Spain: a laboratory for European banking?

After the crisis of 2008, Spanish banks found themselves in a delicate position: bailouts, losses by savings institutions, and forced mergers engendered broad mistrust and prompted a debate that was mostly limited to banking experts and financial circles. More recently, a hostile bid by BBVA to acquire Banco Sabadell has changed that scenario. What was once a specialized and technical issue has become a topic for TV talk shows and press analysis, debated over social networks and sparking comments from customers and shareholders. Almost no one has kept to the sidelines: economists, politicians, and citizens have taken a position on whether the attempted Oferta Pública de Adquisición (OPA) was convenient, risky, or loaded with symbolic meaning.

The appearance on the public agenda of this takeover bid has had immediate effects on public perceptions of BBVA and its decisions. Permanent media coverage has become a major problem for the entity, whose acquisition strategy failed to recognize that, beyond mere financial viability, an operation of this type needs to consider reputation and legitimacy, in public opinion and in the eyes of regulators. Widespread attention and feedback loops among the press, public debates, and citizen comments have reinforced the notion that this OPA represents a decisive milestone for Spanish banks, reinforcing their significance beyond balance sheets and quarterly reports.

BBVA, a pillar of Spain’s banking system, recently launched a bid to acquire Sabadell – a merger that would consolidate BBVA’s size, reduce its costs, and strengthen its domestic presence against rival Santander. But the attempt revealed some very complex and unforeseen tensions. Here was the paradox of a global bank seeking to reassert its European identity within a European financial system still uncertain about how to produce continental champions.

"The Sabadell takeover bid was an attempt to balance BBVA’s business: to strengthen its European base and to compensate for the risks of its subsidiaries"

Although BBVA is headquartered in Madrid, its results depend heavily on Mexico and Turkey. Half its profits derive from the Mexican market, where the bank holds undisputed leadership. Another 10% of profits come from Turkey, while Spain accounts for only a fraction of the total. In that context, the hostile bid for Sabadell was an attempt to balance BBVA’s business, to strengthen its European base and to compensate for the risks of its subsidiaries.

The OPA that collided with reality

When BBVA announced its intention to acquire Sabadell, its expectation was one of relatively straightforward integration. But this soon ran up against political, regulatory, and even social obstacles. Banco Sabadell’s minority shareholders questioned the offer and found it insufficient. Unions warned of mass layoffs, and the regional governments – especially in Catalonia – were leery of possible loss of local control.

Spain’s national government intervened, imposing conditions that would limit the merger for at least three years. That decision was designed to protect the general interest (or, according to some, to postpone an unsavory task for the next government to deal with); in practice, the intervention served to complicate the operation. BBVA was looking for quick and clear synergies but was told that integration had to wait, raising doubts around the OPA’s viability and potential economic returns.

Thus the takeover bid became a mirror: although BBVA aspires to strengthen its European identity, those aspirations clash with local sensitivities as well as with the fragmentation of the Spanish and European regulatory systems

Sabadell and the power of SMEs

While BBVA was hoping to consolidate its size, Sabadell responded with an ingenious defense highlighting its leadership within the SME segment – a niche where its significant presence and experience are distinguishing features. Sabadell’s relationship with small and medium companies has proven both profitable and resilient, allowing the bank to stay relevant in spite of pressure from larger entities.

"European banks can be competitive without needing to grow in size by offering differentiated services"

Moreover, Sabadell sold its British subsidiary, TSB Bank, to Santander. Not only did that sale provide liquidity and concentrate resources, it sent a signal that Sabadell’s strategic commitment depends not on indiscriminate offshore expansion but on specialization and proximity to its main clientele. The implicit message is that Europe’s banks can be competitive without needing to grow in size by offering differentiated services, adapted to local needs but replicable in other markets through their business model.

The illusion of European champions

The takeover bid occurred in a broader context of European mergers and consolidations. In parallel, UniCredit sought to increase its stake in Commerzbank, which would have created a true transnational champion. But this move came up against political resistance in Germany, underlining the European paradox: the continent wants global champions, but political and regulatory borders make true integration difficult. In this specific case, it should be noted that the German State held 14% of the bank when intervention became necessary during the financial crisis.

