REG - Santander UKGrp Hdgs Santander UK Plc - Quarterly Management Statement – Q3 2023
25/10/2023 08:30
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RNS Number : 1629R Santander UK Group Holdings PLC 25 October 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 nine months ended 30 September 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. 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 2023
Paul Sharratt Head of Investor Relations ir@santander.co.uk (mailto:ir@santander.co.uk)
Stewart Todd Head of Communications and Responsible Banking 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 in spite of a challenging
macroeconomic environment. We have prioritised our customers' needs, offering
the right products and services as well as support with their finances when
they need it. We provided competitive rates for savers, including a
top-of-market easy access savings account, and helped homeowners struggling
with rising rates, through the Government's Mortgage Charter.
This quarter we opened our new head office in Milton Keynes, offering
sustainable office spaces and exciting opportunities for both staff and the
wider community. We have continued our branch network investment and
modernisation programme, encouraging people to visit and make the most of the
facilities we provide. We also opened two new Work Cafés, providing a modern
environment to access banking services, co-working space and free meeting
rooms.
Our clear strategy and prudent approach to risk - alongside the positive
benefits of Banco Santander's new operating model - will enable us to continue
to support customers through the economic challenges ahead."
9M-23 financial and business highlights
We continued to help and support our customers facing the pressures of the
current economic environment
§ Strong deposit proposition with top-of-market savings rate in September and
Edge Up current account paying interest and cashback.
§ Proactively contacted 2.2 million customers this year to offer support with
the increased cost of living.
§ Network investment with ongoing branch refurbishment and new Work Cafés
opened, providing banking and community services.
§ 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).
Good set of results with profit before tax of £1,731m (9M-22: £1,489m)
§ Credit impairment charges down 20% to £204m. Cost of risk(2) of 13bps (9M-22:
9bps), close to expected through-the-cycle average.
§ Profit before tax up 16%, RoTE(2) of 15.0% (2022: 12.0%). Adjusted profit(2)
before tax up 13%, adjusted RoTE(2) of 15.5% (2022: 14.1%).
§ Banking NIM(2) up 19bps to 2.23% (9M-22: 2.04%) largely driven by base rate
increases and active management of our balance sheet.
§ CIR(2) of 47% (9M-22: 48%) as income increased, and transformation programme
savings partially offset inflationary pressures.
§ Transformation programme investment of £122m in 9M-23 (9M-22: £156m).
Adjusted CIR(2) of 44% (9M-22: 44%).
Customer loans and deposits reduced following market trends and our
disciplined pricing actions
§ With a slower housing market and higher mortgage rates, applications fell in
the first nine months of the year.
§ Our decision to optimise the balance sheet given higher funding costs has
contributed to a reduction of £10.1bn in mortgage lending.
§ Customer deposits reduced by £6.0bn in 9M-23; only down £0.2bn in Q3-23
following good deposit acquisition in September.
§ As a result of active balance sheet management, our LDR reduced to 111%
(Dec-22: 113%).
Our strategy delivers strong liquidity, funding and capital with prudent
approach to risk
§ Strong LCR of 155% (2022: 163%) with liquidity pool of £51.1bn (2022:
£49.0bn).
§ Customer deposits mainly retail with low average balances, 86% 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 2% of lending.
§ Corporate customers are diversified across operating sectors. Low exposure to
CRE and BTL lending.
§ Stage 3 ratio of 1.48% (2022: 1.24%), with a modest increase in customers
entering late arrears and a smaller mortgage book.
§ CET1 capital ratio of 16.0% (2022: 15.2%) and UK leverage ratio of 5.3% (2022:
5.2%), well above regulatory requirements.
§ Repaid £6.0bn TFSME in 9M-23 as planned with £19.0bn outstanding. Stable and
diversified wholesale funding programmes.
Looking ahead
§ We expect high-for-longer interest rates to have a more pronounced impact on
households and businesses.
§ Banking NIM(2) is likely to peak in 2023 reflecting base rate increases and
disciplined pricing actions.
§ We expect transformation programme savings to continue to help offset
inflationary pressures on operating expenses.
1. See page 11 for more on NPS.
2. Non-IFRS measure. See Appendix 1 for details and a reconciliation of APMs to
the nearest IFRS measure.
