425: BBVA Chair Highlights Commitment to Catalonia Amid Banco Sabadell Merger

BBVA's Chair, Carlos Torres Vila, emphasized the bank's commitment to Catalonia and the strategic benefits of the proposed merger with Banco Sabadell, particularly for SMEs.

Summary

• BBVA's Chair, Carlos Torres Vila, addressed the proposed merger with Banco Sabadell in Barcelona, emphasizing BBVA's commitment to Catalonia.
• He highlighted Catalonia's significance as the largest contributor to BBVA's Spanish business, with 25% of new SME customers originating from the region.
• The merger aims to strengthen BBVA's support for Catalan SMEs.
• Torres Vila believes the merger will not create competition issues, citing previous mergers with similar or higher market shares approved by the CNMC.
• He argued that competition analysis should be national, not regional, and that the combined entity's market share would not exceed that of other merged banks in various regions.
• He stated that lending tends to increase after bank mergers.
• Torres Vila emphasized the need for European banks to grow in size to compete with global players and spread technology costs.
• He noted that Banco Sabadell shareholders will have the final say on the offer.
• BBVA shareholders overwhelmingly supported the capital increase for the merger, and the British supervisory authority and the ECB have given their approval.
• The remaining milestones include authorization from the CNMC and CNMV, and the decision of Banco Sabadell's shareholders.
• Torres Vila believes Sabadell shareholders would gain 27% higher EPS at the combined entity compared to remaining independent, based on analyst consensus.
• He noted the close correlation between the share prices of both banks since the offer.
• BBVA's digital customer acquisition has increased significantly, from 7% in 2017 to 67% currently.
• BBVA is focused on sustainability as a business opportunity and is combining growth and profitability effectively.
• BBVA's tangible book value per share plus dividends grew by 20% in the first six months of the year.
• The document includes forward-looking statements and cautions readers about potential risks and uncertainties.

Sentiment

Score: 8

Explanation: The document presents a positive outlook on the proposed merger, emphasizing its strategic benefits, commitment to Catalonia, and potential for increased shareholder value. The tone is confident and optimistic, highlighting BBVA's strong financial performance and digital transformation progress.

Positives

• The merger is expected to strengthen BBVA's commitment to Catalonia and its SMEs.
• BBVA anticipates no competition issues, based on previous merger precedents.
• Banco Sabadell shareholders are projected to benefit from a 27% increase in EPS if the merger is successful.
• BBVA's digital transformation is progressing rapidly, with a significant increase in digital customer acquisition.
• BBVA is experiencing strong financial performance, with a 20% increase in tangible book value per share plus dividends.
• BBVA has received overwhelming support from its shareholders for the capital increase required for the merger, with 96% voting in favor.

Negatives

• The merger is subject to regulatory approvals, including from the CNMC and CNMV.
• The success of the merger depends on the decision of Banco Sabadell's shareholders.
• There are inherent risks and uncertainties associated with forward-looking statements regarding the merger's benefits and timeline.
• The document acknowledges the risk that the combined company may be unable to achieve synergies or that it takes longer than expected to achieve those synergies.

Risks

• The merger is subject to regulatory approvals, including from the Spanish competition authority (CNMC) and stock market regulator (CNMV).
• The success of the merger depends on the decision of Banco Sabadell's shareholders.
• There are risks related to the disruption of management time from ongoing business operations.
• The transaction could have adverse effects on the market price of BBVA's shares.
• The transaction could negatively impact the ability of BBVA or Banco Sabadell to retain customers and key personnel.
• Problems may arise in successfully integrating the businesses of the companies.
• The combined company may be unable to achieve synergies or it may take longer than expected to achieve those synergies.

Future Outlook

BBVA anticipates the successful completion of the merger with Banco Sabadell, pending regulatory approvals and shareholder decisions, and expects to achieve significant synergies and benefits from the integration.

Management Comments

• Carlos Torres Vila: 'The combination with Banco Sabadell reinforces BBVAs commitment to Catalonia.'
• Carlos Torres Vila: 'We aim to continue growing with Catalonia and the transaction with Banco Sabadell reflects that.'
• Carlos Torres Vila stated that, following recent mergers, there has been no decline in lending.
• Carlos Torres Vila: 'Banco Sabadells shareholders will have the final say on our clearly attractive offer.'
• Carlos Torres Vila is confident that Sabadells shareholders will accept the exceptionally good offer put forward by BBVA.
• Carlos Torres Vila: 'Banco Sabadell shareholders would stand to obtain earnings per share (or EPS) at the combined entity 27 percent higher than if the entity continued to go it alone.'
• Carlos Torres Vila remarked that the banking sector has been profoundly impacted in recent years by digitization.
• Carlos Torres Vila believes that BBVA stands at an incredible juncture in financial and strategic terms.
• Carlos Torres Vila: 'At present, BBVA is doing the best job at combining growth and profitability among its group of European peer banks.'

Industry Context

The proposed merger reflects a broader trend in the European banking sector towards consolidation to achieve scale, improve efficiency, and compete with larger global players, particularly in the face of increasing technology costs and digital transformation.

Comparison to Industry Standards

• The document mentions that previous mergers with similar or higher market shares have been approved by the Spanish National Commission for Markets and Competition (CNMC).
• The BBVA Chair noted that even when looking at local market shares, there is no region in Spain where the combined entity from the BBVA-Sabadell merger would hold a larger market share than other banks that have already merged, such as in Castilla y Len, Galicia, or the Basque Country.
• The BBVA Chair argued that European banks must seek scale to compete, noting the absence of any European bank among the worlds top 20 by market capitalization.

Stakeholder Impact

• Shareholders of Banco Sabadell are expected to benefit from a potential 27% increase in EPS.
• SMEs in Catalonia are expected to receive increased support from the combined entity.
• Customers of both banks may experience changes as a result of the integration.

Next Steps

• Authorization by the Spanish competition authority (CNMC).
• Authorization by the Spanish stock market regulator (CNMV).
• Decision of each and every Banco Sabadell shareholder on what they want to do with their shares.

Key Dates