BBVA’s hostile takeover bid for Banco Sabadell is still in its early stages, but if it goes ahead and opens the door to a merger of the two entities, the bank chaired by Carlos Torres would become a major shareholder in the asset management company of Bank Sareb, retaining the shares now in the hands of its competitor.
This is not a minor package. Currently, Sabadell holds 6.61% of Sareb’s capital and is the third private shareholder of the so-called Banco Malo, behind the State (50.14%), Santander (22.21%) and CaixaBank (12.24%).
Maintaining this package of 11,346 shares would represent a turning point in the scenario, since in 2012 BBVA, then chaired by Francisco González, had firmly opposed landing in Sareb, the entity that ended up with the bankrupt real estate assets of the Spanish bank after the bursting of the real estate bubble, which its main competitors had indeed entered.
Today, the takeover bid, which has the express rejection of Sabadell and the government, can change the banking market in Spain, although it still has several months of processing ahead of it, and have a rebound influence on the future of Sareb, because it is necessary to decide what to do with it, and its private shareholders – even if it is controlled by the State – will have to have their say.
The bad bank was created with an expiration date, scheduled for 2027, and still has a significant volume of toxic assets (real estate and loans) to sell on its balance sheet, so it cannot be ruled out that when that date arrives, of its extinction, it will be decided to extend its existence. In addition, it has become an important player in the Spanish real estate sector, as it constitutes one of the cornerstones of the future public stock of affordable rental housing, which the government estimates, in total, at 183,000 homes. Of this figure, 50,000 correspond to the “bad bank”.
Rejection before
Sareb was created in 2012, in the midst of the economic and financial crisis, alongside the multi-million dollar rescue of Bankia and in an attempt to save the banks, freeing them from their toxic assets, such as land and buildings that were difficult to clean up. sell. These assets were grouped together in a company that was to sell them to the highest bidder within 15 years. BBVA decided to stay out, which caused friction with the government headed by Mariano Rajoy, with Luis de Guindos, now vice-president of the European Central Bank (ECB), as Minister of Economy.
Thirteen Spanish banks entered Sareb (Santander, Caixabank, Banco Sabadell, Banco Popular, Kutxabank, Ibercaja, Bankinter, Unicaja, Cajamar, Caja Laboral, Banca March, Cecabank and Banco Cooperativo Español), two foreign banks (Deutsche Bank and Barclays Bank) and four insurance companies (Mapfre, Mutua Madrileña, Catalana Occidente and Axa), in addition to the Fund for the Orderly Restructuring of Banks (FROB) and, later, a small package was taken by a company outside the financial sector, Iberdrola, through its real estate company.
Finally, FROB ended up taking the lead, as it has exceeded 50% of the capital since 2022, after the State took over the 35 billion euros of Sareb’s debt, after Europe demanded it. The following graph details its current shareholders.
BBVA had then refused to enter, even though its president at the time, Francisco González, had even declared that he was considering becoming a shareholder of Sareb “for the good of Spain”.
Finally, the one who was president of the entity until 2018, and who is awaiting trial in one of the pieces of the so-called Villarejo case for the irregular hiring of the former police officer, justified that, whether or not he was on the “wrong” “bank” had “nothing” to do with the “affection” that the entity had for Spain.
The decision was justified by its CEO at the time, Ángel Cano: “We are not going to expose ourselves to a relevant or significant capital consumption that could affect our solvency.” “It is too early to know how this partnership will end,” Cano said in mid-2012 during a results presentation.
Instead of entering Sareb, BBVA chose to create, with the vulture fund Cerberus, a joint company to manage the physical parts of the entity. In this document, the American investment giant held 80% of the shares, as we have in this topic. Finally, in 2021, Cerberus ended up taking over the entire capital of this joint venture.
Less than four years ahead
A little over ten years ago, the then CEO of BBVA had doubts about the future of Sareb and how it would end. At the moment, with that expiration date in sight, it is not known. However, it seems unlikely that, in the less than three years that remain, it will manage to sell all the assets that are still weighing on its balance sheet.
A balance that does not shine. Sareb closes the 2023 financial year with losses worth 2.198 million euros. Red figures that are getting worse, because they are 46% higher than those of 2022, when it had already lost 1.506 million. In 2021, after the pandemic, there were already 1.626 million euros left.
It is losing more, even though it is accelerating the sale of assets. Last year, it made disposals worth 3 billion, while the objective is 2 billion per year until 2027. For example, it has sold more than 10,000 homes at an average price of 90,000 euros. Since the creation of Sareb, the portfolio of toxic assets has been reduced by more than 27 billion, but there are still nearly 23 billion left.
The underlying problem is time, debt and your net worth, the difference between what you own and what you owe. Its net worth is negative by almost €14.6 billion and it still has almost €30 billion of debt to repay, even though it has written off €21 billion since its creation.
These nearly 30 billion are considered public debt. And Sareb herself acknowledges that it is very difficult to recover it and sell all the toxic assets that remain before its expiration date in 2027.
