Santander UK will acquire TSB Banking Group from Banco de Sabadell for £2.65bn, the highstreet lender announced today (July 3).
The acquisition will see TSB’s 5 million customers join Santander UK bringing its total to 28 million real and business customers, significantly strengthening the bank’s position in the market.
Once the merger has taken place, Santander UK will become the third largest bank in the UK by current account balances (£35bn in deposits), fourth largest by mortgages (£34bn in mortgages).
TSB customers will gain access to Santander’s international network as well as benefitting from the group’s technology platforms, inclusive of the lenders’ cloud banking platform Gravity.
“This is an excellent deal for customers combining two strong and complementary banks, creating one of the most substantial banks in the UK and materially enhancing the competitiveness of the industry,” said Mike Regnier, CEO of Santander UK.
A capital advantage
While the acquisition is still subject to regulatory and Banco Sabadell shareholder approval, a completion is expected to settle in the first quarter of 2026.
Santander UK said the acquisition of TSB enables the bank to access low-risk mortgages and “high-quality deposits” as TSB offers different capabilities to enable its customers to perform deposits.
The deal would generate a return on invested capital of over 20%, according to Santander UK. It is expected the integrated business’s return on tangible equity would increase from 11% in 2024, to 16% by 2028.
The transaction is expected to generate cost synergies of 13% of the combined business’s cost base, equivalent to £400m in pre-tax, with the majority realised by 2027. To deliver these synergies, Santander UK aims to incur £520m of pre-tax restructuring costs during 2026-2027.
Market competitiveness
The acquisition will likely breed new competition across the UK banking sector, largely dominated by the ‘Big Four’: Barclays, HSBC, Lloyd’s and NatWest.
HSBC currently has the largest market share among the Big Four with an estimated £132.6bn, followed by Barclays in second (£38.3bn), Lloyd’s in third (£32.39bn), and NatWest in fourth (£32.36bn), according to statistics by Finder.
Despite Santander’s significantly smaller market share, the bank has carved itself a niche by focusing on mortgages (10.7%); this will only grow further with TSB.
Similarly to Santander UK, TSB has been placing more emphasis on its digital platforms, recognising the shift in consumer demands who prefer tailored banking solutions online.
By leveraging TSB’s technology, this could see the arrival of Santander’s digital-only bank Openbank to UK shores. However it will also be competing with digital challenger bank heavyweights such as Revolut, Monzo and Starling for market share and customers.
“At Santander UK we have momentum in our strategy to become the best bank for customers in the UK by investing in technology and service and improving our processes and efficiency,” added Regnier.
“This deal accelerates our transformation allowing us to enhance our customer proposition and invest more in innovative products and our digital offering, supported by the human touch service so many appreciate, not least in our new branch formats and enhancements across the country.”
