By Jesús Aguado
Oct 30 (Reuters) – Banco Sabadell reported on Friday that its third-quarter net profit fell 77% compared to a year ago due to higher provisions, announcing an efficiency plan that involves unspecified job cuts in Spain to offset the impact of the COVID-19 pandemic.
Provisions against bad debts in the July-September period rose to 302 million euros (357 million dollars), compared to 194 million a year earlier.
Even so, the bank, the fifth largest in Spain, exceeded market expectations thanks to the recovery of its banking activity, both in terms of new mortgages and consumer loans. Analysts polled by Reuters had expected a net profit of 13 million euros.
In an attempt to offset the impact of the COVID-19 pandemic, banks are focusing on reducing expenses, either independently or through deals.
Sabadell said that its efficiency and digital transformation plan will begin in the fourth quarter and will be financed with the capital gains from the sale of part of its debt portfolio, with a neutral impact on capital.
The bank did not specify how many employees will be affected, although a source with knowledge of the matter told Reuters on Wednesday that the bank could cut up to 2,000 jobs in Spain in 2021.
“This efficiency and transformation plan will be based on the voluntary and agreed negotiation of incentivized leave and early retirement,” Sabadell said in its statement.
The bank expects the initiative to have a positive annual impact on the margin before endowments of 115 million euros. This would include recurring cost savings expected in Spain and an accelerated restructuring in its British arm TSB, to be completed in 2021 with the aim of returning to profitability.
TSB posted a loss of 84 million euros in the third quarter.
(Edited by Andrei Khalip; translated by Andrea Ariet in Gdansk and Tomás Cobos)