Banco Sabadell has taken stock of the 2021 financial year this Thursday at its general meeting of shareholders in Alicante. And Josep Oliu, president of the entity, has warned of the negative impact of the Russian offensive on the economy and warns of a possible rise in defaults. “The coincidence of the end of the maturities of the loans covered by the ICO guarantee with the beginning of the disruption caused by the outbreak of the war recommends prudence to face its possible effects”, Oliu assured the shareholders. A day before, he already advanced this issue in a meeting with journalists: “There may be increases in circumstantial delinquency rates.”
Due to this concern that exists in the sector, Sabadell demands that the necessary aid and tax measures be adapted to prevent the fall of viable companies. Especially those that depend more on energy or raw materials that have skyrocketed as a result of the war. “The impact of the war in Ukraine puts Europe before the prospect of lower growth rates and higher inflation rates, especially while the war lasts,” Oliu said on the board, who considers that the coronavirus crisis has ceased to affect be a central condition.
To avoid an increase in defaults, the Catalan entity considers it appropriate to repeat the model that worked during the coronavirus crisis with measures such as ICO credits. In fact, César González-Bueno, CEO of the bank, applauded the government’s announcement on Wednesday about the extension of the grace periods for ICOs and the opening of a new line of financing. And before the shareholders he has explained his need because the delinquency ratio has already “grown slightly to 3.65%”.
According to the bank’s forecasts, the economy will maintain its growth path, although it will do so at a slower pace. In Spain and at Banco Sabadell there is limited exposure to Russia. However, indirectly the blow can be noticeable. “We are exposed to the impact that the current situation has on the Spanish economy,” González-Bueno stressed. Despite this, the CEO explained a day before to the media that delinquency “is going better than expected”, although they are vigilant.
The bank does not quantify the force of the impact on the economy, but it does assume that there will be one due to the doubts generated by the military conflict: “The uncertainty has been reflected, for the moment, in an escalation in the prices of energy and raw materials, as well as in episodes of scarcity of some of them that affect our business fabric”. A famine that in recent weeks has been increased by the stoppage of transport.
These increases have caused inflation to skyrocket even higher. A factor that presses the ECB to take the step of raising interest rates, a decision that would benefit banks by increasing margins. “In Europe, people are already beginning to think about the first rate hikes. It is said that perhaps before the end of this year, ”Oliu assured this Wednesday.
He knows in depth all the sides of the coin.
Tour of Catalonia
On a possible return of the bank’s headquarters to Catalonia, the president of Sabadell was blunt before the press: “I don’t know what has to happen, but it hasn’t happened. That is why this matter is not on the agenda.” He has also addressed the decision and consequences of not carrying out the merger with BBVA at the meeting. “The strategic decision to continue as a solo bank made at the end of 2020, after exploring the path of a possible merger, has been very successful due to the revaluation of the bank. In addition, a new impulse of optimism has been given to our project for the future”.
One of the legs that has been valued the most since then is its British subsidiary TSB, as González-Bueno stressed at the meeting: “In 2021 TSB has contributed 118 million euros to the group’s results, which contrast with the losses 220 million from the previous year. For this reason, as well as the good performance of the bank as a whole, Sabadell maintains its commitment to achieve a return (ROTE) of 6% during this financial year.