Summarised consolidated income statement 9M-23 vs 9M-22 Adjusted(2)
9M-23 9M-22 Change 9M-23 9M-22 Change
£m £m % £m £m %
Net interest income 3,561 3,293 8 3,561 3,293 8
Non-interest income(1) 424 415 2 421 422 -
Total operating income 3,985 3,708 7 3,982 3,715 7
Operating expenses before credit impairment (charges) / write-backs, (1,856) (1,770) 5 (1,764) (1,649) 7
provisions and charges
Credit impairment (charges) / write-backs (204) (256) (20) (204) (256) (20)
Provisions for other liabilities and charges (194) (193) 1 (161) (165) (2)
Profit before tax 1,731 1,489 16 1,853 1,645 13
Tax on profit (462) (356) 30
Profit after tax 1,269 1,133 12
Banking NIM(2) 2.23% 2.04% 19bps
CIR(2) 47% 48% -1pp 44% 44% -
Profit before tax up 16%
§ Net interest income up 8% largely due to the impact of higher base rates with
disciplined deposit pricing, partially offset by a reduction in lending
margins. Banking NIM(2) benefited from the disciplined pricing actions across
both sides of the balance sheet, deposit betas increased in the third quarter.
§ Non-interest income broadly flat. The £46m gain from our sale of Euroclear
shares was partially offset by unrealised gains in 9M-22 which were not
repeated this year.
§ Operating expenses(3) up 5%, transformation programme and ongoing efficiency
savings partially offset inflationary pressure on costs.
§ Credit impairment charges down 20%, reflecting better macroeconomic scenarios
from Sep-22.
§ Provisions for other liabilities and charges broadly flat.
§ Tax on profit increased by £106m 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.
Adjusted profit before tax up 13%(2)
§ After transformation related adjustments, variances are explained above or are
not material.
Summarised balance sheet 30.09.23 31.12.22
£bn £bn
Customer loans 208.8 219.7
Other assets 76.0 72.5
Total assets 284.8 292.2
Customer deposits 190.5 196.5
Total wholesale funding 59.4 63.0
Other liabilities 19.7 18.0
Total liabilities 269.6 277.5
Shareholders' equity 15.2 14.7
Total liabilities and equity 284.8 292.2
1. Comprises 'Net fee and commission income' and 'Other operating income'.
2. Non-IFRS measure. See Appendix 1 for details of APMs, a reconciliation to the
nearest IFRS measure and a prior period adjustment for 9M-22.
3. Operating expenses before credit impairment (charges) / write-backs,
provisions and charges.
Customer deposits by segment 30.09.23 31.12.22
£bn £bn
Retail Banking 156.7 161.8
-Current accounts 66.7 76.6
-Savings accounts 73.7 67.0
-Business banking accounts 10.8 12.2
-Other retail products 5.5 6.0
Corporate & Commercial Banking 23.1 24.8
Corporate Centre 10.7 9.9
Total 190.5 196.5
Customer deposits by segment 30.09.23 31.12.22
£bn £bn
Retail Banking 156.7 161.8
- Current accounts 66.7 76.6
- Savings accounts 73.7 67.0
- Business banking accounts 10.8 12.2
- Other retail products 5.5 6.0
Corporate & Commercial Banking 23.1 24.8
Corporate Centre 10.7 9.9
Total 190.5 196.5
Prudent approach to risk evident across product portfolios
§ Mortgages: average stock LTV of 51% (2022: 50%) and average new loan size of
£227k (2022: £237k). In 9M-23, c.£32bn of mortgages were refinanced and a
further £50bn will reach end of incentive period by the end of 2024.
§ UPL: Average customer balances £6k (2022: £6k).
§ Business Banking: includes £1.9bn (2022: £2.4bn) of BBLS with 100%
Government guarantee.
§ Consumer Finance: 89% (2022: 84%) of lending is collateralised on the vehicle.
Arrears over 90 days past due 30 September 2023 31 December 2022
% %
Mortgages 0.74 0.62
Credit cards 0.50 0.49
UPL 0.68 0.61
Overdrafts 2.54 2.24
Business Banking 3.11 3.47
Consumer Finance 0.40 0.44
§ Early and late arrears remain at low levels across the portfolio. However, we
have seen a slight increase in mortgage, UPLs and overdrafts arrears in recent
quarters. Mortgage arrears of 0.74% remain below pre-Covid-19 average of
1.31%(1).
