FINANCIAL INSTITUTIONS

CREDIT OPINION18 May 2020

Update

RATINGS

TSB Banking Group plcDomicile United Kingdom

Long Term Issuer Rating Baa3

Type LT Issuer Rating Domcurr

Outlook Negative

Please see the ratings section at the end of this reportfor more information. The ratings and outlook shownreflect information as of the publication date.

Contacts

Anna Sherbakova +44.20.7772.1954AVP-Analystanna.sherbakova@moodys.com

Romy Van Rooij +44.20.7772.1638Associate Analystromy.vanrooij@moodys.com

Laurie Mayers +44.20.7772.5582Associate Managing Directorlaurie.mayers@moodys.com

Nick Hill +33.1.5330.1029MD-Bankingnick.hill@moodys.com

TSB Banking Group plcUpdate following ratings affirmation with a negative outlook

SummaryTSB Bank plc's (TSB) baa2 Baseline Credit Assessment (BCA) reflects the bank's: (1) highquality loan portfolio, consisting mostly of mortgages; (2) weak profitability given the largeinherited cost base; (3) solid risk-based capital levels; (4) large proportion of retail depositsin its funding profile and a large stack of liquid assets; and (5) concentration of revenue andrisks in UK residential mortgages.

We believe that TSB's revised strategy focusing on cost containment will support its futureprofitability. In addition, the operational and execution risk related to TSB's IT migrationchallenges in 2018 has materially lessened, as the bank reorganised its managementstructure and IT governance, and subsequently demonstrated successful client managementand improved customer satisfaction. We also believe that the tail risk stemming frompotential regulatory actions related to the IT migration will be manageable for TSB, given itssolid capitalisation, as well as potential recoveries under insurance claims.

The Baa2 long-term bank deposit and issuer ratings of TSB, as well as the Baa3 issuer ratingand subordinated debt rating of TSB Banking Group plc (TSBG), are underpinned by TSB'sbaa2 BCA, the results of our Advanced Loss Given Failure (LGF) analysis, which lead to nouplift for TSB’s ratings, and a negative one-notch adjustment from the BCA to the ratingsof TSBG. Our assumption of a low probability of support from the Government of UnitedKingdom (Aa2 negative) results in no further rating uplift.

Exhibit 1

Rating Scorecard - Key financial ratiosFor 2019 financials

1.7% 20.9%

0.1%

15.2% 17.7%

0%

5%

10%

15%

20%

25%

30%

35%

0%

5%

10%

15%

20%

25%

Asset Risk:Problem Loans/

Gross Loans

Capital:Tangible Common

Equity/Risk-WeightedAssets

Profitability:Net Income/

Tangible Assets

Funding Structure:Market Funds/

Tangible BankingAssets

Liquid Resources:Liquid Banking

Assets/TangibleBanking Assets

Solvency Factors (LHS) Liquidity Factors (RHS)

TSB Banking Group (BCA: baa2) Median baa2-rated banks

So

lve

ncy F

acto

rs

Liq

uid

ity F

acto

rs

Source: Moody's Investors Service

MOODY'S INVESTORS SERVICE FINANCIAL INSTITUTIONS

Credit strengths

» Solid capital and leverage metrics

» High-quality retail loan portfolio, consisting mostly of mortgages

» Strong funding profile, supported by low reliance on wholesale funding and stable retail deposit base

» High stack of liquid assets

Credit challenges

» Weak profitability given large inherited cost base, continued expenditures related to strategic initiatives and investments in thetechnology platform, as well as margin pressures

» Existence of the higher-risk legacy portfolio

» Concentration of revenue and risks in UK residential mortgages

» Weakening operating environment in the United Kingdom (UK, Aa2 negative)

OutlookThe negative outlook reflects our expectation that TSB’s profitability will remain under pressure as the bank continues its strategictransitioning plan, which includes optimising its cost structure through branch closures and other budget initiatives, as well asinvestments in the technology platform. We believe that pressure on TSB’s profitability will be further exacerbated by the economicshock generated by the spread of coronavirus in the UK, likely resulting in reduced revenue, an increase in loan losses and increasedprovisions.

Factors that could lead to an upgradeTSB's BCA is unlikely to be upgraded given the negative outlook. The outlook could be revised to stable if the bank improves andstabilises its profitability, while maintaining solid asset quality and capitalisation, with no deterioration in its liquidity and fundingprofile.

