REG - Santander UKGrp Hdgs Santander UK Plc - Quarterly Management Statement - Q3 2022
26/10/2022 08:30
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RNS Number : 1011E Santander UK Group Holdings PLC 26 October 2022
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 2021 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 nine months ended 30 September 2022 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 2021.
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 nine months ended 30 September 2022
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:
"Many of our customers remain worried about the impact of the cost of living,
and they are looking to us to help them navigate this challenging environment.
As one of the UK's leading mortgage providers, we particularly understand the
concerns of existing mortgage customers, first time buyers and especially
those whose fixed rate mortgage is about to come to an end. So we are
providing advice and guidance on how households can manage their mortgage,
such as exploring options around length of term.
"We are also continuing our programme of proactively contacting customers who
are struggling, to offer help with managing their finances and energy costs.
"In this environment, we have maintained a focus on how we can deliver more
for our customers with products that deliver real value. We introduced
initiatives like double cashback on gas and electricity bills, raised the
1|2|3 Current Account interest rate and offered some of the best savings'
rates amongst High Street lenders.
"We have also unveiled a package of measures to support our people at
Santander, including a new helpline for colleagues that focuses on financial
wellbeing. This follows August's pay increase for 11,000 of our employees to
help with the increased cost of living.
"These are a set of results reflecting the hard work of our people, but they
also demonstrate the continued importance of taking a prudent approach to risk
and maintaining a resilient balance sheet. While we have seen no material
deterioration in our mortgage book to date, we have increased our provisions.
Looking ahead it is clear that the ongoing inflationary pressures, increased
energy prices and impact on economic activity will mean the service and
support we provide our customers and businesses will continue to be critical."
9M-22 financial and business highlights
Providing more support for our customers as they face higher living costs
§ Net mortgage lending of £9.8bn (9M-21: £5.2bn) with £28.2bn gross mortgage
lending (9M-21: £25.2bn).
§ Raised interest rates across our savings range and 1I2I3 Current Account.
Doubled energy bill cashback in limited period offer.
§ Proactive outreach to over 1.6m customers most likely to be impacted by the
cost of living crisis, to highlight the support we can offer.
§ Supporting businesses with our Santander Navigator platform providing
expertise and practical support from our global network.
§ NPS ranked 6(th) for Retail and 1(st) for Business & Corporate. Improving
NPS is integral to our strategy and remains a key area of focus(1).
Profit from continuing operations(2) before tax up 4% to £1,489m
§ Higher profit supported by increased income and lower costs, with credit
impairment charges of £256m (9M-21: releases of £170m).
§ Banking NIM(3) increased to 2.04% (9M-21: 1.91%) reflecting the impact of base
rate increases; 2.07% in Q3-22, up 3bps in the quarter.
§ CIR improved to 48% (9M-21: 56%) from increased net interest income and lower
operating expenses. Adj. CIR(3) of 43% (9M-21: 50%).
§ Transformation programme savings of £610m from total investment of £892m
since 2019.
§ Adjusted profit from continuing operations(2,3) before tax down 3%, with
adjusted RoTE(3) of 13.0% (Dec-21: 13.2%).
Proven balance sheet resilience with strong capital and liquidity levels
§ 85% of lending is prime UK retail mortgages, with average LTV of 50% (Dec-21:
52%).
§ Small unsecured personal lending portfolio of £5.1bn, 2% of total lending
(Dec-21: £4.8bn and 2% respectively).
§ Corporate & Commercial Banking loans of £17.4bn with no material
corporate defaults (Dec-21: £17.0bn).
§ Resilient asset quality with low arrears, Stage 3 ratio of 1.21% (Dec-21:
1.43%) and no material increase in arrears.
§ CET1 capital ratio of 15.5% (2021: 15.9%) and UK leverage ratio of 5.3% (2021:
5.2%), well above regulatory requirements.
§ Strong LCR of 168%, representing headroom of £21bn liquid assets above
minimum requirement.
Looking ahead
§ We expect our net mortgage lending will be broadly in line with market growth
for the year.
§ We expect Banking NIM(2) to continue to be above 2021.
§ We will continue to control operating expenses and expect further savings from
our transformation programme.
