Banco de Sabadell, S.A. (SAB.MC) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to Sabadell's webcast to explain the response of our Board to the BBVA hostile tender offer. Thank you for joining us, especially given the short notice. It looks like every Friday, there's some breaking news about this transaction. As in previous occasions, presenting today are our CEO, Cesar Gonzalez-Bueno; and our CFO, Sergio Palavecino. Cesar, over to you.

Thank you so much, and apologies on the fact that there's no single Friday lately that gives you a rest, but this is what it is. So this is -- today, we are going to talk about the response to the BBVA hostile tender offer. And what the Board has done is it has unanimously rejected the BBVA hostile tender offer. And I think the words are important. BBVA hostile tender offer is fundamentally undervaluing Sabadell and destroys value for its shareholders. Let me read this slide because I think the content has been chosen quite carefully, and it's very much in line with what the Board has said. To begin with, it very significantly undervalues the stand-alone potential, which is up to 25% higher versus the current market price. And when we look at the BBVA's tender offer, Sabadell's stock price is currently trading 11% above BBVA's offer of EUR 3.04 per share. And therefore, we consider that Sabadell fundamental value is between 24% and 37% above the offer -- current offer value. In second instance, the strong performance and outstanding remuneration of close to 37% of its market cap over the next 3 years. Over the next 3 years, we are going to distribute 37% of the market cap of Sabadell. On the other side, if Sabadell shareholders would accept the offer, they would receive 30% lower distribution in '25, '27, and they would not receive the extraordinary cash dividend from the sale of TSB. And third, Sabadell focuses on Spain, which is one of the fastest-growing economies in Europe. It is predictable and has a low risk outlook. On the other side, BBVA is emerging markets-focused bank. That's not good or bad, but it certainly exposes it to highly volatile regions that represent 67% of the net profit contribution. And furthermore, this comes with an exposure to currency depreciation turns reporting profits into a lower and riskier capital generation and distribution capacity. Sergio will cover that later in detail and in a more analytical way. This is the continuation of the previous slide. But here, what we emphasize is that the hostile offer is based on many unrealistic assumptions, and it poses significant execution risk. Let me emphasize before beginning and covering the slide that it could even happen that the merger is not allowed after the 3 to 5 years of autonomous management. As we live in Spain, understand that for any political party or any political aggregation of parties, it will be very difficult to see Banco Sabadell brand disappear after 3 or 5 years. So the hypothesis that a merger will happen immediately, not even after 3 or 5 years, but after the third year, doesn't seem at least prudent. So let me go through the slide. BBVA has, as I said, an unrealistic view of future synergies, the EPS accretion and other financial impacts, the EPS accretion of Banco Sabadell. So synergies are nonexistent while both entities are independent and managed autonomously. That is precisely the definition of autonomous management. It explicitly says that nothing should be done for the common synergies and that everything should be done exclusively and solely into the value creation of each of the entities individually. Then after the independent and autonomous period, any future merger, as I said before, is subject to the government's approval, and it cannot be taken for granted, not at all. And even if the government were to approve the merger, it would take more than 7 years in total. I mean, the 3 additional years that were in the initial prospectus or proposal from BBVA that it takes to fully realize the synergies remain in place, because there cannot be preparation during the previous years that have been stated in a fully autonomously managed entity. Because to prepare for a merger paralyzes an organization, and that is completely contrarian to the existing ruling. And furthermore, BBVA has reported a 25% EPS accretion for Sabadell shareholders, and that is based on an incorrect approach. Actually, it's economically dilutive. Just to set an example, and I think Sergio, who will cover it later, it does not include, for example, the EUR 2.5 billion proceeds of the sale of TSB. And how can that be, they are completely ignored in the calculation. In second term, the current offer terms are worse than the original proposal. I