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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\u00a0Appetite. We focus 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. We take
proportionate steps to assess whether a customer will be able to repay the money borrowed including under foreseeable changes in their circumstances. We
do\u00a0this 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, 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. For Business Banking, we also consider business turnover and ongoing commitments
including any personal drawings and existing credit obligations.
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 to
individuals
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.
Unsecured lending to
businesses
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).
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
In 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 their 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\u00a0making 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 ESG 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 ESG 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, we may take credit insurance over
individual transactions, and at a portfolio level we execute significant risk transfer transactions, which typically also result in reducing 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\u00a0bank
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, we may take credit insurance over
individual transactions, and 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, 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 lending with ongoing credit limits, i.e. credit cards and overdrafts, monitoring might lead us to raise or lower credit limits.
Consumer Finance
In Consumer Finance, we track customer accounts using IT systems and data tools. Alongside our relationship with the customer, we use data provided by credit
reference agencies that shows how our customers manage their financial commitments. The Retail Risk framework ensures our portfolio stays within agreed limits.
We review our residual value risk on a regular basis, which allows us to spot changes in market trends early.
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 use a Watchlist for exposures subject to annual reviews to identify potential problem debt early. If a customer is on our Watchlist, it does not mean they have
defaulted. It just means their probability of default has increased, such as they have breached a covenant or lost a major contract.
We classify Watchlist cases as:
\u2013 Proactive: for heightened monitoring. We monitor these cases more often and where appropriate may consider more collateral.
\u2013 Intensive/Specialised: for more 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 on the Proactive watchlist, 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 on the Intensive or Specialised
watchlist, we consider it has suffered a SICR and apply a lifetime ECL for our loss allowance calculations. Further measures are considered which include additional
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 use multiple strategies to manage arrears, starting as soon as the day after a missed payment. We also contact customers who are up to date but may be at risk
of falling into arrears, offering support where needed. When a customer faces financial difficulties, we assess their situation to provide the most suitable help and
ensure they can manage their agreement while in arrears. The level of support depends on the customer\u2019s risk profile and individual circumstances, with solutions
tailored to their needs.
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 parties. Where required, we engage and hand over to our Restructuring & Recoveries team serious cases. 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 urgent or requires 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, the customer agreement is usually secured by a motor vehicle asset. We will seek to recover this asset if we are unable to rehabilitate the
customer, or they remain in arrears with no contact. As in Retail & Business Banking, we may use a debt collection agency or specialist law firm to recover any
remaining balance.
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. In few cases, we also help a customer more than once. This can happen if the plan to repay their debt does
not work and we have to draw up another one. When this happens more than once in a year, or more than three times in five years, we call it multiple forbearance.
We only use foreclosure or repossession 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 in arrears or 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 conversions to interest-only repayment plans due to financial difficulties are classed as forborne.
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
capitalise property charges due to a landlord. We pay them for the customer to avoid the lease being forfeited, although these are not classed as
forbearance. We may combine this help with term extensions and, in the past, interest-only concessions. In certain exceptional 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, or to pay more than the Contractual Monthly Payment in order to pay back accrued arrears.
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. Non-performing forborne accounts will be classified as Stage 3 and performing forborne accounts as Stage 2. All forborne accounts will
be\u00a0minimum 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 it will be Stage 3. A loan moves out of forbearance once the exit criteria below are met. We monitor the performance of all forborne loans.
Exit from forbearance criteria
Exit from
Conditions to be met
Cure
Non-performing to
Performing / Stage 3 to
Stage 2
For an account classified as non-performing forbearance/Stage 3 to exit, all the following conditions must be met:
\u2013 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
\u2013 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
\u2013 The customer has no other material default debt with us more than 90 days past due.
\u2013 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
Performing forbearance
to Non-Forborne / Stage
2 to Stage 1
For an account classified as forbearance/Stage 2 to exit, all the following conditions must be met:
\u2013 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
\u2013 The account no longer triggers SICR
\u2013 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 re-classified as non-performing and Stage 3 and the probation
period is reset.
Other forms of debt management and modifications
Retail & Business Banking
For mortgage customers we can offer other modifications (Contract Variations) at the customer's request that are not motivated by financial difficulty. These
modifications are not classified as forbearance. Within Mortgages and Everyday Banking, we do not classify insolvency solutions for any unsecured retail customers
as forbearance and 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
property\u00a0collateral.
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)
(unaudited)
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\u00a0is\u00a0unlikely. In some cases, we need to apply Judgemental Adjustments (JAs) to our model outputs. We use internal credit ratings for corporate borrowers and
individually assessed corporate 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. Our scenarios 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 2025, there were no significant differences between our
base case forecasts and the consensus views.
In 2025, as in previous years, we undertook a further peer benchmarking analysis of the economic scenarios, which for Q4-25 included the mean weighted analysis
for a selection of economic variables, including GDP, unemployment rate and HPI and CRE. This meant that we could compare our weighted scenarios against the
average of our peers to understand what differences there may be. The analysis demonstrated that our economic scenarios were in line with our peers.
In 2025, 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. 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 2025
In 2025, there were no major changes to our forecasting approach. We incorporated the OBR's March 2025 fan chart parameters to generate the GDP paths
(excluding the base case).
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 has GDP growth rising over the forecast period. As inflation gradually returns to the target rate, further Bank Rate
cuts\u00a0should support a recovery in business and consumer confidence. 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 Q3-25 with growth of 0.1% quarter-on-quarter. It was always likely that a slow-down from the above average quarterly growth rates of H1-25
would\u00a0happen, but with weak PMIs as well there is a concern that the economy will stagnate in Q4-25. However, Q3-25 GDP did see a slight improvement in household spending while
business investment posted a solid gain, 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 public finances. For 2026, we expect to see another year of positive growth,
although slightly weaker than in 2025 as real wage growth eases and the pace of interest rate cuts slows. 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%. It remains to be seen whether artificial intelligence (AI) or government policy can help to
improve\u00a0this.
Bank Rate: The Monetary Policy Committee (MPC) lowered Bank Rate four times in 2025 to 3.75%, in line with our expectations. Our base case assumes a further two rate cuts in 2026,
taking Bank Rate to 3.25% by the end of the year, with no further reductions thereafter. The outlook for further interest rate cuts remains uncertain, with the MPC stating that decisions to
lower Bank Rate further will be influenced by policymakers' views on how restrictive the current stance of monetary policy is.
House price growth: House prices grew marginally in 2025, helped in part by falling mortgage rates, despite some weakness towards the end of the year. House prices have proved
resilient given the heightened levels of uncertainty experienced throughout the year. Lower inflation and interest rates coupled with the gradual improvement in affordability, and
ongoing weakness in housing supply, is expected to ensure steady house price growth over the forecast period. We anticipate growth of c.2.5% year-on-year in 2026 with an annual
house price growth of c.3% year-on-year growth for the rest of the forecast period.
Unemployment rate: Recent data for unemployment indicates there is a loosening of the labour market in response to higher employment costs. However, some caution needs to be
taken as the unemployment data is still subject to problems with the ONS Labour Force Survey data. The unemployment rate has risen to over 5%, payroll numbers have fallen in most
months over the past year and redundancies have risen too, all chiming with weakness seen across various survey data. In terms of the forecast, we expect the unemployment rate to
remain elevated in the short term with businesses reporting pay pressures and squeezed margins as reasons for reducing headcounts. The unemployment rate then drops back to 4.3%
by the end of the forecast period, broadly in line with Bank of England's prediction for the natural rate of unemployment which is, as growth recovers, businesses and consumer
sentiment improves and CPI inflation remains at the target rate.
CRE price growth: After falling for seven quarters in a row, CRE prices stabilised in Q2-24 and have since risen in each of the five quarters through to Q3-25 as the sector continues to
recover, after two years of falling prices. Cuts in Bank Rate have likely helped prices to rise and despite monthly increases slowing towards the end of 2025, we expect CRE price growth
to stabilise throughout the forecast period around the 2% year-on-year mark.
In the medium-term, the projections assume that current demographic trends will continue, which could impact 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\u00a0particular sectors. The same can be said for current productivity trends, although there is potential for AI to improve growth towards the end of the decade.
However, our assumption of the average annual growth of c.1.5% for our medium-term forecasts is in line with the OBR\u2019s latest estimate of the UK\u2019s long run
average growth rate.
Key changes to our base case in 2025
For our base case, key changes were stronger GDP growth compared to 2024; higher unemployment exacerbated by the higher costs of employment businesses
have experienced since the 2024 Autumn Budget; lower house price growth which was affected by uncertainty and the Stamp Duty Land Tax change. Risks to the
base case remain with potential for rising geopolitical risks affecting the UK economy. Base case was updated to reflect back data changes to GDP pushing up
growth. We anticipate a modest rise in unemployment as firms adjust to the higher cost of employment.
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\u00a0include; (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\u00a0global economy in particular changes and additional frictions to supply chains; and (iv) the global economy recovering more swiftly from higher inflation and
supply constraints.
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 the unemployment rate set at 4%.
The other scenarios are:
One upside scenario
This scenario has quicker economic performance, that is driven by an improvement in the supply side of the economy that allows for stronger growth with lower
inflation. Inflation falls slightly below target at the start of the forecast period helped by lower wage growth, and stays just below the 2% target 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\u00a0higher 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, as does house price growth. Unemployment peaks at a lower
level and drops more quickly than the base case.
Two downside scenarios
The downside scenarios capture a range of risks, including further escalation of geopolitical events, continuing weaker investment (reflecting the unstable
environment and higher cost of employment), a continuing and significant mismatch between job vacancies and skills (as well as a smaller labour force) and a
return to upside inflation surprises causing interest rates to remain at higher levels for longer.
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 increase in
various employment costs mean growth is tempered and employment shrinks as businesses restructure to deal with the extra costs. 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. With inflation remaining above target, Bank Rate remains in restrictive territory and only gradually falls back, while
house prices fall as households look to downsize in response to persistently high rates of unemployment. 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 lower growth and productivity, which
feeds\u00a0across 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 the start of the scenario to stabilise demand. This fails to support the housing market with house values
falling sharply. Inflation below target and lower interest rates eventually eases some of the pressures on the UK economy and growth picks up in the medium-term.
Key changes to our alternative scenarios in 2025
In 2025, there were no key changes to the alternative scenarios, however the narratives were updated to reflect key risks.
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 2025 were:
Economic scenarios 1
Upside
Base case
Downside 1
Downside 2
Weighted
%
%
%
%
%
GDP
2024 (actual)
1.1
1.1
1.1
1.1
1.1
2025
1.5
1.4
1.3
1.3
1.4
2026
1.7
1.0
(0.4)
(3.3)
0.3
2027
2.3
1.4
\u2014
(1.0)
0.9
2028
2.5
1.4
0.4
1.4
1.3
2029
2.6
1.5
0.4
1.4
1.4
2030
2.7
1.5
0.7
1.4
1.5
Start to trough 2
n/a
n/a
(0.7)
(5.0)
n/a
5-year average increase/decrease 3
2.3
1.4
0.2
(0.1)
n/a
Bank Rate
2024 (actual)
4.75
4.75
4.75
4.75
4.75
2025
3.75
3.75
3.75
3.75
3.75
2026
3.00
3.25
4.50
2.00
3.40
2027
3.00
3.25
3.25
1.50
3.04
2028
3.00
3.25
3.25
2.50
3.14
2029
3.00
3.25
3.25
2.75
3.16
2030
3.00
3.25
3.25
3.00
3.19
5-year end period
3.00
3.25
3.25
3.00
n/a
5-year peak
3.75
3.75
4.50
3.75
3.79
HPI
2024 (actual)
4.0
4.0
4.0
4.0
4.0
2025
2.3
1.5
0.1
0.3
1.2
2026
4.1
2.5
(5.3)
(12.1)
(0.6)
2027
4.5
3.0
(4.4)
(11.9)
0.2
2028
4.5
3.0
0.7
(4.9)
2.1
2029
4.5
3.0
3.4
7.2
3.7
2030
4.5
3.0
4.4
7.1
3.9
Start to trough 2
n/a
n/a
(10.2)
(28.0)
(0.3)
5-year average increase/decrease 3
4.4
2.9
(0.7)
(3.7)
n/a
Unemployment
2024 (actual)
4.4
4.4
4.4
4.4
4.4
2025
4.7
4.8
5.1
5.2
4.9
2026
4.7
4.9
5.7
6.8
5.3
2027
4.1
4.7
5.8
8.5
5.3
2028
4.0
4.4
5.8
7.9
5.0
2029
4.0
4.3
5.9
7.1
4.9
2030
4.0
4.3
6.0
6.4
4.9
5-year end period
4.0
4.3
6.0
6.4
n/a
5-year peak
4.7
4.9
6.0
8.5
5.3
CRE price growth
2024 (actual)
0.5
0.5
0.5
0.5
0.5
2025
2.1
1.7
(0.2)
(0.8)
1.0
2026
6.7
2.2
(3.1)
(16.8)
(0.3)
2027
5.8
2.5
(1.9)
(7.2)
1.2
2028
3.6
2.2
(0.8)
2.5
1.8
2029
4.0
1.9
0.3
3.0
2.0
2030
2.3
1.5
2.4
3.9
2.1
Start to trough 2
n/a
n/a
(6.7)
(24.1)
(0.1)
5-year average increase/decrease 3
4.6
2.2
(0.9)
(3.8)
n/a
1 Our Q4-25 forecast used for ECL calculation. GDP is the calendar year annual growth rate. HPI and CRE price growth is Q4 annual growth rate and all other data points are at 31 December in the year indicated.
2 GDP, HPI and CRE start is taken from level at Q3-25.
3 This is the compound annual growth rate (CAGR) based on a 5-year period which represents an average annualised growth rate.
The table below sets out our macroeconomic assumptions and their evolution throughout the forecast period for each of the scenarios at 31 December 2024:
Economic scenarios 1
Upside
Base case
Downside 1
Downside 2
Weighted
%
%
%
%
%
GDP
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
Start to trough 2
n/a
n/a
(0.7)
(5.2)
n/a
5-year average increase/decrease 3
2.4
1.5
0.6
0.3
n/a
Bank Rate
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
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
Start to trough 2
n/a
n/a
(10.1)
(33.0)
(0.8)
5-year average increase/decrease 3
4.7
3.2
n/a
(3.7)
n/a
Unemployment
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
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
Start to trough 2
n/a
n/a
(7.4)
(24.7)
(1.2)
5-year average increase/decrease 3
4.0
2.3
(0.1)
(3.3)
n/a
1 Our Q4-24 forecast used for ECL calculation. GDP is the calendar year annual growth rate. HPI and CRE price growth is Q4 annual growth rate and all other data points are at 31 December in the year indicated.
2 GDP. HPI and CRE start is taken from level at Q3-24.
3 This is the compound annual growth rate (CAGR) based on a 5-year period which represents an average annualised growth rate.
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 2025 and 2024 were:
Upside
Base case
Downside 1
Downside 2
Weighted
Scenario weights
%
%
%
%
%
2025
15
50
25
10
100
2024
15
50
25
10
100
2025 compared to 2024
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 The loan term has ended, and the customer has not repaid the principal in full after three months.
\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.
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 2025 and 2024 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
Unsecured Lending 1
Personal loans
Credit cards
Overdrafts
30bps
30bps
30bps
30bps
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 2025 and 2024 were:
Retail & Business Banking
Consumer Finance
Corporate &
Commercial Banking
Corporate Centre
Mortgages
Unsecured Lending 1
Personal loans
Credit cards
Overdrafts
\u2013In forbearance
\u2013Default in last 24m
\u201330 Days Past Due (DPD) in
last 12m
\u2013Bankrupt
\u2013\u00a3100+ arrears
\u2013Over-indebted customers
\u2013Interest Only accounts 24m
pre-maturity
\u2013In Collections
\u2013Default in last 12m
\u2013\u00a350+ arrears
\u2013In forbearance
\u2013Default in last 12m
\u2013In Collections
\u2013\u00a3100+ arrears
\u2013Behaviour score
indicators
\u2013Fees suspended
\u2013Default in last 12m
\u2013Debit dormant >35
days
\u2013Any excess in month
\u2013In forbearance
\u2013Deceased or
Insolvent
\u2013Court \u2018Return of
goods\u2019 order or
Police watchlist
\u2013Agreement
terminated
\u2013Payment holiday
\u2013Cash Collection
\u2013In forbearance
\u2013Default in last 12m
\u2013Watchlist: proactive
management
\u2013Default at proxy
origination
\u2013Customers in a high-
risk sector
\u2013Watchlist: 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 calculated 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
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Modelled ECL
104
160
115
74
110
\u2014
563
Individually assessed
8
\u2014
\u2014
\u2014
180
\u2014
188
ECL before Judgemental Adjustments
112
160
115
74
290
\u2014
751
Judgemental Adjustments
Affordability and Cost of Living
2
\u2014
6
\u2014
1
\u2014
9
Adjustments to modelled forecast parameters
23
(5)
13
(11)
5
\u2014
25
Corporate single large exposure
\u2014
\u2014
\u2014
\u2014
27
\u2014
27
Total Judgemental Adjustments
25
(5)
19
(11)
33
\u2014
61
Total ECL
137
155
134
63
323
\u2014
812
Total JAs as a percentage of Total ECL (%)
8
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 Judgemental Adjustments
133
149
122
69
304
\u2014
777
Judgemental Adjustments
Affordability and Cost of Living
11
\u2014
6
\u2014
14
\u2014
31
Adjustments to modelled forecast parameters
28
1
8
\u2014
\u2014
\u2014
37
Corporate single large exposure
\u2014
\u2014
\u2014
\u2014
24
\u2014
24
Total Judgemental Adjustments
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
Judgemental Adjustments
\u2013 Affordability and Cost of Living: In 2025, Bank Rate continued to gradually reduce, with inflation stabilising and overall credit performance across UK retail
lending remained resilient. As a result, we reduced the Affordability and Cost of Living JAs, consistent with the improved macroeconomic outlook and continued
portfolio stability
\u2013 Adjustments to modelled forecast parameters: In 2025, our model monitoring framework identified where modelled outputs are not considered a true
representation of\u00a0the risks present in the current economic environment, resulting in under and over estimations. In addition, we introduced a new JA to
recalibrate LGDs in Consumer Finance.
\u2013 Corporate single large exposure: This JA\u00a0safeguards against individual large exposures defaulting over a short period. It was used for one case in 2025. This JA
was replenished in 2025 to reflect the risk of single name defaults, incurring high losses, as UK corporate insolvencies have risen to a 30-year high and
government support schemes have 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.
Climate change
In the last few years we continued to assess the risks to asset valuations in the customer loan book from both transitional and physical risks associated with climate
change. Similar to previous years, at 31 December 2025, 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 to
capture the inherent risk of diesel obsolescence and measurement uncertainty of electric vehicles;
\u2013 ECL calculations are based on forward-looking economic scenarios developed by management covering a period of five years, during which timeframe climate
change risks may not crystallise;
\u2013 The proportion of our mortgage loans subject to flood and subsidence risk is not considered 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 Flood
Re. The potential risk may increase over time if flooding due to climate change increases and/or insurance market circumstances change.
Internal credit risk rating for corporate borrowers (audited)
We use our internal rating to determine the Probability of Default for a client.
Individually assessed corporate 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\u00a03. In 2025, we also enhanced our approach to individually assess the ECL requirements for high Leveraged Finance Transactions in Stage 2. Individual
assessment uses the latest specific data\u00a0about 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 all these individually assessed loans, the ECL allowance was \u00a3180m at 31 December 2025 (2024: \u00a3162m). Had
management assumed the best or worst outcome for loss estimates, the ECL allowance could have been within a range of \u00a392m to \u00a3316m (2024: \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
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Exposure
293,493
293,493
293,493
293,493
293,493
Retail & Business Banking
201,290
201,290
201,290
201,290
201,290
Of which:
\u00a0 \u2013 Mortgages
180,339
180,339
180,339
180,339
180,339
Consumer Finance
4,979
4,979
4,979
4,979
4,979
Corporate & Commercial Banking
27,361
27,361
27,361
27,361
27,361
Corporate Centre
59,863
59,863
59,863
59,863
59,863
ECL
730
761
899
1,119
812
Retail & Business Banking
357
381
483
689
426
Of which:
\u00a0 \u2013 Mortgages
87
100
177
366
137
Consumer Finance
62
62
64
64
63
Corporate & Commercial Banking
311
318
352
366
323
Corporate Centre
\u2014
\u2014
\u2014
\u2014
\u2014
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
2025 compared to 2024
ECL reduced by \u00a357m, reflecting reductions across almost all portfolios. The decrease was mainly driven by mortgages due to refinance-related JA releases,
economic updates and the sale of high RWA mortgages in Q3-25.
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
2025
38
24
(43)
(126)
2024
34
21
(38)
(112)
2025 compared to 2024
The impairment model assumes that low LTV accounts experience a similar loss even when HPI decreases, and the impact on the ECL is limited. These results are
consistent with the prior period, although updated economic forecasts project slightly larger fluctuations.
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 use 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\u00a0assess 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 users, 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 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
\u2013 Monitoring trends: we track ECL and Stage classification over time and against our internal budgets and forecasts, with triggers set accordingly.
SANTANDER UK GROUP LEVEL \u2013 CREDIT RISK REVIEW
The credit risk balances in these credit risk review sections include interest we have charged to the customer\u2019s account, but not accrued interest that we have not
charged to the account yet, unless otherwise stated.
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
2025
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Cash and balances at central banks
29.4
\u2014
29.4
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
29.4
Financial assets at amortised cost:
Loans and advances to customers: 3
\u2013 Residential Mortgages 4
167.3
(0.1)
167.2
13.1
\u2014
13.1
\u2014
(169.9)
\u2014
10.4
\u2013 Corporate loans
20.4
(0.2)
20.2
7.7
\u2014
7.7
\u2014
(15.7)
\u2014
12.2
\u2013 Finance leases
4.3
(0.1)
4.2
\u2014
\u2014
\u2014
\u2014
(4.2)
\u2014
\u2014
\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
5.5
(0.3)
5.2
14.7
(0.1)
14.6
\u2014
\u2014
\u2014
19.8
\u2013 Amounts due from fellow Banco Santander group
subsidiaries and JVs
5.0
\u2014
5.0
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
5.0
Total loans and advances to customers
203.3
(0.7)
202.6
35.9
(0.1)
35.8
\u2014
(189.8)
\u2014
48.6
\u2013 Loans and advances to banks
1.0
\u2014
1.0
0.7
\u2014
0.7
\u2014
\u2014
\u2014
1.7
\u2013 Reverse repurchase agreements \u2013 non trading
17.7
\u2014
17.7
2.2
\u2014
2.2
\u2014
(16.5)
(1.2)
2.2
\u2013 Other financial assets at amortised cost
4.0
\u2014
4.0
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
4.0
Total financial assets at amortised cost
226.0
(0.7)
225.3
38.8
(0.1)
38.7
\u2014
(206.3)
(1.2)
56.5
Financial assets at fair value at FVOCI:
\u2013 Debt securities
5.2
\u2014
5.2
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
5.2
Total financial assets at FVOCI
5.2
\u2014
5.2
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
5.2
Total
260.6
(0.7)
259.9
38.8
(0.1)
38.7
\u2014
(206.3)
(1.2)
91.1
2024
Cash and balances at central banks
29.9
\u2014
29.9
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
29.9
Financial assets at amortised cost:
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 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
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 \u2013 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
2025
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Financial assets at FVTPL:
\u2013 Derivative financial instruments
0.9
(0.4)
\u2014
(0.4)
0.1
\u2013 Other financial assets at FVTPL
0.1
\u2014
\u2014
\u2014
0.1
Total
1.0
(0.4)
\u2014
(0.4)
0.2
2024
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
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
2025
\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
11.2
31.6
80.9
46.1
15.4
6.2
5.0
6.9
(0.7)
202.6
\u00a0 \u00a0 \u2013Stage 1
11.0
31.0
77.9
41.0
12.4
2.9
0.7
6.8
(0.1)
183.6
\u00a0 \u00a0 \u2013Stage 2
0.2
0.6
3.0
5.1
3.0
3.3
2.1
0.1
(0.3)
17.1
\u00a0 \u00a0 \u2013Stage 3
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
2.2
\u2014
(0.3)
1.9
Of which mortgages:
10.6
29.7
75.5
39.3
6.7
3.0
2.4
0.1
(0.1)
167.2
\u00a0 \u00a0 \u2013Stage 1
10.4
29.1
72.4
34.3
4.3
0.4
0.1
\u2014
\u2014
151.0
\u00a0 \u00a0 \u2013Stage 2
0.2
0.5
3.1
5.0
2.4
2.6
1.0
\u2014
\u2014
14.8
\u00a0 \u00a0 \u2013Stage 3
\u2014
0.1
\u2014
\u2014
\u2014
\u2014
1.3
0.1
(0.1)
1.4
Total off\u2013balance sheet
10.1
8.9
8.5
4.0
1.9
0.9
0.7
3.8
(0.1)
38.7
\u00a0 \u00a0 \u2013Stage 1
10.1
8.8
8.3
3.8
1.7
0.7
0.4
3.8
\u2014
37.6
\u00a0 \u00a0 \u2013Stage 2
\u2014
0.1
0.2
0.2
0.2
0.2
0.2
\u2014
(0.1)
1.0
\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
2025
\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
0.4
\u2014
0.7
0.3
\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
1.7
\u2013 Stage 3
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
0.3
\u2014
0.3
13.6
Of which mortgages:
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
0.1
\u2014
0.1
0.1
\u2013 Stage 1
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2013 Stage 2
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2013 Stage 3
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
0.1
\u2014
0.1
6.7
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
2024
\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
5.8
31.3
81.8
46.4
15.6
6.8
5.4
7.1
(0.8)
199.4
\u2013 Stage 1
5.7
30.6
78.1
40.5
12.4
2.8
0.6
6.9
(0.1)
177.5
\u2013 Stage 2
0.1
0.7
3.7
5.9
3.2
3.9
2.4
0.1
(0.3)
19.7
\u2013 Stage 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
\u2013 Stage 1
5.1
29.3
72.9
35.0
4.0
0.4
\u2014
\u2014
\u2014
146.7
\u2013 Stage 2
0.1
0.5
3.6
5.8
2.5
2.9
1.3
\u2014
(0.1)
16.6
\u2013 Stage 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
\u2013 Stage 1
6.9
8.8
8.8
4.0
1.7
0.5
0.4
3.3
\u2014
34.4
\u2013 Stage 2
\u2014
0.1
0.2
0.2
0.2
0.3
0.2
\u2014
(0.1)
1.1
\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
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
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 performance (audited)
Customer Loans
12 month
Gross write-
offs
Loan Loss
Allowances
Total
Stage 1
Stage 2
Stage 3 1
2025
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
%
\u00a3m
\u00a3m
Retail & Business Banking
173.5
156.2
15.7
1.6
0.95
168
384
\u2013 Mortgages
167.3
151.0
14.8
1.5
0.88
15
137
\u2013 Credit Cards
3.1
2.6
0.4
0.1
2.88
55
137
\u2013 Unsecured Personal Loans
2.0
1.8
0.2
\u2014
1.07
65
57
\u2013 Overdrafts
0.4
0.2
0.2
\u2014
6.87
24
37
\u2013 Business Banking
0.7
0.6
0.1
\u2014
5.65
9
16
Consumer Finance
5.0
4.6
0.4
\u2014
0.96
27
63
Corporate & Commercial Banking
18.9
16.9
1.4
0.6
3.42
53
282
Corporate Centre
\u2014
\u2014
\u2014
\u2014
0.15
\u2014
\u2014
Total Drawn
197.4
177.7
17.5
2.2
1.18
248
729
Retail & Business Banking
27.8
27.0
0.8
\u2014
\u2014
42
\u2013 Mortgages
13.1
12.8
0.3
\u2014
\u2014
\u2014
\u2013 Credit Cards
11.6
11.3
0.3
\u2014
\u2014
18
\u2013 Unsecured Personal Loans
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2013 Overdrafts
2.9
2.7
0.2
\u2014
\u2014
23
\u2013 Business Banking
0.2
0.2
\u2014
\u2014
\u2014
1
Consumer Finance
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Corporate & Commercial Banking
8.4
8.1
0.3
\u2014
\u2014
41
Corporate Centre
2.6
2.6
\u2014
\u2014
\u2014
\u2014
Total Undrawn
38.8
37.7
1.1
\u2014
\u2014
83
Total
236.2
215.4
18.6
2.2
248
812
2024
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
%
\u00a3m
\u00a3m
Retail & Business Banking
171.7
152.2
17.6
1.9
1.17
156
421
\u2013 Mortgages
165.1
146.7
16.7
1.7
1.08
9
172
\u2013 Credit Cards
2.8
2.3
0.5
\u2014
2.75
51
135
\u2013 Unsecured Personal Loans
2.1
1.9
0.2
\u2014
1.20
60
63
\u2013 Overdrafts
0.5
0.3
0.2
\u2014
7.40
26
37
\u2013 Business Banking
1.2
1.0
\u2014
0.2
7.10
10
14
Consumer Finance
4.8
4.5
0.3
\u2014
0.77
25
69
Corporate & Commercial Banking
18.0
15.2
2.1
0.7
3.96
49
294
Corporate Centre
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Total Drawn
194.5
171.9
20.0
2.6
1.42
230
784
Retail & Business Banking
25.0
24.3
0.7
\u2014
\u2014
37
\u2013 Mortgages
10.8
10.5
0.3
\u2014
\u2014
\u2014
\u2013 Credit Cards
10.9
10.7
0.2
\u2014
\u2014
15
\u2013 Unsecured Personal Loans
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2013 Overdrafts
3.1
2.9
0.2
\u2014
\u2014
20
\u2013 Business Banking
0.2
0.2
\u2014
\u2014
\u2014
2
Consumer Finance
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Corporate & Commercial Banking
8.3
7.7
0.5
0.1
\u2014
48
Corporate Centre
2.4
2.4
\u2014
\u2014
\u2014
\u2014
Total Undrawn
35.7
34.4
1.2
0.1
\u2014
85
Total
230.2
206.3
21.2
2.7
230
869
1 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.
Credit quality (audited)
Total on-balance sheet exposures at 31 December 2025 comprised \u00a3197.4bn of customer loans, loans and advances to banks of \u00a31.0bn, \u00a321.7bn of sovereign
assets measured at amortised cost, \u00a35.2bn of assets measured at FVOCI, and \u00a329.4bn of cash and balances at central banks.
Stage 1
Stage 2
Stage 3
Total
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Exposures
On-balance sheet
Retail & Business Banking
156,212
15,657
1,592
173,461
Consumer Finance
4,595
336
48
4,979
Corporate & Commercial Banking
16,859
1,445
623
18,927
Corporate Centre
57,305
\u2014
\u2014
57,305
Total on-balance sheet
234,971
17,438
2,263
254,672
Off\u2013balance sheet
Retail & Business Banking 1
27,026
752
51
27,829
Consumer Finance
\u2014
\u2014
\u2014
\u2014
Corporate & Commercial Banking
8,074
334
26
8,434
Corporate Centre
2,558
\u2014
\u2014
2,558
Total off\u2013balance sheet 2
37,658
1,086
77
38,821
Total exposures
272,629
18,524
2,340
293,493
ECL
On-balance sheet
Retail & Business Banking
54
207
123
384
Consumer Finance
14
21
28
63
Corporate & Commercial Banking
53
35
194
282
Corporate Centre
\u2014
\u2014
\u2014
\u2014
Total on-balance sheet
121
263
345
729
Off\u2013balance sheet
Retail & Business Banking
11
29
2
42
Consumer Finance
\u2014
\u2014
\u2014
\u2014
Corporate & Commercial Banking
25
9
7
41
Corporate Centre
\u2014
\u2014
\u2014
\u2014
Total off\u2013balance sheet
36
38
9
83
Total ECL
157
301
354
812
Coverage ratio 3
%
%
%
%
On-balance sheet
Retail & Business Banking
\u2014
1.3
7.7
0.2
Consumer Finance
0.3
6.2
58.4
1.3
Corporate & Commercial Banking
0.3
2.4
31.1
1.5
Corporate Centre
\u2014
\u2014
\u2014
\u2014
Total on-balance sheet
0.1
1.5
15.2
0.3
Off\u2013balance sheet
Retail & Business Banking
\u2014
3.9
2.7
0.1
Consumer Finance
\u2014
\u2014
\u2014
\u2014
Corporate & Commercial Banking
0.3
2.7
28.1
0.5
Corporate Centre
\u2014
\u2014
\u2014
\u2014
Total off-balance sheet
0.1
3.5
11.4
0.2
Total coverage
0.1
1.6
15.1
0.3
1 Off-balance sheet exposures include \u00a38.8bn 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 2024 comprised \u00a3194.5bn 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.
Stage 1
Stage 2
Stage 3
Total
2024
\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
On-balance sheet
Retail & Business Banking
52
223
146
421
Consumer Finance
16
27
26
69
Corporate & Commercial Banking
55
71
168
294
Corporate Centre
\u2014
\u2014
\u2014
\u2014
Total on-balance sheet
123
321
340
784
Off\u2013balance sheet
Retail & Business Banking
12
24
1
37
Consumer Finance
\u2014
\u2014
\u2014
\u2014
Corporate & Commercial Banking
18
14
16
48
Corporate Centre
\u2014
\u2014
\u2014
\u2014
Total off\u2013balance sheet
30
38
17
85
Total ECL
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.
Stage 2 analysis
The following table analyses our Stage 2 exposures and ECL allowance by the reason the exposure is classified as Stage 2.
2025
Backstop
Quantitative
Qualitative
JAs
Total
30 DPD
PD deterioration
PD threshold
Forbearance
Other 1
Mortgage
Refinancing
Retail & Business
Banking
Exposure \u00a3m
463
8,945
389
485
4,965
410
15,657
ECL \u00a3m
17
120
27
5
36
2
207
Of which
-Mortgages
Exposure \u00a3m
394
8,365
281
474
4,855
410
14,779
ECL \u00a3m
5
40
3
3
16
2
69
Consumer Finance
Exposure \u00a3m
31
170
13
2
120
\u2014
336
ECL \u00a3m
8
8
4
\u2014
1
\u2014
21
Corporate &
Commercial Banking
Exposure \u00a3m
92
771
90
22
470
\u2014
1,445
ECL \u00a3m
\u2014
16
6
\u2014
13
\u2014
35
Corporate Centre
Exposure \u00a3m
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
ECL \u00a3m
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Total Drawn
Exposure \u00a3m
586
9,886
492
509
5,555
410
17,438
ECL \u00a3m
25
144
37
5
50
2
263
Undrawn
ECL \u00a3m
\u2014
23
6
1
8
\u2014
38
Total Reported
Exposure \u00a3m
616
10,504
536
551
5,907
410
18,524
ECL \u00a3m
25
167
43
6
58
2
301
2024
Backstop
Quantitative
Qualitative
JAs
Total
30 DPD
PD deterioration
PD Threshold
Forbearance
Other 1
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
1 Mainly consists of Qualitative triggers for Mortgages, over-indebted customers c\u00a32.6bn (2024: c\u00a32.5bn)and Interest-only accounts 24 months pre-maturity c\u00a31.4bn (2024: c\u00a31.3bn), and for CCB customers
operating in a high-risk sector c\u00a30.2bn (2024:c\u00a30.7bn).
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
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Retail & Business Banking 1
173,461
384
173,077
27,829
42
Consumer Finance
4,979
63
4,916
\u2014
\u2014
Corporate & Commercial Banking
18,927
282
18,645
8,434
41
Corporate Centre
57,305
\u2014
57,305
2,558
\u2014
Total exposures presented in Credit Quality tables
254,672
729
253,943
38,821
83
Intercompany balances (including joint ventures)
5,055
Other items 2
916
Adjusted net carrying amount
259,914
Assets classified at FVTPL
934
Non-financial assets 3
5,989
Total assets per the Consolidated Balance Sheet
266,837
2024
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
Intercompany balances (including joint ventures)
4,832
Other items 2
848
Adjusted net carrying amount
253,107
Assets classified at FVTPL
1,340
Non-financial assets 3
5,497
Total assets per the Consolidated Balance Sheet
259,944
1 Off-balance sheet exposures include offers in the pipeline, undrawn flexible mortgage products and credit cards.
2 Other includes accrued interest of \u00a3725m (2024: \u00a3714m).
3 Non-financial assets include \u00a380m (2024:\u00a3738m) of Macro hedge of interest rate risk.
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 2025
259,883
153
21,218
359
2,759
357
283,860
869
Transfers from Stage 1 to Stage 22
(7,088)
(10)
7,088
10
\u2014
\u2014
\u2014
\u2014
Transfers from Stage 2 to Stage 12
6,231
78
(6,231)
(78)
\u2014
\u2014
\u2014
\u2014
Transfers to Stage 3 2
(239)
(1)
(852)
(31)
1,091
32
\u2014
\u2014
Transfers from Stage 3 2
2
\u2014
290
17
(292)
(17)
\u2014
\u2014
Transfers of financial instruments
(1,094)
67
295
(82)
799
15
\u2014
\u2014
Net ECL remeasurement on stage transfer3
\u2014
(69)
\u2014
83
\u2014
103
\u2014
117
Change in economic scenarios 4
\u2014
(10)
\u2014
7
\u2014
(5)
\u2014
(8)
Change to ECL models
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
New lending and assets purchased 5 8
54,405
41
1,086
38
44
13
55,535
92
Redemptions, repayments and assets sold6 8
(31,104)
(29)
(4,267)
(79)
(1,042)
(61)
(36,413)
(169)
Changes in risk parameters and other movements7
(9,461)
4
192
(25)
371
180
(8,898)
159
Assets written off 6
\u2014
\u2014
\u2014
\u2014
(591)
(248)
(591)
(248)
At 31 December 2025
272,629
157
18,524
301
2,340
354
293,493
812
Net movement in the period
12,746
4
(2,694)
(58)
(419)
(3)
9,633
(57)
ECL charge/(release) to the Income Statement
4
(58)
245
191
Less: Discount unwind
\u2014
\u2014
(21)
(21)
Less: Recoveries net of collection costs
\u2014
\u2014
23
23
Total ECL charge/(release) to the Income Statement
4
(58)
247
193
At 1 January 2024
268,211
170
23,595
461
3,071
361
294,877
992
Transfers from Stage 1 to Stage 22
(11,911)
(11)
11,911
11
\u2014
\u2014
\u2014
\u2014
Transfers from Stage 2 to Stage 12
9,395
118
(9,395)
(118)
\u2014
\u2014
\u2014
\u2014
Transfers to Stage 3 2
(434)
(2)
(845)
(34)
1,279
36
\u2014
\u2014
Transfers from Stage 3 2
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 transfer3
\u2014
(107)
\u2014
96
\u2014
122
\u2014
111
Change in economic scenarios 4
\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 8
33,894
43
1,170
58
164
40
35,228
141
Redemptions, repayments and assets sold6 8
(38,081)
(44)
(4,663)
(69)
(1,242)
(79)
(43,986)
(192)
Changes in risk parameters and other movements7
1,061
9
(3,333)
(73)
355
169
(1,917)
105
Assets written off 6
\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 charge/(release) 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 charge/(release) to the Income Statement
(17)
(102)
190
71
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\u00a0includes 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. Relates to the revaluation of ECL following the transfer of an exposure from one Stage to another.
4 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
5 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.
6 Exposures and ECL for facilities that existed at the start of the period but not at the end.
7 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.
8 New lending and assets purchased and Redemptions, repayments and assets sold categories include internal transfers.
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 table below shows 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. The
table excludes balances with central banks, cash at hand, interests in other entities, intangible assets, property, plant and equipment, tax assets, retirement benefit
assets and other assets.
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 includes balances with other Banco Santander group members. 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.
2025
2024
\u00a3bn
\u00a3bn
UK
282.6
271.5
Rest of Europe
12.1
11.4
Rest of world
4.8
6.9
Total
299.5
289.8
Borrower profile (audited)
Stock
New business 1
2025
2024
2025
2024
\u00a3m
%
\u00a3m
%
\u00a3m
%
\u00a3m
%
Home movers 2
69,963
42
69,354
42
10,516
41
6,736
45
Remortgagers 3
47,242
28
45,226
27
9,572
38
4,353
29
First-time buyers
34,776
21
35,702
22
3,426
14
3,262
22
Buy-to-let
15,287
9
14,931
9
1,718
7
567
4
167,268
100
165,213
100
25,232
100
14,918
100
Movement in mortgage lending
\u00a3bn
1 January 2025
165.2
New business
25.3
Redemptions and repayments
(23.2)
31 December 2025
167.3
2025
2024
Proportion of mortgage internal transfers retained online
79%
77%
2025
2024
Internal transfers (\u00a3bn) 4
36.0
32.2
Further advances and flexi drawdowns (\u00a3bn)
1.0
0.8
First-time buyers - gross lending (\u00a3bn )
3.4
3.3
1 The 2024 values exclude advances, flexible drawdowns and fees
2 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.
3 Remortgagers\u2019 are new customers who are taking a new mortgage with us.
4 Internal remortgages are where we moved our customers with maturing mortgages onto new ones.
2025 compared to 2024
In 2025 , mortgage asset stock increased with new business exceeding redemptions and repayments. New business increased in all sectors, with remortgages
causing the largest proportion of overall increase. The borrower profile remained stable.
Interest rate profile (audited)
The interest rate profile of our maturing mortgage asset stock was:
2025
2024
\u00a3m
%
\u00a3m
%
Fixed rate
153,172
92
148,495
90
Of which maturing:
\u2013 < 12 months
41,262
25
37,656
23
\u2013 Later than 1 year but no later than 3 years
83,529
50
84,704
51
\u2013 Later than 3 years but no later than 4 years
11,431
7
11,122
7
\u2013 Later than 4 years but no later than 5 years
14,011
8
11,645
7
\u2013 Later than 5 years
2,939
2
3,368
2
Variable rate
10,227
6
12,105
7
Standard Variable Rate (SVR)
2,434
1
3,007
2
Follow on Rate (FoR)
1,435
1
1,606
1
167,268
100
165,213
100
2025 compared to 2024
We continued to see customers refinance from reversion to fixed-rate products in 2025, influenced by high interest rates. Demand for fixed-rate products increased,
particularly with shorter fixed rate terms.
Geographical distribution (audited)
The geographical distribution of our mortgage asset stock and new business was:
Stock
New business 1
2025
2024
2025
2024
Region
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
London
43.9
42.7
6.6
4.1
Midlands and East Anglia
23.4
23.1
3.6
2.0
North
21.8
21.7
3.4
1.9
Northern Ireland
2.2
2.3
0.3
0.1
Scotland
6.0
6.0
1.0
0.6
South East excluding London
52.7
52.3
7.6
4.6
South West, Wales and other
17.3
17.1
2.7
1.6
167.3
165.2
25.2
14.9
1 The 2024 values exclude advances, flexible drawdown and fees.
2025 compared to 2024
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 2.91(2024: 2.93).
Mortgage loan size (audited)
The split of our mortgage asset by size was:
Mortgage loan size
2025
2024
>\u00a31.0m
3%
2%
\u00a30.5m to \u00a31.0m
11%
10%
\u00a30.25m to \u00a30.5m
32%
31%
<\u00a30.25m
54%
57%
Average loan size (stock) 1
\u00a3201k
\u00a3193k
Average loan size (new business)
\u00a3254k
\u00a3246k
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.
2025
2024
Stock
Stage 3
New
Business
Stock
Stage 3
New
Business
Total
ECL
Total
ECL
Total
ECL
Total
ECL
LTV
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Up to 50%
75,743
29
705
10
5,373
76,122
33
880
13
3,407
>50-60%
33,122
17
270
6
4,375
33,067
21
317
8
2,394
>60-70%
27,776
21
210
9
3,803
29,171
27
254
10
2,311
>70-80%
18,466
19
122
7
5,214
17,132
27
150
12
3,458
>80-90%
9,385
15
64
7
4,352
7,989
19
72
8
2,445
>90-100%
2,503
10
30
4
2,099
1,452
12
38
7
888
>100%
273
26
49
14
16
280
33
56
20
15
167,268
137
1,450
57
25,232
165,213
172
1,767
78
14,918
Collateral value 1
167,234
\u00a0
1,441
25,232
165,176
1,756
14,918
%
%
%
%
%
%
Average balance weighted LTV 2
52
52
65
51
51
64
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 \u00a3240m (2024: \u00a3244m).
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) + ...) /(Loan 1 balance + Loan 2 balance+...).
The balance weighted average LTV of new business in the period in London was 64% (2024: 64%).
2025 compared to 2024
Collateral quality remained strong in 2025, with reductions in both ECL and Stage 3 balances. Average balance weighted LTVs of stock were broadly flat, whilst
new\u00a0business contribution increased due to an improved trading strategy covering price competitiveness, propositions, and service. 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
For credit performance details, see the Credit performance section in Santander UK Group level \u2013 Credit risk review.
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\u00a0
73 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 2025
157,268
10
16,973
84
1,785
78
176,026
172
Transfers from Stage 1 to Stage 22
(5,651)
\u2014
5,651
\u2014
\u2014
\u2014
\u2014
\u2014
Transfers from Stage 2 to Stage 12
4,863
14
(4,863)
(14)
\u2014
\u2014
\u2014
\u2014
Transfers to Stage 3 2
(123)
\u2014
(465)
(5)
588
5
\u2014
\u2014
Transfers from Stage 3 2
\u2014
\u2014
235
6
(235)
(6)
\u2014
\u2014
Transfers of financial instruments
(911)
14
558
(13)
353
(1)
\u2014
\u2014
Net ECL remeasurement on stage transfer3
\u2014
(14)
\u2014
14
\u2014
9
\u2014
9
Change in economic scenarios 4
\u2014
(6)
\u2014
\u2014
\u2014
(4)
\u2014
(10)
Change to ECL models
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
New lending and assets purchased 5 8
34,589
6
586
5
23
1
35,198
12
Redemptions, repayments and assets sold6 8
(20,975)
\u2014
(3,125)
(20)
(652)
(21)
(24,752)
(41)
Changes in risk parameters and other movements7
(6,137)
1
49
(1)
21
10
(6,067)
10
Assets written off 6
\u2014
\u2014
\u2014
\u2014
(66)
(15)
(66)
(15)
At 31 December 2025
163,834
11
15,041
69
1,464
57
180,339
137
Net movement in the period
6,566
1
(1,932)
(15)
(321)
(21)
4,313
(35)
ECL charge/(release) to the Income Statement
1
(15)
(6)
(20)
Less: Discount unwind
\u2014
\u2014
(3)
(3)
Less: Recoveries net of collection costs
\u2014
\u2014
41
41
Total ECL charge/(release) to the Income Statement
1
(15)
32
18
At 1 January 2024
161,163
24
17,997
110
2,028
108
181,188
242
Transfers from Stage 1 to Stage 22
(9,873)
(1)
9,873
1
\u2014
\u2014
\u2014
\u2014
Transfers from Stage 2 to Stage 12
7,899
20
(7,899)
(20)
\u2014
\u2014
\u2014
\u2014
Transfers to Stage 3 2
(230)
\u2014
(524)
(7)
754
7
\u2014
\u2014
Transfers from Stage 3 2
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 transfer3
\u2014
(19)
\u2014
31
\u2014
15
\u2014
27
Change in economic scenarios 4
\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 8
21,758
4
315
3
33
1
22,106
8
Redemptions, repayments and assets sold6 8
(21,925)
(1)
(3,162)
(14)
(762)
(27)
(25,849)
(42)
Changes in risk parameters and other movements7
332
1
(1,764)
(21)
46
28
(1,386)
8
Assets written off 6
\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 charge/(release) to the Income Statement
(14)
(26)
12
(28)
Loan modifications
Forbearance1
The following table sets out the financial assets that were forborne while they had a loss allowance measured at lifetime ECL. (audited)
2025
2024
\u00a3m
\u00a3m
Financial assets modified in the period:
\u2013 Amortised cost before modification
542
555
\u2013Net modification loss
2
2
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
338
260
The balances at 31 December 2025 and 31 December 2024, analysed by their staging and the forbearance we applied, were:
Capitalisation
Term extension
Interest-only
Concessionary
interest rate
Reduced
repayment plan
Total
Loss allowances
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Stage 2
186
184
186
41
261
858
6
Stage 3
209
86
45
41
293
674
25
395
270
231
82
554
1,532
31
Proportion of portfolio
0.2%
0.2%
0.1%
0.1%
0.3%
0.9%
2024
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%
1 We base forbearance type on the first forbearance on the accounts.
At 31 December 2025, the proportion of the mortgage portfolio in forbearance was 0.9% (2024: 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 80% (2024: 83%). The weighted average LTV of all accounts in forbearance was 46%
(2024: 45%) compared to the weighted average portfolio LTV of 52% (2024: 51%).
At 31 December 2025, the carrying value of mortgages classified as multiple forbearance was \u00a313m (2024: \u00a39m).
Credit performance (audited)
2025
Total
Stage 1
Stage 2
Stage 3
Stage 3 ratio
Properties in
possession
Balance
weighted LTV
(indexed)
\u00a3m
\u00a3m
\u00a3m
\u00a3m
%
\u00a3m
%
Mortgage portfolio
167,268
151,039
14,779
1,450
0.88
74
52
Of which: Portfolio of particular interest 1
\u2013Interest only
35,637
29,866
5,155
616
1.74
35
49
\u2013Part interest-only, part repayment 2
11,495
9,978
1,357
160
1.40
9
53
\u2013Flexible
3,504
2,508
828
168
5.19
11
37
\u2013LTV >100%
273
88
136
49
17.91
18
116
\u2013Buy-to-let
15,287
14,166
1,070
51
0.33
4
59
2024
Mortgage portfolio
165,213
146,758
16,688
1,767
1.08
46
51
Of which: Portfolio of particular interest 1
\u2013Interest only
36,188
29,802
5,572
814
2.27
23
48
\u2013Part interest-only, part repayment 2
11,873
10,112
1,542
219
1.85
8
52
\u2013Flexible
4,333
3,190
933
210
5.25
8
38
\u2013LTV >100%
280
75
149
56
20.15
10
117
\u2013Buy-to-let
14,931
13,672
1,204
55
0.37
2
59
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 \u00a38,769m (2024: \u00a39,046m) and the non-interest-only part of the loan.
2025 compared to 2024
In 2025, the combined total proportion of interest-only loans, part interest-only, part repayment loans and flexible loans decreased to 30.3% (2024: 31.7%).
BTL mortgage balances increased by \u00a30.4bn to \u00a315.3bn (2024: \u00a314.9bn) driven by our pivot to growth strategy and affordability improvements. In 2025, the
balance weighted average LTV of mortgage total new BTL lending was 60% (2024: 59%).
Forbearance1
The balances at 31 December 2025 and 31 December 2024 were:
Interest-only 2
Flexible
LTV >100%
Buy-to-Let
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Total
239
43
8
18
\u2013 Stage 2
103
17
1
8
\u2013 Stage 3
136
26
7
10
2024
Total
272
56
9
18
\u2013 Stage 2
115
19
2
8
\u2013 Stage 3
157
37
7
10
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.
2025 compared to 2024
Mortgage forbearance stock reduced mainly due to portfolio sales and the improvement of our risk profile.
Credit performance (audited)
For credit performance details, see the Credit performance section in Santander UK Group level - Credit risk review. In addition, we monitor the following credit
performance metrics that are specific to Everyday Banking:
2025
2024
BBLS with 100% Government Guarantee (\u00a3bn)
0.6
1.1
% of credit card customers that repay balance in full each month (unaudited)
54%
56%
UPL average customer balance (\u00a3)
6,000
6,000
Loan modifications
Forbearance
The following table sets out the financial assets that were forborne while they had a loss allowance measured at lifetime ECL. (audited)
Credit cards
Overdrafts
Total
2025
\u00a3m
\u00a3m
\u00a3m
Financial assets modified in the period:
\u2013 Amortised cost before modification
18
13
31
\u2013 Net modification loss
12
4
16
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
1
\u2014
1
2024
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
The balances at 31 December 2025 and 31 December 2024 were:
Other unsecured
Business
banking
Personal loans
Credit cards
Overdrafts
Total other
unsecured
Total
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Total
6
1
70
26
97
103
\u2013 Stage 2
\u2014
1
15
10
26
26
\u2013 Stage 3
6
\u2014
55
16
71
77
2024
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
Other loan modifications
There were no other loan modifications made in 2025.
Credit performance (audited)
For credit performance details, see the Credit performance section in Santander UK Group level - Credit risk review. In addition, we monitor the following credit
performance metrics that are specific to Consumer Finance:
2025
2024
Consumer (auto) finance new business gross lending (\u00a3m)
2,029
1,593
Wholesale loans (stock finance) to car dealerships as approximate % of the Consumer loan book
13.8%
9.7%
% of lending collateralised on the vehicle
98%
95%
Average Consumer (auto) finance loan size (\u00a3)
19,551
16,045
2025 compared to 2024
In 2025, there was increased volume of new business, with larger quantities of electric vehicles and a marginal increase in the proportion of wholesale balances as
a % of the loan book.
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 2025 the amount of forborne assets net of deferred income was \u00a311m (2024: \u00a35.4m).
