Spain's BBVA and Sabadell end tie-up talks, TSB up for sale

MADRID: BBVA and Sabadell ended merger talks on Friday after they failed to agree on price, stalling a wave of Spanish bank tie-ups and putting Sabadell's loss-making British lender TSB on the block.

The collapse piles pressure on Sabadell, which was seen as the weaker partner. The smaller Spanish bank said it would announce a new business plan, with a focus on its home market, in the first quarter of 2021.

European banks are struggling with ultra low interest rates and the fallout from the COVID-19 pandemic is forcing them to focus on cutting costs, either alone or through tie-ups.

Before entering formal talks with BBVA in mid-November, Sabadell was focused on an efficiency plan. It said it will now analyse "strategic alternatives" for its overseas assets, which largely consist of TSB, which it bought in 2015.

Two sources told Reuters that Sabadell had asked Goldman Sachs to find a buyer for TSB, although investment firm Alantra said that selling it "will be complicated as Sabadell might be perceived as a forced seller".

BBVA and Sabadell had been looking to create Spain's second-biggest domestic bank with almost 600 billion euros ($715 billion) in assets. But two days after announcing talks, BBVA Chief Executive Onur Genc said the bank had other options, such as a sizeable share buyback programme.

The banks confirmed talks were over in separate statements.

One of the sources said the deal was called off so quickly because BBVA was forced to acknowledge interest in Sabadell after announcing the sale of its US division, but that it had not been ready to enter serious talks.

Spanish bank consolidation had gathered pace again in September after Caixabank agreed to buy Bankia for 4.3 billion euros ($5.1 billion).

The sector has already shrunk from 55 lenders to 12 since the 2008 financial crisis and further consolidation is expected to reduce this to half a dozen, putting Spain on a par with Britain, two banking sources have told Reuters.

While regulators including the European Central Bank have been pushing for cross-border and domestic deals, the failure of a BBVA merger with Sabadell shows how complex they can be.

But other potential deals remain possible in Spain, with Unicaja and Liberbank in talks

SABADELL SUFFERS

Sabadell shares fell 12% to 0.3520 euros after rising almost 20% since news on Nov. 16 of the sale of BBVA's US business triggered an announcement that it could use part of the $11.6 billion proceeds to buy its rival.

Sabadell's market value fell to around 2 billion euros from 2.26 billion on Thursday, while BBVA shares rose 4%.

No details of the financial disagreement were disclosed by the banks. El Economista reported on Thursday that while BBVA was willing to pay in cash, it would not consider a substantial increase on a potential offer of close to 2.5 billion euros.

Sabadell's current market value was still above the around 1.9 billion euros it was worth on Nov. 13, before shares jumped on the potential acquisition by BBVA.