Santander UK Group Holdings PLC

The stable outlook reflects our view that SanUK will maintain robust credit quality that will support earnings. It also reflects our expectation that the bank will maintain a good position in U.K. retail banking and a conservative risk profile. We assume Banco Santander will 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 by a bail-in of its subordinated debt instruments for loss absorption and recapitalization than by relying on group support. We could lower the ratings over our two-year horizon if the uncertain U.K. economic environment compromises SanUK's performance significantly beyond

...Our rating on Santander UK Group Holdings PLC (SanUK) balances its deep but relatively narrow U.K. banking franchise against its solid capital base and well-diversified funding and liquidity profile. Although it has developed a deep U.K. prime mortgage business, SanUK's overall scope remains narrower than U.K.-focused peers Lloyds and NatWest, both of which run materially larger commercial lending franchises, or Barclays, which has built an internationally diversified investment banking and credit card franchise. At the same time, SanUK's narrower scope, well-managed balance sheet (in which corporate exposures have been steadily reduced), and focus on operating efficiency have enabled it to record resilient risk-adjusted earnings over the past 24 months. The combination of these factors also supports our view of SanUK's solid capitalization, with our risk-adjusted capital (RAC) ratio moving just above 10% at year-end 2023....

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