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What the TSB takeover means for customers

Kit Klarenberg
Written By:
Kit Klarenberg
Posted:
Updated:
23/03/2015

As reported by Your Money on Friday, Sabadell will purchase challenger bank TSB in a £1.7bn deal. In this article, Your Money investigates what the takeover will mean for TSB customers and shareholders – and for the bank.

What does the takeover mean for TSB customers?

TSB has been very clear that it will very much be business as usual before, during and after the takeover. “There’s no need for our customers to do anything differently,” said a spokesperson for the bank in a statement issued on Friday. “We will continue to focus on giving you the service you want from your bank.”

“The takeover is unlikely to impact customers – at least in the short-term,” said Kevin Mountford of MoneySuperMarket. “TSB will remain a UK based entity and continue to be covered by the Financial Services Compensation Scheme.”

Mountford also believes that the takeover will be good news in the long-term for TSB customers old and new. “With Banco Sabadell’s investment, TSB can grow further and generate much needed competition, particularly in the retail and SME space,” he concluded.

What does the takeover mean for TSB’s business?

TSB performed strongly last year – as Your Money reported last month, the bank seized 8.4 per cent of all new bank customers last year. Nevertheless, many of TSB’s products do not offer particularly competitive rates (the bank’s cash ISA pay 0.75 per cent, for example); “the offerings are pretty standard and rarely trouble the best buys,” notes Andrew Hagger of Moneycomms.

However, the Sabadell takeover could the launch of several new products, designed to ensnare an even bigger share of the market. The takeover of Abbey National by Santander 11 years ago transformed the building society from a recurrent underachiever to a prime port of call for savers and borrowers – its 123 account is one of the most popular products with UK current account holders. “It will be interesting to see if Sabadell is as aggressive as Santander,” concludes Hagger.

What does the takeover mean for TSB shareholders?

The takeover is good news for TSB shareholders; 10 per cent of TSB shares were sold to private investors when the bank went public last June. At the time, the shares were sold for £2.60 each – and then-owner Lloyds offered investors a bonus share for every 20 shares purchased, as long as the shares were held for a calendar year.

Sabadell’s bid values the shares at £3.40 each, a 31 per cent increase on the flotation price. According to Laith Khalaf of Hargreaves Lansdown, investors who held on to their shares stand to reap a significant cash benefit. “The shares become fully payable in cash, if the deal goes through – so the maximum windfall from these shares would be £129.20.”

Please visit the article ‘should investors sell their TSB shares?‘ for more information.

 

 


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