Spanish banks BBVA and Sabadell abandon their merger project

In a brief statement to the Spanish stock market regulator, Sabadell acknowledged having considered the negotiations broken and detailed that there was no agreement on the exchange price of the shares of both banks, which means that BBVA did not offer an acceptable amount.

"The Board of Directors of Banco Sabadell has decided to terminate these conversations as the parties have not reached an agreement on the eventual exchange ratio of the shares of both entities," said the Catalan bank, the fifth largest in Spain.

In its statement, BBVA limited itself to saying that "the conversations regarding a potential merger operation with Banco de Sabadell, SA have concluded without an agreement having been reached" .

BBVA and Sabadell had officially announced their negotiations on November 16, an operation that in practice implied an absorption of the second by the first.

The possible union was presented as a way to strengthen itself in the face of the economic crisis derived from the pandemic. But also as an attempt to compete with the great merger underway in the Spanish banking sector, between Bankia and CaixaBank, which is expected to give rise to the largest entity in terms of assets within the country.

On the same November 16, BBVA, the second largest Spanish bank, had announced the sale of its subsidiary in the United States for 11.6 billion dollars in cash, which represented a very considerable cushion to finance the eventual merger with Sabadell.

The Spanish banking sector has been experienced a formidable process of concentration since the financial crisis of 2008, by which dozens of savings banks, sunk by their exposure to the real estate bubble at that time, were absorbed by banks of greater weight.

The panorama has been boiling since that in September the merger between Bankia, the fourth largest Spanish bank, and CaixaBank, the third, was announced.

The new banking landscape must be completed with a possible merger between Liberbank and Uni Caja, two medium-sized entities, which have been trading since October.

Smaller within Spain, Santander will nonetheless remain the largest Spanish financial entity thanks to its strong international presence and particularly in Latin America.

Encouraged by the European Central Bank (ECB) and the Bank of Spain, this concentration process aims to help banks face the new economic crisis derived from the covid-19 pandemic.

Spain has been hit hard. due to the pandemic, and in 2020 the IMF expects the largest drop in GDP in a Western country, 12.8%. A disaster that inevitably causes an increase in the volume of bad debts by companies and individuals.

In another statement to the press, Sabadell announced this Friday that, after being rejected "unanimously" by the council of administration of the merger with BBVA, will launch a plan that prioritizes the domestic market, as a formula to increase "profitability and the creation of value for shareholders."

The plan will be presented in the first quarter of 2021. The entity catalana announced for the moment that the plan will include the transformation of its retail banking business in Spain and the extension of its cost reduction program. Union sources indicated at the beginning of the month that Sabadell wants to eliminate 1,800 jobs, that is, almost 11% of its staff in Spain.

Sabadell is also considering the transfer of its British subsidiary TSB, a question that "it will analyze with its advisers, "as he said.