The series of possible merger of BBVA with Banco Sabadell accompanies the final days of the election campaign. From the outside, two situations are observed with no room for maneuver: one makes an offer, saying that he cannot move even a millimeter, and the other rejects it as insufficient. Now the hostile takeover leaves the decision in the hands of shareholders and not the board of directors, and the current split of Banco Sabadell’s shareholding does not put the entity in the best position.
If the Spanish banking system knows anything, it is takeovers, mergers and acquisitions. In 2009, there were 55 entities, including banks and savings banks; Now, in mid-2024, the funds are history, and there are 10 large banks remaining (9 if the takeover goes ahead). Although the end result is the same, these processes may occur under different conditions. Some of them were generated out of dire need in the face of financial crises, as when Banco de Santander bought Banco Popular for one euro. These are operations that were encouraged by the current government and presented as a better option before bailing out with public money. When there is clear interest in both organizations, transactions are amicable. Finally, we have the antagonistic opera such as the current one. The hostile operations are complex, require a lot of resources on the part of the company posing as the buyer, and in fact, there have been no successful operations in the Spanish banking system.
Hostile operations are complex and require a lot of resources on the part of the company posing as a buyer, and in fact, there have been no successful operations in the Spanish banking system.
During these days, the focus is also on the market’s reaction. In BBVA’s case, shares fell when the offer was made and rose again once they learned it was rejected. For this entity, this was an argument that it was inappropriate to make any further bullish offer. On the other hand, for Banco Sabadell, its stock movements went in the opposite direction. Here are the typical moves in these deals: The buying entity faces more short-term costs and the sellers make above-market profits. The stock value simply reflects this.
This aggressive action in a year when bank profits broke records may seem strange, but there are possible explanations. First, the bells are ringing that interest rates will start to fall in the coming months, even earlier in Europe than in the United States. Therefore, these benefits will be reduced. Second, the banking system in Europe is quite saturated and institutions can only grow by attracting customers from the competition or by taking them up with operations such as these that allow generating economies of scale and reducing costs. Regardless of what is said now, the merger of BBVA and Banco Sabadell will involve closing offices and reducing the number of employees. The lack of banking offices in cities or poor financial care for the elderly will remain social problems to be solved through public policies because Spain is, by far, the second country with the highest number of offices per inhabitant in Europe, after France. . This is a clear indication of what the trend will be in the coming years.
In the banking sector, less competition means worse services
Another important stakeholder is customers and market concentration in just three large banks. In the banking sector, less competition means worse services. If the takeover goes ahead, it will be necessary to trust that the regulator, in this case the CNMV, will determine how competition will be affected, whether the entire entity can be merged or whether some part will have to be left behind. Go out and sell it to a third party. Normally, such public intervention does not occur so that the process can proceed, but given the importance of this process, the Spanish government has already spoken out against it.
Finally, even if it is now based in Valencia, Banco Sabadell’s history and roots in Catalonia are indisputable, and to think that at some point it might stop being Catalan gives a feeling of great loss, of remaining – we are a little more helpless. That is why there has always been speculation about the union of Banco de Sabadell with Unicaja: two entities that can work together but each remain rooted in its own territory. Regional balance is important. It is precisely this sense of regionalism, but at the national level, that prevents a stronger move towards a European-wide financial union through the merger of entities from different countries: banks are still too important to be kept apart or out of control. .
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