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Exposures (audited)
Exposures to credit risk arise in our business segments from:
Retail & Business Banking
Consumer Finance
Corporate & Commercial Banking
Corporate Centre
In Mortgages:
\u2013 Residential mortgages for customers
with good credit quality (prime
lending).
\u2013 We provide these mostly for owner-
occupiers, with buy-to-let mortgages
for non-professional landlords.
In Everyday Banking:
\u2013 Unsecured lending to individuals, such
as loans, credit cards and overdrafts.
\u2013 Unsecured lending to businesses with
annual turnover up to \u00a36.5m and
simpler borrowing needs such as loans,
credit cards and overdrafts.
\u2013 Financing for cars, vans, motorbikes
and leisure vehicles through Santander
Consumer (UK) plc (SCUK).
\u2013 Through our joint ventures, Hyundai
Capital UK Ltd and Volvo Car Financial
Services UK Limited, we provide retail
point of sale customer finance and
wholesale finance facilities (stock
finance).
\u2013 Loans, overdrafts, treasury services,
invoice finance, trade and supplier
finance.
\u2013 We provide these to SMEs and mid-
sized corporates typically with annual
turnover up to \u00a3500m, Commercial
Real Estate and Social Housing
customers.
\u2013 Asset and liability management of\u00a0our
balance sheet.
\u2013 Exposures include financial institutions
(derivatives and other treasury
products), structured products, and
sovereign and supranational assets
chosen for diversification and liquidity.
Our approach to credit risk
We manage our portfolios across the credit risk lifecycle, from formulating our risk strategy and planning, through assessment and origination, monitoring, arrears
management and debt recovery. We make sure the actual risk profile of our exposures stays in line with our business plans and within our Risk Appetite. We tailor
the way we manage risk to the type of product and regularly review our approach and refine it when we need to.
1. Risk strategy and planning (audited)
Relevant areas of the business work together to create our business plans. We consider our strategy, goals, and financial and technical resources alongside our Risk
Appetite. This involves focusing on economic and market conditions and forecasts, regulations, conduct matters, profitability, returns and market share.
2. Assessment and origination (audited)
Managing credit risk begins with lending responsibly. That means only lending to customers who are committed to paying us back and can afford to, even if their
circumstances change. We take proportionate steps to assess whether a customer will be able to repay the money borrowed. We do this by a series of initial
affordability and credit risk assessments. When a customer applies, we assess the data they provide, plus data from credit reference agencies (for Retail & Business
Banking and Consumer Finance) and performance on their other Santander UK accounts (if they have any) against our Credit Policy.
Retail & Business Banking
In Mortgages, we assess affordability by reviewing the customer\u2019s income and spending, their other credit commitments, and what would happen if interest
rates\u00a0went up. Many of our decisions are automated as we use data available to us. We tailor our process and application assessment based on the product.
More\u00a0complex transactions often need greater manual assessment using our credit underwriters\u2019 skill and experience.
In Everyday Banking and Business Banking, many of our decisions are automated. We assess affordability by reviewing the customer\u2019s income and spending,
including other credit commitments and adjusting for future inflation and expected interest rates.
Credit risk mitigation
The types of credit risk mitigation, including collateral, across each of our portfolios are:
Portfolio
Description
Residential mortgages
Collateral is in the form of a first legal charge over the property. Before we grant a mortgage, the property is valued either by a surveyor or using
automated valuation methodologies where our confidence in the accuracy of this method is high.
Unsecured lending
There is no collateral or security tied to the loan that can be used to mitigate any potential loss if the customer does not pay us back.
Business banking services
Business banking lending is unsecured. When lending to incorporated businesses, we typically obtain personal guarantees from each
director, but we do not treat these as collateral. We consider the UK Government guarantee under its Coronavirus Loan Schemes as
collateral, covering 100% of losses for the Bounce Back Loan Scheme (BBLS) and 80% for Coronavirus Business Interruption Loan Scheme
(CBILS).
Consumer Finance
In Consumer Finance, similar to Retail & Business Banking, many decisions are automated and we tailor the process to the product. Residual value risk is one of our
top risks and these exposures are set using forward looking market data, at the level of vehicle derivative by age and anticipated mileage. This data is obtained from
a third party.
Credit risk mitigation
The type of credit risk mitigation, including collateral, is:
Portfolio
Description
Consumer (auto) finance
Collateral is in the form of legal ownership of the vehicle for most loans, with the customer being the registered keeper. Only a very small
proportion of business is underwritten as a personal loan. In these cases, there is no collateral or security tied to the loan. We use a leading
vehicle valuation company to assess the LTV at the proposal stage to ensure the value of the vehicle is appropriate.
Corporate & Commercial Banking
We assign each customer a credit rating, using our internal rating scale (see \u2018Credit quality\u2019 in \u2018Santander UK group level \u2013 credit risk review\u2019 section). To do this, we
look at the customer\u2019s financial history and trends in the economy, backed up by the expert judgement of a risk analyst. We review our internal ratings on a dynamic
basis and at least once a year for those clients that are rated. We also assess the underlying risk of the transaction, taking account of any mitigating factors (see the
tables below) and how it fits with our risk policies, limits and Risk Appetite.
Responsible lending, including climate change and the transition to a low carbon economy
As part of the Banco Santander group, we comply with the Equator Principles to factor social, ethical and environmental impacts into our risk analysis and decision
making for qualifying financial transactions. We aim to support clients and economies in their transition to a low carbon economy, providing financial products and/
or services to business activities that are environmentally and socially responsible. Our Environmental, Social and Climate Change (ESCC) policy sets out how we
identify, assess, monitor and manage environmental and social risks and other climate change related activities in the Oil and Gas, Power Generation and Mining
and Metals sectors and those arising from businesses engaged in soft commodities. Our ESCC policy prohibits project-related financing for new coal-fired power
plants (CFPP) worldwide and we will only work with new clients with CFPPs to provide specific financing for renewable energy projects. In line with Banco
Santander's aim, by 2030 we will aim to eliminate all exposure to thermal coal mining and stop providing financial services to power generation clients with more
than 10% of revenue from thermal coal.
Credit risk mitigation
The types of credit risk mitigation, including collateral, across each of our portfolios are as follows. In addition, from time to time, at a portfolio level we execute
significant risk transfer transactions, which typically reduce RWAs.
Portfolio
Description
SME and mid corporate
Includes secured and unsecured lending. We can take mortgage debentures or a first charge on commercial property as collateral.
Before\u00a0agreeing the loan, we obtain an independent professional valuation of the property. Loan agreements typically allow us to obtain
revaluations during the term of the loan. We can also take guarantees, but we do not treat them as collateral unless they are supported by
a\u00a0tangible asset charged to us. We also lend against assets (like vehicles and equipment) and invoices for some customers. We value assets
before we lend. For invoices, we review the customers' ledgers regularly and lend against debtors who meet agreed criteria.
Commercial Real Estate
(CRE)
We take a first charge on commercial property as collateral. The loan is subject to criteria such as the property condition, age and location,
tenant quality, lease terms and length, and the sponsor\u2019s experience and creditworthiness. Before advancing the loan and where appropriate,
a bank representative visits the property. We also obtain an independent professional valuation which typically includes a site visit. Loan
agreements typically allow us to obtain revaluations during the term of the loan.
Social Housing
We take a first charge on portfolios of residential real estate owned and let by UK Housing Associations as collateral, in most cases. We
revalue this every three to five years (in line with industry practice), using the standard methods for property used for Social Housing.
Corporate Centre
Credit risk mitigation
The types of credit risk mitigation, including collateral, across each of our portfolios are as follows. In addition, from time to time, at a portfolio level we execute
significant risk transfer transactions, which typically reduce RWAs.
Portfolio
Description
Sovereign and Supranational
In line with market practice, there is no collateral against these assets.
Structured Products
These are our High Quality Liquid Assets (HQLA) in our Eligible Liquidity Pool. They are mainly Asset Backed Securities (ABS) and covered
bonds, which hold senior positions in the creditor hierarchy. Their credit rating reflects over-collateralisation in the structure and the assets
that underpin their cash flows.
Financial Institutions
We use standard legal agreements to reduce credit risk via netting and collateralisation on derivatives, repos and reverse repos, and stock
borrowing/lending. We also reduce risk by clearing trades through central counterparties (CCPs) where possible.
3. Monitoring (audited)
We measure and monitor changes in our credit risk profile on a regular and systematic basis against our budgets, limits and benchmarks.
Credit concentrations
A core part of our monitoring and management is a focus on credit concentrations, such as the proportion of our lending that goes to specific borrowers, groups or
industries. We set and monitor concentration limits in line with our Risk Appetite and review them on a regular basis.
\u2013 Geographical concentrations: We set exposure limits to countries and geographies, with reference to the country limits set by Banco Santander and our own Risk
Appetite. For more geographical information, see \u2018Country risk exposures\u2019.
\u2013 Industry concentrations: We also set exposure limits by industry sector. We set these limits based on the industry outlook, our strategic aims and desired level of
concentration, and relevant limits set by Banco Santander. We analyse committed exposures in the \u2018Credit risk review\u2019 section that follows.
Retail & Business Banking
We use IT systems and data available to us to monitor accounts. The main parts are:
\u2013 Behavioural scoring: we use statistical models that help predict whether a customer will have problems repaying, based on how they use their accounts
\u2013 Credit reference agencies: we often use data from agencies on how the borrower is handling credit from other lenders in our behaviour scoring models
\u2013 Other Santander UK accounts: each month, we also look at how the customer uses their other accounts with us, so we can identify problems early.
Our day-to-day retail credit risk monitoring relies on a mix of performance measures as described above. However, changes in the wider UK economy also impact
our Mortgages and Everyday Banking portfolios. As part of our day-to-day risk monitoring, we use a Retail Risk Playbook tolerance tool that monitors the most
relevant macroeconomic variables to retail portfolio performance against our forecasts. If the economy deviates materially from our forecasts, such as due to the
effects of the cost of living crisis or high inflation, we review our retail risk management policy and strategy.
We also ensure that portfolio quality remains within our Risk Appetite by measuring against trigger values for key risk profile and performance metrics.
For secured lending, our monitoring also takes account of changes in property prices. We estimate the property\u2019s value every three months. In most cases, we use
statistical models based on recent sales prices and valuations in that local area. Use of this model is subject to Model Risk Governance. Where a lack of data means
the model\u2019s valuation is not available, we use the original surveyor valuation with a House Price Index (HPI) adjustment as needed.
For unsecured personal lending like credit cards and overdrafts, monitoring might lead us to raise or lower credit limits. For business banking services, we review
revolving credit facilities each year to ensure they remain appropriate for the customer's financial situation.
Consumer Finance
In Consumer Finance, customer accounts are monitored via IT systems and data. The Retail Risk framework ensures that our portfolio keeps within agreed
thresholds. Residual value risk is regularly checked, enabling us to spot any change in market trends.
Corporate & Commercial Banking and Corporate Centre
We regularly monitor and report our credit risk by portfolio, segment, industry, location and customer. We monitor detailed analyses of our credit exposures and
risk trends each month. We also report our larger exposures and risks to the BRC each month.
Our Watchlist
We also use a Watchlist for exposures subject to annual reviews to help identify potential problem debt early. Just because a customer is on our Watchlist does not
mean they have defaulted. It just means that their probability of default has increased, such as they have breached a covenant or lost a major contract.
We classify Watchlist cases as:
\u2013 Enhanced monitoring: for less urgent cases. We monitor these cases more often and where appropriate may consider more collateral.
\u2013 Proactive management: for more urgent or serious cases. We may take steps to restructure debt including extending the term, taking more collateral, agreeing a
lower credit limit, or seeking repayment of the loan through refinancing or other means.
We assess Watchlist cases for impairment as set out in the \u2018Significant Increase in Credit Risk (SICR)\u2019 section. When a customer is in enhanced monitoring, we do
not\u00a0consider it has suffered a SICR for ECL purposes, so it remains in Stage 1 for our loss allowance calculations. When a customer is in proactive management, we
consider it has suffered a SICR, so we transfer it to Stage 2 and apply a lifetime ECL for our loss allowance calculations. We consider any forbearance we offer. This
includes any extra security, guarantees or equity available and the potential to enhance value by asset management.
In Corporate & Commercial Banking, as part of our annual reviews, for loans nearing maturity, we look at the prospect of refinancing the loan on current market
terms and applicable credit policy. If this is unlikely, we put the case on our Watchlist. We manage exposures not subject to annual reviews, mainly high volume and
low value cases, using early warning indicators including credit reference agency data, supported by teams of expert analysts.
In Corporate Centre, we typically monitor the credit quality of our exposures daily. We use internal and third-party data to detect any potential credit deterioration.
4. Arrears management (audited)
Retail & Business Banking and Consumer Finance
We have several strategies to manage arrears that we can use as early as the day after a missed payment. We also reach out to up-to-date customers who may be
at risk of going into arrears where we believe they may benefit from some support. We assess the financial difficulties a customer is having in order to offer them
the right support to manage their agreement whilst in arrears. The strategies we use depend on the risk and the customer\u2019s unique circumstances with tailored
support being provided.
Corporate & Commercial Banking and Corporate Centre
We identify problem debt by close monitoring, supported by our Watchlist process for exposures subject to annual review. We aim to identify warning signs early
by\u00a0monitoring customers\u2019 financial and trading data, checking to see they do not breach covenants, and having regular dialogue with them. We tailor our strategy
to\u00a0the type of customer, their circumstances and the level of risk. We try to help our customers find their own way out of financial difficulty and agree on a plan
that\u00a0works for both of us. We engage our Restructuring & Recoveries team as needed on Watchlist cases and we may hand over more serious cases to them. For
exposures not subject to annual review, we have strategies to manage arrears that we can use as early as the day of the missed payment. If a case becomes more
urgent or needs specialist attention, and if it transfers to Stage 3, we transfer it to our Restructuring & Recoveries team.
For more, see the Forbearance section.
5. Debt recovery (audited)
Sometimes, even when we have taken all reasonable and responsible steps to manage arrears in our Financial Support area, they are not effective. If this happens,
we may choose to end our agreement with the customer and try to recover the outstanding balance (with recourse to any associated collateral), or as much of it as
we can.
Retail & Business Banking
In Mortgages and Everyday Banking, we may use a debt collection agency, sell the debt, or take the customer to court. For residential mortgages, we may repossess
the property as a last resort or to protect it from damage or third-party claims. We make sure our estimated losses from repossessed properties are realistic by
getting two independent valuations and the estimated selling costs, and using them in our loss allowances calculations. Where we repossess a property, we do not
take ownership. We use agents to realise the value and settle the debt. Any surplus funds are returned to the borrower or dealt with in line with insolvency rules.
Consumer Finance
In Consumer Finance, we usually have an asset by way of a motor vehicle secured to the agreement. We will seek to recover this asset if we are unable to
rehabilitate the customer, or they remain in arrears with no contact. Like Retail & Business Banking, we may also use a debt collection agency or a specialist law firm
to recover any subsequent balance outstanding. We may also consider the sale of debt where all avenues have been explored.
Corporate & Commercial Banking and Corporate Centre
Where we look for an exit, we aim to do this, if we can, by agreeing with the borrower that they will sell some or all their assets on a voluntary basis or agreeing
to\u00a0give them time to refinance their debt with another lender. Where we cannot reach an agreement, we consider recovery options. This can be through an
insolvency proceeding, enforcing over any collateral or selling debt on the secondary market. We may also consider other legal action to recover what we are
owed.\u00a0If there is a shortfall, we write it off against our loss allowances. In very rare cases, we may act as mortgagee in possession of assets held as collateral
against\u00a0non-performing commercial lending. In such cases, we carry the assets on our balance sheet and classify them in line with our accounting policies.
Loan modifications (audited)
We sometimes change the terms of a loan when a customer gets into financial difficulty (this is known as forbearance), or for other commercial reasons.
Forbearance (audited)
We can change the terms of a customer's loan, temporarily or permanently, to help them through temporary periods of difficulty so they can get back on to
sustainable terms. We assess what we offer to make sure the customer can afford it. Forbearance improves our customer relationships and we review our approach
regularly to make sure it is still effective. We try to offer forbearance before a customer defaults and we only foreclose or repossess as a last resort.
The main types of forbearance we offer are:
Action
Description
Term extension
We can extend the loan term, making each monthly payment smaller. We may offer this if the customer is up to date with payments but shows
signs of financial difficulties. We may also offer this if the loan is about to mature and refinancing is not possible on market terms. In selected
instances, we may offer term extensions for interest only loans that are past the point of product maturity. This will typically be where no viable
repayment solution has been identified for the outstanding capital balance, and legal enforcement activity is not deemed to be appropriate to the
customer's circumstances.
Interest-only
Historical interest-only payments due to financial difficulties are classed as forborne.\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0
For corporate customers, interest-only concessions are considered on a case by case basis. Concessions are only granted if the nature of the
financial difficulties is assessed to be temporary. Counterparties are expected to recover in full and resume making full capital and interest
payments once they are in a stronger financial position.
Other payment
rescheduling, including
capitalisation
For retail mortgage customers, we may add the arrears to the mortgage balance (this is known as capitalisation) if they cannot afford to increase
their monthly payment to pay off their arrears in a reasonable time but have been making their monthly payments, usually for at least six
months. We can also capitalise property charges due to a landlord. We pay them for the customer to avoid the lease being forfeited. We may
combine this help with term extensions and, in the past, interest-only concessions. In certain cases, we may offer interest rate concessions. We
may agree an arrangement to pay less than the Contractual Monthly Payment (including zero) for a short period of time where they are
experiencing temporary financial difficulties.
For credit card and bank account customers, we may agree to suspend fees and/or interest for a short period of time where they are experiencing
temporary financial difficulties. A refinance of a personal loan over a longer term to reduce the contractual monthly payment may be agreed,
where a customer is showing signs of financial difficulties. The interest rate remains the same, or the closest lower rate available.
For corporate customers, we may lower or stop their payments until they have time to recover. We may reschedule payments to better match
the customer\u2019s cash flow \u2013 for example if the business is seasonal - or provide a temporary increase in facilities to cover peak demand ahead of
their trading improving. We might do this by arrears capitalisation or drawing from an overdraft. We may also offer to provide new facilities,
interest rate concessions and interest roll-up. In rare cases, we agree to forgive or reduce part of the debt.
When we agree forbearance, we consider the account has suffered a SICR, as we explain in the \u2018Significant Increase in Credit Risk (SICR)\u2019 section later on, and we
classify it as Stage 2 or 3. A non-performing forborne account is one that has forbearance carried out in Stage 3, and a performing forborne account is one that has
forbearance carried out in Stage 2. If an account is already in Stage 2, we keep it in Stage 2 unless the account is deemed unlikely to pay, involves forgiving fees and
interest or debt, or is being granted multiple forbearances. In these cases, we move it into Stage 3. If an account is already in Stage 3, we keep it in Stage 3. A loan
moves out of forbearance once the exit criteria below are met. We monitor the performance of all forborne loans.
We signed up to the HM Treasury Mortgage Charter published in June 2023, that aims to provide more support for customers who may be struggling to maintain
their mortgage repayments. We made more customer support solutions available from July 2023, allowing customers who are up-to-date with their payments to
make interest-only payments for six months or extend their mortgage term to reduce their monthly payments. Volumes of accounts seeking more support were
just over 1% of active mortgage account stock. Mortgage Charter support solutions are not automatically classed as forbearance, unless other forbearance criteria
are met.
Exit from forbearance criteria
Exit from
Conditions to be met
Cure
Stage 3 to Stage 2
For an account in Stage 3 to exit non-performing forbearance, all the following conditions must be met:
If the account was classed as Stage 3 due to being more than 90 days past due, then the account should be 90 days or less past due
The customer has no other material default debt with us more than 90 days past due
If the account was classed as Stage 3 due to being unlikely to pay, then the account should no longer be deemed unlikely to pay
Account has exited its forbearance trigger for 12 consecutive months
If all the conditions are met, the account is re-classed as Stage 2 forbearance until the Stage 2 forbearance exit conditions set out
below are also met
Stage 2 to Stage 1
For an account in Stage 2 to exit forbearance, all the following conditions must be met:
The account is no longer in arrears, and the customer has no other material debts with us which are more than 30 days in arrears
The account no longer triggers SICR
The account has been classed as Stage 2 for at least two years since the end of the latest forbearance strategy
If a borrower fails to meet the post forbearance contractual obligations during probation, the loan is classified as Stage 3 and the probation period is reset.
Other forms of debt management and modifications
Retail & Business Banking\u00a0
In Mortgages, apart from forbearance, we have sometimes changed the contract terms to keep a good relationship with a customer. In Mortgages and Everyday
Banking, we do not classify insolvency solutions for any unsecured retail customers as forbearance. This is in line with industry guidelines.
Consumer Finance
We do not classify insolvency solutions for any unsecured retail customers as forbearance. This is in line with industry guidelines.
Corporate & Commercial Banking and Corporate Centre
When customers are in financial difficulty, we can also manage debt in other ways, depending on the facts of the specific case:
Action
Description
Waiving or changing
covenants
If a borrower breaks a covenant, we can either waive it or change it, taking their latest and future financial position into account. We may also
add a condition on the use of any surplus cash (after operating costs) to pay down their debt to us.
Asking for more collateral or
guarantees
If a borrower has unencumbered assets, we may accept more collateral in return for revised financing terms. We may also take a guarantee
from companies in the same group and/or major shareholders. We only do this where we believe the guarantor can meet their commitment.
Asking for more equity
Where a borrower can no longer pay the interest on their debt, we may accept fresh equity capital from new or existing investors to change
the capital structure in return for better terms on the existing debt.
Risk measurement and control
We measure and control credit risk at all stages across the credit risk lifecycle. We have a range of tools, processes and approaches.
Retail & Business Banking and Consumer Finance
These businesses involve managing large numbers of accounts, so they produce a significant amount of data. This allows us to take a more analytical and data
intense approach to measuring risk. This is reflected in the wide range of statistical models we use across the credit risk lifecycle. We use:
\u2013 Risk strategy and planning: econometric models
\u2013 Assessment and origination: application scorecards, and attrition, pricing, loss allowance and capital models
\u2013 Monitoring: behavioural scorecards and profitability models
\u2013 Arrears management: models to estimate the proportion of cases that will result in possession (known as roll rates)
\u2013 Debt recovery: recovery models.
We assess and review our loss allowances regularly. We look at factors such as the cash flow available to service debt. We\u00a0also use an agency to value any
collateral \u2013 mainly mortgages.
Corporate & Commercial Banking and Corporate Centre
We measure the credit risk on treasury products by adding their potential future exposure to market movements over their lives to their fair value. Then we add it
to\u00a0any other exposure and measure the total against our credit limits for each client. We assess our loss allowances regularly by looking at factors such as the cash
flow available to service debt and the value of collateral based on third-party professional valuations.
Key metrics(audited)
We use a number of key metrics to measure and control credit risk, as follows:
Metric
Description
Expected Credit Loss
(ECL)
ECL tells us what credit risk is expected to cost us either over the next 12 months or over the lifetime of the exposure where there is evidence of a SICR since
origination. We explain how we calculate ECL below.
Stages 1, 2 and 3
We assess each facility\u2019s credit risk profile to determine which stage to allocate them to, and we monitor where there is a SICR and transfers between the
Stages including monitoring of coverage ratios for each stage.
Stage 3 ratio
The Stage 3 ratio is the sum of Stage 3 drawn and Stage 3 undrawn assets divided by the sum of total drawn assets and Stage 3 undrawn assets. The\u00a0Stage
3 ratio is a key indicator used to monitor underlying asset performance.
Expected Loss (EL)
EL is based on the CRD IV regulatory capital rules and gives us another view of credit risk. It is the product of the probability of default, exposure at default
and loss given default, and we include direct and indirect costs. We base it on our risk models and our assessment of each customer\u2019s credit quality. The
rest of the Risk review, impairments, losses and loss allowances refer to calculations in accordance with IFRS, unless we specifically say they relate to CRD
IV. For our IFRS impairment accounting policy, see Note 1 to the Consolidated Financial Statements.
We also assess risks from other perspectives, such as geography, business area, product and process to identify areas to focus on. We also use stress testing to
establish vulnerabilities to economic deterioration. Our business segments tailor their approach to credit risk to their customers, as we explain later on.
Recognising ECL (audited)
The ECL approach estimates the credit losses arising from defaults in the next 12 months on qualifying exposures, or defaults over the lifetime of the exposure
where there is evidence of a SICR since the origination date. Our ECL approach for portfolio assessments uses models that consider forward-looking data on
economic scenarios, including a range of possible outcomes, which are unbiased and probability-weighted to reflect the risk of a loss being incurred even when it is
unlikely. In some cases, we need to apply Judgemental Adjustments to our model outputs. We use internal credit ratings for corporate borrowers and individually
assess corporate Stage 3 exposures.
Critical judgements and accounting estimates applied in calculating ECL (audited)
The application of the ECL impairment methodology for calculating credit impairment allowances is susceptible to change from period to period. The methodology
requires management to make judgemental assumptions in determining the estimates.
For more on our approach to making critical judgements and accounting estimates applied in calculating ECL see 'Critical judgements and accounting estimates'
Note 1 to the Consolidated Financial Statements.
Multiple economic scenarios and probability weights (audited)
For all our portfolios, we use forward-looking economic scenarios. During 2024, we reduced the forward looking economic scenarios to four by removing the
stubborn inflation scenario as inflation has returned to more normalised levels. They now consist of a central base case, one upside scenario and two downside
scenarios. We use these scenarios to reflect a wide range of possible outcomes for the UK economy.
Our forecasting approach
We derive our scenarios in part by using a set of parameters in GDP fan charts published by the Office for Budget Responsibility (OBR). These fan charts reflect the
probability distribution of a deviation from the OBR\u2019s central forecast to show the uncertainty about the outcome of a variable, in this case GDP.
Once we have established the GDP paths for each scenario, we run them through the Oxford Global Economic Model (OGEM) to derive the other macroeconomic
variables, such as unemployment and house prices. These variables are the product of the GDP growth paths we have forecast and the output of the OGEM for
these growth paths. We then review them to ensure consistency with the narrative of each scenario and so changes to the variables may be needed in some cases.
We then impose a Bank Rate profile for each scenario using expert judgement with the base case as the starting point and then adjusting this for each of the other
scenarios based on the narratives. We produce a range of Bank Rate profiles to reflect a range of possible outcomes the Bank of England may follow depending on
how it sees the trade-off between growth and inflation evolving over the forecast period. For example, this might consist of higher rates initially in response to
inflationary concerns followed by lower rates as inflation falls towards target, and that this may be sharper in the event of a deep recession.
We update the baseline in our economic scenarios at least twice a year in line with our annual budgeting and three-year planning processes, or sooner if there is a
material change in current or expected economic conditions. We refresh all our economic scenarios quarterly to reflect the latest data and OBR fan charts if these
changed, which are then reviewed and approved by the Credit Risk Provisions Forum (CRPF). The CRPF also assesses the probability weights at least once a quarter.
We do not use consensus forecasts as inputs to our models, but we do compare the outputs of our models against consensus views for the base case, to make
sure\u00a0that we understand any significant differences and address them where needed. At 31 December 2024, there were no significant differences between our
base case forecasts and the consensus views.
In 2024, we undertook a further peer benchmarking analysis of the economic scenarios, which for Q424 included the mean weighted analysis for a selection of
economic variables, including GDP, unemployment rate and HPI. This meant that we could compare our weighted scenarios against the average of our peers to
understand what differences there may be. The conclusion of this analysis demonstrated that our economic scenarios were in line with our peers.
In 2024, we also considered any likely impact from climate risk on our forecasting approach and concluded that no adjustment to the multiple economic
scenarios\u00a0for climate risk was required. This is because climate change effects are generally regarded to be relevant over a longer timeframe than our forecast
period of five years.
Our use of four different scenarios is designed to reflect different possible outcomes to the base case, highlighting the upside and downside risks associated with
the central scenario.
Our forecasting period for GDP is five years and we use the OGEM 25 year model for the outer years, post five year forecast. This is a change to the methodology
from 2023 and it was adopted in Q124. As part of this, we set a floor on the unemployment rate at 4% to ensure that the long-term view is near to the Non-
Accelerating Inflation Rate of Unemployment set out by the Bank of England in its annual supply side review.
Key changes to our forecasting approach in 2024
In 2024, we made two changes to our forecasting approach. We moved from five to four scenarios which saw the removal of the stubborn inflation scenario due to
inflation becoming more stable as it reaches target, negating the need for a specific scenario. We also moved from using mean reversion for the forecasts beyond
five years to using the 25 year OGEM output. This removes the need to make any assumptions regarding the length of time to mean revert.
Base case
We review the scenarios and associated weights every quarter to ensure they appropriately reflect the current economic circumstances and UK Government policy
which is subject to change.
In summary, the outlook for the UK economy in 2025 shows an economy that is growing with the stimulus from the October 2024 Budget helping to boost GDP.
There is above target inflation due to this stimulus and other government measures, but Bank Rate continues to fall gradually, supporting businesses and
households. However, downside risks to the outlook remain particularly around geopolitical tensions and potential productivity gains.
Base case key macroeconomic assumptions
GDP: The UK economy slowed in Q324 with growth of 0.1% quarter-on-quarter. It was always likely that a slow-down from the above average quarterly growth rates of H124 would
happen, but with weak PMIs as well there is a concern that the economy will stagnate in Q424. However, Q324 GDP did see rising consumer spending and strong gains for business
investment as such we would expect that post-Budget growth will pick up, although some underlying weakness means the economy growing at levels similar to those experienced pre-
pandemic, rather than the stronger growth needed to help repair the UK\u2019s finances. For 2025 we would expect to see stronger growth caused by the increase in government spending
given the measures announced in the October 2024 Budget, although this may crowd out some business investment and with a higher tax burden this may impact both investment and
private consumption. Over the longer term the key issue for growth remains productivity and without a boost to this growth will remain at the average pre-pandemic levels of 1.4%.
Bank Rate: The Monetary Policy Committee (MPC) lowered rates twice in 2024 to 4.75%. Our base case assumes a further 100bps of cuts which takes Bank Rate to 3.75% by the end of
2025, with further reductions into the medium term leaving the terminal rate at 3.25% in Q127. This is slightly higher than our previous forecast due to the increased inflation expected
as a result of the October 2024 Budget.
House price growth: House prices grew in 2024, helped in part, by falling mortgage rates. However, the outlook for 2025 is likely to see a slow-down in house price growth due to
higher swap rates which has pushed up mortgage rates in Q424. As always, the key to house price growth is the supply of housing which continues to be weak. This along with the steady
fall in interest rates should ensure steady house price growth over the forecast period. We forecast a c.3% year-on-year growth in house prices by the end of 2025 and remaining at this
growth rate for the rest of the forecast period.
Unemployment rate: Recent data for unemployment indicates that there is a slow loosening of the labour market. However, caution needs to be taken as the unemployment data is still
subject to problems with the ONS Labour Force Survey data. In terms of the forecast the peak in unemployment comes in 2025, with the possibility of more redundancies as firms face
higher employment costs as a result of the National Insurance Contributions (NIC) increase for employers. The rate then drops back to 4.2% (current Bank of England prediction for the
natural rate of unemployment) in 2026. This accords with the better growth outlook, but also reflects the fact that the structure of the UK labour market changed with a large drop in the
number of working age people looking for work, thus reducing supply. Although progress may be made in reducing medical waiting lists over the forecast period to boost supply.
CRE price growth: After falling for seven quarters in a row, CRE prices stabilised in Q224 and rose by 0.3% quarter-on-quarter in Q324 in a sign of the sector turning around after two
years of falling prices. Cuts in Bank Rate boosted prices and this looks set to continue in Q424 following the November 2024 bank rate cut. In addition, with more workers return to the
office this may help boost the flagging office sector. We expect prices to continue to rise throughout the forecast period as Bank Rate is reduced before growth stabilises around the 2%
year-on-year mark.
In the medium-term, the projections assume that current demographic and productivity trends will continue, causing a reduction in the UK\u2019s growth potential. For
instance, it is likely that the reduction in the UK workforce will continue and this will have a knock-on impact for the economy, particularly if there are shortages of
skilled workers in particular sectors. This is reflected in an average annual growth expectation of 1.6%, in line with the OBR\u2019s latest estimate of the UK\u2019s long run
average growth rate.
Key changes to our base case in 2024
For our base case, we no longer expect a short recession given that the economy has been more resilient than previously expected in 2023. For the other macro-
economic variables, the changes made to the base case compared to 2023 included stronger house price inflation for 2024 reflecting the better economic
conditions and slightly lower unemployment for 2024. However, risks to the base case remain with potential for rising geopolitical risks affecting the UK economy.
Our base case scenario incorporates stronger economic growth in 2025, from increased government spending and four Bank Rate cuts of 25bps over the year. It
was updated to reflect the latest market data and to broadly align with the latest consensus estimates. The most notable change was to HPI with expected house
price increases stronger than predicted in 2024.
Other scenarios
Based on this revised base case, we reviewed our suite of scenarios to ensure that they capture the wide range of potential outcomes for the UK economy. These
include; (i) a slower recovery that is more akin to the \u2018U\u2019 shape of past recessions; (ii) labour market frictions due to skills mismatches and a shrinking workforce
as\u00a0some discouraged workers leave altogether (for example longer-term sickness levels remaining above pre-pandemic levels); (iii) fragmentation of the global
economy in particular changes and additional frictions to supply chains; and (iv) the global economy recovering more swiftly from higher inflation.
To reflect these potential outcomes, we use the base case and three additional scenarios, which we consider sufficient to reflect all the above potential outcomes.
As with the base case, the scenarios are forecast over a five-year period with the OEGM 25 year model used to determine the forecasts after this period with a floor
on unemployment set at 4%.
The other scenarios are:
One upside scenario
This scenario has a quicker recovery in growth than the Baseline and is a bull case to the base forecasts. It assumes that inflation falls slightly below target at the
start of the forecast period helped by lower wage growth, however it does rise back to 2% over the period. This allows the Bank of England to cut rates faster than
the base case, bringing them back towards what might be considered the neutral rate earlier. This results in higher consumer and business confidence enabling
higher levels of spending and investment, with savings rates returning to levels consistent with economic growth as real earnings growth returns. In this scenario
GDP remains stronger than the base case along with house price growth. Unemployment falls to 4% slightly below the base case and inflation dips below target in
2026 before ending the forecast period at target.
Two downside scenarios
The downside scenarios capture the impact of weaker investment, the increasing risk from geopolitical events and the ongoing significant mismatch between job
vacancies and skills, as well as a smaller labour force.
Downside 1 \u2013 In this scenario, the economy contracts and although the recession is small and short lived, the recovery is weak and below potential. The measures
announced in the Budget, in particular the increase in NICs for employers means growth is tempered and employment shrinks as businesses restructure to deal
with the extra cost along with increased minimum wage and changes to workers' rights. Consumers opt to save more rather than spend which affects the recovery
path, as consumer confidence is low in part due to concerns about the unstable geopolitical environment and the increase in lay-offs as businesses restructure. The
global economy is affected by a combination of factors, such as commodity prices becoming increasingly volatile due to geopolitical events and the potential impact
of additional tariffs. This affects global inflation which negatively impacts UK trade and hinders a return to growth.
Downside 2 \u2013 This scenario shows a marked fall in GDP, with rising unemployment and falling house prices reflecting the ongoing issues of a higher interest rate
environment. There is a longer lagged effect from monetary policy tightening and lower growth and productivity, which feeds across the whole economy. It also
reflects the increase in geopolitical risk which affects market sentiment and causes further fragmentation of the global economy. It also assumes that major risk
events continue to occur, exposing the vulnerability of countries' fiscal positions and the means to respond to such events. Unemployment peaks at 8.5% and,
although, there are some inflationary pressures from changing trade patterns, the sharp fall in demand means inflation falls below target and allows the MPC to
cut rates sharply from Q125 to stabilise demand. With inflation falling below target and lower interest rates this eases some of the pressures on the UK economy
and growth picks up in the medium-term.
Key changes to our alternative scenarios in 2024
In 2024, we removed the Stubborn inflation scenario (Downside 3) from the suite of scenarios we run. This was because inflation fell significantly and the risks of
inflation increasing above 3% and remaining at levels above this was no longer considered to need a separate scenario. The scenario was not replaced as we already
have two downside scenarios reflecting the risks to the UK economy including inflation being above target and with higher interest rates compared to base case.
It\u00a0was not deemed necessary to have a further upside scenario given the limited upside risk to the UK economy. In addition, the use of four scenarios is in line with
many of our peers.
Despite mixed signals about the UK's recent economic performance, which may impact the path of the Bank Rate, our scenarios continue to capture a broad range
of\u00a0forecasts.
Our macroeconomic assumptions and their evolution throughout the forecast period
Our macroeconomic assumptions and their evolution throughout the forecast period for each of the scenarios at 31 December 2024 were:
Upside
Base case
Downside 1
Downside 2
Weighted
%
%
%
%
%
GDP(1)
2023 (actual)
0.3
0.3
0.3
0.3
0.3
2024
0.9
0.9
0.8
0.4
0.8
2025
2.0
1.4
(0.4)
(3.4)
0.6
2026
2.5
1.6
0.3
(0.9)
1.2
2027
2.5
1.4
0.9
1.3
1.4
2028
2.5
1.4
1.0
2.8
1.6
2029
2.5
1.4
1.1
2.8
1.6
5-year average increase/decrease(2)
2.4
1.5
0.6
0.3
n/a
Start to trough(3)
n/a
n/a
(0.7)
(5.2)
n/a
Bank Rate(1)
2023 (actual)
5.25
5.25
5.25
5.25
5.25
2024
4.75
4.75
4.75
4.75
4.75
2025
3.25
3.75
4.50
2.25
3.71
2026
3.00
3.50
3.25
1.50
3.16
2027
3.00
3.25
3.00
2.50
3.08
2028
3.00
3.25
3.00
2.75
3.10
2029
3.00
3.25
3.00
3.00
3.13
5-year end period
3.00
3.25
3.00
3.00
n/a
5-year peak
4.75
4.75
4.75
4.75
4.75
HPI(1)
2023 (actual)
(0.7)
(0.7)
(0.7)
(0.7)
(0.7)
2024
4.8
4.5
2.0
1.3
3.6
2025
4.3
3.0
(5.8)
(20.1)
(1.2)
2026
4.7
3.0
(3.7)
(14.7)
0.3
2027
4.6
3.0
2.9
5.8
3.4
2028
4.5
3.0
4.4
9.6
4.0
2029
4.6
3.0
4.6
7.7
4.0
5-year average increase/decrease(2)
4.7
3.2
\u2014
(3.7)
n/a
Start to trough(3)
n/a
n/a
(10.1)
(33.0)
(0.8)
Unemployment(1)
2023 (actual)
3.8
3.8
3.8
3.8
3.8
2024
4.4
4.3
4.4
4.4
4.4
2025
4.1
4.4
5.2
8.3
4.9
2026
4.0
4.2
5.5
8.2
4.9
2027
4.0
4.2
5.5
7.6
4.8
2028
4.0
4.2
5.5
7.0
4.8
2029
4.0
4.2
5.5
6.4
4.7
5-year end period
4.0
4.2
5.5
6.4
n/a
5-year peak
4.4
4.4
5.5
8.5
4.9
CRE price growth(1)
2023 (actual)
(5.6)
(5.6)
(5.6)
(5.6)
(5.6)
2024
0.4
(0.1)
(2.3)
(2.7)
(0.9)
2025
5.7
2.5
(5.5)
(14.9)
(0.7)
2026
5.2
2.8
1.7
(8.5)
2.0
2027
2.9
2.5
2.0
4.4
2.6
2028
3.3
2.2
1.8
3.8
2.4
2029
3.0
2.1
2.4
3.4
2.4
5-year average increase/decrease(2)
4.0
2.3
(0.1)
(3.3)
n/a
Start to trough(3)
n/a
n/a
(7.4)
(24.7)
(1.2)
(1) GDP is the calendar year annual growth rate, HPI and CRE price growth rate is Q4 annual growth rate and all other data points are at 31 December in the year indicated.
(2)\u00a0 \u00a0 \u00a0 This is the compound annual growth rate (CAGR) based on a 5 year period which represents an average annualised growth rate.
(3)\u00a0 \u00a0 \u00a0 GDP, HPI and CRE start is taken from level at Q324.
The table below sets out our macroeconomic assumptions and their evolution throughout the forecast period for each of the scenarios at 31 December 2023:
Upside
Base case
Downside 1
Stubborn
Inflation
Downside 2
Weighted
%
%
%
%
%
%
GDP(1)
2022 (actual)
4.3
4.3
4.3
4.3
4.3
4.3
2023
0.6
0.5
0.5
0.5
0.3
0.5
2024
1.0
0.4
(0.1)
(1.8)
(3.3)
(0.4)
2025
2.1
1.3
0.2
(0.9)
(1.4)
0.6
2026
2.4
1.5
0.5
0.4
0.6
1.1
2027
2.4
1.4
0.3
0.7
2.2
1.4
2028
2.4
1.4
0.3
0.8
2.6
1.4
5-year average increase/decrease
2.1
1.2
0.3
(0.2)
0.1
n/a
Peak/(trough) at(2)
\u2014
\u2014
(0.2)
(2.8)
(5.1)
(1.1)
Bank Rate(1)
2022 (actual)
3.50
3.50
3.50
3.50
3.50
3.50
2023
5.25
5.25
5.25
5.25
5.25
5.25
2024
4.25
4.50
5.25
6.50
3.75
4.88
2025
3.25
3.50
4.00
5.00
2.00
3.68
2026
2.75
3.25
3.25
3.75
2.00
3.18
2027
2.75
3.00
3.00
3.00
2.50
2.93
2028
2.75
3.00
3.00
3.00
2.50
2.93
5-year end period
2.75
3.00
3.00
3.00
2.50
n/a
Peak/(trough) at
5.25
5.25
5.75
6.50
5.25
5.55
HPI(1)
2022 (actual)
5.0
5.0
5.0
5.0
5.0
5.0
2023
(1.7)
(2.2)
(4.7)
(6.3)
(7.8)
(3.8)
2024
2.0
(1.0)
(11.7)
(18.8)
(25.8)
(7.8)
2025
6.5
2.5
3.4
3.6
3.6
3.3
2026
5.1
3.0
2.1
1.6
1.6
2.7
2027
4.0
3.0
3.0
1.6
1.6
2.7
2028
3.6
3.0
3.1
1.8
1.8
2.7
5-year average increase/decrease
4.3
2.0
(0.8)
(3.3)
(5.4)
n/a
Peak/(trough) at(2)
(3.7)
(6.5)
(17.5)
(25.5)
(33.0)
(13.8)
Unemployment(1)
2022 (actual)
3.7
3.7
3.7
3.7
3.7
3.7
2023
4.3
4.3
4.3
4.3
4.4
4.3
2024
4.3
4.8
4.8
5.6
8.5
5.3
2025
3.7
4.4
4.9
5.9
8.0
5.1
2026
3.4
4.3
5.2
6.2
7.4
5.0
2027
3.0
4.3
5.4
6.1
6.8
4.9
2028
3.0
4.2
5.3
5.8
6.2
4.7
5-year end period
3.0
4.2
5.3
5.8
6.2
n/a
Peak/(trough) at
4.5
4.8
5.5
6.2
8.5
5.5
(1) GDP is the calendar year annual growth rate, HPI is Q4 annual growth rate and all other data points are at 31 December in the year indicated.
(2) GDP peak taken from GDP level at Q2-23 and HPI peak taken from HPI level at Q3-22.
Scenario weights
Each quarter, we review the scenario weights we apply. We consider the weights of the economic scenarios as a whole, while ensuring that the scenarios capture
the non-linear distribution of losses across a reasonable range. To support our initial assessment of the weight of a scenario, we undertake a Monte Carlo analysis
to estimate the likelihood of a five-year average GDP forecast growth rate occurring based on the long-run historically observed average. We then create a standard
distribution bell curve around this long run average. This allows us to estimate the probability of a given GDP scenario occurring based on past experience and
therefore assign a weight to that scenario. We also consider the UK economic and political environment when applying weights.
The scenario weights we applied for 2024 and 2023 were:
Upside
Base case
Downside 1
Stubborn
Inflation
Downside 2
Weighted
Scenario weights
%
%
%
%
%
%
2024
15
50
25
n/a
10
100
2023
10
50
10
20
10
100
2024 compared to 2023
In 2024, we removed the Stubborn Inflation scenario and re-weighted the remaining scenarios as inflation returned to more normalised levels. We remain of the
view that the risks to UK growth are still biased to the downside and include: further geopolitical events creating more challenges for economies both the UK and
abroad; the potential for further upside inflation surprises causing inflation to stay above target for longer, raising the cost of living and so reducing consumer
demand; continuing weak investment reflecting the uncertain nature of the economic environment; and a continuing and significant mismatch between vacancies
and skills along with a smaller labour force, which may bring disruption to any recovery in the latter years of the forecast.
Definition of default (Credit impaired) (audited)
We define a financial instrument as in default (i.e. credit impaired) for the purpose of calculating ECL if it is more than three months past due, or if we have data that
suggests the customer is unlikely to pay. The data we have on customers varies across our business segments. It typically includes where:
Retail & Business Banking and Consumer Finance
\u2013 They have been reported bankrupt or insolvent and are in arrears
\u2013 Their loan term has ended, but they still owe us money more than three months later
\u2013 They have had forbearance while in default and have failed to perform under the new arrangement terms, or have had multiple forbearance. Performing forborne
accounts while not in default are reported in Stage 2
\u2013 We have suspended their fees and interest because they are in financial difficulties
\u2013 We have repossessed the property or the asset.
Corporate & Commercial Banking and Corporate Centre
\u2013 They have had a winding up notice issued, or something happens that is likely to trigger insolvency \u2013 such as another lender calls in a loan
\u2013 Something happens that makes them less likely to be able to pay us \u2013 such as they lose an important client or contract
\u2013 They have regularly missed or delayed payments, even though they have not gone over the three-month limit for default
\u2013 Their loan is unlikely to be refinanced or repaid in full on maturity
\u2013 Their loan has an excessive LTV that is unlikely to be resolved, such as by a change in planning policy, pay-downs, or increase in market value
\u2013 Loans restructured under financial difficulties, classified as forborne transactions, in last 12 months.
Where we use the advanced internal ratings-based basis for a portfolio in our capital calculations, there are differences with the default definitions for ECL
purposes. The main differences are as follows:
\u2013 Performing forborne accounts while not in default are in Stage 2 until they cure their forbearance status (measured as 12 consecutive months of successful
payments).
\u2013 Performing non-forborne accounts, which under our internal rating-based basis are subject to a 3-month cure period. For accounting purposes, we classify them
in Stage 2 until they cure all SICR triggers.
Significant Increase in Credit Risk (SICR) (audited)
Loans which have suffered a SICR since origination are subject to a lifetime ECL assessment which extends to a maximum of the contractual term of the loan, or the
behavioural term for a revolving facility. Loans which have not experienced a SICR are subject to 12-month ECL. We assess the credit risk profile of each facility to
determine which of three stages to allocate them to:
\u2013 Stage 1: when there has been no SICR since initial recognition. We apply a loss allowance equal to a 12-month ECL i.e. the proportion of lifetime expected losses
that relate to that default event expected in the next 12 months
\u2013 Stage 2: when there has been a SICR since initial recognition, but the exposure is not considered credit impaired. We apply a loss allowance equal to the lifetime
ECL i.e. the expected loss resulting from all possible defaults throughout the residual life of a facility
\u2013 Stage 3: when the exposure is considered credit impaired. We apply a loss allowance equal to the lifetime ECL. Objective evidence of credit impairment is
needed. For more, see the section \u2018Definition of default (Credit impaired)\u2019 above.
We use quantitative, qualitative and backstop criteria to identify exposures that suffer a SICR. The Credit Risk Provisions Forum (CRPF) reviews and approves our SICR
thresholds periodically. The Board Audit Committee reviews and challenges their appropriateness each year, or more often if we change them.
Key changes in 2024
In 2024, alongside our new ECL models, we updated our SICR criteria to enhance and improve consistency across portfolios. As a result, we now treat the following
accounts as Stage 2:
Quantitative:
\u2013 Accounts with a 12-month PD between 30bps (0.3%) and 2000bps (20%) where the annualised lifetime PD has doubled from origination.
\u2013 PD threshold: Accounts where the annualised lifetime PD has increased above 2000bps (20%).
\u2013 Low Credit Risk Exemption (LCRE): we introduced an LCRE where, if the 12-month PD is less than 30bps, we retain the account in Stage 1, unless the
qualitative or backstop criteria are met.
These changes increased the number of accounts in Stage 2 for Credit Cards and Overdrafts mainly due to the lower absolute PD thresholds, with no material
increase in ECL.
Qualitative:
\u2013 For mortgages, over-indebted customers and Interest-only accounts 24 months pre-maturity.
\u2013 For CCB, customers operating in a high-risk sector.
These enhancements enabled us to retire related JAs.
Quantitative criteria
We use quantitative criteria to identify where an exposure has increased in credit risk. We base our criteria on whether any increase in the lifetime PD since
origination exceeds a threshold in relative and absolute terms. We base the value anticipated at origination on similar assumptions and data to the ones we use at
the reporting date, adjusted to reflect the account surviving to that date. The comparison uses either an annualised lifetime PD, where the lifetime PD is divided by
the forecast period, or the absolute change in lifetime PD since origination. The criteria for 2024 and 2023 were: accounts above the lower absolute PD thresholds
below, where the PD has doubled since origination, are treated as Stage 2. Any account above the upper threshold (i.e. 20%) is also treated as Stage 2:
Retail & Business Banking
Consumer
Finance (2)
Corporate &
Commercial
Banking
Corporate Centre
Mortgages
Everyday Banking(1)
Personal loans
Credit cards
Overdrafts
2024
30bps
30bps
30bps
30bps
300bps
30bps
Internal rating method
2023
30bps
30bps
340bps
260bps
300bps
30bps
Internal rating method
(1) For larger business banking customers, we apply the same criteria as we use for CCB. Credit cards and Overdrafts lower PD thresholds aligned with the rest of Everyday Banking for consistency.
(2) Consumer Finance use the comparison of lifetime PDs to determine Stage allocation, unlike other products which first turn the lifetime PD into an average yearly PD (annualised) and then do the comparison. In
addition, Consumer Finance does not apply the upper absolute PD threshold criteria.
Qualitative criteria
We also use qualitative criteria to identify where an exposure has increased in credit risk, independent of changes in PD. The criteria for 2024 and 2023 were:
Retail & Business Banking
Consumer Finance
Corporate &
Commercial Banking
Corporate Centre
Mortgages
Everyday Banking(1)
Personal loans
Credit cards
Overdrafts
\u2013 In forbearance
\u2013 Default in last 24m
\u2013 30 Days Past Due (DPD) in
last 12m
\u2013 Bankrupt
\u2013 \u00a3100+ arrears
New in 2024:
\u2013 Over-indebted customers
\u2013 Interest Only accounts 24m
pre-maturity
\u2013 In Collections
\u2013 Default in last 12m
\u2013 \u00a350+ arrears
\u2013 In forbearance
\u2013 Default in last 12m
\u2013 In Collections
\u2013 \u00a3100+ arrears
\u2013 Behaviour score
indicators
\u2013 Fees suspended
\u2013 Default in last 12m
\u2013 Debit dormant >35
days
\u2013 Any excess in month
\u2013 In forbearance
\u2013 Deceased or
Insolvent
\u2013 Court \u2018Return of
goods\u2019 order or
Police watchlist
\u2013 Agreement
terminated
\u2013 Payment holiday
\u2013 Cash Collection
\u2013 In forbearance
\u2013 Default in last 12m
\u2013 Watchlist: proactive
management
\u2013 Default at proxy
origination
New in 2024:
\u2013 Customers in a high-
risk sector
\u2013 Watchlist: proactive
management
(1)For larger business banking customers, we apply the same criteria that we use for Corporate & Commercial Banking.
If needed, we apply additional qualitative assessments as part of JAs in response to situations where known or expected risk factors and data are not considered in
the modelling process. See 'Judgemental Adjustments (JAs)' below for more on this.
Backstop criteria
As a backstop, we classify all exposures more than 30 or 90 DPD in at least Stage 2 or in Stage 3, respectively. This means that we do not rebut the backstop
presumptions in IFRS 9 (i.e. credit risk has significantly increased if contractual payments are more than 30 DPD) relating to either a SICR or default.
Improvement in credit risk or cure
We transfer Stage 3 exposures to Stage 2 or Stage 1 when we no longer consider them to be credit impaired. We transfer Stage 2 exposures to Stage 1 when we no
longer consider them to have suffered a SICR. Where we identified a SICR using quantitative criteria, we transfer the exposures to Stage 1 when they no longer meet
the original PD-based transfer criteria. Where we identified a SICR using qualitative criteria, the issues that led to the transfer must be cured before we transfer the
exposure to Stage 1. For a loan to exit forbearance, it must meet the conditions set out in the section \u2018Forbearance\u2019 in the 'Credit risk' section of the Risk review.
Judgemental Adjustments (JAs) (audited)
We use a range of methods to identify whether we need a JA. These include regular reviews of model monitoring tools, changes in the period, trend analysis,
comparisons against forecasts, and inputs from expert teams who manage key portfolio risks. We only recognise a JA if its expected impact is over \u00a31m and keep it
in place until we no longer need it. This is usually when we build it into our core credit model or the conditions that led to raising the JA no longer exist.
Our Risk Provisions & Forecasting team calculate JAs to ensure they are incremental to the core credit model and to ensure the calculation is performed in a
consistent and controlled manner. We apply standard end-user computing controls to JAs expected to be in place for more than six months. The CRPF reviews and
approves all JAs on a quarterly basis.
Retail & Business Banking
Everyday Banking
Consumer
Finance
Corporate &
Commercial
Banking
Corporate
Centre
Total
Mortgages
Credit Cards
Other
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Modelled ECL
127
149
122
69
142
\u2014
609
Individually assessed
6
\u2014
\u2014
\u2014
162
\u2014
168
ECL before JAs
133
149
122
69
304
\u2014
777
JAs (excluding Affordability and Cost of Living JAs)
Unsecured PD adjustments
\u2014
\u2014
2
\u2014
\u2014
\u2014
2
Mortgages LGD
27
\u2014
\u2014
\u2014
\u2014
\u2014
27
Corporate single large exposure
\u2014
\u2014
\u2014
\u2014
24
\u2014
24
Other
1
1
6
\u2014
\u2014
\u2014
8
Total JAs (excluding Affordability and Cost of Living JAs)
28
1
8
\u2014
24
\u2014
61
Affordability and Cost of Living JAs
Corporate lending to segments affected by supply chain
pressures
\u2014
\u2014
\u2014
\u2014
14
\u2014
14
Mortgage refinancing risk
11
\u2014
\u2014
\u2014
\u2014
\u2014
11
SME debt burden
\u2014
\u2014
6
\u2014
\u2014
\u2014
6
Total Affordability and Cost of Living JAs
11
\u2014
6
\u2014
14
\u2014
31
Total JAs
39
1
14
\u2014
38
\u2014
92
Total ECL
172
150
136
69
342
\u2014
869
Total JAs as a percentage of Total ECL (%)
11
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Modelled ECL
132
123
123
62
240
\u2014
680
Individually assessed
4
\u2014
\u2014
\u2014
124
\u2014
128
ECL before JAs
136
123
123
62
364
\u2014
808
JAs (excluding Affordability and Cost of Living JAs)
Long-term indeterminate arrears
16
\u2014
\u2014
\u2014
\u2014
\u2014
16
12+ months in arrears
14
\u2014
\u2014
\u2014
\u2014
\u2014
14
UPL loss floor
\u2014
\u2014
6
\u2014
\u2014
\u2014
6
Model underestimation
36
\u2014
\u2014
\u2014
\u2014
\u2014
36
Corporate single large exposure
\u2014
\u2014
\u2014
\u2014
23
\u2014
23
Other
12
1
3
4
(31)
\u2014
(11)
Total JAs (excluding Affordability and Cost of Living JAs)
78
1
9
4
(8)
\u2014
84
Affordability and Cost of Living JAs
Corporate lending to segments affected by supply chain
pressures
\u2014
\u2014
\u2014
\u2014
24
\u2014
24
Secured affordability
9
\u2014
\u2014
4
\u2014
\u2014
13
Unsecured affordability
\u2014
16
22
\u2014
\u2014
\u2014
38
Mortgage refinancing risk
19
\u2014
\u2014
\u2014
\u2014
\u2014
19
SME debt burden
\u2014
\u2014
6
\u2014
\u2014
\u2014
6
Total Affordability and Cost of Living JAs
28
16
28
4
24
\u2014
100
Total JAs
106
17
37
8
16
\u2014
184
Total ECL
242
140
160
70
380
\u2014
992
Total JAs as a percentage of Total ECL (%)
19
JAs (excluding Affordability and Cost of Living JAs)
\u2013 Unsecured PD Adjustments: In 2024, we replaced the UPL Loss floor JA with the Unsecured PD Adjustments JA to widen the scope of the JA. We use this JA to
address the perceived macroeconomic insensitivity in our Unsecured Personal Loans (UPL) model and the over sensitivity in our Overdrafts model.
\u2013 UPL \u2013 This arises where analysis of historical losses shows a larger correlation to the International Labour Organisation (ILO) unemployment forecast than the
model gives. The JA uplifts the lifetime losses expected in each of the macroeconomic scenarios in the model to align with the expected losses the historical
analysis predicts.
\u2013 Overdrafts \u2013 This arises where the ECL model is overly sensitive to Bank Rate changes, leading it to predict extremely high PDs in the early years. The JA reduces
the lifetime losses expected in each of the macroeconomic scenarios in the model to align with the expected losses the historical analysis predicts.
\u2013 Mortgages LGD: We introduced this JA in 2024. It uplifts the modelled parameters that capture the risk of failed recovery strategies of stage 3 accounts in
default and stage 1 and stage 2 accounts not in default targeting the LGD underestimation flagged by model monitoring, as well as the lower level of coverage
compared to peers in this segment.
\u2013 Corporate single large exposure: This JA safeguards against individual large exposures defaulting over a short period. We currently use the JA to safeguard
against two historically observed single name large losses in CCB. This JA was used in 2024 for 2 cases. This JA was also replenished in 2024 as it is still needed
as UK corporate insolvencies rose to a 30-year high. In the current economic environment, the risk of single name defaults, which incur high losses, is considered
greater than before as government support schemes ceased. We continue to assess the risk over the medium term based on actual experience and refine the
estimate based on changes in our portfolio credit quality and loan size mix.
\u2013 Other: This includes Mortgages and Retail Unsecured and generally consists of small portfolios where the ECL calculation is held outside of the main models.
Affordability and Cost of Living JAs
\u2013 Corporate lending to segments affected by supply chain pressures: This JA reflects the corporate lending risks to those sectors susceptible to high inflation
and energy prices, higher input costs, potential for lower consumer and business demand and exposure to supply chain pressures. This JA calculates ECL by
stressing PD levels for customers in Stage 2 according to each customer's risk profile.
\u2013 Mortgage refinancing risk: The JA considers the risk of mortgage customers being unable to afford their new mortgage instalment after re-mortgaging at
higher interest rates. The JA assesses the likely mortgage payment against the stressed interest rate that customers had been assessed against at the point of
application. Customers that are likely to secure rates above their stress levels are considered at risk of not being able to afford their new mortgage. We uplift
their PDs to account for the elevated levels of defaults observed for the most recent cohorts of refinanced mortgages. The JA was designed using some profiling
characteristics of customers that used the Mortgage Charter government scheme as some of those accounts are considered to be at higher risk of arrears.
\u2013 SME debt burden: This JA takes account of the potential debt burden risk of unsecured lending to our SME customers who also took a BBL. This does not
incorporate the credit risk on BBLs as these are government guaranteed, but considers the possible impact on repayment of other lending with us.
2024 compared to 2023
In 2024, we implemented new impairment models for Mortgages and Corporate & Commercial Banking, which now embed many of the JAs in place at the end of
2023. In response to the improved economic data, specifically inflation, we reassessed the need for cost of living JAs and retired the Secured and Unsecured
Affordability JAs.
In 2024, we introduced a new Mortgage LGD JA which uplifts the modelled parameters that capture the risk of failed recovery strategies, for default and non-
default accounts.
Climate change
In 2024 and 2023, we assessed the risks to asset valuations in the customer loan book from both transitional and physical risks associated with climate change. At
31 December 2024 and 2023, we did not consider it appropriate to recognise a climate risk related JA for the following reasons:
\u2013 The behavioural life of the loan book is less than five years. Any material transitional risks are generally regarded to be relevant over a longer timeframe than five
years and, as such, the risk predominantly relates to assets yet to be written;
\u2013 There have been no observed default events or SICRs due to climate change for any part of the loan book;
\u2013 The absolute exposure to fossil fuel industries is not material. On an individually assessed basis, clients in these industries are highly rated and their markets
remain highly liquid;
\u2013 The residual value of automotive vehicles might be impacted by diesel obsolescence and the transition to electric vehicles. The residual value risk is already set at
the more cautious end of the acceptable range to capture the inherent risk of diesel obsolescence and measurement uncertainty of electric vehicles;\u00a0
\u2013 ECL calculations are based on multiple forward-looking economic scenarios developed by management covering a period of five years, during which timeframe
climate change risks may crystallise;
\u2013 The proportion of mortgage loans subject to flood and subsidence risk is not material. The terms of our mortgage lending also require homeowners to have an
active flood protection at any point of the contract. This assessment relies upon availability of risk cover from private insurers and FloodRe, respectively. The
potential risk may increase over time if flooding due to climate change increases and/or insurance market circumstances change.\u00a0
Internal credit risk rating for corporate borrowers (audited)
We assign each corporate borrower an internal credit rating based on our internal rating scale. To do this, we look at the customer\u2019s financial history and trends in
the economy backed up by the expert judgement of a risk analyst. We review our internal ratings on a dynamic basis and at least once a year. The internal risk rating
is used to determine the Probability of Default for a client.
Individually assessed corporate Stage 3 exposures (audited)
We assess the ECL requirement for single name corporate exposures on an individual basis when they meet our definition of default and are transferred into Stage
3. This assessment uses the latest specific data about the counterparty's estimated future cash flows, and collateral valuations, to determine a probability weighted
ECL based on a best, worst and mid case outcome. For these individually assessed loans, the ECL allowance was \u00a3162m at 31 December 2024 (2023: \u00a3124m). Had
management assumed the best or worst outcome for loss estimates, the ECL allowance could have been within a range of \u00a363m to \u00a3291m.
Sensitivity of ECL allowance to economic scenarios and weights (audited)
The ECL allowance is sensitive to the methods, assumptions and estimates underlying its calculation. For example, management could have applied different
probability weights to the economic scenarios. In addition, the ECL allowance for residential mortgages is significantly affected by the HPI assumptions which
determine the valuation of collateral used in the calculations.
Had management used different assumptions on probability weights and HPI, a larger or smaller ECL charge would have resulted that may have had a material
impact on the ECL allowance and profit before tax.
Scenario sensitivity
The tables below show the ECL allowances that would have arisen had management applied a 100% weight to each economic scenario. The allowances were
calculated using a stage allocation appropriate to each scenario and differs from the probability-weighted stage allocation used to determine the ECL allowance
shown above. For exposures subject to individual assessment, the distribution of ECLs which could reasonably be expected has also been considered, assuming no
change in the number of cases subject to individual assessment, and within the context of a potential best to worst case outcome.
Upside
Base case
Downside 1
Downside 2
Weighted
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Exposure
283,860
283,860
283,860
283,860
283,860
Retail & Business Banking
196,732
196,732
196,732
196,732
196,732
Of which:
\u00a0 \u2013 Mortgages
176,026
176,026
176,026
176,026
176,026
Consumer Finance
4,759
4,759
4,759
4,759
4,759
Corporate & Commercial Banking
26,307
26,307
26,307
26,307
26,307
Corporate Centre
56,062
56,062
56,062
56,062
56,062
ECL
741
774
921
1,524
869
Retail & Business Banking
380
403
517
1,051
458
Of which:
\u00a0 \u2013 Mortgages
112
128
218
705
172
Consumer Finance
67
68
69
70
69
Corporate & Commercial Banking
294
303
335
403
342
Corporate Centre
\u2014
\u2014
\u2014
\u2014
\u2014
Upside
Base case
Downside 1
Stubborn
Inflation
Downside 2
Weighted
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Exposure
294,877
294,877
294,877
294,877
294,877
294,877
Retail & Business Banking
201,977
201,977
201,977
201,977
201,977
201,977
Of which:
\u00a0 \u2013 Mortgages
181,188
181,188
181,188
181,188
181,188
181,188
Consumer Finance
5,228
5,228
5,228
5,228
5,228
5,228
Corporate & Commercial Banking
27,277
27,277
27,277
27,277
27,277
27,277
Corporate Centre
60,395
60,395
60,395
60,395
60,395
60,395
ECL
833
896
991
1,176
1,410
992
Retail & Business Banking
419
465
536
689
889
542
Of which:
\u00a0 \u2013 Mortgages
141
174
234
363
562
242
Consumer Finance
68
69
70
72
72
70
Corporate & Commercial Banking
346
362
385
415
449
380
Corporate Centre
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
2024 compared to 2023
ECL reduced by \u00a3123m, driven by deleveraging of the balance sheet and the improved economic outlook resulting in ECL model releases. The ECL on Credit Cards
increased in the year due to the updated SICR rules. The value of JAs decreased in 2024 due to the implementation of new impairment models for Mortgages and
Corporate & Commercial Banking, as well as the releases of the affordability JAs in EDB.
HPI sensitivity
Given the relative size of our residential mortgage portfolio, management considers that changes in HPI assumptions used to calculate the modelled ECL allowance
for residential mortgages would have the most significant impact on the modelled ECL allowance. The table below shows the modelled ECL impact on the profit
before tax of applying an immediate and permanent house price increase/decrease to our unweighted base case scenario, and assumes no changes to the stage
allocation of exposures.
Increase/decrease in house prices
+20%
+10%
-10%
-20%
Increase/(decrease) in profit before tax
\u00a3m
\u00a3m
\u00a3m
\u00a3m
2024
34
21
(38)
(112)
2023
70
38
(54)
(155)
2024 compared to 2023
The decrease in modelled ECL sensitivity reflects the new Retail Mortgages impairment model we introduced in 2024, which shows different economic sensitivities,
as well as portfolio deleveraging. The impairment model assumes a similar loss for low LTV accounts, given the distribution of LTV in the portfolio, and increases in
the HPI exhibit shows less impact on modelled ECL than decreases in HPI.
Measuring ECL (audited)
For our mortgages and CCB portfolios, where accounts are not in default at the reporting date, we estimate a quarterly ECL for each exposure and for each quarter
over the forecast period. The lifetime ECL is the sum of the quarterly ECLs over the forecast period, while the 12-month ECL is limited to the first four quarters. We
calculate each quarterly ECL as the discounted value for the relevant forecast month of the product of the following factors:
Factor
Description
Survival rate (SR)
The probability that the exposure has not closed or defaulted since the reporting date.
Probability of default
(PD)
The likelihood of a borrower defaulting in the following quarter, assuming it has not closed or defaulted since the reporting date. For each quarter in
the forecast period, we estimate the quarterly PD from a range of factors. These include key risk drivers for the exposure, as well as the expected
evolution of the account risk with maturity and factors for changing economics. We support this with historical data analysis.
Exposure at default
(EAD)
The amount we expect to be owed if a default, or sale in the case of retail mortgages, event occurs. We determine EAD for each quarter of the
forecast period by the expected payment profile, which varies by product. For amortising products, we base it on the borrower\u2019s contractual
repayments over the forecast period. We adjust this for any expected overpayments on Stage 1 accounts that the borrower may make and for any
arrears we expect if the account was to default. For revolving products, or amortising products with an off-balance sheet element, we determine
EAD using the balance at default and the contractual exposure limit. We vary these assumptions by product and base them on analysis of recent
default data.
Loss given default
(LGD)
Our expected loss if a default event were to occur. We express it as a percentage and calculate it based on factors that we have observed to affect
the likelihood and/or value of any subsequent write-offs, which vary according to whether the product is secured or unsecured. If the product is
secured, we consider collateral values as well as the historical discounts to market/book values due to forced sales type.
We use the original effective interest rate as the discount rate. For accounts in default, we use the EAD as the reporting date balance. We also calculate an LGD to
reflect the default status of the account, considering the current DPD and loan-to-value. PD and SR are not required for accounts in default.
Forecast period
We base the forecast period for amortising facilities on the remaining contract term. For revolving facilities, we base it on the behavioural, rather than contractual,
characteristics of the facility type.
Forward-looking information
Our assessments of a SICR and the calculation of ECL allowances incorporate forward-looking data. We perform historical analysis and identify the key economic
variables that impact credit risk and ECL allowances for each portfolio. These can include house price growth, GDP, unemployment rate and BoE Bank Rate. Where
applicable, we incorporate these economic variables and their associated impacts into our models.
Economic forecasts have the most impact on ECL measurement for residential mortgages and, to a lesser extent, corporate loans. This is due to the long
behavioural lives and large size of these portfolios. Economic forecasts have less impact on ECL for other portfolios due to their shorter lives and smaller size.
Grouping of instruments for losses measured on a collective basis
We measure ECL at the individual financial instrument level. However, where we have used internal capital or similar models as the basis for our ECL models, this
typically results in a large number of relatively small homogenous groups. We typically group instruments where they share risk characteristics using statistical
models and assess them for impairment collectively. We use this approach for all our Retail & Business Banking and Consumer Finance portfolios and SME
customers in Corporate & Commercial Banking.
We calculate separate collective provisions for instruments in Stages 1, 2 and 3 where the instrument is not individually assessed.
For all our portfolios (whether we assess them for impairment individually or collectively) we use four forward-looking economic scenarios.
Governance around ECL impairment allowances (audited)
Our Risk Methodology team developed our ECL models (except for the external models we use, such as OGEM which we described earlier in \u2018Our forecasting
approach\u2019), and our Independent Validations team reviews all material models. As model owners, our Risk Provisioning & Forecasting team run the models to
calculate our ECL each month. The models are sensitive to changes in credit conditions and reflect management judgements that give rise to measurement
uncertainty in our ECL, as set out above. The following committees and forums review the provision drivers and ensure that the ECL remains appropriate:
\u2013 Model Risk Control Forum (MRCF) reviews and approves new models and model changes. It also reviews the use of OGEM as a reliable model on which to base
our other forecast macroeconomic variables. We use it across all stress testing and planning so it is subject to model risk criteria.
\u2013 ALCO reviews and approves the base case used in the economic scenarios we use to calculate forward-looking scenarios.
\u2013 CRPF reviews and approves the economic scenarios and probability weights we use to calculate forward-looking scenarios. It also reviews management
judgements and approves ECL impairment allowances.
\u2013 Board Audit Committee reviews and challenges the appropriateness of the estimates and judgements made by management.
For more on the governance around specific elements of the ECL impairment allowances, including the frequency of, and thresholds for, reviews, including by these
committees and forums, see the detailed sections above.
How we assess the performance of our ECL estimation process
We assess the reasonableness of our ECL provisions and the results of our Staging analysis using a range of methods. These include:
\u2013 Benchmarking: we compare our coverage levels with our peers
\u2013 Stand-back testing: we monitor the level of our coverage against actual write-offs
\u2013 Back-testing: we compare key drivers periodically as part of model monitoring practices
\u2013 Monitoring trends: we track ECL and Staged assets over time and against our internal budgets and forecasts, with triggers set accordingly.
SANTANDER UK GROUP LEVEL \u2013 CREDIT RISK REVIEW
Our maximum and net exposure to credit risk (audited)
The tables below show the main differences between our maximum and net exposure to credit risk. They show the effects of collateral, netting, and risk transfer to
mitigate our exposure. The tables only show the financial assets that credit risk affects and to which the impairment requirements in IFRS 9 are applied.
For balance sheet assets, the maximum exposure to credit risk is the carrying value after impairment loss allowances. Off-balance sheet exposures are mortgage
offers, guarantees, formal standby facilities, credit lines and other commitments. For off-balance sheet guarantees, the maximum exposure is the maximum
amount that we would have to pay if the guarantees were called on. For formal standby facilities, credit lines and other commitments that are irrevocable over the
life of the facility, the maximum exposure is the total amount of the commitment.
Maximum exposure
Balance sheet asset
Off-balance sheet
Collateral(1)
Gross
amounts
Loss
allowance
Net
amounts
Gross
amounts
Loss
allowance
Net
amounts
Cash
Non-cash
Netting(2)
Net
exposure
2024
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Cash and balances at central banks
29.9
\u2014
29.9
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
29.9
Financial assets at amortised cost:
\u2013 Loans and advances to customers:(3)
\u2013 Residential Mortgages(4)
165.2
(0.2)
165.0
10.8
\u2014
10.8
\u2014
(168.0)
\u2014
7.8
\u2013 Corporate loans
18.6
(0.3)
18.3
7.8
\u2014
7.8
\u2014
(14.9)
\u2014
11.2
\u2013 Finance leases
4.2
(0.1)
4.1
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
4.1
\u2013 Accrued interest and other adjustments
0.8
\u2014
0.8
0.4
\u2014
0.4
\u2014
\u2014
\u2014
1.2
\u2013 Other unsecured loans
6.6
(0.2)
6.4
14.2
(0.1)
14.1
\u2014
\u2014
\u2014
20.5
\u2013 Amounts due from fellow Banco Santander group
subsidiaries and JVs
4.8
\u2014
4.8
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
4.8
Total loans and advances to customers
200.2
(0.8)
199.4
33.2
(0.1)
33.1
\u2014
(182.9)
\u2014
49.6
\u2013 Loans and advances to banks
1.0
\u2014
1.0
0.5
\u2014
0.5
\u2014
\u2014
\u2014
1.5
\u2013 Reverse repurchase agreements \u2013 non trading
10.3
\u2014
10.3
2.0
\u2014
2.0
\u2014
(10.3)
(0.1)
1.9
\u2013 Other financial assets at amortised cost
3.4
\u2014
3.4
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
3.4
Total financial assets at amortised cost
214.9
(0.8)
214.1
35.7
(0.1)
35.6
\u2014
(193.2)
(0.1)
56.4
Financial assets at fair value at FVOCI:
\u2013 Debt securities
9.0
\u2014
9.0
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
9.0
Total financial assets at FVOCI
9.0
\u2014
9.0
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
9.0
Total
253.8
(0.8)
253.0
35.7
(0.1)
35.6
\u2014
(193.2)
(0.1)
95.3
2023
Cash and balances at central banks
38.2
\u2014
38.2
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
38.2
Financial assets at amortised cost:
\u2013 Loans and advances to customers:(3)
\u2013 Residential Mortgages(4)
172.9
(0.2)
172.7
8.3
\u2014
8.3
\u2014
(175.4)
\u2014
5.6
\u2013 Corporate loans
18.3
(0.3)
18.0
8.9
\u2014
8.9
(0.1)
(15.3)
\u2014
11.5
\u2013 Finance leases
4.6
(0.1)
4.5
\u2014
\u2014
\u2014
\u2014
(4.5)
\u2014
\u2014
\u2013 Accrued interest and other adjustments
0.9
\u2014
0.9
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
0.9
\u2013 Other unsecured loans
7.1
(0.3)
6.8
13.8
(0.1)
13.7
\u2014
\u2014
\u2014
20.5
\u2013 Amounts due from fellow Banco Santander group
subsidiaries and JVs
4.5
\u2014
4.5
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
4.5
Total loans and advances to customers
208.3
(0.9)
207.4
31.0
(0.1)
30.9
(0.1)
(195.2)
\u2014
43.0
\u2013 Loans and advances to banks
1.1
\u2014
1.1
0.5
\u2014
0.5
\u2014
\u2014
\u2014
1.6
\u2013 Reverse repurchase agreements \u2013 non trading
12.5
\u2014
12.5
\u2014
\u2014
\u2014
\u2014
(12.4)
(0.1)
\u2014
\u2013 Other financial assets at amortised cost
0.2
\u2014
0.2
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
0.2
Total financial assets at amortised cost
222.1
(0.9)
221.2
31.5
(0.1)
31.4
(0.1)
(207.6)
(0.1)
44.8
Financial assets at FVOCI:
\u2013 Debt securities
8.5
\u2014
8.5
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
8.5
Total financial assets at FVOCI
8.5
\u2014
8.5
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
8.5
Total
268.8
(0.9)
267.9
31.5
(0.1)
31.4
(0.1)
(207.6)
(0.1)
91.5
(1) The forms of collateral we take to reduce credit risk include: residential and commercial property; other physical assets, including motor vehicles; liquid securities, including those transferred under reverse
repurchase agreements; cash, including cash used as collateral for derivative transactions; and receivables. Charges on residential property are most of the collateral we take.
(2) We can reduce credit risk exposures by applying netting. We do this mainly for derivative and repurchase transactions with financial institutions. For derivatives and securities finance transactions, we use standard
master netting agreements. For more on this, see \u2018Credit risk mitigation\u2019 in the \u2018Credit risk - Credit risk management\u2019 section.
(3) Balances include interest we have charged to the customer\u2019s account and accrued interest that we have not charged to the account yet.
(4) The collateral value shown against advances secured on residential property is limited to the balance of each associated individual loan. It does not include the impact of over\u2013collateralisation (where the collateral
has a higher value than the loan balance) and includes collateral we would receive on draw down of certain off\u2013balance sheet commitments.
The tables below show the main differences between our maximum and net exposure to credit risk on the financial assets that credit risk affects and to which the
impairment requirements in IFRS 9 are not applied.
Balance
sheet asset
gross
amount
Collateral(1)
Netting(2)
Net
exposure
Cash
Non-cash
2024
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Financial assets at FVTPL:
\u2013 Derivative financial instruments
1.2
(0.7)
\u2014
(0.4)
0.1
\u2013 Other financial assets at FVTPL
0.1
\u2014
\u2014
\u2014
0.1
Total
1.3
(0.7)
\u2014
(0.4)
0.2
2023
Financial assets at FVTPL:
\u2013 Derivative financial instruments
1.4
(0.8)
0.0
(0.5)
0.1
\u2013 Other financial assets at FVTPL
0.3
\u2014
\u2014
\u2014
0.3
Total
1.7
(0.8)
0.0
(0.5)
0.4
(1) The forms of collateral we take to reduce credit risk include: liquid securities, including those transferred under reverse repurchase agreements; cash, including cash used as collateral for derivative transactions;
and receivables.
(2) We can reduce credit risk exposures by applying netting. We do this mainly for derivative and repurchase transactions with financial institutions. For derivatives and securities finance transactions, we use standard
master netting agreements. They allow us to set off our credit risk exposure to a counterparty against our obligations to the counterparty in relation to transactions under the master netting agreement in the event
of default. This gives us a lower net credit exposure. They may also reduce settlement exposure. For more on this, see \u2018Credit risk mitigation\u2019 in the \u2018Credit risk \u2013 Credit risk management\u2019 section.
Rating distribution (audited)
The tables below show the credit rating of our financial assets to which the impairment requirements in IFRS 9 apply. Financial assets with low risk concentrations
are not included and are all investment grade. JAs are incorporated in the balances. For more on the credit rating profiles of key portfolios, see the credit risk review
section for each business segment.
Santander UK risk grade
Loss
allowance
Total
9
8
7
6
5
4
3 to 1
Other(1)(2)
2024
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Exposures - On balance sheet
Financial assets at amortised cost:
\u2013Loans and advances to customers(2)
5.8
31.3
81.8
46.4
15.6
6.8
5.4
7.1
(0.8)
199.4
\u00a0 \u00a0 \u2013Stage 1
5.7
30.6
78.1
40.5
12.4
2.8
0.6
6.9
(0.1)
177.5
\u00a0 \u00a0 \u2013Stage 2
0.1
0.7
3.7
5.9
3.2
3.9
2.4
0.1
(0.3)
19.7
\u00a0 \u00a0 \u2013Stage 3
\u2014
\u2014
\u2014
\u2014
\u2014
0.1
2.4
0.1
(0.4)
2.2
Of which mortgages:
5.2
29.8
76.5
40.8
6.5
3.3
3.1
\u2014
(0.2)
165.0
\u00a0 \u00a0 \u2013Stage 1
5.1
29.3
72.9
35.0
4.0
0.4
\u2014
\u2014
\u2014
146.7
\u00a0 \u00a0 \u2013Stage 2
0.1
0.5
3.6
5.8
2.5
2.9
1.3
\u2014
(0.1)
16.6
\u00a0 \u00a0 \u2013Stage 3
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
1.8
\u2014
(0.1)
1.7
Total off\u2013balance sheet
6.9
8.9
9.0
4.2
1.9
0.8
0.7
3.3
(0.1)
35.6
\u00a0 \u00a0 \u2013Stage 1
6.9
8.8
8.8
4.0
1.7
0.5
0.4
3.3
\u2014
34.4
\u00a0 \u00a0 \u2013Stage 2
\u2014
0.1
0.2
0.2
0.2
0.3
0.2
\u2014
(0.1)
1.1
\u00a0 \u00a0 \u2013Stage 3
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
0.1
\u2014
\u2014
0.1
Santander UK risk grade
Total
Coverage
Ratio
9
8
7
6
5
4
3 to 1
Other(1)(2)
2024
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
%
ECL - On balance sheet
Financial assets at amortised cost:
\u2013 Loans and advances to customers(2)
\u2014
\u2014
\u2014
\u2014
0.2
0.1
0.5
\u2014
0.8
0.4
\u2013 Stage 1
\u2014
\u2014
\u2014
\u2014
0.1
\u2014
\u2014
\u2014
0.1
0.1
\u2013 Stage 2
\u2014
\u2014
\u2014
\u2014
0.1
0.1
0.1
\u2014
0.3
1.5
\u2013 Stage 3
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
0.4
\u2014
0.4
18.2
Of which mortgages:
\u2014
\u2014
\u2014
\u2014
\u2014
0.1
0.1
\u2014
0.2
0.1
\u2013 Stage 1
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2013 Stage 2
\u2014
\u2014
\u2014
\u2014
\u2014
0.1
\u2014
\u2014
0.1
0.6
\u2013 Stage 3
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
0.1
\u2014
0.1
5.9
Total off\u2013balance sheet
\u2014
\u2014
\u2014
\u2014
\u2014
0.1
\u2014
\u2014
0.1
0.3
\u2013 Stage 1
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2013 Stage 2
\u2014
\u2014
\u2014
\u2014
\u2014
0.1
\u2014
\u2014
0.1
9.1
\u2013 Stage 3
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Santander UK risk grade
Loss
allowance
9
8
7
6
5
4
3 to 1
Other(1)(2)
Total
2023
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Exposures - On balance sheet
Financial assets at amortised cost:
\u2013 Loans and advances to customers(2)
5.3
34.2
84.4
48.9
14.6
8.3
5.4
7.2
(0.9)
207.4
\u2013 Stage 1
5.3
33.1
80.4
43.6
10.3
2.8
0.3
6.9
(0.1)
182.6
\u2013 Stage 2
\u2014
1.1
4.0
5.3
4.3
5.4
2.4
0.1
(0.4)
22.2
\u2013 Stage 3
\u2014
\u2014
\u2014
\u2014
\u2014
0.1
2.7
0.2
(0.4)
2.6
Of which mortgages:
5.2
32.5
79.9
41.5
6.6
3.7
3.5
\u2014
(0.2)
172.7
\u2013 Stage 1
5.2
31.4
75.9
36.3
3.6
0.4
0.2
\u2014
\u2014
153.0
\u2013 Stage 2
\u2014
1.1
4.0
5.2
3.0
3.2
1.4
\u2014
(0.1)
17.8
\u2013 Stage 3
\u2014
\u2014
\u2014
\u2014
\u2014
0.1
1.9
\u2014
(0.1)
1.9
Total off\u2013balance sheet
\u2014
6.3
7.0
6.8
4.6
1.7
0.4
4.7
(0.1)
31.4
\u2013 Stage 1
\u2014
6.3
6.9
6.7
4.4
1.2
0.1
4.7
\u2014
30.3
\u2013 Stage 2
\u2014
\u2014
0.1
0.1
0.2
0.5
0.2
\u2014
(0.1)
1.0
\u2013 Stage 3
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
0.1
\u2014
\u2014
0.1
Santander UK risk grade
Coverage
Ratio
9
8
7
6
5
4
3 to 1
Other(1)(2)
Total
2023
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
%
ECL - On balance sheet
Financial assets at amortised cost:
\u2013 Loans and advances to customers(2)
\u2014
\u2014
\u2014
\u2014
0.2
0.2
0.5
\u2014
0.9
0.4
\u2013 Stage 1
\u2014
\u2014
\u2014
\u2014
0.1
\u2014
\u2014
\u2014
0.1
0.1
\u2013 Stage 2
\u2014
\u2014
\u2014
\u2014
0.1
0.2
0.1
\u2014
0.4
1.8
\u2013 Stage 3
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
0.4
\u2014
0.4
13.3
Of which mortgages:
\u2014
\u2014
\u2014
\u2014
\u2014
0.1
0.1
\u2014
0.2
0.1
\u2013 Stage 1
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2013 Stage 2
\u2014
\u2014
\u2014
\u2014
\u2014
0.1
\u2014
\u2014
0.1
0.6
\u2013 Stage 3
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
0.1
\u2014
0.1
5.0
Total off\u2013balance sheet
\u2014
\u2014
\u2014
\u2014
\u2014
0.1
\u2014
\u2014
0.1
0.3
\u2013 Stage 1
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2013 Stage 2
\u2014
\u2014
\u2014
\u2014
\u2014
0.1
\u2014
\u2014
0.1
9.1
\u2013 Stage 3
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(1) Includes Joint Ventures and Business Banking (including BBLs balances) . We use scorecards for these items, rather than rating models. .
(2) Includes interest we have charged to the customer\u2019s account and accrued interest we have not charged to the account yet.
Credit quality (audited)
Total on-balance sheet exposures at 31 December 2024 comprised \u00a3194.5 bn of customer loans, loans and advances to banks of \u00a31.0bn, \u00a313.7bn of sovereign
assets measured at amortised cost, \u00a39.0bn of assets measured at FVOCI, and \u00a329.9bn of cash and balances at central banks.
Gross Write-offs
Stage 1
Stage 2
Stage 3
Total
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Exposures
On-balance sheet
Retail & Business Banking
152,198
17,571
1,955
171,724
Consumer Finance
4,389
334
36
4,759
Corporate & Commercial Banking
15,280
2,098
651
18,029
Corporate Centre
53,699
\u2014
\u2014
53,699
Total on-balance sheet
225,566
20,003
2,642
248,211
Off\u2013balance sheet
Retail & Business Banking(1)
24,211
745
52
25,008
Consumer Finance
\u2014
\u2014
\u2014
\u2014
Corporate & Commercial Banking
7,743
470
65
8,278
Corporate Centre
2,363
\u2014
\u2014
2,363
Total off\u2013balance sheet(2)
34,317
1,215
117
35,649
Total exposures
259,883
21,218
2,759
283,860
ECL and Gross write-offs
On-balance sheet
Retail & Business Banking
156
52
223
146
421
Consumer Finance
25
16
27
26
69
Corporate & Commercial Banking
49
55
71
168
294
Corporate Centre
\u2014
\u2014
\u2014
\u2014
\u2014
Total on-balance sheet
230
123
321
340
784
Off\u2013balance sheet
Retail & Business Banking
\u2014
12
24
1
37
Consumer Finance
\u2014
\u2014
\u2014
\u2014
\u2014
Corporate & Commercial Banking
\u2014
18
14
16
48
Corporate Centre
\u2014
\u2014
\u2014
\u2014
\u2014
Total off\u2013balance sheet
\u2014
30
38
17
85
Total ECL
230
153
359
357
869
Coverage ratio(3)
%
%
%
%
On-balance sheet
Retail & Business Banking
\u2014
1.3
7.5
0.2
Consumer Finance
0.4
8.2
71.2
1.4
Corporate & Commercial Banking
0.4
3.4
25.9
1.6
Corporate Centre
\u2014
\u2014
\u2014
\u2014
Total on-balance sheet
0.1
1.6
12.9
0.3
Off\u2013balance sheet
Retail & Business Banking
\u2014
3.2
2.6
0.1
Consumer Finance
\u2014
\u2014
\u2014
\u2014
Corporate & Commercial Banking
0.2
3.0
24.2
0.6
Corporate Centre
\u2014
\u2014
\u2014
\u2014
Total off-balance sheet
0.1
3.1
14.6
0.2
Total coverage
0.1
1.7
13.0
0.3
(1) Off-balance sheet exposures include \u00a36.1bn of residential mortgage offers in the pipeline.
(2) Off-balance sheet amounts consist of contingent liabilities and commitments. For more, see Note 30 to the Consolidated Financial Statements.
(3) ECL as a percentage of the related exposure.
Total on-balance sheet exposures at 31 December 2023 comprised \u00a3203.1bn of customer loans, loans and advances to banks of \u00a31.1bn, \u00a312.6bn of sovereign
assets measured at amortised cost, \u00a38.5bn of assets measured at FVOCI, and \u00a338.2bn of cash and balances at central banks.
Gross Write-offs
Stage 1
Stage 2
Stage 3
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Exposures
On-balance sheet
Retail & Business Banking
158,782
18,866
2,239
179,887
Consumer Finance
4,870
330
28
5,228
Corporate & Commercial Banking
13,822
3,418
699
17,939
Corporate Centre
60,395
\u2014
\u2014
60,395
Total on-balance sheet
237,869
22,614
2,966
263,449
Off\u2013balance sheet
Retail & Business Banking(1)
21,597
434
59
22,090
Consumer Finance
\u2014
\u2014
\u2014
0
Corporate & Commercial Banking
8,745
547
46
9,338
Corporate Centre
\u2014
\u2014
\u2014
\u2014
Total off\u2013balance sheet(2)
30,342
981
105
31,428
Total exposures
268,211
23,595
3,071
294,877
ECL and Gross write-offs
On-balance sheet
Retail & Business Banking
141
57
273
169
499
Consumer Finance
23
21
30
19
70
Corporate & Commercial Banking
68
64
118
163
345
Corporate Centre
\u2014
\u2014
\u2014
\u2014
\u2014
Total on-balance sheet
232
142
421
351
914
Off\u2013balance sheet
Retail & Business Banking
\u2014
16
26
1
43
Consumer Finance
\u2014
\u2014
\u2014
\u2014
\u2014
Corporate & Commercial Banking
\u2014
12
14
9
35
Total off\u2013balance sheet
\u2014
28
40
10
78
Total ECL
232
170
461
361
992
Coverage ratio(3)
%
%
%
%
On-balance sheet
Retail & Business Banking
\u2014
1.4
7.5
0.3
Consumer Finance
0.4
9.0
68.5
1.3
Corporate & Commercial Banking
0.5
3.5
23.4
1.9
Corporate Centre
\u2014
\u2014
\u2014
\u2014
Total on-balance sheet
0.1
1.9
11.8
0.3
Off\u2013balance sheet
Retail & Business Banking
0.1
6.0
2.8
0.2
Consumer Finance
\u2014
\u2014
\u2014
\u2014
Corporate & Commercial Banking
0.1
2.5
20.2
0.4
Total off-balance sheet
0.1
4.1
10.4
0.2
Total coverage
0.1
2.0
11.8
0.3
(1) Off-balance sheet exposures include \u00a33.3bn of residential mortgage offers in the pipeline.
(2) Off-balance sheet amounts consist of contingent liabilities and commitments. For more, see Note 30 to the Consolidated Financial Statements.
(3) ECL as a percentage of the related exposure.
Stage 2 analysis (audited)
The following table analyses our Stage 2 exposures and ECL allowance by the reason the exposure is classified as Stage 2.
2024
Backstop
Quantitative
Qualitative
JAs
Total
30 DPD
PD deterioration
PD threshold
Forbearance(1)
Other(2)
Mortgage
Refinancing
Retail & Business
Banking
Exposure \u00a3m
592
9,434
478
308
4,955
1,804
17,571
ECL \u00a3m
20
133
29
5
25
11
223
Of which
-Mortgages
Exposure \u00a3m
504
8,834
350
298
4,898
1,804
16,688
ECL \u00a3m
7
48
3
3
12
11
84
Consumer Finance
Exposure \u00a3m
30
155
\u2014
\u2014
149
\u2014
334
ECL \u00a3m
10
11
\u2014
\u2014
6
\u2014
27
Corporate &
Commercial Banking
Exposure \u00a3m
54
930
61
57
996
\u2014
2,098
ECL \u00a3m
1
38
7
1
24
\u2014
71
Corporate Centre
Exposure \u00a3m
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
ECL \u00a3m
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Total Drawn
Exposure \u00a3m
676
10,519
539
365
6,100
1,804
20,003
ECL \u00a3m
31
182
36
6
55
11
321
Undrawn
ECL \u00a3m
1
23
6
2
6
\u2014
38
Total Reported
Exposure \u00a3m
701
11,180
605
434
6,494
1,804
21,218
ECL \u00a3m
32
205
42
8
61
11
359
2023
Backstop
Quantitative
Qualitative
JAs
Total
30 DPD
PD
deterioration
Forbearance(1)
Other
Secured
affordability
Unsecured
affordability
Mortgage
Refinancing
High risk
corporate
Retail & Business
Banking
Exposure \u00a3m
738
6,421
516
301
2,889
232
7,769
\u2014
18,866
ECL \u00a3m
33
164
2
11
9
35
19
\u2014
273
Of which
-Mortgages
Exposure \u00a3m
560
5,877
516
265
2,889
\u2014
7,769
\u2014
17,876
ECL \u00a3m
11
65
2
3
9
\u2014
19
\u2014
109
Consumer Finance
Exposure \u00a3m
25
115
\u2014
126
64
\u2014
\u2014
\u2014
330
ECL \u00a3m
11
10
\u2014
5
4
\u2014
\u2014
\u2014
30
Corporate &
Commercial Banking
Exposure \u00a3m
93
1,809
85
533
\u2014
\u2014
\u2014
898
3,418
ECL \u00a3m
2
75
2
17
\u2014
\u2014
\u2014
22
118
Corporate Centre
Exposure \u00a3m
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
ECL \u00a3m
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Total Drawn
Exposure \u00a3m
856
8,345
601
960
2,953
232
7,769
898
22,614
ECL \u00a3m
46
249
4
33
13
35
19
22
421
Undrawn
ECL \u00a3m
3
28
\u2014
4
\u2014
3
\u2014
2
40
Total Reported
Exposure \u00a3m
893
9,160
601
1,152
2,889
233
7,769
898
23,595
ECL \u00a3m
49
277
4
37
13
38
19
24
461
(1) Where the values of ECL and/or exposures are not \u00a3nil, but round to \u00a3nil when presented in \u00a3millions, the coverage ratio is still presented in the table.
(2) Mainly consists of Qualitative triggers for Mortgages, over-indebted customers c\u00a32.5bn and Interest-only accounts 24 months pre-maturity c\u00a31.3bn, and for CCB customers operating in a high-risk sector.
Where balances satisfy more than one of the criteria above for determining a SICR, we have assigned the corresponding gross carrying amount and ECL allowance in
order of the categories presented.
Reconciliation of exposures, loss allowance and net carrying amounts (audited)
The table below shows the relationships between disclosures in this Credit risk review section which refer to drawn exposures and the associated ECL allowance ,
and the total assets as presented in the Consolidated Balance Sheet. The Credit risk review disclosures exclude Joint ventures, as they carry low credit risk and
therefore have an immaterial ECL, and Other items, mainly accrued interest that we have not yet charged to the customer's account, and cash collateral.
On-balance sheet
Off-balance sheet
Exposures
Loss
allowance
Net carrying
amount
Exposures
Loss
allowance
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Retail & Business Banking(1)
171,724
421
171,303
25,008
37
Consumer Finance
4,759
69
4,690
\u2014
\u2014
Corporate & Commercial Banking
18,029
294
17,735
8,278
48
Corporate Centre
53,699
\u2014
53,699
2,363
\u2014
Total exposures presented in Credit Quality tables
248,211
784
247,427
35,649
85
Joint ventures
4,832
Other items
848
Adjusted net carrying amount
253,107
Assets classified at FVTPL
1,340
Non-financial assets
5,497
Total assets per the Consolidated Balance Sheet
259,944
2023
Retail & Business Banking(1)
179,887
499
179,388
22,090
43
Consumer Finance
5,228
70
5,158
\u2014
\u2014
Corporate & Commercial Banking
17,939
345
17,594
9,338
35
Corporate Centre
60,395
\u2014
60,395
\u2014
\u2014
Total exposures presented in Credit Quality tables
263,449
914
262,535
31,428
78
Joint ventures
4,544
Other items
751
Adjusted net carrying amount
267,830
Assets classified at FVTPL
1,694
Non-financial assets
5,924
Total assets per the Consolidated Balance Sheet
275,448
(1) Off-balance sheet exposures include offers in the pipeline, undrawn flexible mortgage products and credit cards.
Movement in total exposures and the corresponding ECL (audited)
The following table shows changes in total on and off-balance sheet exposures, subject to ECL assessment, and the corresponding ECL, in the period. The table
presents total gross carrying amounts and ECLs at a Santander UK group level. We present segmental views in the sections below.
Stage 1
Stage 2
Stage 3
Total
Exposures(1)
ECL
Exposures(1)
ECL
Exposures(1)
ECL
Exposures(1)
ECL
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2024
268,211
170
23,595
461
3,071
361
294,877
992
Transfers from Stage 1 to Stage 2(3)
(11,911)
(11)
11,911
11
\u2014
\u2014
\u2014
\u2014
Transfers from Stage 2 to Stage 1(3)
9,395
118
(9,395)
(118)
\u2014
\u2014
\u2014
\u2014
Transfers to Stage 3(3)
(434)
(2)
(845)
(34)
1,279
36
\u2014
\u2014
Transfers from Stage 3(3)
35
2
417
34
(452)
(36)
\u2014
\u2014
Transfers of financial instruments
(2,915)
107
2,088
(107)
827
\u2014
\u2014
\u2014
Net ECL remeasurement on stage transfer(4)
\u2014
(107)
\u2014
96
\u2014
122
\u2014
111
Change in economic scenarios(2)
\u2014
(20)
\u2014
(44)
\u2014
\u2014
\u2014
(64)
Change to ECL models
(2,287)
(5)
2,361
37
(74)
(26)
\u2014
6
New lending and assets purchased(5)
33,894
43
1,170
58
164
40
35,228
141
Redemptions, repayments and assets sold(7)
(38,081)
(44)
(4,663)
(69)
(1,242)
(79)
(43,986)
(192)
Changes in risk parameters and other movements(6)
1,061
9
(3,333)
(73)
355
169
(1,917)
105
Assets written off(7)
\u2014
\u2014
\u2014
\u2014
(342)
(230)
(342)
(230)
At 31 December 2024
259,883
153
21,218
359
2,759
357
283,860
869
Net movement in the period
(8,328)
(17)
(2,377)
(102)
(312)
(4)
(11,017)
(123)
ECL (release)/charge to the Income Statement
(17)
(102)
226
107
Less: Discount unwind
\u2014
\u2014
(24)
(24)
Less: Recoveries net of collection costs
\u2014
\u2014
(12)
(12)
Total ECL (release)/charge to the Income Statement
(17)
(102)
190
71
At 1 January 2023
284,428
170
19,127
516
2,729
319
306,284
1,005
Transfers from Stage 1 to Stage 2(3)
(12,945)
(9)
12,945
9
\u2014
\u2014
\u2014
\u2014
Transfers from Stage 2 to Stage 1(3)
5,913
111
(5,913)
(111)
\u2014
\u2014
\u2014
\u2014
Transfers to Stage 3(3)
(598)
(6)
(920)
(38)
1,518
44
\u2014
\u2014
Transfers from Stage 3(3)
28
1
304
15
(332)
(16)
\u2014
\u2014
Transfers of financial instruments
(7,602)
97
6,416
(125)
1,186
28
\u2014
\u2014
Net ECL remeasurement on stage transfer(4)
\u2014
(111)
\u2014
145
\u2014
130
\u2014
164
Change in economic scenarios(2)
\u2014
29
\u2014
(33)
\u2014
9
\u2014
5
Change to ECL models
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
New lending and assets purchased(5)
25,409
28
562
45
59
20
26,030
93
Redemptions, repayments and assets sold(7)
(33,805)
(35)
(3,017)
(53)
(886)
(46)
(37,708)
(134)
Changes in risk parameters and other movements(6)
(219)
(8)
507
(34)
395
133
683
91
Assets written off(7)
\u2014
\u2014
\u2014
\u2014
(412)
(232)
(412)
(232)
At 31 December 2023
268,211
170
23,595
461
3,071
361
294,877
992
Net movement in the period
(16,217)
\u2014
4,468
(55)
342
42
(11,407)
(13)
ECL (release)/charge to the Income Statement
\u2014
(55)
274
219
Less: Discount unwind
\u2014
\u2014
(21)
(21)
Less: Recoveries net of collection costs
\u2014
\u2014
7
7
Total ECL (release)/charge to the Income Statement
\u2014
(55)
260
205
(1) Exposures that have attracted an ECL, and as reported in the Credit Quality table above.
(2) Changes to assumptions in the period. Isolates the impact on ECL from changes to the economic variables for each scenario, the scenarios themselves, and the probability weights from all other movements. Also
includes the impact of quarterly revaluation of collateral. The impact of changes in economics on exposure Stage allocations are shown in Transfers of financial instruments.
(3) Total impact of facilities that moved Stage(s) in the period. This means, for example, that where risk parameter changes (model inputs) or model changes (methodology) result in a facility moving Stage, the full
impact is reflected here (rather than in Other). Stage flow analysis only applies to facilities that existed at both the start and end of the period. Transfers between Stages are based on opening balances and ECL at
the start of the period.
(4) Relates to the revaluation of ECL following the transfer of an exposure from one Stage to another.
(5) Exposures and ECL of facilities that did not exist at the start of the period but did at the end. Amounts in Stage 2 and 3 represent assets which deteriorated in the period after origination in Stage 1.
(6) Residual movements on existing facilities that did not change Stage in the period, and which were not acquired in the period. Includes the net increase or decrease in the period of the mortgage pipeline, cash at
central banks, the impact of changes in risk parameters in the period, unwind of discount rates and increases in ECL requirements of accounts which ultimately were written off in the period.
(7) Exposures and ECL for facilities that existed at the start of the period but not at the end.
COUNTRY RISK EXPOSURES (audited)
We manage our country risk exposure under our global limits framework. We set our Risk\u00a0Appetite for each country, considering factors that may affect its risk
profile. These can include political events, macroeconomics and the nature of the risk. We actively manage exposures if we need to.
The tables below show our total exposures, which are the total of balance sheet and off\u2013balance sheet values. We calculate balance sheet values in line with IFRS
(i.e. after netting allowed under IAS 32) except for credit provisions which we add back. Off\u2013balance sheet values are undrawn facilities and letters of credit. We
classify location by country of risk \u2013 the country where each client has its main business or assets. That is unless there is a full risk transfer guarantee in place. If so,
we use the guarantor\u2019s country of domicile. If a client has operations in many countries, we use their country of incorporation. The table below excludes balances
with other Banco Santander group members. We show them separately in the section that immediately follows.
2024
2023
Financial
institutions
Financial
institutions
Governments
Banks(1)
Other
Retail
Corporate
Total(2)
Governments
Banks(1)
Other
Retail
Corporate
Total(2)
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Eurozone
Ireland
\u2014
\u2014
3.3
\u2014
\u2014
3.3
\u2014
\u2014
3.1
\u2014
0.1
3.2
Spain
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
France
0.1
1.5
2.1
\u2014
\u2014
3.7
0.1
1.7
0.8
\u2014
\u2014
2.6
Belgium
0.2
0.3
\u2014
\u2014
\u2014
0.5
0.2
0.3
\u2014
\u2014
\u2014
0.5
Germany
\u2014
0.2
\u2014
\u2014
\u2014
0.2
\u2014
0.2
0.3
\u2014
\u2014
0.5
Luxembourg
\u2014
\u2014
2.3
\u2014
0.1
2.4
\u2014
\u2014
0.5
\u2014
0.1
0.6
Other
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
0.1
0.4
\u2014
\u2014
\u2014
0.5
0.3
2.0
7.7
\u2014
0.1
10.1
0.4
2.6
4.7
\u2014
0.2
7.9
Other countries
UK
34.0
1.5
6.3
200.8
24.3
266.9
38.5
1.7
6.5
206.0
25.0
277.7
Jersey
\u2014
\u2014
0.1
\u2014
0.3
0.4
\u2014
\u2014
0.1
\u2014
0.2
0.3
US
\u2014
0.9
\u2014
\u2014
\u2014
0.9
\u2014
0.7
\u2014
\u2014
\u2014
0.7
Canada
0.6
0.9
\u2014
\u2014
\u2014
1.5
0.1
0.8
\u2014
\u2014
\u2014
0.9
Japan
2.8
0.1
\u2014
\u2014
\u2014
2.9
2.0
0.9
\u2014
\u2014
\u2014
2.9
Switzerland
0.4
\u2014
\u2014
\u2014
\u2014
0.4
2.1
\u2014
\u2014
\u2014
\u2014
2.1
Other(3)
\u2014
0.6
0.1
0.2
0.4
1.3
\u2014
0.4
0.1
0.1
0.5
1.1
37.8
4.0
6.5
201.0
25.0
274.3
42.7
4.5
6.7
206.1
25.7
285.7
Total
38.1
6.0
14.2
201.0
25.1
284.4
43.1
7.1
11.4
206.1
25.9
293.6
(1) Excludes balances with central banks.
(2) Excludes cash at hand, interests in other entities, intangible assets, property, plant and equipment, tax assets, retirement benefit assets and other assets.
(3)Mainly includes Australia \u00a30.3bn (2023: \u00a30.3bn), Other OECD \u00a30.2bn (2023: \u00a30.2bn), Bermuda \u00a30.1bn (2023: \u00a30.1bn), China \u00a30.1bn (2023: \u00a30.1bn), Guernsey \u00a30.1bn (2023:\u00a30.2bn), Singapore \u00a30.1bn (2023:
\u00a30.0bn), and Norway \u00a30.1bn (2023: \u00a30.1bn).
Balances with other Banco Santander group members (audited)
We deal with other Banco Santander group members in the ordinary course of business. We do this where we have a particular business advantage or expertise and
where they can offer us commercial opportunities. These transactions also arise where we support the activities of, or with, larger multinational corporate clients
and financial institutions which may deal with other Banco Santander group members. We conduct these activities on the same terms as for similar transactions
with third parties, and in a way that manages the\u00a0credit risk within limits acceptable to the Board and the PRA.
At 31 December 2024 and 31 December 2023 , we had gross balances with other Banco Santander group members as follows:
2024
2023
Financial institutions
Financial institutions
Banks
Other
Corporate
Total
Banks
Other
Corporate
Total
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Assets
Spain
0.6
\u2014
\u2014
0.6
0.8
\u2014
\u2014
0.8
UK
\u2014
4.9
\u2014
4.9
\u2014
4.6
\u2014
4.6
0.6
4.9
\u2014
5.5
0.8
4.6
\u2014
5.4
Liabilities
Spain
0.9
0.1
\u2014
1.0
1.1
0.1
\u2014
1.2
UK
\u2014
14.2
\u2014
14.2
\u2014
14.3
\u2014
14.3
0.9
14.3
\u2014
15.2
1.1
14.4
\u2014
15.5
Interest rate profile (audited)
The interest rate profile of our maturing mortgage asset stock was:
2024
2023
\u00a3m
%
\u00a3m
%
Fixed rate
148,495
90
153,207
89
Of which maturing:
\u2013 < 12 months
37,656
23
37,630
22
\u2013 Later than 1 year but no later than 3 years
84,704
51
65,502
38
\u2013 Later than 3 years but no later than 4 years
11,122
7
34,725
20
\u2013 Later than 4 years but no later than 5 years
11,645
7
10,977
6
\u2013 Later than 5 years
3,368
2
4,373
3
Variable rate
12,105
7
13,761
8
Standard Variable Rate (SVR)
3,007
2
3,915
2
Follow on Rate (FoR)
1,606
1
1,976
1
165,213
100
172,859
100
2024 compared to 2023
We continued to see customers refinance from reversion to fixed rate products in 2024, influenced by high interest rates. Demand for fixed rate products increased,
particularly with shorter fixed rate terms. 25% of mortgages due to reach the end of their incentive period in the next 12 months (2023: 22%).
Geographical distribution (audited)
The geographical distribution of our mortgage asset stock and new business was:
Stock
New business
2024
2023
2024
2023
Region
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
London
42.7
44.0
4.1
2.9
Midlands and East Anglia
23.1
24.2
2.0
1.8
North
21.7
22.9
1.9
1.7
Northern Ireland
2.3
2.6
0.1
0.1
Scotland
6.0
6.4
0.6
0.6
South East excluding London
52.3
54.8
4.6
3.8
South West, Wales and other
17.1
18.0
1.6
1.3
165.2
172.9
14.9
12.2
2024 compared to 2023
The portfolio's geographical distribution continued to represent a broad footprint across the UK, with a concentration around London and the South East. The loan-
to-income multiple of mortgage lending in the year, based on average earnings of new business at inception was 2.93 (2023: 2.98).
Mortgage loan size (audited)
The split of our mortgage asset by size was:
Mortgage loan size
2024
2023
>\u00a31.0m
2%
2%
\u00a30.5m to \u00a31.0m
10%
10%
\u00a30.25m to \u00a30.5m
31%
31%
<\u00a30.25m
57%
57%
Average loan size (stock) (1)
\u00a3193k
\u00a3187k
Average loan size (new business)
\u00a3246k
\u00a3228k
(1) Average initial advance of existing stock.
Loan-to-value analysis (audited)
This table shows the LTV distribution for the gross carrying amount and the related ECL of our total mortgage portfolio and Stage 3 mortgages, and new business.
We also show the collateral value and average LTV. We use our estimate of the property value at the balance sheet date and include fees that have been added to
the loan. For flexible products, we only include the drawn amount, not undrawn limits.
2024
2023
Stock
Stage 3
New
Stock
Stage 3
New
Total
ECL
Total
ECL
Business
Total
ECL
Total
ECL
Business
LTV
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Up to 50%
76,122
33
880
13
3,407
78,673
31
1,106
12
2,616
>50-60%
33,067
21
317
8
2,394
32,837
24
347
10
1,604
>60-70%
29,171
27
254
10
2,311
30,874
40
246
16
1,977
>70-80%
17,132
27
150
12
3,458
18,721
48
138
19
2,736
>80-90%
7,989
19
72
8
2,445
8,893
35
67
15
2,318
>90-100%
1,452
12
38
7
888
2,416
20
39
11
900
>100%
280
33
56
20
15
445
44
65
25
13
165,213
172
1,767
78
14,918
172,859
242
2,008
108
12,164
Collateral value (1)
165,176
\u00a0
1,756
\u00a0
14,918
172,803
1,997
12,164
%
%
%
%
%
%
Average LTV - Balance weighted(2)
51
51
64
51
49
66
(1) Collateral value is limited to the balance of each loan and excludes the impact of any over-collateralisation. Includes collateral against loans in negative equity of \u00a3244m (2023: \u00a3389m).
(2) Balance weighted LTV = (Loan 1 balance x (Loan 1 Balance/Loan 1 latest property valuation) + (Loan 2 balance x (loan 2 balance/Loan 2 latest property valuation) +\u00a0 ...) /(Loan 1 balance + Loan 2 balance+...).
The balance weighted average LTV of new business in the period in London was 64% (2023: 65%).
2024 compared to 2023
There were no significant changes in collateral quality in 2024. Balanced weighted average LTVs of stock were broadly flat, with a reduction in new business due to
elevated price competition in the market at higher LTVs. We monitor the profile of new lending and act as needed to ensure the LTV mix of completions is in line
with our risk appetite.
Credit performance (audited)
2024
2023
\u00a3m
\u00a3m
Mortgage loans and advances to customers
165,213
172,859
of which:
\u2013 Stage 1
146,758
152,975
\u2013 Stage 2
16,688
17,876
\u2013 Stage 3
1,767
2,008
Loss allowances(1)
172
242
%
%
Stage 1 ratio(2)
88.8
88.5
Stage 2 ratio(2)
10.1
10.3
Stage 3 ratio
1.08
1.17
(1) The ECL allowance is for both on and off\u2013balance sheet exposures.
(2) Stage 1/Stage 2 exposures as a percentage of customer loans.
Movement in total exposures and the corresponding ECL (audited)
The following tables show changes in total on and off-balance sheet exposures and ECL in the period. The footnotes to the Santander UK group level table on page
69 also apply to these tables.
Stage 1
Stage 2
Stage 3
Total
Exposures(1)
ECL
Exposures(1)
ECL
Exposures(1)
ECL
Exposures(1)
ECL
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2024
161,163
24
17,997
110
2,028
108
181,188
242
Transfers from Stage 1 to Stage 2(3)
(9,873)
(1)
9,873
1
\u2014
\u2014
\u2014
\u2014
Transfers from Stage 2 to Stage 1(3)
7,899
20
(7,899)
(20)
\u2014
\u2014
\u2014
\u2014
Transfers to Stage 3(3)
(230)
\u2014
(524)
(7)
754
7
\u2014
\u2014
Transfers from Stage 3(3)
3
\u2014
268
9
(271)
(9)
\u2014
\u2014
Transfers of financial instruments
(2,201)
19
1,718
(17)
483
(2)
\u2014
\u2014
Net ECL remeasurement on stage transfer(4)
\u2014
(19)
\u2014
31
\u2014
15
\u2014
27
Change in economic scenarios(2)
\u2014
(15)
\u2014
(29)
\u2014
1
\u2014
(43)
Change to ECL models
(1,859)
(3)
1,869
21
(10)
(37)
\u2014
(19)
New lending and assets purchased(5)
21,758
4
315
3
33
1
22,106
8
Redemptions, repayments and assets sold(7)
(21,925)
(1)
(3,162)
(14)
(762)
(27)
(25,849)
(42)
Changes in risk parameters and other movements(6)
332
1
(1,764)
(21)
46
28
(1,386)
8
Assets written off(7)
\u2014
\u2014
\u2014
\u2014
(33)
(9)
(33)
(9)
At 31 December 2024
157,268
10
16,973
84
1,785
78
176,026
172
Net movement in the period
(3,895)
(14)
(1,024)
(26)
(243)
(30)
(5,162)
(70)
ECL (release)/charge to the Income Statement
(14)
(26)
(21)
(61)
Less: Discount unwind
\u2014
\u2014
(3)
(3)
Less: Recoveries net of collection costs
\u2014
\u2014
36
36
Total ECL (release)/charge to the Income Statement
(14)
(26)
12
(28)
At 1 January 2023
176,965
25
13,533
131
1,848
95
192,346
251
Transfers from Stage 1 to Stage 2(3)
(10,791)
(3)
10,791
3
\u2014
\u2014
\u2014
\u2014
Transfers from Stage 2 to Stage 1(3)
4,778
30
(4,778)
(30)
\u2014
\u2014
\u2014
\u2014
Transfers to Stage 3(3)
(335)
(3)
(566)
(15)
901
18
\u2014
\u2014
Transfers from Stage 3(3)
14
\u2014
277
9
(291)
(9)
\u2014
\u2014
Transfers of financial instruments
(6,334)
24
5,724
(33)
610
9
\u2014
\u2014
Net ECL remeasurement on stage transfer(4)
\u2014
(28)
\u2014
40
\u2014
22
\u2014
34
Change in economic scenarios(2)
\u2014
\u2014
\u2014
(2)
\u2014
3
\u2014
1
Change to ECL models
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
New lending and assets purchased(5)
12,947
4
154
3
5
1
13,106
8
Redemptions, repayments and assets sold(7)
(23,081)
(6)
(1,752)
(12)
(417)
(14)
(25,250)
(32)
Changes in risk parameters and other movements(6)
666
5
338
(17)
36
3
1,040
(9)
Assets written off(7)
\u2014
\u2014
\u2014
\u2014
(54)
(11)
(54)
(11)
At 31 December 2023
161,163
24
17,997
110
2,028
108
181,188
242
Net movement in the period
(15,802)
(1)
4,464
(21)
180
13
(11,158)
(9)
ECL (release)/charge to the Income Statement
(1)
(21)
24
2
Less: Discount unwind
\u2014
\u2014
(3)
(3)
Less: Recoveries net of collection costs
\u2014
\u2014
28
28
Total ECL (release)/charge to the Income Statement
(1)
(21)
49
27
Loan modifications (audited)
Forbearance(1)
The following table sets out the financial assets that were forborne while they had a loss allowance measured at lifetime ECL.
2024
2023
\u00a3m
\u00a3m
Financial assets modified in the period:
\u2013 Amortised cost before modification
555
346
\u2013Net modification loss
2
5
Financial assets modified since initial recognition:
\u2013 Gross carrying amount of financial assets for which the loss allowance changed to 12 months ECL in the period
260
79
The balances at 31 December 2024 and 31 December 2023, analysed by their staging and the forbearance we applied, were:
Capitalisation
Term
extension
Interest-only
Concessionary
interest rate
Reduced
repayment
plan
Total
Loss
allowances
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Stage 2
231
186
201
23
145
786
6
Stage 3
203
141
53
104
156
657
27
434
327
254
127
301
1,443
33
Proportion of portfolio
0.3%
0.2%
0.2%
0.1%
0.2%
0.9%
2023
Stage 2
325
386
211
11
n/a
933
7
Stage 3
284
150
64
171
n/a
669
30
609
536
275
182
n/a
1,602
37
Proportion of portfolio
0.3%
0.3%
0.2%
0.1%
n/a
0.9%
(1) We base forbearance type on the first forbearance on the accounts.
At 31 December 2024, the proportion of the mortgage portfolio in forbearance was at 0.9% (2023: 0.9%) and the proportion of accounts in forbearance for more
than six months that had made their last six months\u2019 contractual payments was 83% (2023: 81%). The weighted average LTV of all accounts in forbearance was
45% (2023: 44%) compared to the weighted average portfolio LTV of 51% (2023: 51%).
At 31 December 2024, the carrying value of mortgages classified as multiple forbearance was \u00a39m (2023: \u00a3121m).
Credit performance (audited)
Of which: Portfolio of particular interest(1)
Total
Interest-only
Part interest-
only, part
repayment (2)
Flexible
LTV >100%
Buy-to-let
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Mortgage portfolio
165,213
36,188
11,873
4,333
280
14,931
\u2013 Stage 1
146,758
29,802
10,112
3,190
75
13,672
\u2013 Stage 2
16,688
5,572
1,542
933
149
1,204
\u2013 Stage 3
1,767
814
219
210
56
55
Stage 3 ratio
1.08%
2.27%
1.85%
5.25%
20.15%
0.37%
Properties in possession
46
23
8
8
10
2
Balance weighted LTV (indexed)
51%
48%
52%
38%
117%
59%
2023
Mortgage portfolio
172,859
38,825
12,584
5,418
445
15,585
\u2013 Stage 1
152,975
32,012
10,896
4,420
276
13,887
\u2013 Stage 2
17,876
5,829
1,449
744
104
1,647
\u2013 Stage 3
2,008
984
239
254
65
51
Stage 3 ratio
1.17%
2.55%
1.90%
5.01%
14.57%
0.33%
Properties in possession
23
12
3
2
5
1
Balance weighted LTV (indexed)
51%
48%
51%
37%
116%
60%
(1) Where a loan falls into more than one category, we include it in all the categories that apply.
(2) Mortgage balance includes both the interest-only part of \u00a39,046m ( 2023: \u00a39,531m) and the non-interest-only part of the loan.
2024 compared to 2023
In 2024, the combined total proportion of interest-only loans, part interest-only, part repayment loans and flexible loans decreased to 31.7% (2023: 32.9%).
BTL mortgage balances decreased by \u00a30.7bn to \u00a314.9bn (2023: \u00a315.6bn) driven by our strategy to deleverage our mortgage portfolio and changes in the market
dynamic. In 2024, the balance weighted average LTV of mortgage total new BTL lending was 59% (2023: 58%).
Forbearance(1) (audited)
The balances at 31 December 2024 and 31 December 2023 were:
Interest-only(2)
Flexible
LTV >100%
Buy-to-Let
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Total
272
56
9
18
\u2013 Stage 2
115
19
2
8
\u2013 Stage 3
157
37
7
10
2023
Total
365
74
12
23
\u2013 Stage 2
216
55
3
16
\u2013 Stage 3
149
19
9
7
(1) Where a loan falls into more than one category, we have included it in all the categories that apply.
(2) Comprises full interest-only loans and part interest-only, part repayment loans.
2024 compared to 2023
New mortgage forbearance stock reduced, mainly due to portfolio sales, lower interest-only maturities and the improvement of our risk profile.
Credit performance (audited)
Business
banking
Other unsecured
Personal
loans
Credit
cards
Overdrafts
Total other
unsecured
Total
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Loans and advances to customers
1,212
2,089
2,774
436
5,299
6,511
of which:
\u2013 Stage 1
1,042
1,892
2,271
235
4,398
5,440
\u2013 Stage 2
85
172
454
172
798
883
\u2013 Stage 3
85
25
49
29
103
188
Loss allowances(1)
16
63
150
57
270
286
Stage 3 undrawn exposures
2
\u2014
28
4
32
34
Stage 3 ratio
7.10%
1.20%
2.75%
7.40%
2.52%
3.37%
Gross write-offs (12 months)
10
60
51
26
137
147
2023
Loans and advances to customers
1,819
2,064
2,674
471
5,209
7,028
of which:
\u2013 Stage 1
1,574
1,743
2,283
207
4,233
5,807
\u2013 Stage 2
115
294
345
236
875
990
\u2013 Stage 3
130
27
46
28
101
231
Loss allowances(1)
16
66
140
78
284
300
Stage 3 undrawn exposures
2
\u2014
33
4
37
39
Stage 3 ratio
7.25%
1.32%
2.95%
6.73%
2.65%
3.83%
Gross write-offs (12 months)
11
48
46
25
119
130
(1) The ECL allowance is for both on and off\u2013balance sheet exposures.
2024
2023
% of credit card customers that repay balance in full each month (unaudited)
56%
55%
UPL average customer balance (\u00a3)
6,000
6,000
2024 compared to 2023
Business Banking loans continued to reduce due to the pay down of the BBL portfolio. Other unsecured Stage 2 loans reduced driven by Personal loans and
Overdrafts, due to the release of the cost of living JAs. Credit card balances increased due to the impact of our SICR updates in the year. Other unsecured Stage 3
assets remained stable in 2024. Gross write-offs increased in the year, primarily driven by Personal loans, reflecting the current economic environment.
Loan modifications (audited)
Forbearance
The following table sets out the financial assets that were forborne while they had a loss allowance measured at lifetime ECL.
Credit cards
Overdrafts
Total
2024
\u00a3m
\u00a3m
\u00a3m
Financial assets modified in the period:
\u2013 Amortised cost before modification
14
9
23
\u2013 Net modification loss
18
6
24
Financial assets modified since initial recognition:
\u2013 Gross carrying amount of financial assets for which the loss allowance changed to 12m ECL in the period
2
1
3
2023
Financial assets modified in the period:
\u2013 Amortised cost before modification
13
8
21
\u2013 Net modification loss
14
6
20
Financial assets modified since initial recognition:
\u2013 Gross carrying amount of financial assets for which the loss allowance changed to 12m ECL in the period
2
1
3
The balances at 31 December 2024 and 31 December 2023 were:
Other unsecured
Business
banking
Personal loans
Credit cards
Overdrafts
Total other
unsecured
Total
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Total
3
2
57
22
81
84
\u2013 Stage 2
\u2014
1
11
5
17
17
\u2013 Stage 3
3
1
46
17
64
67
2023
Total
3
1
47
19
67
70
\u2013 Stage 2
\u2014
1
5
2
8
8
\u2013 Stage 3
3
\u2014
42
17
59
62
Other loan modifications
There were no other loan modifications made in 2024 and 2023.
Credit performance (audited)
2024
2023
\u00a3m
\u00a3m
Loans and advances to customers
4,759
5,228
of which:
\u2013 Stage 1
4,389
4,870
\u2013 Stage 2
334
330
\u2013 Stage 3
36
28
Loss allowances(1)
69
70
Stage 3 ratio
0.77%
0.53%
Gross write-offs
25
23
(1) The ECL allowance is for both on and off\u2013balance sheet exposures.
2024
2023
Consumer (auto) finance new business gross lending (\u00a3m)
1,593
2,055
Wholesale loans (stock finance) to car dealerships as approximate % of the Consumer loan book
9.7%
9.9%
% of lending collateralised on the vehicle
95%
87%
Average Consumer (auto) finance loan size (\u00a3)
16,045
17,308
2024 compared to 2023
In 2024, we maintained our prudent Consumer (auto) finance underwriting criteria. The product mix was broadly unchanged, with wholesale balances
decreasing\u00a0slightly.
The risk profile was stable in terms of our credit scoring acceptance policies. The overall risk performance was good with the vast majority of customers paying.
Loan modifications (audited)
Forbearance
At 31 December 2024 the amount of forborne assets net of deferred income was \u00a35.4m (2023: \u00a3nil).
Other loan modifications
There were no other loan modifications made in 2024.
The gross carrying amount of financial assets for which the ECL allowance changed to a 12-month measurement at 31 December 2024 was \u00a36m (2023: \u00a330m).
Movement in total exposures and the corresponding ECL (audited)
The following tables show changes in total on and off-balance sheet exposures and ECL in the period. The footnotes to the Santander UK group level table on page
69 also apply to these tables.
Stage 1
Stage 2
Stage 3
Total
Exposures(1)
ECL
Exposures(1)
ECL
Exposures(1)
ECL
Exposures(1)
ECL
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2024
22,567
76
3,965
132
745
172
27,277
380
Transfers from Stage 1 to Stage 2(3)
(1,101)
(3)
1,101
3
\u2014
\u2014
\u2014
\u2014
Transfers from Stage 2 to Stage 1(3)
781
13
(781)
(13)
\u2014
\u2014
\u2014
\u2014
Transfers to Stage 3(3)
(84)
(1)
(230)
(12)
314
13
\u2014
\u2014
Transfers from Stage 3(3)
24
1
121
18
(145)
(19)
\u2014
\u2014
Transfers of financial instruments
(380)
10
211
(4)
169
(6)
\u2014
\u2014
Net ECL remeasurement on stage transfer(4)
\u2014
(9)
\u2014
(4)
\u2014
54
\u2014
41
Change in economic scenarios(2)
\u2014
(3)
\u2014
(7)
\u2014
(1)
\u2014
(11)
Change to ECL models
(222)
(2)
286
(11)
(64)
12
\u2014
(1)
New lending and assets purchased(5)
8,485
20
552
21
118
29
9,155
70
Redemptions, repayments and assets sold(7)
(5,203)
(24)
(1,149)
(29)
(254)
(42)
(6,606)
(95)
Changes in risk parameters and other movements(6)
(2,224)
5
(1,297)
(13)
82
15
(3,439)
7
Assets written off (7)
\u2014
\u2014
\u2014
\u2014
(80)
(49)
(80)
(49)
At 31 December 2024
23,023
73
2,568
85
716
184
26,307
342
Net movement in the period
456
(3)
(1,397)
(47)
(29)
12
(970)
(38)
ECL (release)/charge to the Income Statement
(3)
(47)
61
11
Less: Discount unwind
\u2014
\u2014
(12)
(12)
Less: Recoveries net of collection costs
\u2014
\u2014
5
5
Total ECL (release)/charge to the Income Statement
(3)
(47)
54
4
Stage 1
Stage 2
Stage 3
Total
Exposures(1)
ECL
Exposures(1)
ECL
Exposures(1)
ECL
Exposures(1)
ECL
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2023
23,838
83
3,888
166
572
145
28,298
394
Transfers from Stage 1 to Stage 2(3)
(1,376)
(1)
1,376
1
\u2014
\u2014
\u2014
\u2014
Transfers from Stage 2 to Stage 1(3)
512
10
(512)
(10)
\u2014
\u2014
\u2014
\u2014
Transfers to Stage 3(3)
(118)
(3)
(258)
(8)
376
11
\u2014
\u2014
Transfers from Stage 3(3)
1
\u2014
9
1
(10)
(1)
\u2014
\u2014
Transfers of financial instruments
(981)
6
615
(16)
366
10
\u2014
\u2014
Net ECL remeasurement on stage transfer(4)
\u2014
(16)
\u2014
29
\u2014
64
\u2014
77
Change in economic scenarios(2)
\u2014
30
\u2014
(30)
\u2014
6
\u2014
6
New lending and assets purchased(5)
7,257
5
132
6
38
10
7,427
21
Redemptions, repayments and assets sold(7)
(6,713)
(13)
(869)
(10)
(193)
(23)
(7,775)
(46)
Changes in risk parameters and other movements(6)
(834)
(19)
199
(13)
137
28
(498)
(4)
Assets written off (7)
\u2014
\u2014
\u2014
\u2014
(175)
(68)
(175)
(68)
At 31 December 2023
22,567
76
3,965
132
745
172
27,277
380
Net movement in the period
(1,271)
(7)
77
(34)
173
27
(1,021)
(14)
ECL (release)/charge to the Income Statement
(7)
(34)
95
54
Less: Discount unwind
\u2014
\u2014
(9)
(9)
Less: Recoveries net of collection costs
\u2014
\u2014
(5)
(5)
Total ECL (release)/charge to the Income Statement
(7)
(34)
81
40
Rating distribution (audited)
These tables show our credit risk exposure according to our internal rating scale (see the \u2018Santander UK group level \u2013 credit risk review\u2019 section) for each portfolio.
