be determined, prices are estimated using internal
models developed by the Bank, the majority of which take data based on observable market parameters as
significant inputs. Otherwise, the models make use of other inputs which rely on internal assumptions based on
generally accepted practice within the financial services community.
The main valuation techniques in use by the group at 31 December 2011 to determine the fair values of financial
instruments are listed below:
• To measure the values of financial instruments of the swap, cross-currency interest rate swap and call
money swap types, the discounted cash flow method is used. The expected future cash flows are discounted
using the interest rate curves for the relevant currencies. Interest rate curves are observable market data.
• To measure financial instruments of the structured equity, index or exchange rate option types the
Black-Scholes model is normally used, although the binomial tree model may also be applied in certain cases.
The group makes use of observable market inputs to access such factors as exchange rates and interest rate
curves, and also non-observable inputs such as volatility and inter-asset correlation data.
• For the valuation of interest rate derivative instruments such as caps and floors, the Black-Scholes model
(plain vanilla options) is used; for more highly structured instruments the Hull-White model is preferred. The
main inputs used by these models are generally observable market data, including the associated interest rate
curves, volatilities and exchange rates.
Valuation models do not embody significant degrees of subjectivity, given that the above methodologies can
be adjusted and calibrated, where applicable, by internal fair value calculations and subsequent comparison with
actively traded prices.
• Accounting for micro-hedges
For financial instruments designated as hedged items or as hedging instruments, gains or losses in value are
accounted for according to the following criteria:
• For fair value hedges any gains or losses, whether in the hedging instrument or the hedged item, to the extent
that they relate to the type of risk being hedged, are recognized directly in the income statement.
• Gains or losses in value on the ineffective portion of cash flow hedging instruments are recognized directly in
the income statement.
• In cash flow hedging, valuation differences in the effective portion of hedging instruments are temporarily
recorded in equity under valuation adjustments. Gains or losses in value are not recognized in profit or loss
until the gains or losses of the hedged item have been taken to the income statement or until the hedged item
reaches maturity.
• Hedges of net investments in foreign operations are accounted for as follows:
1. Any gain or loss attributable to that part of the hedging instrument that qualifies as an effective hedge is
recognized directly in a valuation adjustment account in equity via the statement of changes in equity. Any
other portion of the gain or loss on the instrument is taken immediately to the income statement.
2. Gains or losses on hedging instruments recognized directly in the valuation adjustment account in equity
remain in the account until the instruments are sold or otherwise removed from the balance sheet, at which
time they are taken to profit or loss.
• Accounting for macro-hedges
Fair value macro-hedges of interest rate risk that are highly effective are accounted for as follows:
a) Hedging instruments: gains or losses that arise from measuring derivatives at fair value are recognized
immediately in the income statement.
b) Hedged amount: gains or losses arising from changes in the fair value of the hedged amount that are
attributable to the hedged risk are recognized directly in the income statement with changes in the fair value
of hedged assets or liabilities in portfolio hedges of interest rate risk as balancing items if the hedged amount
relates to financial assets or financial liabilities.
In the case of portfolio cash flow hedges, a change in the value of the hedging instrument is recognised
temporarily in a valuation adjustment account in equity until the period in which the expected transactions occur,
when it is recognized in the income statement.
In the case of both micro-hedges and macro-hedges, the group discontinues hedge accounting procedures when
the hedge expires or is sold, or when the hedging instrument ceases to meet the conditions for being treated as a
hedge, or when the designation of the instrument as a hedge is withdrawn.
When a fair value hedge is discontinued any previous adjustments made to the hedged item are taken to profit
and loss using the effective interest rate method, recalculated as of the date on which the item ceased to be
hedged. The value adjustment must be fully amortized at maturity.
Where a cash flow hedge is discontinued, the cumulative gain or loss on the hedging instrument recognized
in equity under “valuation adjustments” (while the hedge was in effect) continues to be recognized under
that heading until the hedged cash flow occurs, at which time the gain or loss will be taken to profit and loss
unless the hedged transaction is considered unlikely to occur, in which case it is recognized in profit or loss
immediately.
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(h) Non-current assets held for sale and liabilities associated with non-current assets held for sale
The “non-current assets held for sale” heading of the balance sheet comprises the carrying values of assets —
stated individually or combined in a disposal group, or as part of a business unit that the group intends to sell
(discontinued operations) — which will very probably be disposed of in their current state within one year of the
date of the consolidated annual accounts. Investments in jointly controlled entities or associates that meet these
criteria also qualify as non-current assets held for sale.
It can therefore be assumed that the carrying value of an asset of this kind, which may be of a financial or nonfinancial nature, will be recovered through the disposal of the item concerned rather than from its continued use.
Real estate or other non-current assets received by the group in full or part settlement of borrowers’ payment
obligations to the group are treated as non-current assets held for sale, unless the group has decided to make use
of the assets on a continuous basis.
The “liabilities associated with non-current assets held for sale” caption includes amounts payable that are
associated with disposal groups or discontinued operations.
Assets classified as non-current assets held for sale are generally valued at the lesser of their carrying value
at the time they are so classified and their fair value net of their estimated costs to sell. Tangible and intangible
assets that would otherwise be subject to depreciation and amortization are not depreciated or amortized while
they remain in the category of non-current assets held for sale.
If the carrying value of an asset exceeds the fair value net of its estimated costs to sell, the group adjusts
the carrying value of the asset by the amount of such excess, with a corresponding adjustment being made to
gains (losses) on non-current assets held for sale in the consolidated income statement. In the event of one
or more subsequent increases in the fair value of the asset any previously recorded losses will be reversed
and the carrying value will be increased, subject to its not exceeding the carrying value prior to the loss, and a
corresponding adjustment made to gains (losses) on non-current assets held for sale in the consolidated income
statement.
For real estate assets subject to repossession or otherwise received in settlement of debts, as required by
Bank of Spain Circular 3/2010, the amount at which the asset is carried in the balance sheet is the lesser of
the carrying value of the associated financial asset, that is, its amortized cost reduced by the amount of the
estimated impairment and in any event not less than 10%, and the assessed market value of the property in its
current state, less the estimated costs to sell which will in no circumstances be less than 10% of the assessed
value of the property in its current state. The percentage impairment charge increases to 20% for assets
remaining on the balance sheet for more than 12 months following their acquisition — and to 30% if the period
is more than 24 months. As a general rule, however, impairment charges on assets remaining on the balance
sheet for more than 24 months are replaced by updated valuations by independent valuers, but still subject to a
minimum impairment charge of 20%.
These assets have been valued by independent experts listed in the Bank of Spain’s Special Register of
Appraisal Firms in accordance with Ministerial Order ECO/805/2003, on the valuation of properties and certain
rights for defined financial ends. The appraisal firms and agencies employed to determine the market value of
these assets were Ibertasa,S.A, Krata,S.A., Gestion de valoraciones y tasaciones, S.A (Gesvalt), and Colectivo
Arquitectos tasadores, S.A (Catsa).
Estimates of the fair value of intangible assets (software) are based on a technical assessment of the remaining
useful lives of said assets.
(i) Discontinued operations
Gains or losses arising in the year on group operations classified as discontinued operations are recognized
net of tax under profit or loss on discontinued operations (net) in the consolidated income statement,
whether the operation has been derecognized or remains on the balance sheet at the end of the year.
A discontinued operation or activity is a component of the group that has been sold or otherwise disposed
of or is classified as a non-current asset held for sale and, in addition, meets any of the following conditions:
1. It represents a separate major line of business or geographical area of operations.
2. It is part of a single coordinated plan to sell or otherwise dispose of a separate major line of business or
geographical area of operations.
3. It is a subsidiary acquired exclusively with a view to resale.
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A component of an entity is defined as operations and cash flows, such as a subsidiary, business segment
or geographical area of operations, that can be clearly distinguished, operationally and for financial reporting
purposes, from the rest of the entity.
(j) Tangible assets
Tangible assets comprise property, plant and equipment considered likely to be in continuous use by the group,
the net values of land, buildings and other structures held to be leased out or for the realization of capital gains on
disposal, and assets to be leased to customers under operating leases. As a general rule these assets are valued
at cost less accumulated depreciation and less any impairment loss identified from a comparison of the net value
of each item with its recoverable amount.
Tangible assets are depreciated systematically by the straight-line method over their estimated useful lives,
taking the depreciable amount as the acquisition cost of each item less its residual value. Land on which buildings
and other structures have been erected is treated as having an unlimited life and is not depreciated. Annual
depreciation charges on tangible assets are taken to the income statement and are calculated on the basis of the
following average estimated useful lives:
Useful life in years
Land and buildings
Facilities
Office furniture and equipment
Vehicles
Cash dispensers, computers and computer equipment
20 to 50
4.2 to 12.5
3.3 to 10
3.1 to 6.25
2.3 to 4
At the close of each accounting period the group carries out a review to determine whether there are internal
or external indications that the net value of any asset item exceeds its recoverable amount. If the net value of
an asset is found to be in excess of its recoverable amount, the group writes down the asset to its recoverable
amount, that is, the greater of its fair value (based on valuations of independent third parties) and its value in use,
and adjusts future depreciation charges in proportion to its restated carrying value and, if required, its adjusted
estimated useful life. Where there are indications that the value of an asset has been recovered, the group
records the reversal of the impairment loss recognized in previous periods and adjusts future depreciation charges
accordingly. The reversal of an impairment loss on an asset will in no circumstances result in an increase in its
carrying value above the value that the asset would have had if impairment losses in previous periods had not been
recognized.
No less frequently than at the end of each reporting year, the group carries out a review of the estimated useful
lives of all tangible assets for its own use to determine whether there have been any material changes in their
estimated useful lives. If material changes are identified, an adjustment is made by correcting the depreciation
charge for the asset in the income statement on the basis of the adjusted estimated useful life.
Maintenance and repair costs for own-use tangible assets are recorded in the income statement for the year in
which they are incurred.
Tangible assets classified as investment property are composed of the net values of land, buildings and other
structures held by the group to be leased out or for the realization of capital gains on disposal as a result of future
increases in market prices.
For real estate assets received in settlement of debts, being rental properties and therefore carried
under property, plant and equipment as investment properties, the criteria followed are similar to those set out
above in section (h): “non-current assets held for sale and liabilities associated with non-current assets held for
sale”.
The criteria used by the group in stating the acquisition costs of assets leased out under operating leases, for
purposes of depreciation, useful life estimation and impairment loss recognition are the same as for tangible
assets for the group’s own use.
(k) Leases
Leasing contracts are presented on the basis of the economic substance of the lease regardless of its legal form
and are classified from inception as finance or operating leases.
• Finance leases
A lease is treated as a finance lease if substantially all of the risks and rewards of ownership of the asset are
transferred.
Where the group is the lessor of an asset, the sum of the present values of payments receivable from the lessee
plus the guaranteed residual value — normally the price of the purchase option exercisable by the lessee at the
end of the lease — is recorded as financing provided to a third party and is therefore included in the balance sheet
under loans and receivables according to the type of lessee.
Where the Group is the lessee of the asset, the cost of the leased asset is recorded in the balance sheet
according to the nature of the asset and simultaneously as a liability for the same amount. This liability is the
lesser of the fair value of the leased asset and the sum of the present values of payments to the lessor plus the
exercise price of the purchase option, if applicable. The asset is depreciated using procedures similar to those
applicable to property for the group’s own use.
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Finance income and expense arising from leasing agreements are credited or charged to the income statement
so that the return remains constant throughout the term of the lease.
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• Operating leases
Leases other than finance leases are classified as operating leases.
When the group is the lessor of the asset, the acquisition cost of the leased item is recorded in tangible assets.
Leased assets are depreciated by the same procedure as for own-use property of a similar type and the payments
on the leases are recognized in the income statement on a straight-line basis.
Where the group is the lessee of the asset the costs of the lease, including any incentives offered by the lessor,
are recorded in the income statement on a straight-line basis.
Where an asset is subject to a sale at fair value and leaseback under an operating lease, any profit or loss is
recorded at the time of the sale.
For a transaction to be treated as a sale and leaseback of assets under an operating lease the following
conditions must be met:
- The asset must have been sold and all risks and rewards associated with the asset transferred to the
purchaser.
- The purchaser (lessor) cannot unilaterally transfer the leased asset to the vendor (lessee).
- The lessee has no option to repurchase at below market value and the lessor is exposed to the risk of a fall in
the market price of the asset.
- The lessee has no option to extend the lease on terms significantly more favourable than those available in
the marketplace.
- The fair value of the assets sold and leased back is substantially greater than the current value of the lease
rentals.
- The lessor is more than a mere lender: the lessor’s income and exposure to gain or loss is linked to property
market conditions (rental payments and asset values, for example) and not only to interest rates.
- The lease does not cover the greater part of the economic life of the asset.
- The leased asset can be used by third parties without significant alteration.
(l) Business combinations
A business combination is the bringing together of two or more separate entities or economic units into one single
entity or group of entities, where the acquirer obtains control of the other entity or entities.
On the date of acquisition the acquirer incorporates into its financial statements the assets, liabilities and
contingent liabilities of the acquiree, including any intangible assets not recognised by the acquiree.
Positive differences arising between the cost of holdings in subsidiary, jointly controlled or associated
undertakings and the net fair values of the acquired assets adjusted on the date on which they were consolidated
for the first time, are accounted for as follows:
1. If the differences can be assigned to specific assets of the acquiree, they are accounted for by increasing
the value of any assets or reducing the value of any liabilities whose market values are above or below,
respectively, the net fair values at which they were recorded on the acquiree’s balance sheet, provided that
their accounting treatment has been similar to the treatment that would be given to those same assets or
liabilities by the group.
2. If they are assignable to specific intangible assets they are accounted for by explicit recognition in the
consolidated balance sheet provided that their fair value at the acquisition date can be reliably determined.
3. Any remaining differences that cannot be specifically recognized are recorded as goodwill and assigned to one
or more specific cash-generating units.
Negative differences, once they have been quantified, are recognized in the income statement.
Any purchases of minority interests after control of an entity has been taken are recognized as increases in the
cost of the business combination.
Where the cost of a business combination or the fair values assignable to identifiable assets, liabilities or
contingent liabilities of the acquiree cannot be determined with certainty, the initial accounting for the business
combination is treated as provisional. However, the accounting process is required to be completed within one year
of the acquisition date, and must take effect as from that date.
(m) Intangible assets
Intangible assets are identifiable non-monetary assets without physical substance. Intangible assets are deemed to
be identifiable when they are separable from other assets because they can be sold, leased or otherwise disposed
of individually, or when they arise from a contract or other legal transaction. An intangible asset will be recognized
when it meets this criterion and the group considers it likely that economic benefits will flow from the asset and its
cost can be reliably measured.
Intangible assets are initially recognized at acquisition or production cost, and are subsequently valued at cost
less any accumulated amortization and/or impairment losses.
- Key business assumptions. These assumptions are used as a basis for cash flow projections as part of the
valuation. For businesses engaging in financial operations, projections are made for the following variables:
changes in lending volumes, default rates, customer deposits and rates of interest under a forecast economic
scenario, and capital requirements.
- Estimates of macroeconomic variables and other financial parameters.
- The period covered by the projections, normally five years. This yields a recurring pattern in terms of both
earnings and profitability. These projections take account of the economic outlook at the time of the
valuation.
- The discount rate. The present value of future dividends, from which a value in use is derived, is calculated
from a discount rate taken as the capital cost of the entity (Ke) from the standpoint of a market
participant. To determine this present value the CAPM method is used as expressed by the formula:
“Ke = Rf + β (Rm) + α”, where: Ke = Required return or cost of capital; Rf = Risk-free rate;
β = Company’s systemic risk coefficient, Rm = Expected return of the market and α = Non-systemic
risk premium.
- The rate of growth used to extrapolate cash flow projections beyond the end of the period covered by the most
recent projections. Based on long-term estimates for the main macroeconomic numbers and key business
variables, and bearing in mind the current financial market outlook at all times, an estimate of a nil rate of
growth in perpetuity can be arrived at.
• Goodwill
A positive difference between the cost of a business combination and the acquired portion of the net fair value
of the assets, liabilities and contingent liabilities of the acquired entity is recognized on the balance sheet as
goodwill. Goodwill represents a payment made by the group in anticipation of the future economic benefits from
assets of an acquired entity that are not capable of being individually or separately identified and recognized.
Goodwill is recognized only if it has been purchased for valuable consideration through a business combination.
Goodwill is not amortized, but at the end of each accounting period it is subjected to analysis for any possible
impairment that would reduce its recoverable value to below its stated net cost and, if found to be impaired, is
written down against the consolidated income statement.
To detect possible indications of goodwill impairment value appraisals are undertaken, generally on a present
value of future distributable earnings basis, having regard to the following parameters:
No impairment loss recognized for goodwill can subsequently be reversed.
• Other intangible assets
This item is made up largely of intangible assets identified in business combinations and includes such assets as
contractual relations with customers, deposits or trade marks and computer applications.
Other intangible assets may have useful lives that are indefinite — where, after all relevant factors have been
taken into account, it has been concluded that there is no foreseeable limit to the time during which they can be
expected to generate net cash flows for the group — or finite. Intangible assets that have indefinite useful lives
are not amortized; however, at the end of each accounting period, the group reviews their remaining useful lives to
verify that they are still indefinite and takes appropriate action if it finds otherwise. Intangible assets whose useful
lives are finite are amortized on the basis of their useful lives according to criteria similar to those used for tangible
assets.
Any loss in the stated value of an intangible asset due to impairment will, in any event, be recognized by the
group and a corresponding adjustment made to the consolidated income statement. The rules for recognizing
losses in value due to impairment of intangible assets and any recoveries of impairment losses in earlier periods
are similar to those that apply to tangible assets.
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(n) Inventories
Inventories are non-financial assets that are being held for sale or for use by the group in the normal course of
business, or are in the process of production, construction or development for such sale, or are to be consumed in
the production process or in the rendering of services.
Inventories are valued at the lesser of their cost value, including all purchase and conversion costs and other
direct and indirect costs incurred in bringing the inventories to their present condition and location, and their net
realization value.
Net realization value means the estimated sale price net of the estimated production and marketing costs to
carry out the sale.
Any value adjustments, whether caused by impairment due to damage, obsolescence or a fall in sale prices, to
reflect their net realizable value, or arising from other losses, are recognized as expense in the year in which the
impairment or other loss occurred. Any subsequent recoveries in value are recognized in the consolidated income
statement in the year in which they occur.
Any impairment in the value of inventories comprising land and buildings is calculated on the basis of appraisals
by independent professional valuers authorized by the Bank of Spain and listed in its Special Register of Appraisal
Firms. These are applied in accordance with the rules for the valuation of real estate and certain rights for particular
financial purposes set out in the Ministerial Order ECO/805/2003.
For inventories received in settlement of debts the criteria followed are similar to those set out in section (h)
above under “non-current assets held for sale and liabilities associated with non-current assets held for sale”.
(o) Own equity instruments
An own equity instruments is defined as an equity instrument that:
144
- does not contain any contractual obligation to the issuer: to deliver cash or another financial asset to a third
party, or to exchange financial assets or liabilities with a third party on terms potentially unfavourable to the
issuer;
- will or may be settled in the issuer’s own equity instruments and is: a non-derivative instrument for which
the issuer is or may be obliged to deliver a variable number of its own equity instruments, or a derivative
instrument that will or may be settled for a fixed amount of cash or another financial asset, for a fixed number
of the issuer’s own equity instruments.
All transactions in the group’s own equity instruments, whether on issue or cancellation or otherwise, are
recognized directly in equity.
Changes in the value of instruments classified as own equity instruments are not recognized in the financial
statements. Any consideration paid or received for such instruments is added or deducted directly in equity and the
associated transaction costs are deducted in equity.
(p) Payments based on equity instruments
The delivery to employees of the group’s own equity instruments in payment for their services, where the
instruments are delivered on completion of a specified period of service, is recognized as an expense for services
over the period during which the services are being provided. A corresponding increase in equity or a liability
is recognized, according to whether the compensation is classified as equity instrument-based compensation,
liabilities to employees based on the value of the group’s own equity instruments, or transactions with employees
paid in cash or equity instruments.
Where the liability is discharged by means of a transfer of commitments to financial institutions outside the
group, that is, through derivatives contracts that precisely mirror the terms and economic conditions on which
the equity instruments were issued, the group charges the anticipated costs associated with the derivatives
contracts to the income statement according to the specific period in which the services are provided, but does
not recognize any increase in equity or in the associated liability.
Transactions where, in exchange for the receipt of goods or services other than those provided by employees,
settlement is in own equity instruments or by a payment based on own equity instruments, are accounted for
according to the same rules as apply to employee compensation.
(q) Liabilities under insurance contracts
Liabilities under insurance contracts refer, primarily, to life policies sold by Assegurances Segur Vida, S.A., a group
subsidiary, in which the investment risk is borne by policyholders.
To provide for commitments in respect of investments related to life insurance policies, provisions are
made having regard to the value of the assets on the basis of which policyholders’ entitlements will be
determined.
(r) Provisions and contingent liabilities
Provisions are current obligations of the group which have arisen from past events and whose nature at the
balance sheet date is clearly specified, but which are of uncertain timing and amount; when such obligations
mature or become due for settlement, the group expects to settle them through an outflow of resources
embodying economic benefits.
Provisions for restructuring will be recognized only when the group has a detailed, formal plan identifying
fundamental changes to be made and where the group has started to implement the plan or has publicly
announced its main features, or where there is objective evidence of its implementation.
Contingent liabilities are possible obligations that arise from past events and whose existence will be confirmed
only by the occurrence or non-occurrence of one or more uncertain future events that lie outside the group’s
control. Contingent liabilities include present obligations of the group the settlement of which is not likely to result
in an outflow of resources embodying economic benefits or whose amount, in extremely rare instances, cannot be
measured with sufficient reliability.
(s) Provisions for pensions
The group’s pension commitments to its employees are as follows:
• Defined contribution plans
These are predetermined contributions paid into a separate entity in accordance with agreements reached with
particular groups of employees. Contributions are made subject to there being no legal or constructive obligation to
make additional contributions to cover investment or other risks.
Contributions to defined contribution plans in 2011 totalled €15,207,000 (€11,734,000 in 2010).
• Defined benefit plans
Defined benefit plans provide for all current pension commitments agreed under articles 35, 36 and 37 of the 21st
Collective Agreement for the banking industry.
These commitments are financed in two ways: through the pension scheme and through insurance contracts.
The Banco Sabadell employee pension scheme covers benefits payable under collective agreements with
members of regulated employee organizations as described above, with the following exceptions:
1. Additional commitments on early retirement as provided for by article 36 of the Collective Agreement.
2. Disability in certain circumstances.
3. Widows’, widowers’ and orphans’ benefits payable on the death of retired employees recognized as having
entered the Bank’s service after 8 March 1980.
The Banco Sabadell employee pension scheme is treated for all purposes as a scheme asset.
Insurance policies provide general cover for specified commitments under articles 36 and 37 of the 21st Banking
Industry Agreement, including:
1. Commitments that are expressly excluded from the Banco Sabadell employee pension scheme (1, 2 and 3
above).
2. Serving employees covered by a collective agreement with the former Banco Atlántico.
3. Pension commitments in respect of some serving employees, not provided for under the collective agreement.
4. Commitments to employees on leave of absence who are not entitled to benefits under the Banco Sabadell
employee pension scheme.
5. Commitments to early retirees. These may be partly financed out of pension rights under the Banco Sabadell
employee pension scheme.
145
146
These insurance policies have been taken out with insurers outside the group, principally for commitments to
former Banco Atlántico employees, and also with BanSabadell Vida, S.A. de Seguros y Reaseguros.
The acquisition of Banco Guipuzcoano resulted in the takeover of Gertakizun E.P.S.V., a voluntary social
insurance society which covers defined benefit commitments in respect of the bank’s serving and former
employees. The society was set up by Banco Guipuzcoano in 1991 as a legally separate entity governed by
Law 25/83 de 27 October of the Basque Parliament, Decree 87/84 of 20 February and Decree 92/2007
of 29 May. The defined benefit commitments are covered by policies taken out with insurers independent
from the group.
Commitments to early retirees from the Banco Guipuzcoano up to retirement age are provided for by an internal
retirement fund.
The balance sheet heading “provisions for pensions and similar obligations” includes the actuarial present value
of pension commitments, calculated individually by the projected unit credit method on the basis of financial and
actuarial assumptions which are set out below.
From the obligations so calculated, the scheme assets at their fair value have been deducted. These assets,
including insurance polices, are those from which pension obligations are to be settled since they meet the
following requirements:
1. They are not owned by the Bank but by a legally separate, non-related third party.
2. They are available only to pay or fund employee benefits and are not available to creditors of the Bank, even in
the event of the Bank becoming insolvent.
3. They cannot be returned to the Bank unless the assets remaining in the scheme are sufficient to meet all
obligations of the scheme and of the Bank relating to employee benefits, or unless assets are to be returned
to the Bank to reimburse it for employee benefits previously paid.
4. They are not non-transferable financial instruments issued by the Bank.
The assets to fund pension commitments shown in the individual balance sheet of BanSabadell Vida, S.A. de
Seguros y Reaseguros, a group insurance subsidiary, are not scheme assets as the company is a related party of
the Bank.
The group has decided to apply a corridor in recognizing in profit and loss for the year only one fifth of any
actuarial gains and losses that exceed 10% of the greater of the present value of defined benefit obligations and
the fair value of scheme assets at the end of the immediately preceding year.
However, actuarial gains or losses related to commitments to early retirees until they acquire legally retired
status are recognized immediately.
The actuarial assumptions used in the valuation of pension commitments are as follows:
Tables
Discount rate - pension scheme
Discount rate - own fund
Discount rate - polices taken out with related parties
Discount rate - policies taken out with non-related parties
Inflation
Rate of increase in salaries
Retirement due to disability
Staff turnover
Early retirement
Normal retirement age
2011
2010
PERM / F 2000 (new)
4.00% per annum
4.00% per annum
4.60% per annum
4.60% per annum
2.00% per annum
3.00% per annum
SS90-Absoluta
None assumed
Allowed for
65
PERM / F 2000 (new)
4.00% per annum
--4.60% per annum
4.60% per annum
2.00% per annum
3.00% per annum
SS90-Absoluta
None assumed
Allowed for
65
- Monetary assets and liabilities are translated at the closing exchange rate, defined as the average spot
exchange rate ruling at the reporting date.
- Non-monetary items measured at historical cost are translated at the exchange rate ruling on the date of
acquisition.
- Non-monetary items stated at fair value are translated at the exchange rate ruling on the date on which the
fair value was determined.
- Income and expenses are translated at the exchange rates ruling at the transaction date.
In general, foreign exchange differences arising on the translation of debit and credit balances denominated in
foreign currency are recorded in the income statement. However, for foreign exchange differences arising on nonmonetary items measured at fair value where the fair value adjustment is made and recognized under valuation
adjustments in equity, the exchange rate component is recorded separately from the revaluation of the nonmonetary item.
(t) Foreign currency transactions
The functional currency of the group is the euro. All balances and transactions denominated in currencies other
than the euro are therefore treated as denominated in a foreign currency. Euro equivalent values (in thousands
of euros) for the aggregate balances of asset and liability accounts in foreign currency held by the group at 31
December 2011 and 2010 are given in note 27.
On initial recognition, debit and credit balances denominated in foreign currency are translated to the functional
currency at the spot exchange rate — defined as the exchange rate for immediate delivery — on the recognition
date. Subsequent to initial recognition, the following procedures are used to translate foreign currency balances to
the functional currency:
The discount rate on insurance policies has been determined by reference to the yield on AA-rated 15-year
corporate debt (Bloomberg €AA composite).
The age of early retirement for all employees is assumed to be the earliest retirement date after which pension
entitlements cannot be revoked by the employer.
The expected long-term return on pension scheme assets is 4% per annum (a target return that is compatible
with a level of risk set in accordance with the investment policy of the Banco Sabadell employee pension scheme).
For fixed-rate, without profits, unmatched insurance policies, the return assumed in respect of each commitment is
the average insured interest on each premium paid, weighted according to the mathematical reserve corresponding
to each premium paid. For fixed-rate, without profits, matched insurance policies the rate of return used is the
discount rate.
Commitments for Banco Guipuzcoano employees have been valued taking a discount rate of 4% and using
the SS-1990 disability tables, the GRM/F 95 mortality tables, an annual rate of increase in salaries of 2.75%, a
cumulative annual rate of increase in prices of 1.75%, an expected yield on assets of 4%, the projected unit credit
contribution calculation method and the earliest age at which employees are entitled to retire.
147
(u) Recognition of income and expense
Recognition of income and expense Interest income and expense and similar items are generally recorded in the
period in which they accrue, using the effective interest method. Dividends received from other companies are
recognized as income when the entitlement vests.
Generally, fee and commission income and expense and similar items are recorded in the income statement
according to the following criteria:
- Fees and commissions relating to financial assets and liabilities measured at fair value through profit or loss
are recognized when received.
- Fees and commissions relating to transactions or services that take place over a period of time are allocated
over the period during which the transaction or service takes place.
- Fees and commissions relating to transactions or services that are completed in a single act are recognized at
the time of the act that gives rise to the fee or commission.
148
Financial fees and commissions forming an integral part of the effective cost or yield of a financial transaction
have been deferred net of associated direct costs and recognized in the income statement over the expected
average life of the transaction.
Non-financial income and expense is accounted for on an accrual basis. Amounts paid or received that are
deferred over time are recorded at the value obtained by discounting the expected cash flows at market rates of
interest.
(v) Income tax
Spanish corporation tax and similar tax expense applicable to foreign subsidiaries are treated as expenses
and are recorded in the income statement under income tax unless the tax has arisen on a transaction
accounted for directly in equity, in which case the tax is also recognized directly in equity, or unless it relates
to a business combination, in which case the deferred tax is recognized as an asset or liability of the business
combination.
The tax expense shown under the income tax heading is the tax charge assessed on the taxable income
for the year, after taking account of applicable tax deductions and allowances and any tax losses. The taxable
income for the year may be at variance with the profit for the year as shown in the income statement, as it
excludes items of income or expenditure that are taxable or deductible in other years as well as items which are
non-taxable or non-deductible.
Deferred tax assets and liabilities refer to the tax that is expected to be payable or recoverable on
differences between the carrying values of assets and liabilities in the financial statements, on the one hand,
and the tax bases of those assets and liabilities, on the other. These tax assets and liabilities are determined
by applying to such temporary differences or tax credits the tax rate at which they are expected to be recovered
or paid.
A deferred tax asset such as a tax prepayment, or a credit in respect of a tax deduction or allowance, tax loss or
other benefit is always recognized provided that the group is likely to obtain sufficient future taxable profits against
which the tax asset can be realized. A deferred tax liability will, in general, always be recognized.
All recognized deferred tax assets and liabilities are reviewed in each accounting period to verify that they still
apply and are adjusted as necessary.
The undertakings in the Banco Sabadell group that are included in the consolidated accounts for corporation tax
purposes are shown in Annex I. Their tax charges for the year have been worked out on this basis and are payable
to Banco de Sabadell, S.A. as the parent company of the consolidated group, which is responsible for paying the
tax to the Revenue authorities.
(w) Financial guarantees
Financial guarantees are contracts by which the group undertakes to make specified payments for a third party
in the event of the third party failing to do so. They may take a variety of legal forms such as guarantees, avals,
insurance contracts or credit derivatives.
Guarantees are recognized by the group at their fair value under the liability heading “other financial
liabilities”. On first recognition and in the absence of evidence to the contrary, the fair value will be the present
value of the expected cash flows. The present value of the future cash flows receivable is simultaneously
recorded as an asset.
Subsequent to initial recognition, guarantee contracts are treated as follows:
- The value of all fees, commissions or premiums receivable is discounted by recording the differences in the
income statement as interest income.
- The value of a guarantee contract is the amount initially recognized as a liability item less the amount credited
to the consolidated income statement on a straight-line basis over the anticipated life of the contract.
Financial guarantees are classified according to the credit risk attributable to the customer or the transaction
and in appropriate cases an assessment will be made of the need to provide for the risk by following procedures
similar to those described in note 1(e) for debt instruments carried at amortized cost.
(y) Consolidated cash flow statement
The consolidated cash flow statement includes certain items which are defined as follows:
(x) Assets under management
Third party assets managed by the group are not included in the consolidated balance sheet. Management fees are
shown in the income statement under fees and commission income.
- Cash flows: inflows and outflows of cash and cash equivalents, where “cash equivalents” are short-term,
highly liquid investments for which the risk of a change in value is minimal.
- Operating activities: the ordinary activities of the group, as well as other activities that cannot be described as
investing or funding activities.
- Investing activities: the acquisition, sale or other disposal of long-term assets and other investments not
included in cash and cash equivalents.
- Funding activities: activities that result in changes in the size and composition of equity and of liabilities not
included in operating activities.
(z) Netting
Where credit and debit balances arising from transactions are permitted, whether by contract or by law, to be set off
against each other and the group intends to settle them on a net basis or to realize the asset and settle the liability
simultaneously, they are reported in the balance sheet at their net values.
149
Note 2. Banco Sabadell Group
The undertakings comprising the group as at 31 December 2011 and 2010, are listed in Annex I along with
their registered offices, principal activities, the Bank’s proportional holding in each, key financial data, and the
consolidation method used (full consolidation, proportional consolidation or equity method) in each case.
a) Changes in the composition of the consolidated group
The changes in the composition of the consolidated group are described below.
Changes in the year 2011:
Undertakings included in the consolidated accounts for the first time:
€’000
Name of
undertaking (or operation)
acquired or merged
Desarrollos Inmobiliarios La Serreta, S.L. (a)
Hidrodata, S.A.
Solvia Atlantic, L.L.C.
Societat d’Inversió dels Enginyers, S.L.
Atalanta Catalunya 2011, S.L.
Energias Renovables Sierra Sesnández, S.L. (a)
Eólica Sierra Sesnández, S.L. (b)
Eólica Mirasierra, S.L.
Parque Eólico Loma del Capón, S.L.
Sistema Eléctrico de Conexión Valcaire, S.L. (b) (c)
Cost of
combination
Category
Transaction
effective
date
Amount paid/
consideration
Associate
Associate
Subsidiary
Associate
Associate
Multigroup
Multigroup
Multigroup
Subsidiary
Associate
01/01/2011
05/04/2011
23/05/2011
17/06/2011
24/08/2011
29/07/2011
29/07/2011
29/09/2011
07/10/2011
07/10/2011
5,083
10,200
12
10
1
3,776
2,904
-
Voting Voting rights
acquired
rights
as prop. of
acquired
total %
%
Direct/
indirect
Method
25.00%
33.42%
100.00%
28.79%
25.00%
62.10%
62.10%
50.00%
100.00%
46.88%
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Equity method
Equity method
Full consolidation
Equity method
Equity method
Proportion. consolid.
Full consolidation
Equity method
25.00%
33.42%
100.00%
28.79%
25.00%
62.10%
62.10%
50.00%
100.00%
46.88%
(a) Added to the scope of consolidation as a result of Inerban Proyectos, S.L., the holder of 25% of the shares, having changed its consolidation method to the
equity method.
(b) Shareholding acquired on 29 July 2011 through the acquisition of a shareholding in the company Energias Renovables Sierra Sesnández, S.L.
(c) Shareholding acquired on 7 October 2011 through the acquisition of a shareholding in the company Parque Eólico Loma del Capón.
150
Acquisition and subsequent merger of Hidrodata, S.A. through the contribution of shares held by Sinia Renovables
S.C.R., R.S., S.A. in Santex Pluser, S.L.
On 5 April 2011 a merger by takeover was recorded in the Barcelona Mercantile Registry whereby Hidrodata, S.A.
took over companies including Santex Pluser, S.L., a wholly owned subsidiary of Sinia Renovables S.C.R., R.S.,
S.A., and its investee Establecimientos Industriales y de Servicios, S.L.
As a result of this operation, the Banco Sabadell group, via its subsidiary Sinia Renovables, S.C.R. de R.S., S.A.,
acquired a 33.42% stake in Hidrodata, S.A. This stake was further increased to 45.75% on 18 May 2011 through
the acquisition of new shares in Hidrodata, S.A.
Acquisition by Sabadell United Bank, N.A. of assets and liabilities of the company Lydian Private Bank & Trust
Sabadell United Bank N.A. (SUB), a subsidiary of Banco Sabadell based in the state of Florida (USA),
was designated as the successful bidder in the sale organised by the Federal Deposit Insurance
Corporation (FDIC) of Lydian Private Bank, a financial institution established in Florida that was in receivership
at that time.
Following the adjudication, under a process established beforehand by the FDIC, SUB obtained certain assets
totalling approximately USD 1,607 million (€1,118 million) with a discount of approximately USD 176 million
(€122 million) and assumed certain liabilities amounting to approximately USD 1,607 million (€1,118 million),
including approximately USD 1,224 million (€852 million) of customer deposits, approximately USD 351 million
(€244 million) in advances from Federal Home Loan Bank, and approximately USD 32 million (€22 million) in
other minor items.
This transaction was carried out under a loss-share agreement whereby most of the potential loan losses are
shared 80%/20% between FDIC and SUB respectively.
This transaction, which involved no capital outlay by SUB, generated goodwill of €13,213,000.
Acquisition of 50% of Eólica Mirasierra, S.L.
On 29 September 2011, the group acquired, through its subsidiary Sinia Renovables S.C.R. de R.S.,S.A., a
50% stake in Eólica Mirasierra, S.L. for €13,000. On the same date, at an Extraordinary General Meeting, the
Shareholders of Eólica Mirasierra, S.L. agreed a capital increase comprising two new shares with a nominal value
of 10 euros and with the same rights and nature as the shares already issued, plus a share premium of
€3,763,000 per share.
The shares were subscribed equally by the company’s two shareholders, Sinia Renovables, S.C.R. de R.S. and
Enerpal Eólica S.L.U, and paid for by a monetary contribution.
Acquisition of 100% of Parque Eólico Loma del Capón, S.L.
On 7 October 2011, the group acquired, through its subsidiary Sinia Renovables S.C.R. de R.S.,S.A., a 100% stake
in Eólico Loma del Capón, S.L. for €2,904,000.
Undertakings no longer included in the consolidated accounts:
Incorporation of Solvia Atlantic, L.LC
On 23 May 2011, the company Solvia Atlantic, L.L.C., wholly owned by Solvia Development, S.L., a subsidiary of
the Banco Sabadell group, was incorporated with share capital of €10,200,000.
€’000
Name of
sold, spun off, or eliminated
Category
Proportion of
voting rights
Transaction
effective surrendered on
disposal (%)
date
Proportion of
voting rights
held after Profit/loss
disposal (%)
to group
Direct/
indirect
Consolidation
method
Establecimientos Industriales y de Servicios, S.L.(a)
Santex Pluser, S.L. (a)
Zurriola Inversiones, S.A.
Associate 05/04/2011
Subsidiary 05/04/2011
26.75%
100.00%
100.00%
0.00%
0.00%
0.00%
0
0
9
Indirect
Indirect
Indirect
Equity method
Full consol.
Full consol.
Guipuzcoano Mediador de Seguros,
Sociedad de Agencia de Seguros, S.L. (b)
100.00%
0.00%
0
Indirect
Full consol.
Guipuzcoano, Entidad Gestora
de Fondos de Pensiones, S.A. (b)
100.00%
0.00%
0
Indirect
Full consol.
PR 12 PV 15, S.L. (b)
Associate 20/12/2011
41.00%
0.00%
0
Indirect
Equity method
(a) Items removed from the scope of consolidation as a result of the merger with Hidrodata, S.A. (see section on additions to the scope of consolidation for further information).
(b) Companies removed from the scope of consolidation as a result of their winding up and/or liquidation.
151
Changes in the year 2010:
Undertakings included in the consolidated accounts for the first time:
€’000
Name of
acquired or merged
152
6350 Industries, S.L. (a)
Air Miles España, S.A.
Aldoluz, S.L. (a)
Alfonso XII, 16 Inversiones, S.L. (a)
Anara Guipuzcoa, S.L. (a)
Banco Guipuzcoano, S.A. (a)
Bansabadell Consulting, S.L. (b)
Bitarte S.A. (a)
BlueSky Property Development, S.L. (a)
Casas del Mar levante, S.L. (a)
C-Cuspide 6, S.A. (a)
Cepric, lda. (Sdad. Portuguesa) (a)
Desarrollos Inmobiliarios Pronegui, S.L. (a)
Diana Capital Inversion S.G.F.C.R. S.A. (a)
Easo Bolsa, S.A. (a)
Ederra, S.A. (a)
Egumar Gestion, S.L. (a)
Erbisinia Renovables, S.L. (c)
Espazios Murcia, S.L. (a)
ESUS, Energía Renovable, S.L.(c)
Eurofragance, S.L. (d)
Gate Solar, S.L. SPE (a)
Gazteluberri Gestión, S.L. (a)
Gazteluberri, S.L. (a)
Grao Castalia, S.L. (a)
Guipuzcoano Capital, S.A. Unipersonal (a)
Guipuzcoano Mediador de Seguros, Sociedad de Agencia
de Seguros, S.L. (a)
Guipuzcoano Promoción Empresarial, S.L. (a)
Guipuzcoano Valores, S.A. (a)
Guipuzcoano, Correduría de Seguros del
Grupo Banco Guipuzcoano, S.A. (a)
Guipuzcoano, Entidad Gestora de
Fondos de Pensiones, S.A. (a)
Guipuzcoano, S.G.I.I.C., S.A. (a)
Guisain, S.L. (a)
Harinera Ilundain, S.A. (a)
Harugui Promocion y Gestion Inmobiliaria, S.L. (a)
Haygon La Almazara, S.L.
Hidrophytic, S.L. (a)
Hondarriberri, S.P.E., S.L. (a)
IFOS, S.A. (e)
Improbal Norte, S.L. (a)
Inerban Proyectos, S.L. (a)
Key Vil I, S.L. (a)
Kosta Bareño, S.A. (a)
Lagar de Tasara, S.L. (a)
Lizarre Promociones, A.i.e. (a)
Loalsa Inversiones Castilla la Mancha, S.L. (a)
M.P. Costablanca, S.L. (a)
Mariñamendi, S.L. (a)
Mirador del Segura 21, S.L. (a)
Mursiya Golf, S.L. (a)
Naguisa Promociones, S.L. (a)
Cost of
combination
Amount
paid
Voting
rights
acquired
%
Voting rights
acquired
as prop.
of total %
Direct/
indirect
Consolidation
method
Category
Transaction
effective
date
Associate
Associate
Associate
Subsidiary
Associate
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Associate
Associate
Associate
Associate
Associate
Subsidiary
Subsidiary
Associate
Multigroup
Associate
Associate
Associate
Multigroup
Subsidiary
Subsidiary
Subsidiary
Subsidiary
24/11/2010
03/05/2010
24/11/2010
24/11/2010
24/11/2010
24/11/2010
22/10/2010
24/11/2010
24/11/2010
24/11/2010
24/11/2010
24/11/2010
24/11/2010
24/11/2010
24/11/2010
24/11/2010
24/11/2010
30/12/2009
24/11/2010
15/07/2010
08/07/2010
24/11/2010
24/11/2010
24/11/2010
24/11/2010
24/11/2010
2,140
613,479
3
1
23
9,050
-
37.50
25.00
30.05
100.00
40.00
100.00
100.00
100.00
100.00
33.33
33.00
45.00
40.00
41.23
100.00
97.85
30.00
49.00
45.00
45.00
25.00
50.00
100.00
100.00
100.00
100.00
37.50
25.00
30.05
100.00
40.00
100.00
100.00
100.00
100.00
33.33
33.00
45.00
40.00
41.23
100.00
97.85
30.00
49.00
45.00
45.00
25.00
50.00
100.00
100.00
100.00
100.00
Indirect
Direct
Indirect
Indirect
Indirect
Direct
Direct
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Equity method
Equity method
Equity method
Full consolidation
Equity method
Full consolidation
Full consolidation
Full consolidation
Full consolidation
Equity method
Equity method
Equity method
Equity method
Equity method
Full consolidation
Full consolidation
Equity method
Proportional consol.
