(Bloomberg) -- BBVA said it probably won’t make any purchases of its own shares for as long as it’s trying to take over Banco Sabadell SA.
“We are restricted to continue with the share buybacks” while the Spanish lender is seeking to acquire the domestic competitor, Chief Executive Officer Onur Genc said on an earnings call on Wednesday. “But you will see us immediately starting” them once that’s over, he said.
BBVA’s shares dropped as much as 4.35%. Renta 4 analyst Nuria Alvarez also pointed to rising cost of risk in the bank’s core market Mexico as a negative surprise in the second-quarter results.
The results are the first ones since BBVA, whose official name is Banco Bilbao Vizcaya Argentaria SA, made a hostile bid for Sabadell in early May that valued the smaller firm at about €11.5 billion at the time. Sabadell’s leadership has rejected the offer as insufficient.
BBVA Chairman Carlos Torres and Sabadell CEO Cesar Gonzalez-Bueno have since been locked in a race to impress markets. The proposal needs to be approved by various regulators in a process that’s going to take months, meaning Sabadell investors probably won’t get to decide on it until the end of the year, at the earliest.
The bigger bank’s all-share offer becomes more attractive if its stock price rises more quickly than the one of its takeover target.
Sabadell last week boosted its payouts pledge as it tries to fortify its defenses against BBVA. It also reported a 35% rise in second-quarter profit.
The smaller bank has similarly said it has suspended buying back shares following BBVA’s hostile approach.
BBVA’s net income in the second quarter jumped 38% year-on-year to €2.79 billion ($3 billion), it said in the statement on Wednesday. That compared with an analyst consensus of €2.39 billion.
“We will comfortably surpass the ambitious goals we set for ourselves” until the end of the year, Genc said in the statement. “We are fully confident in the success of the combination” with Sabadell.
Mexico continued to be the strongest profit driver for BBVA, with the lender’s operations in the country contributing just over half to total net income during the first six months of the year.
The results are a “strong earnings beat,” KBW analyst Hugo Cruz said in a note. He pointed to higher trading revenue as a key reason.
(Adds decision to halt buybacks in first and second paragraphs)
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