Co-operative Bank in shock merger approach to rival lender TSB
The Co-operative Bank has made an audacious approach about a merger with TSB in a move that could trigger a fresh wave of consolidation among Britain’s mid-sized lenders.
Sky News has learnt that the Co-operative Bank contacted TSB’s Spanish owner, Banco Sabadell, earlier this month to gauge its appetite for a deal.
TSB’s Spanish owner has been approached about a sale of the UK lender.
It is understood to have said that it would be willing to pay in excess of £1bn for TSB.
City sources said this weekend that Sabadell had indicated that it was not keen to enter into formal discussions at this stage about a merger of what by some measures are the UK’s seventh-largest and eight-largest banks.
If it did materialise, a tie-up between two of the best-known brands in the sector would create a high street lender with more than 8m customers encompassing mortgages, current accounts, credit cards and savings products.
That would make the combined business larger by customer numbers than Virgin Money, which has approximately 6.5m customers, although it would be smaller than Virgin Money as measured by the size of its loan-book.
It would also remain far smaller than Lloyds Banking Group, NatWest Group, Barclays, HSBC Holdings and Santander UK in terms of market share and high street presence.
Nevertheless, the Co-operative Bank’s approach for TSB was described this weekend by one industry executive not connected to the prospective deal as a logical move.
The profitability of UK retail banks has been hampered since the aftermath of the 2008 financial crisis, with interest rates at historic lows for more than a decade.
Analysts have for years forecast a wave of corporate activity that would see mid-sized banks bulk up, although the combination of OneSavings Bank with Charter Court Financial Services and Virgin Money’s tie-up with CYBG have proved to be exceptions.
This week, a takeover of Sainsbury’s Bank by Centerbridge Partners, the US-based investor, fell apart after the supermarket group concluded that it would not deliver value to shareholders.
If the Co-operative Bank did succeed with a formal bid for TSB, it would be a deal laden with corporate irony.
In 2013, the Co-operative Bank’s bid to acquire the branch network which became TSB was left in ruins when the scale of its own financial crisis emerged.
The Co-operative Bank, which at the time was majority-owned by the Co-op Group, one of the UK’s biggest mutuals, was forced to turn to a group of American hedge funds in a £1.5bn rescue deal.
Its former chairman, Paul Flowers, was left humiliated by tabloid revelations about his private life that led to him being dubbed ‘the crystal methodist’, and prompted an overhaul of its leadership and ownership structure.
The ensuing eight years brought further turbulence for both the Co-operative Bank and TSB, however, with the former reliant on another bailout by investors in 2017.
TSB, meanwhile, was plunged into a storm of its own the following year when an IT systems calamity left millions of customers locked out of their accounts for days.
The incident came three years after Sabadell bought TSB from public investors and Lloyds Banking Group, its former parent.
TSB’s future has been the subject of intense speculation since last year when its Spanish owner signalled that it would be open to a sale.
The odds on a short-term deal diminished in the spring, however, when Sabadell indicated that it would delay an auction process.
News of the Co-operative Bank’s unsolicited approach to Sabadell is likely to trigger interest from other suitors for TSB, which operates nearly 300 branches.
It comes just weeks after TSB confirmed the appointment of Nick Prettejohn, a City veteran, as its new chairman.
The Co-operative Bank’s ability to propose a transaction of this scale underlines its recent recovery, having announced an underlying profit of nearly £13m for the first half of 2021.
It has itself been on the receiving end of takeover interest, although talks about a sale to Cerberus Capital Management, an often controversial investor, broke down last December.
A merger with TSB would almost certainly make a medium-term exit for both Sabadell and the Co-operative Bank’s owners easier to execute, potentially through a public share sale.
In April, two major investors – Bain Capital Credit and JC Flowers – took a 10% stake in the Co-operative Bank, which some analysts interpreted as a sign that it would become more proactive in its approach to industry consolidation.
The lender’s other shareholders include GoldenTree Asset Management and Silver Point Capital, two US-based hedge funds.
Credit Suisse is advising the Co-operative Bank, while Goldman Sachs has been retained by Sabadell to advise on the future of TSB.
A Sabadell spokesman said: “This is not a transaction that we wish to explore at this moment, as we have previously expressed publicly.”
The Co-operative Bank and TSB declined to comment.
The world’s most valuable company has reported another series of expectation-beating results, heading off fears of the AI bubble bursting for now.
