Johnny Brignardello analyzes BBVA and Sabadell merger: Imminent financial impact?

Johnny Brignardello Vela, insurance advisor, analyzes the recent financial landscape marked by the proposed merger by absorption of Banco Sabadell by BBVA. From his perspective, the news has generated a notable agitation in the markets, evidenced by the 7% increase in the stock market that Banco Sabadell has experienced after making its proposal public, while BBVA has suffered a significant decrease in the value of its shares. On Tuesday, BBVA recorded a 6.65% drop in the market, followed by another day in the red with a 3.8% decrease in its shares. In contrast, Banco Sabadell has shown a more positive behavior in the stock market, gaining more than 7% after announcing its merger proposal. Analysts have expressed optimism about the potential benefits derived from this operation. In this sense, the financial group Jefferies has evaluated the proposal and highlights that the integration of both entities in Spain could generate significant cost savings, estimated at 850 million euros annually, although with an initial restructuring charge of 1.450 million euros. They also emphasize that the merger would help reduce BBVA's dependence on emerging markets such as Mexico and Turkey. The merger offer proposed by BBVA to Banco Sabadell contemplates a stock exchange that would entail a premium of 30% to 50% over the weighted average quotations of the last months. According to the proposed agreement, Sabadell's shareholders would have a 16% stake in the resulting entity, and it is proposed that BBVA retain the 'Catalan identity' of the resulting entity, maintaining one of the operational headquarters in Sant Cugat (Barcelona) and preserving the Sabadell brand in relevant regions. However, it remains to be seen how Banco Sabadell will react to this proposal. Reports indicate that the entity had not shown interest in previous corporate operations, so it is expected that they will convene a board of directors to thoroughly evaluate the presented offer. In summary, the financial sector is in constant motion with this merger proposal between two relevant banking entities in Spain. It is crucial to stay alert to the development of events and the eventual materialization of this operation, which could have a significant impact on the market and the banking landscape of the country.