Banco Santander has agreed to purchase TSB Banking Group from Banco de Sabadell in a deal valued at GBP 2.65 billion.
The transaction, structured as an all-cash acquisition, is expected to close in the first quarter of 2026, pending regulatory clearance and approval from Sabadell’s shareholders.
The proposed acquisition would see Santander UK absorb TSB’s retail banking operations, which currently serve around 5 million customers across 218 branches and digital channels. TSB holds approximately GBP 34 billion in residential mortgages and GBP 35 billion in customer deposits, equating to roughly 2% of the UK mortgage market.
Operational integration and market impact
Once completed, the integration of TSB would bring Santander UK's total customer base to nearly 28 million across retail and business segments. According to officials from Santander, the deal would increase the group’s scale in the UK and enhance its ability to compete in key product areas such as personal current accounts and mortgages. The bank is set to become the third largest in the country by personal current account balances and fourth in terms of mortgage lending.
The acquisition is expected to yield operational synergies equivalent to around 13% of the combined cost base, amounting to at least GBP 400 million annually before tax. Achieving these efficiencies will require restructuring costs of approximately GBP 520 million over 2026 and 2027. Santander officials noted that the merged entity will adopt a simplified and scalable digital platform, building on the group’s past experience in bank integrations within the UK.
The transaction is forecast to generate a return on invested capital exceeding 20% and contribute positively to Santander’s earnings per share from the first year post-completion. The combined loan-to-deposit ratio is projected to be 107%, a slight improvement from Santander UK’s current 108%.
At a group level, Santander anticipates the deal will reduce its CET1 capital ratio by around 50 basis points. However, the bank expects to maintain a CET1 ratio of approximately 13% by the end of 2025, factoring in this transaction along with the previously announced sale of a 49% stake in Santander Polska and related share buybacks.
