Madrid and London, 1 July 2025 — In a significant move within the European banking sector, Santander has announced an agreement to acquire TSB Banking Group plc from Banco de Sabadell, S.A. The all-cash transaction, valued at £2.65 billion (approximately €3.1 billion), marks a strategic expansion of Santander’s footprint in the UK market.
The acquisition of TSB, a well-established UK retail bank, will see Santander strengthen its customer proposition with TSB’s network of 218 branches and a growing digital presence. Serving around 5 million customers, TSB holds £34 billion in mortgages—representing a 2% market share in the UK—and £35 billion in deposits.
Strategic Expansion in the UK Market
This acquisition positions Santander to further solidify its presence in the UK, one of its core markets. By integrating TSB, Santander UK will become the third-largest bank by personal current account balances and the fourth-largest in mortgages. The merger will enable the combined entity to serve nearly 28 million retail and business customers nationwide.
TSB customers will gain access to Santander’s extensive international network and benefit from the group’s advanced technology platforms, enhancing their banking experience. This development follows Santander’s strategic focus on expanding its digital capabilities and customer reach.
Value Creation and Financial Impact
The merger is expected to deliver substantial value to Santander shareholders through increased market scale and operational efficiencies. The combined businesses will achieve a loan-to-deposit ratio of 107%, slightly improving from Santander UK’s current 108%.
The deal is projected to generate a return on invested capital of over 20%, with a target to raise the integrated business’s return on tangible equity from 11% in 2024 to 16% by 2028.
Cost synergies are anticipated to reach 13% of the combined business’s cost base, equating to at least £400 million pre-tax. However, to realize these synergies, Santander expects to incur £520 million in restructuring costs over 2026 and 2027.
At the group level, the transaction will be accretive to earnings per share from the first year, with an estimated increase of around 4% by 2028. The acquisition will consume approximately 50 basis points of CET1 capital, with Santander expected to maintain a CET1 ratio of about 13% by the end of 2025.
Proven Integration and Operational Efficiency
Santander has a robust track record of successful acquisitions in the UK financial services industry. Past integrations, including Abbey in 2004 and both Alliance & Leicester and Bradford & Bingley in 2008, highlight its capability to seamlessly merge banking platforms.
By leveraging technology across Santander UK and TSB, the bank aims to unlock significant operational efficiencies and support long-term profitability through a streamlined, scalable digital banking model. This approach aligns with Santander’s broader strategy to enhance digital transformation and customer service.
Implications and Future Outlook
The acquisition aligns with Santander’s strict capital hierarchy and does not impact its existing distribution policy. The bank’s 2025 objectives remain unchanged, underscoring its commitment to strategic growth without compromising financial stability.
Experts suggest that this move could set a precedent for further consolidation in the UK banking sector, as institutions seek to bolster their digital capabilities and customer bases. The transaction also reflects a broader trend of European banks expanding their footprint to remain competitive in a rapidly evolving financial landscape.
As Santander embarks on this new chapter, the integration of TSB is expected to enhance its market position and offer significant opportunities for growth and innovation in the UK banking industry.
