Sabadell chief rules out a fire sale of TSB
The chief executive of Spain’s Sabadell bank has said one of his first decisions on taking office this year was to rule out a fire sale of TSB but signalled he wants to keep his options open over the longer term future of the UK lender.
“As soon as I arrived, I said: “Look, calm down, this is a great asset . . . Let’s go slowly, let it flourish,’” said César González-Bueno, who took over at Sabadell in March after talks fell through last year for the Spanish lender to be acquired by its larger counterpart BBVA.
“[As regards] a fire sale [of TSB], which had been raised before I arrived, I told the board that in my opinion there was neither the opportunity nor the need to do it,” he said in an interview with the Financial Times, citing Sabadell’s “comfortable capital and solvency position”. He added: “That is where we are, that has not changed.” Sabadell rejected an unsolicited offer by the Co-operative Bank for TSB last month.
But, indicating that Sabadell may not rule out a TSB sale over the longer term, González-Bueno added: “no one should be a prisoner of their own words.”
Nick Slape, Co-op Bank chief executive, told the FT separately that TSB remained a “natural fit” with his lender, saying that the bank “stood out” in the sector. “We recognise and respect their position,” he said of Sabadell, adding: “We’re not looking at anything else, not having conversations with anyone else.”
González-Bueno said his priority was to continue to improve Sabadell’s results after a hefty round of restructuring in which 20 per cent of the workforce in Spain will lose their jobs over a year and more than a quarter of branches will close.
He added that TSB was now contributing around a fifth of group profits — in line with the proportion it represents of the bank’s assets. Sabadell’s share price has virtually doubled since the talks with BBVA collapsed almost a year ago, as the group steadily increased profits this year after chalking up a mere €2m for 2020.
But, asked whether his strategy for Sabadell included TSB — which the Spanish lender acquired for £1.7bn in 2015 — González-Bueno declined to give a Yes or No answer, instead pointing to the bank’s “vibrancy” and the “attractive” UK market.
He said there was little synergy between TSB and Sabadell, since in sectors such as retail and business banking, cross-border synergies were relatively scarce — and would remain so unless regulations became more harmonised.
After the merger talks with BBVA fell through, Sabadell had indicated a possible TSB sale by announcing a strategic review in which it said it would “prioritise its Spanish domestic business”.
Ultimately that review, which concluded when González-Bueno became chief executive, decided against rushing to offload TSB.
In terms of domestic tie-ups, although the failed talks with BBVA were preceded by half a decade in which Sabadell signalled its interest in a merger with another Spanish bank, González-Bueno stressed that the strategy was now to remain a standalone lender.
“I am not going to exaggerate our size but a balance sheet of €220bn is not a small bank,” he said. “Right now, our size favours us, because we are the fourth-biggest bank in Spain [after Santander, BBVA, and CaixaBank] and this means that our growth possibilities are more than the others.’”
He emphasised the group’s focus on relatively high margin business with small and medium companies and the possibility of expansion in Madrid, Spain’s richest region.
González-Bueno added: “We have been through the most perfect storm you can imagine: negative interest rates, enormous structural costs, and a notable lack of adaptation . . . We have been one of the slowest industries to digitalise.”
Now, he argued, “these three factors are turning around . . . Interest rates are going up . . . [even though] we are still denying in Europe that there is going to be inflation.”