Sabadell sees 2023 strong lending growth after quarterly profit beat

By Jesús Aguado

MADRID (Reuters) - Spain's Sabadell bank handily beat market expectations with its fourth-quarter net profit, helped by higher banking margins, and forecast higher lending income and profitability in 2023, lifting its shares by as much as 10%.

While the bank's net profit of 149 million euros ($162.51 million) came in 7.5% below year-ago levels, dented in part by a loss at its British unit TSB, the result was far above the 95 million euro forecast by analysts polled by Reuters.

Banks across Europe have been under pressure from record low interest rates, but over the past year rising rates have helped boosting financial margins.

Sabadell's fourth-quarter net interest income jumped 24.8% to 1.08 billion euros ($1.93 billion), beating the 1.02 billion forecast by analysts.

Sabadell shares were up around 8.6% as of 1209 GMT, outpacing a 0.5% rise by Spain's blue-chip Ibex-35 index.

For the whole of 2022, the bank reported a net profit of 859 million euros, up 62% on lower provisions and costs and above forecasts of 804 million.

Positive results also lifted other pure domestic banks with Unicaja up almost 2% and Caixabank gaining more than 1%.

Sabadell said its return on tangible equity ratio (ROTE), a measure of profitability, improved to 7.8% in 2022 from 5.05% in 2021.

It forecast a further rise above 9% this year on the back of higher rates, even factoring in the impact from a banking tax in Spain, and said it expected its net interest income to achieve a high-teens percentage growth this year.

"We are guiding the market for 15-20% growth, primarily based on the repricing of the loan book with the evolution of rates", Chief Financial Officer Leopoldo Alvear told a news conference.

While TSB reported a loss of 6 million euros due to a fine of 48.65 million pounds over a botched IT platform migration, its 2022 statutory pre-tax profit of 183.5 million pounds ($226.74 million) was its highest since 2013.

This allowed TSB to propose a dividend payment of 50 million pounds to its parent in the first quarter of 2023.

Following the IT glitch at TSB, the bank has frozen the disposal of its British unit. Sabadell CEO Cesar González-Bueno on Thursday said "no talks are taking place in this regard".

At a group level, Sabadell said its board agreed to raise its 2022 dividend pay-out ratio to 50% from 31.8% in 2021.

It proposed for the next shareholders' meeting a final cash dividend of 0.02 euro per share and the repurchase of 204 million euros in shares.

($1 = 0.9159 euros)

($1 = 0.8071 pounds)

(Reporting by Jesús Aguado, additional reporting by Emma Pinedo; edited by Tomasz Janowski and Jason Neely)