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UPDATE 1-Sabadell's Q3 net profit falls 77% as provisions rise, beats forecast

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MADRID, Oct 30 (Reuters) - Banco Sabadell’s third-quarter net profit fell 77% from a year ago due to higher provisions, and the Spanish lender on Friday announced an efficiency plan, entailing yet unspecified job cuts in Spain, to counter the impact of the coronavirus pandemic.

Overall loan loss provisions in the July-September period rose to 302 million euros ($357 million) from 194 million euros a year ago.

Still, Spain’s fifth-largest lender beat market expectations thanks to a recovery in its banking activity, both in new mortgage and consumer lending. Analysts surveyed by Reuters had expected a net profit of 13 million euros.

In an attempt to offset the impact from the COVID-19 pandemic, banks are focused on cutting costs, either on a standalone basis or through tie-ups.

Sabadell said its efficiency and digital transformation plan would start in the fourth quarter and be financed with capital gains from the sale of a part of its debt portfolio, with a neutral impact on capital.

The bank did not spell out how many employees would be affected, though a source with knowledge of the matter told Reuters on Wednesday that the bank could cut up to 2,000 jobs in Spain in 2021.

“This efficiency plan will essentially be based on voluntary and negotiated incentivised redundancies and early retirement,” Sabadell said in its statement.

The plan is expected to produce an annual positive impact on pre-provision profit of 115 million euros. That would include expected recurring cost savings at home and from an accelerating restructuring at its British arm TSB, to be completed in 2021 with the aim of returning it to profitability.

TSB booked a loss of 84 million euros in the third quarter. (Reporting by Jesús Aguado, editing by Andrei Khalip)

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