Spanish lenders BBVA and Sabadell drop merger talks

Banco Bilbao Vizcaya Argentaria SA, Spain’s second-largest lender in terms of assets, and Banco de Sabadell SA, its smaller counterpart, have ended their merger talks due to price disagreements, stressing that consolidation in Europe’s fragmented banking system remains complicated.

The banks unveiled the talks less than two weeks ago. BBVA said on November 16 that it was performing due diligence on Sabadell after agreeing to sell its operations in the United States to PNC Financial Services Group Inc., based in Pittsburgh, for $ 11.6 billion.

European banks have faced increasing pressure to merge as they struggle to make money in a negative rate environment and as the pandemic hits the economy. The shares of most of the region’s lenders have fallen sharply this year, with Sabadell – with its exposure to businesses and small businesses in Spain – declining by more than 60%.

Sabadell shares were down 13% on Friday morning, while BBVA shares were up almost 3%.

Another duo of Spanish lenders, CaixaBank SA and Bankia SA, agreed to merge in September. In Italy, Intesa Sanpaolo SpA acquires the smaller competitor UBI Banca SpA. A small Italian cooperative bank, Credito Valtellinese SpA, is currently considering an offer to acquire the French company Credit Agricole SA, which operates in the country. Regulators are hoping for more deals, which would provide the scale banks need to be profitable in an industry where costs remain high.

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