Santander Bank to purchase TSB from Sabadell for a staggering £2.65 billion.
Santander, the Spanish banking giant, has announced its intention to acquire TSB in a £2.65 billion all-cash deal. The transaction, expected to close in the first quarter of 2026, is set to significantly strengthen Santander's position in the UK market and contribute to its growth and profitability.
The acquisition is valued at five times TSB's projected 2026 earnings and 1.45 times its tangible book value as of March 31, 2025. The deal is expected to generate at least £400 million in cost synergies, representing approximately 13% of the combined business's cost base.
Santander anticipates incurring £520 million of pre-tax restructuring costs during 2026 and 2027 to deliver these synergies. The transaction is projected to yield a return on invested capital of over 20%, contributing to an increase in Santander UK's return on tangible equity from 11% in 2024 to 16% by 2028. This aligns with the performance of leading UK peers.
The acquisition is expected to be accretive to Santander's earnings per share from the first year, with a projected EPS increase of about 4% by 2028. The deal strengthens Santander's position in the UK retail banking market, making it the third-largest bank by personal current account balances and the fourth in mortgages.
TSB, with its nationwide network of 218 branches and outlets, serves approximately 5 million customers, primarily in the personal and small business segments. The acquisition adds these customers to Santander's portfolio, enhancing its customer proposition and expanding its lending capacity in the UK.
By integrating TSB into Santander UK, the group aims to leverage its experience in integrating banking platforms, as seen with Abbey and Alliance & Leicester, to improve operational efficiency and reduce costs. The deal also allows TSB customers to benefit from Santander's advanced technology platforms, enhancing the digital banking experience and further consolidating Santander's competitiveness in the UK market.
Santander's 2025 objectives remain unchanged, and the transaction remains subject to regulatory approvals and Sabadell shareholder approval. Completion of the transaction is expected to occur in the first quarter of 2026. The acquisition strengthens Santander's position in the UK, positioning it as a major player in the UK retail banking sector.
The acquisition of TSB, expected to strengthen Santander's position in the UK market, will contribute to an increase in shareholder remuneration as the deal is projected to yield a return on invested capital of over 20%. By integrating TSB's digital banking services, Santander aims to expand its lending capacity in the UK and enhance operational efficiency, thus offering a superior digital banking experience to its customers.
