Santander had hoped to float 20 per cent of its UK arm

Saturday September 17,2011
By Andrew Johnson, Deputy City Editor

SANTANDER has been forced to push back its proposed float on the London Stock Exchange, which is now unlikely before 2013, because of the Independent Commission on Banking’s reforms to the financial system.

The Spanish bank believes the work needed to pin down the details of Sir John Vickers’ plans to force UK banks to “ringfence” their high-street arms from investment banking counterparts means it can no longer give investors the certainty needed for a float for some time.

The Spanish bank had hoped to float 20 per cent of its UK arm, forged by the acquisitions of Abbey National, Alliance & Leicester and the good parts of Bradford & Bingley, to raise up to £4billion during the second half of this year. However, market turmoil and regulatory uncertainty initially delayed the plan until the first half next year. Now it has been set back again.

Santander’s profits are also expected to come under pressure in the UK Although Santander UK, led by Ana Botin, is less affected by Vickers’ proposals because it does not have a major investment banking business, it still faces difficulties. This is because at least some of its UK activities will fall outside the ringfence.

These are thought to include some instruments designed to help the bank manage its balance sheet, as well as aspects of its corporate banking business. It hopes to persuade ministers and regulators to allow these activities, which include foreign exchange and interest rate hedges, inside the ringfence so long as they remain within a set level of total operations.

It will also need to assess the costs of the reforms, including special bonds designed to soak up initial losses in the event of a crisis. It is still looking to integrate 318 branches bought from Royal Bank of Scotland. A Santander spokesman declined to comment.

Banking analyst Nuria Alvarez of Renta 4 said: “The market was already speculating that Santander could delay its IPO plans in Britain until the second half of 2012.

“But if you take into account market volatility, new British regulation and poor growth expectations, it makes perfect sense to put these plans off until 2013.”

Santander’s profits are also expected to come under pressure in the UK as the bank ramps up investment in the division.

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