Equity method
Equity method
Equity method
Equity method
Full consolidation
Full consolidation
Full consolidation
Full consolidation
Subsidiary
24/11/2010
-
100.00
100.00
Indirect
Full consolidation
Subsidiary
Subsidiary
24/11/2010
24/11/2010
-
100.00
100.00
100.00
100.00
Indirect
Indirect
Full consolidation
Full consolidation
Subsidiary
24/11/2010
-
60.00
60.00
Indirect
Full consolidation
Subsidiary
24/11/2010
-
100.00
100.00
Indirect
Full consolidation
Subsidiary
Associate
Associate
Associate
Subsidiary
Multigroup
Subsidiary
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Subsidiary
Associate
Associate
Associate
24/11/2010
24/11/2010
24/11/2010
24/11/2010
24/11/2010
24/11/2010
24/11/2010
07/10/2010
24/11/2010
24/11/2010
24/11/2010
24/11/2010
24/11/2010
24/11/2010
24/11/2010
24/11/2010
24/11/2010
24/11/2010
24/11/2010
24/11/2010
-
100.00
40.00
45.00
50.00
75.00
50.00
100.00
20.00
35.00
50.00
40.00
20.00
33.78
40.00
20.00
45.00
100.00
32.20
49.70
45.00
100.00
40.00
45.00
50.00
75.00
50.00
100.00
20.00
35.00
50.00
40.00
20.00
33.78
40.00
20.00
45.00
100.00
32.20
49.70
45.00
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Full consolidation
Equity method
Equity method
Equity method
Full consolidation
Equity method
Full consolidation
Equity method
Equity method
Equity method
Equity method
Equity method
Equity method
Equity method
Equity method
Equity method
Full consolidation
Equity method
Equity method
Equity method
€’000
Name of
acquired or merged
Amount
paid
Voting
rights
acquired
%
Voting rights
acquired
as prop.
of total %
Direct/
indirect
Consolidation
method
Category
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
24/11/2010
24/11/2010
24/11/2010
24/11/2010
24/11/2010
24/11/2010
24/11/2010
24/11/2010
24/11/2010
-
40.00
49.50
33.00
34.14
41.00
25.00
40.00
40.00
40.00
40.00
49.50
33.00
34.14
41.00
25.00
40.00
40.00
40.00
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Equity method
Equity method
Equity method
Equity method
Equity method
Equity method
Equity method
Equity method
Equity method
Associate
24/11/2010
-
20.00
20.00
Indirect
Equity method
Subsidiary
Associate
Subsidiary
Associate
Subsidiary
Subsidiary
Associate
Subsidiary
Subsidiary
Associate
Associate
Subsidiary
Associate
Subsidiary
Associate
Associate
Subsidiary
24/11/2010
24/11/2010
16/12/2010
24/11/2010
24/11/2010
15/01/2010
24/11/2010
24/11/2010
24/11/2010
24/11/2010
24/11/2010
24/11/2010
24/11/2010
24/11/2010
24/11/2010
24/11/2010
24/11/2010
3
117,336
-
100.00
50.00
100.00
25.00
100.00
100.00
45.02
100.00
100.00
40.00
35.00
100.00
30.00
100.00
45.00
32.20
100.00
100.00
50.00
100.00
25.00
100.00
100.00
45.02
100.00
100.00
40.00
35.00
100.00
30.00
100.00
45.00
32.20
100.00
Indirect
Indirect
Direct
Indirect
Indirect
Direct
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Full consolidation
Equity method
Full consolidation
Equity method
Full consolidation
Full consolidation
Equity method
Full consolidation
Full consolidation
Equity method
Equity method
Full consolidation
Equity method
Full consolidation
Equity method
Equity method
Full consolidation
NF Desarrollos, S.L. (a)
Norfin 21, S.L. (a)
Parque Boulevard Finestrat, S.L. (a)
Parque del Segura, S.L. (a)
PR 12 PV 15, S.L. (a)
Probur BG XXI, S.L. (a)
Promociones Abaco Costa Almeria, S.L. (a)
Promociones Aguiver, S.L. (a)
Promociones Florida Casas, S.L. (a)
Promociones y Desarrollos Creaziona Castilla
la Mancha, S.L. (a)
Promociones y Desarrollos Creaziona Levante, S.L. (a)
Promociones y Desarrollos Urbanos Oncineda, S.L. (a)
Proteo Banking Software, S.L. (b)
Residencial Haygon, S.L. (a)
Residencial Kataoria ,S.L. (a)
Sabadell United Bank, N.A. (f)
Saprosin Promociones, S.L. (a)
Son Blanc Caleta, S.L. (a)
Tierras Vega Alta del Segura, S.L. (a)
Torre Sureste, S.L. (a)
Txonta Egizastu, S.L. (a)
Urdin Oria, S.A. (a)
Urtago Promozioak, A.i.e. (a)
Urumea Gestión, S.L. (a)
Vera Muniain, S.L. (a)
Vistas del Parque 21, S.L. (a)
Zurriola Inversiones, S.A. (a)
Cost of
combination
Transaction
effective
date
(a) Included in the consolidated accounts as a result of the acquisition of Banco Guipuzcoano, S.A.
(b) New company formation
(c) Acquired by the group through its subsidiary Sinia Renovables, S.C.R., S.A., Erbisinia Renovables, S.A., was acquired on 30 December 2009 and registered in November 2010.
(d) Acquired by the group through Aurica XXI, S.C.R., S.A., S.A.
(e) Acquired by the group through Servicios Reunidos, S.A.
(f) Acquired by the group under its former name of Mellon United National Bank. The company name was changed to Sabadell United Bank, N.A.
The holders of every eight ordinary shares in Banco Guipuzcoano taking up the offer, received in exchange:
(i) five Banco Sabadell shares with a nominal value of €0.125 each (either shares from the Bank’s existing
holding of treasury shares, or newly issued shares), to have the same voting and dividend rights as other
Banco Sabadell shares then in issue and outstanding; and
(ii) five Banco Sabadell mandatorily convertible subordinated bonds with a nominal value of €5.00 each
represented by book entries in Iberclear, with a term of 3 years and a rate of interest of 7.75% per annum.
On each interest payment date Banco Sabadell would decide, at its discretion, whether to pay interest on the
bonds or to declare a voluntary conversion period.
Acquisition of Banco Guipuzcoano, S.A.
The process of acquiring 100% of the share capital of Banco Guipuzcoano, S.A. (“Banco Guipuzcoano”), was
completed on 24 November 2010. This process was set in motion following a public share purchase offer by Banco
Sabadell to the holders of all ordinary and preference shares of Banco Guipuzcoano. This acquisition should be
seen in the context of Banco Sabadell’s strategy to strengthen, consolidate and rebalance the group’s business in
Spain.
Banco Guipuzcoano, S.A. is a Spanish-domiciled company headquartered in San Sebastián in the north of Spain.
Its corporate object is to carry on and engage in any business or operations normally carried on by a bank and any
other services directly or indirectly related to such business or operations.
The offer price proposed by the Bank in payment for the acquisition was approved by an Extraordinary General
Meeting on 18 September 2010 and took the form of an exchange of equity and other securities on the following
terms:
153
The holders of every eight Banco Guipuzcoano non-voting preference shares taking up the offer, received in
exchange:
(i) six Banco Sabadell shares with a nominal value of €0.125 each (either shares from the Bank’s existing
holding of treasury shares, or newly issued shares), to have the same voting and dividend rights as other
Banco Sabadell shares then in issue and outstanding; and
(ii) five Banco Sabadell mandatorily convertible subordinated bonds with a nominal value of €5.00 each
represented by book entries in Iberclear, on the same terms as to term and interest as indicated above for
holders of ordinary shares.
The valuation of the securities given in exchange for shares in Banco Guipuzcoano as of the date on which
control of the bank passed to Banco Sabadell was €613,479,000, this being the purchase consideration paid in
the transaction.
The valuation and accounting for the business combination resulted in a goodwill of €285,345,000. This has
been recorded under intangible assets (see note 16).
Acquisition of Mellon United National Bank (MUNB)
On 23 July 2009 Banco de Sabadell, S.A. concluded an agreement with the Bank of New York Mellon
to buy 100% of the ordinary shares of its Miami, Florida subsidiary Mellon United National Bank. On 15 January
2010, having obtained the necessary official and regulatory permissions, Banco Sabadell completed
the purchase according to the terms of the agreement, for an initial sum of €117,336,000 (USD 164,000,000).
Subsequently, on 17 June 2010, a final transaction price of €111,712,000 (USD 156,151,000)
was agreed.
The goodwill generated by the transaction has been valued at €29,598,000 (see note 16).
From then onwards the new Banco Sabadell subsidiary traded under the name of Sabadell United Bank, N.A.
Acquisition of 25% of Eurofragance, S.L.
On 8 July 2010 the group acquired, through its subsidiary Aurica XXI, S.C.R., S.A., a 25% holding in Eurofragance,
S.L. for the sum of €9,050,000.
154
Acquisition of 25% of Air Miles Spain, S.A.
On 3 May 2010 the group acquired a 25% share in Air Miles Spain, S.A. for the sum of €2,140,000.
Undertakings no longer included in the consolidated accounts:
€’000
Name of
sold, spun off, or eliminated
Compañía de Electricidad y Cogeneración de
Uvero, S.A. (a)
Ibersecurities Holding, S.A.
Ibersecurities, Sociedad de Valores, S.A., S.U.
Inmobiliaria Asturiana, S.A. (a)
Parque Eólico La Peñuca, S.L. (b)
Sabadell International Finance, B.V (a)
Tolosa, 161, S.L.
Transatlantic Bank Inc.
Transatlantic Holding Corp. (a)
Translaction
effective
date
Proportion of
voting rights
surrendered
on disposal (%)
Proportion of
voting rights
held after
disposal (%)
Profit/
loss to
group
Direct/
indirect
Consolidation
method
72.92
0.00
0
Indirect
Full consolidation
100.00
100.00
99.63
40.00
100.00
23.00
100.00
100.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0
0
0
6,839
0
0
0
0
Direct
Indirect
Direct
Indirect
Direct
Indirect
Indirect
Direct
Full consolidation
Full consolidation
Full consolidation
Equity method
Full consolidation
Equity method
Full consolidation
Full consolidation
Category
Subsidiary
Subsidiary
Subsidiary
Associate
Subsidiary
Associate
Subsidiary
Subsidiary
15/06/2010
15/06/2010
15/06/2010
22/06/2010
29/12/2010
10/06/2010
09/08/2010
31/12/2010
(a) Liquidated.
(b) On 22 June 2010 Explotaciones Energéticas Sinia XXI, S.L. sold its stake in Parque Eólico La Peñuca, S.L., for the sum of €10,800,000.
Merger by absorption by Banco Sabadell, S.A. of Ibersecurities Holding, S.A. and Ibersecurities, Sociedad de
Valores, S.A., Sociedad Unipersonal.
On 15 June 2010 Ibersecurities Holding, S.A. and Ibersecurities, Sociedad de Valores, S.A., Sociedad
Unipersonal were merged into Banco de Sabadell, S.A. Both companies were dissolved but not liquidated, and
their entire share capital was transferred en bloc to Banco de Sabadell, S.A. by universal succession. The latter
was subrogated in all rights and obligations of the absorbed companies generally and without any reservation or
limitation whatsoever.
From 1 January 2010 onwards all operations of the merged companies were treated for accounting purposes as
operations of Banco de Sabadell, S.A.
Dissolution and liquidation of Transatlantic Holding Corp.
On 23 December 2010, Transatlantic Holding Corp. approved a plan for its own liquidation in which it would
cease all operations of the business and transfer to Banco de Sabadell, S.A. (as sole shareholder) its portfolio
of shares consisting of a 100% interest in Interstate Property Holdings, LLC and 28.61% of Sabadell United
Bank, N.A.
(i) The FGD will acquire 100% of Banco CAM through the subscription of one or more capital increases, for a
total amount of €5,249 million, and Banco CAM will then be sold to Banco Sabadell for a price of one euro.
That figure includes the €2,800 million that had been previously committed by the FROB and were paid by
the FGD on 15 December 2011.
(ii) The FGD will grant Banco CAM an asset protection scheme (APS) for a pre-determined portfolio of assets
whose gross value is €24,660 million, and the FGD will assume 80% of the losses on that portfolio over a
period of ten years, once the provisions for those assets have been absorbed.
(iii) The FROB will assume certain contingent commitments to Banco CAM aimed at guaranteeing its access to
certain sources of funding currently available to it.
b) Acquisition agreement
On 7 December 2011, Banco CAM, S.A. (“Banco CAM”) was adjudicated to Banco Sabadell following a competitive
auction process undertaken by the Fund for Orderly Bank Restructuring (FROB).
In accordance with that process, a contract was signed by the FROB, the Credit Institutions’ Deposit Guarantee
Fund (FGD) and Banco Sabadell, by which Banco Sabadell undertook to acquire 100% of the shares of Banco CAM.
On that same date, Banco CAM, Banco Sabadell, the FROB and the FGD signed a protocol of financial support
measures for the restructuring of Banco CAM, under which:
Merger by absorption of Transatlantic Bank Inc. by Sabadell United Bank, N.A.
On 9 August 2010 Transatlantic Bank Inc. was merged by absorption into Sabadell United Bank, N.A. The company
was dissolved but not liquidated and its entire assets, liabilities and equity were transferred en bloc to Sabadell
United Bank, N.A.
As a result of the merger the ownership of Sabadell United Bank, N.A. was split between Transatlantic Holding
Corp., with a shareholding of 28.61%, and Banco de Sabadell, S.A. with the remaining 71.39%.
As of 30 September 2011, Banco CAM had total assets amounting to €70,518 million, customer loans
amounting to €50,825 million, 939 branch offices, and 6,319 employees.
Completion of the transaction is subject to approval by the European Union competition authorities.
155
Note 3. Proposed allocation of profits - earnings per share
The allocation of the Bank’s profit for the year 2011 which the Board will propose to the Annual General Meeting
is shown in the following table. The allocation for 2010 was approved by the Annual General Meeting on 14 April
2011 and is also shown in the table.
€’000
To
To
To
To
dividends
statutory reserve
reserves for investment in Canary Islands
voluntary reserves
Profit of Banco de Sabadell, S.A. for the year
2011
2010
69,516
26
294
128,147
189,545
990
248
189,837
197,983
380,620
Proposals for allocations of profits of subsidiaries and associates are subject to approval by their respective
Annual General Meetings.
The gross dividend per share for the year recommended by the Board of Directors of the Bank is €0.05 (€0.15 in
2010).
The Board of Directors decided on the distribution of an interim dividend for 2011 amounting to a total of
€69,516,000 (€113,727,000 in 2010). The dividend was paid on 6 September 2011, and will be recommended to
the Annual General Meeting for final approval.
The Board of Directors will propose to the Annual General Meeting the distribution of a final dividend of €0.05
per share to be paid in the form of shares reissued from the company’s treasury shares and charged to the share
premium reserve.
The following table shows that sufficient profits were generated by the Bank in each annual period to enable an
interim dividend to be paid.
€’000
31.08.2011
30.11.2010
Profit of Bank
Estimated income tax
Dividends paid
149,175
55,607
(69,516)
451,977
(131,223)
(113,727)
Net profit available for distribution
135,266
207,027
Amount proposed and distributed
69,516
113,727
06.09.2011
20.12.2010
Payment date
Earnings per share
Basic earnings per share are obtained by dividing the net profit or loss attributable to the group by the weighted
average number of ordinary shares outstanding in the year, excluding any treasury shares purchased by the group.
Diluted earnings per share are calculated by adjusting the attributable profit or loss, and the weighted average
number of shares outstanding, for the estimated effect of all conversions to ordinary shares being exercised.
Earnings per share calculations are shown in the following table:
156
2011
2010
231,902
0
380,040
0
1,336,236,199
192,560,056
1,528,796,255
1,179,321,979
193,614,891
1,372,936,870
Earnings per share (€)
0.17
0.32
Basic earnings per share after adjusting for conversion of
mandatory convertible bonds (€)
0.15
0.28
Diluted earnings per share (€)
0.15
0.28
Net profit attributable to group (€’000)
Profit from discontinued operations (net) (€’000)
Ordinary shares outstanding (weighted average)
Assumed conversions of convertible bonds
Ordinary shares outstanding (weighted average) - adjusted
Note 4. Loans and advances to credit institutions
Loans and advances to credit institutions recorded in the consolidated balance sheet at 31 December 2011 and
2010 are analysed in the following table:
€’000
2010
Analysis by heading:
3,628,914
2,744,614
Total
3,628,914
2,744,614
Analysis by type:
Time deposits
Reverse repos
Other accounts
Doubtful assets
Other financial assets
Impairment provisions
951,849
733,110
1,210,856
859
725,087
(1,907)
9,060
444,223
1,072,334
421,487
507
800,597
(1,812)
7,278
Total
3,628,914
2,744,614
Analysis by currency:
Euro denominated
Foreign currency denominated
3,395,366
233,548
2,519,833
224,781
Total
3,628,914
2,744,614
Note 5. Debt securities
Debt securities shown in the consolidated balance sheet at 31 December 2011 and 2010 are analysed as follows:
Average annual interest rates on loans and advances to credit institutions for the years 2011 and 2010 were
1.60% and 1.14% respectively.
The main components of the “other accounts” item at 31 December 2011 principally relate to increases in
the balances on securitization funds, buyer credit to non-resident banks and forfaiting deals with other credit
institutions. In 2010, they comprised buyer credit to non-resident banks and forfaiting deals with other credit
institutions.
2011
€’000
2011
2010
Held for trading
Debt securities
205,931
12,090,847
118,203
9,762,889
Total
12,296,778
9,881,092
7,939,556
1,175,162
5,086,979
1,677,415
4,359,945
8,281
(11,004)
6,421,118
1,405,113
4,457,221
558,784
3,462,548
7,933
(10,507)
Total
12,296,778
9,881,092
Euro denominated
11,663,885
632,893
9,281,843
599,249
Total
12,296,778
9,881,092
Analysis by type:
Government securities
Treasury bills
Other book-entry securities
General government
Securities of financial institutions and other issuers
Doubtful assets
157
Average annual rates of interest on debt securities in the years 2011 and 2010 were 3.31% and 2.72%,
respectively.
Details of debt instruments comprised within the “available-for-sale financial assets” category are as follows:
€’000
Level I (*)
2011
Level II (*)
Level III (*)
Level I (*)
2010
Level II (*)
Level III (*)
11,506,834
11,267,034
765,304
778,089
42,766
45,724
9,255,236
8,820,316
919,633
902,886
39,645
39,687
(372,148)
(8,512)
(483)
(435,161)
(26,503)
(586)
Accumulated gains recognized in equity at end
of period
13,281
13,583
746
241
9,756
628
Losses recognized as impairment in the income
statement for the period
(1,290)
(85)
0
(726)
(727)
0
Valuation method
Quoted
price
Discounted
cash flow
Internal
models
Quoted
price
Discounted
cash flow
Internal
models
Acquisition cost
Fair value
Accumulated losses recognized in equity at end
of period
(*) The levels used in this table are explained in note 1 (d) of these annual accounts, in the section on accounting principles and policies - valuation and
recording of financial instruments.
Debt securities held in the available-for-sale financial assets portfolio in the form of public debt at 31
December 2011 correspond to €7,697,111,000 in Spanish government bonds and €110,001,000 in foreign
government bonds. The group’s foreign debt security holdings comprise positions in Portuguese, Irish, Moroccan
and Andorran government bonds in the amounts of €56,411,000, €40,840,000, €1,180,000 and €11,570,000
respectively.
The group’s exposure to public debt securities is detailed below according to fair value level:
€’000
Level I (*)
158
Acquisition cost
Fair value
Accumulated losses recognized in equity at end of period
Accumulated gains recognized in equity at end of period
Losses recognized as impairment in the income statement for the period
Valuation method
7,956,315
7,767,057
(265,852)
7,607
0
Quoted
price
2011
Level II (*)
0
0
0
0
0
0
Level III (*)
38,624
40,055
(71)
732
0
Internal
models
Note 6. Equity instruments
The “equity instruments” heading of the consolidated balance sheet at 31 December 2011 and 2010 can be
analysed as follows:
€’000
2010
Held for trading
38,517
173,326
1,177,323
33,168
177,492
1,067,740
Total
1,389,166
1,278,400
790,881
62,654
728,227
573,417
542,029
31,388
771,466
(746,598)
667,750
44,574
623,176
509,660
487,276
22,384
731,021
(630,031)
Total
1,389,166
1,278,400
Euro denominated
1,350,440
38,726
1,250,408
27,992
Total
1,389,166
1,278,400
Analysis by type:
Resident sector
Credit institutions
Other
Non-resident sector
Credit institutions
Other
Share in net assets of mutual funds and OEICs
€’000
Level I (*)
2011
Level II (*)
Level III (*)
Level I (*)
2010
Level II (*)
Level III (*)
Acquisition cost
Fair value
224,222
195,619
931,302
943,827
35,113
37,877
277,899
245,337
725,197
737,529
82,482
84,874
Accumulated losses recognized in equity at end
of period
(32,670)
(7,331)
0
(36,692)
(12,265)
(959)
4,067
19,856
2,764
4,130
24,597
3,351
(115,484)
0
0
(60,103)
(52,098)
0
Accumulated gains recognized in equity at end
of period
Losses recognized as impairment in the income
statement for the period
Financial assets at fair value through profit or loss in both years consisted entirely of investments associated
with unit-linked life policies sold through Assegurances Segur Vida, S.A., a group subsidiary.
Details of equity instruments comprised within the “available-for-sale financial assets” category are as follows:
2011
During the year an impairment was recognized in the group’s shareholding in Banco Comercial Português, S.A.
(BCP) amounting to €114,301,000 (€54,751,000 in 2010). As a result, the value of the group’s holding in BCP at
31 December 2011 was written down to the quoted price of the shares. The impairment has been recorded under
impairment losses on financial assets in the consolidated income statement.
The group has a holding in Metrovacesa, S.A. (MVC). The holding was initially valued, and is periodically
revalued, on the basis of the most reliable NAV (net asset value) data available, although these valuations are
liable to be supplemented by yet more rigorous valuation criteria. On 1 August 2011, said company carried out
a capital increase of 918,507,207 shares (€1,377,761,000). Banco Sabadell, S.A. subscribed to 114,807,397
(€172,211,000) of these shares through the capitalization of loans made to said company, thereby increasing its
total shareholding to 12.35%. As at 31 December 2011 the holding was valued at €2.9 per share.
159
Note 7. Trading derivatives (assets and liabilities)
The breakdown by transaction types for the trading derivatives captions on the asset and liability sides of the
consolidated balance sheet at 31 December 2011 and 2010 is as follows:
€’000
2011
Assets
2010
Liabilities
Assets
Liabilities
Securities derivatives
Interest rate derivatives
Currency derivatives
Other derivatives
188,218
1,021,999
222,072
5,383
231,391
1,036,240
177,832
5,558
145,346
840,718
139,699
20,462
150,176
850,312
139,414
21,219
Total
1,437,672
1,451,021
1,146,225
1,161,121
Euro denominated
1,341,612
96,060
1,350,813
100,208
1,077,865
68,360
1,091,538
69,583
Total
1,437,672
1,451,021
1,146,225
1,161,121
The fair values and valuation techniques being used for each type of trading derivative at 31 December 2011
and 2010 are shown in the table below.
€’000
Fair value
2011
2010
Valuation method
Assets
Trading derivatives:
1,437,672
1,146,225
943,932
820,374
Discounted cash flow
10,798
18,461
Montecarlo simulations on Black-Scholes model
Black-Scholes, Garman & Kohlhagen model
Interest rate options
121,422
105,277
Black & Black-Scholes with convexity adjustment
Simulation on Hull-White model
Index and securities options
183,810
144,782
Black-Scholes and binomial tree
Black-Scholes
Currency forwards
177,710
57,331
1,437,672
1,146,225
1,451,021
1,161,121
962,817
821,619
10,956
18,492
Black-Scholes, Garman & Kohlhagen model
Interest rate options
120,702
126,163
Black & Black-Scholes with convexity adjustment
Simulation on Hull-White model
Index and securities options
223,662
148,015
Black-Scholes and binomial tree
Black-Scholes
Currency forwards
132,884
46,832
1,451,021
1,161,121
Swaps, CCIRS, Call Money Swap
Exchange rate options
Total assets held in trading portfolio
Liabilities
Trading derivatives:
Swaps, CCIRS, Call Money Swap
Exchange rate options
160
Total liabilities held in trading portfolio
Fair values of trading derivatives are calculated from inputs based on observable market data, except in the case
of stock and index options, where the inputs are supplemented by estimated volatilities and correlations, using
methods generally accepted within the financial services community.
At 31 December 2011, trading derivatives measured at fair value according to the hierarchy of levels described
in note 1 to these annual accounts (accounting principles and polices applied) for the years 2011 and 2010, were
classified as follows:
€’000
Trading derivatives (assets)
Trading derivatives (liabilities)
Level I
2011
Level II
Levell III
Level I
2010
Level II
Levell III
6,227
56,729
1,243,454
1,207,795
187,991
186,497
0
0
998,058
1,007,310
148,167
153,811
Changes in the carrying value of derivative instruments measured at fair value according to Level III of the
hierarchy, and gains or losses due to changes in value during the years 2011 and 2010 are shown in the following
table:
Balance at 31 December 2009
5,224
Additions
Write-downs and recoveries
Transfers
Gain/loss taken to income statement due to changes in value
(1,153)
(9,897)
0
182
(5,644)
Additions
Transfers
Gain/loss taken to income statement due to changes in value
(1,565)
6,166
0
2,537
€’000
1,494
161
Note 8. Loans and advances to other debtors
Loans and advances to other debtors on the consolidated balance sheet at 31 December 2011 and 2010 are
analysed as follows:
€’000
162
2011
2010
72,654,030
73,980,818
Total
72,654,030
73,980,818
Analysis by type:
Reverse repos settled through the futures market (MEFF) clearing house
Commercial loans
Secured receivables
Other term receivables
Payable on demand and other accounts
Finance leases
Factoring and confirming
Doubtful assets
1,286,731
2,479,422
37,910,786
20,889,437
1,852,445
2,673,778
2,975,350
4,759,280
(2,268,043)
94,844
3,132,792
2,839,019
40,015,744
19,106,137
1,377,025
2,994,755
2,737,599
3,944,427
(2,209,902)
43,222
Total
72,654,030
73,980,818
Analysis by sector:
General government
Resident sector
Non-resident sector
Doubtful assets
2,212,140
61,595,746
6,260,063
4,759,280
(2,268,043)
94,844
1,032,724
65,966,070
5,204,277
3,944,427
(2,209,902)
43,222
Total
72,654,030
73,980,818
Euro denominated
68,783,112
3,870,918
71,141,455
2,839,363
Total
72,654,030
73,980,818
Average annual rates of interest on loans and advances to other debtors in the years 2011 and 2010 were
4.05% and 3.54%, respectively.
With regard to financial leases in the year:
- At 31 December 2011 the total gross value of finance leasing contracts amounted to €2,839,591,000
(€3,130,693,000 in 2010);
- The present value of the minimum future payments receivable by the bank during the obligatory lease
period (assuming that no extensions of purchase options will be exercised) at 31 December 2011
totals €560,867,000 due within one year, €1,375,206,000 falling due between one and five years, and
€823,378,000 falling due after five years.
- The contingent instalments recognized as revenue in the year totalled €126,484,000;
- Unaccrued finance income totalling €434,375,000 (€327,959,000 in 2010);
- The non-guaranteed residual value for the leases totalled €176,867,000 (€178,367,000 in 2010);
- Value adjustments due to impairment of finance leases amounted to €86,853,000 (€72,700,000 in 2010).
Loans and advances to government bodies comprise a balance of €2,037,794,000 with the Spanish government
(€1,004,039,000 at 31 December 2010) and €174,346,000 with foreign governments. This latter amount includes
a balance of €147,168,000 with the US government.
The distribution of loans and advances to other debtors by geographical region at 31 December 2011 and 2010
was as follows:
€’000
2010
Spain
Other European Union
Latin America
USA and Canada
Other OECD
Rest of the world
68,346,894
2,860,318
393,752
2,882,911
47,073
391,125
(2,268,043)
70,522,703
3,112,042
356,824
1,709,653
61,541
427,957
(2,209,902)
Total
72,654,030
73,980,818
Loans and advances to other debtors due for repayment but not classified as doubtful assets at 31 December
2011 amounted to €585,527,000 (€416,309,000 at 31 December 2010). At 31 December 2011 more than 65%
of this total was not more than one month overdue (31 December 2011: 60% of the total).
2011
Doubtful assets
Assets recognized as doubtful under different balance sheet headings at 31 December 2011 and 2010 were as
follows:
€’000
2010
Debt securities
859
8,281
4,759,280
507
7,933
3,944,427
Total
4,768,420
3,952,867
Changes in doubtful assets were as follows:
€’000
2,657,310
Additions
Written off
Due to acquisition of Banco Guipuzcoano group
3,800,091
(2,429,794)
(508,279)
433,539
2011
3,952,867
Additions
Written off
4,507,583
(2,873,998)
(818,032)
4,768,420
163
The distribution of doubtful assets at 31 December 2011 and 2010 according to the type of security provided
was as follows:
€’000
2011
2010
Mortgage (1)
Other security represented by a charge on property (2)
Other
3,283,460
619,737
865,223
2,545,002
315,582
1,092,283
Total
4,768,420
3,952,867
(1) Loans secured by mortgage where the amount loaned is less than 100% of the assessed value.
(2) Includes all other loans secured on property.
The distribution of doubtful assets by geographical region at 31 December 2011 and 2010 was as follows:
€’000
2011
2010
Spain
Latin America
USA and Canada
Other OECD
Rest of the world
4,555,679
108,624
2,699
83,744
4,452
13,222
3,759,839
112,718
1,937
66,761
2,991
8,621
Total
4,768,420
3,952,867
Impairment provisions resulting in value adjustments to assets under different balance sheet headings at 31
December 2011 and 2010 were as follows:
€’000
2011
2010
Debt securities
1,907
11,004
2,268,043
1,812
10,507
2,209,902
Total
2,280,954
2,222,221
Details of changes in, and opening and closing balances of, impairment provisions to cover against credit risk
exposure are shown in the following table:
€’000
Provisions charged to income statement
Releases to income statement
Transfers
Added on acquisition of Banco Guipuzcoano
Other movements
Provisions charged to income statement (*)
Releases to income statement (*)
Transfers
Other movements (**)
Specific
Generic
Country risk
Total
1,410,623
381,295
4,698
1,796,616
1,912,393
(1,253,457)
932
(504,007)
262,589
(23,953)
76,916
(366,523)
1,779
8
51,008
267,287
3,237
(2,710)
106
0
0
0
1,992,546
(1,622,690)
2,817
(503,999)
313,597
243,334
1,805,120
411,770
5,331
2,222,221
907,235
(484,486)
696
(812,644)
44,381
58,588
(24,442)
370
0
369,673
2,602
(3,249)
9
0
0
968,425
(512,177)
1,075
(812,644)
414,054
1,460,302
815,959
4,693
2,280,954
(*) The total of these amounts and the amortisation/recovery taken to income in relation to impaired financial assets derecognized in this note is recognized
under the heading impairment losses on financial assets: loans and debt securities (note 34(g)).
(**) The movement in the general allowance is due mainly to provisions for expected losses in the year from the recognition at fair value of assets and
liabilities associated with business combinations (note 16).
164
Specific provisions at 31 December 2011 included €308,631,000 in provisions for sub-standard risks
(€491,618,000 at 31 December 2010).
The distribution of impairment provisions by geographical region at 31 December 2011 and 2010 was as
follows:
€’000
2011
2010
Spain
Latin America
USA and Canada
Other OECD
Rest of the world
1,909,572
32,326
6,492
321,193
2,197
9,174
2,109,551
38,965
6,046
57,903
922
8,834
Total
2,280,954
2,222,221
Additional information
Finance income accruing on impaired financial assets but not recognized in the consolidated income statement at
31 December 2011 and 2010, amounted to €104,929,000 and €84,626,000 respectively.
Financial assets whose terms were renegotiated during the year totalled €3,886,074,000 at 31 December
2011.
Impaired financial assets derecognized from the balance sheet on the ground that the probability of recovery was
remote showed the following evolution:
€’000
1,134,306
628,591
551,593
59,853
17,145
Recoveries:
Due to receipt of cash without additional financing
Due to repossession of tangible assets
(15,379)
(15,309)
(70)
Permanently written off:
Due to debt forgiveness
Due to statute of limitations
Due to other circumstances
(99,911)
(85,155)
(7,801)
(6,955)
Net change due to foreign exchange differences
167
1,647,774
Additions:
Assets with poor prospects of recovery
Derecognized for other reasons
924,796
818,032
106,764
Recoveries:
Due to receipt of cash without additional financing
Due to repossession of tangible assets
(44,304)
(35,961)
(8,343)
Permanently written off:
Due to debt forgiveness
Due to statute of limitations
Due to other circumstances
Net change due to foreign exchange differences
Balance at 31 December 2011 (*)
(310,345)
(230,050)
(802)
(79,493)
111
2,218,032
(*) Impairment/recovery charged or credited to income derived from impaired financial assets removed from the asset side amounts to €60,312,000 and is
reflected in the note 34(g).
Additions:
Assets with poor prospects of recovery
Added on acquisition of Banco Guipuzcoano
Derecognized for other reasons
165
Note 9. Issuers in the mortgage market and the special mortgage register
This section provides information on data in the Special Mortgage Register kept by Banco Sabadell and
Banco Guipuzcoano as issuing entities, as required by the Bank of Spain’s Circular 5/2011. The Circular makes
certain amendments to the earlier Circular 4/2004 on public and confidential financial reporting by credit
institutions.
A) Lending
The aggregate nominal value of the loan and credit portfolio at 31 December 2011 and 2010 which can be used
as cover for the issue of mortgage bonds and considered eligible for the calculation of the issue limit of mortgage
notes is detailed below:
€’000
Breakdown of total loans and mortgages; eligible and attributable capital (nominal values)
2011
2010
Total loans and mortgages portfolio
37,107,842
38,333,854
Mortgage securities issued
Of which: Loans carried in the statement of financial position
Mortgage transfer certificates issued
Of which: Loans carried in the statement of financial position
Mortgages used as security for loans received
Loans used to cover bond issues and mortgage notes
Non-eligible loans
1,909,018
1,826,564
4,796,162
4,749,478
0
30,402,662
10,336,263
1,685,443
1,589,348
5,691,817
5,581,716
0
30,956,594
10,737,837
8,496,312
7,735,148
1,839,951
20,066,399
40,552
20,025,847
0
20,025,847
3,002,689
20,218,757
351,647
19,867,110
0
19,867,110
Comply with eligibility requirements up to the limits stated in Royal Decree 716/2009,
article 5.1
Other
Eligible loans
Non-attributable amounts
Attributable amounts
Loans used to cover mortgage bond issues
Loans suitable to cover mortgage bond issues
166
A breakdown of these nominal values according to a range of categories is shown in the following table:
€’000
Analysis of mortgage loan/credit portfolio (overall, and eligible loans/credit only)
2011
Total
Eligible
2010
Total
Eligible
20,066,399
30,956,594
20,218,757
Origin of loan/credit
Originated by Bank
Transferred from other lenders
Other
30,402,662
29,266,656
302,861
833,145
20,066,399
19,540,251
233,065
293,083
30,956,594
29,662,634
527,685
766,275
20,218,757
19,592,377
368,971
257,409
Currency
Euro
Other currencies
30,402,662
30,159,901
242,761
20,066,399
19,992,986
73,413
30,956,594
30,703,061
253,533
20,218,757
20,153,031
65,726
Payment position
None outstanding
Other loans/credit
30,402,662
26,738,469
3,664,193
20,066,399
18,470,554
1,595,845
30,956,594
28,177,282
2,779,312
20,218,757
19,036,076
1,182,681
Average residual term
10 years or less
10 to 20 years
20 to 30 years
More than 30 years
30,402,662
10,958,025
7,836,351
7,586,145
4,022,141
20,066,399
5,380,178
5,506,670
5,963,621
3,215,930
30,956,594
11,353,665
8,028,055
7,015,045
4,559,829
20,218,757
5,651,035
5,471,801
5,477,990
3,617,931
Interest rate
Fixed rate
Variable rate
Split fixed/variable rate
30,402,662
767,810
29,634,332
520
20,066,399
419,046
19,647,112
241
30,956,594
1,817,444
29,126,322
12,828
20,218,757
1,098,622
19,111,486
8,649
Holders
For use by individual/corporate customers
Of which: for real estate development
Other Individual and ISFLSH
30,402,662
18,231,926
8,568,412
12,170,736
20,066,399
10,103,573
4,919,724
9,962,826
30,956,594
18,695,636
9,460,441
12,260,958
20,218,757
10,484,913
5,880,745
9,733,844
Security/collateral
Assets/Completed buildings
Residential
Of which: Public housing
Commercial
Other
Assets/Buildings under construction
Residential
Of which: Public housing
Commercial
Other
Land
Development land with services
Other land
30,402,662
24,685,425
18,492,090
39,042
5,530,853
662,482
959,712
912,671
2,448
45,158
1,883
4,757,525
3,971,486
786,039
20,066,399
17,433,320
14,232,224
29,083
3,065,436
135,660
773,285
728,879
2,448
42,525
1,881
1,859,794
1,576,502
283,292
30,956,594
25,846,367
19,724,645
20,403
5,987,660
134,062
1,407,206
1,070,903
0
124,538
211,765
3,703,021
2,658,023
1,044,998
20,218,757
17,910,067
14,131,101
16,771
3,737,475
41,491
850,527
825,867
0
18,271
6,389
1,458,163
1,015,512
442,651
30,402,662
Total mortgage loan/credit portfolio
167
The nominal value of drawable funds (i.e. undrawn loan commitments) within the total mortgage loan and credit
portfolio are as follows:
€’000
Available balances (nominal value). Total loans and mortgages used to cover bond
issues and mortgage notes
Potentially eligible
Non-eligible
2011
2010
957,285
644,028
909,602
662,774
The breakdown by loan-to-value (LTV) ratio of the nominal values of the mortgage loan and credit portfolio eligible
as cover for the issue of mortgage bonds and mortgage notes is as follows:
€’000
Type by loan-to-value (LTV) ratio. Eligible loans for the issuance of mortgage bonds and
covered bonds
Secured on residential property
LTV less than 40%
LTV 40% to 60%
LTV 60% to 80%
LTV more than 80%
Other security
LTV less than 40%
LTV 40% to 60%
LTV more than 60%
2011
2010
15,850,901
4,854,242
5,507,277
5,417,242
72,140
14,926,364
4,753,855
4,900,159
5,272,350
0
4,215,498
2,065,700
2,149,798
0
5,292,393
2,199,876
3,006,074
86,443
The changes in the nominal values of the mortgage loans used to cover bond issues and mortgage notes
(eligible and non-eligible) in 2011 and 2010 are as follows:
€’000
Changes in mortgage loans nominal values
Non-eligible
Initial balance
20,218,757
10,737,837
Cancellations
Cancellations on maturity date
Early cancellations
Other
(2,439,775)
196,149
690,695
0
1,552,931
(1,693,366)
149,401
356,320
0
1,187,645
Registrations
Originated by Bank
Other
2,287,417
2,222,296
10,463
54,658
1,291,792
1,051,537
3,733
236,522
20,066,399
10,336,263
Final balance
168
2011
Eligible
B) Funding
Information on issues of collateralized securities backed by Banco Sabadell and Banco Guipuzcoano mortgage
loan and credit portfolios, analysed on the basis of residual term and of whether the issue was by public offering or
otherwise, is shown in the following table:
€'000
Nominal value
Mortgage bonds issued
Of which: Not taken to liabilities
13,638,500
1,340,750
13,678,700
1,002,550
9,450,000
1,000,000
2,700,000
1,000,000
3,250,000
1,500,000
0
2,958,500
538,500
500,000
0
420,000
1,500,000
0
1,230,000
200,000
380,000
130,000
0
100,000
420,000
9,450,000
1,200,000
1,000,000
1,500,000
2,500,000
3,250,000
0
2,958,700
600,200
538,500
500,000
0
1,220,000
100,000
1,270,000
40,000
200,000
380,000
130,000
100,000
420,000
2010
Nominal
Average
value unexpired term
(€’000)
(in years)
(€’000)
(in years)
Mortgage participations
Issued by public offer
Issued otherwise than by public offer
4,796,162
0
4,796,162
14
0
14
5,691,817
0
5,691,817
16
0
16
Mortgage certificates
Issued by public offer
Issued otherwise than by public offer
1,909,018
0
1,909,018
15
0
15
1,685,443
0
1,685,443
18
0
27
At 31 December 2011 Banco de Sabadell, S.A. and Banco Guipuzcoano, S.A. (the group’s issuing entities) were
overcollaterized by 224% and 201% respectively, this being understood as the ratio between the nominal value of
the entire mortgage loan and credit portfolio and the nominal value of the mortgage notes issued.
As required by Royal Decree 716/2009, which developed certain aspects of Law 2/1081 of 25 March on
the regulation of the mortgage market and other matters relating to mortgage lending, the Board of Directors is
responsible for ensuring that as of 31 December 2011 the Bank had a set of policies and procedures in place to
ensure its compliance with the mortgage market regulations.
In line with these policies and procedures for managing the group’s mortgage market activities, the Board
of Directors is responsible for compliance with all mortgage market regulations and to implementing the group’s
risk management and control procedures (see note 37 Financial Risk Management). In the area of credit risk,
in particular, the Board of Directors delegates powers and discretions to its Risk Control Committee, which
then sub-delegates authority at each level of decision-taking. The internal procedures set up to handle the
origination and monitoring of the assets that make up the group’s lending and particularly those secured by
mortgage, which serve as cover for the group’s covered bond issues, are described in detail below for each type
of loan applicant.
2011
Average
Nominal
value unexpired term
2010
Debt securities Issued via public offering
Residual maturity less than one year
Residual maturity between one and two years
Residual maturity between two and three years
Residual maturity between three and five years
Residual maturity between five and ten years
Residual maturity greater than ten years
Debt securities Other issues
Deposits
2011
169
Individuals
170
• Analysis. Applications are analysed with the help of scoring tools that measure the risk involved in a
transaction by evaluating such customer profile aspects as the likely return and the nature of the property
on which the loan is to be secured. There will be some circumstances that require the intervention of a risk
analyst, who will examine the case in more detail and whose opinion will be required before any decision can
be made on the application, favourable or otherwise.
