BBVA, a Spanish multinational financial services company, has made a series of commitments to alleviate competition concerns regarding its intended merger with Banco Sabadell. The financial institution has vowed to retain its branches, mainly in regions where competition is sparse, and to guarantee credit for small and medium-sized enterprises (SMEs). This move is aimed at appeasing worries about risks to competition and rural access. If given the green light, the merger could significantly transform Spain’s banking sector.
The commitments were presented to the National Markets and Competition Commission (CNMC) of Spain. They are designed to ensure financial inclusion, preserve lending to SMEs, and maintain competitiveness, primarily in Catalonia and the Valencian Community. These are regions where both BBVA and Banco Sabadell have a significant footprint.
BBVA is committed to ensuring that the business terms for individuals and SMEs remain unchanged in areas served by fewer than four financial institutions. The bank has also promised to uphold working capital lines for SMEs for 18 months post-merger and to sustain the total credit volume for SMEs that exclusively bank with BBVA and Sabadell during the same duration.
The merger proposal also includes maintaining pricing standards for SMEs at the national average and ensuring transparency in changes to commercial policies for Sabadell customers. These commitments, as per BBVA’s press release, substantially alleviate the risks identified by the CNMC.
However, the proposed merger is not without its challenges. The CNMC noted several concerns arising from the transaction. Although it wouldn’t create municipal monopolies, the combined entity could dominate in 50 municipalities, potentially limiting consumer choice. The disparity in diversification between the two banks could also result in consolidated lending practices, which could negatively impact smaller businesses.
The CNMC has initiated a second-phase investigation that will carry on into 2025, inviting feedback from stakeholders like consumer groups, SMEs, and competing financial institutions. If approved, the merger will form one of Spain’s largest financial institutions, significantly consolidating market power in key regions.
For investors, the BBVA-Sabadell merger holds considerable implications. It could result in a stronger, more competitive institution in the European and global landscape. In Spain, it would be the second-largest banking group by market share in loans, boasting total assets of €265 billion.
Despite these potential benefits, BBVA shares fell 0.7% during midday trading on Thursday, marking a third consecutive session of losses. This decline was primarily driven by deteriorating risk sentiment amid escalating geopolitical tensions between Russia and Ukraine. Banco Sabadell shares also slipped 0.7% during the session.
