REG - Santander UKGrp Hdgs Santander UK Plc - Quarterly Management Statement - Q1 2023
25/04/2023 08:30
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RNS Number : 2898X Santander UK Group Holdings PLC 25 April 2023
The information contained in this report 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 2022 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 report provides a summary of the unaudited business and financial trends
for the three months ended 31 March 2023 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 (the statutory
perimeter). 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 2022.
This report contains non-IFRS financial measures that are reviewed by
management in order to measure our overall performance. These are financial
measures which management believe provide useful information to investors
regarding our results and are outlined as Alternative Performance Measures in
Appendix 1. These measures are not a substitute for IFRS measures. Appendix 2
contains supplementary consolidated information for Santander UK plc, our
principal ring-fenced bank. A list of abbreviations is included at the end of
this report and a glossary of terms is available at:
https://www.santander.co.uk/about-santander/investor-relations/glossary
(https://www.santander.co.uk/about-santander/investor-relations/glossary)
Santander UK Group Holdings plc
Quarterly Management Statement
for the three months ended 31 March 2023
Paul Sharratt Head of Investor Relations ir@santander.co.uk (mailto:ir@santander.co.uk)
Stewart Todd Head of External Affairs mediarelations@santander.co.uk
For more information: See Investor Update presentation www.santander.co.uk
Mike Regnier, Chief Executive Officer, commented:
"We have delivered a good set of results against a backdrop of turbulence in
the global financial sector and ongoing challenges for the UK economy. We
agree with the Bank of England that the regulatory regime means that UK banks
are well-positioned to navigate such difficulties. Thanks to our measured and
prudent approach to risk, we retain a resilient balance sheet and strong
funding and liquidity.
"We have remained focused on providing real value for new and existing
customers. Following rises in the base rate, we have seen the most competitive
ISA period for several years and a further slowdown in the mortgage market. In
this environment we continue to offer market-leading savings products and a
broad range of mortgages.
"The economic outlook for 2023 remains uncertain with inflation predicted to
remain above the 2% target meaning many households and businesses will
continue to face difficult decisions in the months ahead. Providing the
support they need across all our channels remains the priority for everyone at
Santander UK."
Q1-23 financial and business highlights
Continued support for our customers
§ Proactively contacted 2.5m customers, helping them to navigate the ongoing
challenges in the current environment.
§ Helped 14% more customers in the first two months of the year, with increased
capacity in our financial support team.
§ Doubled the number of customers using our innovative Santander Navigator
platform to help them grow their business internationally.
§ NPS ranked 5(th) for Retail and 1(st) for Business & Corporate. Customer
service is integral to our strategy and remains a key area of focus(1).
Profit before tax of £547m (Q1-22: £495m) with higher income partially
offset by higher costs, credit impairment charges and provisions
§ Banking NIM(2) up 20bps to 2.21% (Q1-22: 2.01%), largely reflecting base rate
increases.
§ CIR improved to 47% (Q1-22: 49%) as increased net interest income more than
offset cost inflation. Adj. CIR(2) of 45% (Q1-22: 47%).
§ In Q1-23, we invested £56m in our transformation (Q1-22: £39m). Ongoing
savings from this programme helped mitigate inflation.
§ Credit impairment charges £9m up due to weaker UK economic environment. Cost
of risk(2) of 15bps stable from Q4-22 (Q1-22: -9bps).
§ Profit before tax up 11%, RoTE of 14.4% (2022: 12.0%). Adjusted profit(2)
before tax up 13%, adjusted RoTE(2) of 15.0% (2022: 14.1%).
Customer loans and deposits reduced following market trends and disciplined
pricing actions
§ The mortgage market trends we saw at the end of 2022 have continued into 2023
with applications down 37%(3).
§ Competition for deposits has increased and funding costs have risen notably
over the last six months.
§ Mortgage balances reduced by £4.1bn and customer deposits reduced by £5.1bn
keeping our LDR broadly stable.
Compared to last year both loans and deposits are up by £1.8bn and £0.7bn
respectively.
Strong liquidity, funding and capital with prudent balance sheet management
§ Strong LCR of 164% (2022: 163%) with liquidity pool of £49.6bn (2022:
£49.0bn), 89% cash and central bank reserves (2022: 91%).