• Decision. A decision will be based on the result of the credit scoring procedure supplemented, where
necessary, by the opinion of an analyst. There will, in addition, be a whole range of other details and
parameters to be considered, such as the consistency of the customer’s application and how well it matches
his possibilities; the customer’s ability to pay based on his current and future position; the value of the
property provided as security for the loan (as determined by an appraisal carried out by a Bank of Spainauthorized valuation firm which Banco Sabadell’s own internal approval processes will, additionally, have
shown to be free of any association with the group); the availability of any additional security; examinations of
internal and external databases of defaulters, etc.
One part of the decision-making process is to establish the maximum amount of the loan, based on the
assessed value of the security (the loan-to-value ratio, or LTV). As a general rule, under internal group
procedures the maximum LTV is applicable to purchases by individuals of properties for use as their normal
residence and is fixed at 80%. This provides an upper limit below with a range of other maximum LTV ratios
below 80% are set, having regard to the purpose of the loan.
A further step that must be taken before the application can be decided upon is to review all charges
associated with the property on which the loan is to be secured and also any insurance taken out to cover
the security. Once a loan application has been approved, the mortgage must be registered with the Property
Registry as part of the formalities for finalizing the loan.
• Autonomy levels. The scoring of an application is the key element in determining the viability of a loan. Where
the loan being sought is above a certain level, or where factors are present that are not readily captured by a
scoring procedure, a risk analyst will be involved. The limit for each autonomy level is based on credit scores,
with additional conditions being specified at each level to determine when special intervention is required.
A set of exceptional circumstances has been defined for borrowers or sectors which are provided for in the
group’s internal rules and procedures.
• Monitoring. The group has a wide-ranging monitoring system in place to identify customers that may be
showing early signs of default, ensuring that prompt action can be taken to initiate a timely response
procedure in every case. A key part of this process consists of well-established procedures to review and
validate the security provided.
Corporates
• Analysis. This is carried out by “key management teams” made up of staff members on both the business and
the risk management sides, thus ensuring a suitable separation of functions. This is supported by a credit
rating tool that takes account of the following parameters:
- Management skill and effectiveness
- Market competitiveness
- Economic/financial aspects
- Track record
- Security/guarantees
• Decision. A decision will be based on the credit rating assessment together with a range of other data and
parameters such as the consistency of the application, ability to pay and the nature of the security provided
(as determined by an appraisal carried out by a Bank of Spain-authorized valuation firm which Banco
Sabadell’s own approval processes will, additionally, have shown to be free of any association with the group)
and taking account of any supplementary guarantees, the “fit” between the company’s working capital and its
total sales; the appropriateness of the total amount borrowed from the group based on the business’s capital
strength; examinations of internal and external databases of defaulters, and so on.
With companies the decision process followed is similar to that used with individuals, with a scale of
maximum LTV ratios being defined internally by the group having regard to the intended purpose of the loan.
For business borrowers, as a general rule, the maximum LTV ratio is applied to mortgage loans to property
developers, which are then transferred to buyers of homes for use as their principal residences. This is fixed
at 80%.
Business loans are likewise subject to processes to evaluate any charges associated with the security
provided and to have any mortgage registered with the Property Registry.
• Autonomy levels. An autonomy level is assigned on the basis of the expected loss associated with a
transaction. There are several levels at which decisions may be taken. Each of these levels involves the “key
management team”, one member of which will be on the business side and one on the risk management side.
All loan approvals must be the result of a joint decision. As with individual customers, a set of exceptional
circumstances has been specified for borrowers or sectors, and these are provided for in the group’s internal
procedures.
• Monitoring. A comprehensive monitoring system ensures that any customer showing signs of deteriorating
creditworthiness will be identified. Loan monitoring is triggered by certain events such as the expiry of a credit
rating, a change in the nature of the business or risk and other aspects identified by the group’s system of
early warning alerts. Again, this includes procedures to ensure that the borrower’s security or guarantees are
constantly being reviewed and validated.
The Banco Sabadell group is an active participant in the capital markets and has a number of funding
programmes in place (see note 37). As one element of its funding strategy, Banco de Sabadell, S.A. and
Banco Guipuzcoano, S.A. are a regular issuers of covered bonds. Its mortgage bond issues are backed by
a portfolio of loans secured by real estate mortgages that meet the eligibility criteria applicable under Royal
Decree 716/2009 which provides rules on the mortgage market and mortgage finance in Spain. The group
has review procedures in place to monitor its entire portfolio of loans and credit lines secured by mortgages.
These include maintaining special accounting records of all the mortgage assets — and any assets that
replace them — used to back its covered bonds and mortgage bonds, and of any financial derivatives
associated with them; verifying that all loans and assets meet the eligibility criteria for use as collateral for
issues of covered bonds; and ensuring that bond issues are at all times kept to within their maximum limits,
as required by the applicable mortgage market legislation.
Note 10. Financial asset transfers
€’000
Derecognized in full from balance sheet:
Securitized mortgage loans
Other transferred financial asset
Retained in full on balance sheet:
Securitized mortgage loans
Total
2011
2010
131,009
129,139
1,870
0
209,907
193,401
16,506
0
9,888,144
6,576,041
3,312,103
10,508,020
6,654,318
3,853,702
10,019,153
10,717,927
In recent years the Banco Sabadell group has undertaken a number of securitization programmes, either alone or
in partnership with other highly rated domestic and foreign banks. Financial assets securitized by the group under
these programmes at the end of the years 2011 and 2010 are summarized below. Assets on which the associated
risks and rewards were transferred are shown separately in the table.
171
Assets and liabilities held in securitization funds set up after 1 January 2004 and whose associated risks
and rewards were not transferred to third parties have been retained in the consolidated financial statements.
That is, for the assets listed there was no transfer of risk but some form of subordinate financing or other credit
enhancement for the securitization vehicles was arranged.
Details of current securitization programmes participated in by Banco de Sabadell, S.A. and/or Banco
Guipuzcoano, S.A. are given in the table below:
€’000
Credit rating
Year
2000
2001
2002
2003
2003
2003
2003
2004
2004
2005
2005
2005
172
2005
2005
Fund name
and series
Issue
Liability outstanding
Fitch
Moody’s
S&P
DBRS
Number
of securities
TDA 12, FTA (*)
Serie A3
Serie B
-----
Aaa
A2
-----
-----
564
530
34
56,323
53,000
3,323
6,511
4,411
2,100
7,969
4,646
3,323
EURIBOR 3M + 0.28%
EURIBOR 3M + 0.50%
TDA 14-MIXTO, FTA (*)
Serie A3
Serie ANC
Serie B1
Serie BNC
---------
Aaa
Aaa
A2
A2
---------
---------
614
362
217
21
14
61,362
36,200
21,700
2,076
1,386
13,119
7,174
2,845
1,800
1,300
16,895
9,760
3,673
2,076
1,386
EURIBOR 3M + 0.27%
EURIBOR 3M + 0.30%
EURIBOR 3M + 0.65%
EURIBOR 3M + 0.65%
Serie A1
Serie A2
Serie B1
Serie B2
---------
Aaa
Aa3
A2
A2
---------
---------
1,279
972
251
41
15
127,798
97,200
25,100
4,033
1,465
28,998
19,273
4,925
3,600
1,200
38,366
26,068
6,800
4,033
1,465
EURIBOR 3M + 0.23%
EURIBOR 3M + 0.25%
EURIBOR 3M + 0.65%
EURIBOR 3M + 0.65%
GC FTGENCAT II, F.T.A.
Serie AG (b)
Serie AS
Serie BG (b)
Serie BS
Serie C
AAA
AAA
AAA
AAA
A
Aaa
Aaa
Aaa
Aaa
A1
-----------
-----------
9,500
7,068
1,767
176
176
313
950,000
706,800
176,700
17,600
17,600
31,300
0
0
0
0
0
0
24,518
5,617
1,404
4,631
4,631
8,235
EURIBOR 3M+0.11%
EURIBOR 3M+0.48%
EURIBOR 3M+0.28%
EURIBOR 3M+0.70%
EURIBOR 3M+1.45%
FTPYME TDA SABADELL 2, F.T.A.
Serie 1CA (a)
Serie 1SA
Serie 2SA
Serie 3SA
AAA
AAA
BBB
BB
---------
A+
A+
A
BB
---------
5,000
1,968
2,667
215
150
500,000
196,800
266,700
21,500
15,000
56,907
18,009
24,405
8,537
5,956
81,889
26,654
36,121
11,259
7,855
EURIBOR 3M
EURIBOR 3M+0.26%
EURIBOR 3M+0.50%
EURIBOR 3M+1.20%
FTPYME TDA 4, FTA (*)
Serie 2CA
Serie 2SA
Serie B
AA+
AA
BB
-------
-------
-------
1,079
824
206
49
107,900
82,400
20,600
4,900
0
0
0
0
26,273
17,098
4,275
4,900
EURIBOR 3M + 0.2%
EURIBOR 3M + 0.4%
EURIBOR 3M + 1.8%
Serie A1
Serie A2
Serie B1
Serie B2
---------
Aaa
Aa1
A3
Baa3
---------
---------
2,484
1,954
438
70
22
248,327
195,400
43,800
6,927
2,200
51,049
35,668
6,481
6,700
2,200
63,105
45,629
8,349
6,927
2,200
EURIBOR 3M + 0.24%
EURIBOR 3M + 0.26%
EURIBOR 3M + 0.65%
EURIBOR 3M + 0.65%
GC SABADELL 1, F.T.H.
Serie A1
Serie A2
Serie B
Serie C
---------
Aaa
Aaa
A2
Baa2
AAA
A+
A
BBB
---------
12,000
1,500
10,206
192
102
1,200,000
150,000
1,020,600
19,200
10,200
407,744
0
388,050
12,861
6,832
465,121
0
441,578
15,375
8,168
EURIBOR 3M+0.06%
EURIBOR 3M+0.17%
EURIBOR 3M+0.42%
EURIBOR 3M+0.78%
IM FTPYME SABADELL 3, F.T.A.
Serie 1SA
Serie 1CA (a)
Serie 2
Serie 3SA
---------
Aaa
Aaa
A2
B3
A+
AAA
A-BB--
---------
6,000
4,408
1,241
234
117
600,000
440,800
124,100
23,400
11,700
84,281
0
62,787
14,329
7,164
114,537
0
93,044
14,329
7,164
EURIBOR 3M+0.11%
EURIBOR 3M-0.01%
EURIBOR 3M+0.35%
EURIBOR 3M+0.80%
GC FTPYME SABADELL 4, F.T.A.
Serie AS
Serie AG (a)
Serie B
Serie C
AAA
AAA
BBB
CCC
Aaa
Aaa
Ba1
Caa3
---------
---------
7,500
5,494
1,623
240
143
750,000
549,400
162,300
24,000
14,300
150,655
0
112,355
24,000
14,300
192,589
0
154,289
24,000
14,300
EURIBOR 3M+0.10%
EURIBOR 3M+0.00%
EURIBOR 3M+0.42%
EURIBOR 3M+0.70%
GC FTGENCAT SABADELL 1, F.T.A.
Serie AS
Serie AG (b)
Serie B
Serie C
A
AAA
CCC
CC
---------
---------
---------
5,000
1,289
3,456
198
57
500,000
128,900
345,600
19,800
5,700
143,032
0
117,532
19,800
5,700
210,367
0
184,867
19,800
5,700
EURIBOR 3M+0.15%
EURIBOR 3M-0.04%
EURIBOR 3M+0.42%
EURIBOR 3M+0.78%
Serie 2CA
Serie 2SA
Serie 3SA
AA+
AA
BBB
-------
-------
-------
426
288
74
64
42,600
28,800
7,400
6,400
20,221
10,995
2,825
6,400
28,096
17,261
4,435
6,400
EURIBOR 3M
EURIBOR 3M + 0.25%
EURIBOR 3M + 1.50%
-------
Aa1
A2
Ba1
-------
-------
2,887
2,810
55
22
289,500
281,000
6,100
2,400
95,680
87,180
6,100
2,400
122,195
114,543
5,470
2,181
EURIBOR 3M + 0.09%
EURIBOR 3M + 0.3%
EURIBOR 3M + 0.75%
AA+
A
B
-------
-------
-------
420
300
75
45
42,000
30,000
7,500
4,500
26,519
17,615
4,404
4,500
35,389
24,711
6,178
4,500
EURIBOR 3M
EURIBOR 3M + 0.45%
EURIBOR 3M + 0.65%
1,084,714
1,427,309
TDA 23, FTA (*)
Serie A
Serie B
Serie C
Serie 2CA
Serie 2SA
Serie 3SA
Sub-total to 2005
Amount
2011
2010
Yield
Market
AIAF
AIAF
AIAF
AIAF
AIAF
AIAF
AIAF
AIAF
AIAF
AIAF
AIAF
AIAF
AIAF
AIAF
€’000
Credit rating
Year
Fund name
and series
Fitch
Moody’s
Issue
S&P
DBRS
Number
of securities
Amount
Sub-total to 2005
2006
2006
2006
2007
2007
2007
1,084,714
1,427,309
Yield
IM FTGENCAT SABADELL 2, F.T.A.
Serie AS
Serie AG (b)
Serie B
Serie C
AA-A
CCC
CC
--Aa2
-----
---------
5,000
2.028
2.717
198
57
500,000
202.800
271.700
19.800
5.700
235,125
0
207.625
19.800
5.700
304,616
7,416
271,700
19,800
5,700
EURIBOR 3M+0.15%
EURIBOR 3M-0.045%
EURIBOR 3M+0.40%
EURIBOR 3M+0.70%
Serie A1
Serie A2
Serie A3 (G) (a)
Serie B
Serie C
AAA
AA
AA+
BB
CCC
Aaa
Aaa
Aaa
Baa2
Caa3
-----------
12.500
2.200
8.803
828
400
269
1.250.000
220.000
880.300
82.800
40.000
26.900
308.392
0
158.692
82.800
40.000
26.900
396,978
0
247,278
82,800
40,000
26,900
EURIBOR 3M+0.07%
EURIBOR 3M+0.13%
EURIBOR 3M+0.01%
EURIBOR 3M+0.30%
EURIBOR 3M+0.58%
Serie 1-A2
Serie 1-B
Serie 1-C
Serie 1-D
Serie 2-A
Serie 2-B
Serie 2-C
AAA
A
BBB
CCC
AAA
ACCC
Aaa
A1
Ba3
C
-------
---------------
---------------
4.354
4.021
115
35
40
130
10
3
435.500
402.100
11.500
3.500
4.000
13.000
1.000
400
229.402
201.236
10.987
3.500
4.000
8.421
1.000
258
282,154
253,518
11,499
3,412
3,917
8,646
912
250
EURIBOR 3M + 0.14%
EURIBOR 3M + 0.35%
EURIBOR 3M + 0.5%
EURIBOR 3M + 3.5%
EURIBOR 3M + 0.16%
EURIBOR 3M + 0.37%
EURIBOR 3M + 2.5%
Serie A1
Serie A2
Serie A3(G) (a)
Serie B
Serie C
-----------
Aaa
Aa1
Aa2
B2
Caa3
AAA
A+
A+
BBB
B
-----------
10.000
1.750
6.354
1.341
355
200
1.000.000
175.000
635.400
134.100
35.500
20.000
335.783
0
146.183
134.100
35.500
20.000
423,093
0
233,493
134,100
35,500
20,000
EURIBOR 3M+0.11%
EURIBOR 3M+0.19%
EURIBOR 3M+0.005%
EURIBOR 3M+0.43%
EURIBOR 3M+0.75%
IM SABADELL EMPRESAS 1, F.T.A.
Serie A1
Serie A2
Serie B
Serie C
---------
Aaa
A1
Ba3
Caa3
AAA
A+
A
CCC
---------
10.000
2.000
7.390
250
360
1.000.000
200.000
739.000
25.000
36.000
275.371
0
214.371
25.000
36.000
425,517
0
364,517
25,000
36,000
EURIBOR 3M+0.25%
EURIBOR 3M+0.35%
EURIBOR 3M+1.25%
EURIBOR 3M+2.50%
IM FTGENCAT SABADELL 3, F.T.A.
Serie AS
Serie AG (b)
Serie B
Serie C
---------
---------
AAA
A+
A-B--
--AAH
-----
3.500
1.690
1.573
139
98
350.000
169.000
157.300
13.900
9.800
113.296
0
89.596
13.900
9.800
155,301
0
131,601
13,900
9,800
EURIBOR 3M+0.25%
EURIBOR 3M+0.21%
EURIBOR 3M+1.25%
EURIBOR 3M+2.50%
AAA
AA
BBB
CCC
CC
Aa1
Aa1
A1
Baa3
C
-----------
-----------
4.513
1.928
2.408
97
52
28
452.173
192.800
240.773
10.300
5.500
2.800
260.268
17.168
224.500
10.300
5.500
2.800
312,259
53,996
240,773
9,631
5,148
2,712
EURIBOR 3M + 0.14%
EURIBOR 3M + 0.2%
EURIBOR 3M + 0.5%
EURIBOR 3M + 0.85%
EURIBOR 3M + 3.5%
A
A
-------
Aa3
Aa3
Baa3
Caa1
C
-----------
-----------
2.904
2.303
183
202
112
104
290.400
230.300
18.300
20.200
11.200
10.400
117.015
56.915
18.300
20.200
11.200
10.400
144,599
84,499
18,300
20,200
11,200
10,400
EURIBOR 3M + 0.3%
EURIBOR 3M + 0.1%
EURIBOR 3M + 0.6%
EURIBOR 3M + 1.25%
EURIBOR 3M + 4%
2.957.368
3,871,826
TDA 29, FTA (*)
Serie A1
Serie A2
Serie B
Serie C
Serie D
Serie A1
Serie A2 (G)
Serie B
Serie C
Serie D
Sub-total to 2007
Market
AIAF
AIAF
AIAF
AIAF
AIAF
AIAF
AIAF
AIAF
2007
2010
2007
2011
173
€’000
Credit rating
Year
Fund name
and series
Fitch
Moody’s
Issue
S&P
DBRS
Number
of securities
Amount
Sub-total to 2007
2008
2008
2008
2008
2008
2008
2008
2009
2009
2009
2010
2010
2011
2010
3,871,826
Yield
GC SABADELL EMPRESAS 2, F.T.A.
A1
A2
B
C
---------
---------
AAA
A
CCC
BBB--
--AA
-----
10,000
2,000
7,475
400
125
1,000,000
200,000
747,500
40,000
12,500
341,965
0
389,465
40,000
12,500
470,972
0
418,472
40,000
12,500
EURIBOR 3M+0.35%
EURIBOR 3M+0.55%
EURIBOR 3M+1.25%
EURIBOR 3M+1.75%
IM SABADELL RMBS 2, F.T.A.
A
B
C
-------
-------
A+
A
BBB
AAH
-----
14,000
13,650
182
168
1,400,000
1,365,000
18,200
16,800
952,850
917,850
18,200
16,800
1,058,788
1,023,788
18,200
16,800
EURIBOR 3M+0.45%
EURIBOR 3M+1.25%
EURIBOR 3M+1.75%
A1
A2 (G)
B
C
---------
---------
AAA
AAA
A+
BB-
AAA
AAH
-----
10,000
4,975
4,025
650
350
1,000,000
497,500
402,500
65,000
35,000
436,999
0
336,999
65,000
35,000
554,552
52,052
402,500
65,000
35,000
EURIBOR 3M+0.45%
EURIBOR 3M+0.50%
EURIBOR 3M+1.25%
EURIBOR 3M+1.75%
IMFTGENCAT SABADELL 4, F.T.A.
A1
A2 (G)
B
C
---------
---------
A-A-A-B
AAA
AAA
-----
5,000
2,350
1,941
393
316
500,000
235,000
194,100
39,300
31,600
230,610
0
159,710
39,300
31,600
309,077
44,077
194,100
39,300
31,600
EURIBOR 3M+0.30%
EURIBOR 3M+0.50%
EURIBOR 3M+1.25%
EURIBOR 3M+1.75%
IM SABADELL RMBS 3, F.T.A.
A
B
C
-------
Aa3
A3
Ba2
-------
AAH
-----
14,400
14,112
144
144
1,440,000
1,411,200
14,400
14,400
1,033,951
1,005,151
14,400
14,400
1,154,794
1,125,994
14,400
14,400
EURIBOR 3M+0.40%
EURIBOR 3M+0.85%
EURIBOR 3M+1.25%
A
B
C
-------
Aa3
A3
Ba2
-------
AAA
-----
17,400
14,094
2,088
1,218
1,740,000
1,409,400
208,800
121,800
843,431
512,831
208,800
121,800
1,097,836
767,236
208,800
121,800
EURIBOR 3M+0.35%
EURIBOR 3M+1.0%
EURIBOR 3M+1.50%
TDA 31, FTA (*)
Serie A
Serie B
Serie C
-------
Aaa
A2
Baa3
AA+
A
BBB
-------
3,000
2,805
60
135
300,000
280,500
6,000
13,500
197,439
177,939
6,000
13,500
228,053
208,553
6,000
13,500
EURIBOR 3M + 0.3%
EURIBOR 3M + 0.6%
EURIBOR 3M + 1.2%
GC SABADELL EMPRESAS 4, F.T.A.
A
B
C
-------
Aaa
A3
Ba2
-------
AAA
-----
6,200
5,258
251
691
620,000
525,800
25,100
69,100
327,003
232,803
25,100
69,100
426,413
332,213
25,100
69,100
EURIBOR 3M+0.55%
EURIBOR 3M+1.25%
EURIBOR 3M+1.75%
A1
A2
B
-------
-------
AAA
AAA
B+
--AAA
---
9,000
1,500
5,340
2,160
900,000
150,000
534,000
216,000
381,484
0
165,484
216,000
900,000
150,000
534,000
216,000
EURIBOR 3M+0.40%
EURIBOR 3M+0.50%
EURIBOR 3M+1.50%
TDA EMPRESAS 1, FTA (*)
Serie A
Serie B
-----
Aa3
B3
A+
---
-----
2,750
2,145
605
275,000
214,500
60,500
125,887
65,387
60,500
190,624
130,124
60,500
EURIBOR 3M + 0.3%
EURIBOR 3M + 1.5%
A1 (G) (a)
A2 (G) (a)
A3
B
---------
---------
A-A-A-BB
AAA
AAA
AAA
BBH
10,000
2,500
3,900
1,600
2,000
1,000,000
250,000
390,000
160,000
200,000
904,550
154,550
390,000
160,000
200,000
1,000,000
250,000
390,000
160,000
200,000
EURIBOR 3M+1.30%
EURIBOR 3M+1.35%
EURIBOR 3M+1.40%
EURIBOR 3M+1.50%
TDA EMPRESAS 2, FTA (*)
Serie A
Serie B
-----
Aa3
Baa1
A+
---
-----
2,000
1,563
437
200,000
156,300
43,700
140,904
97,204
43,700
200,000
156,300
43,700
EURIBOR 3M + 0.3%
EURIBOR 3M + 1.5%
A1
A2 (G)
B
-------
-------
AAA
AAA
---
AAA
AAA
B
15,000
2,950
6,500
5,550
1,500,000
295,000
650,000
555,000
1,500,000
295,000
650,000
555,000
0
0
0
0
EURIBOR 3M+0.40%
EURIBOR 3M+0.30%
EURIBOR 3M+1.00%
10,374,440
11,462,935
Total
174
2011
2,957,368
Market
AIAF
AIAF
AIAF
AIAF
AIAF
AIAF
AIAF
AIAF
AIAF
AIAF
AIAF
AIAF
AIAF
(*) Banco Guipuzcoano issues outstanding.
(a) With guarantee of the Spanish government.
(b) With guarantee of the Government of Catalonia.
Of the total outstanding liability, bonds associated with assets that were not removed from the balance sheet
amounted to a total of €1,575,889,000 in 2011 and €2,061,428,000 in 2010. These bonds are reported in the
balance sheet under debt certificates including bonds (see note 21).
Note 11. Changes in fair value of hedged items in portfolio hedges of interest rate risk
At 31 December 2011 the balances under this heading on the asset and liability sides of the consolidated
balance sheet were made up of gains and losses on items covered by fair value hedges of the interest rate
risk on portfolios of financial instruments. At the end of the year losses on hedged items were €449,245,000
(€451,064,000 at 31 December 2010) but these losses were almost entirely offset by gains on their associated
hedging derivatives.
Note 12. Hedging derivatives (assets and liabilities)
€’000
2011
Assets
Liabilities
2010
Assets
The fair values of these items of the consolidated balance sheet at 31 December 2011 and 2010 are analysed as
follows::
Liabilities
16,641
7,322
0
45,660
9,626
0
10,130
89
0
41,471
70
89
Macro-hedges:
Fair value hedges
Cash flow hedges
Of which: Recognized in equity (note 29)
393,722
0
0
11,086
44,773
0
474,100
3,245
348
53,282
9,492
1,155
Total
417,685
111,145
487,564
104,315
Euro denominated
417,685
0
109,317
1,828
487,564
0
102,962
1,353
Total
417,685
111,145
487,564
104,315
The main types of interest rate risk hedging contract entered into by the group are fixed/variable interest rate
swaps. The most usual valuation technique used with these swaps is the discounted cash flow method.
The group enters into interest rate hedging contracts as part of its policy for managing interest rate risk (see
note 37 on financial risk management). The main types of hedging instrument used are described below:
Micro-hedges
Fair value hedges
Cash flow hedges
Of which: Recognized in equity (note 29)
a) Fair value hedges:
The items covered are as follows:
• Capital market funding operations by the group, resulting in debt issues at fixed rates of interest. At 31
December 2011 and 2010 the fair values of swaps covering these items showed a net loss of €386,118,000
and €424,160,000 respectively.
• Deposits sold through the group’s branch network at fixed rates of interest. At 31 December 2011 and 2010
the fair values of swaps covering these deposits showed a net loss of €18,723,000 and €24,388,000
respectively.
• Individual loans by the group at fixed rates of interest. At 31 December 2011 and 2010 the fair value of swaps
covering these items showed a net gain of €18,333,000 and €13,779,000 respectively.
The majority of the group’s hedging operations are carried out by Banco de Sabadell, S.A., Banco Urquijo
Sabadell Banca Privada, S.A. and Banco Guipuzcoano, S.A.
175
Gains and losses recognized during the year on hedging instruments and on hedged items are shown in the
following table:
€’000
2011
2010
Hedging
instruments
Hedged
items
Hedging
instruments
Hedged
items
(9,636)
(2,430)
49
5,508
(12,763)
9,382
1,953
(49)
(5,508)
12,986
(30,426)
(1,014)
135
(568)
(28,979)
31,011
1,098
0
590
29,323
Macro-hedges
Capital market and fixed-rate liabilities
61,764
61,764
(55,345)
(55,345)
(120,409)
(120,409)
138,581
138,581
Total
52,128
(45,963)
(150,835)
169,592
Micro-hedges
Fixed-rate assets
Exchange rate hedges
Capital market
Fixed-rate liabilities
b) Cash flow hedges:
Amounts recognized in consolidated equity in the year and amounts derecognized from consolidated equity and
taken to the consolidated income statement for the year are reported in the consolidated statement of changes in
total equity for the Banco Sabadell group.
In the case of interest rate micro-hedges, the expected cash flows are considered likely to occur in the near
term.
The group enters into cash flow macro-hedges to reduce net interest income volatility due to fluctuations in
interest rates over a one-year time horizon. The macro-hedge is thus a hedge of future cash flows related to the
net exposure of a portfolio made up of highly probable liabilities with exposures similar to interest rate risk. At the
present time the hedging instruments used for this purpose are interest rate swaps.
Note 13. Non-current assets held for sale and liabilities associated with non-current assets held
for sale
The components of this item of the consolidated balance sheet at 31 December 2011 and 2010 were as follows:
€’000
2011
2010
Assets
Land and buildings for own use
Repossessed assets
Intangible assets
Other assets
594,880
29,809
489,121
74,048
1,902
465,214
23,632
350,396
88,213
2,973
(63,999)
(113,300)
Total non-current assets held for sale
530,881
351,914
0
0
Liabilities associated with non-current assets held for sale
176
The above totals are made up of non-current assets and liabilities whose book values are expected to be
recoverable on disposal within one year of the balance sheet date.
Repossessed assets comprise assets received from borrowers or others debtors of the Bank in full or part
settlement of financial assets representing claims against those borrowers or debtors.
The fair value of the repossessed assets classified as non-current assets held for sale at 31 December 2011
was €583,878,000.
Changes in the group’s repossessed assets for 2011 and 2010 were as follows:
€’000
Repossessed assets
81,541
298
104,243
(24,548)
82,983
220,697
Additions/reductions due to changes in basis of consolidation
Additions
Transfers
465,214
15,783
304,708
(56,460)
(134,365)
Balances at 31 December 2011
594,880
Impairment losses:
Additions
Transfers
Acquisition of Banco Guipuzcoano group
9,995
0
19,982
(6,991)
0
90,314
Additions
Transfers
113,300
11,924
17,108
(18,346)
(59,987)
Cost:
Additions
Transfers (*)
63,999
351,914
Net balance at 31 December 2011
530,881
(*) Total intangible assets transferred pertaining to group company Bansabadell Information System, S.A.
The group is currently seeking an industrial partner for a joint venture to market the software used on the
group’s technology platform. The aim would be to develop a business based on generating value from the platform
and promoting it as a comprehensive technology solution for the banking industry. Some organizational and legal
arrangements have already been made to put the scheme onto a solid corporate footing as it expands beyond its
current operational base within BanSabadell Information System, S.A., a group subsidiary. The industrial partner
would have control of the new company.
Accordingly, that part of intangible assets which is attributable to BanSabadell Information System, S.A. and
would be transferred to the future joint venture have been reclassified as non-current assets held for sale. Virtually
all the software classified under this heading has been developed in-house.
177
Note 14. Investments
The following table shows the composition of, and changes in, this item at 31 December 2011 and 2010.
€’000
Balance at
31.12.2010
Results of
equityaccounted
undertakings
Acquisition
or increase
in capital
Disposal
or
dissolution
Payment
of
dividends
38,494
2,228
1,030
8,446
125,438
14,873
533
143
56
252
7,886
1,998
0
0
0
0
5,989
0
0
0
0
0
0
0
7,183
1,959
0
146,482
52,645
1,352
193,330
1,030
1,946
37,862
9,612
48,698
1,884
3,382
2,931
27,225
13,262
(341)
386
97
(40)
0
1,247
1,345
(11)
(22)
2
928
1,000
(865)
(67)
(24)
(701)
17
(147)
0
(1,894)
(75)
23
0
6,243
0
6,800
0
0
0
0
0
0
0
0
1,828
0
0
0
0
0
0
0
0
0
0
0
47,271
0
400
0
0
13,643
(1,531)
147
(12)
(65)
813,492
52,641
21,407
(2,460)
(48,003)
(30,703)
Transfer
Translation
differences
and other
movements
Balance at
31.12.2011
(75)
0
0
(41)
(21,700)
(3,233)
0
0
0
0
0
0
(1)
0
(1,086)
1
(6,767)
(492)
38,951
2,371
0
8,658
110,846
13,146
0
0
0
(166)
8,976
0
0
0
0
0
0
0
0
0
0
0
0
(2,448)
0
0
0
0
0
0
0
0
0
0
0
(7,500)
(13,757)
0
0
0
0
0
(607)
(520)
0
0
0
0
0
0
0
0
0
(37,862)
0
0
0
0
0
7,452
0
0
0
0
0
0
0
0
0
0
0
(4,821)
1,217
(1,011)
(79,725)
0
(1,906)
0
0
0
0
97
(2,933)
764
0
0
(1,081)
(2,173)
0
451
(1,713)
(2,008)
1
0
0
161,386
59,610
0
120,791
1,127
0
0
10,252
49,523
1,873
3,457
0
8,524
24,833
7,367
0
0
1,492
5,190
0
0
0
2,776
2,313
0
370
48,041
(293)
(6,458)
5,431
(109,440)
696,934
Undertakings consolidated by
the equity method:
Adelanta Corporación, S.A.
Anara Guipúzcoa, S.L.
Aviación Regional Cántabra, A.I.E.
Banco del Bajío, S.A. (a)
BanSabadell Pensiones, E.G.F.P., S.A.
BanSabadell Seguros Generales, S.A.
de Seguros y Reaseguros
BanSabadell Vida, S.A. de Seguros y Reaseguros
Centro Financiero B.H.D., S.A. (a)
Desarrollos Inmobiliarios Pronegui, S.L.
Dexia Sabadell, S.A.
Diana Capital Inversión, S.G.E.C.R., S.A.
Espazios Murcia, S.L.
Establecimientos Industriales y Servicios, S.L
Eurofragance, S.L.
Garnova, S.L.
Gate Solar, S.L.
Grafos, S.A. Arte sobre Papel
Harinera Ilundain, S.A.
Hidrodata, S.A.
Intermas Nets, S.A.
J. Feliu de la Penya, S.L.
Key Vil I, S.L.
M.P. Costa Blanca, S.L.
Parc Eòlic Veciana - Cabaro, S.L.
Parque Eólico Magaz, S.L.
Promociones Abaco Costa Almería, S.L.
Promociones Aguiver, S.L.
Saprosin Promociones, S.L.
SBD Creixent, S.A.
Sociedad de Cartera del Vallés, S.I.C.A.V., S.A.
Sociedad de Inversiones y
Participaciones Comsa Emte, S.L.
Other
Total
(a) Euro equivalent.
178
24,338
8,232
1,148
2,197
2,193
4,722
1,860
2,008
1,893
2,851
2,290
(505)
0
0
0
0
0
0
0
0
0
0
€’000
Balance to
31.12.2009
Results of
equityaccounted
undertakings
Acquisition
or increase
in capital
Disposal
or
dissolution
Payment
of
dividends
37,894
0
0
8,693
100,385
13,634
674
88
0
(247)
12,840
3,233
0
2,140
1,030
0
6,108
0
0
0
0
0
0
0
Transfer
Translation
differences
and other
movements
Balance to
31.12.2010
(74)
0
0
0
(3,000)
(1,380)
0
0
0
0
0
0
0
0
0
0
9,105
(614)
38,494
2,228
1,030
8,446
125,438
14,873
Undertakings consolidated by
the equity method:
833
0
0
0
0
(263)
7,183
124,433
41,973
0
183,535
0
0
38,319
0
47,920
0
3,037
0
24,146
7,327
0
0
1,233
3,313
5,427
20,356
15,620
0
20,961
(9)
(19)
2,137
562
1,532
24
277
(2)
792
905
0
0
(459)
180
101
0
5,831
1,352
0
1,039
1,965
0
9,050
0
1,860
0
2,933
0
0
1,148
2,197
1,419
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
(3,402)
0
0
(11,058)
0
(5,673)
0
0
(2,642)
0
(754)
0
0
0
(600)
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1,693
279
0
(5,493)
0
0
48
0
0
0
68
0
0
0
0
0
0
(91)
(806)
146,482
52,645
1,352
193,330
1,030
1,946
37,862
9,612
48,698
1,884
3,382
2,931
24,338
8,232
1,148
2,197
2,193
0
4,722
0
34
1,826
0
0
0
0
1,860
0
0
2,869
2,463
0
(250)
(18)
(120)
2,008
2,143
0
0
0
0
0
0
0
0
0
(53)
0
0
0
0
0
0
0
0
2,008
1,893
2,851
2,290
47,271
160
0
0
(160)
0
0
47,271
5,590
(1,037)
9,195
0
0
0
(105)
13,643
Total
706,075
79,148
53,244
(3,402)
(25,394)
0
3,821
813,492
(a) Euro equivalent.
Changes in goodwill associated with investments in the years to 31 December 2011 amounted to €97,345,000.
6,613
Anara Guipúzcoa, S.L.
BanSabadell Seguros Generales, S.A.
de Seguros y Reaseguros
Centro Financiero B.H.D., S.A. (a)
Diana Capital Inversión, S.G.E.C.R., S.A.
Establecimientos Industriales y Servicios, S.L
Eurofragance, S.L.
Garnova, S.L.
Gate Solar, S.L.
Intermas Nets, S.A.
J. Feliu de la Penya, S.L.
Key Vil I, S.L.
M.P. Costa Blanca, S.L.
Parc Eòlic Veciana - Cabaro, S.L.
Parque Eólico La Peñuca, S.L.
Promociones Abaco
Costa Almería, S.L.
SBD Creixent, S.A.
Sociedad de Inversiones y Participaciones
Comsa Emte, S.L.
Other
179
Note 15. Tangible assets
The composition of this item of the consolidated balance sheet at 31 December 2011 and 2010 were as follows:
€’000
2011
180
2010
Cost
Depreciation
Impairment
Net value
Cost
Depreciation
Impairment
Net value
Tangible fixed assets
1,583,306
(699,536)
(5,835)
877,935
1,621,667
(715,254)
(5,894)
900,519
For own use:
1,455,226
(656,697)
(5,835)
792,694
1,480,206
(669,332)
(5,894)
804,980
Computer and related equipment
263,889
(196,153)
0
67,736
257,976
(200,245)
0
57,731
Furniture, vehicles & other equipment
667,604
(375,655)
0
291,949
693,598
(385,708)
0
307,890
Buildings
369,898
422,241
(84,884)
(5,835)
331,522
459,168
(83,376)
(5,894)
Building work in progress
73,605
0
0
73,605
41,705
0
0
41,705
Other
27,887
(5)
0
27,882
27,759
(3)
0
27,756
Leased out under operating leases
128,080
(42,839)
0
85,241
141,461
(45,922)
0
95,539
Investment property
291,015
(12,640)
(49,429)
228,946
228,411
(6,930)
(40,451)
181,030
Buildings
281,878
(12,290)
(49,276)
220,312
219,552
(6,880)
(40,378)
172,294
9,137
(350)
(153)
8,634
8,859
(50)
(73)
8,736
1,874,321
(712,176)
(55,264)
1,106,881
1,850,078
(722,184)
(46,345)
1,081,549
Rural property, building plots and sites
Total
Changes in tangible assets in 2011 and 2010 are shown in the following table:
€’000
Leased out
Investments
under operating
properties
leases
Land and
buildings
Furniture and
equipment
621,312
15,196
(181,337)
6,852
112
66,497
802,167
63,522
(12,947)
821
(5,260)
103,271
184,353
15,941
(10,969)
0
28,674
10,412
140,332
37,239
(35,364)
0
(746)
0
1,748,164
131,898
(240,617)
7,673
22,780
180,180
Additions
Changes in basis of consolidation
Other
528,632
38,286
(5,367)
0
(37,818)
951,574
72,890
(85,922)
0
(7,049)
228,411
112,799
(13,156)
0
(37,039)
141,461
28,021
(42,371)
0
969
1,850,078
251,996
(146,816)
0
(80,937)
523,733
931,493
291,015
128,080
1,874,321
Accumulated depreciation:
Additions
Other
102,996
7,193
(41,272)
493
(1,074)
15,043
448,605
63,649
(7,792)
176
(1,677)
82,992
3,411
2,373
(245)
0
699
692
44,316
22,776
(20,539)
0
(631)
0
599,328
95,991
(69,848)
669
(2,683)
98,727
Additions
Other
83,379
7,208
(3,053)
0
(2,645)
585,953
67,999
(80,161)
0
(1,983)
6,930
4,052
(446)
0
2,104
45,922
21,424
(25,201)
0
694
722,184
100,683
(108,861)
0
(1,830)
84,889
571,808
12,640
42,839
712,176
Impairment losses
Additions
Other
2,913
1,379
(146)
0
1,647
101
2,272
13
0
(2,272)
(13)
0
3,461
26,238
(617)
4,291
7,078
0
0
0
0
0
0
0
8,646
27,630
(763)
2,019
8,712
101
Additions
Other
5,894
212
(165)
0
(106)
0
518
(451)
0
(67)
40,451
35,140
(26,705)
0
543
0
0
0
0
0
46,345
35,870
(27,321)
0
370
Cost:
Additions
Other
0
49,429
0
55,264
439,359
365,621
181,030
95,539
1,081,549
433,009
359,685
228,946
85,241
1,106,881
5,835
Total
181
The fair value of properties for the group’s own use at 31 December 2011 was €743,461,000
(€713,519,000) in 2010. Fair values of properties have been calculated on the basis of assessed values
certified by independent experts listed in the Bank of Spain’s special registry of property appraisers in
accordance with Ministerial Order ECO/805/2003 on the valuation of properties and certain rights for defined
financial ends.
The gross value of own-use tangible assets that remained in use and had been fully depreciated at 31 December
2011 and 2010 amounted to €279,788,000 and €297,678,000 respectively.
The net book cost of tangible assets of foreign operations was €57,146,000 at the close of 2011 (€49,987,000
at the close of 2010).
In the course of 2010 the group completed sale arrangements for 379 for a total amount of €410 million
realizing a net profit of €252,737,000. At the same time, the Bank entered into operating leases with the
purchaser on the property (with the Bank being responsible for maintenance, insurance and taxes). All the leases
are for obligatory terms of 10 years, during which the rent (initially fixed at €37,500 per month) will be reviewed
annually. A purchase option exercisable by the group is provided in 396 of the leases in another 14 leases no such
purchase option is provided.
Other features of the leases, all of which are common in the operating lease market, include the fact that none
of them provide for the ownership of the property to revert to the Bank at the end of the lease; neither does any of
them require the Bank to continue the tenancy beyond the end of the obligatory minimum term. Moreover, the Bank
did not give any guarantee to the buyers in respect of any losses incurred as a result of the early termination of the
leases or of possible changes in the residual value of the leased properties. The sale prices of the properties and
subsequent payments of rent under the leases were arrived at on the basis of reasonable market values as of the
date of sale.
Rental costs recognized by the group for the year 2011 totalled €45,255,000 (€18,430,000 in 2010) and have
been recorded under “other general administrative expenses” in the income statement (note 34.(f)).
The present values of minimum future rental payments to be incurred by the Bank under all operating leases,
that is, during the minimum term of the leases (assuming that none of the available options to renew the lease
or purchase the asset are likely to be exercised) at 31 December 2011 stood at €39,821,000 for one-year terms
(2010: €37,813,000), €122,315,000 for terms from one to five years (2010: €120,028,000) and €145,293,000
for terms of more than five years (2010: €170,845,000).
With regard to the “Leased out under operating leases” column of the table, the bulk of the group’s operating
lease business is carried on by BanSabadell Renting, S.A. and consists of vehicle leasing.
Assets comprised within the “Investment properties” column showed an aggregate fair value of €267,371,000
at the end of the year. Rental income from these investment properties and the direct costs associated with these
properties, whether giving rise to rental income during the year or not, were not such as to have a significant impact
on the consolidated annual accounts.
In 1996 Banco de Sabadell, S.A., Banco Herrero, S.A. and Europea de Inversiones y Rentas, S.L. (both
now merged into Banco Sabadell) availed themselves of article 5 of Royal Decree Law 7/1996 of 7 June and
subsequent legislative provisions to restate their property, plant and equipment in accordance with Royal Decree
2607/1996 of 20 December. The maximum amount to which any asset could be revalued was the professionally
assessed market value of the asset. Increases in the valuations of property, plant and equipment for these
undertakings were as follows:
€’000
Increase in valuation
Banco de Sabadell, S.A.