Nvidia’s revenue reached $57bn in the three months to October, higher than Wall Street estimates and the company’s own guidance.
That’s up 62% on the same time last year, and has been described by the business as an “outstanding” quarter.
Money blog: Ryanair flights to EU banned in ‘unprecedented’ decision
A profit measure called earnings per share was also better than expected at $1.30.
It matters as Nvidia has powered the artificial intelligence (AI) boom through its computer chips, which are key parts in AI chatbots such as ChatGPT.
Nvidia has major tech companies as clients and acts as a good proxy for whether the tens of billions of dollars invested in AI is paying off.
Its chief executive, Jensen Huang, has been described as the Godfather of AI and watch parties were organised for those looking to follow the Wednesday evening announcement.
The company has been a massive beneficiary of the push to put money into AI, with its share price reaching stratospheric highs.
In October, it became the first worth $5trn (£3.83trn), about the size of the German economy, Europe’s largest, and double the UK’s benchmark stock index, the FTSE 100.
What’s been announced?
Revenue from data centres reached a record high of $51.2bn, more than £10bn higher than the three months previous.
The outlook is for continuing strong sales in the final three months of the financial year, as the company forecasts revenue will be roughly $65bn.
Read more:
Nvidia boss defends against claims of bubble by ‘Big Short’ investor
Inflation slows to 3.6%, but food costs shoot upwards
Demand for Nvidia products continues to surpass expectations, while the business is “still in the early innings” of AI transitions, its chief financial officer Colette Kress said.
Mr Huang said sales of its blackwell chips are “off the charts” and its cloud graphics processing chips (GPUs) are “sold out”.
Why it matters
Developing AI infrastructure, like the construction of data centres, has been a significant contributor to US economic growth, as measured by gross domestic product (GDP).
A faltering of AI expansion, therefore, impacts the US economy, the world’s largest, which in turn affects the UK and global economies.
Anxiety around the massive valuations tech companies have accrued, on the hope of AI revolutionising the world, is likely to be staved off by the results announcement.
A fall in these tech company valuations could have meant a drop in the value of pension pots or savings.
Just seven dominant tech companies, many of which have borrowed to invest in AI, make up more than a quarter of major US stock index, the S&P 500.
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Could the AI bubble burst?
In the last year alone, Nvidia’s share price has risen more than 230%.
Some, including US trader Michael Burry, famous for being played by Christian Bale in the Hollywood film The Big Short, have effectively bet that Nvidia’s share price would fall.
Addressing the topic of an AI bubble, Nvidia’s founder, Mr Huang, said, “From our vantage point, we see something very different”.
What next?
Regardless of the figures released on Wednesday evening, significant market moves were anticipated, given the attention paid to the results and the significance of the company.
Nvidia shares rose as much as 4% in after-hours trading.
The results also boosted the share price of its chip-making competitors like Broadcom and Advanced Micro Devices.
For now, the AI bubble remains intact.
Business
Budget 2025: Consumer confidence falls as speculation ramps up – but London mayor welcomes major rail investment
Consumer confidence has tumbled amid rampant speculation about what the chancellor will announce in the budget, figures show.
The British Retail Consortium (BRC) blamed “strong hints” from the government of income tax hikes for the public’s falling expectations of how much they’ll spend over the next three months – even as Christmas beckons.
While a planned increase in income tax rates was scrapped last week, Sir Keir Starmer has refused to rule out freezing income tax thresholds – which the Conservatives argue amounts to a tax rise by stealth because it drags people into paying higher rates even if their wages increase.
BRC chief executive Helen Dickinson said months of uncertainty had “heightened public concern about their own finances and the wider economy”.
Consumer expectations for the state of the economy over the next three months have fallen significantly to minus 44, down from minus 35 in October, according to data from the BRC and Opinium.
Ms Dickinson said action was needed from Rachel Reeves to “bring down the spiralling cost burden facing retailers”, which she said would “keep price rises in check”.
Read more: Inflation eases but food costs rise
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Is chancellor to blame for food price rises?
Signs of ‘fragile’ recovery in jobs market
In slightly more encouraging news for Ms Reeves ahead of her statement next Wednesday, new research suggests the jobs market may be on the up.
The Recruitment and Employment Confederation said the number of new job adverts last month was 754,359, up by 2.1% from September, taking the total to more than 1.6 million.