On this scale, the higher the rating, the better the quality of the counterparty.
Santander UK risk grade
9
8
7
6
5
4
3 to 1
Other
Total(1)
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
SME and mid corporate
\u2014
253
723
3,170
4,295
3,013
1,589
82
13,125
Commercial Real Estate
\u2014
\u2014
567
1,913
2,460
620
309
\u2014
5,869
Social Housing
13
1,983
5,868
\u2014
\u2014
\u2014
\u2014
\u2014
7,864
13
2,236
7,158
5,083
6,755
3,633
1,898
82
26,858
Of which:
Stage 1
13
2,236
7,115
4,991
6,159
2,597
382
82
23,575
Stage 2
\u2014
\u2014
43
92
596
1,036
800
\u2014
2,567
Stage 3
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
716
\u2014
716
2023
SME and mid corporate
\u2014
166
911
2,970
3,497
3,575
1,439
118
12,676
Commercial Real Estate
\u2014
\u2014
360
1,684
2,132
972
209
1
5,358
Social Housing
43
3,032
4,881
\u2014
\u2014
\u2014
\u2014
\u2014
7,956
43
3,198
6,152
4,654
5,629
4,547
1,648
119
25,990
Of which:
Stage 1
43
3,130
6,152
4,618
4,715
2,363
141
118
21,280
Stage 2
\u2014
68
\u2014
36
914
2,184
762
1
3,965
Stage 3
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
745
\u2014
745
(1) Credit risk exposures include derivatives exposures. For invoice finance the credit risk exposures represent the full facility limit present on the credit agreement papers, a total limit before consideration of
underlying collaterals and application of prepayment caps for any given point.
Geographical distribution (audited)
We typically classify geographical location according to the counterparty\u2019s country of domicile unless a full risk transfer guarantee is in place, in which case we use
the guarantor\u2019s country of domicile instead. At 31 December 2024 and 31 December 2023 this is mainly focused in the UK.
Credit risk mitigation (audited)
Gross exposure
Collateral
Net exposure
Stage 3
Stage 3
Stage 3
2024
\u00a3m
\u00a3m
\u00a3m
SME and mid corporate
639
209
430
Commercial Real Estate
77
71
6
716
280
436
2023
SME and mid corporate
627
190
437
Commercial Real Estate
118
28
90
745
218
527
Credit performance (audited)
We monitor exposures that show potentially higher risk characteristics using our Watchlist process. The table below shows the exposures we monitor, and those
we classify as Stage 3 by portfolio at 31 December 2024 and 31 December 2023.
Committed exposure
Watchlist
Fully
performing
Enhanced
monitoring
Proactive
management
Stage 3
Total(1)
Loss
allowances
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
SME and mid corporate
10,851
570
1,065
639
13,125
315
Commercial Real Estate
5,440
51
301
77
5,869
26
Social Housing
7,440
\u2014
424
\u2014
7,864
1
23,731
621
1,790
716
26,858
342
2023
SME and mid corporate
10,140
462
1,447
627
12,676
341
Commercial Real Estate
4,734
10
496
118
5,358
39
Social Housing
7,752
\u2014
204
\u2014
7,956
\u2014
22,626
472
2,147
745
25,990
380
(1) Includes committed facilities and derivatives.
2024 compared to 2023
The watchlist exposures decreased by 7.9%, with a reduction in Proactive management of 16.6%, and an increase in Enhanced Monitoring of 31.6%. The increase in
Enhanced Monitoring was due to a small number of large exposures moving from Proactive management.
Loan modifications (audited)
Forbearance
The following table sets out the financial assets that were forborne while they had a loss allowance measured at lifetime ECL.
2024
2023
\u00a3m
\u00a3m
Financial assets modified in the period:
\u2013 Amortised cost before modification
232
189
\u2013 Net modification loss
5
10
Financial assets modified since initial recognition:
\u2013 Gross carrying amount of financial assets for which the loss allowance changed to 12-month ECL in the period
15
27
We only make forbearance arrangements for lending to customers. The balances at 31 December 2024 and 31 December 2023, analysed by their staging and the
forbearance we applied, were:
2024
2023
\u00a3m
\u00a3m
Stock(1)
\u2013 Term extension
102
113
\u2013 Interest-only
229
215
\u2013 Other payment rescheduling
373
264
704
592
Of which:
\u2013 Stage 1
40
2
\u2013 Stage 2
228
159
\u2013 Stage 3
436
431
704
592
Proportion of portfolio
2.6%
2.3%
(1) We base forbearance type on the first forbearance we applied. Tables only show accounts open at the period-end. Amounts are drawn balances and include off balance sheet balances.
Committed exposures
Rating distribution (audited)
Corporate Centre committed exposures mainly comprise Sovereign exposures and Structured Products (High Quality Liquid Assets, mainly Asset Backed Securities
and covered bonds) managed as part of our Eligible Liquidity Pool. These are low risk, high quality, investment grade exposures with a credit rating of 8 or 9
according to our internal rating scale (see the \u2018Santander UK group level \u2013 credit risk review\u2019 section).
Geographical distribution (audited)
We typically classify geographical location according to the counterparty\u2019s country of domicile unless a full risk transfer guarantee is in place, in which case we use
the guarantor\u2019s country of domicile instead. At 31 December 2024 and 31 December 2023 this was mainly focused in the UK.
Credit performance (audited)
We monitor exposures that show potentially higher risk characteristics using our Watchlist process. In Corporate Centre, committed exposures were all fully
performing at 31 December 2024 and 31 December 2023.
Loan modifications (audited)
There were no loan modifications made in 2024 and 2023.
OUR KEY LIQUIDITY RISKS (audited)
Through our Liquidity Risk Appetite (LRA) framework, we manage our market liquidity risks, funding or structural liquidity risk, contingent liquidity risk, wherever
they arise. This can be in retail and corporate deposit outflows, outflows in wholesale secured and unsecured funding and off-balance sheet activities. Other risks
our framework covers include funding concentrations, intra-day cash flows, intra-group commitments and support, franchise retention and cross currency risk.
Our main sources of liquidity
Customer deposits finance most of our customer lending. Although these funds are mostly callable, in practice they give us a stable and predictable core of funding.
This is due to the nature of retail accounts and the breadth of our retail customer relationships.
We have a strong wholesale funding investor base, diversified across product types and geographies. Through the wholesale markets, we have active relationships
in many sectors including banks, other financial institutions, corporates, pensions and investment funds. We access the wholesale funding markets through the
issuance of capital, senior unsecured debt, covered bonds, structured notes and short-term funding. We also access these markets through securitisations of certain
assets of Santander UK plc and our operating subsidiaries. For more on our programmes, see Notes 14, 25 and 29 to the Consolidated Financial Statements.
We generate funding on the strength of our own balance sheet, our own profitability and our own network of investors. In addition, we have access to UK
Government funding schemes. We comply with rules set by the PRA, other regulators, and Banco Santander standards. While we consolidate, manage and monitor
liquidity risk centrally, we also manage and monitor it in the business area it comes from.
Our main uses of liquidity
Our main uses of liquidity are to fund our lending, to pay interest and dividends, and to repay debt. Our ability to pay dividends depends on various factors. These
include our regulatory capital needs, the level of our distributable reserves, and our financial performance.
Risk mitigation (audited)
The Board aims to make our balance sheet resilient at all times and for it to be perceived as such by stakeholders. This preserves our short and long-term viability.
The Board recognises that as we are involved in maturity transformation, we cannot hold enough liquidity to cover all possible stress scenarios. The Board requires
us to hold enough liquidity to make sure we will survive three plausible but severe stress scenarios (our LRA stress test, described above). We do this by maintaining
a prudent balance sheet structure and approved liquid resources.
Recovery and Resolution framework
The CFO is the accountable SMF for recovery and resolution and the related work is managed by the CFO division. The work is overseen by the Board Audit
Committee and the Board. We review and refresh our recovery plan each year. It sets out the risks, the indicators we use to monitor those risks, and the actions that
are available to mitigate\u00a0a capital, liquidity or combined stress event. We are confident that we have sufficient credible and executable options to respond to a wide
range of stresses, be they market-wide or idiosyncratic, in a timely and effective manner. Recovery indicators are both qualitative and quantitative and we have
embedded them into our risk frameworks. We monitor our recovery capacity, headroom to recovery triggers and recovery indicators regularly. If needed, we would
invoke recovery early to mitigate the effects of a stress and restore our financial position and balance sheet strength.
Our resolution capabilities are underpinned by comprehensive governance, testing and assurance arrangements, which seek to ensure that we maintain and
enhance our resolution readiness on an ongoing basis.
Risk monitoring and reporting (audited)
We monitor liquidity risk daily, weekly and monthly. We do this through different committees and levels of management, including ALCO and the BRC.
Reconciliation of wholesale funding to the balance sheet (audited)
This table reconciles our wholesale funding to our balance sheet at 31 December 2024 and 31 December 2023.
Balance sheet line item
Funding
analysis
Deposits
by banks (1)
Deposits
by customers (2)
Repurchase
agreements
- non
trading
Financial
liabilities
designated
at fair value
Debt
securities
in issue
Subordinated
liabilities
Other equity
instruments (3)
2024
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Deposits by banks
1.4
1.4
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Certificates of deposit and commercial paper
4.5
\u2014
\u2014
\u2014
\u2014
4.5
\u2014
\u2014
Senior unsecured \u2013 public benchmark
11.1
\u2014
1.7
\u2014
\u2014
9.4
\u2014
\u2014
\u2013 privately placed
1.1
\u2014
0.1
\u2014
0.4
0.6
\u2014
\u2014
Covered bonds
17.4
\u2014
\u2014
\u2014
\u2014
17.4
\u2014
\u2014
Securitisation and structured issuance(4)
5.1
\u2014
\u2014
\u2014
\u2014
5.1
\u2014
\u2014
TFSME
11.0
11.0
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Subordinated liabilities and equity
4.1
\u2014
\u2014
\u2014
\u2014
\u2014
2.2
1.9
Total wholesale funding
55.7
12.4
1.8
\u2014
0.4
37.0
2.2
1.9
Repos
8.6
\u2014
\u2014
8.6
\u2014
\u2014
\u2014
\u2014
Foreign exchange and hedge accounting
(0.4)
\u2014
\u2014
\u2014
\u2014
(0.6)
0.2
\u2014
Other
1.6
1.6
\u2014
\u2014
0.7
(0.7)
\u2014
\u2014
Balance sheet total
65.5
14.0
1.8
8.6
1.1
35.7
2.4
1.9
2023
Deposits by banks
1.1
1.1
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Certificates of deposit and commercial paper
4.3
\u2014
\u2014
\u2014
\u2014
4.3
\u2014
\u2014
Senior unsecured \u2013 public benchmark
12.7
\u2014
1.6
\u2014
\u2014
11.1
\u2014
\u2014
\u2013 privately placed
0.8
\u2014
0.1
\u2014
0.6
0.1
\u2014
\u2014
Covered bonds
14.8
\u2014
\u2014
\u2014
\u2014
14.8
\u2014
\u2014
Securitisation and structured issuance(4)
2.7
\u2014
\u2014
\u2014
\u2014
2.7
\u2014
\u2014
TFSME
17.0
17.0
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Subordinated liabilities and equity
4.2
\u2014
\u2014
\u2014
\u2014
\u2014
2.2
2.0
Total wholesale funding
57.6
18.1
1.7
\u2014
0.6
33.0
2.2
2.0
Repos
8.4
\u2014
\u2014
8.4
\u2014
\u2014
\u2014
\u2014
Foreign exchange and hedge accounting
1.1
\u2014
\u2014
\u2014
\u2014
0.9
0.2
\u2014
Other
2.5
2.2
\u2014
\u2014
0.3
\u2014
\u2014
\u2014
Balance sheet total
69.6
20.3
1.7
8.4
0.9
33.9
2.4
2.0
(1)Consists of Perpetual Capital Securities. See Note 32 to the Consolidated Financial Statements.
(2)This is included in our balance sheet total of\u00a3180,967m (2023:\u00a3190,850m).
(3)Other consists of items in the course of transmission and other deposits. See Note 21 to the Consolidated Financial Statements.
(4)Includes Residential Mortgage-Backed Securities (RMBS) and Asset-Backed Securities (ABS) of \u00a33.9bn (2023: \u00a32.8bn).
Maturity profile of wholesale funding (audited)
This table shows our main sources of wholesale funding. It does not include securities finance agreements. The table is based on exchange rates at issue and
scheduled repayments and call dates. It does not reflect the final contractual maturity of the funding.
For details of the maturities of financial liabilities and off-balance sheet commitments, see Note 38 to the Consolidated Financial Statements .
\u2264 1
month
>1 and \u2264 3
months
>3 and \u2264 6
months
>6 and \u2264 9
months
>9 and \u2264
12 months
Sub-total
\u2264 1 year
>1 and
\u2264 2 years
>2 and
\u2264 5 years
>5 years
Total
2024
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Downstreamed from Santander UK Group Holdings plc to Santander UK plc(1)
Senior unsecured \u2013 public benchmark
\u2014
\u2014
0.4
0.7
1.3
2.4
2.0
5.6
0.4
10.4
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u2013privately placed
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
0.1
\u2014
0.1
Subordinated liabilities and equity (incl. AT1)
\u2014
0.5
\u2014
0.3
\u2014
0.8
0.2
1.4
1.0
3.4
\u2014
0.5
0.4
1.0
1.3
3.2
2.2
7.1
1.4
13.9
Other Santander UK plc
Deposits by banks
0.8
0.6
\u2014
\u2014
\u2014
1.4
\u2014
\u2014
\u2014
1.4
Certificates of deposit and commercial paper
1.6
2.8
0.1
\u2014
\u2014
4.5
\u2014
\u2014
\u2014
4.5
Senior unsecured \u2013 public benchmark
\u2014
0.4
\u2014
\u2014
\u2014
0.4
\u2014
0.3
\u2014
0.7
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u2013privately placed
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
0.3
0.7
1.0
Covered bonds
0.9
\u2014
\u2014
0.2
0.1
1.2
4.0
11.1
1.1
17.4
Securitisation & structured issuance(2)
\u2014
0.5
0.8
\u2014
\u2014
1.3
0.3
3.0
\u2014
4.6
TFSME
\u2014
\u2014
\u2014
\u2014
7.1
7.1
2.5
\u2014
1.4
11.0
Subordinated liabilities
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
0.2
0.5
0.7
3.3
4.3
0.9
0.2
7.2
15.9
6.8
14.9
3.7
41.3
Other group entities
Securitisation & structured issuance(3)
\u2014
\u2014
0.5
\u2014
\u2014
0.5
\u2014
\u2014
\u2014
0.5
Total at 31 December 2024
3.3
4.8
1.8
1.2
8.5
19.6
9.0
22.0
5.1
55.7
Of which:
\u2013 Secured
0.9
0.5
1.3
0.2
7.2
10.1
6.8
14.1
2.5
33.5
\u2013 Unsecured
2.4
4.3
0.5
1.0
1.3
9.5
2.2
7.9
2.6
22.2
Total at 31 December 2023
1.4
7.3
1.6
0.5
1.1
11.9
22.3
19.7
3.7
57.6
Of which:
\u2013 Secured
0.1
1.0
0.9
0.4
1.1
3.5
18.6
11.3
1.1
34.5
\u2013 Unsecured
1.3
6.3
0.7
0.1
\u2014
8.4
3.7
8.4
2.6
23.1
(1) 95% of senior unsecured debt issued from Santander UK Group Holdings plc has been downstreamed to Santander UK plc as \u2018secondary non-preferential debt\u2019 in line with the guidelines from the Bank of England
for Internal MREL.
(2) Includes funding from mortgage-backed securitisation vehicles where Santander UK plc is the asset originator.
(3) Includes funding from asset-backed securitisation vehicles where entities other than Santander UK plc are the asset originator.
Currency composition of wholesale funds (audited)
This table shows our wholesale funding by major currency at 31 December 2024 and 31 December 2023.
2024
2023
Sterling
US Dollar
Euro
Other
Sterling
US Dollar
Euro
Other
%
%
%
%
%
%
%
%
Downstreamed from Santander UK Group Holdings plc to Santander UK plc
Senior unsecured \u2013 public benchmark
25
62
12
1
23
60
17
\u2014
\u2013 privately placed
\u2014
\u2014
\u2014
100
\u2014
\u2014
\u2014
100
Subordinated liabilities and equity (incl. AT1)
89
11
\u2014
\u2014
87
13
\u2014
\u2014
42
48
9
1
38
48
13
1
Other Santander UK plc
Deposits by banks
1
97
2
\u2014
1
97
2
\u2014
Certificates of deposit and commercial paper
24
67
8
1
29
70
\u2014
1
Senior unsecured \u2013 public benchmark
48
\u2014
52
\u2014
21
56
23
\u2014
\u2013 privately placed
100
\u2014
\u2014
\u2014
98
\u2014
2
\u2014
Covered bonds
48
9
40
3
54
5
39
2
Securitisation & structured issuance
100
\u2014
\u2014
\u2014
100
\u2014
\u2014
\u2014
TFSME
100
\u2014
\u2014
\u2014
100
\u2014
\u2014
\u2014
Subordinated liabilities
76
24
\u2014
\u2014
76
24
\u2014
\u2014
65
15
19
1
71
14
15
\u2014
Other group entities
Securitisation & structured issuance
100
\u2014
\u2014
\u2014
100
\u2014
\u2014
\u2014
Total
59
23
16
2
63
23
14
\u2014
Term issuance (audited)
In 2024, our external term issuance (sterling equivalent) was:
Sterling
US Dollar
Euro
Other
Total 2024
Total 2023
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Downstreamed from Santander UK Group Holdings plc to Santander UK plc
Senior unsecured \u2013 public benchmark
\u2014
0.8
\u2014
\u2014
0.8
1.5
Subordinated debt and equity (inc. AT1)
0.4
\u2014
\u2014
\u2014
0.4
1.1
0.4
0.8
\u2014
\u2014
1.2
2.6
Other Santander UK plc
Securitisations and other secured funding
1.2
\u2014
\u2014
\u2014
1.2
1.5
Covered bonds
2.2
0.8
2.6
0.3
5.9
1.8
Senior unsecured \u2013 privately placed
0.5
\u2014
\u2014
\u2014
0.5
0.3
3.9
0.8
2.6
0.3
7.6
3.6
Other group entities
Securitisations
\u2014
\u2014
\u2014
\u2014
\u2014
0.5
Total gross issuances
4.3
1.6
2.6
0.3
8.8
6.7
2024 compared to 2023
Together with our immediate parent, Santander UK Group Holdings plc, our overall funding strategy remains to develop and sustain a diversified funding base. We
also need to fulfil regulatory requirements as well as support our credit ratings. We have stable and diversified wholesale funding programmes.
In 2024 we issued \u00a38.4bn Sterling equivalent medium-term funding, including Covered bond, Senior unsecured and RMBS issuances. We repaid \u00a36.0bn of TFSME
in 2024 as planned, with an outstanding balance of \u00a311.0bn at 31 December 2024. \u00a37.1bn is due for repayment in October 2025, \u00a32.5bn in 2027, and the
remaining \u00a31.4bn. in 2031. We expect to issue \u00a310-\u00a312bn of medium-term funding in 2025, including \u00a33.7bn equivalent already issued.
At 31 December 2024, 65% (2023: 79%) of wholesale funding had a maturity of greater than one year, with an overall residual duration of 37 months (2023: 35
months).
On-balance sheet encumbered assets (audited)
Encumbered with counterparties other than central banks
Assets
positioned
at central
banks(3)
Covered
bonds
Securitis-
ations
Other
Total
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cash and balances at central banks(1)(2)
\u2014
\u2014
1,580
1,580
\u2014
Loans and advances to customers
25,695
7,026
68
32,789
49,888
Loans and advances to banks
\u2014
\u2014
139
139
\u2014
Repurchase agreements \u2013 non trading
\u2014
\u2014
\u2014
\u2014
\u2014
Other financial assets at amortised cost
\u2014
\u2014
1,529
1,529
\u2014
Financial assets at fair value through other comprehensive income
\u2014
\u2014
3,920
3,920
584
Total assets
25,695
7,026
7,236
39,957
50,472
2023
Cash and balances at central banks(1)(2)
\u2014
\u2014
1,480
1,480
831
Loans and advances to customers
21,880
5,208
59
27,147
58,489
Loans and advances to banks
\u2014
\u2014
254
254
\u2014
Repurchase agreements \u2013 non trading
\u2014
\u2014
\u2014
\u2014
\u2014
Other financial assets at amortised cost
\u2014
\u2014
14
14
\u2014
Financial assets at fair value through other comprehensive income
\u2014
\u2014
5,183
5,183
\u2014
Total assets
21,880
5,208
6,990
34,078
59,320
(1) Encumbered cash and balances at central banks include minimum cash balances we have to hold at central banks for regulatory purposes.
(2) Readily realisable cash and balances at central banks are amounts held at central banks as part of our liquidity management activities.
(3) Comprises pre-positioned assets and encumbered assets.
Regulatory capital resources (audited)
This table shows our qualifying regulatory capital:
2024
2023
\u00a3m
\u00a3m
CET1 capital
9,791
10,443
AT1 capital
1,860
1,956
Tier 1 capital
11,651
12,399
Tier 2 capital
2,093
2,172
Total capital(1)
13,744
14,571
(1)Capital resources include a transitional IFRS 9 benefit at 31 December 2024 of \u00a312.2m (2023: \u00a343.0m).
Balance sheet allocation by market risk classification(audited)
We classify all our assets and liabilities exposed to market risk as non-traded market risk, except for certain portfolios that we must classify as trading books for
regulatory purposes (such as selling derivatives or derivative-based products to clients), of which we must fair value for accounting reasons (such as assets in the
eligible liquidity pool). For accounting purposes, we classify all derivatives as held for trading unless they are designated as being in a hedging relationship. For
more, see Note 11 to the Consolidated Financial Statements.
OUR KEY NON-TRADED MARKET RISKS (audited)
Non-traded market risk mainly comes from providing banking products and services to our customers, as well as our structural balance sheet exposures. It arises in
all our business segments. In Retail & Business Banking, Consumer Finance and Corporate & Commercial Banking, it is a by-product of us writing customer business
and we transfer most of these risks to Corporate Centre to manage. The only types of non-traded market risk that we keep in Retail & Business Banking, Consumer
Finance and Corporate & Commercial Banking are short-term mismatches due to forecasting variances in prepayment and launch risk. This is where customers
repay their loans earlier than their expected maturity date or do not take the expected volume of new products. Corporate Centre also manages our structural
balance sheet exposures, such as foreign exchange and Income Statement volatility risk.
Our non-traded market risk categories are:
Category
Description
Interest rate risk
Interest rate risk mainly consists of yield curve risk, which comes from timing mismatches in repricing fixed and variable rate
assets, liabilities and off-balance sheet instruments. It also comes from investing non-rate sensitive liabilities in interest-earning
assets.
Spread risk
Spread risk arises when the value of assets or liabilities which are accounted for at fair value (either through Other Comprehensive Income
or through profit and loss) are affected by changes in the credit spread. We measure these spreads as the difference between the discount
rate we use to value the asset or liability, and an underlying interest rate curve.
Foreign exchange risk
Our banking businesses operate mainly in sterling markets, so we do not create significant foreign exchange exposures. The only exception
to this is money we raise in foreign currencies. For more on this, see \u2018Wholesale funding\u2019 in the \u2018Liquidity risk\u2019 section.
Income statement
volatility risk
We measure most of the assets and liabilities in our banking book balance sheet at amortised cost. We sometimes manage their risk profile
by using derivatives. As all derivatives are accounted for at fair value, the mismatch in their accounting treatment can lead to volatility in our
Income Statement. This happens even if the derivative is an economic hedge of the asset or liability.
NII and EVE sensitivities (audited)
The calculations for NII and EVE sensitivities to interest rate moves involve many assumptions, including expected customer behaviour (such as early repayment of
loans) and the projected evolution and repricing of our balance sheet. These assumptions are a key part of our overall control framework, so we update and review
them regularly. Our NII and EVE sensitivities include the interest rate risk from all our banking book positions. Our banking book positions generate almost all our
reported net interest income.
Net Interest Income (NII) sensitivity
\u2013 NII sensitivity is an income-based measure we use to forecast the changes to interest income and interest expense in different scenarios. It gives us a combined impact on
net interest income over a given period \u2013 usually 12 or 36 months.
\u2013 We calculate NII sensitivity as the change in NII for a defined set of instantaneous parallel and non-parallel shifts in the yield curve.
EVE sensitivity
\u2013 We calculate EVE sensitivity as the change in the net present value of all the interest rate sensitive items in the banking book balance sheet for a defined set of
instantaneous parallel and non-parallel shifts in the yield curve.
Value at Risk (VaR) (audited)
VaR
\u2013 VaR indicates possible losses from market changes in non-stressed conditions.
\u2013 We run a historical simulation. We use two years of historical daily price moves. We report a 99% confidence level.
The limitations of VaR
VaR is a standard risk measure. It has limitations including:
\u2013 It assumes the past is a reliable guide to the possible future.
\u2013 It uses end of day positions. It would miss higher risk run only during the day.
\u2013 It does not predict the loss on the 1% largest-loss days (outside the 99% confidence interval).
\u2013 We use a history of one day price moves. This is reasonable for our business but VaR does not cover positions we could not sell or hedge quickly, or products
whose prices cannot be observed.
Back-testing \u2013 comparing VaR estimates with actual profit and loss
To check that our VaR is reasonable, we compare it against our observed profits and losses for the same area. This confirms the VaR model is working. If we found it
were not, we would investigate, and correct it if required.
Risk mitigation (audited)
We typically hedge the interest rate risk of the securities we hold for liquidity and investment purposes with interest rate swaps. We retain spread exposures,
and\u00a0these are the key drivers of the VaR and stress tests we use to assess the risk of the portfolio. We mitigate Income Statement volatility mainly through hedge
accounting. We monitor any hedge accounting ineffectiveness that might lead to Income Statement volatility with a VaR measure and trigger, reported monthly. For
our accounting policies for derivatives and hedge accounting, see Note 1 to the Consolidated Financial Statements.
We hedge our foreign currency funding positions back to sterling, so our foreign exchange positions tend to be residual exposures that remain after hedging. These
exposures could be, for example, to \u2018spot\u2019 foreign exchange rates or to cross currency basis. We monitor foreign exchange risk against absolute net exposures and
VaR-based limits and triggers.
For more on this, see \u2018Funding strategy\u2018 and \u2018Term issuance\u2019 in the \u2018Liquidity risk\u2019 section.
Risk monitoring and reporting (audited)
We monitor our non-traded market risks using NII and EVE sensitivities, VaR and stress tests. We report them against limits and triggers to senior management
daily\u00a0and to ALCO and ERCC each month. The VaR we report captures all key sources of volatility (including interest rate and spread risks) to fully reflect
potential\u00a0volatility.
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Exposures (audited)
Exposures to credit risk arise in our business segments from:
Retail & Business Banking
Consumer Finance
Corporate & Commercial Banking
Corporate Centre
In Mortgages:
\u2013 Residential mortgages for customers
with good credit quality (prime
lending).
\u2013 We provide these mostly for owner-
occupiers, with buy-to-let mortgages
for non-professional landlords.
In Everyday Banking:
\u2013 Unsecured lending to individuals, such
as loans, credit cards and overdrafts.
\u2013 Unsecured lending to businesses with
annual turnover up to \u00a36.5m and
simpler borrowing needs such as loans,
credit cards and overdrafts.
\u2013 Financing for cars, vans, motorbikes
and leisure vehicles through Santander
Consumer (UK) plc (SCUK).
\u2013 Through our joint ventures, Hyundai
Capital UK Ltd and Volvo Car Financial
Services UK Limited, we provide retail
point of sale customer finance and
wholesale finance facilities (stock
finance).
\u2013 Loans, overdrafts, treasury services,
invoice finance, trade and supplier
finance.
\u2013 We provide these to SMEs and mid-
sized corporates typically with annual
turnover up to \u00a3500m, Commercial
Real Estate and Social Housing
customers.
\u2013 Asset and liability management of\u00a0our
balance sheet.
\u2013 Exposures include financial institutions
(derivatives and other treasury
products), structured products, and
sovereign and supranational assets
chosen for diversification and liquidity.
Our approach to credit risk
We manage our portfolios across the credit risk lifecycle, from formulating our risk strategy and planning, through assessment and origination, monitoring, arrears
management and debt recovery. We make sure the actual risk profile of our exposures stays in line with our business plans and within our Risk Appetite. We tailor
the way we manage risk to the type of product and regularly review our approach and refine it when we need to.
1. Risk strategy and planning (audited)
Relevant areas of the business work together to create our business plans. We consider our strategy, goals, and financial and technical resources alongside our Risk
Appetite. This involves focusing on economic and market conditions and forecasts, regulations, conduct matters, profitability, returns and market share.
2. Assessment and origination (audited)
Managing credit risk begins with lending responsibly. That means only lending to customers who are committed to paying us back and can afford to, even if their
circumstances change. We take proportionate steps to assess whether a customer will be able to repay the money borrowed. We do this by a series of initial
affordability and credit risk assessments. When a customer applies, we assess the data they provide, plus data from credit reference agencies (for Retail & Business
Banking and Consumer Finance) and performance on their other Santander UK accounts (if they have any) against our Credit Policy.
Retail & Business Banking
In Mortgages, we assess affordability by reviewing the customer\u2019s income and spending, their other credit commitments, and what would happen if interest
rates\u00a0went up. Many of our decisions are automated as we use data available to us. We tailor our process and application assessment based on the product.
More\u00a0complex transactions often need greater manual assessment using our credit underwriters\u2019 skill and experience.
In Everyday Banking and Business Banking, many of our decisions are automated. We assess affordability by reviewing the customer\u2019s income and spending,
including other credit commitments and adjusting for future inflation and expected interest rates.
Credit risk mitigation
The types of credit risk mitigation, including collateral, across each of our portfolios are:
Portfolio
Description
Residential mortgages
Collateral is in the form of a first legal charge over the property. Before we grant a mortgage, the property is valued either by a surveyor or using
automated valuation methodologies where our confidence in the accuracy of this method is high.
Unsecured lending
There is no collateral or security tied to the loan that can be used to mitigate any potential loss if the customer does not pay us back.
Business banking services
Business banking lending is unsecured. When lending to incorporated businesses, we typically obtain personal guarantees from each
director, but we do not treat these as collateral. We consider the UK Government guarantee under its Coronavirus Loan Schemes as
collateral, covering 100% of losses for the Bounce Back Loan Scheme (BBLS) and 80% for Coronavirus Business Interruption Loan Scheme
(CBILS).
Consumer Finance
In Consumer Finance, similar to Retail & Business Banking, many decisions are automated and we tailor the process to the product. Residual value risk is one of our
top risks and these exposures are set using forward looking market data, at the level of vehicle derivative by age and anticipated mileage. This data is obtained from
a third party.
Credit risk mitigation
The type of credit risk mitigation, including collateral, is:
Portfolio
Description
Consumer (auto) finance
Collateral is in the form of legal ownership of the vehicle for most loans, with the customer being the registered keeper. Only a very small
proportion of business is underwritten as a personal loan. In these cases, there is no collateral or security tied to the loan. We use a leading
vehicle valuation company to assess the LTV at the proposal stage to ensure the value of the vehicle is appropriate.
Corporate & Commercial Banking
We assign each customer a credit rating, using our internal rating scale (see \u2018Credit quality\u2019 in \u2018Santander UK group level \u2013 credit risk review\u2019 section). To do this, we
look at the customer\u2019s financial history and trends in the economy, backed up by the expert judgement of a risk analyst. We review our internal ratings on a dynamic
basis and at least once a year for those clients that are rated. We also assess the underlying risk of the transaction, taking account of any mitigating factors (see the
tables below) and how it fits with our risk policies, limits and Risk Appetite.
Responsible lending, including climate change and the transition to a low carbon economy
As part of the Banco Santander group, we comply with the Equator Principles to factor social, ethical and environmental impacts into our risk analysis and decision
making for qualifying financial transactions. We aim to support clients and economies in their transition to a low carbon economy, providing financial products and/
or services to business activities that are environmentally and socially responsible. Our Environmental, Social and Climate Change (ESCC) policy sets out how we
identify, assess, monitor and manage environmental and social risks and other climate change related activities in the Oil and Gas, Power Generation and Mining
and Metals sectors and those arising from businesses engaged in soft commodities. Our ESCC policy prohibits project-related financing for new coal-fired power
plants (CFPP) worldwide and we will only work with new clients with CFPPs to provide specific financing for renewable energy projects. In line with Banco
Santander's aim, by 2030 we will aim to eliminate all exposure to thermal coal mining and stop providing financial services to power generation clients with more
than 10% of revenue from thermal coal.
Credit risk mitigation
The types of credit risk mitigation, including collateral, across each of our portfolios are as follows. In addition, from time to time, at a portfolio level we execute
significant risk transfer transactions, which typically reduce RWAs.
Portfolio
Description
SME and mid corporate
Includes secured and unsecured lending. We can take mortgage debentures or a first charge on commercial property as collateral.
Before\u00a0agreeing the loan, we obtain an independent professional valuation of the property. Loan agreements typically allow us to obtain
revaluations during the term of the loan. We can also take guarantees, but we do not treat them as collateral unless they are supported by
a\u00a0tangible asset charged to us. We also lend against assets (like vehicles and equipment) and invoices for some customers. We value assets
before we lend. For invoices, we review the customers' ledgers regularly and lend against debtors who meet agreed criteria.
Commercial Real Estate
(CRE)
We take a first charge on commercial property as collateral. The loan is subject to criteria such as the property condition, age and location,
tenant quality, lease terms and length, and the sponsor\u2019s experience and creditworthiness. Before advancing the loan and where appropriate,
a bank representative visits the property. We also obtain an independent professional valuation which typically includes a site visit. Loan
agreements typically allow us to obtain revaluations during the term of the loan.
Social Housing
We take a first charge on portfolios of residential real estate owned and let by UK Housing Associations as collateral, in most cases. We
revalue this every three to five years (in line with industry practice), using the standard methods for property used for Social Housing.
Corporate Centre
Credit risk mitigation
The types of credit risk mitigation, including collateral, across each of our portfolios are as follows. In addition, from time to time, at a portfolio level we execute
significant risk transfer transactions, which typically reduce RWAs.
Portfolio
Description
Sovereign and Supranational
In line with market practice, there is no collateral against these assets.
Structured Products
These are our High Quality Liquid Assets (HQLA) in our Eligible Liquidity Pool. They are mainly Asset Backed Securities (ABS) and covered
bonds, which hold senior positions in the creditor hierarchy. Their credit rating reflects over-collateralisation in the structure and the assets
that underpin their cash flows.
Financial Institutions
We use standard legal agreements to reduce credit risk via netting and collateralisation on derivatives, repos and reverse repos, and stock
borrowing/lending. We also reduce risk by clearing trades through central counterparties (CCPs) where possible.
3. Monitoring (audited)
We measure and monitor changes in our credit risk profile on a regular and systematic basis against our budgets, limits and benchmarks.
Credit concentrations
A core part of our monitoring and management is a focus on credit concentrations, such as the proportion of our lending that goes to specific borrowers, groups or
industries. We set and monitor concentration limits in line with our Risk Appetite and review them on a regular basis.
\u2013 Geographical concentrations: We set exposure limits to countries and geographies, with reference to the country limits set by Banco Santander and our own Risk
Appetite. For more geographical information, see \u2018Country risk exposures\u2019.
\u2013 Industry concentrations: We also set exposure limits by industry sector. We set these limits based on the industry outlook, our strategic aims and desired level of
concentration, and relevant limits set by Banco Santander. We analyse committed exposures in the \u2018Credit risk review\u2019 section that follows.
Retail & Business Banking
We use IT systems and data available to us to monitor accounts. The main parts are:
\u2013 Behavioural scoring: we use statistical models that help predict whether a customer will have problems repaying, based on how they use their accounts
\u2013 Credit reference agencies: we often use data from agencies on how the borrower is handling credit from other lenders in our behaviour scoring models
\u2013 Other Santander UK accounts: each month, we also look at how the customer uses their other accounts with us, so we can identify problems early.
Our day-to-day retail credit risk monitoring relies on a mix of performance measures as described above. However, changes in the wider UK economy also impact
our Mortgages and Everyday Banking portfolios. As part of our day-to-day risk monitoring, we use a Retail Risk Playbook tolerance tool that monitors the most
relevant macroeconomic variables to retail portfolio performance against our forecasts. If the economy deviates materially from our forecasts, such as due to the
effects of the cost of living crisis or high inflation, we review our retail risk management policy and strategy.
We also ensure that portfolio quality remains within our Risk Appetite by measuring against trigger values for key risk profile and performance metrics.
For secured lending, our monitoring also takes account of changes in property prices. We estimate the property\u2019s value every three months. In most cases, we use
statistical models based on recent sales prices and valuations in that local area. Use of this model is subject to Model Risk Governance. Where a lack of data means
the model\u2019s valuation is not available, we use the original surveyor valuation with a House Price Index (HPI) adjustment as needed.
For unsecured personal lending like credit cards and overdrafts, monitoring might lead us to raise or lower credit limits. For business banking services, we review
revolving credit facilities each year to ensure they remain appropriate for the customer's financial situation.
Consumer Finance
In Consumer Finance, customer accounts are monitored via IT systems and data. The Retail Risk framework ensures that our portfolio keeps within agreed
thresholds. Residual value risk is regularly checked, enabling us to spot any change in market trends.
Corporate & Commercial Banking and Corporate Centre
We regularly monitor and report our credit risk by portfolio, segment, industry, location and customer. We monitor detailed analyses of our credit exposures and
risk trends each month. We also report our larger exposures and risks to the BRC each month.
Our Watchlist
We also use a Watchlist for exposures subject to annual reviews to help identify potential problem debt early. Just because a customer is on our Watchlist does not
mean they have defaulted. It just means that their probability of default has increased, such as they have breached a covenant or lost a major contract.
We classify Watchlist cases as:
\u2013 Enhanced monitoring: for less urgent cases. We monitor these cases more often and where appropriate may consider more collateral.
\u2013 Proactive management: for more urgent or serious cases. We may take steps to restructure debt including extending the term, taking more collateral, agreeing a
lower credit limit, or seeking repayment of the loan through refinancing or other means.
We assess Watchlist cases for impairment as set out in the \u2018Significant Increase in Credit Risk (SICR)\u2019 section. When a customer is in enhanced monitoring, we do
not\u00a0consider it has suffered a SICR for ECL purposes, so it remains in Stage 1 for our loss allowance calculations. When a customer is in proactive management, we
consider it has suffered a SICR, so we transfer it to Stage 2 and apply a lifetime ECL for our loss allowance calculations. We consider any forbearance we offer. This
includes any extra security, guarantees or equity available and the potential to enhance value by asset management.
In Corporate & Commercial Banking, as part of our annual reviews, for loans nearing maturity, we look at the prospect of refinancing the loan on current market
terms and applicable credit policy. If this is unlikely, we put the case on our Watchlist. We manage exposures not subject to annual reviews, mainly high volume and
low value cases, using early warning indicators including credit reference agency data, supported by teams of expert analysts.
In Corporate Centre, we typically monitor the credit quality of our exposures daily. We use internal and third-party data to detect any potential credit deterioration.
4. Arrears management (audited)
Retail & Business Banking and Consumer Finance
We have several strategies to manage arrears that we can use as early as the day after a missed payment. We also reach out to up-to-date customers who may be
at risk of going into arrears where we believe they may benefit from some support. We assess the financial difficulties a customer is having in order to offer them
the right support to manage their agreement whilst in arrears. The strategies we use depend on the risk and the customer\u2019s unique circumstances with tailored
support being provided.
Corporate & Commercial Banking and Corporate Centre
We identify problem debt by close monitoring, supported by our Watchlist process for exposures subject to annual review. We aim to identify warning signs early
by\u00a0monitoring customers\u2019 financial and trading data, checking to see they do not breach covenants, and having regular dialogue with them. We tailor our strategy
to\u00a0the type of customer, their circumstances and the level of risk. We try to help our customers find their own way out of financial difficulty and agree on a plan
that\u00a0works for both of us. We engage our Restructuring & Recoveries team as needed on Watchlist cases and we may hand over more serious cases to them. For
exposures not subject to annual review, we have strategies to manage arrears that we can use as early as the day of the missed payment. If a case becomes more
urgent or needs specialist attention, and if it transfers to Stage 3, we transfer it to our Restructuring & Recoveries team.
For more, see the Forbearance section.
5. Debt recovery (audited)
Sometimes, even when we have taken all reasonable and responsible steps to manage arrears in our Financial Support area, they are not effective. If this happens,
we may choose to end our agreement with the customer and try to recover the outstanding balance (with recourse to any associated collateral), or as much of it as
we can.
Retail & Business Banking
In Mortgages and Everyday Banking, we may use a debt collection agency, sell the debt, or take the customer to court. For residential mortgages, we may repossess
the property as a last resort or to protect it from damage or third-party claims. We make sure our estimated losses from repossessed properties are realistic by
getting two independent valuations and the estimated selling costs, and using them in our loss allowances calculations. Where we repossess a property, we do not
take ownership. We use agents to realise the value and settle the debt. Any surplus funds are returned to the borrower or dealt with in line with insolvency rules.
Consumer Finance
In Consumer Finance, we usually have an asset by way of a motor vehicle secured to the agreement. We will seek to recover this asset if we are unable to
rehabilitate the customer, or they remain in arrears with no contact. Like Retail & Business Banking, we may also use a debt collection agency or a specialist law firm
to recover any subsequent balance outstanding. We may also consider the sale of debt where all avenues have been explored.
Corporate & Commercial Banking and Corporate Centre
Where we look for an exit, we aim to do this, if we can, by agreeing with the borrower that they will sell some or all their assets on a voluntary basis or agreeing
to\u00a0give them time to refinance their debt with another lender. Where we cannot reach an agreement, we consider recovery options. This can be through an
insolvency proceeding, enforcing over any collateral or selling debt on the secondary market. We may also consider other legal action to recover what we are
owed.\u00a0If there is a shortfall, we write it off against our loss allowances. In very rare cases, we may act as mortgagee in possession of assets held as collateral
against\u00a0non-performing commercial lending. In such cases, we carry the assets on our balance sheet and classify them in line with our accounting policies.
Loan modifications (audited)
We sometimes change the terms of a loan when a customer gets into financial difficulty (this is known as forbearance), or for other commercial reasons.
Forbearance (audited)
We can change the terms of a customer's loan, temporarily or permanently, to help them through temporary periods of difficulty so they can get back on to
sustainable terms. We assess what we offer to make sure the customer can afford it. Forbearance improves our customer relationships and we review our approach
regularly to make sure it is still effective. We try to offer forbearance before a customer defaults and we only foreclose or repossess as a last resort.
The main types of forbearance we offer are:
Action
Description
Term extension
We can extend the loan term, making each monthly payment smaller. We may offer this if the customer is up to date with payments but shows
signs of financial difficulties. We may also offer this if the loan is about to mature and refinancing is not possible on market terms. In selected
instances, we may offer term extensions for interest only loans that are past the point of product maturity. This will typically be where no viable
repayment solution has been identified for the outstanding capital balance, and legal enforcement activity is not deemed to be appropriate to the
customer's circumstances.
Interest-only
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For corporate customers, interest-only concessions are considered on a case by case basis. Concessions are only granted if the nature of the
financial difficulties is assessed to be temporary. Counterparties are expected to recover in full and resume making full capital and interest
payments once they are in a stronger financial position.
Other payment
rescheduling, including
capitalisation
For retail mortgage customers, we may add the arrears to the mortgage balance (this is known as capitalisation) if they cannot afford to increase
their monthly payment to pay off their arrears in a reasonable time but have been making their monthly payments, usually for at least six
months. We can also capitalise property charges due to a landlord. We pay them for the customer to avoid the lease being forfeited. We may
combine this help with term extensions and, in the past, interest-only concessions. In certain cases, we may offer interest rate concessions. We
may agree an arrangement to pay less than the Contractual Monthly Payment (including zero) for a short period of time where they are
experiencing temporary financial difficulties.
For credit card and bank account customers, we may agree to suspend fees and/or interest for a short period of time where they are experiencing
temporary financial difficulties. A refinance of a personal loan over a longer term to reduce the contractual monthly payment may be agreed,
where a customer is showing signs of financial difficulties. The interest rate remains the same, or the closest lower rate available.
For corporate customers, we may lower or stop their payments until they have time to recover. We may reschedule payments to better match
the customer\u2019s cash flow \u2013 for example if the business is seasonal - or provide a temporary increase in facilities to cover peak demand ahead of
their trading improving. We might do this by arrears capitalisation or drawing from an overdraft. We may also offer to provide new facilities,
interest rate concessions and interest roll-up. In rare cases, we agree to forgive or reduce part of the debt.
When we agree forbearance, we consider the account has suffered a SICR, as we explain in the \u2018Significant Increase in Credit Risk (SICR)\u2019 section later on, and we
classify it as Stage 2 or 3. A non-performing forborne account is one that has forbearance carried out in Stage 3, and a performing forborne account is one that has
forbearance carried out in Stage 2. If an account is already in Stage 2, we keep it in Stage 2 unless the account is deemed unlikely to pay, involves forgiving fees and
interest or debt, or is being granted multiple forbearances. In these cases, we move it into Stage 3. If an account is already in Stage 3, we keep it in Stage 3. A loan
moves out of forbearance once the exit criteria below are met. We monitor the performance of all forborne loans.
We signed up to the HM Treasury Mortgage Charter published in June 2023, that aims to provide more support for customers who may be struggling to maintain
their mortgage repayments. We made more customer support solutions available from July 2023, allowing customers who are up-to-date with their payments to
make interest-only payments for six months or extend their mortgage term to reduce their monthly payments. Volumes of accounts seeking more support were
just over 1% of active mortgage account stock. Mortgage Charter support solutions are not automatically classed as forbearance, unless other forbearance criteria
are met.
Exit from forbearance criteria
Exit from
Conditions to be met
Cure
Stage 3 to Stage 2
For an account in Stage 3 to exit non-performing forbearance, all the following conditions must be met:
If the account was classed as Stage 3 due to being more than 90 days past due, then the account should be 90 days or less past due
The customer has no other material default debt with us more than 90 days past due
If the account was classed as Stage 3 due to being unlikely to pay, then the account should no longer be deemed unlikely to pay
Account has exited its forbearance trigger for 12 consecutive months
If all the conditions are met, the account is re-classed as Stage 2 forbearance until the Stage 2 forbearance exit conditions set out
below are also met
Stage 2 to Stage 1
For an account in Stage 2 to exit forbearance, all the following conditions must be met:
The account is no longer in arrears, and the customer has no other material debts with us which are more than 30 days in arrears
The account no longer triggers SICR
The account has been classed as Stage 2 for at least two years since the end of the latest forbearance strategy
If a borrower fails to meet the post forbearance contractual obligations during probation, the loan is classified as Stage 3 and the probation period is reset.
Other forms of debt management and modifications
Retail & Business Banking\u00a0
In Mortgages, apart from forbearance, we have sometimes changed the contract terms to keep a good relationship with a customer. In Mortgages and Everyday
Banking, we do not classify insolvency solutions for any unsecured retail customers as forbearance. This is in line with industry guidelines.
Consumer Finance
We do not classify insolvency solutions for any unsecured retail customers as forbearance. This is in line with industry guidelines.
Corporate & Commercial Banking and Corporate Centre
When customers are in financial difficulty, we can also manage debt in other ways, depending on the facts of the specific case:
Action
Description
Waiving or changing
covenants
If a borrower breaks a covenant, we can either waive it or change it, taking their latest and future financial position into account. We may also
add a condition on the use of any surplus cash (after operating costs) to pay down their debt to us.
Asking for more collateral or
guarantees
If a borrower has unencumbered assets, we may accept more collateral in return for revised financing terms. We may also take a guarantee
from companies in the same group and/or major shareholders. We only do this where we believe the guarantor can meet their commitment.
Asking for more equity
Where a borrower can no longer pay the interest on their debt, we may accept fresh equity capital from new or existing investors to change
the capital structure in return for better terms on the existing debt.
Risk measurement and control
We measure and control credit risk at all stages across the credit risk lifecycle. We have a range of tools, processes and approaches.
Retail & Business Banking and Consumer Finance
These businesses involve managing large numbers of accounts, so they produce a significant amount of data. This allows us to take a more analytical and data
intense approach to measuring risk. This is reflected in the wide range of statistical models we use across the credit risk lifecycle. We use:
\u2013 Risk strategy and planning: econometric models
\u2013 Assessment and origination: application scorecards, and attrition, pricing, loss allowance and capital models
\u2013 Monitoring: behavioural scorecards and profitability models
\u2013 Arrears management: models to estimate the proportion of cases that will result in possession (known as roll rates)
\u2013 Debt recovery: recovery models.
We assess and review our loss allowances regularly. We look at factors such as the cash flow available to service debt. We\u00a0also use an agency to value any
collateral \u2013 mainly mortgages.
Corporate & Commercial Banking and Corporate Centre
We measure the credit risk on treasury products by adding their potential future exposure to market movements over their lives to their fair value. Then we add it
to\u00a0any other exposure and measure the total against our credit limits for each client. We assess our loss allowances regularly by looking at factors such as the cash
flow available to service debt and the value of collateral based on third-party professional valuations.
Key metrics(audited)
We use a number of key metrics to measure and control credit risk, as follows:
Metric
Description
Expected Credit Loss
(ECL)
ECL tells us what credit risk is expected to cost us either over the next 12 months or over the lifetime of the exposure where there is evidence of a SICR since
origination. We explain how we calculate ECL below.
Stages 1, 2 and 3
We assess each facility\u2019s credit risk profile to determine which stage to allocate them to, and we monitor where there is a SICR and transfers between the
Stages including monitoring of coverage ratios for each stage.
Stage 3 ratio
The Stage 3 ratio is the sum of Stage 3 drawn and Stage 3 undrawn assets divided by the sum of total drawn assets and Stage 3 undrawn assets. The\u00a0Stage
3 ratio is a key indicator used to monitor underlying asset performance.
Expected Loss (EL)
EL is based on the CRD IV regulatory capital rules and gives us another view of credit risk. It is the product of the probability of default, exposure at default
and loss given default, and we include direct and indirect costs. We base it on our risk models and our assessment of each customer\u2019s credit quality. The
rest of the Risk review, impairments, losses and loss allowances refer to calculations in accordance with IFRS, unless we specifically say they relate to CRD
IV. For our IFRS impairment accounting policy, see Note 1 to the Consolidated Financial Statements.
We also assess risks from other perspectives, such as geography, business area, product and process to identify areas to focus on. We also use stress testing to
establish vulnerabilities to economic deterioration. Our business segments tailor their approach to credit risk to their customers, as we explain later on.
Recognising ECL (audited)
The ECL approach estimates the credit losses arising from defaults in the next 12 months on qualifying exposures, or defaults over the lifetime of the exposure
where there is evidence of a SICR since the origination date. Our ECL approach for portfolio assessments uses models that consider forward-looking data on
economic scenarios, including a range of possible outcomes, which are unbiased and probability-weighted to reflect the risk of a loss being incurred even when it is
unlikely. In some cases, we need to apply Judgemental Adjustments to our model outputs. We use internal credit ratings for corporate borrowers and individually
assess corporate Stage 3 exposures.
Critical judgements and accounting estimates applied in calculating ECL (audited)
The application of the ECL impairment methodology for calculating credit impairment allowances is susceptible to change from period to period. The methodology
requires management to make judgemental assumptions in determining the estimates.
For more on our approach to making critical judgements and accounting estimates applied in calculating ECL see 'Critical judgements and accounting estimates'
Note 1 to the Consolidated Financial Statements.
Multiple economic scenarios and probability weights (audited)
For all our portfolios, we use forward-looking economic scenarios. During 2024, we reduced the forward looking economic scenarios to four by removing the
stubborn inflation scenario as inflation has returned to more normalised levels. They now consist of a central base case, one upside scenario and two downside
scenarios. We use these scenarios to reflect a wide range of possible outcomes for the UK economy.
Our forecasting approach
We derive our scenarios in part by using a set of parameters in GDP fan charts published by the Office for Budget Responsibility (OBR). These fan charts reflect the
probability distribution of a deviation from the OBR\u2019s central forecast to show the uncertainty about the outcome of a variable, in this case GDP.
Once we have established the GDP paths for each scenario, we run them through the Oxford Global Economic Model (OGEM) to derive the other macroeconomic
variables, such as unemployment and house prices. These variables are the product of the GDP growth paths we have forecast and the output of the OGEM for
these growth paths. We then review them to ensure consistency with the narrative of each scenario and so changes to the variables may be needed in some cases.
We then impose a Bank Rate profile for each scenario using expert judgement with the base case as the starting point and then adjusting this for each of the other
scenarios based on the narratives. We produce a range of Bank Rate profiles to reflect a range of possible outcomes the Bank of England may follow depending on
how it sees the trade-off between growth and inflation evolving over the forecast period. For example, this might consist of higher rates initially in response to
inflationary concerns followed by lower rates as inflation falls towards target, and that this may be sharper in the event of a deep recession.
We update the baseline in our economic scenarios at least twice a year in line with our annual budgeting and three-year planning processes, or sooner if there is a
material change in current or expected economic conditions. We refresh all our economic scenarios quarterly to reflect the latest data and OBR fan charts if these
changed, which are then reviewed and approved by the Credit Risk Provisions Forum (CRPF). The CRPF also assesses the probability weights at least once a quarter.
We do not use consensus forecasts as inputs to our models, but we do compare the outputs of our models against consensus views for the base case, to make
sure\u00a0that we understand any significant differences and address them where needed. At 31 December 2024, there were no significant differences between our
base case forecasts and the consensus views.
In 2024, we undertook a further peer benchmarking analysis of the economic scenarios, which for Q424 included the mean weighted analysis for a selection of
economic variables, including GDP, unemployment rate and HPI. This meant that we could compare our weighted scenarios against the average of our peers to
understand what differences there may be. The conclusion of this analysis demonstrated that our economic scenarios were in line with our peers.
In 2024, we also considered any likely impact from climate risk on our forecasting approach and concluded that no adjustment to the multiple economic
scenarios\u00a0for climate risk was required. This is because climate change effects are generally regarded to be relevant over a longer timeframe than our forecast
period of five years.
Our use of four different scenarios is designed to reflect different possible outcomes to the base case, highlighting the upside and downside risks associated with
the central scenario.
Our forecasting period for GDP is five years and we use the OGEM 25 year model for the outer years, post five year forecast. This is a change to the methodology
from 2023 and it was adopted in Q124. As part of this, we set a floor on the unemployment rate at 4% to ensure that the long-term view is near to the Non-
Accelerating Inflation Rate of Unemployment set out by the Bank of England in its annual supply side review.
Key changes to our forecasting approach in 2024
In 2024, we made two changes to our forecasting approach. We moved from five to four scenarios which saw the removal of the stubborn inflation scenario due to
inflation becoming more stable as it reaches target, negating the need for a specific scenario. We also moved from using mean reversion for the forecasts beyond
five years to using the 25 year OGEM output. This removes the need to make any assumptions regarding the length of time to mean revert.
Base case
We review the scenarios and associated weights every quarter to ensure they appropriately reflect the current economic circumstances and UK Government policy
which is subject to change.
In summary, the outlook for the UK economy in 2025 shows an economy that is growing with the stimulus from the October 2024 Budget helping to boost GDP.
There is above target inflation due to this stimulus and other government measures, but Bank Rate continues to fall gradually, supporting businesses and
households. However, downside risks to the outlook remain particularly around geopolitical tensions and potential productivity gains.
Base case key macroeconomic assumptions
GDP: The UK economy slowed in Q324 with growth of 0.1% quarter-on-quarter. It was always likely that a slow-down from the above average quarterly growth rates of H124 would
happen, but with weak PMIs as well there is a concern that the economy will stagnate in Q424. However, Q324 GDP did see rising consumer spending and strong gains for business
investment as such we would expect that post-Budget growth will pick up, although some underlying weakness means the economy growing at levels similar to those experienced pre-
pandemic, rather than the stronger growth needed to help repair the UK\u2019s finances. For 2025 we would expect to see stronger growth caused by the increase in government spending
given the measures announced in the October 2024 Budget, although this may crowd out some business investment and with a higher tax burden this may impact both investment and
private consumption. Over the longer term the key issue for growth remains productivity and without a boost to this growth will remain at the average pre-pandemic levels of 1.4%.
Bank Rate: The Monetary Policy Committee (MPC) lowered rates twice in 2024 to 4.75%. Our base case assumes a further 100bps of cuts which takes Bank Rate to 3.75% by the end of
2025, with further reductions into the medium term leaving the terminal rate at 3.25% in Q127. This is slightly higher than our previous forecast due to the increased inflation expected
as a result of the October 2024 Budget.
House price growth: House prices grew in 2024, helped in part, by falling mortgage rates. However, the outlook for 2025 is likely to see a slow-down in house price growth due to
higher swap rates which has pushed up mortgage rates in Q424. As always, the key to house price growth is the supply of housing which continues to be weak. This along with the steady
fall in interest rates should ensure steady house price growth over the forecast period. We forecast a c.3% year-on-year growth in house prices by the end of 2025 and remaining at this
growth rate for the rest of the forecast period.
Unemployment rate: Recent data for unemployment indicates that there is a slow loosening of the labour market. However, caution needs to be taken as the unemployment data is still
subject to problems with the ONS Labour Force Survey data. In terms of the forecast the peak in unemployment comes in 2025, with the possibility of more redundancies as firms face
higher employment costs as a result of the National Insurance Contributions (NIC) increase for employers. The rate then drops back to 4.2% (current Bank of England prediction for the
natural rate of unemployment) in 2026. This accords with the better growth outlook, but also reflects the fact that the structure of the UK labour market changed with a large drop in the
number of working age people looking for work, thus reducing supply. Although progress may be made in reducing medical waiting lists over the forecast period to boost supply.
CRE price growth: After falling for seven quarters in a row, CRE prices stabilised in Q224 and rose by 0.3% quarter-on-quarter in Q324 in a sign of the sector turning around after two
years of falling prices. Cuts in Bank Rate boosted prices and this looks set to continue in Q424 following the November 2024 bank rate cut. In addition, with more workers return to the
office this may help boost the flagging office sector. We expect prices to continue to rise throughout the forecast period as Bank Rate is reduced before growth stabilises around the 2%
year-on-year mark.
In the medium-term, the projections assume that current demographic and productivity trends will continue, causing a reduction in the UK\u2019s growth potential. For
instance, it is likely that the reduction in the UK workforce will continue and this will have a knock-on impact for the economy, particularly if there are shortages of
skilled workers in particular sectors. This is reflected in an average annual growth expectation of 1.6%, in line with the OBR\u2019s latest estimate of the UK\u2019s long run
average growth rate.
Key changes to our base case in 2024
For our base case, we no longer expect a short recession given that the economy has been more resilient than previously expected in 2023. For the other macro-
economic variables, the changes made to the base case compared to 2023 included stronger house price inflation for 2024 reflecting the better economic
conditions and slightly lower unemployment for 2024. However, risks to the base case remain with potential for rising geopolitical risks affecting the UK economy.
Our base case scenario incorporates stronger economic growth in 2025, from increased government spending and four Bank Rate cuts of 25bps over the year. It
was updated to reflect the latest market data and to broadly align with the latest consensus estimates. The most notable change was to HPI with expected house
price increases stronger than predicted in 2024.
Other scenarios
Based on this revised base case, we reviewed our suite of scenarios to ensure that they capture the wide range of potential outcomes for the UK economy. These
include; (i) a slower recovery that is more akin to the \u2018U\u2019 shape of past recessions; (ii) labour market frictions due to skills mismatches and a shrinking workforce
as\u00a0some discouraged workers leave altogether (for example longer-term sickness levels remaining above pre-pandemic levels); (iii) fragmentation of the global
economy in particular changes and additional frictions to supply chains; and (iv) the global economy recovering more swiftly from higher inflation.
To reflect these potential outcomes, we use the base case and three additional scenarios, which we consider sufficient to reflect all the above potential outcomes.
As with the base case, the scenarios are forecast over a five-year period with the OEGM 25 year model used to determine the forecasts after this period with a floor
on unemployment set at 4%.
The other scenarios are:
One upside scenario
This scenario has a quicker recovery in growth than the Baseline and is a bull case to the base forecasts. It assumes that inflation falls slightly below target at the
start of the forecast period helped by lower wage growth, however it does rise back to 2% over the period. This allows the Bank of England to cut rates faster than
the base case, bringing them back towards what might be considered the neutral rate earlier. This results in higher consumer and business confidence enabling
higher levels of spending and investment, with savings rates returning to levels consistent with economic growth as real earnings growth returns. In this scenario
GDP remains stronger than the base case along with house price growth. Unemployment falls to 4% slightly below the base case and inflation dips below target in
2026 before ending the forecast period at target.
Two downside scenarios
The downside scenarios capture the impact of weaker investment, the increasing risk from geopolitical events and the ongoing significant mismatch between job
vacancies and skills, as well as a smaller labour force.
Downside 1 \u2013 In this scenario, the economy contracts and although the recession is small and short lived, the recovery is weak and below potential. The measures
announced in the Budget, in particular the increase in NICs for employers means growth is tempered and employment shrinks as businesses restructure to deal
with the extra cost along with increased minimum wage and changes to workers' rights. Consumers opt to save more rather than spend which affects the recovery
path, as consumer confidence is low in part due to concerns about the unstable geopolitical environment and the increase in lay-offs as businesses restructure. The
global economy is affected by a combination of factors, such as commodity prices becoming increasingly volatile due to geopolitical events and the potential impact
of additional tariffs. This affects global inflation which negatively impacts UK trade and hinders a return to growth.
Downside 2 \u2013 This scenario shows a marked fall in GDP, with rising unemployment and falling house prices reflecting the ongoing issues of a higher interest rate
environment. There is a longer lagged effect from monetary policy tightening and lower growth and productivity, which feeds across the whole economy. It also
reflects the increase in geopolitical risk which affects market sentiment and causes further fragmentation of the global economy. It also assumes that major risk
events continue to occur, exposing the vulnerability of countries' fiscal positions and the means to respond to such events. Unemployment peaks at 8.5% and,
although, there are some inflationary pressures from changing trade patterns, the sharp fall in demand means inflation falls below target and allows the MPC to
cut rates sharply from Q125 to stabilise demand. With inflation falling below target and lower interest rates this eases some of the pressures on the UK economy
and growth picks up in the medium-term.
Key changes to our alternative scenarios in 2024
In 2024, we removed the Stubborn inflation scenario (Downside 3) from the suite of scenarios we run. This was because inflation fell significantly and the risks of
inflation increasing above 3% and remaining at levels above this was no longer considered to need a separate scenario. The scenario was not replaced as we already
have two downside scenarios reflecting the risks to the UK economy including inflation being above target and with higher interest rates compared to base case.
It\u00a0was not deemed necessary to have a further upside scenario given the limited upside risk to the UK economy. In addition, the use of four scenarios is in line with
many of our peers.
Despite mixed signals about the UK's recent economic performance, which may impact the path of the Bank Rate, our scenarios continue to capture a broad range
of\u00a0forecasts.
Our macroeconomic assumptions and their evolution throughout the forecast period
Our macroeconomic assumptions and their evolution throughout the forecast period for each of the scenarios at 31 December 2024 were:
Upside
Base case
Downside 1
Downside 2
Weighted
%
%
%
%
%
GDP(1)
2023 (actual)
0.3
0.3
0.3
0.3
0.3
2024
0.9
0.9
0.8
0.4
0.8
2025
2.0
1.4
(0.4)
(3.4)
0.6
2026
2.5
1.6
0.3
(0.9)
1.2
2027
2.5
1.4
0.9
1.3
1.4
2028
2.5
1.4
1.0
2.8
1.6
2029
2.5
1.4
1.1
2.8
1.6
5-year average increase/decrease(2)
2.4
1.5
0.6
0.3
n/a
Start to trough(3)
n/a
n/a
(0.7)
(5.2)
n/a
Bank Rate(1)
2023 (actual)
5.25
5.25
5.25
5.25
5.25
2024
4.75
4.75
4.75
4.75
4.75
2025
3.25
3.75
4.50
2.25
3.71
2026
3.00
3.50
3.25
1.50
3.16
2027
3.00
3.25
3.00
2.50
3.08
2028
3.00
3.25
3.00
2.75
3.10
2029
3.00
3.25
3.00
3.00
3.13
5-year end period
3.00
3.25
3.00
3.00
n/a
5-year peak
4.75
4.75
4.75
4.75
4.75
HPI(1)
2023 (actual)
(0.7)
(0.7)
(0.7)
(0.7)
(0.7)
2024
4.8
4.5
2.0
1.3
3.6
2025
4.3
3.0
(5.8)
(20.1)
(1.2)
2026
4.7
3.0
(3.7)
(14.7)
0.3
2027
4.6
3.0
2.9
5.8
3.4
2028
4.5
3.0
4.4
9.6
4.0
2029
4.6
3.0
4.6
7.7
4.0
5-year average increase/decrease(2)
4.7
3.2
\u2014
(3.7)
n/a
Start to trough(3)
n/a
n/a
(10.1)
(33.0)
(0.8)
Unemployment(1)
2023 (actual)
3.8
3.8
3.8
3.8
3.8
2024
4.4
4.3
4.4
4.4
4.4
2025
4.1
4.4
5.2
8.3
4.9
2026
4.0
4.2
5.5
8.2
4.9
2027
4.0
4.2
5.5
7.6
4.8
2028
4.0
4.2
5.5
7.0
4.8
2029
4.0
4.2
5.5
6.4
4.7
5-year end period
4.0
4.2
5.5
6.4
n/a
5-year peak
4.4
4.4
5.5
8.5
4.9
CRE price growth(1)
2023 (actual)
(5.6)
(5.6)
(5.6)
(5.6)
(5.6)
2024
0.4
(0.1)
(2.3)
(2.7)
(0.9)
2025
5.7
2.5
(5.5)
(14.9)
(0.7)
2026
5.2
2.8
1.7
(8.5)
2.0
2027
2.9
2.5
2.0
4.4
2.6
2028
3.3
2.2
1.8
3.8
2.4
2029
3.0
2.1
2.4
3.4
2.4
5-year average increase/decrease(2)
4.0
2.3
(0.1)
(3.3)
n/a
Start to trough(3)
n/a
n/a
(7.4)
(24.7)
(1.2)
(1) GDP is the calendar year annual growth rate, HPI and CRE price growth rate is Q4 annual growth rate and all other data points are at 31 December in the year indicated.
(2)\u00a0 \u00a0 \u00a0 This is the compound annual growth rate (CAGR) based on a 5 year period which represents an average annualised growth rate.
(3)\u00a0 \u00a0 \u00a0 GDP, HPI and CRE start is taken from level at Q324.
The table below sets out our macroeconomic assumptions and their evolution throughout the forecast period for each of the scenarios at 31 December 2023:
Upside
Base case
Downside 1
Stubborn
Inflation
Downside 2
Weighted
%
%
%
%
%
%
GDP(1)
2022 (actual)
4.3
4.3
4.3
4.3
4.3
4.3
2023
0.6
0.5
0.5
0.5
0.3
0.5
2024
1.0
0.4
(0.1)
(1.8)
(3.3)
(0.4)
2025
2.1
1.3
0.2
(0.9)
(1.4)
0.6
2026
2.4
1.5
0.5
0.4
0.6
1.1
2027
2.4
1.4
0.3
0.7
2.2
1.4
2028
2.4
1.4
0.3
0.8
2.6
1.4
5-year average increase/decrease
2.1
1.2
0.3
(0.2)
0.1
n/a
Peak/(trough) at(2)
\u2014
\u2014
(0.2)
(2.8)
(5.1)
(1.1)
Bank Rate(1)
2022 (actual)
3.50
3.50
3.50
3.50
3.50
3.50
2023
5.25
5.25
5.25
5.25
5.25
5.25
2024
4.25
4.50
5.25
6.50
3.75
4.88
2025
3.25
3.50
4.00
5.00
2.00
3.68
2026
2.75
3.25
3.25
3.75
2.00
3.18
2027
2.75
3.00
3.00
3.00
2.50
2.93
2028
2.75
3.00
3.00
3.00
2.50
2.93
5-year end period
2.75
3.00
3.00
3.00
2.50
n/a
Peak/(trough) at
5.25
5.25
5.75
6.50
5.25
5.55
HPI(1)
2022 (actual)
5.0
5.0
5.0
5.0
5.0
5.0
2023
(1.7)
(2.2)
(4.7)
(6.3)
(7.8)
(3.8)
2024
2.0
(1.0)
(11.7)
(18.8)
(25.8)
(7.8)
2025
6.5
2.5
3.4
3.6
3.6
3.3
2026
5.1
3.0
2.1
1.6
1.6
2.7
2027
4.0
3.0
3.0
1.6
1.6
2.7
2028
3.6
3.0
3.1
1.8
1.8
2.7
5-year average increase/decrease
4.3
2.0
(0.8)
(3.3)
(5.4)
n/a
Peak/(trough) at(2)
(3.7)
(6.5)
(17.5)
(25.5)
(33.0)
(13.8)
Unemployment(1)
2022 (actual)
3.7
3.7
3.7
3.7
3.7
3.7
2023
4.3
4.3
4.3
4.3
4.4
4.3
2024
4.3
4.8
4.8
5.6
8.5
5.3
2025
3.7
4.4
4.9
5.9
8.0
5.1
2026
3.4
4.3
5.2
6.2
7.4
5.0
2027
3.0
4.3
5.4
6.1
6.8
4.9
2028
3.0
4.2
5.3
5.8
6.2
4.7
5-year end period
3.0
4.2
5.3
5.8
6.2
n/a
Peak/(trough) at
4.5
4.8
5.5
6.2
8.5
5.5
(1) GDP is the calendar year annual growth rate, HPI is Q4 annual growth rate and all other data points are at 31 December in the year indicated.
(2) GDP peak taken from GDP level at Q2-23 and HPI peak taken from HPI level at Q3-22.
Scenario weights
Each quarter, we review the scenario weights we apply. We consider the weights of the economic scenarios as a whole, while ensuring that the scenarios capture
the non-linear distribution of losses across a reasonable range. To support our initial assessment of the weight of a scenario, we undertake a Monte Carlo analysis
to estimate the likelihood of a five-year average GDP forecast growth rate occurring based on the long-run historically observed average. We then create a standard
distribution bell curve around this long run average. This allows us to estimate the probability of a given GDP scenario occurring based on past experience and
therefore assign a weight to that scenario. We also consider the UK economic and political environment when applying weights.
The scenario weights we applied for 2024 and 2023 were:
Upside
Base case
Downside 1
Stubborn
Inflation
Downside 2
Weighted
Scenario weights
%
%
%
%
%
%
2024
15
50
25
n/a
10
100
2023
10
50
10
20
10
100
2024 compared to 2023
In 2024, we removed the Stubborn Inflation scenario and re-weighted the remaining scenarios as inflation returned to more normalised levels. We remain of the
view that the risks to UK growth are still biased to the downside and include: further geopolitical events creating more challenges for economies both the UK and
abroad; the potential for further upside inflation surprises causing inflation to stay above target for longer, raising the cost of living and so reducing consumer
demand; continuing weak investment reflecting the uncertain nature of the economic environment; and a continuing and significant mismatch between vacancies
and skills along with a smaller labour force, which may bring disruption to any recovery in the latter years of the forecast.
Definition of default (Credit impaired) (audited)
We define a financial instrument as in default (i.e. credit impaired) for the purpose of calculating ECL if it is more than three months past due, or if we have data that
suggests the customer is unlikely to pay. The data we have on customers varies across our business segments. It typically includes where:
Retail & Business Banking and Consumer Finance
\u2013 They have been reported bankrupt or insolvent and are in arrears
\u2013 Their loan term has ended, but they still owe us money more than three months later
\u2013 They have had forbearance while in default and have failed to perform under the new arrangement terms, or have had multiple forbearance. Performing forborne
accounts while not in default are reported in Stage 2
\u2013 We have suspended their fees and interest because they are in financial difficulties
\u2013 We have repossessed the property or the asset.
Corporate & Commercial Banking and Corporate Centre
\u2013 They have had a winding up notice issued, or something happens that is likely to trigger insolvency \u2013 such as another lender calls in a loan
\u2013 Something happens that makes them less likely to be able to pay us \u2013 such as they lose an important client or contract
\u2013 They have regularly missed or delayed payments, even though they have not gone over the three-month limit for default
\u2013 Their loan is unlikely to be refinanced or repaid in full on maturity
\u2013 Their loan has an excessive LTV that is unlikely to be resolved, such as by a change in planning policy, pay-downs, or increase in market value
\u2013 Loans restructured under financial difficulties, classified as forborne transactions, in last 12 months.
Where we use the advanced internal ratings-based basis for a portfolio in our capital calculations, there are differences with the default definitions for ECL
purposes. The main differences are as follows:
\u2013 Performing forborne accounts while not in default are in Stage 2 until they cure their forbearance status (measured as 12 consecutive months of successful
payments).
\u2013 Performing non-forborne accounts, which under our internal rating-based basis are subject to a 3-month cure period. For accounting purposes, we classify them
in Stage 2 until they cure all SICR triggers.
Significant Increase in Credit Risk (SICR) (audited)
Loans which have suffered a SICR since origination are subject to a lifetime ECL assessment which extends to a maximum of the contractual term of the loan, or the
behavioural term for a revolving facility. Loans which have not experienced a SICR are subject to 12-month ECL. We assess the credit risk profile of each facility to
determine which of three stages to allocate them to:
\u2013 Stage 1: when there has been no SICR since initial recognition. We apply a loss allowance equal to a 12-month ECL i.e. the proportion of lifetime expected losses
that relate to that default event expected in the next 12 months
\u2013 Stage 2: when there has been a SICR since initial recognition, but the exposure is not considered credit impaired. We apply a loss allowance equal to the lifetime
ECL i.e. the expected loss resulting from all possible defaults throughout the residual life of a facility
\u2013 Stage 3: when the exposure is considered credit impaired. We apply a loss allowance equal to the lifetime ECL. Objective evidence of credit impairment is
needed. For more, see the section \u2018Definition of default (Credit impaired)\u2019 above.
We use quantitative, qualitative and backstop criteria to identify exposures that suffer a SICR. The Credit Risk Provisions Forum (CRPF) reviews and approves our SICR
thresholds periodically. The Board Audit Committee reviews and challenges their appropriateness each year, or more often if we change them.
Key changes in 2024
In 2024, alongside our new ECL models, we updated our SICR criteria to enhance and improve consistency across portfolios. As a result, we now treat the following
accounts as Stage 2:
Quantitative:
\u2013 Accounts with a 12-month PD between 30bps (0.3%) and 2000bps (20%) where the annualised lifetime PD has doubled from origination.
\u2013 PD threshold: Accounts where the annualised lifetime PD has increased above 2000bps (20%).
\u2013 Low Credit Risk Exemption (LCRE): we introduced an LCRE where, if the 12-month PD is less than 30bps, we retain the account in Stage 1, unless the
qualitative or backstop criteria are met.
These changes increased the number of accounts in Stage 2 for Credit Cards and Overdrafts mainly due to the lower absolute PD thresholds, with no material
increase in ECL.
Qualitative:
\u2013 For mortgages, over-indebted customers and Interest-only accounts 24 months pre-maturity.
\u2013 For CCB, customers operating in a high-risk sector.
These enhancements enabled us to retire related JAs.
Quantitative criteria
We use quantitative criteria to identify where an exposure has increased in credit risk. We base our criteria on whether any increase in the lifetime PD since
origination exceeds a threshold in relative and absolute terms. We base the value anticipated at origination on similar assumptions and data to the ones we use at
the reporting date, adjusted to reflect the account surviving to that date. The comparison uses either an annualised lifetime PD, where the lifetime PD is divided by
the forecast period, or the absolute change in lifetime PD since origination. The criteria for 2024 and 2023 were: accounts above the lower absolute PD thresholds
below, where the PD has doubled since origination, are treated as Stage 2. Any account above the upper threshold (i.e. 20%) is also treated as Stage 2:
Retail & Business Banking
Consumer
Finance (2)
Corporate &
Commercial
Banking
Corporate Centre
Mortgages
Everyday Banking(1)
Personal loans
Credit cards
Overdrafts
2024
30bps
30bps
30bps
30bps
300bps
30bps
Internal rating method
2023
30bps
30bps
340bps
260bps
300bps
30bps
Internal rating method
(1) For larger business banking customers, we apply the same criteria as we use for CCB. Credit cards and Overdrafts lower PD thresholds aligned with the rest of Everyday Banking for consistency.
(2) Consumer Finance use the comparison of lifetime PDs to determine Stage allocation, unlike other products which first turn the lifetime PD into an average yearly PD (annualised) and then do the comparison. In
addition, Consumer Finance does not apply the upper absolute PD threshold criteria.
Qualitative criteria
We also use qualitative criteria to identify where an exposure has increased in credit risk, independent of changes in PD. The criteria for 2024 and 2023 were:
Retail & Business Banking
Consumer Finance
Corporate &
Commercial Banking
Corporate Centre
Mortgages
Everyday Banking(1)
Personal loans
Credit cards
Overdrafts
\u2013 In forbearance
\u2013 Default in last 24m
\u2013 30 Days Past Due (DPD) in
last 12m
\u2013 Bankrupt
\u2013 \u00a3100+ arrears
New in 2024:
\u2013 Over-indebted customers
\u2013 Interest Only accounts 24m
pre-maturity
\u2013 In Collections
\u2013 Default in last 12m
\u2013 \u00a350+ arrears
\u2013 In forbearance
\u2013 Default in last 12m
\u2013 In Collections
\u2013 \u00a3100+ arrears
\u2013 Behaviour score
indicators
\u2013 Fees suspended
\u2013 Default in last 12m
\u2013 Debit dormant >35
days
\u2013 Any excess in month
\u2013 In forbearance
\u2013 Deceased or
Insolvent
\u2013 Court \u2018Return of
goods\u2019 order or
Police watchlist
\u2013 Agreement
terminated
\u2013 Payment holiday
\u2013 Cash Collection
\u2013 In forbearance
\u2013 Default in last 12m
\u2013 Watchlist: proactive
management
\u2013 Default at proxy
origination
New in 2024:
\u2013 Customers in a high-
risk sector
\u2013 Watchlist: proactive
management
(1)For larger business banking customers, we apply the same criteria that we use for Corporate & Commercial Banking.
If needed, we apply additional qualitative assessments as part of JAs in response to situations where known or expected risk factors and data are not considered in
the modelling process. See 'Judgemental Adjustments (JAs)' below for more on this.
Backstop criteria
As a backstop, we classify all exposures more than 30 or 90 DPD in at least Stage 2 or in Stage 3, respectively. This means that we do not rebut the backstop
presumptions in IFRS 9 (i.e. credit risk has significantly increased if contractual payments are more than 30 DPD) relating to either a SICR or default.
Improvement in credit risk or cure
We transfer Stage 3 exposures to Stage 2 or Stage 1 when we no longer consider them to be credit impaired. We transfer Stage 2 exposures to Stage 1 when we no
longer consider them to have suffered a SICR. Where we identified a SICR using quantitative criteria, we transfer the exposures to Stage 1 when they no longer meet
the original PD-based transfer criteria. Where we identified a SICR using qualitative criteria, the issues that led to the transfer must be cured before we transfer the
exposure to Stage 1. For a loan to exit forbearance, it must meet the conditions set out in the section \u2018Forbearance\u2019 in the 'Credit risk' section of the Risk review.
Judgemental Adjustments (JAs) (audited)
We use a range of methods to identify whether we need a JA. These include regular reviews of model monitoring tools, changes in the period, trend analysis,
comparisons against forecasts, and inputs from expert teams who manage key portfolio risks. We only recognise a JA if its expected impact is over \u00a31m and keep it
in place until we no longer need it. This is usually when we build it into our core credit model or the conditions that led to raising the JA no longer exist.
Our Risk Provisions & Forecasting team calculate JAs to ensure they are incremental to the core credit model and to ensure the calculation is performed in a
consistent and controlled manner. We apply standard end-user computing controls to JAs expected to be in place for more than six months. The CRPF reviews and
approves all JAs on a quarterly basis.
Retail & Business Banking
Everyday Banking
Consumer
Finance
Corporate &
Commercial
Banking
Corporate
Centre
Total
Mortgages
Credit Cards
Other
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Modelled ECL
127
149
122
69
142
\u2014
609
Individually assessed
6
\u2014
\u2014
\u2014
162
\u2014
168
ECL before JAs
133
149
122
69
304
\u2014
777
JAs (excluding Affordability and Cost of Living JAs)
Unsecured PD adjustments
\u2014
\u2014
2
\u2014
\u2014
\u2014
2
Mortgages LGD
27
\u2014
\u2014
\u2014
\u2014
\u2014
27
Corporate single large exposure
\u2014
\u2014
\u2014
\u2014
24
\u2014
24
Other
1
1
6
\u2014
\u2014
\u2014
8
Total JAs (excluding Affordability and Cost of Living JAs)
28
1
8
\u2014
24
\u2014
61
Affordability and Cost of Living JAs
Corporate lending to segments affected by supply chain
pressures
\u2014
\u2014
\u2014
\u2014
14
\u2014
14
Mortgage refinancing risk
11
\u2014
\u2014
\u2014
\u2014
\u2014
11
SME debt burden
\u2014
\u2014
6
\u2014
\u2014
\u2014
6
Total Affordability and Cost of Living JAs
11
\u2014
6
\u2014
14
\u2014
31
Total JAs
39
1
14
\u2014
38
\u2014
92
Total ECL
172
150
136
69
342
\u2014
869
Total JAs as a percentage of Total ECL (%)
11
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Modelled ECL
132
123
123
62
240
\u2014
680
Individually assessed
4
\u2014
\u2014
\u2014
124
\u2014
128
ECL before JAs
136
123
123
62
364
\u2014
808
JAs (excluding Affordability and Cost of Living JAs)
Long-term indeterminate arrears
16
\u2014
\u2014
\u2014
\u2014
\u2014
16
12+ months in arrears
14
\u2014
\u2014
\u2014
\u2014
\u2014
14
UPL loss floor
\u2014
\u2014
6
\u2014
\u2014
\u2014
6
Model underestimation
36
\u2014
\u2014
\u2014
\u2014
\u2014
36
Corporate single large exposure
\u2014
\u2014
\u2014
\u2014
23
\u2014
23
Other
12
1
3
4
(31)
\u2014
(11)
Total JAs (excluding Affordability and Cost of Living JAs)
78
1
9
4
(8)
\u2014
84
Affordability and Cost of Living JAs
Corporate lending to segments affected by supply chain
pressures
\u2014
\u2014
\u2014
\u2014
24
\u2014
24
Secured affordability
9
\u2014
\u2014
4
\u2014
\u2014
13
Unsecured affordability
\u2014
16
22
\u2014
\u2014
\u2014
38
Mortgage refinancing risk
19
\u2014
\u2014
\u2014
\u2014
\u2014
19
SME debt burden
\u2014
\u2014
6
\u2014
\u2014
\u2014
6
Total Affordability and Cost of Living JAs
28
16
28
4
24
\u2014
100
Total JAs
106
17
37
8
16
\u2014
184
Total ECL
242
140
160
70
380
\u2014
992
Total JAs as a percentage of Total ECL (%)
19
JAs (excluding Affordability and Cost of Living JAs)
\u2013 Unsecured PD Adjustments: In 2024, we replaced the UPL Loss floor JA with the Unsecured PD Adjustments JA to widen the scope of the JA. We use this JA to
address the perceived macroeconomic insensitivity in our Unsecured Personal Loans (UPL) model and the over sensitivity in our Overdrafts model.
\u2013 UPL \u2013 This arises where analysis of historical losses shows a larger correlation to the International Labour Organisation (ILO) unemployment forecast than the
model gives. The JA uplifts the lifetime losses expected in each of the macroeconomic scenarios in the model to align with the expected losses the historical
analysis predicts.
\u2013 Overdrafts \u2013 This arises where the ECL model is overly sensitive to Bank Rate changes, leading it to predict extremely high PDs in the early years. The JA reduces
the lifetime losses expected in each of the macroeconomic scenarios in the model to align with the expected losses the historical analysis predicts.
\u2013 Mortgages LGD: We introduced this JA in 2024. It uplifts the modelled parameters that capture the risk of failed recovery strategies of stage 3 accounts in
default and stage 1 and stage 2 accounts not in default targeting the LGD underestimation flagged by model monitoring, as well as the lower level of coverage
compared to peers in this segment.
\u2013 Corporate single large exposure: This JA safeguards against individual large exposures defaulting over a short period. We currently use the JA to safeguard
against two historically observed single name large losses in CCB. This JA was used in 2024 for 2 cases. This JA was also replenished in 2024 as it is still needed
as UK corporate insolvencies rose to a 30-year high. In the current economic environment, the risk of single name defaults, which incur high losses, is considered
greater than before as government support schemes ceased. We continue to assess the risk over the medium term based on actual experience and refine the
estimate based on changes in our portfolio credit quality and loan size mix.
\u2013 Other: This includes Mortgages and Retail Unsecured and generally consists of small portfolios where the ECL calculation is held outside of the main models.
Affordability and Cost of Living JAs
\u2013 Corporate lending to segments affected by supply chain pressures: This JA reflects the corporate lending risks to those sectors susceptible to high inflation
and energy prices, higher input costs, potential for lower consumer and business demand and exposure to supply chain pressures. This JA calculates ECL by
stressing PD levels for customers in Stage 2 according to each customer's risk profile.
\u2013 Mortgage refinancing risk: The JA considers the risk of mortgage customers being unable to afford their new mortgage instalment after re-mortgaging at
higher interest rates. The JA assesses the likely mortgage payment against the stressed interest rate that customers had been assessed against at the point of
application. Customers that are likely to secure rates above their stress levels are considered at risk of not being able to afford their new mortgage. We uplift
their PDs to account for the elevated levels of defaults observed for the most recent cohorts of refinanced mortgages. The JA was designed using some profiling
characteristics of customers that used the Mortgage Charter government scheme as some of those accounts are considered to be at higher risk of arrears.
\u2013 SME debt burden: This JA takes account of the potential debt burden risk of unsecured lending to our SME customers who also took a BBL. This does not
incorporate the credit risk on BBLs as these are government guaranteed, but considers the possible impact on repayment of other lending with us.
2024 compared to 2023
In 2024, we implemented new impairment models for Mortgages and Corporate & Commercial Banking, which now embed many of the JAs in place at the end of
2023. In response to the improved economic data, specifically inflation, we reassessed the need for cost of living JAs and retired the Secured and Unsecured
Affordability JAs.
In 2024, we introduced a new Mortgage LGD JA which uplifts the modelled parameters that capture the risk of failed recovery strategies, for default and non-
default accounts.
Climate change
In 2024 and 2023, we assessed the risks to asset valuations in the customer loan book from both transitional and physical risks associated with climate change. At
31 December 2024 and 2023, we did not consider it appropriate to recognise a climate risk related JA for the following reasons:
\u2013 The behavioural life of the loan book is less than five years. Any material transitional risks are generally regarded to be relevant over a longer timeframe than five
years and, as such, the risk predominantly relates to assets yet to be written;
\u2013 There have been no observed default events or SICRs due to climate change for any part of the loan book;
\u2013 The absolute exposure to fossil fuel industries is not material. On an individually assessed basis, clients in these industries are highly rated and their markets
remain highly liquid;
\u2013 The residual value of automotive vehicles might be impacted by diesel obsolescence and the transition to electric vehicles. The residual value risk is already set at
the more cautious end of the acceptable range to capture the inherent risk of diesel obsolescence and measurement uncertainty of electric vehicles;\u00a0
\u2013 ECL calculations are based on multiple forward-looking economic scenarios developed by management covering a period of five years, during which timeframe
climate change risks may crystallise;
\u2013 The proportion of mortgage loans subject to flood and subsidence risk is not material. The terms of our mortgage lending also require homeowners to have an
active flood protection at any point of the contract. This assessment relies upon availability of risk cover from private insurers and FloodRe, respectively. The
potential risk may increase over time if flooding due to climate change increases and/or insurance market circumstances change.\u00a0
Internal credit risk rating for corporate borrowers (audited)
We assign each corporate borrower an internal credit rating based on our internal rating scale. To do this, we look at the customer\u2019s financial history and trends in
the economy backed up by the expert judgement of a risk analyst. We review our internal ratings on a dynamic basis and at least once a year. The internal risk rating
is used to determine the Probability of Default for a client.
Individually assessed corporate Stage 3 exposures (audited)
We assess the ECL requirement for single name corporate exposures on an individual basis when they meet our definition of default and are transferred into Stage
3. This assessment uses the latest specific data about the counterparty's estimated future cash flows, and collateral valuations, to determine a probability weighted
ECL based on a best, worst and mid case outcome. For these individually assessed loans, the ECL allowance was \u00a3162m at 31 December 2024 (2023: \u00a3124m). Had
management assumed the best or worst outcome for loss estimates, the ECL allowance could have been within a range of \u00a363m to \u00a3291m.
Sensitivity of ECL allowance to economic scenarios and weights (audited)
The ECL allowance is sensitive to the methods, assumptions and estimates underlying its calculation. For example, management could have applied different
probability weights to the economic scenarios. In addition, the ECL allowance for residential mortgages is significantly affected by the HPI assumptions which
determine the valuation of collateral used in the calculations.
Had management used different assumptions on probability weights and HPI, a larger or smaller ECL charge would have resulted that may have had a material
impact on the ECL allowance and profit before tax.
Scenario sensitivity
The tables below show the ECL allowances that would have arisen had management applied a 100% weight to each economic scenario. The allowances were
calculated using a stage allocation appropriate to each scenario and differs from the probability-weighted stage allocation used to determine the ECL allowance
shown above. For exposures subject to individual assessment, the distribution of ECLs which could reasonably be expected has also been considered, assuming no
change in the number of cases subject to individual assessment, and within the context of a potential best to worst case outcome.
Upside
Base case
Downside 1
Downside 2
Weighted
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Exposure
283,860
283,860
283,860
283,860
283,860
Retail & Business Banking
196,732
196,732
196,732
196,732
196,732
Of which:
\u00a0 \u2013 Mortgages
176,026
176,026
176,026
176,026
176,026
Consumer Finance
4,759
4,759
4,759
4,759
4,759
Corporate & Commercial Banking
26,307
26,307
26,307
26,307
26,307
Corporate Centre
56,062
56,062
56,062
56,062
56,062
ECL
741
774
921
1,524
869
Retail & Business Banking
380
403
517
1,051
458
Of which:
\u00a0 \u2013 Mortgages
112
128
218
705
172
Consumer Finance
67
68
69
70
69
Corporate & Commercial Banking
294
303
335
403
342
Corporate Centre
\u2014
\u2014
\u2014
\u2014
\u2014
Upside
Base case
Downside 1
Stubborn
Inflation
Downside 2
Weighted
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Exposure
294,877
294,877
294,877
294,877
294,877
294,877
Retail & Business Banking
201,977
201,977
201,977
201,977
201,977
201,977
Of which:
\u00a0 \u2013 Mortgages
181,188
181,188
181,188
181,188
181,188
181,188
Consumer Finance
5,228
5,228
5,228
5,228
5,228
5,228
Corporate & Commercial Banking
27,277
27,277
27,277
27,277
27,277
27,277
Corporate Centre
60,395
60,395
60,395
60,395
60,395
60,395
ECL
833
896
991
1,176
1,410
992
Retail & Business Banking
419
465
536
689
889
542
Of which:
\u00a0 \u2013 Mortgages
141
174
234
363
562
242
Consumer Finance
68
69
70
72
72
70
Corporate & Commercial Banking
346
362
385
415
449
380
Corporate Centre
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
2024 compared to 2023
ECL reduced by \u00a3123m, driven by deleveraging of the balance sheet and the improved economic outlook resulting in ECL model releases. The ECL on Credit Cards
increased in the year due to the updated SICR rules. The value of JAs decreased in 2024 due to the implementation of new impairment models for Mortgages and
Corporate & Commercial Banking, as well as the releases of the affordability JAs in EDB.
HPI sensitivity
Given the relative size of our residential mortgage portfolio, management considers that changes in HPI assumptions used to calculate the modelled ECL allowance
for residential mortgages would have the most significant impact on the modelled ECL allowance. The table below shows the modelled ECL impact on the profit
before tax of applying an immediate and permanent house price increase/decrease to our unweighted base case scenario, and assumes no changes to the stage
allocation of exposures.
Increase/decrease in house prices
+20%
+10%
-10%
-20%
Increase/(decrease) in profit before tax
\u00a3m
\u00a3m
\u00a3m
\u00a3m
2024
34
21
(38)
(112)
2023
70
38
(54)
(155)
2024 compared to 2023
The decrease in modelled ECL sensitivity reflects the new Retail Mortgages impairment model we introduced in 2024, which shows different economic sensitivities,
as well as portfolio deleveraging. The impairment model assumes a similar loss for low LTV accounts, given the distribution of LTV in the portfolio, and increases in
the HPI exhibit shows less impact on modelled ECL than decreases in HPI.
Measuring ECL (audited)
For our mortgages and CCB portfolios, where accounts are not in default at the reporting date, we estimate a quarterly ECL for each exposure and for each quarter
over the forecast period. The lifetime ECL is the sum of the quarterly ECLs over the forecast period, while the 12-month ECL is limited to the first four quarters. We
calculate each quarterly ECL as the discounted value for the relevant forecast month of the product of the following factors:
Factor
Description
Survival rate (SR)
The probability that the exposure has not closed or defaulted since the reporting date.
Probability of default
(PD)
The likelihood of a borrower defaulting in the following quarter, assuming it has not closed or defaulted since the reporting date. For each quarter in
the forecast period, we estimate the quarterly PD from a range of factors. These include key risk drivers for the exposure, as well as the expected
evolution of the account risk with maturity and factors for changing economics. We support this with historical data analysis.
Exposure at default
(EAD)
The amount we expect to be owed if a default, or sale in the case of retail mortgages, event occurs. We determine EAD for each quarter of the
forecast period by the expected payment profile, which varies by product. For amortising products, we base it on the borrower\u2019s contractual
repayments over the forecast period. We adjust this for any expected overpayments on Stage 1 accounts that the borrower may make and for any
arrears we expect if the account was to default. For revolving products, or amortising products with an off-balance sheet element, we determine
EAD using the balance at default and the contractual exposure limit. We vary these assumptions by product and base them on analysis of recent
default data.
Loss given default
(LGD)
Our expected loss if a default event were to occur. We express it as a percentage and calculate it based on factors that we have observed to affect
the likelihood and/or value of any subsequent write-offs, which vary according to whether the product is secured or unsecured. If the product is
secured, we consider collateral values as well as the historical discounts to market/book values due to forced sales type.
We use the original effective interest rate as the discount rate. For accounts in default, we use the EAD as the reporting date balance. We also calculate an LGD to
reflect the default status of the account, considering the current DPD and loan-to-value. PD and SR are not required for accounts in default.
Forecast period
We base the forecast period for amortising facilities on the remaining contract term. For revolving facilities, we base it on the behavioural, rather than contractual,
characteristics of the facility type.
Forward-looking information
Our assessments of a SICR and the calculation of ECL allowances incorporate forward-looking data. We perform historical analysis and identify the key economic
variables that impact credit risk and ECL allowances for each portfolio. These can include house price growth, GDP, unemployment rate and BoE Bank Rate. Where
applicable, we incorporate these economic variables and their associated impacts into our models.
Economic forecasts have the most impact on ECL measurement for residential mortgages and, to a lesser extent, corporate loans. This is due to the long
behavioural lives and large size of these portfolios. Economic forecasts have less impact on ECL for other portfolios due to their shorter lives and smaller size.
Grouping of instruments for losses measured on a collective basis
We measure ECL at the individual financial instrument level. However, where we have used internal capital or similar models as the basis for our ECL models, this
typically results in a large number of relatively small homogenous groups. We typically group instruments where they share risk characteristics using statistical
models and assess them for impairment collectively. We use this approach for all our Retail & Business Banking and Consumer Finance portfolios and SME
customers in Corporate & Commercial Banking.
We calculate separate collective provisions for instruments in Stages 1, 2 and 3 where the instrument is not individually assessed.
For all our portfolios (whether we assess them for impairment individually or collectively) we use four forward-looking economic scenarios.
Governance around ECL impairment allowances (audited)
Our Risk Methodology team developed our ECL models (except for the external models we use, such as OGEM which we described earlier in \u2018Our forecasting
approach\u2019), and our Independent Validations team reviews all material models. As model owners, our Risk Provisioning & Forecasting team run the models to
calculate our ECL each month. The models are sensitive to changes in credit conditions and reflect management judgements that give rise to measurement
uncertainty in our ECL, as set out above. The following committees and forums review the provision drivers and ensure that the ECL remains appropriate:
\u2013 Model Risk Control Forum (MRCF) reviews and approves new models and model changes. It also reviews the use of OGEM as a reliable model on which to base
our other forecast macroeconomic variables. We use it across all stress testing and planning so it is subject to model risk criteria.
\u2013 ALCO reviews and approves the base case used in the economic scenarios we use to calculate forward-looking scenarios.
\u2013 CRPF reviews and approves the economic scenarios and probability weights we use to calculate forward-looking scenarios. It also reviews management
judgements and approves ECL impairment allowances.
\u2013 Board Audit Committee reviews and challenges the appropriateness of the estimates and judgements made by management.
For more on the governance around specific elements of the ECL impairment allowances, including the frequency of, and thresholds for, reviews, including by these
committees and forums, see the detailed sections above.
How we assess the performance of our ECL estimation process
We assess the reasonableness of our ECL provisions and the results of our Staging analysis using a range of methods. These include:
\u2013 Benchmarking: we compare our coverage levels with our peers
\u2013 Stand-back testing: we monitor the level of our coverage against actual write-offs
\u2013 Back-testing: we compare key drivers periodically as part of model monitoring practices
\u2013 Monitoring trends: we track ECL and Staged assets over time and against our internal budgets and forecasts, with triggers set accordingly.
SANTANDER UK GROUP LEVEL \u2013 CREDIT RISK REVIEW
Our maximum and net exposure to credit risk (audited)
The tables below show the main differences between our maximum and net exposure to credit risk. They show the effects of collateral, netting, and risk transfer to
mitigate our exposure. The tables only show the financial assets that credit risk affects and to which the impairment requirements in IFRS 9 are applied.
For balance sheet assets, the maximum exposure to credit risk is the carrying value after impairment loss allowances. Off-balance sheet exposures are mortgage
offers, guarantees, formal standby facilities, credit lines and other commitments. For off-balance sheet guarantees, the maximum exposure is the maximum
amount that we would have to pay if the guarantees were called on. For formal standby facilities, credit lines and other commitments that are irrevocable over the
life of the facility, the maximum exposure is the total amount of the commitment.
Maximum exposure
Balance sheet asset
Off-balance sheet
Collateral(1)
Gross
amounts
Loss
allowance
Net
amounts
Gross
amounts
Loss
allowance
Net
amounts
Cash
Non-cash
Netting(2)
Net
exposure
2024
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Cash and balances at central banks
29.9
\u2014
29.9
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
29.9
Financial assets at amortised cost:
\u2013 Loans and advances to customers:(3)
\u2013 Residential Mortgages(4)
165.2
(0.2)
165.0
10.8
\u2014
10.8
\u2014
(168.0)
\u2014
7.8
\u2013 Corporate loans
18.6
(0.3)
18.3
7.8
\u2014
7.8
\u2014
(14.9)
\u2014
11.2
\u2013 Finance leases
4.2
(0.1)
4.1
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
4.1
\u2013 Accrued interest and other adjustments
0.8
\u2014
0.8
0.4
\u2014
0.4
\u2014
\u2014
\u2014
1.2
\u2013 Other unsecured loans
6.6
(0.2)
6.4
14.2
(0.1)
14.1
\u2014
\u2014
\u2014
20.5
\u2013 Amounts due from fellow Banco Santander group
subsidiaries and JVs
4.8
\u2014
4.8
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
4.8
Total loans and advances to customers
200.2
(0.8)
199.4
33.2
(0.1)
33.1
\u2014
(182.9)
\u2014
49.6
\u2013 Loans and advances to banks
1.0
\u2014
1.0
0.5
\u2014
0.5
\u2014
\u2014
\u2014
1.5
\u2013 Reverse repurchase agreements \u2013 non trading
10.3
\u2014
10.3
2.0
\u2014
2.0
\u2014
(10.3)
(0.1)
1.9
\u2013 Other financial assets at amortised cost
3.4
\u2014
3.4
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
3.4
Total financial assets at amortised cost
214.9
(0.8)
214.1
35.7
(0.1)
35.6
\u2014
(193.2)
(0.1)
56.4
Financial assets at fair value at FVOCI:
\u2013 Debt securities
9.0
\u2014
9.0
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
9.0
Total financial assets at FVOCI
9.0
\u2014
9.0
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
9.0
Total
253.8
(0.8)
253.0
35.7
(0.1)
35.6
\u2014
(193.2)
(0.1)
95.3
2023
Cash and balances at central banks
38.2
\u2014
38.2
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
38.2
Financial assets at amortised cost:
\u2013 Loans and advances to customers:(3)
\u2013 Residential Mortgages(4)
172.9
(0.2)
172.7
8.3
\u2014
8.3
\u2014
(175.4)
\u2014
5.6
\u2013 Corporate loans
18.3
(0.3)
18.0
8.9
\u2014
8.9
(0.1)
(15.3)
\u2014
11.5
\u2013 Finance leases
4.6
(0.1)
4.5
\u2014
\u2014
\u2014
\u2014
(4.5)
\u2014
\u2014
\u2013 Accrued interest and other adjustments
0.9
\u2014
0.9
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
0.9
\u2013 Other unsecured loans
7.1
(0.3)
6.8
13.8
(0.1)
13.7
\u2014
\u2014
\u2014
20.5
\u2013 Amounts due from fellow Banco Santander group
subsidiaries and JVs
4.5
\u2014
4.5
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
4.5
Total loans and advances to customers
208.3
(0.9)
207.4
31.0
(0.1)
30.9
(0.1)
(195.2)
\u2014
43.0
\u2013 Loans and advances to banks
1.1
\u2014
1.1
0.5
\u2014
0.5
\u2014
\u2014
\u2014
1.6
\u2013 Reverse repurchase agreements \u2013 non trading
12.5
\u2014
12.5
\u2014
\u2014
\u2014
\u2014
(12.4)
(0.1)
\u2014
\u2013 Other financial assets at amortised cost
0.2
\u2014
0.2
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
0.2
Total financial assets at amortised cost
222.1
(0.9)
221.2
31.5
(0.1)
31.4
(0.1)
(207.6)
(0.1)
44.8
Financial assets at FVOCI:
\u2013 Debt securities
8.5
\u2014
8.5
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
8.5
Total financial assets at FVOCI
8.5
\u2014
8.5
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
8.5
Total
268.8
(0.9)
267.9
31.5
(0.1)
31.4
(0.1)
(207.6)
(0.1)
91.5
(1) The forms of collateral we take to reduce credit risk include: residential and commercial property; other physical assets, including motor vehicles; liquid securities, including those transferred under reverse
repurchase agreements; cash, including cash used as collateral for derivative transactions; and receivables. Charges on residential property are most of the collateral we take.
(2) We can reduce credit risk exposures by applying netting. We do this mainly for derivative and repurchase transactions with financial institutions. For derivatives and securities finance transactions, we use standard
master netting agreements. For more on this, see \u2018Credit risk mitigation\u2019 in the \u2018Credit risk - Credit risk management\u2019 section.
(3) Balances include interest we have charged to the customer\u2019s account and accrued interest that we have not charged to the account yet.
(4) The collateral value shown against advances secured on residential property is limited to the balance of each associated individual loan. It does not include the impact of over\u2013collateralisation (where the collateral
has a higher value than the loan balance) and includes collateral we would receive on draw down of certain off\u2013balance sheet commitments.
The tables below show the main differences between our maximum and net exposure to credit risk on the financial assets that credit risk affects and to which the
impairment requirements in IFRS 9 are not applied.
Balance
sheet asset
gross
amount
Collateral(1)
Netting(2)
Net
exposure
Cash
Non-cash
2024
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Financial assets at FVTPL:
\u2013 Derivative financial instruments
1.2
(0.7)
\u2014
(0.4)
0.1
\u2013 Other financial assets at FVTPL
0.1
\u2014
\u2014
\u2014
0.1
Total
1.3
(0.7)
\u2014
(0.4)
0.2
2023
Financial assets at FVTPL:
\u2013 Derivative financial instruments
1.4
(0.8)
0.0
(0.5)
0.1
\u2013 Other financial assets at FVTPL
0.3
\u2014
\u2014
\u2014
0.3
Total
1.7
(0.8)
0.0
(0.5)
0.4
(1) The forms of collateral we take to reduce credit risk include: liquid securities, including those transferred under reverse repurchase agreements; cash, including cash used as collateral for derivative transactions;
and receivables.
(2) We can reduce credit risk exposures by applying netting. We do this mainly for derivative and repurchase transactions with financial institutions. For derivatives and securities finance transactions, we use standard
master netting agreements. They allow us to set off our credit risk exposure to a counterparty against our obligations to the counterparty in relation to transactions under the master netting agreement in the event
of default. This gives us a lower net credit exposure. They may also reduce settlement exposure. For more on this, see \u2018Credit risk mitigation\u2019 in the \u2018Credit risk \u2013 Credit risk management\u2019 section.
Rating distribution (audited)
The tables below show the credit rating of our financial assets to which the impairment requirements in IFRS 9 apply. Financial assets with low risk concentrations
are not included and are all investment grade. JAs are incorporated in the balances. For more on the credit rating profiles of key portfolios, see the credit risk review
section for each business segment.
Santander UK risk grade
Loss
allowance
Total
9
8
7
6
5
4
3 to 1
Other(1)(2)
2024
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Exposures - On balance sheet
Financial assets at amortised cost:
\u2013Loans and advances to customers(2)
5.8
31.3
81.8
46.4
15.6
6.8
5.4
7.1
(0.8)
199.4
\u00a0 \u00a0 \u2013Stage 1
5.7
30.6
78.1
40.5
12.4
2.8
0.6
6.9
(0.1)
177.5
\u00a0 \u00a0 \u2013Stage 2
0.1
0.7
3.7
5.9
3.2
3.9
2.4
0.1
(0.3)
19.7
\u00a0 \u00a0 \u2013Stage 3
\u2014
\u2014
\u2014
\u2014
\u2014
0.1
2.4
0.1
(0.4)
2.2
Of which mortgages:
5.2
29.8
76.5
40.8
6.5
3.3
3.1
\u2014
(0.2)
165.0
\u00a0 \u00a0 \u2013Stage 1
5.1
29.3
72.9
35.0
4.0
0.4
\u2014
\u2014
\u2014
146.7
\u00a0 \u00a0 \u2013Stage 2
0.1
0.5
3.6
5.8
2.5
2.9
1.3
\u2014
(0.1)
16.6
\u00a0 \u00a0 \u2013Stage 3
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
1.8
\u2014
(0.1)
1.7
Total off\u2013balance sheet
6.9
8.9
9.0
4.2
1.9
0.8
0.7
3.3
(0.1)
35.6
\u00a0 \u00a0 \u2013Stage 1
6.9
8.8
8.8
4.0
1.7
0.5
0.4
3.3
\u2014
34.4
\u00a0 \u00a0 \u2013Stage 2
\u2014
0.1
0.2
0.2
0.2
0.3
0.2
\u2014
(0.1)
1.1
\u00a0 \u00a0 \u2013Stage 3
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
0.1
\u2014
\u2014
0.1
Santander UK risk grade
Total
Coverage
Ratio
9
8
7
6
5
4
3 to 1
Other(1)(2)
2024
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
%
ECL - On balance sheet
Financial assets at amortised cost:
\u2013 Loans and advances to customers(2)
\u2014
\u2014
\u2014
\u2014
0.2
0.1
0.5
\u2014
0.8
0.4
\u2013 Stage 1
\u2014
\u2014
\u2014
\u2014
0.1
\u2014
\u2014
\u2014
0.1
0.1
\u2013 Stage 2
\u2014
\u2014
\u2014
\u2014
0.1
0.1
0.1
\u2014
0.3
1.5
\u2013 Stage 3
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
0.4
\u2014
0.4
18.2
Of which mortgages:
\u2014
\u2014
\u2014
\u2014
\u2014
0.1
0.1
\u2014
0.2
0.1
\u2013 Stage 1
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2013 Stage 2
\u2014
\u2014
\u2014
\u2014
\u2014
0.1
\u2014
\u2014
0.1
0.6
\u2013 Stage 3
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
0.1
\u2014
0.1
5.9
Total off\u2013balance sheet
\u2014
\u2014
\u2014
\u2014
\u2014
0.1
\u2014
\u2014
0.1
0.3
\u2013 Stage 1
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2013 Stage 2
\u2014
\u2014
\u2014
\u2014
\u2014
0.1
\u2014
\u2014
0.1
9.1
\u2013 Stage 3
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Santander UK risk grade
Loss
allowance
9
8
7
6
5
4
3 to 1
Other(1)(2)
Total
2023
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Exposures - On balance sheet
Financial assets at amortised cost:
\u2013 Loans and advances to customers(2)
5.3
34.2
84.4
48.9
14.6
8.3
5.4
7.2
(0.9)
207.4
\u2013 Stage 1
5.3
33.1
80.4
43.6
10.3
2.8
0.3
6.9
(0.1)
182.6
\u2013 Stage 2
\u2014
1.1
4.0
5.3
4.3
5.4
2.4
0.1
(0.4)
22.2
\u2013 Stage 3
\u2014
\u2014
\u2014
\u2014
\u2014
0.1
2.7
0.2
(0.4)
2.6
Of which mortgages:
5.2
32.5
79.9
41.5
6.6
3.7
3.5
\u2014
(0.2)
172.7
\u2013 Stage 1
5.2
31.4
75.9
36.3
3.6
0.4
0.2
\u2014
\u2014
153.0
\u2013 Stage 2
\u2014
1.1
4.0
5.2
3.0
3.2
1.4
\u2014
(0.1)
17.8
\u2013 Stage 3
\u2014
\u2014
\u2014
\u2014
\u2014
0.1
1.9
\u2014
(0.1)
1.9
Total off\u2013balance sheet
\u2014
6.3
7.0
6.8
4.6
1.7
0.4
4.7
(0.1)
31.4
\u2013 Stage 1
\u2014
6.3
6.9
6.7
4.4
1.2
0.1
4.7
\u2014
30.3
\u2013 Stage 2
\u2014
\u2014
0.1
0.1
0.2
0.5
0.2
\u2014
(0.1)
1.0
\u2013 Stage 3
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
0.1
\u2014
\u2014
0.1
Santander UK risk grade
Coverage
Ratio
9
8
7
6
5
4
3 to 1
Other(1)(2)
Total
2023
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
%
ECL - On balance sheet
Financial assets at amortised cost:
\u2013 Loans and advances to customers(2)
\u2014
\u2014
\u2014
\u2014
0.2
0.2
0.5
\u2014
0.9
0.4
\u2013 Stage 1
\u2014
\u2014
\u2014
\u2014
0.1
\u2014
\u2014
\u2014
0.1
0.1
\u2013 Stage 2
\u2014
\u2014
\u2014
\u2014
0.1
0.2
0.1
\u2014
0.4
1.8
\u2013 Stage 3
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
0.4
\u2014
0.4
13.3
Of which mortgages:
\u2014
\u2014
\u2014
\u2014
\u2014
0.1
0.1
\u2014
0.2
0.1
\u2013 Stage 1
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2013 Stage 2
\u2014
\u2014
\u2014
\u2014
\u2014
0.1
\u2014
\u2014
0.1
0.6
\u2013 Stage 3
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
0.1
\u2014
0.1
5.0
Total off\u2013balance sheet
\u2014
\u2014
\u2014
\u2014
\u2014
0.1
\u2014
\u2014
0.1
0.3
\u2013 Stage 1
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2013 Stage 2
\u2014
\u2014
\u2014
\u2014
\u2014
0.1
\u2014
\u2014
0.1
9.1
\u2013 Stage 3
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(1) Includes Joint Ventures and Business Banking (including BBLs balances) . We use scorecards for these items, rather than rating models. .
(2) Includes interest we have charged to the customer\u2019s account and accrued interest we have not charged to the account yet.
Credit quality (audited)
Total on-balance sheet exposures at 31 December 2024 comprised \u00a3194.5 bn of customer loans, loans and advances to banks of \u00a31.0bn, \u00a313.7bn of sovereign
assets measured at amortised cost, \u00a39.0bn of assets measured at FVOCI, and \u00a329.9bn of cash and balances at central banks.
Gross Write-offs
Stage 1
Stage 2
Stage 3
Total
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Exposures
On-balance sheet
Retail & Business Banking
152,198
17,571
1,955
171,724
Consumer Finance
4,389
334
36
4,759
Corporate & Commercial Banking
15,280
2,098
651
18,029
Corporate Centre
53,699
\u2014
\u2014
53,699
Total on-balance sheet
225,566
20,003
2,642
248,211
Off\u2013balance sheet
Retail & Business Banking(1)
24,211
745
52
25,008
Consumer Finance
\u2014
\u2014
\u2014
\u2014
Corporate & Commercial Banking
7,743
470
65
8,278
Corporate Centre
2,363
\u2014
\u2014
2,363
Total off\u2013balance sheet(2)
34,317
1,215
117
35,649
Total exposures
259,883
21,218
2,759
283,860
ECL and Gross write-offs
On-balance sheet
Retail & Business Banking
156
52
223
146
421
Consumer Finance
25
16
27
26
69
Corporate & Commercial Banking
49
55
71
168
294
Corporate Centre
\u2014
\u2014
\u2014
\u2014
\u2014
Total on-balance sheet
230
123
321
340
784
Off\u2013balance sheet
Retail & Business Banking
\u2014
12
24
1
37
Consumer Finance
\u2014
\u2014
\u2014
\u2014
\u2014
Corporate & Commercial Banking
\u2014
18
14
16
48
Corporate Centre
\u2014
\u2014
\u2014
\u2014
\u2014
Total off\u2013balance sheet
\u2014
30
38
17
85
Total ECL
230
153
359
357
869
Coverage ratio(3)
%
%
%
%
On-balance sheet
Retail & Business Banking
\u2014
1.3
7.5
0.2
Consumer Finance
0.4
8.2
71.2
1.4
Corporate & Commercial Banking
0.4
3.4
25.9
1.6
Corporate Centre
\u2014
\u2014
\u2014
\u2014
Total on-balance sheet
0.1
1.6
12.9
0.3
Off\u2013balance sheet
Retail & Business Banking
\u2014
3.2
2.6
0.1
Consumer Finance
\u2014
\u2014
\u2014
\u2014
Corporate & Commercial Banking
0.2
3.0
24.2
0.6
Corporate Centre
\u2014
\u2014
\u2014
\u2014
Total off-balance sheet
0.1
3.1
14.6
0.2
Total coverage
0.1
1.7
13.0
0.3
(1) Off-balance sheet exposures include \u00a36.1bn of residential mortgage offers in the pipeline.
(2) Off-balance sheet amounts consist of contingent liabilities and commitments. For more, see Note 30 to the Consolidated Financial Statements.
(3) ECL as a percentage of the related exposure.
Total on-balance sheet exposures at 31 December 2023 comprised \u00a3203.1bn of customer loans, loans and advances to banks of \u00a31.1bn, \u00a312.6bn of sovereign
assets measured at amortised cost, \u00a38.5bn of assets measured at FVOCI, and \u00a338.2bn of cash and balances at central banks.
Gross Write-offs
Stage 1
Stage 2
Stage 3
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Exposures
On-balance sheet
Retail & Business Banking
158,782
18,866
2,239
179,887
Consumer Finance
4,870
330
28
5,228
Corporate & Commercial Banking
13,822
3,418
699
17,939
Corporate Centre
60,395
\u2014
\u2014
60,395
Total on-balance sheet
237,869
22,614
2,966
263,449
Off\u2013balance sheet
Retail & Business Banking(1)
21,597
434
59
22,090
Consumer Finance
\u2014
\u2014
\u2014
0
Corporate & Commercial Banking
8,745
547
46
9,338
Corporate Centre
\u2014
\u2014
\u2014
\u2014
Total off\u2013balance sheet(2)
30,342
981
105
31,428
Total exposures
268,211
23,595
3,071
294,877
ECL and Gross write-offs
On-balance sheet
Retail & Business Banking
141
57
273
169
499
Consumer Finance
23
21
30
19
70
Corporate & Commercial Banking
68
64
118
163
345
Corporate Centre
\u2014
\u2014
\u2014
\u2014
\u2014
Total on-balance sheet
232
142
421
351
914
Off\u2013balance sheet
Retail & Business Banking
\u2014
16
26
1
43
Consumer Finance
\u2014
\u2014
\u2014
\u2014
\u2014
Corporate & Commercial Banking
\u2014
12
14
9
35
Total off\u2013balance sheet
\u2014
28
40
10
78
Total ECL
232
170
461
361
992
Coverage ratio(3)
%
%
%
%
On-balance sheet
Retail & Business Banking
\u2014
1.4
7.5
0.3
Consumer Finance
0.4
9.0
68.5
1.3
Corporate & Commercial Banking
0.5
3.5
23.4
1.9
Corporate Centre
\u2014
\u2014
\u2014
\u2014
Total on-balance sheet
0.1
1.9
11.8
0.3
Off\u2013balance sheet
Retail & Business Banking
0.1
6.0
2.8
0.2
Consumer Finance
\u2014
\u2014
\u2014
\u2014
Corporate & Commercial Banking
0.1
2.5
20.2
0.4
Total off-balance sheet
0.1
4.1
10.4
0.2
Total coverage
0.1
2.0
11.8
0.3
(1) Off-balance sheet exposures include \u00a33.3bn of residential mortgage offers in the pipeline.
(2) Off-balance sheet amounts consist of contingent liabilities and commitments. For more, see Note 30 to the Consolidated Financial Statements.
(3) ECL as a percentage of the related exposure.
Stage 2 analysis (audited)
The following table analyses our Stage 2 exposures and ECL allowance by the reason the exposure is classified as Stage 2.
2024
Backstop
Quantitative
Qualitative
JAs
Total
30 DPD
PD deterioration
PD threshold
Forbearance(1)
Other(2)
Mortgage
Refinancing
Retail & Business
Banking
Exposure \u00a3m
592
9,434
478
308
4,955
1,804
17,571
ECL \u00a3m
20
133
29
5
25
11
223
Of which
-Mortgages
Exposure \u00a3m
504
8,834
350
298
4,898
1,804
16,688
ECL \u00a3m
7
48
3
3
12
11
84
Consumer Finance
Exposure \u00a3m
30
155
\u2014
\u2014
149
\u2014
334
ECL \u00a3m
10
11
\u2014
\u2014
6
\u2014
27
Corporate &
Commercial Banking
Exposure \u00a3m
54
930
61
57
996
\u2014
2,098
ECL \u00a3m
1
38
7
1
24
\u2014
71
Corporate Centre
Exposure \u00a3m
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
ECL \u00a3m
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Total Drawn
Exposure \u00a3m
676
10,519
539
365
6,100
1,804
20,003
ECL \u00a3m
31
182
36
6
55
11
321
Undrawn
ECL \u00a3m
1
23
6
2
6
\u2014
38
Total Reported
Exposure \u00a3m
701
11,180
605
434
6,494
1,804
21,218
ECL \u00a3m
32
205
42
8
61
11
359
2023
Backstop
Quantitative
Qualitative
JAs
Total
30 DPD
PD
deterioration
Forbearance(1)
Other
Secured
affordability
Unsecured
affordability
Mortgage
Refinancing
High risk
corporate
Retail & Business
Banking
Exposure \u00a3m
738
6,421
516
301
2,889
232
7,769
\u2014
18,866
ECL \u00a3m
33
164
2
11
9
35
19
\u2014
273
Of which
-Mortgages
Exposure \u00a3m
560
5,877
516
265
2,889
\u2014
7,769
\u2014
17,876
ECL \u00a3m
11
65
2
3
9
\u2014
19
\u2014
109
Consumer Finance
Exposure \u00a3m
25
115
\u2014
126
64
\u2014
\u2014
\u2014
330
ECL \u00a3m
11
10
\u2014
5
4
\u2014
\u2014
\u2014
30
Corporate &
Commercial Banking
Exposure \u00a3m
93
1,809
85
533
\u2014
\u2014
\u2014
898
3,418
ECL \u00a3m
2
75
2
17
\u2014
\u2014
\u2014
22
118
Corporate Centre
Exposure \u00a3m
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
ECL \u00a3m
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Total Drawn
Exposure \u00a3m
856
8,345
601
960
2,953
232
7,769
898
22,614
ECL \u00a3m
46
249
4
33
13
35
19
22
421
Undrawn
ECL \u00a3m
3
28
\u2014
4
\u2014
3
\u2014
2
40
Total Reported
Exposure \u00a3m
893
9,160
601
1,152
2,889
233
7,769
898
23,595
ECL \u00a3m
49
277
4
37
13
38
19
24
461
(1) Where the values of ECL and/or exposures are not \u00a3nil, but round to \u00a3nil when presented in \u00a3millions, the coverage ratio is still presented in the table.
(2) Mainly consists of Qualitative triggers for Mortgages, over-indebted customers c\u00a32.5bn and Interest-only accounts 24 months pre-maturity c\u00a31.3bn, and for CCB customers operating in a high-risk sector.
Where balances satisfy more than one of the criteria above for determining a SICR, we have assigned the corresponding gross carrying amount and ECL allowance in
order of the categories presented.
Reconciliation of exposures, loss allowance and net carrying amounts (audited)
The table below shows the relationships between disclosures in this Credit risk review section which refer to drawn exposures and the associated ECL allowance ,
and the total assets as presented in the Consolidated Balance Sheet. The Credit risk review disclosures exclude Joint ventures, as they carry low credit risk and
therefore have an immaterial ECL, and Other items, mainly accrued interest that we have not yet charged to the customer's account, and cash collateral.
On-balance sheet
Off-balance sheet
Exposures
Loss
allowance
Net carrying
amount
Exposures
Loss
allowance
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Retail & Business Banking(1)
171,724
421
171,303
25,008
37
Consumer Finance
4,759
69
4,690
\u2014
\u2014
Corporate & Commercial Banking
18,029
294
17,735
8,278
48
Corporate Centre
53,699
\u2014
53,699
2,363
\u2014
Total exposures presented in Credit Quality tables
248,211
784
247,427
35,649
85
Joint ventures
4,832
Other items
848
Adjusted net carrying amount
253,107
Assets classified at FVTPL
1,340
Non-financial assets
5,497
Total assets per the Consolidated Balance Sheet
259,944
2023
Retail & Business Banking(1)
179,887
499
179,388
22,090
43
Consumer Finance
5,228
70
5,158
\u2014
\u2014
Corporate & Commercial Banking
17,939
345
17,594
9,338
35
Corporate Centre
60,395
\u2014
60,395
\u2014
\u2014
Total exposures presented in Credit Quality tables
263,449
914
262,535
31,428
78
Joint ventures
4,544
Other items
751
Adjusted net carrying amount
267,830
Assets classified at FVTPL
1,694
Non-financial assets
5,924
Total assets per the Consolidated Balance Sheet
275,448
(1) Off-balance sheet exposures include offers in the pipeline, undrawn flexible mortgage products and credit cards.
Movement in total exposures and the corresponding ECL (audited)
The following table shows changes in total on and off-balance sheet exposures, subject to ECL assessment, and the corresponding ECL, in the period. The table
presents total gross carrying amounts and ECLs at a Santander UK group level. We present segmental views in the sections below.
Stage 1
Stage 2
Stage 3
Total
Exposures(1)
ECL
Exposures(1)
ECL
Exposures(1)
ECL
Exposures(1)
ECL
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2024
268,211
170
23,595
461
3,071
361
294,877
992
Transfers from Stage 1 to Stage 2(3)
(11,911)
(11)
11,911
11
\u2014
\u2014
\u2014
\u2014
Transfers from Stage 2 to Stage 1(3)
9,395
118
(9,395)
(118)
\u2014
\u2014
\u2014
\u2014
Transfers to Stage 3(3)
(434)
(2)
(845)
(34)
1,279
36
\u2014
\u2014
Transfers from Stage 3(3)
35
2
417
34
(452)
(36)
\u2014
\u2014
Transfers of financial instruments
(2,915)
107
2,088
(107)
827
\u2014
\u2014
\u2014
Net ECL remeasurement on stage transfer(4)
\u2014
(107)
\u2014
96
\u2014
122
\u2014
111
Change in economic scenarios(2)
\u2014
(20)
\u2014
(44)
\u2014
\u2014
\u2014
(64)
Change to ECL models
(2,287)
(5)
2,361
37
(74)
(26)
\u2014
6
New lending and assets purchased(5)
33,894
43
1,170
58
164
40
35,228
141
Redemptions, repayments and assets sold(7)
(38,081)
(44)
(4,663)
(69)
(1,242)
(79)
(43,986)
(192)
Changes in risk parameters and other movements(6)
1,061
9
(3,333)
(73)
355
169
(1,917)
105
Assets written off(7)
\u2014
\u2014
\u2014
\u2014
(342)
(230)
(342)
(230)
At 31 December 2024
259,883
153
21,218
359
2,759
357
283,860
869
Net movement in the period
(8,328)
(17)
(2,377)
(102)
(312)
(4)
(11,017)
(123)
ECL (release)/charge to the Income Statement
(17)
(102)
226
107
Less: Discount unwind
\u2014
\u2014
(24)
(24)
Less: Recoveries net of collection costs
\u2014
\u2014
(12)
(12)
Total ECL (release)/charge to the Income Statement
(17)
(102)
190
71
At 1 January 2023
284,428
170
19,127
516
2,729
319
306,284
1,005
Transfers from Stage 1 to Stage 2(3)
(12,945)
(9)
12,945
9
\u2014
\u2014
\u2014
\u2014
Transfers from Stage 2 to Stage 1(3)
5,913
111
(5,913)
(111)
\u2014
\u2014
\u2014
\u2014
Transfers to Stage 3(3)
(598)
(6)
(920)
(38)
1,518
44
\u2014
\u2014
Transfers from Stage 3(3)
28
1
304
15
(332)
(16)
\u2014
\u2014
Transfers of financial instruments
(7,602)
97
6,416
(125)
1,186
28
\u2014
\u2014
Net ECL remeasurement on stage transfer(4)
\u2014
(111)
\u2014
145
\u2014
130
\u2014
164
Change in economic scenarios(2)
\u2014
29
\u2014
(33)
\u2014
9
\u2014
5
Change to ECL models
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
New lending and assets purchased(5)
25,409
28
562
45
59
20
26,030
93
Redemptions, repayments and assets sold(7)
(33,805)
(35)
(3,017)
(53)
(886)
(46)
(37,708)
(134)
Changes in risk parameters and other movements(6)
(219)
(8)
507
(34)
395
133
683
91
Assets written off(7)
\u2014
\u2014
\u2014
\u2014
(412)
(232)
(412)
(232)
At 31 December 2023
268,211
170
23,595
461
3,071
361
294,877
992
Net movement in the period
(16,217)
\u2014
4,468
(55)
342
42
(11,407)
(13)
ECL (release)/charge to the Income Statement
\u2014
(55)
274
219
Less: Discount unwind
\u2014
\u2014
(21)
(21)
Less: Recoveries net of collection costs
\u2014
\u2014
7
7
Total ECL (release)/charge to the Income Statement
\u2014
(55)
260
205
(1) Exposures that have attracted an ECL, and as reported in the Credit Quality table above.