9M-23 ECL provision increased by £57m to £1,064m (Dec-22: £1,007m)
§ Increases reflect updated economic assumptions and in CCB from higher single
name cases. In the third quarter we incorporated a softening in the UK housing
market in our scenarios.
§ Gross write-off utilisation of £149m (9M-22: £120m).
Credit performance resilient with small increase in Stage 3 ratio
Credit Performance 30 September 2023 31 December 2022
Total Stage 1 Stage 2 Stage 3(2) Total Stage 1 Stage 2 Stage 3(2)
Customer loans £bn % % % £bn % % %
Retail Banking 184.0 90.6 8.2 1.24 194.6 91.5 7.4 1.08
- Mortgages 177.0 91.0 7.9 1.15 187.1 91.8 7.3 0.99
- Credit Cards 2.6 83.7 14.7 2.82 2.5 85.7 12.9 2.53
- UPLs 2.0 83.9 14.9 1.21 2.0 87.3 11.7 1.07
- Overdrafts 0.4 29.7 63.7 7.67 0.5 33.5 61.0 5.93
- Business Banking 2.0 87.4 6.3 6.42 2.5 88.3 5.3 6.55
Consumer Finance 5.3 92.8 6.7 0.52 5.4 93.0 6.5 0.54
Corporate & Commercial Banking 18.3 76.8 19.2 4.24 18.5 78.3 18.8 3.08
Corporate Centre 1.2 99.7 0.2 0.09 1.2 99.6 0.3 0.10
Total 208.8 89.5 9.1 1.48 219.7 90.4 8.4 1.24
1. Average of 9 years to Dec-19.
2. Non-IFRS measure. See Appendix 1 for details and a reconciliation of APMs to
the nearest IFRS measure.
Updated economic scenarios
§ Our base case is broadly aligned to latest market consensus.
§ The stubborn inflation scenario is based on higher inflation, which is
persistently above the Bank of England target leading to further base rate
increases. These further add to the cost of living crisis and falling 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 increasing costs and a continuing and
significant mismatch between job vacancies and skills, as well as a smaller
labour force.
§ The upside scenario incorporates a quicker economic recovery with some lag in
house price declines compared to the base case.
§ Scenario weightings were unchanged between Q3-23 and Q2-23.
Economic scenarios 30-Sep-23 Upside Base case Downside 1 Stubborn Inflation Downside 2 Weighted
% % % % %
GDP 2023 0.4 0.3 0.2 0.0 -0.5 0.2
(calendar year annual growth rate)
2024 1.0 0.4 -0.4 -2.0 -3.6 -0.5
2025 2.3 1.3 0.4 -0.3 -0.3 0.8
2026 2.4 1.5 0.4 0.4 0.8 1.2
2027 2.4 1.4 0.3 0.8 2.3 1.4
Peak to trough(1) 0.0 -0.2 -0.7 -2.8 -5.2 -1.2
Base rate 2023 5.25 5.25 5.75 6.00 5.25 5.45
(At 31 December)
2024 4.50 4.75 5.25 6.00 4.00 4.95
2025 3.50 3.75 4.00 4.50 2.75 3.80
2026 2.50 3.25 3.25 3.25 2.50 3.10
2027 2.50 3.00 3.00 3.00 2.50 2.90
5 yr Peak 5.25 5.25 6.00 7.00 5.25 5.68
HPI 2023 -2.6 -7.0 -3.9 -5.4 -6.7 -5.9
(Q4 annual growth rate)
2024 -5.2 -2.0 -8.0 -11.2 -14.1 -6.0
2025 -0.8 2.0 -2.4 -4.4 -6.4 -0.8
2026 2.0 3.0 2.0 2.0 2.0 2.5
2027 3.0 3.0 3.0 3.0 3.0 3.0
Peak to trough(2) -12.3 -11.1 -17.5 -23.2 -28.2 -16.0
Unemployment 2023 4.4 4.3 4.5 4.5 5.2 4.4
(At 31 December)
2024 4.4 4.5 5.0 5.7 8.5 5.2
2025 3.6 4.4 5.0 5.8 7.9 5.0
2026 3.4 4.3 5.4 6.1 7.3 5.0
2027 3.1 4.3 5.6 6.1 6.6 4.9
5yr Peak 4.6 4.5 5.8 6.1 8.5 5.4
Weighting Sep-23: 10% 50% 10% 20% 10% 100%
ECL 30-Sep-23 Upside Base case Downside 1 Stubborn Inflation Downside 2 Weighted
(100% weight to each scenario)
