communities where BBVA merges with Sabadell

The National Markets and Competition Commission (CNMC) has decided to further analyze BBVA’s offer to purchase (OPA) Banco Sabadell. This will delay the outcome of the operation by several months and force more government administrations to say how they see Spain’s two largest banking entities merging.

On Tuesday, the CNMC confirmed it would request “a mandatory report from autonomous communities that would be significantly impacted by the concentration.” Thus, in the second phase of the analysis, Competition will ask communities where BBVA and Sabadell have more overlap in their activities to detail how this will impact the banking union that is known to be about to impact their territory. branch closures and job cuts.

The autonomous communities in which the future BBVA with Sabadell will have the greatest weight are Catalonia, the Valencian Community and Murcia. Also Andalusia, Madrid, Euskadi, Asturias and Galicia, as can be seen in the following graph, which details how many branches each of the two banks has, from municipality to municipality, according to the latest data published by the Bank of Spain.

Two banks were formed as a result of a merger with savings banks

It should be remembered that both BBVA and Sabadell were the main proponents of the banking integration that has been carried out over the past 15 years and was a consequence of the bursting of the real estate bubble, which took away the old savings banks due to their high incomes. brick impact.

In the case of Sabadell, because the defunct Mediterranean Savings Bank (CAM), which has a strong presence in the Valencian Community and Murcia, was awarded. He also held Banco Gallego. In the case of BBVA, he did the same with Unimm and Catalunya Banc, which allowed him to gain a foothold in Catalan territory, a position he will now expand with Sabadell. In this topic we summarize how the merger of BBVA and Sabadell will affect the Spanish banking system, which has been in a process of continuous concentration for many years.

Competition will require this information from the Autonomous Communities because, by expanding the analysis of the consequences of the merger of BBVA with Sabadell, it has the right to demand more detailed information from all affected parties. And once he has all the information, he will decide whether to approve the transaction, reject it, or approve it, but with conditions and assignments to minimize the impact on customers’ options.

The Competition Law states that when moving to the second stage, “in the event that the concentration has a significant impact on the territory of the Autonomous Community,” as in this case, the CNMC “Investigative Directorate” will “request a mandatory, non-binding report from the affected Autonomous Community,” who will have 20 days to issue the report.

This information will not be mandatory, but it will be key to the management of the CNMC, and there the communities governed by the PP have demonstrated their reluctance to participate in the operation, similar to what was expressed by the government, which was also critical. the impact of greater concentration of banking activities. For example, already in May, the President of the Generalitat of Valencia, Carlos Mason, was “absolutely against” the merger. “This is an operation against the province of Alicante, against the Valencian Community and against consumers,” he said.

We will have to wait a few months to see what the CNMC will decide and whether it will set conditions for approving the operation. It is already known from the very beginning that in the event of a merger there will be closure of branches.

In the summer, BBVA already informed the National Securities Market Commission (CNMC) that it plans to close 300 offices. He spoke of “rationalization” as he discovered a total of 870 BBVA and Sabadell branches located less than 500 meters apart. “This percentage is less than 10% of the total network of both companies,” Onur Genç, CEO of BBVA, justified then.

Reduction of the retail network, which, in addition to corporate operations, is constantly shrinking. Over the past three years, five major banks have closed 2,500 branches. During this time, Sabadell closed more than 350 offices, and BBVA closed 225. Together, both banks will exceed 3,000 offices and become the second organization with the largest territorial presence after Caixabank. The following chart shows how BBVA and Sabadell have closed offices since 2015.

Following the CNMC decision, both banks reiterated the same arguments they have been making in recent months. On the one hand, the CEO of BBVA noted yesterday at an event in the financial sector that integration means “creating value.” The business case is undeniable. The numbers make sense,” he said. However, he also acknowledged that if CNMC chooses very strict terms and “if there is no value creation, we have the option to withdraw the takeover bid.” We will not hesitate for a second to retreat.”

Meanwhile, Sabadell CEO Cesar Gonzalez-Bueno admitted that the organization has already appeared before competitors to protect its interests, and that if the operation is extended, it will help “put everything on the table” as it happens “with the lighting and the stenographers.”

If you set conditions, the money will go to the government.

From now on, several scenarios are open, depending on what the Competition decides. Then, on the other hand, there is what the National Securities Market Commission (CNMV) will do in the coming months: it is the one that must decide whether to open the takeover bid acceptance period so that Sabadell shareholders can make a decision. whether they will sell their BBVA shares or not; or if the market surveillance authority is waiting for a decision from the CNMC.

This body, headed by Cani Fernandez, can approve the operation without further ado and without any conditions. Alternatively, reject it or submit provisions or requirements to the BBVA. In the latter case, the organization chaired by Carlos Torres reserves the option to refuse and withdraw the proposal. In these last two scenarios, the government’s assessment also plays a role.

The Competition Law states that if a concentration reaches the second stage of analysis and the CNMC prohibits it or makes it subject to obligations, this decision must be referred to the Minister of Economy and Finance. There are now two different ministries, headed by Carlos Cuerpo and Maria Jesús Montero. In addition, it may be submitted to the Council of Ministers for consideration “for reasons of general interest.” In this case, the government may “confirm the resolution” adopted by the CNMC Council or “agree to authorize the concentration with or without conditions.” In this case, his opinion “must be properly motivated by reasons of general interest other than the protection of competition” and, in addition, he can request a report from the CNMC itself, which will lengthen the process over time.