Sabadell's Q1 net profit beats forecast on TSB, lending income

By Jesús Aguado

MADRID (Reuters) -Spain's Sabadell on Thursday reported a slide in its first-quarter net profit, but trounced market forecasts on higher lending income and strong performance at its British unit TSB even as customer deposits dipped.

The country's fourth-largest bank in terms of market value reported a net profit of 205 million euros ($227 million) in the January-March period. Analysts polled by Reuters expected a net profit of 138 million euros.

The lender said the cost of the banking levy was 157 million euros, which it fully booked in the quarter. The bank has legally challenged the tax.

Without taking the banking tax into account, the lender's quarterly net profit rose 69% year-on-year.

Banks across Europe are benefiting from higher interest rates. Sabadell's net interest income in the quarter rose 28% year-on-year to 1.1 billion euros, in line with analysts' forecasts.

At TSB, profit on a standalone basis more than doubled in the quarter to 54 million pounds, supported by lending income.

Apart from lending income, the focus has also recently shifted towards cash and liquidity ratios in the aftermath of the biggest turmoil to hit the banking sector since 2008.

At Sabadell, customer deposits were down 1.5% against December and fell 0.6% against the same quarter of 2022 in a context marked by last month's failure of Silicon Valley Bank.

Sabadell ended March with a liquidity coverage ratio (LCR) of 220%, compared with 234% at the end of December. A ratio above 100% means banks don't need to tap the markets in the short term to cover for potential outflows of funds in a 30-day stress scenario.

($1 = 0.9049 euros)

(Reporting by Jesús Aguado; additional reportinbg by Emma Pinedo; Editing by Inti Landauro and Sherry Jacob-Phillips)