César González-Bueno: "The return of the headquarters goes far beyond politics; it is a matter of pride, belonging and proximity"

MadridNine months later, Banc Sabadell is still immersed in the hostile takeover launched by BBVA. Since then, many things have changed, such as the evolution of the value of its shares (with the numbers in hand, the proposed exchange already represents a loss for Sabadell shareholders), but also in regard to its corporate headquarters: Seven years later, Sabadell has returned to the city of Valles. Its CEO, César González-Bueno, receives the ARA in Madrid at a time when the operation is on the verge of being ruled on by the Competition Authority.

BBVA gives four arguments to show its confidence in the takeover bid: that medium-sized banks like Sabadell have no future; that institutional shareholders have already said yes; that the merger creates the tenth bank in Europe and that it will be able to lend more, and that the takeover premium, now in the negative, shows that it will go ahead. How do you see it?

— I will answer them from my point of view. First, we have a balance sheet of 250 billion. If this is small, God come and see it. Then, in Spain, and in SMEs, we are almost as big as BBVA. In addition, the most profitable banks in Spain are the smallest, Bankinter and KutxaBank. Regarding the institutional [shareholders], I have just come from London to talk to them. There are five types and each one has a different perspective. Some say that they are not clear, that with their information everything is very confusing because they see enormous execution risks. Others, with the value of Sabadell itself, with the track record, the growth, the credibility, with a solid management team that delivers and clear dividends, like this story. If they promise them the moon, well, they will see. And the shareholders who are indices will vote based on the probability that the takeover will be successful. And then there are the private individuals, whom we survey weekly, and they are not too excited [about the offer].

What do these polls say?

— Some of them don't know that there is a takeover bid. Then there is a significant group that is not sure and will decide based on the dividends and who best explains the operation. And there is a third group, which is a very clear and powerful majority, who have decided that they are not going to sell.

Returning to BBVA’s arguments…

— The idea that it is the tenth bank in Europe is a lie. 70% of BBVA's activity is in emerging markets. It is a Mexican bank, with a very important presence in Turkey, Spain and somewhat less in Argentina and other countries. And as for the premium, the idea that if the takeover goes away, Sabadell's value would fall by up to 40%, as BBVA says, makes no sense and the analysts tell you so.

Sabadell has a profit of 1.8 billion euros and BBVA 10 billion euros. Is this too uneven a fight?

— No. We doubled their dividend in relative value and this is much more important. Some say that, because they are older, they have greater management capacity. I will let everyone judge for themselves.

What do you expect to happen in Phase 2 of the Competition? Will it move to Phase 3?

— To phase 3, of course.

So the government will have to have its say.

— He has the right to do so. What the takeover law establishes is that the government, during phase 3, can reduce the conditions, tighten them or leave them as they are. The president himself [Pedro Sánchez] has already said that he is concerned about the operation due to a question of territorial and social cohesion.

Are you worried about what the Competition Authority might decide?

— The CNMC is faced with an extraordinarily complex dilemma. It is debating whether to opt for the methodology it has always defended, the one it used with CaixaBank and Bankia, and it has found that the situation is totally different because there have been 79 complaints against it. Then there is the issue of SMEs and the need to have four or five banks on average. The debate is abysmal because the measures proposed by BBVA are behavioural measures: either I do not touch the volumes for twelve months or I do not touch the conditions for three years. Then, it returns to the starting situation. In the retail It is less important because there are more players, but with SMEs it is very critical [...] Any Competition body has the obligation to maintain the levels of competition similar to those before the operation, which is why the European Commission is applying structural measures.

That's why they are remedies [measures to mitigate the impact of the operation on competition].

— What cannot be is to arrive here with a question: with these remedies proposed by BBVA, competition will be better than without the remedies? These are temporary, not structural, behavioural measures. They should not sit down and carry out market research with a pre-established methodology. The methodology should not be put before the heart of the matter, which is whether there is real competition.

He is pessimistic.

