BBVA’s Carlos Torres, the banker going hostile on TSB owner Sabadell

Knowing Banco Sabadell’s board was meeting the next day to size up his €12bn bid for Spain’s fourth-largest lender, BBVA chair Carlos Torres made one last-ditch move to win over his prized target.

In an email sent on Sunday evening to his Sabadell counterpart Josep Oliu, he pushed his second attempt at a merger — he tried and failed to acquire Sabadell in 2020 — that he has called a chance to create one of Europe’s largest banks. But, he warned, BBVA’s all-share deal was the bank’s best offer. “BBVA has no room to improve its economic terms,” he insisted. “We have already used up all the room we had.”

Sabadell, which owns UK lender TSB, rejected the bid the following day, and adding insult to injury, published the plaintive correspondence on Wednesday. Then Torres spurned the staid conventions of corporate Spain and turned hostile, pitching the same offer directly to Sabadell shareholders.

In doing so, the cordial former McKinsey consultant, 58, has sent shockwaves across the country and Europe, where unsolicited takeovers have been rare, especially in such a sensitive part of the economy as banking.

Sure enough, the Spanish government was quick to oppose the move, saying that fusing Spain’s third- and fourth-biggest banks would have “potentially harmful effects” on jobs, consumers and financial stability. The top business lobby in Catalonia, Sabadell’s proudly distinctive homebase, said it would hurt the region. Startled bankers had to cast their minds back to the late 1980s to find the last hostile bid in the Spanish sector, when Banco de Bilbao, a forebear of BBVA, launched an unsuccessful swoop for Banesto.

Lorenzo Bernaldo de Quirós, president of Freemarket, a Madrid-based consultancy, was scornful of Torres’s hostile move: “He’s trying to escape after the ridicule over his leaked email. He was cornered.”

A former BBVA executive said: “He’s jumped into the pool. Let’s see how much water is in there.”

Six years after becoming BBVA’s chair — and 16 years after joining the bank — Torres was not under pressure to do a deal. He approached Oliu in mid-April, but a leak in the press last week pushed him to send a formal proposal earlier than planned, valuing the Sabadell shares at a 30 per cent premium.

But BBVA shares dropped 10 per cent after the announcement, and fell further after Torres’s hostile turn. They are now 11 per cent below where they were before the drama began, giving the lender a market capitalisation of €54bn, and making the offer less enticing to Sabadell shareholders.

Torres told the Financial Times that after the initial rejection “we could have walked away and that would have been, probably, the most comfortable way forward”. But he added: “I’m not paid to take the comfortable route. My role is to cater for the value of our shareholders.”

Stressing that the bid was a “unanimous board decision”, Torres said acquiring Sabadell would generate higher returns than another share buyback.

Yet he repeated: “there’s no margin” to offer more.

The son of parents from Galicia in north-west Spain, Torres had a nomadic childhood as his mother worked as a schoolteacher and the family moved with his father’s jobs as a tax inspector, stock broker and notary. He moved to Boston to study electrical engineering then business at MIT, before spending more than a decade at McKinsey.

Then he went to Spanish energy group Endesa, where he lived through the turbulence of life as a takeover target, eventually leaving after it was snapped up by Italy’s Enel in 2007.

He has turned BBVA into a strong performer despite its oddball shape. Since Torres sold its US business for nearly €10bn in 2021, the bank’s only developed market is its home country. Spain accounted for a quarter of last year’s net profit, but is dwarfed by its emerging markets.

Nearly half of BBVA’s income came from Mexico, where it owns the country’s largest lender, Bancomer, and is booming. Ten per cent was generated from Turkey, the home country of BBVA chief executive Onur Genç, where it owns Garanti bank.

BBVA’s global net profit rose 26 per cent to €8bn last year and “the fundamental metrics are very good”, said Francisco Riquel, analyst at Alantra Equities. “There’s no concern among investors about exposure to Mexico. To the contrary, people buy BBVA for the Mexico growth story.”

But the Sabadell transaction “would be a way to rebalance that mix, in addition to having a logic in purely Spanish terms”, Riquel said. Torres argues that Sabadell’s roster of small business clients would complement BBVA’s blue-chips and retail customers.

In an interview with IE University earlier this year, he said one of his attributes was the ability to stay calm even when others were losing their heads. He said he advised people to put things in perspective by asking: what’s the worst that can happen?

This week Torres said: “Even the worst that can happen is something you can always live with.” Asked if he worried his job was at risk, he said: “not at all”.

“There should be no regret that we attempted this even if it fails. There’s nothing wrong with presenting an offer to shareholders . . . If the reputational damage that I have is for doing the right thing, I will take that any time.”