Santander could float UK division next year

The Spanish-owned bank’s UK arm also revealed it has set aside £232m to cover mis-sold products such as complex interest rate swaps sold to businesses.

It has identified fewer than 500 potential swap mis-selling cases, mainly sold by Alliance & Leicester before Santander bought it at the peak of the credit crunch in 2008.

The Financial Services Authority yesterday said its review of swaps sold to small businesses found more than 90 per cent had been mis-sold. It said a significant proportion of the 173 cases were likely to result in redress being due to the customer. It is believed that as many as 40,000 of the interest rate swaps could have been mis-sold to small businesses since the end of 2001.

Santander UK did not increase its provision for payment protection insurance from the £751m set aside last year.

The bank, headed by chief executive Ana Botin, made pre-tax profits of £1.23bn in 2012, two per cent down on 2011.

Santander UK’s head of UK banking, Steve Pateman, said a flotation would not happen this year. “We would like to do it,” he said. “Our view is if we continue to make progress in building the banking franchise, continue to improve our balance sheet metrics and continue to grow our SME (small to medium-sized enterprise) business, as we have done in the last 12 months, then it’s something we could look at for 2014 or 2015.”

Santander last year walked away from buying more than 300 Royal Bank of Scotland branches, at a cost of £55m. It declined to comment on speculation of a bid for Yorkshire and Clydesdale banks, owned by National Australia Bank.

Santander’s share of the UK mortgage market fell to 10.2 per cent from 16.6 per cent a year earlier, as the lender tightened its criteria on high loan-to-value and interest-only loans. Including redemptions, net lending fell by £9.4bn, with gross lending falling 38 per cent to £14.6bn. However, its lending to small businesses grew 18 per cent to £10.6bn.

It ended the year with 190 fewer branches than a year ago at 1,189 – a 13.8 per cent fall – as it cut duplicate branches.

Parent group Santander raised provisions for bad loans sharply after defaults rose in its home market and in Brazil, a key driver of earnings.