The information contained in this
statement is unaudited and does not comprise statutory accounts
within the meaning of section 434 of the Companies Act 2006 ('the
Act'). The statutory accounts for the year ended 31 December 2023
have been filed with the Registrar of Companies. The report of the
auditor on those statutory accounts was unqualified, did not draw
attention to any matters by way of emphasis and did not contain a
statement under section 498(2) or (3) of the Act.
This
statement provides a summary of the unaudited business and
financial trends for the six months ended 30 June 2024 for
Santander UK Group Holdings plc and its subsidiaries (Santander
UK), including its principal subsidiary Santander UK plc. The
unaudited business and financial trends in this statement only
pertain to Santander UK on a statutory basis. Unless otherwise
stated, references to results in previous periods and other general
statements regarding past performance refer to the business results
for the same period in 2023.
This
statement contains non-IFRS financial measures that are reviewed by
management in order to measure our overall performance and these
are outlined in the Appendix. A list of abbreviations is included
at the end of this statement and a glossary of terms is available
at:
https://www.santander.co.uk/about-santander/investor-relations/glossary
Santander UK Group Holdings plc
Quarterly Management Statement
for the six months ended 30 June 2024
Mike Regnier, Chief Executive Officer,
commented:
"We remain focused on supporting our customers and delivering
products and services that help them make the most of their money.
Our expanded digital offer - including OneApp, our new mobile
banking app which has new functionality for an improved customer
experience - is making it easier to use our services. We're also
offering competitive savings rates and improved access to mortgage
financing. Our retail customers have responded by ranking us second
in the NPS survey, positioning us in the top three of UK
banks.
"We've seen an increase in customers choosing our products
with more businesses using Banco Santander's global network to
trade abroad and continued success with our Edge current account.
We will continue to leverage the scale and expertise of Banco
Santander to ensure we're offering customers innovative and
sustainable products. Looking ahead, we remain well positioned to
support our retail and business customers as they benefit from the
fall in inflation and improving economic picture.
"Our first half financial results were in line with our
expectations, with a more positive trajectory reflecting
improvements in the second quarter. Banking NIM increased by 2bps
and strengthened as the quarter evolved. Our continued prudent
approach to risk and balance sheet management means we remain well
capitalised with a CET1 capital ratio of 15.2% after dividends and
we expect the impact of our pricing actions and the increasing
yield from the structural hedge to provide Banking NIM tailwinds in
H2-24."
H1-24 financial and business highlights
We continued to help and support our
customers
|
§
|
Delivered our new mobile banking
app to six million UK customers, following introduction across
Spain, Portugal and Poland.
|
|
|
§
|
NPS1 rank improved to
2nd for Retail and remained 1st for Business
& Corporate, reflecting our focus on customer
service.
|
|
|
§
|
Working towards completion of
Consumer Duty Phase 2 by 31 July 2024, to ensure continued delivery
of good customer outcomes.
|
|
§
|
Grew our CCB business with 320 new
clients, providing connections to our global network to support
their UK and overseas growth.
|
Second quarter performance improved with Q2-24 profit before
tax up to £413m (Q1-24: £391m)
|
§
|
Q2-24 Banking NIM2 of
2.09% improved 2bps QoQ with a strong end of the quarter. Net
interest income stable in the quarter following active margin
management.
|
|
§
|
Q2-24 CIR2 of 55%
improved 2pp QoQ, with stable income and lower costs returning to
positive operating jaws.
|
|
§
|
Q2-24 cost of risk2
flat at 8bps QoQ with low arrears, positioning us well as we exit
the period of higher inflation and bank rate.
|
|
§
|
Delivered improvements from our
transformation programme, through simplifying our business and
automating processes.
|
Half yearly profit before tax of £804m (H1-23: £1,173m), with
RoTE2 of 10.9% (2023: 14.4%)
|
§
|
Net interest income down 11%,
largely due to higher customer deposit costs.
|
|
§
|
Operating expenses up 5%,
following further investment in efficiency and customer experience
and two years of high inflation.
|
|
§
|
Credit impairment charges down 43%
and cost of risk2 down to 8bps (H1-23: 14bps), given the
improved economic outlook.
|
|
§
|
Stage 3 ratio2 of
1.57%, up 8bps from Dec-23, due to a smaller mortgage book and
additional single name cases in CCB.
|
Customer loans and deposits reduced following further
disciplined pricing actions, with LDR of 109% (Dec-23:
108%)
|
§
|
While
H1-24 mortgage loans reduced by £4.4bn, we saw improved new
business margins and gross lending in the second
quarter.
|
|
§
|
Customer
deposits reduced by £5.6bn in H1-24, following savings outflows due
to repricing actions taken in Q2-24.
