Banco de Sabadell, S.A.

Good morning, everyone, and thank you for joining us. My name is Lluc Sas, and I'm the Head of Investor Relations and Ratings.

It is a pleasure to welcome you to our second quarter 2025 results presentation. For the convenience of investors and analysts, this time and exceptionally, the webcast is being prerecorded, and therefore, there will be no live Q&A session.

In any case, our upcoming Capital Markets Day will follow the usual format with a live presentation and a Q&A session. During the event, we will be happy to answer any questions regarding both the strategic plan and the quarterly results.

As always, we are joined by our CEO, Cesar Gonzalez-Bueno; and our CFO, Sergio Palavecino. The presentation will follow the same structure as in previous quarters.

Our CEO will begin by highlighting the key developments of the quarter and discussing the most relevant topics. Then our CFO will cover financial results and balance sheet evolution.

Finally, our CEO will conclude with some closing remarks. I will now hand over to Cesar Gonzalez-Bueno to kick off the presentation.

Thank you, Lluc. Good morning, everyone.

Before starting our presentation, please allow me to share with you a change in the results presentation for this quarter. Following the agreement on the sale of TSB, we believe that Sabadell's performance, excluding TSB, has become more relevant.

Therefore, this quarter presentation focuses on the Spanish franchise. You will notice more detailed figures than usual, excluding TSB.

We hope you find it useful. Let us begin by highlighting the performance delivered in Q2.

Once again, the bank has reported a solid set of results, maintaining the positive momentum of the franchise. Starting with commercial activity, volumes continue to accelerate in Spain.

Performing loans rose by 6.1% year-on-year, while customer funds grew by 7.3%. Regarding asset quality, the cost of risk, excluding TSB, improved to 37 basis points in Q2.

The NPL ratio ex-TSB declined by 28 basis points in the quarter, reaching levels well below 3%. And the coverage ratio ex-TSB increased to 69%, which is 162 basis points more than in the previous quarter.

Looking at the right-hand side of the slide, core banking revenues, excluding TSB, remained resilient. NII increased slightly quarter-on-quarter, while fee income rose by 1.5%.

This results in a 0.6% growth in total core banking revenues. This performance underscores the stability of the income profile and our ability to generate sustainable revenue streams.

Next, total costs, excluding TSB, declined by 2.6% quarter-on-quarter. Costs remain well contained on a year-on-year basis with a modest increase of 1.8%.

This reflects our disciplined cost control. All in all, Sabadell ex-TSB generated a net profit of EUR 410 million in the quarter.

TSB contributed an additional EUR 77 million that will be factored into the final sale price. The reported return on tangible equity stood at 15.3% with a recurrent return on tangible equity reaching 14.4%.

For its part, the fully loaded common equity Tier 1 ratio stood at 13.6%, having continued to improve during the quarter. Finally, reflecting on our continued commitment to delivering shareholder value, the first interim cash dividend of EUR 0.07 will be paid in August.

On Slide 5, our strategy of prudent and profitable growth is translating into improved return on tangible equity guidance. As you can see, we are posting strong year-on-year loan book growth across all segments.

At the same time, we are significantly reducing the probability of default of new lending, demonstrating better credit quality. As a result, we have upgraded our total cost of risk guidance for '25 -- 2025 to 35 basis points.

Consequently, our return on tangible equity target has increased to 14.5%. In addition, we reached a capital generation of 61 basis points in the quarter before dividend accrual.

Indeed, our strategy of prudent and profitable growth also supports strong capital generation. Slide 6, evolution of business volumes in Q2.

Loan volumes in Spain continued to accelerate, growing by 3.6% quarter-on-quarter and by 6.1% year-on-year. International operations also showed positive momentum, particularly when adjusted for constant exchange rates.

All in all, the loan book, excluding TSB, grew by 3.1% quarter-on-quarter and by 5.7% year-on-year. On the funding side, we continue to see strong growth in off-balance sheet products, supported by net inflows and positive mark-to-market evolution.

Overall, customer funds ex-TSB increased by 1.3% quarter-on-quarter and by 6.7% year-on-year. Slide 7, new lending in Spain.

New mortgages in Q2 increased by 10% quarter-on-quarter and by 21% year-on-year. New consumer loans grew by 7% quarter-on-quarter and by 17% year-on-year.

