REG - Banco Santander S.A. - Santander to acquire TSB. Analysts meeting notice

Banco Santander SAAnnouncement

Tue 18:30

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RNS Number : 3044P  Banco Santander S.A.  01 July 2025

Santander to acquire TSB from Sabadell

for £2.65 billion

 

·    The all-cash transaction values TSB at 5x 2026 earnings(( 1  (#_ftn1)
)) post identified cost synergies and 1.45x tangible book value as of 31 March
2025(( 2  (#_ftn2) )).

·    The acquisition would strengthen Santander's position in the UK.
Santander intends to integrate TSB in the Santander UK group, enabling it to
become the third largest bank in the country by personal current account
balances.

·    The transaction is expected to generate a return on invested capital
of over 20%, thereby contributing to an increase in Santander UK's return on
tangible equity from 11% in 2024 to 16% in 2028, in line with leading UK
peers, with cost synergies of at least £400 million or 13% of the combined
business's cost base.

·    The acquisition is expected to result in earnings per share accretion
for Santander from the first year and of c.4% in 2028 while consuming 50 basis
points of CET1 capital at closing. The transaction is consistent with
Santander's strategy to carry out bolt-on acquisitions to accelerate organic
growth in its core markets while adhering to Santander's strict capital
hierarchy.

·    The transaction will not affect Santander's distribution policy and
2025 targets. The group remains on track to deliver at least €10 billion in
share buybacks from 2025 and 2026 earnings and excess capital over an
accelerated timetable than originally planned(( 3  (#_ftn3) )).

·    The transaction remains subject to regulatory approvals and Sabadell
shareholder approval.

Madrid and London, 1 July 2025 - PRESS RELEASE

Santander announces that it has reached an agreement to acquire 100% of TSB
Banking Group plc (TSB) from Banco de Sabadell, S.A. (Sabadell), with a
valuation of £2.65 billion (approximately €3.1 billion) in an all-cash
transaction.

Strengthened customer proposition

TSB is a well-established UK retail bank with a nationwide network of 218
branches and outlets, and a growing digital presence. It serves approximately
5 million customers, primarily in the personal and small business segments,
with £34 billion in mortgages (2% market share in the UK) and £35 billion in
deposits.

The acquisition further strengthens Santander's position in one of its core
markets, expanding its customer base and lending capacity across the UK.
Santander UK would become the third largest bank in the country by personal
current account balances and number four in mortgages.

When combined, the two banks would serve nearly 28 million retail and business
customers nationwide, giving TSB customers access to Santander's international
network and allowing them to benefit from the group's leading technology
platforms.

Clear path to value creation

The combination of the two high quality franchises would deliver substantial
value to Santander shareholders through increased in-market scale, greater
access to low-risk mortgages and high-quality deposits, and operational
efficiencies. The combined businesses would have a loan-to-deposit ratio of
107% versus 108% for Santander UK currently.

The deal would generate a return on invested capital of over 20% and bring the
business closer to Santander UK's productivity and efficiency standards. When
coupled with our transformation plans for Santander UK, it is expected the
integrated business's return on tangible equity would increase from 11% in
2024 to 16% by 2028.

The transaction is expected to generate cost synergies of 13% of the combined
business's cost base, equivalent to at least £400million pre-tax. To deliver
these synergies, Santander expects to incur £520 million of pre-tax
restructuring costs during 2026 and 2027.

At Santander group level, the transaction would be accretive to earnings per
share from the first year and of c.4% by 2028 and consume approximately 50
basis points of CET1 capital. Santander is expected to operate with an
approximately 13% CET1 ratio at year-end 2025 on a pro forma basis for both
the sale of 49% of Santander Polska and associated share buyback in early 2026
announced on 5 May 2025(3), and the acquisition of TSB.

The transaction is consistent with Santander's strict capital hierarchy and
will not affect the existing distribution policy. Santander's 2025 objectives
remain unchanged.

Proven integration capability

Santander is one of the largest international investors in the UK financial
services industry, having successfully acquired and integrated Abbey in 2004
and both Alliance & Leicester and Bradford & Bingley in 2008. It has a
proven track record in successful banking platform migrations.

By integrating technology across Santander UK and TSB, Santander expects to
unlock substantial operational efficiencies and support long-term
profitability through a simplified, scalable digital banking model.

 

 

Commenting on the transaction, Ana Botín, Banco Santander's executive chair,
said:

"The acquisition of TSB represents a continuing strategic commitment to our
customers in the UK, offering a compelling opportunity that is financially
attractive to our shareholders and aligned with Santander's long-term
objectives. It strengthens our franchise in a core market through the
acquisition of a low-risk and complementary business that adds to our
diversification.

