Banco de Sabadell S A : 3Q23 Financial Report

3Q23

Quarterly Financial Report

Contents

1

Summary

3

2

Key figures

5

3

Performance review	6
Macroeconomic environment	6
Income statement	8
Balance sheet	15
Risk management	19
Liquidity management	23
Capital management and credit ratings	24
Results, by business unit	26

4

Share price performance

31

5

Key developments in the quarter

32

6

Glossary of terms on performance measures

33

Disclaimer

This document is strictly for information purposes only and is not an offer of any product. No agreement or commitment should be based or dependent on this document or any part thereof. Any decisions concerning financial transactions should take into account the client's needs and their appropriateness from a legal, fiscal, accounting and/or financial point of view, in accordance with the information documents envisaged by the law in force. Investments mentioned or recommended herein may not be suitable for all investors. The opinions, forecasts and estimates contained in this document are based on available public information and are an evaluation by Banco de Sabadell, S.A. as of the date of preparing this document. No assurance is given that future results or events will conform to these opinions, forecasts and estimates. The information is subject to change without prior notice, its accuracy is not guaranteed and it may be incomplete or summarised. Banco de Sabadell, S.A. accepts no liability whatsoever for any losses arising from the use of this document or its content, or otherwise in connection herewith.

Basis of presentation

The consolidated income statement and balance sheet as of the end of September 2023 and 2022, together with the disclosures shown in this Financial Report, are presented in accordance with the accounting standards, principles and criteria defined in Note 1 to the Group's consolidated interim financial statements as of 30 June 2023.

Pursuant to the Guidelines on alternative performance measures published by the European Securities and Markets Authority on 5 October 2015 (ESMA/2015/1415), a glossary has been included with the definitions and the reconciliation with the items presented in the financial statements of certain alternative financial measures used in this document. See Glossary of terms on performance measures.

Third quarter of 2023

2

1. Summary

Net interest income

Net interest income continued to follow a positive trend, reaching 3,512 million euros as of the end of September 2023, representing year-on-year growth of 29.0%, mainly due to a higher loan yields and improved revenue from the fixed- income portfolio, underpinned by higher interest rates, all of which served to offset higher costs both of funds and wholesale funding.

In the same way, these factors caused net interest income in the quarter to continue to trend upwards, recording an increase of 6.2%.

Net fees and commissions

Net fees and commissions amounted to 1,047 million euros as of the end of September 2023, representing a year-on-year reduction of -6.3%, due mainly to fewer service fees, as well as fewer asset management fees, in particular fees on pension funds and insurance due to a change in the insurance product mix.

Quarter-on-quarter, there was slight growth of 0.9%, where particular note should be taken of the growth of service fees, which offset the decline in asset management fees associated with the sale of pension funds and insurance, which were impacted primarily by a seasonal effect.

Total costs

Total costs amounted to 2,231 million euros as of the end of September 2023, reflecting a year-on-year increase of 3.2%, due both to higher staff expenses and higher general expenses, in particular marketing and IT expenses, which offset the reduction of amortisations.

Quarter-on-quarter, total costs recorded slight growth of 0.7%, also impacted by the increase in operating expenses, which offset the reduction of amortisations.

Net profit of the Group

As of the end of September 2023, the Group's net profit amounted to 1,028 million euros, with profit ex-TSB amounting to 867 million euros and profit at TSB to 161 million euros. This positive evolution of profits pushed the Group's ROTE up to 11.6%.

It is worth highlighting the good performance of core results (net interest income + fees and commissions - costs), which increased by 38.8% year-on-year and by 9.1% quarter-on- quarter, supported by the increase of net interest income.

