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The statutory information set out below consists of the following:
Auditor’s Report
Consolidated Annual Accounts
Consolidated Report of the Directors
The Consolidated Annual Accounts and Report of the Directors have
been prepared by all of the Directors of the company, whose
signatures appear on the original statements.
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Statutory
information
Torre BancoSabadell
Barcelona
Senior management offices
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Auditor’s Report
Statutory information
Banco Sabadell Annual Report 2006
163
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Consolidated Annual Accounts of the Banco Sabadell group for 2006 - Contents
Note
Title
Financial statements
Balance sheet
Income statement
Statement of changes in equity
Cash flow statement
Notes to the Accounts
Report of the Directors
Banco Sabadell Annual Report 2006
Principal business and accounting policies and practices
Banco Sabadell group
Proposed distribution of profits and basic earnings per share
Loans and advances to credit institutions
Debt securities
Other equity instruments
Trading derivatives (assets and liabilities)
Loans and advances to other debtors
Financial asset transfers
Other financial assets
Hedging derivatives (assets and liabilities)
Non-current assets held for sale and liabilities associated with non-current assets held for sale
Investments
Tangible assets
Intangible assets
Other assets
Deposits from credit institutions
Deposits from other creditors
Debt certificates including bonds
Subordinated liabilities
Other financial liabilities
Liabilities under insurance contracts
Provisions
Capital having the nature of a financial liability
Fair value of financial assets and liabilities
Foreign currency transactions
Minority interests
Valuation adjustments
Own funds
Contingent exposures
Contingent commitments
Off-balance sheet customer funds
Income statement
Taxation (income tax)
Segment reporting
Financial risk management
Environment
Related party transactions
Agents
Customer Service Department
Remuneration paid to directors and senior management group
Directors' duty of loyalty
Post-balance sheet events
Banco Sabadell group undertakings
Statutory information
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
Annex
165
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Consolidated balance sheet of the Banco Sabadell group
As at 31 December 2006 and 31 December 2005
€'000
Assets
Statutory information
Banco Sabadell Annual Report 2006
2006
2005
Cash and balances with central banks
904,751
553,449
Financial assets held for trading
Loans and advances to credit institutions (note 4)
Money market operations through counterparties
Loans and advances to other debtors
Debt securities (note 5)
Other equity instruments
Trading derivatives (note 7)
Memorandum item: Loaned or advanced as collateral
112,161
0
0
0
4,784
0
107,377
0
84,578
0
0
0
4,152
0
80,426
0
Other financial assets at fair value through profit or loss
Loans and advances to credit institutions
Money market operations through counterparties
Loans and advances to other debtors
Debt securities (note 5)
Other equity instruments (note 6)
Memorandum item: Loaned or advanced as collateral
295,580
0
0
0
39,689
255,891
0
261,134
0
0
0
0
261,134
0
Available-for-sale financial assets
Debt securities (note 5)
Other equity instruments (note 6)
Memorandum item: Loaned or advanced as collateral
3,499,367
3,063,473
435,894
1,673,304
3,084,011
2,709,308
374,703
1,169,229
Loans and receivables
Loans and advances to credit institutions (note 4)
Money market operations through counterparties
Loans and advances to other debtors (note 8)
Debt securities (note 5)
Other financial assets (note 10)
Memorandum item: Loaned or advanced as collateral
64,575,570
6,928,116
0
54,557,292
1
3,090,161
2,414,723
44,689,233
2,841,243
0
40,828,470
14
1,019,506
1,671,495
Held-to-maturity investments
Memorandum item: Loaned or advanced as collateral
0
0
0
0
Changes in the fair value of the hedged items in portfolio hedges of interest rate risk
0
0
317,591
316,221
12,426
2,221
292
0
0
9,901
12
70,858
0
57,709
0
0
13,149
0
229,670
229,670
0
0
248,423
248,423
0
0
0
0
4,971
8
Tangible assets (note 14)
For own use
Investment properties
Other assets leased out an operating lease
Memorandum item: Acquired under a finance lease
982,078
903,230
6,005
72,843
0
1,069,807
690,733
316,131
62,943
0
Intangible assets (note 15)
Goodwill
Other intangible assets
627,296
481,268
146,028
51,220
2,696
48,524
Tax assets
Current
Deferred (note 34)
763,264
52,531
710,733
834,390
72,124
762,266
65,782
53,486
389,326
2,844
386,482
1,003,577
995,500
8,077
72,779,833
52,320,395
Hedging derivatives (note 11)
Non-current assets held for sale (note 12)
Loans and advances to credit institutions
Loans and advances to other debtors
Debt securities
Equity instruments
Tangible assets
Other assets
Investments (note 13)
Associates
Jointly controlled entities
Group entities
Insurance contracts linked to pensions
Reinsurance assets
166
Prepayments and accrued income
Other assets (note 16)
Inventories
Other
Total assets
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€'000
Liabilities
119,845
0
0
0
0
115,657
4,188
79,379
1,203
0
0
0
75,148
3,028
Other financial liabilities at fair value through profit or loss
Deposits from credit institutions
Deposits from other creditors
Debt certificates including bonds
0
0
0
0
0
0
0
0
Financial liabilities at fair value through equity
Deposits from credit institutions
Deposits from other creditors
Debt certificates including bonds
0
0
0
0
0
0
0
0
63,270,224
300,499
4,112,937
0
30,090,641
23,923,137
1,767,554
3,075,456
45,134,820
808,311
3,476,447
0
23,023,190
15,093,323
1,040,947
1,692,602
0
0
253,543
27,660
1,161
0
201
704
0
256
122,625
0
0
122,625
0
0
2,765,683
2,309,775
Provisions (note 23)
Provisions for pensions and similar obligations
Provisions for taxes
Provisions for contingent exposures and commitments
Other provisions
499,873
298,488
2,830
94,569
103,986
466,543
276,639
2,833
87,775
99,296
Tax liabilities
Current
Deferred (note 34)
432,300
268,024
164,276
164,537
31,925
132,612
Accrued expenses and deferred income
214,674
196,868
Other liabilities (note 16)
269,550
61,480
Capital having the nature of a financial liability (note 24)
757,564
250,000
68,584,417
48,813,687
Financial liabilities held for trading
Deposits from credit institutions (note 17)
Money market operations through counterparties
Deposits from other creditors
Debt certificates including bonds
Trading derivatives (note 7)
Short positions
Financial liabilities at amortized cost
Deposits from central banks
Deposits from credit institutions (note 17)
Money market operations through counterparties
Deposits from other creditors (note 18)
Debt certificates including bonds (note 19)
Subordinated liabilities (note 20)
Other financial liabilities (note 21)
Changes in the fair value of the hedged items in portfolio hedges of interest rate risk
Hedging derivatives (note 11)
Liabilities associated with non-current assets held for sale (note 12)
Deposits from central banks
Deposits from credit institutions
Deposits from other creditors
Debt certificates including bonds
Other liabilities
Liabilities under insurance contracts (note 22)
Total liabilities
Banco Sabadell Annual Report 2006
2005
Statutory information
2006
167
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€'000
Equity
2006
2005
17,503
16,005
136,708
137,542
0
(363)
0
(471)
0
117,082
117,455
0
(593)
0
195
25
Own funds (note 29)
Capital or endowment fund
Issued
Unpaid and uncalled (-)
Share premium
Reserves
Accumulated reserves (losses)
Retained earnings
Reserves (losses) of entities accounted for using the equity method
Associates
Jointly controlled entities
Other equity instruments
Equity component of compound financial instruments
Other
Less: Treasury shares
Non-voting equity units and associated funds (savings banks)
Non-voting equity units
Reserves of holders of non-voting equity units
Stabilization fund
Profit or loss attributed to the group
Less: Dividends and remuneration
4,041,205
153,002
153,002
0
1,373,270
1,723,124
1,700,645
0
22,479
22,479
0
1,557
0
1,557
(1,865)
0
0
0
0
908,398
(116,281)
3,373,621
153,002
153,002
0
1,373,270
1,485,745
1,479,919
0
5,826
5,826
0
277
0
277
0
0
0
0
0
453,128
(91,801)
Total equity
4,195,416
3,506,708
72,779,833
52,320,395
8,218,834
8,218,834
0
0
6,339,021
6,333,245
0
5,776
21,703,635
19,626,656
2,076,979
16,599,561
14,742,768
1,856,793
Minority interests (note 27)
Valuation adjustments (note 28)
Available-for-sale financial assets
Financial liabilities measured at fair value through equity
Cash flow hedges
Hedges of net investments in foreign operations
Exchange differences
Non-current assets held for sale
Statutory information
Banco Sabadell Annual Report 2006
Total liabilities and equity
Memorandum items
Contingent exposures (note 30)
Financial guarantees
Assets earmarked for third-party obligations
Other contingent exposures
Contingent commitments (note 31)
Drawable by third parties
Other commitments
168
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Consolidated income statement of the Banco Sabadell group
For the years ended on 31 December 2006 and 2005
€'000
2006
Interest and similar income (note 33 (a))
Interest expense and similar charges (note 33 (a))
Remuneration of capital having the nature of a financial liability
Other
Return on equity instruments (note 33 (a))
2,476,719
(1,401,001)
(15,244)
(1,385,757)
2005 (*)
1,738,224
(778,405)
(6,160)
(772,245)
16,784
1,097,871
976,603
18,490
18,490
0
12,668
12,668
0
Fee and commission income (note 33 (b))
600,378
491,234
Fee and commission expenses (note 33 (b))
(50,117)
(44,120)
59,812
1,371,645
0
(984,350)
0
(457,453)
132,895
(2,925)
43,737
948,710
0
(776,435)
0
(227,785)
122,252
(23,005)
Net interest income
Share of profit or loss of entities accounted for using the equity method
Associates
Jointly controlled entities
Insurance activity (note 33 (c))
Insurance and reinsurance premium income
Reinsurance premiums paid
Benefits paid and other insurance-related expenses
Reinsurance income
Net provisions for insurance contracts liabilities
Finance income
Finance expense
36,398
20,776
0
24,856
(629)
(8,605)
64,701
11,282
0
31,813
1,427
20,179
Exchange differences (net)
48,644
42,059
1,811,476
1,586,882
20,400
21,697
(16,776)
(14,342)
31,361
25,284
Gross income
Sales and income from the provision of non-financial services (note 33 (e))
Cost of sales (note 33 (e))
Other operating income
Personnel expenses (note 33 (f))
(605,682)
(535,370)
Other administrative expenses (note 33 (g))
(308,617)
(256,993)
Depreciation and amortization
Tangible assets
Intangible assets
(106,981)
(83,200)
(23,781)
(88,671)
(71,051)
(17,620)
Other operating expenses (note 33 (h))
(11,463)
(10,889)
Net operating income
813,718
Banco Sabadell Annual Report 2006
Gains or losses on financial assets and liabilities (net) (note 33 (d))
Held for trading
Other financial instruments at fair value through profit or loss
Available-for-sale financial assets
Loans and receivables
Other
Statutory information
22,153
169
727,598
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€'000
2006
Impairment losses (net) (note 33 (i))
Available-for-sale financial assets
Loans and receivables
Held-to-maturity investments
Non-current assets held for sale
Investments
Tangible assets
Goodwill
Other intangible assets
Other assets
Statutory information
Provisioning expense (net)
Finance income from non-financial activities
Finance expenses of non-financial activities
Other gains
Gains on disposal of tangible assets
Gains on disposal of investments
Other
(254,781)
(2,467)
(241,777)
0
(68)
0
(444)
(8,268)
(1,757)
0
2005 (*)
(163,667)
(3,803)
(144,100)
0
939
(12,332)
0
0
(4,371)
0
14,334
(8,627)
7
13
(883)
(141)
88,968
15,200
30,939
42,829
78,522
54,852
1,056
22,614
Other losses
Losses on disposal of tangible assets
Losses on disposal of investments
Other
(31,582)
(7,753)
(2,367)
(21,462)
(40,537)
(12,563)
(704)
(27,270)
Profit or loss before tax
629,781
593,161
(273,307)
(176,974)
Income tax (note 34)
Banco Sabadell Annual Report 2006
Mandatory transfer to welfare funds
0
0
Profit or loss from ordinary activities
356,474
416,187
Profit or loss from discontinued operations (net) (note 33 (j)) (*)
554,831
38,780
Consolidated profit or loss for the period
911,305
454,967
2,907
908,398
1,839
453,128
2,97
1,48
Profit or loss attributed to minority interests (note 27)
Profit or loss attributed to the group
Basic earnings per share (€)
(*) The consolidated income statement for 2005, approved in 2006, has been adjusted to take account of reclassifications of discontinued operations.
These consist mainly of the operations of the Landscape real estate group as described in note 1.
170
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Consolidated statement of changes in equity for the Banco Sabadell group
As at 31 December 2006 and 31 December 2005
€'000
2006
2005
37,535
37,908
66,159
(7,839)
(20,412)
0
0
0
0
0
(593)
(912)
0
0
319
0
0
0
0
195
307
(7)
(105)
25
38
0
(13)
0
Consolidated profit or loss for the period
Published consolidated profit or loss for the period
Adjustments due to changes in accounting policy
Adjustments made to correct errors
911,305
911,305
0
0
454,967
454,967
0
0
Total income and expenses for the period
Parent
Minority interests
930,378
928,024
2,354
492,502
490,981
1,521
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Memorandum item: Equity adjustments allocable to prior periods
Effects of changes in accounting policies
Own funds
Valuation adjustments
Minority interests
Effects of errors
Own funds
Valuation adjustments
Minority interests
Banco Sabadell Annual Report 2006
19,073
19,534
56,292
(19,411)
(17,347)
0
0
0
0
0
230
(2,638)
1,930
0
938
0
0
0
0
(666)
(1,016)
(3)
353
(25)
0
(25)
0
0
Statutory information
Net income recognized directly in equity
Available-for-sale financial assets
Revaluation gains/losses
Amounts transferred to income statement
Income tax
Reclassifications
Other financial liabilities at fair value
Revaluation gains/losses
Amounts transferred to income statement
Income tax
Cash flow hedges
Revaluation gains/losses
Amounts transferred to income statement
Amounts transferred to the initial carrying amount of hedged items
Income tax
Hedges of net investments in foreign operations
Revaluation gains/losses
Amounts transferred to income statement
Income tax
Exchange differences
Translation gains/losses
Amounts transferred to income statement
Income tax
Non-current assets held for sale
Revaluation gains
Amounts transferred to income statement
Income tax
Reclassifications
171
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Consolidated cash flow statement for the Banco Sabadell group
As at 31 December 2006 and 31 December 2005
€'000
2006
Consolidated profit or loss for the period
Adjustment to profit or loss
Depreciation of tangible assets (+)
Amortization of intangible assets (+)
Impairment losses (net) (+/-)
Net provisions for insurance contract liabilities (+/-)
Provisioning expense (net) (+/-)
Gains/losses on disposal of tangible assets (+/-)
Gains/losses on disposal of investments (+/-)
Share of profit or loss of entities accounted for using the equity method (net of dividends) (+/-)
Taxes (+/-)
Other non-monetary items (+/-) (note 33.j)
Statutory information
Banco Sabadell Annual Report 2006
172
2005
911,305
488,434
83,200
23,781
254,781
457,453
(14,334)
(7,447)
(28,572)
(18,490)
273,307
(535,245)
454,967
621,410
78,445
17,703
162,715
227,785
6,360
(42,311)
(190)
(12,668)
189,758
(6,187)
1,399,739
1,076,377
Net increase/decrease in operating assets
Financial assets held for trading
Loans and advances to credit institutions
Money market operations through counterparties
Loans and advances to other debtors
Debt securities
Other equity instruments
Trading derivatives
Other financial assets at fair value through profit or loss
Loans and advances to credit institutions
Money market operations through counterparties
Loans and advances to other debtors
Debt securities
Other equity instruments
Available-for-sale financial assets
Debt securities
Other equity instruments
Loans and receivables
Loans and advances to credit institutions
Money market operations through counterparties
Loans and advances to other debtors
Debt securities
Other financial assets
Other operating assets
20,238,355
27,583
0
0
0
632
0
26,951
34,446
0
0
0
39,689
(5,243)
419,402
353,334
66,068
19,228,113
4,086,873
0
13,970,638
(53)
1,170,655
528,811
6,615,955
12,299
(24)
0
0
2,632
0
9,691
42,102
0
0
0
0
42,102
311,653
313,957
(2,304)
5,746,753
(1,876,066)
0
7,364,965
(23,558)
281,412
503,148
Net increase/decrease in operating liabilities
Financial liabilities held for trading
Deposits from credit institutions
Money market operations through counterparties
Deposits from other creditors
Debt certificates including bonds
Trading derivatives
Short positions
Other financial liabilities at fair value through profit or loss
Deposits from credit institutions
Deposits from other creditors
Debt certificates including bonds
Financial liabilities at fair value through equity
Deposits from credit institutions
Deposits from other creditors
Debt certificates including bonds
Financial liabilities measured at amortized cost
Deposits from central banks
Deposits from credit institutions
Money market operations through counterparties
Deposits from other creditors
Debt certificates including bonds
Other financial liabilities
Other operating liabilities
19,083,792
40,466
(1,203)
0
0
0
40,509
1,160
0
0
0
0
0
0
0
0
18,695,828
(507,812)
636,490
0
7,067,451
8,829,814
2,669,885
347,498
5,864,303
7,594
1,203
0
0
0
3,363
3,028
0
0
0
0
0
0
0
0
5,824,498
528,275
(240,418)
0
794,338
4,136,601
605,702
32,211
245,176
324,725
Adjusted profit or loss
Total net cash flows from operating activities
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€'000
2005
Investments (-)
Group entities, jointly controlled entities and associates
Tangible assets
Intangible assets
Held-to-maturity investments
Other financial assets
Other assets
1,122,535
54,205
451,789
616,541
0
0
0
317,614
81,910
193,111
42,593
0
0
0
Divestments (+)
Group entities, jointly controlled entities and associates
Tangible assets
Intangible assets
Held-to-maturity investments
Other financial assets
Other assets
206,008
150,995
48,988
6,025
0
0
0
184,579
5,660
172,816
6,103
0
0
0
(916,527)
(133,035)
0
141,206
139,341
0
1,280
507,564
726,607
0
1,498
229,502
17,737
0
70,128
70,306
0
0
0
(7,237)
0
0
171,362
7,441
1,023,319
(170,980)
Total net cash flows from investing activities
Issuance/Redemption of capital or endowment fund (+/-)
Acquisition of own equity instruments (-)
Disposal of own equity instruments (+)
Issuance/Redemption of non-voting equity units (+/-)
Issuance/Redemption of other equity instruments (+/-)
Issuance/Redemption of capital having the nature of a financial liability (+/-)
Issuance/Redemption of subordinated liabilities (+/-)
Issuance/Redemption of other long-term liabilities (+/-)
Increase/Decrease in minority interests (+/-)
Dividends/Interest paid (-)
Other items relating to financing activities (+/-)
Total net cash flows from financing activities
Net increase/decrease in cash or cash equivalents
Cash or cash equivalents at beginning of period
Cash or cash equivalents at end of period
(666)
195
351,302
553,449
904,751
20,905
532,544
553,449
Banco Sabadell Annual Report 2006
Effect of exchange rate changes on cash or cash equivalents
Statutory information
2006
173
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Notes to the consolidated annual accounts of the Banco Sabadell group
For the years ended on 31 December 2006 and 31 December 2005
Note 1. Principal business and accounting policies and practices
Statutory information
Banco Sabadell Annual Report 2006
174
Principal business
The corporate object of Banco de Sabadell, S.A. whose registered office is at Plaza de Catalunya, 1, Sabadell, Spain (also
referred to as "Banco Sabadell" or the "Bank") is to carry on business as a provider of banking services. As such, it is
subject to the laws and regulations applicable to all banks operating in Spain.
The Bank is the dominant company in a group of financial services undertakings whose activities it controls either
directly or indirectly and which, together with the Bank, make up the Banco Sabadell group (the "group" or the "Banco
Sabadell group").
Basis of presentation
On 1 January 2005, it became mandatory for companies to prepare their consolidated annual accounts in accordance
with the International Financial Reporting Standards adopted by the European Union ("IFRS-EU") if, at their balance sheet
date, their securities were admitted to trading on a regulated market in any Member State, under Regulation (EC) No
1606/2002 of the European Parliament and of the Council of 19 July.
This was followed by the publication of the Bank of Spain's Circular 4/2004 of 22 December (which replaced the
earlier Circular 4/1991), with the English title of “Credit Institutions - Public and Confidential Financial Reporting Rules
and Formats”, whose purpose was to amend the accounting rules for credit institutions to adapt them to IFRS-EU.
The consolidated annual accounts of the Banco Sabadell group for 2006 have been prepared in accordance with IFRSEU to give a true and fair view of the consolidated equity and financial position of the group and of the consolidated
results of its operations, the changes in consolidated shareholders' equity and the consolidated cash flows. These
consolidated annual accounts do not show any significant difference with respect to the accounts that would result from
being prepared in accordance with Bank of Spain Circular 4/2004. There is no obligatory accounting principle, standard or
valuation policy having a material effect that has not been applied in preparing the accounts. A summary of the most
significant accounting principles, standards and valuation procedures that have been applied in these consolidated
annual accounts is provided in this note.
The information provided in these consolidated annual accounts is the responsibility of the directors of the parent
company of the group. The consolidated annual accounts for the year 2006 were signed off by the directors of Banco
Sabadell at a meeting of the Board on 25 January 2007 and will be submitted to the Annual General Meeting for approval.
It is expected that the Meeting will approve the accounts without significant changes.
Unless otherwise indicated, these consolidated annual accounts are expressed in euros and all figures are rounded to
the nearest thousand euros (€'000).
Comparable data
The consolidated income statement for the year ended on 31 December 2005 has been amended to take account of
reclassifications of discontinued operations and thus facilitate comparisons between the two periods as required by IFRSEU. Details of discontinued operations are given in note 33 (j).
Accounting principles and policies applied
The most significant principles, accounting standards and valuation policies that have been applied in preparing these
consolidated annual accounts are as follows:
(a) Consolidation principles
In the consolidation process three types of entity are distinguished: subsidiaries, jointly controlled entities and associates.
Subsidiaries are entities over which the Bank is able exercise control and which therefore constitute, together with the
Bank, a decision-making unit. The ability to exercise control is generally, but not exclusively, manifested through the direct
or indirect holding of an interest giving the holder more than 50% of the voting rights in the subsidiary. Control means the
power to determine the financial and operating policies of the subsidiary so as to obtain profit from its activities, and may
be exercised even when a majority interest is not held.
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Statutory information
The group therefore includes all subsidiary undertakings that constitute a decision making unit together with the Bank.
These undertakings have been consolidated by the full consolidation method. Interests held by third parties in group
shareholders' equity are shown in the balance sheet under minority interests and the share of the profit or loss for the
year attributable to these shareholders is shown in the income statement under profit or loss attributable to minority
shareholders.
Profits or losses generated by entities acquired by the group during the year are consolidated solely on the basis of the
profits or losses generated in the period between the date of acquisition and the end of the year. Similarly, profits or
losses generated by entities disposed of by the group during the year are consolidated solely on the basis of the profits or
losses generated in the period between the beginning of the year and the date of disposal.
Jointly controlled entities are those which are controlled jointly by the group and one or more other entities not related
to the group. Entities of this kind undertake operations and maintain assets in such a way that any strategic decision of a
financial or operational nature concerning the entity requires the unanimous consent of all interest holders. Jointly
controlled entities have been consolidated by the proportionate consolidation method.
Associates are entities over which the group is able to exercise a significant influence which is generally, but not
exclusively, manifested through a direct or indirect interest that gives the group 20% of more of the voting rights. In the
consolidated accounts associates are accounted for by the equity method, that is, according to the fraction of the equity
represented by the group's shareholding, after taking account of any dividends received from the associate and other
eliminations.
In the consolidation process all significant balances and transactions between group undertakings have been
eliminated in such proportion as may apply according to the consolidation method used.
Details of the most significant acquisitions and disposals made by the group during the year are provided in note 2.
(b) Accrual principle
These annual accounts (with the exception of certain items of the consolidated cash flow statements) have been
prepared based on real movements of goods and services, regardless of the date on which payment was made or
received.
(d) Valuation and recording of financial instruments
Financial instruments are divided into the following categories according to the valuation method that is applied to them:
• Financial assets/liabilities held for trading
Financial assets/liabilities are classified as held for trading if they have been acquired or issued to be sold or
repurchased in the near term, or form part of a portfolio of financial instruments that are managed together and in which
there has been recent action for short-term profit taking, or are derivatives not designated as hedging instruments for
accounting purposes, or have arisen from the outright sale of financial assets purchased under reverse repurchase
agreements or borrowed.
Financial instruments of this type are recorded at fair value. The fair value of a financial asset on a given date is
defined as the amount for which the asset could be exchanged between knowledgeable, willing parties in an arm's length
transaction. The best evidence of the fair value of an asset is the price being quoted for the asset on an actively traded
market where the market is organized, transparent and of sufficient depth.
Where there is no market price for a particular financial asset, the fair value can be estimated from the values
established for similar assets in recent transactions or, failing that, by using suitably tested valuation models. Any
peculiarities specific to the financial asset being valued are also taken into account, particularly the different types of risk
with which it may be associated. However, the limitations inherent in the valuation models that have been developed and
possible inaccuracies in the assumptions required by these models may result in the estimated fair value of a financial
asset not precisely matching the price at which the asset could be bought or sold as of the valuation date.
Changes in fair value are taken directly to profit or loss. For non-derivative instruments, the gain or loss attributable to
the returns accruing on the instrument are treated differently from other gains or losses, with the former being recorded
as interest or dividends as appropriate, and the latter as gains or losses on financial assets and liabilities.
Banco Sabadell Annual Report 2006
(c) Use of judgements and estimates in preparing the financial statements
The preparation of consolidated annual accounts involves the making of estimates. It also requires the exercise of
judgement by senior managers in applying the group's accounting policies. Such estimates may affect the carrying value
of assets and liabilities and the classification of contingent assets and liabilities at the date of the annual accounts, as
well as income and expenditure items in the period covered by the accounts. Although estimates are based on the best
information concerning present and future circumstances that is available to senior managers, final outcomes may be at
variance with these estimates.
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• Other financial assets and liabilities at fair value through profit or loss
This category includes financial instruments not held for trading that are treated as hybrid financial instruments and are
valued entirely on a fair value basis. It also includes financial assets which are managed together with liabilities under
insurance contracts measured at fair value or with financial derivatives which have the purpose and effect of significantly
reducing exposure to changes in fair value, or which are managed in combination with financial liabilities and derivatives
for the purpose of significantly reducing overall exposure to interest rate risk. These are valued and recorded in the same
way as for financial assets/liabilities held for trading.
Statutory information
Banco Sabadell Annual Report 2006
176
• Available-for-sale financial assets
This category includes debt securities that are not classified as held-to-maturity or financial assets at fair value through
profit or loss, loans and receivables, or financial assets/liabilities held for trading; it also includes equity instruments of
entities that are not subsidiaries or associates of, or jointly controlled by, the group.
Available-for-sale financial assets are measured at their fair value. Changes in value other than those due to exchange
differences are temporarily recorded, net of tax, under valuation adjustments in consolidated equity. Amounts recorded as
valuation adjustments continue to be included in consolidated shareholders' equity until the asset from which they have
originated is derecognized on the balance sheet, when they are charged or credited to profit or loss.
• Loans and receivables
Loans and receivables are financial assets not traded on an active market or required to be designated as at fair value,
the cash flows on which are of a fixed or determinable amount and whose cost to the group will be recovered in full,
except for reasons related to borrower solvency. This category includes investments associated with normal bank lending
and amounts loaned to customers and not yet repaid; deposits placed with other financial institutions, regardless of the
legal arrangements under which the funds were provided; unquoted debt securities; and any debt incurred by the
purchasers of goods or services forming part of the group's business.
Loans and receivables are recorded at their amortized cost, where "amortized cost" means the acquisition cost of a
financial asset adjusted for any repayments of principal and the cumulative amortization (as shown in the income
statement using the effective interest rate method) of any difference between the initial cost and the repayment amount,
less any reduction in value due to impairment, whether recognized directly as a write-down of the asset or through a
provisioning account. Where loans and receivables are covered by fair value hedges, any change in their fair value is
recorded where the change is associated with the risk or risks covered by the hedge.
The effective interest rate is the discount rate that exactly equates the value of a financial instrument to the estimated
cash flows over the remaining life of the instrument, based on the contract terms of the instrument including any early
repayment option, but disregarding future losses due to credit risk. For a fixed-rate instrument the effective interest rate is
the same as the contract interest rate agreed at the time the instrument was acquired plus any fees or commissions that
qualify for treatment as interest. In the case of a variable-rate instrument the effective interest rate is the same as the
rate of return in respect of interest and fees on the instrument, until the first date on which the base rate is to be
reviewed.
Interest is determined by the effective interest rate method and recorded in the income statement under interest and
similar income.
• Financial liabilities at amortized cost
This category comprises those financial liabilities that cannot be classified under any other balance sheet heading and
are associated with the normal deposit-taking activity of a financial institution, regardless of the term and other
arrangements under which the deposit is set up.
Also included in this category is capital having the nature of a financial liability. This reflects the value of financial
instruments issued by the group which, although treated as capital for legal purposes, do not qualify for classification as
equity. These consist mainly of issued shares that do not carry voting rights and on which a dividend is paid based on a
fixed or variable rate of interest.
(e) Impairment of financial assets
In general, adjustments to the carrying value of financial assets are recognized in the income statement where there is
objective evidence that an impairment loss has occurred. In the case of debt instruments, that is, loans and debt
securities, an impairment loss is considered to have occurred when, after initial recognition of the instrument, a single
event or a combination of events causes a negative impact on its future cash flows. In the case of equity instruments, an
impairment loss is deemed to have occurred when, after initial recognition, a single event or a combination of events
makes it likely that the carrying value of the instrument will not be recovered.
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• Other equity instruments
Impairment losses on equity instruments carried at acquisition cost are accounted for as the difference between the
carrying amount and the present value of the expected future cash flows discounted at the market rate of return for similar
securities. These impairment losses are recognized in the income statement for the period in which they occur, as a direct
write-down in the value of the instrument; this cannot be subsequently reversed other than through the sale of the asset.
In the case of investments in subsidiaries, jointly controlled entities and associates, the group estimates impairment
loss by comparing the amount recoverable with the carrying value of the investments. Losses are recognized in the
income statement for the period in which they occur; subsequent reversals of previously recognized impairment losses
are recognized in the income statement for the period in which recovery takes place.
(f) Transfer and derecognition of financial instruments
Financial assets are only derecognized on the balance sheet when the rights to cash flows generated by the assets have
expired or when substantially all of their risks and rewards have been transferred. Similarly, financial liabilities are
derecognized only when the obligations generated by the liabilities have expired or are acquired for settlement or resale.
Banco Sabadell Annual Report 2006
• Available-for-sale financial assets
Impairment losses on debt securities and equity instruments classified as available-for-sale financial assets are equal to
the positive difference between their acquisition cost net of any repayment of principal and their fair value, less any
impairment loss previously recognized in the consolidated income statement.
Where there is objective evidence that a diminution in the fair value of an asset is due to impairment, the unrealized
losses recognized directly in equity as valuation adjustments are recorded immediately in the income statement. If all or
part of the impairment losses are subsequently recovered, the amount is recognized, in the case of debt securities, in the
income statement for the period in which the recovery occurs; in the case of equity instruments, the recovery is
recognized in equity as a valuation adjustment.
Statutory information
• Financial assets carried at amortized cost
Portfolios of debt instruments, contingent exposures and contingent commitments, regardless of the borrower, the
contractual arrangements or the security/collateral, are analysed to determine the credit risk to which the group is
exposed and to estimate the impairment provision required. In preparing the consolidated financial statements the group
classifies its lending transactions on the basis of credit risk, with customer insolvency risk being analysed separately from
any country risk to which transactions may be exposed.
Objective evidence of impairment is determined individually for all debt instruments that are individually significant, and
individually or collectively for groups of debt instruments that are not individually significant. When an instrument cannot
be included in any group of assets with similar credit risk features, it is analysed solely on an individual basis to determine
whether it is impaired and, if so, to estimate the impairment loss.
Instruments are classified into the following categories, on the basis of the insolvency risk attributable to the customer
or to the transaction: standard, sub-standard, doubtful due to customer arrears, doubtful for reasons other than customer
arrears, and write-off. For debt instruments not classified as standard risks, the required provisions for impairment are
estimated having regard to the age of past-due accounts, the collateral or other security provided and the financial
situation of the customer and the guarantors. These estimates are made on the basis of default schedules drawn up by
the Bank of Spain from its knowledge and experience of the Spanish banking industry.
Similar estimates are also made to determine the credit risk on these instruments that is attributable to country risk.
Country risk means the risk associated with customers resident in a specific country that arises from circumstances
other than normal commercial risk.
In addition to these specific provisions, the group makes provision for latent losses in debt instruments classified as
standard risks by providing for impairment loss on a collective basis. The collective provision is made on the basis of
historical impairment experience and other circumstances known at the time of the risk assessment, and covers latent
losses that have been incurred at the balance sheet date and calculated using statistical procedures, but not identified
with specific transactions.
Since the group's own historical and statistical data are insufficient, it relies on parameters set by the Bank of Spain
when making these provisions. This method of determining provisions for latent loss due to impairment of debt
instruments involves the use of percentages which vary according to how debt instruments classified as standard risk are
assessed. The sub-categories into which standard risk instruments are classified are: negligible risk, low risk, medium-low
risk, medium risk, medium-high risk and high risk.
Interest recorded at contractual rates ceases to be recognized in the income statement for all debt instruments that
have been individually classified as impaired or for which impairment losses have been collectively calculated as a result
of there being accounts more than three months in arrears.
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Details of asset transfers that were in effect at the close of the years 2006 and 2005, including those that did not
result in assets being derecognized from the balance sheet, are given in note 9.
(g) Derivatives
Derivatives are instruments which, in addition to providing a gain or a loss, may under certain conditions offset all or part
of the credit and/or market risk associated with balances or transactions. The underlyings used in derivatives may be
interest rates, specified indices, the prices of specified securities, cross-currency exchange rates or similar benchmarks.
The group uses derivatives traded on organized markets or traded bilaterally with counterparties on the over-the-counter
(OTC) market.
Derivatives may be used as part of the service to customers when requested by them, or to manage risks associated
with the group's own exposures (hedging derivatives) or to realize gains as a result of price movements. Financial
derivatives that do not qualify for designation as hedging instruments are classified as trading derivatives. To be
designated as a hedging instrument, a financial derivative must satisfy the following conditions:
Statutory information
Banco Sabadell Annual Report 2006
178
• It must cover exposures to changes in the values of assets and liabilities caused by interest rate and/or exchange
rate movements (fair value hedge); exposure to changes in the estimated cash flows from financial assets and
liabilities and from highly probable forecast commitments and transactions (cash flow hedge); or the exposure
associated with net investments in foreign operations (hedge of the net investment in a foreign operation).
• It must effectively eliminate a significant portion of the risk inherent in the hedged item or position over the expected
term of the hedge. This means that the derivative must be effective both prospectively, at the date on which it is
entered into under normal circumstances, and retrospectively, based on reasonable evidence that the hedge will
remain effective throughout the life of the item or position to be hedged.
• Suitable documentation must be available to show that the financial derivative has been entered into specifically to
provide a hedge for certain balances or transactions and to show how effective coverage is to be achieved and
assessed (such assessment necessarily being consistent with the group's management of its own exposures).
The effectiveness of the coverage provided by derivatives designated as hedging instruments is documented by means
of effectiveness testing. This is used to verify that divergences due to changes in the fair value of the hedged item and the
hedging instrument remain within reasonable limits over the life of the transaction and that the intended effect of the
derivative contract at inception has been fulfilled. If at any time this condition is not met, all associated transactions in the
hedging group must be reclassified as held-for-trading and recognized accordingly in the balance sheet.
A hedge is considered to be highly effective if, at inception of the hedge and during its life, it is anticipated prospectively
that any changes in the fair value or cash flows of the hedged item that are attributable to the hedged risk are almost
entirely offset by changes in the fair value or cash flows of the hedging instrument. A hedge is deemed retrospectively to
have been highly effective if the gains or losses on the hedging instrument are within a range of 80% to 125% of the gains
or losses on the hedged item.
Derivatives embedded in other financial instruments or other primary contracts are recorded separately as derivatives
where the risk and other characteristics of the derivative are not closely related to those of the primary contract and
provided that the primary contract is not classified as held for trading or as other financial assets or liabilities at fair value
through profit or loss.
• Valuation
The fair value of a financial derivative quoted on an active market is determined from the daily market price. If,
exceptionally, the price of a derivative cannot be determined on a particular date, similar valuation methods are used as
for OTC financial derivatives.
The fair value of OTC derivatives is obtained by means of a discounted cash flow or option valuation model according to
procedures recognized by the financial markets.
• Hedge accounting
For financial instruments designated as hedged items or as hedging instruments, gains or losses in value are accounted
for according to the following criteria:
• For fair value hedges any gains or losses, whether in the hedging instrument or the hedged item, to the extent that
they relate to the type of risk being hedged, are recognized directly in the income statement.