TSB's deposit and issuer ratings could be upgraded if the bank were to issue significant amounts of long-term debt, includingstructurally subordinated debt issued through its holding company.

Factors that could lead to a downgradeTSB's BCA could be downgraded if the bank's profitability and asset quality prove to be materially weaker than we anticipated or if thebank's weak profitability during the period of its strategic repositioning were accompanied by a meaningful reduction in capitalization.

TSB's BCA could also be downgraded if the parent's Banco Sabadell, S.A.'s (Sabadell; Baa2 stable, ba2) 1 BCA were downgraded.

A downward movement in TSB's BCA would likely result in a downgrade of all its ratings. TSB's deposit and issuer ratings could alsobe downgraded in response to a reduction in the volume of its deposits or debt that could be bailed in, which would increase the loss-given-failure for depositors.

Any increase in the interdependence between TSB and its parent, in the absence of an upgrade of Sabadell's BCA, could result innegative pressure on TSB's ratings.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page onwww.moodys.com for the most updated credit rating action information and rating history.

2 18 May 2020 TSB Banking Group plc: Update following ratings affirmation with a negative outlook

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Key indicators

Exhibit 2

TSB Banking Group plc (Consolidated Financials) [1]

12-192 12-182 12-172 12-162 12-152 CAGR/Avg.3

Total Assets (GBP Billion) 39.5 41.1 42.5 37.2 31.6 5.74

Total Assets (USD Billion) 52.4 52.4 57.5 46.0 46.6 3.04

Tangible Common Equity (GBP Billion) 1.9 1.8 2.0 1.9 1.7 1.74

Tangible Common Equity (USD Billion) 2.5 2.3 2.7 2.3 2.6 (0.9)4

Problem Loans / Gross Loans (%) 1.7 2.0 0.5 0.5 0.6 1.15

Tangible Common Equity / Risk Weighted Assets (%) 20.9 19.7 20.7 19.2 18.5 19.86

Problem Loans / (Tangible Common Equity + Loan Loss Reserve) (%) 27.0 29.1 7.6 7.3 8.8 15.95

Net Interest Margin (%) 2.1 2.2 2.4 2.5 2.7 2.45

PPI / Average RWA (%) 1.2 -0.3 2.5 2.5 2.1 1.66

Net Income / Tangible Assets (%) 0.1 -0.2 0.3 0.3 0.3 0.25

Cost / Income Ratio (%) 89.2 102.5 78.1 75.5 80.5 85.25

Market Funds / Tangible Banking Assets (%) 15.2 21.6 20.7 13.6 10.7 16.45

Liquid Banking Assets / Tangible Banking Assets (%) 17.7 24.7 24.3 17.7 14.3 19.75

Gross Loans / Due to Customers (%) 103.5 103.6 101.3 100.4 102.3 102.25

[1] All figures and ratios are adjusted using Moody's standard adjustments. [2] Basel III - fully loaded or transitional phase-in; IFRS. [3] May include rounding differences because of thescale of reported amounts. [4] Compound annual growth rate (%) based on the periods for the latest accounting regime. [5] Simple average of periods for the latest accounting regime. [6]Simple average of Basel III periods.Sources: Moody's Investors Service and company filings

ProfileTSB Bank plc (TSB) is a retail bank operating in the UK with a Macro Profile of Strong+ and headquartered in Edinburgh, Scotland. As ofDecember 2019, TSB was the ninth-largest rated UK bank by total assets, as listed in our Banking System Outlook – United Kingdom.

TSB was initially operating under the name of TSB Group plc, which was listed on the London Stock Exchange. In 1995, the groupmerged with Lloyds Bank and was renamed Lloyds TSB; however, it was later divested from Lloyds following a European Commissionruling. The new bank, named TSB Bank, began operating in 2013 with a strong presence in Scotland, and the remainder of Lloyds TSBwas renamed Lloyds Bank (Aa3 negative, a32). On 30 June 2015, TSBG was purchased by the Spanish banking group Sabadell.

Recent developmentsThe UK is one of the countries experiencing a severe and extensive credit shock from the rapid and widening spread of the coronavirusoutbreak, deteriorating global economic outlook, falling oil prices, and asset price declines (see 28 April 2020 update of Global MacroOutlook 2020-21: Global recession is deepening rapidly as restrictions exact high economic cost). The banking sector is one of thesectors affected by the shock given the expected negative impact on its profitability and asset quality.

