Santander UK Group Holdings PLC

The stable outlook reflects our view that the bank will incur a materially lower impairment charge for 2021 that will support earnings. It also reflects our expectation that the bank will continue to maintain a good position in U.K. retail banking and maintain a conservative risk profile. We assume Banco Santander will continue to provide ongoing group support, despite our view of uncertain extraordinary group support in a severe stress scenario given its multiple point of entry approach to resolution. This means that we believe the U.K. subgroup is more likely to support itself through bailing in its subordinated debt instruments for loss absorption and recapitalization, rather than rely on group support. We could lower the ratings over our two-year

...Santander UK Group Holdings' (Santander UK) asset quality remains robust thanks to sufficient provisioning throughout 2020. Given the material credit provisions in 2020, Santander UK's asset quality has remained strong, with the group having suffered low credit losses aided by fiscal and monetary support intervention. We believe that that the bank's capitalization, funding, and liquidity profiles are in line with those of domestic U.K. peers; as such, we expect Santander UK will maintain a healthy balance sheet. Santander UK's transformation program will constrain earnings in the short term, but materially benefit the bank in the medium term. We acknowledge a renewed focus on efficiency exhibited by significant deposit repricing, further branche closures, and headquarter relocation. Operating expenses were up 16% year on year at March 31, 2021, reflecting transformation program costs of ú142 million. However, adjusted operating expenses showed further progress falling by 3%, and we expect...

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