Spanish firm Sabadell raised its 2024 loan revenue forecast and raised its shareholder distribution target on Tuesday as it tries to fend off a hostile takeover bid from BBVA.
Higher-than-expected interest rates have boosted lending income at Spanish banks, which have benefited from charging customers higher costs for variable-rate loans while retaining control over what they pay customers.
Sabadell said it now expects single-digit growth for 2024 in net interest income, the difference between loan income minus deposit costs, compared with a previous estimate of around 3%. .
In April, the bank predicted that net interest income would remain flat in 2025.
In the second quarter, PNI rose 7.8% year-on-year to 1.26 billion euros, which was slightly higher than analysts’ forecasts and up 2.5% from the previous quarter.
Sabadell also announced a shareholder distribution policy of 2.9 billion euros for the results for 2024 and 2025, compared to a previous target of 2.4 billion euros, as part of the bank’s strategy to promote its independent activities.
Sabadell said its board had decided to distribute 60% of the profits linked to the 2024 results to investors, which corresponds to the upper limit of its distribution policy, which is between 40% and 60%.
At 0753 GMT, Sabadell shares were flat, having risen 15% since BBVA’s April 29 offer.
BBVA is offering one newly issued share for every 4.83 Sabadell shares, representing a 30% premium to the target’s closing price on April 29.
The offer had valued Sabadell at 12.28 billion euros, but the 7.5% drop in BBVA shares since then brought it down to 11.36 billion euros, according to Reuters calculations.
The bank’s fully loaded Common Equity Tier 1 ratio, the strictest solvency measure, rose 18 basis points from the previous quarter to 13.48%.
Net profit rose 34.5% to 483 million euros between April and June, above the 422 million euros expected by analysts, thanks to an increase in new business loans, mortgages and consumer loans.
The increased margins helped the bank improve its return on tangible equity (ROTE), a measure of profitability, to 13.1% from 12.2% in the previous quarter.
In that context, the bank predicts that ROTE will be above 13% by the end of 2024, while the previous target was above 12%. For 2025, it also aims for a ROTE of more than 13%.
At its UK unit, net profit on a standalone basis fell 18% year-on-year in the second quarter to £41m, following an 8% drop in loan income.
