Santander may float in UK

02/07/2010 (22 h 28 m ago)

Speculation mounts over possible UK flotation by Spanish bank if it buys network that EU is forcing bailed-out RBS to sell Banco Santander could float part of its rapidly growing UK division – which includes the former Abbey, Bradford & Bingley and Alliance & Leicester – if it ends up buying the 300 bank branches of Williams & Glyn's that the Royal Bank of Scotland has been forced by the EU to put up for sale. Other options include seeking finance from the debt markets, through a big loan subscribed by several banks, or through a share exchange with other investors, it is understood. But the process to sell the business-focused RBS branch network – a move forced by the European Union after the government bailout of the taxpayer-owned bank – is still in its "very early days," a source told the Guardian. Neither Santander nor UBS, which is managing the sale, declined to comment. Speculation about a possible deal has been sparked by comments by Santander's chief executive, Alfredo Sáenz, last week in Madrid that "there's still much to be done in Britain". However, Sáenz also said the bank did not have any plans to float its British unit, which is now selling about half of all new mortgages in the UK. Bankers and investors have speculated about a flotation of the UK division after the successful partial stock market listing of Santander's Brazilian unit last year. The sale contributed €1.4bn (£1.2bn) to the bank's €8.9bn profit in 2009, which was also driven by strong growth in the UK, the chairman, Emilio Botín, said in Madrid. Contrary to press reports, it is understood that Santander has not contacted its shareholders to test the idea of a partial flotation of the UK unit. The business posted annual profits of £1.5bn last year, up 30% from 2008, after aggressive expansion and as brand awareness grew through its red logo and sponsorships such as Formula 1 driver Lewis Hamilton. An average valuation of ten times the company's profits would value the business at £15bn.Buying the 300-strong former Williams & Glyn's branch network would lift Santander's share of Britain's small business market, which stands at about 3%, well behind its stake of about 11% of the residential mortgage market. Santander is now Britain's third-largest bank, in terms of deposits, after RBS and Lloyds Banking Group. The Madrid-based bank, which has rapidly grown in the UK after the acquisition of Abbey National and parts of Alliance & Leicester and Bradford & Bingley, has expanded internationally over the past decade, reducing its dependence on Spain, which now only accounts for about 25% of its profits. The country's shrinking economy and 19% unemployment has lifted the bad loans ratio to more than 3% and is expected to continue doing so as the economy still deteriorates. The UK market now provides 16% of the group's profits, the third largest, after Spain and Brazil. The bank expects double-digit growth in Britain this year, pushed by a recovering economy, and through "opportunities that may arise," Botín said. Banco Santander Royal Bank of Scotland Banking Investing Bradford & Bingley Alliance & Leicester Elena Moya guardian.co.uk © Guardian News & Media Limited 2010 | Use of this content is subject to our Terms & Conditions | More Feeds

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