|
Strong liquidity, capital and funding
|
§
|
LCR of 147% reduced following TFSME repayments (Dec-23: 162%) with
liquidity pool of £49.1bn (Dec-23: £50.9bn).
|
|
§
|
In Jun-24 we paid £556m in interim
dividends.
|
|
§
|
CET1 capital ratio of 15.2%
(Dec-23: 15.2%) and UK leverage ratio of 4.9% (Dec-23: 5.1%), well
above minimum requirements.
|
|
§
|
Stable and diversified wholesale
funding programmes.
|
Looking ahead
|
§
|
We intend to continue to
prioritise profitability, capital generation and our core banking
franchise in 2024, through planned balance sheet optimisation,
resulting in lower mortgage lending and customer
deposits.
|
|
§
|
Pricing actions taken and
increasing yield from the structural hedge positively impacted
Banking NIM2 towards the end of Q2-24, providing a
tailwind into H2-24.
|
|
1.
|
See page 11
for more on NPS.
|
|
2.
|
Non-IFRS
measure. See Appendix for details.
|
Income statement and balance sheet
|
Summarised consolidated income statement
|
|
|
|
|
|
H1-24
|
H1-23
|
Change
|
|
|
Q2-24
|
Q1-24
|
Change
|
|
|
£m
|
£m
|
%
|
|
|
£m
|
£m
|
%
|
|
Net interest income
|
2,105
|
2,361
|
(11)
|
|
|
1,052
|
1,053
|
-
|
|
Non-interest
income1
|
196
|
297
|
(34)
|
|
|
101
|
95
|
6
|
|
Total operating income
|
2,301
|
2,658
|
(13)
|
|
|
1,153
|
1,148
|
-
|
|
Operating
expenses2
|
(1,294)
|
(1,232)
|
5
|
|
|
(639)
|
(655)
|
(2)
|
|
Credit impairment (charges) /
write-backs
|
(60)
|
(105)
|
(43)
|
|
|
(41)
|
(19)
|
116
|
|
Provisions for other liabilities and
charges
|
(143)
|
(148)
|
(3)
|
|
|
(60)
|
(83)
|
(28)
|
|
Profit before tax
|
804
|
1,173
|
(31)
|
|
|
413
|
391
|
6
|
|
Tax on profit
|
(207)
|
(315)
|
(34)
|
|
|
(104)
|
(103)
|
1
|
|
Profit after tax
|
597
|
858
|
(30)
|
|
|
309
|
288
|
7
|
|
Banking NIM3
|
2.08%
|
2.21%
|
-13bps
|
|
|
2.09%
|
2.07%
|
2bps
|
|
CIR3
|
56%
|
46%
|
10pp
|
|
|
55%
|
57%
|
-2pp
|
Q2-24 profit before tax up 6% vs Q1-24
|
§
|
Net
interest income stabilised in the second quarter following active
margin management.
|
|
§
|
Non-interest income increased 6% in the quarter following
higher fees.
|
|
§
|
Operating
expenses2 down 2% following simplification and
automation.
|
|
§
|
Credit
impairment charges up
116%, following lower releases than in
Q1-24.
|
|
§
|
Provisions
for other liabilities and charges down 28% following the
recognition of the annual Bank of England Levy in
Q1-24.
|
H1-24 profit before tax down 31% vs H1-23
|
§
|
Net
interest income down 11%, largely due to higher customer deposit
costs.
|
|
§
|
Non-interest income down 34%, primarily due to the H1-23
revaluation gain of our shares in Euroclear which was not repeated
and lower operating lease income in Consumer Finance.
|
|
§
|
Operating
expenses2 up 5%,
following two years of high inflation and further investment in
efficiency and customer experience.
|
|
§
|
Credit
impairment charges down
43%, given the improved economic outlook
with lower unemployment and higher house prices now
expected.
|
|
§
|
Tax on
profit decreased 34%, reflecting the reduction in
profit.
|
|
Summarised balance sheet
|
30.06.24
|
31.12.23
|
|
|
£bn
|
£bn
|
|
Customer loans
|
201.7
|
206.7
|
|
Other assets
|
69.7
|
75.4
|
|
Total assets
|
271.4
|
282.1
|
|
|
|
|
|
Customer deposits
|
188.0
|
193.6
|
|
Total wholesale funding
|
52.6
|
55.8
|
|
Other liabilities
|
16.3
|
17.7
|
|
Total liabilities
|
256.9
|
267.1
|
|
Shareholders'
equity4
|
14.5
|
15.0
|
|
Total liabilities and equity
|
271.4
|
282.1
|
|
1.
|
Comprises
'Net fee and commission income' and 'Other operating
income'.
|
|
2.
|
Operating
expenses before credit impairment (charges) / write-backs,
provisions for other liabilities and charges.
|
|
3.
|
Non-IFRS
measure. See Appendix for details.
|
|
4.
