Fitch: hostile nature of BBVA’s takeover bid for Sabadell risks distracting both

Fitch hostile nature of BBVAs takeover bid for Sabadell risks

(Finance) – The public takeover offer (OPA) hostile of Banco Bilbao Vizcaya Argentaria (BBVA) on Banco de Sabadell, without the support of Sabadell’s board of directors, increases execution risks. Fitch Ratings states this in a report on the topic, underlining that the relatively long period until the potential approval date (six to eight months) adds uncertainty and can represent a distraction for both banks.

According to the rating agency, BBVA would benefit from a larger scale and of a national franchisingparticularly in the SME segment, of potential cost synergies (850 million euros pre-tax or 13% of the combined entity’s cost base in Spain) and greater geographic exposure to developed markets.

BBVA estimates that theinitial negative impact on CET1 will be manageable between 30 and 44 basis points depending on the take-up rate (CET1 ratio at 12.8% at end-1Q24), although there are still uncertainties regarding the final impact. BBVA reiterated its capital plans regardless of the outcome of the offer, which includes its intention to distribute any excess capital above 12% of CET1 to its shareholders.

If the offering does not proceed, Fitch does not foresee negative credit implications for the two banks. Fitch still expects that BBVA and Sabadell continue to benefit from the favorable operating environment in Spain, the positive interest rate cycle and, for BBVA, the growth opportunities in Mexico. Fitch’s expectations of a structural improvement in Sabadell’s profitability due to rising interest rates, containment of credit impairment charges and improved performance of the bank’s UK branch are reflected in the positive outlook on the bank’s rating, effective from June 2023.

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