(2) Changes to assumptions in the period. Isolates the impact on ECL from changes to the economic variables for each scenario, the scenarios themselves, and the probability weights from all other movements. Also
includes the impact of quarterly revaluation of collateral. The impact of changes in economics on exposure Stage allocations are shown in Transfers of financial instruments.
(3) Total impact of facilities that moved Stage(s) in the period. This means, for example, that where risk parameter changes (model inputs) or model changes (methodology) result in a facility moving Stage, the full
impact is reflected here (rather than in Other). Stage flow analysis only applies to facilities that existed at both the start and end of the period. Transfers between Stages are based on opening balances and ECL at
the start of the period.
(4) Relates to the revaluation of ECL following the transfer of an exposure from one Stage to another.
(5) Exposures and ECL of facilities that did not exist at the start of the period but did at the end. Amounts in Stage 2 and 3 represent assets which deteriorated in the period after origination in Stage 1.
(6) Residual movements on existing facilities that did not change Stage in the period, and which were not acquired in the period. Includes the net increase or decrease in the period of the mortgage pipeline, cash at
central banks, the impact of changes in risk parameters in the period, unwind of discount rates and increases in ECL requirements of accounts which ultimately were written off in the period.
(7) Exposures and ECL for facilities that existed at the start of the period but not at the end.
COUNTRY RISK EXPOSURES (audited)
We manage our country risk exposure under our global limits framework. We set our Risk\u00a0Appetite for each country, considering factors that may affect its risk
profile. These can include political events, macroeconomics and the nature of the risk. We actively manage exposures if we need to.
The tables below show our total exposures, which are the total of balance sheet and off\u2013balance sheet values. We calculate balance sheet values in line with IFRS
(i.e. after netting allowed under IAS 32) except for credit provisions which we add back. Off\u2013balance sheet values are undrawn facilities and letters of credit. We
classify location by country of risk \u2013 the country where each client has its main business or assets. That is unless there is a full risk transfer guarantee in place. If so,
we use the guarantor\u2019s country of domicile. If a client has operations in many countries, we use their country of incorporation. The table below excludes balances
with other Banco Santander group members. We show them separately in the section that immediately follows.
2024
2023
Financial
institutions
Financial
institutions
Governments
Banks(1)
Other
Retail
Corporate
Total(2)
Governments
Banks(1)
Other
Retail
Corporate
Total(2)
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Eurozone
Ireland
\u2014
\u2014
3.3
\u2014
\u2014
3.3
\u2014
\u2014
3.1
\u2014
0.1
3.2
Spain
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
France
0.1
1.5
2.1
\u2014
\u2014
3.7
0.1
1.7
0.8
\u2014
\u2014
2.6
Belgium
0.2
0.3
\u2014
\u2014
\u2014
0.5
0.2
0.3
\u2014
\u2014
\u2014
0.5
Germany
\u2014
0.2
\u2014
\u2014
\u2014
0.2
\u2014
0.2
0.3
\u2014
\u2014
0.5
Luxembourg
\u2014
\u2014
2.3
\u2014
0.1
2.4
\u2014
\u2014
0.5
\u2014
0.1
0.6
Other
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
0.1
0.4
\u2014
\u2014
\u2014
0.5
0.3
2.0
7.7
\u2014
0.1
10.1
0.4
2.6
4.7
\u2014
0.2
7.9
Other countries
UK
34.0
1.5
6.3
200.8
24.3
266.9
38.5
1.7
6.5
206.0
25.0
277.7
Jersey
\u2014
\u2014
0.1
\u2014
0.3
0.4
\u2014
\u2014
0.1
\u2014
0.2
0.3
US
\u2014
0.9
\u2014
\u2014
\u2014
0.9
\u2014
0.7
\u2014
\u2014
\u2014
0.7
Canada
0.6
0.9
\u2014
\u2014
\u2014
1.5
0.1
0.8
\u2014
\u2014
\u2014
0.9
Japan
2.8
0.1
\u2014
\u2014
\u2014
2.9
2.0
0.9
\u2014
\u2014
\u2014
2.9
Switzerland
0.4
\u2014
\u2014
\u2014
\u2014
0.4
2.1
\u2014
\u2014
\u2014
\u2014
2.1
Other(3)
\u2014
0.6
0.1
0.2
0.4
1.3
\u2014
0.4
0.1
0.1
0.5
1.1
37.8
4.0
6.5
201.0
25.0
274.3
42.7
4.5
6.7
206.1
25.7
285.7
Total
38.1
6.0
14.2
201.0
25.1
284.4
43.1
7.1
11.4
206.1
25.9
293.6
(1) Excludes balances with central banks.
(2) Excludes cash at hand, interests in other entities, intangible assets, property, plant and equipment, tax assets, retirement benefit assets and other assets.
(3)Mainly includes Australia \u00a30.3bn (2023: \u00a30.3bn), Other OECD \u00a30.2bn (2023: \u00a30.2bn), Bermuda \u00a30.1bn (2023: \u00a30.1bn), China \u00a30.1bn (2023: \u00a30.1bn), Guernsey \u00a30.1bn (2023:\u00a30.2bn), Singapore \u00a30.1bn (2023:
\u00a30.0bn), and Norway \u00a30.1bn (2023: \u00a30.1bn).
Balances with other Banco Santander group members (audited)
We deal with other Banco Santander group members in the ordinary course of business. We do this where we have a particular business advantage or expertise and
where they can offer us commercial opportunities. These transactions also arise where we support the activities of, or with, larger multinational corporate clients
and financial institutions which may deal with other Banco Santander group members. We conduct these activities on the same terms as for similar transactions
with third parties, and in a way that manages the\u00a0credit risk within limits acceptable to the Board and the PRA.
At 31 December 2024 and 31 December 2023 , we had gross balances with other Banco Santander group members as follows:
2024
2023
Financial institutions
Financial institutions
Banks
Other
Corporate
Total
Banks
Other
Corporate
Total
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Assets
Spain
0.6
\u2014
\u2014
0.6
0.8
\u2014
\u2014
0.8
UK
\u2014
4.9
\u2014
4.9
\u2014
4.6
\u2014
4.6
0.6
4.9
\u2014
5.5
0.8
4.6
\u2014
5.4
Liabilities
Spain
0.9
0.1
\u2014
1.0
1.1
0.1
\u2014
1.2
UK
\u2014
14.2
\u2014
14.2
\u2014
14.3
\u2014
14.3
0.9
14.3
\u2014
15.2
1.1
14.4
\u2014
15.5
Borrower profile (audited)
Stock
New business
2024
2023
2024
2023
\u00a3m
%
\u00a3m
%
\u00a3m
%
\u00a3m
%
Home movers(1)
69,354
42
71,931
42
6,736
45
5,009
41
Remortgagers(2)
45,226
27
48,475
28
4,353
29
3,901
32
First-time buyers
35,702
22
36,868
21
3,262
22
3,015
25
Buy-to-let
14,931
9
15,585
9
567
4
239
2
165,213
100
172,859
100
14,918
100
12,164
100
2024
2023
Internal remortgages (\u00a3bn)(3)
32.2
31.2
Further advances and flexi drawdowns (\u00a3bn)
0.8
0.7
First-time buyers - gross lending (\u00a3bn )
3.3
3.0
% of customers retained with a maturing mortgage (unaudited)(4)
77
77
(1) 'Home movers\u2019 include both existing customers moving house and taking out a new mortgage with us, and customers who switch their mortgage to us when they move house.
(2) Remortgagers\u2019 are new customers who are taking a new mortgage with us.
(3) Internal remortgages are where we moved our customers with maturing mortgages onto new ones.
(4) Applied to mortgages three months post maturity, and is calculated as a 12-month average of retention rates to September 2024 and December 2023 respectively.
2024 compared to 2023
In 2024, mortgage asset stock decreased across all sectors, with the stock borrower profile unchanged. Although our new business increased year-on-year in all
sectors, a decision to optimise the balance sheet in a competitively priced market has resulted in us not fully replacing the asset balances lost through repayments
and redemptions.
Interest rate profile (audited)
The interest rate profile of our maturing mortgage asset stock was:
2024
2023
\u00a3m
%
\u00a3m
%
Fixed rate
148,495
90
153,207
89
Of which maturing:
\u2013 < 12 months
37,656
23
37,630
22
\u2013 Later than 1 year but no later than 3 years
84,704
51
65,502
38
\u2013 Later than 3 years but no later than 4 years
11,122
7
34,725
20
\u2013 Later than 4 years but no later than 5 years
11,645
7
10,977
6
\u2013 Later than 5 years
3,368
2
4,373
3
Variable rate
12,105
7
13,761
8
Standard Variable Rate (SVR)
3,007
2
3,915
2
Follow on Rate (FoR)
1,606
1
1,976
1
165,213
100
172,859
100
2024 compared to 2023
We continued to see customers refinance from reversion to fixed rate products in 2024, influenced by high interest rates. Demand for fixed rate products increased,
particularly with shorter fixed rate terms. 25% of mortgages due to reach the end of their incentive period in the next 12 months (2023: 22%).
Geographical distribution (audited)
The geographical distribution of our mortgage asset stock and new business was:
Stock
New business
2024
2023
2024
2023
Region
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
London
42.7
44.0
4.1
2.9
Midlands and East Anglia
23.1
24.2
2.0
1.8
North
21.7
22.9
1.9
1.7
Northern Ireland
2.3
2.6
0.1
0.1
Scotland
6.0
6.4
0.6
0.6
South East excluding London
52.3
54.8
4.6
3.8
South West, Wales and other
17.1
18.0
1.6
1.3
165.2
172.9
14.9
12.2
2024 compared to 2023
The portfolio's geographical distribution continued to represent a broad footprint across the UK, with a concentration around London and the South East. The loan-
to-income multiple of mortgage lending in the year, based on average earnings of new business at inception was 2.93 (2023: 2.98).
Mortgage loan size (audited)
The split of our mortgage asset by size was:
Mortgage loan size
2024
2023
>\u00a31.0m
2%
2%
\u00a30.5m to \u00a31.0m
10%
10%
\u00a30.25m to \u00a30.5m
31%
31%
<\u00a30.25m
57%
57%
Average loan size (stock) (1)
\u00a3193k
\u00a3187k
Average loan size (new business)
\u00a3246k
\u00a3228k
(1) Average initial advance of existing stock.
Loan-to-value analysis (audited)
This table shows the LTV distribution for the gross carrying amount and the related ECL of our total mortgage portfolio and Stage 3 mortgages, and new business.
We also show the collateral value and average LTV. We use our estimate of the property value at the balance sheet date and include fees that have been added to
the loan. For flexible products, we only include the drawn amount, not undrawn limits.
2024
2023
Stock
Stage 3
New
Stock
Stage 3
New
Total
ECL
Total
ECL
Business
Total
ECL
Total
ECL
Business
LTV
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Up to 50%
76,122
33
880
13
3,407
78,673
31
1,106
12
2,616
>50-60%
33,067
21
317
8
2,394
32,837
24
347
10
1,604
>60-70%
29,171
27
254
10
2,311
30,874
40
246
16
1,977
>70-80%
17,132
27
150
12
3,458
18,721
48
138
19
2,736
>80-90%
7,989
19
72
8
2,445
8,893
35
67
15
2,318
>90-100%
1,452
12
38
7
888
2,416
20
39
11
900
>100%
280
33
56
20
15
445
44
65
25
13
165,213
172
1,767
78
14,918
172,859
242
2,008
108
12,164
Collateral value (1)
165,176
\u00a0
1,756
\u00a0
14,918
172,803
1,997
12,164
%
%
%
%
%
%
Average LTV - Balance weighted(2)
51
51
64
51
49
66
(1) Collateral value is limited to the balance of each loan and excludes the impact of any over-collateralisation. Includes collateral against loans in negative equity of \u00a3244m (2023: \u00a3389m).
(2) Balance weighted LTV = (Loan 1 balance x (Loan 1 Balance/Loan 1 latest property valuation) + (Loan 2 balance x (loan 2 balance/Loan 2 latest property valuation) +\u00a0 ...) /(Loan 1 balance + Loan 2 balance+...).
The balance weighted average LTV of new business in the period in London was 64% (2023: 65%).
2024 compared to 2023
There were no significant changes in collateral quality in 2024. Balanced weighted average LTVs of stock were broadly flat, with a reduction in new business due to
elevated price competition in the market at higher LTVs. We monitor the profile of new lending and act as needed to ensure the LTV mix of completions is in line
with our risk appetite.
Credit performance (audited)
2024
2023
\u00a3m
\u00a3m
Mortgage loans and advances to customers
165,213
172,859
of which:
\u2013 Stage 1
146,758
152,975
\u2013 Stage 2
16,688
17,876
\u2013 Stage 3
1,767
2,008
Loss allowances(1)
172
242
%
%
Stage 1 ratio(2)
88.8
88.5
Stage 2 ratio(2)
10.1
10.3
Stage 3 ratio
1.08
1.17
(1) The ECL allowance is for both on and off\u2013balance sheet exposures.
(2) Stage 1/Stage 2 exposures as a percentage of customer loans.
Movement in total exposures and the corresponding ECL (audited)
The following tables show changes in total on and off-balance sheet exposures and ECL in the period. The footnotes to the Santander UK group level table on page
69 also apply to these tables.
Stage 1
Stage 2
Stage 3
Total
Exposures(1)
ECL
Exposures(1)
ECL
Exposures(1)
ECL
Exposures(1)
ECL
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2024
161,163
24
17,997
110
2,028
108
181,188
242
Transfers from Stage 1 to Stage 2(3)
(9,873)
(1)
9,873
1
\u2014
\u2014
\u2014
\u2014
Transfers from Stage 2 to Stage 1(3)
7,899
20
(7,899)
(20)
\u2014
\u2014
\u2014
\u2014
Transfers to Stage 3(3)
(230)
\u2014
(524)
(7)
754
7
\u2014
\u2014
Transfers from Stage 3(3)
3
\u2014
268
9
(271)
(9)
\u2014
\u2014
Transfers of financial instruments
(2,201)
19
1,718
(17)
483
(2)
\u2014
\u2014
Net ECL remeasurement on stage transfer(4)
\u2014
(19)
\u2014
31
\u2014
15
\u2014
27
Change in economic scenarios(2)
\u2014
(15)
\u2014
(29)
\u2014
1
\u2014
(43)
Change to ECL models
(1,859)
(3)
1,869
21
(10)
(37)
\u2014
(19)
New lending and assets purchased(5)
21,758
4
315
3
33
1
22,106
8
Redemptions, repayments and assets sold(7)
(21,925)
(1)
(3,162)
(14)
(762)
(27)
(25,849)
(42)
Changes in risk parameters and other movements(6)
332
1
(1,764)
(21)
46
28
(1,386)
8
Assets written off(7)
\u2014
\u2014
\u2014
\u2014
(33)
(9)
(33)
(9)
At 31 December 2024
157,268
10
16,973
84
1,785
78
176,026
172
Net movement in the period
(3,895)
(14)
(1,024)
(26)
(243)
(30)
(5,162)
(70)
ECL (release)/charge to the Income Statement
(14)
(26)
(21)
(61)
Less: Discount unwind
\u2014
\u2014
(3)
(3)
Less: Recoveries net of collection costs
\u2014
\u2014
36
36
Total ECL (release)/charge to the Income Statement
(14)
(26)
12
(28)
At 1 January 2023
176,965
25
13,533
131
1,848
95
192,346
251
Transfers from Stage 1 to Stage 2(3)
(10,791)
(3)
10,791
3
\u2014
\u2014
\u2014
\u2014
Transfers from Stage 2 to Stage 1(3)
4,778
30
(4,778)
(30)
\u2014
\u2014
\u2014
\u2014
Transfers to Stage 3(3)
(335)
(3)
(566)
(15)
901
18
\u2014
\u2014
Transfers from Stage 3(3)
14
\u2014
277
9
(291)
(9)
\u2014
\u2014
Transfers of financial instruments
(6,334)
24
5,724
(33)
610
9
\u2014
\u2014
Net ECL remeasurement on stage transfer(4)
\u2014
(28)
\u2014
40
\u2014
22
\u2014
34
Change in economic scenarios(2)
\u2014
\u2014
\u2014
(2)
\u2014
3
\u2014
1
Change to ECL models
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
New lending and assets purchased(5)
12,947
4
154
3
5
1
13,106
8
Redemptions, repayments and assets sold(7)
(23,081)
(6)
(1,752)
(12)
(417)
(14)
(25,250)
(32)
Changes in risk parameters and other movements(6)
666
5
338
(17)
36
3
1,040
(9)
Assets written off(7)
\u2014
\u2014
\u2014
\u2014
(54)
(11)
(54)
(11)
At 31 December 2023
161,163
24
17,997
110
2,028
108
181,188
242
Net movement in the period
(15,802)
(1)
4,464
(21)
180
13
(11,158)
(9)
ECL (release)/charge to the Income Statement
(1)
(21)
24
2
Less: Discount unwind
\u2014
\u2014
(3)
(3)
Less: Recoveries net of collection costs
\u2014
\u2014
28
28
Total ECL (release)/charge to the Income Statement
(1)
(21)
49
27
Loan modifications (audited)
Forbearance(1)
The following table sets out the financial assets that were forborne while they had a loss allowance measured at lifetime ECL.
2024
2023
\u00a3m
\u00a3m
Financial assets modified in the period:
\u2013 Amortised cost before modification
555
346
\u2013Net modification loss
2
5
Financial assets modified since initial recognition:
\u2013 Gross carrying amount of financial assets for which the loss allowance changed to 12 months ECL in the period
260
79
The balances at 31 December 2024 and 31 December 2023, analysed by their staging and the forbearance we applied, were:
Capitalisation
Term
extension
Interest-only
Concessionary
interest rate
Reduced
repayment
plan
Total
Loss
allowances
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Stage 2
231
186
201
23
145
786
6
Stage 3
203
141
53
104
156
657
27
434
327
254
127
301
1,443
33
Proportion of portfolio
0.3%
0.2%
0.2%
0.1%
0.2%
0.9%
2023
Stage 2
325
386
211
11
n/a
933
7
Stage 3
284
150
64
171
n/a
669
30
609
536
275
182
n/a
1,602
37
Proportion of portfolio
0.3%
0.3%
0.2%
0.1%
n/a
0.9%
(1) We base forbearance type on the first forbearance on the accounts.
At 31 December 2024, the proportion of the mortgage portfolio in forbearance was at 0.9% (2023: 0.9%) and the proportion of accounts in forbearance for more
than six months that had made their last six months\u2019 contractual payments was 83% (2023: 81%). The weighted average LTV of all accounts in forbearance was
45% (2023: 44%) compared to the weighted average portfolio LTV of 51% (2023: 51%).
At 31 December 2024, the carrying value of mortgages classified as multiple forbearance was \u00a39m (2023: \u00a3121m).
Credit performance (audited)
Of which: Portfolio of particular interest(1)
Total
Interest-only
Part interest-
only, part
repayment (2)
Flexible
LTV >100%
Buy-to-let
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Mortgage portfolio
165,213
36,188
11,873
4,333
280
14,931
\u2013 Stage 1
146,758
29,802
10,112
3,190
75
13,672
\u2013 Stage 2
16,688
5,572
1,542
933
149
1,204
\u2013 Stage 3
1,767
814
219
210
56
55
Stage 3 ratio
1.08%
2.27%
1.85%
5.25%
20.15%
0.37%
Properties in possession
46
23
8
8
10
2
Balance weighted LTV (indexed)
51%
48%
52%
38%
117%
59%
2023
Mortgage portfolio
172,859
38,825
12,584
5,418
445
15,585
\u2013 Stage 1
152,975
32,012
10,896
4,420
276
13,887
\u2013 Stage 2
17,876
5,829
1,449
744
104
1,647
\u2013 Stage 3
2,008
984
239
254
65
51
Stage 3 ratio
1.17%
2.55%
1.90%
5.01%
14.57%
0.33%
Properties in possession
23
12
3
2
5
1
Balance weighted LTV (indexed)
51%
48%
51%
37%
116%
60%
(1) Where a loan falls into more than one category, we include it in all the categories that apply.
(2) Mortgage balance includes both the interest-only part of \u00a39,046m ( 2023: \u00a39,531m) and the non-interest-only part of the loan.
2024 compared to 2023
In 2024, the combined total proportion of interest-only loans, part interest-only, part repayment loans and flexible loans decreased to 31.7% (2023: 32.9%).
BTL mortgage balances decreased by \u00a30.7bn to \u00a314.9bn (2023: \u00a315.6bn) driven by our strategy to deleverage our mortgage portfolio and changes in the market
dynamic. In 2024, the balance weighted average LTV of mortgage total new BTL lending was 59% (2023: 58%).
Forbearance(1) (audited)
The balances at 31 December 2024 and 31 December 2023 were:
Interest-only(2)
Flexible
LTV >100%
Buy-to-Let
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Total
272
56
9
18
\u2013 Stage 2
115
19
2
8
\u2013 Stage 3
157
37
7
10
2023
Total
365
74
12
23
\u2013 Stage 2
216
55
3
16
\u2013 Stage 3
149
19
9
7
(1) Where a loan falls into more than one category, we have included it in all the categories that apply.
(2) Comprises full interest-only loans and part interest-only, part repayment loans.
2024 compared to 2023
New mortgage forbearance stock reduced, mainly due to portfolio sales, lower interest-only maturities and the improvement of our risk profile.
Credit performance (audited)
Business
banking
Other unsecured
Personal
loans
Credit
cards
Overdrafts
Total other
unsecured
Total
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Loans and advances to customers
1,212
2,089
2,774
436
5,299
6,511
of which:
\u2013 Stage 1
1,042
1,892
2,271
235
4,398
5,440
\u2013 Stage 2
85
172
454
172
798
883
\u2013 Stage 3
85
25
49
29
103
188
Loss allowances(1)
16
63
150
57
270
286
Stage 3 undrawn exposures
2
\u2014
28
4
32
34
Stage 3 ratio
7.10%
1.20%
2.75%
7.40%
2.52%
3.37%
Gross write-offs (12 months)
10
60
51
26
137
147
2023
Loans and advances to customers
1,819
2,064
2,674
471
5,209
7,028
of which:
\u2013 Stage 1
1,574
1,743
2,283
207
4,233
5,807
\u2013 Stage 2
115
294
345
236
875
990
\u2013 Stage 3
130
27
46
28
101
231
Loss allowances(1)
16
66
140
78
284
300
Stage 3 undrawn exposures
2
\u2014
33
4
37
39
Stage 3 ratio
7.25%
1.32%
2.95%
6.73%
2.65%
3.83%
Gross write-offs (12 months)
11
48
46
25
119
130
(1) The ECL allowance is for both on and off\u2013balance sheet exposures.
2024
2023
% of credit card customers that repay balance in full each month (unaudited)
56%
55%
UPL average customer balance (\u00a3)
6,000
6,000
2024 compared to 2023
Business Banking loans continued to reduce due to the pay down of the BBL portfolio. Other unsecured Stage 2 loans reduced driven by Personal loans and
Overdrafts, due to the release of the cost of living JAs. Credit card balances increased due to the impact of our SICR updates in the year. Other unsecured Stage 3
assets remained stable in 2024. Gross write-offs increased in the year, primarily driven by Personal loans, reflecting the current economic environment.
Loan modifications (audited)
Forbearance
The following table sets out the financial assets that were forborne while they had a loss allowance measured at lifetime ECL.
Credit cards
Overdrafts
Total
2024
\u00a3m
\u00a3m
\u00a3m
Financial assets modified in the period:
\u2013 Amortised cost before modification
14
9
23
\u2013 Net modification loss
18
6
24
Financial assets modified since initial recognition:
\u2013 Gross carrying amount of financial assets for which the loss allowance changed to 12m ECL in the period
2
1
3
2023
Financial assets modified in the period:
\u2013 Amortised cost before modification
13
8
21
\u2013 Net modification loss
14
6
20
Financial assets modified since initial recognition:
\u2013 Gross carrying amount of financial assets for which the loss allowance changed to 12m ECL in the period
2
1
3
The balances at 31 December 2024 and 31 December 2023 were:
Other unsecured
Business
banking
Personal loans
Credit cards
Overdrafts
Total other
unsecured
Total
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Total
3
2
57
22
81
84
\u2013 Stage 2
\u2014
1
11
5
17
17
\u2013 Stage 3
3
1
46
17
64
67
2023
Total
3
1
47
19
67
70
\u2013 Stage 2
\u2014
1
5
2
8
8
\u2013 Stage 3
3
\u2014
42
17
59
62
Other loan modifications
There were no other loan modifications made in 2024 and 2023.
Credit performance (audited)
2024
2023
\u00a3m
\u00a3m
Loans and advances to customers
4,759
5,228
of which:
\u2013 Stage 1
4,389
4,870
\u2013 Stage 2
334
330
\u2013 Stage 3
36
28
Loss allowances(1)
69
70
Stage 3 ratio
0.77%
0.53%
Gross write-offs
25
23
(1) The ECL allowance is for both on and off\u2013balance sheet exposures.
2024
2023
Consumer (auto) finance new business gross lending (\u00a3m)
1,593
2,055
Wholesale loans (stock finance) to car dealerships as approximate % of the Consumer loan book
9.7%
9.9%
% of lending collateralised on the vehicle
95%
87%
Average Consumer (auto) finance loan size (\u00a3)
16,045
17,308
2024 compared to 2023
In 2024, we maintained our prudent Consumer (auto) finance underwriting criteria. The product mix was broadly unchanged, with wholesale balances
decreasing\u00a0slightly.
The risk profile was stable in terms of our credit scoring acceptance policies. The overall risk performance was good with the vast majority of customers paying.
Loan modifications (audited)
Forbearance
At 31 December 2024 the amount of forborne assets net of deferred income was \u00a35.4m (2023: \u00a3nil).
Other loan modifications
There were no other loan modifications made in 2024.
The gross carrying amount of financial assets for which the ECL allowance changed to a 12-month measurement at 31 December 2024 was \u00a36m (2023: \u00a330m).
Movement in total exposures and the corresponding ECL (audited)
The following tables show changes in total on and off-balance sheet exposures and ECL in the period. The footnotes to the Santander UK group level table on page
69 also apply to these tables.
Stage 1
Stage 2
Stage 3
Total
Exposures(1)
ECL
Exposures(1)
ECL
Exposures(1)
ECL
Exposures(1)
ECL
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2024
22,567
76
3,965
132
745
172
27,277
380
Transfers from Stage 1 to Stage 2(3)
(1,101)
(3)
1,101
3
\u2014
\u2014
\u2014
\u2014
Transfers from Stage 2 to Stage 1(3)
781
13
(781)
(13)
\u2014
\u2014
\u2014
\u2014
Transfers to Stage 3(3)
(84)
(1)
(230)
(12)
314
13
\u2014
\u2014
Transfers from Stage 3(3)
24
1
121
18
(145)
(19)
\u2014
\u2014
Transfers of financial instruments
(380)
10
211
(4)
169
(6)
\u2014
\u2014
Net ECL remeasurement on stage transfer(4)
\u2014
(9)
\u2014
(4)
\u2014
54
\u2014
41
Change in economic scenarios(2)
\u2014
(3)
\u2014
(7)
\u2014
(1)
\u2014
(11)
Change to ECL models
(222)
(2)
286
(11)
(64)
12
\u2014
(1)
New lending and assets purchased(5)
8,485
20
552
21
118
29
9,155
70
Redemptions, repayments and assets sold(7)
(5,203)
(24)
(1,149)
(29)
(254)
(42)
(6,606)
(95)
Changes in risk parameters and other movements(6)
(2,224)
5
(1,297)
(13)
82
15
(3,439)
7
Assets written off (7)
\u2014
\u2014
\u2014
\u2014
(80)
(49)
(80)
(49)
At 31 December 2024
23,023
73
2,568
85
716
184
26,307
342
Net movement in the period
456
(3)
(1,397)
(47)
(29)
12
(970)
(38)
ECL (release)/charge to the Income Statement
(3)
(47)
61
11
Less: Discount unwind
\u2014
\u2014
(12)
(12)
Less: Recoveries net of collection costs
\u2014
\u2014
5
5
Total ECL (release)/charge to the Income Statement
(3)
(47)
54
4
Stage 1
Stage 2
Stage 3
Total
Exposures(1)
ECL
Exposures(1)
ECL
Exposures(1)
ECL
Exposures(1)
ECL
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2023
23,838
83
3,888
166
572
145
28,298
394
Transfers from Stage 1 to Stage 2(3)
(1,376)
(1)
1,376
1
\u2014
\u2014
\u2014
\u2014
Transfers from Stage 2 to Stage 1(3)
512
10
(512)
(10)
\u2014
\u2014
\u2014
\u2014
Transfers to Stage 3(3)
(118)
(3)
(258)
(8)
376
11
\u2014
\u2014
Transfers from Stage 3(3)
1
\u2014
9
1
(10)
(1)
\u2014
\u2014
Transfers of financial instruments
(981)
6
615
(16)
366
10
\u2014
\u2014
Net ECL remeasurement on stage transfer(4)
\u2014
(16)
\u2014
29
\u2014
64
\u2014
77
Change in economic scenarios(2)
\u2014
30
\u2014
(30)
\u2014
6
\u2014
6
New lending and assets purchased(5)
7,257
5
132
6
38
10
7,427
21
Redemptions, repayments and assets sold(7)
(6,713)
(13)
(869)
(10)
(193)
(23)
(7,775)
(46)
Changes in risk parameters and other movements(6)
(834)
(19)
199
(13)
137
28
(498)
(4)
Assets written off (7)
\u2014
\u2014
\u2014
\u2014
(175)
(68)
(175)
(68)
At 31 December 2023
22,567
76
3,965
132
745
172
27,277
380
Net movement in the period
(1,271)
(7)
77
(34)
173
27
(1,021)
(14)
ECL (release)/charge to the Income Statement
(7)
(34)
95
54
Less: Discount unwind
\u2014
\u2014
(9)
(9)
Less: Recoveries net of collection costs
\u2014
\u2014
(5)
(5)
Total ECL (release)/charge to the Income Statement
(7)
(34)
81
40
Rating distribution (audited)
These tables show our credit risk exposure according to our internal rating scale (see the \u2018Santander UK group level \u2013 credit risk review\u2019 section) for each portfolio.
On this scale, the higher the rating, the better the quality of the counterparty.
Santander UK risk grade
9
8
7
6
5
4
3 to 1
Other
Total(1)
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
SME and mid corporate
\u2014
253
723
3,170
4,295
3,013
1,589
82
13,125
Commercial Real Estate
\u2014
\u2014
567
1,913
2,460
620
309
\u2014
5,869
Social Housing
13
1,983
5,868
\u2014
\u2014
\u2014
\u2014
\u2014
7,864
13
2,236
7,158
5,083
6,755
3,633
1,898
82
26,858
Of which:
Stage 1
13
2,236
7,115
4,991
6,159
2,597
382
82
23,575
Stage 2
\u2014
\u2014
43
92
596
1,036
800
\u2014
2,567
Stage 3
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
716
\u2014
716
2023
SME and mid corporate
\u2014
166
911
2,970
3,497
3,575
1,439
118
12,676
Commercial Real Estate
\u2014
\u2014
360
1,684
2,132
972
209
1
5,358
Social Housing
43
3,032
4,881
\u2014
\u2014
\u2014
\u2014
\u2014
7,956
43
3,198
6,152
4,654
5,629
4,547
1,648
119
25,990
Of which:
Stage 1
43
3,130
6,152
4,618
4,715
2,363
141
118
21,280
Stage 2
\u2014
68
\u2014
36
914
2,184
762
1
3,965
Stage 3
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
745
\u2014
745
(1) Credit risk exposures include derivatives exposures. For invoice finance the credit risk exposures represent the full facility limit present on the credit agreement papers, a total limit before consideration of
underlying collaterals and application of prepayment caps for any given point.
Geographical distribution (audited)
We typically classify geographical location according to the counterparty\u2019s country of domicile unless a full risk transfer guarantee is in place, in which case we use
the guarantor\u2019s country of domicile instead. At 31 December 2024 and 31 December 2023 this is mainly focused in the UK.
Credit risk mitigation (audited)
Gross exposure
Collateral
Net exposure
Stage 3
Stage 3
Stage 3
2024
\u00a3m
\u00a3m
\u00a3m
SME and mid corporate
639
209
430
Commercial Real Estate
77
71
6
716
280
436
2023
SME and mid corporate
627
190
437
Commercial Real Estate
118
28
90
745
218
527
Credit performance (audited)
We monitor exposures that show potentially higher risk characteristics using our Watchlist process. The table below shows the exposures we monitor, and those
we classify as Stage 3 by portfolio at 31 December 2024 and 31 December 2023.
Committed exposure
Watchlist
Fully
performing
Enhanced
monitoring
Proactive
management
Stage 3
Total(1)
Loss
allowances
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
SME and mid corporate
10,851
570
1,065
639
13,125
315
Commercial Real Estate
5,440
51
301
77
5,869
26
Social Housing
7,440
\u2014
424
\u2014
7,864
1
23,731
621
1,790
716
26,858
342
2023
SME and mid corporate
10,140
462
1,447
627
12,676
341
Commercial Real Estate
4,734
10
496
118
5,358
39
Social Housing
7,752
\u2014
204
\u2014
7,956
\u2014
22,626
472
2,147
745
25,990
380
(1) Includes committed facilities and derivatives.
2024 compared to 2023
The watchlist exposures decreased by 7.9%, with a reduction in Proactive management of 16.6%, and an increase in Enhanced Monitoring of 31.6%. The increase in
Enhanced Monitoring was due to a small number of large exposures moving from Proactive management.
Loan modifications (audited)
Forbearance
The following table sets out the financial assets that were forborne while they had a loss allowance measured at lifetime ECL.
2024
2023
\u00a3m
\u00a3m
Financial assets modified in the period:
\u2013 Amortised cost before modification
232
189
\u2013 Net modification loss
5
10
Financial assets modified since initial recognition:
\u2013 Gross carrying amount of financial assets for which the loss allowance changed to 12-month ECL in the period
15
27
We only make forbearance arrangements for lending to customers. The balances at 31 December 2024 and 31 December 2023, analysed by their staging and the
forbearance we applied, were:
2024
2023
\u00a3m
\u00a3m
Stock(1)
\u2013 Term extension
102
113
\u2013 Interest-only
229
215
\u2013 Other payment rescheduling
373
264
704
592
Of which:
\u2013 Stage 1
40
2
\u2013 Stage 2
228
159
\u2013 Stage 3
436
431
704
592
Proportion of portfolio
2.6%
2.3%
(1) We base forbearance type on the first forbearance we applied. Tables only show accounts open at the period-end. Amounts are drawn balances and include off balance sheet balances.
Committed exposures
Rating distribution (audited)
Corporate Centre committed exposures mainly comprise Sovereign exposures and Structured Products (High Quality Liquid Assets, mainly Asset Backed Securities
and covered bonds) managed as part of our Eligible Liquidity Pool. These are low risk, high quality, investment grade exposures with a credit rating of 8 or 9
according to our internal rating scale (see the \u2018Santander UK group level \u2013 credit risk review\u2019 section).
Geographical distribution (audited)
We typically classify geographical location according to the counterparty\u2019s country of domicile unless a full risk transfer guarantee is in place, in which case we use
the guarantor\u2019s country of domicile instead. At 31 December 2024 and 31 December 2023 this was mainly focused in the UK.
Credit performance (audited)
We monitor exposures that show potentially higher risk characteristics using our Watchlist process. In Corporate Centre, committed exposures were all fully
performing at 31 December 2024 and 31 December 2023.
Loan modifications (audited)
There were no loan modifications made in 2024 and 2023.
", "dimensions": { "concept": "ifrs-full:DisclosureOfCreditRiskExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-3": { "value": "
OUR KEY LIQUIDITY RISKS (audited)
Through our Liquidity Risk Appetite (LRA) framework, we manage our market liquidity risks, funding or structural liquidity risk, contingent liquidity risk, wherever
they arise. This can be in retail and corporate deposit outflows, outflows in wholesale secured and unsecured funding and off-balance sheet activities. Other risks
our framework covers include funding concentrations, intra-day cash flows, intra-group commitments and support, franchise retention and cross currency risk.
Our main sources of liquidity
Customer deposits finance most of our customer lending. Although these funds are mostly callable, in practice they give us a stable and predictable core of funding.
This is due to the nature of retail accounts and the breadth of our retail customer relationships.
We have a strong wholesale funding investor base, diversified across product types and geographies. Through the wholesale markets, we have active relationships
in many sectors including banks, other financial institutions, corporates, pensions and investment funds. We access the wholesale funding markets through the
issuance of capital, senior unsecured debt, covered bonds, structured notes and short-term funding. We also access these markets through securitisations of certain
assets of Santander UK plc and our operating subsidiaries. For more on our programmes, see Notes 14, 25 and 29 to the Consolidated Financial Statements.
We generate funding on the strength of our own balance sheet, our own profitability and our own network of investors. In addition, we have access to UK
Government funding schemes. We comply with rules set by the PRA, other regulators, and Banco Santander standards. While we consolidate, manage and monitor
liquidity risk centrally, we also manage and monitor it in the business area it comes from.
Our main uses of liquidity
Our main uses of liquidity are to fund our lending, to pay interest and dividends, and to repay debt. Our ability to pay dividends depends on various factors. These
include our regulatory capital needs, the level of our distributable reserves, and our financial performance.
Risk mitigation (audited)
The Board aims to make our balance sheet resilient at all times and for it to be perceived as such by stakeholders. This preserves our short and long-term viability.
The Board recognises that as we are involved in maturity transformation, we cannot hold enough liquidity to cover all possible stress scenarios. The Board requires
us to hold enough liquidity to make sure we will survive three plausible but severe stress scenarios (our LRA stress test, described above). We do this by maintaining
a prudent balance sheet structure and approved liquid resources.
Recovery and Resolution framework
The CFO is the accountable SMF for recovery and resolution and the related work is managed by the CFO division. The work is overseen by the Board Audit
Committee and the Board. We review and refresh our recovery plan each year. It sets out the risks, the indicators we use to monitor those risks, and the actions that
are available to mitigate\u00a0a capital, liquidity or combined stress event. We are confident that we have sufficient credible and executable options to respond to a wide
range of stresses, be they market-wide or idiosyncratic, in a timely and effective manner. Recovery indicators are both qualitative and quantitative and we have
embedded them into our risk frameworks. We monitor our recovery capacity, headroom to recovery triggers and recovery indicators regularly. If needed, we would
invoke recovery early to mitigate the effects of a stress and restore our financial position and balance sheet strength.
Our resolution capabilities are underpinned by comprehensive governance, testing and assurance arrangements, which seek to ensure that we maintain and
enhance our resolution readiness on an ongoing basis.
Risk monitoring and reporting (audited)
We monitor liquidity risk daily, weekly and monthly. We do this through different committees and levels of management, including ALCO and the BRC.
Reconciliation of wholesale funding to the balance sheet (audited)
This table reconciles our wholesale funding to our balance sheet at 31 December 2024 and 31 December 2023.
Balance sheet line item
Funding
analysis
Deposits
by banks (1)
Deposits
by customers (2)
Repurchase
agreements
- non
trading
Financial
liabilities
designated
at fair value
Debt
securities
in issue
Subordinated
liabilities
Other equity
instruments (3)
2024
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Deposits by banks
1.4
1.4
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Certificates of deposit and commercial paper
4.5
\u2014
\u2014
\u2014
\u2014
4.5
\u2014
\u2014
Senior unsecured \u2013 public benchmark
11.1
\u2014
1.7
\u2014
\u2014
9.4
\u2014
\u2014
\u2013 privately placed
1.1
\u2014
0.1
\u2014
0.4
0.6
\u2014
\u2014
Covered bonds
17.4
\u2014
\u2014
\u2014
\u2014
17.4
\u2014
\u2014
Securitisation and structured issuance(4)
5.1
\u2014
\u2014
\u2014
\u2014
5.1
\u2014
\u2014
TFSME
11.0
11.0
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Subordinated liabilities and equity
4.1
\u2014
\u2014
\u2014
\u2014
\u2014
2.2
1.9
Total wholesale funding
55.7
12.4
1.8
\u2014
0.4
37.0
2.2
1.9
Repos
8.6
\u2014
\u2014
8.6
\u2014
\u2014
\u2014
\u2014
Foreign exchange and hedge accounting
(0.4)
\u2014
\u2014
\u2014
\u2014
(0.6)
0.2
\u2014
Other
1.6
1.6
\u2014
\u2014
0.7
(0.7)
\u2014
\u2014
Balance sheet total
65.5
14.0
1.8
8.6
1.1
35.7
2.4
1.9
2023
Deposits by banks
1.1
1.1
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Certificates of deposit and commercial paper
4.3
\u2014
\u2014
\u2014
\u2014
4.3
\u2014
\u2014
Senior unsecured \u2013 public benchmark
12.7
\u2014
1.6
\u2014
\u2014
11.1
\u2014
\u2014
\u2013 privately placed
0.8
\u2014
0.1
\u2014
0.6
0.1
\u2014
\u2014
Covered bonds
14.8
\u2014
\u2014
\u2014
\u2014
14.8
\u2014
\u2014
Securitisation and structured issuance(4)
2.7
\u2014
\u2014
\u2014
\u2014
2.7
\u2014
\u2014
TFSME
17.0
17.0
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Subordinated liabilities and equity
4.2
\u2014
\u2014
\u2014
\u2014
\u2014
2.2
2.0
Total wholesale funding
57.6
18.1
1.7
\u2014
0.6
33.0
2.2
2.0
Repos
8.4
\u2014
\u2014
8.4
\u2014
\u2014
\u2014
\u2014
Foreign exchange and hedge accounting
1.1
\u2014
\u2014
\u2014
\u2014
0.9
0.2
\u2014
Other
2.5
2.2
\u2014
\u2014
0.3
\u2014
\u2014
\u2014
Balance sheet total
69.6
20.3
1.7
8.4
0.9
33.9
2.4
2.0
(1)Consists of Perpetual Capital Securities. See Note 32 to the Consolidated Financial Statements.
(2)This is included in our balance sheet total of\u00a3180,967m (2023:\u00a3190,850m).
(3)Other consists of items in the course of transmission and other deposits. See Note 21 to the Consolidated Financial Statements.
(4)Includes Residential Mortgage-Backed Securities (RMBS) and Asset-Backed Securities (ABS) of \u00a33.9bn (2023: \u00a32.8bn).
Maturity profile of wholesale funding (audited)
This table shows our main sources of wholesale funding. It does not include securities finance agreements. The table is based on exchange rates at issue and
scheduled repayments and call dates. It does not reflect the final contractual maturity of the funding.
For details of the maturities of financial liabilities and off-balance sheet commitments, see Note 38 to the Consolidated Financial Statements .
\u2264 1
month
>1 and \u2264 3
months
>3 and \u2264 6
months
>6 and \u2264 9
months
>9 and \u2264
12 months
Sub-total
\u2264 1 year
>1 and
\u2264 2 years
>2 and
\u2264 5 years
>5 years
Total
2024
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Downstreamed from Santander UK Group Holdings plc to Santander UK plc(1)
Senior unsecured \u2013 public benchmark
\u2014
\u2014
0.4
0.7
1.3
2.4
2.0
5.6
0.4
10.4
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u2013privately placed
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
0.1
\u2014
0.1
Subordinated liabilities and equity (incl. AT1)
\u2014
0.5
\u2014
0.3
\u2014
0.8
0.2
1.4
1.0
3.4
\u2014
0.5
0.4
1.0
1.3
3.2
2.2
7.1
1.4
13.9
Other Santander UK plc
Deposits by banks
0.8
0.6
\u2014
\u2014
\u2014
1.4
\u2014
\u2014
\u2014
1.4
Certificates of deposit and commercial paper
1.6
2.8
0.1
\u2014
\u2014
4.5
\u2014
\u2014
\u2014
4.5
Senior unsecured \u2013 public benchmark
\u2014
0.4
\u2014
\u2014
\u2014
0.4
\u2014
0.3
\u2014
0.7
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u2013privately placed
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
0.3
0.7
1.0
Covered bonds
0.9
\u2014
\u2014
0.2
0.1
1.2
4.0
11.1
1.1
17.4
Securitisation & structured issuance(2)
\u2014
0.5
0.8
\u2014
\u2014
1.3
0.3
3.0
\u2014
4.6
TFSME
\u2014
\u2014
\u2014
\u2014
7.1
7.1
2.5
\u2014
1.4
11.0
Subordinated liabilities
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
0.2
0.5
0.7
3.3
4.3
0.9
0.2
7.2
15.9
6.8
14.9
3.7
41.3
Other group entities
Securitisation & structured issuance(3)
\u2014
\u2014
0.5
\u2014
\u2014
0.5
\u2014
\u2014
\u2014
0.5
Total at 31 December 2024
3.3
4.8
1.8
1.2
8.5
19.6
9.0
22.0
5.1
55.7
Of which:
\u2013 Secured
0.9
0.5
1.3
0.2
7.2
10.1
6.8
14.1
2.5
33.5
\u2013 Unsecured
2.4
4.3
0.5
1.0
1.3
9.5
2.2
7.9
2.6
22.2
Total at 31 December 2023
1.4
7.3
1.6
0.5
1.1
11.9
22.3
19.7
3.7
57.6
Of which:
\u2013 Secured
0.1
1.0
0.9
0.4
1.1
3.5
18.6
11.3
1.1
34.5
\u2013 Unsecured
1.3
6.3
0.7
0.1
\u2014
8.4
3.7
8.4
2.6
23.1
(1) 95% of senior unsecured debt issued from Santander UK Group Holdings plc has been downstreamed to Santander UK plc as \u2018secondary non-preferential debt\u2019 in line with the guidelines from the Bank of England
for Internal MREL.
(2) Includes funding from mortgage-backed securitisation vehicles where Santander UK plc is the asset originator.
(3) Includes funding from asset-backed securitisation vehicles where entities other than Santander UK plc are the asset originator.
Currency composition of wholesale funds (audited)
This table shows our wholesale funding by major currency at 31 December 2024 and 31 December 2023.
2024
2023
Sterling
US Dollar
Euro
Other
Sterling
US Dollar
Euro
Other
%
%
%
%
%
%
%
%
Downstreamed from Santander UK Group Holdings plc to Santander UK plc
Senior unsecured \u2013 public benchmark
25
62
12
1
23
60
17
\u2014
\u2013 privately placed
\u2014
\u2014
\u2014
100
\u2014
\u2014
\u2014
100
Subordinated liabilities and equity (incl. AT1)
89
11
\u2014
\u2014
87
13
\u2014
\u2014
42
48
9
1
38
48
13
1
Other Santander UK plc
Deposits by banks
1
97
2
\u2014
1
97
2
\u2014
Certificates of deposit and commercial paper
24
67
8
1
29
70
\u2014
1
Senior unsecured \u2013 public benchmark
48
\u2014
52
\u2014
21
56
23
\u2014
\u2013 privately placed
100
\u2014
\u2014
\u2014
98
\u2014
2
\u2014
Covered bonds
48
9
40
3
54
5
39
2
Securitisation & structured issuance
100
\u2014
\u2014
\u2014
100
\u2014
\u2014
\u2014
TFSME
100
\u2014
\u2014
\u2014
100
\u2014
\u2014
\u2014
Subordinated liabilities
76
24
\u2014
\u2014
76
24
\u2014
\u2014
65
15
19
1
71
14
15
\u2014
Other group entities
Securitisation & structured issuance
100
\u2014
\u2014
\u2014
100
\u2014
\u2014
\u2014
Total
59
23
16
2
63
23
14
\u2014
Term issuance (audited)
In 2024, our external term issuance (sterling equivalent) was:
Sterling
US Dollar
Euro
Other
Total 2024
Total 2023
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Downstreamed from Santander UK Group Holdings plc to Santander UK plc
Senior unsecured \u2013 public benchmark
\u2014
0.8
\u2014
\u2014
0.8
1.5
Subordinated debt and equity (inc. AT1)
0.4
\u2014
\u2014
\u2014
0.4
1.1
0.4
0.8
\u2014
\u2014
1.2
2.6
Other Santander UK plc
Securitisations and other secured funding
1.2
\u2014
\u2014
\u2014
1.2
1.5
Covered bonds
2.2
0.8
2.6
0.3
5.9
1.8
Senior unsecured \u2013 privately placed
0.5
\u2014
\u2014
\u2014
0.5
0.3
3.9
0.8
2.6
0.3
7.6
3.6
Other group entities
Securitisations
\u2014
\u2014
\u2014
\u2014
\u2014
0.5
Total gross issuances
4.3
1.6
2.6
0.3
8.8
6.7
2024 compared to 2023
Together with our immediate parent, Santander UK Group Holdings plc, our overall funding strategy remains to develop and sustain a diversified funding base. We
also need to fulfil regulatory requirements as well as support our credit ratings. We have stable and diversified wholesale funding programmes.
In 2024 we issued \u00a38.4bn Sterling equivalent medium-term funding, including Covered bond, Senior unsecured and RMBS issuances. We repaid \u00a36.0bn of TFSME
in 2024 as planned, with an outstanding balance of \u00a311.0bn at 31 December 2024. \u00a37.1bn is due for repayment in October 2025, \u00a32.5bn in 2027, and the
remaining \u00a31.4bn. in 2031. We expect to issue \u00a310-\u00a312bn of medium-term funding in 2025, including \u00a33.7bn equivalent already issued.
At 31 December 2024, 65% (2023: 79%) of wholesale funding had a maturity of greater than one year, with an overall residual duration of 37 months (2023: 35
months).
On-balance sheet encumbered assets (audited)
Encumbered with counterparties other than central banks
Assets
positioned
at central
banks(3)
Covered
bonds
Securitis-
ations
Other
Total
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cash and balances at central banks(1)(2)
\u2014
\u2014
1,580
1,580
\u2014
Loans and advances to customers
25,695
7,026
68
32,789
49,888
Loans and advances to banks
\u2014
\u2014
139
139
\u2014
Repurchase agreements \u2013 non trading
\u2014
\u2014
\u2014
\u2014
\u2014
Other financial assets at amortised cost
\u2014
\u2014
1,529
1,529
\u2014
Financial assets at fair value through other comprehensive income
\u2014
\u2014
3,920
3,920
584
Total assets
25,695
7,026
7,236
39,957
50,472
2023
Cash and balances at central banks(1)(2)
\u2014
\u2014
1,480
1,480
831
Loans and advances to customers
21,880
5,208
59
27,147
58,489
Loans and advances to banks
\u2014
\u2014
254
254
\u2014
Repurchase agreements \u2013 non trading
\u2014
\u2014
\u2014
\u2014
\u2014
Other financial assets at amortised cost
\u2014
\u2014
14
14
\u2014
Financial assets at fair value through other comprehensive income
\u2014
\u2014
5,183
5,183
\u2014
Total assets
21,880
5,208
6,990
34,078
59,320
(1) Encumbered cash and balances at central banks include minimum cash balances we have to hold at central banks for regulatory purposes.
(2) Readily realisable cash and balances at central banks are amounts held at central banks as part of our liquidity management activities.
(3) Comprises pre-positioned assets and encumbered assets.
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Capital risk
Overview
Capital risk is the risk that we do not have an adequate amount or quality of capital to
meet our business objectives, regulatory requirements and market expectations.
In this section, we set out how we are regulated. We explain how we manage capital on
a standalone basis as a subsidiary in the Banco Santander group. We then analyse our
capital resources and key capital ratios including our RWAs.
Key metrics
CET1 capital ratio of 14.9% (2023: 15.4%)
Total qualifying regulatory capital of \u00a313.7bn (2023: \u00a314.6bn)
Regulatory supervision
For capital purposes, we are subject to prudential supervision by the PRA, as a UK banking group, and by the European Central Bank (ECB) as part of the Banco
Santander group. The ECB supervises Banco Santander as part of the Single Supervisory Mechanism (SSM). Although we are part of the Banco Santander group, we
do not have a guarantee from Banco Santander SA and we operate as a standalone subsidiary. As we are part of the UK sub-group regulated by the PRA, we have to
meet the PRA capital requirements on a standalone basis. We also have to show the PRA that we can withstand capital stresses without the support of our ultimate
parent, Banco Santander SA. Reinforcing our corporate governance framework, the PRA exercises oversight through its rules and regulations on the Board and
senior management appointments.
Santander UK Group Holdings plc is the holding company of Santander UK plc and is the head of the Santander UK group for regulatory capital and leverage
purposes. Santander UK plc is the head of the ring-fenced bank sub-group and is subject to regulatory capital and leverage rules in relation to that sub-group. Our
basis of consolidation for our capital disclosures is substantially the same as for our Consolidated Financial Statements.
CAPITAL RISK MANAGEMENT
Risk appetite
The Board is responsible for capital management strategy and policy and ensuring that we monitor and control our capital within regulatory and internal limits. We
manage our funding and maintain capital adequacy on a standalone basis. We operate within the capital risk framework and appetite approved by our Board. This
reflects the environment we operate in, our strategy for each material risk and the potential impact of adverse scenarios or stresses on our capital.
Management of capital requirements (audited)
Our capital risk appetite aims to maintain capital levels appropriate to the level of stress applied, and the expected regulatory response. In:
\u2013 An adverse economic stress, which we expect once in 20 years, we should remain profitable and exceed all regulatory capital minimums at all times.
\u2013 A very severe economic stress, which we expect once in 100 years, and which has been designed to test any specific weaknesses of our business model, we
should meet all regulatory capital minimums at all times. This is subject to using regulatory buffers designed to absorb losses in such a stress.
Risk measurement
We apply Banco Santander\u2019s approach to capital measurement and risk management for CRD IV. Santander UK plc is classified as a large subsidiary of Banco
Santander SA. For more on the CRD IV risk measurement of our exposures, see Banco Santander\u2019s Pillar 3 report. For more on our capital, see our Additional Capital
and Risk Management Disclosures on our website: aboutsantander.co.uk.
Management of capital resources (audited)
We use a mix of regulatory and EC ratios and limits, internal buffers and restrictions to manage our capital resources. We also take account of the costs of differing
capital instruments and capital management techniques. We also use these to shape the best structure for our capital needs. We decide how to allocate our capital
resources as part of our strategic planning process. We base this in part on the relative returns on capital using both EC and regulatory capital measures. We plan
for severe stresses and we set out what action we would take if an extremely severe stress threatened our viability and solvency. This could include not paying
dividends, selling assets, reducing our business and issuing more capital.
Key metrics
The main metrics we use to measure capital risk are CET1 capital ratio, total capital ratio and UK leverage ratio. We continue to be in excess of overall capital
requirements, minimum leverage requirements and minimum requirements for own funds and eligible liabilities (Internal MREL).
Stress testing
Each year we create a capital plan, as part of our ICAAP. We share our ICAAP with the PRA. The PRA then tells us how much capital (Pillar 2A), and of what quality,
it\u00a0thinks we should hold on top of our Pillar 1 requirements and buffer levels. We also develop a series of economic scenarios to stress test our capital needs and
confirm that we have enough regulatory capital to meet our projected and stressed capital needs and to meet our obligations as they fall due.
Our CISA was developed to understand the impact of climate change on our business. We invested in a strategic solution which delivers the capability to run long-
term horizon multi-scenario assessments which reflect a range of climate outcomes. These outcomes cover shorter and longer-term horizons and reflect physical
and transition risks. The CISA outputs are used in our future ICAAP exercises for climate risk and will help us prioritise our actions for the next five years.
We augment our regulatory minimum capital with internal buffers. We hold buffers to ensure we have enough time to act against unexpected changes.
Risk mitigation
We designed our capital risk framework, policies and procedures to ensure that we operate within our Risk Appetite. We manage capital transferability between our
subsidiaries in line with our business strategy, risk and capital management policies, and UK laws and regulations. There are no legal restrictions on us moving
capital resources promptly, or repaying liabilities, between the Company and its subsidiaries except for loans and distributions between Santander UK entities in the
ring-fenced bank sub-group and Santander UK entities that are not members of the ring-fenced bank sub-group, where the PRA is required to assess the impact of
proposed distribution prior to payment. For details on our Recovery framework in the event of a capital stress, see 'risk mitigation' in the \u2018Liquidity risk\u2019 section.
Capital support arrangements
At 31 December 2024, Santander UK plc, Cater Allen Limited, Santander ISA Managers Limited and certain other non-regulated subsidiaries of Santander UK plc
were party to a capital support deed dated 3 December 2024 which was effective from 3 December 2024 (the RFB Sub-Group Capital Support Deed). These parties
were permitted by the PRA to form a core UK group as defined in the PRA Rulebook, a permission which expires on 3 December 2027. Exposures of each of the
regulated entities to other members of the core UK group are exempt from large exposure limits that would otherwise apply and these exposures are risk-weighted
at 0%. Where applicable this permission also provides for intra-group exposures to be excluded from the leverage exposure measure. The purpose of the RFB Sub-
Group Capital Support Deed is to facilitate the prompt transfer of available capital resources from, or repayment of liabilities by, the non-regulated entities to any of
the regulated entities in the event that one of the regulated entities breached or was at risk of breaching its capital resources or risk concentrations requirements.
Risk monitoring and reporting
We monitor and report regularly against our capital plan. We do this to identify any change in our business performance that might affect our capital. Each month,
we also review the economic assumptions we use to create and stress test our capital plan. We do this to identify any potential reduction in our capital.
CAPITAL RISK REVIEW
Meeting evolving capital requirements
We target a CET1 management buffer of sufficient size to absorb volatility in CET1 deductions, capital supply and capital demand whilst remaining above the
current and expected future regulatory CET1 requirement. Distribution restrictions would be expected to be applied if we were unable to meet both our minimum
requirement, which consists of the Pillar 1 minimum plus Pillar 2A, the CRD IV buffers consisting of the Capital Conservation Buffer (CCB), the Countercyclical Capital
Buffer (CCyB), and the Other Systemically Important Institutions Buffer (O-SII).
Impact of IFRS 9 on regulatory capital
Our ECL methodology takes account of forward-looking data and covers a range of possible economic outcomes, and so provision movements may result in
increased pro-cyclicality of risk-based capital and leverage ratios. However, the impact is currently mitigated by our surplus of IRB model regulatory expected losses
over provisions for exposures using the IRB approach. For such exposures (which include residential mortgages) the adverse impact on CET1 capital of provision
increases from reserve movements is offset by the related reduction of the negative CET1 capital adjustment for regulatory expected loss amounts. Also, the UK
CRR transitional rules for the capital impact of IFRS 9 meant that adverse CET1 effects from increases in ECL-based provisions from the level of such provisions at
1\u00a0January 2018 were partly reduced until the end of 2024.
We reflect projections of ECL provisions in our capital position forecasting under base case and stress scenarios for ICAAP and capital management purposes. We
also consider the dynamics of ECL in how we assess and manage capital risk. A period of economic instability, such as that seen in early 2020 due to the impacts of
the Covid-19 pandemic, could significantly impact our results and our financial assets. It could also impact the amount of capital we have to hold. We consider the
volatility of ECL in our capital planning strategy.
Key capital ratios
2024
2023
%
%
CET1 capital ratio
14.9
15.4
AT1
2.8
2.9
Tier 2
3.3
3.2
Total capital ratio
21.0
21.5
Total subordination available to Santander UK plc senior unsecured bondholders as a % of RWAs
21.0
21.5
Return on assets - profit after tax divided by average total assets
0.36
0.55
Regulatory capital resources (audited)
This table shows our qualifying regulatory capital:
2024
2023
\u00a3m
\u00a3m
CET1 capital
9,791
10,443
AT1 capital
1,860
1,956
Tier 1 capital
11,651
12,399
Tier 2 capital
2,093
2,172
Total capital(1)
13,744
14,571
(1)Capital resources include a transitional IFRS 9 benefit at 31 December 2024 of \u00a312.2m (2023: \u00a343.0m).
Risk-weighted assets
Total RWAs at 31 December 2024 were \u00a365.5bn (2023: \u00a367.8bn) which are consistent with our regulatory filings.", "dimensions": { "concept": "ifrs-full:DisclosureOfObjectivesPoliciesAndProcessesForManagingCapitalExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-5": { "value": "
Balance sheet allocation by market risk classification(audited)
We classify all our assets and liabilities exposed to market risk as non-traded market risk, except for certain portfolios that we must classify as trading books for
regulatory purposes (such as selling derivatives or derivative-based products to clients), of which we must fair value for accounting reasons (such as assets in the
eligible liquidity pool). For accounting purposes, we classify all derivatives as held for trading unless they are designated as being in a hedging relationship. For
more, see Note 11 to the Consolidated Financial Statements.
OUR KEY NON-TRADED MARKET RISKS (audited)
Non-traded market risk mainly comes from providing banking products and services to our customers, as well as our structural balance sheet exposures. It arises in
all our business segments. In Retail & Business Banking, Consumer Finance and Corporate & Commercial Banking, it is a by-product of us writing customer business
and we transfer most of these risks to Corporate Centre to manage. The only types of non-traded market risk that we keep in Retail & Business Banking, Consumer
Finance and Corporate & Commercial Banking are short-term mismatches due to forecasting variances in prepayment and launch risk. This is where customers
repay their loans earlier than their expected maturity date or do not take the expected volume of new products. Corporate Centre also manages our structural
balance sheet exposures, such as foreign exchange and Income Statement volatility risk.
Our non-traded market risk categories are:
Category
Description
Interest rate risk
Interest rate risk mainly consists of yield curve risk, which comes from timing mismatches in repricing fixed and variable rate
assets, liabilities and off-balance sheet instruments. It also comes from investing non-rate sensitive liabilities in interest-earning
assets.
Spread risk
Spread risk arises when the value of assets or liabilities which are accounted for at fair value (either through Other Comprehensive Income
or through profit and loss) are affected by changes in the credit spread. We measure these spreads as the difference between the discount
rate we use to value the asset or liability, and an underlying interest rate curve.
Foreign exchange risk
Our banking businesses operate mainly in sterling markets, so we do not create significant foreign exchange exposures. The only exception
to this is money we raise in foreign currencies. For more on this, see \u2018Wholesale funding\u2019 in the \u2018Liquidity risk\u2019 section.
Income statement
volatility risk
We measure most of the assets and liabilities in our banking book balance sheet at amortised cost. We sometimes manage their risk profile
by using derivatives. As all derivatives are accounted for at fair value, the mismatch in their accounting treatment can lead to volatility in our
Income Statement. This happens even if the derivative is an economic hedge of the asset or liability.
NII and EVE sensitivities (audited)
The calculations for NII and EVE sensitivities to interest rate moves involve many assumptions, including expected customer behaviour (such as early repayment of
loans) and the projected evolution and repricing of our balance sheet. These assumptions are a key part of our overall control framework, so we update and review
them regularly. Our NII and EVE sensitivities include the interest rate risk from all our banking book positions. Our banking book positions generate almost all our
reported net interest income.
Net Interest Income (NII) sensitivity
\u2013 NII sensitivity is an income-based measure we use to forecast the changes to interest income and interest expense in different scenarios. It gives us a combined impact on
net interest income over a given period \u2013 usually 12 or 36 months.
\u2013 We calculate NII sensitivity as the change in NII for a defined set of instantaneous parallel and non-parallel shifts in the yield curve.
EVE sensitivity
\u2013 We calculate EVE sensitivity as the change in the net present value of all the interest rate sensitive items in the banking book balance sheet for a defined set of
instantaneous parallel and non-parallel shifts in the yield curve.
Value at Risk (VaR) (audited)
VaR
\u2013 VaR indicates possible losses from market changes in non-stressed conditions.
\u2013 We run a historical simulation. We use two years of historical daily price moves. We report a 99% confidence level.
The limitations of VaR
VaR is a standard risk measure. It has limitations including:
\u2013 It assumes the past is a reliable guide to the possible future.
\u2013 It uses end of day positions. It would miss higher risk run only during the day.
\u2013 It does not predict the loss on the 1% largest-loss days (outside the 99% confidence interval).
\u2013 We use a history of one day price moves. This is reasonable for our business but VaR does not cover positions we could not sell or hedge quickly, or products
whose prices cannot be observed.
Back-testing \u2013 comparing VaR estimates with actual profit and loss
To check that our VaR is reasonable, we compare it against our observed profits and losses for the same area. This confirms the VaR model is working. If we found it
were not, we would investigate, and correct it if required.
Risk mitigation (audited)
We typically hedge the interest rate risk of the securities we hold for liquidity and investment purposes with interest rate swaps. We retain spread exposures,
and\u00a0these are the key drivers of the VaR and stress tests we use to assess the risk of the portfolio. We mitigate Income Statement volatility mainly through hedge
accounting. We monitor any hedge accounting ineffectiveness that might lead to Income Statement volatility with a VaR measure and trigger, reported monthly. For
our accounting policies for derivatives and hedge accounting, see Note 1 to the Consolidated Financial Statements.
We hedge our foreign currency funding positions back to sterling, so our foreign exchange positions tend to be residual exposures that remain after hedging. These
exposures could be, for example, to \u2018spot\u2019 foreign exchange rates or to cross currency basis. We monitor foreign exchange risk against absolute net exposures and
VaR-based limits and triggers.
For more on this, see \u2018Funding strategy\u2018 and \u2018Term issuance\u2019 in the \u2018Liquidity risk\u2019 section.
Risk monitoring and reporting (audited)
We monitor our non-traded market risks using NII and EVE sensitivities, VaR and stress tests. We report them against limits and triggers to senior management
daily\u00a0and to ALCO and ERCC each month. The VaR we report captures all key sources of volatility (including interest rate and spread risks) to fully reflect
potential\u00a0volatility.
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1. ACCOUNTING POLICIES
Basis of preparation
These financial statements incorporate the financial statements of the Company and entities it controls (its subsidiaries) made up to 31 December each year. The
consolidated financial statements have been prepared on the going concern basis using the historical cost convention, except for financial assets and liabilities that
have been measured at fair value. An assessment of the appropriateness of the adoption of the going concern basis of accounting is disclosed in the statement of
going concern in the Directors\u2019 report.
Compliance with International Financial Reporting Standards (IFRS)
The consolidated financial statements of the Santander UK group and the separate financial statements of the Company comply with UK-adopted International
Accounting Standards (IAS). The financial statements are also prepared in accordance with IFRS as issued by the International Accounting Standards Board (IASB),
including interpretations issued by the IFRS Interpretations Committee, as there are no applicable differences from IFRS as issued by the IASB for the periods
presented.
Disclosures required by IFRS 7 \u2018Financial Instruments: Disclosure\u2019 relating to the nature and extent of risks arising from financial instruments, and IAS 1
\u2018Presentation of Financial Statements\u2019 relating to objectives, policies and processes for managing capital, have been included in the Risk review section of this
Annual Report. This information forms an integral part of these financial statements by this cross reference, is marked as audited, and is covered by the Independent
auditors' report.
Climate change
Santander UK continues to develop its assessment of the potential impacts that climate change and the transition to a low carbon economy may have on the assets
and liabilities recognised and presented in its financial statements.
Santander UK is mindful of its responsibilities as a responsible lender and is focused on aligning with the objectives of the Paris Agreement on climate change and to
support the UK\u2019s transition to a climate-resilient, net zero economy.
Santander UK's current climate change strategy focuses on three main areas to achieve Banco Santander's ambition to reach net zero emissions by 2050:
1. Managing climate risks by integrating climate considerations into risk management frameworks, screening and stress testing our portfolio for climate related
financial risks, and setting risk appetites to help steer our portfolio in line with the Paris Agreement,
2. Supporting our customers\u2019 transition by developing products and services that promote a reduction in CO2 emissions, and
3. Reducing emissions in our operations and supply chain by focusing on continuous improvement in our operations, and environmental and energy management
systems in accordance with ISO14001 and 15001, promoting responsible procurement practices and employee engagement.
Santander UK's current climate change strategy and its view of the risks associated with climate change and the transition to a low carbon economy are reflected in
its critical judgements and accounting estimates, although climate change risk did not require any material adjustments at 31 December 2024 and 2023, consistent
with management's assessment that climate change and the transition to a low carbon economy are not currently expected to have a meaningful impact on the
viability of the Santander UK group in the medium term.
At31 December 2024 and 2023, management specifically considered the potential impact of climate change and the transition to a low carbon economy on:
\u2013 Loans and advances to customers (see Note 13 and the credit risk section of the Risk review). Some climate change risks arise due to the requirements of IFRS 9
and others relate to specific portfolios and sectors:\u00a0
\u2013 ECL calculations are based on multiple forward-looking economic scenarios developed by management covering a period of five years, during which
timeframe climate change risks may crystallise;
\u2013 For mortgages in Retail & Business Banking and commercial real estate lending in Corporate & Commercial Banking, the value of property collateral might be
affected by physical impacts related to the frequency and scale of extreme weather events, such as flood and subsidence risk, or changing environmental
performance standards for property.
\u2013 For automotive loans in Consumer Finance, the residual value of automotive vehicles might be impacted by diesel obsolescence and the transition to electric
vehicles.
\u2013 For corporate lending in Corporate & Commercial Banking, certain sectors give rise to fossil fuel exposures, such as Oil & Gas, Mining & Extraction and Power
Generation.
\u2013 Goodwill impairment assessment (see Note 19). Estimates underpinning the determination of whether or not goodwill balances are impaired are partly based on
forecast business performance beyond the time horizon for management's detailed plans.
\u2013 Unity Place our new corporate headquarters in Milton Keynes has been built with sustainability at its core. All property assets are evaluated annually for potential
flood damage and are currently considered low risk.
Future changes to Santander UK's climate change strategy may impact Santander UK's critical judgements and accounting estimates and result in material changes
to financial results and the carrying values of certain assets and liabilities in future reporting periods.
Change in accounting policy
In 2024, Santander UK voluntarily changed its accounting policy to remove reverse repurchase agreements (reverse repos) from being treated as cash equivalents
under IAS 7 for the purposes of the cashflow statement. This change provides reliable and more relevant information to users of the financial statements where the
bank is using reverse repos as an investment instrument to manage net interest income and operational liquidity rather than as cash equivalents. The change in
accounting policy has no effect on any other primary financial statements, income statement metrics, key indicators, liquidity ratios, or maturity and offsetting
disclosures. This change aligns Santander UK's accounting policy on the treatment of reverse repos under IAS 7 with the policy applied by its ultimate parent, Banco
Santander, SA. The impact of the change on prior periods is set out below:
For the year ended 31 December
Group
Company
Balance before
change
(Decrease)/
increase
Balance after
change
Balance before
change
(Decrease)/
increase
Balance after
change
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cash and cash equivalents at beginning of the year
46,484
(3,613)
42,871
46,484
(3,613)
42,871
Cash and cash equivalents at the end of the year
42,502
(5,721)
36,781
42,474
(5,721)
36,753
Effects of exchange rate changes on cash and cash equivalents
(121)
63
(58)
(121)
63
(58)
Net change in operating assets and liabilities:
\u2013 Reverse repurchase agreements \u2013 non trading
(3,224)
(1,896)
(5,120)
(3,224)
(1,896)
(5,120)
\u2013 Repurchase agreements \u2013 non trading
704
(275)
429
703
(274)
429
\u2013 Other liabilities
\u2014
\u2014
\u2014
(82)
(1)
(83)
Net cash flows from operating activities
(1,133)
(2,171)
(3,304)
751
(2,171)
(1,420)
2022
Cash and cash equivalents at beginning of the year
49,254
(2,539)
46,715
Cash and cash equivalents at the end of the year
46,484
(3,613)
42,871
Effects of exchange rate changes on cash and cash equivalents
121
(52)
69
Net change in operating assets and liabilities:
\u2013 Reverse repurchase agreements \u2013 non trading
6,818
(1,483)
5,335
\u2013 Repurchase agreements \u2013 non trading
(4,145)
461
(3,684)
Net cash flows from operating activities
(2,970)
(1,022)
(3,992)
The value of reverse repo transactions at 31 December 2024 no longer included as cash and cash equivalents was \u00a36,193m.
Future accounting developments
The IASB issued the following new/amended accounting standards which are not yet effective and have not been endorsed for use in the UK:
\u2013 Effective 1 January 2026: \u2018Amendments to the Classification and Measurement of Financial Instruments\u2019 (Amendments to IFRS 9 \u2018Financial Instruments\u2019 and IFRS
7 \u2018Financial Instruments: Disclosures\u2019) - the amendments set out changes to settling financial liabilities using an electronic payment system, assessing contractual
cash flow characteristics of financial assets including those with environmental, social and governance (ESG)-linked features and requiring additional disclosures
for certain financial instruments.
\u2013 Effective 1 January 2027: IFRS 18 \u2018Presentation and Disclosure in Financial Statements\u2019 \u2013 the new standard will replace IAS 1 \u2018Presentation of Financial
Statements\u2019 and introduces changes to the categories for classifying income and expenses and subtotals presented in the income statement and new or amended
disclosures in respect of management-defined performance measures and specified expenses by nature.
The Santander UK group is assessing these new/amended accounting standards to determine the potential impacts on the financial statements when they become
effective or if they are otherwise earlier adopted when available.
Comparative information
As required by US public company reporting requirements, these financial statements include two years of comparative information for the consolidated income
statement, consolidated statement of comprehensive income, consolidated statement of changes in equity, consolidated statement of cash flows and related notes.
Material accounting policy information
The following material accounting policies have been applied in preparing these financial statements. For material accounting policies which involve the application
of judgements or accounting estimates that are determined to be critical to the preparation of these financial statements see 'Critical judgements and accounting
estimates'.
Consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities (including structured entities) controlled by it and its
subsidiaries. The acquisition method of accounting is used to account for the acquisition of subsidiaries which meet the definition of a business.
Business combinations between entities under common control (i.e. fellow subsidiaries of Banco Santander SA, the ultimate parent) are outside the scope of IFRS 3
\u2013 \u2018Business Combinations\u2019, and there is no other guidance for such transactions under IFRS. The Santander UK group elects to account for business combinations
between entities under common control at their book values in the acquired entity by including the acquired entity\u2019s results from the date of the business
combination and not restating comparatives. Reorganisations of entities within the Santander UK group are also accounted for at their book values.
Credit protection entities established as part of significant risk transfer (SRT) transactions are not consolidated by the Santander UK group in cases where third party
investors have the exposure, or rights, to all of the variability of returns from the performance of the entities.
Revenue recognition
a) Interest income and expense
Interest and similar income and expense are recognised in the income statement using the effective interest rate method for: all financial instruments measured at
amortised cost; debt instruments measured at FVOCI; and the effective part of any related accounting hedging instruments.
Interest income is calculated by applying the effective interest rate to the gross carrying amount of financial assets, except for financial assets that have
subsequently become credit-impaired (i.e. Stage 3), for which interest revenue is calculated by applying the effective interest rate to their amortised cost (i.e. net of
the ECL provision). For more information on stage allocations of credit risk exposures, see \u2018Significant increase in credit risk\u2019 in the \u2018Santander UK group level \u2013 credit
risk management\u2019 section of the Risk review.
b) Fee and commission income and expense
Fees and commissions that are not an integral part of the effective interest rate are recognised when the service is performed. Most fee and commission income is
recognised at a point in time. Certain commitment, upfront and management fees are recognised over time but are not material. For retail and corporate products,
fee and commission income consists principally of collection services fees, commission on foreign currencies, commission and other fees received from retailers for
processing credit card transactions, fees received from other credit card issuers for providing cash advances for their customers through the Santander UK group\u2019s
branch and ATM networks, annual fees payable by credit card holders and fees for non-banking financial products.
For insurance products, fee and commission income consists principally of commissions and profit share arising from the sale of building and contents insurance
and life protection insurance. Commissions arising from the sale of buildings and contents insurance are recognised over the period of insurance cover, adjusted to
take account of cancelled policies. Profit share income from the sale of buildings and contents insurance which is not subject to any adjustment is recognised when
the profit share income is earned. Commissions and profit share arising from the sale of life protection insurance is subject to adjustment for cancellations of
policies within 3 years from inception.
Fee and commission income which forms an integral part of the effective interest rate of a financial instrument (for example certain loan commitment fees) is
recognised as an adjustment to the effective interest rate and recorded in \u2018Interest income\u2019.
c) Other operating income
Other operating income includes all gains and losses from changes in the fair value of financial assets and liabilities held at fair value through profit or loss
(comprising financial assets and liabilities held for trading, trading derivatives and other financial assets and liabilities at fair value through profit or loss), together
with related interest income, expense, dividends, and changes in fair value of any derivatives managed in conjunction with these assets and liabilities. Other
operating income also includes hedge ineffectiveness arising from fair value and cash flow hedging, income from operating lease assets, and profits and losses
arising on the sales of property, plant and equipment and subsidiary undertakings.
Defined benefit pension schemes (see 'Critical judgements and accounting estimates')
A defined benefit scheme is a pension scheme that guarantees an amount of pension benefit to be provided, usually as a function of one or more factors such as
age, years of service or compensation. Pension costs are charged to \u2018Administration expenses\u2019, within the line item \u2018Operating expenses before impairment losses,
provisions and charges\u2019 with the net interest on the defined benefit asset or liability included within \u2018Net interest income\u2019 in the income statement. The asset or
liability recognised in respect of defined benefit pension schemes is the present value of the defined benefit obligation at the balance sheet date, less the fair value
of scheme assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The assets of the schemes
are measured at their fair values at the balance sheet date.
The present value of the defined benefit obligation is estimated by projecting forward the growth in current accrued pension benefits to reflect inflation and salary
growth to the date of pension payment, then discounted to present value using the yield applicable to high-quality AA rated corporate bonds of the same currency
and which have terms to maturity closest to the terms of the scheme liabilities, adjusted where necessary to match those terms. In determining the value of
scheme liabilities, demographic and financial assumptions are made by management about life expectancy, inflation, discount rates, pension increases and
earnings growth, based on past experience and future expectations. Financial assumptions are based on market conditions at the balance sheet date and can
generally be derived objectively.
Demographic assumptions require a greater degree of estimation and judgement to be applied to externally derived data. Any surplus or deficit of scheme assets
over liabilities is recognised in the balance sheet as an asset (surplus) or liability (deficit). An asset is only recognised to the extent that the surplus can be recovered
through reduced contributions in the future or through refunds from the scheme.
Share-based payments
The Santander UK group engages in cash-settled and equity-settled share-based payment transactions in respect of services received from certain of its employees.
Shares of the Santander UK group\u2019s parent, Banco Santander SA are purchased in the open market by the Santander UK group (for the Employee Sharesave scheme)
or are purchased by Banco Santander SA or another Banco Santander subsidiary (including awards granted under the Long-Term Incentive Plan and the Deferred
Shares Bonus Plan) to satisfy share options or awards as they vest.
Options granted under the Employee Sharesave scheme and awards granted under the Transformation Incentive Plan are accounted for as cash-settled share-
based payment transactions. Awards granted under the Long-Term Incentive Plan and Deferred Shares Bonus Plan are accounted for as equity-settled share-based
payment transactions.
The fair value of the options granted under the Employee Sharesave scheme is determined using an option pricing model, which takes into account the exercise
price of the option, the current share price, the risk-free interest rate, the expected volatility of the Banco Santander SA share price over the life of the option and the
dividend growth rate. The fair value of the awards granted for the Long-Term Incentive Plan was determined at the grant date using an option pricing model, which
takes into account the share price at grant date, the risk-free interest rate, the expected volatility of the Banco Santander SA share price over the life of the award
and the dividend growth rate.
Goodwill and other intangible assets (for goodwill see 'Critical judgements and accounting estimates')
Goodwill represents the excess of the cost of an acquisition, as well as the fair value of any interest previously held, over the fair value of the share of the
identifiable net assets of the acquired subsidiary, or business at the date of acquisition. Goodwill on the acquisition of subsidiaries and businesses is included
in\u00a0intangible assets. Goodwill is tested for impairment annually, or more frequently when events or changes in circumstances dictate and carried at cost less
accumulated impairment losses. Gains and losses on the disposal of an entity or business include the carrying amount of goodwill relating to the entity or
business\u00a0sold.
Other intangible assets are recognised if they arise from contractual or other legal rights or if they are capable of being separated or divided from Santander UK and
sold, transferred, licensed, rented or exchanged. The value of such intangible assets, where they are available for use, is amortised on a straight-line basis generally
over a three year useful economic life and the assets are reviewed annually for impairment indicators and tested for impairment where indicators are present.
Other intangible assets that are not yet available for use are tested for impairment annually or more frequently when events or changes in circumstances dictate.
Software development costs are capitalised when they are direct costs associated with identifiable and unique software products that are expected to provide
future economic benefits, and the cost of those products can be measured reliably. These costs include payroll, materials, services and directly attributable
overheads. Internally developed software meeting these criteria and externally purchased software are classified in intangible assets on the balance sheet and
amortised on a straight-line basis generally over a three year useful life unless the software is an integral part of the related computer hardware, in which case
it\u00a0is\u00a0treated as property, plant and equipment as described below. Capitalisation of costs ceases when the software is capable of operating as intended. Costs of
maintaining software are expensed as incurred.
Property, plant and equipment
Property, plant and equipment include owner-occupied properties (including leasehold properties), office fixtures and equipment and computer software. Property,
plant and equipment also includes operating leases where the Santander UK group is the lessor and right-of-use assets where the Santander UK group is the lessee.
Internally developed software meeting the criteria set out in \u2018Goodwill and other intangible assets\u2019 above and externally purchased software are classified in
property, plant and equipment where the software is an integral part of the related computer hardware (for example, the operating system of a computer). Classes
of property, plant and equipment are depreciated on a straight-line basis over their useful life, as follows:
Owner-occupied properties
Not exceeding 50 years
Office fixtures and equipment
3 to 35 years
Computer software
Generally 3 years
Right-of-use assets
Shorter of the lease term or the useful life of the underlying asset
Operating lease assets - vehicles
1 to 4 years
Depreciation is not charged on freehold land. Depreciation of operating lease assets where the Santander UK group is the lessor is described in 'Leases' below.
In 2024, the range of useful lives for Office fixtures and equipment expanded to 35 years due to the addition of fixtures and equipment in Unity Place.
Financial instruments (for impairment of debt instrument financial assets see 'Critical judgements and accounting estimates: Credit impairment losses')
a) Initial recognition and measurement
Financial assets and liabilities are initially recognised when the Santander UK group becomes a party to the contractual terms of the instrument. The Santander UK
group determines the classification of its financial assets and liabilities at initial recognition and measures a financial asset or financial liability at its fair value plus or
minus, in the case of a financial asset or financial liability not at FVTPL, transaction costs that are incremental and directly attributable to the acquisition or issue of
the financial asset or financial liability. Transaction costs of financial assets and financial liabilities carried at FVTPL are expensed in profit or loss. Immediately after
initial recognition, an expected credit loss (ECL) allowance is recognised for financial assets measured at amortised cost and investments in debt instruments
measured at FVOCI.
A regular way purchase or sale is a purchase or sale of a financial asset under a contract whose terms require delivery of the asset within the timeframe established
generally by regulation or convention in the marketplace concerned. Regular way purchases and sales of financial assets measured at amortised cost are recognised
on settlement date; all other regular way purchases and sales of financial assets are recognised on trade date.
b) Financial assets and liabilities
i) Classification and subsequent measurement
The Santander UK group classifies its financial assets in the measurement categories of amortised cost, FVOCI and FVTPL.
Financial assets and financial liabilities are classified as FVTPL where there is a requirement to do so or where they are otherwise designated at FVTPL on initial
recognition. Financial assets and financial liabilities which are required to be held at FVTPL include:
\u2013 Financial assets and financial liabilities held for trading.
\u2013 Debt instruments that do not have solely payments of principal and interest (SPPI) characteristics. Otherwise, such instruments are measured at amortised cost
or FVOCI, and
\u2013 Equity instruments that have not been designated as held at FVOCI.
Financial assets and financial liabilities are classified as held for trading if they are derivatives or if they are acquired or incurred principally for the purpose of
selling\u00a0or repurchasing in the near-term, or form part of a portfolio of financial instruments that are managed together and for which there is evidence of short-
term profit taking.
In certain circumstances, other financial assets and financial liabilities are designated at FVTPL where this results in more relevant information. This may arise
because it significantly reduces a measurement inconsistency that would otherwise arise from measuring assets or liabilities or recognising the gains or losses on
them on a different basis, where the assets and liabilities are managed and their performance evaluated on a fair value basis or, in the case of financial liabilities,
where it contains one or more embedded derivatives which are not closely related to the host contract.
The classification and measurement requirements for financial asset debt and equity instruments and financial liabilities are set out below.
Financial assets: debt instruments
Debt instruments are those instruments that meet the definition of a financial liability from the issuer\u2019s perspective, such as loans and debt securities which consist
mainly of government bonds and covered bonds. Classification and subsequent measurement of debt instruments depend on the Santander UK group\u2019s business
model for managing the asset, and the cash flow characteristics of the asset.
Business model
The business model reflects how the Santander UK group manages the assets in order to generate cash flows and, specifically, whether the Santander UK group\u2019s
objective is solely to collect the contractual cash flows from the assets or is to collect both the contractual cash flows and cash flows arising from the sale of the
assets. If neither of these is applicable, such as where the financial assets are held for trading purposes, then the financial assets are classified as part of an \u2018other\u2019
business model and measured at FVTPL. Factors considered in determining the business model for a group of assets include past experience on how the cash flows
for these assets were collected, how the assets\u2019 performance is evaluated and reported to key management personnel, and how risks are assessed and managed.
SPPI
Where the business model is to hold assets to collect contractual cash flows or to collect contractual cash flows and sell, the Santander UK group assesses whether
the assets\u2019 cash flows represent SPPI. In making this assessment, the Santander UK group considers whether the contractual cash flows are consistent with a basic
lending arrangement (i.e. interest includes only consideration for the time value of money, credit risk, other basic lending risks and a profit margin that is consistent
with a basic lending arrangement). Where the contractual terms introduce exposure to risk or volatility that is inconsistent with a basic lending arrangement, the
related asset is classified and measured at FVTPL.
Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are SPPI.
Based on these factors, the Santander UK group classifies its debt instruments into one of the following measurement categories:
\u2013 Amortised cost \u2013 Financial assets that are held for collection of contractual cash flows where those cash flows represent SPPI, and that are not designated at
FVTPL, are measured at amortised cost. The carrying amount of these assets is adjusted by any ECL recognised and measured as presented in Note 13. Interest
income from these financial assets is included in \u2018Interest and similar income\u2019 using the effective interest rate method. When estimates of future cash flows are
revised, the carrying amount of the respective financial assets is adjusted to reflect the new estimate discounted using the original effective interest rate. Any
changes are recognised in the income statement.
\u2013 FVOCI \u2013 Financial assets that are held for collection of contractual cash flows and for selling the assets, where the assets\u2019 cash flows represent SPPI, and that are
not designated at FVTPL, are measured at FVOCI. Movements in the carrying amount are recognised in OCI, except for the recognition of impairment gains or
losses, interest revenue and foreign exchange gains and losses which are recognised in profit or loss. When the financial asset is derecognised, the cumulative
gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in \u2018Other operating income\u2019. Interest income from these
financial assets is included in \u2018Interest and similar income\u2019 using the effective interest rate method.
\u2013 FVTPL \u2013 Financial assets that do not meet the criteria for amortised cost or FVOCI are measured at FVTPL. A gain or loss on a debt instrument that is subsequently
measured at FVTPL, including any debt instruments designated at fair value, is recognised in profit or loss and presented in the income statement in \u2018Other
operating income\u2019 in the period in which it arises.
The Santander UK group reclassifies financial assets when and only when its business model for managing those assets changes. The reclassification takes place
from the start of the first reporting period following the change. Such changes are expected to be very infrequent.
Financial assets: equity instruments
Equity instruments are instruments that meet the definition of equity from the issuer\u2019s perspective, being instruments that do not contain a contractual obligation to
pay cash and that evidence a residual interest in the issuer\u2019s net assets. All equity investments are subsequently measured at FVTPL; management may elect, at
initial recognition, to irrevocably designate an equity investment at FVOCI but has not currently done so. When this election is used, fair value gains and losses are
recognised in OCI and are not subsequently reclassified to profit or loss, including on disposal. ECLs (and reversal of ECLs) are not reported separately from other
changes in fair value. Dividends, when representing a return on such investments, continue to be recognised in profit or loss as other income when the right to
receive payments is established. Gains and losses on equity investments at FVTPL are included in \u2018Other operating income\u2019 in the income statement.
Financial liabilities
Financial liabilities, which include deposits by banks, deposits by customers, debt securities in issue and subordinated liabilities, are classified as subsequently
measured at amortised cost, except for:
\u2013 Financial liabilities at FVTPL (see Note 24): this classification is applied to derivatives and other financial liabilities designated as such at initial recognition. Gains or
losses on financial liabilities designated at FVTPL are presented partially in other comprehensive income (the amount of change in the fair value of the financial
liability that is attributable to changes in the credit risk of that liability) and partially in profit or loss (the remaining amount of change in the fair value of the
liability)
\u2013 Financial liabilities arising from the transfer of financial assets which did not qualify for derecognition, whereby a financial liability is recognised for the
consideration received for the transfer. In subsequent periods, the Santander UK group recognises any expense incurred on the financial liability, and
\u2013 Financial guarantee contracts and loan commitments.
Preference shares which carry a contractual obligation to transfer economic benefits are classified as financial liabilities and are presented in subordinated liabilities.
The coupon on these preference shares is recognised in the income statement as interest expense on an amortised cost basis using the effective interest method.
Contracts involving the receipt of cash on which customers receive an index-linked return are accounted for as equity index-linked deposits. The principal products
are Capital Guaranteed/Protected Products, which give the customers a limited participation in the upside growth of an equity index. In the event the index falls in
price, a cash principal element is guaranteed/protected. The equity index-linked deposits contain embedded derivatives. These embedded derivatives, in
combination with the principal cash deposit element, are designed to replicate the investment performance profile tailored to the return agreed in the contracts
with customers. The cash principal element is accounted for as deposits by customers at amortised cost. The embedded derivatives are separated from the host
instrument and are separately accounted for as derivatives.
Sale and repurchase agreements (including stock borrowing and lending)
Securities sold subject to a commitment to repurchase them at a predetermined price (repos) under which substantially all the risks and rewards of ownership
are\u00a0retained by the Santander UK group remain on the balance sheet and a liability is recorded in respect of the consideration received. Securities purchased
under\u00a0commitments to resell (reverse repos) are not recognised on the balance sheet and the consideration paid is recorded as an asset. The difference between
the sale and repurchase price is treated as trading income in the income statement, except where the repo is not treated as part of the trading book, in which case
the difference is recorded in interest income or expense.
Securities lending and borrowing transactions are generally secured, with collateral in the form of securities or cash advanced or received. Securities borrowed
are\u00a0not reflected on the balance sheet. Collateral in the form of cash received or advanced is recorded as a deposit or a loan. Collateral in the form of securities is
not\u00a0recognised.
Day One profit adjustments
The fair value of a financial instrument on initial recognition is generally its transaction price (that is, the fair value of the consideration given or received). However,
sometimes the fair value will be based on other observable current market transactions in the same instrument, without modification or repackaging, or on a
valuation technique whose variables include only data from observable markets, such as interest rate yield curves, option volatilities and currency rates. When such
evidence exists, the Santander UK group recognises a trading gain or loss at inception (Day One gain or loss), being the difference between the transaction price and
the fair value. When significant unobservable parameters are used, the entire Day One gain or loss is deferred and is recognised in the income statement over the
life of the transaction until the transaction matures, is closed out, the valuation inputs become observable, or an offsetting transaction is entered into.
ii) Impairment of debt instrument financial assets
The Santander UK group assesses on a forward-looking basis the ECL associated with its debt instrument assets carried at amortised cost and FVOCI and with the
exposure arising from financial guarantee contracts and loan commitments. The Santander UK group recognises a loss allowance for such losses at each reporting
date. The measurement of ECL reflects:
\u2013 An unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes.
\u2013 The time value of money, and
\u2013 Reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of
future economic conditions.
Grouping of instruments for losses measured on a collective basis
We typically group instruments and assess them for impairment collectively where they share risk characteristics (as described in the Credit risk section of the Risk
review) using one or more statistical models. Where we have used internal capital or similar models as the basis for our ECL models, this typically results in a large
number of relatively small homogenous groups which are determined by the permutations of the underlying characteristics in the statistical models. We calculate
separate collective provisions for instruments in Stages 1, 2 and 3 where the instrument is not individually assessed, as described below.
Individually assessed impairments (IAIs)
We assess significant Stage 3 cases individually. We do this for Corporate & Commercial Banking cases, but not for Business Banking cases in Retail & Business
Banking which we assess collectively. To calculate the estimated loss, we estimate the future cash flows under several scenarios each of which uses case-specific
factors and circumstances. We then probability-weight the net present value of the cash flows under each scenario to arrive at a weighted average provision
requirement. We update our assessment process every quarter and more frequently if there are changes in circumstances that might affect the scenarios, cash
flows or probabilities we apply.
For more on how ECL is calculated, see the Credit risk section of the Risk review.
\u2013 Write-off
For secured loans, a write-off is only made when all collection procedures have been exhausted and the security has been sold and/or a claim made on any
mortgage indemnity guarantee or other insurance. In the corporate loan portfolio, there may be occasions where a write-off occurs for other reasons, such as
following a consensual restructure or refinancing of the debt or where the debt is sold for strategic reasons into the secondary market at a value lower than its
face value.
There is no threshold based on past due status beyond which all secured loans are written off as there can be significant variations in the time needed to enforce
possession and sale of the security, especially due to the different legal frameworks that apply in different regions of the UK. For unsecured loans, a write-off is only
made when all internal avenues of collecting the debt have been exhausted. Where appropriate the debt is passed over to external collection agencies. A past due
threshold is applied to unsecured debt where accounts that are 180 days past due are written off unless there is a dispute awaiting resolution. Contact is made with
customers with the aim to achieve a realistic and sustainable repayment arrangement. Litigation and/or enforcement of security is usually carried out only when the
steps described above have been undertaken without success.
All write-offs are assessed / made on a case-by-case basis, taking account of the exposure at the date of write-off, after accounting for the value from any
collateral or insurance held against the loan. The exception to this is in cases where fraud has occurred, where the exposure is written off once investigations
have been completed and the probability of recovery is minimal. The time span between discovery and write-off will be short and may not result in an
impairment loss allowance being raised. The write-off policy is regularly reviewed. Write-offs are charged against previously established loss allowances.
\u2013 Recoveries
Recoveries of credit impairment charges are not included in the impairment loss allowance but are taken to income and offset against credit impairment
charges. Recoveries of credit impairment charges are classified in the income statement as \u2018Credit impairment charges\u2019.
iii) Modifications of financial assets
The treatment of a renegotiation or modification of the contractual cash flows of a financial asset normally depends upon whether the renegotiation or modification
is due to financial difficulties of the borrower or for other commercial reasons.
\u2013 Contractual modifications due to financial difficulties of the borrower: where the Santander UK group modifies the contractual conditions to enable the
borrower to fulfil their payment obligations, the asset is not derecognised. The gross carrying amount of the financial asset is recalculated as the present value of
the renegotiated/modified contractual cash flows that are discounted at the financial asset\u2019s original EIR and any gain or loss arising from the modification is
recognised in the income statement.\u00a0
\u2013 Contractual modifications for other commercial reasons: an assessment is performed to determine whether the terms of the new agreement are substantially
different from the terms of the existing agreement, after considering changes in the cash flows arising from the modified terms and the overall instrument risk
profile. Where terms are substantially different, such modifications are treated as a new transaction resulting in derecognition of the original financial asset, and
the recognition of a \u2018new\u2019 financial asset with any difference between the carrying amount of the derecognised asset and the fair value of the new asset is
recognised in the income statement as a gain or loss on derecognition. Where terms are not substantially different, the carrying value of the financial asset is
adjusted to reflect the present value of modified cash flows discounted at the original EIR with any gain or loss arising from modification recognised immediately
in the income statement.
Any other contractual modifications, such as where a regulatory authority imposes a change in certain contractual terms or due to legal reasons, are assessed on a
case-by-case basis to establish whether or not the financial asset should be derecognised.\u00a0
iv) Derecognition other than on a modification
Financial assets are derecognised when the rights to receive cash flows have expired or the Santander UK group has transferred its contractual right to receive the
cash flows from the assets and either: (1) substantially all the risks and rewards of ownership have been transferred; or (2) the Santander UK group has neither
retained nor transferred substantially all of the risks and rewards but has transferred control.
Financial liabilities are derecognised when extinguished, cancelled or expired.
c) Financial guarantee contracts and loan commitments
Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor
fails to make payments when due, in accordance with the terms of a debt instrument. Such financial guarantees are given to banks, financial institutions and others
on behalf of customers to secure loans, overdrafts and other banking facilities.
Financial guarantee contracts are initially measured at fair value and subsequently measured at the higher of the amount of the loss allowance, and the premium
received on initial recognition less income recognised in accordance with the principles of IFRS 15. Loan commitments are measured as the amount of the loss
allowance (determined in accordance with IFRS 9 as described in Credit risk section of the Risk review). The Santander UK group has not provided any commitment
to provide loans at a below-market interest rate, or that can be settled net in cash or by delivering or issuing another financial instrument.
For financial guarantee contracts and loan commitments, the loss allowance is recognised as a provision and charged to credit impairment charges in the income
statement. The loss allowance in respect of revolving facilities is classified in loans and advances to customers to the extent of any drawn balances. The loss
allowance in respect of undrawn amounts is classified in provisions. When amounts are drawn, any related loss allowance is transferred from provisions to loans
and advances to customers.
Derivative financial instruments (derivatives)
Derivatives are contracts or agreements whose value is derived from one or more underlying indices or asset values inherent in the contract or agreement, which
require no or little initial net investment and are settled at a future date. Transactions are undertaken in interest rate, cross currency, equity, residential property and
other index-related swaps, forwards, caps, floors, swaptions, as well as credit default and total return swaps, equity index contracts and exchange traded interest
rate futures, and equity index options.
Derivatives are held for risk management purposes. Derivatives are classified as held for trading unless they are designated as being in a hedge accounting
relationship. The Santander UK group chooses to designate certain derivatives as in a hedging relationship if they meet specific criteria, as further described in
\u2018Hedge accounting\u2019 below.
Derivatives are recognised initially (on the date on which a derivative contract is entered into), and are subsequently remeasured, at their fair value. Fair values
of\u00a0exchange-traded derivatives are obtained from quoted market prices. Fair values of over-the-counter derivatives are estimated using valuation techniques,
including discounted cash flow and option pricing models.
Certain derivatives may be embedded in hybrid contracts. If the hybrid contract contains a host that is a financial asset, then the Santander UK group assesses the
entire contract as described in the financial asset section above for classification and measurement purposes. Otherwise, embedded derivatives are treated as
separate derivatives when their economic characteristics and risks are not closely related to those of the host contract; the terms of the embedded derivative would
meet the definition of a stand-alone derivative if they were contained in a separate contract; and the combined contract is not held for trading or designated at fair
value. These embedded derivatives are measured at fair value with changes in fair value recognised in the income statement. Contracts containing embedded
derivatives are not subsequently reassessed for separation unless either there has been a change in the terms of the contract which significantly modifies the cash
flows (in which case the contract is reassessed at the time of modification) or the contract has been reclassified (in which case the contract is reassessed at the time
of reclassification).
All derivatives are carried as assets when their fair value is positive and as liabilities when their fair value is negative, except where netting is permitted. The method
of recognising fair value gains and losses depends on whether derivatives are held for trading or are designated as hedging instruments and, if the latter, the nature
of the risks being hedged. Gains and losses from changes in the fair value of derivatives held for trading are recognised in the income statement and included in
Other operating income.
Offsetting financial assets and liabilities
Financial assets and liabilities including derivatives are offset and the net amount reported in the balance sheet when there is a legally enforceable right to set off
the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The Santander UK group is party
to a number of arrangements, including master netting arrangements under industry standard agreements which facilitate netting of transactions in jurisdictions
where netting agreements are recognised and have legal force. These netting arrangements do not generally result in an offset of balance sheet assets and
liabilities for accounting purposes, as transactions are usually settled on a gross basis.
Hedge accounting
The Santander UK group applies hedge accounting to represent, to the maximum possible extent permitted under accounting standards, the economic effects of its
risk management strategies. Derivatives are used to hedge exposures to interest rates, inflation and exchange rates.
At the time a financial instrument is designated as a hedge (i.e. at the inception of the hedge), the Santander UK group formally documents the relationship between
the hedging instrument(s) and hedged item(s), its risk management objective and strategy for undertaking the hedge. The documentation includes the identification
of each hedging instrument and respective hedged item, the nature of the risk being hedged (including the benchmark interest rate being hedged in a hedge of
interest rate risk) and how the hedging instrument\u2019s effectiveness in offsetting the exposure to changes in the hedged item\u2019s fair value attributable to the hedged
risk is to be assessed. Accordingly, the Santander UK group formally assesses, both at the inception of the hedge and on an ongoing basis, whether the hedging
derivatives have been and will be highly effective in offsetting changes in the fair value attributable to the hedged risk during the period that the hedge is
designated. A hedge is normally regarded as highly effective if, at inception and throughout its life, the Santander UK group can expect, and actual results indicate
that changes in the fair value or cash flow of the hedged items are effectively offset by changes in the fair value or cash flow of the hedging instrument. If at any
point it is concluded that it is no longer highly effective in achieving its documented objective, hedge accounting is discontinued.
Where derivatives are held for risk management purposes, and when transactions meet the required criteria for documentation and hedge effectiveness, the
derivatives may be designated as either: (i) hedges of the change in fair value of recognised assets or liabilities or firm commitments (fair value hedges); (ii) hedges
of the variability in highly probable future cash flows attributable to a recognised asset or liability, or a forecast transaction (cash flow hedges); or (iii) a hedge of a
net investment in a foreign operation (net investment hedges). The Santander UK group applies fair value and cash flow hedge accounting but not hedging of a net
investment in a foreign operation.
a) Fair value hedge accounting
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement, together with the changes in the
fair value of the hedged asset or liability that are attributable to the hedged risk. Where the hedged item is measured at amortised cost, the fair value changes due
to the hedged risk adjust the carrying amount of the hedged asset or liability. Changes in the fair value of portfolio hedged items are presented separately in the
consolidated balance sheet in macro hedge of interest rate risk and recognised in the income statement. If the hedge no longer meets the criteria for hedge
accounting, changes in the fair value of the hedged item attributable to the hedged risk are no longer recognised in the income statement. For fair value hedges of
interest rate risk, the cumulative adjustment that has been made to the carrying amount of the hedged item is amortised to the income statement using the
effective interest method over the period to maturity. For portfolio hedged items, the cumulative adjustment is amortised to the income statement using the
straight-line method over the period to maturity.
b) Cash flow hedge accounting
The effective portion of changes in the fair value of qualifying cash flow hedges is recognised in other comprehensive income in the cash flow hedging reserve.
The\u00a0gain or loss relating to the ineffective portion is recognised immediately in the income statement. Amounts accumulated in equity are reclassified to the
income\u00a0statement in the periods in which the hedged item affects profit or loss. When a hedging instrument expires or is sold, or when a hedge no longer meets
the\u00a0criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised in the income statement when the
forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that
was reported in equity is immediately transferred to the income statement. The Santander UK group is exposed to variability in future cash flows attributable
to\u00a0i)\u00a0interest rate and inflation risks on its GBP floating rate assets and liabilities ii) foreign currency risk on debt issuances denominated in foreign currency and
iii)\u00a0equity price risk from operating the Employee Sharesave scheme. Cash flow hedging is used to hedge the variability in cash flows arising from these risks.
Securitisation transactions
The Santander UK group has entered into arrangements where undertakings have issued mortgage-backed and other asset-backed securities or have entered
into\u00a0funding arrangements with lenders in order to finance specific loans and advances to customers. The Santander UK group has also entered into synthetic
securitisation arrangements, as part of significant risk transfer (SRT) transactions to reduce its risk-weighted assets, where undertakings have issued credit-linked
notes, and in some cases deposited the funds raised as collateral, for credit protection in respect of specific loans and advances to customers. As the Santander UK
group has retained substantially all the risks and rewards of the underlying assets, such financial instruments continue to be recognised on the balance sheet, and a
liability recognised for the proceeds of the funding transaction, or in the case of SRT transactions, collateral deposited.
Impairment of non-financial assets
At each balance sheet date, or more frequently when events or changes in circumstances dictate, property plant and equipment (including operating lease assets)
and intangible assets (including goodwill) are assessed for indicators of impairment. If indications are present, these assets are subject to an impairment review.
The impairment review comprises a comparison of the carrying value of the asset or cash generating unit with its recoverable amount: the higher of the asset\u2019s or
cash-generating unit\u2019s fair value less costs to sell and its value in use. The cash-generating unit represents the lowest level at which non-financial assets, including
goodwill, are monitored for internal management purposes and is not larger than an operating segment.
The fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date. Value in use is calculated by discounting management\u2019s expected future cash flows obtainable as a result of the asset\u2019s continued use (after
making allowance for increases in regulatory capital requirements), including those resulting from its ultimate disposal, at a market-based discount rate on a pre-
tax basis. The recoverable amounts of goodwill have been based on value in use calculations.
For conducting goodwill impairment reviews, cash generating units are the lowest level at which management monitors the return on investment on assets.
Leases (as lessor)
Operating lease assets are recorded at cost and the difference between cost and residual value (RV) is depreciated over the life of the asset. Operating lease rental
income and depreciation is recognised on a straight-line basis over the life of the asset. After initial recognition, residual values are reviewed regularly, and any
changes are recognised prospectively through remaining depreciation charges.
Amounts due from lessees under finance leases and hire purchase contracts are recorded as receivables at the amount of the Santander UK group\u2019s net investment
in the leases. Finance lease income is allocated to accounting periods to reflect a constant periodic rate of return on the Santander UK group\u2019s net investment
outstanding in respect of the leases and hire purchase contracts. A provision is recognised to reflect a reduction in any anticipated unguaranteed RV. A provision is
also recognised for voluntary termination of the contract by the customer, where appropriate.
Income taxes, including deferred taxes
The tax expense represents the sum of the income tax currently payable and deferred income tax.
A current tax liability for the current or prior period is measured at the amount expected to be paid to the tax authorities. Where the amount of the final tax liability is
uncertain or where a position is challenged by a taxation authority, the liability recognised is the most likely outcome. Where a most likely outcome cannot be
determined, a weighted average basis is applied.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled, or the asset is realised based on rates enacted or
substantively enacted at the balance sheet date. Deferred tax is charged or credited in the income statement, except when it relates to items recognised in other
comprehensive income or directly in equity, in which case the deferred tax is also recognised in other comprehensive income or directly in equity.
Deferred and current tax assets and liabilities are only offset when they arise in the same tax reporting group and where there is both the legal right and the
intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents comprise balances with not more than three months maturity from the date of acquisition,
including cash and non-restricted balances with central banks and loans and advances to banks. Balances with central banks represent amounts held at the Bank of
England as part of the Santander UK group\u2019s liquidity management activities. It includes reserves collateralised accounts in respect of Santander UK\u2019s participation in
certain payments schemes which are required to be maintained with the Bank of England and are restricted balances.
Provisions and contingent liabilities (see 'Critical judgements and accounting estimates')
Provisions are recognised for present obligations arising as consequences of past events where it is more likely than not that a transfer of economic benefits will be
necessary to settle the obligation, and it can be reliably estimated.
Customer remediation provisions are made for the estimated cost of making redress payments with respect to the past sales of products, using conclusions such
as\u00a0the number of claims, the number of those that will be upheld, the estimated average settlement per case and other related costs. Provision is made for the
anticipated cost of restructuring, including redundancy costs, when an obligation exists. An obligation exists when the Santander UK group has a detailed formal
plan for restructuring a business, has raised valid expectations in those affected by the restructuring, and has started to implement the plan or announce its
main\u00a0features.
When a leasehold property ceases to be used in the business, provision is made where the unavoidable costs of the future obligations relating to the lease are
expected to exceed anticipated rental income. The net costs are discounted using market rates of interest to reflect the long-term nature of the cash flows.
Loan commitments are measured as the amount of the loss allowance, determined in line with IFRS 9 as set out in the Credit risk section of the Risk review.
Contingent liabilities are possible obligations whose existence will be confirmed only by certain future events or present obligations where the transfer of economic
benefit is uncertain or cannot be reliably measured. Contingent liabilities are not recognised but are disclosed unless they are remote.
Critical judgements and accounting estimates
The preparation of Santander UK's consolidated financial statements in accordance with IFRS requires management to make judgements and assumptions in
applying the accounting policies that affect the reported amounts of assets, liabilities, income and expenses. Due to the inherent uncertainty in making estimates,
actual results reported in future periods may be based on amounts which differ from those estimates. Estimates, judgements and assumptions are continually
evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the
circumstances. Management has considered the impact of developments in principal risks and uncertainties, as set out in the Risk review, on critical judgements and
accounting estimates.
The significant judgements, apart from those involving estimation, made by management in applying Santander UK's accounting policies in these financial
statements (key judgements) and the key sources of estimation uncertainty that may have a significant risk of causing a material adjustment to the carrying
amount\u00a0of assets and liabilities within the next financial year (key estimates), which together are considered critical to Santander UK's results and financial position,
are as follows:
a) Credit impairment allowance
The application of the ECL impairment methodology for calculating credit impairment allowances is highly susceptible to change from period to period. The
methodology requires management to make judgmental assumptions in determining the estimates. Any significant difference between the estimated amounts and
actual amounts could have a material impact on the future financial results and financial condition. The impact of the cost of living crisis has increased the
uncertainty around ECL impairment calculations and has required management to make additional judgements and accounting estimates that affect the amount of
assets and liabilities at the reporting date and the amount of income and expenses in the reporting period. The key additional judgements due to the impact of the
cost of living crisis mainly reflect the increased uncertainty around forward-looking economic data and the need for additional judgemental adjustments.
Key judgements
\u2013 Establishing the criteria for a significant increase in credit risk (SICR) and, for corporate borrowers, internal credit risk rating
\u2013 Determining the need for any judgemental adjustments
\u2013 Determining an appropriate definition of default
\u2013 Establishing low credit risk exemption (LCRE) criteria to determine that the credit risk did not increase significantly since initial recognition
\u2013 Determining the need to assess corporate Stage 3 exposures individually
Key estimates
\u2013 Forward-looking multiple economic scenario assumptions
\u2013 Probability weights assigned to multiple economic scenarios
For more on each of these key judgements and estimates, see 'Critical Judgements and accounting estimates applied in calculating ECL' in the \u2018Credit risk \u2013 credit
risk management\u2019 section of the Risk review.
Sensitivity of ECL allowance
For detailed disclosures, see 'Sensitivity of ECL allowance' in the \u2018Credit risk \u2013 credit risk management\u2019 section of the Risk review.
b) Provisions and contingent liabilities
Key judgements
\u2013 Determining whether a present obligation exists
\u2013 Determining the likely outcome of future legal decisions
Key estimates
\u2013 Probability, timing, nature and amount of any outflows that may arise from past events
Included in Litigation and other regulatory provisions in Note 27 are amounts in respect of management\u2019s best estimates of liability relating to a legal dispute
regarding allocation of responsibility for a specific PPI portfolio of complaints, and Plevin related litigation. Note 30 provides disclosure relating to ongoing factual
issues and reviews that could impact the timing and amount of any outflows. It includes disclosure relating to an investigation in relation to the historical
involvement of Santander UK plc, Santander Financial Services plc and Cater Allen International Limited (all subsidiaries of Santander UK Group Holdings plc) in
German dividend tax arbitrage transactions. It also includes disclosure relating to the historical use of discretionary commission arrangements by Santander
Consumer (UK) plc.
These judgements are based on the specific facts available and often require specialist professional advice. There can be a wide range of possible outcomes and
uncertainties, particularly in relation to legal actions, and regulatory and consumer credit matters. As a result, it is often not possible to make reliable estimates of
the likelihood and amount of any potential outflows, or to calculate any resulting sensitivities. For more on each of these key judgements and estimates, see Notes
27 and 30.
c) Retirement benefit plans
The Santander UK group operates a number of defined benefit pension schemes as described in Note 28 and estimates their position as described in the accounting
policy \u2018Pensions and other post retirement benefits\u2019.
Key judgements
\u2013 Setting the criteria for constructing the corporate bond yield curve used to determine the discount rate
\u2013 Determining the methodology for setting the inflation assumption
Key estimates
\u2013 Discount rate applied to future cash flows
\u2013 Rate of price inflation
\u2013 Expected lifetime of the schemes' members
\u2013 Valuation of pension fund assets whose values are not based on market observable data
For more on each of these key judgements and estimates, see Note 28 .
Sensitivity of defined benefit pension scheme estimates
For detailed disclosures, see \u2018Actuarial assumption sensitivities\u2019 in Note 28 . The Scheme is invested in certain assets whose values are not based on market
observable data, such as investments in private equity funds and property. Due diligence has been conducted to support the values obtained in respect of these
assets represent fair value. Given the nature of these investments, we are unable to prepare sensitivities on how their values could vary as market conditions or
other variables change.
d) Goodwill
The carrying amount of goodwill is based on the application of judgements including the basis of goodwill impairment calculation assumptions. Santander UK
undertakes an annual assessment to evaluate whether the carrying amount of goodwill is impaired, carrying out this assessment more frequently if reviews identify
indicators of impairment or when events or changes in circumstances dictate.
Key judgement:
\u2013 Determining the basis of goodwill impairment testing methodology, including the need for planning assumptions and internal capital allocations
Key estimates:
\u2013 Forecast cash flows for cash generating units
\u2013 Discount rates which factor in risk-free rates and applicable risk premiums
All of these variables are subject to fluctuations in external market rates and economic conditions beyond management\u2019s control
Santander UK group undertakes an annual assessment to evaluate whether the carrying amount of goodwill is impaired, carrying out this assessment more
frequently if reviews identify indicators of impairment or when events or changes in circumstances dictate.
The estimation of future cash flows and the level to which they are discounted is inherently uncertain and requires significant judgement and is subject to potential
change over time.
For more on each of these key judgements and estimates, see Note 19 .
Sensitivity of goodwill
For detailed disclosures, see \u2018Sensitivities of key assumptions in calculating 'VIU\u2019 in Note 19.
Sensitivity of level 3 intercompany derivative valuation estimates
For detailed disclosures, see \u2018Effect of changes in significant unobservable assumptions to reasonably possible alternatives\u2019 in Note 38.
As discussed above, the fair value of financial instruments are, in certain circumstances, measured using valuation techniques that incorporate assumptions that are
not evidenced by prices from observable current market transactions in the same instrument and are not based on observable market data and, as such require the
application of a degree of judgement. Changing one or more of the inputs to the valuation models to reasonably possible alternative assumptions would change the
fair values significantly.
The segmental data is prepared on a statutory basis of accounting, in line with the accounting policies set out in Note 1. Transactions between segments are on
normal commercial terms and conditions. Internal charges and internal UK transfer pricing adjustments are reflected in the results of each segment and eliminate
on consolidation. Revenue sharing agreements are used to allocate external customer revenues to a segment on a reasonable basis. Funds are ordinarily
reallocated between segments, resulting in funding cost transfers disclosed in operating income. Interest charged for these funds is based on Santander UK\u2019s cost
of wholesale funding. Interest income and interest expense have not been reported separately. The majority of segment revenues are interest income in nature and
net interest income is relied on primarily to assess segment performance and to make decisions on the allocation of segment resources.
The following table shows the impact of netting arrangements on:
\u2013 All financial assets and liabilities that are reported net on the balance sheet
\u2013 All derivative financial instruments and repurchase agreements and other similar secured lending and borrowing agreements that are subject to enforceable
master netting arrangements or similar agreements, but do not qualify for balance sheet netting.
The table identifies the amounts that have been offset in the balance sheet and those amounts that are covered by enforceable netting arrangements (offsetting
arrangements and financial collateral) but do not qualify for netting under the requirements described above.
For derivative contracts, the \u2018Financial instruments\u2019 column identifies financial assets and liabilities that are subject to set off under netting agreements, such as
the\u00a0ISDA Master Agreement or derivative exchange or clearing counterparty agreements, whereby all outstanding transactions with the same counterparty can
be\u00a0offset and close-out netting applied across all outstanding transactions covered by the agreements if an event of default or other predetermined events occur.
Financial collateral refers to cash and non-cash collateral obtained, typically daily or weekly, to cover the net exposure between counterparties by enabling the
collateral to be realised in an event of default or if other predetermined events occur. For repurchase and reverse repurchase agreements and other similar secured
lending and borrowing, the \u2018Financial instruments\u2019 column identifies financial assets and liabilities that are subject to set off under netting agreements, such as
global master repurchase agreements and global master securities lending agreements, whereby all outstanding transactions with the same counterparty can
be\u00a0offset and close-out netting applied across all outstanding transactions covered by the agreements if an event of default or other predetermined events occur.
Financial collateral typically comprises highly liquid securities which are legally transferred and can be liquidated if a counterparty defaults.
", "dimensions": { "concept": "ifrs-full:DisclosureOfMaterialAccountingPolicyInformationExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-507": { "value": "
These financial statements are prepared for Santander UK plc (the Company) and the Santander UK plc group (the Santander UK group) under the UK Companies Act
2006. The principal activity of the Santander UK group is the provision of a wide range of banking and financial services to personal, business and corporate
customers. Santander UK plc is a public company, limited by shares and incorporated and registered in England and Wales having a registered office at 2 Triton
Square, Regent\u2019s Place, London, NW1 3AN. It is an operating company undertaking banking and financial services transactions.", "dimensions": { "concept": "ifrs-full:DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-508": { "value": "Santander UK plc", "dimensions": { "concept": "ifrs-full:NameOfReportingEntityOrOtherMeansOfIdentification", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-509": { "value": "The principal activity of the Santander UK group is the provision of a wide range of banking and financial services to personal, business and corporate customers.", "dimensions": { "concept": "ifrs-full:DescriptionOfNatureOfEntitysOperationsAndPrincipalActivities", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-510": { "value": "UK", "dimensions": { "concept": "ifrs-full:DomicileOfEntity", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-511": { "value": "public company, limited by shares", "dimensions": { "concept": "ifrs-full:LegalFormOfEntity", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-512": { "value": "England and Wales", "dimensions": { "concept": "ifrs-full:CountryOfIncorporation", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-513": { "value": "2 Triton Square, Regent\u2019s Place, London, NW1 3AN.", "dimensions": { "concept": "ifrs-full:AddressOfRegisteredOfficeOfEntity", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-514": { "value": "
Basis of preparation
These financial statements incorporate the financial statements of the Company and entities it controls (its subsidiaries) made up to 31 December each year. The
consolidated financial statements have been prepared on the going concern basis using the historical cost convention, except for financial assets and liabilities that
have been measured at fair value. An assessment of the appropriateness of the adoption of the going concern basis of accounting is disclosed in the statement of
going concern in the Directors\u2019 report.
Compliance with International Financial Reporting Standards (IFRS)
The consolidated financial statements of the Santander UK group and the separate financial statements of the Company comply with UK-adopted International
Accounting Standards (IAS). The financial statements are also prepared in accordance with IFRS as issued by the International Accounting Standards Board (IASB),
including interpretations issued by the IFRS Interpretations Committee, as there are no applicable differences from IFRS as issued by the IASB for the periods
presented.
Disclosures required by IFRS 7 \u2018Financial Instruments: Disclosure\u2019 relating to the nature and extent of risks arising from financial instruments, and IAS 1
\u2018Presentation of Financial Statements\u2019 relating to objectives, policies and processes for managing capital, have been included in the Risk review section of this
Annual Report. This information forms an integral part of these financial statements by this cross reference, is marked as audited, and is covered by the Independent
auditors' report.
Climate change
Santander UK continues to develop its assessment of the potential impacts that climate change and the transition to a low carbon economy may have on the assets
and liabilities recognised and presented in its financial statements.
Santander UK is mindful of its responsibilities as a responsible lender and is focused on aligning with the objectives of the Paris Agreement on climate change and to
support the UK\u2019s transition to a climate-resilient, net zero economy.
Santander UK's current climate change strategy focuses on three main areas to achieve Banco Santander's ambition to reach net zero emissions by 2050:
1. Managing climate risks by integrating climate considerations into risk management frameworks, screening and stress testing our portfolio for climate related
financial risks, and setting risk appetites to help steer our portfolio in line with the Paris Agreement,
2. Supporting our customers\u2019 transition by developing products and services that promote a reduction in CO2 emissions, and
3. Reducing emissions in our operations and supply chain by focusing on continuous improvement in our operations, and environmental and energy management
systems in accordance with ISO14001 and 15001, promoting responsible procurement practices and employee engagement.
Santander UK's current climate change strategy and its view of the risks associated with climate change and the transition to a low carbon economy are reflected in
its critical judgements and accounting estimates, although climate change risk did not require any material adjustments at 31 December 2024 and 2023, consistent
with management's assessment that climate change and the transition to a low carbon economy are not currently expected to have a meaningful impact on the
viability of the Santander UK group in the medium term.
At31 December 2024 and 2023, management specifically considered the potential impact of climate change and the transition to a low carbon economy on:
\u2013 Loans and advances to customers (see Note 13 and the credit risk section of the Risk review). Some climate change risks arise due to the requirements of IFRS 9
and others relate to specific portfolios and sectors:\u00a0
\u2013 ECL calculations are based on multiple forward-looking economic scenarios developed by management covering a period of five years, during which
timeframe climate change risks may crystallise;
\u2013 For mortgages in Retail & Business Banking and commercial real estate lending in Corporate & Commercial Banking, the value of property collateral might be
affected by physical impacts related to the frequency and scale of extreme weather events, such as flood and subsidence risk, or changing environmental
performance standards for property.
\u2013 For automotive loans in Consumer Finance, the residual value of automotive vehicles might be impacted by diesel obsolescence and the transition to electric
vehicles.
\u2013 For corporate lending in Corporate & Commercial Banking, certain sectors give rise to fossil fuel exposures, such as Oil & Gas, Mining & Extraction and Power
Generation.
\u2013 Goodwill impairment assessment (see Note 19). Estimates underpinning the determination of whether or not goodwill balances are impaired are partly based on
forecast business performance beyond the time horizon for management's detailed plans.
\u2013 Unity Place our new corporate headquarters in Milton Keynes has been built with sustainability at its core. All property assets are evaluated annually for potential
flood damage and are currently considered low risk.
Future changes to Santander UK's climate change strategy may impact Santander UK's critical judgements and accounting estimates and result in material changes
to financial results and the carrying values of certain assets and liabilities in future reporting periods.
", "dimensions": { "concept": "ifrs-full:DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-515": { "value": "The
consolidated financial statements have been prepared on the going concern basis using the historical cost convention, except for financial assets and liabilities that
have been measured at fair value. An assessment of the appropriateness of the adoption of the going concern basis of accounting is disclosed in the statement of
going concern in the Directors\u2019 report.", "dimensions": { "concept": "ifrs-full:DisclosureOfGoingConcernExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-516": { "value": "
Compliance with International Financial Reporting Standards (IFRS)
The consolidated financial statements of the Santander UK group and the separate financial statements of the Company comply with UK-adopted International
Accounting Standards (IAS). The financial statements are also prepared in accordance with IFRS as issued by the International Accounting Standards Board (IASB),
including interpretations issued by the IFRS Interpretations Committee, as there are no applicable differences from IFRS as issued by the IASB for the periods
presented.
Disclosures required by IFRS 7 \u2018Financial Instruments: Disclosure\u2019 relating to the nature and extent of risks arising from financial instruments, and IAS 1
\u2018Presentation of Financial Statements\u2019 relating to objectives, policies and processes for managing capital, have been included in the Risk review section of this
Annual Report. This information forms an integral part of these financial statements by this cross reference, is marked as audited, and is covered by the Independent
auditors' report.", "dimensions": { "concept": "ifrs-full:StatementOfIFRSCompliance", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-517": { "value": "
Climate change
Santander UK continues to develop its assessment of the potential impacts that climate change and the transition to a low carbon economy may have on the assets
and liabilities recognised and presented in its financial statements.
Santander UK is mindful of its responsibilities as a responsible lender and is focused on aligning with the objectives of the Paris Agreement on climate change and to
support the UK\u2019s transition to a climate-resilient, net zero economy.
Santander UK's current climate change strategy focuses on three main areas to achieve Banco Santander's ambition to reach net zero emissions by 2050:
1. Managing climate risks by integrating climate considerations into risk management frameworks, screening and stress testing our portfolio for climate related
financial risks, and setting risk appetites to help steer our portfolio in line with the Paris Agreement,
2. Supporting our customers\u2019 transition by developing products and services that promote a reduction in CO2 emissions, and
3. Reducing emissions in our operations and supply chain by focusing on continuous improvement in our operations, and environmental and energy management
systems in accordance with ISO14001 and 15001, promoting responsible procurement practices and employee engagement.
Santander UK's current climate change strategy and its view of the risks associated with climate change and the transition to a low carbon economy are reflected in
its critical judgements and accounting estimates, although climate change risk did not require any material adjustments at 31 December 2024 and 2023, consistent
with management's assessment that climate change and the transition to a low carbon economy are not currently expected to have a meaningful impact on the
viability of the Santander UK group in the medium term.
At31 December 2024 and 2023, management specifically considered the potential impact of climate change and the transition to a low carbon economy on:
\u2013 Loans and advances to customers (see Note 13 and the credit risk section of the Risk review). Some climate change risks arise due to the requirements of IFRS 9
and others relate to specific portfolios and sectors:\u00a0
\u2013 ECL calculations are based on multiple forward-looking economic scenarios developed by management covering a period of five years, during which
timeframe climate change risks may crystallise;
\u2013 For mortgages in Retail & Business Banking and commercial real estate lending in Corporate & Commercial Banking, the value of property collateral might be
affected by physical impacts related to the frequency and scale of extreme weather events, such as flood and subsidence risk, or changing environmental
performance standards for property.
\u2013 For automotive loans in Consumer Finance, the residual value of automotive vehicles might be impacted by diesel obsolescence and the transition to electric
vehicles.
\u2013 For corporate lending in Corporate & Commercial Banking, certain sectors give rise to fossil fuel exposures, such as Oil & Gas, Mining & Extraction and Power
Generation.
\u2013 Goodwill impairment assessment (see Note 19). Estimates underpinning the determination of whether or not goodwill balances are impaired are partly based on
forecast business performance beyond the time horizon for management's detailed plans.
\u2013 Unity Place our new corporate headquarters in Milton Keynes has been built with sustainability at its core. All property assets are evaluated annually for potential
flood damage and are currently considered low risk.
Future changes to Santander UK's climate change strategy may impact Santander UK's critical judgements and accounting estimates and result in material changes
to financial results and the carrying values of certain assets and liabilities in future reporting periods.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForEnvironmentRelatedExpenseExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-518": { "value": "
Change in accounting policy
In 2024, Santander UK voluntarily changed its accounting policy to remove reverse repurchase agreements (reverse repos) from being treated as cash equivalents
under IAS 7 for the purposes of the cashflow statement. This change provides reliable and more relevant information to users of the financial statements where the
bank is using reverse repos as an investment instrument to manage net interest income and operational liquidity rather than as cash equivalents. The change in
accounting policy has no effect on any other primary financial statements, income statement metrics, key indicators, liquidity ratios, or maturity and offsetting
disclosures. This change aligns Santander UK's accounting policy on the treatment of reverse repos under IAS 7 with the policy applied by its ultimate parent, Banco
Santander, SA. The impact of the change on prior periods is set out below:
For the year ended 31 December
Group
Company
Balance before
change
(Decrease)/
increase
Balance after
change
Balance before
change
(Decrease)/
increase
Balance after
change
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cash and cash equivalents at beginning of the year
46,484
(3,613)
42,871
46,484
(3,613)
42,871
Cash and cash equivalents at the end of the year
42,502
(5,721)
36,781
42,474
(5,721)
36,753
Effects of exchange rate changes on cash and cash equivalents
(121)
63
(58)
(121)
63
(58)
Net change in operating assets and liabilities:
\u2013 Reverse repurchase agreements \u2013 non trading
(3,224)
(1,896)
(5,120)
(3,224)
(1,896)
(5,120)
\u2013 Repurchase agreements \u2013 non trading
704
(275)
429
703
(274)
429
\u2013 Other liabilities
\u2014
\u2014
\u2014
(82)
(1)
(83)
Net cash flows from operating activities
(1,133)
(2,171)
(3,304)
751
(2,171)
(1,420)
2022
Cash and cash equivalents at beginning of the year
49,254
(2,539)
46,715
Cash and cash equivalents at the end of the year
46,484
(3,613)
42,871
Effects of exchange rate changes on cash and cash equivalents
121
(52)
69
Net change in operating assets and liabilities:
\u2013 Reverse repurchase agreements \u2013 non trading
6,818
(1,483)
5,335
\u2013 Repurchase agreements \u2013 non trading
(4,145)
461
(3,684)
Net cash flows from operating activities
(2,970)
(1,022)
(3,992)
The value of reverse repo transactions at 31 December 2024 no longer included as cash and cash equivalents was \u00a36,193m.