|
Decrease in
shareholders' equity largely a result of rising SONIA rates on cash
flow hedging, reducing the fair value of derivatives relating to
the structural hedge.
|
Customer balance sheet analysis
|
Customer loans
|
30.06.24
|
|
31.12.23
|
|
|
Total
|
Stage 1
|
Stage 2
|
Stage
31
|
|
Total
|
Stage 1
|
Stage 2
|
Stage
31
|
|
|
£bn
|
%
|
%
|
%
|
|
£bn
|
%
|
%
|
%
|
|
Retail & Business
Banking
|
177.4
|
87.7
|
11.1
|
1.28
|
|
182.3
|
88.3
|
10.5
|
1.27
|
|
- Mortgages
|
170.8
|
87.9
|
11.0
|
1.18
|
|
175.2
|
88.5
|
10.4
|
1.16
|
|
- Credit Cards
|
2.6
|
80.1
|
17.9
|
3.32
|
|
2.7
|
85.4
|
12.9
|
2.95
|
|
- UPLs
|
2.1
|
90.2
|
8.3
|
1.48
|
|
2.1
|
84.4
|
14.3
|
1.32
|
|
- Overdrafts
|
0.4
|
48.7
|
44.7
|
7.55
|
|
0.5
|
43.9
|
50.1
|
6.73
|
|
- Business Banking
|
1.5
|
86.2
|
6.7
|
7.16
|
|
1.8
|
86.5
|
6.3
|
7.25
|
|
Consumer Finance
|
4.9
|
93.0
|
6.2
|
0.75
|
|
5.2
|
93.1
|
6.3
|
0.53
|
|
Corporate & Commercial
Banking
|
18.1
|
82.8
|
12.9
|
4.71
|
|
17.9
|
77.1
|
19.1
|
4.14
|
|
Corporate Centre
|
1.3
|
99.8
|
0.1
|
0.10
|
|
1.3
|
99.8
|
0.1
|
0.10
|
|
Total
|
201.7
|
87.5
|
11.1
|
1.57
|
|
206.7
|
87.5
|
11.1
|
1.49
|
|
Arrears over 90 days past due
%
|
Mortgages
|
Credit
cards
|
UPL
|
Overdrafts
|
Business
Banking
|
Consumer
Finance
|
CCB
|
|
30 June 2024
|
0.84
|
0.54
|
0.85
|
2.58
|
4.13
|
0.52
|
1.30
|
|
31 December 2023
|
0.80
|
0.51
|
0.73
|
2.43
|
4.15
|
0.43
|
1.04
|
Loans in Stage 2 compared to 2023 affected by SICR
changes
|
§
|
Loans in Stage 2 and 3 remain low
compared to historic trends although, as expected we have seen an
increase in arrears in H1-24.
|
|
§
|
While
underlying asset quality remains good, we have seen an impact from
changes to our SICR criteria. These were updated in Q2-24 and
increased Stage 2 loans for mortgages and credit
cards.
|
Prudent approach to risk evident across
portfolios
|
§
|
Mortgages:
average stock LTV of 51% (Dec-23: 51%) and average new loan size of
£234k (2023: £228k). Arrears from recent internal transfers remains
low, with less than 1% of customers entering arrears within 12
months.
|
|
§
|
Credit
Cards: 57% (2023: 55%) of customers repay full balance each month.
UPL: average customer balances £6k (2023: £6k). Overdrafts:
relatively small balance of £0.4bn, down from £0.5bn in
2023.
|
|
§
|
Business
Banking: includes £1.4bn (Dec-23: £1.7bn) of BBLS with 100%
Government guarantee.
|
|
§
|
Consumer
Finance: 92% (Dec-23: 87%) of lending is collateralised on the
vehicle.
|
|
§
|
CCB:
customers largely resilient to macro-economic and inflationary
pressures, with a small uptick in watchlist and stage 3
exposures.
|
ECL provision
|
§
|
ECL provision decreased by £34m to
£960m (2023: £994m) with a £37m release of judgemental adjustments
related to cost of living and a change in our economic assumptions
and weightings.
|
|
§
|
The changes from SICR and model
changes increased Stage 2 exposures by £0.7bn across all
portfolios, with only a modest impact on ECL of £30m. We also
implemented second generation models for mortgages and CCB
resulting in a £23m release.
|
|
§
|
6-month gross write-off utilisation
of £98m largely driven by unsecured retail (H1-23: £97m; 12-month
2023: £232m).
|
|
Customer deposits
|
30.06.24
|
31.12.23
|
|
|
|
£bn
|
£bn
|
|
|
Retail & Business
Banking
|
151.0
|
158.3
|
|
|
- Current accounts
|
62.8
|
65.0
|
|
|
- Savings accounts
|
73.2
|
77.5
|
|
|
- Business banking
accounts
|
9.7
|
10.6
|
|
|
- Other retail products
|
5.3
|
5.2
|
|
|
Corporate & Commercial
Banking
|
25.4
|
24.1
|
|
|
Corporate Centre
|
11.6
|
11.2
|
|
|
Total
|
188.0
|
193.6
|
|
|
|
|
|
|
|
1.
