Santander is to wind down its asset finance arm in the UK as part of a strategic review of its operations.
It will stop writing any new asset finance business by the end of the year and the existing portfolio will reduce as customers complete payment schedules.
Santander said its asset finance business made up less than 5% of its corporate bank portfolio. The bank said that where possible it will continue to support its core clients with different forms of lending and other services.
Tim Hinton (pictured), head of corporate and commercial banking, said: “The banking industry is changing at a rapid pace. To ensure that we can continue to grow and improve our business and meet more needs for our core customers, we made some changes to our operating structure and focus earlier this year.
“Having reviewed our priorities, we concluded that now is not the right time for us to invest further in our small asset finance offering, which comprises less than 5% of our lending to corporates and SMEs. We remain committed to continuing to support our corporate and commercial clients through our wide range of products and services.”
The announcement comes as banks face mounting competitive pressures and reduced margins.
Ana Botin, chair of Banco Santander, recently announced €1.2 billion (£1billion) of cost cuts across its global operations in an effort to hit profitability targets, with the UK expected to be a key target for savings.
Asset Finance International recently reported that Barclays Partner Finance would leave the motor finance market as part of a broader strategic review.
In a statement, the company said: “Barclays Partner Finance has made a commercial decision to reduce its focus on motor point of sale finance. Given this outcome, the business will no longer invest in the motor portfolio as a growth area and will shortly cease to originate new business in this segment.”
Peter Cottle, head of automotive sector at industry consultancy Growcap, told Asset Finance International the Barclays Partner Finance decision may reflect a wish to deal more directly with end-user customers, which could improve return on investment.
He said: “It could be that they still have an appetite for financing motor vehicles, but just not in an intermediary manner. Taking account of the fact that they bank a substantial percentage of the UK population, along with products such as Barclaycard, they may feel that they have enough ‘in-house’ customers to market to in respect of car purchases.
“Equally there will be better return on investment from other parts of Barclays, especially with the investment required in systems and compliance for the motor point-of-sale arena.”
As the pressure on motor finance companies continues to mount, many lenders and dealers will be forced to evolve, said Mark Standish, chief executive officer of MotoNovo.
He said: “While recent years have seen new entrants move into the market, the current economic climate is not as favourable for lenders. We are beginning to see a reversal of this trend, with exits and consolidation among the lending community.”
