The pieces of the Spanish banking puzzle continue to look for fit on their particular journey towards consolidation. Yesterday BBVA took the initiative and proposed a merger with Sabadell to create the third largest bank in Europe, behind the French BNP Paribas and the Spanish Santander. It will also gain weight in Spain, without challenging CaixaBank for first place.
The movement was already among the most likely in the sector and reissues the attempted merger between both entities in 2020. However, it was not predictable. It caught many managers of both entities by surprise and caused a tremor in the market. There is a reason why it is the largest operation proposed in the sector since the integration between CaixaBank and Bankia, completed in 2021.
Late yesterday morning, BBVA sent a note to the CNMV in which it reported that it had informed the president of Sabadell, Josep Oliu, of the bank’s interest in exploring a possible merger. The group chaired by Carlos Torres wishes to “start negotiations” to this end. It did not offer much more information, beyond the fact that it already has advisors. They are JPMorgan and UBS.
The reply arrived shortly after, in the form of an acknowledgment of receipt. Sabadell sent its own communication to the supervisor confirming receipt of the “written” and “indicative” proposal from BBVA, and announcing that the board of directors “will adequately analyze all aspects” of it. In the note registered with the CNMV, Sabadell says that the BBVA proposal reached it “at 1:47 p.m.” It is practically the same time that BBVA launched its communication to the market, which would demonstrate that there had been no prior approach. At least officially.
Aside from this detail, the announcement caused movements in the prices of both banks. Sabadell rose nearly 5% on the stock market and closed the session with a rise of 3.37%, while BBVA ended up falling 6.6%.
BBVA capitalizes 62,000 million euros and Sabadell, almost 9,800 million, so that the sum is around 71,800 million, not far from the 72,500 million of Santander, nor the 77,580 million of the largest bank in Europe, BNP Paribas.
Aside from any dream of greatness, BBVA understands that there is a high degree of complementarity between businesses. It is maintained that its potential in retail and business banking would be greatly strengthened by adding Sabadell’s leadership in financing for SMEs.
BBVA’s premise is to only undertake operations that add value to shareholders. The bank sold its business in the United States for more than 9 billion euros in 2020 and, since then, it has had enough artillery to launch into large operations. He entered Turkey with force and explored the failed merger with Sabadell. In the last year and a half, thanks to interest rate increases, it had a capital surplus of nearly 2.5 billion once it distributed dividends and repurchased shares. Its managers had not given clues about the use of these resources.
If they merge, BBVA and Sabadell will have to rationalize their respective capacities in terms of staff and offices. The first has 121,563 employees and 5,912 branches, especially in Spain, Mexico and Türkiye. The second has 19,213 workers and 1,414 offices in Spain and the United Kingdom, through TSB.
Analysts agree that the current environment is conducive to mergers. Unlike what happened after the 2008 crisis, operations are now being planned to achieve synergies and grow in new businesses and geographies, and not out of necessity. Not only BBVA and Sabadell have been in the pools, but also Unicaja, Abanca and Ibercaja.
Both BBVA and Sabadell have presented record results these days. The first earned 2.2 billion euros in the first quarter, 19% more than in the same period of the previous year, and predicts that both this year and in 2025 it will be able to surpass its own marks. His forecast is to earn more than 8.8 billion this year.
Sabadell earned 308 million euros in the first quarter of the year, 50.4% more than in the same period of 2023. The interest margin grew by 11.9% year-on-year, to 1,231 million, while commissions stood at 340 million euros, with a decrease of 3.1% year-on-year.
Despite being in the midst of restructuring its British subsidiary, TSB, the bank is in excellent shape. For this year, it plans to exceed the profits of 2023.
