TSB bedding down with Banco Sabadell? SABADELL? THE NAME HARDLY ROLLS OFF THE TONGUE!

BANCO SABADEL – It does not exactly roll off the tongue! I have not stood to attention and saluted the Spanish flag and an effigy of King Felipe V1. This Barcelona based bank, which majors in lending to SMES, went public back in 2001. I have no doubt that this financial titan is the pillar of financial society, but I hasten to add I have never heard of the CEO or any board member. There isn’t exactly an Emilio Botin! Sabadell’s share capital is €9.3 billion against Santander’s €91 billion.

 

The EU driven forced abortive sale of 621 branches from Lloyds Banking Group to Cooperative Bank – that Flower scandal strewn debacle – eventually went at a knock down price of £900 million. Those of us not suffering from amnesia will recall that the initial sale deliberations with Coop and others back in 2011 had a price tag of £1.5 billion on it!

 

This deal makes little sense to me and I have to say that though the share price had gone nowhere since its IPO issue price of 275p, even though a 30% premium is being offered (circa 340p valued at £1.7 billion), the synergy is not obvious. If it were Handelsbanken, with a respected retail footprint in the UK, I would get it. The same would apply if it were Societe Generale, BNP Paribas or Deutsche Bank – all with long standing presences and reputations in the UK. They would also make sense. as I think making a quantum leap forward as a modest sized challenger bank will be very difficult with increasingly tough regulatory controls and capital requirements. I feel sorry for CEO Mark Preston and his management team. Surely, despite BIS Secretary Vince Cable wanting banking competition to expand, he will whinge and make a fuss about one of our banks going abroad. TSB being sold abroad does not bother me – charge what the traffic will bear! But Banco Sabadell? – Not sure… – 333p – up 26%

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