mean, after the revaluation of all the market where BBVA has been the worst performing stock, now the offer is worse even in exchange of shares. And this is because -- and it is a 16% lower stake that we would receive on BBVA versus the original proposal in '24. It's because we've given more dividends than then, and we have done more share buybacks, and that has led to an automatic adjustment that weakens our position. So we pay more and therefore, because of the way it is calculated, we received a 16% less. The cash component on top has brought the loss of fiscal neutrality for Spanish shareholders, it would immediately trigger capital gains for retail shareholders, which have seen because it has been the best performing stock of the European banks and the best performing stock in IBEX, it would bring significant capital gains. And last but not least, BBVA has admittedly contemplated a take-up as low as 30%. This raises many, many issues. To begin with, it raises a lack of confidence by BBVA in its -- in the attractive of its offer, the current one or any one that they might do in the future. Furthermore, an acceptance of between 30% and 50% would trigger a mandatory cash tender offer, which would create a number of uncertainty to Sabadell and also to BBVA shareholders. Such uncertainties include the price of the mandatory tender offer, which could be higher than the offer that others have already been -- have accepted, the asymmetry of information between what BBVA knows and what the shareholders know, and the potential dilution resulting from BBVA's capital financing or if it's not a dilution, it would be a significant decrease in the dividends to be provided. So this is the index. Let's go to the first part. And now let's go to the next slide, please. Sabadell will deliver strong performance and outstanding shareholder remuneration. This is the chapter. And here, you see in the chart that since the beginning of -- since when the first time the Board of Sabadell rejected the offer from BBVA, we have multiplied the value. This includes, of course, dividend reinvestments by 12.7x for Sabadell. BBVA has done very well, 6.7x. Spanish peers, also fantastic 5.2x, and above the European peers, 3.4x. Spain has done especially well during this period. It is also true that it is especially bad during the previous period. So if we move to the next slide. Here, we see that our value creation continue -- journey will continue. I mean, of course, we have done very well in the past, but what about the future? That is what is really relevant. Well, we have guided for an increase of our return on tangible equity from 14.5% to 16% in '27. And this has been generally and widely been accepted by the investment community as realistic. But this is coupled with a solid growth, mid-single-digit growth in our book. So the beauty is not only distributing capital, but at the same time, growing. And we are talking about a mid-single-digit growth compounded average growth rate between 2024 and 2027. And this results in high returns expected for Sabadell shareholders. The tangible book value per share plus the dividends per share amount to an estimated of 15%. And this gives a very attractive shareholder remuneration. We have talked already about this numerous times. It's EUR 6.3 billion between '25 and '27, a total cumulative shareholder remuneration. And this means 37% of the market cap during the next 3 years versus the 29% that the BBVA estimates. But furthermore, it is very front-loaded because in the first 9 months, it represents 22% of the market cap in terms of distribution. I think we are -- I mean, we have created a track record of reliability in our guidance. We have a track record of consistently beating expectations. You can see that in '23, we said that we would be above 9% in return on tangible equity, we delivered 11.5%. At the beginning of '24, we said 11.5%, it was 14%. At the beginning of '25, we said 14%, it was 14.4%. So I think we have that track record of reliability. And our track record also includes that when we execute transactions, we also do pretty well. I think the sale of TSB has been an example of this. We did it very quickly. We did it very smoothly, and that led to an approval of 100% of our Extraordinary General Meeting in the 6th of August with a quorum of 75% of our shareholders. And the value creation was obvious versus the analyst average and versus our peers. The total consideration was EUR 3.4 billion, which was higher -- much higher than the expectation. And furthermore, it was above all Sabadell's multiples, which leaves Sabadell stand-alone at above -- with potential to increase its multiples from here on. And now let's move it on to Sergi.