|
Non-IFRS measure. See Appendix for
details.
|
Economic scenarios and ECL
Economic scenarios updated in Q2-24 to reflect the latest
market data including expectations for inflation and base rate
trajectory
|
§
|
Our Base Case has been updated to reflect
strong growth seen in Q1-24; we now forecast two bank rate cuts
rather than three later in 2024; this contributes to a slower rise
in house price growth.
|
|
§
|
Downside 1 and Downside 2 scenarios capture
the impact of continuing weaker investment, the increasing risk
from geopolitical events and the ongoing significant mismatch
between job vacancies and skills, as well as a smaller labour
force.
|
|
§
|
The Stubborn Inflation scenario reflects the
possibility that inflation remains above the Bank of England
target, leading to further base rate increases. This adds to cost
of living pressures creating weak consumer demand.
|
|
§
|
The Upside
scenario incorporates a quicker economic recovery.
|
|
§
|
In Q2-24
we increased the Downside 1 scenario weighting by 5pp, offset by a
reduction in the weighting for the Stubborn Inflation scenario by
5pp due to the easing of inflationary pressures.
|
|
Economic
scenarios 30 June 20241
|
Upside
%
|
Base
Case
%
|
Downside
1
%
|
Stubborn
Inflation
%
|
Downside
2
%
|
Weighted
%
|
|
GDP
(calendar
year annual growth rate)
|
2024
|
1.1
|
0.8
|
0.6
|
-0.5
|
-1.2
|
0.5
|
|
2025
|
2.1
|
1.3
|
0.4
|
-1.4
|
-3.5
|
0.5
|
|
2026
|
2.4
|
1.5
|
0.3
|
0.0
|
0.0
|
1.0
|
|
2027
|
2.5
|
1.4
|
0.3
|
0.7
|
1.9
|
1.3
|
|
2028
|
2.5
|
1.4
|
0.2
|
0.8
|
2.7
|
1.4
|
|
|
Start to
trough2
|
n.a.
|
n.a.
|
n.a.
|
-2.4
|
-5.2
|
n.a.
|
|
Base
rate
(At 31 December)
|
2024
|
4.50
|
4.75
|
5.50
|
6.00
|
4.00
|
4.93
|
|
2025
|
3.50
|
3.75
|
4.25
|
5.75
|
2.00
|
3.85
|
|
2026
|
3.00
|
3.50
|
3.25
|
4.00
|
2.00
|
3.30
|
|
2027
|
3.00
|
3.00
|
3.00
|
3.00
|
2.50
|
2.95
|
|
2028
|
3.00
|
3.00
|
3.00
|
3.00
|
3.00
|
3.00
|
|
|
5-year
Peak
|
5.25
|
5.25
|
5.50
|
6.00
|
5.25
|
5.25
|
|
HPI
(Q4 annual
growth rate)
|
2024
|
9.1
|
2.5
|
-1.7
|
-4.4
|
-9.2
|
0.4
|
|
2025
|
8.7
|
3.0
|
-5.0
|
-9.0
|
-16.5
|
-0.8
|
|
2026
|
8.0
|
3.0
|
-2.3
|
-4.2
|
-9.2
|
1.0
|
|
2027
|
7.4
|
3.0
|
1.2
|
3.8
|
5.8
|
3.5
|
|
2028
|
4.8
|
3.0
|
2.7
|
5.1
|
8.4
|
3.7
|
|
Start to
trough2
|
n.a.
|
n.a.
|
-10.9
|
-18.9
|
-33.0
|
-2.7
|
|
Unemployment
(At 31 December)
|
2024
|
4.2
|
4.4
|
4.4
|
4.9
|
6.6
|
4.7
|
|
2025
|
4.1
|
4.3
|
4.7
|
5.8
|
8.3
|
4.9
|
|
2026
|
4.0
|
4.2
|
5.1
|
6.1
|
7.7
|
4.9
|
|
2027
|
4.0
|
4.2
|
5.5
|
6.2
|
7.1
|
4.9
|
|
2028
|
4.0
|
4.2
|
5.8
|
6.3
|
6.5
|
4.9
|
|
5-year
Peak
|
4.3
|
4.4
|
6.0
|
6.3
|
8.5
|
4.9
|
|
CRE price
growth
(Q4 annual
growth rate)
|
2024
|
1.3
|
-0.5
|
-1.7
|
-4.7
|
-6.7
|
-1.6
|
|
2025
|
2.2
|
0.5
|
-0.9
|
-1.2
|
-2.2
|
0.0
|
|
2026
|
4.2
|
3.1
|
2.0
|
3.9
|
3.3
|
3.1
|
|
2027
|
3.4
|
2.7
|
2.4
|
3.9
|
4.2
|
3.0
|
|
2028
|
2.6
|
2.3
|
2.4
|
3.3
|
4.3
|
2.6
|
|
Start to
trough2
|
n.a.
