Sabadell ups payout target to $3.43 billion in BBVA takeover tussle

By Jesús Aguado

MADRID (Reuters) -Sabadell moved to convince shareholders it should stay independent on Friday by raising its payout policy to 3.3 billion euros ($3.43 billion), as the Spanish bank tries to fend off a hostile takeover by its larger rival BBVA.

Spain's government has opposed the takeover, which is undergoing a longer phase 2 antitrust review, while Sabadell has rejected BBVA's 12 billion euro offer, saying it significantly undervalued the bank's growth potential.

Barclays analysts welcomed better-than-expected results from Sabadell and a higher-than-expected payout, but its shares fell 1%, after staging a 27% increase for the year so far.

Sabadell increased its payout target on the back of forecast-beating fourth quarter and annual results on Friday. Its quarterly net profit jumped 75% year-on-year to 532 million euros, while full-year net profit in 2024 rose 37% to 1.83 billion euros due to higher revenues in Spain.

Spanish banks have benefited from the higher cost of loans linked mostly to variable rates that have been passed onto customers, while savers have been given smaller increases.

Sabadell announced the shareholder payout policy against 2024 and 2025 results, up from a target of 2.9 billion euros.

Higher earnings and a positive impact of 109 million euros from extraordinary items in 2024 helped Sabadell raise its return on tangible equity ratio, a measure of profitability, to 14.9% at end-2024 from 13.2% in September.

Excluding one-offs, the recurrent ROTE rose to 14% and it forecast profitability to stay around 14% for 2025 and above that level in 2026. Its previous 2025 forecast was above 13%.

Part of the shareholder distribution included a 1 billion share buyback against 2024 earnings and the distribution of 1.1 billion euros in cash as part of its 60% payout policy, at the upper-end of its 40% and 60% payout policy.

Sabadell said it would pay 1.2 billion euros in dividends and share buybacks against 2025 results.

Net profit at Sabadell's Spain-based business rose 65% year-on-year in the fourth quarter, while net interest income, the difference between earnings on loans and deposit costs, was up 1% against the previous quarter.

For 2025, Sabadell said it expects NII without Britain's TSB to fall by a low-single digit as lower rates squeeze margins.

Overall, the group's NII in 2024 rose 6% to 5.02 billion euros while for 2025 it forecast NII of above 4.9 billion euros.

At TSB, net profit more than tripled against the fourth quarter of 2023, while lending income rose 7%. It expected TSB to grow its NII by high single digits in 2025.

Full-year net profit at the British unit rose 18.9% to 208 million pounds ($259.06 million) on mortgage growth. It forecast net profit to rise 15% in 2025 and to increase further in 2026.

($1 = 0.8029 pounds)

($1 = 0.9627 euros)

(Reporting by Jesús Aguado; additional reporting by Emma Pinedo; Editing by Inti Landauro, Sherry Jacob-Phillips and Alexander Smith)