Thank you very much, Cesar, and good morning to everybody. I'm happy to share with you this section of the presentation. Starting on Page 11, we show how Sabadell share price has been more correlated with the Spanish peers than with BBVA. In the left-hand side, you can see the graph with the share price evolution since the hostile tender offer was launched back in 29th of April 2024. Since that date, Banco Sabadell shares have risen 94%, while Spanish domestic peers have seen their shares gaining 75%. BBVA in contrast has only gained 48%, a lower figure. This is aligned actually with the evolution of the analyst target prices that are shown in the right-hand side of the slide. The Sabadell analyst target price has been increased by 86%. The Spanish peers by 62%, a difference of 24 basis points, while BBVA increase has been 48%, a bigger difference, 38 percentile points.

I think you're absolutely right. I don't see very much the correlation with the BBVA shares.

Well, it's a bank. But as you can see, we have higher correlation with domestic. Given that, we are domestic purely.

And the previous chart, just for clarification, doesn't include the reinvestment of dividends. So in some charts, you will see higher numbers for all of us, but the difference remains.

This is pure price, exactly. Okay. I think we were still on Page 11, please. Okay. I just wanted to insist on a very clear -- on this very clear idea that Sabadell is basically trading on its own fundamentals with a higher correlation with the Spanish peers than with BBVA. Now yes, we can move to please, Page #12, where we show how the hostile tender offer compares to our current stock price and valuation metrics. Now going from left to right, you have in columns our current stock price in gray and 3 commonly used valuation methodologies in blue. The black dotted line shows the value offered by BBVA as of the closing prices of September 10, the day before yesterday, with a value of EUR 3.04. In the bubbles, we show the value shortfall of the offer to each reference. Starting with our current stock price, also as of September 10, Sabadell shares trade at EUR 3.4, and that is 11% above the hostile tender offer. In other words, Sabadell shareholders could lose 10% if they were to accept this offer. As everybody knows, this premium has been negative for a very long time now and consistently, actually since January this year. As a cross-check measures, we can have a look at other references from left to right, EUR 3 point (sic) [ EUR 3.8 ] is the estimation of Sabadell share price derived from the price to earnings multiple of our domestic peers. EUR 4.2 is the estimation of Sabadell share price based on the price to tangible book value multiple versus the RoTE regression of our domestic peers. And by domestic peers, we have included CaixaBank, Bankinter and Unicaja, the 3 listed banks that are purely domestic apart from ourselves. All these references -- sorry, and a final reference, which is the Gordon Growth fundamental valuation that shows an estimation of EUR 3.8 to EUR 4.1. All these references show that there is potential in the current Sabadell share price, and that the offer value and that the offer price of the hostile tender implies a very significant value shortfall between 24% to 37%. Bottom line, any way we look at it, the wholesale tender offer fundamentally undervalues the bank and its future prospects. If we can now move to the following page, we would like to highlight that these valuations do not consider any M&A or change of control premium. Slide 13 shows that precedent transactions in the European banking sector were completed with an average premium of 40%. The 30% control premium announced by BBVA in their prospectus and the market presentation ignores the entire performance observed in the last 16 months. It is actually stuck in April 2024 with no validity as of today. Additionally, let me highlight that BBVA's selection of precedent transactions in its presentation includes examples of transactions that failed or very different transactions in terms of comparability. Also quite relevant in all the examples chosen by BBVA, the offered currency was comparable to the acquired entity, which is not the case here as BBVA is offering a more volatile and emerging market exports stock in exchange for a pure domestic one. In conclusion, again, the offer undervalues Sabadell and has no premium at all. Let me move to the next section where we would like to share with you what we think are relevant comments that the Board would like to make regarding BBVA shares given that this hostile tender offer is offering shares. The shares of BBVA has a very different business prospects than the Sabadell one. Actually, the contribution from emerging markets and by this, we mean Mexico, Turkey, Argentina, Venezuela and some other South American countries in BBVA represents 2/3 in terms of net attributable profit. This weight is only 4% in the case of Banco Sabadell. This risk profile is of maximum relevance for any shareholder analyzing the tender offer as higher exposure to risk in emerging market comes with higher cost of equity, higher geopolitical risk and higher FX volatility, which can translate into capital impacts and a more volatile share price performance. We'll see an example of this in the following pages. It is typically assumed by the market that this risk profile requires a higher cost of equity with a consequent drag on valuation multiples. In the next slide, we provide a comparative analysis of CET1 and capital buffer targets among major Spanish banks. Despite BBVA's riskier geographic footprint, which includes exposure to volatile markets and currency as we just seen, it maintains the lowest CET1 capital buffer target compared to any other Spanish bank. Specifically, BBVA targets a CET1 of 12%. In contrast, Santander operates with a target CET1 of 13% and other domestic peers 12.5%. Sabadell set 13% at the level at which a commitment to distribute excess capital is triggered, reflecting a higher capital buffer. In terms of MDA, BBVA is the bank with the lowest capital buffer as it can be seen in the page. Now moving on to Slide #17 will reflect implication of FX volatility on BBVA shareholders' equity and capital. Since 2014, BBVA has seen their equity reduced by EUR 17 billion due to the depreciation of the currencies where they operate. In other words, this is an average erosion of EUR 1.5 billion. This impact is not in the P&L, but translates into a lesser capacity to distribute capital, as we will show in the next slide. In this slide, we bridge from P&L to capital distributions. Starting from left to right, BBVA had last year a 21% return on tangible equity when adjusting to the target CET1 of 12%. This figure has in the denominator, the deductions of the OCI, which includes the FX impacts that we have just seen. A comparable figure for Sabadell could be 15%. If we adjust the denominator as we in Sabadell report and what we do is that we exclude the impact from OCI to the denominator, that could deduct 5 percentage points to the return on the tangible equity. And this figure then would exclude those deductions, and it could be 15%. It can be comparable to a 15% because those impacts in the case of Sabadell are actually negligible. Then when we look at the numerator and therefore, the amount that is needed in order to finance risk-weighted asset growth and the annual impact of FX devaluation on the CET1, there could be a requirement of 6 percentile points for BBVA and only 1 percentile point for Sabadell. And that leaves BBVA with a distribution capacity of 9% and the denominator of that could be the non-adjusted return on the tangible equity that could compare to the 14% distributable dividend capacity for Sabadell for the same period. So coming from lower reported RoTE, we get to a higher distributable dividend capacity. If we were to look at a longer period of time, and we have taken a look at the 3.5 years before the end of the first quarter of this year. So this could include this year and the 3 years before, the figure could still be 9% for BBVA and 12% for Sabadell. So the conclusions couldn't actually change. And with this, let me share the word to -- let me give you -- back the word to you, Cesar.

