The merger of BBVA and Sabadell would cause three banks to account for more than 70% of credit and deposits in Spain | Companies

The merger of BBVA and Sabadell would cause three banks to account for more than 70% of credit and deposits in Spain | Companies
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The possible merger between BBVA and Sabadell would further dry up competition in the Spanish banking market. The resulting entity would leave a banking map with three large entities (Santander, CaixaBank and the new merged entity) followed at a great distance by a handful of medium-sized entities. These three large entities would hold 71.6% of the credit market and 73% of deposits. In total, more than two thirds of the banking pie, according to the calculations of Five days based on the 2023 results of the entities and the financial statements of the Spanish Banking Association (AEB).

The eventual union of these two banks would not dethrone, at least for the moment, CaixaBank as the first bank in the Spanish market. This entity, which merged with Bankia in 2020, holds more than a quarter of both the credit and deposit markets. The new BBVA-Sabadell would follow closely: according to the closing figures for 2023, the combination of these two entities would add 338,000 million in deposits and 216,000 million in credit. This translates into a share of 23.44% in the first parameter and 23.87% in the second. The possible purchase would give oxygen to BBVA in its particular battle with Santander to establish itself, within the Spanish market, in the second position, highly disputed between the two global giants. Adding Sabadell would allow it to surpass the entity chaired by Ana Botín both in deposit quota (22.43% for Santander) and in credit (20.27%). At the end of 2023, BBVA was behind in both variables.

For the operation to go ahead, at some point it would have to have the approval of the National Markets and Competition Commission (CNMC). But the process of banking concentration that has occurred in Spain since the financial crisis has led to fewer and larger entities that accumulate the majority of the banking business.

In terms of number of offices, the resulting entity would total 3,084. The figure would represent a great leap for BBVA, which independently has 1,881 offices and with the acquisition would add the 1,200 of Sabadell (before possible adjustments or asset sales). It would be far above Santander’s 1,864, as the second largest bank in the Spanish market, only behind CaixaBank, which has 4,161 offices.

Beyond strengthening itself in Spain, the meaning of the operation for BBVA is also on the international level. The entity chaired by Josep Oliu has in its British business, TSB, a great incentive for its Spanish competitor. It is a medium-sized firm in the English market that has been in the spotlight several times and for which Sabadell, in more difficult past stages, has explored its sale. Once these difficulties were overcome, TSB is now a business focus. With the arrival of César González-Bueno as CEO, the bank decided to give a strategic turn to the subsidiary and specialized in mortgages, amassing a powerful business in British lands in which several entities have been interested. In 2023 it contributed a profit of 175 million pounds, 71% more

For BBVA, on the contrary, it would be the gateway to the Kingdom. After the sale of its business in the US in 2019, BBVA decided to focus on new geographies and reinforced itself with the Turkish Garanti, to whom it launched a takeover bid to acquire 86%. It also has a powerful business in Mexico, which in 2023 obtained a profit of 1,441 million euros. Two large markets but subject to the fluctuations typical of emerging economies.

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At an international level, the entity chaired by Ana Botín is also the Spanish bank with the most offices, with more than 8,000, compared to the 7,325 of BBVA and Sabadell (counting both those of BBVA in its business outside Spain and those of TSB of Sabadell ). The sum of BBVA and Sabadell would have a workforce of 140,000 workers. Santander has more than 200,000 and CaixaBank, 45,000 employees in total.

According to the results of the first quarter, BBVA has assets of 801,690 million. By joining forces with Sabadell, with more than 236,000 million, the entity led by Carlos would surpass that bar of one trillion euros in assets, a level that in Spain currently only surpasses Santander. The entity chaired by Ana Botín reaches 1.8 billion assets. The resulting bank, with 1.04 billion, would consolidate itself as the second largest in Spain, far behind CaixaBank (613,000 million), third on the podium. A gap that is explained because these figures include both assets in Spain and in other markets, where CaixaBank is barely present. In the new entity, BBVA would contribute 77% and Sabadell the remaining 23%. It would also become the tenth largest bank in Europe, in a select club of 10 entities that have more than one trillion euros in assets.

On the stock market, the resulting entity, affected by the rises of Sabadell and the falls of BBVA, would have a value of close to 70,000 million euros. Santander has a capitalization of 72,000 million, just 2,000 million more, almost tied with Iberdrola’s 73,000. Thus, the fight to be the second largest listed company in Spain (the leadership of Inditex, with 133,000 million, does not allow discussion) would go from being a duel between two to a three-way battle. Likewise, on the European scene, BBVA would fight to be one of the largest entities. The first is the French bank BNP Paribas, which has a capitalization of 77.6 billion. All of this, if an operation crystallizes of which, at the moment, the price or the position of the Sabadell council is not known.

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