Spain's Banking Giant Emerges: BBVA-Sabadell Merger Nears Completion Amid Regulatory Scrutiny

The proposed merger between BBVA and Banco Sabadell, which would create Spain’s second-largest banking entity with over €1 trillion in assets, is on the cusp of regulatory approval. Sources indicate Spain’s National Commission of Markets and Competition (CNMC) will greenlight the deal as early as next week, subject to specific conditions aimed at addressing antitrust concerns. This milestone marks a pivotal shift in Spain’s financial sector, balancing strategic consolidation with safeguards for competition.

The Remedies: A Behavioral Blueprint for Competition

The CNMC’s approval hinges on BBVA’s commitments to mitigate dominance in key regions, particularly Catalonia and Valencia, where the merged entity’s retail banking market share exceeds 30%. The proposed remedies, outlined in BBVA’s fifth submission to regulators, focus on behavioral constraints rather than structural asset sales:

1. SME Credit Protections:
2. BBVA must maintain existing credit terms for small and mid-sized enterprises (SMEs) and self-employed clients in high-concentration areas for a minimum of three years. This includes preserving working capital lines and credit volumes for businesses reliant entirely on either bank.

3. The extension from 18 months to three years addresses Sabadell’s criticism that shorter-term guarantees fail to protect SMEs from abrupt credit reductions.

4. Transparency and Access:

5. BBVA agreed to uphold Sabadell’s branch network in rural areas and preserve interbank agreements for cash machine access, ensuring continued consumer access to financial services.

While these measures avoid the disruption of asset disposals, critics argue they may not fully address long-term dominance risks. Sabadell has lobbied for structural remedies, but the CNMC’s focus on behavioral safeguards reflects a pragmatic approach to balancing efficiency and competition.

Regulatory Context: A Vigilant CNMC in a Digital Age

The BBVA-Sabadell deal is just one front in the CNMC’s expanding enforcement agenda. Recent actions highlight its resolve to combat dominance in digital and traditional sectors alike:
- Apple’s Antitrust Probe: The CNMC continues investigating Apple for anti-steering clauses in its App Store, aligning with EU efforts under the Digital Markets Act (DMA).
- Booking.com’s €413M Fine: The CNMC penalized Booking.com for abusive parity clauses, a case now overlapping with DMA prohibitions on gatekeeper firms.
- Healthcare Scrutiny: An ongoing probe into Generali-Sanitas’s 2022 agreement underscores the CNMC’s focus on cross-sector collusion risks.

These cases reflect Spain’s alignment with EU competition priorities, reinforced by a 2024 Memorandum of Understanding with the European Commission to collaborate on DMA enforcement.

Investment Implications: Risks and Rewards

For investors, the merger’s approval signals a consolidation wave in Spain’s banking sector, driven by low interest rates and digital disruption. Key considerations include:

1. Operational Synergies:

2. BBVA’s dominance in digital banking and international reach could be bolstered by Sabadell’s strong domestic SME portfolio. Analysts estimate cost synergies of €500–700 million annually by 2026.

3. Regulatory Risks:

4. While the CNMC’s conditions are manageable, Sabadell’s shareholders may challenge the deal, and the Spanish government’s opposition could delay shareholder approvals.

5. Market Sentiment:

6. BBVA’s stock has risen 18% year-to-date amid merger optimism, but further gains hinge on execution. A successful integration could lift its valuation closer to peers like Santander, which trades at a 15% premium to BBVA.

Conclusion: A New Era for Spain’s Banks

The BBVA-Sabadell merger, if finalized, will reshape Spain’s financial landscape. The CNMC’s approval underscores its preference for behavioral remedies in concentrated markets, a pragmatic stance that avoids stifling consolidation while protecting SMEs. For investors, the deal presents opportunities in a sector poised for post-merger efficiency gains. However, risks remain, including regulatory compliance costs and shareholder pushback.

With €1.2 trillion in combined assets and a streamlined cost base, the merged entity could emerge as a formidable competitor in Europe’s banking sector. Yet, its success will depend on navigating Spain’s evolving regulatory environment—a task made clearer by the CNMC’s growing assertiveness.

Data as of April 2025:
- BBVA’s market cap: €18.4 billion (up 12% since merger announcement).
- Sabadell’s market cap: €2.6 billion (down 8% due to merger uncertainty).
- CNMC’s 2024 fines total: €425.8 million, a 40% increase from 2023.

In this climate, BBVA’s bet on scale and digital agility may pay off—but only if regulators’ conditions remain a guideline, not a straitjacket.