Ms Reeves’s decision to hike national insurance contributions for employers in last year’s budget was blamed for a slowdown in the market, and a rising unemployment rate.
The report said there has been an increase in adverts for medical radiographers, delivery drivers and couriers, and further education teaching professionals.
But it warned the apparent recovery was “fragile”.
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PM challenged on budget leaks
Reeves set to back DLR extension
One man looking forward to the budget is Sir Sadiq Khan, who has welcomed reports that London’s DLR is set to be given funding for an extension.
According to the Press Association, the chancellor will back an extension to the Docklands Light Railway to Thamesmead at a cost of £1.7bn – unlocking thousands of new homes.
Thamesmead has been notoriously short of public transport links ever since it was developed in the 1960s.
Thamesmead in southeast London straddles the boroughs of Bexley and Greenwich. Pic: PA
The plan would see the line extended from Gallions Reach, near London City Airport, and include a new station at Beckton as well as in Thamesmead itself.
Sir Sadiq said the DLR extension “will not only transform travel in a historically under-served part of the capital but also unlock thousands of new jobs and homes, boosting the economy not just locally but nationally”.
It is also expected to unlock land for 25,000 new homes and up to 10,000 new jobs, along with almost £18bn of private investment in the area.
The world’s most valuable company has reported another series of expectation-beating results, heading off fears of the AI bubble bursting for now.
Nvidia’s revenue reached $57bn in the three months to October, higher than Wall Street estimates and the company’s own guidance.
That’s up 62% on the same time last year, and has been described by the business as an “outstanding” quarter.
Money blog: Ryanair flights to EU banned in ‘unprecedented’ decision
A profit measure called earnings per share was also better than expected at $1.30.
It matters as Nvidia has powered the artificial intelligence (AI) boom through its computer chips, which are key parts in AI chatbots such as ChatGPT.
Nvidia has major tech companies as clients and acts as a good proxy for whether the tens of billions of dollars invested in AI is paying off.
Its chief executive, Jensen Huang, has been described as the Godfather of AI and watch parties were organised for those looking to follow the Wednesday evening announcement.
The company has been a massive beneficiary of the push to put money into AI, with its share price reaching stratospheric highs.
In October, it became the first worth $5trn (£3.83trn), about the size of the German economy, Europe’s largest, and double the UK’s benchmark stock index, the FTSE 100.
What’s been announced?
Revenue from data centres reached a record high of $51.2bn, more than £10bn higher than the three months previous.
The outlook is for continuing strong sales in the final three months of the financial year, as the company forecasts revenue will be roughly $65bn.
Read more:
Nvidia boss defends against claims of bubble by ‘Big Short’ investor
Inflation slows to 3.6%, but food costs shoot upwards
Demand for Nvidia products continues to surpass expectations, while the business is “still in the early innings” of AI transitions, its chief financial officer Colette Kress said.
Mr Huang said sales of its blackwell chips are “off the charts” and its cloud graphics processing chips (GPUs) are “sold out”.
Why it matters
Developing AI infrastructure, like the construction of data centres, has been a significant contributor to US economic growth, as measured by gross domestic product (GDP).
A faltering of AI expansion, therefore, impacts the US economy, the world’s largest, which in turn affects the UK and global economies.
Anxiety around the massive valuations tech companies have accrued, on the hope of AI revolutionising the world, is likely to be staved off by the results announcement.
A fall in these tech company valuations could have meant a drop in the value of pension pots or savings.
Just seven dominant tech companies, many of which have borrowed to invest in AI, make up more than a quarter of major US stock index, the S&P 500.
Please use Chrome browser for a more accessible video player
Could the AI bubble burst?
In the last year alone, Nvidia’s share price has risen more than 230%.
Some, including US trader Michael Burry, famous for being played by Christian Bale in the Hollywood film The Big Short, have effectively bet that Nvidia’s share price would fall.
Addressing the topic of an AI bubble, Nvidia’s founder, Mr Huang, said, “From our vantage point, we see something very different”.
What next?
Regardless of the figures released on Wednesday evening, significant market moves were anticipated, given the attention paid to the results and the significance of the company.
Nvidia shares rose as much as 4% in after-hours trading.
The results also boosted the share price of its chip-making competitors like Broadcom and Advanced Micro Devices.
For now, the AI bubble remains intact.
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