Competitive maneuvers: Major banks consider acquisitions to boost market dominance
British banking is on the verge of a massive overhaul as top players aggressively chase lucrative acquisitions.
The industry is trembling as powerhouse players search for groundbreaking deals that would rock the foundations of the market.
London-based lender Shawbrook, under the watch of its private equity owners, has been hovering around high street bank Metro.
In the past, Shawbrook has expressed interest in a £5bn merger with fintech pioneer Starling and even lodged a bid for Co-operative bank.
Moreover, owners of TSB Banco Sabadell have received proposals for a full-blown takeover of the UK unit.
William Howlett, financial analyst at Quilter Cheviot, told City AM that these recent takeover moves represent the continuation of the "recent consolidation of the UK banking industry over the last couple of years."
Howlett pointed to Nationwide's £2.9bn takeover of Virgin Money and Barclays' £600m swoop for Tesco Bank, both happening within the last year, as evidence of the industry's shift.
HSBC renewed its collaboration with M&S Banking arm, enabling the retail giant to enhance its credit offerings.
Howlett asserted, "We see scale as the primary motivation with larger entities better placed to absorb technological advancements and regulatory demands."
Big Four Join the Game
John Cronin, founder of Seapoint Insights, forecasts that the larger banks will be "very active" in the wave of merger and acquisition activity.
The Big Four banks - Barclays, HSBC, Natwest, Lloyds - dominate around 85 percent of UK business accounts and 75 percent of current accounts, according to Moneyfact.
Natwest has been tipped as the most likely acquirer of TSB by RBC analysts, who believe the partnership would "make the most sense."
With Natwest entering back into private ownership just last month, many speculate the firm is gearing up for a shopping spree as it seeks to outdo domestic-focused rival and the UK's largest retail bank, Lloyds.
Natwest made waves with an £11bn bid for Santander UK's retail arm earlier this year, though discussions have since stalled. If the deal had gone through, it would have marked the largest banking deal since the financial crisis.
Apart from Natwest, the firm also recently snapped up the majority of Sainsbury's lending assets and purchased Metro Bank's £2.5bn residential mortgages portfolio in 2024.
Tech in the Driving Seat
Top-tier lenders have boosted their technological offerings over the past year as they sought to modernize digital banking options to compete with newcomers.
Legacy banks are involved in a technological "arms race" to compete against "better equipped" neobanks, according to Gautam Pillai, head of fintech research at Peel Hunt.
As a result, Pillai suggested a mutually beneficial partnership between traditional banks and newcomers, allowing traditional banks to safeguard their clientele thus avoiding a head-to-head battle with neobanks.
Cronin predicts potential consolidation within the mainstream, digital, and specialist challenger bank space in the UK and Europe.
Streamlining for Efficiency
Bank leaders have made cutting costs and streamlining operations a top priority in their new strategies. HSBC's chief, Georges Elhedery, is aiming to slash $3bn in costs through restructuring efforts, while Barclays' CS Venkatkrishnan has his sights set on reducing costs by £2bn by 2026.
According to Howlett, consolidating operations would lead to efficiencies such as "right-sizing branch networks, spreading back-office costs over a larger asset base," as well as "product diversification and better funding structures," thus fostering consolidation.
Metro secured 20,000 new employees, 10,000 business current account openings, and witnessed 16% growth in its loan book during the first quarter of the year due to its cost-effective offering. On the other hand, Shawbrook's loan book grew by 16% last year.
These "natural synergies" would enhance combined operations, Howlett said.
European M&A Boom
While British giants target TSB for takeover, TSB's owner Banco Sabadell is fending off a hostile takeover bid. The Spanish lender has rejected several offers from BBVA - Spain's second-largest bank - which led to BBVA initiating a hostile takeover in May 2023, proposing a €12.2bn (£10.5bn) all-share merger.
The Spanish government intervened in the situation by submitting legislation for review by cabinet ministers.
Elsewhere in Europe, Italian banking giant Intesa Sanpaolo has been active in efforts to consolidate Italy's banking sector, making a €4.9bn bid for rival UBI.
Overall, recent data doesn't provide specific information regarding Shawbrook, Metro Bank, TSB, or the Big Four banks in the UK's banking industry for major mergers or acquisitions up until mid-2025. However, the general understanding is that the industry faces ongoing consolidation due to regulatory pressures, and smaller players like Shawbrook and Metro Bank are potential targets for acquisition and merger discussions. European banking sectors, especially in Spain and Italy, have also been experiencing a wave of consolidation. The latest confirmed UK-specific major mergers or acquisitions in 2025 can be found through dedicated financial news sources or market reports from firms like the Financial Times, Bloomberg, or UK regulatory announcements.
- The forecast by John Cronin, the founder of Seapoint Insights, suggests that the Big Four banks, which dominate a significant portion of UK business and current accounts, will likely be highly active in the ongoing wave of merger and acquisition activity.
- In an effort to streamline operations and enhance efficiency, bank leaders like Georges Elhedery at HSBC and CS Venkatkrishnan at Barclays are aiming to slash billions of dollars in costs through restructuring efforts.
- With British banking on the verge of a massive overhaul, potential consolidation is expected within the mainstream, digital, and specialist challenger bank space, not only in the UK but also in Europe, as legacy banks and neobanks seek to find mutual benefits in partnerships.
