Santander considers UK exit amid turmoil for high street banks

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Santander is rethinking its UK presence two decades after acquiring Abbey National to make it a major player on Britain’s high street, according to people familiar with the matter.

The bank is exploring a number of strategic options, one of which is from the UK market, the people said. They also said that there is no agreement or announcement imminent and that the investigation is still in its early stages.

The move comes as the Spanish lender grapples with low returns on its UK-bound business relative to other markets, and its exposure to a British court ruling over the mis-selling of car loans. In November, that is set aside £295mn to cover the potential costs of the judgment.

Santander UK – which includes its retail and business operations in the UK – has caused confusion within the wider group in recent years, a former executive has said.

This was due to high ongoing costs, the UK’s tight control, its independent board, and the fact that it did not benefit from rising interest rates in recent years. like other markets like Spain.

The former boss said it was “always a possibility” that Ana Botín, Santander’s chief executive, would decide to sell the struggling bank because of the turmoil. Two people familiar with the matter said it was unclear who would be interested in buying the branch.

Santander could still decide to keep the business.

Santander entered the UK banking market in 2004 with its purchase of former construction company Abbey National and emerged from the financial crisis as one of Britain’s largest lenders by merging Abbey with Alliance & Leicester and part of Bradford & Bingley. It rebranded as Santander UK in 2010.

At the time, Santander’s entry into the UK was seen as a major domestic investment. The sale may be seen as a sign of a decline in confidence in Britain at a time when the Labor government is struggling to revive the country’s economy.

The Abbey deal helped transform Santander from a family-owned home loan provider into a multinational giant. Botín, whose family has controlled Banco Santander since the turn of the 20th century, ran the UK business from 2010 until he was promoted to the group chair in 2014 following the death of his father.

Some investors in the Spanish group question the fact that Santander maintains a presence in the different markets where it operates. Shares in Santander have fallen 30 percent since Botín became chairman.

The bank is already reducing its headcount in the UK and in October announced plans to cut 1,400 jobs in the country as part of a cost-cutting initiative called “Project Nike”. It employs around 21,000 people in the UK and has 14 million customers.

The bank is exploring an exit from the UK in part because it wants to focus on big growth areas like the US, people familiar with the matter said.

It recently announced a major expansion of its corporate and investment bank, recruiting mainly from former Credit Suisse bankers.

Even if Santander decides to withdraw from retail and commercial banking in the UK, people familiar with the matter say it will continue to operate in commercial and investment banking, keeping a London location for that business.

Santander UK reported a pre-tax profit of £947mn in the first nine months of 2024, up from £1.73bn in the same period a year earlier, as interest rates fell and set aside a provision for car finance decision. It had total assets of £275bn at the end of September.

Santander said: “The UK is Santander’s core market and this has not changed.”

Additional report by Barney Jopson in London