Sabadell shows reluctance to merge with BBVA in shares only
A new merger attempt between BBVA and Banco Sabadell four years later will not have an easy path to a successful conclusion. The Catalan company’s management is showing reluctance to enter into an alliance with the Basque giant at a time when its profit and loss account and its stock market performance still have room for improvement.
This is confirmed to elEconomista.es by sources familiar with the conversations that have been going on since last Tuesday, when the highest body of the bank, led by Josep Oliu and César González Bueno, received a proposal from BBVA for an operation that will be carried out in full. ., as it turned out yesterday, through an exchange of shares. It is this last extreme, i.e. The fact that the monetary part is not included in the payment is a reason for dissatisfaction. and this caused resistance from the first moment, as this newspaper learned.
Sources aware of the movements that have taken place since the Sabadell council received a letter from BBVA last Tuesday with a “written” proposal and all the details of the hypothetical operation indicate that On the same day, an extraordinary meeting of the bank’s supreme body was held.
In it, the contents of the letter were conveyed and, without giving an official assessment on this matter, it was convened 14 council members for a second meeting it’s still was not called and in which various opinions of the bank’s management will be collected.
Various voices in the market have already noted that although bonus 30% about the price of shares on the stock market last Monday is worth the corresponding amount, Sabadell is in a solid position to continue the game alone.. This is evidenced, according to the same sources, by the results for 2023 and the first quarter, reflecting an increase of 50%.
The company’s stock market performance is also positive and remains, as is the case with most European banks, below book value, so they believe it still has work to do.
Moreover, they point to solid prospects for the coming years, with credit restored and Caterpillar in the UK protected from falling rates – UK banks are using swaps in the loan book to extend the period over which repricing, both up and down, impacts interest margins. This way, they avoid sharp ups and downs in earnings and stabilize the income statement over the medium term.
Sabadell’s situation has nothing in common with the 2020 situation. when BBVA tried to buy it. At the time, the economy was mired in pandemic-related uncertainty and Sabadell was unprofitable, in addition to the significant burden of TSB.
Low exposure to emerging markets
Situation BBVA is different today, it has excess capital and achieved stabilize your business in Turkey. It is this point, its accessibility to emerging markets, that is one of the key points that the market sees in this operation.
The move will ease the group’s influence in developing countries, which has grown since it sold its US retail business in 2020 and used part of the proceeds to increase its stake in Turkey’s Garanti. Contribution to the income statement the share of emerging markets in the new group will fall from 77% to 66%. in the trial balance and according to calculations made by Jeffreys, due to its larger size in Spain and the UK TSB franchise.
So the operation is also would reduce market risk hyperinflationary ones such as Venezuela and Argentina.which, despite not being key percentages for BBVA, force the adoption of measures to cover foreign exchange, which will be reduced as a result of this movement.
corporate governance
The same sources recall that this operation was born as a result of contact between the presidents of the two entities, Carlos Torres and Josep Oliu. In this sense, they note that the corporate governance structure that BBVA offers three non-executive board seats of the resulting bank, one of them will hold the position of vice-president and who, although not specified, will correspond to Oliu- Sabadell wouldn’t like it either.
In this sense, they remember that Oliu has led Sabadell for decades and that the proposed corporate structure is the same as in the 2020 attempt, although the banks’ circumstances have changed.
“The proposed merger creates value for all constituencies: shareholders, employees, customers and society as a whole,” concludes the BBVA letter, in which the company shows some haste: “We We are ready to begin the operation immediately.” Sabadell’s first impressions don’t match this idea, but the council meeting will be the key to putting the black on the white.
Board independent and without a controlling shareholder
It’s important to remember that 10 of Sabadell’s 14 council seats are independent. Bye only one Sunday – Mexican David Martinez Guzman, who owns 3.56% of the capital -.
President Josep Oliu and Maria José Beato are members of this body, as well as other external members. CEO Cesar Gonzalez Bueno and Chief Risk Officer David Vegara serve as principals. In addition, Sabadell there is no controlling shareholder, Thus, the decision to accept the proposal is made by a group of shareholders with different sensitivities.
This point is key when it comes to understanding the movements that have been taking place since the council meeting ended last Tuesday afternoon. Yesterday morning, BBVA was surprised by a letter sent a few hours earlier to Sabadell, which revealed details of the operation, including the price. Market sources interpret this movement as pressure on institutions to steer them toward yes and push the Catalan council to support the merger.