§ Customer deposits predominantly retail with low average balances, 84% of these
are covered by depositor guarantee scheme (FSCS).
§ 85% of lending is prime UK retail mortgages with an average LTV of 51% (2022:
50%). Unsecured retail constitutes 3% of lending.
§ Corporate customers are diversified across operating sectors. Stable CRE
portfolio: 2% of customer loans and with 46% average LTV.
§ Resilient asset quality with low arrears across all portfolios, Stage 3 ratio
of 1.32% (2022: 1.24%).
§ CET1 capital ratio of 15.4% (2022: 15.2%) and UK leverage ratio of 5.2% (2022:
5.2%), well above regulatory requirements.
Looking ahead
§ The outlook remains uncertain, inflation is likely to reduce consumer spending
further and we expect house prices to fall back to 2021 levels.
§ We expect the LDR to trend lower in 2023 and Banking NIM(2) to be higher than
2022 reflecting base rate increases and disciplined pricing actions.
§ Going forward we expect inflationary pressures to be partially offset by
savings from the transformation programme.
§ The challenges faced by households and businesses are expected to continue
through 2023.
1. See Appendix for more on NPS including note on change in the peer set for
Retail. Business & Corporate NPS is Dec-22, latest available.
2. Non-IFRS measure. See Appendix 1 for details and a reconciliation of adjusted
metrics to the nearest IFRS measure.
3. Mortgage market applications year-on-year, source Bank of England.
Summarised consolidated income statement Q1-23 vs Q1-22 Adjusted(2)
Q1-23 Q1-22 Change Q1-23 Q1-22 Change
£m £m % £m £m %
Net interest income 1,184 1,053 12 1,184 1,053 12
Non-interest income(1) 124 122 2 121 125 (3)
Total operating income 1,308 1,175 11 1,305 1,178 11
Operating expenses before credit impairment (charges) / write-backs, (614) (581) 6 (583) (548) 6
provisions and charges
Credit impairment (charges) / write-backs (61) (52) 17 (61) (52) 17
Provisions for other liabilities and charges (86) (47) 83 (58) (44) 32
Profit before tax 547 495 11 603 534 13
Tax on profit (145) (105) 38
Profit after tax 402 390 3
Banking NIM(2) 2.21% 2.01% 20bps
CIR 47% 49% -2pp 45% 47% -2pp
Profit before tax up 11%
§ Total operating income up 11% largely due to the impact of higher base rate,
increasing net interest income and Banking NIM(2).
§ Operating expenses(3) up 6% largely due to inflation, partially offset by
savings from the transformation programme.
§ Credit impairment charges up 17% driven by the deterioration in the economic
environment from a year ago with cost of risk of 15bps, unchanged from Q4-22
(Q1-22: -9bps).
§ Provisions for other liabilities and charges up 83%, largely due to fraud
redress of £30m related to the rise in scams (Q1-22: £26m) and higher
transformation charges.
§ Tax on profit from continuing operations increased to £145m as a result of
both higher profits and an increase in underlying tax rates overall for the
period. 2022 was also impacted favourably by a legislative reduction in the
bank surcharge rate in that period to be effective from 1 April 2023 resulting
in a remeasurement of deferred tax balances at this new rate.
Adjusted profit before tax up 13%: adjustments for transformation and
property(2)
§ Adjusted non-interest income(2) down 3%, a decrease of £4m.
§ Adjusted operating expenses(2,3) up 6% due to inflationary pressures.
§ Adjusted provisions for other liabilities and charges(2) up 32%, an increase
of £14m largely due to fraud charges.
Summarised balance sheet 31.03.23 31.12.22
£bn £bn
Customer loans 215.5 219.7
Other assets(4) 75.6 72.5
Total assets 291.1 292.2
Customer deposits 191.4 196.5
Total wholesale funding 64.3 63.0
Other liabilities 20.0 18.0
Total liabilities 275.7 277.5
Shareholders' equity 15.4 14.7
Total liabilities and equity 291.1 292.2
1. Comprises 'Net fee and commission income' and 'Other operating income'.
2. Non-IFRS measure. See Appendix 1 for details and a reconciliation of adjusted
metrics to the nearest IFRS measure.
3. Operating expenses before credit impairment (charges) / write-backs,
provisions and charges.
