Banco Sabadell Achieves Record Profit and Increases Shareholder Compensation

The Banco Sabadell Group reached a record profit of 1.827 billion euros in 2024, representing an increase of 37.1%. This result is due to the solid performance of the business in Spain, both in the individual and corporate segments, as well as the growing contribution of TSB. In the last two quarters, the bank surpassed the historical barrier of 500 million euros in profit.

Thanks to these results and the favorable outlook for the current fiscal year, Banco Sabadell's Board of Directors has decided to increase the shareholder remuneration estimate for the 2024 and 2025 results. Initially set at 2.9 billion euros in July, it is now raised to 3.3 billion euros.

This amount will allow for a total distribution of 61 cents per share in both fiscal years. The remuneration will include cash dividends of 20.44 cents per share for 2024 and at least an equivalent amount for 2025, in addition to share buyback programs aimed at distributing capital exceeding 13%. This year, 1.002 billion euros will be allocated for this purpose, pending approval by the Shareholders' Meeting.

After the payment of eight cents as an interim dividend on October 1, the entity plans to deliver a total of 53 cents per share in the next 13 months, equivalent to 22% of its current stock market price.
Banco Sabadell's Chairman, Josep Oliu, explained: “The Board of Directors has decided to raise the remuneration estimate for its shareholders given the strong financial performance reported, the solid and recurring capital generation, and the favorable outlook.”

“In 2024, we have tripled the cash dividend, and in the next 13 months, shareholders will have a remuneration equivalent to 22% of the value of their shares. None of the major banks in Spain plans to deliver a similar proportion,” stated Oliu, who also highlighted his confidence that the shareholder remuneration policy will remain very attractive in the coming years.

“We start a new year with confidence and ambition, convinced that Banco Sabadell's standalone project will generate value in a recurring and sustainable way for shareholders, customers, employees, and society as a whole,” he added.

The entity's CEO, César González-Bueno, emphasized: “Banco Sabadell has achieved a new record profit, showing that in recent years we have made the right decisions, that we are on the right path, and that we have a promising future, with high and sustainable profitability levels, excellent risk quality, and a high capacity to continue generating capital to distribute among shareholders.”

He also stated: “The commitment and involvement of all the people who are part of the entity have been key in the positive evolution of all business units, which are advancing at a healthy pace and with an optimal capacity to support SMEs, companies, freelancers, and families.”

Meanwhile, the CFO, Sergio Palavecino, highlighted “the new improvement in asset quality, which allowed for a reduction in provisions and risk cost, thus achieving a historic profit of 532 million euros in the last quarter of the year.” He also expressed optimism by pointing out that “the high capacity for shareholder remuneration and the positive expectations for the bank's profitability provide potential for stock revaluation in the coming months.”

High growth in capital and profitability

Banco Sabadell consolidated its financial strength in 2024, driven by a higher volume of income, cost containment, and constant improvement in asset quality. This has allowed for a reduction in provisions and better-than-expected risk cost.

Thanks to these results, the Group caused 83 basis points of capital in the fiscal year, reaching 13% CET1 after announcing its share buyback program. It also experienced an increase of 343 basis points in its RoTE profitability, closing the year at 14.9%, surpassing market consensus.

Looking ahead, the bank expects to maintain these positive trends on a recurring basis. Its forecast is that RoTE profitability will remain at 14% in 2025 and exceed this level in 2026, with a further reduction in risk cost and a solid capacity for capital generation, allowing for an attractive shareholder remuneration policy.

The entity plans to hold a Capital Markets Day to present its new financial plan until 2027, detailing strategies to achieve its new objectives. This event will take place after the presentation of the first quarter 2025 results.

Regarding its income statement, Banco Sabadell closed 2024 with a net interest margin of 5.021 billion euros, representing a year-on-year increase of 6.3%.

For this year, the entity expects to achieve a margin exceeding 4.9 billion euros, thanks to volume growth, the strength of its credit portfolio –more than 60% is at a fixed rate– and the contribution of its British subsidiary TSB, which expects to increase its net interest margin at a high single-digit rate.

Net fees amounted to 1.357 billion euros for the year, reflecting a year-on-year reduction of 2.1%, although better than expected. Banking business income (net interest margin plus net fees) totaled 6.378 billion euros in 2024, representing a growth of 4.4%.

On the other hand, total costs amounted to 3.084 billion euros, with a year-on-year increase of 2.3%, while recurring costs, excluding extraordinary items, increased by 2.7%, in line with forecasts.

The recurring margin, composed of interest, fees, and operating costs, experienced a significant improvement of 6.0% compared to the previous year, reaching a total of 3.315 billion euros. Additionally, the bank's efficiency improved notably, with a decrease of 2.8 points in its ratio, closing 2024 at 48.7%, compared to 51.4% in 2023.

Within the financial results, a 21.6% decrease in provisions stands out, amounting to 714 million euros at the end of 2024, resulting from a continuous improvement in the bank's risk profile. This allowed Banco Sabadell to reduce its credit risk cost, which closed at 26 basis points in December. Additionally, the total risk cost also showed a positive trend, reaching 42 basis points at the end of the last quarter.

