Quarterly financial report · • Good earnings performance: Continued resilience of net interest...

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Quarterly financial report

First quarter of 2016

First quarter of 2016 2 2

Key figures 3

Summary 4

Performance review 6

Macroeconomic environment 6

Income statement 8

Balance sheet 16

Risk management 21

Capital management and credit ratings 24

Liquidity management 25

Results by business units 26

Share price performance 27

Other key developments in the quarter 28

Annex: TSB 29

Disclaimer

This document is strictly for informational purposes and is not an offer of any product. No agreement or commitment should be based on this document or any part of it. Any decisions on financial transactions should take into account the client's needs and their appropriateness from a legal, tax, accounting and/or financial point of view, in accordance with the informational documents envisaged under the law in force. Investments that are commented on or recommended herein may not be of interest to all investors. The opinions, projections and estimates contained in this document are based on public information and are an evaluation by Banco de Sabadell, S.A. at the date of drafting. No assurance is given that future results or events will conform to those opinions, projections and estimates. The information is subject to change without prior notice, its accuracy is not guaranteed and it may be incomplete or summarised. Banco de Sabadell, S.A. accepts no liability whatsoever for any losses arising from the use of this document or its content or otherwise in connection herewith.

Basis of presentation

The consolidated profit and loss accounts at the end of the first quarter 2016 and 2015, together with the disclosures shown in this Financial Report, are presented in accordance with the accounting standards, principles and criteria defined in Note 1 to the group’s consolidated annual accounts as of 31 December 2015.

On 30 June 2015, the group took control over TSB Banking Group PLC. As a result of its incorporation into the scope of consolidation, the data contained in the profit and loss account and the balance sheet are not comparable to previous periods.

First quarter of 2016 3

Key figures

(1) Includes customer deposits (ex-repos) and other liabilities placed via the branch network: Banco Sabadell non-convertible bonds, commercial paper, and others. (2) Personnel and other general administrative expenses / gross income. To calculate these ratios, gross operating income was adjusted considering only trading income and recurrent exchange

differences. Includes linear accrual of the Deposit Guarantee Fund and National Resolution Fund. (3) The LtD ratio is defined as Gross Loans and advances to customers / Retail funding. It is calculated by subtracting provisions and brokered loans from the numerator. (4) The number of shares, assuming conversion of mandatory convertible bonds, was 4,290 as of 31.03.2015 and 5,480 as of 31.03.2016. (5) Without adjusting historical values. (6) Considering lineal annualised profit to date and accrued contributions to the Deposit Guarantee Fund. Assuming conversion of mandatory convertible bonds, EPS amounted to 0.13 as of 31.03.2015

and 0.14 as of 31.03.2016; the book value per share was 2.42 as of 31.03.2015 and 2.28 as of 31.03.2016; the price/book value ratio was 0.94 as of 31.03.2015 and 0.69 as of 31.03.2016. (7) The EURGBP exchange rate used for the income statement at the end of the first quarter 2016 is 0.77. The rate used for the balance sheet is 0.7916 as of 31.03.16.

C hang e ( % ) (7) C hang e ( % )3 1.0 3 .15 3 1.0 3 .16 3 1.0 3 .15 3 1.0 3 .16 3 1.0 3 .15

P ro f it and lo ss acco unt (€ millio n)Net interest income 643 696 8.2 974 51.4Gross operating income 1,666 1,253 -24.8 1,568 -5.9Pre-provisions income 1,142 722 -36.8 806 -29.5Provisions for NPLs -520 -276 -46.9 -276 -46.9Prof it before tax 246 284 15.6 368 49.8Att ributable net profit 175 190 9.0 252 44.3

B alance sheet (€ millio n)Total assets 167,480 161,189 -3.8 204,021 21.8Gross loans to customers, excluding repos and accrual adjustments) 103,963 103,724 -0.2 138,255 33.0Gross loans to customers, excluding repos 118,527 115,087 -2.9 149,828 26.4Gross loans to customers 118,593 115,146 -2.9 149,887 26.4On-balance sheet funds 121,914 121,474 -0.4 159,573 30.9 Of which: Customer funds (1) 94,899 97,493 2.7 131,290 38.3M utual funds 18,674 21,153 13.3 21,153 13.3Pension funds and third-party insurance products 11,750 12,175 3.6 12,175 3.6Funds under management 156,128 158,581 1.6 196,680 26.0Equity 11,579 -- 12,789 10.4Shareholders' equity 10,409 -- 12,539 20.5

P ro f itability and co st - to - inco me ra t io s (% )ROA 0.35 -- 0.38RORWA 0.77 -- 0.90ROE 5.72 -- 6.67ROTE 6.76 -- 8.00Cost / income (ex amort isation) (2) 48.82 46.13 51.14

R isk managementNon-performing loans (€ million) 14,863 11,674 11,870NPL rat io (% ) 11.68 9.45 7.50NPL coverage rat io (% ) 51.4 54.4 54.7

C apital managementRisk weighted assets (RWA) 74,945 -- 86,299Common Equity Tier 1 11.8 -- 11.9Tier I 11.8 -- 11.9Total capital rat io 12.8 -- 13.3Leverage rat io (%) 5.24 -- 4.91

Liquidity managementLoan-to-deposits rat io (%) (3) 109.1 105.8 104.9

Share data (perio d end)Number of shareholders 229,181 -- 262,221Number of shares (million) (4) 4,025 -- 5,439Share price (€ ) (5) 2.279 -- 1.582M arket capitalisat ion (€ million) 9,173 -- 8,605Earnings per share (EPS) (€ ) (6) 0.14 -- 0.14Book value per share (€ ) (6) 2.58 -- 2.29Price / Book value (t imes) (6) 0.88 -- 0.69Price / Earnings rat io (P/E) (t imes) 15.91 -- 11.05

Other dataBranches 2,305 2,262 2,874Employees 17,596 17,865 26,064

T o ta l gro upExc l. T SB


Key aspects

• Good earnings performance:

� Continued resilience of net interest income, which grew in both Spain and UK despite increased pressure, and amounted to €973.9 million at the end of the first quarter 2016 (+51.4% year-on-year and +1.2% quarter-on-quarter). Excluding TSB, net interest income increased by +8.2% year-on-year and +0.8% quarter-on-quarter.

� Customer spread as of first quarter 2016 year-end amounted to 2.84% (2.68% excluding TSB), compared with 2.75% as of 2015 year-end.

� Commissions reflect a lower contribution QoQ mainly driven by market conditions’ impact in AuM.

� Income from net fees and commissions rose by 13.5% year-on-year, primarily due to the acquisition of TSB. Excluding TSB, this income remained stable, representing a 0.4% increase.

� Extraordinary gains during the first quarter arising from results from financial transactions have been neutralised through additional provisions .

� The group’s attributable net profit in the first quarter 2016 amounted to €252.0 million, a 44.3% increase. Excluding TSB, attributable net profit amounted to €190.3 million, a 9.0% increase.

Change YoY:

Change QoQ:

Total group

+51.4%

+1.2%

Excl. TSB

+8.2%

+0.8%

690.1 695.7

272.4 278.2

962.5 973.9

4Q15 1Q16TSB Excl. TSB

2

643.1 695.7

278.2643.1

973.9


Change YoY:

Change QoQ:

+13.5%

-6.6%

Total groupExcl. TSB

+0.4%

-5.4%

260.0 245.9

37.6 31.9

297.6 277.8


2

244.8 245.9

31.9244.8 277.8


Change excl. TSB QoQ:

Change excl. TSB YoY:

+15.1%

-52.0%

377.9 434.9

4Q15 1Q16

2

906.5

434.9

1Q15 1Q16

Cha nge YoY :

Cha nge e xc l. TSB YoY :

+44.3%

+9.0%

26

174.6 190.3

61.7174.6

252.0



• Continued improvement in lending mix and stable per forming loan book. Sustained reduction in NPL ratio:

� Outstanding credit volumes increased by 33.0% at the end of the first quarter 2016, compared with the same period in the previous year, primarily due to the acquisition of TSB. Excluding TSB, volumes remain stable. Compared with the previous quarter, outstanding credit volumes decline by 1.5% (a 0.8% decline excluding TSB), primarily explained by the negative trend of the GBPEUR exchange rate and by the payment received related to account receivable by the Deposit Guarantee Fund (DGF).

� On-balance sheet customer funds increased by 38.3% throughout the year (2.7% excluding TSB), and remained stable compared with the previous quarter (increasing by 1.3% excluding TSB).

� The volume of problematic assets has declined considerably, by €3,055 million over the last twelve months, and by €711 million during the first quarter 2016.

� The group’s NPL ratio was reduced by 29bp during the first quarter 2016, positioning the NPL ratio at 7.50% (9.45% excluding TSB).

� Coverage of foreclosed real estate assets stood at 42.7%.

• Capital strength:

� The fully-loaded Common Equity Tier 1 (CET1) was 11.8% as of 31 March 2016.

� The phase-in Common Equity Tier 1 (CET1) ratio was 11.9% as of 31 March 2016.