4. 31 March 2023 and 31 December 2022 includes £49m of property assets
classified as held for sale.
Customer deposits by segment 31.03.23 31.12.22
£bn £bn
Retail Banking 156.6 161.8
-Current accounts 74.0 76.6
-Savings accounts 65.4 67.0
-Business banking accounts 11.4 12.2
-Other retail products 5.8 6.0
Corporate & Commercial Banking 24.5 24.8
Corporate Centre 10.3 9.9
Total 191.4 196.5
Customer deposits by segment 31.03.23 31.12.22
£bn £bn
Retail Banking 156.6 161.8
- Current accounts 74.0 76.6
- Savings accounts 65.4 67.0
- Business banking accounts 11.4 12.2
- Other retail products 5.8 6.0
Corporate & Commercial Banking 24.5 24.8
Corporate Centre 10.3 9.9
Total 191.4 196.5
Prudent approach to risk evident across product portfolios
§ Mortgages: average stock LTV of 51% (2022: 50%) and average new loan size of
£230k (2022: £237k).
§ Credit cards: 56% (2022: 55%) of customers repay full balance each month.
§ UPL: Average customer balances £6k (2022: £6k).
§ Business Banking: includes £2.2bn (2022: £2.4bn) of BBLS with 100%
Government guarantee.
§ Consumer Finance: 85% (2022: 84%) of lending is collateralised on the vehicle.
Arrears over 90 days past due 31 March 2023 31 December 2022
% %
Mortgages 0.64 0.62
Credit cards 0.53 0.49
UPL 0.64 0.61
Overdrafts 2.36 2.24
Business Banking 3.19 3.47
Consumer Finance 0.39 0.44
Q1-23 ECL provision increased by £22m to £1,029m (Dec-22: £1,007m)
§ Modest increases in Retail Banking and further impacts of the single name
cases that emerged in CCB in Q4-22.
§ 3-month gross write-off utilisation of £42m (12-month 2022: £157m).
Credit Performance 31 March 2023 31 December 2022
Total Stage 1 Stage 2 Stage 3(1) Total Stage 1 Stage 2 Stage 3(1)
Customer loans £bn % % % £bn % % %
Retail Banking 190.3 91.3 7.6 1.14 194.6 91.5 7.4 1.08
- Mortgages 183.0 91.6 7.4 1.04 187.1 91.8 7.3 0.99
- Credit cards 2.5 85.2 13.3 2.61 2.5 85.7 12.9 2.53
- UPL 2.0 87.0 11.9 1.11 2.0 87.3 11.7 1.07
- Overdrafts 0.5 32.7 61.8 6.25 0.5 33.5 61.0 5.93
- Business Banking 2.3 88.2 5.5 6.35 2.5 88.3 5.3 6.55
Consumer Finance 5.4 92.9 6.6 0.49 5.4 93.0 6.5 0.54
Corporate & Commercial Banking 18.6 77.3 19.5 3.41 18.5 78.3 18.8 3.08
Corporate Centre 1.2 99.7 0.2 0.10 1.2 99.6 0.3 0.10
Total 215.5 90.2 8.6 1.32 219.7 90.4 8.4 1.24
1. Stage 3 ratio is the sum of Stage 3 drawn and Stage 3 undrawn assets (£0.1bn)
divided by the sum of total drawn assets and Stage 3 undrawn assets.
Updated economic scenarios, with scenario weights unchanged in the quarter
§ The economic outlook for 2023 remains uncertain. Inflation is forecast to be
above the 2% target rate for 2023 putting further pressure on real disposable
income. We expect house prices to decrease by 10% in 2023, falling back to
2021 levels.
§ The stubborn inflation scenario is based on higher inflation which is
persistently above the Bank of England target. This results in base rate
peaking at 6%, further adding to the cost of living crisis and reducing
consumer demand.
§ The other downside scenarios capture a range of risks, including continuing
weaker investment reflecting the unstable environment; a larger negative
impact from the EU trade deal and a continuing and significant mismatch
between job vacancies and skills, as well as a smaller labour force.
