Santander is mulling quitting the UK due to lower returns than other countries, a source told the Financial Times
The lender's Spanish parent company is considering a number of options, they said, due to "frustrations" with the UK in recent years.
Santander UK suffers from various problems, the former executive said, including a "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".
In October, the UK arm announced 1,400 job cuts as a means of reducing costs and a month later revealed a big fall in profits, partly due to provisions for possible motor finance commission compensation claims.
However, a statement from a Santander spokesperson yesterday stated: "The UK is a core market for Santander and this has not changed."
Shares in Santander rose 2.4% in London and 1.5% in Spain on Monday morning.
Citi analysts said the Spanish bank is "struggling to turnaround a subpar deposit franchise".
Despite the balance sheet optimisation strategy launched in 2023 that has resulted in a 9% drop in the mortgage book, Santander UK's return on tangible equity has narrowed to circa 10% from 14% in 2022, they noted.
Looking at possible scenarios of the exit, the Citi analysts calculates the impact on group's capital CET1 levels from selling the UK business at a price range between 0.0-1.0x book value (like last year's Virgin Money-Nationwide transaction at 0.7x) this would free up about 75 basis points of capital and leave it with €3.7 billion surplus capital.
** Update: Adds price and analyst comment **