|
n.a.
|
-2.0
|
-5.7
|
-8.5
|
-1.4
|
|
Weight
Jun-24
|
10%
|
50%
|
20%
|
10%
|
10%
|
100%
|
|
Weight
Mar-24
|
10%
|
50%
|
15%
|
15%
|
10%
|
100%
|
|
Weight
Dec-23
|
10%
|
50%
|
10%
|
20%
|
10%
|
100%
|
|
|
|
|
|
|
|
|
|
|
ECL 30
June 2024
(100% weight to each scenario)
|
Upside
£m
|
Base
Case
£m
|
Downside
1
£m
|
Stubborn
Inflation
£m
|
Downside
2
£m
|
Weighted
£m
|
|
Retail
& Business Banking
|
383
|
437
|
567
|
655
|
1,040
|
513
|
|
Consumer
Finance
|
69
|
69
|
70
|
72
|
72
|
70
|
|
Corporate
& Commercial Banking
|
329
|
338
|
357
|
412
|
435
|
377
|
|
Total
|
781
|
844
|
994
|
1,139
|
1,547
|
960
|
|
1.
|
Our
Q2-24 forecast used for ECL calculation.
|
|
2.
|
GDP, HPI and
CRE start is taken from level at Q1-24.
|
Capital, liquidity and funding
|
Key
metrics
|
30 June
2024
|
|
31 December
2023
|
|
|
£bn
|
%
|
|
£bn
|
%
|
|
CET1 capital
|
10.4
|
15.2
|
|
10.5
|
15.2
|
|
Total qualifying regulatory
capital
|
14.5
|
21.3
|
|
14.8
|
21.4
|
|
UK leverage (T1 capital)
|
12.4
|
4.9
|
|
12.5
|
5.1
|
|
RWA
|
68.3
|
-
|
|
69.1
|
-
|
|
LDR
|
-
|
109
|
|
-
|
108
|
|
Liquid assets / LCR
|
49.1
|
147
|
|
50.9
|
162
|
|
Total wholesale funding and
AT1
|
55.0
|
-
|
|
58.0
|
-
|
|
- of which term funding
|
47.0
|
-
|
|
50.4
|
-
|
|
- of which TFSME
|
13.0
|
-
|
|
17.0
|
-
|
|
Wholesale funding with a residual
maturity less than one year
|
10.2
|
-
|
|
11.9
|
-
|
Capital ratios well above
regulatory requirements
|
§
|
The CET1 capital ratio remained
stable at 15.2% following £556m interim dividends paid in
Jun-24.
|
|
§
|
UK
leverage exposure increased slightly to £251.4bn (Dec-23: £247.2bn)
as a result of optimisation of liquid assets.
|
|
§
|
RWAs
decreased slightly following active balance sheet
management.
|
|
§
|
We remain very strongly capitalised
with significant headroom to minimum requirements and
MDA.
|
Strong liquidity
position
|
§
|
Strong LCR of 147%, (Dec-23: 162%),
reduced following TFSME repayments with £15.5bn surplus LCR
eligible liquid assets to requirement. NSFR1 of 137%,
(Dec-23: 138%).
|
|
§
|
LCR eligible liquidity pool of
£49.1bn (Dec-23: £50.9bn), includes £29.2bn cash and central bank
reserves (Dec-23: £38.4bn).
|
|
§
|
Term duration in the LCR eligible
liquidity pool is hedged with swaps to offset mark to market
movements from interest rate changes.
|
Diversified funding across
well-established issuance programmes
|
§
|
LDR of 109% (Dec-23: 108%),
following further disciplined pricing actions, with mortgage
lending down £4.4bn and customer deposits down £5.6bn.
|
|
§
|
Issued c.£5.1bn Sterling equivalent
medium-term funding from Santander UK plc.
|
Structural hedge
evolution
|
§
|
Santander UK plc's structural hedge
position increased, with c.£114bn at Jun-24 (Dec-23: c.£106bn), and
duration of c.2.5 years
(Dec-23: c.2.4 years). We are well positioned for expected bank
rate reductions.
|
|
§
|
The overall contribution to income
has increased as maturities were replaced with higher yielding term
assets. Over the medium term, we expect the overall
contribution of the structural hedge to stabilise.
|
|
|
|
1.
|
NSFR is
latest data available, May-24.
