Santander now issues half of all new UK mortgages – and plans to expand

Published 06th Feb 2010

Santander now issues half of all new UK mortgages – and plans to expand

Spanish bank considers purchase of 300 former RBS branches as profits from British operations rise 30%


Santander is planning to accelerate its expansion in Britain after reporting bumper profits in a market where it is now issuing 50% of all new mortgages.

The Spanish bank saw its share of new and existing mortgage lending peak at 20.4% over the last three months of last year, as its red flame logo began to replace the brands it has bought on Britain's high streets.

Santander's UK net lending – which strips out remortgaging – reached £7.6bn in 2009, estimated to be half the net lending of the entire market. Gross mortgage lending of £26.4bn gave the bank an overall market share for the year of 18.6%, a level it believes is its highest ever.

After acquiring Bradford & Bingley and Alliance & Leicester in the depths of the financial crisis, Santander is now Britain's third-largest bank, in terms of deposits, after RBS and Lloyds Banking Group. The UK market now provides 16% of the group's profits.

Chairman Emilio Botín said in Madrid today that the bank made profits of £1.5bn in Britain last year, up 30%, and planned to continue expanding. "We will grow organically in the UK, and we will study any potential opportunities as they come," he said during Santander's annual profits presentation, adding that the bank would now also target the small and medium-sized business sector.

Santander is understood to be one of the parties interested in buying the 300-strong former Williams & Glyn's branch network that RBS will put up for sale next year, which focuses on small business banking. Chief executive Alfredo Sáenz added: "There's still much to be done in Britain."

The bank also appears to have benefited from the recent spate of withdrawals of savings from building societies by taking in new savings of £14.9bn.

The UK and Brazilian market helped Santander hold full-year profits at €8.9bn (£7.7bn), compared with last year's €8.8bn, and in line with the bank's own estimates. Santander also reported a €1.4bn one-off gain after floating a stake in its Brazilian arm, which offset a rise in bad loans, mostly in Spain.

The bank is also in talks to expand in China, although these discussions are preliminary, Botín said, declining to give more details.

Santander has benefited from the near collapse of its rivals in Britain, which are suffering for past forays into the riskier activities of investment banking. Unlike many European banks, Santander has avoided heavy losses as it did not invest in "toxic assets" such as mortgage backed securities, Botín said. The bank's investment banking unit, not created until 1985, only accounts for about 15% of the group's profits. Santander's business model is based on its more than 13,000 branches, directed from the company's headquarters in a bleak central area of Spain.

"We have to differentiate between retail and investment banks: some banks created the crisis, and others didn't. We need to get back to basics – we've always been there," Botín said.

The veteran banker called for better supervision as the key towards a stable financial system. He said President Obama's proposals to clamp down on investment banking and bankers' bonuses should not be emulated in Europe as they take the focus away from regulatory reform. "They penalise, indiscriminately, a sector that's very important for economic growth," he said.

The chairman backed the Spanish ­government's move to cut its budget deficit and restore financial confidence. Unemployment in Spain's shrinking economy now exceeds 4 million people, or almost 19% of the population, and has pushed the bank's bad loan ratio in its home market up to 3.4%. Spain accounts for 25% of the company's profits.

Concerns about the capacity of southern European countries to pay their debts in the wake of the Greece crisis have pushed debt and equity markets lower in Spain and Portugal. Santander shares fell as much as 4.4% during the day. "This shall pass," Botín said.

Source: ' Guardian '

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