Most paradoxical is that a portion of the capital gains obtained by BBVA from the sale of assets in the United States (around €9.5 billion) could have been put toward more ambitious expansion in Europe. Those extraordinary profits gave the bank a liquidity buffer sufficient to acquire other strategic entities in key markets. UniCredit has followed that precise path, consolidating its European presence through the purchase of a bank in Belgium and another entity in Poland. In contrast, BBVA chose to prioritize digitalization and internal consolidation, missing a chance to fortify its continental profile.

Elsewhere, Santander had managed to root itself in the United Kingdom through the purchase of Abbey National, while BBVA opted not to do so, again missing a chance to strengthen its European holdings.

"Santander has become a European bank with global presence; BBVA is a global bank with a European passport"

Today, the comparison is illustrative: Banco Santander has become a European bank with global presence; BBVA is a global bank with a European passport. The recent OPA can be seen as an attempt to balance that dichotomy: a chance for BBVA to not pass up another shot at European relevance.

The paradox of scale

BBVA and Sabadell might be said to represent two opposing visions of European banking. The former, Basque in origin, is committed to scale and international diversification; the latter, based in Catalonia, is focused on specialization and its relationship with SMEs. In a fragmented market like Spain – and Europe in general – both these strategies have their merits and limitations.

Concentration in banking brings a promise of efficiency, cost reduction, and greater capacity to invest in technology. But it also invites risks: by decreasing competition, it can affect the financing of small businesses, thus increasing systemic vulnerability. BBVA’s takeover bid did nothing to resolve such tensions; it would have merely consolidated a domestic oligopoly without addressing Europe’s lack of truly pan-European banks. 

Risk, legitimacy, and reputation

The failure of BBVA’s takeover bid means high costs for the bank and Chairman Carlos Torres. It’s not just a question of financial resources, but of reputation and legitimacy. The perception of hostility toward Sabadell has eroded the confidence of customers, investors, and regulators – which the bank has tried to assuage with discourses on modernization, digitalization, and corporate responsibility.

Meanwhile, Sabadell is demonstrating that resistance is possible, as well as strategic. By concentrating on its specialization and selling off non-core assets, the bank has revealed an alternative way to survive and thrive in Europe by focusing on excellence in specific niches rather than pure scale.

What does it mean to be a European bank?

The story of BBVA and Sabadell prompts the larger question of what defines a European bank. The formal answer is simple: European headquarters, regulatory compliance, and a listing on the European stock exchange. The functional answer is much more complex and depends on where income is generated, exposure to risk, commitment to the local economy, and real integration with the continental financial system.

"BBVA’s European vision is being projected through operations like this takeover bid – but its essence is still being shaped by foreign markets"

BBVA meets the formal requirements, but its profits depend on emerging economies. Its European identity is being projected through operations like the takeover bid, but its essence is still being shaped by foreign markets. On the other hand, Sabadell sustains a European profile not in terms of size but through specialization and territorial roots. 

Meanwhile, Europe persists with this tension unresolved: it wants to host continental champions, yet it protects the national banks; it desires integration but clings to local competencies; it wants efficiency but fears concentration. The contemporary European banking system is, in a sense, defined by incoherence.

What’s next? 

BBVA’s takeover bid can be seen as a reflection of the paradoxes at work in European banking. A global bank seeks local legitimacy; a specialized bank seeks independence and a replicable strategy; governments protect national interests while preaching integration; regulators try to balance competition and stability.

The result so far has been an operation left incomplete, a relative failure that offers clear lessons. The Basque bank must decide whether to remain a global entity with European roots or else strengthen its continental identity.

Sabadell needs to consolidate its advantage in SMEs and show that specialization can be compatible with scale. That might involve leveraging its focus on SME-lending into the basis for a genuinely European growth strategy. Forged through financial support for small and medium-sized companies, the Sabadell model presents an advantage that can be replicated at the European level, in markets like Italy or Germany, exporting a culture of proximity, sophisticated risk analysis, and knowledge of the productive landscape. In that way, Sabadell might position itself as a force for integration, helping to build an authentic banking union that marries private profitability with added social value.