Sabadell beats forecasts helped by lending income, TSB

By Jesús Aguado

MADRID (Reuters) -Banco Sabadell on Thursday reported a 22% increase in second-quarter net profit as strong lending in Spain supported by mortgage growth and a solid performance at its British business TSB helped the group beat earnings' forecasts.

The country's fourth-largest bank in terms of total assets reported a net profit of 179 million euros ($181.22 million) in the April to June period. Analysts polled by Reuters expected a net profit of 115 million euros.

Lower loan-loss provisions and costs, thanks to previously announced savings plans, and higher trading income also allowed Sabadell to close the second quarter with a 7% return on tangible equity (ROTE), up from 6.5% in the previous quarter, already above its three-year strategic plan.

At 0731 GMT, Sabadell shares rose around 0.7% on the results, against a 0.8% fall for Spain's blue-chip index Ibex-35.

The results also benefited from new mortgage production in Spain, which reached a record of 1.5 billion euros, after rising 19% against the previous quarter.

For years, banks across Europe have been under pressure from record low interest rates, but that is beginning to change as rising rates are expected to boost lenders' income.

Against that background, Sabadell's Chief Financial Officer Leopoldo Alvear revised up the bank's net interest income guidance to a mid-single digit growth for 2022 on the back of higher interest rates.

At a group level, second-quarter net interest income rose 5.5% from a year earlier to 899 million euros, compared with analysts' forecasts of 868 million euros, and it also rose 4.8% against the previous quarter.

Sabadell's TSB business in Britain made a positive contribution to parent group's results for the sixth consecutive quarter, adding 35 million euros in the second quarter, compared with 36 million euros in the same quarter a year ago.

Sabadell has frozen previous plans to sell TSB until it turns around the business.

(Reporting by Jesús Aguado; additional reporting by Emma Pinedo; editing by Inti Landauro, Robert Birsel and Jane Merriman)