Banco Santander is selling one out of every two mortgages in Britain as the bank pushes ahead with expansion plans which could see it buying 315 Royal Bank of Scotland branches.
Net mortgage lending in 2009 reached £7.6bn – estimated to be almost half the total market in 2009. That compares with its share of existing mortgages of just 13 per cent. Santander also has around 10 per cent of deposits and around 8 per cent of current accounts.
The Spanish company's current dominance of the mortgage market is a stark illustration of the way other banks have withdrawn in the wake of the credit crunch and subsequent financial crisis. Despite its surge in mortgages, Santander – which has been aggressively marketing itself utilising its sponsorship of the McLaren Formula One team – is still a way from becoming a "fifth force" in British banking capable of challenging the "big four" of Lloyds Banking Group, HSBC, Barclays and Royal Bank of Scotland.
Business banking is a particular weak point. However, the bank would be greatly enhanced with the acquisition of one of the three "new" banking businesses set to come on to the market. Williams & Glyn, the Royal Bank of Scotland business which includes 318 branches, is the prime target because it will include several business banking centres.
Santander knows the business well and has worked with RBS before, including on the disastrous acquisition and break up of ABN Amro. Of the three banks involved Santander was the only one to emerge with its reputation and finances enhanced.
If it fails to buy Williams & Glyn, Santander would likely switch its attention to the more than 600 branches Lloyds Banking Group has to sell, but this would be a consolation prize. It is not expected to bid for Northern Rock's "good bank" when that is sold.
Banco Santander's chief executive officer, Alfredo Saenz, told analysts in Madrid yesterday that the company would "study takeover opportunities in the UK" although he stressed that the lender's goal was to generate "organic growth".
He was speaking as the bank, the second largest in Europe after HSBC, reported a 13 per cent rise in fourth-quarter net profit to €2.2bn (£1.9bn) from €1.94bn a year earlier, which was ahead of analysts' forecasts. Full-year net profit stood at €8.94bn, 1 per cent higher than the €8.88bn reported in 2008. Chairman, Emilio Botin, had targeted repeating the year-earlier profit figure.
In Britain profits grew by nearly a third while turnover increased by a fifth. The bank insisted that despite the enormous surge in mortgage lending, which was helped by the virtual withdrawal from the markets of many weaker players, its loan to value on existing stock was 56 per cent, while the figure for new business was 64 per cent.
Santander's broad geographic spread helped it stand up better to the financial crisis than many other banks, leaving it with enough firepower to snap up less fortunate players.
The bank's rise in the UK has been dramatic – it only entered the market in 2004 with the acquisition of Abbey National but has since added Alliance & Leicester and the deposit business of Bradford & Bingley, recently opting to package them all up under the Santander name.