Santander announced that it has reached an agreement to acquire 100% of TSB Banking Group from Banco de Sabadell, with a valuation of £2.65 billion (approximately €3.1 billion) in an all-cash transaction.
TSB is a well-established UK retail bank with a nationwide network of 218 branches and outlets, as well as a growing digital presence. And it serves approximately 5 million customers, primarily in the personal and small business segments, with £34 billion in mortgages (2% market share in the UK) and £35 billion in deposits.
The deal further enhances Santander’s position in one of its core markets, expanding its customer base and lending capacity across the UK. And Santander UK would become the third largest bank in the country by personal current account balances and number four in mortgages.
When combined, these two banks would serve nearly 28 million retail and business customers nationwide, giving TSB customers access to Santander’s international network and allowing them to benefit from the group’s leading technology platforms.
The combination of the two franchises would deliver substantial value to Santander shareholders through increased in-market scale, greater access to low-risk mortgages and high-quality deposits, and operational efficiencies. And the combined businesses would have a loan-to-deposit ratio of 107% versus 108% for Santander UK currently.
This deal would generate a return on invested capital of over 20% and bring the business closer to Santander UK’s productivity and efficiency standards. When combined with the transformation plans for Santander UK, it is expected the integrated business’s return on tangible equity would increase from 11% in 2024 to 16% by 2028.
This deal is expected to generate cost synergies of 13% of the combined business’s cost base, equivalent to at least £400million pre-tax. To deliver these synergies, Santander expects to incur £520 million of pre-tax restructuring costs during 2026 and 2027.
KEY QUOTES:
“The acquisition of TSB represents a continuing strategic commitment to our customers in the UK, offering a compelling opportunity that is financially attractive to our shareholders and aligned with Santander’s long-term objectives. It strengthens our franchise in a core market through the acquisition of a low-risk and complementary business that adds to our diversification.”
“We are creating a stronger and more competitive business across key products such as personal current accounts where the combined business will become the third largest bank in the UK by market share.”
“The transaction will accelerate our path to greater profitability in the UK and helps achieve a return on tangible equity of 16% by 2028.”
“The acquisition also reflects our commitment to growing profitably through disciplined capital allocation. This acquisition meets our goal of achieving a return on investment above 20% and EPS accretion from year 1, while consuming limited capital and having low execution risk.”
“Furthermore, the transaction will not affect Santander’s existing distribution policy and 2025 targets.”
Ana Botín, Banco Santander’s executive chair
“This is an excellent deal for customers combining two strong and complementary banks, creating one of the most substantial banks in the UK and materially enhancing the competitiveness of the industry.”
At Santander UK we have momentum in our strategy to become the best bank for customers in the UK by investing in technology and service and improving our processes and efficiency. This deal accelerates our transformation allowing us to enhance our customer proposition and invest more in innovative products and our digital offering, supported by the human touch service so many appreciate, not least in our new branch formats and enhancements across the country.
We are fully committed to ensuring a seamless integration, by leveraging our market leading technology and significant experience. Maintaining the highest levels of service for customers across both banks will be a key priority and we will support all colleagues through the transition, as we invest in building a stronger bank for the future”.
Mike Regnier, CEO of Santander UK
