By Jonathan Davies

The Spanish bank Banco Sabadell has launched a takeover bid for UK bank TSB.

TSB said Sabadell's offer is "preliminary" and a formal bid has not yet been made.

The bank said Sabadell was offering 340p per share - TSB's shares closed at 264.05p on Wednesday. If the bid goes ahead and is successful, it would value TSB at £1.7bn, less than two years after it was split from Lloyds Banking Group, which still owns 50%.

In a statement, TSB said: "The board of TSB has indicated to Sabadell that it would be willing to recommend an offer at the proposed price, subject to reaching agreement on the other terms and conditions of any offer."

Sabadell is Spain's fifth biggest bank, and is understood to be keen to expand its overseas operation to counter slow growth at home.

TSB's shares surged 25% after news of the bid.