Thank you, Sergi. I think that was a very interesting analysis because we always take EPS as a very good proxy for the capacity of capital distribution. But it's a proxy that in some circumstances when you're in high inflationary world and where you have to grow very rapidly your risk-weighted assets, that comparison of EPS to the capacity of capital distribution is not there. And therefore, I thought that, that analysis was great, and thank you very much for it. Let's go to the next part, which is why the BBVA hostile offer destroys value for Sabadell shareholders. Let me begin with by saying that when you read the prospectus, a very large amount of uncertainties are raised because it's mandatory and it's reasonable. But then when you look at the hypothesis that are used in the presentation, it's the most extreme of the most positive hypothesis that are taken. And therefore, it brings the fact that it's based on many unreasonable assumptions because it's an accumulation of optimism. In our view, synergies will be 0 as long as there is no governance independence and managerial autonomy between Sabadell and BBVA. And that's the definition of the autonomy. So I think putting any number there is kind of optimistic. Second, the merger is taken for granted. And as I said, and front loaded to 2028. So immediately after the 3 years, not the 5 years, the 3 years are finished. And in practice, it's not guaranteed. And as I said before, it's going to be politically very difficult for anyone to see the brand of Banco Sabadell disappearing. The opposition in the market has been phenomenal. It will remain. And therefore, it will be a difficult decision to take. And I think it's overly optimistic to say that it will be done immediately. Then the hypothesis of an unprecedented phasing of cost synergies, the run rate achieved in year 1 immediately post-merger in 2029 under the assumption that the preparation works have been done previously. But how can you do that preparation work? The preparation work for us who have done mergers, for us who have been in banking for a long time, paralyzes a bank, and that is completely incompatible with the governance independence and the managerial autonomy. So the 3 years still apply. And then the restructuring costs, I mean, 1 point times the savings, that is close to magic because any precedent is around 3x the cost. And furthermore, they have unchanged the cost, increasing the level of synergies. And then last but not least, multiple layers of dis-synergies are ignored before and after the hypothetical merger. We're talking to clients. Of course, they will remain being clients of -- if this happened of BBVA plus Sabadell, a merger that I think, as I've said many times, I don't think it will ever happen, but they would remain -- but with a slower amounts, smaller amounts, our estimation of negative synergies even conservative is large. And we only have to look at all the previous examples, considering them 0, although they are recognized as a risk in the prospectus, but then in the models and in the presentations, they are stated at 0. We don't think it is realistic. If we go to the next slide, this is just an example of the timetable. BBVA talks about 4 years, 2029, 3 years for the managerial autonomy. And we say that they could be, as the law says, between 3 and 5, merger authorization instantaneous. We think that it takes at least a year because of all the procedures that have to be realized and maybe never for a long period. And synergies at 100% during the first year, no, there would not be preparation. So it's 3 years. So the 4 years become at least 7 years and certainly not before 2032, but they could take even a much longer period. And with this, I turn to Sergi.

