Spain's Sabadell expects to hit profitability target a year early

By Jesús Aguado

MADRID (Reuters) -Spain's Banco Sabadell expects to hit its 6% profitability target a year early, it said on Thursday after posting better than forecast quarterly and annual profit on the back of cost savings and a rise in mortgage lending.

Lower impairments for last year as it recovered from the COVID-19 pandemic helped the bank to a 530 million euro ($598 million) net profit for 2021, above the 2 million euros in 2020 and the 403 million euros expected by analysts polled by Reuters.

This allowed Sabadell to close the year with a 5% return on tangible equity (ROTE), up from 0.02% in 2020. It now expects ROTE of more than 6% in 2022, a year earlier than envisaged in its three-year strategy.

The bank said that further cost savings and lower provisions in 2022 should continue to support earnings in the coming quarters.

In its fourth quarter to Dec. 31, Spain's fourth-largest bank by assets swung to a net profit of 161 million euros from a 201 million euro loss in the same period of 2020 and far above analyst expectations of 34 million euros.

Sabadell shares rose more than 2% on the results, against a 0.8% decline for Spain's blue-chip index.

Quarterly results were also helped by new mortgages in the UK, jumping 56% year on year to almost 2.17 billion pounds ($2.91 billion) and helping Sabadell's UK subsidiary TSB to book a 33 million pound net profit.

Sabadell had been planning to sell TSB but has frozen the process for now. TSB's contribution to Sabadell's group results rose to 118 million euros last year, against a 220 million euro loss in 2020.

At group level, fourth-quarter net interest income rose 1% from a year earlier to 863 million euros, in line with analyst expectations, but fell 1.6% against the previous quarter on weaker bond sales and pressure from low interest rates.

The lender also said its board had approved a 0.03 euro per share cash dividend against 2021 results, equivalent to a 31.8% dividend payout.

($1 = 0.7453 pounds)

(Reporting by Jesús AguadoEditing by David Goodman)