Santander has agreed to acquire TSB Banking Group from Banco de Sabadell for £2.65 billion in an all-cash transaction, strengthening the Spanish bank's position in the UK retail banking market.

The deal, announced on Tuesday, will make Santander the third largest bank in the UK by personal current account balances, serving nearly 28 million customers when combined with its existing operations. TSB brings approximately 5 million customers, £34 billion in mortgages and £35 billion in deposits to the acquisition.

The transaction represents a significant consolidation move in British banking, where TSB operates 175 branches nationwide with around 5,000 staff. Santander UK currently serves 14 million customers through 350 branches with 18,000 employees.

Ana Botín, Banco Santander's executive chair, 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."

Santander expects the acquisition to generate a return on invested capital of over 20 per cent and boost its UK unit's return on tangible equity from 11 per cent in 2024 to 16 per cent by 2028. The bank projects cost synergies of at least £400 million, equivalent to 13 per cent of the combined business's cost base.


The transaction will be earnings accretive from the first year, contributing approximately 4 per cent to earnings per share by 2028 while consuming 50 basis points of CET1 capital at closing.

Marc Armengol, chief executive officer of TSB, said: "TSB is a truly special bank, run by a first-class team that deliver trusted service and support for customers, day in and day out. Today's announcement represents the next exciting chapter for this successful business, as part of Santander, a highly regarded banking group."

Sabadell will use proceeds from the sale to fund shareholder returns totalling 3.8 billion euros, including a 0.50 euro per share extraordinary dividend worth 2.5 billion euros.

The acquisition marks TSB's third major ownership change in just over a decade. The bank was spun off from Lloyds in 2013, floated on the London Stock Exchange in 2014, and acquired by Sabadell in 2015 for £1.7 billion.

The transaction remains subject to regulatory approvals and Sabadell shareholder approval, with completion expected in the first quarter of 2026.

The deal comes as Sabadell faces a hostile takeover approach worth more than €14 billion from Spanish rival BBVA. Despite the Spanish government imposing restrictions that would prevent the banks from fully merging for at least three years, BBVA confirmed on Monday it would proceed with its bid, having first launched the unsolicited approach in May 2024.

Sabadell's decision to sell TSB is viewed as a defensive strategy to complicate BBVA's takeover attempt while returning substantial value to shareholders. Under Spanish law, if BBVA succeeds in acquiring Sabadell, the latter would need shareholder approval before selling TSB.

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