Net interest income

		Total group	Constant FX	Excl. TSB
Change YoY:	+29.0%	+29.9%	+39.3%
Change QoQ:	+6.2%	+5.4%	+8.5%
		3,512
2,722	901
847
		2,611	1,170	1,242
1,875		300	298
			870	944
	9M22	9M23	2Q23	3Q23
		TSB	Excl. TSB
		Net fees and commissions
		Total group	Constant FX	Excl. TSB
Change YoY:	-6.3%	-6.0%	-5.7%
Change QoQ:	+0.9%	+0.6%	+0.2%
1,118	1,047
103
91
1,015	956	347	350
			30	33
			317	317
	9M22	9M23	2Q23	3Q23
		TSB	Excl. TSB
		Total costs
		Total group	Constant FX	Excl. TSB
Change YoY:	+3.2%	+3.9%	+4.4%
Change QoQ:	+0.7%	+0.0%	+2.8%
2,162	2,231
689	692
1,474	1,538	748	753
238	229
			510	524
	9M 22	9M 23	2Q23	3Q23
		TSB	Excl. TSB
		Group net profit
		Total group	Constant FX	Excl. TSB
Change YoY:	+44.9%	+45.8%	+40.7%
Change QoQ:	+29.4%	+28.7%	+33.4%
		1,028
709	161
93			464
			359
		867	55
		52
616		409
			307
	9M22	9M23	2Q23	3Q23
		TSB	Excl. TSB

Third quarter of 2023

3

Performing loans

Performing loans decreased by -3.3%year-on-year, mainly due to reduced mortgage volumes in both Spain and the United Kingdom, to lower volumes of loans granted to SMEs and corporates, and to the maturity of Treasury loans in public sector.

Quarter-on-quarter, lending was down by -1.4%, affected in the same way by the smaller volume of mortgages and loans granted by SMEs and corporates, in turn impacted by seasonality in the period.

Customer funds

On-balance sheet customer funds fell by -0.8%year-on-year, due mainly to the smaller volume of sight deposit accounts, which was partially offset by the growth of term deposits and retail issuances, particularly commercial paper, factors that in the same way explain the slight reduction of -0.5% during the quarter.

The loan-to-deposit ratio improved during the quarter to 94.6%, generating a funding gap of 1,300 million euros in the quarter and of 3,500 million euros year-on-year.

Off-balance sheet funds recorded year-on-year growth of 3.4%, with increases across all segments, particularly in mutual funds, due both to increased yields and to a positive level of net inflows. These trends reversed in the quarter, with off-balance sheet funds recording a reduction of -0.9%.

Non-performing assets (NPAs)

The balance of NPAs fell during the quarter and amounted to 6,930 million euros (gross) as of the end of September 2023, with coverage considering total provisions increasing to 53.9%.

The Group's stage 3 ratio stood at 3.5% and the stage 3 coverage ratio considering total provisions rose to 56.5%. The stage 3 coverage ratio also increased during the quarter to 40.8%.

The gross NPA ratio was 4.1%, while the net NPA ratio stood at 1.9% considering total provisions.

The Group's credit cost of risk stood at 43 bps and the total cost of risk stood at 55 bps as of the end of September 2023.

Performing loans

										Total group					Constant FX					Excl. TSB
Change YoY:	-3.3%	-3.5%					-3.6%
Change QoQ:	-1.4%	-1.4%					-1.3%
156,745							153,834		151,627
42,857							42,526		41,793
113,889							111,307		109,834
						Sep 22								Jun 23			Sep 23
														TSB				Excl. TSB
													Total customer funds
										Total group					Constant FX					Excl. TSB
Change YoY:	+0.0%	-0.3%					0.0%
Change QoQ:	-0.6%	-0.5%					-0.1%
201,296							202,510		201,315
40,163							41,203			40,209
38,049							39,720			39,342
123,084							121,587		121,764
						Sep 22								Jun 23			Sep 23
					TSB Off-balance sheet customer funds On-balance sheet customer funds Excl. TSB
														Stage 3 exposures
56.9			57.4		58.3	55.1		55.7			56.5
42.0			43.0		43.8	39.0		40.1			40.8
		4.10			4.23				4.27		3.40		3.50			3.54
					Sep 22	Jun 23			Sep 23					Sep 22	Jun 23	Sep 23
									Excl. TSB										Total group
						Stage 3 ratio				Stage 3 coverage ratio with total provisions			Stage 3 coverage ratio
														Problematic assets
7,039							6,971			6,930
							1,209								1,083					1,039
5,830							5,888			5,891
							Sep 22								Jun 23			Sep 23
												Stage 3 assets				Problematic RE Assets

Capital ratio

The fully-loaded CET1 ratio increased by 26 bps in the quarter to 13.13%, while the total capital ratio rose to 18.35%. The MDA buffer stood at 428 bps, above requirements.

