Spanish bank BBVA took markets by surprise on Thursday after it opted to launch a rare hostile bid for domestic player Banco Sabadell in what one investment firm described as \u201cvery strange.\u201d<\/p>\n\n\n\n
This is only a few weeks after a different 12 billion euro ($12. 87 billion) bid from BBVA to acquire Sabadell\u2019s shares were turned down by the latter\u2019s board of directors.<\/p>\n\n\n\n
The board explained that the initially proposed bid from BBVA \u201csubstantially\u201d underestimated the growth opportunities for the bank in the future and noted that a standalone strategy would be far more valuable. That stance was reinforced later as BBVA publicly called for the takeover by taking its all-share offer to the bank\u2019s shareholders.<\/p>\n\n\n\n BBVA said that its bid to take over Sabadell is similar to the merger proposed to Sabadell\u2019s board in terms of funds terms. It described the formation of the second largest financial organisation in Spain if the deal went through, as \u201cextraordinarily attractive.\u201d<\/p>\n\n\n\n BBVA Chair Carlos Torres Vila explained that Banco Sabadell\u2019s shareholders would receive an extremely compelling opportunity to build a bank of greater size for this group in one of its core markets. This would increase both sides\u2019 effectiveness in their respective areas of work.<\/p>\n\n\n\n Hostile takeover bids are unusual in the European banking sector and BBVA\u2019s decision was unexpected. The news resulted in the decline of<\/p>\n\n\n\n BBVA\u2019s stock by 6% while Sabadell\u2019s stocks gained more than a 3% increase.<\/p>\n\n\n\n Carlo Messina, Chief Executive of Italy\u2019s largest bank Intesa Sanpaolo, said to CNBC that there are a lot of obstacles to onboard integration within the region\u2019s banking sector.<\/p>\n\n\n\n The nominations commissioner said that a \u201cfriendly acquisition\u201d was not possible in the current conditions, adding that a \u201chostile\u201d takeover bid was also somewhat challenging.<\/p>\n\n\n\n speaking to CNBC\u2019s \u201cSquawk Box Europe\u201d, said that the proposed offer \u201cmakes sense\u201d from Sabadell shareholders and, in his opinion, it would go through. He said that the specific proposal signifies BBVA will be paying 30% more for Banco Gallego shares than the closing share value of both companies on 29 April. It resonated with the recent talks in Switzerland regarding the merger of Credit Suisse by UBS and concerns about financial stability.<\/p>\n\n\n\n Consolidation, Benamou said, is a growing phenomenon in the European market owing to the fact that most of the regional players are very small compared to their larger US peers.<\/p>\n\n\n\n Spain\u2019s Economy Ministry said in a statement that the government was against the hostile takeover bid by BBVA in Sabadell. The ministry also cautioned that the proposed deal would have negative consequences on the Spanish financial system.<\/p>\n\n\n\n According to a Reuters article (23 July), Spanish giant Banco Bilbao Vizcaya Argentaria (BBVA.MC), wants to buy Banco de Sabadell (SABE.MC), but the latter\u2019s response is effectively to buy itself instead.<\/p>\n\n\n\n Sabadell\u2019s CEO C\u00e9sar Gonz\u00e1lez-Bueno committed to buybacks and dividends worth 2.9 billion euros over the next two years.<\/p>\n\n\n\n Sabadell began 2024 with an 11.5% return on tangible equity target and goals for returning money to shareholders.<\/p>\n\n\n\n An additional factor that worsened the outlook was higher, longer interest rates and the approach by BBVA Chair Carlos Torres Vila, whose all-share offer became hostile at the beginning of May. Gonz\u00e1lez-Bueno has his sights set on achieving more than 13% this year and even the coming year. He also aims to award investors more than one-quarter of the group\u2019s value via the buyback and cash over a two-year span.<\/p>\n\n\n\n What is enabling these new targets is Net Interest which is the sum of income from loans and bonds minus the interest given out to the clients. It increased by 10% y-o-y from the same period in the previous year. Gonz\u00e1lez-Bueno now forecasts a mid-single-digit growth for this year, against the low-single-digit growth predicted back in January. Furthermore, he indicated that expectations for next year\u2019s total are higher, even if the ECB reduces rates.<\/p>\n\n\n\n If the two new targets are anywhere close to being plausible, then BBVA\u2019s proposal is definitely not.<\/p>\n\n\n\n Sabadell shares may actually not drop significantly lower even if the shareholders reject the bid from BBVA. Without an offer, Gonz\u00e1lez-Bueno\u2019s bank would have increased its profit in line with the 10% increase in numbers for the local competitors such as CaixaBank (CABK. MC) and Bankinter (BKT. MC).<\/p>\n\n\n\n Sabadell\u2019s shares would now be around 1.92 euros, and only 9% below the current value of the BBVA bid. Even that’s probably conservative: on average, analysts had increased +18% the 2025 earnings per share target in Sabadell since before the bid, which is more than double the 8% average increase for CaixaBank and Bankinter.<\/p>\n\n\n\n BBVA\u2019s Chair Torres may have to bid higher to SEC to get what he wishes for. He could also claim that in the same way ECB rates will cause earnings to fall, so will Sabadell. But the estimates compiled by Visible Alpha suggest that Sabadell\u2019s net interest income will remain stable for several years.<\/p>\n\n\n\n Banco de Sabadell on 23 July said it now believes it can deliver tangible-return on equity greater than 13% in 2024, above the prior target of more than 12%. The lender battling to fend off a hostile takeover by the larger Spanish peer (Banco Bilbao Vizcaya Argentaria) reckons it can achieve the same for a 13% return in 2025 too even if interest rates are cut.<\/p>\n\n\n\n Banco de Sabadell stocks increased by 2% to 2 euros on 23 July.<\/p>\n\n\n\n If you are interested in trading Banco Bilbao stocks via CFDs or you just want to explore IronFX\u2019s wide range of stocks, you can open a trading account with the leading broker. From superb trading conditions to advanced platforms and free education, IronFX is by your side to help you navigate the exciting world of the financial markets. With dedicated multilingual customer support and your very own personal account manager, you will always have the necessary support to trade with certainty and security.<\/p>\n\n\n\n Disclaimer: This information is not considered as investment advice or an investment recommendation, but instead a marketing communication. IronFX is not responsible for any data or information provided by third parties referenced, or hyperlinked, in this communication.<\/em><\/p>","protected":false},"excerpt":{"rendered":" Banco Bilbao Vizcaya Argentaria, S.A., better known by its…<\/p>\n![\"The](\"\/wp-content\/uploads\/2024\/11\/banco-bilbao-spain-bank-old-building.jpg\")
<\/figure>\n\n\n\nChief investment officer at Axiom, David Benamou<\/strong><\/h3>\n\n\n\n
Banco Sabadell\u2019s attempt to stop Spanish behemoth Banc Bilbao<\/strong><\/h3>\n\n\n\n
![\"A](\"\/wp-content\/uploads\/2024\/11\/banco-bilbao-spain-bank-euros.gif\")
<\/figure>\n\n\n\nMaking a convincing case for independence<\/strong> of Banco Bilbao<\/strong><\/h3>\n\n\n\n
![\"A](\"\/wp-content\/uploads\/2024\/11\/banco-bilbao-spain-bank-building.jpg\")
<\/figure>\n\n\n\nStart trading stocks with IronFX<\/strong><\/h2>\n\n\n\n