New loans and credit facilities to SMEs and corporates rose by 30% quarter-on-quarter, remaining broadly stable on a year-on-year basis. Finally, origination of working capital finance remained fairly stable.

Loan origination remained at strong levels across all products in Q2, continuing to foster loan book growth, both in individuals and in companies. Slide 8.

Payment-related services in Spain remained strong in Q2. Cards turnover increased by 10% in the quarter, while point-of-sale turnover rose by 15%.

On a year-on-year basis, cards increased by 8%, while point of sale increased by 4%. In the bottom half of the slide, we can see the evolution of customer funds in savings and investment products in Spain.

They grew by EUR 5.7 billion in the year, driven by off-balance sheet products. Slide 9 shows our solid loan growth across key segments, reflecting positive commercial momentum.

In Spain, performing loans reached more than EUR 100 billion as of June. This represents a 3.6% increase quarter-on-quarter and a 6.1% year-on-year.

This growth was broad-based. Mortgages rose steadily and consumer lending surged by over 20% year-on-year, reflecting strong demand from households.

Lending to SMEs and corporates remained resilient and grew by more than 3% year-on-year, supported by a solid pipeline of long-term financing and working capital solutions. Public sector lending posted double-digit annual growth.

Given its low risk-weighted asset density, this is positive for both our capital generation and profitability. Finally, other lending is positively impacted by the seasonal effect of the social security payroll, which will revert next quarter.

Moving to the right-hand side of the slide, our international loan book ex-TSB totaled more than EUR 15 billion. At constant FX, this portfolio grew by more than 5% in the quarter and by more than 11% on a year-on-year basis.

All in all, loan book ex-TSB grew by 3.1% quarter-on-quarter and by 5.7% year-on-year. Slide 10, U.K.

business. Starting with mortgage lending, new origination totaled GBP 1 billion in Q2, a 29% decline quarter-on-quarter.

This is related to a higher volume of transactions in Q1 in anticipation of the stamp duty changes that came into effect on 1st April. That said, mortgage applications increased by 11% over the quarter.

This supports a stable outlook for future lending volumes. Looking at the stock, total performing loans remained broadly flat at GBP 36 billion.

On the funding side, we observed a modest shift from current accounts to savings products in the quarter. Total customer deposits remained stable and broadly aligned with the loan book, maintaining a loan-to-deposit ratio close to 100%.

Slide 11, TSB's financial performance. NII declined this quarter by 1.4%.

This is mainly explained by a positive one-off in Q1 of GBP 7 million, which offset the higher contribution from the structural hedge. Nevertheless, on a year-on-year basis, NII rose by 7.9%.

This is in line with our annual guidance of high single-digit growth. Fees and commissions are not so relevant for TSB and are volatile given the low baseline figure.

Total expenses rose by 3% in Q2 due to some personnel cost inflation. On a yearly basis, costs were down by 6.1%.

This is consistent with our full year guidance of a 3% decline. Finally, provisions for the quarter were negligible as we released GBP 18 million, driven by an update in macro assumptions and models.

All in all, TSB generated a net profit of GBP 65 million in the second quarter, contributing EUR 77 million to the group. This contribution will be factored into the final valuation of the TSB sale, supporting value creation for Sabadell shareholders.

Slide 12, summary of financial performance. Looking at the quarter ex-TSB, net interest income remained stable above EUR 900 million.

Fees grew by 1.5%, while costs were down by 2.6% and provisions also improved significantly. Therefore, a strong bottom line performance in the quarter that implies a net profit ex-TSB above EUR 800 million in the first half of the year.

At group level, net profit reached close to EUR 1 billion in the first half. Let me highlight that we have delivered the highest first half net profit in the bank's history for the ex-TSB perimeter.

Regarding capital and profitability, the core Tier 1 ratio rose to 13.6% and recurring return on tangible equity reached 14.4%. In summary, these results validate the effectiveness of our strategy and the operational execution, placing the group in a strong position to beat the former profitability targets and improving our 2025 return on tangible equity guidance to 14.5%.

With that, I will now pass the floor to Sergio, who will provide a more detailed overview of the bank's financial performance.

Thank you, Cesar, and good morning, everyone. Let's move on to the financial results.

Slide 14 provides an overview of the group's financial performance, both including and excluding TSB, for the second quarter and first half of the year. I would like to highlight that these results reflect our solid track record and ongoing focus on driving profitability improvements, and we'll get into the details in the next few pages.