Excl. TSB Total groupChange YoY: -0.2% +33.0%Change QoQ: -0.8% -1.5%

Performing gross loans to customers (excluding repos and accrual adjustments)):

103,963 104,537 103,724

35,831 34,530

140,368 138,255

Mar 15 Dec 15 Mar 16

Excl. TSB

TSB

On-balance sheet customer funds:

Excl. TSB Total groupChange YoY: +2.7% +38.3%Change QoQ: +1.3% -0.2%

94,899 96,227 97,493

35,262 33,798

131,489 131,290

Mar 15 Dec 15 Mar 16

Excl. TSB

TSB

-3.3%-12.8%

Change excl. TSB QoQ:Change excl. TSB YoY:

21,579 20,867

4Q15 1Q16

2

23,922

20,867

1Q15 1Q16

11.68 10.98 10.38 9.86 9.45 9.01 8.51 7.79 7.50

51.38 52.75 54.45 53.10 54.39 53.65 55.34 53.64 54.66

0 .0 0

1 0. 0 0

2 0. 0 0

3 0. 0 0

4 0. 0 0

5 0. 0 0

0 .0 0

2 .0 0

4 .0 0

6 .0 0

8 .0 0

1 0. 0 0

1 2. 0 0

1 4. 0 0

1 6. 0 0

1 8. 0 0

2 0. 0 0

Mar 15 Jun 15 Sep 15 Dec 15 Mar 16 Jun 15 Sep 15 Dec 15 Mar 16

Excl. TSB Total group

NPL ratio Coverage ratio

Phase-in: Fully loaded:

11.8 11.5 11.9

1Q15 4Q15 1Q16

211.7 11.4 11.8

1Q15 4Q15 1Q16


Performance review

Macroeconomic environment Global economic and financial background

Global financial markets exhibited a very negative tone at the beginning of the year. This is largely explained by the decline in oil prices, the continued outflow of capital from China and concerns regarding the health of the US economy. However, financial markets successfully reversed part of this negative behaviour, influenced by reduced fears of global recession and the recovery of crude oil prices. The new lax monetary policies adopted by China and the ECB, and the more lax attitude of the Fed also contributed to this improvement. In terms of activity, economic sentiment indicators in the Eurozone point to a slowdown in activity going forward after the economy grew by 0.3% quarter-on-quarter in the fourth quarter. The US economy has continued to show weakness, following the deceleration of GDP in the fourth quarter (0.3% quarter-on-quarter). With regards to inflation, this has returned to negative figures in the Eurozone, whilst core inflation in the United States reached maximum levels not seen since 2012.

Macroeconomic situation in Spain

The economy continued to perform well in the first quarter, after 2015 registered a 3.2% growth rate and unemployment stood at 20.9%, its lowest level since 2011. The Bank of Spain estimates that GDP increased by 0.7% quarter-on-quarter during the first quarter, one tenth lower than in the final quarter 2015. HICP inflation fell sharply compared to 2015 year-end, due to changes in oil prices. In the external sector, the current account balance ended 2015 with a surplus of 1.4% GDP, reaching positive figures for the third consecutive year. In the political arena, Pedro Sánchez, leader of the labour party PSOE, failed to achieve the necessary support to be appointed President. In consequence, a new period of negotiations between the different political parties has begun in an attempt to reach a consensus and form Government before the legal deadline of May 2nd 2016. In the event that no agreement is reached, new elections will take place on June 26th.

Macroeconomic situation in the UK

Growth has slowed down compared with the last quarter of 2015, when GDP grew by 0.6% quarter-on-quarter (3Q15: 0.4%). In February, industrial production experienced its sharpest decline since mid-2013. The labour market has maintained a positive trend. In the political arena, British Prime Minister David Cameron set the date for the referendum on EU membership for June 23rd. This decision was reached following an agreement with other EU Member States granting the United Kingdom the freedom to differentiate between European and British citizens when granting access to British social benefits. The UK also has the right to paralyse European legislation if 55% of national parliaments vote against it. In this context, the Labour Party, David Cameron and part of his Conservative Party have indicated that they will campaign in favour of the UK’s continued EU membership. However, other members of the Conservative Party (including the influential Mayor of London) and UKIP (a Eurosceptic party) have indicated that they will campaign in favour of a withdrawal. Surveys carried

out to date suggest that the referendum outcome will be very close.

Macroeconomic situation in Latin America

Economic weakness and the downward trend of economic growth continue to make headlines in the region, with the exception of Peru, whose economy has benefited from an increase in copper production. Inflation has continued to rise, influenced by the effect of currency depreciations and, in some cases, by the climatic conditions caused by the El Niño phenomenon. On a financial level, Latin American markets have been subjected to significant pressure at the beginning of the year, amidst high levels of uncertainty surrounding China and a sharp decrease in oil prices. In this context, some central banks have further increased the official interest rates (Mexico, Colombia and Peru). In the political arena, the main focus has been on the possible impeachment of the President in Brazil.

Fixed-income markets

The Fed maintained its benchmark rate (FFR) at 0.25%-0.50%, after raising it in its December meeting. The Fed meeting in March reflected a dovish attitude, and the predicted FFR trend was adjusted to a lower level, with two increases forecast during 2016, instead of four. In its March meeting, the EBC announced a series of measures to strengthen economic recovery in the Eurozone, and accelerate the adjustment of inflation to the central bank’s target level (2.0%). The ECB cut the deposit interest rate to -0.40% and the benchmark interest rate to 0.00%. The monthly asset purchase rate was increased to €80M per month, and corporate debt was included as an eligible asset under this programme. New long-term financing operations will be held with incentives for banks to grant credit to the private sector. In the United Kingdom, the Bank of England announced that three extraordinary liquidity operations with six-month maturities will be held in the weeks before and after the referendum, in order to prevent excessive financial strain on the markets. Lastly, the Bank of Japan cut its deposit interest rate into negative figures for the first time (-0.10%), in order to boost inflation.

As regards long-term fixed-income markets, the yield on German and US government bonds declined during the quarter, reaching levels not seen since the beginning of 2015. This decline was influenced by international financial turbulence, the lax attitude of central banks and, in the case of Germany, the lower predicted rates of inflation. Developments in financial and international markets, together with political uncertainty in Spain and concerns regarding the Italian financial system, caused the country risk premia in Spain and Italy to rise slightly. In Portugal, the country risk premium experienced a more pronounced increase, due to the complex political context and the fragility of its financial system.


Equity markets

Equity indices in the main advanced economies generally did well in the fourth quarter, following financial turbulence experienced in the Summer. As a result, the indices corrected part of their poor performance in the previous three months. The DAX rose +11.2%, with Volkswagen up

+33.2%, after losing half its value in the third quarter due to the emissions scandal, while the Euro STOXX 50 gained +5.4%.In contrast, the IBEX 35 fell by -0.2%, affected by political uncertainty. In the US, the S&P500 gained +9.6% (in euro terms) while Japan’s Nikkei 225 appreciated by +11.3% (in euro terms), boosted by gains in the Chinese index.

GDP – USA vs. Euro area (year-on-year change, %)

Official interest rate – USA vs. Euro area (%)

Exchange rates: parity vs. euro

-6.0

-5.0

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

3/07

3/08

3/09

3/10

3/11

3/12

3/13

3/14

3/15

3/16

US GDP Euro area GDP

0.0

1.0

2.0

3.0

4.0

5.0

6.0

3/0

7

3/0

8

3/0

9

3/1

0

3/1

1

3/1

2

3/1

3

3/1

4

3/1

5

3/1

6

US official interest rate Euro area official interest rate

Fx 31.03.15 30.06.15 30.09.15 31.12.15 31.03.16

USD 1.0759 1.1189 1.1203 1.0887 1.1385

GBP 0.7273 0.7114 0.7385 0.7340 0.7916

MXN 16.5124 17.5332 18.9768 18.9145 19.5903


Income statement

Highlights:

• The group acquired control of TSB on 30 June 2015. As a result, the profit and loss account numbers are not comparable with those of previous periods.

• The group’s attributable net profit amounted to €252.0 million (+44.3% year-on-year). Excluding TSB, this figure stands at €190.3 million (+9.0% year-on-year).

• Continued resilience of net interest income, which grew in both Spain and UK despite increased pressure.

• Commissions reflect a lower contribution QoQ mainly driven by market conditions’ impact in AuM.

• Extraordinary gains in 2016 arising from results from financial transactions have been neutralised through additional provisions.

Profit and loss account

(1) In the profit and loss account for 2015, income from forex trading commissions previously included in forex exchange (net) have been reclassified under net fees and commissions. (2) The EURGBP exchange rate used for the income statement is 0.77. (3) Considering accrued contributions to the Deposit Guarantee Fund. YTD at the end of each quarter (not annualised). (4) The change at fixed exchange rate is calculated using the EURGBP exchange rate of 0.77.