Prior to the outbreak of the coronavirus, Moody’s had already expected a weakening operating environment in the UK anddeteriorating asset quality and profitability, with mortgage lenders in particular facing additional profitability challenges due tocontracting margins and strong competition.

The coronavirus outbreak will exacerbate these negative pressures. We expect a decrease in revenues due to mandatory lockdownmeasures, and also an increase in credit losses and provisions, an increase in the inflow of new problem loans, and a further contractionin net interest margins. At the same time, we expect that UK banks and building societies will maintain strong capital and liquiditydespite these negative pressures.

3 18 May 2020 TSB Banking Group plc: Update following ratings affirmation with a negative outlook

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Detailed credit considerationsThe financial data in the following sections are sourced from TSBG's financial statements unless otherwise stated.

Strong asset quality consisting mostly of mortgagesWe assign a score of a3 to TSB's asset risk, two notches below the Macro-Adjusted score. The assigned score reflects our expectationsfor asset quality deterioration as a result of the economic shock from the coronavirus outbreak, as well as the execution risk related toTSB's strategic transitioning plan and the bank's rapid loan portfolio expansion in the recent past.

We view TSB's loan portfolio as relatively low risk, consisting almost entirely of mortgage loans with relatively low loan-to-value(LTV), which was 45% as of 31 March 2020. TSB's mortgage portfolio amounted to £29.2 billion as of year-end 2019 (see Exhibit 3),representing 93% of TSB's £31.2 billion loan book. The remaining portion of the loan portfolio comprised unsecured loans (6% of totalloans) and a small amount of business banking lending (less than 1% of total loans).

About 13% of TSB's mortgages were buy-to-let loans, which we view as relatively low compared to other rated mortgage lenders.In addition, the mortgage loan portfolio includes a higher-risk mortgage portfolio (Whistletree), originated by Northern Rock before2007 and purchased from Cerberus Capital Management Group in 2015. Although these loans are now well-seasoned and performedwithin the bank's expectations in the benign credit environment, we view them as higher risk because they were underwritten under adifferent risk appetite framework. Positively, the size of the acquired loan book declined substantially, amortising to 46% of the originalamount of £3 billion by year-end 2019, represented 4.5% of total loans (down from 11.4% as of year-end 2015) and 4.8% of mortgageloan portfolio.

Exhibit 3

TSB's lending portfolio breakdown

0

5

10

15

20

25

30

35

2014 2015 2016 2017 2018 2019

£21.6 bn £26.4 bn £29.4 bn £30.9 bn £30.0 bn £31.1 bn

Bilio

n

Whistletree Loans Mortgage Enhancement Franchise (secured) Franchise (unsecured)

Source: Company's financials

According to our calculations, TSB's problem loan ratio was 1.7% as of year-end 2019, a decrease from 2.0% as of year-end 2018 (seeExhibit 4). The spike in the problem loan ratio in 2018 compared with previous years was because of TSB's adoption of IFRS9 and theacquisition of POCI loans, which were purchased or originated as credit-impaired loans per the bank's disclosures.

4 18 May 2020 TSB Banking Group plc: Update following ratings affirmation with a negative outlook

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Exhibit 4

TSB benefits from a good-quality loan portfolioThe increase in 2018 is driven by the IFRS9 adoption

0.00%

0.50%

1.00%

1.50%

2.00%

2013 2014 2015 2016 2017 2018 2019

Problem loans / Gross Loans, %

Source: Moody's Financial Metrics

Solid capital and leverage metrics protect TSB against downside risksWe view capital as one of TSB's main credit strengths, which is reflected in the assigned Capital score of aa3. The assigned score istwo notches below the Macro-Adjusted score, reflecting the anticipated decline in the bank's capitalisation due to changes in the risk-weighted assets (RWA) calculations. The score also reflects our view that the bank will be able to absorb a potential regulatory chargerelated to the IT migration challenges in 2018 without a meaningful impact to its capitalisation, due to potential recoveries underinsurance claims.

As of 31 March 2020, TSB's Common Equity Tier 1 (CET1) capital ratio was 19.8%. TSB previously projected that its CET1 ratio willdecline to around 16% by December 2020. The forecast was driven by the bank's projected loan portfolio growth and the regulatorychange related to the RWA calculations as a result of adopting a 90-day definition of default for the mortgage portfolio, required of allUK banks by the end of 2020. However, due to the current economic situation, with very limited amounts of new mortgage lending,and the government actions taken in response to the coronavirus outbreak, we believe the bank's capital levels will likely stay at thecurrent levels until the end of 2020.

