Banco Sabadell reported a 2.8% drop in net profit for 2025, reaching €1.78 billion. This decline comes as the Spanish lender prepares to finalize the sale of its UK unit, TSB Banking Group, to Banco Santander for €2.65 billion. The bank aims to bolster its capital buffers with this transaction, which is expected to close in Q2 2026.

Net interest income experienced a 3.7% decrease, totaling €4.84 billion, due to ECB rate cuts that compressed margins. The customer spread also narrowed. However, asset quality improved, with the non-performing loan ratio falling and Stage 3 coverage increasing. These changes reflect broader trends in the European banking sector as they adapt to a changing economic environment.

Performing loans saw a 2.4% increase, driven by mortgage growth in Spain and expansion in Mexico. Sabadell's CET1 ratio stood at 13.11% at year-end. The bank also issued new debt instruments. Investors will be watching how Sabadell deploys the capital from the TSB sale and any potential impact on future profitability.

Looking ahead, the market will closely monitor the final sale price of TSB, which will be adjusted based on its tangible net asset value. Furthermore, analysts are assessing Sabadell's strategic moves, like its distribution plans and overall financial performance against the backdrop of a challenging economic climate, and the sale of TSB.