UPDATE 4-Sabadell expands U.S. footprint with Florida buy

* Sabadell expands U.S. footprint with Florida bank buy

* Bankinter, Sabadell H1 net interest income beats f/casts

* Bad loans still rising, but below expectations

* Bankinter shares down 0.24 pct, Sabadell up 1.23 percent

(Adds Sabadell news conference details, updates shares)

By Judy MacInnes

MADRID, July 23 (Reuters) - Spanish retail bank Sabadell SAB.MC said on Thursday that it plans to merge Florida's Mellon United National Bank (MUNB) with TransAtlantic Bank, which it bought in May 2007.

"The aim of the Mellon buy is to unlock the value in TransAtlantic," Sabadell Chairman Josep Oliu told journalists, after announcing the acquisition of MUNB for up to $142 million.

The new merged bank will become Florida's sixth largest by volume of deposits at $2.5 billion.

Sabadell had had a lot of potential acquisition opportunities in Florida since the beginning of the global crisis, but MUNB seems a good fit, he said.

"It is also a good moment to buy because we think we are close to the low point of the cycle in the United States," Oliu said.

The MUNB buy will shave 12 basis points off Sabadell's core Tier 1 capital ratio leaving this at 7.66 percent, a level with which Sabadell is "comfortable," he added.

Sabadell will now focus on organic growth in the Florida region

"We are not considering any further acquisitions for the time being," the chairman said.

TOUGH LOAN ENVIRONMENT AHEAD

Sabadell and domestic retail peer Bankinter (BKT.MC) both reported on Thursday robust first-half to June net interest revenues, as the banks' charged more on loans than it paid on deposits.

But Bankinter expects a tougher lending environment ahead, its chief financial officer told analyts.

Over the last two quarters, Spanish banks' management of loan rates and business volumes have helped offset rising bad loans.

But Bankinter said it was braced for higher interest rates that will eat into its margins.

"We are getting ready for a tougher margin environment," Bankinter Chief Financial Officer Gloria Ortiz told analysts during a conference call, referring to the expected change in the trend of eurozone interest rates which have fallen to 1 percent, their lowest ever.

BAD LOANS RISE MODERATE

While second quarter bad loans continued to rise from the previous quarter, both Sabadell and Bankinter's bad loans ratios came in lower than analysts' forecasts.

Bankinter said its loan book is less exposed to Spain's property sector, now in a sharp downturn after a decade-long boom, and bad loans at the bank rose to 2.01 percent of total lending at end-June, the lowest in Spain's banking sector.

As a result of its comparatively low bad-loans ratio, Bankinter was able to boost its so-called generic provisions fund to the maximum 573 million euros, Ortiz said.

After the last economic downturn in the 1990s, the Bank of Spain obliged all Spanish banks to set up a special provisions fund against future bad loans.

This regulation has been the main reason why Spanish banks have so far survived the global financial crisis and the impact of the domestic housing crash after a decade-long boom.

At Sabadell, bad loans rose to 3.19 percent at end-June from 2.82 percent at end-March, although BPI analysts noted this was lower than their forecast for 3.34 percent.

Sabadell shares closed up 1.23 percent at 4.53 euros, while Bankinter was down 0.24 percent at 8.29 euros.

"Bankinter is currently trading at a 17 percent premium to the remaining Spanish domestic banks. Although the bank's asset quality could help justify part of this premium, we continue to believe it is currently already reflected in the stock price," Banesto said in a noted.

(Reporting by Tracy Rucinski and Judy MacInnes; writing by Judy MacInnes; Editing by Erica Billingham and David Cowell)