TSB Bank, owned by Spanish bank Sabadell, has been put up for sale as the latter looks to retreat from the British banking market after a decade of operations. Sabadell is exploring the sale of its British subsidiary after receiving interest from potential bidders, with the Financial Times reporting that the Spanish bank has begun circulating documents and granting limited access to one of its data rooms to allow potential buyers to carry out due diligence.
Last night, Sabadell confirmed it has received approaches about TSB and said it would “assess any potential binding offers.” The potential sale comes a decade after Sabadell acquired TSB from Lloyds Banking Group in 2015. The initial acquisition was part of Sabadell’s strategy to gain a foothold in the UK as it struggled to grow in Spain, where the economy was still reeling from the impact of the 2008 financial crash.
However, Spain is now one of Europe’s fastest-growing economies, expanding by 3.2% in 2024 compared to 1.1% in the UK. Sabadell is also involved in its own hostile takeover saga that has prompted questions about TSB’s future. A TSB takeover would add to a wave of dealmaking within the British banking sector, with Metro Bank seeing its share price surge 15% on Monday following reports it had received an offer from private equity firm Pollen Street Capital.
Analyst Johann Scholtz at MorningStar said the widespread takeover interest reflected higher levels of profitability at Europe’s biggest banks after a surge in interest rates since the pandemic. “European banks’ valuations have increased, so banking management teams are seeing less value in buying back their own shares and are looking for other avenues to deploy excess capital,” he said. “The whole M&A space in European banking is heating up with buyers now looking for obvious targets.”
TSB made a pre-tax profit of £290.4m last year, marking a 22.4% increase on the year before. The British bank paid its Spanish owner a record £300m dividend on the back of strong results. The lender, which traces its origins back to the formation of the Trustee Savings Bank in Dumfriesshire in 1810, currently has five million customers across the UK and a mortgage book worth over £33bn.
Potential buyers include Barclays, NatWest, Santander, and HSBC – all of which could use an acquisition to strengthen their positions in the UK market. Lloyds is unlikely to bid given it was made to sell-off TSB under the terms of a financial crisis rescue deal. A sale by Sabadell comes as Spain’s fourth-largest bank fights an €12bn hostile takeover bid from its Bilbao-based rival BBVA, which has led to questions about the future of TSB, which would look increasingly out of place in a combined Spanish banking group.
