TSB has agreed a takeover by Spain’s Banco de Sabadell in a move that will see the Spanish firm pay £1.7bn to buy the recently relaunched bank.
Hasn’t TSB just become independent?
The bank relaunched in September 2013 after being spun off by its parent company Lloyds. The move was forced by the EU following the injection of government cash during the financial crisis.
More than 4.6 million customers were transferred to the new bank, and 631 branches became TSBs. Since then, the bank has been offering high rates of interest on its current account and relaunched its mortgage range through brokers. In 2014, it won 500,000 customers to its current accounts.
Will things change for customers?
The bank says it is business as usual during the takeover.
“There’s no need for you to do anything differently. We will continue to focus on giving you the service you want from your bank,” TSB said in a statement on its website. It added that TSB and Sabadell “share similar values”.
Kevin Mountford, head of banking at MoneySuperMarket, said that while it was early days, the takeover was unlikely to impact customers – “at least in the short-term”. He added: “It is likely TSB will remain a UK-based entity and continue to be covered by the Financial Services Compensation Scheme.
“However, with Banco Sabadell’s investment, TSB can grow further and generate much-needed competition, particularly in the retail and small- and medium-sized enterprises space.”
What will it all mean for TSB’s products and services?
No changes are imminent. It’s possible that having the muscle and money of a major Spanish bank behind it means TSB will be able to launch some best-buy products. At the moment, many of its savings accounts aren’t particularly competitive in terms of rate. For example, its Cash Isa Saver and eSavings account both pay 0.75%, while Easy Saver pays 0.5%, which includes an interest bonus.
However, TSB is offering quite a good deal on current accounts: its Classic Plus offering pays an impressive 5% on balances up to £2,000, provided you pay in a minimum of £500 a month and register for internet banking, paperless statements and paperless correspondence.
“Overall apart from the credit interest on the current account, the offerings are pretty standard and rarely trouble the best buys,” said Andrew Hagger at Moneycomms. “It will be interesting to see if the new Spanish bank is as aggressive as Santander, which is winning lots of switching business with its 123 current account.”
Some might argue that being owned by a Spanish bank could be good news for TSB customers and competition generally. Back in the early 2000s, Abbey National couldn’t seem to do anything right – it was dubbed “Shabby Abbey” or “Shabby National”. Then, in 2004, Santander took it over and started turning the business around. There were some problems with customer service, but some strong mortgage and savings products were launched.
Doesn’t Lloyds own some of it?
Yes, Lloyds currently has a 50% stake in TSB – it owned it outright but was forced to start selling it off after its multibillion-pound taxpayer bailout during the financial crisis. It has agreed to the deal.
What about individual shareholders?
Around 10% of shares in TSB are held by private investors who bought them at £2.60 each when the bank floated in June 2014.
Laith Khalaf, senior analyst at Hargreaves Lansdown says investors stand to get a windfall of up to £129.20 as well as the profit on selling shares at the £3.40 offered by Banco de Sabadell.
He said: “The shares were promised on the basis of one bonus share for each 20 ordinary shares bought in the float, subject to a maximum of 38 bonus shares per investor. These become fully payable in cash, if the deal goes through, at a price of £3.40 per share. So the maximum windfall from these shares would be £129.20.”
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