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A Brief History of BBVA (XXIV): Banco de Bilbao and Banco de Vizcaya Merge

When the deep crisis of the first half of the 1980s was over, the banking sector had undergone a process of consolidation. After restructuring, the most stable and solvent banks took over those that had not been able to survive the depression. The most important banking groups grew stronger, but had to take even more ambitious and decisive steps to meet the challenges posed by the new European landscape.

Lartaun de Azumendi (Colaborador externo)

Spain joined the European Economic Community in 1986, and José Ángel Sánchez Asiaín, then Chairman of Banco de Bilbao, continued to insist that it was increasingly imperative for the banking industry to dimension itself accordingly. He was concerned about the difficulty of competing with other banks on the Continent within the new European framework. He therefore quietly began exploring growth possibilities for Banco de Bilbao with his most trusted employees.

The attempt to take over Banesto

It had been public knowledge for years that Sánchez Asiaín advocated bank consolidation, and, in 1987, he was no longer alone in this. Spanish political and economic authorities had come to agree with his point of view, and expected banks to began take action along these lines. The firm belief that Banco de Bilbao needed to grow first led to concrete action in the autumn of 1987. Banco de Bilbao, Spain’s fourth largest Spanish bank, set its sights on Banesto, Spain’s second-largest bank. The goal was to create a financial group large enough to compete with other such European groups.

On 19 November 1987, Banco de Bilbao announced that it has initiated discussions with Banesto to “integrate the two entities into a single banking and financial group that would be competitive at both the national and international level”. Banesto confirmed that José María López de Letona, its Vice-Chairman and Managing Director, and its new Directors, Mario Conde and Juan Abelló, had met with the Chairman of Banco de Bilbao. The plan was to conduct a friendly takeover with the approval of the Spanish Government and recognition by the Bank of Spain. Nevertheless, despite this, Banesto’s Board of Directors, rejected the offer.

A few days later, on 30 November 1987, after having obtained approval from its Board of Directors four days previously, Banco de Bilbao presented Banesto with a hostile takeover bid since it had not been possible for the two companies to reach agreement. Banco de Bilbao’s offer to each Banesto shareholder was six new shares and one old share of the Banco de Bilbao for every ten of their Banesto shares, plus 15,000 pesetas in cash, which meant a premium of 40%. In the meantime, and coincidentally, Pablo Garnica – then Chairman of Banesto – proposed appointing Mario Conde as his successor, and this was in fact approved by Banesto’s Board of Directors.


Cover of “El Correo” the day after the Banesto hostile takeover offer

The transaction, however, did not succeed, and not only on account of opposition by Mario Conde, Banesto new Chairman, and its Board of Directors. The Board of Directors of the Madrid Stock Exchange also played a decisive role when it decided not to admit the offer for trading on the exchange since – according the Exchange’s Board – the transactions could not be based on future assets that did not yet exist. In addition, the fact that Banco de Bilbao did not own a significant group of Banesto shares also helped ensure the transaction would fail.

In search of a amicable agreement

After the unsuccessful experience with Banesto, Sánchez Asiaín tried to grow his bank quickly via an amicable agreement with another bank of similar size and interests. Banco de Vizcaya quickly surfaced as the most logical option, and Banco de Bilbao made contact with Pedro Toledo, Chairman of Vizcaya, to see whether an amicable agreement could be reached.

On 21 January 1988, after 19 days of negotiations between top management of both companies from Biscay, Banco de Bilbao and Banco de Vizcaya issued their first joint press release, which stated: “The Boards of Directors of Banco de Bilbao and Banco de Vizcaya held meetings today to study a friendly merger of the two entities as equals.” This was the public debut of the new path these two banks, the fourth and fifth largest in Spain in terms of liabilities, and one which they continue to go down together today.

The next day, the banks’ respective Boards of Directors approved the general structure of the merger, which included creation of a company called Bilbao-Vizcaya Holding, S.A., to which each bank was to contribute 50% of the capital, and which was to act as the head of both groups.

On 27 January 1988, in a solemn public session in which both Boards of Directors were present in their entirety, the merger agreement was signed by José Ángel Sánchez Asiaín and Pedro Toledo as Chairmen of Banco de Bilbao and Banco de Vizcaya, respectively. This was the creation of the Bilbao-Vizcaya Holding, S.A., which had a Board of Directors formed of the two previous Boards. It was decided that the new company would take charge of merging the two banks’ systems and organisations.


Sánchez Asiaín and Toledo sign the agreement to merge the two banks in the presence of Emilio Ybarra

Finally, on 1 June 1988, shareholders of both banks, meeting in extraordinary session and representing over 90% of the capital of the two entities, approved the merger and the creation of the new company, Banco Bilbao Vizcaya, S.A. The estimate at the time was that the merger would lead to savings of 17 billion pesetas.

The new leaders of BBV thus opted to become a universal bank and prepare for the liberalisation of the European market scheduled to take place by law in 1992. Companies on both sides, including Banco de Comercio, Induban, Banca Mas Sardà, and Banca Catalana, immediately joined and implemented a Basic Merger Plan that was to be completed prior to 1 October 1988. The effort required was enormous, but it was successfully completed on time. One hundred thirty-one years had gone by since Banco de Bilbao was founded in Bilbao in 1857. The new Banco Bilbao Vizcaya became the first large bank merger of the time, thus proving those wrong who had stated publicly time and again that such mergers were by no means required to meet the challenge of the European Single Market.


Portrait of Pedro de Toledo by Mari Puri Herrero - BBVA Collection

The method approved to fill the position of Chair of BBV was to select two Co-Chairmen, one from each of the banks: Sánchez Asiaín for Banco de Bilbao, and Toledo for Banco de Vizcaya. The new bank was then run under this arrangement for more than a year, during which time, as expected, there were moments of tension between the two different corporate cultures. Then, Pedro Toledo died unexpectedly on 12 September 1989. The next day, given that the Co-Chair arrangement had not been as stable as originally expected, José Ángel Sánchez Asiaín, with the good of the entity in mind, renounced his position and allowed the BBV Board of Directors to select a new Chairman. When the former Banco de Bilbao and Banco de Vizcaya directors were unable to reach agreement on a successor for Sánchez Asiaín, the matter was submitted to the Bank of Spain for arbitration, which led to the nomination of Emilio Ybarra as the sole Chairman of BBV on 19 January 1990. Up to that point, Ybarra had been Vice-Chairman under the Co-Chairmen Sánchez Asiaín and Toledo.