Banco Herrero, S.A. (1)
Europea de Inversiones y Rentas, S.L. (2)
36,402
6,353
2,254
Total
45,009
(1) Banco Herrero, S.A. was absorbed by Banco de Sabadell, S.A. in 2002.
(2) Europea de Inversiones y Rentas, S.L. was absorbed by Banco de Sabadell, S.A. in 2008.
182
Of the total amount of assets subject to restatement, €208,000 was written off for depreciation during the year
2011 for Banco de Sabadell, S.A. (2010: €303,000).
Also included in tangible assets are assets currently on the Bank’s balance sheet as a result of a series of
mergers that have seen the incorporation of Solbank SAD, S.A., Banco Herrero, S.A., Banco de Asturias, S.A.,
BanSabadell Leasing EFC, S.A., Solbank Leasing EFC, S.A., BanAsturias Leasing EFC, S.A., Banco Atlántico, S.A.,
Banco Urquijo, S.A. and Europea de Inversiones y Rentas, S.L. Details of these mergers are provided in legalized
accounting records filed with the Mercantile Registry.
Note 16. Intangible assets
The composition of this item at 31 December 2011 and 2010 was as follows:
€’000
2010
Goodwill:
Axel Group, S.L.
Banco Urquijo
BanSabadell Fincom, E.F.C., S.A.
BanSabadell Profesional, S.L.
Eólica Sierra Sesnández, S.L.
Grupo Banco Guipuzcoano (1)
Jerez Solar, S.L.
Sabadell United Bank, N.A. (1) (2)
823,815
1,128
7,858
473,837
4,923
984
1
285,345
2,873
46,866
748,622
1,128
7,858
473,837
4,923
984
0
225,619
3,312
30,961
Other intangible assets:
With finite useful lives:
Contractual relations with customers (Banco Guipuzcoano)
Contractual relations with customers and Banco Urquijo brand (Banco Urquijo)
Private banking business, Miami
Contractual relations with customers (Sabadell United Bank)
Software purchase costs (note 13)
Other deferred charges
198,346
198,346
48,917
30,326
24,140
24,149
61,177
9,637
82,679
82,679
0
38,773
25,380
0
16,913
1,613
1,022,161
831,301
Total
2011
(1) See note 2.
(2) Includes goodwill arising on the acquisition of the assets and liabilities of the company Lydian Private Bank & Trust.
Goodwill
Banco Urquijo
To measure the goodwill in Banco Urquijo, the cost of the business combination was determined based
on the fair value of the assets surrendered, the liabilities incurred, any potential income and cost synergies
identified, and the costs directly attributable to the business combination. From a comparison of the cost
of the business combination with the net fair value of the assets, liabilities and contingent liabilities
of the acquired undertaking, a difference of €473,837,000 arose and was recognized in assets as
goodwill. In measuring assets at their fair values, increases in property values were recognized for a total
of €80,690,000 (€61,410,000 after tax) and intangible assets were identified with a value of €78,587,000
(€54,598,000 after tax).
This goodwill was then allocated to the cash-generating units (CGUs) thought likely to benefit from the
synergies identified. These were the Private Banking CGU, the Commercial Banking CGU, and Other Gus.
Synergies that could not be allocated to any one CGU because of limitations in the historical data available for
the acquired undertaking were assigned to all Gus. In 2009 the goodwill for the Business Banking CGU was
assigned to the Commercial Banking CGU and the newly created Corporate Banking CGU in line with the group’s
current business model.
At the end of 2011 the Bank made an assessment, on a recoverable value basis, to see whether there were any
indications of impairment in the goodwill associated with Banco Urquijo. The assessment showed there had been
no impairment in the value of the goodwill.
The valuation method used was to estimate the present value of future distributable net profits associated
with the business carried on by Banco Urquijo over a projection period of 5 years (up to 2016) and to calculate a
terminal value based on a nil growth rate in perpetuity. The key variables on which the financial projections were
built were: growth in net interest income (determined on the basis of forecast business volumes and rates of
interest), changes in other income and expense items, and capital ratios.
183
184
These forecasts were based on a modest recovery in lending growth and declining default and delinquency
rates in the latter part of the projection period. The Spanish economy will remain weak in 2012. Domestic
demand will continue to be depressed by restrictive fiscal policies, by the deleveraging process taking place in
the private sector and by tight conditions on the granting of credit. The process of restructuring the financial
sector will further hamper the flow of credit. Meanwhile, property assets continue to lose value, negatively
affecting household wealth. Foreign demand will be hit by the worsening economic situation of Spain’s main
trading partners, although it will not perform as badly as domestic demand. In this context, the trade imbalance
will continue to adjust.
As far as prices are concerned, inflation will be kept under control in the light of fragile domestic demand and
relatively low installed capacity utilization rates, although prices could be pushed up by possible increases in
indirect taxes.
Economic policy continues to focus on ambitious fiscal adjustments, which will make it difficult to meet the initial
targets set, especially in the context of a weak economy. Finally, Spain is still implementing the structural reforms
demanded by the European Council on 26 October. Key reforms to be adopted include measures to improve the
labour market and competitiveness.
In terms of yield curves, the ECB’s base rate will be held down in a climate of low economic growth and little
inflationary pressure in the medium term.
The ECB will also continue to inject liquidity into the market to aid financial stability.
The present value of future distributable income flows used to measure value in use was calculated taking the
discount rate as the cost of Banco Sabadell’s capital (Ke) from the standpoint of a market participant. To do this
the Capital Asset Pricing Model (CAPM) was used.
In applying this method discount rates of between 10.75% and 11.56% were used, depending on the CGU that
was being valued.
The annual growth rates (CAGRs) used for business volumes in the projection period were between 2% and 4%,
according to the particular analysis being carried out for each CGU.
No indications of impairment were detected following a sensitivity analysis of the key variables used to value
goodwill. The variables included in this analysis were: the cost of capital (which has increased by over one
percentage point), the core capital requirement, the growth rate in perpetuity, movements in net interest income
and the increase in the cost of recurring risk.
This goodwill is not tax deductible in accordance with the Revised Text of the Law on Corporate Income Tax.
Banco Guipuzcoano
The goodwill from Banco Guipuzcoano has been valued as the difference between the fair value of the shares and
other securities paid (Banco Sabadell ordinary shares and subordinated bonds mandatorily convertible to shares in
Banco Sabadell) as of 24 November 2010 when control passed to the Bank —a total of €613,479,000— and the
estimated fair value of the acquired assets and liabilities.
This goodwill was assigned to the Commercial Banking CGU and reflects the future income generation potential
of the acquired assets and liabilities, the value of potential cost and income synergies identified and the costs
associated with the business combination.
Under current accounting rules the period allowed for the production of final accounts for a business combination
is one year from the date of taking control. As a result of this process, the fair values of the acquired assets
and liabilities, and the goodwill associated with the business combination, have been included in the financial
statements for the year to 31 December 2011. These values are €328,134,000 and €285,345,000.
A difference between the fair values and the carrying values of assets and liabilities net of tax, amounting
to €298,311,000, was determined. On the other hand, intangible assets to the amount of €54,862,000 were
identified in reference to core deposits and the management of investment funds.
To determine the fair value of the loan portfolio, a range of estimated expected loss ratios were applied to the
portfolio. The estimated ratios were determined according to standard market procedures and having regard to the
nature of the loans and of any collateral or other security.
Goodwill derived from the acquisition of the assets and liabilities of Lydian Private Bank
The goodwill generated by the acquisition of certain assets and liabilities of Lydian Private Bank is calculated
from the difference between the accounted value received on the overtake date (19 August 2011) and the
estimated fair market value of these assets and liabilities.
Current legislation establishes a period of one year since takeover to include the combination of businesses in
the accounts. As a result of this process, the financial statements at 31 December 2011 included an estimate of
the fair value of the assets and liabilities acquired, valued at €1,105,708,000 and €1,118,921,000 respectively,
as well as the goodwill associated with the combination of businesses.
The difference between the fair value and the tax-free carrying values of assets and liabilities has been
calculated at €13,213,000, mainly proceeding from the lending portfolio and the account receivable from Federal
Deposit Insurance Corporation in accordance with the terms established in asset protection scheme signed with
this institution. On the other hand, intangible assets to the amount of USD 3,059,000 were identified in reference
to core deposits and the management of investment funds.
The fair value of the lending portfolio was determined by applying estimated percentages of expected loss
in accordance with market standards, determined basically as a function of the characteristics of the financing
granted, the debt collateral and expected future cash flow. The same premises were used to determine the fair
value of the assets with FDIC and the characteristics of this contract over time.
In the 2010 financial year, within the deadline set by current legislation, final accounting was made of the
combination of businesses. The goodwill of MUNB was assessed by determining the cost of the combination of
businesses by taking the fair value of the assets and liabilities incurred into account. Comparison of the cost of the
combination of businesses and the net fair value of assets and liabilities showed a difference of USD 41,314,000
(€30,174,000) recorded as goodwill in the assets.
The discount rate used in this assessment was calculated using the capital asset pricing model (CAPM) and was
16.0%. An independent expert carried out the assessment of the assets and liabilities acquired and assignation of
the price paid.
The fair value of the real estate assets taken over by the group was determined from observed percentage
falls in market values. These percentages were determined on the basis of the length of time the assets had
remained on the balance sheet, their use, their location and their status from the planning/development point
of view.
At closure 2011, the bank determined whether there were indications of deterioration of the goodwill of
Bank Guipuzcoano as a result of the estimate of the recuperable amount. The macroeconomic and interest rate
hypotheses used were the same as those described in the previous section on Banco Urquijo. According to the
result of this assessment, this goodwill has not undergone any loss in value.
The method used was to discount the future net distributable profits associated with the bank’s activity for a
projected period of 5 years (to 2016) plus the calculation of its end-value using a perpetual nul growth rate.
The present value of the future cash flow to distribute, used for determining the value in use, was calculated
using a discount rate of the Bank Sabadell capital cost (Ke) from a market participant perspective. The CAPM
(Capital Asset Pricing Model) method was used.
According to this method, the discount rate used was 10.75%.
An independent expert validated the assignation of the price paid in the transaction to different assets and
liabilities of Banco Guipuzcoano, as well as the goodwill deterioration test.
A sensitivity analysis was made of the key variables of the resulting assessment and the result also indicated
that there was no indication of deterioration. The variables used for this analysis were: the capital cost (which has
increased by more than one percentage point), the required core capital, the perpetual growth rate, the variation of
the interest margin, and the increase of the recurrent cost of risk.
According to current tax legislation, on 31 December 2011, the goodwill generated is not tax deductible.
185
Other intangible assets
Banco Urquijo
Under the “other intangible assets” heading, the main intangibles associated with the purchase of Banco Urquijo
are the values of contractual rights under agreements with Banco Urquijo customers for certain products (OEICs,
investment and pension funds, credit/debit cards, short-term loans, brokerage and custody services), the values
of deposits, and the value of the Banco Urquijo brand. These assets have been valued by the income (discounted
cash flow) method, with the multi-period excess earnings technique being used for income from contractual
relations and deposits, and the price premium technique to measure the brand value.
These intangible items have finite useful lives of 12 years for Private Banking customers, seven years for
Commercial Banking customers and five years for other categories. They are amortized over these lives on a
straight-line basis in a way similar to that used for tangible assets.
186
Private Banking Business in Miami
The intangibles associated with the 2008 acquisition of the BBVA private banking business in Miami include the
value of contractual arrangements arising from customer relationships transferred along with the business and
consisting mainly of short-term loans and also of deposits. As required by the accounting rules, a final accounting
for the business combination resulting from this acquisition was completed in the course of 2009. The final
accounting identified and recognized intangible assets with a total value of €29,495,000.
The amortisation of these assets will take place over 15 years from their creation and at 31 December 2011 the
value was €24,140,000.
Banco Guipuzcoano
The intangible assets associated with the acquisition of Banco Guipuzcoano basically include the value of the
contractual rights resulting from the relationship with Banco Guipuzcoano customers for core deposits and
investment funds. The core deposits were assessed by the income approach using the cost saving method. The
fair value was determined, mainly, by estimating the current net value of the cash flow generated by the lower
cost of core deposits compared to alternative financing. The investment fund management was assessed by
the income approach using the excess profit method. The fair value was determined, mainly, by estimating the
current net value of the cash flow generated by the commissions received from marketing investment funds.
The amortisation of these assets takes place over a period of ten years as of the acquisition date of Banco
Guipuzcoano.
Intangible assets to the amount of USD 35,051,000 (€25,600,000) have been identified as corresponding to core
deposits and conceptually their value is derived from the capacity they offer current customers to access finance at
interest rates below market rates. This is an intangible with a defined life as it is assumed that existing customer
accounts will be cancelled over time as a result of changes of address, death or changes of institution. The value
was determined by establishing a customer loss rate that varied between 9% and 20% per annum depending on
the type of deposit. The profit from the current base of deposits is the same as the current value of the cash flow
calculated as the difference between maintaining the current deposits or replacing them with alternative sources of
financing.
The amortisation of these intangible assets will take place over 10 years from their creation and at 31 December
2011 the value was €24,149,000.
Assessments were carried out to determine whether there were indications of impairment in any of these
intangibles by comparing the actual performance of intangible-generating variables with the performance assumed
in the initial valuation. These variables included possible loss of customers, average balance per customer, average
gross income and the assigned cost:income ratio. As of 31 December 2011 there is no need to recognize any
impairment.
The “software purchase costs” item in the table refers principally to deferred expense related to outsourced IT
work and software licence purchases.
Changes in goodwill for the years 2011 and 2010 were as follows:
€’000
Goodwill
Impairment
Total
582,184
(91,254)
490,930
Additions
Other
256,504
(90,208)
1,363
(175)
90,208
0
256,329
0
1,363
749,843
(1,221)
748,622
13,469
0
62,163
(439)
0
0
13,030
0
62,163
825,475
(1,660)
823,815
Additions
Other
€’000
Additions/reductions due to changes in basis of
consolidation
Additions
Other
Additions/reductions due to changes in basis of
consolidation
Amortization
Impairment
Total
(257,594)
(4,434)
179,050
(2,845)
3,109
(346)
(82)
53,068
(1,343)
(175,113)
402
(62,590)
673
89,009
(399)
0
0
4
0
(9,522)
(670)
(86,100)
3
315,247
(227,792)
(4,776)
82,679
0
0
0
0
66,862
(4,221)
79,942
(30,234)
3,467
10
0
0
(159)
36,628
(754)
79,793
457,830
(254,549)
(4,935)
198,346
The gross value of other intangible assets that were still in use and had been fully amortized at 31 December
2011 and 2010 totalled €226,792,000 and €222,781,000 respectively.
Additions
Other
Cost
441,078
Changes in other intangible assets in 2011 and 2010 were as follows:
Note 17. Other assets
The composition of other assets at 31 December 2011 and 2010 was as follows:
€’000
2011
2010
Inventories
Other
2,238,784
155,697
1,596,758
254,047
Total
2,394,481
1,850,805
187
Changes in inventories in 2011 and 2010 were as follows:
€’000
Additions
Transfers
Impairment
Additions
Transfers
Impairment
Land
Real estate
developments
Other
Total
1,165,800
160,426
4,618
1,330,844
200,165
(60,656)
(22,991)
(288,764)
58,611
517,677
(145,849)
(1,342)
(78,803)
90,029
0
(2,277)
0
0
114
717,842
(208,782)
(24,333)
(367,567)
148,754
1,052,165
542,138
2,455
1,596,758
409,178
(158,021)
78,404
(52,509)
745,260
(313,474)
148,640
(214,113)
13
0
(7)
(1,345)
1,154,451
(471,495)
227,037
(267,967)
1,329,217
908,451
1,116
2,238,784
The fair value of inventories was €2,715 million at 31 December 2011 (€2,054 million at 31 December 2010),
of which 22.80% of the amount corresponds to appraisals that are more than 12 months old.
At 31 December 2011 the total value of inventories subject to a charge or mortgage was €15,085,000.
Note 18. Financing for construction and real estate development; assessment of bank’s requirement for
wholesale market funding
Information on finance for construction and real estate development
Details of finance for construction and real estate development, and associated provisions, are given in the
following table:
€Mn.
31.12.2011
Gross
amount
Loans recorded by group credit institutions
(Spanish operations) (1)
Of which: Doubtful
Of which: Sub-standard
Excess value
of security
31.12.2010
Specific
provisions
Gross
amount
Excess value
of security
Specific
provisions
9,402
1,575
717
10,170
1,628
725
2,120
1,564
379
323
482
234
1,544
2,174
296
400
367
358
(1) The loans to which these data relate are classified according to the purpose of the loan rather than according to the business or sector of the borrower.
For example, if the borrower is: (a) a real estate company using the loan for a purpose other than construction or real estate development, the loan has
not been included in the table; or (b) a company that is not in the business of construction or real estate development but is using the loan to finance real
estate for development, the loan has been included in the table.
188
€Mn.
Memorandum item
Assets written off
Gross amount
31.12.2011
85
31.12.2010
21
Carrying amount
31.12.2011
31.12.2010
€Mn.
Memorandum item:
Total loans and advances to other debtors excluding government and local authorities
(Spanish operations)
Total assets (all operations)
Value adjustments and credit risk provisions Exposures covered by generic provisions
(all operations)
66,931
68,701
100,437
97,099
832
427
Transactions recorded by credit institutions (Spanish operations): details of finance provided by the group for
construction and real estate development is given in the following table.
€Mn.
Lending:
Gross amount 31.12.2010
640
642
Secured by mortgage
Completed buildings
Residential property
Other property
Buildings under construction
Other property
Land
Plots prepared for development
Other land
8,762
4,340
3,295
1,045
724
620
104
3,698
3,342
356
9,528
4,600
4,033
567
1,248
1,133
115
3,680
3,152
528
Total
9,402
10,170
Unsecured by mortgage
Transactions recorded by credit institutions (Spanish operations): details of home purchase loans to households
provided by the group is given in the following table.
€Mn.
31.12.2011
Gross amount Of which: Doubtful
Loans for purchase of residential property
Unsecured by mortgage
Secured by mortgage
14,288
101
14,187
468
1
467
31.12.2010
14,061
170
13,891
410
8
402
Transactions recorded by credit institutions (Spanish operations): a breakdown of home loans secured by
mortgages, showing the group’s total exposure as a proportion of the most recent available valuation of the
mortgaged property, is given in the following table.
189
€Mn.
31.12.2011
LTV Ratios
LTV <= 40%
40% < LTV <= 60%
60% < LTV <= 80%
80% < LTV <= 100%
LTV > 100%
14,187
3,072
4,208
5,395
1,373
139
467
57
91
241
67
11
31.12.2010
13,891
2,895
4,077
5,434
1,340
146
Lending:
Gross amount 31.12.2011
402
36
70
199
86
11
Repossessions recorded by credit institutions in Spain: details of asset repossessions by group undertakings are
given in the following table.
€Mn.
31.12.2011
Real estate assets originating
from loans to building
contractors and real estate
developers
Completed buildings
Other property
Buildings under construction
Other property
Land
Plots prepared for
development
Other land
Carrying
value (net)
Carrying
value
(gross)
Provisions
(amount)
Provisions
(%)
Provisions
(amount)
Provisions
(%)
Carrying
value (net)
3,444
1,058
31%
2,385
2,571
774
30%
1,797
1,097
736
361
414
197
217
1,933
246
169
77
114
57
57
698
22%
23%
21%
28%
29%
26%
36%
851
567
284
300
140
160
1,235
594
379
215
244
106
138
1,733
126
90
36
61
34
27
587
21%
24%
17%
25%
32%
20%
34%
468
289
179
183
72
111
1,146
1,230
425
35%
805
695
219
32%
476
703
274
39%
430
1,038
368
35%
670
Real estate assets originating
from mortgage loans to
households for the purchase
of a home
562
100
18%
463
293
104
35%
189
Other repossessed real estate
assets
0
0
0
16
10
64%
6
603
253
42%
350
431
277
65%
154
4,609
1,411
31%
3,198
3,311
1,165
35%
2,146
Equity instruments,
shareholdings and loans to
undertakings of these assets
Total real estate portfolio
190
31.12.2010
Carrying
value
(gross)
The bank, as part of the general risk policy and in particular that relative to the building industry and real-estate
promotion, has established a series of specific policies in regard to risk mitigation.
The main measure put in place is continuous follow-up of risk and re-evaluation of the financial viability of the
credit holder in the new economic situation. In the event that it is satisfactory, the relationship continues under
the established term, taking on new commitments in the event that they enable better adaptation to the new
circumstances.
With regard to real estate developments under construction, the key objective is to bring projects
to completion where it is expected that the new properties can be absorbed by the market in the short to
medium term.
For land-related loans, again, the saleability of properties to be built on the site is the key consideration in
deciding on the provision of finance for construction.
In the event that the analysis and follow-up do not indicate reasonable viability, the mechanism of dation in
payment and/or purchase of assets is resorted to.
Where none of these solutions is viable legal proceedings are taken, leading to repossession of the assets.
All assets taken into the possession of the group, whether by surrender in settlement of debt or by purchase,
or as a result of legal action, are managed in a very active way by the Real Estate Management department with
a view to early disposal. Depending on the maturity of the real estate assets, three different strategies may be
used:
1. Sale
A number of mechanisms designed to put completed properties (residential, commercial, industrial, parking, etc.)
on the market have been set up using a variety of distribution channels and commercial agents depending on the
type, location and state of repair of each property and its status from the land/planning viewpoint. A key role in this
strategy is performed by solvia.es, an online real estate market.
2. Mobilization:
Given the very difficult circumstances surrounding the sale of building plots and buildings under construction,
a mobilization strategy has been adopted whose aim is to generate liquidity from building plots. A number of
mobilization schemes have been launched:
• Collaboration with real estate developers: this seeks to make building land available in areas of high housing
demand and allow developers to develop and sell properties.
• An investor programme: the aim of this is to develop “tertiary” sites (for office, commercial and industrial use)
with participation by investors.
• A social housing programme: this involves developing social housing units to be let out and to sell the
properties once they have been let.
Assessment of liquidity requirements - financing policy
Since the onset of the financial crisis in 2007 Banco Sabadell’s funding policy has focused on generating a
liquidity gap from its trading operations, reducing the total amount of finance raised on the wholesale markets and
increasing the Bank’s liquidity position. At 31 December 2011 the nominal value of the group’s liquid assets stood
at €11,413 million (2010: €12,675 million).
3. Development/planning status:
Land that is not yet ready for development must be managed to secure development rights. This is vital as a means
of leveraging the value of the sites and is key to any subsequent development and sale.
In 2011 Banco Sabadell’s maturing wholesale market debt totalled €3,012 million. This was refinanced out of a
€5,691 million liquidity reserve built up in 2011 and by capital market issues totalling €3,332 million; at the same
time, the Bank’s reserve of liquid assets was increased.
In 2012, Banco Sabadell will see maturing medium- and long-term wholesale market debt of €3,811 million.
In line with the funding strategy pursued by the Bank since 2007, it is intended that the maturing debts will be
refinanced mainly from the liquidity gap generated by the Bank and, to a lesser extent, by capital-raising issues
on the wholesale debt markets. Even if Banco Sabadell does not issue any debt on the capital markets, it has
sufficient reserves of liquid assets to cover its maturing debt.
Additional information on the group’s policies and strategies for issuing mortgage market securities and the
keeping of a special mortgage register is provided in note 37 on financial risk management and in note 8 on loans
and advances to other debtors.
191
Note 19. Deposits from credit institutions
Deposits from credit institutions, a liability item on the consolidated balance sheet, are analysed as follows for the
years 2011 and 2010:
€’000
2011
2010
8,128,791
10,300,991
Total
8,128,791
10,300,991
Analysis by type:
Time deposits
Other accounts
6,872,308
1,049,933
161,415
45,135
6,702,212
3,352,521
214,638
31,620
Total
8,128,791
10,300,991
Euro denominated
7,318,671
810,120
9,870,562
430,429
Total
8,128,791
10,300,991
Average annual rates of interest payable on deposits from credit institutions for the years 2011 and 2010 were
Note 20. Deposits from other creditors
192
The deposits from other creditors reported on the consolidated balance sheet at 31 December 2011 and 2010 can
be analysed as follows:
€’000
2011
2010
58,444,050
55,092,555
Total
58,444,050
55,092,555
Analysis by type:
Demand deposits
Time deposits
18,739,971
32,819,805
6,297,269
587,005
18,284,503
30,091,528
6,249,332
467,192
Total
58,444,050
55,092,555
Analysis by sector:
General government
Resident sector
Non-resident sector
2,983,741
49,161,785
5,711,519
587,005
1,282,570
48,229,930
5,112,863
467,192
Total
58,444,050
55,092,555
Euro denominated
53,958,484
4,485,566
51,234,307
3,858,248
Total
58,444,050
55,092,555
Average annual rates of interest payable on deposits from other creditors for the years 2011 and 2010 were
Note 21. Debt certificates including bonds
Details of issues and buybacks/redemptions of debt securities by the group from 31 December 2010 to 31
December 2011 are given in the table below together with comparative information for the previous year.
€’000
31.12.2011
(+) Debt
Issues
(-) Buybacks/
redemptions
(+/-) Exchange
and other
movements
Closing
balance
31.12.2011
Debt securities issued in an EU Member
State and requiring the filing of a
prospectus
19,013,612
3,079,144
(4,511,184)
(73,387)
17,508,185
State and not requiring the filing of a
prospectus
367,053
1,270,118
(1,652,334)
15,163
0
Debt securities issued in a non-EU
Member State
126,832
8,078
0
0
134,910
19,507,497
4,357,340
(6,163,518)
(58,224)
17,643,095
Total
Opening
balance
31.12.2010
€’000
31.12.2010
Opening
balance
31.12.2009
State and requiring the filing of a
prospectus
State and not requiring the filing of a
prospectus
Total
(-) Buybacks/
redemptions
(+/-) Exchange
and other
movements
Closing
balance
31.12.2010
20,046,496
1,610,472
2,859,234
(5,629,599)
127,009
19,013,612
2,163,226
0
5,522,819
(7,342,003)
23,011
367,053
602,725
0
10,016
(485,909)
0
126,832
22,812,447
1,610,472
8,392,069
(13,457,511)
150,020
19,507,497
Debt securities issued in a non-EU
Member State
Guipuzcoano
(+) Debt
Issues
193
Details of debt certificates including bonds issued by the group and recorded on the balance sheet at 31
December 2011 and 2010 are given in the table below:
€’000
Date of
issue
Issuer
Banco Guipuzcoano, S.A.
Subscribed by group companies
Banco de Sabadell, S.A. (London branch)
194
Own securities
BancSabadell d’Andorra, S.A.
Securitization funds
(1)
(1)
(1)
(1)
(1)
Type of
security
2011
Interest rate
2010 in force to 31.12.2011
Maturity
Issue
date currency
04.10.2006
Debt securities
26.10.2006
Debt securities
10.03.2008
Structured bonds
20.04.2009
Debt securities
22.05.2009
Debt securities
20.11.2009
Debt securities
02.08.2010
Debt securities
07.09.2010
Debt securities
09.03.2011
Debt securities
29.09.2011
Debt securities
22.12.2011 Simple bonds guarantee state
29.12.2011
Debt securities
30.11.2009 Simple bonds guarantee state
21.03.2006
Ordinary bonds
18.04.2007
Ordinary bonds
50,000
0
0
0
750,000
800,000
22,000
0
74,750
300,000
1,500,000
300,000
400,000
0
25,000
(1,815,000)
50,000
1,000,000
8,800
38,000
750,000
800,000
132,000
50,000
0
0
0
0
398,672
400,000
25,000
(15,000)
EURIBOR 3M + 0.14
4.38%
EURIBOR 3M + 0.80
EURIBOR 3M + 1.75
EURIBOR 1M + 1.90
4.25%
5.44%
4.25%
2.38%
1.50%
04.10.2016
26.10.2011
10.03.2011
20.04.2011
22.05.2012
20.02.2012
02.08.2012
07.09.2012
09.03.2012
29.03.2013
22.12.2014
29.03.2013
30.11.2012
21.03.2011
18.04.2022
Euros
Euros
Euros
Euros
Euros
Euros
Euros
Euros
Euros
Euros
Euros
Euros
Euros
Euros
Euros
12.03.2009
09.03.2010
10.03.2011
25.06.2008
04.06.2009
03.06.2010
07.06.2011
Notes
Notes
Notes
Comm. paper (ECP)
Notes
Notes
Notes
0
194,192
1,910,574
0
0
51,000
146,300
(22,553)
76,136
1,160,722
0
369,496
116,704
414,377
0
(142,556)
Between 2.8% and 3.7%
Between 1% and 4.92%
Between 2.85% and 3.60%
Between 1.55% and 4%
Miscellaneous
Miscellaneous
Miscellaneous
Miscellaneous
Several
Several
Several
Euros
Euros
Euros
Euros
Euros
Euros
Euros
29.04.2003
26.01.2004
15.06.2005
19.01.2006
10.05.2006
16.05.2006
24.01.2007
20.06.2007
29.12.2008
17.02.2009
30.04.2009
17.07.2009
24.07.2009
10.09.2009
20.01.2010
30.06.2010
10.09.2010
10.12.2010
11.01.2011
11.02.2011
07.06.2011
13.07.2011
12.12.2011
19.01.2011
29.12.2011
Covered bonds
Covered bonds
Covered bonds
Covered bonds
Covered bonds
Covered bonds
Covered bonds
Covered bonds
Covered bonds
Covered bonds
Covered bonds
Covered bonds
Covered bonds
Covered bonds
Covered bonds
Covered bonds
Covered bonds
Covered bonds
Covered bonds
Covered bonds
Covered bonds
Covered bonds
Covered bonds
Covered bonds
Public sector bonds
1,500,000
0
1,500,000
1,750,000
300,000
120,000
1,500,000
300,000
0
488,500
100,000
50,000
200,000
150,000
1,000,000
500,000
1,000,000
150,000
100,000
1,200,000
200,000
50,000
150,000
100,000
500,000
(1,867,466)
1,500,000
1,200,000
1,500,000
1,750,000
300,000
120,000
1,500,000
300,000
600,200
488,500
100,000
50,000
200,000
150,000
1,000,000
500,000
1,000,000
150,000
0
0
0
0
0
0
0
(1,002,550)
4.50%
3.25%
3.50%
4.13%
4.25%
4.25%
EURIBOR 3M + 0.05
3.50%
EURIBOR 3M + 1
3.12%
EURIBOR 3M + 1.30
EURIBOR 3M + 0.90
3.13%
EURIBOR 1M + 2.00
3.25%
EURIBOR 3M + 2.35
EURIBOR 3M + 2.60
4.50%
EURIBOR 3M + 2.25
EURIBOR 3M + 2.60
EURIBOR 3M + 3.10
EURIBOR 3M + 2.75
4.50%
29.04.2013
26.01.2011
15.06.2015
19.01.2016
10.05.2016
16.05.2016
24.01.2017
20.06.2017
29.12.2011
17.02.2012
08.05.2021
17.07.2012
31.07.2017
18.09.2018
20.01.2014
30.06.2013
10.09.2012
10.12.2020
11.01.2019
11.02.2013
07.06.2019
13.07.2021
12.12.2021
19.01.2019
29.12.2014
Euros
Euros
Euros
Euros
Euros
Euros
Euros
Euros
Euros
Euros
Euros
Euros
Euros
Euros
Euros
Euros
Euros
Euros
Euros
Euros
Euros
Euros
Euros
Euros
Euros
Various dates
Various dates
Ordinary bonds
Ordinary bonds
134,910
1,575,889
126,832
2,061,428
204,999
280,736
17,643,095
19,507,497
Valuation and other adjustments
Total
(1) A prospectus for an issue of €8,500 million has been filed with the CNMV.
Note 22. Subordinated liabilities
Details of subordinated liabilities issued by the group and recorded on the consolidated balance sheet at 31
December 2011 and 2010 are as follows:
€’000
Issuer
Maturity/
repayment
date
0
353,500
49,200
500,000
500,000
40,400
250,000
0
30,000
50,000
125,000
62
50,000
50,000
(164,158)
25,366
30,000
716,600
154,200
500,000
500,000
0
250,000
25,000
30,000
50,000
124,941
62
50,000
50,000
(124,439)
30,265
2.271%
5.234%
4.500%
6.250%
5.471%
4.500%
4.500%
4.200%
2.318%
1.724%
7.750%
-
11.10.2011
25.05.2016
20.09.2016
26.04.2020
25.02.2021
15.04.2011
15.10.2012
15.10.2014
21.03.2016
-
1,859,370
2,386,629
2011
21.08.2003
25.05.2006
20.09.2006
24.02.2009
26.04.2010
25.02.2011
30.03.1999
20.12.2001
15.02.2002
15.10.2004
21.03.2006
01.05.1992
27.02.2004
19.11.2009
-
Total
Banco Atlántico, S.A. (a)
Sabadell International Equity Ltd.
Guipuzcoano Capital, S.A.
Guipuzcoano Capital, S.A.
Valuation and other adjustments
2010
Interest rate
at
31.12.2011
Amount
Date of
issue
(a) Now merged with Banco de Sabadell, S.A.
€’000
Securities in issue
Banco de Sabadell - 500,000 Preferred Securities I/2006
Banco Guipuzcoano - 125,000 Subordinated Bonds March 2006
Banco de Sabadell - 1,000,000 Subordinated Bonds I/2006
Buyback acceptances - nominal value
105,000
23,700
363,100
This repurchase generated positive results to the amount of €87,054,000 and appear in the financial operations
results section of the Profit and Loss Account (see note 34.(c)).
On 19 April 2010 Banco de Sabadell, S.A. issued an invitation offering the exchange of 100% of the outstanding
securities of an issue of Series I/2006 preferred securities quoted on the London Stock Exchange and an issue
of Series I/2006 subordinated securities traded on the AIAF Fixed Income Market, for newly issued Series I/2010
subordinated securities (the “new securities”).
The nominal values of existing preferred securities and existing subordinated securities tendered for exchange
were €193,950,000 and €283,400,000 respectively. The nominal amount of new securities issued for exchange
was €406,150,000. Additional new securities were issued for a nominal amount of €93,850,000, bringing the total
nominal amount of new securities issued to €500,000,000. The issue price of the new securities was 99.406%.
The securities will bear interest at an annual rate of 6.25% and will be redeemed on 26 April 2020. Settlement of
the offer and exchange took place on 26 April 2010.
The profit for Banco de Sabadell, S.A. on the exchange was €88,857,000.
At 31 December 2011 the rate of interest payable on securities issued by Sabadell International Equity Ltd. was
4.5% (4.5% at 31 December 2010).
Subordinated liabilities rank below the claims of all other unsecured creditors of the group. All issues are
denominated in euros.
The Bank de Sabadell, S.A. board meeting held on 31 January 2011 agreed to go ahead, conditioned by
the previous implementation and execution of the capital increase (see note 28), with the offer for the cash
purchase of the whole or part of certain debt securities with the purpose of improving and reinforcing the group’s
resources.
The debt securities affected by repurchase, as well as the existing nominal values accepted therein are
described below:
195
Note 23. Other financial liabilities
The “other financial liabilities” item of the consolidated balance sheet at 31 December 2011 and 2010 is analysed
below.
€’000
2011
2010
1,470,467
1,390,069
Total
1,470,467
1,390,069
152,241
352,954
79,269
122,907
763,096
184,003
369,747
35,643
175,145
625,531
Total
1,470,467
1,390,069
Euro denominated
1,431,216
39,251
1,375,078
14,991
Total
1,470,467
1,390,069
Analysis by type:
Obligations payable
Guarantee deposits received
Clearing houses
Tax collection accounts
Other financial liabilities (*)
(*) Balance payable to suppliers included.
Information about deferment of payments to a suppliers. Additional provision three. “Duty of information” of Law
15/2010, dated 5 July
Under Law 15/2010 on 5 July amending Law 3/2004 on 29 December on measures to combat late payment in
commercial transactions, the Bank is required to provide information on amounts owed to suppliers. The amount
outstanding at 31 December 2010, with agreed payment periods of more than 85 days, stood at a total of
€7,218,000.
The following table provides information about deferments of payment in the 2011 financial year:
€’000
2011
Amount
Within the maximum legal period
Other (1)
Total payments in the year
Weighted ave. days past due (*)
Deferred payments at year end that exceeded the legal time limit
2,302,154
95,983
2,398,137
78
424
%
96
4
100
-
Total
(*) Weighted average days past due: the number of days each invoice is due after the legal payment period has expired, weighted by the amount of the invoice.
(1) In those cases where the legal limit is exceeded, there is a wide range of reasons for the late payment.
196
Note 24. Liabilities under insurance contracts
The balances for this heading at 31 December 2011 and 2010 are analysed below:
€’000
2011
2010
Technical reserves for life insurance where the investment risk
is borne by policyholders
173,348
177,512
Total
173,348
177,512
Note 25. Provisions
The components of this item of the consolidated balance sheet at 31 December 2011 and 2010 were as follows:
€’000
2011
2010
Provisions for pensions and similar obligations
Provisions for contingent exposures and commitments
Other provisions
163,510
89,611
97,082
176,258
91,672
99,732
Total
350,203
367,662
Details of changes in provisions during the years 2011 and 2010 are given in the following table:
Contingent
exposures &
commitments
Other
provisions
Total
189,583
81,183
42,501
313,267
20,064
5,031
8,218
6,815
71,014
0
0
71,014
6,948
0
0
6,948
98,026
5,031
8,218
84,777
0
(76,221)
(4,973)
(81,194)
(193)
0
0
(193)
0
981
25
1,006
(38,579)
(9,353)
(29,226)
0
0
0
0
0
(5,569)
0
0
(5,569)
(44,148)
(9,353)
(29,226)
(5,569)
Other movements
(5,341)
5,760
8,184
8,603
10,724
8,955
52,616
72,295
176,258
91,672
99,732
367,662
26,895
4,955
8,260
13,680
66,062
0
0
66,062
8,877
0
0
8,877
101,834
4,955
8,260
88,619
0
(67,943)
(9,663)
(77,606)
2,016
0
0
2,016
0
137
8
145
(36,947)
(8,977)
(32,123)
4,153
0
0
0
0
(19,154)
0
0
(19,154)
(56,101)
(8,977)
(32,123)
(15,001)
(4,712)
(317)
17,282
12,253
163,510
89,611
97,082
350,203
Provisions charged to income statement:
Personnel expenses
Provisioning expenses
Actuarial gains/losses
Utilizations:
Insurance premiums paid
Pension payments
Other payments
Provisions charged to income statement:
Personnel expenses
Provisioning expenses
Actuarial gains/losses
Utilizations:
Insurance premiums paid
Pension payments
Other payments
Other movements
The main provision components are as follows:
• Provisions for pensions and similar obligations: includes provisions to cover post-employment benefits,
including pension commitments in respect of employees taking early retirement and similar obligations.
• Provisions for contingent exposures: includes all provisions to cover contingent exposures associated with
financial guarantees or other contractual commitments.
• Other provisions: consists largely of reserve funds assigned by the group to cover certain risks incurred in the
normal course of business, including those described in note 35.
• Most provisions are long-term in character.
Pensions and
obligations
similar
€’000
197
Pensions and similar obligations
The balances giving rise to pension liabilities recognized in the group balance sheet are shown below:
€’000
2011
2010
2009
2008
2007
Obligations due to pension commitments
765,700
781,660
656,430
685,994
738,582
Actuarial gains / (losses) in scheme assets not
recognized in income statement
(18,600)
(13,173)
(5,327)
(11,745)
(717)
(583,590)
(592,229)
(461,520)
(471,277)
(475,479)
163,510
176,258
189,583
202,972
262,386
Fair value of scheme assets
Net liability recognized on balance sheet
The return for the Banco Sabadell pension scheme in 2011 was 1.017% and the return for the Banco
Guipuzcoano social insurance society for the year was -0.99%.
Changes in obligations due to pension commitments and in the fair value of pension scheme assets during the
years 2011 and 2010 are shown in the following table:
€’000
Obligations due
to pension
commitments
Fair value
of scheme
assets
656,430
461,520
Interest costs
Expected returns
Normal costs in year
Benefit payments
Settlements, reductions and terminations
Employer’s contributions
Actuarial gains and losses
Other movements
Due to acquisition of Grupo Banco Guipuzcoano
28,296
0
5,123
(44,535)
(13,187)
0
1,404
6,774
141,355
0
20,106
0
(15,309)
(12,599)
9,353
(6,076)
0
135,234
781,660
592,229
Interest costs
Expected returns
Normal costs in year
Benefit payments
Settlements, reductions and terminations
Employer’s contributions
Actuarial gains and losses
Other movements
32,622
0
6,040
(54,855)
(1,107)
0
960
380
0
24,630
0
(22,731)
(7,849)
8,978
(5,383)
(6,284)
765,700
583,590
Obligations covered by specific assets totalled €738,280,000 (including €23,217,000 in commitments to early
retirees) at 31 December 2011, and €764,472,000 (including €35,973,000 for early retirees) at 31 December
2010.
The fair value of pension-linked assets reported in the group balance sheet stood at €162,735,000 at 31
December 2011 and €183,051,000 at 31 December 2010.
198
The main categories of scheme assets as a proportion of total scheme assets were as follows:
%
Own equity instruments
Debt instruments
Mutual funds
Other (insurance policies taken out with non-related parties)
Total
2011
2010
0.24%
1.75%
25.29%
2.26%
70.46%
0.23%
5.14%
12.29%
1.06%
81.28%
100.00%
100.00%
The fair value of scheme assets includes the following financial instruments issued by the Bank:
€’000
Total
2010
1,373
3,786
5,866
1,381
3,397
10,854
11,025
15,632
Equity instruments
Debt instruments
Deposits and current accounts
2011
Estimates of probability-weighted present values at 31 December 2011 of benefits payable over the next ten
years are shown below:
€’000
Probable pension
payments
2012
2013
2014
2015
31,458
25,727
19,722
15,809
Years
2016
2017
12,988
10,761
2018
2019
2020
2021
9,596
9,111
8,735
8,528
Total
152,435
The fair values of the main balance sheet items valued at amortized cost are shown in the table below.
Assets and liabilities stated in the balance sheet at amortized cost have been valued by the discounted future
cash flow method using the risk-free interest rate curve plus a spread to reflect the credit risk of the different
financial instruments being valued. The interest rate curve used in the analysis was derived from the rates
quoted for Spanish government bonds from which pure discount factors could be derived to calculate present
values that the market would accept as unskewed. The curve is constructed from an equation which adjusts to
observed market rates and gives forward interest rates for any intermediate period or maturity.