(1) Change (% ) (2) Change (% ) (4)

(€'000) 1Q15 1Q16 YoY 1Q16 YoY Change (% )at fixed FX

Net interest income 643,077 695,657 8.2 973,893 51.4 51.1

Income from equity method and dividends 10,352 21,573 108.4 21,573 108.4 108.4Net fees and commissions 244,819 245,918 0.4 277,802 13.5 13.3Results from f inancial transactions (net) 736,249 303,375 -58.8 308,091 -58.2 -58.2Foreign exchange (net) 46,430 2,906 -93.7 2,906 -93.7 -93.7Other operating income/expense -15,074 -16,222 7.6 -16,694 10.7 11.1Gross operating income 1,665,853 1,253,207 -24.8 1,567,571 -5.9 -6.1

Personnel expenses -301,047 -306,669 1.9 -415,528 38.0 37.7Non-recurrent -5,572 -6,695 20.2 -10,274 84.4 -- Recurrent -295,475 -299,974 1.5 -405,254 37.2 --

Other general expenses -146,339 -146,417 0.1 -249,181 70.3 69.8Non-recurrent -1,124 0 -100.0 -7,662 -- -- Recurrent -145,215 -146,417 0.8 -241,519 66.3 --

Amortization & depreciation -76,060 -78,263 2.9 -97,167 27.8 27.4Pre-provisions income 1,142,407 721,858 -36.8 805,695 -29.5 -29.6

Provisions for NPLs -520,087 -276,343 -46.9 -276,343 -46.9 -46.9Other impairments -386,394 -158,566 -59.0 -158,566 -59.0 -59.0Gains on sale of assets 9,580 -3,066 -- -3,066 -- -- Badw ill 0 0 -- 0 -- -- Profit before tax 245,506 283,883 15.6 367,720 49.8 49.5

Income tax -69,757 -92,296 32.3 -114,429 64.0 63.6Consolidated net profit 175,749 191,587 9.0 253,291 44.1 43.9

Minority interest 1,111 1,290 16.1 1,290 16.1 16.1Attributable net profit 174,638 190,297 9.0 252,001 44.3 44.0

Pro memoria:Average total assets (€ million) 166,113 162,661 204,806Earnings per share (€) (3) 0.04 0.02 0.04



Quarterly profit and loss account

(1) In the profit and loss account for 2015, income from forex trading commissions previously included in forex exchange (net) have been reclassified under net fees and commissions. (2) The EURGBP exchange rate used for the income statement is 0.77. (3) Considering accrued contributions to the Deposit Guarantee Fund. YTD at the end of each quarter (not annualised). (4) The change at fixed exchange rate is calculated using the EURGBP exchange rate of 0.77.

Net interest income:

• Net interest income amounted to €973.9 million at the end of the first quarter 2016, a 51.4% increase year-on-year (a 1.2% increase in the last quarter).

• Excluding TSB, net interest income amounted to €695.7 million at the end of the first quarter 2016, an 8.2% increase year-on-year, due to lower funding costs (both customer deposits and capital markets), a 0.8% increase in the last quarter.

• The quarter-on-quarter TSB growth of 9.0% (at fixed exchange rate) is due to the to strong Franchise business volumes and contribution of UKAR Portfolio.

Cha nge Cha nge (4)

(1 ) (1 ) (1 ) (1 ) ( % ) (2 ) ( % ) Cha nge ( % )

(€'000) 1Q15 2 Q15 3 Q15 4 Q15 1Q16 4 Q15 4 Q15 1Q16 4 Q15 a t f i x e d FX

Ne t i nt e r e st i nc ome 6 4 3 , 0 7 7 6 5 5 , 9 0 1 6 7 4 , 12 5 6 9 0 , 10 7 6 9 5 , 6 5 7 0 . 8 9 6 2 , 5 3 7 9 7 3 , 8 9 3 1. 2 3 . 4

Income f rom equit y met hod and dividends 10,352 16,948 13,227 11,180 21,573 93.0 11,180 21,573 93.0 93.0

Net f ees and commissions 244,819 249,759 254,394 259,962 245,918 -5.4 297,576 277,802 -6.6 -5.6

Result s f rom f inancial t ransact ions (net ) 736,249 378,019 39,844 52,996 303,375 472.4 55,818 308,091 452.0 454.3

Foreign exchange (net ) 46,430 -4,680 -1,253 13,010 2,906 -77.7 13,010 2,906 -77.7 -78.4

Ot her operat ing income/ expense -15,074 -1,781 12,806 -119,328 -16,222 -86.4 -120,556 -16,694 -86.2 -86.2

Gr oss ope r a t i ng i nc ome 1, 6 6 5 , 8 5 3 1, 2 9 4 , 16 6 9 9 3 , 14 3 9 0 7 , 9 2 7 1, 2 5 3 , 2 0 7 3 8 . 0 1, 2 19 , 5 6 5 1, 5 6 7 , 5 7 1 2 8 . 5 3 1. 1

Personnel expenses -301,047 -314,458 -303,970 -299,830 -306,669 2.3 -425,034 -415,528 -2.2 0.0

Non-recurrent -5,572 -19,168 -7,533 -3,255 -6,695 105.7 -5,925 -10,274 73.4 --

Recurrent -295,475 -295,290 -296,437 -296,575 -299,974 1.1 -419,109 -405,254 -3.3 --

Ot her general expenses -146,339 -146,154 -144,781 -151,144 -146,417 -3.1 -271,497 -249,181 -8.2 -5.2

Non-recurrent -1,124 -1,187 -990 -5,472 0 -100.0 -20,672 -7,662 -62.9 --

Recurrent -145,215 -144,967 -143,791 -145,672 -146,417 0.5 -250,825 -241,519 -3.7 --

Amort izat ion & depreciat ion -76,060 -67,390 -72,686 -73,452 -78,263 6.5 -94,222 -97,167 3.1 4.8

P r e - pr ov i si ons i nc ome 1, 14 2 , 4 0 7 7 6 6 , 16 4 4 7 1, 7 0 6 3 8 3 , 5 0 1 7 2 1, 8 5 8 8 8 . 2 4 2 8 , 8 12 8 0 5 , 6 9 5 8 7 . 9 8 9 . 8

Provisions f or NPLs -520,087 -630,449 -109,071 -112,220 -276,343 146.3 -112,220 -276,343 146.3 147.0

Ot her impairment s -386,394 -212,191 -97,026 -265,725 -158,566 -40.3 -265,725 -158,566 -40.3 -40.3

Gains on sale of asset s 9,580 -12,895 -14,170 525 -3,066 -- 525 -3,066 -- --

Badwill 0 207,371 0 24,520 0 -100.0 24,520 0 -100.0 -100.0

P r of i t be f or e t a x 2 4 5 , 5 0 6 118 , 0 0 0 2 5 1, 4 3 9 3 0 , 6 0 1 2 8 3 , 8 8 3 - - 7 5 , 9 12 3 6 7 , 7 2 0 3 8 4 . 4 4 14 . 6

Income t ax -69,757 60,181 -62,842 17,100 -92,296 -- 54,240 -114,429 -- --

Consol i da t e d ne t p r o f i t 17 5 , 7 4 9 17 8 , 18 1 18 8 , 5 9 7 4 7 , 7 0 1 1 9 1, 5 8 7 3 0 1. 6 13 0 , 15 2 2 5 3 , 2 9 1 9 4 . 6 10 7 . 0

Minorit y int erest 1,111 573 604 1,516 1,290 -14.9 1,516 1,290 -14.9 -14.9

At t r i but a bl e ne t pr of i t 17 4 , 6 3 8 17 7 , 6 0 8 18 7 , 9 9 3 4 6 , 18 5 19 0 , 2 9 7 3 12 . 0 12 8 , 6 3 6 2 5 2 , 0 0 1 9 5 . 9 10 8 . 5

Pro memoria:

Average t ot al asset s (€ mill ion) 166,113 165,960 164,817 166,425 162,661 209,189 204,806

Earnings per share (€ ) (3) 0.04 0.06 0.08 0.11 0.02 0.13 0.04

Ex c l . TS B Tot a l g r oup


Customer spread:

• The customer spread for the first quarter 2016 stood at 2.84% (2.75% in the fourth quarter 2015) while the net interest margin as a percentage of average total assets was 1.91% (1.83% in the fourth quarter 2015).

• Excluding TSB, the customer spread in the first quarter of 2016 was 2.68% (2.59% in the fourth quarter 2015) and the net interest margin as a percentage of average total assets was 1.72% (1.65% in the fourth quarter 2015).

Net interest income

Total group (€ million)

Sabadell Excl. TSB (€ million)

TSB (€ million)


Change YoY: +8.2% +51.4%

Change QoQ: +0.8% +1.2%

643.1 655.9 941.3 962.5 973.9

1Q15 2Q15 3Q15 4Q15 1Q16

Change YoY:

Change QoQ:

+8.2%

+0.8%

643.1 690.1 695.7

1Q15 4Q15 1Q16

Change QoQ:

+9.0% in GBP

+2.1%

272.4 278.2

4Q15 1Q16


Gains and charges in the quarter

(1) The EURGBP exchange rate used for the income statement is 0.77, while that used for the balance sheet is 0.7916 (position as of 31.03.16).

