Banco Sabadell is exploring the sale of its British high street bank TSB after receiving preliminary expressions of interest from potential buyers, as the Spanish lender seeks to fend off an €11 billion hostile takeover approach from domestic rival BBVA.

The Catalonia-based bank confirmed on Monday evening that it had received "preliminary nonbinding expressions of interest for the acquisition of the entire share capital of TSB Banking Group". Sabadell added that it "will assess any potential binding offer it may receive" and that "naturally, any transaction would be subject to the satisfaction of all legal obligations".

According to reports, Sabadell has been working with advisers to examine offloading the UK high street unit and has been in contact with potential bidders. Documents relating to a sale have been circulated to potential bidders in recent weeks, with interested parties granted access to a limited due diligence process including a data room. Interested bidders were expected to submit offers this month.

Sabadell acquired TSB, which was formerly owned by Lloyds Banking Group, in 2015 for £1.7 billion as part of the bank's strategy to "internationalise" and diversify away from Spain. TSB has about 5 million customers in the UK and reported pre-tax profits of £285mn on income of £1.14 billion last year, with total assets of £46.1 billion at the end of 2024.

However, the lender has been caught up in a drawn-out takeover battle with BBVA for more than a year, raising questions about the future of TSB. BBVA's hostile bid became Spain's most ill-tempered takeover saga in years after it was rejected by Sabadell's board. The bid is opposed by Sabadell's board as well as the business elite in Catalonia, where Sabadell has roots.

Spain's Socialist-led government, which previously voiced opposition to the takeover of Sabadell by BBVA, last month subjected that bid to a full review by cabinet ministers. A combination would make BBVA-Sabadell the second-biggest player in the country's loan market, leapfrogging Santander but falling short of CaixaBank.

Potential bidders for TSB could include Barclays, NatWest, Santander UK and HSBC, though it remains unclear which parties approached Sabadell about a deal. A sale could generate between £1.7 billion and £2 billion according to sources, with TSB having total equity of £2.1 billion at the end of last year.

With Sabadell currently the subject of a takeover bid, its board of directors is bound by a "duty of passivity", meaning any agreement reached regarding a sale of TSB would need to be submitted to shareholders for approval. If BBVA is successful in its takeover of Sabadell, it is widely expected that the bank would look to offload TSB.

The sale process represents the latest attempt at dealmaking in Britain's banking industry and comes after Santander recently rejected bids from NatWest and Barclays for its UK retail bank.

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