Heard on the Street: Europe's Banking Consolidation Is Faltering Before Getting Started -- WSJ

Dow Jones2024-11-15

By Jon Sindreu

The long-awaited wave of bank mergers that is supposed to glue together Europe's fragmented financial landscape is already in dire straits.

Hopes of consolidation were sparked in April, when Spanish lender BBVA made a bid for domestic rival Banco de Sabadell. Despite both political backlash and opposition from Sabadell's board, BBVA pursued a hostile takeover. A combined bank would be the second-largest player in Spain in terms of deposits, right after Banco Santander.

This week, Spain's antitrust regulator placed the deal into a "phase 2" review, involving more intense scrutiny. BBVA seems likely to miss its goal of tendering an offer to Sabadell's shareholders before the end of the year. The final decision could happen well into 2025.

Part of the review process involves consulting third parties. Many, such as Catalonia's government, will likely push back. Regulators seem likely to impose hard remedies on BBVA, including sales of assets. Investors were down on the acquisition when it was originally announced, and are even more so now. BBVA Chief Executive Onur Gen? said this week that walking away remains an option.

Crucially, Sabadell's investors don't have strong reasons to swap their shares for BBVA's anymore. Their bank posted strong third-quarter earnings two weeks ago, confirming its strong recovery path.

BBVA does have a far better track record at delivering on guidance-but it has Mexico as its main market. Donald Trump's election victory, which has come hand-in-hand with a stronger dollar, is seen as negative for emerging markets, and Mexico in particular. At April 29 share prices, Sabadell shareholders would have got a 30% acquisition premium. That has now fallen below 4%.

Meantime, UniCredit's amassing of a stake in Commerzbank has sparked strong backlash by Berlin. While the government there has now collapsed, the potential Italian-German merger also has a high probability of falling through.

European banking consolidation was never set to create a rival for Wall Street. But at this rate, it won't even create a regional champion.

This item is part of a Wall Street Journal live coverage event. The full stream can be found by searching P/WSJL (WSJ Live Coverage).

(END) Dow Jones Newswires

November 15, 2024 10:43 ET (15:43 GMT)

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Heard on the Street: Europe's Banking Consolidation Is Faltering Before Getting Started -- WSJ

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