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Sabadell relocation, CaixaBank's mooted move fueled by shareholder pressure


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Sabadell relocation, CaixaBank's mooted move fueled by shareholder pressure

Banco de Sabadell SA has decided to move its headquarters from Catalonia to Alicante, while CaixaBank SA's board will meet on a possible relocation Oct. 6, as analysts said the lenders are coming under increasing shareholder pressure to relocate given escalating tensions amid political uncertainty in the region.

Sabadell confirmed Oct. 5 that its board had voted on the relocation at an extraordinary meeting, while Expansión reported that CaixaBank's board would meet to discuss a possible relocation. Neither bank could be reached for immediate comment the evening of Oct. 5.

Sabadell's shares closed up 6.16% in Oct. 5 trading, while CaixaBank's shares rose 4.93%, rebounding from heavy declines since the Oct. 1 Catalan independence referendum. Both lenders had been pummeled by investors, with Sabadell's stock price falling 10.17% between Sept. 29 and Oct. 4, and CaixaBank's falling 7.78%.

SNL Image

A Spanish national police officer confronts independence demonstrators in Barcelona on Sept. 20.

Source: Associated Press

"There is a lot of pressure from shareholders," Borja Rubio, head of brokerage at Orey Financial, said in an interview. "Shareholders want their investments to be safe. They don't want the stock to fall 10% or 20%."

The referendum, which had been declared illegal by Spain's constitutional court, was marred by violence as police confiscated ballot papers and hundreds of people were injured. Tensions have risen in the past days, and pro-independence parties have requested a vote on independence in the regional government's parliament on Oct. 9.

HQ relocation

Fears are increasing that there will be no easy fix to the political upheaval, and moving the headquarters could help banks remove some of the uncertainty around their Catalan exposure.

"It makes sense in this context," Rubio said. "The situation could last one month, five months or longer."

Investors are concerned that the banks would lose access to ECB liquidity should a split with Spain leave them outside the EU and therefore the eurozone. Spain's central bank governor has warned that Catalonia would automatically be ejected from the eurozone in the event of independence, and the relocations are seen as a way of ensuring the lenders stay within the currency bloc.

Sabadell Chairman Josep Oliu was cited in January as saying the bank has the power to relocate its headquarters without a shareholder vote and that the process would take two days. A spokesman for CaixaBank told S&P Global Market Intelligence earlier in the day that "the necessary decisions will be taken, in due course."

Javier Bernat, an analyst at GVC Beka Finance, said both banks were making contingency plans because a large part of their business is in the region. They may choose to follow other Spanish companies that have announced plans to relocate their headquarters, he said.

Biotechnology firm Oryzon Genomics SA said Oct. 3 that it would move its headquarters to Madrid from Barcelona, and the move was loudly applauded by investors, with the company's share rising sharply Oct. 4.

Bernat said a similar move by the banks would boost their share prices, but said he thought a relocation at this time would be premature.

"It's too early to throw in the towel," he said.

Threat of deposit withdrawals, boycott

There have been concerns that depositors might seek to withdraw investments from Catalan banks or that lenders could face a backlash from customers who are politically motivated to leave the banks because they are based in Catalonia. Bernat said this was a possibility, but it was very difficult to ascertain because there were no readily available statistics from the central bank at this time.

Investor firm iBroker said on its website that it had decided to stop using Sabadell as a deposit bank for its client funds until further notice "due to political and financial instability." The company declined to comment further when contacted by S&P Global Market Intelligence.

Meanwhile, pro-independence party CUP has called for a boycott of CaixaBank, Banco de Sabadell and Banco Bilbao Vizcaya Argentaria SA, a large Spanish lender with a significant presence in Catalonia, El Confidencial reported, citing Catalan-language digital newspaper Nació Digital.

Both Sabadell and CaixaBank are regarded as financially sound and have been expanding abroad, which would make them less exposed to headwinds in the Spanish market. Sabadell acquired U.K.-based TSB Banking Group Plc in 2015, while CaixaBank took over Portugal's Banco BPI SA in early 2017.

In addition, their Catalan businesses are a going concern and are not at risk, Bernat said.