(Bloomberg) -- Banco Sabadell SA’s possible takeover of TSB Banking Group Plc would help shield the Barcelona-headquartered lender from the risks of Catalan independence, according to Francois Lavier, a fund manager at Lazard Freres Gestion.
Sabadell, Spain’s fifth-largest bank, is following the international strategy of its bigger rivals Banco Santander SA and Banco Bilbao Vizcaya Argentaria SA as political leaders in its home region push to breakaway from Spain, a move that would potentially leave Catalan lenders shut off from European Central Bank funding.
Catalonia, where almost third of Sabadell’s branches are located, is scheduled to hold elections on Sept. 27 and the regional president, Artur Mas, says that if pro-independence parties win a majority he’ll begin the process of separating from Spain, even though the government in Madrid says such a move would be illegal.
“Limiting exposure to Spain and Catalonia, following the model of Santander or BBVA, is a good way to prepare in case political risk keeps rising,” said Lavier, who helps to manage about 15 billion euros ($16 billion) of assets out from Paris. “Sabadell managers may be getting ahead of events.”
Investors are liable to underestimate the political risks in Catalonia with the ECB’s 1.1 trillion-euro quantitative-easing program flooding the market with cheap money, Lavier said.

Independence Push

With Prime Minister Mariano Rajoy stonewalling his requests for talks, Mas has already started setting up institutions to run a Catalan state, ready to swing into gear if the separatist camp wins in September.
Mas’s plan to “disconnect” Catalonia from the Spanish state poses the biggest challenge to the nation’s territorial integrity since the civil war in the 1930s with potential ramifications for the owners of the country’s 1 trillion euros of sovereign debt as well as the Spanish banking system.
Sabadell Chief Executive Officer Jaime Guardiola was asked about the political situation in Catalonia at a conference in Seville on March 9.
“It’s a complex problem, which requires a solution,” he said. “There should be an ability for dialogue.”

International Expansion

Sabadell’s shares fell more than 6 percent on Tuesday after the lender said it’s in talks to buy British consumer-lender TSB for 1.7 billion pounds ($2.5 billion) in what would be its biggest international acquisition. Lloyds Banking Group Plc, which owns 50 percent of TSB after taking it public in June, said it’s “minded” to accept that price.
Sabadell is aiming to get 30 percent of its revenue from outside Spain, compared with 8 percent at present, the lender’s chairman Josep Oliu said Monday in Valencia.
The Catalan government takes a hands-off approach to the operations of major companies, a press officer for the regional economy department said by telephone. Still, the administration welcomes the efforts of any Catalan institutions to increase their international presence, she added.

To contact the reporter on this story: Esteban Duarte in Madrid at eduarterubia@bloomberg.net
To contact the editors responsible for this story: Alan Crawford at acrawford6@bloomberg.net Ben Sills, Zoe Schneeweiss