Sabadell maintains that the takeover bid has been "derailed" by social backlash and the offer price.

MadridThis Friday will mark one year since BBVA launched its hostile takeover bid for Banc Sabadell, and despite the uproar (still pending resolution), the Valles-based bank continues to boast about how its business is evolving. This Thursday, it once again flexed its muscles with the announcement of its first-quarter earnings: €489 million in three months, which is 58.6% more than the same period in 2024, as reported by the financial institution through the National Securities Market Commission (CNMV). Sabadell shares led the gains on the Ibex 35 this Thursday, with a gain of 3.64%.

This improvement in earnings comes at a time when BBVA's hostile takeover bid has just landed in the political arenaThe operation is now on the table of the Ministry of Economy, which, following unanimous approval from the Competition Authority, must decide before May 27 whether to submit it to the Council of Ministers so it can make its decision.

Although the process remains open, the Vallesan bank maintains that the operation is going nowhere: "I said some time ago that the takeover bid had derailed [...] and I think it continues to derail," stated the bank's CEO, César González-Bueno, this Thursday during the presentation. The reasons why the executive reaffirms this prediction are twofold: the "unanimous rejection" of the operation by society and businesses, and the "low price" of BBVA's offer. "It's priceless because BBVA has been devalued," said the executive. "The premium [today] is negative", he reiterated.

To claim that BBVA's shares have been "devalued", Sabadell compares the entity's revaluation with that of the rest of the banks in the State, as well as the European average. If we look at the share price on April 29, BBVA and 2 38% on average. The average for Spanish banks is 54% and, in the case of Sabadell, 60%. end of the acceptance period (when Sabadell shareholders will have to decide whether to sell their shares to BBVA), if it is reached.

It is in this context of "unanimous rejection" of the takeover bid - according to Sabadell - that Pedro Sánchez's executive, through the Ministry of Economy, has launched a public consultation to gather social and business opinions regarding the transaction. Although they are not binding, the ministry will take them into account when submitting the Competition Authority's opinion to the Council of Ministers, which opens the door to toughening conditions at BBVA, this time for reasons of "general interest" rather than competition. "Obviously, we are going to participate [in the government's consultation]," the Sabadell CEO stated. However, González-Bueno also remained cautious: he did not want to assess Pedro Sánchez's gesture, nor did he detail the bank's response. "It's a matter for the board of directors," he simply stated.

After focusing on the Competition Authority's analysis, González-Bueno did not want to make a fuss about the entity's final opinion. "The CNMC has reached some conclusions, and those are the ones we have," he said. However, he insisted that the commitments and conditions do not cover "by any stretch of the imagination" 100% of Sabadell's SMEs in terms of financing. Regarding whether the Spanish government could tighten this issue by, for example, forcing BBVA to sell part of its business (should the takeover bid be successful), Sabadell is worried that this will spill over into the Competition Authority and, therefore, it's unlikely anything can be done. As ARA explained last week, industry sources suggest that workforce protection, the economic impact, or territorial cohesion could come into play if the government decides to make a move.

Banking tax plus credit

The results announced this Thursday are primarily explained by the increase in lending to businesses and households, fee income, the drop in provisions, and the new design of the banking tax. In this regard, banks now pay quarterly and do not settle the entire amount in a single payment. Thus, the bank has paid €31 million through March, far from the €192 million it had to assume in the first quarter of 2024. Furthermore, the normalization of interest rates by the European Central Bank (ECB) has begun to be felt in the business, as well as in the sector. Revenue from banking activities (interest income plus net fee income) amounted to €1.56 billion in the first quarter of the year, a slight drop of 0.7%. Regarding net interest income, where the drop in rates is most noticeable, revenue stood at €1.216 billion, a drop of 1.3%. However, this is offset by credit demand and the fee margin. Between January and March, net fees grew by 1.3%, to €334 million, while lending activity grew in all areas, but particularly in corporate and personal lending, with a significant increase in mortgage lending, which soared by 81% to €1.645 billion, and consumer lending, which grew by 2%.

Finally, the bank's results were also boosted by a 29.2% reduction in provisions (the bank's provisions for future losses). This also included a higher contribution from TSB, the bank's British subsidiary, which stood at €94 million between January and March. Return on tangible equity (ROTE) stood at 15%.

Strategic plan

Sabadell is expected to present its strategic plan for the next three years shortly, although the timing will depend on how the takeover bid process develops. The bank indicates that it intends to present it, if it ever does, days before the start of the takeover acceptance period (when shareholders vote), so that minority and institutional shareholders have a more realistic picture, especially since the Spanish government will have already issued its opinion. In fact, with its shareholders in mind, Sabadell has announced an increase in its remuneration through dividends and share buybacks thanks to the capital increase. The bank has increased its remuneration forecast by €100 million, to €1.3 billion, charged to 2025 results. "We estimate that the sum of dividends and share buybacks in 2024 and 2025 will total €3.4 billion," Gonzá noted.