If on Wednesday the photo of the 39th Annual Meeting of the Economic Circle was the fleeting meeting between Salvador Illa and Pere Aragonès, yesterday the most outstanding image was the brief conversation held by the Minister of Economy, Carlos Cuerpo, and the president of Banco Sabadell, Josep Oliu. The meeting took place just after Cuerpo alerted when it arrived about the negative effects that a hypothetical BBVA-Sabadell merger would have for Catalonia. Cuerpo is one of the staunchest opponents of the operation.
Following the journalists’ questions, the head of the Spanish Government’s Economy mentioned, as the most pernicious consequences for the community, the risk of financial exclusion and the reduction of credit for SMEs. “We know that Sabadell is an entity with a fundamental activity for SMEs, both in Catalonia and in the Valencian Community, and this is another element that must also be safeguarded”, announced Cuerpo.
Precisely yesterday, the Catalan Competition Authority (ACCO), dependent on the Ministry of Economy, assured in a report that a merger between the two banks would make loans more expensive to companies and families, raise bank commissions and lower remuneration of deposits among customers in Catalonia.
The minister, before participating in a meeting with the members of the Circle, insisted that the Spanish Government can veto the merger between the two entities, but not the takeover that is underway. Financial sources explained that BBVA will have to adequately explain the current risk that the merger cannot be carried out because the Executive vetoes it. The other element that could wreck the merger is that the Spanish competition authority forces BBVA to divest itself of part of Sabadell’s business and has to sell it to a third competitor.
Precisely, the problems of lack of competition in the Spanish market were another of the elements that Cuerpo identified yesterday as harmful in the BBVA-Sabadell operation. According to his opinion, the Spanish market already presents a low level of banking competition, which customers suffer today with the low remuneration of deposits by the country’s entities. The minister believes that this low remuneration is something particular to Spain. Cuerpo recalled that if the merger goes ahead, in the Spanish market three entities will control 70% of the market. In contrast, in countries such as Germany, France or Italy, the first three banks represent 50% of the market or less.
Meanwhile, the auction continues its course. Yesterday, Sabadell warned the National Securities Market Commission (CNMV) of the negative effects on the day-to-day activity of the entity and on employment, qualified by the uncertainty represented by the hostile takeover of BBVA. In a statement called the Universal Registration Document that every year the entity sends to the CNMV, Sabadell assures that “the takeover exposes Banco Sabadell to multiple uncertainties”, and mentions the “eventual consequences on strategic agreements” for the businesses of life insurance, asset management and institutional depository. The text warns of “possible losses of qualified personnel”, since they may choose to look for “other professional opportunities in the face of the risk of losing their jobs in the event that the takeover is successful”. The third major risk identified by the bank is that of “possible loss of business opportunities as a result of the limitations on the actions of the administrative and management bodies”.
In addition to Oliu, the CEO of Banco Sabadell, César González-Bueno, and other directors and managers of the entity were present at the Cercle’s meetings yesterday. González-Bueno told Blooomberg that he was confident that the evolution of the Sabadell share price would dissuade shareholders from going to the BBVA tender offer.
Regarding other issues, Minister Carlos Cuerpo pointed out that the re-establishment of the new European fiscal rules in 2025 aims to make “growing with investing” compatible. The head of the economy, who will participate this weekend for the first time in the G-7 of finance ministers and central bank governors in Italy, added that with the fiscal rules it is intended to carry out a “soft landing”.