2 0 15

(€ million) Av ge . ba l a nc e R a t e % R e sul t s Av ge . ba l a nc e Ra t e % R e su l t s A v ge . ba l a nc e Ra t e % R e su l t s Av ge . ba l a nc e Ra t e % R e sul t s

Cash and balance with cent ral banks & f in. inst . 4,507 0.69 8 4,239 0.72 8 10,017 0.58 15 10,594 0.46 12

Loans to customers (net) 105,699 3.32 866 106,085 3.20 845 135,423 3.29 1,122 137,816 3.28 1,140

Fixed-income securit ies 26,659 2.94 193 26,000 2.87 186 28,003 2.73 193 28,860 2.64 192

Equity securit ies 1,466 -- -- 1,765 -- -- 1,292 -- -- 1,207 -- --

Tang. & intang. assets 3,713 -- -- 3,486 -- -- 4,795 -- -- 4,900 -- --

Other assets 24,069 0.18 10 24,384 0.19 12 24,693 0.37 23 25,812 0.27 18

T ot al asset s 16 6 ,113 2 .6 3 1,0 77 16 5,9 6 0 2 .54 1,0 50 2 0 4 ,2 2 3 2 .6 3 1,3 53 2 0 9 ,18 9 2 .58 1,3 6 2

Financial inst itut ions 15,819 -1.06 -41 16,683 -0.91 -38 18,933 -0.74 -35 18,554 -0.56 -26

Customer deposits 92,351 -0.88 -200 93,214 -0.73 -170 126,975 -0.62 -198 127,756 -0.53 -171

Sight Accounts 37,643 -0.27 -25 41,172 -0.24 -25 43,545 -0.19 -21 45,572 -0.20 -23

Term accounts / Fix term deposits 42,176 -1.47 -153 39,332 -1.27 -125 36,054 -1.06 -96 33,338 -0.86 -72

Ofex inv. / Foreign S. 6,442 -0.52 -8 6,765 -0.47 -8 42,023 -0.65 -69 43,203 -0.61 -67

Others 6,090 -0.88 -13 5,945 -0.81 -12 5,354 -0.82 -11 5,643 -0.64 -9

Capital markets 25,896 -2.71 -173 25,814 -2.56 -165 25,989 -2.35 -154 29,439 -2.27 -169

Repos 10,118 -0.42 -11 8,425 -0.43 -9 9,768 -0.28 -7 10,179 -0.59 -15

Other liabilit ies 10,323 -0.34 -9 9,486 -0.54 -13 10,313 -0.67 -17 10,468 -0.72 -19

Shareholders' equity 11,606 -- -- 12,337 -- -- 12,246 -- -- 12,793 -- --

T ot al f unds 16 6 ,113 - 1.0 6 - 4 3 4 16 5,9 6 0 - 0 .9 5 - 3 9 4 2 0 4 , 2 2 3 - 0 .8 0 - 4 11 2 0 9 ,18 9 - 0 .75 - 4 0 0

N et int erest income 6 4 3 6 56 9 4 1 9 6 3

C ust o mer sp read 2 .4 4 2 .4 7 2 .6 7 2 .75

N et int erest marg in as % o f A TA 1.57 1.59 1.8 3 1.8 3

2 0 16

(€ million) Av ge . ba l a nc e R a t e % R e sul t s Av ge . ba l a nc e Ra t e % R e su l t s A v ge . ba l a nc e Ra t e % R e su l t s Av ge . ba l a nc e Ra t e % R e sul t s

Cash and balance with cent ral banks & f in. inst . 8,715 0.40 9

Loans to customers (net) 138,494 3.28 1,130

Fixed-income securit ies 27,245 2.60 176

Equity securit ies 966 -- --

Tang. & intang. assets 4,801 -- --

Other assets 24,585 0.30 19

T ot al asset s 2 0 4 ,8 0 6 2 .6 2 1,3 3 3

Financial inst itut ions 18,205 -0.60 -27

Customer deposits 126,729 -0.44 -140

Sight Accounts 46,390 -0.20 -23

Term accounts / Fix term deposits 32,271 -0.72 -57

Ofex inv. / Foreign S. 41,430 -0.59 -61

Others 6,638 0.06 1

Capital markets 30,641 -2.12 -162

Repos 6,826 -0.64 -11

Other liabilit ies 9,832 -0.80 -20

Shareholders' equity 12,574 -- --

T ot al f unds 2 0 4 ,8 0 6 - 0 .70 - 3 59

N et int erest income 9 74

C ust o mer sp read 2 .8 4

N et int erest marg in as % o f A TA 1.9 1

1st Quar t er 2 nd Quart er 3 rd Quar t er 4 t h Quart er

1st Quar t er ( 1) 2 nd Quart er 3 rd Quar t er 4 t h Quart er


Net interest income (%)

Customer spread (%)

Income from equity method and dividends:

• This item amounted to €21.5 million at the end of the first quarter 2016, compared with €10.3 million at the end of the first quarter 2015. Those revenues are due mainly to the insurance and pension fund business.

Net fees and commissions:

• Net fees and commissions amounted to €277.8 million at the end of the first quarter 2016 (+13.5% year-on-year).

• Excluding TSB, this item amounted to €245.9 million at the end of the first quarter 2016 (a 0.4% increase year-on-year).

• The income from fees and commissions associated with insurance and pension funds grows substantially, as together they increased by 68.6% compared with the first quarter of 2015.

• Commissions reflect a lower contribution QoQ mainly driven by market conditions’ impact in AuM.

• TSB commissions decline as expected by 9.4% at the end of the first quarter 2016 due in part to lower interchange commission and servicing costs of UKAR portfolio.

Net fees and commissions

Total group (€ millions)

Sabadell Excl. TSB (€ millions)

TSB (€ millions)

2.06%2.22% 2.29% 2.35% 2.44% 2.47%

2.67% 2.75%2.84%

1.29% 1.36% 1.40% 1.49% 1.57% 1.59%

1.83% 1.83% 1.91%2.47%

2.59%2.68%

1.62% 1.65% 1.72%

1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16

Customer spread Net interest margin as % of ATA

Customer spread excl. TSB Net interest margin as % of ATA excl. TSB

3.50% 3.47% 3.39% 3.32% 3.32%3.20% 3.29% 3.28% 3.28%

1.44%1.25%

1.10%0.97% 0.88%

0.73%0.62% 0.53% 0.44%

3.06% 3.08% 3.06%

0.59% 0.49%0.38%

1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16

Customer loan yield Cost of customer funds

Customer loan yield excl. TSB Cost of customer funds excl. TSB


Change YoY: +0.4% +13.5%

Change QoQ: -5.4% -6.6%

244.8 249.8 295.6 297.6 277.8

1Q15 2Q15 3Q15 4Q15 1Q16

Change YoY:

Change QoQ:+0.4%

-5.4%

244.8 260.0 245.9

1Q15 4Q15 1Q16

Change QoQ:

-9.4% in GBP

-15.2%

37.6 31.9

4Q15 1Q16


Net fees and commissions

(1) The EURGBP exchange rate used for the income statement is 0.77.

Results from financial transactions (net):

• This item amounted to €308.1 million at the end of the first quarter 2016 (€303.4 million excluding TSB), including, among others, €320.3 million in gains on the sale of available-for-sale fixed-income financial assets.

• This item amounted to €736.2 million at the end of the first quarter 2015, including €770.8 million in gains on the sale of available-for-sale fixed-income financial assets.

Foreign exchange (net):

• This item amounted to €2.9 million at the end of the first quarter 2016, compared with €46.4 million at the end of the first quarter 2015.

Other operating income/expenses:

• Other operating income/expenses amounted to €-16.7 million at the end of the first quarter 2016 (€-16.2 million excluding TSB).

• At the end of the first quarter 2015, other operating income/expenses amounted to €-15.1 million.

Operating expenses:

• Operating expenses amounted to €664.7 million at the end of the first quarter 2016, including €17.9 million in non-recurrent expenses.

• Excluding TSB, operating expenses amounted to €453.1 million, including €6.7 million in non-recurrent expenses.

• TSB recurrent personnel costs of the last quarter 2015 include a seasonal expense.

C hange C hang e C hange C hange

( %) (1) ( %) ( %) (1) ( %)

(€'000) 4 Q15 1Q16 4 Q15 4 Q15 1Q16 4 Q15 1Q15 1Q16 1Q15 1Q16 1Q15

Lending fees 28,102 27,719 -1.4 56,212 54,023 -3.9 28,782 27,719 -3.7 54,023 87.7

Guarantees commissions 25,858 25,255 -2.3 25,858 25,255 -2.3 25,694 25,255 -1.7 25,255 -1.7

Transferred to other entit ies -237 -159 -32.9 -237 -159 -32.9 -280 -159 -43.2 -159 -43.2

R isk t ransact io n

f ees 53 ,72 3 52 ,8 15 - 1.7 8 1,8 3 3 79 ,119 - 3 .3 54 ,19 6 52 ,8 15 - 2 .5 79 ,119 4 6 .0

Cards 37,294 36,287 -2.7 56,157 52,335 -6.8 36,465 36,287 -0.5 52,335 43.5

Payment orders 12,634 11,690 -7.5 12,634 11,690 -7.5 11,362 11,690 2.9 11,690 2.9

Securit ies 12,717 11,373 -10.6 12,716 11,373 -10.6 12,966 11,373 -12.3 11,373 -12.3

Sight accounts 20,106 18,716 -6.9 28,617 22,262 -22.2 20,480 18,716 -8.6 22,262 8.7

Other t ransactions 40,310 40,922 1.5 22,441 26,908 19.9 46,507 40,922 -12.0 26,908 -42.1

C o mmissio ns f o r services 12 3 ,0 6 1 118 ,9 8 8 - 3 .3 13 2 ,56 5 12 4 ,56 8 - 6 .0 12 7,78 0 118 ,9 8 8 - 6 .9 12 4 ,56 8 - 2 .5

M utual funds 39,244 36,306 -7.5 39,244 36,306 -7.5 36,792 36,306 -1.3 36,306 -1.3

Pension funds and

insurance brokerage 30,894 31,786 2.9 30,894 31,786 2.9 18,857 31,786 68.6 31,786 68.6

Wealth management 13,040 6,023 -53.8 13,040 6,023 -53.8 7,194 6,023 -16.3 6,023 -16.3

A sset U nd er M anagement co mmissio ns 8 3 ,178 74 ,115 - 10 .9 8 3 ,178 74 ,115 - 10 .9 6 2 ,8 4 3 74 ,115 17.9 74 ,115 17.9

T o t al 2 59 ,9 6 2 2 4 5,9 18 - 5.4 2 9 7,576 2 77,8 0 2 - 6 .6 2 4 4 ,8 19 2 4 5,9 18 0 .4 2 77,8 0 2 13 .5

Excl. T SB T ot al g ro up Excl. TSB T ot al g roup


Operating expenses

(1) The EURGBP exchange rate used for the income statement is 0.77.