Note 26. Fair value of financial assets and liabilities
199
€’000
2011
Account balances
Fair value
Assets at amortized cost:
3,628,914
72,654,030
3,659,179
77,966,688
Total assets at amortized cost
76,282,944
81,625,867
€’000
2011
Account balances
Fair value
Liabilities at amortized cost:
4,040,717
8,128,791
58,444,050
17,643,095
1,859,370
1,470,467
4,241,927
8,331,248
58,130,170
18,798,683
2,185,169
1,470,460
Total liabilities at amortized cost
91,586,490
93,157,657
€’000
2010
Account balances
Fair value
Assets at amortized cost:
2,744,614
73,980,818
2,819,775
77,987,784
Total assets at amortized cost
76,725,432
80,807,559
€’000
2010
Account balances
200
Fair value
Liabilities at amortized cost:
32,997
10,300,991
55,092,555
19,507,497
2,386,629
1,390,069
32,996
10,382,018
53,906,730
20,033,472
2,653,037
1,390,059
Total liabilities at amortized cost
88,710,738
88,398,312
Note 27. Foreign currency transactions
Euro equivalent values for different classes of foreign currency-denominated assets and liabilities held by the group
at 31 December 2011 and 2010 were as follows:
€’000
2010
Foreign currency assets:
Other assets
369,049
233,548
632,893
3,870,918
517,498
370,532
224,781
599,249
2,839,363
409,357
Total
5,623,906
4,443,282
Foreign currency liabilities:
Other liabilities
239
810,120
4,485,566
192,242
6,293
430,429
3,858,248
138,607
Total
5,488,167
4,433,577
2011
The group’s net position in foreign currency assets and liabilities is covered by transactions consisting of
spot and forward currency trades and exchange rate swaps in line with the group’s risk management policy
(see note 37).
201
Note 28. Own funds
Changes in own funds in the years 2011 and 2010 were as follows:
€’000
Reserves and
share premium
Capital
account
Other
equity
instruments
Treasury
shares
Profit/
loss for
the year
Interim
dividend
Total
500,000
(138,203)
522,489
(168,000)
5,226,333
0
150,000
4,360,047
Appropriation of profits in previous years
0
354,489
0
0
(354,489)
0
Interim dividend for 2009
0
0
0
0
(168,000)
168,000
0
Final dividend for 2009
0
(93,392)
0
93,188
0
0
(204)
Translation differences and other movements
0
84
(5,132)
0
0
0
(5,048)
Acquisitions of own equity instruments
0
0
0
(492,359)
0
0
(492,359)
Disposals of own equity instruments
0
8,179
(1,625)
511,688
0
0
518,242
Issues of other equity instruments (1)
0
(30,083)
325,471
0
0
0
295,388
Increase in capital
7,954
228,874
0
0
0
0
236,828
Increase in capital expenses
0
(1,673)
0
0
0
0
(1,673)
Adjustment in fair value of financial instruments paid in
acquisition of Banco Guipuzcoano (2)
0
(65,408)
0
0
0
0
(65,408)
Transfers
0
0
0
0
0
0
0
Profit for the year 2010
0
0
0
0
380,040
0
380,040
0
0
0
0
0
(113,727)
(113,727)
157,954
4,761,117
818,714
(25,686)
380,040
(113,727)
5,978,412
Appropriation of profits in previous years
0
266,313
0
0
(266,313)
0
0
0
0
0
0
(113,727)
113,727
0
Final dividend for 2010
0
(83,400)
0
0
0
0
(83,400)
Translation differences and other movements
0
26
57
0
0
0
83
Acquisitions of own equity instruments
0
0
0
(504,009)
0
0
(504,009)
Disposals of own equity instruments
0
7,183
(4,151)
355,256
0
0
358,288
Issues of other equity instruments (1)
0
(46,275)
0
0
0
0
(46,275)
15,927
400,022
0
0
0
0
415,949
Increase in capital expenses
0
(5,274)
0
0
0
0
(5,274)
Adjustment in fair value of own equity instruments
0
0
0
0
0
0
0
Transfers
0
0
0
0
0
0
0
Profit for the year 2011
0
0
0
0
231,902
0
231,902
0
0
0
0
0
(69,516)
(69,516)
173,881
5,299,712
814,620
(174,439)
231,902
(69,516)
6,276,160
Increase in capital
(1) See the section on Other equity instruments in this note.
(2) This item shows the difference between the value of securities paid as part of the purchase consideration for securities of Banco Guipuzcoano and the fair value of the
securities on taking control of the company.
Minimum capital requirement - capital management
At 31 December 2011 and 2010, the group’s qualifying capital resources were above the required levels both
under Bank of Spain rules and under the requirements of the Bank of International Settlements in Basel (BIS).
Ongoing management of the group’s capital base has ensured that funding has been available to finance growth
in conformity with minimum regulatory capital requirements.
202
At 31 December 2011 the group’s qualifying capital under the revised BIS framework (known as Basel II) stood
at €6,149,184,000. This gives the group a capital surplus of €1,655,807,000, as can be seen from the following
table:
Capital management
€’000
2010
Change
y.o.y. (%)
173,881
5,171,378
814,620
53,239
(1,151,809)
157,954
4,777,188
818,714
39,294
(829,717)
10.08
8.25
(0.50)
35.49
38.82
5,061,309
4,963,433
1.97
9.01
8.20
520,711
699,490
(25.56)
5,582,020
5,662,923
(1.43)
9.94
9.36
567,164
1,041,663
1.01
1.72
Capital base
6,149,184
6,704,586
(8.28)
Minimum capital requirement
4,493,377
4,842,011
(7.20)
Capital surplus
1,655,807
1,862,575
(11.10)
10.95
11.08
(1.17)
56,167,208
60,525,138
(7.20)
Capital
Reserves
Convertible bonds
Minority interests
Deductions
Core capital
Core capital (%)
Preference shares and deductions
Primary capital
Tier I capital ratio (%)
Secondary capital
Tier II capital ratio (%)
BIS Ratio (%)
Risk-weighted assets (RWA)
2011
(45.55)
Share capital
When the period for voluntarily conversion of the Necessarily Convertible Subordinated Debentures I/2010 issued
as a result of the offer in exchange for shares in Banco Guipuzcoano, S.A. as part of the offer public for acquisition
made by Bank de Sabadell, S.A. expired on 10 November 2011, a total de 425 share holders asked for the
conversion of 734,346 shares which, according to that stipulated in the terms of the issue, are equivalent to a
total of 734,346 shares.
On 13 December 2011, the public instrument for capital increase executed to meet this voluntarily share
conversion was presented in the company register of Barcelona.
On 21 December 2011, the Governing Bodies of the Barcelona, Madrid and Valencia Stock Exchanges accepted
the listing of these new shares after the National Securities Market Commission verified that they complied with the
requirements demanded for listing the 734,346 shares with a nominal face value of €0.125 each and issued by
Bank Sabadell.
The public instrument for increase of capital executed authorised by the Administrative Board of Bank Sabadell
on 21 July 2011 was recorded in the company register of Barcelona on 22 August 2011 to cover the voluntarily
conversion of the 1,597 shares of the issue of the Necessarily Convertible Subordinated Debentures I/2009. The
capital increase implied Bank Sabadell issuing and releasing a total of 320,455 ordinary Bank Sabadell shares with
a nominal face value of €0.125.
On 2 September 2011, the Governing Bodies of the Barcelona, Madrid and Valencia stock exchanges accepted
listing these new shares.
Core capital contributed 9.01% towards the BIS ratio and accounted for 82% of qualifying capital resources. This
was helped by an increase in core capital from retained profits for the year.
The addition of preference share issues to core capital and the deduction of certain items (including investments
in financial and insurance undertakings) brings Tier I capital to a total of €5,582,021,000, that is, 91% of qualifying
capital resources, giving a Tier I capital ratio of 9.94%.
Secondary or Tier II capital provides a further 9% of the BIS ratio and is made up very largely of subordinated
debt, valuation adjustments and generic provisions (subject to regulatory limits as to eligibility), less other required
deductions.
203
204
On 1 February 2011, Bank de Sabadell, S.A. finalised the process of accelerated placement of the increase
in share capital agreed by its Administrative Board in the meeting held on 31 January 2011. Through this capital
increase a total of one hundred and twenty-six million three hundred and sixty-three thousand and eighty-two
(126,363,082) ordinary shares of the same class and series as those currently in circulation were issued and
subscribed, at an effective price of three Euros and twenty-five cents (3.25) per share, including nominal value and
issue premium.
The effective total amount of the capital increase (including the nominal value and issue premium)
amounted to four hundred and ten million six hundred and eighty thousand and sixteen Euros and fifty cents
(410,680,016.50).
The purpose of the capital increase with cash contributions was to reinforce the core capital ratio of the
bank and obtain the funds required to carry out the repurchase offer simultaneously with the capital increase
(see note 22).
On 18 September 2010 an Extraordinary General Meeting of Banco Sabadell adopted a resolution to increase
the capital of the company by the issue and allotment of 63,630,834 ordinary shares of a single class with a
nominal value of €0.125 each, to be paid in the form of non-monetary contributions as part of the offer price in a
purchase offer for all shares of Banco Guipuzcoano. The issue price of the new shares was fixed at €3.7219 per
share.
It was also resolved to hold in reserve, as part of the offer price, a total of 30,000,000 Banco Sabadell ordinary
shares with a nominal value of €0.125 each, representing two and one-half per cent (2.5%) of the share capital of
the Bank, from the Bank’s available holding of treasury shares, and to keep the said shares in reserve pending the
outcome of the offer (see note 2).
On 19 November 2010 the 63,630,834 new shares issued by Banco Sabadell as part of the offer price, with a
nominal value of €0.125 each, were admitted to trading by the management companies of the Barcelona, Madrid
and Valencia stock exchanges.
Share capital at closure of the financial year
Of the capital movements explained above, the Bank’s issued share capital at 31 December 2011 was
€173,881,089.63 divided into 1,391,048,717 registered shares with a nominal value of €0.125 each The
corresponding figure at 31 December 2010 was €157,953,854.25, divided into 1,263,630,834 registered shares
with the same nominal value. All shares are fully paid and are numbered consecutively from 1 to 1,391,048,717,
both inclusive.
The Bank’s shares are quoted on the Madrid, Barcelona and Valencia stock exchanges via the automatic
quotation system managed by Sociedad de Bolsas, S.A.
None of the other undertakings included in the consolidated accounts are quoted on any stock exchange.
The rights attaching to all equity instruments of the Bank are regulated by the Spanish companies legislation
(“Ley de Sociedades de Capital”). At a General Meeting a shareholder may cast votes in a number that reflects his
proportional holding in the share capital.
As required by article 23 of Royal Decree 1362/2007 of 19 October, implementing the Securities Market Law
(Law 24/1988 of 28 July), the following table gives details of significant shareholdings in Banco Sabadell (i.e.
holdings amounting to 3% or more of the share capital or voting rights) at 31 December 2011.
Undertaking
Direct
holding
Number
of shares
Mayor Vent, S.L. Unipersonal
Jaipur Investment, S.L.
Famol Participaciones, S.L.
Fundo de Pensoes do Grupo BCP
5.000%
4.536%
4.483%
4.455%
69,552,974
63,099,261
62,355,735
61,968,986
Indirect shareholder
Isak Andic Ermay (1)
Inversiones Hemisferio, S.L. (2)
-Banco Comercial Portugues, S.A.
(1) Holds 99.99% of Mayor Vent, S.L. Unipersonal.
(2) Holds 75% of Jaipur Investment, S.L.
Share premium account
The balance of the share premium account at 31 December 2011 was €1,861,702,000 (€1,465,980,000 at 31
December 2010).
On 18 September 2010 an Extraordinary General Meeting of Banco Sabadell resolved that an issue be made of
subordinated bonds mandatorily convertible into newly issued shares of Banco de Sabadell, S.A. to be offered as
part of the offer price in a takeover offer for 100% of the share capital of Banco Guipuzcoano, S.A. (see note 2).
The nominal value of the bond issue was four hundred and sixty-eight million euros (€468,000,000); the effective
value was €325,470,600. The number of mandatorily convertible subordinated bonds issued was ninety-three
million six hundred thousand (93,600,000).
On 19 November 2010 the management companies of the Barcelona, Madrid and Valencia stock exchanges
approved the admission to trading of the 93,600,000 mandatorily convertible subordinated bonds with a nominal
value of €5.00 each issued by Banco Sabadell as part of the price of the takeover offer.
The convertible bonds have a term of three years and bear interest at 7.75% per annum. On each quarterly
payment date Banco Sabadell may, at its discretion, decide to pay interest on the bonds or declare a voluntary
conversion period in which bonds may be converted at a price pre-set in each period.
In 2009 Banco Sabadell carried out an issue of Series 1/2009 mandatorily convertible bonds for a total of €500
million. The bonds can be exchanged voluntarily for shares of the Bank on 21 July of each of the years 2010, 2011
and 2012 and are obligatorily exchangeable on 21 July 2013.
Interest paid on the bonds in the year 2011 totalled €64,846,000 (2010: €32,939,000).
The mandatorily convertible subordinated bonds are listed on the Madrid, Barcelona y Valencia securities
markets. The bonds were intended primarily for retail investors resident in Spain although they were also available
to qualified investors, whether resident or non-resident.
Reserves
€’000
2010
265,581
34,750
220,620
7,096
113
3,002
252,406
30,600
211,843
6,848
113
3,002
2,947,946
2,849,691
224,483
193,040
3,438,010
3,295,137
Restricted reserves:
Statutory reserve
Reserve for own shares pledged as security
Reserve for investment in Canary Islands
Share redenomination reserve
Capital redemption reserve
Available reserves
Reserves of equity-accounted undertakings
Total
The contributions of consolidated undertakings to group reserves are shown in Annex I.
2011
Transactions in own equity instruments
The Bank’s holdings of shares in the parent company showed the following evolution during the year:
Purchases
Sales
Purchases
Sales
Balance at 31 December 2011 (1)
No. of shares
Nominal value
(€’000)
Average share
price (€)
Proportion of
total (%) (1)
35,803,943
4,475.49
4.38
2.98
133,044,319
161,169,062
16,630.54
20,146.13
3.71
3.83
10.49
12.64
7,679,200
959.90
3.34
0.61
174,292,304
124,023,477
21,786.54
15,502.93
2.91
2.82
12.53
8.92
57,948,027
7,243.50
2.93
4.17
(1) This includes 1,506,138 shares loaned in a liquidity facility agreement entered into with Caixa d’Estalvis i Pensions de Barcelona, as desribed in the
Securities Note for the issue of mandatory convertible subordinated bonds, Series I/2009, filed with the National Stock Exchange Commission (CNMV) on
25 June 2009.
205
Net gains and losses arising on transactions in the Bank’s own equity instruments have been included in Own
funds - Reserves under Equity in the consolidated balance sheet.
At the close of the year a total of 75,194,406 shares of the Bank with a nominal value of €9,399,000 were
pledged as security (71,811,184 shares with a nominal value of €8,976,000 at 31 December 2010).
The number of Banco de Sabadell, S.A. own equity instruments held by third parties but under management by
group undertakings at 31 December 2011 and 2010 was 2,216,301 and 1,916,562 shares or securities, with
nominal values of €7,431,000 and €7,981,000, respectively. Of these totals, 2,153,591 and 1,905,710 were
Banco Sabadell shares; the rest were mandatorily convertible bonds.
Note 29. Valuation adjustments
Valuation adjustments for the group at 31 December 2011 and 2010 are analysed below:
€’000
2011
2010
Debt securities
Cash flow hedges
(277,573)
(250,910)
(26,663)
(30,374)
2,790
(85,062)
991
(327,492)
(313,232)
(14,260)
(3,934)
1,655
5,045
991
Total
(389,228)
(323,735)
The income tax effects of valuation adjustments for the different items of recognized income and expense at 31
December 2011 and 2010 were:
206
€’000
2011
2010
Gross
amount
Tax
effect
Net
amount
Gross
amount
Tax
effect
Net
amount
Debt securities
Cash flow hedges
Other recognized income and expense
70,644
88,362
(17,718)
(37,771)
1,632
(90,107)
0
(21,193)
(26,509)
5,316
11,331
(490)
0
0
49,450
61,853
(12,403)
(26,440)
1,142
(90,107)
0
(551,630)
(528,938)
(22,692)
11,600
5,452
4,905
0
165,490
158,682
6,808
(3,480)
(1,636)
0
0
(386,140)
(370,256)
(15,884)
8,120
3,816
4,905
0
Total
(55,602)
(10,352)
(65,954)
(529,673)
160,374
(369,299)
Note 30. Minority interests
The undertakings in which minority interests are held are as follows:
€’000
2011
Sabadell BS Select Fund of
Hedge Funds SICAV (Luxembourg)
Sabadell United Bank, N.A.
Other
% Minority
interests
2010
Amount
Attributable
profit/loss
% Minority
interests
Amount
Attributable
profit/loss
49.03%
19,029
3,052
49.03%
17,585
2,253
50.89%
5.22%
-
17,227
9,760
1,196
(11)
772
157
47.50%
-
15,488
793
652
(23)
-
47,212
3,970
-
33,866
2,882
Total
€’000
Balance at
31.12.2009
Changes
in 2010
Balance at
31.12.2010
Changes
in 2011
Balance at
31.12.2011
(3,781)
31,162
(1,908)
8,393
(5,689)
39,555
(461)
13,807
(6,150)
53,362
Changes in proportional
shareholdings and other movements
17,137
5,511
22,648
9,837
32,485
Profit for the year
14,025
2,882
16,907
3,970
20,877
27,381
6,485
33,866
13,346
47,212
Other movements
Total
The breakdown of this item is as follows:
€’000
2011
2010
Financial guarantees
Other contingent exposures
8,346,422
600
8,309,422
600
Total
8,347,022
8,310,022
Note 31. Contingent exposures
Changes in the “minority interests” heading in 2011 and 2010 were as follows:
Doubtful contingent exposures
The movement in the doubtful contingent exposures account was as follows:
€’000
Balances on 31 December 2009
55,107
Additions
135,698
(86,205)
16,484
121,084
Additions
133,574
(146,523)
108,135
207
The distribution of contingent exposures by geographical region at 31 December 2011 and 2010 was as
follows:
€’000
2011
2010
Spain
Latin America
108,128
7
121,084
0
Total
108,135
121,084
2011
2010
Exposures covered by specific provisions:
Provisions for credit risk
Provisions for country risk
73,771
72,790
981
76,068
75,591
477
Exposures covered by generic provisions
15,840
15,604
Total
89,611
91,672
Provisions for credit risk arising from doubtful contingent exposures were as follows:
€’000
Changes in these provisions, which are reported in provisions on the liability side of the balance sheet, are
shown in note 25.
Note 32. Contingent commitments
The composition of this item at 31 December 2011 and 2010 was as follows:
€’000
Drawable by third parties
Credit institutions
General government
Other resident sectors
Non-resident sector
Financial asset forward purchase commitments
Regular way financial asset purchase contracts
Other contingent commitments
Total
208
2011
2010
9,590,753
8,397
272,263
8,988,775
321,318
199,801
104,853
1,762,458
14,305,101
71,843
1,213,508
12,399,265
620,485
57,285
213,982
1,557,073
11,657,865
16,133,441
Among the more significant components of the “drawable by third parties” item at 31 December 2011 mortgage
credit commitments amounting to €1,251,564,000 (€1,220,795,000 at 31 December 2010). The “other
contingent commitments” category consisted mainly of guarantees of other types in line with the group’s risk
management policy.
Note 33. Off-balance sheet customer funds
Off-balance sheet customer funds under the group’s management and funds sold but not managed by the group
were of the following types:
€’000
2010
Under management by the group:
Investment companies and mutual funds
Asset management
7,870,425
6,737,188
1,133,237
8,660,421
7,421,903
1,238,518
Mutual funds sold but not managed by the group
1,286,997
1,430,894
Pension funds (1)
2,858,299
3,015,818
Insurance (1)
5,926,378
5,726,873
Financial instruments deposited by third parties
33,895,532
36,196,194
Total
51,837,631
55,030,200
(1) The amounts shown for pension funds and insurance relate to pension and other funds distributed by the group.
2011
Net fees and commissions on these products are reported in the income statement under fee and commission
income and amounted to €131,015,000 in 2011 (€131,956,000 in 2010).
Note 34. Income statement
Some salient aspects of the Group’s consolidated income statement for the years 2011 and 2010 are highlighted
in the following tables.
€’000
2011
2010
Interest and similar income:
Cash and balances with central banks
Debt securities
Doubtful assets
Adjustments to income as a result of hedging transactions
Income from insurance contracts linked to pensions
Other interest
12,750
43,347
2,805,126
417,928
33,665
41,278
26,861
13,127
9,488
28,620
2,226,244
311,667
29,680
6,287
28,511
4,290
Total
3,394,082
2,644,787
Interest expense and similar charges:
Adjustments to income as a result of hedging transactions
Interest cost of pension funds
Other interest
(25,689)
(237,329)
(1,086,647)
(602,540)
(88,504)
214,027
(27,511)
(2,626)
(16,806)
(116,542)
(740,379)
(539,842)
(85,794)
343,865
(27,864)
(2,309)
Total
(1,856,819)
(1,185,671)
(a) Interest income and expense
The components of net interest income were as follows:
209
(b) Fee and commission income
Fee and commission income from trading and for services was composed of the following:
€’000
2011
2010
On contingent exposures
On contingent commitments
Foreign currency and banknote exchange
Collection and payment services
Securities-related services
Distribution of non-bank financial products
Other fees and commissions
87,160
19,086
1,307
240,436
81,955
113,640
94,040
79,034
16,320
1,202
220,146
56,308
114,352
83,333
Total
637,624
570,695
2011
2010
Fees and commissions payable to correspondent and other banks
Other fees and commissions
(52,629)
(11,402)
(42,269)
(11,964)
Total
(64,031)
(54,233)
Fee and commission expenses were as follows:
€’000
(c) Gains and losses on financial assets and liabilities (net)
The composition of this item of the consolidated income statement for the years to 31 December 2011 and 2010
was as follows:
€’000
2011
2010
Held for trading
Financial instruments not measured at fair value through profit or loss
Other
139,025
126,056
6,165
62,324
123,166
18,575
Total
271,246
204,065
Analysis by type of financial instrument:
Net gain (loss) on debt securities
Net gain (loss) on equity instruments
Net gain (loss) on derivatives contracts
Other net gains (losses) (note 22)
49,128
(19,229)
148,102
93,245
67,084
3,677
65,153
68,151
Total
271,246
204,065
In 2011 the group sold off a number of debt securities from its portfolio of available-for-sale financial assets,
recording gains amounting to €45,347,000 at 31 December 2011 (€62,954,000 at 31 December 2010 Of these
results, €756,000 in losses come from the sale of debt securities held with the Public Administration.
210
(d) Other operating income
was as follows:
€’000
2011
2010
Income from insurance and reinsurance contracts written
Sales and income from non-financial services
Income from rental of investment property
Insurance settlements
Other income
34,912
3,563
60,954
7,464
361
53,129
27,848
23,907
48,396
8,843
183
39,370
Total
99,429
100,151
Income from insurance and reinsurance contracts written includes issued premiums sold by the insurer
Assegurances Segur Vida, S.A. (in which the group holds an indirect interest through BancSabadell d’Andorra, S.A.).
The costs of these operations are shown in note 34 (e).
Income from property rentals was accounted for mainly by Banco de Sabadell, S.A., Solvia Development, S.L.,
and Solvia Properties, S.L. which reported rental income of €1,280,000, €1,691,000 and €1,477,000 respectively.
The figure shown for “other income” consists largely of income received by non-financial group undertakings.
(e) Other operating expenses
was as follows:
€’000
2010
Expenses on insurance and reinsurance contracts written
Change in inventories
Other operating expenses
Operating expenses on investment property
Payments to deposit guarantee funds
Other expenses
(34,208)
(41)
(56,961)
(38)
(29,820)
(27,103)
(27,808)
(21,346)
(45,105)
(659)
(20,567)
(23,879)
Total
(91,210)
(94,259)
(f) Administrative expenses
This heading of the consolidated income statement includes expenses incurred by the Bank in respect of personnel
and other general administrative expenses.
Personnel expenses
The personnel expenses charged to the consolidated income statement for the years to 31 December 2011 and
2010 are as follows:
Expenses from insurance and reinsurance contracts written arose mainly from provisions in respect of
insurance policies and incurred benefit payments for the insurer Assegurances Segur Vida, S.A. (in which the
group holds an indirect interest through BancSabadell d’Andorra, S.A.). The income from these operations is
shown in note 34(d).
The figure shown under “payments to deposit guarantee funds” is made up largely of contributions for Banco
Guipuzcoano, S.A. totalling €2,504,000, Sabadell United Bank, N.A. totalling €2,559,000 and for Banco de
Sabadell, S.A., amounting to €24,197,000 in 2011.
The “other expenses” category consists, for the most part, of costs to sell items relating to undertakings of a
non-financial nature.
2011
€’000
2011
2010
Salaries and bonuses of current employees
Social security contributions
Provisions for pension schemes
Other staff-related costs
(539,693)
(113,017)
(20,162)
(69,728)
(500,460)
(100,290)
(16,709)
(62,262)
Total
(742,600)
(679,721)
The number of staff employed by all group undertakings in 2011 averaged 10,670, of whom 5,703 were men
and 4,967 were women (2010: 9,839 staff of whom 5,928 were men and 5,025 were women).
211
The gender and category split of group employees at 31 December 2011 and 2010 was as follows:
Number of employees
2011
Men
2010
Men
Women
Technical/specialist
Administrative
4,883
789
3,964
1,039
4,837
966
3,621
1,353
Total
5,672
5,003
5,803
4,974
Of the total number of people employed at 31 December 2011, 69 were recognized as having some form of
disability (60 at 31 December 2010).
The evolution of group employees is attributable to the staff reduction derived from the impact of the measures
applied in the operative efficiency program and includes the centralisation and automation of administrative tasks
carried out in branch offices and the reorganisation of the network of branch offices, as well as their increase
associated with corporate transactions carried out during the financial year (see note 2).
A share-based incentive scheme for senior group executives was approved by the Annual General Meeting of
Banco de Sabadell, S.A. held on 29 March 2007. The scheme came to an end in March 2010.
No shares were awarded to employees on the winding up of the scheme as the target share price set under the
scheme was not reached.
A new share-based incentive scheme for senior group executives was approved by the Annual General Meeting of
Banco de Sabadell, S.A. on 25 March 2010.
The scheme was set up to encourage a high degree of motivation and loyalty among senior executives. Under
its terms, a certain number of stock appreciation rights (SAR) were given to employees who, when the rights
expired, would become entitled to receive shares in the Bank equal in value to the amount by which Banco
Sabadell shares had appreciated over a maximum period of three years and three months, with an end date of
11 June 2013.
The changes during the year in the value of SARs awarded under the share-based incentive scheme are as
follows:
€’000
0
Awards
Cancellations
25,330
(524)
24,806
Awards
Cancellations
212
Women
0
(332)
24,474
The exercise price for all the SARs is 3.89, with the settlement amount being the positive difference, if any,
between the quoted share price at the end of the scheme and the exercise price.
At the time the SARs were awarded, to meet the resulting commitment the Bank entered into hedging
arrangements with financial institutions outside the group. These contracts have economic effects that act to offset
the commitment undertaken by the Bank. The premium paid for the hedge (€21.8 million) was considered as the
fair value of services received during the 3-year duration of the scheme.
Personnel expenses associated with the share-based incentive schemes were recognized totalling €6.9 million
for 2011 and €10.9 million for 2010 (see note 1 (p)).
Other general administrative expenses
This includes all other administrative expenses incurred during the year:
€’000
2011
2010
Premises, fittings and equipment
Computer science
Communications
Advertising and promotion
State and local taxes
Other expenses
(127,835)
(58,007)
(20,277)
(35,585)
(61,962)
(98,825)
(103,077)
(56,976)
(21,828)
(30,919)
(54,271)
(89,263)
Total
(402,491)
(356,334)
€’000
2011
2010
Loans and receivables (*)
Other financial instruments not measured at fair value through profit or loss
Debt securities (*)
(512,633)
(121,891)
(121,891)
(3,928)
(117,963)
(395,905)
(109,856)
(109,856)
3,299
(113,155)
Total
(634,524)
(505,761)
(g) Impairment losses (net)
was as follows:
A total of €978,000 in fees was paid to PricewaterhouseCoopers Auditores, S.L. for auditing services in Spain
in the year 2011 (€1,055,000 in 2010). Fees for auditing services in relation to foreign branches and subsidiaries
totalled €515,000 in 2011 (€410,000 in 2010).
Fees totalling €118,000 were paid to other auditors for auditing services in Spain in 2011 (€90,000 in 2010)
plus another €133,000 for services relating to foreign branches and subsidiaries in 2011 (€137,000 in 2010).
The fees paid to PricewaterhouseCoopers Auditores, S.L. and other firms operating under the
PricewaterhouseCoopers Auditores, S.L. name for tax advisory services in the year 2011 was €77,000, while
fee payments to these firms for other services amounted to €560,000. Fees for these services in 2010 totalled
€91,000 and €1,168,000 respectively. Fees paid to other auditors for other services amounted to €725,000 in
2011 (€1,228,000 in 2010).
In addition, the section of other expenses includes the more significant items corresponding to expenses
for Surveillance Services and transfer of funds to the amount of €10,879,000 in 2011 (2010: €12,221,000),
representation and displacement of personal, €9,724,000 in 2011 (2010: €8,996,000) and subcontracted
services to the amount of €27,919,000 in 2011 (2010: €27,808,000).
(*) The sum of these amounts equals the total provisions and reversals thereof taken to the income statement to cover credit risk and the amortization and
recovery of derecognized impaired financial assets (note 8).
213
(h) Gains (losses) on derecognition of assets not classified as non-current assets held for sale
was as follows:
€’000
2011
2010
Gains
On disposal of tangible assets
On disposal of equity investments
Other
7,878
3,183
4,695
0
304,481
294,287
10,188
6
Losses
On disposal of tangible assets
On investment property
On disposal of equity investments
Other
(2,206)
(2,182)
0
(23)
(1)
(8,370)
(7,778)
(509)
(72)
(11)
5,672
296,111
Total
A major component of the “gains (losses) on disposal of tangible assets” item corresponding to the 2010
financial year consists of gains from sale and leaseback arrangements (see note 15).
Note 35. Taxation (income tax)
Undertakings treated as consolidated for tax purposes
Banco de Sabadell, S.A. is the parent company of a group treated as consolidated for tax purposes which includes
all Spanish-domiciled group undertakings that qualify as dependent companies under the Spanish income tax
regulations for consolidated groups.
Undertakings treated as part of the group for tax purposes are shown in Annex I.
All other group companies submit individual tax returns in accordance with the applicable tax regulations.
Reconciliation
The reconciliation of the difference between the accounting results for the years 2011 and 2010 and the assessed
income for corporation tax purposes is as follows:
€’000
2011
2010
187,466
593,966
(623,826)
464,341
356,231
(364,638)
157,606
455,934
47,282
136,780
(10,581)
(18,767)
36,701
118,013
Tax due to timing differences (net)
Adjustments on recognition of reinvestment allowance to be deducted
Other adjustments (net)
(19,653)
0
(65,454)
(37,026)
(16,000)
16,432
Income tax
(48,406)
81,419
Profit or loss before tax
Increases in taxable income
Reductions in taxable income
Assessed income for tax purposes
Tax (at 30%)
Double taxation, training and other allowances
214
Net tax payable
Taxable income - increases and reductions
The increases and reductions in taxable income shown in the previous table are analysed in the following table on
the basis of whether they arose from temporary or permanent differences.
In the first quarter of 2011 the Spanish Treasury recognised the deductibility of the difference resulting from
the fusion by absorption of Banco Herrero, S.A. which took place by the bank on 18 September 2002, setting this
difference at €376.62 million.
In addition, also in the first quarter of 2011 the Spanish Treasury definitively established the deductible tax
amount resulting from the difference arising from the fusion by absorption of Banco Atlántico, S.A. which took place
by the bank on 1 September 2004, setting it at €759.09 million.
As a result of the recognition of the tax deductibility of the difference resulting from the fusion with Banco
Herrero, S.A. and the definitive fixation of the difference resulting from the fusion with Banco Atlántico, S.A., in
2011 Banco de Sabadell, S.A. has entered a net income under the heading of Corporate Income Tax of the amount
of €66.2 million.
As explained in note 3 to these annual accounts, the General Shareholders Meeting held on 14 April 2011
approved an reserve endowment for investments in Canary Islands to the amount: of €248,000. In 2010 the
reserve was wholly made up of various investments during the year in fixed assets classifiable as property, plant
and equipment.
€’000
2011
2010
Permanent differences
Temporary differences arising in the current year
Temporary differences arising in earlier years
66,116
46,323
481,527
51,375
7,598
297,258
Increases
593,966
356,231
Permanent differences
Temporary differences arising in the current year
Temporary differences arising in earlier years
(161,487)
(1,609)
(460,730)
(183,201)
(115)
(181,322)
Reductions
(623,826)
(364,638)
Tax assets - deferred
This caption shows the amount reclaimable from the Spanish Treasury in respect of deferred tax assets. These
arise primarily from deferred tax due to differences between accounting and tax assessment procedures. The
differences relate to non-tax deductible provisions totalling €383,993,000 (€449,118,000 in 2010), transfers into
pension funds totalling €60,537,000 (€75,995,000 in 2010), merger reserves of €179,243,000 (€137,542,000
in 2010) and €94,814,000 to funds related to the updating to fair value of the assets and liabilities resulting from
Banco Guipuzcoano.
215
The changes in deferred tax assets, other than those related to valuation adjustments in equity, in the last two
years were:
€’000
216
680,589
Intragroup transactions
Pension funds
Non-tax deductible reserve funds
Merger reserves
Recognition of loan arrangement fees
Change in corporation tax rate
Advance tax payments for foreign branches
Accelerated depreciation
Consolidation adjustments
Other
57,542
11,334
(16,188)
48,135
(10,139)
(634)
0
(625)
(197)
23,310
137,523
(7,061)
923,589
Pension funds
Non-tax deductible reserve funds
Merger reserves
Recognition of loan arrangement fees
Change in corporation tax rate
Advance tax payments for foreign branches
Accelerated depreciation
Other
26,948
(15,458)
(65,125)
41,647
(404)
788
308
(500)
73,910
1,720
9,885
997,308
Tax liabilities - deferred
This consists of amounts payable to the Spanish Treasury in respect of deferred tax liabilities. These liabilities
include deferred tax charges due to accelerated depreciation as permitted by the tax regulations, and reversals of
deferred tax totalling €6,049,000 (€6,145,000 in 2010) in relation to mergers, and €58,696,000 (€28,595,000 in
2010) due to consolidation adjustments.
Changes in deferred tax liabilities in the last two years were as follows:
€’000
102,786
Mergers
Deferred tax charges applicable to foreign branches
Transfer of business/operations
Asset restatements
Other
8,714
10,337
(2,029)
(274)
(19,901)
(8,012)
(130)
6,214
(169)
97,536
Mergers
Deferred tax charges applicable to foreign branches
Transfer of business/operations
Asset restatements
Other
5,190
(97)
3,091
(1,630)
(2,579)
(231)
30,101
(714)
130,667
Tax audits
In 2011 notification was given of the final settlement of the inspection for disagreement with the Company Tax for
the 2005 financial year, as well as resolution of the different motions for reconsideration filed against the final
settlements corresponding to the inspections instituted in relation to Company Tax for the years 2003, 2004 and
2005. The rejection of the motions for reconsideration filed against the above acts has been contested before
the Central Economic Administrative Tribunal, the total amount of the quotas subject to appeal being €870,000,
having, nevertheless, paid the amount of the said tax debt.
As a result of earlier inspections by the tax authorities, audit reports had been issued and were contested both
by the group and by the acquired and subsequently merged companies. The result was a final assessment for tax of
€28,585,000 of which €13,259,000 was due to timing differences in the assessment for corporate income tax. All
of these assessments were contested. The Bank has, in any event, made suitable provision for any contingencies
that could arise in relation to these tax assessments.
Tax liabilities of a contingent nature could arise as a result of different possible interpretations of the tax rules
applicable to certain types of transaction within the banking industry. However, the possibility of such liabilities
arising is remote, and if they did arise the resulting tax charge would not be such as to have any significant impact
on the annual accounts.
All group undertakings are liable to be inspected for any tax which has not been subject to audit and for which
the statutory time limit has not expired.
The amount payable to the Spanish Treasury is shown under current tax liabilities.
In 2011 the Banco Sabadell group made investments amounting to approximately €81,875,000 (€712,089,000
at 31 December 2010), allowing it to make deductions for reinvestment of exceptional profits as permitted by
article 42 of the Consolidated Text of the Corporation Tax Law (Royal Legislative Decree 4/2004 of 5 March),
totalling €279,000 (€65,514,000 at 31 December 2010) which correspond to revenue generated during the
financial year of €2,327,000 (at 31 December 2010 they corresponded to revenue generated in the 2007, 2008,
2009 and 2010 financial years to amounts of €46,507,000, €416,360,000, €18,871,000 and €54,522,000,
respectively).
The amount of revenue subject to deduction for reinvestment in the 2006, 2007, 2008 and 2009 financial years
was €110,831,000, €173,641,000, €392,358,000 and €388,968,000 respectively.
In reference to the last paragraph of article 12.3 of the Consolidated Text of the Corporation Tax Law, Royal
Legislative Decree 4/2004 of 5 March, for the 2011 financial year, as well as the 2010 financial year, the
information to be included in the report appears in the individual reports for the different companies making up the
Group.
Note 36. Segmental information
Segmentation policy
Segmental reporting is organized primarily according to business units, and secondarily according to geography.
The business units described below are based on the group organizational structure as it was at the end of
the year 2011. For customer-facing businesses (Commercial Banking, Corporate Banking and Banco Urquijo),
segmentation is based on the types of customer addressed by those units. Asset Management is a cross selling
business that offers specialized products which are sold through the group’s branch network.
217
Business unit segmentation
Presentation principles and methods: information for each business unit is based on the individual accounting
records of each group undertaking, after all consolidation eliminations and adjustments have been made, and
on an analytical accounting for income and expense where particular business lines are allocated to one or more
corporate entities. The income and expense for each customer can thus be assigned according to the business to
which they have been allocated.
Each business division is treated as a free-standing operation. Where services are provided by one division
to another (distribution of products, services, systems, etc.) inter-unit pricing applies. The impact of this on the
group’s income statement is nil.
Each business pays the direct costs allocated to it through generic and analytical accounting, as well as the
indirect costs attributable to Central Services divisions.
Capital is allocated in such a way that each business has the equivalent of the minimum regulatory capital
requirement to cover its risk exposure. This minimum capital requirement is allocated by reference to the
supervisory authority for each business (the Bank of Spain for customer-facing businesses and the National Stock
Market Commission [CNMV] for Asset Management).
Key data for each business division are shown in the following table:
a) Segmentation by business unit
Details of profit before tax and other financial data for each business unit for the year 2011 are shown in the table
below, along with a reconciliation of the totals shown in the table with those shown in the consolidated group
accounts:
€’000
2011
Commercial
Banking
Corporate
Banking
Banco
Urquijo
Asset
Management
1,275,890
165,901
27,753
509
379,777
24,859
26,658
9,203
15,978
6,598
28,040
573
1,680,526
201,762
50,329
29,122
(886,451)
(412,659)
0
(404,316)
0
(21,066)
(6,512)
0
2,570
0
(32,632)
(16,652)
1,583
86
(41)
(19,410)
(11,705)
0
0
0
Operating profit or loss Operating profit or loss
389,759
183,266
19,325
9,712
Profit before tax, by segment
389,759
183,266
19,325
9,712
Ratios (%)
ROE
Efficiency
9.3%
52.7%
16.3%
10.4%
6.2%
53.7%
14.7%
66.7%
Other details
Employees
Branches in Spain
7,259
1,322
94
2
207
15
153
--
Net Interest income
Other income
218
Gross income
Operating expenses
of which: personnel expenses
Impairment losses
Other gains/losses
Profit before tax - reconciliation
All Business Units
(+/-) Unallocated profits/losses (1)
(+/-) Eliminations (inter-segment profits/losses)
(+/-) Other profits/losses
(+/-) Income tax and/or discontinued operations
(1) Impairment of financial assets and other assets are included.
Consolidated
602,062
(382,383)
0
(32,213)
0
187,466
€’000
2010
Corporate
Banking
Banco
Urquijo
Asset
Management
1,343,669
153,677
26,888
17
378,981
25,924
17,426
12,055
19,173
3,503
31,284
1,641
1,748,574
183,158
49,564
32,942
(946,009)
(436,181)
0
(327,390)
0
(23,352)
(6,452)
0
(50,991)
0
(35,029)
(19,202)
(125)
(191)
(466)
(18,651)
(10,809)
0
0
(13)
Operating profit or loss
475,175
108,815
13,753
14,278
Profit before tax, by segment
475,175
108,815
13,753
14,278
Ratios (%)
ROE
Efficiency
11.2%
54.1%
9.7%
12.7%
4.6%
59.7%
24.5%
56.6%
Other details
Employees
Branches in Spain
7,324
1,412
89
2
219
14
158
--
Net Interest income
Other income
Gross income
Operating expenses
of which: personnel expenses
Impairment losses
Other gains/losses
Profit before tax - reconciliation
All Business Units
(+/-) Unallocated profits/losses
(+/-) Eliminations (inter-segment profits/losses)
(+/-) Other profits/losses (1)
(+/-) Income tax and/or discontinued operations
Commercial
Banking
Consolidated
612,021
42,181
0
(189,861)
0
464,341
Average total assets for the group as a whole at 31 December 2011 were €96,009,015,000 compared with
€87,449,374,000 a year earlier.
The types of products and services from which ordinary income is derived are described below for each business
unit:
- Commercial Banking offers products both for investing and for saving. Products for investment include
mortgage loans and credit facilities. The product range for savers includes deposits (on demand and term),
mutual funds and pension plans.
Also of significance are insurance products and payment media such as credit cards and transfers.
- Corporate Banking has a comprehensive offering of specialized financing services and solutions, ranging from
transaction banking to more sophisticated, tailor-made solutions in such areas as financing, treasury services
and corporate finance.
- Banco Urquijo provides a comprehensive advisory service covering the whole range of financial products:
mutual funds managed by the Banco Sabadell group and major global fund managers, portfolio
management, open-end investment companies (OEICs), products issued on a wide variety of underlyings
and with a range of time horizons, unit-linked investments, brokerage services in fixed-income and equity
securities and alternative investment products (collective investments in hedge funds, private equity,
renewable energy, etc.).
- Asset Management creates investment solutions for customers mainly by administering and managing mutual
funds and investment companies (SICAVs) and actively managing asset portfolios.
The figures for 2010 include Banco Guipuzcoano for the whole of the financial year (Banco Guipuzcoano was included in the scope of consolidation from
December 2010).
(1) This includes an extraordinary impairment loss recognized against the group’s property assets.
