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Spanish Banco Santander S.A., the biggest lender in continental Europe by market capitalisation, is buying Scotland-based commercial bank TSB for £2.65 billion (€3.08bn). This is a major step to bolster the Spanish lender’s future in the UK, as it has been struggling to keep its UK arm afloat.
The acquisition of TSB Bank means 5 million customers will be transferred to Santander, who will keep a total of £35bn (€40.1bn) in their deposits.
The combined entity will become the third-largest bank in the UK by share of personal current accounts and the fourth-largest by mortgages.
However, TSB Bank’s name and branding could disappear, as the Spanish lender intends to integrate TSB into the Santander UK group.
Santander’s chief executive Mike Regnier said to BBC, “We haven’t made any decisions yet”, but “we tend to use the Santander brand on the high street around the world”.
The Spanish bank is hoping to turn its fortunes around after it announced in March that it would cut hundreds of jobs and close a fifth of its branch network in the UK.
TSB Bank has been a subsidiary of the Spanish Sabadell Group since 2015, which has now decided to sell the Edinburgh-based lender after it received unsolicited interest from another Spanish financial giant Banco Bilbao Vizcaya Argentaria (BBVA).
Sabadell’s efforts to repel BBVA’s interest
Selling TSB Bank could weaken Sabadell’s appeal as a merger target. The Spanish bank is expected to boost its returns to its shareholders, using the money it receives from Santander in the deal. It is part of a strategy where Sabadell seeks to retain shareholder interest as it attempts to repel the renewed takeover attempts from BBVA. Sabadell keeps a tab on its website for investors dedicated to the takeover bid, indicating how much shareholders would lose if they agreed to the merger.
BBVA said on Monday that the bank “is moving forward with the acquisition of Banco Sabadell,” despite Sabadell’s opposition.
Santander’s deal is expected to generate a return on invested capital of over 20%. The common cost base of the two banks is expected to decline by 13%, equating to around £400mn (€466mn) in cost savings, according to the bank.
A Santander spokeswoman did not rule out branch closures, and said to the BBC that there would be job cuts in the back offices without naming the number of jobs in danger.
TSB announced in May that it would lay off 250 employees and close 36 branches. The bank has around 5,000 staff and 175 branches.
Santander’s deal, first, needs to gain the necessary regulatory approvals and a green light from Sabadell shareholders.
After the announcement, the bank’s shares were up by nearly 3% at midday in Europe.
