Madrid, Feb 7 (Reuters) - Sabadell took steps on Friday to persuade shareholders of its independence by increasing its payout policy to 3.3 billion euros ($3.43 billion) amidst a hostile takeover bid from its larger rival, BBVA.
The Spanish government is reviewing the takeover bid while Sabadell has rejected BBVA's 12 billion euro offer, citing an undervaluation of its growth potential.
Following Sabadell's stronger-than-expected financial results and increased payout, Barclays analysts expressed positivity, although Sabadell's shares dropped by 1%, despite having risen by 27% since the beginning of the year.
Sabadell boosted its payout target after surpassing fourth quarter and annual forecasts. Quarterly net profit surged by 75% year-on-year to 532 million euros, with full-year net profit for 2024 increasing by 37% to 1.83 billion euros, driven by higher revenues in Spain.
Spanish banks have profited from higher loan costs, mainly due to variable rates passed on to customers, while savers have seen smaller returns.
Sabadell announced the shareholder payout policy based on 2024 and 2025 results, raising it from the previous target of 2.9 billion euros.
Improved earnings and a positive impact of 109 million euros from extraordinary items in 2024 allowed Sabadell to elevate its return on tangible equity ratio to 14.9% by the end of 2024, up from 13.2% in September.
Excluding one-time gains, the recurring return on tangible equity increased to 14%, with a forecast to remain around 14% for 2025 and beyond, exceeding the previous 2025 prediction above 13%.
Among the shareholder distributions was a 1 billion euro share buyback using 2024 earnings, along with a 1.1 billion euro cash distribution as part of its 60% payout policy, at the upper end of its 40%-60% range.
Sabadell intends to allocate 1.2 billion euros for dividends and share buybacks based on 2025 results.
Net profit at Sabadell's Spain-based operations escalated by 65% year-on-year in the fourth quarter, while net interest income, the difference between loan earnings and deposit costs, increased by 1% compared to the previous quarter.
Anticipating a low-single-digit decline in Net Interest Income (NII) without TSB in 2025 due to lower rates pressuring margins, Sabadell projected NII of over 4.9 billion euros for 2025.
In 2024, the group's NII increased by 6% to 5.02 billion euros. It forecast TSB's NII to grow by a high single digit in 2025.
TSB saw a more than threefold increase in net profit in the fourth quarter of 2023, with lending income up by 7%. The bank expected a strong single-digit growth in TSB's NII for 2025.
TSB's full-year net profit climbed by 18.9% to 208 million pounds ($259.06 million) due to mortgage growth, with a 15% net profit increase predicted for 2025 and further growth in 2026.
($1 = 0.8029 pounds)
($1 = 0.9627 euros)