The pieces of the Spanish banking puzzle continue to fit together in 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 reaching the top spot in CaixaBank.
The move was already among the most likely in the sector and reissues the merger attempt between the two entities in 2020. This is not why it was predictable. It took many managers of the two entities by surprise and caused a shortage in the market. For some reason, this is the largest operation proposed in the sector since the integration between CaixaBank and Bankia, completed in 2021.
Early yesterday morning, BBVA sent a note to the CNMV in which it informed the president of Sabadell, Josep Oliu, of the bank’s interest in exploring a possible merger. The group chaired by Carlos Torres wants to “start negotiations” for this purpose. He did not offer much more information, beyond that he already has advisers. They are JPMorgan and UBS.
The reply arrived soon after, in the form of a receipt. Sabadell sent its own communication to the supervisor in which it confirmed receipt of BBVA’s “written” and “indicative” proposal, and said that the board of directors “will adequately analyze all aspects”. In the note registered with the CNMV, Sabadell says that BBVA’s proposal arrived “at 1:47 p.m.”. It is practically the same time that BBVA sent its communication to the market, which would show that there had been no prior approach. At least officially.
Aside from this detail, the announcement caused movements in the quotations of the two banks. Sabadell managed to rise on the stock market by nearly 5% and closed the session with a progression of 3.37%, while BBVA ended up retreating by 6.6%.
BBVA capitalizes 62,000 million euros and Sabadell, almost 9,800 million, so that the sum is close to 71,800 million, not far from the 72,500 million of Santander, nor the 77,580 million of the largest bank in Europe, the BNP Paribas.
Aside from any dreams of grandeur, BBVA understands that there is a high level of business complementarity. It is argued that its potential in retail banking and companies would be greatly strengthened by adding Sabadell’s leadership in SME financing.
BBVA’s premise is to only tackle operations that bring value to shareholders. In 2020, the bank sold its business in the United States for more than 9,000 million euros, and since then it has had enough artillery to launch large-scale operations. He entered Turkey strongly and explored the failed merger with Sabadell. In the last year and a half, thanks to interest rate hikes, it had a capital surplus of nearly 2,500 million once dividends were distributed and shares were bought back. Its managers had not given any clues about the use of these resources.
In the event of a merger, BBVA and Sabadell will have to rationalize their respective capacities in terms of staff and offices. The first has 121,563 workers and 5,912 branches, especially in Spain, Mexico and Turkey. The second has 19,213 employees 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 planned to achieve synergies and grow in new businesses and geographies, and not out of necessity. Not only BBVA and Sabadell have been in trouble, but also Unicaja, Abanca and Ibercaja.
Both BBVA and Sabadell have presented record results these days. The first earned 2.2 billion euros during the first quarter, 19% more than in the same period of the previous year, and predicts that both this year and 2025 it will manage to surpass its own brands. Its 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 during the same period in 2023. The interest margin grew by 11.9% year-on-year, up to 1,231 million, while commissions stood at 340 million euros, with a year-on-year decrease of 3.1%.
Although it is in the middle of restructuring its British subsidiary, TSB, the bank is going through an excellent time. For this year, he expects to exceed the gains he achieved in 2023.
