Tear Sheet: Santander UK Group Holdings PLC

U.K. Banks Credit Outlook 2024: Earnings Stay Solid As Margins Ease, Jan. 4, 2024 Banking Industry Country Risk Assessment: United Kingdom, Nov. 28, 2023 Update: Santander UK Group Holdings PLC, June 29, 2023 The stable outlook reflects our view that SanUK will maintain robust credit quality that will support earnings. It also reflects our expectation that SanUK 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

...Santander UK Group Holdings PLC (SanUK) has delivered a strong 2023 performance. Pretax earnings were ú2.15 billion, up 13% year-on-year, and return on tangible equity was 14.4% (2022: 12.0%). This was largely driven by increased net interest income stemming from a higher base rate and good cost management, along with lower credit impairment charges due to the improved macroeconomic outlook. We expect SanUK's performance to remain resilient in 2024. Its performance should reflect healthy earnings and solid funding and liquidity metrics, despite subdued U.K. economic growth and higher debt-servicing costs weighing on asset quality and margins. We expect revenue tailwinds from higher rates to taper off amid interest rate cuts in 2024. That said, SanUK should maintain a healthy, albeit lower, net interest margin over the next 12-18 months due to a lower rate environment and pressure on new business margins offset by rising yields on the structural hedge, which will become increasingly visible...

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