Yes. Let's try to put this into numbers. And here, we've done our best in order to get an estimate for you. This is our best estimation. On the left-hand side of the table, you can see what BBVA's estimates are. And we have divided the table between these 2 different phases of management, one where the cabinet has the restrictions and there is the need of having managerial autonomy. And then further down the line, we don't know exactly when there will be no managerial autonomy and potentially a merger. Starting from each row regarding cost synergies, in the case of managerial autonomy, BBVA is estimating EUR 175 million and in the case of no managerial autonomy as much as EUR 835 million. In our case, ourselves, the estimate for the no managerial autonomy is actually not too far, it's EUR 750 million. This is actually more aligned with the initial case, but in any case, not a big difference. What we see bigger differences are in the case of managerial autonomy. In that time frame, we think that synergies are going to be very close to 0 as there will be the need to optimize each institution individually instead of managing a combined institution. Then moving into other synergies and potential dis-synergy in revenues and funding. Revenue dis-synergies are not considered or ignored by BBVA. And with regards to funding, EUR 60 million, EUR 65 million is the estimate. In our case, when there is managerial autonomy, we have signed a negative synergy, so a dis-synergy of EUR 90 million. This is mainly coming from funding and capital requirements. We see risk of MREL higher needs in this time frame as BBVA will have probably the resolution entity in Europe. While the 2 entities are kept separate, there might arise some needs of additional MREL funding at the parent company that actually will create some inefficiency during the transition period -- during this period. And then as I said, potentially some additional capital requirements for being more systemic BBVA in this period. It's not that material, but still some EUR 90 million. It's more material what we think will come from potential revenue dis-synergy when the managerial autonomy goes away and the potential merger comes because it's something that we have seen in the past. It's something that we clearly saw in precedent transactions that there might be particularly in the credit space, some reorganization of business, and we assigned EUR 250 million. And then finally, a very quite a straightforward one in our case is the banking tax. It's been not taken into account from BBVA as a dis-synergy. However, the current shape of the banking tax is progressive. And therefore, any combination would have an adverse effect. We are assuming here simply that this -- that the current shape of the banking tax will continue. If it changes, then it could be different. But our assumption is that if it continues the way it is, it will mean at the synergy of EUR 130 million. With that...

And here, help me, Sergi. In our projections, have we included that -- in our reasonable projections, have we included the tax to continue?

Yes. In the -- in our projections in the guidance that we have shared with the market, we are assuming that the current shape of the banking tax is going to continue.

And that's in our strategic plan, and that's in our numbers?

And that's in our strategic plan, exactly.

So we include them, but they don't?

We include them and they haven't included the synergy that it comes from the fact that the tax is progressive and the bigger, the higher rate.

I think this chart shows why the price is so fundamentally wrong. I think the hypothesis from the beginning that were potentially more on the correct side, although we thought that they had many, many caveats. Now they have tremendous doubts about the potential of realizing those synergies. Those synergies are very small. And if they happen, they will happen very far in the future. So that is, I think, at the core of why this transaction doesn't make any sense.

