Santander has agreed to buy TSB for £2.65bn in a deal that will make it the fourth-largest mortgage lender in the UK.
The Spanish giant says the move, agreed last night with TSB-owner Banco Sabadell, “further strengthens Santander’s position in one of its core markets, expanding its customer base and lending capacity across the UK”.
Santander says its UK arm will become the third largest bank in the country by personal current account balances and number four in home loans.
It adds: “The combination of the two high-quality 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.”
It adds that it “intends to integrate TSB in the Santander UK group”.
TSB turned in £34bn of mortgage lending last year, equivalent to 2% market share of the UK market. It has a nationwide network of 218 branches, serves around five million customers and has £35bn in deposits.
In the UK, Santander’s mortgage lending came in at £167.2bn last year, according to its annual report. It has 444 branches and £183.4bn in customer deposits.
Banco Santander executive chair Ana Botín says the purchase “strengthens our franchise in a core market through the acquisition of a low-risk and complementary business that adds to our diversification”.
Santander UK chief executive Mike Regnier adds: “This deal accelerates our transformation, allowing us to enhance our customer proposition and invest more in innovative products and our digital offering”.
Banco Sabadell Chairman Josep Oliu says the sale “creates significant value,” which allows the lender to pay an extraordinary dividend to shareholders.
Shareholders at Banco Sabadell will vote on the deal on 6 August. If passed, the deal is expected to close in the first three months of next year.
The value of the deal could rise to £2.9bn considering TSB’s estimated profits future, Sabadell said.
TSB chief executive Marc Armengol adds that the agreed sale is “the next exciting chapter for this successful business”.
Santander has a track record of buying up UK banking brands and absorbing them into the business, with past takeovers including Abbey, Bradford & Bingley, and Alliance & Leicester.
At the start of the year, press reports circulated that Banco Santander was considering pulling out of the UK, unhappy with costly ringfencing restrictions around its British arm.
But in February, Botin said the UK bank was “not for sale”. The bank’s bid for TSB reinforces her comments.
TSB was bought by Sabadell in 2015 for £1.7bn from Lloyds Banking Group.
