High street banking giant Santander has agreed to buy rival TSB for £2.65billion, sparking fears of widespread job losses and yet more branch closures.

The tie-up, if approved, would create Britain’s second biggest bank by personal current account balances. When combined, they would have nearly 28 million retail and business customers nationwide. But the big money deal will lead to large cost cutting. Santander is earmarking least £400million of “cost synergies”, with the majority by 2027.

TSB has 175 branches - making it the UK’s seventh largest - and a growing online arm, with head offices in Edinburgh and London. It has approximately five million customers, primarily in personal and small business, with £34billion in mortgages (2% market share in the UK) and £35billion in deposits. Spanish-owned Santander has around 350 branches in the UK, a number that has fallen sharply amid widespread closures, with the bank employing 18,000 full-time equivalent staff.

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Santander insisted that the deal isn't scheduled to complete until year and, even then, staff who maybe impacted would be told directly "as is right and proper. But for now it is business as usual."

However, it also warned that it would not make to have two branches of the same bank close to each other, fuelling concerns that more branches will shut..

TSB is being sold by Spain’s Sabadell, as it seeks to stop a hostile takeover approach from another Spanish heavyweight, BBVA. Sabadell said it would submit the deal to a shareholders meeting on August 6 for its approval.

It said the deal’s value could rise to £2.9billion “considering TSB’s estimated profits until the closing of the transaction, expected in the first quarter of 2026.”

Ana Botín, Banco Santander’s executive chair, said: “The acquisition of TSB represents a continuing strategic commitment to our customers in the UK, offering a compelling opportunity that is financially attractive to our shareholders and aligned with Santander’s long-term objectives. It strengthens our franchise in a core market through the acquisition of a low-risk and complementary business that adds to our diversification.”

Mike Regnier, chief executive of Santander UK, said: “This is an excellent deal for customers combining two strong and complementary banks, creating one of the most substantial banks in the UK and materially enhancing the competitiveness of the industry.”

Marc Armengol, TSB chief executive, said: “TSB is a truly special bank, run by a first-class team that deliver trusted service and support for customers, day in and day out. Today’s announcement represents the next exciting chapter for this successful business, as part of Santander, a highly regarded banking group. I believe this will prove to be an excellent fit for our loyal customers.”