Santander on the fast track as it takes bigger share of UK market

SPANISH bank Santander continued its advance on the UK high street in 2009, seizing a bigger share of the retail banking market.

The group, which bought Bradford & Bingley's 197-strong branch network in 2008, said it now has 10 per cent of the UK mortgages, savings and deposits market.

Santander, which sponsors Formula One driver Lewis Hamilton, posted a 30 per cent rise in UK annual trading pre-tax profits to 1.54bn in the year to the end of December.

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Its share of the gross mortgage market rose to 18.6 per cent in 2009, from 13.9 per cent the previous year. Net home lending climbed to 7.6bn, more than half the estimated total market in 2009.

The bank, which recently completed the rebranding of its Abbey and Bradford & Bingley branches under the Santander banner, said it opened an extra 1.1 million new bank accounts last year, up 26 per cent on a year earlier and 10 per cent above its target.

Santander's branch network, including Alliance & Leicester branches, spans 1,300 sites.

Santander said customers were increasingly attracted by its value-for-money products and it plans to launch more products like its Zero current account "to reward" its existing 25 million customers.

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The account, which is only available to Santander mortgage customers, has no overdraft fees and pays interest of six per cent for the first year on balances of up to 2,500, providing at least 1,000 is paid into the account each month.

Antnio Horta-Osrio, chief executive of Santander UK, said: "Our full year results demonstrate clearly our business model and strategy are delivering superior results, allowing us to increase profits and revenues, balanced against controlled costs and prudent lending.

"Our ongoing focus on efficiency means we can continue to share the benefits of this cost advantage with our customers through competitive products, demonstrated by us having more 'best buy' mentions than any other high street bank.

"This has enabled Santander UK to write significant new business and continue to support the UK economy with increased lending to homeowners and businesses."

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Santander, the first of the big UK banks to release results for 2009, said its drive into business banking was helped by 20 regional business banking centres acquired with Alliance & Leicester in 2008.

It said lending to small and medium-sized customers grew by 16 per cent to 6.7bn.

It took part in the Government's Enterprise Finance Guarantee scheme, as well as putting in place more than 100m of business lending through the European Investment Bank scheme.

Growth in net deposits was said to be strong, with gains of 14.9bn from retail, corporate and private banking customers, which it said showed the bank was seen as a "safe haven" for savers.

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Santander added it saw relatively low levels of mortgage arrears and repossessions because of its limited exposure to high-risk lending.

Arrears rates continued to rise, hitting 1.71 per cent of its total mortgage book at the end of the year, compared to 1.04 per cent a year earlier.

But Santander said the value of non-performing loans has remained broadly flat, and its rate is far short of the UK average of 2.4 per cent, according to the Council of Mortgage Lenders. Its average loan-to-value rate stood at 64 per cent.

Bad debt provisions, modest in comparison to it UK peers, rose to 784m in the year, from 545m in 2008, but have been decreasing in the last two quarters of 2009.

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By contrast, Bradford & Bingley's nationalised mortgage book, which is 60 per cent buy-to-let, last reported an arrears rate of 5.88 per cent.

Farewell to famous names

Santander last month erased the Bradford & Bingley and Abbey names for good from the high street, replacing the historic brands with its own.

The Spanish bank rebranded more than 1,000 branches and expects to complete the rebranding of Alliance & Leicester later this year.

The move signalled the end of B&B's 150-year presence on the high street, although its loan book remains in state ownership and is unaffected by the rebranding.

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Santander bought B&B's 197 branches and 141 agencies, plus its 20bn savings book, for 612m in October 2008 when the bank's loan book was nationalised. Santander is spending 12m on the rebranding, although it aims to save 180m from integrating the three businesses.

Santander bought Abbey National in 2004 for 8.5m, followed four years later with a 1.3m move for Alliance & Leicester. About 1,900 jobs have already gone as part of its efforts to combine the banks.