§ The outlook remains uncertain, with higher inflation leading to an increased
cost of living and a drop in real disposable income this year. Mortgage
interest rates have risen with the expectation of further increases to base
rate and are likely to remain substantially higher than a year ago. These
challenges for households and businesses are expected to continue well into
2023 and could impact credit impairments.
1. Dec-21 NPS: Retail 7(th), Business and Corporate 1(st). See Appendix 3 for
more on NPS rank.
2. In 9M-21, CIB is presented as a discontinued operation after its transfer to
SLB under a Part VII banking business transfer scheme, completed on 11 October
2021.
3. Non-IFRS measure. See Appendix 1 for details and a reconciliation of adjusted
metrics to the nearest IFRS measure.
Summarised consolidated income statement 9M-22 vs 9M-21 Adjusted(2)
9M-22 9M-21 Change 9M-22 9M-21 Change
£m £m % £m £m %
Net interest income 3,293 2,968 11 3,293 2,968 11
Non-interest income(1) 415 445 (7) 362 302 20
Total operating income 3,708 3,413 9 3,655 3,270 12
Operating expenses before credit impairment (charges) / write-backs, (1,770) (1,920) (8) (1,589) (1,627) (2)
provisions and charges
Credit impairment (charges) / write-backs (256) 170 n.m. (256) 170 n.m.
Provisions for other liabilities and charges (193) (225) (14) (165) (112) 47
Profit from continuing operations before tax 1,489 1,438 4 1,645 1,701 (3)
Tax on profit from continuing operations (356) (383) (7)
Profit from continuing operations after tax 1,133 1,055 7
Profit from discontinued operations after tax(3) - 33 n.m.
Profit after tax 1,133 1,088 4
Banking NIM(2) 2.04% 1.91% 13bps
CIR 48% 56% -8pp 43% 50% -7pp
Profit from continuing operations after tax up 7%
§ Net interest income up 11% and Banking NIM up 13bps following the impact of
base rate increases and higher mortgage lending.
§ Non-interest income down 7%, as the £71m gain on sale of our UK head office
in 9M-21 was not repeated.
§ Operating expenses(4) down 8% largely due to lower transformation programme
spend following significant restructuring in 2021.
§ Credit impairment charges of £256m following write-backs of £170m in 9M-21.
The Q3-22 charge of £138m was the highest quarterly charge in the last 2
years. The charges in 9M-22 were driven by the deterioration in the economic
outlook, including the expectation of higher interest rates, lower GDP, and
lower house prices, as well as the risk that higher inflation could impact
lending repayments. Whilst we have seen no material increase in arrears, the
cost of risk increased to 9bps largely reflecting the ECL build in retail
portfolios (2021: -11bps).
§ Provisions for other liabilities and charges decreased 14%, largely related to
lower transformation programme charges following significant restructuring in
2021.
Adjusted profit from continuing operations(2) before tax down 3%: adjustments
for transformation, operating lease depreciation, property
§ Adjusted non-interest income(2) up 20%, as the continued strength of the
second-hand car market drove higher Consumer Finance income and the cost of
wholesale funding liability management in 9M-21 was not repeated.
§ Adjusted operating expenses(2,4) down 2% as efficiency savings from our
transformation programme were partially offset by increased financial crime
spend and some inflationary pressures.
§ Adjusted provisions for other liabilities and charges(2) up 47%, an increase
of £53m. This was primarily due to higher fraud charges of £106m in 9M-22
(9M-21: £53m).
Capital ratios well above regulatory requirements
§ The CET1 capital ratio decreased 40bps to 15.5%, largely due to higher RWAs
and the one-off regulatory changes that took effect on 1 January 2022, these
were partially offset by retained profit. RWAs increased to £71.4bn with
growth in mortgage lending
(Dec-21: £68.1bn). The business remains strongly capitalised with significant
headroom to minimum requirements and MDA.
