TSB Sale: Are More UK Banking Acquisitions on the Horizon?

Banco de Sabadell, SA (Sabadell) reported that it had received interest from various entities in the acquisition of the entire share capital of TSB Bank plc (TSB), a move it is considering if it creates value for shareholders. Also, the media has reported NatWest Group plc (NatWest) decided not to bid for TSB, meanwhile Barclays PLC (Barclays) and Banco Santander, SA (Santander) are among potential interested.

Key highlights:
-- TSB, the UK predominantly retail banking subsidiary of Sabadell, could be the next in a nationwide move towards more consolidation across the banking sector.
-- Some UK lenders have been changing ownership recently and we see further room for banking consolidation in the UK.
-- Large UK banks in particular have the capacity to inorganically reinforce their domestic footprint thanks to their currently solid capacity to generate earnings and strong capitalisation levels.

"The potential sale of TSB fits a broader consolidation trend among UK banks, which face strategic pressures and regulatory costs", said Vitaline Yeterian, Senior Vice President, Sector Lead, European Financial Institution Ratings. "Looking ahead, we consider that UK banks will likely remain well positioned for non-organic growth opportunities because of solid earnings trajectory and strong capitalisation levels despite increased shareholders' returns".