Santander purchases TSB for £2.65 billion, aiming to improve UK profitability; strategically positive.

From CNBC: 2025-07-02 05:33:00

Santander has agreed to purchase British lender TSB for £2.65 billion in an all-cash deal, aiming to increase its return on tangible equity in the U.K. from 11% to 16% by 2028. The move comes amid concerns over Santander’s long-term presence in Britain due to declining profitability and previous layoff announcements.

The acquisition is seen as a defensive move by Sabadell, who acquired TSB from Lloyds in 2015 and is facing a potential hostile takeover bid from BBVA. Despite a recent condition from the Spanish government, BBVA has decided to keep its bid alive, which could complicate the takeover process.

The European Commission has cautioned Spain against hindering the BBVA-Sabadell merger, while Spain’s antitrust watchdog has already cleared the acquisition. RBC analysts believe Santander’s acquisition of TSB could further complicate BBVA’s takeover bid, as competition in the Spanish banking sector remains tough.

Santander’s Chief Financial Officer emphasized the importance of the U.K. market for the bank, highlighting the high quality and low-risk nature of its business there. While the TSB acquisition strategically benefits Santander’s risk-return profile, the competitive landscape in Spanish banking is expected to remain challenging.

Read more: Santander doubles down on UK presence amid Spain’s banking M&A turmoil