Deal positions Santander as third-largest UK bank by current account balances
Santander has agreed to purchase TSB from Banco Sabadell for an initial £2.65 billion in cash, pending regulatory and shareholder approvals.
The transaction, announced Tuesday, marks a significant move in the ongoing reshaping of the UK banking sector. The deal would see Santander gain the country’s seventh-largest branch network, potentially boosting its presence across the UK retail banking market.
Sabadell’s decision to divest TSB comes as it tries to fend off a takeover bid from rival Spanish bank BBVA. The sale would allow the Barcelona-based lender to sharpen its focus on its home market, which it sees as offering stronger growth prospects.
“This transaction expresses our confidence in our strategy, but also in the UK market,” said Santander executive chair Ana Botín.
According to Santander, the acquisition would make it the UK’s third-largest bank by personal current account balances. The lender expects the purchase to lift the return on tangible equity at its UK arm from 11% in 2024 to 16% by 2028, and to generate a return on invested capital of over 20%.
Banking is changing, and so must we.
— Santander UK (@santanderuk) July 1, 2025
We're pleased to announce that we've acquired @TSB from Banco Sabadell, subject to regulatory and shareholder approvals.
This move will provide us with the scale needed to accelerate our transformation and become the best bank for all our… pic.twitter.com/zjZDiqQ2rg
Cost synergies are projected to exceed £400 million. Santander also anticipates the deal will be earnings accretive from year one, with earnings per share expected to rise by around 4% by 2028. The transaction will use 50 basis points of CET1 capital at closing.
The deal follows a period of internal review by Santander of its UK operations. Although the group had considered reducing its presence in Britain, Botín has reaffirmed the UK remains a key market for the bank.
TSB has faced challenges competing with dominant UK lenders, and the sale adds to a wave of consolidation in the sector. If completed, the transaction would be finalised in the first quarter of 2026.
The final purchase price is expected to increase to about £2.9 billion to account for profits earned up to completion. The £2.65 billion figure represents 1.5 times TSB’s book value, according to Sabadell.
Proceeds from the deal will fund a €0.50 per share special dividend to Sabadell shareholders, worth around €2.5 billion, on top of €1.3 billion in expected ordinary dividends tied to 2025 earnings.
“This is a strategic opportunity we could not ignore,” said Sabadell CEO César González-Bueno. “We will now focus our strategy on Spain, where we see significant growth potential in both business terms and share price performance relative to peers.”
The agreement is set to be presented to Sabadell shareholders at a meeting scheduled for August 6.
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