BBVA office in Bilbao EFE / LUIS TEJIDOLuis Tejido / EFE
Negotiations for the purchase of Sabadell by BBVA are progressing at a good pace "and the result will be seen in the coming weeks," according to Jaime Guardiola, CEO of the Catalan entity.
The operation will focus on cutting expenses as the main factor to recover the lost profitability.
The digitization of the sector accelerates the reduction of physical presence: analysts expect more than 5,000 layoffs, 11% of the total workforce and 1,300 office closures, 30%.
The unions fear the worst and demand agreed staff reductions and voluntary redundancies.
Among the bankers in the sector, an agreement between the two entities is committed, because the alternative of breaking up and looking for another partner seems less favorable.
But they remember that the road will be long and that the operation will not be closed until June or September 2021 if there is an agreement, in parallel with the payment for the BBVA subsidiary in the United States sold to PNC for 9,700 million.
Meanwhile, analysts point out that one of the biggest risks will be the execution of the merger.
In other words, designing the new map of offices and templates and choosing the best managers from both entities.
Neither Carlos Torres, president of BBVA, nor Onur Genç, the CEO, have experience in this work in Spain.
However, Sabadell, with 139 years of history, has grown based on more than 12 acquisitions between 1996 and 2015, and market sources highlight the high technical quality of a large part of its executives, who are heavily involved in commercial and small banking. Business.
Reduce 40-50% of small bank expenses
Analysts are writing their reports in a hurry after the surprise of yesterday's announcement.
Like any merger, this one will also focus on cutting costs to compensate for the drop in income caused by negative interest rates and the economic crisis that emerged after the pandemic.
Their calculations coincide in that to obtain synergies they will have to reduce "between 40% or 50% of the costs of the smallest bank of the merger", as José Antonio Álvarez, CEO of Santander, said yesterday in a conference organized by Deloitte and ABC .
This percentage represents a little more than 1,000 million on Sabadell's costs, which would translate into layoffs of “between 5,000 and 6,000 employees of the merged bank in two years,” according to José Luis Cortina, president of the Neovantas banking consultancy.
"It is very expensive to do without so many employees, but it is more expensive to maintain them over the years," adds this consultant.
The future entity will have 4,240 offices (2,521 from BBVA plus 1,719 from Sabadell) and 46,365 workers (29,475 from BBVA and 16,890 from Sabadell).
Cortina estimates that “more than 1,200 offices could be closed, with an average of three employees, about 4,000 network workers, to which should be added about 2,000 more of the central services that have to lose weight throughout the digitization process, that will accelerate ”.
The office calculation coincides with another report from the consulting firm Bain & Company.
Barclays analysts calculate that if the “unexpected” merger of BBVA and Sabadell comes to fruition, it could mean the closure of 1,232 branches that overlap by zip code.
This movement comes after the huge branch closures and layoffs accumulated by Spanish banks in the decade.
Morgan Stanley takes the cost of reducing layoffs to $ 4 billion.
In an intermediate zone is Íñigo Vega, from Nau-Securities, who believes that the new entity can spend around 2,000 million in restructuring and coincides in 5,000 or more layoffs.
This chapter will highlight the merger of digital platforms, "although in the medium term one of them, that of Sabadell, has to be scrapped, with all the loss in value that this entails," says Cortina.
"Here is the risk of losing clients if the quality of care drops."
The keys, the price and the provisions
Experts recall that Sabadell a week ago proposed the departure of 1,800 workers with voluntary leave.
"Now it is easy for me to try to reach 6,000 employees," says a manager who requests anonymity.
It is also pointed out that BBVA has reduced offices, but very few employees, so it comes to the merger with a high staff, especially in Catalonia where it bought two banks from savings banks, Unnim and Catalunya Banc.
The decision will be conditioned by several factors, including how much BBVA will pay for Sabadell.
The consensus of the market is that it will put around 2,400 million.
Yesterday it was worth 2,512 million on the stock market, after rising 7% more.
In November it has appreciated by 70%, although it accumulates a decrease of more than 50% in the last year.
In this chapter it will be necessary to see what happens with the British subsidiary of Sabadell, TSB, whose market value is zero.
The provisions that are needed to cover impaired real estate assets will also be key: Vega points out that it will be 2,116 million, taking into account that delinquencies will grow strongly in 2021, especially in SMEs, where Sabadell is strong.
This will be a key factor and difficult to pin down for BBVA.
In his favor, the buyer has a negative goodwill (badwill), the difference between the book value and what he pays: up to 7.900 million that would be used to meet the restructuring expenses.
The road will be long.
Unions criticize possible integration
CC OO de Catalunya requires BBVA and Sabadell "guarantees" for the workforce before the merger project.
The majority union considers "essential" that, if the operation goes out, a labor agreement is articulated that protects the working conditions and the occupation of both templates.
CC OO recalls that Sabadell, before this announcement, "negotiated voluntary leave for people over 56 years old" and tried to avoid geographical mobility and the modification of working conditions.
UGT does not position itself, in the absence of official contacts, although it believes that it is "an excessive bank concentration".
LAB believes that the operation leads to oligopoly and the destruction of thousands of jobs, "making services more expensive, which will be of poorer quality."
