Santander considers UK exit amid frustrations with high street banking

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Santander is rethinking 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, including 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 move comes as the Spanish lender disputes lower returns on its UK ringfenced business than in other markets and its exposure to a British court ruling over the possible mis-selling of car loans. In November, it Set aside £295mn Incumbents cover potential costs.

Santander UK – which includes its retail and commercial banking operations in the UK – has caused frustration among the wider group in recent years, a former executive said.

It has not benefited from the UK’s ring fencing regime, its independent board and rising interest rates like other markets such as Spain in recent years, due to its persistently high cost base, they added.

The former executive said it was “always a possibility” that Santander’s executive chair Anna Bottin would decide to sell the ringfenced bank as a result of the disappointment. It is unclear who would be interested in buying the unit, two people familiar with the matter said.

Santander may still decide to keep the business.

Santander entered the UK retail banking market in 2004 by buying the former building society Abbey National and emerged from the financial crisis as one of Britain’s largest lenders through an alliance with Abbey and Leicester and a combination of parts 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 in the country. A sale could potentially be perceived as a sign of declining confidence in Britain at a time when the Labor 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. Bottin, whose family has controlled Banco Santander since the turn of the 20th century, ran the UK business from 2010 until he was promoted to group chair in 2014 following the death of his father.

Some investors in the Spanish group have questioned Santander’s rationale for maintaining a presence in the diverse markets in which it operates. Shares in Santander have fallen nearly 30 percent since Bottin became chair.

The bank has already reduced 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 around 21,000 staff in the UK and has 14 million customers.

The bank is examining an exit from the U.K. in part because it wants to focus on bigger growth areas like the U.S., people familiar with the matter said.

It recently embarked on an aggressive expansion of its corporate and investment bank, hiring heavily from former Credit Suisse bankers.

Even if Santander decides to pull back from UK retail and commercial banking, people familiar with the matter said it will continue to work in corporate and investment banking, maintaining a London outpost for that business.

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

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

Additional reporting by Bernie Jopson in London