By David Wighton in London and Christopher Bjork in Madrid
Spain's Banco de Sabadell SA agreed a GBP1.7 billion ($2.5
billion) takeover of TSB Banking Group PLC that could lead to
further consolidation among smaller "challenger" banks in the
U.K.
Josep Oliu Creus, Sabadell's chairman, said "it would be natural
to see some consolidation" in due course although he told a news
conference in London that the Spanish lender wasn't looking for
further opportunities now.
The bank's chief executive, Jaime Guardiola, told reporters in
Barcelona on Friday: "Evidently there could be room to do
transactions, from the position of challenger. I believe we will be
in a condition to grow."
Sabadell's acquisition of TSB has been privately welcomed by the
British government which is eager to see increased competition in
banking and has encouraged the growth of new challenger banks.
One senior official said the government was enthusiastic about
the deal which it hopes will lead to consolidation. "There is a
question of whether these banks are big enough on their own to
challenge the market leaders. They may need greater scale to have a
significant impact on competition," said the official. TSB has 4%
of checking accounts and 6% of U.K. bank branches.
The official pointed to the example of Sabadell's bigger Spanish
rival, Banco Santander SA, which has become a major force in U.K.
banking after building on its acquisition of Abbey National in
2004. It made further purchases of banks hit by the financial
crisis and is now the second largest mortgage lender in the U.K. In
total size it ranks behind the big four of Lloyds Banking Group
PLC, Royal Bank of Scotland Group PLC, Barclays PLC and HSBC
Holdings PLC.
The U.K. has seen the emergence of a number of smaller banks
since the financial crisis. These include Virgin Money Holdings PLC
and Aldermore Group PLC, both of which recently went public, and
Shawbrook Group Ltd, which has just announced plans for an initial
public offering. Adding to the list soon will be Williams &
Glyn, which is being spun out of RBS, and Yorkshire and Clydesdale
banks, which are being prepared for an initial public offering by
their owner, National Australia Bank Ltd.
Sabadell, Spain's firth-largest lender, has been an active
consolidator during the Spanish banking crisis, buying several
struggling lenders at deep discounts. But it has made few moves
outside its home market. Sabadell said the acquisition of TSB will
increase its assets outside Spain from 5% to 22% of the total.
Mr. Oliu said that Santander's success was an important factor
behind Sabadell's decision to enter the U.K. which was an
attractive banking market with margins similar to those in Spain
and higher than in other eurozone countries.
"TSB has enormous potential in the U.K. market. It is a
challenger and backed by us makes it even more of a challenger," he
said. Sabadell would be able to accelerate TSB's entry into the
small business banking market, he added.
TSB said it had agreed the terms, first revealed a week ago, of
a takeover at 340p a share. To maintain its key capital ratio, a
measure of financial strength, following the deal Sabadell said it
would raise E1.6 billion ($1.7 billion) in a rights issue. Lloyds,
which floated a minority stake in TSB at 260p a share last June,
said it would sell a 9.99% stake in TSB to Sabadell and has agreed
to accept the offer for its remaining 40% shareholding.
Sabadell plans to move TSB to its own Proteo IT platform and
predicted there would be annual pretax savings of GBP160 million in
the third full year after completion. Lloyds, which currently
provides IT services to TSB, is already committed to paying GBP450
million to help migrate TSB to a new platform.
Sabadell's shares rose 3% after Friday's confirmation of the
deal but were still 8% below where they were trading before the
announcement of the talks.
Following the takeover, Paul Pester, TSB's chief executive, and
Darren Pope, its chief financial officer, have agreed to stay in
the roles subject to agreeing personal terms. Mr. Pester will join
Sabadell's management executive committee. Will Samuel will remain
as TSB's independent chairman.
Write to Ian Walker at ian.walker@wsj.com
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