Cash windfall for TSB investors

Peter Pester: Sabadell offer a vote of confidence in TSB's progress. Picture: Getty
Peter Pester: Sabadell offer a vote of confidence in TSB's progress. Picture: Getty
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Challenger bank TSB has been snapped up for £1.7 billion by Spain’s Banco de Sabadell after a brief nine-month life on the stock market in the wake of the UK lender’s spin-off from Lloyds Banking Group.

The deal means a windfall for 60,000 private shareholders who bought in at 260p when the bank got a public listing last June, with the Spanish suitor offering 340p a share – a 31 per cent premium. The deal will see tens of thousands of small investors each pocket a typical £800 profit.

Paul Pester, TSB’s chief executive, who will keep his job after the takeover, said with Sabadell’s “firepower” the UK bank could accelerate its drive into the UK banking market.

Lloyds was ordered by the European Commission to sell off the TSB assets – including more than 600 branches – by the end of this year, in return for the group’s £20bn taxpayer bailout at the height of the financial crisis.

The TSB flotation, which left Lloyds with a 50 per cent stake, happened after an earlier plan for the sale of the assets to the Co-op Bank foundered when a £1.5bn hole was discovered in the self-styled ethical group’s balance sheet.

Sabadell said yesterday that it was attracted by a UK banking market with “a well-defined and stable regulatory framework, consistent profitability and good growth prospects”.

The Spanish group’s chairman, Josep Oliu Creus, said: “TSB is a well-established brand which shares our culture of focusing on our customers and local communities.”

TSB has a 6 per cent share of UK branches, which attracted 8.4 per cent of new and switching personal bank accounts in 2014, for which it reported profits of £170 million.

At the time of its flotation, the bank said it would be a “challenger” to the big five that dominate the high street. These include Sabadell’s Spanish rival Santander, which acquired the old Abbey National for £9bn in 2004, and then swallowed up Alliance & Leicester and Bradford & Bingley’s branch network in the financial crash. TSB’s float was a return to a public listing for the first time since being taken over by Lloyds in 1995.

Pester said yesterday that Sabadell’s offer was a vote of confidence in TSB and the group’s “straightforward, transparent approach we’re bringing to banking in the UK”.

Will Samuel, the UK bank’s chairman, said the offer was “a significant endorsement of TSB’s progress since its initial public offering”, and gave shareholders the chance “to receive today in cash the value that would otherwise be unlocked over time as TSB executes its strategy”.

Antonio Horta-Osorio, chief executive of Lloyds, which is now 23 per cent owned by the state, said the sale of its remaining holding in TSB was a significant step for the group “and will enable us to meet our commitments to the European Commission, well ahead of its mandated deadline”.

At the time of the TSB float, retail investors were lured with the promise of free additional shares if they kept the stock for 12 months.

Lloyds said yesterday it would compensate those who would have been entitled to the bonus, with the cash value of the shares they would have received.

Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said: “In all, the news looks good for both UK consumers and businesses, with the new TSB adding competitive vigour to the UK market place.”