• Gains or losses in value on the ineffective portion of cash flow hedging instruments are recognized directly in the
income statement.
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• In cash flow hedging, valuation differences in the effective portion of hedging instruments are temporarily recorded
in equity under valuation adjustments. Gains or losses in value are not recognized as profit or loss until the gains or
losses of the hedged item have been taken to the income statement or until the hedged item reaches maturity.
The group did not enter into any fair value or cash flow interest rate hedging contracts in respect of a portfolio of financial
instruments (macro-hedges) in 2005 or 2006.
1. It represents a separate major line of business or geographical area of operations.
2. It is part of a single co-ordinated plan to sell or otherwise dispose of a separate major line of business or
geographical area of operations.
3. It is a subsidiary acquired exclusively with a view to resale.
Banco Sabadell Annual Report 2006
(i) Discontinued operations
Gains or losses arising in the year on group operations classified as discontinued operations are recognized net of tax
under profit or loss on discontinued operations (net) in the consolidated income statement, whether the group operation
has been derecognized or remains on the balance sheet at the end of the year.
A discontinued operation or activity is a component of an entity that has been sold or otherwise disposed of or is
classified as a non-current asset held for sale and, in addition, meets the following conditions:
Statutory information
(h) Non-current assets held for sale and liabilities associated with non-current assets held for sale
The "non-current assets held for sale" heading of the balance sheet comprises the carrying values of assets –stated
individually or combined in a disposal group, or as part of a business unit that the group intends to sell (discontinued
operations)– which will very probably be disposed of in their current state within one year of the date of the consolidated
annual accounts. Investments in jointly controlled entities or associates that meet these criteria also qualify as noncurrent assets held for sale.
It can therefore be expected that the carrying value of an asset of this kind, which may be of a financial or non-financial
nature, will be recovered through the disposal of the item concerned rather than from its continued use.
Real estate or other non-current assets received by the group in full or part settlement of borrowers' payment
obligations to the group are treated as non-current assets held for sale, unless the group has decided to make use of the
assets on a continuous basis.
The "liabilities associated with non-current assets held for sale" caption includes amounts payable that are associated
with disposal groups or discontinued operations.
Assets classified as non-current assets held for sale are generally valued at the lesser of their carrying value at the
time they are so classified and their fair value net of their estimated costs to sell. Tangible and intangible assets that
would otherwise be subject to depreciation and amortization are not depreciated or amortized while they remain in the
category of non-current assets held for sale.
Where the carrying value exceeds the fair value of the asset net of its costs to sell, the group adjusts the carrying value
by the amount of the excess and makes a balancing adjustment in the consolidated income statement under impairment
losses. In the event of a subsequent increase in the fair value of the asset any such previously recorded loss will be
reversed and the carrying value will be increased, subject to its not exceeding the carrying value prior to the loss, and a
corresponding adjustment made to impairment losses in the consolidated income statement.
A component of an entity is defined as operations and cash flows that can be clearly distinguished, operationally and
for financial reporting purposes, from the rest of the entity, such as a subsidiary, business segment or geographical area
of operations.
179
(j) Tangible assets
Tangible assets comprise land and buildings for continuous use by the group, the net values of land, buildings and other
structures held to be leased out or for the realization of capital gains on disposal, and assets to be leased to customers
under operating leases. These assets are valued at cost less accumulated depreciation and any impairment loss
identified from a comparison of the net value of each item with its recoverable amount.
Tangible assets are depreciated systematically by the straight-line method over their estimated useful lives, taking the
depreciable amount as the acquisition cost of each item less its residual value. Land on which buildings and other
structures have been erected is treated as having an unlimited life and is not depreciated. Annual depreciation charges
on tangible assets are taken to the income statement and are calculated on the basis of the following average estimated
useful lives:
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Useful life in years
Land and buildings
Fixtures and fittings
Office furniture and equipment
Vehicles
Cash dispensers, computers and computer equipment
25 - 50
4.2 - 12.5
3.3 - 10
3.1 - 6.25
2.3 - 4
Statutory information
At the close of each accounting period the group carries out a review to determine whether there are indications that
the net value of any asset item exceeds its recoverable amount. If the recoverable amount of an asset is found to be in
excess of its net value, the group writes down the asset to its recoverable amount and adjusts future depreciation
charges in proportion to its restated carrying value and, if required, its adjusted estimated useful life. Where there are
indications that the value of an asset has been recovered, the group records the reversal of the impairment loss
recognized in previous periods and adjusts future depreciation charges accordingly. The reversal of an impairment loss on
an asset will in no circumstances result in an increase in its carrying value above the value that the asset would have had
if impairment losses in previous periods had not been recognized.
No less frequently than at the end of each reporting year, the group carries out a review of the estimated useful lives of
all tangible assets for its own use to determine whether there have been any material changes in their estimated useful
lives. If material changes are identified, an adjustment is made by correcting the depreciation charge for the asset in the
income statement on the basis of the adjusted estimated useful life.
Maintenance and repair costs for own-use tangible assets are recorded in the income statement for the year in which
they are incurred.
Tangible assets classified as investment property are composed of the net values of land, buildings and other
structures held by the group to be leased out or for the realization of capital gains on disposal resulting from future
increases in their market prices.
The criteria used by the group in stating the acquisition costs of assets leased out under operating leases, for
purposes of depreciation, useful life estimation and impairment loss recognition are the same as for tangible assets for
the group's own use.
Banco Sabadell Annual Report 2006
(k) Leases
Leasing contracts are presented on the basis of the economic substance of the lease regardless of its legal form, and are
classified from inception as either finance leases or operating leases.
• Finance leases
A lease is treated as a finance lease if substantially all of the risks and rewards of ownership of the asset are transferred.
Where the group is the lessor of an asset, the sum of the present values of payments receivable from the lessee plus
the guaranteed residual value, normally the exercise price of the purchase option exercisable by the lessee at the end of
the lease, is recorded as financing provided to a third party and is therefore included in the balance sheet under loans and
receivables according to the type of lessee.
Where the group is the lessee of the asset, the cost of the leased asset is recorded in the balance sheet according to
the nature of the asset and simultaneously as a liability for the same amount. This liability is the lesser of the fair value of
the leased asset and the sum of the present values of payments to the lessor plus the exercise price of the purchase
option, if applicable. The asset is depreciated using procedures similar to those applicable to property for the group's
own use.
Finance income and expense arising from leasing agreements is credited or charged to the income statement so that
the return remains constant throughout the term of the lease.
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• Operating leases
Leases other than finance leases are classified as operating leases.
Where the group is the lessor of the asset, the acquisition cost of the leased item is recorded in tangible assets. The
assets are depreciated by the same procedures as for own-use property of a similar type and the payments on the leases
are recognized in the income statement on a straight-line basis.
Where the group is the lessee of the asset the costs of the lease, including any incentives offered by the lessor, are
recorded in the income statement on a straight-line basis.
(l) Business combinations
A business combination is the bringing together of two or more separate entities or economic units into one single entity
or group of entities, where the adquirer acquires control of the other entity or entities.
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On the date of acquisition the acquirer incorporates into its financial statements or its consolidated financial
statements the assets, liabilities and contingent liabilities of the acquiree, including any intangible assets not recognised
by the acquiree.
Positive differences arising between the cost of holdings in subsidiary, jointly controlled or associated undertakings
and the net fair value of the acquired assets adjusted on the date on which they were consolidated for the first time, are
accounted for as follows:
Negative differences, when quantified, are recognized in the income statement.
Any purchases of minority interests after the taking of control of an entity are recognized as increases in the cost of the
business combination.
Statutory information
1. If the differences can be assigned to specific assets of the acquiree, they are accounted for by increasing the value
of any assets or reducing the value of any liabilities whose market values are above or below, respectively, the net
fair values at which they were recorded on the acquiree's balance sheet, provided that their accounting treatment
has been similar to the treatment that would be given to those same assets or liabilities by the group.
2. If they are assignable to specific intangible assets they are accounted for by explicit recognition in the consolidated
balance sheet provided that their fair value at the acquisition date can be reliably determined.
3. Any remaining differences that cannot be specifically recognized are recorded as goodwill and assigned to one or
more specific cash-generating units.
(m) Intangible assets
Intangible assets are identifiable non-monetary assets without physical substance. Assets are deemed to be identifiable
when they are separable from other assets because they can be sold, leased or otherwise disposed of individually, or
when they arise from a contract or other legal transaction. An intangible asset will be recognized when it meets this
criterion and the group considers it likely that economic benefits will flow from the asset and its cost can be reliably
measured.
Intangible assets are initially recognized at acquisition or production cost, and are subsequently valued at cost less any
accumulated amortization and/or impairment losses.
• Other intangible assets
This item is made up largely of intangible assets identified in business combinations and includes such assets as
contractual relations with customers, deposits or trade marks and computer applications.
Other intangible assets may have useful lives that are indefinite — where, after all relevant factors have been taken
into account, it has been concluded that there is no foreseeable limit to the time during which they can be expected to
generate net cash flows for the group — or finite. Intangible assets that have indefinite useful lives are not amortized;
however, at the end of each accounting period, the group reviews their remaining useful lives to verify that they are still
indefinite and takes appropriate action if it finds otherwise. Intangible assets whose useful lives are finite are amortized
on the basis of their useful lives according to criteria similar to those used for tangible assets.
Any loss in the stated value of an intangible asset due to impairment will, in any event, be recognized by the group and
a corresponding adjustment made to the consolidated income statement. The rules for recognizing losses due to
deterioration of intangible assets and any recoveries of impairment losses in earlier periods are similar to those that
apply to tangible assets.
(n) Inventories
Inventories are non-financial assets held for sale or for use by the group in the normal course of business, or that are in
the process of production, construction or development for such sale, or that are to be consumed in the production
Banco Sabadell Annual Report 2006
• Goodwill
A positive difference between the cost of a business combination and the acquired proportion of the net fair value of the
assets, liabilities and contingent liabilities of the acquired entity is recognized on the balance sheet as goodwill. Goodwill
represents a payment made by the group in anticipation of the future economic benefits from assets of an acquired entity
that are not capable of being individually or separately identified and recognized. Goodwill is recognized only if it has been
purchased for valuable consideration through a business combination. Goodwill is not amortized but is subjected to
analysis for possible impairment and if found to be impaired is written down accordingly. No impairment loss recognized
for goodwill can subsequently be reversed.
Goodwill acquired from 1 January 2004 onwards is valued at acquisition cost, while goodwill acquired before that date
is held at the net value recorded as at 31 December 2003.
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process or in the rendering of services. They include land and other property held for sale by the group as part of its
property development activities.
Inventories are valued at the lesser of their cost value, including all purchase and conversion costs and other direct and
indirect costs incurred in bringing the inventories to their present condition and location, and their net realization value.
(o) Liabilities under insurance contracts
The group's insurance undertakings credit their issued premiums, and charge the costs of claims payable by them, when
finally settled, to the income statement. All amounts credited to the income statement but not accrued at the balance
sheet date, and all costs incurred but not charged to the income statement, are accounted for at the end of each year as
accrued expenses and deferred income or prepayments and accrued income. The most significant items accounted for in
this way are:
Statutory information
Banco Sabadell Annual Report 2006
182
• Provisions for non-life insurance
Provisions for unearned premiums represent the portion of premiums accruing in the year that relate to the period
between the end of the year and the end of the policy term on a "policy-by-policy" basis. In the years 2006 and 2005, as
required by existing regulations, this allocation has been calculated at the premium rates accruing in the year after
deducting any premium loading.
• Provisions for life insurance
Provisions for life insurance consist of the provision for unearned premiums for policies with terms of one year or less,
and the mathematical reserves for all other policies.
Mathematical reserves are calculated by the prospective method, that is, the difference between the actuarial present
value of the insurer's future obligations and those of the policyholder (or, if applicable, the insured) except in those types
of policy where this calculation method is impracticable, in which case the retrospective method, that is, taking the
mathematical reserves as the difference between the value of current premiums paid by the policyholder on the reserve
calculation date and the value of the obligations already assumed by the insurer, is applied. The mortality, survivorship
and invalidity tables used in calculating provisions for life insurance are based on domestic or foreign experience adjusted
according to generally accepted actuarial practice, using confidence intervals generally accepted in the light of Spanish
experience.
The mortality tables used in the main types of life insurance written or sold by the group have generally been the GKM
80 tables except in the case of annuities, for which the ERM/F90, GRM/95 or PERFM/F 2000 tables have been used.
The average duration of the mathematical reserves is 1.06 years for saving-with-insurance products and 5.53 years for
annuity products, according to the most recent available information.
• Claims reserves
This represents the value of the group's outstanding liabilities in respect of claims made before the end of the year and is
equal to the difference between the total estimated or known cost and the total amount already paid in respect of these
claims. The costs of claims include all external expenses and internal claims handling costs. Claims have been assessed
individually in estimating these costs.
Claims reserves are made up of provisions for unpaid or unsettled benefits, provisions for unreported claims and
provisions for internal loss adjustment expenses. As required by regulations, the technical provisions for unreported
claims in 2006 and 2005 have been determined on the basis of the number of unreported claims and the average cost of
claims for the last three years.
• Provision for "with profits" insurance and return premiums
This includes provisions for benefits or bonuses payable to policyholders, insureds or beneficiaries and any premiums
required to be returned to policyholders or insureds based on past experience with each insured risk, to the extent that
they have not been assigned to any individual policy.
• Technical provisions for life insurance when the investment risk is borne by policyholders.
To provide for commitments in respect of investments related to life insurance contracts, provisions are made having
regard to the value of the assets on the basis of which policyholders' entitlements will be determined.
(p) Provisions and contingent liabilities
Provisions are current obligations of the group which have arisen from past events and whose nature at the balance sheet
date is clearly specified, but which are of uncertain timing and amount; when such obligations mature or become due for
settlement, the group expects to settle them through an outflow of resources embodying economic benefits.
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A restructuring provision is recognized only if there is a detailed formal plan identifying the basic changes to be made
and the entity has started to implement that plan or has publicly announced its main features or there is objective
evidence of its implementation.
Contingent liabilities are potential liabilities for the group that may arise from past events and whose existence is
confirmed only by the occurrence or non-occurrence of one or more future events which are beyond the group's control.
Contingent liabilities include present obligations of the group the settlement of which is not likely to result in an outflow of
resources embodying economic benefits or which, in extremely rare instances, cannot be measured with sufficient
reliability.
(q) Provisions for pensions
The group's pension commitments to its employees are as follows:
Statutory information
• Defined contribution plans
These are predetermined contributions paid into a separate entity in accordance with agreements reached with particular
groups of employees. Contributions are made subject to there being no statutory or constructive obligation to make
additional contributions to cover investment or other risks.
Contributions to defined contribution plans totalled €13,938,000 in 2006 (€15,909,000 in 2005).
• Defined benefit plans
Defined benefit plans provide for all current pension commitments agreed under articles 35, 36 and 37 of the 20th
Banking Industry Collective Agreement.
These commitments are financed in two ways: through the pension scheme and through insurance contracts.
The Banco Sabadell employee pension scheme covers benefits payable under collective agreements with members of
regulated employee organizations as described above, with the following exceptions:
1. Additional commitments for early retirement as provided for by article 36 of the Collective Agreement.
2. Disability benefit in certain circumstances.
3. Widows', widowers' and orphans' benefits payable on the death of retired employees recognized as having entered
the Bank's service after 8 March 1980.
1.
2.
3.
4.
Commitments that are expressly excluded from the Banco Sabadell employee pension scheme (1, 2 and 3 above).
Serving employees covered by a collective agreement with the former Banco Atlántico.
Pension commitments in respect of some serving employees not covered by a collective agreement.
Commitments to employees on leave of absence who are not entitled to benefits under the Banco Sabadell
employee pension scheme.
5. Commitments to early retirees. These may be partly financed out of pension rights under the Banco Sabadell
employee pension scheme.
Insurance policies have been taken out both with insurers outside the group, principally for commitments to former Banco
Atlántico employees, and with BanSabadell Vida, S.A.
The acquisition of Banco Urquijo has resulted in an additional pension plan the defined benefit commitments of which
are covered by an insurer outside the group and by a number of policies in respect of certain other pension commitments
of Banco Urquijo to its employees.
Commitments to Banco Urquijo early retirees, which had been covered by an internal fund, have now been insured with
a group insurance undertaking and the internal fund has been eliminated. Insurance has also been taken out to cover
certain other pension commitments in respect of welfare benefits to retired Banco Urquijo personnel, which were also
covered by an internal fund. In November Banco Urquijo paid insurance premiums to BanSabadell Vida totalling
€55,306,000 in respect of both sets of commitments.
The balance sheet heading "provisions for pensions and similar obligations" includes the actuarial present value of
pension commitments, calculated individually by the projected unit credit method on the basis of financial and actuarial
assumptions which are set out below.
Banco Sabadell Annual Report 2006
The Banco Sabadell employee pension scheme is treated for all purposes as a scheme asset.
Insurance policies provide general cover for specified commitments under articles 36 and 37 of the 20th banking
industry agreement, including:
183
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From the obligations so calculated, the scheme assets at their fair value have been deducted. These assets, including
insurance polices, are those from which the pension obligations are to be settled, since they meet the following
requirements:
1. They are not owned by the Bank but by a legally separate, non-related third party.
2. They are available only to pay or fund employee benefits and are not available to creditors of the Bank, even in the
event of the Bank becoming insolvent.
3. They cannot be returned to the Bank unless the assets remaining in the scheme are sufficient to meet all
obligations of the scheme and of the Bank relating to employee benefits, or unless the assets are returned to the
Bank to reimburse it for employee benefits previously paid.
4. They are not non-transferable financial instruments issued by the Bank.
Statutory information
Banco Sabadell Annual Report 2006
184
Assets to fund pension commitments shown in the individual balance sheet of BanSabadell Vida, S.A., a group insurance
subsidiary, are not scheme assets as the company is a related party of the Bank. They are shown in the consolidated
balanced sheet under different headings according to the type financial asset.
The group has decided to apply a corridor in recognizing in profit or loss for the year only such actuarial gains and
losses as exceed 10% of the greater of the present value of defined benefit obligations and the fair value of scheme
assets at the end of the immediately preceding year.
However, actuarial gains or losses related to commitments to early retirees until they acquire legally retired status are
recognized immediately.
The actuarial assumptions used in the valuation of pension commitments are as follows:
Tables
Discount rate - pension scheme
Discount rate - policies taken out with related parties
Discount rate - policies taken out with non-related parties
Inflation
Rate of increase in salaries
Retirement due to disability
Staff turnover
Early retirement
Normal retirement age
2006
2005
PERM / F 2000 (new)
4.00% per annum
4.00% per annum
4.20% per annum
2.00% per annum
3.00% per annum
SS90-Absoluta
None assumed
Allowed for
65
PERM / F 2000 (new)
4.00% per annum
4.00% per annum
4.00% per annum
2.00% per annum
3.00% per annum
SS90-Absoluta
None assumed
Allowed for
65
The discount rate on policies taken out with non-related parties has been determined by reference to the yield on AA-rated
15-year corporate debt (Bloomberg €AA Composite).
The age of early retirement for all employees is assumed to be the earliest retirement date after which pension
entitlements cannot be revoked by the employer.
The expected long-term return on pension scheme assets is 4% per annum (a target return that is compatible with the
level of risk set in accordance with the investment policy of the Banco Sabadell employee pension scheme). For fixed-rate,
without profits, unmatched insurance policies, the return assumed in respect of each commitment is the average insured
interest on each premium paid, weighted according to the mathematical reserve corresponding to each premium paid. For
fixed-rate, without profits, matched insurance policies the rate of return used is the discount rate.
(r) Foreign currency transactions
The functional currency of the group is the euro. All balances and transactions denominated in currencies other than the
euro are therefore treated as denominated in a foreign currency. Euro equivalent values (in thousands of euros) for the
aggregate balances of asset and liability accounts in foreign currency held by the group at 31 December 2006 and 2005
are given in note 26.
On initial recognition, debit and credit balances denominated in foreign currency are translated to the functional
currency at the spot exchange rate –defined as the exchange rate for immediate delivery– on the recognition date.
Subsequent to initial recognition, the following procedures are used to translate foreign currency balances to the
functional currency:
• Monetary assets and liabilities are translated at the closing exchange rate, defined as the average spot exchange
rate ruling on the reporting date.
• Non-monetary items measured at historical cost are translated at the exchange rate ruling on the date of
acquisition.
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• Non-monetary items stated at fair value are translated at the exchange rate ruling on the date on which the value
was determined.
• Income and expenses are translated at the exchange rate ruling on the transaction date.
In general, foreign exchange differences arising on the translation of debit and credit balances denominated in foreign
currency are recorded in the income statement. However, for foreign exchange differences arising on non-monetary items
measured at fair value where the fair value adjustment is made and recognized under valuation adjustments in equity, the
exchange rate component is recorded separately from the revaluation of the non-monetary item.
• Fees and commissions relating to financial assets and liabilities measured at fair value through profit or loss are
recognized when received.
• Fees and commissions relating to transactions or services that take place over a period of time are allocated over
the period during which the transaction or service takes place.
• Fees and commissions relating to transactions or services that are completed in a single act are recognized at the
time of the act that gives rise to the fee or commission.
Statutory information
(s) Recognition of income and expense
Interest income and expense and similar items are generally recorded in the period in which they accrue, using the
effective interest method. Dividends received from other companies are recognized as income when the entitlement
vests.
Generally, fee and commission income and expense and similar items are recorded in the income statement according
to the following criteria:
Financial fees and commissions, which form an integral part of the effective cost or yield of a financial transaction, have
been deferred net of associated direct costs and recognized in the income statement over the expected average life of
the transaction.
Non-financial income and expenditure is accounted for on an accrual basis. Amounts paid or received that are deferred
over time are recorded at the value obtained by discounting the expected cash flows at market rates of interest.
(u) Financial guarantees
Financial guarantees are contracts by which the group undertakes to make specified payments for a third party in the
event of the third party failing to do so. They may take a variety of legal forms such as guarantees, avals, surety or
performance bonds and irrevocable documentary credits issued or confirmed by the group.
Banco Sabadell Annual Report 2006
(t) Income tax
Spanish corporation tax and similar tax expense applicable to foreign subsidiaries are treated as expenses and are
recorded in the income statement under income tax unless the tax has arisen on a transaction accounted for directly in
equity, in which case the tax is also recognized directly in equity, or unless it relates to a business combination, in which
case the deferred tax is recognized as an asset or liability of the business combination.
The tax expense shown under the income tax heading is the tax charge assessed on the taxable income for the year,
after taking account of applicable tax deductions and allowances and any tax losses. The taxable income for the year may
be at variance with the net profit for the year as shown in the income statement, as it excludes items of income or
expenditure that are taxable or deductible in other years as well as items which are non-taxable or non-deductible.
Tax assets and liabilities in respect of deferred tax comprise the tax expected to be payable or recoverable on
differences between the carrying values of assets and liabilities in the financial statements, on the one hand, and the
values of those assets and liabilities on which tax is assessed, on the other. These tax assets and liabilities are
determined by applying to such temporary differences or tax credits the tax rate at which they are expected to be
recovered or paid.
A deferred tax asset such as a tax prepayment, or a credit in respect of a deduction, tax loss or other benefit is always
recognized provided that the group is likely to obtain sufficient future taxable profits against which the tax asset can be
realized. A deferred tax liability will, in general, always be recognized.
All recognized deferred tax assets and liabilities are reviewed in each accounting period to verify that they still apply
and are adjusted as necessary.
The undertakings in the Banco Sabadell group that are included in the consolidated accounts for corporation tax
purposes are shown in the Annex. Their tax charges for the year have been worked out on this basis and are payable to
Banco de Sabadell, S.A. as the parent company of the consolidated group, which is responsible for paying the tax to the
Revenue authorities.
185
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Financial guarantees are classified according to the credit risk attributable to the customer or the transaction and in
appropriate cases an assessment will be made of the need to provide for the risk by following procedures similar to those
described in note 1(e) for debt instruments carried at amortized cost.
(v) Assets under management
Third party assets managed by the group are not included in the consolidated balance sheet. Management fees are
shown in the income statement under fee and commission income.
(w) Consolidated cash flow statement
The consolidated cash flow statement includes certain items which are defined as follows:
Statutory information
• Cash flows: inflows and outflows of cash and cash equivalents, where "cash equivalents" are short-term, highly
liquid investments for which the risk of a change in value is negligible.
• Operating activities: The ordinary activities of the group, as well as other activities that cannot be described as
investing or financing activities.
• Investing activities: the acquisition, sale or other disposal of long-term assets and other investments not included in
cash and cash equivalents.
• Financing activities: activities that result in changes in the size and composition of equity and of liabilities not
included in operating activities.
(x) Netting
Where credit and debit balances arising from transactions are permitted, whether by contract or by law, to be set off
against each other and the group intends to settle them on a net basis or to realize the asset and settle the liability
simultaneously, they are reported in the balance sheet at their net values.
Banco Sabadell Annual Report 2006
186
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Note 2. Banco Sabadell group
The companies comprising the group as at 31 December 2006 and 2005 are listed in the Annex along with their
registered offices, principal activities, the Bank's proportional holding in each, key financial data for each company, and
whether they are accounted for by the full consolidation, proportional consolidation or equity method.
Changes in the composition of the consolidated group are shown in the tables that follow.
Changes in the year 2005:
Undertakings included in the consolidated accounts for the first time:
Name of
undertaking
Direct/
indirect
Method or
procedure
20.34
24.67
20.00
20.00
50.00
50.00
51.80
51.80
51.80
51.80
100.00
74.00
Indirect
Indirect
Direct
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Direct
Indirect
Equity method
Equity method
Equity method
Equity method
Proportional consolidation
Proportional consolidation
Full consolidation
Full consolidation
Full consolidation
Full consolidation
Full consolidation
Full consolidation
Statutory information
Aquaria de Inv. Corp., S.A. (1)
Berta Energies Renovables, S.L. (2)
Banco del Bajío, S.A. (3)
Europastry, S.A. (1)
Landscape Larcovi Proyectos Inmobiliarios, S.L. (4)
Landscape Nozar, S.L. (4)
Parc Eòlic Coll de Som, S.L. (2)
Parc Eòlic l'Arram, S.L. (2)
Parc Eòlic los Aligars, S.L. (2)
Parc Eòlic Tossa La Mola d'en Pascual, S.L. (2)
Sabadell Asia Trade Services Ltd. (1)
Totvent-2000, S.A. (1)
% Share
(1) A more detailed explanation is given in this note.
(2) Part of the Totvent-2000, S.A. group.
(3) The company was included in the consolidated accounts on the acquisition of a further 10.04%, bringing the total interest to 20%.
(4) A newly incorporated company.
Increased holding in Europastry, S.A.
On 31 March 2005 the group, through its subsidiary BanSabadell Inversió Desenvolupament, S.A. took a 12% interest in
Europastry, S.A. which, when added to the 8% share already in its possession, brought its holding up to 20%. The group's
total outlay was €34,968,000, generating a goodwill of €17,545,000 which has been recognized under investments in
associates.
Banco Sabadell Annual Report 2006
Increased holding in Aquaria de Inv. Corp., S.A.
On 17 January 2005 Aurica XXI, S.C.R., S.A. (a company 50% owned by the group) sold a 15% equity holding in Aquaria de
Inv. Corp., S.A. to BanSabadell Inversió Desenvolupament, S.A. With the 5% already in its possession, this brought the
company’s holding up to 20%. On 19 July 2005 BanSabadell Inversió Desenvolupament acquired a further 0.34%. The
group's total outlay was €34,159,000, generating a goodwill of €1,403,000 which has been recognized under
investments in associates.
Incorporation of Sabadell Asia Trade Services Ltd.
On 14 June 2005 Banco de Sabadell, S.A. set up Sabadell Asia Trade Services Ltd. in Hong Kong with a share capital of
one Hong Kong dollar represented by a single share. The company is a wholly-owned subsidiary of the Bank and has been
accounted for by the full consolidation method.
187
Acquisition of Totvent 2000, S.A.
On 28 October 2005 the group, through its subsidiary Explotaciones Energéticas Sínia XXI, S.L., acquired a 74% interest
in the wind generation enterprise Totvent-2000, S.A. The purchase consideration for the holding was €1,681,000, giving
rise to a goodwill of €967,000.
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Undertakings no longer included in the consolidated accounts:
Name of undertaking
Statutory information
Anchorage Intl. Services Inc. (1)
Atlántico Fondos, S.A., S.G.I.I.C. (1)
Atlántico Leasing, S.A. (2)
Atlántico Servicios, S.A. (2)
Atlántico Servicios Corporativos, S.A. (1)
BanSabadell Finanziaria Spa. (1)
Cannon Power España, S.L. (3)
Entidad Gestora Minera, S.L. (1)
Fonomarket, S.A. (3)
Geyser International Inc. (1)
Interaliment, S.A. (2)
Landscape Valterna, S.L. (1)
Sabadell International Capital, B.V. (1)
SCI ABC 1 (1)
% Share
Direct/
Indirect
Method or procedure
100.00
100.00
100.00
100.00
100.00
100.00
50.00
100.00
100.00
100.00
30.00
100.00
100.00
100.00
Indirect
Direct/Indirect
Indirect
Indirect
Indirect
Direct
Indirect
Direct
Direct
Indirect
Indirect
Indirect
Direct
Indirect
Full consolidation
Full consolidation
Full consolidation
Full consolidation
Full consolidation
Full consolidation
Proportional consolidation
Full consolidation
Full consolidation
Full consolidation
Equity method
Full consolidation
Full consolidation
Full consolidation
(1) Liquidated.
(2) A more detailed explanation is given in this note.
(3) Company sold in 2005.
Merger by absorption of Atlántico Leasing, S.A. and Atlántico Servicios, S.A.
On 4 March 2005 Atlántico Leasing, S.A. and Atlántico Servicios, S.A. were merged by absorption into Banco Atlántico
(Panamá), S.A.
Sale of Interaliment, S.A.
On 22 June 2005 BanSabadell Inversió Desenvolupament, S.A. disposed of its entire shareholding in Interaliment, S.A.
The sale resulted in a profit of €1,352,000 for the group.
Changes in the year 2006:
Undertakings included in the consolidated accounts for the first time:
Banco Sabadell Annual Report 2006
188
Name of
undertaking
Aviación Regional Cántabra, AIE (1)
Axel Group, S.L. (1) (6)
Axel Urquijo, S.L. (2)
Banco Urquijo, S.A. (6)
BanSabadell Seguros Generales, S.A. de Seguros y Reaseguros (3) (6)
Biodiesel Aragón, S.L. (3)
Caceis Bank España, S.A. (2) (6)
Ciudad Circuito, S.L. (4)
Dish, S.A. (2)
Explotación Eólica la Pedrera, S.L. (3)
Gaviel, S.A. (2)
General de Biocarburantes, S.A. (5)
Grafos, S.A.
Indigo Investments, SP, zoo (3)
Nisa Gav, S.A. (2)
Promotora de Negocios y Representaciones, S.A. (2)
Tarraco Eólico Ascó, S.L. (5)
Tarraco Eólico les Garrigues, S.L. (5)
Urquijo Correduría de Seguros, S.A. (2)
Urquijo Gestión Pensiones, E.G,F.P., S.A. (2)
Urquijo Gestión, S.G.I.I.C., S.A. (2)
Urquijo Servicios Patrimoniales, S.A. (2)
(1) Acquired by the Group in December 2006 through Banco de Sabadell, S.A.
(2) Acquisition of company owned by former Banco Urquijo.
(3) A newly incorporated company.
(4) Acquired by the Group in September 2006 through Landscape Coperfil Logistics, S.L.
(5) Acquired by the Group in April 2006 through Explotaciones Energéticas Sínia XXI, S.L.
(6) A more detailed explanation is given in this note.
% Share
Direct/
indirect
Method or
procedure
26.41
100.00
100.00
99.75
100.00
37.60
100.00
25.00
99.75
80.00
49.88
30.24
45.00
50.00
49.88
99.75
20.00
20.00
64.84
99.75
99.75
99.75
Direct
Direct
Direct/Indirect
Direct
Direct
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Equity method
Full consolidation
Full consolidation
Full consolidation
Full consolidation
Equity method
Full consolidation
Proportional consolidation
Full consolidation
Full consolidation
Equity method
Equity method
Equity method
Proportional consolidation
Equity method
Full consolidation
Equity method
Equity method
Full consolidation
Full consolidation
Full consolidation
Full consolidation
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Purchase of Axel Group, S.L.
On 28 December 2006 Banco Sabadell acquired Axel Group, S.L., for €6,435,000. Axel Group held 70% of the share
capital of Axel Urquijo, S.L., the corporate finance subsidiary of the former Banco Urquijo. Banco Sabadell already owned
a 30% interest as a result of the purchase of Banco Urquijo on 4 July 2006.
Axel Urquijo is to be renamed Sabadell Corporate Finance and will become Banco Sabadell’s corporate finance
subsidiary, operating as part of its Investment Banking division.
Statutory information
Purchase of Banco Urquijo, S.A.
On 4 July 2006, all necessary official approvals and consents having been obtained, a deed of sale was executed under
which the group acquired and took control of the equity interest in Banco Urquijo, S.A held by Kredietbank S.A.
Luxembourgeoise, amounting to approximately 99.74% of the company. Banco Urquijo was integrated into the
consolidated group on 1 July 2006. The contribution to the group’s balance sheet on consolidation is shown in Annex II.
The final purchase consideration paid by the group was €762,401,000 which was paid out of Banco Sabadell funds,
with no increase in capital being required.
Once the 0.26% of the company in the hands of minority shareholders had been acquired, the purchase resulted in a
goodwill of €473,837,000, which has been accounted for under intangible assets (see note 15).
The terms of the share exchange with minority shareholders were nine Banco Sabadell shares with a nominal value of
€0.50 per share for every 10 Banco Urquijo shares with a nominal value of €3.01 per share.
This definitive valuation and accounting treatment given to the business combination are shown in these annual
accounts for 2006.
Merger by absorption of Banco Urquijo, S.A. into Banco de Sabadell, S.A.
On 1 December 2006 Banco Urquijo, S.A. was merged by absorption into Banco de Sabadell, S.A. but with effect, for
accounting purposes, from 1 August 2006. The merger involved the dissolution, but not the liquidation, of Banco Urquijo,
all of whose assets and liabilities were transferred en bloc to Banco de Sabadell, S.A. by universal succession. Banco de
Sabadell, S.A. thus succeeded universally to all rights and obligations of Banco Urquijo, S.A., without any reservation or
limitation whatsoever.
From 1 August 2006 onwards, all operations of Banco Urquijo, S.A. were treated for accounting purposes as being
carried out on behalf of Banco de Sabadell, S.A.
Change of name from Sabadell Banca Privada, S.A. to Banco Urquijo Sabadell Banca Privada, S.A.
The integration of the Banco Urquijo private banking business with that of Sabadell Banca Privada, S.A. resulted in a new
entity, Banco Urquijo Sabadell Banca Privada, S.A. The change of name from Sabadell Banca Privada, S.A. to Banco
Urquijo Sabadell Banca Privada, S.A. was effective as from 5 December 2006. On that date the business began to
operate under the Banco Urquijo mark.
Incorporation of BanSabadell Seguros Generales
On 2 May 2006 a new company, BanSabadell Seguros Generales S.A. de Seguros y Reaseguros, was formed with a share
capital of €10,000,000 divided into 10,000 ordinary registered shares with a nominal value of €1,000 each.
The company will operate exclusively as a direct insurer in the non-life class of business, as well as in the areas of
reinsurance and insurance-related loss prevention. It will also form partnerships with companies outside the insurance
industry to market their services.
Banco Sabadell Annual Report 2006
Transfer of private banking business
On 26 October 2006 Banco de Sabadell's Board of Directors approved a recommendation for the transfer to Sabadell
Banca Privada, S.A. by Banco de Sabadell, S.A. of the private banking business that it had taken over following the merger
of Banco Urquijo, S.A.
The proposed transfer would take the form of a non-monetary contribution of the assets and liabilities forming the
private banking business of Banco de Sabadell, S.A. to Sabadell Banca Privada, S.A.
The assets and liabilities to be transferred were valued at the same book value as they had had when under the
ownership of Banco de Sabadell, S.A. that is, a total of €125,000,000.
In consideration of the transfer of business by Banco Sabadell, on 5 December 2006 the capital of Sabadell Banca
Privada, S.A. was increased by €55,088,000 by the issue of 18,301,610 new ordinary shares with a nominal value of
€3.01 each, at a premium of €3.82 per share. The new shares, amounting to a total of €69,912,000, were taken up by
Banco de Sabadell, S.A. in their entirety.
The object of the transfer of business was to concentrate the whole of the former private banking business of Banco
Urquijo, S.A. within the group's specialist private banking subsidiary and thus preserve the existing organization of
businesses within the Banco Sabadell group.
189
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Control of 100% of Caceis Bank España, S.A. and change of name to Banco Exelbank, S.A.
On 17 November 2006 the 51% interest held by Caceis S.A.S. in Caceis Bank España, S.A. was formally transferred to
Banco de Sabadell, S.A. Banco Sabadell already indirectly held 49% of the shares as a result of the purchase of a majority
holding in Banco Urquijo on 4 July 2006, and this further purchase therefore gave Banco Sabadell control of 100% of
Caceis Bank España. The purchase consideration was €25,971,000.
