2q09 english presentation...1q08 2q08 3q08 4q08 1q09 2q09 347.1 363.0 367.9 394.6 418.6 jun-09 nii...

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23 rd July 2009 2Q09 Results Banco Sabadell

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Page 1: 2Q09 english presentation...1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 347.1 363.0 367.9 394.6 418.6 Jun-09 NII 813.1 Dividends 10.5 Equity Method 31.7 Commissions 267.1 Trading income 163.9 Forex

23rd July 2009

2Q09 Results

Banco Sabadell

Page 2: 2Q09 english presentation...1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 347.1 363.0 367.9 394.6 418.6 Jun-09 NII 813.1 Dividends 10.5 Equity Method 31.7 Commissions 267.1 Trading income 163.9 Forex

2

Disclaimer

Banco Sabadell cautions that this presentation may contain forward looking statements with respect to the business. financial condition. results of operations. strategy. plans and objectives of the Banco Sabadell Group. While these forward looking statements represent our judgement and future expectations concerning the development of our business. a certain number of risks. uncertainties and other important factors could cause actual developments and results to differ materially from our expectations. These factors include. but are not limited to. (1) general market. Macroeconomic. governmental. political and regulatory trends. (2) movements in local and international securities markets. currency exchange rate. and interest rates. (3) competitive pressures. (4) technical developments. (5) changes in the financial position or credit worthiness of our customers. obligors and counterparts. These risk factors could adversely affect our business and financial performance published in our past and future filings and reports. including those with the Spanish Securities and Exchange Commission (Comisión Nacional del Mercado de Valores).

Banco Sabadell is not nor can it be held responsible for the usage. valuations. opinions. expectations or decisions which might be adopted by third parties following the publication of this information.

Financial information by business areas is presented according to GAAP as well as internal Banco Sabadell group´s criteria as a result of which each division reflects the true nature of its business. These criteria do not follow any particular regulation and can include forecasts and subjective valuations which could represent substantial differences should another methodology be applied.

The distribution of this presentation in certain jurisdictions may be restricted by law. Recipients of this presentation should inform themselves about and observe such restrictions.

These slides do not constitute or form part of any offer for sale or subscription of or solicitation or invitation of any offer to buy or subscribe to any securities nor shall they or any one of them form the basis of or be relied on in connection with any contract or commitment whatsoever.

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3

Agenda

1. Quarterly highlights

2. Capital management

3. 2Q09 Results

4. Commercial activity and liquidity

5. Risk management

6. Optima program

7. Appendices

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4

Strong net interest income due to active pricing and hedging

Improving capital ratios further

NPLs entries slowing down and recovery trend confirmed

Coverage ratio remains at the top of the range

Proved capacity to issue senior debt without government guarantees

Second quarter 2009

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5

Agenda

1. Quarterly highlights

2. Capital management

3. 2Q09 Results

4. Commercial activity and liquidity

5. Risk management

6. Optima program

7. Appendices

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6

Active capital management (I)

Financial Impact

February 2009

May 2009

July 2009

Issuance of € 500 M preferred shares

Repurchase of preferred shares issued in 2006

ca. 152 M tendered

Issuance of € 500 M mandatory subordinated convertible bond

+ 58 bp additional Tier 1

Capital gain: ca. € 96 M+ 11 bp additional Core Tier 1

+ 84 bp additional Core Tier 1

September2008

Zurich acquires 50% of Sabadell insurance business Capital gain ca. € 512 M

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7

6,60

1,34 1,161,16

2,31 2,272,27

7,456,63

1Q09 2Q09 2Q09 (Incl. €500M ConvertibleBond)

BIS ratio (%)

Lower Tier I

Core Capital

Tier II

10.24 10.0510.88

Active capital management (II)

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8

Active capital management (III)

NOTE: The size of the circle represents the amount of gross loans to customers. BS core capital ratio including repurchase of preferenceshares and convertible bond issue. Numbers as of March 2009

4%

5%

6%

7%

8%

9%

30% 40% 50% 60% 70% 80% 90% 100%

NPL Coverage ratio

Cor

e ca

pita

l

NPL ratio above system average

System average(NPL coverage)

NPL ratio below system average

Systemaverage

(core capital)

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9

Theoretical stress scenarios

2009 2010 2011

GDP growth -3,5% -0,8% 1,1%

Unemployment rate 19,2% 21,0% 18,2%

Housing price change -11,0% -5,5% -3,0%

Base case scenario

Even in a hypothetical adverse scenario with the NPL ratio reaching 8.3%, the core capital ratio would still stay above 6.5%

