Unlock Editor’s Digest Lock for Free
FT editor Roula Khalaf will select your favorite stories in this weekly newsletter.
Having been a longtime UK banking business, TSB suddenly became the most popular lender at parties. Carved into the Lloyd’s Banking Group over a decade ago, British High Street Bank has played a key role in two multi-billion pound acquisition battles.
In one, TSB is the target. Santander agreed to buy the bank from pro-Sabadell for £2.7 billion on Tuesday, watching the competition with Barclays. However, Sabadel is also the target of hostile bids from Spanish rival BBVA. This is an approach that appears to be a challenge now that Sabadell has agreed to sell the British trophy.
For Santander Chair Ana Botin, there are clear benefits to hooking the TSB. The Spanish bank will be the UK’s third largest current account provider and film it passing Natwest as the country’s third largest mortgage lender, expelling questions about whether Santander’s UK operations will not be able to compete.
And her shareholders should not be too bothered. The £2.7 billion price tag looks generous compared to the TSB’s tangible book value of around £1.8 billion, but the similarity of the operation of Santander UK and TSB should lead to significant cost savings. Santander believes that it can trim TSB’s 2024 operating expenses each year, increasing its profit margin on tangible stocks to 16% by 2028 from 11% last year.
For Barclays, who is trying to grow their UK business, Missing is a double blow. In addition to the TSB bid, Santander’s decision to double in the UK took two potential expansion routes, as he previously thought it was the Santander UK approach. After buying £2.9 billion of virgin money nationwide last year, there are few medium-sized targets left.
Meanwhile, BBVA is a bit stuck. To be successful, you need to increase your overall Sabadell offer for a large amount, but you don’t have much room to do so. Sabadell shareholders were already planning to receive a large portion of the combined profits. The Spanish government has said the deal is even less attractive, as the two have not been allowed to consolidate the business for three years.
Sabadell shareholders have options. They can vote for the Santander agreement and bid for stocks in the BBVA. With 2.5 billion euros of revenue coming in as dividends, it’s hard to see why they beat Botin. Conversely, it is not clear that we will accept the BBVA offer. Because its value is comfortable below Sabadell’s current stock price.
It’s not all bad for BBVA Chairman Carlos Torres Vila, despite his staunching reputation for winning Sabadell. It’s better to climb than forcing a deal that hurts his own shareholders. What’s more, if the logic of combining BBVA with Sabadell’s Spanish business makes sense, then that makes sense later — and after the TSB is released, it would be a much simpler proposal for his own shareholders as well.
nicholas.megaw@ft.com