§ The UK leverage ratio increased 10bps to 5.3%, as retained profit was
partially offset by the change in treatment of software assets on 1 January
2022. UK leverage exposure remained broadly stable.
§ Total capital ratio decreased by 90bps to 20.7%, largely due to growth in
mortgage lending, the one-off regulatory changes that took effect on 1 January
2022 and the reduction in Additional Tier 1 and Tier 2 capital securities
recognised following the end of the CRR Grandfathering period on 1 January
2022. Total qualifying regulatory capital of £14.8bn was broadly stable
(Dec-21: £14.7bn).
§ The defined benefit pension scheme surplus was broadly stable from 30 June
2022. The scheme held sufficient liquid assets to withstand the stress
following recent market volatility and at 25 October 2022 the scheme remains
comfortably in surplus and has not materially impacted our capital position.
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. In 9M-21, CIB is presented as a discontinued operation after its transfer to
SLB under a Part VII banking business transfer scheme, completed on 11 October
2021.
4. Operating expenses before credit impairment (charges) / write-backs,
provisions and charges.
Summarised balance sheet 30.09.22 31.12.21
£bn £bn
Customer loans 220.2 210.6
Other assets(1) 75.0 83.1
Total assets 295.2 293.7
Customer deposits 190.7 192.2
Total wholesale funding 69.5 65.4
Other liabilities 19.3 19.8
Total liabilities 279.5 277.4
Shareholders' equity 15.7 16.1
Non-controlling interest - 0.2
Total liabilities and equity 295.2 293.7
Customer loans increased with strong gross mortgage lending
§ Customer loans increased £9.6bn, with £9.8bn of net mortgage lending
(£28.2bn gross lending), in a strong mortgage market.
§ Customer deposits decreased £1.5bn, largely due to competitive pressures in
deposits, which we expect to stabilise going forward.
§ Other assets and other liabilities fell primarily reflecting our approach to
liquidity management in 9M-22.
§ Total wholesale funding increased, with total term funding of £63.7bn
(Dec-21: £60.1bn).
Sep-22 ECL provision increased to £956m (Dec-21: £866m)
Notable changes to ECL during 9M-22, which impacted credit impairment:
§ Covid-19 related PMAs: net release of £175m
All corporate sector staging PMAs related to Covid-19 released as the risks
from lockdowns have significantly reduced.
§ Economic scenarios and weights: charge of £118m
Update of economic scenarios with higher base rate and house prices falling in
2023, impacting our mortgage and corporate portfolios.
§ Corporate sector staging risks: charge of £73m
PMAs to reflect the corporate lending risks to those sectors which are
susceptible to high inflation and energy prices, higher input costs, potential
for lower consumer and business demand, as well as exposure to supply chain
challenges.
§ Affordability of retail lending repayments: charge of £44m
PMAs to account for the potential repayment affordability risk among those
customers with low disposable income.
Credit performance
30 September 2022 31 December 2021
Total Stage 1 Stage 2 Stage 3(4) Total Stage 1 Stage 2 Stage 3(4)
Customer loans £bn % % % £bn % % %
Retail Banking 194.9 92.0 6.9 1.13 185.6 92.6 6.2 1.15
of which mortgages 187.1 92.2 6.8 1.04 177.3 92.7 6.3 1.02
of which unsecured retail(2) 7.8 86.1 10.7 3.70 8.3 89.2 6.9 4.22
Consumer Finance(3) 5.3 93.4 6.1 0.55 5.0 95.5 4.0 0.48
Corporate & Commercial Banking 17.4 79.8 18.1 2.25 17.0 69.5 25.9 4.85
Corporate Centre 2.6 100.0 - - 3.0 93.1 6.9 -
Total 220.2 91.1 7.7 1.21 210.6 90.8 7.8 1.43
§ Write-offs against provision
Gross write-off utilisation of £120m (Dec-21: £191m).
§ New to arrears flows remain low. The Stage 3 ratio reduced by 22bps with the
movement of £0.4bn corporate loans from Stage 3 to Stage 2, as part of the
Covid-19 related PMAs release.
1. 30 September 2022 includes £49m of property assets classified as held for
sale.
2. Includes unsecured personal lending of £5.1bn and £2.7bn of Business
Banking, predominately BBLS with 100% government guarantee.
3. 82% of loan book secured on a vehicle.
4. 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.
