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The chief executive of Spain’s Banco Sabadell has warned that its would-be acquirer BBVA could be forced by antitrust regulators to offload part of its business serving small companies, jeopardising the main attraction for the hostile bidder.
César González-Bueno, Sabadell’s chief executive, was launching the latest salvo in a contentious takeover battle as Sabadell seeks to fight off Spanish bank’s BBVA’s bid, which initially valued the target at €12bn and would be the largest deal in European banking this year.
“In an already concentrated market, [the takeover] raises significant competition issues . . . The disappearance of Sabadell would put not only the pricing at risk for [small businesses], but it will also put at risk the access to credit,” González-Bueno told the Financial Times.
He predicted that Spain’s competition authority, the CNMC, would request antitrust remedies for the deal to secure regulatory approval and said these could include obliging BBVA to jettison part of Sabadell’s SME business.
“This is not for me to say, but one possible, effective way would be to carve out part of the people, procedures, capabilities [and] infrastructure from Sabadell and make them available in the market to third parties that don’t have significant market shares in SMEs,” he said.
The CNMC said its review of the deal was ongoing and that no decision had been made. Speaking at an event last month, Cani Fernández, its head, said she would also look at whether areas such as Sabadell’s insurance business should be cut as part of the deal.
Sabadell’s board rejected a friendly offer from BBVA in May and the larger bank then returned with a hostile bid on exactly the same terms. If it receives approval from the competition regulator and the European Central Bank, BBVA wants to launch its formal tender offer to Sabadell shareholders before the end of the year.
BBVA sees Sabadell’s prized small and mid-sized client base in Spain as the most attractive part of its business. Carlos Torres, the BBVA chair driving the bid, has expressed confidence that it will not be derailed by competition objections.
But González-Bueno said that even without drastic antitrust remedies, there could be an exodus of customers who already had banking relationships with BBVA and wanted to diversify.
He pointed to the impact on fellow Spanish lender Banco Popular after it was taken over by Santander in 2017: within two years of the deal Popular’s business lending volumes dropped by two-thirds, according to data from Sabadell.
“It’s very simple. Banks don’t want to have all their risk with one company and SMEs don’t want to have all their credit risk with one bank, so they diversify,” González-Bueno said.
Despite being the smaller business, Sabadell has a larger share of Spain’s lucrative small and medium-sized company market with 12.7 per cent compared with BBVA’s 11.5 per cent.
BBVA said the transaction represented a firm commitment to SMEs. “Barring a financial downturn, BBVA has pledged to maintain the working capital facilities of all small and medium-sized companies for at least 12 months,” it said.
The bidder also said it was wrong to assume that a more consolidated banking sector led to higher borrowing costs. Pointing to data showing lower loan prices in Spain than Germany, which has a more fragmented financial services sector, it said: “Banks with more scale can be more competitive in pricing.”