Santander reduces outstanding commercial real estate loans by £200m

In a quarterly management statement for the year ending 31st December 2016, the bank posted £9bn in outstanding CRE customer loans, down from £9.2bn in 2015.

Santander attributed the 2% decrease to it actively managing exposures to certain segments in line with its risk management practices. 

95% of commercial real estate business was written at or below 60% loan-to-value (LTV), while no new business was written above 70% LTV. The weighted average LTV for the CRE portfolio stood at 50%, down from 52% in 2015.  

Santander’s non-performing loan (NPL) ratio for its CRE portfolio also grew from 1.83% in 2015 to 2% in 2016 due to a £50m loan in commercial banking that moved to non-performance, partially offset by some impaired loan redemptions. 

“The UK’s decision to leave the EU has led to economic uncertainty and financial market volatility,” it said in a statement. 

“The lower value of sterling, when combined with higher oil prices over the past year, we believe, is likely to lead to higher inflation. In the near-term, the effects of this and continued economic uncertainty could result in slower UK economic growth in 2017 than experienced in the past three years.”

Santander revealed that its total residential mortgage lending grew during 2016. 

The bank issued £154.3bn of residential mortgages during 2016 compared with £152.8bn in 2015, with the South East of England (excluding London) recording the strongest activity at £46.1bn. 

Of the residential mortgages, Santander completed 12,400 buy-to-let mortgages, but said it noticed lending in this area was lower in the quarters following the stamp duty increase. 

However, mortgage gross lending dropped from £26.5bn in 2015 to £25.8bn in 2016, where mortgage net lending decreased to £1.5bn in 2016 from £2.7bn in 2015.

Nathan Bostock, CEO of Santander UK, said: “We saw net lending growth across all three customer business segments, increased cost discipline and continued good credit quality – all supported by robust UK economic growth. 

“We also continued to see the benefits of our innovative approach to enhancing our customers’ experience, with significant improvements to core digital services throughout the course of the year giving us one integrated platform which will allow us to understand and meet our customers’ needs better.”

Nathan revealed that Santander planned to increase investment into new technology as it would help the bank to achieve its 2017 growth targets. 

“Looking ahead, we expect to see a changeable and more challenging macro environment in 2017. 

“We believe the transformation we have made in putting the customer at the heart of our business, coupled with a continued focus on costs and risk management, gives us solid foundations to succeed and confidence in the future.”