2009 2010 2011

-4,5% -2,6% 0,1%

21,4% 26,2% 24,3%

-15,0% -10,0% -6,0%

Adversely stressed scenario

2011e:

NPL ratio 5,7%NPL coverage > 59%Core capital > 7,5% Tier I > 8,4%

2011e:

NPL ratio 8,3%NPL coverage > 52%Core capital > 6,5% Tier I > 7,5%

Spain

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10

Agenda

1. Quarterly highlights

2. Capital management

3. 2Q09 Results

4. Commercial activity and liquidity

5. Risk management

6. Optima program

7. Appendices

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11

Jun-08 Jun-09 09/08 (%)

Net interest income 710,2 813,1 14,5%

Dividends and equity method income 34,1 42,2 23,6%Net fees and commissions 289,6 267,1 -7,8%Trading income and Forex 65,5 185,7 183,6%Other operating income/expense 14,5 3,7 -74,1%Gross operating income 1.113,9 1.311,9 17,8%

Operating expenses -467,1 -523,2 12,0%Depreciation and amortization -65,6 -69,0 5,2%Pre-provision operating income 581,2 719,7 23,8%

Provisions for NPLs -104,8 -245,1 133,9%Other impairments 21,7 -109,0 ***Gains on sale of assets 23,6 28,9 22,2%Taxes and others -104,3 -62,4 -40,2%Discontinued transactions 11,0 0,0 ***

Adjusted attributable net profit 428,5 332,0 -22,5%

1H results ...

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12

... include important adjustments …

Euros in millions

Jun-09 Adjustments

Net interest income 813.1 813.1 14.5%Dividends and equity method income 42.2 42.2 23.6%Net fees and commissions 267.1 267.1 -7.8%Trading income and Forex 185.7 -96.8 88.9 35.8%Other operating income/expense 3.7 3.7 -74.1%Gross operating income 1,311.9 1,215.1 9.1%Personnel expenses -370.5 55.2 -315.4 -0.4%Other general expenses -152.6 -152.6 1.5%Depreciation and amortization -69.0 -69.0 5.2%Adjusted pre-provision operating income 719.7 678.0 16.7%Provisions for NPLs and other impairments -354.2 262.2 -92.0 10.7%

Generic provision -132.8 132.8 0.0 --Substandard provision -129.4 129.4 0.0 --

Gains on sale of assets 28.9 28.9 22.2%Taxes and others -62.4 -106.2 -168.5 61.6%Discontinued transactions 0.0 0.0 --

Adjusted attributable net profit 332.0 446.4 4.2%

Jun-09 recurrent

09/08 (%)

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13

446

114

332

Jun-09 Recurrent Adjustments Jun-09 Real

Maintaining a high coverage ratio of 89% vs. the sector average of 58%*

-22.5%

+4.2%

… due to our conservative policy

Euros in millions. * Sector average as of May 2009

70% 677 +58%

80% 472 +10%

82% 446 +4.2%

89% 332 -22.5%

Coverage (%) €m 09/08 (%)

Net profit

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14

A sound margin evolution …

813.1710.2

Jun-08 Jun-09

+ 14.5 %

Euros in millions

374.8

710.2813.1

1Q08 2Q08 3Q08 4Q08 1Q09 2Q09

347.1 363.0 367.9 394.6 418.6

Jun-09NII 813.1

Dividends 10.5

Equity Method 31.7

Commissions 267.1

Trading income 163.9

Forex 21.8

Other op. results 3.7

Gross Op. Income 1,311.9

Personnel exp. -370.5

Administration exp. -152.6

Deprec. & amort. -69.0

Pre-provision Op. Incom 719.7

Prov. for NPLs and others -354.2

Gains on sale of assets 28.9

Taxes and others -62.4

Disc. transactions 0.0Attr. Net Profit 332.0

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15

… with increasing NIM

Net Interest Margin

We are well positioned for the current interest rate environment

Combined customer spread (*)

(*) Combined spread: Asset yield – (cost of customer funds + cost of wholesale funding). In percentage

