Santander is planning to separate its UK car finance division from its main banking operations, a move that could signal the Spanish lender's potential exit from Britain.
The bank is seeking approval for this shake-up amid ongoing litigation related to car loan mis-selling.
The car finance unit has been embroiled in scandal following a landmark court ruling on "secret" commissions paid to car salesmen.
City analysts suggest this separation could make the UK business more attractive to potential buyers.
The move comes as Santander has reportedly been exploring options to exit the British market entirely.
By isolating the scandal-hit car finance unit from its main banking operations, the Spanish lender could facilitate a smoother sale process.
This restructuring represents a significant step in what appears to be Santander's broader strategy regarding its UK presence.
City analysts suggest this separation could make the UK business more attractive to potential buyers
PABenjamin Toms, of RBC Capital Markets, said: "Shifting of the consumer finance business out of the UK subsidiary could be an important step in this sale process.
"Given the ongoing litigation in the motor finance space, removing this product from the equation, will likely help with the marketability of the Santander UK asset."
Gary Greenwood, of Shore Capital, added: "It’s difficult to find buyers when you’ve got an unquantifiable liability. It’s unlikely that a buyer would take on that sort of risk."
The analyst's comments highlight the strategic significance of Santander's restructuring plans. This separation could be viewed as preparing the ground for a potential full withdrawal from the UK market.
Financial experts are closely monitoring these developments as they could signal major changes in Britain's banking landscape
GETTYFinancial experts are closely monitoring these developments as they could signal major changes in Britain's banking landscape.
The legal troubles stem from a court ruling that declared "secret" commissions paid to car salesmen by drivers were unlawful.
This landmark decision has triggered a wave of possible litigation against various lenders, including Santander.
The car loan mis-selling case has become a significant concern for financial institutions operating in the UK's motor finance sector.
The ruling has opened the door for potential compensation claims from affected customers.
Santander has already set aside millions of pounds to cover potential compensation costs related to the scandal.
This financial provision reflects the seriousness of the situation and the bank's assessment of possible liabilities.
Customers will be looking to see how the merger will impact them going forward GETTYOther lenders in the sector have taken similar precautionary measures as the industry braces for the financial impact of the mis-selling case.
The scale of provisions indicates the potentially significant costs facing financial institutions involved in car finance.
These regulatory concerns exist alongside worries about the ongoing car finance case. The Spanish bank appears to be reassessing its position in the UK banking sector amid these challenges.
The combination of regulatory frustrations and legal complications has seemingly prompted Santander to consider strategic alternatives for its British operations.
Despite these concerns, Santander maintains its commitment to Britain, with a spokesman stating: "The UK is a core market for Santander, and this has not changed."
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