Bank of America (BofA) has updated its financial forecasts for Banco de Sabadell, the Spanish lender, ahead of its second-quarter earnings report scheduled for July 24th. The revision comes after Sabadell completed the sale of its UK subsidiary, TSB, in late April, a move that significantly reshapes the bank's financial profile.
What the New Forecasts Show
BofA now expects Sabadell to report a second-quarter net profit of 739 million euros. That figure is well above the same period last year and also exceeds the consensus estimate compiled by Visible Alpha. However, the headline number is heavily influenced by a one-time event: the broker models a roughly 350 million-euro gain directly linked to the TSB disposal.
Because TSB is now classified as "discontinued operations"—meaning it's no longer part of Sabadell's ongoing business—BofA has stripped it out of its forward projections. This treatment is standard practice when a bank sells a major unit, as it gives investors a clearer view of the continuing business's performance.
Underlying Trends Are More Mixed
When you remove the TSB gain, the picture becomes less straightforward. BofA sees total revenue rising only slightly to about 1.27 billion euros. The broker is also trimming some longer-term assumptions, particularly net interest income (NII)—the difference between what a bank earns on loans and pays on deposits—for 2027 and 2028.
The offset comes from cost discipline and potentially lower loan losses. Because of these factors, BofA still nudged its earnings per share (EPS) estimate up by about 1% for those years. Even so, the firm cut its overall profit and revenue projections for 2026 through 2028 and kept its neutral rating and 3.60-euro price target unchanged.
This kind of mixed adjustment is common after a major divestiture. For context, similar dynamics have been seen in other banking deals, such as when RBC adjusted ABN Amro forecasts after its NIBC acquisition shifted timelines.
What It Means for Investors
The unchanged 3.60-euro price target carries a subtle but important signal. When an analyst raises forward EPS but keeps the price target flat, the implied valuation multiple—the price-to-earnings (P/E) ratio—usually falls. That's because the target is essentially calculated as "multiple × earnings." So BofA's update suggests that while near-term earnings get a boost from the TSB gain, the underlying business may not support a higher valuation.
For Sabadell shareholders, the key question is what the bank can earn after TSB is gone. The 350 million-euro gain is a one-off, non-repeatable event. If the market focuses on the modest underlying revenue trend, it may be harder for the stock's valuation to expand, even if the headline quarterly profit looks clean.
This situation echoes other recent analyst moves in the banking sector. For instance, Citizens Financial saw a 35% profit rise driven by higher loan income and capital markets fees, but investors there also focused on sustainability. Similarly, Europe's earnings growth often hides dependence on one-off factors, as seen when a 16.7% profit jump dropped to 6.4% after stripping out energy sector gains.
Looking Ahead
Investors will likely watch Sabadell's July 24th earnings call for details on the bank's strategy post-TSB, including how it plans to deploy the sale proceeds and whether it can sustain cost discipline. The broader European banking environment, with rising interest rates and economic uncertainty, will also play a role.
For now, BofA's update serves as a reminder that headline earnings can be misleading. The 739 million-euro profit may grab attention, but the underlying story is about a bank in transition, and the market's reaction will depend on whether investors see a path to sustainable growth without the TSB crutch.
