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Categorized | Banks, Financial

Sabadell’s TSB takeover gets UK go-ahead

Posted on June 30, 2015

A branch of TSB©Bloomberg

TSB’s takeover by Banco Sabadell’s has been given the regulatory seal of approval, paving the way for the UK challenger to break into the small business banking market.

The UK’s city watchdogs approved the £1.7bn takeover on Tuesday, nearly four months after Spain’s fifth-largest lender originally struck the deal to acquire TSB.

    The move will bolster TSB as a so-called challenger to the largest high-street banks, while providing a route for Sabadell into the UK retail banking sector, in a sign that further consolidation is on the cards.

    Harriet Baldwin, the city minister, said the acquisition is “a vote of confidence in Britain’s economy and the stronger and safer banking system that we’ve built since 2010”.

    Sabadell will pay 340p a share in cash, up from the 260p price at which the challenger floated in June last year.

    The takeover is part of Sabadell’s strategic plan to “internationalise” in attempt to diversify away from Spain. Following the acquisition, some 22 per cent of the bank’s assets will be held outside Spain, compared with 5 per cent at present.

    Josep Oliu, Sabadell chairman, said: “This is a milestone that enables us to enter a market with vast opportunities.”

    Sabadell’s focus on small business lending in Spain will help TSB to launch into the equivalent UK sector. Ms Baldwin added: “We particularly welcome Sabadell’s focus on growing lending to smaller businesses and strengthening TSB’s position as a strong and effective challenger in the UK banking sector.”

    Paul Pester, chief executive of TSB, said the “extra firepower” and “fresh perspective” will help the bank grow faster and provide a more viable challenger to the UK’s “big five”.

    TSB unveiled a sweeping board reshuffle followed the sign off from the Prudential Regulation Authority and Financial Conduct Authority.

    Philip Augar, Norval Bryson and Mark Fisher will step down as non-executive directors of TSB, while Miguel Montes and Tomás Varela, who occupy senior management roles at Sabadell, join the board.

    Lloyds Banking Group was forced to carve out 631 branches to form TSB as a standalone “challenger” as a condition of EU law for receiving state aid during the financial crisis.

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    The regulatory clearance means Lloyds has effectively completed the sale of its remaining 40 per cent stake in TSB, amounting to £680m.

    Under the terms of the deal, Lloyds must pay £450m to migrate TSB’s technology systems. Sabadell said it expects that the contribution will be more than sufficient to meet the costs of the IT migration on to Sabadell’s platform.