AIBC

Santander’s response to the UK’s banker bonus cap removal

Posted:Nov 27, 2023 13:00 Category: Europe , Fintech , Posted by
Lea Hogg

Santander’s Executive Chair, Ana Botín, expressed a positive stance on the removal of the UK’s banker bonus cap. She said that this move could better align the interests of bankers with those of their shareholders.

Aligning interests for industry adaptation

he recent decision by the UK government to lift the bonus cap, previously limiting bankers’ bonuses to twice their base pay, is seen as a strategic measure to enhance the competitiveness of the City of London post-Brexit.

Adapting compensation strategies

As Europe’s fourth-largest bank by assets, Santander is poised to reconsider the way it compensates its UK staff in the wake of the cap removal. Ana Botín highlights the importance of variable compensation in the banking industry, viewing the change as a positive development that makes business sense.

Botín recently affirmed Santander’s readiness to adapt to this evolving scenario.

EU bonus cap and the road ahead

While the UK has discarded the bonus cap, it’s noteworthy that the European Union still maintains this restriction, originally implemented to discourage excessive risk-taking by finance workers post-financial crisis. Ana Botín, when asked about the European cap, suggests that its removal would be positive, fostering better alignment with shareholders. The ongoing debate over bonus restrictions has long been a point of contention, with banking executives arguing that it led to inflated fixed pay, impacting cost management during periods of lower revenues.

Regulatory dynamics

In conclusion, Santander’s strategic response to the changing regulatory landscape reflects the adaptability required in the financial sector. Ana Botín’s insights not only shed light on the bank’s approach to compensation but also highlight the broader industry conversations around aligning interests, regulatory dynamics, and the ongoing pursuit of growth strategies.

Increase in revenues

In the meantime, Santander has reported robust financial results, achieving an attributable profit of €8,143 million in the first nine months of 2023, marking an 11 percent increase compared to the same period last year. Notably, the bank’s strategic focus on growing profitability and shareholder value is evident in a Return on Tangible Equity (RoTE) of 14.8 percent, an earnings per share (EPS) rise of 17 percent, and a tangible net asset value (TNAV) per share of €4.61. With a 13 percent increase in total income, Santander’s growth is supported by a 16 percent rise in net interest income and a 6% increase in net fee income. As the bank continues its digital transformation, the efficiency ratio has improved to 44.0 percent.

While loan-loss provisions increased by 21 percent, the overall credit quality remains robust, with a cost of risk below target at 1.13 percent. Santander is on track to meet its 2023 targets, including double-digit income growth and a RoTE above 15 percent. Customer funds grew by 5 percent, reaching 166 million customers, and the bank remains focused on enhancing services, efficiency, and shareholder value.

 

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