Spanish banks BBVA and Banco Sabadell abandon their merger plan

Posted on Nov 27, 2020 at 9:20 amUpdated Nov 27, 2020 9:21 AM

The case seemed well underway, but the merger between BBVA and Banco Sabadell will not ultimately take place. The two banks indicated on Friday that they were abandoning their merger project, formalized on November 16, which was to give birth to a new heavyweight in the banking sector in Spain.

The price of the transaction caused the negotiations to fail. “The board of directors of Banco Sabadell has decided to end these discussions, the parties not having reached an agreement on the possible exchange of shares between the two entities”, announced the fifth Iberian bank in a press release. . BBVA, the second largest banking group in the country, simply indicated in a separate press release “that the conversations about a potential merger transaction with Banco Sabadell were concluded without an agreement having been reached”.

Towards new merger projects

This news sounds like a halt to banking consolidation in Spain, launched by the marriage between CaixaBank and Bankia in September. This union, which should become effective in early December, will give birth to the largest Spanish bank.

On the other side of the Pyrenees, the merger ball is not over yet. The search for a partner appears inevitable for Banco Sabadell, which could ultimately turn to Abanca or the new entity CaixaBank / Bankia. Ditto for BBVA, which has significant liquidity after selling its American subsidiary to the PNC group for 11.6 billion dollars (9.7 billion euros).

While the health crisis due to Covid-19 has largely affected the Spanish economy, which is very dependent on tourism, the country’s banks are also suffering from low interest rates and are seeking to reduce their costs. Before discussing the merger with BBVA, Sabadell had also announced its intention to cut some 2,000 jobs.

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