Spanish takeover of TSB gets green light

TSB’s takeover by Spanish banking group Banco de Sabadell has been sealed after City regulators gave the £1.7 billion deal the green light in a move that will increase competition for the UK’s biggest lenders.

Peter Pester of TSB. Picture: Contributed

Sabadell – Spain’s fifth-biggest bank – agreed to buy TSB earlier this year with aims to turn it into a major competitor to Britain’s “big five” grouping.

Taxpayer-backed Lloyds Banking Group floated TSB last June after the brand was revived to meet the EU rules on state aid, but the return to the stock market proved short-lived with Sabadell making its takeover offer in March.

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Lloyds said the approval for the takeover from the Prudential Regulation Authority and the Financial Conduct Authority means it has effectively completed the sale of its remaining 40 per cent stake in the business for around £680 million.

It hopes to get confirmation that it has now met the European Commission’s requirements on state aid “well ahead” of the year-end deadline.

Paul Pester, chief executive of TSB, said the deal was a “major vote of confidence in TSB”. He said: “With the extra firepower and fresh perspective of Sabadell, TSB will be stronger and even better placed to build on its position as Britain’s challenger bank.

“Being part of the Sabadell Group will help TSB bring more competition to the UK market more quickly and help us break the stranglehold the ‘big five’ banks have had for far too long.

“TSB and Sabadell have similar values. Both have heritages that date back to the 19th century and proud histories of focusing on and supporting hard working local people and businesses.”

Sabadell said completion of the deal marked a “milestone” for the group.

Chairman Josep Oliu said: “Today marks the beginning of a major project. This is a milestone that enables us to enter a market with vast opportunities. We do so in partnership with a well-positioned challenger bank with a prestigious brand backed by a long tradition. Furthermore, TSB has a highly professional management team which is successfully delivering its business plan and which is committed to growing TSB further still as part of the Sabadell Group.

“TSB will enable us to increase our international footprint and diversify our business activities. It’s a major opportunity.”

TSB is the seventh largest retail bank in the UK, with more than 600 branches, 8,700 employees and some 4.7 million customers.

But the group said in April it planned to close 17 branches and posted a sharp fall in first-quarter profits – at £34.3m, down 67 per cent on a year earlier.

TSB said the fall largely reflected higher costs, with operating expenses up as the group developed its infrastructure after being spun out of Lloyds and investment spending increased.

Lloyds was forced to offload TSB in return for its bailout at the height of the financial crisis.

The taxpayer was initially left holding a 40 per cent stake in Lloyds, but this has since been reduced to less than 17 per cent as the UK government sells off tranches of shares with aims to return the bank to full private ownership.

Shore Capital analyst Gary Greenwood said: “TSB’s shares are expected to be de-listed from the main market of the London Stock Exchange on or around 28 July. Consequently, we formally terminate coverage of TSB stock.”