Monday, March 4

BBVA and Sabadell can create a single Spanish bank

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The second largest Spanish bank may appear soon

BBVA and Sabadell decided to unite and create the second largest Spanish bank. Now financial institutions are negotiating in order to agree on all terms of the deal. This is the second significant merger in the country’s banking sector, in September last year the conglomerate Caixabank acquired Bankia for 4.3 billion euros.
According to analysts, the merger of BBVA and Sabadell will create a new bank with assets amounting to 600 billion euros. In this case, the market value will be about 26.7 billion euros.
It also became known that BBVA plans to sell the division of the bank, which is located in the U.S.. If we consider the international business of financial institutions, the new company may have assets amounting to 860 billion euros. At the same time, this amount is still lower than its competitor – Santander Bank, whose assets are 1.5 trillion euros.
The banking segment of Europe is going through a difficult time. Record low interest rates make us reconsider the processes in order to survive. In addition, as a result of the pandemic, there is an economic downturn in the global market, as a result of which financial institutions are cutting costs. One way to do this is to combine assets to strengthen positions and compensate for losses.
Until there is a final decision on the transaction between BBVA and Sabadell, now there is a standard procedure of complex inspection of banks, which is carried out by independent consultants. Decisive will be the next few months when it becomes clear whether it makes sense to continue the transaction. While discussing the amount of premium to be paid by a larger bank, in this case BBVA. However, according to its representatives, the management does not yet intend to increase the funds to finance the merger. It remains to be seen whether the payment will be made in money or in a share package.

Since the news of the merger, Sabadell securities have increased in price by 24.6% and amounted to 0.42 euros per share. In turn, the market value of the company has increased to 2.36 billion euros. BBVA shares rose by 15.3 percent to 3.66 euros per share, bringing the total market value to 24.35 billion euros.
Goldman Sachs, an investment company from Sabadell Bank, and JP Morgan are involved in the transaction and represent BBVA.
Despite the fact that there was no official information about the merger of the banks, rumors about it appeared after BBVA announced the sale of its American division. The amount of the deal with PNC Financial Services Group was $11.6 billion. It is expected that these funds will be used to acquire Sabadell.

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