TSB is up for sale again

steven141

https://www.msn.com/en-gb/money/other/tsb-could-be-sold-off-by-spanish-owner-banco-sabadell/ar-AA1GRBgq

wmb194

"In a regulatory filing, the banking giant said it had already received 'preliminary non-binding expressions of interest for the acquisition of the entire share capital of TSB.'"

So there's interest.

"In Spain, legislation requires the governing bodies of a company targeted in a takeover bid [BBVA/Sabadell] to remain passive and request shareholder approval before promoting or taking any action that might prevent an acquisition from succeeding."

So might not be anytime very soon.

WillPS

They've been floating around on the market since at least 2020, possibly longer. Would perhaps be a nice target for YBS

Olenna

wmb194 said:

"In a regulatory filing, the banking giant said it had already received 'preliminary non-binding expressions of interest for the acquisition of the entire share capital of TSB.'"

So there's interest.

"In Spain, legislation requires the governing bodies of a company targeted in a takeover bid [BBVA/Sabadell] to remain passive and request shareholder approval before promoting or taking any action that might prevent an acquisition from succeeding."

So might not be anytime very soon.

BBVA has indicated that it plans to exit the UK market if it takes over Sabadell (including TSB) so it will interesting to see if BBVA will also dispose of it's holdings in Atom bank at the same time. 

7sefton

Can't help feeling the whole story of TSB is a sorry example of what happens when government (in this case the EU) meddles with banking to try and make the market 'fairer'. 

I'm pro regulation in financial services because it's a critical sector which can directly harm lives if it's run badly.

But TSB was forced to spin out from (the then) Lloyds TSB as a penalty/competitive safeguard for taking over HBOS (which you could argue was a noble thing for them to, as it saved it from collapse). 

It took years and £££ to spin out, to the point where Lloyds said the project costs to separate it were almost as much as the bank was worth. Huge customer disruption - not forgetting the debacle of the IT platforms - only for it to end up back on the market and probably subsumed into a big high street bank. It would probably suit Lloyds (!), but the sheer shame of it means they probably wouldn't bid.

Was it really worth it, to go full circle? Has TSB really changed the face of banking for the better? I say this as someone who got my first mortgage with them in 2015, and benefited from a few marginally competitive current account deals. But they haven't changed the game... their original position was very local/branch focused, only for this to fall by the way-side as soon as real economics hit them. Subscale, generic bank. Soon to be part of a big bank again. 

7sefton

As someone above says, I have a feeling YBS might bid. 

Their relatively new CEO is doing a 'boring' job and probably wants to keep up with her peers at Coventry and Nationwide.

YBS have dabbled before with acquiring a current account provider (N&P) but it was tiny and built on awful tech with no ability to scale it. TSB might be just about the right size... but believe me, it will be as much about ego as it is business case.

WillPS

7sefton said:

But TSB was forced to spin out from (the then) Lloyds TSB as a penalty/competitive safeguard for taking over HBOS (which you could argue was a noble thing for them to, as it saved it from collapse). 

You could argue nobility, but to do so would totally misrepresent true motivation. It certainly wasn't altruism. Both Lloyds TSB and HBOS were at risk of collapse without treasury assistance. 

7sefton said:
It took years and £££ to spin out, to the point where Lloyds said the project costs to separate it were almost as much as the bank was worth. 

Never seen this before, have you got a source for that? The original split was clearly done relatively cheaply - same IT platform, new signage etc. Far more significant costs would have been borne combining the LTSB and HBOS platforms - TSB was effectively just another instance of this platform in its original form.

It also enabled them to shed a bulk load of branches which they wanted to be rid of - notably the entire chain of C&G branches which had been practically deserted for years.

7sefton said:

Huge customer disruption - not forgetting the debacle of the IT platforms - only for it to end up back on the market and probably subsumed into a big high street bank.

Nothing to do with the separation and everything to do with Sabadell bungling it. TSB could have carried on using the LBG platform, LBG even offered assistance backing out at the height of the meltdown.

7sefton said:

Was it really worth it, to go full circle? Has TSB really changed the face of banking for the better? I say this as someone who got my first mortgage with them in 2015, and benefited from a few marginally competitive current account deals. But they haven't changed the game... their original position was very local/branch focused, only for this to fall by the way-side as soon as real economics hit them. Subscale, generic bank. Soon to be part of a big bank again. 

In what way is it full circle? The split of TSB was done in a very temporary fashion precisely so the bank could be offloaded. Indeed originally the project was working towards delivering TSB as a distinct chunk which was lined up for acquisition by The Co-operative Bank - the intention was to create something temporary.

They happened in to the "challenger" narrative (which never really fit, and definitely didn't stick) for lack of any other suitors at the time.