Economic scenarios 31-Mar-23 Upside 1 Base case Downside 1 Downside 2 Stubborn Inflation Weighted
% % % % %
GDP 2022 4.0 4.0 4.0 4.0 4.0 4.0
(calendar year annual growth rate)
2023 -0.3 -0.7 -1.0 -4.8 -1.6 -1.3
2024 1.7 0.9 0.1 0.1 -1.6 0.2
2025 2.4 1.6 0.5 0.5 0.1 1.1
2026 2.4 1.5 0.3 0.8 0.6 1.1
Peak to trough(1) -0.5 -0.9 -1.5 -5.2 -3.3 -1.9
Base rate 2022 3.50 3.50 3.50 3.50 3.50 3.50
(At 31 December)
2023 3.50 4.25 4.75 3.50 6.00 4.56
2024 3.00 3.50 4.25 2.75 5.50 3.91
2025 2.50 2.75 3.25 2.75 3.50 2.96
2026 2.25 2.50 2.75 2.50 3.00 2.63
5 yr Peak 4.25 4.25 4.75 4.25 6.00 4.68
HPI 2022 4.9 4.9 4.9 4.9 4.9 4.9
(Q4 annual growth rate)
2023 -8.9 -10.0 -8.6 -12.5 -9.0 -9.8
2024 0.1 0.0 -6.3 -11.1 -8.2 -3.7
2025 5.0 2.0 -2.7 -4.2 -2.2 0.0
2026 5.8 3.0 -0.1 1.5 1.6 2.2
Peak to trough -13.3 -12.9 -19.0 -27.5 -20.3 -16.8
Unemployment 2022 3.7 3.7 3.7 3.7 3.7 3.7
(At 31 December)
2023 4.4 4.6 4.7 7.6 5.0 5.0
2024 4.0 4.9 5.0 8.2 5.9 5.4
2025 3.8 4.5 5.4 7.6 6.3 5.3
2026 3.6 4.3 5.8 7.0 6.5 5.2
5yr Peak 4.4 4.9 5.8 8.5 6.5 5.7
Weighting: 5% 50% 15% 10% 20% 100%
ECL 31-Mar-23 Upside 1 Base case Downside 1 Downside 2 Stubborn Inflation Weighted
(100% weight to each scenario)
£m £m £m £m £m £m
Retail Banking 502 518 565 768 633 552
Consumer Finance 70 71 69 73 73 71
Corporate & Commercial Banking 369 381 412 484 446 406
Corporate Centre - - - - - -
Total 941 970 1,046 1,325 1,152 1,029
1. Peak is taken from GDP data at Q2-22.
Treasury
Highly liquid balance sheet
§ Strong LCR of 164%, (Dec-22: 163%), with £19.3bn LCR eligible liquid assets
surplus to minimum requirement.
§ LCR eligible liquidity pool of £49.6bn (Dec-22: £49.0bn), includes £44.1bn
cash and central bank reserves (Dec-22: £44.5bn). Remaining assets
predominantly Sterling and USD denominated government bonds and covered bonds.
§ Term duration in the LCR eligible liquidity pool is hedged with swaps to
offset mark to market movements from interest rate changes.
Strong and diversified funding
§ LDR broadly stable with lower customer lending and deposits after pricing
actions in Q4-22 to optimise the customer balance sheet.
§ Term funding stock of £58.3bn across well-established covered bond, RMBS,
senior unsecured and SEC registered issuance programs.
§ As a contingency in 2021 we took all TFSME available and began repayments in
2022. At end Mar-23, TFSME outstanding was £25.0bn with £21.1bn due for
repayment by 2025 and the remaining £3.9bn due for repayment between 2027 and
2031.
§ In Q1-23 we issued c£3.3bn Sterling equivalent medium term funding, including
c£1bn of MREL issuance and c£2.3bn of other secured issuance from Santander
UK plc. We also issued £300m of 10 year Tier 2 (non-call 5 year) which was
bought by Banco Santander.
§ We expect to issue £1.5bn to £2.5bn of MREL in 2023.
Capital ratios well above regulatory requirements
§ The CET1 capital ratio increased 20bps to 15.4%. This was largely due to
higher profit. We remain strongly capitalised with significant headroom to
minimum requirements and MDA.
§ The UK leverage ratio remained stable at 5.2%. UK leverage exposure remained
broadly stable at £249.1bn (2022: £248.6bn).
§ Total capital ratio remained broadly stable at 20.5% (2022: 20.4%).
