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BBVA launches the purchase of Sabadell after making cash in the US

BBVA is surveying the troubled waters in which the Spanish financial sector is moving to gain size after making cash with the sale of its US subsidiary. The market assumes that you will end up buying Sabadell Bank, whose stock market value has soared even more than that of the bank itself chaired by Carlos Torres.

Both entities have already maintained contacts on a hypothetical merger and have launched what is known as ‘due diligence’, that is, the analysis of the guts of the other group to evaluate a potential integration and its corresponding price. The two groups have hired external consultants to carry out this operation: Goldman Sachs in the case of Sabadell and JP Morgan in that of BBVA.

BBVA clarified in a statement to the CNMV that for now “has not made any decision in relation to this potential merger operation and that there is no certainty that it will be adopted, nor, in this case, on the terms and conditions of an eventual operation “.

Torres was limited yesterday to indicate that he will use part of the 9.7 billion euros obtained upon its exit from the North American market to reinforce the bank’s position in those markets where it already holds a leadership position. All analysts agreed in their reports that this market will be Spain and that the acquired group will be Catalan, whose shares have appreciated 24% this Monday.

The exit from the US after the sale of the business to the PNL group represents an excess of capital for BBVA of 8.5 billion euros. The bank will distribute part of that money among its shareholders through a share buyback program – once the ECB lifts the veto on dividends in the sector – and will use the rest to finance the acquisition of Sabadell.

Analysts and investors are so convinced that the operation will come to fruition that they are even arguing about its potential price and the structure in which it will be carried out. Santander, for example, estimates that the operation would be carried out through a takeover bid with a before 40% on the current value of Sabadell, which would raise its cost above the 3,000 million euros.

“BBVA would be rich in capital with a ratio of 14.46%, which opens the door to further consolidation of the sector in Spain, with Sabadell as a likely candidate to be absorbed,” he explains the Cantabrian entity in a report sent to investors. BBVA spoke yesterday in its “merger” statement, although according to financial sources on a technicality to refer to the absorption of the Catalan group.

“This move puts BBVA back in the game, with an acquisition in the domestic market that creates value for its shareholders given the low valuation of its Spanish competitors,” he adds Mediobanca.

Another of the issues that will have to be dealt with in these months of analysis and approaches involves the governance of the new entity. The president of Sabadell,Josep Oliú, who has turned 71 in 2020, will be able to retire from the financial sector after 34 years at the bank, while the CEO, Jaime Guardiola -ex-BBV-, will be key to successful integration port and it is not clear what his role will be in the new entity.

Another ‘superbank’

The merger, if completed, would give rise to another ‘superbank’ in the Spanish market after the announced and ongoing merger of CaixaBank and Bankia. In this case, the new entity that would result from the union of BBVA and Sabadell would have assets worth 600,000 million euros, a little above the 660,000 million that its first competitor would bring together at the local level.

Both groups would already be far from Santander, which would occupy the third place by volume of assets, adding 352,296 million euros. The bank that runs Ana BotÃn So far, it has tried to take the pressure off a hypothetical corporate move and focuses on adjusting its size after the integration of Popular, but investors and analysts point out that BBVA’s move is pushing it to probe the market again to win size.

Behind would be Bankinter and the rest of the considered medium-sized banks, with a very marked regional character. These include KutxaBank, Ibercaja, Abanca, Unicaja and Liberbank, although these last two are also mired in a ‘due diligence’ process and could complete their integration in a matter of days.

Third merger in two months

Mergers have been consolidated as an escape route for banks in an environment of negative interest rates and given the threat posed to their balance sheets by the wave of defaults derived from the coronavirus crisis. The entities estimate that this will arrive in the first months of 2021, coinciding with the end or reduction of the public aid programs promoted by the Government to avoid a sharp deterioration in family and business income during the pandemic.

Financial supervisors have blessed inter-entity integrations as a mechanism to “lower their operating costs,” a euphemism that hides a drastic reduction in jobs and the closure of branches across the country. Without these adjustments, the vice president himself has pointed out Central European Bank (ECB), Luis de Guindos, integrations make little sense.

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