Merger between BBVA and Sabadell called off

ON November 16, BBVA and Sabadell announced, after several months of speculation, that they were entering into talks with the intention of agreeing to a merger which would have created the second strongest bank in Spain.

Now, just two weeks later, both banks have advised the National Securities Market Commission (CNMV) that due to a number of serious sticking points, they were unable to agree a basic understanding with regards to value of shares and therefore the proposed merger has been called off.

Whilst organisations such as the European Central Bank and the Bank of Spain have made it clear that the current financial situation calls for the strengthening of banks’ finances by merger, this will not be the case for these two.

BBVA is by far the stronger of the two banks and having recently sold its subsidiary in the USA for a reported €9.7 billion, it was clear that the merger, would really be a takeover in all but name.

Sabadell saw its share price rocket as the merger talks were confirmed, but they reversed immediately upon the announcement of the break down of talks and it seems more than likely that they will now try to divest themselves of overseas assets such as TSB Bank which has not generated significant profits for them.

With a large amount of money in BBVA and a wish to increase its share of established business rather than relying heavily on emerging business, it seems likely that it will be sizing up other Spanish banking merger options.

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