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TSB future in doubt after merger collapses

Spanish lender Banco Sabadell has said it will consider options for its UK bank TSB after it called off a planned merger with rival BBVA.

Sabadell and BBVA said they were in merger talks less than two weeks ago, but they failed to agree a price.

Sabadell said it would now seek “strategic alternatives for creating value with regard to the group’s international assets, including TSB”.

It did not specify if that would mean selling TSB, which it bought in 2015.

Separately, TSB said it had “good momentum” in its business growth as well as progress in “taking full control of our IT, delivering a right-sized modern branch network and reducing overall operating costs”.

In January, it signed a deal with US computing giant IBM to run its online banking, bank systems and cash machines, in an attempt to put a stop to the IT failures that have plagued the bank.

The most serious of these failures came in April 2018, when an IT problem left up to 1.9 million TSB customers unable to bank online for several weeks.

Customers had been moved on to a new system, but an investigation found it had not been tested properly before going live. It cost TSB a total of £330m for customer compensation, fraud losses and other expenses.

The TSB business used to be part of Lloyds Banking Group, but was sold off after Lloyds received a government bailout in the wake of the 2008 financial crisis.

The sale process was delayed after a possible deal with troubled rival Co-op fell through, and TSB was eventually listed as a separate business before Sabadell bought it.

In September this year, TSB said it would close 164 of its branches and cut 960 jobs, blaming “a significant shift in customer behaviour” as online banking became more popular.

From the end of next year TSB will have 290 branches – down from 475 currently.

Sabadell itself will tell its investors early next year what it plans to do. Its decision to focus on the Spanish market suggests TSB may be sold.

It is Spain’s fifth-largest bank, and a deal with BBVA would have made the combined lender the second-biggest after Caixabank-Bankia.

The news of the deal with BBVA being called off was not received well by Sabadell shareholders. The shares tumbled 13% in Madrid, to 35 cents apiece.

BBVA shares, meanwhile, gained 2% to €3.86 (£3.45) each.

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