CET1 fully-loaded

12.52	12.87	13.13
Sep 22	Jun 23	Sep 23

Third quarter of 2023

4

2. Key figures

			Excl. T SB
				(7)
		3 0 .0 9 .2 2	3 0 .0 9 .2 3	Yo Y (%)
Profit and loss account (€ million)
Net interest income		1,875	2,611	39.3
Core revenues		2,890	3,568	23.5
Gross operating income		2,976	3,472	16.7
Pre-provisions income		1,502	1,933	28.7
Attributable net profit		616	867	40.7
Balance sheet (€ million)
Total assets		207,677	191,188	-7.9
Performing gross loans		113,889	109,834	-3.6
Gross loans to customers		118,856	115,045	-3.2
On-balance sheet customer funds		123,084	121,764	-1.1
Off-balance sheet customer funds		38,049	39,342	3.4
Total customer funds		161,133	161,106	0.0
Net equity		--	--
Shareholders' equity		--	--
Profitability and efficiency ratios (%)
ROA		--	--
RORWA		--	--
ROE		--	--
ROTE		--	--
Efficiency		40.93	36.71
Efficiency with amortisation & depreciation		50.91	45.12
Risk management	(1)
Stage 3 exposures (€ millio n)		5,237	5,287	1.0
Total problematic assets (€ millio n)		6,447	6,326	-1.9
Stage 3 ratio (%)		4.10	4.27
Stage 3 coverage ratio (%)		42.0	43.8
Stage 3 coverage ratio with total provisions (%)		56.9	58.3
Problematic assets coverage (%)		53.5	55.1
Liquidity management (%)
Loan-to-deposits ratio		93.2	91.2
LCR		250	253
NSFR	(2)	--	--
Capital management
Risk weighted assets (RWA) (€ millio n)		--	--
Common Equity Tier 1 (%)		--	--
Common Equity Tier 1 fully-loaded (%)		--	--
Tier 1 (%)		--	--
Total capital ratio (%)		--	--
M REL (% RWA)		--	--
M REL (% LRE)		--	--
Leverage ratio (%)		--	--
Share data (period end)
Number of shareholders		--	--
Number of outstanding shares (millio n)	(3)	--	--
Share price (€)	(4)	--	--
M arket capitalisation (€ millio n)		--	--
Earnings per share (EP S) (€)	(5)	--	--
Book value per share (€)		--	--
TBV per share (€)		--	--
Price / Tangible book value (times)		--	--
Price / Earnings ratio (P/E) (times)		--	--
Other data
Branches		1,303	1,203
Employees		13,484	13,821

T o tal gro up

	(6)	(7)
30 .09 .22	30 .09 .23	Yo Y (%)
2,722	3,512	29.0
3,840	4,559	18.7
3,907	4,448	13.8
1,744	2,217	27.1
709	1,028	44.9
260,407	243,261	-6.6
156,745	151,627	-3.3
162,403	157,505	-3.0
163,247	161,973	-0.8
38,049	39,342	3.4
201,296	201,315	0.0
13,363	13,778	3.1
13,815	14,263	3.2

0.350.54

1.081.69

6.469.55

1. 11.59

1. 41.91

1. 50.87

5,830	5,891	1.1
7,039	6,930	-1.6

3.403.54

39.040.8

55.156.5

52.353.9

96.794.6

217	220
140	140
80,880	78,795	-2.6

12.6513.13

12.5213.13

14.6915.35

1. 18.35

1. 28.35

1. 9.25

1. 5.01

224,151	218,033
5,590	5,432
0.688	1.101
3,848	5,978

0.140.22

2.462.62

2.012.17

0.340.51

5.084.92

1,523	1,414
18,987	19,331

1. The NPA coverage ratio is based on total provisions.
2. Taking into account the best estimate as of the date of publication of this report.
3. Total number of shares excluding the final position of treasury shares.
4. Historical values not adjusted.
5. Net profit adjusted by the Additional Tier 1 coupons recorded under shareholders' equity.
6. The cumulative EUR/GBP exchange rate as of 30.09.2023 applied throughout the report is 0.8709 in the case of the income statement and 0.8646 in the case of the balance sheet.
7. Throughout this document, YoY changes in relation to the income statement refer to the cumulative nine-month period to the end of September 2023 versus the same cumulative nine- month period of 2022.

Third quarter of 2023

5

3. Performance review

Macroeconomic environment

Global economic, political and financial context

The economy continued to perform well in the United States, while it remained weak in the Eurozone.

