The European Central Bank (ECB) shows no signs of rejection of BBVA’s takeover bid for Banc Sabadell and is in favor of banking concentrations in Europe, but recognizes that the operation proposed in Spain is not its favorite. What he really likes are cross-border movements.
“We are in favor of consolidation in Europe, but always with a very favorable vision of cross-border consolidations, between banks of different nationalities of origin,” said yesterday the vice president of the central bank, Luis de Guindos, when asked about the launched takeover bid. by BBVA in a conference organized by IESE.
For the CNMV to authorize the hostile takeover of Sabadell, the approval of the ECB and the competition authority, the CNMC, is necessary. The first of these two organizations mainly looks after the solvency of the banks and is receptive to mergers. The second tries to prevent excessive concentration, although its president, Cani Fernández, warned this week from Alicante, where Sabadell’s headquarters are located, that “more banking entities do not necessarily mean more competition.”
The processing of the takeover bid is now marked precisely by the authorizations of the regulators. Yesterday, the Minister of Economy, Carlos Body, insisted on his rejection of the merger proposed by BBVA and said that the Government has “a broader vision” than that of the Bank of Spain, the CNMV and the CNMC to veto the operation.
The president of BBVA, Carlos Torres, had assured last week, at the press conference presenting the takeover bid, that he had already contacted the regulators and supervisors and that he trusted their approval. The bank is expected to present the operation brochure to the CNMV next week.
In his speech yesterday, Guindos assured that the European Central Bank does not change its criteria despite the “context” and insisted on its preference for movements between countries. He said that “it was very good” that French President Emmanuel Macron, in an interview with Bloomberg a few days ago, seemed receptive to cross-border operations.
When Macron was asked how he would welcome a hypothetical offer from Santander for Société Générale, against all odds he responded that we must be “open.” “Negotiating as Europeans means that we have to consolidate ourselves as Europeans,” he even said, which has encouraged comments among sector analysts.
“The French president’s recent statements have certainly increased the heart rate,” says Guy de Blonay, fund manager at Jupiter AM. His impression is that “the likelihood of mergers and acquisitions” between European banks increases.
The purchase of Banc Sabadell would reduce BBVA’s exposure to Mexico and Turkey at the expense of more presence in the Spanish market. Two thirds of the Catalan bank’s business is located in the country of origin, and its most significant international contribution comes from the British TSB. A report this week from Barclays indicates that BBVA could raise its offer by 10% if it were to be separated after TSB.
Guindos also regretted yesterday the lack of a single banking market at European level, which “does not help understanding” by investors. This inefficiency complicates economies of scale and also mergers at the European level.
So far, cross-border concentrations in the EU have been very small. The latest movements have been limited to the periphery and non-strategic businesses. The Italian group UniCredit has bought 9% of the Greek Alpha Bank and has sealed alliances in Romania. BNP Paribas has entered the Belgian insurer Ageas.
Regarding the decision of the Bank of Spain to activate the countercyclical buffer and demand 7.5 billion more reserves from the banks, the vice president of the ECB said that it is “adequate.” It will not be activated until 2025 and will be progressive, but the impact for BBVA will be 1,217 million. The measure may influence the distribution of dividends, at a time when both BBVA and Banc Sabadell compete to attract the shareholders of the Catalan bank.
Banc Sabadell shares closed this week with a rise of 1.6%, up to 1.89 euros. It is a level 11% lower than the price of 2.12 euros, which is what BBVA valued them at when announcing the takeover bid.
