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2014 EU-wide Stress Test Summary for Banco de Sabadell, S.A.

Core Content Overview

The 2014 EU-wide Stress Test evaluates the financial resilience of Banco de Sabadell, S.A. under both Baseline and Adverse scenarios, with a focus on capital adequacy, risk exposure, and impairment losses. The test spans from the end of 2013 to the end of 2016, analyzing the bank's performance in terms of operating profit, capital ratios, and risk-weighted assets.

Key Financial Indicators

Actual Figures (as of 31 December 2013)

• Operating profit before impairments: 2,111 min EUR
• Impairment losses on financial and non-financial assets in the banking book: 1,726 min EUR
• Common Equity Tier 1 (CET1) capital: 8,227 min EUR
• Total Risk Exposure: 80,189 min EUR
• CET1 ratio: 10.3%

Outcome of Adverse Scenario (as of 31 December 2016)

• 3-year cumulative operating profit before impairments: 2,530 min EUR
• 3-year cumulative impairment losses on banking book assets: 3,927 min EUR
• 3-year cumulative losses from the stress in the trading book: 92 min EUR
• Valuation losses due to sovereign shock after tax and prudential filters: 610 min EUR
• CET1 capital: 6,661 min EUR
• Total Risk Exposure: 79,914 min EUR
• CET1 ratio: 8.3%

Outcome of Baseline Scenario (as of 31 December 2016)

• 3-year cumulative operating profit before impairments: 2,788 min EUR
• 3-year cumulative impairment losses on banking book assets: 2,107 min EUR
• 3-year cumulative losses from the stress in the trading book: 47 min EUR
• CET1 capital: 8,375 min EUR
• Total Risk Exposure: 81,997 min EUR
• CET1 ratio: 10.2%

Memorandum Items

Common EU-wide CET1 Threshold

• Adverse Scenario: 5.5% (Threshold: 4,395 min EUR)
• Baseline Scenario: 8.0% (Threshold: 6,560 min EUR)

Mandatory Conversion of Instruments

• Cumulative conversions (2014-2016): 842 min EUR
• Conversions not considered for CET1 computation: 842 min EUR

Additional Tier 1 and Tier 2 Instruments

• Eligible instruments that convert into CET1 or are written down: 0 min EUR
• Eligible instruments with trigger above CET1 ratio in adverse scenario: 0 min EUR

Risk Exposure Breakdown (as of 31 December 2013)

Impairment and Coverage Ratios (Baseline and Adverse Scenarios)

Baseline Scenario

Adverse Scenario

Key Observations

• Capital Adequacy: The CET1 ratio dropped from 10.3% (2013) to 8.3% in the adverse scenario by 2016, while it remained stable at 10.2% in the baseline scenario.
• Impairment Trends: Impairment losses increased significantly in the adverse scenario (3,927 min EUR) compared to the baseline (2,107 min EUR).
• Operating Profit: Operating profit before impairments was higher in the baseline scenario (2,788 min EUR) than in the adverse scenario (2,530 min EUR).
• Risk Exposure: Total risk exposure increased slightly in the baseline scenario (81,997 min EUR) compared to the adverse scenario (79,914 min EUR).
• Valuation Losses: The adverse scenario included valuation losses due to sovereign shock (610 min EUR), which were not present in the baseline scenario.
• Mandatory Conversions: The bank had 842 min EUR in instruments with mandatory conversion during the 2014-2016 period, but none of these instruments were eligible to convert into CET1 or be written down in the adverse scenario.

Conclusion

The 2014 EU-wide Stress Test shows that Banco de Sabadell, S.A. experienced a decline in CET1 capital under the adverse scenario, but remained above the minimum threshold of 5.5% at 8.3% by 2016. In the baseline scenario, the CET1 ratio remained stable at 10.2%, indicating resilience to typical market conditions. The adverse scenario included higher impairment losses and valuation adjustments, reflecting the impact of a severe economic shock. The bank's exposure and risk management practices were tested under various models (F-IRB, A-IRB, STA), with the adverse scenario showing more pronounced effects on capital and risk metrics.