Santander Uk 20-F 2024 FY Annual report (foreign)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

(Mark One)

☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2024

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report                         

For the transition period from                          to                         

Commission file number 001-37595

Santander UK Group Holdings plc

(Exact name of Registrant as specified in its charter)

England

(Jurisdiction of incorporation or organization)

2 Triton Square, Regent’s Place, London NW1 3AN, England

(Address of principal executive offices)

Lee Grant

2 Triton Square, Regent’s Place, London NW1 3AN, England

Tel: +44 (0) 800 085 1491

E-mail: lee.grant@santander.co.uk

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
1.532%  Fixed Rate Resetting Notes due 2026	SAN/26	New York Stock Exchange
1.673%  Fixed Rate/Floating Rate Notes due 2027	SAN/27A	New York Stock Exchange
3.823%  Fixed Rate/Floating Rate Notes due 2028	SAN/28	New York Stock Exchange
2.896%  Fixed Rate/Floating Rate Notes due 2032	SAN/32	New York Stock Exchange
2.469%  Fixed Rate/Floating Rate Notes due 2028	SAN/28A	New York Stock Exchange
6.833%  Fixed Rate/Floating Rate Notes due 2026	SAN/28B	New York Stock Exchange
6.534%  Fixed Rate/Floating Rate Notes due 2029	SAN/29B	New York Stock Exchange
4.858% Fixed Rate/Floating Rate Notes due 2030	SAN/28C	New York Stock Exchange

Securities registered or to be registered pursuant to Section 12(g) of the Act.

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by

the annual report

Ordinary shares of nominal value of £1 each 7,060,000,000

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☒    No  ☐

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934.    Yes  ☐   No  ☒

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act

of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been

subject to such filing requirements for the past 90 days.    Yes  ☒    No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule

405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to

submit such files).    Yes  ☒     No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or an emerging growth

company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Emerging growth company ☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant

has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to

Section 13(a) of the Exchange Act.  ☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its

internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting

firm that prepared or issued its audit report.  ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant

included in the filing reflect the correction of an error to previously issued financial statements.  ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive based

compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b).  ☐  

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP ☐ International Financial Reporting Standards as issued by the International Accounting Standards Board ☒ Other ☐

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has

elected to follow.    Item 17  ☐   Item 18  ☐

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange

Act).    Yes  ☐   No  ☒

It

starts

here

Santander UK Group Holdings plc – Annual Report 2024

Annual Report 2024 Santander UK Group Holdings plc 1

Strategic Report Sustainability Governance Risk review Financial statements Shareholder information

About this report

Our purpose is to help people

and businesses prosper

			The strategic report outlines the key elements of the Annual Report and provides context for the related financial statements.
Contents
Strategic report		1
	About this report	1
	Our business model and overview	3
	Chair’s statement	6
	CEO review	8	The report highlights key financial and non- financial metrics which help to explain our performance over the past year. It also highlights the external environmental factors affecting the business along with Santander UK’s positions in the UK banking market.
	Market overview	10
	Our strategic priorities	12
	Our performance and KPIs	13
	Risk management overview	15
	Financial overview	19
	Sustainability highlights	22
	Stakeholder voice	25
Sustainability		28	By Order of the Board.
Governance		42	William Vereker Chair
Risk review		77
Financial statements		156	7 March 2025
Shareholder information		238

Important information for readers

Santander UK Group Holdings plc (the Company) and its subsidiaries

(collectively Santander UK or the Santander UK group) operate primarily in

the UK, and are part of Banco Santander (comprising Banco Santander SA

and its subsidiaries). Santander UK plc and Santander Financial Services plc

are regulated by the UK Prudential Regulation Authority (PRA) and the

Financial Conduct Authority (FCA). Certain other companies within the

Santander UK group are regulated by the FCA and the PRA. This Annual

Report contains forward-looking statements that involve inherent risks and

uncertainties. Actual results may differ materially from those contained in such

forward-looking statements. See Forward-looking statements on page 242.

The Company is the immediate parent company of Santander UK plc.

The two companies operate on the basis of a unified business strategy,

albeit the principal business activities of the Santander UK group are carried

on by Santander UK plc and its subsidiaries (the Santander UK plc group).

The Board and Committees of the two companies run substantially

simultaneously to ensure efficiency and effectiveness, whilst ensuring

the independence and autonomy of Santander UK plc, our ring-fenced bank,

are appropriately protected.

The Company’s Corporate Governance and Risk Frameworks have been

adopted by its subsidiaries to ensure consistency of application. As a result, the

review of the business and principal risks and uncertainties facing the

Company, and the description of the Company’s Corporate Governance,

including the activities of the Board and risk management arrangements, are

integrated with those of Santander UK plc and are reported in this document as

operating within the Company for all periods presented.

None of the websites referred to in this Annual Report on Form 20-F for the

year ended 31 December 2024 (the Form 20-F), including where a link is

provided, nor any of the information contained on such websites, is

incorporated by reference in the Form 20-F.

Annual Report 2024 Santander UK Group Holdings plc 2

Strategic Report Sustainability Governance Risk review Financial statements Shareholder information

About this report continued

Our stakeholders
	Customers
	Communities
	Shareholders
	Climate & ethics
	People

	At all times, we aim to treat all our stakeholders fairly and meet our environmental responsibilities. Information to demonstrate this commitment has been included in the Strategic Report.

Annual Report 2024 Santander UK Group Holdings plc 3

Strategic Report Sustainability Governance Risk review Financial statements Shareholder information

Our business model and overview

We follow the Santander Way

	Our aim
To be the best open financial services platform, by acting responsibly and earning the lasting loyalty of our people, customers, shareholders and communities
Our purpose		Our how
To help people and businesses prosper		Everything we do should be Simple, Personal and Fair

Annual Report 2024 Santander UK Group Holdings plc 4

Strategic Report Sustainability Governance Risk review Financial statements Shareholder information

Our business model and overview continued

	Santander UK
We provide financial products and services Mortgages, consumer auto finance, unsecured loans, credit cards, banking and savings accounts, investment and insurance products for individuals and growth-focused support and services for companies

Competitive advantages	Strategic priorities
Scaled and established bank in the UK	Be customer centric and increase customer activity
Scale in our core banking businesses combined with an innovative mindset
Strong balance sheet with a prudent approach to risk	Focus on simplification, automation and digitalisation
High asset quality and capital metrics well above regulatory requirements
Part of a global banking group	Create value and be disciplined with capital allocation
Synergies from Banco Santander’s expertise, operating model and technology
A talented and motivated team	Be a responsible and sustainable bank
A highly talented and engaged team, with the right skills in place to support our customers and transform the bank

Annual Report 2024 Santander UK Group Holdings plc 5

Strategic Report Sustainability Governance Risk review Financial statements Shareholder information

Our business model and overview continued

Our behaviours
We live our values of Simple, Personal and Fair through great behaviours and our people leaders
		Think Customer
		Embrace Change
		Act Now
		Move Together
		Speak Up

Our corporate structure
	Banco Santander SA
	Santander UK Group Holdings plc
	Santander UK plc	Santander Financial Services plc
	Ring-fenced bank	Non ring- fenced bank

At a glance

14 million

active UK customers

444

branches

c18,000

full time equivalent employees

£167.2bn

in mortgage lending

£183.4bn

in customer deposits

Our sustainability strategy

Environment

Supporting our customers’ transition,

aligning our activities with the

Paris Agreement and embed climate risk

Social

Promote inclusive and sustainable

growth and help people gain the skills

they need to thrive

Governance

Act responsibly through strong culture,

governance and conduct

Annual Report 2024 Santander UK Group Holdings plc 6

Strategic Report Sustainability Governance Risk review Financial statements Shareholder information

Chair’s statement 

Supporting the UK

for 175 years

When Richard Cobden and John Bright, two radical

reformers and Members of Parliament, formed

the National Freehold Land Society in 1849, it was

the start of a bold vision to help Britain‘s working

population access better health, education and,

critically, the right to a home.

Cobden and Bright also wanted to help extend the

right to vote to more working men, so they bought

up large estates, dividing them into smaller pieces

of land that were big enough to carry the vote,

but affordable enough for people to buy. The first

share purchase took place in May 1849 and the

first members’ meeting followed in November

that same year.

These were the first steps taken by what would

eventually become Abbey National which was

acquired by Banco Santander in 2004. In the

twenty years since, Santander UK has established

itself as a significant player in the UK’s financial

services sector: a home for innovative product

development in the retail, corporate and

commercial banking spaces and, regardless of the

environment we operate in, a commitment to the

core principle of supporting people to make their

better happen right across the United Kingdom. It is

a principle that our founders would recognise and

continues to be at the heart of everything we do

175 years later.

Taking pride in the help we give our

customers

This year we helped 200,000 people buy their

first home and our personal current account

openings grew by 13%. We also held 2.5 million

appointments in our branch network, along with a

20% increase in the number of online chat

contacts.

This support is particularly vital at a time of

continued economic uncertainty, and we can take

pride in the help we have provided our customers

and clients to navigate these difficulties.

The cost of living continues to have a very real

impact on the everyday decisions our customers

are making. Our Financial Support team continues

to play a vital part in providing timely help and

advice, with 711,000 calls throughout 2024. Our

people provided 23,000 Financial Health Checks

and nearly 10,000 budget calculator completions,

helping customers to make decisions about how

best to manage their outgoings.

For our business clients, we redesigned the

Beyond Banking hub by creating segments

that provide customers with a clearer and more

structured pathway to our Business solutions and

services, Business programmes and the

Breakthrough knowledge hub. We increased the

options available through the SME Support Toolkit

with easily accessible help and advice on

strategies for growth, navigating international

expansion, developing a workforce, and business

coaching and mentoring.

Transforming to better serve our customers

This has been a year of significant change for the

Bank. Our ongoing transformation programme is

now yielding significant benefits for our customers.

Inside the bank, the way we work together is

shaped by how we can deliver greater value to our

customers. Moving to more agile ways of working

so we can respond more effectively and quickly to

feedback, increase our speed to market and always

with the aim of delivering for our customers.

We strongly believe that collaboration is an

essential element of our transformation and a key

part of working in an agile way. Our people are now

expected to come into the office for at least twelve

days a month to accelerate the connections and

ways of working needed to drive our future

success.

Working together in the office is crucial to

building a high-performance environment to

drive the change that will be so important for

us to succeed. It is also a critical part of creating

opportunities for our people to develop and grow

within the Bank, particularly those at the start of

their careers. Whether it be in our branches, offices

or the Unity Place campus, we strongly believe that

this approach will deliver the most effective results

for our customers.

Our relationship with Banco Santander has allowed

us to leverage their global scale and capability for

the benefit of our customers. The main highlight

was the delivery of OneApp, which works across

Santander markets and offers a much-improved

experience. With shared platforms and

technologies integrated into our day-to-day

operations our customers and clients enjoy better

service and smoother end-to-end engagement with

us – meaning they can spend their time on what is

important to them, from household improvements

to running a business.

I believe that we will be able to take forward

this sense of momentum into 2025, building

on our programme of transformation that UK

Chief Executive, Mike Regnier, has overseen.

With closer collaboration with Banco Santander,

the UK will continue to play a central part in

the wider group’s new era of value creation

and increased profitability.

Supporting growth

We welcome the Government’s focus on

growth. With a clear mandate for the next five

years, they should be well positioned to enact the

policies that we hope can help facilitate confidence

in the UK economy.

A thriving financial services sector will have a

critical role to play. Attracting capital into the

City of London and the country and being a hub

of innovation and creativity that is adopted around

the globe is vital.

A capital and regulatory framework that can

facilitate growth and investment whilst providing the

certainty and security that customers and investors

want will be an asset to the United Kingdom,

making it an attractive global proposition and

reinvigorating for the City of London. There is a real

opportunity for Government, regulators and the

industry to make a significant change that will be of

benefit to the economy and the country as a whole.

There is a danger that the collective mindset has

been so weighted towards preventing risk, that

the unintended consequences mean banks are

sometimes not willing to take the sort of decision

that can yield meaningful returns for shareholders,

investors and customers.

We are continuing to work closely with the

Government and the Treasury to identify the

policies and initiatives that can deliver the change

which will result in a more competitive environment

for the financial services sector.

Developing skills for tomorrow’s economy

Santander UK has a long-standing history of

helping people develop the skills and knowledge

needed to thrive in the economy. Indeed, if we go

back to our founders, the National provided

members with a ‘Freeholder’s Circular’ to help

improve financial literacy and knowledge.

Our programmes of support today are based

on the three E’s of Education, Employability and

Entrepreneurship and are designed to be accessed

by people when they need it, on the platform that

works best for them.

In October 2024, we launched our Tomorrow's

Skills report which explored how public perceptions

of the world of work are changing and what

governments and businesses can do to upskill

workers in each of these areas.

Annual Report 2024 Santander UK Group Holdings plc 7

Strategic Report Sustainability Governance Risk review Financial statements Shareholder information

Chair’s statement continued

Our research made clear that workers understand

they will need new training and new skills in a world

of hybrid working and where AI is shaping

the workplace at a rapid pace. Our Open Academy

has programmes designed specifically to address

these challenges with an adult education

programme to equip people from age 18 onwards

with digital, sustainability and professional growth

skills that will set them up for the jobs of the future.

In spring of 2025, we will launch the next phase

of courses on our Open Academy platform that are

designed to help young people improve their level

of financial literacy, for those key years when they

leave school and home for the first time. In 2024,

over 290,000 people registered on the platform and

we expect to exceed 1 million users in 2025.

Improving financial education and literacy amongst

our children and young people is a challenge that is

incredibly important to Santander UK. Working with

Twinkl, The Numbers Game provides free financial

education for five-to-sixteen-year-olds which

has now been used by over 3.2 million children,

100,000 teachers and 8,300 schools in the UK.

These figures alone show this is an issue that

should be higher on the political agenda, which is

why we are working alongside the Foundation for

Education Development on a new national strategy

for the development of financial wellbeing for

students.

We know that money habits and attitudes start to

form between the ages of 3 and 7, but currently

financial education is not statutory in the English

primary school curriculum. Our research suggests

having financial education taught at an earlier age

will enable and equip adults to be better prepared

in handling finances and improve financial inclusion

later in life.

	175 years of our Foundation
	In 2024 we celebrated the 175th anniversary of the founding of the National Building Society (The National) in 1849, which grew into Abbey National and joined the Banco Santander group in 2004, becoming the bank we are today. While we have evolved significantly over the years, the long-standing commitment to home ownership and education at the heart of The National remains a core foundation of everything that we do. A look back at our past In the early 1900s, railways were reaching new areas outside cities and towns, which eventually became known as suburbs. Advertising by The National, like the example pictured here, showed attractive homes in leafy suburbs, illustrating how the building society could help people to live where they like, away from overcrowded areas. This dream for our customers still remains today, and despite 175 years passing we remain committed to making our customers’ better happen. We are extremely proud of where we came from, and wouldn’t be the bank that we are today without the nearly two centuries of heritage behind us.
	Image: ‘Live where you like’ advertisement by the National, early 1900s

As our founders knew, strong financial wellbeing

plays a crucial role in shaping young people’s

future. We believe that financial education should

be compulsory for primary schools in England as

part of the curriculum and made accessible for all

teachers, parents and students across the UK.

Embedding our climate strategy into the

business

We continue to work with our colleagues

throughout Banco Santander and to play our part

in supporting the ambition for net zero carbon

emissions across the group by 2050. This is driven

by our own climate strategy which focuses on

the support we provide our customers and our

internal climate transition plan, which sets out

the aim to align our activity with the UN Paris

Agreement to meet the 2050 ambition.

As part of that strategy, we have improved

our Mortgage portfolio data, and reported

emissions from our Commercial Real Estate

lending for the first time. These are vital steps in

enabling us to better understand the environmental

impact of our activities and how our strategy should

address them.

Supporting our retail and CCB customers in their

green transition is a key driver, and alongside new

initiatives focused on helping homeowners, we

developed a green finance strategy specifically

aimed at our CCB clients. We now offer clients

Green and Social Housing lending. For Social

Housing, we provided significant new lending,

which enables investment in improving energy

efficiency and safety in existing Social Housing

homes as well as the development of new stock.

CCB continues to provide funding to the expanding

UK renewables and battery energy storage sectors,

which aligns with Banco Santander’s efforts to fund

renewable energy projects globally.

Across CCB and the retail bank we firmly

believe that a willingness to be innovative

will yield better results. Based on our ongoing

research to understand the barriers faced by

our SMEs and home owners to the transition

to a low-carbon economy, we are undertaking

a series of test and learn customer initiatives,

working in partnership with the energy sector to

help customers access finance and products that

will fit their needs.

Board changes

This year I was pleased to welcome David Gledhill

and David Oldfield as Non-Executive Directors

and Angel Santodomingo as an Executive Director,

alongside Mark Lewis, Dirk Marzluf and Baroness

Nicky Morgan who became Directors of Santander

UK Group Holdings plc in 2024.

This will be my final statement as Chair of

Santander UK, I will be standing down later in the

year after five years in the role. In that time we have

navigated the challenges of Covid and some of the

most significant economic events of recent times.

Thanks to the leadership of Nathan Bostock and

now Mike Regnier and their executive committee

members, along with the support and direction of

my colleagues on the Board, I strongly believe the

bank is now stronger and more focused than ever

on delivering what our customers need.

Whilst the nature of banking in the UK has

changed, we have changed with it whilst staying

true to the principles of our founders 175 years ago.

With that same desire to support our customers

and building on the momentum generated by our

progress, there is a bright future for Santander UK.

William Vereker

Chair, 7 March 2025

Annual Report 2024 Santander UK Group Holdings plc 8

Strategic Report Sustainability Governance Risk review Financial statements Shareholder information

CEO review

Building a real

sense of momentum

Highlights

£1,330m

Profit before tax

(2023: £2,149m)

8.8%

Return on tangible equity

(2023: 14.4%)

7.2 million

Digital customers

(2023: 7.2 million)

88%

Retail current accounts

opened digitally

(2023: >90%)

7.9/10

Employee engagement

score

(2023: 8.2/10)

Ranked 1st

NPS for businesses with

a turnover under £2m

(2023: 1st)

The bank we will become

It has been another 12 months of challenge for

our customers. The economic climate has

remained uncertain just as the political one has

changed.

In such an environment, life can feel messy and

difficult to navigate. Our customers look to us to

provide help, certainty and a quality of service that

can ease the inevitable pressures we all face.

Recent years were about putting in place the

foundations that would enable us to meet our

customers expectations. 2024 has been the year

where we have shifted our focus on to how we

can exceed those expectations.

We do that by being a radically simpler bank to

deal with. That means our customers are able

to access digital first solutions, but with a human

touch. Being driven by the spirit of innovation that

has been the trademark of Santander in the United

Kingdom, leveraging the technological expertise

and scale of Banco Santander and reducing

complexity and friction across our products and

processes. All for the benefit of our customers

and clients.

The shift to that customer-centric mindset has

been palpable throughout the business and I have

been thrilled at how this challenge has been

embraced across the bank. It has created a real

sense of momentum which has manifested itself

through improved business performance as 2024

evolved, setting us up for the years to come.

Building momentum through 2024

Our 2024 results were in line with expectations, but

I was particularly pleased at the progress we made

against our strategic objectives in the second half of

the year.

We delivered profits from continuous operations

before tax of £1,330m, impacted by the provision

of £295m set aside for the historical motor finance

commissions payments. As a result our RoTE fell to

8.8%. Net interest income was down by 7% which

was primarily due to increased customer deposit

costs and a reduction in mortgage loans. Our

CET1 capital ratio was at 14.8%, leaving us with

significant headroom to regulatory requirements.

Another year of planned balance sheet optimisation

resulted in our balance sheet reducing over 2024,

with mortgage lending reducing by £8.0bn to

£167.2bn. However, with more attractive lending

margins in the market, I expect a gradual return to

net lending growth throughout the coming year.

Our disciplined approach to pricing, supported by

reduced funding needs, meant a fall in customer

deposits to £183.4bn. This fall was targeted to high-

cost corporate deposits.

We also saw customers looking to lock in longer

term deposits, with £3.0bn of savings inflows into

fixed rated bonds and ISAs in 2024.

Of our 22.5 million total customers, 14 million

were active and those who conducted their

business with us through our digital channels

were 7.2 million digital customers. Our retail NPS

remained 5th in 2024, whilst we retained our 1st

place in NPS for business banking.

A customer-centric approach

We are all aware that the shape of retail banking is

changing at pace, so it was essential that our digital

offering was able to deliver a significantly improved

customer experience.

Key to that offering was the launch of our new

banking app, OneApp. This highlighted both our

customer-centric approach to product

development, and the direct benefit to our

customers that accessing Banco Santander

technology and platforms can bring.

OneApp is being used by over six million

customers and brings more of our products and

services straight to their phone. Behind the scenes,

we merged a number of legacy platforms and

simplified the payments operations by moving

to the Banco Santander PagoNxt platform.

For our customers, the only thing that matters is

that they now have an app that complements the

way people bank today.

The launch of our new online Santander Personal

Pension is the perfect illustration of that point. This

is the first pension product ever to be launched by

Santander UK, and in keeping with our desire to

ensure that it is straightforward for customers to

engage with our products in a way that suits them,

it will be accessible through OneApp.

This year we brought the management of Homes

and the rest of the Retail and Business Banking

division closer together. I was pleased that

alongside the competitive mortgage rates

we offered, we made several significant changes

to our lending criteria to improve affordability.

The introduction of 40-year interest only

mortgages takes National Insurance and Child

Benefit into account, which enables us to meet

a clear customer need more effectively.

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CEO review continued

Combined with the launch of our personal pension,

Building our Edge

Last year saw the launch of our Edge Current Account, and in 2024 we opened more than 500,000

new current accounts, which has increased our market share by 2%.

In 2024 we expanded the Edge portfolio with the Edge Credit Card. It offered our customers 2%

cashback in the first year on all purchases which contributed to an increase in wider credit card

openings of 42% across the year.

We also rolled out our online service Edge Home to all brokers, allowing customers applying for a

Santander mortgage via a broker, to track the real-time progress of their mortgage application from

start to finish, without the need for multiple phone calls.

It will also mean customers can view and download their mortgage offer online, reducing the

waiting time for it to arrive via post.

I am delighted that our suite of Edge products is resonating with customers as it re-establishes our

reputation for innovation in the retail banking sector.

we now, for the first time, can offer our customers

a complete retail product range.

We continue working to support customers who

look to us to help them take steps to make their

homes more energy efficient.

I am delighted that we have launched a series of

innovative partnerships with Octopus Energy,

Vibrant Energy Matters, Scottish Power and

Ecofurb to make it easier for households to utilise

solar power, fit heat pumps and receive Energy

Performance Certificate home assessments.

By working with the industry, we can make it easier

for people to get the information they need to make

informed decisions.

Connecting businesses here and abroad

Following a hugely successful 2023, the focus for

our Corporate and Commercial Bank was to focus

on winning new business whilst improving the

service and insight we provide for our clients.

We onboarded over 500 new clients across

Wholesale & Retail, Food & Drink, Transport &

Logistics, Advanced Manufacturing, Life Sciences

and Technology Media and Telecoms sectors.

We offer businesses an unrivalled ability to connect

with overseas markets thanks to our relationships

across Banco Santander, and with the Santander

Navigator platform over 1,000 businesses made

connections with potential new suppliers,

distributors and retailers across the globe.

But crucially, we offer our customers an expertise

on the ground that supports growth within the UK.

Our improved processes that allowed us to reduce

account opening times by 25% and provide critical

services like property valuations more effectively so

clients can access funding more quickly and

efficiently.

Business and Government must work together

The new Government’s commitment to creating the

environment in which the economy can grow has to

be welcomed.

So I am pleased to be part of the Chancellor of the

Exchequer’s British Infrastructure Taskforce, which

is examining how best to mobilise the investment

that will deliver essential infrastructure projects

across the country.

I am particularly focused on the energy sector,

where Santander, both at a UK and Banco

Santander level, has a significant market presence.

To deliver the level of growth that we so

badly need, businesses and Government must

work together on potential solutions on how we can

showcase the best of British business and financial

services to the wider world.

Supporting our customers

When the economy fails to grow, the impact is felt

by people up and down the country, many of whom

have faced challenges over the last five years.

I continue to be extremely proud of the work

our people across our contact centres and

branches undertake every day to provide our

customers with invaluable help and support

regarding their finances.

Through a better understanding of our customers,

their situations and spending requirements, we are

better able to make earlier interventions that can

help prevent worst-case scenarios taking place, like

repossessions. This is a situation no bank or its

staff wants to find itself in.

Alongside the first class support provided by

our people, we have accelerated the deployment

of AI technology to help them deliver faster

responses. The shape of customer interactions

in the coming years is going to change significantly

as we understand how to use AI effectively,

particularly where it can allow our people to spend

more time on more complex cases or on providing

face-to-face help.

A mighty amount for Macmillan

This year marked the end of our three-year

charity partnership with Macmillan Cancer Support.

Thanks to our colleagues and the generosity of our

customers, we’ve raised more than £1.8m to fund

their vital work.

From fundraising events like Coffee Mornings and

Mighty Hikes, to taking part in specialist cancer

training, we exceeded the original target for our

partnership.

Our partnership with Macmillan has also helped

improve the support our people have been able

to provide to customers affected by cancer. One

of the key aims for our partnership was to try and

address the financial concerns that people living

with cancer have.

In 2024 we trained more than 2,200 customer-

facing staff, including more in-depth training for

our Financial Support team, to offer tailored and

emotional support to people struggling with cancer.

Households where someone is affected by cancer

experience a financial impact of nearly £900 per

month, so it is vital that support and guidance

are available.

This is a legacy of the partnership that will

endure for many years to come. It has been

a privilege to work closely with Macmillan to support

customers and their families who are living with

cancer.

Leadership changes

This year, Tim Hinton retired as Chief Executive

Officer of our Corporate and Commercial Bank

after six years. Tim oversaw a significant

turnaround of the business, turning CCB into a

client-focused, high-performing business with great

potential to grow further. Tim was also a strong

inclusive culture advocate, having been our

Executive Committee sponsor for gender for the

past six years. We wish him well in his retirement.

I was delighted to welcome John Baldwin to the

Executive Committee as Tim’s successor and look

forward to working with him in the months ahead.

As I look ahead, there is a real sense of

momentum within the business. Transformation is

about more than just technology or efficiencies. It is

about our people.

We have invested more in their development,

to give them the skills we need as we become a

more digital bank. We have invested in our branch

network, opening new Work Cafes and enjoyed

the benefit of our Unity Place campus. Giving

our people the best possible environment to

serve our customers. We will also need the right

culture. A high-performance culture focused on

our customers, that executes at pace and sets

the highest standards for what we do every single

day. This mindset will enable us to go beyond the

expectations of our customers, to be the bank we

will become.

We have made significant progress as we enter

2025 with the customer at the heart of everything

we do.

Mike Regnier

CEO, 7 March 2025

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Market overview

Our market overview

	Improving economic environment		Competitive UK market		Customers becoming digital
	What we have seen In the UK, we saw economic conditions improve despite another year of slow growth (0.9% in 2024 based on the latest data available, 0.4% in 2023). Inflation fell towards the Bank of England’s target rate over the year. The housing market in the UK performed better than expected in 2024 (House Price Index: 4%) and showed signs of increased activity as the year progressed. This led to the Monetary Policy Committee (MPC) cutting the Bank Rate twice in the second half of 2024 to 4.75% (50bps below 2023). Our response and looking ahead As we exit two years of high inflation and continue the rate-cut cycle, cost management became a significant focus industry-wide. We continued to deliver our transformation through simplifying, automating and digitising processes, helping to manage our operating expenses in line with CPI for the year. We remained focused on supporting our customers and delivering products and services that help them make the most of their money, and for those who needed extra help we continued to provide the support they needed. Looking ahead, we expect the Bank of England to cut the Bank Rate over 2025 by 100bps (including the 25bps cut in Feb-25) to support growth. As this occurs and affordability improves for our customers, we expect to see activity in the mortgage market increase further.		What we have seen M&A increased in the UK in 2024 and the banking sector is likely to see further consolidation in the near term. Nationwide and Barclays completed acquisitions of Virgin Money and Tesco’s retail banking arms respectively in 2024, while Coventry Building Society’s acquisition of Co-op Bank’s retail banking arm completed in early 2025, with NatWest’s acquisition of Sainsbury’s retail banking arm due for completion in 2025. Nonetheless, the market remained highly competitive while operating in a higher rate environment. Established international and digital challengers continued to compete for deposits and lending in the market in addition to our traditional peers. 2024 marked the second year in a row of over 1 million customers in the UK using the Current Account Switch Service. Our response and looking ahead 2024 saw another year of pricing discipline and continuation of the strategic deleveraging of our portfolio. Over the year, customer lending decreased by £8.8bn to £197.9bn and our customer deposits decreased by £10.2bn to £183.4bn. We continued to monitor competitors’ products and invested in our multi-channel offerings throughout the year, to bring customers to Santander UK. Looking forward, we expect large peers to continue investing in their product offerings to retain and attract customers, while we expect digital challengers to continue in their pursuit of market share.		What we have seen 2024 was another year of customers moving towards digital banking over traditional banking channels. Our digital customer base grew again in 2024 to 7.2 million users, with 88% of our retail current account openings in the year made through digital channels. Our response and looking ahead Following the pilot of our new mobile banking offering in 2023, OneApp became available to all our customers in 2024. OneApp is now being used by over six million customers in the UK and provides our customers with faster and enhanced functionality, including personal insights into their spending. We also launched new products to support our customers’ changing needs, including the latest edition of our Edge offerings – the Edge Credit Card. Whilst digital banking is becoming embedded in our customers’ everyday lives, we remain committed to delivering customer engagement through our branch and telephony channels. In 2024, we completed 50 branch refurbishments, and made significant progress with planning two new Work Cafés in support of this commitment. Looking ahead to 2025, we look forward to the opening of those two new Work Cafés as we continue to review our customers’ needs and provide them with products and services that meet their requirements, while continuing to evolve our digital offerings and in person services.

