The European Central Bank (ECB) shows no signs of rejecting BBVA’s takeover of Banco Sabadell and is in favor of banking concentrations in Europe, but acknowledges that the proposed operation in Spain is not its favourite. What he really likes are cross-border movements.
“We are in favor of consolidation in Europe, but always with a very favorable view of cross-border consolidations, between banks of different nationalities of origin”, said yesterday the vice-president of the central bank, Luis de Guindos, when he was asked for the tender offer launched by BBVA at conferences organized by IESE.
For the CNMV to authorize the hostile takeover of Sabadell, approval is required from the ECB and the competition authority, the CNMC. The first of these two bodies mainly monitors the solvency of banks and is receptive to mergers. The second is trying to prevent an excess of concentration, although its president, Cani Fernández, warned this week from Alicante, where Sabadell is headquartered, 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 Cuerpo, insisted on the rejection of the merger proposed by BBVA and said that the Spanish Government has “a broader vision” than that of the Bank of Spain, the CNMV and the CNMC for veto the operation.
The president of BBVA, Carlos Torres, had assured last week, in the press conference to present the offer, that he had already contacted the regulators and supervisors, and that he was confident of their approval. The bank will predictably present the prospectus of the operation to the CNMV this coming week.
In yesterday’s intervention, Guindos assured that the ECB 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 the French president, Emmanuel Macron, in an interview with Bloomberg a few days ago, was receptive to cross-border operations.
When Macron was asked how he would welcome a hypothetical offer from Santander on Société Générale, against all odds he replied that we must be “open”. “Negotiating as Europeans means that it is necessary to consolidate as Europeans”, he went so far as to say, which has encouraged the comments among analysts of the sector.
“The recent statements of the French president have certainly increased the heart rate”, says Guy de Blonay, fund manager of Jupiter AM. His impression is that “the likelihood of mergers and acquisitions” between European banks is increasing.
The purchase of Sabadell would reduce BBVA’s exposure to Mexico and Turkey at the expense of greater presence in the Spanish market. Two-thirds of the Catalan bank’s business is in its 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 break away from TSB.
Guindos also lamented yesterday the lack of a single banking market in Europe, 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. Recent movements have been limited to the periphery and non-strategic businesses. The Italian group UniCredit has bought 9% of the Greek Alpha Bank and sealed alliances in Romania. BNP Paribas has entered into the Belgian insurance company Ageas.
Regarding the decision of the Bank of Spain to activate the anti-cyclical cushion and demand 7.5 billion more in 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 Sabadell compete to attract the shareholders of the Catalan bank.
Sabadell’s 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 offered when it announced the tender offer.
