Spain's BBVA takes aim again at $10 billion Sabadell

By Jesús Aguado

MADRID (Reuters) -BBVA said on Tuesday it had approached Sabadell about a possible merger, a deal which would create a Spanish bank with assets of nearly 1 trillion euros ($1.07 trillion) and a market value close to Santander's.

Talk of a tie-up between Spain's second and fourth-largest banks comes almost four years after previous negotiations collapsed. Sabadell's shares jumped as much as 7.7%, while BBVA's closed down 6.7% after the announcement.

The potential merger follows a period of consolidation in the sector as Spanish banks seek to cut costs and boost scale. Spain now has 10 banks, down from 55 before the start of the 2008 global financial crisis.

BBVA said it had appointed advisers and told the chair of Sabadell's board of directors of its interest in initiating negotiations over a potential merger.

Sabadell confirmed it had received an indicative written proposal from BBVA and said in a statement that its board "will properly analyse all aspects of the proposal".

For BBVA, a tie-up would boost its domestic business and increase lending to small and medium-sized companies, where Sabadell is strong. The bank's shares have soared in recent years under CEO Onur Genҫ and Chair Carlos Torres thanks to its booming Mexican business and big shareholder payouts.

Sabadell has reported a run of rising profits, helped by higher interest rates in Spain, and its share price has increased five-fold since the 2020 merger talks failed.

"With this operation, BBVA recovers its leading position by volume of assets in Spain, one of its main markets and one of those that has grown the most in its latest results," said Joaquin Robles, analyst at Spanish broker XTB.

It could also be an opportunity for Sabadell, which had recently been linked to a possible takeover of Unicaja, he said.

Two sources familiar with the matter said UBS and JP Morgan were advising BBVA. JPMorgan, UBS and BBVA declined to comment.

Spain's Economy Minister Carlos Cuerpo told Spanish news agency EFE that it was essential to preserve a competitive landscape in the financial sector.

And the biggest union in the banking sector, CCOO, expressed concern about the preservation of jobs in Spain, where since 2008, the number of staff working in the industry has shrunk by around 40%.

TERMS

The deal would come as Spanish banks look for ways to raise revenue as the boost from high interest rates begins to fade.

Sabadell and BBVA called off merger talks in November 2020 as they did not agree on the terms, including the price tag.

Differences between BBVA and Sabadell over the value of Britain's TSB, which was bought by Sabadell in 2015 for 1.7 billion pounds ($2.29 billion), were partly to blame for the talks collapsing, a source with direct knowledge said then.

BBVA did not want to pay more than 2.5 billion euros for Sabadell, which was not willing to accept less than 3 billion euros, the source said, with the difference partly down to TSB.

Sabadell is now worth 9.7 billion euros ($10.36 billion), while BBVA has a market value of 59.4 billion euros, against Santander's more than 72 billion euros.

Recent deals in Spain include Unicaja's acquisition of Liberbank, sealed in July 2021 for 763 million euros.

In March 2021, Caixabank completed its 4.3 billion euro acquisition of state-owned Bankia, creating Spain's biggest domestic bank with more than 610 billion euros in assets.

($1 = 0.9341 euros)

(Reporting by Jesús Aguado and Inti Landauro; additional reporting by Andrés González and Pablo Mayo Cerqueiro in London; Writing by Jesús Aguado and Tommy Reggiori Wilkes, Editing by Aislinn Laing, Jan Harvey and Alexander Smith)