Personnel expenses



TSB (€ million)

C hang e C hang e C hang e C hang e

( %) (1) ( %) ( %) ( %)

(€'000) 4 Q15 1Q16 4 Q15 4 Q15 1Q16 4 Q15 1Q15 1Q16 1Q15 1Q16 1Q15

Recurrent -296,575 -299,974 1.1 -419,109 -405,254 -3.3 -295,475 -299,974 1.5 -405,254 37.2

Non-recurrent -3,255 -6,695 105.7 -5,925 -10,274 73.4 -5,572 -6,695 20.2 -10,274 84.4

Perso nnel exp enses - 2 9 9 ,8 3 0 - 3 0 6 ,6 6 9 2 .3 - 4 2 5,0 3 4 - 4 15,5 2 8 - 2 .2 - 3 0 1,0 4 7 - 3 0 6 ,6 6 9 1.9 - 4 15,52 8 3 8 .0

IT and communications -33,958 -37,232 9.6 -48,057 -45,554 -5.2 -35,207 -37,232 5.8 -45,554 29.4

Advertising -13,772 -9,974 -27.6 -32,312 -28,510 -11.8 -7,187 -9,974 38.8 -28,510 296.7

Premises and of f ice supplies -36,361 -36,904 1.5 -65,771 -62,872 -4.4 -39,042 -36,904 -5.5 -62,872 61.0

Taxes other than income tax -24,534 -25,789 5.1 -24,608 -25,844 5.0 -25,012 -25,789 3.1 -25,844 3.3

Others -42,519 -36,518 -14.1 -100,749 -86,401 -14.2 -39,891 -36,518 -8.5 -86,401 116.6

Ot her general exp enses - 151,14 4 - 14 6 ,4 17 - 3 .1 - 2 71,4 9 7 - 2 4 9 ,18 1 - 8 .2 - 14 6 ,3 3 9 - 14 6 ,4 17 0 .1 - 2 4 9 ,18 1 70 .3

T o t al - 4 50 ,9 74 - 4 53 ,0 8 6 0 .5 - 6 9 6 ,53 1 - 6 6 4 ,70 9 - 4 .6 - 4 4 7,3 8 6 - 4 53 ,0 8 6 1.3 - 6 6 4 ,70 9 4 8 .6

Excl. T SB Excl. T SBT o t al g ro up T o t al g ro up


Change YoY: +1.9% +38.0%

Change QoQ: +2.3% -2.2%

295.5 295.3 407.6 419.1 405.3

5.6 19.2

9.2 5.9 10.3

301.0 314.5

416.8425.0

415.5

1Q15 2Q15 3Q15 4Q15 1Q16

Recurrent Non recurrent

Change YoY:

Change QoQ:

Recurrent:

+1.5%

+1.1%295.5 296.6 300.0

5.6 3.3 6.7

301.0 299.8 306.7

1Q15 4Q15 1Q16


Change QoQ:

-8.2% in GBP

Recurrent:

-14.1%

122.5 105.3

2.73.6

125.2108.9

4Q15 1Q16



Administrative expenses



TSB (€ million)

Pre-provision income:

• At the end of the first quarter 2016, pre-provision income amounted to €805.7 million (€721.9 million excluding TSB), a 29.5% decrease year-on-year (36.8% excluding TSB).

Provisions for NPLs and other impairments:

• Provisions for NPLs and other impairments amounted to €434.9 million at the end of the first quarter 2016 (€906.7 million at the end of the first quarter 2015), reflecting in both years the additional provisions that have neutralised the higher trading income.

Gains on sale of assets:

• Gains on sale of assets amounted to €-3.1 million at the end of the first quarter 2016 (€9.6 million at the end of the first quarter in the previous year). Both periods included mainly gains on sales and losses on sales own-use fixed assets.

Net profit:

• Net profit attributable to the group amounted to €252.0 million at the end of the first quarter 2016, 44.3% more than in the first quarter 2015 (€174.6 million).

• Excluding TSB, net profit attributable to the group amounted to €190.3 million at the end of the first quarter 2016, 9.0% more than the same period in 2015.


Change YoY: +0.1% +70.3%

Change QoQ: -3.1% -8.2%

145.2 145.0 264.2 250.8 241.5

1.1 1.2

1.0 20.77.7

146.3 146.2

265.2 271.5

249.2

1Q15 2Q15 3Q15 4Q15 1Q16


Change YoY:

Change QoQ:

Recurrent:

+0.8%

+0.5%145.2 145.7 146.4

1.1 5.5 0.0

146.3 151.1 146.4

1Q15 4Q15 1Q16


Change QoQ:

-3.4% in GBP

Recurrent:

-9.6%

105.2 95.1

15.27.7

120.4102.8

4Q15 1Q16



Balance sheet

Highlights:

• The group acquired control of TSB on 30 June 2015. As a result, the balance sheet numbers are not comparable with those of previous periods.

• Gross loans and advances to customers increased compared with the first quarter 2015 due to the acquisition of TSB. Compared with the previous quarter, the decrease is primarily explained by the negative trend of the GBPEUR exchange rate and by the payment received related to account receivable by the Deposit Guarantee Fund (DGF).

• On-balance sheet customer funds increased year-on-year. Compared with the previous quarter, they remain stable, with a +1.3% increase excluding TSB.

• The position with the ECB (TLTRO) amounted to €11,000 million as of 31 March 2016.

Balance sheet

(1) Balances with credit institutions include the following amounts of repos: €1,194 million as of 31.03.15, €3,102 million as of 31.12.15 and €595 million as of 31.03.16. (2) Deposits with central Banks and credit institutions include the following amounts of repos: €8,903 million as of 31.03.15, €7,181 million as of 31.12.15 and €4,279 million as of 31.03.16. (3) Includes other capital instruments (€739 million as of 31.03.15, €14 million as of 31.12.15 and €17 million as of 31.03.16), mainly mandatory convertible bonds. (4) The EURGBP exchange rate used for the balance sheet is 0.7340 as of 31.12.15 and 0.7916 as of 31.03.16.

Assets: • The Banco Sabadell group’s total assets increased

by 21.8% year-on-year to €204,021.0 million. Excluding TSB, total assets amounted to €161,189.1 million.

(4) (4)(€ million) 31.03.15 31.12.15 31.03.16 31.03.15 31.12.15

Cash and balance with Central Banks 1,606 6,139 5,559 246.0 -9.5Trading and derivatives portfo lios and o ther financial assets 3,785 3,098 4,146 9.5 33.8Available-for-sale financial assets 24,427 23,460 24,255 -0.7 3.4Loans and advances 117,789 154,754 149,020 26.5 -3.7

Balances with financial institutions (1) 4,237 6,206 3,762 -11.2 -39.4Loans to customers (net) 111,117 146,816 143,525 29.2 -2.2Debt securities 2,436 1,732 1,733 -28.9 0.0

Investments in associated companies 768 341 366 -52.3 7.3Property, plant and equipment 3,976 4,189 4,197 5.6 0.2Intangible assets 1,600 2,081 2,011 25.7 -3.3Other assets 13,529 14,566 14,468 6.9 -0.7T o ta l assets 167,480 208,628 204,021 21.8 -2.2

Trading and derivatives portfo lios 2,619 2,335 2,923 11.6 25.2Financial liabilities at amortised cost 148,860 189,469 184,104 23.7 -2.8

Central banks 8,905 11,566 11,020 23.8 -4.7Credit institutions (2) 17,695 14,725 12,958 -26.8 -12.0Customer deposits 98,176 132,876 130,757 33.2 -1.6Debt and other tradable securities 20,378 26,407 25,120 23.3 -4.9Subordinated liabilities 946 1,473 1,451 53.4 -1.5Other financial liabilities 2,761 2,422 2,799 1.4 15.5

Liabilities under insurance contracts 2,413 2,218 2,245 -7.0 1.2Provisions 362 346 335 -7.5 -3.3Other liabilities 1,645 1,492 1,625 -1.2 8.9Subto tal liabilit ies 155,901 195,860 191,232 22.7 -2.4

Shareholders' equity (3) 10,409 12,275 12,539 20.5 2.1Valuation adjustments 1,116 456 212 -81.0 -53.6M inority interest 55 37 38 -30.0 3.3Equity 11,579 12,768 12,789 10.4 0.2

T o ta l liabilit ies and equity 167,480 208,628 204,021 21.8 -2.2

Contingent risks 8,568 8,356 8,243 -3.8 -1.4Contingent liabilities 12,259 21,131 19,926 62.5 -5.7

C hange (%)


Loans and advances to customers:

• Gross loans and advances to customers, excluding repos, non-performing loans and accrual adjustments amounted to €138,254.6 million at the end of the first quarter 2016. This represents a 33.0% increase year-on-year, mainly due to the acquisition of TSB. Compared with the previous quarter, gross loans and advances to customers remain stable, decreasing by 1.5%, mainly due to the negative trend of the GBPEUR exchange rate.

