The information contained in this statement is unaudited and does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006 ('the Act'). The statutory accounts for the year ended 31 December 2023 have been filed with the Registrar of Companies. The report of the auditor on those statutory accounts was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Act.

This statement provides a summary of the unaudited business and financial trends for the nine months ended 30 September 2024 for Santander UK Group Holdings plc and its subsidiaries (Santander UK), including its principal subsidiary Santander UK plc. The unaudited business and financial trends in this statement only pertain to Santander UK on a statutory basis. Unless otherwise stated, references to results in previous periods and other general statements regarding past performance refer to the business results for the same period in 2023.

This statement contains non-IFRS financial measures that are reviewed by management in order to measure our overall performance and these are outlined in the Appendix. A list of abbreviations is included at the end of this statement and a glossary of terms is available at:
https://www.santander.co.uk/about-santander/investor-relations/glossary

Santander UK Group Holdings plc

Quarterly Management Statement
for the nine months ended 30 September 2024

Santander UK Q3-24 results

During the third quarter 2024, profit before tax reduced to £143m from £413m in the second quarter. Increased income from active price management, and a steadily improving economic environment were offset by a provision relating to historical motor finance commission payments.

On 25 October the Court of Appeal published its judgment on disclosure of dealer commissions on motor finance transactions. The Court of Appeal decided that motor dealers acting as credit brokers owe certain duties to their customers and set a higher bar for the disclosure of and consent to the existence, nature, and amount of commission paid to dealers than that required by current FCA rules, or regulatory requirements in force at the time of the cases in question. The lenders involved in the cases subject to the Court of Appeal's judgment have indicated that they intend to seek permission to appeal that judgment to the Supreme Court.

In light of the Court of Appeal judgment, we have recognised a provision of £295m in our Q3-24 results. This includes estimates for operational and legal costs and potential awards, based on various scenarios using a range of assumptions. There are currently significant uncertainties as to the nature, extent and timing of any remediation action if required and the ultimate financial impact could be materially higher or lower than the amount provided.

The CET1 capital ratio increased in the quarter to 15.4% despite the impact of this provision, which was 19bps. We remain well capitalised with significant buffers over regulatory requirements.

9M-24 financial and business highlights

We continued to help and support our customers

Q3-24 profit before tax reduced to £143m (Q2-24: £413m)

First nine months profit before tax reduced to £947m (9M-23: £1,731m)

Customer loans and deposits reduced following further disciplined pricing actions, with LDR of 109% (Dec-23: 108%)

Strong liquidity and capital, well above minimum requirements

Looking ahead

Income statement and balance sheet

Q3-24 profit before tax down 65% vs Q2-24

9M-24 profit before tax down 45% vs 9M-23

Customer balance sheet analysis

Loans in Stage 2 compared to 2023 affected by SICR changes

Prudent approach to risk evident across portfolios

ECL provision

Economic scenarios and ECL

Economic scenarios were updated in Q3-24 to reflect latest market data, including expectations for inflation and base rate

Capital, liquidity and funding

Capital ratios well above regulatory requirements

Strong liquidity position

Diversified funding across well-established issuance programmes

Structural hedge evolution

Appendix

a)    Non-IFRS measures and their calculations

Movement in Banking NIM

RoTE calculation (£m)

b)    Additional mortgage information

c)    Interest rate risk

d)    Movement in CET1 capital ratio

e)    Regulatory capital requirements

f)     Wholesale funding (£bn)

g)    Balance sheet information (£bn)

h)    Historical motor finance commission payments

Following the FCA's Motor Market review in 2019 which resulted in a change in rules in January 2021, Santander Consumer (UK) plc (SCUK) has received a number of county court claims and complaints in respect of its historical use of discretionary commission arrangements (DCAs) prior to the 2021 rule changes. In January 2024, the FCA commenced a review of the use of DCAs between lenders and credit brokers (the FCA review) and paused the handling of these complaints originally until September 2024. The FCA announced in July 2024 that it expected to share the outcome of its Review by May 2025 and that the pause in respect of handling of these complaints was extended to 4 December 2025. A claim has also been issued against SCUK, Santander UK plc and others in the Competition Appeal Tribunal (CAT), alleging that SCUK's historical DCAs in respect of used car financing operated in breach of the Competition Act 1998. This is currently paused until the end of July 2025 connected to the outcome of the FCA Review.

The outcome of the FCA's Review may be informed by the judgment of the Court of Appeal handed down on 25 October 2024 in relation to cases against other lenders involving DCAs (noting that the lenders subject to the Court of Appeal's judgment have indicated they intend to seek permission to appeal), and the outcome of a judicial review of a final decision by the Financial Ombudsman Service (FOS) against another lender that was heard in October 2024. 

In light of the Court of Appeal judgment, the Santander UK Group has recognised a provision of £295m in its financial results for the quarter ended 30 September 2024. This includes estimates for operational and legal costs (including litigation costs) and potential awards, based on various scenarios using a range of assumptions (such as the outcome of any Supreme Court appeal, the scope and timeframe of any redress scheme, applicable time periods, claims rates and compensatory interest rates). The outcome of the FCA's Review and/or adverse outcomes from litigation could result in material costs. These matters mean that there are currently significant uncertainties as to the extent of any misconduct, if any, as well as the perimeter of commission models, nature, extent and timing of any remediation action if required. As such, the ultimate financial impact could be materially higher or lower than the amount provided and it is not practicable to quantify the extent of any remaining contingent liability. 

i)      Legacy tax issue

A provision of £14m was taken in Q3-24 by Santander Financial Services plc (SFS) in relation to a dispute with an overseas tax authority concerning the tax treatment of legacy equity related transactions when SFS was trading as Santander Corporate and Investment Banking in 2018. In addition to this provision there was an associated increase in interest and related costs on the tax liability of £16m. 