", "dimensions": { "concept": "ifrs-full:DisclosureOfChangesInAccountingPoliciesAccountingEstimatesAndErrorsExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-519": { "value": "
Consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities (including structured entities) controlled by it and its
subsidiaries. The acquisition method of accounting is used to account for the acquisition of subsidiaries which meet the definition of a business.
Business combinations between entities under common control (i.e. fellow subsidiaries of Banco Santander SA, the ultimate parent) are outside the scope of IFRS 3
\u2013 \u2018Business Combinations\u2019, and there is no other guidance for such transactions under IFRS. The Santander UK group elects to account for business combinations
between entities under common control at their book values in the acquired entity by including the acquired entity\u2019s results from the date of the business
combination and not restating comparatives. Reorganisations of entities within the Santander UK group are also accounted for at their book values.
Credit protection entities established as part of significant risk transfer (SRT) transactions are not consolidated by the Santander UK group in cases where third party
investors have the exposure, or rights, to all of the variability of returns from the performance of the entities.
", "dimensions": { "concept": "ifrs-full:DisclosureOfBasisOfConsolidationExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-522": { "value": "
The consolidated financial statements incorporate the financial statements of the Company and entities (including structured entities) controlled by it and its
subsidiaries. The acquisition method of accounting is used to account for the acquisition of subsidiaries which meet the definition of a business.
Business combinations between entities under common control (i.e. fellow subsidiaries of Banco Santander SA, the ultimate parent) are outside the scope of IFRS 3
\u2013 \u2018Business Combinations\u2019, and there is no other guidance for such transactions under IFRS. The Santander UK group elects to account for business combinations
between entities under common control at their book values in the acquired entity by including the acquired entity\u2019s results from the date of the business
combination and not restating comparatives. Reorganisations of entities within the Santander UK group are also accounted for at their book values.
Credit protection entities established as part of significant risk transfer (SRT) transactions are not consolidated by the Santander UK group in cases where third party
investors have the exposure, or rights, to all of the variability of returns from the performance of the entities.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForBusinessCombinationsAndGoodwillExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-521": { "value": "
The consolidated financial statements incorporate the financial statements of the Company and entities (including structured entities) controlled by it and its
subsidiaries. The acquisition method of accounting is used to account for the acquisition of subsidiaries which meet the definition of a business.
Business combinations between entities under common control (i.e. fellow subsidiaries of Banco Santander SA, the ultimate parent) are outside the scope of IFRS 3
\u2013 \u2018Business Combinations\u2019, and there is no other guidance for such transactions under IFRS. The Santander UK group elects to account for business combinations
between entities under common control at their book values in the acquired entity by including the acquired entity\u2019s results from the date of the business
combination and not restating comparatives. Reorganisations of entities within the Santander UK group are also accounted for at their book values.
Credit protection entities established as part of significant risk transfer (SRT) transactions are not consolidated by the Santander UK group in cases where third party
investors have the exposure, or rights, to all of the variability of returns from the performance of the entities.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForBusinessCombinationsExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-520": { "value": "
The consolidated financial statements incorporate the financial statements of the Company and entities (including structured entities) controlled by it and its
subsidiaries. The acquisition method of accounting is used to account for the acquisition of subsidiaries which meet the definition of a business.
Business combinations between entities under common control (i.e. fellow subsidiaries of Banco Santander SA, the ultimate parent) are outside the scope of IFRS 3
\u2013 \u2018Business Combinations\u2019, and there is no other guidance for such transactions under IFRS. The Santander UK group elects to account for business combinations
between entities under common control at their book values in the acquired entity by including the acquired entity\u2019s results from the date of the business
combination and not restating comparatives. Reorganisations of entities within the Santander UK group are also accounted for at their book values.
Credit protection entities established as part of significant risk transfer (SRT) transactions are not consolidated by the Santander UK group in cases where third party
investors have the exposure, or rights, to all of the variability of returns from the performance of the entities.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForSubsidiariesExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-523": { "value": "
Revenue recognition
a) Interest income and expense
Interest and similar income and expense are recognised in the income statement using the effective interest rate method for: all financial instruments measured at
amortised cost; debt instruments measured at FVOCI; and the effective part of any related accounting hedging instruments.
Interest income is calculated by applying the effective interest rate to the gross carrying amount of financial assets, except for financial assets that have
subsequently become credit-impaired (i.e. Stage 3), for which interest revenue is calculated by applying the effective interest rate to their amortised cost (i.e. net of
the ECL provision). For more information on stage allocations of credit risk exposures, see \u2018Significant increase in credit risk\u2019 in the \u2018Santander UK group level \u2013 credit
risk management\u2019 section of the Risk review.
b) Fee and commission income and expense
Fees and commissions that are not an integral part of the effective interest rate are recognised when the service is performed. Most fee and commission income is
recognised at a point in time. Certain commitment, upfront and management fees are recognised over time but are not material. For retail and corporate products,
fee and commission income consists principally of collection services fees, commission on foreign currencies, commission and other fees received from retailers for
processing credit card transactions, fees received from other credit card issuers for providing cash advances for their customers through the Santander UK group\u2019s
branch and ATM networks, annual fees payable by credit card holders and fees for non-banking financial products.
For insurance products, fee and commission income consists principally of commissions and profit share arising from the sale of building and contents insurance
and life protection insurance. Commissions arising from the sale of buildings and contents insurance are recognised over the period of insurance cover, adjusted to
take account of cancelled policies. Profit share income from the sale of buildings and contents insurance which is not subject to any adjustment is recognised when
the profit share income is earned. Commissions and profit share arising from the sale of life protection insurance is subject to adjustment for cancellations of
policies within 3 years from inception.
Fee and commission income which forms an integral part of the effective interest rate of a financial instrument (for example certain loan commitment fees) is
recognised as an adjustment to the effective interest rate and recorded in \u2018Interest income\u2019.
c) Other operating income
Other operating income includes all gains and losses from changes in the fair value of financial assets and liabilities held at fair value through profit or loss
(comprising financial assets and liabilities held for trading, trading derivatives and other financial assets and liabilities at fair value through profit or loss), together
with related interest income, expense, dividends, and changes in fair value of any derivatives managed in conjunction with these assets and liabilities. Other
operating income also includes hedge ineffectiveness arising from fair value and cash flow hedging, income from operating lease assets, and profits and losses
arising on the sales of property, plant and equipment and subsidiary undertakings.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForRecognitionOfRevenue", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-524": { "value": "
a) Interest income and expense
Interest and similar income and expense are recognised in the income statement using the effective interest rate method for: all financial instruments measured at
amortised cost; debt instruments measured at FVOCI; and the effective part of any related accounting hedging instruments.
Interest income is calculated by applying the effective interest rate to the gross carrying amount of financial assets, except for financial assets that have
subsequently become credit-impaired (i.e. Stage 3), for which interest revenue is calculated by applying the effective interest rate to their amortised cost (i.e. net of
the ECL provision). For more information on stage allocations of credit risk exposures, see \u2018Significant increase in credit risk\u2019 in the \u2018Santander UK group level \u2013 credit
risk management\u2019 section of the Risk review.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInterestIncomeAndExpenseExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-525": { "value": "
b) Fee and commission income and expense
Fees and commissions that are not an integral part of the effective interest rate are recognised when the service is performed. Most fee and commission income is
recognised at a point in time. Certain commitment, upfront and management fees are recognised over time but are not material. For retail and corporate products,
fee and commission income consists principally of collection services fees, commission on foreign currencies, commission and other fees received from retailers for
processing credit card transactions, fees received from other credit card issuers for providing cash advances for their customers through the Santander UK group\u2019s
branch and ATM networks, annual fees payable by credit card holders and fees for non-banking financial products.
For insurance products, fee and commission income consists principally of commissions and profit share arising from the sale of building and contents insurance
and life protection insurance. Commissions arising from the sale of buildings and contents insurance are recognised over the period of insurance cover, adjusted to
take account of cancelled policies. Profit share income from the sale of buildings and contents insurance which is not subject to any adjustment is recognised when
the profit share income is earned. Commissions and profit share arising from the sale of life protection insurance is subject to adjustment for cancellations of
policies within 3 years from inception.
Fee and commission income which forms an integral part of the effective interest rate of a financial instrument (for example certain loan commitment fees) is
recognised as an adjustment to the effective interest rate and recorded in \u2018Interest income\u2019.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFeeAndCommissionIncomeAndExpenseExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-526": { "value": "
For insurance products, fee and commission income consists principally of commissions and profit share arising from the sale of building and contents insurance
and life protection insurance. Commissions arising from the sale of buildings and contents insurance are recognised over the period of insurance cover, adjusted to
take account of cancelled policies. Profit share income from the sale of buildings and contents insurance which is not subject to any adjustment is recognised when
the profit share income is earned. Commissions and profit share arising from the sale of life protection insurance is subject to adjustment for cancellations of
policies within 3 years from inception.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInsuranceContracts", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-527": { "value": "
Defined benefit pension schemes (see 'Critical judgements and accounting estimates')
A defined benefit scheme is a pension scheme that guarantees an amount of pension benefit to be provided, usually as a function of one or more factors such as
age, years of service or compensation. Pension costs are charged to \u2018Administration expenses\u2019, within the line item \u2018Operating expenses before impairment losses,
provisions and charges\u2019 with the net interest on the defined benefit asset or liability included within \u2018Net interest income\u2019 in the income statement. The asset or
liability recognised in respect of defined benefit pension schemes is the present value of the defined benefit obligation at the balance sheet date, less the fair value
of scheme assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The assets of the schemes
are measured at their fair values at the balance sheet date.
The present value of the defined benefit obligation is estimated by projecting forward the growth in current accrued pension benefits to reflect inflation and salary
growth to the date of pension payment, then discounted to present value using the yield applicable to high-quality AA rated corporate bonds of the same currency
and which have terms to maturity closest to the terms of the scheme liabilities, adjusted where necessary to match those terms. In determining the value of
scheme liabilities, demographic and financial assumptions are made by management about life expectancy, inflation, discount rates, pension increases and
earnings growth, based on past experience and future expectations. Financial assumptions are based on market conditions at the balance sheet date and can
generally be derived objectively.
Demographic assumptions require a greater degree of estimation and judgement to be applied to externally derived data. Any surplus or deficit of scheme assets
over liabilities is recognised in the balance sheet as an asset (surplus) or liability (deficit). An asset is only recognised to the extent that the surplus can be recovered
through reduced contributions in the future or through refunds from the scheme.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-528": { "value": "
Share-based payments
The Santander UK group engages in cash-settled and equity-settled share-based payment transactions in respect of services received from certain of its employees.
Shares of the Santander UK group\u2019s parent, Banco Santander SA are purchased in the open market by the Santander UK group (for the Employee Sharesave scheme)
or are purchased by Banco Santander SA or another Banco Santander subsidiary (including awards granted under the Long-Term Incentive Plan and the Deferred
Shares Bonus Plan) to satisfy share options or awards as they vest.
Options granted under the Employee Sharesave scheme and awards granted under the Transformation Incentive Plan are accounted for as cash-settled share-
based payment transactions. Awards granted under the Long-Term Incentive Plan and Deferred Shares Bonus Plan are accounted for as equity-settled share-based
payment transactions.
The fair value of the options granted under the Employee Sharesave scheme is determined using an option pricing model, which takes into account the exercise
price of the option, the current share price, the risk-free interest rate, the expected volatility of the Banco Santander SA share price over the life of the option and the
dividend growth rate. The fair value of the awards granted for the Long-Term Incentive Plan was determined at the grant date using an option pricing model, which
takes into account the share price at grant date, the risk-free interest rate, the expected volatility of the Banco Santander SA share price over the life of the award
and the dividend growth rate.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForSharebasedPaymentTransactionsExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-529": { "value": "
Goodwill and other intangible assets (for goodwill see 'Critical judgements and accounting estimates')
Goodwill represents the excess of the cost of an acquisition, as well as the fair value of any interest previously held, over the fair value of the share of the
identifiable net assets of the acquired subsidiary, or business at the date of acquisition. Goodwill on the acquisition of subsidiaries and businesses is included
in\u00a0intangible assets. Goodwill is tested for impairment annually, or more frequently when events or changes in circumstances dictate and carried at cost less
accumulated impairment losses. Gains and losses on the disposal of an entity or business include the carrying amount of goodwill relating to the entity or
business\u00a0sold.
Other intangible assets are recognised if they arise from contractual or other legal rights or if they are capable of being separated or divided from Santander UK and
sold, transferred, licensed, rented or exchanged. The value of such intangible assets, where they are available for use, is amortised on a straight-line basis generally
over a three year useful economic life and the assets are reviewed annually for impairment indicators and tested for impairment where indicators are present.
Other intangible assets that are not yet available for use are tested for impairment annually or more frequently when events or changes in circumstances dictate.
Software development costs are capitalised when they are direct costs associated with identifiable and unique software products that are expected to provide
future economic benefits, and the cost of those products can be measured reliably. These costs include payroll, materials, services and directly attributable
overheads. Internally developed software meeting these criteria and externally purchased software are classified in intangible assets on the balance sheet and
amortised on a straight-line basis generally over a three year useful life unless the software is an integral part of the related computer hardware, in which case
it\u00a0is\u00a0treated as property, plant and equipment as described below. Capitalisation of costs ceases when the software is capable of operating as intended. Costs of
maintaining software are expensed as incurred.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIntangibleAssetsAndGoodwillExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-530": { "value": "
Goodwill represents the excess of the cost of an acquisition, as well as the fair value of any interest previously held, over the fair value of the share of the
identifiable net assets of the acquired subsidiary, or business at the date of acquisition. Goodwill on the acquisition of subsidiaries and businesses is included
in\u00a0intangible assets. Goodwill is tested for impairment annually, or more frequently when events or changes in circumstances dictate and carried at cost less
accumulated impairment losses. Gains and losses on the disposal of an entity or business include the carrying amount of goodwill relating to the entity or
business\u00a0sold.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForGoodwillExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-531": { "value": "
Other intangible assets are recognised if they arise from contractual or other legal rights or if they are capable of being separated or divided from Santander UK and
sold, transferred, licensed, rented or exchanged. The value of such intangible assets, where they are available for use, is amortised on a straight-line basis generally
over a three year useful economic life and the assets are reviewed annually for impairment indicators and tested for impairment where indicators are present.
Other intangible assets that are not yet available for use are tested for impairment annually or more frequently when events or changes in circumstances dictate.
Software development costs are capitalised when they are direct costs associated with identifiable and unique software products that are expected to provide
future economic benefits, and the cost of those products can be measured reliably. These costs include payroll, materials, services and directly attributable
overheads. Internally developed software meeting these criteria and externally purchased software are classified in intangible assets on the balance sheet and
amortised on a straight-line basis generally over a three year useful life unless the software is an integral part of the related computer hardware, in which case
it\u00a0is\u00a0treated as property, plant and equipment as described below. Capitalisation of costs ceases when the software is capable of operating as intended. Costs of
maintaining software are expensed as incurred.
Owner-occupied properties
Not exceeding 50 years
Office fixtures and equipment
3 to 35 years
Computer software
Generally 3 years
Right-of-use assets
Shorter of the lease term or the useful life of the underlying asset
Operating lease assets - vehicles
1 to 4 years
Depreciation is not charged on freehold land. Depreciation of operating lease assets where the Santander UK group is the lessor is described in 'Leases' below.
In 2024, the range of useful lives for Office fixtures and equipment expanded to 35 years due to the addition of fixtures and equipment in Unity Place.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDepreciationExpenseExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-532": { "value": "
Software development costs are capitalised when they are direct costs associated with identifiable and unique software products that are expected to provide
future economic benefits, and the cost of those products can be measured reliably. These costs include payroll, materials, services and directly attributable
overheads. Internally developed software meeting these criteria and externally purchased software are classified in intangible assets on the balance sheet and
amortised on a straight-line basis generally over a three year useful life unless the software is an integral part of the related computer hardware, in which case
it\u00a0is\u00a0treated as property, plant and equipment as described below. Capitalisation of costs ceases when the software is capable of operating as intended. Costs of
maintaining software are expensed as incurred.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-533": { "value": "
Property, plant and equipment
Property, plant and equipment include owner-occupied properties (including leasehold properties), office fixtures and equipment and computer software. Property,
plant and equipment also includes operating leases where the Santander UK group is the lessor and right-of-use assets where the Santander UK group is the lessee.
Internally developed software meeting the criteria set out in \u2018Goodwill and other intangible assets\u2019 above and externally purchased software are classified in
property, plant and equipment where the software is an integral part of the related computer hardware (for example, the operating system of a computer). Classes
of property, plant and equipment are depreciated on a straight-line basis over their useful life, as follows:
Owner-occupied properties
Not exceeding 50 years
Office fixtures and equipment
3 to 35 years
Computer software
Generally 3 years
Right-of-use assets
Shorter of the lease term or the useful life of the underlying asset
Operating lease assets - vehicles
1 to 4 years
Depreciation is not charged on freehold land. Depreciation of operating lease assets where the Santander UK group is the lessor is described in 'Leases' below.
In 2024, the range of useful lives for Office fixtures and equipment expanded to 35 years due to the addition of fixtures and equipment in Unity Place.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-535": { "value": "
a) Initial recognition and measurement
Financial assets and liabilities are initially recognised when the Santander UK group becomes a party to the contractual terms of the instrument. The Santander UK
group determines the classification of its financial assets and liabilities at initial recognition and measures a financial asset or financial liability at its fair value plus or
minus, in the case of a financial asset or financial liability not at FVTPL, transaction costs that are incremental and directly attributable to the acquisition or issue of
the financial asset or financial liability. Transaction costs of financial assets and financial liabilities carried at FVTPL are expensed in profit or loss. Immediately after
initial recognition, an expected credit loss (ECL) allowance is recognised for financial assets measured at amortised cost and investments in debt instruments
measured at FVOCI.
A regular way purchase or sale is a purchase or sale of a financial asset under a contract whose terms require delivery of the asset within the timeframe established
generally by regulation or convention in the marketplace concerned. Regular way purchases and sales of financial assets measured at amortised cost are recognised
on settlement date; all other regular way purchases and sales of financial assets are recognised on trade date.
b) Financial assets and liabilities
i) Classification and subsequent measurement
The Santander UK group classifies its financial assets in the measurement categories of amortised cost, FVOCI and FVTPL.
Financial assets and financial liabilities are classified as FVTPL where there is a requirement to do so or where they are otherwise designated at FVTPL on initial
recognition. Financial assets and financial liabilities which are required to be held at FVTPL include:
\u2013 Financial assets and financial liabilities held for trading.
\u2013 Debt instruments that do not have solely payments of principal and interest (SPPI) characteristics. Otherwise, such instruments are measured at amortised cost
or FVOCI, and
\u2013 Equity instruments that have not been designated as held at FVOCI.
Financial assets and financial liabilities are classified as held for trading if they are derivatives or if they are acquired or incurred principally for the purpose of
selling\u00a0or repurchasing in the near-term, or form part of a portfolio of financial instruments that are managed together and for which there is evidence of short-
term profit taking.
In certain circumstances, other financial assets and financial liabilities are designated at FVTPL where this results in more relevant information. This may arise
because it significantly reduces a measurement inconsistency that would otherwise arise from measuring assets or liabilities or recognising the gains or losses on
them on a different basis, where the assets and liabilities are managed and their performance evaluated on a fair value basis or, in the case of financial liabilities,
where it contains one or more embedded derivatives which are not closely related to the host contract.
The classification and measurement requirements for financial asset debt and equity instruments and financial liabilities are set out below.
Financial assets: debt instruments
Debt instruments are those instruments that meet the definition of a financial liability from the issuer\u2019s perspective, such as loans and debt securities which consist
mainly of government bonds and covered bonds. Classification and subsequent measurement of debt instruments depend on the Santander UK group\u2019s business
model for managing the asset, and the cash flow characteristics of the asset.
Business model
The business model reflects how the Santander UK group manages the assets in order to generate cash flows and, specifically, whether the Santander UK group\u2019s
objective is solely to collect the contractual cash flows from the assets or is to collect both the contractual cash flows and cash flows arising from the sale of the
assets. If neither of these is applicable, such as where the financial assets are held for trading purposes, then the financial assets are classified as part of an \u2018other\u2019
business model and measured at FVTPL. Factors considered in determining the business model for a group of assets include past experience on how the cash flows
for these assets were collected, how the assets\u2019 performance is evaluated and reported to key management personnel, and how risks are assessed and managed.
SPPI
Where the business model is to hold assets to collect contractual cash flows or to collect contractual cash flows and sell, the Santander UK group assesses whether
the assets\u2019 cash flows represent SPPI. In making this assessment, the Santander UK group considers whether the contractual cash flows are consistent with a basic
lending arrangement (i.e. interest includes only consideration for the time value of money, credit risk, other basic lending risks and a profit margin that is consistent
with a basic lending arrangement). Where the contractual terms introduce exposure to risk or volatility that is inconsistent with a basic lending arrangement, the
related asset is classified and measured at FVTPL.
Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are SPPI.
Based on these factors, the Santander UK group classifies its debt instruments into one of the following measurement categories:
\u2013 Amortised cost \u2013 Financial assets that are held for collection of contractual cash flows where those cash flows represent SPPI, and that are not designated at
FVTPL, are measured at amortised cost. The carrying amount of these assets is adjusted by any ECL recognised and measured as presented in Note 13. Interest
income from these financial assets is included in \u2018Interest and similar income\u2019 using the effective interest rate method. When estimates of future cash flows are
revised, the carrying amount of the respective financial assets is adjusted to reflect the new estimate discounted using the original effective interest rate. Any
changes are recognised in the income statement.
\u2013 FVOCI \u2013 Financial assets that are held for collection of contractual cash flows and for selling the assets, where the assets\u2019 cash flows represent SPPI, and that are
not designated at FVTPL, are measured at FVOCI. Movements in the carrying amount are recognised in OCI, except for the recognition of impairment gains or
losses, interest revenue and foreign exchange gains and losses which are recognised in profit or loss. When the financial asset is derecognised, the cumulative
gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in \u2018Other operating income\u2019. Interest income from these
financial assets is included in \u2018Interest and similar income\u2019 using the effective interest rate method.
\u2013 FVTPL \u2013 Financial assets that do not meet the criteria for amortised cost or FVOCI are measured at FVTPL. A gain or loss on a debt instrument that is subsequently
measured at FVTPL, including any debt instruments designated at fair value, is recognised in profit or loss and presented in the income statement in \u2018Other
operating income\u2019 in the period in which it arises.
The Santander UK group reclassifies financial assets when and only when its business model for managing those assets changes. The reclassification takes place
from the start of the first reporting period following the change. Such changes are expected to be very infrequent.
Financial assets: equity instruments
Equity instruments are instruments that meet the definition of equity from the issuer\u2019s perspective, being instruments that do not contain a contractual obligation to
pay cash and that evidence a residual interest in the issuer\u2019s net assets. All equity investments are subsequently measured at FVTPL; management may elect, at
initial recognition, to irrevocably designate an equity investment at FVOCI but has not currently done so. When this election is used, fair value gains and losses are
recognised in OCI and are not subsequently reclassified to profit or loss, including on disposal. ECLs (and reversal of ECLs) are not reported separately from other
changes in fair value. Dividends, when representing a return on such investments, continue to be recognised in profit or loss as other income when the right to
receive payments is established. Gains and losses on equity investments at FVTPL are included in \u2018Other operating income\u2019 in the income statement.
Financial liabilities
Financial liabilities, which include deposits by banks, deposits by customers, debt securities in issue and subordinated liabilities, are classified as subsequently
measured at amortised cost, except for:
\u2013 Financial liabilities at FVTPL (see Note 24): this classification is applied to derivatives and other financial liabilities designated as such at initial recognition. Gains or
losses on financial liabilities designated at FVTPL are presented partially in other comprehensive income (the amount of change in the fair value of the financial
liability that is attributable to changes in the credit risk of that liability) and partially in profit or loss (the remaining amount of change in the fair value of the
liability)
\u2013 Financial liabilities arising from the transfer of financial assets which did not qualify for derecognition, whereby a financial liability is recognised for the
consideration received for the transfer. In subsequent periods, the Santander UK group recognises any expense incurred on the financial liability, and
\u2013 Financial guarantee contracts and loan commitments.
Preference shares which carry a contractual obligation to transfer economic benefits are classified as financial liabilities and are presented in subordinated liabilities.
The coupon on these preference shares is recognised in the income statement as interest expense on an amortised cost basis using the effective interest method.
Contracts involving the receipt of cash on which customers receive an index-linked return are accounted for as equity index-linked deposits. The principal products
are Capital Guaranteed/Protected Products, which give the customers a limited participation in the upside growth of an equity index. In the event the index falls in
price, a cash principal element is guaranteed/protected. The equity index-linked deposits contain embedded derivatives. These embedded derivatives, in
combination with the principal cash deposit element, are designed to replicate the investment performance profile tailored to the return agreed in the contracts
with customers. The cash principal element is accounted for as deposits by customers at amortised cost. The embedded derivatives are separated from the host
instrument and are separately accounted for as derivatives.
Sale and repurchase agreements (including stock borrowing and lending)
Securities sold subject to a commitment to repurchase them at a predetermined price (repos) under which substantially all the risks and rewards of ownership
are\u00a0retained by the Santander UK group remain on the balance sheet and a liability is recorded in respect of the consideration received. Securities purchased
under\u00a0commitments to resell (reverse repos) are not recognised on the balance sheet and the consideration paid is recorded as an asset. The difference between
the sale and repurchase price is treated as trading income in the income statement, except where the repo is not treated as part of the trading book, in which case
the difference is recorded in interest income or expense.
Securities lending and borrowing transactions are generally secured, with collateral in the form of securities or cash advanced or received. Securities borrowed
are\u00a0not reflected on the balance sheet. Collateral in the form of cash received or advanced is recorded as a deposit or a loan. Collateral in the form of securities is
not\u00a0recognised.
Day One profit adjustments
The fair value of a financial instrument on initial recognition is generally its transaction price (that is, the fair value of the consideration given or received). However,
sometimes the fair value will be based on other observable current market transactions in the same instrument, without modification or repackaging, or on a
valuation technique whose variables include only data from observable markets, such as interest rate yield curves, option volatilities and currency rates. When such
evidence exists, the Santander UK group recognises a trading gain or loss at inception (Day One gain or loss), being the difference between the transaction price and
the fair value. When significant unobservable parameters are used, the entire Day One gain or loss is deferred and is recognised in the income statement over the
life of the transaction until the transaction matures, is closed out, the valuation inputs become observable, or an offsetting transaction is entered into.
ii) Impairment of debt instrument financial assets
The Santander UK group assesses on a forward-looking basis the ECL associated with its debt instrument assets carried at amortised cost and FVOCI and with the
exposure arising from financial guarantee contracts and loan commitments. The Santander UK group recognises a loss allowance for such losses at each reporting
date. The measurement of ECL reflects:
\u2013 An unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes.
\u2013 The time value of money, and
\u2013 Reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of
future economic conditions.
Grouping of instruments for losses measured on a collective basis
We typically group instruments and assess them for impairment collectively where they share risk characteristics (as described in the Credit risk section of the Risk
review) using one or more statistical models. Where we have used internal capital or similar models as the basis for our ECL models, this typically results in a large
number of relatively small homogenous groups which are determined by the permutations of the underlying characteristics in the statistical models. We calculate
separate collective provisions for instruments in Stages 1, 2 and 3 where the instrument is not individually assessed, as described below.
Individually assessed impairments (IAIs)
We assess significant Stage 3 cases individually. We do this for Corporate & Commercial Banking cases, but not for Business Banking cases in Retail & Business
Banking which we assess collectively. To calculate the estimated loss, we estimate the future cash flows under several scenarios each of which uses case-specific
factors and circumstances. We then probability-weight the net present value of the cash flows under each scenario to arrive at a weighted average provision
requirement. We update our assessment process every quarter and more frequently if there are changes in circumstances that might affect the scenarios, cash
flows or probabilities we apply.
For more on how ECL is calculated, see the Credit risk section of the Risk review.
\u2013 Write-off
For secured loans, a write-off is only made when all collection procedures have been exhausted and the security has been sold and/or a claim made on any
mortgage indemnity guarantee or other insurance. In the corporate loan portfolio, there may be occasions where a write-off occurs for other reasons, such as
following a consensual restructure or refinancing of the debt or where the debt is sold for strategic reasons into the secondary market at a value lower than its
face value.
There is no threshold based on past due status beyond which all secured loans are written off as there can be significant variations in the time needed to enforce
possession and sale of the security, especially due to the different legal frameworks that apply in different regions of the UK. For unsecured loans, a write-off is only
made when all internal avenues of collecting the debt have been exhausted. Where appropriate the debt is passed over to external collection agencies. A past due
threshold is applied to unsecured debt where accounts that are 180 days past due are written off unless there is a dispute awaiting resolution. Contact is made with
customers with the aim to achieve a realistic and sustainable repayment arrangement. Litigation and/or enforcement of security is usually carried out only when the
steps described above have been undertaken without success.
All write-offs are assessed / made on a case-by-case basis, taking account of the exposure at the date of write-off, after accounting for the value from any
collateral or insurance held against the loan. The exception to this is in cases where fraud has occurred, where the exposure is written off once investigations
have been completed and the probability of recovery is minimal. The time span between discovery and write-off will be short and may not result in an
impairment loss allowance being raised. The write-off policy is regularly reviewed. Write-offs are charged against previously established loss allowances.
\u2013 Recoveries
Recoveries of credit impairment charges are not included in the impairment loss allowance but are taken to income and offset against credit impairment
charges. Recoveries of credit impairment charges are classified in the income statement as \u2018Credit impairment charges\u2019.
iii) Modifications of financial assets
The treatment of a renegotiation or modification of the contractual cash flows of a financial asset normally depends upon whether the renegotiation or modification
is due to financial difficulties of the borrower or for other commercial reasons.
\u2013 Contractual modifications due to financial difficulties of the borrower: where the Santander UK group modifies the contractual conditions to enable the
borrower to fulfil their payment obligations, the asset is not derecognised. The gross carrying amount of the financial asset is recalculated as the present value of
the renegotiated/modified contractual cash flows that are discounted at the financial asset\u2019s original EIR and any gain or loss arising from the modification is
recognised in the income statement.\u00a0
\u2013 Contractual modifications for other commercial reasons: an assessment is performed to determine whether the terms of the new agreement are substantially
different from the terms of the existing agreement, after considering changes in the cash flows arising from the modified terms and the overall instrument risk
profile. Where terms are substantially different, such modifications are treated as a new transaction resulting in derecognition of the original financial asset, and
the recognition of a \u2018new\u2019 financial asset with any difference between the carrying amount of the derecognised asset and the fair value of the new asset is
recognised in the income statement as a gain or loss on derecognition. Where terms are not substantially different, the carrying value of the financial asset is
adjusted to reflect the present value of modified cash flows discounted at the original EIR with any gain or loss arising from modification recognised immediately
in the income statement.
Any other contractual modifications, such as where a regulatory authority imposes a change in certain contractual terms or due to legal reasons, are assessed on a
case-by-case basis to establish whether or not the financial asset should be derecognised.\u00a0
iv) Derecognition other than on a modification
Financial assets are derecognised when the rights to receive cash flows have expired or the Santander UK group has transferred its contractual right to receive the
cash flows from the assets and either: (1) substantially all the risks and rewards of ownership have been transferred; or (2) the Santander UK group has neither
retained nor transferred substantially all of the risks and rewards but has transferred control.
Financial liabilities are derecognised when extinguished, cancelled or expired.
c) Financial guarantee contracts and loan commitments
Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor
fails to make payments when due, in accordance with the terms of a debt instrument. Such financial guarantees are given to banks, financial institutions and others
on behalf of customers to secure loans, overdrafts and other banking facilities.
Financial guarantee contracts are initially measured at fair value and subsequently measured at the higher of the amount of the loss allowance, and the premium
received on initial recognition less income recognised in accordance with the principles of IFRS 15. Loan commitments are measured as the amount of the loss
allowance (determined in accordance with IFRS 9 as described in Credit risk section of the Risk review). The Santander UK group has not provided any commitment
to provide loans at a below-market interest rate, or that can be settled net in cash or by delivering or issuing another financial instrument.
For financial guarantee contracts and loan commitments, the loss allowance is recognised as a provision and charged to credit impairment charges in the income
statement. The loss allowance in respect of revolving facilities is classified in loans and advances to customers to the extent of any drawn balances. The loss
allowance in respect of undrawn amounts is classified in provisions. When amounts are drawn, any related loss allowance is transferred from provisions to loans
and advances to customers.
Derivative financial instruments (derivatives)
Derivatives are contracts or agreements whose value is derived from one or more underlying indices or asset values inherent in the contract or agreement, which
require no or little initial net investment and are settled at a future date. Transactions are undertaken in interest rate, cross currency, equity, residential property and
other index-related swaps, forwards, caps, floors, swaptions, as well as credit default and total return swaps, equity index contracts and exchange traded interest
rate futures, and equity index options.
Derivatives are held for risk management purposes. Derivatives are classified as held for trading unless they are designated as being in a hedge accounting
relationship. The Santander UK group chooses to designate certain derivatives as in a hedging relationship if they meet specific criteria, as further described in
\u2018Hedge accounting\u2019 below.
Derivatives are recognised initially (on the date on which a derivative contract is entered into), and are subsequently remeasured, at their fair value. Fair values
of\u00a0exchange-traded derivatives are obtained from quoted market prices. Fair values of over-the-counter derivatives are estimated using valuation techniques,
including discounted cash flow and option pricing models.
Certain derivatives may be embedded in hybrid contracts. If the hybrid contract contains a host that is a financial asset, then the Santander UK group assesses the
entire contract as described in the financial asset section above for classification and measurement purposes. Otherwise, embedded derivatives are treated as
separate derivatives when their economic characteristics and risks are not closely related to those of the host contract; the terms of the embedded derivative would
meet the definition of a stand-alone derivative if they were contained in a separate contract; and the combined contract is not held for trading or designated at fair
value. These embedded derivatives are measured at fair value with changes in fair value recognised in the income statement. Contracts containing embedded
derivatives are not subsequently reassessed for separation unless either there has been a change in the terms of the contract which significantly modifies the cash
flows (in which case the contract is reassessed at the time of modification) or the contract has been reclassified (in which case the contract is reassessed at the time
of reclassification).
All derivatives are carried as assets when their fair value is positive and as liabilities when their fair value is negative, except where netting is permitted. The method
of recognising fair value gains and losses depends on whether derivatives are held for trading or are designated as hedging instruments and, if the latter, the nature
of the risks being hedged. Gains and losses from changes in the fair value of derivatives held for trading are recognised in the income statement and included in
Other operating income.
Offsetting financial assets and liabilities
Financial assets and liabilities including derivatives are offset and the net amount reported in the balance sheet when there is a legally enforceable right to set off
the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The Santander UK group is party
to a number of arrangements, including master netting arrangements under industry standard agreements which facilitate netting of transactions in jurisdictions
where netting agreements are recognised and have legal force. These netting arrangements do not generally result in an offset of balance sheet assets and
liabilities for accounting purposes, as transactions are usually settled on a gross basis.
Hedge accounting
The Santander UK group applies hedge accounting to represent, to the maximum possible extent permitted under accounting standards, the economic effects of its
risk management strategies. Derivatives are used to hedge exposures to interest rates, inflation and exchange rates.
At the time a financial instrument is designated as a hedge (i.e. at the inception of the hedge), the Santander UK group formally documents the relationship between
the hedging instrument(s) and hedged item(s), its risk management objective and strategy for undertaking the hedge. The documentation includes the identification
of each hedging instrument and respective hedged item, the nature of the risk being hedged (including the benchmark interest rate being hedged in a hedge of
interest rate risk) and how the hedging instrument\u2019s effectiveness in offsetting the exposure to changes in the hedged item\u2019s fair value attributable to the hedged
risk is to be assessed. Accordingly, the Santander UK group formally assesses, both at the inception of the hedge and on an ongoing basis, whether the hedging
derivatives have been and will be highly effective in offsetting changes in the fair value attributable to the hedged risk during the period that the hedge is
designated. A hedge is normally regarded as highly effective if, at inception and throughout its life, the Santander UK group can expect, and actual results indicate
that changes in the fair value or cash flow of the hedged items are effectively offset by changes in the fair value or cash flow of the hedging instrument. If at any
point it is concluded that it is no longer highly effective in achieving its documented objective, hedge accounting is discontinued.
Where derivatives are held for risk management purposes, and when transactions meet the required criteria for documentation and hedge effectiveness, the
derivatives may be designated as either: (i) hedges of the change in fair value of recognised assets or liabilities or firm commitments (fair value hedges); (ii) hedges
of the variability in highly probable future cash flows attributable to a recognised asset or liability, or a forecast transaction (cash flow hedges); or (iii) a hedge of a
net investment in a foreign operation (net investment hedges). The Santander UK group applies fair value and cash flow hedge accounting but not hedging of a net
investment in a foreign operation.
a) Fair value hedge accounting
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement, together with the changes in the
fair value of the hedged asset or liability that are attributable to the hedged risk. Where the hedged item is measured at amortised cost, the fair value changes due
to the hedged risk adjust the carrying amount of the hedged asset or liability. Changes in the fair value of portfolio hedged items are presented separately in the
consolidated balance sheet in macro hedge of interest rate risk and recognised in the income statement. If the hedge no longer meets the criteria for hedge
accounting, changes in the fair value of the hedged item attributable to the hedged risk are no longer recognised in the income statement. For fair value hedges of
interest rate risk, the cumulative adjustment that has been made to the carrying amount of the hedged item is amortised to the income statement using the
effective interest method over the period to maturity. For portfolio hedged items, the cumulative adjustment is amortised to the income statement using the
straight-line method over the period to maturity.
b) Cash flow hedge accounting
The effective portion of changes in the fair value of qualifying cash flow hedges is recognised in other comprehensive income in the cash flow hedging reserve.
The\u00a0gain or loss relating to the ineffective portion is recognised immediately in the income statement. Amounts accumulated in equity are reclassified to the
income\u00a0statement in the periods in which the hedged item affects profit or loss. When a hedging instrument expires or is sold, or when a hedge no longer meets
the\u00a0criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised in the income statement when the
forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that
was reported in equity is immediately transferred to the income statement. The Santander UK group is exposed to variability in future cash flows attributable
to\u00a0i)\u00a0interest rate and inflation risks on its GBP floating rate assets and liabilities ii) foreign currency risk on debt issuances denominated in foreign currency and
iii)\u00a0equity price risk from operating the Employee Sharesave scheme. Cash flow hedging is used to hedge the variability in cash flows arising from these risks.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-534": { "value": "
a) Initial recognition and measurement
Financial assets and liabilities are initially recognised when the Santander UK group becomes a party to the contractual terms of the instrument. The Santander UK
group determines the classification of its financial assets and liabilities at initial recognition and measures a financial asset or financial liability at its fair value plus or
minus, in the case of a financial asset or financial liability not at FVTPL, transaction costs that are incremental and directly attributable to the acquisition or issue of
the financial asset or financial liability. Transaction costs of financial assets and financial liabilities carried at FVTPL are expensed in profit or loss. Immediately after
initial recognition, an expected credit loss (ECL) allowance is recognised for financial assets measured at amortised cost and investments in debt instruments
measured at FVOCI.
A regular way purchase or sale is a purchase or sale of a financial asset under a contract whose terms require delivery of the asset within the timeframe established
generally by regulation or convention in the marketplace concerned. Regular way purchases and sales of financial assets measured at amortised cost are recognised
on settlement date; all other regular way purchases and sales of financial assets are recognised on trade date.
b) Financial assets and liabilities
i) Classification and subsequent measurement
The Santander UK group classifies its financial assets in the measurement categories of amortised cost, FVOCI and FVTPL.
Financial assets and financial liabilities are classified as FVTPL where there is a requirement to do so or where they are otherwise designated at FVTPL on initial
recognition. Financial assets and financial liabilities which are required to be held at FVTPL include:
\u2013 Financial assets and financial liabilities held for trading.
\u2013 Debt instruments that do not have solely payments of principal and interest (SPPI) characteristics. Otherwise, such instruments are measured at amortised cost
or FVOCI, and
\u2013 Equity instruments that have not been designated as held at FVOCI.
Financial assets and financial liabilities are classified as held for trading if they are derivatives or if they are acquired or incurred principally for the purpose of
selling\u00a0or repurchasing in the near-term, or form part of a portfolio of financial instruments that are managed together and for which there is evidence of short-
term profit taking.
In certain circumstances, other financial assets and financial liabilities are designated at FVTPL where this results in more relevant information. This may arise
because it significantly reduces a measurement inconsistency that would otherwise arise from measuring assets or liabilities or recognising the gains or losses on
them on a different basis, where the assets and liabilities are managed and their performance evaluated on a fair value basis or, in the case of financial liabilities,
where it contains one or more embedded derivatives which are not closely related to the host contract.
The classification and measurement requirements for financial asset debt and equity instruments and financial liabilities are set out below.
Financial assets: debt instruments
Debt instruments are those instruments that meet the definition of a financial liability from the issuer\u2019s perspective, such as loans and debt securities which consist
mainly of government bonds and covered bonds. Classification and subsequent measurement of debt instruments depend on the Santander UK group\u2019s business
model for managing the asset, and the cash flow characteristics of the asset.
Business model
The business model reflects how the Santander UK group manages the assets in order to generate cash flows and, specifically, whether the Santander UK group\u2019s
objective is solely to collect the contractual cash flows from the assets or is to collect both the contractual cash flows and cash flows arising from the sale of the
assets. If neither of these is applicable, such as where the financial assets are held for trading purposes, then the financial assets are classified as part of an \u2018other\u2019
business model and measured at FVTPL. Factors considered in determining the business model for a group of assets include past experience on how the cash flows
for these assets were collected, how the assets\u2019 performance is evaluated and reported to key management personnel, and how risks are assessed and managed.
SPPI
Where the business model is to hold assets to collect contractual cash flows or to collect contractual cash flows and sell, the Santander UK group assesses whether
the assets\u2019 cash flows represent SPPI. In making this assessment, the Santander UK group considers whether the contractual cash flows are consistent with a basic
lending arrangement (i.e. interest includes only consideration for the time value of money, credit risk, other basic lending risks and a profit margin that is consistent
with a basic lending arrangement). Where the contractual terms introduce exposure to risk or volatility that is inconsistent with a basic lending arrangement, the
related asset is classified and measured at FVTPL.
Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are SPPI.
Based on these factors, the Santander UK group classifies its debt instruments into one of the following measurement categories:
\u2013 Amortised cost \u2013 Financial assets that are held for collection of contractual cash flows where those cash flows represent SPPI, and that are not designated at
FVTPL, are measured at amortised cost. The carrying amount of these assets is adjusted by any ECL recognised and measured as presented in Note 13. Interest
income from these financial assets is included in \u2018Interest and similar income\u2019 using the effective interest rate method. When estimates of future cash flows are
revised, the carrying amount of the respective financial assets is adjusted to reflect the new estimate discounted using the original effective interest rate. Any
changes are recognised in the income statement.
\u2013 FVOCI \u2013 Financial assets that are held for collection of contractual cash flows and for selling the assets, where the assets\u2019 cash flows represent SPPI, and that are
not designated at FVTPL, are measured at FVOCI. Movements in the carrying amount are recognised in OCI, except for the recognition of impairment gains or
losses, interest revenue and foreign exchange gains and losses which are recognised in profit or loss. When the financial asset is derecognised, the cumulative
gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in \u2018Other operating income\u2019. Interest income from these
financial assets is included in \u2018Interest and similar income\u2019 using the effective interest rate method.
\u2013 FVTPL \u2013 Financial assets that do not meet the criteria for amortised cost or FVOCI are measured at FVTPL. A gain or loss on a debt instrument that is subsequently
measured at FVTPL, including any debt instruments designated at fair value, is recognised in profit or loss and presented in the income statement in \u2018Other
operating income\u2019 in the period in which it arises.
The Santander UK group reclassifies financial assets when and only when its business model for managing those assets changes. The reclassification takes place
from the start of the first reporting period following the change. Such changes are expected to be very infrequent.
Financial assets: equity instruments
Equity instruments are instruments that meet the definition of equity from the issuer\u2019s perspective, being instruments that do not contain a contractual obligation to
pay cash and that evidence a residual interest in the issuer\u2019s net assets. All equity investments are subsequently measured at FVTPL; management may elect, at
initial recognition, to irrevocably designate an equity investment at FVOCI but has not currently done so. When this election is used, fair value gains and losses are
recognised in OCI and are not subsequently reclassified to profit or loss, including on disposal. ECLs (and reversal of ECLs) are not reported separately from other
changes in fair value. Dividends, when representing a return on such investments, continue to be recognised in profit or loss as other income when the right to
receive payments is established. Gains and losses on equity investments at FVTPL are included in \u2018Other operating income\u2019 in the income statement.
Financial liabilities
Financial liabilities, which include deposits by banks, deposits by customers, debt securities in issue and subordinated liabilities, are classified as subsequently
measured at amortised cost, except for:
\u2013 Financial liabilities at FVTPL (see Note 24): this classification is applied to derivatives and other financial liabilities designated as such at initial recognition. Gains or
losses on financial liabilities designated at FVTPL are presented partially in other comprehensive income (the amount of change in the fair value of the financial
liability that is attributable to changes in the credit risk of that liability) and partially in profit or loss (the remaining amount of change in the fair value of the
liability)
\u2013 Financial liabilities arising from the transfer of financial assets which did not qualify for derecognition, whereby a financial liability is recognised for the
consideration received for the transfer. In subsequent periods, the Santander UK group recognises any expense incurred on the financial liability, and
\u2013 Financial guarantee contracts and loan commitments.
Preference shares which carry a contractual obligation to transfer economic benefits are classified as financial liabilities and are presented in subordinated liabilities.
The coupon on these preference shares is recognised in the income statement as interest expense on an amortised cost basis using the effective interest method.
Contracts involving the receipt of cash on which customers receive an index-linked return are accounted for as equity index-linked deposits. The principal products
are Capital Guaranteed/Protected Products, which give the customers a limited participation in the upside growth of an equity index. In the event the index falls in
price, a cash principal element is guaranteed/protected. The equity index-linked deposits contain embedded derivatives. These embedded derivatives, in
combination with the principal cash deposit element, are designed to replicate the investment performance profile tailored to the return agreed in the contracts
with customers. The cash principal element is accounted for as deposits by customers at amortised cost. The embedded derivatives are separated from the host
instrument and are separately accounted for as derivatives.
Day One profit adjustments
The fair value of a financial instrument on initial recognition is generally its transaction price (that is, the fair value of the consideration given or received). However,
sometimes the fair value will be based on other observable current market transactions in the same instrument, without modification or repackaging, or on a
valuation technique whose variables include only data from observable markets, such as interest rate yield curves, option volatilities and currency rates. When such
evidence exists, the Santander UK group recognises a trading gain or loss at inception (Day One gain or loss), being the difference between the transaction price and
the fair value. When significant unobservable parameters are used, the entire Day One gain or loss is deferred and is recognised in the income statement over the
life of the transaction until the transaction matures, is closed out, the valuation inputs become observable, or an offsetting transaction is entered into.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFairValueMeasurementExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-536": { "value": "
Financial assets and liabilities are initially recognised when the Santander UK group becomes a party to the contractual terms of the instrument. The Santander UK
group determines the classification of its financial assets and liabilities at initial recognition and measures a financial asset or financial liability at its fair value plus or
minus, in the case of a financial asset or financial liability not at FVTPL, transaction costs that are incremental and directly attributable to the acquisition or issue of
the financial asset or financial liability. Transaction costs of financial assets and financial liabilities carried at FVTPL are expensed in profit or loss. Immediately after
initial recognition, an expected credit loss (ECL) allowance is recognised for financial assets measured at amortised cost and investments in debt instruments
measured at FVOCI.
A regular way purchase or sale is a purchase or sale of a financial asset under a contract whose terms require delivery of the asset within the timeframe established
generally by regulation or convention in the marketplace concerned. Regular way purchases and sales of financial assets measured at amortised cost are recognised
on settlement date; all other regular way purchases and sales of financial assets are recognised on trade date.
b) Financial assets and liabilities
i) Classification and subsequent measurement
The Santander UK group classifies its financial assets in the measurement categories of amortised cost, FVOCI and FVTPL.
Financial assets and financial liabilities are classified as FVTPL where there is a requirement to do so or where they are otherwise designated at FVTPL on initial
recognition. Financial assets and financial liabilities which are required to be held at FVTPL include:
\u2013 Financial assets and financial liabilities held for trading.
\u2013 Debt instruments that do not have solely payments of principal and interest (SPPI) characteristics. Otherwise, such instruments are measured at amortised cost
or FVOCI, and
\u2013 Equity instruments that have not been designated as held at FVOCI.
Financial assets and financial liabilities are classified as held for trading if they are derivatives or if they are acquired or incurred principally for the purpose of
selling\u00a0or repurchasing in the near-term, or form part of a portfolio of financial instruments that are managed together and for which there is evidence of short-
term profit taking.
In certain circumstances, other financial assets and financial liabilities are designated at FVTPL where this results in more relevant information. This may arise
because it significantly reduces a measurement inconsistency that would otherwise arise from measuring assets or liabilities or recognising the gains or losses on
them on a different basis, where the assets and liabilities are managed and their performance evaluated on a fair value basis or, in the case of financial liabilities,
where it contains one or more embedded derivatives which are not closely related to the host contract.
The classification and measurement requirements for financial asset debt and equity instruments and financial liabilities are set out below.
Financial assets: debt instruments
Debt instruments are those instruments that meet the definition of a financial liability from the issuer\u2019s perspective, such as loans and debt securities which consist
mainly of government bonds and covered bonds. Classification and subsequent measurement of debt instruments depend on the Santander UK group\u2019s business
model for managing the asset, and the cash flow characteristics of the asset.
Business model
The business model reflects how the Santander UK group manages the assets in order to generate cash flows and, specifically, whether the Santander UK group\u2019s
objective is solely to collect the contractual cash flows from the assets or is to collect both the contractual cash flows and cash flows arising from the sale of the
assets. If neither of these is applicable, such as where the financial assets are held for trading purposes, then the financial assets are classified as part of an \u2018other\u2019
business model and measured at FVTPL. Factors considered in determining the business model for a group of assets include past experience on how the cash flows
for these assets were collected, how the assets\u2019 performance is evaluated and reported to key management personnel, and how risks are assessed and managed.
SPPI
Where the business model is to hold assets to collect contractual cash flows or to collect contractual cash flows and sell, the Santander UK group assesses whether
the assets\u2019 cash flows represent SPPI. In making this assessment, the Santander UK group considers whether the contractual cash flows are consistent with a basic
lending arrangement (i.e. interest includes only consideration for the time value of money, credit risk, other basic lending risks and a profit margin that is consistent
with a basic lending arrangement). Where the contractual terms introduce exposure to risk or volatility that is inconsistent with a basic lending arrangement, the
related asset is classified and measured at FVTPL.
Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are SPPI.
Based on these factors, the Santander UK group classifies its debt instruments into one of the following measurement categories:
\u2013 Amortised cost \u2013 Financial assets that are held for collection of contractual cash flows where those cash flows represent SPPI, and that are not designated at
FVTPL, are measured at amortised cost. The carrying amount of these assets is adjusted by any ECL recognised and measured as presented in Note 13. Interest
income from these financial assets is included in \u2018Interest and similar income\u2019 using the effective interest rate method. When estimates of future cash flows are
revised, the carrying amount of the respective financial assets is adjusted to reflect the new estimate discounted using the original effective interest rate. Any
changes are recognised in the income statement.
\u2013 FVOCI \u2013 Financial assets that are held for collection of contractual cash flows and for selling the assets, where the assets\u2019 cash flows represent SPPI, and that are
not designated at FVTPL, are measured at FVOCI. Movements in the carrying amount are recognised in OCI, except for the recognition of impairment gains or
losses, interest revenue and foreign exchange gains and losses which are recognised in profit or loss. When the financial asset is derecognised, the cumulative
gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in \u2018Other operating income\u2019. Interest income from these
financial assets is included in \u2018Interest and similar income\u2019 using the effective interest rate method.
\u2013 FVTPL \u2013 Financial assets that do not meet the criteria for amortised cost or FVOCI are measured at FVTPL. A gain or loss on a debt instrument that is subsequently
measured at FVTPL, including any debt instruments designated at fair value, is recognised in profit or loss and presented in the income statement in \u2018Other
operating income\u2019 in the period in which it arises.
The Santander UK group reclassifies financial assets when and only when its business model for managing those assets changes. The reclassification takes place
from the start of the first reporting period following the change. Such changes are expected to be very infrequent.
Financial assets: equity instruments
Equity instruments are instruments that meet the definition of equity from the issuer\u2019s perspective, being instruments that do not contain a contractual obligation to
pay cash and that evidence a residual interest in the issuer\u2019s net assets. All equity investments are subsequently measured at FVTPL; management may elect, at
initial recognition, to irrevocably designate an equity investment at FVOCI but has not currently done so. When this election is used, fair value gains and losses are
recognised in OCI and are not subsequently reclassified to profit or loss, including on disposal. ECLs (and reversal of ECLs) are not reported separately from other
changes in fair value. Dividends, when representing a return on such investments, continue to be recognised in profit or loss as other income when the right to
receive payments is established. Gains and losses on equity investments at FVTPL are included in \u2018Other operating income\u2019 in the income statement.
Financial liabilities
Financial liabilities, which include deposits by banks, deposits by customers, debt securities in issue and subordinated liabilities, are classified as subsequently
measured at amortised cost, except for:
\u2013 Financial liabilities at FVTPL (see Note 24): this classification is applied to derivatives and other financial liabilities designated as such at initial recognition. Gains or
losses on financial liabilities designated at FVTPL are presented partially in other comprehensive income (the amount of change in the fair value of the financial
liability that is attributable to changes in the credit risk of that liability) and partially in profit or loss (the remaining amount of change in the fair value of the
liability)
\u2013 Financial liabilities arising from the transfer of financial assets which did not qualify for derecognition, whereby a financial liability is recognised for the
consideration received for the transfer. In subsequent periods, the Santander UK group recognises any expense incurred on the financial liability, and
\u2013 Financial guarantee contracts and loan commitments.
Preference shares which carry a contractual obligation to transfer economic benefits are classified as financial liabilities and are presented in subordinated liabilities.
The coupon on these preference shares is recognised in the income statement as interest expense on an amortised cost basis using the effective interest method.
Contracts involving the receipt of cash on which customers receive an index-linked return are accounted for as equity index-linked deposits. The principal products
are Capital Guaranteed/Protected Products, which give the customers a limited participation in the upside growth of an equity index. In the event the index falls in
price, a cash principal element is guaranteed/protected. The equity index-linked deposits contain embedded derivatives. These embedded derivatives, in
combination with the principal cash deposit element, are designed to replicate the investment performance profile tailored to the return agreed in the contracts
with customers. The cash principal element is accounted for as deposits by customers at amortised cost. The embedded derivatives are separated from the host
instrument and are separately accounted for as derivatives.
Sale and repurchase agreements (including stock borrowing and lending)
Securities sold subject to a commitment to repurchase them at a predetermined price (repos) under which substantially all the risks and rewards of ownership
are\u00a0retained by the Santander UK group remain on the balance sheet and a liability is recorded in respect of the consideration received. Securities purchased
under\u00a0commitments to resell (reverse repos) are not recognised on the balance sheet and the consideration paid is recorded as an asset. The difference between
the sale and repurchase price is treated as trading income in the income statement, except where the repo is not treated as part of the trading book, in which case
the difference is recorded in interest income or expense.
Securities lending and borrowing transactions are generally secured, with collateral in the form of securities or cash advanced or received. Securities borrowed
are\u00a0not reflected on the balance sheet. Collateral in the form of cash received or advanced is recorded as a deposit or a loan. Collateral in the form of securities is
not\u00a0recognised.
Day One profit adjustments
The fair value of a financial instrument on initial recognition is generally its transaction price (that is, the fair value of the consideration given or received). However,
sometimes the fair value will be based on other observable current market transactions in the same instrument, without modification or repackaging, or on a
valuation technique whose variables include only data from observable markets, such as interest rate yield curves, option volatilities and currency rates. When such
evidence exists, the Santander UK group recognises a trading gain or loss at inception (Day One gain or loss), being the difference between the transaction price and
the fair value. When significant unobservable parameters are used, the entire Day One gain or loss is deferred and is recognised in the income statement over the
life of the transaction until the transaction matures, is closed out, the valuation inputs become observable, or an offsetting transaction is entered into.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialInstrumentsAtFairValueThroughProfitOrLossExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-537": { "value": "
Financial assets and liabilities are initially recognised when the Santander UK group becomes a party to the contractual terms of the instrument. The Santander UK
group determines the classification of its financial assets and liabilities at initial recognition and measures a financial asset or financial liability at its fair value plus or
minus, in the case of a financial asset or financial liability not at FVTPL, transaction costs that are incremental and directly attributable to the acquisition or issue of
the financial asset or financial liability. Transaction costs of financial assets and financial liabilities carried at FVTPL are expensed in profit or loss. Immediately after
initial recognition, an expected credit loss (ECL) allowance is recognised for financial assets measured at amortised cost and investments in debt instruments
measured at FVOCI.
A regular way purchase or sale is a purchase or sale of a financial asset under a contract whose terms require delivery of the asset within the timeframe established
generally by regulation or convention in the marketplace concerned. Regular way purchases and sales of financial assets measured at amortised cost are recognised
on settlement date; all other regular way purchases and sales of financial assets are recognised on trade date.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForRecognisingDifferenceBetweenFairValueAtInitialRecognitionAndAmountDeterminedUsingValuationTechniqueExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-539": { "value": "
b) Financial assets and liabilities
i) Classification and subsequent measurement
The Santander UK group classifies its financial assets in the measurement categories of amortised cost, FVOCI and FVTPL.
Financial assets and financial liabilities are classified as FVTPL where there is a requirement to do so or where they are otherwise designated at FVTPL on initial
recognition. Financial assets and financial liabilities which are required to be held at FVTPL include:
\u2013 Financial assets and financial liabilities held for trading.
\u2013 Debt instruments that do not have solely payments of principal and interest (SPPI) characteristics. Otherwise, such instruments are measured at amortised cost
or FVOCI, and
\u2013 Equity instruments that have not been designated as held at FVOCI.
Financial assets and financial liabilities are classified as held for trading if they are derivatives or if they are acquired or incurred principally for the purpose of
selling\u00a0or repurchasing in the near-term, or form part of a portfolio of financial instruments that are managed together and for which there is evidence of short-
term profit taking.
In certain circumstances, other financial assets and financial liabilities are designated at FVTPL where this results in more relevant information. This may arise
because it significantly reduces a measurement inconsistency that would otherwise arise from measuring assets or liabilities or recognising the gains or losses on
them on a different basis, where the assets and liabilities are managed and their performance evaluated on a fair value basis or, in the case of financial liabilities,
where it contains one or more embedded derivatives which are not closely related to the host contract.
The classification and measurement requirements for financial asset debt and equity instruments and financial liabilities are set out below.
Financial assets: debt instruments
Debt instruments are those instruments that meet the definition of a financial liability from the issuer\u2019s perspective, such as loans and debt securities which consist
mainly of government bonds and covered bonds. Classification and subsequent measurement of debt instruments depend on the Santander UK group\u2019s business
model for managing the asset, and the cash flow characteristics of the asset.
Business model
The business model reflects how the Santander UK group manages the assets in order to generate cash flows and, specifically, whether the Santander UK group\u2019s
objective is solely to collect the contractual cash flows from the assets or is to collect both the contractual cash flows and cash flows arising from the sale of the
assets. If neither of these is applicable, such as where the financial assets are held for trading purposes, then the financial assets are classified as part of an \u2018other\u2019
business model and measured at FVTPL. Factors considered in determining the business model for a group of assets include past experience on how the cash flows
for these assets were collected, how the assets\u2019 performance is evaluated and reported to key management personnel, and how risks are assessed and managed.
SPPI
Where the business model is to hold assets to collect contractual cash flows or to collect contractual cash flows and sell, the Santander UK group assesses whether
the assets\u2019 cash flows represent SPPI. In making this assessment, the Santander UK group considers whether the contractual cash flows are consistent with a basic
lending arrangement (i.e. interest includes only consideration for the time value of money, credit risk, other basic lending risks and a profit margin that is consistent
with a basic lending arrangement). Where the contractual terms introduce exposure to risk or volatility that is inconsistent with a basic lending arrangement, the
related asset is classified and measured at FVTPL.
Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are SPPI.
Based on these factors, the Santander UK group classifies its debt instruments into one of the following measurement categories:
\u2013 Amortised cost \u2013 Financial assets that are held for collection of contractual cash flows where those cash flows represent SPPI, and that are not designated at
FVTPL, are measured at amortised cost. The carrying amount of these assets is adjusted by any ECL recognised and measured as presented in Note 13. Interest
income from these financial assets is included in \u2018Interest and similar income\u2019 using the effective interest rate method. When estimates of future cash flows are
revised, the carrying amount of the respective financial assets is adjusted to reflect the new estimate discounted using the original effective interest rate. Any
changes are recognised in the income statement.
\u2013 FVOCI \u2013 Financial assets that are held for collection of contractual cash flows and for selling the assets, where the assets\u2019 cash flows represent SPPI, and that are
not designated at FVTPL, are measured at FVOCI. Movements in the carrying amount are recognised in OCI, except for the recognition of impairment gains or
losses, interest revenue and foreign exchange gains and losses which are recognised in profit or loss. When the financial asset is derecognised, the cumulative
gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in \u2018Other operating income\u2019. Interest income from these
financial assets is included in \u2018Interest and similar income\u2019 using the effective interest rate method.
\u2013 FVTPL \u2013 Financial assets that do not meet the criteria for amortised cost or FVOCI are measured at FVTPL. A gain or loss on a debt instrument that is subsequently
measured at FVTPL, including any debt instruments designated at fair value, is recognised in profit or loss and presented in the income statement in \u2018Other
operating income\u2019 in the period in which it arises.
The Santander UK group reclassifies financial assets when and only when its business model for managing those assets changes. The reclassification takes place
from the start of the first reporting period following the change. Such changes are expected to be very infrequent.
Financial assets: equity instruments
Equity instruments are instruments that meet the definition of equity from the issuer\u2019s perspective, being instruments that do not contain a contractual obligation to
pay cash and that evidence a residual interest in the issuer\u2019s net assets. All equity investments are subsequently measured at FVTPL; management may elect, at
initial recognition, to irrevocably designate an equity investment at FVOCI but has not currently done so. When this election is used, fair value gains and losses are
recognised in OCI and are not subsequently reclassified to profit or loss, including on disposal. ECLs (and reversal of ECLs) are not reported separately from other
changes in fair value. Dividends, when representing a return on such investments, continue to be recognised in profit or loss as other income when the right to
receive payments is established. Gains and losses on equity investments at FVTPL are included in \u2018Other operating income\u2019 in the income statement.
Financial liabilities
Financial liabilities, which include deposits by banks, deposits by customers, debt securities in issue and subordinated liabilities, are classified as subsequently
measured at amortised cost, except for:
\u2013 Financial liabilities at FVTPL (see Note 24): this classification is applied to derivatives and other financial liabilities designated as such at initial recognition. Gains or
losses on financial liabilities designated at FVTPL are presented partially in other comprehensive income (the amount of change in the fair value of the financial
liability that is attributable to changes in the credit risk of that liability) and partially in profit or loss (the remaining amount of change in the fair value of the
liability)
\u2013 Financial liabilities arising from the transfer of financial assets which did not qualify for derecognition, whereby a financial liability is recognised for the
consideration received for the transfer. In subsequent periods, the Santander UK group recognises any expense incurred on the financial liability, and
\u2013 Financial guarantee contracts and loan commitments.
Preference shares which carry a contractual obligation to transfer economic benefits are classified as financial liabilities and are presented in subordinated liabilities.
The coupon on these preference shares is recognised in the income statement as interest expense on an amortised cost basis using the effective interest method.
Contracts involving the receipt of cash on which customers receive an index-linked return are accounted for as equity index-linked deposits. The principal products
are Capital Guaranteed/Protected Products, which give the customers a limited participation in the upside growth of an equity index. In the event the index falls in
price, a cash principal element is guaranteed/protected. The equity index-linked deposits contain embedded derivatives. These embedded derivatives, in
combination with the principal cash deposit element, are designed to replicate the investment performance profile tailored to the return agreed in the contracts
with customers. The cash principal element is accounted for as deposits by customers at amortised cost. The embedded derivatives are separated from the host
instrument and are separately accounted for as derivatives.
Sale and repurchase agreements (including stock borrowing and lending)
Securities sold subject to a commitment to repurchase them at a predetermined price (repos) under which substantially all the risks and rewards of ownership
are\u00a0retained by the Santander UK group remain on the balance sheet and a liability is recorded in respect of the consideration received. Securities purchased
under\u00a0commitments to resell (reverse repos) are not recognised on the balance sheet and the consideration paid is recorded as an asset. The difference between
the sale and repurchase price is treated as trading income in the income statement, except where the repo is not treated as part of the trading book, in which case
the difference is recorded in interest income or expense.
Securities lending and borrowing transactions are generally secured, with collateral in the form of securities or cash advanced or received. Securities borrowed
are\u00a0not reflected on the balance sheet. Collateral in the form of cash received or advanced is recorded as a deposit or a loan. Collateral in the form of securities is
not\u00a0recognised.
Day One profit adjustments
The fair value of a financial instrument on initial recognition is generally its transaction price (that is, the fair value of the consideration given or received). However,
sometimes the fair value will be based on other observable current market transactions in the same instrument, without modification or repackaging, or on a
valuation technique whose variables include only data from observable markets, such as interest rate yield curves, option volatilities and currency rates. When such
evidence exists, the Santander UK group recognises a trading gain or loss at inception (Day One gain or loss), being the difference between the transaction price and
the fair value. When significant unobservable parameters are used, the entire Day One gain or loss is deferred and is recognised in the income statement over the
life of the transaction until the transaction matures, is closed out, the valuation inputs become observable, or an offsetting transaction is entered into.
ii) Impairment of debt instrument financial assets
The Santander UK group assesses on a forward-looking basis the ECL associated with its debt instrument assets carried at amortised cost and FVOCI and with the
exposure arising from financial guarantee contracts and loan commitments. The Santander UK group recognises a loss allowance for such losses at each reporting
date. The measurement of ECL reflects:
\u2013 An unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes.
\u2013 The time value of money, and
\u2013 Reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of
future economic conditions.
Grouping of instruments for losses measured on a collective basis
We typically group instruments and assess them for impairment collectively where they share risk characteristics (as described in the Credit risk section of the Risk
review) using one or more statistical models. Where we have used internal capital or similar models as the basis for our ECL models, this typically results in a large
number of relatively small homogenous groups which are determined by the permutations of the underlying characteristics in the statistical models. We calculate
separate collective provisions for instruments in Stages 1, 2 and 3 where the instrument is not individually assessed, as described below.
Individually assessed impairments (IAIs)
We assess significant Stage 3 cases individually. We do this for Corporate & Commercial Banking cases, but not for Business Banking cases in Retail & Business
Banking which we assess collectively. To calculate the estimated loss, we estimate the future cash flows under several scenarios each of which uses case-specific
factors and circumstances. We then probability-weight the net present value of the cash flows under each scenario to arrive at a weighted average provision
requirement. We update our assessment process every quarter and more frequently if there are changes in circumstances that might affect the scenarios, cash
flows or probabilities we apply.
For more on how ECL is calculated, see the Credit risk section of the Risk review.
\u2013 Write-off
For secured loans, a write-off is only made when all collection procedures have been exhausted and the security has been sold and/or a claim made on any
mortgage indemnity guarantee or other insurance. In the corporate loan portfolio, there may be occasions where a write-off occurs for other reasons, such as
following a consensual restructure or refinancing of the debt or where the debt is sold for strategic reasons into the secondary market at a value lower than its
face value.
There is no threshold based on past due status beyond which all secured loans are written off as there can be significant variations in the time needed to enforce
possession and sale of the security, especially due to the different legal frameworks that apply in different regions of the UK. For unsecured loans, a write-off is only
made when all internal avenues of collecting the debt have been exhausted. Where appropriate the debt is passed over to external collection agencies. A past due
threshold is applied to unsecured debt where accounts that are 180 days past due are written off unless there is a dispute awaiting resolution. Contact is made with
customers with the aim to achieve a realistic and sustainable repayment arrangement. Litigation and/or enforcement of security is usually carried out only when the
steps described above have been undertaken without success.
All write-offs are assessed / made on a case-by-case basis, taking account of the exposure at the date of write-off, after accounting for the value from any
collateral or insurance held against the loan. The exception to this is in cases where fraud has occurred, where the exposure is written off once investigations
have been completed and the probability of recovery is minimal. The time span between discovery and write-off will be short and may not result in an
impairment loss allowance being raised. The write-off policy is regularly reviewed. Write-offs are charged against previously established loss allowances.
\u2013 Recoveries
Recoveries of credit impairment charges are not included in the impairment loss allowance but are taken to income and offset against credit impairment
charges. Recoveries of credit impairment charges are classified in the income statement as \u2018Credit impairment charges\u2019.
iii) Modifications of financial assets
The treatment of a renegotiation or modification of the contractual cash flows of a financial asset normally depends upon whether the renegotiation or modification
is due to financial difficulties of the borrower or for other commercial reasons.
\u2013 Contractual modifications due to financial difficulties of the borrower: where the Santander UK group modifies the contractual conditions to enable the
borrower to fulfil their payment obligations, the asset is not derecognised. The gross carrying amount of the financial asset is recalculated as the present value of
the renegotiated/modified contractual cash flows that are discounted at the financial asset\u2019s original EIR and any gain or loss arising from the modification is
recognised in the income statement.\u00a0
\u2013 Contractual modifications for other commercial reasons: an assessment is performed to determine whether the terms of the new agreement are substantially
different from the terms of the existing agreement, after considering changes in the cash flows arising from the modified terms and the overall instrument risk
profile. Where terms are substantially different, such modifications are treated as a new transaction resulting in derecognition of the original financial asset, and
the recognition of a \u2018new\u2019 financial asset with any difference between the carrying amount of the derecognised asset and the fair value of the new asset is
recognised in the income statement as a gain or loss on derecognition. Where terms are not substantially different, the carrying value of the financial asset is
adjusted to reflect the present value of modified cash flows discounted at the original EIR with any gain or loss arising from modification recognised immediately
in the income statement.
Any other contractual modifications, such as where a regulatory authority imposes a change in certain contractual terms or due to legal reasons, are assessed on a
case-by-case basis to establish whether or not the financial asset should be derecognised.\u00a0
iv) Derecognition other than on a modification
Financial assets are derecognised when the rights to receive cash flows have expired or the Santander UK group has transferred its contractual right to receive the
cash flows from the assets and either: (1) substantially all the risks and rewards of ownership have been transferred; or (2) the Santander UK group has neither
retained nor transferred substantially all of the risks and rewards but has transferred control.
Financial liabilities are derecognised when extinguished, cancelled or expired.
The following table shows the impact of netting arrangements on:
\u2013 All financial assets and liabilities that are reported net on the balance sheet
\u2013 All derivative financial instruments and repurchase agreements and other similar secured lending and borrowing agreements that are subject to enforceable
master netting arrangements or similar agreements, but do not qualify for balance sheet netting.
The table identifies the amounts that have been offset in the balance sheet and those amounts that are covered by enforceable netting arrangements (offsetting
arrangements and financial collateral) but do not qualify for netting under the requirements described above.
For derivative contracts, the \u2018Financial instruments\u2019 column identifies financial assets and liabilities that are subject to set off under netting agreements, such as
the\u00a0ISDA Master Agreement or derivative exchange or clearing counterparty agreements, whereby all outstanding transactions with the same counterparty can
be\u00a0offset and close-out netting applied across all outstanding transactions covered by the agreements if an event of default or other predetermined events occur.
Financial collateral refers to cash and non-cash collateral obtained, typically daily or weekly, to cover the net exposure between counterparties by enabling the
collateral to be realised in an event of default or if other predetermined events occur. For repurchase and reverse repurchase agreements and other similar secured
lending and borrowing, the \u2018Financial instruments\u2019 column identifies financial assets and liabilities that are subject to set off under netting agreements, such as
global master repurchase agreements and global master securities lending agreements, whereby all outstanding transactions with the same counterparty can
be\u00a0offset and close-out netting applied across all outstanding transactions covered by the agreements if an event of default or other predetermined events occur.
Financial collateral typically comprises highly liquid securities which are legally transferred and can be liquidated if a counterparty defaults.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialLiabilitiesExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-538": { "value": "
b) Financial assets and liabilities
i) Classification and subsequent measurement
The Santander UK group classifies its financial assets in the measurement categories of amortised cost, FVOCI and FVTPL.
Financial assets and financial liabilities are classified as FVTPL where there is a requirement to do so or where they are otherwise designated at FVTPL on initial
recognition. Financial assets and financial liabilities which are required to be held at FVTPL include:
\u2013 Financial assets and financial liabilities held for trading.
\u2013 Debt instruments that do not have solely payments of principal and interest (SPPI) characteristics. Otherwise, such instruments are measured at amortised cost
or FVOCI, and
\u2013 Equity instruments that have not been designated as held at FVOCI.
Financial assets and financial liabilities are classified as held for trading if they are derivatives or if they are acquired or incurred principally for the purpose of
selling\u00a0or repurchasing in the near-term, or form part of a portfolio of financial instruments that are managed together and for which there is evidence of short-
term profit taking.
In certain circumstances, other financial assets and financial liabilities are designated at FVTPL where this results in more relevant information. This may arise
because it significantly reduces a measurement inconsistency that would otherwise arise from measuring assets or liabilities or recognising the gains or losses on
them on a different basis, where the assets and liabilities are managed and their performance evaluated on a fair value basis or, in the case of financial liabilities,
where it contains one or more embedded derivatives which are not closely related to the host contract.
The classification and measurement requirements for financial asset debt and equity instruments and financial liabilities are set out below.
Financial assets: debt instruments
Debt instruments are those instruments that meet the definition of a financial liability from the issuer\u2019s perspective, such as loans and debt securities which consist
mainly of government bonds and covered bonds. Classification and subsequent measurement of debt instruments depend on the Santander UK group\u2019s business
model for managing the asset, and the cash flow characteristics of the asset.
Business model
The business model reflects how the Santander UK group manages the assets in order to generate cash flows and, specifically, whether the Santander UK group\u2019s
objective is solely to collect the contractual cash flows from the assets or is to collect both the contractual cash flows and cash flows arising from the sale of the
assets. If neither of these is applicable, such as where the financial assets are held for trading purposes, then the financial assets are classified as part of an \u2018other\u2019
business model and measured at FVTPL. Factors considered in determining the business model for a group of assets include past experience on how the cash flows
for these assets were collected, how the assets\u2019 performance is evaluated and reported to key management personnel, and how risks are assessed and managed.
SPPI
Where the business model is to hold assets to collect contractual cash flows or to collect contractual cash flows and sell, the Santander UK group assesses whether
the assets\u2019 cash flows represent SPPI. In making this assessment, the Santander UK group considers whether the contractual cash flows are consistent with a basic
lending arrangement (i.e. interest includes only consideration for the time value of money, credit risk, other basic lending risks and a profit margin that is consistent
with a basic lending arrangement). Where the contractual terms introduce exposure to risk or volatility that is inconsistent with a basic lending arrangement, the
related asset is classified and measured at FVTPL.
Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are SPPI.
Based on these factors, the Santander UK group classifies its debt instruments into one of the following measurement categories:
\u2013 Amortised cost \u2013 Financial assets that are held for collection of contractual cash flows where those cash flows represent SPPI, and that are not designated at
FVTPL, are measured at amortised cost. The carrying amount of these assets is adjusted by any ECL recognised and measured as presented in Note 13. Interest
income from these financial assets is included in \u2018Interest and similar income\u2019 using the effective interest rate method. When estimates of future cash flows are
revised, the carrying amount of the respective financial assets is adjusted to reflect the new estimate discounted using the original effective interest rate. Any
changes are recognised in the income statement.
\u2013 FVOCI \u2013 Financial assets that are held for collection of contractual cash flows and for selling the assets, where the assets\u2019 cash flows represent SPPI, and that are
not designated at FVTPL, are measured at FVOCI. Movements in the carrying amount are recognised in OCI, except for the recognition of impairment gains or
losses, interest revenue and foreign exchange gains and losses which are recognised in profit or loss. When the financial asset is derecognised, the cumulative
gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in \u2018Other operating income\u2019. Interest income from these
financial assets is included in \u2018Interest and similar income\u2019 using the effective interest rate method.
\u2013 FVTPL \u2013 Financial assets that do not meet the criteria for amortised cost or FVOCI are measured at FVTPL. A gain or loss on a debt instrument that is subsequently
measured at FVTPL, including any debt instruments designated at fair value, is recognised in profit or loss and presented in the income statement in \u2018Other
operating income\u2019 in the period in which it arises.
The Santander UK group reclassifies financial assets when and only when its business model for managing those assets changes. The reclassification takes place
from the start of the first reporting period following the change. Such changes are expected to be very infrequent.
Financial assets: equity instruments
Equity instruments are instruments that meet the definition of equity from the issuer\u2019s perspective, being instruments that do not contain a contractual obligation to
pay cash and that evidence a residual interest in the issuer\u2019s net assets. All equity investments are subsequently measured at FVTPL; management may elect, at
initial recognition, to irrevocably designate an equity investment at FVOCI but has not currently done so. When this election is used, fair value gains and losses are
recognised in OCI and are not subsequently reclassified to profit or loss, including on disposal. ECLs (and reversal of ECLs) are not reported separately from other
changes in fair value. Dividends, when representing a return on such investments, continue to be recognised in profit or loss as other income when the right to
receive payments is established. Gains and losses on equity investments at FVTPL are included in \u2018Other operating income\u2019 in the income statement.
Financial liabilities
Financial liabilities, which include deposits by banks, deposits by customers, debt securities in issue and subordinated liabilities, are classified as subsequently
measured at amortised cost, except for:
\u2013 Financial liabilities at FVTPL (see Note 24): this classification is applied to derivatives and other financial liabilities designated as such at initial recognition. Gains or
losses on financial liabilities designated at FVTPL are presented partially in other comprehensive income (the amount of change in the fair value of the financial
liability that is attributable to changes in the credit risk of that liability) and partially in profit or loss (the remaining amount of change in the fair value of the
liability)
\u2013 Financial liabilities arising from the transfer of financial assets which did not qualify for derecognition, whereby a financial liability is recognised for the
consideration received for the transfer. In subsequent periods, the Santander UK group recognises any expense incurred on the financial liability, and
\u2013 Financial guarantee contracts and loan commitments.
Preference shares which carry a contractual obligation to transfer economic benefits are classified as financial liabilities and are presented in subordinated liabilities.
The coupon on these preference shares is recognised in the income statement as interest expense on an amortised cost basis using the effective interest method.
Contracts involving the receipt of cash on which customers receive an index-linked return are accounted for as equity index-linked deposits. The principal products
are Capital Guaranteed/Protected Products, which give the customers a limited participation in the upside growth of an equity index. In the event the index falls in
price, a cash principal element is guaranteed/protected. The equity index-linked deposits contain embedded derivatives. These embedded derivatives, in
combination with the principal cash deposit element, are designed to replicate the investment performance profile tailored to the return agreed in the contracts
with customers. The cash principal element is accounted for as deposits by customers at amortised cost. The embedded derivatives are separated from the host
instrument and are separately accounted for as derivatives.
Sale and repurchase agreements (including stock borrowing and lending)
Securities sold subject to a commitment to repurchase them at a predetermined price (repos) under which substantially all the risks and rewards of ownership
are\u00a0retained by the Santander UK group remain on the balance sheet and a liability is recorded in respect of the consideration received. Securities purchased
under\u00a0commitments to resell (reverse repos) are not recognised on the balance sheet and the consideration paid is recorded as an asset. The difference between
the sale and repurchase price is treated as trading income in the income statement, except where the repo is not treated as part of the trading book, in which case
the difference is recorded in interest income or expense.
Securities lending and borrowing transactions are generally secured, with collateral in the form of securities or cash advanced or received. Securities borrowed
are\u00a0not reflected on the balance sheet. Collateral in the form of cash received or advanced is recorded as a deposit or a loan. Collateral in the form of securities is
not\u00a0recognised.
Day One profit adjustments
The fair value of a financial instrument on initial recognition is generally its transaction price (that is, the fair value of the consideration given or received). However,
sometimes the fair value will be based on other observable current market transactions in the same instrument, without modification or repackaging, or on a
valuation technique whose variables include only data from observable markets, such as interest rate yield curves, option volatilities and currency rates. When such
evidence exists, the Santander UK group recognises a trading gain or loss at inception (Day One gain or loss), being the difference between the transaction price and
the fair value. When significant unobservable parameters are used, the entire Day One gain or loss is deferred and is recognised in the income statement over the
life of the transaction until the transaction matures, is closed out, the valuation inputs become observable, or an offsetting transaction is entered into.
ii) Impairment of debt instrument financial assets
The Santander UK group assesses on a forward-looking basis the ECL associated with its debt instrument assets carried at amortised cost and FVOCI and with the
exposure arising from financial guarantee contracts and loan commitments. The Santander UK group recognises a loss allowance for such losses at each reporting
date. The measurement of ECL reflects:
\u2013 An unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes.
\u2013 The time value of money, and
\u2013 Reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of
future economic conditions.
Grouping of instruments for losses measured on a collective basis
We typically group instruments and assess them for impairment collectively where they share risk characteristics (as described in the Credit risk section of the Risk
review) using one or more statistical models. Where we have used internal capital or similar models as the basis for our ECL models, this typically results in a large
number of relatively small homogenous groups which are determined by the permutations of the underlying characteristics in the statistical models. We calculate
separate collective provisions for instruments in Stages 1, 2 and 3 where the instrument is not individually assessed, as described below.
Individually assessed impairments (IAIs)
We assess significant Stage 3 cases individually. We do this for Corporate & Commercial Banking cases, but not for Business Banking cases in Retail & Business
Banking which we assess collectively. To calculate the estimated loss, we estimate the future cash flows under several scenarios each of which uses case-specific
factors and circumstances. We then probability-weight the net present value of the cash flows under each scenario to arrive at a weighted average provision
requirement. We update our assessment process every quarter and more frequently if there are changes in circumstances that might affect the scenarios, cash
flows or probabilities we apply.
For more on how ECL is calculated, see the Credit risk section of the Risk review.
\u2013 Write-off
For secured loans, a write-off is only made when all collection procedures have been exhausted and the security has been sold and/or a claim made on any
mortgage indemnity guarantee or other insurance. In the corporate loan portfolio, there may be occasions where a write-off occurs for other reasons, such as
following a consensual restructure or refinancing of the debt or where the debt is sold for strategic reasons into the secondary market at a value lower than its
face value.
There is no threshold based on past due status beyond which all secured loans are written off as there can be significant variations in the time needed to enforce
possession and sale of the security, especially due to the different legal frameworks that apply in different regions of the UK. For unsecured loans, a write-off is only
made when all internal avenues of collecting the debt have been exhausted. Where appropriate the debt is passed over to external collection agencies. A past due
threshold is applied to unsecured debt where accounts that are 180 days past due are written off unless there is a dispute awaiting resolution. Contact is made with
customers with the aim to achieve a realistic and sustainable repayment arrangement. Litigation and/or enforcement of security is usually carried out only when the
steps described above have been undertaken without success.
All write-offs are assessed / made on a case-by-case basis, taking account of the exposure at the date of write-off, after accounting for the value from any
collateral or insurance held against the loan. The exception to this is in cases where fraud has occurred, where the exposure is written off once investigations
have been completed and the probability of recovery is minimal. The time span between discovery and write-off will be short and may not result in an
impairment loss allowance being raised. The write-off policy is regularly reviewed. Write-offs are charged against previously established loss allowances.
\u2013 Recoveries
Recoveries of credit impairment charges are not included in the impairment loss allowance but are taken to income and offset against credit impairment
charges. Recoveries of credit impairment charges are classified in the income statement as \u2018Credit impairment charges\u2019.
iii) Modifications of financial assets
The treatment of a renegotiation or modification of the contractual cash flows of a financial asset normally depends upon whether the renegotiation or modification
is due to financial difficulties of the borrower or for other commercial reasons.
\u2013 Contractual modifications due to financial difficulties of the borrower: where the Santander UK group modifies the contractual conditions to enable the
borrower to fulfil their payment obligations, the asset is not derecognised. The gross carrying amount of the financial asset is recalculated as the present value of
the renegotiated/modified contractual cash flows that are discounted at the financial asset\u2019s original EIR and any gain or loss arising from the modification is
recognised in the income statement.\u00a0
\u2013 Contractual modifications for other commercial reasons: an assessment is performed to determine whether the terms of the new agreement are substantially
different from the terms of the existing agreement, after considering changes in the cash flows arising from the modified terms and the overall instrument risk
profile. Where terms are substantially different, such modifications are treated as a new transaction resulting in derecognition of the original financial asset, and
the recognition of a \u2018new\u2019 financial asset with any difference between the carrying amount of the derecognised asset and the fair value of the new asset is
recognised in the income statement as a gain or loss on derecognition. Where terms are not substantially different, the carrying value of the financial asset is
adjusted to reflect the present value of modified cash flows discounted at the original EIR with any gain or loss arising from modification recognised immediately
in the income statement.
Any other contractual modifications, such as where a regulatory authority imposes a change in certain contractual terms or due to legal reasons, are assessed on a
case-by-case basis to establish whether or not the financial asset should be derecognised.\u00a0
iv) Derecognition other than on a modification
Financial assets are derecognised when the rights to receive cash flows have expired or the Santander UK group has transferred its contractual right to receive the
cash flows from the assets and either: (1) substantially all the risks and rewards of ownership have been transferred; or (2) the Santander UK group has neither
retained nor transferred substantially all of the risks and rewards but has transferred control.
Financial liabilities are derecognised when extinguished, cancelled or expired.
The following table shows the impact of netting arrangements on:
\u2013 All financial assets and liabilities that are reported net on the balance sheet
\u2013 All derivative financial instruments and repurchase agreements and other similar secured lending and borrowing agreements that are subject to enforceable
master netting arrangements or similar agreements, but do not qualify for balance sheet netting.
The table identifies the amounts that have been offset in the balance sheet and those amounts that are covered by enforceable netting arrangements (offsetting
arrangements and financial collateral) but do not qualify for netting under the requirements described above.
For derivative contracts, the \u2018Financial instruments\u2019 column identifies financial assets and liabilities that are subject to set off under netting agreements, such as
the\u00a0ISDA Master Agreement or derivative exchange or clearing counterparty agreements, whereby all outstanding transactions with the same counterparty can
be\u00a0offset and close-out netting applied across all outstanding transactions covered by the agreements if an event of default or other predetermined events occur.
Financial collateral refers to cash and non-cash collateral obtained, typically daily or weekly, to cover the net exposure between counterparties by enabling the
collateral to be realised in an event of default or if other predetermined events occur. For repurchase and reverse repurchase agreements and other similar secured
lending and borrowing, the \u2018Financial instruments\u2019 column identifies financial assets and liabilities that are subject to set off under netting agreements, such as
global master repurchase agreements and global master securities lending agreements, whereby all outstanding transactions with the same counterparty can
be\u00a0offset and close-out netting applied across all outstanding transactions covered by the agreements if an event of default or other predetermined events occur.
Financial collateral typically comprises highly liquid securities which are legally transferred and can be liquidated if a counterparty defaults.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialAssetsExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-540": { "value": "
The Santander UK group reclassifies financial assets when and only when its business model for managing those assets changes. The reclassification takes place
from the start of the first reporting period following the change. Such changes are expected to be very infrequent.
Certain derivatives may be embedded in hybrid contracts. If the hybrid contract contains a host that is a financial asset, then the Santander UK group assesses the
entire contract as described in the financial asset section above for classification and measurement purposes. Otherwise, embedded derivatives are treated as
separate derivatives when their economic characteristics and risks are not closely related to those of the host contract; the terms of the embedded derivative would
meet the definition of a stand-alone derivative if they were contained in a separate contract; and the combined contract is not held for trading or designated at fair
value. These embedded derivatives are measured at fair value with changes in fair value recognised in the income statement. Contracts containing embedded
derivatives are not subsequently reassessed for separation unless either there has been a change in the terms of the contract which significantly modifies the cash
flows (in which case the contract is reassessed at the time of modification) or the contract has been reclassified (in which case the contract is reassessed at the time
of reclassification).", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForReclassificationOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-543": { "value": "
Sale and repurchase agreements (including stock borrowing and lending)
Securities sold subject to a commitment to repurchase them at a predetermined price (repos) under which substantially all the risks and rewards of ownership
are\u00a0retained by the Santander UK group remain on the balance sheet and a liability is recorded in respect of the consideration received. Securities purchased
under\u00a0commitments to resell (reverse repos) are not recognised on the balance sheet and the consideration paid is recorded as an asset. The difference between
the sale and repurchase price is treated as trading income in the income statement, except where the repo is not treated as part of the trading book, in which case
the difference is recorded in interest income or expense.
Securities lending and borrowing transactions are generally secured, with collateral in the form of securities or cash advanced or received. Securities borrowed
are\u00a0not reflected on the balance sheet. Collateral in the form of cash received or advanced is recorded as a deposit or a loan. Collateral in the form of securities is
not\u00a0recognised.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForRepurchaseAndReverseRepurchaseAgreementsExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-542": { "value": "
Sale and repurchase agreements (including stock borrowing and lending)
Securities sold subject to a commitment to repurchase them at a predetermined price (repos) under which substantially all the risks and rewards of ownership
are\u00a0retained by the Santander UK group remain on the balance sheet and a liability is recorded in respect of the consideration received. Securities purchased
under\u00a0commitments to resell (reverse repos) are not recognised on the balance sheet and the consideration paid is recorded as an asset. The difference between
the sale and repurchase price is treated as trading income in the income statement, except where the repo is not treated as part of the trading book, in which case
the difference is recorded in interest income or expense.
Securities lending and borrowing transactions are generally secured, with collateral in the form of securities or cash advanced or received. Securities borrowed
are\u00a0not reflected on the balance sheet. Collateral in the form of cash received or advanced is recorded as a deposit or a loan. Collateral in the form of securities is
not\u00a0recognised.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForBorrowingsExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-541": { "value": "
Sale and repurchase agreements (including stock borrowing and lending)
Securities sold subject to a commitment to repurchase them at a predetermined price (repos) under which substantially all the risks and rewards of ownership
are\u00a0retained by the Santander UK group remain on the balance sheet and a liability is recorded in respect of the consideration received. Securities purchased
under\u00a0commitments to resell (reverse repos) are not recognised on the balance sheet and the consideration paid is recorded as an asset. The difference between
the sale and repurchase price is treated as trading income in the income statement, except where the repo is not treated as part of the trading book, in which case
the difference is recorded in interest income or expense.
Securities lending and borrowing transactions are generally secured, with collateral in the form of securities or cash advanced or received. Securities borrowed
are\u00a0not reflected on the balance sheet. Collateral in the form of cash received or advanced is recorded as a deposit or a loan. Collateral in the form of securities is
not\u00a0recognised.
Securitisation transactions
The Santander UK group has entered into arrangements where undertakings have issued mortgage-backed and other asset-backed securities or have entered
into\u00a0funding arrangements with lenders in order to finance specific loans and advances to customers. The Santander UK group has also entered into synthetic
securitisation arrangements, as part of significant risk transfer (SRT) transactions to reduce its risk-weighted assets, where undertakings have issued credit-linked
notes, and in some cases deposited the funds raised as collateral, for credit protection in respect of specific loans and advances to customers. As the Santander UK
group has retained substantially all the risks and rewards of the underlying assets, such financial instruments continue to be recognised on the balance sheet, and a
liability recognised for the proceeds of the funding transaction, or in the case of SRT transactions, collateral deposited.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForCollateralExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-545": { "value": "
ii) Impairment of debt instrument financial assets
The Santander UK group assesses on a forward-looking basis the ECL associated with its debt instrument assets carried at amortised cost and FVOCI and with the
exposure arising from financial guarantee contracts and loan commitments. The Santander UK group recognises a loss allowance for such losses at each reporting
date. The measurement of ECL reflects:
\u2013 An unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes.
\u2013 The time value of money, and
\u2013 Reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of
future economic conditions.
Grouping of instruments for losses measured on a collective basis
We typically group instruments and assess them for impairment collectively where they share risk characteristics (as described in the Credit risk section of the Risk
review) using one or more statistical models. Where we have used internal capital or similar models as the basis for our ECL models, this typically results in a large
number of relatively small homogenous groups which are determined by the permutations of the underlying characteristics in the statistical models. We calculate
separate collective provisions for instruments in Stages 1, 2 and 3 where the instrument is not individually assessed, as described below.
Individually assessed impairments (IAIs)
We assess significant Stage 3 cases individually. We do this for Corporate & Commercial Banking cases, but not for Business Banking cases in Retail & Business
Banking which we assess collectively. To calculate the estimated loss, we estimate the future cash flows under several scenarios each of which uses case-specific
factors and circumstances. We then probability-weight the net present value of the cash flows under each scenario to arrive at a weighted average provision
requirement. We update our assessment process every quarter and more frequently if there are changes in circumstances that might affect the scenarios, cash
flows or probabilities we apply.
For more on how ECL is calculated, see the Credit risk section of the Risk review.
Impairment of non-financial assets
At each balance sheet date, or more frequently when events or changes in circumstances dictate, property plant and equipment (including operating lease assets)
and intangible assets (including goodwill) are assessed for indicators of impairment. If indications are present, these assets are subject to an impairment review.
The impairment review comprises a comparison of the carrying value of the asset or cash generating unit with its recoverable amount: the higher of the asset\u2019s or
cash-generating unit\u2019s fair value less costs to sell and its value in use. The cash-generating unit represents the lowest level at which non-financial assets, including
goodwill, are monitored for internal management purposes and is not larger than an operating segment.
The fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date. Value in use is calculated by discounting management\u2019s expected future cash flows obtainable as a result of the asset\u2019s continued use (after
making allowance for increases in regulatory capital requirements), including those resulting from its ultimate disposal, at a market-based discount rate on a pre-
tax basis. The recoverable amounts of goodwill have been based on value in use calculations.
For conducting goodwill impairment reviews, cash generating units are the lowest level at which management monitors the return on investment on assets.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForImpairmentOfAssetsExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-544": { "value": "
ii) Impairment of debt instrument financial assets
The Santander UK group assesses on a forward-looking basis the ECL associated with its debt instrument assets carried at amortised cost and FVOCI and with the
exposure arising from financial guarantee contracts and loan commitments. The Santander UK group recognises a loss allowance for such losses at each reporting
date. The measurement of ECL reflects:
\u2013 An unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes.
\u2013 The time value of money, and
\u2013 Reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of
future economic conditions.
Grouping of instruments for losses measured on a collective basis
We typically group instruments and assess them for impairment collectively where they share risk characteristics (as described in the Credit risk section of the Risk
review) using one or more statistical models. Where we have used internal capital or similar models as the basis for our ECL models, this typically results in a large
number of relatively small homogenous groups which are determined by the permutations of the underlying characteristics in the statistical models. We calculate
separate collective provisions for instruments in Stages 1, 2 and 3 where the instrument is not individually assessed, as described below.
Individually assessed impairments (IAIs)
We assess significant Stage 3 cases individually. We do this for Corporate & Commercial Banking cases, but not for Business Banking cases in Retail & Business
Banking which we assess collectively. To calculate the estimated loss, we estimate the future cash flows under several scenarios each of which uses case-specific
factors and circumstances. We then probability-weight the net present value of the cash flows under each scenario to arrive at a weighted average provision
requirement. We update our assessment process every quarter and more frequently if there are changes in circumstances that might affect the scenarios, cash
flows or probabilities we apply.
For more on how ECL is calculated, see the Credit risk section of the Risk review.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForImpairmentOfFinancialAssetsExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-546": { "value": "
iv) Derecognition other than on a modification
Financial assets are derecognised when the rights to receive cash flows have expired or the Santander UK group has transferred its contractual right to receive the
cash flows from the assets and either: (1) substantially all the risks and rewards of ownership have been transferred; or (2) the Santander UK group has neither
retained nor transferred substantially all of the risks and rewards but has transferred control.
Financial liabilities are derecognised when extinguished, cancelled or expired.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDerecognitionOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-547": { "value": "
c) Financial guarantee contracts and loan commitments
Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor
fails to make payments when due, in accordance with the terms of a debt instrument. Such financial guarantees are given to banks, financial institutions and others
on behalf of customers to secure loans, overdrafts and other banking facilities.
Financial guarantee contracts are initially measured at fair value and subsequently measured at the higher of the amount of the loss allowance, and the premium
received on initial recognition less income recognised in accordance with the principles of IFRS 15. Loan commitments are measured as the amount of the loss
allowance (determined in accordance with IFRS 9 as described in Credit risk section of the Risk review). The Santander UK group has not provided any commitment
to provide loans at a below-market interest rate, or that can be settled net in cash or by delivering or issuing another financial instrument.
For financial guarantee contracts and loan commitments, the loss allowance is recognised as a provision and charged to credit impairment charges in the income
statement. The loss allowance in respect of revolving facilities is classified in loans and advances to customers to the extent of any drawn balances. The loss
allowance in respect of undrawn amounts is classified in provisions. When amounts are drawn, any related loss allowance is transferred from provisions to loans
and advances to customers.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialGuaranteesExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-549": { "value": "
Derivative financial instruments (derivatives)
Derivatives are contracts or agreements whose value is derived from one or more underlying indices or asset values inherent in the contract or agreement, which
require no or little initial net investment and are settled at a future date. Transactions are undertaken in interest rate, cross currency, equity, residential property and
other index-related swaps, forwards, caps, floors, swaptions, as well as credit default and total return swaps, equity index contracts and exchange traded interest
rate futures, and equity index options.
Derivatives are held for risk management purposes. Derivatives are classified as held for trading unless they are designated as being in a hedge accounting
relationship. The Santander UK group chooses to designate certain derivatives as in a hedging relationship if they meet specific criteria, as further described in
\u2018Hedge accounting\u2019 below.
Derivatives are recognised initially (on the date on which a derivative contract is entered into), and are subsequently remeasured, at their fair value. Fair values
of\u00a0exchange-traded derivatives are obtained from quoted market prices. Fair values of over-the-counter derivatives are estimated using valuation techniques,
including discounted cash flow and option pricing models.
Certain derivatives may be embedded in hybrid contracts. If the hybrid contract contains a host that is a financial asset, then the Santander UK group assesses the
entire contract as described in the financial asset section above for classification and measurement purposes. Otherwise, embedded derivatives are treated as
separate derivatives when their economic characteristics and risks are not closely related to those of the host contract; the terms of the embedded derivative would
meet the definition of a stand-alone derivative if they were contained in a separate contract; and the combined contract is not held for trading or designated at fair
value. These embedded derivatives are measured at fair value with changes in fair value recognised in the income statement. Contracts containing embedded
derivatives are not subsequently reassessed for separation unless either there has been a change in the terms of the contract which significantly modifies the cash
flows (in which case the contract is reassessed at the time of modification) or the contract has been reclassified (in which case the contract is reassessed at the time
of reclassification).
All derivatives are carried as assets when their fair value is positive and as liabilities when their fair value is negative, except where netting is permitted. The method
of recognising fair value gains and losses depends on whether derivatives are held for trading or are designated as hedging instruments and, if the latter, the nature
of the risks being hedged. Gains and losses from changes in the fair value of derivatives held for trading are recognised in the income statement and included in
Other operating income.
Hedge accounting
The Santander UK group applies hedge accounting to represent, to the maximum possible extent permitted under accounting standards, the economic effects of its
risk management strategies. Derivatives are used to hedge exposures to interest rates, inflation and exchange rates.
At the time a financial instrument is designated as a hedge (i.e. at the inception of the hedge), the Santander UK group formally documents the relationship between
the hedging instrument(s) and hedged item(s), its risk management objective and strategy for undertaking the hedge. The documentation includes the identification
of each hedging instrument and respective hedged item, the nature of the risk being hedged (including the benchmark interest rate being hedged in a hedge of
interest rate risk) and how the hedging instrument\u2019s effectiveness in offsetting the exposure to changes in the hedged item\u2019s fair value attributable to the hedged
risk is to be assessed. Accordingly, the Santander UK group formally assesses, both at the inception of the hedge and on an ongoing basis, whether the hedging
derivatives have been and will be highly effective in offsetting changes in the fair value attributable to the hedged risk during the period that the hedge is
designated. A hedge is normally regarded as highly effective if, at inception and throughout its life, the Santander UK group can expect, and actual results indicate
that changes in the fair value or cash flow of the hedged items are effectively offset by changes in the fair value or cash flow of the hedging instrument. If at any
point it is concluded that it is no longer highly effective in achieving its documented objective, hedge accounting is discontinued.
Where derivatives are held for risk management purposes, and when transactions meet the required criteria for documentation and hedge effectiveness, the
derivatives may be designated as either: (i) hedges of the change in fair value of recognised assets or liabilities or firm commitments (fair value hedges); (ii) hedges
of the variability in highly probable future cash flows attributable to a recognised asset or liability, or a forecast transaction (cash flow hedges); or (iii) a hedge of a
net investment in a foreign operation (net investment hedges). The Santander UK group applies fair value and cash flow hedge accounting but not hedging of a net
investment in a foreign operation.
a) Fair value hedge accounting
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement, together with the changes in the
fair value of the hedged asset or liability that are attributable to the hedged risk. Where the hedged item is measured at amortised cost, the fair value changes due
to the hedged risk adjust the carrying amount of the hedged asset or liability. Changes in the fair value of portfolio hedged items are presented separately in the
consolidated balance sheet in macro hedge of interest rate risk and recognised in the income statement. If the hedge no longer meets the criteria for hedge
accounting, changes in the fair value of the hedged item attributable to the hedged risk are no longer recognised in the income statement. For fair value hedges of
interest rate risk, the cumulative adjustment that has been made to the carrying amount of the hedged item is amortised to the income statement using the
effective interest method over the period to maturity. For portfolio hedged items, the cumulative adjustment is amortised to the income statement using the
straight-line method over the period to maturity.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsAndHedgingExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-548": { "value": "
Derivative financial instruments (derivatives)
Derivatives are contracts or agreements whose value is derived from one or more underlying indices or asset values inherent in the contract or agreement, which
require no or little initial net investment and are settled at a future date. Transactions are undertaken in interest rate, cross currency, equity, residential property and
other index-related swaps, forwards, caps, floors, swaptions, as well as credit default and total return swaps, equity index contracts and exchange traded interest
rate futures, and equity index options.
Derivatives are held for risk management purposes. Derivatives are classified as held for trading unless they are designated as being in a hedge accounting
relationship. The Santander UK group chooses to designate certain derivatives as in a hedging relationship if they meet specific criteria, as further described in
\u2018Hedge accounting\u2019 below.
Derivatives are recognised initially (on the date on which a derivative contract is entered into), and are subsequently remeasured, at their fair value. Fair values
of\u00a0exchange-traded derivatives are obtained from quoted market prices. Fair values of over-the-counter derivatives are estimated using valuation techniques,
including discounted cash flow and option pricing models.
Certain derivatives may be embedded in hybrid contracts. If the hybrid contract contains a host that is a financial asset, then the Santander UK group assesses the
entire contract as described in the financial asset section above for classification and measurement purposes. Otherwise, embedded derivatives are treated as
separate derivatives when their economic characteristics and risks are not closely related to those of the host contract; the terms of the embedded derivative would
meet the definition of a stand-alone derivative if they were contained in a separate contract; and the combined contract is not held for trading or designated at fair
value. These embedded derivatives are measured at fair value with changes in fair value recognised in the income statement. Contracts containing embedded
derivatives are not subsequently reassessed for separation unless either there has been a change in the terms of the contract which significantly modifies the cash
flows (in which case the contract is reassessed at the time of modification) or the contract has been reclassified (in which case the contract is reassessed at the time
of reclassification).
All derivatives are carried as assets when their fair value is positive and as liabilities when their fair value is negative, except where netting is permitted. The method
of recognising fair value gains and losses depends on whether derivatives are held for trading or are designated as hedging instruments and, if the latter, the nature
of the risks being hedged. Gains and losses from changes in the fair value of derivatives held for trading are recognised in the income statement and included in
Other operating income.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-550": { "value": "
Offsetting financial assets and liabilities
Financial assets and liabilities including derivatives are offset and the net amount reported in the balance sheet when there is a legally enforceable right to set off
the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The Santander UK group is party
to a number of arrangements, including master netting arrangements under industry standard agreements which facilitate netting of transactions in jurisdictions
where netting agreements are recognised and have legal force. These netting arrangements do not generally result in an offset of balance sheet assets and
liabilities for accounting purposes, as transactions are usually settled on a gross basis.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForOffsettingOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-551": { "value": "
Hedge accounting
The Santander UK group applies hedge accounting to represent, to the maximum possible extent permitted under accounting standards, the economic effects of its
risk management strategies. Derivatives are used to hedge exposures to interest rates, inflation and exchange rates.
At the time a financial instrument is designated as a hedge (i.e. at the inception of the hedge), the Santander UK group formally documents the relationship between
the hedging instrument(s) and hedged item(s), its risk management objective and strategy for undertaking the hedge. The documentation includes the identification
of each hedging instrument and respective hedged item, the nature of the risk being hedged (including the benchmark interest rate being hedged in a hedge of
interest rate risk) and how the hedging instrument\u2019s effectiveness in offsetting the exposure to changes in the hedged item\u2019s fair value attributable to the hedged
risk is to be assessed. Accordingly, the Santander UK group formally assesses, both at the inception of the hedge and on an ongoing basis, whether the hedging
derivatives have been and will be highly effective in offsetting changes in the fair value attributable to the hedged risk during the period that the hedge is
designated. A hedge is normally regarded as highly effective if, at inception and throughout its life, the Santander UK group can expect, and actual results indicate
that changes in the fair value or cash flow of the hedged items are effectively offset by changes in the fair value or cash flow of the hedging instrument. If at any
point it is concluded that it is no longer highly effective in achieving its documented objective, hedge accounting is discontinued.
Where derivatives are held for risk management purposes, and when transactions meet the required criteria for documentation and hedge effectiveness, the
derivatives may be designated as either: (i) hedges of the change in fair value of recognised assets or liabilities or firm commitments (fair value hedges); (ii) hedges
of the variability in highly probable future cash flows attributable to a recognised asset or liability, or a forecast transaction (cash flow hedges); or (iii) a hedge of a
net investment in a foreign operation (net investment hedges). The Santander UK group applies fair value and cash flow hedge accounting but not hedging of a net
investment in a foreign operation.
a) Fair value hedge accounting
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement, together with the changes in the
fair value of the hedged asset or liability that are attributable to the hedged risk. Where the hedged item is measured at amortised cost, the fair value changes due
to the hedged risk adjust the carrying amount of the hedged asset or liability. Changes in the fair value of portfolio hedged items are presented separately in the
consolidated balance sheet in macro hedge of interest rate risk and recognised in the income statement. If the hedge no longer meets the criteria for hedge
accounting, changes in the fair value of the hedged item attributable to the hedged risk are no longer recognised in the income statement. For fair value hedges of
interest rate risk, the cumulative adjustment that has been made to the carrying amount of the hedged item is amortised to the income statement using the
effective interest method over the period to maturity. For portfolio hedged items, the cumulative adjustment is amortised to the income statement using the
straight-line method over the period to maturity.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForHedgingExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-552": { "value": "
Impairment of non-financial assets
At each balance sheet date, or more frequently when events or changes in circumstances dictate, property plant and equipment (including operating lease assets)
and intangible assets (including goodwill) are assessed for indicators of impairment. If indications are present, these assets are subject to an impairment review.
The impairment review comprises a comparison of the carrying value of the asset or cash generating unit with its recoverable amount: the higher of the asset\u2019s or
cash-generating unit\u2019s fair value less costs to sell and its value in use. The cash-generating unit represents the lowest level at which non-financial assets, including
goodwill, are monitored for internal management purposes and is not larger than an operating segment.
The fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date. Value in use is calculated by discounting management\u2019s expected future cash flows obtainable as a result of the asset\u2019s continued use (after
making allowance for increases in regulatory capital requirements), including those resulting from its ultimate disposal, at a market-based discount rate on a pre-
tax basis. The recoverable amounts of goodwill have been based on value in use calculations.
For conducting goodwill impairment reviews, cash generating units are the lowest level at which management monitors the return on investment on assets.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForImpairmentOfNonfinancialAssetsExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-553": { "value": "
Leases (as lessor)
Operating lease assets are recorded at cost and the difference between cost and residual value (RV) is depreciated over the life of the asset. Operating lease rental
income and depreciation is recognised on a straight-line basis over the life of the asset. After initial recognition, residual values are reviewed regularly, and any
changes are recognised prospectively through remaining depreciation charges.
Amounts due from lessees under finance leases and hire purchase contracts are recorded as receivables at the amount of the Santander UK group\u2019s net investment
in the leases. Finance lease income is allocated to accounting periods to reflect a constant periodic rate of return on the Santander UK group\u2019s net investment
outstanding in respect of the leases and hire purchase contracts. A provision is recognised to reflect a reduction in any anticipated unguaranteed RV. A provision is
also recognised for voluntary termination of the contract by the customer, where appropriate.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForLeasesExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-555": { "value": "
Income taxes, including deferred taxes
The tax expense represents the sum of the income tax currently payable and deferred income tax.
A current tax liability for the current or prior period is measured at the amount expected to be paid to the tax authorities. Where the amount of the final tax liability is
uncertain or where a position is challenged by a taxation authority, the liability recognised is the most likely outcome. Where a most likely outcome cannot be
determined, a weighted average basis is applied.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled, or the asset is realised based on rates enacted or
substantively enacted at the balance sheet date. Deferred tax is charged or credited in the income statement, except when it relates to items recognised in other
comprehensive income or directly in equity, in which case the deferred tax is also recognised in other comprehensive income or directly in equity.
Deferred and current tax assets and liabilities are only offset when they arise in the same tax reporting group and where there is both the legal right and the
intention to settle on a net basis or to realise the asset and settle the liability simultaneously.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDeferredIncomeTaxExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-554": { "value": "
Income taxes, including deferred taxes
The tax expense represents the sum of the income tax currently payable and deferred income tax.
A current tax liability for the current or prior period is measured at the amount expected to be paid to the tax authorities. Where the amount of the final tax liability is
uncertain or where a position is challenged by a taxation authority, the liability recognised is the most likely outcome. Where a most likely outcome cannot be
determined, a weighted average basis is applied.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled, or the asset is realised based on rates enacted or
substantively enacted at the balance sheet date. Deferred tax is charged or credited in the income statement, except when it relates to items recognised in other
comprehensive income or directly in equity, in which case the deferred tax is also recognised in other comprehensive income or directly in equity.
Deferred and current tax assets and liabilities are only offset when they arise in the same tax reporting group and where there is both the legal right and the
intention to settle on a net basis or to realise the asset and settle the liability simultaneously.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIncomeTaxExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-558": { "value": "
Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents comprise balances with not more than three months maturity from the date of acquisition,
including cash and non-restricted balances with central banks and loans and advances to banks. Balances with central banks represent amounts held at the Bank of
England as part of the Santander UK group\u2019s liquidity management activities. It includes reserves collateralised accounts in respect of Santander UK\u2019s participation in
certain payments schemes which are required to be maintained with the Bank of England and are restricted balances.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyToDetermineComponentsOfCashAndCashEquivalents", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-557": { "value": "
Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents comprise balances with not more than three months maturity from the date of acquisition,
including cash and non-restricted balances with central banks and loans and advances to banks. Balances with central banks represent amounts held at the Bank of
England as part of the Santander UK group\u2019s liquidity management activities. It includes reserves collateralised accounts in respect of Santander UK\u2019s participation in
certain payments schemes which are required to be maintained with the Bank of England and are restricted balances.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForRestrictedCashAndCashEquivalentsExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-556": { "value": "
Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents comprise balances with not more than three months maturity from the date of acquisition,
including cash and non-restricted balances with central banks and loans and advances to banks. Balances with central banks represent amounts held at the Bank of
England as part of the Santander UK group\u2019s liquidity management activities. It includes reserves collateralised accounts in respect of Santander UK\u2019s participation in
certain payments schemes which are required to be maintained with the Bank of England and are restricted balances.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForCashFlowsExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-559": { "value": "
Provisions and contingent liabilities (see 'Critical judgements and accounting estimates')
Provisions are recognised for present obligations arising as consequences of past events where it is more likely than not that a transfer of economic benefits will be
necessary to settle the obligation, and it can be reliably estimated.
Customer remediation provisions are made for the estimated cost of making redress payments with respect to the past sales of products, using conclusions such
as\u00a0the number of claims, the number of those that will be upheld, the estimated average settlement per case and other related costs. Provision is made for the
anticipated cost of restructuring, including redundancy costs, when an obligation exists. An obligation exists when the Santander UK group has a detailed formal
plan for restructuring a business, has raised valid expectations in those affected by the restructuring, and has started to implement the plan or announce its
main\u00a0features.
When a leasehold property ceases to be used in the business, provision is made where the unavoidable costs of the future obligations relating to the lease are
expected to exceed anticipated rental income. The net costs are discounted using market rates of interest to reflect the long-term nature of the cash flows.
Loan commitments are measured as the amount of the loss allowance, determined in line with IFRS 9 as set out in the Credit risk section of the Risk review.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForProvisionsExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-560": { "value": "
Contingent liabilities are possible obligations whose existence will be confirmed only by certain future events or present obligations where the transfer of economic
benefit is uncertain or cannot be reliably measured. Contingent liabilities are not recognised but are disclosed unless they are remote.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForContingentLiabilitiesAndContingentAssetsExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-563": { "value": "
Critical judgements and accounting estimates
The preparation of Santander UK's consolidated financial statements in accordance with IFRS requires management to make judgements and assumptions in
applying the accounting policies that affect the reported amounts of assets, liabilities, income and expenses. Due to the inherent uncertainty in making estimates,
actual results reported in future periods may be based on amounts which differ from those estimates. Estimates, judgements and assumptions are continually
evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the
circumstances. Management has considered the impact of developments in principal risks and uncertainties, as set out in the Risk review, on critical judgements and
accounting estimates.
The significant judgements, apart from those involving estimation, made by management in applying Santander UK's accounting policies in these financial
statements (key judgements) and the key sources of estimation uncertainty that may have a significant risk of causing a material adjustment to the carrying
amount\u00a0of assets and liabilities within the next financial year (key estimates), which together are considered critical to Santander UK's results and financial position,
are as follows:
a) Credit impairment allowance
The application of the ECL impairment methodology for calculating credit impairment allowances is highly susceptible to change from period to period. The
methodology requires management to make judgmental assumptions in determining the estimates. Any significant difference between the estimated amounts and
actual amounts could have a material impact on the future financial results and financial condition. The impact of the cost of living crisis has increased the
uncertainty around ECL impairment calculations and has required management to make additional judgements and accounting estimates that affect the amount of
assets and liabilities at the reporting date and the amount of income and expenses in the reporting period. The key additional judgements due to the impact of the
cost of living crisis mainly reflect the increased uncertainty around forward-looking economic data and the need for additional judgemental adjustments.
Key judgements
\u2013 Establishing the criteria for a significant increase in credit risk (SICR) and, for corporate borrowers, internal credit risk rating
\u2013 Determining the need for any judgemental adjustments
\u2013 Determining an appropriate definition of default
\u2013 Establishing low credit risk exemption (LCRE) criteria to determine that the credit risk did not increase significantly since initial recognition
\u2013 Determining the need to assess corporate Stage 3 exposures individually
Key estimates
\u2013 Forward-looking multiple economic scenario assumptions
\u2013 Probability weights assigned to multiple economic scenarios
For more on each of these key judgements and estimates, see 'Critical Judgements and accounting estimates applied in calculating ECL' in the \u2018Credit risk \u2013 credit
risk management\u2019 section of the Risk review.
Sensitivity of ECL allowance
For detailed disclosures, see 'Sensitivity of ECL allowance' in the \u2018Credit risk \u2013 credit risk management\u2019 section of the Risk review.
b) Provisions and contingent liabilities
Key judgements
\u2013 Determining whether a present obligation exists
\u2013 Determining the likely outcome of future legal decisions
Key estimates
\u2013 Probability, timing, nature and amount of any outflows that may arise from past events
Included in Litigation and other regulatory provisions in Note 27 are amounts in respect of management\u2019s best estimates of liability relating to a legal dispute
regarding allocation of responsibility for a specific PPI portfolio of complaints, and Plevin related litigation. Note 30 provides disclosure relating to ongoing factual
issues and reviews that could impact the timing and amount of any outflows. It includes disclosure relating to an investigation in relation to the historical
involvement of Santander UK plc, Santander Financial Services plc and Cater Allen International Limited (all subsidiaries of Santander UK Group Holdings plc) in
German dividend tax arbitrage transactions. It also includes disclosure relating to the historical use of discretionary commission arrangements by Santander
Consumer (UK) plc.
These judgements are based on the specific facts available and often require specialist professional advice. There can be a wide range of possible outcomes and
uncertainties, particularly in relation to legal actions, and regulatory and consumer credit matters. As a result, it is often not possible to make reliable estimates of
the likelihood and amount of any potential outflows, or to calculate any resulting sensitivities. For more on each of these key judgements and estimates, see Notes
27 and 30.
c) Retirement benefit plans
The Santander UK group operates a number of defined benefit pension schemes as described in Note 28 and estimates their position as described in the accounting
policy \u2018Pensions and other post retirement benefits\u2019.
Key judgements
\u2013 Setting the criteria for constructing the corporate bond yield curve used to determine the discount rate
\u2013 Determining the methodology for setting the inflation assumption
Key estimates
\u2013 Discount rate applied to future cash flows
\u2013 Rate of price inflation
\u2013 Expected lifetime of the schemes' members
\u2013 Valuation of pension fund assets whose values are not based on market observable data
For more on each of these key judgements and estimates, see Note 28 .
Sensitivity of defined benefit pension scheme estimates
For detailed disclosures, see \u2018Actuarial assumption sensitivities\u2019 in Note 28 . The Scheme is invested in certain assets whose values are not based on market
observable data, such as investments in private equity funds and property. Due diligence has been conducted to support the values obtained in respect of these
assets represent fair value. Given the nature of these investments, we are unable to prepare sensitivities on how their values could vary as market conditions or
other variables change.
d) Goodwill
The carrying amount of goodwill is based on the application of judgements including the basis of goodwill impairment calculation assumptions. Santander UK
undertakes an annual assessment to evaluate whether the carrying amount of goodwill is impaired, carrying out this assessment more frequently if reviews identify
indicators of impairment or when events or changes in circumstances dictate.
Key judgement:
\u2013 Determining the basis of goodwill impairment testing methodology, including the need for planning assumptions and internal capital allocations
Key estimates:
\u2013 Forecast cash flows for cash generating units
\u2013 Discount rates which factor in risk-free rates and applicable risk premiums
All of these variables are subject to fluctuations in external market rates and economic conditions beyond management\u2019s control
Santander UK group undertakes an annual assessment to evaluate whether the carrying amount of goodwill is impaired, carrying out this assessment more
frequently if reviews identify indicators of impairment or when events or changes in circumstances dictate.
The estimation of future cash flows and the level to which they are discounted is inherently uncertain and requires significant judgement and is subject to potential
change over time.
For more on each of these key judgements and estimates, see Note 19 .
Sensitivity of goodwill
For detailed disclosures, see \u2018Sensitivities of key assumptions in calculating 'VIU\u2019 in Note 19.
Sensitivity of level 3 intercompany derivative valuation estimates
For detailed disclosures, see \u2018Effect of changes in significant unobservable assumptions to reasonably possible alternatives\u2019 in Note 38.
As discussed above, the fair value of financial instruments are, in certain circumstances, measured using valuation techniques that incorporate assumptions that are
not evidenced by prices from observable current market transactions in the same instrument and are not based on observable market data and, as such require the
application of a degree of judgement. Changing one or more of the inputs to the valuation models to reasonably possible alternative assumptions would change the
fair values significantly.
", "dimensions": { "concept": "ifrs-full:DisclosureOfAssetsAndLiabilitiesWithSignificantRiskOfMaterialAdjustmentExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-561": { "value": "
Critical judgements and accounting estimates
The preparation of Santander UK's consolidated financial statements in accordance with IFRS requires management to make judgements and assumptions in
applying the accounting policies that affect the reported amounts of assets, liabilities, income and expenses. Due to the inherent uncertainty in making estimates,
actual results reported in future periods may be based on amounts which differ from those estimates. Estimates, judgements and assumptions are continually
evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the
circumstances. Management has considered the impact of developments in principal risks and uncertainties, as set out in the Risk review, on critical judgements and
accounting estimates.
The significant judgements, apart from those involving estimation, made by management in applying Santander UK's accounting policies in these financial
statements (key judgements) and the key sources of estimation uncertainty that may have a significant risk of causing a material adjustment to the carrying
amount\u00a0of assets and liabilities within the next financial year (key estimates), which together are considered critical to Santander UK's results and financial position,
are as follows:
a) Credit impairment allowance
The application of the ECL impairment methodology for calculating credit impairment allowances is highly susceptible to change from period to period. The
methodology requires management to make judgmental assumptions in determining the estimates. Any significant difference between the estimated amounts and
actual amounts could have a material impact on the future financial results and financial condition. The impact of the cost of living crisis has increased the
uncertainty around ECL impairment calculations and has required management to make additional judgements and accounting estimates that affect the amount of
assets and liabilities at the reporting date and the amount of income and expenses in the reporting period. The key additional judgements due to the impact of the
cost of living crisis mainly reflect the increased uncertainty around forward-looking economic data and the need for additional judgemental adjustments.
Key judgements
\u2013 Establishing the criteria for a significant increase in credit risk (SICR) and, for corporate borrowers, internal credit risk rating
\u2013 Determining the need for any judgemental adjustments
\u2013 Determining an appropriate definition of default
\u2013 Establishing low credit risk exemption (LCRE) criteria to determine that the credit risk did not increase significantly since initial recognition
\u2013 Determining the need to assess corporate Stage 3 exposures individually
Key estimates
\u2013 Forward-looking multiple economic scenario assumptions
\u2013 Probability weights assigned to multiple economic scenarios
For more on each of these key judgements and estimates, see 'Critical Judgements and accounting estimates applied in calculating ECL' in the \u2018Credit risk \u2013 credit
risk management\u2019 section of the Risk review.
Sensitivity of ECL allowance
For detailed disclosures, see 'Sensitivity of ECL allowance' in the \u2018Credit risk \u2013 credit risk management\u2019 section of the Risk review.
b) Provisions and contingent liabilities
Key judgements
\u2013 Determining whether a present obligation exists
\u2013 Determining the likely outcome of future legal decisions
Key estimates
\u2013 Probability, timing, nature and amount of any outflows that may arise from past events
Included in Litigation and other regulatory provisions in Note 27 are amounts in respect of management\u2019s best estimates of liability relating to a legal dispute
regarding allocation of responsibility for a specific PPI portfolio of complaints, and Plevin related litigation. Note 30 provides disclosure relating to ongoing factual
issues and reviews that could impact the timing and amount of any outflows. It includes disclosure relating to an investigation in relation to the historical
involvement of Santander UK plc, Santander Financial Services plc and Cater Allen International Limited (all subsidiaries of Santander UK Group Holdings plc) in
German dividend tax arbitrage transactions. It also includes disclosure relating to the historical use of discretionary commission arrangements by Santander
Consumer (UK) plc.
These judgements are based on the specific facts available and often require specialist professional advice. There can be a wide range of possible outcomes and
uncertainties, particularly in relation to legal actions, and regulatory and consumer credit matters. As a result, it is often not possible to make reliable estimates of
the likelihood and amount of any potential outflows, or to calculate any resulting sensitivities. For more on each of these key judgements and estimates, see Notes
27 and 30.
c) Retirement benefit plans
The Santander UK group operates a number of defined benefit pension schemes as described in Note 28 and estimates their position as described in the accounting
policy \u2018Pensions and other post retirement benefits\u2019.
Key judgements
\u2013 Setting the criteria for constructing the corporate bond yield curve used to determine the discount rate
\u2013 Determining the methodology for setting the inflation assumption
Key estimates
\u2013 Discount rate applied to future cash flows
\u2013 Rate of price inflation
\u2013 Expected lifetime of the schemes' members
\u2013 Valuation of pension fund assets whose values are not based on market observable data
For more on each of these key judgements and estimates, see Note 28 .
Sensitivity of defined benefit pension scheme estimates
For detailed disclosures, see \u2018Actuarial assumption sensitivities\u2019 in Note 28 . The Scheme is invested in certain assets whose values are not based on market
observable data, such as investments in private equity funds and property. Due diligence has been conducted to support the values obtained in respect of these
assets represent fair value. Given the nature of these investments, we are unable to prepare sensitivities on how their values could vary as market conditions or
other variables change.
d) Goodwill
The carrying amount of goodwill is based on the application of judgements including the basis of goodwill impairment calculation assumptions. Santander UK
undertakes an annual assessment to evaluate whether the carrying amount of goodwill is impaired, carrying out this assessment more frequently if reviews identify
indicators of impairment or when events or changes in circumstances dictate.
Key judgement:
\u2013 Determining the basis of goodwill impairment testing methodology, including the need for planning assumptions and internal capital allocations
Key estimates:
\u2013 Forecast cash flows for cash generating units
\u2013 Discount rates which factor in risk-free rates and applicable risk premiums
All of these variables are subject to fluctuations in external market rates and economic conditions beyond management\u2019s control
Santander UK group undertakes an annual assessment to evaluate whether the carrying amount of goodwill is impaired, carrying out this assessment more
frequently if reviews identify indicators of impairment or when events or changes in circumstances dictate.
The estimation of future cash flows and the level to which they are discounted is inherently uncertain and requires significant judgement and is subject to potential
change over time.
For more on each of these key judgements and estimates, see Note 19 .
Sensitivity of goodwill
For detailed disclosures, see \u2018Sensitivities of key assumptions in calculating 'VIU\u2019 in Note 19.
Sensitivity of level 3 intercompany derivative valuation estimates
For detailed disclosures, see \u2018Effect of changes in significant unobservable assumptions to reasonably possible alternatives\u2019 in Note 38.
As discussed above, the fair value of financial instruments are, in certain circumstances, measured using valuation techniques that incorporate assumptions that are
not evidenced by prices from observable current market transactions in the same instrument and are not based on observable market data and, as such require the
application of a degree of judgement. Changing one or more of the inputs to the valuation models to reasonably possible alternative assumptions would change the
fair values significantly.