1.80% 1.83% 1.79% 1.85%1.98%

2.06%

1Q08 2Q08 3Q08 4Q08 1Q09 2Q09

2.07%2.10%2.02% 2.15%2.41%

2.60%

1Q08 2Q08 3Q08 4Q08 1Q09 2Q09

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16

We actively manage asset and liability spreads

Customer loan yield

Cost of customer funds

Customer spread

Customer spread remains flat

2.73%2.81%2.80% 2.84% 2.81%2.72%

5.56%6.28%5.93% 6.06% 6.29%

4.93%

2.83%3.47%

3.13%

2.21%

3.22%3.48%

1Q08 2Q08 3Q08 4Q08 1Q09 2Q09

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17

Commission income reflects market conditions

43,7

54,7

37,040,8 33,3 34,129,8

61,5 52,251,2 52,860,6

40,4 45,346,548,5

44,447,9

1Q08 2Q08 3Q08 4Q08 1Q09 2Q09

84.5

116.2

89.7

63.9

113.4

89.0

Jun-08 Jun-09

289.6 - 7.8%267.1

Asset Mgmt1

Services

Lending

Euros in millions 1 Including mutual funds commissions and pension funds and non-life insurance brokerage

Asset Mgmt1

Services

Lending

138.8 150.8 134.7 133.4 134.9 132.2Jun-09

NII 813.1

Dividends 10.5

Equity Method 31.7Commissions 267.1

Trading income 163.9

Forex 21.8

Other op. results 3.7

Gross Op. Income 1,311.9

Personnel exp. -370.5

Administration exp. -152.6

Deprec. & amort. -69.0

Pre-provision Op. Incom 719.7

Prov. for NPLs and others -354.2

Gains on sale of assets 28.9

Taxes and others -62.4

Disc. transactions 0.0Attr. Net Profit 332.0

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18

153,6 155,8 160,0 162,7 158,1 157,2

6,57,2 5,3 23.6

1Q08 2Q08 3Q08 4Q08 1Q09 2Q09

315.4309.4

7.3 55.2

Jun-08 Jun-09

316.6 370.5

+ 1.9%

Recurrent Non-recurrent

Euros in millions. * Including Fincom, Tecnocredit and BBVA Miami in 2008.

153.6

+ 17.0%

163.0 166.5 168.0

We continue to take advantage of strong revenues to apply non-recurrent costs

189.7

31.6

180.8

+ 1.5%like-for-like*

Jun-09

NII 813.1

Dividends 10.5

Equity Method 31.7

Commissions 267.1

Trading income 163.9

Forex 21.8

Other op. results 3.7

Gross Op. Income 1,311.9Personnel exp. -370.5

Administration exp. -152.6

Deprec. & amort. -69.0

Pre-provision Op. Incom 719.7

Prov. for NPLs and others -354.2

Gains on sale of assets 28.9

Taxes and others -62.4

Disc. transactions 0.0Attr. Net Profit 332.0

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19

Administrative expenses

78,2 73,7 78,996,1

81,572,2

1Q08 2Q08 3Q08 4Q08 1Q09 2Q09

150.4 152.6

Jun-08 Jun-09

150.4 152.6

+ 1.5%

+ 0.5%like-for-like*

Euros in millions. * Including Fincom, Tecnocredit and BBVA Miami in 2008.

Jun-09

NII 813.1

Dividends 10.5

Equity Method 31.7

Commissions 267.1

Trading income 163.9

Forex 21.8

Other op. results 3.7

Gross Op. Income 1,311.9

Personnel exp. -370.5Administration exp. -152.6

Deprec. & amort. -69.0

Pre-provision Op. Incom 719.7

Prov. for NPLs and others -354.2

Gains on sale of assets 28.9

Taxes and others -62.4

Disc. transactions 0.0Attr. Net Profit 332.0

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20Euros in millions

Provisions for credit risk (P/L):

Balance sheet provisions:

Continued extraordinary provisions reflect our conservative approach

We maintain a high coverage ratio of 88.8% Including guarantees the coverage ratio would be 141.3%

1Q08 2Q08 3Q08 4Q08 1Q09 2Q09

Generic 20.2 3.8 -10.1 -12.0 0.0 -129.4

NPLs entry 13.2 6.5 55.4 46.1 11.0 16.2Calendar effect 14.8 37.1 48.6 56.9 80.8 121.7Extraordinary 0.2 10.1 214.0 85.3 41.9 87.5

Rest -4.6 3.5 11.9 3.0 8.2 7.3

Total 43.8 61.0 319.8 179.3 141.9 103.3

1Q08 2Q08 3Q08 4Q08 1Q09 2Q09

Generic fund 1,184.2 1,192.0 1,183.7 1,170.4 1,170.4 1,040.1Specific fund 130.3 166.7 457.5 645.4 786.0 991.0

Total 1,314.5 1,358.6 1,641.3 1,815.8 1,956.4 2,031.1

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21

Agenda

1. Quarterly highlights

2. Capital management

3. 2Q09 Results

4. Commercial activity and liquidity

5. Risk management

6. Optima program

7. Appendices

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22

Deposit growth confirming customer confidence in BS

* Excluding repos and including preference shares placed in the retail network. June ’08 adjusted for the deconsolidation effect of the insurance group. Euros in millions.

