Santander eyes flat for UK arm as earnings rise

SANTANDER, the Spanish bank, confirmed yesterday that it may spin off its burgeoning UK empire into a stock market listing, after revealing the division's profits rose 10 per cent to £875 million in the first six months of this year.

Alfredo Saenz, the group's chief executive, also said Santander could complete its acquisition of more than 300 high street branches from Royal Bank of Scotland as early as next month.

Santander is seen as wanting the branches partly to boost its drive into the small business lending market, an area currently controversial, with Business Secretary Vince Cable and Mervyn King, governor of the Bank of England, claiming banks are not doing enough to lend to small businesses.

The Spanish bank said its UK operations boosted lending to small and medium-sized enterprises (SMEs) by 20 per cent to 7.5bn in the first half, up from 6.2bn in the same period of 2009.

Santander also disclosed the scale of its UK costcutting vigour, with its cost/income ratio falling a further 2 per cent to 39 per cent in the latest period. It was 70 per cent when the Spanish acquired Abbey National.

The bank said it was supporting the UK housing market, writing one in five mortgages with gross market lending standing at 12.3bn.

The group said it would create 600 jobs in the next few months, largely weighted to its branch network but also including extra staffing in call centres. A spokesman said it was too early to say whether any of the jobs would be in Scotland where Santander UK has 107 branches and 840 staff.

A flotation would follow Santander's entry into the British market with the 9 billion purchase of Abbey National in 2004, followed by swoops on Alliance & Leicester and Bradford & Bingley's savings arm during the banking industry crisis.

Santander's group interim profits edged down 1.6 per cent to €4.4bn (3.7bn), partly due to a difficult home Spanish market.