Santander has discussed a potential sale of the Spanish lender’s UK retail business with NatWest, according to people familiar with the matter.
Early stage talks took place last year, but interest remains from both parties in a potential deal, the people added.
Santander has insisted that its UK retail business is “not for sale” since the Financial Times reported last month that it was exploring a potential exit after two decades on the British high street.
One person familiar with the situation said Santander had not approached any party about a sale of the UK business.
However, discussions between Santander and one of Britain’s biggest lenders are likely to raise further questions about the Spanish bank’s desire to continue fighting it out in the UK’s highly competitive mortgage market.
“Santander UK is not for sale. The UK remains a core part of Santander’s globally diversified business model”, said Santander in a statement. It added that the model had “significant potential upside for years to come, including in the UK.”
NatWest said: “We do not comment on speculation”.
The two banks have diverging strategies. Santander maintains a sprawling international presence, while NatWest has since the financial crisis retrenched to focus on its domestic market.
Santander has grown frustrated with Britain’s ringfencing regime, its UK unit’s high cost base, and weaker returns relative to some of Santander’s other markets.
NatWest meanwhile is primed for more aggressive growth once the UK government sells the last of its £46bn crisis-era stake, expected to come within the next four months.
One person familiar with NatWest’s strategy said its retail bank had room to grow and it was exploring M&A opportunities in anticipation of its return to fully private ownership.
NatWest chief executive Paul Thwaite told the FT’s Banking Summit in December that the lender was on the “front foot” when it came to acquisitions.
Since Thwaite took the helm of the bank in July 2023, NatWest has bought the bulk of Sainsbury’s Bank and £2.5bn of prime residential mortgages from Metro Bank.
Santander’s UK business has previously attracted interest from other domestic rivals.
The Spanish group last year rejected a “low ball” offer for the unit from Barclays, the FT reported last week. Analysts have estimated that Santander could generate between €11bn and €15bn from a sale of the unit.
“Barclays is more logical but NatWest is probably keener because they are desperate to get away from the legacy of the financial crisis and the government shareholding,” said one person familiar with the discussions.
Last week, Santander’s UK business reported net profits of €1.3bn for 2024, a 15 per cent drop on the previous year. Return on tangible equity — a measure of bank profitability — also remained far below Santander’s other key markets.
The wider group reported record annual profits in 2024 after higher rates boosted net interest income, and its corporate and investment bank posted a jump in fee income.
The Spanish bank has been trying to persuade investors of the merits of its global strategy and that its presence in the disparate set of markets where it operates complements each other.