Santander has announced its acquisition of UK lender TSB from Banco Sabadell for £2.65 billion in an all-cash deal.
The decision to divest TSB comes amid Sabadell’s efforts to fend off a hostile takeover attempt by BBVA. Sabadell originally purchased TSB in 2015 for £1.7 billion. TSB serves approximately five million customers in the UK and reported pre-tax profits of £285 million on revenues of £1.14 billion last year, boasting total assets of £46.1 billion as of the end of 2024.
Following the acquisition, a poorly executed upgrade to Sabadell’s core banking system led to significant IT disruptions at TSB, impacting customer access for months.
This acquisition dispels speculation that Santander intended to withdraw from the UK market. Currently, Santander UK has around 14 million active customers, including 7 million digital users, accessible through a network of 444 branches, as well as telephone and online banking services.
The bank is contending with immediate issues, including a potential £250 million bill for the mis-selling of car finance loans, waning mortgage sales, and looming regulatory challenges, particularly concerning the UK’s ring-fencing rules.
The acquisition of TSB positions Santander more competitively in the mortgage sector, establishing the combined entity as the second-largest bank in the UK by personal current account balances and fourth in terms of mortgages. TSB currently holds a 2% share of the UK mortgage market, with a loan portfolio of £34 billion.
Once merged, the two banks will serve nearly 28 million retail and business clients across the country. This transaction is projected to yield cost synergies equating to 13% of the combined operating costs, amounting to at least £400 million pre-tax, predominantly realized by 2027. Santander anticipates incurring £520 million in pre-tax restructuring costs throughout 2026 and 2027.
By leveraging technology across both Santander UK and TSB, the company aims to unlock significant operational efficiencies, supporting long-term profitability via a streamlined digital banking model while reducing the branch network to minimize redundancy.
TSB operates 175 branches and employs around 5,000 staff, whereas Santander has about 349 branches but is in the process of closing several, as customer preferences shift towards digital banking.
Ana Botín, Executive Chair of Banco Santander, remarked, “The acquisition of TSB underscores our strategic commitment to our UK customers. It presents a financially attractive opportunity for our shareholders and aligns with Santander’s long-term goals. This acquisition solidifies our presence in a core market by integrating a low-risk and complementary business that enhances our diversification.
“This transaction will expedite our journey toward improved profitability in the UK and aims for a return on tangible equity of 16% by 2028.”