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Market overview continued

	Deployment of AI technology		Evolving regulatory landscape		Delivering on our ESG ambitions
	What we have seen The market has evolved rapidly, which has provided opportunities to accelerate deployment of AI as well as challenges in how we manage risk. Across the industry, banks have adopted a cautious approach, focusing on initial use cases with a ‘human in the loop’ to ensure outputs are reviewed before being communicated to customers. Most of these use cases have helped improve productivity without introducing material risk to our operations. Our response and looking ahead We delivered several new machine learning and generative AI solutions in 2024, including Agent Assist and Sandi. Agent Assist gives our people access to knowledge bases through generative AI, allowing them to provide faster and more accurate responses to customers. Sandi is our internal AI search tool helping our employees search and find answers to People & Culture related questions. Since its launch in November 2024, it has answered 98% of the questions asked, with only 2% requiring additional ‘human touch’. An internal working group supported the deployment of this technology and developed a stringent governance framework with the right controls. In 2025, we expect industry use of AI to continue to grow and we plan to expand our use of it, allowing our colleagues to focus on the more complex customer cases.		What we have seen Regulatory change continues to be significant within the financial services sector, with 2024 seeing new proposals and interventions from UK regulators. The FCA remained particularly active, continuing to monitor and engage with firms on Consumer Duty, while introducing new rules and guidance to address issues on wider access to banking. The Payments Systems Regulator (PSR) introduced mandatory reimbursement for Authorised Push Payment (APP) fraud, providing significantly increased protections to consumers. The publication of a National Payments Vision and wider exploration of innovation in the payments sector helped contribute to the regulatory space in 2024. While there has been substantial activity, there has also been a wider recognition of the burden of regulation on the industry and the impact this has on economic growth. Our response and looking ahead Phase 2 of the FCA’s Consumer Duty was implemented for closed book products in July 2024, in addition to our work to meet new Basel capital requirements. We welcome the UK government’s commitment to improving the balance of regulation, with a focus on driving growth and international competitiveness, we look forward to continue working closely with the regulators to help drive growth in 2025. The FCA’s review of its rulebook is a positive start to simplifying the current regulatory landscape.		What we have seen Customers, governments, regulators, NGOs, and investors continue to scrutinise ESG activities with a real focus on the say- do gap of organisations, which in turn is beginning to drive real-world action. Our response and looking ahead In 2024, we advanced our climate strategy by launching six retail green finance propositions to support our customers. We also enhanced our portfolio analysis, reporting financed emissions from commercial real estate lending for the first time, in addition to focusing on aligning our activities with the UN Paris Agreement. In the social space, we continued to proactively reach out to over 2.6 million customers showing potential early signs of financial difficulty and strengthened our focus on education, employability, and entrepreneurship. This includes the launch of a free adult education initiative which aims to equip people above the age of 18 with the skills needed to power the economy of the future. Within our business, we increased our gender and ethnicity senior level representation with senior female representation at 34.1% and senior minority ethnic representation at 14.7%. In 2024, we approved our new Governance Strategy focused on clear and robust governance with well-defined accountability promoting the success of our business, customers, and stakeholders. Looking ahead, we will continue to evolve how we report on ESG matters. This involves updating our ambitions with a focus on real world impact.

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Our strategic priorities

Focused on customer loyalty, improved

efficiency and growth

Customer centric & customer activity			Simplification, automation & digitalisation
Initiatives focused to better serve and engage our customers by leveraging technological and operations synergies from the global Banco Santander group, enabling access to financial services for our customers through several channels. 2024 progress: expanded our Edge portfolio for our customers through the launch of Edge Credit Card and Edge Home which enables live mortgage tracking for all our broker partners. For our corporate customers, we launched a Virtual Account Management platform supporting the needs of our clients in the legal, real estate, property and pensions sectors.			Reduce complexity, decrease friction and increase automation to streamline our products and processes. This is supported by becoming a ‘digital bank with a human touch’. 2024 progress: launched OneApp which is now being used by over six million customers and achieved a customer rating of above 4.7 stars out of 5. We merged our four legacy mortgage platforms into one and simplified payments operations by moving to Banco Santander’s PagoNxt platform as part of simplifying our business. Lastly, we delivered several new AI solutions across the business including Agent Assist and Sandi.
Value creation & disciplined capital allocation
Focus on value creation for all (customers, employees, shareholders and communities) while managing risk and profitability and being disciplined with capital allocation. 2024 progress: continued strategic deleveraging of our balance sheet delivering profits in line with expectations for our shareholder. We maintained significant headroom on regulatory capital requirements and delivered substantial dividends back to Banco Santander.
Be a responsible and sustainable bank
Initiatives aimed at supporting our customers with a secure and just transition to a sustainable economy and helping them get the skills they need to thrive. 2024 progress: continued to develop our new social strategy with a distinct focus on Education and Skills whilst also launching several test and learn initiatives to support our customers in retrofitting their homes.

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Our performance and KPIs1   

Driving performance for stakeholders

22.5 million total customers Our total customer base remained stable in 2024 despite continued strategic deleveraging of our balance sheet. Our loyal customer base continues to be deepened by existing relationships and acquiring valuable new customers.

Ranked 5th2 in Retail Net Promoter Score Customer service is integral to our strategy and remains a key area of focus. While we were ranked 5th this year, we note a margin for error which impacts those ranked between 2nd and 6th. 2023: NPS ranked 5th2

5th out of 9 competitors
7.2 million digital customers Customers in the UK continue to move toward digital banking. We have made significant improvements with our digital banking capabilities, with over half of our active customers now digital.

55% cost-to-income ratio Increased in 2024 due to pressures on net interest income from high customer deposit costs and a reduction in mortgage loans, in addition to higher operating expenses.

13.7 million active customers Our active customer base decreased slightly in 2024, as expected. We continue to focus on product delivery and customer experience. Note: Customers need to meet a specific set of activity criteria to be considered active.

Ranked 1st2 in Business Net Promoter We maintained our first place ranking, a testament to the comprehensive proposition and our strong support for our UK business customers. 2023: NPS ranked 1st2

1st out of 6 competitors
80% digital sales This KPI measures the percentage of new business that was performed through digital channels throughout the period. Digital sales decreased in 2024, due to a lower online savings take-up rate.

£2,577m in operating expenses Operating expenses were up 4% in 2024, due to further investment in efficiency and customer experiences and two years of high inflation. This investment is expected to help drive cost efficiencies in 2025.

1.See glossary on page 278 for KPI definitions.

2.See calculations on page 243 for Net Promoter Score details and sources.

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Our performance and KPIs continued

14.8% CET1 capital ratio The CET1 capital ratio decreased to 14.8% in 2024, driven by lower profits and £1.3bn in dividends paid, slightly offset by a reduction in RWA exposure. We remain strongly capitalised with significant headroom to minimum requirements and MDA.

We continue to closely monitor our ESG performance in addition

to our traditional financial metrics.

£17.2bn in green finance raised since 2021 On track to meet ambition of £20.0bn in cumulative green finance raised by 2025.

We achieved our ambition of >3 million people financially empowered ahead of schedule in 2023. As a result we have introduced a new KPI on this page.

FOR OUR FULL SUITE OF SUSTAINABILITY KPIs, SEE PAGE 24.

1.See glossary on page 278 for KPI definitions.

8.8% RoTE 2024 RoTE was impacted by lower profits following pressures on net interest income and the provision relating to historical motor finance commission payments.

152,000 customers supported to become greener since 2021 On track to provide 180,000 customers with green products and services by 2025.

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Risk management overview

Sustained support

for our stakeholders

Supporting our customers and business growth

through simpler and improved processes was

a key focus throughout 2024 and remains a key

priority in 2025.

Overview

By simplifying and automating processes, using

digital tools and designing smarter solutions,

we are supporting the delivery of good customer

outcomes and business growth demonstrated

through:

–Enhanced credit decisioning for our retail

customers, in improved customer journey,

resulting in increased new business volumes,

whilst delivering robust risk oversight and

challenge to ensure our lending remains prudent.

–Supporting delivery of stress testing including

the BoE’s Annual Cyclical Scenario, sensitivity

analysis of our future business plans, and

Climate Internal Scenario Analysis to meet

regulatory requirements and better understand

our risk exposures.

–Leading the delivery of material and complex

programmes to support the regulatory agenda

including Model Risk management initiatives

(SS1/23 compliance, IFRS9 enhanced models

implementation, PRA Hybrid Mortgage Model)

and customer conduct initiatives (Consumer

Duty, account closures, overdraft complaints,

and customer support surveys).

–Embedding Climate Change considerations

into our credit decisioning.

–Supporting Economic Crime investigations which

led to the recovery of Fraud losses for the bank.

–Delivering initiatives which led to simpler

processes and cost savings: automation of the

Corporate Credit assessment alerts and Credit

policy simplification.

–Oversight of Capital Risk, where we face

complex and dual regulation from both the PRA

and ECB, along with newly published Basel 3.1

rules.

–Compliance oversight of Reputational Risk

management issues impacting our customers

during 2024, including debanking, Consumer

Duty, cost of living and mortgage affordability,

savings rates, IT & Transformation, and historical

motor finance commission payments.

Capital and liquidity risks

We remain in a strong position with respect to our

Capital and Liquidity metrics. Our Capital position

has significant buffers over regulatory requirements

despite the impact of a £295m provision relating to

historical motor finance commission payments.

We hold a significant proportion of our Eligible

Liquidity pool in cash and central bank reserves.

Our funding strategy is based on maintaining a

conservatively structured balance sheet and

diverse sources of funding to support our business

plans.

Our Risk team undertake an assessment of our

funding plans including mix, diversification and

market capacity and is also involved in the annual

ILAAP and associated Liquidity Risk Appetite

review.

Non-Financial risks

We made progress in 2024 addressing our

Non-Financial Risks, particularly with our Financial

Crime and IT remediation programmes, which are

monitored closely via specific governance forums

and highlighted in our regular EWRM report

updates to Executive Risk Control Committee

(ERCC), Board Risk Committee (BRC) and Board.

The net value of our Operational Risk losses

(events over £10k) increased significantly in

2024, largely due to the provision referenced

under Capital and Liquidity risks (excluding this

provision, 2024 losses tracked favourably

compared to 2023).

We have been assessing whether there are

any potential wider impacts from the Court of

Appeal decision, which necessitated the provision

related to motor finance commissions, on our wider

business product set, and have enhanced

processes and controls where we feel appropriate.

We continued to provide support and impactful

oversight to our Line 1 colleagues across several

key bank initiatives including: assessing and

reporting progress against Critical Remediation

Plans across a broad range of Non-Financial risks;

involvement in advising the business with respect

to cost prioritisation exercises; risk assessment of

organisational change programmes; and business

as usual risk oversight of principal risk types.

Looking forward

Strategic challenges for the UK banking sector will

likely remain elevated in 2025. With this in mind, we

aim to maintain our forward transition by focusing

on:

–Enhancing our ability to manage our risk profile

in an effective and efficient manner through

digital enablement, leveraging Banco Santander

group solutions and enhanced tools and

automation.

–Supporting our customers

–Attracting and retaining risk management

and compliance talent, in a very competitive

recruitment market

–Performing regular risk assessments of our

business plans

–Continuing to deliver impactful oversight,

challenge, guidance and support to the business

–Continued emphasis on return to the office to

maximise productivity and collaboration across

the business, while retaining the flexibility and

benefits of working from home.

Christine Palmer

CRO, 7 March 2025

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Risk management overview continued

Top Risks

We monitor our Top Risks

quarterly at the Executive Risk

Control Committee (ERCC) and

Board Risk Committee (BRC).

In 2024, our focus shifted away from Inflationary

and Supply Chain pressures to Margin

Compression, with UK headline inflation falling

towards 2% and markets implying a peak in the UK

Bank Rate.

We made further changes to our Top Risks by

introducing three new areas (Resiliency,

Payments Transformation, and AI/Machine

Learning) and removing two existing Top Risks

(Ring-Fencing and People risk), although we

continue to closely monitor human resource

impacts as part of Strategic Transformation.

Conduct and Regulatory

In 2024, we continued to have significant

regulatory engagement, notable among

these were with respect to: Financial Crime,

Technology risk, Regulatory Models, Payments

Services regulation, Outsourcing and Third-Party

risk, Data Privacy, Operational Resiliency,

Consumer Duty embedding, and Historical Motor

Finance Commissions. We have reduced our

regulatory risk profile including closing issues

related to Financial Crime, IT risk and Change

Management projects, and implementation of

Regulatory Capital models.

Economic Crime

Financial Crime (FC) risk remains a key focus area

for senior management and the Board. In 2024, we

continued to mature our oversight capabilities and

Centre of Excellence operations to further integrate

FC risk management into the business. We also

continued to review our processes to address

complex global sanctions regimes and enhance

our use of technology in screening processes.

Fraud losses continue to be a significant proportion

of our overall operational losses, in line with the

wider UK financial services industry. However,

these losses were significantly lower in 2024

compared to 2023, with the design and

implementation of new fraud prevention tools to

complement our existing systems and controls. As

part of our Fraud Transformation programme, we

are taking action to reduce losses and case

volumes.

Technology

The importance of IT risk management and control

remains at the centre of our activities. We

continued to progress our bank-wide programme to

address risks that could arise from obsolete

technology and a Single Point of Failure (SPOF) in

our network. We delivered further risk reduction in

2024 and closely monitored these improvements

through our risk governance framework. In parallel

we leveraged business transformation, where both

platform and application obsolescence coincide.

Margin Compression

Implied Bank Rate fell in 2024 and risks

appear to be skewed more towards downwards

movements in rates, although higher for longer

is a viable scenario should inflation remain sticky.

Regulatory pressure remains around deposit

pricing and Consumer Duty and has the potential

to increase deposit market competition. Our

Treasury team executed a Margin Compression

investment strategy in 2024, approved by our

Asset and Liability Committee (ALCO), which

mitigated our risk exposure. There is regular

engagement between Treasury, Risk and the

business to ensure key market and pricing

assumptions and the strategy remain appropriate.

Operational Resiliency

In 2024, we progressed our Operational Resilience

and Recovery Plan (ORRP) which will enable us

to meet a key regulatory deadline in March 2025.

We also prioritised scenario testing in key areas

to reduce risk and to ensure we identify and

remediate potential vulnerabilities in a timely

fashion (we remain on-track to meet the

March 2025 regulatory deadline), although

execution risk is elevated due to complexity. We

continue to actively engage with industry working

groups to ensure we are cognisant of common

vulnerabilities and third-party service providers.

Cybersecurity

In 2024, key drivers of risk included geopolitically

motivated cybersecurity attacks where ransomware

is inserted into supply-chains, posing a critical

risk, and exploitation of critical vulnerabilities. Our

remediation plans drove improvements to our

cybersecurity risk profile throughout 2024. This

strengthened our overall cybersecurity controls and

improved our resilience, within a cybersecurity 

threat landscape which continues to evolve.

Data Quality

In 2024, we enhanced our Data Operating

and Ownership models, end-to-end data

management controls, and governance for

measuring and escalating data quality issues. We

have remediation plans in place as part of our Data

Management Programme  to further enhance data

quality, data privacy and protection.

Outsourcing and Third-Party

Under Operational Resilience regulations, loss

of a critical third-party (SPOF) is deemed a severe

but plausible scenario. Our ORRP programme

addresses these risks, along with the creation

of specific playbooks which are cross-checked to

business area continuity plans.

Strategic Transformation

Key areas of concern related to our plans include:

potential risk of material disruption and incidents;

insufficient funding to deliver critical business

priorities; and the risks arising from implementing

cost driven efficiencies.

We have set up a taskforce with Risk participation

to provide a review of, and challenge, project costs.

Savings initiatives undergo rigorous governance

and risk assessment processes. Operational risk

provides enhanced oversight on moderate and

higher risk projects, which require risk assessments

and mitigations to be in place.

Regulatory Capital

The level of capital we have to hold is highly

sensitive to regulatory decisions on the

implementation and interpretation of capital rules.

Further complexity arises due to dual regulation

of Santander UK by the PRA and the ECB. Basel

3.1 ‘near-final’ rules have been published which

could impact us, although they will not apply until

1 January 2027. However, our current and

projected CET1 Capital surpluses provide

significant capacity to absorb adverse capital

movements.

Climate Change

There are clear regulatory expectations on the

embedding of climate risks in our risk management

processes, strategies and remuneration targets.

In 2024, we made significant strides in integrating

climate risk management into our business. For

the first time, we ran internal models and scenarios

for Climate Internal Scenario Assessment (CISA),

which considered the broader impacts of physical

and transitional risks in addition to our internal

climate transition plan and green finance plan.

There are execution risks around these

programmes, as well as regulatory risks. To

address this, we are enhancing our data and

governance processes to support risk management

and reporting.

Payments Risk Transformation

The payments industry landscape is rapidly

evolving with new regulatory requirements, scheme

changes and adoption of new technology and

standards. Risks arise from the scale and pace of

transformation of payment systems which pose

a challenge to capacity and capability to deliver. In

2024, we continued to progress an improvement

plan to address these requirements.

Artificial Intelligence (AI) & Machine Learning

AI developments in the banking industry will test

preparedness to safely manage and respond to

its evolution given the velocity, pace and scale

of change.

We have a planned phased approach to AI

over our three-year plan period. To support this,

we are improving data quality to enable model

development, which is being progressed primarily

under our Data Management Programme.

We plan to incorporate AI into our Non-Financial

risk structure, along with adopting a specific

AI policy standard.

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Risk management overview continued

Emerging Risks

We monitor these risks using our

Risk Radar and regularly provide

updates to the ERCC and BRC.

Highlighted below are our Emerging Risks in 2024

and our associated management actions.

Most Emerging Risks we face are systemic risk

issues which also impact our peers. Santander UK

may be exposed to more idiosyncratic risk in areas

impacting regulation, where we face dual regimes,

principally the PRA and FCA in the UK and the

ECB in Europe.

In 2024, our portfolio of Emerging Risks was

broadly unchanged, but we have identified and

categorised specific Emerging Risks under the

most significant drivers below.

Strategic and business related risks are addressed

under our risk types and cover the broader

challenges in the banking sector including Market

Competition. Under Emerging Risks we focus on

emerging digital business risks and opportunities

which also impact market competition.

Uncertain Regulatory Agenda

UK Regulatory Demand on Banking Sector:

adverse impacts on sector investability are likely

to continue in the medium-term given the level of

regulatory stretch relative to the EU and US.

Whilst the PRA’s proposed Basel 3.1 rules have

been received positively, total levels of capital in

the UK banking system remain materially higher

than in other jurisdictions. This coupled with

Consumer Duty, Financial Ombudsman Service

determinations on complaints, normal course

of business inspections of our operations such

as Liquidity Supervisory Review and Evaluation

Process, and retrospective action on banking

activity, is negatively impacting the UK banking

sector’s international competitiveness. Our Public

Affairs and Regulatory Policy teams have been fully

engaged with regulators and the UK Government

to prompt action to redress the balance.

Net Zero transition: given the UK Government’s

acceleration of the clean power action plan from

2035 to 2030, there are potential risks to the

economy if this is not achieved. We have included

a delayed transition scenario in our climate stress

testing that assesses potential adverse economic

impacts of carbon taxes, which could be introduced

to speed up transition, but inadvertently cause an

economic shock. We also support Banco

Santander with data for their mandatory disclosures

under CSRD, and align our qualitative and

quantitative data as much as possible, although

Santander UK is not subject to CSRD itself.

Chevron Deference: the US Supreme Court

overturned a doctrine that ambiguity in a statute

implied delegation of interpretive authority to a

relevant federal government agency. As such, long-

standing positions of regulatory agencies in the US

may be subject to change, and lead to regulatory

uncertainty which we may need to be cognisant of

in certain areas such as capital markets.

Increased uncertainty in Macroeconomic and

Geopolitical Environment

UK Political risks: the banking sector was spared

some measures to increase related taxes in the

October 2024 budget, such as the Bank Levy and

payment of interest on commercial reserves.

However, there will be increased costs to

businesses as a result of increased employer’s

National Insurance (NI) which will also flow through

to customers and the wider economy. Our Public

Affairs team regularly engages with government

officials to understand policy direction and we

consider potential financial and other impacts in our

business plans.

US Political risks (Deregulation): although the

new Republican administration’s policy agenda is

still evolving, there are directional signals:

increased energy production; lower corporation tax

rates; variable trade tariff rates on imports; and

deregulation policies.

Deregulation is likely to be a feature of the new

Republican administration and could further

increase UK banks’ uncompetitiveness should US

banks gain further regulatory advantage.

Trade Tariffs, Sanctions and Supply Chains:

increased trade tariffs and/or sanctions either on

specific nations or more broadly, given elevated

geopolitical tensions, could impede critical supply

chains in the UK, reigniting inflationary concerns

and a negative economic outlook.

In such a scenario, it is likely the MPC would have

to hold rates rather than enact cuts to mitigate

inflation. We consider the potential impacts of such

a scenario in our stress testing for Capital (ICAAP)

and in our Operational Resilience planning and

testing. Our third-party suppliers could be impacted

through retaliatory measures including cyber-

attacks, which might then impact us.

Quantitative Tightening: driven mainly by

Quantitative Easing (QE), the total stock of Bank of

England (BoE) reserves reached a peak of £978bn

in January 2022. Since then, the MPC has been

selling assets to unwind QE. The size of the BoE’s

balance sheet is determined by the amount of

reserves supplied, implying that reserves will shrink

going forwards. We are now undertaking asset

purchases and lending through short-term and

long-term repo operations as part of Liquidity

Management. As QE unwinds there could be

unintended consequences for markets and financial

stability.

Eurozone Sovereign Bank contagion: the ECB

warned of Eurozone sovereign debt risks in its

November 2024 Financial Stability Review.

Elevated debt levels and high budget deficits,

coupled with weak long-term growth potential,

increase the risk that market concerns over

sovereign debt sustainability will reignite. The

banking and corporate sectors are not immune as

rising sovereign bond yields could ultimately drive-

up both banks’ and companies’ funding costs. We

monitor sovereign credit spreads and potential for

market contagion via daily Market and Structural

risk reports and at our ALCO.

Markets, Competition & Technology

Digital Bank challengers: market competition

continues to intensify with challengers, having

achieved improved profitability and viability,

posing a significant medium-term challenge to

the business. Our investments in digital and data

capabilities are ongoing to enhance digital

offerings, including: our new mobile banking app,

which has been well received by customers, pre-

approved aggregator credit card sales, and

enhanced customer relationship management

capabilities to leverage our insights into customer

behaviour.

Digital Pound (Central Bank Digital Currency):

our initial concerns over adverse market liquidity

and funding implications were fed back to the BoE

in 2023, along with our peers. The BoE now

appears to be more receptive to the use of Central

Bank Digital Currencies in the Wholesale sphere,

which may benefit retail use cases, in which we

have an aspiration to develop. We are working with

our peers on the Regulated Liability Network

programme to develop an alternative retail offering,

and to the Digital Pound. Our Regulatory Policy

team monitors developments in this area with the

business and risk.

Digital Risks: the banking sector is accelerating

innovation and elevating business and market

competition through adopting technologies that

are shaping the present and future of financial

services. These include: AI, Quantum Computing,

Crypto & Blockchain, Open Banking/Finance, and

Cloud Computing. These innovations will likely

result in enhanced regulatory scrutiny and

disclosure requirements and a fully fledged

regulatory/supervisory framework. We are

enhancing our risk management approach to these

broader digital risks, as well as leveraging potential

business opportunities and will track progress via

our top and Emerging Risk updates.

Environmental and Social

Environmental and Social related risks are

increasing. Significant wealth disparity both

within nations and globally is driving geopolitical

fragmentation, with emerging pushback to

international regulations and globalisation, as

well as mass migration to the US and Europe.

Climate Change and Biodiversity concerns are

prominent, including more frequent extreme

weather events and related risks such as

natural resource shortages and global pandemics.

Environmental regulations are also becoming

more disruptive, although there are emerging

signs of a significant pushback to these generally.

There are potential implications for economic

stability, our customers and colleagues, which

we will carefully consider in our business and

resource planning.

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Risk management overview continued

Risk types

Risk types map to,

and are significant drivers of, our

Top and Emerging risks.

Introduction

Risk types are components of our overarching risk

framework and are set out in detail in the risk

review. Each has its own defined framework and

we report on and review the risk profile formally at

the ERCC, BRC and Board. However, the risk

profile status level is proposed and recommended

by the underlying specialist risk control forums.

Many of our Top and Emerging Risk issues, which

we described in the commentary above, intersect

with our risk types and are mapped in the table

below. We also comment below on a selection of

these risk types, which were in focus in 2024:

Credit risk

Our Credit portfolios remained relatively resilient

in 2024, with better than anticipated economic

performance being the main driver. Portfolio arrears

levels remained stable in the year.

However, we remain cautious, as the full effects

of relatively higher interest rates may not yet have

flowed through to the wider economy, and growth

remains below average.

Broader macroeconomic and geopolitical

headwinds also remain, as set out in our

Emerging Risks update.

Strategic and Business risk

These risks remain challenging to manage, due

to the competitive market environment in both

mortgages and deposits. Digital banks continue

to build their customer base and expand their

product offerings. Government and regulatory

focus remains elevated. Recent judgements on

motor finance commissions remain a headwind,

given the potential wider scope of redress.

In 2024, we continued to invest in our digital

and data capabilities, as well as launching new

propositions for our customers, whilst simplifying,

automating, and reducing residual risk.

Operational risk

This continued to be an area of focus in 2024,

as we managed risks arising from a heightened

external cybersecurity environment, exacerbated

by geopolitical conflicts. We enhanced our fraud

detection and prevention controls to mitigate fraud

attacks and fraud losses, which are impacting the

banking industry. We also enhanced oversight of

IT Risk management where we are implementing

a multi-year transformation programme.

In 2024, we matured our Outsourcing and Third-

Party Risk management capabilities which remains

a key area of regulatory focus. We also managed

complex change risk delivery with capacity and

capability challenges, and enhanced our

operational resilience and related regulatory

requirements.

We have Critical Remediation Plans in place for

our Non-Financial Risks, as needed, and we track

progress via regular EWRM report updates to

ERCC, BRC and Board.

Model risks

In 2024, we managed a heavy regulatory models

agenda, including compliance with new regulatory

technical standards for banks. We expect this trend

to continue over the next two years in line with

supervisory expectations, particularly given the

recent publication of Basel 3.1 rules.

Risk Types	Top Risks	Emerging Risks
Credit & Capital	Margin Compression Climate Change Regulatory Capital	Uncertain Macroeconomic & Geopolitical environment Environmental and Social
Market & Liquidity	Margin Compression Regulatory Capital	Uncertain Macroeconomic & Geopolitical environment
Pension	Regulatory Capital	Uncertain Macroeconomic & Geopolitical environment
Strategic & Business	Margin Compression Data Management Technology Strategic Transformation Financial Crime	Markets, Competition and Technology Uncertain Macroeconomic & Geopolitical environment
Reputational	Climate Change Conduct & Regulatory	Uncertain Regulatory Agenda
Operational	Third Party Risk management Strategic Transformation Cybersecurity Data Quality Technology Resiliency Fraud Payments	Markets, Competition and Technology Environmental & Social
Model	Climate Change Margin Compression	Uncertain Macroeconomic & Geopolitical environment Uncertain Regulatory Agenda
Conduct & Regulatory	Climate Change Margin Compression Data Management Fraud risk	Uncertain Regulatory Agenda Environmental & Social
Economic crime	Financial Crime Payments Fraud	Markets, Competition and Technology

Annual Report 2024 Santander UK Group Holdings plc 19

Strategic Report Sustainability Governance Risk review Financial statements Shareholder information

Financial overview

Building on

Strong foundations

Highlights

£950m

Profit after tax

(2023: £1,596m)

2.14%

Banking NIM

(2023: 2.20%)

55%

Cost-to-income ratio

(2023: 48%)

3bps

Cost of risk

(2023: 10bps)

14.8%

CET1 Capital ratio

(2023: 15.2%)

4.9%

UK leverage ratio

(2023: 5.1%)

1.Comprises ‘Net fee and commission income’ and ‘Other

operating income’.

Please refer to the Financial review section of our

Annual Report on Form 20-F for the year ended 31

December 2023 for a comparative discussion of

2023 financial results compared to 2022.

CFO’s review of the year

After a record year last year, 2024 presented a

difficult environment for both ourselves and our

customers. While we saw inflationary pressures

ease for our customers, the macroeconomic

environment remained volatile and placed pressure

on customers and business alike.

Overall, we saw lower profit before tax and Return

on Tangible Equity2 (RoTE) in 2024, both of which

were impacted by higher costs of deposits and

the provision charge we took relating to historical

motor finance commission payments. Despite

this, the performance of the business in the

second half of 2024 was particularly pleasing, with

a significant improvement from the first half of the

year, gaining momentum with clear evidence that

our strategic focus is starting to pay off. The gap

between revenues and operating expenses before

credit impairment charges, provisions and charges

positively widened by £92m in H2-24 from H1-24.