Later that same month, the name of Caceis Bank España was changed to Banco Exelbank, S.A.
Undertakings no longer included in the consolidation accounts:
Name of undertaking
Statutory information
Banco Sabadell Annual Report 2006
190
Atlántico Bienes Raíces (Panamá) (4)
Atlántico Holding Financial, Ltd. (4)
Banco Atlántico (Panamá) (4)
Banco Urquijo, S.A. (1)
Ciudad Circuito, S.L. (5)
Derivados Forestales Group XXI, S.L. (4)
Espais & Landscape Diagonal Mar, S.L. (5)
Europastry, S.A. (4)
IBA Management, Ltd. (Bahamas)
IBA Nominee Trust, Ltd. (Bahamas)
IBA Services, Ltd. (Bahamas)
Indigo Investments SP, zoo (5)
Landscape Arcisa Cantábrico, S.L. (5)
Landscape Augusta, S.L. (5)
Landscape Coperfil Activa, S.L. (5)
Landscape Coperfil Logistics, S.L. (5)
Landscape Corsan, S.L. (5)
Landscape Ebrosa, S.L. (5)
Landscape Espais Diagonal 0, S.L. (5)
Landscape Espais Promocions, S.L. (5)
Landscape Europrojectes, S.L. (5)
Landscape Grupo Lar, S.L. (5)
Landscape Habitat, S.L. (5)
Landscape Inversions, S.L. (5)
Landscape Larcovi Proyectos Inmobiliarios, S.L. (5)
Landscape Nozar, S.L. (5)
Landscape Osuna, S.L. (5)
Landscape Parcsud, S.L. (5)
Landscape Proingru Pinetons, S.L. (5)
Landscape Proingru, S.L. (5)
Landscape Promocions Immobiliàries, S.L. (4) (5)
Landscape Serveis Immobiliaris, S.A. (5)
Landscape Toro, S.L. (5)
Landscape Vertix, S.L. (5)
Netfocus, S.L. (4)
Representaciones Sabadell, S.A. (2)
Reyal Landscape, S.L. (5)
Urquijo Correduría de Seguros, S.A. (4)
Urquijo Gestión Pensiones, E.G.F.P., S.A. (3) (4)
(1)
(2)
(3)
(4)
(5)
% Share
Direct/
Indirect
Method
of procedure
100.00
100.00
100.00
99.75
25.00
45.00
50.00
20.00
100.00
100.00
100.00
50.00
50.00
100.00
50.00
50.00
50.00
50.00
50.00
50.00
50.00
50.00
50.00
100.00
50.00
50.00
50.00
50.00
50.00
50.00
100.00
100.00
50.00
50.00
80.00
100.00
50.00
65.00
99.75
Indirect
Direct
Indirect
Direct
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Direct
Indirect
Indirect
Indirect
Direct
Indirect
Indirect
Indirect
Indirect
Full consolidation
Full consolidation
Full consolidation
Full consolidation
Proportional consolidation
Equity method
Proportional consolidation
Equity method
Full consolidation
Full consolidation
Full consolidation
Proportional consolidation
Proportional consolidation
Full consolidation
Proportional consolidation
Proportional consolidation
Proportional consolidation
Proportional consolidation
Proportional consolidation
Proportional consolidation
Proportional consolidation
Proportional consolidation
Proportional consolidation
Full consolidation
Proportional consolidation
Proportional consolidation
Proportional consolidation
Proportional consolidation
Proportional consolidation
Proportional consolidation
Full consolidation
Full consolidation
Proportional consolidation
Proportional consolidation
Full consolidation
Full consolidation
Proportional consolidation
Full consolidation
Full consolidation
Merged with Banco de Sabadell, S.A.
Liquidated.
Merged with BanSabadell Pensiones, E.G.F.P., S.A.
Further details are given in this note.
A company in the Landscape Group. Further details are given in this note.
Sale of Atlántico Holdings Financial Ltd. with its subsidiaries Banco Atlántico (Panamá), S.A. and Atlántico Bienes
Raíces, S.A.
On 29 September 2006 Banco de Sabadell, S.A. sold its holding of shares in Atlántico Holdings Financial Ltd. and its
subsidiary Banco Atlántico (Panamá), S.A., a Panama-based bank, to Grupo Financiero Continental, S.A. The sale was for
a consideration of USD 141,000,000 (€111,842,000) and resulted in a profit before tax of €37,550,000 for Banco
Sabadell. Atlántico Bienes Raíces, S.A., a wholly-owned subsidiary of Banco Atlántico (Panamá), was sold at the same
time.
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Exchange of shares in Derivados Forestales Group XXI, S.L. for shares in Ercros, S.A. and subsequent sale of shares in
Ercros
On 28 April 2006 the Annual General Meeting of Ercros, S.A. adopted a resolution to increase the capital of the company
by 133,971,417 shares. A total of 60,287,138 of these shares — 8.39% of the total share capital — were taken by
BanSabadell Inversió Desenvolupament, S.A.
The shares were paid for in the form of a non-money contribution of 45,000 shares in Derivados Forestales Group XXI,
S.L., –45% that company– owned by BanSabadell Inversió Desenvolupament, valued at €44,081,000 in its equity
portfolio.
As of 28 April 2006 the newly purchased holding in Ercros, S.A. was recognized as part of the purchaser's portfolio of
available-for-sale financial assets at its fair value of €51,847,000. In October, however, the holding in Ercros, S.A. was
sold for €49,375,000, resulting in an overall capital gain of €5,294,000 on the transaction.
Sale of Landscape real estate group
On 21 November 2006 Banco de Sabadell, S.A. concluded an agreement with three companies, Astroc Mediterráneo,
S.A., Courrent Assets, S.L. and Alramaev, S.L. for the sale of Banco Sabadell's holding in real estate developer
Landscape Promocions Immobiliàries, S.L.U.
The sale was approved by the Bank's Board of Directors on 26 October.
Approval for the deal was sought from the regulatory authorities, including the competition authorities.
On 28 December 2006, regulatory approval having been obtained, a notarial deed was executed for the transfer of
100% of the group’s 100% holding in Landscape Promocions Immobiliàries, S.L.U. The consideration agreed for the sale
was €900,000,000 and the group’s profit before tax was €734,701,000.
Statutory information
Sale of Europastry, S.A.
On 30 November 2006 the group disposed of its 20% holding in Europastry, S.A. A total of €48 million was received for
the sale, resulting in a profit before tax of €10,335,000 for the group.
Sale of Netfocus
On 22 December 2006 the group’s 80% holding in Netfocus, S.L. was sold. A total sale consideration of €8,500,000 was
received, including the return of a participation loan to the company.
Banco Sabadell Annual Report 2006
Sale of Urquijo Correduría de Seguros, S.A.
On 27 November 2006 Banco de Sabadell, S.A. and Unipsa Correduría de Seguros, S.A., Grupo March, sold their
respective interests in Urquijo Correduría de Seguros, S.A. to Concentra Inversiones, S.L.
Urquijo Correduría de Seguros had been owned as to 65% by Banco Urquijo, S.A., with the remaining 35% being held by
Unipsa Correduría de Seguros, S.A. Grupo March.
The Banco Sabadell group received €2,600,000 from the sale, a figure which could increase by a further €1,300,000
in commission income from Urquijo Correduría de Seguros, S.A. in the course of 2007.
Merger by absorption of Urquijo Gestión Pensiones, E.G.F.P., S.A. by BanSabadell Pensiones, E.G.F.P., S.A.
On 11 December 2006 Urquijo Gestión Pensiones, E.G.F.P., S.A., a pension fund management entity, was merged by
absorption into BanSabadell Pensiones, E.G.F.P., S.A. From 1 August onwards all transactions of the merged entity were
treated for accounting purposes as carried out on behalf of BanSabadell Pensiones.
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Note 3. Proposed distribution of profits and basic earnings per share
The allocation of the Bank's profit for the year 2006 which the Board will propose to the Annual General Meeting is shown
in the following table. The allocation for 2005 was approved by the Annual General Meeting on 27 April 2006 and is also
shown in the table.
€'000
2006
2005
To dividends
To statutory reserve
To reserves for investment in Canary Islands
To voluntary reserves
253,983
0
0
602,580
205,022
0
1,363
133,146
Profit of Banco Sabadell for the year
856,563
339,531
Statutory information
Proposals for allocations of profits of subsidiaries and associates are subject to approval by their respective Annual
General Meetings.
The gross dividend per share for the year was €0.83 (€0.67 in 2005)
Interim dividend payments by the Bank during the year are included in equity under interim dividends and totalled
€116,281,000 (€91,801,000 in 2005).
The following table shows that sufficient profits were generated by the Bank during the period to enable an interim
dividend to be paid.
€'000
2006
Profit of Bank to 30 September
Estimated income tax
2005
485,323
(136,767)
416,911
(125,022)
Net profit available for distribution
348,556
291,889
Amount proposed and distributed
116,281
91,801
Banco Sabadell Annual Report 2006
Basic earnings per share
Basic earnings per share are obtained by dividing the net profit attributable to the group by the weighted average number
of ordinary shares outstanding in the year, excluding any treasury shares purchased by the group. The calculations are
shown in the following table:
Net profit attributable to the Group (€'000)
Profit from discontinued operations (net) (€'000)
Outstanding ordinary shares (weighted average)
Basic earnings per share (€)
2006
2005
908,398
554,831
306,003,420
453,128
38,780
306,003,420
2.97
1.48
Since the Bank has not issued any bonds convertible into shares or options on its own shares, diluted earnings per share
are equal to basic earnings per share.
192
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Note 4 - Loans and advances to credit institutions
Loans and advances to credit institutions recorded in the consolidated balance sheet at 31 December 2006 and 2005
are analysed in the following table:
€'000
2005
Analysis by heading:
Loans and receivables
6,928,116
2,841,243
Total
6,928,116
2,841,243
Analysis by type:
Reciprocal accounts
Time deposits
Reverse repos
Other accounts
Doubtful assets
Impairment provisions
Other valuation adjustments
0
2,559,446
2,594,216
1,751,062
1,161
(1,543)
23,774
24
1,327,640
1,364,492
143,912
10,391
(10,514)
5,298
Total
6,928,116
2,841,243
Analysis by currency:
Euro denominated
Foreign currency denominated
5,683,820
1,244,296
2,148,083
693,160
Total
6,928,116
2,841,243
Statutory information
2006
Average annual interest rates on loans and advances to credit institutions for the years 2006 and 2005 were 3.02% and
2.16% respectively.
Debt securities shown in the consolidated balance sheet at 31 December 2006 and 2005 are analysed as follows:
€'000
2006
2005
Analysis by heading:
Financial assets held for trading
Other financial assets at fair value through profit or loss
Available-for-sale financial assets
Loans and receivables
4,784
39,689
3,063,473
1
4,152
0
2,709,308
14
Total
3,107,947
2,713,,474
Analysis by type:
Spanish government securities
Treasury bills
Other book-entry debt
Securities of financial institutions and other issuers
Doubtful assets
Impairment provisions
Other valuation adjustments
1,206,916
69,846
1,137,070
1,906,213
51
(5,233)
0
1,216,447
20,416
1,196,031
1,503,060
0
(6,310)
277
Total
3,107,947
2,713,474
Analysis by currency:
Euro denominated
Foreign currency denominated
3,076,446
31,501
2,698,398
15,076
Total
3,107,947
2,713,474
Banco Sabadell Annual Report 2006
Note 5. Debt securities
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Average annual rates of interest on debt securities in the years 2006 and 2005 were 2.64% and 2.79% respectively.
Debt securities have been recorded at their fair values measured, for 96% and 90% of holdings in 2006 and 2005
respectively, by reference to published quoted prices on official securities markets. Fair values for the remaining 4% and
10% have been calculated based on discounted cash flows taking account of risk premiums on comparable quoted
securities and/or recent transactions in those securities.
Note 6 - Other equity instruments
The other equity instruments heading of the consolidated balance sheets at 31 December 2006 and 2005 can be
analysed as follows:
Statutory information
Banco Sabadell Annual Report 2006
194
€'000
2006
2005
Analysis by heading:
Other financial assets at fair value through profit or loss
Available-for-sale financial assets
255,891
435,894
261,134
374,703
Total
691,785
635,837
Analysis by type:
Resident sector
Credit institutions
Other
Non-resident sector
Credit institutions
Other
Share in net assets of mutual funds and OEICs
Impairment provisions
108,139
7,152
100,987
305,234
253,344
51,890
288,741
(10,329)
108,589
9,511
99,078
288,059
236,545
51,514
254,504
(15,315)
Total
691,785
635,837
Analysis by currency:
Euro denominated
Foreign currency denominated
686,216
5,569
632,427
3,410
Total
691,785
635,837
Other financial assets at fair value through profit or loss consisted entirely of investments in unit linked life policies.
Other equity instruments have been recorded at fair values which, for 95% and 92% the group's holdings in 2006 and
2005 respectively, have been determined by reference to published official market prices. For the remaining 5% and 8%,
fair values are based on market information for comparable quoted companies and/or the most recent available financial
statements.
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Note 7. Trading derivatives (assets and liabilities)
The composition of the Trading derivatives captions on the asset and liability sides of the consolidated balance sheets at
31 December 2006 and 2005 was as follows:
€'000
2006
Forward foreign exchange contracts
Securities options
Interest rate options
Currency options
Swaps
Other
Analysis by currency:
Euro denominated
Foreign currency denominated
Total
Assets
Liabilities
Assets
Liabilities
0
2,693
19,454
1,909
81,693
1,628
0
2,937
20,920
1,878
88,238
1,684
0
2,642
11,334
3,628
62,610
212
419
607
10,837
3,669
59,187
429
107,377
115,657
80,426
75,148
97,096
10,281
105,351
10,306
71,916
8,510
66,989
8,159
107,377
115,657
80,426
75,148
Statutory information
Total
2005
Note 8. Loans and advances to other debtors
Loans and advances to other debtors in the consolidated balance sheets at 31 December 2006 and 2005, except for
non-current assets held for sale, are analysed as follows:
€'000
2005
Loans and receivables
54,557,292
40,828,470
Total
54,557,292
40,828,470
Analysis by type:
Spanish general government
Commercial loans
Secured receivables
Other term receivables
Payable on demand and other
Finance leases
Factoring and "confirming"
Reverse repos
Doubtful assets
Impairment provisions
Other valuation adjustments
143,164
3,729,858
28,682,784
16,788,220
844,275
3,197,147
1,945,279
88,502
237,962
(1,075,674)
(24,225)
194,563
3,317,938
21,624,956
11,469,727
567,438
2,769,209
1,424,080
115,271
195,985
(814,233)
(36,464)
Total
54,557,292
40,828,470
Analysis by sector:
Spanish general government
Resident sector
Non-resident sector
Doubtful assets
Impairment provisions
Other valuation adjustments
143,164
52,211,741
3,064,324
237,962
(1,075,674)
(24,225)
194,563
38,727,186
2,561,433
195,985
(814,233)
(36,464)
Total
54,557,292
40,828,470
Analysis by currency:
Euro denominated
Foreign currency denominated
53,292,566
1,264,726
39,961,576
866,894
Total
54,557,292
40,828,470
Analysis by heading:
Banco Sabadell Annual Report 2006
2006
195
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Average annual rates of interest on loans and advances to other debtors in the years 2006 and 2005 were 4.51% and
4.08% respectively.
The breakdown of loans and advances to other debtors (except for non-current assets held for sale) by geographical
region at 31 December 2006 and 2005 was as follows:
€'000
2006
2005
Spain
Other European Union
Latin America
USA and Canada
Other OECD
Rest of world
Impairment provisions
52,223,254
2,562,329
181,612
232,528
69,701
363,542
(1,075,674)
39,015,957
1,601,532
497,436
255,527
57,510
214,741
(814,233)
Total
54,557,292
40,828,470
Statutory information
Loans and advances to other debtors due for repayment but not classified as doubtful assets as at 31 December 2006
amounted to €99,369,000 (€52,805,000 at 31 December 2005). At 31 December 2006 more than 82% of this total
was not more than one month overdue (31 December 2005: 86% of the total).
Doubtful assets
Assets recognized as doubtful under different balance sheet headings at 31 December 2006 and 2005 were as follows:
€'000
2006
2005
Loans and advances to credit institutions
Debt securities
Loans and advances to other debtors
1,161
51
237,962
10,391
0
195,985
Total
239,174
206,376
The movements in the doubtful assets account were follows:
€'000
Banco Sabadell Annual Report 2006
Balance at 31 December 2004
220,982
Additions
Recoveries
Foreign exchange differences
Written off
211,538
(161,081)
633
(65,696)
Balance at 31 December 2005
206,376
Acquisition of Banco Urquijo group
Additions
Recoveries
Foreign exchange differences
Written off
18,545
333,437
(267,990)
(462)
(50,732)
Balance at 31 December 2006
239,174
The distribution of doubtful assets by geographical region at 31 December 2006 and 2005 was as follows:
€'000
196
2006
2005
Spain
Other European Union
Latin America
USA and Canada
Other OECD
Rest of world
203,029
11,208
23,264
136
418
1,119
162,871
9,298
32,875
19
264
1,049
Total
239,174
206,376
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Impairment provisions
Impairment provisions resulting in value adjustments to assets under different balance sheet headings at 31 December
2006 and 2005 were as follows:
€'000
2006
2005
Loans and advances to credit institutions
Debt securities
Loans and advances to other debtors
1,543
5,233
1,075,674
10,514
6,310
814,233
Total
1,082,450
831,057
Details of changes in, and opening and closing balances of, impairment provisions to cover against credit risk exposure
are shown in the following table:
€'000
Generic
Country risk
Total
Balance at 31 December 2004
114,571
595,223
14,443
724,237
Provisions charged to income statement
Releases to income statement
Exchange differences
Transfers
Other movements
70,642
(27,008)
330
(65,697)
(1,659)
284,898
(154,693)
473
0
1,028
18,962
(15,325)
797
0
(5,928)
374,502
(197,026)
1,600
(65,697)
(6,559)
Balance at 31 December 2005
91,179
726,929
12,949
831,057
Acquisition of Banco Urquijo group
Provisions charged to income statement
Releases to income statement
Exchange differences
Transfers
Other movements
16,838
67,729
(28,285)
(2,072)
(50,745)
(3,283)
41,778
234,392
(11,693)
(1,355)
0
(5,592)
463
6,586
(12,279)
(648)
0
(441)
59,079
308,707
(52,257)
(4,075)
(50,745)
(9,316)
Balance at 31 December 2006
91,361
984,459
6,630
1,082,450
€'000
2006
2005
Spain
Other European Union
Latin America
USA and Canada
Other OECD
Rest of world
1,016,833
31,064
21,407
4,142
899
8,105
754,460
26,641
39,736
4,320
684
5,216
Total
1,082,450
831,057
Additional information
Finance income accruing on impaired financial assets but not recognized in the consolidated income statement at 31
December 2006 and 2005 amounted to €4,248,000 and €1,868,000 respectively.
Impaired financial assets derecognized from the balance sheet on the ground that the probability of recovery was
remote showed the following evolution:
Banco Sabadell Annual Report 2006
The distribution of impairment allowances by geographical region at 31 December 2006 and 2005 was as follows:
Statutory information
Specific
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€'000
Balance at 31 December 2004
829,940
Additions:
Assets with poor prospects of recovery
Derecognized for other reasons
78,761
76,751
2,010
Recoveries:
Due to debt refinancing or restructuring
Due to receipt of cash without additional financing
Due to repossession of tangible assets
(38,132)
0
(36,732)
(1,400)
Permanently written off:
Due to debt forgiveness
Due to statute of limitations
Due to other circumstances
(202,862)
(23,722)
(107,990)
(71,150)
Statutory information
Net change due to foreign exchange differences
40
Balance at 31 December 2005
667,747
Additions:
Acquisition of Banco Urquijo group
Assets with poor prospects of recovery
Derecognized for other reasons
471,130
418,271
52,424
435
Recoveries:
Due to debt refinancing or restructuring
Due to receipt of cash without additional financing
Due to repossession of tangible assets
(17,820)
0
(16,350)
(1,470)
Permanently written off:
Due to debt forgiveness
Due to statute of limitations
Due to other circumstances
(108,797)
(10,060)
(96,131)
(2,606)
Net change due to foreign exchange differences
(36)
Banco Sabadell Annual Report 2006
Balance at 31 December 2006
1,012,224
Note 9. Financial asset transfers
In recent years the Banco Sabadell group has undertaken a number of securitization programmes, either alone or in
partnership with other domestic and foreign banks of recognized solvency. Financial assets securitized by the group under
these programmes at the end of the years 2006 and 2005 are summarized below. Assets on which the associated risks
and rewards were transferred are shown separately.
€'000
198
2006
2005
496,630
400,823
90,707
5,100
691,455
517,344
168,417
5,694
Retained in full on balance sheet:
Securitized mortgage loans
Other securitized assets
4,031,297
2,281,012
1,750,285
2,829,850
1,941,692
888,158
Total
4,527,927
3,521,305
Derecognized in full from balance sheet:
Securitized mortgage loans
Other securitized assets
Other financial asset transfers
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Assets and liabilities held in securitization funds set up after 1 January 2004 and for which the risks and rewards were
not transferred to third parties have been retained in the consolidated financial statements.
Details of current securitization programmes are given in the table below:
€'000
Rating
Year
1998
2002
2003
2004
2004
2005
2006
2006
Moody's
S&P
Number of
securities
Amount
2006
2005
1,171,974
1,148,535
23,439
184,259
160,820
23,439
248,873
225,434
23,439
LIBOR 3M+0.16%
LIBOR 3M+0.45%
Yield
TDA 5, FTH
Serie A
Serie B (subordinated)
AAA
AAA
Aaa
Aa1
-----
7,800
7,644
156
FTPYME TDA SABADELL 1
Serie 1CA (a)
Serie 1SA
Serie 2SA
Serie B
AAA
AA
A
BB
---------
---------
6,000
3,201
2,544
111
144
600,000
320,100
254,400
11,100
14,400
164,703
77,561
61,642
11,100
14,400
182,061
114,996
41,565
11,100
14,400
EURIBOR 6M+0.01%
EURIBOR 6M+0.40%
EURIBOR 6M+0.50%
EURIBOR 6M+0.75%
GC FTGENCAT II, F.T.A.
Serie AG (b)
Serie AS
Serie BG (b)
Serie BS
Serie C
AAA
AA+
AA
A
BBB
Aaa
Aa1
Aa2
A1
Baa1
-----------
9,500
7,068
1,767
176
176
313
950,000
706,800
176,700
17,600
17,600
31,300
392,914
271,931
54,483
17,600
17,600
31,300
467,414
320,731
80,183
17,600
17,600
31,300
EURIBOR 3M+0.11%
EURIBOR 3M+0.48%
EURIBOR 3M+0.28%
EURIBOR 3M+0.70%
EURIBOR 3M+1.45%
FTPYME TDA SABADELL 2
Serie 1CA (a)
Serie 1SA
Serie 2SA
Serie 3SA
AAA
AAA
AA
BBB
---------
AAA
AAA
A
BBB
5,000
1,968
2,667
215
150
500,000
196,800
266,700
21,500
15,000
366,222
139,999
189,723
21,500
15,000
500,000
196,800
266,700
21,500
15,000
EURIBOR 3M
EURIBOR 3M+0.26%
EURIBOR 3M+0.50%
EURIBOR 3M+1.20%
GC SABADELL 1 FTH
Serie A1
Serie A2
Serie B
Serie C
---------
Aaa
Aaa
A2
Baa2
AAA
AAA
A
BBB
12,000
1,500
10,206
192
102
1,200,000
150,000
1,020,600
19,200
10,200
822,346
0
792,946
19,200
10,200
1,050,000
0
1,020,600
19,200
10,200
EURIBOR 3M+0.06%
EURIBOR 3M+0.17%
EURIBOR 3M+0.42%
EURIBOR 3M+0.78%
IM FTPYME SABADELL 3
Serie 1SA
Serie 1CA (a)
Serie 2
Serie 3SA
---------
Aaa
Aaa
A2
Baa3
AAA
AAA
A
BBB-
6,000
4,408
1,241
234
117
600,000
440,800
124,100
23,400
11,700
391,689
232,489
124,100
23,400
11,700
502,291
343,091
124,100
23,400
11,700
EURIBOR 3M+0.11%
EURIBOR 3M-0.01%
EURIBOR 3M+0.35%
EURIBOR 3M+0.80%
GC FTPYME SABADELL 4
Serie AS
Serie AG (a)
Serie B
Serie C
AAA
AAA
A+
BBB
Aaa
Aaa
A2
Baa3
---------
7,500
5,494
1,623
240
143
750,000
549,400
162,300
24,000
14,300
750,000
549,400
162,300
24,000
14,300
750,000
549,400
162,300
24,000
14,300
EURIBOR 3M+0.10%
EURIBOR 3M+0.00%
EURIBOR 3M+0.42%
EURIBOR 3M+0.70%
GC FTGENCAT SABADELL 1
Serie AS
Serie AG (b)
Serie B
Serie C
AAA
AAA
A
BBB
---------
---------
5,000
1,289
3,456
198
57
500,000
128,900
345,600
19,800
5,700
500,000
128,900
345,600
19,800
5,700
500,000
128,900
345,600
19,800
5,700
EURIBOR 3M+0.15%
EURIBOR 3M-0.04%
EURIBOR 3M+0.42%
EURIBOR 3M+0.78%
IM FTGENCAT SABADELL 2
Serie AS
Serie AG (b)
Serie B
Serie C
AAA
AAA
A
BBB
---------
---------
5,000
2,028
2,717
198
57
500,000
202,800
271,700
19,800
5,700
500,000
202,800
271,700
19,800
5,700
0
0
0
0
0
EURIBOR 3M+0.15%
EURIBOR 3M-0.05%
EURIBOR 3M+0.40%
EURIBOR 3M+0.70%
GC FTPYME SABADELL 5
Serie A1
Serie A2
Serie A3 (G) (a)
Serie B
Serie C
AAA
AAA
AAA
A
BBB
-----------
-----------
12,500
2,200
8,803
828
400
269
1,250,000
220,000
880,300
82,800
40,000
26,900
1,250,000
220,000
880,300
82,800
40,000
26,900
0
0
0
0
0
0
EURIBOR 3M+0.07%
EURIBOR 3M+0.13%
EURIBOR 3M+0.01%
EURIBOR 3M+0.30%
EURIBOR 3M+0.58%
5,322,133
4,200,639
Market
AIAF
AIAF
AIAF
AIAF
AIAF
AIAF
AIAF
AIAF
AIAF
AIAF
Banco Sabadell Annual Report 2006
2005
Fitch
Liability outstanding
Statutory information
2003
Fund name
and series
Issue
(a) Guaranteed by the Spanish Government.
(b) Guaranteed by the Catalan Government.
Of the securities outstanding at the close of 2006 and 2005, those associated with assets not derecognized from the
balance sheet amounted to €2,917,678,000 in 2006 and €2,278,532,000 in 2005. These securities are reported in
the balance sheet under debt certificates including bonds (see note 19).
199
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Página 200
Note 10. Other financial assets
Other financial assets stated on the consolidated balance sheets at 31 December 2006 and 2005 are analysed as
follows:
€'000
Statutory information
2006
2005
Analysis by heading:
Loans and receivables
3,090,161
1,019,506
Total
3,090,161
1,019,506
Analysis by type:
Fees and commissions for financial guarantees
Collateral advanced
Clearing houses
Other (a)
55,281
239,582
1,275,726
1,519,572
58,320
70,261
730,008
160,917
Total
3,090,161
1,019,506
Analysis by currency:
Euro denominated
Foreign currency denominated
2,827,408
262,753
1,008,660
10,846
Total
3,090,161
1,019,506
(a) The "other" item includes an outstanding amount of €900,000,000 receivable on the sale of Landscape Promocions Immobiliàries, S.L.U. This was paid in full on
2 January 2007.
Note 11. Hedging derivatives (assets and liabilities)
Banco Sabadell Annual Report 2006
Hedging derivatives reported at fair value on the consolidated balance sheet at 31 December 2006 and 2005 are
analysed as follows:
€'000
2006
2005
Assets
Liabilities
Assets
Liabilities
Micro-hedges
Fair value hedges
Cash flow hedges
317,069
522
249,384
4,159
316,121
100
26,186
1,474
Total
317,591
253,543
316,221
27,660
Analysis by currency:
Euro denominated
Foreign currency denominated
314,882
2,709
249,664
3,879
309,722
6,499
19,327
8,333
Total
317,591
253,543
316,221
27,660
The group enters into interest rate hedging contracts as part of its policy for managing interest rate risk (see note 36 on
interest rate exposures). The following are the main types of hedging instrument used:
200
• At 31 December 2006 and 2005, the group had entered into interest rate swap arrangements with counterparties
of good credit standing, the fair value of which was -€67,529,000 and €206,193,000 respectively at those dates.
These had been designated as hedging instruments to cover the interest rate risk on specified capital raising issues
by the group at fixed interest rates. The interest rate swaps had the effect of changing the interest payable on these
issues from fixed to variable.
• At 31 December 2006 and 2005, the group had entered into interest rate swap arrangements with counterparties
of good credit standing, the fair value of which amounted to €107,181,000 and €70,805,000 respectively at those
dates. These had been designated as hedging instruments to cover the interest rate risk on specified financial
liabilities sold through the branch network at fixed rates of interest. The interest rate swaps had the effect of
changing the rates of interest on these issues from fixed to variable.
160-263-Part blue
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Página 201
• At 31 December 2006 and 2005, the group had acquired liabilities under interest rate swap arrangements entered
into with counterparties of good credit standing, the fair value of which amounted to €13,094,000 and €1,498,000
respectively at those dates. These had been designated as hedging instruments to cover the interest rate risk on
individual loans extended by the group at fixed rates of interest. The interest rate swaps had the effect of changing
the interest rates on these loans from fixed to variable.
Note 12. Non-current assets held for sale and liabilities associated with non-current assets held for sale.
These items of the consolidated balance sheets at 31 December 2006 and 2005 are analysed below:
€'000
2005
Assets
Loans and advances to credit institutions
Loans and advances to other debtors
Land and buildings for own use
Repossessed assets
Other assets
13,551
2,221
292
6,598
4,428
12
72,012
0
57,709
9,090
5,213
0
Impairment provisions
(1,125)
(1,154)
Total non-current assets held for sale
12,426
70,858
Liabilities
Deposits from credit institutions
Deposits from other creditors
Other liabilities
1,161
201
704
256
122,625
0
122,625
0
Total liabilities associated with non-current assets held for sale
1,161
122,625
Banco Sabadell Annual Report 2006
These totals include non-current assets and liabilities whose book values are expected to be recoverable on disposal
within one year of the balance sheet date.
Statutory information
2006
201
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Página 202
Note 13. Investments
The following table shows the composition of, and changes in, this item at 31 December 2006 and 2005.
€'000
Statutory information
Undertakings consolidated by
the equity method:
Aquaria de Inv. Corp., S.A.
Banco del Bajío, S.A. (a)
Berta Energías Renovables, S.L.
Centro Financiero B.H.D., S.A. (a)
Derivados Forestales Group XXI, S.L.
Dexia Sabadell Banco Local, S.A.
Europa Invest, S.A.
Europastry, S.A.
FS Colaboración y Asistencia, S.A.
Interaliment, S.A.
Parque Eólico La Peñuca, S.L.
SBD Creixent, S.A.
Sociedad de Cartera del Vallés, S.A.
Total
Balance at
31.12.2004
Results
of equityaccounted
undertakings
Acquisition
or increase
in capital
Translation
differences
and other
Transfer movements
Disposal or
dissolution
Payment of
dividends
0
0
0
19,286
61,086
34,906
55
0
160
2,642
1,339
1,684
1,898
4,194
4,308
0
2,047
(48)
4,190
0
1,124
66
0
(159)
(1)
219
14,496
34,683
5
2,559
0
6,400
0
22,492
0
0
(6)
1,281
0
0
0
0
0
0
0
0
0
0
(2,642)
0
0
0
0
0
0
(2,559)
(12,600)
0
0
0
0
0
0
0
0
19,404
9,099
0
0
0
0
0
12,467
0
0
0
0
0
(651)
4,450
0
1,222
(26)
(148)
16
(367)
(13)
0
2
0
(137)
37,443
52,540
5
22,555
48,412
45,348
71
35,716
213
0
1,176
2,964
1,980
123,056
15,940
81,910
(2,642)
(15,159)
40,970
4,348
248,423
Balance at
31.12.2005
Results
of equityaccounted
undertakings
Acquisition
or increase
in capital
Disposal or
dissolution
Payment of
dividends
Translation
differences
and other
Transfer movements
Balance at
31.12.2006
37,443
0
0
52,540
5
0
22,555
48,412
45,348
71
35,716
213
0
0
0
1,176
2,964
1,980
0
0
4,572
0
0
9,480
(4)
0
3,758
0
5,650
0
0
118
1
(9)
198
855
(8)
454
(21)
(6)
14,970
7,863
467
14,010
0
1,750
2,119
0
8,000
0
1,685
0
630
2,250
0
0
0
0
214
246
0
0
0
0
0
0
0
(44,081)
0
0
(36,442)
0
0
0
0
0
0
0
0
0
(1,322)
0
0
(2,061)
0
0
(3,779)
(4,331)
0
0
(959)
0
0
0
0
0
0
(212)
0
0
0
0
(467)
0
0
0
0
0
0
(71)
0
0
0
0
2,116
0
0
0
0
0
49
0
0
(6,388)
0
0
55
0
(127)
0
0
(9)
0
0
0
0
(1)
35
0
0
55,712
7,863
0
67,581
1
1,750
24,708
0
58,871
0
0
322
631
2,241
2,314
2,031
2,955
2,257
193
240
54,204
(80,523)
(12,664)
1,578
(6,386)
229,670
Balance at
31.12.2005
(a) Euro equivalent.
€'000
Banco Sabadell Annual Report 2006
Undertakings consolidated by
the equity method:
Aquaria de Inv. Corp., S.A.
Aviación Regional Cántabra, A.I.E.
Axel Urquijo, S.L.
Banco del Bajío, S.A. (a)
Berta Energías Renovables, S.L.
Biodiésel Aragón, S.L.
Centro Financiero B.H.D., S.A. (a)
Derivados Forestales Group XXI, S.L.
Dexia Sabadell Banco Local, S.A.
Europa Invest, S.A.
Europastry, S.A.
FS Colaboración y Asistencia, S.A.
Gaviel, S.A.
General de Biocarburantes, S.A.
Grafos, S.A. Arte sobre Papel
Parque Eólico La Peñuca, S.L.
SBD Creixent, S.A.
Sociedad de Cartera del Vallés, S.A.
Tarraco Eólica Ascó, S.L.
Tarraco Eólica Les Garrigues, S.L.
Total
248,423
25,038
(a) Euro equivalent.
202
Changes in separately recognized goodwill associated with investments in the years to 31 December 2006 and 2005
were as follows:
€'000
Balance at
31.12.04
Recognized/
derecognized
Balance at
31.12.05
Recognized/
derecognized
Balance at
31.12.06
Aquaria de Inv. Corp., S.A.
Centro Financiero BHD, S.A.
Dexia Sabadell Banco Local, S.A.
Europastry, S.A.
General de Biocarburantes, S.A.
