BBVA proposes a merger with Sabadell

On 30 April 2024, BBVA confirmed that it had proposed a merger to Banco Sabadell. On 6 May, Sabadell’s board of directors rejected the offer on the grounds that it undervalued the bank. It was the first step in a transaction involving two large Spanish banks, one of them of Catalan origin, and it immediately drew attention in the business and financial world.

A merger proposal of this kind is not a formality but the start of a negotiation that may drag on, change shape or come to nothing. In the meantime, clients keep the same accounts, cards and loans, but legitimate questions arise about the future of their relationship with the bank, which are best considered calmly. This note summarises what was proposed, what Sabadell’s board said and what is worth bearing in mind in one’s relationship with the bank.

What was proposed

A merger is an agreement by which two institutions combine into one. It can be done in various ways, but the result is that they cease to exist as separate organisations, with their own structures, staff and brands, and begin to operate under a single management. It requires the approval of the governing bodies of both parties and whatever authorisations apply. When the two institutions operate in the same market, supervisors usually look with particular care at the effect on competition.

A merger proposal and a first rejection are not yet an outcome. It is common for first proposals to meet resistance: price, terms and the division of power are part of the negotiation, and a board saying no to an offer does not, by itself, mean the matter is closed. That is why the prudent course is to speak of a proposal and not a decision, and to wait for the next steps before drawing conclusions.

What clients were asking

For companies and families banking with Sabadell, especially in Catalonia, the question arose of what would happen to their bank, their relationship managers and their terms. A deal like this changes nothing overnight: existing accounts, contracts and mortgages remain in force on the agreed terms, and each party’s obligations are the same as before. Day-to-day activity at the branch carries on as normal while the parties negotiate.

But it opens a period of uncertainty. Clients wonder whether branches, managers or fees will change, and companies that rely on credit lines wonder whether the conditions will be maintained when they are renewed. The reasonable course is to keep informed through official channels and not take decisions on the basis of rumours or isolated headlines. If there were relevant changes, they would normally be communicated through the channels set out in each contract.

What to review

Banking concentration reduces options. The fewer banks compete in a market, the fewer alternatives a client has when wanting to compare prices or negotiate terms. A company should keep a balanced relationship with more than one bank, so that none has too dominant a position in its financing. Spreading financing across several institutions also has practical value: if one of them changes policy, the company is not left without alternatives.

It is also worth knowing the terms of policies and credit lines well and understanding which clauses would apply if the bank changed hands: maturities, the possibility of cancellation, guarantees provided. Having that information in order, and speaking to the bank in good time, makes it possible to react calmly if a change comes. An annual review of terms is a good habit, whatever happens in the sector.

Having alternatives is the best negotiating position.

This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.