April 26, 2018 / 5:53 AM / a year ago

UPDATE 2-Sabadell, Bankinter beat profit forecasts as bad loans fall

* Sabadell Q1 net profit 259 mln euros, ahead of forecasts

* Bankinter Q1 net profit 143 mln, beats expectations

* Both lenders keep NPLs under control (Adds details and includes Bankinter net profit)

By Jesús Aguado

MADRID, April 26 (Reuters) - Spanish banks Banco Sabadell and Bankinter exceeded first quarter forecasts on Thursday on lower loan-loss provisions, although their lending businesses remained under pressure from low interest rates.

Both managed to keep their non-performing loans under control and reduced the amount of money they set aside against soured property loans at a time when the European Central Bank is pushing banks to reduce bad loans.

A solid economic recovery in Spain and a property rebound has allowed most of the country’s banks to tackle toxic balance sheets faster than rivals in Italy.

Sabadell, which reduced its toxic real estate assets by 250 million euros in the quarter, is expected to reduce those assets by more than 6 billion euros by 2020 and is already in talks to sell property portfolios worth 10.8 billion euros

Banco Sabadell’s net profit rose 33 percent to 259 million euros, compared with analysts’ forecasts of 211 million euros in a Reuters poll.

Net interest income, a measure of earnings on loans minus deposits costs, rose 1.9 percent to 912 million euros, below forecasts of 920 million euros and was 1.4 percent lower than in the previous quarter.

Spanish banks are struggling to increase earnings from loans as interest rates remain at historic lows and increasing competition erodes margins.

At Bankinter, net profit rose by 15 percent from last year to 143 million euros, compared with analysts expectations of 137 million euros.

At 09.25 GMT, Banco Sabadell shares fell 1.5 percent, while Bankinter’s were down 0.4 percent, underperforming Spain’s blue-chip index Ibex which slightly rose 0.3 percent.


On Thursday, Jaime Guardiola, CEO of Banco Sabadell, which owns British bank TSB, said that fixing an IT outage at TSB took more time than initially expected and said he was optimistic TSB could return to “normality” as of next week.

The outage followed a planned migration of TSB’s computer systems, as it shifted from the platform of its former owner Lloyds Banking Group to a new system called Proteo developed by Sabadell.

On Thursday, Sabadell said it was aware that the service disruption affected some customers and caused a negative reaction in the UK.

Sabadell said that services were restored early on Wednesday and that “normal conditions would be progressively restored over the coming days.”

Sabadell booked non-recurring expenses of 77 million euros in the first quarter mainly due to the IT deal.

Banco Sabadell’s bad loan ratio was unchanged at 5.14 percent at end-March, while Bankinter reduced its ratio slightly to 3.4 percent from 3.45 percent from the previous quarter.

Sabadell finished with a fully-loaded core capital ratio of 12 percent, with the implementation of the new international accounting standards IFRS9, in line with the previous quarter.

Sabadell was one of the two banks to move registered headquarters out of the northeastern region of Catalonia to seek legal certainty after the region’s leaders pressed ahead with a secession campaign in October.

$1 = 0.8214 euros $1 = 0.7172 pounds Reporting By Jesús Aguado; editing by Paul Day, Biju Dwarakanath and Jane Merriman

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