Santander reviews UK retail banking presence; Commerzbank considers cutting thousands of jobs

Posted by Admin January 20, 2025 Jobs

Santander is reconsidering its presence in the UK after its acquisition of Abbey National in 2004 positioned it as a major retail player in the country, according to a Financial Times report on Saturday, citing sources familiar with the matter.

Among a number of strategic options under consideration is an exit from the UK retail market, the FT’s sources said, although no imminent announcement is expected, as discussions remain in early stages.

The discussions come as the Spanish lender grapples with lower returns from its UK business compared to other markets, coupled with a £295mn provision for a court ruling on the potential mis-selling of car loans.

Internal frustrations with Santander UK’s high cost base, the UK’s ringfencing regime and muted benefits from rising interest rates have fuelled speculation of a possible sale. “It has always been a possibility,” said a former executive.

Two people familiar with the matter told the FT it was unclear who would be interested in buying the unit and Santander could yet decide to keep the business.

Santander entered the UK market in 2004 by acquiring Abbey National and later merged it with Alliance & Leicester and part of Bradford & Bingley, rebranding as Santander UK in 2010.

Santander UK reported pre-tax profits of £947mn in the first nine months of 2024, down from £1.73bn a year earlier, as net interest income declined and provisions were made for the car financing ruling.

Santander has already begun trimming its UK workforce, announcing in October a reduction of 1,400 jobs as part of a cost-saving initiative called “Project Nike”. Should Santander exit UK retail and commercial banking, sources cited by the FT said it would retain its London presence for corporate and investment banking operations.

In comments to the FT, Santander said: “The UK is a core market for Santander and this has not changed.”

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Commerzbank is reportedly exploring cutting thousands of jobs as it aims to counter an unsolicited takeover approach from Italy’s UniCredit, the Financial Times reported on Saturday, citing sources familiar with the matter.

The FT’s sources said the plans, which are still in development, are expected to be presented to the workers’ council in the coming weeks.

The German lender’s supervisory board chair, Jens Weidmann, last week downplayed the likelihood of a friendly merger with UniCredit, following the Italian bank’s surprise acquisition of a large stake in Commerzbank.

UniCredit now controls approximately 28 per cent of Commerzbank, with 18.5 per cent secured via financial instruments and 9.5 per cent held directly.

Commerzbank’s new chief executive, Bettina Orlopp, is set to unveil an updated strategic plan on February 13. The plan aims to demonstrate that the bank can improve profitability and increase shareholder payouts while remaining independent.

In comments to the FT, Commerzbank said the strategy update was still being developed and added: “We cannot pre-empt the upcoming discussions in the management and supervisory boards.”

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Four of Canada’s largest banks: TD Bank, Bank of Montreal, National Bank of Canada and CIBC, said on Friday they were withdrawing from the UN-sponsored Net-Zero Banking Alliance, joining six major US banks.

In separate statements, the Canadian banks said that they are well-equipped to operate independently of the alliance and advance their own climate strategies.

The exits, which began with Goldman Sachs’ announcement on December 6, come ahead of Donald Trump’s inauguration on Monday. Trump has consistently criticised government initiatives aimed at mandating climate-change policies.

Other US banks leaving include Wells Fargo, Citigroup, Bank of America, Morgan Stanley and JPMorgan.

The Net-Zero Banking Alliance, established in 2021 under the leadership of former Bank of Canada governor Mark Carney, is a UN-backed initiative aimed at guiding financial institutions to mitigate the impacts of climate change and work towards achieving net-zero emissions.

Separately, the US Federal Reserve announced on Friday that it had withdrawn from an international body of central banks and regulators formed to tackle climate change risks in the financial sector.

In a statement, the Fed said it was exiting the Network of Central Banks and Supervisors for Greening the Financial System because “the work of the NGFS has increasingly broadened in scope, covering a wider range of issues that are outside of the [Fed] board’s statutory mandate”.

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A January rate cut by the European Central Bank is “not a foregone conclusion for me at all”, said Austrian governing council member Robert Holzmann in a Politico interview published on Monday.

Noting that inflation remained “well above” 2 per cent in December, with January figures expected to reflect similar levels, Holzmann warned that “cutting interest rates when inflation rises faster than anticipated, even temporarily, risks hurting credibility”.

“Since our December policy decision, we have seen changes we could not anticipate, with gas reserves running down much faster than expected due to colder weather, effective closure of the Ukraine gas transit and the risks of energy prices remaining elevated,” he added.

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Indonesia’s state-owned Bank Tabungan Negara is planning to acquire sharia lender Bank Victoria Syariah, as part of its further expansion into Islamic finance.

The mortgage-focused lender announced the potential bid in Indonesian daily Bisnis Indonesia on Monday, noting it intends to use internal funds for the acquisition.

Bank Tabungan Negra said it will seek shareholder approval at a meeting on March 14. If successful, the deal is expected to finalise by May.