Sabadell will pay 340p a share, far above the 260p price at which TSB floated on the London Stock Exchange last June. Shares in TSB rose 1.8% on Friday morning to 332.9p, making them the biggest riser on the FTSE 250. The terms are the same as those unveiled last week when the two banks made the surprise announcement.
Sabadell has agreed to buy a near-10% stake in TSB from Lloyds, and Lloyds has given an irrevocable undertaking to accept the offer for its entire remaining 40% shareholding in TSB.
TSB sees itself as a challenger to the UK’s four big banks: Lloyds, Royal Bank of Scotland, Barclays and HSBC. Sabadell believes it can speed up TSB’s retail growth strategy – from selling mortgages to gaining current account customers – and its expansion into the small-business lending market. TSB signed up half a million new banking customers last year, winning one in 12 of all new, or switched, bank accounts.
TSB’s chief executive, Paul Pester, said Sabadell’s offer was a “real vote of confidence in TSB, our 8,700 employees and the straightforward, transparent approach we’re bringing to banking in the UK”.
Lloyds’ chief executive, António Horta-Osório, said: “This is a significant and positive step for the group and will enable us to meet our commitments to the European commission, well ahead of its mandated deadline.”
The commission ordered Lloyds to sell off the TSB branches, code-named Verde, after its £20bn taxpayer bailout during the financial crisis.
Lloyds said it would use the proceeds from the sale of its TSB stake – estimated at £850m – for “general corporate purposes”. It will take a £640m charge on the transaction, most of it related to the cost of moving TSB on to an independent IT system, for which Lloyds set aside £450m. TSB still rents its IT systems from its parent company and could continue to do so, or claim the IT dowry.
The takeover will give Sabadell its first European business outside Spain. The chair, Josep Oliu Creus, said: “We see the UK as an attractive market with a strong regulatory framework, sound macroeconomic fundamentals and exciting prospects for growth.”
Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said the deal is good news for both UK consumers and businesses, “with the new TSB adding competitive vigour to the UK market place”. He added: “Concerns regarding its reliance on Lloyds’ systems could be removed that bit quicker, whilst TSB’s immunity from historical mis-selling charges and other legacy issues, with former outright owner Lloyds shouldering responsibility, offering Sabadell additional incentive.”
Looking at what it means for Sabadell, he said: “Sabadell joins Spanish rival Santander in competing for market share in the UK’s competitive mortgage market. The move by Sabadell expands its international diversification at a time when banks are generally still retreating from overseas markets.”
Sabadell - founded in 1881, now Spain’s fifth largest bank
Banco Sabadell, the Catalan bank buying TSB, is one of the few banks to emerge stronger from a financial crisis which has redrawn Spain’s banking sector.
Unlike many of its Iberian rivals, the bank is in good shape. Sabadell, founded in 1881 with the aim of financing local industry, reported a 50% increase in annual profits at the end of 2014 to €371.7m (£263m).
Since 2007 it has doubled in size and is now Spain’s fifth largest bank. It achieved this mainly through an energetic programme of acquisitions in Spain and abroad. It has already acquired the Lloyds TSB network in Spain and Miami, as well as NatWest Spain and the private banking business of its larger Spanish competitor BBVA in the US.
At the end of 2014, Banco Sabadell Group’s assets were valued at €161.5bn. It has a network of 2,320 branches – 53 of them outside Spain – and 6.4 million customers.
Restructuring has changed the face of Spanish banking, with the majority of savings banks either being swallowed up by other entities or having disappeared altogether. The most notable was Caja Madrid, now Bankia, which carries a heavy burden of toxic property assets built up in the boom of the previous decade.
However, in January the ratings agency Standard & Poor’s declared itself “relatively optimistic” about Spanish banking, which has reduced its debts and begun to recover profitability. The agency said most of the restructuring had been done and it didn’t expect any major changes this year.
The agency Fitch also predicted stability for the sector, although it said profitability would be low and there were risks due to the large quantity of “problematic assets”.
Profits rose by 25.7% at Spain’s second-largest bank BBVA in 2014 while Banco Santander’s were up 32%. Since the start of 2014 Banco Popular has been back in the black after finishing 2012 with debts of €2.4bn. Meanwhile, CaixaBank nearly doubled its profits last year to €620m.
This article was written by Julia Kollewe, for theguardian.com on Friday 20th March 2015 08.26 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010