Spain-based Banco Santander, S.A. (ES:SAN) is reportedly looking at its exit from the UK market due to lower returns than other regions. According to the Financial Times, the company is not satisfied with the performance of Santander UK (GB:SANB) over the last few years. Meanwhile, Santander’s evaluation of its UK operations also comes as a part of its boarder-level review of its key businesses. Nonetheless, sources noted that no decision or announcement is expected soon, and the review is still in its early stages.
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Santander UK is one of the major retail and commercial banks in the UK and operates as a subsidiary of Banco Santander.
Santander Evaluates More Options
The FT stated that the bank is considering several options, including the possibility of exiting the UK market or reducing its operations in the region. Additionally, Santander could be considering exiting the UK retail and commercial banking market to focus on higher-growth regions like the U.S., according to sources. However, the bank would likely maintain its corporate and investment banking operations in the UK.
Overall, the Spanish group is facing troubles in its UK operations. These are mainly attributed to its high-cost base, its independent board, and limited benefit from rising interest rates compared to markets like Spain. In November, Santander had also set aside £295 million to cover potential costs linked to an industry-wide investigation into motor finance commissions. Before that, the company announced 1,400 job cuts in October to simplify and automate its structure amid the competitive mortgage market in Britain.
Notably, Spanish banks reported strong results in the first half of 2024 and expect similar trend for the second half, driven by high interest rates and a quicker-than-expected rebound in loan volumes. On the other hand, Santander’s net profit in the UK market dropped 19% year-on-year in Q3 FY24, with lending income falling 7%. The bank will announce its FY24 results on February 05.
Is Banco Santander a Good Stock to Buy?
According to TipRanks’ analyst consensus, SAN stock has a Strong Buy rating backed by eight Buy and two Hold recommendations. The Santander share price forecast is €5.75, which is almost 20% higher than the current price level.
