Santander Acquires TSB Banking Group for $3.65 Billion

In one of the mega mergers in the European banking sector, Spain’s Banco Santander has reached an agreement to acquire 100% of the capital of the UK’s TSB Banking Group plc (TSB) from Banco de Sabadell, SA (Sabadell), at a valuation of $3.65 billion in an all-cash deal.

The transaction, which is subject to Sabadell shareholder approval and the corresponding regulatory approvals, is expected to close in the first quarter of 2026.

TSB is a long-established high street bank in the UK, with a network of 218 branches and other customer service points, and a growing digital business. It has approximately 5 million customers, primarily in the personal and small business segments, with a mortgage portfolio of $46.57 billion (2% market share in the UK) and deposits worth $47.94 billion.

With this acquisition, Santander UK would become the country’s third-largest bank by current account balances for individual customers and fourth-largest by mortgages.

Together, the two banks would serve nearly 28 million individual and business customers across the country. TSB customers will be able to access Santander’s international network and benefit from the group’s most advanced technological platforms.

The combination of two well-established franchises would deliver significant value to Santander shareholders through greater market scale, access to more low-risk mortgages and higher-quality deposits, and operational efficiencies. The combined bank’s loan-to-deposit ratio would reach 107%, compared to Santander UK’s current 108%.

The transaction would generate a return on invested capital of over 20% and would apply Santander UK’s productivity and efficiency standards to the acquired business. The combined business’s return on tangible equity would increase from 11% in 2024 to 16% in 2028, also taking into account the transformation plans planned for Santander UK.

The transaction is expected to generate synergies of 13% of the combined entity’s cost base, equivalent to at least $547.88 million before tax. Santander expects pre-tax restructuring costs in 2026 and 2027 to amount to $712.25 million.

For the group, the transaction would have a positive impact on earnings per share from the first year and 4% in 2028 and would entail a CET1 capital consumption of 50 basis points.

The group is expected to operate with a pro forma CET1 ratio of 13% at the end of 2025, taking into account the sale of 49% of Santander Polska and the corresponding share buyback in early 2026 announced on 5 May 2025, 3 as well as the acquisition of TSB.

Santander is one of the leading international investors in the UK financial sector, having successfully acquired and integrated Abbey in 2004, and Alliance & Leicester and Bradford & Bingley in 2008. The group has a proven track record in banking platform migration.

Committed to UK

Banco Santander President Ana Botín said that the acquisition is a further step in their commitment to the UK, and a financially attractive opportunity for their shareholders that is aligned with Santander’s long-term plans.

“Furthermore, it strengthens our presence in one of our core markets with the addition of a complementary, low-risk business that supports our diversification,” Ana said.

She also said that they were creating a stronger and more competitive bank, especially in products like personal checking accounts and transaction will accelerate Santander’s goal of increasing profitability and achieving a return on tangible equity of 16% by 2028.

“It also reflects our objective of growing profitably while maintaining discipline in capital allocation. This acquisition meets our goal of achieving returns on investment of over 20% and a positive impact on earnings per share from year one, with limited capital burn and low execution risk,” she added.