Santander considers UK exit amid frustrations with high street banking

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Santander is reconsidering its presence in the UK two decades after its acquisition of Abbey National made 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 exiting the UK market, the people said. They added that no deal or announcement was imminent and that the review was at an early stage.

The process comes as the Spanish lender contends with lower returns at its UK ringfenced business relative to other markets, and its exposure to a British court ruling about the possible mis-selling of car loans. In November, it set aside £295mn to cover the potential costs of the ruling.

Santander UK — which encompasses its retail and commercial banking operations in the UK — has caused frustrations within the wider group in recent years, said one former executive.

This was because of its persistently high cost base, the UK’s ring fencing regime, its independent board, and the fact that it did not benefit from rising interest rates in recent years as much as its other markets like Spain, they added.

The former executive said that it had “always been a possibility” that Ana Botín, executive chair of Santander, would decide to sell the ringfenced bank as a result of these frustrations. Two people familiar with the matter said it was unclear who would be interested in buying the unit.

Santander could yet decide to keep the business.

Santander entered the UK retail banking market in 2004 with its purchase of former building society Abbey National and emerged from the financial crisis as one of Britain’s largest lenders through the combination of Abbey with Alliance & Leicester and part of Bradford & Bingley. It rebranded the combined entity as Santander UK in 2010.

At the time, Santander’s entry into the UK was seen as a huge inward investment into the country. A sale could potentially be perceived as a signal of falling confidence in Britain at a time when the Labour government is struggling to revive the country’s flagging economy.

The Abbey deal helped transform Santander from a family-run regional mortgage lender into a multinational giant. Botín, whose family has controlled Banco Santander since the early 20th century, ran the UK business from 2010 until she was elevated to group chair in 2014 following her father’s death.

Some investors in the Spanish group have questioned the logic of Santander maintaining a presence in the disparate set of markets where it operates. Santander’s shares have fallen about 30 per cent since Botín became chair.

The bank has already been 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 plan dubbed “Project Nike”. It employs about 21,000 staff in the UK and has 14mn customers.

The bank is examining an exit from the UK in part because it wants to focus on bigger growth regions such as the US, people familiar with the matter said.

It recently launched an aggressive expansion of its corporate and investment bank, recruiting heavily from the ranks of former Credit Suisse bankers.

Even if Santander did decide to retreat from retail and commercial banking in the UK, people familiar with the matter said it would continue to operate in corporate and investment banking, retaining a London outpost for that business.

Santander UK reported pre-tax profits of £947mn during the first nine months of 2024, down from £1.73bn during the same period a year earlier, as net interest income fell and it set aside the provision for the auto financing ruling. It had total assets of £275bn at the end of September.

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

Additional reporting by Barney Jopson in London