TSB will remain a tasty morsel for somebody

TSB ISN’T changing hands — yet.

Co-op Bank this morning confirmed weekend reports that it had made an audacious tilt for TSB. The rumoured £1 billion bid was rejected by TSB’s Spanish owner Sabadell. Talks failed to get off the ground and that’s that.

TSB remains in Spanish hands for now then, but an eventual sale seems inevitable. Scale is crucial in banking and TSB simply doesn’t have it. It’s a minnow compared with High Street giants like Lloyds, its former owner.

Sabadell bought TSB in 2015 as part of a planned push into the UK but that plan failed to materialise. TSB was hit by serious IT problems in 2018 that sucked time and resources.

Sabadell lost interest and moved its focus elsewhere. The bank announced plans to focus on Spain last year and put TSB on the block.

The only reason it didn’t entertain Co-op’s offer is because TSB has become a key source of profit since then. The UK’s booming mortgage market and strong economic recovery means TSB has accounted for around a quarter of Sabadell’s overall group profits in recent quarters. That is not something any CEO would want to get rid of.

Still, this is just a stay of execution for TSB. With appetite to expand gone, Sabadell will surely look to offload the mid-tier player to someone who can make better use of it.

“If at some point, there is a buyer interested at a later stage, we are open to it,” Sabadell’s CEO Cesar Gonzalez-Bueno said in summer. “Right now, we don’t even want to hear about it.”

Don’t write off the Co-op deal just yet...