Key metrics 31 March 2023 31 December 2022
£bn % £bn %
LCR 49.6 164 49.0 163
CET1 capital 11.0 15.4 10.8 15.2
Total qualifying regulatory capital 14.6 20.5 14.5 20.4
UK leverage 13.2 5.2 13.0 5.2
RWA 71.3 - 71.2 -
Loan to deposit ratio - 114 - 113
Total wholesale funding and AT1 66.5 - 65.2 -
- term funding 58.3 - 57.8 -
- TFSME 25.0 - 25.0 -
- with a residual maturity of less than one year 12.2 - 11.0 -
Summarised changes to CET1 capital ratio
Retained earnings +0.21pp
Pension -0.05pp
RWA -0.03pp
CET1 capital ratio MDA trigger (headroom 4.2%) Minimum
%
Pillar 1 4.5
Pillar 2A 3.2
Capital conservation buffer 2.5
Countercyclical capital buffer 1.0
Current MDA trigger 11.2
Appendix 1 - Alternative Performance Measures
In addition to the financial information prepared under IFRS, this Quarterly
Management Statement contains non-IFRS financial measures that constitute
APMs, as defined in ESMA guidelines. The financial measures contained in this
report that qualify as APMs have been calculated using the financial
information of the Santander UK group but are not defined or detailed in the
applicable financial information framework or under IFRS.
We use these APMs when planning, monitoring, and evaluating our performance.
We consider these APMs to be useful metrics for management and investors to
facilitate operating performance comparisons from period to period. Whilst we
believe that these APMs are useful in evaluating our business, this
information should be considered as supplemental in nature and is not meant as
a substitute for IFRS measures.
In Q1-23, we removed the adjustment for operating lease depreciation in the
adjusted profit metrics which also impacted adjusted CIR. Prior periods have
been amended accordingly.
a) Adjusted profit metrics
As shown in the table below, profit before tax is adjusted for items
management believe to be significant. We adjust for these to facilitate
operating performance comparisons from period to period.
Ref. Q1-23 Q1-22
£m £m
Non-interest income
Reported (i) 124 122
Adjust for transformation related net loss / (gain) on sale of property (3) 3
Adjusted (ii) 121 125
Operating expenses before credit impairment (charges) / write-backs,
provisions and charges
Reported (iii) (614) (581)
Adjust for transformation 31 33
Adjusted (iv) (583) (548)
Provisions for other liabilities and charges
Reported (86) (47)
Adjust for transformation 28 3
Adjusted (58) (44)
Profit before tax
Reported 547 495
Specific income, expenses and charges 56 39
Adjusted 603 534
Net loss / (gain) on sale of property: previously named 'net gain on sale of
London head office and branch properties', now also includes subsequent sale
of property under our transformation programme.
Transformation costs and charges: relate to a multi-year project to deliver on
our strategic priorities and enhance efficiency in order for us to better
serve our customers and meet our medium-term targets.
Adjusted CIR
Calculated as adjusted total operating expenses before credit impairment
(charges) / write-backs, provisions and charges as a percentage of the total
of net interest income and adjusted non-interest income. We consider this
metric useful for management and investors as an efficiency measure to capture
the amount spent to generate income, as we invest in our multi-year
transformation programme.
Ref. Q1-23 Q1-22
CIR (iii) divided by the sum of (i) + net interest income 47% 49%
Adjusted CIR (iv) divided by the sum of (ii) + net interest income 45% 47%
b) Adjusted RoTE
Calculated as adjusted profit after tax attributable to equity holders of the
parent, divided by average shareholders' equity less non-controlling
interests, other equity instruments and average goodwill and other intangible
assets. We consider this adjusted measure useful for management and investors
as a measure of income generation on shareholder investment, as we focus on
improving returns through our multi-year transformation programme.