0
3,469
3,237
0
0
1,403
116
0
17,545
0
1,403
3,585
3,237
17,545
0
0
0
0
(17,545)
523
1,403
3,585
3,237
0
523
Total
6,706
19,064
25,770
(17,022)
8,748
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Página 203
Note 14. Tangible assets
The composition of this consolidated balance sheet item at 31 December 2006 and 2005 was as follows:
€'000
2006
Cost
For own use:
Computer and related equipment
Furniture, vehicles and other equipment
Buildings
Building work in progress
Other
Investment property:
Buildings
Rural property, land parcels and unbuilt land
Total
Depreciation Impairment
Net value
Cost
903.230
29,341
274,161
588,241
2,235
9,252
1,116,203
171,068
426,385
505,575
312
12,863
(413,000)
(150,260)
(179,019)
(80,351)
0
(3,370)
(12,470)
0
(12,371)
(99)
0
0
690,733
20,808
234,995
425,125
312
9,493
(12,919)
0
(12,371)
(548)
0
0
Depreciation Impairment
Net value
1,389,009
187,435
500,583
689,500
2,235
9,256
(472,860)
(158,094)
(214,051)
(100,711)
0
(4)
6,961
5,922
1,039
(956)
(956)
0
0
0
0
6,005
4,966
1,039
339,704
338,591
1,113
(23,566)
(23,566)
0
(7)
(7)
0
316,131
315,018
1,113
105,304
(32,461)
0
72,843
87,613
(24,670)
0
62,943
1,501,274
(506,277)
982,078
1,543,520
(461,236)
(12,919)
(12,477)
1,069,807
Changes in tangible assets in 2006 and 2005 are shown in the following table:
Statutory information
Leased out under operating leases
2005
€'000
Furniture &
fittings
Investment
properties
Leased out under
op. leases
Total
Cost:
Balance at 31 December 2004
Additions
Disposals
Other
484,023
42,472
(1,681)
(19,239)
657,110
104,704
(151,032)
(154)
371,132
14,461
(28,598)
(17,291)
73,025
31,474
(16,886)
0
1,585,290
193,111
(198,197)
(36,684)
Balance at 31 December 2005
Acquisition of Banco Urquijo group
Additions
Disposals
Reduction due to sale of Landscape group
Other
505,575
157,343
45,864
(8,751)
0
(10,531)
610,628
54,395
105,199
(72,358)
(10,590)
12,235
339,704
0
104,090
2,956
(432,890)
(6,899)
87,613
10
52,310
(34,629)
0
0
1,543,520
211,748
307,463
(112,782)
(443,480)
(5,195)
Balance at 31 December 2006
689,500
699,509
6,961
105,304
1,501,274
Accumulated depreciation:
Balance at 31 December 2004
Additions
Disposals
Other
74,341
8,506
(251)
(2,245)
369,273
51,366
(93,469)
5,479
22,361
5,477
(1,002)
(3,270)
17,662
13,096
(6,669)
581
483,637
78.445
(101,391)
545
Balance at 31 December 2005
80,351
Acquisition of Banco Urquijo group
14,341
Additions
9,328
Disposals
(3,028)
Derecognized due to sale of Landscape group
0
Other
(281)
332,649
38,679
56,955
(53,717)
(2,902)
485
23,566
0
114
(302)
(30,206)
7,784
24,670
6
16,803
(9,483)
0
465
461,236
53,026
83,200
(66,530)
(33,108)
8,453
Balance at 31 December 2006
100,711
372,149
956
32,461
506,277
Impairment losses:
Balance at 31 December 2004
Additions
Disposals
Other
0
0
0
99
0
0
0
12,371
0
0
0
7
0
0
0
0
0
0
0
12,477
Balance at 31 December 2005
Acquisition of Banco Urquijo group
Additions
Disposals
Derecognized due to sale of Landscape group
Other
99
0
441
(99)
0
107
12,371
200
3
(200)
0
(3)
7
0
0
(7)
0
0
0
0
0
0
0
0
12,477
200
444
(306)
0
104
Balance at 31 December 2006
548
12,371
0
0
12,919
Net balance at 31 December 2005
425,125
265,608
316,131
62,943
1,069,807
Net balance at 31 December 2006
588,241
314,989
6,005
72,843
982,078
The fair value of properties for the group’s own use is approximately €1,200,000,000. Fair values of properties have
been based on certified values assessed by firms of valuers. In reaching their assessments, valuers used the
Banco Sabadell Annual Report 2006
Land and
buildings
203
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Página 204
Statutory information
comparative method for unoccupied and/or own use premises, the income capitalization method for leased properties
and the “static residual” approach for land values.
The group's property investments at 31 December 2005 were made up largely of properties held by the Landscape
real estate business and their fair value at that date was €458,456,000. These investments had been derecognized on
the balance sheet at 31 December 2006 following the sale of the Landscape group.
The gross value of own-use tangible assets that remained in use and had been fully depreciated at 31 December 2006
and 2005 amounted to €184,912,000 and €215,148,000 respectively.
The net book cost of tangible assets of foreign operations was €43,149,000 at the close of 2006 (€43,932,000 in
2005).
The bulk of the group's operating lease business is carried on by BanSabadell Renting, S.A.
In 1996 Banco de Sabadell, S.A., Banco Herrero, S.A. (now merged with Banco Sabadell) and Europea de Inversiones y
Rentas, S.L. availed themselves of article 5 of Royal Decree Law 7/1996 of 7 June and subsequent legislative provisions
to restate their tangible fixed assets in accordance with Royal Decree 2607/1996 of 20 December. The maximum
amount to which any asset could be revalued was the professionally assessed market value of the asset. Increases in the
valuations of tangible fixed assets of group companies availing themselves of the asset restatement provisions of Royal
Decree-Law 7/1996 were as follows:
€'000
Increase in valuation
Banco de Sabadell, S.A.
Banco Herrero, S.A. (1)
Europea de Inversiones y Rentas, S.L.
36,402
6,353
2,254
Total
45,009
(1) Banco Herrero, S.A. was absorbed by Banco de Sabadell, S.A. in 2002.
Banco Sabadell Annual Report 2006
204
Of the total amount shown in the table, €666,000 was written off during the year for Banco de Sabadell, S.A. (€693,000
in 2005) and €11,000 for Europea de Inversiones y Rentas, S.L. (€11,000 in 2005).
The asset restatements have had the effect of increasing depreciation charges and this will mean increased charges
of €677,000 against group results in the coming year 2007, assuming that no assets are sold and derecognized from the
balance sheet during the year.
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Note 15 - Intangible assets
The composition of this item at 31 December 2006 and 2005 was as follows:
€'000
2005
Goodwill in subsidiary undertakings:
Banco Urquijo
Axel Group, S.L.
Compañía de Electricidad y Cogeneración de Uvero, S.A.
Banco Exelbank, S.A.
Netfocus, S.L.
Totvent-2000, S.A.
Other goodwill
481,268
473,837
5,215
1,046
203
0
967
0
2,696
0
0
1,045
0
583
967
101
Other intangible assets:
With finite useful lives:
Contractual relations with customers (Banco Urquijo)
Deposits from other creditors (Banco Urquijo)
Banco Urquijo brand
Computer software purchase costs
Other deferred charges
146,028
146,028
49,767
14,766
10,277
70,516
702
48,524
48,524
0
0
0
46,293
2,231
Total
627,296
51,220
Banco Sabadell Annual Report 2006
The goodwill in Banco Urquijo has been valued according to the current valuation rules. First, the cost of the business
combination was determined, based on the fair value of the assets surrendered, the liabilities incurred, any potential
income and cost synergies identified, and the costs directly attributable to the business combination.
From a comparison of the cost of the business combination with the net fair value of the assets, liabilities and
contingent liabilities of the acquired undertaking, a difference of €473,857,000 arose and was recognized in assets as
goodwill. In measuring assets at their fair values, increases in property values were recognized for a total of €80,690,000
(€61,410,000 after tax) and intangible assets were identified with a value of €78,587,000 (€54,598,000 after tax).
This goodwill was then allocated to the cash-generating units (CGUs) thought likely to benefit from the synergies
identified. These were the Private Banking CGU, the Commercial Banking CGU, and the Other CGU. Synergies that could
not be allocated to any CGU because of limitations in the historical data available for the acquired undertaking were
assigned to all CGUs.
In “other intangible assets”, the main items associated with the purchase of Banco Urquijo are the values of
contractual rights under agreements with Banco Urquijo customers for certain products (OEICs, investment and pension
funds, cards, short-term loans, broking and custody services), the values of deposits, and the value of the Banco Urquijo
brand. These assets have been valued by the income approach (discounted cash flow), with the multi-period excess
earnings technique being used for income from contractual relations and deposits, and the price premium technique to
measure the brand value.
These intangible items have finite useful lives of 12 years for Private Banking customers, seven years for Commercial
Banking customers and five yeas for other categories. They are amortized over these lives on a straight-line basis in a way
similar to that used for tangible assets.
Computer application purchase costs refer principally to deferred expense related to outsourced IT work and software
licence purchases. The largest expense item under this heading was the cost of building a new information system
(known as Proteo) designed to support the value and growth objectives embraced by the group's strategic plan. The
deferred costs of the Proteo project at 31 December 2006 amounted to approximately €41,129,000 of which
€4,723,000 had been amortized. Computer applications have an estimated useful life of three years and are amortized
by the straight-line method.
Statutory information
2006
205
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Changes in goodwill for the years 2006 and 2005 were as follows:
€'000
Statutory information
Goodwill
Impairment
Total
Balance at 31 December 2004
1,785
0
1,785
Additions
Disposals and write-offs
Other
1,068
(157)
0
0
0
0
1,068
(157)
0
Balance at 31 December 2005
2,696
0
2,696
Acquisition of Banco Urquijo group
Additions
Disposals and write-offs
Other
473,837
13,686
(682)
0
0
(8,269)
0
0
473,837
5,417
(682)
0
Balance at 31 December 2006
489,537
(8,269)
481,268
Changes in the group's intangible asset accounts in 2006 and 2005 were as follows:
€'000
Cost
Balance at 31 December 2004
Additions
Disposals and write-offs
Other
Balance at 31 December 2005
Acquisition of Banco Urquijo group
Additions
Disposals and write-offs
Other
Balance at 31 December 2006
Banco Sabadell Annual Report 2006
206
Depreciation
Impairment
Total
179,118
(144,099)
0
35,019
41,525
(4,233)
(2,186)
(17,703)
1,358
(885)
0
0
(4,371)
23,822
(2,875)
(7,442)
214,224
(161,329)
(4,371)
48,524
93,002
49,349
(21,703)
1,814
(13,964)
(23,781)
17,673
(3,127)
0
(1,759)
0
0
79,038
23,809
(4,030)
(1,313)
336,686
(184,528)
(6,130)
146,028
The gross value of other intangible assets that were still in use and had been fully amortized at 31 December 2006 and
2005 totalled €151,676,000 and €132,403,000 respectively.
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Note 16. Other assets
The composition of other assets at 31 December 2006 and 2005 was as follows:
€'000
2006
2005
Inventories
Other
2,844
386,482
995,500
8,077
Total
389,326
1,003,577
The amount shown under inventories for 2005 relates almost entirely to the Landscape Group.
The “Other” total for 2006 consisted mainly of offsetting entries consisting of debit transactions in transit to be paired
with credit transactions in transit under the “Other liabilities” heading.
€'000
Land
Real estate
developments
Other
Total
Balance at 31 December 2004
470,106
215,969
28,469
714,544
Additions
Disposals
369,523
(166,616)
72,152
(84,710)
40,859
49,748
482,534
(201,578)
Balance at 31 December 2005
673,013
203,411
119,076
995,500
Additions
Disposals
Derecognized due to sale of Landscape group
252,204
(5,318)
(919,899)
118,408
(106,736)
(215,083)
40,245
(35,200)
(121,277)
410,857
(147,254)
(1,256,259)
0
0
2,844
2,844
Balance at 31 December 2006
Deposits from credit institutions, a liability item on the consolidated balance sheet, are analysed as follows for the years
2006 and 2005:
€'000
2006
2005
Analysis by heading:
Held for trading
Financial liabilities at amortized cost
0
4,112,937
1,203
3,476,447
Total
4,112,937
3,477,650
Analysis by type:
Time deposits
Repurchase agreements
Other accounts
Valuation adjustments
2,940,672
231,978
902,775
37,512
3,167,082
30,890
257,681
21,997
Total
4,112,937
3,477,650
Analysis by currency:
Euro denominated
Foreign currency denominated
3,232,302
880,635
2,833,563
644,087
Total
4,112,937
3,477,650
Average annual rates of interest payable on deposits from credit institutions for the years 2006 and 2005 were 2.74%
and 1.98% respectively.
Banco Sabadell Annual Report 2006
Note 17. Deposits from credit institutions
Statutory information
Changes in inventories in 2006 and 2005 were as follows:
207
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Note 18. Deposits from other creditors
Deposits from other creditors (except for liabilities associated with non-current assets held for sale) reported on the
consolidated balance sheet at 31 December 2006 and 2005 are analysed in the following table:
€'000
Statutory information
Banco Sabadell Annual Report 2006
208
2006
2005
Analysis by heading:
Financial liabilities at amortized cost
30,090,641
23,023,190
Total
30,090,641
23,023,190
Analysis by type:
General government
Demand deposits
Current accounts
Savings accounts
Time deposits
Repurchase agreements
Valuation adjustments
1,038,289
16,448,556
14,342,525
2,106,031
9,124,028
3,277,692
202,076
750,629
12,801,160
10,759,532
2,041,628
7,119,748
2,203,388
148,265
Total
30,090,641
23,023,190
Analysis by sector:
General government
Resident sector
Non-resident sector
Valuation adjustments
1,038,289
26,076,347
2,773,929
202,076
750,629
19,171,905
2,952,391
148,265
Total
30,090,641
23,023,190
Analysis by currency:
Euro denominated
Foreign currency denominated
28,382,652
1,707,989
21,548,347
1,474,843
Total
30,090,641
23,023,190
Average annual rates of interest on deposits from other creditors for the years 2006 and 2005 were 1.60% and 1.14%
respectively.
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Note 19. Debt certificates including bonds
Details of debt certificates including bonds issued by the group and recorded on the balance sheet at 31 December 2006
and 2005 are given in the table below:
€'000
Type of
security
Debt securities
Debt securities
Debt securities
Debt securities
Debt securities
Debt securities
Debt securities
Debt securities
Debt securities
Debt securities
Debt securities
Debt securities
2006
450,000
0
0
600,000
1,000,000
1,000,000
1,250,000
1,500,000
1,500,000
50,000
1,000,000
1,000,000
2005
450,000
3,900
500,000
600,000
1,000,000
1,000,000
1,250,000
0
0
0
0
0
EURIBOR 3M + 0.15
EURIBOR 3M + 0.14
EURIBOR 3M + 0.09
EURIBOR 3M + 0.10
EURIBOR 3M + 0.05
EURIBOR 3M + 0.01
EURIBOR 3M + 0.10
EURIBOR 3M + 0.14
EURIBOR 3M + 0.13
EURIBOR 3M + 0.05
Maturity
date
15.01.2007
05.01.2006
03.02.2006
12.11.2008
25.05.2007
20.09.2010
29.11.2007
10.03.2008
07.07.2009
04.10.2016
26.10.2011
18.06.2008
03.06.2004
22.03.2005
20.06.2006
Notes
Notes
Notes
0
312,029
4,991,678
234,724
3,353,875
0
2.70% - 3.20%
1.99% - 4.04%
Various dates
Various dates
Various dates
Euro
Euro
Euro
Banco de Sabadell, S.A.
Banco de Sabadell, S.A.
Banco de Sabadell, S.A.
Banco de Sabadell, S.A.
Banco de Sabadell, S.A.
Banco de Sabadell, S.A.
29.04.2003
26.01.2004
15.06.2005
19.01.2006
10.05.2006
16.05.2006
Mortage bonds
Mortage bonds
Mortage bonds
Mortage bonds
Mortage bonds
Mortage bonds
1,500,000
1,200,000
1,500,000
1,750,000
300,000
120,000
1,500,000
1,200,000
1,500,000
0
0
0
0.0450
0.0375
0.0325
0.0350
0.0413
0.0425
29.04.2013
26.01.2011
15.06.2015
19.01.2016
10.05.2016
16.05.2016
Euro
Euro
Euro
Euro
Euro
Euro
BancSabadell d'Andorra, S.A.
Securitization funds
Various dates
Various dates
Ordinary bonds
Ordinary bonds
2,000
2,917,678
7,000
2,278,532
0% - 7.00%
Various dates
Various dates
Euro
Euro
(20,248)
215,292
23,923,137
15,093,323
Banco de Sabadell, S.A.
Banco de Sabadell, S.A.
Banco de Sabadell, S.A.
(1)
(1)
(1)
(1)
(2)
(3)
(3)
Valuation and other adjustments
Total
Rate of interest
at 31.12.06
EURIBOR 3M + 0.175
Issue
currency
Euro
Euro
Euro
Euro
Euro
Euro
Euro
Euro
Euro
Euro
Euro
Euro
Statutory information
Date of
issue
15.01.2002
03.01.2003
03.02.2003
12.11.2003
25.05.2004
20.09.2005
29.11.2005
10.03.2006
07.07.2006
04.10.2006
26.10.2006
18.12.2006
Issuer
Sabadell International Finance LTD
Sabadell International Finance LTD
Sabadell International Finance LTD
Sabadell International Finance B.V.
Banco de Sabadell, S.A.
Banco de Sabadell, S.A.
Banco de Sabadell, S.A.
Banco de Sabadell, S.A.
Banco de Sabadell, S.A.
Banco de Sabadell, S.A.
Banco de Sabadell, S.A.
Banco de Sabadell, S.A.
(1) Underwritten by Banco de Sabadell, S.A.
(2) A prospectus has been filed with the CNMV for an issue of €3,500,000,000 extendible to €4,000,000,000.
(3) A prospectus has been filed with the CNMV for an issue of €6,000,000,000.
Details of subordinated liabilities issued by the group and recorded on the consolidated balance sheet at 31 December
2006 and 2005 are as follows:
Banco Sabadell Annual Report 2006
Note 20. Subordinated liabilities
€'000
Amount
Date of
issue
Issuer
Banco Atlántico, S.A. (a)
Sabadell International Capital Ltd.
Banco Atlántico, S.A. (a)
Sabadell International Capital Ltd.
Banco Atlántico, S.A. (a)
Banco de Sabadell, S.A.
Banco de Sabadell, S.A.
Valuation and other adjustments
27.04.2000
27.07.2001
09.08.2002
05.12.2002
21.08.2003
18.02.2004
25.05.2006
Total
2006
2005
90,000
0
30,000
300,000
30,000
300,000
1,000,000
17,554
90,000
300,000
30,000
300,000
30,000
300,000
0
(9,053)
1,767,554
1,040,947
Rate of interest
at 31.12.06
Maturity
date
3.760%
3.640%
4.875%
3.630%
4.048%
3.925%
01.08.2008
01.10.2010
05.12.2012
11.10.2011
18.02.2014
25.05.2016
a) Now merged with Banco de Sabadell, S.A.
Subordinated liabilities rank below the claims of all other ordinary creditors of the group. All issues are denominated in
euros.
209
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Note 21. Other financial liabilities
The "other financial liabilities" item of the consolidated balance sheet for the years 2006 and 2005 is analysed below.
€'000
Statutory information
2006
2005
Analysis by heading:
Financial liabilities at amortized cost
3,075,456
1,692,602
Total
3,075,456
1,692,602
Analysis by type:
Obligations payable
Collateral received
Clearing houses
Tax collection accounts
Payment orders outstanding
Other financial liabilities
217,791
185,822
973,502
147,599
67,336
1,483,406
326,917
220,312
589,183
156,739
98,354
301,097
Total
3,075,456
1,692,602
Analysis by currency:
Euro denominated
Foreign currency denominated
2,688,926
386,530
1,632,176
60,426
Total
3,075,456
1,692,602
2006
2005
Unearned premium and unexpired risk reserves
Provisions for life insurance
Unearned premium and unexpired risk reserves
Mathematical reserves
Provisions for benefits
Provisions for "with profits" insurance and return premiums
Technical reserves for life insurance where the investment risk
is borne by policyholders
Liabilities due to reinsurance and co-insurance
59
2,239,082
12,550
2,226,532
39,573
1,261
60
1,919,522
11,721
1,907,801
34,018
1,325
484,878
830
354,313
537
Total
2,765,683
2,309,775
Note 22 . Liabilities under insurance contracts
The balances for this heading at 31 December 2006 and 2005 are itemized below:
€'000
Banco Sabadell Annual Report 2006
210
Note 23. Provisions
The components of this item of the consolidated balance sheets at 31 December 2006 and 2005 were as follows:
€'000
2006
2005
Provisions for pensions and similar obligations
Provisions for contingent exposures and commitments
Other provisions
298,488
94,569
106,816
276,639
87,775
102,129
Total
499,873
466,543
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Details of changes in provisions for the years 2006 and 2005 are given in the following table:
€'000
Pensions and
similar
obligations
Contingent
exposures &
commitments
Other
provisions
Total
313,965
81,668
173,766
569,399
Provisions charged to income statement
Personnel expenses
Interest expense and similar charges
Provisioning expenses
18,101
6,949
11,152
0
58,733
0
0
58,733
750
0
0
750
77,584
6,949
11,152
59,483
Releases to income statement
(6,601)
(51,817)
(859)
(59,277)
Balance at 31 December 2004
Foreign exchange differences
Other movements
Balance at 31 December 2005
(48,826)
(17,584)
(31,242)
0
0
53
0
0
0
0
(862)
0
(80,164)
0
0
(80,164)
53
(128,990)
(17,584)
(31,242)
(80,164)
8,636
7,774
276,639
87,775
102,129
466,543
Acquisition of Banco Urquijo group
59,154
5,142
69,949
134,245
Provisions charged to income statement
Personnel expenses
Interest expense and similar charges
Provisioning expenses
18,269
6,691
10,929
649
19,451
0
0
19,451
1,804
0
0
1,804
39,524
6,691
10,929
21,904
Releases to income statement
(4,341)
(17,482)
(21,903)
(43,726)
(588)
(13)
(601)
Foreign exchange differences
Other movements
Balance at 31 December 2006
(49,101)
(8,095)
(41,006)
0
0
0
0
0
(31,841)
0
0
(31,841)
(80,942)
(8,095)
(41,006)
(31,841)
(2,132)
271
(13,309)
(15,170)
106,816
499,873
298,488
94,569
Banco Sabadell Annual Report 2006
Utilizations:
Insurance premiums paid
Pension payments
Other payments
0
Statutory information
Utilizations:
Insurance premiums paid
Pension payments
Other payments
0
The main provision components are as follows:
• Provisions for pensions and similar obligations: includes provisions to cover post-employment benefits, including
pension commitments in respect of employees taking early retirement and similar obligations.
• Provisions for contingent exposures: includes all provisions to cover contingent exposures associated with financial
guarantees or other contractual commitments.
• Other provisions: consists mainly of reserve funds assigned by the group to cover certain risks incurred in the
normal course of business, including those described in note 34.
Most provisions are long-term in character.
211
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The balances giving rise to pension liabilities recognized in the group balance sheet are shown below:
€'000
2006
2005
Obligations due to pension commitments
Actuarial gains / (losses) in scheme assets not recognized in
income statement
Fair value of scheme assets
799,493
695,021
12,466
(513,471)
15,224
(433,606)
Net liability recognized on balance sheet
298,488
276,639
Statutory information
Obligations covered by specific assets totalled €797,559,000 (including €114,872,000 in commitments to early
retirees) at 31 December 2006, and €694,885,000 (including €98,249,000 for early retirees) at 31 December 2005.
The fair value of pension-linked assets reported in the balance sheet stood at €325,834,000 at 31 December 2006
and €312,968,000 at 31 December 2005.
The fair value of scheme assets consisting of financial instruments issued by the Bank was €3,894,000 at 31
December 2006 and €6,055,000 at 31 December 2005.
Of the total net liability recognized on the balance sheet at 31 December 2006, it is estimated that €44,822,000 will
become payable in the near term, with the remainder becoming payable in more than one year.
Note 24. Capital having the nature of a financial liability
Banco Sabadell Annual Report 2006
As of 31 December 2006 this balance sheet item was made up entirely of two preference share issues, one carried out in
March 1999 by Sabadell International Equity Ltd. for a value of €250,000,000 and one carried out in September 2006 by
Banco Sabadell for a value of €500,000,000, with the interest paid on the shares amounting to €5,514,000 and
€2,050,000 respectively. At 31 December 2005 the item was composed entirely of the €250,000,000 preference share
issue.
These preference shares carry no voting rights and were subscribed for in their entirety by third party investors not
related to the group. Both issues are perpetual in character but are redeemable at the option of the issuer on application
to the Bank of Spain.
At 31 December 2006 the rate of interest payable on the Sabadell International Equity Ltd. preference share issue was
3.283% (2.531% at 31 December 2005). The rate of interest payable on the Banco Sabadell issue was 5.234%.
Note 25. Fair value of financial assets and liabilities
212
As explained in note 1, financial assets are recorded in the balance sheet at their fair values except in the case of loans
and receivables, equity instruments whose market value cannot reliably be determined and derivatives which have these
equity instruments as their underlyings and are settled on delivery of the underlying instruments. Financial liabilities are
recognized in the balance sheet at their fair values except in the case of financial liabilities at amortized cost, capital
having the nature of a financial liability and derivatives whose underlyings are equity instruments for which a market value
cannot reliably be determined.
A certain portion of the assets and liabilities recorded in the balance sheet under loans and receivables and financial
liabilities at amortized cost are counted as fair value and cash flow hedges used by the group; they are therefore
recognized in the balance sheet at their fair values based on the risks being hedged.
Other assets and liabilities, for the most part, have rates of interest which are variable and due for review within
periods of one year or less. This greatly limits the potential differences between the carrying values at which these assets
and liabilities are recorded and their fair values.
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Note 26. Foreign currency transactions
Euro equivalent values for different classes of foreign currency-denominated assets and liabilities held by the group at 31
December 2006 and 2005 were as follows:
€'000
2005
Foreign currency assets:
Cash and balances with central banks
Loans and advances to credit institutions
Debt securities
Loans and advances to other debtors
Other assets
19,548
1,244,296
31,501
1,264,726
393,650
64,912
693,160
15,076
866,894
829,944
Total
2,953,721
2,469,986
Foreign currency liabilities:
Deposits from central banks
Deposits from credit institutions
Deposits from other creditors
Other liabilities
260
880,635
1,707,989
436,501
1,902
644,087
1,474,843
93,720
Total
3,025,385
2,214,552
Statutory information
2006
Note 27. Minority interests
The undertakings in which minority interests are held are as follows:
€'000
2006
% Minority
Interests
Amount
Attributed
profit/(loss)
%Minority
interests
49.03%
16,468
3,005
49.03%
14,863
1,775
27.08%
793
242
137
(235)
27.08%
734
408
(16)
80
17,503
2,907
16,005
1,839
Total
Attributed
Amount profit/(loss)
Banco Sabadell Annual Report 2006
BancSabadell d'Andorra, S.A.
Compañía de Electricidad y
Cogeneración de Uvero, S.A.
Other undertakings
2005
Changes in the "minority interests" heading in 2006 and 2005 were as follows:
€'000
Balance at 31 December 2004
Changes in proportional shareholdings and other movements
Profit or loss for the year
Balance at 31 December 2005
Changes in valuation adjustments
Changes in proportional shareholdings and other movements
Profit or loss for the year
Balance at 31 December 2006
13,807
359
1,839
16,005
(553)
(856)
2,907
17,503
213
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Note 28. Valuation adjustments
Valuation adjustments for the group at 31 December 2006 and 2005 were composed of the following:
€'000
2006
2005
Available-for-sale financial assets
Debt securities
Other equity instruments
Cash flow hedges
Foreign exchange differences
Non-current assets held for sale
137,542
46,975
90,567
(363)
(471)
0
117,455
75,323
42,132
(593)
195
25
Total
136,708
117,082
Statutory information
Note 29. Own funds
Changes in own funds in the years 2006 and 2005 were as follows:
€'000
Balance at 31 December 2004
Banco Sabadell Annual Report 2006
Appropriation of profits in previous years
Interim dividend for 2004
Final dividend for 2004
Translation differences and other movements
Acquisitions of own shares
Disposals of own shares
Issuance/redemption of other equity instruments
Profit for the year 2005
Interim dividend for 2005
Balance at 31 December 2005
Appropriation of profits in previous years
Interim dividend for 2005
Final dividend for 2005
Translation differences and other movements
Acquisitions of own shares
Disposals of own shares
Issuance/redemption of other equity instruments
Profit for the year 2006
Interim dividend for 2006
Balance at 31 December 2006
214
Other
equity Treasury
instruments
shares
Profit/
(loss) for
the year
Interim
dividend
Capital
Reserves
153,002
2,630,306
205
(106)
373,196
(73,441) 3,083,162
0
0
0
0
0
0
0
0
0
220,194
0
0
8,515
0
0
0
0
0
0
0
0
0
0
0
72
0
0
0
0
0
0
(70,128)
70,234
0
0
0
(220,194)
(73,441)
(79,561)
0
0
0
0
453,128
0
0
73,441
0
0
0
0
0
0
(91,801)
153,002
2,859,015
277
0
453,128
(91,801) 3,373,621
0
0
0
0
0
0
0
0
0
248,106
0
0
(10,727)
0
0
0
0
0
0
0
0
0
0
0
0
0
0 (141,206)
0 139,341
1,280
0
0
0
0
0
(248,106)
(91,801)
(113,221)
0
0
0
0
908,398
0
0
91,801
0
0
0
0
0
0
(116,281)
153,002
3,096,394
1,557
908,398
(116,281) 4,041,205
(1,865)
Total
0
0
(79,561)
8,515
(70,128)
70,234
72
453,128
(91,801)
0
0
(113,221)
(10,727)
(141,206)
139,341
1,280
908,398
(116,281)
Minimum capital requirements
At 31 December 2006 and 2005, the group's qualifying capital resources were above the required levels both under Bank
of Spain rules and under the regulations of the Bank of International Settlements in Basel.
Issued capital
The Bank's issued share capital at 31 December 2006 and 2005 was €153,001,710 divided into 306,003,420
registered shares with a nominal value of €0.50 each.
There were no changes in the Bank's share capital in the years 2006 and 2005.
The Bank's shares are quoted on the Madrid, Barcelona and Valencia stock exchanges via the automatic quotation
system managed by Sociedad de Bolsas, S.A.
None of the undertakings included in the consolidated accounts are quoted on any stock exchange, except for
Sociedad de Cartera del Vallés, S.A., which is quoted on Spain’s alternative stock market (MAB). The MAB is an organized
trading system set up in February 2006, authorized by the Spanish government and regulated by article 31.4 of the Stock
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Market Act. Its is subject to organizational and operational supervision by the CNMV.
The rights attached to all the Bank's equity instruments are regulated by the Spanish SA Companies Act [Ley de
Sociedades Anónimas]. At a General Meeting a shareholder may cast votes in proportion to his holding in the share
capital, subject to a limit of 10% of the total number of votes.
As required by article 53 of the Stock Market Act [Ley del Mercado de Valores], information is provided below on all
significant shareholdings in Banco Sabadell (i.e. holdings amounting to 5% or more of the share capital or voting rights) at
31 December 2006.
Undertaking
Reales del Turia, S.L.
Direct
holding
Number
of shares
5.28%
16,161,870
Indirect holder
Enrique Bañuelos de Castro (1)
(1) Mr Bañuelos owns 100% of Reales del Turia, S.L.
Statutory information
Caixa Holding, S.A. sold its 12.45% holding of 38,095,265 shares in Banco de Sabadell, S.A. in December 2006.
Share premium account
The balance of the share premium account at 31 December 2006 and 2005 was €1,373,270,000.
Reserves
€'000
Restricted reserves:
Statutory reserve
Reserve for treasury shares pledged as security
Revaluation reserve pursuant to Royal Decree-Law 7/1996
Reserve for investment in Canary Islands
Share redenomination reserve
Available reserves
Total
2005
457,484
30,600
383,195
37,046
6,530
113
309,403
30,600
236,477
37,046
5,167
113
1,243,161
1,170,516
22,479
5,826
1,723,124
1,485,745
The balance of the revaluation reserve set up pursuant to Royal Decree-Law 7/1996 was formally approved by the tax
authorities on 28 April 2000 and may now be used:
a) to eliminate negative accounting results
b) to increase the share capital
c) as available reserves, on the expiry of ten years following the date of the balance sheet on which the asset
revaluations were recorded.
Banco Sabadell Annual Report 2006
Reserves of equity-accounted undertakings
2006
The contributions made by consolidated undertakings to group reserves are set out in the Annex.
Holdings of treasury shares
The Bank’s holdings of shares in the parent company showed the following evolution during the year:
215
Balance at 31 December 2004
Purchases
Sales
Balance at 31 December 2005
Purchases
Sales
Balance at 31 December 2006
No. of shares
Nominal value
(€'000)
Average share
price (€)
Proportion
of total (%)
6,146
3.07
17.20
0.00
3,499,411
3,505,557
1,749.71
1,752.78
20.04
20.11
1.14
1.14
0
0.00
0.00
0.00
5,120,638
5,064,500
2,560.32
2,532.25
27.58
27.76
1.67
1.66
56,138
28.07
33.23
0.02
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Of the total sales in 2006, 59,427 were sold as part of the share exchange with minority shareholders in Banco Urquijo,
S.A. after its absorption by Banco Sabadell.
This resulted in a profit and an increase in equity of €1,280,000 in 2006 (€277,000 in 2005).
At the close of the year a total of 11,300,367 shares of the Bank with a nominal value of €5,650,000 were pledged as
security (10,671,341 shares with a nominal value of €5,336,000 at 31 December 2005).
Note 30. Contingent exposures
The breakdown of this item is as follows:
€'000
Statutory information
2006
2005
Financial guarantees
Other contingent exposures
8,218,834
0
6,333,245
5,776
Total
8,218,834
6,339,021
Doubtful contingent exposures
The movement in the "doubtful contingent exposures" account was as follows:
€'000
Banco Sabadell Annual Report 2006
Balance at 31 December 2004
22,307
Additions
Disposals
25,509
(18,254)
Balance at 31 December 2005
29,562
Acquisition of Banco Urquijo group
Additions
Disposals
539
15,995
(34,661)
Balance at 31 December 2006
11,435
The distribution of contingent exposures by geographical region at 31 December 2006 and 2005 was as follows:
€'000
2006
2005
8,368
1,560
920
0
587
28,536
15
809
1
201
11,435
29,562
2006
2005
Exposures covered by specific provisions:
Provisions for credit risk
Provisions for country risk
7,856
6,723
1,133
22,044
19,889
2,155
Exposures covered by generic provisions
86,713
65,731
Total
94,569
87,775
Spain
Other European Union
Latin America
USA and Canada
Rest of world
Total
Provisions for credit risk in respect of doubtful contingent exposures were as follows:
€'000
216
The movement in these provisions, which are recorded in provisions on the liability side of the balance sheet, is shown in
note 23.
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Note 31. Contingent commitments
The composition of this item at 31 December 2006 and 2005 was as follows:
€'000
2005
Drawable by third parties
Credit institutions
General government
Other resident sectors
Non-resident sector
Financial asset forward purchase commitments
Regular way financial asset purchase contracts
Securities due for redemption
Other contingent commitments
19,626,656
165,990
620,138
18,334,721
505,807
22,500
270,696
6,282
1,777,501
14,742,768
127,254
323,158
13,486,540
805,816
64,323
333,466
2,362
1,456,642
Total
21,703,635
16,599,561
Total commitments drawable by third parties included commitments totalling €3,693,307,000 subject to debtor
creditworthiness assessments in without-recourse factoring operations at 31 December 2006 (€2,584,417,000 at 31
December 2005).
Statutory information
2006
Note 32. Off-balance sheet customer funds
Off-balance sheet customer funds under the group's management and funds sold but not managed by the group were as
follows:
€'000
2005
18,645,374
14,184,318
3,317,514
1,143,542
12,831,107
9,147,242
2,655,895
1,027,970
Mutual funds sold but not managed by the group
2,297,749
1,501,373
Financial instruments deposited by third parties
60,479,325
33,364,974
Total
81,422,448
47,697,454
Under management by the group:
Investment companies and mutual funds
Pension funds
Asset management
Banco Sabadell Annual Report 2006
2006
Net fees and commissions on these products are reported in the income statement under fees and commissions
received and amounted to €188,507,000 in 2006 (€131,300,000 in 2005).
217
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Note 33. Income statement
Some salient aspects of the group's income statement for the years 2006 and 2005 are highlighted in the following
tables.
(a) Interest and similar income/charges and returns on equity instruments
The components of net interest income were as follows:
€'000
Statutory information
Interest and similar income
Cash and balances with central banks
Loans and advances to credit institutions
Loans and advances to other debtors
Debt securities
Doubtful assets
Rectification of income as a result of hedging transactions
Income from insurance contracts linked to pensions and similar obligations
Other interest
2005
2,476,719
14,648
168,463
2,089,259
75,708
7,230
85,015
31,346
5,050
1,738,224
9,036
88,971
1,484,188
76,268
1,251
50,081
26,853
1,576
22,153
16,784
2,498,872
1,755,008
Return on equity instruments
Total
Banco Sabadell Annual Report 2006
218
2006
Interest expense and similar charges
Deposits from central banks
Deposits from credit institutions
Deposits from other creditors
Debt certificates including bonds
Subordinated liabilities
Rectification of expenses as a result of hedging transactions
Interest cost of pension funds
Remuneration of capital having the nature of a financial liability
Other interest
(1,401,001)
(16,495)
(148,546)
(500,494)
(645,325)
(60,975)
19,430
(30,282)
(15,244)
(3,070)
(778,405)
(7,619)
(71,416)
(325,979)
(308,389)
(43,666)
14,380
(26,935)
(6,160)
(2,621)
Total
(1,401,001)
(778,405)
b) Fee and commission
Fee and commission income from trading and for services were composed of the following:
€'000
2006
2005
Arising from contingent exposures
Arising from contingent commitments
Arising from exchange of foreign currencies and banknotes
Arising from collection and payment service
Securities-related services
Distribution of non-bank financial products
Other fees and commissions
73,248
11,307
4,094
224,922
67,738
183,972
35,097
59,829
8,351
4,707
222,157
44,327
127,547
24,316
Total
600,378
491,234
2006
2005
Fee and commission expenses to correspondent and other banks
Other fee and commission expenses
38,682
11,435
35,465
8,655
Total
50,117
44,120
Fee and commission expenses were as follows:
€'000
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(c) Insurance activity
This component of the income statement was made up of the following:
€'000
2006
Insurance and reinsurance premiums received and paid
Benefits paid and other insurance-related expenses
Net provisions for insurance contracts liabilities
Finance income (net)
Total
2005
1,371,645
(984,350)
(457,453)
129,970
948,710
(776,435)
(227,785)
99,247
59,812
43,737
(d) Gains or losses on financial assets and liabilities (net)
The composition of this item of the consolidated income statement for the years to 31 December 2006 and 2005 was as
follows:
2006
2005
Held for trading
Available-for-sale financial assets
Loans and receivables
Hedging derivatives and other gains/losses
20,776
24,856
(629)
(8,605)
11,282
31,813
1,427
20,179
Total
36,398
64,701
Analysis by type of financial instrument
Net gains/losses on debt securities
Net gains/losses on equity instruments
Net gains/losses on derivatives contracts
Other net gains/losses
600
30,858
5,569
(629)
(26)
34,592
26,833
3,302
Total
36,398
64,701
(f) Personnel expenses
The personnel expenses item of the income statement was composed of the following:
€'000
2006
2005
Salaries and bonuses of current employees
Social security contributions
Pensions
Other costs
423,417
92,353
20,630
69,282
381,154
85,240
19,794
49.182
Total
605,682
535,370
The average number of staff employed by all group undertakings was 9,843 in 2006 (9,489 in 2005).
