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.
Image: 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.
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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.
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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.
English water companies have collectively been given the lowest environmental rating by the Environment Agency (EA) since records began.
Companies were ranked on a scale of one to four stars. Out of a maximum score of 36 stars for all nine companies, the firms together scored 19, the lowest since the EA began monitoring.
The only utility to receive the highest four-star rank was Severn Trent, the agency said in its annual performance assessment.
The number of serious incidents, in which “significant” environmental harm was caused, increased by 60% last year compared to 2023.
Just three companies were responsible for the vast majority of incidents.
Thames Water – the country’s biggest supplier – Southern Water and Yorkshire Water were responsible for 81% of all incidents.
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Only two firms out of nine – Northumbrian Water and Wessex Water – recorded no serious incidents.
More monitoring, inspections and data have meant that knowledge of pollution in English waterways is now greater than ever. In turn, the amount of reporting has been greater.
Other factors driving the figures are underinvestment and poor maintenance of infrastructure, as well as wet and stormy weather.
Firms have again been called on by the Environment Agency to “urgently” improve their performance. There had previously been a trend of improvement since records began in 2011, but the latest figures indicated a “dip”.
In addition to pollution incidents, companies were assessed on self-reporting and compliance with permits.
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1:32
Is Thames Water a step closer to nationalisation?
A separate report by water regulator Ofwat published on Thursday showed “mixed” performance with improvements in sewer flooding and pipe leakage, but only two companies reported a reduction in pollution incidents over five years.
Regulation of the sector has been criticised in a once-in-a-generation review of the water industry by career civil servant Sir Jon Cunliffe. In the wake of it, the government says Ofwat is to be retired.
Pressure has mounted on utilities across the UK as the public has sought action on poor water quality and rising bills.
An autistic man who was told he could no longer stack shelves at Waitrose when he asked to be paid has been offered a job by Asda.
Tom Boyd, 28, began volunteering unpaid at the branch of WaitroseinCheadle Hulme, Greater Manchester, in 2021, supported by a care worker, to develop skills for the workplace on a further education course he was taking.
The work gave him a sense of “purpose and belonging”, his mother, Frances Boyd, told the BBC.
When she asked in July if he could be paid for a few hours every week, however, the supermarket’s head office told him he had to stop and could not return to the shop.
Ms Boyd said they felt “deeply let down” by the decision as he had taken great pride in his work, which included putting out stock and tidying the shelves.
“If I went in and saw him, he was smiling, and it gave him independence, a sense of purpose and belonging,” she said.
“He gave over 600 hours of his time purely because he wanted to belong, contribute, and make a difference…
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“He deserved better. He deserved kindness, respect and the chance for all his hard work to mean something.”
Mr Boyd has now been offered two paid five-hour shifts each week by Asda.
“It’s overwhelming and they are flexible to say if at any time he is struggling they are fine,” his mother said.
Welcoming the news on X, Greater Manchester mayor Andy Burnham said he hoped it would lead to more employers accepting a neurodivergent code of best practice he has launched.
An Asda spokesperson said that when the store heard about Mr Boyd’s desire to find meaningful work they knew he would be a “fantastic fit” and were delighted to offer him a role.
“We know that finding meaningful work can be especially challenging for individuals with learning disabilities or difficulties,” they said.
“Asda has a Supported Internship Programme and partnership with DFN Project SEARCH, through which we have welcomed over 30 talented new colleagues into roles across our stores. We have seen the positive impact this has for the individuals who join and for our colleagues and customers too.”
A Waitrose spokesperson said they “care deeply” about helping people into the workplace who might not otherwise be given a chance and that the chain is currently investigating what happened to Mr Boyd.
“We’d like to welcome Tom back, in paid employment, and are seeking support from his family and the charity to do so. We hope to see him back with us very soon,” they added.
US sanctions against Russia’s two largest energy companies, the state-owned Rosneft and privately held Lukoil, are perhaps the most significant economic measures imposed by the West since the invasion of Ukraine.
If fully implemented, they have the potential to significantly choke off the flow of fossil fuel revenue that funds Russia’s war machine, but their power lies not in directly denying Russia access to the tankers, ports and refineries that make the oil trade turn, but the US financial system that greases the wheels.
Ever since the invasion, the Russian government has proved masterful at evading sanctions, aided and abetted by allies of economic convenience and an oil industry with decades of experience.
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2:58
New US sanctions on Russia: What do we know?
While the West, principally the EU, has largely turned off the taps and stopped buying Russian oil, China, India and Turkey became the largest consumers, with a shadow fleet of tankers ensuring exports continued to flow.
Data from the Centre for Research into Energy and Clean Air (CREA) shows that while fossil fuel revenues have fallen from more than €1bn a day before the war, they have remained above €600m since the start of 2023, only dipping towards €500m in the last month.
None of that oil has been heading for the US, but these sanctions will directly impact the ability of the Russian companies, and anyone doing business with them, to operate within America’s financial orbit.
According to the order from the US Office for Foreign Asset Control, the sanctions block all assets of the two companies, their subsidiaries and a number of named individuals, as well as preventing US citizens or financial institutions from doing business with them.
It also threatens foreign financial institutions that “facilitate transactions… involving Russia’s military-industrial base” with direct or secondary sanctions.
Image: Vladimir Putin chairs a meeting in Moscow.
Pic: Sputnik/Reuters
In practice, the measures should prevent the two companies from accessing not just dollars, but trading markets, insurance and other services with any financial connection to the US.
Taken in harness with similar steps announced by the UK earlier this month, analysts believe they can have a genuinely chilling effect on the market for Russian oil and gas.
Russia’s customers for oil in China, India and Turkey will also be affected, with the largest companies, state-owned and private, expected to be unwilling to take the risk of engaging directly with sanctioned entities.
Indian companies are already reported to be “recalibrating” their imports following the announcement, which came just a week after Donald Trump announced an additional 25% import tariff on Indian goods as punishment for the country’s reliance on Russian oil.
That does not mean that Russian oil and gas exports will cease. There are other unsanctioned Russian energy companies that can still trade, and ever since the first barrel of oil was tapped, the industry has proved adept at evading sanctions intended to interrupt its flow from one country or another.
Any significant increase in the oil price beyond the 5% seen in the aftermath of the announcement could also put pressure on the White House, which is at least as sensitive to fuel prices at home as it is to foreign wars.
But analysts Kpler expect the sanctions to cause “an immediate, short-term hiatus in Russian crude exports, as it will take time for sellers to reorganise and rebuild their trading systems to circumvent restrictions and ease buyers’ concerns”.
And Russian gas will, for now, continue to flow into Europe, where distaste for Vladimir Putin‘s imperial ambitions has not killed the appetite for his fuel. While the EU has this week imposed sanctions on liquified natural gas (LNG), they will not be fully enforced until 2027.