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Name | Symbol | Market | Type |
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Sant Uk Grp 45a | LSE:95VC | London | Medium Term Loan |
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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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April 25, 2023 02:15 ET (06:15 GMT)
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