The category split of employees of the group as of 31 December was as follows:
219
Number of employees
Technical/specialist
Administrative
Total
Banco Sabadell Annual Report 2006
(e) Income from non-financial services and cost of sales
Sales and other income from non-financial services include sales of goods and income from services associated with the
ordinary operations of non-financial undertakings that do not qualify for inclusion in the consolidated financial services
group. Costs of sales include the costs attributable to sales of goods and services sold or provided as part of the ordinary
business of such undertakings.
Statutory information
€'000
2006
2005
6,528
3,538
5,787
3,656
10,066
9,443
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(g) Other administrative expenses
€'000
IT and systems
Communications
Advertising
Premises, fittings and equipment
Printing and office supplies
Taxes
Other expenses
Total
2006
2005
71,457
23,150
22,916
62,652
6,704
43,866
77,872
43,315
21,352
19,955
52,547
10,916
36,219
72,689
308,617
256,993
Statutory information
A total of €856,000 in fees was paid to PricewaterhouseCoopers Auditores, S.L. for auditing services in Spain in the year
2006 (€634,000 in 2005), plus a further €278,000 for services relating to foreign branches and subsidiaries in 2006
(€224,000 in 2005).
A further €247,000 in fees was paid to other auditors for auditing services in Spain in 2006 (€48,000 in 2005), plus
another €114,000 for services relating to foreign branches and subsidiaries in 2006 (€182,000 in 2005).
Fees for other services provided by PricewaterhouseCoopers Auditores, S.L. and other firms in the same group
amounted to €413,000 in 2006 (€341,000 in 2005).
Fees paid to other auditors for other services amounted to €1,572,000 in 2006 (€818,000 in 2005).
(h) Other operating expenses
The other operating expenses item was made up almost entirely of the group's contribution to the Deposit Guarantee
Fund.
(i) Impairment losses (net)
The composition of this item of the consolidated income statement for the years to 31 December 2006 and 2005 was as
follows:
€'000
2006
Banco Sabadell Annual Report 2006
220
2005
Available-for-sale financial assets
Loans and receivables
Non-current assets held for sale
Investments
Tangible assets
Goodwill
Other intangible assets
2,467
241,777
68
0
444
8,268
1,757
3,803
144,100
(939)
12,332
0
0
4,371
Total
254,781
163,667
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(j) Profit from discontinued operations (net)
This item of the income statement for the years 2006 and 2005 can be analysed as follows:
€'000
2005
Interest and similar income
Interest expense and similar charges
Returns on equity instruments
Share of profit or loss of equity-accounted undertakings
Fee and commision income
Fee and commision expense
Gains or losses on financial assets and liabilities (net)
Foreign exchange differences (net)
Sales and income from non-financial services
Cost of sales
Other operating income
Personnel expenses
Other administrative expenses
Depreciation and amortization
Other operating expenses
Impairment losses (net)
Provisioning expense (net)
Finance income from non-financial activities
Finance expenses of non-financial activities
Other gains
Other losses
Income tax
(8,842)
(2,037)
1
(36)
1,250
(244)
48
61
250,239
(175,861)
(118)
(4,420)
(2,201)
(8,645)
0
306
7
12,216
(38,829)
774,520
(2,126)
(240,458)
10,638
(11,800)
110
0
5,756
(277)
867
0
202,522
(121,835)
12
(6,825)
(5,295)
(7,477)
(52)
952
2,266
10,117
(28,351)
1,915
(1,679)
(12,784)
Total
554,831
38,780
Statutory information
2006
The profit from discontinued operations relates, essentially, to the Landscape group.
Basic earnings per share for discontinued operations were €1.81 in 2006 (€0.13 in 2005)
Cash flows generated by discontinued operations in 2006 were as follows:
€'000
Adjustment to profit or loss:
Depreciation/amortization of assets (+)
Impairment losses (net) (+/-)
Provisioning expense (net) (+/-)
Gains/losses on disposal of tangible assets (+/-)
Gains/losses on disposal of investments (+/-)
Taxes (+/-)
Other non-monetary items (+/-)
2005
554,831
38,780
(523,744)
8,645
(306)
(7)
0
(772,534) (*)
240,458 (*)
0
15,501
7,477
(952)
(2,266)
(1,542)
0
12,784
0
Adjusted profit or loss
31,087
54,281
Net increase/decrease in operating assets
85,538
(135,838)
Total net cash flows from operating activities
116,625
(81,557)
Total net cash flows from investing activities
(63,026)
87,622
Total net cash flows from financing activities
(5,194)
Net increase/decrease in cash or cash equivalents
48,405
(*) These items are included in “other non-monetary items” in the consolidated cash flow statement.
(39)
6,026
Banco Sabadell Annual Report 2006
Contribution to group results:
2006
221
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Note 34. Taxation (income tax)
Undertakings treated as consolidated for tax purposes
Banco de Sabadell, S.A. is the dominant company of a group treated as consolidated for tax purposes which includes all
Spanish-resident group undertakings that qualify as dependent companies under Spanish regulations on the taxation of
the consolidated income of corporate groups.
Companies treated as part of the group for tax purposes are shown in the Annex.
All other group companies submit individual tax returns in accordance with the applicable tax regulations.
Reconciliation
The reconciliation of the difference between the accounting results for the years 2006 and 2005 and the assessed
income for corporation tax purposes is as follows:
€'000
Statutory information
2006
Profit before tax
Increases in taxable income
Reductions taxable income
629,781
175,924
(248,375)
593,161
250,536
(302,478)
Assessed income for tax purposes
557,330
541,219
Tax (at 35%)
195,066
189,427
Double taxation, training and other allowances
(20,322)
(21,747)
Net tax payable
174,744
167,680
11,018
0
96,535
(8,990)
10,328
5,114
0
(6,148)
273,307
176,974
Tax due to timing differences (net)
Reclassification adjustments on sale of investments (1)
Adjustments due to changes in tax regulations (2)
Other adjustments (net) (3)
Income tax
Banco Sabadell Annual Report 2006
222
2005
(1) Refers to income tax accruing in 2005 in respect of Landscape Promocions Immobiliàries, S.L. and Atlántico Holdings Financial Ltd., which were reclassified in
2006 on being classified as discontinued operations.
(2) Relates to a charge to income resulting from a change in the rate of corporation tax pursuant to Law 35/2006 of 28 November, which will apply in forthcoming
years.
(3) This relates to undertakings forming part of the group for accounting purposes but not for tax purposes.
Law 35/2006 of 28 November provides, inter alia, for reductions in the rate of corporation tax from the current rate of
35% to 32.5% in 2007 and 30% from 2008 onwards.
As undertakings have recognized deferred tax assets and liabilities based on temporary adjustments to the
corporation tax based on a rate of 35% and future reversals will be at lower rates (the accounting rules require that
possible future losses be recognized at the time they become known), an adjustment has been made this year and
charged to the income statement.
The size of the adjustment has been calculated from the total amount of the adjustments to be made at 31 December
2006, to which a rate reduced by 2.5% has been applied for anticipated reversals in 2007 and 5.0% for the remainder.
As a result of the sale in 2006 of Landscape Promocions Immobiliàries, S.L. and Atlántico Holdings Financial Ltd., a
tax charge on the sale of these undertakings of €239,932,000 has been included in profit from discontinued operations.
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Taxable income - increases and reductions
The increases and reductions in taxable income shown in the table above are analysed in the following table on the basis
of whether they arose from temporary or permanent differences.
€'000
2005
Permanent differences
Temporary differences arising in the current year
Temporary differences arising in earlier years
3,612
159,662
12,650
5,660
212,672
32,204
Increases
175,924
250,536
Permanent differences
Temporary differences arising in the current year
Temporary differences arising in earlier years
(44,583)
(37,503)
(166,289)
(28,094)
(17,276)
(257,108)
Reductions
(248,375)
(302,478)
Tax assets - deferred
This caption shows the amount reclaimable from the Spanish Treasury in respect of deferred tax assets. These arise
primarily from deferred tax credit due to differences between accounting and tax assessment procedures. This includes
€67,764,000 in tax credits arising from the integration of Banco Urquijo, €275,127,000 (2005: €196,947,000) in
respect of non-tax deductible provisioning expenses, €109,906,000 on payments related to pension funds (2005:
€147,531,000), €178,236,000 (2005: €219,626,000) related to merger reserves, and tax credits due to consolidation
adjustments. The remaining components of deferred tax assets are made up of sundry amounts to be recovered from the
Spanish tax authorities.
Statutory information
2006
Changes in deferred tax assets in 2006 and 2005 were:
€'000
Balance at 31 December 2004
864
(93)
(1,475)
33,952
(4,726)
(11,563)
(11,153)
24
72,406
(14,559)
5,743
171
Balance at 31 December 2005
728,253
Acquisition of Banco Urquijo group
Intragroup transactions
Pension fund
Non tax-deductible reserve funds
Appropriations to merger reserve
Recognition of loan arrangement fees
Change in corporation tax rate
Change in valuation adjustments
Advance tax payments for offices abroad
Accelerated depreciation
Consolidation adjustments
Other movements
78,997
568
(19,405)
35,918
(11,843)
(9,628)
(113,536)
(321)
2,136
(1,558)
(5,364)
822
Balance at 31 December 2006
685,039
Tax liabilities - deferred
This comprises amounts payable to the Spanish Treasury in respect of deferred tax liabilities. These liabilities include tax
charges of €53,900,000 arising from the integration of Banco Urquijo, accelerated depreciation as permitted by the tax
regulations, reversion of deferred tax of €8,000,000 (2005: €12,335,000) related to mergers, €2,698,000 (2005:
€2,386,000) in respect of intragroup transactions, and €81,428,000 (2005: 79,253,000) due to consolidation
adjustments.
Banco Sabadell Annual Report 2006
Intragroup transactions
Capitalization of pension fund
Change in generic loan loss provisions
Non-tax deductible reserve funds
Externalization of pension fund
Banco Atlántico S.A. merger fund
Reversal of deferred income
Impairment of repossessed properties
Changeover to IFRS
Reversals of changes due to implementation of IFRS
Consolidation adjustments
Other movements
658,662
223
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Changes in deferred tax liabilities in the last two years were as follows:
€'000
Balance at 31 December 2004
20,072
Free depreciation
Intragroup transactions
Changes in securities revaluation reserve
Banco Atlántico S.A. merger reserve
Deferred payment on sales
Deferred tax charges applicable to foreign branches
Changeover to IFRS
Reversals of changes due to implementation of IFRS
Consolidation adjustments
Other movements
(318)
1,026
2,003
(2,149)
3,479
4,252
39,370
(8,705)
73,747
(165)
Balance at 31 December 2005
Statutory information
Acquisition of Banco Urquijo group
Free depreciation
Intragroup transactions
Changes in securities valuation reserve
Mergers
Deferred payment sales
Deferred tax charges applicable to foreign branches
Valuation adjustments
Consolidation adjustments
Change in corporation tax rate
Other movements
Balance at 31 December 2006
132,612
53,900
(264)
312
0
(4,334)
0
(78)
(3,037)
2,174
(17,001)
(8)
164,276
The amount payable to the Spanish Treasury is shown under current tax liabilities.
Banco Sabadell Annual Report 2006
224
Deductions
Deductions include €15,618,000 (€8,982,000 in 2005) to be deducted under article 42 of the consolidated text of the
Corporation Tax Law (Deduction of tax on reinvestment of extraordinary gains), in respect of reinvested gains to a value of
€259,741,000 (€82,812,000 in 2005) of undertakings treated as part of the group for tax purposes.
Tax audits
Since July 2003 a tax audit has been in progress at the Banco Sabadell group and Banco Atlántico, S.A. for corporation
tax for the tax years 1998 to 2001, both inclusive.
At the same time an audit for value added tax and the personal investment income and earned income taxes for the
tax years 1999 to 2001, both inclusive, was put in hand for Banco de Sabadell, S.A., Banco de Asturias, S.A.,
BanSabadell Leasing, E.F.C., S.A., Solbank Leasing, E.F.C., S.A., Solbank SBD, S.A., Sabadell Banca Privada, S.A.,
BanSabadell Financiación, E.F.C., S.A. (formerly BanSabadell Hipotecaria, E.F.C., S.A.), BanSabadell Vida, S.A. and Banco
Atlántico, S.A.
As a result of the audit, as of the end of 2005 audit reports for the Banco Sabadell group had been signed to contest
the inspectorate's assessment of €20,460,000 in unpaid tax including €13,259,000 arising from temporary differences
in respect of the corporation tax. Appeals against the inspectorate's findings have been filed under the economicadministrative procedure.
On 19 January 2006 tax demands identifying a total of €8,271,000 in unpaid tax for the former Banco Atlántico, S.A.,
were disputed and suitable supporting evidence was provided.
Penalty notices for unpaid tax amounting to €2,725,000 have also been contested and appeals filed under the
economic-administrative procedure.
As a result of earlier investigations by the tax authorities, audit reports had also been issued for Banco Atlántico, S.A.
and Banco Urquijo, S.A. The amounts involved are €2,408,000 and €25,000 respectively. Appeals against the original tax
assessments have been filed.
The group has, of course, made sufficient provision for any contingencies that may arise in relation to these tax
assessments.
Tax liabilities of a contingent nature could arise as a result of different possible interpretations of the tax rules
applicable to certain types of transaction within the banking industry. However, in the opinion of the Bank and its
independent advisors, the possibility of such liabilities arising is remote, and if they did arise they would not be such as to
have any significant impact on the annual accounts.
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All companies treated as part of the consolidated group for tax purposes are due to be audited for corporation tax for
the year 2002 onwards.
Note 35. Segment reporting
Key data for each business unit are shown in the following table:
31.12.05
Commercial Banking
Corporate Banking
Private Banking
Bancassurance
Asset Management
31.12.06
Commercial Banking
Corporate Banking
Banco Urquijo
Bancassurance
Asset Management
Net operating
income
(€'000)
Profit
before tax
(€'000)
Average
total assets
(€'000)
ROE
Cost/
income
ratio
Employees
Branches
in Spain
354,447
340,389
6,081
44,161
16,538
293,520
269,005
3,680
45,788
16,538
20,158,388
17,755,947
275,654
2,463,593
15,705
16.3%
10.4%
11.3%
24.5%
96.2%
58.1%
27.9%
55.6%
27.3%
32.1%
6,227
1,102
76
91
96
1,048
49
7
-
Net operating
income
(€'000)
Profit
before tax
(€'000)
Average
total assets
(€'000)
ROE
Cost/
income
ratio
Employees
Branches
in Spain
444,606
441,710
13,384
53,168
26,615
376,238
289,846
10,522
54,166
26,615
23,529,860
22,808,516
475,777
3,050,193
21,797
17.6%
11.0%
17.9%
24.6%
145.5%
53.3%
23.9%
40.2%
22.9%
25.4%
6,532
1,237
267
89
144
1,107
63
17
-
The balances between the amounts shown above and totals for the consolidated group relate to Central Services,
investee companies, internal pricing offset entries and extraordinary income and expense.
Average total assets for the group as a whole were €61,629,169,000 at 31 December 2006 (€48,195,332,000 at
31 December 2005).
Banco Sabadell Annual Report 2006
(b) Presentation principles and methods
Information for each business unit is based on the individual accounting records of each group undertaking, after all
consolidation eliminations and adjustments have been made, and on analytical accounting for income and expense for
particular business lines allocated to one or more corporate entities. The income and expenses for each customer can
thus be assigned according to the business to which they relate.
Each business unit is treated as an independent business. Where services are provided by one business unit to
another (distribution of products, services, systems, etc.) inter-unit pricing applies. The impact of this on the group's
income statement is nil.
Each business pays the direct costs allocated to it through generic and analytical accounting, as well as indirect costs
relating to Central Services units.
Capital is allocated in such a way that each business unit has the equivalent of the regulatory capital required to cover
its risk exposure. This minimum capital requirement is allocated by reference to the supervisory authority for each
business (the Bank of Spain for customer-facing businesses, the National Stock Market Commission for Asset
Management and the Directorate-General for Insurance for Bancassurance).
Statutory information
(a) Segmentation policy
Segmental information has been provided first for the group's business units, and then on a regional basis.
The business units described below were set up under the group organizational structure existing at the end of the year
2006. For customer-facing businesses (Commercial Banking and Corporate Banking), the segmentation is based on the
type of customer addressed by those units. “Cross selling” units (Bancassurance and Asset Management) are
businesses offering specialized products which are marketed through the group's branch network.
The main change from the annual accounts for 2005 is elimination of the real estate business segment. Figures for
2005 have been adjusted on a comparative basis.
225
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Note 36. Financial risk management
The main financial risks faced by the Banco Sabadell group in the course of its operations involving the use of financial
instruments are credit risk, market risk and liquidity risk.
The group is aware that the accurate and efficient management and control of risk ensures that shareholder value is
maximized and that an appropriate degree of solvency is maintained in a context of sustainable growth.
With this in view, the management and control of risk has been embodied in a broad framework of principles, policies,
procedures and advanced valuation methods, forming an efficient decision-taking structure whose aim is to achieve an
optimum balance of return and risk.
Underlying principles
The Banco Sabadell group has laid down basic principles for the management and control of risk. These are described
in the following paragraphs.
Statutory information
Banco Sabadell Annual Report 2006
226
• Solvency. Banco Sabadell has opted for a prudent and balanced policy on risk to ensure sustained and profitable
business growth in line with the strategic targets set by Banco Sabadell and the group for maximum value creation.
It is vital that the structure of limits and thresholds should be able to prevent concentrations of risk from building up
in such a way as to compromise a significant proportion of the Bank’s capital resources. For this reason, the risk
variable is taken into account in decisions at every level and is quantified according to a single measure: economic
capital.
• Responsibility. The Board of Directors is committed to maintaining processes for the management and control of
risk: drawing up policies, setting limits and responsibility thresholds at lower levels of management; and approving a
risk management model and procedures and a methodology by which risk can be measured, monitored and
controlled. At the executive level there is a clear separation of functions between risk-originating business units and
the units responsible for managing and controlling risk.
• Monitoring and control. The ongoing management of risk is supported by robust control procedures to ensure
compliance with specified limits, clearly defined responsibilities for monitoring indicators and predictive alerts, and
the use of an advanced risk assessment methodology.
Credit Risk
Credit risk is the possibility that losses may be incurred as a result of default by obligors of financial instruments held by
the group.
Credit risk exposure is subjected to rigorous monitoring and control through regular reviews of borrowers'
creditworthiness and their ability to meet their obligations to the group, with exposure limits for each counterparty being
adjusted to levels that are deemed to be acceptable. It is also normal practice to mitigate exposure to credit risk by
requiring the borrower to provide collateral or other security to the Bank.
The group makes provisions to cover against credit risk, both in respect of specific losses actually incurred at the
balance sheet date and for losses considered likely to be incurred in the light of past experience. This is done in such a
way as to ensure that losses could not exceed loss provisions even in the event of a major change in economic conditions
or in borrower quality.
To maximize the business opportunities provided by each customer and to guarantee an appropriate degree of security,
the responsibility for approving and monitoring risks is shared between the relationship manager and the risk analyst, who
by maintaining effective communication are able to obtain a comprehensive view of each customer’s individual
circumstances.
The relationship manager monitors the business aspect through direct contact with customers and by handling their
day-to-day banking, while the risk analyst takes a more system-based approach based on his specialized knowledge.
The Board of Directors delegates powers and discretions to the Risk Control Committee, which then sub-delegates
authority at each level. The authority thresholds assigned to each level represent limits of exposure to each customer or
company group, taking account of all exposures already assumed by the Banco Sabadell group to the customer or group
in question.
The use of advanced methodologies for managing risk exposures also benefits the process in ensuring that proactive
measures can be taken once a risk has been identified. Of vital importance in this process are risk assessment tools
such as credit rating for corporate borrowers and credit scoring for retail customers, as well as indicators that serve as
advance alerts in monitoring risk.
Recovery of past-due accounts is the responsibility of a specialized function which coordinates initial out-of-court
negotiations and, where necessary, legal proceedings conducted by the group's legal department or independent legal
advisors, depending on the nature of the proceedings and the amount to be recovered.
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The year-end carrying values of financial assets involving credit risk exposures, analysed by asset type, counterparty
type and instrument type, and for each geographical region, are set out in the table that follows. This gives a good
indication of maximum exposures to credit risk since it shows the maximum level of indebtedness for each type of
borrower at the end of each year.
€'000
2006
2005
Foreign
operations
Total
Spanish
operations
Foreign
operations
Total
882,468
22,283
904,751
482,344
71,105
553,449
6,615,246
600
290,639
561
6,905,885
1,161
2,508,216
9,365
338,243
1,026
2,846,459
10,391
0
0
0
0
0
0
54,526,425
139,693
2,287
54,386,732
233,015
1,130,766
5,758
0
1,125,008
2,660
55,657,191
145,451
2,287
55,511,740
235,675
40,746,484
188,479
367
40,558,005
183,677
996,259
4,912
0
991,347
11,941
41,742,743
193,391
367
41,549,352
195,618
3,009,656
0
1,510,937
1,049,625
449,043
51
103,524
0
13,383
84,846
5,295
0
3,113,180
0
1,524,320
1,134,471
454,338
51
2,629,024
0
1,281,286
36.355
1,311,383
0
90,483
0
33,264
18,470
38,749
0
2,719,507
0
1,314,550
54,825
1,350,132
0
Trading derivatives
106,860
517
107,377
80,216
210
80,426
Hedging derivatives
317,821
(230)
317,591
313,515
2,706
316,221
65,458,476
1,547,499
67,005,975
46,759,799
1,499,006
48,258,805
Cash and deposits with central banks
Loans and advances to credit institutions
Doubtful assets
Money market operations
Loans and advances to other debtors
General government
Doubtful assets
Other private sector
Doubtful assets
Debt securities
Central banks
General government
Credit institutions
Other private sector
Doubtful assets
Total
Banco Sabadell Annual Report 2006
In line with current market developments the Banco Sabadell group enters into agreements to set up netting
arrangements with most of the counterparties with which it trades in derivative instruments and has agreed a number of
Credit Support Annexes (CSAs). Both these measures are designed to mitigate the group's exposure to credit risk.
Security deposits held by Banco Sabadell at the end of 2006 by way of collateral totalled €16.26 million (€159,27 million
at the end of 2005).
The group also has exposures and commitments to borrowers of a contingent nature. These generally arise from
guarantees given by the group or commitments under credit facilities extended to customers for up to a given limit so that
they have access to funds when required. These facilities also involve credit exposure and are subject to the same
processes of approval, monitoring and control as described above.
Statutory information
Spanish
operations
Credit risk exposure
227
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An analysis of the group's loans and advances on a segmental and sectoral basis is given in the following table:
%
Statutory information
2006
2005
Resident sector:
93.58
93.37
Loans to resident sector - productive activities:
Agriculture and livestock
Fisheries
Extraction industries
Food and food products
Oil refining
Chemicals
Glass and building materials
Metallurgy
Transport equipment manufacture
Other manufacturing
Energy
Construction
Retailing
Hotel and catering
Transport
Financial services
Property rentals
Other services
71.16
0.68
0.04
0.33
1.62
0.02
0.85
1.23
3.29
0.46
3.34
1.87
7.24
8.31
3.13
3.19
0.76
22.16
12.64
67.10
0.47
0.03
0.33
1.71
0.02
1.03
1.18
3.54
0.44
3.69
1.93
5.93
8.68
3.37
3.38
1.18
21.78
8.41
Loans for purchase of principal residence
Other residential loans
Loans to other institutions and other
15.12
6.51
0.79
18.46
7.12
0,69
0.25
6.05
0.12
0.47
6.24
-0.08
100.00
100.00
2006
2005
89.98
7.46
0.73
0.15
0.76
0.92
90.71
6.18
1.28
0.24
1.03
0.56
100.00
100.00
Public sector
Non-resident sector
Other
Total
Banco Sabadell Annual Report 2006
The geographical breakdown of credit risk is as follows:
%
Spain
Other European Union
USA and Canada
Other OECD
Latin America
Rest of world
Total
The regional distribution of loans and advances to the resident sector is shown in the following table:
%
228
Catalonia
Madrid
Valencia/Murcia & Balearic Islands
Asturias/Castile-León
Rest of Northern Spain
Rest Of Southern Spain
Other
Total
2006
2005
45.71
16.68
8.93
7.34
6.74
9.33
5.27
47.67
13.99
9.07
8.02
6.49
9.35
5.41
100.00
100.00
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The credit quality of financial assets held by the Banco Sabadell group may be inferred from its loan loss ratios which, as
the next table shows, have reached historically low levels:
%
Loan loss ratio
Loan loss coverage ratio
2006
2005
2004
0.39
466.56
0.49
383.07
0.61
325.03
€'000
Credit quality of financial assets
2006
2005
Negligible risk
Low risk
Medium-low risk
Medium risk
Medium-high risk
High risk
10,895,341
11,592,211
21,210,572
20,215,817
1,044,201
430,983
5,994,440
10,107,997
14,526,453
15,030,457
955,626
347,510
Total
65,389,125
46,962,483
Statutory information
As mentioned earlier, the group uses internally-generated models to rate most of the borrowers (or transactions) with
whom it incurs credit exposure. These models have been designed in accordance with best practice as proposed by the
new framework of International Convergence of Capital Measurement and Capital Standards, also known as Basel II.
However, not all asset portfolios giving rise to credit risk are subject to these models, partly because the design of such
models demands a certain degree of experience of actual cases of default. To give a clear view of the overall quality of the
portfolio, the following table uses risk categories defined by financial reporting standards laid down by the Bank of Spain's
Circular 4/2004. These categories are used to analyse credit risks to which the group is exposed and to estimate
provisioning requirements to cover against impairment losses in portfolios of debt instruments.
The following table shows the distribution of the group's credit risk according to how risks were assessed in credit rating
and credit scoring terms, for the most significant types of lending. It can be seen from the table that the proportion of
exposures rated higher than BBB- was 82.08% for risks assessed by credit rating (74.35% in 2005), and 87.39% for risks
assessed by credit scoring (91.88% in 2005).
%
Risk measured by credit scoring
2006
2005
2006
2005
AAA / AA+
AA
AAA+
A
ABBB+
BBB
BBBBB+
BB
BBB+
B
BCCC+
6.21
2.29
6.40
5.55
6.16
9.86
23.68
12.21
9.72
7.31
4.08
4.36
0.81
0.38
0.80
0.18
0.01
4.76
7.19
4.65
2.97
5.76
24.28
13.17
11.56
8.03
7.20
8.11
1.03
0.75
0.40
0.13
0.48
1.13
2.90
5.38
21.11
15.44
16.00
14.25
10.70
9.63
1.60
0.83
0.52
0.03
0.00
0.00
0.01
0.12
0.65
2.40
4.98
8.93
35.80
23.26
15.73
5.67
1.88
0.55
0.02
0.00
0.00
0.00
100.00
100.00
100.00
100.00
Total
Market risk
Market risk arises from the possibility of a loss in the value of a position or financial instrument held by the group due to
changing market conditions such as movements in equity prices, interest rates or exchange rates.
Different approaches are taken to the management of market risk, depending on which of the group's main business
lines has given rise to the risk:
• Risks arising from the group's customer-focused commercial banking and corporate banking businesses, known as
structural risk. This can be sub-classified into interest rate risk, currency risk and liquidity risk. These categories of
risk are discussed separately below.
• Risks generated through proprietary trading or market making activities by group undertakings, including trading in
equities, bonds or derivatives. Trading of this kind will often be undertaken as part of treasury and capital market
operations, with which this section is specifically concerned.
Banco Sabadell Annual Report 2006
Risk measured by credit rating
Analysis of risk exposures
229
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Statutory information
Banco Sabadell Annual Report 2006
230
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Discretionary market risk is measured by the VaR (Value at Risk) method, which allows the risks on different types of
financial market transactions to be analysed as a single class. The VaR method provides an estimate of the potential
maximum loss on a position that would result from an adverse, but normal, movement in any of the above risk factors.
This estimate is expressed in monetary terms and is calculated at a specified date, to a specified confidence level and
over a specified time horizon.
Market risk is monitored on a daily basis and reports on current risk levels and on compliance with the limits assigned
to each unit are sent to the risk control functions. Limits are assigned by the Board of Directors for each risk monitoring
unit (i.e. notional amount, VaR or sensitivity limits as applicable). This makes it possible to keep track of changes in
exposure levels and measure the contribution of each risk factor.
Risk control of this kind is supplemented by special simulation exercises and extreme market scenarios ("stress
testing"). The reliability of the VaR methodology is validated by back testing techniques which are used to verify that VaR
estimates are consistent with the specified confidence level. Using the VaR methodology does not, however, rule out the
possibility that losses will be above the set limits, as significant market movements may occur that exceed the confidence
levels being applied.
Risk levels as measured by the 10-day VaR at a 99% confidence level were as follows:
€m.
2006
2005
Average
Maximum
Minimum
Average
Maximum
Minimum
Interest rate risk
Currency risk
Equity risk
0.60
0.02
3.43
2.97
0.11
5.28
0.33
0.00
1.60
0.28
0.03
1.88
0.48
0.09
2.67
0.17
0.00
1.25
Aggregate VaR
4.05
8.09
2.00
2.18
2.95
1.51
Interest rate risk
Changes in interest rates can affect financial instruments held by the group in two ways: through changes in their value
and through changes in their future cash flows. For example, fixed-rate instruments or instruments on which interest rates
are fixed when the contract is made are often exposed to impacts of the first type. On the other hand, instruments that
reprice over their whole lives in response to market conditions will be exposed to impacts of the second type.
As a holder of both these kinds of instrument, the group is subject to both of these types of exposure to unexpected
interest rate movements. Such movements may ultimately translate into unforeseen changes in net interest income if, as
is common in banking, there are temporary mismatches in the maturity or repricing dates of asset, liability or off-balance
sheet exposures.
Interest rate risk is managed on a consolidated basis for the whole group. This task is performed by the Asset and
Liability Committee, although separate but coordinated risk management is also carried out within individual companies
and areas of business such as insurance. The management of interest rate risk involves proposing alternative business
or hedging strategies to ensure that business objectives are appropriate to market conditions and the group's asset
position, and that the limits set by the Board are strictly observed.
A number of methodologies are used to measure interest rate risk, allowing a more flexible approach to be taken. One
of these methodologies is to measure the sensitivity of net interest income to changes in interest rates over a one-year
horizon on a maturity and repricing matrix. In this technique the carrying values of financial assets and liabilities are
grouped according to their maturity dates or the dates on which their rates of interest are reviewed, whichever is nearer in
time. In this particular type of analysis the maturity or repricing dates are those contractually agreed and no other
assumptions are made. The analysis allows an estimate to be made of the effect that a change in interest rates would
have on net interest income, assuming that all rates change by the same amount and in a sustained manner. An analysis
of interest rate sensitivity at 31 December 2006 and 2005 is presented in the following table.
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€'000
From 3 to
12 months
From 1 to
2 years
From 2 to
3 years
From 3 to
4 years
From 4 to
5 years
More than
5 years
Loans and advances
Money market
Capital market
Other assets
13,419,086 18,379,817 24,529,726
2,356,610
187,785
31,698
2,479,368
102,256
124,211
453
0
0
491,478
1,748
73
0
246,269
0
242,447
0
172,603
0
520
0
104,820
0
283,158
0
413,493
0
669,145
0
0 57,757,292
4,581
2,582,422
0
3,901,178
8,538,488
8,538,941
Total assets
18,255,517
493,299
488,716
173,123
387,978 1,082,638
8,543,069 72,779,833
Customer accounts
Money market
Capital market
Other liabilities
15,411,391
6,142,529
747,226
97,345
4,555,231 11,932,155
64,745
0
4,854,857
239,551
1,071,177
0
4,357,159
0
33,879
0
3,766,663
0
27,133
0
933,296
0
19,151
0
791,094
535,523
0 36,792,512
0
0
0
1,084,122
1,279,646 5,470,436
0 24,388,808
0
0 10,449,646 10,514,391
Total liabilities
20,778,593
6,165,585
4,391,038
3,793,796
952,447
2,070,740 6,005,959 10,449,646 72,779,833
Hedging derivatives
(4,601,706) (3,447,901)
1,239,810
791,842
119,052
104,673
Interest rate sensitivity gap
(7,124,782) (2,950,072) 19,759,860
31.12.06
1 month
or less
From 1 to
3 months
18,669,858 24,685,635
18,172,029
(729,526)
0
(82,327) (1,906,577)
Total
0
0
€'000
31.12.05
Loans and advances
Money market
Capital market
Other assets
1 month
or less
From 1 to
3 months
From 3 to
12 months
From 1 to
2 years
From 2 to
3 years
From 3 to
4 years
From 4 to
5 years
More than
5 years
8,069,147 12,357,831 20,389,903
758,181
84,451
23,315
1,571,748
227,508
547,698
1,310
0
0
360,565
4,400
5,011
0
248,921
0
7
0
162,792
0
230,267
0
105,084
0
493
0
231,060
0
881,778
0
0 41,925,303
3,933
874,280
0
3,464,510
6,054,992
6,056,302
369,976
248,928
393,059
105,577 1,112,838
6,058,925 52,320,395
12,669,790 20,960,916
Not
sensitive
Total
Total assets
10,400,386
Customer accounts
Money market
Capital market
Other liabilities
10,224,522
1,661,880
1,643,952
62,316
4,192,633
115,880
7,259,039
0
3,554,964
113,000
954,338
0
4,320,815
1,275
324,783
0
4,039,707
0
16,739
0
908,475
0
10,438
0
917,260
557,762
0
0
6,310 4,202,905
0
0
0 28,716,138
0
1,892,035
0 14,418,504
7,231,402
7,293,718
Total liabilities
13,592,670
11,567,552
4,622,302
4,646,873
4,056,446
918,913
923,570 4,760,667
7,231,402 52,320,395
Hedging derivatives
(3,361,229) (3,211,178)
130,299
1,203,534
750,062
84,721
111,908 4,291,883
Interest rate sensitivity gap
(6,553,513) (2,108,940) 16,468,913
(3,073,363) (3,057,456) (441,133)
(706,085)
0
644,054 (1,172,477)
0
0
Banco Sabadell Annual Report 2006
The term structure shown in the table is typical for a bank with commercial banking as its main activity, with gaps or
mismatches that are negative in the very short term, positive for terms of up to one year (reflecting the loan components
of the portfolio), and negative for long term or not sensitive instruments (reflecting the liability balances held in current
accounts). The matrix also shows the differing effects that hedging instruments have in adjusting the term profile of the
group's interest rate risk exposure.
Sensitivity gap analysis is supplemented by a simulation technique which measures the effect of different interest rate
movements at different maturities, i.e. changes in the slope of the yield curve. These simulation techniques assign a
probability to each scenario so as to arrive at a more precise estimate of the effect that interest rate movements might
have. Another technique is to measure the sensitivity of net asset values to changes in interest rates by duration gap
analysis. This measures the effect of interest rate changes over a longer time horizon.
The sensitivity of net interest income and equity, in relative terms in the latter case, to a change of 100 basis points
(1%) in euro interest rates would be €21 million (2005: €12 million) and 1.99% (2005: 1.84%) respectively. The main
assumption used in making this estimate is to take the estimated average term for current accounts as two and a half
years even though, contractually speaking, balances in current accounts can be withdrawn at any time. This assumption is
consistent with the observation that balances in current accounts can normally be expected to remain stable. Another
assumption that is made is to exclude all possible maturities other than those that have been contractually agreed, that
is, such scenarios as early repayment or requests for early redemption are not taken into account. Finally, it is assumed
that the change of 100 basis points in interest rates is immediate and sustained throughout the time horizon. A change
of this size is itself hypothetical as there is nothing to indicate that this particular change should be expected. It has been
used for purposes of illustration only.
Currency risk
Currency risk is the possibility of losses being incurred due to changes in the prices of currencies in which financial
instruments are denominated, and results from the taking of matched open asset and liability positions.
The group's structural foreign currency exposure remained stable throughout 2006 and comprised long-term
investments in foreign branches and subsidiaries.
The group's foreign currency exposure is not significant and is generally linked to activities to support customerfocused operations. A summary of the group's exposure to the main foreign currencies is provided in note 26.
