Banco de Sabadell has increased self-servicing at its branches in recent months as part of its drive to improve efficiency.
Source: David Ramos/Getty Images News via Getty Images It has been a busy few months for Banco de Sabadell SA.
The Spanish lender has undertaken a sweeping cost-cutting program, entered and then walked away from merger talks with domestic rival Banco Bilbao Vizcaya Argentaria SA, and announced a new CEO and CFO, all in less than five months.
With Jaime Guardiola having bid farewell as CEO at the company’s full-year 2020 earnings presentation, investors are now looking ahead to Sabadell’s new strategy, set to be delivered in May by its revamped executive team led by César González-Bueno. The bank’s cost-cutting efforts in recent months have gone some way to improving efficiency and profitability, but analysts say more will be required if it is to compete with its peers.
"Sabadell has tremendous challenges," said Daniel Lacalle, chief economist at Spanish asset manager Tressis. "If they want to present a credible message [in May] about the firm’s potential as an independent entity and a driver of, not just top-line growth, but return on tangible equity, they have to undertake a very significant reduction of costs and streamline their operations."
Sabadell is by far the least efficient of Spain’s five largest banks, S&P Global Market Intelligence data shows, with a cost-to-income ratio for the fourth quarter of 2020 of 80.8%. It was also the only one of the five to report a negative return on average equity. The bank’s weaker fourth-quarter performance came despite its introduction of a significant efficiency drive in October. Under the plan, Sabadell is increasing self-service banking in branches and centralizing modeling, controls and reporting in its corporate unit, which it said would allow it to reduce the use of outsourcing.
Sabadell also cut 1,800 jobs in Spain in the final quarter of 2020 as part of the restructuring program. The efficiency push will deliver the bank €141 million in annual gross savings, it said in a presentation, though the €314 million cost of restructuring means it will be some time before the bank sees a payback from the changes.
Further measures have been taken to improve efficiency at its U.K. subsidiary, TSB Banking Group PLC, which contributed a €220 million net loss to the overall group in 2020. Sabadell shuttered 93 TSB branches in 2020, with another 153 closures announced for 2021. […]