Again, I think you've ascribed motivations to the forced split beyond those which actually existed; the focus was on ensuring LBG was not supported in to owning an unhealthy share of the market(s) and also ensuring the treasury (which majority owned LBG as well as RBS) did not have too great an influence.

Exactly the same thing happened over at RBS with Williams & Glyn only in that instance they dragged it out to the point the competition concerns over local markets were moot.

7sefton

I seem to have touched a nerve but not really sure why. I don’t think it’s controversial to consider TSB's latest chapter as a relative failure - or at the very least, terrible wasted potential. 

I happen to know a lot about the situation - or Project Verde as the sale was know in the City - but have no particular axe to grind. I’ll take your points one by one as best as I can, in case people are interested.

1. Both banks were affected by the credit crunch but LTSB’s situation was nowhere near as parlous as HBOS’. In the years running up to the GFC LTSB was often criticised by investors for its balance sheet discipline and more conservative approach, which weighed on returns. The credit crunch challenged all banks but LTSB was stronger than most. It took on HBOS because the government of the time encouraged it to (as a stronger partner) and turned a blind eye to competition law. Eric Daniels saw a once in a lifetime opportunity and took it, for better or worse.

2. It’s extremely naïve (or misleading) to say the planning, carve out, approvals, separation and execution of TSB was done on the cheap with little more than ‘a few signage costs’. The retail footprint isn’t really the major cost base it once was for banks (despite what most public believe). Rather, it required setting up a ‘bank within a bank’ and all the administration, staff costs, legal fees, consultancy rates etc that comes with it. Plus the opportunity cost to LTSB doing other value-adding things whilst it was distracted with Verde. 

You say Verde gave LTSB a much-needed excuse to offload the C&G network. Nonsense: LTSB had actually planned (and even announced) the close down of C&G around 2009. It then had to do a U-turn because the regulators wanted it to create a shadow branch network for Verde. If LTSB had been allowed to run its business without interference, C&G would have been gone quickly. Instead it was forced to artificially keep it alive whilst Verde dragged on - they didn’t need Verde to do this, quite the opposite!

Source: easily Google that the costs of Verde topped £2.5bn. The cost of selling to Co-op required a price cut (and eventually fell through), Sabadell paid around £1.7bn for it. So it cost more to create than it did to acquire. 

3. You miss my point: the IT debacle wouldn’t have happened in the first place if regulators/EU didn’t mandate Verde. Sure, Sabadell bungled it, but why would they pay millions every year (which rose YoY to a rival banking group)? My point is all about the opportunity cost.

4. Well obviously it’s gone full circle: smaller bank carved out of a bigger one, floated, sold, disappointed, now bought by a bigger bank. I repeat my point: was it really all worth it? A load of effort, cost, attention and waste… only for it to be bought by NatWest? Maybe you think it was worth it - fair enough - but I could think of better ways to deploy my staff and capital. 

EarthBoy

https://www.cityam.com/natwest-rules-out-tsb-takeover/

WillPS

7sefton said:

1. Both banks were affected by the credit crunch but LTSB’s situation was nowhere near as parlous as HBOS’. In the years running up to the GFC LTSB was often criticised by investors for its balance sheet discipline and more conservative approach, which weighed on returns. The credit crunch challenged all banks but LTSB was stronger than most. It took on HBOS because the government of the time encouraged it to (as a stronger partner) and turned a blind eye to competition law. Eric Daniels saw a once in a lifetime opportunity and took it, for better or worse.

So we can agree both were at risk (to differing extents) and in need of treasury support (to differing extents).

The only point of contention is whether LTSB and HBOS was a shotgun marriage or an opportunistic move on the acquirer's part. Either way, we can put the idea of nobility aside, right?

7sefton said:

2. It’s extremely naïve (or misleading) to say the planning, carve out, approvals, separation and execution of TSB was done on the cheap with little more than ‘a few signage costs’. The retail footprint isn’t really the major cost base it once was for banks (despite what most public believe). Rather, it required setting up a ‘bank within a bank’ and all the administration, staff costs, legal fees, consultancy rates etc that comes with it. Plus the opportunity cost to LTSB doing other value-adding things whilst it was distracted with Verde. 

I didn't say it was 'a few signage costs' - nor did I intend to imply my list of 2 items was a comprehensive list of all separation costs. What I said is they did it on the cheap, because they did - leaving absolutely everything on their own platforms and letting it be the spun-off entity (or its acquirer's) job to pull them away from that on their own weight.