Other loan modifications
There were no other loan modifications made in 2025.
The gross carrying amount of financial assets for which the ECL allowance changed to a 12-month measurement at 31 December 2025 was \u00a32m (2024: \u00a36m).
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
73 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 2025
23,023
73
2,568
85
716
184
26,307
342
Transfers from Stage 1 to Stage 23
(681)
(3)
681
3
\u2014
\u2014
\u2014
\u2014
Transfers from Stage 2 to Stage 13
797
14
(797)
(14)
\u2014
\u2014
\u2014
\u2014
Transfers to Stage 3 3
(32)
\u2014
(291)
(12)
323
12
\u2014
\u2014
Transfers from Stage 3 3
\u2014
\u2014
22
2
(22)
(2)
\u2014
\u2014
Transfers of financial instruments
84
11
(385)
(21)
301
10
\u2014
\u2014
Net ECL remeasurement on stage transfer4
\u2014
(9)
\u2014
12
\u2014
44
\u2014
47
Change in economic scenarios 2
\u2014
(2)
\u2014
2
\u2014
(1)
\u2014
(1)
Change to ECL models
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
New lending and assets purchased 5
11,687
14
207
2
6
3
11,900
19
Redemptions, repayments and assets sold7
(6,105)
(10)
(732)
(29)
(237)
(24)
(7,074)
(63)
Changes in risk parameters and other movements6
(3,756)
1
121
(7)
77
38
(3,558)
32
Assets written offs 7
\u2014
\u2014
\u2014
\u2014
(214)
(53)
(214)
(53)
At 31 December 2025
24,933
78
1,779
44
649
201
27,361
323
Net movement in the period
1,910
5
(789)
(41)
(67)
17
1,054
(19)
ECL (release)/charge to the Income Statement
5
(41)
70
34
Less: Discount unwind
\u2014
\u2014
(11)
(11)
Less: Recoveries net of collection costs
\u2014
\u2014
5
5
Total ECL (release)/charge to the Income Statement
5
(41)
64
28
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 23
(1,101)
(3)
1,101
3
\u2014
\u2014
\u2014
\u2014
Transfers from Stage 2 to Stage 13
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 transfer4
\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 sold7
(5,203)
(24)
(1,149)
(29)
(254)
(42)
(6,606)
(95)
Changes in risk parameters and other movements6
(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
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
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
SME and mid corporate
\u2014
449
903
3,364
4,172
3,069
1,604
36
13,597
Commercial Real Estate
\u2014
\u2014
802
2,589
2,360
411
134
\u2014
6,296
Social Housing
120
2,032
5,581
\u2014
\u2014
\u2014
\u2014
\u2014
7,733
120
2,481
7,286
5,953
6,532
3,480
1,738
36
27,626
Of which:
\u2013 Stage 1
120
2,481
7,278
5,910
6,219
2,710
444
36
25,198
\u2013 Stage 2
\u2014
\u2014
8
43
313
770
645
\u2014
1,779
\u2013 Stage 3
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
649
\u2014
649
2024
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:
\u2013 Stage 1
13
2,236
7,115
4,991
6,159
2,597
382
82
23,575
\u2013 Stage 2
\u2014
\u2014
43
92
596
1,036
800
\u2014
2,567
\u2013 Stage 3
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
716
\u2014
716
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 2025 and 31 December 2024 this is mainly focused in the UK.
Credit risk mitigation (audited)
Gross exposure
Collateral
Net exposure
Stage 3
Stage 3
Stage 3
2025
\u00a3m
\u00a3m
\u00a3m
SME and mid corporate
572
141
431
Commercial Real Estate
77
74
3
649
215
434
2024
SME and mid corporate
639
209
430
Commercial Real Estate
77
71
6
716
280
436
Credit performance (audited)
For credit performance details, see the Credit performance section in Santander UK Group level \u2013 Credit risk review.
Loan modifications
Forbearance
The following table sets out the financial assets that were forborne while they had a loss allowance measured at lifetime ECL. (audited)
2025
2024
\u00a3m
\u00a3m
Financial assets modified in the period:
\u2013 Amortised cost before modification
160
232
\u2013 Net modification loss
15
5
Financial assets modified in the period (multiple forbearance):
\u2013 Amortised cost before modification
126
145
\u2013 Net modification loss
3
7
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
10
15
We only make forbearance arrangements for lending to customers. The balances at 31 December 2025 and 31 December 2024, analysed by their staging and the
forbearance we applied, were:
2025
2024
\u00a3m
\u00a3m
Stock 1
\u2013 Term extension
103
102
\u2013 Interest-only
193
229
\u2013 Other payment rescheduling
381
373
677
704
Of which:
\u2013 Stage 1
\u2014
40
\u2013 Stage 2
218
228
\u2013 Stage 3
459
436
677
704
Proportion of portfolio
2.5%
2.6%
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, the majority 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).
Credit performance (audited)
For credit performance details, see the Credit performance section in Santander UK Group level \u2013 Credit risk review.
Loan modifications (audited)
There were no loan modifications made in 2025 and 2024.
OUR KEY LIQUIDITY RISKS (audited)
Through our Liquidity Risk Appetite (LRA) framework, we manage our market liquidity risks, funding or structural liquidity risk and 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 by issuing
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 as well as the Bank of England's lending facilities. 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 2025 and 31 December 2024.
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
2025
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Deposits by banks
0.6
0.6
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Certificates of deposit and commercial paper
4.1
\u2014
\u2014
\u2014
\u2014
4.1
\u2014
\u2014
Senior unsecured
14.3
\u2014
1.4
\u2014
0.5
12.4
\u2014
\u2014
Covered bonds
18.9
\u2014
\u2014
\u2014
\u2014
18.9
\u2014
\u2014
Securitisation and structured issuance
6.7
\u2014
\u2014
\u2014
\u2014
6.7
\u2014
\u2014
Of which:
- RMBS and ABS
5.6
\u2014
\u2014
\u2014
\u2014
5.6
\u2014
\u2014
TFSME
3.9
3.9
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Subordinated liabilities and equity
3.8
\u2014
\u2014
\u2014
\u2014
\u2014
1.9
1.9
Total wholesale funding
52.3
4.5
1.4
\u2014
0.5
42.1
1.9
1.9
Repos
9.0
\u2014
\u2014
9.0
\u2014
\u2014
\u2014
\u2014
Foreign exchange and hedge accounting
(1.0)
\u2014
\u2014
\u2014
\u2014
(1.0)
\u2014
\u2014
Other
3.3
2.1
\u2014
\u2014
0.8
0.3
0.1
\u2014
Balance sheet total
63.6
6.6
1.4
9.0
1.3
41.4
2.0
1.9
2024
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
12.2
\u2014
1.8
\u2014
0.4
10.0
\u2014
\u2014
Covered bonds
17.4
\u2014
\u2014
\u2014
\u2014
17.4
\u2014
\u2014
Securitisation and structured issuance
5.1
\u2014
\u2014
\u2014
\u2014
5.1
\u2014
\u2014
Of which:
- RMBS and ABS
3.9
\u2014
\u2014
\u2014
\u2014
3.9
\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
1 Consists of Perpetual Capital Securities. See Note 32 to the Consolidated Financial Statements.
2 This is included in our balance sheet total of \u00a3187,300m (2024:\u00a3180,967m).
3 Other consists of items in the course of transmission and other deposits. See Note 21 to the Consolidated Financial Statements.
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
2025
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Downstreamed from Santander UK Group Holdings plc to Santander UK plc1
Senior unsecured
0.5
\u2014
0.7
\u2014
0.8
2.0
2.0
5.7
1.3
11.0
Subordinated liabilities and equity (incl. AT1)
\u2014
0.2
\u2014
\u2014
\u2014
0.2
0.9
2.0
\u2014
3.1
0.5
0.2
0.7
\u2014
0.8
2.2
2.9
7.7
1.3
14.1
Other Santander UK plc
Deposits by banks
\u2014
\u2014
\u2014
0.4
0.2
0.6
\u2014
\u2014
\u2014
0.6
Certificates of deposit and commercial paper
0.5
3.1
0.5
\u2014
\u2014
4.1
\u2014
\u2014
\u2014
4.1
Senior unsecured
\u2014
\u2014
\u2014
\u2014
0.1
0.1
0.7
2.3
0.2
3.3
Covered bonds
\u2014
2.8
0.8
0.2
0.1
3.9
6.2
7.2
1.6
18.9
Securitisation & structured issuance 2
\u2014
0.5
0.7
0.2
0.2
1.6
1.5
3.0
\u2014
6.1
Of which:
\u2013 RMBS and ABS
\u2014
0.1
0.2
0.2
0.5
1.5
3.0
\u2014
5.0
TFSME
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
2.5
\u2014
1.4
3.9
Subordinated liabilities
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
0.2
0.5
0.7
0.5
6.4
2.0
0.8
0.6
10.3
10.9
12.7
3.7
37.6
Other group entities
Securitisation & structured issuance 3
\u2014
\u2014
0.6
\u2014
\u2014
0.6
\u2014
\u2014
\u2014
0.6
Total at 31 December 2025
1.0
6.6
3.3
0.8
1.4
13.1
13.8
20.4
5.0
52.3
Of which:
\u2013 Secured
\u2014
3.3
2.0
0.4
0.3
6.0
10.2
10.3
3.0
29.5
\u2013 Unsecured
1.0
3.3
1.3
0.4
1.1
7.1
3.6
10.1
2.0
22.8
2024
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
1 99% 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 2025 and 31 December 2024.
2025
2024
Sterling
US Dollar
Euro
Other
Sterling
US Dollar
Euro
Other
%
%
%
%
%
%
%
%
Downstreamed from Santander UK Group Holdings plc to Santander UK plc
Senior unsecured
19
68
12
1
25
62
12
1
Subordinated liabilities and equity (incl. AT1)
94
6
\u2014
\u2014
89
11
\u2014
\u2014
36
54
9
1
42
48
9
1
Other Santander UK plc
Deposits by banks
1
97
1
1
1
97
2
\u2014
Certificates of deposit and commercial paper
36
64
\u2014
\u2014
24
67
8
1
Senior unsecured
49
\u2014
51
\u2014
80
\u2014
20
\u2014
Covered bonds
49
8
39
4
48
9
40
3
Securitisation & structured issuance
100
\u2014
\u2014
\u2014
100
\u2014
\u2014
\u2014
TFSME
100
\u2014
\u2014
\u2014
100
\u2014
\u2014
\u2014
Subordinated liabilities
77
23
\u2014
\u2014
76
24
\u2014
\u2014
61
13
24
2
65
15
18
2
Other group entities
Securitisation & structured issuance
100
\u2014
\u2014
\u2014
100
\u2014
\u2014
\u2014
Total
55
24
20
1
60
23
16
1
Term issuance (audited)
In 2025, our external term issuance (sterling equivalent) was:
Sterling
US Dollar
Euro
Other
Total 2025
Total 2024
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Downstreamed from Santander UK Group Holdings plc to Santander UK plc
Senior unsecured
\u2014
3.0
\u2014
\u2014
3.0
0.8
Subordinated debt and equity (inc. AT1)
0.5
\u2014
\u2014
\u2014
0.5
0.4
0.5
3.0
\u2014
\u2014
3.5
1.2
Other Santander UK plc
Securitisations and other secured funding
1.7
\u2014
\u2014
\u2014
1.7
1.2
Of which:
\u2013 RMBS and ABS
1.7
\u2014
\u2014
\u2014
1.7
1.2
Covered bonds
1.0
\u2014
1.7
\u2014
2.7
5.9
Senior unsecured 1
0.3
\u2014
1.7
\u2014
2.0
0.1
3.0
\u2014
3.4
\u2014
6.4
7.2
Other group entities
Securitisations
0.6
\u2014
\u2014
\u2014
0.6
\u2014
Total gross issuances
4.1
3.0
3.4
\u2014
10.5
8.4
1 Credit linked notes are not included in the Term issuance table. As a result, 2024 has been restated to exclude \u00a30.4bn of CLN issuance.
2025 compared to 2024
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.
We issued \u00a310.5bn Sterling equivalent term issuance in 2025, including Covered Bond, RMBS, AT1 and Senior Unsecured issuances. We repaid \u00a37.1bn in TFSME in
2025, with an outstanding balance of \u00a33.9bn at 31 December 2025, of which \u00a32.5bn is due for repayment in 2027 and \u00a31.4bn is due in 2031. We expect to issue
\u00a38.0 to 12.0bn of term issuance in 2026, including the \u00a31.25bn equivalent issued in January 2026.
At 31 December 2025, 75% (2024 : 65%) of wholesale funding had a maturity of greater than one year, with an overall residual duration of 32 months (2024: 37
months).
On-balance sheet encumbered assets (audited)
Encumbered with counterparties other than central banks
Assets
positioned
at central
banks3
Covered
bonds
Securitisations
Other
Total
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cash and balances at central banks1,2
\u2014
\u2014
1,440
1,440
\u2014
Loans and advances to customers
27,428
9,038
100
36,566
41,857
Loans and advances to banks
\u2014
\u2014
238
238
\u2014
Other financial assets at amortised cost
\u2014
\u2014
1,282
1,282
\u2014
Financial assets at fair value through other comprehensive income
\u2014
\u2014
2,349
2,349
551
Total assets
27,428
9,038
5,409
41,875
42,408
2024
Cash and balances at central banks1,2
\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
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
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:
2025
2024
\u00a3m
\u00a3m
CET1 capital
10,601
9,791
AT1 capital
1,860
1,860
Tier 1 capital
12,461
11,651
Tier 2 capital
1,854
2,093
Total capital 1
14,315
13,744
1\u00a0 \u00a0 \u00a0 \u00a0 Capital resources include a transitional IFRS 9 benefit at 31 December 2025 of \u00a3nil (2024: \u00a312.2m).
Balance sheet allocation by market risk classification(audited)
We classify all assets and liabilities exposed to market risk as non-traded market risk, except for specific portfolios that must be classified as trading books for
regulatory purposes (such as portfolios involving the sale of derivatives or derivative-based products to clients). Some assets are also measured at fair value for
accounting reasons, such as those held 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 arises from providing banking products and services to our customers, as well as our structural balance sheet exposures. The risk
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 for central management. The only types of non-traded market risks we retain in these business
areas relate to short-term mismatches caused by forecasting variances such as prepayment risk and launch risk. These occur when customers repay their loans
earlier than expected, or when the actual take-up of new products differs from projections. Corporate Centre also manages our structural balance sheet exposures,
including interest rate risk, foreign exchange and Income Statement volatility risk. Interest rate risk includes margin compression risk, which is a Top risk for
Santander UK particularly in a falling rate environment where we are unable to reprice our deposits as quickly as mortgage assets.
Our non-traded market risk categories are:
Category
Description
Interest rate risk
Interest rate risk mainly consists of yield curve risk, which arises from timing mismatches in the repricing of fixed and variable rate assets, liabilities
and off-balance sheet instruments. It also includes margin compression risk, which arises when we are unable to reprice our deposits in line with our
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) is affected by changes in the credit spreads. These spreads represent the difference between the discount rate used to value the asset
or liability, and the corresponding underlying interest rate curve.
Foreign exchange risk
Our banking business is mainly conducted in sterling, so we have limited exposure to foreign exchange risk. Where exposure does arise from activities
such as raising money in foreign currencies and holding high quality foreign currency bonds in the eligible liquidity pool, we buy or sell relevant
currencies and use derivatives to manage the exposure to within low limits. For more on this, see \u2018Wholesale Funding\u2019 in the \u2018Liquidity Risk\u2019 section.
Income statement
volatility risk
Most of the assets and liabilities in our banking book are measured at amortised cost. However, we sometimes use derivatives to manage their risk
profiles. As all derivatives are accounted for at fair value, differences in their accounting treatment can create volatility in the Income Statement, even
when the derivative serves as an economic hedge of the underlying asset or liability.
NII and EVE sensitivities (audited)
The calculations for NII and EVE sensitivities to interest rate movements 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 used to forecast the changes to interest income and interest expense under different rate scenarios. It shows the combined
impact on net interest income over a given period \u2013 typically 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 EVE sensitivity measures 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 yield curve shifts.
Value at Risk (VaR) (audited)
VaR
\u2013 VaR estimates possible losses from market changes under normal (non-stressed) conditions.
\u2013 We use a historical simulation approach based on two years of historical daily price movements, and reported at a 99% confidence level.
The limitations of VaR
VaR is a standard risk measure, but it has limitations including:
\u2013 It assumes that historical data provides a reliable indicator of future outcomes.
\u2013 It uses end of day positions and may miss potentially higher risks arising during the day.
\u2013 It does not capture the losses on the 1% of days beyond the 99% confidence interval).
\u2013 It considers one day price movements which is reasonable for our business but does not cover positions that 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
We regularly compare VaR estimates with actual profit and loss results to confirm the accuracy of our models. If discrepancies arise, we investigate and adjust the
models as necessary.
Risk mitigation (audited)
Our largest residual interest rate risk exposure arises from structural deposit balances that are deemed to be insensitive to changes in market rates (including
current accounts, a portion of variable rate deposits and investable equity). We manage the risk, including margin compression risk, through Santander UK plc\u2019s
structural hedge which is designed to stabilise the NII on these balances. The structural hedge is achieved by investing these balances in a rolling portfolio of fixed
rate assets or receive fixed pay variable interest rate swaps. By locking in fixed returns for defined periods, the structural hedge secures a portion of future NII and
helps smooth the impact of interest rate changes on overall performance. The notional and duration of the structural hedge is reviewed regularly by ALCO.
We hedge the interest rate risk of the securities we hold for liquidity and investment purposes using interest rate swaps. We retain spread exposures, and\u00a0these are
the key drivers of the VaR and stress tests used to assess the risk of the portfolio. We mitigate Income Statement volatility mainly through hedge accounting and
measure hedge accounting ineffectiveness using VaR, monitored against a trigger and 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 residual foreign exchange positions tend to be minimal. 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\u00a0triggers.
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.
The table below shows how our net interest income would be affected by a 100bps parallel shift (both up and down) applied instantaneously to the yield curve at
31 December 2025 and 31 December 2024. Sensitivity to parallel shifts represents the amount of risk in a way that we think is both simple and scalable.
2025
2024
+100bps
-100bps
+100bps
-100bps
\u00a3m
\u00a3m
\u00a3m
\u00a3m
NII sensitivity (audited) 1
281
(195)
167
(201)
EVE sensitivity
(449)
540
(496)
425
1 Based on modelling assumptions of repricing behaviour.
", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialRiskManagementExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-1": { "value": "
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\u00a0Appetite. We focus 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. We take
proportionate steps to assess whether a customer will be able to repay the money borrowed including under foreseeable changes in their circumstances. We
do\u00a0this 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, 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. For Business Banking, we also consider business turnover and ongoing commitments
including any personal drawings and existing credit obligations.
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 to
individuals
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.
Unsecured lending to
businesses
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).
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
In 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 their 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\u00a0making 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 ESG 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 ESG 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, we may take credit insurance over
individual transactions, and at a portfolio level we execute significant risk transfer transactions, which typically also result in reducing 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\u00a0bank
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, we may take credit insurance over
individual transactions, and 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, 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 lending with ongoing credit limits, i.e. credit cards and overdrafts, monitoring might lead us to raise or lower credit limits.
Consumer Finance
In Consumer Finance, we track customer accounts using IT systems and data tools. Alongside our relationship with the customer, we use data provided by credit
reference agencies that shows how our customers manage their financial commitments. The Retail Risk framework ensures our portfolio stays within agreed limits.
We review our residual value risk on a regular basis, which allows us to spot changes in market trends early.
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 use a Watchlist for exposures subject to annual reviews to identify potential problem debt early. If a customer is on our Watchlist, it does not mean they have
defaulted. It just means their probability of default has increased, such as they have breached a covenant or lost a major contract.
We classify Watchlist cases as:
\u2013 Proactive: for heightened monitoring. We monitor these cases more often and where appropriate may consider more collateral.
\u2013 Intensive/Specialised: for more 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 on the Proactive watchlist, 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 on the Intensive or Specialised
watchlist, we consider it has suffered a SICR and apply a lifetime ECL for our loss allowance calculations. Further measures are considered which include additional
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 use multiple strategies to manage arrears, starting as soon as the day after a missed payment. We also contact customers who are up to date but may be at risk
of falling into arrears, offering support where needed. When a customer faces financial difficulties, we assess their situation to provide the most suitable help and
ensure they can manage their agreement while in arrears. The level of support depends on the customer\u2019s risk profile and individual circumstances, with solutions
tailored to their needs.
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 parties. Where required, we engage and hand over to our Restructuring & Recoveries team serious cases. 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 urgent or requires 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, the customer agreement is usually secured by a motor vehicle asset. We will seek to recover this asset if we are unable to rehabilitate the
customer, or they remain in arrears with no contact. As in Retail & Business Banking, we may use a debt collection agency or specialist law firm to recover any
remaining balance.
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. In few cases, we also help a customer more than once. This can happen if the plan to repay their debt does
not work and we have to draw up another one. When this happens more than once in a year, or more than three times in five years, we call it multiple forbearance.
We only use foreclosure or repossession 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 in arrears or 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 conversions to interest-only repayment plans due to financial difficulties are classed as forborne.
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
capitalise property charges due to a landlord. We pay them for the customer to avoid the lease being forfeited, although these are not classed as
forbearance. We may combine this help with term extensions and, in the past, interest-only concessions. In certain exceptional 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, or to pay more than the Contractual Monthly Payment in order to pay back accrued arrears.
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. Non-performing forborne accounts will be classified as Stage 3 and performing forborne accounts as Stage 2. All forborne accounts will
be\u00a0minimum 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 it will be Stage 3. A loan moves out of forbearance once the exit criteria below are met. We monitor the performance of all forborne loans.
Exit from forbearance criteria
Exit from
Conditions to be met
Cure
Non-performing to
Performing / Stage 3 to
Stage 2
For an account classified as non-performing forbearance/Stage 3 to exit, all the following conditions must be met:
\u2013 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
\u2013 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
\u2013 The customer has no other material default debt with us more than 90 days past due.
\u2013 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
Performing forbearance
to Non-Forborne / Stage
2 to Stage 1
For an account classified as forbearance/Stage 2 to exit, all the following conditions must be met:
\u2013 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
\u2013 The account no longer triggers SICR
\u2013 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 re-classified as non-performing and Stage 3 and the probation
period is reset.
Other forms of debt management and modifications
Retail & Business Banking
For mortgage customers we can offer other modifications (Contract Variations) at the customer's request that are not motivated by financial difficulty. These
modifications are not classified as forbearance. Within Mortgages and Everyday Banking, we do not classify insolvency solutions for any unsecured retail customers
as forbearance and 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
property\u00a0collateral.
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)
(unaudited)
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\u00a0is\u00a0unlikely. In some cases, we need to apply Judgemental Adjustments (JAs) to our model outputs. We use internal credit ratings for corporate borrowers and
individually assessed corporate 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. Our scenarios 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 2025, there were no significant differences between our
base case forecasts and the consensus views.
In 2025, as in previous years, we undertook a further peer benchmarking analysis of the economic scenarios, which for Q4-25 included the mean weighted analysis
for a selection of economic variables, including GDP, unemployment rate and HPI and CRE. This meant that we could compare our weighted scenarios against the
average of our peers to understand what differences there may be. The analysis demonstrated that our economic scenarios were in line with our peers.
In 2025, 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. 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 2025
In 2025, there were no major changes to our forecasting approach. We incorporated the OBR's March 2025 fan chart parameters to generate the GDP paths
(excluding the base case).
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 has GDP growth rising over the forecast period. As inflation gradually returns to the target rate, further Bank Rate
cuts\u00a0should support a recovery in business and consumer confidence. 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 Q3-25 with growth of 0.1% quarter-on-quarter. It was always likely that a slow-down from the above average quarterly growth rates of H1-25
would\u00a0happen, but with weak PMIs as well there is a concern that the economy will stagnate in Q4-25. However, Q3-25 GDP did see a slight improvement in household spending while
business investment posted a solid gain, 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 public finances. For 2026, we expect to see another year of positive growth,
although slightly weaker than in 2025 as real wage growth eases and the pace of interest rate cuts slows. 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%. It remains to be seen whether artificial intelligence (AI) or government policy can help to
improve\u00a0this.
Bank Rate: The Monetary Policy Committee (MPC) lowered Bank Rate four times in 2025 to 3.75%, in line with our expectations. Our base case assumes a further two rate cuts in 2026,
taking Bank Rate to 3.25% by the end of the year, with no further reductions thereafter. The outlook for further interest rate cuts remains uncertain, with the MPC stating that decisions to
lower Bank Rate further will be influenced by policymakers' views on how restrictive the current stance of monetary policy is.
House price growth: House prices grew marginally in 2025, helped in part by falling mortgage rates, despite some weakness towards the end of the year. House prices have proved
resilient given the heightened levels of uncertainty experienced throughout the year. Lower inflation and interest rates coupled with the gradual improvement in affordability, and
ongoing weakness in housing supply, is expected to ensure steady house price growth over the forecast period. We anticipate growth of c.2.5% year-on-year in 2026 with an annual
house price growth of c.3% year-on-year growth for the rest of the forecast period.
Unemployment rate: Recent data for unemployment indicates there is a loosening of the labour market in response to higher employment costs. However, some caution needs to be
taken as the unemployment data is still subject to problems with the ONS Labour Force Survey data. The unemployment rate has risen to over 5%, payroll numbers have fallen in most
months over the past year and redundancies have risen too, all chiming with weakness seen across various survey data. In terms of the forecast, we expect the unemployment rate to
remain elevated in the short term with businesses reporting pay pressures and squeezed margins as reasons for reducing headcounts. The unemployment rate then drops back to 4.3%
by the end of the forecast period, broadly in line with Bank of England's prediction for the natural rate of unemployment which is, as growth recovers, businesses and consumer
sentiment improves and CPI inflation remains at the target rate.
CRE price growth: After falling for seven quarters in a row, CRE prices stabilised in Q2-24 and have since risen in each of the five quarters through to Q3-25 as the sector continues to
recover, after two years of falling prices. Cuts in Bank Rate have likely helped prices to rise and despite monthly increases slowing towards the end of 2025, we expect CRE price growth
to stabilise throughout the forecast period around the 2% year-on-year mark.
In the medium-term, the projections assume that current demographic trends will continue, which could impact 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\u00a0particular sectors. The same can be said for current productivity trends, although there is potential for AI to improve growth towards the end of the decade.
However, our assumption of the average annual growth of c.1.5% for our medium-term forecasts is in line with the OBR\u2019s latest estimate of the UK\u2019s long run
average growth rate.
Key changes to our base case in 2025
For our base case, key changes were stronger GDP growth compared to 2024; higher unemployment exacerbated by the higher costs of employment businesses
have experienced since the 2024 Autumn Budget; lower house price growth which was affected by uncertainty and the Stamp Duty Land Tax change. Risks to the
base case remain with potential for rising geopolitical risks affecting the UK economy. Base case was updated to reflect back data changes to GDP pushing up
growth. We anticipate a modest rise in unemployment as firms adjust to the higher cost of employment.
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\u00a0include; (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\u00a0global economy in particular changes and additional frictions to supply chains; and (iv) the global economy recovering more swiftly from higher inflation and
supply constraints.
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 the unemployment rate set at 4%.
The other scenarios are:
One upside scenario
This scenario has quicker economic performance, that is driven by an improvement in the supply side of the economy that allows for stronger growth with lower
inflation. Inflation falls slightly below target at the start of the forecast period helped by lower wage growth, and stays just below the 2% target 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\u00a0higher 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, as does house price growth. Unemployment peaks at a lower
level and drops more quickly than the base case.
Two downside scenarios
The downside scenarios capture a range of risks, including further escalation of geopolitical events, continuing weaker investment (reflecting the unstable
environment and higher cost of employment), a continuing and significant mismatch between job vacancies and skills (as well as a smaller labour force) and a
return to upside inflation surprises causing interest rates to remain at higher levels for longer.
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 increase in
various employment costs mean growth is tempered and employment shrinks as businesses restructure to deal with the extra costs. 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. With inflation remaining above target, Bank Rate remains in restrictive territory and only gradually falls back, while
house prices fall as households look to downsize in response to persistently high rates of unemployment. 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 lower growth and productivity, which
feeds\u00a0across 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 the start of the scenario to stabilise demand. This fails to support the housing market with house values
falling sharply. Inflation below target and lower interest rates eventually eases some of the pressures on the UK economy and growth picks up in the medium-term.
Key changes to our alternative scenarios in 2025
In 2025, there were no key changes to the alternative scenarios, however the narratives were updated to reflect key risks.
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 2025 were:
Economic scenarios 1
Upside
Base case
Downside 1
Downside 2
Weighted
%
%
%
%
%
GDP
2024 (actual)
1.1
1.1
1.1
1.1
1.1
2025
1.5
1.4
1.3
1.3
1.4
2026
1.7
1.0
(0.4)
(3.3)
0.3
2027
2.3
1.4
\u2014
(1.0)
0.9
2028
2.5
1.4
0.4
1.4
1.3
2029
2.6
1.5
0.4
1.4
1.4
2030
2.7
1.5
0.7
1.4
1.5
Start to trough 2
n/a
n/a
(0.7)
(5.0)
n/a
5-year average increase/decrease 3
2.3
1.4
0.2
(0.1)
n/a
Bank Rate
2024 (actual)
4.75
4.75
4.75
4.75
4.75
2025
3.75
3.75
3.75
3.75
3.75
2026
3.00
3.25
4.50
2.00
3.40
2027
3.00
3.25
3.25
1.50
3.04
2028
3.00
3.25
3.25
2.50
3.14
2029
3.00
3.25
3.25
2.75
3.16
2030
3.00
3.25
3.25
3.00
3.19
5-year end period
3.00
3.25
3.25
3.00
n/a
5-year peak
3.75
3.75
4.50
3.75
3.79
HPI
2024 (actual)
4.0
4.0
4.0
4.0
4.0
2025
2.3
1.5
0.1
0.3
1.2
2026
4.1
2.5
(5.3)
(12.1)
(0.6)
2027
4.5
3.0
(4.4)
(11.9)
0.2
2028
4.5
3.0
0.7
(4.9)
2.1
2029
4.5
3.0
3.4
7.2
3.7
2030
4.5
3.0
4.4
7.1
3.9
Start to trough 2
n/a
n/a
(10.2)
(28.0)
(0.3)
5-year average increase/decrease 3
4.4
2.9
(0.7)
(3.7)
n/a
Unemployment
2024 (actual)
4.4
4.4
4.4
4.4
4.4
2025
4.7
4.8
5.1
5.2
4.9
2026
4.7
4.9
5.7
6.8
5.3
2027
4.1
4.7
5.8
8.5
5.3
2028
4.0
4.4
5.8
7.9
5.0
2029
4.0
4.3
5.9
7.1
4.9
2030
4.0
4.3
6.0
6.4
4.9
5-year end period
4.0
4.3
6.0
6.4
n/a
5-year peak
4.7
4.9
6.0
8.5
5.3
CRE price growth
2024 (actual)
0.5
0.5
0.5
0.5
0.5
2025
2.1
1.7
(0.2)
(0.8)
1.0
2026
6.7
2.2
(3.1)
(16.8)
(0.3)
2027
5.8
2.5
(1.9)
(7.2)
1.2
2028
3.6
2.2
(0.8)
2.5
1.8
2029
4.0
1.9
0.3
3.0
2.0
2030
2.3
1.5
2.4
3.9
2.1
Start to trough 2
n/a
n/a
(6.7)
(24.1)
(0.1)
5-year average increase/decrease 3
4.6
2.2
(0.9)
(3.8)
n/a
1 Our Q4-25 forecast used for ECL calculation. GDP is the calendar year annual growth rate. HPI and CRE price growth is Q4 annual growth rate and all other data points are at 31 December in the year indicated.
2 GDP, HPI and CRE start is taken from level at Q3-25.
3 This is the compound annual growth rate (CAGR) based on a 5-year period which represents an average annualised growth rate.
The table below sets out our macroeconomic assumptions and their evolution throughout the forecast period for each of the scenarios at 31 December 2024:
Economic scenarios 1
Upside
Base case
Downside 1
Downside 2
Weighted
%
%
%
%
%
GDP
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
Start to trough 2
n/a
n/a
(0.7)
(5.2)
n/a
5-year average increase/decrease 3
2.4
1.5
0.6
0.3
n/a
Bank Rate
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
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
Start to trough 2
n/a
n/a
(10.1)
(33.0)
(0.8)
5-year average increase/decrease 3
4.7
3.2
n/a
(3.7)
n/a
Unemployment
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
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
Start to trough 2
n/a
n/a
(7.4)
(24.7)
(1.2)
5-year average increase/decrease 3
4.0
2.3
(0.1)
(3.3)
n/a
1 Our Q4-24 forecast used for ECL calculation. GDP is the calendar year annual growth rate. HPI and CRE price growth is Q4 annual growth rate and all other data points are at 31 December in the year indicated.
2 GDP. HPI and CRE start is taken from level at Q3-24.
3 This is the compound annual growth rate (CAGR) based on a 5-year period which represents an average annualised growth rate.
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 2025 and 2024 were:
Upside
Base case
Downside 1
Downside 2
Weighted
Scenario weights
%
%
%
%
%
2025
15
50
25
10
100
2024
15
50
25
10
100
2025 compared to 2024
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 The loan term has ended, and the customer has not repaid the principal in full after three months.
\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.
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 2025 and 2024 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
Unsecured Lending 1
Personal loans
Credit cards
Overdrafts
30bps
30bps
30bps
30bps
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 2025 and 2024 were:
Retail & Business Banking
Consumer Finance
Corporate &
Commercial Banking
Corporate Centre
Mortgages
Unsecured Lending 1
Personal loans
Credit cards
Overdrafts
\u2013In forbearance
\u2013Default in last 24m
\u201330 Days Past Due (DPD) in
last 12m
\u2013Bankrupt
\u2013\u00a3100+ arrears
\u2013Over-indebted customers
\u2013Interest Only accounts 24m
pre-maturity
\u2013In Collections
\u2013Default in last 12m
\u2013\u00a350+ arrears
\u2013In forbearance
\u2013Default in last 12m
\u2013In Collections
\u2013\u00a3100+ arrears
\u2013Behaviour score
indicators
\u2013Fees suspended
\u2013Default in last 12m
\u2013Debit dormant >35
days
\u2013Any excess in month
\u2013In forbearance
\u2013Deceased or
Insolvent
\u2013Court \u2018Return of
goods\u2019 order or
Police watchlist
\u2013Agreement
terminated
\u2013Payment holiday
\u2013Cash Collection
\u2013In forbearance
\u2013Default in last 12m
\u2013Watchlist: proactive
management
\u2013Default at proxy
origination
\u2013Customers in a high-
risk sector
\u2013Watchlist: 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 calculated 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
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Modelled ECL
104
160
115
74
110
\u2014
563
Individually assessed
8
\u2014
\u2014
\u2014
180
\u2014
188
ECL before Judgemental Adjustments
112
160
115
74
290
\u2014
751
Judgemental Adjustments
Affordability and Cost of Living
2
\u2014
6
\u2014
1
\u2014
9
Adjustments to modelled forecast parameters
23
(5)
13
(11)
5
\u2014
25
Corporate single large exposure
\u2014
\u2014
\u2014
\u2014
27
\u2014
27
Total Judgemental Adjustments
25
(5)
19
(11)
33
\u2014
61
Total ECL
137
155
134
63
323
\u2014
812
Total JAs as a percentage of Total ECL (%)
8
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 Judgemental Adjustments
133
149
122
69
304
\u2014
777
Judgemental Adjustments
Affordability and Cost of Living
11
\u2014
6
\u2014
14
\u2014
31
Adjustments to modelled forecast parameters
28
1
8
\u2014
\u2014
\u2014
37
Corporate single large exposure
\u2014
\u2014
\u2014
\u2014
24
\u2014
24
Total Judgemental Adjustments
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
Judgemental Adjustments
\u2013 Affordability and Cost of Living: In 2025, Bank Rate continued to gradually reduce, with inflation stabilising and overall credit performance across UK retail
lending remained resilient. As a result, we reduced the Affordability and Cost of Living JAs, consistent with the improved macroeconomic outlook and continued
portfolio stability
\u2013 Adjustments to modelled forecast parameters: In 2025, our model monitoring framework identified where modelled outputs are not considered a true
representation of\u00a0the risks present in the current economic environment, resulting in under and over estimations. In addition, we introduced a new JA to
recalibrate LGDs in Consumer Finance.
\u2013 Corporate single large exposure: This JA\u00a0safeguards against individual large exposures defaulting over a short period. It was used for one case in 2025. This JA
was replenished in 2025 to reflect the risk of single name defaults, incurring high losses, as UK corporate insolvencies have risen to a 30-year high and
government support schemes have 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.
Climate change
In the last few years we continued to assess the risks to asset valuations in the customer loan book from both transitional and physical risks associated with climate
change. Similar to previous years, at 31 December 2025, 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 to
capture the inherent risk of diesel obsolescence and measurement uncertainty of electric vehicles;
\u2013 ECL calculations are based on forward-looking economic scenarios developed by management covering a period of five years, during which timeframe climate
change risks may not crystallise;
\u2013 The proportion of our mortgage loans subject to flood and subsidence risk is not considered 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 Flood
Re. The potential risk may increase over time if flooding due to climate change increases and/or insurance market circumstances change.
Internal credit risk rating for corporate borrowers (audited)
We use our internal rating to determine the Probability of Default for a client.
Individually assessed corporate 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\u00a03. In 2025, we also enhanced our approach to individually assess the ECL requirements for high Leveraged Finance Transactions in Stage 2. Individual
assessment uses the latest specific data\u00a0about 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 all these individually assessed loans, the ECL allowance was \u00a3180m at 31 December 2025 (2024: \u00a3162m). Had
management assumed the best or worst outcome for loss estimates, the ECL allowance could have been within a range of \u00a392m to \u00a3316m (2024: \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
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Exposure
293,493
293,493
293,493
293,493
293,493
Retail & Business Banking
201,290
201,290
201,290
201,290
201,290
Of which:
\u00a0 \u2013 Mortgages
180,339
180,339
180,339
180,339
180,339
Consumer Finance
4,979
4,979
4,979
4,979
4,979
Corporate & Commercial Banking
27,361
27,361
27,361
27,361
27,361
Corporate Centre
59,863
59,863
59,863
59,863
59,863
ECL
730
761
899
1,119
812
Retail & Business Banking
357
381
483
689
426
Of which:
\u00a0 \u2013 Mortgages
87
100
177
366
137
Consumer Finance
62
62
64
64
63
Corporate & Commercial Banking
311
318
352
366
323
Corporate Centre
\u2014
\u2014
\u2014
\u2014
\u2014
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
2025 compared to 2024
ECL reduced by \u00a357m, reflecting reductions across almost all portfolios. The decrease was mainly driven by mortgages due to refinance-related JA releases,
economic updates and the sale of high RWA mortgages in Q3-25.
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
2025
38
24
(43)
(126)
2024
34
21
(38)
(112)
2025 compared to 2024
The impairment model assumes that low LTV accounts experience a similar loss even when HPI decreases, and the impact on the ECL is limited. These results are
consistent with the prior period, although updated economic forecasts project slightly larger fluctuations.
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 use 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\u00a0assess 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 users, 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 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
\u2013 Monitoring trends: we track ECL and Stage classification over time and against our internal budgets and forecasts, with triggers set accordingly.
SANTANDER UK GROUP LEVEL \u2013 CREDIT RISK REVIEW
The credit risk balances in these credit risk review sections include interest we have charged to the customer\u2019s account, but not accrued interest that we have not
charged to the account yet, unless otherwise stated.
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
2025
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Cash and balances at central banks
29.4
\u2014
29.4
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
29.4
Financial assets at amortised cost:
Loans and advances to customers: 3
\u2013 Residential Mortgages 4
167.3
(0.1)
167.2
13.1
\u2014
13.1
\u2014
(169.9)
\u2014
10.4
\u2013 Corporate loans
20.4
(0.2)
20.2
7.7
\u2014
7.7
\u2014
(15.7)
\u2014
12.2
\u2013 Finance leases
4.3
(0.1)
4.2
\u2014
\u2014
\u2014
\u2014
(4.2)
\u2014
\u2014
\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
5.5
(0.3)
5.2
14.7
(0.1)
14.6
\u2014
\u2014
\u2014
19.8
\u2013 Amounts due from fellow Banco Santander group
subsidiaries and JVs
5.0
\u2014
5.0
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
5.0
Total loans and advances to customers
203.3
(0.7)
202.6
35.9
(0.1)
35.8
\u2014
(189.8)
\u2014
48.6
\u2013 Loans and advances to banks
1.0
\u2014
1.0
0.7
\u2014
0.7
\u2014
\u2014
\u2014
1.7
\u2013 Reverse repurchase agreements \u2013 non trading
17.7
\u2014
17.7
2.2
\u2014
2.2
\u2014
(16.5)
(1.2)
2.2
\u2013 Other financial assets at amortised cost
4.0
\u2014
4.0
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
4.0
Total financial assets at amortised cost
226.0
(0.7)
225.3
38.8
(0.1)
38.7
\u2014
(206.3)
(1.2)
56.5
Financial assets at fair value at FVOCI:
\u2013 Debt securities
5.2
\u2014
5.2
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
5.2
Total financial assets at FVOCI
5.2
\u2014
5.2
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
5.2
Total
260.6
(0.7)
259.9
38.8
(0.1)
38.7
\u2014
(206.3)
(1.2)
91.1
2024
Cash and balances at central banks
29.9
\u2014
29.9
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
29.9
Financial assets at amortised cost:
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 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
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 \u2013 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
2025
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Financial assets at FVTPL:
\u2013 Derivative financial instruments
0.9
(0.4)
\u2014
(0.4)
0.1
\u2013 Other financial assets at FVTPL
0.1
\u2014
\u2014
\u2014
0.1
Total
1.0
(0.4)
\u2014
(0.4)
0.2
2024
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
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
2025
\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
11.2
31.6
80.9
46.1
15.4
6.2
5.0
6.9
(0.7)
202.6
\u00a0 \u00a0 \u2013Stage 1
11.0
31.0
77.9
41.0
12.4
2.9
0.7
6.8
(0.1)
183.6
\u00a0 \u00a0 \u2013Stage 2
0.2
0.6
3.0
5.1
3.0
3.3
2.1
0.1
(0.3)
17.1
\u00a0 \u00a0 \u2013Stage 3
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
2.2
\u2014
(0.3)
1.9
Of which mortgages:
10.6
29.7
75.5
39.3
6.7
3.0
2.4
0.1
(0.1)
167.2
\u00a0 \u00a0 \u2013Stage 1
10.4
29.1
72.4
34.3
4.3
0.4
0.1
\u2014
\u2014
151.0
\u00a0 \u00a0 \u2013Stage 2
0.2
0.5
3.1
5.0
2.4
2.6
1.0
\u2014
\u2014
14.8
\u00a0 \u00a0 \u2013Stage 3
\u2014
0.1
\u2014
\u2014
\u2014
\u2014
1.3
0.1
(0.1)
1.4
Total off\u2013balance sheet
10.1
8.9
8.5
4.0
1.9
0.9
0.7
3.8
(0.1)
38.7
\u00a0 \u00a0 \u2013Stage 1
10.1
8.8
8.3
3.8
1.7
0.7
0.4
3.8
\u2014
37.6
\u00a0 \u00a0 \u2013Stage 2
\u2014
0.1
0.2
0.2
0.2
0.2
0.2
\u2014
(0.1)
1.0
\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
2025
\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
0.4
\u2014
0.7
0.3
\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
1.7
\u2013 Stage 3
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
0.3
\u2014
0.3
13.6
Of which mortgages:
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
0.1
\u2014
0.1
0.1
\u2013 Stage 1
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2013 Stage 2
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2013 Stage 3
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
0.1
\u2014
0.1
6.7
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
2024
\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
5.8
31.3
81.8
46.4
15.6
6.8
5.4
7.1
(0.8)
199.4
\u2013 Stage 1
5.7
30.6
78.1
40.5
12.4
2.8
0.6
6.9
(0.1)
177.5
\u2013 Stage 2
0.1
0.7
3.7
5.9
3.2
3.9
2.4
0.1
(0.3)
19.7
\u2013 Stage 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
\u2013 Stage 1
5.1
29.3
72.9
35.0
4.0
0.4
\u2014
\u2014
\u2014
146.7
\u2013 Stage 2
0.1
0.5
3.6
5.8
2.5
2.9
1.3
\u2014
(0.1)
16.6
\u2013 Stage 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
\u2013 Stage 1
6.9
8.8
8.8
4.0
1.7
0.5
0.4
3.3
\u2014
34.4
\u2013 Stage 2
\u2014
0.1
0.2
0.2
0.2
0.3
0.2
\u2014
(0.1)
1.1
\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
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
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 performance (audited)
Customer Loans
12 month
Gross write-
offs
Loan Loss
Allowances
Total
Stage 1
Stage 2
Stage 3 1
2025
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
%
\u00a3m
\u00a3m
Retail & Business Banking
173.5
156.2
15.7
1.6
0.95
168
384
\u2013 Mortgages
167.3
151.0
14.8
1.5
0.88
15
137
\u2013 Credit Cards
3.1
2.6
0.4
0.1
2.88
55
137
\u2013 Unsecured Personal Loans
2.0
1.8
0.2
\u2014
1.07
65
57
\u2013 Overdrafts
0.4
0.2
0.2
\u2014
6.87
24
37
\u2013 Business Banking
0.7
0.6
0.1
\u2014
5.65
9
16
Consumer Finance
5.0
4.6
0.4
\u2014
0.96
27
63
Corporate & Commercial Banking
18.9
16.9
1.4
0.6
3.42
53
282
Corporate Centre
\u2014
\u2014
\u2014
\u2014
0.15
\u2014
\u2014
Total Drawn
197.4
177.7
17.5
2.2
1.18
248
729
Retail & Business Banking
27.8
27.0
0.8
\u2014
\u2014
42
\u2013 Mortgages
13.1
12.8
0.3
\u2014
\u2014
\u2014
\u2013 Credit Cards
11.6
11.3
0.3
\u2014
\u2014
18
\u2013 Unsecured Personal Loans
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2013 Overdrafts
2.9
2.7
0.2
\u2014
\u2014
23
\u2013 Business Banking
0.2
0.2
\u2014
\u2014
\u2014
1
Consumer Finance
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Corporate & Commercial Banking
8.4
8.1
0.3
\u2014
\u2014
41
Corporate Centre
2.6
2.6
\u2014
\u2014
\u2014
\u2014
Total Undrawn
38.8
37.7
1.1
\u2014
\u2014
83
Total
236.2
215.4
18.6
2.2
248
812
2024
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
%
\u00a3m
\u00a3m
Retail & Business Banking
171.7
152.2
17.6
1.9
1.17
156
421
\u2013 Mortgages
165.1
146.7
16.7
1.7
1.08
9
172
\u2013 Credit Cards
2.8
2.3
0.5
\u2014
2.75
51
135
\u2013 Unsecured Personal Loans
2.1
1.9
0.2
\u2014
1.20
60
63
\u2013 Overdrafts
0.5
0.3
0.2
\u2014
7.40
26
37
\u2013 Business Banking
1.2
1.0
\u2014
0.2
7.10
10
14
Consumer Finance
4.8
4.5
0.3
\u2014
0.77
25
69
Corporate & Commercial Banking
18.0
15.2
2.1
0.7
3.96
49
294
Corporate Centre
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Total Drawn
194.5
171.9
20.0
2.6
1.42
230
784
Retail & Business Banking
25.0
24.3
0.7
\u2014
\u2014
37
\u2013 Mortgages
10.8
10.5
0.3
\u2014
\u2014
\u2014
\u2013 Credit Cards
10.9
10.7
0.2
\u2014
\u2014
15
\u2013 Unsecured Personal Loans
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2013 Overdrafts
3.1
2.9
0.2
\u2014
\u2014
20
\u2013 Business Banking
0.2
0.2
\u2014
\u2014
\u2014
2
Consumer Finance
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Corporate & Commercial Banking
8.3
7.7
0.5
0.1
\u2014
48
Corporate Centre
2.4
2.4
\u2014
\u2014
\u2014
\u2014
Total Undrawn
35.7
34.4
1.2
0.1
\u2014
85
Total
230.2
206.3
21.2
2.7
230
869
1 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.
Credit quality (audited)
Total on-balance sheet exposures at 31 December 2025 comprised \u00a3197.4bn of customer loans, loans and advances to banks of \u00a31.0bn, \u00a321.7bn of sovereign
assets measured at amortised cost, \u00a35.2bn of assets measured at FVOCI, and \u00a329.4bn of cash and balances at central banks.
Stage 1
Stage 2
Stage 3
Total
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Exposures
On-balance sheet
Retail & Business Banking
156,212
15,657
1,592
173,461
Consumer Finance
4,595
336
48
4,979
Corporate & Commercial Banking
16,859
1,445
623
18,927
Corporate Centre
57,305
\u2014
\u2014
57,305
Total on-balance sheet
234,971
17,438
2,263
254,672
Off\u2013balance sheet
Retail & Business Banking 1
27,026
752
51
27,829
Consumer Finance
\u2014
\u2014
\u2014
\u2014
Corporate & Commercial Banking
8,074
334
26
8,434
Corporate Centre
2,558
\u2014
\u2014
2,558
Total off\u2013balance sheet 2
37,658
1,086
77
38,821
Total exposures
272,629
18,524
2,340
293,493
ECL
On-balance sheet
Retail & Business Banking
54
207
123
384
Consumer Finance
14
21
28
63
Corporate & Commercial Banking
53
35
194
282
Corporate Centre
\u2014
\u2014
\u2014
\u2014
Total on-balance sheet
121
263
345
729
Off\u2013balance sheet
Retail & Business Banking
11
29
2
42
Consumer Finance
\u2014
\u2014
\u2014
\u2014
Corporate & Commercial Banking
25
9
7
41
Corporate Centre
\u2014
\u2014
\u2014
\u2014
Total off\u2013balance sheet
36
38
9
83
Total ECL
157
301
354
812
Coverage ratio 3
%
%
%
%
On-balance sheet
Retail & Business Banking
\u2014
1.3
7.7
0.2
Consumer Finance
0.3
6.2
58.4
1.3
Corporate & Commercial Banking
0.3
2.4
31.1
1.5
Corporate Centre
\u2014
\u2014
\u2014
\u2014
Total on-balance sheet
0.1
1.5
15.2
0.3
Off\u2013balance sheet
Retail & Business Banking
\u2014
3.9
2.7
0.1
Consumer Finance
\u2014
\u2014
\u2014
\u2014
Corporate & Commercial Banking
0.3
2.7
28.1
0.5
Corporate Centre
\u2014
\u2014
\u2014
\u2014
Total off-balance sheet
0.1
3.5
11.4
0.2
Total coverage
0.1
1.6
15.1
0.3
1 Off-balance sheet exposures include \u00a38.8bn 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 2024 comprised \u00a3194.5bn 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.
Stage 1
Stage 2
Stage 3
Total
2024
\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
On-balance sheet
Retail & Business Banking
52
223
146
421
Consumer Finance
16
27
26
69
Corporate & Commercial Banking
55
71
168
294
Corporate Centre
\u2014
\u2014
\u2014
\u2014
Total on-balance sheet
123
321
340
784
Off\u2013balance sheet
Retail & Business Banking
12
24
1
37
Consumer Finance
\u2014
\u2014
\u2014
\u2014
Corporate & Commercial Banking
18
14
16
48
Corporate Centre
\u2014
\u2014
\u2014
\u2014
Total off\u2013balance sheet
30
38
17
85
Total ECL
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.
Stage 2 analysis
The following table analyses our Stage 2 exposures and ECL allowance by the reason the exposure is classified as Stage 2.
2025
Backstop
Quantitative
Qualitative
JAs
Total
30 DPD
PD deterioration
PD threshold
Forbearance
Other 1
Mortgage
Refinancing
Retail & Business
Banking
Exposure \u00a3m
463
8,945
389
485
4,965
410
15,657
ECL \u00a3m
17
120
27
5
36
2
207
Of which
-Mortgages
Exposure \u00a3m
394
8,365
281
474
4,855
410
14,779
ECL \u00a3m
5
40
3
3
16
2
69
Consumer Finance
Exposure \u00a3m
31
170
13
2
120
\u2014
336
ECL \u00a3m
8
8
4
\u2014
1
\u2014
21
Corporate &
Commercial Banking
Exposure \u00a3m
92
771
90
22
470
\u2014
1,445
ECL \u00a3m
\u2014
16
6
\u2014
13
\u2014
35
Corporate Centre
Exposure \u00a3m
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
ECL \u00a3m
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Total Drawn
Exposure \u00a3m
586
9,886
492
509
5,555
410
17,438
ECL \u00a3m
25
144
37
5
50
2
263
Undrawn
ECL \u00a3m
\u2014
23
6
1
8
\u2014
38
Total Reported
Exposure \u00a3m
616
10,504
536
551
5,907
410
18,524
ECL \u00a3m
25
167
43
6
58
2
301
2024
Backstop
Quantitative
Qualitative
JAs
Total
30 DPD
PD deterioration
PD Threshold
Forbearance
Other 1
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
1 Mainly consists of Qualitative triggers for Mortgages, over-indebted customers c\u00a32.6bn (2024: c\u00a32.5bn)and Interest-only accounts 24 months pre-maturity c\u00a31.4bn (2024: c\u00a31.3bn), and for CCB customers
operating in a high-risk sector c\u00a30.2bn (2024:c\u00a30.7bn).
