The “trusted” corporation supports BBVA’s capital increase but questions the implications of the takeover bid.

The Spanish “trustee” corporation joins the major global proxy advisors in advising BBVA shareholders to support the capital increase, which will be considered at the special meeting on July 5. The Basque group will submit for investors’ consideration the issuance of 1.126 million shares of new securities, equivalent to almost 552 million euros, a measure it recommends supporting. However, it clarified that this “does not imply” a recommendation regarding the public offering or its acceptance by Banco Sabadell shareholders.

“This is merely a recommendation to BBVA shareholders to sell shares and pay investors who accept the offer if successful,” they said in the report. This issue represents the bank’s previous move to offer an exchange of 1 share for every 4.83 shares of the Catalan group. However, this calls into question the impact of the merger, as well as the problems arising from banking concentration. In particular, it states that if such consolidation occurs, more than 70% of the Spanish banking business will be controlled by the three largest organizations: Banco Santander, CaixaBank and BBVA-Sabadell.

A factor that, according to Corporance criteria, will lead to a decrease in the supply of loans and products to the client, which is the main argument used by the government to oppose the operation. Reproaches from the Ministry of Economy, Trade and Business have been constant since the negotiations went beyond the scope due to the “harmful effects” they could have in terms of competition. For this reason, the group founded by Juan Prieto also warns that the merger could have negative consequences regarding ESG aspects, which could lead to a reduction in workforce.

Corporance shares the views of major global proxies ISS and Glass Lewis, who have also shown their support for the capital increase despite uncertainty over regulatory approvals and ongoing doubts about value creation for the combined group. Institutional Shareholder Services (ISS), the world’s largest trusted advisor, highlights the “compelling strategic logic” emerging from a potential alliance between BBVA and Banco Sabadell, which would facilitate banking consolidation in both Spain and Europe.

Glass Lewis, for its part, also advises going for a capital increase, although the operation is a “unique mess”, it advises shareholders to go for a capital increase. From a strategic point of view, among the reasons they give is the possibility of BBVA’s leadership convergence with Banco Santander, but they also highlight the trend towards higher profit targets resulting from the integration with Banco Sabadell, such as increased earnings per share (EPS). ) by 3.5% or an increase in book value per share by 1%, among other things.