Renta 4 | Banco Santander (SAN) has reached an agreement with Banco Sabadell for the purchase of TSB. The payment will be made entirely in cash for an amount of £2.65 billion (cclose to €3.1 billion versus €2.5 billion R4 estimate).
They estimate that cost synergies of >£400 million will be achieved by 2028 (c.€470 million), representing 13% of the combined cost base of both banks in 2024. To this end, Santander expects pre-tax restructuring costs in 2026 and 2027 to amount to £520 million.
They also estimate a positive impact from the first year on EPS and of around 4% in 2028, a RoIC >20% and that Santander UK will achieve a RoTE of 16% post-integration, with TSB contributing 2 pp.
In terms of capital, the bank estimates an impact of -50 bp, with this acquisition having no impact on Santander’s remuneration policy, which maintains its target of executing at least €10 billion in share buybacks from profits in 2025 and 2026 and from surplus capital within a shorter timeframe than initially planned.
This purchase will enable Banco Santander to increase its market share in mortgages to 12% and reach £74 billion in current accounts. The combined entity will have total assets of £301 billion (+18% versus Santander UK), £199 billion in mortgages (+approximately 21% versus Santander UK) and £216 billion in deposits (+18%, +approximately 21% and +19% respectively versus SAN UK).
Assessment: According to our estimates, the agreed price implies a 2026 P/E ratio of 10x (versus. 8x average for major British banks). According to Santander, the price implies a 2026e P/E ratio of 5x post-synergies and a P/VCT of 1.45x.
We believe the transaction makes sense for Santander, which will be able to benefit from significant synergies, improve efficiency in this geographical area and profitability, with RoTE of 16% post-integration in 2028e (versus 9.7% in 1Q25 for Santander UK).
The purchase of TSB will place Banco Santander’s pro-forma CET 1 ratio at 13%, after the consumption of 50 bp, which is offset by the generation of 50 bp from the sale of the business in Poland.
This purchase is part of the Group’s strategy of making bolt-on acquisitions that accelerate organic growth in its main markets, while maintaining its strict capital hierarchy. With this purchase, it gains scale in the UK mortgage and deposit market, becoming the third largest bank in current accounts, supported by a complementary customer base and optimised balance sheet and risk management.
We expect a positive reaction from the share price. MAINTAIN. P.O. €7.62/share.
