Santander weighs UK exit after two decades

London: Santander, the Spanish banking giant, is reportedly reviewing its UK operations, raising the prospect of a potential exit after two decades in Britain.

The bank, which entered the UK market in 2004 with the acquisition of Abbey National and later integrated Alliance & Leicester and Bradford & Bingley, has become a significant player on the British high street. However, mounting regulatory pressures and operational challenges have prompted a reassessment of its position.

The UK’s regulatory environment, particularly the ringfencing rules introduced after the financial crisis, has long been a source of frustration for Santander. These regulations require banks to separate consumer deposits from investment banking activities, creating operational complexities and limiting flexibility.

While some easing of these rules has been proposed, the changes primarily benefit smaller banks, leaving Santander’s challenges largely unaddressed.

Adding to its difficulties, Santander is grappling with a costly scandal over mis-sold car finance. An October 2024 court ruling significantly expanded the scope of investigations, with potential compensation costs for the sector estimated to reach up to £30 billion.

Santander has set aside £295 million to cover its liabilities, but the financial and reputational impact continues to weigh on its UK operations.

Internally, the review has caused unease among Santander’s 21,000 UK employees and its 14 million customers. A memo from John Baldwin, CEO of Santander’s UK corporate and commercial bank, sought to reassure staff, emphasizing that the UK remains a “core market” and framing the review as part of routine strategic planning.

However, this reassurance comes amid broader cost-cutting measures, including the planned reduction of 1,400 jobs under a scheme referred to as “Project Nike.”

Should Santander decide to exit, it would mark one of the most significant changes to the UK’s banking landscape in recent years. Analysts have speculated that major players like Barclays and HSBC could be potential buyers, though integrating Santander’s £275 billion in assets would pose considerable regulatory and operational challenges.

Such a move could also amplify concerns about the UK’s attractiveness as a destination for foreign investment. Critics argue that overly stringent regulations are discouraging international players, further exacerbating challenges for the financial sector.

Globally, Santander appears to be shifting its focus toward higher-growth regions, particularly the US, where it has been aggressively expanding its corporate and investment banking activities.