List of abbreviations

Retail NPS: NPS ranked 4^th for Retail

Our customer experience research was subject to independent third party review. We measured the main banking NPS of 16,954 consumers on a six month basis using a 11-point scale (%Top 2 - %Bottom 7). The reported data is based on the six months ended 30 September 2024, and the competitor set included in the ranking analysis is Barclays, Halifax, HSBC, Lloyds Bank, Nationwide, NatWest Group (NatWest & RBS) and TSB.
Sep-24: NPS ranked 4^th for Retail, we note a margin of error which impacts those from 2^nd to 5^th and makes their rank statistically equivalent.

Sep-23: NPS ranked 5^th for Retail, we note a margin of error which impacts those from 3^rd to 5^th and makes their rank statistically equivalent.

Corporate NPS: NPS ranked 4^th for Corporate

Corporate NPS is measured by the MarketVue Business Banking from Savanta. This is an ongoing telephone based survey designed to monitor usage and attitude of UK businesses towards banks. 14,500 structured telephone interviews are conducted each year among businesses of all sizes from new start-ups to large corporates. The data is based upon 2,466 interviews made in twelve months ended 18 September 2024 with businesses turning over from £2.1m - £500m per annum and are weighted by region and turnover to be representative of businesses in Great Britain. NPS recommendation score is based on an 11-point scale (%Top 2 - %Bottom 7). The competitor set included in this analysis is Barclays, HSBC, Lloyds Banking Group and NatWest Group.

Sep-24: NPS ranked 4^th for Corporate.

Sep-23: NPS ranked 2^nd for Corporate.

Business NPS: NPS ranked 1^st for Business

Business NPS is measured by the MarketVue Business Banking from Savanta. This is an ongoing telephone based survey designed to monitor usage and attitude of UK businesses towards banks. 14,500 structured telephone interviews are conducted each year among businesses of all sizes from new start-ups to large corporates. The data is based upon 6,105 interviews made in twelve months ended 18 September 2024 with businesses turning over from £0 - £2m per annum and are weighted by region and turnover to be representative of businesses in Great Britain. NPS recommendation score is based on an 11-point scale (%Top 2 - %Bottom 7). The competitor set included in this analysis is Barclays, RBS, HSBC, Lloyds Bank and NatWest.
Sep-24: NPS ranked 1^st for Business.

Sep-23: NPS ranked 1^st for Business.

Additional information about Santander UK and Banco Santander

Santander UK is a financial services provider in the UK that offers a wide range of personal and commercial financial products and services. At 30 September 2024, the bank had around 19,200 employees and serves around 14 million active customers, including 7 million digital customers via a nationwide 444 branch network, telephone, mobile and online banking. Santander UK is subject to the full supervision of the FCA and the PRA in the UK. Santander UK plc customers' eligible deposits are protected by the FSCS in the UK.

Banco Santander (SAN SM, STD US, BNC.LN) is a leading commercial bank, founded in 1857 and headquartered in Spain and one of the largest banks in the world by market capitalization. The group's activities are consolidated into five global businesses: Retail & Commercial Banking, Digital Consumer Bank, Corporate & Investment Banking (CIB), Wealth Management & Insurance and Payments (PagoNxt and Cards). This operating model allows the bank to better leverage its unique combination of global scale and local leadership. Banco Santander aims to be the best open financial services platform providing services to individuals, SMEs, corporates, financial institutions and governments. The bank's purpose is to help people and businesses prosper in a simple, personal and fair way. Banco Santander is building a more responsible bank and has made a number of commitments to support this objective, including raising €220 billion in green financing between 2019 and 2030. In the first nine months of 2024, Banco Santander had €1.3 trillion in total funds, 171 million customers, 8,100 branches and 208,000 employees.

Banco Santander has a listing of its ordinary shares on the London Stock Exchange and Santander UK plc has preference shares listed on the London Stock Exchange.

None of the websites referred to in this Quarterly Management Statement, including where a link is provided, nor any of the information contained on such websites is incorporated by reference in this Quarterly Management Statement.

Disclaimer

Santander UK Group Holdings plc (Santander UK) and Banco Santander caution that this announcement may contain forward-looking statements. Such forward-looking statements are found in various places throughout this announcement. Words such as "believes", "anticipates", "expects", "intends", "aims" and "plans" and other similar expressions are intended to identify forward-looking statements, but they are not the exclusive means of identifying such statements. Forward-looking statements include, without limitation, statements concerning our future business development and economic performance. These forward-looking statements are based on management's current expectations, estimates and projections, and Santander UK and Banco Santander caution that these statements are not guarantees of future performance. We also caution readers that a number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. We have identified certain of these factors in the forward-looking statements on page 255 of the Santander UK Group Holdings plc 2023 Annual Report. Investors and others should carefully consider the foregoing factors and other uncertainties and events. Undue reliance should not be placed on forward-looking statements when making decisions with respect to Santander UK, Banco Santander and/or their securities. Such forward-looking statements speak only as of the date on which they are made, and we do not undertake any obligation to update or revise any of them, whether as a result of new information, future events or otherwise. Statements as to historical performance, historical share price or financial accretion are not intended to mean that future performance, future share price or future earnings for any period will necessarily match or exceed those of any prior quarter.

Santander UK is a frequent issuer in the debt capital markets and regularly meets with investors via formal roadshows and other ad hoc meetings. In line with Santander UK's usual practice, over the coming quarter it expects to meet with investors globally to discuss this Quarterly Management Statement, the results contained herein and other matters relating to Santander UK.

Nothing in this announcement constitutes or should be construed as constituting a profit forecast.