", "dimensions": { "concept": "ifrs-full:DisclosureOfAccountingJudgementsAndEstimatesExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-562": { "value": "Critical judgements and accounting estimatesThe preparation of Santander UK's consolidated financial statements in accordance with IFRS requires management to make judgements and assumptions in applying the accounting policies that affect the reported amounts of assets, liabilities, income and expenses. Due to the inherent uncertainty in making estimates, actual results reported in future periods may be based on amounts which differ from those estimates. Estimates, judgements and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Management has considered the impact of developments in principal risks and uncertainties, as set out in the Risk review, on critical judgements and accounting estimates. The significant judgements, apart from those involving estimation, made by management in applying Santander UK's accounting policies in these financial statements (key judgements) and the key sources of estimation uncertainty that may have a significant risk of causing a material adjustment to the carrying amount\u00a0of assets and liabilities within the next financial year (key estimates), which together are considered critical to Santander UK's results and financial position, are as follows: a) Credit impairment allowance The application of the ECL impairment methodology for calculating credit impairment allowances is highly susceptible to change from period to period. The methodology requires management to make judgmental assumptions in determining the estimates. Any significant difference between the estimated amounts and actual amounts could have a material impact on the future financial results and financial condition. The impact of the cost of living crisis has increased the uncertainty around ECL impairment calculations and has required management to make additional judgements and accounting estimates that affect the amount of assets and liabilities at the reporting date and the amount of income and expenses in the reporting period. The key additional judgements due to the impact of the cost of living crisis mainly reflect the increased uncertainty around forward-looking economic data and the need for additional judgemental adjustments. Key judgements \u2013 Establishing the criteria for a significant increase in credit risk (SICR) and, for corporate borrowers, internal credit risk rating\u2013 Determining the need for any judgemental adjustments\u2013 Determining an appropriate definition of default\u2013 Establishing low credit risk exemption (LCRE) criteria to determine that the credit risk did not increase significantly since initial recognition\u2013 Determining the need to assess corporate Stage 3 exposures individuallyKey estimates \u2013 Forward-looking multiple economic scenario assumptions\u2013 Probability weights assigned to multiple economic scenariosFor more on each of these key judgements and estimates, see 'Critical Judgements and accounting estimates applied in calculating ECL' in the \u2018Credit risk \u2013 credit risk management\u2019 section of the Risk review. Sensitivity of ECL allowance For detailed disclosures, see 'Sensitivity of ECL allowance' in the \u2018Credit risk \u2013 credit risk management\u2019 section of the Risk review. b) Provisions and contingent liabilitiesKey judgements \u2013 Determining whether a present obligation exists\u2013 Determining the likely outcome of future legal decisionsKey estimates \u2013 Probability, timing, nature and amount of any outflows that may arise from past eventsIncluded in Litigation and other regulatory provisions in Note 27 are amounts in respect of management\u2019s best estimates of liability relating to a legal dispute regarding allocation of responsibility for a specific PPI portfolio of complaints, and Plevin related litigation. Note 30 provides disclosure relating to ongoing factual issues and reviews that could impact the timing and amount of any outflows. It includes disclosure relating to an investigation in relation to the historical involvement of Santander UK plc, Santander Financial Services plc and Cater Allen International Limited (all subsidiaries of Santander UK Group Holdings plc) in German dividend tax arbitrage transactions. It also includes disclosure relating to the historical use of discretionary commission arrangements by Santander Consumer (UK) plc. These judgements are based on the specific facts available and often require specialist professional advice. There can be a wide range of possible outcomes and uncertainties, particularly in relation to legal actions, and regulatory and consumer credit matters. As a result, it is often not possible to make reliable estimates of the likelihood and amount of any potential outflows, or to calculate any resulting sensitivities. For more on each of these key judgements and estimates, see Notes 27 and 30. c) Retirement benefit plans The Santander UK group operates a number of defined benefit pension schemes as described in Note 28 and estimates their position as described in the accounting policy \u2018Pensions and other post retirement benefits\u2019.Key judgements \u2013 Setting the criteria for constructing the corporate bond yield curve used to determine the discount rate\u2013 Determining the methodology for setting the inflation assumption Key estimates \u2013 Discount rate applied to future cash flows\u2013 Rate of price inflation\u2013 Expected lifetime of the schemes' members\u2013 Valuation of pension fund assets whose values are not based on market observable dataFor more on each of these key judgements and estimates, see Note 28 . Sensitivity of defined benefit pension scheme estimates For detailed disclosures, see \u2018Actuarial assumption sensitivities\u2019 in Note 28 . The Scheme is invested in certain assets whose values are not based on market observable data, such as investments in private equity funds and property. Due diligence has been conducted to support the values obtained in respect of these assets represent fair value. Given the nature of these investments, we are unable to prepare sensitivities on how their values could vary as market conditions or other variables change. d) GoodwillThe carrying amount of goodwill is based on the application of judgements including the basis of goodwill impairment calculation assumptions. Santander UK undertakes an annual assessment to evaluate whether the carrying amount of goodwill is impaired, carrying out this assessment more frequently if reviews identify indicators of impairment or when events or changes in circumstances dictate.Key judgement: \u2013 Determining the basis of goodwill impairment testing methodology, including the need for planning assumptions and internal capital allocationsKey estimates: \u2013 Forecast cash flows for cash generating units\u2013 Discount rates which factor in risk-free rates and applicable risk premiumsAll of these variables are subject to fluctuations in external market rates and economic conditions beyond management\u2019s control Santander UK group undertakes an annual assessment to evaluate whether the carrying amount of goodwill is impaired, carrying out this assessment more frequently if reviews identify indicators of impairment or when events or changes in circumstances dictate. The estimation of future cash flows and the level to which they are discounted is inherently uncertain and requires significant judgement and is subject to potential change over time.For more on each of these key judgements and estimates, see Note 19 . Sensitivity of goodwill For detailed disclosures, see \u2018Sensitivities of key assumptions in calculating 'VIU\u2019 in Note 19.Sensitivity of level 3 intercompany derivative valuation estimatesFor detailed disclosures, see \u2018Effect of changes in significant unobservable assumptions to reasonably possible alternatives\u2019 in Note 38.As discussed above, the fair value of financial instruments are, in certain circumstances, measured using valuation techniques that incorporate assumptions that are not evidenced by prices from observable current market transactions in the same instrument and are not based on observable market data and, as such require the application of a degree of judgement. Changing one or more of the inputs to the valuation models to reasonably possible alternative assumptions would change the fair values significantly.", "dimensions": { "concept": "ifrs-full:ExplanationOfAssumptionAboutFutureWithSignificantRiskOfResultingInMaterialAdjustments", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-564": { "value": "
2. SEGMENTS
Santander UK\u2019s principal activity is financial services, mainly in the UK. The business is managed and reported on the basis of four segments, which are strategic
business units that offer different products and services, have different customers and require different technology and marketing strategies. Geographical
information is not provided, as substantially all of Santander UK\u2019s activities are in the UK.
\u2013 Retail & Business Banking consists of two business units, Mortgages and Everyday Banking. Mortgages provides prime UK mortgage lending to owner occupiers
and buy-to-let landlords with small portfolios. Everyday Banking provides banking services and unsecured lending to individuals and small businesses as well as
wealth management for high-net-worth clients.
\u2013 Consumer Finance provides prime auto consumer financing for individuals, businesses, and automotive distribution networks.
\u2013 Corporate & Commercial Banking provides banking products and services to SMEs, mid-sized and larger corporates, typically with annual turnovers of between
\u00a32m and \u00a3500m as well as to Local Authorities and Housing Associations.
\u2013 Corporate Centre provides treasury services for asset and liability management of our balance sheet.
Retail & Business Banking delivers products through our omni-channel presence comprising branches, ATMs, telephony, digital and intermediary channels.
Consumer Finance business is primarily introduced by car dealerships acting as our intermediary along with a small amount of new business introduced via digital
channels. Corporate and Commercial Banking expertise is provided by relationship managers, product specialists and through digital and telephony channels, and
covers clients' needs both in the UK and overseas.
The segmental data is prepared on a statutory basis of accounting, in line with the accounting policies set out in Note 1. Transactions between segments are on
normal commercial terms and conditions. Internal charges and internal UK transfer pricing adjustments are reflected in the results of each segment and eliminate
on consolidation. Revenue sharing agreements are used to allocate external customer revenues to a segment on a reasonable basis. Funds are ordinarily
reallocated between segments, resulting in funding cost transfers disclosed in operating income. Interest charged for these funds is based on Santander UK\u2019s cost
of wholesale funding. Interest income and interest expense have not been reported separately. The majority of segment revenues are interest income in nature and
net interest income is relied on primarily to assess segment performance and to make decisions on the allocation of segment resources.
Results by segment
For the year ended 31 December
Retail &
Business
Banking
Consumer
Finance
Corporate &
Commercial
Banking
Corporate
Centre
Total
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Net interest income
3,426
144
694
48
4,312
Non-interest income/(expense)
121
182
128
(86)
345
Total operating income/(expense)
3,547
326
822
(38)
4,657
Operating expenses before credit impairment charges, provisions and charges
(1,976)
(152)
(417)
(3)
(2,548)
Credit impairment charges
(50)
(17)
(4)
\u2014
(71)
Provisions for other liabilities and charges
(297)
(332)
(50)
(10)
(689)
Total credit impairment charges, provisions and charges
(347)
(349)
(54)
(10)
(760)
Profit/(loss) before tax
1,224
(175)
351
(51)
1,349
Revenue/(expense) from external customers
3,711
754
562
(370)
4,657
Inter-segment (expense)/revenue
(164)
(428)
260
332
\u2014
Total operating income/(expense)
3,547
326
822
(38)
4,657
Revenue/(expense) from external customers includes the following fee and commission income:(1)
\u2013 Current account and debit card fees
424
\u2014
50
\u2014
474
\u2013 Insurance, protection and investments
48
\u2014
\u2014
\u2014
48
\u2013 Credit cards
92
\u2014
\u2014
\u2014
92
\u2013 Non-banking and other fees(2)
3
28
73
15
119
Total fee and commission income
567
28
123
15
733
Fee and commission expense
(442)
(7)
(10)
(22)
(481)
Net fee and commission income/(expense)
125
21
113
(7)
252
Customer loans
171,724
4,759
18,029
\u2014
194,512
Customer deposits
151,815
\u2014
22,137
2,781
176,733
Average number of full-time equivalent staff
15,993
773
2,494
\u2014
19,260
(1) The disaggregation of fees and commission income as shown above is not included in reports provided to the chief operating decision maker but is provided to show the split by reportable segments.
(2) Non-banking and other fees include mortgages (except mortgage account fees), consumer finance, commitment commission, asset finance, invoice finance and trade finance.
Retail &
Business
Banking
Consumer
Finance
Corporate &
Commercial
Banking
Corporate
Centre
Total
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Net interest income/(expense)
3,716
156
841
(55)
4,658
Non-interest income/(expense)
182
192
135
(71)
438
Total operating income/(expense)
3,898
348
976
(126)
5,096
Operating expenses before credit impairment charges, provisions and charges
(1,813)
(141)
(351)
(151)
(2,456)
Credit impairment charges
(149)
(15)
(40)
(1)
(205)
Provisions for other liabilities and charges
(233)
(18)
(15)
(69)
(335)
Total credit impairment charges, provisions and charges
(382)
(33)
(55)
(70)
(540)
Profit/(loss) before tax
1,703
174
570
(347)
2,100
Revenue from external customers
3,597
663
712
124
5,096
Inter-segment revenue/(expense)
301
(315)
264
(250)
\u2014
Total operating income/(expense)
3,898
348
976
(126)
5,096
Revenue from external customers includes the following fee and commission income:(1)
\u2013 Current account and debit card fees
493
\u2014
49
\u2014
542
\u2013 Insurance, protection and investments
47
\u2014
\u2014
\u2014
47
\u2013 Credit cards
94
\u2014
\u2014
\u2014
94
\u2013 Non-banking and other fees(2)
3
25
79
14
121
Total fee and commission income
637
25
128
14
804
Fee and commission expense
(458)
(6)
(11)
(26)
(501)
Net fee and commission income/(expense)
179
19
117
(12)
303
Customer loans
179,887
5,228
17,939
\u2014
203,054
Customer deposits
158,329
\u2014
24,066
5,050
187,445
Average number of full-time equivalent staff
16,330
816
2,376
24
19,546
Retail &
Business
Banking
Consumer
Finance
Corporate &
Commercial
Banking
Corporate
Centre
Total
2022
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Net interest income/(expense)
3,671
180
580
(6)
4,425
Non-interest income/(expense)
209
195
146
(19)
531
Total operating income/(expense)
3,880
375
726
(25)
4,956
Operating expenses before credit impairment charges, provisions and charges
(1,682)
(144)
(342)
(175)
(2,343)
Credit impairment charges
(262)
(27)
(31)
\u2014
(320)
Provisions for other liabilities and charges
(394)
(6)
(8)
(11)
(419)
Total credit impairment charges, provisions and charges
(656)
(33)
(39)
(11)
(739)
Profit/(loss) before tax
1,542
198
345
(211)
1,874
Revenue/(expense) from external customers
4,109
513
732
(398)
4,956
Inter-segment (expense)/revenue
(229)
(138)
(6)
373
\u2014
Total operating income/(expense)
3,880
375
726
(25)
4,956
Revenue from external customers includes the following fee and commission income:(1)
\u2013 Current account and debit card fees
502
\u2014
60
\u2014
562
\u2013 Insurance, protection and investments
78
\u2014
\u2014
\u2014
78
\u2013 Credit card fees
95
\u2014
\u2014
\u2014
95
\u2013 Non-banking and other fees(2)
2
20
77
5
104
Total fee and commission income
677
20
137
5
839
Fee and commission expense
(478)
(5)
(18)
(8)
(509)
Net fee and commission income/(expense)
199
15
119
(3)
330
Customer loans
191,836
5,384
18,518
\u2014
215,738
Customer deposits
161,748
\u2014
24,798
3,365
189,911
Average number of full-time equivalent staff
15,212
531
2,336
44
18,123
(1) The disaggregation of fees and commission income as shown above is not included in reports provided to the chief operating decision maker but is provided to show the split by reportable segments.
(2) Non-banking and other fees include mortgages (except mortgage account fees), consumer finance, commitment commission, asset finance, invoice finance and trade finance.
The table below shows the relationship between Customer assets and Loans and advances to customers as presented in the Consolidated Balance Sheet. Customer
assets exclude intercompany balances (including joint ventures), as they carry low credit risk and therefore have an immaterial ECL, Accrued interest that we have
not yet charged to the customer's account, and Other items, consisting mainly of cash collateral. It also shows the relationship between Customer deposits (see
above) and Deposits by customers as presented in the Consolidated Balance Sheet.
Assets
Liabilities
2024
2023
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Customer balances (gross)
194,512
203,054
176,733
187,445
Loan loss allowance
(784)
(914)
\u2014
\u2014
Customer balances (net)
193,728
202,140
176,733
187,445
Intercompany balances (including joint ventures)
4,832
4,544
3,632
2,825
Accrued interest
714
739
854
830
Other items
134
12
(252)
(250)
Loans and advances to customers / Deposits by customers
199,408
207,435
180,967
190,850
", "dimensions": { "concept": "ifrs-full:DisclosureOfEntitysReportableSegmentsExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-565": { "value": "
The segmental data is prepared on a statutory basis of accounting, in line with the accounting policies set out in Note 1. Transactions between segments are on
normal commercial terms and conditions. Internal charges and internal UK transfer pricing adjustments are reflected in the results of each segment and eliminate
on consolidation. Revenue sharing agreements are used to allocate external customer revenues to a segment on a reasonable basis. Funds are ordinarily
reallocated between segments, resulting in funding cost transfers disclosed in operating income. Interest charged for these funds is based on Santander UK\u2019s cost
of wholesale funding. Interest income and interest expense have not been reported separately. The majority of segment revenues are interest income in nature and
net interest income is relied on primarily to assess segment performance and to make decisions on the allocation of segment resources.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForSegmentReportingExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-570": { "value": "
3. NET INTEREST INCOME
For the year ended 31 December
Group
2024
2023
2022
\u00a3m
\u00a3m
\u00a3m
Interest and similar income:
Loans and advances to customers
9,290
8,767
5,774
Loans and advances to banks
1,523
1,751
618
Reverse repurchase agreements \u2013 non-trading
987
626
149
Other
639
473
167
Total interest and similar income(1)
12,439
11,617
6,708
Interest expense and similar charges:
Deposits by customers
(4,276)
(3,230)
(905)
Deposits by banks
(839)
(1,165)
(496)
Repurchase agreements \u2013 non-trading
(644)
(538)
(120)
Debt securities in issue
(2,171)
(1,852)
(650)
Subordinated liabilities
(193)
(169)
(108)
Other
(4)
(5)
(4)
Total interest expense and similar charges(2)
(8,127)
(6,959)
(2,283)
Net interest income
4,312
4,658
4,425
(1) Includes \u00a3296m (2023: \u00a3230m , 2022: \u00a387m) of interest income on financial assets at FVOCI.
(2) Includes \u00a3762m (2023: \u00a3706m, 2022: \u00a36m) of interest expense on the effective part of derivatives hedging debt issuances and \u00a33m (2023: \u00a33m, 2022: \u00a33m) of interest expense on lease liabilities.
", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestIncomeExpenseExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-569": { "value": "
3. NET INTEREST INCOME
For the year ended 31 December
Group
2024
2023
2022
\u00a3m
\u00a3m
\u00a3m
Interest and similar income:
Loans and advances to customers
9,290
8,767
5,774
Loans and advances to banks
1,523
1,751
618
Reverse repurchase agreements \u2013 non-trading
987
626
149
Other
639
473
167
Total interest and similar income(1)
12,439
11,617
6,708
Interest expense and similar charges:
Deposits by customers
(4,276)
(3,230)
(905)
Deposits by banks
(839)
(1,165)
(496)
Repurchase agreements \u2013 non-trading
(644)
(538)
(120)
Debt securities in issue
(2,171)
(1,852)
(650)
Subordinated liabilities
(193)
(169)
(108)
Other
(4)
(5)
(4)
Total interest expense and similar charges(2)
(8,127)
(6,959)
(2,283)
Net interest income
4,312
4,658
4,425
(1) Includes \u00a3296m (2023: \u00a3230m , 2022: \u00a387m) of interest income on financial assets at FVOCI.
(2) Includes \u00a3762m (2023: \u00a3706m, 2022: \u00a36m) of interest expense on the effective part of derivatives hedging debt issuances and \u00a33m (2023: \u00a33m, 2022: \u00a33m) of interest expense on lease liabilities.
4. NET FEE AND COMMISSION INCOME
For the year ended 31 December
Group
2024
2023
2022
\u00a3m
\u00a3m
\u00a3m
Fee and commission income:
Current account and debit card fees
474
542
562
Insurance, protection and investments
48
47
78
Credit cards
92
94
95
Non-banking and other fees(1)
119
121
104
Total fee and commission income
733
804
839
Total fee and commission expense
(481)
(501)
(509)
Net fee and commission income
252
303
330
(1)\u00a0 \u00a0 Non-banking and other fees include mortgages (except mortgage account fees), consumer finance, commitment commission, asset finance, invoice finance and trade finance.
", "dimensions": { "concept": "ifrs-full:DisclosureOfRevenueExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-568": { "value": "
3. NET INTEREST INCOME
For the year ended 31 December
Group
2024
2023
2022
\u00a3m
\u00a3m
\u00a3m
Interest and similar income:
Loans and advances to customers
9,290
8,767
5,774
Loans and advances to banks
1,523
1,751
618
Reverse repurchase agreements \u2013 non-trading
987
626
149
Other
639
473
167
Total interest and similar income(1)
12,439
11,617
6,708
Interest expense and similar charges:
Deposits by customers
(4,276)
(3,230)
(905)
Deposits by banks
(839)
(1,165)
(496)
Repurchase agreements \u2013 non-trading
(644)
(538)
(120)
Debt securities in issue
(2,171)
(1,852)
(650)
Subordinated liabilities
(193)
(169)
(108)
Other
(4)
(5)
(4)
Total interest expense and similar charges(2)
(8,127)
(6,959)
(2,283)
Net interest income
4,312
4,658
4,425
(1) Includes \u00a3296m (2023: \u00a3230m , 2022: \u00a387m) of interest income on financial assets at FVOCI.
(2) Includes \u00a3762m (2023: \u00a3706m, 2022: \u00a36m) of interest expense on the effective part of derivatives hedging debt issuances and \u00a33m (2023: \u00a33m, 2022: \u00a33m) of interest expense on lease liabilities.
", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestIncomeExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-567": { "value": "
3. NET INTEREST INCOME
For the year ended 31 December
Group
2024
2023
2022
\u00a3m
\u00a3m
\u00a3m
Interest and similar income:
Loans and advances to customers
9,290
8,767
5,774
Loans and advances to banks
1,523
1,751
618
Reverse repurchase agreements \u2013 non-trading
987
626
149
Other
639
473
167
Total interest and similar income(1)
12,439
11,617
6,708
Interest expense and similar charges:
Deposits by customers
(4,276)
(3,230)
(905)
Deposits by banks
(839)
(1,165)
(496)
Repurchase agreements \u2013 non-trading
(644)
(538)
(120)
Debt securities in issue
(2,171)
(1,852)
(650)
Subordinated liabilities
(193)
(169)
(108)
Other
(4)
(5)
(4)
Total interest expense and similar charges(2)
(8,127)
(6,959)
(2,283)
Net interest income
4,312
4,658
4,425
(1) Includes \u00a3296m (2023: \u00a3230m , 2022: \u00a387m) of interest income on financial assets at FVOCI.
(2) Includes \u00a3762m (2023: \u00a3706m, 2022: \u00a36m) of interest expense on the effective part of derivatives hedging debt issuances and \u00a33m (2023: \u00a33m, 2022: \u00a33m) of interest expense on lease liabilities.
", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestExpenseExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-566": { "value": "
3. NET INTEREST INCOME
For the year ended 31 December
Group
2024
2023
2022
\u00a3m
\u00a3m
\u00a3m
Interest and similar income:
Loans and advances to customers
9,290
8,767
5,774
Loans and advances to banks
1,523
1,751
618
Reverse repurchase agreements \u2013 non-trading
987
626
149
Other
639
473
167
Total interest and similar income(1)
12,439
11,617
6,708
Interest expense and similar charges:
Deposits by customers
(4,276)
(3,230)
(905)
Deposits by banks
(839)
(1,165)
(496)
Repurchase agreements \u2013 non-trading
(644)
(538)
(120)
Debt securities in issue
(2,171)
(1,852)
(650)
Subordinated liabilities
(193)
(169)
(108)
Other
(4)
(5)
(4)
Total interest expense and similar charges(2)
(8,127)
(6,959)
(2,283)
Net interest income
4,312
4,658
4,425
(1) Includes \u00a3296m (2023: \u00a3230m , 2022: \u00a387m) of interest income on financial assets at FVOCI.
(2) Includes \u00a3762m (2023: \u00a3706m, 2022: \u00a36m) of interest expense on the effective part of derivatives hedging debt issuances and \u00a33m (2023: \u00a33m, 2022: \u00a33m) of interest expense on lease liabilities.
4. NET FEE AND COMMISSION INCOME
For the year ended 31 December
Group
2024
2023
2022
\u00a3m
\u00a3m
\u00a3m
Fee and commission income:
Current account and debit card fees
474
542
562
Insurance, protection and investments
48
47
78
Credit cards
92
94
95
Non-banking and other fees(1)
119
121
104
Total fee and commission income
733
804
839
Total fee and commission expense
(481)
(501)
(509)
Net fee and commission income
252
303
330
(1)\u00a0 \u00a0 Non-banking and other fees include mortgages (except mortgage account fees), consumer finance, commitment commission, asset finance, invoice finance and trade finance.
5. OTHER OPERATING INCOME
For the year ended 31 December
Group
2024
2023
2022
\u00a3m
\u00a3m
\u00a3m
Net (losses)/gains on financial instruments designated at fair value through profit or loss(1)
(38)
(57)
62
Net (losses) on financial instruments mandatorily at fair value through profit or loss(2)
(12)
(11)
(75)
Hedge ineffectiveness
22
19
29
Income from operating lease assets
113
117
129
Other
8
67
56
93
135
201
(1) Net (losses) /gains on financial instruments designated at fair value through profit or loss includes losses of \u00a316m on deposits (2023: \u00a324m losses, 2022 \u00a335m gains), losses of \u00a322m on debt securities 2023:
\u00a332m losses, 2022: \u00a331m gains).
(2) Net losses on financial instruments mandatorily at fair value through profit or loss include gains of \u00a37m on debt securities (2023: \u00a35m gains, 2022: \u00a313m gains).
Net gains on financial instruments mandatorily at FVTPL includes fair value losses of \u00a321m (2023: losses of \u00a312m, 2022: gains of \u00a314m) on embedded derivatives
bifurcated from certain equity index-linked deposits, as described in the derivatives accounting policy in Note 1. The embedded derivatives are economically hedged,
the results of which are also included in this line item and amounted to gains of \u00a321m (2023: gains of \u00a312m, 2022: losses of \u00a314m). As a result, the net fair value
movements recognised on the equity index-linked deposits and the related economic hedges were net gains of \u00a3nil (2023: \u00a3nil, 2022: \u00a3nil).
Group
2024
2023
2022
\u00a3m
\u00a3m
\u00a3m
Exchange rate differences in the consolidated income statement on items not at fair value through profit and loss
495
1,288
(2,163)
These are principally offset by related releases from the cash flow hedge reserve
(500)
(1,248)
2,129
In 2024, no subordinated liabilities were repurchased as part of ongoing liability management exercises (2023: profit of \u00a34m).
In 2024, Other includes \u00a38m of losses on the sale of property as part of our transformation (2023: \u00a3nil; 2022: \u00a37m).
6. OPERATING EXPENSES BEFORE CREDIT IMPAIRMENT CHARGES, PROVISIONS AND CHARGES
For the year ended 31 December
Group
Company
2024
2023
2022
2024
2023
2022
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Staff costs:
Wages and salaries
866
839
745
813
787
683
Performance-related payments
164
162
170
159
156
160
Social security costs
122
115
112
116
109
102
Pensions costs: \u2013 defined contribution plans
79
71
60
74
67
54
\u2013 defined benefit plans
13
13
28
13
12
25
Other personnel costs
33
41
44
32
40
42
1,277
1,241
1,159
1,207
1,171
1,066
Other administration expenses
971
925
888
937
890
882
Depreciation, amortisation and impairment
300
290
296
238
220
219
2,548
2,456
2,343
2,382
2,281
2,167
Staff costs
Performance-related payments include bonuses paid in cash and share awards granted under the arrangements described in Note 35. Included in this are equity-
settled share-based payments, none of which related to option-based schemes. These are disclosed in the table below as \u2018Shares awards\u2019. Performance-related
payments above include amounts related to deferred performance awards as follows:
Costs recognised in 2024
Costs expected to be recognised in 2025 or later
Arising from
awards in
current year
Arising from
awards in prior
year
Total
Arising from
awards in
current year
Arising from
awards in prior
year
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cash
3
5
8
7
7
14
Shares
2
5
7
6
7
13
5
10
15
13
14
27
The following table shows the amount of bonus awarded to employees for the performance year 2024. In the case of deferred cash and shares awards, the final
amount paid to an employee is influenced by forfeiture provisions and any performance conditions to which the awards are subject. The deferred shares award
amount is based on the fair value of the awards at the date of grant.
Expenses charged in the year
Expenses deferred to future periods
Total
2024
2023
2024
2023
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cash award \u2013 not deferred
140
140
\u2014
140
140
\u2013 deferred
8
7
14
12
22
19
Shares award \u2013 not deferred
9
8
\u2014
9
8
\u2013 deferred
7
7
13
11
20
18
Total discretionary bonus
164
162
27
23
191
185
Other share-based payments consist of options granted under the Employee Sharesave scheme which comprise the Santander UK group\u2019s cash-settled share-based
payments. For more, see Note 35.
The average number of full-time equivalent staff in the year is set out in Note 2. For the Company, the average number of full-time equivalent staff was 18,378
(2023: 18,631, 2022: 16,830).
Depreciation, amortisation and impairment
In 2024, depreciation, amortisation and impairment included depreciation of \u00a375m (2023: \u00a364m, 2022: \u00a373m) on operating lease assets (where the Santander UK
group is the lessor) with a carrying amount of \u00a3574m at 31 December 2024 (2023: \u00a3488m, 2022: \u00a3577m). It also included depreciation of \u00a318m (2023: \u00a330m,
2022: \u00a319m) on right-of-use assets with a carrying amount of \u00a379m at 31 December 2024 (2023: \u00a390m, 2022: \u00a3112m).
Other administration expenses includes \u00a318m (2023: \u00a319m, 2022: \u00a321m) related to short-term leases.
In 2024, depreciation, amortisation and impairment included an impairment charge of \u00a3nil (2023: \u00a325m, 2022: \u00a310m) associated with branch and head office site
closures as part of our transformation. For more, see Note 20.
For the Company, in 2024 impairment associated with branch and head office site closures as part of our transformation was \u00a3nil\u00a0 (2023: \u00a325m, 2022: \u00a310m).
7. AUDIT AND OTHER SERVICES
For the year ended 31 December
Group
2024
2023
2022
\u00a3m
\u00a3m
\u00a3m
Audit fees:
Fees payable to the Company\u2019s auditor and its associates for the audit of the Santander UK group\u2019s annual financial
statements
13.8
13.9
11.8
Fees payable to the Company\u2019s auditor and its associates for other services to the Santander UK group:
\u2013 Audit of the Santander UK group's subsidiaries
0.6
0.6
0.7
Total audit fees(1)
14.4
14.5
12.5
Non-audit fees:
Audit-related assurance services
0.6
0.7
0.6
Other assurance services
1.0
0.5
0.3
Other non-audit services
0.6
0.1
\u2014
Total non-audit fees
2.2
1.3
0.9
(1) 2024 audit fees included \u00a30.1m (2023: \u00a30.7m , 2022: \u00a30.6m) which related to the prior year.
Audit fees payable for the statutory audit of Santander UK plc were \u00a312.9m (2023: \u00a312.7m, 2022: \u00a310.9m).
Audit-related assurance services mainly comprised services performed in connection with review of the financial information of the Company and reporting to the
Company's UK regulators.
Other non-audit services mainly comprised services performed in support of various debt issuance programmes.
Of the total non-audit fees, \u00a30.2m (2023: \u00a30.3m, 2022: \u00a30.2m) accords with the definition of 'Audit Fees' per US Securities and Exchange Commission (SEC)
guidance, \u00a32.0m (2023: \u00a31.0m, 2022: \u00a30.7m) accords with the definition of 'Audit related fees' per that guidance and \u00a348,300 (2023: \u00a312,550, 2022: \u00a3nil) accords
with the definition of 'All other fees' per that guidance.
8. CREDIT IMPAIRMENT CHARGES AND PROVISIONS
For the year ended 31 December
Group
2024
2023
2022
\u00a3m
\u00a3m
\u00a3m
Credit impairment charges:
Loans and advances to customers
87
191
248
(Recoveries)/charges of loans and advances, net of collection costs
(23)
10
36
Off-balance sheet credit exposures (See Note 27)
7
4
36
71
205
320
Provisions for other liabilities and charges (excluding off-balance sheet credit exposures) (See Note 27)
687
334
422
Charge/(release) for residual value and voluntary termination
2
1
(3)
689
335
419
760
540
739
In 2024, 2023 and 2022 there were no material credit impairment charges on Loans and advances to banks, Non-trading reverse repurchase agreements, Other
financial assets at amortised cost and Financial assets at FVOCI.
", "dimensions": { "concept": "ifrs-full:DisclosureOfProfitLossFromOperatingActivitiesExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-571": { "value": "
4. NET FEE AND COMMISSION INCOME
For the year ended 31 December
Group
2024
2023
2022
\u00a3m
\u00a3m
\u00a3m
Fee and commission income:
Current account and debit card fees
474
542
562
Insurance, protection and investments
48
47
78
Credit cards
92
94
95
Non-banking and other fees(1)
119
121
104
Total fee and commission income
733
804
839
Total fee and commission expense
(481)
(501)
(509)
Net fee and commission income
252
303
330
(1)\u00a0 \u00a0 Non-banking and other fees include mortgages (except mortgage account fees), consumer finance, commitment commission, asset finance, invoice finance and trade finance.
", "dimensions": { "concept": "ifrs-full:DisclosureOfFeeAndCommissionIncomeExpenseExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-572": { "value": "
5. OTHER OPERATING INCOME
For the year ended 31 December
Group
2024
2023
2022
\u00a3m
\u00a3m
\u00a3m
Net (losses)/gains on financial instruments designated at fair value through profit or loss(1)
(38)
(57)
62
Net (losses) on financial instruments mandatorily at fair value through profit or loss(2)
(12)
(11)
(75)
Hedge ineffectiveness
22
19
29
Income from operating lease assets
113
117
129
Other
8
67
56
93
135
201
(1) Net (losses) /gains on financial instruments designated at fair value through profit or loss includes losses of \u00a316m on deposits (2023: \u00a324m losses, 2022 \u00a335m gains), losses of \u00a322m on debt securities 2023:
\u00a332m losses, 2022: \u00a331m gains).
(2) Net losses on financial instruments mandatorily at fair value through profit or loss include gains of \u00a37m on debt securities (2023: \u00a35m gains, 2022: \u00a313m gains).
Net gains on financial instruments mandatorily at FVTPL includes fair value losses of \u00a321m (2023: losses of \u00a312m, 2022: gains of \u00a314m) on embedded derivatives
bifurcated from certain equity index-linked deposits, as described in the derivatives accounting policy in Note 1. The embedded derivatives are economically hedged,
the results of which are also included in this line item and amounted to gains of \u00a321m (2023: gains of \u00a312m, 2022: losses of \u00a314m). As a result, the net fair value
movements recognised on the equity index-linked deposits and the related economic hedges were net gains of \u00a3nil (2023: \u00a3nil, 2022: \u00a3nil).
Group
2024
2023
2022
\u00a3m
\u00a3m
\u00a3m
Exchange rate differences in the consolidated income statement on items not at fair value through profit and loss
495
1,288
(2,163)
These are principally offset by related releases from the cash flow hedge reserve
(500)
(1,248)
2,129
In 2024, no subordinated liabilities were repurchased as part of ongoing liability management exercises (2023: profit of \u00a34m).
In 2024, Other includes \u00a38m of losses on the sale of property as part of our transformation (2023: \u00a3nil; 2022: \u00a37m).
6. OPERATING EXPENSES BEFORE CREDIT IMPAIRMENT CHARGES, PROVISIONS AND CHARGES
For the year ended 31 December
Group
Company
2024
2023
2022
2024
2023
2022
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Staff costs:
Wages and salaries
866
839
745
813
787
683
Performance-related payments
164
162
170
159
156
160
Social security costs
122
115
112
116
109
102
Pensions costs: \u2013 defined contribution plans
79
71
60
74
67
54
\u2013 defined benefit plans
13
13
28
13
12
25
Other personnel costs
33
41
44
32
40
42
1,277
1,241
1,159
1,207
1,171
1,066
Other administration expenses
971
925
888
937
890
882
Depreciation, amortisation and impairment
300
290
296
238
220
219
2,548
2,456
2,343
2,382
2,281
2,167
Staff costs
Performance-related payments include bonuses paid in cash and share awards granted under the arrangements described in Note 35. Included in this are equity-
settled share-based payments, none of which related to option-based schemes. These are disclosed in the table below as \u2018Shares awards\u2019. Performance-related
payments above include amounts related to deferred performance awards as follows:
Costs recognised in 2024
Costs expected to be recognised in 2025 or later
Arising from
awards in
current year
Arising from
awards in prior
year
Total
Arising from
awards in
current year
Arising from
awards in prior
year
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cash
3
5
8
7
7
14
Shares
2
5
7
6
7
13
5
10
15
13
14
27
The following table shows the amount of bonus awarded to employees for the performance year 2024. In the case of deferred cash and shares awards, the final
amount paid to an employee is influenced by forfeiture provisions and any performance conditions to which the awards are subject. The deferred shares award
amount is based on the fair value of the awards at the date of grant.
Expenses charged in the year
Expenses deferred to future periods
Total
2024
2023
2024
2023
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cash award \u2013 not deferred
140
140
\u2014
140
140
\u2013 deferred
8
7
14
12
22
19
Shares award \u2013 not deferred
9
8
\u2014
9
8
\u2013 deferred
7
7
13
11
20
18
Total discretionary bonus
164
162
27
23
191
185
Other share-based payments consist of options granted under the Employee Sharesave scheme which comprise the Santander UK group\u2019s cash-settled share-based
payments. For more, see Note 35.
The average number of full-time equivalent staff in the year is set out in Note 2. For the Company, the average number of full-time equivalent staff was 18,378
(2023: 18,631, 2022: 16,830).
Depreciation, amortisation and impairment
In 2024, depreciation, amortisation and impairment included depreciation of \u00a375m (2023: \u00a364m, 2022: \u00a373m) on operating lease assets (where the Santander UK
group is the lessor) with a carrying amount of \u00a3574m at 31 December 2024 (2023: \u00a3488m, 2022: \u00a3577m). It also included depreciation of \u00a318m (2023: \u00a330m,
2022: \u00a319m) on right-of-use assets with a carrying amount of \u00a379m at 31 December 2024 (2023: \u00a390m, 2022: \u00a3112m).
Other administration expenses includes \u00a318m (2023: \u00a319m, 2022: \u00a321m) related to short-term leases.
In 2024, depreciation, amortisation and impairment included an impairment charge of \u00a3nil (2023: \u00a325m, 2022: \u00a310m) associated with branch and head office site
closures as part of our transformation. For more, see Note 20.
For the Company, in 2024 impairment associated with branch and head office site closures as part of our transformation was \u00a3nil\u00a0 (2023: \u00a325m, 2022: \u00a310m).
", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherOperatingIncomeExpenseExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-573": { "value": "
5. OTHER OPERATING INCOME
For the year ended 31 December
Group
2024
2023
2022
\u00a3m
\u00a3m
\u00a3m
Net (losses)/gains on financial instruments designated at fair value through profit or loss(1)
(38)
(57)
62
Net (losses) on financial instruments mandatorily at fair value through profit or loss(2)
(12)
(11)
(75)
Hedge ineffectiveness
22
19
29
Income from operating lease assets
113
117
129
Other
8
67
56
93
135
201
(1) Net (losses) /gains on financial instruments designated at fair value through profit or loss includes losses of \u00a316m on deposits (2023: \u00a324m losses, 2022 \u00a335m gains), losses of \u00a322m on debt securities 2023:
\u00a332m losses, 2022: \u00a331m gains).
(2) Net losses on financial instruments mandatorily at fair value through profit or loss include gains of \u00a37m on debt securities (2023: \u00a35m gains, 2022: \u00a313m gains).
Net gains on financial instruments mandatorily at FVTPL includes fair value losses of \u00a321m (2023: losses of \u00a312m, 2022: gains of \u00a314m) on embedded derivatives
bifurcated from certain equity index-linked deposits, as described in the derivatives accounting policy in Note 1. The embedded derivatives are economically hedged,
the results of which are also included in this line item and amounted to gains of \u00a321m (2023: gains of \u00a312m, 2022: losses of \u00a314m). As a result, the net fair value
movements recognised on the equity index-linked deposits and the related economic hedges were net gains of \u00a3nil (2023: \u00a3nil, 2022: \u00a3nil).
Group
2024
2023
2022
\u00a3m
\u00a3m
\u00a3m
Exchange rate differences in the consolidated income statement on items not at fair value through profit and loss
495
1,288
(2,163)
These are principally offset by related releases from the cash flow hedge reserve
(500)
(1,248)
2,129
In 2024, no subordinated liabilities were repurchased as part of ongoing liability management exercises (2023: profit of \u00a34m).
In 2024, Other includes \u00a38m of losses on the sale of property as part of our transformation (2023: \u00a3nil; 2022: \u00a37m).", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherOperatingIncomeExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-575": { "value": "
6. OPERATING EXPENSES BEFORE CREDIT IMPAIRMENT CHARGES, PROVISIONS AND CHARGES
For the year ended 31 December
Group
Company
2024
2023
2022
2024
2023
2022
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Staff costs:
Wages and salaries
866
839
745
813
787
683
Performance-related payments
164
162
170
159
156
160
Social security costs
122
115
112
116
109
102
Pensions costs: \u2013 defined contribution plans
79
71
60
74
67
54
\u2013 defined benefit plans
13
13
28
13
12
25
Other personnel costs
33
41
44
32
40
42
1,277
1,241
1,159
1,207
1,171
1,066
Other administration expenses
971
925
888
937
890
882
Depreciation, amortisation and impairment
300
290
296
238
220
219
2,548
2,456
2,343
2,382
2,281
2,167
Staff costs
Performance-related payments include bonuses paid in cash and share awards granted under the arrangements described in Note 35. Included in this are equity-
settled share-based payments, none of which related to option-based schemes. These are disclosed in the table below as \u2018Shares awards\u2019. Performance-related
payments above include amounts related to deferred performance awards as follows:
Costs recognised in 2024
Costs expected to be recognised in 2025 or later
Arising from
awards in
current year
Arising from
awards in prior
year
Total
Arising from
awards in
current year
Arising from
awards in prior
year
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cash
3
5
8
7
7
14
Shares
2
5
7
6
7
13
5
10
15
13
14
27
The following table shows the amount of bonus awarded to employees for the performance year 2024. In the case of deferred cash and shares awards, the final
amount paid to an employee is influenced by forfeiture provisions and any performance conditions to which the awards are subject. The deferred shares award
amount is based on the fair value of the awards at the date of grant.
Expenses charged in the year
Expenses deferred to future periods
Total
2024
2023
2024
2023
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cash award \u2013 not deferred
140
140
\u2014
140
140
\u2013 deferred
8
7
14
12
22
19
Shares award \u2013 not deferred
9
8
\u2014
9
8
\u2013 deferred
7
7
13
11
20
18
Total discretionary bonus
164
162
27
23
191
185
Other share-based payments consist of options granted under the Employee Sharesave scheme which comprise the Santander UK group\u2019s cash-settled share-based
payments. For more, see Note 35.
The average number of full-time equivalent staff in the year is set out in Note 2. For the Company, the average number of full-time equivalent staff was 18,378
(2023: 18,631, 2022: 16,830).
Depreciation, amortisation and impairment
In 2024, depreciation, amortisation and impairment included depreciation of \u00a375m (2023: \u00a364m, 2022: \u00a373m) on operating lease assets (where the Santander UK
group is the lessor) with a carrying amount of \u00a3574m at 31 December 2024 (2023: \u00a3488m, 2022: \u00a3577m). It also included depreciation of \u00a318m (2023: \u00a330m,
2022: \u00a319m) on right-of-use assets with a carrying amount of \u00a379m at 31 December 2024 (2023: \u00a390m, 2022: \u00a3112m).
Other administration expenses includes \u00a318m (2023: \u00a319m, 2022: \u00a321m) related to short-term leases.
In 2024, depreciation, amortisation and impairment included an impairment charge of \u00a3nil (2023: \u00a325m, 2022: \u00a310m) associated with branch and head office site
closures as part of our transformation. For more, see Note 20.
For the Company, in 2024 impairment associated with branch and head office site closures as part of our transformation was \u00a3nil\u00a0 (2023: \u00a325m, 2022: \u00a310m).
", "dimensions": { "concept": "ifrs-full:DisclosureOfExpensesByNatureExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-574": { "value": "
6. OPERATING EXPENSES BEFORE CREDIT IMPAIRMENT CHARGES, PROVISIONS AND CHARGES
For the year ended 31 December
Group
Company
2024
2023
2022
2024
2023
2022
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Staff costs:
Wages and salaries
866
839
745
813
787
683
Performance-related payments
164
162
170
159
156
160
Social security costs
122
115
112
116
109
102
Pensions costs: \u2013 defined contribution plans
79
71
60
74
67
54
\u2013 defined benefit plans
13
13
28
13
12
25
Other personnel costs
33
41
44
32
40
42
1,277
1,241
1,159
1,207
1,171
1,066
Other administration expenses
971
925
888
937
890
882
Depreciation, amortisation and impairment
300
290
296
238
220
219
2,548
2,456
2,343
2,382
2,281
2,167
Staff costs
Performance-related payments include bonuses paid in cash and share awards granted under the arrangements described in Note 35. Included in this are equity-
settled share-based payments, none of which related to option-based schemes. These are disclosed in the table below as \u2018Shares awards\u2019. Performance-related
payments above include amounts related to deferred performance awards as follows:
Costs recognised in 2024
Costs expected to be recognised in 2025 or later
Arising from
awards in
current year
Arising from
awards in prior
year
Total
Arising from
awards in
current year
Arising from
awards in prior
year
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cash
3
5
8
7
7
14
Shares
2
5
7
6
7
13
5
10
15
13
14
27
The following table shows the amount of bonus awarded to employees for the performance year 2024. In the case of deferred cash and shares awards, the final
amount paid to an employee is influenced by forfeiture provisions and any performance conditions to which the awards are subject. The deferred shares award
amount is based on the fair value of the awards at the date of grant.
Expenses charged in the year
Expenses deferred to future periods
Total
2024
2023
2024
2023
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cash award \u2013 not deferred
140
140
\u2014
140
140
\u2013 deferred
8
7
14
12
22
19
Shares award \u2013 not deferred
9
8
\u2014
9
8
\u2013 deferred
7
7
13
11
20
18
Total discretionary bonus
164
162
27
23
191
185
Other share-based payments consist of options granted under the Employee Sharesave scheme which comprise the Santander UK group\u2019s cash-settled share-based
payments. For more, see Note 35.
The average number of full-time equivalent staff in the year is set out in Note 2. For the Company, the average number of full-time equivalent staff was 18,378
(2023: 18,631, 2022: 16,830).
Depreciation, amortisation and impairment
In 2024, depreciation, amortisation and impairment included depreciation of \u00a375m (2023: \u00a364m, 2022: \u00a373m) on operating lease assets (where the Santander UK
group is the lessor) with a carrying amount of \u00a3574m at 31 December 2024 (2023: \u00a3488m, 2022: \u00a3577m). It also included depreciation of \u00a318m (2023: \u00a330m,
2022: \u00a319m) on right-of-use assets with a carrying amount of \u00a379m at 31 December 2024 (2023: \u00a390m, 2022: \u00a3112m).
Other administration expenses includes \u00a318m (2023: \u00a319m, 2022: \u00a321m) related to short-term leases.
In 2024, depreciation, amortisation and impairment included an impairment charge of \u00a3nil (2023: \u00a325m, 2022: \u00a310m) associated with branch and head office site
closures as part of our transformation. For more, see Note 20.
For the Company, in 2024 impairment associated with branch and head office site closures as part of our transformation was \u00a3nil\u00a0 (2023: \u00a325m, 2022: \u00a310m).
", "dimensions": { "concept": "ifrs-full:DisclosureOfExpensesExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-579": { "value": "
For the year ended 31 December
Group
Company
2024
2023
2022
2024
2023
2022
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Staff costs:
Wages and salaries
866
839
745
813
787
683
Performance-related payments
164
162
170
159
156
160
Social security costs
122
115
112
116
109
102
Pensions costs: \u2013 defined contribution plans
79
71
60
74
67
54
\u2013 defined benefit plans
13
13
28
13
12
25
Other personnel costs
33
41
44
32
40
42
1,277
1,241
1,159
1,207
1,171
1,066
Other administration expenses
971
925
888
937
890
882
Depreciation, amortisation and impairment
300
290
296
238
220
219
2,548
2,456
2,343
2,382
2,281
2,167
Other administration expenses includes \u00a318m (2023: \u00a319m, 2022: \u00a321m) related to short-term leases.
", "dimensions": { "concept": "ifrs-full:DisclosureOfGeneralAndAdministrativeExpenseExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-578": { "value": "
For the year ended 31 December
Group
Company
2024
2023
2022
2024
2023
2022
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Staff costs:
Wages and salaries
866
839
745
813
787
683
Performance-related payments
164
162
170
159
156
160
Social security costs
122
115
112
116
109
102
Pensions costs: \u2013 defined contribution plans
79
71
60
74
67
54
\u2013 defined benefit plans
13
13
28
13
12
25
Other personnel costs
33
41
44
32
40
42
1,277
1,241
1,159
1,207
1,171
1,066
Other administration expenses
971
925
888
937
890
882
Depreciation, amortisation and impairment
300
290
296
238
220
219
2,548
2,456
2,343
2,382
2,281
2,167
28. RETIREMENT BENEFIT PLANS
The amounts recognised in the balance sheet were as follows:
Group and Company
2024
2023
\u00a3m
\u00a3m
Assets/(liabilities)
Funded defined benefit pension scheme - surplus
439
723
Funded defined benefit pension scheme - deficit
\u2014
(41)
Unfunded pension and post-retirement medical benefits
(23)
(25)
Total net assets
416
657
a) Defined contribution pension plans
The majority of employees are members of a defined contribution Master Trust, LifeSight. This is the plan into which eligible employees are enrolled automatically.
The assets of LifeSight are held in separate trustee-administered funds. Funds arising from Additional Voluntary Contributions (AVCs) are largely held within the
main defined benefit scheme operated by the Santander UK group.
An expense of \u00a379m (2023: \u00a371m) was recognised for defined contribution plans in the year and is included in staff costs within operating expenses (see Note 6).
b) Defined benefit pension schemes
The Santander UK group operates a number of defined benefit pension schemes. The main scheme is the Santander (UK) Group Pension Scheme (the Scheme). It
comprises seven legally segregated sections. The Scheme covers 6% (2023: 7%) of the Santander UK group\u2019s current employees and is a funded defined benefit
scheme which is closed to new members. Members accrue final salary benefits for each year of service in the Scheme, according to a salary definition which varies
across the sections.
The corporate trustee of the Scheme is Santander (UK) Group Pension Scheme Trustees Limited (the Trustee), a private limited company incorporated in 1996 and a
wholly owned subsidiary of Santander UK Group Holdings plc. The principal duty of the Trustee is to act in the best interests of the members of the Scheme. The
Trustee board comprises six (2023: six) Directors selected by Santander UK Group Holdings plc, plus four (2023: four) member-nominated Directors selected from
eligible members who apply for the role.
The assets of the Scheme are held independently of the Santander UK group\u2019s assets in separate trustee administered funds. Investment strategy across the
sections of the Scheme remains under regular review. Responsibility for investment decisions, policy and strategy rests with the Trustee of the Scheme who is
required under the Pensions Act 2004 to prepare a statement of investment principles. The defined benefit pension schemes expose the Santander UK group to
risks\u00a0such as investment risk, interest rate risk, longevity risk and inflation risk. The Santander UK group does not hold any insurance policies over the defined benefit
pension schemes and has not entered into any significant transactions with them.
For IAS 19, an accounting valuation of the assets and liabilities of the defined benefits schemes is prepared at each balance sheet date. For funding purposes,
formal\u00a0actuarial valuations are carried out on at least a triennial basis. Both valuations are carried out by independent professionally qualified actuaries. The Scheme
Trustee is responsible for the funding actuarial valuations and in doing so considers, or relies in part on, a report of a third-party expert. The latest triennial funding
valuation for the Scheme at 31 March 2022 was finalised in November 2022, with an overall scheme deficit of \u00a3183m. The next scheduled triennial funding
valuation will be at 31 March 2025. Any funding surpluses can be recovered by Santander UK plc from the Scheme through refunds as the Scheme is run off over
time or could be used to pay for the cost of benefits which are accruing.
The main differences between the assumptions used for assessing the defined benefit liabilities for the funding valuation and those used for IAS 19 are that the
financial and demographic assumptions used for the funding valuation are generally more prudent than those used for the IAS 19 valuation.
The total amount (credited) / charged to the income statement was as follows:
Group
2024
2023
2022
\u00a3m
\u00a3m
\u00a3m
Net interest income
(34)
(54)
(30)
Current service cost
13
13
30
Past service and GMP costs
\u2014
1
\u2014
Administration costs
9
7
9
(12)
(33)
9
The amounts recognised in other comprehensive income were as follows:
Group
2024
2023
2022
\u00a3m
\u00a3m
\u00a3m
Return on plan assets (excluding amounts included in net interest expense)
1,217
352
5,527
Actuarial gains arising from changes in demographic assumptions
(113)
(51)
(122)
Actuarial losses arising from experience adjustments
84
91
481
Actuarial (gains)/losses arising from changes in financial assumptions
(786)
206
(5,164)
402
598
722
Movements in the present value of defined benefit scheme obligations were as follows:
Group and Company
2024
2023
\u00a3m
\u00a3m
At 1 January
(8,201)
(7,933)
Current service cost paid by Santander UK plc
(13)
(13)
Interest cost
(371)
(379)
Employer salary sacrifice contributions
(4)
(1)
Past service cost
\u2014
(1)
Remeasurement due to actuarial movements arising from:
\u2013 Changes in demographic assumptions
113
51
\u2013 Experience adjustments
(84)
(91)
\u2013 Changes in financial assumptions
786
(206)
Benefits paid
394
372
At 31 December
(7,380)
(8,201)
Movements in the fair value of the schemes\u2019 assets were as follows:
Group and Company
2024
2023
\u00a3m
\u00a3m
At 1 January
8,858
8,958
Interest income
405
433
Contributions paid by employer and scheme members
153
198
Administration costs paid
(9)
(7)
Return on plan assets (excluding amounts included in net interest expense)
(1,217)
(352)
Benefits paid
(394)
(372)
At 31 December
7,796
8,858
The composition and fair value of the schemes\u2019 assets by category was:
Group and Company
Quoted prices in active markets
Prices not quoted in active markets
Total
Valuation
2024
\u00a3m
%
\u00a3m
%
\u00a3m
%
technique
Overseas equities
\u2014
\u2014
776
10
776
10
A,C
Corporate bonds
2,511
33
186
2
2,697
35
A,C
Government fixed interest bonds
1,348
17
\u2014
\u2014
1,348
17
A
Government index-linked bonds
4,444
58
\u2014
\u2014
4,444
58
A
Property
\u2014
\u2014
1,073
14
1,073
14
B
Derivatives
\u2014
\u2014
(18)
\u2014
(18)
\u2014
A
Cash
\u2014
\u2014
341
4
341
4
A
Repurchase agreements(1)
\u2014
\u2014
(3,328)
(43)
(3,328)
(43)
A
Infrastructure
\u2014
\u2014
112
1
112
1
B,C
Annuities
\u2014
\u2014
267
3
267
3
D
Longevity swap
\u2014
\u2014
(83)
(1)
(83)
(1)
D
Other
\u2014
\u2014
167
2
167
2
C
8,303
108
(507)
(8)
7,796
100
2023
Overseas equities
\u2014
\u2014
980
11
980
11
A,C
Corporate bonds
2,284
26
242
3
2,526
29
A,C
Government fixed interest bonds
1,618
18
\u2014
\u2014
1,618
18
A
Government index-linked bonds
4,422
50
\u2014
\u2014
4,422
50
A
Property
\u2014
\u2014
1,080
12
1,080
12
B
Derivatives
\u2014
\u2014
(2)
\u2014
(2)
\u2014
A
Cash
\u2014
\u2014
586
7
586
7
A
Repurchase agreements(1)
\u2014
\u2014
(3,062)
(35)
(3,062)
(35)
A
Infrastructure
\u2014
\u2014
408
5
408
5
B,C
Annuities
\u2014
\u2014
293
3
293
3
D
Longevity swap
\u2014
\u2014
(16)
\u2014
(16)
\u2014
D
Other
\u2014
\u2014
25
\u2014
25
\u2014
C
8,324
94
534
6
8,858
100
(1) Sale and repurchase agreements net of purchase and resale agreements.
Valuation techniques
The main methods for measuring the fair value of the Scheme\u2019s assets at 31 December 2024 and 2023 are set out below.
A. The asset valuation is provided by the asset manager. The valuation is based on observable market data, and where relevant is typically based on bid price values,
or the single price if only one price is available.
B. The underlying asset valuations are prepared by an independent expert, adjusted for any cash movements where necessary since the latest valuation.
C. Assets are valued by reference to the latest manager statements provided by the managers, adjusted for any cash movements since the latest valuation.
D. Assets relating to insured liabilities are valued by the actuaries based on our year-end accounting assumptions.
The 'Other' category includes cash receivables in 2025 from secondary market sales in 2024.
A number of insurance transactions have been entered into that have been included in the asset valuation under annuities and Longevity swap. The transactions
were as follows:
\u2013 In May 2020 a pensioner buy-in was entered into by the Trustee. This transaction insured 100% of the SMA section pensioner liabilities and 50% of the SPI
section pensioner liabilities based on membership in the Scheme at 31 December 2018.
\u2013 In March 2021, the Trustee entered into a longevity swap. Approximately 85%of pensioner liabilities were covered by the longevity swap at inception, excluding
pensioners in the SMA and SPI sections.
\u2013 In 2022, a pensioner buy-in was entered into by the Trustee covering pensioners in the SMA and SPI sections who were uninsured at 30 June 2021.
\u2013 In July 2022, the Trustee entered into a second longevity swap, extending the insurance over uninsured pensioners in the same membership groups covered by
the first swap transacted in March 2021, based on membership in the Scheme at 31 December 2021.
At 31 December 2024 and 2023, as highlighted above, the Scheme was invested in certain assets whose values are not based on market observable data, such as
the investments in unquoted equities and bonds, as well as property and infrastructure. The valuation of these assets relies on unobservable data as these assets do
not have a readily available quoted price in an active market. A large proportion of the property is directly held and valued using a bespoke valuation method taking
both the nature of the properties and the tenancy schedules as inputs to derive the fair value. Where there is a time lag between the net asset value and the balance
sheet date, management adjusts the value of the assets for any cash movements. Due diligence has been conducted to ensure the values obtained in respect of
these assets are appropriate and represent fair value. Given the nature of these investments, we are unable to prepare sensitivities on how their values could vary
as market conditions or other variables change.
A strategy is in place to manage interest rate and inflation risk relating to the liabilities. The Scheme also hedges a proportion of its foreign exchange exposure to
manage currency risk. At 31 December 2024 the currency forwards had a notional value of \u00a3709m (2023: \u00a3859m). In 2024, we increased our allocation to
corporate bonds and reduced our investments in infrastructure and private equity.
The Santander UK group\u2019s pension schemes did not directly hold any equity securities of the Company or any of its related parties at 31 December 2024 and 2023.
The Santander UK group\u2019s pension scheme assets do not include any property or other assets that are occupied or used by the Santander UK group.
Funding
In November 2022, in compliance with the Pensions Act 2004, the Trustee and the Santander UK group agreed to a new recovery plan in respect of the Scheme and
a schedule of contributions following the finalisation of the 31 March 2022 actuarial valuation. The funding target for this actuarial valuation is for the Scheme to
have sufficient assets to make payments to members in respect of the accrued benefits as and when they fall due. In accordance with the terms of the Trustee
agreement in place at the time, the Santander UK group contributed \u00a3150m in 2024 (2023: \u00a3195m) to the Scheme, of which \u00a3119m (2023: \u00a3164m) was in respect
of agreed deficit repair contributions. The agreed schedule of the Santander UK group\u2019s contributions to the Scheme covers the period up to 31\u00a0March 2026, and
comprises contingent contributions which become due if the funding position of any section falls behind the agreed plan. The Santander UK group also meets
Scheme administration expenses. The funding valuation is used to judge the amount of cash contributions the Santander UK group needs to put into the pension
scheme. It will always be different to the IAS 19 accounting position, which is an accounting rule concerning employee benefits and shown on the balance sheet of
our financial statements.
Actuarial assumptions
The principal actuarial assumptions used for the Scheme were:
Group and Company
2024
2023
2022
%
%
%
To determine benefit obligations(1) :
\u2013 Discount rate for scheme liabilities
5.5
4.6
4.9
\u2013 General price inflation
3.1
3.0
3.1
\u2013 General salary increase
1.0
1.0
1.0
\u2013 Expected rate of pension increase
3.0
3.0
3.0
Years
Years
Years
Longevity at 60 for current pensioners, on the valuation date:
\u2013 Males
26.9
27.0
27.4
\u2013 Females
29.8
29.8
30.1
Longevity at 60 for future pensioners currently aged 40, on the valuation date:
\u2013 Males
28.5
28.6
28.9
\u2013 Females
31.3
31.3
31.6
(1) The discount rate and inflation related assumptions set out in the table above reflect the assumptions calculated based on the Scheme\u2019s duration and cash flow profile as a whole. The actual assumptions used
were determined for each section independently based on each section\u2019s duration and cash flow profile.
The majority of the liability movement in 2024 was due to increased fixed interest gilt yields.
Discount rate for scheme liabilities
The rate used to discount the retirement benefit obligation for accounting purposes is based on the annual yield at the balance sheet date of high-quality corporate
bonds on that date. There are only a limited number of higher quality Sterling-denominated corporate bonds, particularly those that are longer-dated. Therefore, in
order to set a suitable discount rate, we need to construct a corporate bond yield curve. The model which we use to construct the curve uses corporate bond data
but excludes convertible bonds, asset-backed bonds and government related bonds. The curve is then constructed from this data by extrapolating the spot rates
from 30 years to 50 years by holding the spread above nominal gilt spot rates constant. From 50 years onwards, it is assumed that spot rates remain constant.
When considering an appropriate assumption, we project forward the expected cash flows of each section of the Scheme and adopt a single equivalent cash flow
weighted discount rate for each section, subject to management judgement.
In 2024, we adopted a new version of the model that we currently use to set the discount rate. The updated model is based on an expanded data set which
improves the stability of the model.
General price inflation
Consistent with our discount rate methodology, we set the inflation assumption using the expected cash flows for each section of the Scheme, fitting them to an
inflation curve to give a weighted average inflation assumption. We then deduct an inflation risk premium to reflect the compensation holders of fixed rate
instruments expect to receive for taking on the inflation risk. This premium is subject to a cap, to better reflect management\u2019s view of inflation expectations.
General salary increase
From 1 March 2015, a cap on pensionable pay increases of 1% each year was applied to staff in the Scheme.
Expected rate of pension increase
The pension increase assumption methodology uses a stochastic model, which is calibrated to consider both the observed historical volatility term structure and
derivative pricing. The model allows for the likelihood that high or low inflation in one year, feeds into inflation remaining high or low in the next year.
Mortality assumptions
The mortality assumptions are based on an independent analysis of the Scheme\u2019s actual mortality experience, carried out as part of the triennial actuarial valuation,
together with recent evidence from the Continuous Mortality Investigation. An allowance is then made for expected future improvements to life expectancy based
on the Continuous Mortality Investigation Tables. Following this review the S3 Medium all pensioner mortality table was adopted with appropriate adjustments to
reflect the actual mortality experience. At 31 December 2024 the assumption for future improvements was updated and the CMI 2023 projection model adopted,
with an initial addition to improvements of 0.25% per annum, and a long-term rate of future improvements to life expectancy of 1.25% for male and female
members.
In 2022, the methodology for setting the demographic assumptions was changed to better represent current expectations, following a review carried out by the
Trustee as part of the 2022 triennial valuation. This review resulted in changes in the assumptions for family statistics, early retirement and the withdrawal
assumption, which were retained at 31 December 2024.
Actuarial assumption sensitivities
The sensitivity analyses below have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting
period, while holding all other assumptions constant.
Group and Company
(Decrease)/increase
2024
2023
Assumption
Change in pension obligation at period end from
\u00a3m
\u00a3m
Discount rate
50bps increase
(413)
(507)
General price inflation
50bps increase
316
385
Mortality
Each additional year of longevity assumed
190
223
The 50bps sensitivity to the inflation assumption includes the corresponding impact of changes in future pension increase assumptions before and after retirement.
The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the changes in
assumptions would occur in isolation of one another as some of the assumptions may be correlated. Furthermore, in presenting the sensitivity analysis, the present
value of the defined benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same method used
to calculate the defined benefit obligation recognised in the balance sheet. There were no changes in the methods and assumptions used in preparing the sensitivity
analyses from prior years.
The benefits expected to be paid in each of the next five years, and in the aggregate for the five years thereafter are:
Year ending 31 December
\u00a3m
2025
478
2026
405
2027
424
2028
444
2029
463
Five years ending 2034
2,438
The average duration of the defined benefit obligation at 31 December 2024 was 12.7 years (2023: 13.8 years).
Emerging risks
In 2024, we focused on the risks arising from the Scheme\u2019s private market assets, rising interest rates and cybersecurity risk. The Santander UK group collaborated
with the Trustee to identify and monitor such risks to ensure they are adequately managed. The Trustee has an independent cybersecurity advisor to review the
cybersecurity arrangements of its most critical suppliers and provide recommendations on potential improvements.
The Trustee Sustainability Committee is responsible for overseeing the Scheme\u2019s policies, regulatory obligations and priorities in respect of climate change and
wider Environmental, Social and Governance (ESG) related matters. This includes the monitoring of climate related risks and opportunities, scenario analysis and
monitoring of investments from an ESG perspective.
The Santander UK group's employee pension funds recognise the magnitude of the challenges that climate and energy transition pose to governments, companies
and civil society. They are also aware of their impact on the ability to comply with their fiduciary duty providing long-term risk-adjusted returns to their members.
They have an ambition to achieve net zero by 2050, showing their full support for Banco Santander's vision and ambition to be a responsible and sustainable bank.
", "dimensions": { "concept": "ifrs-full:DisclosureOfEmployeeBenefitsExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-577": { "value": "
For the year ended 31 December
Group
Company
2024
2023
2022
2024
2023
2022
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Staff costs:
Wages and salaries
866
839
745
813
787
683
Performance-related payments
164
162
170
159
156
160
Social security costs
122
115
112
116
109
102
Pensions costs: \u2013 defined contribution plans
79
71
60
74
67
54
\u2013 defined benefit plans
13
13
28
13
12
25
Other personnel costs
33
41
44
32
40
42
1,277
1,241
1,159
1,207
1,171
1,066
Other administration expenses
971
925
888
937
890
882
Depreciation, amortisation and impairment
300
290
296
238
220
219
2,548
2,456
2,343
2,382
2,281
2,167
Depreciation, amortisation and impairment
In 2024, depreciation, amortisation and impairment included depreciation of \u00a375m (2023: \u00a364m, 2022: \u00a373m) on operating lease assets (where the Santander UK
group is the lessor) with a carrying amount of \u00a3574m at 31 December 2024 (2023: \u00a3488m, 2022: \u00a3577m). It also included depreciation of \u00a318m (2023: \u00a330m,
2022: \u00a319m) on right-of-use assets with a carrying amount of \u00a379m at 31 December 2024 (2023: \u00a390m, 2022: \u00a3112m).
b) Other intangibles
Group
Company
Cost
Accumulated
amortisation /
impairment
Carrying
amount
Cost
Accumulated
amortisation /
impairment
Carrying
amount
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2024
1,339
(990)
349
1,382
(1,047)
335
Additions
120
\u2014
120
116
\u2014
116
Disposals
(703)
700
(3)
(703)
700
(3)
Charge
\u2014
(126)
(126)
\u2014
(119)
(119)
At 31 December 2024
756
(416)
340
795
(466)
329
At 1 January 2023
1,261
(910)
351
1,309
(970)
339
Additions
114
\u2014
114
109
\u2014
109
Disposals
(36)
36
\u2014
(36)
36
\u2014
Charge
\u2014
(116)
(116)
\u2014
(113)
(113)
At 31 December 2023
1,339
(990)
349
1,382
(1,047)
335
Group
Property
Office fixtures and
equipment
Computer software
Operating lease
assets
Right-of-use assets
Total(1)
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cost:
At 1 January 2024
918
877
67
635
263
2,760
Additions
35
47
\u2014
304
21
407
Disposals
(20)
(41)
(60)
(223)
(14)
(358)
Other
8
9
\u2014
\u2014
\u2014
17
At 31 December 2024
941
892
7
716
270
2,826
Accumulated depreciation:
At 1 January 2024
226
653
67
147
173
1,266
Charge for the year
21
60
\u2014
75
18
174
Impairment during the year
(5)
(3)
\u2014
\u2014
\u2014
(8)
Disposals
(11)
(33)
(60)
(80)
\u2014
(184)
Other
7
8
\u2014
\u2014
\u2014
15
At 31 December 2024
238
685
7
142
191
1,263
Carrying amount
703
207
\u2014
574
79
1,563
Cost:
At 1 January 2023
889
823
72
722
267
2,773
Additions
87
83
\u2014
85
31
286
Reclassification from assets held for sale
8
\u2014
\u2014
\u2014
\u2014
8
Disposals
(66)
(29)
(5)
(172)
(35)
(307)
At 31 December 2023
918
877
67
635
263
2,760
Accumulated depreciation:
At 1 January 2023
270
618
72
145
155
1,260
Charge for the year
17
62
\u2014
64
30
173
Impairment during the year
\u2014
\u2014
\u2014
\u2014
(11)
(11)
Disposals
(61)
(27)
(5)
(62)
(1)
(156)
At 31 December 2023
226
653
67
147
173
1,266
Carrying amount
692
224
\u2014
488
90
1,494
", "dimensions": { "concept": "ifrs-full:DisclosureOfDepreciationAndAmortisationExpenseExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-576": { "value": "
For the year ended 31 December
Group
Company
2024
2023
2022
2024
2023
2022
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Staff costs:
Wages and salaries
866
839
745
813
787
683
Performance-related payments
164
162
170
159
156
160
Social security costs
122
115
112
116
109
102
Pensions costs: \u2013 defined contribution plans
79
71
60
74
67
54
\u2013 defined benefit plans
13
13
28
13
12
25
Other personnel costs
33
41
44
32
40
42
1,277
1,241
1,159
1,207
1,171
1,066
Other administration expenses
971
925
888
937
890
882
Depreciation, amortisation and impairment
300
290
296
238
220
219
2,548
2,456
2,343
2,382
2,281
2,167
In 2024, depreciation, amortisation and impairment included an impairment charge of \u00a3nil (2023: \u00a325m, 2022: \u00a310m) associated with branch and head office site
closures as part of our transformation. For more, see Note 20.
For the Company, in 2024 impairment associated with branch and head office site closures as part of our transformation was \u00a3nil\u00a0 (2023: \u00a325m, 2022: \u00a310m).
Impairment of goodwill
In 2024 and 2023 for the Santander UK group, no impairment of goodwill was recognised. Goodwill is tested for impairment annually, or more frequently, if
reviews identify an impairment indicator or when events or changes in circumstances dictate. Goodwill is tested for impairment annually at 31 December, with a
review for impairment indicators at 30 June.
For the Company, an impairment of \u00a321m was recognised in 2024.
The annual review identified that the uncertain macroeconomic and geopolitical environment increases the risk around the UK economic trajectory, and its potential
impact on the carrying value of goodwill as impairment indicators for all cash-generating units (CGUs). As a result, management updated the impairment test at 31
December 2024 for all CGUs.
Basis of the recoverable amount
The recoverable amount of all CGUs was determined based on its value in use (VIU) methodology at each testing date. For each CGU, the VIU is calculated by
discounting management\u2019s cash flow projections for the CGU. The cash flow projections also take account of increased internal capital allocations needed to achieve
internal and regulatory capital targets including the leverage ratio. The key assumptions used in the VIU calculation for each CGU are set out below. The Retail &
Business Banking segment consists of the Private Banking CGU and the rest of Retail & Business Banking, known as the Personal Financial Services CGU.
Carrying amount of Goodwill by CGU and key assumptions in the VIU calculation
Goodwill
Discount rate
Growth rate beyond initial cash
flow projections
2024
2023
2024
2023
2024
2023
CGU
\u00a3m
\u00a3m
%
%
%
%
Personal Financial Services
1,169
1,169
12.1
12.2
1.5
1.6
Private Banking
30
30
10.0
9.8
1.5
1.6
1,199
1,199
The CGUs do not carry on their balance sheets any other intangible assets with indefinite useful lives.
Management\u2019s judgement in estimating the cash flows of a CGU
The cash flow projections for the purpose of impairment testing for each CGU are derived from the latest 3-year plan presented to the Board. The Board challenges
and endorses management\u2019s planning assumptions in light of internal capital allocations needed to support Santander UK\u2019s strategy, current market conditions
and\u00a0the macroeconomic outlook. For the goodwill impairment tests conducted at 31 December 2024, the determination of the carrying amount of the Personal
Financial Services CGU was based on an allocation of regulatory capital and management\u2019s cash flow projections until the end of 2027. The assumptions included
in\u00a0the cash flow projections reflect an allocation to the cost of capital to support future growth, as well as the expected impact of recent events in the UK economic
environment on the financial outlook within which the CGUs operate. The cash flow projections are supported by Santander UK\u2019s base case economic scenario. For
more on the base case economic scenario, including our forecasting approach and the assumptions in place at 31 December 2024, see the Credit risk \u2013 Santander
UK group level section of the Risk review. The cash flow projections take into account the likely impact of recent changes to the BoE Bank Rate, inflation and also
consider the impact of future climate change.
Cash flow projections for the purpose of impairment testing do not take account of any adverse outcomes arising from contingent liabilities (see Note 30), whose
existence will be confirmed by uncertain future events or where any obligation is not probable or otherwise cannot be measured reliably, nor do they take account
of the benefits arising from Santander UK\u2019s transformation plans that had not yet been implemented or committed at 31 December 2024.
Discount rate
The rate used to discount the cash flows is based on the cost of equity assigned to each CGU, which is derived using a capital asset pricing model (CAPM) and
calculated on a post-tax basis. The CAPM depends on a number of inputs reflecting financial and economic variables, including the risk-free rate and a premium
to\u00a0reflect the inherent risk of the business being evaluated. These variables are based on the market\u2019s assessment of the economic variables and management\u2019s
judgement. The inputs to the CAPM are observable on a post-tax basis. In determining the discount rate, management has identified the cost of equity associated
with market participants that closely resemble our CGUs and adjusted them for tax to arrive at the pre-tax equivalent rate. The pre-tax equivalent rate applicable to
the Personal Financial Services CGU was 16.5% (2023: 16.7%) and Private Banking CGU was 15.1% (2023: 14.6%). The Private Banking CGU has a different discount
rate compared to the Personal Financial Services CGU because different market participants closely resemble each CGU.\u00a0
Growth rate beyond initial cash flow projections
The growth rate for periods beyond the initial cash flow projections is used to extrapolate the cash flows in perpetuity because of the long-term perspective of
CGUs. In line with the accounting requirements, management uses the UK Government\u2019s official estimate of UK long-term average GDP growth rate, as this is lower
than management's estimate of the long-term average growth rate of the business. The estimated UK long-term average GDP growth rate has regard to the long-
term impact of inherent uncertainties, such as elevated wage growth, weak productivity, large government debt burden and fragile business and consumer
confidence.
Goodwill arising on the acquisition of Personal Financial Services and Private Banking
The VIU of each CGU remains higher than the carrying value of the related goodwill. The VIU review at 31 December 2024 did not indicate the need for an
impairment in the Company\u2019s goodwill balances. Management considered the level of headroom and the uncertainty relating to the respective estimates of the VIU
for those CGUs but determined that there was a sufficient basis to conclude that no impairment was required.
Sensitivities of key assumptions in calculating the value in use
At 31 December 2024 and 31 December 2023, the VIU of the Personal Financial Services CGU was sensitive to reasonably possible changes in the key assumptions
supporting the recoverable amount.
The table below presents a summary of the key assumptions underlying the most sensitive inputs to the model for the Personal Financial Services CGU, the main
risks associated with each and details of a reasonably possible change in assumptions, such as a decrease in mortgage new business. The sensitivity analysis
presented below has been prepared on the basis that a change in each key assumption would not have a consequential impact on other assumptions used in the
impairment review. However, due to the interrelationships between some of the assumptions, a change in one of the assumptions might impact one or more of the
other assumptions and could result in a larger or smaller overall impact.
Reasonably possible changes in key assumptions
CGU
Input
Key assumptions
Associated risks
Reasonably possible change
Personal Financial
Services
Cash flow projections
\u2013 BoE Bank Rate
\u2013 UK house price growth
\u2013 UK mortgage loan market growth
\u2013 UK unemployment rate
\u2013 Position in the market
\u2013 Regulatory capital levels.
\u2013 Uncertain market outlook
\u2013 Higher interest rate environment impact
on customer affordability
\u2013 Customer remediation and regulatory
action outcomes
\u2013 Uncertain regulatory capital requirements.
\u2013 Cash flow projections
decrease by 10% ( 2023 :
10% ) .
Discount rate
\u2013 Discount rate used is a reasonable
estimate of a suitable market rate
for the profile of the business.
\u2013 Market rates of interest rise.
\u2013 Discount rate increases by
100 basis points ( 2023 :
increased by 100 basis
points ) .
At 31 December 2024 and 31 December 2023, a reasonably possible change in the key assumptions in relation to the VIU calculation for the goodwill balance in the
Personal Financial Services CGU would have resulted in a decrease/increase in headroom as follows.\u00a0
Decrease in headroom
2024
2023
CGU
Reasonably possible change
\u00a3m
\u00a3m
Personal Financial Services
Cash flow projections decrease by 10% ( 2023 : 10% )
764
818
Discount rate increases by 100 basis points ( 2023 : increased by 100 basis points )
622
663
Sensitivity of Value in use changes to current assumptions to achieve \u00a3nil headroom
Although there was no impairment of goodwill relating to the Personal Financial Services CGU or the Private Banking CGU at 31 December 2024, the test for the
Personal Financial Services CGU remains sensitive to some of the assumptions used, as described above. In addition, the changes in assumptions detailed below for
the discount rate and cash flow projections would eliminate the current headroom. As a result, there is a risk of impairment in the future should business
performance or economic factors diverge from forecasts.
In 2024, there was a decrease in headroom arising from a decline in cash flow forecasts, partially offset by a decrease to RWAs which led to a reduction in the
required CET1 capital requirement.
The sensitivity analysis presented below has been prepared on the basis that a change in each key assumption would not have a consequential impact on other
assumptions used in the impairment review. However, due to the interrelationships between some of the assumptions, a change in one of the assumptions might
impact one or more of the other assumptions and could result in a larger or smaller overall impact.
2024
Carrying value
Value in use
Headroom
Increase in
discount rate
Decrease in
cash flows
CGU
\u00a3m
\u00a3m
\u00a3m
bps
%
Personal Financial Services
7,294
7,639
345
53
5
2023
Personal Financial Services
7,513
8,178
665
101
8
b) Other intangibles
Group
Company
Cost
Accumulated
amortisation /
impairment
Carrying
amount
Cost
Accumulated
amortisation /
impairment
Carrying
amount
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2024
1,339
(990)
349
1,382
(1,047)
335
Additions
120
\u2014
120
116
\u2014
116
Disposals
(703)
700
(3)
(703)
700
(3)
Charge
\u2014
(126)
(126)
\u2014
(119)
(119)
At 31 December 2024
756
(416)
340
795
(466)
329
At 1 January 2023
1,261
(910)
351
1,309
(970)
339
Additions
114
\u2014
114
109
\u2014
109
Disposals
(36)
36
\u2014
(36)
36
\u2014
Charge
\u2014
(116)
(116)
\u2014
(113)
(113)
At 31 December 2023
1,339
(990)
349
1,382
(1,047)
335
The impairment charge of \u00a35m (2023: \u00a3nil) relates to computer software no longer expected to yield future economic benefits. For the Company, the impairment
charge of \u00a33m (2023: \u00a3nil) relates to computer software no longer expected to yield future economic benefits.
Group
Property
Office fixtures and
equipment
Computer software
Operating lease
assets
Right-of-use assets
Total(1)
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cost:
At 1 January 2024
918
877
67
635
263
2,760
Additions
35
47
\u2014
304
21
407
Disposals
(20)
(41)
(60)
(223)
(14)
(358)
Other
8
9
\u2014
\u2014
\u2014
17
At 31 December 2024
941
892
7
716
270
2,826
Accumulated depreciation:
At 1 January 2024
226
653
67
147
173
1,266
Charge for the year
21
60
\u2014
75
18
174
Impairment during the year
(5)
(3)
\u2014
\u2014
\u2014
(8)
Disposals
(11)
(33)
(60)
(80)
\u2014
(184)
Other
7
8
\u2014
\u2014
\u2014
15
At 31 December 2024
238
685
7
142
191
1,263
Carrying amount
703
207
\u2014
574
79
1,563
Cost:
At 1 January 2023
889
823
72
722
267
2,773
Additions
87
83
\u2014
85
31
286
Reclassification from assets held for sale
8
\u2014
\u2014
\u2014
\u2014
8
Disposals
(66)
(29)
(5)
(172)
(35)
(307)
At 31 December 2023
918
877
67
635
263
2,760
Accumulated depreciation:
At 1 January 2023
270
618
72
145
155
1,260
Charge for the year
17
62
\u2014
64
30
173
Impairment during the year
\u2014
\u2014
\u2014
\u2014
(11)
(11)
Disposals
(61)
(27)
(5)
(62)
(1)
(156)
At 31 December 2023
226
653
67
147
173
1,266
Carrying amount
692
224
\u2014
488
90
1,494
(1) Property, plant and equipment includes investment properties of \u00a316m (2023: \u00a317m).
Company
Property
Office fixtures and
equipment
Computer software
Right-of-use assets
Total(1)
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cost:
At 1 January 2024
913
854
61
247
2,075
Additions
35
47
\u2014
20
102
Disposals
(20)
(41)
(60)
(13)
(134)
Other
3
9
\u2014
\u2014
12
At 31 December 2024
931
869
1
254
2,055
Accumulated depreciation:
At 1 January 2024
228
630
61
168
1,087
Charge for the year
21
60
\u2014
17
98
Impairment during the year
(5)
(3)
\u2014
\u2014
(8)
Disposals
(11)
(33)
(60)
\u2014
(104)
Other
1
8
\u2014
\u2014
9
At 31 December 2024
234
662
1
185
1,082
Carrying amount
697
207
\u2014
69
973
Cost:
At 1 January 2023
834
800
61
252
1,947
Additions
87
83
\u2014
29
199
Reclassification from assets held for sale
8
\u2014
\u2014
\u2014
8
Disposals
(16)
(29)
\u2014
(34)
(79)
At 31 December 2023
913
854
61
247
2,075
Accumulated depreciation:
At 1 January 2023
223
594
61
151
1,029
Charge for the year
17
62
\u2014
28
107
Impairment during the year
\u2014
\u2014
\u2014
(11)
(11)
Disposals
(12)
(26)
\u2014
\u2014
(38)
At 31 December 2023
228
630
61
168
1,087
Carrying amount
685
224
\u2014
79
988
(1) Property includes investment properties of \u00a316m (2023: \u00a317m).
In 2023, right-of-use assets were impaired as part of our transformation. The impairment relates to leasehold properties within the scope of our branch network
restructuring programme and head office sites which are either closing or consolidating.
", "dimensions": { "concept": "ifrs-full:DisclosureOfImpairmentOfAssetsExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-580": { "value": "
The average number of full-time equivalent staff in the year is set out in Note 2. For the Company, the average number of full-time equivalent staff was 18,378
(2023: 18,631, 2022: 16,830).
", "dimensions": { "concept": "ifrs-full:DisclosureOfInformationAboutEmployeesExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-581": { "value": "
7. AUDIT AND OTHER SERVICES
For the year ended 31 December
Group
2024
2023
2022
\u00a3m
\u00a3m
\u00a3m
Audit fees:
Fees payable to the Company\u2019s auditor and its associates for the audit of the Santander UK group\u2019s annual financial
statements
13.8
13.9
11.8
Fees payable to the Company\u2019s auditor and its associates for other services to the Santander UK group:
\u2013 Audit of the Santander UK group's subsidiaries
0.6
0.6
0.7
Total audit fees(1)
14.4
14.5
12.5
Non-audit fees:
Audit-related assurance services
0.6
0.7
0.6
Other assurance services
1.0
0.5
0.3
Other non-audit services
0.6
0.1
\u2014
Total non-audit fees
2.2
1.3
0.9
(1) 2024 audit fees included \u00a30.1m (2023: \u00a30.7m , 2022: \u00a30.6m) which related to the prior year.
Audit fees payable for the statutory audit of Santander UK plc were \u00a312.9m (2023: \u00a312.7m, 2022: \u00a310.9m).
Audit-related assurance services mainly comprised services performed in connection with review of the financial information of the Company and reporting to the
Company's UK regulators.
Other non-audit services mainly comprised services performed in support of various debt issuance programmes.
Of the total non-audit fees, \u00a30.2m (2023: \u00a30.3m, 2022: \u00a30.2m) accords with the definition of 'Audit Fees' per US Securities and Exchange Commission (SEC)
guidance, \u00a32.0m (2023: \u00a31.0m, 2022: \u00a30.7m) accords with the definition of 'Audit related fees' per that guidance and \u00a348,300 (2023: \u00a312,550, 2022: \u00a3nil) accords
with the definition of 'All other fees' per that guidance.
", "dimensions": { "concept": "ifrs-full:DisclosureOfAuditorsRemunerationExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-583": { "value": "
8. CREDIT IMPAIRMENT CHARGES AND PROVISIONS
For the year ended 31 December
Group
2024
2023
2022
\u00a3m
\u00a3m
\u00a3m
Credit impairment charges:
Loans and advances to customers
87
191
248
(Recoveries)/charges of loans and advances, net of collection costs
(23)
10
36
Off-balance sheet credit exposures (See Note 27)
7
4
36
71
205
320
Provisions for other liabilities and charges (excluding off-balance sheet credit exposures) (See Note 27)
687
334
422
Charge/(release) for residual value and voluntary termination
2
1
(3)
689
335
419
760
540
739
In 2024, 2023 and 2022 there were no material credit impairment charges on Loans and advances to banks, Non-trading reverse repurchase agreements, Other
financial assets at amortised cost and Financial assets at FVOCI.
27. PROVISIONS
Group
Customer
remediation
Litigation
and other
regulatory
Regulatory
levies and
fees
Bank Levy
Property
ECL on
undrawn
facilities and
guarantees
Restructuring
Other
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2024
106
132
\u2014
\u2014
47
78
32
7
402
Additional provisions (See Note 8)
306
29
44
41
2
7
87
185
701
Provisions released (See Note 8)
\u2014
(4)
\u2014
\u2014
(1)
\u2014
\u2014
\u2014
(5)
Utilisation and other
(64)
(45)
(42)
(58)
(20)
\u2014
(101)
(178)
(508)
Recharge (1)
\u2014
\u2014
\u2014
15
\u2014
\u2014
\u2014
\u2014
15
Reclassification from provisions to other assets
\u2014
\u2014
\u2014
6
\u2014
\u2014
\u2014
\u2014
6
At 31 December 2024
348
112
2
4
28
85
18
14
611
(1) Recharge in respect of the UK Bank Levy paid on behalf of other UK entities in the Banco Santander group
Provisions expected to be settled within no more than 12 months after 31 December 2024 were \u00a3208m (2023: \u00a3217m).
Company
Customer
remediation
Litigation
and other
regulatory
Regulatory
levies and
fees
Bank Levy
Property
ECL on
undrawn
facilities and
guarantees
Restructuring
Other
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2024
106
125
\u2014
\u2014
47
78
32
7
395
Additional provisions
13
18
44
37
2
7
84
163
368
Provisions released
\u2014
(4)
\u2014
\u2014
(1)
\u2014
\u2014
\u2014
(5)
Utilisation and other
(64)
(28)
(42)
(58)
(20)
\u2014
(98)
(156)
(466)
Recharge (1)
\u2014
\u2014
\u2014
15
\u2014
\u2014
\u2014
\u2014
15
Reclassification from provisions to other assets
\u2014
\u2014
\u2014
6
\u2014
\u2014
\u2014
\u2014
6
At 31 December 2024
55
111
2
\u2014
28
85
18
14
313
(1) Recharge in respect of the UK Bank Levy paid on behalf of other UK entities in the Banco Santander group
Provisions expected to be settled by the Company within no more than 12 months after 31 December 2024 were \u00a3203m (2023: \u00a3209m).
a) Customer remediation
SCUK - Motor Finance Broker Commissions
Following the FCA\u2019s 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. During 2024
the FCA commenced a review of the use of DCAs between lenders and credit brokers (FCA review) which, following an extension, it stated it anticipated to conclude
by May 2025. Pending the conclusion of its review, the FCA first paused DCA related complaints and then extended this to motor finance commission related
complaints which are now paused until 4 December 2025. A claim against SCUK, Santander UK plc and others in the Competition Appeal Tribunal, which alleges
that SCUK\u2019s historical DCAs in respect of used car financing operated in breach of the Competition Act 1998 is currently paused until the end of July 2025 pending
the outcome of the FCA\u2019s review.
The outcome of the FCA\u2019s review may be informed by an appeal to the Supreme Court to be heard in April 2025 of the Court of Appeal\u2019s judgment of October 2024
relating to the use of DCAs by two other lenders, and by an appeal to the Court of Appeal of the High Court\u2019s judicial review of the Financial Ombudsman Service\u2019s
final decision relating to a complaint about the use of a DCA by another lender.
In light of the Court of Appeal\u2019s judgment of October 2024, the Santander UK group recognised a provision of \u00a3295m in its financial results for 2024. This includes
estimates for operational and legal costs and potential awards, based on various scenarios using a range of assumptions, including the outcomes of the appeals
above. There continue to be significant uncertainties as to the extent of any misconduct, if any, as well as the perimeter of commission models, and the 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.
The table below shows the sensitivity of the provision to changes in the claim rate.
Increase / (decrease) in
provision
2024
Assumption
Change in assumption
\u00a3m
Claim rate
5% increase
47
Claim rate
5% decrease
(47)
The claim rate represents the proportion of customers who make a request for reimbursement and is a critical accounting estimate that could materially change the
ultimate financial impact.
Our best estimate of liability is based on similar experience to PPI claim rates which peaked at up to 50% over the lifetime of the redress programme.
Mortgages
Provisions were also recognised in 2024 for customer remediation relating to our mortgage book. These provisions remain subject to change as additional data
becomes available and remediation boundaries are finalised.
b) Litigation and other regulatory
Litigation and other regulatory provisions principally comprised of amounts in respect of litigation and other regulatory charges, operational loss and operational
risk provisions, and related expenses. A number of uncertainties exist with respect to these provisions given the uncertainties inherent in litigation and other
regulatory matters, that affect the amount and timing of any potential outflows with respect to which provisions have been established. These provisions are
reviewed at least quarterly.
In 2024 there were net charges of \u00a339m for legal provisions.
The balance also includes an amount in respect of our best estimate of liability relating to a legal dispute regarding allocation of responsibility for a specific PPI
portfolio of complaints, further described in Note 30. No further information on the best estimate is provided on the basis that it would be seriously prejudicial.
c) Regulatory levies and fees
Regulatory levies and fees are payable to regulatory bodies such as the FCA, PRA and Bank of England in the ordinary course of business. In 2024 there were charges
of \u00a342m relating to the new Bank of England levy.
d) Bank Levy
In 2024, a rate of 0.05% (2023: 0.05%) was charged on long term chargeable equity and liabilities and 0.10% on short-term chargeable liabilities (2023: 0.10%).
e) Property
Property provisions include leasehold vacant property provisions, dilapidation provisions for leased properties within the scope of IFRS 16 and decommissioning and
disposal costs relating to vacant freehold properties. Leasehold vacant property provisions are made by reference to an estimate of any expected sub-let income,
compared to the head rent, and the possibility of disposing of Santander UK\u2019s interest in the lease, taking into account conditions in the property market.
Property provisions include a release of \u00a32m relating to transformation activity in 2024 (2023: charge of \u00a34m ). In 2024, these charges consisted of costs relating to
leasehold head office closures, along with decommissioning costs relating to freehold head office sites which are either closing or consolidating.
f) ECL on undrawn facilities and guarantees
Provisions include expected credit losses relating to guarantees given to third parties and undrawn loan commitments.
g) Restructuring
Restructuring provisions relate to severance costs associated with transformation and organisational changes. The provision includes a charge of \u00a382m as part of
our transformation to improve future returns, focused on simplifying, digitising and automating the bank.
h) Other
Other provisions include provisions that do not fit into any of the other categories, such as fraud losses and some categories of operational losses. In 2024, Other
provisions included charges for operational risk provisions of \u00a3161m, including fraud losses of \u00a3122m.
", "dimensions": { "concept": "ifrs-full:DisclosureOfProvisionsExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-582": { "value": "
8. CREDIT IMPAIRMENT CHARGES AND PROVISIONS
For the year ended 31 December
Group
2024
2023
2022
\u00a3m
\u00a3m
\u00a3m
Credit impairment charges:
Loans and advances to customers
87
191
248
(Recoveries)/charges of loans and advances, net of collection costs
(23)
10
36
Off-balance sheet credit exposures (See Note 27)
7
4
36
71
205
320
Provisions for other liabilities and charges (excluding off-balance sheet credit exposures) (See Note 27)
687
334
422
Charge/(release) for residual value and voluntary termination
2
1
(3)
689
335
419
760
540
739
In 2024, 2023 and 2022 there were no material credit impairment charges on Loans and advances to banks, Non-trading reverse repurchase agreements, Other
financial assets at amortised cost and Financial assets at FVOCI.
", "dimensions": { "concept": "ifrs-full:DisclosureOfAllowanceForCreditLossesExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-584": { "value": "
9. TAXATION
For the year ended 31 December
Group
2024
2023
2022
\u00a3m
\u00a3m
\u00a3m
Current tax:
UK corporation tax on profit for the year
205
475
526
Adjustments in respect of prior years
(47)
(15)
(81)
Total current tax
158
460
445
Deferred tax:
Charge/(credit) for the year
187
106
(29)
Adjustments in respect of prior years
33
(7)
64
Total deferred tax
220
99
35
Tax on profit from continuing operations
378
559
480
The standard rate of UK corporation tax was 28% for banking entities and 25% for non-banking entities (2023: 27.75%) for banking entities and 23.50% for non-
banking entities; 2022: 27% for banking entities and 19% for non-banking entities) following the introduction of a surcharge on banking companies in 2016.
Taxation for other jurisdictions is calculated at the rates prevailing in the relevant jurisdictions.
The Santander UK group\u2019s effective tax rate for 2024 was 28.0% (2023: 26.6%, 2022: 25.6%). Tax on profit differs from that calculated at the statutory rate as
follows:
For the year ended 31 December
Group
2024
2023
2022
\u00a3m
\u00a3m
\u00a3m
Profit before tax
1,349
2,100
1,874
Tax calculated at the statutory rate of 25% (2023: 23.5%, 2022: 19%)
337
494
356
Bank surcharge on profits
41
85
121
Non-deductible preference dividends paid
9
9
9
Non-deductible UK Bank Levy
12
10
13
Non-deductible conduct remediation, fines and penalties
3
13
48
Other non-deductible costs and non-taxable income
26
2
29
Effect of change in tax rate on deferred tax provision
\u2014
2
(29)
Tax relief on dividends in respect of other equity instruments
(36)
(34)
(40)
Adjustment to prior year provisions
(14)
(22)
(27)
Tax on profit
378
559
480
It is not anticipated that the OECD Pillar Two rules which became effective from 1 January 2024 will impact the Santander UK group.
Current tax assets
Movements in current tax assets during the year were as follows:
Group
Company
2024
2023
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
490
478
568
557
At 1 January
490
478
568
557
Income statement charge (including discontinued operations)
(158)
(460)
(198)
(436)
Other comprehensive income charge
(47)
(70)
\u2014
\u2014
Corporate income tax paid
240
537
172
442
Other movements
(19)
5
(14)
5
506
490
528
568
Assets
506
490
528
568
At 31 December
506
490
528
568
The amount of corporation income tax paid differs from the tax charge for the period as a result of the timing of payments due to the tax authorities, the effects of
movements in deferred tax, adjustments to prior period current tax provisions and current tax recognised directly in other comprehensive income.
Santander UK group engages in discussion, and co-operates, with HM Revenue & Customs (HMRC) in their oversight of the Santander UK group's tax matters. The
accounting policy for recognising provisions for any tax risks identified is described in Note 1. It is not expected that there will be any material movement in such
provisions within the next 12 months.
The Santander UK group consistently applies the UK\u2019s Code of Practice on Taxation for Banks. For more information, see our Taxation Strategy on our website
aboutsantander.co.uk.
Deferred tax
The table below shows the deferred tax balances including the movement in the deferred tax account during the year. Deferred tax balances are presented in the
balance sheet after offsetting assets and liabilities where the Santander UK group and Company has the legal right to offset and intends to settle on a net basis.
Group
Fair value of
financial
instruments
Pension
remeasurement
Cash flow
hedges
Fair value
reserve
Accelerated
tax
depreciation
Other
temporary
differences
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2024
(8)
(186)
73
3
18
(86)
(186)
Income statement charge
(144)
(44)
\u2014
\u2014
(24)
(8)
(220)
Transfers/reclassifications
\u2014
\u2014
2
1
\u2014
\u2014
3
Credited to other comprehensive income
\u2014
113
35
4
\u2014
5
157
At 31 December 2024
(152)
(117)
110
8
(6)
(89)
(246)
At 1 January 2023
27
(290)
305
(1)
35
(111)
(35)
Income statement (charge)/credit
(35)
(63)
\u2014
\u2014
(18)
17
(99)
Transfers/reclassifications
\u2014
\u2014
(3)
(1)
1
4
1
Credited/(charged) to other comprehensive income
\u2014
167
(229)
5
\u2014
4
(53)
At 31 December 2023
(8)
(186)
73
3
18
(86)
(186)
Company
Fair value of
financial
instruments
Pension
remeasurement
Cash flow
hedges
Fair value
reserve
Accelerated
tax
depreciation
Other
temporary
differences
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2024
(11)
(186)
74
4
13
(35)
(141)
Income statement charge
(63)
(44)
\u2014
\u2014
(21)
(20)
(148)
Transfers/reclassifications
\u2014
\u2014
\u2014
\u2014
\u2014
(1)
(1)
Credited to other comprehensive income
\u2014
113
38
4
\u2014
5
160
At 31 December 2024
(74)
(117)
112
8
(8)
(51)
(130)
At 1 January 2023
63
(290)
308
(1)
30
(34)
76
Income statement (charge)/credit
(74)
(63)
\u2014
\u2014
(17)
(7)
(161)
Transfers/reclassifications
\u2014
\u2014
1
\u2014
\u2014
2
3
Credited/(charged) to other comprehensive income
\u2014
167
(235)
5
\u2014
4
(59)
At 31 December 2023
(11)
(186)
74
4
13
(35)
(141)
The deferred tax assets and liabilities above have been recognised in both the Company and the Santander UK group on the basis that sufficient future taxable
profits are forecast within the foreseeable future, in excess of the profits arising from the reversal of existing taxable temporary differences, to allow for the
utilisation of the assets as they reverse. Based on the conditions at the balance sheet date, management determined that a reasonably possible change in any of the
key assumptions underlying the estimated future taxable profits in the Santander UK group\u2019s three-year plan (described in Note 19) would not cause a reduction in
the deferred tax assets recognised. In 2024, there were \u00a3nil unrecognised deferred tax assets on capital losses carried forward (2023: \u00a3nil).
", "dimensions": { "concept": "ifrs-full:DisclosureOfIncomeTaxExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-585": { "value": "
Group
2024
2023
2022
\u00a3m
\u00a3m
\u00a3m
Current tax:
UK corporation tax on profit for the year
205
475
526
Adjustments in respect of prior years
(47)
(15)
(81)
Total current tax
158
460
445
Deferred tax:
Charge/(credit) for the year
187
106
(29)
Adjustments in respect of prior years
33
(7)
64
Total deferred tax
220
99
35
Tax on profit from continuing operations
378
559
480
Deferred tax
The table below shows the deferred tax balances including the movement in the deferred tax account during the year. Deferred tax balances are presented in the
balance sheet after offsetting assets and liabilities where the Santander UK group and Company has the legal right to offset and intends to settle on a net basis.
Group
Fair value of
financial
instruments
Pension
remeasurement
Cash flow
hedges
Fair value
reserve
Accelerated
tax
depreciation
Other
temporary
differences
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2024
(8)
(186)
73
3
18
(86)
(186)
Income statement charge
(144)
(44)
\u2014
\u2014
(24)
(8)
(220)
Transfers/reclassifications
\u2014
\u2014
2
1
\u2014
\u2014
3
Credited to other comprehensive income
\u2014
113
35
4
\u2014
5
157
At 31 December 2024
(152)
(117)
110
8
(6)
(89)
(246)
At 1 January 2023
27
(290)
305
(1)
35
(111)
(35)
Income statement (charge)/credit
(35)
(63)
\u2014
\u2014
(18)
17
(99)
Transfers/reclassifications
\u2014
\u2014
(3)
(1)
1
4
1
Credited/(charged) to other comprehensive income
\u2014
167
(229)
5
\u2014
4
(53)
At 31 December 2023
(8)
(186)
73
3
18
(86)
(186)
Company
Fair value of
financial
instruments
Pension
remeasurement
Cash flow
hedges
Fair value
reserve
Accelerated
tax
depreciation
Other
temporary
differences
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2024
(11)
(186)
74
4
13
(35)
(141)
Income statement charge
(63)
(44)
\u2014
\u2014
(21)
(20)
(148)
Transfers/reclassifications
\u2014
\u2014
\u2014
\u2014
\u2014
(1)
(1)
Credited to other comprehensive income
\u2014
113
38
4
\u2014
5
160
At 31 December 2024
(74)
(117)
112
8
(8)
(51)
(130)
At 1 January 2023
63
(290)
308
(1)
30
(34)
76
Income statement (charge)/credit
(74)
(63)
\u2014
\u2014
(17)
(7)
(161)
Transfers/reclassifications
\u2014
\u2014
1
\u2014
\u2014
2
3
Credited/(charged) to other comprehensive income
\u2014
167
(235)
5
\u2014
4
(59)
At 31 December 2023
(11)
(186)
74
4
13
(35)
(141)
The deferred tax assets and liabilities above have been recognised in both the Company and the Santander UK group on the basis that sufficient future taxable
profits are forecast within the foreseeable future, in excess of the profits arising from the reversal of existing taxable temporary differences, to allow for the
utilisation of the assets as they reverse. Based on the conditions at the balance sheet date, management determined that a reasonably possible change in any of the
key assumptions underlying the estimated future taxable profits in the Santander UK group\u2019s three-year plan (described in Note 19) would not cause a reduction in
the deferred tax assets recognised. In 2024, there were \u00a3nil unrecognised deferred tax assets on capital losses carried forward (2023: \u00a3nil).
", "dimensions": { "concept": "ifrs-full:DisclosureOfDeferredTaxesExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-586": { "value": "
10. DIVIDENDS ON ORDINARY SHARES
Dividends on ordinary shares declared and paid in the year were as follows:
For the year ended 31 December
Group and Company
Group and Company
2024
2023
2022
2024
2023
2022
Pence per
share
Pence per
share
Pence per
share
\u00a3m
\u00a3m
\u00a3m
In respect of current year \u2013 first interim
1.78
1.32
1.25
554
410
389
\u2013 second interim
2.44
3.61
2.01
757
1,120
625
4.22
4.93
3.26
1,311
1,530
1,014
In 2024, an interim dividend of \u00a31,311m (2023: \u00a31,530m, 2022: \u00a31,014m) was paid on the Company's ordinary shares in issue. In 2024, \u00a3804m (2023: \u00a3750m,
2022: \u00a3300m) of the dividends were special dividends. These were paid following review and approval by the Board in line with our dividend policy.
", "dimensions": { "concept": "ifrs-full:DisclosureOfDividendsExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-587": { "value": "4.22", "decimals": 2, "dimensions": { "concept": "ifrs-full:DividendsRecognisedAsDistributionsToOwnersPerShare", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00", "unit": "iso4217:GBP/xbrli:shares" } }, "f-588": { "value": "4.93", "decimals": 2, "dimensions": { "concept": "ifrs-full:DividendsRecognisedAsDistributionsToOwnersPerShare", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00", "unit": "iso4217:GBP/xbrli:shares" } }, "f-589": { "value": "3.26", "decimals": 2, "dimensions": { "concept": "ifrs-full:DividendsRecognisedAsDistributionsToOwnersPerShare", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00", "unit": "iso4217:GBP/xbrli:shares" } }, "f-591": { "value": "
11. DERIVATIVE FINANCIAL INSTRUMENTS
a) Use of derivatives
Santander UK undertakes derivative activities primarily to provide customers with risk management solutions and to manage and hedge its own risks. These
derivative activities do not give rise to significant open positions in portfolios of derivatives. Any residual position is managed to ensure that it remains within
acceptable risk levels, with matching transactions used to achieve this where necessary. When entering into derivatives, Santander UK employs the same credit risk
management procedures to assess and approve potential credit exposures that are used for traditional lending.
b) Analysis of derivatives
The table below includes the notional amounts of transactions outstanding at the balance sheet date; they do not represent actual exposures.
Group
2024
2023
Fair value
Fair value
Notional
amount
Assets
Liabilities
Notional
amount
Assets
Liabilities
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Derivatives held for trading:
Exchange rate contracts
13,755
238
156
12,927
92
217
Interest rate contracts
29,296
294
489
28,351
389
583
Equity and credit contracts
681
124
21
765
133
20
Total derivatives held for trading
43,732
656
666
42,043
614
820
Derivatives held for hedging
Designated as fair value hedges:
Exchange rate contracts
1,712
42
8
1,145
29
2
Interest rate contracts
146,172
1,055
477
107,540
1,275
839
147,884
1,097
485
108,685
1,304
841
Designated as cash flow hedges:
Exchange rate contracts
21,535
698
266
21,618
1,008
289
Interest rate contracts
54,267
326
928
50,896
553
915
Inflation rate contracts
1,794
70
\u2014
\u2014
\u2014
\u2014
77,596
1,094
1,194
72,514
1,561
1,204
Total derivatives held for hedging
225,480
2,191
1,679
181,199
2,865
2,045
Derivative netting(1)
\u2014
(1,643)
(1,643)
\u2014
(2,047)
(2,047)
Total derivatives
269,212
1,204
702
223,242
1,432
818
(1) Derivative netting excludes the effect of cash collateral, which is offset against the gross derivative position. The amount of cash collateral received that had been offset against the gross derivative assets was
\u00a3489m (2023: \u00a3472m) and the amount of cash collateral paid that had been offset against the gross derivative liabilities was \u00a332m (2023: \u00a312m).
At 31 December 2024, the fair value of derivative assets included amounts due from Banco Santander group entities of \u00a3544m (2023: \u00a3762m) and the fair value of
derivative liabilities included amounts due to Banco Santander group entities of \u00a3244m (2023: \u00a3230m).
Company
2024
2023
Fair value
Fair value
Notional
amount
Assets
Liabilities
Notional
amount
Assets
Liabilities
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Derivatives held for trading:
Exchange rate contracts
31,646
553
300
25,861
397
322
Interest rate contracts
69,248
358
2,589
62,005
560
1,918
Equity and credit contracts
681
124
21
765
133
20
Total derivatives held for trading
101,575
1,035
2,910
88,631
1,090
2,260
Derivatives held for hedging
Designated as fair value hedges:
Exchange rate contracts
1,524
41
4
948
23
2
Interest rate contracts
144,346
1,013
464
105,678
1,226
836
145,870
1,054
468
106,626
1,249
838
Designated as cash flow hedges:
Exchange rate contracts
12,931
649
152
14,910
869
256
Interest rate contracts
46,549
317
720
45,490
534
667
Inflation rate contracts
1,794
70
\u2014
\u2014
\u2014
\u2014
61,274
1,036
872
60,400
1,403
923
Total derivatives held for hedging
207,144
2,090
1,340
167,026
2,652
1,761
Derivative netting(1)
\u2014
(1,643)
(1,643)
\u2014
(2,047)
(2,047)
Total derivatives
308,719
1,482
2,607
255,657
1,695
1,974
(1) Derivative netting excludes the effect of cash collateral, which is offset against the gross derivative position. The amount of cash collateral received that had been offset against the gross derivative assets was
\u00a3489m (2023: \u00a3472m) and the amount of cash collateral paid that had been offset against the gross derivative liabilities was \u00a332m (2023: \u00a312m).
At 31 December 2024, for the Company, the fair value of derivative assets included amounts due from Banco Santander group entities of \u00a3544m (2023: \u00a3762m)
and the fair value of derivative liabilities included amounts due to Banco Santander group entities of \u00a3244m (2023: \u00a3230m).
For information about the impact of netting arrangements on derivative assets and liabilities in the table above, see Note 39.
The table below analyses the notional and fair values of derivatives by trading and settlement method.
Notional
Traded over the counter
Asset
Liability
Settled by
central
counterparties
Not settled by
central
counterparties
Total
Traded over
the counter
Traded over
the counter
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Exchange rate contracts
\u2014
37,002
37,002
978
430
Interest rate contracts
217,159
12,576
229,735
32
251
Inflation rate contracts
1,794
1,794
70
Equity and credit contracts
\u2014
681
681
124
21
218,953
50,259
269,212
1,204
702
2023
Exchange rate contracts
\u2014
35,690
35,690
1,129
508
Interest rate contracts
174,460
12,327
186,787
170
290
Equity and credit contracts
\u2014
765
765
133
20
174,460
48,782
223,242
1,432
818
c) Analysis of derivatives designated as hedges
Santander UK applies hedge accounting on both a fair value and cash flow basis depending on the nature of the underlying exposure. We establish the hedge ratio
by matching the notional of the derivative with the underlying position being hedged. Only the designated risk is hedged and therefore other risks, such as credit risk
are managed but not hedged. For interest rate hedges, the designated hedged risk is determined with reference to the underlying benchmark rate.
Fair value hedges
Portfolio hedges of interest rate risk
Santander UK holds portfolios of fixed rate assets and liabilities which expose it to changes in fair value due to movements in market interest rates. We manage
these exposures by entering into interest rate swaps. Each portfolio contains assets or liabilities that are similar in nature and share the risk exposure that is
designated as being hedged.
The interest rate risk component is the change in fair value of fixed rate instruments for changes in the designated benchmark rate. Such changes are usually the
largest component of the overall change in fair value. Separate hedges are maintained for each underlying currency. Effectiveness is assessed by comparing
changes in the fair value of the hedged item attributable to changes in the designated benchmark interest rate, with changes in the fair value of the interest rate
swaps.
Micro hedges of interest rate risk and foreign currency risk
Santander UK accesses international markets to obtain funding, to issue fixed rate debt or to invest in fixed rate debt of other issuers as part of maintaining a
portfolio of HQLA (High Quality Liquid Assets) in its functional currency and other currencies. We are therefore exposed to changes in fair value due to changes in
market interest rates and/or foreign exchange rates, principally in USD and EUR, which we mitigate through the use of receive fixed/pay floating rate interest rate
swaps and/or receive fixed/pay floating rate cross currency swaps.\u00a0
The interest rate risk component is the change in fair value of the fixed rate debt due to changes in the benchmark rate. The foreign exchange component is the
change in the fair value of the fixed rate debt issuance due to changes in foreign exchange rates prevailing from the time of execution. Effectiveness is assessed by
using linear regression techniques to compare changes in the fair value of the debt caused by changes in the benchmark interest rate and foreign exchange rates,
with changes in the fair value of the interest rate swaps and/or cross currency swaps.
Cash flow hedges
Hedges of interest rate risk
Santander UK manages its exposure to the variability in cash flows of floating rate assets and liabilities attributable to movements in market interest rates by
entering into interest rate swaps. The interest rate risk component is determined with reference to the underlying benchmark rate attributable to the floating rates
asset or liability. Designated benchmark rates referenced are currently SONIA or BoE base rate. Effectiveness is assessed by comparing changes in the fair value of
the interest rate swap with changes in the fair value of the hedged item attributable to the hedged risk, applying a hypothetical derivative method using linear
regression techniques.
Hedges of inflation risk
Santander UK has exposure to inflation risk arising on UK inflation-linked gilts, that is hedged by entering into inflation swaps. Cash flow hedging is applied whereby
the inflation swap is hedging variability in cash flows of the inflation-linked gilt due to changes in GBP RPI. Effectiveness is assessed by comparing changes in the
fair value of the inflation swap with changes in the fair value of the hedged item attributable to the hedged risk, applying a hypothetical derivative method using
linear regression techniques.
Hedges of foreign currency risk
As Santander UK obtains funding in international markets, we assume significant foreign currency risk exposure, mainly in USD and EUR. In addition, Santander UK
also holds debt securities for liquidity purposes which assumes foreign currency exposure, principally in JPY and CHF.
Santander UK manages the exposures to the variability in cash flows of foreign currency denominated assets and liabilities to movements in foreign exchange rates
by entering into either foreign exchange contracts (spot, forward and swaps) or cross-currency swaps. These instruments are entered into to match the cash flow
profile and maturity of the estimated interest and principal repayments of the hedged item.
The foreign currency risk component is the change in cash flows of the foreign currency debt arising from changes in the relevant foreign currency forward
exchange rate. Such changes constitute a significant component of the overall changes in cash flows of the instrument. Effectiveness is assessed by comparing
changes in the fair value of the foreign exchange contracts (spot, forward and swaps) or cross currency swaps with changes in the fair value of the hedged debt
attributable to the hedged risk applying a hypothetical derivative method using linear regression techniques.
Possible sources of hedge ineffectiveness
For both fair value and cash flow hedges, hedge ineffectiveness can arise from hedging derivatives with a non-zero fair value at the date of initial designation. In
addition, for:
Fair value hedges
Hedge ineffectiveness can also arise due to differences in discounting between the hedged item and the hedging instrument as cash collateralised swaps discount
using Overnight Indexed Swaps discount curves not applied to the hedged item; and where counterparty credit risk impacts the fair value of the derivative but not
the hedged item. For portfolio hedges of interest rate risk, it can also arise due to differences in the expected and actual volume of prepayments.
Cash flow hedges
Hedge ineffectiveness can also arise due to differences in the timing of cash flows between the hedged item and the hedging instrument. For micro hedges of
interest rate risk, it can also arise due to differences in the basis of cash flows between the hedged item and the hedging instrument.
Maturity profile and average price/rate of hedging instruments
The following table sets out the maturity profile and average price/rate of the hedging instruments used in the Santander UK group\u2019s hedging strategies:
Group
2024
Hedging Instruments
\u22641 month
>1 and \u22643
months
>3 and \u226412
months
>1 and \u22645
years
>5 years
Total
Fair value hedges:
Interest rate risk
Interest rate contracts - Nominal amount (\u00a3m)
4,174
6,301
53,531
77,233
3,409
144,648
Average fixed interest rate - GBP
3.75%
4.29%
4.50%
3.87%
3.65%
Average fixed interest rate - EUR
0.20%
(0.35)%
(0.45)%
0.58%
4.37%
Average fixed interest rate - USD
1.68%
1.53%
1.53%
5.76%
0.45%
Interest rate/FX risk
Exchange rate contracts - Nominal amount (\u00a3m)
\u2014
88
128
1,018
478
1,712
Interest rate contracts - Nominal amount (\u00a3m)
\u2014
88
86
872
478
1,524
Average GBP - EUR exchange rate
\u2014
1.14
1.16
1.16
1.18
Average GBP - USD exchange rate
\u2014
\u2014
\u2014
1.32
1.28
Average fixed interest rate - EUR
\u2014
\u2014
1.35%
3.30%
2.94%
Average fixed interest rate - USD
\u2014
\u2014
\u2014
4.83%
4.38%
Cash flow hedges:
Interest rate risk
Interest rate contracts \u2013 Nominal amount (\u00a3m)
4,300
3,366
11,598
28,336
3,587
51,187
Average fixed interest rate - GBP
4.59%
4.05%
4.76%
3.70%
4.35%
FX risk
Exchange rate contracts - Nominal amount (\u00a3m)
258
792
4,927
10,976
1,306
18,259
Interest rate contracts - Nominal amount (\u00a3m)
\u2014
\u2014
\u2014
\u2014
958
958
Average GBP - JPY exchange rate
178.37
179.99
187.64
\u2014
\u2014
Average GBP - CHF exchange rate
\u2014
\u2014
1.09
1.11
\u2014
Average GBP - CAD exchange rate
\u2014
\u2014
1.76
\u2014
\u2014
Average GBP - EUR exchange rate
\u2014
1.20
1.19
1.18
1.16
Average GBP - USD exchange rate
\u2014
\u2014
1.24
1.30
1.39
Interest rate/FX risk
Exchange rate contracts - Nominal amount (\u00a3m)
826
394
534
1,104
418
3,276
Interest rate contracts - Nominal amount (\u00a3m)
826
\u2014
327
799
170
2,122
Average GBP - EUR exchange rate
1.12
1.37
1.16
1.21
1.18
Average GBP - USD exchange rate
\u2014
\u2014
1.54
1.32
1.54
Average fixed interest rate - GBP
1.48%
2.76%
2.65%
2.74%
4.81%
Inflation risk
Inflation derivative contracts - Nominal amount (\u00a3m)
\u2014
\u2014
\u2014
\u2014
1,794
1,794
Average fixed interest rate - GBP
\u2014
\u2014
\u2014
\u2014
4.98%
2023
Fair value hedges:
Interest rate risk
Interest rate contracts- Nominal amount (\u00a3m)
3,612
7,141
32,241
60,590
3,008
106,592
Average fixed interest rate - GBP
2.38%
3.19%
3.42%
3.90%
3.99%
Average fixed interest rate - EUR
1.14%
0.18%
0.45%
0.21%
3.92%
Average fixed interest rate - USD
2.60%
2.46%
4.23%
1.36%
4.91%
Interest rate/FX risk
Exchange rate contracts - Nominal amount (\u00a3m)
\u2014
18
\u2014
1,041
86
1,145
Interest rate contracts - Nominal amount (\u00a3m)
\u2014
18
\u2014
844
86
948
Average GBP - EUR exchange rate
\u2014
1.11
\u2014
1.16
1.15
Average GBP - USD exchange rate
\u2014
\u2014
\u2014
1.32
\u2014
Average fixed interest rate - EUR
\u2014
\u2014
\u2014
2.77%
3.48%
Average fixed interest rate - USD
\u2014
\u2014
\u2014
4.83%
\u2014
Cash flow hedges:
Interest rate risk
Interest rate contracts - Nominal amount (\u00a3m)
911
2,993
12,770
27,721
1,219
45,614
Average fixed interest rate - GBP
5.06%
2.98%
5.39%
3.83%
3.45%
FX risk
Exchange rate contracts - Nominal amount (\u00a3m)
927
3,238
2,692
9,447
588
16,892
Interest rate contracts - Nominal amount (\u00a3m)
\u2014
2,199
\u2014
\u2014
942
3,141
Average GBP - JPY exchange rate
154.14
153.95
167.85
\u2014
\u2014
Average GBP - CHF exchange rate
1.09
1.09
1.09
1.12
1.12
Average GBP - EUR exchange rate
\u2014
1.20
1.17
1.18
\u2014
Average GBP - USD exchange rate
\u2014
1.39
\u2014
1.28
1.39
Interest rate/FX risk
Exchange rate contracts - Nominal amount (\u00a3m)
87
785
500
2,896
458
4,726
Interest rate contracts - Nominal amount (\u00a3m)
\u2014
\u2014
\u2014
1,975
166
2,141
Average GBP - EUR exchange rate
1.18
\u2014
1.25
1.20
1.19
Average GBP - USD exchange rate
\u2014
1.66
\u2014
1.38
1.54
Average fixed interest rate - GBP
2.57%
2.54%
2.96%
2.31%
4.74%
Company
2024
Hedging Instruments
\u22641 month
>1 month
and \u22643
months
>3 and \u226412
months
>1 and \u22645
years
>5 years
Total
Fair value hedges:
Interest rate risk
Interest rate contracts \u2013 Nominal amount (\u00a3m)
4,172
6,296
53,514
75,503
3,337
142,822
Average fixed interest rate \u2013 GBP
3.75%
4.29%
4.50%
3.83%
3.65%
Average fixed interest rate \u2013 EUR
0.20%
(0.35)%
(0.45)%
0.58%
\u2014%
Average fixed interest rate \u2013 USD
1.68%
1.53%
1.53%
5.76%
0.45%
Interest rate/FX risk
Exchange rate contracts \u2013 Nominal amount (\u00a3m)
\u2014
88
86
872
478
1,524
Interest rate contracts \u2013 Nominal amount (\u00a3m)
\u2014
88
86
872
478
1,524
Average GBP - EUR exchange rate
\u2014
1.14
1.16
1.16
1.18
Average GBP - USD exchange rate
\u2014
\u2014
\u2014
1.32
1.28
Average fixed interest rate \u2013 EUR
\u2014
\u2014
0.80
3.06%
2.94%
Average fixed interest rate \u2013 USD
\u2014
\u2014
\u2014
4.83%
4.38
Cash flow hedges:
Interest rate risk
Interest rate contracts \u2013 Nominal amount (\u00a3m)
4,300
3,366
11,598
22,305
2,727
44,296
Average fixed interest rate - GBP
4.59%
4.06%
4.76%
3.83%
4.33%
FX risk
Exchange rate contracts \u2013 Nominal amount (\u00a3m)
258
792
4,927
4,634
479
11,090
Interest rate contracts \u2013 Nominal amount (\u00a3m)
\u2014
\u2014
\u2014
\u2014
958
958
Average GBP - JPY exchange rate
179.37
179.99
187.64
\u2014
\u2014
Average GBP - CAD exchange rate
\u2014
\u2014
1.76
\u2014
\u2014
Average GBP - CHF exchange rate
\u2014
\u2014
1.09
\u2014
\u2014
Average GBP - EUR exchange rate
\u2014
1.20
1.19
1.18
\u2014
Average GBP - USD exchange rate
\u2014
\u2014
1.29
1.32
1.39
Interest rate/FX risk
Exchange rate contracts \u2013 Nominal amount (\u00a3m)
\u2014
394
327
895
225
1,841
Interest rate contracts \u2013 Nominal amount (\u00a3m)
\u2014
\u2014
327
799
169
1,295
Average GBP - EUR exchange rate
\u2014
1.37
\u2014
\u2014
\u2014
Average GBP - USD exchange rate
\u2014
\u2014
1.54
1.32
1.54
Average fixed interest rate \u2013 GBP
\u2014
2.22%
3.34%
2.62%
4.59%
Inflation risk
Inflation derivative contracts - Nominal amount (\u00a3m)
\u2014
\u2014
\u2014
\u2014
1,794
1,794
Average fixed interest rate - GBP
\u2014%
\u2014%
\u2014%
\u2014%
4.98%
2023
Fair value hedges:
Interest rate risk
Interest rate contracts \u2013 Nominal amount (\u00a3m)
3,609
7,135
32,217
59,562
2,207
104,730
Average fixed interest rate \u2013 GBP
2.38%
3.19%
3.42%
3.87%
3.52%
Average fixed interest rate \u2013 EUR
1.14%
0.18%
0.45%
0.21%
0.58%
Average fixed interest rate \u2013 USD
2.60%
2.46%
4.23%
1.36%
4.91%
Interest rate/FX risk
Exchange rate contracts \u2013 Nominal amount (\u00a3m)
\u2014
18
\u2014
844
86
948
Interest rate contracts \u2013 Nominal amount (\u00a3m)
\u2014
18
\u2014
844
86
948
Average GBP - EUR exchange rate
\u2014
1.11
\u2014
1.15
1.15
Average GBP - USD exchange rate
\u2014
\u2014
\u2014
1.32
\u2014
Average fixed interest rate - EUR
\u2014
\u2014
\u2014
2.39%
3.48%
Average fixed interest rate - USD
\u2014
\u2014
\u2014
4.83%
\u2014
Cash flow hedges:
Interest rate risk
Interest rate contracts \u2013 Nominal amount (\u00a3m)
911
2,993
11,913
24,152
1,107
41,076
Average fixed interest rate - GBP
5.06%
2.98%
5.66%
4.05%
3.24%
FX risk
Exchange rate contracts \u2013 Nominal amount (\u00a3m)
927
3,238
1,825
5,816
471
12,277
Interest rate contracts \u2013 Nominal amount (\u00a3m)
\u2014
2,199
\u2014
\u2014
942
3,141
Average GBP - JPY exchange rate
154.14
153.95
167.85
\u2014
\u2014
Average GBP - CHF exchange rate
1.09
1.09
1.09
\u2014
\u2014
Average GBP - EUR exchange rate
\u2014
1.20
\u2014
1.18
\u2014
Average GBP - USD exchange rate
\u2014
1.39
\u2014
1.28
1.39
Interest rate/FX risk
Exchange rate contracts \u2013 Nominal amount (\u00a3m)
\u2014
785
\u2014
1,627
221
2,633
Interest rate contracts \u2013 Nominal amount (\u00a3m)
\u2014
\u2014
\u2014
1,107
166
1,273
Average GBP - EUR exchange rate
\u2014
\u2014
\u2014
1.37
\u2014
Average GBP - USD exchange rate
\u2014
1.66
\u2014
1.38
1.54
Average fixed interest rate \u2013 GBP
\u2014
2.54%
\u2014
2.65%
4.59%
Net gains or losses arising from fair value and cash flow hedges included in other operating income
Group
Company
2024
2023
2022
2024
2023
2022
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Fair value hedging:
Gains/(Losses) on hedging instruments
193
(1,879)
2,381
220
(1,920)
2,685
(Losses)/Gains on hedged items attributable to hedged risks
(168)
1,896
(2,316)
(201)
1,927
(2,626)
Fair value hedging ineffectiveness
25
17
65
19
7
59
Cash flow hedging ineffectiveness
(3)
2
(36)
(4)
\u2014
(34)
22
19
29
15
7
25
Hedge ineffectiveness can be analysed by risk category as follows:
Group
2024
2023
2022
Change in FV
of hedging
instruments
Change in FV
of hedged
items
Recognised in
income
statement
Change in FV
of hedging
instruments
Change in FV
of hedged
items
Recognised in
income
statement
Change in FV
of hedging
instruments
Change in FV
of hedged
items
Recognised in
income
statement
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Fair value hedges:
Interest rate risk
167
(151)
16
(1,865)
1,877
12
2,392
(2,333)
59
Interest rate/FX risk
26
(17)
9
(14)
19
5
(11)
17
6
193
(168)
25
(1,879)
1,896
17
2,381
(2,316)
65
Group
Hedging Instruments
Recognised in
Income
Statement
Reclassified
from reserves
to income
Income statement line item affected by reclassification
Change in FV
Recognised in
OCI
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cash flow hedges:
2024
Interest rate risk
Net interest income
(764)
761
(3)
(488)
FX risk
Net interest income/other operating income
414
(405)
9
216
Interest rate/FX risk
Net interest income/other operating income
(181)
172
(9)
(231)
Inflation Risk
Net Interest Income
71
(71)
\u2014
3
(460)
457
(3)
(500)
2023
Interest rate risk
Net interest income
466
(445)
21
(469)
FX risk
Net interest income/other operating income
(396)
377
(19)
(392)
Interest rate/FX risk
Net interest income/other operating income
(237)
237
\u2014
(387)
(167)
169
2
(1,248)
2022
Interest rate risk
Net interest income
(1,161)
1,160
(1)
(96)
FX risk
Net interest income/other operating income
1,604
(1,604)
\u2014
1,692
Interest rate/FX risk
Net interest income/other operating income
(54)
19
(35)
533
389
(425)
(36)
2,129
Company
2024
2023
2022
Change in FV
of hedging
instruments
Change in FV
of hedged
items
Recognised in
income
statement
Change in FV
of hedging
instruments
Change in FV
of hedged
items
Recognised in
income
statement
Change in FV
of hedging
instruments
Change in FV
of hedged
items
Recognised in
income
statement
Fair value hedges:
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Interest rate risk
186
(171)
15
(1,907)
1,916
9
2,676
(2,622)
54
Interest rate/FX risk
34
(30)
4
(13)
11
(2)
9
(4)
5
220
(201)
19
(1,920)
1,927
7
2,685
(2,626)
59
Company
Hedging Instruments
Recognised in
Income
Statement
Reclassified
from reserves
to income
Income statement line item affected by reclassification
Change in FV
Recognised in
OCI
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cash flow hedges:
2024
Interest rate risk
Net interest income
(616)
614
(2)
(333)
FX risk
Net interest income/other operating income
587
(582)
5
523
Interest rate/FX risk
Net interest income/other operating income
(54)
47
(7)
(64)
Inflation Risk
Net Interest Income
71
(71)
\u2014
3
(12)
8
(4)
129
2023
Interest rate risk
Net interest income
418
(416)
2
(312)
FX risk
Net interest income/other operating income
(204)
200
(4)
(205)
Interest rate/FX risk
Net interest income/other operating income
(168)
170
2
(277)
46
(46)
\u2014
(794)
2022
Interest rate risk
Net interest income
(782)
782
\u2014
(77)
FX risk
Net interest income/other operating income
1,295
(1,299)
(4)
1,366
Interest rate/FX risk
Net interest income/other operating income
67
(97)
(30)
442
580
(614)
(34)
1,731
In 2024, cash flow hedge accounting of \u00a3nil (2023: \u00a3nil) had to cease due to the hedged cash flows no longer being expected to occur.
The following table provides a reconciliation by risk category of components of equity and analysis of OCI items (before tax) resulting from hedge accounting.
Group
Company
2024
2023
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Balance at 1 January
(496)
(1,575)
(262)
(1,102)
Effective portion of changes in fair value:
\u2013 Interest rate risk
(761)
445
(614)
416
\u2013 Foreign currency risk
405
(377)
582
(200)
\u2013 Interest rate/foreign currency risk
(172)
(237)
(47)
(170)
\u2013 Inflation risk
71
\u2014
71
\u2014
(457)
(169)
(8)
46
Income statement transfers:
\u2013 Interest rate risk
488
469
333
312
\u2013 Foreign currency risk
(216)
392
(523)
205
\u2013 Interest rate/foreign currency risk
231
387
64
277
\u2013 Inflation risk
(3)
\u2014
(3)
\u2014
500
1,248
(129)
794
Balance at 31 December
(453)
(496)
(399)
(262)
Hedged exposures
Santander UK hedges its exposures to various risks, including interest rate risk and foreign currency risk, as set out in the following table.