219
The ordinary income generated by each business unit in 2011 and 2010 was as follows:
€’000
Consolidated
Ordinary income
from customers
Ordinary income
intersegmental
Total ordinary income
31.12.2011
31.12.2010
31.12.2011
31.12.2010
31.12.2011
31.12.2010
2,596,356
450,043
60,737
63,937
2,370,613
336,161
52,332
72,327
123,736
938
6,678
4,454
126,906
1,062
9,782
4,033
2,720,092
450,981
67,415
68,391
2,497,519
337,223
62,114
76,360
0
0
(39,621)
(49,301)
(39,621)
(49,301)
3,171,073
2,831,433
96,185
92,482
3,267,258
2,923,915
BUSINESS SEGMENT
Commercial Banking
Corporate Banking
Banco Urquijo
Asset Management
(-) Adjustments and eliminations to
intersegmental ordinary income
Total
The following table shows the net interest income and the net fee and commission income generated by each
business unit in 2011, as a proportion of the total:
%
Segmentation of net interest income and income from services
Loans & advances
to other debtors
Deposits from
other creditors
Income from
services (*)
Share of av.
total volume
Share of av.
total return
Share of av.
total volume
Share of av.
total return
Share of av.
total
Commercial Banking
Corporate Banking
Banco Urquijo
Asset Management
82.1%
16.7%
1.2%
0.0%
84.1%
14.2%
1.7%
0.0%
88.3%
6.9%
4.8%
0.0%
89.8%
8.4%
1.8%
0.0%
84.3%
6.0%
3.5%
6.2%
Total
100%
100%
100%
100%
100%
BUSINESS SEGMENT
(*) Percentage of the total fee and commission income for each segment.
b) Segmentation by geography
The distribution of interest and similar income by geography for the years 2011 and 2010 was as follows:
€’000
Distribution of Interest and similar income by geography
Individual
Consolidated
31.12.2011
31.12.2010
31.12.2011
31.12.2010
Domestic market
Export markets:
European Union
Other OECD
Other countries
3,030,187
2,496,033
3,207,330
2,511,753
29,970
27,447
0
36,088
18,467
0
33,477
131,762
21,513
50,488
66,549
15,997
Total
3,087,604
2,550,588
3,394,082
2,644,787
220
Note 37. Financial risk management
Risk management and risk policy are conducted centrally on a group-wide basis to realize synergies and ensure
overall control. For this reason, most of the information provided in this note relates to the group as a whole,
except in a number of cases where the data relates almost entirely to the Bank.
The main financial risks faced by Banco Sabadell group companies in the course of their operations involving the
use of financial instruments are credit risk, market risk and liquidity risk.
The group is aware that the accurate and efficient management and control of risk ensures that shareholder
value is maximized and that an appropriate degree of solvency is maintained in a context of sustainable growth.
With this in view, the management and control of risk has been embodied in a broad framework of principles,
policies, procedures and advanced valuation methods, forming an efficient decision-taking structure whose aim is
to achieve an optimum balance of return and risk.
Underlying principles
The Banco Sabadell group has laid down basic principles for the management and control of risk. These are
described in the following paragraphs.
Credit risk
Credit risk arises from the possibility of one of the parties to a contract for a financial instrument failing to perform
the obligations arising from its financial liabilities.
Credit risk exposure is subjected to rigorous monitoring and control through regular reviews of borrowers’
creditworthiness and their ability to meet their obligations to the group, with exposure limits for each counterparty
being adjusted to levels that are deemed to be acceptable. It is also normal practice to mitigate exposure to credit
risk by requiring borrowers to provide collateral or other security to the Bank.
The group makes provisions to cover against credit risk, both in respect of specific losses actually incurred at the
balance sheet date and for losses considered likely in the light of past experience. This is done in such a way as to
ensure that losses could not exceed loss provisions even in the event of a major change in economic conditions or
in borrower quality.
To maximize the business opportunities provided by each customer and to guarantee an appropriate degree of
security, responsibility for monitoring risks is shared between the relationship manager and the risk analyst, who
by maintaining effective communication are able to obtain a comprehensive view of each customer’s individual
circumstances.
The relationship manager monitors the business aspect through direct contact with customers and by handling
their day-to-day banking, while the risk analyst takes a more system-based approach making use of his specialized
knowledge.
The Board of Directors delegates powers and discretions to the Risk Control Committee, which then subdelegates authority at each level. The implementation of authority thresholds on credit approval management
systems ensures that powers delegated at each level are linked to the expected loss calculated for each business
loan or other transaction that is requested.
The establishment of advanced methodologies for managing risk exposures — in line with the New Basel Capital
Accord (NBCA) and industry best practice — also benefits the process in ensuring that proactive measures can be
taken once a risk has been identified. Of vital importance in this process are risk assessment tools such as credit
rating for corporate borrowers and credit scoring for retail customers, as well as indicators that serve as advance
alerts in monitoring risk.
Recovery of past-due accounts is the responsibility of a specialized function which coordinates initial out-of-court
negotiations and, where necessary, legal proceedings conducted by the group’s legal department or by independent
legal advisors, depending on the nature and size of the debt. The outcomes of the recovery process are evaluated
to measure the effectiveness of the loss mitigation procedures that are in place.
Year-end carrying values of financial assets involving credit risk exposures, analysed by asset type, counterparty
type and instrument type, and for domestic and foreign operations, are set out in the table that follows. These
values give a good indication of maximum exposure to credit risk since they are based on the maximum
indebtedness for each borrower at the close of each year.
• Solvency. Banco Sabadell has opted for a prudent and balanced policy on risk to ensure sustained and
profitable business growth in line with the strategic targets set by the group for maximum value creation. It is
vital that the structure of limits and thresholds should be able to prevent concentrations of risk from building
up in such a way as to compromise a significant proportion of the Bank’s capital resources. For this reason,
the risk variable is taken into account in decisions at every level and quantified under a common denominator
in terms of assigned capital.
• Responsibility. The Board of Directors is committed to maintaining processes for the management and
control of risk: deciding on policy, setting limits, assigning powers and discretions at different levels of the
organization, and approving management models, procedures and techniques of measurement, supervision
and control. At the executive level there is a clear separation of functions between risk-originating business
units and the functions responsible for managing and controlling risk.
• Monitoring and control. The ongoing management of risk is supported by robust control procedures to ensure
compliance with specified limits, clearly defined responsibilities for monitoring indicators and predictive alerts,
and the use of an advanced risk assessment methodology..
221
€’000
2011
Total
Spanish
operations
Foreign
operations
Total
364,701
1,290,678
880,189
373,411
1,253,600
2,523,057
373,617
2,896,674
1,783,870
154,681
1,938,551
561
298
859
209
298
507
Public administration
Of which: doubtful assets
Other private sectors
68,982,121
2,051,064
15,110
66,931,057
4,655,153
4,194,553
177,188
1,002
4,017,365
88,015
73,176,674
2,228,252
16,112
70,948,422
4,743,168
69,709,249
1,007,999
21,597
68,701,250
3,854,022
3,011,578
47,079
757
2,964,499
68,051
72,720,827
1,055,078
22,354
71,665,749
3,922,073
Debt securities
Public administration
Credit institutions
Other private sectors
Doubtful assets
11,599,917
7,891,190
3,007,445
693,001
8,281
707,865
48,366
96,752
562,747
0
12,307,782
7,939,556
3,104,197
1,255,748
8,281
9,204,995
6,369,268
2,221,977
605,817
7,933
686,604
51,850
124,357
510,397
0
9,891,599
6,421,118
2,346,334
1,116,214
7,933
1,414,415
23,257
1,437,672
1,135,092
11,133
1,146,225
417,685
0
417,685
487,564
0
487,564
7,895,158
451,864
8,347,022
7,970,236
339,786
8,310,022
11,383,793
274,072
11,657,865
15,758,448
374,993
16,133,441
105,142,123
6,389,929
111,532,052
106,929,643
4,952,186
111,881,829
Exhibition to the credit risk
Cash and central banks
Loans and advances to credit
institutions
Trading derivatives
Derived from coverage
Risks contingents
Commitments contingents
Total
Foreign
operations
925,977
The group also has exposures and commitments to borrowers of a contingent nature. These generally arise from
guarantees given by the group or commitments under credit facilities extended to customers for up to a given limit
so that they have access to funds when required. These facilities also involve credit exposure and are subject to
the same processes of approval, monitoring and control as described above.
The distribution of gross loans and advances by Spanish region is as follows:
%
Catalonia
Madrid
Community of Valencia
Balearic Islands
Principality of Asturias
Basque Country
Castile-Leon
Andalucía
Total
222
2010
Spanish
operations
2011
2010
47
19
8
2
6
8
2
8
47
20
8
3
6
6
3
7
100
100
The values of the credit risk exposures described above have not been reduced by the value of any collateral or
other credit enhancement that may have been accepted as security. Such guarantees are in everyday use with the
types of financial instrument dealt in by the group.
Guarantees normally consist of charges on property, and will in most cases be mortgages on buildings for
residential use, either completed or under construction. To a lesser degree, the Bank will also accept other types
of security such as mortgages on business premises, industrial buildings and the like, or deposits of securities.
Another type of security commonly used by the Bank to mitigate credit risk is the aval or third-party guarantee,
provided that it is fully satisfied as to the solvency of the guarantor.
All these risk mitigation techniques are in a form that affords full legal certainty, that is, by framing them in
contracts that are legally binding on all parties and can be enforced in all relevant jurisdictions, thus ensuring
that the security can be realized at any time. The whole contract process is subject to internal review for legal
soundness and legal opinions may be sought from international experts where contracts are drawn up under the
laws of a foreign country.
Guarantees involving a charge on property are drawn up as public instruments and executed before a notary to
be fully valid and effective as against third parties. A public instrument, in the case of a real property mortgage,
will then be registered in the appropriate land registry to make its effectiveness in law and vis-à-vis third parties
complete. In the case of a chattel mortgage or pledge, the pledged items are generally deposited with the Bank.
Contracts are not open to unilateral termination by borrowers and the security remains in effect until the loan has
been repaid in full.
Personal guarantees or suretyships in the Bank’s favour may be arranged and will again, in all but exceptional
cases, be in the form of a notarially authorized public instrument to ensure that the contract is drawn up to
give maximum legal security and that legal proceedings can be taken to enforce it in the event of default. Such
guarantees are irrevocable and give the Bank a direct, first demand claim against the guarantor.
In its market trading operations the Banco Sabadell group, in line with current industry practice, enters into
agreements to set up netting arrangements with most of the institutional counterparties with which it trades in
derivative instruments and has agreed a number of Credit Support Annexes (CSAs). Both these measures are
designed to mitigate the group’s exposure to, and prevent excessive concentrations of, credit risk. Security
deposits held by Banco Sabadell by way of collateral at the end of 2011 totalled €426 million (€318 million at the
end of 2010).
The primary concentration of credit risk in relation to all these types of guarantee or credit enhancement arises
from the use of mortgages to mitigate credit risk exposures resulting from loans to finance home purchases or the
development of residential or other types of real estate. Loans secured by mortgages currently account for 55% of
all group loans and advances.
The loan loss ratios and loan loss coverage ratios for the Banco Sabadell group are as follows:
%
Loan loss ratio
2011
2010
2009
5.95
48.5
5.01
56.6
3.73
69.0
%
Credit quality of financial assets
Negligible risk
Low risk
Medium-low risk
Medium risk
Medium-high risk
High risk
Total
2011
2010
23
22
24
28
2
1
19
25
26
27
2
1
100
100
As mentioned earlier, the group uses internally generated models to rate most of the borrowers (or transactions)
with whom it incurs credit exposure. These models have been designed in accordance with best practice as
proposed by the NBCA. However, not all asset portfolios giving rise to credit risk are subject to these models, partly
because the design of such models demands a certain degree of experience of actual cases of default. To give
a clear view of the overall quality of the portfolio, the following table uses risk categories defined in the financial
reporting standards laid down by the Bank of Spain’s Circular 4/2004. These categories are used to analyse credit
risks to which the group is exposed and to estimate provisioning requirements to cover against impairment losses
in portfolios of debt instruments.
223
As much as 82% of the Bank’s credit risk is internally rated. The distribution of these exposures, rated on an
internal rating scale based on the available information, is as follows.
%
Analysis of risk exposures
by credit rating
AAA/AA
A
BBB
BB
B
Other
Total
Measured by credit rating /scoring
2011
17
12
34
30
6
1
100
Market risk
Market risk arises from possible fluctuations in the fair value or future cash flows of a financial instrument as a
result of changes in the factors affecting market risk. Several types of market risk factors can be distinguished. The
main types are interest rates, exchange rates and equity prices and credit spreads.
Different approaches are taken to the management of market risk, depending on which of the group’s main
business lines has given rise to the risk:
224
• Risks arising from the group’s customer-focused commercial banking and corporate banking businesses,
known as structural risk. This can be sub-classified into interest rate risk, currency risk and liquidity risk. These
categories of risk are discussed separately below.
• Risks generated through proprietary trading or market making activities by group undertakings, including trading
in foreign exchange instruments, equities and bonds, whether on the spot or the derivatives markets. Trading
of this kind will often be undertaken as part of treasury and capital market operations, with which this section
is specifically concerned.
Market risk is measured by the VaR (Value at Risk) method, which allows the risks on different types of financial
market transaction to be analysed as a single class. The VaR method provides an estimate of the potential
maximum loss on a position that would result from an adverse, but normal, movement in any of the above risk
factors. This estimate is expressed in money terms and is calculated at a specified date, to a specified confidence
level and over a specified time horizon.
Market risk is monitored on a daily basis and reports on current risk levels and on compliance with the limits
assigned to each unit are sent to the risk control functions. Limits are assigned by the Board of Directors for each
risk monitoring unit (based on nominal amounts, VaR or sensitivity limits, as applicable). This makes it possible to
keep track of changes in exposure levels and measure the contribution of each risk factor.
Risk control of this kind is supplemented by special simulation exercises and extreme market scenarios (stress
testing). The reliability of the VaR methodology is validated by back testing techniques which are used to verify that
VaR estimates are consistent with the specified confidence level. Using the VaR methodology does not, however,
rule out the possibility that losses will be above the set limits, as significant market movements may occur that
exceed the confidence levels being applied.
Risk levels for 2011 and 2010 as measured by the 1-day VaR at a 99% confidence level were as follows:
€Mn.
Average
2011
Maximum
Minimum
Average
2010
Maximum
Minimum
Interest rate risk
3.50
5.24
1.98
2.89
7.32
0.35
Currency risk - trading
0.82
1.52
0.02
0.08
0.84
0.01
Equity risk
1.23
2.46
0.61
1.06
1.96
0.55
Credit Spread
0.45
1.56
0.00
0.00
0.00
0.00
Aggregate VaR
6.00
10.78
2.61
4.03
10.12
0.91
Currency risk - structural
4.04
6.60
2.09
3.29
5.52
2.05
Interest rate risk
Interest rate risk arises from changes in market rates of interest that impact on different balance sheet assets
and liabilities. The group is exposed to this risk of unexpected interest rate movements, which may ultimately feed
through into unforeseen changes in interest margins and economic value if, as is common in banking, there are
temporary mismatches in the maturity or repricing dates of asset, liability or off-balance sheet exposures.
Interest rate risk is managed on a consolidated basis for the whole group. This task is performed by the Asset
and Liability Committee. This means actively managing the balance sheet by means of transactions (micro- and
macro-hedges) designed to optimize the level of risk exposure in relation to expected returns. For risk management
and accounting purposes the group maintains two distinct types of macro-hedge of the interest rate risk from
portfolios of financial instruments:
Cash flow macro-hedges of interest rate risk: the purpose of the cash flow macro-hedge is to reduce the volatility
of net interest income due to changes in interest rates over a one-year time horizon. The macro-hedge is thus
a hedge of future cash flows related to the net exposure of a portfolio made up of highly probable assets and
liabilities with exposures similar to interest rate risk. At the present time the hedging instruments used for this
purpose are interest rate swaps.
Fair value macro-hedges of interest rate risk: The purpose of this kind of hedge as an accounting tool is to
cover the economic value of the hedged portfolios, the components of which are fixed-rate assets and liabilities,
options that are embedded in or linked to balance sheet items (caps and floors, for example), and derivatives sold
to customers through the Treasury Desk. At the present time the hedging instruments used for this purpose are
interest rate swaps.
The results of hedging operations are reviewed on a regular basis and tests carried out to measure their
effectiveness.
A number of methodologies are used to measure interest rate risk, allowing a more flexible approach to be
taken. One of these methodologies is to measure the sensitivity of net interest income to changes in interest
rates over a one-year horizon on a maturity and repricing matrix. In this technique the carrying values of financial
assets and liabilities are grouped according to their maturity dates or the dates on which their rates of interest
are reviewed, whichever is nearer in time. For the purposes of this analysis the remaining maturity is assumed
to be the time from 31 December 2011 to the due date of each payment. In addition, for current accounts, it is
assumed that expected maturities will exceed contractually agreed terms, in line with the Bank’s past experience.
The analysis allows an estimate to be made of the effect that a change in interest rates would have on net interest
income, assuming that all rates change by the same amount and in a sustained manner.
An analysis of interest rate sensitivity at 31 December 2011 and 2010 is presented in the following table:
€’000
31.12.2011
Loans and advances
of which: Public Administration
Money market
Capital market
1 month
or less
From 1 to
3 months
From 3 to
12 months
From 1 to
2 years
From 2 to
3 years
From 3 to
4 years
From 4 to
5 years
More than
5 years
Not
sensitive
Total
12,613,144
22,183,188
32,888,445
1,127,946
574,589
440,375
236,651
757,704
181,575
71,003,618
242,366
785,475
831,423
16,350
14,556
60,840
33,108
67,127
181,575
2,232,820
1,037,256
312,545
811,967
306
0
0
0
0
31,961
2,194,035
72,857
292,398
809,840
306
0
0
0
0
0
1,175,401
1,771,396
647,316
1,296,524
1,820,211
1,455,088
923,467
1,077,649
4,514,224
10,278
13,516,152
0
3,865
826,304
732,243
155,376
130,231
553,355
3,337,239
0
5,738,613
Other assets
1,534,302
0
0
0
0
0
0
0
12,189,273
13,723,575
Total assets
16,956,098
23,143,049
34,996,936
2,948,463
2,029,677
1,363,842
1,314,300
5,271,928
Customer accounts
12,413,087 100,437,380
8,739,288
16,889,124
3,940,696
3,503,515
1,540,488
542,923
5,443,661
0
6,394,683
1,850,243
312,255
29,419
300,000
4,092,752
54,097
0
1,588
13,035,037
Capital market
2,454,078
6,119,611
4,928,928
3,577,855
1,649,679
1,690,004
2,238,491
2,703,783
0
25,362,430
Other liabilities
0
0
0
0
0
0
0
0
10,798,104
10,798,104
Total liabilities
19,500,876
16,709,142
22,130,308
7,547,970
5,453,194
7,323,244
2,835,511
8,137,445
2,376,721
5,322,460
(1,553,871)
Hedging derivatives
Interest rate sensitivity gap
(168,057) 11,756,367
11,312,757
(984,665) (2,419,228) (2,284,277)
(459,463)
(5,584,172) (5,842,745) (8,243,679) (1,980,674)
2,322
(2,863,194)
51,241,810
10,799,692 100,437,380
0
0
1,613,396
0
Not
sensitive
Total
73,057,900
€’000
31.12.2010
Loans and advances
1 month
or less
From 1 to
3 months
From 3 to
12 months
From 1 to
2 years
From 2 to
3 years
From 3 to
4 years
From 4 to
5 years
More than
5 years
12,623,269
22,782,124
34,262,043
1,306,913
762,390
391,438
351,432
578,291
0
Money market
998,048
87,831
1,012,688
335,184
0
0
0
0
17,246
2,450,997
Capital market
4,319,065
379,859
884,357
1,170,329
915,493
543,304
510,528
5,219,441
9,573
13,951,948
Other assets
722,000
55,540
41,435
5,026
240,917
24,795
21,304
36,156
6,491,191
7,638,364
Total assets
18,662,382
23,305,355
36,200,522
2,817,451
1,918,800
959,536
883,264
5,833,888
6,518,010
97,099,209
Customer accounts
11,819,016
8,057,447
14,158,052
5,219,395
2,929,359
2,135,252
783,720
5,043,686
589
50,146,515
Money market
9,746,277
1,532,239
678,986
32,173
66
9
3,758
313
0
11,993,820
Capital market
3,934,125
6,576,819
2,624,855
3,344,231
2,040,246
1,536,776
1,637,869
5,035,783
164,367
26,895,070
Other liabilities
0
0
0
0
0
0
0
0
8,063,804
8,063,804
Total liabilities
25,499,418
16,166,504
17,461,893
8,595,798
4,969,671
3,672,036
2,425,346
10,079,782
8,228,759
97,099,209
Hedging derivatives
8,123,339
6,269,607
(1,345,006)
(4,181,098)
(148,805)
(1,653,777)
(1,084,012)
(5,980,249)
0
0
Interest rate sensitivity gap
1,286,303
13,408,458
17,393,623
(9,959,445)
(3,199,676)
(4,366,277)
(2,626,094) (10,226,143)
(1,710,749)
0
10,652,115
Money market
225
The term structure shown in the table is typical for a bank with commercial banking as its main activity, with
gaps or mismatches that are negative in the very short term, positive for terms of up to one year (reflecting the
loan components of the portfolio) and negative for longer term or not sensitive instruments. The matrix also
shows the effects that hedging instruments have in altering the term profile of the group’s exposure to interest
rate risk.
This kind of analysis is supplemented by simulations which measure the effects of different interest rate
movements at different maturities, for example, due to changes in the slope of the yield curve. These simulations
assign probabilities to each scenario so as to arrive at a more precise estimate of the effect that interest rate
movements might have. Another technique that is used is to measure the sensitivity of equity to changes in interest
rates by duration gap analysis. This measures the effect of interest rate changes over a longer time horizon.
The sensitivity of net interest income and net asset values, in relative terms in the latter case, to a change of
100 basis points (1%) in euro interest rates would be €37.6 million and 5.86 % respectively (4.49% in 2010).
The main assumption used in making this estimate is to take the estimated average term for current accounts as
roughly two and a half years even though, contractually speaking, balances in current accounts can be withdrawn
at any time. This assumption is consistent with the observation that balances in current accounts can normally
be expected to remain stable. Another assumption that is made is to exclude all possible maturities other than
those fixed by contract, that is, such scenarios as early repayment or requests for early redemption are not taken
into account. Finally, it is assumed that the 100 basis point change in interest rates is immediate and sustained
throughout the time horizon. A change of this kind is itself hypothetical as there is nothing to indicate that this
particular change should be expected. It has been used for illustrative purposes only.
Currency risk
Currency risk arises from possible changes in exchange rates between different currencies. The group’s structural
foreign currency exposure remained stable throughout 2011 and was associated with long-term investments in
foreign branches and subsidiaries.
Foreign currency exposure is not significant and is generally associated with facilitating customer operations.
The Board of Directors sets overall daily limits for intraday position s (positions resulting from all transactions up
to a certain moment in a single day) and overnight positions (positions reached at the end of the day). These limits
are monitored and reviewed on a daily basis.
226
Liquidity risk
This is the risk that a bank may have difficulty in meeting obligations associated with financial liabilities that are
settled by the delivery of cash or another financial asset.
The group is exposed to daily demands on its available cash resources to meet contractual obligations related
to financial instruments, such as maturing deposits, drawdowns of credit facilities, settlements on derivatives and
so on. Experience shows, however, that only a minimum amount is ever actually required and this can be predicted
with a high degree of confidence.
Limits are set by the Board of Directors for the maintenance of minimum cash levels and for levels of structural
borrowing. The group monitors changes in its liquid asset position on a daily basis and holds a diversified portfolio
of such assets. It also carries out yearly projections to anticipate future needs.
In addition, a review is carried out of gaps or mismatches between cash inflows and outflows over a short,
medium and long time horizon using a maturity matrix based on the time remaining between the date to which the
financial statements were made up and the contract maturity dates of assets and liabilities.
In the matrix presented below, times to maturity have been based on contract maturity/repayment dates; for
assets and liabilities on which payments are made over a period of time, the time to maturity has been taken as
the time between 31 December 2011 and the due date of each payment.
The maturity matrix at 31 December 2011 and 2010 is as follows:
€’000
Payable at
sight
1 month or
less
From 1 to 3
months
From 3 to 12
months
From 1 to 5
years
More than 5
years
Sub-total
Loans and advances
0
4,331,561
5,907,057
13,982,418
20,376,612
26,220,395
of which Public Administration
0
151,763
245,914
975,435
445,529
232,604
Money market
0
1,037,256
312,545
811,967
306
0
31.12.2011
No fixed
maturity
Total
70,822,043
181,576
71,003,618
2,051,245
181,576
2,232,820
2,162,075
31,961
2,194,035
0
72,857
292,398
809,840
306
0
1,175,401
0
1,175,401
Capital market
0
1,765,559
459,774
1,328,944
5,404,847
4,546,750
13,505,873
10,278
13,516,152
0
0
3,865
826,304
1,571,205
3,337,239
5,738,613
0
5,738,613
Other assets
0
1,534,302
0
0
0
0
1,534,302
12,189,274
13,723,575
Total assets
0
8,672,678
6,679,375
16,123,329
25,781,765
30,767,145
88,024,292
Customer accounts
12,413,088 100,437,380
6,780,970
4,918,577
18,086,693
12,243,543
632,938
51,241,810
0
51,241,810
0
6,398,555
1,846,371
312,255
4,476,267
0
13,033,449
1,588
13,035,037
Capital market
0
1,029,485
2,214,622
4,196,751
11,776,349
6,145,224
25,362,430
0
25,362,430
Other liabilities
0
0
0
0
0
0
0
10,798,104
10,798,104
Total liabilities
8,579,090
14,209,010
8,979,570
22,595,699
28,496,158
6,778,162
89,637,689
(8,579,090)
(5,536,332)
(2,300,194)
(6,472,370)
(2,714,393)
23,988,982
(1,613,397)
Payable at
sight
1 month or
less
From 1 to 3
months
From 3 to 12
months
From 1 to 5
years
More than 5
years
Sub-total
Loans and advances
0
4,331,261
6,397,888
13,706,912
21,989,118
26,632,721
Money market
0
998,048
87,831
1,007,688
340,184
0
Capital market
0
4,996,353
166,851
913,751
2,752,661
Other assets
0
996,921
32,256
18,289
Total assets
0
11,322,583
6,684,826
Liquidity gap
10,799,692 100,437,380
1,613,397
0
No fixed
maturity
Total
73,057,900
0
73,057,900
2,433,751
17,246
2,450,997
5,112,760
13,942,375
9,573
13,951,948
93,893
37,647
1,179,005
6,459,359
7,638,364
15,646,639
25,175,856
31,783,127
90,613,031
6,486,178
97,099,209
50,146,515
8,579,090
Money market
€’000
31.12.2010
Customer accounts
8,112,682
4,829,960
15,173,650
13,248,730
1,538,923
50,146,515
0
0
9,746,278
1,532,239
678,986
36,005
312
11,993,820
0
11,993,820
Capital market
0
1,246,504
1,420,616
3,586,606
11,915,488
8,561,489
26,730,704
164,367
26,895,070
Other liabilities
0
1,339
0
0
0
0
1,339
8,062,465
8,063,804
Total liabilities
7,242,570
19,106,804
7,782,815
19,439,242
25,200,223
10,100,724
88,872,378
8,226,831
97,099,209
(7,242,570)
(7,784,221)
(1,097,990)
(3,792,603)
21,682,404
1,740,653
(1,740,653)
Liquidity gap
(24,368)
0
In this analysis the very short-term end of the range is typically where refinancing is most required. This is due to
continually maturing short-term liabilities which, in banking, tend to have a higher turnover than assets. In practice,
however, these short-term liabilities are continually being rolled over and therefore their funding requirements, even
where debt volumes are increasing, can be accommodated.
Even so, group policy is to maintain a safety margin to cover financing needs in any circumstances. This means,
inter alia, maintaining a reserve of liquid assets considered as eligible collateral by the European Central Bank that
is sufficient to provide funding for maturing debt issues on the capital markets for a 12-month period.
The group has commitments of a contingent nature which may also affect its cash requirements. Most of these
relate to credit facilities with agreed limits which were undrawn at close of the reporting year. Limits on these
commitments are also set by the Board of Directors and are constantly monitored.
Systematic checks are made to verify that the group’s ability to raise funds on the capital markets is sufficient to
satisfy its requirements in the short, medium and long term. The Banco Sabadell group meets its cash needs in a
number of ways and has programmes in place to raise finance on the capital markets to ensure diversified sources
of funds. Some these funding programmes are described below.
• Nonparticipating Securities Issuance Programme: the programme has been filed with Spain’s stock market
regulator, the CNMV, and covers issuance of straight and subordinated bonds and mortgage and public
sector covered bonds subject to Spanish law through CNMV supervision. These are offered to investors on
the domestic and global markets. The limits for issues under the Banco Sabadell 2010 nonparticipating
securities issuance programme at 31 December 2011 were €7,000 million (€9,168 million at 31 December
2010).
• Commercial Paper Issuance Programme: this covers the issuance of corporate notes (pagarés) and is
directed at both institutional and retail investors. On 10 March 2011 the Banco Sabadell 2011 corporate
7,242,570
Money market
227
note issuance programme was filed with the CNMV with an upper limit of €5,000 million. On 7 June 2011
the Banco Guipuzcoano corporate note issuance programme was filed with the CNMV with a limit of €1,000
million. As of 31 December 2011 the value of notes in circulation under the Banco Sabadell programme
was €2,302 million (€1,614 million at 31 December 2010). In addition, Banco Sabadell operates a Euro
Commercial Paper (ECP) programme for up to a nominal value of €3,500 million. The programme is directed
at institutional investors and provides for issues of short-term securities in a variety of currencies: euros, US
dollars and sterling.
Other sources of funding include:
228
• Medium- and long-term bilateral loans with financial and other institutions.
• Issues of asset-backed securities: Since 1998 the group has participated in the setting up of 23 securitization
funds for the transfer of mortgage loans, SME business finance loans and finance lease receivables. This
does not include securitization funds added to the consolidated group as a result of the integration of Banco
Guipuzcoano. A portion of the bonds issued by the securitization funds have been sold on the capital markets
and the remainder are held by Banco Sabadell. Most of the mortgage bonds held by Banco Sabadell are
pledged as security on a credit facility held by the Bank with the Bank of Spain for the management of shortterm liquidity.
In 2008 the Spanish government introduced a series of measures to help increase the supply of funding to
the country’s economy. Banco Sabadell and Banco Guipuzcoano availed themselves of these measures to obtain
government guarantees for funding transactions totalling €5,313 million and €688 million respectively. The time
within which the guarantees were to be used expired on 31 December 2010. However, on 10 June 2011 the
Spanish Treasury decided to extend the period in which the securities to be guaranteed could be issued until
30 June 2011 and up to 31 December 2011 respectively, the period for the issue of securities backed by this
government guarantee. In November 2009 Banco Guipuzcoano did, however, carry out a €400 million issue of
ordinary bonds backed by the state guarantee. In December 2011, Banco Sabadell made a first issue of ordinary
state-backed debt bonds to the amount of €1,500 million. The Banco Sabadell group currently has scope to make
state-backed issues of securities for a total value of €4,101 million. This is being held for contingent liquidity
purposes.
Risk concentrations
Credit risk is undoubtedly the main business risk faced by the Banco Sabadell group. As an active player in
the global banking industry the group has a sizeable concentration of exposures to other financial institutions.
Managing these exposures involves the setting of limits by the Board of Directors and the monitoring of these limits
on a day-to-day basis. As mentioned earlier, specific measures are also in place to mitigate risk, including netting
agreements with the majority of counterparties with which derivatives are traded.
As of 31 December 2010, there were only seven borrowers (five borrowers at 31 December 2010) involving
individual exposures of more than 10% of the group’s capital; for six of these borrowers (four borrowers at 31
December 2010) the figure did not exceed 15% of the group’s capital. The overall exposure to these borrowers
amounted to €6,015,463,000 (€4,189,326,000 at 31 December 2010).
Capital management
The group’s general policy on capital management is to ensure that its available capital is sufficient to cover the
overall levels of risk being incurred.
This involves setting up sophisticated systems to measure each type of risk incurred by the group and
methodologies capable of integrating all of them. Such an approach requires a broad perspective of risk that takes
account of possible stress scenarios and suitable financial planning in each case. The risk assessment systems
used are in line with current best practice.
Each year the group carries out its own capital assessment process as prescribed by the new Basel Capital
Accord and, in greater detail, by the Bank of Spain’s capital adequacy regulations, and reports the results to the
supervisory authority.
The process starts from a broad spectrum of previously identified risks and a qualitative internal evaluation
of policies, procedures and systems for originating, measuring and controlling each type of risk and appropriate
mitigation techniques.
The next stage is to carry out a comprehensive quantitative assessment of the group’s capital requirement. This
will be based on internal parameters and use the group’s own models (such as borrower credit rating or scoring
systems) and other internal estimates appropriate to each type of risk. The assessments for each type of risk are
then integrated and a figure is set in terms of capital assigned. In addition, the group’s business and financial
objectives and stress testing exercises are reviewed to reach a final determination as to whether certain business
developments or extreme but nevertheless possible scenarios could pose a threat to the Bank’s solvency, having
regard to its available capital resources.
Note 38. The environment
All group operations are subject to legal requirements on environmental protection and health and safety at work.
The group considers that it substantially complies with these legal requirements and has procedures in place to
ensure such compliance.
The group has taken appropriate action on environmental protection and improvement and to minimize possible
environmental impacts, as required by law. A number of group-wide waste treatment, consumable recycling and
energy saving schemes were continued during the year. Given absence of any environment-related contingencies,
it was not thought necessary to make any provision for liabilities or charges of this nature.
Note 39. Related party transactions
No significant transaction took place with any major shareholder during the years 2011 and 2010; those
transactions that did take place were in the normal course of business and on an arm’s length basis.
No transactions that could be described as significant were entered into with directors or senior managers of
the Bank, with the exception described below. Those that did take place were in the normal course of the group’s
business or were done at market prices or on the terms normally applicable to employees.
On 22 June 2010 Banco Sabadell formally concluded the sale of a building at Paseo de Gracia 36, Barcelona to
the Mango Group whose chairman and principal shareholder, Isak Andic Ermay, is a director and shareholder of the
Bank. The amount involved was in excess of €50 million and resulted in a gross profit of €30 million.
The group is not aware of any transaction, other than on an arm’s length basis, with any person or entity
connected in any way to a director or senior manager.
The most significant balances recorded by the group with related parties, and the effect on the income statement
of transactions entered into with them, are shown in the following table:
€’000
2011
Jointly controlled
entity or significant Associated
influence companies
Assets:
Liabilities:
Memorandum accounts
Income statement:
Interest and similar income
(1) Includes employees’ pension plans.
2010
Joint
venture
Key Other related
staff parties (1)
Total
Total
1
537,676
4,900
22,326
895,738
1,460,641
726,341
308
3,349,781
848
10,974
475,302
3,837,213
3,766,888
1,676
0
94,416
24,094
16
9,503
54
5,804
518,872
318,260
615,034
357,661
473,254
223,369
0
(3)
0
25
0
24,240
(72,336)
0
43,431
2,186
84
(8)
0
9
0
606
(331)
0
65
0
24,473
(12,456)
0
3,201
6
49,403
(85,134)
0
46,731
2,192
21,145
(70,638)
0
40,346
2,077
229
Note 40. Agents
For the purposes of article 22 of Royal Decree 1245/1995 of 14 July drafted by the Finance Ministry, the group has
not entered into or maintained any agency agreements appointing agents to deal with customers on a regular basis,
on behalf of the Bank, for the purpose of arranging or formally agreeing business transactions of the type normally
engaged in by a bank.
Note 41. Customer service department
As required by the Spanish Finance Ministry’s Order 734/2004, a report on the group’s Customer Service
Department has been provided in the Report of the Directors that follows these notes to the annual accounts.
Note 42. Remuneration paid to directors and senior management group
The following table shows, for the years to 31 December 2011 and 2010, the amounts paid to directors in fees
and in contributions to meet directors’ pension commitments for services rendered by them in that capacity:
€’000
Commitments
to pensions
Remunerations
José Oliu Creus *
Isak Andic Ermay (1)
José Manuel Lara Bosch (2)
José Javier Echenique Landiribar (3)
Jaime Guardiola Romojaro *
Joaquín Folch-Rusiñol Corachán
M. Teresa Garcia-Milà Lloveras
Joan Llonch Andreu (4)
José Ramón Martínez Sufrategui (5)
Carlos Jorge Ramalho dos Santos Ferreira
Total
Total
2011
2010
2011
2010
2011
2010
252.0
162.0
162.0
144.0
108.0
108.0
126.0
144.0
126.0
144.0
153.0
153.0
108.0
144.0
108.0
252.0
126.0
126.0
108.0
114.0
132.0
144.0
126.0
126.0
156.0
162.0
144.0
108.0
37.8
18.9
18.9
18.9
18.9
18.9
18.9
-
37.8
18.9
18.9
18.9
18.9
18.9
18.9
-
289.8
162.0
162.0
144.0
108.0
126.9
144.9
162.9
126.0
162.9
153.0
171.9
108.0
162.9
108.0
289.8
126.0
126.0
108.0
132.9
150.9
162.9
126.0
144.9
156.0
180.9
162.9
108.0
2,142.0
1,824.0
151.2
151.2
2,293.2
1,975.2
*
(1)
(2)
(3)
230
Executive Directors.
Appointed First Deputy Chairman by the Board of Directors on 25 November 2010.
Appointed Second Deputy Chairman by the Board of Directors on 25 November 2010.
Appointed to the Board of Directors by a resolution of an Extraordinary General Meeting on 18 September 2010.
He will serve as an independent Director. On 25 November 2010 he was appointed by the Board to the office of Third Deputy Chairman.
(4) At the meeting of the Board of Directors held on 25 November 2010, Mr. Llonch resigned from the post of Deputy Chairman.
(5) Appointed to the Board of Directors by a resolution of an Extraordinary General Meeting on 18 September 2010. He will serve as an independent Director.
Amounts paid in salaries and other emoluments to executive directors during the year 2011 totalled €3,225,000
and €440,000 respectively (2010: €3,844,000 and €435,000 respectively). Life assurance premiums covering
contingent pension commitments in respect of pension rights accruing in 2011 amounted to a further €3,224,000
(2010: €2,198,000).
Loan and guarantee risks undertaken by the Bank and consolidated undertakings for all directors of the parent
company totalled €14,390,000 at 31 December 2011. Of this amount €10,028,000 comprised loans and
€4,362,000 related to avals and documentary credits (2010: €11,037,000, consisting of €8,417,000 in loans
and €2,620,000 in avals and documentary credits The average rate of interest charged was 3.16% (2010: 2.71%).
Deposits held by directors totalled €3,971,000 (€3,190,000 in 2010).
Chairman
Managing Director
Deputy Secretary to the Board & Comptroller General
Director, Investment, Products and Research
Director, Barcelona Area
Director, Catalonia
Secretary General
Director, Risk
Director, Real Estate Management
Director, Corporate Development
Director, Banco Herrero
Director, Southern Region & Canary Islands
Director, Valencia, Murcia & Balearic Islands
Director, Madrid, Castile & Galicia
Director, Operations and Corporate Development
Director, Business Development - Americas
Assistant Managing Director
Director, Markets and Private Banking
Assistant Manager - Operations and Corporate Development
Director, Corporate Banking and Global Operations
Director, Communication and Institutional Relations
Director, Northern Region
Chief Financial Officer
Director, Human Resources
Director, Commercial Banking
José Oliu Creus
Cirus Andreu Cabot
Luis Buil Vall
Ignacio Camí Casellas
José Canalias Puig
María José García Beato
Rafael José García Nauffal
Salvador Grané Terradas
Joan-Mateu Grumé Sierra
Pablo Junceda Moreno
Juan Krauel Alonso
Jaime Matas Vallverdú
Blanca Montero Corominas
Miquel Montes Güell
Fernando Pérez-Hickman Muñoz
Jaume Puig Balsells
Ramón de la Riva Reina
Federico Rodriguez Castillo (*)
Enric Rovira Masachs
Ramón Rovira Pol
Pedro Sánchez Sologaistúa
Tomás Varela Muiña
Javier Vela Hernández
Carlos Ventura Santamans
Salary payments to members of the senior management group (other than those sitting on the Board as
executive directors, for whom details are given above) amounted to €8,771,000 in 2011 (2010: €8,323,000).
Premiums paid in respect of accrued pension entitlements of senior managers totalled €3,335,000 in 2011 (2010:
€2,632,000).
Loan and guarantee risks undertaken by the Bank and consolidated undertakings for the senior management
group (other than executive directors, for whom details are provided above) totalled €13,796,000 at 31 December
2011. This amount was comprised of €12,299,000 in loans and €1,497,000 in avals and documentary credits.
Deposits held by senior managers totalled €7,143,000.
Share appreciation rights granted to members of the senior management group, including executive directors,
under the new “Plan 2010” (see note 34 (f)) incentive scheme resulted in personnel expenses of €3,189,000
during the year (2010: €2,323,000).
Details of existing agreements between the company and members of the Board and senior managers with
regard to compensation on severance of contract are set out in the report of the directors that follows these annual
accounts, as part of the section on the Annual Corporate Governance Report.
The members of the senior management group and their areas of responsibility at 31 December 2011 are set
out below:
(*) Joined the Senior Management Group in 2011.
231
Note 43. Directors’ duty of loyalty
Pursuant to article 229 of the consolidated text of the Companies Act (Ley de Sociedades de Capital) as approved
by Royal Legislative Decree 1/2010 of 2 July, the Directors, in the interests of corporate transparency, have made
the following statement to the Company:
a. No Director is in a situation that would give rise to a direct or indirect conflict of interest vis-à-vis the Company.
b. No Director or any related person within the meaning of article 231 of the consolidated text of the Companies
Act holds equity interests in any company whose objects are identical, similar or complementary to those of the
Company, with the following exceptions:
Director
Company
Joaquín Folch-Rusiñol Corachán (*)
José Oliu Creus
Banco de Valencia, S.A.
Banco Santander, S.A.
Consulnor, S.A.
Banco Bilbao Vizcaya Argentaria, S.A.
Banco Santander,S.A.
Banco Comercial Português, S.A.
Caixabank
Banco Bilbao Vizcaya Argentaria, S.A.
Proportional shareholding (%)
0.00004
0.00005
0.00001
1.7031
0.092
0.0000064
0.00112
0.00014
0.000209
0.00032
0.00109
0.00019
(*) Includes a 0.066% indirect shareholding.
c. The Directors have also confirmed that none of them or any party related to them holds any office or position of
responsibility or performs any services, either for their own account or for the account of any other person, in
any company whose objects are identical, similar or complementary to those of the Company, with the following
exceptions:
Director
Company
Position/office held
José Oliu Creus
José Oliu Creus
Joan Llonch Andreu
Joan Llonch Andreu
Joan Llonch Andreu
Joan Llonch Andreu
BanSabadell Holding, S.L., Sociedad Unipersonal
Bank Millenium, S.A.(Polonia)
Bank Millenium Angola, S.A.
BanSabadell Inversió Desenvolupament, S.A., Sociedad Unipersonal
Sinia Renovables, S.C.R. de Régimen Simplificado
Vocal Conselho Geral e de Supervisao
Chairman
Director
Director
Deputy Chairman
Deputy Chairman
Director
Director
Chairman
Vocal do Supervisory Board
Chairman
Director
Chairman
Chairman
Chairman
Director
Chairman
232
Note 44. Post-balance sheet events
Offer for repurchase of Preference Shares and sale and subscription of Banco Sabadell shares
The Board of Directors of Banco de Sabadell, S.A. in the meeting held on 2 December 2011, agreed to offer the
holders of preference shares of issues made by member organisations of the consolidated Banco Sabadell group,
indicated below, the repurchase of the whole of their preference shares for the automatic application of said effect
by those accepting the Repurchase Offer to the purchase and/or subscription of Banco Sabadell shares available
in a simultaneous public offer for subscription of newly issued shares and sale of treasury stock of bank shares
exclusively for the holders of these preference shares.
