The long-awaited merger between Santander and Abbey, Alliance & Leicester and Bradford & Bingley is finally beginning to take shape; although the banks remain tight-lipped about the future of their leasing divisions, Jason T Hesse discovers.
This month marks the first anniversary of Santander’s acquisition of Alliance & Leicester. One year on, the Spanish bank, which acquired Abbey in 2004 and Bradford & Bingley last September, is still working on a strategy to try to bring the banks’ leasing arms together.
While a spokesperson for Santander would not confirm what shape the leasing businesses would eventually take, Leasing Life can confirm that, before the end of the year, each banks’ leasing arm will be adopting the Santander brand.
“All corporate and commercial banking operations, which include leasing, will be changing brand at some stage this year,” said the spokesperson.
“Furthermore, we are very committed to providing asset finance to businesses in the UK. It is a key part of our full banking service; and, going forward, we are looking to broaden out the sectors in which we provide this support.”
The spokesperson would not say into which new sectors Santander’s leasing arms would try to move, but conceded that at the moment the bank was “very focused” on the commercial vehicle and bus and coach sectors, and that its strategy was to reach out to additional areas.
Last April, Alliance & Leicester told Leasing Life that it wanted to offer finance to “a wider range of businesses”, particularly in the SME sector, but that it would cease providing finance to independent leasing companies.
“We used to provide finance to contract hire companies, which then offered fleet services to individual businesses,” said a spokesperson for Alliance & Leicester.
“But this meant the end-customer was receiving finance from Alliance & Leicester without knowing that we were the finance company, because they were dealing with these middle-men who were effectively almost like brokers.”
This change is understood to be in line with Santander’s business model.
It is not known whether the integration of the banks into Santander will result in a reduction of staff at the leasing arms, either.
Six months ago, Santander announced that it would be cutting up to 1,900 employees from the three British banks.
It was claimed that this was not in reaction to the financial crisis, but as part of a planned £180 million (€213 million) annual cost saving identified at the time of the Alliance & Leicester’s acquisition.
Indeed, when Santander acquired the British banks, it took on 23,000 UK staff: 15,000 at Abbey, 7,000 at Alliance & Leicester and 1,000 at Bradford & Bingley.
Since its 2004 acquisition of Abbey, Santander has already cut 7,000 jobs at the bank, largely in back office functions.
Alliance & Leicester has also taken steps to reduce headcount, having launched a voluntary redundancy scheme last year. This was said to be in reaction to a decrease in customer demand as well as a concerted effort to reduce costs. Upon announcing the measures, the bank told Leasing Life this would lead to “no changes” in either the structure or sectors of its leasing business.
Looking forward, Santander’s business model will continue to be adopted by the other banks in the group, based around “relationship banking”.
The three UK banks’ leasing arms, which will form part of Santander’s full banking service, have much to offer to the Spanish group. Alliance & Leicester is particularly strong, with around £6.5 billion of commercial lending across several areas in the UK last year.
“All corporate and commercial banking operations, which include leasing, will be changing brand at some stage this year”
For example, one area of the company’s strength is in the bus and coach market – indeed, Alliance & Leicester currently finances one in four of all coaches in the UK, with one of its subsidiaries, Hansar Finance, providing a service to smaller operators.
The bank also finances ships, rail assets such as freight wagons, container boxes, commercial aviation aircraft and helicopters, and waste recycling through WRAP, the Waste and Resources Action Programme, a government scheme.
Abbey’s leasing model is much smaller since it sold its asset finance and leasing businesses, which provided specialist finance to the SME sector, a few months before it was acquired by Santander in 2004.
Last year, Abbey also sold its railway rolling stock leasing company, Porterbrook, to a consortium of international investors, including Deutsche Bank, Lloyds TSB and BNP Paribas, for an estimated €1.9 billion.
At the time of the sale, it was speculated that Abbey sold the business to boost Santander’s capital base, although this has not been confirmed by the bank.
Santander itself boasts strong leasing credentials as well, having approved, last January, a €4 billion credit line for SME businesses, including €1 billion for leasing and renting operations.
Through Santander Consumer Finance, the Spanish bank also offers motor finance, as well as stock finance and industrial equipment leasing.
This arm of Santander is found in most countries where the bank operates and continues to grow.
The integration of Abbey’s, Alliance & Leicester’s and Bradford & Bingley’s leasing arms into Santander will provide the Spanish bank with a solid base, which it intends to build on.
But before it can do so, it must surmount what can only be a complex and difficult integration. Only time will tell how successful Europe’s largest bank will become in European leasing.