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TSB's botched IT upgrade drives Sabadell to Q2 loss

Banco de Sabadell SA swung to a loss from a year-ago profit in the second quarter, driven by costs related to the botched IT upgrade of British unit TSB Banking Group PLC.

The Spanish lender reported second-quarter group attributable net loss of €138.7 million, compared to a profit of €234.5 million a year ago. EPS for the period was 1 cent, compared to 7 cents a year earlier.

The result was impacted by a €203.1 million charge stemming from TSB's post-IT migration, including €92.4 million in provisions for future customer redress.

Excluding TSB, Sabadell booked a net profit of €14.6 million for the quarter, down from the year-ago €181.4 million.

Group net interest income fell on a yearly basis to €898.6 million from €974.5 million. Net fees and commissions, meanwhile, ticked up to €322.3 million from €306.3 million.

Provisions for nonperforming loans rose year over year to €223.2 million from €180.3 million. Other impairments also increased, to €249.0 million from the year-ago €120.3 million.

For the first half, Sabadell reported group attributable net profit of €120.6 million, down from the year-ago €450.6 million. Excluding TSB, the bank recorded a net profit of €317.7 million, down from €385.3 million a year earlier.

ROE for the first half was 1.45%, down from 6.34% a year ago.

The group's NPL ratio stood at 4.71% at June-end, compared to 5.49% a year earlier, while its NPL coverage ratio improved year over year to 57.0% from 47.1%.

The bank's phased-in common equity Tier 1 ratio, considering recently announced sale of nonperforming assets, stood at 11.9% at June-end, compared to 12.9% at the end of March and 12.7% a year earlier. The fully loaded CET1 ratio, pro forma for the asset sale, was 11.0% at the end of June, compared to 12.0% at March-end and 12.1% a year ago.