RBC Capital Markets has issued a fresh forecast for Banco de Sabadell ahead of the Spanish lender's second-quarter earnings report on July 24, projecting modest growth in a key revenue metric. The investment bank maintained its 'sector perform' rating on the stock and expects the bank's net interest income to rise 1.6% in 2026, excluding contributions from its former UK subsidiary TSB.
Net interest income, or NII, is the difference between what a bank earns on loans and pays out on deposits. It is a core driver of profitability for traditional banks like Sabadell, and even small changes can have a meaningful impact on earnings. RBC's estimate of 1.6% growth is slightly above management's own target of 'over 1%' for 2026, suggesting the bank may be able to eke out a bit more revenue from its lending and deposit operations than previously guided.
Distributions and Capital Returns
Beyond interest income, RBC also projected that Sabadell will distribute a total of €2.53 billion to shareholders over the 2026-2027 period, excluding any special dividend from TSB. TSB, which Sabadell sold to Banco de Comercio in 2021, still contributes to the bank's capital position through retained earnings. The €2.53 billion figure includes ordinary dividends and potential share buybacks, reflecting the bank's strong capital generation and commitment to returning excess capital to investors.
RBC's forecast aligns with Sabadell's midterm targets, which call for a gradual improvement in profitability and capital returns. The bank has been working to streamline its operations and focus on its core Spanish market, while also benefiting from higher interest rates in the eurozone, which have boosted NII across the sector.
What This Means for Investors
For everyday investors, RBC's analysis provides a snapshot of what to expect from Sabadell's earnings next week. The 1.6% NII growth forecast is modest but positive, indicating that the bank is not facing a sharp downturn in lending income despite a potentially slowing economy. However, the 'sector perform' rating suggests RBC sees the stock as fairly valued relative to peers, meaning there may be limited upside in the near term.
Investors should also watch for any updates on cost-cutting measures, loan loss provisions, and the bank's outlook for the Spanish economy, which could affect future earnings. The broader European banking sector has been under pressure from falling interest rates, but Sabadell's focus on Spain and its capital return plans may offer some support.
As earnings season heats up, other banks like FinecoBank are also reporting, and investors can compare performance across the sector. Meanwhile, the S&P 500 has been hitting new highs, but European banks face different headwinds, including slower economic growth and regulatory changes.
Key Numbers to Watch
- Net interest income growth: 1.6% in 2026 (RBC estimate), slightly above management's 'over 1%' target.
- Total distributions: €2.53 billion for 2026-2027, excluding TSB's special dividend.
- Rating: Sector perform, indicating neutral outlook.
RBC's note also highlighted that its 2027 NII view is broadly in line with Sabadell's midterm goals, suggesting the bank is on track to meet its targets. However, investors should be aware that these forecasts are subject to change based on economic conditions, interest rate decisions by the European Central Bank, and competition in the Spanish banking market.
For those looking at the broader market, the STOXX 600 has been lifted by resilient earnings and AI optimism, but banks like Sabadell are more tied to domestic economic trends. The upcoming earnings report will be a key test of whether the bank can maintain its momentum.
