By Jesús Aguado
MADRID (Reuters) -Lending income at Spain’s Sabadell remained pressured in the third quarter, hit by lower interest rates as the focus shifts towards the sustainability of its profits after BBVA’s failed bid and the sale of its British unit TSB.
Spanish banks have benefited from higher costs of loans tied mostly to variable rates, but lower borrowing costs for clients are squeezing margins.
In the third quarter, net profit at the country’s fourth-largest lender by market value fell 17.7% to 414 million euros ($482.8 million), below the 449 million euros expected by analysts.
Sabadell’s net interest income, or earnings on loans minus deposit costs, fell 4% to 1.20 billion euros, below the 1.22 billion euros forecast by analysts in a Reuters poll.
For this year, Sabadell expects an NII of around 4.9 billion euros, compared to 5 billion euros at end-2024, or 3.6 billion euros without TSB, which it agreed to sell to Santander.
As part of its strategy outlined in July, it expects for 2027 an NII of 3.9 billion euros without TSB, the same amount it achieved in 2024 ex-TSB. It expects to complete the deal in the first quarter of 2026.
Analysts are closely watching whether Sabadell will be able to maintain growth rates without TSB, which accounted for 18.5% of the group’s net profit in the first nine months.
Net profit at TSB remained unchanged in the quarter, though lending income rose 5%.
In 2027, Sabadell aims to make a net profit of more than 1.6 billion euros and reach a return on tangible equity ratio (ROTE) of 16%, compared to a reported 15% at end-September, thanks to higher loan growth in Spain, where the economy is projected to grow above the euro zone average.
($1 = 0.8575 euros)
(Reporting by Jesús Aguado; Additional reporting by Emma Pinedo; Editing by David Latona and Jan Harvey)
