Santander takeover of TSB is boost to Reeves as she fights to keep Citys trust - Banco Santander

Santander’s takeover of TSB volition beryllium euphony to Rachel Reeves’ ears: sparing the under-pressure chancellor the imaginable embarrassment of having to explicate wherefore a large precocious thoroughfare lender had fixed up connected Britain.

On Tuesday night, Spanish-owned Santander said it would bargain TSB from its chap Spanish owner, Sabadell, for £2.65bn, ending months of speculation implicit the aboriginal of the British slope – and reaffirming Santander’s committedness to the UK.

Rumours had emerged successful January that Santander UK could propulsion retired of precocious thoroughfare banking, perchance reversing gains made successful stepping up its British beingness with the acquisition of Abbey National 2 decades earlier. Bosses had started slashing 2,000 jobs months earlier, fuelling speculation that it was trying to make a leaner concern that could lure imaginable suitors.

The chatter prompted panic, feeding into a increasing existential situation implicit whether allegedly burdensome regularisation was driving imaginable concern and overseas firms distant from the City – which was already losing banal marketplace listings and floats to overseas rivals .

Publicly, Santander repeated that the UK was a halfway market, with 14 cardinal customers served done 350 branches and 18,000 staff. But successful Madrid, executives led by enforcement seat Ana Botín, were said to beryllium progressively frustrated implicit UK regulations and costs that were dampening profitability.

That included post-financial situation rules specified arsenic ring-fencing, which support and abstracted user deposits from riskier operations including concern banking, but are criticised arsenic costly and analyzable by banks. Meanwhile, Santander’s frustrations were compounded by the car concern committee scandal, which could pb to a £1.9bn compensation measure for the bank’s aggrieved borrowers.

Reeves and her Labour government, however, appeared live to the threats.

Months earlier, the chancellor had ordered City watchdogs to bash much to beforehand maturation and competition, including by watering down fiscal situation regularisation that she claimed had “gone excessively far”. By precocious January, the chancellor was attempting to intervene successful a ultimate tribunal case implicit the car concern scandal, acrophobic it could curb lenders’ activities.

Days aft her involution emerged, Reeves met with Botín connected the sidelines of the World Economic Forum successful Davos, Switzerland. While successful the Swiss Alps, Botín declared: “We emotion the UK, it is simply a halfway marketplace and volition stay a halfway marketplace for Santander. Punto [full stop], that’s it.”

Speculation of its merchantability continued to swirl, but Santander yet enactment its wealth wherever its rima is: agreeing to bargain TSB from Spanish rival Sabadell successful a woody that could yet deed £2.9bn if the smaller bank’s profits conscionable forecasts.

For Santander, the takeover volition assistance fend disconnected contention from the likes of Nationwide Building Society, which has been nipping astatine the bank’s heels aft its ain £2.9bn acquisition of rival Virgin Money. It volition adhd 5 cardinal customers to its books, and marque Santander the fourth-largest owe supplier and third-largest slope successful presumption of idiosyncratic existent relationship deposits, down Lloyds and NatWest.

But for TSB, the aboriginal of its 5,000 unit and 175 branches is astatine stake. Santander volition person to see however to portion retired duplicate roles and branches and whether to scrap the 215-year past aged TSB brand, which could vanish from UK precocious streets aft the takeover.

Santander bosses told analysts connected Tuesday nighttime that they were alert of duplications, including “overlapping branches”.

Meanwhile, unions person been holding urgent talks with TSB to effort to get immoderate clarity for staff, who person been taxable to a tumultuous 12 years, marked by ownership upheavals and a disastrous IT meltdown that tarnished its estimation for years.

Hived disconnected from Lloyds Banking Group arsenic portion of state-aid rules aft its £20.3bn authorities bailout successful 2008, TSB again became a stand-alone marque and floated connected the London Stock Exchange successful 2014. It was delisted aft its takeover by Spanish lender Sabadell successful 2015, successful a large transverse borderline woody that the Treasury hailed arsenic a “vote of confidence” successful the UK.

But the enactment did not last. As soon arsenic 2020, Sabadell began exploring a merchantability of TSB aft the botched motorboat of a caller IT strategy 2 years earlier prompted a tech meltdown, locking millions of customers retired of their slope accounts. It caused a lawsuit exodus, enforcement resignations, fiscal losses and a £48m good from regulators.

Sabadell yet swallowed the losses, and was heartened by TSB’s recovery, adjacent rebuffing a £1bn attack by the Co-operative Bank successful 2022.

It took a hostile bid for Sabadell by Spanish rival BBVA for the slope to reconsider a sale, with proceeds from TSB’s merchantability owed to beryllium distributed among shareholders who it hopes volition spot little payment successful agreeing to the takeover.

But Sabadell’s nonaccomplishment could beryllium Santander’s gain, and supply a timely boost for Reeves arsenic she fights to support the spot of the City courted connected the predetermination run trail amid a gloomy economical outlook.