TSB's Basel III fully loaded leverage ratio, calculated in accordance with the European Banking Authority standards, was 4.6% as of year-end 2019 and 4.5% as of 31 March 2020, relative to the regulatory minimum requirement of 3%.

Profitability is constrained by high cost base, in addition to existing net interest margin pressuresWe assign a caa1 score to TSB's Profitability, one notch below the Macro-Adjusted score, reflecting the large inherited cost base, theNIM pressure currently being experienced by UK mortgage lenders and expectation that the coronavirus outbreak will exacerbate theexisting profitability pressures, driven by a decrease in mortgage volumes because of mandatory lockdown measures, an increase in creditlosses and provisions from corporate and retail clients, and a further contraction in NIM due to the Bank of England's interest rate cutin March 2020.

TSB reported a £46 million profit before taxes in 2019, which was boosted by £39.6 million in recoveries of post-migration charges underservice agreements with Sabis (the IT arm of parent Sabadell). When normalizing for the recoveries, and also for £35.6 million of post-migration related expenses recorded in 2019 and £40.2 million of other non-recurring costs, mostly represented by restructuring expenses,TSB's core profit before tax was £76.8 million, a reduction of almost £100 million from core pre-tax earnings of £173.3 million last year.Approximately £32 million of the reduction was attributable to a decline in net interest income due to competitive environment in themortgage market, as well as the run-off of the higher-priced Whistletree portfolio and lower volumes of higher-margin unsecured lending.The remaining £77 million of the decline in the bank's core pre-tax profitability was driven by higher expenses, including compensation,as well as continued investments in business and increased costs related to a number of regulatory initiatives.

TSB's cost-to-income ratio in 2019 was 89%, which we view as very high, reflecting the bank's large branch network relative to its assetbase. We expect TSB's costs to remain elevated in the next 2-3 years, as the bank continues to optimise its cost structure with branchclosures and other budget initiatives, as well as with investments in its technology platform.

5 18 May 2020 TSB Banking Group plc: Update following ratings affirmation with a negative outlook

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In 1Q20, TSB’s net profits after tax were close to £0. The results included an £11 million insurance recovery payment, but also higherprovisions due to the need to provide for additional anticipated loan losses linked to the coronavirus crisis and the expectation ofdeteriorating economic conditions. Total lending to customers remained broadly flat in the quarter, with customer deposits increasingby £0.5 billion, mostly from current accounts.

Exhibit 5

High cost base impedes TSB's profitability

-0.3%

-0.1%

0.1%

0.3%

0.5%

0.7%

0.9%

-10%

10%

30%

50%

70%

90%

110%

2013 2014 2015 2016 2017 2018 2019

Cost/Income Ratio, % (LHS) Net Income/Tangible Assets, % (RHS)

LHS = left hand side; RHS = right hand side.Source: Moody's Financial Metrics

Moderate reliance on wholesale funding and a granular deposit baseTSB has a solid funding profile with moderate market funding reliance. We assign a baa1 Funding Structure score to TSB, one notchbelow the Macro-Adjusted score, to reflect the bank's large retail deposit base, as well as out expectations for the bank's long-term useof wholesale funding, which would vary in response to market conditions and the bank's growth objectives.

The bank's loan-to-deposit ratio remained low, at 103.5% as of December 2019, indicating largely deposit-funded loan portfolio. TSB'swholesale funding, calculated as the amount of market funds as a proportion of tangible banking assets, decreased to 15.2% as of year-end 2019 from 21.6% as of year-end 2018, driven mainly by a repayment of borrowings under the Bank of England's Term FundingScheme (TFS). With the introduction of the new Term Funding Scheme by the Bank of England in March 2020 (TFSME), we expect TSBto replace, in whole or in part, its borrowings under the existing TFS with advances under the new facility.

High-quality adequate liquid assets moderate refinancing riskTSB has high liquidity buffers, as reflected in our assigned baa2 Liquid Resources score, in line with the Macro-Adjusted score. Accordingto our calculations, TSB's liquid assets as a proportion of its tangible banking assets, was at 17.7% as of December 2019, a decreasefrom 24.7% as of December 2018. The bank's LCR was very strong at 31 March 2020, at 295%, an increase from 231% at year-end2019. The lower level at the recent year-end reflects the bank's paydowns under the TFS facility.