Loans to customers 65,362 64,229 - 1.7%

On-balance sheet customer funds* 34,946 37,834 +8.3%

Positive commercial Gap

Jun-08 Jun-09 Var.

Fix-term deposits 20,172 22,615 +12.1%

€ m

-3.000

-2.000

-1.000

0

1.000

2.000

2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09

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23

Loans Mortgages

CrediGlobal Credit lines

Number of new contracts

2008

2009

20082009

2008200920082009

Product activity levels

1.250

1.750

2.250

2.750

3.250

3.750

Janu

aryFe

bruar

yMarc

h

April

May

June July

Augus

tSep

tembe

rOcto

ber

Novem

ber

Decem

ber

500

700

900

1,100

1,300

1,500

1,700

1,900

Janu

aryFe

bruar

yMarc

h

April

May

June July

Augus

tSep

tembe

rOcto

ber

Novem

ber

Decem

ber

150

250

350

450

550

650

750

850

950

1,050

Janu

aryFe

bruar

yMarc

h

April

May

June July

Augus

tSep

tembe

rOcto

ber

Novem

ber

Decem

ber

2,000

2,500

3,000

3,500

4,000

4,500

5,000

5,500

Janu

aryFeb

ruar

yMarc

h

April

May

June July

Augus

tSep

tembe

rOcto

ber

Novem

ber

Decem

ber

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24

Factoring (€ m) Confirming (active contracts)

Market share 10.80% Market share 9.76%

We continue to increase our market share incommercial loans (7.48%)

2008

2009

20082009

Product activity levels

0

1,000

2,000

3,000

4,000

5,000

Janu

aryFe

bruar

yMarc

h

April

May

June July

Augus

tSep

tembe

rOcto

ber

Novem

ber

Decem

ber

1,150

1,200

1,250

1,300

1,350

1,400

Janu

aryFe

bruar

yMarc

h

April

May

June July

Augus

tSep

tembe

rOcto

ber

Novem

ber

Decem

ber

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25

958

1.51

540

09

1.78

11.

000

193

1.20

01.

000

1.63

048

915

023

050 80

1.50

0

300

200

1.50

0

1.75

042

050

050

1.50

030

0

13 20

0

500

1.000

1.500

2.000

1Q09

3Q09

1Q10

3Q10

1Q11

3Q11

1Q12

3Q12

1Q13

3Q13

1Q14

3Q14

1Q15

3Q15

1Q16

3Q16

1Q17

3Q17

1Q18

3Q18

FINANCIACIÓN

Emisiones en mercados de capitales (no incluye las titulizaciones)

Wholesale funding maturity calendar

No major maturities until April 2010

Settled

*

* Overdue at 7th July 2009

A comfortable maturity calendar

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26

Wholesale market activity

Bonds

Covered bonds

Total capital market issues (a)

Wholesale funding maturities (b)

Positive wholesale funding gap (a-b)

€ 589 m€ 825 m

€ 1.414m

Solid market image versus peer group

Year 2009 through to June

€ 958 m

€ 496 m

No use of state backed guarantees available to BS (€3.200M)

