Santander approaches TSB-owner about high street banking merger

Santander has approached its fellow Spanish banking group Sabadell about a takeover of TSB, its British high street bank.

Sky News has learnt that Santander is among the parties which have expressed an interest in a potential deal, months after its boss denied that it was seeking to offload the UK's fifth-largest retail bank. City sources said on Wednesday that Santander had not tabled a formal offer for TSB, and was not certain to do so.

Money latest: What inflation data means for home buyers However, the fact that it has contacted Sabadell about a possible transaction involving TSB suggests that Ana Botin, the Santander chair, may be open again to expanding its presence in Britain's high street banking market. The extent of the overlap between the two companies' UK branch networks was unclear on Wednesday morning.

Santander, which like other banks has been engaged in an extensive branch closure programme for some time, now has roughly 350 UK branches, while TSB operates roughly half that number. The value that TSB, which was acquired by Sabadell in 2015 from Lloyds Banking Group, might attract in any takeover is also unclear.

Sabadell is in the middle of attempting to thwart a hostile takeover by rival Spanish bank BBVA - a deal revealed by Sky News last year - with a disposal of TSB said to be on the cards regardless of whether or not that bid is successful. Ms Botin insisted that the UK remains a core market for Santander in the wake of speculation that she might sanction a sale of the business.

The company recently confirmed a Sky News report that Sir Tom Scholar, the former top Treasury official sacked by Liz Truss during her brief premiership, was joining the bank's UK arm as its next chairman. NatWest Group, which recently returned to full private ownership, was reported to have submitted an offer worth about £11bn for Santander UK.

No discussions are ongoing about such a deal. NatWest, Barclays and HSBC have also been touted as potential suitors for TSB, although at least two of those three banks are thought to have little interest in bidding.

TSB was effectively created from the ashes of the 2008 financial crisis, when a vehicle set up to acquire assets from distressed banking groups lost out in an auction to a bid from the Co-operative Bank. That deal fell through when it emerged that the Co-operative Bank itself was in a perilous financial state.

Sabadell explored a sale of TSB about five years ago, but opted to retain the business. Goldman Sachs is thought to be advising Sabadell on the prospective sale of TSB.

Read more from Sky News:Inflation slows but no rate cut likelyWestern goods in Russian shops despite sanctionsCo-op discount offer after cyberattack Responding to a report in the Financial Times on Sunday that TSB had been put up for sale, Banco Sabadell said: "Banco Sabadell confirms that it has received preliminary non-binding expressions of interest for the acquisition of the entire share capital of TSB Banking Group plc. "Banco Sabadell will assess any potential binding offer it may receive." Santander declined to comment.

The TSB process emerged just hours after Sky News had revealed that Metro Bank, the high street lender, had been approached by Pollen Street Capital, the private equity firm, about a possible takeover. The absence of a statement from either party implies that the approach was rejected and that Pollen Street has abandoned its interest, at least temporarily..