|
Summary segmental
information
|
Segmental analysis H1-24
|
Customer
loans
|
Customer
deposits
|
RWA
|
Profit / (loss)
before tax
|
|
|
£bn
|
£bn
|
£bn
|
£m
|
|
Retail & Business
Banking
|
177.4
|
151.0
|
43.2
|
601
|
|
Consumer Finance
|
4.9
|
-
|
7.5
|
57
|
|
Corporate & Commercial
Banking1
|
18.1
|
25.4
|
12.9
|
224
|
|
Corporate Centre
|
1.3
|
11.6
|
4.7
|
(78)
|
|
Total
|
201.7
|
188.0
|
68.3
|
804
|
|
Segmental analysis H1-23
|
Customer
loans
|
Customer
deposits
|
RWA
|
Profit / (loss)
before tax
|
|
|
£bn
|
£bn
|
£bn
|
£m
|
|
Retail & Business
Banking
|
185.9
|
155.7
|
44.5
|
885
|
|
Consumer Finance
|
5.3
|
-
|
7.7
|
89
|
|
Corporate & Commercial
Banking1
|
18.4
|
23.5
|
14.5
|
270
|
|
Corporate Centre
|
1.2
|
11.5
|
5.3
|
(71)
|
|
Total
|
210.8
|
190.7
|
72.0
|
1,173
|
Retail & Business Banking
|
§
|
Profitability decreased with higher costs of deposits seen
across the market. Pricing actions on deposits started to impact
margins in the second quarter and will provide a tailwind in
H2-24.
|
Consumer Finance
|
§
|
Lower
lending than H1-23, as a decision was made to focus on value and
capital generation.
|
Corporate & Commercial Banking
|
§
|
Growth
from high value new to bank clients and balance sheet management.
Focus on clients' international needs, connecting 1,500 companies
to our global network to support their international growth in
2024.
|
FCA
review of Motor Finance commission
In
January 2024, the FCA initiated a review of historical commission
arrangements between motor finance firms and dealers. While it is
possible that certain charges may be incurred in relation to the
FCA's review or related existing or future
county court claims, Financial Ombudsman Service (FOS) complaints
and the Competition Appeal Tribunal (CAT) proceedings, it is not
considered that a legal or constructive obligation has been
incurred in relation to these matters that would require a
provision to be recognised at this stage. The resolution of such
matters is not possible to predict with any certainty and there
remain significant inherent uncertainties regarding the existence,
scope and timing of any possible outflow which make it
impracticable to disclose the extent of any potential financial
impact.
|
1.
|
CCB
customer loans includes £4.9bn of CRE loans (H1-23:
£4.6bn).
|
Appendix
a) Non-IFRS measures and their
calculations
|
§
|
Banking
NIM: Annualised net
interest income divided by average customer loans for the
period.
(H1-24: £203,826m; H1-23:
£215,299m).
|
|
§
|
Cost of
risk: Sum of credit impairment (charges) or write-backs for the
last 12-month period as a percentage of average customer loans for
the last 12 months. (H1-24: £206,224m;
H1-23: £217,241m).
|
|
§
|
CIR: Total operating expenses
before credit impairment (charges) or write-backs, provisions and
charges as a percentage of the total of net interest income and
non-interest income.
|
|
§
|
Non-interest income: Net fee and commission income plus other
operating income.
|
|
§
|
Stage 3 ratio: The sum of Stage 3
drawn and Stage 3 undrawn assets divided by the sum of total drawn
assets and Stage 3 undrawn assets.
|
|
§
|
RoTE: Annualised profit after tax
attributable to equity holders of the parent, divided by average
shareholders' equity less average AT1 securities and average
goodwill and other intangible assets.
|
|
Detailed RoTE calculation
|
H1-24
|
2023
|
|
|
£m
|
£m
|
|
Annualised profit after
tax
|
1,201
|
1,596
|
|
Less non-controlling interests of
annual profit
|
-
|
-
|
|
Profit due to equity holders of the parent
(A)
|
1,201
|
1,596
|
|
|
|
|
|
|
H1-24
|
2023
|
|
|
£m
|
£m
|
|
Average shareholders'
equity
|
14,719
|
14,839
|
|
Less average AT1
securities
|
(2,148)
|
(2,196)
|
|
Average ordinary shareholders' equity
|
12,571
|
12,643
|
|
Average goodwill and other
intangible assets
|
(1,535)
|
(1,549)
|
|
Average tangible equity (B)
|
11,036
|
11,094
|
|
RoTE (A/B)
|
10.9%
|
14.4%
|
b) Additional mortgage
information
|
|
30.06.24
|
31.12.23
|
|
Stock average LTV1
|
51%
|
51%
|
|
New business average
LTV1
|
65%
|
66%
|
|
London lending new business average
LTV1
|
64%
|
65%
|
|
BTL proportion of loan
book
|
9%
|
9%
|
|
Fixed rate proportion of loan
book
|
89%
|
89%
|
|
Variable rate proportion of loan
book
|
8%
|
8%
|
|
SVR proportion of loan
book
|
2%
|
2%
|
|
FoR proportion of loan
book
|
1%
|
1%
|
|
Proportion of customers with a
maturing mortgage retained2
|
77%
|
77%
|
|
Average loan size
(stock)3
|
£190k
|
£188k
|
|
Average loan size (new
business)
|
£234k
|
£228k
|
|
§
|
£70.5bn of
new business and internal transfers were priced in 2023 and H1-24,
and by the end of the year a further £17bn will reach end of
incentive period.