£m £m £m £m £m £m
Retail Banking 486 498 566 673 871 573
Consumer Finance 70 71 71 74 74 72
Corporate & Commercial Banking 387 396 428 456 499 419
Corporate Centre - - - - - -
Total 943 965 1,065 1,203 1,444 1,064
1. Peak is taken from GDP level at Q2-23.
2. Peak is taken from HPI level at Q3-22.
Treasury
Highly liquid balance sheet
§ Strong LCR of 155%, (Dec-22: 163%), with £18.1bn surplus LCR eligible liquid
assets to minimum requirement.
§ LCR eligible liquidity pool of £51.1bn (Dec-22: £49.0bn), includes £40.1bn
cash and central bank reserves (Dec-22: £44.5bn).
§ 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 across well-established issuance programmes
§ LDR reduced to 111% with lower customer lending and deposits after pricing
actions in Q4-22 to optimise the customer balance sheet and mortgages down
£10.1bn and deposits down £6.0bn.
§ In 9M-23 we issued c.£5.6bn Sterling equivalent medium term funding,
including c.£1.5bn of MREL issuance and c.£4.1bn of other secured issuance
from Santander UK plc. We also issued £1.1bn of Tier 2 securities which were
bought by Banco Santander.
Capital ratios well above regulatory requirements
§ The CET1 capital ratio increased 80bps to 16.0%. This was largely due to
higher profit and a reduction in RWA exposure. We remain strongly capitalised
with significant headroom to minimum requirements and MDA.
§ RWAs decreased with lower mortgage lending and active balance sheet
management.
§ UK leverage ratio remained broadly stable at 5.3% (2022: 5.2%). UK leverage
exposure remained stable at £249.2bn (2022: £248.6bn).
§ Total capital ratio increased to 22.2% (2022: 20.4%) as a result of the
increase in CET1 ratio and Tier 2 issuances.
Structural hedge evolution
§ Our structural hedge position decreased, with c.£99bn at Sep-23 (Dec-22:
c.£108bn), and duration of c.2.6 years (Dec-22: c.2.5 years).
§ The balance on the structural hedge fell in 2023 reflecting lower non-rate
sensitive liabilities. The overall contribution has however increased as
maturities were replaced with higher yielding term assets offsetting the lower
balance. Going forward we expect the overall contribution of the structural
hedge to continue to increase.
Key metrics 30 September 2023 31 December 2022
£bn % £bn %
LCR 51.1 155 49.0 163
CET1 capital 11.2 16.0 10.8 15.2
Total qualifying regulatory capital 15.5 22.2 14.5 20.4
UK leverage (T1 capital) 13.3 5.3 12.9 5.2
RWA 70.1 - 71.2 -
LDR - 111 - 113
Total wholesale funding and AT1 61.6 - 65.2 -
- term funding 53.6 - 57.8 -
- TFSME 19.0 - 25.0 -
- with a residual maturity of less than one year 12.4 - 11.0 -
Summarised changes to CET1 capital ratio
Profit net of distributions +0.75pp
Pension -0.17pp
Expected loss less provisions -0.08pp
RWA and other +0.29pp
CET1 capital ratio MDA trigger (headroom 3.8%) Minimum
%
Pillar 1 4.5
Pillar 2A 3.2
Capital conservation buffer 2.5
Countercyclical capital buffer 2.0
Current MDA trigger 12.2
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.