We are creating a stronger and more competitive business across key products
such as personal current accounts where the combined business will become the
third largest bank in the UK by market share.

The transaction will accelerate our path to greater profitability in the UK
and helps achieve a return on tangible equity of 16% by 2028.

The acquisition also reflects our commitment to growing profitably through
disciplined capital allocation. This acquisition meets our goal of achieving a
return on investment above 20% and EPS accretion from year 1, while consuming
limited capital and having low execution risk.

Furthermore, the transaction will not affect Santander's existing distribution
policy and 2025 targets."

 

 

Commenting on the benefits for Santander UK and TSB customers, Mike Regnier,
CEO of Santander UK, said:

"This is an excellent deal for customers combining two strong and
complementary banks, creating one of the most substantial banks in the UK and
materially enhancing the competitiveness of the industry.

"At Santander UK we have momentum in our strategy to become the best bank for
customers in the UK by investing in technology and service and improving our
processes and efficiency. This deal accelerates our transformation allowing us
to enhance our customer proposition and invest more in innovative products and
our digital offering, supported by the human touch service so many appreciate,
not least in our new branch formats and enhancements across the country.

"We are fully committed to ensuring a seamless integration, by leveraging our
market leading technology and significant experience. Maintaining the highest
levels of service for customers across both banks will be a key priority and
we will support all colleagues through the transition, as we invest in
building a stronger bank for the future".

The transaction remains subject to regulatory approvals and Sabadell
shareholder approval. Completion of the transaction is expected to occur in
the first quarter of 2026.

 ends 

 

Analysts call

A follow-up call has been scheduled for today, 1 July 2025, at 7.45 pm (CEST).
You can find the registration details for both the interactive conference
call (https://grid.trustwavetechnology.com/santander/register.html)  (Q&A
enabled) and the listen-only audiocast
(https://wavedw.santandergroup.net/WS/CallAnalistas/?ln=EN) .

Important information

 

Non-IFRS and alternative performance measures

 

This document contains financial information prepared according to
International Financial Reporting Standards (IFRS) and taken from our
consolidated financial statements, as well as alternative performance measures
(APMs) as defined in the Guidelines on Alternative Performance Measures issued
by the European Securities and Markets Authority (ESMA) on 5 October 2015, and
other non-IFRS measures. The APMs and non-IFRS measures were calculated with
information from Grupo Santander; however, they are neither defined or
detailed in the applicable financial reporting framework nor audited or
reviewed by our auditors. We use these APMs and non-IFRS measures when
planning, monitoring and evaluating our performance. We consider them to be
useful metrics for our management and investors to compare operating
performance between periods. APMs we use are presented unless otherwise
specified on a constant FX basis, which is computed by adjusting comparative
period reported data for the effects of foreign currency translation
differences, which distort period-on-period comparisons. Nonetheless, the APMs
and non-IFRS measures are supplemental information; their purpose is not to
substitute IFRS measures. Furthermore, companies in our industry and others
may calculate or use APMs and non-IFRS measures differently, thus making them
less useful for comparison purposes. APMs using ESG labels have not been
calculated in accordance with the Taxonomy Regulation or with the indicators
for principal adverse impact in SFDR. For further details on APMs and Non-IFRS
Measures, including their definition or a reconciliation between any
applicable management indicators and the financial data presented in the
consolidated financial statements prepared under IFRS, please see the 2024
Annual Report on Form 20-F filed with the U.S. Securities and Exchange
Commission (the SEC) on 28 February 2025
(https://www.santander.com/content/dam/santander-com/en/documentos/informacion-sobre-resultados-semestrales-y-anuales-suministrada-a-la-sec/2025/sec-2024-annual-20-f-2024-en.pdf),
as well as the section "Alternative performance measures" of Banco Santander,
S.A. (Santander) Q1 2025 Financial Report, published on 30 April 2025
(https://www.santander.com/en/shareholders-and-investors/financial-and-economic-information#quarterly-results).
Underlying measures, which are included in this document, are non-IFRS
measures.

 

The businesses included in each of our geographic segments and the accounting
principles under which their results are presented here may differ from the
businesses included and local applicable accounting principles of our public
subsidiaries in such geographies. Accordingly, the results of operations and
trends shown for our geographic segments may differ materially from those of
such subsidiaries.

 

Forward-looking statements

 

Santander hereby warns that this document contains "forward-looking
statements" as per the meaning of the U.S. Private Securities Litigation
Reform Act of 1995. Such statements can be understood through words and
expressions like "expect", "project", "anticipate", "should", "intend",
"probability", "risk", "VaR", "RoRAC", "RoRWA", "TNAV", "target", "goal",
"objective", "estimate", "future", "ambition", "aspiration", "commitment",
"commit", "focus", "pledge" and similar expressions. They include (but are not
limited to) statements on future business development and shareholder
remuneration policy.

