Santander prepares to back small businesses

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Santander UK is planning to rapidly expand small business lending after freeing up more than £2bn following its withdrawal from a deal to buy 316 branches from Royal Bank of Scotland (LSE: RBS.L - news) .

Ana Botin, chief executive of Santander UK, told The Daily Telegraph that the lender would be “accelerating” the growth of its SME lending operation.

Santander (Madrid: SAN.MC - news) , the bank’s Spanish parent, transferred £4.5bn to its British arm two years ago to bolster the capital of the business, about half of which was intended to fund the purchase of the RBS branches. “We are already the best capitalised major British bank and we will be accelerating our small business lending growth,” said Ms Botin.

Last week, Santander announced a new funding programme to help finance equipment purchases by smaller British companies using money the bank has borrowed under the Government’s Funding for Lending scheme. Ms Botin has said she wants Santander to become the “UK’s SME bank of choice” .

Over the last three years, Santander’s small business lending has grown by 20pc annually and gross outstanding loans to SMEs now stand at more than £10bn.

The strategy mirrors that employed by Ms Botin at Spanish lender Banesto, where she was chief executive until taking over at Santander UK two years ago.

On taking charge, Ms Botin had hoped to rapidly lead the London flotation of Santander UK. The plans have, however, been hit by the troubles facing the sector. “We need the other UK banks to rise in value before we can float. We’re not going to float at the current depressed valuations. We need the banks to be attractive to investors again ,” she said.