Our balance sheet, while smaller after recent

deleveraging, remains strong and reflects our

prudent approach to risk. Good asset quality and a

robust credit performance helped our profitability

in 2024 and continues to be a competitive

advantage for Santander UK in a highly

competitive environment.

In my first full year as Chief Financial Officer, I am

A more detailed Consolidated Income Statement is contained in the Consolidated Financial Statements.

Summarised consolidated income statement
Summarised consolidated income statement (£m)	2024	2023
Net interest income	4,326	4,667
Non-interest income1	357	509
Total operating income	4,683	5,176
Operating expenses before credit impairment charges, provisions and charges	(2,577)	(2,485)
Credit impairment charges	(70)	(206)
Provisions for other liabilities and charges	(706)	(336)
Profit before tax	1,330	2,149
Tax on profit	(380)	(553)
Profit after tax	950	1,596

proud that we were able to deliver a set of financial

results that will position us well for the coming

years. Putting our customers first is always at

the forefront of what we do.

Our financial results

Profit before tax fell to £1,330m in 2024, a 38%

decrease from 2023. This decrease reflects market

wide pressures on customer deposit costs and was

impacted by the £295m charge for historical motor

finance commission payments made in the year.

Net interest income decreased 7%, largely due to

higher customer deposit costs and a reduction in

mortgage loans.

Our Banking NIM2 decreased 6bps to 2.14%,

reflecting the decrease in net interest income.

As we exited 2024, we saw our Banking NIM2 build

momentum in each quarter and expect tailwinds

into 2025.

Non-interest income was down 30%, driven by

the 2023 revaluation gain of our shares in

Euroclear which was not repeated in 2024.

Operating expenses before credit impairment

charges, provisions and charges increased by 4%,

due to further investment in efficiency and customer

experience and two years of high inflation.

This increase in operating expenses, coupled with

lower net interest income and non-interest income,

saw our cost-to-income ratio increase 7 percentage

points to 55% (2023: 48%).

Cost management discipline will remain a key

focus for management throughout 2025.

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Strategic Report Sustainability Governance Risk review Financial statements Shareholder information

Financial overview continued

Credit impairment charges were down 66%

to £70m, given the improved economic outlook

with lower unemployment rate and higher house

prices expected. Our cost of risk remains resilient,

decreasing in the period to 3bps (Dec-23: 10bps).

Provisions for other liabilities and charges

were up £370m, driven by the £295m charge

for historical motor finance commission payments

in the third quarter of 2024, as well as higher

transformation costs.

Tax on profit decreased by 31%, reflecting the

reduction in profit in 2024.

Our loan portfolio continues to underpin

the performance of our balance sheet and

has performed well throughout the cycle.

Being a lender who is primarily focused on UK

mortgages, our mortgage portfolio accounts for

84% of customer loans and has a relatively low

stock loan-to-value ratio of 51%.

With mortgage lending margins improving and

becoming more attractive, we saw our gross

mortgage lending improve slightly to £16.1bn

in 2024 (2023: £13.1bn).

Despite this, we continued with our planned

balance sheet optimisation in 2024 driven by higher

funding costs, contributing to the reduction in total

mortgage lending of £8.0bn over the period.

Unsecured retail lending, which includes credit

cards, overdrafts and UPLs continued to make

up 3% of our portfolio, however we saw a 42%

increase in credit card openings in 2024. Consumer

Finance made up 3% of the loan book at the year-

end and is largely secured on the vehicle.

Our corporate loan customers are well diversified

across sectors, and we maintain relatively low

exposure to CRE and BTL.

The Stage 3 ratio of our loan book was 1.40%

(Dec-23: 1.49%), positively impacted by improving

economic conditions, high asset quality and the

sale of low return portfolios. While we saw a

modest increase across the year, arrears remain

relatively low compared to historical levels.

Customer deposits reduced by £10.2bn in 2024 as

we remained disciplined with pricing actions in a

highly competitive deposit market. The decrease

was mainly driven by outflows from these pricing

actions, and was targeted towards higher cost

corporate deposits. This was possible due to lower

funding requirements given a smaller mortgage

book, and as a result we saw our cost of deposits

start to fall.

As a result of similar reductions on both sides of the

balance sheet, our LDR remained relatively stable

at 109% (Dec-23: 108%).

	The FCA Motor Finance review
	Following the FCA’s Motor Market review in 2019, we received a number of claims and complaints in respect of our historical use of discretionary commission arrangements (DCAs) prior to rule changes made in 2021. In January 2024, the FCA commenced a review of the use of DCAs between lenders and credit brokers (the FCA review) and in July 2024 announced that it expected to share the outcome of its review by May 2025. In October 2024, the Court of Appeal handed down a judgment in relation to cases against other lenders involving DCAs that was unexpected and materially changed the expectations of the FCA review.
	What this means for us
	In light of the Court of Appeal judgment, we recognised a provision of £295m in the third quarter of 2024, materially impacting our 2024 financial performance. This provision included estimates for operational and legal costs and potential awards, based on various scenarios using a range of assumptions. There remain significant uncertainties as to the nature, extent and timing of any remediation action required, and the outcomes of the FCA review will provide the market with more clarity and guidance. Ultimately, the total financial impact remains unknown and could be materially higher or lower than the amount provided.

Summarised segmental balance sheet
At 31 December (£bn)	2024	2023
Customer loans by segment
Retail & Business Banking	173.8	182.3
Consumer Finance	4.8	5.2
Corporate & Commercial Banking	18.0	17.9
Corporate Centre	1.3	1.3
Customer loans	197.9	206.7
Loans to JVs, accrued interest, ECL and other	5.0	4.5
Loans and advances to customers	202.9	211.2
Cash, repos, other financial assets and other assets non-interest earning	64.2	70.9
Total assets	267.1	282.1
Customer deposits by segment
Retail & Business Banking	151.8	158.3
Corporate & Commercial Banking	22.1	24.1
Corporate Centre	9.5	11.2
Customer deposits	183.4	193.6
Deposits from JVs, accrued interest and other	2.4	1.5
Deposits by customers	185.8	195.1
Financial liabilities, repos and other liabilities non-interest earning	67.2	72.0
Total liabilities	253.0	267.1
Shareholders' equity	14.1	15.0
Total liabilities and equity	267.1	282.1

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Financial overview continued

Segmental performance

Our business segments
Retail & Business Banking Retail & Business Banking provides UK mortgage lending and banking services and unsecured lending to individuals and small businesses.	Corporate & Commercial Banking Corporate & Commercial Banking provides banking products and services to SMEs, mid-sized and larger corporates.
Profit before tax: £1,226m	Profit before tax: £351m
Consumer Finance Consumer Finance provides prime auto consumer financing for individuals, businesses, and automotive distribution networks.	Corporate Centre Corporate Centre provides treasury services for asset and liability management of our balance sheet.
Profit/(loss) before tax: (£175m)	Profit/(loss) before tax: (£72m)

We continue to manage our business through three

core operating segments plus the Corporate Centre

as outlined across. To ensure consistency and to

leverage shared investment, best practice, and

expertise, we work closely with our colleagues in

Spain and across Europe.

Retail & Business Banking continued to focus

on delivering products and services that meet our

customers needs in 2024. We launched several

new and exciting products, while focusing on

diversifying liabilities (e.g. Cahoot) and optimising

pricing and margins.

Our new Edge Credit Card saw the expansion of

our Edge offerings to customers, while our new

Green Mortgages range and our first customer

self-invested personal pension product in the UK

rounded out our new product offerings in 2024.

We continued to improve our digital capabilities,

starting with the launch of OneApp in the UK,

allowing our customers a more streamlined,

refreshed way to manage their finances, alongside

fully digitising key customer journeys. We also

provided our mortgage customers and brokers with

new digital experiences through the launch of Edge

Home and My Home Manager, as we continue our

drive to become a digital bank with a human touch.

Retail & Business Banking customer deposits were:

At 31 December (£bn)	2024	2023
Current Accounts	62.3	65.0
Savings	74.8	77.5
Business Banking	9.5	10.6
Other Retail products	5.2	5.2
Total RBB deposits	151.8	158.3

Customer loans and deposits reduced with

disciplined pricing. Profit before tax of £1,226m

(2023: £1,718m) was down, largely due to

higher customer deposit costs and a reduction

in customer balances.

Consumer Finance maintains a prime portfolio,

with 95% of lending secured on the vehicle

and relatively low levels of default. In 2024,

our Original Equipment Manufacturer (OEM)

partners were responsible for 19% of all new car

registrations in the UK, and 27% of new business

was for green assets (i.e. electric vehicles and

hybrids), with tailpipe emissions under 50g/km.

Our green asset balance for the total portfolio is

now 20%.

Lower lending was driven by a decision to focus

on value and capital generation. Loss before tax

of £175m (2023: profit before tax of £174m) was

driven by the £295m provision relating to historical

motor finance commission payments.

Corporate & Commercial Banking (CCB) delivered

a performance in line with 2024 expectations, and

furthered support for UK businesses. We saw an

increase in the number of new clients and provided

more than £26bn in corporate facilities and funding.

We continued to focus on high-value and

international business, with over 500 new

clients onboarded in 2024. Over 1,000 new

users are now on our Santander Navigator

platform and we entered a five year deal with

Dentsu to collaborate on the expansion of the

platform. We also signed a three year partnership

with the Department for Business & Trade to help

UK businesses of all sizes realise the opportunities

presented by global trade.

We ran a refreshed marketing campaign,

focusing on connections and our ability to introduce

businesses to the connections they need to grow

in the UK and internationally.

Profit before tax of £351m (2023: £570m) was

down, largely due to pressures on income from

higher deposit costs and inflationary pressures on

operating expenses.

Corporate Centre loss before tax was down to £72m

in 2024, a positive movement of £241m from 2023,

mainly due to transformation expenses in 2023

which were not repeated in 2024.

Strong liquidity, funding and capital position

We remain strongly capitalised, maintaining buffers

to regulatory requirements.

The CET1 capital ratio decreased to 14.8%

(Dec-23: 15.2%), driven by lower profits and

£1.3bn in dividends paid in the year (2023: £1.5bn),

including £0.8bn in special dividends, slightly offset

by a reduction in RWA exposure. RWAs decreased

to £66.6bn (Dec-23: £69.1bn), as a result of

lower mortgage lending and active balance

sheet management.

The UK leverage ratio remained broadly stable at

4.9% (Dec-23: 5.1%), and our leverage exposure

decreased to £242.4bn (Dec-23: £247.2bn), again

the result of active balance sheet management.

Strong LCR of 156% (Dec-23: 162%), reduced

following TFSME repayments.

Our diversified funding programme across a range

of currencies and classes continued in 2024. We

issued £8.4bn in Sterling equivalent medium-term

funding, including Covered Bond, Senior

Unsecured and RMBS issuances.

We repaid £6.0bn of TFSME in 2024, with an

outstanding balance of £11.0bn at the year-end.

A further £7.1bn is due for repayment in 2025, with

£2.5bn due in 2027 and the remaining £1.4bn due

in 2031.

The structural hedge position for the Santander UK

plc group increased to £110bn (Dec-23: £106bn),

as we position ourselves well for Bank Rate

reductions. Our enhanced structural hedge position

has lowered our net interest income sensitivity to

interest rate changes.

Looking ahead

As we start to see more attractive lending

margins in the market, we anticipate a gradual

return to net lending growth in 2025 after a period

of deleveraging.

Our prudent approach to risk and pricing actions

is expected to continue to provide tailwinds for

net interest income and Banking NIM, following

the improvement we saw in the second half

of 2024.

Following the recent period of ECL write-backs,

we expect to see our cost of risk to trend up

towards pre-pandemic levels in 2025.

We will again be focused on cost management in

2025, as we look to drive profitability and capital

generation, while continuing to invest in our core

banking franchise. As we transform the bank

through the simplification and automation of our

business, we expect investment in these areas to

drive cost efficiencies in 2025.

With performance heading in the right direction,

I expect to see the momentum of the second half

of 2024 help us deliver on our 2025 objectives.

Angel Santodomingo

CFO, 7 March 2025

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Sustainability highlights

Sustainability overview

I ha

	Sustainability Overview
	We are working with our stakeholders to support a secure and inclusive transition to a more sustainable society. Our Sustainability strategy sets out how Santander UK will tackle the challenges identified by the 2024 double materiality assessment (DMA). It is also aligned with Banco Santander's Sustainability strategy.
	Our DMA identifies our priority sustainability topics and was completed as part of a wider exercise with Banco Santander in 2024. This was introduced to meet Banco Santander’s EU CSRD requirements. Banco Santander led the new double materiality assessment (DMA) process across all Santander entities. As part of this approach, Santander UK identified impacts, risks, and opportunities linked to the sustainability topics identified as most material to our business. Currently, Santander UK is fully aligned with Banco Santander on material topics.
	In the Sustainability section of this report, we cover the priority topics identified by our DMA within the environment, social and governance pillars of our Sustainability strategy. It demonstrates how we meet stakeholders’ expectations and support inclusive and sustainable growth. We also include mandatory disclosures, including the Taskforce on Climate-related Financial Disclosures (TCFD) and Streamlined Energy and Carbon Reporting (SECR).

	Environment
	Aim: Support our customers and address key climate issues, risks and opportunities.
	Strategic pillars: –Supporting our customers in the green transition –Embedding climate in risk management –Aiming to align our activity with the UN Paris Agreement
	Material topics:1 Climate change –Climate change mitigation –Energy
	2024 progress: In 2024, we expanded our financed emissions disclosures to include commercial real estate. We also trialled six retail banking test and learn initiatives to the market. These are designed to support our customers to improve the efficiency of their homes. We also developed research on sustainability in relation to buildings, skills and SMEs, to better understand the challenge that society faces of transitioning to a low-carbon economy. We are also working with strategic partners on initiatives aligned to our priorities.
	2025 ambitions: In 2025, we aim to further improve asset level data quality to inform our financed emissions assessments. We will also continue to embed our transition planning, stress testing, and financial planning within the business. The insights gained will continue to inform our business decisions and client engagement.
	Alignment to UN SDGs:

1.Aligned to Banco Santander’s double materiality assessment which is in line with the EU Corporate Sustainability Reporting Directive (CSRD) and European Sustainability Reporting Standards (ESRS).

Annual Report 2024 Santander UK Group Holdings plc 23

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Sustainability highlights continued

	Social
	Aim: Support productive inclusive growth across our key stakeholder groups: our customers, our communities, and our people.
	Strategic pillars: –Our Customers: Making their better happen –Our Communities: Better communities –Our People: Unleash our people’s potential.
	Material topics:1 Customers –Information-related impact for consumers –Social inclusion . Affected communities –Communities’ economic, social, and cultural rights Our people –Working conditions –Equal treatment and opportunities for all –Other work-related rights.
	2024 progress: We developed a new Social strategy to align with Banco Santander. We considered material topics such as UK societal challenges, and our ambition to support inclusive growth, emerging regulation on topics such as inclusion and help people gain the skills they need to thrive.2
	2025 ambitions: We will start to execute our new Social strategy. For our customers, this means continuing to support financial health and inclusion. For our communities, initiatives will focus on education, employability, and entrepreneurship. For our people, we will use our skills and talent development programmes to enable people to contribute to a high- performing culture. Social mobility and leadership accountability will be at the centre of our inclusive culture work.
	Alignment to UN SDGs:

	Governance
	Aim: Clear and robust governance with well-defined accountability which promotes the success of Santander UK, its customers, and other stakeholders.
	Strategic pillars: –Stakeholder engagement –Effective Board of Directors –Responsible practices and stakeholders’ interests.
	Material topics:1 Business conduct –Corporate culture –Protection of whistleblowers –Corruption and bribery –Management of relationships with suppliers, including payment practices.
	2024 progress: In July 2024, we approved our first Governance strategy. A key activity in 2024 was to simplify our governance processes, which allows us to make decisions in an efficient yet effective way. This is vital to the success of our business and we will continue to deliver simplification in decision making.
	2025 ambitions: We have identified key actions for the next three years to deliver our strategic goals. This includes delivering value for Banco Santander and leveraging their knowledge, ideas, capital, resources, and technology. We will also simplify our decision making and legal entity structure, and further embed ESG criteria into future decision making.
	Alignment to UN SDGs:

1.Aligned to Banco Santander’s double materiality assessment which is in line with the EU CSRD and ESRS.

2.In line with the FCA’s consultation: ‘CP23/20: Diversity and inclusion in the financial sector – working together to drive change’.

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Sustainability highlights continued

Medium-term scorecard

In 2021, we established our Sustainability medium-term scorecard with ambitions for 2025 or 2030. The ambitions were developed to strengthen our

contribution to Banco Santander’s public ambitions and help us meet our own sustainability priorities. This year we reviewed our public ambitions in line with

our Sustainability strategy considering we have already achieved some of our 2025 medium-term goals. New ambitions beyond 2025 are in development and

will align with Banco Santander. Performance to 31 December 2024 is shown below. In accordance with Listing Rule 9.8.6(9), the statistics on this page outline

metrics for Board members and executive management at 31 December 2024. Santander UK’s workforce is in the UK and these goals are focused in the UK, and

in compliance with relevant UK law. These goals support business performance and all employment decisions are based on merit.

>3.1 million children and young people given access to financial education resources1	>3.7 million people financially empowered2
Financial empowerment	Financial empowerment
Ambition of 2.2 million by 2025 was achieved in 2023 (>3.1 million). No further monitoring took place in 2024 and comparisons are not provided.	Ambition of 3.1 million by 2025 was achieved in 2023 (>3.7 million). No further monitoring took place in 2024 and comparisons are not provided.

£17.2bn of green finance raised and facilitated3	152,000 customers supported to become greener with products and services3
Supporting our customers in the green transition	Supporting our customers in the green transition
Ambition of £20bn by 2025. 2024 performance was in line with expectations and we expect the ambition to be met by the end of 2025.	Ambition of 180,000 customers supported by 2025. 2024 performance was in line with expectations and we expect the ambition to be met by the end of 2025.

34.1% senior female employees	31% of women on the Board
Inclusive culture	Inclusive culture
At 31 December 2024, 34.1% of senior roles are female with representation increased over the year. To align with Banco Santander, we expect to progress gradually and sustainably to c.40% by 2030. Signatory of the UK Government HM Treasury Women in Finance Charter which asks financial services firms to commit to implement four key industry actions including setting internal targets for gender diversity in our senior management.	Due to several planned changes performance has decreased compared to 2023. At 31 December 2024, 31% of the Board were female.4 Our current ambition is to achieve a gender balance of at least 40% male and female with at least one senior Board position (Chair, CEO, CFO or SID) to be female. This is aligned to FCA rules set out in PS22/3: Diversity and inclusion on company boards and executive management which requires disclosures to targets and progress.

14.7% senior Asian, Black, and other Minority Ethnic employees	29% of senior employees from a lower socio-economic background
Inclusive culture	Social mobility
At 31 December 2024, 14.7% of senior roles were Asian, Black, and other Minority Ethnic. Our ambition was achieved 1 year in advance (14% by 2025). We reviewed our ambition and changed this to 16% by 2026. This is aligned to FCA consultation paper CP23/20.	We continue to encourage our senior leaders to disclose their socio-economic background and continue to integrate social mobility into our ESG agenda with an ambition of 35% by 2030.

1.Cumulative since 2019.

2.People financially empowered: Number of people that are unbanked, financially underserved, in financial distress, with difficulty to access credit, or with financial knowledge constraints who through our products

and services and social investment initiatives are able to get access to the financial system, receive tailored finance, and increase their financial knowledge.

3.Banco Santander uses an internal system to define what investments can be considered green or social financing. We apply this to our lending and identify the following as green finance: Renewable energy and

other green energy financing; mortgages on properties with A or B rated EPC; and financing for electric hybrid, and plug-in hybrid electric vehicles (PHEV) with emissions below 50g CO2/km. Cumulative since

2021.

4.For more, see the Corporate Governance section.

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Stakeholder voice

Listening to our stakeholders

The Boards of the Company and Santander UK plc

(the RFB and the Boards) have identified our

customers, employees, regulators, communities

and investors as our key stakeholder groups on the

basis of their importance in ensuring the continuing

success of Santander UK. While not a stakeholder

in the strictest sense, we also take into account our

impact on the environment and climate given its

criticality to life and business in general.

Balancing the interests of these stakeholder

groups alongside the interests of Santander UK is

key to ensuring that we operate as a sustainable,

responsible and profitable business, and we

therefore seek to ensure that this is embedded in

our strategy and culture.

To support the Boards and their Committees in

their considerations, our Board paper template and

training includes a specific focus on the directors'

duties arising from s172 and how management's

preparation of their papers plays a key role in

ensuring that the Directors can discharge their

responsibilities in a fully informed manner.

In 2024, the Boards continued to spend time,

inside and outside of formal meetings, engaging

with stakeholders and discussing their interests,

including visiting branches, contact centres

and offices around the UK to better understand

the needs of our customers, employees and

communities. You can read more about Directors’

engagement with employees in 2024 on the

following page.

Each Director meets with our principal regulators,

the PRA and FCA, on a periodic basis to

understand their views, and these regulators also

attend our Board meetings from time to time. The

Board meets regularly with members of

management and the directors of Banco Santander

SA, the Company’s shareholder, and, as usual, the

Board held its February 2024 Board cycle in Madrid

in order to strengthen relations and understand

Banco Santander’s views more clearly.

READ MORE ON PAGE 62 IN OUR BOARD

RESPONSIBLE BANKING COMMITTEE CHAIR’S

REPORT

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Stakeholder voice continued

Climate transition

Background

In 2023, when the Board approved Santander UK’s initial internal

Transition Plan, we encouraged management to focus their

efforts on practical initiatives where Santander UK could have a

real impact on the environment and help our customers meet their

net zero ambitions.

How the Board approached it

As a result of our request, management created and delivered a

series of test and learn initiatives aimed at supporting our customers

to become greener. To ensure that management were fully invested

in their success, the delivery of these initiatives formed part of the

ESG metrics set in the 2024 variable pay scorecard. The Committee

received updates on progress against these initiatives during the year

to provide guidance and oversight.

Outcome

At the end of 2024, management had delivered six test and learn

initiatives, partnering with third parties, which provided Santander UK

with critical insights and aided our learning, enabling us to adjust and

develop the initiatives to our customers’ needs. The Board

encouraged management to continue to drive these and to identify

further opportunities to support our customers in the green transition.

Stakeholders considered

READ MORE IN OUR CLIMATE-RELATED FINANCIAL

DISCLOSURES ON PAGE 31

Employee voice in the boardroom

Background

The Santander UK plc Board has appointed a designated director

for employee engagement, Lisa Fretwell, who drives the Board’s

employee engagement programme and reports quarterly to the

Board Responsible Banking Committee on Directors’ findings.

How the Board approached it

In 2024, the Board again had a full programme of employee

engagement opportunities including listening sessions where

employees were encouraged to speak openly about their views

of Santander UK, their experiences working here and supporting

our customers. In addition, each of our employee Networks has a

Non-Executive Director sponsor who attends events and champions

their cause.

Outcome

As well as reporting to RBC at each of its quarterly meetings on

the key messages from Non-Executive Directors’ listening sessions,

Lisa also passed on these findings to management. This is another

helpful way of receiving both positive and constructive feedback

from employees which allows for actions to be taken where

necessary. For example, following a Non-Executive Director branch

visit, management took a number of actions designed to improve

customers’ access to cash machines as well as support and security

for branch employees across the network. In another instance,

management took actions to improve the process for the final

stages of our graduate recruitment programme.

Stakeholders considered

READ MORE IN OUR PEOPLE SECTION ON PAGE 40

Key stakeholder groups:
	Customers		Investors		Employees		Communities		Climate		Regulators

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Non-financial information disclaimer

This Annual Report contains, in addition to financial information, non- financial information (NFI), including environmental, social and governance-related

metrics, statements, goals, commitments and opinions. The NFI can be found throughout the report but mostly in the Sustainability Section. NFI is prepared

following various external and internal frameworks, reporting guidelines and measurement, collection and verification methods and practices, which are

materially different from those applicable to financial information and are in many cases emerging and evolving. The methodologies used to prepare our NFI

metrics can be found in our 2024 ESG Supplement. NFI is based on various materiality thresholds, estimates, assumptions, judgements, and underlying data

derived internally and from third parties. NFI is thus subject to significant measurement uncertainties, may not be comparable to NFI of other companies or over

time or across periods and its inclusion is not meant to imply that the information is fit for any particular purpose or that it is material to us under mandatory

reporting standards. NFI is for informational purposes only, without any liability being accepted in connection with it except where such liability cannot be limited

under overriding provisions of applicable law.

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Sustainability

In this section
Sustainability overview	29
Environment	30
Climate-related financial disclosures	31
Social	39
Governance	41

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Sustainability

Sustainability overview

Financial institutions play a key role in addressing

sector-specific issues such as financial inclusion

and financial crime. They also have a role to play in

tackling broader societal challenges such as

climate change and social mobility.

Environment
Supporting our customers and addressing key issues, risks and opportunities. –Supporting our customers in the green transition –Embedding climate in risk management –Aiming to align our activity with the UN Paris Agreement.

Governance
Clear and robust governance with well-defined accountability which promotes the success of Santander UK, its customers, and other stakeholders. –Shareholder engagement –Effective Board of Directors –Responsible practices and stakeholders’ interests.

Our Sustainability strategy sets out our approach to tackling the key

sustainability challenges identified in our double materiality assessment, led

by Banco Santander. We continue working towards our ambition of net zero

by 2050 by driving inclusive and sustainable growth. Our Sustainability strategy

embeds environmental, social, and governance (ESG) aspects into our

business and culture and aligns to the global framework of Banco Santander.

More information on each of these pillars is shown below. We disclose

progress on our Sustainability strategy across our key reports each year, as

outlined in this section of the report.

Social
Supporting productive inclusive growth across our key stakeholder groups: our customers, our communities and our people. –Our Customers: Making their better happen –Our Communities: Better communities –Our People: Unleash our people’s potential.

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Sustainability continued

Environment

Highlights

£3.9bn

Green finance raised

and facilitated in 2024

47,000

Customers provided with products

and services in 2024 that support

our transition to net zero

£17.2bn

Green finance raised and facilitated since

2021 against an ambition of £20bn by 2025

We are supporting our

customers in the transition to

a low-carbon economy, as we

continue working towards our

ambition of net zero by 2050.

Tackling climate change is a key strategic priority

for Banco Santander. To underpin this ambition,

Banco Santander is a founding member of the

Net Zero Banking Alliance (NZBA).

In the UK, we are fully aligned to Banco

Santander's net zero ambition and understand

our role in supporting this. Our Climate strategy

consists of three pillars:

–Supporting our customers in the green

transition;

–Embedding climate in risk management;

–Aiming to align our activity with the

UN Paris Agreement.

Delivering our Climate strategy is integral to our

broader business priorities. In 2023, we developed

a first iteration of our internal climate transition

plan. The plan is aligned to the HM Treasury

Transition Plan Taskforce guidelines and defines

how we will implement our strategy.

The internal climate transition plan includes an

assessment of the actions needed to align our

portfolios with the UN Paris Agreement.

We categorised these actions into three groups:

–Actions wholly within our control

–Actions we can influence

–Actions we are reliant on and will need

to monitor.

Our focus in 2024 was on the actions wholly within

our control. Our Green Finance Team trialled six

retail banking test and learn initiatives. These are

a mix of financial incentives and partnerships that

will help us understand how we can best support

our customers in the transition. 

The actions we can influence are heavily

dependent on future government policy. To better

understand the barriers to action, we have

undertaken three influential pieces of customer

research:

–Tomorrow’s Homes explores the barriers to

improving the energy efficiency of existing UK

housing stock

–Tomorrow’s Skills looks at the global economic

shifts that will alter the way we work and the

impact this may have on the skills needed in the

UK workforce

–SME research examining attitudes to net zero

among SME clients.

Our research findings have helped shape our

policy and advocacy efforts with the UK

Government to better support our customers.

Santander UK’s Climate Strategy
Working towards our ambition of achieving net zero emissions by 2050
Supporting our customers in the green transition		Embedding climate in risk management			Aiming to align our activity with the UN Paris Agreement
Help our customers transition to a low-carbon economy		Integrate climate-related risks and adhere to regulatory and supervisory expectations			Align key lending portfolios and reduce our own environmental footprint
Green finance products and propositions		Embedding climate as a transversal risk			Interim goals and addressing our dependencies
Key Enablers
Strategic partnerships	Data and disclosures		Stakeholder research and engagement	Policy advocacy		Green skills

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Sustainability continued

Climate-related financial disclosures

Introduction

We believe that the banking sector, together with others such as the government, have a major role to play in addressing climate change and this role is constantly

evolving. So, we continually seek to improve the way we measure, manage, and report on climate change. The table below outlines how we align to the Task

Force on Climate-related Financial Disclosures (TCFD) recommendations including the Companies Act 414CB. In this section, we share our activities for

2024 relating to the TCFD recommendations, along with ongoing and future activity. We believe our disclosures are materially consistent with the TCFD

Recommendations and Recommended Disclosures (as defined in the FCA’s Listing Rules) with detailed information provided in the ESG Supplement, which

does not form part of this Annual Report. We have adopted this approach to present the detailed and technical content in the clearest position for users of these

reports.