Once the period for acceptance of the offer expired on 3 January 2012 repurchase had been requested by:
a. 488,534 Series I/2009 Banco Sabadell preference shares, to a total nominal amount of €488,534,000,
representing 97.71% of the total of these preference shares;
b. 456,285 Series A Sabadell International Equity Ltd. preference shares, to a total nominal amount of
€228,142,500, representing 91.26% of the total of these preference shares;
c. 322,663 Series III Guipuzcoano Capital, S.A. sole preference shares to a total nominal amount of €32,266,300,
representing 64.53% of the total of these preference shares; and
d. 483,901 Series I Guipuzcoano Capital, S.A. sole preference shares to a total nominal amount of €48,390,100,
representing 96.78% of the total of these preference shares.
Call for an Extraordinary General Shareholders Meeting on 23 February 2012
On 12 January 2012, the Board of Directors of Banco de Sabadell, S.A. agreed to call an Extraordinary General
Shareholders Meeting on 23 February 2012.
The points on the agenda included the increase in share capital, through cash contributions, by a nominal
amount of €86,476,525.625, through the emission and release of 691,812,205 ordinary shares each with
a nominal face value of €0.125, with recognition of the right to preferential subscription and with forecast of
incomplete subscription, with delegation in the Board of Directors, with replacement faculties, to execute the capital
increase setting the conditions in all that not foreseen by the Board.
Furthermore, it included delegation in the Board of Directors of the faculty to extend the share capital by one of
more fold with the faculty, if applicable, of exclusion of the right of preferential subscription.
The Price of the Offer (this is the unit price for each share of the Bank object of the offer) to the effects of
making payment of 90% of the nominal value of the repurchased preference shares, was set at the amount of
€2.6461 (equivalent to the arithmetic mean of the mean weighted prices of the Banco Sabadell share for the 90
calendar days prior to 30 December 2011 −inclusive−). The remaining 10% of the nominal value of the repurchased
preference shares increased by 2% on the total nominal value of the preference shares will be paid in accordance
with the terms of the offer once investor compliance with the condition of uninterrupted holding of the totality of the
shares in the bank acquired under this offer until 14 December 2012, inclusive, has been verified by the Bank.
The total number of shares in the bank subject to issue and sale as a result of the application by holders
of the preference shares of the effective corresponding to 90% of the nominal value of the preference shares
repurchased, without the corresponding peaks, was 271,179,763 shares (of which 48,000,000 are treasury stock
shares; and 223,179,763 new shares representing 13.83% of the share capital of the bank, after the result of the
offer).
On 4 January 2012 the public instrument for increasing the share capital of Banco Sabadell by 223,179,763
new shares was presented before in the company register of Barcelona. These shares were admitted for trading by
the Barcelona, Madrid and Valencia stock exchanges through the Continuous Market system on 12 January 2012.
This capital increase represents a growth of 128 basic points over the capital ratios shown in note 28 of these
annual accounts.
The per share profit at 31 December 2011, considering this last capital increase was €0.15 (basic per share
profit considering the effect of the necessarily convertible shares €0.13).
233
Annex I: Companies in the Banco Sabadell group at 31 December 2011
234
Name of undertaking
Fully consolidated companies
Alfonso XII, 16 Inversiones, S.L.
Assegurances Segur Vida, S.A.
Axel Group, S.L.
Ballerton Servicios, S.L. (a)
Banco Atlantico Bahamas Bank & Trust, Ltd.
Banco Atlantico Mónaco S.A.M.
Banco Urquijo Sabadell Banca Privada, S.A.
BancSabadell d’Andorra , S.A.
BanSabadell Consulting, S.L.
BanSabadell Correduría de Seguros, S.A.
Bansabadell Factura, S.L.
BanSabadell Financiación, E.F.C., S.A
Bansabadell Fincom, E.F.C., S.A.
BanSabadell Holding, S.L.
BanSabadell Information System S.A.
BanSabadell Inversió Desenvolupament, S.A.
BanSabadell Inversión, S.A., S.G.I.I.C.
BanSabadell Professional, S.A.
BanSabadell Renting, S.L.
BanSabadell Securities Services, S.L
Bitarte S.A.
BlueSky Property Development, S.L.
Compañía de Cogeneración del Caribe Dominicana, S.A.
Compañía de Cogeneración del Caribe, S.L.
Easo Bolsa, S.A.
Ederra, S.A.
Europa Invest, S.A.
Europea Pall Mall Ltd.
Explotaciones Energéticas SINIA XXI, S.L.
Gazteluberri Gestión S.L.
Gazteluberri S.L.
Grao Castalia S.L.
Guipuzcoano Capital, S.A. Unipersonal
Guipuzcoano Promoción Empresarial, S.L.
Guipuzcoano Valores, S.A.
Guipuzcoano, Correduría de Seguros del Grupo Banco Guipuzcoano, S.A.
Guipuzcoano, S.G.I.I.C., S.A.
Herrero Internacional Gestión, S.L. (a)
Hobalear, S.A.
Hondarriberri, S.P.E., S.L.
Interstate Property Holdings, LLC
Mariñamendi S.L.
Promociones y Desarrollos Creaziona Levante S.L.
Promociones y Financiaciones Herrero, S.A.
Proteo Banking Software, S.L.
Residencial Kataoria S.L.
Sabadell Asia Trade Services, Ltd.
Sabadell Brasil Trade Services - Ass.Cial Ltda.
Sabadell BS Select Fund of Hedge Funds, S.I.C.A.V S.A.
Sabadell Corporate Finance, S.L.
Sabadell d’Andorra Inversions Societat Gestora, S.A.
Sabadell International Equity, Ltd.
Sabadell Securities USA, Inc.
Serveis d’Assessorament BSA, S.A.U.
Servicio de Administración de Inversiones, S.A.
Servicios Reunidos, S.A.
Sinia Renovables, S.C.R. de R.S., S.A.
Solvia Development, S.L
Solvia Estate, S.L.
Solvia Gestió Immobiliària, S.L.
Solvia Hotels, S.L.
Solvia Housing, S.L.
Solvia Properties, S.L.
Son Blanc Caleta S.L.
Tierras Vega Alta del Segura S.L.
Urdin Oria, S.A.
Urquijo Gestión, S.G.I.I.C., S.A.
Urumea Gestión, S.L.
Registered office
Real estate
Insurance
Venture capital company
Financial advisers
Holding company
Banking
Banking
Banking
Banking
Banking
Banking
Services
Insurance brokers
Electronic billing services
Finance company
Finance company
Holding company
Computer services
Holding company
Investment fund managers
Services
Equipment leasing
Services
Holding company
Real estate
Electricity utility
Real estate holding company
Holding company
Real estate
Real estate
Holding company
Real estate
Real estate
Real estate
Issuer preference shares
Holding company
Real estate
Insurance
Fund managers
Real estate
Holding company
Real estate
Business start-ups
Real estate
Electricity utility
Real estate
Holding company
Computer services
Real estate
Services
Representative office
Holding company
Financial advisers
Finance company
Services
Banking
Services
Holding company
Services
Real estate
Real estate
Real estate
Property rentals
Real estate
Real estate
Real estate
Real estate
Real estate
Not trading
Holding company
Barcelona
Andorra la Vella
Barcelona
Madrid
Sant Cugat del Vallès
Nassau, Bahamas
Mónaco
Sabadell
San Sebastián
Madrid
Andorra la Vella
Sabadell
Sabadell
Barcelona
Sabadell
Sabadell
San Sebastian
Murcia
Santo Domingo (Dominican Republic)
Barcelona
San Sebastian
San Sebastian
Luxembourg
London
Barcelona
Madrid
San Sebastian
Valencia
San Sebastian
San Sebastian
San Sebastian
San Sebastian
San Sebastian
Alicante
Barcelona
San Sebastian
Miami
Madrid
Churriana de la Vega
Valencia
Oviedo
Valencia
Hong Kong
Brazil
Luxembourg
Madrid
Andorra la Vella
George Town
Miami
Miami
Andorra la Vella
Madrid
Sabadell
Barcelona
Miami
Madrid
Valencia
Alicante
San Sebastian
Madrid
San Sebastian
Proportional holding (%)
Direct
Indirect
100.00
100.00
99.99
100.00
100.00
100.00
100.00
50.97
100.00
100.00
100.00
100.00
100.00
100.00
81.00
100.00
100.00
100.00
100.00
100.00
22.00
100.00
100.00
100.00
100.00
100.00
99.99
49.11
30.00
100.00
100.00
94.78
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
-
100.00
50.97
100.00
0.01
100.00
100.00
100.00
100.00
100.00
97.85
78.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
60.00
100.00
75.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
0.01
70.00
50.67
50.67
100.00
100.00
100.00
100.00
100.00
Total
(a) On 28 March 2011, the companies Ballerton Corporation Serviços, S.A. and Herrerro Internacional, S.A.R.L. moved their registered offices to Sant Cugat del Vallés, Spain, and changed their names to Ballerton Servicios, S.L.
and Herrero Internacional Gestión, S.L., respectively.
€’000
Group
net
investment
Contribution
to reserves
or losses of
consolidated
undertakings
Contribution
to
consolidated
profit
0
602
17,492
9,079
3,140
2,439
19,498
0
613,479
143,030
15,326
3
588
299
24,040
28,920
0
3,687
19,368
607
1,130
3,861
2,500
10,735
0
0
3,007
38,914
19,485
336
16,880
3,797
0
15
0
58
15,753
3,076
(3,795)
107
19,213
959
(95)
900
4,592
5,665,921
41,717
92,099
7,186
0
(519)
(3,353)
31,790
(31,258)
(244,745)
3,356
22,645
71,668
189
3,485
6,372
23
(703)
170
(727)
(524)
(13)
(173)
(1,408)
29,163
(1,901)
(12,091)
(280)
(3)
(521)
13
(1,404)
463
6,128
(4)
(23)
(121)
235
197,983
1,196
13,597
3,184
11
325
(228)
(611)
9,548
(74,017)
4,018
1,312
8,743
16
3,293
2,760
81
(4,197)
(64)
(63)
554
(4,476)
7
(175)
(1,688)
(5,369)
(25,107)
(410)
6
(6,623)
106
Financial data (1)
Name of undertaking
Capital
Reserves
Results (2)
(18,880)
210
21,545
1,018
24,350
914
12,727
4,965,422
581,047
147,679
18,380
0
18
(3,155)
26,993
(4,998)
(303,933)
12,330
17,287
71,678
516
5,439
6,438
6,691
(4,728)
(5,471)
(1,993)
23,206
33,602
46
(4,665)
15,955
(8,588)
(38,541)
(2,063)
(4)
(9,934)
6,330
(1,404)
908
6,128
(4)
(23)
(121)
235
197,983
1,196
13,597
6,246
11
325
(228)
Dividends
paid (3)
Total
assets
Treated as
consolidated
for tax
purposes
Guipuzcoano, S.G.I.I.C., S.A.
Herrero Internacional Gestión, S.L.
Hobalear, S.A.
Hondarriberri, S.P.E., S.L.
Mariñamendi S.L.
Promociones y Desarrollos Creaziona Levante S.L.
Residencial Kataoria S.L.
Sabadell d'Andorra Inversions Societat Gestora, S.A.
Serveis d'Assessorament BSA, S.A.U.
Solvia Estate, S.L.
Solvia Hotels, S.L.
Son Blanc Caleta S.L.
Tierras Vega Alta del Segura S.L.
Urdin Oria, S.A.
Total
(611)
9,548
(74,017)
4,018
1,312
8,743
16
3,293
2,760
81
(4,197)
(64)
(63)
554
(4,574)
7
(175)
(1,688)
(5,369)
(25,107)
(410)
6
(6,623)
106
0
868
0
0
0
0
0
69,516
0
0
1,020
0
520
0
1,537
0
0
0
0
11,000
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
24,324
174,206
185,310
1,040
24,376
3,009
25,766
94,214,316
7,551,457
1,452,873
611,878
188
850
718
665,480
524,508
257,265
138,678
79,758
119,097
886
185,415
12,388
14,361
7,968
648
163
38,961
32,902
206
13,917
52,184
17,655
45,505
1,352
100,594
92,501
11,004
No
No
Yes
Yes
Yes
No
No
Yes
No
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
No
No
Yes
No
No
No
No
Yes
No
No
No
No
No
No
100
669
597
273
2,155
263
(295)
358
No
1,503
60
354
60
259,561
6,183
55,013
3,124
8,740
3,456
3
3,250
0
1,416
33,394
70
300
1
618
2,770
60
6,010
60
15,000
10,183
15,807
60
2,705
500
2,073
500
4,000
4,550
60
3,606
9
7,599
200
3,632
545
(103,102)
(9,903)
(19,094)
(0)
(6,879)
270
0
(3,460)
695
(1,213)
871
357
568
57
400
322,048
14
757
19
(826)
0
452
0
7,994
(13)
1,346
278
(4,898)
(8,346)
2
2,042
9
(327)
(43)
129
40
(100,750)
(2,001)
(45,025)
0
(2,952)
(0)
(1)
(2,822)
77
(28)
(21)
481
1,064
27
540
14,802
2
(1)
(0)
2,019
0
(231,653)
(38,993)
(359)
(5,693)
229
(784)
(3,650)
(1,695)
(0)
51
(1)
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
898
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
9,442
217
4,115
673
64,256
64,091
68,505
18,812
7,135
3,725
2
9,368
780
195
36,082
1,385
1,474
252,953
1,591
2,720,846
77
6,765
79
91,943
10,183
2,381,220
221,085
10,361
27,939
12,893
31,766
9,493
18,743
63
9,635
18
3,014
45
1,139
60
51,674
0
0
2,904
0
24,185
3
0
0
250
16,400
358
300
1
551
317,046
60
6,793
67
15,000
10,200
0
0
2,784
0
3,356
0
0
0
60
5,286
9
(16)
(442)
159
545
4,903
(14,033)
(12,406)
0
(2,495)
8
0
(2,400)
644
(115)
628
(888)
289
13
369
(16,167)
7
(6,099)
12
(244)
0
(520,843)
(50,921)
7,912
(13)
(873)
(2,511)
(715)
(2,478)
(1)
277
2
(327)
(32)
129
40
(100,750)
(2,001)
(45,025)
0
(2,952)
(0)
(1)
(2,822)
77
(28)
(10)
481
539
27
540
14,029
1
(1)
(0)
2,019
0
(231,653)
(38,993)
(359)
(5,693)
229
(784)
(3,650)
(1,695)
(0)
51
(1)
No
No
Yes
Yes
No
No
No
No
No
Yes
Yes
No
No
No
No
Yes
No
No
No
No
No
Yes
Yes
Yes
N/A
Yes
Yes
Yes
Yes
Yes
Yes
No
No
No
Yes
No
1,482,952
5,081,272
(289,269)
85,632
(1) Foreign-registered companies have been translated into euros at the exchange rate ruling on 31 December 2010.
(2) Results are subject to approval by the Annual General Meeting of each company.
(3) Includes final dividends for the previous year and interim dividends paid to the group during the year.
Guipuzcoano, Correduría de Seguros del Grupo Banco
Guipuzcoano, S.A.
11,400
602
14,200
26
50
1,546
11,250
173,881
37,378
73,148
30,069
3
60
100
24,040
35,520
330,340
240
15,025
601
60
2,000
2,500
6,506
2,500
6,183
49
15,150
2,036
125
18,528
1,352
1,460
44,315
700
60
32,314
4,514
Alfonso XII, 16 Inversiones, S.L.
Axel Group, S.L.
Ballerton Servicios, S.L.
BancSabadell d'Andorra , S.A.
Bitarte S.A.
BlueSky Property Development, S.L.
Easo Bolsa, S.A.
Ederra, S.A.
Europa Invest, S.A.
Gazteluberri Gestión S.L.
Gazteluberri S.L.
Grao Castalia S.L.
Guipuzcoano Promoción Empresarial, S.L.
235
Name of undertaking
Proportionally consolidated companies
Emte Renovables, S.L.
Energias Renovables Sierra Sesnández, S.L.
Eólica Mirasierra, S.L.
Eólica Sierra Sesnández, S.L.
Erbisinia Renovables, S.L.
Financiera Iberoamericana, S.A.
Inerban Proyectos, S.L.
Jerez Solar, S.L.
Plaxic Estelar, S.L.
Direct
Indirect
Principal business
Registered office
Holding company
Instrumental society
Electricity utility
Electricity utility
Sociedad Holding
Finance company
Real estate
Electricity utility
Real estate
Barcelona
Valladolid
Palencia
Madrid
León
Havana
Alicante
Sant Joan Despí
Barcelona
50.00
-
62.11
62.10
50.00
62.10
49.00
50.00
100.00
45.01
Real estate
Services
Wind power
Services
Real estate
Real estate
Services
Services
Services
Services
Services
Banking
Management of pension funds
Insurance
Insurance
Chemistry
Real estate
Real estate
Financial services
Real estate
Real estate
Real estate
Banking
Venture Capital
Real estate
Real estate
Electricity utility
Perfume and cosmetics manufacture
Services
Food products
Solar power
Property investment
Chemistry
Graphic arts
Real estate
Real estate
Real estate
Hydroelectric power
Real estate
Services
Real estate
Chemistry
Products of illumination
Real estate
Real estate
Barcelona
Ourense
Ourense
Madrid
Almeria
Alicante
Boadilla del Monte
Madrid
Madrid
Madrid
Madrid
León (Mexico)
Altorricón
Alicante
Guadalajara
Santo Domingo (Dominican Republic)
Lisboa
Madrid
Madrid
Madrid
Madrid
Madrid
Murcia
Vigo
Rubí
Barcelona
Granollers
Vitoria
Barcelona
Marina de Cudeyo
Barcelona
Abanto y Zierbena
Pamplona
Mutilva Baja
Barcelona
Vitoria
Buenos Aires (Argentina)
Pamplona
Llinars del Vallès
Canovelles
Banos y Mendigo
Abanto y Zierbena
25.00
26.42
25.00
25.00
25.00
25.00
20.00
50.00
50.00
50.00
20.00
40.00
50.00
-
37.50
25.00
25.00
30.06
40.00
49.78
33.33
33.00
45.00
25.00
40.00
41.23
30.00
45.00
45.00
25.00
35.00
25.00
50.00
25.00
45.00
40.00
45.00
50.00
45.75
50.00
20.00
35.00
20.00
20.00
40.00
20.00
Total
Equity-accounted companies (1)
6350 Industries, S.L.
Atalanta Catalunya 2011, S.L.
Air Miles España, S.A. (a)
Aldoluz, S.L.
Anara Guipuzcoa, S.L.
Aviones Alfambra CRJ-900, A.I.E.
Aviones Cabriel CRJ-900, A.I.E.
Aviones Gorgos CRJ-900, A.I.E.
Aviones Sella CRJ-900, A.I.E.
Banco del Bajío, S.A.
BanSabadell Seguros Generales, S.A. de Seguros y Reaseguros
Biodiésel Aragón, S.L.
Casas del Mar levante, S.L.
C-Cuspide 6, S.A.
Centro Financiero B.H.D., S.A.
Cepric Imobiliária, Lda.
Desarrollos Inmobiliarios La Serreta, S.L.
Diana Capital Inversion S.G.E.C.R. S.A.
Egumar Gestion, S.L.
ESUS Energía Renovable, S.L.
Eurofragance, S.L.
FS Colaboración y Asistencia, S.A.
Garnova, S.L.
Gate Solar, S.L. SPE
Gaviel, S.A.
General de Biocarburantes, S.A.
Guisain, S.L.
Harugui Gestion y Promoción Inmobiliaria, S.L.
Hidrodata, S.A.
Hidrophytic, S.L.
IFOS, S.A.
Improbal Norte, S.L.
Intermas Nets, S.A.
J. Feliu de la Penya, S.L
Key Vil I, S.L.
Kosta Bareño, S.A.
(1) Accounted for by the equity method because the parent company does not have managerial control.
(a) 25% of the voting rights are held by the parent company.
236
Principal business
Registered office
Real estate
Real estate
Real estate
Real estate
Real estate
Real estate
Real estate
Real estate
Real estate
Electricity utility
Real estate
Real estate
Electricity utility
Real estate
Real estate
Real estate
Real estate
Real estate
Real estate
Real estate
Real estate
Real estate
Electricity utility
Society of investment
Holding company
Holding company
Real estate
Real estate
Real estate
Real estate
Real estate
Malaga
Abanto y Zierbena
Madrid
Benidorm
Benalmadena
Murcia
Pamplona
Murcia
Benalmadena
Barcelona
Benidorm
Benalmadena
Magaz de Pisuerga
Burgos
Granada
Murcia
Alicante
Madrid
Pamplona
San Vicente del Raspeig
Elda
Sabadell
Granada
Esplugues de Llobregat
Barcelona
San Vicente del Raspeig
Zarautz
Zarautz
Noain
Benalmadena
Direct
Indirect
23.01
43.08
-
33.78
40.00
20.00
42.00
34.55
49.70
45.00
40.00
49.50
40.00
33.00
32.20
49.00
25.00
40.00
40.00
40.00
20.00
50.00
25.00
45.00
46.88
20.00
28.79
40.00
35.00
30.00
45.00
35.91
Name of undertaking
Lagar de Tasara, S.L.
Lizarre Promociones, A.I.E.
Loalsa Inversiones Castilla la Mancha, S.L.
M.P. Costablanca, S.L.
Mirador del Segura 21, S.L.
Mursiya Golf, S.L.
Naguisa Promociones, S.L.
NF Desarrollos, S.L.
Norfin 21, S.L.
Parc Eòlic Veciana-Cabaro, S.L.
Parque Boulevard Finestrat, S.L.
Parque del Segura, S.L.
Proburg BG XXI, S.L.
Promociones Abaco Costa Almeria, S.L.
Promociones Florida Casas, S.L.
Promociones y Desarrollos Creaziona Castilla la Mancha, S.L.
Promociones y Desarrollos Urbanos Oncineda, S.L.
Residencial Haygon, S.L.
SBD Creixent, S.A.
Sistema Eléctrico de Conexión Valcaire, S.L.
Sociedad de Inversiones y Participaciones COMSA EMTE, S.L.
Societat d'Inversió dels Enginyers, S.L.
Torre Sureste, S.L.
Txonta Egizastu Promozioak, S.L.
Urtago Promozioak, A.I.E.
Vera Munain, S.L.
Vistas del Parque 21, S.L.
Total
(a) 25% of the voting rights are held by the parent company.
237
€’000
Financial data (2)
Name of undertaking
Emte Renovables, S.L. (a)
Energias Renovables Sierra Sesnández, S.L. (f)
Eólica Mirasierra, S.L. (c)
Eólica Sierra Sesnández, S.L. (f)
Jerez Solar, S.L. (a)
Plaxic Estelar, S.L. (a)
Total
238
6350 Industries, S.L. (c)
Atalanta Catalunya 2011, S.L. (d)
Air Miles España, S.A. (b)
Aldoluz, S.L. (h)
Aviación Regional Cántabra, A.I.E. (a)
Aviones Alfambra CRJ-900, A.I.E. (a)
Aviones Cabriel CRJ-900, A.I.E. (a)
Aviones Gorgos CRJ-900, A.I.E. (a)
Aviones Sella CRJ-900, A.I.E. (a)
BanSabadell Pensiones, E.G.F.P., S.A. (a)
BanSabadell Seguros Generales, S.A. de Seguros y Reaseguros (a)
BanSabadell Vida, S.A. de Seguros y Reaseguros (a)
Biodiésel Aragón, S.L. (e)
C-Cuspide 6, S.A. (g)
Centro Financiero B.H.D., S.A. (f)
Cepric Imobiliária, Lda. (g)
Desarrollos Inmobiliarios La Serreta, S.L. (d)
Desarrollos Inmobiliarios Pronegui, S.L. (g)
Dexia Sabadell, S.A. (a)
Diana Capital Inversion S.G.E.C.R. S.A. (e)
ESUS Energía Renovable, S.L. (a)
Eurofragance, S.L. (a)
FS Colaboración y Asistencia, S.A. (c )
Garnova, S.L. (b)
Gate Solar, S.L. SPE (c)
Gaviel, S.A. (d)
General de Biocarburantes, S.A. (f)
Grafos, S.A. Arte sobre Papel (a)
Guisain, S.L. (d)
Capital
Dividends
paid (4)
Total
assets
Group
net
investment
Contribution
to reserves
or losses of
consolidated
undertakings
Contribution
to
consolidated
profit
Treated as
consolidated
for tax
purposes
Reserves
Result (3)
8,050
3
64
4
3
18,669
1,000
3,050
3
(163)
(1)
7,488
(1)
(3)
1,197
588
(1,358)
(9,782)
(115)
0
(21)
0
(3)
63
(176)
(338)
(28)
0
0
0
0
0
1,199
0
0
0
1,199
15,073
(7,186)
(26,160)
(9,483)
(8)
52,383
(9,779)
59,586
38,542
4,379
1
3,776
2
1
8,616
500
1,894
0
19,169
(95)
0
0
0
(2)
177
(13)
43
(6,153)
(6,043)
(533)
0
(10)
0
(1)
32
(153)
(210)
(447)
(1,323)
No
No
No
No
No
No
No
No
No
230
301
40
72
6,628
150
29,606
4,496
4,495
4,495
4,495
134,453
7,813
10,000
43,858
5,911
892
1,000
158,876
7
1,756
2,004
254,061
606
600
4,500
50
667
600
48,072
3,005
1,203
6,000
1,800
4,200
664
39,056
(0)
5,214
(6,628)
2,429
(711)
(1,514)
(1,511)
(1,510)
(1,508)
364,100
16,694
4,895
236,301
(6,456)
(5,277)
(105)
58,536
(521)
504
(1,437)
194,477
1,826
(488)
(175)
(64)
8,367
2,050
16,792
766
92
(3,019)
8,444
(2,176)
(33)
1,426
0
(493)
0
137
835
24
24
23
23
42,523
3,676
3,723
49,736
(884)
(605)
(1)
37,874
(723)
(258)
(722)
26,184
302
(102)
(90)
(150)
5,035
(19)
5,508
(25)
(2)
(134)
278
(148)
0
75
0
0
0
0
41
0
0
0
0
20,243
3,233
0
7,500
0
0
0
12,486
0
0
0
0
0
0
0
0
608
0
520
0
0
0
0
0
2,673
133,782
40
108,290
0
12,240
103,202
20,064
20,049
20,024
20,000
4,995,703
48,038
63,815
6,370,826
47,049
17,351
17,592
2,298,120
8,833
13,598
8,928
18,146,719
3,290
6,312
7,965
580
24,472
4,190
106,039
3,870
1,296
10,468
33,494
10,052
0
37,202
10
2,140
0
0
7,824
1,060
1,060
1,060
1,060
96,900
9,378
5,000
27,106
2,820
0
0
44,936
0
0
0
108,026
457
0
0
23
9,050
887
42,814
1,503
630
0
2,626
0
0
1,217
0
88
0
0
581
(306)
(305)
(306)
(306)
14,837
3,667
2,586
114,391
(2,820)
0
0
3,212
(1)
0
0
77,457
(10)
0
(20)
0
355
20
5,885
24
43
(130)
315
(11)
(12)
475
0
(134)
0
55
241
7
7
6
6
9,728
1,998
1,959
27,225
0
(202)
0
13,502
(325)
(103)
(181)
0
125
(31)
(41)
(23)
1,220
(9)
1,425
(13)
(1)
0
0
(59)
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
€’000
Financial data (2)
Name of undertaking
60
593
3,720
186
4
300
846
851
3,574
1,500
4,441
835
180
5,000
164
300
300
160
10
6,847
801
1,752
1,500
4,000
5,000
5,000
120
2,743
300
541
2,604
12,895
175
4,818
15,127
390
300
600
100
60
164
Reserves
Result (3)
91
(379)
(6,658)
21
23
(1)
27,157
21,897
(833)
(18)
(4,533)
0
628
(141)
(2)
(285)
320
1,091
0
(2,197)
(233)
(1,185)
(566)
(593)
(299)
20
555
(892)
(7)
(252)
(5,168)
(452)
(15)
4,152
232,468
0
792
568
190
(2)
(2)
(4)
(214)
(3,397)
13
9
0
3,205
(3,296)
(241)
0
922
(7)
(70)
(29)
0
(87)
(5)
(4)
0
(2,017)
(57)
6
(252)
(11)
(420)
0
(110)
(416)
0
(93)
(2,203)
(173)
(2)
52
(2,845)
(145)
(268)
1
(1)
0
0
0
0
0
0
0
0
505
0
0
0
0
61
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
45,272
Group
net
investment
2,354
3,398
242,378
471
491
1,556
72,454
66,541
41,581
24,838
24,587
828
15,367
53,964
5,804
7,871
6,436
2,506
5,000
43,523
38,448
25,779
44,370
13,849
30,526
25,849
6,398
15,786
6,935
7,624
83,600
20,308
383
5,117
244,223
251
18,628
16,007
263
1,910
5,699
0
0
4,974
93
0
0
22,213
10,501
0
0
0
311
0
0
0
0
168
0
0
2,739
0
0
6,582
0
0
0
0
0
0
0
0
2,968
82
422
47,302
55
0
0
30
0
0
(12)
(152)
1,859
12
0
0
1,620
(15)
0
0
(1)
0
54
0
0
(1)
0
(1)
0
(546)
21
0
(418)
0
34
(1)
13
(53)
0
103
(249)
(117)
0
1,868
0
0
0
0
2
0
0
502,012
224,483
Total
Contribution
to
consolidated
profit
(2)
(107)
0
7
0
1,039
(720)
(96)
0
311
(3)
(14)
(13)
0
(43)
(2)
(2)
0
(600)
(19)
2
(137)
(3)
(168)
0
(44)
(83)
0
(23)
(992)
(14)
0
22
0
(42)
(107)
0
0
0
0
54,992
467,502
132,103
2,004,133
5,299,712
231,902
(2) foreign corporations are converted to euros to the exchange rate fixing on 31 December 2011
(3) Results pending approval by the General Committee of Shareholders
(4) Includes equalizing dividends of the previous year and paid interim dividends to the group
The figures for the companies referred to in the following notes are based on a year end which is not December 31, there being no more up-to-date information available.
(a) The details of these indicated societies under the denomination of “Details of the society (2)” correspond on 30 November 2011
(b) The details of these indicated societies under the denomination of “Details of the society (2)” correspond on 31 October 2011
(c) The details of these indicated societies under the denomination of “Details of the society (2)” correspond on 30 September 2011
(d) The details of these indicated societies under the denomination of “Details of the society (2)” correspond on 31 August 2011
(e) The details of these indicated societies under the denomination of “Details of the society (2)” correspond on 31 July 2011
(f) The details of these indicated societies under the denomination of “Details of the society (2)” correspond on 30 June 2011
(g) The details of these indicated societies under the denomination of “Details of the society (2)” correspond on 31 December 2010.
(h) The details of these indicated societies under the denomination of “Details of the society (2)” correspond on 31 May 2010.
(i) The details of these indicated societies under the denomination of “Details of the society (2)” correspond on 31 December 2008.
Total revenues of associated undertakings accounted for by the equity method were €2,616,013,000 in the
year to 31 December 2011. The overall liabilities of associated undertakings at the close of 2011 totalled
€31,805,166,000.
Treated as
consolidated
for tax
purposes
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
Total
Capital
Total
assets
Harugui Gestion y Promoción Inmobiliaria, S.L. (a)
Hidrodata, S.A. (c)
Hidrophytic, S.L.
IFOS, S.A. (a)
Intermas Nets, S.A. (a)
J. Feliu de la Penya, S.L (b)
Key Vil I, S.L. (d)
Lizarre Promociones, A.I.E. (d)
Loalsa Inversiones Castilla la Mancha, S.L. (e)
Parc Eòlic Veciana-Cabaro, S.L. (a)
Parque Eólico Magaz, S.L. (a)
Proburg BG XXI, S.L. (a)
Promociones Abaco Costa Almeria, S.L. (c)
Promociones Aguiver, S.L. (f)
Promociones y Desarrollos Creaziona Castilla la Mancha, S.L. (a)
SBD Creixent, S.A. (a)
Sistema Eléctrico de Conexión Valcaire, S.L. (c)
Societat d'Inversió dels Enginyers, S.L.
Txonta Egizastu Promozioak, S.L. (a)
Urtago Promozioak, A.I.E. (a)
Vera Munain, S.L. (i)
Dividends
paid (4)
Contribution
to reserves
or losses of
consolidated
undertakings
239
240
Name of undertaking
Alfonso XII, 16 Inversiones, S.L. (a)
Axel Group, S.L.
Ballerton Corporation Serviços, S.A.
Banco Guipuzcoano, S.A. (a)
Bitarte S.A. (a)
BlueSky Property Development, S.L. (a)
Easo Bolsa, S.A. (a)
Ederra, S.A. (a)
Europa Invest, S.A.
Gazteluberri Gestión S.L. (a)
Gazteluberri S.L. (a)
Grao Castalia S.L. (a)
Guipuzcoano Capital, S.A. Unipersonal (a)
Guipuzcoano Mediador de Seguros, Sociedad de Agencia de Seguros, S.L. (a)
Principal business
Registered office
Real estate
Insurance
Financial advisers
Holding company
Banking
Banking
Banking
Banking
Banking
Banking
Insurance brokers
Electronic billing services
Finance company
Finance company
Holding company
Computer services
Holding company
Services
Equipment leasing
Services
Holding company
Real estate
Electricity utility
Electricity utility
Holding company
Real estate
Real estate
Holding company
Real estate
Real estate
Real estate
Issuer preference shares
Insurance brokers
Barcelona
Andorra la Vella
Barcelona
Madrid
Madeira
Nassau, Bahamas
Mónaco
Sabadell
Guipúzcoa
Madrid
Andorra la Vella
Sabadell
Sabadell
Sabadell
Sant Fruitós de Bages
Barcelona
Barcelona
Sabadell
Guipúzcoa
Murcia
Santo Domingo (Dominican Rep.)
Barcelona
Guipúzcoa
Guipúzcoa
Luxemburgo
London
Madrid
Madrid
Guipúzcoa
Valencia
Guipúzcoa
Guipúzcoa
Direct
Indirect
100.00
100.00
99.99
100.00
100.00
100.00
50.97
100.00
100.00
100.00
100.00
100.00
81.00
100.00
100.00
100.00
100.00
100.00
22.00
100.00
-
100.00
50.97
100.00
0.01
100.00
100.00
100.00
99.99
100.00
97.85
78.00
100.00
100.00
100.00
100.00
100.00
100.00
Principal business
Registered office
Holding company
Real estate
Insurance
Pension fund managers
Fund managers
Real estate
Holding company
Real estate
Business start-ups
Real estate
Real estate
Holding company
Real estate
Services
Representative office
Holding company
Financial advisers
Finance company
Services
Banking
Real estate
Services
Holding company
Services
Real estate
Real estate
Property rentals
Real estate
Real estate
Real estate
Real estate
Real estate
Not trading
Holding company
Holding company
Guipúzcoa
Guipúzcoa
Guipúzcoa
Guipúzcoa
Guipúzcoa
Alicante
Luxembourg
Sabadell
Guipúzcoa
Miami
Madrid
Valencia
Oviedo
Valencia
Hong Kong
Brazil
Luxembourg
Madrid
Andorra la Vella
George Town
Miami
Miami
Barcelona
Andorra la Vella
Madrid
Sabadell
Barcelona
Madrid
Madrid
Valencia
Alicante
Guipúzcoa
Madrid
Guipúzcoa
Guipúzcoa
Direct
Indirect
100.00
100.00
100.00
99.99
52.50
30.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
-
100.00
100.00
60.00
100.00
100.00
75.00
100.00
100.00
100.00
100.00
100.00
100.00
0.01
70.00
50.97
100.00
50.97
100.00
100.00
100.00
100.00
100.00
100.00
Name of undertaking
Guipuzcoano Promoción Empresarial, S.L. (a)
Guipuzcoano Valores, S.A. (a)
Guipuzcoano, Correduría de Seguros del Grupo Banco Guipuzcoano, S.A. (a)
Guipuzcoano, Entidad Gestora de Fondos de Pensiones, S.A. (a)
Guipuzcoano, S.G.I.I.C., S.A. (a)
Haygon La Almazara, S.L. (a)
Herrero International, S.A.R.L.
Hobalear, S.A.
Hondarriberri, S.P.E., S.L. (a)
Mariñamendi S.L. (a)
Promociones y Desarrollos Creaziona Levante S.L. (a)
Residencial Kataoria S.L. (a)
Sabadell International Equity, Ltd. (b)
Santex Pluser, S.L.
Serveis d'Assessorament BSA, S.A.U. (c)
Solvia Estate, S.L.
Solvia Hotels, S.L.
Son Blanc Caleta S.L. (a)
Tierras Vega Alta del Segura S.L. (a)
Urdin Oria, S.A. (a)
Urumea Gestión, S.L. (a)
Zurriola Inversiones, S.A. (a)
Total
(a) Added to the consolidated group following the acquisition of Banco Guipuzcoano, S.A.
(b) 100% of the voting rights are held by the parent company.
(c) The company name was changed from Sabadell d’Andorra Borsa S.A.U to Serveis d’Assessorament BSA, S.A.U. in July 2010. The business of the company was also changed.
241
€’000
Total
assets
Group
net
investment
Contribution
to reserves
or losses of
consolidated
undertakings
29,486
178,362
129,978
1,041
27,510
3,056
25,893
86,558,894
9,916,704
1,609,026
639,766
3
1,650
785
682,213
510,439
294,293
102,000
82,818
126,513
859
184,067
9,205
14,283
13,337
702
268
38,406
36,928
231
13,528
64,505
29,370
79,075
1,801
100,777
0
602
17,492
9,079
3,140
2,439
19,498
0
613,479
143,030
15,326
3
588
299
24,040
72,232
239,544
3,687
19,368
607
1,130
3,861
2,500
10,735
0
63
3,007
38,367
19,485
336
20,843
4,672
0
5,787
0
58
0
85
15,044
945
(73)
877
3,957
4,816,625
0
71,116
6,411
0
(612)
(2,598)
26,993
(32,864)
(206,593)
1,643
12,332
71,641
138
1,995
4,098
0
0
(329)
(584)
0
0
(161)
(1,146)
23,481
0
0
0
0
Financial data (1)
Name of undertaking
242
Alfonso XII 16 Inversiones S.L.
Axel Group, S.L.
Ballerton Corporation Serviços, S.A.
Banco Atlantico Bahamas Bank & Trust, Ltd. (a)
BanSabadell Financiación, E.F.C., S.A.
BanSabadell Fincom E.F.C., S.A.
BanSabadell Information System, S.A.
BanSabadell Securities Services, S.L.
Bitarte, S.A.
Blue Sky Property Development, S.L.
Compañía de Cogeneración del Caribe Dominicana, S.A. (a)
Easo Bolsa, S.A.
Ederra, S.A.
Europa Invest, S.A.
Gazteluberri Gestión, S.L.
Gazteluberri, S.L.
Grao Castalia, S.L.
Guipuzcoano Correduría de Seguros
del Grupo Banco Guipuzcoano, S.A.
Capital
Reserves
Results (2)
Dividends
paid (3)
11,400
602
14,200
26
50
1,497
11,250
157,954
37,378
73,148
30,069
3
60
100
24,040
35,720
330,340
240
15,025
601
60
2,000
2,500
6,506
2,500
75
49
15,150
1,976
125
17,980
1,352
1,460
44,315
700
60
(2,595)
166
17,591
983
24,367
884
12,613
4,442,110
579,116
138,052
14,550
0
18
(2,381)
26,993
97,415
(265,781)
5,444
11,794
71,651
217
3,576
4,098
6,530
(774)
(5,187)
(1,712)
25,009
34,738
58
(4,469)
10,101
(4,028)
(17,754)
(197)
(5)
(14,715)
444
3,898
14
(17)
27
126
380,620
1,931
9,627
5,571
0
613
(774)
1,537
(5,095)
(38,152)
1,599
5,493
11,027
58
1,858
2,275
161
(2,712)
(110)
(275)
(1,804)
129
(13)
(211)
5,854
(4,560)
(20,785)
(1,818)
0
0
400
0
0
0
0
0
113,727
0
0
765
0
832
0
7,415
0
0
0
0
0
0
0
0
0
0
0
0
0
569
0
0
0
0
0
0
0
Contribution
to
consolidated
profit
Treated as
consolidated
for tax
purposes
(3,794)
226
3,898
14
(17)
27
126
380,620
1,249
9,627
3,809
0
613
(774)
1,537
(5,095)
(38,152)
1,599
5,493
11,027
58
1,858
2,275
17
(702)
(110)
(275)
(526)
(11)
(13)
(211)
5,854
(1,901)
(12,088)
(279)
(4)
No
No
Yes
Yes
No
No
No
Yes
No
Yes
No
Yes
Yes
Yes
Yes
No
Yes
Yes
Yes
Yes
No
Yes
Yes
No
No
No
Yes
No
No
No
No
Yes
No
No
No
No
100
558
661
598
2,933
263
0
36
No
1,503
1,026
71
0
2,762
1,504
0
13
No
Guipuzcoano Mediador de Seguros,
Sociedad Agencia de Seguros, S.L.
3
546
(31)
0
538
3
0
(5)
No
Guipuzcoano Promoción Empresarial S.L.
Guipuzcoano S.G.I.I.C., S.A.
Herrero International, S.A.R.L.
Hobalear, S.A.
Hondarriberri S.P.E., S.L.
32,314
1,503
4,514
60
429
60
259,561
59
6,883
2,056
13
3,822
512
(23,503)
(9,992)
650
4,275
697
(41)
32
(76,899)
0
0
0
791
0
0
0
106,142
10,039
10,893
1,108
4,310
629
179,726
22,384
3,014
3,076
45
4,246
414
160,146
0
0
0
0
199
512
0
(3,513)
(14)
14
(22)
(41)
32
(34,424)
No
No
No
No
No
Yes
No
1,490,392
4,813,132
328,051
Guipuzcoano Entidad Gestora de Fondos de Pensiones , S.A.
Sub-total
125,097
€’000
Group
net
investment
Contribution
to reserves
or losses of
consolidated
undertakings
Contribution
to
consolidated
profit
1,490,392
4,813,132
328,051
3,102
38,624
2,331
24,185
3
0
0
250
16,400
358
300
1
551
161,343
5,083
60
16,690
67
15,000
41,155
60
2,786
500
3,356
500
0
0
60
5,286
9
1,235
(9,474)
0
0
9
0
0
612
(50)
(328)
(1,903)
158
13
(163)
(8,644)
1,446
7
(6,096)
13
(576)
(202,870)
(17,365)
3,324
(8)
(34)
278
0
0
0
631
0
0
(503)
(8,048)
(1,393)
0
0
(2,151)
31
(57)
721
1,015
285
13
532
(13,120)
1,699
0
(3)
0
(178)
(318,255)
(33,564)
4,559
(5)
(838)
(2,789)
(714)
(2,477)
0
(354)
1
(13)
1,829,687
4,572,112
(47,555)
Financial data (1)
Name of undertaking
Capital
Reserves
Results (2)
5,987
55,013
8,740
3,456
3
3,250
0
1,542
31,236
70
300
1
591
2,359
5,083
60
6,010
60
15,000
15,807
60
2,705
500
2,073
500
4,000
4,550
60
3,606
9
1,412
(2,495)
(3,988)
(2,151)
270
0
58
642
(1,268)
(94)
(459)
309
67
(168)
120,495
(205)
14
760
20
(648)
(180,490)
(17,388)
3,435
(8)
1,248
278
(1,320)
981
4
2,396
8
385
(503)
(12,407)
(4,258)
0
0
(3,361)
31
(57)
1,373
1,015
559
(11)
532
(13,120)
1,699
0
(3)
0
(178)
(318,255)
(33,564)
4,559
(5)
(838)
(2,789)
(3,431)
(9,156)
(1)
(354)
0
(38)
Dividends
paid (3)
Total
assets
Treated as
consolidated
for tax
purposes
Sub-total
125,097
Total
125,397
76,838
114,457
12,044
3,726
3
15,483
659
248
33,230
883
1,262
250,126
1,132
1,721,057
39,147
74
6,767
79
60,032
1,571,748
212,323
11,108
489
13,386
38,741
13,107
20,047
63
11,159
18
2,853
No
No
No
Yes
No
No
No
No
No
Yes
No
No
No
No
No
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
No
No
Yes
No
No
(3) Includes final dividends for the previous year and interim dividends paid to the group during the year.
