Banco Sabadell shares, which celebrated the potential merger with BBVA after the start of the talks was known eleven days ago, this Friday corrected their value on the stock market after the breakdown of the negotiations between the two financial institutions. Sabadell set a first price this Friday at 0.33 euros, which represented a sharp fall of 18%. It even reached 20%. As the session progressed, these strong falls were partially moderated, down to 13.58%, to 0.347 euros. However, it is Sabadell’s biggest drop since March 12.

For its part, BBVA shares that started the day slightly lower, rose strongly at the end, by 4.99%, to 3.958 euros, being the most bullish of the Spanish selective. The rest of the sector registered a mixed trend. On the one hand, Bankinter and Bankia accompanied Sabadell on the side of the falls – although in no case did they reach 1% – while Santander and CaixaBank advanced positions.

The Sabadell share had already corrected since it touched 0.45 euros last week. Onur Genç’s statements indicating that they would not buy the Catalan entity at any price punished the price, which on Thursday deepened the correction with a 5% decrease. Nothing to do with the meteoric rise of Monday 16. Although the negotiations were announced that day at the close of the market, the entity advanced 24.6%, followed by 6.75% the following day. Despite the sharp decline on Friday, the Sabadell revalued 32.7% in November.

In the case of BBVA, the reaction was twofold, to the extent that on Monday, November 16, the entity announced the sale of the subsidiary in the United States for 9.7 billion. It rose 15.25% that day, but the following day it corrected 4.4%. However, it has regained ground and this Friday closed at levels that had not been registered since February, when the pandemic began to sink the world stock markets.

The rating agency Standard & Poor’s considered this Friday that the breakdown of negotiations between BBVA and Banco Sabadell on their merger is “bad news” for the Spanish banking system, since it needs consolidation to improve its efficiency.

The risk rating agency underlined in a report published this Friday that the dismissal of its possible merger due to the disagreement in the price “raises the uncertainties about the next strategic movements of the banks.”

Profitability issues

In this sense, S&P warned that Sabadell will continue to have problems improving its profitability, which is under “increasing pressure” due to the impact of Covid-19, since credit provisions have added to existing risks for revenues.

Despite the Catalan bank’s decision to restructure its business to reduce its number of offices and its staff and accelerate the digitization of its business model, S&P believes that the benefits of these actions will not be noticeable in the short term, which is why concerns of investors on the bank’s ability to raise its profitability will persist, affecting the share price.

Furthermore, for the agency, the possible sale of TSB “would mean acknowledging that the bank’s international expansion in the UK has been unsuccessful.”

Although the transaction could “strengthen” the bank’s capital position, S&P believes there is uncertainty about how much value Sabadell will be able to extract from the sale.


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