Spain's BBVA takes aim again at $10 billion Sabadell

BBVA said on Tuesday it had approached Sabadell about a possible merger, a deal which would create a Spanish bank with assets of nearly 1 trillion euros ($1.07 trillion) and a market value close to Santander's.

Talk of a tie-up between Spain's second and fourth-largest banks comes almost four years after previous negotiations collapsed. Sabadell's shares jumped as much as 7.7%, while BBVA's closed down 6.7% after the announcement.

The potential merger follows a period of consolidation in the sector as Spanish banks seek to cut costs and boost scale. Spain now has 10 banks, down from 55 before the start of the 2008 global financial crisis.

BBVA said it had appointed advisers and told the chair of Sabadell's board of directors of its interest in initiating negotiations over a potential merger.

Sabadell confirmed it had received an indicative written proposal from BBVA and said in a statement that its board "will properly analyse all aspects of the proposal".

For BBVA, a tie-up would boost its domestic business and increase lending to small and medium-sized companies, where Sabadell is strong. The bank's shares have soared in recent years under CEO Onur Genc and Chair Carlos Torres thanks to its booming Mexican business and big shareholder payouts.

Sabadell has reported a run of rising profits, helped by higher interest rates in Spain, and its share price has increased five-fold since the 2020 merger talks failed.

"With this operation, BBVA recovers its leading position by volume of assets in Spain, one of its main markets and one of those that has grown the most in its latest results," said Joaquin Robles, analyst at Spanish broker XTB.

It could also be an opportunity for Sabadell, which had recently been linked to a possible