Group
2024
2023
Accumulated amount of FV hedge
adjustments
Change in
value to
calculate
hedge
ineffective
ness
Accumulated amount of FV hedge
adjustments
Change in
value to
calculate
hedge
ineffective
ness
Carrying
value
Hedged
item
Portfolio
hedge of
interest
rate risks
Of which
Discontinued
hedges
Carrying
value
Hedged
item
Portfolio
hedge of
interest
rate risks
Of which
Discontinued
hedges
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Fair value hedges
Interest rate risk:
Loans and advances to customers
62,773
\u2014
(731)
(290)
(154)
73,194
\u2014
(625)
(435)
1,968
Other financial assets at amortised cost
1,667
(45)
(7)
(7)
(44)
152
1
(8)
(8)
5
Reverse repurchase agreements \u2013 non
trading
6,423
\u2014
(1)
\u2014
(1)
6,186
\u2014
\u2014
\u2014
4
Other financial assets at FVOCI
2,100
(131)
\u2014
(95)
(18)
2,013
(113)
\u2014
(131)
82
Deposits by customers
(21,726)
18
9
1
(1)
(15,892)
38
(10)
\u2014
(53)
Debt securities in issue
(3,811)
150
(54)
(77)
52
(4,091)
118
(75)
(114)
(128)
Subordinated liabilities
(511)
(12)
(1)
(36)
15
(522)
(27)
(1)
(42)
(1)
Interest rate/FX risk:
Other financial assets at FVOCI
1,503
16
\u2014
\u2014
(30)
989
4
\u2014
\u2014
12
Debt securities in issue
(200)
(9)
\u2014
(14)
13
(214)
(14)
\u2014
(24)
8
Subordinated liabilities
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(1)
48,218
(13)
(785)
(518)
(168)
61,815
7
(719)
(754)
1,896
Group
2024
2023
Change in value to
calculate hedge
ineffectiveness
Cash flow hedge
reserve
Balances on cash
flow hedge
reserve for
discontinued
hedges
Change in value to
calculate hedge
ineffectiveness
Cash flow hedge
reserve
Balances on cash
flow hedge reserve
for discontinued
hedges
Hedged item balance sheet line item
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cash flow hedges:
Interest rate risk:
Loans and advances to customers
361
(497)
2
(163)
(462)
1
Cash and balances at central banks
464
(192)
(50)
(281)
99
(76)
Deposits by banks
(4)
\u2014
\u2014
(1)
(1)
\u2014
Repurchase agreements - non trading
(60)
52
\u2014
\u2014
\u2014
\u2014
FX risk:
Other financial assets at FVOCI
(487)
1
\u2014
(253)
1
\u2014
Not applicable \u2013 highly probable forecast
transactions
4
\u2014
\u2014
88
1
\u2014
Deposits by customers
\u2014
\u2014
\u2014
(33)
\u2014
\u2014
Debt securities in issue
78
181
\u2014
617
(9)
\u2014
Repurchase agreements - non trading
\u2014
\u2014
\u2014
(42)
\u2014
\u2014
Interest rate/FX risk:
Debt securities in issue/loans and advances to
customers
148
(12)
\u2014
99
(75)
\u2014
Deposits by customers
21
(37)
\u2014
94
(39)
\u2014
Subordinated liabilities/loans and advances to
customers
3
(16)
51
44
(11)
52
Inflation risk:
Other financial assets at amortised cost
(70)
66
\u2014
\u2014
\u2014
\u2014
Other financial assets at FVOCI
(1)
1
\u2014
\u2014
\u2014
\u2014
457
(453)
3
169
(496)
(23)
Company
2024
2023
Accumulated amount of FV hedge
adjustments
Change in
value to
calculate
hedge
ineffective
ness
Accumulated amount of FV hedge
adjustments
Change in
value to
calculate
hedge
ineffective
ness
Carrying
value
Hedged
item
Portfolio
hedge of
interest
rate risks
Of which
Discontinued
hedges
Carrying
value
Hedged
item
Portfolio
hedge of
interest
rate risks
Of which
Discontinued
hedges
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Fair value hedges
Interest rate risk:
Loans and advances to customers
62,694
\u2014
(903)
(461)
(153)
73,117
\u2014
(839)
(649)
1,967
Other financial assets at amortised cost
1,667
(45)
(7)
(7)
(44)
152
1
(8)
(8)
5
Reverse repurchase agreements \u2013 non
trading
6,423
\u2014
(1)
\u2014
(1)
6,186
\u2014
\u2014
\u2014
4
Other financial assets at FVOCI
2,100
(131)
\u2014
(95)
(18)
2,013
(113)
\u2014
(131)
82
Deposits by customers
(21,726)
18
10
1
(1)
(16,031)
38
(10)
\u2014
(53)
Debt securities in issue
(2,035)
64
\u2014
\u2014
32
(2,312)
35
\u2014
\u2014
(88)
Subordinated liabilities
(512)
(13)
\u2014
(35)
14
(524)
(28)
\u2014
(42)
(1)
Interest rate/FX risk:
Other financial assets at FVOCI
1,503
17
\u2014
\u2014
(30)
989
4
\u2014
\u2014
12
Subordinated liabilities
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(1)
50,114
(90)
(901)
(597)
(201)
63,590
(63)
(857)
(830)
1,927
Company
2024
2023
Change in value to
calculate hedge
ineffectiveness
Cash flow
hedge reserve
Balances on cash
flow hedge
reserve for
discontinued
hedges
Change in value to
calculate hedge
ineffectiveness
Cash flow
hedge reserve
Balances on cash
flow hedge reserve
for discontinued
hedges
Hedged item balance sheet line item
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cash flow hedges:
Interest rate risk:
Loans and advances to customers
214
(312)
2
(133)
(268)
1
Cash and balances at central banks
464
(191)
(50)
(281)
99
(76)
Deposits by banks
(4)
\u2014
\u2014
(1)
(1)
\u2014
Repurchase agreements - non trading
(60)
52
\u2014
\u2014
\u2014
\u2014
FX risk:
Other financial assets at FVOCI
(487)
1
\u2014
(253)
1
\u2014
Not applicable \u2013 highly probable forecast
transactions
4
\u2014
\u2014
88
1
\u2014
Deposits by customers
\u2014
\u2014
\u2014
(33)
\u2014
\u2014
Debt securities in issue
(99)
48
\u2014
440
(13)
\u2014
Repurchase agreements - non trading
\u2014
\u2014
\u2014
(42)
\u2014
\u2014
Interest rate/FX risk:
Debt securities in issue/loans and advances to
customers
23
(2)
\u2014
35
(21)
(2)
Deposits by customers
21
(38)
(1)
94
(41)
(2)
Subordinated liabilities/loans and advances to
customers
3
(23)
43
41
(19)
44
Inflation risk:
Other financial assets at amortised cost
(70)
65
\u2014
\u2014
\u2014
\u2014
Other financial assets at FVOCI
(1)
1
\u2014
\u2014
\u2014
\u2014
8
(399)
(6)
(45)
(262)
(35)
12. OTHER FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
Group
Company
2024
2023
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Loans and advances to customers:
Loans to housing associations
4
8
4
8
Other loans
40
38
40
38
44
46
44
46
Debt securities
56
167
56
168
Other debt instruments
36
49
\u2014
\u2014
136
262
100
214
For the Santander UK group, other financial assets at FVTPL comprised \u00a360m (2023: \u00a38m) of financial assets designated at FVTPL and \u00a376m (2023: \u00a3254m) of
financial assets mandatorily held at FVTPL. For the Company, other financial assets at FVTPL comprised \u00a360m (2023: \u00a38m) of financial assets designated at FVTPL
and \u00a340m (2023: \u00a3206m) of financial assets mandatorily held at FVTPL.
Loans and advances to customers principally represent other loans, being a portfolio of roll-up mortgages. These are managed, and have their performance
evaluated, on a fair value basis in accordance with a documented investment strategy, and information about them is provided on that basis to management.
The net loss in the year attributable to changes in credit risk for loans and advances at FVTPL was \u00a3nil (2023: \u00a3nil, 2022: \u00a31m). The cumulative net loss attributable
to changes in credit risk for loans and advances at FVTPL at 31 December 2024 was \u00a33m (2023: \u00a33m,2022: \u00a33m).
14. SECURITISATIONS AND COVERED BONDS
The information in this Note relates to securitisations and covered bonds for consolidated structured entities, used to obtain funding or collateral. It excludes
structured entities relating to credit protection transactions.
The Santander UK group uses structured entities to securitise some of the mortgage and other loans to customers that it originates. The Santander UK group also
issues covered bonds, which are guaranteed by, and secured against, a pool of the Santander UK group\u2019s mortgage loans transferred to Abbey Covered Bonds LLP.
The Santander UK group issues mortgage-backed securities, other asset-backed securities and covered bonds mainly in order to obtain diverse, low-cost funding,
but also to use as collateral for raising funds via third party bilateral secured funding transactions or for liquidity purposes in the future. The Santander UK group has
successfully used bilateral secured transactions as an additional form of medium-term funding; this has allowed the Santander UK group to further diversify its
medium-term funding investor base.
Loans and advances to customers include portfolios of residential mortgage loans, and receivables derived from credit agreements with retail customers for the
purchases of financed vehicles, which are subject to non-recourse finance arrangements. These loans and receivables have been purchased by, or assigned to,
structured entities or Abbey Covered Bonds LLP, and have been funded primarily through the issue of mortgage-backed securities, other asset-backed securities or
covered bonds. No gain or loss has been recognised as a result of these sales. The structured entities and Abbey Covered Bonds LLP are consolidated as subsidiary
undertakings. The Company and its subsidiaries do not own directly, or indirectly, any of the share capital of any of the structured entities.
a) Securitisations
i) Master trust structures
The Santander UK group makes use of master trust structures, whereby a pool of residential mortgage loans is assigned to a trust company by the asset originator.
A funding entity acquires a beneficial interest in the pool of assets held by the trust company with funds borrowed from qualifying structured entities, which at the
same time issue asset-backed securities to third-party investors or the Santander UK group.
Santander UK plc and its subsidiaries receive payments from the securitisation companies in respect of fees for administering the loans, and payment of deferred
consideration for the sale of the loans. Santander UK plc and its subsidiaries have no right or obligation to repurchase any securitised loan, except if certain
representations and warranties given by Santander UK plc or its subsidiaries at the time of transfer are breached and, in certain cases, if there is a product switch or
further advance, if a securitised loan is in arrears for over two months or if a securitised loan does not comply with regulatory requirements.
ii) Other securitisation structures
The Santander UK group also makes use of auto loan securitisations, whereby a pool of auto loans originated by a member of the Santander UK group is sold to a
special purpose vehicle by the asset originator. The special purpose vehicle funds the purchase of the auto loans by issuing asset-backed securities to third-party
investors. A proportion of the securities are also retained by members of the Santander UK group. Members of the Santander UK group also receive payments from
the special purpose vehicle in respect of fees for administering the auto loans, and payment of deferred consideration for the sale of the auto loans. The seller has
no right or obligation to repurchase any securitised loan, except if certain representations and warranties given by the seller at the time of transfer are breached
and, in certain cases, if there has been a subsequent variation in the terms of the underlying auto loan not permitted under the sale agreement.
b) Covered bonds
Santander UK plc also issues covered bonds, which are its direct, unsecured and unconditional obligation. The covered bonds benefit from a guarantee from Abbey
Covered Bonds LLP. Santander UK plc makes a term advance to Abbey Covered Bonds LLP equal to the sterling proceeds of each issue of covered bonds. Abbey
Covered Bonds LLP uses the proceeds of the term advance to purchase portfolios of residential mortgage loans and their security from Santander UK plc. Under the
terms of the guarantee, Abbey Covered Bonds LLP has agreed to pay an amount equal to the guaranteed amounts when the same shall become due for payment,
but which would otherwise be unpaid by Santander UK plc.
c) Analysis of securitisations and covered bonds
The Santander UK group\u2019s principal securitisation programmes and covered bond programme, together with the balances of the advances subject to securitisation
(or for the covered bond programme assigned) and the carrying value of the notes in issue at 31 December 2024 and 2023 are listed below. The gross assets in the
Group table below were transferred from the Company to the securitisations and covered bond programme vehicles but do not qualify for derecognition from the
Company.
Group
Gross assets
External notes in issue
Notes held within the Group
2024
2023
2024
2023
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Mortgage-backed master trust structures:
\u2013 Holmes
5,109
3,242
3,379
2,119
389
300
\u2013 Fosse
2,383
2,048
\u2014
100
1,408
1,382
7,492
5,290
3,379
2,219
1,797
1,682
Other asset-backed securitisation structures:
\u2013 Repton
718
757
550
550
\u2014
\u2014
Total securitisation programmes
8,210
6,047
3,929
2,769
1,797
1,682
Covered bond programme:
\u2013 Euro 35bn Global Covered Bond Programme
25,695
21,880
17,211
15,000
1,224
\u2014
Total securitisation and covered bond programmes
33,905
27,927
21,140
17,769
3,021
1,682
Company
Gross assets
External notes in issue
Notes held within the Company
2024
2023
2024
2023
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Covered bond programme:
\u2013 Euro 35bn Global Covered Bond Programme
25,695
21,880
17,300
15,087
1,224
\u2014
Total securitisation and covered bond programmes
25,695
21,880
17,300
15,087
1,224
\u2014
The following table sets out the internal and external issuances and redemptions in 2024 and 2023 for each securitisation and covered bond programme.
Group
Internal issuances
External issuances
Internal redemptions
External redemptions
2024
2023
2024
2023
2024
2023
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Mortgage-backed master trust structures:
\u2013 Holmes
106
241
1,250
1,500
17
121
\u2014
186
\u2013 Fosse
894
\u2014
\u2014
\u2014
865
\u2014
100
\u2014
Other asset-backed securitisation structures:
\u2013 Motor
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
7
\u2013 Repton
\u2014
\u2014
\u2014
550
\u2014
\u2014
\u2014
\u2014
Covered bond programme:
\u2013 Euro 35bn Global Covered Bond Programme
\u2014
\u2014
5,890
\u2014
41
\u2014
3,359
\u2014
1,000
241
7,140
2,050
923
121
3,459
193
Company
Internal issuances
External issuances
Internal redemptions
External redemptions
2024
2023
2024
2023
2024
2023
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Covered bond programme:
\u2013 Euro 35bn Global Covered Bond Programme
\u2014
1,100
5,890
1,844
41
16
3,359
1,897
\u2014
1,100
5,890
1,844
41
16
3,359
1,897
Holmes Funding Ltd has a beneficial interest of \u00a33,735m (2023: \u00a32,396m) in the residential mortgage loans held by Holmes Trustees Ltd. The remaining share of
the beneficial interest in residential mortgage loans held by Holmes Trustees Ltd belongs to Santander UK plc.
Fosse Funding (No.1) Ltd has a beneficial interest of \u00a31,394m (2023: \u00a31,393m) in the residential mortgage loans held by Fosse Trustee (UK) Ltd. The remaining
share of the beneficial interest in residential mortgage loans held by Fosse Trustee (UK) Ltd belongs to Santander UK plc.
The Holmes securitisation companies have cash deposits of \u00a3126m (2023: \u00a380m), which have been accumulated to finance the redemption of a number of
securities issued by the Holmes securitisation companies. The share of Holmes Funding Ltd in the trust assets is therefore reduced by this amount.
The Fosse securitisation companies have cash deposits of \u00a348m (2023: \u00a3108m), which have been accumulated to finance the redemption of a number of securities
issued by the Fosse securitisation companies. The share of Fosse Funding (No.1) Ltd\u2019s beneficial interest in the assets held by Fosse Trustee (UK) Ltd is therefore
reduced by this amount.
15. TRANSFERS OF FINANCIAL ASSETS NOT QUALIFYING FOR DERECOGNITION
The Santander UK group enters into transactions in the normal course of business by which it transfers recognised financial assets directly to third parties or to
structured entities. These transfers may give rise to the full or partial derecognition of those financial assets. Transferred financial assets that do not qualify for
derecognition consist of (i) securities held by counterparties as collateral under repurchase agreements, (ii) securities lent under securities lending agreements, and
(iii) loans that have been transferred under securitisation or covered bond arrangements by which the Santander UK group retains a continuing involvement in such
transferred assets.
As a result of these sale and repurchase and securities lending transactions, the Santander UK group is unable to use, sell or pledge the transferred assets for the
duration of the transaction. The Santander UK group remains exposed to interest rate risk and credit risk on these pledged instruments. The counterparty\u2019s recourse
is not limited to the transferred assets.
The Santander UK group securitisation and covered bond transfers do not qualify for derecognition. The Santander UK group remains exposed to credit risks arising
from the mortgage loans or credit agreements and has retained control of the transferred assets. Circumstances in which the Santander UK group has continuing
involvement in the transferred assets may include retention of servicing rights over the transferred assets (the servicing fee in respect of which is dependent on the
amount or timing of the cash flows collected from, or the non-performance of, the transferred assets), entering into a derivative transaction with the securitisation
or covered bond vehicle, retaining an interest in the securitisation or covered bond vehicle or providing a cash reserve fund. Where the Santander UK group has
continuing involvement, it continues to recognise the transferred assets to the extent of its continuing involvement and recognises an associated liability. The net
carrying amount of the transferred assets and associated liabilities reflects the rights and obligations that the Santander UK group has retained.
The carrying amount of the assets transferred under securitisation and covered bond arrangements and associated financial liabilities is set out in Note 14 c). The
following table analyses the carrying amount of other financial assets that did not qualify for derecognition and their associated financial liabilities:
Group
2024
2023
Assets
Liabilities
Assets
Liabilities
Nature of transaction
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Sale and repurchase agreements
1,346
(1,372)
14
(15)
Securities lending agreements
3,304
(2,807)
3,136
(2,735)
Company
2024
2023
Assets
Liabilities
Assets
Liabilities
Nature of transaction
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Sale and repurchase agreements
1,346
(1,372)
14
(14)
Securities lending agreements
2,358
(2,307)
2,228
(2,735)
17. OTHER FINANCIAL ASSETS AT AMORTISED COST
Group
Company
2024
2023
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Asset backed securities
\u2014
\u2014
1,798
1,681
Debt securities
3,408
152
3,408
152
0
3,408
152
5,206
1,833
A significant portion of the debt securities are held in our eligible liquidity pool and consist mainly of government bonds and covered bonds. In 2024, Santander UK
increased the allocation of liquid assets to longer-dated, duration-hedged UK Gilts to support ongoing HQLA requirements. Detailed disclosures can be found in the
'Liquidity risk' section of the Risk review.
The Company\u2019s asset backed securities include investments in debt securities issued by Santander UK structured entities.
24. OTHER FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS
Group
Company
2024
2023
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Structured Notes Programmes
355
369
355
369
Structured deposits
605
426
605
426
Zero Amortising Guaranteed Notes
95
104
95
104
1,055
899
1,055
899
For the Santander UK group and the Company, all (2023: all) of the other financial liabilities at FVTPL were designated as such.
Gains and losses arising from changes in the credit spread of securities issued by the Santander UK group reverse over the contractual life of the debt, provided that
the debt is not repaid at a premium or a discount. The net loss during the year attributable to changes in the Santander UK group\u2019s own credit risk on the above
securities was \u00a317m (2023: \u00a321m loss, 2022: \u00a325m gain). The cumulative net loss attributable to changes in the Santander UK group\u2019s own credit risk on the above
securities at 31 December 2024 was \u00a34m (2023: \u00a36m loss, 2022: \u00a315m gain).
At 31 December 2024, the amount that would be required to be contractually paid at maturity of the securities above was \u00a376m (2023: \u00a397m) higher than the
carrying value.
25. DEBT SECURITIES IN ISSUE
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Group
Company
2024
2023
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Medium-term notes:
\u2013 US $30bn Euro Medium Term Note Programme
696
744
696
744
\u2013 Euro \u20ac30bn Euro Medium Term Note Programme
2,997
3,784
2,997
3,784
- US SEC-registered Debt Programme - Santander UK plc
5,929
7,128
5,929
7,128
0
9,622
11,656
9,622
11,656
Euro \u20ac35bn Global Covered Bond Programme
17,211
15,000
17,300
15,087
US$20bn Commercial Paper Programmes
3,274
2,761
3,274
2,761
Certificates of deposit
1,196
1,530
1,196
1,530
Credit linked notes
441
194
441
194
Securitisation programmes
3,929
2,769
\u2014
\u2014
35,673
33,910
31,833
31,228
29. SUBORDINATED LIABILITIES
Group
Company
2024
2023
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3325m Sterling preference shares
343
343
343
343
Undated subordinated liabilities
205
205
205
205
Dated subordinated liabilities
1,837
1,838
1,838
1,839
2,385
2,386
2,386
2,387
In 2024, no subordinated liabilities were repurchased as part of ongoing liability management exercises (2023: profit of \u00a34m).
The above securities will, in the event of the winding up of the issuer, be subordinated to the claims of depositors and all other creditors of the issuer, other than
creditors whose claims rank equally with, or are junior to, the claims of the holders of the subordinated liabilities. The subordination amongst each of the
subordinated liabilities upon a winding up of the issuer is specified in their respective terms and conditions.
In 2024 and 2023, the Santander UK group had no defaults of principal, interest or other breaches with respect to its subordinated liabilities. No repayment or
purchase by the issuer of the subordinated liabilities may be made prior to their stated maturity without the consent of the PRA.
Undated subordinated liabilities
Group
Company
2024
2023
2024
2023
First call date
\u00a3m
\u00a3m
\u00a3m
\u00a3m
10.0625% Exchangeable capital securities
n/a
205
205
205
205
205
205
205
205
In common with other debt securities issued by Santander UK group companies and notwithstanding the issuer\u2019s first call dates in the table above, in the event of
certain tax changes affecting the treatment of payments of interest on subordinated liabilities in the UK, the 10.0625% Exchangeable capital securities are
redeemable on any interest payment date \u2013 each in whole at the option of Santander UK, at their principal amount together with any accrued interest.
The 10.0625% Exchangeable capital securities are exchangeable into fully paid 10.375% non-cumulative non-redeemable sterling preference shares of \u00a31 each, at
the option of Santander UK, on the business day immediately following any interest payment date.
Dated subordinated liabilities
Group
Company
2024
2023
2024
2023
Maturity
\u00a3m
\u00a3m
\u00a3m
\u00a3m
4.75% Subordinated notes
2025
332
326
332
326
7.95% Subordinated notes
2029
189
193
189
193
6.50% Subordinated notes
2030
1
1
1
1
5.875% Subordinated notes
2031
7
7
8
8
5.625%Subordinated notes
2045
226
222
226
222
7.869% Subordinated notes
2033
314
321
314
321
8.296% Subordinated notes
2033
768
768
768
768
1,837
1,838
1,838
1,839
The dated subordinated liabilities are redeemable in whole at the option of Santander UK in the event of certain tax changes affecting the treatment of payments of
interest on the subordinated liabilities in the UK, at their principal amount together with any accrued interest.
38. FINANCIAL INSTRUMENTS
a) Fair value measurement and hierarchy
(i) Fair value measurement
The fair value of financial instruments is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date in the principal, or in its absence, the most advantageous market to which Santander UK has access at that date. The fair value
of a liability reflects its non-performance risk.
Financial instruments valued using observable market prices
If a quoted market price in an active market is available for an instrument, the fair value is calculated as the current exit price multiplied by the number of units of
the instrument held.
Financial instruments valued using a valuation technique
In the absence of a quoted market price in an active market, management uses internal models to make its best estimate of the price that the market would set
for\u00a0that financial instrument. In order to make these estimations, various techniques are employed, including extrapolation from observable market data and
observation of similar financial instruments with similar characteristics. Wherever possible, valuation parameters for each product are based on prices directly
observable in active markets or that can be derived from directly observable market prices. Chosen valuation techniques incorporate all the factors that market
participants would take into account in pricing transactions.
Santander UK manages certain groups of financial assets and liabilities on the basis of its net exposure to either market risks or credit risk. As a result, it has elected
to use the exception under IFRS 13 which permits the fair value measurement of a group of financial assets and financial liabilities on the basis of the price that
would be received to sell a net long position for a particular risk exposure or paid to transfer a net short position for a particular risk exposure in an orderly
transaction between market participants at the measurement date under current market conditions.
(ii) Fair value hierarchy
Santander UK applies the following fair value hierarchy that prioritises the inputs to valuation techniques used in measuring fair value. The hierarchy establishes
three categories for valuing financial instruments, giving the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the
lowest priority to unobservable inputs. The three categories are: quoted prices in active markets (Level 1), internal models based on observable market data (Level
2) and internal models based on other than observable market data (Level 3). If the inputs used to measure an asset or a liability fall to different levels within the
hierarchy, the classification of the entire asset or liability will be based on the lowest level input that is significant to the overall fair value measurement of the asset
or liability.
Santander UK categorises assets and liabilities measured at fair value within the fair value hierarchy based on the inputs to the valuation techniques as follows:
Level 1Unadjusted quoted prices for identical assets or liabilities in an active market that Santander UK can access at the measurement date. Active markets
are assessed by reference to average daily trading volumes in absolute terms and, where applicable, by reference to market capitalisation for the
instrument.
Level 2Quoted prices in inactive markets, quoted prices for similar assets or liabilities, recent market transactions, inputs other than quoted market prices for
the asset or liability that are observable either directly or indirectly for substantially the full term, and inputs to valuation techniques that are derived
principally from or corroborated by observable market data through correlation or other statistical means for substantially the full term of the asset or
liability.
Level 3Significant inputs to the pricing or valuation techniques are unobservable. These unobservable inputs reflect the assumptions that market participants
would use when pricing assets or liabilities and are considered significant to the overall valuation.
Changes in the observability of significant valuation inputs during the reporting period may result in a transfer of assets and liabilities within the fair value hierarchy.
The Santander UK group recognises transfers between levels of the fair value hierarchy when there is a significant change in either its principal market or the level
of observability of the inputs to the valuation techniques at the end of the reporting period.
b) Valuation techniques
The main valuation techniques employed in internal models to measure the fair value of the financial instruments at 31 December 2024 and 2023 are set out
below. In substantially all cases, the principal inputs into these models are derived from observable market data. Santander UK did not make any material changes
to the valuation techniques and internal models it used in 2024, 2023 and 2022.
A. In the valuation of financial instruments requiring static hedging (for example interest rate, currency derivatives and property derivatives) and in the valuation
of loans and advances and deposits, the \u2018present value\u2019 method is used. Expected future cash flows are discounted using the interest rate curves of the
applicable currencies or forward house price index levels, as well as credit spreads. The interest rate curves are generally observable market data and
reference yield curves derived from quoted interest rates in appropriate time bandings, which match the timings of the cash flows and maturities of the
instruments.
B. In the valuation of equity financial instruments requiring dynamic hedging (principally equity securities, options and other structured instruments), proprietary
local volatility and stochastic volatility models are used. These types of models are widely accepted in the financial services industry. Observable market inputs
used in these models include the bid-offer spread, foreign currency exchange rates, volatility and correlation between indices. In limited circumstances, other
inputs may be used in these models that are based on unobservable market data, such as the Halifax\u2019s UK HPI volatility, HPI forward growth, HPI spot rate,
mortality and mean reversion.
C. In the valuation of financial instruments exposed to interest rate risk that require either static or dynamic hedging (such as interest rate swaps, caps and
floors), the present value method (swaps), and Black\u2019s model (caps/floors) are used. These types of models are widely accepted in the financial services
industry. The significant inputs used in these models are observable market data, including appropriate interest rate curves, volatilities, correlations and
exchange rates. In limited circumstances, other inputs may be used in these models that are based on unobservable market data, such as HPI volatility, HPI
forward growth, HPI spot rate and mortality.
D. In the valuation of linear instruments such as credit risk and fixed-income derivatives, credit risk is measured using dynamic models similar to those used in
the\u00a0measurement of interest rate risk. In the case of non-linear instruments, if the portfolio is exposed to credit risk such as credit derivatives, the probability
of\u00a0default is determined using the credit default spread market. The main inputs used to determine the underlying cost of credit of credit derivatives are
quoted credit risk premiums and the correlation between the quoted credit derivatives of various issuers.
The fair values of the financial instruments arising from Santander UK\u2019s internal models take into account, among other things, contract terms and observable
market data, which include such factors as bid-offer spread, interest rates, credit risk, exchange rates, the quoted market price of equity securities, and volatility.
In\u00a0all cases, when it is not possible to derive a valuation for a particular feature of an instrument, management uses judgement to determine the fair value of
the\u00a0particular feature. In exercising this judgement, a variety of tools are used including proxy observable data, historical data and extrapolation techniques.
Extrapolation techniques take into account behavioural characteristics of equity markets that have been observed over time, and for which there is a strong case to
support an expectation of a continuing trend in the future. Estimates are calibrated to observable market prices when they become available.
Santander UK believes its valuation methods are appropriate and consistent with other market participants. Nevertheless, the use of different valuation methods or
assumptions, including imprecision in estimating unobservable market inputs, to determine the fair value of certain financial instruments could result in different
estimates of fair value at the reporting date and the amount of gain or loss recorded for a particular instrument. Most of the valuation models are not significantly
subjective, because they can be tested and, if necessary, recalibrated by the internal calculation of and subsequent comparison to market prices of actively traded
securities, where available.
c) Control framework
Fair values are subject to a control framework designed to ensure that they are either determined or validated by a function independent of the risk-taker. To this
end, ultimate responsibility for the determination of fair values lies with the Risk Department. For all financial instruments where fair values are determined by
reference to externally quoted prices or observable pricing inputs to models, independent price determination or verification is utilised. In inactive markets, direct
observation of a traded price may not be possible. In these circumstances, Santander UK will source alternative market information to validate the financial
instrument\u2019s fair value, with greater weight given to information that is considered to be more relevant and reliable.
The factors that are considered in this regard include:
\u2013 The extent to which prices may be expected to represent genuine traded or tradeable prices
\u2013 The degree of similarity between financial instruments
\u2013 The degree of consistency between different sources
\u2013 The process followed by the pricing provider to derive the data
\u2013 The elapsed time between the date to which the market data relates and the balance sheet date
\u2013 The manner in which the data was sourced.
The source of pricing data is considered as part of the process that determines the classification of the level of a financial instrument. Consideration is given to the
quality of the information available that provides the current mark-to-model valuation and estimates of how different these valuations could be on an actual trade,
taking into consideration how active the market is. For spot assets that cannot be sold due to illiquidity, forward estimates are discounted to estimate a realisable
value over time. Adjustments for illiquid positions are regularly reviewed to reflect changing market conditions.
For fair values determined using a valuation model, the control framework may include as applicable, independent development and / or validation of: (i) the logic
within the models; (ii) the inputs to those models; and (iii) any adjustments required outside the models. Internal valuation models are validated independently
within the Risk Department. A validation report is produced for each model-derived valuation that assesses the mathematical assumptions behind the model, the
implementation of the model and its integration within the trading system.
d) Fair values of financial instruments carried at amortised cost
The following tables analyse the fair value of the financial instruments carried at amortised cost at 31 December 2024 and 2023, including their levels in the fair
value hierarchy - Level 1, Level 2 and Level 3. Cash and balances at central banks, which consist of demand deposits with the Bank of England, together with cash in
tills and ATMs, have been excluded from the table as the carrying amount is deemed an appropriate approximation of fair value.
Group
2024
2023
Fair value
Fair
Carrying
Fair value
Fair
Carrying
Level 1
Level 2
Level 3
value
value
Level 1
Level 2
Level 3
value
value
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Loans and advances to customers
\u2014
\u2014
198,376
198,376
199,408
\u2014
\u2014
205,917
205,917
207,435
Loans and advances to banks
\u2014
1,032
\u2014
1,032
1,032
\u2014
1,080
\u2014
1,080
1,080
Reverse repurchase agreements - non-
trading
\u2014
10,342
\u2014
10,342
10,338
\u2014
12,470
\u2014
12,470
12,468
Other financial assets at amortised cost
3,190
\u2014
\u2014
3,190
3,408
144
\u2014
\u2014
144
152
3,190
11,374
198,376
212,940
214,186
144
13,550
205,917
219,611
221,135
Liabilities
Deposits by customers
\u2014
185
180,282
180,467
180,967
\u2014
71
190,561
190,632
190,850
Deposits by banks
\u2014
13,934
39
13,973
13,993
\u2014
20,342
40
20,382
20,332
Repurchase agreements - non-trading
\u2014
8,622
\u2014
8,622
8,617
\u2014
8,413
\u2014
8,413
8,411
Debt securities in issue
21,173
12,910
1,771
35,854
35,673
1,689
30,743
1,189
33,621
33,910
Subordinated liabilities
1,129
10
1,622
2,761
2,385
\u2014
2,591
209
2,800
2,386
22,302
35,661
183,714
241,677
241,635
1,689
62,160
191,999
255,848
255,889
Company
2024
2023
Fair value
Carrying
Fair value
Carrying
Level 1
Level 2
Level 3
Fair value
value
Level 1
Level 2
Level 3
Fair value
value
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Loans and advances to customers
\u2014
\u2014
216,851
216,851
217,780
\u2014
\u2014
222,208
222,208
223,511
Loans and advances to banks
\u2014
926
\u2014
926
926
\u2014
1,052
\u2014
1,052
1,052
Reverse repurchase agreements - non-trading
\u2014
10,342
\u2014
10,342
10,338
\u2014
12,470
\u2014
12,470
12,468
Other financial assets at amortised cost
3,190
1,977
\u2014
5,167
5,206
144
1,681
\u2014
1,825
1,833
3,190
13,245
216,851
233,286
234,250
144
15,203
222,208
237,555
238,864
Liabilities
Deposits by customers
\u2014
185
200,530
200,715
201,215
\u2014
71
207,216
207,287
207,516
Deposits by banks
\u2014
13,922
5,579
19,501
19,521
\u2014
20,326
5,424
25,750
25,699
Repurchase agreements - non-trading
\u2014
8,621
\u2014
8,621
8,617
\u2014
8,413
\u2014
8,413
8,411
Debt securities in issue
17,870
12,846
1,379
32,095
31,833
999
29,181
841
31,021
31,228
Subordinated liabilities
1,129
10
1,598
2,737
2,386
\u2014
2,592
209
2,801
2,387
18,999
35,584
209,086
263,669
263,572
999
60,583
213,690
275,272
275,241
The carrying value above of any financial assets and liabilities that are designated as hedged items in a portfolio (or macro) fair value hedge relationship excludes
gains and losses attributable to the hedged risk, as this is included as a separate line item on the balance sheet.
Valuation methodology for financial instruments carried at amortised cost
The valuation approach to specific categories of financial instruments is described below.
Assets:
Loans and advances to customers
The approach to estimating the fair value of loans and advances to customers has been determined by discounting expected cash flows to reflect either current
market rates or credit spreads relevant to the specific industry of the borrower. The determination of their fair values is an area of considerable estimation and
uncertainty as there is no observable market and values are significantly affected by customer behaviour.
i) Advances secured on residential property
The fair value of the mortgage portfolio is calculated by discounting contractual cash flows by different spreads for each LTV Band, after taking account of expected
customer prepayment rates. The spread is based on new business interest rates derived from publicly available competitor market information.
ii) Corporate loans
The determination of the fair values of performing loans is calculated by discounting the contractual cash flows and also deducting other costs relating to expected
credit losses, cost of capital, credit risk capital, operational risk capital, cost of funding and operating costs.
iii) Other loans
These consist of unsecured personal loans, credit cards, overdrafts and consumer (auto) finance. The weighted average lives of these portfolios are typically short
and relate to relatively new business. For unsecured personal loans and consumer (auto) finance loans, a small surplus or deficit has been recognised based on the
differential between existing portfolio margins and the current contractual interest rates.
Loans and advances to banks
These comprise secured loans, short-term placements with banks including collateral and unsettled financial transactions. The secured loans have been valued
based on a discounted spread for the term of the loans using valuation technique A as described above. The carrying amount of the other items is deemed a
reasonable approximation of their fair value, as the transactions are very short-term in duration.
Reverse repurchase agreements - non-trading
The fair value of the reverse repurchase agreements - non trading has been estimated using valuation technique A as described above, using a spread appropriate to
the underlying collateral.
Other financial assets at amortised cost
These consist of asset backed securities and debt securities. The asset backed securities can be complex products and in some instances are valued with the
assistance of an independent, specialist valuation firm. These fair values are determined using industry-standard valuation techniques, including discounted
cash\u00a0flow models. The inputs to these models used in these valuation techniques include quotes from market makers, prices of similar assets, adjustments for
differences in credit spreads, and additional quantitative and qualitative research. The debt security investments consist of a portfolio of government debt securities.
The fair value of this portfolio has been determined using quoted market prices.
Liabilities:
Deposits by customers
The majority of deposit liabilities are payable on demand and therefore can be deemed short-term in nature with the fair value equal to the carrying value. Certain
of the deposit liabilities are at a fixed rate until maturity. The deficit/surplus of fair value over carrying value of these liabilities has been estimated by reference to
the market rates available at the balance sheet date for similar deposit liabilities of similar maturities. The fair value of such deposit liabilities has been estimated
using valuation technique A as described above.
Deposits by banks
The fair value of deposits by banks, including repos, has been estimated using valuation technique A as described above, discounted at the appropriate credit spread.
Repurchase agreements - non-trading
The fair value of the repurchase agreements - non trading has been estimated using valuation technique A as described above, discounted at a spread appropriate
to the underlying collateral.
Debt securities in issue and subordinated liabilities
Where reliable prices are available, the fair value of debt securities in issue and subordinated liabilities has been calculated using quoted market prices. Where
reliable prices are not available, internal models have been used to determine fair values, which take into account, among other things, contract terms and
observable market data, which include such factors as interest rates, credit risk and exchange rates. In all cases, when it is not possible to derive a valuation for a
particular feature of an instrument, management uses judgement to determine the fair value of the particular feature. In exercising this judgement, a variety of
tools are used including proxy observable data.
e) Fair values of financial instruments measured at fair value
The following tables summarise the fair values of the financial assets and liabilities accounted for at fair value at 31 December 2024 and 31 December 2023,
analysed by their levels in the fair value hierarchy - Level 1, Level 2 and Level 3.
Group
2024
2023
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Valuation
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
technique
Assets
Derivative financial instruments
Exchange rate contracts
\u2014
978
\u2014
978
\u2014
1,129
\u2014
1,129
A
Interest rate contracts
\u2014
1,675
\u2014
1,675
\u2014
2,216
1
2,217
A & C
Inflation rate contracts
\u2014
70
\u2014
70
\u2014
\u2014
\u2014
\u2014
A
Equity and credit contracts
\u2014
89
35
124
\u2014
98
35
133
B & D
Netting
\u2014
(1,643)
\u2014
(1,643)
\u2014
(2,047)
\u2014
(2,047)
\u2014
1,169
35
1,204
\u2014
1,396
36
1,432
Other financial assets at FVTPL
Loans and advances to customers
\u2014
\u2014
44
44
\u2014
\u2014
46
46
A
Debt securities
\u2014
56
36
92
\u2014
167
49
216
A, B & D
\u2014
56
80
136
\u2014
167
95
262
Financial assets at FVOCI
Debt securities
8,805
201
34
9,040
8,293
188
\u2014
8,481
D
8,805
201
34
9,040
8,293
188
\u2014
8,481
Total assets at fair value
8,805
1,426
149
10,380
8,293
1,751
131
10,175
Liabilities
Derivative financial instruments
Exchange rate contracts
\u2014
430
\u2014
430
\u2014
508
\u2014
508
A
Interest rate contracts
\u2014
1,894
\u2014
1,894
\u2014
2,336
1
2,337
A & C
Equity and credit contracts
\u2014
7
14
21
\u2014
11
9
20
B & D
Netting
\u2014
(1,643)
\u2014
(1,643)
\u2014
(2,047)
\u2014
(2,047)
\u2014
688
14
702
\u2014
808
10
818
Other financial liabilities at FVTPL
Debt securities in issue
\u2014
355
\u2014
355
\u2014
369
\u2014
369
A
Structured deposits
\u2014
605
\u2014
605
\u2014
426
\u2014
426
A
Zero Amortising Guaranteed Notes
\u2014
95
\u2014
95
\u2014
104
\u2014
104
D
\u2014
1,055
\u2014
1,055
\u2014
899
\u2014
899
Total liabilities at fair value
\u2014
1,743
14
1,757
\u2014
1,707
10
1,717
Company
2024
2023
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Valuation
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
technique
Assets
Derivative financial instruments
Exchange rate contracts
\u2014
1,243
\u2014
1,243
\u2014
1,289
\u2014
1,289
A
Interest rate contracts
\u2014
1,685
3
1,688
\u2014
2,187
133
2,320
A & C
Inflation rate contracts
\u2014
70
\u2014
70
\u2014
\u2014
\u2014
\u2014
A
Equity and credit contracts
\u2014
89
35
124
\u2014
98
35
133
B & D
Netting
\u2014
(1,643)
\u2014
(1,643)
\u2014
(2,047)
\u2014
(2,047)
\u2014
1,444
38
1,482
\u2014
1,527
168
1,695
Other financial assets at FVTPL
Loans and advances to customers
\u2014
\u2014
44
44
\u2014
\u2014
46
46
A
Debt securities and other debt
instruments
\u2014
56
\u2014
56
\u2014
168
\u2014
168
C
\u2014
56
44
100
\u2014
168
46
214
Financial assets at FVOCI
Debt securities
8,805
201
34
9,040
8,293
188
\u2014
8,481
D
8,805
201
34
9,040
8,293
188
\u2014
8,481
Total assets at fair value
8,805
1,701
116
10,622
8,293
1,883
214
10,390
Liabilities
Derivative financial instruments
Exchange rate contracts
\u2014
456
\u2014
456
\u2014
580
\u2014
580
A
Interest rate contracts
\u2014
1,933
1,840
3,773
\u2014
2,350
1,071
3,421
A & C
Equity and credit contracts
\u2014
7
14
21
\u2014
11
9
20
B
Netting
\u2014
(1,643)
\u2014
(1,643)
\u2014
(2,047)
\u2014
(2,047)
\u2014
753
1,854
2,607
\u2014
894
1,080
1,974
Other financial liabilities at FVTPL
Debt securities in issue
\u2014
355
\u2014
355
\u2014
369
\u2014
369
A
Structured deposits
\u2014
605
\u2014
605
\u2014
426
\u2014
426
A
Zero Amortising Guaranteed Notes
\u2014
95
\u2014
95
\u2014
104
\u2014
104
D
\u2014
1,055
\u2014
1,055
\u2014
899
\u2014
899
Total liabilities at fair value
\u2014
1,808
1,854
3,662
\u2014
1,793
1,080
2,873
Transfers between levels of the fair value hierarchy
In 2024 there were no significant (2023: \u00a322m) transfers of financial instruments between levels of the fair value hierarchy.
f) Fair value adjustments
The internal models incorporate assumptions that Santander UK believes would be made by a market participant to establish fair value. Fair value adjustments
are\u00a0adopted when Santander UK considers that there are additional factors that would be considered by a market participant that are not incorporated in the
valuation model.
Santander UK classifies fair value adjustments as either \u2018risk-related\u2019 or \u2018model-related\u2019. The fair value adjustments form part of the portfolio fair value and are
included in the balance sheet values of the product types to which they have been applied.
The fair value adjustments are set out in the following table:
Group
2024
2023
\u00a3m
\u00a3m
Risk-related:
- Bid-offer and trade specific adjustments
6
(6)
- Uncertainty
4
6
- Credit risk adjustment
1
1
- Funding fair value adjustment
\u2014
1
11
2
Day One profit
\u2014
1
11
3
Company
2024
2023
\u00a3m
\u00a3m
Risk-related:
- Bid-offer and trade specific adjustments
8
(6)
- Uncertainty
4
6
- Credit risk adjustment
1
1
- Funding fair value adjustment
\u2014
1
13
2
Day One profit
\u2014
1
13
3
Risk-related adjustments
Risk-related adjustments are driven, in part, by the magnitude of Santander UK\u2019s market or credit risk exposure, and by external market factors, such as the size of
market spreads.
(i) Bid-offer and trade specific adjustments
Portfolios are marked at bid or offer, as appropriate. Valuation models will typically generate mid-market values. The bid-offer adjustment reflects the cost
that\u00a0would be incurred if substantially all residual net portfolio market risks were closed using available hedging instruments or by disposing of or unwinding
the\u00a0position. For debt securities, the bid-offer spread is based on a market price at an individual security level. For other products, the major risk types are identified.
For each risk type, the net portfolio risks are first classified into buckets, and then a bid-offer spread is applied to each risk bucket based upon the market bid-offer
spread for the relevant hedging instrument.
(ii) Uncertainty
Certain model inputs may be less readily determinable from market data, and/or the choice of model itself may be more subjective. In these circumstances, a
range\u00a0of possible values exists that the financial instrument or market parameter may assume, and an adjustment may be needed to reflect the likelihood that
in\u00a0estimating the fair value of the financial instrument, market participants would adopt more conservative values for uncertain parameters and/or model
assumptions than those used in the valuation model.
(iii) Credit risk adjustment
Credit risk adjustments comprise credit and debit valuation adjustments. The credit valuation adjustment (CVA) is an adjustment to the valuation of OTC derivative
contracts to reflect within fair value the possibility that the counterparty may default, and Santander UK may not receive the full market value of the transactions.
The debit valuation adjustment (DVA) is an adjustment to the valuation of the OTC derivative contracts to reflect within the fair value the possibility that Santander
UK may default, and that Santander UK may not pay full market value of the transactions.
Santander UK calculates a separate CVA and DVA for each Santander UK legal entity, and within each entity for each counterparty to which the entity has exposure.
Santander UK calculates the CVA by applying the probability of default of the counterparty to the expected positive exposure to the counterparty, and multiplying
the result by the loss expected in the event of default i.e. LGD. Conversely, Santander UK calculates the DVA by applying the PD of the Santander UK group, to the
expected positive exposure of the counterparty to Santander UK and multiplying the result by the LGD. Both calculations are performed over the life of the potential
exposure.
For most products Santander UK uses a simulation methodology to calculate the expected positive exposure to a counterparty. This incorporates a range of
potential exposures across the portfolio of transactions with the counterparty over the life of the portfolio. The simulation methodology includes credit mitigants
such as counterparty netting agreements and collateral agreements with the counterparty.
(iv) Funding fair value adjustment (FFVA)
The FFVA is an adjustment to the valuation of OTC derivative positions to include the net cost of funding uncollateralised derivative positions. This is calculated by
applying a suitable funding cost to the expected future funding exposure of any uncollateralised component of the OTC derivative portfolio.
Company
Significant unobservable input
Sensitivity
Assumption value
Favourable
changes
Unfavourable
changes
Fair value
Weighted
average
2024
\u00a3m
Assumption description
Range (1)
Shift
\u00a3m
\u00a3m
1. Derivative assets \u2013 Interest rate contracts:
3
Weighted Average
Mortgage Rate Payable
5% - 6%
5%
0.5%
20
(20)
\u2013 Securitisation swaps
2. Derivative liabilities - Interest rate contracts:
(1,840)
Weighted Average
Mortgage Rate Payable
2% - 7%
4%
0.5%
384
(384)
\u2013 Securitisation swaps
2023
1. Derivative assets \u2013 Interest rate contracts:
132
Weighted Average
Mortgage Rate Payable
3% - 8%
7%
0.5%
29
(29)
\u2013 Securitisation swaps
2. Derivative liabilities - Interest rate contracts:
(1,070)
Weighted Average
Mortgage Rate Payable
1% - 8%
3.76%
0.5%
279
(279)
\u2013 Securitisation swaps
(1) The range of actual assumption values used to calculate the weighted average disclosure.
h) Maturities of financial liabilities and off-balance sheet commitments
The table below analyses the maturities of the undiscounted cash flows relating to financial liabilities and off-balance sheet commitments of Santander UK based
on the remaining period to the contractual maturity date at the balance sheet date. Deposits by customers largely consist of retail deposits. This table is not
intended to show the liquidity of Santander UK.
Group
On demand
Not later than
3 months
Later than 3
months and
not later than
1 year
Later than 1
year and not
later than 5
years
Later than 5
years
Total
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Financial liabilities
Derivative financial instruments
\u2014
165
136
317
173
791
Other financial liabilities at fair value through profit or loss
10
3
135
556
524
1,228
Deposits by customers
169,285
3,487
4,004
4,451
355
181,582
Deposits by banks
1,352
1,561
7,618
4,459
\u2014
14,990
Repurchase agreements \u2013 non trading
\u2014
7,894
762
\u2014
\u2014
8,656
Debt securities in issue
\u2014
5,907
1,959
26,332
7,761
41,959
Subordinated liabilities
\u2014
27
628
332
1,895
2,882
Lease liabilities
\u2014
\u2014
28
58
17
103
Total financial liabilities
170,647
19,044
15,270
36,505
10,725
252,191
Off-balance sheet commitments given
4,007
19,088
916
8,391
3,247
35,649
2023
Financial liabilities
Derivative financial instruments
1
192
52
478
183
906
Other financial liabilities at fair value through profit or loss
\u2014
8
7
538
520
1,073
Deposits by customers
179,732
3,217
3,447
4,690
288
191,374
Deposits by banks
1,454
1,749
573
18,084
\u2014
21,860
Repurchase agreements \u2013 non trading
\u2014
8,418
8
\u2014
\u2014
8,426
Debt securities in issue
\u2014
6,380
4,908
17,029
12,216
40,533
Subordinated liabilities
\u2014
27
83
876
2,470
3,456
Lease liabilities
\u2014
\u2014
29
70
23
122
Total financial liabilities
181,187
19,991
9,107
41,765
15,700
267,750
Off-balance sheet commitments given
3,795
15,205
1,408
7,399
3,621
31,428
Company
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Financial liabilities
Derivative financial instruments
\u2014
159
135
387
2,577
3,258
Other financial liabilities at fair value through profit or loss
10
3
135
556
524
1,228
Deposits by customers
188,933
3,780
4,173
4,089
910
201,885
Deposits by banks
6,880
1,561
7,618
4,459
\u2014
20,518
Repurchase agreements \u2013 non trading
\u2014
7,894
762
\u2014
\u2014
8,656
Debt securities in issue
\u2014
5,865
1,535
25,575
3,548
36,523
Subordinated liabilities
\u2014
27
628
332
1,895
2,882
Lease liabilities
\u2014
\u2014
27
56
12
95
Total financial liabilities
195,823
19,289
15,013
35,454
9,466
275,045
Off-balance sheet commitments given
8,730
19,104
916
8,837
3,246
40,833
2023
Financial liabilities
Derivative financial instruments
23
175
58
555
1,558
2,369
Other financial liabilities at fair value through profit or loss
\u2014
8
7
538
520
1,073
Deposits by customers
195,901
3,479
3,440
4,288
1,060
208,168
Deposits by banks
1,395
1,824
742
24,114
\u2014
28,075
Repurchase agreements \u2013 non trading
\u2014
8,418
8
\u2014
\u2014
8,426
Debt securities in issue
\u2014
6,354
4,801
16,078
9,630
36,863
Subordinated liabilities
\u2014
27
83
875
2,470
3,455
Lease liabilities
\u2014
\u2014
28
67
17
112
Total financial liabilities
197,319
20,285
9,167
46,515
15,255
288,541
Off-balance sheet commitments given
8,271
15,214
1,408
7,945
3,620
36,458
As the above table is based on contractual maturities, no account is taken of call features related to subordinated liabilities. In addition, the repayment terms of debt
securities may be accelerated in line with relevant covenants. Further, no account is taken of the possible early repayment of Santander UK\u2019s mortgage-backed non-
recourse finance which is redeemed by Santander UK as funds become available from redemptions of the residential mortgages. Santander UK has no control over
the timing and amount of redemptions of residential mortgages.
39. OFFSETTING FINANCIAL ASSETS AND LIABILITIES
The following table shows the impact of netting arrangements on:
\u2013 All financial assets and liabilities that are reported net on the balance sheet
\u2013 All derivative financial instruments and repurchase agreements and other similar secured lending and borrowing agreements that are subject to enforceable
master netting arrangements or similar agreements, but do not qualify for balance sheet netting.
The table identifies the amounts that have been offset in the balance sheet and those amounts that are covered by enforceable netting arrangements (offsetting
arrangements and financial collateral) but do not qualify for netting under the requirements described above.
For derivative contracts, the \u2018Financial instruments\u2019 column identifies financial assets and liabilities that are subject to set off under netting agreements, such as
the\u00a0ISDA Master Agreement or derivative exchange or clearing counterparty agreements, whereby all outstanding transactions with the same counterparty can
be\u00a0offset and close-out netting applied across all outstanding transactions covered by the agreements if an event of default or other predetermined events occur.
Financial collateral refers to cash and non-cash collateral obtained, typically daily or weekly, to cover the net exposure between counterparties by enabling the
collateral to be realised in an event of default or if other predetermined events occur. For repurchase and reverse repurchase agreements and other similar secured
lending and borrowing, the \u2018Financial instruments\u2019 column identifies financial assets and liabilities that are subject to set off under netting agreements, such as
global master repurchase agreements and global master securities lending agreements, whereby all outstanding transactions with the same counterparty can
be\u00a0offset and close-out netting applied across all outstanding transactions covered by the agreements if an event of default or other predetermined events occur.
Financial collateral typically comprises highly liquid securities which are legally transferred and can be liquidated if a counterparty defaults.
Santander UK engages in a variety of counterparty credit mitigation strategies in addition to netting and collateral arrangements. Therefore, the net amounts
presented in the tables below do not represent Santander UK\u2019s total credit exposure.
Group
Amounts subject to enforceable netting arrangements
Assets not
subject to
enforceable
netting
arrangements(2)
Effects of offsetting on balance sheet
Related amounts not offset
Gross
amounts
Amounts
offset
Net amounts
on balance
sheet
Financial
instruments
Financial
collateral (1)
Net
amount
Balance
sheet
total (3)
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Derivative financial assets
2,799
(1,643)
1,156
(407)
(711)
38
48
1,204
Reverse repurchase, securities borrowing & similar
agreements:
\u2013 Amortised cost
16,175
(5,837)
10,338
(63)
(10,275)
\u2014
\u2014
10,338
Loans and advances to customers and banks\u207d\u2074\u207e
5,421
(635)
4,786
\u2014
\u2014
4,786
195,654
200,440
24,395
(8,115)
16,280
(470)
(10,986)
4,824
195,702
211,982
Liabilities
Derivative financial liabilities
2,325
(1,643)
682
(407)
(127)
148
20
702
Repurchase, securities lending & similar agreements:
\u2013 Amortised cost
14,454
(5,837)
8,617
(63)
(8,554)
\u2014
\u2014
8,617
Deposits by customers and banks\u207d\u2074\u207e
635
(635)
\u2014
\u2014
\u2014
\u2014
194,960
194,960
17,414
(8,115)
9,299
(470)
(8,681)
148
194,980
204,279
2023
Assets
Derivative financial assets
3,429
(2,047)
1,382
(471)
(823)
88
50
1,432
Reverse repurchase, securities borrowing & similar
agreements:
\u2013 Amortised cost
15,625
(3,157)
12,468
(118)
(12,350)
\u2014
\u2014
12,468
Loans and advances to customers and banks\u207d\u2074\u207e
5,363
(790)
4,573
\u2014
\u2014
4,573
203,942
208,515
24,417
(5,994)
18,423
(589)
(13,173)
4,661
203,992
222,415
Liabilities
Derivative financial liabilities
2,838
(2,047)
791
(471)
(161)
159
27
818
Repurchase, securities lending & similar agreements:
\u2013 Amortised cost
11,568
(3,157)
8,411
(118)
(8,293)
\u2014
\u2014
8,411
Deposits by customers and banks\u207d\u2074\u207e
4,218
(790)
3,428
\u2014
\u2014
3,428
207,754
211,182
18,624
(5,994)
12,630
(589)
(8,454)
3,587
207,781
220,411
(1) Financial collateral is reflected at its fair value but has been limited to the net balance sheet exposure so as not to include any over-collateralisation.
(2) This column includes contractual rights of set-off that are subject to uncertainty under the laws of the relevant jurisdiction.
(3) The balance sheet total is the sum of \u2018Net amounts reported on the balance sheet\u2019 that are subject to enforceable netting arrangements and \u2018Amounts not subject to enforceable netting arrangements\u2019.
(4) The amounts offset within loans and advances to customers/banks or deposits by customers/banks relate to offset mortgages which are classified as either and that are subject to netting.
Company
Amounts subject to enforceable netting arrangements
Assets not
subject to
enforceable
netting
arrangements(2)
Effects of offsetting on balance sheet
Related amounts not offset
Gross
amounts
Amounts
offset
Net amounts
on balance
sheet
Financial
instruments
Financial
collateral (1)
Net
amount
Balance
sheet
total (3)
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Derivative financial assets
3,078
(1,643)
1,435
(686)
(711)
38
47
1,482
Reverse repurchase, securities borrowing & similar
agreements:
\u2013 Amortised cost
16,175
(5,837)
10,338
(63)
(10,275)
\u2014
\u2014
10,338
Loans and advances to customers and banks (4)
5,421
(635)
4,786
\u2014
\u2014
4,786
213,920
218,706
24,674
(8,115)
16,559
(749)
(10,986)
4,824
213,967
230,526
Liabilities
Derivative financial liabilities
4,230
(1,643)
2,587
(686)
(127)
1,774
20
2,607
Repurchase, securities lending & similar agreements:
\u2013 Amortised cost
14,454
(5,837)
8,617
(63)
(8,554)
\u2014
\u2014
8,617
Deposits by customers and banks (4)
635
(635)
\u2014
\u2014
\u2014
\u2014
220,736
220,736
19,319
(8,115)
11,204
(749)
(8,681)
1,774
220,756
231,960
2023
Assets
Derivative financial assets
3,695
(2,047)
1,648
(734)
(823)
91
47
1,695
Reverse repurchase, securities borrowing & similar
agreements:
\u2013 Amortised cost
15,625
(3,157)
12,468
(118)
(12,350)
\u2014
\u2014
12,468
Loans and advances to customers and banks(4)
26,986
(790)
26,196
\u2014
\u2014
26,196
198,367
224,563
46,306
(5,994)
40,312
(852)
(13,173)
26,287
198,414
238,726
Liabilities
Derivative financial liabilities
3,994
(2,047)
1,947
(734)
(161)
1,052
27
1,974
Repurchase, securities lending & similar agreements:
\u2013 Amortised cost
11,568
(3,157)
8,411
(118)
(8,293)
\u2014
\u2014
8,411
Deposits by customers and banks (4)
31,262
(790)
30,472
\u2014
\u2014
30,472
202,743
233,215
46,824
(5,994)
40,830
(852)
(8,454)
31,524
202,770
243,600
(1) Financial collateral is reflected at its fair value but has been limited to the net balance sheet exposure so as not to include any over-collateralisation.
(2) This column includes contractual rights of set-off that are subject to uncertainty under the laws of the relevant jurisdiction.
(3) The balance sheet total is the sum of \u2018Net amounts reported on the balance sheet\u2019 that are subject to enforceable netting arrangements and \u2018Amounts not subject to enforceable netting arrangements\u2019.
(4) The amounts offset within loans and advances to customers/banks or deposits by customers/banks relate to offset mortgages which are classified as either and that are subject to netting.
", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-590": { "value": "
11. DERIVATIVE FINANCIAL INSTRUMENTS
a) Use of derivatives
Santander UK undertakes derivative activities primarily to provide customers with risk management solutions and to manage and hedge its own risks. These
derivative activities do not give rise to significant open positions in portfolios of derivatives. Any residual position is managed to ensure that it remains within
acceptable risk levels, with matching transactions used to achieve this where necessary. When entering into derivatives, Santander UK employs the same credit risk
management procedures to assess and approve potential credit exposures that are used for traditional lending.
b) Analysis of derivatives
The table below includes the notional amounts of transactions outstanding at the balance sheet date; they do not represent actual exposures.
Group
2024
2023
Fair value
Fair value
Notional
amount
Assets
Liabilities
Notional
amount
Assets
Liabilities
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Derivatives held for trading:
Exchange rate contracts
13,755
238
156
12,927
92
217
Interest rate contracts
29,296
294
489
28,351
389
583
Equity and credit contracts
681
124
21
765
133
20
Total derivatives held for trading
43,732
656
666
42,043
614
820
Derivatives held for hedging
Designated as fair value hedges:
Exchange rate contracts
1,712
42
8
1,145
29
2
Interest rate contracts
146,172
1,055
477
107,540
1,275
839
147,884
1,097
485
108,685
1,304
841
Designated as cash flow hedges:
Exchange rate contracts
21,535
698
266
21,618
1,008
289
Interest rate contracts
54,267
326
928
50,896
553
915
Inflation rate contracts
1,794
70
\u2014
\u2014
\u2014
\u2014
77,596
1,094
1,194
72,514
1,561
1,204
Total derivatives held for hedging
225,480
2,191
1,679
181,199
2,865
2,045
Derivative netting(1)
\u2014
(1,643)
(1,643)
\u2014
(2,047)
(2,047)
Total derivatives
269,212
1,204
702
223,242
1,432
818
(1) Derivative netting excludes the effect of cash collateral, which is offset against the gross derivative position. The amount of cash collateral received that had been offset against the gross derivative assets was
\u00a3489m (2023: \u00a3472m) and the amount of cash collateral paid that had been offset against the gross derivative liabilities was \u00a332m (2023: \u00a312m).
At 31 December 2024, the fair value of derivative assets included amounts due from Banco Santander group entities of \u00a3544m (2023: \u00a3762m) and the fair value of
derivative liabilities included amounts due to Banco Santander group entities of \u00a3244m (2023: \u00a3230m).
Company
2024
2023
Fair value
Fair value
Notional
amount
Assets
Liabilities
Notional
amount
Assets
Liabilities
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Derivatives held for trading:
Exchange rate contracts
31,646
553
300
25,861
397
322
Interest rate contracts
69,248
358
2,589
62,005
560
1,918
Equity and credit contracts
681
124
21
765
133
20
Total derivatives held for trading
101,575
1,035
2,910
88,631
1,090
2,260
Derivatives held for hedging
Designated as fair value hedges:
Exchange rate contracts
1,524
41
4
948
23
2
Interest rate contracts
144,346
1,013
464
105,678
1,226
836
145,870
1,054
468
106,626
1,249
838
Designated as cash flow hedges:
Exchange rate contracts
12,931
649
152
14,910
869
256
Interest rate contracts
46,549
317
720
45,490
534
667
Inflation rate contracts
1,794
70
\u2014
\u2014
\u2014
\u2014
61,274
1,036
872
60,400
1,403
923
Total derivatives held for hedging
207,144
2,090
1,340
167,026
2,652
1,761
Derivative netting(1)
\u2014
(1,643)
(1,643)
\u2014
(2,047)
(2,047)
Total derivatives
308,719
1,482
2,607
255,657
1,695
1,974
(1) Derivative netting excludes the effect of cash collateral, which is offset against the gross derivative position. The amount of cash collateral received that had been offset against the gross derivative assets was
\u00a3489m (2023: \u00a3472m) and the amount of cash collateral paid that had been offset against the gross derivative liabilities was \u00a332m (2023: \u00a312m).
At 31 December 2024, for the Company, the fair value of derivative assets included amounts due from Banco Santander group entities of \u00a3544m (2023: \u00a3762m)
and the fair value of derivative liabilities included amounts due to Banco Santander group entities of \u00a3244m (2023: \u00a3230m).
For information about the impact of netting arrangements on derivative assets and liabilities in the table above, see Note 39.
The table below analyses the notional and fair values of derivatives by trading and settlement method.
Notional
Traded over the counter
Asset
Liability
Settled by
central
counterparties
Not settled by
central
counterparties
Total
Traded over
the counter
Traded over
the counter
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Exchange rate contracts
\u2014
37,002
37,002
978
430
Interest rate contracts
217,159
12,576
229,735
32
251
Inflation rate contracts
1,794
1,794
70
Equity and credit contracts
\u2014
681
681
124
21
218,953
50,259
269,212
1,204
702
2023
Exchange rate contracts
\u2014
35,690
35,690
1,129
508
Interest rate contracts
174,460
12,327
186,787
170
290
Equity and credit contracts
\u2014
765
765
133
20
174,460
48,782
223,242
1,432
818
c) Analysis of derivatives designated as hedges
Santander UK applies hedge accounting on both a fair value and cash flow basis depending on the nature of the underlying exposure. We establish the hedge ratio
by matching the notional of the derivative with the underlying position being hedged. Only the designated risk is hedged and therefore other risks, such as credit risk
are managed but not hedged. For interest rate hedges, the designated hedged risk is determined with reference to the underlying benchmark rate.
Fair value hedges
Portfolio hedges of interest rate risk
Santander UK holds portfolios of fixed rate assets and liabilities which expose it to changes in fair value due to movements in market interest rates. We manage
these exposures by entering into interest rate swaps. Each portfolio contains assets or liabilities that are similar in nature and share the risk exposure that is
designated as being hedged.
The interest rate risk component is the change in fair value of fixed rate instruments for changes in the designated benchmark rate. Such changes are usually the
largest component of the overall change in fair value. Separate hedges are maintained for each underlying currency. Effectiveness is assessed by comparing
changes in the fair value of the hedged item attributable to changes in the designated benchmark interest rate, with changes in the fair value of the interest rate
swaps.
Micro hedges of interest rate risk and foreign currency risk
Santander UK accesses international markets to obtain funding, to issue fixed rate debt or to invest in fixed rate debt of other issuers as part of maintaining a
portfolio of HQLA (High Quality Liquid Assets) in its functional currency and other currencies. We are therefore exposed to changes in fair value due to changes in
market interest rates and/or foreign exchange rates, principally in USD and EUR, which we mitigate through the use of receive fixed/pay floating rate interest rate
swaps and/or receive fixed/pay floating rate cross currency swaps.\u00a0
The interest rate risk component is the change in fair value of the fixed rate debt due to changes in the benchmark rate. The foreign exchange component is the
change in the fair value of the fixed rate debt issuance due to changes in foreign exchange rates prevailing from the time of execution. Effectiveness is assessed by
using linear regression techniques to compare changes in the fair value of the debt caused by changes in the benchmark interest rate and foreign exchange rates,
with changes in the fair value of the interest rate swaps and/or cross currency swaps.
Cash flow hedges
Hedges of interest rate risk
Santander UK manages its exposure to the variability in cash flows of floating rate assets and liabilities attributable to movements in market interest rates by
entering into interest rate swaps. The interest rate risk component is determined with reference to the underlying benchmark rate attributable to the floating rates
asset or liability. Designated benchmark rates referenced are currently SONIA or BoE base rate. Effectiveness is assessed by comparing changes in the fair value of
the interest rate swap with changes in the fair value of the hedged item attributable to the hedged risk, applying a hypothetical derivative method using linear
regression techniques.
Hedges of inflation risk
Santander UK has exposure to inflation risk arising on UK inflation-linked gilts, that is hedged by entering into inflation swaps. Cash flow hedging is applied whereby
the inflation swap is hedging variability in cash flows of the inflation-linked gilt due to changes in GBP RPI. Effectiveness is assessed by comparing changes in the
fair value of the inflation swap with changes in the fair value of the hedged item attributable to the hedged risk, applying a hypothetical derivative method using
linear regression techniques.
Hedges of foreign currency risk
As Santander UK obtains funding in international markets, we assume significant foreign currency risk exposure, mainly in USD and EUR. In addition, Santander UK
also holds debt securities for liquidity purposes which assumes foreign currency exposure, principally in JPY and CHF.
Santander UK manages the exposures to the variability in cash flows of foreign currency denominated assets and liabilities to movements in foreign exchange rates
by entering into either foreign exchange contracts (spot, forward and swaps) or cross-currency swaps. These instruments are entered into to match the cash flow
profile and maturity of the estimated interest and principal repayments of the hedged item.
The foreign currency risk component is the change in cash flows of the foreign currency debt arising from changes in the relevant foreign currency forward
exchange rate. Such changes constitute a significant component of the overall changes in cash flows of the instrument. Effectiveness is assessed by comparing
changes in the fair value of the foreign exchange contracts (spot, forward and swaps) or cross currency swaps with changes in the fair value of the hedged debt
attributable to the hedged risk applying a hypothetical derivative method using linear regression techniques.
Possible sources of hedge ineffectiveness
For both fair value and cash flow hedges, hedge ineffectiveness can arise from hedging derivatives with a non-zero fair value at the date of initial designation. In
addition, for:
Fair value hedges
Hedge ineffectiveness can also arise due to differences in discounting between the hedged item and the hedging instrument as cash collateralised swaps discount
using Overnight Indexed Swaps discount curves not applied to the hedged item; and where counterparty credit risk impacts the fair value of the derivative but not
the hedged item. For portfolio hedges of interest rate risk, it can also arise due to differences in the expected and actual volume of prepayments.
Cash flow hedges
Hedge ineffectiveness can also arise due to differences in the timing of cash flows between the hedged item and the hedging instrument. For micro hedges of
interest rate risk, it can also arise due to differences in the basis of cash flows between the hedged item and the hedging instrument.
Maturity profile and average price/rate of hedging instruments
The following table sets out the maturity profile and average price/rate of the hedging instruments used in the Santander UK group\u2019s hedging strategies:
Group
2024
Hedging Instruments
\u22641 month
>1 and \u22643
months
>3 and \u226412
months
>1 and \u22645
years
>5 years
Total
Fair value hedges:
Interest rate risk
Interest rate contracts - Nominal amount (\u00a3m)
4,174
6,301
53,531
77,233
3,409
144,648
Average fixed interest rate - GBP
3.75%
4.29%
4.50%
3.87%
3.65%
Average fixed interest rate - EUR
0.20%
(0.35)%
(0.45)%
0.58%
4.37%
Average fixed interest rate - USD
1.68%
1.53%
1.53%
5.76%
0.45%
Interest rate/FX risk
Exchange rate contracts - Nominal amount (\u00a3m)
\u2014
88
128
1,018
478
1,712
Interest rate contracts - Nominal amount (\u00a3m)
\u2014
88
86
872
478
1,524
Average GBP - EUR exchange rate
\u2014
1.14
1.16
1.16
1.18
Average GBP - USD exchange rate
\u2014
\u2014
\u2014
1.32
1.28
Average fixed interest rate - EUR
\u2014
\u2014
1.35%
3.30%
2.94%
Average fixed interest rate - USD
\u2014
\u2014
\u2014
4.83%
4.38%
Cash flow hedges:
Interest rate risk
Interest rate contracts \u2013 Nominal amount (\u00a3m)
4,300
3,366
11,598
28,336
3,587
51,187
Average fixed interest rate - GBP
4.59%
4.05%
4.76%
3.70%
4.35%
FX risk
Exchange rate contracts - Nominal amount (\u00a3m)
258
792
4,927
10,976
1,306
18,259
Interest rate contracts - Nominal amount (\u00a3m)
\u2014
\u2014
\u2014
\u2014
958
958
Average GBP - JPY exchange rate
178.37
179.99
187.64
\u2014
\u2014
Average GBP - CHF exchange rate
\u2014
\u2014
1.09
1.11
\u2014
Average GBP - CAD exchange rate
\u2014
\u2014
1.76
\u2014
\u2014
Average GBP - EUR exchange rate
\u2014
1.20
1.19
1.18
1.16
Average GBP - USD exchange rate
\u2014
\u2014
1.24
1.30
1.39
Interest rate/FX risk
Exchange rate contracts - Nominal amount (\u00a3m)
826
394
534
1,104
418
3,276
Interest rate contracts - Nominal amount (\u00a3m)
826
\u2014
327
799
170
2,122
Average GBP - EUR exchange rate
1.12
1.37
1.16
1.21
1.18
Average GBP - USD exchange rate
\u2014
\u2014
1.54
1.32
1.54
Average fixed interest rate - GBP
1.48%
2.76%
2.65%
2.74%
4.81%
Inflation risk
Inflation derivative contracts - Nominal amount (\u00a3m)
\u2014
\u2014
\u2014
\u2014
1,794
1,794
Average fixed interest rate - GBP
\u2014
\u2014
\u2014
\u2014
4.98%
2023
Fair value hedges:
Interest rate risk
Interest rate contracts- Nominal amount (\u00a3m)
3,612
7,141
32,241
60,590
3,008
106,592
Average fixed interest rate - GBP
2.38%
3.19%
3.42%
3.90%
3.99%
Average fixed interest rate - EUR
1.14%
0.18%
0.45%
0.21%
3.92%
Average fixed interest rate - USD
2.60%
2.46%
4.23%
1.36%
4.91%
Interest rate/FX risk
Exchange rate contracts - Nominal amount (\u00a3m)
\u2014
18
\u2014
1,041
86
1,145
Interest rate contracts - Nominal amount (\u00a3m)
\u2014
18
\u2014
844
86
948
Average GBP - EUR exchange rate
\u2014
1.11
\u2014
1.16
1.15
Average GBP - USD exchange rate
\u2014
\u2014
\u2014
1.32
\u2014
Average fixed interest rate - EUR
\u2014
\u2014
\u2014
2.77%
3.48%
Average fixed interest rate - USD
\u2014
\u2014
\u2014
4.83%
\u2014
Cash flow hedges:
Interest rate risk
Interest rate contracts - Nominal amount (\u00a3m)
911
2,993
12,770
27,721
1,219
45,614
Average fixed interest rate - GBP
5.06%
2.98%
5.39%
3.83%
3.45%
FX risk
Exchange rate contracts - Nominal amount (\u00a3m)
927
3,238
2,692
9,447
588
16,892
Interest rate contracts - Nominal amount (\u00a3m)
\u2014
2,199
\u2014
\u2014
942
3,141
Average GBP - JPY exchange rate
154.14
153.95
167.85
\u2014
\u2014
Average GBP - CHF exchange rate
1.09
1.09
1.09
1.12
1.12
Average GBP - EUR exchange rate
\u2014
1.20
1.17
1.18
\u2014
Average GBP - USD exchange rate
\u2014
1.39
\u2014
1.28
1.39
Interest rate/FX risk
Exchange rate contracts - Nominal amount (\u00a3m)
87
785
500
2,896
458
4,726
Interest rate contracts - Nominal amount (\u00a3m)
\u2014
\u2014
\u2014
1,975
166
2,141
Average GBP - EUR exchange rate
1.18
\u2014
1.25
1.20
1.19
Average GBP - USD exchange rate
\u2014
1.66
\u2014
1.38
1.54
Average fixed interest rate - GBP
2.57%
2.54%
2.96%
2.31%
4.74%
Company
2024
Hedging Instruments
\u22641 month
>1 month
and \u22643
months
>3 and \u226412
months
>1 and \u22645
years
>5 years
Total
Fair value hedges:
Interest rate risk
Interest rate contracts \u2013 Nominal amount (\u00a3m)
4,172
6,296
53,514
75,503
3,337
142,822
Average fixed interest rate \u2013 GBP
3.75%
4.29%
4.50%
3.83%
3.65%
Average fixed interest rate \u2013 EUR
0.20%
(0.35)%
(0.45)%
0.58%
\u2014%
Average fixed interest rate \u2013 USD
1.68%
1.53%
1.53%
5.76%
0.45%
Interest rate/FX risk
Exchange rate contracts \u2013 Nominal amount (\u00a3m)
\u2014
88
86
872
478
1,524
Interest rate contracts \u2013 Nominal amount (\u00a3m)
\u2014
88
86
872
478
1,524
Average GBP - EUR exchange rate
\u2014
1.14
1.16
1.16
1.18
Average GBP - USD exchange rate
\u2014
\u2014
\u2014
1.32
1.28
Average fixed interest rate \u2013 EUR
\u2014
\u2014
0.80
3.06%
2.94%
Average fixed interest rate \u2013 USD
\u2014
\u2014
\u2014
4.83%
4.38
Cash flow hedges:
Interest rate risk
Interest rate contracts \u2013 Nominal amount (\u00a3m)
4,300
3,366
11,598
22,305
2,727
44,296
Average fixed interest rate - GBP
4.59%
4.06%
4.76%
3.83%
4.33%
FX risk
Exchange rate contracts \u2013 Nominal amount (\u00a3m)
258
792
4,927
4,634
479
11,090
Interest rate contracts \u2013 Nominal amount (\u00a3m)
\u2014
\u2014
\u2014
\u2014
958
958
Average GBP - JPY exchange rate
179.37
179.99
187.64
\u2014
\u2014
Average GBP - CAD exchange rate
\u2014
\u2014
1.76
\u2014
\u2014
Average GBP - CHF exchange rate
\u2014
\u2014
1.09
\u2014
\u2014
Average GBP - EUR exchange rate
\u2014
1.20
1.19
1.18
\u2014
Average GBP - USD exchange rate
\u2014
\u2014
1.29
1.32
1.39
Interest rate/FX risk
Exchange rate contracts \u2013 Nominal amount (\u00a3m)
\u2014
394
327
895
225
1,841
Interest rate contracts \u2013 Nominal amount (\u00a3m)
\u2014
\u2014
327
799
169
1,295
Average GBP - EUR exchange rate
\u2014
1.37
\u2014
\u2014
\u2014
Average GBP - USD exchange rate
\u2014
\u2014
1.54
1.32
1.54
Average fixed interest rate \u2013 GBP
\u2014
2.22%
3.34%
2.62%
4.59%
Inflation risk
Inflation derivative contracts - Nominal amount (\u00a3m)
\u2014
\u2014
\u2014
\u2014
1,794
1,794
Average fixed interest rate - GBP
\u2014%
\u2014%
\u2014%
\u2014%
4.98%
2023
Fair value hedges:
Interest rate risk
Interest rate contracts \u2013 Nominal amount (\u00a3m)
3,609
7,135
32,217
59,562
2,207
104,730
Average fixed interest rate \u2013 GBP
2.38%
3.19%
3.42%
3.87%
3.52%
Average fixed interest rate \u2013 EUR
1.14%
0.18%
0.45%
0.21%
0.58%
Average fixed interest rate \u2013 USD
2.60%
2.46%
4.23%
1.36%
4.91%
Interest rate/FX risk
Exchange rate contracts \u2013 Nominal amount (\u00a3m)
\u2014
18
\u2014
844
86
948
Interest rate contracts \u2013 Nominal amount (\u00a3m)
\u2014
18
\u2014
844
86
948
Average GBP - EUR exchange rate
\u2014
1.11
\u2014
1.15
1.15
Average GBP - USD exchange rate
\u2014
\u2014
\u2014
1.32
\u2014
Average fixed interest rate - EUR
\u2014
\u2014
\u2014
2.39%
3.48%
Average fixed interest rate - USD
\u2014
\u2014
\u2014
4.83%
\u2014
Cash flow hedges:
Interest rate risk
Interest rate contracts \u2013 Nominal amount (\u00a3m)
911
2,993
11,913
24,152
1,107
41,076
Average fixed interest rate - GBP
5.06%
2.98%
5.66%
4.05%
3.24%
FX risk
Exchange rate contracts \u2013 Nominal amount (\u00a3m)
927
3,238
1,825
5,816
471
12,277
Interest rate contracts \u2013 Nominal amount (\u00a3m)
\u2014
2,199
\u2014
\u2014
942
3,141
Average GBP - JPY exchange rate
154.14
153.95
167.85
\u2014
\u2014
Average GBP - CHF exchange rate
1.09
1.09
1.09
\u2014
\u2014
Average GBP - EUR exchange rate
\u2014
1.20
\u2014
1.18
\u2014
Average GBP - USD exchange rate
\u2014
1.39
\u2014
1.28
1.39
Interest rate/FX risk
Exchange rate contracts \u2013 Nominal amount (\u00a3m)
\u2014
785
\u2014
1,627
221
2,633
Interest rate contracts \u2013 Nominal amount (\u00a3m)
\u2014
\u2014
\u2014
1,107
166
1,273
Average GBP - EUR exchange rate
\u2014
\u2014
\u2014
1.37
\u2014
Average GBP - USD exchange rate
\u2014
1.66
\u2014
1.38
1.54
Average fixed interest rate \u2013 GBP
\u2014
2.54%
\u2014
2.65%
4.59%
Net gains or losses arising from fair value and cash flow hedges included in other operating income
Group
Company
2024
2023
2022
2024
2023
2022
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Fair value hedging:
Gains/(Losses) on hedging instruments
193
(1,879)
2,381
220
(1,920)
2,685
(Losses)/Gains on hedged items attributable to hedged risks
(168)
1,896
(2,316)
(201)
1,927
(2,626)
Fair value hedging ineffectiveness
25
17
65
19
7
59
Cash flow hedging ineffectiveness
(3)
2
(36)
(4)
\u2014
(34)
22
19
29
15
7
25
Hedge ineffectiveness can be analysed by risk category as follows:
Group
2024
2023
2022
Change in FV
of hedging
instruments
Change in FV
of hedged
items
Recognised in
income
statement
Change in FV
of hedging
instruments
Change in FV
of hedged
items
Recognised in
income
statement
Change in FV
of hedging
instruments
Change in FV
of hedged
items
Recognised in
income
statement
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Fair value hedges:
Interest rate risk
167
(151)
16
(1,865)
1,877
12
2,392
(2,333)
59
Interest rate/FX risk
26
(17)
9
(14)
19
5
(11)
17
6
193
(168)
25
(1,879)
1,896
17
2,381
(2,316)
65
Group
Hedging Instruments
Recognised in
Income
Statement
Reclassified
from reserves
to income
Income statement line item affected by reclassification
Change in FV
Recognised in
OCI
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cash flow hedges:
2024
Interest rate risk
Net interest income
(764)
761
(3)
(488)
FX risk
Net interest income/other operating income
414
(405)
9
216
Interest rate/FX risk
Net interest income/other operating income
(181)
172
(9)
(231)
Inflation Risk
Net Interest Income
71
(71)
\u2014
3
(460)
457
(3)
(500)
2023
Interest rate risk
Net interest income
466
(445)
21
(469)
FX risk
Net interest income/other operating income
(396)
377
(19)
(392)
Interest rate/FX risk
Net interest income/other operating income
(237)
237
\u2014
(387)
(167)
169
2
(1,248)
2022
Interest rate risk
Net interest income
(1,161)
1,160
(1)
(96)
FX risk
Net interest income/other operating income
1,604
(1,604)
\u2014
1,692
Interest rate/FX risk
Net interest income/other operating income
(54)
19
(35)
533
389
(425)
(36)
2,129
Company
2024
2023
2022
Change in FV
of hedging
instruments
Change in FV
of hedged
items
Recognised in
income
statement
Change in FV
of hedging
instruments
Change in FV
of hedged
items
Recognised in
income
statement
Change in FV
of hedging
instruments
Change in FV
of hedged
items
Recognised in
income
statement
Fair value hedges:
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Interest rate risk
186
(171)
15
(1,907)
1,916
9
2,676
(2,622)
54
Interest rate/FX risk
34
(30)
4
(13)
11
(2)
9
(4)
5
220
(201)
19
(1,920)
1,927
7
2,685
(2,626)
59
Company
Hedging Instruments
Recognised in
Income
Statement
Reclassified
from reserves
to income
Income statement line item affected by reclassification
Change in FV
Recognised in
OCI
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cash flow hedges:
2024
Interest rate risk
Net interest income
(616)
614
(2)
(333)
FX risk
Net interest income/other operating income
587
(582)
5
523
Interest rate/FX risk
Net interest income/other operating income
(54)
47
(7)
(64)
Inflation Risk
Net Interest Income
71
(71)
\u2014
3
(12)
8
(4)
129
2023
Interest rate risk
Net interest income
418
(416)
2
(312)
FX risk
Net interest income/other operating income
(204)
200
(4)
(205)
Interest rate/FX risk
Net interest income/other operating income
(168)
170
2
(277)
46
(46)
\u2014
(794)
2022
Interest rate risk
Net interest income
(782)
782
\u2014
(77)
FX risk
Net interest income/other operating income
1,295
(1,299)
(4)
1,366
Interest rate/FX risk
Net interest income/other operating income
67
(97)
(30)
442
580
(614)
(34)
1,731
In 2024, cash flow hedge accounting of \u00a3nil (2023: \u00a3nil) had to cease due to the hedged cash flows no longer being expected to occur.
The following table provides a reconciliation by risk category of components of equity and analysis of OCI items (before tax) resulting from hedge accounting.
Group
Company
2024
2023
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Balance at 1 January
(496)
(1,575)
(262)
(1,102)
Effective portion of changes in fair value:
\u2013 Interest rate risk
(761)
445
(614)
416
\u2013 Foreign currency risk
405
(377)
582
(200)
\u2013 Interest rate/foreign currency risk
(172)
(237)
(47)
(170)
\u2013 Inflation risk
71
\u2014
71
\u2014
(457)
(169)
(8)
46
Income statement transfers:
\u2013 Interest rate risk
488
469
333
312
\u2013 Foreign currency risk
(216)
392
(523)
205
\u2013 Interest rate/foreign currency risk
231
387
64
277
\u2013 Inflation risk
(3)
\u2014
(3)
\u2014
500
1,248
(129)
794
Balance at 31 December
(453)
(496)
(399)
(262)
Hedged exposures
Santander UK hedges its exposures to various risks, including interest rate risk and foreign currency risk, as set out in the following table.
Group
2024
2023
Accumulated amount of FV hedge
adjustments
Change in
value to
calculate
hedge
ineffective
ness
Accumulated amount of FV hedge
adjustments
Change in
value to
calculate
hedge
ineffective
ness
Carrying
value
Hedged
item
Portfolio
hedge of
interest
rate risks
Of which
Discontinued
hedges
Carrying
value
Hedged
item
Portfolio
hedge of
interest
rate risks
Of which
Discontinued
hedges
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Fair value hedges
Interest rate risk:
Loans and advances to customers
62,773
\u2014
(731)
(290)
(154)
73,194
\u2014
(625)
(435)
1,968
Other financial assets at amortised cost
1,667
(45)
(7)
(7)
(44)
152
1
(8)
(8)
5
Reverse repurchase agreements \u2013 non
trading
6,423
\u2014
(1)
\u2014
(1)
6,186
\u2014
\u2014
\u2014
4
Other financial assets at FVOCI
2,100
(131)
\u2014
(95)
(18)
2,013
(113)
\u2014
(131)
82
Deposits by customers
(21,726)
18
9
1
(1)
(15,892)
38
(10)
\u2014
(53)
Debt securities in issue
(3,811)
150
(54)
(77)
52
(4,091)
118
(75)
(114)
(128)
Subordinated liabilities
(511)
(12)
(1)
(36)
15
(522)
(27)
(1)
(42)
(1)
Interest rate/FX risk:
Other financial assets at FVOCI
1,503
16
\u2014
\u2014
(30)
989
4
\u2014
\u2014
12
Debt securities in issue
(200)
(9)
\u2014
(14)
13
(214)
(14)
\u2014
(24)
8
Subordinated liabilities
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(1)
48,218
(13)
(785)
(518)
(168)
61,815
7
(719)
(754)
1,896
Group
2024
2023
Change in value to
calculate hedge
ineffectiveness
Cash flow hedge
reserve
Balances on cash
flow hedge
reserve for
discontinued
hedges
Change in value to
calculate hedge
ineffectiveness
Cash flow hedge
reserve
Balances on cash
flow hedge reserve
for discontinued
hedges
Hedged item balance sheet line item
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cash flow hedges:
Interest rate risk:
Loans and advances to customers
361
(497)
2
(163)
(462)
1
Cash and balances at central banks
464
(192)
(50)
(281)
99
(76)
Deposits by banks
(4)
\u2014
\u2014
(1)
(1)
\u2014
Repurchase agreements - non trading
(60)
52
\u2014
\u2014
\u2014
\u2014
FX risk:
Other financial assets at FVOCI
(487)
1
\u2014
(253)
1
\u2014
Not applicable \u2013 highly probable forecast
transactions
4
\u2014
\u2014
88
1
\u2014
Deposits by customers
\u2014
\u2014
\u2014
(33)
\u2014
\u2014
Debt securities in issue
78
181
\u2014
617
(9)
\u2014
Repurchase agreements - non trading
\u2014
\u2014
\u2014
(42)
\u2014
\u2014
Interest rate/FX risk:
Debt securities in issue/loans and advances to
customers
148
(12)
\u2014
99
(75)
\u2014
Deposits by customers
21
(37)
\u2014
94
(39)
\u2014
Subordinated liabilities/loans and advances to
customers
3
(16)
51
44
(11)
52
Inflation risk:
Other financial assets at amortised cost
(70)
66
\u2014
\u2014
\u2014
\u2014
Other financial assets at FVOCI
(1)
1
\u2014
\u2014
\u2014
\u2014
457
(453)
3
169
(496)
(23)
Company
2024
2023
Accumulated amount of FV hedge
adjustments
Change in
value to
calculate
hedge
ineffective
ness
Accumulated amount of FV hedge
adjustments
Change in
value to
calculate
hedge
ineffective
ness
Carrying
value
Hedged
item
Portfolio
hedge of
interest
rate risks
Of which
Discontinued
hedges
Carrying
value
Hedged
item
Portfolio
hedge of
interest
rate risks
Of which
Discontinued
hedges
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Fair value hedges
Interest rate risk:
Loans and advances to customers
62,694
\u2014
(903)
(461)
(153)
73,117
\u2014
(839)
(649)
1,967
Other financial assets at amortised cost
1,667
(45)
(7)
(7)
(44)
152
1
(8)
(8)
5
Reverse repurchase agreements \u2013 non
trading
6,423
\u2014
(1)
\u2014
(1)
6,186
\u2014
\u2014
\u2014
4
Other financial assets at FVOCI
2,100
(131)
\u2014
(95)
(18)
2,013
(113)
\u2014
(131)
82
Deposits by customers
(21,726)
18
10
1
(1)
(16,031)
38
(10)
\u2014
(53)
Debt securities in issue
(2,035)
64
\u2014
\u2014
32
(2,312)
35
\u2014
\u2014
(88)
Subordinated liabilities
(512)
(13)
\u2014
(35)
14
(524)
(28)
\u2014
(42)
(1)
Interest rate/FX risk:
Other financial assets at FVOCI
1,503
17
\u2014
\u2014
(30)
989
4
\u2014
\u2014
12
Subordinated liabilities
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(1)
50,114
(90)
(901)
(597)
(201)
63,590
(63)
(857)
(830)
1,927
Company
2024
2023
Change in value to
calculate hedge
ineffectiveness
Cash flow
hedge reserve
Balances on cash
flow hedge
reserve for
discontinued
hedges
Change in value to
calculate hedge
ineffectiveness
Cash flow
hedge reserve
Balances on cash
flow hedge reserve
for discontinued
hedges
Hedged item balance sheet line item
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cash flow hedges:
Interest rate risk:
Loans and advances to customers
214
(312)
2
(133)
(268)
1
Cash and balances at central banks
464
(191)
(50)
(281)
99
(76)
Deposits by banks
(4)
\u2014
\u2014
(1)
(1)
\u2014
Repurchase agreements - non trading
(60)
52
\u2014
\u2014
\u2014
\u2014
FX risk:
Other financial assets at FVOCI
(487)
1
\u2014
(253)
1
\u2014
Not applicable \u2013 highly probable forecast
transactions
4
\u2014
\u2014
88
1
\u2014
Deposits by customers
\u2014
\u2014
\u2014
(33)
\u2014
\u2014
Debt securities in issue
(99)
48
\u2014
440
(13)
\u2014
Repurchase agreements - non trading
\u2014
\u2014
\u2014
(42)
\u2014
\u2014
Interest rate/FX risk:
Debt securities in issue/loans and advances to
customers
23
(2)
\u2014
35
(21)
(2)
Deposits by customers
21
(38)
(1)
94
(41)
(2)
Subordinated liabilities/loans and advances to
customers
3
(23)
43
41
(19)
44
Inflation risk:
Other financial assets at amortised cost
(70)
65
\u2014
\u2014
\u2014
\u2014
Other financial assets at FVOCI
(1)
1
\u2014
\u2014
\u2014
\u2014
8
(399)
(6)
(45)
(262)
(35)
39. OFFSETTING FINANCIAL ASSETS AND LIABILITIES
The following table shows the impact of netting arrangements on:
\u2013 All financial assets and liabilities that are reported net on the balance sheet
\u2013 All derivative financial instruments and repurchase agreements and other similar secured lending and borrowing agreements that are subject to enforceable
master netting arrangements or similar agreements, but do not qualify for balance sheet netting.
The table identifies the amounts that have been offset in the balance sheet and those amounts that are covered by enforceable netting arrangements (offsetting
arrangements and financial collateral) but do not qualify for netting under the requirements described above.
For derivative contracts, the \u2018Financial instruments\u2019 column identifies financial assets and liabilities that are subject to set off under netting agreements, such as
the\u00a0ISDA Master Agreement or derivative exchange or clearing counterparty agreements, whereby all outstanding transactions with the same counterparty can
be\u00a0offset and close-out netting applied across all outstanding transactions covered by the agreements if an event of default or other predetermined events occur.
Financial collateral refers to cash and non-cash collateral obtained, typically daily or weekly, to cover the net exposure between counterparties by enabling the
collateral to be realised in an event of default or if other predetermined events occur. For repurchase and reverse repurchase agreements and other similar secured
lending and borrowing, the \u2018Financial instruments\u2019 column identifies financial assets and liabilities that are subject to set off under netting agreements, such as
global master repurchase agreements and global master securities lending agreements, whereby all outstanding transactions with the same counterparty can
be\u00a0offset and close-out netting applied across all outstanding transactions covered by the agreements if an event of default or other predetermined events occur.
Financial collateral typically comprises highly liquid securities which are legally transferred and can be liquidated if a counterparty defaults.
Santander UK engages in a variety of counterparty credit mitigation strategies in addition to netting and collateral arrangements. Therefore, the net amounts
presented in the tables below do not represent Santander UK\u2019s total credit exposure.
Group
Amounts subject to enforceable netting arrangements
Assets not
subject to
enforceable
netting
arrangements(2)
Effects of offsetting on balance sheet
Related amounts not offset
Gross
amounts
Amounts
offset
Net amounts
on balance
sheet
Financial
instruments
Financial
collateral (1)
Net
amount
Balance
sheet
total (3)
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Derivative financial assets
2,799
(1,643)
1,156
(407)
(711)
38
48
1,204
Reverse repurchase, securities borrowing & similar
agreements:
\u2013 Amortised cost
16,175
(5,837)
10,338
(63)
(10,275)
\u2014
\u2014
10,338
Loans and advances to customers and banks\u207d\u2074\u207e
5,421
(635)
4,786
\u2014
\u2014
4,786
195,654
200,440
24,395
(8,115)
16,280
(470)
(10,986)
4,824
195,702
211,982
Liabilities
Derivative financial liabilities
2,325
(1,643)
682
(407)
(127)
148
20
702
Repurchase, securities lending & similar agreements:
\u2013 Amortised cost
14,454
(5,837)
8,617
(63)
(8,554)
\u2014
\u2014
8,617
Deposits by customers and banks\u207d\u2074\u207e
635
(635)
\u2014
\u2014
\u2014
\u2014
194,960
194,960
17,414
(8,115)
9,299
(470)
(8,681)
148
194,980
204,279
2023
Assets
Derivative financial assets
3,429
(2,047)
1,382
(471)
(823)
88
50
1,432
Reverse repurchase, securities borrowing & similar
agreements:
\u2013 Amortised cost
15,625
(3,157)
12,468
(118)
(12,350)
\u2014
\u2014
12,468
Loans and advances to customers and banks\u207d\u2074\u207e
5,363
(790)
4,573
\u2014
\u2014
4,573
203,942
208,515
24,417
(5,994)
18,423
(589)
(13,173)
4,661
203,992
222,415
Liabilities
Derivative financial liabilities
2,838
(2,047)
791
(471)
(161)
159
27
818
Repurchase, securities lending & similar agreements:
\u2013 Amortised cost
11,568
(3,157)
8,411
(118)
(8,293)
\u2014
\u2014
8,411
Deposits by customers and banks\u207d\u2074\u207e
4,218
(790)
3,428
\u2014
\u2014
3,428
207,754
211,182
18,624
(5,994)
12,630
(589)
(8,454)
3,587
207,781
220,411
(1) Financial collateral is reflected at its fair value but has been limited to the net balance sheet exposure so as not to include any over-collateralisation.
(2) This column includes contractual rights of set-off that are subject to uncertainty under the laws of the relevant jurisdiction.
(3) The balance sheet total is the sum of \u2018Net amounts reported on the balance sheet\u2019 that are subject to enforceable netting arrangements and \u2018Amounts not subject to enforceable netting arrangements\u2019.
(4) The amounts offset within loans and advances to customers/banks or deposits by customers/banks relate to offset mortgages which are classified as either and that are subject to netting.
Company
Amounts subject to enforceable netting arrangements
Assets not
subject to
enforceable
netting
arrangements(2)
Effects of offsetting on balance sheet
Related amounts not offset
Gross
amounts
Amounts
offset
Net amounts
on balance
sheet
Financial
instruments
Financial
collateral (1)
Net
amount
Balance
sheet
total (3)
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Derivative financial assets
3,078
(1,643)
1,435
(686)
(711)
38
47
1,482
Reverse repurchase, securities borrowing & similar
agreements:
\u2013 Amortised cost
16,175
(5,837)
10,338
(63)
(10,275)
\u2014
\u2014
10,338
Loans and advances to customers and banks (4)
5,421
(635)
4,786
\u2014
\u2014
4,786
213,920
218,706
24,674
(8,115)
16,559
(749)
(10,986)
4,824
213,967
230,526
Liabilities
Derivative financial liabilities
4,230
(1,643)
2,587
(686)
(127)
1,774
20
2,607
Repurchase, securities lending & similar agreements:
\u2013 Amortised cost
14,454
(5,837)
8,617
(63)
(8,554)
\u2014
\u2014
8,617
Deposits by customers and banks (4)
635
(635)
\u2014
\u2014
\u2014
\u2014
220,736
220,736
19,319
(8,115)
11,204
(749)
(8,681)
1,774
220,756
231,960
2023
Assets
Derivative financial assets
3,695
(2,047)
1,648
(734)
(823)
91
47
1,695
Reverse repurchase, securities borrowing & similar
agreements:
\u2013 Amortised cost
15,625
(3,157)
12,468
(118)
(12,350)
\u2014
\u2014
12,468
Loans and advances to customers and banks(4)
26,986
(790)
26,196
\u2014
\u2014
26,196
198,367
224,563
46,306
(5,994)
40,312
(852)
(13,173)
26,287
198,414
238,726
Liabilities
Derivative financial liabilities
3,994
(2,047)
1,947
(734)
(161)
1,052
27
1,974
Repurchase, securities lending & similar agreements:
\u2013 Amortised cost
11,568
(3,157)
8,411
(118)
(8,293)
\u2014
\u2014
8,411
Deposits by customers and banks (4)
31,262
(790)
30,472
\u2014
\u2014
30,472
202,743
233,215
46,824
(5,994)
40,830
(852)
(8,454)
31,524
202,770
243,600
(1) Financial collateral is reflected at its fair value but has been limited to the net balance sheet exposure so as not to include any over-collateralisation.
(2) This column includes contractual rights of set-off that are subject to uncertainty under the laws of the relevant jurisdiction.
(3) The balance sheet total is the sum of \u2018Net amounts reported on the balance sheet\u2019 that are subject to enforceable netting arrangements and \u2018Amounts not subject to enforceable netting arrangements\u2019.
(4) The amounts offset within loans and advances to customers/banks or deposits by customers/banks relate to offset mortgages which are classified as either and that are subject to netting.
", "dimensions": { "concept": "ifrs-full:DisclosureOfDerivativeFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-595": { "value": "
The table below includes the notional amounts of transactions outstanding at the balance sheet date; they do not represent actual exposures.
Group
2024
2023
Fair value
Fair value
Notional
amount
Assets
Liabilities
Notional
amount
Assets
Liabilities
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Derivatives held for trading:
Exchange rate contracts
13,755
238
156
12,927
92
217
Interest rate contracts
29,296
294
489
28,351
389
583
Equity and credit contracts
681
124
21
765
133
20
Total derivatives held for trading
43,732
656
666
42,043
614
820
Derivatives held for hedging
Designated as fair value hedges:
Exchange rate contracts
1,712
42
8
1,145
29
2
Interest rate contracts
146,172
1,055
477
107,540
1,275
839
147,884
1,097
485
108,685
1,304
841
Designated as cash flow hedges:
Exchange rate contracts
21,535
698
266
21,618
1,008
289
Interest rate contracts
54,267
326
928
50,896
553
915
Inflation rate contracts
1,794
70
\u2014
\u2014
\u2014
\u2014
77,596
1,094
1,194
72,514
1,561
1,204
Total derivatives held for hedging
225,480
2,191
1,679
181,199
2,865
2,045
Derivative netting(1)
\u2014
(1,643)
(1,643)
\u2014
(2,047)
(2,047)
Total derivatives
269,212
1,204
702
223,242
1,432
818
(1) Derivative netting excludes the effect of cash collateral, which is offset against the gross derivative position. The amount of cash collateral received that had been offset against the gross derivative assets was
\u00a3489m (2023: \u00a3472m) and the amount of cash collateral paid that had been offset against the gross derivative liabilities was \u00a332m (2023: \u00a312m).
At 31 December 2024, the fair value of derivative assets included amounts due from Banco Santander group entities of \u00a3544m (2023: \u00a3762m) and the fair value of
derivative liabilities included amounts due to Banco Santander group entities of \u00a3244m (2023: \u00a3230m).
", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialLiabilitiesHeldForTradingExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-594": { "value": "
The table below includes the notional amounts of transactions outstanding at the balance sheet date; they do not represent actual exposures.
Group
2024
2023
Fair value
Fair value
Notional
amount
Assets
Liabilities
Notional
amount
Assets
Liabilities
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Derivatives held for trading:
Exchange rate contracts
13,755
238
156
12,927
92
217
Interest rate contracts
29,296
294
489
28,351
389
583
Equity and credit contracts
681
124
21
765
133
20
Total derivatives held for trading
43,732
656
666
42,043
614
820
Derivatives held for hedging
Designated as fair value hedges:
Exchange rate contracts
1,712
42
8
1,145
29
2
Interest rate contracts
146,172
1,055
477
107,540
1,275
839
147,884
1,097
485
108,685
1,304
841
Designated as cash flow hedges:
Exchange rate contracts
21,535
698
266
21,618
1,008
289
Interest rate contracts
54,267
326
928
50,896
553
915
Inflation rate contracts
1,794
70
\u2014
\u2014
\u2014
\u2014
77,596
1,094
1,194
72,514
1,561
1,204
Total derivatives held for hedging
225,480
2,191
1,679
181,199
2,865
2,045
Derivative netting(1)
\u2014
(1,643)
(1,643)
\u2014
(2,047)
(2,047)
Total derivatives
269,212
1,204
702
223,242
1,432
818
(1) Derivative netting excludes the effect of cash collateral, which is offset against the gross derivative position. The amount of cash collateral received that had been offset against the gross derivative assets was
\u00a3489m (2023: \u00a3472m) and the amount of cash collateral paid that had been offset against the gross derivative liabilities was \u00a332m (2023: \u00a312m).
At 31 December 2024, the fair value of derivative assets included amounts due from Banco Santander group entities of \u00a3544m (2023: \u00a3762m) and the fair value of
derivative liabilities included amounts due to Banco Santander group entities of \u00a3244m (2023: \u00a3230m).
", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialAssetsHeldForTradingExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-593": { "value": "
The table below includes the notional amounts of transactions outstanding at the balance sheet date; they do not represent actual exposures.
Group
2024
2023
Fair value
Fair value
Notional
amount
Assets
Liabilities
Notional
amount
Assets
Liabilities
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Derivatives held for trading:
Exchange rate contracts
13,755
238
156
12,927
92
217
Interest rate contracts
29,296
294
489
28,351
389
583
Equity and credit contracts
681
124
21
765
133
20
Total derivatives held for trading
43,732
656
666
42,043
614
820
Derivatives held for hedging
Designated as fair value hedges:
Exchange rate contracts
1,712
42
8
1,145
29
2
Interest rate contracts
146,172
1,055
477
107,540
1,275
839
147,884
1,097
485
108,685
1,304
841
Designated as cash flow hedges:
Exchange rate contracts
21,535
698
266
21,618
1,008
289
Interest rate contracts
54,267
326
928
50,896
553
915
Inflation rate contracts
1,794
70
\u2014
\u2014
\u2014
\u2014
77,596
1,094
1,194
72,514
1,561
1,204
Total derivatives held for hedging
225,480
2,191
1,679
181,199
2,865
2,045
Derivative netting(1)
\u2014
(1,643)
(1,643)
\u2014
(2,047)
(2,047)
Total derivatives
269,212
1,204
702
223,242
1,432
818
(1) Derivative netting excludes the effect of cash collateral, which is offset against the gross derivative position. The amount of cash collateral received that had been offset against the gross derivative assets was
\u00a3489m (2023: \u00a3472m) and the amount of cash collateral paid that had been offset against the gross derivative liabilities was \u00a332m (2023: \u00a312m).
At 31 December 2024, the fair value of derivative assets included amounts due from Banco Santander group entities of \u00a3544m (2023: \u00a3762m) and the fair value of
derivative liabilities included amounts due to Banco Santander group entities of \u00a3244m (2023: \u00a3230m).
", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialInstrumentsHeldForTradingExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-592": { "value": "
The table below includes the notional amounts of transactions outstanding at the balance sheet date; they do not represent actual exposures.
Group
2024
2023
Fair value
Fair value
Notional
amount
Assets
Liabilities
Notional
amount
Assets
Liabilities
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Derivatives held for trading:
Exchange rate contracts
13,755
238
156
12,927
92
217
Interest rate contracts
29,296
294
489
28,351
389
583
Equity and credit contracts
681
124
21
765
133
20
Total derivatives held for trading
43,732
656
666
42,043
614
820
Derivatives held for hedging
Designated as fair value hedges:
Exchange rate contracts
1,712
42
8
1,145
29
2
Interest rate contracts
146,172
1,055
477
107,540
1,275
839
147,884
1,097
485
108,685
1,304
841
Designated as cash flow hedges:
Exchange rate contracts
21,535
698
266
21,618
1,008
289
Interest rate contracts
54,267
326
928
50,896
553
915
Inflation rate contracts
1,794
70
\u2014
\u2014
\u2014
\u2014
77,596
1,094
1,194
72,514
1,561
1,204
Total derivatives held for hedging
225,480
2,191
1,679
181,199
2,865
2,045
Derivative netting(1)
\u2014
(1,643)
(1,643)
\u2014
(2,047)
(2,047)
Total derivatives
269,212
1,204
702
223,242
1,432
818
(1) Derivative netting excludes the effect of cash collateral, which is offset against the gross derivative position. The amount of cash collateral received that had been offset against the gross derivative assets was
\u00a3489m (2023: \u00a3472m) and the amount of cash collateral paid that had been offset against the gross derivative liabilities was \u00a332m (2023: \u00a312m).
At 31 December 2024, the fair value of derivative assets included amounts due from Banco Santander group entities of \u00a3544m (2023: \u00a3762m) and the fair value of
derivative liabilities included amounts due to Banco Santander group entities of \u00a3244m (2023: \u00a3230m).
14. SECURITISATIONS AND COVERED BONDS
The information in this Note relates to securitisations and covered bonds for consolidated structured entities, used to obtain funding or collateral. It excludes
structured entities relating to credit protection transactions.
The Santander UK group uses structured entities to securitise some of the mortgage and other loans to customers that it originates. The Santander UK group also
issues covered bonds, which are guaranteed by, and secured against, a pool of the Santander UK group\u2019s mortgage loans transferred to Abbey Covered Bonds LLP.
The Santander UK group issues mortgage-backed securities, other asset-backed securities and covered bonds mainly in order to obtain diverse, low-cost funding,
but also to use as collateral for raising funds via third party bilateral secured funding transactions or for liquidity purposes in the future. The Santander UK group has
successfully used bilateral secured transactions as an additional form of medium-term funding; this has allowed the Santander UK group to further diversify its
medium-term funding investor base.
Loans and advances to customers include portfolios of residential mortgage loans, and receivables derived from credit agreements with retail customers for the
purchases of financed vehicles, which are subject to non-recourse finance arrangements. These loans and receivables have been purchased by, or assigned to,
structured entities or Abbey Covered Bonds LLP, and have been funded primarily through the issue of mortgage-backed securities, other asset-backed securities or
covered bonds. No gain or loss has been recognised as a result of these sales. The structured entities and Abbey Covered Bonds LLP are consolidated as subsidiary
undertakings. The Company and its subsidiaries do not own directly, or indirectly, any of the share capital of any of the structured entities.
a) Securitisations
i) Master trust structures
The Santander UK group makes use of master trust structures, whereby a pool of residential mortgage loans is assigned to a trust company by the asset originator.
A funding entity acquires a beneficial interest in the pool of assets held by the trust company with funds borrowed from qualifying structured entities, which at the
same time issue asset-backed securities to third-party investors or the Santander UK group.
Santander UK plc and its subsidiaries receive payments from the securitisation companies in respect of fees for administering the loans, and payment of deferred
consideration for the sale of the loans. Santander UK plc and its subsidiaries have no right or obligation to repurchase any securitised loan, except if certain
representations and warranties given by Santander UK plc or its subsidiaries at the time of transfer are breached and, in certain cases, if there is a product switch or
further advance, if a securitised loan is in arrears for over two months or if a securitised loan does not comply with regulatory requirements.
ii) Other securitisation structures
The Santander UK group also makes use of auto loan securitisations, whereby a pool of auto loans originated by a member of the Santander UK group is sold to a
special purpose vehicle by the asset originator. The special purpose vehicle funds the purchase of the auto loans by issuing asset-backed securities to third-party
investors. A proportion of the securities are also retained by members of the Santander UK group. Members of the Santander UK group also receive payments from
the special purpose vehicle in respect of fees for administering the auto loans, and payment of deferred consideration for the sale of the auto loans. The seller has
no right or obligation to repurchase any securitised loan, except if certain representations and warranties given by the seller at the time of transfer are breached
and, in certain cases, if there has been a subsequent variation in the terms of the underlying auto loan not permitted under the sale agreement.
b) Covered bonds
Santander UK plc also issues covered bonds, which are its direct, unsecured and unconditional obligation. The covered bonds benefit from a guarantee from Abbey
Covered Bonds LLP. Santander UK plc makes a term advance to Abbey Covered Bonds LLP equal to the sterling proceeds of each issue of covered bonds. Abbey
Covered Bonds LLP uses the proceeds of the term advance to purchase portfolios of residential mortgage loans and their security from Santander UK plc. Under the
terms of the guarantee, Abbey Covered Bonds LLP has agreed to pay an amount equal to the guaranteed amounts when the same shall become due for payment,
but which would otherwise be unpaid by Santander UK plc.
c) Analysis of securitisations and covered bonds
The Santander UK group\u2019s principal securitisation programmes and covered bond programme, together with the balances of the advances subject to securitisation
(or for the covered bond programme assigned) and the carrying value of the notes in issue at 31 December 2024 and 2023 are listed below. The gross assets in the
Group table below were transferred from the Company to the securitisations and covered bond programme vehicles but do not qualify for derecognition from the
Company.
Group
Gross assets
External notes in issue
Notes held within the Group
2024
2023
2024
2023
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Mortgage-backed master trust structures:
\u2013 Holmes
5,109
3,242
3,379
2,119
389
300
\u2013 Fosse
2,383
2,048
\u2014
100
1,408
1,382
7,492
5,290
3,379
2,219
1,797
1,682
Other asset-backed securitisation structures:
\u2013 Repton
718
757
550
550
\u2014
\u2014
Total securitisation programmes
8,210
6,047
3,929
2,769
1,797
1,682
Covered bond programme:
\u2013 Euro 35bn Global Covered Bond Programme
25,695
21,880
17,211
15,000
1,224
\u2014
Total securitisation and covered bond programmes
33,905
27,927
21,140
17,769
3,021
1,682
Company
Gross assets
External notes in issue
Notes held within the Company
2024
2023
2024
2023
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Covered bond programme:
\u2013 Euro 35bn Global Covered Bond Programme
25,695
21,880
17,300
15,087
1,224
\u2014
Total securitisation and covered bond programmes
25,695
21,880
17,300
15,087
1,224
\u2014
The following table sets out the internal and external issuances and redemptions in 2024 and 2023 for each securitisation and covered bond programme.
Group
Internal issuances
External issuances
Internal redemptions
External redemptions
2024
2023
2024
2023
2024
2023
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Mortgage-backed master trust structures:
\u2013 Holmes
106
241
1,250
1,500
17
121
\u2014
186
\u2013 Fosse
894
\u2014
\u2014
\u2014
865
\u2014
100
\u2014
Other asset-backed securitisation structures:
\u2013 Motor
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
7
\u2013 Repton
\u2014
\u2014
\u2014
550
\u2014
\u2014
\u2014
\u2014
Covered bond programme:
\u2013 Euro 35bn Global Covered Bond Programme
\u2014
\u2014
5,890
\u2014
41
\u2014
3,359
\u2014
1,000
241
7,140
2,050
923
121
3,459
193
Company
Internal issuances
External issuances
Internal redemptions
External redemptions
2024
2023
2024
2023
2024
2023
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Covered bond programme:
\u2013 Euro 35bn Global Covered Bond Programme
\u2014
1,100
5,890
1,844
41
16
3,359
1,897
\u2014
1,100
5,890
1,844
41
16
3,359
1,897
Holmes Funding Ltd has a beneficial interest of \u00a33,735m (2023: \u00a32,396m) in the residential mortgage loans held by Holmes Trustees Ltd. The remaining share of
the beneficial interest in residential mortgage loans held by Holmes Trustees Ltd belongs to Santander UK plc.
Fosse Funding (No.1) Ltd has a beneficial interest of \u00a31,394m (2023: \u00a31,393m) in the residential mortgage loans held by Fosse Trustee (UK) Ltd. The remaining
share of the beneficial interest in residential mortgage loans held by Fosse Trustee (UK) Ltd belongs to Santander UK plc.
The Holmes securitisation companies have cash deposits of \u00a3126m (2023: \u00a380m), which have been accumulated to finance the redemption of a number of
securities issued by the Holmes securitisation companies. The share of Holmes Funding Ltd in the trust assets is therefore reduced by this amount.
The Fosse securitisation companies have cash deposits of \u00a348m (2023: \u00a3108m), which have been accumulated to finance the redemption of a number of securities
issued by the Fosse securitisation companies. The share of Fosse Funding (No.1) Ltd\u2019s beneficial interest in the assets held by Fosse Trustee (UK) Ltd is therefore
reduced by this amount.
15. TRANSFERS OF FINANCIAL ASSETS NOT QUALIFYING FOR DERECOGNITION
The Santander UK group enters into transactions in the normal course of business by which it transfers recognised financial assets directly to third parties or to
structured entities. These transfers may give rise to the full or partial derecognition of those financial assets. Transferred financial assets that do not qualify for
derecognition consist of (i) securities held by counterparties as collateral under repurchase agreements, (ii) securities lent under securities lending agreements, and
(iii) loans that have been transferred under securitisation or covered bond arrangements by which the Santander UK group retains a continuing involvement in such
transferred assets.
As a result of these sale and repurchase and securities lending transactions, the Santander UK group is unable to use, sell or pledge the transferred assets for the
duration of the transaction. The Santander UK group remains exposed to interest rate risk and credit risk on these pledged instruments. The counterparty\u2019s recourse
is not limited to the transferred assets.
The Santander UK group securitisation and covered bond transfers do not qualify for derecognition. The Santander UK group remains exposed to credit risks arising
from the mortgage loans or credit agreements and has retained control of the transferred assets. Circumstances in which the Santander UK group has continuing
involvement in the transferred assets may include retention of servicing rights over the transferred assets (the servicing fee in respect of which is dependent on the
amount or timing of the cash flows collected from, or the non-performance of, the transferred assets), entering into a derivative transaction with the securitisation
or covered bond vehicle, retaining an interest in the securitisation or covered bond vehicle or providing a cash reserve fund. Where the Santander UK group has
continuing involvement, it continues to recognise the transferred assets to the extent of its continuing involvement and recognises an associated liability. The net
carrying amount of the transferred assets and associated liabilities reflects the rights and obligations that the Santander UK group has retained.
The carrying amount of the assets transferred under securitisation and covered bond arrangements and associated financial liabilities is set out in Note 14 c). The
following table analyses the carrying amount of other financial assets that did not qualify for derecognition and their associated financial liabilities:
Group
2024
2023
Assets
Liabilities
Assets
Liabilities
Nature of transaction
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Sale and repurchase agreements
1,346
(1,372)
14
(15)
Securities lending agreements
3,304
(2,807)
3,136
(2,735)
Company
2024
2023
Assets
Liabilities
Assets
Liabilities
Nature of transaction
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Sale and repurchase agreements
1,346
(1,372)
14
(14)
Securities lending agreements
2,358
(2,307)
2,228
(2,735)
24. OTHER FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS
Group
Company
2024
2023
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Structured Notes Programmes
355
369
355
369
Structured deposits
605
426
605
426
Zero Amortising Guaranteed Notes
95
104
95
104
1,055
899
1,055
899
For the Santander UK group and the Company, all (2023: all) of the other financial liabilities at FVTPL were designated as such.
Gains and losses arising from changes in the credit spread of securities issued by the Santander UK group reverse over the contractual life of the debt, provided that
the debt is not repaid at a premium or a discount. The net loss during the year attributable to changes in the Santander UK group\u2019s own credit risk on the above
securities was \u00a317m (2023: \u00a321m loss, 2022: \u00a325m gain). The cumulative net loss attributable to changes in the Santander UK group\u2019s own credit risk on the above
securities at 31 December 2024 was \u00a34m (2023: \u00a36m loss, 2022: \u00a315m gain).
At 31 December 2024, the amount that would be required to be contractually paid at maturity of the securities above was \u00a376m (2023: \u00a397m) higher than the
carrying value.
34. ASSETS CHARGED AS SECURITY FOR LIABILITIES AND COLLATERAL ACCEPTED AS
SECURITY FOR ASSETS
The following transactions are conducted under terms that are usual and customary to collateralised transactions including, where relevant, standard securities
lending and repurchase agreements.
a) Assets charged as security for liabilities
The financial assets below are analysed between those assets accounted for on-balance sheet and off-balance sheet.
Group
Company
2024
2023
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
On-balance sheet:
Cash and balances at central banks
1,580
1,480
1,580
1,480
Loans and advances to banks
139
191
139
189
Loans and advances to customers - securitisations and covered bonds (See Note 14)
32,721
27,088
\u2014
\u2014
Loans and advances to customers - other
14,846
20,699
14,846
20,699
Other financial assets at amortised cost
1,529
14
1,529
14
Financial assets at fair value through other comprehensive income
4,504
5,183
4,504
5,183
Total on-balance sheet
55,319
54,655
22,598
27,565
Total off-balance sheet
9,564
10,185
9,564
10,185
Santander UK provides assets as collateral in the following areas of the business.
Sale and repurchase agreements
Santander UK also enters into sale and repurchase agreements and similar transactions of debt securities. Upon entering into such transactions, Santander UK
provides collateral in excess of the borrowed amount. The carrying amount of assets that were so provided at 31 December 2024 was \u00a316,987m (2023:
\u00a313,291m), of which \u00a32,472m (2023: \u00a3909m) was classified in \u2018Loans and advances to customers \u2013 securitisations and covered bonds\u2019 in the table above.
Securitisations and covered bonds
As described in Note 14, Santander UK plc and certain of its subsidiaries issue securitisations and covered bonds through or involving structured entities. At 31
December 2024, there were \u00a333,905m (2023: \u00a327,927m) of gross assets in these secured programmes and \u00a31,184m (2023: \u00a3839m) of these related to internally
retained issuances that were available for use as collateral for liquidity purposes in the future.
At 31 December 2024, \u00a33,003m (2023: \u00a32,928m) of notes issued under securitisation and covered bond programmes had been retained internally, a proportion of
which had been used as collateral via third party bilateral secured funding transactions, which totalled \u00a31,500m at 31 December 2024 (2023: \u00a31,500m), or for use
as collateral for liquidity purposes in the future.
Stock borrowing and lending agreements
Asset balances under stock borrowing and lending agreements represent stock lent by Santander UK. These balances amounted to \u00a315,860m at 31 December
2024 (2023: \u00a323,644m) and are offset by contractual commitments to return stock borrowed or cash received.
Derivatives and other business
In addition to the arrangements described above, collateral is also provided in the normal course of derivative business to counterparties. At 31 December 2024,
\u00a31,787m (2023: \u00a31,726m) of such collateral in the form of cash had been provided by Santander UK and is included in the table.
b) Collateral accepted as security for assets
The collateral held as security for assets, analysed between those liabilities accounted for on balance sheet and off-balance sheet, was:
Group
Company
2024
2023
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
On-balance sheet:
Deposits by banks
682
860
682
860
Total on-balance sheet
682
860
682
860
Total off-balance sheet
14,392
14,992
14,392
14,992
Purchase and resale agreements
Santander UK also enters into purchase and resale agreements and similar transactions of debt securities. Upon entering into such transactions, Santander UK
receives collateral in excess of the loan amount. The level of collateral held is monitored daily and if required, further calls are made to ensure the market values of
collateral remains at least equal to the loan balance. The subsidiaries are permitted to sell or repledge the collateral held in the absence of default. At 31 December
2024, the fair value of such collateral received was \u00a313,221m (2023: \u00a312,982m). Of the collateral received, almost all was sold or repledged. The subsidiaries have
an obligation to return collateral that they have sold or pledged.
Stock borrowing and lending agreements
Obligations representing contractual commitments to return stock borrowed by the Santander UK group amounted to \u00a31,171m at 31 December 2024 (2023:
\u00a32,010m) and are offset by a contractual right to receive stock lent.
Derivatives business
In addition to the arrangements described, collateral is also received from counterparties in the normal course of derivative business. At 31 December 2024, \u00a3682m
(2023: \u00a3860m) of such collateral in the form of cash had been received by Santander UK and is included in the table.
Lending activities
In addition to the collateral held as security for assets, the Santander UK group may obtain a charge over a customer\u2019s property in connection with its lending
activities. Details of these arrangements are set out in the \u2018Credit risk\u2019 section of the Risk review.", "dimensions": { "concept": "ifrs-full:DisclosureOfCollateralExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-596": { "value": "
Hedged exposures
Santander UK hedges its exposures to various risks, including interest rate risk and foreign currency risk, as set out in the following table.
Group
2024
2023
Accumulated amount of FV hedge
adjustments
Change in
value to
calculate
hedge
ineffective
ness
Accumulated amount of FV hedge
adjustments
Change in
value to
calculate
hedge
ineffective
ness
Carrying
value
Hedged
item
Portfolio
hedge of
interest
rate risks
Of which
Discontinued
hedges
Carrying
value
Hedged
item
Portfolio
hedge of
interest
rate risks
Of which
Discontinued
hedges
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Fair value hedges
Interest rate risk:
Loans and advances to customers
62,773
\u2014
(731)
(290)
(154)
73,194
\u2014
(625)
(435)
1,968
Other financial assets at amortised cost
1,667
(45)
(7)
(7)
(44)
152
1
(8)
(8)
5
Reverse repurchase agreements \u2013 non
trading
6,423
\u2014
(1)
\u2014
(1)
6,186
\u2014
\u2014
\u2014
4
Other financial assets at FVOCI
2,100
(131)
\u2014
(95)
(18)
2,013
(113)
\u2014
(131)
82
Deposits by customers
(21,726)
18
9
1
(1)
(15,892)
38
(10)
\u2014
(53)
Debt securities in issue
(3,811)
150
(54)
(77)
52
(4,091)
118
(75)
(114)
(128)
Subordinated liabilities
(511)
(12)
(1)
(36)
15
(522)
(27)
(1)
(42)
(1)
Interest rate/FX risk:
Other financial assets at FVOCI
1,503
16
\u2014
\u2014
(30)
989
4
\u2014
\u2014
12
Debt securities in issue
(200)
(9)
\u2014
(14)
13
(214)
(14)
\u2014
(24)
8
Subordinated liabilities
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(1)
48,218
(13)
(785)
(518)
(168)
61,815
7
(719)
(754)
1,896
Group
2024
2023
Change in value to
calculate hedge
ineffectiveness
Cash flow hedge
reserve
Balances on cash
flow hedge
reserve for
discontinued
hedges
Change in value to
calculate hedge
ineffectiveness
Cash flow hedge
reserve
Balances on cash
flow hedge reserve
for discontinued
hedges
Hedged item balance sheet line item
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cash flow hedges:
Interest rate risk:
Loans and advances to customers
361
(497)
2
(163)
(462)
1
Cash and balances at central banks
464
(192)
(50)
(281)
99
(76)
Deposits by banks
(4)
\u2014
\u2014
(1)
(1)
\u2014
Repurchase agreements - non trading
(60)
52
\u2014
\u2014
\u2014
\u2014
FX risk:
Other financial assets at FVOCI
(487)
1
\u2014
(253)
1
\u2014
Not applicable \u2013 highly probable forecast
transactions
4
\u2014
\u2014
88
1
\u2014
Deposits by customers
\u2014
\u2014
\u2014
(33)
\u2014
\u2014
Debt securities in issue
78
181
\u2014
617
(9)
\u2014
Repurchase agreements - non trading
\u2014
\u2014
\u2014
(42)
\u2014
\u2014
Interest rate/FX risk:
Debt securities in issue/loans and advances to
customers
148
(12)
\u2014
99
(75)
\u2014
Deposits by customers
21
(37)
\u2014
94
(39)
\u2014
Subordinated liabilities/loans and advances to
customers
3
(16)
51
44
(11)
52
Inflation risk:
Other financial assets at amortised cost
(70)
66
\u2014
\u2014
\u2014
\u2014
Other financial assets at FVOCI
(1)
1
\u2014
\u2014
\u2014
\u2014
457
(453)
3
169
(496)
(23)
Company
2024
2023
Accumulated amount of FV hedge
adjustments
Change in
value to
calculate
hedge
ineffective
ness
Accumulated amount of FV hedge
adjustments
Change in
value to
calculate
hedge
ineffective
ness
Carrying
value
Hedged
item
Portfolio
hedge of
interest
rate risks
Of which
Discontinued
hedges
Carrying
value
Hedged
item
Portfolio
hedge of
interest
rate risks
Of which
Discontinued
hedges
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Fair value hedges
Interest rate risk:
Loans and advances to customers
62,694
\u2014
(903)
(461)
(153)
73,117
\u2014
(839)
(649)
1,967
Other financial assets at amortised cost
1,667
(45)
(7)
(7)
(44)
152
1
(8)
(8)
5
Reverse repurchase agreements \u2013 non
trading
6,423
\u2014
(1)
\u2014
(1)
6,186
\u2014
\u2014
\u2014
4
Other financial assets at FVOCI
2,100
(131)
\u2014
(95)
(18)
2,013
(113)
\u2014
(131)
82
Deposits by customers
(21,726)
18
10
1
(1)
(16,031)
38
(10)
\u2014
(53)
Debt securities in issue
(2,035)
64
\u2014
\u2014
32
(2,312)
35
\u2014
\u2014
(88)
Subordinated liabilities
(512)
(13)
\u2014
(35)
14
(524)
(28)
\u2014
(42)
(1)
Interest rate/FX risk:
Other financial assets at FVOCI
1,503
17
\u2014
\u2014
(30)
989
4
\u2014
\u2014
12
Subordinated liabilities
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(1)
50,114
(90)
(901)
(597)
(201)
63,590
(63)
(857)
(830)
1,927
Company
2024
2023
Change in value to
calculate hedge
ineffectiveness
Cash flow
hedge reserve
Balances on cash
flow hedge
reserve for
discontinued
hedges
Change in value to
calculate hedge
ineffectiveness
Cash flow
hedge reserve
Balances on cash
flow hedge reserve
for discontinued
hedges
Hedged item balance sheet line item
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cash flow hedges:
Interest rate risk:
Loans and advances to customers
214
(312)
2
(133)
(268)
1
Cash and balances at central banks
464
(191)
(50)
(281)
99
(76)
Deposits by banks
(4)
\u2014
\u2014
(1)
(1)
\u2014
Repurchase agreements - non trading
(60)
52
\u2014
\u2014
\u2014
\u2014
FX risk:
Other financial assets at FVOCI
(487)
1
\u2014
(253)
1
\u2014
Not applicable \u2013 highly probable forecast
transactions
4
\u2014
\u2014
88
1
\u2014
Deposits by customers
\u2014
\u2014
\u2014
(33)
\u2014
\u2014
Debt securities in issue
(99)
48
\u2014
440
(13)
\u2014
Repurchase agreements - non trading
\u2014
\u2014
\u2014
(42)
\u2014
\u2014
Interest rate/FX risk:
Debt securities in issue/loans and advances to
customers
23
(2)
\u2014
35
(21)
(2)
Deposits by customers
21
(38)
(1)
94
(41)
(2)
Subordinated liabilities/loans and advances to
customers
3
(23)
43
41
(19)
44
Inflation risk:
Other financial assets at amortised cost
(70)
65
\u2014
\u2014
\u2014
\u2014
Other financial assets at FVOCI
(1)
1
\u2014
\u2014
\u2014
\u2014
8
(399)
(6)
(45)
(262)
(35)
16. REVERSE REPURCHASE AGREEMENTS \u2013 NON-TRADING
Group
Company
2024
2023
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Agreements with banks
1,363
2,397
1,363
2,397
Agreements with customers
8,975
10,071
8,975
10,071
10,338
12,468
10,338
12,468
23. REPURCHASE AGREEMENTS \u2013 NON-TRADING
Group
Company
2024
2023
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Agreements with banks
2,336
551
2,336
551
Agreements with customers
6,281
7,860
6,281
7,860
8,617
8,411
8,617
8,411
\u00a0 \u00a0 \u00a0
Sale and repurchase agreements
Santander UK also enters into sale and repurchase agreements and similar transactions of debt securities. Upon entering into such transactions, Santander UK
provides collateral in excess of the borrowed amount. The carrying amount of assets that were so provided at 31 December 2024 was \u00a316,987m (2023:
\u00a313,291m), of which \u00a32,472m (2023: \u00a3909m) was classified in \u2018Loans and advances to customers \u2013 securitisations and covered bonds\u2019 in the table above.
