TSB future uncertain as merger deal is scrapped

The future of Britain’s TSB challenger bank is uncertain after a merger between its Spanish parent company Sabadell and the giant Spanish financial services company BBVA was scrapped.

Sabadell and BBVA were in serious merger talks less than a fortnight ago, but now the deal has folded because they couldn’t agree a price.

Strategic alternatives

A Sabadell spokesman said the bank would now seek ‘strategic alternatives for creating value with regard to the group’s international assets, including TSB’.

It did not make clear whether or not that would mean selling TSB, which it brought from Lloyds Banking Group (LBG) in 2015.

The former Lloyds TSB Bank was split in 2013 as part of the deal for the government bail-out in 2008. TSB was set up as a new, challenger bank.

Good momentum

A TSB spokesman said the bank had ‘good momentum’ in its business growth as well as major progress in ‘taking full control of our IT, delivering a right-sized modern branch network and reducing overall operating costs’.

IT failures have plagued TSB in recent years, most notably the IT meltdown in 2018 which left up to 1,9 million of its customers unable to use online banking services for weeks and cost the bank £330 million in customer compensation, fraud losses and other expenses.

Crash

The crash occurred when a planned migration of data from Lloyds to Sabadell went disastrously wrong. A later investigation found it had not been properly tested before ‘going live’.

In January TSB signed a deal with the US computing giant IBM to run its online banking, systems and cash machines.

Branch closures

In common with most of the other high street banks, TSB has been undertaking a series of branch closures as customers shift their business away from the traditional branch route to take it online.

In September it announced the closure of 164 branches with the loss of 960 jobs, citing ‘a significant shift in customer behaviour’. From the end of next year it will have 290 branches nationwide.

Focus

Sabadell has announced it will reveal its plans on the way forward early next year, but its decision to focus on its Spanish business suggests that TSB may well be sold.

It is Spain’s fifth largest bank and if the merger with BBVA had goner ahead it would have leap-frogged to second place after Caixabank-Bankia.