• Excluding TSB, gross loans and advances to customers, excluding repos, non-performing loans and accrual adjustments, amounted to €103,724.2 million as of 31 March 2016, remaining stable compared with the same period in the previous year. The decrease compared to the last quarter is mainly due to the payment received related to the account receivable by the Deposit Guarantee Fund (DGF).

Loans and advances to customers

(1) The EURGBP exchange rate used for the balance sheet is 0.7340 as of 31.12.15 and 0.7916 as of 31.03.16.

Loans to customers by product type, 31.03.16 (%) (*)

(*) Excluding NPLs and accrual adjustments.

Loans to customers by customer profile, 31.03.16 (%) (*)

(1) (1)(€ million) 3 1.0 3 .15 3 0 .0 6 .15 3 0 .0 9 .15 3 1.12 .15 3 1.0 3 .16 3 1.0 3 .15 3 1.12 .15 3 1.12 .15 3 1.0 3 .16 3 1.0 3 .15 3 1.12 .15

M ortgage loans & credits 59,722 58,753 58,496 57,836 57,326 -4.0 -0.9 90,539 88,981 49.0 -1.7Other secured loans & credits 2,157 2,247 2,350 2,201 2,274 5.4 3.3 2,201 2,274 5.4 3.3Other loans 25,539 26,142 26,184 26,304 26,828 5.0 2.0 28,092 28,482 11.5 1.4Other credits 4,427 4,739 4,937 4,593 5,139 16.1 11.9 4,593 5,139 16.1 11.9Commercial loans 4,763 4,960 4,732 5,411 4,773 0.2 -11.8 5,665 5,000 5.0 -11.7Leasing 2,092 2,070 2,038 2,070 2,144 2.5 3.6 2,070 2,144 2.5 3.6Overdrafts and sundry accounts 5,262 5,886 6,140 6,122 5,239 -0.4 -14.4 7,207 6,235 18.5 -13.5Perf o rming g ro ss lo anst o cust o mers( exclud ing repo s andaccrual ad just ment s) 10 3 ,9 6 3 10 4 ,79 8 10 4 ,8 76 10 4 ,53 7 10 3 ,72 4 - 0 .2 - 0 .8 14 0 ,3 6 8 13 8 ,2 55 3 3 .0 - 1.5

Non-performing loans 14,716 13,835 13,025 12,254 11,569 -21.4 -5.6 12,470 11,765 -20.1 -5.7Accruals -153 -217 -133 -156 -206 35.1 32.4 -141 -192 25.5 35.5Perf o rming g ro ss lo anst o cust o mers ( exclud ing rep o s) 118 ,52 7 118 ,4 16 117,76 8 116 ,6 3 5 115,0 8 7 - 2 .9 - 1.3 152 ,6 9 7 14 9 ,8 2 8 2 6 .4 - 1.9

Reverse repos 66 410 531 728 59 -10.5 -91.9 728 59 -10.5 -91.9Gro ss lo ans t o cust omers 118 ,59 3 118 ,8 2 6 118 ,2 9 9 117,3 6 3 115,14 6 - 2 .9 - 1.9 153 ,4 2 5 14 9 ,8 8 7 2 6 .4 - 2 .3

NPL and country-risk provisions -7,476 -7,220 -7,007 -6,426 -6,223 -16.8 -3.2 -6,610 -6,362 -14.9 -3.8Lo ans t o cust o mers ( net ) 111,117 111,6 0 5 111,2 9 2 110 ,9 3 7 10 8 ,9 2 2 - 2 .0 - 1.8 14 6 ,8 16 14 3 ,52 5 2 9 .2 - 2 .2

C hang e ( %) C hang e ( %)T o t al g roupExcl . T SB

Mortgage loans & credits64%

Ov erdraf ts and sundry accounts

4%

Other secured loans & credits

2%

Commercial loans4%

Other loans21%

Other credits4%

Leasing1%

Large corporates13%

SME20%

Indiv idual borrowers

54%

Public authorities4%

Real estate dev elopment

6%

Others3%


Gross loans and advances to customers (€ million)

Liabilities:

Customer funds:

• At the end of the first quarter 2016, on-balance sheet customer funds amounted to €131,290.1 million (€97,492.6 excluding TSB), a 38.3% increase year-on-year (2.7% excluding TSB).

• Sight accounts amounted to €83,251.4 million (€54,111.7 million excluding TSB), an 83.1% increase year-on-year (19.0% excluding TSB).

• Term deposits amounted to €46,030.7 million (€41,372.9 million excluding TSB), 9.0% less than the same period in the previous year (18.2% less excluding TSB) mainly due to the interest rates trend.

• Off-balance sheet customer funds totalled €37,107.5 million at the end of the first quarter 2016, an 8.5% increase compared with the previous year. They remain mostly stable in quarter-on-quarter terms, representing a 0.7% decrease compared with the previous quarter. The mutual funds amounting to €21,153.1 million as of 31 March 2016, represents a 13.3% increase year-on-year.

Marketable debt securities:

• As of 31 March 2016, this item amounted to €25,119.5 million (€21,601.3 million excluding TSB), compared with €20,378.2 million in the same quarter of the previous year.

Funds under management:

• Funds under management amounted to €196,680.2 million (€158,581.4 million excluding TSB), compared with €156,128.4 million in the previous year, a 26.0% increase year-on-year (1.6% excluding TSB).

103,811 104,581 104,743 104,381 103,518

134,875 134,847 140,226 138,063

14,716 13,835 13,025 12,254 11,569

14,087 13,24812,470 11,765

118,527 118,416 117,768 116,635 115,087

148,963 148,095 152,697 149,828



Loans Exc. NPL NPL Total

Change YoY: +33.0%Change QoQ: -1.5%

Total group (*)

Change YoY: -0.3%Change QoQ: -0.8%

Excl. TSB (*)

(*) Excluding NPLs.


Customer funds

(1) Includes customer deposits (ex-repos) and other liabilities placed via the branch network: non-convertible bonds issued by Banco Sabadell, commercial paper and others. (2) The EURGBP exchange rate used for the balance sheet is 0.7340 as of 31.12.15 and 0.7916 as of 31.03.16.

Customer deposits, 31.03.16 (%) (*)

(*) Excluding adjustments for accruals and hedging derivatives.

Customer funds (€ million)

(2) (2)(€ million) 3 1.0 3 .15 3 1.12 .15 3 1.0 3 .16 3 1.0 3 .15 3 1.12 .15 3 1.12 .15 3 1.0 3 .16 3 1.0 3 .15 3 1.12 .15

On- b alance sheet cust omer f und s (1) 9 4 ,8 9 9 9 6 ,2 2 7 9 7,4 9 3 2 .7 1.3 13 1,4 8 9 13 1,2 9 0 3 8 .3 - 0 .2

Customer deposits 98,176 97,625 96,705 -1.5 -0.9 132,876 130,757 33.2 -1.6 Current accounts 32,800 39,405 39,620 20.8 0.5 50,889 50,984 55.4 0.2 Savings accounts 12,680 14,445 14,491 14.3 0.3 33,647 32,267 154.5 -4.1 Fixed-term deposits 50,561 41,801 41,373 -18.2 -1.0 46,376 46,031 -9.0 -0.7 Repos 1,903 1,951 1,235 -35.1 -36.7 1,951 1,499 -21.2 -23.1Accruals 419 227 177 -100.0 -100.0 227 177 -57.7 -21.9Derivat ive hedging adjustments -186 -202 -191 2.8 -5.7 -213 -202 8.6 -5.5

Debt and other t radable securit ies 20,378 22,456 21,601 6.0 -3.8 26,407 25,120 23.3 -4.9Subordinated liabilit ies 946 925 922 -2.6 -0.3 1,473 1,451 53.4 -1.5Liabilit ies under insurance contracts 2,413 2,218 2,245 -7.0 1.2 2,218 2,245 -7.0 1.2

On- b alance sheet f und s 12 1,9 14 12 3 ,2 2 4 12 1,4 74 - 0 .4 - 1.4 16 2 ,9 74 159 ,573 3 0 .9 - 2 .1

M utual funds 18,674 21,427 21,153 13.3 -1.3 21,427 21,153 13.3 -1.3Equity funds 1,215 1,418 1,206 -0.8 -14.9 1,418 1,206 -0.8 -14.9Balanced funds 2,860 4,272 4,322 51.1 1.2 4,272 4,322 51.1 1.2Fixed-income funds 4,105 4,328 4,503 9.7 4.0 4,328 4,503 9.7 4.0Guaranteed return funds 3,673 3,380 3,337 -9.1 -1.3 3,380 3,337 -9.1 -1.3Real estate funds 16 67 83 426.7 22.4 67 83 426.7 22.4Dedicated investment companies 1,890 1,994 1,953 3.3 -2.1 1,994 1,953 3.3 -2.1Third-party funds 4,915 5,968 5,750 17.0 -3.7 5,968 5,750 17.0 -3.7

M anaged accounts 3,791 4,002 3,779 -0.3 -5.6 4,002 3,779 -0.3 -5.6

Pension funds 4,529 4,305 4,194 -7.4 -2.6 4,305 4,194 -7.4 -2.6Individual 2,989 2,760 2,706 -9.5 -2.0 2,760 2,706 -9.5 -2.0Company 1,524 1,530 1,473 -3.3 -3.7 1,530 1,473 -3.3 -3.7Group 17 16 15 -6.7 -2.2 16 15 -6.7 -2.2

Third-party insurance products 7,220 7,647 7,981 10.5 4.4 7,647 7,981 10.5 4.4

Of f - b alance sheet cust o mer f und s 3 4 ,2 15 3 7,3 8 1 3 7,10 7 8 .5 - 0 .7 3 7,3 8 1 3 7,10 7 8 .5 - 0 .7

F und s und er manag ement 156 ,12 8 16 0 ,6 0 5 158 ,58 1 1.6 - 1.3 2 0 0 ,3 55 19 6 ,6 8 0 2 6 .0 - 1.8

C hang e ( %) C hang e ( %)Excl. T SB T o t al g roup

Current accounts

39%

Savings accounts

25%

Fixed-term deposits

35%

Repos1%

Change YoY: +2.7% Change YoY: +38.3%Change QoQ: +1.3% Change QoQ: -0.2%

(*) Change on balance sheet customer funds.