Q1-23 Specific income, expenses and charges As adjusted
£m £m £m
Profit after tax 402 40 442
Annualised profit after tax 1,630 1,792
Phasing adjustments (59)
Less non-controlling interests of annual profit - -
Profit / adjusted profit due to equity holders of the parent (A) 1,630 1,733
Q1-23 Equity adjustments As adjusted
£m £m £m
Average shareholders' equity 15,041
Less average Additional Tier 1 (AT1) securities (2,196)
Less average non-controlling interests -
Average ordinary shareholders' equity (B) 12,845
Average goodwill and intangible assets (1,551)
Average tangible equity (C) 11,294 232 11,526
Return on ordinary shareholders' equity (A/B) 12.7% -
RoTE (A/C) 14.4% 15.0%
2022 Specific income, expenses and charges As adjusted
£m £m £m
Profit after tax 1,423 254 1,677
Less non-controlling interests of annual profit (17) (17)
Profit / adjusted profit due to equity holders of the parent (A) 1,406 1,660
2022 Equity adjustments As adjusted
£m £m £m
Average shareholders' equity 15,545
Less average Additional Tier 1 (AT1) securities (2,194)
Less average non-controlling interests (118)
Average ordinary shareholders' equity (B) 13,233
Average goodwill and intangible assets (1,548)
Average tangible equity (C) 11,685 63 11,748
Return on ordinary shareholders' equity (A/B) 10.6% -
RoTE (A/C) 12.0% 14.1%
Specific income, expenses, charges
Details of these items are outlined in section a) of Appendix 1, with a total
impact on profit before tax of £56m. The impact of these items on the
taxation charge was £16m and on profit after tax was £40m. Tax is calculated
at the standard rate of corporation tax including the bank surcharge, except
for items such as conduct provisions which are not tax deductible.
Equity adjustments
These adjustments are made to reflect the impact of adjustments to profit on
average tangible equity.
c) Other non-IFRS measures and their calculations
§ Banking NIM: Annualised net interest income divided by average customer loans
for the first quarter.
(Q1-23: £217,569m; Q1-22: £212,065m).
§ Cost of risk: Credit impairment (charges) / write-backs for the 12-month
period as a percentage of average customer loans for the last 12 months.
(Q1-23: £217,874m; Q1-22: £210,432m).
§ Cost-to-income ratio: Total operating expenses before credit impairment
(charges) / 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.
Appendix 2 - Supplementary consolidated information for Santander UK plc and
its controlled entities
Santander UK plc is the principal subsidiary of Santander UK Group Holdings
plc.
Summarised consolidated income statement Q1-23 Q1-22
£m £m
Net interest income 1,183 1,039
Non-interest income(1) 111 119
Total operating income 1,294 1,158
Operating expenses before credit impairment (charges) / write-backs, (607) (574)
provisions and charges
Credit impairment (charges) / write-backs (60) (52)
Provisions for other liabilities and charges (86) (47)
Total operating credit impairment (charges) / write-backs, provisions and (146) (99)
charges
Profit before tax 541 485
Tax on profit (147) (103)
Profit after tax 394 382
Summarised balance sheet 31.03.23 31.12.22
£bn £bn
Total customer loans 211.6 215.7
Other assets(2) 72.2 69.5
Total assets 283.8 285.2
Total customer deposits 184.6 189.9
Wholesale funding 64.1 62.9
Other liabilities 20.0 18.0
Total liabilities 268.7 270.8
Shareholders' equity 15.1 14.4
Total liabilities and equity 283.8 285.2
Other information 31.03.23 31.12.22
Total qualifying regulatory capital £14.4bn £14.3bn
Risk-weighted assets (RWAs) £70.2bn £70.1bn
Total capital ratio 20.5% 20.4%
RFB LCR 156% 157%
RFB DoLSub LCR 151% 152%
Stage 3 ratio 1.34% 1.26%
ECL provision £1,027m £1,006m
The information contained in this report 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 2022 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.
1. Comprises 'Net fee and commission income' and 'Other operating income'.
2. 31 March 2023 and 31 December 2022 includes £49m of property assets
classified as held for sale.
Appendix 3 - Additional information
Mortgage metrics 31.03.23 31.12.22
Stock average LTV(1) 51% 50%
New business average LTV(1) 66% 69%
London lending new business average LTV(1) 64% 66%
BTL proportion of loan book 9% 9%
Fixed rate proportion of loan book 89% 89%
Variable rate proportion of loan book 7% 7%
SVR proportion of loan book 3% 3%
FoR proportion of loan book 1% 1%
Proportion of customers with a maturing mortgage retained(2) 81% 81%
Average loan size (stock) £185k £184k
Average loan size (new business) £230k £237k
Customer loans by segment 31.03.23 31.12.22
£bn £bn
Retail Banking 190.3 194.6
- Mortgages 183.0 187.1
- Other (Business Banking and unsecured lending) 7.3 7.5
Consumer Finance 5.4 5.4
Corporate & Commercial Banking 18.6 18.5
Corporate Centre 1.2 1.2
Total 215.5 219.7
Interest rate risk
NII sensitivity(3) Q1-23 2022
£m £m
+100bps 222 238
-100bps (227) (194)
Well positioned in a rising interest rate environment
§ Our structural hedge position decreased, with c.£104bn at Mar-23 (Dec-22:
c.£108bn), and duration of c.2.4 years (Dec-22: c.2.5 years).
