- BBVA and Sabadell have cut off talks of a potential deal that would have created Spain's second-largest domestic lender, both banks confirmed Friday. Disagreements over price in part led to the decision.
- At issue, Sabadell said, was the proposed exchange ratio. However, the banks also disagreed over composition of the combined entity's board, Bloomberg reported, citing an unnamed source. Sabadell reportedly wanted at least three seats on the board and for its chairman, Josep Oliu, to become a co-chairman of the combined bank. A BBVA spokesman told the wire service governance wasn't an issue.
- News of a potential tie-up between the Spanish lenders broke Nov. 16 after PNC agreed to buy BBVA's U.S. retail banking arm in a separate $11.6 billion deal.
The collapse in negotiation comes amid an uptick in consolidation in the Spanish banking sector. Fellow Spanish lenders Unicaja and Liberbank confirmed last month they were considering merging. Meanwhile, CaixaBank and Bankia, each among the country's five largest banks by assets, are set to vote this week on their own merger, which would create a bank holding 25% to 30% of the Spanish domestic market's loans, the Financial Times reported. By comparison, a BBVA-Sabadell tie-up would account for 20% to 25% of the market. Santander, Spain's largest bank globally, holds about 15%, the publication reported.
Sabadell's board of directors "has decided to terminate the above-mentioned discussions, because the parties have not achieved an agreement on the exchange ratio of both entities," the bank said in a statement to Spain's securities regulator, according to the Financial Times.
BBVA valued Sabadell at about 2.5 billion euros ($3 billion), but Sabadell demanded more after optimism over a COVID-19 vaccine caused shares to jump, Bloomberg reported. Sabadell wanted at least 12% of the merged company if the transaction were to be all-share, two anonymous sources told the wire service. BBVA reportedly came up, but not enough to close the deal.
The "conversations in relation to a potential merger transaction with Banco de Sabadell have come to an end without having reached an agreement," BBVA said in a statement, according to the Financial Times.
The bank stressed over the past weeks that acquiring Sabadell was just one path it could pursue. BBVA CEO Onur Genç said this month the bank was alternatively considering share buybacks and growth project investments.
"We don't feel forced to do anything," Genç said, according to the Financial Times. "We already have 15% market share in Spain ... We will only do it if there is value for shareholders."
Sabadell, meanwhile, has publicly stated, for at least a month, its interest in merging with another Spanish bank — and potentially spinning off its British arm, TSB.
In a statement on its website, Sabadell said it aims to launch, in the first quarter of 2021, a "transformation program in its retail banking business which will have a neutral impact on capital and generate more efficiencies in this segment." The bank added it wants to intensify its focus on small and medium-sized enterprises.
The bank said it would "analyze strategic alternatives for creating shareholder value with regard to … international assets, including TSB."
Sabadell bought TSB for £1.7 billion in 2015 from Lloyds. However, a failed upgrade and data migration in 2018 left TSB customers unable to access their accounts, costing the bank more than £350 million. TSB has since come under new management and runs its own systems instead of using the parent company's. Nonetheless, Sabadell's operations in the U.K. reported a net loss of $100 million in the third quarter. The Spanish lender is also considering selling its businesses based in Mexico, where net profit has fallen about 60% during the quarter, Bloomberg reported.