BBVA Aims to Acquire Sabadell for Second-Largest Lender Status in Spain
The European Union (EU) has cautioned the Spanish government against hindering a crucial bank consolidation that it deems essential for building robust credit institutions, following Madrid’s announcement of a ministerial review of BBVA’s hostile takeover bid for rival Sabadell.
Background on BBVA and Sabadell
BBVA, one of Spain’s leading financial institutions, has been attempting to acquire Sabadell for over a year. The acquisition would position BBVA as the second-largest lender in Spain, enhancing its market share and strengthening its competitive position.
Sabadell, another prominent Spanish bank, has resisted BBVA’s takeover attempt, citing potential job risks. The Spanish government has echoed Sabadell’s concerns, opposing the merger since its inception.
Government’s Response and EU’s Stance
On Tuesday, Spanish Economy Minister Carlos Cuerpo announced the rare step of reviewing BBVA’s offer, which has already received approval from the European Central Bank and Spain’s competition regulator.
Although the government cannot prevent BBVA from purchasing Sabadell shares, it can obstruct a merger. The government now has until the end of June to decide whether to approve the offer and set conditions related to job implications and branch closures.
Olof Gill, a spokesperson for the European Commission’s financial services department, emphasized that there are no grounds to halt an operation complying with risk and competition regulations, especially since consolidation is vital for building stronger European credit institutions and ensuring the success of the EU Savings and Investment Union.
“It is crucial that bank sector consolidation can proceed without imposing unnecessary or inappropriate obstacles,” Gill stated.
Increased Mergers and Acquisitions in European Banking
In the past year, there has been a surge in mergers and acquisitions within the European banking sector. Liquid-rich credit institutions are pursuing operations that regulators and industry executives anticipate will create more competitive banks capable of challenging rivals from the US and Asia.
However, several deals have encountered political hurdles:
- UniCredit and Commerzbank: The merger between Italy’s UniCredit and Germany’s Commerzbank faces opposition from Berlin.
- UniCredit and Banco BPM: Italy recently imposed conditions on UniCredit’s offer for its domestic counterpart, Banco BPM.
Key Questions and Answers
- What is BBVA’s goal in attempting to acquire Sabadell? BBVA aims to become the second-largest lender in Spain by acquiring Sabadell, enhancing its market share and strengthening its competitive position.
- What concerns has the Spanish government raised regarding BBVA’s takeover bid? The Spanish government, echoing Sabadell’s concerns, has opposed the merger due to potential job risks.
- What is the EU’s stance on bank consolidation in Europe? The EU supports bank consolidation to build stronger European credit institutions and ensure the success of the EU Savings and Investment Union, emphasizing that operations should comply with risk and competition regulations.
- Why are mergers and acquisitions increasing in the European banking sector? Liquid-rich credit institutions are pursuing operations to create more competitive banks capable of challenging rivals from the US and Asia.
- What political challenges have some European bank mergers faced? Several deals, such as UniCredit and Commerzbank or UniCredit and Banco BPM, have encountered opposition or conditions imposed by respective governments.