7sefton said:

You say Verde gave LTSB a much-needed excuse to offload the C&G network. Nonsense: LTSB had actually planned (and even announced) the close down of C&G around 2009. It then had to do a U-turn because the regulators wanted it to create a shadow branch network for Verde. If LTSB had been allowed to run its business without interference, C&G would have been gone quickly. Instead it was forced to artificially keep it alive whilst Verde dragged on - they didn’t need Verde to do this, quite the opposite. 

I had forgotten about the announcement they were closing C&G - but the point still stands by offloading it they effectively made it TSB's (or their acquirer's) responsibility to lay off the 1400 staff in time (excluding any branches which weren't eventually closed, if there are any?). 

Indeed, LBG could have closed C&G as intended and sent off some other (better) branches to TSB. There will be a reason they chose not to do that, and I can't imagine it had TSB's best long term interests at heart.

Also, C&G was just one chunk of the store estate. There was also a motley crew of other Lloyds TSB branches, some of which were being closed only 18 months later.

7sefton said:

Source: easily Google that the costs of Verde topped £2.5bn. The cost of selling to Co-op required a price cut (and eventually fell through), Sabadell paid around £1.7bn for it. So it cost more to create than it did to acquire. 

This isn't a citation and I cannot find such a figure after several minutes Googling. I suspect you're conflating it with the £2.5bn loss the Co-operative Bank announced after they pulled out of the takeover.

I have found a figure of roughly half that though (£1.37bn):
https://www.independent.co.uk/news/business/news/lloyds-profits-as-bad-debts-fall-but-misselling-bill-hits-ps8bn-8911900.html

The purchase price of a company tends to be rather weighed down by its liabilities, as Poundland will be tell you. Those are liabilities which LBG shedded though.

7sefton said:
3. You miss my point: the IT debacle wouldn’t have happened in the first place if regulators/EU didn’t mandate Verde. Sure, Sabadell bungled it, but why would they pay millions every year (which rose YoY to a rival banking group)? My point is all about the opportunity cost.

This feels very flimsy logic. The large Natwest/Ulster outages in 2014 wouldn't have happened if RBS hadn't been allowed to acquire them, but it's tenuous to think of the merger as the cause. Stuff happens down the line, there's a point it ceases being causation.

The regulator didn't demand TSB stop using LBG's platform, that was a business decision. (Executed terribly!)

7sefton said:

4. Well obviously it’s gone full circle: smaller bank carved out of a bigger one, floated, sold, disappointed, now bought by a bigger bank. I repeat my point: was it really all worth it? A load of effort, cost, attention and waste… only for it to be bought by NatWest? Maybe you think it was worth it - fair enough - but I could think of better ways to deploy my staff and capital. 

This would stand up to scrutiny if the aim of Project Verde was to create a brand new bank; but it was not - the purpose was to satisfy an EC judgment and the first preference outcome was for another bank to rapidly acquire the separated chain - which was arranged and fell through.

I don't think we are disagreeing that the process was wasteful and ultimately unnecessary (hence Williams & Glyn never happening). That said there are good reasons for competition regulations to exist and ensuring business resource is best utilised cannot be a consideration for them.

7sefton said:

I seem to have touched a nerve but not really sure why. I don’t think it’s controversial to consider TSB's latest chapter as a relative failure - or at the very least, terrible wasted potential. 

Not at all, it's a discussion forum and debate is important. 

Olenna

7sefton said:

Can't help feeling the whole story of TSB is a sorry example of what happens when government (in this case the EU) meddles with banking to try and make the market 'fairer'. 

I'm pro regulation in financial services because it's a critical sector which can directly harm lives if it's run badly.

But TSB was forced to spin out from (the then) Lloyds TSB as a penalty/competitive safeguard for taking over HBOS (which you could argue was a noble thing for them to, as it saved it from collapse). 

It took years and £££ to spin out, to the point where Lloyds said the project costs to separate it were almost as much as the bank was worth. Huge customer disruption - not forgetting the debacle of the IT platforms - only for it to end up back on the market and probably subsumed into a big high street bank. It would probably suit Lloyds (!), but the sheer shame of it means they probably wouldn't bid.

Was it really worth it, to go full circle? Has TSB really changed the face of banking for the better? I say this as someone who got my first mortgage with them in 2015, and benefited from a few marginally competitive current account deals. But they haven't changed the game... their original position was very local/branch focused, only for this to fall by the way-side as soon as real economics hit them. Subscale, generic bank. Soon to be part of a big bank again. 

Not quite; the current TSB Bank was LloydsTSB Scotland (a separate bank from LloydsTSB) 

Lloyds had initially planned to merge LloydsTSB Scotland into Bank of Scotland but blocked due to the combined Scottish market share, so was given the option of retaining only one & it opted for Bank of Scotland. 

They did have to dispose of some E&W market share due to Halifax so it was easier to just package them up with LloydsTSB Scotland to become TSB.