Economic scenarios
§ The UK economy has faced a range of challenges over recent years, and it now
faces a cost of living crisis with higher inflation and increased base rate,
together with the impacts from the conflict in Ukraine.
§ Although GDP grew by 0.2% in Q2-22, the outlook remains uncertain, with
inflation at a 40-year high and falling real disposable income. Although the
energy price guarantee scheme has mitigated some of the effects of rising
energy costs for now, utility bills for households and businesses are likely
to remain substantially higher than a year ago. With the cost of food,
mortgages and rent also increasing, and house prices expected to fall, this
will create further challenges for households and businesses well into 2023.
§ The scenarios continue to encapsulate different potential outcomes from the
base case. The stubborn inflation scenario is based on higher inflation which
is persistently above the Bank of England target. This results in the 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 turbulent environment;
a larger negative impact from the EU trade deal given ongoing issues such as
in Northern Ireland; and a continuing and significant mismatch between job
vacancies and skills, as well as a smaller labour force.
§ The scenario weights for 30 September 2022 have changed to reflect that our
base case is more pessimistic about the outlook for the UK economy and
therefore already reflects some of the downside risks associated with the
weighting at 30 June 2022.
30 September 2022 Upside 1 Base case Downside 1 Downside 2 Stubborn Inflation
% % % % %
GDP 2022 3.5 4.4 3.3 1.8 3.0
(calendar year annual growth rate)
2023 0.4 -0.5 -0.6 -4.8 -2.4
2024 1.5 0.9 0.2 0.7 -0.4
2025 1.8 1.5 0.3 1.5 0.3
2026 2.0 1.5 0.4 1.5 0.7
Base rate 2022 2.75 3.75 3.25 2.75 3.75
(At 31 December)
2023 2.50 4.75 2.50 4.00 5.50
2024 2.00 3.75 2.00 3.50 6.00
2025 2.00 2.75 2.00 2.50 3.50
2026 2.00 2.75 2.00 2.25 2.50
HPI 2022 7.9 7.0 7.8 7.0 7.7
(Q4 annual growth rate)
2023 -4.5 -5.0 -5.9 -13.5 -8.5
2024 -3.3 0.0 -6.3 -12.5 -9.7
2025 2.3 2.0 -1.8 -0.9 -3.5
2026 4.7 3.0 0.4 6.1 0.9
5yr CAGR 1.3 1.3 -1.3 -3.2 -2.8
Unemployment 2022 4.1 4.1 4.2 4.8 4.2
(At 31 December)
2023 4.6 4.8 5.1 7.4 5.9
2024 4.3 4.4 5.2 7.0 6.2
2025 4.3 4.1 5.7 6.8 6.5
2026 4.2 4.1 6.1 6.6 6.7
5yr Peak 4.7 4.8 6.1 7.4 6.7
Scenario weighting:
30 September 2022 5% 50% 15% 10% 20%
30 June 2022 5% 40% 15% 20% 20%
31 December 2021 5% 45% 25% 20% 5%
Contingent liability
§ Santander UK plc believes that the FCA has now completed the civil regulatory
investigation into our compliance with the Money Laundering Regulations 2007
and potential breaches of FCA principles and rules relating to anti-money
laundering, financial crime systems and controls which commenced in July
2017. The FCA's investigation focuses primarily on the period 2012 to 2017
and includes consideration of high-risk customers including Money Service
Businesses. Based on current information, it is probable that information
which could cause recognition of a liability will become known in the current
financial year, although this is not certain. There remain uncertainties which
mean it is not currently possible to make a reliable assessment of the size of
any such liability, which could be material.
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.
a) Adjusted profit metrics
As shown in the table below, profit from continuing operations before tax is
adjusted for items management believe to be significant, to facilitate
operating performance comparisons from period to period. The financial results
reflect continuing operations and therefore do not include discontinued
operations. Prior period results have been amended accordingly.