Excl. TSB (*) Total group (*)

94,899 95,345 95,576 96,227 97,493

130,370 129,957 131,489 131,290

18,674 20,230 20,390 21,427 21,153

20,230 20,390 21,427 21,153

15,541 15,179 15,326 15,954 15,954

15,179 15,326 15,954 15,954

129,114 130,754 131,292 133,608 134,600

165,779 165,673 168,870 168,398



On-balance sheet customer funds Mutual funds Other Off-Balance (*)


Shareholders’ equity:

• At the end of the first quarter 2016, shareholders’ equity amounted to €12,788.6 million, a 0.2% increase compared with 2015 year-end. In 2015, a capital increase of €1,607 million was concluded, and €783.9 million of mandatory subordinated convertible bonds were converted into shares.

Shareholders’ equity

(1) Relates mainly to the issuance of mandatory convertible bonds.

(€ million) 31.03 .15 31.12.15 31.03.16 31.03 .15 31.12.15

Shareholders' equity 10,409 12,275 12,539 2,130 264

Issued capital 503 680 680 177 0

Reserves 9,073 11,111 11,819 2,747 709

Other equity instruments (1) 739 14 17 -722 2

Less: treasury shares -81 -238 -229 -148 9

Attributable net profit 175 708 252 77 -456

Less: dividends and payments 0 0 0 0 0

Valuation adjustments 1,116 456 212 -904 -244

M inority interest 55 37 38 -16 1

Equity 11,579 12,768 12,789 1,209 21

C hange


Risk management

Highlights:

• The NPL ratio was reduced to 7.50% at the end of the first quarter 2016 (-418 bp year-on-year and -29bp quarter-on-quarter). Excluding TSB, the NPL ratio was 9.45% (-223bp year-on-year and -41bp quarter-on-quarter).

• NPL coverage ratio reached 54.66% at the end of the first quarter 2016.

• Problem assets continued to decline throughout the quarter (€711 million excluding TSB).

• Coverage of foreclosed real estate assets reached 42.7% at the end of the first quarter 2016.

Loan-loss ratio and coverage:

• The group’s NPL ratio continued to decline due to the steady reduction in doubtful assets during the first quarter 2016.

• Non-performing loans declined by €670.2 million quarter-on-quarter and €3,188.8 million year-on-year. At the end of the first quarter 2016, the balance of doubtful exposures amounted to €11,674.1 million.

• Problematic assets declined by €711.1 million quarter-on-quarter and by €3,054.9 million year-on-year. At the end of the first quarter 2016, the balance of problematic assets stood at €20,867.5 million.

NPL ratio (%)

NPL coverage ratio (%)

NPL ratios by segment (*)

(*) NPL ratio is calculated including contingent risk and 20% of the APS.

11.68 10.98 10.38 9.86 9.45 9.01 8.51 7.79 7.50

1Q15 2Q15 3Q15 4Q15 1Q16 2Q15 3Q15 4Q15 1Q16


51.38 52.75 54.45 53.10 54.39 53.65 55.34 53.64 54.66

1Q15 2Q15 3Q15 4Q15 1Q16 2Q15 3Q15 4Q15 1Q16


Exc l. T SB 1Q15 2Q15 3Q15 4Q15 1Q16

Real estate development and/or construction purposes 49.21% 47.21% 47.84% 38.81% 37.01%

Construction purposes non-related to real estate dev. 9.03% 8.74% 8.58% 14.36% 12.18%

Large corporates 6.55% 6.14% 5.41% 4.62% 4.58%

SM E and small retailers and self-employed 12.20% 11.96% 11.38% 10.83% 10.23%

Individuals with 1st mortgage guarantee assets 9.12% 8.76% 8.27% 7.83% 7.82%

N P L ra t io 11.68% 10.98% 10.38% 9.86% 9.45%


Group NPL exposures excl. TSB (€ million)

Real estate assets excl. TSB (€ million)

Problem assets excl. TSB (€ million)

The table below shows the performance of the group’s problem assets, whose decline has accelerated in recent quarters.

Evolution of NPLs and RE assets ex. TSB (*)

(*) Data include 20% of the APS.

14,863 13,962 13,122 12,344 11,674

1Q15 2Q15 3Q15 4Q15 1Q16

9,059 9,227 9,228 9,234 9,193

1Q15 2Q15 3Q15 4Q15 1Q16

23,922 23,189 22,350 21,579 20,867

1Q15 2Q15 3Q15 4Q15 1Q16

(€ million) 1Q15 2Q15 3Q15 4Q15 1Q16

Entries 755 740 735 729 654

Recoveries -1,557 -1,471 -1,275 -1,273 -1,111

Ordinary net ent ries -802 -731 -540 -544 -457

Change in real estate assets 211 167 1 7 -41

N et ent ries plus change in rea l estate assets -591 -5 63 -539 -537 -498

Write-offs 245 170 300 234 213

R eal estate assets and N P L quarterly change -836 -733 -839 -771 -711


Real Estate portfolio breakdown by asset class:

The breakdown, as of 31 March 2016, by asset class of the real estate portfolio and developer loans is as follows:

Foreclosed assets, 31.03.16

Developer loans, 31.03.16

(1) Includes other guarantees.

Finished buildings; 54%

Under construction;

6%

Land; 40%

Finished buildings; 58%

Under construction;

5%

Land; 25%

Others (1); 12%


Capital management and credit ratings

Highlights:

• The phase-in Common Equity Tier 1 (CET1) ratio was 11.9% at the end of the first quarter 2016.

• The fully-loaded Common Equity Tier 1 (CET1) ratio was 11.8% at the end of the first quarter 2016.

• The minimum CET1 ratio required by the regulator is 9.25%.

• The leverage ratio was 4.91% at the end of the first quarter 2016.

Capital ratios

Credit ratings:

(€ million) 31.03.15 31.12.15 31.03.16

Issued capital 503 680 680

Reserves 8,993 11,429 11,642

M inority interest 24 24 20

Deductions -673 -1,924 -2,043

C o mmo n Equity T ier 1 8,847 10,209 10,298

C o mmo n Equity T ier 1 11.8% 11.5% 11.9%

Preferred Shares and convertible bonds 828 78 78

Deductions -828 -78 -78

P rimary capita l 8 ,847 10,209 10,298

T ier I 11.8% 11.5% 11.9%

Seco ndary capita l 777 1,208 1,139

T ier II 1.0% 1.4% 1.3%

Total capital 9,624 11,417 11,437

M inimum capital requirement 5,996 7,101 6,904

Capital surplus 3,628 4,316 4,533

T o ta l capital rat io 12.8% 12.9% 13.3%

R isk we ighted assets (R WA ) 74,945 88,769 86,299

Leverage rat io (%) 5.24 4.80 4.91

Agency Date Long term Short term Outlook

DBRS 28.10.2015 BBB (high) R-1 (low ) StableStandard & Poor's (1) 27.01.2016 BB+ B StableMoody's 08.04.2016 Ba1 NP Stable(1) Copyright by Standard & Poor’s, A division of the M cGraw-Hill Companies, Inc. Reproduced with permission of Standard & Poor’s.


Liquidity management

Highlights:

• The adjusted loan-to-deposits ratio as of 31 March 2016 was 104.9% (105.8% excluding TSB), with a balanced retail funding structure.

• The Liquidity Coverage Ratio (LCR) was above 100% as of 31 March 2016.

(1) The EURGBP exchange rate used for the balance sheet is 0.7916 as of 31.03.16.

Funding structure, 31.03.16

Wholesale funding breakdown, 31.03.16

Wholesale maturity calendar

(€ million) 31.03.15 31.12.15 31.03.16(1)

Gross loans to customers, excluding repos 118,527 152,697 149,828NPL and country-risk provisions -7,476 -6,610 -6,362Brokered loans -7,546 -6,069 -5,748Adjusted net loans and advances 103,505 140,018 137,719

On-balance sheet customer funds 94,899 131,489 131,290

Loan-to-deposits ratio (%) 109.1 106.5 104.9

Deposits71.2%

Retail issues2.8%

Repos3.3%

ICO f inancing2.8%

Wholesale f unding13.8%

ECB6.2%

Cov ered bonds49.4%Senior Debt

6.0%

Pref erred Shares and Subordinated

Debt5.6%

ECP10.2%

Securitisation24.6%

GGB4.3%

Outstanding

(€ million) 2016 2017 2018 2019 2020 2021 2022 >2022 balance

Covered bonds (CH) 720 2,022 1,561 1,124 2,165 2,108 1,119 1,289 12,108

GGB 0 1,059 0 0 0 0 0 0 1,059

Senio r Debt 1,293 17 100 0 0 0 25 0 1,434

Preferred Shares and Subordinated Debt 287 66 0 0 425 527 0 33 1,338

Other mid- and long-term financial instruments 0 0 18 0 0 10 0 6 34

T o ta l 2 ,300 3,163 1,679 1,124 2,590 2,645 1,144 1,328 15,973


Results by business units

The tables below summarise earnings and other indicators of the group’s business units.

