June 20, 2021

Banco Sabadell announces new strategic plan and challenges the Government with another employment adjustment


Madrid

Updated:

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Something was wrong with Sabadell Bank last year. Effect of the pandemic, yes, but its problems also came from before. At the end of the third quarter, it was the entity most punished in the Stock Market to the point of lowering its price of 30 cents per share. The market asked him for a merger and he tried it with BBVA; not out. And since then, what would be a new bank began to be forged, with the same name but also with old recipes, as it prepares another restructuring plan to save costs in 2022.

This is already the Sabadell of César González-Bueno, named
CEO a few months ago
. Josep Oliu, the president, left his executive functions and passed the command to the new CEO, more digital and with new ideas. This has been reflected in the strategic plan that the firm has just presented for the period 2021-2023, whose pillars are mainly three, but not only: Spanish companies, retail banking and TSB, its British subsidiary.

Beyond the fundamental pillars, the bank has clear objectives that do translate into figures. They are confident of exceeding 6% profitability at the group level – and thus approaching 700 million profit-, and that requires effort in costs. An effort that has been quantified in the need to reduce costs by 100 million euros at the conclusion of the plan in 2023. This reduction is in line with what the bank has been doing in recent months. In 2020, it closed an employment adjustment on 1,800 workers who expect that it will bring them a saving of 140 million euros annually.

Said cost savings would be achieved with an efficiency plan to be executed in the first quarter of 2022, which would imply, among other things, more staff adjustments after the attack in recent months. The new outflows would be financed with capital gains from the fixed income portfolio.

The reduction of expenses is announced in the middle of the battle of the Government against the banking ERE. Mainly, against those of Caixabank and BBVA. The Vice President and Minister of Labor, Yolanda Diaz, came to ensure that they are looking for formulas to intervene in these processes. Sabadell’s announcement represents another point of tension for the sector with the Executive after the latest threats.

The details of the plan

The turn of the rudder in some aspects is remarkable, especially in what to the market of UK it means. Although the entity planned to get rid of TSB in the short to medium term just a few months ago, its thinking is radically different now: the plan contemplates focusing a good part of the efforts in this region and achieving a boost in the figures there. The subsidiary will base its growth on mortgages and will be financed with its own deposits, as explained by the firm. After the headaches that TSB has given all these years due to technological integration and its recurring losses, the rays of light finally arrive. They thus trust that their positive contribution to the group’s accounts will increase progressively after
have recently returned to benefits
. The profitability objective (ROTE) for this market will be to exceed 6% by 2023.

Another of the main axes of the new plan will be the transformation of its ‘retail’ banking strategy, with a fully digitized business model for the processes of consumer loans, means of payment and current accounts. Regarding mortgages, savings, investment and insurance products will have a mixed distribution model, that is, between remote channels and face-to-face in offices. The entity blames the new consumer habits of users for the need to make this commitment to digital.

In the group’s strategy, there is also room for the redesign of Sabadell’s strengths. Traditionally known as ‘the bank of companies’, they could not ignore segments such as SMEs. With a penetration of 40% in the productive fabric, will rely on specialized solutions to accompany Spanish companies in exporting and providing solutions for their development. The objective will be to consolidate its position and increase its business volume efficiently, while maintaining its current profitability.

In this sense, it will seek to delve into vertical specialization by sectors, adding a factor that they hope will be differential. To Spain correspond, in theory, 140,000 million euros of European fundsBut the banks have been pressuring the government for months to try to sign a public-private agreement to be able to co-finance projects. Sabadell does not want to be left behind in this regard and will seek to take advantage of the credit multiplier effect generated by the fund known as ‘Next Generation EU’.

The new Sabadell, beyond Strategic plan, the slow revolution had already begun with the appointment of González-Bueno and his
reorganization of divisions
. The unsuccessful merger with BBVA has not been an impediment for the market to recognize that the bank may have a future. On the face of it, the less than 30 cents per share has already become around 70.

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