BBVA and Sabadell in talks to create Spain’s second-biggest lender

BBVA and smaller rival Sabadell announced they are in talks to create Spain’s second-biggest domestic lender by assets, the latest move in the accelerating consolidation of the Spanish banking sector.

BBVA/Sabadell merger would mark a significant step in this process, coming after Caixabank agreed in September to buy Bankia for €4.3 billion.

If a BBVA/Sabadell deal goes ahead, the new bank would have nearly €600 billion in assets in Spain and a combined market value, Reuters calculations using Refinitiv data showed.

Taking into account both banks’ international businesses, but deducting the upcoming sale of BBVA’s U.S. division, a merged group would have around €860 billion in total assets, still below Santander’s €1.5 trillion global balance sheet.

Banks across Europe are struggling to cope with record low interest rates, and the economic downturn sparked by the coronavirus pandemic is forcing them to focus on further cost cuts, on a standalone basis or through tie-ups.

Both BBVA and Sabadell said the talks were ongoing and said no decision had been made on whether a transaction would go ahead.

“The entities have initiated a reciprocal due diligence review process as is customary in this type of transactions and have appointed external advisers,” BBVA said in a stock exchange filing.

“It is noted that no decision has been made in relation to the potential merger transaction and that there is no certainty as to whether any such decision will be made or, if that is the case, as to the terms and conditions of a potential transaction.”

Sabadell’s own statement confirmed the talks and said it had initiated a due diligence process and designated external advisers.

Original Story: Reuters | Jesus Aguado 
Photo: BBVA website
Edition: Prime Yield