Banco Sabadell Buys British Bank TSB

Banco Sabadell Buys British Bank TSB

Banco Sabadell Buys British Bank TSB

Spain’s banking sector is now in recovery mode after undergoing an in-depth restructuring to streamline the number of lenders, clean up their balance sheets and boost their capital base.

And what better proof of the sector’s strength than Catalonia-based Banco Sabadell’s recent takeover of Britain’s Trustee Savings Bank (TSB).

The around 1.7 billion pounds acquisition will enable Sabadell to follow in the footsteps of Spain’s two largest banks Santander and BBVA and break into the British market via a retail bank. TSB is the sixth-largest bank in the UK and Sabadell’s buy marks one of the biggest cross-border banking deals since the financial crisis.

So a feather in the cap for one of Spain’s top lenders!

TSB was bought by Lloyds Bank 20 years ago, but was revived as a separate brand after the EU demanded Lloyds Banking Group spin off 631 branches as a condition of its £20bn bailout by taxpayers in 2008. Lloyds listed part of TSB in 2014 and has agreed to sell its remaining 50 percent stake to Sabadell.

 

SABADELL GROWS ITS FOOTPRINT ABROAD

Sabadell has always been one of Spain’s healthiest banks even at the height of the crisis.

Unlike the majority of the country’s ailing savings banks, Sabadell’s bad loans as a percentage of total lending remained relatively contained. It also implemented a strict cost containment policy.

In 2014, the bank posted a 50 percent rise in profits to 371.7 million euros, with assets worth 161.5 billion. It has doubled in size since 2007 thanks to an aggressive acquisition drive at home and abroad.

Before its swoop on TSB’s UK operations, it had already bought the LloydsTSB network in Spain and Miami, as well as NatWest Spain. Sabadell will finance the TSB takeover with a 1.6 billion euros capital increase. The rest of the funds needed to seal the deal will come from the bank itself.

 

RISING CONFIDENCE IN SPANISH BANKS

In October 2014, Spanish banks sailed through the European Central Bank’s stress tests, with healthy balance sheets and solid solvency ratios.

And as the economy continues to recover, their profitability is expected to improve as lending to private individuals and companies also picks up.

In February, ratings agency Standard and Poor (S&P) expressed its confidence in the future of Spanish banks, citing their lower risk profile and a gradual decline in bad loans’ provisioning. Added to that, stronger balance sheets will enable the banks to continue to expand their operations in Spain and abroad.

Sabadell chairman Josep Oliu has not ruled out participating in further consolidation deals in the UK banking sector.

For information on investment in Spain, contact corporate law firm Argali Abogados.

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