Qualitative adjustment and relationship with Banco SabadellIn aggregate, we assign a Financial Profile of baa1 to TSB. Given that TSB's business activity will be initially limited to retail bankingoperations, this relatively narrow focus results in a one-notch negative qualitative adjustment in respect of business diversificationresulting in a BCA of baa2.

Currently, TSB's BCA at baa2 exceeds the standalone rating of its parent Sabadell by three notches. This differential reflects the verylimited connection between the two institutions, Sabadell's plans to retain the TSB brand name and our expectations that the UKPrudential Regulation Authority will continue to ensure that TSB maintains adequate solvency and liquidity before any dividends areallowed to be paid. Should increasing operational links between the two institutions develop, this could affect the notching differentialbetween TSB and Sabadell.

Environmental, social and governance considerationsIn line with our general view on the banking sector, TSB has a low exposure to environmental risks. See our environmental risk heatmap for further information.

6 18 May 2020 TSB Banking Group plc: Update following ratings affirmation with a negative outlook

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The most relevant social risks for banks arise from the way they interact with their customers. Social risks are particularly high in thearea of data security and customer privacy, which are partly mitigated by sizeable technology investments and banks’ long track recordof handling sensitive client data. Fines and reputational damage because of product mis-selling or other types of misconduct are afurther social risk. The IT issue TSB experienced during migration of its systems in 2018 had substantial implications in the form offinancial costs and reputational damage.

Social trends are also relevant in a number of areas, such as shifting customer preferences towards digital banking services increasinginformation technology costs, ageing population concerns in several countries weakening demand for financial services or sociallydriven policy agendas that may translate into regulations that affect banks’ revenue base. Overall, we believe banks face moderatesocial risks.

In our assessment of social risk, we also include considerations in relation to the rapid and widening spread of the coronavirus outbreak,given the substantial implications for public health and safety and deteriorating global economic outlook, which are creating a severeand extensive credit shock across many sectors, regions and markets. See our social risk heat map for further information.

Governance is highly relevant for TSB, as it is to all competitors in the banking industry. Corporate governance weaknesses can leadto a deterioration in a company’s credit quality, while governance strengths can benefit its credit profile. Governance risks are largelyinternal rather than externally driven. The 2018 IT migration issue brought to light corporate governance deficiencies that subsequentlyresulted in management changes, including replacement of the CEO of the bank. TSB's corporate governance remains a key creditconsideration and requires ongoing monitoring.

Support and structural considerationsLoss given failure (LGF) analysis and additional notchingTSB is domiciled in the UK, a jurisdiction that is subject to the EU Bank Recovery and Resolution Directive, which we consider anoperational resolution regime. We assume residual TCE of 3% and post-failure losses of 8% of tangible banking assets, a 25% runoffin "junior" wholesale deposits and a 5% runoff in preferred deposits, and assign a 25% probability to deposits being preferred to seniorunsecured debt. These are in line with our standard assumptions. Particular to TSB and most savings banks and building societies inthe UK, we assume the proportion of deposits considered junior at 10%, relative to the standard assumption of 26%, because of theirlargely retail-oriented deposit base.

Our Advanced LGF analysis indicates that TSB's deposits and senior unsecured debt are likely to face moderate loss given failure,because of the volume of deposits and limited loss absorption provided by a relatively small amount of dated subordinated debt issuedby the holding company, TSBG. This results in a Preliminary Rating Assessment (PRA) for TSB's deposits and any senior unsecured debtat the same level as the bank BCA at baa2.

TSB Banking Group's senior unsecured and subordinated instruments are likely to face a high loss given failure according to ourAdvanced LGF analysis, given the relatively small volume of existing debt and very limited protection from more subordinatedinstruments and residual equity. This results in a baa3 PRA for TSB Group's existing Tier 2 dated subordinated bonds and potentially forsenior unsecured debt, one notch below that of TSB's BCA.

Government supportBecause of the limited interconnection with other financial institutions and the relatively small size of its operations, we assume a lowprobability of government support for TSB's deposits and its potential senior unsecured debt, resulting in no uplift to the PRA. The sameassumption applies to the future bondholders of TSB Group because holding company creditors would be expected to bear losses ifnecessary.