Looking at the year-on-year comparison, it is worth bearing in mind that EUR 31 million were booked this quarter for the bank tax. No amounts were booked for this item in the second quarter of last year.

Let's now take a closer look at the main P&L items. For that, I'd like to focus on Sabadell's performance excluding TSB, although the figures at group level are also shown.

Starting with NII on Slide 15. We can see that excluding TSB, NII is stabilizing after having recorded a small increase quarter-on-quarter.

On the right-hand side of this slide, we can see that the positive impact from larger loan volumes and lower wholesale funding costs mitigated the drag from lower customer margins, a reduced liquidity contribution and FX headwinds. TSB added EUR 303 million, which represents a EUR 9 million decline explained by a positive one-off recorded in Q1 and the depreciation of the sterling.

Lastly, as expected, customer and net interest margins, excluding TSB, both posted a slight decline in the quarter due to the downward repricing of the loan book. Let's now focus -- let's now discuss fees in the next page.

Excluding TSB, the quarter delivered a 1.5% increase in fees, driven by an increase in risk-related and service fees, stemming especially from credit card usage and other transactional activities. This performance offset the decline in asset management revenues, which benefited from positive seasonality in the previous quarter.

On a year-on-year basis, growth accelerated to 4.6%, driven by asset management fees, particularly from insurance and wealth management. This evolution shows that our strategy on high value-added products has been successful.

Leaving the revenue line aside and turning to costs on Slide 17. Total group expenses remained well under control, decreasing by 0.8% in the quarter.

Excluding TSB, costs declined further by 2.6%, mainly due to the lower administrative and staff expenses, underscoring our continued focus on cost management. On a year-on-year basis, total costs posted a reduction of 0.3%, primarily driven by lower staff and administrative expenses at TSB, further supported by the impact of sterling depreciation.

Within the ex-TSB perimeter, costs rose by 1.8% year-on-year, driven by higher staff expenses, reflecting the accrual for the collective bargaining agreement and a slightly higher administrative expenses, which were partially offset by lower levels of amortization and depreciation. In the next slide, we turn to cost of risk.

We continue to observe a positive trend in credit provisions, which reflects the effectiveness of our risk management approach as well as our undergoing improvements in asset quality. Looking at the bridge on the top right-hand side from left to right, we booked EUR 64 million of loans provision ex-TSB during the quarter, equivalent to credit cost of risk of 19 basis points.

Provisions related to real estate assets were minimal as we continue to sell foreclosed assets at a premium. NPA management costs stood at EUR 35 million, in line with the usual run rate.

Other provisions mainly related to litigation and other asset impairments amounted to EUR 9 million. This is lower quarter-on-quarter, thanks to a reduction in litigation provisions.

Finally, TSB provisions were negligible this quarter, impacted by updated assumptions in macro scenarios and models. All in all, total provisions equate to a group cost of risk of 30 basis points or 37% when excluding TSB.

On the back of these trends, combined with our management actions, we are now improving our 2025 guidance to around 35 basis points at the group level and to 40 basis points, excluding TSB. Moving on in the next section, I will walk you through asset quality, liquidity and solvency.

On Slide 20, we take a closer look at nonperforming loans, which showed further improvement both in the quarter and on a year-on-year basis. The nonperforming loan ratio for the ex-TSB perimeter dropped sharply to 2.8%, representing a year-on-year reduction of 100 basis points, while the coverage ratio increased by 2 percentage points in the quarter and by 6% in the year to reach 69%.

This, again, confirms that the improvement in cost of risk is not coming at the expense of our coverage ratio. Looking at the exposures and coverage levels by stages on the right-hand side, we can see that Stage 2 and Stage 3 exposures ex-TSB each decreased by more than EUR 1 billion over the last 12 months.

Moving to the next slide. We can see that the stock of foreclosed assets keeps declining quarter after quarter.

A 14% reduction has been recorded on a year-on-year basis. I would like to point out that 95% of these assets are finished properties.

The coverage ratio remained broadly unchanged at 40%. Additionally, over the last 12 months, 25% of the stock has been sold at an average premium of 11%.

Overall, total NPAs, which include both nonperforming loans and foreclosed assets decreased by 20% year-on-year. Our gross net NPA ratios, excluding TSB, stood at 3.4% and 1.2%, respectively, improving both in the quarter and over the year.

