Bids for UK lender TSB received by Spanish owner Sabadell

UK high street lender TSB has been put up for sale by Spanish owner Banco de Sabadell, a decade after taking it over.

The Catalonia-based banking group said it has received multiple approaches from potential suitors about buying its British business and would "assess any potential binding offers".

This followed a report from the Financial Times overnight that it has granted limited access to its books for buyers to carry out due diligence.

Sabadell bought TSB for £1.7 billion in 2015, a year after it was spun out by Lloyds Banking Group PLC (LSE:LLOY).

Plans to sell the UK business were mooted in 2018 after an IT crisis, with analysts saying there are limited synergies with the rest of the group.

Interested bidders were expected to submit offers this month, with TSB said to potentially be valued between £1.7 billion and £2 billion.

And potential bidders suggested in the article were Barclays PLC (LSE:BARC), NatWest Group PLC (LSE:NWG), Santander UK and HSBC Holdings PLC (LSE:HSBA), though it was not clear who had approached Sabadell about a deal.

Analysts at KBW said £2 billion "might be too low", with the mooted valuation mentioned in the FT article implying a ratio of 7.2 times 2027 forecast earnings for TSB.

With a cost base of around £730 million and cost synergies of 30%, the UK lender "could generate additional value for the potential buyer of circa £800 million".

There are also "complications", the analysts noted, as Sabadell is currently the subject of a takeover offer from larger rival BBVA, so its board of directors is bound by the "passivity rule," which means that a sale of TSB could require shareholder approval at a general meeting.

UK bank consolidation

The news comes amid a spate of UK bank consolidation in the past 12 months, which has fresh from reports that Metro Bank Holdings PLC (LSE:MTRO) has also received approaches from Pollen Street Capital, the private equity owners of rival Shawbrook, sending its shares up 15% at the start of the week.

Virgin Money was snapped up by Nationwide for £2.9 billion, with the deal completing in October, while Coventry Building Society bought Co-op Bank at the start of this year for £780 million.

Last month, NatWest Group PLC (LSE:NWG) had an £11 billion bid rejected by Sabadell's Spanish rival Santander for its UK retail banking business, which used to be Abbey National.

MorningStar analysts said the takeover action reflected higher levels of profitability at Europe’s biggest banks after the rise in interest rates since the pandemic.

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