TSB ready to step up challenge as bank agrees £1.7bn takeover by Spain giant

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TSB is preparing to beef up its challenge to Britain’s big four banks after agreeing to a £1.7bn takeover offer from Spain’s Banco de Sabadell.

The deal will see tens of thousands of small investors each pocket a typical £800 profit after the lender’s short-lived return to the stock market last June. TSB said it was one of the largest cross-border banking deals since the financial crisis. It will boost Spain’s hold on UK banking after Santander’s acquisition of Abbey, Alliance & Leicester and parts of Bradford & Bingley.

Chief executive Paul Pester said the takeover would add to its “firepower” in the banking sector where it styles itself as a challenger to the likes of Royal Bank of Scotland, Lloyds Banking Group, HSBC and Barclays.

Mr Pester, who will continue in his role, said: “Today’s offer by Sabadell to acquire TSB is a real vote of confidence in TSB, our 8,700 employees and the straightforward, transparent approach we’re bringing to banking in the UK.”

The deal is conditional upon clearance by the Bank of England’s Prudential Regulation Authority (PRA) but Mr Pester said: “We certainly don’t see any red flags or any issues at this stage.”

He indicated the likelihood was that such a deal might be expected to take “three to four months to progress”. TSB is expected to retain its name.

The Spanish bank’s chairman, Josep Oliu Creus, said it could “add more value” to TSB’s aim to bring more competition to the UK banking sector and help to speed up its expansion.

Sabadell signalled the possibility of further growth, saying: “The challenger bank market is relatively unconsolidated in the UK and Sabadell believes that this will create opportunities to further develop TSB’s market position over time.”

The deal will see investors receive 340p per share, a 31 per cent premium for those who bought the stock at 260p nine months ago.