Spanish banking giant Santander is reportedly considering quitting Great Britain due to the impact of ‘excessive red tape’ on its profitability.
A report in the Financial Times, suggests that Santander is considering a number of options for its British operations, including exiting the market altogether.
A former executive at the bank claimed that Santander UK has been a source of frustration for the group because of a high cost base, an independent board and lower interest rates. The fact that Santander UK is required to ring-fence it’s retail banking, is also believed to be an issue for it’s Spanish parent.
Legacy Of The Financial Crisis
Ring-fencing was introduced to the British bank system in the wake of the 2008 financial crisis. Ring-fencing rules require the separation of retail banking from other banking activities. The rules came in to ensure that ordinary consumers would not longer be at risk from having their savings wiped out because investment bankers took a risk too far.
While Santander may have gripes with the post-crisis regime, ironically it was partially through the financial crisis in the banking sector that Santander became a household name in Great Britain.
Although Santander made it’s mark on the British scene before the crisis, with it’s acquisition of Abbey National in 2004, it’s reach was increased during the crisis when it bought out casualties of the crash, such as Bradford & Bingley and Alliance & Leicester.
Santander’s Future Plans
Santander has around 14 million customers in Great Britain and employs approximately 21,000 staff. Last year the company announced it would be cutting 1,400 jobs in Britain in an effort to reduce costs. It also announced a drop in profits, with pre-tax profits of £947 million in the first nine months of the year, down from £1.73 billion in the same period the previous year.
Santander has not announced any plans to leave Great Britain and indeed told the FT, ‘The UK is a core market for Santander and this has not changed.’ Despite this apparent show of confidence in the British market, the former executive quoted by the FT insisted that selling up remained a possibility, although no potential buyers of the business have been suggested.
The FT report indicates that, were Santander to close in Britain, it would likely focus on regions perceived to have higher returns, such as the US. It was also noted that Santander would likely retain it’s investment banking operations in Britain and close only it’s retail banking arm.
