BBVA's Hostile Takeover Bid for Sabadell: A Path to Restructuring and Job Cuts Amid Government Scrutiny
The takeover bid launched by BBVA for Sabadell is progressing, but the implications of this hostile merger are already looming large. BBVA's president, Carlos Torres, has openly acknowledged that the union will likely lead to restructuring and job cuts. This potential merger has stirred significant opposition from the government and various political parties, raising doubts in the market.
Bank mergers, in general, have often resulted in branch closures and layoffs, a trend that has been ongoing for more than a decade. This pattern was exacerbated following the real estate bubble burst, which precipitated a financial crisis leading to bank bailouts and subsequent integrations.
Currently, the contentious takeover bid from BBVA has stirred considerable resistance due to the timing and nature of the proposal. The timing of the bid, just days before the crucial Catalan elections, further complicates the situation. Economy Minister Carlos Cuerpo has expressed significant concerns, emphasizing the need for a broader vision regarding the potential impact on consumers. He noted the regulators, particularly the National Commission on Markets and Competition (CNMC), are expected to evaluate the merger's consequences, particularly in terms of market concentration and its effects on financial policies.
The prospect of branch closures is particularly troubling, as history shows that such mergers lead to closures in the areas where both companies have a presence. According to data from the Bank of Spain, BBVA and Sabadell currently overlap in at least 522 municipalities, many of which are smaller towns with populations between 10,000 and 50,000. The regions with the highest concentrations of duplicated offices are mainly situated along the Mediterranean coast, as well as in Catalonia, Valencia, Murcia, Andalusia, Madrid, Euskadi, Asturias, and Galicia.
Despite concerns, BBVA has not disclosed detailed plans for the anticipated restructuring if the merger proceeds. However, they have committed to maintaining a presence in Catalonia and Valencia, where Sabadell has its headquarters. The integration process is expected to take at least six months, during which the government will closely monitor developments, especially regarding consumer impacts.
Carlos Torres argues that the merger should not pose a competition issue as there are plenty of digital banking alternatives available, which have been emerging as significant players in the market. Despite fewer physical locations than in the past, he insists that the digital landscape provides ample competition.
Currently, both BBVA and Sabadell operate over 3,000 physical offices collectively. As branches close, it is projected that the combined entity could save approximately 850 million euros annually from synergies, with 750 million stemming from reduced costs, although a significant portion of these savings would not directly pertain to workforce reductions.
The effects on employment due to ongoing branch closures are also a pressing concern. In 2021 alone, Spanish banks faced a record restructuring leading to 19,000 layoffs, which cost the banking sector around 48 billion euros. These layoffs extend beyond branch closures and affect central services vital for operations.
Torres has confirmed that job cuts will be part of the integration process, assuring, however, that they will be negotiated with labor unions to avoid a traumatic experience for employees. While he refrained from providing specific figures regarding potential layoffs, he emphasized the importance of preserving talent within both entities during the transition.
As the takeover bid unfolds, the implications for the banking landscape in Spain remain uncertain. With the government pledging close scrutiny and various concerns regarding consumer impacts and market concentration being raised, the future of this potential merger—and the broader banking sector—hangs in the balance.
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