Yes. Indeed, this is the estimation, and we wanted to make them public so that shareholders and investors can also make the numbers and have our input. And then if we move to the next page are also key metrics of value creation, earnings per share and total capital distributions. We also provide our best estimate of what this transaction means. Starting from the one in the right, capital distributions, we identified a decrease of 30% in capital distributions from 2025 to 2027, which is the time frame of our plan. And these are very simple numbers. You can see them in the note below. And they are, of course, affected by the fact that in Sabadell expectation, there is this extraordinary dividend of EUR 2.5 billion coming from the sale of TSB, which has not been taken into account by the offer and hasn't been revised at all. So of course, this is contemplated in that figure. So Sabadell shareholders, if they accept the offer, then they could face lower distributions of 30%. And earnings per share, our estimation is that range between minus 1% and minus 3%. And this is a bit more complex calculation, and that's why we have built a waterfall in the next page so that hopefully, people can see what in our view should be the numbers. BBVA presented to the market an EPS accretion of 25%, quite high. In their numbers, they are only looking at a pure accounting definition of EPS accretion. And for that accounting definition, the assumption is that people accepting the offer, then the extraordinary dividend of TSB will be dedicated to buybacks of BBVA shares. And of course, that will have an impact in the EPS. However, they do not take into account a more economic view. And this is that for Sabadell shareholders receiving the extraordinary dividend, that dividend will also have a value. No value has been applied in BBVA analysis. If we assume that someone that receives the Sabadell extraordinary dividend could reinvest that dividend into Sabadell shares. And therefore, we could make the case comparable peers to peers to the BBVA analysis, then that could have an impact of minus 19 percentage points. The next impact that we identified is also about consistency and BBVA has used its guidance for its future net income and has used consensus for ours. Then by simply using consensus for both, then there could be a further reduction of 4 percentage points. And then we come to the previous synergies analysis. If we take into account the synergies that will come -- that the synergies combined with the restructuring cost, then we get to a 1% -- minus 1% dilution in the best case with a no managerial autonomy. And as long as there is managerial autonomy, we identify a higher dilution as much as 3%. So I hope these numbers are clear. Anyway, we're happy to discuss and happy to take questions later on.

Very good. I think we move now to how BBVA's hostile tender raises other concerns beyond the ones that we have already mentioned. And the first one is that the terms are clearly worse than the original proposal. Let me go to the last line. Originally, the initial terms offered 16.2% of the combined entity. Right now, because of the difference in dividends and the share buybacks, it offers only 13.6% of the combined entity, which is 16% lower than for Sabadell shareholders. Not only is that offer worse, but if we limit ourselves to the central part of the -- part on the right, any individual investor, and this is just an example, who acquired 1 share of Sabadell in December 2020, will need to pay taxes equivalent to between 4x and 6x the cash component offered by BBVA. So when we have done the calculation of the 13.6%, we have not included the cash component to increase the percentage that would be acquired in at BBVA. So it's just the share exchange because de facto, the average will have to put more cash into the situation than they receiving cash from BBVA to pay the taxes. If we move to the next slide. I think the execution risk, and we've covered this at length, is also driven because of the widespread opposition to a transaction. This is not neutral for when it happens and execution will be affected. See employee's association, Chambers of Commerce -- employer's associations, it should say, and Chambers of Commerce and more than 70 entities have requested to appeal before the CNMC in the procedure. There is a very, very strong concern about the impact on competition. All the relevant unions in the banking sector have been very outspoken about this transaction. And there's almost unanimous opposition from political parties against this transaction. Other transactions will have not faced this opposition. It's the specificities. It's not that people are against any type of merger, it's when they reach a certain level of concentration that leads to a market power that is contrarian to the general interest, and that's why it has raised so much opposition and why it has so many restrictions and so many severe restrictions to obtain synergies thereafter. And the next element that has created a lot of uncertainty is the waiver of the minimum acceptance condition from 50% to 30%. Because all along in the SEC and everywhere, it was said that it was a transaction that would only happen if it reached 50% or more. But in the last minute, it was raised in the SEC, the F4, that there could be -- that could be wavered. And what happens if that is wavered? Well, in the case they reached 30%, which with this offer, I think it is very difficult. if they reach 30%, the second offer is mandatory to be in cash and for the total amount that is remaining and potentially at a higher price. And that offer would not be available to any shareholder who has already tendered their shares in the current offer. So that raises a very high risk to tender because you don't know if the second tender occurs, and I question both things. But if it was to occur, that would raise a tremendous dilemma because the second offer would be in cash and potentially higher. And it would be open for a period of time to accept or not accept. But that's not where the issues end. And there is that the financing of this potential cash offer is unclear, it has not been clarified. And BBVA may need to raise capital by issuing new shares. This would be dilutive for the shareholders who have just tendered in the first 30% to 50% or it could reduce future dividends for all. So it's a very complex situation, very different from the transaction that was originally -- if this was to occur, very different from the transaction that was originally approved by the shareholders of BBVA. And with this, I would like to go to the closing remarks, which are very sharp and simple, and they resume the whole thing. The Board has unanimously rejected BBVA's hostile tender offer. It considers that this offer fundamentally and the word is not random, it's a well-chosen word. It fundamentally undervalues Sabadell and destroys value for its shareholders. And furthermore, BBVA's hostile tender offer is based on many unrealistic assumptions and poses significant execution risk. And with this, we finalize the presentation. Thank you for your attention.

