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It’s a minor detail, but it all counts. Sabadell barely had four minutes of courtesy time on Tuesday to digest BBVA’s new attempt to undertake a merger between the two banks before the market learned of it. Information from London had set the machinery of the operation in motion. And Sabadell wanted to make it clear by pointing to the clock that there was no prior approach or informal negotiation. Just a small period of vertigo and surprise before the largest banking operation in Spain since the integration between CaixaBank and Bankia. Paraphrasing Víctor Jara, life is eternal in four minutes.
Hot fusion. Before talking about the merger project, which has great ambition because it aspires to create the third largest listed bank in the euro zone, let’s look at the context. Because the context now, unlike those cold fusions and empty refrigerators of more than a decade ago, is no longer necessity, but prosperity. BBVA was being criticized for not knowing what to do with so much money. Does a bank live on dividends alone? Is there no imagination to do something else? Who will make the first big pantry-heavy hot melt?
Car morning. The day of the announcement, Tuesday, was in itself a day for confirmation of how well the banks are doing. Santander presented its first quarter results to analysts and at a press conference, and so did CaixaBank, as Eduardo Magallón, who closely follows the banking developments of these days, tells us here. In both cases they put new benefits on top of the previous ones, which were already records. The strange routine of prosperity, when earning more and more becomes the norm. BBVA, Unicaja, Sabadell and Bankinter have also been announcing historic profits. Among the six listed banks in Spain, they added profits of 6,677 million euros between January and March, 16% more.
Record upon record, and upon record, fusion. The rate increases and the high liquidity available after the ECB aid during the pandemic explain a good part of the high profits. Banks continue to improve income from loans without needing to increase too much what they pay for deposits. If last year, with the start of the ECB’s rate increases, bank accounts evolved from less to more, it is foreseeable that now, with the first drops in sight, they will go from more to less. Nothing serious that prevents the record profits of 2023 from being repeated in 2024. Nor from addressing large operations like the one announced on Tuesday.
Events rush. Between announcements of increases and unleashed profits, the British channel Sky News – don’t you watch Sky News on Tuesday mornings? – announced from London BBVA’s interest in trying again a merger with Sabadell, like the one tried without success for eleven days in 2020. Journalist Mark Kleinman reported that the bank chaired by Carlos Torres already has JPMorgan and USB hired, and posted the message on the X social network and then warned that there was no confirmation between the banks. His message sounded almost like a denial. The communication teams of both entities, as many other journalists were able to verify, did not have the date marked in red. The one from Sky News was going to make them bitter about what in Madrid, added to the May 2 holiday, was presented as a long holiday weekend.
1:16 p.m., 1:43 p.m. and 1:47 p.m. BBVA had to take action because it received a request from the CNMV. The information from London was good. At 1:47 p.m., the bank informed the supervisor that it had conveyed to Sabadell its “interest” in “initiating negotiations to explore a possible merger.” Shortly after, Sabadell transmitted its own information, with an unusual allusion to time: to be clear, it specified in its brief statement that the proposal had reached it at 1:43 p.m., that is, only four minutes before the operation was carried out. public and the machinery of stock market valuations and analyst comments was unleashed. With that he made it clear that he had no prior information about what could happen. That is at least the official version: unsolicited operation and without prior knowledge. The British journalist’s post had been published at 1:16 p.m. and had precipitated in a matter of minutes events destined to unfold differently.
The episode is anecdotal, although in a bank merger everything counts. They are not easy processes and harmony is essential, as demonstrated by the recent power conflict between Unicaja and Liberbank. Once the moment of the announcement had passed, BBVA expanded the information a day later, with the details of its proposal. They can be read here.
What to expect from now on. Sabadell’s board of directors must analyze the approach and decide whether it agrees to start negotiations with BBVA. While waiting for the moment, here is a quick guide to understand the operation, as a decalogue of questions and answers:
In the coming days it will be necessary to address some unresolved issues. Go four ahead, although the first one is the one that counts:
Sabadell’s response. It’s the most important thing. All eyes are on its board of directors, which will have to decide whether to begin merger negotiations, whether to ask for an improved proposal or whether, encouraged by tailwinds, to slam the door in BBVA’s face. Such an operation could hardly prosper if it were not on friendly terms. For now, as can be read in the second paragraph of this information, the forecast is that the decision will be made on Monday and, according to sector sources, Sabadell considers that the offer is low and unattractive.
The competition. At street level, it is the most controversial factor, especially at a time when entities are not characterized by competitive impetus. Banking activity will be concentrated even more in Spain. Together with Santander and CaixaBank, three banks will hold close to 70% of the assets in the country. The Minister of Economy, Carlos Body, has already said that he will monitor this aspect. The operation requires the approval of his department and the competition authority, the CNMC.
The question of Catalanness. The operation comes in the middle of the electoral campaign in Catalonia and it will be necessary to see if the parties want to make use of it. There is concern in different areas of Catalan society, also among businessmen. Upon meeting, the Minister of Economy of the Generalitat, Natàlia Mas, already showed some reluctance, not particularly aggressive. There is “respect” for the decision made, but “Catalan citizens and SMEs need more financial institutions, and not less,” she said.
Let’s wait for new movements. The banking concentration process in Spain is not considered closed. Unicaja, Abanca and Ibercaja also appear in the recurring pools, in the absence of a single European market that begins to encourage cross-border operations.
Nothing more on this matter. The big banking operation of the year is for now a proposal, but it will start rolling if Sabadell gives a positive signal. Perhaps events have been rushed and the information has come out earlier than expected. Perhaps it is an anecdotal touch or perhaps a destabilizing factor. What Sabadell has not lacked is four minutes to take a breath and feel the emotion of entering into memorable times.
