Santander has just splashed out £2.65 billion in cash to buy TSB.
The Spanish bank’s move for TSB is a classic play for scale. It’s not flashy, it’s not transformative, and it certainly isn’t cheap, but it gives Santander UK a bigger chunk of the market and a clear path to third place in current account balances. That seems to be the point.
TSB brings 5 million customers, £34 billion in mortgages and £35 billion in deposits. Sabadell has been trying to offload TSB for years, and Santander finally decided the price was right.
The pitch is predictable, efficiency, synergy, and tech-led transformation. Santander says it’ll squeeze out £400 million in cost savings and lift UK returns from 11% to 16% over four years. There’s also the promise of a lift to earnings from year one, the sort of upbeat forecast that always shows up on deal day, whether or not it holds up.
But Santander isn’t buying growth, it’s buying mass. This is about sweating the existing footprint harder, not changing the game. And while the talk of “digital innovation” and “customer proposition” ticks the right boxes, it’s hard to see what TSB offers that Santander doesn’t already have. That may be part of the logic, but it doesn’t make the integration any simpler.
The capital hit, 50 basis points of CET1, won’t thrill everyone, though the bank insists the dividend policy is untouched. Investors didn’t rush to celebrate; shares nudged down slightly in Madrid.
This isn’t a strategic gamble, nor is it a desperate rescue. It’s a tidy, defensive move to consolidate position in a stagnant UK banking market. The real question is whether the cost savings materialise without turning into another branch-cutting, job-shedding exercise dressed up as digital progress.