— We have many doubts about the methodology that has already been applied in the past, which is preferred by the CNMC.

So, would you like me to change it?

— I think it is essential.

BBVA has offered to engage in dialogue with the Spanish government to dispel its doubts. Have you done so too?

— Sabadell speaks to everyone.

You have told us that you are talking to the funds and that you are optimistic. Are these funds worried about the executive's position with the takeover bid?

— The most speculative funds are looking to take the offer, sell it and leave if the price increases. They don't care about the competition; they just want it to be in their favour. They play to bet and win. But in other cases they want the opposite.

When other entities are asked about the operation, they answer that there is a lot of competition in Spain.

— They cannot say more. But I think there is competition. In SMEs I think we are touching the core, but in mortgages or consumer credit there is competition. If you ask me if there is a possibility of more mergers, there is also. But it is not the same to take two complementary banks than two banks that overlap. We have four large banks in SMEs and, if one disappears, it is a problem.

Do you think they say that because they are rubbing their hands?

— I leave this to each one. As the president [Josep Oliu] said, "you cannot ask the wolf if he wants to release the chickens."

How would Sabadell experience being a bank? opat but not merged?

— Well, we do what they tell us, but that doesn't make sense, and when institutional investors feel this, their eyebrows go up in smoke. An acquisition has a much higher capital cost for the acquirer if there is no integration. BBVA's argument that the synergies are practically the same with or without a merger is not worth refuting. It makes no sense.

Nine months later, is what business leaders in Catalonia tell you the same as what they tell you in Madrid?

— Identical. In Madrid, in Galicia, in Valencia… Everyone says the same thing. The emphasis is greater in Catalonia and Valencia, but the arguments are the same.

A year ago, during the presentation of the 2023 results, you said that there was talk [internally] about the takeover bid. At that time, were you already thinking about returning?

— We had been considering the option for a long time, yes. In Catalonia we knew that they would love it and outside Catalonia we found no reluctance. Then we started talking to politicians, to everyone, and everyone thought it was natural and reasonable. Another thing is that it was a communication bomb: we were the first and we returned first. And we left for a simple reason: the funds were leaving and we would have had liquidity problems. Now we have returned and we have not noticed anything. What sense would it make for people to withdraw the funds?

His predecessors believed that there was also a lot of irrationality in 2017.

— That moment was very hard. People called us (even people very important to the [independence] movement) asking if anyone knew about it, if they were taking money. It was a time of great instability, and instability affects money.

To what extent has it been a defensive move to ingratiate itself with governments?

— We don't need to curry favour with the [Spanish] government. Moreover, if we talk about the Catalan government, they consider us a very important bank in Catalonia. What I know is that it has had a very positive effect on Catalan society. The return goes far beyond politics; it is a matter of pride, belonging and proximity.

Given the role of the Spanish government in the merger, or even in a possible phase 3, do you understand why the move has been interpreted as political?

— Everyone reads things as they wish and I believe that the movement is absolutely natural and reasonable.

Is coming back right now a sign of weakness in the face of the takeover bid?

— I'm not going to go into more detail than I've already said.

Do you assume that BBVA will improve its offering?

— I don't know. There is a significant part of the market that believes it is a high possibility.

If it improves, the market may applaud it, but the paradox may arise that the operation will continue to be viewed negatively socially and economically.

— Yes, of course, and even the shareholders. There are speculative shareholders and long-term shareholders, and each one sees it differently.

Do you share the opinion that this operation could be the end of the career of Carlos Torres, or of Josep Oliu, or of you?

— If the takeover goes through, I have no doubt that it will be the end of my career, at least in banking, but that is not relevant. And I will not speak for the others.

The sector has just made more money than ever before. How does this fit in with the ongoing criticism of the tax?

— Profits have increased, but they were at a very low level. It is also true that we threw a tantrum over 1.5 billion when at the end of the year we made 31 billion. However, if you look at total taxes, the tax rate is higher than in other sectors.