|
c) Interest rate risk
|
Net
interest income sensitivity4
|
H1-24
|
2023
|
|
|
£m
|
£m
|
|
+100bps
|
122
|
218
|
|
-100bps
|
(122)
|
(220)
|
|
§
|
The table
above shows how our net interest income would be affected by a
100bps parallel shift (both up and down) applied instantaneously to
the yield curve. Sensitivity to parallel shifts represents the
amount of risk in a way that we think is both simple and
scalable.
|
d) Summarised changes to CET1 capital ratio
in H1-24
|
|
|
|
CET1 capital
ratio
|
|
|
|
|
%
|
|
31 December 2023 CET1 capital
ratio
|
|
|
15.2
|
|
Profit
|
|
|
+0.9pp
|
|
Dividends and AT1 coupons
|
|
|
-0.9pp
|
|
Expected loss less provisions and
pension
|
|
|
-0.2pp
|
|
RWA growth and other
|
|
|
+0.2pp
|
|
30
June 2024 CET1 capital ratio
|
|
|
15.2
|
e) CET1 capital ratio MDA trigger (headroom
3.9%)
|
|
Minimum
%
|
|
Pillar 1
|
4.5
|
|
Pillar 2A
|
2.3
|
|
Capital conservation
buffer
|
2.5
|
|
Countercyclical capital
buffer
|
2.0
|
|
Current MDA trigger
|
11.3
|
|
|
|
|
1.
|
Balance
weighted LTV.
|
|
2.
|
Applied to
mortgages three months post maturity and is calculated as a
12-month average of retention rates to Mar-24 and Dec-23
respectively.
|
|
3.
|
Average
initial advance of existing stock.
|
|
4.
|
Based on
modelling assumptions of repricing behaviour.
|
List of abbreviations
|
AT1
|
Additional Tier 1
|
|
Banco Santander
|
Banco Santander, S.A.
|
|
Banking NIM
|
Banking Net Interest Margin
|
|
BBLS
|
Bounce Back Loan Scheme
|
|
BTL
|
Buy-To-Let
|
|
CCB
|
Corporate & Commercial Banking
|
|
CET1
|
Common Equity Tier 1
|
|
CIB
|
Corporate & Investment Banking
|
|
CIR
|
Cost-to-Income Ratio
|
|
CRE
|
Commercial Real Estate
|
|
ECL
|
Expected Credit Losses
|
|
FoR
|
Follow on Rate
|
|
FCA
|
Financial Conduct Authority
|
|
FSCS
|
Financial Services Compensation Scheme
|
|
GDP
|
Gross Domestic Product
|
|
HPI
|
House Price Index
|
|
IFRS
|
International Financial Reporting Standards
|
|
JA
|
Judgemental Adjustment
|
|
LCR
|
Liquidity Coverage Ratio
|
|
LDR
|
Loan-to-Deposit Ratio
|
|
LTV
|
Loan-To-Value
|
|
MDA
|
Maximum Distributable Amount
|
|
n.a.
|
Not applicable
|
|
NPS
|
Net Promoter Score
|
|
NSFR
|
Net Stable Funding Ratio
|
|
PD
|
Probability of Default
|
|
PRA
|
Prudential Regulation Authority
|
|
QoQ
|
Quarter-on-quarter
|
|
RoTE
|
Return on Tangible Equity
|
|
RWA
|
Risk-Weighted Assets
|
|
Santander UK
|
Santander UK Group Holdings plc
|
|
SICR
|
Significant Increase in Credit
Risk
|
|
SONIA
|
Sterling Overnight Index Average
|
|
SVR
|
Standard Variable Rate
|
|
TFSME
|
Term Funding Scheme with additional incentives for
SMEs
|
|
UK
|
United Kingdom
|
|
UPL
|
Unsecured personal loans
|
Retail NPS: NPS ranked
2nd for Retail
Our customer experience research was
subject to independent third party review. We measured the main
banking NPS of 17,038 consumers on a six month basis using a
11-point scale (%Top 2 - %Bottom 7). The reported data is based on
the six months ending 30 June 2024, and the competitor set included
in the ranking analysis is Barclays, Halifax, HSBC, Lloyds Bank,
Nationwide, NatWest Group (NatWest & RBS) and TSB.