TCFD pillar and disclosure requirements		page	CA 414CB
Governance
a) Board’s oversight of climate-related risks and opportunities	The Board Responsible Banking Committee (RBC) continues to provide Board-level oversight and approval of climate performance and in the past 12 months met eight times. Key sustainability topics discussed included: ESG disclosures, changes to our Environmental, Social, and Climate Change Prohibitions and Special Attention Risk Management policy, internal climate transition plan, and ESG remuneration scorecards. The Board Risk Committee (BRC) is responsible for recognising environmental and social risks. Together with the RBC it assesses Santander UK’s exposure to climate- related risks and other sustainability issues, as appropriate. The Board Risk Committee met eight times and discussed sustainability-related matters on three occasions.The Board Audit Committee maintains oversight of sustainability-related controls and disclosures. Ongoing activities: The Board will continue overseeing our Climate strategy, internal climate transition plan, and management of related climate risks and opportunities. This includes a focus on strengthening our ESG data controls and further embedding transition planning within financial planning.	ESG Supplement: 40-50	(a)
b) Management’s role in assessing and managing climate-related risks and opportunities	Our Senior Management Committee (SMC) provides comprehensive executive oversight, steering, and review of ESG strategy and performance supported by the ESG Leadership Forum, which reports upwards to SMC and Board. In 2024, management engaged on several climate-related topics and created two new forums to enhance accountability for green finance and transition planning: –Green Finance Taskforce: responsible for overseeing delivery of our green finance propositions –Climate Transition Plan Governance Meeting: responsible for overseeing the development, embedding and execution of our internal climate transition plan. We reviewed our current sustainability governance approach. This covered policies, processes, roles, and responsibilities. A further assessment will be carried out in 2025 to develop our longer-term strategy.	ESG Supplement: 40-50
Strategy
a) Climate-related risks and opportunities the organisation has identified over the short, medium, and long term	Climate is considered a transversal risk within our risk framework, which helps identify and prioritise climate-related risks and opportunities for our organisation. The evolution of our internal climate transition plan continues to provide insight into climate-related opportunities. We published our Tomorrow's Homes, Tomorrow's Skills, and SME research reports which provide insight into the risks and opportunities of a just transition and the role we can play to support this. We also continued to support the energy transition by lending £382m of green finance in 2024 to a range of qualifying renewable energy and infrastructure projects. This included supporting the construction and operation of over 600MW of battery energy storage assets (BESS).	33	(d), (e), (f)
b) Impact of climate-related risks and opportunities on the organisation’s businesses, strategy, and financial planning	In 2024, we took several actions to address the impact of climate-related risks and opportunities: –Appointed a UK Head of Green Finance accountable for delivering our green finance ambition –Trialled six new test and learn initiatives designed to gain insight into how we can support our customers to improve their homes or reward customers living in the most energy efficient homes. These include discounted lending rates, cashback offers to reduce the cost of taking action, and a series of new partnerships. These partnerships look to plug customer knowledge gaps, and connect them with trusted suppliers. We also made significant progress in enhancing our climate risk appetite statement by: –Embedding adherence to the Banco Santander Environmental, Social, and Climate Change Prohibitions and Special Attention Risk Management policy –Articulating that we have no appetite for greenwashing –Defining metrics to track delivery of the UK contribution towards our Banco Santander Consumer Finance ambition.	23
c) Resilience of the organisation’s strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario	Our scenario analysis exercises assess the resilience of our strategy against the impacts of climate change in two different scenarios (including a less than 2.0°C scenario). Our 2024 analysis indicates that while climate-related risks can potentially intensify other risk factors, we remain resilient within the context of the scenarios examined.	34 ESG Supplement: 13

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Sustainability continued

TCFD pillar and disclosure requirements		page	CA 414CB
Risk Management
a) Organisation’s processes for identifying and assessing climate- related risks	We continue to embed climate within our existing risk management framework to identify and assess climate-related risks. This year we deployed a new in-house Climate Internal Scenario Analysis (CISA) programme. This assessed transition and physical risks, using a range of factors, including assumptions on both current and emerging climate requirements to deliver granular insights. This enabled us to confirm our previous conclusions that climate risk is not yet a material threat to our business strategy. In CCB, we enhanced the focus of our client-level climate questionnaires, CEROM (Client Environmental Risks and Opportunities Model). This helps us identify ways to support our customers in their transition to a low-carbon economy. We also updated our Environmental, Social, and Climate Change Prohibition and Special Attention Risk Management policy. This works toward delivering our ambition to reduce lending to fossil fuel intensive industry and to identify customers that require assistance to transition away from non-sustainable practices. Additionally this year, we also enhanced our quarterly climate risk MI dashboard, which is reported in the ESG Leadership Forum.	ESG Supplement: 21-26	(b), (c)
b) Organisation’s processes for managing climate- related risks	In 2024, we undertook several key initiatives to effectively manage climate-related risks: –Enhanced our greenwashing controls through staff training programmes and improved governance. This includes oversight of ESG product labelling, and implementing policies and procedures. –Developed and implemented a reporting suite to review sector-based trends and areas of concern. –Utilised CISA to explore more severe tail risk events and sensitivities, enhancing our scenario analysis. Ongoing activities: In 2025, we will leverage our new CISA capabilities and work to integrate the insights gained with data from CEROM into our credit decision-making process.	ESG Supplement: 21-26
c) How processes for identifying, assessing, and managing climate-related risks are integrated into the organisation’s overall risk management	In 2024, we made substantial progress in embedding climate risk management into our business operations. Using the outputs from CISA, CEROM, and our internal climate transition plan, we have enhanced our decision-making processes. We aim to continuously review and refine our approach to climate change risk appetite, incorporating the outputs from CISA to establish a well-informed risk appetite across the business. Furthermore, we have revised our Environmental Operations Policy Standard. This sets the requirements for managing climate-related risks and impacts within our own operations and supply chain. Ongoing activities: With our new CISA capability, we are integrating insights from the CEROM to assess whether climate and broader ESG-related risks require consideration into our decision making process. Additionally, we will use CEROM and CISA to support our internal climate transition planning and Green Finance strategy to identify opportunities where we can support customers in their transition.	ESG Supplement: 21-26
Metrics and Targets
a) Metrics used by the organisation to assess climate-related risks and opportunities in line with its strategy and risk management process	In 2024, we implemented an internal climate transition plan dashboard to track progress against our net zero ambition. This dashboard monitors the internal and the external levers identified as critical to achieving this goal. This covers Scope 1 and 2 emissions and financed emissions for our Mortgages, Commercial Real Estate (CRE) and Consumer Finance portfolios. The dashboard is reported quarterly to our Climate Transition Plan Governance Meeting and the ESG Leadership Forum. The dashboard is used to inform a wide range of actions, including green finance initiatives, our public policy engagement, and areas of customer research. Additionally, our annual Variable Pay Scorecard provides a weighting related to ESG performance, with ambitions linked to execution of our Climate strategy. Our emissions footprint reporting has focused on the areas where we have the greatest impact. We aim to continue to expand our coverage in alignment with GHG Scope 3 categories while improving our data gathering and reporting processes	35-38	(g), (h)
b) Scope 1, Scope 2 and, if appropriate, Scope 3 greenhouse gas (GHG) emissions and related risks	This year, we have continued to enhance our disclosures by including emissions from our Scope 3 CRE lending. This portfolio accounts for the majority of our CCB lending and is a material addition to our reporting. We also made progress in assessing Scope 3 emissions from purchased goods and services, capital goods, and upstream transportation and distribution. In 2024, we developed our in-house calculation abilities in relation to supply chain emissions, which was reviewed against industry best practice by Deloitte. Based on their recommendations, we created a plan to include these categories in future disclosures. Ongoing activities: In 2025, we will improve how we assess our existing financed emissions portfolio by enhancing data quality and implementing a process for increasing reporting frequency.	35-38
c) Targets used by the organisation to manage climate-related risks and opportunities and performance targets	We are aligned to Banco Santander's approach to progressively set specific actions to align our portfolios with the UN Paris Agreement, focusing on managing and activating key levers. Our internal analysis of all emissions categories also includes assessments against multiple net zero pathways. In the UK, we have a £20bn green finance lending by 2025 goal, supporting the global ambition of €220bn by 2030. While we continue to monitor a range of climate related risks, we do not have specific targets or key performance indicators for those that we do not currently deem material to our strategy.	35

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Sustainability continued

Strategy: Climate risks and opportunities

We focus on managing climate risks and opportunities, assessing impacts on portfolios, and our wider business strategy. While we continue to monitor a range of

climate related risks, we do not have specific targets or key performance indicators for those that we do not currently deem material to our strategy.

Risks	Term1	Risk Rating2	Impact	Mitigation
Physical
More frequent and severe climate events	All	Low	May cause damage, business disruption, affecting insurability and asset values of mortgage and CRE.	We monitor flood risk for all our real estate assets and include physical climate risks in our scenario analysis.
	MT, LT	Low	Physical damage to Santander UK assets such as offices and branches.	We conduct a climate change risk assessment of our estate every five years, with currently low exposure.
Transitional
A delayed and disorganised transition	All	Medium	Stringent government measures causing inflation and financial instability and the wider economic impact may affect our clients credit risk profiles.	Inclusion of a delayed transition within our scenario analysis, for which we have forecast the impacts to be immaterial.
New EPC laws strand low-efficiency properties	LT	Medium	Low energy efficiency mortgages and commercial real estate may become stranded.	We monitor the EPC rating of all our real estate assets.
Lack of access to timely and quality data	All	Low	Impacts our ability to monitor and measure our emissions preventing us from accurately assessing the risks and opportunities arising from the transition.	We are continuously enhancing data quality in financed emissions reporting. Additionally, we plan to integrate more granular data into our scenario analysis to improve outputs and understanding of climate risks.
Partners give unsuitable retrofitting advice or poorly performed retrofits	MT, LT	Low	Potential for conduct-related risks, leading to regulatory or legal penalties and damage to the bank's reputation.	We thoroughly vet all our test and learn partners to provide high-quality services.
Rapid EV technological developments increase residual value risk	MT, LT	Low	Older electric vehicles depreciate more rapidly than anticipated, which can affect the profitability of the auto lending portfolio.	Residual value forecasts are embedded within predictive market-driven data received from our independent valuation analytics company prior to all sales being made.
Rapidly evolving regulatory landscape for net zero	MT, LT	Low	Non-compliance with these regulations could lead to reputational risks, potentially damaging the bank's image and trust with stakeholders.	Both Lines 1 and 2 implement a dedicated horizon scanning approach to identify and manage new climate- related requirements with relevant business parts.
Falling behind the UK's progress towards net zero	MT, LT	Low	Could lead to reputational risks, potentially damaging the bank's credibility.	We have developed our internal transition plan and aim to align the activity with the UN Paris Agreement.

Opportunity	Term1	Benefit	Action
Homes
Grow our green mortgage lending book	ST	Increasing energy efficiency regulations will drive our retail customers to retrofit, potentially requiring additional financing.	Developing tailor products to support customers in meeting regulations using insights gained from our Tomorrow’s Homes report.
Growing retrofit market	LT	The need to retrofit the UK’s housing stock presents an opportunity to offer customers tailored retrofitting products.
Consumer Finance
Develop new relationships with manufacturers aligned to net zero	All	The transition to electric vehicles has provided the opportunity for new manufacturers to enter the UK market, with whom we can grow our partnerships.	We have already developed relationships with new entrants BYD and Polestar.
Corporate and Commercial Banking
Support our clients in their transition	All	Increasing regulation on transitioning the UK economy to Net Zero will drive our corporate and commercial clients to transition which may require additional financing.	Engage clients in proactive conversations to understand ESG impacts and offer support. In the short term we will conduct research to understand CCB clients' challenges and develop pilot products to aid them.
Provide financing for green economy	ST, MT	The UK Government’s Clean Power 2030 Action Plan offers opportunities to increase our renewable energy infrastructure and battery storage financing.	We continue to finance renewable energy projects, lending £382 million of green finance in 2024 to renewable energy and infrastructure projects.
Growing retrofit market	LT	Increasing regulation on improving energy efficiency will drive our Commerical Real Estate customers to transition which may require additional financing.	In the short term we will conduct further research to better understand the challenges faced by our CRE clients and how we can best support them.
Own Operations
Reduce emissions from our own properties	ST, MT	This offers a great opportunity to set an example and minimise our footprint.	We have set ourselves an ambition to achieve net zero in our own operations by 2030.

1.Short term (2025–2027): Aligned with our financial planning horizon. Medium term (2028 – 2030): Aligned with industry and policy 2030 milestones. Long term (2031–2050): Aligned with our

Net Zero Ambition.

2.Business impact (low, medium, high): the scale of potential loss in terms of profitability/revenues, diminishing value of collateral/assets, or occurrence of increased potential costs that Santander UK could face for

climate-related risks.

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Sustainability continued

Risk management: Climate stress testing

and scenario analysis

Scenario analysis helps us recognise our exposure

to climate-related financial risks. It also allows us to

explore the actions required to manage

these risks.

In 2024, we developed the capability to run

internal models and scenarios within our CISA.

Our scenarios meet regulatory expectations while

also offering multiple use cases for the business.

CISA provides a long-horizon, dynamic balance

sheet assessment of transitional and physical

risks.

The modelling approach for CISA uses Santander

UK’s existing stress test methodologies and

infrastructure. It now also applies assumptions on

how climate change may affect the probability of

default and collateral values, including:

–Simulation of new business by EPC Rating

–Regional House Price Index (HPI) to project

collateral values

–Collateral and Probability of Default (PD)

adjustments based on the likelihood of climate

risks, costs, and insurability

–Sectoral Gross Value Added (GVA) pathways.

Impacts are split between physical risks specifically

flood, subsidence, and coastal erosion, and

transitional risks such as changing government

policy and reduced affordability through rising

energy costs.

In CISA 2023, we performed a desktop physical

risk assessment .To build upon this assessment,

we chose a delayed transition scenario for CISA

2024, to be run alongside a climate baseline

scenario. This enabled us to identify any risks

and opportunities that could arise on our balance

sheet from transition risk. The table below shows

the scenarios we explored.

Delayed transition scenario

A delayed transition scenario could lead to an

increase in losses of 20% over 30-years against

the baseline scenario. In 2024, the largest losses

were concentrated in our Retail mortgages book

and our CCB portfolio.

Retail mortgage losses were driven by a reduction

in customer affordability through the economic

impact of the transition. Additional stress arises

from mandated minimum EPC policy.

Corporate and Commercial losses were attributed

to the impact of policy changes on macroeconomic

factors. However, this was mitigated by our

portfolio having no sector concentration and low

exposure in carbon intensive sectors.

Compared to our five-year delayed transition

shock scenario in 2022, peak losses were higher,

primarily due to energy price stress.

Sensitivity scenario – physical event

To better understand tail risks, we ran a sensitivity

scenario. This focused on compounding a real

estate price shock, with a material flood event

due to the failure of the Thames Barrier. This

event would be material because Greater London

accounts for around 25% of our retail mortgages.

Under this sensitivity scenario, we projected a 5%

increase in losses.

The results of our scenario analysis show that we

are not materially exposed to expected physical

climate risks within the 30-year period assessed.

The risk is mitigated due to low average loan-to-

value ratio across our Mortgage and CCB

portfolios and the FloodRe insurance scheme.

Looking ahead we will continue enhancing

our modelling capabilities. This includes using

more granular data to upgrade the model

outputs and improving our understanding of

climate-related risks. We will continue monitoring

the industry’s best practices and incorporate them

in our approach.

We will also use our new climate modelling

capability to explore more severe tail risk events

and sensitivities. This will include second-order

supply chain impacts.

For information on Santander UK’s process for

embedding climate in risk management, please

see the ESG supplement.

2024 transition risk assessment scenarios

CISA scenario	Baseline	Delayed Transition	Sensitivity
Scenario Characteristics	Reflects current landscape and government policies. It is used to provide a basis for other scenarios to compare to. The baseline scenario is aligned to our internal climate transition plan.	Policy is late and disorderly. Stringent government policies implemented in 2030 causing inflationary and financial instability. Sectoral business disruption and consumer affordability are stressed.	Residential and commercial real estate downward price shock (based on 2008) sensitivity combined with Thames Barrier flood event, on the baseline scenario.
Time Horizon	30 years	30 years	30 years
Mean Global Warming by 2050	1.9oC	1.6oC	1.9oC
Nature of Physical Risks	Medium	Low with acceleration over time	Medium
Nature of Transition	Partial	Disruptive	Partial
Transition Start Date	2023 Q4	2030 Q1	2023 Q4

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Sustainability continued

Metrics and targets

In 2024, we continued to monitor progress against our climate ambitions. In this section, we illustrate key metrics and ambitions used to monitor this progress

against the three pillars of our Climate strategy. We will continue to refine our climate-related metrics and associated goals in 2025, focusing on impact and actions

that we can influence.

Santander UK medium-term climate change ambitions and 2024 performance
Climate strategy pillar: Supporting our customers in the green transition
	Metric	Performance		2025 ambition	Climate-related risk or opportunity	Progress in 2024	Looking ahead
		2024	Cumulative since 2021
1	Volume of green finance raised and facilitated.1	£3.9bn	£17.2bn	£20bn	This ambition reflects our ambition to finance green assets and activities. It illustrates the opportunity to provide leading green finance products to support our customers in developing climate-resilient business models.	In 2024, our green lending grew by 40% compared to 2023, driven mainly in our retail mortgages due to growth in our lending for EPC A and B properties, in addition to overall growth in our CRE portfolio.	Status: On track Mortgages: our focus is aiming to deliver the right quality of mortgage stock by focusing core new lending on high-EPC properties. We are also supporting the retrofit of existing housing stock. Consumer Finance: We are exploring new partnerships which support the transition to electric vehicles. CCB: We continue to develop our green and sustainable lending capabilities to contribute to this ambition.
2	Number of customers supported with products and services in their transition to net zero.	47,000 customers	152,000 customers	180,000 customers	This ambition considers the impact our green lending has in supporting customers with their own transition.	In 2024, we assisted c.15,000 more customers compared to 2023. This growth was driven by an increase in auto lending for low-emission vehicles and the expansion of our EPC A and B mortgage lending.	Status: On track Mortgages: We are looking at ways to engage customers in home energy efficiency. This includes how we can support customers who wish to take action to improve their home energy performance. We will continue to focus on our retrofitting strategy and test and learn projects to make retrofitting simple and risk-free across the UK. CCB: We are working with our clients to help them assess, understand, and mitigate climate-related risks.
Climate strategy pillar: Aiming to align our activity with the UN Paris Agreement
	Metric	2024	Reduction since 2019	2030 ambition	Climate-related risk or opportunity	Progress in 2024	Looking ahead
3	Achieve net zero in our own operations by 2030.2	2537.5 tCO2e	65%	Net zero	Improving operational sustainability performance will limit the carbon footprint of our own operations while potentially reducing long-term operational costs.	Reductions in our Scope 1 emissions were mainly driven by rationalisation and refurbishment of our head office estate.	Status: On track We will continue to execute our 2025 property strategy and will begin to implement actions that will continue to 2030.

1. Banco Santander uses an internal classification system to define what investments can be considered green or social financing. We apply this to our lending and identify the following as green finance:

Renewable energy and other green energy financing; mortgages on properties with A- or B-rated EPC; and financing for electric vehicles, hybrid, and plug-in hybrid electric vehicles (PHEV) with emissions below

50g CO2 /km. Cumulative since 2021.

2. Refers to Scope 1 and 2 market-based emissions.

Supporting our customers in the green transition

We use two ambitions to measure our impact on

supporting our customers in the net zero transition.

These are part of our sustainability medium-term

scorecard and progress is shown in the table

above. In recent years, performance was hindered

by external factors, such as economic slowdown

and monetary policy.

Despite these challenges, green finance raised

and facilitated in 2024 was considerably higher

than in 2023. Potential improvement of the

economic landscape in 2025 means that we are

more confident marking the status of these two

metrics as ‘on track’ in achieving our 2025

ambition.

Embedding climate in risk management

Retail and Business Banking – Mortgages

We continue to closely monitor physical and

transition climate risks on our most significant

lending activity: residential mortgages. We’re

embedding these risks into our governance and

risk management processes, scenario analysis,

decision making, and financial risk disclosures.

Energy efficiency profile of our residential

mortgage book (transition climate risk)

The UK government is committed to publish detail

on their Warm Homes Plan in Spring 2025. We

continuously monitor and engage on relevant

policy development to support our customers’

EPC band distribution	A	B	C	D	E	F	G	Total
	%	%	%	%	%	%	%	%
London	-	2.4	4.6	7.0	2.4	0.3	0.1	16.8
Midlands	0.1	3.2	4.5	7.1	2.7	0.6	0.1	18.1
Northern Ireland	-	0.2	0.4	0.8	0.5	0.2	-	2.0
North	0.1	2.7	5.0	8.5	2.9	0.5	0.1	19.7
Southwest and Wales	0.1	1.7	3.2	4.8	1.9	0.5	0.1	12.2
Scotland	-	0.6	1.7	1.4	0.4	0.1	-	4.2
Southeast	0.1	4.3	7.3	10.8	3.7	0.7	0.1	26.9
Total 2024 (registered)	0.4	15.0	26.6	40.3	14.4	2.8	0.6	100
Total 2023 (registered)	0.3	14.9	25.7	40.5	14.9	3.0	0.6	100
Total 2024 (registered and modelled)	0.3	11.7	24.1	47.7	13.4	2.3	0.5	100
Total 2023 (registered and modelled)	0.2	11.3	22.8	48.8	14.0	2.4	0.5	100

needs. The table below shows the distribution

of EPCs by band across all regions, with all data

sourced from Landmark. In 2024, the percentage

of A-C rated energy efficient properties on our

mortgage books slightly increased to 42% and

the overall profile was broadly unchanged.

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Sustainability continued

Flood risk (physical climate risk)

Flooding is one of the most material physical

climate risks to our mortgage portfolio. We

closely monitor the flood risk for every Santander

UK mortgage using postcode-level data. Flood risk

probability is expressed as a ratio, such as a one

in 30-year event (1:30) indicating the likelihood of

flooding in a given year. Almost 95% of properties

in our mortgage lending have very low or negligible

flood risk. We regularly assess the impact of

physical climate risks on our portfolio's value,

as set out in the Credit risk section of this Annual

Report. There was no material change in flood

risk across the portfolio in 2024. The table

below shows the annual flood risk for mortgage

accounts open on 31 December 2024. Flood risk

estimates are based on the likelihood of winter

precipitation exceeding 6mm per day and account

for coastal, river, and pluvial flooding.

EPC data for our residential mortgage portfolio is

Credit exposure to carbon intensive sectors (CCB)	2024 £m	2024 %(a)	2023 £m	2023%(b)	% change
Real estate activities	8,672	52.3	8,678	50.5	1.7
Accommodation and food service activities	1,155	7.0	1,269	7.4	(0.4)
Wholesale and retail trade(c)	948	5.7	1,099	6.4	(0.7)
Construction(d)	915	5.5	904	5.3	0.2
Manufacturing(e)	536	3.2	544	3.2	0.1
Electricity, gas, steam, and air conditioning supply (f)	403	2.4	376	2.2	0.2
Information and communication	324	2.0	348	2	(0.1)
Transport and storage(g)	180	1.1	216	1.3	(0.2)
Agriculture	93	0.6	112	0.7	(0.1)
Water supply	84	0.5	88	0.5	-
Mining and quarrying(h)	70	0.4	55	0.3	0.1

(a) Percentage of Santander UK's total credit exposure to non-financial corporates of £16.6bn in 2024. (b) Percentage of Santander UK's total credit exposure to non-financial corporates of £17.2bn in 2023. (c)

Includes wholesale and trade of motor vehicles and motorcycles, parts and accessories. (d) Includes construction of buildings and civil engineering activities. (e) Includes manufacturing and processing of food

products. (f) Includes power generation, which comes largely from renewable sources (g) Includes transport by road, rail, and air, and passenger transport. (h) Includes mining and extraction activities, of which

oil and natural gas extraction is minimal.

1.We classify carbon-intensive or climate-relevant sectors in line with the European Banking Authority’s technical standards on prudential disclosures on ESG risks in accordance to Article 449a CRR (Pillar 3),

following the NACE classification.

Flood risk for residential mortgages	2024									2023
Annual probability band	Number of properties	%								Number of properties	%
		Total %	London %	Midlands %	North %	Southeas t %	Northern Ireland %	Scotland %	Southwest and Wales %
High: >1:30	2,578	—	-	-	-	-	-	-	-	2,858	—
Medium: between 1:30 and 1:100	8,768	0.8	0.2	0.1	0.2	0.2	-	-	0.1	9,319	1
Low: between 1:100 and 1:1,000	46,597	4.3	1.3	0.5	0.8	1.0	0.1	0.2	0.5	49,304	4
Very Low: between 1:1,000 and 1:10,000	60,353	5.6	1.8	0.8	0.9	1.4	0.1	0.2	0.5	64,359	6
Negligible: <1:10,000	957,971	89.0	13.3	15.9	17.8	23.1	2.8	5.2	11.0	1,015,858	89
Total	1,076,267	100.0	16.6	17.3	19.6	25.8	3.0	5.6	12.1	1,141,698	100

provided by Landmark, sourced from the central

EPC registers for England and Wales, Scotland,

and Northern Ireland. Where a property lacks an

EPC rating, Landmark infers energy efficiency

using its proprietary model or reference to EPC

ratings in the same postcode area. Reasonable

efforts are made to ensure data is complete and

accurate.

Approximately 76% of the portfolio has a

registered EPC, with the highest data quality and

availability for England and Wales. In 2024,

properties in these regions represented 91% of our

mortgage portfolio. Landmark provides current

flood risk estimates and 50-year forecasts using

four climate change scenarios.

Consumer Finance

The key sustainability consideration for our

Vehicle type	2024	2023
	%	%
Hybrid electric vehicles	13	11
Plug-in hybrid electric vehicles	8	6
Electric vehicles	13	9
Internal combustion engine vehicles	65	74

Consumer Finance division is the phase-out of

internal combustion engine (ICE) vehicles. We are

monitoring the UK Government's delay on the ban

of new ICE vehicles. The shift to electric vehicles

may impact auto loan demand and vehicle residual

values. Consumer Finance exposure is in the

transition from ICE to hybrid and electric vehicles,

as shown in the table below.

Corporate and Commercial Banking

In 2024, our corporate lending exposure

to sectors1 with severe climate change impacts

remained relatively low, with a slight increase in

real estate activities by 1.7 percentage points as

shown in the table below.

Our Environment, Social, and Climate

Change Prohibitions and Special Attention

Risk Management policy is aligned with Banco

Santander. It sets criteria to identify, assess,

monitor, and manage environmental and social

risks and other climate change-related activities.

It prohibits direct new investments and/or providing

financial services to specific projects or activities

across key sectors that are considered harmful to

the environment.

The policy covers activities in the oil and gas,

power generation, and mining and metals

sectors, and those arising from businesses

engaged in soft commodities. We define fossil fuel

exposure as exposure in operations and

companies associated with extracting, producing,

and investing in fossil fuels.

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Sustainability continued

Aiming to align our activity with the

UN Paris Agreement

Own Operations

Aligned with our revised Banco Santander group

efficiency objective and their 2030 Efficiency

Plan, we have made significant progress in

reducing our operational environmental impact.

This includes significant reductions in energy

and waste production. More details about our

sustainability metrics and performance trends

are available in the Metrics section of the

ESG Supplement.

Streamlined Energy and Carbon Reporting (SECR)

We continue to monitor and evaluate our energy

and carbon footprint in line with the

SECR regulation. Our emissions are calculated

using the UK Government Department for Energy

Security and Net Zero (DESNZ) conversion

factors. In 2024, we used 89,994,215 kWh of

energy, compared to the 93,387,392 kWh used in

2023. This change was due to reductions in our

gas consumption. We emitted 5,577 tCO2e

market-based greenhouse gas emissions,

compared to 5,417 tCO2e in 2023.

Our total Scope 1, 2, and 3 emissions for 2024

are set out in the SECR table. The slight increase

in Scope 2 location-based emissions was due to

the opening of Unity Place, our head office

building, and an increase in staff returning to

offices across the estate. However, we saw

reductions in natural gas in 2024, mainly due to

rationalisation across our Head Office Estate.

Business travel also continued to rise in 2024

leading to an increase in Scope 3 emissions. As

a result, in 2024 our overall scope 1, 2 and 3

business travel emissions increased compared

to 2023. Refurbishments at Triton Square

our London office, are close to completion. These

include replacing lower efficiency mechanical,

electrical and plumbing items (i.e. pumps, LED

lights, fan coil units, air handling units (AHUs),

HVAC replacements). Our Bradford

and Sheffield sites completed energy saving

projects in 2024. Redhill and Glasgow started

projects in 2024 that will continue into 2025.

Financed emissions

Banco Santander is a founding member of the

Net Zero Banking Alliance (NZBA) and is working

towards net zero by 2050. In the UK, our internal

climate transition plan articulates how we will

implement our Climate strategy to support this

ambition. This includes exploring and analysing

different UN Paris Agreement pathways for our

portfolios in line with reputable, scientific pathways.

To define pathways for our portfolios, we consider

(1)2023 Scope 2 emissions updated to reflect a small reduction due to a new data source for Jersey which more accurately reflects the emissions profile of our operations there. This has a material impact on SFS

emissions, which also account for the majority of Santander UK's Scope 2 market-based emissions. This update also impacts Total CO2e emissions and CO2e emissions per employee for 2023.