As a result of income growth, cost containment, and asset quality improvement, the bank's net profit increased by 37.1%, reaching a historic high of 1.827 billion euros. In the last quarter alone, the entity achieved a profit of 532 million euros, an increase of 75% compared to the same period of the previous year. It is important to note that until the third quarter of 2024, a quarterly profit exceeding 500 million had never been recorded.

Robust commercial growth

In terms of credit, Banco Sabadell saw a year-on-year growth of 4.7%, reaching 156.913 billion euros at the end of December. This increase was mainly driven by strong demand for corporate financing and the expansion in mortgage lending in Spain.

Corporate financing, which includes both long-term loans and credit lines, amounted to 15.351 billion euros between January and December, representing an increase of 31% compared to the same period of the previous year. Similarly, mortgage activity showed solid expansion, growing by 53% in the year to reach 5.753 billion euros.

Meanwhile, consumer credit maintained its positive trend, with a 21% increase in the year, reaching 2.548 billion euros granted. Additionally, 90% of consumer loans were pre-approved in the last quarter.

There was also a 7% increase in card billing volume, reaching 25.093 billion euros at the end of December. In line with this, transactions made through point-of-sale terminals (POS) increased by 8%, totaling 57.041 billion euros throughout the year.

Increase in client savings and investment

On the liability side, resources managed by Banco Sabadell, both on and off-balance sheet, grew by 7.1% year-on-year, reaching a total of 215.729 billion euros by December.

On-balance sheet resources amounted to 169.557 billion euros, representing a growth of 5.4% compared to the previous year, mainly driven by an increase in current accounts and term deposits.

As for off-balance sheet resources, these increased by 13.8% year-on-year, reaching 46.171 billion euros, mainly due to the strong performance of investment funds. Funds managed in savings and investment products in Spain increased by 3.2 billion euros in the last quarter alone, closing the year with a total of 66.4 billion euros.

Despite the full repayment of TLTRO III and a significant portion of TFSME to the Bank of England, the Group's total assets grew by 1.9%, reaching 239.598 billion euros.

Improvement in risk profile

The balance of problematic assets was reduced by 1.068 billion euros in the last twelve months, with a 16% year-on-year decrease, closing at 5.68 billion euros by December. Of this total, 4.844 billion correspond to doubtful loans and 836 million to foreclosed assets. This reduction in problematic assets allowed the non-performing loan ratio to fall to 2.84% in December 2024, the lowest level since 2009, surpassing the 3.14% of the previous quarter and the 3.52% of December 2023.

The improvement in balance sheet quality was also reflected in an increase in problematic asset coverage, which stood at 58.6%, while the provision on doubtful loans (stage 3) reached 61.7%, and the coverage of foreclosed assets rose to 40.5%.

Historic contribution of TSB to the Group: 253 million euros

TSB closed the 2024 fiscal year with an individual net profit of 208 million pounds, representing an increase of 18.9%. This improvement resulted in a positive contribution of 253 million euros to the Banco Sabadell Group, a 29.9% year-on-year increase, the largest since the acquisition of the entity in 2015. TSB anticipates profit growth of around 15% in 2025, with expectations of continued growth in 2026.

The recurring margin experienced a decrease of 7.3%, due to a decline in both the net interest margin and fees, as had been anticipated. Additionally, recurring costs were reduced by 3.7% as a result of implemented efficiency plans.

TSB's commercial activity remains strong, highlighting a 19% growth in new mortgage lending during the year, reflecting a positive trend in its business.

Record profit distribution in 2024: 2.1 billion euros

Banco Sabadell will allocate a total of 2.1 billion euros in 2024 to remunerate its shareholders, equivalent to 39 cents per share. This figure includes both cash payments and share buybacks, reflecting a strong commitment to shareholder remuneration.

The interim dividend paid in October was 8 cents per share, and in March 2025, pending approval by the Shareholders' Meeting, it will be completed with a complementary dividend of 12.44 cents per share, totaling 20.44 cents in cash. This total represents 1.1 billion euros, a notable threefold increase compared to the previous year. This distribution aligns with the 60% payout approved by the Board of Directors, in line with the established policy of distributing between 40% and 60% of profits.

Throughout the year, the bank will also allocate 1.002 billion euros (18.69 cents per share) to a share buyback program, aimed at distributing the capital exceeding 13% that has not been used. This amount reflects a greater effort than usual, given that last year this type of operation could not be carried out due to BBVA's hostile takeover bid.

According to Banco Sabadell, buybacks are favorable for shareholders, as they reduce the number of shares in circulation, which increases earnings per share and, therefore, their intrinsic value.

Plans for 2025: Distribution of 1.2 billion euros between dividends and share buybacks

For 2025, Banco Sabadell plans to continue its shareholder remuneration policy, expecting the cash dividend per share to be equal to or greater than the 20.44 cents distributed in 2024. Additionally, the bank will allocate the excess capital of 13% to share buybacks.

The total distribution estimate for 2025 amounts to 1.2 billion euros (22 cents per share), including both dividends and share buybacks.

As a novelty, the Board of Directors has decided to propose to the Shareholders' Meeting a change in the payment structure. Instead of making two payments, it will move to three: two interim payments, in August and December 2025, and a third complementary payment, scheduled for March 2026.