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
Sabadell Anticipates Decline in Lending Income by 2025 Amid Strategy Shift
Sabadell's Financial Outlook and Strategic Changes
By Jesús Aguado
Impact of Interest Rate Cuts on Lending Income
MADRID (Reuters) -Sabadell forecast lower lending income in 2025 due to pressure from interest rate cuts, as the focus shifts towards the Spanish bank's profitability outlook after BBVA's failed bid and the sale of its British business TSB.
Profitability Goals and Future Projections
Spanish banks' margins are being squeezed by lower interest rates, after they previously benefited from higher costs of loans tied mostly to variable rates.
TSB Sale and Its Implications for Sabadell
Sabadell's net interest income, or earnings on loans minus deposit costs, fell 4% to 1.2 billion euros, below the 1.22 billion euros expected by analysts in a Reuters poll.
For 2025, 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.
Chief Financial Officer Sergio Palavecino told analysts it expected lending income to start growing in 2026 backed by higher lending volumes.
For 2027, Sabadell targets an NII of 3.9 billion euros without TSB, similar to the amount it achieved in 2024 ex-TSB.
It expects to complete the TSB sale in the first quarter of 2026.
The bank's lending income targets were in line with previous guidance, but its shares fell 3.7%. They have risen 83% so far this year partly due to pay-out plans of 6.45 billion euros in 2025-2027.
Spanish broker Renta 4 highlighted that "main metrics" of results came in below market expectations.
Analysts are watching how 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 for a net profit of over 1.6 billion euros and for a return-on-tangible-equity ratio, a measure of profitability, of 16% compared with 15% at end-September thanks to higher loan growth in Spain, where the economy is projected to grow above the euro zone average.
Net profit fell 18% to 414 million euros, below the 449 million euros expected by analysts, following an impact of 31 million euros due to a banking tax.
It finished with a core tier-1 capital ratio of 13.74% compared with 13.56% as of end-June.
($1 = 0.8575 euros)
(Reporting by Jesús Aguado; Additional reporting by Emma Pinedo; Editing by David Latona, Jan Harvey and Jane Merriman)