§ 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.
1. Balance weighted LTV.
2. Applied to mortgages four months post maturity and is calculated as a 12-month
average of retention rates to December.
3. Based on modelling assumptions of repricing behaviour.
List of abbreviations
APM Alternative Performance Measure
AML Anti-money laundering
AT1 Additional Tier 1
BBLS Bounce Back Loan Scheme
Banco Santander Banco Santander S.A.
Banking NIM Banking Net Interest Margin
BTL Buy-To-Let
CET1 Common Equity Tier 1
CIB Corporate & Investment Banking
CIR Cost-To-Income Ratio
CRE Commercial Real Estate
CRR Capital Requirements Regulation
ECL Expected Credit Losses
EDB Everyday Banking
ESMA European Securities and Markets Authority
EU European Union
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
JAs Judgemental Adjustments (previously Post Model Adjustments)
LCR Liquidity Coverage Ratio
LDR Loan-to-deposit Ratio
LTV Loan-To-Value
n.m. Not meaningful
MDA Maximum Distributable Amount
MREL Minimum Requirement for own funds and Eligible Liabilities
NPS Net Promoter Score
PRA Prudential Regulation Authority
QMS Quarterly Management Statement
RFB Ring-Fenced Bank (Santander UK plc)
RFB DoLSub Santander UK plc Domestic Liquidity Sub-group
RMBS Residential Mortgage Backed Security
RoTE Return on Tangible Equity
RWA Risk-Weighted Assets
Santander UK Santander UK Group Holdings plc
SLB Santander London Branch
SVR Standard Variable Rate
TFSME Term Funding Scheme with additional incentives for SMEs
UK United Kingdom
UPL Unsecured personal loans
Retail NPS: Our customer experience research was subject to independent third
party review. We measured the main banking NPS of 12,744 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 31 March 2023, and the competitor set included
in the ranking analysis is Barclays, Halifax, HSBC, Lloyds Bank, Nationwide,
NatWest Group and TSB. RBS was amalgamated into NatWest Group from January
2023 resulting in a reduced number of competitors from 9 to 8 (including
Santander).
March 2023: NPS ranked 5(th) for Retail, we note a margin of error which
impacts those from 3(rd) to 5(th) and makes their rank statistically
equivalent.
December 2022: NPS ranked 6(th) for Retail, we note a margin of error which
impacts those from 4(th) to 6(th) and makes their rank statistically
equivalent.
Business & Corporate NPS: Business and 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 8,706 interviews made in twelve months ended 16 December 2022 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. As at time of publication, March 2023 Business & Corporate
NPS rank is not available, December 2022 latest available.
December 2022: NPS ranked 1(st) for Business & Corporate.
December 2021: NPS ranked 1(st) 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 31 March
2023, the bank had around 19,600 employees and serves around 14 million active
customers, 7 million digital customers via a nationwide 446 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 retail and commercial
bank, founded in 1857 and headquartered in Spain and is one of the largest
banks in the world by market capitalization. Its primary segments are Europe,
North America, South America and Digital Consumer Bank, backed by its
secondary segments: Santander Corporate & Investment Banking (Santander
CIB), Wealth Management & Insurance (WM&I) and PagoNxt. Its 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 over €120 billion
in green financing between 2019 and 2025, as well as financially empowering
more than 10 million people over the same period.
At 31 December 2022, Banco Santander had more than 1.3 trillion euros in total
funds, 160 million customers, of which 27 million are loyal and 51 million are
digital, over 9,000 branches and over 200,000 employees.
Banco Santander has a standard 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), Santander UK plc 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, Santander UK plc 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 271 of the Santander
UK Group Holdings plc 2022 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, Santander UK plc, 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.
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