Last Update 15 Dec 25

Fair value Increased 0.19%

SAB: Dividend Yield And Post Takeover Fair Value Will Shape Share Performance

Banco de Sabadell's analyst price target has edged higher to approximately EUR 3.44, up from around EUR 3.43 previously. Analysts point to slightly improved profit margin expectations and a still-supportive valuation backdrop, despite a cluster of neutral and sector-perform ratings around the EUR 3.00 to EUR 3.50 range.

Analyst Commentary

Analyst opinions on Banco de Sabadell remain finely balanced, with price targets clustering in a narrow range around the current market level. Recent moves in target prices reflect a shift toward viewing the shares as closer to fair value, even as income and corporate actions offer potential upside drivers.

Bullish Takeaways

Bullish analysts highlight that modestly higher target prices, despite rating downgrades, signal that earnings power and capital generation still justify incremental upside from prior expectations.
The projected double digit dividend yield over the near term is seen as a key support for the share price, underpinning the valuation even if earnings growth slows.
Some bullish analysts view the current price range as an attractive entry point for income focused investors, given the combination of cash returns and still reasonable earnings multiples.
Takeover dynamics are regarded as a potential catalyst, with a successful improvement in terms potentially unlocking further value if execution is managed effectively.

Bearish Takeaways

Bearish analysts argue that the shares now trade close to fair value, which limits scope for multiple expansion without a clear acceleration in growth or profitability.
Neutral and hold stances emphasize execution risk around strategic transactions, including uncertainty over whether improved takeover terms would sufficiently enhance shareholder value.
Recent downward and upward revisions to price targets within a tight band highlight concerns that earnings momentum may be peaking, which could cap upside to current forecasts.
There is caution that, despite supportive income, any disappointment on capital deployment or regulatory outcomes could pressure the valuation back toward the lower end of the target range.

What's in the News

BBVA’s initial April 2024 all share proposal to acquire Banco de Sabadell for €11.5 billion, offering 1 BBVA share for every 4.83 Sabadell shares, marked the start of a multiyear takeover saga. (Key Developments)
After Sabadell’s board rejected the bid as undervaluing its standalone prospects, BBVA relaunched a hostile offer in May 2024 on the same terms. It later revised the offer in October 2024 to 1 BBVA share plus €0.29 in cash for every 5.0196 Sabadell shares. (Key Developments)
The transaction cleared multiple regulatory hurdles, including approvals from the European Central Bank, European Commission, Spain’s National Commission for Markets and Competition, and other competition authorities between 2024 and 2025. (Key Developments)
Sabadell’s board repeatedly advised shareholders to reject the offer, most recently in September 2025, arguing that the enhanced terms still undervalued the bank relative to its intrinsic and strategic value. (Key Developments)
On October 16, 2025, BBVA cancelled the acquisition after only 25.5% of Sabadell’s voting rights were tendered, below the minimum acceptance threshold, causing the hostile bid to lapse. (Key Developments)

Valuation Changes

Fair value has risen slightly to approximately €3.44 per share, from about €3.43 previously, indicating a marginal upward adjustment in intrinsic value estimates.
The discount rate has fallen slightly to around 9.41 percent from about 9.42 percent, reflecting a modestly lower perceived risk or cost of equity in the valuation model.
Revenue growth expectations have edged marginally lower to roughly minus 1.67 percent from around minus 1.67 percent, pointing to a very small deterioration in the top line outlook.
The net profit margin has improved slightly to about 29.90 percent, up from roughly 29.89 percent, suggesting a minimal uplift in expected profitability.
The future P/E has increased marginally to around 10.87 times from about 10.86 times, implying a very small expansion in the valuation multiple applied to forward earnings.

Robust loan and customer fund growth, paired with successful digital transformation and cost controls, strengthen revenue streams and operational efficiency.
Strategic focus on the Spanish core and improved asset quality lower risk and support increased shareholder returns and long-term earnings growth.
Reduced international reach and ongoing margin pressures heighten Sabadell's reliance on Spain, exposing it to local risks and constraining future growth and shareholder returns.