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
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Retail & Business Banking 1
173,461
384
173,077
27,829
42
Consumer Finance
4,979
63
4,916
\u2014
\u2014
Corporate & Commercial Banking
18,927
282
18,645
8,434
41
Corporate Centre
57,305
\u2014
57,305
2,558
\u2014
Total exposures presented in Credit Quality tables
254,672
729
253,943
38,821
83
Intercompany balances (including joint ventures)
5,055
Other items 2
916
Adjusted net carrying amount
259,914
Assets classified at FVTPL
934
Non-financial assets 3
5,989
Total assets per the Consolidated Balance Sheet
266,837
2024
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
Intercompany balances (including joint ventures)
4,832
Other items 2
848
Adjusted net carrying amount
253,107
Assets classified at FVTPL
1,340
Non-financial assets 3
5,497
Total assets per the Consolidated Balance Sheet
259,944
1 Off-balance sheet exposures include offers in the pipeline, undrawn flexible mortgage products and credit cards.
2 Other includes accrued interest of \u00a3725m (2024: \u00a3714m).
3 Non-financial assets include \u00a380m (2024:\u00a3738m) of Macro hedge of interest rate risk.
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 2025
259,883
153
21,218
359
2,759
357
283,860
869
Transfers from Stage 1 to Stage 22
(7,088)
(10)
7,088
10
\u2014
\u2014
\u2014
\u2014
Transfers from Stage 2 to Stage 12
6,231
78
(6,231)
(78)
\u2014
\u2014
\u2014
\u2014
Transfers to Stage 3 2
(239)
(1)
(852)
(31)
1,091
32
\u2014
\u2014
Transfers from Stage 3 2
2
\u2014
290
17
(292)
(17)
\u2014
\u2014
Transfers of financial instruments
(1,094)
67
295
(82)
799
15
\u2014
\u2014
Net ECL remeasurement on stage transfer3
\u2014
(69)
\u2014
83
\u2014
103
\u2014
117
Change in economic scenarios 4
\u2014
(10)
\u2014
7
\u2014
(5)
\u2014
(8)
Change to ECL models
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
New lending and assets purchased 5 8
54,405
41
1,086
38
44
13
55,535
92
Redemptions, repayments and assets sold6 8
(31,104)
(29)
(4,267)
(79)
(1,042)
(61)
(36,413)
(169)
Changes in risk parameters and other movements7
(9,461)
4
192
(25)
371
180
(8,898)
159
Assets written off 6
\u2014
\u2014
\u2014
\u2014
(591)
(248)
(591)
(248)
At 31 December 2025
272,629
157
18,524
301
2,340
354
293,493
812
Net movement in the period
12,746
4
(2,694)
(58)
(419)
(3)
9,633
(57)
ECL charge/(release) to the Income Statement
4
(58)
245
191
Less: Discount unwind
\u2014
\u2014
(21)
(21)
Less: Recoveries net of collection costs
\u2014
\u2014
23
23
Total ECL charge/(release) to the Income Statement
4
(58)
247
193
At 1 January 2024
268,211
170
23,595
461
3,071
361
294,877
992
Transfers from Stage 1 to Stage 22
(11,911)
(11)
11,911
11
\u2014
\u2014
\u2014
\u2014
Transfers from Stage 2 to Stage 12
9,395
118
(9,395)
(118)
\u2014
\u2014
\u2014
\u2014
Transfers to Stage 3 2
(434)
(2)
(845)
(34)
1,279
36
\u2014
\u2014
Transfers from Stage 3 2
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 transfer3
\u2014
(107)
\u2014
96
\u2014
122
\u2014
111
Change in economic scenarios 4
\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 8
33,894
43
1,170
58
164
40
35,228
141
Redemptions, repayments and assets sold6 8
(38,081)
(44)
(4,663)
(69)
(1,242)
(79)
(43,986)
(192)
Changes in risk parameters and other movements7
1,061
9
(3,333)
(73)
355
169
(1,917)
105
Assets written off 6
\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 charge/(release) 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 charge/(release) to the Income Statement
(17)
(102)
190
71
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\u00a0includes 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. Relates to the revaluation of ECL following the transfer of an exposure from one Stage to another.
4 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
5 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.
6 Exposures and ECL for facilities that existed at the start of the period but not at the end.
7 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.
8 New lending and assets purchased and Redemptions, repayments and assets sold categories include internal transfers.
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 table below shows 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. The
table excludes balances with central banks, cash at hand, interests in other entities, intangible assets, property, plant and equipment, tax assets, retirement benefit
assets and other assets.
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 includes balances with other Banco Santander group members. 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.
2025
2024
\u00a3bn
\u00a3bn
UK
282.6
271.5
Rest of Europe
12.1
11.4
Rest of world
4.8
6.9
Total
299.5
289.8
Borrower profile (audited)
Stock
New business 1
2025
2024
2025
2024
\u00a3m
%
\u00a3m
%
\u00a3m
%
\u00a3m
%
Home movers 2
69,963
42
69,354
42
10,516
41
6,736
45
Remortgagers 3
47,242
28
45,226
27
9,572
38
4,353
29
First-time buyers
34,776
21
35,702
22
3,426
14
3,262
22
Buy-to-let
15,287
9
14,931
9
1,718
7
567
4
167,268
100
165,213
100
25,232
100
14,918
100
Movement in mortgage lending
\u00a3bn
1 January 2025
165.2
New business
25.3
Redemptions and repayments
(23.2)
31 December 2025
167.3
2025
2024
Proportion of mortgage internal transfers retained online
79%
77%
2025
2024
Internal transfers (\u00a3bn) 4
36.0
32.2
Further advances and flexi drawdowns (\u00a3bn)
1.0
0.8
First-time buyers - gross lending (\u00a3bn )
3.4
3.3
1 The 2024 values exclude advances, flexible drawdowns and fees
2 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.
3 Remortgagers\u2019 are new customers who are taking a new mortgage with us.
4 Internal remortgages are where we moved our customers with maturing mortgages onto new ones.
2025 compared to 2024
In 2025 , mortgage asset stock increased with new business exceeding redemptions and repayments. New business increased in all sectors, with remortgages
causing the largest proportion of overall increase. The borrower profile remained stable.
Interest rate profile (audited)
The interest rate profile of our maturing mortgage asset stock was:
2025
2024
\u00a3m
%
\u00a3m
%
Fixed rate
153,172
92
148,495
90
Of which maturing:
\u2013 < 12 months
41,262
25
37,656
23
\u2013 Later than 1 year but no later than 3 years
83,529
50
84,704
51
\u2013 Later than 3 years but no later than 4 years
11,431
7
11,122
7
\u2013 Later than 4 years but no later than 5 years
14,011
8
11,645
7
\u2013 Later than 5 years
2,939
2
3,368
2
Variable rate
10,227
6
12,105
7
Standard Variable Rate (SVR)
2,434
1
3,007
2
Follow on Rate (FoR)
1,435
1
1,606
1
167,268
100
165,213
100
2025 compared to 2024
We continued to see customers refinance from reversion to fixed-rate products in 2025, influenced by high interest rates. Demand for fixed-rate products increased,
particularly with shorter fixed rate terms.
Geographical distribution (audited)
The geographical distribution of our mortgage asset stock and new business was:
Stock
New business 1
2025
2024
2025
2024
Region
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
London
43.9
42.7
6.6
4.1
Midlands and East Anglia
23.4
23.1
3.6
2.0
North
21.8
21.7
3.4
1.9
Northern Ireland
2.2
2.3
0.3
0.1
Scotland
6.0
6.0
1.0
0.6
South East excluding London
52.7
52.3
7.6
4.6
South West, Wales and other
17.3
17.1
2.7
1.6
167.3
165.2
25.2
14.9
1 The 2024 values exclude advances, flexible drawdown and fees.
2025 compared to 2024
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 2.91(2024: 2.93).
Mortgage loan size (audited)
The split of our mortgage asset by size was:
Mortgage loan size
2025
2024
>\u00a31.0m
3%
2%
\u00a30.5m to \u00a31.0m
11%
10%
\u00a30.25m to \u00a30.5m
32%
31%
<\u00a30.25m
54%
57%
Average loan size (stock) 1
\u00a3201k
\u00a3193k
Average loan size (new business)
\u00a3254k
\u00a3246k
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.
2025
2024
Stock
Stage 3
New
Business
Stock
Stage 3
New
Business
Total
ECL
Total
ECL
Total
ECL
Total
ECL
LTV
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Up to 50%
75,743
29
705
10
5,373
76,122
33
880
13
3,407
>50-60%
33,122
17
270
6
4,375
33,067
21
317
8
2,394
>60-70%
27,776
21
210
9
3,803
29,171
27
254
10
2,311
>70-80%
18,466
19
122
7
5,214
17,132
27
150
12
3,458
>80-90%
9,385
15
64
7
4,352
7,989
19
72
8
2,445
>90-100%
2,503
10
30
4
2,099
1,452
12
38
7
888
>100%
273
26
49
14
16
280
33
56
20
15
167,268
137
1,450
57
25,232
165,213
172
1,767
78
14,918
Collateral value 1
167,234
\u00a0
1,441
25,232
165,176
1,756
14,918
%
%
%
%
%
%
Average balance weighted LTV 2
52
52
65
51
51
64
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 \u00a3240m (2024: \u00a3244m).
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) + ...) /(Loan 1 balance + Loan 2 balance+...).
The balance weighted average LTV of new business in the period in London was 64% (2024: 64%).
2025 compared to 2024
Collateral quality remained strong in 2025, with reductions in both ECL and Stage 3 balances. Average balance weighted LTVs of stock were broadly flat, whilst
new\u00a0business contribution increased due to an improved trading strategy covering price competitiveness, propositions, and service. 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
For credit performance details, see the Credit performance section in Santander UK Group level \u2013 Credit risk review.
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\u00a0
73 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 2025
157,268
10
16,973
84
1,785
78
176,026
172
Transfers from Stage 1 to Stage 22
(5,651)
\u2014
5,651
\u2014
\u2014
\u2014
\u2014
\u2014
Transfers from Stage 2 to Stage 12
4,863
14
(4,863)
(14)
\u2014
\u2014
\u2014
\u2014
Transfers to Stage 3 2
(123)
\u2014
(465)
(5)
588
5
\u2014
\u2014
Transfers from Stage 3 2
\u2014
\u2014
235
6
(235)
(6)
\u2014
\u2014
Transfers of financial instruments
(911)
14
558
(13)
353
(1)
\u2014
\u2014
Net ECL remeasurement on stage transfer3
\u2014
(14)
\u2014
14
\u2014
9
\u2014
9
Change in economic scenarios 4
\u2014
(6)
\u2014
\u2014
\u2014
(4)
\u2014
(10)
Change to ECL models
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
New lending and assets purchased 5 8
34,589
6
586
5
23
1
35,198
12
Redemptions, repayments and assets sold6 8
(20,975)
\u2014
(3,125)
(20)
(652)
(21)
(24,752)
(41)
Changes in risk parameters and other movements7
(6,137)
1
49
(1)
21
10
(6,067)
10
Assets written off 6
\u2014
\u2014
\u2014
\u2014
(66)
(15)
(66)
(15)
At 31 December 2025
163,834
11
15,041
69
1,464
57
180,339
137
Net movement in the period
6,566
1
(1,932)
(15)
(321)
(21)
4,313
(35)
ECL charge/(release) to the Income Statement
1
(15)
(6)
(20)
Less: Discount unwind
\u2014
\u2014
(3)
(3)
Less: Recoveries net of collection costs
\u2014
\u2014
41
41
Total ECL charge/(release) to the Income Statement
1
(15)
32
18
At 1 January 2024
161,163
24
17,997
110
2,028
108
181,188
242
Transfers from Stage 1 to Stage 22
(9,873)
(1)
9,873
1
\u2014
\u2014
\u2014
\u2014
Transfers from Stage 2 to Stage 12
7,899
20
(7,899)
(20)
\u2014
\u2014
\u2014
\u2014
Transfers to Stage 3 2
(230)
\u2014
(524)
(7)
754
7
\u2014
\u2014
Transfers from Stage 3 2
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 transfer3
\u2014
(19)
\u2014
31
\u2014
15
\u2014
27
Change in economic scenarios 4
\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 8
21,758
4
315
3
33
1
22,106
8
Redemptions, repayments and assets sold6 8
(21,925)
(1)
(3,162)
(14)
(762)
(27)
(25,849)
(42)
Changes in risk parameters and other movements7
332
1
(1,764)
(21)
46
28
(1,386)
8
Assets written off 6
\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 charge/(release) to the Income Statement
(14)
(26)
12
(28)
Loan modifications
Forbearance1
The following table sets out the financial assets that were forborne while they had a loss allowance measured at lifetime ECL. (audited)
2025
2024
\u00a3m
\u00a3m
Financial assets modified in the period:
\u2013 Amortised cost before modification
542
555
\u2013Net modification loss
2
2
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
338
260
The balances at 31 December 2025 and 31 December 2024, analysed by their staging and the forbearance we applied, were:
Capitalisation
Term extension
Interest-only
Concessionary
interest rate
Reduced
repayment plan
Total
Loss allowances
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Stage 2
186
184
186
41
261
858
6
Stage 3
209
86
45
41
293
674
25
395
270
231
82
554
1,532
31
Proportion of portfolio
0.2%
0.2%
0.1%
0.1%
0.3%
0.9%
2024
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%
1 We base forbearance type on the first forbearance on the accounts.
At 31 December 2025, the proportion of the mortgage portfolio in forbearance was 0.9% (2024: 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 80% (2024: 83%). The weighted average LTV of all accounts in forbearance was 46%
(2024: 45%) compared to the weighted average portfolio LTV of 52% (2024: 51%).
At 31 December 2025, the carrying value of mortgages classified as multiple forbearance was \u00a313m (2024: \u00a39m).
Credit performance (audited)
2025
Total
Stage 1
Stage 2
Stage 3
Stage 3 ratio
Properties in
possession
Balance
weighted LTV
(indexed)
\u00a3m
\u00a3m
\u00a3m
\u00a3m
%
\u00a3m
%
Mortgage portfolio
167,268
151,039
14,779
1,450
0.88
74
52
Of which: Portfolio of particular interest 1
\u2013Interest only
35,637
29,866
5,155
616
1.74
35
49
\u2013Part interest-only, part repayment 2
11,495
9,978
1,357
160
1.40
9
53
\u2013Flexible
3,504
2,508
828
168
5.19
11
37
\u2013LTV >100%
273
88
136
49
17.91
18
116
\u2013Buy-to-let
15,287
14,166
1,070
51
0.33
4
59
2024
Mortgage portfolio
165,213
146,758
16,688
1,767
1.08
46
51
Of which: Portfolio of particular interest 1
\u2013Interest only
36,188
29,802
5,572
814
2.27
23
48
\u2013Part interest-only, part repayment 2
11,873
10,112
1,542
219
1.85
8
52
\u2013Flexible
4,333
3,190
933
210
5.25
8
38
\u2013LTV >100%
280
75
149
56
20.15
10
117
\u2013Buy-to-let
14,931
13,672
1,204
55
0.37
2
59
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 \u00a38,769m (2024: \u00a39,046m) and the non-interest-only part of the loan.
2025 compared to 2024
In 2025, the combined total proportion of interest-only loans, part interest-only, part repayment loans and flexible loans decreased to 30.3% (2024: 31.7%).
BTL mortgage balances increased by \u00a30.4bn to \u00a315.3bn (2024: \u00a314.9bn) driven by our pivot to growth strategy and affordability improvements. In 2025, the
balance weighted average LTV of mortgage total new BTL lending was 60% (2024: 59%).
Forbearance1
The balances at 31 December 2025 and 31 December 2024 were:
Interest-only 2
Flexible
LTV >100%
Buy-to-Let
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Total
239
43
8
18
\u2013 Stage 2
103
17
1
8
\u2013 Stage 3
136
26
7
10
2024
Total
272
56
9
18
\u2013 Stage 2
115
19
2
8
\u2013 Stage 3
157
37
7
10
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.
2025 compared to 2024
Mortgage forbearance stock reduced mainly due to portfolio sales and the improvement of our risk profile.
Credit performance (audited)
For credit performance details, see the Credit performance section in Santander UK Group level - Credit risk review. In addition, we monitor the following credit
performance metrics that are specific to Everyday Banking:
2025
2024
BBLS with 100% Government Guarantee (\u00a3bn)
0.6
1.1
% of credit card customers that repay balance in full each month (unaudited)
54%
56%
UPL average customer balance (\u00a3)
6,000
6,000
Loan modifications
Forbearance
The following table sets out the financial assets that were forborne while they had a loss allowance measured at lifetime ECL. (audited)
Credit cards
Overdrafts
Total
2025
\u00a3m
\u00a3m
\u00a3m
Financial assets modified in the period:
\u2013 Amortised cost before modification
18
13
31
\u2013 Net modification loss
12
4
16
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
1
\u2014
1
2024
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
The balances at 31 December 2025 and 31 December 2024 were:
Other unsecured
Business
banking
Personal loans
Credit cards
Overdrafts
Total other
unsecured
Total
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Total
6
1
70
26
97
103
\u2013 Stage 2
\u2014
1
15
10
26
26
\u2013 Stage 3
6
\u2014
55
16
71
77
2024
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
Other loan modifications
There were no other loan modifications made in 2025.
Credit performance (audited)
For credit performance details, see the Credit performance section in Santander UK Group level - Credit risk review. In addition, we monitor the following credit
performance metrics that are specific to Consumer Finance:
2025
2024
Consumer (auto) finance new business gross lending (\u00a3m)
2,029
1,593
Wholesale loans (stock finance) to car dealerships as approximate % of the Consumer loan book
13.8%
9.7%
% of lending collateralised on the vehicle
98%
95%
Average Consumer (auto) finance loan size (\u00a3)
19,551
16,045
2025 compared to 2024
In 2025, there was increased volume of new business, with larger quantities of electric vehicles and a marginal increase in the proportion of wholesale balances as
a % of the loan book.
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 2025 the amount of forborne assets net of deferred income was \u00a311m (2024: \u00a35.4m).
Other loan modifications
There were no other loan modifications made in 2025.
The gross carrying amount of financial assets for which the ECL allowance changed to a 12-month measurement at 31 December 2025 was \u00a32m (2024: \u00a36m).
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
73 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 2025
23,023
73
2,568
85
716
184
26,307
342
Transfers from Stage 1 to Stage 23
(681)
(3)
681
3
\u2014
\u2014
\u2014
\u2014
Transfers from Stage 2 to Stage 13
797
14
(797)
(14)
\u2014
\u2014
\u2014
\u2014
Transfers to Stage 3 3
(32)
\u2014
(291)
(12)
323
12
\u2014
\u2014
Transfers from Stage 3 3
\u2014
\u2014
22
2
(22)
(2)
\u2014
\u2014
Transfers of financial instruments
84
11
(385)
(21)
301
10
\u2014
\u2014
Net ECL remeasurement on stage transfer4
\u2014
(9)
\u2014
12
\u2014
44
\u2014
47
Change in economic scenarios 2
\u2014
(2)
\u2014
2
\u2014
(1)
\u2014
(1)
Change to ECL models
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
New lending and assets purchased 5
11,687
14
207
2
6
3
11,900
19
Redemptions, repayments and assets sold7
(6,105)
(10)
(732)
(29)
(237)
(24)
(7,074)
(63)
Changes in risk parameters and other movements6
(3,756)
1
121
(7)
77
38
(3,558)
32
Assets written offs 7
\u2014
\u2014
\u2014
\u2014
(214)
(53)
(214)
(53)
At 31 December 2025
24,933
78
1,779
44
649
201
27,361
323
Net movement in the period
1,910
5
(789)
(41)
(67)
17
1,054
(19)
ECL (release)/charge to the Income Statement
5
(41)
70
34
Less: Discount unwind
\u2014
\u2014
(11)
(11)
Less: Recoveries net of collection costs
\u2014
\u2014
5
5
Total ECL (release)/charge to the Income Statement
5
(41)
64
28
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 23
(1,101)
(3)
1,101
3
\u2014
\u2014
\u2014
\u2014
Transfers from Stage 2 to Stage 13
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 transfer4
\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 sold7
(5,203)
(24)
(1,149)
(29)
(254)
(42)
(6,606)
(95)
Changes in risk parameters and other movements6
(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
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
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
SME and mid corporate
\u2014
449
903
3,364
4,172
3,069
1,604
36
13,597
Commercial Real Estate
\u2014
\u2014
802
2,589
2,360
411
134
\u2014
6,296
Social Housing
120
2,032
5,581
\u2014
\u2014
\u2014
\u2014
\u2014
7,733
120
2,481
7,286
5,953
6,532
3,480
1,738
36
27,626
Of which:
\u2013 Stage 1
120
2,481
7,278
5,910
6,219
2,710
444
36
25,198
\u2013 Stage 2
\u2014
\u2014
8
43
313
770
645
\u2014
1,779
\u2013 Stage 3
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
649
\u2014
649
2024
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:
\u2013 Stage 1
13
2,236
7,115
4,991
6,159
2,597
382
82
23,575
\u2013 Stage 2
\u2014
\u2014
43
92
596
1,036
800
\u2014
2,567
\u2013 Stage 3
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
716
\u2014
716
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 2025 and 31 December 2024 this is mainly focused in the UK.
Credit risk mitigation (audited)
Gross exposure
Collateral
Net exposure
Stage 3
Stage 3
Stage 3
2025
\u00a3m
\u00a3m
\u00a3m
SME and mid corporate
572
141
431
Commercial Real Estate
77
74
3
649
215
434
2024
SME and mid corporate
639
209
430
Commercial Real Estate
77
71
6
716
280
436
Credit performance (audited)
For credit performance details, see the Credit performance section in Santander UK Group level \u2013 Credit risk review.
Loan modifications
Forbearance
The following table sets out the financial assets that were forborne while they had a loss allowance measured at lifetime ECL. (audited)
2025
2024
\u00a3m
\u00a3m
Financial assets modified in the period:
\u2013 Amortised cost before modification
160
232
\u2013 Net modification loss
15
5
Financial assets modified in the period (multiple forbearance):
\u2013 Amortised cost before modification
126
145
\u2013 Net modification loss
3
7
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
10
15
We only make forbearance arrangements for lending to customers. The balances at 31 December 2025 and 31 December 2024, analysed by their staging and the
forbearance we applied, were:
2025
2024
\u00a3m
\u00a3m
Stock 1
\u2013 Term extension
103
102
\u2013 Interest-only
193
229
\u2013 Other payment rescheduling
381
373
677
704
Of which:
\u2013 Stage 1
\u2014
40
\u2013 Stage 2
218
228
\u2013 Stage 3
459
436
677
704
Proportion of portfolio
2.5%
2.6%
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, the majority 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).
Credit performance (audited)
For credit performance details, see the Credit performance section in Santander UK Group level \u2013 Credit risk review.
Loan modifications (audited)
There were no loan modifications made in 2025 and 2024.
", "dimensions": { "concept": "ifrs-full:DisclosureOfCreditRiskExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "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 and 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 by issuing
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 as well as the Bank of England's lending facilities. 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 2025 and 31 December 2024.
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
2025
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Deposits by banks
0.6
0.6
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Certificates of deposit and commercial paper
4.1
\u2014
\u2014
\u2014
\u2014
4.1
\u2014
\u2014
Senior unsecured
14.3
\u2014
1.4
\u2014
0.5
12.4
\u2014
\u2014
Covered bonds
18.9
\u2014
\u2014
\u2014
\u2014
18.9
\u2014
\u2014
Securitisation and structured issuance
6.7
\u2014
\u2014
\u2014
\u2014
6.7
\u2014
\u2014
Of which:
- RMBS and ABS
5.6
\u2014
\u2014
\u2014
\u2014
5.6
\u2014
\u2014
TFSME
3.9
3.9
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Subordinated liabilities and equity
3.8
\u2014
\u2014
\u2014
\u2014
\u2014
1.9
1.9
Total wholesale funding
52.3
4.5
1.4
\u2014
0.5
42.1
1.9
1.9
Repos
9.0
\u2014
\u2014
9.0
\u2014
\u2014
\u2014
\u2014
Foreign exchange and hedge accounting
(1.0)
\u2014
\u2014
\u2014
\u2014
(1.0)
\u2014
\u2014
Other
3.3
2.1
\u2014
\u2014
0.8
0.3
0.1
\u2014
Balance sheet total
63.6
6.6
1.4
9.0
1.3
41.4
2.0
1.9
2024
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
12.2
\u2014
1.8
\u2014
0.4
10.0
\u2014
\u2014
Covered bonds
17.4
\u2014
\u2014
\u2014
\u2014
17.4
\u2014
\u2014
Securitisation and structured issuance
5.1
\u2014
\u2014
\u2014
\u2014
5.1
\u2014
\u2014
Of which:
- RMBS and ABS
3.9
\u2014
\u2014
\u2014
\u2014
3.9
\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
1 Consists of Perpetual Capital Securities. See Note 32 to the Consolidated Financial Statements.
2 This is included in our balance sheet total of \u00a3187,300m (2024:\u00a3180,967m).
3 Other consists of items in the course of transmission and other deposits. See Note 21 to the Consolidated Financial Statements.
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
2025
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Downstreamed from Santander UK Group Holdings plc to Santander UK plc1
Senior unsecured
0.5
\u2014
0.7
\u2014
0.8
2.0
2.0
5.7
1.3
11.0
Subordinated liabilities and equity (incl. AT1)
\u2014
0.2
\u2014
\u2014
\u2014
0.2
0.9
2.0
\u2014
3.1
0.5
0.2
0.7
\u2014
0.8
2.2
2.9
7.7
1.3
14.1
Other Santander UK plc
Deposits by banks
\u2014
\u2014
\u2014
0.4
0.2
0.6
\u2014
\u2014
\u2014
0.6
Certificates of deposit and commercial paper
0.5
3.1
0.5
\u2014
\u2014
4.1
\u2014
\u2014
\u2014
4.1
Senior unsecured
\u2014
\u2014
\u2014
\u2014
0.1
0.1
0.7
2.3
0.2
3.3
Covered bonds
\u2014
2.8
0.8
0.2
0.1
3.9
6.2
7.2
1.6
18.9
Securitisation & structured issuance 2
\u2014
0.5
0.7
0.2
0.2
1.6
1.5
3.0
\u2014
6.1
Of which:
\u2013 RMBS and ABS
\u2014
0.1
0.2
0.2
0.5
1.5
3.0
\u2014
5.0
TFSME
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
2.5
\u2014
1.4
3.9
Subordinated liabilities
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
0.2
0.5
0.7
0.5
6.4
2.0
0.8
0.6
10.3
10.9
12.7
3.7
37.6
Other group entities
Securitisation & structured issuance 3
\u2014
\u2014
0.6
\u2014
\u2014
0.6
\u2014
\u2014
\u2014
0.6
Total at 31 December 2025
1.0
6.6
3.3
0.8
1.4
13.1
13.8
20.4
5.0
52.3
Of which:
\u2013 Secured
\u2014
3.3
2.0
0.4
0.3
6.0
10.2
10.3
3.0
29.5
\u2013 Unsecured
1.0
3.3
1.3
0.4
1.1
7.1
3.6
10.1
2.0
22.8
2024
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
1 99% 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 2025 and 31 December 2024.
2025
2024
Sterling
US Dollar
Euro
Other
Sterling
US Dollar
Euro
Other
%
%
%
%
%
%
%
%
Downstreamed from Santander UK Group Holdings plc to Santander UK plc
Senior unsecured
19
68
12
1
25
62
12
1
Subordinated liabilities and equity (incl. AT1)
94
6
\u2014
\u2014
89
11
\u2014
\u2014
36
54
9
1
42
48
9
1
Other Santander UK plc
Deposits by banks
1
97
1
1
1
97
2
\u2014
Certificates of deposit and commercial paper
36
64
\u2014
\u2014
24
67
8
1
Senior unsecured
49
\u2014
51
\u2014
80
\u2014
20
\u2014
Covered bonds
49
8
39
4
48
9
40
3
Securitisation & structured issuance
100
\u2014
\u2014
\u2014
100
\u2014
\u2014
\u2014
TFSME
100
\u2014
\u2014
\u2014
100
\u2014
\u2014
\u2014
Subordinated liabilities
77
23
\u2014
\u2014
76
24
\u2014
\u2014
61
13
24
2
65
15
18
2
Other group entities
Securitisation & structured issuance
100
\u2014
\u2014
\u2014
100
\u2014
\u2014
\u2014
Total
55
24
20
1
60
23
16
1
Term issuance (audited)
In 2025, our external term issuance (sterling equivalent) was:
Sterling
US Dollar
Euro
Other
Total 2025
Total 2024
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
\u00a3bn
Downstreamed from Santander UK Group Holdings plc to Santander UK plc
Senior unsecured
\u2014
3.0
\u2014
\u2014
3.0
0.8
Subordinated debt and equity (inc. AT1)
0.5
\u2014
\u2014
\u2014
0.5
0.4
0.5
3.0
\u2014
\u2014
3.5
1.2
Other Santander UK plc
Securitisations and other secured funding
1.7
\u2014
\u2014
\u2014
1.7
1.2
Of which:
\u2013 RMBS and ABS
1.7
\u2014
\u2014
\u2014
1.7
1.2
Covered bonds
1.0
\u2014
1.7
\u2014
2.7
5.9
Senior unsecured 1
0.3
\u2014
1.7
\u2014
2.0
0.1
3.0
\u2014
3.4
\u2014
6.4
7.2
Other group entities
Securitisations
0.6
\u2014
\u2014
\u2014
0.6
\u2014
Total gross issuances
4.1
3.0
3.4
\u2014
10.5
8.4
1 Credit linked notes are not included in the Term issuance table. As a result, 2024 has been restated to exclude \u00a30.4bn of CLN issuance.
2025 compared to 2024
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.
We issued \u00a310.5bn Sterling equivalent term issuance in 2025, including Covered Bond, RMBS, AT1 and Senior Unsecured issuances. We repaid \u00a37.1bn in TFSME in
2025, with an outstanding balance of \u00a33.9bn at 31 December 2025, of which \u00a32.5bn is due for repayment in 2027 and \u00a31.4bn is due in 2031. We expect to issue
\u00a38.0 to 12.0bn of term issuance in 2026, including the \u00a31.25bn equivalent issued in January 2026.
At 31 December 2025, 75% (2024 : 65%) of wholesale funding had a maturity of greater than one year, with an overall residual duration of 32 months (2024: 37
months).
On-balance sheet encumbered assets (audited)
Encumbered with counterparties other than central banks
Assets
positioned
at central
banks3
Covered
bonds
Securitisations
Other
Total
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cash and balances at central banks1,2
\u2014
\u2014
1,440
1,440
\u2014
Loans and advances to customers
27,428
9,038
100
36,566
41,857
Loans and advances to banks
\u2014
\u2014
238
238
\u2014
Other financial assets at amortised cost
\u2014
\u2014
1,282
1,282
\u2014
Financial assets at fair value through other comprehensive income
\u2014
\u2014
2,349
2,349
551
Total assets
27,428
9,038
5,409
41,875
42,408
2024
Cash and balances at central banks1,2
\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
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
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.
", "dimensions": { "concept": "ifrs-full:DisclosureOfLiquidityRiskExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-4": { "value": "
Capital risk
Overview
Capital risk is the risk that we do not have an adequate amount or quality of capital to
meet our internal 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 15.8% (2024: 14.9%)
Total qualifying regulatory capital of \u00a314.3bn (2024: \u00a313.7bn)
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\u00a0Santander 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\u00a0basis 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\u00a0manage 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, 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 2), 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 ICAAP exercises for climate risk and 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\u00a0proposed 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 2025, 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 quarter,
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 headroom.
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.
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
2025
2024
%
%
CET1 capital ratio
15.8
14.9
AT1
2.8
2.8
Tier 2
2.7
3.3
Total capital ratio
21.3
21.0
Total subordination available to Santander UK plc senior unsecured bondholders as a % of RWAs
21.3
21.0
Return on assets - profit after tax divided by average total assets
0.40
0.36
Regulatory capital resources (audited)
This table shows our qualifying regulatory capital:
2025
2024
\u00a3m
\u00a3m
CET1 capital
10,601
9,791
AT1 capital
1,860
1,860
Tier 1 capital
12,461
11,651
Tier 2 capital
1,854
2,093
Total capital 1
14,315
13,744
1\u00a0 \u00a0 \u00a0 \u00a0 Capital resources include a transitional IFRS 9 benefit at 31 December 2025 of \u00a3nil (2024: \u00a312.2m).
Risk-weighted assets
Total RWAs at 31 December 2025 were \u00a367.2bn (2024: \u00a365.5bn) which are consistent with our regulatory filings.", "dimensions": { "concept": "ifrs-full:DisclosureOfObjectivesPoliciesAndProcessesForManagingCapitalExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-5": { "value": "
Balance sheet allocation by market risk classification(audited)
We classify all assets and liabilities exposed to market risk as non-traded market risk, except for specific portfolios that must be classified as trading books for
regulatory purposes (such as portfolios involving the sale of derivatives or derivative-based products to clients). Some assets are also measured at fair value for
accounting reasons, such as those held 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 arises from providing banking products and services to our customers, as well as our structural balance sheet exposures. The risk
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 for central management. The only types of non-traded market risks we retain in these business
areas relate to short-term mismatches caused by forecasting variances such as prepayment risk and launch risk. These occur when customers repay their loans
earlier than expected, or when the actual take-up of new products differs from projections. Corporate Centre also manages our structural balance sheet exposures,
including interest rate risk, foreign exchange and Income Statement volatility risk. Interest rate risk includes margin compression risk, which is a Top risk for
Santander UK particularly in a falling rate environment where we are unable to reprice our deposits as quickly as mortgage assets.
Our non-traded market risk categories are:
Category
Description
Interest rate risk
Interest rate risk mainly consists of yield curve risk, which arises from timing mismatches in the repricing of fixed and variable rate assets, liabilities
and off-balance sheet instruments. It also includes margin compression risk, which arises when we are unable to reprice our deposits in line with our
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) is affected by changes in the credit spreads. These spreads represent the difference between the discount rate used to value the asset
or liability, and the corresponding underlying interest rate curve.
Foreign exchange risk
Our banking business is mainly conducted in sterling, so we have limited exposure to foreign exchange risk. Where exposure does arise from activities
such as raising money in foreign currencies and holding high quality foreign currency bonds in the eligible liquidity pool, we buy or sell relevant
currencies and use derivatives to manage the exposure to within low limits. For more on this, see \u2018Wholesale Funding\u2019 in the \u2018Liquidity Risk\u2019 section.
Income statement
volatility risk
Most of the assets and liabilities in our banking book are measured at amortised cost. However, we sometimes use derivatives to manage their risk
profiles. As all derivatives are accounted for at fair value, differences in their accounting treatment can create volatility in the Income Statement, even
when the derivative serves as an economic hedge of the underlying asset or liability.
NII and EVE sensitivities (audited)
The calculations for NII and EVE sensitivities to interest rate movements 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 used to forecast the changes to interest income and interest expense under different rate scenarios. It shows the combined
impact on net interest income over a given period \u2013 typically 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 EVE sensitivity measures 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 yield curve shifts.
Value at Risk (VaR) (audited)
VaR
\u2013 VaR estimates possible losses from market changes under normal (non-stressed) conditions.
\u2013 We use a historical simulation approach based on two years of historical daily price movements, and reported at a 99% confidence level.
The limitations of VaR
VaR is a standard risk measure, but it has limitations including:
\u2013 It assumes that historical data provides a reliable indicator of future outcomes.
\u2013 It uses end of day positions and may miss potentially higher risks arising during the day.
\u2013 It does not capture the losses on the 1% of days beyond the 99% confidence interval).
\u2013 It considers one day price movements which is reasonable for our business but does not cover positions that 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
We regularly compare VaR estimates with actual profit and loss results to confirm the accuracy of our models. If discrepancies arise, we investigate and adjust the
models as necessary.
Risk mitigation (audited)
Our largest residual interest rate risk exposure arises from structural deposit balances that are deemed to be insensitive to changes in market rates (including
current accounts, a portion of variable rate deposits and investable equity). We manage the risk, including margin compression risk, through Santander UK plc\u2019s
structural hedge which is designed to stabilise the NII on these balances. The structural hedge is achieved by investing these balances in a rolling portfolio of fixed
rate assets or receive fixed pay variable interest rate swaps. By locking in fixed returns for defined periods, the structural hedge secures a portion of future NII and
helps smooth the impact of interest rate changes on overall performance. The notional and duration of the structural hedge is reviewed regularly by ALCO.
We hedge the interest rate risk of the securities we hold for liquidity and investment purposes using interest rate swaps. We retain spread exposures, and\u00a0these are
the key drivers of the VaR and stress tests used to assess the risk of the portfolio. We mitigate Income Statement volatility mainly through hedge accounting and
measure hedge accounting ineffectiveness using VaR, monitored against a trigger and 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 residual foreign exchange positions tend to be minimal. 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\u00a0triggers.
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.
The table below shows how our net interest income would be affected by a 100bps parallel shift (both up and down) applied instantaneously to the yield curve at
31 December 2025 and 31 December 2024. Sensitivity to parallel shifts represents the amount of risk in a way that we think is both simple and scalable.
2025
2024
+100bps
-100bps
+100bps
-100bps
\u00a3m
\u00a3m
\u00a3m
\u00a3m
NII sensitivity (audited) 1
281
(195)
167
(201)
EVE sensitivity
(449)
540
(496)
425
1 Based on modelling assumptions of repricing behaviour.
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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 and
marked as (audited). This information, and information in the Shareholder information section marked as (audited) forms an integral part of these financial
statements, 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 2025 and 2024, 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.
At 31 December 2025 and 2024, 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:
\u2013 ECL calculations are based on forward-looking economic scenarios developed by management covering a period of five years, during which timeframe climate
change risks may not 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 corporate headquarters in Milton Keynes was 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
IFRS 9 Hedge Accounting
On 1 October 2025, the Santander UK group voluntarily adopted the hedge accounting requirements established by IFRS 9. Santander UK continues to apply IAS 39
fair value hedge accounting to portfolio hedges of interest rate risk. The adoption of IFRS 9 hedge accounting provides reliable and more relevant information to
users of the financial statements by better aligning hedge accounting with Santander UK's risk management strategies. The change aligns with the hedge
accounting policy applied by Santander UK\u2019s ultimate parent Banco Santander SA.
The main changes from IAS 39 for the Santander UK group are: the mandatory separation of the time value of options (when the hedged risk is the intrinsic value),
the separation of the forward element of foreign exchange forward contracts for all such types of hedges, the separation of the foreign currency basis spread of a
foreign exchange derivative for each hedging relationship, the performance of hedge effectiveness testing on a prospective basis only, and the inability to
voluntarily de-designate hedging relationships.
The application of IFRS 9 hedge accounting has not had a material impact on the Santander UK group's financial statements but resulted in the creation of a Cost of
Hedging reserve within equity. Comparatives have not been restated.
Recent accounting developments
Lack of Exchangeability (Amendments to IAS 21)
The Santander UK group has applied the following amendment for the first time for their reporting period commencing 1 January 2025:
\u2013 Effective from 1 January 2025, Santander UK has adopted the IASB's amendment to IAS 21 which helps entities determine whether a currency is exchangeable
into another currency, and which spot exchange rate to use when it is not. The amendments did not have a material impact on Santander UK's operations or
financial statements.
Future accounting developments
The IASB issued the following new/amended accounting standards which are not yet mandatory for reporting periods commencing 1 January 2025:
\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. The amendments were endorsed for use in the UK on 15 April 2025. The Santander UK group has chosen not to early adopt the
new standard.
\u2013 Effective 1 January 2027: IFRS 18 \u2018Presentation and Disclosure in Financial Statements\u2019 - 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. IFRS 18 was endorsed for use in the UK on 10
December 2025. The Santander UK group has chosen not to early adopt the new standard.
The Santander UK group will assess the new/amended accounting standards to determine their potential impacts on the financial statements when they become
effective or if they are otherwise early 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
- \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 - 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 5 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.
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. Corporate current accounts and instant access deposit accounts in notional pooling arrangements are managed on a net basis and are
presented as a single unit of account.
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 - 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 - 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 - 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 individually assess significant Stage 3 cases and also include high leveraged finance transactions in Stage 2 from 2025. 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.
\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.
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
From 1 October 2025, the Santander UK group voluntarily adopted IFRS 9 hedge accounting requirements, except for portfolio hedges of interest rate risk which
continue to apply IAS 39 requirements.
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), 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 (including an analysis of potential sources of ineffectiveness), and the hedge ratio. Hedges accounted for under IFRS 9 are required to be effective on
a prospective basis, in line with risk management strategy, whilst IAS 39 hedging relationships are required to be highly effective on both a prospective and
retrospective basis.
The Santander UK group discontinues hedge accounting when the hedging instrument matures, is sold, or when the hedging relationship becomes ineffective
because it no longer aligns with the risk management objective. In such cases, the derivative is treated as a trading derivative.
If a hedging relationship no longer meets the effectiveness requirements but the risk management objective remains, the Santander UK group may rebalance or
adjust the hedge ratio to once again meet effectiveness requirements without discontinuing the hedging relationship.
For portfolio hedges of interest rate risk which continue to be accounted for under IAS 39, the Santander UK group may also voluntarily de-designate hedge
relationships by ceasing to designate the financial instrument as a hedge.
A hedging instrument is generally designated in its entirety, as the factors contributing to its fair value are interdependent. IFRS 9 allows certain components of the
fair value of a hedging instrument to be excluded:
(i)Separation of intrinsic and time value of an option, designating only the intrinsic value as the hedging instrument, which is mandatory if the intrinsic value is
designated;
(ii)Separation of the forward and spot elements of a forward contract, designating only the spot element as the hedging instrument, determined for each hedging
relationship; and
(iii)Separation of the foreign currency basis spread of a currency derivative, excluding it from the designation of the hedging instrument, determined for each
hedging relationship.
The separation of these components improves hedge effectiveness and allows an alternative accounting treatment for the excluded component, consisting of
recording its value changes in \u201cOther comprehensive income - cost of hedging\u201d and recognising it in the consolidated income statement according to the nature of
the hedged item, either over time, when the hedged transaction occurs, or when the hedge relationship ends.
Where derivatives are held for risk management purposes, and when transactions meet the required criteria for documentation, 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 judgemental 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.
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
Key estimates
\u2013 Forward-looking multiple economic scenario assumptions
\u2013 Probability weights assigned to multiple economic scenarios
\u2013 Expected future cash flows for individually assessed Stage 3 corporate exposures
\u2013 Collateral valuations of individually assessed Stage 3 corporate exposures
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 - credit risk management\u2019 section of the Risk review.
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 the provisions in Note 27 are amounts in respect of management\u2019s best estimates of liability relating to a legal dispute regarding the historical use of
discretionary commission arrangements by Santander Consumer (UK) plc and property and redundancy provisions relating to the transformation of our branch
network. 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, and legal disputes regarding allocation of responsibility for a
specific PPI portfolio of complaints and 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, regulatory, and customer remediation matters. As a result, on extremely rare occasions it is 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 'Defined benefit pension schemes\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 confirm that 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 value in use (VIU)' 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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-485": { "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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-486": { "value": "Santander UK plc", "dimensions": { "concept": "ifrs-full:NameOfReportingEntityOrOtherMeansOfIdentification", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-487": { "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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-488": { "value": "UK", "dimensions": { "concept": "ifrs-full:DomicileOfEntity", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-489": { "value": "public company, limited by shares", "dimensions": { "concept": "ifrs-full:LegalFormOfEntity", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-490": { "value": "England and Wales", "dimensions": { "concept": "ifrs-full:CountryOfIncorporation", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-491": { "value": "2 Triton Square, Regent\u2019s Place, London, NW1 3AN.", "dimensions": { "concept": "ifrs-full:AddressOfRegisteredOfficeOfEntity", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-492": { "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 and
marked as (audited). This information, and information in the Shareholder information section marked as (audited) forms an integral part of these financial
statements, 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 2025 and 2024, 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.
At 31 December 2025 and 2024, 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:
\u2013 ECL calculations are based on forward-looking economic scenarios developed by management covering a period of five years, during which timeframe climate
change risks may not 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 corporate headquarters in Milton Keynes was 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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-493": { "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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-494": { "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.
", "dimensions": { "concept": "ifrs-full:StatementOfIFRSCompliance", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-495": { "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 2025 and 2024, 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.
At 31 December 2025 and 2024, 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:
\u2013 ECL calculations are based on forward-looking economic scenarios developed by management covering a period of five years, during which timeframe climate
change risks may not 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 corporate headquarters in Milton Keynes was 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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-496": { "value": "
Change in accounting policy
IFRS 9 Hedge Accounting
On 1 October 2025, the Santander UK group voluntarily adopted the hedge accounting requirements established by IFRS 9. Santander UK continues to apply IAS 39
fair value hedge accounting to portfolio hedges of interest rate risk. The adoption of IFRS 9 hedge accounting provides reliable and more relevant information to
users of the financial statements by better aligning hedge accounting with Santander UK's risk management strategies. The change aligns with the hedge
accounting policy applied by Santander UK\u2019s ultimate parent Banco Santander SA.
The main changes from IAS 39 for the Santander UK group are: the mandatory separation of the time value of options (when the hedged risk is the intrinsic value),
the separation of the forward element of foreign exchange forward contracts for all such types of hedges, the separation of the foreign currency basis spread of a
foreign exchange derivative for each hedging relationship, the performance of hedge effectiveness testing on a prospective basis only, and the inability to
voluntarily de-designate hedging relationships.
The application of IFRS 9 hedge accounting has not had a material impact on the Santander UK group's financial statements but resulted in the creation of a Cost of
Hedging reserve within equity. Comparatives have not been restated.", "dimensions": { "concept": "ifrs-full:DisclosureOfChangesInAccountingPoliciesAccountingEstimatesAndErrorsExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-497": { "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
- \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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-500": { "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
- \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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-499": { "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
- \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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-498": { "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
- \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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-501": { "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 - 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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-502": { "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 - credit
risk management\u2019 section of the Risk review.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInterestIncomeAndExpenseExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-503": { "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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-504": { "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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-505": { "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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-506": { "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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-507": { "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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-508": { "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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-509": { "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 5 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.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDepreciationExpenseExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-510": { "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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-511": { "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 5 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.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-513": { "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. Corporate current accounts and instant access deposit accounts in notional pooling arrangements are managed on a net basis and are
presented as a single unit of account.
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 - 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 - 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 - 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 individually assess significant Stage 3 cases and also include high leveraged finance transactions in Stage 2 from 2025. 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.
\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.
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
From 1 October 2025, the Santander UK group voluntarily adopted IFRS 9 hedge accounting requirements, except for portfolio hedges of interest rate risk which
continue to apply IAS 39 requirements.
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), 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 (including an analysis of potential sources of ineffectiveness), and the hedge ratio. Hedges accounted for under IFRS 9 are required to be effective on
a prospective basis, in line with risk management strategy, whilst IAS 39 hedging relationships are required to be highly effective on both a prospective and
retrospective basis.
The Santander UK group discontinues hedge accounting when the hedging instrument matures, is sold, or when the hedging relationship becomes ineffective
because it no longer aligns with the risk management objective. In such cases, the derivative is treated as a trading derivative.
If a hedging relationship no longer meets the effectiveness requirements but the risk management objective remains, the Santander UK group may rebalance or
adjust the hedge ratio to once again meet effectiveness requirements without discontinuing the hedging relationship.
For portfolio hedges of interest rate risk which continue to be accounted for under IAS 39, the Santander UK group may also voluntarily de-designate hedge
relationships by ceasing to designate the financial instrument as a hedge.
A hedging instrument is generally designated in its entirety, as the factors contributing to its fair value are interdependent. IFRS 9 allows certain components of the
fair value of a hedging instrument to be excluded:
(i)Separation of intrinsic and time value of an option, designating only the intrinsic value as the hedging instrument, which is mandatory if the intrinsic value is
designated;
(ii)Separation of the forward and spot elements of a forward contract, designating only the spot element as the hedging instrument, determined for each hedging
relationship; and
(iii)Separation of the foreign currency basis spread of a currency derivative, excluding it from the designation of the hedging instrument, determined for each
hedging relationship.
The separation of these components improves hedge effectiveness and allows an alternative accounting treatment for the excluded component, consisting of
recording its value changes in \u201cOther comprehensive income - cost of hedging\u201d and recognising it in the consolidated income statement according to the nature of
the hedged item, either over time, when the hedged transaction occurs, or when the hedge relationship ends.
Where derivatives are held for risk management purposes, and when transactions meet the required criteria for documentation, 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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-512": { "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. Corporate current accounts and instant access deposit accounts in notional pooling arrangements are managed on a net basis and are
presented as a single unit of account.
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 - 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 - 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 - 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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-514": { "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. Corporate current accounts and instant access deposit accounts in notional pooling arrangements are managed on a net basis and are
presented as a single unit of account.
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 - 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 - 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 - 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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-515": { "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. Corporate current accounts and instant access deposit accounts in notional pooling arrangements are managed on a net basis and are
presented as a single unit of account.
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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-517": { "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 - 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 - 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 - 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 individually assess significant Stage 3 cases and also include high leveraged finance transactions in Stage 2 from 2025. 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.
\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.
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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-516": { "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 - 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 - 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 - 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 individually assess significant Stage 3 cases and also include high leveraged finance transactions in Stage 2 from 2025. 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.
\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.
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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-518": { "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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-519": { "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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-521": { "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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-520": { "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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-522": { "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 individually assess significant Stage 3 cases and also include high leveraged finance transactions in Stage 2 from 2025. 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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-523": { "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 individually assess significant Stage 3 cases and also include high leveraged finance transactions in Stage 2 from 2025. 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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-524": { "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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-525": { "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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-527": { "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
From 1 October 2025, the Santander UK group voluntarily adopted IFRS 9 hedge accounting requirements, except for portfolio hedges of interest rate risk which
continue to apply IAS 39 requirements.
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), 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 (including an analysis of potential sources of ineffectiveness), and the hedge ratio. Hedges accounted for under IFRS 9 are required to be effective on
a prospective basis, in line with risk management strategy, whilst IAS 39 hedging relationships are required to be highly effective on both a prospective and
retrospective basis.
The Santander UK group discontinues hedge accounting when the hedging instrument matures, is sold, or when the hedging relationship becomes ineffective
because it no longer aligns with the risk management objective. In such cases, the derivative is treated as a trading derivative.
If a hedging relationship no longer meets the effectiveness requirements but the risk management objective remains, the Santander UK group may rebalance or
adjust the hedge ratio to once again meet effectiveness requirements without discontinuing the hedging relationship.
For portfolio hedges of interest rate risk which continue to be accounted for under IAS 39, the Santander UK group may also voluntarily de-designate hedge
relationships by ceasing to designate the financial instrument as a hedge.
A hedging instrument is generally designated in its entirety, as the factors contributing to its fair value are interdependent. IFRS 9 allows certain components of the
fair value of a hedging instrument to be excluded:
(i)Separation of intrinsic and time value of an option, designating only the intrinsic value as the hedging instrument, which is mandatory if the intrinsic value is
designated;
(ii)Separation of the forward and spot elements of a forward contract, designating only the spot element as the hedging instrument, determined for each hedging
relationship; and
(iii)Separation of the foreign currency basis spread of a currency derivative, excluding it from the designation of the hedging instrument, determined for each
hedging relationship.
The separation of these components improves hedge effectiveness and allows an alternative accounting treatment for the excluded component, consisting of
recording its value changes in \u201cOther comprehensive income - cost of hedging\u201d and recognising it in the consolidated income statement according to the nature of
the hedged item, either over time, when the hedged transaction occurs, or when the hedge relationship ends.
Where derivatives are held for risk management purposes, and when transactions meet the required criteria for documentation, 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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-526": { "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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-528": { "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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-529": { "value": "
Hedge accounting
From 1 October 2025, the Santander UK group voluntarily adopted IFRS 9 hedge accounting requirements, except for portfolio hedges of interest rate risk which
continue to apply IAS 39 requirements.
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), 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 (including an analysis of potential sources of ineffectiveness), and the hedge ratio. Hedges accounted for under IFRS 9 are required to be effective on
a prospective basis, in line with risk management strategy, whilst IAS 39 hedging relationships are required to be highly effective on both a prospective and
retrospective basis.
The Santander UK group discontinues hedge accounting when the hedging instrument matures, is sold, or when the hedging relationship becomes ineffective
because it no longer aligns with the risk management objective. In such cases, the derivative is treated as a trading derivative.