Ref. 9M-22 9M-21
£m £m
Non-interest income
Reported (i) 415 445
Adjust for operating lease depreciation (60) (72)
Adjust for net loss / (gain) on sale of property 7 (71)
Adjusted (ii) 362 302
Operating expenses before credit impairment (charges) / write-backs,
provisions and charges
Reported (iii) (1,770) (1,920)
Adjust for transformation 121 221
Adjust for operating lease depreciation 60 72
Adjusted (iv) (1,589) (1,627)
Provisions for other liabilities and charges
Reported (193) (225)
Adjust for transformation 28 113
Adjusted (165) (112)
Profit from continuing operations before tax
Reported 1,489 1,438
Specific income, expenses and charges 156 263
Adjusted 1,645 1,701
The financial results were impacted by a number of specific income, expenses
and charges with an aggregate impact on profit from continuing operations
before tax of £156m in 9M-22 and £263m in 9M-21. The specific income,
expenses and charges are outlined below:
Operating lease depreciation
We adjust operating expenses and non-interest income for operating lease
depreciation. We believe this provides a clearer explanation of expenses and
income as operating lease depreciation is a direct cost associated with
business volumes.
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
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.
b) 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. 9M-22 9M-21
CIR (iii) divided by the sum of (i) + net interest income 48% 56%
Adjusted CIR (iv) divided by the sum of (ii) + net interest income 43% 50%
c) 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.
Adjusted RoTE of 13.0% decreased slightly due to lower annualised adjusted
profit, as shown below.
9M-22 Specific income, expenses and charges As adjusted
£m £m £m
Profit after tax 1,133 114 1,247
Annualised profit after tax 1,515 1,667
Phasing adjustments (58)
Less non-controlling interests of annual profit (17) (17)
Profit due to equity holders of the parent (A) 1,498 1,592
9M-22 Equity adjustments As adjusted
£m £m £m
Average shareholders' equity 16,035
Less average Additional Tier 1 (AT1) securities (2,194)
Less average non-controlling interests (118)
Average ordinary shareholders' equity (B) 13,723
Average goodwill and intangible assets (1,541)
Average tangible equity (C) 12,182 38 12,220
Return on ordinary shareholders' equity (A/B) 10.9% -
Adjusted RoTE (A/C) - 13.0%
2021 Specific income, expenses and charges As adjusted
£m £m £m
Profit after tax 1,405 244 1,649
Less non-controlling interests of annual profit (36) (36)
Profit due to equity holders of the parent (A) 1,369 1,613
2021 Equity Adjustments As adjusted
£m £m £m
Average shareholders' equity 16,312
Less average Additional Tier 1 (AT1) securities (2,216)
Less average non-controlling interests (316)
Average ordinary shareholders' equity (B) 13,780
Average goodwill and intangible assets (1,597)
Average tangible equity (C) 12,183 61 12,244
Return on ordinary shareholders' equity (A/B) 9.9% -
Adjusted RoTE (A/C) - 13.2%
Specific income, expenses, charges
Details of these items are outlined in section a) of Appendix 1, with a total
impact on profit from continuing operations before tax of £156m. The impact
of these items on the taxation charge was £42m and on profit after tax was
£114m. Tax is effected 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.
d) Other non-IFRS measures and their calculations
§ Banking NIM: Annualised net interest income divided by average customer assets
(9M-22: £215,554m; 9M-21: £207,871m).
§ Cost of risk: Credit impairment charge for the 12-month period as a percentage
of average customer loans.
§ 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 9M-22 9M-21(1)
£m £m
Net interest income 3,253 2,932
Non-interest income(2) 411 446
Total operating income 3,664 3,378
Operating expenses before credit impairment (charges) / write-backs, (1,750) (1,899)
provisions and charges
Credit impairment (charges) / write-backs (256) 170
Provisions for other liabilities and charges (193) (224)
Total operating credit impairment (charges) / write-backs, provisions and (449) (54)
charges
Profit from continuing operations before tax 1,465 1,425
Tax on profit from continuing operations (354) (383)
Profit from continuing operations after tax 1,111 1,042
Profit from discontinued operations after tax - 32
Profit after tax 1,111 1,074
Summarised balance sheet 30.09.22 31.12.21
£bn £bn
Customer loans 216.3 207.3
Other assets(3) 72.0 79.8
Total assets 288.3 287.1
Customer deposits 184.2 186.2
Wholesale funding 69.5 65.2
Other liabilities 19.2 19.6
Total liabilities 272.9 271.0
Shareholders' equity 15.4 16.1
Total liabilities and equity 288.3 287.1
Other information 30.09.22 31.12.21
Total qualifying regulatory capital £14.7bn £14.8bn
Risk-weighted assets (RWAs) £70.3bn £67.1bn
Total capital ratio 20.9% 21.9%
RFB LCR 166% 166%
RFB DolSub LCR 161% 166%
Stage 3 ratio 1.22% 1.45%
ECL provision £955m £865m
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 2021 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. Discontinued operations relate to the CIB segment which was moved to SLB under
a Part VII banking business transfer scheme, completed on 11 October 2021.
