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Santander has agreed to buy the British high street lender TSB for £2.65bn, in a move that underlines the Spanish bank’s commitment to its UK retail operation only months after it entertained bids for the business.
Santander beat its British rival Barclays which also put in a formal bid for the Sabadell-owned unit, according to people familiar with the matter.
The deal comes as Sabadell, which bought TSB in 2015 for £1.7bn, is seeking to fend off an €11bn hostile approach from its domestic rival BBVA.
Sabadell launched the bidding process for TSB after receiving unsolicited interest for the business, the Financial Times revealed last month.
The move was seen by industry observers as a deterrent to a takeover by BBVA, which launched its hostile bid for Sabadell last May which has since descended into Spain’s most ill-tempered takeover saga in years.
Santander’s successful bid for TSB will boost the Spanish lender’s UK market share and comes after a period of uncertainty about its future in Britain, where the bank has cut thousands of jobs. Its UK chair also announced his departure earlier this year following disagreements with the group’s leadership.
Over the past year Santander has entertained bids from both NatWest and Barclays for its UK retail arm, but ultimately rejected the offers because of disagreements over price, the FT previously reported.
The bank’s Spanish executives had grown frustrated with the weaker returns at its UK business relative to its other markets, as well as the unit’s high cost base.
“We didn’t want to sell the UK business but we did have offers,” said one person familiar with the matter. “This is the better outcome and will allow Santander to address its UK issues . . . and accelerate growth.”
Santander earlier this year sold a large part of its Polish operations to Austrian bank Erste Group for about €7bn, promising to use half of the cash to buy back its own shares.
BBVA has never been clear about its plans for Sabadell, but was widely expected to put it on the market if it succeeded in buying its Spanish rival. However, it has faced considerable pushback from the Spanish government, which last week said it would block a legal merger between the banks for at least three years.
With Sabadell currently the subject of a takeover bid, its board of directors is bound by a “duty of passivity”, meaning the agreed transaction will be submitted to investors for approval in an extraordinary general shareholders’ meeting.
Sabadell’s chair Josep Oliu said: “This transaction is beneficial for the Bank and its shareholders, as it creates significant value, allowing us to pay an extraordinary dividend.”
Santander said the combination “would deliver substantial value to Santander shareholders through increased . . . scale, greater access to low-risk mortgages and high-quality deposits, and operational efficiencies”.
Ana Botín, the bank’s executive chair, added: “The transaction will accelerate our path to greater profitability in the UK and helps achieve a return on tangible equity of 16 per cent by 2028.” The unit had a return on tangible equity — a measure of profitability — of 11 per cent in 2024.
TSB reported pre-tax profits last year of £285mn on income of £1.14bn, and had total assets of £46.1bn at the end of 2024. The bank has about 5mn customers in the UK.