(Bloomberg) -- BBVA might not achieve planned cost reductions if it buys Banco Sabadell SA but fails to integrate it, according to a regulatory filing this week.
In such a scenario, the Spanish lender “may not be able to realize some or all of these synergies, or such synergies may be realized at later dates” than initially forecast, it said in a document submitted to the US Securities and Exchange Commission.
BBVA, whose official name is Banco Bilbao Vizcaya Argentaria SA, would still expect “to capture the majority of the cost synergies” even in that scenario and it considers the probability of it unfolding as “very remote,” it also said.
BBVA made a hostile approach for Sabadell three months ago, valuing the smaller lender at about €11.5 billion ($12.6 billion) at the time. The Spanish government, which would need to approve a legal merger between the two banks, has opposed the deal, raising the possibility that BBVA ends up with a majority stake in Sabadell but is unable to fully integrate it.
A takeover of Sabadell would result in €850 million in cost savings, with €300 million coming from reductions in staff expenses, BBVA has said. That figure implies 3,700 job cuts, Berenberg has estimated.
BBVA also said in the SEC document a deal would likely lead to €70 million in annual charges for a period of five years to account for the depreciating value of IT. That would be on top of the estimated restructuring costs of 1.45 billion euros, it said.
The takeover would probably generate an estimated €2.13 billion in accounting profit known as badwill, BBVA said.
A representative for Sabadell said it’s reviewing the BBVA filing to the SEC.
(Updates with details from document in sixth and seventh paragraph)
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