* Books 2.3 bln in impairments to clean up its balance sheet

* Shares in Sabadell rise 0.4% on cleaning effort

* Appoints new CFO to present new strategy along incoming CEO

* TSB books a loss of 220 mln in 2020, 65 mln euros in Q4

MADRID, Feb 1 (Reuters) - Spain's Sabadell opted to clean up its books in the fourth quarter and booked higher impairments due to the sale of non-performing assets and COVID-19 provisions, triggering wider-than-expected losses ahead of its new strategic plan in May.

Banks across Europe, which were already struggling to cope with record low interest rates, have been forced into further cost cuts by the economic impact of the pandemic.

In the fourth quarter, Sabadell booked a loss of 201 million euros, against expectations from analysts polled by Reuters for a 132 million euro loss.

Overall impairments of 2.3 billion euros cut its full-year net profit to 2 million euros, down 99.7% from 2019.

Shares in Sabadell rose 0.4%, in line with Spain's leading blue-chip Ibex-35. Analysts from UBS welcomed the bank's effort to clean up its balance sheet while highlighting a recovery in lending income.

The clean-up included the disposal in the quarter of 466 million euros of what the group termed problematic assets, including non-performing loans and foreclosed assets.

Overall quarterly net interest income, a measure of earnings on loans minus deposit costs, fell around 6% from a year earlier to 854 million euros, but edged up 1.5% from the preceding quarter thanks to support from corporate lending.

STRATEGY, TSB IN FOCUS

Sabadell's failure to merge with bigger rival BBVA in November added pressure, with investors worried about its ability to handle rising bad loans stemming from the COVID-19 crisis.

In December Sabadell appointed Cesar Gonzalez-Bueno as its incoming CEO to present the lender's new strategy and digital drive, which is expected to include the potential sale of its loss-making British unit TSB and possible new cost-cutting measures.

Analysts at BofA however believed Sabadell "will struggle to cut costs fast enough to make up for revenue headwinds and improved profitability".

In the fourth quarter, Sabadell completed the reduction of around 1,800 jobs in Spain, which is expected to deliver 141 million euros in savings. That resulted in charges of 314 million euros.

TSB also cut its workforce by 685 employees and closed 93 branches, booking 101 million euros in restructuring costs.

Sabadell now expects TSB to break even in 2021 after booking a loss of 220 million euros last year, 65 million euros of which were reported in the last quarter.

On Monday, Sabadell announced the appointment of Bankia Chief Financial Officer Leopoldo Alvear as its new CFO to replace Tomas Varela.

($1 = 0.9014 euros) (Reporting by Jesús Aguado; additional reporting y Emma Pinedo; Editing by Inti Landauro and Jan Harvey)