2. Comprises 'Net fee and commission income' and 'Other operating income'.
3. 30 September 2022 includes £49m of property assets classified as held for
sale.
Appendix 3 - Additional information
Mortgage metrics 30.09.22 31.12.21
Stock average LTV(1) 50% 52%
New business average LTV (1) 69% 66%
London lending new business average LTV(1) 66% 64%
New business average loan size £236k £234k
BTL proportion of loan book 9% 8%
Fixed rate proportion of loan book 88% 84%
Variable rate proportion of loan book 7% 10%
SVR proportion of loan book 3% 4%
FoR proportion of loan book 2% 2%
Customer deposits by segment 30.09.22 31.12.21
£bn £bn
Retail Banking 155.6 157.0
Corporate & Commercial Banking 24.9 25.6
Corporate Centre 10.2 9.6
Total 190.7 192.2
Retail Banking customer deposits by portfolio 30.09.22 31.12.21
£bn £bn
Current accounts 79.9 80.7
Savings accounts 57.4 57.8
Business banking accounts 12.4 13.1
Other retail products 5.9 5.4
Retail Banking customer deposits 155.6 157.0
Interest rate risk
NII sensitivity(2) 30.09.22 31.12.21
£m £m
+50bps 209 167
+25bps 105 89
-25bps (102) (94)
-50bps (204) (205)
Well positioned in a rising interest rate environment
§ Our structural hedge position remained broadly stable, with an average of
c£109bn over the last 12 months, and an average duration of c2.5 years.
§ The table above shows how our net interest income would be affected by a 25bps
and a 50bps 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. Simple average stock LTV 40% at 30.09.22 (31.12.21:
41%).
2. RFB metric. Based on modelling assumptions of repricing behaviour.
List of abbreviations
APM Alternative Performance Measure
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
CAGR Compound Annual Growth Rate
CET1 Common Equity Tier 1
CIB Corporate & Investment Banking
CIR Cost-To-Income Ratio
CRR Capital Requirements Regulation
ECL Expected Credit Losses
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 Standard
LCR Liquidity Coverage Ratio
LTV Loan-To-Value
n.m. Not meaningful
MDA Maximum Distributable Amount
NPS Net Promoter Score
PMAs Post model adjustments
PRA Prudential Regulation Authority
QMS Quarterly Management Statement
RFB Ring-Fenced Bank (Santander UK plc)
RFB DoLSub Santander UK plc Domestic Liquidity Sub-group
RoTE Return on Tangible Equity
RWA Risk-Weighted Assets
Santander UK Santander UK Group Holdings plc
SLB Santander London Branch
SVR Standard Variable Rate
UK United Kingdom
Retail NPS: Our customer experience research is independently audited by
Stiga. We measured the main banking NPS of 10,098 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 September 2022, and the competitor set included in
the ranking analysis is Barclays, Halifax, HSBC, Lloyds Bank, Nationwide,
NatWest, TSB and RBS. We note a margin of error which impacts those from 3(rd)
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 8,662 interviews made in twelve months ended 16 September 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.
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
September 2022, the bank had around 18,000 employees and serves around 14
million active customers, 7 million digital customers via a nationwide 449
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 H1 2021, Banco Santander
had more than 1.2 trillion euros in total funds, 152.9 million customers, of
which 26.5 million are loyal and 49.9 million are digital, 9,900 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 297 of the Santander
UK Group Holdings plc 2021 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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