NatWest has ruled itself out of bidding for TSB, eliminating one of the leading contenders from a sale process that could result in significant job losses and branch closures for the high street lender.

The formerly state-owned bank has decided not to pursue an acquisition of the Sabadell-owned retail lender and is not actively bidding for it, according to sources familiar with the matter. The decision comes after TSB's Spanish owner confirmed it was working with advisers to examine offloading the UK bank following unsolicited approaches.

Barclays and Santander remain among the bidders considering making an offer for the retail bank, with bids due by 27 June. A successful acquisition could see TSB's 175 branches and 4,900 staff come under threat as new owners seek cost savings through consolidation.

NatWest chief executive officer Paul Thwaite had previously signalled the bank was taking an aggressive approach to acquisitions since returning to private ownership at the end of May. However, he told investors at a Goldman Sachs conference last week that the bank would be "very disciplined" in its approach to acquisitions and had a "very high financial bar" as well as a "very high operational bar" when it comes to dealmaking.

Santander's interest in TSB comes after the Spanish bank entertained bids from both NatWest and Barclays for its UK retail arm in the past year, ultimately rejecting the offers due to disagreements over price. Spanish executives have grown frustrated with Santander UK's high cost base and weaker returns relative to other markets.

However, a successful bid for TSB would boost Santander's UK market share and suggest the lender remains committed to its British business. The bank previously stated that Santander UK was "not for sale".

TSB has about 5 million customers in the UK and last year posted pre-tax profits of £285 million. It had £46 billion in assets at the end of 2024, with around 94 per cent of its loan book consisting of owner-occupier mortgages.

The bank's ownership changes have not always been smooth. When it transitioned from former owner Lloyds' legacy infrastructure to Sabadell's IT system in 2018, it left 2 million customers temporarily locked out of their accounts, costing the bank £49 million in fines.

The anticipated sale comes as UK banking giants look to scale up their market share to retain dominance against rising challenger banks. A takeover of TSB would mark the latest ownership shake-up for the centuries-old lender, which was founded by a Scottish minister in 1810 and has been owned by Sabadell since 2015.

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