Catalysts

About Banco de Sabadell

Provides banking products and services to personal, business, and private customers in Spain and internationally.What are the underlying business or industry changes driving this perspective?

Strong and accelerating loan growth-especially in Spanish mortgages, consumer lending (up 20%+ year-on-year), SME/corporate, public sector, and international portfolios-suggests robust underlying demand for banking services and positions the company for future revenue expansion and higher net interest income.
Sustained increase in customer funds, particularly through off-balance sheet investment and savings products (up 6.7% year-on-year), demonstrates growing customer engagement and enables greater cross-selling of fee-based products, supporting long-term growth in recurring fee income and revenue diversification.
Ongoing digital transformation and disciplined cost control are driving efficiency gains, as evidenced by contained operating expenses (costs down 2.6% quarter-on-quarter ex-TSB), which should bolster net margins and support higher return on equity over time.
The sale of TSB and focus on the Spanish core franchise reduces group risk, improves capital ratios, and enables capital redeployment, enhancing stability and providing capacity for increased shareholder returns (including extraordinary dividends, higher payout ratio), which will positively impact earnings per share and tangible book value.
Improved asset quality-reflected by declining NPL ratios and higher coverage, as well as lower cost of risk guidance-signals effective risk management and lays the groundwork for reduced future credit provisions, further supporting bottom-line earnings growth.

Banco de Sabadell Earnings and Revenue Growth

Banco de Sabadell Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Banco de Sabadell's revenue will grow by 5.2% annually over the next 3 years.
Analysts assume that profit margins will shrink from 31.8% today to 26.1% in 3 years time.
Analysts expect earnings to reach €1.8 billion (and earnings per share of €0.37) by about August 2028, down from €1.9 billion today. The analysts are largely in agreement about this estimate.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 11.3x on those 2028 earnings, up from 8.9x today. This future PE is greater than the current PE for the GB Banks industry at 9.2x.
Analysts expect the number of shares outstanding to decline by 1.36% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 9.44%, as per the Simply Wall St company report.

Banco de Sabadell Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The sale of TSB, while resulting in an extraordinary dividend, significantly reduces Banco de Sabadell's international diversification, increasing the bank's reliance on the Spanish economy and exposing its revenues and earnings to local economic downturns or demographic stagnation in Spain.
Guidance for net interest income (NII) is now only expected to be around €4.9 billion, revised from a higher expectation, due to currency depreciation and ongoing pressure from lower customer margins and reduced liquidity contribution-trends that, if prolonged by a low/negative interest rate environment, could structurally compress net interest margins and impact revenue and profitability.
Despite improved asset quality and lower provisions in the current period, credit growth is heavily skewed to mortgages and SMEs within Spain; a demographic shift towards an aging population could ultimately reduce demand for credit products, limiting future loan growth and squeezing longer-term revenue streams.
Ongoing cost control is helping current results, but cost increases related to staff (due to collective bargaining agreements) and operational expenses are evident, while historical underperformance in digital transformation compared to larger peers means the bank may struggle to maintain margin improvements if industry competition from neobanks and fintechs accelerates, impacting net margins and earnings.
The bank references regulatory impacts such as the new bank tax and higher capital distribution requirements; as ESG regulations and broader banking rules tighten further, Sabadell may face higher compliance costs and capital retention, reducing its flexibility for dividend payouts and increasing operational expenses, ultimately pressuring long-term returns to shareholders.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of €3.113 for Banco de Sabadell based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €4.0, and the most bearish reporting a price target of just €2.3.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €7.0 billion, earnings will come to €1.8 billion, and it would be trading on a PE ratio of 11.3x, assuming you use a discount rate of 9.4%.
Given the current share price of €3.22, the analyst price target of €3.11 is 3.5% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

SAB: Dividend Yield And Takeover Dynamics Will Shape Future Performance