Sabadell rises 4% after agreeing to sell TSB to Santander for £2.9 bln

Investing.com -- Shares in Banco Sabadell (BME:SABE) rose 4% on Wednesday after the bank on Tuesday said it had agreed to sell its U.K. unit, TSB, to Banco Santander (BME:SAN) for up to £2.9 billion, subject to shareholder approval. The all-cash deal is expected to close in the first quarter of 2026.

The proposed sale will be submitted for approval at a General Shareholders’ Meeting on August 6. The agreed price is based on a £2.65 billion valuation as of March 31, 2025, representing 1.5 times TSB’s book value. 

The final price will be adjusted to include estimated profits from April 1, until completion, bringing the expected total to £2.9 billion.

Proceeds from the transaction will fund an extraordinary dividend of €0.50 per share, equivalent to approximately €2.5 billion. 

This is in addition to €1.3 billion in ordinary dividends expected from 2025 earnings, bringing total shareholder remuneration to €3.8 billion over the next 12 months. The extraordinary dividend will be paid to shareholders of record upon completion.

Chairman Josep Oliu said the sale creates “significant value” for shareholders and allows the bank to maintain a capital ratio above 13%. 

He also confirmed that the transaction will go ahead if approved, regardless of whether BBVA’s takeover bid is withdrawn.

Chief executive César González-Bueno called the sale a “strategic opportunity,” adding that Sabadell will now focus on its domestic market. 

“We will now focus our strategy on Spain, where we see significant growth potential in both business terms and share price performance relative to peers,” he added.

Sabadell acquired TSB in 2015 for £1.7 billion. Since then, TSB has expanded its loan book from £26.4 billion to £36.4 billion, reduced its cost-income ratio from 80% to 67%, and improved its return on tangible equity from 5.3% to 12.5%.

Over the past decade, Sabadell has received €559 million in dividends from the unit.

Under the deal, Sabadell will transfer £1.45 billion in TSB debt securities, comprising perpetual convertible bonds, subordinated debt, and senior unsecured bonds, at fair value. 

The bank has also agreed not to compete in the U.K. retail market for 24 months post-completion but will retain a U.K. branch for corporate clients through its Corporate & Investment Banking division.

TSB CEO Marc Armengol said the bank, which serves more than 5 million customers, is entering a “new chapter” as part of Santander.