If a hedging relationship no longer meets the effectiveness requirements but the risk management objective remains, the Santander UK group may rebalance or
adjust the hedge ratio to once again meet effectiveness requirements without discontinuing the hedging relationship.
For portfolio hedges of interest rate risk which continue to be accounted for under IAS 39, the Santander UK group may also voluntarily de-designate hedge
relationships by ceasing to designate the financial instrument as a hedge.
A hedging instrument is generally designated in its entirety, as the factors contributing to its fair value are interdependent. IFRS 9 allows certain components of the
fair value of a hedging instrument to be excluded:
(i)Separation of intrinsic and time value of an option, designating only the intrinsic value as the hedging instrument, which is mandatory if the intrinsic value is
designated;
(ii)Separation of the forward and spot elements of a forward contract, designating only the spot element as the hedging instrument, determined for each hedging
relationship; and
(iii)Separation of the foreign currency basis spread of a currency derivative, excluding it from the designation of the hedging instrument, determined for each
hedging relationship.
The separation of these components improves hedge effectiveness and allows an alternative accounting treatment for the excluded component, consisting of
recording its value changes in \u201cOther comprehensive income - cost of hedging\u201d and recognising it in the consolidated income statement according to the nature of
the hedged item, either over time, when the hedged transaction occurs, or when the hedge relationship ends.
Where derivatives are held for risk management purposes, and when transactions meet the required criteria for documentation, 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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-530": { "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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-531": { "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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-533": { "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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-532": { "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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-536": { "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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-535": { "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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-534": { "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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-537": { "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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-538": { "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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-541": { "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 judgemental 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.
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
Key estimates
\u2013 Forward-looking multiple economic scenario assumptions
\u2013 Probability weights assigned to multiple economic scenarios
\u2013 Expected future cash flows for individually assessed Stage 3 corporate exposures
\u2013 Collateral valuations of individually assessed Stage 3 corporate exposures
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 - 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 the provisions in Note 27 are amounts in respect of management\u2019s best estimates of liability relating to a legal dispute regarding the historical use of
discretionary commission arrangements by Santander Consumer (UK) plc and property and redundancy provisions relating to the transformation of our branch
network. 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, and legal disputes regarding allocation of responsibility for a
specific PPI portfolio of complaints and 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, regulatory, and customer remediation matters. As a result, on extremely rare occasions it is 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 'Defined benefit pension schemes\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 confirm that 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 value in use (VIU)' 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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-539": { "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 judgemental 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.
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
Key estimates
\u2013 Forward-looking multiple economic scenario assumptions
\u2013 Probability weights assigned to multiple economic scenarios
\u2013 Expected future cash flows for individually assessed Stage 3 corporate exposures
\u2013 Collateral valuations of individually assessed Stage 3 corporate exposures
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 - 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 the provisions in Note 27 are amounts in respect of management\u2019s best estimates of liability relating to a legal dispute regarding the historical use of
discretionary commission arrangements by Santander Consumer (UK) plc and property and redundancy provisions relating to the transformation of our branch
network. 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, and legal disputes regarding allocation of responsibility for a
specific PPI portfolio of complaints and 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, regulatory, and customer remediation matters. As a result, on extremely rare occasions it is 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 'Defined benefit pension schemes\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 confirm that 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 value in use (VIU)' 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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-540": { "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 judgemental 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. 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 adjustmentsKey estimates \u2013 Forward-looking multiple economic scenario assumptions\u2013 Probability weights assigned to multiple economic scenarios\u2013 Expected future cash flows for individually assessed Stage 3 corporate exposures\u2013 Collateral valuations of individually assessed Stage 3 corporate exposuresFor 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 - 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 the provisions in Note 27 are amounts in respect of management\u2019s best estimates of liability relating to a legal dispute regarding the historical use of discretionary commission arrangements by Santander Consumer (UK) plc and property and redundancy provisions relating to the transformation of our branch network. 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, and legal disputes regarding allocation of responsibility for a specific PPI portfolio of complaints and 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, regulatory, and customer remediation matters. As a result, on extremely rare occasions it is 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 'Defined benefit pension schemes\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 confirm that 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 value in use (VIU)' 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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-542": { "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 UK residential mortgages for customers with
good credit quality (prime lending) mostly to owner occupiers and buy-to-let mortgages for non-professional landlords. Everyday Banking provides banking
services and unsecured lending to individuals and small businesses with annual turnover up to \u00a36.5m, such as loans, credit cards and overdrafts, as well as
wealth management for high-net-worth clients.
\u2013 Consumer Finance provides prime auto consumer financing for cars, vans, motorbikes and leisure vehicles through Santander Consumer (UK) plc (SCUK).
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 Corporate & Commercial Banking provides banking products and services including loans, overdrafts, treasury services, invoice finance, trade and supplier
finance, to SMEs, mid-sized and larger corporates typically with annual turnover up to \u00a3500m, Commercial Real Estate and Social Housing customers.
\u2013 Corporate Centre provides treasury services for asset and liability management of our balance sheet. Exposures include financial institutions (derivatives and
other treasury products), structured products, and sovereign and supranational assets chosen for diversification and liquidity. It also provides mainly residential
Crown Dependencies mortgages to individuals in Jersey and the Isle of Man.
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
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Net interest income
3,506
129
677
68
4,380
Non-interest income/(expense)
176
181
117
(125)
349
Total operating income/(expense)
3,682
310
794
(57)
4,729
Operating expenses before credit impairment charges, provisions and charges
(1,918)
(150)
(374)
(15)
(2,457)
Credit impairment charges
(133)
(8)
(28)
(24)
(193)
Provisions for other liabilities and charges
(340)
(228)
(68)
39
(597)
Total credit impairment charges, provisions and charges
(473)
(236)
(96)
15
(790)
Profit/(loss) before tax
1,291
(76)
324
(57)
1,482
Revenue/(expense) from external customers
4,204
781
647
(903)
4,729
Inter-segment (expense)/revenue
(522)
(471)
147
846
\u2014
Total operating income/(expense)
3,682
310
794
(57)
4,729
Revenue from external customers includes the following fee and commission income1:
\u2013 Current account and debit card fees
415
\u2014
49
\u2014
464
\u2013 Insurance, protection and investments
48
\u2014
\u2014
\u2014
48
\u2013 Credit cards
100
\u2014
\u2014
\u2014
100
\u2013 Non-banking and other fees 2
5
38
92
5
140
Total fee and commission income
568
38
141
5
752
Fee and commission expense
(395)
(8)
(5)
(11)
(419)
Net fee and commission income/(expense)
173
30
136
(6)
333
At 31 December 2025
Customer loans
173,462
4,979
18,927
(1)
197,367
Customer deposits
155,652
\u2014
24,414
3,536
183,602
Average number of full-time equivalent staff
13,802
762
2,092
\u2014
16,656
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
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 from external customers includes the following fee and commission income1:
\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
At 31 December 2024
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
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 income1:
\u2013 Current account and debit card fees
493
\u2014
49
\u2014
542
\u2013 Insurance, protection and investments
47
\u2014
\u2014
\u2014
47
\u2013 Credit card fees
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
At 31 December 2023
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
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 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. It also shows the relationship between customer liabilities (see above) and Deposits by customers as
presented in the Consolidated Balance Sheet.
Assets
Liabilities
2025
2024
2025
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Customer balances (gross)
197,367
194,512
183,602
176,733
Loan loss allowance
(729)
(784)
\u2014
\u2014
Customer balances (net)
196,638
193,728
183,602
176,733
Intercompany balances (including joint ventures)
5,054
4,832
3,145
3,632
Accrued interest
725
714
928
854
Other items
192
134
(375)
(252)
Loans and advances to customers / Deposits by customers
202,609
199,408
187,300
180,967
", "dimensions": { "concept": "ifrs-full:DisclosureOfEntitysReportableSegmentsExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-543": { "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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-548": { "value": "
3. NET INTEREST INCOME
For the year ended 31 December
Group
2025
2024
2023
\u00a3m
\u00a3m
\u00a3m
Interest and similar income:
Loans and advances to customers
8,891
9,290
8,767
Loans and advances to banks
1,155
1,523
1,751
Reverse repurchase agreements - non-trading
873
987
626
Other
622
639
473
Total interest and similar income1
11,541
12,439
11,617
Interest expense and similar charges:
Deposits by customers
(3,787)
(4,276)
(3,230)
Deposits by banks
(415)
(839)
(1,165)
Repurchase agreements - non-trading
(594)
(644)
(538)
Debt securities in issue
(2,189)
(2,171)
(1,852)
Subordinated liabilities
(172)
(193)
(169)
Other
(4)
(4)
(5)
Total interest expense and similar charges 2
(7,161)
(8,127)
(6,959)
Net interest income
4,380
4,312
4,658
1 Includes \u00a3274m (2024: \u00a3296m , 2023: \u00a3230m) of interest income on financial assets at FVOCI.
2 Includes \u00a3460m (2024: \u00a3762m, 2023: \u00a3706m) of interest expense on the effective part of derivatives hedging debt issuances and \u00a33m (2024: \u00a33m, 2023: \u00a33m) of interest expense on lease liabilities.
", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestExpenseExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-547": { "value": "
3. NET INTEREST INCOME
For the year ended 31 December
Group
2025
2024
2023
\u00a3m
\u00a3m
\u00a3m
Interest and similar income:
Loans and advances to customers
8,891
9,290
8,767
Loans and advances to banks
1,155
1,523
1,751
Reverse repurchase agreements - non-trading
873
987
626
Other
622
639
473
Total interest and similar income1
11,541
12,439
11,617
Interest expense and similar charges:
Deposits by customers
(3,787)
(4,276)
(3,230)
Deposits by banks
(415)
(839)
(1,165)
Repurchase agreements - non-trading
(594)
(644)
(538)
Debt securities in issue
(2,189)
(2,171)
(1,852)
Subordinated liabilities
(172)
(193)
(169)
Other
(4)
(4)
(5)
Total interest expense and similar charges 2
(7,161)
(8,127)
(6,959)
Net interest income
4,380
4,312
4,658
1 Includes \u00a3274m (2024: \u00a3296m , 2023: \u00a3230m) of interest income on financial assets at FVOCI.
2 Includes \u00a3460m (2024: \u00a3762m, 2023: \u00a3706m) of interest expense on the effective part of derivatives hedging debt issuances and \u00a33m (2024: \u00a33m, 2023: \u00a33m) of interest expense on lease liabilities.
", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestIncomeExpenseExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-546": { "value": "
3. NET INTEREST INCOME
For the year ended 31 December
Group
2025
2024
2023
\u00a3m
\u00a3m
\u00a3m
Interest and similar income:
Loans and advances to customers
8,891
9,290
8,767
Loans and advances to banks
1,155
1,523
1,751
Reverse repurchase agreements - non-trading
873
987
626
Other
622
639
473
Total interest and similar income1
11,541
12,439
11,617
Interest expense and similar charges:
Deposits by customers
(3,787)
(4,276)
(3,230)
Deposits by banks
(415)
(839)
(1,165)
Repurchase agreements - non-trading
(594)
(644)
(538)
Debt securities in issue
(2,189)
(2,171)
(1,852)
Subordinated liabilities
(172)
(193)
(169)
Other
(4)
(4)
(5)
Total interest expense and similar charges 2
(7,161)
(8,127)
(6,959)
Net interest income
4,380
4,312
4,658
1 Includes \u00a3274m (2024: \u00a3296m , 2023: \u00a3230m) of interest income on financial assets at FVOCI.
2 Includes \u00a3460m (2024: \u00a3762m, 2023: \u00a3706m) of interest expense on the effective part of derivatives hedging debt issuances and \u00a33m (2024: \u00a33m, 2023: \u00a33m) of interest expense on lease liabilities.
4. NET FEE AND COMMISSION INCOME
For the year ended 31 December
Group
2025
2024
2023
\u00a3m
\u00a3m
\u00a3m
Fee and commission income:
Current account and debit card fees
464
474
542
Insurance, protection and investments
48
48
47
Credit cards
100
92
94
Non-banking and other fees 1
140
119
121
Total fee and commission income
752
733
804
Total fee and commission expense
(419)
(481)
(501)
Net fee and commission income
333
252
303
1 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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-545": { "value": "
3. NET INTEREST INCOME
For the year ended 31 December
Group
2025
2024
2023
\u00a3m
\u00a3m
\u00a3m
Interest and similar income:
Loans and advances to customers
8,891
9,290
8,767
Loans and advances to banks
1,155
1,523
1,751
Reverse repurchase agreements - non-trading
873
987
626
Other
622
639
473
Total interest and similar income1
11,541
12,439
11,617
Interest expense and similar charges:
Deposits by customers
(3,787)
(4,276)
(3,230)
Deposits by banks
(415)
(839)
(1,165)
Repurchase agreements - non-trading
(594)
(644)
(538)
Debt securities in issue
(2,189)
(2,171)
(1,852)
Subordinated liabilities
(172)
(193)
(169)
Other
(4)
(4)
(5)
Total interest expense and similar charges 2
(7,161)
(8,127)
(6,959)
Net interest income
4,380
4,312
4,658
1 Includes \u00a3274m (2024: \u00a3296m , 2023: \u00a3230m) of interest income on financial assets at FVOCI.
2 Includes \u00a3460m (2024: \u00a3762m, 2023: \u00a3706m) of interest expense on the effective part of derivatives hedging debt issuances and \u00a33m (2024: \u00a33m, 2023: \u00a33m) of interest expense on lease liabilities.
4. NET FEE AND COMMISSION INCOME
For the year ended 31 December
Group
2025
2024
2023
\u00a3m
\u00a3m
\u00a3m
Fee and commission income:
Current account and debit card fees
464
474
542
Insurance, protection and investments
48
48
47
Credit cards
100
92
94
Non-banking and other fees 1
140
119
121
Total fee and commission income
752
733
804
Total fee and commission expense
(419)
(481)
(501)
Net fee and commission income
333
252
303
1 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
2025
2024
2023
\u00a3m
\u00a3m
\u00a3m
Net (losses) on financial instruments designated at fair value through profit or loss1
(82)
(38)
(57)
Net gains/(losses) on financial instruments mandatorily at fair value through profit or loss2
7
(12)
(11)
Hedge ineffectiveness
(31)
22
19
Net gain on sale of financial assets at fair value through other comprehensive income
1
\u2014
\u2014
Income from operating lease assets
124
113
117
Other
(3)
8
67
16
93
135
1 Net (losses) on financial instruments designated at fair value through profit or loss includes losses of \u00a347m on deposits (2024: \u00a316m losses, 2023 \u00a324m losses), losses of \u00a334m on debt securities (2024: \u00a322m
losses, 2023: \u00a332m losses).
2 Net gains on financial instruments mandatorily at fair value through profit or loss include gains of \u00a31m on debt securities (2024: \u00a37m gains, 2023: \u00a35m gains).
Net gains on financial instruments mandatorily at FVTPL includes fair value losses of \u00a39m (2024: losses of \u00a321m, 2023: losses of \u00a312m) 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 \u00a39m (2024: gains of \u00a321m, 2023: gains of \u00a312m). As a result, in 2025, 2024 and
2023 the net fair value movements recognised on the equity index-linked deposits and the related economic hedges were \u00a3nil.
Group
2025
2024
2023
\u00a3m
\u00a3m
\u00a3m
Exchange rate differences in the consolidated income statement on items not at fair value through profit or loss
562
495
1,288
These are principally offset by related releases from the cash flow hedge reserve:
(536)
(500)
(1,248)
In 2025 and 2024, no subordinated liabilities were repurchased as part of ongoing liability management exercises (2023: profit of \u00a34m).
In 2025, Other includes \u00a34m of losses on the sale of property as part of our transformation (2024: \u00a38m losses; 2023: \u00a3nil).
6. OPERATING EXPENSES BEFORE CREDIT IMPAIRMENT CHARGES, PROVISIONS AND CHARGES
For the year ended 31 December
Group
Company
2025
2024
2023
2025
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Staff costs:
Wages and salaries
785
866
839
733
813
787
Performance-related payments
175
164
162
168
159
156
Social security costs
131
122
115
124
116
109
Pension costs - defined contribution plans
74
79
71
70
74
67
Pension costs - defined benefit plans
8
13
13
8
13
12
Other personnel costs
25
33
41
25
32
40
1,198
1,277
1,241
1,128
1,207
1,171
Other administration expenses
937
971
925
898
937
890
Depreciation, amortisation and impairment
322
300
290
241
238
220
2,457
2,548
2,456
2,267
2,382
2,281
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 2025
Costs expected to be recognised in 2026 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
2
9
11
5
4
9
Shares
2
8
10
4
5
9
4
17
21
9
9
18
The following table shows the amount of bonus awarded to employees for the performance year 2025. 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
2025
2024
2025
2024
2025
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cash award - not deferred
145
140
\u2014
\u2014
145
140
\u2013 deferred
11
8
9
14
20
22
Shares award - not deferred
9
9
\u2014
\u2014
9
9
\u2013 deferred
10
7
9
13
19
20
Total discretionary bonus
175
164
18
27
193
191
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 15,792
(2024: 18,378, 2023: 18,631).
Depreciation, amortisation and impairment
In 2025, depreciation, amortisation and impairment included depreciation of \u00a375m (2024: \u00a375m, 2023: \u00a364m) on operating lease assets (where the Santander UK
group is the lessor) with a carrying amount of \u00a3573m at 31 December 2025 (2024: \u00a3574m, 2023: \u00a3488m). See Note 20 for the depreciation on right-of-use assets
and their carrying value.
Other administration expenses includes \u00a317m (2024: \u00a318m, 2023: \u00a319m) related to short-term leases.
In 2025, depreciation, amortisation and impairment included an impairment charge of \u00a3nil (2024: \u00a3nil, 2023: \u00a325m) associated with branch and head office site
closures as part of our transformation. For more, see Note 20.
For the Company, in 2025, depreciation, amortisation and impairment included an impairment charge of \u00a3nil (2024: \u00a3nil, 2023: \u00a325m) associated with branch and
head office site closures as part of our transformation.
7. AUDIT AND OTHER SERVICES
For the year ended 31 December
Group
2025
2024
2023
\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
13.5
13.8
13.9
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
0.8
0.6
0.6
Total audit fees 1
14.3
14.4
14.5
Non-audit fees:
Audit-related assurance services
2.5
0.6
0.7
Other assurance services
0.3
1.0
0.5
Other non-audit services
\u2014
0.6
0.1
Total non-audit fees
2.8
2.2
1.3
1 2025 audit fees included \u00a30.1m (2024: \u00a30.1m , 2023: \u00a30.7m) which related to the prior years.
Audit fees payable for the statutory audit of Santander UK plc were \u00a312.2m (2024: \u00a312.9m, 2023: \u00a312.7m).
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 (2024: \u00a30.2m, 2023: \u00a30.3m) accords with the definition of 'Audit Fees' per US Securities and Exchange Commission (SEC)
guidance, \u00a32.5m (2024: \u00a32.0m, 2023: \u00a31.0m) accords with the definition of 'Audit related fees' per that guidance and \u00a393,300 (2024: \u00a348,300, 2023: \u00a312,550)
accords with the definition of 'All other fees' per that guidance.
In 2025 , the Company's auditors earned \u00a31.8m ( 2024 : \u00a31.8m , 2023 : \u00a31.6m ), in relation to incremental work undertaken in support of the audit of Banco Santander SA.
8. CREDIT IMPAIRMENT CHARGES AND PROVISIONS
For the year ended 31 December
Group
2025
2024
2023
\u00a3m
\u00a3m
\u00a3m
Credit impairment charges/(write-backs):
Loans and advances to customers
209
87
191
Recoveries of loans and advances, net of collection costs
(14)
(23)
10
Off-balance sheet credit exposures (See Note 27)
(2)
7
4
193
71
205
Provisions for other liabilities and charges (excluding off-balance sheet credit exposures) (See Note 27)
563
687
334
Charge for residual value and voluntary termination
34
2
1
597
689
335
790
760
540
In 2025, 2024 and 2023 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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-544": { "value": "
3. NET INTEREST INCOME
For the year ended 31 December
Group
2025
2024
2023
\u00a3m
\u00a3m
\u00a3m
Interest and similar income:
Loans and advances to customers
8,891
9,290
8,767
Loans and advances to banks
1,155
1,523
1,751
Reverse repurchase agreements - non-trading
873
987
626
Other
622
639
473
Total interest and similar income1
11,541
12,439
11,617
Interest expense and similar charges:
Deposits by customers
(3,787)
(4,276)
(3,230)
Deposits by banks
(415)
(839)
(1,165)
Repurchase agreements - non-trading
(594)
(644)
(538)
Debt securities in issue
(2,189)
(2,171)
(1,852)
Subordinated liabilities
(172)
(193)
(169)
Other
(4)
(4)
(5)
Total interest expense and similar charges 2
(7,161)
(8,127)
(6,959)
Net interest income
4,380
4,312
4,658
1 Includes \u00a3274m (2024: \u00a3296m , 2023: \u00a3230m) of interest income on financial assets at FVOCI.
2 Includes \u00a3460m (2024: \u00a3762m, 2023: \u00a3706m) of interest expense on the effective part of derivatives hedging debt issuances and \u00a33m (2024: \u00a33m, 2023: \u00a33m) of interest expense on lease liabilities.
", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestIncomeExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-549": { "value": "
4. NET FEE AND COMMISSION INCOME
For the year ended 31 December
Group
2025
2024
2023
\u00a3m
\u00a3m
\u00a3m
Fee and commission income:
Current account and debit card fees
464
474
542
Insurance, protection and investments
48
48
47
Credit cards
100
92
94
Non-banking and other fees 1
140
119
121
Total fee and commission income
752
733
804
Total fee and commission expense
(419)
(481)
(501)
Net fee and commission income
333
252
303
1 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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-551": { "value": "
5. OTHER OPERATING INCOME
For the year ended 31 December
Group
2025
2024
2023
\u00a3m
\u00a3m
\u00a3m
Net (losses) on financial instruments designated at fair value through profit or loss1
(82)
(38)
(57)
Net gains/(losses) on financial instruments mandatorily at fair value through profit or loss2
7
(12)
(11)
Hedge ineffectiveness
(31)
22
19
Net gain on sale of financial assets at fair value through other comprehensive income
1
\u2014
\u2014
Income from operating lease assets
124
113
117
Other
(3)
8
67
16
93
135
1 Net (losses) on financial instruments designated at fair value through profit or loss includes losses of \u00a347m on deposits (2024: \u00a316m losses, 2023 \u00a324m losses), losses of \u00a334m on debt securities (2024: \u00a322m
losses, 2023: \u00a332m losses).
2 Net gains on financial instruments mandatorily at fair value through profit or loss include gains of \u00a31m on debt securities (2024: \u00a37m gains, 2023: \u00a35m gains).
Net gains on financial instruments mandatorily at FVTPL includes fair value losses of \u00a39m (2024: losses of \u00a321m, 2023: losses of \u00a312m) 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 \u00a39m (2024: gains of \u00a321m, 2023: gains of \u00a312m). As a result, in 2025, 2024 and
2023 the net fair value movements recognised on the equity index-linked deposits and the related economic hedges were \u00a3nil.
Group
2025
2024
2023
\u00a3m
\u00a3m
\u00a3m
Exchange rate differences in the consolidated income statement on items not at fair value through profit or loss
562
495
1,288
These are principally offset by related releases from the cash flow hedge reserve:
(536)
(500)
(1,248)
In 2025 and 2024, no subordinated liabilities were repurchased as part of ongoing liability management exercises (2023: profit of \u00a34m).
In 2025, Other includes \u00a34m of losses on the sale of property as part of our transformation (2024: \u00a38m losses; 2023: \u00a3nil).
6. OPERATING EXPENSES BEFORE CREDIT IMPAIRMENT CHARGES, PROVISIONS AND CHARGES
For the year ended 31 December
Group
Company
2025
2024
2023
2025
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Staff costs:
Wages and salaries
785
866
839
733
813
787
Performance-related payments
175
164
162
168
159
156
Social security costs
131
122
115
124
116
109
Pension costs - defined contribution plans
74
79
71
70
74
67
Pension costs - defined benefit plans
8
13
13
8
13
12
Other personnel costs
25
33
41
25
32
40
1,198
1,277
1,241
1,128
1,207
1,171
Other administration expenses
937
971
925
898
937
890
Depreciation, amortisation and impairment
322
300
290
241
238
220
2,457
2,548
2,456
2,267
2,382
2,281
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 2025
Costs expected to be recognised in 2026 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
2
9
11
5
4
9
Shares
2
8
10
4
5
9
4
17
21
9
9
18
The following table shows the amount of bonus awarded to employees for the performance year 2025. 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
2025
2024
2025
2024
2025
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cash award - not deferred
145
140
\u2014
\u2014
145
140
\u2013 deferred
11
8
9
14
20
22
Shares award - not deferred
9
9
\u2014
\u2014
9
9
\u2013 deferred
10
7
9
13
19
20
Total discretionary bonus
175
164
18
27
193
191
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 15,792
(2024: 18,378, 2023: 18,631).
Depreciation, amortisation and impairment
In 2025, depreciation, amortisation and impairment included depreciation of \u00a375m (2024: \u00a375m, 2023: \u00a364m) on operating lease assets (where the Santander UK
group is the lessor) with a carrying amount of \u00a3573m at 31 December 2025 (2024: \u00a3574m, 2023: \u00a3488m). See Note 20 for the depreciation on right-of-use assets
and their carrying value.
Other administration expenses includes \u00a317m (2024: \u00a318m, 2023: \u00a319m) related to short-term leases.
In 2025, depreciation, amortisation and impairment included an impairment charge of \u00a3nil (2024: \u00a3nil, 2023: \u00a325m) associated with branch and head office site
closures as part of our transformation. For more, see Note 20.
For the Company, in 2025, depreciation, amortisation and impairment included an impairment charge of \u00a3nil (2024: \u00a3nil, 2023: \u00a325m) associated with branch and
head office site closures as part of our transformation.
", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherOperatingIncomeExpenseExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-550": { "value": "
5. OTHER OPERATING INCOME
For the year ended 31 December
Group
2025
2024
2023
\u00a3m
\u00a3m
\u00a3m
Net (losses) on financial instruments designated at fair value through profit or loss1
(82)
(38)
(57)
Net gains/(losses) on financial instruments mandatorily at fair value through profit or loss2
7
(12)
(11)
Hedge ineffectiveness
(31)
22
19
Net gain on sale of financial assets at fair value through other comprehensive income
1
\u2014
\u2014
Income from operating lease assets
124
113
117
Other
(3)
8
67
16
93
135
1 Net (losses) on financial instruments designated at fair value through profit or loss includes losses of \u00a347m on deposits (2024: \u00a316m losses, 2023 \u00a324m losses), losses of \u00a334m on debt securities (2024: \u00a322m
losses, 2023: \u00a332m losses).
2 Net gains on financial instruments mandatorily at fair value through profit or loss include gains of \u00a31m on debt securities (2024: \u00a37m gains, 2023: \u00a35m gains).
Net gains on financial instruments mandatorily at FVTPL includes fair value losses of \u00a39m (2024: losses of \u00a321m, 2023: losses of \u00a312m) 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 \u00a39m (2024: gains of \u00a321m, 2023: gains of \u00a312m). As a result, in 2025, 2024 and
2023 the net fair value movements recognised on the equity index-linked deposits and the related economic hedges were \u00a3nil.
Group
2025
2024
2023
\u00a3m
\u00a3m
\u00a3m
Exchange rate differences in the consolidated income statement on items not at fair value through profit or loss
562
495
1,288
These are principally offset by related releases from the cash flow hedge reserve:
(536)
(500)
(1,248)
In 2025 and 2024, no subordinated liabilities were repurchased as part of ongoing liability management exercises (2023: profit of \u00a34m).
In 2025, Other includes \u00a34m of losses on the sale of property as part of our transformation (2024: \u00a38m losses; 2023: \u00a3nil).
", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherOperatingIncomeExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-553": { "value": "
6. OPERATING EXPENSES BEFORE CREDIT IMPAIRMENT CHARGES, PROVISIONS AND CHARGES
For the year ended 31 December
Group
Company
2025
2024
2023
2025
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Staff costs:
Wages and salaries
785
866
839
733
813
787
Performance-related payments
175
164
162
168
159
156
Social security costs
131
122
115
124
116
109
Pension costs - defined contribution plans
74
79
71
70
74
67
Pension costs - defined benefit plans
8
13
13
8
13
12
Other personnel costs
25
33
41
25
32
40
1,198
1,277
1,241
1,128
1,207
1,171
Other administration expenses
937
971
925
898
937
890
Depreciation, amortisation and impairment
322
300
290
241
238
220
2,457
2,548
2,456
2,267
2,382
2,281
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 2025
Costs expected to be recognised in 2026 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
2
9
11
5
4
9
Shares
2
8
10
4
5
9
4
17
21
9
9
18
The following table shows the amount of bonus awarded to employees for the performance year 2025. 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
2025
2024
2025
2024
2025
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cash award - not deferred
145
140
\u2014
\u2014
145
140
\u2013 deferred
11
8
9
14
20
22
Shares award - not deferred
9
9
\u2014
\u2014
9
9
\u2013 deferred
10
7
9
13
19
20
Total discretionary bonus
175
164
18
27
193
191
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 15,792
(2024: 18,378, 2023: 18,631).
Depreciation, amortisation and impairment
In 2025, depreciation, amortisation and impairment included depreciation of \u00a375m (2024: \u00a375m, 2023: \u00a364m) on operating lease assets (where the Santander UK
group is the lessor) with a carrying amount of \u00a3573m at 31 December 2025 (2024: \u00a3574m, 2023: \u00a3488m). See Note 20 for the depreciation on right-of-use assets
and their carrying value.
Other administration expenses includes \u00a317m (2024: \u00a318m, 2023: \u00a319m) related to short-term leases.
In 2025, depreciation, amortisation and impairment included an impairment charge of \u00a3nil (2024: \u00a3nil, 2023: \u00a325m) associated with branch and head office site
closures as part of our transformation. For more, see Note 20.
For the Company, in 2025, depreciation, amortisation and impairment included an impairment charge of \u00a3nil (2024: \u00a3nil, 2023: \u00a325m) associated with branch and
head office site closures as part of our transformation.
", "dimensions": { "concept": "ifrs-full:DisclosureOfExpensesByNatureExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-552": { "value": "
6. OPERATING EXPENSES BEFORE CREDIT IMPAIRMENT CHARGES, PROVISIONS AND CHARGES
For the year ended 31 December
Group
Company
2025
2024
2023
2025
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Staff costs:
Wages and salaries
785
866
839
733
813
787
Performance-related payments
175
164
162
168
159
156
Social security costs
131
122
115
124
116
109
Pension costs - defined contribution plans
74
79
71
70
74
67
Pension costs - defined benefit plans
8
13
13
8
13
12
Other personnel costs
25
33
41
25
32
40
1,198
1,277
1,241
1,128
1,207
1,171
Other administration expenses
937
971
925
898
937
890
Depreciation, amortisation and impairment
322
300
290
241
238
220
2,457
2,548
2,456
2,267
2,382
2,281
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 2025
Costs expected to be recognised in 2026 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
2
9
11
5
4
9
Shares
2
8
10
4
5
9
4
17
21
9
9
18
The following table shows the amount of bonus awarded to employees for the performance year 2025. 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
2025
2024
2025
2024
2025
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cash award - not deferred
145
140
\u2014
\u2014
145
140
\u2013 deferred
11
8
9
14
20
22
Shares award - not deferred
9
9
\u2014
\u2014
9
9
\u2013 deferred
10
7
9
13
19
20
Total discretionary bonus
175
164
18
27
193
191
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 15,792
(2024: 18,378, 2023: 18,631).
Depreciation, amortisation and impairment
In 2025, depreciation, amortisation and impairment included depreciation of \u00a375m (2024: \u00a375m, 2023: \u00a364m) on operating lease assets (where the Santander UK
group is the lessor) with a carrying amount of \u00a3573m at 31 December 2025 (2024: \u00a3574m, 2023: \u00a3488m). See Note 20 for the depreciation on right-of-use assets
and their carrying value.
Other administration expenses includes \u00a317m (2024: \u00a318m, 2023: \u00a319m) related to short-term leases.
In 2025, depreciation, amortisation and impairment included an impairment charge of \u00a3nil (2024: \u00a3nil, 2023: \u00a325m) associated with branch and head office site
closures as part of our transformation. For more, see Note 20.
For the Company, in 2025, depreciation, amortisation and impairment included an impairment charge of \u00a3nil (2024: \u00a3nil, 2023: \u00a325m) associated with branch and
head office site closures as part of our transformation.
", "dimensions": { "concept": "ifrs-full:DisclosureOfExpensesExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-557": { "value": "
For the year ended 31 December
Group
Company
2025
2024
2023
2025
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Staff costs:
Wages and salaries
785
866
839
733
813
787
Performance-related payments
175
164
162
168
159
156
Social security costs
131
122
115
124
116
109
Pension costs - defined contribution plans
74
79
71
70
74
67
Pension costs - defined benefit plans
8
13
13
8
13
12
Other personnel costs
25
33
41
25
32
40
1,198
1,277
1,241
1,128
1,207
1,171
Other administration expenses
937
971
925
898
937
890
Depreciation, amortisation and impairment
322
300
290
241
238
220
2,457
2,548
2,456
2,267
2,382
2,281
Other administration expenses includes \u00a317m (2024: \u00a318m, 2023: \u00a319m) related to short-term leases.
", "dimensions": { "concept": "ifrs-full:DisclosureOfGeneralAndAdministrativeExpenseExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-556": { "value": "
For the year ended 31 December
Group
Company
2025
2024
2023
2025
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Staff costs:
Wages and salaries
785
866
839
733
813
787
Performance-related payments
175
164
162
168
159
156
Social security costs
131
122
115
124
116
109
Pension costs - defined contribution plans
74
79
71
70
74
67
Pension costs - defined benefit plans
8
13
13
8
13
12
Other personnel costs
25
33
41
25
32
40
1,198
1,277
1,241
1,128
1,207
1,171
Other administration expenses
937
971
925
898
937
890
Depreciation, amortisation and impairment
322
300
290
241
238
220
2,457
2,548
2,456
2,267
2,382
2,281
28. RETIREMENT BENEFIT PLANS
The amounts recognised in the balance sheet were as follows:
Group and Company
2025
2024
\u00a3m
\u00a3m
Assets/(liabilities)
Funded defined benefit pension scheme - surplus
524
439
Unfunded pension and post-retirement medical benefits
(22)
(23)
Total net assets
502
416
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 \u00a374m (2024: \u00a379m) 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% (2024: 6%) 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 (2024: six) Directors selected by Santander UK Group Holdings plc, plus four (2024: 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 2025 was finalised in November 2025, with an overall scheme deficit of \u00a375m. The next scheduled triennial funding
valuation will be at 31 March 2028. 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
2025
2024
2023
\u00a3m
\u00a3m
\u00a3m
Net interest income
(27)
(34)
(54)
Current service cost
8
13
13
Past service and GMP costs
\u2014
\u2014
1
Administration costs
8
9
7
(11)
(12)
(33)
The amounts recognised in other comprehensive income were as follows:
Group
2025
2024
2023
\u00a3m
\u00a3m
\u00a3m
Loss on plan assets (excluding amounts included in net interest expense)
359
1,217
352
Actuarial gains arising from changes in demographic assumptions
(163)
(113)
(51)
Actuarial losses arising from experience adjustments
86
84
91
Actuarial (gains)/losses arising from changes in financial assumptions
(182)
(786)
206
100
402
598
Movements in the present value of defined benefit scheme obligations were as follows:
Group and Company
2025
2024
\u00a3m
\u00a3m
At 1 January
(7,380)
(8,201)
Current service cost paid by Santander UK plc
(8)
(13)
Interest cost
(398)
(371)
Employer salary sacrifice contributions
(2)
(4)
\u2013 Changes in demographic assumptions
163
113
\u2013 Experience adjustments
(86)
(84)
\u2013 Changes in financial assumptions
182
786
Benefits paid
402
394
At 31 December
(7,127)
(7,380)
Movements in the fair value of the schemes\u2019 assets were as follows:
Group and Company
2025
2024
\u00a3m
\u00a3m
At 1 January
7,796
8,858
Interest income
425
405
Contributions paid by employer and scheme members
177
153
Administration costs paid
(8)
(9)
Return on plan assets (excluding amounts included in net interest expense)
(359)
(1,217)
Benefits paid
(402)
(394)
At 31 December
7,629
7,796
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
2025
\u00a3m
%
\u00a3m
%
\u00a3m
%
technique
Overseas equities
\u2014
\u2014
585
8
585
8
A,C
Corporate bonds
2,282
30
151
2
2,433
32
A,C
Government fixed interest bonds
1,717
23
\u2014
\u2014
1,717
23
A
Government index-linked bonds
4,509
59
\u2014
\u2014
4,509
59
A
Property
\u2014
\u2014
848
11
848
11
B
Derivatives
\u2014
\u2014
(6)
\u2014
(6)
\u2014
A
Cash
\u2014
\u2014
918
12
918
12
A
Repurchase agreements 1
\u2014
\u2014
(3,629)
(48)
(3,629)
(48)
A
Infrastructure
62
1
3
\u2014
65
1
B,C
Annuities
\u2014
\u2014
262
3
262
3
D
Longevity swap
\u2014
\u2014
(76)
(1)
(76)
(1)
D
Other
\u2014
\u2014
3
\u2014
3
\u2014
C
8,570
113
(941)
(13)
7,629
100
\u2014
2024
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
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 2025 and 2024 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.
At 31 December 2025 and 2024 , as highlighted above, the Scheme was invested in certain assets whose values are not based on market observable data, such as\u00a0
investments in private equity funds and bonds, as well as commercial real estate, property funds, 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 2025 the currency forwards had a notional value of \u00a3772m ( 2024 : \u00a3709m ). In 2025 , we reduced our investments in property
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 2025 and 2024 .
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 \u00a3174m in 2025 ( 2024 : \u00a3150m ) to the Scheme, of which \u00a3148m (2024: \u00a3119m) was in respect
of agreed deficit repair contributions. A new valuation at 31 March 2025 was agreed in November 2025 with a new schedule of contributions applying from 28
November 2025. The funding target was maintained as above. Under this valuation a single deficit contribution is due in March 2026 to address any remaining
underfunding. Contingent contributions may also be due if there is underperformance from the not quoted assets . 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
2025
2024
2023
%
%
%
To determine benefit obligations 1:
\u2013 Discount rate for scheme liabilities
5.6
5.5
4.6
\u2013 General price inflation
2.9
3.1
3.0
\u2013 General salary increase
1.0
1.0
1.0
\u2013 Expected rate of pension increase
2.8
3.0
3.0
Years
Years
Years
Longevity at 60 for current pensioners, on the valuation date:
\u2013 Males
27.2
26.9
27.0
\u2013 Females
29.1
29.8
29.8
Longevity at 60 for future pensioners currently aged 40, on the valuation date:
\u2013 Males
28.7
28.5
28.6
\u2013 Females
30.6
31.3
31.3
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 2025 was due to the decreased inflation rate reflecting changes in market conditions and updated longevity assumptions.
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.
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 S4 Light all pensioners amounts mortality table was adopted with appropriate
adjustments to reflect the actual mortality experience. At 31 December 2025 the assumption for future improvements was updated and the CMI 2024 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. The assumptions were reviewed as part of the 2025 funding valuation which indicated no changes were required so were retained at 31 December
2025.
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
2025
2024
Assumption
Change in pension obligation at period end from
\u00a3m
\u00a3m
Discount rate
50bps increase
(377)
(413)
General price inflation
50bps increase
305
316
Mortality
Each additional year of longevity assumed
195
190
The 50 bps 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
2026
503
2027
423
2028
439
2029
460
2030
475
Five years ending 2035
2,445
The average duration of the defined benefit obligation at 31 December 2025 was 12.0 years (2024: 12.7 years).
", "dimensions": { "concept": "ifrs-full:DisclosureOfEmployeeBenefitsExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-555": { "value": "
For the year ended 31 December
Group
Company
2025
2024
2023
2025
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Staff costs:
Wages and salaries
785
866
839
733
813
787
Performance-related payments
175
164
162
168
159
156
Social security costs
131
122
115
124
116
109
Pension costs - defined contribution plans
74
79
71
70
74
67
Pension costs - defined benefit plans
8
13
13
8
13
12
Other personnel costs
25
33
41
25
32
40
1,198
1,277
1,241
1,128
1,207
1,171
Other administration expenses
937
971
925
898
937
890
Depreciation, amortisation and impairment
322
300
290
241
238
220
2,457
2,548
2,456
2,267
2,382
2,281
Depreciation, amortisation and impairment
In 2025, depreciation, amortisation and impairment included depreciation of \u00a375m (2024: \u00a375m, 2023: \u00a364m) on operating lease assets (where the Santander UK
group is the lessor) with a carrying amount of \u00a3573m at 31 December 2025 (2024: \u00a3574m, 2023: \u00a3488m
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 2025
756
(416)
340
795
(466)
329
Additions
106
\u2014
106
100
\u2014
100
Disposals
(44)
39
(5)
(44)
40
(4)
Charge
\u2014
(129)
(129)
\u2014
(125)
(125)
At 31 December 2025
818
(506)
312
851
(551)
300
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
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 2025
941
892
7
716
270
2,826
Additions
2
65
\u2014
213
22
302
Reclassification to assets held for sale
(15)
\u2014
\u2014
\u2014
\u2014
(15)
Disposals
(20)
(38)
(1)
(225)
(15)
(299)
At 31 December 2025
908
919
6
704
277
2,814
Accumulated depreciation and impairment:
At 1 January 2025
238
685
7
142
191
1,263
Charge for the year
22
55
\u2014
70
18
165
Impairment during the year
16
4
\u2014
5
3
28
Reclassification to assets held for sale
(7)
\u2014
\u2014
\u2014
\u2014
(7)
Disposals
(18)
(37)
(1)
(86)
(4)
(146)
At 31 December 2025
251
707
6
131
208
1,303
Carrying amount
657
212
\u2014
573
69
1,511
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 and impairment:
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
1 In 2025 and 2024, property included investment properties of \u00a316m.
See Note 27 for further details on the property provision made as part of transforming our branch network.
Company
Property
Office fixtures and
equipment
Computer software
Right-of-use assets
Total 1
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cost:
At 1 January 2025
931
869
1
254
2,055
Additions
2
65
\u2014
21
88
Reclassification from assets held for sale
(15)
\u2014
\u2014
\u2014
(15)
Disposals
(16)
(38)
(1)
(13)
(68)
At 31 December 2025
902
896
\u2014
262
2,060
Accumulated depreciation:
At 1 January 2025
234
662
1
185
1,082
Charge for the year
22
55
\u2014
16
93
Impairment during the year
16
4
\u2014
3
23
Reclassification from assets held for sale
(7)
\u2014
\u2014
\u2014
(7)
Disposals
(16)
(37)
(1)
(3)
(57)
At 31 December 2025
249
684
\u2014
201
1,134
Carrying amount
653
212
\u2014
61
926
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
1 In 2025 and 2024, property included investment properties of \u00a316m.
", "dimensions": { "concept": "ifrs-full:DisclosureOfDepreciationAndAmortisationExpenseExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-554": { "value": "
For the year ended 31 December
Group
Company
2025
2024
2023
2025
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Staff costs:
Wages and salaries
785
866
839
733
813
787
Performance-related payments
175
164
162
168
159
156
Social security costs
131
122
115
124
116
109
Pension costs - defined contribution plans
74
79
71
70
74
67
Pension costs - defined benefit plans
8
13
13
8
13
12
Other personnel costs
25
33
41
25
32
40
1,198
1,277
1,241
1,128
1,207
1,171
Other administration expenses
937
971
925
898
937
890
Depreciation, amortisation and impairment
322
300
290
241
238
220
2,457
2,548
2,456
2,267
2,382
2,281
In 2025, depreciation, amortisation and impairment included an impairment charge of \u00a3nil (2024: \u00a3nil, 2023: \u00a325m) associated with branch and head office site
closures as part of our transformation. For more, see Note 20.
For the Company, in 2025, depreciation, amortisation and impairment included an impairment charge of \u00a3nil (2024: \u00a3nil, 2023: \u00a325m) associated with branch and
head office site closures as part of our transformation.
Impairment of goodwill
In 2025 and 2024, 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. Impairment is required where the carrying value of goodwill exceeds its recoverable amount.
For the Company, an impairment of \u00a321m was recognised in 2024.
In 2025, 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).
Basis of the recoverable amount
The recoverable amount of all CGUs was determined based on a 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 and discount rate by CGU in the VIU calculation:
Goodwill
Discount rate
2025
2024
2025
2024
CGU
\u00a3m
\u00a3m
%
%
Personal Financial Services
1,169
1,169
12.3
12.1
Private Banking
30
30
9.2
10.0
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 forecast 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 2025, 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 2028. 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 2025, 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 2025.
Discount rate
The rate used to discount the forecast 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 16.7% (2024:16.5%) and Private Banking CGU was 13.0% (2024: 15.1%). The Private Banking CGU has a different discount
rate compared to the Personal Financial Services CGU because they operate in different markets and therefore have different comparables.
Growth rate beyond initial cash flow projections
The growth rate for periods beyond the initial cash flow projections is used to extrapolate the forecast 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 2025 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 2025 and 31 December 2024, 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 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 5% (2024: 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 (2024:
increased by 100 basis
points).
At 31 December 2025 and 31 December 2024, 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 in headroom as follows.
Decrease in headroom
2025
2024
CGU
Reasonably possible change
\u00a3m
\u00a3m
Personal Financial Services
Cash flow projections decrease by 5% ( 2024 : 10% )
438
764
Discount rate increases by 100 basis points ( 2024 : increased by 100 basis points )
723
622
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 2025, 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 2025, there was an increase in headroom driven by higher cash flow forecasts.
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.
2025
Carrying value
Value in use
Headroom
Increase in
discount rate
Decrease in
forecast cash
flows
CGU
\u00a3m
\u00a3m
\u00a3m
bps
%
Personal Financial Services
8,072
8,752
680
94
8
2024
Personal Financial Services
7,294
7,639
345
53
5
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 2025
756
(416)
340
795
(466)
329
Additions
106
\u2014
106
100
\u2014
100
Disposals
(44)
39
(5)
(44)
40
(4)
Charge
\u2014
(129)
(129)
\u2014
(125)
(125)
At 31 December 2025
818
(506)
312
851
(551)
300
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
The impairment charge of \u00a3nil (2024: \u00a35m) relates to computer software no longer expected to yield future economic benefits. For the Company, the impairment
charge of \u00a3nil (2024: \u00a33m) 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 2025
941
892
7
716
270
2,826
Additions
2
65
\u2014
213
22
302
Reclassification to assets held for sale
(15)
\u2014
\u2014
\u2014
\u2014
(15)
Disposals
(20)
(38)
(1)
(225)
(15)
(299)
At 31 December 2025
908
919
6
704
277
2,814
Accumulated depreciation and impairment:
At 1 January 2025
238
685
7
142
191
1,263
Charge for the year
22
55
\u2014
70
18
165
Impairment during the year
16
4
\u2014
5
3
28
Reclassification to assets held for sale
(7)
\u2014
\u2014
\u2014
\u2014
(7)
Disposals
(18)
(37)
(1)
(86)
(4)
(146)
At 31 December 2025
251
707
6
131
208
1,303
Carrying amount
657
212
\u2014
573
69
1,511
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 and impairment:
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
1 In 2025 and 2024, property included investment properties of \u00a316m.
See Note 27 for further details on the property provision made as part of transforming our branch network.
Company
Property
Office fixtures and
equipment
Computer software
Right-of-use assets
Total 1
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cost:
At 1 January 2025
931
869
1
254
2,055
Additions
2
65
\u2014
21
88
Reclassification from assets held for sale
(15)
\u2014
\u2014
\u2014
(15)
Disposals
(16)
(38)
(1)
(13)
(68)
At 31 December 2025
902
896
\u2014
262
2,060
Accumulated depreciation:
At 1 January 2025
234
662
1
185
1,082
Charge for the year
22
55
\u2014
16
93
Impairment during the year
16
4
\u2014
3
23
Reclassification from assets held for sale
(7)
\u2014
\u2014
\u2014
(7)
Disposals
(16)
(37)
(1)
(3)
(57)
At 31 December 2025
249
684
\u2014
201
1,134
Carrying amount
653
212
\u2014
61
926
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
1 In 2025 and 2024, property included investment properties of \u00a316m.
", "dimensions": { "concept": "ifrs-full:DisclosureOfImpairmentOfAssetsExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-558": { "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 15,792
(2024: 18,378, 2023: 18,631).
", "dimensions": { "concept": "ifrs-full:DisclosureOfInformationAboutEmployeesExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-559": { "value": "
7. AUDIT AND OTHER SERVICES
For the year ended 31 December
Group
2025
2024
2023
\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
13.5
13.8
13.9
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
0.8
0.6
0.6
Total audit fees 1
14.3
14.4
14.5
Non-audit fees:
Audit-related assurance services
2.5
0.6
0.7
Other assurance services
0.3
1.0
0.5
Other non-audit services
\u2014
0.6
0.1
Total non-audit fees
2.8
2.2
1.3
1 2025 audit fees included \u00a30.1m (2024: \u00a30.1m , 2023: \u00a30.7m) which related to the prior years.
Audit fees payable for the statutory audit of Santander UK plc were \u00a312.2m (2024: \u00a312.9m, 2023: \u00a312.7m).
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 (2024: \u00a30.2m, 2023: \u00a30.3m) accords with the definition of 'Audit Fees' per US Securities and Exchange Commission (SEC)
guidance, \u00a32.5m (2024: \u00a32.0m, 2023: \u00a31.0m) accords with the definition of 'Audit related fees' per that guidance and \u00a393,300 (2024: \u00a348,300, 2023: \u00a312,550)
accords with the definition of 'All other fees' per that guidance.
In 2025 , the Company's auditors earned \u00a31.8m ( 2024 : \u00a31.8m , 2023 : \u00a31.6m ), in relation to incremental work undertaken in support of the audit of Banco Santander SA.", "dimensions": { "concept": "ifrs-full:DisclosureOfAuditorsRemunerationExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-561": { "value": "
8. CREDIT IMPAIRMENT CHARGES AND PROVISIONS
For the year ended 31 December
Group
2025
2024
2023
\u00a3m
\u00a3m
\u00a3m
Credit impairment charges/(write-backs):
Loans and advances to customers
209
87
191
Recoveries of loans and advances, net of collection costs
(14)
(23)
10
Off-balance sheet credit exposures (See Note 27)
(2)
7
4
193
71
205
Provisions for other liabilities and charges (excluding off-balance sheet credit exposures) (See Note 27)
563
687
334
Charge for residual value and voluntary termination
34
2
1
597
689
335
790
760
540
In 2025, 2024 and 2023 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 2025
348
112
2
4
28
85
18
14
611
Additional provisions (See Note 8)
198
40
95
36
18
5
93
208
693
Provisions released (See Note 8)
(2)
(83)
\u2014
\u2014
(2)
(7)
\u2014
(4)
(98)
Utilisation and other
(76)
(31)
(91)
(74)
(13)
\u2014
(90)
(201)
(576)
Recharge 1
\u2014
\u2014
\u2014
14
\u2014
\u2014
\u2014
\u2014
14
Reclassification from provisions to other assets
\u2014
\u2014
\u2014
39
\u2014
\u2014
\u2014
\u2014
39
At 31 December 2025
468
38
6
19
31
83
21
17
683
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 2025 were \u00a3352m (2024: \u00a3208m).
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 2025
55
111
2
\u2014
28
85
18
14
313
Additional provisions
48
12
95
32
18
5
90
170
470
Provisions released
(2)
(83)
\u2014
\u2014
(2)
(7)
\u2014
(3)
(97)
Utilisation and other
(60)
(16)
(91)
(71)
(13)
\u2014
(87)
(163)
(501)
Recharge 1
\u2014
\u2014
\u2014
14
\u2014
\u2014
\u2014
\u2014
14
Reclassification from provisions to other assets
\u2014
\u2014
\u2014
39
\u2014
\u2014
\u2014
\u2014
39
At 31 December 2025
41
24
6
14
31
83
21
18
238
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 2025 were \u00a3138m (2024: \u00a3203m).
a) Customer remediation
Motor Finance Broker Commissions
Following the Financial Conduct Authority\u2019s (FCA) Motor Market review in 2019 which resulted in a change in rules in January 2021, Santander Consumer (UK) plc
(SCUK) received several county court claims and complaints in respect of its historical use of discretionary commission arrangements (DCAs) prior to the 2021 rule
changes. In January 2024, the FCA commenced a review of the use of DCAs between lenders and credit brokers (the FCA Review). Pending the conclusion of its
review, the FCA paused the handling of motor finance commission related complaints. The pause is currently in place until 31 May 2026. A claim was issued against
SCUK, Santander UK plc and others in the Competition Appeal Tribunal, alleging that SCUK\u2019s historical DCAs in respect of used car financing operated in breach of the
Competition Act 1998. This is currently paused until the end of March 2026 reflecting the extended timeline of the FCA\u2019s Review and subsequent Consultation (see
below).