(a) Data shown for these undertakings under “financial data” are correct as of 30 November 2010.
0
0
0
0
0
0
0
0
0
0
300
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Mariñamendi, S.L.
Promociones y Desarrollo Creaziona Levante, S.L.
Residencial kataoria, S.L.
Sabadell BS Select Fund of Hedge Funds, S.I.C.A.V S.A. (a)
Sabadell United Bank, S.A.
Santex Pluser, S.L.
Serveis d'Assessorament BSA, S.A.U.
Solvia Estate, S.L.
Solvia Gestió Immobiliària, S.L
Solvia Hotels ,S.L.
Solvia Properties,S.L.
Son Blan Caleta, S.L.
Tierras Vega Alta del Segura, S.L.
Urdin Oria, S.A.
Zurriola Inversiones S.A.
243
Name of undertaking
Emte Renovables, S.L.
Jerez Solar, S.L.
Direct
Indirect
Principal business
Registered office
Holding company
Society Holding company
Finance company
Electricity utility
Real estate
Sant Joan Despí
León
Havana
Sant Joan Despí
Barcelona
50.00
-
62.11
49.00
62.11
45.01
Real estate
Services
Services
Real estate
Real estate
Services
Services
Services
Services
Services
Banking
Management of pension funds
Insurance
Insurance
Chemistry
Real estate
Real estate
Financial services
Real estate
Real estate
Banking
Venture Capital
Real estate
Real estate
Electricity utility
Electricity utility
Perfume and cosmetics manufacture
Services
Food
Solar power
Property investment
Chemistry
Graphic arts
Real estate
Real estate
Real estate
Real estate
Services
Real estate
Real estate
Chemistry
Products of illumination
Barcelona
Ourense
Madrid
Almería
Alicante
Boadilla del Monte
Madrid
Madrid
Madrid
Madrid
León (Mexico)
Sabadell
Sabadell
Altorricón
Alicante
Madrid
Santo Domingo
Portugal
Madrid
Madrid
Guipúzcoa
Madrid
Murcia
Barcelona
Vigo, Pontevedra
Rubí
Barcelona
Granollers
Álava
Barcelona
Marina de Cudeyo
Barcelona
Vizcaya
Navarra
Navarra
Álava
Buenos Aires, Argentina
Navarra
Alicante
Llinars del Vallès
Canovelles
22.50
26.42
25.00
25.00
25.00
25.00
20.00
50.00
50.00
50.00
20.00
40.00
50.00
-
37.50
24.00
30.06
40.00
49.78
33.33
33.00
45.00
40.00
41.23
30.00
45.00
26.75
45.00
25.00
35.00
25.00
50.00
25.00
45.00
40.00
45.00
50.00
50.00
20.00
35.00
50.00
20.00
20.00
Total
244
Air Miles España, S.A. (b)
Aldoluz, S.L. (a)
Banco del Bajío, S.A.
Biodiésel Aragón, S.L.
C-Cuspide 6, S.A. (a)
Centro Financiero B.H.D., S.A.
Cepric Inmobiliaria, Lda. (a)
Desarrollos Inmobiliarios Pronegui, S.L. (a)
Diana Capital Inversion S.G.E.C.R. S.A. (a)
Establecimientos Industriales y Servicios, S.L.
Eurofragance, S.L.
FS Colaboración y Asistencia, S.A.
Garnova, S.L.
Gaviel, S.A.
General de Biocarburantes, S.A.
Guisain, S.L. (a)
Harinera Ilundain, S.A. (a)
Harugui Gestion y Promoción Inmobiliaria, S.L. (a)
Hidrophytic, S.L. (a)
IFOS, S.A.
Inerban Proyectos, S.L. (a)
Intermas Nets, S.A.
J. Feliu de la Penya, S.L
Total
Principal business
Registered office
Real estate
Real estate
Real estate
Real estate
Real estate
Real estate
Real estate
Real estate
Real estate
Real estate
Real estate
Electricity utility
Real estate
Real estate
Electricity utility
Real estate
Real estate
Real estate
Real estate
Real estate
Real estate
Real estate
Real estate
Real estate
Real estate
Society of investment
Holding company
Real estate
Real estate
Real estate
Real estate
Real estate
Murcia
Vizcaya
Málaga
Vizcaya
Madrid
Alicante
Málaga
Murcia
Navarra
Murcia
Málaga
Barcelona
Alicante
Málaga
Magaz de Pisuerga
Alicante
Burgos
Almería
Murcia
Alicante
Madrid
Navarra
Alicante
Alicante
Sabadell
Esplugues de Llobregat
Alicante
Guipúzcoa
Guipúzcoa
Navarra
Málaga
Direct
Indirect
23.01
42.72
-
40.00
20.00
33.78
40.00
20.00
45.00
32.20
49.70
45.00
40.00
49.50
40.00
33.00
34.14
49.00
41.00
25.00
40.00
40.00
40.00
20.00
50.00
25.00
45.02
20.00
40.00
35.00
30.00
45.00
32.20
Name of undertaking
Key Vil I, S.L. (a)
Lizarre Promociones, A.I.E. (a)
Loalsa Inversiones Castilla la Mancha, S.L. (a)
Parc Eòlic Veciana-Cabaro, S.L.
PR 12 PV 15, S.L. (a)
Proburg BG XXI, S.L. (a)
Promociones Abaco Costa Almeria, S.L. (a)
Promociones Aguiver, S.L. (a)
Promociones y Desarrollos Creaziona Castilla la Mancha, S.L. (a)
SBD Creixent, S.A.
Vera Munain, S.L. (a)
Total
(a) Included in the consolidated accounts as a result of the acquisition of Banco Guipuzcoano, S.A.
(b) 25% of the voting rights are held by the parent company.
245
€’000
Total
assets
Group
net
investment
Contribution
to reserves
or losses of
consolidated
undertakings
8,106
10
23,615
66,120
35,865
5,000
1
7,443
1,894
1
79
0
1,016
0
(5,130)
(36)
(2)
141
(14)
(1,424)
14,339
(4,035)
(1,335)
86
37,202
2,140
0
60
7,824
1,060
1,060
1,060
1,060
90,911
9,378
5,000
27,106
2,820
0
113
38,693
306
1,352
101,226
456
42
1,944
37,443
23
9,050
887
42,814
1,503
630
2,250
3,781
822
2,933
29
93
0
105
500
22,213
10,501
0
618
0
0
0
869
(288)
(287)
(287)
(287)
23,698
3,667
1,753
101,133
(1,882)
0
0
1,348
0
0
56,496
0
0
0
(272)
0
0
31
5,106
0
18
(130)
38
0
0
0
0
0
0
0
1,333
(920)
0
480
88
0
0
157
(14)
(15)
(15)
(15)
12,369
3,234
833
20,356
(1,234)
0
0
15,001
0
0
23,052
(10)
0
(20)
2,081
0
563
0
1,814
24
(2)
0
306
(11)
(2)
(152)
0
0
0
(13)
1,000
40
466,476
191,755
79,895
Financial data (2)
Name of undertaking
Emte Renovables, S.L.(a)
Jerez Solar, S.L. (a)
Capital
Reserves
Result (3)
Dividends
paid (4)
8,050
3
15,716
3,050
3
(96)
0
1,128
(971)
(6,618)
(58)
(3)
282
(22)
(3,164)
0
0
0
0
0
Total
Adelanta Corporación, S.A. (b)
Air Miles España, S.A. (a)
Aldoluz, S.L. (f)
Aviación Regional Cántabra, A.I.E. (c)
Biodiesel Aragón, S.L. (a)
C-Cúspide 6, S.A. (b)
Centro Financiero B.H.D., S.A. (e)
Cepric Inmobiliaria, Lda. (b)
Desarrollos Inmobiliarios Pronegui, S.L. (e)
Dexia Sabadell, S.A. (a)
Diana Capital Inversion S.G.E.C.R. S.A. (a)
Egumar Gestion, S.L. (d)
Establecimientos Industriales y Servicios, S.L. (a)
Eurofragance, S.L. (b)
FS Colaboración y Asistencia, S.A. (d)
Garnova, S.L. (c)
Gaviel, S.A. (a)
General de Biocarburantes, S.A. (b)
Grafos, S.A. Arte sobre Papel (b)
Guisain, S.L. (a)
Harinera Ilundain, S.A. (g)
Harugui Gestion y Promoción Inmobiliaria, S.L.
Hidrophytic, S.L. (c)
IFOS, S.A.
Improbal Norte, S.L.
Intermas Nets, S.A. (a)
J. Feliu de la Penya, S.L (b)
Sub-total
246
0
230
301
72
6,628
150
29,606
4,496
4,495
4,495
4,495
141,534
7,813
10,000
43,858
5,911
892
1,000
157,350
7
1,756
237,061
606
600
4,500
49
50
704
600
48,072
3,005
1,203
6,000
1,800
4,200
60
593
186
0
300
1,000
846
851
721
37,441
3,387
(6,731)
2,483
(1,056)
(1,463)
(1,459)
(1,459)
(1,457)
430,473
16,694
3,228
210,590
(3,130)
(3,812)
(105)
11,152
(520)
646
135,881
2,155
(268)
(59)
(2,100)
0
6,416
2,022
13,863
796
97
(2,968)
7,814
(1,915)
91
(225)
(5)
0
(1)
899
26,872
23,587
0
1,859
687
103
(58)
444
(51)
(52)
(52)
(51)
57,099
6,467
1,667
40,711
(2,891)
(1,419)
(9)
37,610
(298)
(18)
55,240
(262)
(5)
(118)
6,347
0
6,196
42
5,374
(34)
(4)
(95)
730
(232)
(4)
(311)
40
0
0
(311)
2,794
56
0
74
0
0
0
0
0
0
0
0
3,379
1,380
0
0
0
0
0
11,661
0
0
5,673
0
0
0
2,642
0
0
0
754
0
0
0
0
0
0
0
0
0
0
0
600
0
26,163
2,705
138,109
104,517
0
11,162
113,694
20,450
20,450
20,435
20,430
4,902,609
33,155
49,280
6,535,069
60,122
17,363
17,417
2,010,789
8,793
14,872
18,116,324
2,850
6,038
8,690
33,458
0
19,889
3,888
89,740
3,888
1,299
10,616
33,889
10,012
2,354
4,601
473
0
1,542
9,779
69,046
76,590
Contribution
to
consolidated
profit
Treated as
consolidated
for tax
purposes
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
€’000
Group
net
investment
Contribution
to reserves
or losses of
consolidated
undertakings
Contribution
to
consolidated
profit
466,476
191,755
79,895
1,649
296
533
310
36
2,189
52
31
270
64
3
2,739
97
125
6,582
56
853
1,858
2,000
48
430
88
73
1,885
2,968
422
47,271
120
397
30
25
53
0
0
0
0
0
0
0
0
0
0
0
(87)
0
0
(519)
0
0
0
0
0
0
0
0
0
(98)
1,989
0
0
0
0
0
0
0
0
0
0
0
0
0
(1)
0
(1)
0
(520)
21
0
0
0
0
34
0
13
1
0
103
(249)
21
(120)
160
0
0
2
0
0
540,029
193,040
79,359
0
0
349,571
2,384,055
4,761,117
380,040
Financial data (2)
Name of undertaking
Capital
Reserves
Result (3)
3,574
1,500
4,441
835
180
5,000
164
300
300
160
10
3,300
801
1,752
1,500
180
4,000
5,000
5,000
120
2,743
300
541
2,604
12,895
4,818
15,000
300
600
100
60
164
(172)
(18)
(2,970)
(21)
659
(116)
0
(126)
322
1,096
0
(641)
(419)
(1,226)
(879)
(1)
(570)
(179)
20
547
(267)
(7)
(152)
5,238
(192)
4,433
221,312
1,021
568
206
(3)
0
(736)
0
(732)
(12)
3
(1)
(2)
(155)
(1)
(10)
0
(2,066)
199
(6)
(298)
(1)
(30)
(258)
0
73
(482)
0
(100)
(1,889)
84
(281)
1,208
1
1
(16)
1
(2)
0
0
0
Dividends
paid (4)
Total
assets
Treated as
consolidated
for tax
purposes
Sub-total
26,163
Total
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
53
160
0
0
0
0
0
40,281
24,289
23,569
889
15,986
53,019
6,355
7,728
6,441
2,547
4,786
44,543
39,713
25,499
45,869
844
12,764
30,226
25,716
6,990
15,706
6,713
7,144
95,338
20,722
5,186
254,941
20,033
15,694
275
1,910
6,194
26,376
Total
151,773
0
(4) Includes final dividends for the previous year and interim dividends paid to the group during the year.
(a) Data shown for these undertakings under “Financial data” are correct as of 30 November 2010.
(b) Data shown for these undertakings under “Financial data” are correct as of 31 October 2010.
(c) Data shown for these undertakings under “Financial data” are correct as of 30 September 2010.
(d) Data shown for these undertakings under “Financial data” are correct as of 31 August 2010.
(e) Data shown for these undertakings under “Financial data” are correct as of 30 June 2010.
(f) Data shown for these undertakings under “Financial data” are correct as of 31 May 2010.
(g) Data shown for these undertakings under “Financial data” are correct as of 31 December 2008.
0
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
Key Vil I, S.L. (e)
Lizarre Promociones, A.I.E. (a)
Loalsa Inversiones Castilla la Mancha, S.L. (b)
M.P. Costablanca, S.L. (d)
Mirador del Segura 21, S.L. (c)
Mursiya Golf, S.L.
NF Desarrollos, S.L.
Norfin 21, S.L. (c)
Parc Eòlic Veciana-Cabaro, S.L. (a)
Parque Boulevard Finestrat, S.L. (b)
Parque del Segura, S.L. (c)
Parque Eólico Magaz, S.L. (a)
PR 12 PV 15, S.L. (a)
Proburg BG XXI, S.L. (d)
Promociones Abaco Costa Almeria, S.L. (b)
Promociones Florida Casas, S.L.
Promociones y Desarrollos Creaziona Castilla la Mancha, S.L. (b)
Promociones y Desarrollos Urbanos Oncineda, S.L. (e)
Residencial Haygon, S.L. (b)
Saprosin Promociones, S.L. (b)
SBD Creixent, S.A. (a)
Sociedad de Inversiones y Participaciones COMSA EMTE, S.L. (c)
Torre Sureste, S.L. (b)
Vera Munain, S.L. (g)
Vistas del Parque 21, S.L. (c)
247
Consolidated report of the directors for the year 2011
Macroeconomic Environment
248
Attention has continued to focus on the sovereign debt crisis in the euro zone in 2011. Advances in economic and
fiscal governance and the introduction of improvements in mechanisms for financial aid have not been sufficient
to rectify the situation. Financial instability in the area was intensified in the second half of the year as a result of
contagion in systemic countries.
In the first half of the year instability mainly centred on Greece’s fiscal and political problems and on discussion
by European authorities about the possible voluntary participation of the private sector in a debt swap for Greece. In
April Portugal asked for international assistance following its internal political crisis.
The agreements reached by the European Council on 21 July did not prevent a worsening of financial tension
over the summer, significantly affecting sovereign debt markets in countries such as Spain and Italy. The following
agreements were reached in the July summit: (i) a new aid package for Greece, linked, in the final agreement, to
an orderly restructuring of public debt held by the private sector; (ii) an improvement in the conditions under which
countries could be bailed out and (iii) a more flexible bail-out mechanism which could operate via a precautionary
programme, with the purchase of public debt on the secondary market. The greater financial instability was the
result of doubts about the implementation of bail-out mechanisms, the increasingly critical situation in Greece
and rumours of a cut in France’s credit rating. The situation was aggravated by fears of a global recession and
the downgrading of the United States’ AAA rating by Standard and Poor’s. Against this backdrop Spain and Italy
proposed additional corrective measures and the ECB reactivated its programme to purchase assets, buying debt
from both countries.
In the fourth quarter the European Council, at its session on 26 October, again demonstrated the difficulty of
reaching agreements within the euro zone and the measures announced did not inspire confidence in financial
markets. In particular, it was agreed that the European banks should be asked to comply with a higher capital ratio
in view of their exposure to European sovereign debt, which led them to reduce their exposure to this asset class.
These factors, together with the lack of firm agreements at the G20 meeting in November and the political crises
in Italy and Greece, accentuated the financial instability and the public debt crisis spread to countries like France.
Public debt in European countries lost its risk-free status, risk premiums in inter-bank markets returned to the same
levels as at the end of 2008 and many of the markets financing credit entities remained closed. The European
Council meeting on 9 December, at which a new budgetary agreement and greater coordination in economic policy
were approved, was seen by agents as a step in the right direction but still insufficient to solve the euro zone’s
sovereign debt crisis.
Apart from the crisis occasioned by sovereign debt problems in the euro zone, the year has also seen a number
of other shocks that have helped to inhibit world economic growth. Firstly, geopolitical tension in North Africa and
the Middle East lead to a new high in the price of oil in the first quarter. Then, in March, Japan suffered a major
natural disaster, causing disruption in world production chains. Moreover, in the United States political opinion is
clearly becoming polarised, making the adoption of measures to stimulate the economy more difficult. Lastly, the
restrictive nature of the economic policies that emerging countries had been implementing to combat the risk of
overheating led to a slowdown in their economic activity in the second half of the year.
In Spain, economic activity has stagnated in the year as a whole, with a slight drop towards the end of the year.
Domestic demand has been hampered by factors including restrictive fiscal policy, a shrinking labour market and
financial instability in international markets. Nevertheless, Spain has continued to introduce structural reforms in
areas such as pensions, collective bargaining and the plan to strengthen the financial sector. Constitutional limits
have been placed on the structural deficit and rules introduced governing the growth of public spending by the state
and the largest local corporations. General elections were held on November 20, the Partido Popular winning an
absolute majority.
In the scenario we have described, the central banks in the main developed countries maintained clearly
accommodative monetary policies, including the adoption of coordinated measures to provide liquidity. The ECB
in particular, after increasing its base rate in April and October, reduced it to 1.00% in the last quarter, influenced
by concerns about inflation and the economic downturn. The ECB has adopted unconventional measures intended
to ease the problems of liquidity in the financial system and the lack of collateral, such as the introduction of
financing over 36 months, extensions to eligible collateral, lower requirements for reserves, reactivating the
programme to buy covered bonds, etc. The Federal Reserve has kept its base rate in the range 0%-0.25% and has
Total assets for the Banco Sabadell group stood at €100,437.4 million at the end of 2010, a rise of €3,338.2
million compared with the year-end figure for 2010, representing a year-on-year increase of 3.4%.
Gross loans and advances to customers excluding reverse repos totalled €73,635.3 million at 31 December
2011, up from €73,057.9 million at the close of 2010, a rise of +0.8%. Under this heading, the most significant
growth was in the “other loans” category, which increased by €1,921.3 million.
The loan loss ratio (bad and doubtful loans as a proportion of total qualifying loans and advances), at 5.95%,
was once again below the average for the Spanish financial services industry. The loan loss coverage ratio was
48.49%; this increases to 115.84% if mortgage security is taken into account.
On-balance sheet customer funds at 31 December 2011 stood at €52,827.0 million, up from €49,374.4 million
at the end of 2010 (+7.0%). Time deposits in particular grew by 9.1% to €32,819.8 million at 31 December 2011.
Demand deposits also grew by 2.5%. Customer funds at 31 December 2011 included a €300 million issue of
straight bonds launched last September.
The relative performances of loans and advances and customer funds described above have resulted in a growth
gap between them of €3,876.9 million in 2011.
Debt securities and other negotiable instruments and subordinated liabilities totalled €19,502.5 million, a fall of
-10.9% from the previous year’s figure of €21,894.1 million.
The value of assets in collective investment schemes (CIS’s) at the end of the year was €8,024.2 million. This
was 9.4% below the figure for 2010 and was in line with market trends in the period.
Assets held in pension funds sold by the group totalled €2,858.3 million, up 3.5% on the figure of €5,926.4
million at 31 December 20101.
Overall, customer funds under the group’s management amounted to €96,062.0 million at the close of the year,
a similar amount to the €95,998.2 million reported at the end of 2010.
Statement of Financial Position
indicated that economic conditions will probably ensure that it remains exceptionally low until mid-2013. It has also
adopted unorthodox new measures to reduce interest rates in the long term and support activity in the mortgage
market. The Bank of Japan has also kept its base rate unchanged, in the range 0.00%-0.10%, and has extended
its unorthodox monetary programmes. The Bank of England, for its part, has kept its base rate at 0.50% and, in
the last quarter decided to increase the assets held under its purchase programme by GBP 75,000 million to GBP
275,000 million.
In long-term public debt markets, returns in Germany and the United States fell significantly to all-time lows.
Europe’s continuing financial instability has meant that these assets are acting as a haven for investors, a trend
reinforced by the deterioration in world economic activity. In the euro zone’s peripheral countries risk premiums
are clearly rising, hitting record highs since the creation of the euro zone. In the fourth quarter, with the sovereign
debt crisis affecting the whole area, the public debt spread for countries such as France and Austria versus the
German bund also reached record levels since the creation of the EMU. The situation has led the main credit
rating agencies to downgrade the sovereign debt of the peripheral countries. The ratings of Portugal and Ireland, in
particular, have been downgraded to “speculative”. The scepticism shown by the agencies regarding advances in
dealing with the sovereign debt crisis led them to review the credit rating of all the euro zone countries at the end of
the year.
In the currency markets, the euro ended the year down against the dollar. In the first few months of the year,
the euro enjoyed support from advances in European mechanisms for financial support and from ECB statements
suggesting an increase in interest rates. Subsequently the euro stabilised and after September fell as a result of
doubts regarding the solution of sovereign debt problems in the euro zone, a different message from the ECB and
the political crises in Italy and Greece. One of the few factors supporting the euro in this period was the repatriation
of capital by European banks. Despite intervention in the currency market by the authorities, the yen gained ground
against the dollar during the year, boosted by global financial instability.
Finally, equity markets, after performing fairly stably in the first half of the year, experienced a significant drop
in the summer months, in response to worsening financial instability and the global economic downturn. Over the
year the EURO STOXX 50 index recorded a fall of -17.1%, compared to the -13.1% drop on the IBEX. In the United
States the S&P recovered after the summer and finished the year practically unchanged, relatively unaffected by
the European sovereign debt crisis. In euro terms the S&P ended the year up +3.1% because of the euro’s relative
weakness.
249
Income and profit performance
Despite the difficult economic and financial climate, the Banco Sabadell group ended the year 2011 with a net
attributable profit of €231.9 million after net provisions for loan defaults, securities revaluations and real estate
write-downs amounting to €1,048.9 million, 8.4% more than in 2010.
At the close of 2011, the group’s net interest margin totalled €1,537.3 million, falling by 5.4% year-on-year.
Comparing like-for-like, including Banco Guipuzcoano for the whole of 2010 (Banco Guipuzcoano was included in
the scope of consolidation from December 2010), the year-on-year decline would have been 4.4% as a result of
negative yield curve movements. This was partly offset by careful management of interest rate spreads and by
interest income from a portfolio managed by the Asset and Liability Committee.
Profits of group undertakings consolidated by the equity method totalled €37.7 million and included substantial
contributions from the group’s insurance and pension associates (€14.3 million), and profits from affiliate banks in
Latin America (Banco del Bajío and Centro Financiero BHD), which together contributed a total of €21.1 million.
Net fee and commission income was €573.6 million and increased by €57.1 million (+11.1%) on the year (3.1%
on a like-for-like basis including Banco Guipuzcoano for the whole of 2010). Fees for securities-related services,
cards and syndicated loans performed particularly well.
Net income from trading totalled €271.2 million, including a €87.1 million gain on a debt-for-equity swap carried
out in the first quarter (issue and placement of 126 million BS shares in order to buy back preference shares
and subordinated debt at a discount). Net income in 2010 also included gains of €89.0 million on a transaction
involving a preference share and subordinated bond exchange offer in the second quarter of the year. Financial
earnings in 2011 also included gains of €139.0 million on the trading portfolio and €45.3 million on sales of
available-for-sale fixed-income securities.
Operating costs in 2011 totalled €1,145.1 million, of which €38.1 million corresponded to non-recurring
expenses (severance payments and restructuring costs in relation to the acquisition of Banco Guipuzcoano). Nonrecurring expenses in 2010 totalled €22.6 million. On a pro forma basis (including Banco Guipuzcoano for the
whole of 2010 and excluding the impact of the incorporation of Lydian Private Bank in the second half of 2010 and
a sale and leaseback operation in April 2010), operating costs in 2010 fell by 3.7% year-on-year. The cost:income
ratio with non-recurring costs excluded was 45.75%.
The resulting operating profit (before impairment and other provisions) for the year 2011 was €1,230.7 million,
down 8.3% on the previous year.
Net loan loss provisions totalled €512.4 million, up from €383.9 million the previous year. Provisions of €536.6
million were also made to cover impairments of real estate and financial assets. €186.0 million of the provisions
made in 2011 were as a result of taking to reserves the extraordinary revenues generated from the debt-for-equity
swap carried out in February and due to the gross impact of the Spanish tax authorities’ ruling on the tax treatment
of goodwill. This latter was taken to the “corporate income tax” heading as a net amount of €69.4 million.
Profits on asset sales were not significant in 2011 (€5.7 million) compared with 2010 (€296.1 million), which
included a included a one-off gain of €250.0 million on a sale and leaseback deal in April 2010 and another gain of
€29.0 million euros from the sale of a property in Barcelona’s Passeig de Gràcia.
The net attributable group profit was €231.9 million, down from €380.0 million in 2010. Tier l capital was
9.94%, up from 9.36% at the end of the previous year. The core capital ratio was 9.01%, compared with 8.20% in
2010.
Branch network
250
Banco Sabadell ended the year 2011 with a total of 1,382 branches, 85 less than at 31 December 2010. This
reduction of 85 offices is mainly due to reorganisation of the network, more specifically the fusion of different
branch offices because of duplication of the names SabadellAtlántico and SabadellGuipuzcoano.
Of the total number of branches of the Banco Sabadell group, 950 were operating under the SabadellAtlántico
name (including 48 specialist business banking branches and 2 specialist corporate banking branches); 179
(including 5 business banking branches) were part of the Banco Herrero network in Asturias and León; 110 were
SabadellGuipuzcoano branches; 15 were Banco Urquijo branches; 83 were operating under the Solbank brand, and
the remaining 43 made up the group’s international network, including the 25 operated by Sabadell United Bank.
Two ActivoBank customer service centres completed the network.
Divisional review
Commercial Banking
€’000
2010 (1)
Change
y.o.y (%)
1,275,890
1,343,669
(5.0)
379,777
24,859
378,981
25,924
0.2
(4.1)
1,680,526
1,748,574
(3.9)
(886,451)
(946,009)
(6.3)
794,075
802,565
(1.1)
(404,316)
(327,390)
23.5
389,759
475,175
(18.0)
Ratios (%):
ROE
Efficiency
Loan loss ratio
9.3%
52.7%
6.6%
48.0%
11.2%
54.1%
5.6%
55.7%
Business volumes (€Mn)
Loans and advances
Customer accounts
Securities
55,788
54,188
8,611
57,115
51,018
8,776
(2.3)
6.2
(1.9)
7,259
1,322
7,324
1,412
(0.9)
(6.4)
Net Interest income
Other income
Gross income
Operating expenses
Operating profit
Impairment losses
Other details
Employees
Branches in Spain
2011
(1) The figures for 2010 include Banco Guipuzcoano for the whole of the financial year (Banco Guipuzcoano was included in the scope of consolidation from
December 2010).
Corporate Banking and Global Operations
Corporate Banking and Global Businesses offers a range of products and services to large corporates and financial
institutions in Spain and abroad, and covers the following business areas: International Trade, Consumer Finance,
BS Capital, Corporate Finance and Structured Finance.
Commercial Banking is the largest of the group’s business lines. It focuses on providing financial products and
services to large and medium-sized businesses, SMEs, retailers and individuals — including private banking,
personal banking and mass market services — and to non-residents and professional groupings. A strong focus
on market specialization ensures that customers receive a personalized service to suit their needs, whether from
expert staff assigned to branches operating under the various group brands, or via other channels that support the
customer relationship and provide access to remote banking services.
In 2011, despite a difficult operating environment, a major promotional effort aimed at attracting new customers
and deposits was key to achieving increased market shares for the Bank.
Net interest income attributable to Commercial Banking totalled €1,275.9 million in 2011, with pre-tax profits
reaching €389.8 million. The ROE was 9.3% and the cost:income ratio was 52.7%. Loans and advances totalled
€55,788 million and customer funds stood at €54,188 million.
251
Corporate Banking
Banco Sabadell continues to be one of the leading active entities in this market segment, reinforcing the position of
the group among large corporations. During the fiscal year, the same level of activity was maintained as in previous
years, with the clear focus of maximizing relations with our clients on the basis of the use of capital (RaRoC
system), as well as capturing new clients and rigor in risk concession / renovation. With regards geographical
diversification, we must highlight that for the second consecutive year, 20% of revenue from the unit comes through
our platforms abroad (Corporate teams located in Paris, London and Miami).
€’000
2011
2010
Change
y.o.y (%)
165,901
153,677
8.0
26,658
9,203
17,426
12,055
53.0
(23.7)
Gross income
201,762
183,158
10.2
Operating expenses
(21,066)
(23,352)
(9.8)
Operating profit
180,696
159,806
13.1
2,570
0
(50,991)
0
(105.0)
0.0
183,266
108,815
68.4
Ratios (%):
ROE
Efficiency
Loan loss ratio
16.3%
10.4%
0.7%
86.7%
9.7%
12.7%
1.1%
84.5%
Loans and advances
Customer accounts
Securities
11,344
4,207
444
10,923
4,261
1,106
3.9
(1.3)
(59.9)
94
2
2
89
2
2
5.6
0.0
0.0
Net Interest income
Other income
Impairment losses
Other gains/losses
252
Other details
Employees
Branches in Spain
Branches abroad
Furthermore, maintaining a high level of activity, together with the revaluation of risks conceded, in line with the
market situation, permitted us to improve the net interest margin to reach +8%. This, together with the excellent
performance of the commissions business and lower costs, permitted the operating margin to increase to +13%.
The non-performing loans ratio remained at the minimum levels as those at the close of the previous fiscal year,
and had practically no impact on the forecast with regards the profit and loss account, thus permitting the fiscal
year to close at +68% before tax.
Banco Urquijo
Banco Urquijo is one of the oldest and most prestigious banks in the Spanish financial market. With a business
model focused on private banking, it is characterized by its client focused service and its specialization in
comprehensive consultancy and wealth management.
In 2011, it consolidated its leadership as Spain’s best bank specializing in private banking, according to the
“Best Private Banking Awards” awarded annually by the magazine Euromoney among entities specializing in wealth
management. This financial publication once again acknowledged the success of the bank’s business model and
reaffirmed the quality of its service within the sector. Banco Urquijo obtained the highest award for Spain’s Best
Private Bank and Best Global Private Banking Service for the second time.
€’000
Change
y.o.y (%)
Net Interest income
27,753
26,888
3.2
Other income
15,978
6,598
19,173
3,503
(16.7)
88.4
Gross income
50,329
49,564
1.5
(32,632)
(35,029)
(6.8)
17,697
14,535
21.8
1,583
86
(41)
(125)
(191)
(466)
--(91.2)
19,325
13,753
40.5
Ratios (%):
ROE
Efficiency
Loan loss ratio
6.2%
53.7%
0.9%
219.7%
4.6%
59.7%
2.3%
79.6%
799
2,956
4,955
1,029
3,252
5,146
(22.4)
(9.1)
(3.7)
207
15
219
14
(5.5)
7.1
Operating expenses
Operating profit
Impairment losses
Other gains/losses
Loans and advances
Customer accounts
Securities
Other details
Employees
Branches in Spain
During the fiscal year, it was able to respond to market demands with a profit before tax of €19.3 million, which
represented an increase of 40.5% with respect to the previous year. The business volume rose to €8,710 million,
with a total managed and deposited resources of €7,911 million and total client loans of €799 million. The nonperforming loans ratio decreased to 0.91%.
2010
2011
Investment, Products and Research
Banco Sabadell has a team of professionals dedicated to research and the analysis of financial markets in order
to establish a strategy of asset assignment with the aim of designating investments, planning the development of
investment products and the analysis mandate of the various investable assets for clients.
253
Asset Management
€’000
2011
2010
Change
y.o.y. (%)
29,122
32,942
(11.6)
(19,410)
(18,651)
4.1
9,712
14,291
(32.0)
0
(13)
--
9,712
14,278
(32.0)
Ratios (%):
ROE
Efficiency
14.7%
66.7%
24.5%
56.6%
Assets under management in CIS’s
Total assets in CIS’s including schemes sold but not managed
6,737
8,024
7,422
8,853
(9.2)
(9.4)
153
--
158
--
(3.2)
--
Gross income
Operating expenses
Operating profit
Other gains/losses
Other details
Employees
Branches in Spain
The group’s Asset Management business, which is carried on by the functions responsible for managing its
collective investment schemes (CIS’s), combines asset management with the selling and operation of CIS’s; it also
manages investments for other Banco Sabadell businesses that hold portfolios of assets.
At the close of 2011 total assets under management by the Spanish-domiciled mutual fund industry as a whole,
including real estate investment funds, were €132,266.5 million. The volume of Spanish-domiciled mutual fund
assets under management by the Banco Sabadell group amounted to €5,193.5 million at the close of 2011.
The group’s offering of guaranteed return funds was maintained during the year and return guarantees were
issued in respect of nine guaranteed funds totalling €1,176.9 million at 31 December 2011 Guaranteed funds as
a whole accounted for €2,030.5 million of assets at the close of the year. Assets in guaranteed funds increased
in importance relative to the total value of financial assets under management in funds subject to Spanish
jurisdiction, rising to 48.3% from 40.1% the year before.
Sabadell BS Inmobiliario FII, a real estate fund launched in early 2004, ended the year with assets of €990.2
million and 16,389 fundholders. It remains an industry leader for investment in real estate assets on the Spanish
market.
In 2011, the gross margin stood at €29.1 million and the result before tax reached €9.7 million. The ROE ratio
stood at 14.7% and the efficiency ratio at 66.7%.
Research and development
254
During the 2011 financial year, the main transversal project was the operative and technological integration of
Banco Guipuzcoano, which required the participation of the entire resources sector of Information Systems during
the first four-month period.
The most significant projects carried out during the year, classified as Technological Innovation, were aimed
at the materialization of the 2011-2013 Master Plan, “GREA”, encompassing Growth, Profitability, Efficiency and
Ambition.
The projects of the Systems Plan were structured on the following lines of action:
Clients: Promoting the catalogue of products and improvement in service through various channels as well as
the increase in client resources. In this section we can highlight the projects in the EXPANSION line, with pregranted financing, and the launch of the EXPLORER project for providing advanced products and services for the
internationalization of Spanish companies. Also standing out was the GAUDI project, the Generalitat of Catalonia
payment gateway and the issue of pre-pay tickets for school expenses in the Comunidad de Madrid.
Business network: This contemplated the development of business management tools aimed at capturing
new clients in the private client and companies segments. In this sphere, the most relevant projects were the
implementation of the PROTEO 3.0 project, a new corporate desktop which integrates in a single front office all the
systems and tools used in the network of offices, thus improving usability. The ARGENT project was also relevant
in that it integrated support systems for business processes, risks, developing the risk-value model, deploying the
pre-granted model for private clients and the products and business proposal simulation system.
Automation and elimination of administrative tasks: Projects aimed at improving productivity and efficiency such
as the launch of the paperless office and the document digitalization factory, complemented with the centralization
of the registrations of Risk Files with the digitalization of the corresponding documentation. Also, projects for the
optimization of client registration processes and purchasing of products and services were initiated during this year.
Instant Banking and Electronic Channels: With the aim of increasing the scope of BSOnline and promoting the
use of mobile banking, the Personal Finance projects to improve the client’s experience when using the channel
were completed. The availability of all operations from the mobile platform to the market’s relevant operative
systems (Andriod, iPhone, etc.) was also extended.
Treasury, Markets and Wealth Management: With the aim of developing the integrated tools of front and back
office and developing the activities of the treasury room, the TRADE project was implemented. In the area of wealth
management product distribution, the MMP Project, Discretional Management of Multi-asset Portfolios, stood out.
Outlook
2011 was the first year of the Plan CREA, a plan created with highly ambitious business objectives which were the
result of achieving the high level of business capacity and operative efficiency that the group has achieved in recent
fiscal years. Growth, Profitability and Efficiency were the axis of this new plan, with targets such as capture / share,
margin, cost / efficiency, international business and optimization of capital, which was carried out in a complex
environment with regards liquidity and solvency. The results of the first year were very positive, especially with
regards to the capturing of new clients and market shares. This ratified the idea with which it was created and even
more so taking into account that the bank maintained the highest standards of service quality.
A full description of risk management policy in the Banco Sabadell group can be found in Note 37.
Customer Service Department
The Customer Service Department is part of the control function within the Banco Sabadell group. The head of the
Department is appointed by the Board of Directors and reports directly to the Comptroller General. The Department
is responsible for looking into and resolving claims and complaints from customers and other users of the
group’s financial services that relate to their legal rights and interests under contracts or arising from disclosure
requirements, customer protection legislation and financial services industry best practice.
In addition to this primary function, the Department also responds to requests for assistance and information
from customers and users on matters that do not amount to complaints within the meaning of the Spanish
Economics Ministry’s Order 734/2004 of 11 March and the group’s own Regulations for the Protection of
Customers and Users. A total of 973 such enquiries and requests for assistance were handled by the Department
in 2011, down from 810 in 2010.
Average response times in dealing with claims and complaints were 23.68 days in highly complex cases (34.11
days in 2010); 11.51 days for cases of medium complexity (10.48 days in 2010) and 2.37 days in cases of low
complexity (5.92 days in 2010). This compares with the 60-day maximum response time under the Economics
Ministry’s Order and the group’s own Regulations for the Protection of Customers and Users.
Cases Handled
In 2011 the Customer Service Department received 3,245 cases (3,146 in 2010), of which 3,212 (3,092 in 2010),
were looked into according to the procedure established by the Economics Ministry’s Order 734/2004. A total of
3,212 cases were resolved or otherwise dealt with (3,184 in 2010), of which 54% were complaints (50% in 2010)
and 46% were claims (50% in 2010). At the end of the year 186 cases remained unresolved (186 in 2010).
Risk management
255
Of the total number of cases examined by the Customer Service Department, 21% resulted in a decision
favourable to the customer or user (23% in 2010), 4% were settled by agreement with the customer or user (3%
in 2010), and 9% were resolved partly in the customer or user’s favour (9% in 2010). The remaining 66% of cases
resulted in a decision favourable to the group (64% in 2010).
Customer and Stakeholder Ombudsman
The group has a Customer and Stakeholder Ombudsman, a role performed by Esteban María Faus Mompart.
The Ombudsman deals with claims or complaints referred to him by customers or users of the Banco Sabadell
group, either directly or on appeal from a prior procedure. He also adjudicates on cases referred to him by the
Customer Service Department.
A total of 415 cases were received by the Ombudsman directly (429 in 2010) and another 27 were referred
to him by the Customer Service Department (74 in 2010). Of the 442 claims received (503 in 2010) 13 were
withdrawn by the complainant and 442 were looked into and resolved by the Ombudsman (440 in 2010), with
48% being decided in the group’s favour (44% in 2010) and 5% in the customer’s favour (5% in 2010). Of the
other cases where a decision or other settlement was reached, the Bank accepted the claim or complaint in 26%
of cases (26% in 2010), and 9% resulted in decisions partly favourable to the group (17% in 2010). In 5% of
cases (1% in 2010) the Ombudsman declared the matter to be beyond his competence (without prejudice to the
claimant’s right to take his claim elsewhere) and a further 7% were settled by agreement with the customer or user
(7% in 2010).
Complaints to Supervisory Authorities
Under Spanish law customers and other users of financial services are entitled to submit complaints or claims to
the Bank of Spain’s complaints department, to the Spanish stock market regulator (CNMV), or to the DirectorateGeneral for Insurance and Pension Plans. To do so, however, they must first have sought a resolution of the issue
by raising it directly with the bank or other institution involved.
As required by Article 61 bis of the Stock Market Law, the Banco Sabadell group has prepared an Annual Report
on Corporate Governance for the year 2011 which forms part of this Report of the Directors and has been provided
as a separate document and includes a section setting out the procedures put in place by the Bank to verify
compliance with the recommendations on corporate governance that currently exist in Spain.
Other information
For information on purchases of the Bank’s own shares and post-balance sheet events, see notes 28 and 44,
respectively.
256
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— Banco
Sabadell
group contact
details
—
—
—
—
—
— Banco Sabadell
Plaza Sant Roc, 20
08201 Sabadell
Barcelona
Spain
— www.grupobancosabadell.com
— Shareholder relations
+34 937 288 882
[email protected]
— Investor relations
+34 902 030 255
[email protected]
— Communication
and institutional relations
+34 902 030 255
[email protected]
— Catalonia
Plaza de Catalunya, 1
08201 Sabadell
+34 902 030 255
— Madrid, Castile and Galicia
Príncipe de Vergara, 125
28002 Madrid
+34 913 217 159
— Northern Region
Ercilla, 24, 3ª planta
48011 Bilbao
+34 944 232 100
— Southern Region and Canary Islands
Martínez, 11
29005 Málaga
+34 952 122 350
— Valencia, Murcia and Balearic Islands
Pintor Sorolla, 6
46002 Valencia
+34 963 984 055
— Banco Herrero
Fruela, 11
33007 Oviedo
+34 985 968 020
— Compliance, CSR
and Corporate Governance
+34 902 030 255
[email protected]
— Barcelona
Av. Diagonal, 407 bis
08008 Barcelona
+34 934 033 268
Banco Sabadell group
contact details
— General enquiries
+34 902 323 555
[email protected]
— Regional Divisions
259
—
— Credits for this Annual Report
—
—
— Creative Director
Mario Eskenazi
—
— Photography
Maria Espeus
—
— Translation
InterSpanish, London
National Bank Catalogue No. B-17201-2012
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Banco Sabadell — Annual Report 2011 — 130th year

Transcription

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