To sum up, over the past 12 months, we have seen a strong improvement across all the 3 pillars of asset quality. Firstly, NPAs are down by 20% at the group level and by more than 20% ex-TSB.

Secondly, the coverage ratio is up by 5 percentage points in the ex-TSB perimeter. And finally, the cost of risk continues to improve.

Turning now to liquidity and credit ratings. The indicators, excluding TSB, show that we ended the quarter with a very sound liquidity position.

Our LCR remained at a solid level of 193%. The net -- the NSFR reached 138% and the loan-to-deposit ratio stood at 93%.

Moving on to credit ratings. Fitch recently placed Sabadell on rating watch positive after having already upgraded the bank's rating by 2 notches in the last 2 years.

In the next slide, we can see the current MREL position. We are comfortably meeting our MREL requirements in terms of both risk-weighted assets and leverage ratio exposure.

In addition, we have built a comfortable management buffer across all requirements, which is our funding plan needs and helps to reduce wholesale funding costs for the coming quarters. During the first half of the year, we successfully issued EUR 2.6 billion across the capital structure, including 1 AT1 instrument, one senior nonpreferred bond and a couple of covered bonds as well as an SRT transaction in the quarter.

Turning now to capital. At the end of June, our fully loaded CET1 ratio reached 13.56%, reflecting an increase of 25 basis points during this quarter and 110 basis points in the last 12 months when including the excess capital distributed.

Looking more closely at the quarterly evolution, we recorded 61 bps of capital generation per dividend accrual. That corresponds to 62 bps from organic CET1 generation after deducting AT1 coupons.

5 basis points from the fair value reserves adjustment and minus 6 bps from risk-weighted assets, which includes a positive impact of 8 basis points related to an SRT transaction. Then the accrual of 60% dividend payout represents minus 36 basis points.

From a regulatory standpoint, this translates into an MDA buffer of 40 -- sorry, 468 basis points. Finally, in terms of shareholder value creation, tangible book value per share increased by more than 15% year-on-year, including the distribution of more than EUR 0.23 in dividends paid to shareholders over the last 12 months.

I will now conclude my part of the presentation with an update on shareholder remuneration. Looking ahead, in less than 12 months, we are set to deliver a total amount of shareholder remuneration of EUR 3.8 billion, equivalent to 25% of our current market cap and EUR 0.79 per share.

This includes EUR 1.3 billion in recurring remuneration, aligned with our policy of 60% payout and the distribution of the excess capital above 13% CET1 as well as an extraordinary cash dividend of EUR 2.5 billion derived from the TSB sale. These returns will be delivered through a combination of 2 interim dividends and one final dividend plus the distribution of excess capital and the extraordinary dividend of EUR 0.50 per share to be paid once the TSB sale has been closed.

We are now announcing an interim cash dividend of EUR 0.07 per share to be paid by the end of August. With that, I'll hand over to Cesar, who will conclude today's presentation.

Thank you, Sergio. During this results presentation, I would like to review our 2025 financial targets.

On the right-hand side of the slide, you can see the guidance for Sabadell, excluding TSB. Following its sale, we believe it is also important to establish specific targets ex-TSB.

We expect net income to reach EUR 3.6 billion, fee income to grow at mid-single-digit rate and cost to increase at a low single-digit pace. Finally, the total cost of risk is expected to remain at around 40 basis points.

These targets are aligned with the performance seen year-to-date. At group level, we initially targeted NII in excess of EUR 4.9 billion for the full year 2025.

Given the impact of currency depreciation, we now expect to achieve NII at around that level. On the positive side, the FX effect has helped reduce costs.

So we improved our guidance from a 1% increase to a flattish year-on-year evolution. Next, we reaffirm our guidance of low single-digit growth for fees.

Provisions and total cost of risk are performing better than initially expected. This has led us to improve our full year guidance to 35 basis points.

This improvement also supports an upgrade in our 2025 return on tangible equity guidance from 14% to 14.5%. And with this, we finalize the presentation.

Right. Thank you, Cesar.

As I explained at the beginning, this webcast is prerecorded. Therefore, any questions regarding the quarterly results will be addressed during the Capital Markets Day presentation that will take place today at half past 8 Spanish time.

Thank you, Cesar. Sergio.

As always, Investor Relations team is at your disposal. Have a nice day.

Thank you all.