The market discounts that BBVA will sell TSB ‘at a loss’ after the absorption of Sabadell

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Although nothing is decided yet, the negotiations for the merger between BBVA and Banco Sabadell they continue their course with the aim of carrying out the operation before the end of the year. The auditors are immersed in the asset valuation, bad credits, capital, investees and subsidiaries to determine the price and formula (in shares or cash) in which the transaction will be closed.

According to financial sources, BBVA would have already made the decision to sell the British subsidiary of Sabadell, TSB, if the operation finally goes ahead. And the market is clear that that sale would occur ‘at a loss’, that in any case the entity chaired by Carlos Torres could assume without problem.

Although there are no details about the assessment given to TSB in the ‘due diligence’, the experts recall that “Sabadell paid 2,300 million euros for that franchise and, currently, the equity of this division barely reaches 1,600 million euros ”, indicate from a national consultancy.

Access to UK

It is true that TSB offers access to the British market to BBVA. The blue bank likes this because of the loss of weight in the mature markets with its exit from the US. Also due to the ‘turn’ towards the business segment that the Sabadell subsidiary is attempting.

However, the risks of entering a market “that they do not know well” and the uncertainty about Brexit they would have already tipped the balance towards selling, according to sources consulted. The decision would be made: focus growth on core markets such as Spain, Mexico and Turkey, and get rid of any risk in a complex economic scenario, even if that means putting the ‘for sale’ sign below the price paid by Sabadell to enter the market. United Kingdom.

The experts are also not clear that this sale will be easy. “It will be complicated, because no matter how much it is in the process of restructuring and recovering volumes and commissions, the reality is that it is a bank that loses money and is not profitable … and it will not be so in 2021”, they explain. “Furthermore, TSB still has restructuring costs pending recovery”, They add from another financial institution.

The major investment banks have also sided with the sell theory these days. Barclays, for example, estimates that TSB will only be able to generate 21 million pounds in profit by 2023, putting the necessary endowment for the subsidiary’s goodwill at around 1.2 billion.

For their part, JP Morgan Cazaenove analysts have carried out a study of the operation that includes a breakdown analysis (Sopt valuation), which is basically a method of assessing which divisions of a company would be worthwhile if they were divided.

In this assessment, TSB subtracts from Sabadell’s calculations with a negative adjusted profit of 10 million estimated for 2022, compared to the +466 million that only Sabadell would present.

Defense in management

From Banco Sabadell they defend that, precisely now, and with the restructuring plan of its subsidiary, TSB should not pose any type of concern for BBVA. However, experts agree that “it makes no sense for BBVA to keep the franchise, first, because it is a market that he does not know, and second, because it is not profitable ”, they insist.

The sale of the subsidiary, which had already been speculated in the last months before the merger, would be certain ‘moral blow’ for the main executives of Sabadell, which have always defended their entry into the British market, despite being the great headache for the bank in recent years.

Its journey in the United Kingdom began in 2015 with the ‘compulsory acquisition’ of 100% of TSB. The beginning of the bank’s international expansion in a market where the mortgage segment dominated the sector’s competitive war.

A strong investment that was soon truncated with the Brexit referendum and, later, technological migration, with a strong impact on the bank’s 2018 profits, which in the early stages of 2019 had already managed to straighten out the situation of its subsidiary and, in the third quarter results, the CEO of Banco Sabadell, Jaume Guardiola, indicated that “we hope to return to the profit path”. But timing To carry out the operation, press the objective.


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