Spanish banking firm Santander has agreed to acquire TSB Banking Group, a British retail and commercial bank, from Banco de Sabadell in a deal valued at £2.65bn.
This acquisition will be conducted entirely in cash and aims to bolster Santander’s position within the UK banking sector.
TSB currently operates a network of 218 branches alongside a digital platform.
It is said to cater to around five million customers, largely within the personal and small business segments. TSB manages £34bn in mortgages and £35bn in deposits.
The transaction will see Santander’s subsidiary Santander UK become the third-largest bank in terms of personal current account balances and fourth in mortgage lending across the UK.
Santander executive chair Ana Botín said: “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.”
The merger of Santander UK and TSB is projected to significantly expand Santander’s customer base and lending capacity in the UK. The combined entity will serve nearly 28 million retail and business customers nationwide.
TSB customers are expected to benefit from access to Santander’s international network and advanced technology solutions.
According to Santander, this acquisition is designed to create substantial shareholder value through increased market presence, improved access to low-risk mortgages and quality deposits, and operational efficiencies.
The integration is anticipated to yield a return on invested capital exceeding 20% while aligning with Santander UK’s productivity and efficiency standards. It is forecasted that the return on tangible equity will rise from 11% in 2024 to 16% by 2028.
Cost synergies of approximately £400m pre-tax are expected, with restructuring costs estimated at £520m during 2026 and 2027.
The transaction aligns with Santander’s capital management strategies without altering existing distribution policies or its financial objectives for 2025.
Completion of the acquisition is anticipated in Q1 2026 following regulatory approvals and Sabadell shareholder consent.
Santander has been integrating acquisitions within the UK financial services sector, having previously incorporated entities such as Abbey, Alliance & Leicester, and Bradford & Bingley. The Spanish banking group plans to enhance its operational efficiencies by integrating technology across both Santander UK and TSB platforms, aiming for a more streamlined digital banking model.
Sabadell plans to use proceeds from the sale of TSB to fund an extraordinary cash dividend of €0.5 per share, totalling about €2.5bn. This is separate from the €1.3bn in ordinary dividends expected from its 2025 earnings.
The Spanish banking group acquired TSB in 2015 for £1.7bn at book value. Since then, TSB’s loan book has increased from £26.4bn to £36.4bn by Q1 2025, with its cost-income ratio improving from 80% to 67% and return on tangible equity rising from 5.3% to 12.5%.
Over 10 years, Sabadell said that it received €559m in dividends from TSB.
As part of the deal, TSB debt securities held by Sabadell will transfer at fair value upon completion, including perpetual convertible bonds, subordinated debt, and senior unsecured bonds amounting to £1.45bn.
Sabadell has agreed not to compete in the UK market for two years after the transaction closes. It will maintain its UK branch to support businesses with international operations and continue its activities through its Corporate & Investment Banking division.
Sabadel CEO César González-Bueno said: “We will now focus our strategy on Spain, where we see significant growth potential in both business terms and share price performance relative to peers.”
