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Provisions dent Sabadell's Q4'16 profit

Banco de Sabadell SA reported fourth-quarter 2016 net attributable profit of €63.5 million, down from €221.6 million in the previous quarter.

The bank said Jan. 27 that the result was impacted by extraordinary provisions, which include the impact of a court ruling on floor clauses, and by provisions of TSB Banking Group Plc, as well as the year-end contribution to Spain's deposit guarantee fund.

Excluding the British unit, attributable net profit for the period was €59.7 million, compared to €191.8 million in the third quarter of 2016.

Consolidated net interest income for the quarter amounted to €946.9 million, compared to €948.4 million in the previous quarter. Total provisions and impairments rose to €313.6 million from €211.7 million in the previous quarter.

For the full year 2016, attributable net profit rose to €710.4 million from €708.4 million in 2015. Excluding TSB, attributable net profit fell to €531.1 million from €586.4 million.

Insolvency provisions and other impairments, which include the impact of floor clauses, amounted to €1.43 billion at the end of 2016, compared to €2.33 billion at 2015-end. The charge represents a group-level reduction of 38.8%.

The bank's fully loaded common equity Tier 1 ratio stood at 12.0% at the end of 2016, which Sabadell said is "comfortably above regulatory requirements."

Meanwhile, TSB's statutory profit after tax for 2016 rose 43.9% year over year to £127.8 million. The bank's IT outsourcing fees paid to Lloyds Banking Group Plc is expected to increase by more than £100 million in 2017 before TSB's new banking platform is launched toward the end of 2017.

That increase in outsourcing fees, coupled with the prevailing low interest rates and the continued roll-off of the mortgage enhancement portfolio, is expected to lead to "a significant reduction" in TSB's profit before tax in 2017, the bank said Jan. 26.