Banco de Sabadell, S.A. (BNDSY) Presents at Bank of America 30th Annual Financials CEO Conference 2025 Transcript

Banco de Sabadell's CEO, Cesar Gonzalez-Bueno, and CFO, Sergio Palavecino, reiterated their unanimous rejection of BBVA's hostile takeover bid, citing significant undervaluation of Sabadell, flawed synergy and EPS accretion calculations, and increased risks associated with BBVA's emerging market exposure compared to Sabadell's domestic focus. Sabadell emphasized its strong standalone value creation potential, projecting a 16% Return on Tangible Equity (ROTE) by 2027 and a commitment to distribute EUR 6.3 billion to shareholders over three years, underpinned by robust capital generation, strategic loan growth in SMEs and consumer lending, and a sustainable 40 basis points cost of risk, asserting this independent path offers superior, less risky returns.

Analysis

Banco de Sabadell's management has presented a comprehensive and aggressive defense against BBVA's hostile takeover bid, asserting that the offer fundamentally undervalues the bank's standalone potential. The CEO, Cesar Gonzalez-Bueno, detailed the board's unanimous rejection, highlighting that their internal valuation is north of EUR 4 per share plus a premium. The core of Sabadell's counter-argument rests on its superior, de-risked capital generation capability, claiming that after adjusting for currency devaluation and RWA inflation in emerging markets, BBVA's 21% ROTE yields only a 9% distributable capital increase, compared to Sabadell's 14% from a 15% ROTE. Management systematically dismantled BBVA's projections, arguing the stated 25% EPS accretion is not only 'significantly wrong' but turns negative when accounting for Sabadell's committed dividends and consensus forecasts. Furthermore, BBVA's EUR 900 million synergy target is deemed 'unrealistic' due to regulatory-mandated autonomy periods and significant political opposition in Catalonia. Underscoring its standalone case, Sabadell reaffirmed its guidance for a 16% ROTE by 2027 and a EUR 6.3 billion shareholder distribution over three years, with a significant EUR 3.8 billion front-loaded, arguing this front-loaded, Spain-focused return profile is superior to the riskier, emerging-market-dependent proposition from BBVA.

Key Decisions for Investors

• Investors must weigh the credibility of Sabadell's standalone guidance, including a 16% ROTE target by 2027 and a EUR 6.3 billion capital return plan, against the value and certainty of BBVA's current offer.
• A key consideration is the risk-adjusted return profile; investors should scrutinize management's claim that Sabadell's Spain-focused operations generate superior distributable capital (14%) compared to BBVA's riskier emerging market-heavy earnings (9% distributable).
• Shareholders should assess the probability of the takeover's success, considering the vocal management opposition, potential political and regulatory hurdles, and the complexities of a sub-50% tender, which could either force a higher bid from BBVA or lead to the deal's collapse.
• Monitor Sabadell's execution on its near-term capital generation and distribution targets, as delivering on the promised EUR 3.8 billion of front-loaded returns will be a critical validation of the standalone thesis and management's credibility.