The bank wants to makes its computer systems leaner and more efficient to handle more data and transactions from customers´ mobile phones, said Montes.

The bank intends to set up new services for its customers such as account aggregation, credit risk assessment and cash pooling, he said, adding Sabadell will pay around 100 million euros a year to IBM.

The U.S. tech firm is offering hybrid cloud services developed by its recently acquired Red Hat unit, said Marta Martinez, IBM's head for Spain, Portugal, Greece and Israel.

Traditional banks are investing huge amounts to upgrade their IT systems to keep up with the rising competition from new on-line banks which, with no branches and no physical infrastructure, are able to offer cheap, mobile-only banking services.

IBM will also help Sabadell's U.K. bank TSB, which experienced severe IT glitches in the past years.

The bank will open a new technology center in Edinburgh where it will handle all the British unit's data.

(Reporting by Inti Landauro, editing by Louise Heavens, Kirsten Donovan)