Banco Sabadell announced on Tuesday that its first-quarter net profit fell by 29% year-on-year, driven by a decline in interest and fee income alongside rising costs, as the lender focuses on its standalone strategy following the sale of its British subsidiary TSB.

Spain's fourth-largest bank by market capitalization reported a net profit of 347 million euros for the January-to-March period, falling short of the 424 million euros expected by analysts polled by Reuters.

Total costs rose by 13.4% year-on-year during the quarter, impacted by 55 million euros in non-recurring expenses related to an early retirement plan for staff in Spain, and a 14 million euro charge linked to the TSB sale.

Although the TSB sale did not close until May 1, the bank also provided a pro-forma comparison excluding TSB, which showed a 28% decline in net profit to 284 million euros for the quarter, compared to a forecast of 335 million euros.

Excluding TSB, Sabadell's net interest income—representing revenue from loans minus deposit costs—fell by 3.5% year-on-year on a pro-forma basis to 872 million euros, in line with analyst expectations.

(1 dollar = 0.8482 euros)

(Reporting by Jesús Aguado; editing by Emma Pinedo; Spanish editing by Benjamín Mejías Valencia)