(2)Employees that had left Santander UK or were temporarily absent during the 2023 reporting period had been excluded from Scope 3 business travel but should have been included. We have estimated this

exclusion based on available data. This estimation also impacts the Total CO2e emissions, CO2e emissions per employee, and year-on-year percentage for 2023. This excluded population has been included for

the related data points in 2024 but 2023 data was not updated due to confidence in the previous calculation based on available data.

key external and internal levers. These include

Government policy and our own commercial

actions, on which we have different degrees of

influence. We aim to integrate the learnings from

this process into our overall business strategy

and climate risk management cycle. We are also

aware of challenges in obtaining high quality data.

Streamlined Energy and Carbon Reporting (SECR)	2024	2023
Scope 1 (tCO2e)	2,473	2,827
Scope 2 location-based1 (tCO2e)	16,259	16,190
Scope 2 market-based1 (tCO2e)	65	63
Scope 3 business travel2 (tCO2e)	3,039	2,527
Total1, 2 (tCO2e)	5,577	5,417
Year-on-year change (%)	3%	(9)%
Total emissions per employee1, 2 (tCO2e/FTE)	0.29	0.27

In 2024, we continued to assess financed

emissions for our Mortgages and Consumer

Finance portfolios which cover 99.1% and 97.6%

of exposures within these portfolios. This year we

also report our initial assessment of financed

emissions from our CCB book for Commercial

Real Estate, Social Housing, Care Homes, and

Hotels.

We use the latest Partnership for Carbon

Accounting Financials (PCAF) financed emissions

methodology for our material portfolios. We have

been PCAF signatories since 2021 and contribute

to the ongoing development of its standards.

PCAF data quality scores give an indication of data

confidence (a lower score means a higher level of

data confidence). We are working to improve the

quality and collection process for underlying data.

Our approach to calculating and attributing

financed emissions is overseen and approved by

our ESG Leadership Forum.

Residential Mortgages portfolio financed emissions	2023	2022
Exposure covered (£bn)	175.3	187.1
Total portfolio (£bn)	176.9	187.5
Coverage of portfolio (%)	99.1	99.8
PCAF data quality score	3.2	3.3
Emissions intensity (kgCO2e/m2)	20.9	39.7
Financed emissions (thousand tCO2e)	1,221	2,561

In 2023, we first disclosed GHG emissions from

our mortgage portfolio to 31 December 2022. In

2024, we improved our approach, replacing the

EPC emissions calculation with one that combines

the EPC rating with the PCAF emissions factors.

We believe this improves accuracy by using

emissions factors more aligned with current grid

intensity. Our disclosure this year covers financed

emissions to 31 December 2023. The calculated

emissions decreased year on year mainly due to

our decision to use PCAF emissions factors. More

detail on our financed emissions and the reasons

for the movement are set out in the additional

notes on GHG emissions calculations.

Consumer Finance portfolio financed emissions	2023	2022
Exposure covered (£bn)	8.6	8.3
Total portfolio (£bn)	8.8	8.5
Coverage of portfolio (%)	97.6	97
PCAF data quality score	2.1	3.1
Emissions intensity (gCO2e/km)	141	143
Financed emissions (thousand tCO2e)	1,336	1,366

In 2023, we also established the baseline GHG

financed emissions from our Consumer Finance

portfolio to 31 December 2022. Our disclosure this

year covers financed emissions from our

Consumer Finance portfolio to 31 December 2023.

In 2024, we developed an automated process to

calculate and report emissions from our Consumer

Finance portfolio. Results are updated monthly and

reported to senior management to support

business decisions in a timely manner. Emissions

disclosed in this section only include emissions

from passenger cars and exclude £208.9m of

loans to other vehicles.

CRE, Social Housing, Care Homes, and Hotels portfolio financed emissions	2023
Exposure covered (£bn)	9.6
Total portfolio (£bn)	9.7
Coverage of portfolio (%)	98.7
PCAF data quality score	4
Emissions intensity (kgCO2e/m2)	25.4
Financed emissions (thousand tCO2e)	114

Our initial assessment of financed emissions from

CRE, Social Housing, Care Homes, and Hotels is

shown in the table above. The PCAF data quality

score for this book reflects current data challenges.

In 2025, we plan to prioritise improving the quality

of our CRE book. We also aim to build a more

automated and streamlined process to assess

the GHG impact.

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Sustainability continued

Additional notes on GHG emissions calculations

Boundary

Scope 1-3 GHG emissions include the activities

and facilities owned and/or under operational

control of Santander UK Group Holdings plc.

Calculation

Scope 1: GHG emissions from oil, gas,

direct transport, and fugitive gas emissions.

Consumption and transport data is extracted

from relevant source systems and records. Data

is sourced from internal systems, including meter

readings, maintenance records, and internal travel

systems, as well as external systems such as bill

validation systems and external supplier invoices.

Emissions calculated for gas, oil, direct travel, and

fugitive gases follow the GHG Protocol Corporate

Standard. We use the relevant UK Government

Department for Energy Security and Net

Zero (DESNZ) conversion factors and collate

emissions into a total Scope 1 emissions figure.

We use billing invoices, meter readings, mileage

claims, and maintenance records to obtain our

consumption data.

Scope 2: GHG emissions from purchased

electricity, electric fleet and company cars. For

Santander UK, we use the market-based approach

to quantify our emissions, meaning we use

emissions factors provided by our electricity

suppliers. For our Scope 2 emissions, this reflects

the emissions from electricity we have purchased

via green tariffs. These provide electricity from

renewable sources including biomass and wind

generation. Scope 2 emissions for electricity

consumption are calculated using the relevant UK

Government DESNZ conversion factors and

guidance. Emissions from the electric fleet are

calculated using the Residual Mix from DESNZ

Fuel Mix Disclosure. Data for electricity

consumption and travel for electric fleet and

company cars are extracted from relevant source

systems. In 2024, 72% of the fleet were battery

electric vehicles, and 27% were hybrid. Emissions

are collated into a total Scope 2 emissions figure.

We use billing invoices and mileage claims for our

consumption data. Electricity purchased by

Santander Financial Services plc (SFS) was from

conventional energy sources. We record Scope 2

emissions from SFS both as location-based and

market-based emissions. We sourced data for

SFS electricity usage from billing invoices. Where

data was delayed for year-end reporting, the

average monthly electricity consumption was used

to project the consumption for the remainder of

the year.

Scope 3 – Business travel: This includes indirect

travel emissions created through our value chain

that have not been included in Scope 1 and 2.

Our Scope 3 reporting encompasses emissions

from business travel (air, road, and rail). Business

travel records are extracted from relevant internal

systems or provided by our third-party travel admin

operator. The distance in kilometres travelled is

converted into carbon emissions using relevant

factors from UK Government DESNZ and collated

into a total Scope 3 emissions figure. Car data is

based on engine size, flight figures are based on

average cabin seat class, and for rail they are

based on average cabin seat class. Rail figures

are based on national rail conversion factors. We

source data from mileage claims and third-party

travel reports. Taxi travel is excluded due to the

lack of mileage data.

Scope 3 – Financed emissions: This year we made

several enhancements to our methodology; this

includes estimating emissions at an individual

property level rather than grouping properties with

similar characteristics and using averages. 

Calculations for residential mortgages include the

attribution factor. This is the outstanding amount of

the loan at 31 December for each mortgage

divided by the total property value at origination for

each building, as per PCAF’s methodology. We

also updated how we calculate the emissions for

each property, replacing the EPC emissions

factors with PCAF derived factors. Building

emissions are now calculated using the EPC label

and floor area at a property level provided to

Santander UK by the external data provider,

Landmark. Where EPC data is not available,

Landmark uses modelled data. Buildings

emissions are then modelled using PCAF

emissions factors mapped by property type,

location, and EPC band. These building emissions

are multiplied by the emissions factor before being

aggregated to provide portfolio-level emissions.

We believe these methodology changes provide a

more accurate current emissions profile of our

mortgage lending. The change to PCAF emissions

factors better reflects the current UK grid average

emissions, that are masked by the long refresh

periods (up to 10 years) of solely relying on EPCs.

We have not updated the prior year figures and

instead have provided additional detail and

reconciliation in our ESG supplement. We believe

that this provides full transparency to users of the

data presented across both reporting periods. We

recognise that EPCs have several limitations,

including gaps in coverage, a lack of dynamic

updates to capture improvements in properties and

a disconnect from actual energy usage. We

recognise the need to mature our approach to

further refine and address these limitations. We

intend to maintain our current approach of

providing full transparency and reconciliation to

prior years while we further mature and stabilise

our approach to calculating emissions for this

portfolio.

Calculations for Commercial Real Estate include

the attribution factor. This is the outstanding

amount of the loan at 31 December divided by

the total property value at origination for each

building, as per PCAF’s methodology. Building

emissions are calculated by using EPC rating at a

property level provided to Santander UK by

external data providers, Gloval Es and Landmark.

Buildings emissions are then modelled using

PCAF emissions factors based on mapping the

asset to a specific building type and EPC rating.

Where an EPC rating was not available, the UK

PCAF emissions factor for building type was

used. These building emissions are then

multiplied by the attribution factor, before being

aggregated to provide portfolio-level emissions.

Calculations for Consumer Finance include the

attribution factor. This is the outstanding amount

of the loan at 31 December divided by the vehicle

value at origination, as per PCAF’s methodology.

Vehicle emissions are based on vehicle make and

model and are provided by a third party, CAP,

using the WLTP and NEDC data sets. Vehicle

distance is taken from the annual forecast mileage

recorded on the agreement at point of sale. These

vehicle emissions are then multiplied by the

attribution factor, before being aggregated to

provide portfolio-level emissions.

Additional notes: DESNZ conversion factors

change annually, which affects emissions

calculations and explains some of the changes in

these numbers.

Our emissions footprint reporting has

focused on the areas where we have the

greatest impact. We aim to continue to expand

our coverage in alignment with GHG Scope 3

categories while improving our data gathering and

reporting processes.

Annual Report 2024 Santander UK Group Holdings plc 39

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Sustainability continued

Social

In 2025, we’ll introduce our new

Social strategy designed to

foster productive and inclusive

growth with our customers,

communities, and employees.

This strategy will empower our customers

to thrive by enhancing their financial health,

promoting financial inclusion, and providing

access to social finance. It aims to strengthen

communities by equipping an increasing number

of people with the skills necessary to advance their

career opportunities. For our employees, we aim

to unleash potential in an inclusive workplace that

prioritises skill development and supports overall

employee wellbeing.

Our customers

In 2024, we contacted more than 2.6 million

customers showing early signs of potential

financial difficulty. We refer customers to our digital

tools and support, or phone-based or online chat

assistance provided by over 440 financial care

specialists. We contacted 800,000 customers,

to guide them to the Turn2Us benefits calculator.

This aims to identify entitlement to unclaimed

government benefits. As a result, we’ve seen a

£1m increase in benefits payments per month to

associated accounts.

We trained more than 2,200 frontline staff as part

of our partnership with Macmillan Cancer Support.

The training helps employees give specialist

financial and emotional support to customers

affected by cancer. Macmillan calculated that

cancer sufferers often face additional financial

impacts of around £891 a month. We have also

used our partnership with PayPlan to identify

customers who may benefit from free debt advice.

Referrals to this service increased by 64% as a

result.

OneApp, our new mobile banking app, was

recognised as the Best Digital Financial Inclusion

Initiative by The Digital Banker CX 2024 awards.

Accessibility was a core requirement in the

design, development, and launch of our app.

We collaborated with people with accessibility

needs with the aim to have accessibility for all. This

includes features like changing the font size on the

screen, a discreet mode to hide your balances,

and biometric log on.

Our communities

Our support for community development

concentrates on implementing our global strategy

for education, employability, and entrepreneurship.

Our long-term dedication to supporting higher

education students, staff, and academics remains

steadfast. We aim to equip individuals with

the skills they need to graduate and prepare for

the workplace.

The Santander Open Academy is a new initiative

that will provide top tier learning opportunities for

adults looking to get new skills in an ever evolving

job market. Additionally, Santander X will continue

to empower aspiring entrepreneurs to start and

scale their businesses.

Recognising the importance of financial literacy,

we'll focus on providing financial education to

individuals within our communities. This will

not only address pressing societal needs but

also enhance our business goals and strengthen

brand reputation.

Furthermore, a review of our product portfolio will

aim to align our propositions to support the most

vulnerable members of society.

With these initiatives, we aim to build stronger,

more resilient communities equipped for success,

and well prepared for their financial futures.

Highlights

Ranked in the

Top 25

In the Social Mobility Foundation

Employer Index

Euromoney Awards

for Excellence

Won UK Best Bank for Diversity and

Inclusion in 2024

Our employee engagement index score of

7.9

is in the top 25% of external

benchmark data1

Over 2.6 million

customers proactively engaged to offer

support to those who are showing signs

of potential financial difficulty

Over £10m

invested in community support initiatives

in 2024.

1.Employee Engagement Index according to external

benchmark by Workday Peakon Employee Voice.

Santander UK’s Social Strategy
Support productive inclusive growth across our main stakeholders: Our Customers, Our Communities and Our People
Our Customers		Our Communities		Our People
Making their better happen		Better communities		Unleash potential
Financial health Financial inclusion Social finance (Social housing)		Education, employability, and entrepreneurship Financial education Vulnerable people		Social mobility in the workplace Talent and skills development Inclusive culture
Key Enablers
Partnerships and collaborations	Communication		Strategic workforce planning		Data and disclosures

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Sustainability continued

Santander’s The Numbers Game

Our financial education programme, The

Numbers Game, is delivered through our five-

year partnership with Twinkl established in 2020.

In 2024, we launched the Financial Education

Framework at UK Parliament calling for financial

education to be compulsory at primary schools.

The report also identified the barriers to financial

education at Secondary level. We also attended

the related Education Select Committee and the

House of Lords hearings. We continued to

promote our school Financial Education

Recognition Scheme with over 200 schools signed

up since 2023.

An estimated 670,000 5-to-16-year-olds in the UK

have been given access to resources from The

Numbers Game programme each year since

launching in 2024. Our resources will soon be

rolling out in schools across all our key markets,

including Argentina, Brazil, Chile, Mexico, Poland,

Portugal, Spain, and the USA.

We also established a partnership with the

Foundation for Education Development. Our

ambition is to collaborate on future education

projects. This includes a national strategy for

developing financial wellbeing in students.

Our people

The Santander Way – Our culture

We are a global company united by our culture,

The Santander Way. Our people are guided by

this and our TEAMS behaviours – Think Customer,

Embrace Change, Act Now, Move Together, and

Speak Up. Our Risk Pro approach also makes risk

management everyone's job within Santander.

We work to give our people an environment where

they can thrive as part of a winning team. A place

where they can deliver our purpose to help people

and businesses prosper with our values of Simple,

Personal, Fair.

Our Culture Dashboard measures the connection

between our strategy and our culture. It is used by

the Board to monitor our organisational culture.

This year, we improved our people’s understanding

of our strategy and how their work contributes

to good customer outcomes. We are becoming

a simpler, more efficient organisation that always

puts the customer at the heart of our decisions.

This will continue to be the focus of our developing

culture. We will also work to build greater

leadership effectiveness, as we innovate to meet

the challenges and expectations of our customers.

Collaboration and time spent together in person

builds stronger connections. In 2024, we decided

our hybrid way of working for people based in a

head office will include 12 office days a month.

Employee engagement

We keep our people engaged with employee

communications. In 2024, we maintained our

continuous listening approach, capturing a regular

picture of employee sentiment. Your Voice, our

quarterly pulse survey, listens to experiences of

our people through a two-way process.

Our Board and Executive Committee joined

in employee listening sessions. They aimed to

understand how to strengthen our culture and

inform future decision making. We held meetings

with our recognised unions – Advance and the

Communication Workers Union.

We aim to maintain high levels of engagement.

Towards the end of the year, our employee

engagement index reduced by 0.3 to an average

of 7.9 (out of 10). The score remains above the

financial services benchmark (7.8). This reflects

the transformation across Santander UK, including

our new approach to hybrid working.

We know that our managers have the greatest

influence on how our people feel about work.

They ran sessions on our strategy with their teams

during 2024. This was an opportunity to discuss

our goals and align with our priorities.

As a result, our people feel committed to our

strategy, scoring 8.8. They also see how their

work contributes to good outcomes for customers,

scoring 8.8. Having healthy relationships with

peers is part of a fulfilling life at work. Our people

score this 9.0, which is in the top 10% in the

financial services benchmark.

Managers at all levels play a critical role in

accelerating our culture transformation. After a pilot

in 2023, we launched The School of Management,

a three day immersive event for our people

managers. The event aims to build the skills and

capability required to drive cultural and behavioural

change across their teams. In 2024, 766 leaders

attended the event, with an average net promoter

score from attendees of 66.3. In 2025, we aim to

train 750 people managers to support our cultural

transformation.

Reward and recognition

It is important that our people are fairly rewarded.

This was reflected in our 2024 pay deal and

supplemented by a one-off payment. The pay deal

reinforced our support for employees within the

lowest pay bands. We’re committed to maintaining

wages at or above the Real Living Wage.

In 2024, we also gave an extra day’s annual leave

to recognise our people’s efforts and commitment.

It supports a high-performance culture, which

enables our growth and the transformation of

our operating model.

We want to recognise our people for their

outstanding contribution to our business and

culture ambitions. To do this, we’ve launched a

new recognition programme, The CEO Awards.

The awards, open to all employees, celebrate

and showcase teams and individuals who are

role models for our TEAMS behaviours. With over

1,500 nominations received 100 finalists attended

a celebratory award ceremony. Nine employees

and teams were crowned winners by our

Executive Committee. The CEO Awards will

remain a part of our employee recognition

approach, alongside our day-to-day recognition

tool, Kudos.

Inclusive culture

The Board approved our updated evidence based

inclusion strategy in 2024. It focuses on creating

a truly inclusive organisation that reflects the

customers and communities we serve. More

information is available in our 2024 Pay Gap

Report, published on our website  which does not

form part of this Annual Report. This includes

voluntarily publishing our ethnicity pay gap, going

a step further with accountability and

transparency.

We are at the forefront of the financial services

industry to create more equal opportunities for

people from lower socio-economic backgrounds.

We believe someone’s background should not

determine their future, and we continue working

towards building a culture where everyone can

thrive. We ranked in the top 25 of the Social

Mobility Foundation Employer Index, up five places

since 2023. In partnership with The Lead Mindset,

we launched the second cohort of our Mobilise

Programme. This offers employees the opportunity

to educate, support, and mentor disadvantaged

14–16-year-old students in our local community.

This year, we set new ambitions for our gender

and ethnicity representation at senior levels.

–Senior female representation is 34.1%. Our new

2030 ambition is 40%.

–Senior Minority Ethnic representation is 14.7%

meeting our 2025 ambition of 14%. Our new

2026 ambition is 16%.

Our workforce is in the UK and these goals are

focused in the UK, and in compliance with relevant

UK law. These goals support business

performance and all employment decisions are

based on merit.

Santander UK is a Disability Confident Employer.

This means we commit to interviewing every

disabled applicant who meets the minimum

criteria for the job they are applying for. We

also offer workplace adjustment passports for

our people. Our eight people networks create an

inclusive supportive culture. They provide access

for employees to share common lived experiences.

Menopause, DEFA (Domestic, Economic,

Financial Abuse), and the Black network are new

subgroups formed within our existing networks to

further support our people.

Wellbeing

Positive wellbeing is essential to helping our

employees thrive and is part of our people deal.

We’re there for our people in moments that matter,

providing wellbeing support to all employees. Our

comprehensive approach spans mental, physical,

social, and financial wellbeing. We promote

positive wellbeing every day. This includes access

to virtual GP appointments, a 24/7 assistance

helpline, free physiotherapy, and more.

We are proud to be accredited as a menopause

friendly employer by Henpicked. Our menopause

support app has been particularly well received.

Our team of 30 passionate menopause advocates

were trained by Henpicked. They run awareness

sessions across Santander UK and signpost

employees and managers to support available.

Annual Report 2024 Santander UK Group Holdings plc 41

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Sustainability continued

Governance

The third pillar of our

Sustainability strategy

focuses on clear and robust

governance with well-defined

accountability. It aims to promote

the success of our business,

customers, and stakeholders.

In July 2024, we approved our new Governance

strategy. It follows the three strategic pillars of

Banco Santander’s global governance model

along with priorities specific to Santander UK. A

strong governance culture and structure has

always been a focus for our business. Yet there

are areas we can strengthen, simplify, or clarify to

support more efficient decision making. This

strategy will also help us to capitalise on

opportunities more effectively. See the

Governance section for more information.

Shareholder engagement

We have continued to work on enhancing

our relationship with, and understanding of,

our parent company Banco Santander. In 2024,

this included: Board and management teams

engaging informally with Banco Santander

counterparts outside of Board cycles. Incorporating

Banco Santander governance requirements and

relevant business operating models. Using Banco

Santander systems to automate governance

processes. Looking ahead, we’re focused on

delivering value for Banco Santander and

leveraging their knowledge, ideas, capital,

resources, and technology.

Effective Board of Directors

In 2024, we continued to focus on Board

succession planning. We aspire to have the right

balance of skills, experience, and inclusive culture

on the Board. We also focused on ensuring

balanced and appropriate segregation of roles on

the Board and the composition of Board

committees.

Responsible practices and stakeholder

interests

We focused on reviewing and simplifying

management-level governance, delegated

authority frameworks, and embedding ESG. This

helps to support effective and efficient decision-

making across the business. We will continue to

focus on this in 2025 and beyond.

Human rights and modern slavery

Banco Santander’s sustainability policy outlines its

commitment to protect human rights. This policy

takes into account the UN Guiding Principles on

Business and Human Rights. It also expresses

Banco Santander’s opposition to forced labour

and child exploitation. We follow this policy in

Santander UK and it provides the foundation of our

commitment to tackling human rights abuses. In

line with the UK Modern Slavery Act 2015, we also

review annually how we prevent modern slavery

and human trafficking (MSHT) in our business.

Fair pay and transparency

We are transparent about pay and benefits and

continue to be an accredited Real Living Wage

employer. We voluntarily publish our Ethnicity

Pay Gap in our annual Pay Gap Report alongside

the mandatory Gender Pay Gap. Our latest report

published in December 2024 (based on data at

5 April 2024) showcases reductions in both gender

and ethnicity pay gaps. However, an increase in

the pay gap between White and Black employees

shows that we still have work to do. We check that

salary reviews and changes to reward policies do

not have an adverse impact on any employees.

Highlights

31%

of the Board were women at

31 December 2024. The Board

aims to maintain at least two

female members and aims to have

40% female representation by the end of

2025.

Corporate governance

We aim to uphold the highest standards

of governance, including applying the

UK Corporate Governance Code.

10%

of the Santander UK Quantitative Variable

Pay Scorecard is based on ESG metrics

for all employees.

Approved new

Governance strategy

with key Executive Committee

accountabilities.

Santander UK’s Governance Strategy
Clear and robust governance with well-defined accountability which promotes the success of Santander UK, its customers, and other stakeholders
Shareholder engagement	Effective Board of Directors	Responsible practices and stakeholders’ interests
Promote the success of Santander UK for the benefit of our shareholder in line with Companies Act 2006, including having due regard to the interests of stakeholders	A balanced, qualified and diverse Board to ensure optimal decision making	Value-led, risk-attuned, effective and efficient decision making following robust and constructive challenge
Proactive engagement and alignment with Banco Santander Group, balancing the requirement for independent decision making	Separation of key roles and robust succession planning including for subsidiary boards	Simple and effective legal structure and management governance facilitates agile decision making aligned to Senior Managers and Certification Regime (SMCR)
Leverage Group’s scale and capabilities for UK stakeholder interests	Strong and embedded practices in board corporate governance including strong information flows and targeted board training	Strong corporate values to reinforce culture and deliver our Strategic Blueprint

Annual Report 2024 Santander UK Group Holdings plc 42

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Governance

In this section
Governance overview	43
Corporate Governance report	44
Chair's report on corporate governance	44
Board Nomination & Governance Committee Chair's report	51
Board Risk Committee Chair's report	53
Board Audit Committee Chair's report	57
Board Responsible Banking Committee Chair's report	62
Directors’ Remuneration report	63
Board Remuneration Committee Chair's report	63
Remuneration policy report	65
Remuneration implementation report	68
Directors’ report	72

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Governance overview

	Santander UK Group Holdings plc Board
Board Nomination & Governance Committee		Board Risk Committee	Board Audit Committee	Board Responsible Banking Committee	Board Remuneration Committee
Executive level committees
Due to the alignment in Board membership, the Santander UK Group Holdings plc and Santander UK plc Board and Board Committees meet substantively simultaneously. As such, this report details the governance arrangements, practices and activities of both Santander UK Group Holdings plc's and Santander UK plc's Boards and Board Committees.

	Board changes in 2024
	1 January	5 March	1 September	1 December	13 December
	Mark Lewis, Dirk Marzluf and Nicky Morgan appointed1	Angel Santodomingo appointed	David Gledhill appointed	David Oldfield appointed	Announced the appointment of Enrique Alvarez2
1. Santander UK Group Holdings plc only – following changes to the Santander UK ring-fencing rule modifications 2. Appointment effective from 12 February 2025

Compliance with the UK Corporate Governance Code
The UK Corporate Governance Code 2018 (the Code) sets out the framework for premium listed companies in the UK. We feel that it is appropriate for a Company of our size and systemic importance to the UK economy to adopt the Code and as such, this Governance section details how we comply with its principles and provisions. Any sections of the Code that we do not comply with are explained in the Directors’ Report.
Board Leadership and Company Purpose Our strategic priorities – page 12 Our performance and KPIs – pages 13 - 14 Board and governance structure – page 44 Culture – pages 40, 44 and 46 Stakeholder voice – pages 25 - 26 Workforce engagement – pages 44 - 45	Division of Responsibilities The role and responsibilities of the Board – page 44 Committee reports – pages 51 - 64 Board and Committee attendance – page 47	Audit, Risk and Internal Control Audit Committee report – pages 57 - 61 Principal risks – page 16 Risk Committee report – pages 53 - 56 Going concern – pages 60 & 75
	Composition, Succession & Evaluation Board composition – page 48 Board succession – pages 45 and 51 - 52 Board and Committee effectiveness – pages 49 - 50 Nomination & Governance Committee report – pages 51 - 52	Remuneration Directors Remuneration Report – pages 63 - 64

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Chair’s report on corporate governance

Our approach

Board and governance structure

Maintaining high standards of corporate

governance is vital to ensuring effective

decision making by the Board and therefore the

ongoing success of the Company.

We also adhere to various internal governance

frameworks and practices which ensure that we

have the right systems and controls in place to

allow the Board to effectively oversee the

business and provide challenge where needed.

These include:

–The UK Group Framework, which defines

clearly our responsibilities and relationship

with Banco Santander SA, our shareholder,

taking account of our fiduciary and regulatory

responsibilities. This gives us the autonomy to

discharge our responsibilities in the UK in line

with best practice as an independent board

while providing Banco Santander SA with the

oversight it needs. Clarity of roles and

responsibilities is key to ensuring proper

accountability for decisions and outcomes.

–The Corporate Governance Framework (CGF),

which is designed to support the Boards in

discharging their responsibilities and ensuring

an appropriate degree of delegation throughout

the Santander UK group.

We review the CGF regularly to confirm that

governance arrangements remain effective and

appropriate. The corporate governance structure is

supported by internal control and risk management

systems. An important principle applied throughout

the CGF is the delegation of executive authority

from the Board to the CEO, who further delegates

aspects of their authority to Executive level

committees or other individuals. This supports

effective decision making and accountability in

discharging their responsibilities.

Santander UK group structure and ring-

fencing governance arrangements

The substantive business of the Santander UK

group continues to be conducted by Santander UK

plc, our principal ring-fenced bank (RFB). Ring-

fenced banks operate within governance rules

defined and overseen by the PRA who granted

Santander UK plc certain ring-fencing governance

rule modifications, recognising our ownership

structure and chosen ring-fencing business model.

As set out in last years' report, with effect from

1 January 2024, the PRA approved revisions

to our ring-fencing rule modifications which

simplified our governance arrangements,

including the ability to have common Santander

UK Group Holdings plc and Santander UK plc

Board and Board Committee memberships,

subject to certain safeguards. As such, Mark

Lewis, Dirk Marzluf and Nicky Morgan were

appointed to the Board of Santander UK Group

Holdings plc, and the composition of the Board

Committees was aligned.

One of the safeguards agreed is that if a conflict

matter (as defined by the PRA) arises between the

two companies, three INEDs holding PRA senior

management functions (SMF) will have veto rights

on Board decisions. These INEDs are Nicky

Morgan, Mark Lewis and Ed Giera. David Oldfield

will succeed Ed Giera in this role with effect from

10 March 2025. Nicky Morgan will chair the RFB

Board meeting in the event of a conflict matter

decision.

The role and responsibilities of the Board

The Board is collectively responsible for promoting

the success of Santander UK for the benefit of its

stakeholders, taking into account the likely impact

of our decisions in the long-term, as well as

balancing the interests of our other stakeholders

and our contribution to wider society. Our

Stakeholder voice statement in the Strategic

Report explains how we engaged with our

stakeholders in the year.

The key decisions and matters reserved for the

Board's approval, such as the long-term strategy

and priorities, are set out in the CGF. A copy of the

Schedule of Matters Reserved for the Board is also

available on our website, which does not form part

of this Annual Report.

