After the fervor of the last few months, the Spanish banking risk registers a first major setback. While awaiting news on dividends, the sector is looking towards Spain where the possible marriage between Banco Sabadell and BBVA, which had kicked off the European movements of credit institutions, creating ferment on the stock exchanges across the continent, will not exist.
The two banks had announced on 16 November the start of negotiations aimed at creating Spain's second largest banking group, with almost 600 billion dollars of assets, a reality more solidly able to face the repercussions of the Covid-19 pandemic.
Today, Sabadell made it known that “the board of directors has decided to end the negotiation because the parties have not reached an agreement on the possible exchange ratio for the shares of both entities”. Simply speaking, Sabadell rejected BBVA's offerconsidered too low. The operation appeared more like the acquisition by the largest (Bbva) of the smaller rival, than as a merger and consolidation project.
Sabadell's refusal immediately sparked the stock market reaction. At the opening, the stock of the Institute recorded a decline of 18%. At 12 the shares lost 13,2% to 0,3489 euros, against a sharp rise in BBVA, which advanced by 2,5% to 3,863 euros.
The reason is obvious: after this No, Sabadell will come back under pressure in a banking scenario that is showing signs of consolidation and fervor in Spain. We must in fact consider that last September CaixaBank, Spain's third largest bank, took over Bankia, the fourth institution in the country, forming the new leader of the Spanish market (Santander is larger in absolute terms, but due to its international presence). Also for a few months Liberbank and Unicaja are negotiating for a possible wedding. It should also be underlined that, a few hours before the November announcement, the BBVA had announced the agreement for the sale of its US assets to Pnc Financial for 9,7 billion euros, an operation that had been linked to the trial of consolidation of the banking sector in Spain, one of the countries most affected by the coronavirus crisis.
