Spanish government rejects new BBVA bid to win over Sabadell shareholders

A man uses an ATM at a bank in Pamplona northern Spain

On Thursday 9 May, Spanish bank BBVA said in a press statement that its board of directors is presenting an offer to Banco Sabadell shareholders so they can benefit from an “exceptionally favourable proposal”. However, the Spanish government has rejected the offer.

“The deal offers one BBVA share for every 4.83 of Sabadell, representing a 30% premium over the closing price of both banks on 29 April, and a 50% premium over the weighted average prices of the past three months. The transaction has very positive financial impacts thanks to relevant synergies and the complementarity and excellence of both banks,” a BBVA statement said.

BBVA also said that the operation would create one of the best banks in Europe, with a loan market share close to 22% in Spain.

“Furthermore, BBVA will maintain its current shareholders distribution policy and its commitment to distribute any excess capital above 12%,” the bank added.

However, sources from the Ministry of Finance told Europa Press that “an excessive level of concentration would introduce an additional potential risk to financial stability,” as was also indicated by the governor of the Bank of Spain.

A sign of things to come within eurozone banking?

BBVA’s merger proposal to Banco Sabadell, if it goes ahead, could transform the eurozone banking sector, potentially boosting BBVA’s assets to more than $1 trillion and making it the third-largest eurozone bank according to market value, as previously reported by Euonews contributor, Piero Cingari.

“The potential merger between BBVA and Banco Sabadell would catapult the former into the exclusive club of eurozone banks with more than $1 trillion (€940bn) in total assets, positioning it just behind industry giants such as BNP Paribas, Crédit Agricole, Banco Santander SA, Société Générale SA, and Deutsche Bank AG,” Cingari said.

According to 2023 figures, Cingari also highlighted, this merger could potentially increase BBVA’s revenues and net profit by 17%, with a 40% boost in loans and a 22% rise in risk-weighted assets.

Chris Hallam, a Goldman Sachs equity analyst, believes that the BBVA/Sabadell merger “would be based on solid industrial logic, given the potential for revenue and cost synergies due to their business overlap in Spain”.

Cingari said that despite the appealing prospects, Hallam pointed out challenges in cross-border mergers within the eurozone, due to stringent regulatory frameworks and the complexities of bank integration. This has made such large-scale mergers less likely, favouring in-market consolidations instead.

“The backdrop for this merger discussion is a sparking a broader trend of significant market outperformance by eurozone smaller banks compared to larger ones since the start of the year,” Cingari added.

Shares of Banco Sabadell have surged by nearly 60% in the first four months of the year.