As Chair, I have overall responsibility for the

leadership of the Board, for ensuring its

effectiveness in all aspects of operation and for

promoting a culture of openness and debate.

These responsibilities are formalised in the

CGF. The composition of the Board helps to

ensure that no one individual or small group

dominates the Board's decision-making. The

diversity of skills, experience and background of

Directors enables them to provide constructive

challenge, strategic guidance and offer

specialist advice.

There is a clear division of responsibilities

between the leadership of the Board and the

executive leadership of the business. The

responsibilities of the Chair, CEO, Senior

Independent Director (SID) and Non-Executive

Directors (NEDs) are agreed by the Board and

set out in separate role statements within the

CGF and are available on our website, which

does not form part of this Annual Report. The

Board is also supported by its Committees, who

make decisions and recommendations on

specific responsibilities delegated to them. This

enables the Board to spend more of its time on

strategic, forward-looking matters.

Board Committees

The Committees play an essential role in

supporting the Board, giving focused oversight

of key areas and aspects of the business. Their

roles and responsibilities are set out in their

Terms of Reference which are available on our

website and which do not form part of this Annual

Report. The Terms of Reference are regularly

reviewed by each Committee to make sure they

remain appropriate. Cross-Committee

memberships provide visibility and awareness of

matters relevant across the Committees, and the

chair of each Committee reports back to the Board

on its activities after each meeting.

In addition to our five core Board Committees,

shown on the previous page, the Board are also

supported by committees which are stood up as

needed to allow dedicated time for topics at a

more focused forum. In December 2024, we

created a Board Special Projects Committee to

focus on remediation, special projects and

transformation matters.

Each of the core Committees is chaired by and

comprised of only INEDs, except for the Board

Nomination & Governance Committee, where

Pamela Walkden, a Banco Santander group

appointed NED (GNED) is a member.

The Chair of each of the core Board Committees

has each prepared a report which includes a

description of their role and composition. These

are presented in the sections that follow.

How governance contributes to the delivery of

our strategy

Our governance arrangements contribute to the

development and delivery of our strategy by

promoting accountability and responsibility, and

ensuring information flows and independent insight

from the NEDs.

While all Directors are collectively responsible for

the success of the Company, the NEDs exercise

objective judgement in respect of Board decisions,

and scrutinise and challenge management

constructively. They also have responsibilities on

the integrity of financial information, internal

controls and risk management.

As a Board, we are responsible for ensuring that

the business is purpose-led and that our

decision making and activities reflect our core

purpose to help people and businesses prosper.

We do this by setting and developing our

strategy, approving risk appetite and policies and

overseeing their delivery and implementation by

management. The Board is accountable to our

shareholders for the proper conduct of the

business and seeks to represent the interests of

all stakeholders.

The Board has identified the following key

stakeholders: Customers, Employees,

Regulators, Communities and Investors. For

more on how the Board balances the interests of

these stakeholders, see the Board Responsible

Banking Committee Chair's report and our

Stakeholder voice statement in the Strategic

Report.

Culture and hearing the views of the

workforce at the Board

The Board recognises that culture plays a

fundamental role in delivering our strategic

priorities and ensuring the success of the business,

we are ultimately responsible for ensuring that our

activities reflect the culture we wish to instil

throughout the business to deliver on our values of

simple, personal and fair.

Our Code of Conduct sets out how we and all

employees of Santander UK should act and

behave towards everyone we encounter through

our work. This, alongside our TEAMS behaviours -

Think Customer, Embrace Change, Act Now, Move

Together and Speak Up - contribute to drive our

culture and maintain the standards that underpin it.

All new employees are required to complete

training on the Code of Conduct and annual

refresher training is required for all employees. 

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Chair’s report on corporate governance continued

Our employees are central to delivering our

strategy, and the Board ensures continuous

engagement with them to create a culture of

inclusivity and belonging, and a healthy working

environment. The Board receives regular updates

on the culture of the business and views of

employees from engagement surveys feedback.

These give the Board an understanding of the

overall Santander UK group workforce and provide

meaningful dialogue at Board meetings on

workforce matters. For more, see the Board

Responsible Banking Committee Chair's report

and our Stakeholder voice statement in the

Strategic Report.

The right information and support

The Chair, supported by the Company Secretary,

ensures that all Board members receive

appropriate and timely information. All Directors

have access to the advice of the Company

Secretary and the Company provides access, at its

expense, to the services of independent

professional advisers in order to help the Directors

discharge their role.

Board membership & succession planning

Since 1 January 2024, the membership of the

Board and Board Committees of Santander UK

Group Holdings plc and Santander UK plc have

been fully aligned.

Through the Board Nomination & Governance

Committee, we make sure there is the right

mix of individuals on the Board, giving an

appropriate balance of knowledge, skills,

experience and perspectives. Our aim to

ensure orderly succession for Board positions

is supported by continuous and proactive

processes, taking into account our strategic

priorities and the main trends and factors affecting

the sustainability and success of the business.

We oversee and regularly review the

development of a diverse pipeline for succession.

In 2024, we welcomed David Gledhill and David

Oldfield as INEDs. David Oldfield will succeed Ed

Giera as chair of the Board Risk Committee (BRC)

in March 2025, ahead of Ed's retirement after more

than nine years on the Board. I would like to thank

Ed for his remarkable commitment and exceptional

contributions during his tenure.

We also announced in December 2024 that

Enrique Alvarez Labiano, CEO of Retail and

Business Banking would be appointed as an

Executive Director (ED). His appointment was

effective from 12 February 2025.

As announced on 28 January 2025, I will be

stepping down during the course of 2025, once a

thorough appointment process and orderly

handover have been completed.

At 31 December 2024, the Board consisted of the

Chair (independent on appointment), eight INEDs,

two EDs and three GNEDs. Biographies of the

Directors are included in the Shareholder

information section. The letters of appointment for

INEDs and GNEDs are available at the Company’s

registered office and at the Annual General

Meeting (AGM).

For more, see the Board Nomination &

Governance Committee Chair's report.

Appointment and retirement of Directors

The Company's Articles of Association require

each Director to retire every year at the AGM and

any Director may offer themselves for re-election

by members. For more, see the Directors’ report.

Monitoring independence

The Board Nomination & Governance Committee

monitors whether there are relationships or

circumstances which may affect a Director's

independence, and have concluded that all INEDs

remain independent in character and judgement.

We acknowledge that Ed Giera has now served as

a Director for more than nine years, with his tenure

being extended to allow for a comprehensive

handover with his successors as both BRC Chair

and SID. We are confident that Ed has the strength

of character and integrity to ensure his

independence has not been affected by the length

of his tenure.

I, as Chair, was independent on appointment when

assessed against the circumstances set out in

Provision 10 of the Code. No INEDs have a

material relationship with the Company nor receive

additional remuneration to Directors' fees. In

addition, no INEDs serve as directors of any

external companies or affiliates in which any other

Director is also a director.

Monitoring Director interests, time

commitment, and fees

The Board Nomination & Governance Committee

is responsible for oversight of conflicts of interest.

Each Director has a duty under the Companies Act

2006 to avoid a situation in which they have or

may have, a direct or indirect interest that conflicts,

or may conflict, with the interests of the Company.

This duty is in addition to the existing duty

Directors owe to the Company to disclose to the

Board any interest in a transaction or arrangement

under consideration by the Company.

The Board Nomination & Governance Committee

continued to review the time commitment and

Directors' potential conflicts of interest to ensure

that any such conflicts are managed appropriately,

including compliance with CRD IV and ring-fencing

requirements.

In accordance with Provision 15 of the Code, any

proposed external appointments are disclosed to

the Board, before appointment, with an indication

of the expected time commitment. All Directors

continue to devote sufficient time to their roles at

the Company. No significant external

appointments were undertaken by any Directors.

The Board considers and, if it sees fit, authorises

situational conflicts.

Any authorisations given are recorded by the

Company Secretary and Directors are asked to

certify, on an annual basis, that the information in

the register is correct.

The fees paid to INEDs for Board and Board

Committee chair and membership were

unchanged in 2024. We introduced a fee for

members of the newly formed Board Special

Projects Committee. For more, see the

Remuneration Implementation Report.

Director induction and training

The Company Secretary supports the Chair in

designing individual inductions for NEDs, which

include site visits and cover topics like strategy,

balance sheet and capital, risk and compliance,

and current issues including the legal and

regulatory landscape.

Directors who take on new roles or change roles in

the year (such as becoming a member of a new

Board Committee) attend induction or handover

meetings as appropriate. Committee Chairs, with

support from their Committee secretaries, agree

Committee specific training, as appropriate.

Directors are also given the opportunity to

undertake further training so that they are fully

informed about matters concerning Santander UK

to enable them to discharge their duties and

responsibilities as a Director.

Board meetings in the year

We held 11 Board meetings in 2024. Meetings of

the Company were held concurrently with

Santander UK plc.

Regular updates are provided to the Board by me,

each of the Committee Chairs, the CEO, CFO and

CRO. We have a comprehensive and continuous

agenda setting and escalation process to enable

the Directors to take decisions efficiently and

effectively. As Chair, I lead the process, assisted by

the CEO and Company Secretary, and this

ensures enough time is set aside for strategic

discussions and business critical items. Together

with the Committee Chairs, we ensure Board and

Committee meetings are structured to facilitate

open discussion, debate and challenge. The NEDs

also receive regular updates from management to

give context to current issues, and there is always

time allowed on each Board agenda for discussion

between the NEDs without the EDs present.

Annual Report 2024 Santander UK Group Holdings plc 46

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Board activities in the year

I, together with the CEO and Company Secretary, and supported by the Directors and senior management, make sure that the Boards have an appropriate

schedule for the year. This is focused on the opportunities to drive growth and profitability of the business, transformation to support its success, business

performance and risk management, customer experience and outcomes, and remaining apprised of the external operating environment. It includes ensuring the

Company is run in a responsible and sustainable way in the interests of its stakeholders, and ensuring that the Company’s culture is aligned with its purpose,

values, and strategy.

The Boards ensure regular contact with management and employees through several means. These include inviting relevant business and function heads to

present to the Board or its Committees on latest developments; supporting senior management development plans by welcoming them as observers; scheduling

regular meetings for Committee Chairs with relevant senior managers; site visits by NEDs; and topical or technical workshops. Senior leaders are also available to

the NEDs for advice and support.

The Boards regularly monitor progress against the strategic priorities and performance targets of the business, and in 2024, once again held a separate Board

Strategy Day. This included a case study on executing large scale transformation in the financial services sector, adapting the retail branch model to reflect

changing customer behaviours and how to engage with our customers better. External presenters gave their thoughts on the competitive landscape and inorganic

opportunities to accelerate our transformation.

Alignment with Banco Santander group strategy is also strengthened by holding one board cycle in Madrid each year, providing the Boards with opportunities to

interact with executives and senior management of Banco Santander SA.

The Board aims to consider the views of all impacted stakeholders, whilst acting in the best interests of the Company and its members as a whole, as set out in

the Stakeholder Voice statement in the Strategic report. In 2024, the Boards and Board Committees participated in the workshops listed below to consider

important topics in depth and to engage with key stakeholders. To ensure the most effective use of the time at Board meetings, informal discussions between

Board members and senior management took place on a regular basis.

Key:
	Customers		Investors		Regulators		Communities		Employees		Climate

Theme	Action taken by the Board and outcomes	Stakeholders considered
Business and Customer Strategy	–As part of the Board Strategy Day, considered how to improve customer proposition, engagement and experience across all our business segments, as well as drive revenue growth, by transforming the branch network. –Discussed reports on performance against strategy from principal business areas including: –Mortgages –Personal Current Accounts –Business Banking –Payments and Cards –Wealth and Insurance Management –Participated in an externally facilitated session on UK banking market context and competitive landscape. –Considered reports on M&A activity and market trends. –Reviewed, challenged, and approved the 3-year business plan (2025-2027) and the annual budget, including assumptions underpinning the plan. –Discussed and took learnings from an external report on Santander UK’s reputation. –Considered the strategic workforce plan and strategy to optimise the real estate portfolio.
Transformatio n including leveraging Banco Santander scale	–Reviewed initiatives and opportunities to collaborate and leverage resources and capability across the Europe region and the Banco Santander group, including the Banco Santander group-wide transformation agenda (One Transformation) and the implications of the Banco Santander group’s new operating model structured across the five global business lines. –Received regular reports on progress with driving operational efficiencies and management’s revised approach to strategic change management and investment prioritisation. –Received a report on agile working practices and their implementation within the business. –Received a demonstration on Artificial Intelligence capabilities.
People and Culture	–In addition to reports from the Board Responsible Banking Committee (RBC) on delivery of the culture strategy, the Board participated in several informal activities to assess the culture and sentiment of employee cohorts including our Young Leaders and Graduates and Apprentices. –Participated in engagement activities throughout the year including listening events, branch and head office visits where two-way interaction was encouraged and valuable feedback shared, as well as an engagement event with the Santander Network leads where key inclusive culture priorities were discussed. –Considered employees' ways of working and opportunities to enhance collaboration across teams. –Considered succession planning across all key control, support functions and business functions. –Approved the Diversity and Inclusion Strategy on recommendation from the RBC. –Approved the Group Corporate Culture Policy.

Annual Report 2024 Santander UK Group Holdings plc 47

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Chair’s report on corporate governance continued

   

Theme	Action taken by the Board and outcomes	Stakeholders considered
Audit, risk, compliance and control	–Received regular enterprise-wide risk updates from the CRO, and updates on specific risks, such as third-party outsourcing, IT, data management, financial crime compliance, fraud, climate change and inflation. The Board closely monitored overall operational risk given the ongoing extensive transformation agenda. –Considered financial crime remediation, including oversight of programmes to enhance controls and regulatory engagement, back book remediation, and the progress made to return the Company to Board Risk Appetite on a sustainable basis. The Board also approved the Anti Money Laundering and Counter Terrorist Policy as part of its annual review. –Reviewed and approved the implementation of Consumer Duty on recommendation of the RBC, recognizing the valuable enhancements it had made to customer outcomes and value. –As part of the annual review, approved the Company’s Risk Appetite Statement and the Risk Framework.  –Approved the 2024 Internal Audit Report and received annual reports on whistleblowing. –Received regular reports on recovery and resolution with a full fire drill exercise planned for Q3 2025. –Participated in workshops on the Operational Resilience, Risk Weighted Assets and Regulatory Capital and Model Risks.
Regulation, Balance Sheet and Capital	–Reviewed, challenged, and approved the ICAAP, ILAAP, adequacy and effectiveness of stress-testing and capital management, AT1 payments and ordinary and preference share dividend payments in line with PRA guidance. The Board followed the methodology set out in the Board-approved Surplus Capital Allocation Framework to determine the assessment and utilisation of surplus capital. –Approved the Resolvability Self-Assessment related to the 2023 Resolvability Public Disclosure, the 2024 Resolvability Public Disclosure and the 2024 Recovery Plan for submission to the Bank of England. –Considered the future regulatory landscape and implications, as well as considering regular reports from the General Counsel on legislative developments and other legal matters. –Participated in workshops on ICAAP and ILAAP which provided an overview of the processes and addressed PRA feedback on Board engagement and supporting models.
Governance and Responsible Banking	–Participated in an externally facilitated Board evaluation led by Dr Tracy Long at Boardroom Review and monitored the progress against 2023 action plan from the internally facilitated Board evaluation. –Approved appointments to the Board on the recommendation of the BNC. –Reviewed, challenged, and approved the 2023 Annual Report and the first Santander UK Governance Strategy. –Reviewed and approved the Company’s Social Mobility Strategy, the Modern Slavery report and the Employee Code of Conduct. –Participated in workshops delivered to the RBC on ESG related strategies, approaches and reporting and the Company’s compliance with the Consumer Duty.

Board and Board Committee attendance1

Board

Board Audit Committee

Board Nomination & Governance Committee

Board Remuneration Committee

Board Responsible Banking Committee

Board Risk Committee

Schedule d

Ad hoc

Schedule d

Ad hoc

Schedule d

Ad hoc

Schedule d

Ad hoc

Schedule d

Ad hoc

Schedule d

Ad hoc

Chair

William Vereker

10/10

1/1

-

-

5/5

1/1

-

-

-

-

-

-

Independent Non- Executive Directors

Lisa Fretwell

10/10

1/1

10/10

1/1

-

-

6/6

-

8/8

-

6/6

1/22

Ed Giera

10/10

1/1

7/102

1/1

5/5

1/1

6/6

-

4/62

-

8/8

2/2

Dave Gledhill3

2/2

1/1

3/3

1/1

-

-

2/2

-

2/2

-

-

-

Michelle Hinchliffe

10/10

1/1

10/10

1/1

5/5

1/1

-

-

6/6

-

8/8

2/2

Mark Lewis3

10/10

1/1

7/7

-

4/52

1/1

6/6

-

8/8

-

7/8

2/2

Nicky Morgan 3

10/10

1/1

7/7

-

5/5

1/1

-

-

8/8

-

8/8

2/2

David Oldfield3

1/1

-

1/1

-

-

-

1/1

-

-

-

1/1

-

Jose Maria Roldan

10/10

1/1

-

-

-

-

2/2

-

8/8

-

8/8

2/2

Banco Santander Group nominated Non-Executive Directors

Pedro Castro e Almeida

10/10

1/1

-

-

-

-

-

-

-

-

-

-

Dirk Marzluf3

10/10

0/12

-

-

-

-

-

-

-

-

-

-

Pamela Walkden

10/10

1/1

-

-

5/5

1/1

-

-

-

-

3/3

1/1

Executive Directors

Mike Regnier

10/10

1/1

–

–

–

–

–

Angel Santodomingo3

10/10

1/1

–

–

–

–

–

1. With effect from 1 October 2024, Nicky Morgan and Mark Lewis stepped down from the Board Audit Committee, Jose Maria Roldan became a member of the Board Remuneration Committee, Ed Giera and

Michelle Hinchliffe stepped down from the Board Responsible Banking Committee and Lisa Fretwell stepped down from the Board Risk Committee.

2. Meetings missed due to Directors' prior commitments.

3. For dates of Board appointments or resignations in the year, see the timeline on the 'Governance overview' page. Appointments to, or resignations from, the relevant Board Committees were aligned to these

dates unless stated otherwise

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Chair’s report on corporate governance continued

Board diversity

The Board values the unique differences that each

Director and Santander employee brings to work

every day. Diverse views, combined with inclusion,

encourages the sharing of a wide range of

perspectives and ideas alongside challenging and

raising concerns for good decision making. The

basis of this premise applies to our Boards and

Board Committees as much as it does to any other

area of our organisation.

We recognise that the Board sets the tone for an

inclusive culture and that our success is integrally

linked to the diverse composition of our people.

With this in mind, the Board fosters an

environment where all our employees feel that they

belong in our business, and for our people to

reflect the customers and communities we serve.

It’s the right thing to do for our business and the

communities we operate in.

As a Board, we approve the Santander UK

Diversity and Inclusion strategy, as required by UK

regulation, and monitor its implementation through

our Board Responsible Banking Committees. The

Committees hold management to account for

promoting inclusion to see positive outcomes for a

healthy culture in diversity, risk management, good

conduct and innovation. Each of our Independent

Non-Executive Board Directors sponsors a

diversity strand to foster the open exchange of

ideas regularly engaging with our employee

networks to support their decision making.

Progress against this can be found in our Everyday

Inclusion and Pay Gap Report, which does not

form part of this Annual Report.

We also have a Board Diversity & Inclusion

(D&I) Policy, as required by UK regulation, which

recognises that an inclusive Board representing a

diversity of experience and backgrounds should

result in a broad strategic perspective and is

available on the Company’s website.

Board appointments are always made on merit by

assessing candidates against measurable,

objective criteria. We want a Board that reflects

diversity in the broadest sense to embrace different

perspectives and dynamics such as gender, race,

age, disability and socio-economic background. 

We believe that such an environment is vital to

achieve our goals as a business.

During the year, we reviewed and updated the

ambitions in our Board D&I Policy, recognising that

we had not achieved the aims we previously set for

ourselves in respect of gender or ethnicity. The

Board and its Committees will continue to focus on

gender and ethnicity as we progress future

appointments with a view to regaining the

appropriate balance.

Our current ambitions are to achieve a gender

balance of at least 40% male and female; at least

one senior Board position (Chair, CEO, CFO or

SID) to be female and at least one member from a

non-white minority ethnic background by 2028.

In accordance with Listing Rule 9.8.6(9), the

statistics on this page outline the diversity metrics

for Board members and executive management at

31 December 2024. We have chosen to exclude

Ed Giera from these statistics to avoid duplication

as he will retire from our Board in March 2025 and

will be succeeded as Board Risk Committee Chair

by David Oldfield (who was appointed to the Board

with effect from 1 December 2024).

At 31 December 2024, 31% of the Board were

female. Following the appointment of Enrique

Alvarez on 12 February 2025 this reduced to 29%.

With the appointment of Nicky Morgan as SID, I

am pleased that we have already made positive

progress towards meeting our ambitions.

No Directors were from an ethnic minority

background.

At 31 December 2024, 30% of Executive

Committee members were female, 38% of our

Leadership Group (the level below the Executive

Committee) were female. The Board places high

emphasis on ensuring the development of different

perspectives in the senior management and

through succession planning. 

Board composition and skills

	Number of board members	Percentage of the board	Number of senior positions on the board (CEO, CFO, SID and Chair)	Number in executive management	Percentage of executive management
Men	9	69%	4	7	70%
Women	4	31%	1	3	30%
Not specified/prefer not to say	-	-	-	-	-

	Number of board members	Percentage of the board	Number of senior positions on the board (CEO, CFO, SID and Chair)	Number in executive management	Percentage of executive management
White British or other White (inc. minority-white groups)	13	100%	4	10	100%
Mixed/Multiple Ethnic Groups	-	-	-	-	-
Asian/Asian British	-	-	-	-	-
Black/African/Caribbean/Black British	-	-	-	-	-
Other ethnic group, including Arab	-	-	-	-	-
Not specified/prefer not to say	-	-	-	-	-
The tables above outline the current gender and ethnic diversity of the Santander UK Group Holdings plc Board and executive management reflecting data gathered via self-reporting methods. For Board directors this was via an email data collection exercise and for members of the executive management team it was collected via the HR system WorkDay, which colleagues can choose to update at any point. The CEO and CFO are members of both the Board and executive management and so are counted in both groups in the above tables.

Annual Report 2024 Santander UK Group Holdings plc 49

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Board and Committee effectiveness

To ensure that the Board and its Committees' remain effective, we carry out an annual evaluation which includes the performance of individual Directors. In line

with the Corporate Governance Code, this evaluation is typically facilitated externally at least once every three years, allowing for an independent review of the

Boards' performance. I, with the support of the Board Nomination & Governance Committee, lead the Board in considering and responding to the annual

evaluation. The Board approves an action plan to address any areas of improvement identified in the annual evaluations and the Board Nomination &

Governance Committee oversees the progress on these. An update on the findings from the 2023 evaluation is set out below.

Progress against 2023 evaluation findings

Opportunities for improvement	Update on actions
Improving Board-level information	There has been a marked improvement as a result of training, updated paper templates and advice given by the Corporate Governance Office in the length of the Board packs and the timeliness in which they are provided to Directors. We believe that there is always room for improvement and therefore it remains on the 2024 action plan.
Forward leaning strategic topics for the board agenda	During 2024, we provided updates on strategic topics such as market outlook, competitive environment and external landscape through Board updates, workshops or sessions with external speakers. We will also continue to review the Forward-Looking Agendas for the Boards and the Committees to ensure the Board’s time is maximised on matters of strategic relevance including covering topics such as customer perspective and competitor environment.
Managing Board transition and roles	Following the appointment of three new Directors in 2024, the Board Nomination & Governance Committee oversaw that each new Board member was given a thorough and tailored induction to the business to help them settle into their roles quickly has been acknowledged as a priority. The induction plans included familiarisation with the overall Group-wide strategy and Group-subsidiary relationship and sessions on specific topics relevant to the Santander UK business. The induction sessions were led by key members of management, the Corporate Governance Office and Group representatives.

Following the internal reviews completed in the prior two years, Dr Tracy Long of Boardroom Review Limited was chosen to undertake an externally facilitated

review (the Review) in 2024, in line with UK Corporate Governance Code expectations. Dr Long completed the previous external evaluation in 2021, but has no

other connection to the Company or its Directors, and as such it was felt she would be able to independently assess the Board whilst providing valuable insight on

the progress and performance over the last three years. 

2024 External effectiveness review process

Stage 1	à	Stage 2	à	Stage 3
Scope of review		Review activity		Findings and actions
The scope for the Review was agreed to ensure a formal and rigorous evaluation of the performance of the Board and its Committees. The methodology encouraged candid reflections from each participant on the current strengths and preparation for future challenges.		Individual interviews were held with each Director, as well as members of senior management. Discussion themes included board dynamics, culture and contribution; understanding of purpose, values and strategic alignment and executive leadership. A full cycle of Board and Board Committee meetings was also observed. The Company Secretary provided a suite of documents to enable a thorough review of Board-related governance materials.		A comprehensive report evaluating the Board's performance was produced by Boardroom Review and presented by Dr Long at the December Board meeting. The Board collectively discussed the results and recommendations, before agreeing the key priorities and a practical action plan (see below).

Outcomes from the 2024 Board evaluation

Overall, the Review concluded that the Board and all Committees continue to operate effectively and are rated highly. The key strengths identified were the

Board's positive ways of working, progress made on transformation and remediation activities, an improvement in the relationship with the regulators since the last

review, improvement on the quality of the Board papers and significant improvements to the Environmental, Social and Governance agenda.

The Review also identified opportunities for improvement for the Board as a whole and for the Board Committees. The key priorities are set out below. The Board

considered all of the recommendations from the Review and agreed on an action plan which will be overseen by the Board Nomination & Governance Committee

throughout 2025.

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Chair’s report on corporate governance continued

2024 Review findings

Opportunities for improvement	Commentary and actions
Future board composition	The Board will need greater technology insight as a core skill to meet our longer term strategic goals. Workshops will be scheduled to ensure the Board remain up to date with, and are forward looking, on technology, including digital functionality for customers, AI uses and cybersecurity issues and their impact on the Company. In addition, we recognise the importance of a diverse Board, and the ambitions we have set on gender and ethnicity as set out in our Board D&I Policy.
Cyber risk	To ensure that the Board are as well prepared as possible to respond to a cyber threat, an unscripted simulation exercise will be performed this year. We will also arrange for an external expert to speak to the Board.
External landscape	There is appetite for the Board to know more about the competitive landscape, with updates covering real-time information on sector dynamics, clarity of expected results and appreciation of existing and/or emerging barriers to action. These updates will be scheduled throughout 2025, and we will invite external speakers to Board sessions to provide different perspectives.
Measuring our culture	To continue to promote and oversee the embedding of our desired culture, the Board will continue to evolve how it measures and evaluates Santander UK's culture, reflect on new ways to monitor and communicate the behaviours we want to promote, sharing who we were to who we are becoming through our stories of success and lessons learned.

As part of the Review, I also conducted an assessment of each individual Director's performance to identify any areas of development, which we then discussed

privately. The findings, in combination with the individual's skills, time commitment and independence assessments, as overseen by the Board Nomination &

Governance Committee, confirmed that each Director continues to contribute positively.

Ed Giera, as SID at the time, also undertook an assessment of my performance as Chair, seeking feedback from each Director which was then discussed at a

meeting without me present.

William Vereker

Chair

7 March 2025

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Board Nomination & Governance Committee Chair’s report

William Vereker

Chair

Introduction

On behalf of the Committee, I am pleased to

present the Board Nomination & Governance

Committee report.

When feasible, the Committee and the RFB

Committee (together the Committees) conduct

their business concurrently to ensure alignment

of practices, policies and procedures.

I am also the Chair of the RFB Committee and,

as the vast majority of Santander UK's

business is within the RFB’s perimeter, this

report details the governance arrangements,

practices and activities of both Committees.

Committees’ responsibilities

Lead the process for Board and Board

Committee appointments and oversee

succession planning for the Board and senior

management positions.

Oversee the evaluation of the performance

and composition of the Board and Board

Committees.

Monitor the governance arrangements

for Santander UK and make appropriate

recommendations to the Board to ensure

that those arrangements remain adequate.

Committee members

William Vereker (Chair)

Ed Giera

Michelle Hinchliffe

Mark Lewis

Nicky Morgan

Pamela Walkden

Details of the Committee’s role in the annual

effectiveness review of the Board and its

Committees, and on progress against the

Board D&I Policy are set out in the Board

and Committee effectiveness section and the

Board Diversity section of the Chair's report on

Corporate Governance, respectively.

Fees paid to INEDs for Board and Board

Committee chair and membership are set out

in the Remuneration Implementation Report.

Key activities in the year

In 2024, the Committees’ work focused on:

Succession planning

The Committee oversees a formal, rigorous and

transparent process to identify, nominate and

recommend candidates for appointment to the

Board and senior management positions.

As part of ongoing succession planning activity,

the Committee regularly reviews the succession

plans in place for the Board, the CEO and senior

management positions. This includes ensuring that

there is a skills, experience and diversity matrix to

map each Director's attributes against those most

relevant for the Board, reflecting the Company’s

strategic direction and identifying gaps in its desired

collective skills profile as well as highlighting the

skills and experience which could be lost with

a retiring Director. For key senior management

positions, the Committee works with Banco

Santander to ensure there are suitable candidates

identified from across the Banco Santander group

as ‘Ready Now’, ‘Ready in 1-3 years’ and ‘Future

Ready’.

