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Building a global retail bank is hard work. If Santander decides to pull out of the UK, it could find dismantling a global retail bank is no easier.
The Spanish banking group is considering the future of its British arm, built by rolling up former building societies like Abbey National in the 2000s. The frustrations are obvious: high costs, fairly low recent returns and slow growth.
At first glance, exiting the UK might seem as easy as cutting along the dotted line. Watchdogs already demand UK retail banks be legally ringfenced from international and investment banking operations. However, Santander has spent years working to centralise the back-end systems that power its different businesses. Attempted disentanglements at rivals like Deutsche Bank and Sabadell have run into problems.
Even if boss Ana Botín succeeds, she might find she has opened a Pandora’s box that is hard to shut. Santander has always defended its business model — with retail banks in 10 “core” markets — by arguing that markets going through temporary troubles are offset by stronger ones.
That has been vindicated in the past. At times in the 2010s, the UK was Santander’s most profitable market, while its US business underperformed. In later years, though, the US reported higher profits than the bank’s foundational Spanish division. If Botín is now of the view that laggard businesses should be put up for sale, it will be harder to dismiss demands for shrinking further.
Then there’s the challenge of finding a buyer. A combination with local UK rivals Barclays or NatWest would create the largest mortgage lender in the country, with more than 20 per cent market share. That would not be an encouraging development for regulators that have spent the last 15 years complaining that the UK banking sector is too concentrated.
Either way, nothing will happen quickly. Look at rival Citigroup, which vowed in 2022 to divest its Mexican retail business Banamex. After failing to find a buyer at a reasonable price, CEO Jane Fraser decided to list the business instead. Now she says that might take until 2026 — which will mark four years of trying to cut the division loose.
It makes sense that Botín would be considering her options. Santander’s share price has fallen 30 per cent since she succeeded her father as chair in 2014. If the latest deal talk flushes out a prospective buyer with an offer that is too good to refuse, the group would be remiss to ignore it. But backing out of Britain is no quick fix.