On 1 August 2025, the Supreme Court handed down its judgment in Hopcraft, Wrench and Johnson (Hopcraft) that motor dealers acting as credit brokers do not
owe fiduciary or disinterested duties to their customers and, as a consequence, commission payments by lenders to motor dealers would not be unlawful on that
basis. In addition, the Supreme Court held that an unfair relationship under s.140A of the Consumer Credit Act 1974 had arisen in one of the cases on its facts and
awarded the amount of the commission paid by the lender plus interest at a commercial rate as the remedy. It also confirmed that the test for unfairness was highly
fact sensitive and it outlined a series of non-exhaustive factors to consider in assessing unfair relationships in this context (indicating that no or partial disclosure
was not necessarily enough on its own to constitute an unfair relationship).
Following the Supreme Court\u2019s judgment, on 3 August 2025 the FCA announced that it aimed to publish a consultation on an industry wide redress scheme in early
October, and that this consultation would be open for six weeks. In early September 2025, the appeal to the Court of Appeal of the High Court\u2019s judicial review of a
final decision by the Financial Ombudsman Service against another lender (which alongside the Supreme Court case was highly relevant to the outcome of the FCA\u2019s
Review) was discontinued.
Further to the publication of the FCA\u2019s consultation paper on 7 October 2025 regarding a proposed industry-wide motor finance consumer redress scheme
(Consultation), the Santander UK group has reassessed the potential financial impact arising from motor finance related redress payments.
The Santander UK group recognised a provision of \u00a3295m in its financial results for 2024. This provision was determined based upon the information then available.
It included estimates for operational and legal costs and potential awards based on various scenarios and used a range of assumptions, including the possible
outcome of the appeal to the Supreme Court in 2025 of the Court of Appeal\u2019s decision in Hopcraft.
The Santander UK group responded to the Consultation on 12 December 2025 and continues to engage constructively with the FCA about its Consultation
proposals. Based on its detailed consideration, the Santander UK group considers that there remains significant uncertainty regarding the ultimate outcome of the
Consultation. The Santander UK group has updated its range of scenarios which has resulted in an additional estimated charge of \u00a3183m, increasing the total
provision to \u00a3461m. This continues to include estimates for operational and legal costs and potential awards reflecting an increased likelihood of a higher number
of cases than had previously been predicted as eligible for redress as well as an increased possibility that a remedy is sought to be imposed which extends beyond
reversing any damaging financial consequences caused by any unfair relationships. The provision is based on various scenarios using a range of assumptions,
including potential changes to the proposed scheme following responses to the Consultation or publication of the FCA\u2019s final scheme rules.
There continue to be significant uncertainties as to the nature, extent and timing of redress payments. The ultimate financial impact could be materially higher or
lower than the amount provided.
Increase / (decrease) in provision
2025
Assumption
Change in assumption
\u00a3m
Claim rate
5% increase
18
Claim rate
5% decrease
(18)
The claim rate represents the proportion of customers who make a request for reimbursement and is a critical judgement and accounting estimate that could
materially change the ultimate financial impact.
We have assumed the claim rate in our provision is in line with a write and invite redress scheme with claim rates at 85%.
Mortgages
Provisions were also recognised in 2025 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 2025 there were net releases of \u00a343m (2024: \u00a339m charge) for legal provisions.
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 2025 there were charges
of \u00a395m (2024: \u00a344m) including \u00a350m (2024: \u00a3nil) relating to FCA fees.
d) Bank Levy
In 2025, a rate of 0.05% (2024: 0.05%) was charged on long term chargeable equity and liabilities and 0.10% on short-term chargeable liabilities (2024: 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 charge of \u00a316m relating to transformation activity in 2025 (2024: release of \u00a32m). In 2025, 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 \u00a388m 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 2025, Other
provisions included charges for operational risk provisions of \u00a3153m (2024: \u00a3161m), including fraud losses of \u00a3122m (2024: \u00a3122m).
Transforming our Branch Network
In 2025 we announced changes to our branch network to enable the bank to better serve the changing needs of its customers. Starting in June 2025, the changes
involve the closure of 95 branches, with new Community Bankers providing local communities with ongoing face-to-face support in these locations. Our refreshed
network will consist of 350 branches, including 290 full-service branches, 36 reduced-hours branches, 18 counter-free branches and 6 Work Caf\u00e9s. As part of these
changes, approximately 750 of our colleagues have been placed at risk of redundancy, with support provided to those impacted, including assistance in finding
redeployment roles within the bank, access to specialist outplacement support, and dedicated wellbeing support. As a result, we have taken \u00a363m in charges in
2025 including \u00a325m in redundancy provisions and \u00a317m in property provisions which are included in the table shown above. The remaining \u00a321m relates to the
impairment of property, see Note 20.
", "dimensions": { "concept": "ifrs-full:DisclosureOfProvisionsExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-560": { "value": "
8. CREDIT IMPAIRMENT CHARGES AND PROVISIONS
For the year ended 31 December
Group
2025
2024
2023
\u00a3m
\u00a3m
\u00a3m
Credit impairment charges/(write-backs):
Loans and advances to customers
209
87
191
Recoveries of loans and advances, net of collection costs
(14)
(23)
10
Off-balance sheet credit exposures (See Note 27)
(2)
7
4
193
71
205
Provisions for other liabilities and charges (excluding off-balance sheet credit exposures) (See Note 27)
563
687
334
Charge for residual value and voluntary termination
34
2
1
597
689
335
790
760
540
In 2025, 2024 and 2023 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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-562": { "value": "
9. TAXATION
For the year ended 31 December
Group
2025
2024
2023
\u00a3m
\u00a3m
\u00a3m
Current tax:
UK corporation tax on profit for the year
386
205
475
Adjustments in respect of prior years
(14)
(47)
(15)
Total current tax
372
158
460
Deferred tax:
Charge for the year
23
187
106
Adjustments in respect of prior years
1
33
(7)
Total deferred tax
24
220
99
Tax on profit
396
378
559
The standard rate of UK corporation tax was 28% for banking entities and 25% for non-banking entities (2024: 28% for banking entities and 25% for non-banking
entities; 2023: 27.75% for banking entities and 23.5% 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 2025 was 26.7% (2024: 28.0%, 2023: 26.6%). Tax on profit differs from that calculated at the statutory rate as
follows:
For the year ended 31 December
Group
2025
2024
2023
\u00a3m
\u00a3m
\u00a3m
Profit before tax
1,482
1,349
2,100
Tax calculated at the statutory rate of 25% (2024: 25%, 2023: 23.5%)
371
337
494
Bank surcharge on profits
56
41
85
Non-deductible preference dividends paid
9
9
9
Non-deductible UK Bank Levy
11
12
10
Non-deductible conduct remediation, fines and penalties
(15)
3
13
Other non-deductible costs and non-taxable income
14
26
2
Effect of change in tax rate on deferred tax provision
\u2014
\u2014
2
Tax relief on dividends in respect of other equity instruments
(37)
(36)
(34)
Adjustment to prior year provisions
(13)
(14)
(22)
Tax on profit
396
378
559
It is not anticipated that the OECD Pillar Two rules which became effective from 1 January 2024 will impact the Santander UK group. The Santander UK group has
applied the amendments to IAS 12 relating to Pillar Two, issued in May 2023, and no additional disclosures arise.
Current tax assets
Movements in current tax assets during the year were as follows:
Group
Company
2025
2024
2025
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January
506
490
528
568
Income statement charge
(372)
(158)
(369)
(198)
Other comprehensive income charge
(14)
(47)
\u2014
\u2014
Corporate income tax paid
46
240
48
172
Other movements
189
(19)
188
(14)
At 31 December
355
506
395
528
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, current tax recognised directly in other comprehensive income and adjustments to prior period current tax provisions. In 2025 other
movements for both Santander UK group and Company includes \u00a3170m relating to amounts payable to related parties in respect of group relief (2024: \u00a3nil).
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
Intangible
assets
Accelerated
tax
depreciation
Other
temporary
differences
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2025
(152)
(117)
110
8
(72)
(6)
(17)
(246)
Income statement credit/(charge)
9
(51)
\u2014
\u2014
(8)
(14)
40
(24)
Transfers/reclassifications
\u2014
\u2014
3
1
\u2014
\u2014
(4)
\u2014
Credited/(charged) to other comprehensive income
\u2014
28
(190)
(5)
\u2014
\u2014
\u2014
(167)
At 31 December 2025
(143)
(140)
(77)
4
(80)
(20)
19
(437)
At 1 January 2024
(8)
(186)
73
3
(70)
18
(16)
(186)
Income statement charge
(144)
(44)
\u2014
\u2014
(2)
(24)
(6)
(220)
Transfers/reclassifications
\u2014
\u2014
2
1
\u2014
\u2014
\u2014
3
Credited to other comprehensive income
\u2014
113
35
4
\u2014
\u2014
5
157
At 31 December 2024
(152)
(117)
110
8
(72)
(6)
(17)
(246)
Company
Fair value of
financial
instruments
Pension
remeasurement
Cash flow
hedges
Fair value
reserve
Intangible
assets
Accelerated
tax
depreciation
Other
temporary
differences
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2025
(74)
(117)
112
8
(72)
(8)
21
(130)
Income statement (charge)/credit
(24)
(51)
\u2014
\u2014
(8)
(18)
19
(82)
Credited/(charged) to other comprehensive income
\u2014
28
(184)
(4)
\u2014
\u2014
\u2014
(160)
At 31 December 2025
(98)
(140)
(72)
4
(80)
(26)
40
(372)
At 1 January 2024
(11)
(186)
74
4
(70)
13
35
(141)
Income statement charge
(63)
(44)
\u2014
\u2014
(2)
(21)
(18)
(148)
Transfers/reclassifications
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(1)
(1)
Credited to other comprehensive income
\u2014
113
38
4
\u2014
\u2014
5
160
At 31 December 2024
(74)
(117)
112
8
(72)
(8)
21
(130)
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 2025 and 2024, unrecognised deferred tax assets on capital losses carried forward were \u00a3nil.
", "dimensions": { "concept": "ifrs-full:DisclosureOfIncomeTaxExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-563": { "value": "
Group
2025
2024
2023
\u00a3m
\u00a3m
\u00a3m
Current tax:
UK corporation tax on profit for the year
386
205
475
Adjustments in respect of prior years
(14)
(47)
(15)
Total current tax
372
158
460
Deferred tax:
Charge for the year
23
187
106
Adjustments in respect of prior years
1
33
(7)
Total deferred tax
24
220
99
Tax on profit
396
378
559
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
Intangible
assets
Accelerated
tax
depreciation
Other
temporary
differences
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2025
(152)
(117)
110
8
(72)
(6)
(17)
(246)
Income statement credit/(charge)
9
(51)
\u2014
\u2014
(8)
(14)
40
(24)
Transfers/reclassifications
\u2014
\u2014
3
1
\u2014
\u2014
(4)
\u2014
Credited/(charged) to other comprehensive income
\u2014
28
(190)
(5)
\u2014
\u2014
\u2014
(167)
At 31 December 2025
(143)
(140)
(77)
4
(80)
(20)
19
(437)
At 1 January 2024
(8)
(186)
73
3
(70)
18
(16)
(186)
Income statement charge
(144)
(44)
\u2014
\u2014
(2)
(24)
(6)
(220)
Transfers/reclassifications
\u2014
\u2014
2
1
\u2014
\u2014
\u2014
3
Credited to other comprehensive income
\u2014
113
35
4
\u2014
\u2014
5
157
At 31 December 2024
(152)
(117)
110
8
(72)
(6)
(17)
(246)
Company
Fair value of
financial
instruments
Pension
remeasurement
Cash flow
hedges
Fair value
reserve
Intangible
assets
Accelerated
tax
depreciation
Other
temporary
differences
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2025
(74)
(117)
112
8
(72)
(8)
21
(130)
Income statement (charge)/credit
(24)
(51)
\u2014
\u2014
(8)
(18)
19
(82)
Credited/(charged) to other comprehensive income
\u2014
28
(184)
(4)
\u2014
\u2014
\u2014
(160)
At 31 December 2025
(98)
(140)
(72)
4
(80)
(26)
40
(372)
At 1 January 2024
(11)
(186)
74
4
(70)
13
35
(141)
Income statement charge
(63)
(44)
\u2014
\u2014
(2)
(21)
(18)
(148)
Transfers/reclassifications
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(1)
(1)
Credited to other comprehensive income
\u2014
113
38
4
\u2014
\u2014
5
160
At 31 December 2024
(74)
(117)
112
8
(72)
(8)
21
(130)
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 2025 and 2024, unrecognised deferred tax assets on capital losses carried forward were \u00a3nil.
", "dimensions": { "concept": "ifrs-full:DisclosureOfDeferredTaxesExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-564": { "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
2025
2024
2023
2025
2024
2023
Pence per
share
Pence per
share
Pence per
share
\u00a3m
\u00a3m
\u00a3m
In respect of current year - first interim
0.08
1.78
1.32
26
554
410
In respect of current year - second interim
\u2014
2.44
3.61
\u2014
757
1,120
0.08
4.22
4.93
26
1,311
1,530
In December 2025, \u00a326m of dividends were paid on the Company's ordinary shares in issue (2024: \u00a31,311m, 2023: \u00a31,530m) as, in anticipation of the proposed
acquisition of TSB by Santander UK (subject to regulatory approvals and other consents), the Board passed a resolution in August 2025 to cancel the interim
dividends that had been declared at 30 June 2025. In 2025, none (2024: \u00a3804m, 2023: \u00a3750m) 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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-565": { "value": "0.08", "decimals": 2, "dimensions": { "concept": "ifrs-full:DividendsRecognisedAsDistributionsToOwnersPerShare", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00", "unit": "iso4217:GBP/xbrli:shares" } }, "f-566": { "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-567": { "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-569": { "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
2025
2024
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
9,341
85
118
13,755
238
156
Interest rate contracts
25,372
198
336
29,296
294
489
Inflation rate contracts
171
16
30
\u2014
\u2014
\u2014
Equity and credit contracts
568
94
21
681
124
21
Total derivatives held for trading
35,452
393
505
43,732
656
666
Derivatives held for hedging
Designated as fair value hedges:
Exchange rate contracts
4,099
86
16
1,712
42
8
Interest rate contracts
169,084
564
479
146,172
1,055
477
Inflation rate contracts
1,850
69
\u2014
\u2014
\u2014
\u2014
175,033
719
495
147,884
1,097
485
Designated as cash flow hedges:
Exchange rate contracts
18,343
500
378
21,535
698
266
Interest rate contracts
37,508
316
367
54,267
326
928
Inflation rate contracts
\u2014
\u2014
\u2014
1,794
70
\u2014
55,851
816
745
77,596
1,094
1,194
Total derivatives held for hedging
230,884
1,535
1,240
225,480
2,191
1,679
Derivative netting 1
\u2014
(1,058)
(1,058)
\u2014
(1,643)
(1,643)
Total derivatives
266,336
870
687
269,212
1,204
702
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
\u00a3827m (2024: \u00a3489m) and the amount of cash collateral paid that had been offset against the gross derivative liabilities was \u00a323m (2024: \u00a332m).
At 31 December 2025, the fair value of derivative assets included amounts due from Banco Santander group entities of \u00a3599m (2024: \u00a3544m) and the fair value of
derivative liabilities included amounts due to Banco Santander group entities of \u00a3292m (2024: \u00a3244m).
Company
2025
2024
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
28,677
480
542
31,646
553
300
Interest rate contracts
71,108
320
1,527
69,248
358
2,589
Inflation rate contracts
171
16
30
\u2014
\u2014
\u2014
Equity and credit contracts
568
94
21
681
124
21
Total derivatives held for trading
100,524
910
2,120
101,575
1,035
2,910
Derivatives held for hedging
Designated as fair value hedges:
Exchange rate contracts
2,854
47
16
1,524
41
4
Interest rate contracts
166,223
490
478
144,346
1,013
464
Inflation rate contracts
1,850
69
\u2014
\u2014
\u2014
\u2014
170,927
606
494
145,870
1,054
468
Designated as cash flow hedges:
Exchange rate contracts
9,890
244
278
12,931
649
152
Interest rate contracts
29,984
265
298
46,549
317
720
Inflation rate contracts
\u2014
\u2014
\u2014
1,794
70
\u2014
39,874
509
576
61,274
1,036
872
Total derivatives held for hedging
210,801
1,115
1,070
207,144
2,090
1,340
Derivative netting 1
\u2014
(1,058)
(1,058)
\u2014
(1,643)
(1,643)
Total derivatives
311,325
967
2,132
308,719
1,482
2,607
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
\u00a3827m (2024: \u00a3489m) and the amount of cash collateral paid that had been offset against the gross derivative liabilities was \u00a323m (2024: \u00a332m).
At 31 December 2025, for the Company, the fair value of derivative assets included amounts due from Banco Santander group entities of \u00a3599m (2024: \u00a3544m)
and the fair value of derivative liabilities included amounts due to Banco Santander group entities of \u00a3292m (2024: \u00a3244m).
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
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Exchange rate contracts
\u2014
31,783
31,783
671
512
Interest rate contracts
219,306
12,658
231,964
20
124
Inflation rate contracts
2,021
\u2014
2,021
85
30
Equity and credit contracts
\u2014
568
568
94
21
221,327
45,009
266,336
870
687
2024
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
\u2014
1,794
70
\u2014
Equity and credit contracts
\u2014
681
681
124
21
218,953
50,259
269,212
1,204
702
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.
Hedges of inflation risk
Santander UK has exposure to inflation arising on UK inflation-linked gilts, that is hedged by entering into inflation swaps. Fair value hedging is applied whereby the
inflation swap is hedging variability in cash flows of the inflation-linked gilt due to change in GBP RPI. Effectiveness is assessed by using linear regression techniques
to compare changes in the fair value of the inflation-linked gilts attributable to the hedged risk, with changes in the fair value of the inflation linked 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 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, CAD 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
2025
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)
12,649
10,884
60,547
75,678
3,581
163,339
Average fixed interest rate - GBP
4.15%
4.70%
4.02%
3.51%
3.75%
Average fixed interest rate - EUR
\u2014
0.22%
\u2014
0.62%
4.37%
Average fixed interest rate - USD
\u2014
\u2014
\u2014
4.09%
1.33%
Interest rate/FX risk
Exchange rate contracts - Nominal amount (\u00a3m)
12
13
199
3,086
789
4,099
Interest rate contracts - Nominal amount (\u00a3m)
12
13
113
2,968
789
3,895
Average GBP - EUR exchange rate
1.18
1.14
1.16
1.18
1.18
Average GBP - USD exchange rate
\u2014
\u2014
1.25
1.35
1.29
Average fixed interest rate - EUR
1.78%
3.25%
4.08%
3.51%
2.82%
Average fixed interest rate - USD
\u2014
\u2014
4.99%
4.39%
4.36%
Inflation risk/Interest rate
risk
Inflation derivative contracts - Nominal amount (\u00a3m)
\u2014
\u2014
\u2014
\u2014
1,850
1,850
Interest rate contracts - Nominal amount (\u00a3m)
\u2014
\u2014
\u2014
\u2014
1,850
1,850
Average fixed interest rate - GBP
\u2014
\u2014
\u2014
\u2014
5.00%
Cash flow hedges:
Interest rate risk
Interest rate contracts \u2013 Nominal amount (\u00a3m)
261
\u2014
2,174
30,622
3,550
36,607
Average fixed interest rate - GBP
4.38%
\u2014
3.15%
3.88%
4.48%
FX risk
Exchange rate contracts - Nominal amount (\u00a3m)
\u2014
\u2014
1,730
12,429
2,716
16,875
Average GBP - CHF exchange rate
\u2014
\u2014
1.12
1.11
\u2014
Average GBP - EUR exchange rate
\u2014
\u2014
\u2014
1.18
1.17
Average GBP - USD exchange rate
\u2014
\u2014
1.33
1.27
1.37
Interest rate/FX risk
Exchange rate contracts - Nominal amount (\u00a3m)
\u2014
\u2014
76
1,183
209
1,468
Interest rate contracts - Nominal amount (\u00a3m)
\u2014
\u2014
\u2014
743
158
901
Average GBP - EUR exchange rate
\u2014
\u2014
1.17
1.20
\u2014
Average GBP - USD exchange rate
\u2014
\u2014
\u2014
1.32
1.54
Average fixed interest rate - GBP
\u2014
\u2014
2.86%
3.10%
4.59%
2024
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 - 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%
Company
2025
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)
12,647
9,897
60,537
74,947
3,504
161,532
Average fixed interest rate \u2013 GBP
4.15%
4.60%
4.02%
3.49%
3.75%
Average fixed interest rate \u2013 EUR
\u2014
0.22%
\u2014
0.62%
\u2014
Average fixed interest rate \u2013 USD
\u2014
\u2014
\u2014
4.09%
1.33%
Interest rate/FX risk
Exchange rate contracts \u2013 Nominal amount (\u00a3m)
12
13
112
1,928
789
2,854
Interest rate contracts \u2013 Nominal amount (\u00a3m)
12
13
112
1,915
789
2,841
Average GBP - EUR exchange rate
1.18
1.14
1.15
1.16
1.18
Average GBP - USD exchange rate
\u2014
\u2014
1.25
1.35
1.29
Average fixed interest rate \u2013 EUR
1.78%
3.25%
3.21%
2.97%
2.82%
Average fixed interest rate \u2013 USD
\u2014
\u2014
4.99%
4.39%
4.36%
Inflation risk/interest rate
risk
Inflation derivative contracts - Nominal amount (\u00a3m)
\u2014
\u2014
\u2014
\u2014
1,850
1,850
Interest rate contracts - Nominal amount (\u00a3m)
\u2014
\u2014
\u2014
\u2014
1,850
1,850
Average fixed interest rate - GBP
\u2014
\u2014
\u2014
\u2014
5.00%
Cash flow hedges:
Interest rate risk
Interest rate contracts \u2013 Nominal amount (\u00a3m)
261
\u2014
1,144
25,621
2,058
29,084
Average fixed interest rate - GBP
4.38%
\u2014
2.93%
4.01%
4.37%
FX risk
Exchange rate contracts \u2013 Nominal amount (\u00a3m)
\u2014
\u2014
743
6,914
1,189
8,846
Average GBP - EUR exchange rate
\u2014
\u2014
\u2014
1.18
\u2014
Average GBP - USD exchange rate
\u2014
\u2014
1.41
1.28
1.37
Interest rate/FX risk
Exchange rate contracts \u2013 Nominal amount (\u00a3m)
\u2014
\u2014
30
805
209
1,044
Interest rate contracts \u2013 Nominal amount (\u00a3m)
\u2014
\u2014
\u2014
743
157
900
Average GBP - USD exchange rate
\u2014
\u2014
\u2014
1.32
1.54
Average fixed interest rate \u2013 GBP
\u2014
\u2014
2.84%
2.60%
4.59%
2024
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 - EUR
\u2014
\u2014
0.80%
3.06%
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
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 - CHF exchange rate
\u2014
\u2014
1.09
\u2014
\u2014
Average GBP - CAD exchange rate
\u2014
\u2014
1.76
\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%
Net gains or losses arising from fair value and cash flow hedges included in other operating income
Group
Company
2025
2024
2023
2025
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Fair value hedging:
(Losses)/Gains on hedging instruments
(551)
193
(1,879)
(626)
220
(1,920)
Gains/(Losses) on hedged items attributable to hedged risks
523
(168)
1,896
589
(201)
1,927
Fair value hedging ineffectiveness
(28)
25
17
(37)
19
7
Cash flow hedging ineffectiveness
(3)
(3)
2
(3)
(4)
\u2014
(31)
22
19
(40)
15
7
Hedge ineffectiveness can be analysed by risk category as follows:
Group
2025
2024
2023
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
(528)
499
(29)
167
(151)
16
(1,865)
1,877
12
Interest rate/FX risk
9
(8)
1
26
(17)
9
(14)
19
5
Inflation rate risk/interest rate
risk
(32)
32
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(551)
523
(28)
193
(168)
25
(1,879)
1,896
17
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:
2025
Interest rate risk
Net interest income
465
(469)
(4)
(305)
FX risk
Net interest income/other operating income
(287)
295
8
(151)
Interest rate/FX risk
Net interest income/other operating income
(66)
59
(7)
(89)
Inflation Risk
Net Interest Income
82
(82)
\u2014
9
194
(197)
(3)
(536)
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)
Company
2025
2024
2023
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
(553)
521
(32)
186
(171)
15
(1,907)
1,916
9
Interest rate/FX risk
(41)
36
(5)
34
(30)
4
(13)
11
(2)
Inflation rate risk/Interest
rate risk
(32)
32
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(626)
589
(37)
220
(201)
19
(1,920)
1,927
7
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:
2025
Interest rate risk
Net interest income
394
(398)
(4)
(204)
FX risk
Net interest income/other operating income
(312)
315
3
(277)
Interest rate/FX risk
Net interest income/other operating income
(101)
99
(2)
(124)
Inflation Risk
Net Interest Income
82
(82)
\u2014
9
63
(66)
(3)
(596)
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)
In 2025, cash flow hedge accounting of \u00a3nil (2024: \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
2025
2024
2025
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Balance at 1 January
(453)
(496)
(399)
(262)
Effective portion of changes in fair value:
\u2013 Interest rate risk
469
(761)
398
(614)
\u2013 Foreign currency risk
(295)
405
(315)
582
\u2013 Interest rate/foreign currency risk
(59)
(172)
(99)
(47)
\u2013 Inflation risk
82
71
82
71
197
(457)
66
(8)
Income statement transfers:
\u2013 Interest rate risk
305
488
204
333
\u2013 Foreign currency risk
151
(216)
277
(523)
\u2013 Interest rate/foreign currency risk
89
231
124
64
\u2013 Inflation risk
(9)
(3)
(9)
(3)
536
500
596
(129)
Balance at 31 December
280
(453)
263
(399)
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
2025
2024
Accumulated FV hedge adjustments
Change in value
to calculate
hedge
ineffectiveness
Accumulated FV hedge adjustments
Change in
value to
calculate
hedge
ineffectiveness
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
72,604
\u2014
(76)
(24)
552
62,773
\u2014
(731)
(290)
(154)
Other financial assets at amortised cost
2,103
(25)
(6)
(5)
21
1,667
(45)
(7)
(7)
(44)
Reverse repurchase agreements \u2013 non
trading
8,802
\u2014
2
\u2014
2
6,423
\u2014
(1)
\u2014
(1)
Other financial assets at FVOCI
2,010
(87)
\u2014
(74)
42
2,100
(131)
\u2014
(95)
(18)
Deposits by customers
(29,620)
\u2014
(27)
\u2014
(53)
(21,726)
18
9
1
(1)
Debt securities in issue
(3,758)
70
(32)
(38)
(60)
(3,811)
150
(54)
(77)
52
Subordinated liabilities
(505)
(18)
(1)
(28)
(6)
(511)
(12)
(1)
(36)
15
Interest rate/FX risk:
Other financial assets at FVOCI
1,898
7
\u2014
\u2014
46
1,503
16
\u2014
\u2014
(30)
Debt securities in issue
(2,284)
(5)
\u2014
(8)
(53)
(200)
(9)
\u2014
(14)
13
Inflation risk/Interest rate risk:
Other financial assets at amortised cost
1,884
12
\u2014
\u2014
32
\u2014
\u2014
\u2014
\u2014
\u2014
Other financial assets at FVOCI
83
(1)
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
53,217
(47)
(140)
(177)
523
48,218
(13)
(785)
(518)
(168)
Group
2025
2024
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
(205)
(79)
\u2014
361
(497)
2
Cash and balances at central banks
(207)
112
(27)
464
(192)
(50)
Deposits by banks
2
\u2014
\u2014
(4)
\u2014
\u2014
Repurchase agreements - non trading
(59)
104
104
(60)
52
\u2014
FX risk:
Other financial assets at FVOCI
(84)
\u2014
\u2014
(487)
1
\u2014
Highly probable forecast transactions
(5)
1
\u2014
4
\u2014
\u2014
Debt securities in issue
383
36
\u2014
78
181
\u2014
Interest rate/FX risk:
Debt securities in issue/loans and advances to
customers
(47)
(3)
\u2014
148
(12)
\u2014
Deposits by customers
58
(13)
\u2014
21
(37)
\u2014
Subordinated liabilities/loans and advances to
customers
49
(19)
48
3
(16)
51
Inflation risk:
Other financial assets at amortised cost
(81)
139
139
(70)
66
\u2014
Other financial assets at FVOCI
(1)
2
2
(1)
1
\u2014
(197)
280
266
457
(453)
3
Company
2025
2024
Accumulated FV hedge adjustments
Change in value
to calculate
hedge
ineffectiveness
Accumulated FV hedge adjustments
Change in value
to calculate
hedge
ineffectiveness
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
72,525
\u2014
(220)
(169)
552
62,694
\u2014
(903)
(461)
(153)
Other financial assets at amortised cost
2,103
(25)
(6)
(6)
21
1,667
(45)
(7)
(7)
(44)
Reverse repurchase agreements \u2013 non
trading
8,802
\u2014
2
\u2014
2
6,423
\u2014
(1)
\u2014
(1)
Other financial assets at FVOCI
2,010
(87)
\u2014
(74)
42
2,100
(131)
\u2014
(95)
(18)
Deposits by customers
(29,112)
\u2014
(27)
\u2014
(53)
(21,726)
18
10
1
(1)
Debt securities in issue
(1,948)
25
\u2014
\u2014
(37)
(2,035)
64
\u2014
\u2014
32
Subordinated liabilities
(506)
(18)
\u2014
(27)
(6)
(512)
(13)
\u2014
(35)
14
Interest rate/FX risk:
Other financial assets at FVOCI
1,898
7
\u2014
\u2014
46
1,503
17
\u2014
\u2014
(30)
Debt securities in issue
(1,010)
3
\u2014
\u2014
(10)
\u2014
\u2014
\u2014
\u2014
\u2014
Inflation risk/Interest rate risk:
Other financial assets at amortised cost
1,884
12
\u2014
\u2014
32
\u2014
\u2014
\u2014
\u2014
\u2014
Other financial assets at FVOCI
83
(1)
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
56,729
(84)
(251)
(276)
589
50,114
(90)
(901)
(597)
(201)
Company
2025
2024
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
(111)
(65)
\u2014
214
(312)
2
Cash and balances at central banks
(230)
112
(27)
464
(191)
(50)
Deposits by banks
2
\u2014
\u2014
(4)
\u2014
\u2014
Repurchase agreements - non trading
(59)
104
104
(60)
52
\u2014
FX risk:
Other financial assets at FVOCI
(84)
\u2014
\u2014
(487)
1
\u2014
Highly probable forecast transactions
(5)
1
\u2014
4
\u2014
\u2014
Debt securities in issue
404
9
\u2014
(99)
48
\u2014
Interest rate/FX risk:
Debt securities in issue/loans and advances to
customers
(6)
\u2014
\u2014
23
(2)
\u2014
Deposits by customers
57
(13)
(1)
21
(38)
(1)
Subordinated liabilities/loans and advances to
customers
48
(26)
42
3
(23)
43
Inflation risk:
Other financial assets at amortised cost
(81)
139
139
(70)
65
\u2014
Other financial assets at FVOCI
(1)
2
2
(1)
1
\u2014
(66)
263
259
8
(399)
(6)
Cost of Hedging
Group
Company
2025
2025
Components of hedging derivatives excluded
from hedge designation
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Balance at 1 January
\u2014
\u2014
Transfers to cost of hedging reserve:
Cash flow hedges:
Foreign currency risk
Time-period related
24
8
Transaction-related
\u2014
\u2014
24
8
Equity risk
Time-period related
\u2014
\u2014
Transaction-related
\u2014
\u2014
\u2014
\u2014
24
8
Fair value hedges:
Foreign currency risk
Time-period related
(2)
(2)
Transaction-related
\u2014
\u2014
(2)
(2)
(2)
(2)
22
6
Transfers out of cost of hedging reserve:
Cash flow hedges:
Foreign currency risk
Time-period related
(1)
(1)
Transaction-related
\u2014
\u2014
(1)
(1)
Equity risk
Time-period related
\u2014
\u2014
Transaction-related
\u2014
\u2014
\u2014
\u2014
(1)
(1)
(1)
(1)
Tax
(1)
(1)
Balance at 31 December
20
4
12. OTHER FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
Group
Company
2025
2024
2025
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Loans and advances to customers:
Loans to housing associations
\u2014
4
\u2014
4
Other loans
40
40
40
40
40
44
40
44
Debt securities
\u2014
56
\u2014
56
Other debt instruments
24
36
\u2014
\u2014
64
136
40
100
For the Santander UK group, other financial assets at FVTPL comprised \u00a3nil (2024: \u00a360m) of financial assets designated at FVTPL and \u00a364m (2024: \u00a376m) of
financial assets mandatorily held at FVTPL. For the Company, other financial assets at FVTPL comprised \u00a3nil (2024: \u00a360m) of financial assets designated at FVTPL
and \u00a340m (2024: \u00a340m) 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.
In 2025, 2024 and 2023, the net loss in the year attributable to changes in credit risk for loans and advances at FVTPL was \u00a3nil. The cumulative net loss attributable
to changes in credit risk for loans and advances at FVTPL at 31 December 2025 was \u00a33m (2024: \u00a33m 2023: \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
securitisations and 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 pools of auto loans originated by members of the Santander UK group are sold to
special purpose vehicles by members of the Santander UK group. The special purpose vehicle funds the purchase of the auto loans by issuing Variable Funding
Notes to third-party investors. A proportion of the remaining exposure is retained by members of the Santander UK group. Members of the Santander UK group also
receive payments from the special purpose vehicles in respect of fees for administering the auto loans, and payment of deferred consideration for the sale of the
securitised auto loans. The members of the Santander UK group have no right or obligation to repurchase any securitised loans, except if certain representations and
warranties given at the time of sale are breached and, in certain cases, if there has been a subsequent variation in the terms of the underlying auto loans not
permitted under the sale agreements related to the auto loan securitisations.
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 2025 and 2024 are listed below. The gross assets in the
Santander UK 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
2025
2024
2025
2024
2025
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Mortgage-backed master trust structures:
\u2013 Holmes
7,090
5,109
4,887
3,379
562
389
\u2013 Fosse
1,845
2,383
201
\u2014
1,204
1,408
8,935
7,492
5,088
3,379
1,766
1,797
Other asset-backed securitisation structures:
\u2013 Repton
760
718
550
550
\u2014
\u2014
Total securitisation programmes
9,695
8,210
5,638
3,929
1,766
1,797
Covered bond programme:
\u2013 Euro 35bn Global Covered Bond Programme
27,428
25,695
19,201
17,211
1,224
1,224
Total securitisation and covered bond programmes
37,123
33,905
24,839
21,140
2,990
3,021
Company
Gross assets
External notes in issue
Notes held within the Company
2025
2024
2025
2024
2025
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Covered bond programme:
\u2013 Euro 35bn Global Covered Bond Programme
27,428
25,695
19,248
17,300
1,224
1,224
Total securitisation and covered bond programmes
27,428
25,695
19,248
17,300
1,224
1,224
The following table sets out the internal and external issuances and redemptions in 2025 and 2024 for each securitisation and covered bond programme.
Group
Internal issuances
External issuances
Internal redemptions
External redemptions
2025
2024
2025
2024
2025
2024
2025
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Mortgage-backed master trust structures:
\u2013 Holmes
172
106
1,500
1,250
\u2014
17
\u2014
\u2014
\u2013 Fosse
\u2014
894
\u2014
\u2014
\u2014
865
\u2014
100
Covered bond programme:
\u2013 Euro 35bn Global Covered Bond Programme
\u2014
\u2014
2,687
5,890
\u2014
41
1,152
3,359
172
1,000
4,187
7,140
\u2014
923
1,152
3,459
In January 2025, \u00a3200m of the Fosse retained notes were sold to an external counterparty.
Company
External issuances
Internal redemptions
External redemptions
2025
2024
2025
2024
2025
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Covered bond programme:
\u2013 Euro 35bn Global Covered Bond Programme
2,687
5,890
\u2014
41
1,152
3,359
2,687
5,890
\u2014
41
1,152
3,359
Holmes Funding Ltd has a beneficial interest of \u00a35,407m (2024: \u00a33,735m) 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 (2024: \u00a31,394m) 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 \u00a3182m (2024: \u00a3126m), 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 \u00a347m (2024: \u00a348m), 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 include (i) securities held by counterparties as collateral under repurchase agreements, (ii) securities lent under securities lending agreements, and
(iii) loans transferred under securitisation or covered bond arrangements where 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 cannot 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 retains 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 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
2025
2024
Assets
Liabilities
Assets
Liabilities
Nature of transaction
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Sale and repurchase agreements
1,295
1,280
1,346
(1,372)
Securities lending agreements
2,160
1,857
3,304
(2,807)
Company
2025
2024
Assets
Liabilities
Assets
Liabilities
Nature of transaction
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Sale and repurchase agreements
1,295
1,280
1,346
(1,372)
Securities lending agreements
2,160
1,857
2,358
(2,307)
17. OTHER FINANCIAL ASSETS AT AMORTISED COST
Group
Company
2025
2024
2025
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Asset backed securities
\u2014
\u2014
1,767
1,798
Debt securities
3,987
3,408
3,987
3,408
0
3,987
3,408
5,754
5,206
A significant portion of the debt securities are held in our eligible liquidity pool and consist mainly of government bonds and covered bonds.
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 and Company
2025
2024
\u00a3m
\u00a3m
Structured Notes Programmes
331
355
Structured deposits
824
605
Zero Amortising Guaranteed Notes
95
95
1,250
1,055
At 31 December 2025, other financial liabilities at fair value through profit or loss included amounts due to Banco Santander group entities of \u00a316m (2024: \u00a318m).
For the Santander UK group and the Company, in 2025 and 2024 all the other financial liabilities were designated at FVTPL.
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 \u00a31m (2024: \u00a317m loss, 2023: \u00a321m loss). The cumulative net loss attributable to changes in the Santander UK group\u2019s own credit risk on the above
securities at 31 December 2025 was \u00a35m (2024: \u00a34m loss, 2023: \u00a36m loss).
At 31 December 2025, the amount that would be required to be contractually paid at maturity of the securities above was \u00a335m (2024: \u00a376m) below the carrying
value.
25. DEBT SECURITIES IN ISSUE
Group
Company
2025
2024
2025
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Medium-term notes:
\u2013 US $30bn Euro Medium Term Note Programme
308
696
308
696
\u2013 Euro \u20ac30bn Euro Medium Term Note Programme
1,982
\u2014
1,982
\u2014
2,290
696
2,290
696
Downstreamed from Santander UK Group Holdings plc to Santander UK plc:
\u2013 Euro \u20ac30bn Euro Medium Term Note Programme
2,960
2,997
2,960
2,997
\u2013 US SEC-registered Debt Programme - Santander UK plc
6,646
5,929
6,646
5,929
11,896
9,622
11,896
9,622
Euro \u20ac35bn Global Covered Bond Programme
19,201
17,211
19,248
17,300
US $20bn Commercial Paper Programmes
2,411
3,274
2,411
3,274
Certificates of deposit
1,607
1,196
1,607
1,196
Credit linked notes
635
441
635
441
Securitisation programmes
5,638
3,929
\u2014
\u2014
41,388
35,673
35,797
31,833
At 31 December 2025, debt securities in issue included amounts due to Banco Santander group entities of \u00a39,626m (2024: \u00a39,036m).
29. SUBORDINATED LIABILITIES
Group
Company
2025
2024
2025
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3325m Sterling preference shares
343
343
343
343
Undated subordinated liabilities
205
205
205
205
Dated subordinated liabilities
1,484
1,837
1,485
1,838
2,032
2,385
2,033
2,386
At 31 December 2025, subordinated liabilities included amounts due to Banco Santander group entities of \u00a31,532m (2024: \u00a31,879m).
In 2025, certain debt securities and subordinated liabilities were repurchased, resulting in a loss of \u00a33m (2024: nil).
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 2025 and 2024, 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
2025
2024
2025
2024
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
2025
2024
2025
2024
Maturity
\u00a3m
\u00a3m
\u00a3m
\u00a3m
4.75% Subordinated notes
2025
\u2014
332
\u2014
332
7.95% Subordinated notes
2029
177
189
177
189
6.50% Subordinated notes
2030
1
1
1
1
5.875% Subordinated notes
2031
8
7
9
8
5.625%Subordinated notes
2045
210
226
210
226
7.869% Subordinated notes
2033
319
314
319
314
8.296% Subordinated notes
2033
769
768
769
768
1,484
1,837
1,485
1,838
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 2025 and 2024 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 2025, 2024 and 2023.
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 2025 and 2024, 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
2025
2024
Fair value
Carrying
Fair value
Carrying
Level 1
Level 2
Level 3
Total
value
Level 1
Level 2
Level 3
Total
value
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Loans and advances to customers
\u2014
\u2014
203,426
203,426
202,609
\u2014
\u2014
198,376
198,376
199,408
Loans and advances to banks
\u2014
1,048
\u2014
1,048
1,048
\u2014
1,032
\u2014
1,032
1,032
Reverse repurchase agreements - non-trading
\u2014
17,696
\u2014
17,696
17,678
\u2014
10,342
\u2014
10,342
10,338
Other financial assets at amortised cost
3,747
\u2014
\u2014
3,747
3,987
3,190
\u2014
\u2014
3,190
3,408
3,747
18,744
203,426
225,917
225,322
3,190
11,374
198,376
212,940
214,186
Liabilities
Deposits by customers
\u2014
117
187,849
187,966
187,300
\u2014
185
180,282
180,467
180,967
Deposits by banks
\u2014
6,630
\u2014
6,630
6,628
\u2014
13,934
39
13,973
13,993
Repurchase agreements - non-trading
\u2014
9,039
\u2014
9,039
9,029
\u2014
8,622
\u2014
8,622
8,617
Debt securities in issue
25,874
14,618
1,421
41,913
41,388
21,173
12,910
1,771
35,854
35,673
Subordinated liabilities
1,065
1,161
187
2,413
2,032
1,129
10
1,622
2,761
2,385
26,939
31,565
189,457
247,961
246,377
22,302
35,661
183,714
241,677
241,635
Company
2025
2024
Fair value
Carrying
Fair value
Carrying
Level 1
Level 2
Level 3
Total
value
Level 1
Level 2
Level 3
Total
value
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Loans and advances to customers
\u2014
\u2014
223,075
223,075
222,467
\u2014
\u2014
216,851
216,851
217,780
Loans and advances to banks
\u2014
990
\u2014
990
990
\u2014
926
\u2014
926
926
Reverse repurchase agreements - non-trading
\u2014
17,696
\u2014
17,696
17,678
\u2014
10,342
\u2014
10,342
10,338
Other financial assets at amortised cost
3,747
1,593
\u2014
5,340
5,754
3,190
1,977
\u2014
5,167
5,206
3,747
20,279
223,075
247,101
246,889
3,190
13,245
216,851
233,286
234,250
Liabilities
Deposits by customers
\u2014
17
212,293
212,310
211,643
\u2014
185
200,530
200,715
201,215
Deposits by banks
\u2014
11,127
\u2014
11,127
11,126
\u2014
13,922
5,579
19,501
19,521
Repurchase agreements - non-trading
\u2014
9,039
\u2014
9,039
9,029
\u2014
8,621
\u2014
8,621
8,617
Debt securities in issue
20,968
14,480
859
36,307
35,797
17,870
12,846
1,379
32,095
31,833
Subordinated liabilities
1,065
1,161
187
2,413
2,033
1,129
10
1,598
2,737
2,386
22,033
35,824
213,339
271,196
269,628
18,999
35,584
209,086
263,669
263,572
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 2025 and 31 December 2024,
analysed by their levels in the fair value hierarchy - Level 1, Level 2 and Level 3.
Group
2025
2024
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
671
\u2014
671
\u2014
978
\u2014
978
A
Interest rate contracts
\u2014
1,078
\u2014
1,078
\u2014
1,675
\u2014
1,675
A & C
Inflation rate contracts
\u2014
85
\u2014
85
\u2014
70
\u2014
70
A
Equity and credit contracts
\u2014
64
30
94
\u2014
89
35
124
B & D
Netting
\u2014
(1,058)
\u2014
(1,058)
\u2014
(1,643)
\u2014
(1,643)
\u2014
840
30
870
\u2014
1,169
35
1,204
Other financial assets at FVTPL
Loans and advances to customers
\u2014
\u2014
40
40
\u2014
\u2014
44
44
A
Debt securities and other debt
instruments
\u2014
\u2014
24
24
\u2014
56
36
92
A, B & D
\u2014
\u2014
64
64
\u2014
56
80
136
Financial assets at FVOCI
Debt securities
5,017
199
\u2014
5,216
8,805
201
34
9,040
D
5,017
199
\u2014
5,216
8,805
201
34
9,040
Total assets at fair value
5,017
1,039
94
6,150
8,805
1,426
149
10,380
Liabilities
Derivative financial instruments
Exchange rate contracts
\u2014
512
\u2014
512
\u2014
430
\u2014
430
A
Interest rate contracts
\u2014
1,182
\u2014
1,182
\u2014
1,894
\u2014
1,894
A & C
Inflation rate contracts
\u2014
30
\u2014
30
\u2014
\u2014
\u2014
\u2014
A
Equity and credit contracts
\u2014
8
13
21
\u2014
7
14
21
B & D
Netting
\u2014
(1,058)
\u2014
(1,058)
\u2014
(1,643)
\u2014
(1,643)
\u2014
674
13
687
\u2014
688
14
702
Other financial liabilities at FVTPL
Debt securities in issue
\u2014
331
\u2014
331
\u2014
355
\u2014
355
A
Structured deposits
\u2014
824
\u2014
824
\u2014
605
\u2014
605
A
Zero Amortising Guaranteed Notes
\u2014
95
\u2014
95
\u2014
95
\u2014
95
D
\u2014
1,250
\u2014
1,250
\u2014
1,055
\u2014
1,055
Total liabilities at fair value
\u2014
1,924
13
1,937
\u2014
1,743
14
1,757
Company
2025
2024
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
771
\u2014
771
\u2014
1,243
\u2014
1,243
A
Interest rate contracts
\u2014
1,075
\u2014
1,075
\u2014
1,685
3
1,688
A & C
Inflation rate contracts
\u2014
85
\u2014
85
\u2014
70
\u2014
70
A
Equity and credit contracts
\u2014
64
30
94
\u2014
89
35
124
B & D
Netting
\u2014
(1,058)
\u2014
(1,058)
\u2014
(1,643)
\u2014
(1,643)
\u2014
937
30
967
\u2014
1,444
38
1,482
Other financial assets at FVTPL
Loans and advances to customers
\u2014
\u2014
40
40
\u2014
\u2014
44
44
A
Debt securities and other debt
instruments
\u2014
\u2014
\u2014
\u2014
\u2014
56
\u2014
56
C
\u2014
\u2014
40
40
\u2014
56
44
100
Financial assets at FVOCI
Debt securities
5,017
199
\u2014
5,216
8,805
201
34
9,040
D
5,017
199
\u2014
5,216
8,805
201
34
9,040
Total assets at fair value
5,017
1,136
70
6,223
8,805
1,701
116
10,622
Liabilities
Derivative financial instruments
Exchange rate contracts
\u2014
836
\u2014
836
\u2014
456
\u2014
456
A
Interest rate contracts
\u2014
1,235
1,068
2,303
\u2014
1,933
1,840
3,773
A & C
Inflation rate contracts
\u2014
30
\u2014
30
\u2014
\u2014
\u2014
\u2014
A
Equity and credit contracts
\u2014
8
13
21
\u2014
7
14
21
B
Netting
\u2014
(1,058)
\u2014
(1,058)
\u2014
(1,643)
\u2014
(1,643)
\u2014
1,051
1,081
2,132
\u2014
753
1,854
2,607
Other financial liabilities at FVTPL
Debt securities in issue
\u2014
331
\u2014
331
\u2014
355
\u2014
355
A
Structured deposits
\u2014
824
\u2014
824
\u2014
605
\u2014
605
A
Zero Amortising Guaranteed Notes
\u2014
95
\u2014
95
\u2014
95
\u2014
95
D
\u2014
1,250
\u2014
1,250
\u2014
1,055
\u2014
1,055
Total liabilities at fair value
\u2014
2,301
1,081
3,382
\u2014
1,808
1,854
3,662
Transfers between levels 1 and 2 of the fair value hierarchy
In 2025 and 2024, there were no significant transfers of financial instruments between levels 1 and 2 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
2025
2024
\u00a3m
\u00a3m
Risk-related:
- Bid-offer and trade specific adjustments
9
6
- Uncertainty
4
4
- Credit risk adjustment
1
1
- Funding fair value adjustment
1
\u2014
15
11
Company
2025
2024
\u00a3m
\u00a3m
Risk-related:
- Bid-offer and trade specific adjustments
9
8
- Uncertainty
4
4
- Credit risk adjustment
1
1
- Funding fair value adjustment
1
\u2014
15
13
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.
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
arrangements2
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
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Derivative financial assets
1,890
(1,058)
832
(415)
(370)
47
38
870
Reverse repurchase, securities borrowing & similar
agreements:
\u2013 Amortised cost
20,967
(3,289)
17,678
(1,167)
(16,511)
\u2014
\u2014
17,678
Loans and advances to customers and banks\u2074
3,959
(588)
3,371
\u2014
\u2014
3,371
200,286
203,657
26,816
(4,935)
21,881
(1,582)
(16,881)
3,418
200,324
222,205
Liabilities
Derivative financial liabilities
1,731
(1,058)
673
(415)
(182)
76
14
687
Repurchase, securities lending & similar agreements:
\u2013 Amortised cost
12,318
(3,289)
9,029
(1,167)
(7,862)
\u2014
\u2014
9,029
Deposits by customers and banks\u2074
588
(588)
\u2014
\u2014
\u2014
\u2014
193,928
193,928
14,637
(4,935)
9,702
(1,582)
(8,044)
76
193,942
203,644
2024
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\u2074
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\u2074
635
(635)
\u2014
\u2014
\u2014
\u2014
194,960
194,960
17,414
(8,115)
9,299
(470)
(8,681)
148
194,980
204,279
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
arrangements2
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
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Derivative financial assets
1,987
(1,058)
929
(514)
(370)
45
38
967
Reverse repurchase, securities borrowing & similar
agreements:
\u2013 Amortised cost
20,967
(3,289)
17,678
(1,167)
(16,511)
\u2014
\u2014
17,678
Loans and advances to customers and banks 4
3,959
(588)
3,371
\u2014
\u2014
3,371
220,086
223,457
26,913
(4,935)
21,978
(1,681)
(16,881)
3,416
220,124
242,102
Liabilities
Derivative financial liabilities
3,177
(1,058)
2,119
(514)
(182)
1,423
13
2,132
Repurchase, securities lending & similar agreements:
\u2013 Amortised cost
12,318
(3,289)
9,029
(1,167)
(7,862)
\u2014
\u2014
9,029
Deposits by customers and banks 4
588
(588)
\u2014
\u2014
\u2014
\u2014
222,769
222,769
16,083
(4,935)
11,148
(1,681)
(8,044)
1,423
222,782
233,930
2024
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
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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-568": { "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
2025
2024
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
9,341
85
118
13,755
238
156
Interest rate contracts
25,372
198
336
29,296
294
489
Inflation rate contracts
171
16
30
\u2014
\u2014
\u2014
Equity and credit contracts
568
94
21
681
124
21
Total derivatives held for trading
35,452
393
505
43,732
656
666
Derivatives held for hedging
Designated as fair value hedges:
Exchange rate contracts
4,099
86
16
1,712
42
8
Interest rate contracts
169,084
564
479
146,172
1,055
477
Inflation rate contracts
1,850
69
\u2014
\u2014
\u2014
\u2014
175,033
719
495
147,884
1,097
485
Designated as cash flow hedges:
Exchange rate contracts
18,343
500
378
21,535
698
266
Interest rate contracts
37,508
316
367
54,267
326
928
Inflation rate contracts
\u2014
\u2014
\u2014
1,794
70
\u2014
55,851
816
745
77,596
1,094
1,194
Total derivatives held for hedging
230,884
1,535
1,240
225,480
2,191
1,679
Derivative netting 1
\u2014
(1,058)
(1,058)
\u2014
(1,643)
(1,643)
Total derivatives
266,336
870
687
269,212
1,204
702
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
\u00a3827m (2024: \u00a3489m) and the amount of cash collateral paid that had been offset against the gross derivative liabilities was \u00a323m (2024: \u00a332m).
At 31 December 2025, the fair value of derivative assets included amounts due from Banco Santander group entities of \u00a3599m (2024: \u00a3544m) and the fair value of
derivative liabilities included amounts due to Banco Santander group entities of \u00a3292m (2024: \u00a3244m).
