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(Sharecast News) - Banco Sabadell shares fell on Thursday after the Spanish lender reported weaker-than-expected third-quarter earnings and warned that lending income will come under pressure next year as European interest rates decline.
The bank missed market forecasts on several key metrics, but reaffirmed all full-year 2025 guidance and set out medium-term targets following the agreed sale of its British unit TSB and the collapse of BBVA's takeover bid earlier this year.
Sabadell reported third-quarter net profit of 414m, down 18% year on year and below analysts' expectations of 449m.
The decline reflected softer trading and foreign-exchange income, lower core revenue and a 31 million charge from Spain's banking tax.
Pre-tax profit undershot consensus by 6.6%, though the gap narrowed to about 3% once one-off impacts from liability management and an FX hedge linked to the TSB sale were excluded.
Net interest income fell 4% to 1.2bn, slightly below expectations, as loan yields slipped and the customer spread narrowed to 2.92% from 2.98%.
The net interest margin eased to 1.93%.
Fees and commissions also disappointed, leaving overall core revenues about 1% below consensus.
Gross operating income missed forecasts by around 3.5%, while costs were broadly in line.
Asset quality remained stable - the non-performing loan ratio improved to 2.45% and the cost of risk increased to 33 basis points, up from 26 basis points in the second quarter but still below year-earlier levels.
The bank's fully loaded CET1 capital ratio strengthened to 13.74%, comfortably above management's target.
Sabadell confirmed that full-year NII should reach about 4.9bn, with low-single-digit fee income growth, flat operating costs and a cost of risk near 35 basis points.
It reiterated a 2025 return-on-tangible-equity target of roughly 14.5% and 1.45bn in shareholder distributions.
Looking further ahead, the bank forecast lower lending income in 2025 as rate cuts reduce margins, with NII expected to fall slightly to 4.9 billion, or 3.6 billion excluding TSB.
Lending income is projected to resume growth in 2026 as loan volumes increase, with NII of 3.9 billion targeted for 2027 without TSB.
The group said it was aiming for net profit above 1.6 billion and a 16% ROTE in 2027.
At 1454 CET (1354 GMT), shares in Banco de Sabadell were down 3.79% at 3.30.
Reporting by Josh White for Sharecast.com.