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* Second quarter net profit rises to 147 mln euros
* Net interest income increases 3.9% year on year
* TSB books net profit of 41 mln pounds in second quarter
* Sabadell says it is on track to deliver strategic plan
(Adds comments from Sabadell's CEO, analysts, shares)
By Jesús Aguado
MADRID, July 29 (Reuters) - Lower loan loss provisions and
costs and a boost from lending activity at its British unit TSB
allowed Spain's Banco Sabadell to almost treble its
net profit in the second quarter compared to the same period a
year ago.
The country's fourth-largest bank by assets reported a net
profit of 147 million euros ($173.6 million) in the April to
June period. Analysts polled by Reuters expected a net profit of
86 million euros.
The lender said its board had proposed a cash dividend
pay-out of 30% against 2021 results, following ongoing
conversations with the supervisor..
In Britain, TSB booked on standalone basis a net profit of
41 million pounds in the second quarter compared to a loss of 41
million pounds in the same period last year.
Shares in Sabadell rose 2%, outperforming an increase of
0.8% by Spain's leading blue-chip index Ibex-35.
Analysts welcomed a broadly solid set of results driven by
lower provisions, with broker Jefferies highlighting that TSB's
profit was also supported by a positive tax adjustment.
Sabadell's acquisition of TSB in 2015 backfired when IT
glitches sent costs spiralling in 2018. It has for now frozen
its plans to sell TSB until it completely turns around its
business.
On Thursday, Sabadell's Chief Executive Officer Cesar
Gonzalez-Bueno told analysts that TSB was also on track to meet
its costs savings target of 730 million pounds by 2023 and added
this unit "recorded its best ever mortgage lending origination
in June."
Banks across Europe are under growing pressure from low
interest rates as they grapple with the COVID-19 impact but a
more benign economic scenario also allowed Sabadell to reduce
its cost of risk, which acts as an indicator for potential
losses in the future, to 53 basis points from 69 basis points in
March.
It did not book coronavirus provisions in the quarter.
Sabadell also said it was on track to meet its overall
strategic plan year-end targets, which foresees a low single
digit growth in net interest income, earnings from loans minus
deposit costs, in 2021.
Its net interest income already rose 3.9% in the second
quarter compared to the same quarter a year ago to 852 million
euros, slightly above analysts' forecasts of 848 million euros,
thanks to an increase in mortgage lending in Spain and the UK.
Its three-year strategy sets a return on equity target
(ROTE), a measure of profitability, of more than 6% by the end
of 2023. It finished the first half with a ROTE of 3.88%.
Sabadell's failure to merge with bigger rival BBVA
in November added pressure, and the bank is also expected to
focus on new cost-cutting measures in Spain.
The lender's fully loaded core Tier 1 capital ratio remained
stable at around 12% in June.
(Reporting by Jesús Aguado; additional reporting by Emma
Pinedo; editing by Inti Landauro and David Evans)