Company
2025
2024
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
28,677
480
542
31,646
553
300
Interest rate contracts
71,108
320
1,527
69,248
358
2,589
Inflation rate contracts
171
16
30
\u2014
\u2014
\u2014
Equity and credit contracts
568
94
21
681
124
21
Total derivatives held for trading
100,524
910
2,120
101,575
1,035
2,910
Derivatives held for hedging
Designated as fair value hedges:
Exchange rate contracts
2,854
47
16
1,524
41
4
Interest rate contracts
166,223
490
478
144,346
1,013
464
Inflation rate contracts
1,850
69
\u2014
\u2014
\u2014
\u2014
170,927
606
494
145,870
1,054
468
Designated as cash flow hedges:
Exchange rate contracts
9,890
244
278
12,931
649
152
Interest rate contracts
29,984
265
298
46,549
317
720
Inflation rate contracts
\u2014
\u2014
\u2014
1,794
70
\u2014
39,874
509
576
61,274
1,036
872
Total derivatives held for hedging
210,801
1,115
1,070
207,144
2,090
1,340
Derivative netting 1
\u2014
(1,058)
(1,058)
\u2014
(1,643)
(1,643)
Total derivatives
311,325
967
2,132
308,719
1,482
2,607
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
\u00a3827m (2024: \u00a3489m) and the amount of cash collateral paid that had been offset against the gross derivative liabilities was \u00a323m (2024: \u00a332m).
At 31 December 2025, for the Company, the fair value of derivative assets included amounts due from Banco Santander group entities of \u00a3599m (2024: \u00a3544m)
and the fair value of derivative liabilities included amounts due to Banco Santander group entities of \u00a3292m (2024: \u00a3244m).
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
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Exchange rate contracts
\u2014
31,783
31,783
671
512
Interest rate contracts
219,306
12,658
231,964
20
124
Inflation rate contracts
2,021
\u2014
2,021
85
30
Equity and credit contracts
\u2014
568
568
94
21
221,327
45,009
266,336
870
687
2024
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
\u2014
1,794
70
\u2014
Equity and credit contracts
\u2014
681
681
124
21
218,953
50,259
269,212
1,204
702
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.
Hedges of inflation risk
Santander UK has exposure to inflation arising on UK inflation-linked gilts, that is hedged by entering into inflation swaps. Fair value hedging is applied whereby the
inflation swap is hedging variability in cash flows of the inflation-linked gilt due to change in GBP RPI. Effectiveness is assessed by using linear regression techniques
to compare changes in the fair value of the inflation-linked gilts attributable to the hedged risk, with changes in the fair value of the inflation linked 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 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, CAD 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
2025
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)
12,649
10,884
60,547
75,678
3,581
163,339
Average fixed interest rate - GBP
4.15%
4.70%
4.02%
3.51%
3.75%
Average fixed interest rate - EUR
\u2014
0.22%
\u2014
0.62%
4.37%
Average fixed interest rate - USD
\u2014
\u2014
\u2014
4.09%
1.33%
Interest rate/FX risk
Exchange rate contracts - Nominal amount (\u00a3m)
12
13
199
3,086
789
4,099
Interest rate contracts - Nominal amount (\u00a3m)
12
13
113
2,968
789
3,895
Average GBP - EUR exchange rate
1.18
1.14
1.16
1.18
1.18
Average GBP - USD exchange rate
\u2014
\u2014
1.25
1.35
1.29
Average fixed interest rate - EUR
1.78%
3.25%
4.08%
3.51%
2.82%
Average fixed interest rate - USD
\u2014
\u2014
4.99%
4.39%
4.36%
Inflation risk/Interest rate
risk
Inflation derivative contracts - Nominal amount (\u00a3m)
\u2014
\u2014
\u2014
\u2014
1,850
1,850
Interest rate contracts - Nominal amount (\u00a3m)
\u2014
\u2014
\u2014
\u2014
1,850
1,850
Average fixed interest rate - GBP
\u2014
\u2014
\u2014
\u2014
5.00%
Cash flow hedges:
Interest rate risk
Interest rate contracts \u2013 Nominal amount (\u00a3m)
261
\u2014
2,174
30,622
3,550
36,607
Average fixed interest rate - GBP
4.38%
\u2014
3.15%
3.88%
4.48%
FX risk
Exchange rate contracts - Nominal amount (\u00a3m)
\u2014
\u2014
1,730
12,429
2,716
16,875
Average GBP - CHF exchange rate
\u2014
\u2014
1.12
1.11
\u2014
Average GBP - EUR exchange rate
\u2014
\u2014
\u2014
1.18
1.17
Average GBP - USD exchange rate
\u2014
\u2014
1.33
1.27
1.37
Interest rate/FX risk
Exchange rate contracts - Nominal amount (\u00a3m)
\u2014
\u2014
76
1,183
209
1,468
Interest rate contracts - Nominal amount (\u00a3m)
\u2014
\u2014
\u2014
743
158
901
Average GBP - EUR exchange rate
\u2014
\u2014
1.17
1.20
\u2014
Average GBP - USD exchange rate
\u2014
\u2014
\u2014
1.32
1.54
Average fixed interest rate - GBP
\u2014
\u2014
2.86%
3.10%
4.59%
2024
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 - 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%
Company
2025
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)
12,647
9,897
60,537
74,947
3,504
161,532
Average fixed interest rate \u2013 GBP
4.15%
4.60%
4.02%
3.49%
3.75%
Average fixed interest rate \u2013 EUR
\u2014
0.22%
\u2014
0.62%
\u2014
Average fixed interest rate \u2013 USD
\u2014
\u2014
\u2014
4.09%
1.33%
Interest rate/FX risk
Exchange rate contracts \u2013 Nominal amount (\u00a3m)
12
13
112
1,928
789
2,854
Interest rate contracts \u2013 Nominal amount (\u00a3m)
12
13
112
1,915
789
2,841
Average GBP - EUR exchange rate
1.18
1.14
1.15
1.16
1.18
Average GBP - USD exchange rate
\u2014
\u2014
1.25
1.35
1.29
Average fixed interest rate \u2013 EUR
1.78%
3.25%
3.21%
2.97%
2.82%
Average fixed interest rate \u2013 USD
\u2014
\u2014
4.99%
4.39%
4.36%
Inflation risk/interest rate
risk
Inflation derivative contracts - Nominal amount (\u00a3m)
\u2014
\u2014
\u2014
\u2014
1,850
1,850
Interest rate contracts - Nominal amount (\u00a3m)
\u2014
\u2014
\u2014
\u2014
1,850
1,850
Average fixed interest rate - GBP
\u2014
\u2014
\u2014
\u2014
5.00%
Cash flow hedges:
Interest rate risk
Interest rate contracts \u2013 Nominal amount (\u00a3m)
261
\u2014
1,144
25,621
2,058
29,084
Average fixed interest rate - GBP
4.38%
\u2014
2.93%
4.01%
4.37%
FX risk
Exchange rate contracts \u2013 Nominal amount (\u00a3m)
\u2014
\u2014
743
6,914
1,189
8,846
Average GBP - EUR exchange rate
\u2014
\u2014
\u2014
1.18
\u2014
Average GBP - USD exchange rate
\u2014
\u2014
1.41
1.28
1.37
Interest rate/FX risk
Exchange rate contracts \u2013 Nominal amount (\u00a3m)
\u2014
\u2014
30
805
209
1,044
Interest rate contracts \u2013 Nominal amount (\u00a3m)
\u2014
\u2014
\u2014
743
157
900
Average GBP - USD exchange rate
\u2014
\u2014
\u2014
1.32
1.54
Average fixed interest rate \u2013 GBP
\u2014
\u2014
2.84%
2.60%
4.59%
2024
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 - EUR
\u2014
\u2014
0.80%
3.06%
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
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 - CHF exchange rate
\u2014
\u2014
1.09
\u2014
\u2014
Average GBP - CAD exchange rate
\u2014
\u2014
1.76
\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%
Net gains or losses arising from fair value and cash flow hedges included in other operating income
Group
Company
2025
2024
2023
2025
2024
2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Fair value hedging:
(Losses)/Gains on hedging instruments
(551)
193
(1,879)
(626)
220
(1,920)
Gains/(Losses) on hedged items attributable to hedged risks
523
(168)
1,896
589
(201)
1,927
Fair value hedging ineffectiveness
(28)
25
17
(37)
19
7
Cash flow hedging ineffectiveness
(3)
(3)
2
(3)
(4)
\u2014
(31)
22
19
(40)
15
7
Hedge ineffectiveness can be analysed by risk category as follows:
Group
2025
2024
2023
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
(528)
499
(29)
167
(151)
16
(1,865)
1,877
12
Interest rate/FX risk
9
(8)
1
26
(17)
9
(14)
19
5
Inflation rate risk/interest rate
risk
(32)
32
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(551)
523
(28)
193
(168)
25
(1,879)
1,896
17
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:
2025
Interest rate risk
Net interest income
465
(469)
(4)
(305)
FX risk
Net interest income/other operating income
(287)
295
8
(151)
Interest rate/FX risk
Net interest income/other operating income
(66)
59
(7)
(89)
Inflation Risk
Net Interest Income
82
(82)
\u2014
9
194
(197)
(3)
(536)
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)
Company
2025
2024
2023
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
(553)
521
(32)
186
(171)
15
(1,907)
1,916
9
Interest rate/FX risk
(41)
36
(5)
34
(30)
4
(13)
11
(2)
Inflation rate risk/Interest
rate risk
(32)
32
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(626)
589
(37)
220
(201)
19
(1,920)
1,927
7
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:
2025
Interest rate risk
Net interest income
394
(398)
(4)
(204)
FX risk
Net interest income/other operating income
(312)
315
3
(277)
Interest rate/FX risk
Net interest income/other operating income
(101)
99
(2)
(124)
Inflation Risk
Net Interest Income
82
(82)
\u2014
9
63
(66)
(3)
(596)
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)
In 2025, cash flow hedge accounting of \u00a3nil (2024: \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
2025
2024
2025
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Balance at 1 January
(453)
(496)
(399)
(262)
Effective portion of changes in fair value:
\u2013 Interest rate risk
469
(761)
398
(614)
\u2013 Foreign currency risk
(295)
405
(315)
582
\u2013 Interest rate/foreign currency risk
(59)
(172)
(99)
(47)
\u2013 Inflation risk
82
71
82
71
197
(457)
66
(8)
Income statement transfers:
\u2013 Interest rate risk
305
488
204
333
\u2013 Foreign currency risk
151
(216)
277
(523)
\u2013 Interest rate/foreign currency risk
89
231
124
64
\u2013 Inflation risk
(9)
(3)
(9)
(3)
536
500
596
(129)
Balance at 31 December
280
(453)
263
(399)
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
2025
2024
Accumulated FV hedge adjustments
Change in value
to calculate
hedge
ineffectiveness
Accumulated FV hedge adjustments
Change in
value to
calculate
hedge
ineffectiveness
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
72,604
\u2014
(76)
(24)
552
62,773
\u2014
(731)
(290)
(154)
Other financial assets at amortised cost
2,103
(25)
(6)
(5)
21
1,667
(45)
(7)
(7)
(44)
Reverse repurchase agreements \u2013 non
trading
8,802
\u2014
2
\u2014
2
6,423
\u2014
(1)
\u2014
(1)
Other financial assets at FVOCI
2,010
(87)
\u2014
(74)
42
2,100
(131)
\u2014
(95)
(18)
Deposits by customers
(29,620)
\u2014
(27)
\u2014
(53)
(21,726)
18
9
1
(1)
Debt securities in issue
(3,758)
70
(32)
(38)
(60)
(3,811)
150
(54)
(77)
52
Subordinated liabilities
(505)
(18)
(1)
(28)
(6)
(511)
(12)
(1)
(36)
15
Interest rate/FX risk:
Other financial assets at FVOCI
1,898
7
\u2014
\u2014
46
1,503
16
\u2014
\u2014
(30)
Debt securities in issue
(2,284)
(5)
\u2014
(8)
(53)
(200)
(9)
\u2014
(14)
13
Inflation risk/Interest rate risk:
Other financial assets at amortised cost
1,884
12
\u2014
\u2014
32
\u2014
\u2014
\u2014
\u2014
\u2014
Other financial assets at FVOCI
83
(1)
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
53,217
(47)
(140)
(177)
523
48,218
(13)
(785)
(518)
(168)
Group
2025
2024
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
(205)
(79)
\u2014
361
(497)
2
Cash and balances at central banks
(207)
112
(27)
464
(192)
(50)
Deposits by banks
2
\u2014
\u2014
(4)
\u2014
\u2014
Repurchase agreements - non trading
(59)
104
104
(60)
52
\u2014
FX risk:
Other financial assets at FVOCI
(84)
\u2014
\u2014
(487)
1
\u2014
Highly probable forecast transactions
(5)
1
\u2014
4
\u2014
\u2014
Debt securities in issue
383
36
\u2014
78
181
\u2014
Interest rate/FX risk:
Debt securities in issue/loans and advances to
customers
(47)
(3)
\u2014
148
(12)
\u2014
Deposits by customers
58
(13)
\u2014
21
(37)
\u2014
Subordinated liabilities/loans and advances to
customers
49
(19)
48
3
(16)
51
Inflation risk:
Other financial assets at amortised cost
(81)
139
139
(70)
66
\u2014
Other financial assets at FVOCI
(1)
2
2
(1)
1
\u2014
(197)
280
266
457
(453)
3
Company
2025
2024
Accumulated FV hedge adjustments
Change in value
to calculate
hedge
ineffectiveness
Accumulated FV hedge adjustments
Change in value
to calculate
hedge
ineffectiveness
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
72,525
\u2014
(220)
(169)
552
62,694
\u2014
(903)
(461)
(153)
Other financial assets at amortised cost
2,103
(25)
(6)
(6)
21
1,667
(45)
(7)
(7)
(44)
Reverse repurchase agreements \u2013 non
trading
8,802
\u2014
2
\u2014
2
6,423
\u2014
(1)
\u2014
(1)
Other financial assets at FVOCI
2,010
(87)
\u2014
(74)
42
2,100
(131)
\u2014
(95)
(18)
Deposits by customers
(29,112)
\u2014
(27)
\u2014
(53)
(21,726)
18
10
1
(1)
Debt securities in issue
(1,948)
25
\u2014
\u2014
(37)
(2,035)
64
\u2014
\u2014
32
Subordinated liabilities
(506)
(18)
\u2014
(27)
(6)
(512)
(13)
\u2014
(35)
14
Interest rate/FX risk:
Other financial assets at FVOCI
1,898
7
\u2014
\u2014
46
1,503
17
\u2014
\u2014
(30)
Debt securities in issue
(1,010)
3
\u2014
\u2014
(10)
\u2014
\u2014
\u2014
\u2014
\u2014
Inflation risk/Interest rate risk:
Other financial assets at amortised cost
1,884
12
\u2014
\u2014
32
\u2014
\u2014
\u2014
\u2014
\u2014
Other financial assets at FVOCI
83
(1)
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
56,729
(84)
(251)
(276)
589
50,114
(90)
(901)
(597)
(201)
Company
2025
2024
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
(111)
(65)
\u2014
214
(312)
2
Cash and balances at central banks
(230)
112
(27)
464
(191)
(50)
Deposits by banks
2
\u2014
\u2014
(4)
\u2014
\u2014
Repurchase agreements - non trading
(59)
104
104
(60)
52
\u2014
FX risk:
Other financial assets at FVOCI
(84)
\u2014
\u2014
(487)
1
\u2014
Highly probable forecast transactions
(5)
1
\u2014
4
\u2014
\u2014
Debt securities in issue
404
9
\u2014
(99)
48
\u2014
Interest rate/FX risk:
Debt securities in issue/loans and advances to
customers
(6)
\u2014
\u2014
23
(2)
\u2014
Deposits by customers
57
(13)
(1)
21
(38)
(1)
Subordinated liabilities/loans and advances to
customers
48
(26)
42
3
(23)
43
Inflation risk:
Other financial assets at amortised cost
(81)
139
139
(70)
65
\u2014
Other financial assets at FVOCI
(1)
2
2
(1)
1
\u2014
(66)
263
259
8
(399)
(6)
Cost of Hedging
Group
Company
2025
2025
Components of hedging derivatives excluded
from hedge designation
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Balance at 1 January
\u2014
\u2014
Transfers to cost of hedging reserve:
Cash flow hedges:
Foreign currency risk
Time-period related
24
8
Transaction-related
\u2014
\u2014
24
8
Equity risk
Time-period related
\u2014
\u2014
Transaction-related
\u2014
\u2014
\u2014
\u2014
24
8
Fair value hedges:
Foreign currency risk
Time-period related
(2)
(2)
Transaction-related
\u2014
\u2014
(2)
(2)
(2)
(2)
22
6
Transfers out of cost of hedging reserve:
Cash flow hedges:
Foreign currency risk
Time-period related
(1)
(1)
Transaction-related
\u2014
\u2014
(1)
(1)
Equity risk
Time-period related
\u2014
\u2014
Transaction-related
\u2014
\u2014
\u2014
\u2014
(1)
(1)
(1)
(1)
Tax
(1)
(1)
Balance at 31 December
20
4
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
arrangements2
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
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Derivative financial assets
1,890
(1,058)
832
(415)
(370)
47
38
870
Reverse repurchase, securities borrowing & similar
agreements:
\u2013 Amortised cost
20,967
(3,289)
17,678
(1,167)
(16,511)
\u2014
\u2014
17,678
Loans and advances to customers and banks\u2074
3,959
(588)
3,371
\u2014
\u2014
3,371
200,286
203,657
26,816
(4,935)
21,881
(1,582)
(16,881)
3,418
200,324
222,205
Liabilities
Derivative financial liabilities
1,731
(1,058)
673
(415)
(182)
76
14
687
Repurchase, securities lending & similar agreements:
\u2013 Amortised cost
12,318
(3,289)
9,029
(1,167)
(7,862)
\u2014
\u2014
9,029
Deposits by customers and banks\u2074
588
(588)
\u2014
\u2014
\u2014
\u2014
193,928
193,928
14,637
(4,935)
9,702
(1,582)
(8,044)
76
193,942
203,644
2024
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\u2074
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\u2074
635
(635)
\u2014
\u2014
\u2014
\u2014
194,960
194,960
17,414
(8,115)
9,299
(470)
(8,681)
148
194,980
204,279
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
arrangements2
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
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Derivative financial assets
1,987
(1,058)
929
(514)
(370)
45
38
967
Reverse repurchase, securities borrowing & similar
agreements:
\u2013 Amortised cost
20,967
(3,289)
17,678
(1,167)
(16,511)
\u2014
\u2014
17,678
Loans and advances to customers and banks 4
3,959
(588)
3,371
\u2014
\u2014
3,371
220,086
223,457
26,913
(4,935)
21,978
(1,681)
(16,881)
3,416
220,124
242,102
Liabilities
Derivative financial liabilities
3,177
(1,058)
2,119
(514)
(182)
1,423
13
2,132
Repurchase, securities lending & similar agreements:
\u2013 Amortised cost
12,318
(3,289)
9,029
(1,167)
(7,862)
\u2014
\u2014
9,029
Deposits by customers and banks 4
588
(588)
\u2014
\u2014
\u2014
\u2014
222,769
222,769
16,083
(4,935)
11,148
(1,681)
(8,044)
1,423
222,782
233,930
2024
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
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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-573": { "value": "
The table below includes the notional amounts of transactions outstanding at the balance sheet date; they do not represent actual exposures.
Group
2025
2024
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
9,341
85
118
13,755
238
156
Interest rate contracts
25,372
198
336
29,296
294
489
Inflation rate contracts
171
16
30
\u2014
\u2014
\u2014
Equity and credit contracts
568
94
21
681
124
21
Total derivatives held for trading
35,452
393
505
43,732
656
666
Derivatives held for hedging
Designated as fair value hedges:
Exchange rate contracts
4,099
86
16
1,712
42
8
Interest rate contracts
169,084
564
479
146,172
1,055
477
Inflation rate contracts
1,850
69
\u2014
\u2014
\u2014
\u2014
175,033
719
495
147,884
1,097
485
Designated as cash flow hedges:
Exchange rate contracts
18,343
500
378
21,535
698
266
Interest rate contracts
37,508
316
367
54,267
326
928
Inflation rate contracts
\u2014
\u2014
\u2014
1,794
70
\u2014
55,851
816
745
77,596
1,094
1,194
Total derivatives held for hedging
230,884
1,535
1,240
225,480
2,191
1,679
Derivative netting 1
\u2014
(1,058)
(1,058)
\u2014
(1,643)
(1,643)
Total derivatives
266,336
870
687
269,212
1,204
702
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
\u00a3827m (2024: \u00a3489m) and the amount of cash collateral paid that had been offset against the gross derivative liabilities was \u00a323m (2024: \u00a332m).
At 31 December 2025, the fair value of derivative assets included amounts due from Banco Santander group entities of \u00a3599m (2024: \u00a3544m) and the fair value of
derivative liabilities included amounts due to Banco Santander group entities of \u00a3292m (2024: \u00a3244m).
", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialLiabilitiesHeldForTradingExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-572": { "value": "
The table below includes the notional amounts of transactions outstanding at the balance sheet date; they do not represent actual exposures.
Group
2025
2024
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
9,341
85
118
13,755
238
156
Interest rate contracts
25,372
198
336
29,296
294
489
Inflation rate contracts
171
16
30
\u2014
\u2014
\u2014
Equity and credit contracts
568
94
21
681
124
21
Total derivatives held for trading
35,452
393
505
43,732
656
666
Derivatives held for hedging
Designated as fair value hedges:
Exchange rate contracts
4,099
86
16
1,712
42
8
Interest rate contracts
169,084
564
479
146,172
1,055
477
Inflation rate contracts
1,850
69
\u2014
\u2014
\u2014
\u2014
175,033
719
495
147,884
1,097
485
Designated as cash flow hedges:
Exchange rate contracts
18,343
500
378
21,535
698
266
Interest rate contracts
37,508
316
367
54,267
326
928
Inflation rate contracts
\u2014
\u2014
\u2014
1,794
70
\u2014
55,851
816
745
77,596
1,094
1,194
Total derivatives held for hedging
230,884
1,535
1,240
225,480
2,191
1,679
Derivative netting 1
\u2014
(1,058)
(1,058)
\u2014
(1,643)
(1,643)
Total derivatives
266,336
870
687
269,212
1,204
702
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
\u00a3827m (2024: \u00a3489m) and the amount of cash collateral paid that had been offset against the gross derivative liabilities was \u00a323m (2024: \u00a332m).
At 31 December 2025, the fair value of derivative assets included amounts due from Banco Santander group entities of \u00a3599m (2024: \u00a3544m) and the fair value of
derivative liabilities included amounts due to Banco Santander group entities of \u00a3292m (2024: \u00a3244m).
", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialAssetsHeldForTradingExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-571": { "value": "
The table below includes the notional amounts of transactions outstanding at the balance sheet date; they do not represent actual exposures.
Group
2025
2024
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
9,341
85
118
13,755
238
156
Interest rate contracts
25,372
198
336
29,296
294
489
Inflation rate contracts
171
16
30
\u2014
\u2014
\u2014
Equity and credit contracts
568
94
21
681
124
21
Total derivatives held for trading
35,452
393
505
43,732
656
666
Derivatives held for hedging
Designated as fair value hedges:
Exchange rate contracts
4,099
86
16
1,712
42
8
Interest rate contracts
169,084
564
479
146,172
1,055
477
Inflation rate contracts
1,850
69
\u2014
\u2014
\u2014
\u2014
175,033
719
495
147,884
1,097
485
Designated as cash flow hedges:
Exchange rate contracts
18,343
500
378
21,535
698
266
Interest rate contracts
37,508
316
367
54,267
326
928
Inflation rate contracts
\u2014
\u2014
\u2014
1,794
70
\u2014
55,851
816
745
77,596
1,094
1,194
Total derivatives held for hedging
230,884
1,535
1,240
225,480
2,191
1,679
Derivative netting 1
\u2014
(1,058)
(1,058)
\u2014
(1,643)
(1,643)
Total derivatives
266,336
870
687
269,212
1,204
702
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
\u00a3827m (2024: \u00a3489m) and the amount of cash collateral paid that had been offset against the gross derivative liabilities was \u00a323m (2024: \u00a332m).
At 31 December 2025, the fair value of derivative assets included amounts due from Banco Santander group entities of \u00a3599m (2024: \u00a3544m) and the fair value of
derivative liabilities included amounts due to Banco Santander group entities of \u00a3292m (2024: \u00a3244m).
", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialInstrumentsHeldForTradingExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-570": { "value": "
The table below includes the notional amounts of transactions outstanding at the balance sheet date; they do not represent actual exposures.
Group
2025
2024
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
9,341
85
118
13,755
238
156
Interest rate contracts
25,372
198
336
29,296
294
489
Inflation rate contracts
171
16
30
\u2014
\u2014
\u2014
Equity and credit contracts
568
94
21
681
124
21
Total derivatives held for trading
35,452
393
505
43,732
656
666
Derivatives held for hedging
Designated as fair value hedges:
Exchange rate contracts
4,099
86
16
1,712
42
8
Interest rate contracts
169,084
564
479
146,172
1,055
477
Inflation rate contracts
1,850
69
\u2014
\u2014
\u2014
\u2014
175,033
719
495
147,884
1,097
485
Designated as cash flow hedges:
Exchange rate contracts
18,343
500
378
21,535
698
266
Interest rate contracts
37,508
316
367
54,267
326
928
Inflation rate contracts
\u2014
\u2014
\u2014
1,794
70
\u2014
55,851
816
745
77,596
1,094
1,194
Total derivatives held for hedging
230,884
1,535
1,240
225,480
2,191
1,679
Derivative netting 1
\u2014
(1,058)
(1,058)
\u2014
(1,643)
(1,643)
Total derivatives
266,336
870
687
269,212
1,204
702
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
\u00a3827m (2024: \u00a3489m) and the amount of cash collateral paid that had been offset against the gross derivative liabilities was \u00a323m (2024: \u00a332m).
At 31 December 2025, the fair value of derivative assets included amounts due from Banco Santander group entities of \u00a3599m (2024: \u00a3544m) and the fair value of
derivative liabilities included amounts due to Banco Santander group entities of \u00a3292m (2024: \u00a3244m).
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
securitisations and 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 pools of auto loans originated by members of the Santander UK group are sold to
special purpose vehicles by members of the Santander UK group. The special purpose vehicle funds the purchase of the auto loans by issuing Variable Funding
Notes to third-party investors. A proportion of the remaining exposure is retained by members of the Santander UK group. Members of the Santander UK group also
receive payments from the special purpose vehicles in respect of fees for administering the auto loans, and payment of deferred consideration for the sale of the
securitised auto loans. The members of the Santander UK group have no right or obligation to repurchase any securitised loans, except if certain representations and
warranties given at the time of sale are breached and, in certain cases, if there has been a subsequent variation in the terms of the underlying auto loans not
permitted under the sale agreements related to the auto loan securitisations.
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 2025 and 2024 are listed below. The gross assets in the
Santander UK 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
2025
2024
2025
2024
2025
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Mortgage-backed master trust structures:
\u2013 Holmes
7,090
5,109
4,887
3,379
562
389
\u2013 Fosse
1,845
2,383
201
\u2014
1,204
1,408
8,935
7,492
5,088
3,379
1,766
1,797
Other asset-backed securitisation structures:
\u2013 Repton
760
718
550
550
\u2014
\u2014
Total securitisation programmes
9,695
8,210
5,638
3,929
1,766
1,797
Covered bond programme:
\u2013 Euro 35bn Global Covered Bond Programme
27,428
25,695
19,201
17,211
1,224
1,224
Total securitisation and covered bond programmes
37,123
33,905
24,839
21,140
2,990
3,021
Company
Gross assets
External notes in issue
Notes held within the Company
2025
2024
2025
2024
2025
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Covered bond programme:
\u2013 Euro 35bn Global Covered Bond Programme
27,428
25,695
19,248
17,300
1,224
1,224
Total securitisation and covered bond programmes
27,428
25,695
19,248
17,300
1,224
1,224
The following table sets out the internal and external issuances and redemptions in 2025 and 2024 for each securitisation and covered bond programme.
Group
Internal issuances
External issuances
Internal redemptions
External redemptions
2025
2024
2025
2024
2025
2024
2025
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Mortgage-backed master trust structures:
\u2013 Holmes
172
106
1,500
1,250
\u2014
17
\u2014
\u2014
\u2013 Fosse
\u2014
894
\u2014
\u2014
\u2014
865
\u2014
100
Covered bond programme:
\u2013 Euro 35bn Global Covered Bond Programme
\u2014
\u2014
2,687
5,890
\u2014
41
1,152
3,359
172
1,000
4,187
7,140
\u2014
923
1,152
3,459
In January 2025, \u00a3200m of the Fosse retained notes were sold to an external counterparty.
Company
External issuances
Internal redemptions
External redemptions
2025
2024
2025
2024
2025
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Covered bond programme:
\u2013 Euro 35bn Global Covered Bond Programme
2,687
5,890
\u2014
41
1,152
3,359
2,687
5,890
\u2014
41
1,152
3,359
Holmes Funding Ltd has a beneficial interest of \u00a35,407m (2024: \u00a33,735m) 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 (2024: \u00a31,394m) 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 \u00a3182m (2024: \u00a3126m), 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 \u00a347m (2024: \u00a348m), 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 include (i) securities held by counterparties as collateral under repurchase agreements, (ii) securities lent under securities lending agreements, and
(iii) loans transferred under securitisation or covered bond arrangements where 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 cannot 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 retains 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 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
2025
2024
Assets
Liabilities
Assets
Liabilities
Nature of transaction
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Sale and repurchase agreements
1,295
1,280
1,346
(1,372)
Securities lending agreements
2,160
1,857
3,304
(2,807)
Company
2025
2024
Assets
Liabilities
Assets
Liabilities
Nature of transaction
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Sale and repurchase agreements
1,295
1,280
1,346
(1,372)
Securities lending agreements
2,160
1,857
2,358
(2,307)
24. OTHER FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS
Group and Company
2025
2024
\u00a3m
\u00a3m
Structured Notes Programmes
331
355
Structured deposits
824
605
Zero Amortising Guaranteed Notes
95
95
1,250
1,055
At 31 December 2025, other financial liabilities at fair value through profit or loss included amounts due to Banco Santander group entities of \u00a316m (2024: \u00a318m).
For the Santander UK group and the Company, in 2025 and 2024 all the other financial liabilities were designated at FVTPL.
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 \u00a31m (2024: \u00a317m loss, 2023: \u00a321m loss). The cumulative net loss attributable to changes in the Santander UK group\u2019s own credit risk on the above
securities at 31 December 2025 was \u00a35m (2024: \u00a34m loss, 2023: \u00a36m loss).
At 31 December 2025, the amount that would be required to be contractually paid at maturity of the securities above was \u00a335m (2024: \u00a376m) below 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
2025
2024
2025
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
On-balance sheet:
Cash and balances at central banks
1,440
1,580
1,440
1,580
Loans and advances to banks
238
139
235
139
Loans and advances to customers - securitisations and covered bonds (See Note 14)
36,466
32,721
\u2014
\u2014
Loans and advances to customers - other
6,512
14,846
6,512
14,846
Other financial assets at amortised cost
1,282
1,529
1,282
1,529
Financial assets at fair value through other comprehensive income
2,900
4,504
2,900
4,504
Total on-balance sheet
48,838
55,319
12,369
22,598
Total off-balance sheet
9,653
9,564
9,653
9,564
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 2025 was \u00a315,243m (2024:
\u00a316,987m), of which \u00a32,474m (2024: \u00a32,472m) 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 2025, there were \u00a337,123m (2024: \u00a333,905m) of gross assets in these secured programmes and \u00a3657m (2024: \u00a31,184m) of these related to internally
retained issuances that were available for use as collateral for liquidity purposes in the future.
At 31 December 2025, \u00a32,975m (2024: \u00a33,003m) 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 2025 (2024: \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 \u00a37,133m at 31 December 2025
(2024: \u00a315,860m) 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 2025,
\u00a32,122m (2024: \u00a31,787m) of such collateral in the form of cash had been provided by Santander UK and is included in the table above.
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
2025
2024
2025
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
On-balance sheet:
Deposits by banks
442
682
442
682
Deposits by customers
117
\u2014
17
\u2014
Total on-balance sheet
559
682
459
682
Total off-balance sheet
17,708
14,392
17,708
14,392
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
2025, the fair value of such collateral received was \u00a316,410m (2024: \u00a313,221m). 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 \u00a31,298m at 31 December 2025 (2024:
\u00a31,171m) 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 2025, \u00a3559m
(2024: \u00a3682m) 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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-574": { "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
2025
2024
Accumulated FV hedge adjustments
Change in value
to calculate
hedge
ineffectiveness
Accumulated FV hedge adjustments
Change in
value to
calculate
hedge
ineffectiveness
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
72,604
\u2014
(76)
(24)
552
62,773
\u2014
(731)
(290)
(154)
Other financial assets at amortised cost
2,103
(25)
(6)
(5)
21
1,667
(45)
(7)
(7)
(44)
Reverse repurchase agreements \u2013 non
trading
8,802
\u2014
2
\u2014
2
6,423
\u2014
(1)
\u2014
(1)
Other financial assets at FVOCI
2,010
(87)
\u2014
(74)
42
2,100
(131)
\u2014
(95)
(18)
Deposits by customers
(29,620)
\u2014
(27)
\u2014
(53)
(21,726)
18
9
1
(1)
Debt securities in issue
(3,758)
70
(32)
(38)
(60)
(3,811)
150
(54)
(77)
52
Subordinated liabilities
(505)
(18)
(1)
(28)
(6)
(511)
(12)
(1)
(36)
15
Interest rate/FX risk:
Other financial assets at FVOCI
1,898
7
\u2014
\u2014
46
1,503
16
\u2014
\u2014
(30)
Debt securities in issue
(2,284)
(5)
\u2014
(8)
(53)
(200)
(9)
\u2014
(14)
13
Inflation risk/Interest rate risk:
Other financial assets at amortised cost
1,884
12
\u2014
\u2014
32
\u2014
\u2014
\u2014
\u2014
\u2014
Other financial assets at FVOCI
83
(1)
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
53,217
(47)
(140)
(177)
523
48,218
(13)
(785)
(518)
(168)
Group
2025
2024
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
(205)
(79)
\u2014
361
(497)
2
Cash and balances at central banks
(207)
112
(27)
464
(192)
(50)
Deposits by banks
2
\u2014
\u2014
(4)
\u2014
\u2014
Repurchase agreements - non trading
(59)
104
104
(60)
52
\u2014
FX risk:
Other financial assets at FVOCI
(84)
\u2014
\u2014
(487)
1
\u2014
Highly probable forecast transactions
(5)
1
\u2014
4
\u2014
\u2014
Debt securities in issue
383
36
\u2014
78
181
\u2014
Interest rate/FX risk:
Debt securities in issue/loans and advances to
customers
(47)
(3)
\u2014
148
(12)
\u2014
Deposits by customers
58
(13)
\u2014
21
(37)
\u2014
Subordinated liabilities/loans and advances to
customers
49
(19)
48
3
(16)
51
Inflation risk:
Other financial assets at amortised cost
(81)
139
139
(70)
66
\u2014
Other financial assets at FVOCI
(1)
2
2
(1)
1
\u2014
(197)
280
266
457
(453)
3
Company
2025
2024
Accumulated FV hedge adjustments
Change in value
to calculate
hedge
ineffectiveness
Accumulated FV hedge adjustments
Change in value
to calculate
hedge
ineffectiveness
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
72,525
\u2014
(220)
(169)
552
62,694
\u2014
(903)
(461)
(153)
Other financial assets at amortised cost
2,103
(25)
(6)
(6)
21
1,667
(45)
(7)
(7)
(44)
Reverse repurchase agreements \u2013 non
trading
8,802
\u2014
2
\u2014
2
6,423
\u2014
(1)
\u2014
(1)
Other financial assets at FVOCI
2,010
(87)
\u2014
(74)
42
2,100
(131)
\u2014
(95)
(18)
Deposits by customers
(29,112)
\u2014
(27)
\u2014
(53)
(21,726)
18
10
1
(1)
Debt securities in issue
(1,948)
25
\u2014
\u2014
(37)
(2,035)
64
\u2014
\u2014
32
Subordinated liabilities
(506)
(18)
\u2014
(27)
(6)
(512)
(13)
\u2014
(35)
14
Interest rate/FX risk:
Other financial assets at FVOCI
1,898
7
\u2014
\u2014
46
1,503
17
\u2014
\u2014
(30)
Debt securities in issue
(1,010)
3
\u2014
\u2014
(10)
\u2014
\u2014
\u2014
\u2014
\u2014
Inflation risk/Interest rate risk:
Other financial assets at amortised cost
1,884
12
\u2014
\u2014
32
\u2014
\u2014
\u2014
\u2014
\u2014
Other financial assets at FVOCI
83
(1)
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
56,729
(84)
(251)
(276)
589
50,114
(90)
(901)
(597)
(201)
Company
2025
2024
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
(111)
(65)
\u2014
214
(312)
2
Cash and balances at central banks
(230)
112
(27)
464
(191)
(50)
Deposits by banks
2
\u2014
\u2014
(4)
\u2014
\u2014
Repurchase agreements - non trading
(59)
104
104
(60)
52
\u2014
FX risk:
Other financial assets at FVOCI
(84)
\u2014
\u2014
(487)
1
\u2014
Highly probable forecast transactions
(5)
1
\u2014
4
\u2014
\u2014
Debt securities in issue
404
9
\u2014
(99)
48
\u2014
Interest rate/FX risk:
Debt securities in issue/loans and advances to
customers
(6)
\u2014
\u2014
23
(2)
\u2014
Deposits by customers
57
(13)
(1)
21
(38)
(1)
Subordinated liabilities/loans and advances to
customers
48
(26)
42
3
(23)
43
Inflation risk:
Other financial assets at amortised cost
(81)
139
139
(70)
65
\u2014
Other financial assets at FVOCI
(1)
2
2
(1)
1
\u2014
(66)
263
259
8
(399)
(6)
Cost of Hedging
Group
Company
2025
2025
Components of hedging derivatives excluded
from hedge designation
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Balance at 1 January
\u2014
\u2014
Transfers to cost of hedging reserve:
Cash flow hedges:
Foreign currency risk
Time-period related
24
8
Transaction-related
\u2014
\u2014
24
8
Equity risk
Time-period related
\u2014
\u2014
Transaction-related
\u2014
\u2014
\u2014
\u2014
24
8
Fair value hedges:
Foreign currency risk
Time-period related
(2)
(2)
Transaction-related
\u2014
\u2014
(2)
(2)
(2)
(2)
22
6
Transfers out of cost of hedging reserve:
Cash flow hedges:
Foreign currency risk
Time-period related
(1)
(1)
Transaction-related
\u2014
\u2014
(1)
(1)
Equity risk
Time-period related
\u2014
\u2014
Transaction-related
\u2014
\u2014
\u2014
\u2014
(1)
(1)
(1)
(1)
Tax
(1)
(1)
Balance at 31 December
20
4
16. REVERSE REPURCHASE AGREEMENTS \u2013 NON-TRADING
Group
Company
2025
2024
2025
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Agreements with banks
3,973
1,363
3,973
1,363
Agreements with customers
13,705
8,975
13,705
8,975
17,678
10,338
17,678
10,338
At 31 December 2025, reverse repurchase agreements - non-trading included amounts due from Banco Santander group entities of \u00a31m (2024: \u00a3nil).
23. REPURCHASE AGREEMENTS \u2013 NON-TRADING
Group and Company
2025
2024
\u00a3m
\u00a3m
Agreements with banks
3,557
2,336
Agreements with customers
5,472
6,281
9,029
8,617
At 31 December 2025, repurchase agreements - non-trading included amounts due to Banco Santander group entities of \u00a320m (2024: \u00a39m).
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 2025 was \u00a315,243m (2024:
\u00a316,987m), of which \u00a32,474m (2024: \u00a32,472m) 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
2025, the fair value of such collateral received was \u00a316,410m (2024: \u00a313,221m). 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
2025
2024
Fair value
Carrying
Fair value
Carrying
Level 1
Level 2
Level 3
Total
value
Level 1
Level 2
Level 3
Total
value
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Loans and advances to customers
\u2014
\u2014
203,426
203,426
202,609
\u2014
\u2014
198,376
198,376
199,408
Loans and advances to banks
\u2014
1,048
\u2014
1,048
1,048
\u2014
1,032
\u2014
1,032
1,032
Reverse repurchase agreements - non-trading
\u2014
17,696
\u2014
17,696
17,678
\u2014
10,342
\u2014
10,342
10,338
Other financial assets at amortised cost
3,747
\u2014
\u2014
3,747
3,987
3,190
\u2014
\u2014
3,190
3,408
3,747
18,744
203,426
225,917
225,322
3,190
11,374
198,376
212,940
214,186
Liabilities
Deposits by customers
\u2014
117
187,849
187,966
187,300
\u2014
185
180,282
180,467
180,967
Deposits by banks
\u2014
6,630
\u2014
6,630
6,628
\u2014
13,934
39
13,973
13,993
Repurchase agreements - non-trading
\u2014
9,039
\u2014
9,039
9,029
\u2014
8,622
\u2014
8,622
8,617
Debt securities in issue
25,874
14,618
1,421
41,913
41,388
21,173
12,910
1,771
35,854
35,673
Subordinated liabilities
1,065
1,161
187
2,413
2,032
1,129
10
1,622
2,761
2,385
26,939
31,565
189,457
247,961
246,377
22,302
35,661
183,714
241,677
241,635
Company
2025
2024
Fair value
Carrying
Fair value
Carrying
Level 1
Level 2
Level 3
Total
value
Level 1
Level 2
Level 3
Total
value
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Loans and advances to customers
\u2014
\u2014
223,075
223,075
222,467
\u2014
\u2014
216,851
216,851
217,780
Loans and advances to banks
\u2014
990
\u2014
990
990
\u2014
926
\u2014
926
926
Reverse repurchase agreements - non-trading
\u2014
17,696
\u2014
17,696
17,678
\u2014
10,342
\u2014
10,342
10,338
Other financial assets at amortised cost
3,747
1,593
\u2014
5,340
5,754
3,190
1,977
\u2014
5,167
5,206
3,747
20,279
223,075
247,101
246,889
3,190
13,245
216,851
233,286
234,250
Liabilities
Deposits by customers
\u2014
17
212,293
212,310
211,643
\u2014
185
200,530
200,715
201,215
Deposits by banks
\u2014
11,127
\u2014
11,127
11,126
\u2014
13,922
5,579
19,501
19,521
Repurchase agreements - non-trading
\u2014
9,039
\u2014
9,039
9,029
\u2014
8,621
\u2014
8,621
8,617
Debt securities in issue
20,968
14,480
859
36,307
35,797
17,870
12,846
1,379
32,095
31,833
Subordinated liabilities
1,065
1,161
187
2,413
2,033
1,129
10
1,598
2,737
2,386
22,033
35,824
213,339
271,196
269,628
18,999
35,584
209,086
263,669
263,572
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
arrangements2
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
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Derivative financial assets
1,890
(1,058)
832
(415)
(370)
47
38
870
Reverse repurchase, securities borrowing & similar
agreements:
\u2013 Amortised cost
20,967
(3,289)
17,678
(1,167)
(16,511)
\u2014
\u2014
17,678
Loans and advances to customers and banks\u2074
3,959
(588)
3,371
\u2014
\u2014
3,371
200,286
203,657
26,816
(4,935)
21,881
(1,582)
(16,881)
3,418
200,324
222,205
Liabilities
Derivative financial liabilities
1,731
(1,058)
673
(415)
(182)
76
14
687
Repurchase, securities lending & similar agreements:
\u2013 Amortised cost
12,318
(3,289)
9,029
(1,167)
(7,862)
\u2014
\u2014
9,029
Deposits by customers and banks\u2074
588
(588)
\u2014
\u2014
\u2014
\u2014
193,928
193,928
14,637
(4,935)
9,702
(1,582)
(8,044)
76
193,942
203,644
2024
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\u2074
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\u2074
635
(635)
\u2014
\u2014
\u2014
\u2014
194,960
194,960
17,414
(8,115)
9,299
(470)
(8,681)
148
194,980
204,279
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
arrangements2
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
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Derivative financial assets
1,987
(1,058)
929
(514)
(370)
45
38
967
Reverse repurchase, securities borrowing & similar
agreements:
\u2013 Amortised cost
20,967
(3,289)
17,678
(1,167)
(16,511)
\u2014
\u2014
17,678
Loans and advances to customers and banks 4
3,959
(588)
3,371
\u2014
\u2014
3,371
220,086
223,457
26,913
(4,935)
21,978
(1,681)
(16,881)
3,416
220,124
242,102
Liabilities
Derivative financial liabilities
3,177
(1,058)
2,119
(514)
(182)
1,423
13
2,132
Repurchase, securities lending & similar agreements:
\u2013 Amortised cost
12,318
(3,289)
9,029
(1,167)
(7,862)
\u2014
\u2014
9,029
Deposits by customers and banks 4
588
(588)
\u2014
\u2014
\u2014
\u2014
222,769
222,769
16,083
(4,935)
11,148
(1,681)
(8,044)
1,423
222,782
233,930
2024
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
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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-576": { "value": "
12. OTHER FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
Group
Company
2025
2024
2025
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Loans and advances to customers:
Loans to housing associations
\u2014
4
\u2014
4
Other loans
40
40
40
40
40
44
40
44
Debt securities
\u2014
56
\u2014
56
Other debt instruments
24
36
\u2014
\u2014
64
136
40
100
For the Santander UK group, other financial assets at FVTPL comprised \u00a3nil (2024: \u00a360m) of financial assets designated at FVTPL and \u00a364m (2024: \u00a376m) of
financial assets mandatorily held at FVTPL. For the Company, other financial assets at FVTPL comprised \u00a3nil (2024: \u00a360m) of financial assets designated at FVTPL
and \u00a340m (2024: \u00a340m) 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.
In 2025, 2024 and 2023, the net loss in the year attributable to changes in credit risk for loans and advances at FVTPL was \u00a3nil. The cumulative net loss attributable
to changes in credit risk for loans and advances at FVTPL at 31 December 2025 was \u00a33m (2024: \u00a33m 2023: \u00a33m).
13. LOANS AND ADVANCES TO CUSTOMERS
Group
Company
2025
2024
2025
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Loans secured on residential properties
167,284
165,214
167,284
165,214
Corporate loans
20,450
18,550
19,413
17,778
Finance leases
4,251
4,222
\u2014
\u2014
Other unsecured loans
5,566
6,601
5,513
6,521
Accrued interest and other adjustments
760
796
906
961
Amounts due from fellow Banco Santander subsidiaries and joint ventures
5,043
4,814
7
3
Amounts due from Santander UK Group Holdings plc
11
18
11
18
Amounts due from subsidiaries
\u2014
\u2014
29,999
27,999
Loans and advances to customers
203,365
200,215
223,133
218,494
Credit impairment loss allowances on loans and advances to customers
(729)
(784)
(666)
(714)
Residual value and voluntary termination provisions on finance leases
(27)
(23)
\u2014
\u2014
Net loans and advances to customers
202,609
199,408
222,467
217,780
At 31 December 2025, loans and advances to customers included amounts due from Banco Santander group entities of \u00a35,055m (2024: \u00a34,834m).
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
2025
2024
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
1,362
(202)
1,160
1,400
(208)
1,192
Later than one year and not later than two years
1,337
(202)
1,135
1,423
(215)
1,208
Later than two years and not later than three years
1,086
(164)
922
1,220
(184)
1,036
Later than three years and not later than four years
972
(147)
825
721
(109)
612
Later than four years and not later than five years
135
(21)
114
115
(17)
98
Later than five years
112
(17)
95
90
(14)
76
5,004
(753)
4,251
4,969
(747)
4,222
At 31 December 2025 and 2024, 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 \u00a31,804m (2024: \u00a31,748m) of unguaranteed RV at the end of the
current lease terms, which is expected to be recovered through re-payment, re-financing or sale. Finance income on the net investment in finance leases was
\u00a3324m (2024: \u00a3308m, 2023: \u00a3266m).
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 2025 and 2024, the Santander UK group had contracted with lessees for the following future undiscounted minimum lease payments receivable
under operating leases.
Group
Company
2025
2024
2025
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
No later than one year
20
27
19
25
Later than one year and not later than two years
17
21
16
20
Later than two years and not later than three years
12
17
11
16
Later than three years and not later than four years
7
7
6
7
Later than four years and not later than five years
5
5
4
4
Later than five years
11
11
7
7
72
88
63
79
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
securitisations and 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 pools of auto loans originated by members of the Santander UK group are sold to
special purpose vehicles by members of the Santander UK group. The special purpose vehicle funds the purchase of the auto loans by issuing Variable Funding
Notes to third-party investors. A proportion of the remaining exposure is retained by members of the Santander UK group. Members of the Santander UK group also
receive payments from the special purpose vehicles in respect of fees for administering the auto loans, and payment of deferred consideration for the sale of the
securitised auto loans. The members of the Santander UK group have no right or obligation to repurchase any securitised loans, except if certain representations and
warranties given at the time of sale are breached and, in certain cases, if there has been a subsequent variation in the terms of the underlying auto loans not
permitted under the sale agreements related to the auto loan securitisations.
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 2025 and 2024 are listed below. The gross assets in the
Santander UK 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
2025
2024
2025
2024
2025
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Mortgage-backed master trust structures:
\u2013 Holmes
7,090
5,109
4,887
3,379
562
389
\u2013 Fosse
1,845
2,383
201
\u2014
1,204
1,408
8,935
7,492
5,088
3,379
1,766
1,797
Other asset-backed securitisation structures:
\u2013 Repton
760
718
550
550
\u2014
\u2014
Total securitisation programmes
9,695
8,210
5,638
3,929
1,766
1,797
Covered bond programme:
\u2013 Euro 35bn Global Covered Bond Programme
27,428
25,695
19,201
17,211
1,224
1,224
Total securitisation and covered bond programmes
37,123
33,905
24,839
21,140
2,990
3,021
Company
Gross assets
External notes in issue
Notes held within the Company
2025
2024
2025
2024
2025
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Covered bond programme:
\u2013 Euro 35bn Global Covered Bond Programme
27,428
25,695
19,248
17,300
1,224
1,224
Total securitisation and covered bond programmes
27,428
25,695
19,248
17,300
1,224
1,224
Holmes Funding Ltd has a beneficial interest of \u00a35,407m (2024: \u00a33,735m) 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 (2024: \u00a31,394m) 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 \u00a3182m (2024: \u00a3126m), 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 \u00a347m (2024: \u00a348m), 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
2025
2024
2025
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Asset backed securities
\u2014
\u2014
1,767
1,798
Debt securities
3,987
3,408
3,987
3,408
0
3,987
3,408
5,754
5,206
A significant portion of the debt securities are held in our eligible liquidity pool and consist mainly of government bonds and covered bonds.
The Company\u2019s asset backed securities include investments in debt securities issued by Santander UK structured entities.
25. DEBT SECURITIES IN ISSUE
Group
Company
2025
2024
2025
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Medium-term notes:
\u2013 US $30bn Euro Medium Term Note Programme
308
696
308
696
\u2013 Euro \u20ac30bn Euro Medium Term Note Programme
1,982
\u2014
1,982
\u2014
2,290
696
2,290
696
Downstreamed from Santander UK Group Holdings plc to Santander UK plc:
\u2013 Euro \u20ac30bn Euro Medium Term Note Programme
2,960
2,997
2,960
2,997
\u2013 US SEC-registered Debt Programme - Santander UK plc
6,646
5,929
6,646
5,929
11,896
9,622
11,896
9,622
Euro \u20ac35bn Global Covered Bond Programme
19,201
17,211
19,248
17,300
US $20bn Commercial Paper Programmes
2,411
3,274
2,411
3,274
Certificates of deposit
1,607
1,196
1,607
1,196
Credit linked notes
635
441
635
441
Securitisation programmes
5,638
3,929
\u2014
\u2014
41,388
35,673
35,797
31,833
At 31 December 2025, debt securities in issue included amounts due to Banco Santander group entities of \u00a39,626m (2024: \u00a39,036m).
", "dimensions": { "concept": "ifrs-full:DisclosureOfDebtSecuritiesExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-575": { "value": "
12. OTHER FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
Group
Company
2025
2024
2025
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Loans and advances to customers:
Loans to housing associations
\u2014
4
\u2014
4
Other loans
40
40
40
40
40
44
40
44
Debt securities
\u2014
56
\u2014
56
Other debt instruments
24
36
\u2014
\u2014
64
136
40
100
For the Santander UK group, other financial assets at FVTPL comprised \u00a3nil (2024: \u00a360m) of financial assets designated at FVTPL and \u00a364m (2024: \u00a376m) of
financial assets mandatorily held at FVTPL. For the Company, other financial assets at FVTPL comprised \u00a3nil (2024: \u00a360m) of financial assets designated at FVTPL
and \u00a340m (2024: \u00a340m) 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.
In 2025, 2024 and 2023, the net loss in the year attributable to changes in credit risk for loans and advances at FVTPL was \u00a3nil. The cumulative net loss attributable
to changes in credit risk for loans and advances at FVTPL at 31 December 2025 was \u00a33m (2024: \u00a33m 2023: \u00a33m).
