BBVA's hostile takeover bid for Banco Sabadell has taken yet another twist as regulatory and governmental scrutiny continues to loom over the negotiation process. The takeover attempt, which began back in May 2024, has involved extensive scrutiny from Spain's National Commission on Markets and Competition (CNMC) and has drawn mixed reactions from political figures and market analysts alike.
After ten months of disputes and changing viewpoints concerning the public acquisition offer (OPA) initiated by the Basque group BBVA over the Catalan bank Sabadell, both parties affirm one thing: the government can intervene during this process. Banco Sabadell has submitted claims to the CNMC to clarify compensatory measures aimed at ensuring the system remains unscathed and to hinder the procedure moving forth.
According to sources familiar with the report registered with the regulatory body, these measures could include structural adjustments, such as selling off portions of Sabadell's small business unit once the operation is complete. The CNMC will decide whether to take these claims under advisement; if they deem it necessary, this could lead to what is known as phase three, where the government could engage, albeit without the power to prohibit the acquisition outright.
Internally, both BBVA and Sabadell employees seem to be expecting this subsequent phase to proceed unhindered. Sabadell has publicly stated its position on the matter, claiming clarity within the law, yet BBVA holds dissenting views. Carlos Torres, BBVA's CEO, insisted earlier this year at least the government would not enter the process if the conditions remained light and agreed with the regulator.
Despite these legal tussles, Sabadell is anticipating increased revenue streams this year, driven largely by improvements within its interest margin—a pivotal revenue source representing almost 80% of the bank's income, as pointed out by analysts at Bloomberg Intelligence. This optimistic outlook provides the bank with some leverage as it fights against BBVA's bid.
The average market consensus predicts Sabadell's interest margin to reach 4.960 billion euros by 2025, but Bloomberg Intelligence believes it could soar as high as 5.060 billion euros, surpassing last year’s figures. Sabadell's resilience is partly projected to stem from its UK subsidiary, TSB, which is expected to add ten additional points—a significant touchpoint for maintaining stability against market adversities.
While the costs associated with deposits have increased, particularly within Spain where it rose by 27 basis points, it is suggested by analysts this will begin to stabilise later on, hinting at potential profitability for Sabadell. This financial prediction feeds the narrative of heightened investor confidence, as individuals and entities are eagerly purchasing stocks following the favorable earning results, sparking bullish sentiment within the market.
Adding to the tense atmosphere, the CNMC's decision to send the examination to phase two has drawn criticism, particularly facing allegations of governmental influence affecting timelines and approvals. Competency authorities, including Cani Fernández, chair of the CNMC, have maintained they faced no political pressure throughout this process.
Regulatory bodies have been examining the acquisition's potential impact on the Spanish banking system since late May, concerned predominantly with its ramifications on the small and medium enterprises and payment sectors, which are thought to be particularly vulnerable to changes. The legislative framework permits Spain's government to intervene, citing national interest whenever required, which keeps the uncertainty alive around the transaction.
While the clock is ticking, Banco Sabadell is strategizing its response to BBVA's bid; having recently proposed enhancements to shareholder dividends and advocating for certain concessions, including the asset sale, to bolster its defense. The potential for BBVA to raise its offer remains to be seen, yet they remain adamant about proceeding only if the deal is advantageous and faced with manageable conditions.
The final countdown is on as the outcome of this protracted acquisition battle raises broader questions about the future footprint of these two banking giants within Spain's financial fabric. What appears certain, is the preparation from Banco Sabadell reflects not only their immediate concerns over BBVA's takeover attempt but highlights the seismic shifts underway within the sector as entities seek to reshape market dynamics amid regulatory ever-looming watch.
The underlying geopolitical narrative entwined with this acquisition struggle serves to remind stakeholders of the broader implications financial mergers may bring, beyond simple corporate motivations.