Santander, the Spanish multinational bank, is reconsidering its presence in the UK, more than two decades after entering the British market with its acquisition of Abbey National. According to sources, the bank is exploring various strategic options, including a complete exit from the UK retail and commercial banking market.
While discussions are at an early stage, frustrations over the persistently high cost base, the UK's regulatory ringfencing regime, and lower returns compared to other markets like Spain have driven the reconsideration. Santander also faces exposure to a court ruling on potential car loan mis-selling, prompting a £295 million provision in November.
Challenges in the UK Market:
- Cost Base: Santander UK has struggled with high operational costs compared to its global peers.
- Regulatory Hurdles: The UK's ringfencing rules and the independence of the UK board have added complexities to its operations.
- Missed Opportunities: Rising interest rates have benefited Santander’s markets like Spain more than the UK.
A former executive noted that a potential sale has "always been a possibility," citing longstanding frustrations within the broader Santander group.
Santander entered the UK retail banking market in 2004 by acquiring Abbey National and later merged it with Alliance & Leicester and parts of Bradford & Bingley. This move positioned Santander as one of the UK’s largest lenders, rebranding as Santander UK in 2010.
At the time, the acquisition was hailed as a significant inward investment into the UK. A sale now, however, might be perceived as a loss of confidence in the UK market, particularly as the Labour government grapples with economic challenges.
Santander’s focus has shifted toward growth in regions like the US. The bank has aggressively expanded its corporate and investment banking operations, hiring from competitors like Credit Suisse.
Even if Santander exits UK retail banking, it plans to maintain its corporate and investment banking presence in London.
Santander UK reported pre-tax profits of £947 million during the first nine months of 2024, down from £1.73 billion in the same period a year earlier. Total assets stood at £275 billion at the end of September.
In October, the bank announced a cost-cutting initiative, “Project Nike,” which included a reduction of 1,400 UK jobs. It currently employs 21,000 staff and serves 14 million customers in the UK.