In the US, consensus estimates continued to push back the moment at which the economy might fall into recession, with that moment now standing more clearly in Q1 2024. This was due to positive surprises in activity data and upward revisions of excess savings estimates. In spite of this, there are still downside risks for economic growth related to (i) the effects of restrictive monetary policy, (ii) the possibility of a government shutdown from mid-November onwards, (iii) the end of the student loan payment pause and (iv) the effects of workers' strikes in the automotive industry taking place at several plants across the country.

In the Eurozone, the various economic sentiment indicators point towards a slight economic recession in the second half of 2023, after remaining all but stagnant since the end of 2022. It is particularly worth mentioning the weakness of more electricity-intensive industrial sectors and the loss of momentum in the services sector, which had been one of the main drivers of economic growth. Domestic demand is also showing signs of fragility.

As for prices, inflation generally dropped in developed economies, although certain fears have emerged in relation to the upwards pressures that higher oil prices might entail. In any case, core inflation, which excludes energy and food, is still at historically high levels.

Economic situation in Spain

In Spain, after the GDP figure for Q2 2023 was revised upwards to 0.5% QoQ, data for Q3 2023 continue to point to reduced momentum in terms of economic activity. Indeed, the Bank of Spain expects GDP growth to slow during Q3 2023 to 0.3% QoQ, as a result of higher energy prices, higher interest rates and weaker performance in export markets. Furthermore, interest rate hikes have continued to impact the housing market, with double-digit declines in both sales and mortgage applications. On the positive side of things, it is worth mentioning that data up to August for the tourism industry continued to be positive. On the other hand, the European Commission approved the Addendum to the Recovery Plan, with an additional 94 billion euros, part of which will be used to reinforce PERTEs (strategic projects for economic recovery and transformation), while the remainder is to be channelled through various funds managed by the ICO, the EIB and other public organisations.

As for inflation, this rose for three consecutive months, influenced by a smaller negative base effect of energy prices. Specifically, the year-on-year change in HICP in September was 3.3% (Aug 23: 2.4%), while core inflation continued to trend downwards, falling to 3.8%, influenced in particular by non-energy industrial goods.

Economic situation in the United Kingdom

The economy remained stagnant during the first half of the year. However, an upwards revision of historical GDP data caused UK economic growth to stand 1.8% above pre- pandemic levels in Q2 2023. The divergence between the more dynamic services sector and the manufacturing industry persisted, but has become less pronounced in recent months. The services sector further tightened financial conditions and already-high inflation.

On the topic of inflation, prices have now peaked but are still at very high levels amply above the 2% target. Core inflation slowed to 6.2% in August, while headline inflation is still 6.7%. Inflation was pushed up over the summer by energy prices.

The labour market, while still tight from a historical standpoint (unemployment rate is currently 4.3% compared to the average of 5.5%), has started to readjust, recording four consecutive months of unemployment rate increases. The number of vacancies has also fallen from record high levels, so it would appear that wage pressures have peaked.

The real estate market is feeling the impact of tighter financial conditions. Mortgage rates have risen by over 400bps since the interest rate hike cycle began, and the effects of this on transactions and prices are already evident. Price corrections reached 5% year-on-year in August, while new mortgage lending volumes were 25% below pre-pandemic levels.

Economic situation in Mexico

The Mexican economy continued to show strength, underpinned in particular by the good evolution of the US economy and the surge of investment, which could be benefitting from the nearshoring process. In terms of inflation, this continued to fall, although the services component retained certain inertia. On the other hand, the government disclosed a budget for 2024 (election year), which will pave the way for the largest fiscal deficit of recent decades. This prompted rating agencies to express concern that the incoming administration might struggle to return to a smaller deficit. In this context, the Mexican peso, which had been appreciating in its currency pair with the US dollar since the beginning of the year, came to a halt and the central bank has kept the official rate at 11.25%.

Fixed-income markets

The ECB raised interest rates in its July and September meetings, ultimately placing the deposit rate at an all-time- high of 4.00%. The ECB suggested that September's hike could be the last, but stated that it would keep rates at restrictive levels for as long as necessary to return inflation to its target. Going forward, the central bank will focus on its balance sheet policies.

