Spanish bank BBVA is headquartered in Madrid, Spain.
Juan Medina | Reuters
BBVA said on Tuesday it had approached Sabadell about a possible merger that would create a Spanish bank with nearly 1 trillion euros ($1.07 trillion) in assets and a market capitalization close to that of Santander.
Rumors of a tie-up between Spain’s second- and fourth-largest banks come nearly four years after the last talks collapsed. Sabadell’s shares rose 7.7% after the news was announced, while BBVA’s shares fell 6.7%.
The potential merger follows a period of industry consolidation as Spanish banks seek to cut costs and gain scale. Spain currently has 10 banks, down from 55 before the 2008 global financial crisis.
BBVA said it had appointed advisers and informed the chairman of Sabadell’s board of its interest in launching talks on a potential merger.
Sabadell confirmed it had received the indicative written proposal from BBVA and said in a statement that its board “will properly analyze all aspects of the proposal”.
For BBVA, the partnership will boost its domestic business and increase lending to Sabadell’s strong SMEs. The bank’s shares have soared in recent years under Chief Executive Onur Genc and Chairman Carlos Torres on the back of its booming Mexican business and dividends from major shareholders.
Sabadell reported a sequential rise in profits, helped by rising interest rates in Spain, and has seen its share price rise fivefold since merger talks failed in 2020.
Joaquin Robles, an analyst at Spanish brokerage One of the fastest markets.
He said it could also be an opportunity for Sabadell, which has recently been linked with a possible acquisition of Unicaja.
UBS and JPMorgan are advising BBVA, two people familiar with the matter said. JPMorgan, UBS and BBVA declined to comment.
Spanish Economy Minister Carlos Cuerpo told Spanish news agency EFE that maintaining a competitive landscape in the financial sector was crucial.
The banking industry’s largest union, CCOO, has expressed concerns about job retention in Spain, where the number of employees has fallen by around 40% since 2008.
Terms
The deal comes as Spanish banks look for ways to boost revenue as the boost from high interest rates begins to fade.
Sabadell and BBVA called off merger talks in November 2020 after they failed to reach agreement on terms, including price.
A person with direct knowledge of the matter said at the time that disagreements between BBVA and Sabadell over the value of Britain’s TSB were part of the reason for the breakdown in talks.
Sources said BBVA did not want to pay more than 2.5 billion euros for Sabadell, while Sabadell was unwilling to accept less than 3 billion euros, with some of the difference partly blamed on TSB.
Sabadell currently has a market capitalization of 9.7 billion euros ($10.36 billion), while BBVA has a market value of 59.4 billion euros and Santander has a market capitalization of more than 72 billion euros.
Recent deals in Spain include Unicaja’s acquisition of Liberbank in July 2021 for €763 million.
In March 2021, Caixabank completed the €4.3 billion acquisition of state-owned Bankia, creating Spain’s largest domestic bank with assets of more than €610 billion.
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