Statutory information
(3,105,897) (3,186,028) (674,651)
953,236 4,840,994
Not
sensitive
231
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The Board of Directors sets overall daily exposure limits for intraday positions (positions resulting from all transactions
up to a particular time in a single day) and overnight positions (positions reached at the end of the day). These limits are
monitored on a daily basis.
Statutory information
Liquidity risk
Liquidity risk is defined as the possibility of the group being unable to meet payment commitments, even if only
temporarily, due to a lack of liquid assets or of its being unable to access the markets to refinance debts at a reasonable
cost. This may be caused by external factors such as a financial market downturn, a systemic crisis or reputational
issues, or internally, by an excessive concentration of maturing liabilities.
The group is exposed to daily demands on its available cash resources to meet contractual obligations related to
financial instruments, such as maturing deposits, drawdowns of credit facilities, settlements on derivatives and so on.
Experience shows, however, that only a minimum amount is ever actually required and can be predicted with a high degree
of confidence.
Limits are set by the Board of Directors for the maintenance of minimum cash levels and for levels of structural
borrowing. The group monitors changes in its liquid asset position on a daily basis and holds a diversified portfolio of
such assets. It also carries out yearly projections to anticipate future needs.
In addition, a review is carried out of gaps or mismatches between cash inflows and outflows over a short, medium and
long time horizon using a maturity matrix based on the time remaining between the date to which the financial statements
were made up and the contract maturity date of assets and liabilities. Gaps between cash inflows and outflows are
analysed.
The maturity matrix at 31 December 2006 and 2005 is shown in the table below:
€'000
Payable
on demand
1 month
or less
From 1 to
3 months
From 3 to
12 months
From 1 to
5 years
More than
5 years
Undated
Total
Loans and advances
Money market
Capital market
Other assets
0
0
0
0
3,939,440
2,356,610
2,479,368
453
5,425,527
187,785
69,564
0
9,027,837
31,698
18,589
0
17,604,100
1,748
541,989
0
21,760,388
0
791,666
0
0
4,581
0
8,538,490
57,757,292
2,582,422
3,901,176
8,538,943
Total assets
0
8,775,871
5,682,876
9,078,124
18,147,837
22,552,054
8,543,071
72,779,833
Customer accounts
Money market
Capital market
Other liabilities
17,531,332
0
0
0
9,244,804
747,226
546,770
64,745
3,179,902
97,345
42,907
0
4,836,573
239,551
3,031,541
0
1,630,805
0
11,135,219
0
369,097
0
9,632,369
0
0
0
0
10,449,647
36,792,513
1,084,122
24,388,806
10,514,392
Total liabilities
17,531,332
10,603,545
3,320,154
8,107,665
12,766,024
10,001,466
10,449,647
72,779,833
(17,531,332)
(1,827,674)
2,362,722
970,459
5,381,813
12,550,588
(1,906,576)
0
Payable
on demand
1 month
or less
From 1 to
3 months
From 3 to
12 months
From 1 to
5 years
More than
5 years
Undated
Total
Loans and advances
Money market
Capital market
Other assets
0
0
0
0
2,806,555
758,181
1,571,748
1,310
4,114,243
84,451
196,568
0
6,116,809
23,315
447,698
0
12,513,628
4,400
245,778
0
16,374,068
0
1,002,718
0
0
3,933
0
6,054,992
41,925,303
874,280
3,464,510
6,056,302
Total assets
0
5,137,794
4,395,262
6,587,822
12,763,806
17,376,786
6,058,925
52,320,395
Customer accounts
Money market
Capital market
Other liabilities
12,821,149
0
0
0
6,639,952
1,661,880
16,503
62,316
2,750,764
115,880
532,375
0
3,768,813
113,000
629,008
0
2,315,166
1,275
5,983,055
0
420,294
0
7,257,563
0
0
0
0
7,231,402
28,716,138
1,892,035
14,418,504
7,293,718
Total liabilities
12,821,149
8,380,651
3,399,019
4,510,821
8,299,496
7,677,857
7,231,402
52,320,395
(12,821,149)
(3,242,857)
996,243
2,077,001
4,464,310
9,698,929
(1,172,477)
0
31.12.06
Banco Sabadell Annual Report 2006
Liquidity gap
€'000
31.12.05
232
Liquidity gap
An important assumption made in preparing the matrix is that contract maturity dates will always apply for assets and
liabilities on which payments are made over a period of time. The remaining maturity of these instruments is assumed to
be the time between 31 December 2006 and the due date of each payment.
As will be seen from the matrix the group, like any normal financial institution, shows a negative gap in short-term
instruments owing to the strict application of the contract maturity date assumption to customer instant access deposits.
This does not, however, imply a high degree of liquidity risk as the group's experience shows that only a small reserve of
cash needs to be maintained.
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The group has commitments of a contingent nature which may also affect its cash requirements. Most of these relate
to credit facilities with agreed limits which were undrawn at the close of the reporting year. Limits on these commitments
are also set by the Board of Directors and are constantly monitored.
Systematic checks are made to verify that the group’s ability to raise funds on the capital markets is sufficient to
satisfy its requirements in the short, medium and long term. The Banco Sabadell group meets its cash needs in a number
of ways and has programmes in place to raise finance on the capital markets to ensure a diversified source of funds.
Some these funding programmes are described below.
Statutory information
• Euro Medium Term Notes: The group has a programme in place for regulated issues of senior and subordinated
debt on the global capital markets, directed at institutional investors. Although the programme has not been
renewed since August 2003, the notes outstanding at 31 December 2006 amounted to €1,350 million (€2,153
million at 31 December 2005).
• Nonparticipating Securities Issuance Programme. The programme has been filed with Spain's stock market
regulator, the CNMV, and covers regulated issues of medium-term and long-term bonds, both straight and
subordinated, and mortgage bonds under CNMV supervision as required by Spanish law. These issues are aimed at
domestic and global investors. The limit for new issues under the Banco Sabadell Securities Issuance Programme
2006 at 31 December was €3,530 million (€1,750 million at 31 December 2005).
• Banco de Sabadell Commercial Paper Issuance Programme: this programme for regulated issues of corporate
notes is directed at both institutional and retail investors. On 16 March 2006 Banco Sabadell Commercial Paper
Issuance Programme 2006 was filed with the CNMV for up to a limit of €6,000 million. The value of notes in issue
under the programme was €5,306 million at 31 December 2006 (€3,588 million at 31 December 2005).
Other sources of funding include:
Risk concentrations
Credit risk is undoubtedly the main business risk faced by the Banco Sabadell group. As an active player in the global
banking industry the group has a sizeable concentration of exposures to other financial institutions. Managing these
exposures involves the setting of limits by the Board of Directors and the monitoring of these limits on a day-to-day basis.
As mentioned earlier, specific measures are in place to mitigate risk, including netting agreements with the majority of
counterparties with whom derivatives are traded.
At 31 December 2006 there were only four borrowers involving individual exposures of more than 10% of the group's
capital; in no case, however, did the figure exceed 15%. The overall exposure to these four borrowers was
€2,730,890,000. At 31 December 2005 there were four borrowers involving exposures of this nature: this amounted to
€2,311,081,000 and none individually exceeded 17% of the group's capital.
Banco Sabadell Annual Report 2006
• Medium and long term bilateral loans with financial and other institutions.
• Issues of asset-backed securities. Since 1998 the group has taken part in setting up 11 securitization funds for the
transfer of mortgage loans, business loans for small and medium-sized firms and finance lease receivables. A
portion of the bonds issued by securitization funds has been sold on the capital markets and the remainder is held
by Banco Sabadell. Most of the mortgage bonds held by Banco Sabadell are pledged as security on a credit facility
entered into by the Bank with the Bank of Spain to help it manage its short-term liquidity requirements.
233
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Note 37. Environment
All group operations are subject to legal requirements on environmental protection and health and safety at work. The
group considers that it substantially complies with these legal requirements and has procedures in place to ensure such
compliance.
The group has taken appropriate action on environmental protection and improvement and to minimize possible
environmental impacts as required by law. A number of group-wide waste treatment, consumable recycling and energy
saving schemes were continued during the year. Given the absence of any likely environmental risk or expense, it was not
thought necessary to set aside any provision for contingencies of this nature.
Statutory information
Note 38. Related party transactions
With the exception of the transaction described below, no significant transactions took place with any major shareholder
during the year other than in the normal course of the group's business and at market prices.
Transaction:
Date:
Seller:
Buyer:
Total consideration for
transfer of shares (2)
Sale of Landscape Promocions Immobiliàries, S.L.U.
28 December 2006
Banco de Sabadell, S.A.
Astroc Mediterráneo, S.A. (1)
49.99%
Alramaev, S.L.
45.01%
Courrent Assets, S.L.
5.00%
€900,000,000 of which €449,997,000 were paid by Astroc Mediterráneo, S.A.
(1) Astroc Mediterráneo is indirectly owned as to 51.58% by Enrique Bañuelos de Castro, who is chairman of its board of directors. Mr. Bañuelos holds 100% of Reales
del Turia, S.L. which owns a significant shareholding in the Bank as described in note 29 on own funds.
(2) The Bank is in possession of a report dated 26 October 2006 from an independent expert who acted as external financial advisor to the Bank and gave a fairness
opinion on the transaction price.
Banco Sabadell Annual Report 2006
No transactions were entered into with directors or senior managers of the company that could be described as
significant. Those that did take place were in the normal course of the company's business or were done at market prices
or on the same terms as applied to employees.
The group is not aware of any transaction, other than on an arm's length basis, with any person or entity related in any
way to a director or senior manager.
The most significant balances held by the group with associated undertakings and, as to any part not eliminated on
consolidation, with jointly controlled undertakings, and the effect of these transactions on the income statement are
shown in the following table:
€'000
Assets:
Loans and advances to other debtors
Liabilities:
Deposits from other creditors
234
Memorandum accounts
Contingent exposures
Contingent commitments
Income statement:
Interest and similar income
Interest expense and similar charges
Return on equity instruments
Net fees and commissions
Other operating income
2006
2005
17,555
577,738
8,842
20,153
13,343
17,499
95,318
102,216
526
(113)
2,581
118
773
1,095
(93)
1,597
306
643
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Note 39. Agents
As of 31 December 2006 and 2005, no group undertaking had entered into an agency agreement that would allow an
agent to act for and on behalf of the group on an ongoing basis in any customer relationship or in any negotiation or
business of a kind commonly engaged in by a credit institution.
Note 40. Customer Service Department
As required by Ministry of Finance Order 734/2004, details of the group's Customer Service Department have been
provided in the consolidated Report of the Directors that follows these notes to the annual accounts.
Statutory information
Note 41. Remuneration paid to directors and senior management group
The group's reporting of remuneration paid to directors and senior executives is in line with the recommendations
contained in the Aldama Report. Details of fees paid to individual members of the Board of Directors in the years to 31
December 2006 and 2005 and all other emoluments received by them in that capacity in these two years are fully
disclosed.
To ensure transparency in the reporting of remuneration paid to senior managers as recommended by Aldama, details
have also been provided for all the senior executives in the Bank's senior management group, including Executive
Directors and other executives at General Manager and Assistant General Manager level.
The following table shows the fees paid to directors and the amounts paid in respect of directors' pension
commitments, for services rendered by them in that capacity:
€'000
José Oliu Creus
Joan Llonch Andreu
Juan María Nin Genova
Isak Andic Ermay (1)
Miguel Bósser Rovira
Francesc Casas Selvas
Hector María Colonques Moreno
Juan Manuel Desvalls Maristany
Joaquín Folch-Rusiñol Corachán
Jorge Manuel Jardim Gonçalves
José Manuel Lara Bosch
José Permanyer Cunillera
Total
Total
2006
2005
2006
2005
2006
2005
260
190
130
120
130
130
150
150
130
110
130
150
250
185
125
-125
125
145
145
125
105
125
145
39.0
19.5
19.5
19.5
19.5
19.5
19.5
19.5
19.5
37
19
22
-19
19
19
19
19
--19
299.0
209.5
149.5
120.0
149.5
149.5
169.5
169.5
149.5
110.0
130.0
169.5
287
204
147
-144
144
164
164
144
105
125
164
1,780
1,600
195.0
192
1,975.0
1,792
Banco Sabadell Annual Report 2006
Pension
commitments
Fees paid
(1) Appointed by the Board as a director of the Bank on 22 December 2005.
235
Fees to honorary directors amounted to €135,000 in 2006 and 2005.
Loan and guarantee risks undertaken by the Bank and consolidated undertakings for all directors of the parent
company and for companies outside the group in which directors held positions of responsibility or had significant
interests totalled €90,106,000. Of this amount €89,830,000 consisted of loans and €276,000 related to avals and
documentary credits. (2005: €44,578,000, consisting of €44,103,000 in loans and €475,000 in avals and
documentary credits). The average rate of interest charged was 3.99% (2005: 2,93%). Deposits totalled €14,189,000
(€55,784,000 in 2005).
Salary payments to the members of the senior management group amounted to €11,711,000 in 2006 (€8,967,000
in 2005). Premiums paid in respect of pension commitments totalled €6,462,000 (€11,081,000 in 2005).
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The members of the senior management group are listed below.
Statutory information
José Oliu Creus
Juan María Nin Genova
José Permanyer Cunillera
José Luis Negro Rodríguez (1)
Juan-Cruz Alcalde Merino
Juan Antonio Alcaraz García
Cirus Andreu Cabot (2)
Ignacio Camí Casellas
Rafael José García Nauffal
Joan-Mateu Grumé Sierra (3)
Miquel Montes Güell
Jaume Puig Balsells
José Tarrés Busquets
Tomás Varela Muiña
Chairman
Managing Director
Executive Director
Deputy Secretary to the Board - Comptroller General
Organization and Resources
Corporate Banking
Asset Management
Bancassurance
Treasury and Capital Markets
Corporate Development
Operations and Technology
Commercial Banking
Risk and Recovery
Finance
(1) José Luis Negro Rodríguez, Comptroller General, was appointed Deputy Secretary to the Board at a meeting of the Board of Directors on 21 December 2006.
(2) Appointed to the senior management group on 21 July 2005.
(3) Appointed to the senior management group on 21 December 2006.
Note 42. Directors' duty of loyalty
Pursuant to article 127 (iii) 4 of the Spanish S.A. Companies Act which was introduced by Law 26/2003 of 17 July
amending Law 24/1988 of 28 July on the Securities Market and the Spanish Companies Act, and in the interests of
greater corporate transparency, the Directors have made the following disclosures to the Company:
Banco Sabadell Annual Report 2006
236
(a) No situation has arisen that would directly or indirectly give rise to a conflict between an individual's private interest
and the interests of the Company.
(b) No Directors hold equity interests in any company whose objects are identical, similar or complementary to those of
the Company, with the following exceptions:
Director
Company in which interest held
Juan Manuel Desvalls Maristany
Juan Manuel Desvalls Maristany
Juan Manuel Desvalls Maristany
Banco Bilbao Vizcaya Argentaria, S.A.
Banco Popular, S.A.
Santander Central Hispano, S.A.
Proportional holding
0.000052%
0.000028%
0.000045%
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The Directors have also confirmed that none of them holds any office or position of responsibility or performs any
services, either for their own account or for the account of any other person, in any company whose objects are identical,
similar or complementary to those of the Company, with the following exceptions:
Company in which interest held
Position held
José Oliu Creus
José Oliu Creus
José Oliu Creus
Joan Llonch Andreu
Joan Llonch Andreu
Joan Llonch Andreu
Juan María Nin Genova
Juan María Nin Genova
Juan María Nin Genova
Juan María Nin Genova
Miguel Bósser Rovira
Juan Manuel Desvalls Maristany
Jorge Manuel Jardim Gonçalves
Jorge Manuel Jardim Gonçalves
José Permanyer Cunillera
José Permanyer Cunillera
José Permanyer Cunillera
José Permanyer Cunillera
José Permanyer Cunillera
José Permanyer Cunillera
Banco Comercial Português, S.A.
Banco Comercial Português, S.A.
BanSabadell Holding, S.L., Sociedad Unipersonal
BancSabadell d'Andorra, S.A.
BanSabadell Holding, S.L., Sociedad Unipersonal
Sociedad de Cartera del Vallès, S.A.
BanSabadell Pensiones, E.G.F.P., S.A., Sociedad Unipersonal
BanSabadell Seguros Generales, S.A., de Seguros y Reaseguros
BanSabadell Vida, S.A. de Seguros y Reaseguros
Ibersecurities, S.A., Sociedad de Valores, Sociedad Unipersonal
BanSabadell Holding, S.L., Sociedad Unipersonal
BanSabadell Renting, S.L., Sociedad Unipersonal
Banco Comercial Português, S.A.
Banco Comercial Português, S.A.
BancSabadell d'Andorra, S.A.
Banco Urquijo Sabadell Banca Privada, S.A.
Aurica XXI, S.C.R., S.A.
BanSabadell Inversió Desenvolupament, S.A., Sociedad Unipersonal
Grup Assegurador Sabadell, A.I.E.
Sabadell Aseguradora, Cia. Seguros y Reaseguros
Member of Supervisory Board
Member of General and Supervisory Board
Chairman
Director
Director
Deputy Chairman
Chairman
Chairman
Chairman
Chairman
Director
Chairman
Chairman of Supervisory Board
Chairman of General and Supervisory Board
Director
Deputy Chairman
Director
Chairman
Director
Director
Statutory information
Director
Note 43. Post-balance sheet events
Banco Sabadell Annual Report 2006
On 23 January 2007 Banco Sabadell entered into a share purchase agreement with a Florida-registered company,
TransAtlantic Holding Corp., under which Banco Sabadell will acquire 100% of the company on 31 December 2007 for a
consideration of approximately USD 175 million (€135 million).
TransAtlantic Holding Corp. is the sole shareholder of another Florida-based company, TransAtlantic Bank. This
company will come under the exclusive control of Banco Sabadell when the acquisition is completed.
The acquisition is subject to all official permissions and consents being granted.
237
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Annex I: Companies in the Banco Sabadell Group at 31 December 2005
Proportional holding
Name of company
Principal business
Registered office
Insurance
Real estate
Holding company
Holding company
Holding company
Banking
Banking
Banking
IT services
Banking
Banking
Insurance brokers
Electronic billing services
Finance company
Holding company
Holding company
Investment fund managers
Pension fund managers
Equipment leasing
Insurance
Real estate
Real estate
Electricity utility
Electricity utility
Real estate
Real estate
Real estate
Holding company
Services
Holding company
Real estate
Services
Services
Services
Representative office
Holding company
Stockbrokers
Real estate
Real estate
Real estate
Real estate
Real estate
Real estate
Real estate
Real estate
Services
Electricity utility
Electricity utility
Electricity utility
Electricity utility
Real estate
Holding company
Real estate
Services
Services
Banking
Investment managers
Investment fund managers
Finance company
Finance company
Finance company
Finance company
Holding company
Services
IT services
Holding company
Andorra la Vella
Panama
British Virgin Islands
Madrid
Madeira
Nassau, Bahamas
Monaco
Panama
Monaco
Sabadell
Andorra la Vella
Sabadell
Sant Cugat del Vallès
Sabadell
Sabadell
Barcelona
Sant Cugat del Vallès
Sabadell
Sabadell
Sabadell
Oviedo
Barcelona
Barcelona
Higuey (Dom. Rep.)
Oviedo
Madrid
London
Madrid
Oviedo
Luxembourg
Sabadell
Nassau, Bahamas
Nassau, Bahamas
Nassau, Bahamas
Brazil
Madrid
Madrid
Oviedo
Madrid
Sabadell
Barcelona
Barcelona
Sabadell
Sabadell
Mexico City
Barcelona
Barcelona
Barcelona
Barcelona
Barcelona
Oviedo
Oviedo
Madrid
Guatemala City
Hong Kong
Barcelona
Andorra la Vella
Andorra la Vella
George Town
George Town
Amsterdam
George Town
Madrid
Sabadell
Sant Fruitós de Bages
Barcelona
Direct
Indirect
100.00
100.00
100.00
50.97
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
59.23
100.00
99.99
100.00
99.63
100,00
100,00
100.00
100.00
80.00
100.00
100.00
0.20
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
-
50.97
100.00
100.00
100.00
100.00
100.00
100.00
72.92
40.77
100.00
100.00
100.00
100.00
100.00
100.00
100.00
0.01
100.00
100.00
100.00
100.00
51.80
51.80
51.80
51.80
99.63
99.80
50.97
50.97
74.00
Fully consolidated companies
Statutory information
Banco Sabadell Annual Report 2006
238
Assegurances Segur Vida, S.A.
Atlántico Bienes Raíces, S.A.
Atlantico Holdings Financial Ltd.
Auxiliar Barcelonesa de Servicios, S.A.
Ballerton Corporation Serviços, S.A.
Banco Atlántico Bahamas Bank and Trust Ltd.
Banco Atlantico Monaco S.A.M.
Banco Atlántico Panamá, S.A.
Banco Atlantico Services S.A.M.
Banco de Sabadell, S.A.
BancSabadell d'Andorra, S.A.
BanSabadell Correduría de Seguros, S.A.
BanSabadell Factura, S.L.U.
BanSabadell Financiación, E.F.C., S.A.
BanSabadell Holding, S.L.
BanSabadell Inversió Desenvolupament, S.A.
BanSabadell Inversión, S.A., S.G.I.I.C.
BanSabadell Pensiones, E.G.F.P., S.A.
BanSabadell Renting, S.L.
BanSabadell Vida, S.A. de Seguros y Reaseguros
Colinas de Nueva Andalucía, S.A.
Compañía Auxiliar de Transportes y Aparcamientos, S.A.
Compañía de Cogeneración del Caribe, S.L.
Compañía de Electricidad y Cogeneración de Uvero, S.A.
Difusión de la Propiedad Inmobiliaria, S.A.
Europea de Inversiones y Rentas, S.L.
Europea Pall Mall Ltd.
Explotaciones Energéticas SINIA XXI, S.A. (a)
Gestora Plan HF94, S.L.
Herrero International, S.A.R.L.
Hobalear, S.A.
IBA Management Ltd.
IBA Nominee Trust Ltd.
IBA Services Ltd.
Iberatlántico Serviços e Participaçoes Ltda.
Ibersecurities Holding, S.A.
Ibersecurities, Soc. de V., S.A., Soc. Unip.
Inmobiliaria Asturiana, S.A.
Inmobiliaria Sil, S.A.
Inmobiliaria Sotecón, S.A.
Landscape Augusta, S.L.
Landscape Inversions, S.L.
Landscape Promocions Immobiliàries, S.L.
Landscape Serveis Immobiliaris, S.A.
Multibarter Mexicana, S.A. de C.V.
Netfocus, S.L.
Parc Eòlic l'Arram, S.L. (b)
Parc Eòlic la Tossa la Mola d'en Pascual, S.L. (b)
Parc Eòlic Coll de Som, S.L. (b)
Parc Eòlic Los Aligars, S.L. (b)
Promociones Argañosa, S.L.
Promociones y Financiaciones Herrero, S.A.
Promotora Navarra para el Norte de España, S.A.
Representaciones Sabadell, S.A.
Sabadell Asia Trade Services, Ltd.
Sabadell Banca Privada, S.A.
Sabadell d'Andorra Borsa, S.A.
Sabadell d'Andorra Inversions Societat Gestora, S.A.
Sabadell International Capital Ltd.
Sabadell International Equity Ltd. (b)
Sabadell International Finance, B.V.
Sabadell International Finance Ltd.
Servicio Administración de Inversiones, S.A.
Servicios Reunidos, S.A.
Solintec, S.A.
Totvent-2000, S.A.
Total
(a) The company, formerly known as Inmobiliaria Tietar, S.A., changed its name in 2005.
(b) 100% of the voting rights in the company are held by the Group.
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€'000
Financial data (1)
Name of company
Capital
Reserves
Results (2)
Dividends
paid (3)
Contribution
to reserves Contribution
Treated as
Group or losses of
to consolidated
Total
net consolidated consolidated
for tax
assets investment undertakings
profit
purposes
Fully consolidated companies
0
26,933
602
0
4,266
42
0
25,391 53,791
0
751
600
0
22,938
3,140
0
161,302
8,477
0
23,322 19,498
0
418,326 16,530
0
83
38
171,362 49,954,717
0
0
456,714 15,326
2,019
15,082
588
0
547
100
2,000
485,562 24,040
0
301,952 239,544
0
144,927 15,025
11,000
94,230
607
2,506
47,126 14,782
0
106,918
3,861
0 2,748,145 54,212
0
1,372
1,495
0
1,421
1,382
0
22,078
3,007
0
9,067
2,410
0
146
142
0
96,133 87,557
0
16,307 17,672
0
4,647
4,672
0
81
3
0
4,178
1,139
0
1,943
414
0
4
4
0
8
8
0
4
4
0
289
251
0
59,717 54,922
0
27,494 76,794
0
4,745
3,094
0
728
530
0
613
58
0
317,723
64
0
364,342 98,201
0
961,330 79,813
0
30,256 16,159
0
872
212
0
6,065
217
0
56
2
0
57
2
0
55
2
0
63
2
0
1,549
941
0
3,728 24,185
0
2,506
1,614
0
56
1
0
13
0
720
876,279 18,030
0
46
31
0
1,050
30
0
610,622
1
0
250,108
1
0
604,173
2,000
0
959,938
1
0
13,089 16,690
0
80
67
0
89,679
0
0
1,185
1,681
0
30
(250)
81
(2,242)
5,946
449
2,982
(1,294)
2,736,296
(3,283)
2,292
(246)
26,965
(10,188)
17,671
15,823
14,630
1,078
61,592
15
22
(1,989)
389
(188)
13,199
(3,796)
919
0
(9)
317
0
0
0
(25)
(97,410)
6,865
2,410
283
554
628
11,649
28,446
1,380
767
(1,360)
0
0
0
0
106
10
771
5
0
21,023
8
178
528
(16)
131
1,141
204
13
(7,996)
0
2
(677)
648
55
286
7,142
466
5,811
(11)
339,531
1,695
2,308
(290)
462
(33,727)
14,890
14,051
6,487
235
18,807
16
14
(339)
(48)
2
(231)
(339)
(81)
0
30
48
0
0
0
(84)
(32,956)
4,286
1,451
0
0
(2,679)
4,630
47,105
553
0
198
0
0
0
0
126
0
81
(1)
5
3,114
(1)
146
487
50
164
64
16
0
7,668
0
189,607
2,847,504
411,666
(1) Foreign registered companies have been translated into euros at the exchange rate ruling on 31 December 2005.
(2) Results are subject to approval by the Annual General Meeting of each company.
(3) Includes final dividends for the previous year and interim dividends paid to the Group during the year.
(a) The company, formerly known as Inmobiliaria Tietar, S.A., changed its name in 2005.
(b) Data shown for these undertakings under "Financial data" are correct as of 31 October 2005.
(c) Data shown for these undertakings under "Financial data" are correct as of 31 July 2005.
(d) 100% of the voting rights in the company are held by the Group.
986,308
No
No
No
Yes
No
No
No
No
No
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
Yes
No
Yes
Yes
No
Yes
No
No
No
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
No
No
No
No
Yes
Yes
Yes
No
No
Yes
No
No
No
No
No
No
Yes
Yes
Yes
No
Banco Sabadell Annual Report 2006
Total
6
(677)
648
55
286
7,142
466
5,811
(11)
339,531
3,325
2,308
(290)
462
(33,727)
14,890
14,051
6,487
235
18,807
16
14
(339)
(64)
2
(231)
(339)
(81)
0
30
48
0
0
0
(84)
(32,956)
4,286
1,456
0
0
(2,679)
4,630
45,400
553
0
250
(4)
(3)
(4)
(4)
126
0
81
(1)
5
3,114
(1)
287
487
(14)
164
64
16
0
7,668
333
Statutory information
Assegurances Segur Vida, S.A.
602
8
Atlántico Bienes Raíces, S.A.
636
1,756
Atlantico Holdings Financial Ltd.
15,258
9,485
Auxiliar Barcelonesa de Servicios, S.A.
150
524
Ballerton Corporation Serviços, S.A.
50
22,203
Banco Atlántico Bahamas Bank and Trust Ltd.
8,477
16,917
Banco Atlantico Monaco S.A.M.
11,250
8,174
Banco Atlántico Panamá, S.A.
15,258
24,065
Banco Atlantico Services S.A.M.
150
(832)
Banco de Sabadell, S.A.
153,002 2,705,432
BancSabadell d'Andorra, S.A.
30,069
(3,715)
BanSabadell Correduría de Seguros, S.A.
60
2,923
BanSabadell Factura, S.L.U.
100
(245)
BanSabadell Financiación, E.F.C., S.A.
24,040
26,966
BanSabadell Holding, S.L.
330,340
(5,136)
BanSabadell Inversió Desenvolupament, S.A.
15,025
15,621
BanSabadell Inversión, S.A., S.G.I.I.C.
601
15,829
BanSabadell Pensiones, E.G.F.P., S.A.
7,813
21,024
BanSabadell Renting, S.L.
2,000
2,210
BanSabadell Vida, S.A. de Seguros y Reaseguros
43,858
69,763
Colinas de Nueva Andalucía, S.A.
1,052
302
Compañía Auxiliar de Transportes y Aparcamientos, S.A.
201
1,203
Compañía de Cogeneración del Caribe, S.L.
2,933
(1,083)
Compañía de Electricidad y Cogeneración de Uvero, S.A. 3,341
(572)
Difusión de la Propiedad Inmobiliaria, S.A.
60
84
Europea de Inversiones y Rentas, S.L.
53,633
40,513
Europea Pall Mall Ltd.
19,519
(3,799)
Explotaciones Energéticas SINIA XXI, S.A. (a)
1,352
3,364
Gestora Plan HF94, S.L.
3
0
Herrero International, S.A.R.L.
429
3,614
Hobalear, S.A.
60
318
IBA Management Ltd.
4
0
IBA Nominee Trust Ltd.
8
0
IBA Services Ltd.
4
0
Iberatlántico Serviços e Participaçoes Ltda.
1,246
0
Ibersecurities Holding, S.A.
31,581
61,075
Ibersecurities, Soc. de V., S.A., Soc. Unip.
3,000
11,853
Inmobiliaria Asturiana, S.A.
198
3,052
Inmobiliaria Sil, S.A.
619
109
Inmobiliaria Sotecón, S.A.
60
552
Landscape Augusta, S.L.
60
17,583
Landscape Inversions, S.L.
95,652
15,480
Landscape Promocions Immobiliàries, S.L.
79,813
39,533
Landscape Serveis Immobiliaris, S.A.
15,870
1,710
Multibarter Mexicana, S.A. de C.V.
794
60
Netfocus, S.L.
651
(403)
Parc Eòlic l'Arram, S.L. (b)
3
0
Parc Eòlic la Tossa la Mola d'en Pascual, S.L. (b)
3
0
Parc Eòlic Coll de Som, S.L. (b)
3
0
Parc Eòlic Los Aligars, S.L. (b)
3
0
Promociones Argañosa, S.L.
812
494
Promociones y Financiaciones Herrero, S.A.
3,456
272
Promotora Navarra para el Norte de España, S.A.
1,262
1,126
Representaciones Sabadell, S.A. (c)
1
3
Sabadell Asia Trade Services Ltd.
0
0
Sabadell Banca Privada, S.A.
18,060
20,993
Sabadell d'Andorra Borsa, S.A.
31
15
Sabadell d'Andorra Inversions Societat Gestora, S.A.
30
350
Sabadell International Capital Ltd.
1
478
Sabadell International Equity Ltd. (d)
250,001
85
Sabadell International Finance, B.V.
2,000
131
Sabadell International Finance Ltd.
1
1,142
Servicio Administración de Inversiones, S.A.
6,010
7,061
Servicios Reunidos, S.A.
60
20
Solintec, S.A.
240
(7,266)
Totvent-2000, S.A. (c)
1,000
(331)
239
160-263-Part blue
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Proportional holding
Name of company
Principal business
Registered office
Direct
Indirect
Venture capital company
Services
Finance company
Real estate
Finance company
Real estate
Real estate
Real estate
Real estate
Real estate
Real estate
Real estate
Real estate
Real estate
Real estate
Real estate
Real estate
Real estate
Real estate
Real estate
Real estate
Real estate
Real estate
Real estate
Real estate
Services
Barcelona
Oviedo
Sant Cugat del Vallès
Barcelona
Havana
Sabadell
Barcelona
Vallgorguina
Vallgorguina
Madrid
Zaragoza
Barcelona
Barcelona
Barcelona
Madrid
Barcelona
Madrid
Madrid
Madrid
Sabadell
Barcelona
Barcelona
Cerdanyola del Vallès
Barcelona
Madrid
Barcelona
50.00
50.00
50.00
50.00
50.00
50.00
50.00
50.00
50.00
50.00
50.00
50.00
50.00
50.00
50.00
50.00
50.00
50.00
50.00
50.00
50.00
50.00
50.00
50.00
50.00
50.00
-
Portfolio company management
Banking
Electricity utility
Financial services
Chemicals
Banking
Fund managers
Food products
Services
Electricity utility
Real estate
Holding company
Sabadell
León (Mexico)
Barcelona
Santo Domingo
Barcelona
Madrid
Luxembourg
Sant Cugat del Vallès
Barcelona
León
Sabadell
Sabadell
20.00
19.42
40.00
22.00
23.01
26.52
20.34
24.67
45.00
20.00
35.00
40.00
-
Proportionally consolidated companies
Statutory information
Aurica XXI, S.C.R., S.A.
Banco Herrero, S.A. y "la Caixa", U.T.E.
BanSabadell Fincom, E.F.C., S.A.
Espais & Landscape Diagonal Mar, S.L.
Financiera Iberoamericana, S.A.
Homarta, S.L.
Landscape Arcisa Cantábrico, S.L.
Landscape Coperfil Activa, S.L.
Landscape Coperfil Logistics, S.L.
Landscape Corsan, S.L.
Landscape Ebrosa, S.L.
Landscape Espais Diagonal 0, S.L.
Landscape Espais Promocions, S.L.
Landscape Europrojectes, S.L.
Landscape Grupo Lar, S.L.
Landscape Habitat, S.L.
Landscape Larcovi Proyectos Inmobiliarios, S.L.
Landscape Nozar, S.L.
Landscape Osuna, S.L.
Landscape Parcsud, S.L.
Landscape Proingru Pinetons, S.L.
Landscape Proingru, S.L.
Landscape Toro, S.L.
Landscape Vertix, S.L.
Reyal Landscape, S.L.
Tecnocredit, S.A.
Total
Equity-accounted companies (1)
Banco Sabadell Annual Report 2006
Aquaria de Inv. Corp., S.A.
Banco del Bajío, S.A.
Berta Energies Renovables, S.L.
Centro Financiero B.H.D., S.A.
Derivados Forestales Group XXI, S.L.
Dexia Sabadell Banco Local, S.A.
Europa Invest, S.A.
Europastry, S.A.
FS Colaboración y Asistencia, S.A.
Parque Eólico la Peñuca, S.L.
SBD Creixent, S.A.
Sociedad de Cartera del Vallés, S.A.
Total
Translation differences
Consolidation adjustments
Total
(1) Accounted for by the equity method because the parent company does not take part in the management of the undertaking.
240
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13:07
Página 241
€'000
Financial data (2)
Name of company
Capital
Reserves
Results (3)
Dividends
paid (4)
Contribution
to reserves Contribution
Treated as
Group or losses of
to consolidated
Total
net consolidated consolidated
for tax
assets investment undertakings
profit
purposes
Proportionally consolidated companies
14,200
258
17,720
1,803
6,671
2,406
1,220
4,000
25,200
1,512
2,000
1,060
1,803
1,000
2,405
1,800
600
6,000
3,000
2,164
58
1,823
150
3,006
3,000
60
(1,400)
0
(470)
1,250
251
203
403
(25)
(179)
128
(15)
(179)
(179)
86
1,409
(103)
0
0
(283)
269
117
623
150
(2,536)
(102)
113
15,191
(68)
(1,431)
28
1,135
(9)
60
(868)
(203)
764
1,422
(11)
1,091
398
358
102
(2)
(139)
(148)
166
11
1,127
5
(1,313)
(113)
190
Total
6,038
0
0
0
264
0
0
0
0
300
0
0
0
0
0
0
0
0
0
65
0
0
0
0
0
0
16,060
191
0
116,132
19,396
2,938
14,398
57,951
78,099
13,145
63,667
53,241
130,586
41,731
177,561
49,120
152,821
137,020
103,131
2,350
8,227
40,845
30,634
211,562
48,893
867
6,667
7,100
161
8,860
3,826
3,192
1,202
610
2,000
12,600
756
1,000
530
901
500
1,202
900
300
3,000
1,500
1,082
29
911
75
1,503
1,500
30
(805)
(648)
(235)
(2,082)
123
100
95
(12)
(90)
(265)
(8)
(150)
(604)
(428)
(688)
(417)
0
0
(336)
23
2
43
75
(1,995)
(51)
52
7,595
(34)
(715)
14
567
(5)
30
(434)
(102)
382
711
(5)
546
199
179
51
(1)
(69)
(74)
83
5
563
2
(656)
(57)
(7)
55,270
(8,301)
8,768
34,159
38,895
5
18,833
47,261
39,226
51
34,968
887
1,339
2,968
421
(1,037)
0
0
905
1,225
4,434
13
(367)
(727)
0
(2)
1,381
4,194
4,308
0
2,047
(48)
4,190
0
1,124
66
5
(1)
219
219,013
5,825
16,104
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
Statutory information
Aurica XXI, S.C.R., S.A.
