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Santander rejected a bid worth about £11bn for its UK retail bank from NatWest earlier this year after the Spanish lender said the offer was too low.
The approach by the state-backed British lender, which was being advised by Morgan Stanley and UBS, is no longer live, according to people familiar with the matter.
Santander has since raised €7bn from the sale of a large stake in its Polish unit this week, making any sale of its UK unit less likely. The Spanish lender said it would redeploy some of the proceeds from the stake sale to invest in its other regions, as it accelerates a strategic pivot away from Europe to the Americas.
NatWest’s approach — which would have led to the biggest UK banking deal since the financial crisis — comes as the British lender gears up to expand aggressively in its domestic market once the UK government sells the last of its £46bn crisis-era stake, which is expected in the coming weeks.
Paul Thwaite, the bank’s chief executive, previously said that it was on the “front foot” when it came to acquisitions. He has said that any purchase “needs to be absolutely compelling from a shareholder perspective”.
NatWest made an offer of “more than £10bn, but less than £12bn” for Santander UK, according to people familiar with the bid.
Santander’s UK subsidiary, which includes both retail and commercial banking, had total equity of £10.4bn at the end of last year, according to the group’s accounts, a metric that broadly reflects the market value of the business.
Meanwhile, the price agreed for its Polish unit equated to 2.2 times the tangible book value of that business, a considerably higher valuation than that of the overall group.
The bank also previously rejected a “low ball” offer for its UK ringfenced unit from Barclays last year, the Financial Times previously reported.
The Spanish group, which recently became the most valuable bank in continental Europe, is cutting back in some European countries to free up resources to expand in the Americas in a drive led by its executive chair Ana Botín. This has included a push in the US, where it has launched an aggressive expansion of its corporate and investment bank.
“We want to be a relevant bank in the US,” Jose Garcia Cantera, Santander’s chief financial officer, said last month.
Meanwhile, the bank has been reducing headcount in the UK, announcing more than 2,000 job cuts since last October as part of plans to cut costs and close branches. It employs about 18,000 staff in the UK and has 14mn customers.
The group had become frustrated with the UK unit’s high cost base and its weaker returns relative to some of the lender’s other markets, as well as Britain’s ringfencing regime, the FT previously reported. The Spanish bank has explored a number of options for its UK business, including exiting the market altogether.
One person familiar with the bank said that any potential suitors would now have to return with a “big offer for it to make sense” for Santander to offload its UK ringfenced bank, given its execution of the Polish stake sale.
Santander said: “As we have said, the UK is not for sale and is a core part of Santander’s diversified business model.”
NatWest declined to comment.
Additional reporting by Ivan Levingston in London
https://www.ft.com/content/56458448-fed2-47d1-b157-58cc73d24aca