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27

Agenda

1. Quarterly highlights

2. Capital management

3. 2Q09 Results

4. Commercial activity and liquidity

5. Risk management

6. Optima program

7. Appendices

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28

NPL ratio

Source: Bank of Spain * Banco Sabadell estimates

*

*

Continued improvement of gap vs. the rest of the sector

Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09

NPL ratio BS 0.62% 0.85% 1.59% 2.35% 2.82% 3.19%

NPL ratio system 1.20% 1.70% 2.63% 3.37% 4.27% 4.78%

GAP (p.b) 58 85 104 102 145 159

%

024

68

10

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 Mar-09

Jun-09NPL ratio system NPL ratio BS

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29

NPL ratio: New entries and recoveries by segments

NPL new entries Recoveries

1Q08 2Q08 3Q08 4Q08 1Q09 2Q09

Entries 213.2 244.0 625.4 748.5 806.7 823.7

Recoveries -59.9 -42.2 -35.1 -223.1 -480.1 -532.9

Write-offs -39.4 -24.5 -40.9 0.5 -1.7 -25.4

Quarterly change on NPL 113.9 177.3 549.5 525.8 324.8 265.4

Individuals 12%

Companies 47%

Real Estate development

30%Other 4%Self-

employed 7%

Individuals 13%

Companies 39%

Real Estate development

39%

Other 2%Self-employed

7%

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30

Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09

Companies 0.35% 0.52% 1.28% 2.02% 2.54% 2.89%

SME 0.84% 1.07% 1.37% 2.17% 2.18% 2.77%

Small retailers and self-employed 1.04% 1.10% 1.37% 1.68% 2.42% 2.93%

Real Estate development 0.42% 0.95% 2.99% 5.35% 7.34% 7.73%

Mortgages to individuals 0.47% 0.57% 0.75% 1.12% 1.48% 1.69%

Individuals others 1.88% 1.98% 2.44% 3.21% 4.24% 4.91%

Total 0.62% 0.85% 1.59% 2.35% 2.82% 3.19%

NPL ratio by segments

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Solvia

Stock profile

Madrid & Metropolitan area21%

Barcelona & Metropolitan area

49%

Rest30%

118 current projectsNo rural land400 finished dwellings, of which 17% has been sold

Geographic distribution

Land under development

54%

Finished property10%

Real Estate under development

6%

Land30%

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32

Agenda

1. Quarterly highlights

2. Capital management

3. 2Q09 Results

4. Commercial activity and liquidity

5. Risk management

6. Optima program

7. Appendices

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33

The transformation plan is in its final stageBranch network

1.54 Back-office FTEs* per branch (1.95 in dec-07)

448 back-office personnel reduction since the beginning of the program, increasing our commercial capacity

Services Global CenterServices Global Center set up, concentrating headquarters’ activity for the branch network

Regional Administrative Centers (RAC)3 RACs open (Barcelona, Madrid and Oviedo): Service-related facility rolled out, asset-related facility in its final stage

Foreign trade facility streamlined down to 25 operational centers, from 63 previously.

* FTE= Full Time Equivalents

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36%Efficiency improvement

due to Optima 09

Widespread implementation of digital processing, centralized workflowmanagement system and advanced tracking system have resulted in a 36% efficiency improvement in the businesess where these measures have beenapplied.

Digital processing

Advanced tracking tool

Workflow management system

Optima developing according to plan

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Optima developing according to plan

Increase in commercial activity after Programa Activahas been rolled-out

2S08 1S09

57.178

146.977

Contacts with customers by the customer service personnel

+157%

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Impact on headcount and number ofbranches

Number of branchesNumber of employees

9.668

10.015

10.189 10.178

9.929

9.615

1T08 2T08 3T08 4T08 1T09 2T09

1.229

1.2601.257 1.2561.247 1.230

1T08 2T08 3T08 4T08 1T09 2T09

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Service quality and awards

7,56

6,95

7,877,667,827,65

7,317,43

6,736,63

6,216,53

6,80 6,737,09 7,24 7,08 7,00

2002 2003 2004 2005 2006 2007 2008 1Q09 2Q09

Banco Sabadell group Market

Ranking in retail banking networkindependent quality surveys2

Renewal of theGlobal Award of

EuropeanExcellence

Source: 1 Bank of Spain, 4Q08 Bulletin2 STIGA, “RCB Objective Quality in Retail Banking Networks” 2Q09.

Ranking in service quality 1

The only Spanish financialinstitution with a global ISO

9001 quality certificate

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38

Agenda

1. Quarterly highlights

2. Capital management

3. 2Q09 Results

4. Commercial activity and liquidity

5. Risk management

6. Optima program

7. Appendices

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Mellon United National Bank acquisition

Founded in 1978

A well established institution with professional management

Main activity: Very selective with its customer base, focused in professionals

15 branches in Miami-Dade, Broward and Palm Beach

352 employees (FTE*)

Main data: Deposits USD 1,613 M

Loans to customers USD 900 M

* Full Time Equivalents Data as of March 2009

Acquired amount

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It will reinforce significantly the strategic positioning of BS in Florida

Solid growth platform

Gross cost synergies with TAB and BS Miami branch (USD 10 millions)

312

2.127

900915 449

2.243

4.305

1.613

Oficina BSMiami

TAB Mellon UnitedNational Bank

BS Miami

Investment rationale

+ =

Customer deposits

Assets

+

Dollars in millions

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Transaction terms

Total consideration USD 142 M

Goodwill USD 42 M

Impact in core capital - 12 bp

Of which:

Acquisition of 100% of the shares

Selection of 60% of the loan portfolio (1)

(1) Sale of remaining 40% to BNYM

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The Value of Trust