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BBVA Pursues Merger Talks with Banco Sabadell

 |  May 1, 2024

Banco Bilbao Vizcaya Argentaria (BBVA) is once again eyeing a merger with Banco Sabadell in a move that could potentially reshape Spain’s banking landscape. This pursuit follows a previous failed attempt in 2020 and underscores BBVA’s determination to secure its position as Spain’s largest bank.

A successful merger would create a financial behemoth with a combined market value nearing 73 billion euros ($78.27 billion), catapulting it into the ranks of Europe’s largest banks. Moreover, it would establish the merged entity as the leading player in Spain, the eurozone’s fourth-largest economy, based on assets.

In a regulatory disclosure on Tuesday, BBVA revealed that its board had initiated talks with Banco Sabadell’s leadership to explore the possibility of a merger. Additionally, BBVA confirmed the appointment of advisors to navigate the complex negotiations. Meanwhile, Banco Sabadell acknowledged receiving a merger proposal from BBVA and pledged to conduct a thorough analysis.

The market responded with mixed reactions to the news. Sabadell shares surged initially, trading 3.2% higher at EUR1.71, before paring back gains. Conversely, BBVA experienced a 5.3% decline in late European trading, with shares trading at EUR10.33.

BBVA’s pursuit of Sabadell comes amid growing speculation about consolidation within the European banking sector. A period of elevated interest rates has bolstered profits for many banks, prompting discussions about potential mergers and acquisitions. However, analysts caution that obstacles remain, particularly in Europe’s fragmented banking landscape.

While conditions in Italy appear conducive to banking mergers and acquisitions, with Barclays analysts noting a favorable environment, the outlook for broader consolidation remains uncertain. Earlier reports suggested that Deutsche Bank was exploring potential takeover targets, although the German bank declined to comment on the speculation.

Source: WSJ