Failed merger frightens Spanish banks

D.he two major Spanish banks, BBVA and Banco Sabadell, broke off their merger negotiations after just under two weeks. As a reason, Sabadell cited different ideas about the financial details on Friday. The board of directors decided to end the talks as no agreement had been reached on the exchange ratio between the two banks.

BBVA announced that the negotiations had ended without any result being found. Sabadell shares slumped on the Madrid stock exchange by 18 percent at times. The institute is now under pressure to assert itself in the highly competitive Spanish banking market.

BBVA had filled its coffers for a takeover in mid-November by selling its America subsidiary to PNC Financial Services for around ten billion euros. Just hours after the deal was bagged in the United States, BBVA had made merger negotiations with the Spanish competitor public. BBVA boss Onur Genc had emphasized from the start that he was in no hurry, would examine everything calmly and also had other options. A merger would have created the second largest Spanish bank with assets of almost 600 billion euros.

A Spanish newspaper had already reported on Thursday about the failure of the talks, the Sabadell share had plummeted by 5.4 percent. BBVA was therefore prepared to pay the offer price of almost 2.5 billion euros in cash. However, BBVA rejected a significant price increase requested by Sabadell. BBVA is worth 25 billion euros on the stock exchange, about ten times as much as Sabadell.

Looking for a new strategy

According to its own statements, Sabadell now wants to work out a new strategy and present it in the first quarter. The focus of the fifth largest Spanish money house should be on the home market. Options are being examined for the British subsidiary TSB. Even before the talks with BBVA had started, Sabadell had announced branch closings and around 2,000 jobs. That corresponds to about one in ten jobs.

In Spain, the pressure to consolidate in the financial sector is particularly high. The low interest rates in the euro area have been weighing on earnings for years, Spain’s economy is down and the coronavirus is raging there as badly as in hardly any other European country. A few months ago, Bankia and Caixabank sealed a merger to create the largest financial institution in Spain. In October, Unicaja and Liberbank announced merger talks.


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