Spanish Lenders BBVA and Sabadell Abandon Merger Talks -- Update
November 27 2020 - 5:08AM
Dow Jones News
By Patricia Kowsmann
Banco Bilbao Vizcaya Argentaria SA, Spain's second-largest
lender by assets, and smaller peer Banco de Sabadell SA ended their
merger talks because of disagreements over pricing, underlining
that consolidation in Europe's fragmented banking system remains
complicated.
The banks disclosed the talks less than two weeks ago. BBVA said
on Nov. 16 that it was conducting due diligence on Sabadell after
agreeing to sell its operations in the U.S. to Pittsburgh-based PNC
Financial Services Group Inc. for $11.6 billion.
European banks have faced intensifying pressure to merge as they
struggle to make money in a negative-rates environment and as the
pandemic pummels the economy. Shares of most of the region's
lenders have fallen sharply this year, with Sabadell -- with its
exposure to corporates and small businesses in Spain -- declining
more than 60%.
Sabadell's shares were down 13% Friday morning, while BBVA's
were up close to 3%.
Another duo of Spanish lenders, CaixaBank SA and Bankia SA,
agreed to merge in September. In Italy, Intesa Sanpaolo SpA is
buying smaller rival UBI Banca SpA. A small Italian cooperative
bank, Credito Valtellinese SpA, is currently considering an
acquisition offer from France's Credit Agricole SA, which has
operations in the country. Regulators are hopeful for more deals,
which would provide the scale banks need to be profitable in a
sector where costs remain high.
Sabadell said Friday that its board unanimously agreed to end
talks with BBVA given the lenders didn't reach an agreement on the
exchange ratio of their shares. It said it would launch a strategic
plan early next year focusing on its domestic business. The bank
added that it would analyze alternatives for its U.K. unit, TSB
Banking Group.
BBVA also said the talks were off. The bank said earlier this
month that it could buy back shares with the proceeds of its U.S.
sale and still have plenty to grow in its key markets, which
include Mexico and Turkey.
Spanish banks were hit hard during the sovereign-debt crisis of
the last decade because of their exposure to a troubled
construction sector. Since then, most have sold off large
portfolios of souring loans, cleaning up their balance sheets more
than those in Italy or Portugal.
Spain's largest bank, Banco Santander SA, which has big
operations abroad, has stayed away from mergers so far. In 2017, it
bought a collapsing lender in the country with considerable
operations.
Write to Patricia Kowsmann at patricia.kowsmann@wsj.com
(END) Dow Jones Newswires
November 27, 2020 04:53 ET (09:53 GMT)
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