The UK challenger bank confirmed this morning it has been approached by Sabadell with a £1.7bn takeover bid, less than a year after the stock rejoined the London stock market when Lloyds began to sell off its stake.

TSB said its board is prepared to recommend the Spanish bank’s offer of 340p per share. 

The news sent the group’s shares soaring as much as 26% in early trading to 333p from an opening price of 265p.

Sabadell is Spain’s fifth largest bank and is currently planning to expand outside its home country, where economic growth has been sluggish.

In a statement, TSB said: “Sabadell recognises the achievement of TSB’s management and employees and would continue to operate TSB as a robust competitor in the UK banking market, building on the TSB brand name.”

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Lloyds, which has been ordered by European regulators to sell the TSB business as a condition of its bailout package, still has a 50% stake in the firm, after selling a further 11.5% in September.

Shares in Lloyds Banking Group were up 1.5% this morning.