The BBVA-Sabadell merger will cost more than $2 billion due to alliance violations.
The merger of BBVA and Sabadell will increase integration costs due to the breakdown of alliances to more than 2 billion euros. The group, led by Josep Oliu, operates life and non-life insurance businesses exclusively with Swiss company Zurich through two joint ventures, while the bank, led by Carlos Torres, operates non-life insurance businesses with Allianz and independently sells life and retirement products from its own subsidiaries.
Sabadell has another joint venture with Italian company Nexi for payments business and long-term commercial agreements in asset and investment fund management with Amundi, to whom the management company sold it; work with I like Intrum service staff manage non-performing assets after the transfer of Solvia to it and operates with ALD Automotive following the sale of its leasing subsidiary. It also sells death policies from Meridiano, and both banks offer health insurance from Sanitas.
Bancassurance standard
Current rules do not allow privileged or exclusive alliances to co-exist in bancassurance of the same industry in the same branch network, which would lead to the closure of a joint venture with Switzerland’s Zurich or with Germany’s Allianz in general insurance.
In other types of activities this is not so important, but in practice, bank mergers have also destroyed most business alliances with million-dollar compensation payments by including in their signature the right to terminate it if the partner changes.
BBVA estimated the restructuring costs at 1,450 million euros before taxes, excluding, in particular, the potential breakdown of alliances. Goldman estimated total costs at $1.1 billion to $2.3 billion when it included these events in its calculations. And the figure, judging by precedents, is likely to be small.
CaixaBank compensated Mapfre 570.8 million in 2021, ending a historic alliance with Bankia, and the insurer is seeking another 53 million in arbitration over valuation differences. And a year later he paid Kaser 262 million for the 81.31% he did not control in Sa Nostra Vida and pensions.
The biggest bill came from Santander in 2020, with $935 million given to Allianz to preserve subsidiaries it had with the defunct Banco Popular. -The life of the company cost him 277 million).
Millionaire breakups
In most mergers, bancassurance alliances were negotiated in favor of the insurance partner of the largest bank.. If the merger is successful and the agreement with Sabadell is resolved, compensation may come close to your investment. Bank sold 50% of its general insurance and life insurance subsidiaries to Zurich in 2008 for $750 million., and in 2014 collected another 107 million by reformulating its agreement. Zurich then established itself as the sole supplier for the BBVA branches and combined networks of the former Banco CAM, Banco Gallego, Lloyds Bank Spain and the Caixa Penedès offices in Catalonia and Aragon.
with an Italian Nexy completes the signing of an agreement according to which 80% of Paycomet, its retail payments, or POS, subsidiary for $280 million. Sabadell is also expected to hold the remaining 20% for at least three years. The transaction was formalized for the purpose of promoting an activity with an industrial partner and generating capital gains.
A move similar to the one he made in 2020 when sold his management company to Amundi, Crédit Agricole group for $430 million. This agreement provides for a new payment of 30 million this year if it meets business goals and distributes the manager’s products within a decade. His succession is not obvious since BBVA has its own manager.
In 2021, Sabadell divested its car rental subsidiary ALD Automotive for 59 million (Bansabadell Renting) as part of another long-term agreement to offer car rental products at its affiliates. At the end of 2022, it sold the remaining 20% in Solvia to Intrum and they entered into a long-term services agreement. These alliances cannot be resolved if the latter group is subject to the agreements.