By Mauro Orru

 

Talks for a potential merger between Spanish lenders Banco Bilbao Vizcaya Argentaria SA and Banco de Sabadell SA have come to an abrupt end, upending a deal that would have created a bank with a market cap of about 27.5 billion euros ($32.76 billion).

Banco de Sabadell said Friday that negotiations have ended as the two banks failed to reach an agreement on the exchange ratio of both entities. BBVA also confirmed talks fell apart.

Shares in Banco de Sabadell fell around 17% at market open, while BBVA was flat.

The announcement comes less than two weeks after the two banks had said they were holding discussions, had appointed external advisors and embarked on a due diligence process.

The missed deal is a setback for consolidation in the overcrowded European banking sector, which had been gathering pace.

CaixaBank SA in September agreed to take over small rival Bankia SA in a merger set to create Spain's largest domestic bank and the country's third-largest bank by assets.

Intesa Sanpaolo SpA also secured support to acquire UBI Banca, creating Italy's largest bank by assets and the eurozone's second-biggest by market capitalization.

As prospects of a BBVA-Sabadell deal have faded, Banco de Sabadell said it would evaluate alternatives for value creation with regards to the group's international assets, including British lender TSB.

The Spanish bank will prioritize the Spanish market as part of a new plan aimed at increasing profitability and creating value for shareholders.

While details of the plan are due in the first quarter of 2021, it is expected to include the expansion of the transformation program in the Spanish retail market, with a neutral impact on capital.

 

Pietro Lombardi contributed to this article

 

Write to Mauro Orru at mauro.orru@wsj.com; @MauroOrru94

 

(END) Dow Jones Newswires

November 27, 2020 03:39 ET (08:39 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.
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