24. OTHER FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS
Group and Company
2025
2024
\u00a3m
\u00a3m
Structured Notes Programmes
331
355
Structured deposits
824
605
Zero Amortising Guaranteed Notes
95
95
1,250
1,055
At 31 December 2025, other financial liabilities at fair value through profit or loss included amounts due to Banco Santander group entities of \u00a316m (2024: \u00a318m).
For the Santander UK group and the Company, in 2025 and 2024 all the other financial liabilities were designated at FVTPL.
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 \u00a31m (2024: \u00a317m loss, 2023: \u00a321m loss). The cumulative net loss attributable to changes in the Santander UK group\u2019s own credit risk on the above
securities at 31 December 2025 was \u00a35m (2024: \u00a34m loss, 2023: \u00a36m loss).
At 31 December 2025, the amount that would be required to be contractually paid at maturity of the securities above was \u00a335m (2024: \u00a376m) below 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)
2025
2024
2025
2024
2023
Balance sheet line item
Category
Financial instrument product type
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
1. Derivative assets
Equity and credit contracts
Reversionary property interests
30
35
1
6
12
2. FVTPL assets
Loans and advances to customers
Roll-up mortgage portfolio
20
22
(1)
(1)
(2)
3. FVTPL assets
Loans and advances to customers
Other loans
20
22
2
\u2014
4
4. FVTPL assets
Debt securities
Reversionary property securities
24
36
\u2014
2
(3)
5. FVOCI assets
Debt Instruments
Other securities
\u2014
34
\u2014
\u2014
\u2014
94
149
2
7
11
Other Level 3 assets
\u2014
\u2014
\u2014
\u2014
(1)
Other Level 3 liabilities
(13)
(14)
1
(5)
(2)
Total net assets
81
135
Total income/(expense)
3
2
8
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:DisclosureOfFinancialInstrumentsAtFairValueThroughProfitOrLossExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-577": { "value": "
13. LOANS AND ADVANCES TO CUSTOMERS
Group
Company
2025
2024
2025
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Loans secured on residential properties
167,284
165,214
167,284
165,214
Corporate loans
20,450
18,550
19,413
17,778
Finance leases
4,251
4,222
\u2014
\u2014
Other unsecured loans
5,566
6,601
5,513
6,521
Accrued interest and other adjustments
760
796
906
961
Amounts due from fellow Banco Santander subsidiaries and joint ventures
5,043
4,814
7
3
Amounts due from Santander UK Group Holdings plc
11
18
11
18
Amounts due from subsidiaries
\u2014
\u2014
29,999
27,999
Loans and advances to customers
203,365
200,215
223,133
218,494
Credit impairment loss allowances on loans and advances to customers
(729)
(784)
(666)
(714)
Residual value and voluntary termination provisions on finance leases
(27)
(23)
\u2014
\u2014
Net loans and advances to customers
202,609
199,408
222,467
217,780
At 31 December 2025, loans and advances to customers included amounts due from Banco Santander group entities of \u00a35,055m (2024: \u00a34,834m).
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
2025
2024
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
1,362
(202)
1,160
1,400
(208)
1,192
Later than one year and not later than two years
1,337
(202)
1,135
1,423
(215)
1,208
Later than two years and not later than three years
1,086
(164)
922
1,220
(184)
1,036
Later than three years and not later than four years
972
(147)
825
721
(109)
612
Later than four years and not later than five years
135
(21)
114
115
(17)
98
Later than five years
112
(17)
95
90
(14)
76
5,004
(753)
4,251
4,969
(747)
4,222
At 31 December 2025 and 2024, 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 \u00a31,804m (2024: \u00a31,748m) of unguaranteed RV at the end of the
current lease terms, which is expected to be recovered through re-payment, re-financing or sale. Finance income on the net investment in finance leases was
\u00a3324m (2024: \u00a3308m, 2023: \u00a3266m).
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 2025 and 2024, the Santander UK group had contracted with lessees for the following future undiscounted minimum lease payments receivable
under operating leases.
Group
Company
2025
2024
2025
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
No later than one year
20
27
19
25
Later than one year and not later than two years
17
21
16
20
Later than two years and not later than three years
12
17
11
16
Later than three years and not later than four years
7
7
6
7
Later than four years and not later than five years
5
5
4
4
Later than five years
11
11
7
7
72
88
63
79
Group
2025
2024
Fair value
Carrying
Fair value
Carrying
Level 1
Level 2
Level 3
Total
value
Level 1
Level 2
Level 3
Total
value
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Loans and advances to customers
\u2014
\u2014
203,426
203,426
202,609
\u2014
\u2014
198,376
198,376
199,408
Loans and advances to banks
\u2014
1,048
\u2014
1,048
1,048
\u2014
1,032
\u2014
1,032
1,032
Reverse repurchase agreements - non-trading
\u2014
17,696
\u2014
17,696
17,678
\u2014
10,342
\u2014
10,342
10,338
Other financial assets at amortised cost
3,747
\u2014
\u2014
3,747
3,987
3,190
\u2014
\u2014
3,190
3,408
3,747
18,744
203,426
225,917
225,322
3,190
11,374
198,376
212,940
214,186
Liabilities
Deposits by customers
\u2014
117
187,849
187,966
187,300
\u2014
185
180,282
180,467
180,967
Deposits by banks
\u2014
6,630
\u2014
6,630
6,628
\u2014
13,934
39
13,973
13,993
Repurchase agreements - non-trading
\u2014
9,039
\u2014
9,039
9,029
\u2014
8,622
\u2014
8,622
8,617
Debt securities in issue
25,874
14,618
1,421
41,913
41,388
21,173
12,910
1,771
35,854
35,673
Subordinated liabilities
1,065
1,161
187
2,413
2,032
1,129
10
1,622
2,761
2,385
26,939
31,565
189,457
247,961
246,377
22,302
35,661
183,714
241,677
241,635
Company
2025
2024
Fair value
Carrying
Fair value
Carrying
Level 1
Level 2
Level 3
Total
value
Level 1
Level 2
Level 3
Total
value
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Loans and advances to customers
\u2014
\u2014
223,075
223,075
222,467
\u2014
\u2014
216,851
216,851
217,780
Loans and advances to banks
\u2014
990
\u2014
990
990
\u2014
926
\u2014
926
926
Reverse repurchase agreements - non-trading
\u2014
17,696
\u2014
17,696
17,678
\u2014
10,342
\u2014
10,342
10,338
Other financial assets at amortised cost
3,747
1,593
\u2014
5,340
5,754
3,190
1,977
\u2014
5,167
5,206
3,747
20,279
223,075
247,101
246,889
3,190
13,245
216,851
233,286
234,250
Liabilities
Deposits by customers
\u2014
17
212,293
212,310
211,643
\u2014
185
200,530
200,715
201,215
Deposits by banks
\u2014
11,127
\u2014
11,127
11,126
\u2014
13,922
5,579
19,501
19,521
Repurchase agreements - non-trading
\u2014
9,039
\u2014
9,039
9,029
\u2014
8,621
\u2014
8,621
8,617
Debt securities in issue
20,968
14,480
859
36,307
35,797
17,870
12,846
1,379
32,095
31,833
Subordinated liabilities
1,065
1,161
187
2,413
2,033
1,129
10
1,598
2,737
2,386
22,033
35,824
213,339
271,196
269,628
18,999
35,584
209,086
263,669
263,572
The following tables summarise the fair values of the financial assets and liabilities accounted for at fair value at 31 December 2025 and 31 December 2024,
analysed by their levels in the fair value hierarchy - Level 1, Level 2 and Level 3.
Group
2025
2024
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
671
\u2014
671
\u2014
978
\u2014
978
A
Interest rate contracts
\u2014
1,078
\u2014
1,078
\u2014
1,675
\u2014
1,675
A & C
Inflation rate contracts
\u2014
85
\u2014
85
\u2014
70
\u2014
70
A
Equity and credit contracts
\u2014
64
30
94
\u2014
89
35
124
B & D
Netting
\u2014
(1,058)
\u2014
(1,058)
\u2014
(1,643)
\u2014
(1,643)
\u2014
840
30
870
\u2014
1,169
35
1,204
Other financial assets at FVTPL
Loans and advances to customers
\u2014
\u2014
40
40
\u2014
\u2014
44
44
A
Debt securities and other debt
instruments
\u2014
\u2014
24
24
\u2014
56
36
92
A, B & D
\u2014
\u2014
64
64
\u2014
56
80
136
Financial assets at FVOCI
Debt securities
5,017
199
\u2014
5,216
8,805
201
34
9,040
D
5,017
199
\u2014
5,216
8,805
201
34
9,040
Total assets at fair value
5,017
1,039
94
6,150
8,805
1,426
149
10,380
Liabilities
Derivative financial instruments
Exchange rate contracts
\u2014
512
\u2014
512
\u2014
430
\u2014
430
A
Interest rate contracts
\u2014
1,182
\u2014
1,182
\u2014
1,894
\u2014
1,894
A & C
Inflation rate contracts
\u2014
30
\u2014
30
\u2014
\u2014
\u2014
\u2014
A
Equity and credit contracts
\u2014
8
13
21
\u2014
7
14
21
B & D
Netting
\u2014
(1,058)
\u2014
(1,058)
\u2014
(1,643)
\u2014
(1,643)
\u2014
674
13
687
\u2014
688
14
702
Other financial liabilities at FVTPL
Debt securities in issue
\u2014
331
\u2014
331
\u2014
355
\u2014
355
A
Structured deposits
\u2014
824
\u2014
824
\u2014
605
\u2014
605
A
Zero Amortising Guaranteed Notes
\u2014
95
\u2014
95
\u2014
95
\u2014
95
D
\u2014
1,250
\u2014
1,250
\u2014
1,055
\u2014
1,055
Total liabilities at fair value
\u2014
1,924
13
1,937
\u2014
1,743
14
1,757
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
arrangements2
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
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Derivative financial assets
1,890
(1,058)
832
(415)
(370)
47
38
870
Reverse repurchase, securities borrowing & similar
agreements:
\u2013 Amortised cost
20,967
(3,289)
17,678
(1,167)
(16,511)
\u2014
\u2014
17,678
Loans and advances to customers and banks\u2074
3,959
(588)
3,371
\u2014
\u2014
3,371
200,286
203,657
26,816
(4,935)
21,881
(1,582)
(16,881)
3,418
200,324
222,205
Liabilities
Derivative financial liabilities
1,731
(1,058)
673
(415)
(182)
76
14
687
Repurchase, securities lending & similar agreements:
\u2013 Amortised cost
12,318
(3,289)
9,029
(1,167)
(7,862)
\u2014
\u2014
9,029
Deposits by customers and banks\u2074
588
(588)
\u2014
\u2014
\u2014
\u2014
193,928
193,928
14,637
(4,935)
9,702
(1,582)
(8,044)
76
193,942
203,644
2024
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\u2074
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\u2074
635
(635)
\u2014
\u2014
\u2014
\u2014
194,960
194,960
17,414
(8,115)
9,299
(470)
(8,681)
148
194,980
204,279
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
arrangements2
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
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Derivative financial assets
1,987
(1,058)
929
(514)
(370)
45
38
967
Reverse repurchase, securities borrowing & similar
agreements:
\u2013 Amortised cost
20,967
(3,289)
17,678
(1,167)
(16,511)
\u2014
\u2014
17,678
Loans and advances to customers and banks 4
3,959
(588)
3,371
\u2014
\u2014
3,371
220,086
223,457
26,913
(4,935)
21,978
(1,681)
(16,881)
3,416
220,124
242,102
Liabilities
Derivative financial liabilities
3,177
(1,058)
2,119
(514)
(182)
1,423
13
2,132
Repurchase, securities lending & similar agreements:
\u2013 Amortised cost
12,318
(3,289)
9,029
(1,167)
(7,862)
\u2014
\u2014
9,029
Deposits by customers and banks 4
588
(588)
\u2014
\u2014
\u2014
\u2014
222,769
222,769
16,083
(4,935)
11,148
(1,681)
(8,044)
1,423
222,782
233,930
2024
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
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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-578": { "value": "
18. INTERESTS IN OTHER ENTITIES
Group
Company
2025
2024
2025
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Subsidiaries
\u2014
\u2014
1,281
1,257
Joint Ventures
293
289
\u2014
\u2014
293
289
1,281
1,257
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
Carrying amount
\u00a3m
\u00a3m
At 1 January 2025
1,257
1,257
Additions
24
24
At 31 December 2025
1,281
1,281
At 1 January 2024
1,220
1,220
Capital contribution
37
37
At 31 December 2024
1,257
1,257
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.
b) Interests in joint ventures
Santander UK does not have any individually material interests in joint ventures. In 2025, Santander UK\u2019s share in the profit after tax of its joint ventures was \u00a34m
(2024: \u00a345m) before elimination of transactions between Santander UK and the joint ventures. At 31 December 2025, the carrying amount of Santander UK\u2019s
interest was \u00a3293m (2024: \u00a3289m). At 31 December 2025 and 2024, 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 \u00a37,431m (2024: \u00a37,591m) 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 four (2024: five) 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 \u00a3175m (2024: \u00a3226m), 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.
Subsidiaries and related undertakings (audited)
In accordance with Section 409 of the Companies Act 2006, details of the Company\u2019s subsidiaries and related undertakings at 31 December 2025 are set out below.
This section forms an integral part of the financial statements.
Subsidiaries
All subsidiaries are owned 100% and consolidated by Santander UK.
Incorporated and registered in England and Wales:
Registered
office1
Direct/Indirect
ownership
Share class through
which ownership is
held
Proportion of
ownership
interest
Name of subsidiary
%
2 & 3 Triton Limited (In Liquidation)
E
Direct
Ordinary \u00a31
100
Abbey National Nominees Limited
A
Direct
Ordinary \u00a31
100
Abbey National Property Investments
A
Direct
Ordinary \u00a31
100
Alliance & Leicester Personal Finance Limited
A
Direct
Ordinary \u00a31
100
Cater Allen Limited
A
Indirect
Ordinary \u00a31
\u2014
First National Tricity Finance Limited
A
Indirect
Ordinary \u00a31
\u2014
Navigator Global Limited
A
Direct
Ordinary \u00a31
\u2014
Santander Asset Finance plc
A
Direct
Ordinary \u00a30.10
100
Santander Cards Limited
A
Indirect
Ordinary \u00a31
\u2014
Santander Cards UK Limited
A
Direct
Ordinary \u00a31
100
Santander Consumer (UK) plc
B
Direct
Ordinary \u00a31
100
Santander Consumer Credit Services Limited
A
Indirect
Ordinary \u00a31
\u2014
Santander Estates Limited
F
Direct
Ordinary \u00a31
100
Santander Global Consumer Finance Limited
A
Indirect
Ordinary \u00a30.0001
\u2014
Santander Guarantee Company (In Liquidation)
A
Direct
Ordinary \u00a31
100
Santander Lending Limited
A
Direct
Ordinary \u00a31
100
Santander Private Banking UK Limited
A
Direct
Ordinary \u00a31
100
Santander UK Operations Limited
A
Direct
Ordinary \u00a31
100
Santander UK (Structured Solutions) Limited
A
Direct
Ordinary \u00a30.01
100
Preference \u00a30.01
100
Santander UK Technology Limited
A
Direct
Ordinary \u00a31
100
1 Refer to the key at the end of this section for the registered office address.
Incorporated and registered outside England and Wales:
Registered
office1
Share class through
which ownership is
held
Proportion of
ownership
interest
Name of subsidiary
%
Santander Cards Ireland Limited
H
Indirect
Ordinary \u20ac1
100
Ordinary \u20ac1.27
100
Santander ISA Managers Limited
G
Direct
Ordinary \u00a31
100
1 Refer to the key at the end of this section for the registered office address, including the country.
Subsidiaries benefitting from an audit exemption according to section 479A of the Companies Act 2006
Name of subsidiary
Company number
Santander Estates Limited
02304569
Santander Global Consumer Finance Limited
00048468
Santander UK Operations Limited
04137550
Santander UK Technology Limited
05212726
Santander Private Banking UK Limited
02582000
Other subsidiary undertakings
All entities are registered in England and Wales except for Motor Securities 2018-1 Designated Activity Company which is registered in Ireland.
The Company and its subsidiaries do not own directly, or indirectly, any of the share capital of any of the entities, however they are consolidated by the Santander
UK group because the substance of the relationship indicates control, as described in Note 1 to the Consolidated Financial Statements.
Registered
Registered
Name of entity
office1
Name of entity
office1
Abbey Covered Bonds (Holdings) Limited
D
Holmes Funding Limited
A
Abbey Covered Bonds (LM) Limited
D
Holmes Holdings Limited
A
Abbey Covered Bonds LLP
A
Holmes Master Issuer plc
A
Fosse (Master Issuer) Holdings Limited
C
Holmes Trustees Limited
A
Fosse Funding (No.1) Limited
C
MAC No.1 Limited
A
Fosse Master Issuer plc
C
Repton 2023-1 Limited
C
Fosse Trustee (UK) Limited
A
1 Refer to the key at the end of this section for the registered office address.
Related undertakings
All of these entities, which are registered in England and Wales, are accounted for by the equity method of accounting, with 50% ownership being held.
Registered
office1
Direct/
Indirect
ownership
Share class
through
which
ownership
is held
Proportion
of
ownership
interest
Name of entity
%
Hyundai Capital UK Limited
I
Indirect
Ordinary \u00a31
\u2014
Volvo Car Financial Services UK Limited
J
Indirect
Ordinary \u00a31
\u2014
1 Refer to the key at the end of this section for the registered office address.
Overseas branches
The Company has no overseas branches.
Key of registered office addresses
A
2 Triton Square, Regent\u2019s Place, London NW1 3AN
B
Santander House, 86 Station Road, Redhill RH1 1SR
C
1 Bartholomew Lane, London EC2V 2AX
D
Wilmington Trust SP Services (London) Limited, 1 Kings Arms Yard, London EC2R 7AF
E
Griffins Tavistock House North, Tavistock Square, London, WC1H 9HR
F
Carlton Park, Narborough, Leicester LE19 0AL
G
287 St. Vincent Street, Glasgow, Scotland G2 5NB
H
3 Dublin Landings, North Wall Quay, Dublin 1, Ireland
I
London Court, 39 London Road, Reigate RH2 9AQ
J
Scandinavia House, Norreys Drive, Maidenhead, Berkshire SL6 4FL
", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestsInOtherEntitiesExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-579": { "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
Carrying amount
\u00a3m
\u00a3m
At 1 January 2025
1,257
1,257
Additions
24
24
At 31 December 2025
1,281
1,281
At 1 January 2024
1,220
1,220
Capital contribution
37
37
At 31 December 2024
1,257
1,257
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.
Subsidiaries and related undertakings (audited)
In accordance with Section 409 of the Companies Act 2006, details of the Company\u2019s subsidiaries and related undertakings at 31 December 2025 are set out below.
This section forms an integral part of the financial statements.
Subsidiaries
All subsidiaries are owned 100% and consolidated by Santander UK.
Incorporated and registered in England and Wales:
Registered
office1
Direct/Indirect
ownership
Share class through
which ownership is
held
Proportion of
ownership
interest
Name of subsidiary
%
2 & 3 Triton Limited (In Liquidation)
E
Direct
Ordinary \u00a31
100
Abbey National Nominees Limited
A
Direct
Ordinary \u00a31
100
Abbey National Property Investments
A
Direct
Ordinary \u00a31
100
Alliance & Leicester Personal Finance Limited
A
Direct
Ordinary \u00a31
100
Cater Allen Limited
A
Indirect
Ordinary \u00a31
\u2014
First National Tricity Finance Limited
A
Indirect
Ordinary \u00a31
\u2014
Navigator Global Limited
A
Direct
Ordinary \u00a31
\u2014
Santander Asset Finance plc
A
Direct
Ordinary \u00a30.10
100
Santander Cards Limited
A
Indirect
Ordinary \u00a31
\u2014
Santander Cards UK Limited
A
Direct
Ordinary \u00a31
100
Santander Consumer (UK) plc
B
Direct
Ordinary \u00a31
100
Santander Consumer Credit Services Limited
A
Indirect
Ordinary \u00a31
\u2014
Santander Estates Limited
F
Direct
Ordinary \u00a31
100
Santander Global Consumer Finance Limited
A
Indirect
Ordinary \u00a30.0001
\u2014
Santander Guarantee Company (In Liquidation)
A
Direct
Ordinary \u00a31
100
Santander Lending Limited
A
Direct
Ordinary \u00a31
100
Santander Private Banking UK Limited
A
Direct
Ordinary \u00a31
100
Santander UK Operations Limited
A
Direct
Ordinary \u00a31
100
Santander UK (Structured Solutions) Limited
A
Direct
Ordinary \u00a30.01
100
Preference \u00a30.01
100
Santander UK Technology Limited
A
Direct
Ordinary \u00a31
100
1 Refer to the key at the end of this section for the registered office address.
Incorporated and registered outside England and Wales:
Registered
office1
Share class through
which ownership is
held
Proportion of
ownership
interest
Name of subsidiary
%
Santander Cards Ireland Limited
H
Indirect
Ordinary \u20ac1
100
Ordinary \u20ac1.27
100
Santander ISA Managers Limited
G
Direct
Ordinary \u00a31
100
1 Refer to the key at the end of this section for the registered office address, including the country.
Subsidiaries benefitting from an audit exemption according to section 479A of the Companies Act 2006
Name of subsidiary
Company number
Santander Estates Limited
02304569
Santander Global Consumer Finance Limited
00048468
Santander UK Operations Limited
04137550
Santander UK Technology Limited
05212726
Santander Private Banking UK Limited
02582000
Other subsidiary undertakings
All entities are registered in England and Wales except for Motor Securities 2018-1 Designated Activity Company which is registered in Ireland.
The Company and its subsidiaries do not own directly, or indirectly, any of the share capital of any of the entities, however they are consolidated by the Santander
UK group because the substance of the relationship indicates control, as described in Note 1 to the Consolidated Financial Statements.
Registered
Registered
Name of entity
office1
Name of entity
office1
Abbey Covered Bonds (Holdings) Limited
D
Holmes Funding Limited
A
Abbey Covered Bonds (LM) Limited
D
Holmes Holdings Limited
A
Abbey Covered Bonds LLP
A
Holmes Master Issuer plc
A
Fosse (Master Issuer) Holdings Limited
C
Holmes Trustees Limited
A
Fosse Funding (No.1) Limited
C
MAC No.1 Limited
A
Fosse Master Issuer plc
C
Repton 2023-1 Limited
C
Fosse Trustee (UK) Limited
A
1 Refer to the key at the end of this section for the registered office address.
Related undertakings
All of these entities, which are registered in England and Wales, are accounted for by the equity method of accounting, with 50% ownership being held.
Registered
office1
Direct/
Indirect
ownership
Share class
through
which
ownership
is held
Proportion
of
ownership
interest
Name of entity
%
Hyundai Capital UK Limited
I
Indirect
Ordinary \u00a31
\u2014
Volvo Car Financial Services UK Limited
J
Indirect
Ordinary \u00a31
\u2014
1 Refer to the key at the end of this section for the registered office address.
Overseas branches
The Company has no overseas branches.
Key of registered office addresses
A
2 Triton Square, Regent\u2019s Place, London NW1 3AN
B
Santander House, 86 Station Road, Redhill RH1 1SR
C
1 Bartholomew Lane, London EC2V 2AX
D
Wilmington Trust SP Services (London) Limited, 1 Kings Arms Yard, London EC2R 7AF
E
Griffins Tavistock House North, Tavistock Square, London, WC1H 9HR
F
Carlton Park, Narborough, Leicester LE19 0AL
G
287 St. Vincent Street, Glasgow, Scotland G2 5NB
H
3 Dublin Landings, North Wall Quay, Dublin 1, Ireland
I
London Court, 39 London Road, Reigate RH2 9AQ
J
Scandinavia House, Norreys Drive, Maidenhead, Berkshire SL6 4FL
", "dimensions": { "concept": "ifrs-full:DisclosureOfSignificantInvestmentsInSubsidiariesExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-581": { "value": "
b) Interests in joint ventures
Santander UK does not have any individually material interests in joint ventures. In 2025, Santander UK\u2019s share in the profit after tax of its joint ventures was \u00a34m
(2024: \u00a345m) before elimination of transactions between Santander UK and the joint ventures. At 31 December 2025, the carrying amount of Santander UK\u2019s
interest was \u00a3293m (2024: \u00a3289m). At 31 December 2025 and 2024, the joint ventures had no commitments and contingent liabilities.
", "dimensions": { "concept": "ifrs-full:DisclosureOfJointVenturesExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-580": { "value": "
b) Interests in joint ventures
Santander UK does not have any individually material interests in joint ventures. In 2025, Santander UK\u2019s share in the profit after tax of its joint ventures was \u00a34m
(2024: \u00a345m) before elimination of transactions between Santander UK and the joint ventures. At 31 December 2025, the carrying amount of Santander UK\u2019s
interest was \u00a3293m (2024: \u00a3289m). At 31 December 2025 and 2024, the joint ventures had no commitments and contingent liabilities.
", "dimensions": { "concept": "ifrs-full:DisclosureOfInvestmentsAccountedForUsingEquityMethodExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-582": { "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 \u00a37,431m (2024: \u00a37,591m) 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 four (2024: five) 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 \u00a3175m (2024: \u00a3226m), 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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-583": { "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 2025 and 31 December 2025
1,269
(70)
1,199
1,194
(25)
1,169
Impairment of goodwill
In 2025 and 2024, 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. Impairment is required where the carrying value of goodwill exceeds its recoverable amount.
For the Company, an impairment of \u00a321m was recognised in 2024.
In 2025, 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).
Basis of the recoverable amount
The recoverable amount of all CGUs was determined based on a 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 and discount rate by CGU in the VIU calculation:
Goodwill
Discount rate
2025
2024
2025
2024
CGU
\u00a3m
\u00a3m
%
%
Personal Financial Services
1,169
1,169
12.3
12.1
Private Banking
30
30
9.2
10.0
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 forecast 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 2025, 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 2028. 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 2025, 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 2025.
Discount rate
The rate used to discount the forecast 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 16.7% (2024:16.5%) and Private Banking CGU was 13.0% (2024: 15.1%). The Private Banking CGU has a different discount
rate compared to the Personal Financial Services CGU because they operate in different markets and therefore have different comparables.
Growth rate beyond initial cash flow projections
The growth rate for periods beyond the initial cash flow projections is used to extrapolate the forecast 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 2025 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 2025 and 31 December 2024, 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 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 5% (2024: 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 (2024:
increased by 100 basis
points).
At 31 December 2025 and 31 December 2024, 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 in headroom as follows.
Decrease in headroom
2025
2024
CGU
Reasonably possible change
\u00a3m
\u00a3m
Personal Financial Services
Cash flow projections decrease by 5% ( 2024 : 10% )
438
764
Discount rate increases by 100 basis points ( 2024 : increased by 100 basis points )
723
622
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 2025, 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 2025, there was an increase in headroom driven by higher cash flow forecasts.
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.
2025
Carrying value
Value in use
Headroom
Increase in
discount rate
Decrease in
forecast cash
flows
CGU
\u00a3m
\u00a3m
\u00a3m
bps
%
Personal Financial Services
8,072
8,752
680
94
8
2024
Personal Financial Services
7,294
7,639
345
53
5
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 2025
756
(416)
340
795
(466)
329
Additions
106
\u2014
106
100
\u2014
100
Disposals
(44)
39
(5)
(44)
40
(4)
Charge
\u2014
(129)
(129)
\u2014
(125)
(125)
At 31 December 2025
818
(506)
312
851
(551)
300
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
Other intangibles which consist of computer software, include computer software under development of \u00a380m (2024: \u00a399m), of which \u00a335m is internally
generated (2024: \u00a320m). For the Company, other intangibles include computer software under development of \u00a379m (2024: \u00a399m), of which \u00a317m is internally
generated (2024: \u00a319m).
The impairment charge of \u00a3nil (2024: \u00a35m) relates to computer software no longer expected to yield future economic benefits. For the Company, the impairment
charge of \u00a3nil (2024: \u00a33m) relates to computer software no longer expected to yield future economic benefits.
", "dimensions": { "concept": "ifrs-full:DisclosureOfIntangibleAssetsAndGoodwillExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-584": { "value": "
a) Goodwill
Group
Company
Cost
Accumulated
impairment
Carrying
amount
Cost
Accumulated
impairment
Carrying
amount
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2025 and 31 December 2025
1,269
(70)
1,199
1,194
(25)
1,169
Impairment of goodwill
In 2025 and 2024, 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. Impairment is required where the carrying value of goodwill exceeds its recoverable amount.
For the Company, an impairment of \u00a321m was recognised in 2024.
In 2025, 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).
Basis of the recoverable amount
The recoverable amount of all CGUs was determined based on a 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 and discount rate by CGU in the VIU calculation:
Goodwill
Discount rate
2025
2024
2025
2024
CGU
\u00a3m
\u00a3m
%
%
Personal Financial Services
1,169
1,169
12.3
12.1
Private Banking
30
30
9.2
10.0
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 forecast 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 2025, 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 2028. 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 2025, 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 2025.
Discount rate
The rate used to discount the forecast 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 16.7% (2024:16.5%) and Private Banking CGU was 13.0% (2024: 15.1%). The Private Banking CGU has a different discount
rate compared to the Personal Financial Services CGU because they operate in different markets and therefore have different comparables.
Growth rate beyond initial cash flow projections
The growth rate for periods beyond the initial cash flow projections is used to extrapolate the forecast 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 2025 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 2025 and 31 December 2024, 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 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 5% (2024: 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 (2024:
increased by 100 basis
points).
At 31 December 2025 and 31 December 2024, 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 in headroom as follows.
Decrease in headroom
2025
2024
CGU
Reasonably possible change
\u00a3m
\u00a3m
Personal Financial Services
Cash flow projections decrease by 5% ( 2024 : 10% )
438
764
Discount rate increases by 100 basis points ( 2024 : increased by 100 basis points )
723
622
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 2025, 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 2025, there was an increase in headroom driven by higher cash flow forecasts.
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.
2025
Carrying value
Value in use
Headroom
Increase in
discount rate
Decrease in
forecast cash
flows
CGU
\u00a3m
\u00a3m
\u00a3m
bps
%
Personal Financial Services
8,072
8,752
680
94
8
2024
Personal Financial Services
7,294
7,639
345
53
5
", "dimensions": { "concept": "ifrs-full:DisclosureOfGoodwillExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-585": { "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 2025
756
(416)
340
795
(466)
329
Additions
106
\u2014
106
100
\u2014
100
Disposals
(44)
39
(5)
(44)
40
(4)
Charge
\u2014
(129)
(129)
\u2014
(125)
(125)
At 31 December 2025
818
(506)
312
851
(551)
300
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
Other intangibles which consist of computer software, include computer software under development of \u00a380m (2024: \u00a399m), of which \u00a335m is internally
generated (2024: \u00a320m). For the Company, other intangibles include computer software under development of \u00a379m (2024: \u00a399m), of which \u00a317m is internally
generated (2024: \u00a319m).
The impairment charge of \u00a3nil (2024: \u00a35m) relates to computer software no longer expected to yield future economic benefits. For the Company, the impairment
charge of \u00a3nil (2024: \u00a33m) relates to computer software no longer expected to yield future economic benefits.
", "dimensions": { "concept": "ifrs-full:DisclosureOfIntangibleAssetsExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-587": { "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 2025
941
892
7
716
270
2,826
Additions
2
65
\u2014
213
22
302
Reclassification to assets held for sale
(15)
\u2014
\u2014
\u2014
\u2014
(15)
Disposals
(20)
(38)
(1)
(225)
(15)
(299)
At 31 December 2025
908
919
6
704
277
2,814
Accumulated depreciation and impairment:
At 1 January 2025
238
685
7
142
191
1,263
Charge for the year
22
55
\u2014
70
18
165
Impairment during the year
16
4
\u2014
5
3
28
Reclassification to assets held for sale
(7)
\u2014
\u2014
\u2014
\u2014
(7)
Disposals
(18)
(37)
(1)
(86)
(4)
(146)
At 31 December 2025
251
707
6
131
208
1,303
Carrying amount
657
212
\u2014
573
69
1,511
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 and impairment:
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
1 In 2025 and 2024, property included investment properties of \u00a316m.
See Note 27 for further details on the property provision made as part of transforming our branch network.
Company
Property
Office fixtures and
equipment
Computer software
Right-of-use assets
Total 1
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cost:
At 1 January 2025
931
869
1
254
2,055
Additions
2
65
\u2014
21
88
Reclassification from assets held for sale
(15)
\u2014
\u2014
\u2014
(15)
Disposals
(16)
(38)
(1)
(13)
(68)
At 31 December 2025
902
896
\u2014
262
2,060
Accumulated depreciation:
At 1 January 2025
234
662
1
185
1,082
Charge for the year
22
55
\u2014
16
93
Impairment during the year
16
4
\u2014
3
23
Reclassification from assets held for sale
(7)
\u2014
\u2014
\u2014
(7)
Disposals
(16)
(37)
(1)
(3)
(57)
At 31 December 2025
249
684
\u2014
201
1,134
Carrying amount
653
212
\u2014
61
926
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
1 In 2025 and 2024, property included investment properties of \u00a316m.
", "dimensions": { "concept": "ifrs-full:DisclosureOfPropertyPlantAndEquipmentExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-586": { "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 2025
941
892
7
716
270
2,826
Additions
2
65
\u2014
213
22
302
Reclassification to assets held for sale
(15)
\u2014
\u2014
\u2014
\u2014
(15)
Disposals
(20)
(38)
(1)
(225)
(15)
(299)
At 31 December 2025
908
919
6
704
277
2,814
Accumulated depreciation and impairment:
At 1 January 2025
238
685
7
142
191
1,263
Charge for the year
22
55
\u2014
70
18
165
Impairment during the year
16
4
\u2014
5
3
28
Reclassification to assets held for sale
(7)
\u2014
\u2014
\u2014
\u2014
(7)
Disposals
(18)
(37)
(1)
(86)
(4)
(146)
At 31 December 2025
251
707
6
131
208
1,303
Carrying amount
657
212
\u2014
573
69
1,511
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 and impairment:
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
1 In 2025 and 2024, property included investment properties of \u00a316m.
See Note 27 for further details on the property provision made as part of transforming our branch network.
Company
Property
Office fixtures and
equipment
Computer software
Right-of-use assets
Total 1
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cost:
At 1 January 2025
931
869
1
254
2,055
Additions
2
65
\u2014
21
88
Reclassification from assets held for sale
(15)
\u2014
\u2014
\u2014
(15)
Disposals
(16)
(38)
(1)
(13)
(68)
At 31 December 2025
902
896
\u2014
262
2,060
Accumulated depreciation:
At 1 January 2025
234
662
1
185
1,082
Charge for the year
22
55
\u2014
16
93
Impairment during the year
16
4
\u2014
3
23
Reclassification from assets held for sale
(7)
\u2014
\u2014
\u2014
(7)
Disposals
(16)
(37)
(1)
(3)
(57)
At 31 December 2025
249
684
\u2014
201
1,134
Carrying amount
653
212
\u2014
61
926
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
1 In 2025 and 2024, property included investment properties of \u00a316m.
Group
Company
2025
2024
2025
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Lease liabilities
72
88
63
79
Other
2,101
1,764
1,886
1,710
2,173
1,852
1,949
1,789
At 31 December 2025, other liabilities included amounts due to Banco Santander group entities of \u00a3273m (2024: \u00a367m).
", "dimensions": { "concept": "ifrs-full:DisclosureOfLeasesExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-588": { "value": "
21. DEPOSITS BY BANKS
Group
Company
2025
2024
2025
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Items in the course of transmission1
572
523
555
517
Deposits held as collateral
442
682
442
682
Other deposits 2
5,613
12,787
4,791
12,781
Amounts due to other Santander UK Group Holdings plc subsidiaries
1
1
5,338
5,541
6,628
13,993
11,126
19,521
1 Includes \u00a3503m (2024: \u00a3476m) of balances relating to settlement activities.
2 Includes balance drawn from the TFSME of \u00a33.9bn (2024: \u00a311.0bn).
At 31 December 2025, deposits by banks included amounts due to Banco Santander group entities of \u00a31,264m (2024: \u00a3361m).
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
arrangements2
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
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Derivative financial assets
1,890
(1,058)
832
(415)
(370)
47
38
870
Reverse repurchase, securities borrowing & similar
agreements:
\u2013 Amortised cost
20,967
(3,289)
17,678
(1,167)
(16,511)
\u2014
\u2014
17,678
Loans and advances to customers and banks\u2074
3,959
(588)
3,371
\u2014
\u2014
3,371
200,286
203,657
26,816
(4,935)
21,881
(1,582)
(16,881)
3,418
200,324
222,205
Liabilities
Derivative financial liabilities
1,731
(1,058)
673
(415)
(182)
76
14
687
Repurchase, securities lending & similar agreements:
\u2013 Amortised cost
12,318
(3,289)
9,029
(1,167)
(7,862)
\u2014
\u2014
9,029
Deposits by customers and banks\u2074
588
(588)
\u2014
\u2014
\u2014
\u2014
193,928
193,928
14,637
(4,935)
9,702
(1,582)
(8,044)
76
193,942
203,644
2024
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\u2074
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\u2074
635
(635)
\u2014
\u2014
\u2014
\u2014
194,960
194,960
17,414
(8,115)
9,299
(470)
(8,681)
148
194,980
204,279
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
arrangements2
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
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Derivative financial assets
1,987
(1,058)
929
(514)
(370)
45
38
967
Reverse repurchase, securities borrowing & similar
agreements:
\u2013 Amortised cost
20,967
(3,289)
17,678
(1,167)
(16,511)
\u2014
\u2014
17,678
Loans and advances to customers and banks 4
3,959
(588)
3,371
\u2014
\u2014
3,371
220,086
223,457
26,913
(4,935)
21,978
(1,681)
(16,881)
3,416
220,124
242,102
Liabilities
Derivative financial liabilities
3,177
(1,058)
2,119
(514)
(182)
1,423
13
2,132
Repurchase, securities lending & similar agreements:
\u2013 Amortised cost
12,318
(3,289)
9,029
(1,167)
(7,862)
\u2014
\u2014
9,029
Deposits by customers and banks 4
588
(588)
\u2014
\u2014
\u2014
\u2014
222,769
222,769
16,083
(4,935)
11,148
(1,681)
(8,044)
1,423
222,782
233,930
2024
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
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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-589": { "value": "
22. DEPOSITS BY CUSTOMERS
Group
Company
2025
2024
2025
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Demand and time deposits 1
184,155
177,335
179,090
172,222
Amounts due to other Santander UK Group Holdings plc subsidiaries
182
122
30,990
26,933
Amounts due to Santander UK Group Holdings plc2
1,373
1,793
1,373
1,793
Amounts due to fellow Banco Santander subsidiaries and joint ventures
1,590
1,717
190
267
187,300
180,967
211,643
201,215
1 Includes capital amount guaranteed / protected equity index-linked deposits of \u00a387m (2024: \u00a3173m ).
2 Includes downstreamed funding from our immediate parent company Santander UK Group Holdings plc.
At 31 December 2025, deposits by customers included amounts due to Banco Santander group entities of \u00a33,145m (2024: \u00a33,632m).
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
arrangements2
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
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Derivative financial assets
1,890
(1,058)
832
(415)
(370)
47
38
870
Reverse repurchase, securities borrowing & similar
agreements:
\u2013 Amortised cost
20,967
(3,289)
17,678
(1,167)
(16,511)
\u2014
\u2014
17,678
Loans and advances to customers and banks\u2074
3,959
(588)
3,371
\u2014
\u2014
3,371
200,286
203,657
26,816
(4,935)
21,881
(1,582)
(16,881)
3,418
200,324
222,205
Liabilities
Derivative financial liabilities
1,731
(1,058)
673
(415)
(182)
76
14
687
Repurchase, securities lending & similar agreements:
\u2013 Amortised cost
12,318
(3,289)
9,029
(1,167)
(7,862)
\u2014
\u2014
9,029
Deposits by customers and banks\u2074
588
(588)
\u2014
\u2014
\u2014
\u2014
193,928
193,928
14,637
(4,935)
9,702
(1,582)
(8,044)
76
193,942
203,644
2024
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\u2074
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\u2074
635
(635)
\u2014
\u2014
\u2014
\u2014
194,960
194,960
17,414
(8,115)
9,299
(470)
(8,681)
148
194,980
204,279
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
arrangements2
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
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Derivative financial assets
1,987
(1,058)
929
(514)
(370)
45
38
967
Reverse repurchase, securities borrowing & similar
agreements:
\u2013 Amortised cost
20,967
(3,289)
17,678
(1,167)
(16,511)
\u2014
\u2014
17,678
Loans and advances to customers and banks 4
3,959
(588)
3,371
\u2014
\u2014
3,371
220,086
223,457
26,913
(4,935)
21,978
(1,681)
(16,881)
3,416
220,124
242,102
Liabilities
Derivative financial liabilities
3,177
(1,058)
2,119
(514)
(182)
1,423
13
2,132
Repurchase, securities lending & similar agreements:
\u2013 Amortised cost
12,318
(3,289)
9,029
(1,167)
(7,862)
\u2014
\u2014
9,029
Deposits by customers and banks 4
588
(588)
\u2014
\u2014
\u2014
\u2014
222,769
222,769
16,083
(4,935)
11,148
(1,681)
(8,044)
1,423
222,782
233,930
2024
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
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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-591": { "value": "
26. OTHER LIABILITIES
Group
Company
2025
2024
2025
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Lease liabilities
72
88
63
79
Other
2,101
1,764
1,886
1,710
2,173
1,852
1,949
1,789
At 31 December 2025, other liabilities included amounts due to Banco Santander group entities of \u00a3273m (2024: \u00a367m).
", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherLiabilitiesExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-590": { "value": "
26. OTHER LIABILITIES
Group
Company
2025
2024
2025
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Lease liabilities
72
88
63
79
Other
2,101
1,764
1,886
1,710
2,173
1,852
1,949
1,789
At 31 December 2025, other liabilities included amounts due to Banco Santander group entities of \u00a3273m (2024: \u00a367m).
", "dimensions": { "concept": "ifrs-full:DisclosureOfAccruedExpensesAndOtherLiabilitiesExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-592": { "value": "
29. SUBORDINATED LIABILITIES
Group
Company
2025
2024
2025
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3325m Sterling preference shares
343
343
343
343
Undated subordinated liabilities
205
205
205
205
Dated subordinated liabilities
1,484
1,837
1,485
1,838
2,032
2,385
2,033
2,386
At 31 December 2025, subordinated liabilities included amounts due to Banco Santander group entities of \u00a31,532m (2024: \u00a31,879m).
In 2025, certain debt securities and subordinated liabilities were repurchased, resulting in a loss of \u00a33m (2024: nil).
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 2025 and 2024, 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
2025
2024
2025
2024
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
2025
2024
2025
2024
Maturity
\u00a3m
\u00a3m
\u00a3m
\u00a3m
4.75% Subordinated notes
2025
\u2014
332
\u2014
332
7.95% Subordinated notes
2029
177
189
177
189
6.50% Subordinated notes
2030
1
1
1
1
5.875% Subordinated notes
2031
8
7
9
8
5.625%Subordinated notes
2045
210
226
210
226
7.869% Subordinated notes
2033
319
314
319
314
8.296% Subordinated notes
2033
769
768
769
768
1,484
1,837
1,485
1,838
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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-594": { "value": "
30. CONTINGENT LIABILITIES AND COMMITMENTS
Group
Company
2025
2024
2025
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Guarantees given to subsidiaries
\u2014
\u2014
5,044
5,185
Guarantees given to third parties
716
493
716
493
Formal standby facilities, credit lines and other commitments
38,105
35,156
38,094
35,155
38,821
35,649
43,854
40,833
At 31 December 2025, 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 December 2027. 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.
Motor finance broker commissions
As set out in Note 27, Santander UK has recognised a provision for motor finance commission payments. There continue to be significant uncertainties as to the
extent of remediation action. As such, the ultimate financial impact could be materially higher or lower than the amount provided. Based on Management's range of
scenarios, the unweighted provision for the upper range estimate would result in an increase in provision from \u00a3461m to \u00a3646m.
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 2025 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 liabilities. 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. Any potential losses, claims or expenses suffered or incurred by Santander
Financial Services plc in respect of these matters have been fully indemnified by Santander UK plc, as part of the ring-fencing transfer scheme between Santander
UK plc, Santander Financial Services plc and Banco Santander SA.
Payment Protection Insurance claim
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) brought a claim against (i) Santander Cards UK Limited (formerly 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) (SISUK and together with GECB 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.
On 25 July 2025, the Commercial Court of England and Wales handed down its judgment in relation to the claim brought by AXA France (the Judgment). It found
against SISUK in relation to AXA France\u2019s claim pursuant to an indemnity in an agency agreement entered between GECB, FICL and FACL in 2000 and novated by
GECB to SISUK in 2010. It also found GECB negligent in the sale of PPI policies, but this element of the claim was time barred to PPI policies sold in the period
between 2002 and 2005 and overlaps with the indemnity claim.
In October 2025, the Santander Entities obtained permission to appeal the findings in the Judgment relating to the application of the indemnity arising from PPI
sales occurring before the indemnity had been agreed in December 2000 (Santander Appeal). In January 2026, AXA France obtained permission to cross-appeal the
Commercial Court\u2019s rejection of AXA France\u2019s contribution claim made under the Civil Liability (Contribution) Act 1978 against Santander Cards UK Limited. If the
Santander Entities and AXA are both successful in their respective appeals, subject to any further appeal and defences which may be available to the Santander
Entities, the Court of Appeal may find that Santander Cards UK Limited has a liability in contribution to AXA France for an amount to be determined by the Court.
With respect to the Santander Appeal and AXA France\u2019s cross-appeal, there are points of legal interpretation to be resolved and, in the case of the cross-appeal,
factual points to be determined. In addition to the significant uncertainties outlined above as to whether any exposure for Santander Cards UK Limited will arise, it is
noted that any such exposure would represent a reallocation of the costs already paid and recognised by other entities within the Banco Santander SA Group. The
significant uncertainties make it difficult to predict the timing or the significance of the possible impact for the Santander UK group. With that context (and subject to
the foregoing), the Santander UK group notes that its maximum potential exposure is approximately \u00a3528m. A decision on the Santander Appeal and AXA France\u2019s
cross appeal is expected in H2 2026.
No customers have suffered loss as a consequence of the claim brought by AXA France or the Judgment, nor does it impact upon past redress paid to customers for
PPI complaints.
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, our assessment is that the litigation will not
give rise to more than \u20ac1bn of losses relating to UK&I MIFs, which would mean that the indemnity would not be called upon. However, the potential impact of the
litigation is still not certain, and therefore it is still possible that the indemnity could be called upon.
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 2025, 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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-593": { "value": "
30. CONTINGENT LIABILITIES AND COMMITMENTS
Group
Company
2025
2024
2025
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Guarantees given to subsidiaries
\u2014
\u2014
5,044
5,185
Guarantees given to third parties
716
493
716
493
Formal standby facilities, credit lines and other commitments
38,105
35,156
38,094
35,155
38,821
35,649
43,854
40,833
At 31 December 2025, 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 December 2027. 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.
Motor finance broker commissions
As set out in Note 27, Santander UK has recognised a provision for motor finance commission payments. There continue to be significant uncertainties as to the
extent of remediation action. As such, the ultimate financial impact could be materially higher or lower than the amount provided. Based on Management's range of
scenarios, the unweighted provision for the upper range estimate would result in an increase in provision from \u00a3461m to \u00a3646m.
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 2025 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 liabilities. 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. Any potential losses, claims or expenses suffered or incurred by Santander
Financial Services plc in respect of these matters have been fully indemnified by Santander UK plc, as part of the ring-fencing transfer scheme between Santander
UK plc, Santander Financial Services plc and Banco Santander SA.
Payment Protection Insurance claim
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) brought a claim against (i) Santander Cards UK Limited (formerly 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) (SISUK and together with GECB 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.
On 25 July 2025, the Commercial Court of England and Wales handed down its judgment in relation to the claim brought by AXA France (the Judgment). It found
against SISUK in relation to AXA France\u2019s claim pursuant to an indemnity in an agency agreement entered between GECB, FICL and FACL in 2000 and novated by
GECB to SISUK in 2010. It also found GECB negligent in the sale of PPI policies, but this element of the claim was time barred to PPI policies sold in the period
between 2002 and 2005 and overlaps with the indemnity claim.
In October 2025, the Santander Entities obtained permission to appeal the findings in the Judgment relating to the application of the indemnity arising from PPI
sales occurring before the indemnity had been agreed in December 2000 (Santander Appeal). In January 2026, AXA France obtained permission to cross-appeal the
Commercial Court\u2019s rejection of AXA France\u2019s contribution claim made under the Civil Liability (Contribution) Act 1978 against Santander Cards UK Limited. If the
Santander Entities and AXA are both successful in their respective appeals, subject to any further appeal and defences which may be available to the Santander
Entities, the Court of Appeal may find that Santander Cards UK Limited has a liability in contribution to AXA France for an amount to be determined by the Court.
With respect to the Santander Appeal and AXA France\u2019s cross-appeal, there are points of legal interpretation to be resolved and, in the case of the cross-appeal,
factual points to be determined. In addition to the significant uncertainties outlined above as to whether any exposure for Santander Cards UK Limited will arise, it is
noted that any such exposure would represent a reallocation of the costs already paid and recognised by other entities within the Banco Santander SA Group. The
significant uncertainties make it difficult to predict the timing or the significance of the possible impact for the Santander UK group. With that context (and subject to
the foregoing), the Santander UK group notes that its maximum potential exposure is approximately \u00a3528m. A decision on the Santander Appeal and AXA France\u2019s
cross appeal is expected in H2 2026.
No customers have suffered loss as a consequence of the claim brought by AXA France or the Judgment, nor does it impact upon past redress paid to customers for
PPI complaints.
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, our assessment is that the litigation will not
give rise to more than \u20ac1bn of losses relating to UK&I MIFs, which would mean that the indemnity would not be called upon. However, the potential impact of the
litigation is still not certain, and therefore it is still possible that the indemnity could be called upon.
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 2025, 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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-595": { "value": "
30. CONTINGENT LIABILITIES AND COMMITMENTS
Group
Company
2025
2024
2025
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Guarantees given to subsidiaries
\u2014
\u2014
5,044
5,185
Guarantees given to third parties
716
493
716
493
Formal standby facilities, credit lines and other commitments
38,105
35,156
38,094
35,155
38,821
35,649
43,854
40,833
At 31 December 2025, 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 December 2027. 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.
Motor finance broker commissions
As set out in Note 27, Santander UK has recognised a provision for motor finance commission payments. There continue to be significant uncertainties as to the
extent of remediation action. As such, the ultimate financial impact could be materially higher or lower than the amount provided. Based on Management's range of
scenarios, the unweighted provision for the upper range estimate would result in an increase in provision from \u00a3461m to \u00a3646m.
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 2025 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 liabilities. 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. Any potential losses, claims or expenses suffered or incurred by Santander
Financial Services plc in respect of these matters have been fully indemnified by Santander UK plc, as part of the ring-fencing transfer scheme between Santander
UK plc, Santander Financial Services plc and Banco Santander SA.
Payment Protection Insurance claim
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) brought a claim against (i) Santander Cards UK Limited (formerly 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) (SISUK and together with GECB 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.
On 25 July 2025, the Commercial Court of England and Wales handed down its judgment in relation to the claim brought by AXA France (the Judgment). It found
against SISUK in relation to AXA France\u2019s claim pursuant to an indemnity in an agency agreement entered between GECB, FICL and FACL in 2000 and novated by
GECB to SISUK in 2010. It also found GECB negligent in the sale of PPI policies, but this element of the claim was time barred to PPI policies sold in the period
between 2002 and 2005 and overlaps with the indemnity claim.
In October 2025, the Santander Entities obtained permission to appeal the findings in the Judgment relating to the application of the indemnity arising from PPI
sales occurring before the indemnity had been agreed in December 2000 (Santander Appeal). In January 2026, AXA France obtained permission to cross-appeal the
Commercial Court\u2019s rejection of AXA France\u2019s contribution claim made under the Civil Liability (Contribution) Act 1978 against Santander Cards UK Limited. If the
Santander Entities and AXA are both successful in their respective appeals, subject to any further appeal and defences which may be available to the Santander
Entities, the Court of Appeal may find that Santander Cards UK Limited has a liability in contribution to AXA France for an amount to be determined by the Court.
With respect to the Santander Appeal and AXA France\u2019s cross-appeal, there are points of legal interpretation to be resolved and, in the case of the cross-appeal,
factual points to be determined. In addition to the significant uncertainties outlined above as to whether any exposure for Santander Cards UK Limited will arise, it is
noted that any such exposure would represent a reallocation of the costs already paid and recognised by other entities within the Banco Santander SA Group. The
significant uncertainties make it difficult to predict the timing or the significance of the possible impact for the Santander UK group. With that context (and subject to
the foregoing), the Santander UK group notes that its maximum potential exposure is approximately \u00a3528m. A decision on the Santander Appeal and AXA France\u2019s
cross appeal is expected in H2 2026.
