Spain's Banco Sabadell 2016 net profit stalls on mortgage charges

* Posts 2016 net profit of 710 mln euros, below forecasts

* Q4 net profit 64 mln, sets aside 130 mln euros in provisions

* First Spanish bank to report impact of mortgage ruling

* Shares (Berlin: DI6.BE - news) down 2 pct (Adds details, share price)

By Jesús Aguado

MADRID, Jan 27 (Reuters) - Banco Sabadell's profit growth stalled in 2016, hit by one-off charges from a court ruling forcing Spanish banks to repay customers affected by unclearly marketed mortgages, sending its shares lower.

Spanish banks are expected to repay customers more than 4 billion euros ($4.2 billion) after Europe's top court overturned a Spanish ruling that capped liabilities over disputed mortgage clauses which prevented the loan's interest rate from falling below a benchmark.

Sabadell, Spain's fifth largest bank by market value, set aside 130 million euros in additional provisions in the fourth quarter to compensate for the mortgage clauses, Chairman Josep Oliu said on a conference call with analysts on Friday.

Partly as a result, Sabadell said net profit in the fourth quarter was 64 million euros, almost 51 percent down from the same quarter last year.

Sabadell's full-year net profit for 2016 came in at 710 million euros ($757.43 million), below the average of analysts' estimates calculated by Thomson Reuters (Dusseldorf: TOC.DU - news) of 738 million euros, and it was up only 0.3 percent from a year earlier.

Sabadell is the first Spanish bank to report the ruling's impact on earnings. Banco Santander (Amsterdam: 817651.AS - news) and Bankinter (Amsterdam: BI6.AS - news) , which have already reported results, were not affected as they did not use floor clauses in their mortgage contracts.

Sabadell had said on Monday it expected a one-time hit to its annual results of up to 490 million euros from the European court ruling in December.

Shares in Sabadell opened down 2 percent at the bottom of Spain's blue-chip Ibex index, dragging down other Spanish banks expected to be hit by new charges, which eat into earnings already affected by eroded lending margins.

CEO Jaime Guardiola said Sabadell had enough overall provisions to absorb the potential impact of the European ruling and defended the clauses which he said had been clearly presented to customers.

Full-year net interest income - a measure of earnings on loans minus deposit costs - was up 20 percent to 3.8 billion euros, in line with analysts' estimates and boosted by the integration of British bank TSB in the third quarter of 2016.

Sabadell said it expected the British economy, where it makes around a quarter of its profit thanks to TSB, to perform better than initially expected this year after Britain's decision to leave the European Union last June. ($1 = 0.9374 euros) (Editing by Angus Berwick and Adrian Croft)