Banco Herrero, S.A. y "la Caixa", U.T.E.
BanSabadell Fincom, E.F.C., S.A.
Espais & Landscape Diagonal Mar, S.L.
Financiera Iberoamericana, S.A.
Homarta, S.L. (d)
Landscape Arcisa Cantábrico, S.L.
Landscape Coperfil Activa, S.L.
Landscape Coperfil Logistics, S.L.
Landscape Corsan, S.L.
Landscape Ebrosa, S.L.
Landscape Espais Diagonal 0, S.L.
Landscape Espais Promocions, S.L.
Landscape Europrojectes, S.L.
Landscape Grupo Lar, S.L.
Landscape Habitat, S.L.
Landscape Larcovi Proyectos Inmobiliarios, S.L.
Landscape Nozar, S.L.
Landscape Osuna, S.L.
Landscape Parcsud, S.L.
Landscape Proingru Pinetons, S.L.
Landscape Proingru, S.L.
Landscape Toro, S.L.
Landscape Vertix, S.L.
Reyal Landscape, S.L.
Tecnocredit, S.A. (d)
Equity-accounted companies (1)
Total
90,303
106,800
15
73,230
100,000
82,061
125
200
600
3,333
12,895
2,408
65,913
130,793
0
2,857
7,689
12,738
92
85,035
(180)
4
(8)
4,235
20,971
27,843
(8)
11,909
9
10,160
50
4,686
172
11
(3)
764
1,230
420
0
2,559
0
0
0
367
0
0
0
95
4,671
381,939
3,120,276
14
104,713
191,264
6,444
1,530
236,696
3,149
40,069
13,014
7,406
Translation differences
Consolidation adjustments
Total
No
No
No
No
No
No
No
No
No
No
No
No
Banco Sabadell Annual Report 2006
Aquaria de Inv. Corp., S.A.
Banco del Bajío, S.A. (b)
Berta Energies Renovables, S.L. (a)
Centro Financiero B.H.D., S.A. (c)
Derivados Forestales Group XXI, S.L. (b)
Dexia Sabadell Banco Local, S.A. (b)
Europa Invest, S.A.
Europastry, S.A. (a)
FS Colaboración y Asistencia, S.A. (b)
Parque Eólico la Peñuca, S.L. (b)
SBD Creixent, S.A. (b)
Sociedad de Cartera del Vallés, S.A. (b)
13,987
16,590
200,945
1,260,591
(1) Accounted for by the equity method because the parent company does not take part in the management of the undertaking.
(2) Foreign-registered companies have been translated into euros at the exchange rate ruling on 31 December 2005.
(3) Results are subject to approval by the Annual General Meeting of each company.
(4) Includes final dividends for the previous year and interim dividends paid to the Group during the year.
(a) Data shown for these undertakings under "Financial data" are correct as of 31 October 2005.
(b) Data shown for these undertakings under "Financial data" are correct as of 30 November 2005.
(c) Data shown for these undertakings under "Financial data" are correct as of 31 December 2004.
(d) Data shown for these undertakings under "Financial data" are correct as of 30 September 2005.
2,859,015
453,128
241
160-263-Part blue
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Página 242
Companies in the Banco Sabadell Group at 31 December 2006
Proportional holding
Name of company
Principal business
Registered office
Direct
Indirect
Insurance
Holding company
Financial advisors
Financial advisors
Holding company
Banking
Banking
IT services
Banking
Banking
Banking
Banking
Insurance brokers
Electronic billing services
Finance company
Holding company
Holding company
Investment fund managers
Pension fund managers
Andorra la Vella
Madrid
Madrid
Madrid
Madeira
Nassau, Bahamas
Monaco
Monaco
Sabadell
Madrid
Madrid
Andorra la Vella
Sabadell
Sant Cugat del Vallès
Sabadell
Sabadell
Barcelona
Sant Cugat del Vallès
Sabadell
100.00
100.00
30.00
99.99
100.00
100.00
100.00
50.97
100.00
100.00
100.00
100.00
100.00
100.00
100.00
50.97
70.00
100.00
0.01
100.00
-
Insurance
Equipment leasing
Insurance
Real state
Real state
Electricity utility
Electricity utility
Real state
Hotel management
Investment fund managers
Real state
Real state
Holding company
Electricity utility
Services
Holding company
Real state
Representative office
Holding company
Stockbrokers
Real state
Real state
Real state
Real state
Electricity utility
Electricity utility
Electricity utility
Electricity utility
Real state
Holding company
Propery lettings
Real state
Services
Investment managers
Investment fund managers
Finance company
Finance company
Finance company
Finance company
Holding company
Services
IT services
Holding company
Investment fund managers
Holding company
Sant Cugat del Vallès
Sabadell
Sabadell
Oviedo
Barcelona
Barcelona
Higuey (Dom. Rep.)
Oviedo
Madrid
Luxembourg
Madrid
London
Madrid
Murcia
Oviedo
Luxembourg
Sabadell
Brazil
Madrid
Madrid
Oviedo
Madrid
Sabadell
Mexico City
Barcelona
Barcelona
Barcelona
Barcelona
Oviedo
Oviedo
Madrid
Madrid
Hong Kong
Andorra la Vella
Andorra la Vella
George Town
George Town
Amsterdam
George Town
Madrid
Sabadell
Sant Fruitós de Bages
Barcelona
Madrid
Madrid
100.00
100.00
100.00
100.00
100.00
100.00
100.00
22.00
100.00
100.00
100.00
99.99
100.00
99.63
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
99.99
100.00
100.00
72.92
78.00
100.00
100.00
80.00
100.00
0.01
100.00
51.80
51.80
51.80
51.80
99.63
50.97
50.97
74.00
0.01
-
Fully consolidated companies
Statutory information
Banco Sabadell Annual Report 2006
242
Assegurances Segur Vida, S.A.
Auxiliar Barcelonesa de Servicios, S.A.
Axel Group, S.L.
Axel Urquijo, S.L.
Ballerton Corporation Serviços, S.A.
Banco Atlantico Bahamas Bank & Trust, Ltd.
Banco Atlantico Monaco S.A.M.
Banco Atlantico Services S.A.M.
Banco de Sabadell, S.A.
Banco Exelbank, S.A.
Banco Urquijo Sabadell Banca Privada, S.A.
BancSabadell d'Andorra , S.A.
BanSabadell Correduría de Seguros, S.A.
BanSabadell Factura, S.L.U.
BanSabadell Financiación, E.F.C., S.A.
BanSabadell Holding, S.L.
BanSabadell Inversió Desenvolupament, S.A.
BanSabadell Inversión, S.A., S.G.I.I.C.
BanSabadell Pensiones, E.G.F.P., S.A.
BanSabadell Seguros Generales, S.A.
De Seguros y Reaseguros
BanSabadell Renting, S.L.
BanSabadell Vida, S.A. de Seguros y Reaseguros
Colinas de Nueva Andalucía, S.A.
Compañía Auxiliar de Transportes y Aparcamientos, S.A.
Compañía de Cogeneración del Caribe, S.L.
Compañía de Electricidad y Cogeneración de Uvero, S.A.
Difusión de la Propiedad Inmobiliaria, S.A.
Dish, S.A.
Europa Invest, S.A.
Europea de Inversiones y Rentas, S.L.
Europea Pall Mall Ltd.
Explotaciones Energéticas SINIA XXI, S.A. (a)
Explotación Eólica la Pedrera, S.L.
Gestora Plan HF94, S.L.
Herrero International, S.A.R.L.
Hobalear, S.A.
Iberatlantico Serviços e Participaçoes Ltda.
Ibersecurities Holding, S.A.
Ibersecurities, Soc. de V., S.A., Soc. Unip.
Inmobiliaria Asturiana, S.A.
Inmobiliaria Sil, S.A.
Inmobiliaria Sotecón, S.A.
Multibarter Mexicana, S.A. de C.V.
Parc Eòlic l'Arram, S.L. (a)
Parc Eòlic la Tossa la Mola de'n Pascual, S.L. (a)
Parc Eòlic Coll de Som, S.L. (a)
Parc Eòlic Los Aligars, S.L. (a)
Promociones Argañosa, S.L.
Promociones y Financiaciones Herrero, S.A.
Promotora de Negocios y Representaciones, S.A.
Promotora Navarra para el Norte de España, S.A.
Sabadell Ásia Trade Services, Ltd.
Sabadell d'Andorra Borsa, S.A.
Sabadell d'Andorra Inversions Societat Gestora, S.A.
Sabadell International Capital, Ltd.
Sabadell International Equity, Ltd. (a)
Sabadell International Finance, B.V.
Sabadell International Finance, Ltd.
Servicio Administración Inversiones, S.A.
Servicios Reunidos, S.A.
Solintec, S.A.
Totvent-2000, S.A.
Urquijo Gestión, S.G.I.I.C., S.A.
Urquijo Servicios Patrimoniales, S.A.
Total
(a) 100% of the voting rights in the company are held by the Group.
160-263-Part blue
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Página 243
€'000
Financial data (1)
Name of company
Capital
Reserves
Results (2)
Dividends
paid (3)
Contribution
to reserves Contribution
Treated as
Group or losses of
to consolidated
Total
net consolidated consolidated
for tax
assets investment undertakings
profit
purposes
Fully consolidated companies
0
6,735
668
24,892
0
22
(228)
233
158
2
3
(1,142)
(625)
(211)
0
0
28
28
(19)
6,930
10,762
101
0
7
(56)
0
0
0
0
(3)
0
(3)
0
177
(1)
567
233
(14)
207
212
0
0
770
(94)
(2)
41
0
38,395
602
0
721
600
0
398
6,435
0
2,985
358
0
23,318
3,140
0
3,280
2,439
0
21,658 19,498
0
83
38
229,502 71,296,929
0
0
538,884 42,312
0 2,349,842 143,030
0
529,319 15,326
5,213
9,345
588
0
1,208
100
440
546,592 24,040
0
323,612 239,544
0
120,891 15,025
0
143,221
607
0
14,834
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
6,294
0
0
0
0
0
10,000
48,664
132,725
3,554,872
1,369
1,445
20,134
7,358
508
148
147
115,452
18,880
10,010
800
55
4,240
474
240
66,642
43,778
5,203
728
626
687
78
102
76
206
1,476
3,727
2,786
2,468
187
45
1,018
317,309
252,137
609,508
455,054
6,793
80
89,601
800
25,571
3,418
256,283
(1) Foreign registered companies have been translated into euros at the exchange rate ruling on 31 December 2006.
(2) Results are subject to approval by the Annual General Meeting of each company.
(3) Includes final dividends for the previous year and interim dividends paid to the Group during the year.
(a) Data shown for these undertakings under "Financial data" are correct as of 30 November 2006.
(b) Data shown for these undertakings under "Financial data" are correct as of 31 October 2006.
(c) Data shown for these undertakings under "Financial data" are correct as of 30 September 2006.
(d) 100% of the voting rights in the company are held by the Group.
7
126
0
0
(1,956)
25
(59)
0
2,954,285
0
21,137
(880)
(612)
(536)
26,988
(4,454)
29,444
29,874
8
1
0
133
375
801
326
0
856,563
(9,269)
6,503
3,410
2,648
(443)
205
32,060
11,581
20,510
No
Yes
No
No
No
No
No
No
Yes
No
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
5,000
18,757
3,861
54,212
1,495
1,382
3,007
2,410
336
142
136
87,557
20,843
4,672
640
3
1,139
414
250
54,922
76,794
3,094
530
58
212
2
2
2
2
941
24,185
2,786
1,614
0
31
30
1
1
2,000
1
16,690
67
0
1,681
17,871
3,356
0
6,283
1,171
79,427
31
36
(2,369)
347
0
(186)
0
13,277
(4,132)
838
0
0
21
366
(109)
(77,657)
11,317
3,861
284
554
772
0
0
0
0
231
10
0
732
4
7
109
1,016
34
296
1,210
(6,073)
13
(1,121)
(2)
0
0
0
6,735
668
24,892
0
22
(228)
170
158
2
(23)
(1,142)
(625)
(211)
0
0
28
27
(19)
6,930
10,762
101
0
7
(56)
0
0
0
0
(3)
0
(3)
0
176
(1)
289
233
0
207
212
0
0
770
(98)
(1,048)
(6)
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
No
Yes
Yes
Yes
No
Yes
Yes
Yes
No
Yes
No
Yes
Yes
Yes
Yes
Yes
No
No
No
No
No
Yes
Yes
Yes
Yes
No
No
No
No
No
No
No
Yes
Yes
Yes
No
Yes
Yes
926,811
3,083,987
974,338
Banco Sabadell Annual Report 2006
Total
16
1
531
0
375
801
326
1
856,563
(8,526)
6,503
6,691
2,648
(443)
205
32,060
11,581
20,510
Statutory information
Assegurances Segur Vida, S.A.
602
15
Auxiliar Barcelonesa de Servicios, S.A.
150
570
Axel Group, S.L. (a)
26
80
Axel Urquijo, S.L. (a)
70
27
Ballerton Corporation Serviços, S.A.
50
22,490
Banco Atlantico Bahamas Bank & Trust, Ltd. (a)
1,519
0
Banco Atlantico Monaco S.A.M. (b)
11,250
8,088
Banco Atlantico Services S.A.M.
150
(848)
Banco de Sabadell, S.A.
153,002 2,839,941
Banco Exelbank, S.A.
45,473
2,370
Banco Urquijo Sabadell Banca Privada, S.A.
73,148
91,019
BancSabadell d'Andorra, S.A.
30,069
(606)
BanSabadell Correduría de Seguros, S.A.
60
18
BanSabadell Factura, S.L.U.
100
(535)
BanSabadell Financiación, E.F.C., S.A.
24,040
26,988
BanSabadell Holding, S.L.
330,340
(38,863)
BanSabadell Inversió Desenvolupament, S.A.
15,025
34,968
BanSabadell Inversión, S.A., S.G.I.I.C.
601
29,880
BanSabadell Seguros Generales, S.A.
De Seguros y Reaseguros
10,000
0
BanSabadell Pensiones, E.G.F.P., S.A.
7,813
16,694
BanSabadell Renting, S.L.
2,000
3,234
BanSabadell Vida, S.A. de Seguros y Reaseguros
43,858
88,569
Colinas de Nueva Andalucía, S.A.
1,052
318
Compañía Auxiliar de Transportes y Aparcamientos, S.A.
201
1,217
Compañía de Cogeneración del Caribe, S.L.
2,933
(1,563)
Compañía de Electricidad y Cogeneración de Uvero, S.A. 2,992
(570)
Europa Invest, S.A. (c)
125
144
Difusión de la Propiedad Inmobiliaria, S.A.
60
85
Dish, S.A.
87
23
Europea de Inversiones y Rentas, S.L.
53,633
40,283
Europea Pall Mall Ltd.
23,048
(4,258)
Explotaciones Energéticas SINIA XXI, S.A.
1,352
3,283
Explotación Eólica la Pedrera, S.L.
800
0
Gestora Plan HF94, S.L.
3
0
Herrero International, S.A.R.L.
429
3,644
Hobalear, S.A.
60
366
Iberatlantico Serviços e Participaçoes Ltda.
1,215
(951)
Ibersecurities Holding, S.A.
31,581
28,120
Ibersecurities, Soc.de V., S.A., Soc.Unip.
3,000
16,130
Inmobiliaria Asturiana, S.A.
198
4,507
Inmobiliaria Sil, S.A.
619
109
Inmobiliaria Sotecón, S.A.
60
552
Multibarter Mexicana, S.A. de C.V.
697
45
Parc Eòlic l'Arram, S.L. (a)
3
0
Parc Eòlic la Tossa la Mola de'n Pascual, S.L. (a)
3
0
Parc Eòlic Coll de Som, S.L. (a)
3
0
Parc Eòlic Los Aligars, S.L. (a)
3
0
Promociones Argañosa, S.L.
812
620
Promociones y Financiaciones Herrero, S.A.
3,456
272
Promotora de Negocios y Representaciones, S.A.
2,705
85
Promotora Navarra para el Norte de España, S.A.
1,262
1,207
Sabadell Ásia Trade Services, Ltd.
0
4
Sabadell d'Andorra Borsa, S.A.
31
15
Sabadell d'Andorra Inversions Societat Gestora, S.A.
30
213
Sabadell International Capital, Ltd.
1
1,013
Sabadell International Equity, Ltd. (d)
250,001
71
Sabadell International Finance, B.V.
2,000
296
Sabadell International Finance, Ltd.
1
1,251
Servicio Administración Inversiones, S.A.
6,010
783
Servicios Reunidos, S.A.
60
20
Solintec, S.A.
240
108
Totvent-2000, S.A.
1,000
(252)
Urquijo Gestión, S.G.I.I.C., S.A.
3,606
15,923
Urquijo Servicios Patrimoniales, S.A.
2,073
1,236
243
160-263-Part blue
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13:07
Página 244
Proportional holding
Name of company
Principal business
Registered office
Direct
Indirect
Venture capital company
Services
Finance company
Finance company
Real estate
Services
Barcelona
Oviedo
Sant Cugat del Vallès
Havana
Sabadell
Barcelona
50.00
50.00
50.00
50.00
50.00
50.00
-
Portfolio company management
Services
Banking
Electricity utility
Chemicals
Financial services
Banking
Property investment
Chemicals
Services
Graphic art
Property investment
Electricity utility
Real estate
Holding company
Electricity utility
Electricity utility
Sabadell
Boadilla del Monte
León (Mexico)
Barcelona
Altorricón
Santo Domingo
Madrid
Barcelona
Marina de Cudeyo
Barcelona
Barcelona
Barcelona
León
Sabadell
Sabadell
Barcelona
Barcelona
26.41
20.00
19.42
40.00
50.00
23.01
26.52
-
20.04
24.67
37.60
30.42
35.00
22.50
50.00
40.00
20.00
20.00
Proportionally consolidated companies
Aurica XXI, S.C.R., S.A.
Banco Herrero, S.A. y "la Caixa", U.T.E.
BanSabadell Fincom, E.F.C., S.A.
Financiera Iberoamericana, S.A.
Homarta, S.L.
Tecnocredit, S.A.
Total
Equity-accounted companies (1)
Statutory information
Aquaria de Inv.Corp., S.A.
Aviación Regional Cántabra, AIE
Banco del Bajío, S.A.
Berta Energies Renovables, S.L.
Biodiesel Aragón, S.L.
Centro Financiero B.H.D., S.A.
Dexia Sabadell Banco Local, S.A.
Gaviel, S.A.
General de Biocarburantes, S.A.
FS Colaboración y Asistencia, S.A.
Grafos, S.A.
Nisa Gav S.A.
Parque Eólico la Peñuca, S.L.
SBD Creixent, S.A.
Sociedad de Cartera del Vallés, SICAV, S.A.
Tarraco Eólica-Ascó, S.L.
Tarraco Eólica-Les Garrigues, S.L.
Total
Translation differences
Consolidation adjustments
Total
(1) Accounted for by the equity method because the parent company does not take part in the management of the undertaking.
Banco Sabadell Annual Report 2006
244
160-263-Part blue
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13:07
Página 245
€'000
Financial data (2)
Name of company
Dividends
paid (4)
Contribution
to reserves Contribution
Treated as
Group or losses of
to consolidated
Total
net consolidated consolidated
for tax
assets investment undertakings
profit
purposes
Capital
Reserves
Results (3)
Aurica XXI, S.C.R., S.A.
Banco Herrero, S.A. y "la Caixa", U.T.E.
BanSabadell Fincom, E.F.C., S.A.
Financiera Iberoamericana, S.A.
Homarta, S.L. (a)
Tecnocredit, S.A. (b)
14,200
193
29,720
6,169
2,406
60
3,108
0
(1,848)
311
194
134
583
0
(2,443)
1,300
(2,552)
51
0
0
0
238
0
0
17,899
195
192,170
24,993
397
1,259
7,100
161
14,860
3,192
1,203
30
(1,746)
(681)
(951)
287
97
45
292
0
(1,221)
650
(1,276)
25
Total
52,748
1,899
(3,061)
238
236,913
26,546
(2,949)
(1,530)
631,157
153,870
3,270,938
11
1,765
1,003,468
7,413,227
2,210
8,554
2,748
29,030
1,202
43,440
13,898
8,956
2,542
1,682
Proportionally consolidated companies
No
No
No
No
No
No
Equity-accounted companies (1)
112,629
29,767
109,688
15
1,795
63,431
102,061
1,203
4,960
600
1,800
1,134
3,333
12,895
2,408
800
14
143,362
0
184,214
(4)
0
28,640
22,897
0
750
(18)
7,602
51
16
(16)
4,790
427
1,243
21,735
(2,648)
42,076
(6)
0
18,621
12,485
5
(26)
310
806
4
1,896
(36)
1,714
(181)
(38)
1,322
0
2,061
0
0
3,779
0
0
0
0
0
0
0
0
212
0
0
49,129
7,863
52,904
5
1,750
20,953
47,226
630
2,250
887
1,891
567
1,339
2,968
421
208
4
3,542
0
2,247
0
0
(438)
8,906
0
0
(674)
0
0
(158)
(3)
1,453
0
0
4,572
0
9,480
0
0
3,758
5,650
2
(9)
118
198
0
828
(9)
455
(48)
(10)
Total
448,533
393,954
96,717
7,374 12,588,698 190,995
14,875
24,985
Translation differences
Consolidation adjustments
Total
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
Statutory information
Aquaria de Inv.Corp., S.A. (a)
Aviación Regional Cántabra, AIE
Banco del Bajío, S.A. (a)
Berta Energies Renovables, S.L. (a)
Biodiésel Aragón, S.L. (a)
Centro Financiero B.H.D., S.A. (c)
Dexia Sabadell Banco Local, S.A. (a)
Gaviel, S.A. (d)
General de Biocarburantes, S.A. (a)
FS Colaboración y Asistencia, S.A. (a)
Grafos, S.A. (a)
Nisa Gav S.A. (d)
Parque Eólico la Peñuca, S.L. (a)
SBD Creixent, S.A. (a)
Sociedad de Cartera del Vallés, S.A.
Tarraco Eólica-Ascó, S.L. (b)
Tarraco Eólica-Les Garrigues, S.L. (b)
480
(89,395)
263,895
1,444,352
908,398
Banco Sabadell Annual Report 2006
(1) Accounted for by the equity method because the parent company does not take part in the management of the undertaking.
(2) Foreign-registered companies have been translated into euros at the exchange rate ruling on 31 December 2006.
(3) Results are subject to approval by the Annual General Meeting of each company.
(4) Includes final dividends for the previous year and interim dividends paid to the Group during the year.
(a) Data shown for these undertakings under "Financial data" are correct as of 30 November 2006.
(b) Data shown for these undertakings under "Financial data" are correct as of 30 September 2006.
(c) Data shown for these undertakings under "Financial data" are correct as of 31 December 2005.
(d) Data shown for these undertakings under "Financial data" are correct as of 31 October 2006.
3,096,393
245
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Annex II: Balance Sheet of Banco Urquijo group
As at 30 June 2006
€'000
Assets
Cash and balances with central banks
13,648
Financial assets held for trading
Loans and advances to credit institutions
Money market operations through counterparties
Loans and advances to other debtors
Debt securities
Other equity instruments
Trading derivatives
Memorandum item: Loaned or advanced as collateral
21,355
0
0
0
18,333
0
3,022
8,369
Statutory information
Other financial assets at fair value through profit or loss
Loans and advances to credit institutions
Money market operations through counterparties
Loans and advances to other debtors
Debt securities
Other equity instruments
Memorandum item: Loaned or advanced as collateral
Banco Sabadell Annual Report 2006
Available-for-sale financial assets
Debt securities
Other equity instruments
Memorandum item: Loaned or advanced as collateral
121,748
119,656
2,092
0
Loans and receivables
Loans and advances to credit institutions
Money market operations through counterparties
Loans and advances to other debtors
Debt securities
Other financial assets
Memorandum item: Loaned or advanced as collateral
3,545,406
1,263,060
0
2,183,186
0
99,160
1,151,940
Held-to-maturity investments
Memorandum item: Loaned or advanced as collateral
0
0
Changes in the fair value of hedged items in portfolio hedges of interest rate risk
0
Hedging derivatives
Non-current assets held for sale
Loans and advances to credit institutions
Loans and advances to other debtors
Debt securities
Equity instruments
Tangible assets
Other assets
Investments
Associates
Jointly controlled entities
Group entities
Insurance contracts linked to pensions
246
0
0
0
0
0
0
0
Tangible assets
For own use
Investment property
Other assets leased out under operating leases
Assigned to welfare projects
Memorandum item: Acquired under finance leases
Intangible assets
Goodwill
Other intangible assets
Tax assets
Current
Deferred
4,527
10,850
0
0
0
10,850
0
0
938
938
0
0
0
77,825
74,447
0
3,378
0
0
5,294
4,843
451
79,959
1,181
78,778
Prepayments and accrued income
5,419
Other assets
2,921
Total assets
3,889,890
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Página 247
€'000
Liabilities
Financial liabilities held for trading
Deposits from credit institutions
Money market operations through counterparties
Deposits from other creditors
Debt certificates including bonds
Trading derivatives
Short positions
4,367
0
0
0
0
4,367
0
0
0
0
0
Financial liabilities at fair value through equity
Deposits from credit institutions
Deposits from other creditors
Debt certificates including bonds
0
0
0
0
Financial liabilities at amortized cost
Deposits from central banks
Deposits from credit institutions
Money market operations through counterparties
Deposits from other creditors
Debt certificates including bonds
Subordinated liabilities
Other financial liabilities
Changes in the fair value of hedged items in portfolio hedges of interest rate risk
Hedging derivatives
Liabilities associated with non-current assets held for sale
Deposits from other creditors
Other liabilities
0
4,685
0
0
0
134,395
59,265
0
5,143
69,987
Tax liabilities
Current
Deferred
14,189
3,359
10,830
Accrued expenses and deferred income
73,054
Other liabilities
Capital having the nature of a financial liability
Total liabilities
Banco Sabadell Annual Report 2006
Provisions
Provisions for pensions and similar obligations
Provisions for taxes
Provisions for contingent exposures and commitments
Other provisions
3,477,312
0
1,579,940
0
1,736,553
0
73,175
87,644
Statutory information
Other financial liabilities at fair value through profit or loss
Deposits from credit institutions
Deposits from other creditors
Debt certificates including bonds
74
0
3,708,076
247
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Página 248
€'000
Equity
Minority interests
Valuation adjustments
Available-for-sale financial assets
Financial liabilities measured at fair value through equity
Cash flow hedges
Hedges of net investments in foreign operations
Foreign exchange differences
Non-current assets held for sale
107
(1,153)
125
0
(1,278)
0
0
0
Statutory information
Own funds
Capital or endowment fund
Issued
Unpaid and uncalled (-)
Share premium
Reserves
Accumulated reserves (losses)
Retained earnings
Other equity instruments
Equity component of compound financial instruments
Other
Less: Treasury shares
Non-voting equity units and associated funds (savings banks)
Non-voting equity units
Reserves of holders of non-voting equity units
Stabilization fund
Profit or loss for the year
Less: Dividends and similar payments
182,860
92,694
92,694
0
51
0
0
0
0
0
0
0
0
0
0
0
90,115
0
Total equity
181,814
Total liabilities and equity
3,889,890
Memorandum items
Banco Sabadell Annual Report 2006
248
Contingent exposures
Financial guarantees
Assets earmarked for third-party obligations
Other contingent exposures
440,661
439,387
82
1,192
Contingent commitments
Drawable by third parties
Other commitments
589,709
565,670
24,039
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Consolidated Report of the Directors for the year 2006
Macroeconomic environment
Statutory information
Banco Sabadell Annual Report 2006
Global economic growth remained at a high level in 2006 against a backdrop of continuing high commodity prices.
Economic activity was buoyant in virtually all the world’s regions. In the US, however, economic growth slackened in the
latter months of the year as the housing market weakened. In the euro zone the economy grew at the highest rate seen
for five years on the back of an upswing in domestic demand and particularly in business investment. Labour markets
tightened and consumer confidence was at it highest point since 2001. In Asia, China had another year of investment-led
expansion. In Japan economic activity continued to recover, with a strong performance by exports and corporate
investment counterbalancing weak consumer demand towards the end of the year.
The Spanish economy continued to show marked strength during the year, with GDP growth close to 4.0%. The pattern
of growth was somewhat more balanced than last year. Persistent strong domestic demand was accompanied by a less
unimpressive contribution from exports. On the supply side, improving levels of industrial activity and a vibrant
construction sector were notable features. Employment continued to rise and the unemployment rate declined to end the
year at close to 8.0%. On the prices front, inflation remained at levels similar to the previous year at about 3.5%. A fall in
the oil price in the second half of the year helped inflation to reach its lowest level in two years. As in earlier years,
Spanish inflation was again significantly higher than in the euro area as a whole. Finally, on the fiscal front, the public
accounts continued to look healthy. In particular, Ministry of Economic Affairs estimates show that Spanish central and
local government will end the year 2006 with a surplus of 1.4% of GDP.
Turning to actions by central banks, the Federal Reserve (Fed) called a halt to the upward movement in interest rates
that began in June 2004. Since then official rates have remained unchanged at 5.25%. With rates at this level, the Fed
continues to raise the possibility of some additional tightening of monetary policy despite its open acknowledgement of a
slowdown in the economy. In the euro area, the European Central Bank (ECB) continued the cycle of interest rate rises
that started in late 2005, bringing official rates up to 3.50% from 2.25% at the beginning of the year. The ECB has left the
door open for further rate increases in 2007, continuing to regard current monetary policy as accommodative and noting
that inflation risks remain on the upside. Despite this, the ECB’s pronouncements have become more ambiguous and
have ceased to make reference to the need for further rate rises if its economic forecasts prove to be right. Finally, the
Bank of Japan abandoned its unorthodox monetary stance in March, after five years of setting targets for bank reserves.
It subsequently made a single increase in its call rate to 0.25%. The Bank of Japan has said that it will keep interest rates
at a very low level and that the adjustment will be only gradual and will be dependent on the economy’s performance going
forward.
In the long-term government bond markets, US bond yields showed mixed trends in the first and second halves of the
year, though they were up on the year as a whole. Yields rose significantly in the first half of the year, helped by
expectations of further interest rate hikes by the Fed, the shift in monetary policy in Japan and progress towards more
flexible exchange rates for the Chinese yuan. In the second half-year, however, yields fell back as domestic demand
weakened, inflationary pressures eased and the Fed brought the upward cycle of interest rates to an end. Eurozone
government bond yields rallied strongly in 2006 from the weakness seen in recent years. The improved performance of
the economy, a strengthening labour market and the return to more normal monetary conditions were largely responsible
for the recovery.
In the currency markets the dollar/euro exchange rate weakened all through the year to reach all-time lows. Key causes
of dollar weakness were the slowdown in the US housing market, out-of-phase interest rate cycles on both sides of the
Atlantic, the persistent trade deficit in the US and the holding of a greater diversity of currencies in the reserves of central
banks. On the other hand, the US currency remained relatively stable against the yen notwithstanding the change in
Japanese monetary policy. Finally, the G7 was insistent that emerging economies with large current account surpluses
should move towards greater exchange rate flexibility. China did indeed take further steps to make the yuan more flexible
and these have been reflected in a gradual appreciation of the currency.
Equity markets, for the most part, ended the year with positive returns. Particularly strong gains were registered by
emerging markets against a backdrop of generally low volatility. Support for equities was provided, mainly, by continuing
low bond yields. Despite uncertainty over the pace of economic slowdown in the US, equity markets remained relatively
well protected by strong corporate earnings, which continued to experience double-digit growth. There was also a strong
surge of merger and acquisition activity in the latter months of the year thanks to healthier corporate balance sheets,
lower borrowing costs and high cash generation. This was further boosted by the active participation of private equity
houses.
249
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Business review
Statutory information
The year 2006, the Bank's 125th year of operation, took place against a backdrop of a strong economy and rising
financial markets. This helped the Bank to meet its growth and value creation targets and make rapid progress towards
its goal of consolidating its position as a major domestic bank and a market leader in corporate banking and personal
banking.
For Banco Sabadell 2006 was another crucial year, marked by vigorous organic growth and the successful conclusion
of another round of strategic restructuring, reinforcing still further its position as a key player in Spain's financial services
industry.
The acquisition of Banco Urquijo and the swift completion of the merger and integration processes in just five months
were landmark achievements in European banking, giving Banco Sabadell a strong market position in the high-income
segment in Spain and making it the country's second largest specialist private banking operation.
This intense activity combined with excellent growth across all areas and lines of business resulted in consolidated
assets increasing to a total of €72,779.83 million, up 39.1% compared with the previous year, with the net profit
attributable to the group rising to €908.39 million, up 100.5% on the figure for 2005.
These figures include an important one-off event, namely, the sale of the Group's real estate business, Landscape
Promociones, as well as an accounting adjustment made necessary by a change in the tax rules that is now in force.
Balance sheet
Banco Sabadell Annual Report 2006
At the close of the year, gross loans and advances to customers were up by 33.6% and totalled €55,632.97 million.
Banco Sabadell continued to focus its commercial banking business on the small and medium-sized enterprise, clearly
demonstrating its high degree of specialization and the market-leading position that it holds in this vital segment.
Products such as finance for working capital performed particularly well, with receivables financing under factoring
agreements and advances under the “confirming” system increasing by 28.6% and 48.4% respectively.
Mortgage loans were up by 32.6% on the year, with loans to first-time buyers showing particularly strong growth. Loanto-value ratios (the ratio of the loan to the value of the property) were held steady at 54.1%.
Non-performing loans as a proportion of total lending fell to 0.39%, a ratio that remains among the best in the industry.
Increased provisioning in response to the growth in lending brought the ratio of provisions to bad and doubtful loans up to
466.6%.
A proactive policy of continually launching new saving and investment products, combined with the addition of the
Banco Urquijo portfolio, drove up market shares and propelled the volume of customer assets under management to a
year-end total of €80,247.70 million, a rise of 43.2% on the previous year. Current account balances rose by 33.3% and
time deposits by 28.2%.
A key component of assets under management was mutual funds and open-ended investment companies (OEICs) with
assets increasing by 54.8% to €16,482.07 million. Pension funds were up 24.9%, reaching a total of €3,317.51 million.
The excellent performance of bancassurance products was another notable feature this year, backed up by strong
business development and sales activity. Premium income on life policies increased strongly by 35% and pension plans
were up 25% thanks to the highly successful Pentapensión product.
Margins and profits
250
High levels of activity and growing business volumes, backed by a careful and selective targeting of individual customer
groups and a tight control on recurring costs, were reflected in the consolidated profit for the year, which showed
increases across all income categories.
Net interest income reached a total of €1,097.87 million, up 12.4% on the year 2005.
The contribution to group profits from undertakings accounted for by the equity method increased by 46.0% over the
year, and profits from non-financial activities rose by 7.2%.
Net fee and commission income was up 23.1%. Buoyant financial markets, together with the addition of the Banco
Urquijo customer portfolio, combined to drive up income from market trading on customers’ behalf, which rose by 59.0%
to a total of €49.79 million.
The rising trend in income from insurance activities continued in 2006. Bancassurance continued to perform well
during the year and generated revenues of €59.81 million, an increase of 36.8% on the year 2005.
As a result, gross operating income increased by 14.2% to €1,811.47 million.
Net operating costs were €914.29 million, a 15.4% rise. This was due to the addition of Banco Urquijo costs and to
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Statutory information
certain non-recurring costs, including the costs of Banco Urquijo integration. If these non-recurring costs are eliminated,
the increase in operating costs over the year falls to just 2.2%, which is in line with the group’s cost control and efficiency
targets. The cost:income ratio after integration of Banco Urquijo is 50.5%.
Depreciation and amortization charges for the year were €106.98 million, up 20.6% on the close of 2005; this was
due in large measure to investment in new computer equipment and applications (for the Proteo programme) and to
amortize intangible assets arising from the integration and merger of Banco Urquijo.
Net operating income for 2006 rose to €813.71 million, up 11.8% compared with 2005.
The sharp increase in lending impacted on total generic loan loss provisions, which were up by 68.9% on the year. Total
net provisions increased by 39.6% to €240.44 million, an increase which was due in large measure to reduced specific
provisions resulting from the fall in loan defaults.
The need for banks to adapt to a new tax regime from this year onwards had an effect on the income tax charge for the
year. The change in the tax rules involves a reduction in the tax rate to 32.5% in 2007 and 30.0% in 2008, and this
required an additional tax charge in December of €96.5 million to allow for the adjustment in tax credits for recovery in
future years.
To strengthen the Bank’s capital base after the acquisition of Banco Urquijo, and to increase its capacity for future
growth and at the same time reduce its exposure to the property market, the group’s real estate subsidiary, Landscape
Promocions Immobiliàries, S.L.U. was sold in October, having been in operation since 1998.
