Spanish Bank Sabadell Resets After Failed BBVA Merger

Sabadell is reportedly looking at cutting jobs and striking distribution deals with other European banks after merger talks with fellow Spanish banker BBVA crashed last week, Reuters reported. The two could not agree on a price.

After the deal with the larger bank fell through, shares of Sabadell slumped, amid investor concerns over the lender getting hit with bad loans as part of the pandemic-triggered economic crisis.

“Banco de Sabadell will launch a new strategy that will prioritize its Spanish domestic business,” the bank said in a press release after the talks with BBVA dead-ended. Sabadell said it would “launch a transformation program in its retail banking business” and look at its “strategic alternatives” regarding its international options, which include U.K. bank TSB.

Sabadell said that its “leadership” in serving small to medium-sized businesses (SMBs) in Spain help to make it “a highly profitable solid domestic franchise.” It added that it would focus on market segments that “generate greater profitability and added value.”

Two sources told Reuters that Sabadell was also looking at slashing jobs by up to 2,000 people in Spain next year, on top of 1,800 job cuts it already announced.

Differences between BBVA and Sabadell over the value of TSB — a mid-sized bank that Sabadell bought in 2015 for $2.29 billion — was a point of contention.

“The market and BBVA were putting a zero valuation on TSB,” said a Reuters source, who added that the TSB valuation could be higher – even close to one billion euros –depending on whether a potential buyer had a program for cutting costs.

While BBVA did not want to pony up more than 2.5 billion euros for Sabadell, the smaller bank wanted a minimum of three billion euros, the source said. One sticking point was the value of Sabadell’s TSB.

BBVA has also been looking to strike a deal with PNC Bank in the U.S., but may face problems with regulators.