July 3, 2016 / 10:11 AM / 3 years ago

Spanish banks' post-Brexit rout hinders M&A: Sabadell chairman

Sabadell bank's logo is seen at an ATM machine outside one of the bank's branches in Madrid, Spain, April 18, 2016. REUTERS/Susana Vera

MADRID (Reuters) - A sharp fall in Spanish banks’ share values after Britain’s vote to leave the European Union severely hampers any potential merger activity in the sector, the chairman of Sabadell (SABE.MC) said in a newspaper interview on Sunday.

Spanish lenders have been looking to counter low interest rates and weak demand for home loans by boosting market share through acquisitions, but those efforts have been undermined by Britain’s June 23 referendum, Sabadell’s Josep Oliu told the Vanguardia newspaper.

“Getting involved in merger activity is practically impossible with current share prices,” he said.

Shares in Sabadell, which bought British lender TSB last year, have fallen 20 percent since the so-called Brexit vote. Rivals Santander (SAN.MC) and BBVA (BBVA.MC), meanwhile, have dropped 17 percent and 11 percent respectively.

The Brexit vote has also devalued TSB as an asset on Sabadell’s balance sheet and could affect returns on investment, Oliu said, adding that its capital reserves would not be affected.

Oliu also urged Spanish political parties to form a government as soon as possible after last Sunday’s inconclusive general election, in which the center-right People’s Party (PP) won but not by enough to govern.

“They should form a government, and the sooner the better,” he said, adding that global economic uncertainty made the swift formation of a stable government of utmost importance.

Reporting By Sonya Dowsett; Editing by David Goodman

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