Sabadell has today reported a drop in net profit in the first quarter, as lower interest rates weighed on its income from loans, while the Spanish bank shifts its focus to a standalone strategy after the sale of its British unit TSB.
Spain's fourth-largest lender in terms of market value reported a net profit of €347m in the three months from January to March, missing an analysts' average of €424m in a poll by Reuters.
Overall costs rose 13.4% year-on-year in the quarter due to €55m in non-recurrent expenses, linked to an early retirement plan in Spain, and a €14m charge related to the sale of TSB.
Spanish banks have benefited from higher loan costs, mostly tied to variable rates, but lower client borrowing costs are squeezing margins. Recent geopolitical tensions stemming from the US-Israeli war on Iran are driving inflation higher, and markets now expect three European Central Bank hikes.
Though the sale of TSB was not closed until May 1, the bank provided a pro forma comparison to strip out TSB for net interest income, or earnings on loans minus deposit costs.
Sabadell's net interest income (NII) fell 3.5% year-on-year in the first quarter to €872m, in line with analysts' forecasts. NII fell 2.5% against the previous quarter.
The bank expects NII to grow above 1% this year.
In February, the lender appointed Marc Armengol as its new chief executive, and analysts are now watching if Sabadell will be able to maintain growth rates and protect profitability without TSB following BBVA's failed bid.