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. 9M-23 9M-22
£m £m
Non-interest income
Reported (i) 424 415
Adjust for transformation related net loss / (gain) on sale of property (3) 7
Adjusted (ii) 421 422
Operating expenses before credit impairment (charges) / write-backs,
provisions and charges
Reported (iii) (1,856) (1,770)
Adjust for transformation 92 121
Adjusted (iv) (1,764) (1,649)
Provisions for other liabilities and charges
Reported (194) (193)
Adjust for transformation 33 28
Adjusted (161) (165)
Profit before tax
Reported 1,731 1,489
Specific income, expenses and charges 122 156
Adjusted 1,853 1,645
Prior period adjustment: In Q1-23 we removed the operating lease depreciation
adjustment to non-interest income and operating expenses to align to Banco
Santander's presentation. Prior periods were restated, there was no impact on
adjusted profit. In 9M-22 adjusted non-interest income and adjusted operating
expenses increased by £60m and the adjusted CIR increased by 1pp to 44%.
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. 9M-23 9M-22
CIR (iii) divided by the sum of (i) + net interest income 47% 48%
Adjusted CIR (iv) divided by the sum of (ii) + net interest income 44% 44%
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.
9M-23 Adjust for transformation As adjusted
£m £m £m
Profit after tax 1,269 88 1,357
Annualised profit after tax 1,697 1,814
Phasing adjustments (11) (70)
Profit / adjusted profit due to equity holders of the parent (A) 1,686 1,744
9M-23 Equity adjustments As adjusted
£m £m £m
Average shareholders' equity 14,980
Less average Additional Tier 1 (AT1) securities (2,196)
Average ordinary shareholders' equity (B) 12,784
Average goodwill and intangible assets (1,547)
Average tangible equity (C) 11,237 9 11,246
Return on ordinary shareholders' equity (A/B) 13.2% -
RoTE (A/C) 15.0% 15.5%
2022 Adjust for transformation 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%
Adjustment for transformation
Details of these items are outlined in section a) of Appendix 1, with a total
impact on profit before tax of £122m. The impact of these items on the
taxation charge was £34m and on profit after tax was £88m. 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 period.
(9M-23: £213,456m; 9M-22: £215,554m).
§ 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. (9M-23: £215,070m; 9M-22: £214,078m).
§ Cost-to-income ratio: 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.
§ RoTE: 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.
§ 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 - Additional information
Mortgage metrics 30.09.23 31.12.22
Stock average LTV(1) 51% 50%
New business average LTV(1) 65% 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 8% 7%
SVR proportion of loan book 2% 3%
FoR proportion of loan book 1% 1%
Proportion of customers with a maturing mortgage retained(2) 77% 81%
Average loan size (stock)(3) £187k £184k
Average loan size (new business) £227k £237k
Customer loans by segment 30.09.23 31.12.22
£bn £bn
Retail Banking 184.0 194.6
- Mortgages 177.0 187.1
- Other (Business Banking and unsecured lending) 7.0 7.5
Consumer Finance 5.3 5.4
Corporate & Commercial Banking 18.3 18.5
Corporate Centre 1.2 1.2
Total 208.8 219.7
Interest rate risk
NII sensitivity(4) 9M-23 2022
£m £m
+100bps 113 238
-100bps (122) (194)
§ 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 Jun-23 and Dec-22 respectively.
3. Average initial advance of existing stock.
4. 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
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
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
LCR Liquidity Coverage Ratio
LDR Loan-to-Deposit Ratio
LTV Loan-To-Value
MDA Maximum Distributable Amount
MREL Minimum Requirement for own funds and Eligible Liabilities
NPS Net Promoter Score
PRA Prudential Regulation Authority
RoTE Return on Tangible Equity
RWA Risk-Weighted Assets
Santander UK Santander UK Group Holdings plc
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 17,095 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 2023, and the competitor set
included in the ranking analysis is Barclays, Halifax, HSBC, Lloyds Bank,
Nationwide, NatWest Group (Natwest & RBS) and TSB.
September 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 8,522 interviews made in twelve months ended 18 September 2023 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.
September 2023: NPS ranked 1(st) for Business & Corporate.
December 2022: 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 30
September 2023, the bank had around 19,800 employees and serves around 14
million active customers, 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 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 30 June 2023, Banco Santander had more than 1.2 trillion euros in total
funds, 164 million customers, of which 28 million are loyal and 53 million are
digital, 9,000 branches and over 212,000 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) 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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