Third quarter of 2023

6

The Federal Reserve kept its funds rate unchanged at the 5.25-5.50% range in its September meeting, after having increased it by 25bps in July. Its September meeting had a hawkish tone. It mainly emphasised that members of the Fed were still forecasting one additional rate hike for this year, while at the same time anticipating drops of just 50bps in 2024 (compared to their previous estimate in June of 100bps).

The BoE, in light of the slowdown of economic activity and after promising CPI inflation figures, decided to keep its base rate stable in its September meeting, after having raised it in previous meetings to 5.25%. In terms of its quantitative tightening, the BoE announced that it will continue with this process until at least October 2024.

Long-term government bond yields rebounded sharply on both sides of the Atlantic, particularly in the United States, where they reached their highest levels since 2007. This rebound was explained by an improvement in the real component, in a context of (i) favourable economic data in the United States, (ii) upwards pressures on energy prices,

1. the hawkish tone adopted by the Fed in its last meeting,
2. concerns over political polarisation in the US and its possible impact on economic management, (v) concerns over fiscal developments in the US and the Treasury's need for extensive funding, and (v) factors that constrain demand for credit (such as the shift of monetary policy in Japan).

Risk premiums in the periphery increased in Spain and especially in Italy. The rebound of Italy's risk premium was influenced by the Italian government's new public deficit forecasts, which were revised upwards for 2023 and 2024, due to the change of accounting treatment and the increased use made of a package of subsidies to drive households' energy efficiency and also due to the increased payment of interest. These revisions could lead to tensions with European institutions, as the deficit in 2024 is expected to reach over 3% of GDP, above the levels established in the EU's fiscal rules which are due to come into force next year. This would also complicate Italy's hypothetical use of the ECB's emergency programme known as TPI (Transmission Protection Instrument), as one of the requirements to use this programme is that the country must be compliant with the EU's fiscal rules.

Equity markets

Equity markets experienced poor performance during Q3 2023 on a global scale. The S&P 500, for instance, dropped 0.55% in euros (-3.65% in dollars). In Europe, the Euro Stoxx 50 fell by -5.10%, with particularly sharp drops recorded by the German DAX (-4.71%) and the French CAC (-3.58%). Stork market indices in the periphery were somewhat steadier. The Italian FTSE MIB remained practically flat, while Spain's IBEX 35 dipped by 1.72%.

GDP - US vs. Euro area (year-on-year change, %)			Official interest rate - US vs. Euro area (%)
			US GDP			Euro area GDP					US official interest rate			Euro area official interest rate
15.0										5.5
10.0										4.5
5.0										3.5
0.0										2.5
-5.0										1.5
-10.0										0.5
-15.0	9/15					9/20				-0.5
9/14	9/16	9/17	9/18	9/19	9/21	9/22	9/23	9/14	9/15	9/16	9/17	9/18	9/19	9/20	9/21	9/22	9/23
Source: Bloomberg
Exchange rates: Parity vs. euro
Fx	30.09.22	31.12.22	31.03.23	30.06.23		30.09.23
USD		0.9748	1.0666		1.0875	1.0866		1.0594
GBP		0.8830	0.8869		0.8792	0.8583		0.8646
MXN	19.6393	20.8560		19.6392	18.5614		18.5030

Source: Bank of Spain

Third quarter of 2023

7

Income statement

Summary of results:

Banco Sabadell Group earned attributable profit of 1,028 million euros as of the end of September 2023, representing year-on-year growth of 44.9%, of which 867 million euros were recorded ex-TSB and 161 million euros correspond to TSB. The Group's ROTE increased by 363 bps compared to the same period in the previous year, reaching 11.6%.

This Group profit was mainly driven by the good performance of core results (net interest income + fees and commissions - costs), which increased by 38.8% year-on- year due to the improvement of net interest income, mainly supported by higher interest rates.

