Sabadell Faces Pressure on Lending Income Amid Lower Interest Rates

Sabadell's Financial Performance Overview

By Jesús Aguado

Impact of Lower Interest Rates

MADRID, Feb 6 (Reuters) - Sabadell said on Friday its lending income remained under pressure in the fourth quarter on lower interest rates, as the focus shifts towards its profitability outlook after BBVA's failed bid and the sale of its British unit TSB.

Profitability and Future Projections

Spanish banks have benefited from higher costs of loans tied mostly to variable rates but lower borrowing costs for clients are squeezing margins.

Shareholder Returns and Buyback Plans

Its net interest income, or earnings on loans minus deposit costs, fell 5.2% year-on-year in the October to December period to 1.21 billion euros ($1.43 billion), in line with analysts' forecasts and was 3.7% down to 4.84 billion euros for the entire 2025.

As part of its strategic plan, it expects for 2027 an NII of 3.9 billion euros without TSB, the same amount it achieved in 2024 ex-TSB. The deal has yet to be closed.

For 2026, it expects lending income to rise above 1%.

In the fourth quarter, the group's net profit fell 27.4% to 386 million euros in line with analysts' forecasts after being hit by a banking tax.

For the entire 2025, net profit fell 2.8% to 1.78 billion euros due to lower one-offs compared with 2024.

Analysts are now watching if Sabadell will be able to maintain growth rates without TSB, a task that will be overseen by Marc Armengol as its new chief executive.

On Friday, Sabadell said it had received authorization from the ECB for a new share buyback of 800 million euros, that is part of its plans to distribute 6.45 billion euros to shareholders in 2025-2027 period.

($1 = 0.8475 euros)

(Reporting by Jesús Aguado; additional reporting by Emma Pinedo; Editing by Rashmi Aich)