June 2024: NPS ranked 2nd
for Retail, we note a margin of error which impacts those from
2nd to 4th and makes their rank statistically
equivalent.
June 2023: NPS ranked 5th
for Retail, we note a margin of error which impacts those from
3rd to 7th and makes their rank statistically
equivalent.
Business & Corporate NPS: NPS
ranked 1st for Business & Corporate
Business & Corporate NPS is
measured by the MarketVue Business Banking from Savanta. This is an
ongoing telephone based survey designed to monitor usage and
attitude of UK businesses towards banks. 14,500 structured
telephone interviews are conducted each year among businesses of
all sizes from new start-ups to large corporates. The data is based
upon 8,327 interviews made in twelve months ended 21 June 2024 with
businesses turning over from £0 - £500m per annum and are weighted
by region and turnover to be representative of businesses in Great
Britain. NPS recommendation score is based on an 11-point scale
(%Top 2 - %Bottom 7). The competitor set included in this analysis
is Barclays, RBS, HSBC, Lloyds Bank and NatWest.
June 2024: NPS ranked 1st for Business &
Corporate.
June 2023: NPS ranked 1st
for Business & Corporate.
Additional information about Santander UK and Banco
Santander
Santander UK is a financial services provider in the
UK that offers a wide range of personal and commercial financial
products and services. At 30 June 2024, the bank had around 19,600
employees and serves around 14 million active customers, including
7 million digital customers via a nationwide 444 branch network,
telephone, mobile and online banking. Santander UK is subject to
the full supervision of the FCA and the PRA in the UK. Santander UK
plc customers' eligible deposits are protected by the FSCS in the
UK.
Banco Santander (SAN SM, STD
US, BNC.LN) is a leading commercial bank, founded
in 1857 and headquartered in Spain and one of the largest banks in
the world by market capitalization. The group's activities are
consolidated into five global businesses: Retail & Commercial
Banking, Digital Consumer Bank, Corporate & Investment Banking
(CIB), Wealth Management & Insurance and Payments (PagoNxt and
Cards). This operating model allows the bank to better leverage its
unique combination of global scale and local leadership. Banco
Santander aims to be the best open financial services platform
providing services to individuals, SMEs, corporates, financial
institutions and governments. The bank's purpose is to help people
and businesses prosper in a simple, personal and fair way. Banco
Santander is building a more responsible bank and has made a number
of commitments to support this objective, including raising €220
billion in green financing between 2019 and 2030. In the first
quarter of 2024, Banco Santander had €1.3 trillion in total funds,
166 million customers, 8,400 branches and 211,000
employees.
Banco Santander has a listing of its ordinary shares
on the London Stock Exchange and Santander UK plc has preference
shares listed on the London Stock Exchange.
None of the websites referred to in this Quarterly
Management Statement, including where a link is provided, nor any
of the information contained on such websites is incorporated by
reference in this Quarterly Management Statement.
Disclaimer
Santander UK Group Holdings plc
(Santander UK) and Banco Santander caution that this announcement
may contain forward-looking statements. Such forward-looking
statements are found in various places throughout this
announcement. Words such as "believes", "anticipates", "expects",
"intends", "aims" and "plans" and other similar expressions are
intended to identify forward-looking statements, but they are not
the exclusive means of identifying such statements. Forward-looking
statements include, without limitation, statements concerning our
future business development and economic performance. These
forward-looking statements are based on management's current
expectations, estimates and projections, and Santander UK and Banco
Santander caution that these statements are not guarantees of
future performance. We also caution readers that a number of
important factors could cause actual results to differ materially
from the plans, objectives, expectations, estimates and intentions
expressed in such forward-looking statements. We have identified
certain of these factors in the forward-looking statements on page
255 of the Santander UK Group Holdings plc 2023 Annual Report.
Investors and others should carefully consider the foregoing
factors and other uncertainties and events. Undue reliance should
not be placed on forward-looking statements when making decisions
with respect to Santander UK, Banco Santander and/or their
securities. Such forward-looking statements speak only as of the
date on which they are made, and we do not undertake any obligation
to update or revise any of them, whether as a result of new
information, future events or otherwise. Statements as to
historical performance, historical share price or financial
accretion are not intended to mean that future performance, future
share price or future earnings for any period will necessarily
match or exceed those of any prior quarter.
Santander UK is a frequent issuer in
the debt capital markets and regularly meets with investors via
formal roadshows and other ad hoc meetings. In line with Santander
UK's usual practice, over the coming quarter it expects to meet
with investors globally to discuss this Quarterly Management
Statement, the results contained herein and other matters relating
to Santander UK.
Nothing in this announcement
constitutes or should be construed as constituting a profit
forecast.