Santander could float its £15bn UK banking arm

Feb 8 2010 by Chris Knox, The Journal

SPANISH banking giant Santander is weighing up a possible £15bn float of its UK banking interests, it has been reported.

The plans could see a return to the stock market for the British trio bought by Santander – Alliance & Leicester, Abbey and the savings business of Bradford & Bingley.

The Spanish firm – which recently completed the rebranding of its Abbey and B&B branches under the Santander name – is said to be looking at selling a minority 25% stake in the UK business.

This would give it the funds to bolster its UK position by buying up the 300 branches due to be sold by Royal Bank of Scotland to ease European competition authorities.

The capital raised by the float could also help Santander weather the losses likely from its exposure to the ailing Spanish economy.

The Spanish group has grown rapidly since it entered the UK high street in 2004 with the acquisition of Abbey, although it is likely to face competition for the RBS branches from Virgin Money and the National Australia Bank.

Its deals for A&L and the B&B business in 2008 has left it with 25 million customers and 1,300 branches.

The bank is the UK’s second biggest mortgage lender and third biggest savings provider.

But Santander – which declined to comment on the report – has also announced plans to take on the big four high street banks on current accounts.

It hopes to gain market share by undercutting rivals through offering market leading products, and by cross-selling as many different products as possible to existing customers. The bank has launched a fee-free zero current account for existing customers and last week said it had opened an extra 1.1 million new bank accounts last year, slightly above its target.

The group also posted a 30% rise in annual profits at its UK arm to £1.54bn in the year to December 31, despite a 44% leap in bad debts to £784m. It also boosted its net mortgage lending by a quarter to £7.6bn. Santander has also increased its presence in the North East recently after signing a 10-year lease to house its corporate banking department on the ninth floor of West tower at Baltic Place on the Gateshead Quayside.