Yearly income statement

			Excl. TSB
(€ million)	9M22	9M22	9M23	YoY (%)	YoY (%)
		(*)			(*)
Net interest income	1,875	1,875	2,611	39.3	39.3
Net fees and commissions	1,015	1,015	956	-5.7	-5.7
Core revenues	2,890	2,890	3,568	23.5	23.5
Net trading income and exchange differences	102	102	50	-51.1	-51.1
Income from equity method and dividends	113	135	95	-15.5	-29.6
Other operating income/expense	-129	-129	-241	87.5	87.5
Gross operating income	2,976	2,998	3,472	16.7	15.8
Operating expenses	-1,185	-1,185	-1,252	5.7	5.7
Personnel expenses	-778	-778	-820	5.5	5.5
Other general expenses	-407	-407	-432	6.0	6.0
Amortisation & depreciation	-289	-289	-287	-0.8	-0.8
Total costs	-1,474	-1,474	-1,538	4.4	4.4
Pre-provisions income	1,502	1,525	1,933	28.7	26.8
Provisions for NPLs	-517	-517	-569	10.0	10.0
Provisions for other financial assets	-47	-47	-21	-56.0	-56.0
Other impairments	-72	-72	-48	-33.6	-33.6
Gains on sale of assets and other results	-16	-16	-31	94.6	94.6
Profit before tax	851	873	1,265	48.7	44.9
Income tax	-220	-220	-397	80.3	80.3
Minority interest	14	14	1	-95.3	-95.3
Attributable net profit	616	639	867	40.7	35.7
Memorandum item:
Core results (NII + net fees and commissions - costs)	1,416	1,416	2,029	43.3	43.3

Total group

				YoY (%)
9M22	9M22	9M23	YoY (%)	at	YoY (%)
	(*)			constant	(*)

2,722	2,722	3,512	29.0	29.9	29.0
1,118	1,118	1,047	-6.3	-6.0	-6.3
3,840	3,840	4,559	18.7	19.4	18.7
113	113	64	-43.8	-42.1	-43.8
113	135	95	-15.5	-15.5	-29.6
-159	-159	-270	70.1	72.3	70.1
3,907	3,929	4,448	13.8	14.5	13.2
-1,753	-1,753	-1,838	4.8	5.6	4.8
-1,043	-1,043	-1,093	4.9	5.6	4.9
-711	-711	-745	4.8	5.8	4.8
-409	-409	-393	-4.0	-3.4	-4.0
-2,162	-2,162	-2,231	3.2	3.9	3.2
1,744	1,767	2,217	27.1	27.6	25.4
-560	-560	-622	11.1	11.1	11.1
-77	-77	-13	-83.4	-83.2	-83.4
-72	-72	-48	-33.6	-33.6	-33.6
-16	-16	-30	90.6	84.2	90.6
1,019	1,042	1,504	47.5	48.5	44.3
-296	-296	-475	60.4	62.1	60.4
14	14	1	-95.3	-95.3	-95.3
709	732	1,028	44.9	45.8	40.5
1,677	1,677	2,328	38.8	39.3	38.8

(*) Shown for comparative purposes only. Data restated to factor in the application of IFRS 17.

Quarterly income statement

			Excl. T SB
(€ million)	3 Q2 2	4 Q2 2	1Q2 3	2 Q2 3	3 Q2 3	Qo Q ( %)
Net interest income	669	773	797	870	944	8.5
Net fees and commissions	349	342	322	317	317	0.2
Core revenues	1,018	1,115	1,119	1,187	1,261	6.3
Net trading income and exchange differences	22	-4	-6	32	24	-25.8
Income from equity method and dividends	28	12	31	40	23	-42.1
Other operating income/expense	-3	-113	-161	-80	0	-100.0
Gross operating income	1,066	1,009	983	1,180	1,309	11.0
Operating expenses	-396	-400	-405	-412	-435	5.7
Personnel expenses	-259	-258	-264	-274	-282	2.8
Other general expenses	-137	-142	-141	-138	-153	11.3
Amortisation & depreciation	-99	-99	-100	-98	-89	-9.1
Total costs	-495	-499	-504	-510	-524	2.8
Pre-provisions income	571	510	479	670	785	17.2
Provisions for NPLs	-159	-243	-200	-201	-168	-16.4
Provisions for other financial assets	-18	-25	-11	-4	-5	15.4
Other impairments	-16	-24	-6	-23	-19	-20.0
Gains on sale of assets and other results	3	-7	-3	-11	-17	52.7
Profit before tax	382	210	259	430	576	34.0
Income tax	-104	-58	-108	-122	-167	36.4
M inority interest	0	-3	0	1	0	-100.0
Attributable net profit	278	155	151	307	409	33.4
M emorandum item:
Core results (NII + net fees and commissions - costs)	523	615	615	677	737	8.8