While appointments are always based on the merit

of the individual candidates and objective criteria,

we also aim to promote diversity in its broadest

sense. This complements and strengthens the

overall Board and its Committees' skills, knowledge

and experience. Any appointments also take

account of all legal and regulatory requirements.

In anticipation of Ed Giera retiring from the Board

in 2025, following more than nine years of service,

the Committee focused on identifying successors

for the roles of Chair of the Board Risk Committee

(BRC) and Senior Independent Director (SID).

As reported last year, Spencer Stuart, external

search consultants with whom the Company and

individual Directors have no other relationship,

assisted with the search process to identify

candidates who could serve as Chair of the BRC.

The Committee agreed the personal attributes

including cultural fit, and ability to lead and manage

change which were desirable for the role and the

skills and experience needed. A database of

potential candidates was created with our Board

D&I Policy in mind when doing so.

Following a review of a longlist of potential

candidates drawn up by Spencer Stuart, the

Committee agreed a shortlist, each of whom were

interviewed by me and other Board members. After

detailed feedback from these interviews, the

Committee selected which individuals should

progress to interviews with representatives

of Banco Santander management. David Oldfield

was identified as the preferred candidate, and his

appointment as an INED, to succeed Ed Giera as

Chair of the BRC on Ed’s retirement in 2025 was

recommended to, and approved by the Board.

During the above search process it was identified

that David Gledhill would bring valuable and

relevant experience in digital transformation

and broader banking from his 30 years in

financial services. As such, the Committee also

recommended his appointment as an INED to

the Board.

For the role of the SID, we considered candidates

from our existing INEDs and proposed that Nicky

Morgan be appointed to serve as SID following

Ed’s retirement given her familiarity with the

business, understanding of the customer from her

role as Board Responsible Banking Committee

Chair and Consumer Duty Champion, and

excellent relationships with the other NEDs and

EDs.

As set out in last years’ report, the Committee

recommended Angel Santodomingo be appointed

as successor to Duke Dayal as CFO. Angel was

appointed to the Board on 5 March 2024.

The Committee also recommended the

appointment of Enrique Alvarez Labiano, CEO of

Retail and Business Banking as an ED upon

receipt of regulatory approval. The appointment

promotes our succession planning and talent

development initiatives and provides greater

balance of NEDs and EDs on the Board.

We also oversaw and approved changes to the

Executive Committee and other senior

management positions in 2024. Tim Hinton, CEO,

Santander CCB retired in September 2024 and

was succeeded by John Baldwin. John Mills,

Company Secretary, also retired and was

succeeded by Roz Rule from 1 January 2025.

On behalf of the Board, I would like to welcome

all those who joined us in the year and thank those

who left us for their contributions.

In 2025, the Committee will oversee the search for

my successor. This process is being led by Nicky

Morgan as the SID.

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Board Nomination & Governance Committee Chair’s report continued

Committee Composition

Following Board changes in the last two years,

the Committee reviewed the composition of each

Board Committee. The review aimed to balance,

streamline and align Committee memberships,

taking into account any regulatory requirements.

A series of changes to Board Committee

composition were recommended to the Board,

as set out in the Board and Board Committee

attendance table in the Chair’s report on

Corporate Governance.

Governance

Review of the Corporate Governance Framework

(CGF) and Banco Santander group Frameworks

Santander UK has adopted a number of corporate

frameworks which set common principles across

key Banco Santander group subsidiaries on certain

matters due to their impact on the overall group

risk profile.

Six of these frameworks were updated in 2024,

and we oversaw whether Santander UK remained

compliant with the key principles in each and if any

UK specific amendments were required.

In 2024, Santander UK approved its first

Governance strategy. As the Governance strategy

complements the Environmental and Social

strategies, which are overseen by the Board

Responsible Banking Committee, the Governance

strategy was recommended to the Board for

approval by the Board Responsible Banking

Committee. For more, see the Board Responsible

Banking Committee Chair’s report.

The Committee also reviewed updates to the

CGF to ensure it remains fit for purpose. Minor

changes were made to reflect updated ring-fencing

governance rule modifications plus a simplified

approach to delegated authorities.

Director induction and training

The Committee oversaw the induction and

development plans for each new Director,

ensuring they each received a comprehensive,

tailored induction for their specific roles

and were fully informed about strategic and

commercial issues affecting Santander UK, as

well as their duties and responsibilities as Directors.

Meetings were also held with key stakeholders in

the UK and across the Banco Santander group,

and they undertook visits to business sites in line

with their roles and needs.

Annual review of Director interests and

conflicts of interest

As set out in the Chair's report on Corporate

Governance, the Committee is responsible for

the oversight of conflicts of interest, reviewing

Directors' proposed external appointments and

their time commitment. No conflicts of interest were

identified in the year and no external appointments

were refused on the basis of a potential conflict or

time commitment.

William Vereker

Chair

7 March 2025

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Board Risk Committee Chair’s report

Ed Giera

Chair

Introduction

On behalf of the Committee, I am pleased to

present the Board Risk Committee report.

When feasible, the Committee and the RFB

Committee (together the Committees) conduct

their business concurrently to ensure alignment

of practices, policies and procedures.

I am also the Chair of the RFB Committee and,

as the vast majority of Santander UK's business

is within the RFB’s perimeter, this report details

the governance arrangements, practices and

activities of both Committees.

I would like to thank Lisa Fretwell for her

service on the Committee during 2024. I was

pleased to welcome David Oldfield to

the Committee in 2024 and to prepare for

David’s succession as Chair of the Committee

in March 2025. Having had the privilege to

Chair the Committee since 2015, I also wish

to thank the shareholder, management, and

the current and former Chairs of the Board,

the other Board Committees, and the members

of the Committee, past and present, for their

support and contributions during my tenure.

Committees’ responsibilities

Advise the Board on the Enterprise Wide Risk

profile, Risk Appetite and strategy.

Provide advice, oversight and challenge to

embed and maintain a supportive risk culture.

Review the Risk Framework and recommend

it to the Board for approval.

Review and approve the risk types and risk

activity frameworks in the Risk Framework.

Review the capability in the organisation to

identify and manage new risks and risk types.

Review risks and issues escalated by the

CRO, and their associated action plans.

Oversee and challenge the day-to-day risk

management, oversight and adherence to risk

frameworks and policies.

Committee members
Ed Giera (Chair)	Jose Maria Roldan
Michelle Hinchliffe	David Oldfield1
Mark Lewis	Pamela Walkden2
Nicky Morgan	Lisa Fretwell3

1.Joined on 1 December 2024

2.Left 1 April 2024

3.Left 1 October 2024

As described in the Board and Committee

effectiveness section of the Chair's report

on Corporate Governance, the Committees’

performance was assessed as part of the

annual review. The review concluded that the

Committee continues to operate effectively.

Key activities in the year

In 2024, the Committees’ work focused on:

Economic Crime risk

Financial crime risk remains a source of significant

external threats and a focus for the Committee.

Throughout the year, the Committee continued

to oversee the plans to return to Board risk

appetite. In doing this the Committee challenged

management's approach to financial crime risk

appetite metrics, the pace of transformation,

the embedding of effective controls, and any

emerging risks.

The Committee welcomed the progress made

to mitigate operational risk losses from fraud,

including the implementation of new detection

controls and coordinated customer awareness

campaigns, which has led to a reduction in Remote

Access Fraud risk for our customers.

Evolving Geopolitical and Macroeconomic

Conditions

The Committee conducted a thorough assessment

of the capital and liquidity requirements needed to

sustain resilient business operations and endure

any significant stress events. We evaluated how

any UK election-related policy commitments might

impact Santander UK, as well as the potential

market instability that could arise from elections in

other jurisdictions.

The Committee also examined various factors in

the broader macroeconomic environment that

could influence the funding market or contribute

to market instability, particularly concerning any

changes in monetary policy introduced by a new

UK government.

We also considered the potential implications

for credit exposures in both our retail and

corporate portfolios, taking into account shifting

macroeconomic conditions and any potential

shocks that could affect borrowers' ability to service

their debts amid heightened volatility in both

interest and non-interest related costs.

IT, Cyber and Information Security risk

In 2024, significant progress was made in

reducing technology risk through a programme

of remediation activities. The Committee oversaw

the programme throughout the year to meet the

Board's Risk Appetite targets, highlighting the

continued improvement in reducing IT related

incidents and the ongoing management of

technology obsolescence.

The Committee also received regular reports on

cyber and information security risks, monitored

the progress of our Cyber Critical Remediation

Plan, and ensured robust controls are in place to

manage cyber threats and related Third-Party

services.

Net Interest Margin Compression risk

The Committee continued to oversee

management’s strategies for managing liquidity,

funding, and interest rate risks. This involved

evaluating management's approach to mitigating

exposure to net interest margin compression,

managing the structural position in a more volatile

interest rate environment, and balancing funding

requirements in a challenging market environment.

Outsourcing and Third-Party Risk

Management and Business Disruption

The Committee maintained oversight of

outsourcing and third-party risk management

arrangements to identify risks from its third-party

supply chain. The Committee constructively

challenged management about the progress made

in remediating issues related to intra-group third-

party risk management and ensuring compliance

with regulatory requirements.

Data risk

The Committee continued to focus on data

management and data privacy risks. We received

updates on the data management strategy and the

ongoing efforts to improve its risk profile. We held

discussions with management on the progress

in developing, implementing, and enhancing new

and existing data controls through various data risk

initiatives. These initiatives included establishing

appropriate processes, prioritising the resolution

of gaps in data controls and data lineage testing,

and ensuring that effective remediation plans are

in place to further enhance data quality.

Effectiveness of risk management system and

internal controls

Santander UK made significant improvements

in 2024 to identify risks across the business and

enhance controls. We continued to enhance our

approach to assess and report on key non-financial

risk categories. This included developing and

monitoring critical remediation plans, enhancing

Risk Control Self-Assessments (RCSAs) with a

move to a trigger-driven approach, a rationalisation

of essential controls, expanding independent

control testing, and creating an improved non-

financial risk taxonomy.

Despite these advancements, the Committee

acknowledges that work remains ongoing to

further bolster and mature the framework and tools

to meet industry standards and greater regulatory

expectations. In the first half of 2025, management

plans to substantially refresh and simplify RCSAs

and associated controls to generate outputs that

are more meaningful and actionable for the

business in reducing risk to our customers.

Looking ahead, we face increasing challenges from

emerging risks. The external threat landscape is

continuing to evolve, influenced by geopolitical

factors, new technologies, and heightened risk

interconnectivity. Plans have been put in place to

address these risks effectively, but will require close

ongoing management.

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Board Risk Committee Chair’s report continued

Primary activities

The Committee fulfilled its responsibilities in 2024, by monitoring, challenging, and advising the Board on Santander UK’s current risk exposure and future risk

strategy. The Committee seeks to promote a strong risk culture throughout the business.

Areas of focus	Action taken by the Board Risk Committee	Outcome
Risk Appetite	–Reviewed and challenged the framework of the Board Risk Appetite Statement (RAS) to ensure that it effectively sets appropriate limits for each primary risk type. The challenge included the metrics related to Business Disruption risk, specifically concerning impacts to important business services for customers, making Data Risk metrics more outcome-based, examining the appropriateness of thresholds for Model risk metrics, and ensuring consistency across the RAS with the metrics. Management addressed all these challenges effectively.	–Recommended the proposed Risk Appetite to the Board for approval. For more, see ‘Risk Appetite’ in the ‘Risk governance’ section of the Risk review.
Risk Framework	–Reviewed proposed changes to the Risk Framework, particularly changes proposed to the second line of defence responsibilities, management restructures, risk culture and the Financial Crime risk framework. We also challenged management on the accountability of the Financial Crime risk framework to align with regulatory expectations. –Discussed the annual certification process and assessed the extent to which the Risk Framework had been effectively implemented and embedded across the business. –Noted that Risk certification results indicated the majority of Santander UK remained fully compliant with the Risk Framework.	–Agreed that the Risk Framework continues to meet Industry and regulatory standards and that it has been effectively implemented. –Recommended proposed changes to the Board for approval. For more, see ‘Risk Framework’ in the ‘Risk governance’ section of the Risk review.
Stress testing	–Stress testing remains a key tool to highlight and manage the impact on capital and profit and loss in stress scenarios. The Committee continued to closely monitor methodology, governance arrangements, and outputs. –Reviewed and challenged the stress testing, assumptions, sensitivity testing and scenario analysis for the 2024 ILAAP and ICAAP submissions.	–Supported management’s assumptions and range of outcomes that Santander UK needs to prepare for. For more, see ‘Stress testing’ in the ‘Risk governance’ section of the Risk review.
Credit risk	–Provided oversight via regular updates on the credit risk exposure of customers and clients in our Retail & Business Banking, Corporate & Commercial Banking and Consumer Finance businesses. This included monitoring risks associated with large single-name exposures and franchises. –Reviewed the potential implications of changing macroeconomic conditions and the impact of any possible shocks on our customers’ credit risk exposures across our portfolios. This analysis considered the impact on borrowers' debt servicing capacity amidst elevated cost of living expenses in the UK in 2024, as well as rising volatility in both interest and non-interest related costs.	–Concluded that Santander UK’s credit portfolios remained resilient and encouraged management to take appropriate measures to address our top and emerging risks exposure. –Supported management in implementing policy adjustments to manage risks across our portfolios, particularly focusing on arrears management and assisting customers in financial difficulty. For more, see the ‘Credit risk’ section of the Risk review.
Liquidity risk	–Assessed the liquidity risks related to current macroeconomic factors and changing customer behaviours, especially between digital and non-digital channel customers. Reviewed management’s proposed approach to managing exposure to interest rates and mitigating net interest margin compression risk over the duration of our strategic plan and challenged management’s continued ability to remain agile in a more volatile interest rate environment. –Reviewed the ILAAP, including the different scenarios and approaches utilised, and noted management had addressed all regulatory feedback on the previous Liquidity Supervisory Review and Evaluation Process and subsequent ILAAP reviews. –Challenged management on the risks to financial stability posed by the shadow banking sector. –Considered half yearly updates on Treasury and asset and liability management activities, the macroeconomic environment, Bank of England Bank ate changes and the impacts on products, particularly mortgages and pricing.	–Acknowledged that Santander UK holds sufficient liquid resources and has adequate governance and controls in place to manage liquidity risks. –Recommended the 2024 ILAAP to the Board for approval, following review and challenge. For more, see the ‘Liquidity risk’ section of the Risk review.
Capital risk	–Considered dividends proposed to be paid from Santander UK plc to Santander UK Group Holdings plc, and from Santander UK Group Holdings plc to Banco Santander SA, for the year. –Challenged management on the capital risk profiles, which remained robust, with all key risk appetite measures staying within the Board Risk Appetite. –Reviewed and challenged management on the changes proposed to the Surplus Capital Allocation Framework and the Dividend Policy. –Reviewed the ICAAP, including the scenarios used, and challenged management on the climate scenarios.	–Recommended the payment of dividends to the Board for approval, subject to final determinations on capital distributions by the regulator. –Recommended the ICAAP to the Board for approval, following review and challenge. For more, see the ‘Capital risk’ section of the Risk review.

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Board Risk Committee Chair’s report continued

Areas of focus	Action taken by the Board Risk Committee	Outcome
Operational risk & resilience (including Critical Remediation Plans)	Received regular updates on key operational risk profiles and risk appetite, including progress on critical remediation plans, with a particular focus on Operational Resilience and Business Disruption, IT and Cyber and Information Security, Outsourcing and Third Party and Data:	For more, see the ‘Operational risk & resilience’ section of the Risk review.
	Data
	– Received regular updates on Data Management and Data Privacy risks. These updates included information about the data strategy and the progress of remediation plans aimed at improving the metrics for measuring risk appetite. We discussed legacy and emerging data risk challenges, particularly those related to data quality and control. – Challenged management regarding the adequacy of the financial, SME and IT resources required for delivery of the remediation plan, and the feasibility of meeting the associated deliverables. – Reviewed the data strategy and its approach. In addition to ensuring compliance, we encouraged management to explore how the programme can create commercial opportunities that lead to additional positive outcomes for customers.	– Supported the data strategy and its approach. – Oversight of the Data remediation plan will remain a priority for the Committee in 2025.
	Operational Resilience and Business disruption
	–Challenged management on the scope and coverage of operational risk appetite, resulting in enhancements to a number of risk appetite statement metrics. –Reviewed the progress of Operational Risk self-assessments towards achieving regulatory compliance in 2025. –Challenged management on the progress made in completing the scenario tests carried out across all important business services (IBS) to customers to determine any limitations in the IBS to recover customer services within impact tolerance. –Reviewed the business disruption risk profile and Board Risk Appetite associated with IBS. –Sought assurance regarding compliance with the March 2025 regulatory operational resilience requirements and the strategy that would be utilised as part of the associated governance and assurance processes. –Reviewed the 2024 Operational Resilience Self-Assessment report. This report outlines the resilience risks that could affect Santander UK's ability to recover IBS services to customers within impact tolerance in severe but plausible scenarios. –Held a Board workshop with Operational Resilience subject matter experts to review operational resilience and challenge management on the methodologies and the rationale behind their approach.	–Approved the 2024 Operational Resilience Self-Assessment report. –The Committee is encouraged by management’s confidence in delivering the operational resilience risk remediation programme and the high level of focus on ensuring Santander UK achieves operational resilience regulatory requirements by March 2025.
	IT, Cyber and Information security
	–Received regular updates on IT risk and progress made across the IT Risk Remediation activities, including achieving key milestones such as the integration of the IT and Operational Resilience programme to ensure delivery of the operational resiliency requirements by March 2025. –Challenged management’s long-term plan for addressing key resource constraints within the Technology team and received assurance that they have successfully reached their goals of strengthening subject matter expertise, and will continue to enhance the technology target operating model. –Reviewed the cyber and information security risk strategy which is focused on ensuring safe and resilient services to customers. –Reviewed reports on cyber and information security risks with a key focus on the external threat landscape posed by third-party supply chains and the actions being taken by management in response, including a comprehensive review of all critical third-party vendors and enhancement of controls. –Considered the progress made on the Cyber Critical Remediation Plan, which included the progress on Active Directory domains and technology obsolescence.	–Acknowledged the progress made in achieving key milestones for IT risk as part of the IT Risk Remediation activities. –Supported the cyber and information security risk strategy. Noted that recent efforts, such as introducing a new Cyber Fraud Intelligence source, implementing enhanced detection controls, and coordinated awareness campaigns, successfully led to a decrease in Remote Access Fraud for customers. –Encouraged management to give further consideration to cultural challenges and how they would support ongoing risk reduction for our customers.
	Outsourcing and Third party
	–Provided oversight of the risk exposure related to Santander UK's third-party supply chain. This involved closely monitoring the progress of remediation plans for Third Party Risk Management and ensuring compliance with SS2/21, particularly concerning intra-group arrangements with Banco Santander. –Challenged management on any concentration risk considerations associated with the business’s direct and indirect exposure to AWS Public Cloud. The Committee was assured that Santander UK continues to collaborate with Banco Santander technology team to align with a multi-hybrid cloud strategy aimed at mitigating any concentration risk and enhancing regional resilience.	–The Committee is encouraged by the level of progress made, including investment in core systems, training of key staff, and improved service management to support our customers.

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Board Risk Committee Chair’s report continued

Areas of focus	Action taken by the Board Risk Committee	Outcome
Financial Crime	–Continued to challenge management on reducing the residual risk and returning to Board Risk Appetite, adequacy of resources and key deliverables across the remediation plan, which remained a priority in 2024. Assessed preparations by the three lines of defence in respect of testing and demonstrating the planned return to Board Risk Appetite on a sustainable basis in accordance with the remediation plan. –Reviewed the regular Money Laundering Reporting Officer’s reports and considered the evolving regulatory, geo-political and legal requirements across the financial crime landscape. –Considered the changes proposed to Anti-Money Laundering and Counter Terrorist Financing Policy (AML/CTF). –Reviewed different strategies to mitigate fraud risk, including improving the Fraud Framework and impact of any decisions taken by the Payment Systems Regulator. –Following changes to the Governance framework in Q424, transferred oversight for the Financial Crime Remediation Programme to the Special Projects Committee.	–Recommended the proposed Financial Crime risk, Fraud risk Appetite metrics and AML/CTF Policy to the Board for approval following review and challenge. –Acknowledged the significant progress on financial crime remediation plans made in 2024 and continuing commitment and high level focus on ensuring that Santander UK returns to Board Risk Appetite on a sustainable basis. For more, see the ‘Financial crime risk’ section of the Risk review.
Model risk	–Received updates on model risk management activities. –Considered management’s assessment of the progress of the Model Risk Transformation Programme, noting that it encompasses a broader scope than the progress of any individual model, with a focus on establishing standards and frameworks. –Reviewed the advancements in new regulatory model requirements, including the governance approach and resource capabilities needed to meet the increasing regulatory expectations such as those related to Supervisory Statement 1/23 (SS1/23). Examined management’s strategy for complying with SS1/23, along with potential challenges and critical issues. –Held a Board workshop with subject matter experts to discuss the regulatory expectations for Boards regarding SS1/23, including with respect to assumptions and limitations of Santander UK’s most significant models.	–Endorsed the appointment of the Senior Management Functions responsible for supporting compliance with regulatory requirements as part of the implementation of SS1/23. –Agreed to recommend the Model Risk Policy to the Board for approval following review and challenge. –The Committee is committed to ensuring that Santander UK meets the SS1/23 requirements and effectively implements the overall Model Risk Transformation Programme. For more, see the ‘Model risk’ section of the Risk review.

Ed Giera

7 March 2025

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Board Audit Committee Chair’s report

Michelle Hinchliffe

Chair

Introduction

On behalf of the Committee, I am pleased to

present the Board Audit Committee report.

When feasible, the Committee and the RFB

Committee (together the Committees) conduct

their business concurrently to ensure

alignment of practices, policies and

procedures.

I am also the Chair of the RFB Committee and, as

the vast majority of Santander UK's business is

within the RFB’s perimeter, this report details the

governance arrangements, practices and activities

of both Committees.

I was pleased to welcome Dave Gledhill and David

Oldfield to the Committee in 2024. I would like to

thank Nicky Morgan and Mark Lewis who stepped

down from the Committee in 2024 for their

contributions.

Committees’ responsibilities

Oversight of the integrity of the financial

statements of the Company and any formal

announcements relating to its financial

performance, including underlying significant

financial reporting judgements and estimates.

Oversight of internal financial control

effectiveness.

Oversight of the relationship with our external

auditors including their independence and

objectivity, audit scope and effectiveness of

the audit process in respect of their statutory

audit of the annual financial statements.

Oversight of the Internal Audit function.

Oversight of Recovery and Resolution

planning

Oversight of Whistleblowing arrangements.

Committee members

Michelle Hinchliffe (Chair)

Ed Giera

Lisa Fretwell

David Gledhill1

David Oldfield2

1.Joined on 1 October 2024

2.Joined on 1 December 2024

As described in the Board and Committee

effectiveness section of the Chair's report

on Corporate Governance, the Committees’

performance was assessed as part of the

annual review. The review concluded that the

Committee continues to operate effectively.

Key activities in the year

In 2024, the Committees’ work focused on:

Financial reporting

–Challenging the macroeconomic scenarios and

the weights applied to each scenario and other

inputs to credit risk models for purposes of

estimating expected credit loss (ECL)

provisions, to ensure appropriateness.

–Considering management's proposals on

Judgemental Adjustments (JA) to the ECL and

other areas of management estimate.

–Reviewing management’s approach and key

methodology changes for new mortgage

and corporate ECL models, and supporting

simplifications to reduce run time and allow for

increased macroeconomic sensitivity analysis.

–Considering management's assessment of the

effectiveness of model risk management for

financial reporting related models.

–Considering management's proposals on key

inputs to interest rate models and challenging

the calculation of JAs including a JA to reduce

an overestimation in Early Repayment Charges

(ERC).

–Considering the approach and key inputs to the

valuation of the pension scheme assets and

reviewing key assumptions and inputs to the

calculation of the defined benefit obligation.

–Reviewing the goodwill balances to identify

any indicators of impairment and consideration

of the disclosures of key sensitivities and

potential impacts.

–Reviewing the disclosures in the financial

statements, including challenging provision

estimates and the assessment of contingent

liability matters and their disclosures.

–Reviewing management’s assessment of

historical motor finance commission payments

and that an economic outflow was probable.

–Challenging the inputs to the model to

determine the historical motor finance provision

and considering the disclosure requirements

regarding this matter.

Internal controls and regulatory reporting

–Overseeing the independent testing of

Sarbanes-Oxley (SOx) controls by the Finance

Risk and Control team, identified control

deficiencies and related remediation plans.

–Overseeing programs to enhance the

completeness and accuracy of data used in

ECL provisions.

–Overseeing management’s capital and liquidity

regulatory reporting programs designed to

ensure continued compliance with regulatory

requirements and standards.

–Reviewing the implementation of significant

change and transformation programmes, with

consequences for internal control over financial

reporting (ICFR), including commencing on a

new general ledger replacement programme.

Internal Audit

–Monitoring progress against the 2024

Audit Plan.

–Monitoring past due Internal Audit

recommendations and management's

remediation plans to close them.

–Receiving regular updates on the operational

effectiveness of Internal Audit to ensure the

quality and experience is appropriate for the

business and that it is appropriately resourced.

–Considering the results of Internal Audit

reviews with relevant Line 1 management

as appropriate.

–Considering the 2025 Audit Plan and Internal

Audit’s annual report for recommendation to

the Board.

–Monitoring adherence to the Internal

Audit Charter and appropriate preparation

for compliance with the new Global Internal

Audit Standards effective from January 2025.

Recovery and Resolution planning

–Overseeing management's progress on

resolvability.

–Supporting the ongoing maintenance and,

where appropriate, enhancement of the

Company's resolution capabilities.

–Overseeing the updating and submission of the

recovery plan to the PRA.

Whistleblowing

–Monitoring management's continued embedding

of its whistleblowing framework

and arrangements including refinements of

our policies and operating procedures to stay

abreast of best practice.

–Considering key themes and individual

whistleblowing cases where appropriate.

–Considering the whistleblowing annual report

to the Board.

Oversight of external auditors

–Approving the external auditor's proposed audit

scope and related fee proposal.

–Considering the FRC's 2023/24 Audit Quality

Inspection results published in August 2024

and other audit quality indicators including the

PwC Transparency Report as part of our annual

assessment of PwC's performance.

–Reviewing PwC's reports on findings

and recommendations on internal control

and their view of management's progress in

resolving them.

–Reviewing PwC’s reports on financial reporting

matters identified during their audit.

–Discussing developments in financial reporting

including changes to statute, accounting

standards and best practice.

–Monitoring the ongoing independence of PwC.

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Board Audit Committee Chair’s report continued

Financial reporting Significant financial reporting issues including judgements and estimates The use of assumptions or estimates and the application of management judgement is an essential part of financial reporting. This is considered by the Committee on at least a quarterly basis. In 2024, we focused on the following significant reporting matters in relation to financial accounting and disclosures:
Financial reporting issue	Action taken by the Board Audit Committee	Outcome
Credit impairment charges Determining the appropriateness of credit impairment charges is highly judgemental requiring management to make a number of assumptions.	Overall approach –Considered the challenges in applying management judgements on ECL provision given the current economic environment. –Reviewed the updated macroeconomic scenarios and weights throughout the year, which captured a wide range of potential outcomes for the UK economy. –Considered management’s proposal to reduce number of macroeconomic scenarios by removing the Stubborn inflation scenario as the risk of high inflation reduced. –Oversaw improvements in the framework to identify when a new JA is needed or an existing JA is no longer required. –Monitored the new ECL model implementation that went live in H124.	–Agreed with management on the level of disclosures on management judgements and estimates. –Satisfied ourselves with the robustness of the process used to arrive at the management judgements and estimates as well as with the management judgements and estimates themselves. –Endorsed the updates to the macroeconomic scenarios and weights including management’s judgement to reduce number of macroeconomic scenarios from five to four. –Endorsed the improvements in the JA framework. –Endorsed management’s approach and key methodology changes for ECL provisioning including updated SICR triggers and the new ECL models implemented in the year. See the 'Credit risk' section in the Risk review. See 'Critical judgements and accounting estimates' in Note 1 to the Consolidated Financial Statements.
	Retail and corporate credit impairment charges –Reviewed detailed reports from management throughout the year to satisfy ourselves that SICR triggers had been correctly identified. –Considered management's proposal to retire certain JAs due to the updated SICR triggers.	–Concurred with management's judgement on the level of retail and corporate credit impairment charges, concluding that the underlying assumptions were reasonable. –Agreed with management's updates on existing and new JAs. See 'Critical judgements and accounting estimates' in Note 1 to the Consolidated Financial Statements. See Note 13 to the Consolidated Financial Statements. See ‘Credit risk’ in the Risk Review.
Provisions and Contingent liabilities The provisions for customer remediation, litigation and other regulatory activities continued to be highly judgemental and have required significant assumptions.	–Reviewed management’s judgements and estimates on the level of provision and any potential liability for historical motor finance commission payments. –Scrutinised the level and adequacy of customer remediation, litigation and other regulatory provisions and challenged management’s assumptions. –Monitored progress on litigation with a third party over an alleged PPI liability and reviewed judgements and estimates on the level of provision for potential future legal claims. –Reviewed management’s judgements and estimates on the level of provision for a legacy tax dispute with an overseas tax authority regarding equity related transactions undertaken by Santander Financial Services plc (SFS). –Reviewed management’s judgements and estimates in respect of any potential liability in relation to on-going German dividend tax arbitrage transactions regulatory and law enforcement investigations.	–The Committee agreed that it was now probable that an economic outflow would be incurred and endorsed management’s best estimate of the potential loss, which considered a range of scenarios scrutinised by the Committee. –Agreed with management’s judgement on the level of customer remediation, litigation and other regulatory provisions and/or contingent liability disclosures. –Endorsed the proposed year-end disclosures. See ‘Critical judgements and accounting estimates’ in Note 1 to the Consolidated Financial Statements. See Note 27 and 30 to the Consolidated Financial Statements.