Purchase and resale agreements
Santander UK also enters into purchase and resale agreements and similar transactions of debt securities. Upon entering into such transactions, Santander UK
receives collateral in excess of the loan amount. The level of collateral held is monitored daily and if required, further calls are made to ensure the market values of
collateral remains at least equal to the loan balance. The subsidiaries are permitted to sell or repledge the collateral held in the absence of default. At 31 December
2024, the fair value of such collateral received was \u00a313,221m (2023: \u00a312,982m). Of the collateral received, almost all was sold or repledged. The subsidiaries have
an obligation to return collateral that they have sold or pledged.
Group
2024
2023
Fair value
Fair
Carrying
Fair value
Fair
Carrying
Level 1
Level 2
Level 3
value
value
Level 1
Level 2
Level 3
value
value
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Loans and advances to customers
\u2014
\u2014
198,376
198,376
199,408
\u2014
\u2014
205,917
205,917
207,435
Loans and advances to banks
\u2014
1,032
\u2014
1,032
1,032
\u2014
1,080
\u2014
1,080
1,080
Reverse repurchase agreements - non-
trading
\u2014
10,342
\u2014
10,342
10,338
\u2014
12,470
\u2014
12,470
12,468
Other financial assets at amortised cost
3,190
\u2014
\u2014
3,190
3,408
144
\u2014
\u2014
144
152
3,190
11,374
198,376
212,940
214,186
144
13,550
205,917
219,611
221,135
Liabilities
Deposits by customers
\u2014
185
180,282
180,467
180,967
\u2014
71
190,561
190,632
190,850
Deposits by banks
\u2014
13,934
39
13,973
13,993
\u2014
20,342
40
20,382
20,332
Repurchase agreements - non-trading
\u2014
8,622
\u2014
8,622
8,617
\u2014
8,413
\u2014
8,413
8,411
Debt securities in issue
21,173
12,910
1,771
35,854
35,673
1,689
30,743
1,189
33,621
33,910
Subordinated liabilities
1,129
10
1,622
2,761
2,385
\u2014
2,591
209
2,800
2,386
22,302
35,661
183,714
241,677
241,635
1,689
62,160
191,999
255,848
255,889
Company
2024
2023
Fair value
Carrying
Fair value
Carrying
Level 1
Level 2
Level 3
Fair value
value
Level 1
Level 2
Level 3
Fair value
value
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Loans and advances to customers
\u2014
\u2014
216,851
216,851
217,780
\u2014
\u2014
222,208
222,208
223,511
Loans and advances to banks
\u2014
926
\u2014
926
926
\u2014
1,052
\u2014
1,052
1,052
Reverse repurchase agreements - non-trading
\u2014
10,342
\u2014
10,342
10,338
\u2014
12,470
\u2014
12,470
12,468
Other financial assets at amortised cost
3,190
1,977
\u2014
5,167
5,206
144
1,681
\u2014
1,825
1,833
3,190
13,245
216,851
233,286
234,250
144
15,203
222,208
237,555
238,864
Liabilities
Deposits by customers
\u2014
185
200,530
200,715
201,215
\u2014
71
207,216
207,287
207,516
Deposits by banks
\u2014
13,922
5,579
19,501
19,521
\u2014
20,326
5,424
25,750
25,699
Repurchase agreements - non-trading
\u2014
8,621
\u2014
8,621
8,617
\u2014
8,413
\u2014
8,413
8,411
Debt securities in issue
17,870
12,846
1,379
32,095
31,833
999
29,181
841
31,021
31,228
Subordinated liabilities
1,129
10
1,598
2,737
2,386
\u2014
2,592
209
2,801
2,387
18,999
35,584
209,086
263,669
263,572
999
60,583
213,690
275,272
275,241
h) Maturities of financial liabilities and off-balance sheet commitments
The table below analyses the maturities of the undiscounted cash flows relating to financial liabilities and off-balance sheet commitments of Santander UK based
on the remaining period to the contractual maturity date at the balance sheet date. Deposits by customers largely consist of retail deposits. This table is not
intended to show the liquidity of Santander UK.
Group
On demand
Not later than
3 months
Later than 3
months and
not later than
1 year
Later than 1
year and not
later than 5
years
Later than 5
years
Total
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Financial liabilities
Derivative financial instruments
\u2014
165
136
317
173
791
Other financial liabilities at fair value through profit or loss
10
3
135
556
524
1,228
Deposits by customers
169,285
3,487
4,004
4,451
355
181,582
Deposits by banks
1,352
1,561
7,618
4,459
\u2014
14,990
Repurchase agreements \u2013 non trading
\u2014
7,894
762
\u2014
\u2014
8,656
Debt securities in issue
\u2014
5,907
1,959
26,332
7,761
41,959
Subordinated liabilities
\u2014
27
628
332
1,895
2,882
Lease liabilities
\u2014
\u2014
28
58
17
103
Total financial liabilities
170,647
19,044
15,270
36,505
10,725
252,191
Off-balance sheet commitments given
4,007
19,088
916
8,391
3,247
35,649
2023
Financial liabilities
Derivative financial instruments
1
192
52
478
183
906
Other financial liabilities at fair value through profit or loss
\u2014
8
7
538
520
1,073
Deposits by customers
179,732
3,217
3,447
4,690
288
191,374
Deposits by banks
1,454
1,749
573
18,084
\u2014
21,860
Repurchase agreements \u2013 non trading
\u2014
8,418
8
\u2014
\u2014
8,426
Debt securities in issue
\u2014
6,380
4,908
17,029
12,216
40,533
Subordinated liabilities
\u2014
27
83
876
2,470
3,456
Lease liabilities
\u2014
\u2014
29
70
23
122
Total financial liabilities
181,187
19,991
9,107
41,765
15,700
267,750
Off-balance sheet commitments given
3,795
15,205
1,408
7,399
3,621
31,428
Company
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Financial liabilities
Derivative financial instruments
\u2014
159
135
387
2,577
3,258
Other financial liabilities at fair value through profit or loss
10
3
135
556
524
1,228
Deposits by customers
188,933
3,780
4,173
4,089
910
201,885
Deposits by banks
6,880
1,561
7,618
4,459
\u2014
20,518
Repurchase agreements \u2013 non trading
\u2014
7,894
762
\u2014
\u2014
8,656
Debt securities in issue
\u2014
5,865
1,535
25,575
3,548
36,523
Subordinated liabilities
\u2014
27
628
332
1,895
2,882
Lease liabilities
\u2014
\u2014
27
56
12
95
Total financial liabilities
195,823
19,289
15,013
35,454
9,466
275,045
Off-balance sheet commitments given
8,730
19,104
916
8,837
3,246
40,833
2023
Financial liabilities
Derivative financial instruments
23
175
58
555
1,558
2,369
Other financial liabilities at fair value through profit or loss
\u2014
8
7
538
520
1,073
Deposits by customers
195,901
3,479
3,440
4,288
1,060
208,168
Deposits by banks
1,395
1,824
742
24,114
\u2014
28,075
Repurchase agreements \u2013 non trading
\u2014
8,418
8
\u2014
\u2014
8,426
Debt securities in issue
\u2014
6,354
4,801
16,078
9,630
36,863
Subordinated liabilities
\u2014
27
83
875
2,470
3,455
Lease liabilities
\u2014
\u2014
28
67
17
112
Total financial liabilities
197,319
20,285
9,167
46,515
15,255
288,541
Off-balance sheet commitments given
8,271
15,214
1,408
7,945
3,620
36,458
39. OFFSETTING FINANCIAL ASSETS AND LIABILITIES
The following table shows the impact of netting arrangements on:
\u2013 All financial assets and liabilities that are reported net on the balance sheet
\u2013 All derivative financial instruments and repurchase agreements and other similar secured lending and borrowing agreements that are subject to enforceable
master netting arrangements or similar agreements, but do not qualify for balance sheet netting.
The table identifies the amounts that have been offset in the balance sheet and those amounts that are covered by enforceable netting arrangements (offsetting
arrangements and financial collateral) but do not qualify for netting under the requirements described above.
For derivative contracts, the \u2018Financial instruments\u2019 column identifies financial assets and liabilities that are subject to set off under netting agreements, such as
the\u00a0ISDA Master Agreement or derivative exchange or clearing counterparty agreements, whereby all outstanding transactions with the same counterparty can
be\u00a0offset and close-out netting applied across all outstanding transactions covered by the agreements if an event of default or other predetermined events occur.
Financial collateral refers to cash and non-cash collateral obtained, typically daily or weekly, to cover the net exposure between counterparties by enabling the
collateral to be realised in an event of default or if other predetermined events occur. For repurchase and reverse repurchase agreements and other similar secured
lending and borrowing, the \u2018Financial instruments\u2019 column identifies financial assets and liabilities that are subject to set off under netting agreements, such as
global master repurchase agreements and global master securities lending agreements, whereby all outstanding transactions with the same counterparty can
be\u00a0offset and close-out netting applied across all outstanding transactions covered by the agreements if an event of default or other predetermined events occur.
Financial collateral typically comprises highly liquid securities which are legally transferred and can be liquidated if a counterparty defaults.
Santander UK engages in a variety of counterparty credit mitigation strategies in addition to netting and collateral arrangements. Therefore, the net amounts
presented in the tables below do not represent Santander UK\u2019s total credit exposure.
Group
Amounts subject to enforceable netting arrangements
Assets not
subject to
enforceable
netting
arrangements(2)
Effects of offsetting on balance sheet
Related amounts not offset
Gross
amounts
Amounts
offset
Net amounts
on balance
sheet
Financial
instruments
Financial
collateral (1)
Net
amount
Balance
sheet
total (3)
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Derivative financial assets
2,799
(1,643)
1,156
(407)
(711)
38
48
1,204
Reverse repurchase, securities borrowing & similar
agreements:
\u2013 Amortised cost
16,175
(5,837)
10,338
(63)
(10,275)
\u2014
\u2014
10,338
Loans and advances to customers and banks\u207d\u2074\u207e
5,421
(635)
4,786
\u2014
\u2014
4,786
195,654
200,440
24,395
(8,115)
16,280
(470)
(10,986)
4,824
195,702
211,982
Liabilities
Derivative financial liabilities
2,325
(1,643)
682
(407)
(127)
148
20
702
Repurchase, securities lending & similar agreements:
\u2013 Amortised cost
14,454
(5,837)
8,617
(63)
(8,554)
\u2014
\u2014
8,617
Deposits by customers and banks\u207d\u2074\u207e
635
(635)
\u2014
\u2014
\u2014
\u2014
194,960
194,960
17,414
(8,115)
9,299
(470)
(8,681)
148
194,980
204,279
2023
Assets
Derivative financial assets
3,429
(2,047)
1,382
(471)
(823)
88
50
1,432
Reverse repurchase, securities borrowing & similar
agreements:
\u2013 Amortised cost
15,625
(3,157)
12,468
(118)
(12,350)
\u2014
\u2014
12,468
Loans and advances to customers and banks\u207d\u2074\u207e
5,363
(790)
4,573
\u2014
\u2014
4,573
203,942
208,515
24,417
(5,994)
18,423
(589)
(13,173)
4,661
203,992
222,415
Liabilities
Derivative financial liabilities
2,838
(2,047)
791
(471)
(161)
159
27
818
Repurchase, securities lending & similar agreements:
\u2013 Amortised cost
11,568
(3,157)
8,411
(118)
(8,293)
\u2014
\u2014
8,411
Deposits by customers and banks\u207d\u2074\u207e
4,218
(790)
3,428
\u2014
\u2014
3,428
207,754
211,182
18,624
(5,994)
12,630
(589)
(8,454)
3,587
207,781
220,411
(1) Financial collateral is reflected at its fair value but has been limited to the net balance sheet exposure so as not to include any over-collateralisation.
(2) This column includes contractual rights of set-off that are subject to uncertainty under the laws of the relevant jurisdiction.
(3) The balance sheet total is the sum of \u2018Net amounts reported on the balance sheet\u2019 that are subject to enforceable netting arrangements and \u2018Amounts not subject to enforceable netting arrangements\u2019.
(4) The amounts offset within loans and advances to customers/banks or deposits by customers/banks relate to offset mortgages which are classified as either and that are subject to netting.
Company
Amounts subject to enforceable netting arrangements
Assets not
subject to
enforceable
netting
arrangements(2)
Effects of offsetting on balance sheet
Related amounts not offset
Gross
amounts
Amounts
offset
Net amounts
on balance
sheet
Financial
instruments
Financial
collateral (1)
Net
amount
Balance
sheet
total (3)
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Derivative financial assets
3,078
(1,643)
1,435
(686)
(711)
38
47
1,482
Reverse repurchase, securities borrowing & similar
agreements:
\u2013 Amortised cost
16,175
(5,837)
10,338
(63)
(10,275)
\u2014
\u2014
10,338
Loans and advances to customers and banks (4)
5,421
(635)
4,786
\u2014
\u2014
4,786
213,920
218,706
24,674
(8,115)
16,559
(749)
(10,986)
4,824
213,967
230,526
Liabilities
Derivative financial liabilities
4,230
(1,643)
2,587
(686)
(127)
1,774
20
2,607
Repurchase, securities lending & similar agreements:
\u2013 Amortised cost
14,454
(5,837)
8,617
(63)
(8,554)
\u2014
\u2014
8,617
Deposits by customers and banks (4)
635
(635)
\u2014
\u2014
\u2014
\u2014
220,736
220,736
19,319
(8,115)
11,204
(749)
(8,681)
1,774
220,756
231,960
2023
Assets
Derivative financial assets
3,695
(2,047)
1,648
(734)
(823)
91
47
1,695
Reverse repurchase, securities borrowing & similar
agreements:
\u2013 Amortised cost
15,625
(3,157)
12,468
(118)
(12,350)
\u2014
\u2014
12,468
Loans and advances to customers and banks(4)
26,986
(790)
26,196
\u2014
\u2014
26,196
198,367
224,563
46,306
(5,994)
40,312
(852)
(13,173)
26,287
198,414
238,726
Liabilities
Derivative financial liabilities
3,994
(2,047)
1,947
(734)
(161)
1,052
27
1,974
Repurchase, securities lending & similar agreements:
\u2013 Amortised cost
11,568
(3,157)
8,411
(118)
(8,293)
\u2014
\u2014
8,411
Deposits by customers and banks (4)
31,262
(790)
30,472
\u2014
\u2014
30,472
202,743
233,215
46,824
(5,994)
40,830
(852)
(8,454)
31,524
202,770
243,600
(1) Financial collateral is reflected at its fair value but has been limited to the net balance sheet exposure so as not to include any over-collateralisation.
(2) This column includes contractual rights of set-off that are subject to uncertainty under the laws of the relevant jurisdiction.
(3) The balance sheet total is the sum of \u2018Net amounts reported on the balance sheet\u2019 that are subject to enforceable netting arrangements and \u2018Amounts not subject to enforceable netting arrangements\u2019.
(4) The amounts offset within loans and advances to customers/banks or deposits by customers/banks relate to offset mortgages which are classified as either and that are subject to netting.
", "dimensions": { "concept": "ifrs-full:DisclosureOfRepurchaseAndReverseRepurchaseAgreementsExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-598": { "value": "
12. OTHER FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
Group
Company
2024
2023
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Loans and advances to customers:
Loans to housing associations
4
8
4
8
Other loans
40
38
40
38
44
46
44
46
Debt securities
56
167
56
168
Other debt instruments
36
49
\u2014
\u2014
136
262
100
214
For the Santander UK group, other financial assets at FVTPL comprised \u00a360m (2023: \u00a38m) of financial assets designated at FVTPL and \u00a376m (2023: \u00a3254m) of
financial assets mandatorily held at FVTPL. For the Company, other financial assets at FVTPL comprised \u00a360m (2023: \u00a38m) of financial assets designated at FVTPL
and \u00a340m (2023: \u00a3206m) of financial assets mandatorily held at FVTPL.
Loans and advances to customers principally represent other loans, being a portfolio of roll-up mortgages. These are managed, and have their performance
evaluated, on a fair value basis in accordance with a documented investment strategy, and information about them is provided on that basis to management.
The net loss in the year attributable to changes in credit risk for loans and advances at FVTPL was \u00a3nil (2023: \u00a3nil, 2022: \u00a31m). The cumulative net loss attributable
to changes in credit risk for loans and advances at FVTPL at 31 December 2024 was \u00a33m (2023: \u00a33m,2022: \u00a33m).
13. LOANS AND ADVANCES TO CUSTOMERS
Group
Company
2024
2023
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Loans secured on residential properties
165,214
172,854
165,214
172,854
Corporate loans
18,550
18,267
17,778
17,794
Finance leases
4,222
4,530
\u2014
\u2014
Other unsecured loans
6,601
7,232
6,521
7,065
Accrued interest and other adjustments
796
943
961
882
Amounts due from fellow Banco Santander subsidiaries and joint ventures
4,814
4,489
3
4
Amounts due from Santander UK Group Holdings plc
18
55
18
55
Amounts due from subsidiaries
\u2014
\u2014
27,999
25,903
Loans and advances to customers
200,215
208,370
218,494
224,557
Credit impairment loss allowances on loans and advances to customers
(784)
(914)
(714)
(1,046)
Residual value and voluntary termination provisions on finance leases
(23)
(21)
\u2014
\u2014
Net loans and advances to customers
199,408
207,435
217,780
223,511
For movements in expected credit losses, see the 'Movement in total exposures and the corresponding ECL' table in the Santander UK group level \u2013 Credit risk
review section of the Risk review.
Finance lease and hire purchase contract receivables may be analysed as follows:
Group
2024
2023
Gross
investment
Unearned
finance
income
Net
investment
Gross
investment
Unearned
finance income
Net
investment
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
No later than one year
1,400
(208)
1,192
1,502
(216)
1,286
Later than one year and not later than two years
1,423
(215)
1,208
1,426
(208)
1,218
Later than two years and not later than three years
1,220
(184)
1,036
1,331
(194)
1,137
Later than three years and not later than four years
721
(109)
612
882
(129)
753
Later than four years and not later than five years
115
(17)
98
99
(14)
85
Later than five years
90
(14)
76
60
(9)
51
4,969
(747)
4,222
5,300
(770)
4,530
At 31 December 2024 and 2023, the Company had no finance lease and hire purchase contract receivables.
The Santander UK group enters into finance leasing arrangements primarily for the financing of motor vehicles and a range of assets for its corporate customers.
Included in the carrying value of net investment in finance leases and hire purchase contracts is \u00a31,748m (2023: \u00a31,830m) of unguaranteed RV at the end of the
current lease terms, which is expected to be recovered through re-payment, re-financing or sale. Contingent rent income of \u00a3nil (2023: \u00a3nil, 2022: \u00a3nil) was earned
in the year, which was classified in \u2018Interest and similar income\u2019. Finance income on the net investment in finance leases was \u00a3308m (2023: \u00a3266m, 2022: \u00a3230m).
Finance lease receivable balances are secured over the asset leased. The Santander UK group is not permitted to sell or repledge the asset in the absence of default
by the lessee. The Directors consider that the carrying amount of the finance lease receivables approximates to their fair value.
Included within loans and advances to customers are advances assigned to bankruptcy remote structured entities and Abbey Covered Bonds LLP. These loans
provide security to issues of covered bonds and mortgage-backed or other asset-backed securities issued by the Santander UK group. For more, see Note 14.
At 31 December 2024 and 2023, the Santander UK group had contracted with lessees for the following future undiscounted minimum lease payments receivable
under operating leases.
Group
Company
2024
2023
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
No later than one year
27
28
25
27
Later than one year and not later than two years
21
26
20
24
Later than two years and not later than three years
17
18
16
17
Later than three years and not later than four years
7
14
7
13
Later than four years and not later than five years
5
7
4
6
Later than five years
11
18
7
13
88
111
79
100
14. SECURITISATIONS AND COVERED BONDS
The information in this Note relates to securitisations and covered bonds for consolidated structured entities, used to obtain funding or collateral. It excludes
structured entities relating to credit protection transactions.
The Santander UK group uses structured entities to securitise some of the mortgage and other loans to customers that it originates. The Santander UK group also
issues covered bonds, which are guaranteed by, and secured against, a pool of the Santander UK group\u2019s mortgage loans transferred to Abbey Covered Bonds LLP.
The Santander UK group issues mortgage-backed securities, other asset-backed securities and covered bonds mainly in order to obtain diverse, low-cost funding,
but also to use as collateral for raising funds via third party bilateral secured funding transactions or for liquidity purposes in the future. The Santander UK group has
successfully used bilateral secured transactions as an additional form of medium-term funding; this has allowed the Santander UK group to further diversify its
medium-term funding investor base.
Loans and advances to customers include portfolios of residential mortgage loans, and receivables derived from credit agreements with retail customers for the
purchases of financed vehicles, which are subject to non-recourse finance arrangements. These loans and receivables have been purchased by, or assigned to,
structured entities or Abbey Covered Bonds LLP, and have been funded primarily through the issue of mortgage-backed securities, other asset-backed securities or
covered bonds. No gain or loss has been recognised as a result of these sales. The structured entities and Abbey Covered Bonds LLP are consolidated as subsidiary
undertakings. The Company and its subsidiaries do not own directly, or indirectly, any of the share capital of any of the structured entities.
a) Securitisations
i) Master trust structures
The Santander UK group makes use of master trust structures, whereby a pool of residential mortgage loans is assigned to a trust company by the asset originator.
A funding entity acquires a beneficial interest in the pool of assets held by the trust company with funds borrowed from qualifying structured entities, which at the
same time issue asset-backed securities to third-party investors or the Santander UK group.
Santander UK plc and its subsidiaries receive payments from the securitisation companies in respect of fees for administering the loans, and payment of deferred
consideration for the sale of the loans. Santander UK plc and its subsidiaries have no right or obligation to repurchase any securitised loan, except if certain
representations and warranties given by Santander UK plc or its subsidiaries at the time of transfer are breached and, in certain cases, if there is a product switch or
further advance, if a securitised loan is in arrears for over two months or if a securitised loan does not comply with regulatory requirements.
ii) Other securitisation structures
The Santander UK group also makes use of auto loan securitisations, whereby a pool of auto loans originated by a member of the Santander UK group is sold to a
special purpose vehicle by the asset originator. The special purpose vehicle funds the purchase of the auto loans by issuing asset-backed securities to third-party
investors. A proportion of the securities are also retained by members of the Santander UK group. Members of the Santander UK group also receive payments from
the special purpose vehicle in respect of fees for administering the auto loans, and payment of deferred consideration for the sale of the auto loans. The seller has
no right or obligation to repurchase any securitised loan, except if certain representations and warranties given by the seller at the time of transfer are breached
and, in certain cases, if there has been a subsequent variation in the terms of the underlying auto loan not permitted under the sale agreement.
b) Covered bonds
Santander UK plc also issues covered bonds, which are its direct, unsecured and unconditional obligation. The covered bonds benefit from a guarantee from Abbey
Covered Bonds LLP. Santander UK plc makes a term advance to Abbey Covered Bonds LLP equal to the sterling proceeds of each issue of covered bonds. Abbey
Covered Bonds LLP uses the proceeds of the term advance to purchase portfolios of residential mortgage loans and their security from Santander UK plc. Under the
terms of the guarantee, Abbey Covered Bonds LLP has agreed to pay an amount equal to the guaranteed amounts when the same shall become due for payment,
but which would otherwise be unpaid by Santander UK plc.
c) Analysis of securitisations and covered bonds
The Santander UK group\u2019s principal securitisation programmes and covered bond programme, together with the balances of the advances subject to securitisation
(or for the covered bond programme assigned) and the carrying value of the notes in issue at 31 December 2024 and 2023 are listed below. The gross assets in the
Group table below were transferred from the Company to the securitisations and covered bond programme vehicles but do not qualify for derecognition from the
Company.
Group
Gross assets
External notes in issue
Notes held within the Group
2024
2023
2024
2023
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Mortgage-backed master trust structures:
\u2013 Holmes
5,109
3,242
3,379
2,119
389
300
\u2013 Fosse
2,383
2,048
\u2014
100
1,408
1,382
7,492
5,290
3,379
2,219
1,797
1,682
Other asset-backed securitisation structures:
\u2013 Repton
718
757
550
550
\u2014
\u2014
Total securitisation programmes
8,210
6,047
3,929
2,769
1,797
1,682
Covered bond programme:
\u2013 Euro 35bn Global Covered Bond Programme
25,695
21,880
17,211
15,000
1,224
\u2014
Total securitisation and covered bond programmes
33,905
27,927
21,140
17,769
3,021
1,682
Company
Gross assets
External notes in issue
Notes held within the Company
2024
2023
2024
2023
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Covered bond programme:
\u2013 Euro 35bn Global Covered Bond Programme
25,695
21,880
17,300
15,087
1,224
\u2014
Total securitisation and covered bond programmes
25,695
21,880
17,300
15,087
1,224
\u2014
Holmes Funding Ltd has a beneficial interest of \u00a33,735m (2023: \u00a32,396m) in the residential mortgage loans held by Holmes Trustees Ltd. The remaining share of
the beneficial interest in residential mortgage loans held by Holmes Trustees Ltd belongs to Santander UK plc.
Fosse Funding (No.1) Ltd has a beneficial interest of \u00a31,394m (2023: \u00a31,393m) in the residential mortgage loans held by Fosse Trustee (UK) Ltd. The remaining
share of the beneficial interest in residential mortgage loans held by Fosse Trustee (UK) Ltd belongs to Santander UK plc.
The Holmes securitisation companies have cash deposits of \u00a3126m (2023: \u00a380m), which have been accumulated to finance the redemption of a number of
securities issued by the Holmes securitisation companies. The share of Holmes Funding Ltd in the trust assets is therefore reduced by this amount.
The Fosse securitisation companies have cash deposits of \u00a348m (2023: \u00a3108m), which have been accumulated to finance the redemption of a number of securities
issued by the Fosse securitisation companies. The share of Fosse Funding (No.1) Ltd\u2019s beneficial interest in the assets held by Fosse Trustee (UK) Ltd is therefore
reduced by this amount.
17. OTHER FINANCIAL ASSETS AT AMORTISED COST
Group
Company
2024
2023
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Asset backed securities
\u2014
\u2014
1,798
1,681
Debt securities
3,408
152
3,408
152
0
3,408
152
5,206
1,833
A significant portion of the debt securities are held in our eligible liquidity pool and consist mainly of government bonds and covered bonds. In 2024, Santander UK
increased the allocation of liquid assets to longer-dated, duration-hedged UK Gilts to support ongoing HQLA requirements. Detailed disclosures can be found in the
'Liquidity risk' section of the Risk review.
The Company\u2019s asset backed securities include investments in debt securities issued by Santander UK structured entities.
25. DEBT SECURITIES IN ISSUE
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0
Group
Company
2024
2023
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Medium-term notes:
\u2013 US $30bn Euro Medium Term Note Programme
696
744
696
744
\u2013 Euro \u20ac30bn Euro Medium Term Note Programme
2,997
3,784
2,997
3,784
- US SEC-registered Debt Programme - Santander UK plc
5,929
7,128
5,929
7,128
0
9,622
11,656
9,622
11,656
Euro \u20ac35bn Global Covered Bond Programme
17,211
15,000
17,300
15,087
US$20bn Commercial Paper Programmes
3,274
2,761
3,274
2,761
Certificates of deposit
1,196
1,530
1,196
1,530
Credit linked notes
441
194
441
194
Securitisation programmes
3,929
2,769
\u2014
\u2014
35,673
33,910
31,833
31,228
", "dimensions": { "concept": "ifrs-full:DisclosureOfDebtSecuritiesExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-597": { "value": "
12. OTHER FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
Group
Company
2024
2023
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Loans and advances to customers:
Loans to housing associations
4
8
4
8
Other loans
40
38
40
38
44
46
44
46
Debt securities
56
167
56
168
Other debt instruments
36
49
\u2014
\u2014
136
262
100
214
For the Santander UK group, other financial assets at FVTPL comprised \u00a360m (2023: \u00a38m) of financial assets designated at FVTPL and \u00a376m (2023: \u00a3254m) of
financial assets mandatorily held at FVTPL. For the Company, other financial assets at FVTPL comprised \u00a360m (2023: \u00a38m) of financial assets designated at FVTPL
and \u00a340m (2023: \u00a3206m) of financial assets mandatorily held at FVTPL.
Loans and advances to customers principally represent other loans, being a portfolio of roll-up mortgages. These are managed, and have their performance
evaluated, on a fair value basis in accordance with a documented investment strategy, and information about them is provided on that basis to management.
The net loss in the year attributable to changes in credit risk for loans and advances at FVTPL was \u00a3nil (2023: \u00a3nil, 2022: \u00a31m). The cumulative net loss attributable
to changes in credit risk for loans and advances at FVTPL at 31 December 2024 was \u00a33m (2023: \u00a33m,2022: \u00a33m).
24. OTHER FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS
Group
Company
2024
2023
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Structured Notes Programmes
355
369
355
369
Structured deposits
605
426
605
426
Zero Amortising Guaranteed Notes
95
104
95
104
1,055
899
1,055
899
For the Santander UK group and the Company, all (2023: all) of the other financial liabilities at FVTPL were designated as such.
Gains and losses arising from changes in the credit spread of securities issued by the Santander UK group reverse over the contractual life of the debt, provided that
the debt is not repaid at a premium or a discount. The net loss during the year attributable to changes in the Santander UK group\u2019s own credit risk on the above
securities was \u00a317m (2023: \u00a321m loss, 2022: \u00a325m gain). The cumulative net loss attributable to changes in the Santander UK group\u2019s own credit risk on the above
securities at 31 December 2024 was \u00a34m (2023: \u00a36m loss, 2022: \u00a315m gain).
At 31 December 2024, the amount that would be required to be contractually paid at maturity of the securities above was \u00a376m (2023: \u00a397m) higher than the
carrying value.
Day One profit adjustments
Day One profit adjustments are adopted where the fair value estimated by a valuation model is based on one or more significant unobservable inputs. Day One
profit adjustments are calculated and reported on a portfolio basis.
The timing of recognition of deferred Day One profit and loss is determined individually. It is deferred until either the instrument\u2019s fair value can be determined
using market observable inputs or is realised through settlement. The financial instrument is subsequently measured at fair value, adjusted for the deferred Day
One profit and loss. Subsequent changes in fair value are recognised immediately in the Income Statement without immediate reversal of deferred Day One profits
and losses.
g) Internal models based on information other than market data (Level 3)
The table below provides an analysis of financial instruments valued using internal models based on information other than market data together with further
details on the valuation techniques used for each type of instrument. Each instrument is initially valued at transaction price:
Group
Balance sheet value
Fair value movements recognised
in profit/(loss)
2024
2023
2024
2023
2022
Balance sheet line item
Category
Financial instrument product type
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
1. Derivative assets
Equity and credit contracts
Reversionary property interests
35
35
6
12
(8)
2. FVTPL assets
Loans and advances to customers
Roll-up mortgage portfolio
22
24
(1)
(2)
(18)
3. FVTPL assets
Loans and advances to customers
Other loans
22
22
\u2014
4
(4)
4. FVTPL assets
Debt securities
Reversionary property securities
36
49
2
(3)
\u2014
5. FVOCI assets
Debt Instruments
Other securities
34
\u2014
\u2014
\u2014
\u2014
149
130
7
11
(30)
Other Level 3 assets
\u2014
1
\u2014
(1)
10
Other Level 3 liabilities
(14)
(10)
(5)
(2)
3
Total net assets
135
121
Total income/(expense)
2
8
(17)
Valuation techniques (Group)
1. Derivative assets \u2013 Equity and credit contracts
These are valued using a probability weighted set of HPI forward prices, which are assumed to be a reasonable representation of the increase in value of the
Santander UK group\u2019s reversionary interest portfolio underlying the derivatives. The probability used reflects the likelihood of the homeowner vacating the property
and is calculated from mortality rates and acceleration rates which are a function of age and gender, obtained from the relevant mortality tables. Indexing is felt
to\u00a0be appropriate due to the size and geographical dispersion of the reversionary interest portfolio. These are determined using HPI Spot Rates adjusted to reflect
estimated forward growth. Non-seasonally adjusted (NSA) national and regional HPI are used in the valuation model to avoid any subjective judgement in the
adjustment process, which is made by Markit, which publishes the Halifax House Price Index.
The inputs used to determine the value of the reversionary property derivatives are HPI spot, HPI forward growth and mortality rates. The principal pricing
parameter is HPI forward growth.
2. FVTPL assets \u2013 Loans and advances to customers \u2013 roll-up mortgage portfolio
These represent roll-up mortgages (sometimes referred to as lifetime mortgages), which are an equity release scheme under which a property owner takes out a
loan secured against their home. The owner does not have to make any interest payments during their lifetime in which case the fixed interest payments are rolled
up into the mortgage. The loan or mortgage (capital and rolled-up interest) is repaid upon the owner\u2019s vacation of the property and the value of the loan is only
repaid from the value of the property. This is known as a \u2018no negative equity guarantee\u2019. Santander UK suffers a loss if the sale proceeds from the property are
insufficient to repay the loan, as it is unable to pursue the homeowner\u2019s estate or beneficiaries for the shortfall.
The value of the mortgage \u2018rolls up\u2019 or accretes until the owner vacates the property. In order to value the roll-up mortgages, Santander UK uses a probability-
weighted set of European option prices (puts) determined using the Black-Scholes model, in which the \u2018no negative equity guarantee\u2019 are valued as short put
options. The probability weighting applied is calculated from mortality rates and acceleration rates as a function of age and gender, taken from mortality tables.
The inputs used to determine the value of these instruments are HPI spot, HPI forward growth, HPI volatility, mortality rates and repayment rates. The principal
pricing parameter is HPI forward growth. The HPI forward growth rate used is unobservable and is the same as used in the valuation of Instrument 1 above. The
other parameters do not have a significant effect on the value of the instruments.
3. FVTPL assets \u2013 Loans and advances to customers \u2013 other loans
These relate to loans to transport and education companies. The fair value of these loans is estimated using the \u2018present value\u2019 model based on a credit curve
derived from current market spreads. Loan specific credit data is unobservable, so a proxy population is applied based on industry sector and credit rating.
4. FVTPL assets \u2013 Debt securities
These consist of reversionary property securities and are an equity release scheme, where the property owner receives an upfront lump sum in return for paying a
fixed percentage of the sales proceeds of the property when the owner vacates the property. These reversionary property securities are valued using a probability-
weighted set of HPI forward prices which are assumed to be a reasonable representation of the increase in value of Santander UK\u2019s reversionary interest portfolio
underlying the derivatives. The probability weighting used reflects the probability of the homeowner vacating the property through death or moving into care and is
calculated from mortality rates and acceleration factors which are a function of age and gender, obtained from the relevant mortality table.
The inputs used to determine the value of these instruments are HPI spot, HPI forward growth and mortality rates. The principal pricing parameter is HPI forward
growth. Discussion of the HPI spot rate, HPI forward growth rate and mortality rates for this financial instrument is the same as Instrument 1 above. An adjustment
is also made to reflect the specific property risk. Specific property risk is from the difference between the specific properties in the portfolio, and the average price as
expressed in the regionally weighted house price index.
5. FVOCI assets \u2013 Debt instruments
These consist of asset-back securities where third-party prices are not available or reliable. The fair value is estimated using market standard cash flow models with
input parameter assumptions which include prepayment speeds, default rates, discount margins derived from comparable securities with similar vintage, collateral
type, and credit ratings.
Effect of changes in significant unobservable assumptions to reasonably possible alternatives (Level 3)
As discussed above, the fair value of financial instruments are, in certain circumstances, measured using valuation techniques that incorporate assumptions that are
not evidenced by prices from observable current market transactions in the same instrument and are not based on observable market data and, as such require the
application of a degree of judgement. Changing one or more of the inputs to the valuation models to reasonably possible alternative assumptions would change the
fair values significantly. The following table shows the sensitivity of these fair values to reasonably possible alternative assumptions.
Favourable and unfavourable changes are determined on the basis of changes in the value of the instrument as a result of varying the levels of the unobservable
input as described in the table below. The potential effects do not take into effect any hedged positions.
Company
Significant unobservable input
Sensitivity
Assumption value
Favourable
changes
Unfavourable
changes
Fair value
Weighted
average
2024
\u00a3m
Assumption description
Range (1)
Shift
\u00a3m
\u00a3m
1. Derivative assets \u2013 Interest rate contracts:
3
Weighted Average
Mortgage Rate Payable
5% - 6%
5%
0.5%
20
(20)
\u2013 Securitisation swaps
2. Derivative liabilities - Interest rate contracts:
(1,840)
Weighted Average
Mortgage Rate Payable
2% - 7%
4%
0.5%
384
(384)
\u2013 Securitisation swaps
2023
1. Derivative assets \u2013 Interest rate contracts:
132
Weighted Average
Mortgage Rate Payable
3% - 8%
7%
0.5%
29
(29)
\u2013 Securitisation swaps
2. Derivative liabilities - Interest rate contracts:
(1,070)
Weighted Average
Mortgage Rate Payable
1% - 8%
3.76%
0.5%
279
(279)
\u2013 Securitisation swaps
(1) The range of actual assumption values used to calculate the weighted average disclosure.
h) Maturities of financial liabilities and off-balance sheet commitments
The table below analyses the maturities of the undiscounted cash flows relating to financial liabilities and off-balance sheet commitments of Santander UK based
on the remaining period to the contractual maturity date at the balance sheet date. Deposits by customers largely consist of retail deposits. This table is not
intended to show the liquidity of Santander UK.
Group
On demand
Not later than
3 months
Later than 3
months and
not later than
1 year
Later than 1
year and not
later than 5
years
Later than 5
years
Total
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Financial liabilities
Derivative financial instruments
\u2014
165
136
317
173
791
Other financial liabilities at fair value through profit or loss
10
3
135
556
524
1,228
Deposits by customers
169,285
3,487
4,004
4,451
355
181,582
Deposits by banks
1,352
1,561
7,618
4,459
\u2014
14,990
Repurchase agreements \u2013 non trading
\u2014
7,894
762
\u2014
\u2014
8,656
Debt securities in issue
\u2014
5,907
1,959
26,332
7,761
41,959
Subordinated liabilities
\u2014
27
628
332
1,895
2,882
Lease liabilities
\u2014
\u2014
28
58
17
103
Total financial liabilities
170,647
19,044
15,270
36,505
10,725
252,191
Off-balance sheet commitments given
4,007
19,088
916
8,391
3,247
35,649
2023
Financial liabilities
Derivative financial instruments
1
192
52
478
183
906
Other financial liabilities at fair value through profit or loss
\u2014
8
7
538
520
1,073
Deposits by customers
179,732
3,217
3,447
4,690
288
191,374
Deposits by banks
1,454
1,749
573
18,084
\u2014
21,860
Repurchase agreements \u2013 non trading
\u2014
8,418
8
\u2014
\u2014
8,426
Debt securities in issue
\u2014
6,380
4,908
17,029
12,216
40,533
Subordinated liabilities
\u2014
27
83
876
2,470
3,456
Lease liabilities
\u2014
\u2014
29
70
23
122
Total financial liabilities
181,187
19,991
9,107
41,765
15,700
267,750
Off-balance sheet commitments given
3,795
15,205
1,408
7,399
3,621
31,428
Company
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Financial liabilities
Derivative financial instruments
\u2014
159
135
387
2,577
3,258
Other financial liabilities at fair value through profit or loss
10
3
135
556
524
1,228
Deposits by customers
188,933
3,780
4,173
4,089
910
201,885
Deposits by banks
6,880
1,561
7,618
4,459
\u2014
20,518
Repurchase agreements \u2013 non trading
\u2014
7,894
762
\u2014
\u2014
8,656
Debt securities in issue
\u2014
5,865
1,535
25,575
3,548
36,523
Subordinated liabilities
\u2014
27
628
332
1,895
2,882
Lease liabilities
\u2014
\u2014
27
56
12
95
Total financial liabilities
195,823
19,289
15,013
35,454
9,466
275,045
Off-balance sheet commitments given
8,730
19,104
916
8,837
3,246
40,833
2023
Financial liabilities
Derivative financial instruments
23
175
58
555
1,558
2,369
Other financial liabilities at fair value through profit or loss
\u2014
8
7
538
520
1,073
Deposits by customers
195,901
3,479
3,440
4,288
1,060
208,168
Deposits by banks
1,395
1,824
742
24,114
\u2014
28,075
Repurchase agreements \u2013 non trading
\u2014
8,418
8
\u2014
\u2014
8,426
Debt securities in issue
\u2014
6,354
4,801
16,078
9,630
36,863
Subordinated liabilities
\u2014
27
83
875
2,470
3,455
Lease liabilities
\u2014
\u2014
28
67
17
112
Total financial liabilities
197,319
20,285
9,167
46,515
15,255
288,541
Off-balance sheet commitments given
8,271
15,214
1,408
7,945
3,620
36,458
", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialInstrumentsAtFairValueThroughProfitOrLossExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-599": { "value": "
13. LOANS AND ADVANCES TO CUSTOMERS
Group
Company
2024
2023
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Loans secured on residential properties
165,214
172,854
165,214
172,854
Corporate loans
18,550
18,267
17,778
17,794
Finance leases
4,222
4,530
\u2014
\u2014
Other unsecured loans
6,601
7,232
6,521
7,065
Accrued interest and other adjustments
796
943
961
882
Amounts due from fellow Banco Santander subsidiaries and joint ventures
4,814
4,489
3
4
Amounts due from Santander UK Group Holdings plc
18
55
18
55
Amounts due from subsidiaries
\u2014
\u2014
27,999
25,903
Loans and advances to customers
200,215
208,370
218,494
224,557
Credit impairment loss allowances on loans and advances to customers
(784)
(914)
(714)
(1,046)
Residual value and voluntary termination provisions on finance leases
(23)
(21)
\u2014
\u2014
Net loans and advances to customers
199,408
207,435
217,780
223,511
For movements in expected credit losses, see the 'Movement in total exposures and the corresponding ECL' table in the Santander UK group level \u2013 Credit risk
review section of the Risk review.
Finance lease and hire purchase contract receivables may be analysed as follows:
Group
2024
2023
Gross
investment
Unearned
finance
income
Net
investment
Gross
investment
Unearned
finance income
Net
investment
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
No later than one year
1,400
(208)
1,192
1,502
(216)
1,286
Later than one year and not later than two years
1,423
(215)
1,208
1,426
(208)
1,218
Later than two years and not later than three years
1,220
(184)
1,036
1,331
(194)
1,137
Later than three years and not later than four years
721
(109)
612
882
(129)
753
Later than four years and not later than five years
115
(17)
98
99
(14)
85
Later than five years
90
(14)
76
60
(9)
51
4,969
(747)
4,222
5,300
(770)
4,530
At 31 December 2024 and 2023, the Company had no finance lease and hire purchase contract receivables.
The Santander UK group enters into finance leasing arrangements primarily for the financing of motor vehicles and a range of assets for its corporate customers.
Included in the carrying value of net investment in finance leases and hire purchase contracts is \u00a31,748m (2023: \u00a31,830m) of unguaranteed RV at the end of the
current lease terms, which is expected to be recovered through re-payment, re-financing or sale. Contingent rent income of \u00a3nil (2023: \u00a3nil, 2022: \u00a3nil) was earned
in the year, which was classified in \u2018Interest and similar income\u2019. Finance income on the net investment in finance leases was \u00a3308m (2023: \u00a3266m, 2022: \u00a3230m).
Finance lease receivable balances are secured over the asset leased. The Santander UK group is not permitted to sell or repledge the asset in the absence of default
by the lessee. The Directors consider that the carrying amount of the finance lease receivables approximates to their fair value.
Included within loans and advances to customers are advances assigned to bankruptcy remote structured entities and Abbey Covered Bonds LLP. These loans
provide security to issues of covered bonds and mortgage-backed or other asset-backed securities issued by the Santander UK group. For more, see Note 14.
At 31 December 2024 and 2023, the Santander UK group had contracted with lessees for the following future undiscounted minimum lease payments receivable
under operating leases.
Group
Company
2024
2023
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
No later than one year
27
28
25
27
Later than one year and not later than two years
21
26
20
24
Later than two years and not later than three years
17
18
16
17
Later than three years and not later than four years
7
14
7
13
Later than four years and not later than five years
5
7
4
6
Later than five years
11
18
7
13
88
111
79
100
Group
2024
2023
Fair value
Fair
Carrying
Fair value
Fair
Carrying
Level 1
Level 2
Level 3
value
value
Level 1
Level 2
Level 3
value
value
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Loans and advances to customers
\u2014
\u2014
198,376
198,376
199,408
\u2014
\u2014
205,917
205,917
207,435
Loans and advances to banks
\u2014
1,032
\u2014
1,032
1,032
\u2014
1,080
\u2014
1,080
1,080
Reverse repurchase agreements - non-
trading
\u2014
10,342
\u2014
10,342
10,338
\u2014
12,470
\u2014
12,470
12,468
Other financial assets at amortised cost
3,190
\u2014
\u2014
3,190
3,408
144
\u2014
\u2014
144
152
3,190
11,374
198,376
212,940
214,186
144
13,550
205,917
219,611
221,135
Liabilities
Deposits by customers
\u2014
185
180,282
180,467
180,967
\u2014
71
190,561
190,632
190,850
Deposits by banks
\u2014
13,934
39
13,973
13,993
\u2014
20,342
40
20,382
20,332
Repurchase agreements - non-trading
\u2014
8,622
\u2014
8,622
8,617
\u2014
8,413
\u2014
8,413
8,411
Debt securities in issue
21,173
12,910
1,771
35,854
35,673
1,689
30,743
1,189
33,621
33,910
Subordinated liabilities
1,129
10
1,622
2,761
2,385
\u2014
2,591
209
2,800
2,386
22,302
35,661
183,714
241,677
241,635
1,689
62,160
191,999
255,848
255,889
Company
2024
2023
Fair value
Carrying
Fair value
Carrying
Level 1
Level 2
Level 3
Fair value
value
Level 1
Level 2
Level 3
Fair value
value
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Loans and advances to customers
\u2014
\u2014
216,851
216,851
217,780
\u2014
\u2014
222,208
222,208
223,511
Loans and advances to banks
\u2014
926
\u2014
926
926
\u2014
1,052
\u2014
1,052
1,052
Reverse repurchase agreements - non-trading
\u2014
10,342
\u2014
10,342
10,338
\u2014
12,470
\u2014
12,470
12,468
Other financial assets at amortised cost
3,190
1,977
\u2014
5,167
5,206
144
1,681
\u2014
1,825
1,833
3,190
13,245
216,851
233,286
234,250
144
15,203
222,208
237,555
238,864
Liabilities
Deposits by customers
\u2014
185
200,530
200,715
201,215
\u2014
71
207,216
207,287
207,516
Deposits by banks
\u2014
13,922
5,579
19,501
19,521
\u2014
20,326
5,424
25,750
25,699
Repurchase agreements - non-trading
\u2014
8,621
\u2014
8,621
8,617
\u2014
8,413
\u2014
8,413
8,411
Debt securities in issue
17,870
12,846
1,379
32,095
31,833
999
29,181
841
31,021
31,228
Subordinated liabilities
1,129
10
1,598
2,737
2,386
\u2014
2,592
209
2,801
2,387
18,999
35,584
209,086
263,669
263,572
999
60,583
213,690
275,272
275,241
e) Fair values of financial instruments measured at fair value
The following tables summarise the fair values of the financial assets and liabilities accounted for at fair value at 31 December 2024 and 31 December 2023,
analysed by their levels in the fair value hierarchy - Level 1, Level 2 and Level 3.
Group
2024
2023
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Valuation
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
technique
Assets
Derivative financial instruments
Exchange rate contracts
\u2014
978
\u2014
978
\u2014
1,129
\u2014
1,129
A
Interest rate contracts
\u2014
1,675
\u2014
1,675
\u2014
2,216
1
2,217
A & C
Inflation rate contracts
\u2014
70
\u2014
70
\u2014
\u2014
\u2014
\u2014
A
Equity and credit contracts
\u2014
89
35
124
\u2014
98
35
133
B & D
Netting
\u2014
(1,643)
\u2014
(1,643)
\u2014
(2,047)
\u2014
(2,047)
\u2014
1,169
35
1,204
\u2014
1,396
36
1,432
Other financial assets at FVTPL
Loans and advances to customers
\u2014
\u2014
44
44
\u2014
\u2014
46
46
A
Debt securities
\u2014
56
36
92
\u2014
167
49
216
A, B & D
\u2014
56
80
136
\u2014
167
95
262
Financial assets at FVOCI
Debt securities
8,805
201
34
9,040
8,293
188
\u2014
8,481
D
8,805
201
34
9,040
8,293
188
\u2014
8,481
Total assets at fair value
8,805
1,426
149
10,380
8,293
1,751
131
10,175
Liabilities
Derivative financial instruments
Exchange rate contracts
\u2014
430
\u2014
430
\u2014
508
\u2014
508
A
Interest rate contracts
\u2014
1,894
\u2014
1,894
\u2014
2,336
1
2,337
A & C
Equity and credit contracts
\u2014
7
14
21
\u2014
11
9
20
B & D
Netting
\u2014
(1,643)
\u2014
(1,643)
\u2014
(2,047)
\u2014
(2,047)
\u2014
688
14
702
\u2014
808
10
818
Other financial liabilities at FVTPL
Debt securities in issue
\u2014
355
\u2014
355
\u2014
369
\u2014
369
A
Structured deposits
\u2014
605
\u2014
605
\u2014
426
\u2014
426
A
Zero Amortising Guaranteed Notes
\u2014
95
\u2014
95
\u2014
104
\u2014
104
D
\u2014
1,055
\u2014
1,055
\u2014
899
\u2014
899
Total liabilities at fair value
\u2014
1,743
14
1,757
\u2014
1,707
10
1,717
39. OFFSETTING FINANCIAL ASSETS AND LIABILITIES
The following table shows the impact of netting arrangements on:
\u2013 All financial assets and liabilities that are reported net on the balance sheet
\u2013 All derivative financial instruments and repurchase agreements and other similar secured lending and borrowing agreements that are subject to enforceable
master netting arrangements or similar agreements, but do not qualify for balance sheet netting.
The table identifies the amounts that have been offset in the balance sheet and those amounts that are covered by enforceable netting arrangements (offsetting
arrangements and financial collateral) but do not qualify for netting under the requirements described above.
For derivative contracts, the \u2018Financial instruments\u2019 column identifies financial assets and liabilities that are subject to set off under netting agreements, such as
the\u00a0ISDA Master Agreement or derivative exchange or clearing counterparty agreements, whereby all outstanding transactions with the same counterparty can
be\u00a0offset and close-out netting applied across all outstanding transactions covered by the agreements if an event of default or other predetermined events occur.
Financial collateral refers to cash and non-cash collateral obtained, typically daily or weekly, to cover the net exposure between counterparties by enabling the
collateral to be realised in an event of default or if other predetermined events occur. For repurchase and reverse repurchase agreements and other similar secured
lending and borrowing, the \u2018Financial instruments\u2019 column identifies financial assets and liabilities that are subject to set off under netting agreements, such as
global master repurchase agreements and global master securities lending agreements, whereby all outstanding transactions with the same counterparty can
be\u00a0offset and close-out netting applied across all outstanding transactions covered by the agreements if an event of default or other predetermined events occur.
Financial collateral typically comprises highly liquid securities which are legally transferred and can be liquidated if a counterparty defaults.
Santander UK engages in a variety of counterparty credit mitigation strategies in addition to netting and collateral arrangements. Therefore, the net amounts
presented in the tables below do not represent Santander UK\u2019s total credit exposure.
Group
Amounts subject to enforceable netting arrangements
Assets not
subject to
enforceable
netting
arrangements(2)
Effects of offsetting on balance sheet
Related amounts not offset
Gross
amounts
Amounts
offset
Net amounts
on balance
sheet
Financial
instruments
Financial
collateral (1)
Net
amount
Balance
sheet
total (3)
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Derivative financial assets
2,799
(1,643)
1,156
(407)
(711)
38
48
1,204
Reverse repurchase, securities borrowing & similar
agreements:
\u2013 Amortised cost
16,175
(5,837)
10,338
(63)
(10,275)
\u2014
\u2014
10,338
Loans and advances to customers and banks\u207d\u2074\u207e
5,421
(635)
4,786
\u2014
\u2014
4,786
195,654
200,440
24,395
(8,115)
16,280
(470)
(10,986)
4,824
195,702
211,982
Liabilities
Derivative financial liabilities
2,325
(1,643)
682
(407)
(127)
148
20
702
Repurchase, securities lending & similar agreements:
\u2013 Amortised cost
14,454
(5,837)
8,617
(63)
(8,554)
\u2014
\u2014
8,617
Deposits by customers and banks\u207d\u2074\u207e
635
(635)
\u2014
\u2014
\u2014
\u2014
194,960
194,960
17,414
(8,115)
9,299
(470)
(8,681)
148
194,980
204,279
2023
Assets
Derivative financial assets
3,429
(2,047)
1,382
(471)
(823)
88
50
1,432
Reverse repurchase, securities borrowing & similar
agreements:
\u2013 Amortised cost
15,625
(3,157)
12,468
(118)
(12,350)
\u2014
\u2014
12,468
Loans and advances to customers and banks\u207d\u2074\u207e
5,363
(790)
4,573
\u2014
\u2014
4,573
203,942
208,515
24,417
(5,994)
18,423
(589)
(13,173)
4,661
203,992
222,415
Liabilities
Derivative financial liabilities
2,838
(2,047)
791
(471)
(161)
159
27
818
Repurchase, securities lending & similar agreements:
\u2013 Amortised cost
11,568
(3,157)
8,411
(118)
(8,293)
\u2014
\u2014
8,411
Deposits by customers and banks\u207d\u2074\u207e
4,218
(790)
3,428
\u2014
\u2014
3,428
207,754
211,182
18,624
(5,994)
12,630
(589)
(8,454)
3,587
207,781
220,411
(1) Financial collateral is reflected at its fair value but has been limited to the net balance sheet exposure so as not to include any over-collateralisation.
(2) This column includes contractual rights of set-off that are subject to uncertainty under the laws of the relevant jurisdiction.
(3) The balance sheet total is the sum of \u2018Net amounts reported on the balance sheet\u2019 that are subject to enforceable netting arrangements and \u2018Amounts not subject to enforceable netting arrangements\u2019.
(4) The amounts offset within loans and advances to customers/banks or deposits by customers/banks relate to offset mortgages which are classified as either and that are subject to netting.
Company
Amounts subject to enforceable netting arrangements
Assets not
subject to
enforceable
netting
arrangements(2)
Effects of offsetting on balance sheet
Related amounts not offset
Gross
amounts
Amounts
offset
Net amounts
on balance
sheet
Financial
instruments
Financial
collateral (1)
Net
amount
Balance
sheet
total (3)
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Derivative financial assets
3,078
(1,643)
1,435
(686)
(711)
38
47
1,482
Reverse repurchase, securities borrowing & similar
agreements:
\u2013 Amortised cost
16,175
(5,837)
10,338
(63)
(10,275)
\u2014
\u2014
10,338
Loans and advances to customers and banks (4)
5,421
(635)
4,786
\u2014
\u2014
4,786
213,920
218,706
24,674
(8,115)
16,559
(749)
(10,986)
4,824
213,967
230,526
Liabilities
Derivative financial liabilities
4,230
(1,643)
2,587
(686)
(127)
1,774
20
2,607
Repurchase, securities lending & similar agreements:
\u2013 Amortised cost
14,454
(5,837)
8,617
(63)
(8,554)
\u2014
\u2014
8,617
Deposits by customers and banks (4)
635
(635)
\u2014
\u2014
\u2014
\u2014
220,736
220,736
19,319
(8,115)
11,204
(749)
(8,681)
1,774
220,756
231,960
2023
Assets
Derivative financial assets
3,695
(2,047)
1,648
(734)
(823)
91
47
1,695
Reverse repurchase, securities borrowing & similar
agreements:
\u2013 Amortised cost
15,625
(3,157)
12,468
(118)
(12,350)
\u2014
\u2014
12,468
Loans and advances to customers and banks(4)
26,986
(790)
26,196
\u2014
\u2014
26,196
198,367
224,563
46,306
(5,994)
40,312
(852)
(13,173)
26,287
198,414
238,726
Liabilities
Derivative financial liabilities
3,994
(2,047)
1,947
(734)
(161)
1,052
27
1,974
Repurchase, securities lending & similar agreements:
\u2013 Amortised cost
11,568
(3,157)
8,411
(118)
(8,293)
\u2014
\u2014
8,411
Deposits by customers and banks (4)
31,262
(790)
30,472
\u2014
\u2014
30,472
202,743
233,215
46,824
(5,994)
40,830
(852)
(8,454)
31,524
202,770
243,600
(1) Financial collateral is reflected at its fair value but has been limited to the net balance sheet exposure so as not to include any over-collateralisation.
(2) This column includes contractual rights of set-off that are subject to uncertainty under the laws of the relevant jurisdiction.
(3) The balance sheet total is the sum of \u2018Net amounts reported on the balance sheet\u2019 that are subject to enforceable netting arrangements and \u2018Amounts not subject to enforceable netting arrangements\u2019.
(4) The amounts offset within loans and advances to customers/banks or deposits by customers/banks relate to offset mortgages which are classified as either and that are subject to netting.
", "dimensions": { "concept": "ifrs-full:DisclosureOfLoansAndAdvancesToCustomersExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-600": { "value": "
18. INTERESTS IN OTHER ENTITIES
Group
Company
2024
2023
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Subsidiaries
\u2014
\u2014
1,257
1,220
Joint Ventures
289
245
\u2014
\u2014
0
289
245
1,257
1,220
The Santander UK group consists of a parent company, Santander UK plc, incorporated and domiciled in the UK and a number of subsidiaries and joint ventures held
directly and indirectly by it.
Details of subsidiaries and joint ventures are set out in the Shareholder Information section and form an integral part of these financial statements.
Details of subsidiaries benefitting from an audit exemption according to section 479A of the Companies Act 2006 are also set out in the Shareholder Information
section and form an integral part of these financial statements.
a) Interests in subsidiaries
The Company holds directly or indirectly 100% of the issued ordinary share capital of its principal subsidiaries. All companies operate principally in their country of
incorporation or registration.
The movement in the Company\u2019s interests in subsidiaries was as follows:
Company
Cost
Impairment
Carrying amount
\u00a3m
\u00a3m
\u00a3m
At 1 January 2024
1,220
\u2014
1,220
Capital contribution
37
\u2014
37
At 31 December 2024
1,257
\u2014
1,257
At 1 January 2023
1,234
(2)
1,232
Reversal
(14)
2
(12)
At 31 December 2023
1,220
\u2014
1,220
Interests in consolidated structured entities
Structured entities are formed by Santander UK to accomplish specific and well-defined objectives. Santander UK consolidated these structured entities when the
substance of the relationship indicates control, as described in Note 1. In addition to the structured entities disclosed in Note 14 which are used for securitisation
and\u00a0covered bond programmes, the only other structured entities consolidated by Santander UK are described below. All the external assets and liabilities in these
entities are included in the financial statements and in relevant Notes. Other than as set out below, no significant judgements were required with respect to control
or significant influence.
Motor Securities 2018-1 Designated Activity Company (Motor 2018)
Motor 2018 is a credit protection entity, and a Designated Activity Company limited by shares, incorporated in Ireland. It issued a series of credit linked notes varying
in seniority which referenced a portfolio of Santander UK group auto loans. Concurrently, this entity sold credit protection to SCUK in respect of the referenced loans
and, in return for a fee, was liable to make protection payments to SCUK upon the occurrence of a credit event in relation to any of the referenced loans. Motor 2018
is consolidated as Santander UK held a variable interest by retaining the junior tranche of notes issued by the entity. The outstanding notes were redeemed and the
transaction terminated in 2023.
b) Interests in joint ventures
Santander UK does not have any individually material interests in joint ventures. In 2024, Santander UK\u2019s share in the profit after tax of its joint ventures was \u00a345m
(2023: \u00a343m) before elimination of transactions between Santander UK and the joint ventures. At 31 December 2024, the carrying amount of Santander UK\u2019s
interest was \u00a3289m (2023: \u00a3245m). At 31 December 2024 and 2023, the joint ventures had no commitments and contingent liabilities.
c) Interests in unconsolidated structured entities
Structured entities sponsored by the Santander UK group
Santander UK has interests in structured entities which it sponsors but does not control. Santander UK considers itself a sponsor of a structured entity when it
facilitates the establishment of the structured entity. Other than as set out below, no significant judgements were required with respect to control or significant
influence. The structured entities sponsored but not consolidated by Santander UK are as follows:
i) Santander (UK) Common Investment Fund (the Fund)
The Fund is a common investment fund that was established to hold the assets of the Santander (UK) Group Pension Scheme. The Fund is not consolidated by
Santander UK, but its assets of \u00a37,591m (2023: \u00a38,551m) are accounted for as part of the defined benefit assets and obligations recognised on Santander UK\u2019s
balance sheet. For more on the Fund, see Note 28. As the Fund holds the assets of the pension scheme, it is outside the scope of IFRS 10. Santander UK\u2019s maximum
exposure to loss is the carrying amount of the assets held.
ii) Credit protection entities
Santander UK has established five (2023: four) unconsolidated credit protection entities, which are Designated Activity Companies limited by shares, incorporated in
Ireland. Each entity has issued a series of credit linked notes varying in seniority which reference portfolios of Santander UK group loans. Concurrently, these entities
sell credit protection to Santander UK in respect of the referenced loans and, in return for a fee, are liable to make protection payments to Santander UK upon the
occurrence of a credit event in relation to any of the referenced loans.
Credit linked notes, which amounted to \u00a3226m (2023: \u00a3185m), are all held by third party investors. Funds raised by the sale of the credit linked notes are deposited
with Santander UK as collateral for the credit protection.
Deposits and associated guarantees in respect of the credit linked notes are included in \u2018Deposits by customers\u2019 (see Note 22).
The entities are not consolidated by Santander UK because the third-party investors have the exposure, or rights, to all of the variability of returns from the
performance of the entities. No assets are transferred to, or income received from, these entities. Since the credit linked notes are fully cash collateralised,
Santander UK\u2019s maximum exposure to loss is equal to any unamortised fees paid to the entities in connection with the credit protection outlined above.
Structured entities not sponsored by the Santander UK group
Santander UK also has interests in structured entities which it does not sponsor or control. These consist of holdings of mortgage and other asset backed securities
issued by entities that were established and/or sponsored by other unrelated financial institutions. These securities comprise the asset backed securities held by the
Company included in Note 17. Management has concluded that the Santander UK group has no control or significant influence over these entities and that the
carrying value of the interests held in these entities represents the maximum exposure to loss.
", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestsInOtherEntitiesExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-601": { "value": "
a) Interests in subsidiaries
The Company holds directly or indirectly 100% of the issued ordinary share capital of its principal subsidiaries. All companies operate principally in their country of
incorporation or registration.
The movement in the Company\u2019s interests in subsidiaries was as follows:
Company
Cost
Impairment
Carrying amount
\u00a3m
\u00a3m
\u00a3m
At 1 January 2024
1,220
\u2014
1,220
Capital contribution
37
\u2014
37
At 31 December 2024
1,257
\u2014
1,257
At 1 January 2023
1,234
(2)
1,232
Reversal
(14)
2
(12)
At 31 December 2023
1,220
\u2014
1,220
Interests in consolidated structured entities
Structured entities are formed by Santander UK to accomplish specific and well-defined objectives. Santander UK consolidated these structured entities when the
substance of the relationship indicates control, as described in Note 1. In addition to the structured entities disclosed in Note 14 which are used for securitisation
and\u00a0covered bond programmes, the only other structured entities consolidated by Santander UK are described below. All the external assets and liabilities in these
entities are included in the financial statements and in relevant Notes. Other than as set out below, no significant judgements were required with respect to control
or significant influence.
", "dimensions": { "concept": "ifrs-full:DisclosureOfSignificantInvestmentsInSubsidiariesExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-603": { "value": "
b) Interests in joint ventures
Santander UK does not have any individually material interests in joint ventures. In 2024, Santander UK\u2019s share in the profit after tax of its joint ventures was \u00a345m
(2023: \u00a343m) before elimination of transactions between Santander UK and the joint ventures. At 31 December 2024, the carrying amount of Santander UK\u2019s
interest was \u00a3289m (2023: \u00a3245m). At 31 December 2024 and 2023, the joint ventures had no commitments and contingent liabilities.
", "dimensions": { "concept": "ifrs-full:DisclosureOfJointVenturesExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-602": { "value": "
b) Interests in joint ventures
Santander UK does not have any individually material interests in joint ventures. In 2024, Santander UK\u2019s share in the profit after tax of its joint ventures was \u00a345m
(2023: \u00a343m) before elimination of transactions between Santander UK and the joint ventures. At 31 December 2024, the carrying amount of Santander UK\u2019s
interest was \u00a3289m (2023: \u00a3245m). At 31 December 2024 and 2023, the joint ventures had no commitments and contingent liabilities.
", "dimensions": { "concept": "ifrs-full:DisclosureOfInvestmentsAccountedForUsingEquityMethodExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-604": { "value": "
c) Interests in unconsolidated structured entities
Structured entities sponsored by the Santander UK group
Santander UK has interests in structured entities which it sponsors but does not control. Santander UK considers itself a sponsor of a structured entity when it
facilitates the establishment of the structured entity. Other than as set out below, no significant judgements were required with respect to control or significant
influence. The structured entities sponsored but not consolidated by Santander UK are as follows:
i) Santander (UK) Common Investment Fund (the Fund)
The Fund is a common investment fund that was established to hold the assets of the Santander (UK) Group Pension Scheme. The Fund is not consolidated by
Santander UK, but its assets of \u00a37,591m (2023: \u00a38,551m) are accounted for as part of the defined benefit assets and obligations recognised on Santander UK\u2019s
balance sheet. For more on the Fund, see Note 28. As the Fund holds the assets of the pension scheme, it is outside the scope of IFRS 10. Santander UK\u2019s maximum
exposure to loss is the carrying amount of the assets held.
ii) Credit protection entities
Santander UK has established five (2023: four) unconsolidated credit protection entities, which are Designated Activity Companies limited by shares, incorporated in
Ireland. Each entity has issued a series of credit linked notes varying in seniority which reference portfolios of Santander UK group loans. Concurrently, these entities
sell credit protection to Santander UK in respect of the referenced loans and, in return for a fee, are liable to make protection payments to Santander UK upon the
occurrence of a credit event in relation to any of the referenced loans.
Credit linked notes, which amounted to \u00a3226m (2023: \u00a3185m), are all held by third party investors. Funds raised by the sale of the credit linked notes are deposited
with Santander UK as collateral for the credit protection.
Deposits and associated guarantees in respect of the credit linked notes are included in \u2018Deposits by customers\u2019 (see Note 22).
The entities are not consolidated by Santander UK because the third-party investors have the exposure, or rights, to all of the variability of returns from the
performance of the entities. No assets are transferred to, or income received from, these entities. Since the credit linked notes are fully cash collateralised,
Santander UK\u2019s maximum exposure to loss is equal to any unamortised fees paid to the entities in connection with the credit protection outlined above.
Structured entities not sponsored by the Santander UK group
Santander UK also has interests in structured entities which it does not sponsor or control. These consist of holdings of mortgage and other asset backed securities
issued by entities that were established and/or sponsored by other unrelated financial institutions. These securities comprise the asset backed securities held by the
Company included in Note 17. Management has concluded that the Santander UK group has no control or significant influence over these entities and that the
carrying value of the interests held in these entities represents the maximum exposure to loss.
", "dimensions": { "concept": "ifrs-full:DisclosureOfInvestmentsOtherThanInvestmentsAccountedForUsingEquityMethodExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-605": { "value": "
19. INTANGIBLE ASSETS
a) Goodwill
Group
Company
Cost
Accumulated
impairment
Carrying
amount
Cost
Accumulated
impairment
Carrying
amount
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2024
1,269
(70)
1,199
1,194
(4)
1,190
Movement in the period
\u2014
\u2014
\u2014
\u2014
(21)
(21)
At 31 December 2024
1,269
(70)
1,199
1,194
(25)
1,169
Impairment of goodwill
In 2024 and 2023 for the Santander UK group, no impairment of goodwill was recognised. Goodwill is tested for impairment annually, or more frequently, if
reviews identify an impairment indicator or when events or changes in circumstances dictate. Goodwill is tested for impairment annually at 31 December, with a
review for impairment indicators at 30 June.
For the Company, an impairment of \u00a321m was recognised in 2024.
The annual review identified that the uncertain macroeconomic and geopolitical environment increases the risk around the UK economic trajectory, and its potential
impact on the carrying value of goodwill as impairment indicators for all cash-generating units (CGUs). As a result, management updated the impairment test at 31
December 2024 for all CGUs.
Basis of the recoverable amount
The recoverable amount of all CGUs was determined based on its value in use (VIU) methodology at each testing date. For each CGU, the VIU is calculated by
discounting management\u2019s cash flow projections for the CGU. The cash flow projections also take account of increased internal capital allocations needed to achieve
internal and regulatory capital targets including the leverage ratio. The key assumptions used in the VIU calculation for each CGU are set out below. The Retail &
Business Banking segment consists of the Private Banking CGU and the rest of Retail & Business Banking, known as the Personal Financial Services CGU.
Carrying amount of Goodwill by CGU and key assumptions in the VIU calculation
Goodwill
Discount rate
Growth rate beyond initial cash
flow projections
2024
2023
2024
2023
2024
2023
CGU
\u00a3m
\u00a3m
%
%
%
%
Personal Financial Services
1,169
1,169
12.1
12.2
1.5
1.6
Private Banking
30
30
10.0
9.8
1.5
1.6
1,199
1,199
The CGUs do not carry on their balance sheets any other intangible assets with indefinite useful lives.
Management\u2019s judgement in estimating the cash flows of a CGU
The cash flow projections for the purpose of impairment testing for each CGU are derived from the latest 3-year plan presented to the Board. The Board challenges
and endorses management\u2019s planning assumptions in light of internal capital allocations needed to support Santander UK\u2019s strategy, current market conditions
and\u00a0the macroeconomic outlook. For the goodwill impairment tests conducted at 31 December 2024, the determination of the carrying amount of the Personal
Financial Services CGU was based on an allocation of regulatory capital and management\u2019s cash flow projections until the end of 2027. The assumptions included
in\u00a0the cash flow projections reflect an allocation to the cost of capital to support future growth, as well as the expected impact of recent events in the UK economic
environment on the financial outlook within which the CGUs operate. The cash flow projections are supported by Santander UK\u2019s base case economic scenario. For
more on the base case economic scenario, including our forecasting approach and the assumptions in place at 31 December 2024, see the Credit risk \u2013 Santander
UK group level section of the Risk review. The cash flow projections take into account the likely impact of recent changes to the BoE Bank Rate, inflation and also
consider the impact of future climate change.
Cash flow projections for the purpose of impairment testing do not take account of any adverse outcomes arising from contingent liabilities (see Note 30), whose
existence will be confirmed by uncertain future events or where any obligation is not probable or otherwise cannot be measured reliably, nor do they take account
of the benefits arising from Santander UK\u2019s transformation plans that had not yet been implemented or committed at 31 December 2024.
Discount rate
The rate used to discount the cash flows is based on the cost of equity assigned to each CGU, which is derived using a capital asset pricing model (CAPM) and
calculated on a post-tax basis. The CAPM depends on a number of inputs reflecting financial and economic variables, including the risk-free rate and a premium
to\u00a0reflect the inherent risk of the business being evaluated. These variables are based on the market\u2019s assessment of the economic variables and management\u2019s
judgement. The inputs to the CAPM are observable on a post-tax basis. In determining the discount rate, management has identified the cost of equity associated
with market participants that closely resemble our CGUs and adjusted them for tax to arrive at the pre-tax equivalent rate. The pre-tax equivalent rate applicable to
the Personal Financial Services CGU was 16.5% (2023: 16.7%) and Private Banking CGU was 15.1% (2023: 14.6%). The Private Banking CGU has a different discount
rate compared to the Personal Financial Services CGU because different market participants closely resemble each CGU.\u00a0
Growth rate beyond initial cash flow projections
The growth rate for periods beyond the initial cash flow projections is used to extrapolate the cash flows in perpetuity because of the long-term perspective of
CGUs. In line with the accounting requirements, management uses the UK Government\u2019s official estimate of UK long-term average GDP growth rate, as this is lower
than management's estimate of the long-term average growth rate of the business. The estimated UK long-term average GDP growth rate has regard to the long-
term impact of inherent uncertainties, such as elevated wage growth, weak productivity, large government debt burden and fragile business and consumer
confidence.
Goodwill arising on the acquisition of Personal Financial Services and Private Banking
The VIU of each CGU remains higher than the carrying value of the related goodwill. The VIU review at 31 December 2024 did not indicate the need for an
impairment in the Company\u2019s goodwill balances. Management considered the level of headroom and the uncertainty relating to the respective estimates of the VIU
for those CGUs but determined that there was a sufficient basis to conclude that no impairment was required.
Sensitivities of key assumptions in calculating the value in use
At 31 December 2024 and 31 December 2023, the VIU of the Personal Financial Services CGU was sensitive to reasonably possible changes in the key assumptions
supporting the recoverable amount.
The table below presents a summary of the key assumptions underlying the most sensitive inputs to the model for the Personal Financial Services CGU, the main
risks associated with each and details of a reasonably possible change in assumptions, such as a decrease in mortgage new business. The sensitivity analysis
presented below has been prepared on the basis that a change in each key assumption would not have a consequential impact on other assumptions used in the
impairment review. However, due to the interrelationships between some of the assumptions, a change in one of the assumptions might impact one or more of the
other assumptions and could result in a larger or smaller overall impact.
Reasonably possible changes in key assumptions
CGU
Input
Key assumptions
Associated risks
Reasonably possible change
Personal Financial
Services
Cash flow projections
\u2013 BoE Bank Rate
\u2013 UK house price growth
\u2013 UK mortgage loan market growth
\u2013 UK unemployment rate
\u2013 Position in the market
\u2013 Regulatory capital levels.
\u2013 Uncertain market outlook
\u2013 Higher interest rate environment impact
on customer affordability
\u2013 Customer remediation and regulatory
action outcomes
\u2013 Uncertain regulatory capital requirements.
\u2013 Cash flow projections
decrease by 10% ( 2023 :
10% ) .
Discount rate
\u2013 Discount rate used is a reasonable
estimate of a suitable market rate
for the profile of the business.
\u2013 Market rates of interest rise.
\u2013 Discount rate increases by
100 basis points ( 2023 :
increased by 100 basis
points ) .
At 31 December 2024 and 31 December 2023, a reasonably possible change in the key assumptions in relation to the VIU calculation for the goodwill balance in the
Personal Financial Services CGU would have resulted in a decrease/increase in headroom as follows.\u00a0
Decrease in headroom
2024
2023
CGU
Reasonably possible change
\u00a3m
\u00a3m
Personal Financial Services
Cash flow projections decrease by 10% ( 2023 : 10% )
764
818
Discount rate increases by 100 basis points ( 2023 : increased by 100 basis points )
622
663
Sensitivity of Value in use changes to current assumptions to achieve \u00a3nil headroom
Although there was no impairment of goodwill relating to the Personal Financial Services CGU or the Private Banking CGU at 31 December 2024, the test for the
Personal Financial Services CGU remains sensitive to some of the assumptions used, as described above. In addition, the changes in assumptions detailed below for
the discount rate and cash flow projections would eliminate the current headroom. As a result, there is a risk of impairment in the future should business
performance or economic factors diverge from forecasts.
In 2024, there was a decrease in headroom arising from a decline in cash flow forecasts, partially offset by a decrease to RWAs which led to a reduction in the
required CET1 capital requirement.
The sensitivity analysis presented below has been prepared on the basis that a change in each key assumption would not have a consequential impact on other
assumptions used in the impairment review. However, due to the interrelationships between some of the assumptions, a change in one of the assumptions might
impact one or more of the other assumptions and could result in a larger or smaller overall impact.
2024
Carrying value
Value in use
Headroom
Increase in
discount rate
Decrease in
cash flows
CGU
\u00a3m
\u00a3m
\u00a3m
bps
%
Personal Financial Services
7,294
7,639
345
53
5
2023
Personal Financial Services
7,513
8,178
665
101
8
b) Other intangibles
Group
Company
Cost
Accumulated
amortisation /
impairment
Carrying
amount
Cost
Accumulated
amortisation /
impairment
Carrying
amount
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2024
1,339
(990)
349
1,382
(1,047)
335
Additions
120
\u2014
120
116
\u2014
116
Disposals
(703)
700
(3)
(703)
700
(3)
Charge
\u2014
(126)
(126)
\u2014
(119)
(119)
At 31 December 2024
756
(416)
340
795
(466)
329
At 1 January 2023
1,261
(910)
351
1,309
(970)
339
Additions
114
\u2014
114
109
\u2014
109
Disposals
(36)
36
\u2014
(36)
36
\u2014
Charge
\u2014
(116)
(116)
\u2014
(113)
(113)
At 31 December 2023
1,339
(990)
349
1,382
(1,047)
335
Other intangibles which consist of computer software, include computer software under development of \u00a399m (2023: \u00a3157m), of which \u00a320m is internally
generated (2023: \u00a335m). For the Company, \u00a319m of computer software under development is internally generated (2023: \u00a326m).
The impairment charge of \u00a35m (2023: \u00a3nil) relates to computer software no longer expected to yield future economic benefits. For the Company, the impairment
charge of \u00a33m (2023: \u00a3nil) relates to computer software no longer expected to yield future economic benefits.
", "dimensions": { "concept": "ifrs-full:DisclosureOfIntangibleAssetsAndGoodwillExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-606": { "value": "
a) Goodwill
Group
Company
Cost
Accumulated
impairment
Carrying
amount
Cost
Accumulated
impairment
Carrying
amount
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2024
1,269
(70)
1,199
1,194
(4)
1,190
Movement in the period
\u2014
\u2014
\u2014
\u2014
(21)
(21)
At 31 December 2024
1,269
(70)
1,199
1,194
(25)
1,169
Impairment of goodwill
In 2024 and 2023 for the Santander UK group, no impairment of goodwill was recognised. Goodwill is tested for impairment annually, or more frequently, if
reviews identify an impairment indicator or when events or changes in circumstances dictate. Goodwill is tested for impairment annually at 31 December, with a
review for impairment indicators at 30 June.
For the Company, an impairment of \u00a321m was recognised in 2024.
The annual review identified that the uncertain macroeconomic and geopolitical environment increases the risk around the UK economic trajectory, and its potential
impact on the carrying value of goodwill as impairment indicators for all cash-generating units (CGUs). As a result, management updated the impairment test at 31
December 2024 for all CGUs.
Basis of the recoverable amount
The recoverable amount of all CGUs was determined based on its value in use (VIU) methodology at each testing date. For each CGU, the VIU is calculated by
discounting management\u2019s cash flow projections for the CGU. The cash flow projections also take account of increased internal capital allocations needed to achieve
internal and regulatory capital targets including the leverage ratio. The key assumptions used in the VIU calculation for each CGU are set out below. The Retail &
Business Banking segment consists of the Private Banking CGU and the rest of Retail & Business Banking, known as the Personal Financial Services CGU.
Carrying amount of Goodwill by CGU and key assumptions in the VIU calculation
Goodwill
Discount rate
Growth rate beyond initial cash
flow projections
2024
2023
2024
2023
2024
2023
CGU
\u00a3m
\u00a3m
%
%
%
%
Personal Financial Services
1,169
1,169
12.1
12.2
1.5
1.6
Private Banking
30
30
10.0
9.8
1.5
1.6
1,199
1,199
The CGUs do not carry on their balance sheets any other intangible assets with indefinite useful lives.
Management\u2019s judgement in estimating the cash flows of a CGU
The cash flow projections for the purpose of impairment testing for each CGU are derived from the latest 3-year plan presented to the Board. The Board challenges
and endorses management\u2019s planning assumptions in light of internal capital allocations needed to support Santander UK\u2019s strategy, current market conditions
and\u00a0the macroeconomic outlook. For the goodwill impairment tests conducted at 31 December 2024, the determination of the carrying amount of the Personal
Financial Services CGU was based on an allocation of regulatory capital and management\u2019s cash flow projections until the end of 2027. The assumptions included
in\u00a0the cash flow projections reflect an allocation to the cost of capital to support future growth, as well as the expected impact of recent events in the UK economic
environment on the financial outlook within which the CGUs operate. The cash flow projections are supported by Santander UK\u2019s base case economic scenario. For
more on the base case economic scenario, including our forecasting approach and the assumptions in place at 31 December 2024, see the Credit risk \u2013 Santander
UK group level section of the Risk review. The cash flow projections take into account the likely impact of recent changes to the BoE Bank Rate, inflation and also
consider the impact of future climate change.
Cash flow projections for the purpose of impairment testing do not take account of any adverse outcomes arising from contingent liabilities (see Note 30), whose
existence will be confirmed by uncertain future events or where any obligation is not probable or otherwise cannot be measured reliably, nor do they take account
of the benefits arising from Santander UK\u2019s transformation plans that had not yet been implemented or committed at 31 December 2024.
Discount rate
The rate used to discount the cash flows is based on the cost of equity assigned to each CGU, which is derived using a capital asset pricing model (CAPM) and
calculated on a post-tax basis. The CAPM depends on a number of inputs reflecting financial and economic variables, including the risk-free rate and a premium
to\u00a0reflect the inherent risk of the business being evaluated. These variables are based on the market\u2019s assessment of the economic variables and management\u2019s
judgement. The inputs to the CAPM are observable on a post-tax basis. In determining the discount rate, management has identified the cost of equity associated
with market participants that closely resemble our CGUs and adjusted them for tax to arrive at the pre-tax equivalent rate. The pre-tax equivalent rate applicable to
the Personal Financial Services CGU was 16.5% (2023: 16.7%) and Private Banking CGU was 15.1% (2023: 14.6%). The Private Banking CGU has a different discount
rate compared to the Personal Financial Services CGU because different market participants closely resemble each CGU.\u00a0
Growth rate beyond initial cash flow projections
The growth rate for periods beyond the initial cash flow projections is used to extrapolate the cash flows in perpetuity because of the long-term perspective of
CGUs. In line with the accounting requirements, management uses the UK Government\u2019s official estimate of UK long-term average GDP growth rate, as this is lower
than management's estimate of the long-term average growth rate of the business. The estimated UK long-term average GDP growth rate has regard to the long-
term impact of inherent uncertainties, such as elevated wage growth, weak productivity, large government debt burden and fragile business and consumer
confidence.
Goodwill arising on the acquisition of Personal Financial Services and Private Banking
The VIU of each CGU remains higher than the carrying value of the related goodwill. The VIU review at 31 December 2024 did not indicate the need for an
impairment in the Company\u2019s goodwill balances. Management considered the level of headroom and the uncertainty relating to the respective estimates of the VIU
for those CGUs but determined that there was a sufficient basis to conclude that no impairment was required.
Sensitivities of key assumptions in calculating the value in use
At 31 December 2024 and 31 December 2023, the VIU of the Personal Financial Services CGU was sensitive to reasonably possible changes in the key assumptions
supporting the recoverable amount.
The table below presents a summary of the key assumptions underlying the most sensitive inputs to the model for the Personal Financial Services CGU, the main
risks associated with each and details of a reasonably possible change in assumptions, such as a decrease in mortgage new business. The sensitivity analysis
presented below has been prepared on the basis that a change in each key assumption would not have a consequential impact on other assumptions used in the
impairment review. However, due to the interrelationships between some of the assumptions, a change in one of the assumptions might impact one or more of the
other assumptions and could result in a larger or smaller overall impact.
Reasonably possible changes in key assumptions
CGU
Input
Key assumptions
Associated risks
Reasonably possible change
Personal Financial
Services
Cash flow projections
\u2013 BoE Bank Rate
\u2013 UK house price growth
\u2013 UK mortgage loan market growth
\u2013 UK unemployment rate
\u2013 Position in the market
\u2013 Regulatory capital levels.
\u2013 Uncertain market outlook
\u2013 Higher interest rate environment impact
on customer affordability
\u2013 Customer remediation and regulatory
action outcomes
\u2013 Uncertain regulatory capital requirements.
\u2013 Cash flow projections
decrease by 10% ( 2023 :
10% ) .
Discount rate
\u2013 Discount rate used is a reasonable
estimate of a suitable market rate
for the profile of the business.
\u2013 Market rates of interest rise.
\u2013 Discount rate increases by
100 basis points ( 2023 :
increased by 100 basis
points ) .
At 31 December 2024 and 31 December 2023, a reasonably possible change in the key assumptions in relation to the VIU calculation for the goodwill balance in the
Personal Financial Services CGU would have resulted in a decrease/increase in headroom as follows.\u00a0
Decrease in headroom
2024
2023
CGU
Reasonably possible change
\u00a3m
\u00a3m
Personal Financial Services
Cash flow projections decrease by 10% ( 2023 : 10% )
764
818
Discount rate increases by 100 basis points ( 2023 : increased by 100 basis points )
622
663
Sensitivity of Value in use changes to current assumptions to achieve \u00a3nil headroom
Although there was no impairment of goodwill relating to the Personal Financial Services CGU or the Private Banking CGU at 31 December 2024, the test for the
Personal Financial Services CGU remains sensitive to some of the assumptions used, as described above. In addition, the changes in assumptions detailed below for
the discount rate and cash flow projections would eliminate the current headroom. As a result, there is a risk of impairment in the future should business
performance or economic factors diverge from forecasts.
In 2024, there was a decrease in headroom arising from a decline in cash flow forecasts, partially offset by a decrease to RWAs which led to a reduction in the
required CET1 capital requirement.
The sensitivity analysis presented below has been prepared on the basis that a change in each key assumption would not have a consequential impact on other
assumptions used in the impairment review. However, due to the interrelationships between some of the assumptions, a change in one of the assumptions might
impact one or more of the other assumptions and could result in a larger or smaller overall impact.
2024
Carrying value
Value in use
Headroom
Increase in
discount rate
Decrease in
cash flows
CGU
\u00a3m
\u00a3m
\u00a3m
bps
%
Personal Financial Services
7,294
7,639
345
53
5
2023
Personal Financial Services
7,513
8,178
665
101
8
", "dimensions": { "concept": "ifrs-full:DisclosureOfGoodwillExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-607": { "value": "
b) Other intangibles
Group
Company
Cost
Accumulated
amortisation /
impairment
Carrying
amount
Cost
Accumulated
amortisation /
impairment
Carrying
amount
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2024
1,339
(990)
349
1,382
(1,047)
335
Additions
120
\u2014
120
116
\u2014
116
Disposals
(703)
700
(3)
(703)
700
(3)
Charge
\u2014
(126)
(126)
\u2014
(119)
(119)
At 31 December 2024
756
(416)
340
795
(466)
329
At 1 January 2023
1,261
(910)
351
1,309
(970)
339
Additions
114
\u2014
114
109
\u2014
109
Disposals
(36)
36
\u2014
(36)
36
\u2014
Charge
\u2014
(116)
(116)
\u2014
(113)
(113)
At 31 December 2023
1,339
(990)
349
1,382
(1,047)
335
Other intangibles which consist of computer software, include computer software under development of \u00a399m (2023: \u00a3157m), of which \u00a320m is internally
generated (2023: \u00a335m). For the Company, \u00a319m of computer software under development is internally generated (2023: \u00a326m).
The impairment charge of \u00a35m (2023: \u00a3nil) relates to computer software no longer expected to yield future economic benefits. For the Company, the impairment
charge of \u00a33m (2023: \u00a3nil) relates to computer software no longer expected to yield future economic benefits.
", "dimensions": { "concept": "ifrs-full:DisclosureOfIntangibleAssetsExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-609": { "value": "
20. PROPERTY, PLANT AND EQUIPMENT
Group
Property
Office fixtures and
equipment
Computer software
Operating lease
assets
Right-of-use assets
Total(1)
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cost:
At 1 January 2024
918
877
67
635
263
2,760
Additions
35
47
\u2014
304
21
407
Disposals
(20)
(41)
(60)
(223)
(14)
(358)
Other
8
9
\u2014
\u2014
\u2014
17
At 31 December 2024
941
892
7
716
270
2,826
Accumulated depreciation:
At 1 January 2024
226
653
67
147
173
1,266
Charge for the year
21
60
\u2014
75
18
174
Impairment during the year
(5)
(3)
\u2014
\u2014
\u2014
(8)
Disposals
(11)
(33)
(60)
(80)
\u2014
(184)
Other
7
8
\u2014
\u2014
\u2014
15
At 31 December 2024
238
685
7
142
191
1,263
Carrying amount
703
207
\u2014
574
79
1,563
Cost:
At 1 January 2023
889
823
72
722
267
2,773
Additions
87
83
\u2014
85
31
286
Reclassification from assets held for sale
8
\u2014
\u2014
\u2014
\u2014
8
Disposals
(66)
(29)
(5)
(172)
(35)
(307)
At 31 December 2023
918
877
67
635
263
2,760
Accumulated depreciation:
At 1 January 2023
270
618
72
145
155
1,260
Charge for the year
17
62
\u2014
64
30
173
Impairment during the year
\u2014
\u2014
\u2014
\u2014
(11)
(11)
Disposals
(61)
(27)
(5)
(62)
(1)
(156)
At 31 December 2023
226
653
67
147
173
1,266
Carrying amount
692
224
\u2014
488
90
1,494
(1) Property, plant and equipment includes investment properties of \u00a316m (2023: \u00a317m).
Company
Property
Office fixtures and
equipment
Computer software
Right-of-use assets
Total(1)
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cost:
At 1 January 2024
913
854
61
247
2,075
Additions
35
47
\u2014
20
102
Disposals
(20)
(41)
(60)
(13)
(134)
Other
3
9
\u2014
\u2014
12
At 31 December 2024
931
869
1
254
2,055
Accumulated depreciation:
At 1 January 2024
228
630
61
168
1,087
Charge for the year
21
60
\u2014
17
98
Impairment during the year
(5)
(3)
\u2014
\u2014
(8)
Disposals
(11)
(33)
(60)
\u2014
(104)
Other
1
8
\u2014
\u2014
9
At 31 December 2024
234
662
1
185
1,082
Carrying amount
697
207
\u2014
69
973
Cost:
At 1 January 2023
834
800
61
252
1,947
Additions
87
83
\u2014
29
199
Reclassification from assets held for sale
8
\u2014
\u2014
\u2014
8
Disposals
(16)
(29)
\u2014
(34)
(79)
At 31 December 2023
913
854
61
247
2,075
Accumulated depreciation:
At 1 January 2023
223
594
61
151
1,029
Charge for the year
17
62
\u2014
28
107
Impairment during the year
\u2014
\u2014
\u2014
(11)
(11)
Disposals
(12)
(26)
\u2014
\u2014
(38)
At 31 December 2023
228
630
61
168
1,087
Carrying amount
685
224
\u2014
79
988
(1) Property includes investment properties of \u00a316m (2023: \u00a317m).
In 2023, right-of-use assets were impaired as part of our transformation. The impairment relates to leasehold properties within the scope of our branch network
restructuring programme and head office sites which are either closing or consolidating.
Group
Company
2024
2023
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Lease liabilities
88
111
79
100
Other
1,764
2,368
1,710
2,271
1,852
2,479
1,789
2,371
", "dimensions": { "concept": "ifrs-full:DisclosureOfLeasesExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-608": { "value": "
20. PROPERTY, PLANT AND EQUIPMENT
Group
Property
Office fixtures and
equipment
Computer software
Operating lease
assets
Right-of-use assets
Total(1)
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cost:
At 1 January 2024
918
877
67
635
263
2,760
Additions
35
47
\u2014
304
21
407
Disposals
(20)
(41)
(60)
(223)
(14)
(358)
Other
8
9
\u2014
\u2014
\u2014
17
At 31 December 2024
941
892
7
716
270
2,826
Accumulated depreciation:
At 1 January 2024
226
653
67
147
173
1,266
Charge for the year
21
60
\u2014
75
18
174
Impairment during the year
(5)
(3)
\u2014
\u2014
\u2014
(8)
Disposals
(11)
(33)
(60)
(80)
\u2014
(184)
Other
7
8
\u2014
\u2014
\u2014
15
At 31 December 2024
238
685
7
142
191
1,263
Carrying amount
703
207
\u2014
574
79
1,563
Cost:
At 1 January 2023
889
823
72
722
267
2,773
Additions
87
83
\u2014
85
31
286
Reclassification from assets held for sale
8
\u2014
\u2014
\u2014
\u2014
8
Disposals
(66)
(29)
(5)
(172)
(35)
(307)
At 31 December 2023
918
877
67
635
263
2,760
Accumulated depreciation:
At 1 January 2023
270
618
72
145
155
1,260
Charge for the year
17
62
\u2014
64
30
173
Impairment during the year
\u2014
\u2014
\u2014
\u2014
(11)
(11)
Disposals
(61)
(27)
(5)
(62)
(1)
(156)
At 31 December 2023
226
653
67
147
173
1,266
Carrying amount
692
224
\u2014
488
90
1,494
(1) Property, plant and equipment includes investment properties of \u00a316m (2023: \u00a317m).
Company
Property
Office fixtures and
equipment
Computer software
Right-of-use assets
Total(1)
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cost:
At 1 January 2024
913
854
61
247
2,075
Additions
35
47
\u2014
20
102
Disposals
(20)
(41)
(60)
(13)
(134)
Other
3
9
\u2014
\u2014
12
At 31 December 2024
931
869
1
254
2,055
Accumulated depreciation:
At 1 January 2024
228
630
61
168
1,087
Charge for the year
21
60
\u2014
17
98
Impairment during the year
(5)
(3)
\u2014
\u2014
(8)
Disposals
(11)
(33)
(60)
\u2014
(104)
Other
1
8
\u2014
\u2014
9
At 31 December 2024
234
662
1
185
1,082
Carrying amount
697
207
\u2014
69
973
Cost:
At 1 January 2023
834
800
61
252
1,947
Additions
87
83
\u2014
29
199
Reclassification from assets held for sale
8
\u2014
\u2014
\u2014
8
Disposals
(16)
(29)
\u2014
(34)
(79)
At 31 December 2023
913
854
61
247
2,075
Accumulated depreciation:
At 1 January 2023
223
594
61
151
1,029
Charge for the year
17
62
\u2014
28
107
Impairment during the year
\u2014
\u2014
\u2014
(11)
(11)
Disposals
(12)
(26)
\u2014
\u2014
(38)
At 31 December 2023
228
630
61
168
1,087
Carrying amount
685
224
\u2014
79
988
(1) Property includes investment properties of \u00a316m (2023: \u00a317m).
In 2023, right-of-use assets were impaired as part of our transformation. The impairment relates to leasehold properties within the scope of our branch network
restructuring programme and head office sites which are either closing or consolidating.
", "dimensions": { "concept": "ifrs-full:DisclosureOfPropertyPlantAndEquipmentExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-610": { "value": "
21. DEPOSITS BY BANKS
Group
Company
2024
2023
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Items in the course of transmission
523
732
517
719
Deposits held as collateral
682
860
682
860
Other deposits(1)
12,787
18,737
12,781
18,733
Amounts due to Santander UK subsidiaries
1
3
5,541
5,387
13,993
20,332
19,521
25,699
(1) Includes balance drawn from the TFSME of \u00a311bn (2023: \u00a317bn).
39. OFFSETTING FINANCIAL ASSETS AND LIABILITIES
The following table shows the impact of netting arrangements on:
\u2013 All financial assets and liabilities that are reported net on the balance sheet
\u2013 All derivative financial instruments and repurchase agreements and other similar secured lending and borrowing agreements that are subject to enforceable
master netting arrangements or similar agreements, but do not qualify for balance sheet netting.
The table identifies the amounts that have been offset in the balance sheet and those amounts that are covered by enforceable netting arrangements (offsetting
arrangements and financial collateral) but do not qualify for netting under the requirements described above.
For derivative contracts, the \u2018Financial instruments\u2019 column identifies financial assets and liabilities that are subject to set off under netting agreements, such as
the\u00a0ISDA Master Agreement or derivative exchange or clearing counterparty agreements, whereby all outstanding transactions with the same counterparty can
be\u00a0offset and close-out netting applied across all outstanding transactions covered by the agreements if an event of default or other predetermined events occur.
Financial collateral refers to cash and non-cash collateral obtained, typically daily or weekly, to cover the net exposure between counterparties by enabling the
collateral to be realised in an event of default or if other predetermined events occur. For repurchase and reverse repurchase agreements and other similar secured
lending and borrowing, the \u2018Financial instruments\u2019 column identifies financial assets and liabilities that are subject to set off under netting agreements, such as
global master repurchase agreements and global master securities lending agreements, whereby all outstanding transactions with the same counterparty can
be\u00a0offset and close-out netting applied across all outstanding transactions covered by the agreements if an event of default or other predetermined events occur.
Financial collateral typically comprises highly liquid securities which are legally transferred and can be liquidated if a counterparty defaults.
Santander UK engages in a variety of counterparty credit mitigation strategies in addition to netting and collateral arrangements. Therefore, the net amounts
presented in the tables below do not represent Santander UK\u2019s total credit exposure.
Group
Amounts subject to enforceable netting arrangements
Assets not
subject to
enforceable
netting
arrangements(2)
Effects of offsetting on balance sheet
Related amounts not offset
Gross
amounts
Amounts
offset
Net amounts
on balance
sheet
Financial
instruments
Financial
collateral (1)
Net
amount
Balance
sheet
total (3)
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Derivative financial assets
2,799
(1,643)
1,156
(407)
(711)
38
48
1,204
Reverse repurchase, securities borrowing & similar
agreements:
\u2013 Amortised cost
16,175
(5,837)
10,338
(63)
(10,275)
\u2014
\u2014
10,338
Loans and advances to customers and banks\u207d\u2074\u207e
5,421
(635)
4,786
\u2014
\u2014
4,786
195,654
200,440
24,395
(8,115)
16,280
(470)
(10,986)
4,824
195,702
211,982
Liabilities
Derivative financial liabilities
2,325
(1,643)
682
(407)
(127)
148
20
702
Repurchase, securities lending & similar agreements:
\u2013 Amortised cost
14,454
(5,837)
8,617
(63)
(8,554)
\u2014
\u2014
8,617
Deposits by customers and banks\u207d\u2074\u207e
635
(635)
\u2014
\u2014
\u2014
\u2014
194,960
194,960
17,414
(8,115)
9,299
(470)
(8,681)
148
194,980
204,279
2023
Assets
Derivative financial assets
3,429
(2,047)
1,382
(471)
(823)
88
50
1,432
Reverse repurchase, securities borrowing & similar
agreements:
\u2013 Amortised cost
15,625
(3,157)
12,468
(118)
(12,350)
\u2014
\u2014
12,468
Loans and advances to customers and banks\u207d\u2074\u207e
5,363
(790)
4,573
\u2014
\u2014
4,573
203,942
208,515
24,417
(5,994)
18,423
(589)
(13,173)
4,661
203,992
222,415
Liabilities
Derivative financial liabilities
2,838
(2,047)
791
(471)
(161)
159
27
818
Repurchase, securities lending & similar agreements:
\u2013 Amortised cost
11,568
(3,157)
8,411
(118)
(8,293)
\u2014
\u2014
8,411
Deposits by customers and banks\u207d\u2074\u207e
4,218
(790)
3,428
\u2014
\u2014
3,428
207,754
211,182
18,624
(5,994)
12,630
(589)
(8,454)
3,587
207,781
220,411
(1) Financial collateral is reflected at its fair value but has been limited to the net balance sheet exposure so as not to include any over-collateralisation.
(2) This column includes contractual rights of set-off that are subject to uncertainty under the laws of the relevant jurisdiction.
(3) The balance sheet total is the sum of \u2018Net amounts reported on the balance sheet\u2019 that are subject to enforceable netting arrangements and \u2018Amounts not subject to enforceable netting arrangements\u2019.
(4) The amounts offset within loans and advances to customers/banks or deposits by customers/banks relate to offset mortgages which are classified as either and that are subject to netting.
Company
Amounts subject to enforceable netting arrangements
Assets not
subject to
enforceable
netting
arrangements(2)
Effects of offsetting on balance sheet
Related amounts not offset
Gross
amounts
Amounts
offset
Net amounts
on balance
sheet
Financial
instruments
Financial
collateral (1)
Net
amount
Balance
sheet
total (3)
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Derivative financial assets
3,078
(1,643)
1,435
(686)
(711)
38
47
1,482
Reverse repurchase, securities borrowing & similar
agreements:
\u2013 Amortised cost
16,175
(5,837)
10,338
(63)
(10,275)
\u2014
\u2014
10,338
Loans and advances to customers and banks (4)
5,421
(635)
4,786
\u2014
\u2014
4,786
213,920
218,706
24,674
(8,115)
16,559
(749)
(10,986)
4,824
213,967
230,526
Liabilities
Derivative financial liabilities
4,230
(1,643)
2,587
(686)
(127)
1,774
20
2,607
Repurchase, securities lending & similar agreements:
\u2013 Amortised cost
14,454
(5,837)
8,617
(63)
(8,554)
\u2014
\u2014
8,617
Deposits by customers and banks (4)
635
(635)
\u2014
\u2014
\u2014
\u2014
220,736
220,736
19,319
(8,115)
11,204
(749)
(8,681)
1,774
220,756
231,960
2023
Assets
Derivative financial assets
3,695
(2,047)
1,648
(734)
(823)
91
47
1,695
Reverse repurchase, securities borrowing & similar
agreements:
\u2013 Amortised cost
15,625
(3,157)
12,468
(118)
(12,350)
\u2014
\u2014
12,468
Loans and advances to customers and banks(4)
26,986
(790)
26,196
\u2014
\u2014
26,196
198,367
224,563
46,306
(5,994)
40,312
(852)
(13,173)
26,287
198,414
238,726
Liabilities
Derivative financial liabilities
3,994
(2,047)
1,947
(734)
(161)
1,052
27
1,974
Repurchase, securities lending & similar agreements:
\u2013 Amortised cost
11,568
(3,157)
8,411
(118)
(8,293)
\u2014
\u2014
8,411
Deposits by customers and banks (4)
31,262
(790)
30,472
\u2014
\u2014
30,472
202,743
233,215
46,824
(5,994)
40,830
(852)
(8,454)
31,524
202,770
243,600
(1) Financial collateral is reflected at its fair value but has been limited to the net balance sheet exposure so as not to include any over-collateralisation.
(2) This column includes contractual rights of set-off that are subject to uncertainty under the laws of the relevant jurisdiction.
(3) The balance sheet total is the sum of \u2018Net amounts reported on the balance sheet\u2019 that are subject to enforceable netting arrangements and \u2018Amounts not subject to enforceable netting arrangements\u2019.
(4) The amounts offset within loans and advances to customers/banks or deposits by customers/banks relate to offset mortgages which are classified as either and that are subject to netting.
", "dimensions": { "concept": "ifrs-full:DisclosureOfDepositsFromBanksExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-611": { "value": "
22. DEPOSITS BY CUSTOMERS
Group
Company
2024
2023
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Demand and time deposits(1)
177,335
188,004
172,222
183,010
Amounts due to other Santander UK Group Holdings plc subsidiaries
122
114
26,933
22,524
Amounts due to Santander UK Group Holdings plc(2)
1,793
1,772
1,793
1,772
Amounts due to fellow Banco Santander subsidiaries and joint ventures
1,717
960
267
210
180,967
190,850
201,215
207,516
(1) Includes capital amount guaranteed / protected equity index-linked deposits of \u00a3173m (2023: \u00a3304m ).
(2) Includes downstreamed funding from our immediate parent company Santander UK Group Holdings plc.
39. OFFSETTING FINANCIAL ASSETS AND LIABILITIES
The following table shows the impact of netting arrangements on:
\u2013 All financial assets and liabilities that are reported net on the balance sheet
\u2013 All derivative financial instruments and repurchase agreements and other similar secured lending and borrowing agreements that are subject to enforceable
master netting arrangements or similar agreements, but do not qualify for balance sheet netting.
The table identifies the amounts that have been offset in the balance sheet and those amounts that are covered by enforceable netting arrangements (offsetting
arrangements and financial collateral) but do not qualify for netting under the requirements described above.
For derivative contracts, the \u2018Financial instruments\u2019 column identifies financial assets and liabilities that are subject to set off under netting agreements, such as
the\u00a0ISDA Master Agreement or derivative exchange or clearing counterparty agreements, whereby all outstanding transactions with the same counterparty can
be\u00a0offset and close-out netting applied across all outstanding transactions covered by the agreements if an event of default or other predetermined events occur.
Financial collateral refers to cash and non-cash collateral obtained, typically daily or weekly, to cover the net exposure between counterparties by enabling the
collateral to be realised in an event of default or if other predetermined events occur. For repurchase and reverse repurchase agreements and other similar secured
lending and borrowing, the \u2018Financial instruments\u2019 column identifies financial assets and liabilities that are subject to set off under netting agreements, such as
global master repurchase agreements and global master securities lending agreements, whereby all outstanding transactions with the same counterparty can
be\u00a0offset and close-out netting applied across all outstanding transactions covered by the agreements if an event of default or other predetermined events occur.
Financial collateral typically comprises highly liquid securities which are legally transferred and can be liquidated if a counterparty defaults.
Santander UK engages in a variety of counterparty credit mitigation strategies in addition to netting and collateral arrangements. Therefore, the net amounts
presented in the tables below do not represent Santander UK\u2019s total credit exposure.
Group
Amounts subject to enforceable netting arrangements
Assets not
subject to
enforceable
netting
arrangements(2)
Effects of offsetting on balance sheet
Related amounts not offset
Gross
amounts
Amounts
offset
Net amounts
on balance
sheet
Financial
instruments
Financial
collateral (1)
Net
amount
Balance
sheet
total (3)
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Derivative financial assets
2,799
(1,643)
1,156
(407)
(711)
38
48
1,204
Reverse repurchase, securities borrowing & similar
agreements:
\u2013 Amortised cost
16,175
(5,837)
10,338
(63)
(10,275)
\u2014
\u2014
10,338
Loans and advances to customers and banks\u207d\u2074\u207e
5,421
(635)
4,786
\u2014
\u2014
4,786
195,654
200,440
24,395
(8,115)
16,280
(470)
(10,986)
4,824
195,702
211,982
Liabilities
Derivative financial liabilities
2,325
(1,643)
682
(407)
(127)
148
20
702
Repurchase, securities lending & similar agreements:
\u2013 Amortised cost
14,454
(5,837)
8,617
(63)
(8,554)
\u2014
\u2014
8,617
Deposits by customers and banks\u207d\u2074\u207e
635
(635)
\u2014
\u2014
\u2014
\u2014
194,960
194,960
17,414
(8,115)
9,299
(470)
(8,681)
148
194,980
204,279
2023
Assets
Derivative financial assets
3,429
(2,047)
1,382
(471)
(823)
88
50
1,432
Reverse repurchase, securities borrowing & similar
agreements:
\u2013 Amortised cost
15,625
(3,157)
12,468
(118)
(12,350)
\u2014
\u2014
12,468
Loans and advances to customers and banks\u207d\u2074\u207e
5,363
(790)
4,573
\u2014
\u2014
4,573
203,942
208,515
24,417
(5,994)
18,423
(589)
(13,173)
4,661
203,992
222,415
Liabilities
Derivative financial liabilities
2,838
(2,047)
791
(471)
(161)
159
27
818
Repurchase, securities lending & similar agreements:
\u2013 Amortised cost
11,568
(3,157)
8,411
(118)
(8,293)
\u2014
\u2014
8,411
Deposits by customers and banks\u207d\u2074\u207e
4,218
(790)
3,428
\u2014
\u2014
3,428
207,754
211,182
18,624
(5,994)
12,630
(589)
(8,454)
3,587
207,781
220,411
(1) Financial collateral is reflected at its fair value but has been limited to the net balance sheet exposure so as not to include any over-collateralisation.
(2) This column includes contractual rights of set-off that are subject to uncertainty under the laws of the relevant jurisdiction.
(3) The balance sheet total is the sum of \u2018Net amounts reported on the balance sheet\u2019 that are subject to enforceable netting arrangements and \u2018Amounts not subject to enforceable netting arrangements\u2019.
(4) The amounts offset within loans and advances to customers/banks or deposits by customers/banks relate to offset mortgages which are classified as either and that are subject to netting.
Company
Amounts subject to enforceable netting arrangements
Assets not
subject to
enforceable
netting
arrangements(2)
Effects of offsetting on balance sheet
Related amounts not offset
Gross
amounts
Amounts
offset
Net amounts
on balance
sheet
Financial
instruments
Financial
collateral (1)
Net
amount
Balance
sheet
total (3)
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Derivative financial assets
3,078
(1,643)
1,435
(686)
(711)
38
47
1,482
Reverse repurchase, securities borrowing & similar
agreements:
\u2013 Amortised cost
16,175
(5,837)
10,338
(63)
(10,275)
\u2014
\u2014
10,338
Loans and advances to customers and banks (4)
5,421
(635)
4,786
\u2014
\u2014
4,786
213,920
218,706
24,674
(8,115)
16,559
(749)
(10,986)
4,824
213,967
230,526
Liabilities
Derivative financial liabilities
4,230
(1,643)
2,587
(686)
(127)
1,774
20
2,607
Repurchase, securities lending & similar agreements:
\u2013 Amortised cost
14,454
(5,837)
8,617
(63)
(8,554)
\u2014
\u2014
8,617
Deposits by customers and banks (4)
635
(635)
\u2014
\u2014
\u2014
\u2014
220,736
220,736
19,319
(8,115)
11,204
(749)
(8,681)
1,774
220,756
231,960
2023
Assets
Derivative financial assets
3,695
(2,047)
1,648
(734)
(823)
91
47
1,695
Reverse repurchase, securities borrowing & similar
agreements:
\u2013 Amortised cost
15,625
(3,157)
12,468
(118)
(12,350)
\u2014
\u2014
12,468
Loans and advances to customers and banks(4)
26,986
(790)
26,196
\u2014
\u2014
26,196
198,367
224,563
46,306
(5,994)
40,312
(852)
(13,173)
26,287
198,414
238,726
Liabilities
Derivative financial liabilities
3,994
(2,047)
1,947
(734)
(161)
1,052
27
1,974
Repurchase, securities lending & similar agreements:
\u2013 Amortised cost
11,568
(3,157)
8,411
(118)
(8,293)
\u2014
\u2014
8,411
Deposits by customers and banks (4)
31,262
(790)
30,472
\u2014
\u2014
30,472
202,743
233,215
46,824
(5,994)
40,830
(852)
(8,454)
31,524
202,770
243,600
(1) Financial collateral is reflected at its fair value but has been limited to the net balance sheet exposure so as not to include any over-collateralisation.
(2) This column includes contractual rights of set-off that are subject to uncertainty under the laws of the relevant jurisdiction.
(3) The balance sheet total is the sum of \u2018Net amounts reported on the balance sheet\u2019 that are subject to enforceable netting arrangements and \u2018Amounts not subject to enforceable netting arrangements\u2019.
(4) The amounts offset within loans and advances to customers/banks or deposits by customers/banks relate to offset mortgages which are classified as either and that are subject to netting.
", "dimensions": { "concept": "ifrs-full:DisclosureOfDepositsFromCustomersExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-613": { "value": "
26. OTHER LIABILITIES
Group
Company
2024
2023
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Lease liabilities
88
111
79
100
Other
1,764
2,368
1,710
2,271
1,852
2,479
1,789
2,371
", "dimensions": { "concept": "ifrs-full:DisclosureOfAccruedExpensesAndOtherLiabilitiesExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-612": { "value": "
26. OTHER LIABILITIES
Group
Company
2024
2023
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Lease liabilities
88
111
79
100
Other
1,764
2,368
1,710
2,271
1,852
2,479
1,789
2,371
", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherLiabilitiesExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-614": { "value": "
29. SUBORDINATED LIABILITIES
Group
Company
2024
2023
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3325m Sterling preference shares
343
343
343
343
Undated subordinated liabilities
205
205
205
205
Dated subordinated liabilities
1,837
1,838
1,838
1,839
2,385
2,386
2,386
2,387
In 2024, no subordinated liabilities were repurchased as part of ongoing liability management exercises (2023: profit of \u00a34m).
The above securities will, in the event of the winding up of the issuer, be subordinated to the claims of depositors and all other creditors of the issuer, other than
creditors whose claims rank equally with, or are junior to, the claims of the holders of the subordinated liabilities. The subordination amongst each of the
subordinated liabilities upon a winding up of the issuer is specified in their respective terms and conditions.
In 2024 and 2023, the Santander UK group had no defaults of principal, interest or other breaches with respect to its subordinated liabilities. No repayment or
purchase by the issuer of the subordinated liabilities may be made prior to their stated maturity without the consent of the PRA.
Undated subordinated liabilities
Group
Company
2024
2023
2024
2023
First call date
\u00a3m
\u00a3m
\u00a3m
\u00a3m
10.0625% Exchangeable capital securities
n/a
205
205
205
205
205
205
205
205
In common with other debt securities issued by Santander UK group companies and notwithstanding the issuer\u2019s first call dates in the table above, in the event of
certain tax changes affecting the treatment of payments of interest on subordinated liabilities in the UK, the 10.0625% Exchangeable capital securities are
redeemable on any interest payment date \u2013 each in whole at the option of Santander UK, at their principal amount together with any accrued interest.
The 10.0625% Exchangeable capital securities are exchangeable into fully paid 10.375% non-cumulative non-redeemable sterling preference shares of \u00a31 each, at
the option of Santander UK, on the business day immediately following any interest payment date.
Dated subordinated liabilities
Group
Company
2024
2023
2024
2023
Maturity
\u00a3m
\u00a3m
\u00a3m
\u00a3m
4.75% Subordinated notes
2025
332
326
332
326
7.95% Subordinated notes
2029
189
193
189
193
6.50% Subordinated notes
2030
1
1
1
1
5.875% Subordinated notes
2031
7
7
8
8
5.625%Subordinated notes
2045
226
222
226
222
7.869% Subordinated notes
2033
314
321
314
321
8.296% Subordinated notes
2033
768
768
768
768
1,837
1,838
1,838
1,839
The dated subordinated liabilities are redeemable in whole at the option of Santander UK in the event of certain tax changes affecting the treatment of payments of
interest on the subordinated liabilities in the UK, at their principal amount together with any accrued interest.
", "dimensions": { "concept": "ifrs-full:DisclosureOfSubordinatedLiabilitiesExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-616": { "value": "
30. CONTINGENT LIABILITIES AND COMMITMENTS
Group
Company
2024
2023
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Guarantees given to subsidiaries
\u2014
\u2014
5,185
5,052
Guarantees given to third parties
493
452
493
452
Formal standby facilities, credit lines and other commitments
35,156
30,976
35,155
30,954
35,649
31,428
40,833
36,458
At 31 December 2024, the Santander UK group had credit impairment loss provisions relating to guarantees given to third parties and undrawn loan commitments.
See Note 27 for more details.
Where the items set out below can be reliably estimated, they are disclosed in the table above.
Guarantees given to subsidiaries
Santander UK plc has guaranteed the payment of any liabilities to Cater Allen Limited\u2019s account holders. This guarantee expires on 31\u00a0December 2025, although
customer deposit balances on or before 31\u00a0December 2025 will remain guaranteed after the expiry date.
Santander UK plc has also undertaken, for the purposes of section 479C of the Companies Act 2006 (the Act), the guarantee of the payment of all outstanding
liabilities to which certain direct or indirect subsidiaries were subject at 31 December 2024, until they are satisfied in full, in order to allow those subsidiaries to
benefit from the audit exemption provided for by Section 479A of the Act for the year ended 31 December 2024. The subsidiaries benefiting from this guarantee are
listed in the Shareholder information section of this Annual Report.
Guarantees given to third parties
Guarantees given to third parties consist primarily of letters of credit, bonds and guarantees granted as part of normal product facilities which are offered to
customers.
Formal standby facilities, credit lines and other commitments
Standby facilities, credit lines and other commitments are also granted as part of normal product facilities which are offered to customers. Retail facilities comprise
undrawn facilities granted on flexible mortgages, bank overdrafts and credit cards. On flexible mortgages, the credit limit is set at the point of granting the loan
through property value and affordability assessments.
Ongoing assessments are made to ensure that credit limits remain appropriate considering any change in the security value or the customer\u2019s financial
circumstances. For unsecured overdraft facilities and credit cards, the facilities are granted based on new business risk assessment and are reviewed more
frequently based on internal, as well as external data. Corporate facilities can comprise standby and revolving facilities which are subject to ongoing compliance
with covenants and may require the provision of agreed security.
FSCS
The FSCS is the UK\u2019s independent statutory compensation fund for customers of authorised financial services firms and pays compensation if a firm is unable to pay
certain claims against it. The FSCS is funded by levies on the industry and recoveries and borrowings where appropriate.
Loan representations and warranties
In connection with the securitisations and covered bond transactions described in Note 14, the Santander UK group entities selling the relevant loans into the
applicable securitisation or covered bond portfolios make representations and warranties with respect to such loans, as of the date of the sale of the loans into the
applicable portfolio. These representations and warranties cover, among other things, the relevant Santander UK group entity's ownership of the loan, the absence
of a material breach or default by the relevant borrower, the loan\u2019s compliance with applicable laws, and absence of material disputes with respect to the relevant
borrower, asset or loan. The specific representations and warranties made by Santander UK group companies which act as sellers of loans in these securitisations
and covered bond transactions depend in each case on the nature of the transaction and the requirements of the transaction structure.
In the event that there is a material breach of the representations and warranties given by Santander UK plc as seller of loans under the residential mortgage-
backed securitisations or the covered bond programme included in Note 14, or if such representations and warranties prove to be materially untrue at the date
when they were given, Santander UK plc may be required to repurchase the affected mortgage loans (generally) at their outstanding principal balance plus accrued
interest). These securitisations and covered bond programme are collateralised by prime residential mortgage loans. Santander UK plc is principally a retail prime
lender and has no appetite or product offering for any type of sub-prime business.
Similarly, under the auto loan securitisations in Note 14, in the event that there is a breach or inaccuracy in respect of a representation or warranty relating to the
loans, the relevant Santander UK group entity who sold the auto loans into the securitisation portfolio will be required to repurchase such loans from the structure
(also at their outstanding principal balance plus accrued interest). In addition to breaches of representation and warranties, under the auto loan securitisations, the
seller may also have a repurchase obligation if certain portfolio limits are breached (which include, amongst other things, limits as to the size of a loan given to an
individual customer, LTV ratio, average term to maturity and average seasoning).
In the case of a repurchase of a loan from the relevant securitisation or covered bond programmes, the Santander UK group may bear any subsequent credit loss on
such loan. The Santander UK group manages and monitors its securitisation and covered bond activities closely to minimise potential claims.
Other legal, regulatory or tax matters
Santander UK engages in discussion, and co-operates, with the FCA, PRA, CMA and other regulators and government agencies in various jurisdictions in their
supervision and review of Santander UK including reviews exercised under statutory powers, regarding its interaction with past and present customers, both as part
of general thematic work and in relation to specific products, services and activities. During the ordinary course of business, Santander UK is also subject to
complaints and threatened legal proceedings brought by or on behalf of current or former employees, customers, investors or other third parties. In addition,
Santander UK is subject to audits, reviews, challenges and tax, regulatory or law enforcement investigations or proceedings by relevant regulators or government
agencies in various jurisdictions. All such matters are assessed periodically to determine the likelihood of Santander UK incurring a liability.
In those instances where it is concluded that it is not yet probable that a quantifiable payment will be made, for example because the facts are unclear or further
time is required to fully assess the merits of the case or to reasonably quantify the expected payment, no provision is made. In addition, where it is not currently
practicable to estimate the possible financial effect of these matters, no provision is made.
Payment Protection Insurance
AXA France IARD and AXA France Vie (former GE Capital Corporation Group entities (GE Capital), known as Financial Insurance Company Ltd (FICL) and Financial
Assurance Company Ltd (FACL), acquired by AXA SA in 2015) (together, AXA France) have brought a claim for \u00a3552m (plus interest) against (i) Santander Cards UK
Limited (former GE Capital entity known as GE Capital Bank Limited (GECB), which was acquired by Banco Santander SA in 2008 and subsequently transferred to
Santander UK plc); and (ii) Santander Insurance Services UK Limited (a Banco Santander SA subsidiary) (together the Santander Entities). The claim relates to the
allocation of liability for compensation and associated costs in respect of a large number of PPI policies distributed by GECB pre-2005, which were underwritten by
FICL and FACL. AXA France reduced their claim from \u00a3670m (plus interest) to \u00a3552m (plus interest) in their Re-Re-Amended Particulars of Claim dated 29 June
2023. The Santander Entities strongly refute the claim. Trial has been fixed for six weeks, beginning on 11 March 2025.
There are ongoing factual issues to be resolved which may have legal consequences including in relation to liability. These issues create uncertainties which mean
that it is difficult to reliably predict the outcome or the timing of the resolution of the matter. The litigation and other regulatory provision in Note 27 includes our
best estimate of the Santander Entities\u2019 liability to the specific portfolio. Further information has not been provided on the basis that it would be seriously prejudicial
to the Santander Entities\u2019 interests in connection with the dispute.
In addition, and in relation to PPI more generally, the PPI provision includes an amount relating to legal claims challenging the FCA\u2019s industry guidance on the
treatment of Plevin / recurring non-disclosure assessments. This provision is based on current stock levels, future projected claims, and average redress. There
remains a risk that volumes received in future may be higher than forecast. The provision in Note 27 includes our best estimate of Santander UK\u2019s liability for the
specific issue. The actual cost of customer compensation could differ from the amount provided. It is not currently practicable to provide an estimate of the risk and
amount of any further financial impact.
German dividend tax arbitrage transactions
In June 2018 the Cologne Criminal Prosecution Office and the German Federal Tax Office commenced an investigation in relation to the historical involvement of
Santander UK plc, Santander Financial Services plc and Cater Allen International Limited (all subsidiaries of Santander UK Group Holdings plc) in German dividend tax
arbitrage transactions (known as cum/ex transactions). These transactions allegedly exploited a loophole of a specific German settlement mechanism through
short-selling and complex derivative structuring which resulted in the German government either refunding withholding tax where such tax had not been paid or
refunding it more than once. The German authorities are investigating numerous institutions and individuals in connection with alleged transactions and practices
which may be found to be illegal under German law.
During 2024 we continued to cooperate with the German authorities and, with the assistance of external experts, to progress an internal investigation into the
matters in question. From Santander UK plc\u2019s perspective, the investigation is focused principally on the period 2009-2011 and remains on-going. There remain
factual issues to be resolved which may have legal consequences including potentially material financial penalties. These issues create uncertainties which mean
that it is difficult to predict the resolution of the matter including timing or the significance of the possible impact. These uncertainties mean it is not currently
practicable to make a reliable assessment of the size of any related potential liability.
SCUK - Motor Finance Broker Commissions
As set out in Note 27, Santander UK has recognised a provision for historical motor finance commission payments. There continue to be significant uncertainties as
to the extent of any misconduct, if any, as well as the perimeter of commission models, and the 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.
Other
In 2016, Visa Europe Ltd was sold to Visa Inc. As a member and shareholder of Visa Europe Ltd, Santander UK received upfront consideration made up of cash and
convertible preferred stock. The convertible preferred stock is now held by Santander Equity Investments Limited (SEIL), outside the ring-fenced bank. Conversion of
the preferred stock into Class A Common Stock of Visa Inc. depends on the outcome of litigation against Visa involving UK & Ireland multilateral interchange fees
(UK&I MIFs).
In addition, Santander UK and certain other UK&I banks have agreed to indemnify Visa Inc. in the event that the preferred stock is insufficient to meet the costs of
this litigation. Visa Inc. has recourse to this indemnity once more than \u20ac1bn of losses relating to UK&I MIFs have arisen or once the total value of the preferred stock
issued on closing has been reduced to nil. Santander UK's liability under this indemnity is capped at \u20ac40m. At this stage, it is unclear whether the litigation will give
rise to more than \u20ac1bn of losses relating to UK&I MIFs, which means it is difficult to predict whether the indemnity would be called upon, or the timing or
significance of any potential impact.
As part of the sale of subsidiaries, businesses and other entities, and as is normal in such circumstances, Santander UK plc (and/or, where relevant, its subsidiaries)
has given warranties and/or indemnities to the purchasers.
Obligations under stock borrowing and lending agreements
Obligations under stock borrowing and lending agreements represent contractual commitments to return stock borrowed. These obligations are offset by a
contractual right to receive stock under other contractual agreements. See Note 34.
Other off-balance sheet commitments
The Santander UK group has commitments to lend at fixed interest rates which expose us to interest rate risk. For further information, see the Risk review.
Capital support arrangements
At 31 December 2024, Santander UK plc, Cater Allen Limited, Santander ISA Managers Limited and certain other non-regulated subsidiaries of Santander UK plc
were party to a capital support deed dated 3 December 2024 which was effective from 3 December 2024 (the RFB Sub-Group Capital Support Deed). These parties
were permitted by the PRA to form a core UK group as defined in the PRA Rulebook, a permission which expires on 3 December 2027. Exposures of each of the
regulated entities to other members of the core UK group are exempt from large exposure limits that would otherwise apply and these exposures are risk-weighted
at 0%. Where applicable this permission also provides for intra-group exposures to be excluded from the leverage exposure measure. The purpose of the RFB Sub-
Group Capital Support Deed is to facilitate the prompt transfer of available capital resources from, or repayment of liabilities by, the non-regulated entities to any of
the regulated entities in the event that one of the regulated entities breached or was at risk of breaching its capital resources or risk concentrations requirements.
Liquidity support arrangement
Under the PRA\u2019s liquidity rules, Santander UK plc and its subsidiary Cater Allen Limited form the RFB Domestic Liquidity Sub-group (the RFB DoLSub), which allows
them to collectively meet regulatory requirements to manage liquidity risk. Each member of the RFB DoLSub will support the other by transferring surplus liquidity
in times of stress.
", "dimensions": { "concept": "ifrs-full:DisclosureOfCommitmentsAndContingentLiabilitiesExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-615": { "value": "
30. CONTINGENT LIABILITIES AND COMMITMENTS
Group
Company
2024
2023
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Guarantees given to subsidiaries
\u2014
\u2014
5,185
5,052
Guarantees given to third parties
493
452
493
452
Formal standby facilities, credit lines and other commitments
35,156
30,976
35,155
30,954
35,649
31,428
40,833
36,458
At 31 December 2024, the Santander UK group had credit impairment loss provisions relating to guarantees given to third parties and undrawn loan commitments.
See Note 27 for more details.
Where the items set out below can be reliably estimated, they are disclosed in the table above.
Guarantees given to subsidiaries
Santander UK plc has guaranteed the payment of any liabilities to Cater Allen Limited\u2019s account holders. This guarantee expires on 31\u00a0December 2025, although
customer deposit balances on or before 31\u00a0December 2025 will remain guaranteed after the expiry date.
Santander UK plc has also undertaken, for the purposes of section 479C of the Companies Act 2006 (the Act), the guarantee of the payment of all outstanding
liabilities to which certain direct or indirect subsidiaries were subject at 31 December 2024, until they are satisfied in full, in order to allow those subsidiaries to
benefit from the audit exemption provided for by Section 479A of the Act for the year ended 31 December 2024. The subsidiaries benefiting from this guarantee are
listed in the Shareholder information section of this Annual Report.
