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Sabadell Q3 net beats forecasts on lending income, lower costs

A man uses an ATM at a branch of Sabadell bank in the Basque town of Guernica

By Jesús Aguado

MADRID (Reuters) - Sabadell's third-quarter net profit more than doubled and beat forecasts thanks to lower costs and strong lending income supported by mortgage growth in Spain.

The country's fourth-largest bank in terms of total assets reported a net profit of 317 million euros ($319.06 million) for the July-September period. Analysts polled by Reuters expected a net profit of 221 million euros.

Lower loan-loss provisions and costs, thanks to previously announced savings plans, allowed Sabadell to close with a 7.96% return on tangible equity (ROTE) as of end-September, up from around 7.04% as of end-June, already above its three-year strategic plan.

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

At a group level, third-quarter net interest income rose 10% from a year earlier to 965 million euros, compared with analysts' forecast of 917 million euros, and it also rose 7.4% against the previous quarter.

Against that background, Sabadell revised the bank's net interest income guidance up to a double-digit growth for 2022 from a previous mid-single digit growth forecast on the back of higher interest rates.

Total costs fell 30% in the third quarter against the same quarter a year ago though were 1% higher compared to the previous quarter.

Sabadell's board agreed to increase its dividend payout to at least 40% of the profits against 2022 results from a previous payout ratio of 31.8% against 2021 earnings.

It also approved the distribution of an interim gross dividend of 0.02 euros per share to be paid in cash on Dec. 30.

(Reporting by Jesús Aguado; editing by Inti Landauro, David Latona and Subhranshu Sahu)