As a result, we assign issuer and deposit ratings of Baa2 to TSB, in line with the PRA. We also assign a Baa3 issuer rating to TSB Groupand a Baa3 rating to its existing Tier 2 dated subordinated bonds.

In line with our support assumptions on deposits and senior unsecured debt ratings, neither the CR Assessment nor CRRs benefit fromnotching uplift because of government support.

7 18 May 2020 TSB Banking Group plc: Update following ratings affirmation with a negative outlook

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Counterparty Risk Ratings (CRRs)CRRs are opinions on the ability of entities to honour the uncollateralised portion of non-debt counterparty financial liabilities (CRRliabilities) and also reflect the expected financial losses in the event that such liabilities are not honoured. CRR liabilities typicallyrelate to transactions with unrelated parties. Examples of CRR liabilities include the uncollateralised portion of payables arising fromderivative transactions and the uncollateralised portion of liabilities under sale and repurchase agreements. CRRs are not applicable tofunding commitments or other obligations associated with covered bonds, letters of credit, guarantees, servicer and trustee obligationsand other similar obligations that arise from a bank performing its essential operating functions

TSB's CRRs are positioned at Baa1/P-2The CRR is one notch above the bank's Adjusted BCA of baa2. The uplift derives from the buffer against default provided to theoperating obligations by bail-in-able debt and deposits.

Counterparty Risk (CR) AssessmentThe CR Assessment is an opinion of how counterparty obligations are likely to be treated if a bank fails and is distinct from debt anddeposit ratings in that it considers only the risk of default rather than both the likelihood of default and the expected financial losssuffered in the event of default and applies to counterparty obligations and contractual commitments rather than debt or depositinstruments. The CR Assessment is an opinion of the counterparty risk related to a bank's covered bonds, contractual performanceobligations (servicing), derivatives (for example, swaps), letters of credit guarantees and liquidity facilities.

TSB's CR Assessment is positioned at A3(cr)/P-2(cr)The CR Assessment is positioned two notches above the Adjusted BCA of baa2, based on the buffer against default provided to thesenior obligations represented by the CR Assessment by more subordinated instruments.

Methodology and scorecardAbout Moody's Bank ScorecardOur scorecard is designed to capture, express and explain in summary form our Rating Committee's judgement. When read inconjunction with our research, a fulsome presentation of our judgement is expressed. As a result, the output of our scorecardmay materially differ from that suggested by raw data alone (though it has been calibrated to avoid the frequent need for strongdivergence). The scorecard output and the individual scores are discussed in rating committees and may be adjusted up or down toreflect conditions specific to each rated entity.

8 18 May 2020 TSB Banking Group plc: Update following ratings affirmation with a negative outlook

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Rating methodology and scorecard factors

Exhibit 6

TSB Banking Group plc

Macro FactorsWeighted Macro Profile Strong + 100%

Factor HistoricRatio

InitialScore

ExpectedTrend

Assigned Score Key driver #1 Key driver #2

SolvencyAsset RiskProblem Loans / Gross Loans 1.7% a1 ←→ a3 Operational risk Loan growth

CapitalTangible Common Equity / Risk Weighted Assets(Basel III - fully loaded)

20.9% aa1 ↓↓ aa3 Expected trend Capital retention

ProfitabilityNet Income / Tangible Assets 0.1% b3 ←→ caa1 Expected trend

Combined Solvency Score a2 baa1LiquidityFunding StructureMarket Funds / Tangible Banking Assets 15.2% a3 ←→ baa1 Expected trend

Liquid ResourcesLiquid Banking Assets / Tangible Banking Assets 17.7% baa2 ←→ baa2 Expected trend

Combined Liquidity Score baa1 baa1Financial Profile baa1Qualitative Adjustments Adjustment

Business Diversification -1Opacity and Complexity 0Corporate Behavior 0

Total Qualitative Adjustments -1Sovereign or Affiliate constraint Aa2BCA Scorecard-indicated Outcome - Range baa1 - baa3Assigned BCA baa2Affiliate Support notching 0Adjusted BCA baa2

Balance Sheet in-scope(GBP Million)

% in-scope at-failure(GBP Million)

