Santander aims to challenge the Big Four in business banking

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SANTANDER UK laid out plans to break the dominance of the Big Four in business banking as it looks to rebalance the lender ahead of a split from its Spanish parent.

The lender yesterday stepped up its charm offensive in Yorkshire when Ms Botin addressed business leaders, students and academics at Leeds University Business School.

Santander hopes to shift its lending ratio – currently 15 per cent to businesses and 85 per cent to households and homebuyers – to nearer half and half. The imminent completion of its acquisition of 318 RBS branches will significantly accelerate this, boosting its presence among small to medium-sized enterprises (SMEs).

“No bank has ever challenged the Big Four in SME business for decades,” said Ms Botin. “We are going to be the first real competitor.

“We intend to be much bigger in SME and corporate banking.

“The RBS branch business is what really takes us to a truly national level. Once we have got RBS that proportion changes and we are also growing organically.”

The RBS purchase – a sale forced by the European Union – will mean Santander’s market share of SME lending surges from about four per cent to eight or nine per cent.

Another EU-mandated sale, Lloyds’ divestment of 632 branches to The Co-operative, yesterday appeared to stumble. Lloyds said because of the “highly complex” nature of the deal it plans to update the market on progress between April and June.

It still hopes to sell the business to the Co-op, but is keeping the flotation option open as concerns grow over the mutual’s readiness to complete the deal.

Ms Botin said she intends Santander to be 70/30 split between retail and business within four years.

“You cannot grow this very fast because you need to do it in a prudent way,” she said.

Santander entered the UK in 2004 through its purchase of former building society Abbey National. Its growth spurt continued with the acquisitions of Alliance & Leicester and Bradford & Bingley’s branches and deposits.

The bank now has 25 business lending centres, including sites in Leeds, Sheffield and Hull. It is also opening sites in Doncaster, Wakefield and Bradford, and employs hundreds at a call centre in Bradford. Upon completion, it will have 60 to 70 regional business banking centres.

“We are still small but we will be a very credible player once we have integrated the RBS branches,” said Ms Botin.

“We want to be the SME bank of choice in the UK. We are putting a huge amount of effort in terms of building that business based on long-term relationships.

“Yorkshire is our second-biggest regional centre after London.

“Because we are quite small we see a lot of opportunities. We are introducing competition and doing things which others are not doing.”

Santander is one of five lenders which signed up to the Government’s new National Loan Guarantee Scheme, which aims to boost lending to small and medium-sized businesses by offering them discounted loans.

“We don’t like the name at all but we think it’s a great programme,” said Ms Botin, adding there is “no financial advantage” for the bank.

Ms Botin, whose father Emilio Botin chairs the Spanish banking giant, has headed the lender’s UK arm since December 2010 when she replaced António Horta Osório, who became Lloyds CEO.

She said one of her greatest achievements was “putting together a strong team”, after losing a number of top executives to Lloyds.

Santander plans to float its UK arm, but Ms Botin said that will not happen until at least 2013.

“We are very tied to the UK economy and until that looks a bit better it’s not going to be possible to do the IPO,” she said.

“The macro environment has not been very supportive. The UK has been deleveraging. The big state-owned banks need to deleverage. Lending to SMEs is negative. We are one of the few banks which has grown net lending.”

Ms Botin said Britain’s flagship attempt at boosting growth, its £325bn asset purchase or quantitative easing programme, is not helping companies access cheaper finance. “The quantitative easing is not working that much, not as much as it should be,” she said.

“It’s very important and necessary. (But) it’s not having an influence on the rate at which banks are lending to companies.

“Unfortunately the (Bank of England) base rate is not a reference for bank rates any more.”