Let's start then the Q&A session. Okay. So I would kindly ask to limit the number of questions to no more than two. So operator, if we could open the floor to the first question, please.

First question is coming from Maks Mishyn from JB Capital.

I have just one question. It would be super helpful if you could share any color on the feedback from the retail shareholders as well as investors that also tend to be partners of your business if possible.

What was the question? The feedback from the retail shareholders?

Retail shareholders, yes.

Yes. I think we are continuously asking them in a structured way. So we do polls around them. The view in general is very negative. And I should not give the numbers. They are changing numbers over time, but they are quite consistent, nevertheless, and they are quite negative. And the reason is several. First, the offer, again, fundamentally undervalues the bank. But furthermore, of those 200,000 shareholders, the majority, more than 80%, close to 90% are clients of Banco Sabadell. So at the same time, they feel very attached to the institution.

Okay. Thank you, Max. So operator, if you could jump to the next question, please.

And by the way, on the first question, the tax issue, where has that been immensely.

Well, given that we are currently at very high levels compared to historical trading levels, for certain -- the vast majority of the retail shareholders will have unrealized capital gains in the...

Very high unrealized capital gains, yes.

So operator, the next question please.

Next question is coming from Francisco Riquel from Alantra.

So you have shared a fair value for the first time at EUR 3.8, EUR 4.1 per Sabadell share. I wonder if the Board would change its opinion if there is an offer at that price range or if you would still -- also you have made remarks about the BBVA shares risk profile, negative synergies and so you will request cash. So I understand everything has a price. What is yours?

I think the Board discussed that at length and decided not to take a position. Not to take a position because the Board, what it has to do is to respond at every point in time and not make any hypothesis to respond at any point in time to any offer that is on the table. One of the considerations that was clearly made by the Board is there are only 2 options. Either the synergies are not there or if the synergies are there, they are not being shared through a premium. And that premium cannot be considered that it is attained by a 13% participation in the joint venture. That should be a much bigger percentage. So either the synergies do not exist or they are very small as we think they are. But if they think they are that big, they should be sharing and there should be a premium. So no, we did not establish a price or sharehold -- a threshold. We just said that with the current traditional methods of valuation, which, by the way, we have been beating all along during the last 4.5 years. But with those traditional methods, the offer is short of up to 40%, and we didn't say anything more than that.

Okay. Thank you, Paco. All right, could we move to the next question, please?

Next question is coming from Ignacio Ulargui from BNP Paribas Exane.

I just have one question. I am just curious to see what kind of revenue dis-synergies are you -- and what is the origin of that revenue dis-synergies that is less business activity from the same clients. I mean, in your experience in the M&A that you have undertaken in Spain, then could you just elaborate a bit on where this could come from?