T o t al g ro up

						Qo Q ( %)
3 Q2 2	4 Q2 2	1Q2 3	2 Q2 3	3 Q2 3	Qo Q ( %)	at co nst ant
						F X
965	1,077	1,100	1,170	1,242	6.2	5.4
388	372	350	347	350	0.9	0.6
1,354	1,449	1,450	1,517	1,592	5.0	4.3
30	-9	1	30	32	6.1	6.3
28	12	31	40	23	-42.1	-42.1
-12	-178	-172	-89	-9	-90.0	-90.3
1,400	1,273	1,311	1,498	1,638	9.4	8.7
-586	-584	-593	-611	-634	3.8	3.0
-348	-349	-350	-367	-376	2.6	1.9
-238	-235	-243	-244	-258	5.6	4.8
-137	-136	-138	-136	-119	-12.9	-13.5
-723	-720	-730	-748	-753	0.7	0.0
677	553	581	750	885	18.0	17.4
-180	-265	-217	-216	-189	-12.4	-12.7
-38	-34	-14	7	-6	--	--
-16	-24	-6	-23	-19	-20.0	-20.0
3	-7	-3	-11	-17	58.2	58.5
447	223	342	507	654	29.0	28.3
-130	-77	-137	-148	-190	28.7	28.0
0	-3	0	1	0	-100.0	-100.0
317	149	205	359	464	29.4	28.7
		0
631	729	720	769	839	9.1	8.5

Third quarter of 2023

8

Net interest income:

Net interest income continued with its positive trend and amounted to 3,512 million euros as of the end of September 2023, representing growth of 29.0% year-on-year and of 6.2% in the quarter.

This growth, both year-on-year and in the quarter, was mainly driven by higher loan yields, higher earnings on the fixed-income portfolio and improved liquidity, all of which offset the higher costs of both funds and wholesale funding.

Evolution of net interest income

Total group (€ millions)

965	1,077	1,100	1,170	1,242
3Q 22	4Q 22	1Q 23	2Q 23	3Q 23

	Total group	Constant FX
Change YoY:	+29.0%	+29.9%
Change QoQ:	+6.2%	+5.4%

Customer spread and net interest margin:

The customer spread increased by 10 bps in the quarter and by 67 bps compared to the same period of the previous year, standing at 2.99%, driven by the increase in loan yields, which offset the higher cost of deposits.

Similarly, the net interest margin as a percentage of average total assets rose by 14 bps in the quarter and by 56 bps compared to the same period in the previous year, reaching 2.02%.

Sabadell ex - TSB (€ millions)

			Change YoY:
			+39.3%
			Change QoQ:
			+8.5%
870	944
	2Q 23	3Q 23
TSB (€ millions)
			Change YoY:
			+6.3%
			+9.3%	Constant FX
			Change QoQ:
300	298	-0.6%
			-1.8% Constant FX
	2Q 23	3Q 23

Third quarter of 2023

9

Quarterly evolution of net interest income (€ million)

	-5	2	3	-2
	28	3	1
	42
					1,242	TSB
1,170
						Excl. TSB
2Q23	Customer NII	ALCO, wholesale funding and	Calendar days	Others	3Q23
		liquidity

Net interest income, Group (%)

			3.67%	4.01%
		3.29%
	2.88%
2.54%				2.99%
			2.89%
		2.73%
	2.53%
2.32%
			2.02%
		1.79%	1.88%
	1.64%	1.02%
1.46%		0.78%
	0.56%

0.22%	0.35%

Net interest income, ex-TSB(%)

			3.81%	4.20%
		3.33%
	2.85%
2.47%			3.05%	3.20%
		2.80%
	2.53%
2.24%				1.96%
			1.77%
		1.65%	1.00%
1.27%	1.49%	0.76%
0.53%

0.23%	0.32%

3Q22	4Q22	1Q23	2Q23	3Q23	3Q22	4Q22	1Q23	2Q23	3Q23

Net interest income, TSB (%)

			3.33%	3.52%
		3.18%
	2.94%
2.72%			Customer spread	Net interest margin as % of ATA
			Customer loan yield	Cost of customer funds
		2.55%	2.50%
		2.43%
2.55%	2.50%
2.10%	2.10%	2.20%	2.15%	2.10%
			0.83%	1.09%
		0.63%
	0.44%
0.17%

3Q22

4Q22

1Q23

2Q23

3Q23

Third quarter of 2023

10