The information presented here is based on the separate financial statements of each group company, on consolidation eliminations and adjustments, and on analytical accounting of revenues and expenses in cases in which a business is spread over more than one legal entity, to enable customer revenues and costs to be assigned to specific units.

Each business unit is treated as an independent business and transactions between them for the product distribution

or the provision of services and systems are priced on an arm’s-length basis. The aggregate impact on the group profit and loss account is zero.

Each business bears its own direct costs, on the basis of general and analytical accounting, as well as the indirect costs of corporate units.

Moreover, capital is assigned such that each business has capital equivalent to the regulatory amount required to reach the group’s target ratios on the basis of its risk assets.

(*) The exchange rate used for the balance sheet is GBP 0.7916 and that for the income statement is GBP 0.77. (**) The exchange rate used is USD 1.1385 in 2016 and in 2015. (***) The reconciliation with total group results must include other geographies not shown here, and the tax effect.

Gross Profit Cost /operating before ROE income Employees Domestic

31.03.2015 income tax ratio branches(€'000) (€'000)

Banking business Spain 1,611,562 372,607 13.8% 43.9% 16,044 2,252Real Estate asset transformation -10,187 -149,598 -21.9% -- 712 0Banking business UK (*) 0 0 0.0% 0.0% 0 0Banking business America (**) 53,632 16,334 12.6% 59.8% 716 27

239,342 (***)

Gross Profit Cost /operating before ROE income Employees Domestic

31.03.2016 income tax ratio branches(€'000) (€'000)

Banking business Spain 1,148,715 470,927 18.4% 44.5% 16,011 2,205Real Estate asset transformation 25,522 -200,892 -22.0% 81.5% 712 0Banking business UK (*) 312,687 68,371 9.0% 67.5% 8,199 612Banking business America (**) 72,788 25,845 13.0% 50.7% 1,012 30

364,250 (***)


Share price performance

(1) Without adjusting historical values. (2) Considering lineal annualised profit to date and accrued contributions to the Deposit Guarantee Fund.

Shareholders’ structure

Source: GEM, as of 31 March 2016

Change (%)31.03.15 31.12.15 31.03.16 YoY

Shareholders and tradingNumber of shareholders 229,181 265,935 262,221 14.4Number of shares 4,024,898,657 5,439,244,992 5,439,244,992 35.1Average daily trading volume (number of shares) 33,465,316 32,155,802 32,559,343 -2.7

Share price (€) (1)

Opening session (of the year) 2.205 2.205 1.635High (of the year) 2.499 2.499 1.774Low (of the year) 2.053 1.577 1.375Closing session (end of quarter) 2.279 1.635 1.582Market capitalisation (€ '000) 9,172,744 8,893,166 8,604,886

Stock market multiplesEarnings per share (EPS) (€) (2) 0.14 0.13 0.14Book value per share (€) 2.58 2.26 2.29Price / Book value (times) 0.88 0.72 0.69Price / Earnings ratio (P/E) (times) 15.91 12.55 11.05

Including conversion of convertible bonds:Fully diluted number of shares including conversion of convertible bonds 4,289,705,145 5,479,755,323 5,479,755,323Earnings per share (EPS) (€) (2) 0.13 0.13 0.14Book value per share (€) 2.42 2.24 2.28Price / Book value (times) 0.94 0.73 0.69

Institutional investors

45.6%

Retail shareholders

54.4%


Other key developments in the quarter Transfer of the full holding of Banco Sabadell in Dexia Sabadell S.A. to Dexia Crédit Local, S.A.

On 14 April 2016, Banco Sabadell transferred its full holding (20.994% of its share capital) in Dexia Sabadell, S.A. to Dexia Crédit Local, S.A. (Dexia), at a price of €52,390,600.50, representing gross gains for Banco Sabadell in the same amount, under the terms ratified by the arbitration award. This transfer was the result of Banco Sabadell exercising its sale option on 6 July 2012 to Dexia, holder of the remaining share capital of the above-referred institution. The transfer of shares by Banco Sabadell and their acquisition by Dexia occurred after having sent the relevant communications to the corresponding regulatory authorities.

Formalisation of shareholder remuneration

The Board of Directors of Banco de Sabadell agreed, during their meeting held on 31 March 2016, following the conclusion of the Ordinary General Meeting of Shareholders held on this date, to implement a capital increase (Increase) in order to formalise the flexible shareholder remuneration (scrip dividend), the main terms of which are as follows: (a) Each shareholder received the right of cost-free allocation for each Banco Sabadell share of which they are holders. (b) The rights of cost-free allocation were assigned to legitimate Banco Sabadell shareholders recorded in the Iberclear accounting records at 23:59 on the day of publication of the notice of the capital increase in the Official Gazette of the Mercantile Registry. (c) The number of cost-free allocation rights required to receive a new share was 34. (d) The nominal amount of the Increase was €19,997,224.125 (e) The price of the irrevocable commitment of the purchase of rights undertaken by Banco Sabadell was €0.048 (gross) per right. (f) The trading period of cost-free allocation rights was 15 calendar days. (g) The payment in cash to those who have opted to receive their remuneration in cash by virtue of the purchase commitment is expected to take place on 22 April 2016. (h) The expected start date for the ordinary purchase of new shares from the Increase is 4 May 2016.

The Board of Directors of Banco Sabadell agreed on the supplementary shareholder remuneration of €0.02 per share, approved by the General Ordinary Meeting of Shareholders under motion number two of agenda item three for legitimate shareholders of Banco Sabadell recorded in the accounting records of IBERCLEAR participating companies at 23:59 on 6 April 2016. This supplementary remuneration was settled on 14 April 2016.


Annex: TSB The performance of TSB’s income statement and balance sheet is shown below: Income statement:

1 Franchise comprises the retail banking business carried out in the United Kingdom, which offers a broad range of retail financial services.

2 Mortgage enhancement is a separate portfolio of mortgage assets which was assigned to TSB with effect from 28 February 2014. This segment was established in response to a review by the Office of Fair Trading of the effect on

competition of the divestment of TSB and is designed to increase TSB’s profitability.

3 UKAR Portfolio is a GBP 3,006 million portfolio of former UKAR mortgage loans and unsecured loans which was acquired from Cerberus Capital Management group with effect from 7 December 2015.

Balance sheet:

(1) The customer lending and customer deposit exclude macro fair value hedge accounting adjustment.

(GBP millions) 1Q15 4Q15 1Q16 % QoQ % YoY

Franchise1 172.3 180.4 183.2 1.6% 6.3%

Mortgage enhancement2 20.0 16.7 14.8 -11.4% -26.0%

Portfolio UKAR3 --- 3.3 20.5 -- --

Net Interest Income 192.3 200.4 218.5 9.0% 13.6%

Franchise1 33.1 30.9 28.6 -7.4% -13.6%

Mortgage enhancement2 -2.6 -2.4 -2.2 -8.3% -15.4%

Portfolio UKAR3 --- -1.1 -1.9 72.7% --

Other operating income 30.5 27.4 24.5 -10.6% -19.7%

Total income 222.8 227.8 243.0 6.7% 9.1%

Total operating expenses (excl. one-offs) -169.8 -176 .5 -164.0 -7.1% -3.4%

Franchise1 -18.8 -21.9 -18.5 -15.5% -1.6%

Mortgage enhancement2 --- -0.1 --- --- --

Portfolio UKAR3 --- --- -0.6 --- --

Impairment on loans & advances -18.8 -22.0 -19.1 -13.2% 1.6%

Management profit (excl. one-offs) 34.2 29.3 59.9 104.4% 75.1%

1Q15 4Q15 1Q16 QoQ YoY

Franchise NIM 3.71% 3.45% 3.38% -0,07 pp -0,33 pp

(GBP millions) 1Q15 4Q15 1Q16 % YoY %QoQ

Core mortgages 16,461 18,904 20,200 22.7% 6.9%

Mortgage enhancement 2,678 2,272 2,157 -19.5% -5.1%

Portfolio UKAR --- 3,006 2,873 --- -4.4%

Other net customer lending 2,242 2,215 2,200 -1.9% -0.7%

Total Customer lending (Net) (1) 21,381 26,397 27,430 2 8.3% 3.9%

Savings deposits 16,759 17,026 17,605 5.0% 3.4%

Current account deposits 7,031 7,872 8,191 16.5% 4.1%

Business banking deposits 871 975 948 8.8% -2.8%

Total customer deposits (1) 24,661 25,873 26,744 8.4% 3.4%

Mar-15 Dec-15 Mar-16 YoY QoQ

Loan to deposit (Franchise) 75.8% 81.6% 83.8% + 8,0 pp + 2,2 pp

Common Equity Tier 1 Capital ratio 19.8% 17.8% 17.7% - 2.1 pp - 0.1 pp


Investor Relations

For further information, contact:

[email protected]

+34 93 728 12 00

Investor Relations

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