Guarantees given to third parties
Guarantees given to third parties consist primarily of letters of credit, bonds and guarantees granted as part of normal product facilities which are offered to
customers.
Formal standby facilities, credit lines and other commitments
Standby facilities, credit lines and other commitments are also granted as part of normal product facilities which are offered to customers. Retail facilities comprise
undrawn facilities granted on flexible mortgages, bank overdrafts and credit cards. On flexible mortgages, the credit limit is set at the point of granting the loan
through property value and affordability assessments.
Ongoing assessments are made to ensure that credit limits remain appropriate considering any change in the security value or the customer\u2019s financial
circumstances. For unsecured overdraft facilities and credit cards, the facilities are granted based on new business risk assessment and are reviewed more
frequently based on internal, as well as external data. Corporate facilities can comprise standby and revolving facilities which are subject to ongoing compliance
with covenants and may require the provision of agreed security.
FSCS
The FSCS is the UK\u2019s independent statutory compensation fund for customers of authorised financial services firms and pays compensation if a firm is unable to pay
certain claims against it. The FSCS is funded by levies on the industry and recoveries and borrowings where appropriate.
Loan representations and warranties
In connection with the securitisations and covered bond transactions described in Note 14, the Santander UK group entities selling the relevant loans into the
applicable securitisation or covered bond portfolios make representations and warranties with respect to such loans, as of the date of the sale of the loans into the
applicable portfolio. These representations and warranties cover, among other things, the relevant Santander UK group entity's ownership of the loan, the absence
of a material breach or default by the relevant borrower, the loan\u2019s compliance with applicable laws, and absence of material disputes with respect to the relevant
borrower, asset or loan. The specific representations and warranties made by Santander UK group companies which act as sellers of loans in these securitisations
and covered bond transactions depend in each case on the nature of the transaction and the requirements of the transaction structure.
In the event that there is a material breach of the representations and warranties given by Santander UK plc as seller of loans under the residential mortgage-
backed securitisations or the covered bond programme included in Note 14, or if such representations and warranties prove to be materially untrue at the date
when they were given, Santander UK plc may be required to repurchase the affected mortgage loans (generally) at their outstanding principal balance plus accrued
interest). These securitisations and covered bond programme are collateralised by prime residential mortgage loans. Santander UK plc is principally a retail prime
lender and has no appetite or product offering for any type of sub-prime business.
Similarly, under the auto loan securitisations in Note 14, in the event that there is a breach or inaccuracy in respect of a representation or warranty relating to the
loans, the relevant Santander UK group entity who sold the auto loans into the securitisation portfolio will be required to repurchase such loans from the structure
(also at their outstanding principal balance plus accrued interest). In addition to breaches of representation and warranties, under the auto loan securitisations, the
seller may also have a repurchase obligation if certain portfolio limits are breached (which include, amongst other things, limits as to the size of a loan given to an
individual customer, LTV ratio, average term to maturity and average seasoning).
In the case of a repurchase of a loan from the relevant securitisation or covered bond programmes, the Santander UK group may bear any subsequent credit loss on
such loan. The Santander UK group manages and monitors its securitisation and covered bond activities closely to minimise potential claims.
Other legal, regulatory or tax matters
Santander UK engages in discussion, and co-operates, with the FCA, PRA, CMA and other regulators and government agencies in various jurisdictions in their
supervision and review of Santander UK including reviews exercised under statutory powers, regarding its interaction with past and present customers, both as part
of general thematic work and in relation to specific products, services and activities. During the ordinary course of business, Santander UK is also subject to
complaints and threatened legal proceedings brought by or on behalf of current or former employees, customers, investors or other third parties. In addition,
Santander UK is subject to audits, reviews, challenges and tax, regulatory or law enforcement investigations or proceedings by relevant regulators or government
agencies in various jurisdictions. All such matters are assessed periodically to determine the likelihood of Santander UK incurring a liability.
In those instances where it is concluded that it is not yet probable that a quantifiable payment will be made, for example because the facts are unclear or further
time is required to fully assess the merits of the case or to reasonably quantify the expected payment, no provision is made. In addition, where it is not currently
practicable to estimate the possible financial effect of these matters, no provision is made.
Payment Protection Insurance
AXA France IARD and AXA France Vie (former GE Capital Corporation Group entities (GE Capital), known as Financial Insurance Company Ltd (FICL) and Financial
Assurance Company Ltd (FACL), acquired by AXA SA in 2015) (together, AXA France) have brought a claim for \u00a3552m (plus interest) against (i) Santander Cards UK
Limited (former GE Capital entity known as GE Capital Bank Limited (GECB), which was acquired by Banco Santander SA in 2008 and subsequently transferred to
Santander UK plc); and (ii) Santander Insurance Services UK Limited (a Banco Santander SA subsidiary) (together the Santander Entities). The claim relates to the
allocation of liability for compensation and associated costs in respect of a large number of PPI policies distributed by GECB pre-2005, which were underwritten by
FICL and FACL. AXA France reduced their claim from \u00a3670m (plus interest) to \u00a3552m (plus interest) in their Re-Re-Amended Particulars of Claim dated 29 June
2023. The Santander Entities strongly refute the claim. Trial has been fixed for six weeks, beginning on 11 March 2025.
There are ongoing factual issues to be resolved which may have legal consequences including in relation to liability. These issues create uncertainties which mean
that it is difficult to reliably predict the outcome or the timing of the resolution of the matter. The litigation and other regulatory provision in Note 27 includes our
best estimate of the Santander Entities\u2019 liability to the specific portfolio. Further information has not been provided on the basis that it would be seriously prejudicial
to the Santander Entities\u2019 interests in connection with the dispute.
In addition, and in relation to PPI more generally, the PPI provision includes an amount relating to legal claims challenging the FCA\u2019s industry guidance on the
treatment of Plevin / recurring non-disclosure assessments. This provision is based on current stock levels, future projected claims, and average redress. There
remains a risk that volumes received in future may be higher than forecast. The provision in Note 27 includes our best estimate of Santander UK\u2019s liability for the
specific issue. The actual cost of customer compensation could differ from the amount provided. It is not currently practicable to provide an estimate of the risk and
amount of any further financial impact.
German dividend tax arbitrage transactions
In June 2018 the Cologne Criminal Prosecution Office and the German Federal Tax Office commenced an investigation in relation to the historical involvement of
Santander UK plc, Santander Financial Services plc and Cater Allen International Limited (all subsidiaries of Santander UK Group Holdings plc) in German dividend tax
arbitrage transactions (known as cum/ex transactions). These transactions allegedly exploited a loophole of a specific German settlement mechanism through
short-selling and complex derivative structuring which resulted in the German government either refunding withholding tax where such tax had not been paid or
refunding it more than once. The German authorities are investigating numerous institutions and individuals in connection with alleged transactions and practices
which may be found to be illegal under German law.
During 2024 we continued to cooperate with the German authorities and, with the assistance of external experts, to progress an internal investigation into the
matters in question. From Santander UK plc\u2019s perspective, the investigation is focused principally on the period 2009-2011 and remains on-going. There remain
factual issues to be resolved which may have legal consequences including potentially material financial penalties. These issues create uncertainties which mean
that it is difficult to predict the resolution of the matter including timing or the significance of the possible impact. These uncertainties mean it is not currently
practicable to make a reliable assessment of the size of any related potential liability.
SCUK - Motor Finance Broker Commissions
As set out in Note 27, Santander UK has recognised a provision for historical motor finance commission payments. There continue to be significant uncertainties as
to the extent of any misconduct, if any, as well as the perimeter of commission models, and the 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.
Other
In 2016, Visa Europe Ltd was sold to Visa Inc. As a member and shareholder of Visa Europe Ltd, Santander UK received upfront consideration made up of cash and
convertible preferred stock. The convertible preferred stock is now held by Santander Equity Investments Limited (SEIL), outside the ring-fenced bank. Conversion of
the preferred stock into Class A Common Stock of Visa Inc. depends on the outcome of litigation against Visa involving UK & Ireland multilateral interchange fees
(UK&I MIFs).
In addition, Santander UK and certain other UK&I banks have agreed to indemnify Visa Inc. in the event that the preferred stock is insufficient to meet the costs of
this litigation. Visa Inc. has recourse to this indemnity once more than \u20ac1bn of losses relating to UK&I MIFs have arisen or once the total value of the preferred stock
issued on closing has been reduced to nil. Santander UK's liability under this indemnity is capped at \u20ac40m. At this stage, it is unclear whether the litigation will give
rise to more than \u20ac1bn of losses relating to UK&I MIFs, which means it is difficult to predict whether the indemnity would be called upon, or the timing or
significance of any potential impact.
As part of the sale of subsidiaries, businesses and other entities, and as is normal in such circumstances, Santander UK plc (and/or, where relevant, its subsidiaries)
has given warranties and/or indemnities to the purchasers.
Obligations under stock borrowing and lending agreements
Obligations under stock borrowing and lending agreements represent contractual commitments to return stock borrowed. These obligations are offset by a
contractual right to receive stock under other contractual agreements. See Note 34.
Other off-balance sheet commitments
The Santander UK group has commitments to lend at fixed interest rates which expose us to interest rate risk. For further information, see the Risk review.
Capital support arrangements
At 31 December 2024, Santander UK plc, Cater Allen Limited, Santander ISA Managers Limited and certain other non-regulated subsidiaries of Santander UK plc
were party to a capital support deed dated 3 December 2024 which was effective from 3 December 2024 (the RFB Sub-Group Capital Support Deed). These parties
were permitted by the PRA to form a core UK group as defined in the PRA Rulebook, a permission which expires on 3 December 2027. Exposures of each of the
regulated entities to other members of the core UK group are exempt from large exposure limits that would otherwise apply and these exposures are risk-weighted
at 0%. Where applicable this permission also provides for intra-group exposures to be excluded from the leverage exposure measure. The purpose of the RFB Sub-
Group Capital Support Deed is to facilitate the prompt transfer of available capital resources from, or repayment of liabilities by, the non-regulated entities to any of
the regulated entities in the event that one of the regulated entities breached or was at risk of breaching its capital resources or risk concentrations requirements.
Liquidity support arrangement
Under the PRA\u2019s liquidity rules, Santander UK plc and its subsidiary Cater Allen Limited form the RFB Domestic Liquidity Sub-group (the RFB DoLSub), which allows
them to collectively meet regulatory requirements to manage liquidity risk. Each member of the RFB DoLSub will support the other by transferring surplus liquidity
in times of stress.
", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherProvisionsContingentLiabilitiesAndContingentAssetsExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-617": { "value": "
30. CONTINGENT LIABILITIES AND COMMITMENTS
Group
Company
2024
2023
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Guarantees given to subsidiaries
\u2014
\u2014
5,185
5,052
Guarantees given to third parties
493
452
493
452
Formal standby facilities, credit lines and other commitments
35,156
30,976
35,155
30,954
35,649
31,428
40,833
36,458
At 31 December 2024, the Santander UK group had credit impairment loss provisions relating to guarantees given to third parties and undrawn loan commitments.
See Note 27 for more details.
Where the items set out below can be reliably estimated, they are disclosed in the table above.
Guarantees given to subsidiaries
Santander UK plc has guaranteed the payment of any liabilities to Cater Allen Limited\u2019s account holders. This guarantee expires on 31\u00a0December 2025, although
customer deposit balances on or before 31\u00a0December 2025 will remain guaranteed after the expiry date.
Santander UK plc has also undertaken, for the purposes of section 479C of the Companies Act 2006 (the Act), the guarantee of the payment of all outstanding
liabilities to which certain direct or indirect subsidiaries were subject at 31 December 2024, until they are satisfied in full, in order to allow those subsidiaries to
benefit from the audit exemption provided for by Section 479A of the Act for the year ended 31 December 2024. The subsidiaries benefiting from this guarantee are
listed in the Shareholder information section of this Annual Report.
Guarantees given to third parties
Guarantees given to third parties consist primarily of letters of credit, bonds and guarantees granted as part of normal product facilities which are offered to
customers.
Loan representations and warranties
In connection with the securitisations and covered bond transactions described in Note 14, the Santander UK group entities selling the relevant loans into the
applicable securitisation or covered bond portfolios make representations and warranties with respect to such loans, as of the date of the sale of the loans into the
applicable portfolio. These representations and warranties cover, among other things, the relevant Santander UK group entity's ownership of the loan, the absence
of a material breach or default by the relevant borrower, the loan\u2019s compliance with applicable laws, and absence of material disputes with respect to the relevant
borrower, asset or loan. The specific representations and warranties made by Santander UK group companies which act as sellers of loans in these securitisations
and covered bond transactions depend in each case on the nature of the transaction and the requirements of the transaction structure.
In the event that there is a material breach of the representations and warranties given by Santander UK plc as seller of loans under the residential mortgage-
backed securitisations or the covered bond programme included in Note 14, or if such representations and warranties prove to be materially untrue at the date
when they were given, Santander UK plc may be required to repurchase the affected mortgage loans (generally) at their outstanding principal balance plus accrued
interest). These securitisations and covered bond programme are collateralised by prime residential mortgage loans. Santander UK plc is principally a retail prime
lender and has no appetite or product offering for any type of sub-prime business.
Similarly, under the auto loan securitisations in Note 14, in the event that there is a breach or inaccuracy in respect of a representation or warranty relating to the
loans, the relevant Santander UK group entity who sold the auto loans into the securitisation portfolio will be required to repurchase such loans from the structure
(also at their outstanding principal balance plus accrued interest). In addition to breaches of representation and warranties, under the auto loan securitisations, the
seller may also have a repurchase obligation if certain portfolio limits are breached (which include, amongst other things, limits as to the size of a loan given to an
individual customer, LTV ratio, average term to maturity and average seasoning).
In the case of a repurchase of a loan from the relevant securitisation or covered bond programmes, the Santander UK group may bear any subsequent credit loss on
such loan. The Santander UK group manages and monitors its securitisation and covered bond activities closely to minimise potential claims.
Other legal, regulatory or tax matters
Santander UK engages in discussion, and co-operates, with the FCA, PRA, CMA and other regulators and government agencies in various jurisdictions in their
supervision and review of Santander UK including reviews exercised under statutory powers, regarding its interaction with past and present customers, both as part
of general thematic work and in relation to specific products, services and activities. During the ordinary course of business, Santander UK is also subject to
complaints and threatened legal proceedings brought by or on behalf of current or former employees, customers, investors or other third parties. In addition,
Santander UK is subject to audits, reviews, challenges and tax, regulatory or law enforcement investigations or proceedings by relevant regulators or government
agencies in various jurisdictions. All such matters are assessed periodically to determine the likelihood of Santander UK incurring a liability.
In those instances where it is concluded that it is not yet probable that a quantifiable payment will be made, for example because the facts are unclear or further
time is required to fully assess the merits of the case or to reasonably quantify the expected payment, no provision is made. In addition, where it is not currently
practicable to estimate the possible financial effect of these matters, no provision is made.
Payment Protection Insurance
AXA France IARD and AXA France Vie (former GE Capital Corporation Group entities (GE Capital), known as Financial Insurance Company Ltd (FICL) and Financial
Assurance Company Ltd (FACL), acquired by AXA SA in 2015) (together, AXA France) have brought a claim for \u00a3552m (plus interest) against (i) Santander Cards UK
Limited (former GE Capital entity known as GE Capital Bank Limited (GECB), which was acquired by Banco Santander SA in 2008 and subsequently transferred to
Santander UK plc); and (ii) Santander Insurance Services UK Limited (a Banco Santander SA subsidiary) (together the Santander Entities). The claim relates to the
allocation of liability for compensation and associated costs in respect of a large number of PPI policies distributed by GECB pre-2005, which were underwritten by
FICL and FACL. AXA France reduced their claim from \u00a3670m (plus interest) to \u00a3552m (plus interest) in their Re-Re-Amended Particulars of Claim dated 29 June
2023. The Santander Entities strongly refute the claim. Trial has been fixed for six weeks, beginning on 11 March 2025.
There are ongoing factual issues to be resolved which may have legal consequences including in relation to liability. These issues create uncertainties which mean
that it is difficult to reliably predict the outcome or the timing of the resolution of the matter. The litigation and other regulatory provision in Note 27 includes our
best estimate of the Santander Entities\u2019 liability to the specific portfolio. Further information has not been provided on the basis that it would be seriously prejudicial
to the Santander Entities\u2019 interests in connection with the dispute.
In addition, and in relation to PPI more generally, the PPI provision includes an amount relating to legal claims challenging the FCA\u2019s industry guidance on the
treatment of Plevin / recurring non-disclosure assessments. This provision is based on current stock levels, future projected claims, and average redress. There
remains a risk that volumes received in future may be higher than forecast. The provision in Note 27 includes our best estimate of Santander UK\u2019s liability for the
specific issue. The actual cost of customer compensation could differ from the amount provided. It is not currently practicable to provide an estimate of the risk and
amount of any further financial impact.
German dividend tax arbitrage transactions
In June 2018 the Cologne Criminal Prosecution Office and the German Federal Tax Office commenced an investigation in relation to the historical involvement of
Santander UK plc, Santander Financial Services plc and Cater Allen International Limited (all subsidiaries of Santander UK Group Holdings plc) in German dividend tax
arbitrage transactions (known as cum/ex transactions). These transactions allegedly exploited a loophole of a specific German settlement mechanism through
short-selling and complex derivative structuring which resulted in the German government either refunding withholding tax where such tax had not been paid or
refunding it more than once. The German authorities are investigating numerous institutions and individuals in connection with alleged transactions and practices
which may be found to be illegal under German law.
During 2024 we continued to cooperate with the German authorities and, with the assistance of external experts, to progress an internal investigation into the
matters in question. From Santander UK plc\u2019s perspective, the investigation is focused principally on the period 2009-2011 and remains on-going. There remain
factual issues to be resolved which may have legal consequences including potentially material financial penalties. These issues create uncertainties which mean
that it is difficult to predict the resolution of the matter including timing or the significance of the possible impact. These uncertainties mean it is not currently
practicable to make a reliable assessment of the size of any related potential liability.
SCUK - Motor Finance Broker Commissions
As set out in Note 27, Santander UK has recognised a provision for historical motor finance commission payments. There continue to be significant uncertainties as
to the extent of any misconduct, if any, as well as the perimeter of commission models, and the 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.
Other
In 2016, Visa Europe Ltd was sold to Visa Inc. As a member and shareholder of Visa Europe Ltd, Santander UK received upfront consideration made up of cash and
convertible preferred stock. The convertible preferred stock is now held by Santander Equity Investments Limited (SEIL), outside the ring-fenced bank. Conversion of
the preferred stock into Class A Common Stock of Visa Inc. depends on the outcome of litigation against Visa involving UK & Ireland multilateral interchange fees
(UK&I MIFs).
In addition, Santander UK and certain other UK&I banks have agreed to indemnify Visa Inc. in the event that the preferred stock is insufficient to meet the costs of
this litigation. Visa Inc. has recourse to this indemnity once more than \u20ac1bn of losses relating to UK&I MIFs have arisen or once the total value of the preferred stock
issued on closing has been reduced to nil. Santander UK's liability under this indemnity is capped at \u20ac40m. At this stage, it is unclear whether the litigation will give
rise to more than \u20ac1bn of losses relating to UK&I MIFs, which means it is difficult to predict whether the indemnity would be called upon, or the timing or
significance of any potential impact.
As part of the sale of subsidiaries, businesses and other entities, and as is normal in such circumstances, Santander UK plc (and/or, where relevant, its subsidiaries)
has given warranties and/or indemnities to the purchasers.
Obligations under stock borrowing and lending agreements
Obligations under stock borrowing and lending agreements represent contractual commitments to return stock borrowed. These obligations are offset by a
contractual right to receive stock under other contractual agreements. See Note 34.
Other off-balance sheet commitments
The Santander UK group has commitments to lend at fixed interest rates which expose us to interest rate risk. For further information, see the Risk review.
Capital support arrangements
At 31 December 2024, Santander UK plc, Cater Allen Limited, Santander ISA Managers Limited and certain other non-regulated subsidiaries of Santander UK plc
were party to a capital support deed dated 3 December 2024 which was effective from 3 December 2024 (the RFB Sub-Group Capital Support Deed). These parties
were permitted by the PRA to form a core UK group as defined in the PRA Rulebook, a permission which expires on 3 December 2027. Exposures of each of the
regulated entities to other members of the core UK group are exempt from large exposure limits that would otherwise apply and these exposures are risk-weighted
at 0%. Where applicable this permission also provides for intra-group exposures to be excluded from the leverage exposure measure. The purpose of the RFB Sub-
Group Capital Support Deed is to facilitate the prompt transfer of available capital resources from, or repayment of liabilities by, the non-regulated entities to any of
the regulated entities in the event that one of the regulated entities breached or was at risk of breaching its capital resources or risk concentrations requirements.
Liquidity support arrangement
Under the PRA\u2019s liquidity rules, Santander UK plc and its subsidiary Cater Allen Limited form the RFB Domestic Liquidity Sub-group (the RFB DoLSub), which allows
them to collectively meet regulatory requirements to manage liquidity risk. Each member of the RFB DoLSub will support the other by transferring surplus liquidity
in times of stress.
", "dimensions": { "concept": "ifrs-full:DisclosureOfContingentLiabilitiesExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-618": { "value": "
30. CONTINGENT LIABILITIES AND COMMITMENTS
Group
Company
2024
2023
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Guarantees given to subsidiaries
\u2014
\u2014
5,185
5,052
Guarantees given to third parties
493
452
493
452
Formal standby facilities, credit lines and other commitments
35,156
30,976
35,155
30,954
35,649
31,428
40,833
36,458
At 31 December 2024, the Santander UK group had credit impairment loss provisions relating to guarantees given to third parties and undrawn loan commitments.
See Note 27 for more details.
Where the items set out below can be reliably estimated, they are disclosed in the table above.
Formal standby facilities, credit lines and other commitments
Standby facilities, credit lines and other commitments are also granted as part of normal product facilities which are offered to customers. Retail facilities comprise
undrawn facilities granted on flexible mortgages, bank overdrafts and credit cards. On flexible mortgages, the credit limit is set at the point of granting the loan
through property value and affordability assessments.
Ongoing assessments are made to ensure that credit limits remain appropriate considering any change in the security value or the customer\u2019s financial
circumstances. For unsecured overdraft facilities and credit cards, the facilities are granted based on new business risk assessment and are reviewed more
frequently based on internal, as well as external data. Corporate facilities can comprise standby and revolving facilities which are subject to ongoing compliance
with covenants and may require the provision of agreed security.
FSCS
The FSCS is the UK\u2019s independent statutory compensation fund for customers of authorised financial services firms and pays compensation if a firm is unable to pay
certain claims against it. The FSCS is funded by levies on the industry and recoveries and borrowings where appropriate.
Loan representations and warranties
In connection with the securitisations and covered bond transactions described in Note 14, the Santander UK group entities selling the relevant loans into the
applicable securitisation or covered bond portfolios make representations and warranties with respect to such loans, as of the date of the sale of the loans into the
applicable portfolio. These representations and warranties cover, among other things, the relevant Santander UK group entity's ownership of the loan, the absence
of a material breach or default by the relevant borrower, the loan\u2019s compliance with applicable laws, and absence of material disputes with respect to the relevant
borrower, asset or loan. The specific representations and warranties made by Santander UK group companies which act as sellers of loans in these securitisations
and covered bond transactions depend in each case on the nature of the transaction and the requirements of the transaction structure.
In the event that there is a material breach of the representations and warranties given by Santander UK plc as seller of loans under the residential mortgage-
backed securitisations or the covered bond programme included in Note 14, or if such representations and warranties prove to be materially untrue at the date
when they were given, Santander UK plc may be required to repurchase the affected mortgage loans (generally) at their outstanding principal balance plus accrued
interest). These securitisations and covered bond programme are collateralised by prime residential mortgage loans. Santander UK plc is principally a retail prime
lender and has no appetite or product offering for any type of sub-prime business.
Similarly, under the auto loan securitisations in Note 14, in the event that there is a breach or inaccuracy in respect of a representation or warranty relating to the
loans, the relevant Santander UK group entity who sold the auto loans into the securitisation portfolio will be required to repurchase such loans from the structure
(also at their outstanding principal balance plus accrued interest). In addition to breaches of representation and warranties, under the auto loan securitisations, the
seller may also have a repurchase obligation if certain portfolio limits are breached (which include, amongst other things, limits as to the size of a loan given to an
individual customer, LTV ratio, average term to maturity and average seasoning).
In the case of a repurchase of a loan from the relevant securitisation or covered bond programmes, the Santander UK group may bear any subsequent credit loss on
such loan. The Santander UK group manages and monitors its securitisation and covered bond activities closely to minimise potential claims.
Other legal, regulatory or tax matters
Santander UK engages in discussion, and co-operates, with the FCA, PRA, CMA and other regulators and government agencies in various jurisdictions in their
supervision and review of Santander UK including reviews exercised under statutory powers, regarding its interaction with past and present customers, both as part
of general thematic work and in relation to specific products, services and activities. During the ordinary course of business, Santander UK is also subject to
complaints and threatened legal proceedings brought by or on behalf of current or former employees, customers, investors or other third parties. In addition,
Santander UK is subject to audits, reviews, challenges and tax, regulatory or law enforcement investigations or proceedings by relevant regulators or government
agencies in various jurisdictions. All such matters are assessed periodically to determine the likelihood of Santander UK incurring a liability.
In those instances where it is concluded that it is not yet probable that a quantifiable payment will be made, for example because the facts are unclear or further
time is required to fully assess the merits of the case or to reasonably quantify the expected payment, no provision is made. In addition, where it is not currently
practicable to estimate the possible financial effect of these matters, no provision is made.
Payment Protection Insurance
AXA France IARD and AXA France Vie (former GE Capital Corporation Group entities (GE Capital), known as Financial Insurance Company Ltd (FICL) and Financial
Assurance Company Ltd (FACL), acquired by AXA SA in 2015) (together, AXA France) have brought a claim for \u00a3552m (plus interest) against (i) Santander Cards UK
Limited (former GE Capital entity known as GE Capital Bank Limited (GECB), which was acquired by Banco Santander SA in 2008 and subsequently transferred to
Santander UK plc); and (ii) Santander Insurance Services UK Limited (a Banco Santander SA subsidiary) (together the Santander Entities). The claim relates to the
allocation of liability for compensation and associated costs in respect of a large number of PPI policies distributed by GECB pre-2005, which were underwritten by
FICL and FACL. AXA France reduced their claim from \u00a3670m (plus interest) to \u00a3552m (plus interest) in their Re-Re-Amended Particulars of Claim dated 29 June
2023. The Santander Entities strongly refute the claim. Trial has been fixed for six weeks, beginning on 11 March 2025.
There are ongoing factual issues to be resolved which may have legal consequences including in relation to liability. These issues create uncertainties which mean
that it is difficult to reliably predict the outcome or the timing of the resolution of the matter. The litigation and other regulatory provision in Note 27 includes our
best estimate of the Santander Entities\u2019 liability to the specific portfolio. Further information has not been provided on the basis that it would be seriously prejudicial
to the Santander Entities\u2019 interests in connection with the dispute.
In addition, and in relation to PPI more generally, the PPI provision includes an amount relating to legal claims challenging the FCA\u2019s industry guidance on the
treatment of Plevin / recurring non-disclosure assessments. This provision is based on current stock levels, future projected claims, and average redress. There
remains a risk that volumes received in future may be higher than forecast. The provision in Note 27 includes our best estimate of Santander UK\u2019s liability for the
specific issue. The actual cost of customer compensation could differ from the amount provided. It is not currently practicable to provide an estimate of the risk and
amount of any further financial impact.
German dividend tax arbitrage transactions
In June 2018 the Cologne Criminal Prosecution Office and the German Federal Tax Office commenced an investigation in relation to the historical involvement of
Santander UK plc, Santander Financial Services plc and Cater Allen International Limited (all subsidiaries of Santander UK Group Holdings plc) in German dividend tax
arbitrage transactions (known as cum/ex transactions). These transactions allegedly exploited a loophole of a specific German settlement mechanism through
short-selling and complex derivative structuring which resulted in the German government either refunding withholding tax where such tax had not been paid or
refunding it more than once. The German authorities are investigating numerous institutions and individuals in connection with alleged transactions and practices
which may be found to be illegal under German law.
During 2024 we continued to cooperate with the German authorities and, with the assistance of external experts, to progress an internal investigation into the
matters in question. From Santander UK plc\u2019s perspective, the investigation is focused principally on the period 2009-2011 and remains on-going. There remain
factual issues to be resolved which may have legal consequences including potentially material financial penalties. These issues create uncertainties which mean
that it is difficult to predict the resolution of the matter including timing or the significance of the possible impact. These uncertainties mean it is not currently
practicable to make a reliable assessment of the size of any related potential liability.
SCUK - Motor Finance Broker Commissions
As set out in Note 27, Santander UK has recognised a provision for historical motor finance commission payments. There continue to be significant uncertainties as
to the extent of any misconduct, if any, as well as the perimeter of commission models, and the 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.
Other
In 2016, Visa Europe Ltd was sold to Visa Inc. As a member and shareholder of Visa Europe Ltd, Santander UK received upfront consideration made up of cash and
convertible preferred stock. The convertible preferred stock is now held by Santander Equity Investments Limited (SEIL), outside the ring-fenced bank. Conversion of
the preferred stock into Class A Common Stock of Visa Inc. depends on the outcome of litigation against Visa involving UK & Ireland multilateral interchange fees
(UK&I MIFs).
In addition, Santander UK and certain other UK&I banks have agreed to indemnify Visa Inc. in the event that the preferred stock is insufficient to meet the costs of
this litigation. Visa Inc. has recourse to this indemnity once more than \u20ac1bn of losses relating to UK&I MIFs have arisen or once the total value of the preferred stock
issued on closing has been reduced to nil. Santander UK's liability under this indemnity is capped at \u20ac40m. At this stage, it is unclear whether the litigation will give
rise to more than \u20ac1bn of losses relating to UK&I MIFs, which means it is difficult to predict whether the indemnity would be called upon, or the timing or
significance of any potential impact.
As part of the sale of subsidiaries, businesses and other entities, and as is normal in such circumstances, Santander UK plc (and/or, where relevant, its subsidiaries)
has given warranties and/or indemnities to the purchasers.
Obligations under stock borrowing and lending agreements
Obligations under stock borrowing and lending agreements represent contractual commitments to return stock borrowed. These obligations are offset by a
contractual right to receive stock under other contractual agreements. See Note 34.
Other off-balance sheet commitments
The Santander UK group has commitments to lend at fixed interest rates which expose us to interest rate risk. For further information, see the Risk review.
Capital support arrangements
At 31 December 2024, Santander UK plc, Cater Allen Limited, Santander ISA Managers Limited and certain other non-regulated subsidiaries of Santander UK plc
were party to a capital support deed dated 3 December 2024 which was effective from 3 December 2024 (the RFB Sub-Group Capital Support Deed). These parties
were permitted by the PRA to form a core UK group as defined in the PRA Rulebook, a permission which expires on 3 December 2027. Exposures of each of the
regulated entities to other members of the core UK group are exempt from large exposure limits that would otherwise apply and these exposures are risk-weighted
at 0%. Where applicable this permission also provides for intra-group exposures to be excluded from the leverage exposure measure. The purpose of the RFB Sub-
Group Capital Support Deed is to facilitate the prompt transfer of available capital resources from, or repayment of liabilities by, the non-regulated entities to any of
the regulated entities in the event that one of the regulated entities breached or was at risk of breaching its capital resources or risk concentrations requirements.
", "dimensions": { "concept": "ifrs-full:DisclosureOfCommitmentsExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-620": { "value": "
31. SHARE CAPITAL
Group and Company
Ordinary shares of \u00a30.10 each
Total
Issued and fully paid share capital
No.
\u00a3m
\u00a3m
At 31 December 2023, 1 January 2024 and 31 December 2024
31,051,768,866
3,105
3,105
Group and Company
2024
2023
Share premium
\u00a3m
\u00a3m
At 1 January and 31 December
5,620
5,620
The Company has one class of ordinary shares which carries no right to fixed income. The Company\u2019s \u00a3325m sterling preference shares are classified as
Subordinated Liabilities as described in Note 29.
32. OTHER EQUITY INSTRUMENTS
Group and Company
Interest rate
2024
2023
%
Next call date
\u00a3m
\u00a3m
AT1 securities:
- \u00a3500m Perpetual Capital Securities
6.75
June 2024
\u2014
496
- \u00a3500m Perpetual Capital Securities
6.30
March 2025
500
500
- \u00a3210m Perpetual Capital Securities
4.25
March 2026
210
210
- \u00a3750m Perpetual Capital Securities
6.50
June 2027
750
750
- \u00a3400m Perpetual Capital Securities
8.75
Sept 2029
400
\u2014
1,860
1,956
AT1 securities
The AT1 securities issued by the Company were subscribed for by its immediate parent company, Santander UK Group Holdings plc. The AT1 securities are perpetual
and pay a quarterly distribution. At each distribution payment date, the Company can decide whether to pay the distribution, which is non-cumulative, in whole or in
part. The distribution rate resets every five years. The securities will be automatically written down and the investors will lose their entire investment in the
securities should the CET1 capital ratio of the Santander UK prudential consolidation group, or the Company (calculated on a solo basis), fall below 7%.
All AT1 securities are redeemable at the option of the Company, and only with the consent of the PRA.", "dimensions": { "concept": "ifrs-full:DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-619": { "value": "
31. SHARE CAPITAL
Group and Company
Ordinary shares of \u00a30.10 each
Total
Issued and fully paid share capital
No.
\u00a3m
\u00a3m
At 31 December 2023, 1 January 2024 and 31 December 2024
31,051,768,866
3,105
3,105
Group and Company
2024
2023
Share premium
\u00a3m
\u00a3m
At 1 January and 31 December
5,620
5,620
The Company has one class of ordinary shares which carries no right to fixed income. The Company\u2019s \u00a3325m sterling preference shares are classified as
Subordinated Liabilities as described in Note 29.
", "dimensions": { "concept": "ifrs-full:DisclosureOfIssuedCapitalExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-621": { "value": "
32. OTHER EQUITY INSTRUMENTS
Group and Company
Interest rate
2024
2023
%
Next call date
\u00a3m
\u00a3m
AT1 securities:
- \u00a3500m Perpetual Capital Securities
6.75
June 2024
\u2014
496
- \u00a3500m Perpetual Capital Securities
6.30
March 2025
500
500
- \u00a3210m Perpetual Capital Securities
4.25
March 2026
210
210
- \u00a3750m Perpetual Capital Securities
6.50
June 2027
750
750
- \u00a3400m Perpetual Capital Securities
8.75
Sept 2029
400
\u2014
1,860
1,956
AT1 securities
The AT1 securities issued by the Company were subscribed for by its immediate parent company, Santander UK Group Holdings plc. The AT1 securities are perpetual
and pay a quarterly distribution. At each distribution payment date, the Company can decide whether to pay the distribution, which is non-cumulative, in whole or in
part. The distribution rate resets every five years. The securities will be automatically written down and the investors will lose their entire investment in the
securities should the CET1 capital ratio of the Santander UK prudential consolidation group, or the Company (calculated on a solo basis), fall below 7%.
All AT1 securities are redeemable at the option of the Company, and only with the consent of the PRA.", "dimensions": { "concept": "ifrs-full:DisclosureOfReservesAndOtherEquityInterestExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-622": { "value": "
33. NOTES TO CASH FLOWS
Changes in liabilities and equity arising from financing activities
The table below shows the changes in liabilities arising from financing activities. The changes in equity arising from financing activities are set out in the
Consolidated Statement of Changes in Equity.
Group
Balance sheet line item
Debt securities in
issue
Subordinated
liabilities
Other equity
instruments
Lease liabilities
Dividends paid
Total
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January
33,910
2,386
1,956
111
\u2014
38,363
Proceeds from issue of debt securities
8,397
\u2014
\u2014
\u2014
\u2014
8,397
Repayment of debt securities
(6,539)
\u2014
\u2014
\u2014
\u2014
(6,539)
Issue of other equity instruments
\u2014
\u2014
400
\u2014
\u2014
400
Repurchase of other equity instruments
\u2014
\u2014
(500)
\u2014
\u2014
(500)
Principal elements of lease payments
\u2014
\u2014
\u2014
(33)
\u2014
(33)
Dividends paid
\u2014
\u2014
\u2014
\u2014
(1,440)
(1,440)
Liability-related other changes
283
1
\u2014
10
\u2014
294
Non-cash changes:
\u2013 Unrealised foreign exchange
(395)
3
\u2014
\u2014
\u2014
(392)
\u2013 Other changes
17
(5)
4
\u2014
\u2014
16
At 31 December
35,673
2,385
1,860
88
(1,440)
38,566
2023
At 1 January
31,531
2,332
1,956
125
\u2014
35,944
Proceeds from issue of debt securities
4,208
\u2014
\u2014
\u2014
\u2014
4,208
Repayment of debt securities
(2,568)
\u2014
\u2014
\u2014
\u2014
(2,568)
Proceeds from issue of subordinated liabilities
\u2014
1,050
\u2014
\u2014
\u2014
1,050
Repayment of subordinated liabilities
\u2014
(971)
\u2014
\u2014
\u2014
(971)
Principal elements of lease payments
\u2014
\u2014
\u2014
(47)
\u2014
(47)
Dividends paid
\u2014
\u2014
\u2014
\u2014
(1,653)
(1,653)
Liability-related other changes
1,004
25
\u2014
33
\u2014
1,062
Non-cash changes:
\u2013 Unrealised foreign exchange
(651)
(22)
\u2014
\u2014
\u2014
(673)
\u2013 Other changes
386
(28)
\u2014
\u2014
1,653
2,011
At 31 December
33,910
2,386
1,956
111
\u2014
38,363
2022
At 1 January
25,520
2,228
2,191
132
\u2014
30,071
Proceeds from issue of debt securities
4,778
\u2014
\u2014
\u2014
\u2014
4,778
Repayment of debt securities
(3,036)
\u2014
\u2014
\u2014
\u2014
(3,036)
Repayment of subordinated liabilities
\u2014
(40)
\u2014
\u2014
\u2014
(40)
Issue of other equity instruments
\u2014
\u2014
750
\u2014
\u2014
750
Repurchase of other equity instruments
\u2014
\u2014
(985)
\u2014
\u2014
(985)
Principal elements of lease payments
\u2014
\u2014
\u2014
(26)
\u2014
(26)
Dividends paid
\u2014
\u2014
\u2014
\u2014
(1,164)
(1,164)
Liability-related other changes
3,155
2
\u2014
19
\u2014
3,176
Non-cash changes:
\u2013 Unrealised foreign exchange
1,554
87
\u2014
\u2014
\u2014
1,641
\u2013 Other changes
(440)
55
\u2014
\u2014
1,164
779
At 31 December
31,531
2,332
1,956
125
\u2014
35,944
Company
Balance sheet line item
Debt securities in
issue
Subordinated
liabilities
Other equity
instruments
Lease liabilities
Dividends paid
Total
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January
31,228
2,387
1,956
100
\u2014
35,671
Proceeds from issue of debt securities
7,147
\u2014
\u2014
\u2014
\u2014
7,147
Repayment of debt securities
(6,439)
\u2014
\u2014
\u2014
\u2014
(6,439)
Issue of other equity instruments
\u2014
\u2014
400
\u2014
\u2014
400
Repurchase of other equity instruments
\u2014
\u2014
(500)
\u2014
\u2014
(500)
Principal elements of lease payments
\u2014
\u2014
\u2014
(31)
\u2014
(31)
Dividends paid
\u2014
\u2014
\u2014
\u2014
(1,440)
(1,440)
Liability-related other changes
276
1
\u2014
10
\u2014
287
Non-cash changes:
\u2013 Unrealised foreign exchange
(395)
3
\u2014
\u2014
\u2014
(392)
\u2013 Other changes
16
(5)
4
\u2014
\u2014
15
At 31 December
31,833
2,386
1,860
79
(1,440)
34,718
2023
At 1 January
30,721
2,336
1,956
115
\u2014
35,128
Proceeds from issue of debt securities
2,158
\u2014
\u2014
\u2014
\u2014
2,158
Repayment of debt securities
(2,282)
\u2014
\u2014
\u2014
\u2014
(2,282)
Proceeds from issue of subordinated liabilities
\u2014
1,050
\u2014
\u2014
\u2014
1,050
Repayment of subordinated liabilities
\u2014
(971)
\u2014
\u2014
\u2014
(971)
Principal elements of lease payments
\u2014
\u2014
\u2014
(45)
\u2014
(45)
Dividends paid
\u2014
\u2014
\u2014
\u2014
(1,653)
(1,653)
Liability-related other changes
990
25
\u2014
30
\u2014
1,045
Non-cash changes:
\u2013 Unrealised foreign exchange
(651)
(22)
\u2014
\u2014
\u2014
(673)
\u2013 Other changes
292
(31)
\u2014
\u2014
1,653
1,914
At 31 December
31,228
2,387
1,956
100
\u2014
35,671
2022
At 1 January
24,554
2,233
2,191
122
\u2014
29,100
Proceeds from issue of debt securities
4,178
\u2014
\u2014
\u2014
\u2014
4,178
Repayment of debt securities
(2,596)
\u2014
\u2014
\u2014
\u2014
(2,596)
Repayment of subordinated liabilities
\u2014
(40)
\u2014
\u2014
\u2014
(40)
Issue of other equity instruments
\u2014
\u2014
750
\u2014
\u2014
750
Repurchase of other equity instruments
\u2014
\u2014
(985)
\u2014
\u2014
(985)
Principal elements of lease payments
\u2014
\u2014
\u2014
(24)
\u2014
(24)
Dividends paid
\u2014
\u2014
\u2014
\u2014
(1,164)
(1,164)
Liability-related other changes
3,155
2
\u2014
17
\u2014
3,174
Non-cash changes:
\u2013 Unrealised foreign exchange
1,577
87
\u2014
\u2014
\u2014
1,664
\u2013 Other changes
(147)
54
\u2014
\u2014
1,164
1,071
At 31 December
30,721
2,336
1,956
115
\u2014
35,128
Footnotes to the consolidated cash flow statement
Net cash flows from operating activities includes interest received of \u00a312,370m (2023: \u00a311,395m, 2022: \u00a36,508m), interest paid of \u00a38,033m (2023: \u00a36,326m,
2022: \u00a32,089m) and dividends received of \u00a3nil (2023: \u00a3nil, 2022: \u00a3nil).
Total cash outflow for leases was \u00a336m (2023: \u00a350m, 2022: \u00a328m).
Footnotes to the Company cash flow statement
Net cash flows from operating activities includes interest received of \u00a312,975m (2023: \u00a311,828m, 2022: \u00a36,605m), interest paid of \u00a37,931m (2023: \u00a36,327m,
2022: \u00a32,301m) and dividends received of \u00a3240m (2023: \u00a3420m, 2022: \u00a3548m).
Total cash outflow for leases was \u00a334m (2023: \u00a347m, 2022: \u00a326m).", "dimensions": { "concept": "ifrs-full:DisclosureOfCashFlowStatementExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-623": { "value": "
35. SHARE-BASED COMPENSATION
The Santander UK group operates share schemes and arrangements for eligible employees. The main current schemes are the Sharesave Schemes, the Deferred
Shares Bonus Plan, the Partnership Shares scheme and the Transformation Incentive Plan. All the share options and awards relate to shares in Banco Santander SA.
The amount charged to the income statement in respect of share-based payment transactions is set out in Note 6.
At 31 December 2024, the carrying amount of liabilities arising from share-based payment transactions, excluding any cash element was \u00a324m (2023: \u00a315m), of
which \u00a31m had vested at 31 December 2024 (2023: \u00a31m).
a) Sharesave Schemes
The Santander UK group launched its sixteenth HM Revenue & Customs approved Sharesave invitation under Banco Santander SA sponsorship in September 2024.
Sharesave invitations have been offered since 2008 under broadly similar terms. Under the Sharesave Scheme\u2019s HMRC-approved savings limits, eligible employees
may enter into contracts to save between \u00a35 and \u00a3500 per month. For all schemes, at the end of a fixed term of three or five years after the grant date, the
employees can use these savings to buy shares in Banco Santander SA at a discount, calculated in accordance with the rules of the scheme. The option price is
calculated as the average middle market quoted price of Banco Santander SA shares over the first three dealing days prior to invitation and, for schemes up to and
including 2023, discounted by up to 20%. This year, a 10% discount was applied. The vesting of awards under the scheme depends on continued employment with
the Banco Santander group. Participants in the scheme have six months from the date of vesting to exercise the option.
The table below summarises movements in the number of options, and changes in weighted average exercise price over the same period.
2024
2023
Number of options
Weighted average
exercise price
Number of options
Weighted average
exercise price
\u2018000
\u00a3
\u2018000
\u00a3
Outstanding at 1 January
27,139
2.19
29,988
2.00
Granted
4,991
3.36
7,175
2.78
Exercised
(4,004)
2.29
(5,980)
1.70
Forfeited/expired
(2,437)
2.37
(4,044)
2.53
Outstanding at 31 December
25,689
2.39
27,139
2.19
Exercisable at 31 December
1,115
2.36
868
1.84
The weighted average share price at the date the options were exercised was \u00a33.64 (2023: \u00a33.22).
The following table summarises the range of exercise prices and weighted average remaining contractual life of the options at 31 December 2024 and 2023.
2024
2023
Range of exercise prices
Weighted average
remaining
contractual life
Weighted average
exercise price
Weighted average
remaining
contractual life
Weighted average
exercise price
Years
\u00a3
Years
\u00a3
\u00a31 to \u00a32
2
1.85
3
1.84
\u00a32 to \u00a33
2
2.71
3
2.65
\u00a33 to \u00a34
4
3.36
0
3.46
\u00a34 to \u00a35
0
\u2014
0
\u2014
The fair value of each option at the date of grant is estimated using an analytical model that also reflects the correlation between EUR and GBP. This model uses
assumptions on the share price, the EUR/GBP FX rate, the EUR/GBP risk-free interest rate, dividend yields, the expected volatilities of both the underlying shares and
EUR/GBP for the expected lives of options granted. The weighted average grant-date fair value of options granted during the year was \u00a30.23 (2023: \u00a30.33).
b) Deferred shares bonus plan
Deferred bonus awards are designed to align employee performance with shareholder value and encourage increased retention of senior employees. Those
employees who are designated as Material Risk Takers receive part of their annual bonus as a deferred award comprising 50% in shares and 50% in cash. Either
40% (for any variable pay award of less than \u00a3500,000) or 60% (for any variable pay award greater than \u00a3500,000) is deferred over a four-, five- or seven- year
period from the anniversary of the initial award. Deferred bonus awards in shares or share options are subject to an additional one-year retention period from the
point of delivery. Any deferred awards are dependent on continued employment and subject to Santander UK's discretion, and the vesting of deferred bonus awards
is subject to potential performance adjustment.
c) Partnership Shares scheme
A Partnership Shares scheme is operated for eligible employees under the Share Incentive Plan (SIP) umbrella. Participants can choose to invest up to \u00a31,800 per tax
year (or no more than 10% of an employee\u2019s salary for the tax year) from pre-tax salary to buy Banco Santander SA shares. Shares are held in trust for the
participants. There are no vesting conditions attached to these shares, and no restrictions as to when the shares can be removed from the trust. However, if a
participant chooses to sell the shares before the end of five years, they will be liable for the taxable benefit received when the shares are taken out of the trust. The
shares can be released from trust after five years free of income tax and national insurance contributions. At 31 December 2024, 3,662,718 shares were
outstanding (2023: 3,937,473 shares).
d) Transformation Incentive Plan
Awards under this one-off long-term incentive plan were granted in 2021, 2022 and 2023 with performance assessed over the period 1 January 2021 to 31
December 2023.\u00a0 Awards for Material Risk Takers were granted half in cash and half in share based awards (linked to the Banco Santander SA share price), and will
vest in accordance with regulatory requirements. The liability arising from share-based payment transactions, excluding any cash element was \u00a35.2m (2023:
\u00a33.8m).
", "dimensions": { "concept": "ifrs-full:DisclosureOfSharebasedPaymentArrangementsExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-624": { "value": "
36. TRANSACTIONS WITH DIRECTORS AND OTHER KEY MANAGEMENT PERSONNEL
a) Remuneration of Directors and Other Key Management Personnel
The remuneration of the Directors and Other Key Management Personnel (KMP) of the Santander UK group is set out in aggregate below.
2024
2023
2022
Directors\u2019 remuneration
\u00a3
\u00a3
\u00a3
Salaries and fees
4,879,413
4,733,761
4,696,699
Performance-related payments
2,871,476
1,002,607
3,701,569
Other fixed remuneration (pension and other allowances & non-cash benefits)(2)
516,442
222,538
906,201
Expenses
\u2014
\u2014
27,715
Total remuneration
8,267,331
5,958,906
9,332,184
Compensation for loss of office(1)
\u2014
\u2014
172,856
2024
2023
2022
Directors' and Other Key Management Personnel compensation
\u00a3
\u00a3
\u00a3
Short-term employee benefits
21,742,485
18,449,360
22,627,595
Post-employment benefits
868,368
858,437
1,026,848
Compensation for loss of office(1)
\u2014
\u2014
1,713,256
Total compensation
22,610,853
19,307,797
25,367,699
(1) During 2024 and 2023, no compensation for loss of office was paid to Directors or Other KMPs (2022: two Directors, \u00a3172,856 and three Other KMPs, \u00a31,540,400).
(2) Included in Other fixed remuneration is an employer pension contribution to a defined contribution scheme of \u00a3122,915 (2023: \u00a3nil).
In 2024, the remuneration, excluding pension contributions, of the highest paid Director, was \u00a33,160,709 (2023: \u00a32,640,491, 2022: \u00a33,510,441) of which
\u00a31,431,612 (2023: \u00a31,002,607, 2022: \u00a31,900,506) was performance related. In 2024, the accrued defined benefit pension relating to the highest paid director was
\u00a3nil (2023: \u00a3nil, 2022: \u00a3nil for a different individual) per annum.
b) Retirement benefits
Defined benefit pension schemes are provided to certain employees. See Note 28 for details of the schemes and the related costs and obligations. No director
has\u00a0a\u00a0deferred pension benefit accruing under a defined benefit scheme. Ex-gratia pensions paid to former Directors of Santander UK plc in 2024, which have been
provided for previously, amounted to \u00a3430,904 (2023: \u00a3327,462; 2022: \u00a3379,945). Since the Company became part of the Banco Santander group, the Board has
not awarded any new ex-gratia pensions.
c) Transactions with Directors, Other Key Management Personnel and each of their connected persons
Directors, Other KMP (defined as the Executive Committee of Santander UK plc who served during the year) and their connected persons have undertaken the
following transactions with the Santander UK group in the ordinary course of business.
2024
2023
No.
\u00a3000
No.
\u00a3000
Secured loans, unsecured loans and overdrafts
At 1 January
8
1,075
10
871
Net movements
2
(79)
(2)
204
At 31 December
10
996
8
1,075
Deposit, bank and instant access accounts and investments
At 1 January
17
1,702
23
4,133
Net movements
2
78
(6)
(2,431)
At 31 December
19
1,780
17
1,702
In 2024 and 2023, no Director held any interest in the shares of any company in the Santander UK group and no Director exercised or was granted any rights to
subscribe for shares in any company in the Santander UK group. In addition, in 2024 and 2023, no Directors exercised share options over shares in Banco Santander
SA, the ultimate parent company of the Company.
Secured loans, unsecured loans and overdrafts are made to Directors, Other KMP and their connected persons, in the ordinary course of business, with terms
prevailing for comparable transactions and on the same terms and conditions as applicable to other employees in the Santander UK group. Such loans do not
involve more than the normal risk of collectability or present any unfavourable features. Amounts deposited by Directors, Other KMP and their connected persons
earn interest at the same rates as those offered to the market or on the same terms and conditions applicable to other employees in the Santander UK group.
Deposits, bank and instant access accounts and investments are entered into by Directors, Other KMP and their connected persons on normal market terms and
conditions, or on the same terms and conditions as applicable to other employees in Santander UK group.
In 2024 two Directors had loans (2023: two Directors), with a principal amount of \u00a3180,000 outstanding at 31 December 2024 (2023: \u00a3495,281). In 2024, two
Other KMPs had loans (2023: six), with a principal amount of \u00a3781,285 outstanding at 31 December 2024 (2023: \u00a3579,383).
In 2024 and 2023, there were no other transactions, arrangements or agreements with Santander UK in which Directors, Other KMP or their connected persons had
a material interest. In addition, in 2024 and 2023, no Director had a material interest in any contract of significance with Santander UK other than a service contract
or appointment letter, as appropriate.
37. RELATED PARTY DISCLOSURES
a) Parent undertaking and controlling party
The Company\u2019s immediate parent is Santander UK Group Holdings plc, a company incorporated in England and Wales. Its ultimate parent and controlling party is
Banco Santander SA, a company incorporated in Spain. The smallest and largest groups into which the Santander UK group\u2019s results are included are the group
accounts of Santander UK Group Holdings plc and Banco Santander SA respectively, copies of which may be obtained from Shareholder Relations, 2\u00a0Triton Square,
Regent\u2019s Place, London NW1 3AN, on the corporate website (aboutsantander.co.uk) or on the Banco Santander corporate website (santander.com).
b) Transactions with related parties
Transactions with related parties during the year and balances outstanding at the year-end:
Group
Interest, fees and
other income received
Interest, fees and
other expenses paid
Amounts owed by
related parties
Amounts owed to
related parties
2024
2023
2022
2024
2023
2022
2024
2023
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Ultimate parent
(23)
(8)
(710)
138
414
47
587
800
(944)
(1,062)
Immediate parent
(7)
(7)
(6)
526
504
308
\u2014
\u2014
(12,392)
(13,279)
Fellow subsidiaries
(42)
(38)
(69)
228
203
177
68
101
(346)
(370)
Joint ventures
(258)
(183)
(76)
84
55
17
4,812
4,486
(1,567)
(781)
(330)
(236)
(861)
976
1,176
549
5,467
5,387
(15,249)
(15,492)
Company
Interest, fees and
other income received
Interest, fees and
other expenses paid
Amounts owed by
related parties
Amounts owed to
related parties
2024
2023
2022
2024
2023
2022
2024
2023
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Ultimate parent
(12)
(8)
(689)
127
414
28
587
800
(944)
(1,062)
Immediate parent
(7)
(7)
(6)
526
504
308
\u2014
\u2014
(12,392)
(13,279)
Subsidiaries
(1,311)
(1,014)
(514)
2,535
1,359
782
30,090
27,686
(34,274)
(28,968)
Fellow subsidiaries
(37)
(33)
(67)
221
197
172
60
101
(345)
(369)
Joint ventures
\u2014
\u2014
\u2014
1
1
\u2014
1
1
(117)
(31)
(1,367)
(1,062)
(1,276)
3,410
2,475
1,290
30,738
28,588
(48,072)
(43,709)
For more on this, see \u2018Balances with other Banco Santander group members\u2019 in the Risk review, Note 13. Loans and advances to customers, Note 22. Deposits by
customers and Note 32. Other Equity Instruments. In addition, transactions with pension schemes operated by the Santander UK group are described in Note 28.
The above transactions were made in the ordinary course of business, on substantially the same terms as for comparable transactions with third party
counterparties, and within limits acceptable to the PRA. Such transactions do not involve more than the normal risk of collectability or present any unfavourable
features.
In November 2022, Santander (UK) Group Pension Scheme Trustees Limited entered into an unsecured committed liquidity facility with Santander UK plc for
\u00a3600m for a two year period. On expiry, a new liquidity facility agreement was entered into for \u00a3300m with a maturity date of 4 November 2026. This facility
provides an alternate source of short-term liquidity for day-to-day operational needs. At the balance sheet date, no drawings had been made from this facility and
the entire facility remained undrawn.
", "dimensions": { "concept": "ifrs-full:DisclosureOfRelatedPartyExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-625": { "value": "
36. TRANSACTIONS WITH DIRECTORS AND OTHER KEY MANAGEMENT PERSONNEL
a) Remuneration of Directors and Other Key Management Personnel
The remuneration of the Directors and Other Key Management Personnel (KMP) of the Santander UK group is set out in aggregate below.
2024
2023
2022
Directors\u2019 remuneration
\u00a3
\u00a3
\u00a3
Salaries and fees
4,879,413
4,733,761
4,696,699
Performance-related payments
2,871,476
1,002,607
3,701,569
Other fixed remuneration (pension and other allowances & non-cash benefits)(2)
516,442
222,538
906,201
Expenses
\u2014
\u2014
27,715
Total remuneration
8,267,331
5,958,906
9,332,184
Compensation for loss of office(1)
\u2014
\u2014
172,856
2024
2023
2022
Directors' and Other Key Management Personnel compensation
\u00a3
\u00a3
\u00a3
Short-term employee benefits
21,742,485
18,449,360
22,627,595
Post-employment benefits
868,368
858,437
1,026,848
Compensation for loss of office(1)
\u2014
\u2014
1,713,256
Total compensation
22,610,853
19,307,797
25,367,699
(1) During 2024 and 2023, no compensation for loss of office was paid to Directors or Other KMPs (2022: two Directors, \u00a3172,856 and three Other KMPs, \u00a31,540,400).
(2) Included in Other fixed remuneration is an employer pension contribution to a defined contribution scheme of \u00a3122,915 (2023: \u00a3nil).
In 2024, the remuneration, excluding pension contributions, of the highest paid Director, was \u00a33,160,709 (2023: \u00a32,640,491, 2022: \u00a33,510,441) of which
\u00a31,431,612 (2023: \u00a31,002,607, 2022: \u00a31,900,506) was performance related. In 2024, the accrued defined benefit pension relating to the highest paid director was
\u00a3nil (2023: \u00a3nil, 2022: \u00a3nil for a different individual) per annum.
b) Retirement benefits
Defined benefit pension schemes are provided to certain employees. See Note 28 for details of the schemes and the related costs and obligations. No director
has\u00a0a\u00a0deferred pension benefit accruing under a defined benefit scheme. Ex-gratia pensions paid to former Directors of Santander UK plc in 2024, which have been
provided for previously, amounted to \u00a3430,904 (2023: \u00a3327,462; 2022: \u00a3379,945). Since the Company became part of the Banco Santander group, the Board has
not awarded any new ex-gratia pensions.
c) Transactions with Directors, Other Key Management Personnel and each of their connected persons
Directors, Other KMP (defined as the Executive Committee of Santander UK plc who served during the year) and their connected persons have undertaken the
following transactions with the Santander UK group in the ordinary course of business.
2024
2023
No.
\u00a3000
No.
\u00a3000
Secured loans, unsecured loans and overdrafts
At 1 January
8
1,075
10
871
Net movements
2
(79)
(2)
204
At 31 December
10
996
8
1,075
Deposit, bank and instant access accounts and investments
At 1 January
17
1,702
23
4,133
Net movements
2
78
(6)
(2,431)
At 31 December
19
1,780
17
1,702
In 2024 and 2023, no Director held any interest in the shares of any company in the Santander UK group and no Director exercised or was granted any rights to
subscribe for shares in any company in the Santander UK group. In addition, in 2024 and 2023, no Directors exercised share options over shares in Banco Santander
SA, the ultimate parent company of the Company.
Secured loans, unsecured loans and overdrafts are made to Directors, Other KMP and their connected persons, in the ordinary course of business, with terms
prevailing for comparable transactions and on the same terms and conditions as applicable to other employees in the Santander UK group. Such loans do not
involve more than the normal risk of collectability or present any unfavourable features. Amounts deposited by Directors, Other KMP and their connected persons
earn interest at the same rates as those offered to the market or on the same terms and conditions applicable to other employees in the Santander UK group.
Deposits, bank and instant access accounts and investments are entered into by Directors, Other KMP and their connected persons on normal market terms and
conditions, or on the same terms and conditions as applicable to other employees in Santander UK group.
In 2024 two Directors had loans (2023: two Directors), with a principal amount of \u00a3180,000 outstanding at 31 December 2024 (2023: \u00a3495,281). In 2024, two
Other KMPs had loans (2023: six), with a principal amount of \u00a3781,285 outstanding at 31 December 2024 (2023: \u00a3579,383).
In 2024 and 2023, there were no other transactions, arrangements or agreements with Santander UK in which Directors, Other KMP or their connected persons had
a material interest. In addition, in 2024 and 2023, no Director had a material interest in any contract of significance with Santander UK other than a service contract
or appointment letter, as appropriate.", "dimensions": { "concept": "ifrs-full:DisclosureOfInformationAboutKeyManagementPersonnelExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-626": { "value": "Santander UK Group Holdings plc", "dimensions": { "concept": "ifrs-full:NameOfParentEntity", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-627": { "value": "Banco Santander SA", "dimensions": { "concept": "ifrs-full:NameOfUltimateParentOfGroup", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-629": { "value": "
38. FINANCIAL INSTRUMENTS
a) Fair value measurement and hierarchy
(i) Fair value measurement
The fair value of financial instruments is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date in the principal, or in its absence, the most advantageous market to which Santander UK has access at that date. The fair value
of a liability reflects its non-performance risk.
Financial instruments valued using observable market prices
If a quoted market price in an active market is available for an instrument, the fair value is calculated as the current exit price multiplied by the number of units of
the instrument held.
Financial instruments valued using a valuation technique
In the absence of a quoted market price in an active market, management uses internal models to make its best estimate of the price that the market would set
for\u00a0that financial instrument. In order to make these estimations, various techniques are employed, including extrapolation from observable market data and
observation of similar financial instruments with similar characteristics. Wherever possible, valuation parameters for each product are based on prices directly
observable in active markets or that can be derived from directly observable market prices. Chosen valuation techniques incorporate all the factors that market
participants would take into account in pricing transactions.
Santander UK manages certain groups of financial assets and liabilities on the basis of its net exposure to either market risks or credit risk. As a result, it has elected
to use the exception under IFRS 13 which permits the fair value measurement of a group of financial assets and financial liabilities on the basis of the price that
would be received to sell a net long position for a particular risk exposure or paid to transfer a net short position for a particular risk exposure in an orderly
transaction between market participants at the measurement date under current market conditions.
(ii) Fair value hierarchy
Santander UK applies the following fair value hierarchy that prioritises the inputs to valuation techniques used in measuring fair value. The hierarchy establishes
three categories for valuing financial instruments, giving the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the
lowest priority to unobservable inputs. The three categories are: quoted prices in active markets (Level 1), internal models based on observable market data (Level
2) and internal models based on other than observable market data (Level 3). If the inputs used to measure an asset or a liability fall to different levels within the
hierarchy, the classification of the entire asset or liability will be based on the lowest level input that is significant to the overall fair value measurement of the asset
or liability.
Santander UK categorises assets and liabilities measured at fair value within the fair value hierarchy based on the inputs to the valuation techniques as follows:
Level 1Unadjusted quoted prices for identical assets or liabilities in an active market that Santander UK can access at the measurement date. Active markets
are assessed by reference to average daily trading volumes in absolute terms and, where applicable, by reference to market capitalisation for the
instrument.
Level 2Quoted prices in inactive markets, quoted prices for similar assets or liabilities, recent market transactions, inputs other than quoted market prices for
the asset or liability that are observable either directly or indirectly for substantially the full term, and inputs to valuation techniques that are derived
principally from or corroborated by observable market data through correlation or other statistical means for substantially the full term of the asset or
liability.
Level 3Significant inputs to the pricing or valuation techniques are unobservable. These unobservable inputs reflect the assumptions that market participants
would use when pricing assets or liabilities and are considered significant to the overall valuation.
Changes in the observability of significant valuation inputs during the reporting period may result in a transfer of assets and liabilities within the fair value hierarchy.
The Santander UK group recognises transfers between levels of the fair value hierarchy when there is a significant change in either its principal market or the level
of observability of the inputs to the valuation techniques at the end of the reporting period.
b) Valuation techniques
The main valuation techniques employed in internal models to measure the fair value of the financial instruments at 31 December 2024 and 2023 are set out
below. In substantially all cases, the principal inputs into these models are derived from observable market data. Santander UK did not make any material changes
to the valuation techniques and internal models it used in 2024, 2023 and 2022.
A. In the valuation of financial instruments requiring static hedging (for example interest rate, currency derivatives and property derivatives) and in the valuation
of loans and advances and deposits, the \u2018present value\u2019 method is used. Expected future cash flows are discounted using the interest rate curves of the
applicable currencies or forward house price index levels, as well as credit spreads. The interest rate curves are generally observable market data and
reference yield curves derived from quoted interest rates in appropriate time bandings, which match the timings of the cash flows and maturities of the
instruments.
B. In the valuation of equity financial instruments requiring dynamic hedging (principally equity securities, options and other structured instruments), proprietary
local volatility and stochastic volatility models are used. These types of models are widely accepted in the financial services industry. Observable market inputs
used in these models include the bid-offer spread, foreign currency exchange rates, volatility and correlation between indices. In limited circumstances, other
inputs may be used in these models that are based on unobservable market data, such as the Halifax\u2019s UK HPI volatility, HPI forward growth, HPI spot rate,
mortality and mean reversion.
C. In the valuation of financial instruments exposed to interest rate risk that require either static or dynamic hedging (such as interest rate swaps, caps and
floors), the present value method (swaps), and Black\u2019s model (caps/floors) are used. These types of models are widely accepted in the financial services
industry. The significant inputs used in these models are observable market data, including appropriate interest rate curves, volatilities, correlations and
exchange rates. In limited circumstances, other inputs may be used in these models that are based on unobservable market data, such as HPI volatility, HPI
forward growth, HPI spot rate and mortality.
D. In the valuation of linear instruments such as credit risk and fixed-income derivatives, credit risk is measured using dynamic models similar to those used in
the\u00a0measurement of interest rate risk. In the case of non-linear instruments, if the portfolio is exposed to credit risk such as credit derivatives, the probability
of\u00a0default is determined using the credit default spread market. The main inputs used to determine the underlying cost of credit of credit derivatives are
quoted credit risk premiums and the correlation between the quoted credit derivatives of various issuers.
The fair values of the financial instruments arising from Santander UK\u2019s internal models take into account, among other things, contract terms and observable
market data, which include such factors as bid-offer spread, interest rates, credit risk, exchange rates, the quoted market price of equity securities, and volatility.
In\u00a0all cases, when it is not possible to derive a valuation for a particular feature of an instrument, management uses judgement to determine the fair value of
the\u00a0particular feature. In exercising this judgement, a variety of tools are used including proxy observable data, historical data and extrapolation techniques.
Extrapolation techniques take into account behavioural characteristics of equity markets that have been observed over time, and for which there is a strong case to
support an expectation of a continuing trend in the future. Estimates are calibrated to observable market prices when they become available.
Santander UK believes its valuation methods are appropriate and consistent with other market participants. Nevertheless, the use of different valuation methods or
assumptions, including imprecision in estimating unobservable market inputs, to determine the fair value of certain financial instruments could result in different
estimates of fair value at the reporting date and the amount of gain or loss recorded for a particular instrument. Most of the valuation models are not significantly
subjective, because they can be tested and, if necessary, recalibrated by the internal calculation of and subsequent comparison to market prices of actively traded
securities, where available.
c) Control framework
Fair values are subject to a control framework designed to ensure that they are either determined or validated by a function independent of the risk-taker. To this
end, ultimate responsibility for the determination of fair values lies with the Risk Department. For all financial instruments where fair values are determined by
reference to externally quoted prices or observable pricing inputs to models, independent price determination or verification is utilised. In inactive markets, direct
observation of a traded price may not be possible. In these circumstances, Santander UK will source alternative market information to validate the financial
instrument\u2019s fair value, with greater weight given to information that is considered to be more relevant and reliable.
The factors that are considered in this regard include:
\u2013 The extent to which prices may be expected to represent genuine traded or tradeable prices
\u2013 The degree of similarity between financial instruments
\u2013 The degree of consistency between different sources
\u2013 The process followed by the pricing provider to derive the data
\u2013 The elapsed time between the date to which the market data relates and the balance sheet date
\u2013 The manner in which the data was sourced.
The source of pricing data is considered as part of the process that determines the classification of the level of a financial instrument. Consideration is given to the
quality of the information available that provides the current mark-to-model valuation and estimates of how different these valuations could be on an actual trade,
taking into consideration how active the market is. For spot assets that cannot be sold due to illiquidity, forward estimates are discounted to estimate a realisable
value over time. Adjustments for illiquid positions are regularly reviewed to reflect changing market conditions.
For fair values determined using a valuation model, the control framework may include as applicable, independent development and / or validation of: (i) the logic
within the models; (ii) the inputs to those models; and (iii) any adjustments required outside the models. Internal valuation models are validated independently
within the Risk Department. A validation report is produced for each model-derived valuation that assesses the mathematical assumptions behind the model, the
implementation of the model and its integration within the trading system.
d) Fair values of financial instruments carried at amortised cost
The following tables analyse the fair value of the financial instruments carried at amortised cost at 31 December 2024 and 2023, including their levels in the fair
value hierarchy - Level 1, Level 2 and Level 3. Cash and balances at central banks, which consist of demand deposits with the Bank of England, together with cash in
tills and ATMs, have been excluded from the table as the carrying amount is deemed an appropriate approximation of fair value.
Group
2024
2023
Fair value
Fair
Carrying
Fair value
Fair
Carrying
Level 1
Level 2
Level 3
value
value
Level 1
Level 2
Level 3
value
value
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Loans and advances to customers
\u2014
\u2014
198,376
198,376
199,408
\u2014
\u2014
205,917
205,917
207,435
Loans and advances to banks
\u2014
1,032
\u2014
1,032
1,032
\u2014
1,080
\u2014
1,080
1,080
Reverse repurchase agreements - non-
trading
\u2014
10,342
\u2014
10,342
10,338
\u2014
12,470
\u2014
12,470
12,468
Other financial assets at amortised cost
3,190
\u2014
\u2014
3,190
3,408
144
\u2014
\u2014
144
152
3,190
11,374
198,376
212,940
214,186
144
13,550
205,917
219,611
221,135
Liabilities
Deposits by customers
\u2014
185
180,282
180,467
180,967
\u2014
71
190,561
190,632
190,850
Deposits by banks
\u2014
13,934
39
13,973
13,993
\u2014
20,342
40
20,382
20,332
Repurchase agreements - non-trading
\u2014
8,622
\u2014
8,622
8,617
\u2014
8,413
\u2014
8,413
8,411
Debt securities in issue
21,173
12,910
1,771
35,854
35,673
1,689
30,743
1,189
33,621
33,910
Subordinated liabilities
1,129
10
1,622
2,761
2,385
\u2014
2,591
209
2,800
2,386
22,302
35,661
183,714
241,677
241,635
1,689
62,160
191,999
255,848
255,889
Company
2024
2023
Fair value
Carrying
Fair value
Carrying
Level 1
Level 2
Level 3
Fair value
value
Level 1
Level 2
Level 3
Fair value
value
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Loans and advances to customers
\u2014
\u2014
216,851
216,851
217,780
\u2014
\u2014
222,208
222,208
223,511
Loans and advances to banks
\u2014
926
\u2014
926
926
\u2014
1,052
\u2014
1,052
1,052
Reverse repurchase agreements - non-trading
\u2014
10,342
\u2014
10,342
10,338
\u2014
12,470
\u2014
12,470
12,468
Other financial assets at amortised cost
3,190
1,977
\u2014
5,167
5,206
144
1,681
\u2014
1,825
1,833
3,190
13,245
216,851
233,286
234,250
144
15,203
222,208
237,555
238,864
Liabilities
Deposits by customers
\u2014
185
200,530
200,715
201,215
\u2014
71
207,216
207,287
207,516
Deposits by banks
\u2014
13,922
5,579
19,501
19,521
\u2014
20,326
5,424
25,750
25,699
Repurchase agreements - non-trading
\u2014
8,621
\u2014
8,621
8,617
\u2014
8,413
\u2014
8,413
8,411
Debt securities in issue
17,870
12,846
1,379
32,095
31,833
999
29,181
841
31,021
31,228
Subordinated liabilities
1,129
10
1,598
2,737
2,386
\u2014
2,592
209
2,801
2,387
18,999
35,584
209,086
263,669
263,572
999
60,583
213,690
275,272
275,241
The carrying value above of any financial assets and liabilities that are designated as hedged items in a portfolio (or macro) fair value hedge relationship excludes
gains and losses attributable to the hedged risk, as this is included as a separate line item on the balance sheet.
Valuation methodology for financial instruments carried at amortised cost
The valuation approach to specific categories of financial instruments is described below.
Assets:
Loans and advances to customers
The approach to estimating the fair value of loans and advances to customers has been determined by discounting expected cash flows to reflect either current
market rates or credit spreads relevant to the specific industry of the borrower. The determination of their fair values is an area of considerable estimation and
uncertainty as there is no observable market and values are significantly affected by customer behaviour.
i) Advances secured on residential property
The fair value of the mortgage portfolio is calculated by discounting contractual cash flows by different spreads for each LTV Band, after taking account of expected
customer prepayment rates. The spread is based on new business interest rates derived from publicly available competitor market information.
ii) Corporate loans
The determination of the fair values of performing loans is calculated by discounting the contractual cash flows and also deducting other costs relating to expected
credit losses, cost of capital, credit risk capital, operational risk capital, cost of funding and operating costs.
iii) Other loans
These consist of unsecured personal loans, credit cards, overdrafts and consumer (auto) finance. The weighted average lives of these portfolios are typically short
and relate to relatively new business. For unsecured personal loans and consumer (auto) finance loans, a small surplus or deficit has been recognised based on the
differential between existing portfolio margins and the current contractual interest rates.
Loans and advances to banks
These comprise secured loans, short-term placements with banks including collateral and unsettled financial transactions. The secured loans have been valued
based on a discounted spread for the term of the loans using valuation technique A as described above. The carrying amount of the other items is deemed a
reasonable approximation of their fair value, as the transactions are very short-term in duration.
Reverse repurchase agreements - non-trading
The fair value of the reverse repurchase agreements - non trading has been estimated using valuation technique A as described above, using a spread appropriate to
the underlying collateral.
Other financial assets at amortised cost
These consist of asset backed securities and debt securities. The asset backed securities can be complex products and in some instances are valued with the
assistance of an independent, specialist valuation firm. These fair values are determined using industry-standard valuation techniques, including discounted
cash\u00a0flow models. The inputs to these models used in these valuation techniques include quotes from market makers, prices of similar assets, adjustments for
differences in credit spreads, and additional quantitative and qualitative research. The debt security investments consist of a portfolio of government debt securities.
The fair value of this portfolio has been determined using quoted market prices.
Liabilities:
Deposits by customers
The majority of deposit liabilities are payable on demand and therefore can be deemed short-term in nature with the fair value equal to the carrying value. Certain
of the deposit liabilities are at a fixed rate until maturity. The deficit/surplus of fair value over carrying value of these liabilities has been estimated by reference to
the market rates available at the balance sheet date for similar deposit liabilities of similar maturities. The fair value of such deposit liabilities has been estimated
using valuation technique A as described above.
Deposits by banks
The fair value of deposits by banks, including repos, has been estimated using valuation technique A as described above, discounted at the appropriate credit spread.
Repurchase agreements - non-trading
The fair value of the repurchase agreements - non trading has been estimated using valuation technique A as described above, discounted at a spread appropriate
to the underlying collateral.
Debt securities in issue and subordinated liabilities
Where reliable prices are available, the fair value of debt securities in issue and subordinated liabilities has been calculated using quoted market prices. Where
reliable prices are not available, internal models have been used to determine fair values, which take into account, among other things, contract terms and
observable market data, which include such factors as interest rates, credit risk and exchange rates. In all cases, when it is not possible to derive a valuation for a
particular feature of an instrument, management uses judgement to determine the fair value of the particular feature. In exercising this judgement, a variety of
tools are used including proxy observable data.
e) Fair values of financial instruments measured at fair value
The following tables summarise the fair values of the financial assets and liabilities accounted for at fair value at 31 December 2024 and 31 December 2023,
analysed by their levels in the fair value hierarchy - Level 1, Level 2 and Level 3.
Group
2024
2023
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Valuation
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
technique
Assets
Derivative financial instruments
Exchange rate contracts
\u2014
978
\u2014
978
\u2014
1,129
\u2014
1,129
A
Interest rate contracts
\u2014
1,675
\u2014
1,675
\u2014
2,216
1
2,217
A & C
Inflation rate contracts
\u2014
70
\u2014
70
\u2014
\u2014
\u2014
\u2014
A
Equity and credit contracts
\u2014
89
35
124
\u2014
98
35
133
B & D
Netting
\u2014
(1,643)
\u2014
(1,643)
\u2014
(2,047)
\u2014
(2,047)
\u2014
1,169
35
1,204
\u2014
1,396
36
1,432
Other financial assets at FVTPL
Loans and advances to customers
\u2014
\u2014
44
44
\u2014
\u2014
46
46
A
Debt securities
\u2014
56
36
92
\u2014
167
49
216
A, B & D
\u2014
56
80
136
\u2014
167
95
262
Financial assets at FVOCI
Debt securities
8,805
201
34
9,040
8,293
188
\u2014
8,481
D
8,805
201
34
9,040
8,293
188
\u2014
8,481
Total assets at fair value
8,805
1,426
149
10,380
8,293
1,751
131
10,175
Liabilities
Derivative financial instruments
Exchange rate contracts
\u2014
430
\u2014
430
\u2014
508
\u2014
508
A
Interest rate contracts
\u2014
1,894
\u2014
1,894
\u2014
2,336
1
2,337
A & C
Equity and credit contracts
\u2014
7
14
21
\u2014
11
9
20
B & D
Netting
\u2014
(1,643)
\u2014
(1,643)
\u2014
(2,047)
\u2014
(2,047)
\u2014
688
14
702
\u2014
808
10
818
Other financial liabilities at FVTPL
Debt securities in issue
\u2014
355
\u2014
355
\u2014
369
\u2014
369
A
Structured deposits
\u2014
605
\u2014
605
\u2014
426
\u2014
426
A
Zero Amortising Guaranteed Notes
\u2014
95
\u2014
95
\u2014
104
\u2014
104
D
\u2014
1,055
\u2014
1,055
\u2014
899
\u2014
899
Total liabilities at fair value
\u2014
1,743
14
1,757
\u2014
1,707
10
1,717
Company
2024
2023
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Valuation
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
technique
Assets
Derivative financial instruments
Exchange rate contracts
\u2014
1,243
\u2014
1,243
\u2014
1,289
\u2014
1,289
A
Interest rate contracts
\u2014
1,685
3
1,688
\u2014
2,187
133
2,320
A & C
Inflation rate contracts
\u2014
70
\u2014
70
\u2014
\u2014
\u2014
\u2014
A
Equity and credit contracts
\u2014
89
35
124
\u2014
98
35
133
B & D
Netting
\u2014
(1,643)
\u2014
(1,643)
\u2014
(2,047)
\u2014
(2,047)
\u2014
1,444
38
1,482
\u2014
1,527
168
1,695
Other financial assets at FVTPL
Loans and advances to customers
\u2014
\u2014
44
44
\u2014
\u2014
46
46
A
Debt securities and other debt
instruments
\u2014
56
\u2014
56
\u2014
168
\u2014
168
C
\u2014
56
44
100
\u2014
168
46
214
Financial assets at FVOCI
Debt securities
8,805
201
34
9,040
8,293
188
\u2014
8,481
D
8,805
201
34
9,040
8,293
188
\u2014
8,481
Total assets at fair value
8,805
1,701
116
10,622
8,293
1,883
214
10,390
Liabilities
Derivative financial instruments
Exchange rate contracts
\u2014
456
\u2014
456
\u2014
580
\u2014
580
A
Interest rate contracts
\u2014
1,933
1,840
3,773
\u2014
2,350
1,071
3,421
A & C
Equity and credit contracts
\u2014
7
14
21
\u2014
11
9
20
B
Netting
\u2014
(1,643)
\u2014
(1,643)
\u2014
(2,047)
\u2014
(2,047)
\u2014
753
1,854
2,607
\u2014
894
1,080
1,974
Other financial liabilities at FVTPL
Debt securities in issue
\u2014
355
\u2014
355
\u2014
369
\u2014
369
A
Structured deposits
\u2014
605
\u2014
605
\u2014
426
\u2014
426
A
Zero Amortising Guaranteed Notes
\u2014
95
\u2014
95
\u2014
104
\u2014
104
D
\u2014
1,055
\u2014
1,055
\u2014
899
\u2014
899
Total liabilities at fair value
\u2014
1,808
1,854
3,662
\u2014
1,793
1,080
2,873
Transfers between levels of the fair value hierarchy
In 2024 there were no significant (2023: \u00a322m) transfers of financial instruments between levels of the fair value hierarchy.
f) Fair value adjustments
The internal models incorporate assumptions that Santander UK believes would be made by a market participant to establish fair value. Fair value adjustments
are\u00a0adopted when Santander UK considers that there are additional factors that would be considered by a market participant that are not incorporated in the
valuation model.
Santander UK classifies fair value adjustments as either \u2018risk-related\u2019 or \u2018model-related\u2019. The fair value adjustments form part of the portfolio fair value and are
included in the balance sheet values of the product types to which they have been applied.
The fair value adjustments are set out in the following table:
Group
2024
2023
\u00a3m
\u00a3m
Risk-related:
- Bid-offer and trade specific adjustments
6
(6)
- Uncertainty
4
6
- Credit risk adjustment
1
1
- Funding fair value adjustment
\u2014
1
11
2
Day One profit
\u2014
1
11
3
Company
2024
2023
\u00a3m
\u00a3m
Risk-related:
- Bid-offer and trade specific adjustments
8
(6)
- Uncertainty
4
6
- Credit risk adjustment
1
1
- Funding fair value adjustment
\u2014
1
13
2
Day One profit
\u2014
1
13
3
Risk-related adjustments
Risk-related adjustments are driven, in part, by the magnitude of Santander UK\u2019s market or credit risk exposure, and by external market factors, such as the size of
market spreads.
(i) Bid-offer and trade specific adjustments
Portfolios are marked at bid or offer, as appropriate. Valuation models will typically generate mid-market values. The bid-offer adjustment reflects the cost
that\u00a0would be incurred if substantially all residual net portfolio market risks were closed using available hedging instruments or by disposing of or unwinding
the\u00a0position. For debt securities, the bid-offer spread is based on a market price at an individual security level. For other products, the major risk types are identified.
For each risk type, the net portfolio risks are first classified into buckets, and then a bid-offer spread is applied to each risk bucket based upon the market bid-offer
spread for the relevant hedging instrument.
(ii) Uncertainty
Certain model inputs may be less readily determinable from market data, and/or the choice of model itself may be more subjective. In these circumstances, a
range\u00a0of possible values exists that the financial instrument or market parameter may assume, and an adjustment may be needed to reflect the likelihood that
in\u00a0estimating the fair value of the financial instrument, market participants would adopt more conservative values for uncertain parameters and/or model
assumptions than those used in the valuation model.
(iii) Credit risk adjustment
Credit risk adjustments comprise credit and debit valuation adjustments. The credit valuation adjustment (CVA) is an adjustment to the valuation of OTC derivative
contracts to reflect within fair value the possibility that the counterparty may default, and Santander UK may not receive the full market value of the transactions.
The debit valuation adjustment (DVA) is an adjustment to the valuation of the OTC derivative contracts to reflect within the fair value the possibility that Santander
UK may default, and that Santander UK may not pay full market value of the transactions.
Santander UK calculates a separate CVA and DVA for each Santander UK legal entity, and within each entity for each counterparty to which the entity has exposure.
Santander UK calculates the CVA by applying the probability of default of the counterparty to the expected positive exposure to the counterparty, and multiplying
the result by the loss expected in the event of default i.e. LGD. Conversely, Santander UK calculates the DVA by applying the PD of the Santander UK group, to the
expected positive exposure of the counterparty to Santander UK and multiplying the result by the LGD. Both calculations are performed over the life of the potential
exposure.
For most products Santander UK uses a simulation methodology to calculate the expected positive exposure to a counterparty. This incorporates a range of
potential exposures across the portfolio of transactions with the counterparty over the life of the portfolio. The simulation methodology includes credit mitigants
such as counterparty netting agreements and collateral agreements with the counterparty.
(iv) Funding fair value adjustment (FFVA)
The FFVA is an adjustment to the valuation of OTC derivative positions to include the net cost of funding uncollateralised derivative positions. This is calculated by
applying a suitable funding cost to the expected future funding exposure of any uncollateralised component of the OTC derivative portfolio.
Day One profit adjustments
Day One profit adjustments are adopted where the fair value estimated by a valuation model is based on one or more significant unobservable inputs. Day One
profit adjustments are calculated and reported on a portfolio basis.
The timing of recognition of deferred Day One profit and loss is determined individually. It is deferred until either the instrument\u2019s fair value can be determined
using market observable inputs or is realised through settlement. The financial instrument is subsequently measured at fair value, adjusted for the deferred Day
One profit and loss. Subsequent changes in fair value are recognised immediately in the Income Statement without immediate reversal of deferred Day One profits
and losses.
g) Internal models based on information other than market data (Level 3)
The table below provides an analysis of financial instruments valued using internal models based on information other than market data together with further
details on the valuation techniques used for each type of instrument. Each instrument is initially valued at transaction price:
Group
Balance sheet value
Fair value movements recognised
in profit/(loss)
2024
2023
2024
2023
2022
Balance sheet line item
Category
Financial instrument product type
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
1. Derivative assets
Equity and credit contracts
Reversionary property interests
35
35
6
12
(8)
2. FVTPL assets
Loans and advances to customers
Roll-up mortgage portfolio
22
24
(1)
(2)
(18)
3. FVTPL assets
Loans and advances to customers
Other loans
22
22
\u2014
4
(4)
4. FVTPL assets
Debt securities
Reversionary property securities
36
49
2
(3)
\u2014
5. FVOCI assets
Debt Instruments
Other securities
34
\u2014
\u2014
\u2014
\u2014
149
130
7
11
(30)
Other Level 3 assets
\u2014
1
\u2014
(1)
10
Other Level 3 liabilities
(14)
(10)
(5)
(2)
3
Total net assets
135
121
Total income/(expense)
2
8
(17)
Valuation techniques (Group)
1. Derivative assets \u2013 Equity and credit contracts
These are valued using a probability weighted set of HPI forward prices, which are assumed to be a reasonable representation of the increase in value of the
Santander UK group\u2019s reversionary interest portfolio underlying the derivatives. The probability used reflects the likelihood of the homeowner vacating the property
and is calculated from mortality rates and acceleration rates which are a function of age and gender, obtained from the relevant mortality tables. Indexing is felt
to\u00a0be appropriate due to the size and geographical dispersion of the reversionary interest portfolio. These are determined using HPI Spot Rates adjusted to reflect
estimated forward growth. Non-seasonally adjusted (NSA) national and regional HPI are used in the valuation model to avoid any subjective judgement in the
adjustment process, which is made by Markit, which publishes the Halifax House Price Index.
The inputs used to determine the value of the reversionary property derivatives are HPI spot, HPI forward growth and mortality rates. The principal pricing
parameter is HPI forward growth.
2. FVTPL assets \u2013 Loans and advances to customers \u2013 roll-up mortgage portfolio
These represent roll-up mortgages (sometimes referred to as lifetime mortgages), which are an equity release scheme under which a property owner takes out a
loan secured against their home. The owner does not have to make any interest payments during their lifetime in which case the fixed interest payments are rolled
up into the mortgage. The loan or mortgage (capital and rolled-up interest) is repaid upon the owner\u2019s vacation of the property and the value of the loan is only
repaid from the value of the property. This is known as a \u2018no negative equity guarantee\u2019. Santander UK suffers a loss if the sale proceeds from the property are
insufficient to repay the loan, as it is unable to pursue the homeowner\u2019s estate or beneficiaries for the shortfall.
The value of the mortgage \u2018rolls up\u2019 or accretes until the owner vacates the property. In order to value the roll-up mortgages, Santander UK uses a probability-
weighted set of European option prices (puts) determined using the Black-Scholes model, in which the \u2018no negative equity guarantee\u2019 are valued as short put
options. The probability weighting applied is calculated from mortality rates and acceleration rates as a function of age and gender, taken from mortality tables.
The inputs used to determine the value of these instruments are HPI spot, HPI forward growth, HPI volatility, mortality rates and repayment rates. The principal
pricing parameter is HPI forward growth. The HPI forward growth rate used is unobservable and is the same as used in the valuation of Instrument 1 above. The
other parameters do not have a significant effect on the value of the instruments.
3. FVTPL assets \u2013 Loans and advances to customers \u2013 other loans
These relate to loans to transport and education companies. The fair value of these loans is estimated using the \u2018present value\u2019 model based on a credit curve
derived from current market spreads. Loan specific credit data is unobservable, so a proxy population is applied based on industry sector and credit rating.
4. FVTPL assets \u2013 Debt securities
These consist of reversionary property securities and are an equity release scheme, where the property owner receives an upfront lump sum in return for paying a
fixed percentage of the sales proceeds of the property when the owner vacates the property. These reversionary property securities are valued using a probability-
weighted set of HPI forward prices which are assumed to be a reasonable representation of the increase in value of Santander UK\u2019s reversionary interest portfolio
underlying the derivatives. The probability weighting used reflects the probability of the homeowner vacating the property through death or moving into care and is
calculated from mortality rates and acceleration factors which are a function of age and gender, obtained from the relevant mortality table.
The inputs used to determine the value of these instruments are HPI spot, HPI forward growth and mortality rates. The principal pricing parameter is HPI forward
growth. Discussion of the HPI spot rate, HPI forward growth rate and mortality rates for this financial instrument is the same as Instrument 1 above. An adjustment
is also made to reflect the specific property risk. Specific property risk is from the difference between the specific properties in the portfolio, and the average price as
expressed in the regionally weighted house price index.
5. FVOCI assets \u2013 Debt instruments
These consist of asset-back securities where third-party prices are not available or reliable. The fair value is estimated using market standard cash flow models with
input parameter assumptions which include prepayment speeds, default rates, discount margins derived from comparable securities with similar vintage, collateral
type, and credit ratings.
Effect of changes in significant unobservable assumptions to reasonably possible alternatives (Level 3)
As discussed above, the fair value of financial instruments are, in certain circumstances, measured using valuation techniques that incorporate assumptions that are
not evidenced by prices from observable current market transactions in the same instrument and are not based on observable market data and, as such require the
application of a degree of judgement. Changing one or more of the inputs to the valuation models to reasonably possible alternative assumptions would change the
fair values significantly. The following table shows the sensitivity of these fair values to reasonably possible alternative assumptions.
Favourable and unfavourable changes are determined on the basis of changes in the value of the instrument as a result of varying the levels of the unobservable
input as described in the table below. The potential effects do not take into effect any hedged positions.
", "dimensions": { "concept": "ifrs-full:DisclosureOfFairValueMeasurementExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-628": { "value": "
38. FINANCIAL INSTRUMENTS
a) Fair value measurement and hierarchy
(i) Fair value measurement
The fair value of financial instruments is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date in the principal, or in its absence, the most advantageous market to which Santander UK has access at that date. The fair value
of a liability reflects its non-performance risk.
Financial instruments valued using observable market prices
If a quoted market price in an active market is available for an instrument, the fair value is calculated as the current exit price multiplied by the number of units of
the instrument held.
Financial instruments valued using a valuation technique
In the absence of a quoted market price in an active market, management uses internal models to make its best estimate of the price that the market would set
for\u00a0that financial instrument. In order to make these estimations, various techniques are employed, including extrapolation from observable market data and
observation of similar financial instruments with similar characteristics. Wherever possible, valuation parameters for each product are based on prices directly
observable in active markets or that can be derived from directly observable market prices. Chosen valuation techniques incorporate all the factors that market
participants would take into account in pricing transactions.
Santander UK manages certain groups of financial assets and liabilities on the basis of its net exposure to either market risks or credit risk. As a result, it has elected
to use the exception under IFRS 13 which permits the fair value measurement of a group of financial assets and financial liabilities on the basis of the price that
would be received to sell a net long position for a particular risk exposure or paid to transfer a net short position for a particular risk exposure in an orderly
transaction between market participants at the measurement date under current market conditions.
(ii) Fair value hierarchy
Santander UK applies the following fair value hierarchy that prioritises the inputs to valuation techniques used in measuring fair value. The hierarchy establishes
three categories for valuing financial instruments, giving the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the
lowest priority to unobservable inputs. The three categories are: quoted prices in active markets (Level 1), internal models based on observable market data (Level
2) and internal models based on other than observable market data (Level 3). If the inputs used to measure an asset or a liability fall to different levels within the
hierarchy, the classification of the entire asset or liability will be based on the lowest level input that is significant to the overall fair value measurement of the asset
or liability.
Santander UK categorises assets and liabilities measured at fair value within the fair value hierarchy based on the inputs to the valuation techniques as follows:
Level 1Unadjusted quoted prices for identical assets or liabilities in an active market that Santander UK can access at the measurement date. Active markets
are assessed by reference to average daily trading volumes in absolute terms and, where applicable, by reference to market capitalisation for the
instrument.
Level 2Quoted prices in inactive markets, quoted prices for similar assets or liabilities, recent market transactions, inputs other than quoted market prices for
the asset or liability that are observable either directly or indirectly for substantially the full term, and inputs to valuation techniques that are derived
principally from or corroborated by observable market data through correlation or other statistical means for substantially the full term of the asset or
liability.
Level 3Significant inputs to the pricing or valuation techniques are unobservable. These unobservable inputs reflect the assumptions that market participants
would use when pricing assets or liabilities and are considered significant to the overall valuation.
Changes in the observability of significant valuation inputs during the reporting period may result in a transfer of assets and liabilities within the fair value hierarchy.
The Santander UK group recognises transfers between levels of the fair value hierarchy when there is a significant change in either its principal market or the level
of observability of the inputs to the valuation techniques at the end of the reporting period.
b) Valuation techniques
The main valuation techniques employed in internal models to measure the fair value of the financial instruments at 31 December 2024 and 2023 are set out
below. In substantially all cases, the principal inputs into these models are derived from observable market data. Santander UK did not make any material changes
to the valuation techniques and internal models it used in 2024, 2023 and 2022.
A. In the valuation of financial instruments requiring static hedging (for example interest rate, currency derivatives and property derivatives) and in the valuation
of loans and advances and deposits, the \u2018present value\u2019 method is used. Expected future cash flows are discounted using the interest rate curves of the
applicable currencies or forward house price index levels, as well as credit spreads. The interest rate curves are generally observable market data and
reference yield curves derived from quoted interest rates in appropriate time bandings, which match the timings of the cash flows and maturities of the
instruments.
B. In the valuation of equity financial instruments requiring dynamic hedging (principally equity securities, options and other structured instruments), proprietary
local volatility and stochastic volatility models are used. These types of models are widely accepted in the financial services industry. Observable market inputs
used in these models include the bid-offer spread, foreign currency exchange rates, volatility and correlation between indices. In limited circumstances, other
inputs may be used in these models that are based on unobservable market data, such as the Halifax\u2019s UK HPI volatility, HPI forward growth, HPI spot rate,
mortality and mean reversion.
C. In the valuation of financial instruments exposed to interest rate risk that require either static or dynamic hedging (such as interest rate swaps, caps and
floors), the present value method (swaps), and Black\u2019s model (caps/floors) are used. These types of models are widely accepted in the financial services
industry. The significant inputs used in these models are observable market data, including appropriate interest rate curves, volatilities, correlations and
exchange rates. In limited circumstances, other inputs may be used in these models that are based on unobservable market data, such as HPI volatility, HPI
forward growth, HPI spot rate and mortality.
D. In the valuation of linear instruments such as credit risk and fixed-income derivatives, credit risk is measured using dynamic models similar to those used in
the\u00a0measurement of interest rate risk. In the case of non-linear instruments, if the portfolio is exposed to credit risk such as credit derivatives, the probability
of\u00a0default is determined using the credit default spread market. The main inputs used to determine the underlying cost of credit of credit derivatives are
quoted credit risk premiums and the correlation between the quoted credit derivatives of various issuers.
The fair values of the financial instruments arising from Santander UK\u2019s internal models take into account, among other things, contract terms and observable
market data, which include such factors as bid-offer spread, interest rates, credit risk, exchange rates, the quoted market price of equity securities, and volatility.
In\u00a0all cases, when it is not possible to derive a valuation for a particular feature of an instrument, management uses judgement to determine the fair value of
the\u00a0particular feature. In exercising this judgement, a variety of tools are used including proxy observable data, historical data and extrapolation techniques.
Extrapolation techniques take into account behavioural characteristics of equity markets that have been observed over time, and for which there is a strong case to
support an expectation of a continuing trend in the future. Estimates are calibrated to observable market prices when they become available.
Santander UK believes its valuation methods are appropriate and consistent with other market participants. Nevertheless, the use of different valuation methods or
assumptions, including imprecision in estimating unobservable market inputs, to determine the fair value of certain financial instruments could result in different
estimates of fair value at the reporting date and the amount of gain or loss recorded for a particular instrument. Most of the valuation models are not significantly
subjective, because they can be tested and, if necessary, recalibrated by the internal calculation of and subsequent comparison to market prices of actively traded
securities, where available.
c) Control framework
Fair values are subject to a control framework designed to ensure that they are either determined or validated by a function independent of the risk-taker. To this
end, ultimate responsibility for the determination of fair values lies with the Risk Department. For all financial instruments where fair values are determined by
reference to externally quoted prices or observable pricing inputs to models, independent price determination or verification is utilised. In inactive markets, direct
observation of a traded price may not be possible. In these circumstances, Santander UK will source alternative market information to validate the financial
instrument\u2019s fair value, with greater weight given to information that is considered to be more relevant and reliable.
The factors that are considered in this regard include:
\u2013 The extent to which prices may be expected to represent genuine traded or tradeable prices
\u2013 The degree of similarity between financial instruments
\u2013 The degree of consistency between different sources
\u2013 The process followed by the pricing provider to derive the data
\u2013 The elapsed time between the date to which the market data relates and the balance sheet date
\u2013 The manner in which the data was sourced.
The source of pricing data is considered as part of the process that determines the classification of the level of a financial instrument. Consideration is given to the
quality of the information available that provides the current mark-to-model valuation and estimates of how different these valuations could be on an actual trade,
taking into consideration how active the market is. For spot assets that cannot be sold due to illiquidity, forward estimates are discounted to estimate a realisable
value over time. Adjustments for illiquid positions are regularly reviewed to reflect changing market conditions.
For fair values determined using a valuation model, the control framework may include as applicable, independent development and / or validation of: (i) the logic
within the models; (ii) the inputs to those models; and (iii) any adjustments required outside the models. Internal valuation models are validated independently
within the Risk Department. A validation report is produced for each model-derived valuation that assesses the mathematical assumptions behind the model, the
implementation of the model and its integration within the trading system.
d) Fair values of financial instruments carried at amortised cost
The following tables analyse the fair value of the financial instruments carried at amortised cost at 31 December 2024 and 2023, including their levels in the fair
value hierarchy - Level 1, Level 2 and Level 3. Cash and balances at central banks, which consist of demand deposits with the Bank of England, together with cash in
tills and ATMs, have been excluded from the table as the carrying amount is deemed an appropriate approximation of fair value.
Group
2024
2023
Fair value
Fair
Carrying
Fair value
Fair
Carrying
Level 1
Level 2
Level 3
value
value
Level 1
Level 2
Level 3
value
value
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Loans and advances to customers
\u2014
\u2014
198,376
198,376
199,408
\u2014
\u2014
205,917
205,917
207,435
Loans and advances to banks
\u2014
1,032
\u2014
1,032
1,032
\u2014
1,080
\u2014
1,080
1,080
Reverse repurchase agreements - non-
trading
\u2014
10,342
\u2014
10,342
10,338
\u2014
12,470
\u2014
12,470
12,468
Other financial assets at amortised cost
3,190
\u2014
\u2014
3,190
3,408
144
\u2014
\u2014
144
152
3,190
11,374
198,376
212,940
214,186
144
13,550
205,917
219,611
221,135
Liabilities
Deposits by customers
\u2014
185
180,282
180,467
180,967
\u2014
71
190,561
190,632
190,850
Deposits by banks
\u2014
13,934
39
13,973
13,993
\u2014
20,342
40
20,382
20,332
Repurchase agreements - non-trading
\u2014
8,622
\u2014
8,622
8,617
\u2014
8,413
\u2014
8,413
8,411
Debt securities in issue
21,173
12,910
1,771
35,854
35,673
1,689
30,743
1,189
33,621
33,910
Subordinated liabilities
1,129
10
1,622
2,761
2,385
\u2014
2,591
209
2,800
2,386
22,302
35,661
183,714
241,677
241,635
1,689
62,160
191,999
255,848
255,889
Company
2024
2023
Fair value
Carrying
Fair value
Carrying
Level 1
Level 2
Level 3
Fair value
value
Level 1
Level 2
Level 3
Fair value
value
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Loans and advances to customers
\u2014
\u2014
216,851
216,851
217,780
\u2014
\u2014
222,208
222,208
223,511
Loans and advances to banks
\u2014
926
\u2014
926
926
\u2014
1,052
\u2014
1,052
1,052
Reverse repurchase agreements - non-trading
\u2014
10,342
\u2014
10,342
10,338
\u2014
12,470
\u2014
12,470
12,468
Other financial assets at amortised cost
3,190
1,977
\u2014
5,167
5,206
144
1,681
\u2014
1,825
1,833
3,190
13,245
216,851
233,286
234,250
144
15,203
222,208
237,555
238,864
Liabilities
Deposits by customers
\u2014
185
200,530
200,715
201,215
\u2014
71
207,216
207,287
207,516
Deposits by banks
\u2014
13,922
5,579
19,501
19,521
\u2014
20,326
5,424
25,750
25,699
Repurchase agreements - non-trading
\u2014
8,621
\u2014
8,621
8,617
\u2014
8,413
\u2014
8,413
8,411
Debt securities in issue
17,870
12,846
1,379
32,095
31,833
999
29,181
841
31,021
31,228
Subordinated liabilities
1,129
10
1,598
2,737
2,386
\u2014
2,592
209
2,801
2,387
18,999
35,584
209,086
263,669
263,572
999
60,583
213,690
275,272
275,241
The carrying value above of any financial assets and liabilities that are designated as hedged items in a portfolio (or macro) fair value hedge relationship excludes
gains and losses attributable to the hedged risk, as this is included as a separate line item on the balance sheet.
Valuation methodology for financial instruments carried at amortised cost
The valuation approach to specific categories of financial instruments is described below.
Assets:
Loans and advances to customers
The approach to estimating the fair value of loans and advances to customers has been determined by discounting expected cash flows to reflect either current
market rates or credit spreads relevant to the specific industry of the borrower. The determination of their fair values is an area of considerable estimation and
uncertainty as there is no observable market and values are significantly affected by customer behaviour.
i) Advances secured on residential property
The fair value of the mortgage portfolio is calculated by discounting contractual cash flows by different spreads for each LTV Band, after taking account of expected
customer prepayment rates. The spread is based on new business interest rates derived from publicly available competitor market information.
ii) Corporate loans
The determination of the fair values of performing loans is calculated by discounting the contractual cash flows and also deducting other costs relating to expected
credit losses, cost of capital, credit risk capital, operational risk capital, cost of funding and operating costs.
iii) Other loans
These consist of unsecured personal loans, credit cards, overdrafts and consumer (auto) finance. The weighted average lives of these portfolios are typically short
and relate to relatively new business. For unsecured personal loans and consumer (auto) finance loans, a small surplus or deficit has been recognised based on the
differential between existing portfolio margins and the current contractual interest rates.
Loans and advances to banks
These comprise secured loans, short-term placements with banks including collateral and unsettled financial transactions. The secured loans have been valued
based on a discounted spread for the term of the loans using valuation technique A as described above. The carrying amount of the other items is deemed a
reasonable approximation of their fair value, as the transactions are very short-term in duration.
Reverse repurchase agreements - non-trading
The fair value of the reverse repurchase agreements - non trading has been estimated using valuation technique A as described above, using a spread appropriate to
the underlying collateral.
Other financial assets at amortised cost
These consist of asset backed securities and debt securities. The asset backed securities can be complex products and in some instances are valued with the
assistance of an independent, specialist valuation firm. These fair values are determined using industry-standard valuation techniques, including discounted
cash\u00a0flow models. The inputs to these models used in these valuation techniques include quotes from market makers, prices of similar assets, adjustments for
differences in credit spreads, and additional quantitative and qualitative research. The debt security investments consist of a portfolio of government debt securities.
The fair value of this portfolio has been determined using quoted market prices.
Liabilities:
Deposits by customers
The majority of deposit liabilities are payable on demand and therefore can be deemed short-term in nature with the fair value equal to the carrying value. Certain
of the deposit liabilities are at a fixed rate until maturity. The deficit/surplus of fair value over carrying value of these liabilities has been estimated by reference to
the market rates available at the balance sheet date for similar deposit liabilities of similar maturities. The fair value of such deposit liabilities has been estimated
using valuation technique A as described above.
Deposits by banks
The fair value of deposits by banks, including repos, has been estimated using valuation technique A as described above, discounted at the appropriate credit spread.
Repurchase agreements - non-trading
The fair value of the repurchase agreements - non trading has been estimated using valuation technique A as described above, discounted at a spread appropriate
to the underlying collateral.
Debt securities in issue and subordinated liabilities
Where reliable prices are available, the fair value of debt securities in issue and subordinated liabilities has been calculated using quoted market prices. Where
reliable prices are not available, internal models have been used to determine fair values, which take into account, among other things, contract terms and
observable market data, which include such factors as interest rates, credit risk and exchange rates. In all cases, when it is not possible to derive a valuation for a
particular feature of an instrument, management uses judgement to determine the fair value of the particular feature. In exercising this judgement, a variety of
tools are used including proxy observable data.
e) Fair values of financial instruments measured at fair value
The following tables summarise the fair values of the financial assets and liabilities accounted for at fair value at 31 December 2024 and 31 December 2023,
analysed by their levels in the fair value hierarchy - Level 1, Level 2 and Level 3.
Group
2024
2023
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Valuation
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
technique
Assets
Derivative financial instruments
Exchange rate contracts
\u2014
978
\u2014
978
\u2014
1,129
\u2014
1,129
A
Interest rate contracts
\u2014
1,675
\u2014
1,675
\u2014
2,216
1
2,217
A & C
Inflation rate contracts
\u2014
70
\u2014
70
\u2014
\u2014
\u2014
\u2014
A
Equity and credit contracts
\u2014
89
35
124
\u2014
98
35
133
B & D
Netting
\u2014
(1,643)
\u2014
(1,643)
\u2014
(2,047)
\u2014
(2,047)
\u2014
1,169
35
1,204
\u2014
1,396
36
1,432
Other financial assets at FVTPL
Loans and advances to customers
\u2014
\u2014
44
44
\u2014
\u2014
46
46
A
Debt securities
\u2014
56
36
92
\u2014
167
49
216
A, B & D
\u2014
56
80
136
\u2014
167
95
262
Financial assets at FVOCI
Debt securities
8,805
201
34
9,040
8,293
188
\u2014
8,481
D
8,805
201
34
9,040
8,293
188
\u2014
8,481
Total assets at fair value
8,805
1,426
149
10,380
8,293
1,751
131
10,175
Liabilities
Derivative financial instruments
Exchange rate contracts
\u2014
430
\u2014
430
\u2014
508
\u2014
508
A
Interest rate contracts
\u2014
1,894
\u2014
1,894
\u2014
2,336
1
2,337
A & C
Equity and credit contracts
\u2014
7
14
21
\u2014
11
9
20
B & D
Netting
\u2014
(1,643)
\u2014
(1,643)
\u2014
(2,047)
\u2014
(2,047)
\u2014
688
14
702
\u2014
808
10
818
Other financial liabilities at FVTPL
Debt securities in issue
\u2014
355
\u2014
355
\u2014
369
\u2014
369
A
Structured deposits
\u2014
605
\u2014
605
\u2014
426
\u2014
426
A
Zero Amortising Guaranteed Notes
\u2014
95
\u2014
95
\u2014
104
\u2014
104
D
\u2014
1,055
\u2014
1,055
\u2014
899
\u2014
899
Total liabilities at fair value
\u2014
1,743
14
1,757
\u2014
1,707
10
1,717
Company
2024
2023
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Valuation
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
technique
Assets
Derivative financial instruments
Exchange rate contracts
\u2014
1,243
\u2014
1,243
\u2014
1,289
\u2014
1,289
A
Interest rate contracts
\u2014
1,685
3
1,688
\u2014
2,187
133
2,320
A & C
Inflation rate contracts
\u2014
70
\u2014
70
\u2014
\u2014
\u2014
\u2014
A
Equity and credit contracts
\u2014
89
35
124
\u2014
98
35
133
B & D
Netting
\u2014
(1,643)
\u2014
(1,643)
\u2014
(2,047)
\u2014
(2,047)
\u2014
1,444
38
1,482
\u2014
1,527
168
1,695
Other financial assets at FVTPL
Loans and advances to customers
\u2014
\u2014
44
44
\u2014
\u2014
46
46
A
Debt securities and other debt
instruments
\u2014
56
\u2014
56
\u2014
168
\u2014
168
C
\u2014
56
44
100
\u2014
168
46
214
Financial assets at FVOCI
Debt securities
8,805
201
34
9,040
8,293
188
\u2014
8,481
D
8,805
201
34
9,040
8,293
188
\u2014
8,481
Total assets at fair value
8,805
1,701
116
10,622
8,293
1,883
214
10,390
Liabilities
Derivative financial instruments
Exchange rate contracts
\u2014
456
\u2014
456
\u2014
580
\u2014
580
A
Interest rate contracts
\u2014
1,933
1,840
3,773
\u2014
2,350
1,071
3,421
A & C
Equity and credit contracts
\u2014
7
14
21
\u2014
11
9
20
B
Netting
\u2014
(1,643)
\u2014
(1,643)
\u2014
(2,047)
\u2014
(2,047)
\u2014
753
1,854
2,607
\u2014
894
1,080
1,974
Other financial liabilities at FVTPL
Debt securities in issue
\u2014
355
\u2014
355
\u2014
369
\u2014
369
A
Structured deposits
\u2014
605
\u2014
605
\u2014
426
\u2014
426
A
Zero Amortising Guaranteed Notes
\u2014
95
\u2014
95
\u2014
104
\u2014
104
D
\u2014
1,055
\u2014
1,055
\u2014
899
\u2014
899
Total liabilities at fair value
\u2014
1,808
1,854
3,662
\u2014
1,793
1,080
2,873
Transfers between levels of the fair value hierarchy
In 2024 there were no significant (2023: \u00a322m) transfers of financial instruments between levels of the fair value hierarchy.
f) Fair value adjustments
The internal models incorporate assumptions that Santander UK believes would be made by a market participant to establish fair value. Fair value adjustments
are\u00a0adopted when Santander UK considers that there are additional factors that would be considered by a market participant that are not incorporated in the
valuation model.
Santander UK classifies fair value adjustments as either \u2018risk-related\u2019 or \u2018model-related\u2019. The fair value adjustments form part of the portfolio fair value and are
included in the balance sheet values of the product types to which they have been applied.
The fair value adjustments are set out in the following table:
Group
2024
2023
\u00a3m
\u00a3m
Risk-related:
- Bid-offer and trade specific adjustments
6
(6)
- Uncertainty
4
6
- Credit risk adjustment
1
1
- Funding fair value adjustment
\u2014
1
11
2
Day One profit
\u2014
1
11
3
Company
2024
2023
\u00a3m
\u00a3m
Risk-related:
- Bid-offer and trade specific adjustments
8
(6)
- Uncertainty
4
6
- Credit risk adjustment
1
1
- Funding fair value adjustment
\u2014
1
13
2
Day One profit
\u2014
1
13
3
Risk-related adjustments
Risk-related adjustments are driven, in part, by the magnitude of Santander UK\u2019s market or credit risk exposure, and by external market factors, such as the size of
market spreads.
(i) Bid-offer and trade specific adjustments
Portfolios are marked at bid or offer, as appropriate. Valuation models will typically generate mid-market values. The bid-offer adjustment reflects the cost
that\u00a0would be incurred if substantially all residual net portfolio market risks were closed using available hedging instruments or by disposing of or unwinding
the\u00a0position. For debt securities, the bid-offer spread is based on a market price at an individual security level. For other products, the major risk types are identified.
For each risk type, the net portfolio risks are first classified into buckets, and then a bid-offer spread is applied to each risk bucket based upon the market bid-offer
spread for the relevant hedging instrument.
(ii) Uncertainty
Certain model inputs may be less readily determinable from market data, and/or the choice of model itself may be more subjective. In these circumstances, a
range\u00a0of possible values exists that the financial instrument or market parameter may assume, and an adjustment may be needed to reflect the likelihood that
in\u00a0estimating the fair value of the financial instrument, market participants would adopt more conservative values for uncertain parameters and/or model
assumptions than those used in the valuation model.
(iii) Credit risk adjustment
Credit risk adjustments comprise credit and debit valuation adjustments. The credit valuation adjustment (CVA) is an adjustment to the valuation of OTC derivative
contracts to reflect within fair value the possibility that the counterparty may default, and Santander UK may not receive the full market value of the transactions.
The debit valuation adjustment (DVA) is an adjustment to the valuation of the OTC derivative contracts to reflect within the fair value the possibility that Santander
UK may default, and that Santander UK may not pay full market value of the transactions.
Santander UK calculates a separate CVA and DVA for each Santander UK legal entity, and within each entity for each counterparty to which the entity has exposure.
Santander UK calculates the CVA by applying the probability of default of the counterparty to the expected positive exposure to the counterparty, and multiplying
the result by the loss expected in the event of default i.e. LGD. Conversely, Santander UK calculates the DVA by applying the PD of the Santander UK group, to the
expected positive exposure of the counterparty to Santander UK and multiplying the result by the LGD. Both calculations are performed over the life of the potential
exposure.
For most products Santander UK uses a simulation methodology to calculate the expected positive exposure to a counterparty. This incorporates a range of
potential exposures across the portfolio of transactions with the counterparty over the life of the portfolio. The simulation methodology includes credit mitigants
such as counterparty netting agreements and collateral agreements with the counterparty.
(iv) Funding fair value adjustment (FFVA)
The FFVA is an adjustment to the valuation of OTC derivative positions to include the net cost of funding uncollateralised derivative positions. This is calculated by
applying a suitable funding cost to the expected future funding exposure of any uncollateralised component of the OTC derivative portfolio.
", "dimensions": { "concept": "ifrs-full:DisclosureOfFairValueOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-630": { "value": "
Group
2024
2023
Fair value
Fair
Carrying
Fair value
Fair
Carrying
Level 1
Level 2
Level 3
value
value
Level 1
Level 2
Level 3
value
value
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Loans and advances to customers
\u2014
\u2014
198,376
198,376
199,408
\u2014
\u2014
205,917
205,917
207,435
Loans and advances to banks
\u2014
1,032
\u2014
1,032
1,032
\u2014
1,080
\u2014
1,080
1,080
Reverse repurchase agreements - non-
trading
\u2014
10,342
\u2014
10,342
10,338
\u2014
12,470
\u2014
12,470
12,468
Other financial assets at amortised cost
3,190
\u2014
\u2014
3,190
3,408
144
\u2014
\u2014
144
152
3,190
11,374
198,376
212,940
214,186
144
13,550
205,917
219,611
221,135
Liabilities
Deposits by customers
\u2014
185
180,282
180,467
180,967
\u2014
71
190,561
190,632
190,850
Deposits by banks
\u2014
13,934
39
13,973
13,993
\u2014
20,342
40
20,382
20,332
Repurchase agreements - non-trading
\u2014
8,622
\u2014
8,622
8,617
\u2014
8,413
\u2014
8,413
8,411
Debt securities in issue
21,173
12,910
1,771
35,854
35,673
1,689
30,743
1,189
33,621
33,910
Subordinated liabilities
1,129
10
1,622
2,761
2,385
\u2014
2,591
209
2,800
2,386
22,302
35,661
183,714
241,677
241,635
1,689
62,160
191,999
255,848
255,889
Company
2024
2023
Fair value
Carrying
Fair value
Carrying
Level 1
Level 2
Level 3
Fair value
value
Level 1
Level 2
Level 3
Fair value
value
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Loans and advances to customers
\u2014
\u2014
216,851
216,851
217,780
\u2014
\u2014
222,208
222,208
223,511
Loans and advances to banks
\u2014
926
\u2014
926
926
\u2014
1,052
\u2014
1,052
1,052
Reverse repurchase agreements - non-trading
\u2014
10,342
\u2014
10,342
10,338
\u2014
12,470
\u2014
12,470
12,468
Other financial assets at amortised cost
3,190
1,977
\u2014
5,167
5,206
144
1,681
\u2014
1,825
1,833
3,190
13,245
216,851
233,286
234,250
144
15,203
222,208
237,555
238,864
Liabilities
Deposits by customers
\u2014
185
200,530
200,715
201,215
\u2014
71
207,216
207,287
207,516
Deposits by banks
\u2014
13,922
5,579
19,501
19,521
\u2014
20,326
5,424
25,750
25,699
Repurchase agreements - non-trading
\u2014
8,621
\u2014
8,621
8,617
\u2014
8,413
\u2014
8,413
8,411
Debt securities in issue
17,870
12,846
1,379
32,095
31,833
999
29,181
841
31,021
31,228
Subordinated liabilities
1,129
10
1,598
2,737
2,386
\u2014
2,592
209
2,801
2,387
18,999
35,584
209,086
263,669
263,572
999
60,583
213,690
275,272
275,241
Loans and advances to banks
These comprise secured loans, short-term placements with banks including collateral and unsettled financial transactions. The secured loans have been valued
based on a discounted spread for the term of the loans using valuation technique A as described above. The carrying amount of the other items is deemed a
reasonable approximation of their fair value, as the transactions are very short-term in duration.
39. OFFSETTING FINANCIAL ASSETS AND LIABILITIES
The following table shows the impact of netting arrangements on:
\u2013 All financial assets and liabilities that are reported net on the balance sheet
\u2013 All derivative financial instruments and repurchase agreements and other similar secured lending and borrowing agreements that are subject to enforceable
master netting arrangements or similar agreements, but do not qualify for balance sheet netting.
The table identifies the amounts that have been offset in the balance sheet and those amounts that are covered by enforceable netting arrangements (offsetting
arrangements and financial collateral) but do not qualify for netting under the requirements described above.
For derivative contracts, the \u2018Financial instruments\u2019 column identifies financial assets and liabilities that are subject to set off under netting agreements, such as
the\u00a0ISDA Master Agreement or derivative exchange or clearing counterparty agreements, whereby all outstanding transactions with the same counterparty can
be\u00a0offset and close-out netting applied across all outstanding transactions covered by the agreements if an event of default or other predetermined events occur.
Financial collateral refers to cash and non-cash collateral obtained, typically daily or weekly, to cover the net exposure between counterparties by enabling the
collateral to be realised in an event of default or if other predetermined events occur. For repurchase and reverse repurchase agreements and other similar secured
lending and borrowing, the \u2018Financial instruments\u2019 column identifies financial assets and liabilities that are subject to set off under netting agreements, such as
global master repurchase agreements and global master securities lending agreements, whereby all outstanding transactions with the same counterparty can
be\u00a0offset and close-out netting applied across all outstanding transactions covered by the agreements if an event of default or other predetermined events occur.
Financial collateral typically comprises highly liquid securities which are legally transferred and can be liquidated if a counterparty defaults.
Santander UK engages in a variety of counterparty credit mitigation strategies in addition to netting and collateral arrangements. Therefore, the net amounts
presented in the tables below do not represent Santander UK\u2019s total credit exposure.
Group
Amounts subject to enforceable netting arrangements
Assets not
subject to
enforceable
netting
arrangements(2)
Effects of offsetting on balance sheet
Related amounts not offset
Gross
amounts
Amounts
offset
Net amounts
on balance
sheet
Financial
instruments
Financial
collateral (1)
Net
amount
Balance
sheet
total (3)
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Derivative financial assets
2,799
(1,643)
1,156
(407)
(711)
38
48
1,204
Reverse repurchase, securities borrowing & similar
agreements:
\u2013 Amortised cost
16,175
(5,837)
10,338
(63)
(10,275)
\u2014
\u2014
10,338
Loans and advances to customers and banks\u207d\u2074\u207e
5,421
(635)
4,786
\u2014
\u2014
4,786
195,654
200,440
24,395
(8,115)
16,280
(470)
(10,986)
4,824
195,702
211,982
Liabilities
Derivative financial liabilities
2,325
(1,643)
682
(407)
(127)
148
20
702
Repurchase, securities lending & similar agreements:
\u2013 Amortised cost
14,454
(5,837)
8,617
(63)
(8,554)
\u2014
\u2014
8,617
Deposits by customers and banks\u207d\u2074\u207e
635
(635)
\u2014
\u2014
\u2014
\u2014
194,960
194,960
17,414
(8,115)
9,299
(470)
(8,681)
148
194,980
204,279
2023
Assets
Derivative financial assets
3,429
(2,047)
1,382
(471)
(823)
88
50
1,432
Reverse repurchase, securities borrowing & similar
agreements:
\u2013 Amortised cost
15,625
(3,157)
12,468
(118)
(12,350)
\u2014
\u2014
12,468
Loans and advances to customers and banks\u207d\u2074\u207e
5,363
(790)
4,573
\u2014
\u2014
4,573
203,942
208,515
24,417
(5,994)
18,423
(589)
(13,173)
4,661
203,992
222,415
Liabilities
Derivative financial liabilities
2,838
(2,047)
791
(471)
(161)
159
27
818
Repurchase, securities lending & similar agreements:
\u2013 Amortised cost
11,568
(3,157)
8,411
(118)
(8,293)
\u2014
\u2014
8,411
Deposits by customers and banks\u207d\u2074\u207e
4,218
(790)
3,428
\u2014
\u2014
3,428
207,754
211,182
18,624
(5,994)
12,630
(589)
(8,454)
3,587
207,781
220,411
(1) Financial collateral is reflected at its fair value but has been limited to the net balance sheet exposure so as not to include any over-collateralisation.
(2) This column includes contractual rights of set-off that are subject to uncertainty under the laws of the relevant jurisdiction.
(3) The balance sheet total is the sum of \u2018Net amounts reported on the balance sheet\u2019 that are subject to enforceable netting arrangements and \u2018Amounts not subject to enforceable netting arrangements\u2019.
(4) The amounts offset within loans and advances to customers/banks or deposits by customers/banks relate to offset mortgages which are classified as either and that are subject to netting.
", "dimensions": { "concept": "ifrs-full:DisclosureOfLoansAndAdvancesToBanksExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-631": { "value": "
Reconciliation of fair value measurement in Level 3 of the fair value hierarchy
The following table sets out the movements in Level 3 financial instruments in 2024 and 2023:
Group
Assets
Liabilities
Derivatives
Other
financial
assets at
FVTPL
Financial
assets at
FVOCI
Total
Derivatives
Other
financial
liabilities
at FVTPL
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2024
36
95
\u2014
131
(10)
\u2014
(10)
Total gains/(losses) recognised:
Fair value movements(1)
6
1
\u2014
7
(5)
\u2014
(5)
Purchases
\u2014
\u2014
34
34
\u2014
\u2014
\u2014
Settlements
(7)
(16)
\u2014
(23)
1
\u2014
1
At 31 December 2024
35
80
34
149
(14)
\u2014
(14)
Gains/(losses) recognised in profit or loss/other comprehensive income relating to assets and
liabilities held at the end of the year(1)
6
1
\u2014
7
(5)
\u2014
(5)
At 1 January 2023
37
117
\u2014
154
(12)
(3)
(15)
Total gains/(losses) recognised:
Fair value movements(1)
10
\u2014
\u2014
10
(2)
\u2014
(2)
Purchases
\u2014
1
\u2014
1
\u2014
\u2014
\u2014
Netting(2)
\u2014
(3)
\u2014
(3)
\u2014
\u2014
\u2014
Settlements
(11)
(20)
\u2014
(31)
4
3
7
At 31 December 2023
36
95
\u2014
131
(10)
\u2014
(10)
(Losses)/gains recognised in profit or loss/other comprehensive income relating to assets
and liabilities held at the end of the year (1)
10
\u2014
\u2014
10
(2)
\u2014
(2)
(1) This relates to the effect of netting on the fair value of the credit linked notes due to a legal right of set-off between the principal amounts of the senior notes and the associated cash deposits. For more, see
\u2018ii)\u00a0Credit protection entities\u2019 in Note 18.
(2) Fair value movements relating to derivatives and other financial assets at FVTPL are recognised in other operating income in the income statement.
Company
Assets
Liabilities
Derivatives
Other
financial
assets at
FVTPL
Financial
assets at
FVOCI
Assets
held for
sale
Total
Derivatives
Other
financial
liabilities
at FVTPL
Liabilities
held for
sale
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2024
168
46
\u2014
\u2014
214
(1,080)
\u2014
\u2014
(1,080)
Total gains/(losses) recognised:
Fair value movements(1)
(125)
(1)
\u2014
\u2014
(126)
(754)
\u2014
\u2014
(754)
Purchases
2
\u2014
34
\u2014
36
(22)
\u2014
\u2014
(22)
Settlements
(7)
(1)
\u2014
\u2014
(8)
2
\u2014
\u2014
2
At 31 December 2024
38
44
34
\u2014
116
(1,854)
\u2014
\u2014
(1,854)
0
Gains/(losses) recognised in profit or loss/other
comprehensive income relating to assets and liabilities
held at the end of the year(1)
(125)
(1)
\u2014
\u2014
(126)
(754)
\u2014
\u2014
(754)
At 1 January 2023
33
47
\u2014
\u2014
80
(995)
(3)
\u2014
(998)
Total gains/(losses) recognised:
Fair value movements(1)
146
3
\u2014
\u2014
149
(67)
\u2014
\u2014
(67)
Purchases
\u2014
1
\u2014
\u2014
1
(27)
\u2014
\u2014
(27)
Netting(2)
\u2014
(3)
\u2014
\u2014
(3)
\u2014
\u2014
\u2014
\u2014
Settlements
(11)
(2)
\u2014
\u2014
(13)
9
3
\u2014
12
At 31 December 2023
168
46
\u2014
\u2014
214
(1,080)
\u2014
\u2014
(1,080)
0
Gains/(losses) recognised in profit or loss/other
comprehensive income relating to assets and liabilities held
at the end of the year(1)
146
3
\u2014
\u2014
149
(67)
\u2014
\u2014
(67)
(1) This relates to the effect of netting on the fair value of the credit linked notes due to a legal right of set-off between the principal amounts of the senior notes and the associated cash deposits. For more, see \u2018ii)
Credit protection entities\u2019 in Note 18.
(2) Fair value movements relating to derivatives and other financial assets at FVTPL are recognised in other operating income in the income statement. Fair value movements relating to financial assets at FVOCI are
recognised in the movement in fair value reserve (debt instruments).", "dimensions": { "concept": "ifrs-full:DisclosureOfEffectOfChangesInForeignExchangeRatesExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-632": { "value": "
40. ASSETS HELD FOR SALE
Sale of property
Buckingham House, Bletchley, was sold in 2024 with a gain of \u00a31m. The\u00a0sale of Santander House, Milton Keynes is expected to complete in 2025. As such, the
Santander UK group classified Santander House, which is included in the Corporate Centre segment and carried at the sales price, as held for sale.
At 31 December 2024 and 31 December 2023, assets held for sale comprised:
2024
2023
\u00a3m
\u00a3m
Assets
Property, plant and equipment
12
13
0
12
13
", "dimensions": { "concept": "ifrs-full:DisclosureOfNoncurrentAssetsHeldForSaleAndDiscontinuedOperationsExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-633": { "value": "
Sale of property
Buckingham House, Bletchley, was sold in 2024 with a gain of \u00a31m. The\u00a0sale of Santander House, Milton Keynes is expected to complete in 2025. As such, the
Santander UK group classified Santander House, which is included in the Corporate Centre segment and carried at the sales price, as held for sale.
At 31 December 2024 and 31 December 2023, assets held for sale comprised:
2024
2023
\u00a3m
\u00a3m
Assets
Property, plant and equipment
12
13
0
12
13
", "dimensions": { "concept": "ifrs-full:DisclosureOfNoncurrentAssetsOrDisposalGroupsClassifiedAsHeldForSaleExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } }, "f-634": { "value": "
41. EVENTS AFTER THE BALANCE SHEET DATE
There have been no significant events between 31 December 2024 and the date of approval of these financial statements which would require a change to or
additional disclosure in the financial statements.
", "dimensions": { "concept": "ifrs-full:DisclosureOfEventsAfterReportingPeriodExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2024-01-01T00:00:00/2025-01-01T00:00:00" } } } }