I think the numbers were presented during the presentation, you're asking about the root cause. I think the root cause -- the majority of the root cause is the loss of volume in the SME business. As we have repeated ad nauseam, on average, for the entities that are between EUR 10 million and EUR 100 million of turnover, they have on average 4.2 relationships. And that would be severely affected because now there are 4 national players. Of course, there are some regional players that would be severely affected. And they would look to distribute. And what we have done is a conservative assumption in our numbers, a conservative assumption, much lesser than the impact that it had, for example, in the merger of Popular with Santander of a loss of business among the SMEs. And that is at the core of the loss of business and therefore, negative synergies. I don't know if you want to add anything, Sergi?

I think that is the main cause, yes. So I think that's it.

Thank you, Ignacio. I think we have one additional question.

Next question is coming from Fernando Gil from Intesa Sanpaolo.

So can you share your views on the reasonable estimation of time and outcome it might take for the Supreme Court to resolve on the appeal that BBVA has made for the government decisions?

Unfortunately not. I think I would relate there to the question and answer that has been given by BBVA. They've said that it's going to take a long period of time and that they don't assume that it's going to have any impact on the transaction. So that if it comes and whatever the outcome, it would be too late to have an impact.

Thank you, Fernando. We have still one more question. So if you could open the line for the next caller, please.

Next question is coming from Borja Ramirez from Citi.

I have 2 questions. One is if you could kindly provide some indications on your shareholder base, how many are [indiscernible] investors? And my second question would be if you could -- regarding the revenue dis-synergies that you have provided. So I think you mentioned about the companies with a higher revenue that they cannot have the same bank. I would like to ask if you could provide a bit more details on the components, and the acquisition, please.

Thank you very much. Well, the risk [indiscernible], we are not seeing in any large portion. Usually in this type of transactions, when they think that the transaction is going through, they go up to 25%, 30% of the stockholding. Here, they are practically insignificant. And when we talk to them, because we talk to them at large, qualitatively, they say exactly the same thing. There was a point where there was some entry, but over time, with all the evolution and it's for them to respond why. But the explanation that they are giving us is that they see no reason to be heavily present. And the presence is really marginal. I don't know if we are not disclosing that number, but it's really marginal.

It is.

In terms of the dis-synergies in the large corporates, I don't think we should take them into account. That's not where the issue is. The large companies have a myriad of sources of funding, and they don't need the proximity. So that's not where the issue is because those have access to international banks, they can issue bonds. They can do a tremendous amount of things. It is for the mid-corps where really you see the negative synergies. So we have not counted any negative synergies for large corporates, if that was the question. I think that was the question, 0. We have not taken into account any negative synergies for large corporates.

And any further color on regarding SMEs that you've mentioned where it comes from, whether you said at the beginning, it was mainly related to...

I think it was -- our team has done, I think, a very thorough and careful and conservative calculation in the sense of looking region by region and understanding what was the level of concentration for each and bringing it to a certain level of distribution of their positions among other existing players. I don't think I can give any further detail on that.

I think we have one additional question. So operator, if you could open the line for him.

Next question is coming from Carlos Peixoto from CaixaBank.

Carlos Peixoto from CaixaBank here. A quick one on the MREL requirements, on the [indiscernible] costs attrition that is included in the slide. Why do you believe the MREL requirements would rise for Sabadell within the context of being part of this, but not being fully incorporated in it? And then -- well, better to do it.

Carlos, I think you're asking for the dynamics of the MREL and why we think there might be a potential dis-synergy during the time of managerial autonomy. And we think that case will arise because there will be 2 operating entities, but probably one resolution entity that will be the parent company. And following the SRB regulations, typically, the liabilities -- the eligible liabilities needs to be raised at the parent company. So for that time, the securities that are at Sabadell will not be eligible at the parent company. And we see a risk that the parent company will need to raise for that period of time additional MREL that will be, therefore, in a way, duplicated. Also, we identified the risk that I think it has been also mentioned by BBVA of an increase in the capital requirement because of systemic importance. And all that combined is the EUR 90 million impact that we show in this slide for the managerial autonomy time frame.

Okay. So that concludes the Q&A session. Thank you, Cesar. Thank you, Sergio.

And our apologies again for another Friday.

Exactly. Well, I wish you all a nice day and also a happy weekend. Thank you very much.

Exactly. Great weekend. Thank you very much. Thank you.