Banco Santander—currently the UK’s fourth-largest mortgage lender—will pay £2.65 billion (approximately €3.1 billion) in cash for TSB, the ninth-largest bank in the country. In addition to this, Sabadell will receive the €300 million that TSB is expected to earn until the transaction closes during the first quarter of 2026.
This deal will allow Sabadell to pay €3.8 billion in dividends (equivalent to 1/6 of the bank’s capitalization) over the next 12 months, a move that undoubtedly complicates the hostile takeover bid BBVA has launched for the Catalan entity.
Santander has made the transaction conditions public:
- The all-cash transaction values TSB at 5x 2026 earnings¹ post identified cost synergies and 1.45x tangible book value as of March 31, 2025².
- The acquisition would strengthen Santander’s position in the UK. Santander intends to integrate TSB into the Santander UK group, enabling it to become the third largest bank in the country by personal current account balances.
- The transaction is expected to generate a return on invested capital of over 20%, thereby contributing to an increase in Santander UK’s return on tangible equity from 11% in 2024 to 16% in 2028, in line with leading UK peers, with cost synergies of at least £400 million or 13% of the combined business’s cost base.
- The acquisition is expected to result in earnings per share accretion for Santander from the first year and of c.4% in 2028 while consuming 50 basis points of CET1 capital at closing. The transaction is consistent with Santander’s strategy to carry out bolt-on acquisitions to accelerate organic growth in its core markets while adhering to Santander’s strict capital hierarchy.
- The transaction will not affect Santander’s distribution policy and 2025 targets. The group remains on track to deliver at least €10 billion in share buybacks from 2025 and 2026 earnings and excess capital over an accelerated timetable than originally planned³.
- The transaction remains subject to regulatory approvals and Sabadell shareholder approval.
