Santander UK attracts NatWest bid amidst takeover speculation

The future of Santander’s UK operations has resurfaced as a critical point of interest in financial circles, following revelations that NatWest attempted to acquire the business for an estimated £11 billion earlier this year. Reports suggest the Spanish banking giant rejected the approach on the grounds that the offer undervalued the division. Negotiations are no longer active, but the bid highlights NatWest’s ambitions to solidify its position in the market as the government’s share in the bank nears complete divestment.

NatWest, once one of Britain’s most troubled lenders, faced a state bailout worth £45.5 billion during the 2007–2009 financial crisis. At its peak, the government owned nearly 85 per cent of the bank. Currently, the state’s stake has decreased to less than 2 per cent, with expectations of a full exit in the near future. This transition marks a significant moment for the FTSE 100-listed lender under the leadership of CEO Paul Thwaite, who has been pursuing growth opportunities since taking over in July 2023.

Since his appointment, Thwaite has overseen strategic acquisitions to expand NatWest’s portfolio. These have included acquiring the bulk of Sainsbury’s banking operations and a £2.5 billion mortgage book from Metro Bank in 2024. The attempted purchase of Santander’s UK business demonstrates NatWest’s continued interest in scaling its operations, albeit with a stringent “high bar” for financial and operational viability, as emphasised by Thwaite.

Santander’s UK arm has been a key feature of its global operations since the Spanish banking group built its presence in Britain through a series of acquisitions, including Abbey National in 2004 and later Alliance & Leicester. Despite these moves, Santander’s returns from its UK business have often been described as underwhelming. Additionally, frustrations among senior management stem from regulatory challenges unique to Britain’s banking sector.

Speculation surrounding Santander’s intentions was first fuelled earlier this year, with the company having to reaffirm its commitment to the UK. Ana Botin, executive chairman of Banco Santander, categorically stated that the UK “will remain a core market” for the bank, dismissing any rumours of an exit. A spokesperson for Santander reiterated that the UK business forms an essential part of the group’s diversified model, which has continued to deliver long-term, sustainable returns. NatWest declined to comment on the matter.

Though the deal is off the table, NatWest’s interest underscores its ambition for expansion and sustained competitiveness in a dynamic financial landscape. At the same time, Santander’s dismissal of the approach highlights the strategic importance it places on its UK division despite its challenges.