Sabadell sells US commercial bank for 967 mn euros

Banco Sabadell in USBanco Sabadell

Catalan lender Sabadell has sold its subsidiary Sabadell United Bank (Sabadell United) to US lender Iberiabank Corporation (IBKC) for a total price of 1.025 billion dollars (967 million euros).

The deal is expected to be closed in the second half of 2017, but is subject to obtaining the corresponding administrative authorisations.

The price will be paid when the transaction is completed via the handover of a minimum of 803,1 million dollars in cash and a number of IBKC shares, the market value of which represents the remainder of the total price due. The amount of shares must not exceed 4.9% of IBKC’s capital, and if there is any difference, then this will be paid in cash.

The transaction will generate a net capital gain forecast at around 447 million euros at the current exchange rate when it is completed.

Renta 4 analysts estimate the operation will allow Sabadell to improve its CET1 ‘fully loaded’ capital ratio by 100 bps. Furthermore, it could be seen as move aimed at increasing its presence in the UK.

Indeed, British bank Co-op Bank recently announced it needs to be acquired given the hard times they are having. Banco Sabadell’s UK subsidiary could be the buyer entity. TSB’s mortgages market share would lift up to almost 3.2% from current 1.9%. 

The target price is 1,43 euros/share.

Sabadell’s US presence dates from 2007 when Transatlantic Bank was purchased, with subsequent acquisitions (Mellon United in 2008, Lydian Bank in 2011 and JGB in 2014) and organic growth combining for around $5.8bn asset base. According to UBS’  analysts:
” Sabadell is capitalising on the elevated multiples US regional banks are currently trading on. Strategically, we do not believe the US was considered a core market for the company”.