No customers have suffered loss as a consequence of the claim brought by AXA France or the Judgment, nor does it impact upon past redress paid to customers for
PPI complaints.
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, our assessment is that the litigation will not
give rise to more than \u20ac1bn of losses relating to UK&I MIFs, which would mean that the indemnity would not be called upon. However, the potential impact of the
litigation is still not certain, and therefore it is still possible that the indemnity could be called upon.
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 2025, 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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-596": { "value": "
30. CONTINGENT LIABILITIES AND COMMITMENTS
Group
Company
2025
2024
2025
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Guarantees given to subsidiaries
\u2014
\u2014
5,044
5,185
Guarantees given to third parties
716
493
716
493
Formal standby facilities, credit lines and other commitments
38,105
35,156
38,094
35,155
38,821
35,649
43,854
40,833
At 31 December 2025, 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.
Motor finance broker commissions
As set out in Note 27, Santander UK has recognised a provision for motor finance commission payments. There continue to be significant uncertainties as to the
extent of remediation action. As such, the ultimate financial impact could be materially higher or lower than the amount provided. Based on Management's range of
scenarios, the unweighted provision for the upper range estimate would result in an increase in provision from \u00a3461m to \u00a3646m.
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 2025 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 liabilities. 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. Any potential losses, claims or expenses suffered or incurred by Santander
Financial Services plc in respect of these matters have been fully indemnified by Santander UK plc, as part of the ring-fencing transfer scheme between Santander
UK plc, Santander Financial Services plc and Banco Santander SA.
Payment Protection Insurance claim
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) brought a claim against (i) Santander Cards UK Limited (formerly 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) (SISUK and together with GECB 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.
On 25 July 2025, the Commercial Court of England and Wales handed down its judgment in relation to the claim brought by AXA France (the Judgment). It found
against SISUK in relation to AXA France\u2019s claim pursuant to an indemnity in an agency agreement entered between GECB, FICL and FACL in 2000 and novated by
GECB to SISUK in 2010. It also found GECB negligent in the sale of PPI policies, but this element of the claim was time barred to PPI policies sold in the period
between 2002 and 2005 and overlaps with the indemnity claim.
In October 2025, the Santander Entities obtained permission to appeal the findings in the Judgment relating to the application of the indemnity arising from PPI
sales occurring before the indemnity had been agreed in December 2000 (Santander Appeal). In January 2026, AXA France obtained permission to cross-appeal the
Commercial Court\u2019s rejection of AXA France\u2019s contribution claim made under the Civil Liability (Contribution) Act 1978 against Santander Cards UK Limited. If the
Santander Entities and AXA are both successful in their respective appeals, subject to any further appeal and defences which may be available to the Santander
Entities, the Court of Appeal may find that Santander Cards UK Limited has a liability in contribution to AXA France for an amount to be determined by the Court.
With respect to the Santander Appeal and AXA France\u2019s cross-appeal, there are points of legal interpretation to be resolved and, in the case of the cross-appeal,
factual points to be determined. In addition to the significant uncertainties outlined above as to whether any exposure for Santander Cards UK Limited will arise, it is
noted that any such exposure would represent a reallocation of the costs already paid and recognised by other entities within the Banco Santander SA Group. The
significant uncertainties make it difficult to predict the timing or the significance of the possible impact for the Santander UK group. With that context (and subject to
the foregoing), the Santander UK group notes that its maximum potential exposure is approximately \u00a3528m. A decision on the Santander Appeal and AXA France\u2019s
cross appeal is expected in H2 2026.
No customers have suffered loss as a consequence of the claim brought by AXA France or the Judgment, nor does it impact upon past redress paid to customers for
PPI complaints.
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, our assessment is that the litigation will not
give rise to more than \u20ac1bn of losses relating to UK&I MIFs, which would mean that the indemnity would not be called upon. However, the potential impact of the
litigation is still not certain, and therefore it is still possible that the indemnity could be called upon.
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 2025, 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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-598": { "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 2024, 1 January 2025 and 31 December 2025
31,051,768,866
3,105
3,105
Group and Company
2025
2024
Share premium
\u00a3m
\u00a3m
1 January 2025
5,620
5,620
Reduction
(4,501)
\u2014
31 December 2025
1,119
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.
On 18 September 2025, the High Court of Justice, Chancery Division confirmed the reduction of the share premium account of Santander UK plc. The share premium
account was reduced by \u00a34,501m and retained earnings were increased by the same amount.
32. OTHER EQUITY INSTRUMENTS
Group and Company
Interest rate
Next call date
2025
2024
%
\u00a3m
\u00a3m
AT1 securities:
- \u00a3500m Perpetual Capital Securities
6.30
March 2025
\u2014
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
400
- \u00a3500m Perpetual Capital Securities
7.63
Sept 2030
500
\u2014
1,860
1,860
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%.
In February 2025, Santander UK Group Holdings plc issued \u00a3500m 7.63% Fixed Rate Reset Perpetual AT1 Capital Securities, which were fully subscribed by the
Company\u2019s immediate parent company, Banco Santander SA, and in March 2025 redeemed the \u00a3500m 6.30% Fixed Rate Reset Perpetual AT1 Capital Securities.
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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-597": { "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 2024, 1 January 2025 and 31 December 2025
31,051,768,866
3,105
3,105
Group and Company
2025
2024
Share premium
\u00a3m
\u00a3m
1 January 2025
5,620
5,620
Reduction
(4,501)
\u2014
31 December 2025
1,119
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.
On 18 September 2025, the High Court of Justice, Chancery Division confirmed the reduction of the share premium account of Santander UK plc. The share premium
account was reduced by \u00a34,501m and retained earnings were increased by the same amount.
", "dimensions": { "concept": "ifrs-full:DisclosureOfIssuedCapitalExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-599": { "value": "
32. OTHER EQUITY INSTRUMENTS
Group and Company
Interest rate
Next call date
2025
2024
%
\u00a3m
\u00a3m
AT1 securities:
- \u00a3500m Perpetual Capital Securities
6.30
March 2025
\u2014
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
400
- \u00a3500m Perpetual Capital Securities
7.63
Sept 2030
500
\u2014
1,860
1,860
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%.
In February 2025, Santander UK Group Holdings plc issued \u00a3500m 7.63% Fixed Rate Reset Perpetual AT1 Capital Securities, which were fully subscribed by the
Company\u2019s immediate parent company, Banco Santander SA, and in March 2025 redeemed the \u00a3500m 6.30% Fixed Rate Reset Perpetual AT1 Capital Securities.
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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-600": { "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
Total
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January
35,673
2,385
1,860
88
40,006
Proceeds from issue of debt securities
9,809
\u2014
\u2014
\u2014
9,809
Repayment of debt securities
(3,917)
\u2014
\u2014
\u2014
(3,917)
Repayment of subordinated liabilities
\u2014
(302)
\u2014
\u2014
(302)
Issue of other equity instruments
\u2014
\u2014
500
\u2014
500
Repurchase of other equity instruments
\u2014
\u2014
(500)
\u2014
(500)
Principal elements of lease payments
\u2014
\u2014
\u2014
(22)
(22)
Liability-related other changes
176
(5)
\u2014
6
177
Non-cash changes:
\u2013 Unrealised foreign exchange
(546)
(54)
\u2014
\u2014
(600)
\u2013 Other changes
193
8
\u2014
\u2014
201
At 31 December
41,388
2,032
1,860
72
45,352
2024
At 1 January
33,910
2,386
1,956
111
38,363
Proceeds from issue of debt securities
8,397
\u2014
\u2014
\u2014
8,397
Repayment of debt securities
(6,539)
\u2014
\u2014
\u2014
(6,539)
Issue of other equity instruments
\u2014
\u2014
400
\u2014
400
Repurchase of other equity instruments
\u2014
\u2014
(500)
\u2014
(500)
Principal elements of lease payments
\u2014
\u2014
\u2014
(33)
(33)
Liability-related other changes
283
1
\u2014
10
294
Non-cash changes:
\u2013 Unrealised foreign exchange
(395)
3
\u2014
\u2014
(392)
\u2013 Other changes
17
(5)
4
\u2014
16
At 31 December
35,673
2,385
1,860
88
40,006
2023
At 1 January
31,531
2,332
1,956
125
35,944
Proceeds from issue of debt securities
4,208
\u2014
\u2014
\u2014
4,208
Repayment of debt securities
(2,568)
\u2014
\u2014
\u2014
(2,568)
Proceeds from issue of subordinated liabilities
\u2014
1,050
\u2014
\u2014
1,050
Repayment of subordinated liabilities
\u2014
(971)
\u2014
\u2014
(971)
Principal elements of lease payments
\u2014
\u2014
\u2014
(47)
(47)
Liability-related other changes
1,004
25
\u2014
33
1,062
Non-cash changes:
\u2013 Unrealised foreign exchange
(651)
(22)
\u2014
\u2014
(673)
\u2013 Other changes
386
(28)
\u2014
\u2014
358
At 31 December
33,910
2,386
1,956
111
38,363
Company
Balance sheet line item
Debt securities in
issue
Subordinated
liabilities
Other equity
instruments
Lease liabilities
Total
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January
31,833
2,386
1,860
79
36,158
Proceeds from issue of debt securities
8,108
\u2014
\u2014
\u2014
8,108
Repayment of debt securities
(3,917)
\u2014
\u2014
\u2014
(3,917)
Repayment of subordinated liabilities
\u2014
(302)
\u2014
\u2014
(302)
Issue of other equity instruments
\u2014
\u2014
500
\u2014
500
Repurchase of other equity instruments
\u2014
\u2014
(500)
\u2014
(500)
Principal elements of lease payments
\u2014
\u2014
\u2014
(20)
(20)
Liability-related other changes
171
(5)
\u2014
4
170
Non-cash changes:
\u2013 Unrealised foreign exchange
(546)
(54)
\u2014
\u2014
(600)
\u2013 Other changes
148
8
\u2014
\u2014
156
At 31 December
35,797
2,033
1,860
63
39,753
2024
At 1 January
31,228
2,387
1,956
100
35,671
Proceeds from issue of debt securities
7,147
\u2014
\u2014
\u2014
7,147
Repayment of debt securities
(6,439)
\u2014
\u2014
\u2014
(6,439)
Issue of other equity instruments
\u2014
\u2014
400
\u2014
400
Repurchase of other equity instruments
\u2014
\u2014
(500)
\u2014
(500)
Principal elements of lease payments
\u2014
\u2014
\u2014
(31)
(31)
Liability-related other changes
276
1
\u2014
10
287
Non-cash changes:
\u2013 Unrealised foreign exchange
(395)
3
\u2014
\u2014
(392)
\u2013 Other changes
16
(5)
4
\u2014
15
At 31 December
31,833
2,386
1,860
79
36,158
2023
At 1 January
30,721
2,336
1,956
115
35,128
Proceeds from issue of debt securities
2,158
\u2014
\u2014
\u2014
2,158
Repayment of debt securities
(2,282)
\u2014
\u2014
\u2014
(2,282)
Proceeds from issue of subordinated liabilities
\u2014
1,050
\u2014
\u2014
1,050
Repayment of subordinated liabilities
\u2014
(971)
\u2014
\u2014
(971)
Principal elements of lease payments
\u2014
\u2014
\u2014
(45)
(45)
Liability-related other changes
990
25
\u2014
30
1,045
Non-cash changes:
\u2013 Unrealised foreign exchange
(651)
(22)
\u2014
\u2014
(673)
\u2013 Other changes
292
(31)
\u2014
\u2014
261
At 31 December
31,228
2,387
1,956
100
35,671
Footnotes to the consolidated cash flow statement
Net cash flows from operating activities includes interest received of \u00a311,486m (2024: \u00a312,370m, 2023: \u00a311,395m), interest paid of \u00a36,899m (2024: \u00a38,033m,
2023: \u00a36,326m) and dividends received of \u00a3nil (2024: \u00a3nil, 2023: \u00a3nil).
Total cash outflow for leases was \u00a325m (2024: \u00a336m, 2023: \u00a350m).
Footnotes to the Company cash flow statement
Net cash flows from operating activities includes interest received of \u00a312,102m (2024: \u00a312,975m, 2023: \u00a311,828m), interest paid of \u00a36,960m (2024: \u00a37,931m,
2023: \u00a36,327m) and dividends received of \u00a3162m (2024: \u00a3240m, 2023: \u00a3420m).
Total cash outflow for leases was \u00a323m (2024: \u00a334m, 2023: \u00a347m).
", "dimensions": { "concept": "ifrs-full:DisclosureOfCashFlowStatementExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-601": { "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 2025, the carrying amount of liabilities arising from share-based payment transactions, excluding any cash element was \u00a364m (2024: \u00a324m), of
which \u00a312m had vested at 31 December 2025 (2024: \u00a31m).
a) Sharesave Schemes
The Santander UK group launched its seventeenth HM Revenue & Customs approved Sharesave invitation under Banco Santander SA sponsorship in September
2025. Sharesave invitations have been offered since 2008 under broadly similar terms. However, in 2025 only a three-year term was offered. Eligible employees
may enter into contracts to save between \u00a35 and \u00a3500 per month. 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 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.
2025
2024
Number of options
Weighted average
exercise price
Number of options
Weighted average
exercise price
\u2018000
\u00a3
\u2018000
\u00a3
Outstanding at 1 January
25,689
2.39
27,139
2.19
Granted
3,324
6.35
4,991
3.36
Exercised
(9,966)
1.90
(4,004)
2.29
Forfeited/expired
(1,554)
2.88
(2,437)
2.37
Outstanding at 31 December
17,493
3.38
25,689
2.39
Exercisable at 31 December
1,886
2.10
1,115
2.36
The weighted average share price at the date the options were exercised was \u00a37.78 (2024: \u00a33.64).
The following table summarises the range of exercise prices and weighted average remaining contractual life of the options at 31 December 2025 and 2024.
2025
2024
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
1
1.86
2
1.85
\u00a32 to \u00a33
2
2.74
2
2.71
\u00a33 to \u00a34
3
3.36
4
3.36
\u00a36 to \u00a37
3
6.35
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 \u00a30.44 (2024: \u00a30.23).
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 \u00a3660,000) or 60% (for the portion of any variable pay award greater than \u00a3660,000) is deferred over a four- or five-
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 2025, 2,815,000 shares were outstanding (2024: 3,662,718 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. 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 \u00a313.4m (2024:
\u00a35.2m).
", "dimensions": { "concept": "ifrs-full:DisclosureOfSharebasedPaymentArrangementsExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-603": { "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.
2025
2024
2023
Directors\u2019 remuneration
\u00a3
\u00a3
\u00a3
Salaries and fees
6,069,144
4,879,413
4,733,761
Performance-related payments
5,060,084
2,871,476
1,002,607
Other fixed remuneration (pension and other allowances & non-cash benefits)1
1,201,186
516,442
222,538
Total remuneration
12,330,414
8,267,331
5,958,906
2025
2024
2023
Directors' and Other Key Management Personnel compensation
\u00a3
\u00a3
\u00a3
Short-term employee benefits
24,409,887
21,742,485
18,449,360
Post-employment benefits
1,123,802
868,368
858,437
Compensation for loss of office 2
3,000
\u2014
\u2014
Total compensation
25,536,689
22,610,853
19,307,797
1 Included in Other fixed remuneration is an employer pension contribution to a defined contribution scheme of \u00a3292,540 (2024: \u00a3122,915).
2 During 2025 legal fees of \u00a33,000 were paid to one KMP in connection to loss of office. In 2024 and 2023, no compensation for loss of office was paid to Directors or Other KMPs. No payments to past directors have
been made in respect of 2025 or 2024.
In 2025, the remuneration, excluding pension contributions, of the highest paid Director, was \u00a33,422,838 (2024: \u00a33,160,709, 2023: \u00a32,640,491) of which
\u00a31,686,482 (2024: \u00a31,431,612, 2023: \u00a31,002,607) was performance related. In 2025, the accrued defined benefit pension relating to the highest paid director was
\u00a3nil (2024: \u00a3nil, 2023: \u00a3nil).
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 2025, which have been
provided for previously, amounted to \u00a3445,951 (2024: \u00a3430,904; 2023: \u00a3327,462). 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.
2025
2024
No.
\u00a3000
No.
\u00a3000
Secured loans, unsecured loans and overdrafts
At 1 January
10
996
8
1,075
Net movements
1
316
2
(79)
At 31 December
11
1,312
10
996
Deposit, bank and instant access accounts and investments
At 1 January
19
1,780
17
1,702
Net movements
2
790
2
78
At 31 December
21
2,570
19
1,780
In 2025 and 2024, 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 2025 and 2024, 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 2025 and 2024, two Directors had loans with a principal amount of \u00a3380,067 outstanding at 31 December 2025 (2024: \u00a3180,000). In 2025, four Other KMPs had
loans (2024: two), with a principal amount of \u00a3883,163 outstanding at 31 December 2025 (2024: \u00a3781,285).
In 2025 and 2024, 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 2025 and 2024, 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
2025
2024
2023
2025
2024
2023
2025
2024
2025
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Ultimate parent
(19)
(23)
(8)
321
138
414
730
587
(1,834)
(944)
Immediate parent
(6)
(7)
(7)
594
526
504
\u2014
\u2014
(12,275)
(12,392)
Fellow subsidiaries
(38)
(42)
(38)
310
228
203
62
68
(573)
(346)
Joint ventures
(287)
(258)
(183)
76
84
55
5,038
4,812
(1,485)
(1,567)
(350)
(330)
(236)
1,301
976
1,176
5,830
5,467
(16,167)
(15,249)
Company
Interest, fees and
other income received
Interest, fees and
other expenses paid
Amounts owed by
related parties
Amounts owed to
related parties
2025
2024
2023
2025
2024
2023
2025
2024
2025
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Ultimate parent
(20)
(12)
(8)
291
127
414
730
587
(1,019)
(944)
Immediate parent
(6)
(7)
(7)
594
526
504
\u2014
\u2014
(12,275)
(12,392)
Subsidiaries
(1,371)
(1,311)
(1,014)
784
2,535
1,359
31,883
30,090
(37,593)
(34,274)
Fellow subsidiaries
(34)
(37)
(33)
300
221
197
58
60
(573)
(345)
Joint ventures
\u2014
\u2014
\u2014
1
1
1
1
1
(85)
(117)
(1,431)
(1,367)
(1,062)
1,970
3,410
2,475
32,672
30,738
(51,545)
(48,072)
For more on this, see Note 11 Derivative Financial Statements, Note 13 Loans and advances to customers, Note 21 Deposit by banks, Note 22 Deposits by
customers, Note 23 Repurchase agreements - non-trading, Note 24 Other Financial liabilities at Fair Value Through Profit or Loss, Note 25 Debt Securities in Issue,
Note 26 Other liabilities, Note 29 Subordinated Liabilities and Note 32 Other Equity Instruments.
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.
Santander (CF Trustee) Limited entered into an unsecured committed liquidity facility with Santander UK plc 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.
", "dimensions": { "concept": "ifrs-full:DisclosureOfRelatedPartyExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-602": { "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.
2025
2024
2023
Directors\u2019 remuneration
\u00a3
\u00a3
\u00a3
Salaries and fees
6,069,144
4,879,413
4,733,761
Performance-related payments
5,060,084
2,871,476
1,002,607
Other fixed remuneration (pension and other allowances & non-cash benefits)1
1,201,186
516,442
222,538
Total remuneration
12,330,414
8,267,331
5,958,906
2025
2024
2023
Directors' and Other Key Management Personnel compensation
\u00a3
\u00a3
\u00a3
Short-term employee benefits
24,409,887
21,742,485
18,449,360
Post-employment benefits
1,123,802
868,368
858,437
Compensation for loss of office 2
3,000
\u2014
\u2014
Total compensation
25,536,689
22,610,853
19,307,797
1 Included in Other fixed remuneration is an employer pension contribution to a defined contribution scheme of \u00a3292,540 (2024: \u00a3122,915).
2 During 2025 legal fees of \u00a33,000 were paid to one KMP in connection to loss of office. In 2024 and 2023, no compensation for loss of office was paid to Directors or Other KMPs. No payments to past directors have
been made in respect of 2025 or 2024.
In 2025, the remuneration, excluding pension contributions, of the highest paid Director, was \u00a33,422,838 (2024: \u00a33,160,709, 2023: \u00a32,640,491) of which
\u00a31,686,482 (2024: \u00a31,431,612, 2023: \u00a31,002,607) was performance related. In 2025, the accrued defined benefit pension relating to the highest paid director was
\u00a3nil (2024: \u00a3nil, 2023: \u00a3nil).
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 2025, which have been
provided for previously, amounted to \u00a3445,951 (2024: \u00a3430,904; 2023: \u00a3327,462). 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.
2025
2024
No.
\u00a3000
No.
\u00a3000
Secured loans, unsecured loans and overdrafts
At 1 January
10
996
8
1,075
Net movements
1
316
2
(79)
At 31 December
11
1,312
10
996
Deposit, bank and instant access accounts and investments
At 1 January
19
1,780
17
1,702
Net movements
2
790
2
78
At 31 December
21
2,570
19
1,780
In 2025 and 2024, 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 2025 and 2024, 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 2025 and 2024, two Directors had loans with a principal amount of \u00a3380,067 outstanding at 31 December 2025 (2024: \u00a3180,000). In 2025, four Other KMPs had
loans (2024: two), with a principal amount of \u00a3883,163 outstanding at 31 December 2025 (2024: \u00a3781,285).
In 2025 and 2024, 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 2025 and 2024, no Director had a material interest in any contract of significance with Santander UK other than a service contract
or appointment letter, as appropriate.
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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 2025 and 2024 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 2025, 2024 and 2023.
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 2025 and 2024, 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
2025
2024
Fair value
Carrying
Fair value
Carrying
Level 1
Level 2
Level 3
Total
value
Level 1
Level 2
Level 3
Total
value
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Loans and advances to customers
\u2014
\u2014
203,426
203,426
202,609
\u2014
\u2014
198,376
198,376
199,408
Loans and advances to banks
\u2014
1,048
\u2014
1,048
1,048
\u2014
1,032
\u2014
1,032
1,032
Reverse repurchase agreements - non-trading
\u2014
17,696
\u2014
17,696
17,678
\u2014
10,342
\u2014
10,342
10,338
Other financial assets at amortised cost
3,747
\u2014
\u2014
3,747
3,987
3,190
\u2014
\u2014
3,190
3,408
3,747
18,744
203,426
225,917
225,322
3,190
11,374
198,376
212,940
214,186
Liabilities
Deposits by customers
\u2014
117
187,849
187,966
187,300
\u2014
185
180,282
180,467
180,967
Deposits by banks
\u2014
6,630
\u2014
6,630
6,628
\u2014
13,934
39
13,973
13,993
Repurchase agreements - non-trading
\u2014
9,039
\u2014
9,039
9,029
\u2014
8,622
\u2014
8,622
8,617
Debt securities in issue
25,874
14,618
1,421
41,913
41,388
21,173
12,910
1,771
35,854
35,673
Subordinated liabilities
1,065
1,161
187
2,413
2,032
1,129
10
1,622
2,761
2,385
26,939
31,565
189,457
247,961
246,377
22,302
35,661
183,714
241,677
241,635
Company
2025
2024
Fair value
Carrying
Fair value
Carrying
Level 1
Level 2
Level 3
Total
value
Level 1
Level 2
Level 3
Total
value
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Loans and advances to customers
\u2014
\u2014
223,075
223,075
222,467
\u2014
\u2014
216,851
216,851
217,780
Loans and advances to banks
\u2014
990
\u2014
990
990
\u2014
926
\u2014
926
926
Reverse repurchase agreements - non-trading
\u2014
17,696
\u2014
17,696
17,678
\u2014
10,342
\u2014
10,342
10,338
Other financial assets at amortised cost
3,747
1,593
\u2014
5,340
5,754
3,190
1,977
\u2014
5,167
5,206
3,747
20,279
223,075
247,101
246,889
3,190
13,245
216,851
233,286
234,250
Liabilities
Deposits by customers
\u2014
17
212,293
212,310
211,643
\u2014
185
200,530
200,715
201,215
Deposits by banks
\u2014
11,127
\u2014
11,127
11,126
\u2014
13,922
5,579
19,501
19,521
Repurchase agreements - non-trading
\u2014
9,039
\u2014
9,039
9,029
\u2014
8,621
\u2014
8,621
8,617
Debt securities in issue
20,968
14,480
859
36,307
35,797
17,870
12,846
1,379
32,095
31,833
Subordinated liabilities
1,065
1,161
187
2,413
2,033
1,129
10
1,598
2,737
2,386
22,033
35,824
213,339
271,196
269,628
18,999
35,584
209,086
263,669
263,572
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 2025 and 31 December 2024,
analysed by their levels in the fair value hierarchy - Level 1, Level 2 and Level 3.
Group
2025
2024
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
671
\u2014
671
\u2014
978
\u2014
978
A
Interest rate contracts
\u2014
1,078
\u2014
1,078
\u2014
1,675
\u2014
1,675
A & C
Inflation rate contracts
\u2014
85
\u2014
85
\u2014
70
\u2014
70
A
Equity and credit contracts
\u2014
64
30
94
\u2014
89
35
124
B & D
Netting
\u2014
(1,058)
\u2014
(1,058)
\u2014
(1,643)
\u2014
(1,643)
\u2014
840
30
870
\u2014
1,169
35
1,204
Other financial assets at FVTPL
Loans and advances to customers
\u2014
\u2014
40
40
\u2014
\u2014
44
44
A
Debt securities and other debt
instruments
\u2014
\u2014
24
24
\u2014
56
36
92
A, B & D
\u2014
\u2014
64
64
\u2014
56
80
136
Financial assets at FVOCI
Debt securities
5,017
199
\u2014
5,216
8,805
201
34
9,040
D
5,017
199
\u2014
5,216
8,805
201
34
9,040
Total assets at fair value
5,017
1,039
94
6,150
8,805
1,426
149
10,380
Liabilities
Derivative financial instruments
Exchange rate contracts
\u2014
512
\u2014
512
\u2014
430
\u2014
430
A
Interest rate contracts
\u2014
1,182
\u2014
1,182
\u2014
1,894
\u2014
1,894
A & C
Inflation rate contracts
\u2014
30
\u2014
30
\u2014
\u2014
\u2014
\u2014
A
Equity and credit contracts
\u2014
8
13
21
\u2014
7
14
21
B & D
Netting
\u2014
(1,058)
\u2014
(1,058)
\u2014
(1,643)
\u2014
(1,643)
\u2014
674
13
687
\u2014
688
14
702
Other financial liabilities at FVTPL
Debt securities in issue
\u2014
331
\u2014
331
\u2014
355
\u2014
355
A
Structured deposits
\u2014
824
\u2014
824
\u2014
605
\u2014
605
A
Zero Amortising Guaranteed Notes
\u2014
95
\u2014
95
\u2014
95
\u2014
95
D
\u2014
1,250
\u2014
1,250
\u2014
1,055
\u2014
1,055
Total liabilities at fair value
\u2014
1,924
13
1,937
\u2014
1,743
14
1,757
Company
2025
2024
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
771
\u2014
771
\u2014
1,243
\u2014
1,243
A
Interest rate contracts
\u2014
1,075
\u2014
1,075
\u2014
1,685
3
1,688
A & C
Inflation rate contracts
\u2014
85
\u2014
85
\u2014
70
\u2014
70
A
Equity and credit contracts
\u2014
64
30
94
\u2014
89
35
124
B & D
Netting
\u2014
(1,058)
\u2014
(1,058)
\u2014
(1,643)
\u2014
(1,643)
\u2014
937
30
967
\u2014
1,444
38
1,482
Other financial assets at FVTPL
Loans and advances to customers
\u2014
\u2014
40
40
\u2014
\u2014
44
44
A
Debt securities and other debt
instruments
\u2014
\u2014
\u2014
\u2014
\u2014
56
\u2014
56
C
\u2014
\u2014
40
40
\u2014
56
44
100
Financial assets at FVOCI
Debt securities
5,017
199
\u2014
5,216
8,805
201
34
9,040
D
5,017
199
\u2014
5,216
8,805
201
34
9,040
Total assets at fair value
5,017
1,136
70
6,223
8,805
1,701
116
10,622
Liabilities
Derivative financial instruments
Exchange rate contracts
\u2014
836
\u2014
836
\u2014
456
\u2014
456
A
Interest rate contracts
\u2014
1,235
1,068
2,303
\u2014
1,933
1,840
3,773
A & C
Inflation rate contracts
\u2014
30
\u2014
30
\u2014
\u2014
\u2014
\u2014
A
Equity and credit contracts
\u2014
8
13
21
\u2014
7
14
21
B
Netting
\u2014
(1,058)
\u2014
(1,058)
\u2014
(1,643)
\u2014
(1,643)
\u2014
1,051
1,081
2,132
\u2014
753
1,854
2,607
Other financial liabilities at FVTPL
Debt securities in issue
\u2014
331
\u2014
331
\u2014
355
\u2014
355
A
Structured deposits
\u2014
824
\u2014
824
\u2014
605
\u2014
605
A
Zero Amortising Guaranteed Notes
\u2014
95
\u2014
95
\u2014
95
\u2014
95
D
\u2014
1,250
\u2014
1,250
\u2014
1,055
\u2014
1,055
Total liabilities at fair value
\u2014
2,301
1,081
3,382
\u2014
1,808
1,854
3,662
Transfers between levels 1 and 2 of the fair value hierarchy
In 2025 and 2024, there were no significant transfers of financial instruments between levels 1 and 2 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
2025
2024
\u00a3m
\u00a3m
Risk-related:
- Bid-offer and trade specific adjustments
9
6
- Uncertainty
4
4
- Credit risk adjustment
1
1
- Funding fair value adjustment
1
\u2014
15
11
Company
2025
2024
\u00a3m
\u00a3m
Risk-related:
- Bid-offer and trade specific adjustments
9
8
- Uncertainty
4
4
- Credit risk adjustment
1
1
- Funding fair value adjustment
1
\u2014
15
13
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)
2025
2024
2025
2024
2023
Balance sheet line item
Category
Financial instrument product type
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
1. Derivative assets
Equity and credit contracts
Reversionary property interests
30
35
1
6
12
2. FVTPL assets
Loans and advances to customers
Roll-up mortgage portfolio
20
22
(1)
(1)
(2)
3. FVTPL assets
Loans and advances to customers
Other loans
20
22
2
\u2014
4
4. FVTPL assets
Debt securities
Reversionary property securities
24
36
\u2014
2
(3)
5. FVOCI assets
Debt Instruments
Other securities
\u2014
34
\u2014
\u2014
\u2014
94
149
2
7
11
Other Level 3 assets
\u2014
\u2014
\u2014
\u2014
(1)
Other Level 3 liabilities
(13)
(14)
1
(5)
(2)
Total net assets
81
135
Total income/(expense)
3
2
8
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.
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
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Financial liabilities
Derivative financial instruments
\u2014
77
104
452
134
767
Other financial liabilities at fair value through profit or loss
\u2014
172
114
707
438
1,431
Deposits by customers
177,747
4,072
2,818
2,612
238
187,487
Deposits by banks
696
726
969
3,299
1,668
7,358
Repurchase agreements \u2013 non trading
\u2014
6,584
2,524
\u2014
\u2014
9,108
Debt securities in issue
\u2014
6,677
3,166
27,747
11,462
49,052
Subordinated liabilities
\u2014
33
98
621
2,623
3,375
Lease liabilities
\u2014
\u2014
21
46
14
81
Total financial liabilities
178,443
18,341
9,814
35,484
16,577
258,659
Off-balance sheet commitments given
3,757
22,766
1,330
7,602
3,366
38,821
2024
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
Company
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
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Financial liabilities
Derivative financial instruments
\u2014
121
120
720
1,657
2,618
Other financial liabilities at fair value through profit or loss
\u2014
172
114
707
438
1,431
Deposits by customers
200,560
4,350
2,487
4,293
247
211,937
Deposits by banks
6,011
632
719
2,764
1,667
11,793
Repurchase agreements \u2013 non trading
\u2014
6,584
2,524
\u2014
\u2014
9,108
Debt securities in issue
\u2014
6,628
2,748
26,712
5,284
41,372
Subordinated liabilities
\u2014
24
71
540
2,522
3,157
Lease liabilities
\u2014
\u2014
19
42
10
71
Total financial liabilities
206,571
18,511
8,802
35,778
11,825
281,487
Off-balance sheet commitments given
8,328
22,775
1,364
8,021
3,366
43,854
2024
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
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.", "dimensions": { "concept": "ifrs-full:DisclosureOfFairValueMeasurementExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-606": { "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 2025 and 2024 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 2025, 2024 and 2023.
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 2025 and 2024, 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
2025
2024
Fair value
Carrying
Fair value
Carrying
Level 1
Level 2
Level 3
Total
value
Level 1
Level 2
Level 3
Total
value
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Loans and advances to customers
\u2014
\u2014
203,426
203,426
202,609
\u2014
\u2014
198,376
198,376
199,408
Loans and advances to banks
\u2014
1,048
\u2014
1,048
1,048
\u2014
1,032
\u2014
1,032
1,032
Reverse repurchase agreements - non-trading
\u2014
17,696
\u2014
17,696
17,678
\u2014
10,342
\u2014
10,342
10,338
Other financial assets at amortised cost
3,747
\u2014
\u2014
3,747
3,987
3,190
\u2014
\u2014
3,190
3,408
3,747
18,744
203,426
225,917
225,322
3,190
11,374
198,376
212,940
214,186
Liabilities
Deposits by customers
\u2014
117
187,849
187,966
187,300
\u2014
185
180,282
180,467
180,967
Deposits by banks
\u2014
6,630
\u2014
6,630
6,628
\u2014
13,934
39
13,973
13,993
Repurchase agreements - non-trading
\u2014
9,039
\u2014
9,039
9,029
\u2014
8,622
\u2014
8,622
8,617
Debt securities in issue
25,874
14,618
1,421
41,913
41,388
21,173
12,910
1,771
35,854
35,673
Subordinated liabilities
1,065
1,161
187
2,413
2,032
1,129
10
1,622
2,761
2,385
26,939
31,565
189,457
247,961
246,377
22,302
35,661
183,714
241,677
241,635
Company
2025
2024
Fair value
Carrying
Fair value
Carrying
Level 1
Level 2
Level 3
Total
value
Level 1
Level 2
Level 3
Total
value
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Loans and advances to customers
\u2014
\u2014
223,075
223,075
222,467
\u2014
\u2014
216,851
216,851
217,780
Loans and advances to banks
\u2014
990
\u2014
990
990
\u2014
926
\u2014
926
926
Reverse repurchase agreements - non-trading
\u2014
17,696
\u2014
17,696
17,678
\u2014
10,342
\u2014
10,342
10,338
Other financial assets at amortised cost
3,747
1,593
\u2014
5,340
5,754
3,190
1,977
\u2014
5,167
5,206
3,747
20,279
223,075
247,101
246,889
3,190
13,245
216,851
233,286
234,250
Liabilities
Deposits by customers
\u2014
17
212,293
212,310
211,643
\u2014
185
200,530
200,715
201,215
Deposits by banks
\u2014
11,127
\u2014
11,127
11,126
\u2014
13,922
5,579
19,501
19,521
Repurchase agreements - non-trading
\u2014
9,039
\u2014
9,039
9,029
\u2014
8,621
\u2014
8,621
8,617
Debt securities in issue
20,968
14,480
859
36,307
35,797
17,870
12,846
1,379
32,095
31,833
Subordinated liabilities
1,065
1,161
187
2,413
2,033
1,129
10
1,598
2,737
2,386
22,033
35,824
213,339
271,196
269,628
18,999
35,584
209,086
263,669
263,572
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 2025 and 31 December 2024,
analysed by their levels in the fair value hierarchy - Level 1, Level 2 and Level 3.
Group
2025
2024
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
671
\u2014
671
\u2014
978
\u2014
978
A
Interest rate contracts
\u2014
1,078
\u2014
1,078
\u2014
1,675
\u2014
1,675
A & C
Inflation rate contracts
\u2014
85
\u2014
85
\u2014
70
\u2014
70
A
Equity and credit contracts
\u2014
64
30
94
\u2014
89
35
124
B & D
Netting
\u2014
(1,058)
\u2014
(1,058)
\u2014
(1,643)
\u2014
(1,643)
\u2014
840
30
870
\u2014
1,169
35
1,204
Other financial assets at FVTPL
Loans and advances to customers
\u2014
\u2014
40
40
\u2014
\u2014
44
44
A
Debt securities and other debt
instruments
\u2014
\u2014
24
24
\u2014
56
36
92
A, B & D
\u2014
\u2014
64
64
\u2014
56
80
136
Financial assets at FVOCI
Debt securities
5,017
199
\u2014
5,216
8,805
201
34
9,040
D
5,017
199
\u2014
5,216
8,805
201
34
9,040
Total assets at fair value
5,017
1,039
94
6,150
8,805
1,426
149
10,380
Liabilities
Derivative financial instruments
Exchange rate contracts
\u2014
512
\u2014
512
\u2014
430
\u2014
430
A
Interest rate contracts
\u2014
1,182
\u2014
1,182
\u2014
1,894
\u2014
1,894
A & C
Inflation rate contracts
\u2014
30
\u2014
30
\u2014
\u2014
\u2014
\u2014
A
Equity and credit contracts
\u2014
8
13
21
\u2014
7
14
21
B & D
Netting
\u2014
(1,058)
\u2014
(1,058)
\u2014
(1,643)
\u2014
(1,643)
\u2014
674
13
687
\u2014
688
14
702
Other financial liabilities at FVTPL
Debt securities in issue
\u2014
331
\u2014
331
\u2014
355
\u2014
355
A
Structured deposits
\u2014
824
\u2014
824
\u2014
605
\u2014
605
A
Zero Amortising Guaranteed Notes
\u2014
95
\u2014
95
\u2014
95
\u2014
95
D
\u2014
1,250
\u2014
1,250
\u2014
1,055
\u2014
1,055
Total liabilities at fair value
\u2014
1,924
13
1,937
\u2014
1,743
14
1,757
Company
2025
2024
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
771
\u2014
771
\u2014
1,243
\u2014
1,243
A
Interest rate contracts
\u2014
1,075
\u2014
1,075
\u2014
1,685
3
1,688
A & C
Inflation rate contracts
\u2014
85
\u2014
85
\u2014
70
\u2014
70
A
Equity and credit contracts
\u2014
64
30
94
\u2014
89
35
124
B & D
Netting
\u2014
(1,058)
\u2014
(1,058)
\u2014
(1,643)
\u2014
(1,643)
\u2014
937
30
967
\u2014
1,444
38
1,482
Other financial assets at FVTPL
Loans and advances to customers
\u2014
\u2014
40
40
\u2014
\u2014
44
44
A
Debt securities and other debt
instruments
\u2014
\u2014
\u2014
\u2014
\u2014
56
\u2014
56
C
\u2014
\u2014
40
40
\u2014
56
44
100
Financial assets at FVOCI
Debt securities
5,017
199
\u2014
5,216
8,805
201
34
9,040
D
5,017
199
\u2014
5,216
8,805
201
34
9,040
Total assets at fair value
5,017
1,136
70
6,223
8,805
1,701
116
10,622
Liabilities
Derivative financial instruments
Exchange rate contracts
\u2014
836
\u2014
836
\u2014
456
\u2014
456
A
Interest rate contracts
\u2014
1,235
1,068
2,303
\u2014
1,933
1,840
3,773
A & C
Inflation rate contracts
\u2014
30
\u2014
30
\u2014
\u2014
\u2014
\u2014
A
Equity and credit contracts
\u2014
8
13
21
\u2014
7
14
21
B
Netting
\u2014
(1,058)
\u2014
(1,058)
\u2014
(1,643)
\u2014
(1,643)
\u2014
1,051
1,081
2,132
\u2014
753
1,854
2,607
Other financial liabilities at FVTPL
Debt securities in issue
\u2014
331
\u2014
331
\u2014
355
\u2014
355
A
Structured deposits
\u2014
824
\u2014
824
\u2014
605
\u2014
605
A
Zero Amortising Guaranteed Notes
\u2014
95
\u2014
95
\u2014
95
\u2014
95
D
\u2014
1,250
\u2014
1,250
\u2014
1,055
\u2014
1,055
Total liabilities at fair value
\u2014
2,301
1,081
3,382
\u2014
1,808
1,854
3,662
Transfers between levels 1 and 2 of the fair value hierarchy
In 2025 and 2024, there were no significant transfers of financial instruments between levels 1 and 2 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
2025
2024
\u00a3m
\u00a3m
Risk-related:
- Bid-offer and trade specific adjustments
9
6
- Uncertainty
4
4
- Credit risk adjustment
1
1
- Funding fair value adjustment
1
\u2014
15
11
Company
2025
2024
\u00a3m
\u00a3m
Risk-related:
- Bid-offer and trade specific adjustments
9
8
- Uncertainty
4
4
- Credit risk adjustment
1
1
- Funding fair value adjustment
1
\u2014
15
13
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.
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
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Financial liabilities
Derivative financial instruments
\u2014
77
104
452
134
767
Other financial liabilities at fair value through profit or loss
\u2014
172
114
707
438
1,431
Deposits by customers
177,747
4,072
2,818
2,612
238
187,487
Deposits by banks
696
726
969
3,299
1,668
7,358
Repurchase agreements \u2013 non trading
\u2014
6,584
2,524
\u2014
\u2014
9,108
Debt securities in issue
\u2014
6,677
3,166
27,747
11,462
49,052
Subordinated liabilities
\u2014
33
98
621
2,623
3,375
Lease liabilities
\u2014
\u2014
21
46
14
81
Total financial liabilities
178,443
18,341
9,814
35,484
16,577
258,659
Off-balance sheet commitments given
3,757
22,766
1,330
7,602
3,366
38,821
2024
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
Company
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
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Financial liabilities
Derivative financial instruments
\u2014
121
120
720
1,657
2,618
Other financial liabilities at fair value through profit or loss
\u2014
172
114
707
438
1,431
Deposits by customers
200,560
4,350
2,487
4,293
247
211,937
Deposits by banks
6,011
632
719
2,764
1,667
11,793
Repurchase agreements \u2013 non trading
\u2014
6,584
2,524
\u2014
\u2014
9,108
Debt securities in issue
\u2014
6,628
2,748
26,712
5,284
41,372
Subordinated liabilities
\u2014
24
71
540
2,522
3,157
Lease liabilities
\u2014
\u2014
19
42
10
71
Total financial liabilities
206,571
18,511
8,802
35,778
11,825
281,487
Off-balance sheet commitments given
8,328
22,775
1,364
8,021
3,366
43,854
2024
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
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.", "dimensions": { "concept": "ifrs-full:DisclosureOfFairValueOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-608": { "value": "
Group
2025
2024
Fair value
Carrying
Fair value
Carrying
Level 1
Level 2
Level 3
Total
value
Level 1
Level 2
Level 3
Total
value
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Loans and advances to customers
\u2014
\u2014
203,426
203,426
202,609
\u2014
\u2014
198,376
198,376
199,408
Loans and advances to banks
\u2014
1,048
\u2014
1,048
1,048
\u2014
1,032
\u2014
1,032
1,032
Reverse repurchase agreements - non-trading
\u2014
17,696
\u2014
17,696
17,678
\u2014
10,342
\u2014
10,342
10,338
Other financial assets at amortised cost
3,747
\u2014
\u2014
3,747
3,987
3,190
\u2014
\u2014
3,190
3,408
3,747
18,744
203,426
225,917
225,322
3,190
11,374
198,376
212,940
214,186
Liabilities
Deposits by customers
\u2014
117
187,849
187,966
187,300
\u2014
185
180,282
180,467
180,967
Deposits by banks
\u2014
6,630
\u2014
6,630
6,628
\u2014
13,934
39
13,973
13,993
Repurchase agreements - non-trading
\u2014
9,039
\u2014
9,039
9,029
\u2014
8,622
\u2014
8,622
8,617
Debt securities in issue
25,874
14,618
1,421
41,913
41,388
21,173
12,910
1,771
35,854
35,673
Subordinated liabilities
1,065
1,161
187
2,413
2,032
1,129
10
1,622
2,761
2,385
26,939
31,565
189,457
247,961
246,377
22,302
35,661
183,714
241,677
241,635
Company
2025
2024
Fair value
Carrying
Fair value
Carrying
Level 1
Level 2
Level 3
Total
value
Level 1
Level 2
Level 3
Total
value
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Loans and advances to customers
\u2014
\u2014
223,075
223,075
222,467
\u2014
\u2014
216,851
216,851
217,780
Loans and advances to banks
\u2014
990
\u2014
990
990
\u2014
926
\u2014
926
926
Reverse repurchase agreements - non-trading
\u2014
17,696
\u2014
17,696
17,678
\u2014
10,342
\u2014
10,342
10,338
Other financial assets at amortised cost
3,747
1,593
\u2014
5,340
5,754
3,190
1,977
\u2014
5,167
5,206
3,747
20,279
223,075
247,101
246,889
3,190
13,245
216,851
233,286
234,250
Liabilities
Deposits by customers
\u2014
17
212,293
212,310
211,643
\u2014
185
200,530
200,715
201,215
Deposits by banks
\u2014
11,127
\u2014
11,127
11,126
\u2014
13,922
5,579
19,501
19,521
Repurchase agreements - non-trading
\u2014
9,039
\u2014
9,039
9,029
\u2014
8,621
\u2014
8,621
8,617
Debt securities in issue
20,968
14,480
859
36,307
35,797
17,870
12,846
1,379
32,095
31,833
Subordinated liabilities
1,065
1,161
187
2,413
2,033
1,129
10
1,598
2,737
2,386
22,033
35,824
213,339
271,196
269,628
18,999
35,584
209,086
263,669
263,572
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
arrangements2
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
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Derivative financial assets
1,890
(1,058)
832
(415)
(370)
47
38
870
Reverse repurchase, securities borrowing & similar
agreements:
\u2013 Amortised cost
20,967
(3,289)
17,678
(1,167)
(16,511)
\u2014
\u2014
17,678
Loans and advances to customers and banks\u2074
3,959
(588)
3,371
\u2014
\u2014
3,371
200,286
203,657
26,816
(4,935)
21,881
(1,582)
(16,881)
3,418
200,324
222,205
Liabilities
Derivative financial liabilities
1,731
(1,058)
673
(415)
(182)
76
14
687
Repurchase, securities lending & similar agreements:
\u2013 Amortised cost
12,318
(3,289)
9,029
(1,167)
(7,862)
\u2014
\u2014
9,029
Deposits by customers and banks\u2074
588
(588)
\u2014
\u2014
\u2014
\u2014
193,928
193,928
14,637
(4,935)
9,702
(1,582)
(8,044)
76
193,942
203,644
2024
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\u2074
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\u2074
635
(635)
\u2014
\u2014
\u2014
\u2014
194,960
194,960
17,414
(8,115)
9,299
(470)
(8,681)
148
194,980
204,279
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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-609": { "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 2025 and 2024:
Group
Assets
Liabilities
Derivatives
Other
financial
assets at
FVTPL
Financial
assets at
FVOCI
Total
Derivatives
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January 2025
35
80
34
149
(14)
(14)
Total gains/(losses) recognised:
Fair value movements 1
1
1
\u2014
2
1
1
Transfers out
\u2014
\u2014
(32)
(32)
\u2014
\u2014
Settlements
(6)
(17)
(2)
(25)
\u2014
\u2014
At 31 December 2025
30
64
\u2014
94
(13)
(13)
Gains recognised in profit or loss/other comprehensive income relating to assets and
liabilities held at the end of the year 1
1
1
\u2014
2
1
1
At 1 January 2024
36
95
\u2014
131
(10)
(10)
Total gains/(losses) recognised:
Fair value movements 1
6
1
\u2014
7
(5)
(5)
Purchases
\u2014
\u2014
34
34
\u2014
\u2014
Settlements
(7)
(16)
\u2014
(23)
1
1
At 31 December 2024
35
80
34
149
(14)
(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)
(5)
1 Fair value movements relating to derivatives and other financial assets at FVTPL are recognised in other operating income in the income statement.
", "dimensions": { "concept": "ifrs-full:DisclosureOfEffectOfChangesInForeignExchangeRatesExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-611": { "value": "
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
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Financial liabilities
Derivative financial instruments
\u2014
77
104
452
134
767
Other financial liabilities at fair value through profit or loss
\u2014
172
114
707
438
1,431
Deposits by customers
177,747
4,072
2,818
2,612
238
187,487
Deposits by banks
696
726
969
3,299
1,668
7,358
Repurchase agreements \u2013 non trading
\u2014
6,584
2,524
\u2014
\u2014
9,108
Debt securities in issue
\u2014
6,677
3,166
27,747
11,462
49,052
Subordinated liabilities
\u2014
33
98
621
2,623
3,375
Lease liabilities
\u2014
\u2014
21
46
14
81
Total financial liabilities
178,443
18,341
9,814
35,484
16,577
258,659
Off-balance sheet commitments given
3,757
22,766
1,330
7,602
3,366
38,821
2024
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
Company
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
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Financial liabilities
Derivative financial instruments
\u2014
121
120
720
1,657
2,618
Other financial liabilities at fair value through profit or loss
\u2014
172
114
707
438
1,431
Deposits by customers
200,560
4,350
2,487
4,293
247
211,937
Deposits by banks
6,011
632
719
2,764
1,667
11,793
Repurchase agreements \u2013 non trading
\u2014
6,584
2,524
\u2014
\u2014
9,108
Debt securities in issue
\u2014
6,628
2,748
26,712
5,284
41,372
Subordinated liabilities
\u2014
24
71
540
2,522
3,157
Lease liabilities
\u2014
\u2014
19
42
10
71
Total financial liabilities
206,571
18,511
8,802
35,778
11,825
281,487
Off-balance sheet commitments given
8,328
22,775
1,364
8,021
3,366
43,854
2024
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
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.", "dimensions": { "concept": "ifrs-full:MaturityAnalysisForNonderivativeFinancialLiabilities", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-610": { "value": "
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
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Financial liabilities
Derivative financial instruments
\u2014
77
104
452
134
767
Other financial liabilities at fair value through profit or loss
\u2014
172
114
707
438
1,431
Deposits by customers
177,747
4,072
2,818
2,612
238
187,487
Deposits by banks
696
726
969
3,299
1,668
7,358
Repurchase agreements \u2013 non trading
\u2014
6,584
2,524
\u2014
\u2014
9,108
Debt securities in issue
\u2014
6,677
3,166
27,747
11,462
49,052
Subordinated liabilities
\u2014
33
98
621
2,623
3,375
Lease liabilities
\u2014
\u2014
21
46
14
81
Total financial liabilities
178,443
18,341
9,814
35,484
16,577
258,659
Off-balance sheet commitments given
3,757
22,766
1,330
7,602
3,366
38,821
2024
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
Company
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
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Financial liabilities
Derivative financial instruments
\u2014
121
120
720
1,657
2,618
Other financial liabilities at fair value through profit or loss
\u2014
172
114
707
438
1,431
Deposits by customers
200,560
4,350
2,487
4,293
247
211,937
Deposits by banks
6,011
632
719
2,764
1,667
11,793
Repurchase agreements \u2013 non trading
\u2014
6,584
2,524
\u2014
\u2014
9,108
Debt securities in issue
\u2014
6,628
2,748
26,712
5,284
41,372
Subordinated liabilities
\u2014
24
71
540
2,522
3,157
Lease liabilities
\u2014
\u2014
19
42
10
71
Total financial liabilities
206,571
18,511
8,802
35,778
11,825
281,487
Off-balance sheet commitments given
8,328
22,775
1,364
8,021
3,366
43,854
2024
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
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.", "dimensions": { "concept": "ifrs-full:MaturityAnalysisForDerivativeFinancialLiabilities", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-612": { "value": "
40. ASSETS HELD FOR SALE
Sale of property
The\u00a0sale of the whole of Santander House, Milton Keynes is expected to complete in 2026. 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 2025 and 31 December 2024, assets held for sale comprised:
2025
2024
\u00a3m
\u00a3m
Assets
Property, plant and equipment
18
12
18
12
", "dimensions": { "concept": "ifrs-full:DisclosureOfNoncurrentAssetsHeldForSaleAndDiscontinuedOperationsExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-613": { "value": "
Sale of property
The\u00a0sale of the whole of Santander House, Milton Keynes is expected to complete in 2026. 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 2025 and 31 December 2024, assets held for sale comprised:
2025
2024
\u00a3m
\u00a3m
Assets
Property, plant and equipment
18
12
18
12
", "dimensions": { "concept": "ifrs-full:DisclosureOfNoncurrentAssetsOrDisposalGroupsClassifiedAsHeldForSaleExplanatory", "language": "en", "entity": "scheme:PTCQB104N23FMNK2RZ28", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-614": { "value": "
41. EVENTS AFTER THE BALANCE SHEET DATE
There have been no significant events between 31 December 2025 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": "2025-01-01T00:00:00/2026-01-01T00:00:00" } } } }