TIDM95VC TIDMBN65
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
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
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 GBP547m (Q1-22: GBP495m) 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 GBP56m in our transformation (Q1-22: GBP39m).
Ongoing savings from this programme helped mitigate inflation.
-- Credit impairment charges GBP9m 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 GBP4.1bn and customer deposits reduced
by GBP5.1bn keeping our LDR broadly stable.
Compared to last year both loans and deposits are up by GBP1.8bn
and GBP0.7bn respectively.
Strong liquidity, funding and capital with prudent balance sheet
management
-- Strong LCR of 164% (2022: 163%) with liquidity pool of GBP49.6bn
(2022: GBP49.0bn), 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
GBPm GBPm % GBPm GBPm %
---------------------------------- ------ ------ ------- ------ ------ -------
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, provisions
and charges (614) (581) 6 (583) (548) 6
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 GBP30m related to the rise in scams (Q1-22:
GBP26m) and higher transformation charges.
-- Tax on profit from continuing operations increased to GBP145m 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 GBP4m.
-- Adjusted operating expenses (2,3) up 6% due to inflationary pressures.
-- Adjusted provisions for other liabilities and charges (2) up 32%,
an increase of GBP14m largely due to fraud charges.
Summarised balance sheet 31.03.23 31.12.22
GBPbn GBPbn
------------------------------ --------- ---------
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 GBP49m of property assets
classified as held for sale.
Customer deposits by segment 31.03.23 31.12.22
GBPbn GBPbn
--------------------------------- --------- ---------
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 GBP230k (2022: GBP237k).
-- Credit cards: 56% (2022: 55%) of customers repay full balance each
month.
-- UPL: Average customer balances GBP6k (2022: GBP6k).
-- Business Banking: includes GBP2.2bn (2022: GBP2.4bn) of BBLS with
100% Government guarantee.
-- Consumer Finance: 85% (2022: 84%) of lending is collateralised on
the vehicle.
Arrears over 90 31 March 2023 31 December 2022
days past due
% %
------------------ -------------- -----------------
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 GBP22m to GBP1,029m (Dec-22:
GBP1,007m)
-- 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 GBP42m (12-month 2022: GBP157m).
Credit Performance 31 March 2023 31 December 2022
------------------------------ ------------------------------
Stage Stage Stage Stage Stage Stage
Total 1 2 3(1) Total 1 2 3(1)
Customer loans GBPbn % % % GBPbn % % %
------------------------ ------ ------ ------ ------ ------ ------ ------ ------
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
(GBP0.1bn) 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 Upside Base Downside Downside Stubborn Weighted
31-Mar-23 1 case 1 2 Inflation
% % % % %
----------------------------- ------- ------ --------- --------- -----------
GDP
(calendar
year annual
growth rate) 2022 4.0 4.0 4.0 4.0 4.0 4.0
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
(At 31
December) 2022 3.50 3.50 3.50 3.50 3.50 3.50
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
(Q4 annual
growth rate) 2022 4.9 4.9 4.9 4.9 4.9 4.9
---------------
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
(At 31
December) 2022 3.7 3.7 3.7 3.7 3.7 3.7
---------------
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 Base Downside Downside Stubborn Weighted
1 case 1 2 Inflation
(100% weight to GBPm GBPm GBPm GBPm GBPm GBPm
each scenario)
------------------------ ------- ------ --------- --------- -----------
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 GBP19.3bn LCR eligible
liquid assets surplus to minimum requirement.
-- LCR eligible liquidity pool of GBP49.6bn (Dec-22: GBP49.0bn), includes
GBP44.1bn cash and central bank reserves (Dec-22: GBP44.5bn). 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 GBP58.3bn 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 GBP25.0bn with GBP21.1bn
due for repayment by 2025 and the remaining GBP3.9bn due for repayment
between 2027 and 2031.
-- In Q1-23 we issued cGBP3.3bn Sterling equivalent medium term funding,
including cGBP1bn of MREL issuance and cGBP2.3bn of other secured
issuance from Santander UK plc. We also issued GBP300m of 10 year
Tier 2 (non-call 5 year) which was bought by Banco Santander.
-- We expect to issue GBP1.5bn to GBP2.5bn 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 GBP249.1bn (2022: GBP248.6bn).
-- Total capital ratio remained broadly stable at 20.5% (2022: 20.4%).
Key metrics 31 March 2023 31 December
2022
GBPbn % GBPbn %
--------------------------------------- ------- ---------- ------- ---------
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 Minimum
(headroom 4.2%) %
---------------------------------- --------------------------------------
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
GBPm GBPm
---------------------------------------- ------- ------ ------
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
(iii) divided by the sum of (i)
CIR + net interest income 47% 49%
Adjusted (iv) divided by the sum of (ii)
CIR + 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, As adjusted
expenses and
charges
GBPm GBPm GBPm
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
GBPm GBPm GBPm
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' 12.7% -
equity (A/B)
RoTE (A/C) 14.4% 15.0%
2022 Specific income, As adjusted
expenses and
charges
GBPm GBPm GBPm
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
GBPm GBPm GBPm
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' 10.6% -
equity (A/B)
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 GBP56m. The impact of
these items on the taxation charge was GBP16m and on profit after
tax was GBP40m. 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: GBP217,569m; Q1-22: GBP212,065m) .
-- 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: GBP217,874m; Q1-22: GBP210,432m) .
-- 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
GBPm GBPm
------------------------------------------------------------ ------ ------
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, provisions and charges (607) (574)
Credit impairment (charges) / write-backs (60) (52)
Provisions for other liabilities and charges (86) (47)
Total operating credit impairment (charges) / write-backs,
provisions and charges (146) (99)
------------------------------------------------------------ ------ ------
Profit before tax 541 485
Tax on profit (147) (103)
------------------------------------------------------------ ------ ------
Profit after tax 394 382
------------------------------------------------------------ ------ ------
Summarised balance sheet 31.03.23 31.12.22
GBPbn GBPbn
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 GBP14.4bn GBP14.3bn
Risk-weighted assets (RWAs) GBP70.2bn GBP70.1bn
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 GBP1,027m GBP1,006m
------------------------------------- ---------- ----------
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 GBP49m of property assets
classified as held for sale.
Appendix 3 - Additional information
31.03.23 31.12.22
Mortgage metrics
------------------------------------------ ------------------ ----------
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) GBP185k GBP184k
Average loan size (new business) GBP230k GBP237k
------------------------------------------ ------------------ ----------
Customer loans by segment 31.03.23 31.12.22
GBPbn GBPbn
------------------------------------------------------ --------- ---------
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
GBPm GBPm
+100bps 222 238
-100bps (227) (194)
-------------------- ------ ------
Well positioned in a rising interest rate environment
-- Our structural hedge position decreased, with c.GBP104bn at Mar-23
(Dec-22: c.GBP108bn), 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 Santander UK Group Holdings plc
UK
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 GBP0 - GBP500m 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 EUR120 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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END
QRFIIMPTMTATBLJ
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April 25, 2023 02:15 ET (06:15 GMT)
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