Santander remains coy on Yorkshire Bank bid

A spokesman for Santander Group in Madrid told the Yorkshire Post: “I don’t think we are going to be commenting.”

Citing sources close to the bank, The Sunday Times said executives in London and Spain have been considering the move for the Australian-owned lenders since talks to buy a network of 316 branches from Royal Bank of Scotland collapsed last October.

Santander UK chief executive Ana Patricia Botin declined to directly answer questions about a possible bid, saying: “Right now, our thinking is that organic growth is what we are aiming for.”

Santander UK is Britain’s fifth-biggest bank following deals to buy Bradford & Bingley, Abbey and Alliance & Leicester and the acquisition of Yorkshire and Clydesdale would give it increased muscle in business banking in the north of England and Scotland.

It could fund the takeover from the £2bn excess capital sitting on its balance sheet. The Spanish parent transferred £4.5bn in capital to its subsidiary in 2010 to develop the UK business ahead of a stock market flotation expected later this year.

Previous speculation has valued Yorkshire and Clydesdale at between £2bn and £3.5bn.

A spokesman for Yorkshire and Clydesdale banks said: “We cannot comment on market speculation and rumour.”

The banks reported a worse than expected statutory loss of £470m in the last financial year, mainly due to bad loans on commercial property.

They are undergoing a deep restructuring exercise which will lead to the loss of 1,400 jobs by 2015. The most significant aspect of the programme has seen the transfer of £5.6bn of commercial property loans to parent National Australia Bank (NAB).

Investors have turned up the pressure on NAB’s board to act after the group delivered “below the budget” results last year.

Full-year profits fell 22 per cent to $4.1bn, which the group blamed on the UK economic downturn.

NAB tried and failed to offload the banks in 2010 and 2011. Australian commentators have described them as a “millstone”, “a major blight” and “an albatross around NAB’s neck”.

NAB chief executive Cameron Clyne told shareholders in December that Yorkshire and Clydesdale are “lower risk and better capitalised” as a result of the ongoing restructuring.

The UK banking operations will be largely self-funded and profitable when the programme is completed later this year, according to NAB. This is likely to lead to renewed speculation about their future.

Another option for NAB would be to float Yorkshire and Clydesdale, which might allow shareholders to benefit in more ways than a straight sale.

A report from Credit Suisse last week said an initial public offering could add between $1.5bn and $4bn to NAB’s market capitalisation in Australia. It said the newly created UK plc would debut with a stock market value of $3bn and be ranked 75th in the FTSE-250.

“We see the following reasons for NAB to consider a spin-off of the UK: achievement of a substantial exit from the UK, but allowing shareholders to elect to retain any future UK upside recovery potential; limited and declining synergies between the two businesses; insulation from ongoing UK capital demands; cessation of UK brand/franchise damage associated with ownership uncertainty; and enhanced management focus/incentive alignment,” said the report.

Santander UK’s ambitions cannot be doubted. Ms Botin, the daughter of billionaire group executive chairman Emilio Botin, told The Sunday Times: “Santander UK is probably the best capitalised bank of any big bank in the country. We have core capital of close to 12 per cent. During the crisis we acquired two failing banks. We had 6.5 per cent capital.

“Today we have practically double. So we are going to devote some of that capital to growth.”

Santander UK is growing its retail and SME businesses operations, opening new corporate banking centres and hiring new relationship managers. Its profits slumped by 27 per cent to £372m in the three months to September 30.

Property losses in Spain left the parent group’s net profits 94 per cent lower in the third quarter, at 100 million euros.