Sabadell's Q1 net profit falls 29% hit by higher costs and lower lending income (updated)

Banco De Sabadell, S.a

05/05/2026 05:50

Q1 net profit falls 29% y/y to 347 million euros, below forecasts

Q1 NII falls 3.5% y/y, down 2.5% q/q

Sees NII rising more than 1% in 2026

Sees ROTE of around 16% in 2027

Recasts to lead on earnings miss expectations, includes details on costs in paragraph 4, shares and comments from analysts in 5, ROTE target for 2027 in 7

By Jesús Aguado

MADRID, May 5 (Reuters) - Spanish bank Sabadell's SABE.MC first-quarter earnings slid 29% mainly due to rising costs and lower lending income, creating a challenge as the lender shifts focus to a standalone strategy after the sale of British unit TSB.

Spain's fourth-largest lender by market value reported on Tuesday a net profit of 347 million euros ($405.16 million) in the January to March period, missing analysts' average forecast of 424 million euros in a poll by Reuters.

Costs rose 13.4% year-on-year in the quarter due to 55 million euros in non-recurrent expenses, linked to an early retirement plan in Spain, and a 14 million euro charge related to the sale of TSB.

The bank expects those retirement costs to rise to 90 million euros in 2026, with annual gross savings of 40 million euros from 2027 onwards, and one-third to be materialised in 2026.

Shares in Sabadell, which have fallen more than 3% this year, slipped 0.4%, with RBC Capital highlighting lower than expected revenues.

The shares surged 80% in 2025 as Spanish banks benefited from higher loan growth on the back of solid economic growth in Spain. However, the bank has more recently felt the impact of European Central Bank rate cuts between June 2024 and June 2025, with lower client borrowing costs squeezing margins.

Analysts will be watching to see if the bank's incoming CEO Marc Armengol can maintain growth rates without TSB, which accounted for 18% of the group's net profit in the quarter.

In 2027, Sabadell aims to reach a return-on-tangible-equity ratio (ROTE), a measure of profitability, of 16% compared to a recurrent ROTE of 14.1% currently, backed by higher loans in Spain.

Though the sale of TSB only closed at the start of this month, the bank provided a pro-forma comparison to strip out TSB for net interest income, or earnings on loans minus deposit costs.

Sabadell's net interest income (NII) fell 3.5% year-on-year in the first quarter to 872 million euros, in line with analysts' forecasts. NII fell 2.5% against the previous quarter.

The bank expects NII to grow by more than 1% this year.

($1 = 0.8565 euros)

 (Reporting by Jesús Aguado; Editing by Emma Pinedo, Rashmi Aich and Susan Fenton)

 ((jesus.aguado@thomsonreuters.com; +34 91 835 68 32; Reuters Messaging: Reuters Messaging: jesus.aguado.reuters.com@reuters.net))