Sabadell owned TSB once again on the block

  • November 28, 2020 11:52 AM GMT
  • Kunal Sawhney
    CEO Kunal Sawhney
    2226 Posts

    Kunal Sawhney is founder & CEO at Kalkine and is a richly experienced and accomplished financial professional with a wealth of knowledge in the Australian Equities Market. Kunal obtained a Master of Business Administration degree from University of T...

Sabadell owned TSB once again on the block

Summary

  • Spanish owner of TSB is mulling over selling the UK bank
  • Banco Sabadell, the owner, stated that it was focusing on a new strategy by prioritising its domestic Spanish business

The Spanish owner of TSB has prompted speculation of selling the UK bank, saying that it was considering the option. It could result in the third major sale of TSB, the loss-making lender, within a short span of seven years. Banco Sabadell bought TSB in 2015 for a sum of £1.7 billion.

The news came after the Sabadell bank scrapped merger talks on Friday, which began two weeks back, with its rival BBVA. Both the companies failed to mutually agree on a specific price. 

To Know More, Do Read: BBVA and Sabadell Put the Merger on Hold Due to Disagreement on Financial Terms 

Sabadell’s shares plummeted 13 per cent in Madrid after the news of the failed merger talks surfaced.

He Spanish bank stated that it would now be focusing on a new strategy by prioritising its domestic business. It would create value for the shareholders by adopting strategic alternatives, emphasised the bank. The group also confirmed that it would be publishing a detailed plan in the coming year. 

TSB Plan

TSB bank is the latest in the list of UK lenders to be potentially subjected to a sale. Recently, Cerberus, the US private equity fund had given a bid to the Cooperative Bank and Sainsbury’s Bank was approached by NatWest.

Goldman Sachs has been roped-in by Sabadell to launch a review of TSB that could result in complete disposal of the UK bank. Initially, in July this year, Sabadell had hired Goldman Sachs to explore various options for TSB. But now, it has been given the mandate to pursue a sale itself. 

Interesting Read: Is Sainsbury’s Bank Going to Be the First Major Acquisition of Natwest Since Its 2008 Bailout? 

Misadventure

In 2018, when the lender launched a new IT system, its reputation deteriorated after millions of customers could not sign into their bank accounts for weeks. Amid strong criticism from the MPs and the regulators, the then chief executive Paul Pester resigned within months. The Board of TSB was accused of lacking common sense in an independent review. The incident costed TSB £366 million, which included customer compensations. 

Financial and Operational Highlights

The profits of the UK bank, TSB were hard hit by the Covid-19 pandemic, affecting its performance. The core revenue for Q3 this year was recorded at €1.168 billion, down 7.87 per cent from the previous quarter. There was a decline of 74.1 per cent in the revenue of the bank for the first 9 months of the year, reporting €203 million (same period 2019: €783 million).

The bank had also disclosed its plans of shutting down 164 branches and cutting nearly 1,000 jobs. The slashing of jobs and closing of branches would have left the bank with nearly 6,000 employees and 290 branches.

 

 


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