The sale resulted in pre-tax gains of €734.70 million. These are recognized net of tax under net profit from
discontinued operations.
The net profit attributable to Banco Sabadell, after deducting taxes and the share of profits attributable to minority
interests, was €908.39 million, an increase of 100.5% on the figure at 31 December 2005.
Branch network expansion
Banco Sabadell Annual Report 2006
In addition to the new branches added as part of the integration of the former Banco Urquijo, Banco Sabadell opened a
total of 60 domestic branches distributed among its different business lines and trading brands (SabadellAtlántico, Banco
Herrero and Solbank), and one representative office in Istanbul, Turkey, during the year. Twelve of these new branches are
focused on corporate banking, bringing the number of branches specializing in the corporate market to 63. At 31
December 2006, with the integration of Banco Urquijo complete, Banco Sabadell had a total of 1,204 branches and
offices, 83 more than in 2005, including the 17 making up the Bank’s international network.
Of the total of 60 branches belonging to the former Banco Urquijo, 18 were brought into the Commercial Banking
network under either the Sabadell Atlántico or the Banco Herrero banner. Another 10 became part of the Private Banking
network of the new Banco Urquijo. The remaining branches were merged with branches of Banco Sabadell or Sabadell
Banca Privada.
Divisional review
Commercial Banking
Commercial Banking is one of the key areas within the Banco Sabadell business structure. With its focus on providing
financial products and services to individuals, SMEs and retailers, it has the degree of specialization required to ensure
that customers receive personal attention to suit their needs, whether from expert staff assigned to branches operating
under the various group brand names, or via other channels designed to support the customer relationship and give
customers access to remote banking services.
251
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Commercial Banking comprises the Spanish market sectors (small and medium-sized firms, retailers and private
customers) addressed by the SabadellAtlántico, Banco Herrero and ActivoBank brands.
€'000
Statutory information
2006
2005
Change
y.o.y. (%)
Net interest income
689,597
646,622
6.6
Fees and commissions (net)
Gains or losses on financial assets and liabilities (net)
Foreign exchange differences (net)
348,068
8,674
19,885
298,733
722
17,523
16.5
-13.5
Gross operating income
1,066,224
963,600
10.7
General administrative expenses
Personnel expenses
Other administrative expenses
Depreciation and amortization
Allocation of indirect costs
Other operating income
(361,017)
(297,168)
(63,849)
(26,147)
(234,454)
0
(349,819)
(282,537)
(67,282)
(24,705)
(234,629)
0
3.2
5.2
(5.1)
5.8
(0.1)
--
Net operating income
444,606
354,447
25.4
Impairment losses
Other gains/losses
(68,368)
0
(60,643)
(284)
12.7
--
Profit or loss before tax
376,238
293,520
28.2
17.6%
53.3%
16.3%
58.1%
---
6,532
1,107
25,955
31,383
6,227
1,048
22,024
26,097
4.9
5.6
17.8
20.3
Ratios (%):
ROE
Cost:income ratio
Other information:
Employees
Branches in Spain
Loans and advances to customers (€m)
Customer funds (€m)
Banco Sabadell Annual Report 2006
252
The successful implementation of our business strategy, steady increases in all market segments and policies of
negotiating on prices and commissions combined to produce an increase of 10.7% in gross operating income compared
with the previous year. Fee and commission income increased by 16.5%, with especially strong growth in fees and
commissions related to insurance (up 60.6%) and derivatives (€6.8 million increase on 2005).
A substantial improvement in productivity combined with firm cost control enabled us to handle increased business
volumes while holding operating cost growth to just 2%, resulting in increased net operating income, up 25.4% compared
with 2005.
These results, which are recurring in character, resulted in a profit attributable to Commercial Banking of €376.2
million, a rise of 28.2% on the previous year.
Performance in the micro-enterprise and small and medium-sized business segment was characterized by excellent
business growth and a proactive and sharply focused management policy. This market remains the strongest growth area
for Commercial Banking, with lending increasing by 21.8% and deposits by 16.3%.
There was strong growth in the take-up of products specially designed for the SME market, such as factoring and
“confirming”, with increases of 34.9% and 48.6% on the year respectively. Income generated by the new BS Comercios
package of highly competitive services aimed at retailers, especially via point-of-sale terminals, was 78% up on the
previous year, while subsidized financing for SMEs (sponsored by the Official Credit Institute) was up 75%, with Banco
Sabadell recording the third highest total by value of credit applications under this scheme.
In the Personal Banking segment, the “management of portfolios of funds” proved most successful, attracting more
than €775 million in subscriptions during the year. A mutual fund launched to coincide with the 125th anniversary of
Banco Sabadell, BS Garantía Extra 125, was the best-selling mutual fund of the year, with deposits totalling €500 million.
Fixed-term deposits launched by the group during the year attracted a total of €1,300 million in subscriptions.
The volume of assets in structured deposits grew by 35.3% during the year, with new issues of the BS Depósito
Campeón, with its high media impact, being particularly successful. The first Depósito Campeón issue coincided with the
football World Cup, and a later issue was linked to the start of the Spanish League season. Other products worthy of
mention are BS Directivos and BS Preferente, whose highly competitive offerings of financial and non-financial products
were taken up by more than 10,000 customers during the year.
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Spectacular growth by the wealth management division, Banca Patrimonial, which advises and manages high net worth
individuals (assets of more than €500,000) enabled the unit to consolidate its position, with almost €5,000 million in
funds under management by the end of the year.
Campaigns to attract new customers in the mass-market or retail banking segment were targeted at different groups,
such as existing clients (“Member Get Member”), employees (“Payroll Capture”), children (“BS Junior”) and professional
groupings. As a result, a total of 155,000 new customer accounts were opened.
All in all, our focus on particular market segments –SMEs, private customers (personal banking, wealth management
and retail banking), non-residents and professional associations– resulted in substantial improvements both in our
cost:income ratio (4.8%) and in ROE (1.3%).
€'000
2005
Change
y.o.y. (%)
Net interest income
372,663
312,155
19.4
Fees and commissions (net)
Gains or losses on financial assets and liabilities (net)
Foreign exchange differences (net)
150,225
43,312
22,703
111,019
35,622
19,085
35.3
21.6
19.0
Gross operating income
588,903
477,881
23.2
General administrative expenses
Personnel expenses
Other administrative expenses
Depreciation and amortization
Allocation of indirect costs
Other operating income
(91,150)
(71,607)
(19,543)
(5,482)
(54,214)
3,653
(81,967)
(65,119)
(16,848)
(3,657)
(54,513)
2,645
11.2
10.0
16.0
49.9
(0,5)
38.1
Net operating income
441,710
340,389
29.8
(167,132)
15,268
(78,333)
6,949
113.4
119.7
289,846
269,005
7.7
11.0%
23.9%
10.4%
27.9%
---
1,237
63
26,837
12,395
1,102
49
19,014
9,876
12.3
28.6
41.1
25.5
Impairment losses
Other gains/losses
Profit or loss before tax
Ratios (%):
ROE
Cost:income ratio
Other information:
Employees
Branches in Spain
Loans and advances to customers (€m)
Customer funds (€m)
Banco Sabadell Annual Report 2006
2006
Statutory information
Corporate Banking
One of the key developments for Corporate Banking in the last quarter was the opening of another three branches,
bringing the total number opened this year to 14. Corporate Banking now has 63 branches covering virtually the whole of
Spain. Sales and marketing efforts continued at a high level throughout the year, concentrating especially on attracting
new customers and on promoting products and services with good potential for generating fee and commission income
(mutual funds, foreign trade services and derivatives).
253
Corporate Banking’s lending book achieved substantial growth during the year, rising to €26,837 million, up by 41%. A
strong contributor to this growth was a 67% increase in business in the autonomous region of Madrid, a strategically
important area with enormous business potential, made possible by much hard work on the part of the unit. Among the
top performers were products to help companies finance their working capital requirements (factoring and “confirming”
up by 32% on 2005) helped by a strong marketing campaign. Financing for real estate development also continued at a
high level (up 55% on the year); and a number of major structured financing deals were closed during the year (up 93%
on 2005).
In the area of deposits, very considerable increases were achieved in relative terms, rising by 26% overall to a total of
€12,395 million, thanks partly to initiatives designed to attract deposits in the fourth quarter. Earlier campaigns were
highly selective in character, with a view to striking the right balance between increasing new business and maximizing
rewards. A good example of this focus was an inflow of €89 million into the real estate fund, which is significant in
affording greater stability of funding combined with a higher margin.
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With regard to services, income generated by treasury management products for businesses were up by 216% on the
previous year, while income from credit and debit cards and the issue of avals increased by 47% and 40% respectively
over the year.
This performance resulted in a 23% improvement in Corporate Banking’s gross operating income, its principal sales
performance indicator, far outweighing the increase in operating costs, which was due largely to the expansion of the
Corporate Banking branch network. These increases combined to improve our cost/income ratio still further, to 23.9%
(down from 27.9% in 2005). On the other hand, our pre-tax profit did not fully reflect this excellent performance owing to a
rise of 142.6% in generic provisions during the year, which was made necessary by the strong growth in lending that was
achieved.
Statutory information
Banco Urquijo
Private Banking is set to become one of the group’s strategic business lines in the coming year following the acquisition of
Banco Urquijo in 2006.
Banco Urquijo is a wholly-owned banking subsidiary of Banco Sabadell, and its mission is to serve the needs of private
banking customers requiring an independent, personalized service which is tailored to their service and reporting
requirements.
Banco Urquijo is the result of a transfer of the private banking business from the former Banco Urquijo to Sabadell
Banca Privada, creating Spain’s second largest private banking organization by business volume.
Performance data for the year to some extent reflect the impact of the transfer of the business of the former Banco
Urquijo that took place in December 2006.
If the business performance of Sabadell Banca Privada for 2006 is considered in isolation, the profit and loss account
shows that the private banking business performed very well during the year, with a 35% increase in gross operating
income (adjusted for the impact of the transfer of business from the former Banco Urquijo).
€'000
2006
2005
Change
y.o.y. (%)
9,802
4,332
126.3
Fees and commissions (net)
Gains or losses on financial assets and liabilities (net)
Foreign exchange differences (net)
14,740
43
525
10,727
28
382
37.4
53.6
37.4
Gross operating income
25,110
15,469
62.3
General administrative expenses
Personnel expenses
Other administrative expenses
Depreciation and amortization
Allocation of indirect costs
Other operating income
(6,933)
(6,324)
(609)
(1,260)
(3,533)
0
(5,695)
(4,952)
(743)
(413)
(3,280)
0
21.7
27.7
(18.0)
205.1
7.7
-
Net operating income
13,384
6,081
120.1
Impairment losses
Other gains/losses
(2,304)
(558)
(2,378)
(23)
(3.1)
-
Profit or loss before tax
10,522
3,680
185.9
Ratios (%):
ROE
Cost/income ratio
17.9%
40.2%
11.3%
55.6%
-
Other information:
Employees
Branches in Spain
Loans and advances to customers (€m)
Customer funds (€m)
267
17
1,222
5,811
76
7
258
2,033
251.3
142.9
373.6
185.5
Net interest income
Banco Sabadell Annual Report 2006
254
Fee and commission income, for example, improved significantly compared with 2005, rising by 22% before adding fees
and commissions from Banco Urquijo.
The success of business development initiatives put in hand during the year to promote the securities brokerage
business was reflected in a 54% increase in gains on financial assets and liabilities compared with the previous year.
With regard to business performance, activity continued at a high level and business volumes grew by 27%. Most of
this was repeat business with existing customers, reflecting the greater depth and higher quality of private banking
services.
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Costs rose by 21.7% as a result of staff increases and higher staff costs, as well as increased depreciation and
amortization charges on transferred assets resulting from the transfer of business from the former Banco Urquijo (204%).
The pre-tax profit, adjusted to exclude the impact of the transfer of business from Banco Urquijo, was €6,852 million,
an increase of 86% on the year.
Bancassurance
Bancassurance, a group "cross-selling" business, offers life and non-life insurance products and pension plans designed
to meet the needs of the group's customers. Directly or through the branch network, it markets a full range of
provident/retirement products (both saving and risk protection) designed for specific customer segments including
individual, corporate and institutional customers.
During the year the Bancassurance business was brought into line with the new Spanish legislation on insurance
mediation.
Fees and commissions on pension plans and general insurance
Insurance income
Sales commission expenses
Gross operating income
General administrative expenses
Personnel expenses
Other administrative expenses
Depreciation and amortization
Allocation of indirect costs
Other operating income
Net operating income
Other gains/losses
Ratios (%):
ROE
Cost:income ratio
Other information:
Employees
Branches in Spain
2005
Change
y.o.y. (%)
51,491
60,017
(39,784)
42,309
43,737
(23,441)
21.7
37.2
69.7
71,724
62,605
14.6
(10,632)
(4,449)
(6,183)
(343)
(7,581)
0
(10.388)
(4,971)
(5,417)
(342)
(7,714)
0
2.3
(10.5)
14.1
0.3
(1.7)
-
53,168
44,161
20.4
998
1,627
(38.7)
54,166
45,788
18.3
24.6%
22.9%
24.5%
27.3%
---
89
--
91
--
(2.2)
--
Banco Sabadell Annual Report 2006
Profit or loss before tax
2006
Statutory information
€'000
Business volumes showed solid and sustained growth across all business lines. Highlights for the year included:
• Savings under management of over €6,000 million.
• Sales of individual annuities totalling €600 million.
• Bancassurance savings products for Corporate Banking customers over €550 million.
Savings under management totalled €6,275 million, up 21% on the close of 2005. Of this total, €3,318 million was
accounted for by pension plans and €2,958 million by endowment/cash value life policies. The addition of pension funds
from the former Banco Urquijo resulted in an increase in assets of €273 million.
The growth in endowment policies was well ahead of the market as a whole. Based on figures for September 2006
Banco Sabadell showed the largest increase overall, with the “Plan Ahorro” savings plan, annuities and structured
products as particularly strong performers.
Personal pension plans increased by 30% with volumes rising by €471 million on the year 2005. Pentapensión was a
product that did particularly well (up 56%), having attracted savings of €800 million by the end of the year. A company
pension scheme of a similar type, BS Pentapensión Empresa, was launched during the year.
Company pension scheme assets increased to €1,199 million, a rise of €173 million or 17%, compared with the close
of 2005.
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Statutory information
Individual endowment policies showed a volume increase of €441 million on the year, spearheaded by guaranteed
interest products (Plan Ahorro), annuities and structured products. In company policies, the fastest growing products in
2006 were group annuities (€56 million).
Commission income was another area of strong growth, rising to more than €100 million.
Commission-earning products that did particularly well included personal pension plans, commissions on which rose
by 28% on 2005, and individual general insurance policies, on which brokerage fees, especially for home and payment
protection policies, increased by 23%.
With regard to income from insurance activities, life-protection policies, at €28.7 million, contributed strongly to
Bancassurance operating income. This was attributable to good growth in premium income (€63 million, up 49% on the
year) combined with falling loss ratios for both free-standing and linked products. Personal savings-with-insurance policies
also did well, contributing €17.8 million to operating income.
Sales commissions paid to Banco Sabadell increased to €39.8 million, 69.7%, as a result of increases in volumes and
margins as well as new agreements with other business units.
The increase in gross operating income, which resulted from fee and commission growth combined with a firm control
on costs (up 2.3% on the year), resulted in a 4.4% improvement in the cost:income ratio.
Claims ratios were lower in both the life-protection and group annuity classes of business.
Asset Management
This cost-selling business unit combines asset management with the management of collective investment schemes. It
also manages investments for other Banco Sabadell group businesses that hold portfolios of assets on behalf of
customers.
€'000
Banco Sabadell Annual Report 2006
2006
2005
Change
y.o.y. (%)
Gross operating income
36,872
25,254
46.0
General administrative expenses
Personnel expenses
Other administrative expenses
Depreciation and amortization
Allocation of indirect costs
Other operating income
(7,639)
(5,182)
(2,457)
(342)
(2,130)
(146)
(6,533)
(4,796)
(1,737)
(306)
(1,899)
22
16.9
8.0
41.5
11.8
12.2
-
Net operating income
26,615
16,538
60.9
Profit or loss before tax
26,615
16,538
60.9
Ratios (%):
ROE
Cost:income ratio
145.5%
25.4%
96.2%
32.1%
---
144
--
96
--
50.0
--
Other information:
Employees
Branches in Spain
256
Among the various mutual funds marketed by Banco Sabadell, funds with an equity component showed significant
inflows. Bond and guaranteed return funds nonetheless accounted for 65% of the total value of mutual fund assets.
Assets under management in mutual funds grew by 55.1% during the year, mainly as a result of the integration of the
Banco Urquijo fund management business, rising to a total of €14,184 million. Other factors supporting this strong
performance were buoyant stock markets and increasing net subscriptions as sales activity continued at a high level.
One indication of the excellent performance of the mutual fund business was the strong growth of the property fund,
Sabadell BS Inmobiliario, FII. With subscriptions rising to over €422 million, the fund ranked second in terms of net asset
growth and fourth in terms of overall asset value, within the Spanish managed property fund universe.
The strong performance of the Bank’s equity funds was driven throughout 2006 by buoyant stock markets and the
continuing popularity of our investment schemes offering discretionary management. This helped to raise the value of
assets in equity funds to more than 18% of the value of mutual fund assets as a whole.
Many of our mutual funds had another year of outperformance in 2006. BanSabadell Inversión, S.A. S.G.I.I.C. was
selected by France’s EDHDC Business School and Europerformance, a firm of mutual fund analysts, as third best Spanish
fund manager in alpha performance terms. Three equity funds were awarded high ratings for management quality by rating
agency Standard & Poor’s Investment Services. Sabadell BS Dólar Bolsa, FI obtained an AA quality rating for “very high
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quality” in management, while Sabadell BS España Dividendo, FI and Sabadell BS España Bolsa, FI were given an A
rating, again for high quality management. The highest-returning managed fund in 2006 was Sabadell BS España
Dividendo, FI with cumulative returns of 38% for the year.
An important development this year was the expansion of our managed portfolios of 200 collective investment
schemes as a result of the integration of Banco Urquijo in December. The effect of this was to bring the number of
Spanish collective investment schemes at the close of 2006 to 387, with management being split between BanSabadell
Inversión S.A., S.G.I.I.C. (223 schemes) and Urquijo Gestión, S.G.I.I.C. S.A. (164 schemes).
The group’s “Portfolio of Funds Management” service, BS Gestión de Carteras de Fondos, saw its assets under
management increase by 25% during the year to a total of €778 million, with close to 12,000 subscriptions. Large capital
gains were made for investors with medium or high-risk investment profiles in 2006, with returns exceeding 12% at the
more aggressive end of the spectrum.
These positive results, combined with careful control on operating costs, resulted in gross operating income increasing
by 46% on the previous year, with net operating income and pre-tax profit both up by 61%.
Banco Sabadell Annual Report 2006
In 2006 Banco Sabadell consolidated its position as one of Spain’s most advanced financial institutions thanks to two
major achievements in its internal organization. One of these was to carry through a major programme of IT upgrades
known as Proteo; the other was the successful completion of the integration of Banco Urquijo, the Banco Sabadell group’s
most recent acquisition, within a record time of less than five months.
The main purpose of the IT upgrade programme was to equip the marketing line with the most up-to-date technology in
both hardware and software. This would ensure that less time was taken up with low value added tasks and that offices
and branches had the sales training and tools they needed to offer customers a responsive, personalized and high-quality
service, and thus ensure that the specified cost:income targets are achieved.
All branch-level computers and other hardware have been replaced by latest generation models: computers, screens,
printers and dispensers, including multi-function printers usable in fax, scanner or photocopying modes. As far as
applications software is concerned, the five-year upgrade programme is now complete and as a result Banco Sabadell can
boast a technology platform that is robust, capable of absorbing high rates of business growth, up-to-date, since it
incorporates the latest developments in banking software, and helping to boost the overall efficiency of the Banco
Sabadell group.
Productivity has benefited greatly from an appropriate and flexible product offering and from the addition of new IT
components, including a workflow manager that automates interactions between the various people required to perform
complex processes, and a document manager enabling documents to be digitalized and transmitted electronically.
The group’s business model is based on a multi-channel strategy aimed at offering a personalized, user-friendly service to
customers. This is achieved by designing products and services specially for the group’s different brands; this also applies to
customer communication channels such as the branch network, the telephone, the Internet and the mobile phone.
Banco Sabadell is committed to systems innovation and to using state-of-the-art technology in offering products and
services to its customers.
Banco Sabadell was the first bank to accept electronic ID cards for access to its online banking services. The use of
electronic ID cards is becoming increasingly common throughout Spain and Banco Sabadell would not wish to deny the
opportunity of using these cards to customers who already have them. As a means of identification, they make online
banking services more robust and represent a considerable advance in allowing signatures to be given and recognized
electronically.
Banco Sabadell has also been a pioneer in introducing digital signatures for its email communications with customers
and suppliers. The signature guarantees the authenticity of email communications and protects recipients against
security threats or attacks.
The BS Móvil alerts service was enhanced by new functionality this year, including the addition of new notification
alerts of movements on customers’ accounts. The service is becoming increasingly popular with customers and sign-ups
have been growing rapidly. Key factors in this success have been the novelty of the mobile phone as a customer
communication channel and the security the channel offers.
Security has always been a key priority for the group and this was no less true in 2006 as the group prepared to
embark on the final stages of its IT security plan based on the ISO 17799 international standard. Actions envisaged by
the plan include enhancements to intruder detection systems, continuous 24/7 vigilance and improved incident response
procedures. Vulnerability management, system access control and identity management have also been strengthened.
Encryption systems have been made more robust, helping to keep information confidential and reducing the likelihood of
a phishing attack.
Statutory information
Research and development
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Página 258
Outlook
Statutory information
The group is in the course of rolling out a three-year strategic plan which was launched in 2005. The aim of the plan,
known as ViC 07, is that by the end of 2007 Banco Sabadell will have consolidated itself as a major player in the Spanish
financial services market, a market-leader in corporate banking and a standard-setter for services in personal banking.
Efficiency, profitability, organic growth and the extension of the Banco Sabadell culture to the entire organization and all
group business units: these are the key elements of the ViC 07 strategic plan.
By the end of 2006, the second year of the 3-year plan, 71% of the programmes set up under the plan had been
completed and considerable progress had been made towards achieving the targets for income growth and recurring cost
reductions for 2007. Steady and substantial rates of business growth and improved ratios are already being attained as
envisaged by the plan and will in all likelihood be fully achieved by the end of 2007.
The plan is structured into 12 value programmes and 87 business plans. A senior manager has been assigned to each
business plan and is responsible for its implementation. The plan’s general aims form five main priority action areas, or
levers, on which the 12 value programmes will be focused. These action areas are as follows:
1. Costs and efficiency: reducing recurring and unit costs through improvement in the overall efficiency and the added
value of group central services.
2. Productivity: increasing the productivity of the business, operational and technological capabilities and tools that
support the group’s activities.
3. Business: building segments and businesses to improve our market position through profitable increases in
business volumes and customers.
4. Management: facilitating decision taking and value generation within a framework of risk control.
5. Stakeholder relations: generating additional value through good relations with, and giving satisfaction to,
customers, employees and other institutional, social and economic stakeholders.
Risk management
Banco Sabadell Annual Report 2006
Since risk is managed on a group-wide basis, all the information in this section refers to the group.
The main financial risks faced by the Banco Sabadell group in operations involving the use of financial instruments are
credit risk, market risk and liquidity risk.
The group is aware that the accurate and efficient management and control of risk ensures that shareholder value is
maximized and that an appropriate degree of solvency is maintained in a context of sustainable growth.
With this in view, the management and control of risk has been embodied in a broad framework of principles, policies,
procedures and advanced valuation methods, forming an efficient decision-taking structure whose aim is to achieve an
optimum balance of return and risk.
Underlying principles
The Banco Sabadell group has laid down basic principles for the management and control of risk. These are described in
the following paragraphs.
258
• Solvency. Banco Sabadell has opted for a prudent and balanced policy on risk to ensure sustained and profitable
business growth in line with the group's strategic targets for maximum value creation. It is vital that the structure of
limits and thresholds should be able to prevent concentrations of risk from building up in such a way as to
compromise a significant proportion of the Bank’s capital resources. For this reason, the risk variable is taken into
account in decisions at every level and is quantified according to a single measure: economic capital.
• Responsibility. The Board of Directors is committed to maintaining processes for the management and control of
risk: drawing up policies, setting limits and responsibility thresholds at lower levels of management; and approving a
risk management model and procedures and a methodology for the measurement, monitoring and control of risk. At
the executive level there is a clear separation of functions between risk-originating business units and the functions
responsible for managing and controlling risk.
• Monitoring and control. The ongoing management of risk is supported by robust control procedures to ensure
compliance with specified limits, clearly defined responsibilities, the monitoring of indicators and predictive alerts,
and the use of an advanced risk assessment methodology.
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• Risks arising from the group’s customer-focused commercial banking and corporate banking businesses, known as
structural risk. This can be sub-classified into interest rate risk, currency risk and liquidity risk. These categories of
risk are discussed separately below.
• Risks generated through “own account” trading or market making activities by group undertakings, including trading
in equities, bonds or derivatives. Trading in these instruments will often be undertaken as part of treasury and
capital market operations, with which this section is specifically concerned.
Discretionary market risk is measured by the VaR (Value at Risk) method, which allows risks on different types of financial
market transactions to be analysed together as a single class. The VaR method provides an estimate of the potential
maximum loss on a position that would result from an adverse, but normal, movement in any of the above risk factors.
This estimate is expressed in money terms and is calculated at a specified date, to a specified confidence level and over
a specified time horizon.
Market risk is monitored on a daily basis and reports on current risk levels and on compliance with the limits assigned
to each unit are sent to the risk control functions. Limits are assigned by the Board of Directors for each risk monitoring
unit (i.e. notional value, VaR or sensitivity limits as applicable). This makes it possible to keep track of changes in
exposure levels and measure the contribution of each risk factor.
Risk control of this kind is supplemented by special simulation exercises and extreme market scenarios ("stress
testing"). The reliability of the VaR methodology is validated by back testing techniques which are used to verify that VaR
estimates are consistent with the specified confidence level. Using the VaR methodology does not, however, rule out the
possibility that losses will be above the set limits, as significant market movements may occur that exceed the confidence
levels being used.
Banco Sabadell Annual Report 2006
Market risk
Market risk arises from the possibility of a loss in the value of a position taken in a financial instrument held by the group
due to changes in market conditions such as equity market prices, interest rates or exchange rates.
Different approaches are taken to the management of market risk, depending on which of the group’s main business
lines has given rise to the risk:
Statutory information
Credit Risk
Credit risk arises from the possibility that losses may be incurred as a result of default by obligors of financial instruments
held by the group.
Credit risk exposure is subjected to rigorous monitoring and control through regular reviews of borrowers’
creditworthiness and their ability to meet their obligations to the group, with exposure limits for each counterparty being
adjusted to levels that are deemed to be acceptable. It is also normal practice to mitigate exposure to credit risk by
requiring borrowers to provide collateral or other security to the Bank.
The group makes provision to cover against credit risk, both in respect of specific losses actually incurred at the
balance sheet date and for any other losses that could be incurred in the light of past experience. This is done in such a
way as to ensure that losses could not exceed loss provisions even in the event of a major change in economic conditions
or in borrower quality.
To maximize the business opportunities provided by each customer and to guarantee an appropriate degree of security,
responsibility for approving and monitoring risks is shared between the relationship manager and the risk analyst, who by
maintaining effective communication are able to obtain a comprehensive view of each customer’s individual
circumstances.
The relationship manager monitors the business aspect through direct contact with customers and by handling their
day-to-day banking, while the risk analyst takes a more system-based approach based on his specialized knowledge.
The Board of Directors delegates powers and discretions to the Risk Control Committee, which then sub-delegates
authority at each level. The authority thresholds assigned to each level represent limits of exposure to each customer or
company group, taking account of any existing exposures already assumed by the Banco Sabadell group for that customer
or group.
The establishment of advanced methodologies for managing risk exposures (in line with the new Basel II framework
and best practice) also benefits the process in ensuring that proactive measures can be taken once a risk has been
identified. Of vital importance in this process are risk assessment tools such as credit rating for corporate borrowers and
credit scoring for retail customers, as well as indicators that provide advance alerts in the monitoring process.
Recovery of past-due accounts is the responsibility of a specialized function which coordinates initial out-of-court
negotiations and, where necessary, legal proceedings conducted by the group’s legal department or independent legal
advisors depending on the nature of the proceedings and the amount to be recovered.
259
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Statutory information
Banco Sabadell Annual Report 2006
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Interest rate risk
Changes in interest rates can affect financial instruments held by the group in two ways: through changes in their value and
changes in their future cash flows. For example, fixed-rate instruments or instruments on which interest rates are fixed
when the contract is made are often exposed to impacts of the first type. On the other hand, instruments that reprice over
their whole lives in a way that is determined by market conditions will be exposed to impacts of the second type.
As a holder of both these kinds of instrument, the group is subject to both of these types of exposure to unexpected
interest rate movements. Such movements may ultimately translate into unforeseen changes in net interest income if, as
is common in banking, there is a temporary mismatch in the maturity or repricing dates of asset, liability or off-balance
sheet exposures.
Interest rate risk is managed on a consolidated basis for the whole group. This task is performed by the Asset and
Liability Committee, although separate but coordinated management of interest rate risk is also applied within individual
companies and business units, such as insurance. The management of interest rate risk involves proposing alternative
business or hedging strategies to ensure that business objectives are appropriate to market conditions and the group’s
asset position, and that the limits set by the Board are strictly observed.
A number of methodologies are used to measure interest rate risk, allowing a flexible approach to be taken. One of
these methodologies is to measure the sensitivity of net interest income to changes in interest rates over a one-year
horizon on a maturity and repricing matrix. In this technique the carrying values of financial assets and liabilities are
grouped according to their maturity dates or the dates on which their rates of interest come up for review, whichever is
nearest in time. In this particular type of analysis the maturity or repricing dates are those contractually agreed and no
other assumptions are made. The analysis allows an estimate to be made of the effect that a change in interest rates
would have on net interest income, assuming that all rates change by the same amount and in a sustained manner.
Sensitivity gap analysis is supplemented by a simulation technique which measures the effect of different interest rate
movements on different maturities, i.e. changes in the slope of the yield curve. These simulation techniques assign a
probability to each scenario so as to arrive at a more precise estimate of the effect that interest rate movements might
have. Another technique is to measure the sensitivity of net asset values to changes in interest rates by duration gap
analysis. This measures the effect of interest rate changes over a longer time horizon.
Currency risk
Currency risk is the possibility of losses being incurred due to changes in the prices of currencies in which financial
instruments are denominated, and results from the taking of matched open asset and liability positions.
The group’s structural foreign currency exposure remained stable throughout 2006 and comprised long-term
investments in foreign branches and subsidiaries.
The Board of Directors sets overall daily exposure limits for intraday positions (positions resulting from all transactions
up to a certain moment in a single day) and overnight positions (positions reached at the end of the day). Limits are
monitored on a daily basis.
Liquidity risk
Liquidity risk is defined as the possibility of the group being unable to meet payment commitments, even if only
temporarily, due to a lack of liquid assets or being unable to access the markets to refinance debts at a reasonable cost.
Liquidity risk may be caused by external factors such as a financial market downturn, systemic crisis or reputational
issues, or internally, by an excessive concentration of maturing liabilities.
The group is exposed to daily demands on its available cash resources to meet contractual obligations related to
financial instruments, such as maturing deposits, drawdowns of credit facilities, settlements on derivatives and so on.
Experience shows, however, that only a minimum amount is ever needed and this can be predicted with a high degree of
confidence.
Limits are set by the Board of Directors for the maintenance of minimum cash levels and structural borrowing levels.
The group monitors changes in its liquid asset position on a daily basis and holds a diversified portfolio of such assets. It
also carries out yearly projections to anticipate future needs.
In addition, a review is carried out of gaps or mismatches between cash inflows and outflows over a short, medium and
long time horizon using a maturity matrix based on the time remaining between the date to which the financial statements
were made up and the contract maturity date of assets and liabilities. Gaps between cash inflows and outflows are
analysed.
Systematic checks are made to verify that the group’s ability to raise funds on the capital markets is sufficient to
satisfy its requirements in the short, medium and long term. The Banco Sabadell group meets its cash needs in a number
of ways and has programmes in place to raise finance on the capital markets to ensure diversified sources of funds.
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Cases handled
In 2006 the Customer Service Department received 1,696 cases (1,481 in 2005) and enquired into 1,659 (1,481 in
2005), of which 1,659 were looked into (1,481 in 2005) according to the procedure established by the Economics
Ministry's Order 734/2004 of 11 March. A total of 1,608 were resolved or otherwise dealt with (1,524 in 2005), of which
55% were complaints and 45% were claims (44% complaints and 56% claims in 2005). At the end of the year 110 cases
remained unresolved.
Of the total number of cases examined by the Customer Service, 30% resulted in a decision favourable to the
customer or user (26% in 2005); 6% were settled by agreement with the customer or user (5% in 2005) and 13% were
resolved partly in the customer or user’s favour (9% in 2005). The remaining 51% of cases resulted in a decision
favourable to the Group (60% in 2005).
Customer and Stakeholder Ombudsman
The Group also has a Customer and Stakeholder Ombudsman, a role which is performed by Esteban María Faus Monpart.
The Ombudsman deals with claims or complaints referred to him by customers and users of the Banco Sabadell
Group, either directly or on appeal from a prior procedure. He also adjudicates on cases referred to him by the Customer
Service Department.
A total of 259 cases were received by the Ombudsman directly (195 in 2005) and another 22 were referred to him by
the Customer Service Department (17 in 2005). Of the 281 claims received (212 in 2005), 264 were looked into and
resolved by the Ombudsman (189 in 2005), with 46% being decided in the Group’s favour (51% in 2005) and 6% in the
customer's favour (15% in 2005). Of the other cases on wich a decision was reached, 30% were accepted (22% in 2005)
Banco Sabadell Annual Report 2006
Customer Service Department
Set up more than 10 years ago, the Banco Sabadell Group Customer Service Department is responsible for looking into
and resolving claims or complaints from customers and other users of the Group’s financial services that relate to their
legal rights and interests under contracts, disclosure requirements, customer protection legislation or financial services
industry best practice.
In addition to its primary function, the Department provides assistance and information to customers on matters that
do not amount to complaints within the meaning of the Spanish Economics Ministry’s Order 734/2004 and the Bank's
own Regulations for the Protection of Customers and Users. A total of 1,083 cases of this type were handled by the
Department in 2006.
Organizationally, the Customer Service Department is part of the control function within the Banco Sabadell Group. The
head of the service is appointed by the Board and reports directly to the Comptroller General.
Claims and complaints of average complexity were dealt with in an average of 11.12 days (11.49 days in 2005). For
less complex cases the average time was 6.08 days (4.75 days in 2005).
In the last annual report published by the Bank of Spain's Complaints Department, which covers the year 2005, Banco
Sabadell was specifically cited as an example of good practice, both within the industry and generally. According to the
Bank of Spain's most recent report, which relates to the third quarter of 2006, Banco Sabadell was the bank that showed
the lowest ratio of complaints handled by the Bank of Spain for every million euros of turnover.
Statutory information
Operational risk
Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or from
unforeseen external events. This includes legal risk.
Banco Sabadell pays particular attention to operational risk and has developed a management approach based on a
dual methodology.
To maximize the group’s awareness of potential risks before they occur, a new methodology is being introduced based
on the analysis of processes by the managers responsible for those same processes, to identify associated risks and
assess existing control levels - a quantitative analysis of actual loss events which aims at learning from experience. The
early detection of risk is further supported by key indicators of causal or management-related factors, which provide a
measure of potential risk exposure over which managers have some control.
This dual approach results in a measurement system which provides the level of operational risk associated with every
Banco Sabadell group process.
A detailed analysis of actual loss events resulting from operational risk can enhance the cost/benefit analysis prior to
deciding on any investment in improved systems of process management and control; it can also help to ensure that
casualty and liability insurance is used in the most efficient way.
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and 13% resulted in decisions only partly favourable to the Group (12% in 2005). In 5% of cases the Ombudsman
declared the matter to be outside his competence (without prejudice to its being raised elsewhere).
Complaints to supervisory authorities
Under Spanish law customers and other users of financial services are entitled to submit complaints to the Bank of
Spain’s Complaints Department, to the CNMV, or to the Directorate-General of Insurance and Pension Plans. To do so,
however, they must first have sought a resolution of the issue by raising it directly with the bank or other institution
involved.
Additional information
Statutory information
Quality leader
Quality in management earned international recognition for Banco Sabadell in 2006 when it was awarded the European
Gold Seal for Excellence. The award is presented each year by the European Foundation for Quality Management (EFQM),
a Brussels-based organization whose mission is to assess and promote quality in business management all over Europe.
The Bank is the first Ibex 35 financial institution to obtain this distinction; it is also the only Spanish bank to have
achieved quality certification to the ISO 9001:2000 standard for all financial services, as it did in 2005.
Additional information
For details of own share purchases and post balance sheet events, see notes 29 and 43 of the notes to the accounts.
Banco Sabadell Annual Report 2006
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