 

While these forward-looking statements represent our judgement and future
expectations concerning our business developments and results may differ
materially from those anticipated, expected, projected or assumed in
forward-looking statements.

 

In particular, the important factors below (and others described elsewhere in
the documents mentioned above), as well as other unknown or unpredictable
factors, could affect our future development and results and could lead to
outcomes materially different from what our forward-looking statements
anticipate, expect, project or assume: (a) general economic or industry
conditions (e.g., an economic downturn; higher volatility in the capital
markets; inflation; deflation; changes in demographics, consumer spending,
investment or saving habits; and the effects of the wars in Ukraine and the
Middle East or the outbreak of public health emergencies in the global
economy) in areas where we have significant operations or investments; (b)
climate-related conditions, regulations, targets and weather events (c)
exposure to market risks (e.g., risks from interest rates, foreign exchange
rates, equity prices and new benchmark indices); (d) potential losses from
early loan repayment, collateral depreciation or counterparty risk; (e)
political instability in Spain, the UK, other European countries, Latin
America and the US; (f) legislative, regulatory or tax changes (including
regulatory capital and liquidity requirements), especially in view of the UK's
exit from the European Union and greater regulation prompted by financial
crises; (g) acquisition integration and challenges arising from deviating
management's resources and attention from other strategic opportunities and
operational matters; (f) uncertainty over the scope of actions that may be
required by us,

governments and other to achieve goals relating to climate, environmental and
social matters, as well as the evolving nature of underlying science and
industry and governmental standards and regulations; (g) our own decisions and
actions, including those affecting or changing our practices, operations,
priorities, strategies, policies or procedures; and (h) changes affecting our
access to liquidity and funding on acceptable terms, especially due to credit
spread shifts or credit rating downgrade for the entire group or core
subsidiaries.

 

Forward looking statements are based on current expectations and future
estimates about Santander's and third-parties' operations and businesses and
address matters that are uncertain to varying degrees, including, but not
limited to developing standards that may change in the future; plans,
projections, expectations, targets, objectives, strategies and goals relating
to environmental, social, safety and governance performance, including
expectations regarding future execution of Santander's and third parties'
energy and climate strategies, and the underlying assumptions and estimated
impacts on Santander's and third-parties' businesses related thereto;
Santander's and third-parties' approach, plans and expectations in relation to
carbon use and targeted reductions of emissions; changes in operations or
investments under existing or future environmental laws and regulations; and
changes in government regulations and regulatory requirements, including those
related to climate-related initiatives.

 

Forward-looking statements are therefore aspirational, should be regarded as
indicative, preliminary and for illustrative purposes only, speak only as of
the date of this document, are informed by the knowledge, information and
views available on such date and are subject to change without notice.
Santander is not required to update or revise any forward-looking statements,
regardless of new information, future events or otherwise, except as required
by applicable law. Santander does not accept any liability in connection with
forward-looking statements except where such liability cannot be limited under
overriding provisions of applicable law.

 

Not a securities offer

 

This document and the information it contains does not constitute an offer to
sell nor the solicitation of an offer to buy any securities.

 

Past performance does not indicate future outcomes

 

Statements about historical performance or growth rates must not be construed
as suggesting that future performance, share price or results (including
earnings per share) will necessarily be the same or higher than in a previous
period. Nothing in this document should be taken as a profit and loss
forecast.

 

 

 1  (#_ftnref1) Based on consensus 2026 earnings.

 2  (#_ftnref2) Based on TSB's 31 March 2025 Tangible Net Asset Value of
£1,826 million.

 3  (#_ftnref3) As announced on 5 February 2025, the board intends to allocate
€10bn to shareholder remuneration in the form of share buybacks,
corresponding to the 2025 and 2026 results, as well as to the expected excess
capital. This share buyback target includes: (i) buybacks that are part of the
existing shareholder remuneration policy outlined below, and (ii) additional
buybacks following the publication of annual results to distribute year-end
excesses of CET1 capital. The ordinary remuneration policy for the 2025
results, which the board intends to apply, will remain the same as for the
2024 results, consisting of a total shareholder remuneration of approximately
50% of the Group's reported profit (excluding noncash and non-capital ratios
impact items), distributed in approximately equal parts between cash dividends
and share buybacks. On 5 May 2025 when announcing the agreement for the sale
of 49% of Santander Polska, Santander announced that it intended to distribute
in early 2026 50% of the capital released from that disposal upon completion,
equivalent to approximately €3.2 billion of share buybacks as part of the
referred additional buybacks. The execution of the shareholder remuneration
policy and share buybacks to distribute the excess CET1 capital is subject to
corporate and regulatory approvals.

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