BBVA Set To Face Trial; Not Unexpected, Spreads Dictated By SAB Bid

BBVA (BBVASM: Baa2 dev/BBB+/BBB+) spying trial: bank and its ex-chairman could face trial after ruling handed down yesterday (20-Jun). Litigation risk is nothing new for banks and, whilst the risk is non-zero, we see spread impact as unlikely. The overriding driver for BBVA right now is the success of the Sabadell bid – the equity market is showing SABSM’s price at a 9% discount to the value of the bid which implies some risk of bid failure which would be spread positive for BBVA (and the opposite for SABSM).

• BBG first reported yesterday that a Spanish court ruled the bank, alongside ex-chairman Francisco Gonzalez, should face trial around bribery and “revelation of secrets” charges. An investigation has been ongoing since 2018, so this is not a total surprise.
• The allegations surround payments to a former high-ranking police officer (Commissioner Jose Manuel Villarejo) to spy on “rivals, politicians and journalists” allegedly dating back as far as 2004.
• If we look to the other recent major spying case involving a bank (Credit Suisse allegedly spying on Iqbal Khan, one of its star private bankers who moved to head UBS’s wealth business), this was settled out of court with no meaningful liability for CS.