Banco Santander is planning to reorganise its UK operations by separating its scandal-hit motor finance business from the rest of its UK division.

According to Bloomberg, the Spanish banking group is seeking regulatory approval to move its consumer finance division, which houses the car loan business, out of the Santander UK subsidiary. The potential restructuring comes as the bank grapples with the fallout from a growing car finance commission scandal that could cost it up to £1.9bn in compensation, according to analysts at RBC Capital.

The move could make the UK bank more attractive to potential buyers. Reports emerged in January that Santander UK might be put up for sale, though city bosses have privately indicated finding a buyer would be difficult until the final costs of the motor finance scandal are determined.

A spokesperson for Santander declined to comment on the reorganisation plans.

The car finance industry is awaiting a supreme court decision later this year that could have significant financial implications. If the court rules in consumers' favour, car loan providers including Santander could face a combined bill of up to £30bn, according to rating agency Moody's.

Santander UK already set aside £295m in November to cover potential payouts to car loan customers following a court of appeal ruling in October. The landmark judgment determined that paying "secret" commissions to car dealers who arranged loans without disclosing the terms to borrowers was unlawful.

The scandal contributed to a drop in Santander's annual pre-tax profits, with the UK becoming the only region apart from the bank's South American arm to suffer an earnings slump in 2024. Pretax profit at the UK unit dropped 36 per cent compared to the previous year.

Ana Botin, executive chair of Banco Santander, has previously described the UK as a "core market" but acknowledged that the local unit is undergoing an annual "strategy review." The bank has shifted its investment focus to the Americas in recent years while de-prioritising Europe.

It remains unclear whether the corporate overhaul could lead to further job cuts. The bank, which employs 18,000 staff in the UK and has headquarters in Milton Keynes, confirmed in October it was cutting 1,400 jobs as part of cost-reduction efforts. In February, it stated it was exploring how further "simplification and automation" could "help drive cost efficiencies in 2025."

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