Sabadell vows higher profits and payouts as it battles BBVA bid

By Jesús Aguado

MADRID (Reuters) -Spain's Sabadell pledged on Thursday to boost profits and payouts for shareholders, including from the recently-agreed sale of UK arm TSB, as the bank set out its case to remain independent in the face of a hostile bid from bigger rival BBVA.

Spain's fourth-largest lender by market value, trying to fend off a 13-billion-euro ($15 billion) bid from BBVA, said it aimed to make a net profit of more than 1.6 billion euros in 2027 thanks to higher loan growth in Spain.

Sabadell's net profit was 1.57 billion euros in 2024, excluding TSB, which it has agreed to sell to Spain's Santander.

Sabadell said it also aimed to lift its return on tangible equity ratio, a key measure of profitability, to 16% in 2027 from 14.6% in 2024 as part of a three-year strategy.

At the same time, it said it would pay out 6.3 billion euros to shareholders from 2025-2027.

Investors will be asked to approve the sale of TSB and a one-off 2.5-billion-euro cash dividend, funded by proceeds from the sale, which analysts see as a move to keep shareholders onside in the face of BBVA's overtures.

For 2025, the shareholder payout is expected to total 3.8 billion euros, with at least an additional 2.5 billion euros planned in total for 2026 and 2027.

At 0926 GMT, Sabadell shares were up 1.9%.

Madrid-based brokerage Renta 4 welcomed the strategic plan, saying it was also "focused on a lower credit risk profile and better price segmentation in consumer credit".

Without its British unit, Sabadell aims to boost earnings in Spain, where the economy is projected to grow above the euro zone average.

It expects to increase profits in Spain thanks to cost control and a 5% accumulated annual rise in loans over 2025-2027 focused on mortgage, consumer and enterprise lending, with credit market share growing by 25 to 30 basis points to 8.3%.

In the second quarter, Sabadell's net profit rose 0.6% to 486 million euros, beating analysts' average forecast of 444 million euros.

On a standalone basis, net profit at TSB jumped 58.5% year-on-year in the quarter.

Overall, Sabadell's net interest income, or earnings on loans minus deposit costs, fell 4.2% to 1.21 billion euros, in line with analyst forecasts.

For 2027, Sabadell expects an NII of 3.9 billion euros without TSB.

($1 = 0.8812 euros)

(Reporting by Jesús Aguado. Additional reporting by Emma Pinedo. Editing by Sumana Nandy and Mark Potter)

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