% at-failure

Other liabilities 7,749 19.6% 9,861 25.0%Deposits 30,182 76.4% 28,070 71.1%

Preferred deposits 27,164 68.8% 25,806 65.3%Junior deposits 3,018 7.6% 2,264 5.7%Dated subordinated holding company debt 385 1.0% 385 1.0%Equity 1,185 3.0% 1,185 3.0%Total Tangible Banking Assets 39,501 100.0% 39,501 100.0%

9 18 May 2020 TSB Banking Group plc: Update following ratings affirmation with a negative outlook

MOODY'S INVESTORS SERVICE FINANCIAL INSTITUTIONS

De Jure waterfall De Facto waterfall NotchingDebt ClassInstrumentvolume +

subordination

Sub-ordination

Instrumentvolume +

subordination

Sub-ordination

De Jure De FactoLGF

NotchingGuidance

vs.Adjusted

BCA

AssignedLGF

notching

AdditionalNotching

PreliminaryRating

Assessment

Counterparty Risk Rating 9.7% 9.7% 9.7% 9.7% 1 1 1 1 0 baa1Counterparty Risk Assessment 9.7% 9.7% 9.7% 9.7% 2 2 2 2 0 a3 (cr)Deposits 9.7% 4.0% 9.7% 4.0% 0 0 0 0 0 baa2Dated subordinated holding companydebt

4.0% 3.0% 4.0% 3.0% -1 -1 -1 -1 0 baa3

Instrument Class Loss GivenFailure notching

Additionalnotching

Preliminary RatingAssessment

GovernmentSupport notching

Local CurrencyRating

ForeignCurrency

RatingCounterparty Risk Rating 1 0 baa1 0 Baa1 Baa1Counterparty Risk Assessment 2 0 a3 (cr) 0 A3(cr)Deposits 0 0 baa2 0 Baa2Dated subordinated holding companydebt

-1 0 baa3 0 Baa3

[1] Where dashes are shown for a particular factor (or sub-factor), the score is based on non-public information.Source: Moody’s Investors Service

Ratings

Exhibit 7

Category Moody's RatingTSB BANKING GROUP PLC

Outlook NegativeIssuer Rating -Dom Curr Baa3Subordinate -Dom Curr Baa3

PARENT: BANCO SABADELL, S.A.

Outlook StableCounterparty Risk Rating Baa1/P-2Bank Deposits Baa2/P-2Baseline Credit Assessment ba2Adjusted Baseline Credit Assessment ba2Counterparty Risk Assessment Baa1(cr)/P-2(cr)Senior Unsecured -Dom Curr Baa3Junior Senior Unsecured -Dom Curr Ba3Senior Subordinate -Dom Curr (P)Ba3Pref. Stock Non-cumulative -Dom Curr B2 (hyb)

TSB BANK PLC

Outlook NegativeCounterparty Risk Rating Baa1/P-2Bank Deposits -Dom Curr Baa2/P-2Baseline Credit Assessment baa2Adjusted Baseline Credit Assessment baa2Counterparty Risk Assessment A3(cr)/P-2(cr)Issuer Rating -Dom Curr Baa2

Source: Moody's Investors Service

Endnotes1 The bank ratings shown in this report are the bank’s deposit rating and Baseline Credit Assessment

2 The bank ratings shown in this report are the bank's deposit rating and BCA.

10 18 May 2020 TSB Banking Group plc: Update following ratings affirmation with a negative outlook

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CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND/OR ITS CREDIT RATINGS AFFILIATES ARE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURECREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S(COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. MOODY’S INVESTORS SERVICE DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAYNOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEEMOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’SINVESTORS SERVICE CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, ORPRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS (“ASSESSMENTS”), AND OTHER OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTSOF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS ORCOMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DONOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOTAND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS ANDPUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS, ASSESSMENTS ANDOTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDYAND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

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Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (includingcorporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any credit rating,agreed to pay to Moody’s Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and Moody’sinvestors Service also maintain policies and procedures to address the independence of Moody’s Investors Service credit ratings and credit rating processes. Information regardingcertain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody’s Investors Service and have also publiclyreported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance —Director and Shareholder Affiliation Policy.”

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s InvestorsService Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intendedto be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, yourepresent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly orindirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as tothe creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.

Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’sOverseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a NationallyRecognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by anentity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registeredwith the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferredstock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and servicesrendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

REPORT NUMBER 1214005

11 18 May 2020 TSB Banking Group plc: Update following ratings affirmation with a negative outlook