Key Takeaways:
- Strategic Pivot: Banco de Sabadell (SAB) is transforming into a pure-play Spanish lender after agreeing to sell its U.K. subsidiary, TSB, to Banco Santander for €3.3 billion.
- Price Projection: Our model suggests SAB stock is effectively “dead money” in terms of price appreciation, with a target of €3.41 per share by December 2027.
- Expected Returns: This target implies a modest 1.9% annualized return (IRR) in our Mid Case, suggesting the massive rally has fully played out.
- Special Dividend: While capital appreciation may be limited, shareholders approved a €0.50 per share extraordinary dividend related to the TSB sale.
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Banco Sabadell (SAB) has been one of the best-performing bank stocks in Europe, rallying from under €1.00 to over €3.35.
However, the “easy money” has already been made.
The bank recently secured a major victory by agreeing to sell its TSB subsidiary to Santander in July 2025. This deal allows Sabadell to exit a challenging U.K. market, simplify its business, and focus entirely on its higher-return Spanish franchise.
In the third quarter of 2025, the “new” Sabadell is already taking shape. Performing loans in the core business grew 5.9%, and the bank’s return on tangible equity (RoTE) is pushing toward double digits.
But with the stock price now reflecting these wins, investors need to ask: Is there any gas left in the tank?
See analysts’ full growth forecasts and estimates for Banco de Sabadell stock (It’s free) >>>
What the Model Says for SAB Stock
We evaluated Sabadell’s potential by stripping out the TSB business and focusing on the profitability of its core Spanish operations.
Using a forecast of (5.2%) revenue growth (reflecting the divestiture) and 55% operating margins, our model projects the stock will move sideways from €3.35 to €3.41 over the next two years.
This assumes the market applies a 9.1x P/E multiple, consistent with its current valuation but leaving little room for expansion.
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Our Valuation Assumptions
TIKR’s Valuation Model lets you plug in your own assumptions for a company’s revenue growth, operating margins, and P/E multiple, and calculates the stock’s expected returns.
Here’s what we used for SAB stock:
1. Revenue Growth: (5.2%)
The decline is driven by the sale of TSB, which removes a significant chunk of top-line volume. But this is “good” shrinkage. TSB’s volumes were impacted by sterling depreciation and lower margins compared to the Spanish business.
By shedding TSB, Sabadell is shrinking its revenue base but improving the quality of that revenue. The remaining core business in Spain is healthy, with performing loan volumes growing 5.9% year-over-year and strong momentum in commercial banking.
We used a (5.2%) forecast to reflect the structural reset of the business size post-sale, rather than an operational failure.
2. Operating Margins: 55.0%
This is where the “shrink to grow” strategy pays off.
Sabadell is exiting a high-cost environment in the U.K. to focus on Spain, where it has better pricing power and scale. The bank is also executing a strategic plan that includes cost-cutting measures and a focus on “risk-adjusted returns.”
In Q3, the cost of risk dropped to 37 basis points, improving by 18 basis points year-over-year. This directly boosts the bottom line.
We forecast 55% operating margins, reflecting the new, leaner cost structure and the removal of the lower-margin U.K. operations.
3. Exit P/E Multiple: 9.1x
Sabadell stock currently trades at roughly 9.1x earnings, which is a recovery from the distressed levels seen a few years ago.
While the bank has successfully “crystallized value” through the TSB sale, the market is unlikely to award it a premium multiple given the lack of explosive top-line growth.
We maintain a 9.1x exit multiple, assuming the stock holds its current rating but does not expand significantly further. The primary return for investors here will likely come from dividends (including the €0.50 special payout) rather than share price appreciation.
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What Happens If Things Go Better or Worse?
Different scenarios for SAB stock through 2027 show limited upside across the board, confirming the view that the stock is currently priced for perfection (these are estimates, not guaranteed returns):
- Low Case: If loan growth in Spain stalls and the TSB exit costs are higher than expected → -2.3% annual return.
- Mid Case: If the bank hits its targets and distributes the TSB proceeds efficiently → 1.9% annual return.
- High Case: If the Spanish economy outperforms and credit demand surges → 4.8% annual return.
Even in the High Case, the returns are modest. Sabadell has transformed from a “growth turnaround” story into a mature “capital return” story.
For investors, the thesis now relies almost entirely on collecting the dividend yield, as the share price itself offers little room for further gains.
See what analysts think about SAB stock right now (Free with TIKR) >>>
How Much Upside Does Banco de Sabadell Have From Here?
With TIKR’s new Valuation Model tool, you can estimate a stock’s potential share price in under a minute.
All it takes is three simple inputs:
- Revenue Growth
- Operating Margins
- Exit P/E Multiple
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