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Board Audit Committee Chair’s report continued

Financial reporting issue	Action taken by the Board Audit Committee	Outcome
Defined benefit pension schemes Significant judgement is required on the key assumptions underlying defined benefit pension asset and liability calculations. Outcomes remain inherently uncertain.	–Reviewed management’s approach regarding the principal assumptions underlying the defined benefit pension asset and liability calculations. –Reviewed management's approach to illiquid assets valuation where there is inherent uncertainty as their values are based on unobservable market inputs. –Reviewed management's proposals to update the mortality projections to reflect the latest published CMI projections. –Monitored the continued appropriateness of the methodology for defined benefit pension calculations and reviewed the inflation, discount and mortality rates applied at the year-end.	–Agreed with management’s approach regarding the principal assumptions. –Agreed with management's approach to illiquid assets valuation. –Agreed with management's proposals to update the mortality projections to reflect the latest published CMI projections. –Endorsed the proposed quantitative and qualitative year-end disclosures in respect of pension obligations. See ‘Critical judgements and accounting estimates’ in Note 1 to the Consolidated Financial Statements. See Note 28 to the Consolidated Financial Statements. See ‘Pension risk’ in the Risk Review.
Goodwill and the Company’s investment in Santander UK plc	–Monitored the continued appropriateness of the methodology applied in management’s annual impairment assessments for goodwill and the cost of the Company's investment in Santander UK plc including the discount rate, the long-term growth rate and the cash flow projections applied in the annual impairment assessment.	–Agreed with management that no impairments to goodwill or the cost of the Company's investment in Santander UK plc should be recognised in 2024. –Endorsed the proposed year end disclosures See Note 19 to the Consolidated Financial Statements.
Other areas	–Reviewed the outcome of management’s going concern assessment. –Reviewed the outcome of management’s assessment of climate risk exposure.	–Agreed with management that the going concern basis of accounting remained appropriate at 31 December 2024. –Agreed with management that no impairment should be recognised in relation to climate risk in 2024. –Endorsed the proposed year end disclosures. See Note 1 and 'Going concern' in this report and in the Directors' report.

The Committee’s focus continues to be on areas

of significant judgement and estimate which pose

the greatest risk of a material financial statement

misstatement. In doing so we consider carefully

the views of PwC, our external auditors, who

constructively challenge the Company's financial

reporting. In addition to the areas set out in the

preceding table, the Committee also considers

other higher risk items. For 2024, these continued

to include the identification and assessment of

risks of material misstatement due to management

fraud or error. We also considered management's

assessment of the effectiveness of model

risk management for financial reporting

related models.

Disclosure in the Annual Report

We received verbal updates, in respect of each

quarterly financial report, from the Disclosure

Committee, a senior executive committee chaired

by the Financial Controller. Its remit is to advise the

Committee on the completeness and accuracy of

disclosures in the Company’s external reporting.

Some of the Committee's disclosure

considerations included:

–Introduction of an ESG Framework to better

align with Banco Santander and improvement

of the control environment for ESG, including

narrative and data collation.

–Review of the Modern Slavery Statement which

sets out the steps we have taken to ensure

there is no slavery in our business and supply

chains.

–Overview of SOx control deficiencies at the

year-end 2024.

This, together with other reports received in

the year, and a review of best practice and peer

approaches, enabled us to conclude that we were

satisfied with the disclosures in this Annual Report.

Management also engaged with the Board and the

Committee in 2024 in respect of the approach to

the Annual Report which enabled us to input into

the overall tone and messaging in a timely manner.

Fair, balanced and understandable

The Disclosure Committee also reports on

whether the Annual Report is fair, balanced, and

understandable and whether it provides

the information necessary for readers to assess

Santander UK's position and performance,

business model and strategy.

In this context, the Disclosure Committee

considered whether:

–Key messages are consistent throughout the

document, relating to financial performance and

progress against strategic priorities.

–Key judgements and estimates, significant risks

and issues are reported clearly and adequately.

–The Annual Report has a clear framework with

good signposting and a complete picture of

performance and events.

The Committee's assessment of fair, balanced

and understandable is also underpinned by the

understanding it gains through the reporting made

to it throughout the year relating to management

judgements and estimates, internal control

matters, Internal Audit activities and the reports

of the external auditors. Our assessment also

considers the robustness and outcomes of the

assurance, review and verification processes

conducted by management and whether the key

risks reflected the Committee's concerns and were

consistent with those reported by management.

Following our assessment, we concluded that

the 2024 Annual Report was fair, balanced

and understandable.

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Board Audit Committee Chair’s report continued

Financial Reporting Council (FRC) Annual

Review of Corporate Reporting 2023/24

In September 2024, the FRC issued a report which

set out its views on key developments for annual

reports, codifying its Thematic Reviews. The report

highlighted areas of high-quality reporting, but also

drew attention to improvements needed in areas

such as disclosures on the impairment of assets,

cash flow statements, financial instruments, and

the requirement for the Strategic Report to be 'fair,

balanced and comprehensive'.

As part of our oversight of this area, management

reported to us on its work in the areas of interest

to the FRC. We are satisfied that management

appropriately addressed the areas identified by

the FRC in the preparation of this Annual Report.

Going concern

We satisfied ourselves that it is appropriate to use

the going concern basis of accounting in preparing

the financial statements, supported by a detailed

analysis provided by senior Finance management.

As part of the assessment, we considered whether

there are sufficient financial resources, including

liquidity and capital, available to continue the

operations of Santander UK. We considered

Santander UK's resilience in the face of potential

stress and prominent events.

In making our assessment, we considered all

information of which we were aware about the

future, which was at least, but not limited to,

12 months from the date that the financial

statements were authorised for issue.

Oversight of external auditors

External Auditors

PwC were appointed in 2016 and their

independence was considered and monitored

throughout the year. We were satisfied that PwC

continued to meet the independence requirements.

Ian Godsmark has been lead audit engagement

partner since June 2022.

A Banco Santander group wide external audit

tender was undertaken in the first half of 2024 for

the appointment of financial years 2026, 2027 and

2028. The Committee oversaw the process locally

with selected candidate firms and focused on audit

quality and expertise to ensure high quality audit

standards were retained.

A recommendation to reappoint PwC was made as

the preferred firm to Banco Santander based on a

robust review of the selected firms’ proposals.

Relationship and Engagement with PwC

Our review of the relationship with PwC included

the following activities:

–Consideration of their audit plan and updates.

–Consideration of their work relating to

management judgements and estimates.

–Consideration of the summary of misstatements

not corrected by management. The Committee

was satisfied that they were not quantitatively or

qualitatively material, either individually or in the

aggregate at each quarter-end.

–Discussion on the level of disclosure in the

Annual Report and Half Yearly Financial Report

to satisfy ourselves that it is appropriate.

–Discussion of developments in financial

reporting including changes to statute,

accounting standards and best practice.

–Review of PwC's reports on findings and

recommendations on internal control and

financial reporting matters identified during their

audit and their view of management's progress

in resolving them.

–Interactions, including meetings in private

session during Committee meetings, and at

other times throughout the year.

–Consideration of Santander UK specific

independence issues, as well as those of PwC.   

Based on the above inputs, captured in a

formalised assessment, the Committee satisfied

itself as to the rigour and quality of PwC’s audit

process.

Non-audit fees

We have a robust policy on non-audit services

provided by our external auditors. Non-audit

services were under continuous review throughout

2024 to determine that they were permitted

by reference to their nature, assessing potential

threats and safeguards to auditor independence as

well as the overall ratio of audit to non-audit fees.

All assignments require advance approval, either

by the Chair (or in their absence their alternate),

under delegated authority for amounts under

£250,000 plus VAT or, if larger, by the Committee.

This process is in addition to the requirement for all

non-audit fees to be approved by the Banco

Santander Audit Committee.

The fees for non-audit work performed by PwC in

the year are disclosed in Note 7 to the

Consolidated Financial Statements. We ensured

that these met the external and internal tests for

maintaining their independence.

In 2024, the Company paid a fee of £1.8m to PwC

in relation to incremental work undertaken in

support of their audit of Banco Santander SA.

In 2024, PwC's non-audit related fees were 28% of

their total audit fees for the Company, well within

the required cap of 70%.

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Board Audit Committee Chair’s report continued

Internal Controls and regulatory reporting

The Board Risk Committee has overall

responsibility for the effectiveness of the internal

control systems. However, due to the nature

of internal control matters, there is a degree

of overlap in responsibilities with those of

this Committee, particularly regarding financial

reporting controls.

Section 404 of the Sarbanes-Oxley Act

requires management to report on the design

and effectiveness of its internal controls over

financial reporting (ICFR) framework. The

Committee considered management's SOx

testing framework including 100% independent

design and effectiveness testing of financial

reporting controls; reviewing the adequacy

of data lineage; and the importance of the

deficiencies identified when considering root

causes and the remediation plans.

Recognising the importance within statutory and

regulatory reporting of capital and risk-weighted

asset metrics, many of which are not subject to

external audit, the Committee retained its focus on

the level of comfort we obtain. We also reviewed

the processes and governance in respect of

preparing additional capital and risk management

disclosures. We had a specific focus on liquidity

risk reporting which is subject to a control

enhancement programme.

Internal Audit

The Internal Audit plan, based on a comprehensive

risk assessment, including budget and resources,

was reviewed and challenged by the Committee

prior to recommendation to the Board for its

approval. The plan was updated at regular

intervals in 2024 in response to emerging risks and

changes in the business and the regulatory

environment.

As part of our oversight, we received regular

updates from our Chief Internal Auditor on internal

audit matters which included summaries of the

most relevant conclusions of the audits completed,

and progress on implementing recommendations

with special consideration to any significant

overdue recommendations, and broader root

cause analyses. All unsatisfactory rated audits

were subject to additional scrutiny by the

Committee, requiring the relevant business

areas to present their response and action plans

to address the audit findings.

We also oversaw the objective setting and

performance evaluation of the Chief Internal

Auditor, ensuring objectives were aligned to key

priorities for the Company.

The Committee has approved the Internal Audit

Charter at its annual review and receives regular

updates on the quality assurance, capabilities and

capacity of the Internal Audit function to ensure

its operational effectiveness and adequate

independence. This is supplemented by regular

interactions between the Chief Internal Auditor and

the Committee Chair. We also receive feedback on

interactions between Internal Audit, management

and our external auditors.

Recovery and Resolution Planning

The Bank of England's (BoE) Resolvability

Assessment Framework (RAF) sets out how it

assesses UK financial firms' resolvability and

introduces a public disclosure regime. The

Committee oversaw management's progress on

resolvability, including achieving the best possible

rating across all three resolvability outcomes in

August 2024. Management will continue carrying

out fire drill exercises at various levels across the

business, including with senior management and

the Board.

The Committee also oversaw the updating of the

recovery plan which was submitted to the PRA

in June 2024 and included in the consolidated

Banco Santander Recovery Plan submission to

the European Central Bank in October 2024.

Whistleblowing

The Committee oversees Santander UK's

whistleblowing arrangements including

continuous refinement of our processes to

align with evolving best practice. Santander UK

recognises the importance of creating

an environment where employees feel safe and

able to Speak Up. Speaking Up is a core

behaviour at Santander UK and there are a

number of ways employees can do this, including

raising a concern via Santander UK's

Whistleblowing arrangements.

In 2024, management continued to manage

the whistleblowing framework and arrangements

under our oversight. We continued to refine

our policies and operating procedures to stay

abreast of best practice. During the year, additional

resources were added to the team to allow it to

continue to meet the expectations of regulators

and internal stakeholders, to ensure appropriate

management of conduct risk, and to enable them

to undertake additional activities.

The Committee considered bi-annual reports

on whistleblowing arrangements. This included

oversight and progress of concerns, outcomes,

identifiable trends, observable risks, the regulatory

environment, proposed changes to legislation

and activities to promote and enhance the

arrangements to support the culture of speaking

up. The Committee also reviewed the annual

Whistleblowing Report ahead of its submission

to the Board.

The Committee is satisfied that Santander UK

complied with the FCA and PRA regulations on

whistleblowing in the year.

I am the Whistleblowers' Champion, a role which

is to oversee the integrity, independence, and

effectiveness of the whistleblowing arrangements. I

am focused on procedures and governance to

prevent victimisation of employees who raise

a whistleblowing concern. I meet regularly

with management and I have been involved in

overseeing the implementation of continuous

improvements to the arrangements.

Other areas of 2024 focus

The Committee also reviewed and recommended

the Taxation Strategy for 2024 to the Board for

its approval.

Committee Oversight

In my capacity as Committee Chair, I meet with

key members of the management team and the

external auditors in advance of each Committee

meeting. I ensure that the Committee meets with

management, the Chief Internal Auditor and the

external auditors in private sessions. I also attend

meetings with the PRA.

With regards to my operation as Committee Chair,

the Board has determined that I have the

necessary qualifications and skills to qualify as the

Board Audit Committee financial expert as defined

in Item 16A of Form 20-F.

Michelle Hinchliffe

7 March 2025

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Board Responsible Banking Committee Chair’s report

Nicky Morgan

Chair

Introduction

On behalf of the Committee, I am pleased to

present the Board Responsible Banking

Committee report.

When feasible, the Committee and the RFB

Committee (together the Committees)

conduct their business concurrently to

ensure alignment of practices, policies and

procedures.

I am also the Chair of the RFB Committee and, as

the vast majority of Santander UK's business is

within the RFB’s perimeter, this report details the

governance arrangements, practices and activities

of both Committees.

Committees’ responsibilities

Support management in shaping, driving and

delivering the responsible banking agenda

of the business across a broad spectrum of

areas including customers, inclusive culture,

conduct, communities and climate change

and the environment (the Board Risk

Committee is responsible for overseeing the

risks associated with climate change).

Committee members

Nicky Morgan (Chair)1

Lisa Fretwell

Ed Giera3

David Gledhill2

Michelle Hinchliffe3

Mark Lewis 4

Jose Maria Roldan

1.Joined as a member and Chair on 1 January 2024

2.Joined on 1 September 2024

3.Left on 1 October 2024

4.Joined on 1 January 2024

As described in the Board and Committee

effectiveness section of the Chair's report

on Corporate Governance, the Committees’

performance was assessed as part of the

annual review. The review concluded that the

Committee continues to operate effectively.

Key activities in the year

In 2024, the Committees’ work focused on:

Responsible Banking

Responsible banking is a broad term covering

an extensive array of environmental, social and

governance-related (ESG) matters that are key to

delivering Santander UK's strategy.

To complete our suite of ESG strategies, in 2024

we scrutinised and recommended to the Board

for approval, Santander UK’s first Governance

strategy which aims to ensure we have clear and

robust governance in place which promotes the

success of Santander UK, its customers and other

stakeholders. Fundamentally, this means ensuring

that the right people are in a position to make the

right decisions at the right time and on the basis

of the right information. The strategy identifies

the key priorities we need to deliver to meet that

ambition, and assesses their current status.

Specific actions have been identified and agreed

where the status of a priority is not judged as

‘green’. You can read more about this in our

Strategic Report. During the course of 2024, we

kept abreast of progress against our Responsible

Banking strategy via regular reporting,

encouraging management to work towards our

ESG ambitions.

Our customers

The Committees continue to ensure that customer

considerations are at the centre of their

discussions and decision making, and Consumer

Duty has been a helpful lever in that. We now

monitor our customers’ outcomes via a new

Consumer Duty dashboard and we also use that

dashboard to inform regular ‘deep dive’

discussions on key issues impacting our

customers. In 2024 these included:

–fraud against our customers

–persistent overdraft use

–access to branches

–supporting our customers to be greener

Management continues to take proactive steps to

support our customers, such as raising awareness

of the ways in which fraudsters may attempt to trick

them, and contacting customers to notify them of

products and services that may provide them with

better value. Critically, management continues to

invest in training for our customer-facing

employees to ensure they are fully equipped to

deal with the most complex customer issues at first

contact. We continued to monitor customer

satisfaction via our Net Promoter Scores, and

noted the positive progress this year. You can read

more about this in our Strategic Report.

Our people and culture

Our people are integral to the success of the

organisation and we therefore spend a significant

proportion of our meeting time assessing our

employee value proposition and culture. We have

continued our 'Employee Voice' discussions in the

year which give us first hand insight into the culture

of specific teams across the organisation, hearing

this year from Santander Consumer UK, the

Technology and Data teams, People Managers

and People & Culture function.

Lisa Fretwell is our Employee Designated Director

and she has reported to us quarterly on her and

fellow NEDs’ interactions with, and learnings from,

our employees. Each NED signed up to an

employee engagement programme for 2024 and

they shared their insights and experiences from

these. You can read more about this in our

Stakeholder Voice Statement in the Strategic

Report.I reported to you last year that

management was working on a new oversight

model aimed at providing us with a more holistic

view of our culture. This new approach, which takes

into account key indicators of each of Santander

UK’s behaviours as well as other important factors

such as leadership and inclusion, has been reported

to us over the course of the year. This dashboard

together with our personal interactions with

employees have provided us with evidence of a

shift in Santander UK’s culture which we will

continue to track and encourage in 2025.

Our inclusive culture is a strength that Santander

UK and the Boards are keen to continue to

develop and strengthen. In 2024, the Committee

reviewed and recommended to the Board a

refreshed Diversity and Inclusion Strategy1, as

required by UK regulation, which aims to

accelerate, and make sustainable change

to equality and inclusion over the next two-year

horizon, utilising social mobility as the key

differentiator. We also assumed responsibility from

the Board Remuneration Committees for reviewing

and approving the Pay Gaps report and we were

pleased to see the positive progress made this

year. You can read more about this on our website.

Regulators, conduct and compliance

Our regulators are key stakeholders as they

authorise Santander UK to provide our services to

our customers. Complying with regulatory

requirements and best practice is a priority and at

each quarterly meeting, the RFB Committee

receives comprehensive updates on the RFB's

conduct and regulatory risk status, as well as

actions to resolve any issues. The report also

includes 'horizon scanning' to give insight on future

regulatory or compliance areas of focus and how

management plans to address them.

Community and suppliers

To ensure we do the right thing by our communities

and suppliers, we received reports on a multitude

of matters, including our draft refreshed Social

Strategy, which I will report on in next year’s annual

report, our ethical procurement approach, and

activities undertaken to ensure that no modern

slavery exists in our supply chains . We are

pleased with progress in these areas and continue

to encourage management to do more.

Responding to climate change

We have detailed our activity in relation to our initial

internal Climate Transition Plan in our Stakeholder

Voice Statement of this report.

Nicky Morgan

7 March 2025

1.Alignment with FCA Consultation Paper CP23/20 that firms

in scope must develop an evidence-based Diversity and

Inclusion strategy.

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Board Remuneration Committee Chair’s report

Mark Lewis

Chair

Introduction

On behalf of the Committee, I am pleased to

present the Board Remuneration Committee

report.

When feasible, the Committee and the RFB

Committee (together the Committees) conduct

their business concurrently to ensure

alignment of practices, policies and

procedures.

I am also the Chair of the RFB Committee

and, as the vast majority of Santander UK's

business is within the RFB’s perimeter, this

report details the governance arrangements,

practices and activities of both Committees.

During the year, the Committee welcomed

three new members: Jose Maria Roldan,

David Oldfield and David Gledhill. Further

details on the changes to the composition of

the Committees during the year can be found

in the Chair’s report on corporate governance.

Committees’ responsibilities

Setting the overarching principles and

parameters of the remuneration policy.

It does this in consultation with the RFB

Committee to ensure that the RFB can

comply with its legal and regulatory

obligations, including ring-fencing.

Overseeing the implementation of the

remuneration policy, including approving

individual remuneration packages and the

bonus framework and outcomes for EDs

and other senior executives.

Approving the framework for identifying

Material Risk Takers (MRTs) and overseeing

their remuneration arrangements.

Reviewing the remuneration arrangements for

all employees.

Committee members

Mark Lewis (Chair)

Lisa Fretwell

Ed Giera

David Gledhill1

Jose Maria Roldan2

David Oldfield3

1.Joined as a member on 1 September 2024

2.Joined as a member on 1 October 2024

3.Joined as a member on 1 December 2024

As described in the Board and Committee

effectiveness section of the Chair's report

on Corporate Governance, the Committees’

performance was assessed as part of the

annual review. The review concluded that the

Committee continues to operate effectively.

Key activities in the year

In 2024, the Committees’ work focused on:

Aligning remuneration with our strategic

priorities and good customer outcomes

Our variable pay framework is based on our

core principles which link remuneration and

performance and align with our strategy, risk

appetite and culture. This supports the delivery of

good outcomes for our customers and treats all our

employees fairly.

Each year we review our variable pay framework

to ensure it remains aligned with our strategic

priorities and reflects our culture and the

behaviours we expect from our employees. Our

2024 balanced scorecard comprised of stretching

financial and non-financial metrics across four

categories: Customer, Shareholders, Sustainability

and Responsible Banking. These metrics and

targets were designed to motivate our people to

deliver on our goals and create long-term value for

our shareholders, while continuing to balance with

the interests of our wider stakeholders.

During 2024, we continued to embed Our People

Deal in remuneration structures, with a focus

on high performance and living our TEAMS

behaviours through:

–encouraging a high-performance culture,

where people are rewarded and recognised for

their performance, including individual impact

on risk culture and good customer outcomes

and their contribution to Santander UK’s

success;

–encouraging responsible business conduct and

customer-centricity and seeking to deliver good

outcomes for all customers and clients; and

–promoting an effective risk culture and effective

risk management with the maintenance of a

sound capital base.

We simplified our pensions arrangements and

made improvements to our health and wellbeing

benefits offering for employees to more closely

align to our commitment made in our People Deal

to “be there when it matters” and to ensure people

are “valued for their impact”.

During the year, we also reviewed the regulators’

removal of the bonus cap in the UK and what it

means for Santander UK. As detailed in the Policy

Report, Santander UK continues to apply a 2:1

variable to fixed pay cap given we are a subsidiary

of Banco Santander group, which as a European

entity remains subject to the cap. A number of

our Material Risk Takers (MRTs) are identified at

Banco Santander level and therefore remain

subject to the bonus cap. Retaining the 2:1 ratio

mitigates the risk of unfair outcomes within our

MRT population. The Committee will keep this

approach under review.

During 2024, the Committee also reviewed the use

of options in bonus awards to senior employees. In

the interest of simplification, options will not be

awarded in 2025.

For more on the 2024 variable pay framework,

including the scorecard metrics for Santander UK

plc, see the Remuneration Implementation Report.

Business performance in 2024 and impact

on remuneration

When determining variable pay for 2024, the

Committees carefully considered the performance

delivered against the bonus scorecard metrics,

including those designed to promote positive

outcomes for our broader stakeholder groups,

to ensure a balanced and proportionate outcome.

While seeking to fairly reward strong business

performance and other achievements delivered

during the year, we remained mindful of the

continuing pressures on our customers,

employees and wider communities driven by

higher interest rates and cost of living.

We also took into account an assessment of

current and future risks, including the implications

of the historical motor finance provision, when

approving the overall bonus pools for Santander

UK, Santander Consumer UK and Santander

Financial Services, as well as the bonus awards

for the EDs and other senior executives.

The Committees are satisfied that 2024 variable

pay outcomes for all employees appropriately

reflect Santander UK’s financial and non-financial

performance and are fair, consistent, and aligned

to our stakeholders’ interests. For more detail, see

the Remuneration Implementation Report.

Our approach to risk adjustments

Our risk adjustment procedures, which are

applicable to all employees, are robust and well-

embedded within our remuneration framework. We

continue to use a range of risk adjustment

mechanisms, including applying risk adjustments

at a bonus pool level or an individual level through

recovery provisions (malus and/or clawback).

Our approach to risk adjustment is under

continuous review to adapt to the changes in

Santander UK’s operating environment, ensuring

that they remain comprehensive, relevant and

compliant with regulatory requirements.

This year, particular focus was given to the

customer conduct environment. Indicators

of customer protection and outcomes were

considered as part of the risk adjustment process,

along with metrics related to conduct, integrity

and regulatory compliance.

In addition to the CRO recommending any

bonus pool, collective or individual adjustments,

the Committees also seek assurance from the

Board Risk Committee on risk performance and

any potential areas requiring adjustment that we

may wish to make. The Chief Internal Auditor's

perspective on the control environment is

also considered.

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Board Remuneration Committee Chair’s report continued

We also hear from the Chief Compliance Officer on

investigations into incidents affecting Santander

UK and any resulting recommendations on

individual remuneration risk adjustments.

The Committees spent considerable time

determining the appropriate way to reflect the

current risk issues in variable pay outcomes for

2024 and are comfortable that the resulting

outcomes are fair and proportionate.

As detailed in last year's report, Santander UK

has a NYSE compliant recovery policy in place.

This allows for the recovery of variable

remuneration awarded to Executive Officers in the

case of an accounting restatement.

Supporting our employees

The Committees’ roles and remits extend

beyond the remuneration of the EDs to include

other senior leaders (including MRTs) and,

importantly, to overseeing the implementation

of reward and benefits policies for all employees

across Santander UK.

The Committees undertake annual reviews of

remuneration and benefits for the wider workforce

and receive updates throughout the year on

related key matters. This helps us to ensure that

executive remuneration decisions are informed by,

and consistent with, the approach taken for

employees more broadly.

We are committed to ensuring our employees

are fairly rewarded and have access to a

comprehensive and meaningful range of

benefits. This is important not only for attracting

and retaining talented individuals but also for

supporting our people, particularly our lowest

paid employees.

Looking ahead, the Committees will continue to

focus on the further simplification of variable pay

in particular the harmonisation and simplification

of reward structures to align to our values of

Simple, Personal and Fair. In the coming year,

the Committee will also consider the impact of

the Employment Rights Bill.

Santander UK continues to be an accredited Real

Living Wage employer, a status over which the

Committees maintain oversight.

We have once again voluntarily disclosed our

CEO pay ratio. For more, see the Remuneration

Implementation Report.

Executive Director reward

Angel Santodomingo was appointed to the

Board on 5 March 2024. In determining Angel’s

package, careful consideration was given to

market positioning, alignment to our remuneration

policy and his status as an expatriate having joined

us from Banco Santander S.A in Spain. As per our

remuneration policy, pension provision is aligned

with the wider workforce except in exceptional

circumstances. It was deemed appropriate to

maintain Angel’s home country pension provision

whilst on assignment in the UK.

Inclusive Culture

We continued our long-term strategic

commitment to strengthening our inclusive

culture. We recognise the benefits of this for

our employees and wider communities, and

the value it adds to our business.

While the Committees are responsible for

overseeing Santander UK's approach to pay

gap reporting, the Board Responsible Banking

Committee has responsibility for overseeing

management’s approach to, and progress in,

improving inclusion across Santander UK. For

more on this, see the Board Responsible Banking

Committee Chair’s report.

Given our commitment to inclusion more broadly,

we have continued to provide a more holistic

overview of our actions and progress towards

achieving everyday inclusion, including

additional metrics on employee representation

and experience.

For more on our approach to inclusive culture, see

the Sustainability review in the Strategic report.

Regulatory changes and engagement

Regulatory developments are a key consideration

for the Committee when making decisions and

we are kept abreast of changes in regulatory

requirements via a variety of means, including by

management and our Independent Remuneration

Adviser. We encourage management to engage

proactively and regularly with our regulators on

matters of interest.

On 26 November 2024, the PRA and FCA

published a joint Consultation Paper detailing

proposed changes to the remuneration rules and

regulatory guidance applicable to firms in the UK

banking sector. During 2025, consideration will be

given as to the impact of the proposed changes,

particularly in light of our status as a subsidiary of

the Banco Santander group.

Mark Lewis

7 March 2025

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Remuneration policy report

Basis of preparation

This report has been prepared on behalf of the

Board by the Board Remuneration Committee.

We comply with the statutory reporting

obligations for large private companies. We

applied the UK Corporate Governance Code

2018 (the Code) and complied with the

Provisions other than where stated in the

Directors' Report. Several voluntary

remuneration disclosures are also presented in

this report.

Remuneration policy for Executive Directors

(EDs)

Our remuneration policy, which applies to EDs, is

below. Remuneration has two elements: fixed and

variable pay. Fixed pay is set at market competitive

levels appropriate for the role. Variable pay

rewards the delivery of internal financial targets,

key strategic priorities and individual performance,

and is subject to risk adjustment.

Remuneration policy applicable to Executive Directors in the year

Fixed pay	Principle and description	Policy
Base salary	–To attract and retain EDs of sufficient calibre and with the skills to deliver our strategy, taking into account the demands and complexity of the role.	–Base salaries are normally reviewed annually. In reviewing base salaries, the Committee considers a number of factors, including: –the skills required, the role responsibilities and the market value of the individual and the role; –the requirement for base salaries to be set at a level that avoids inappropriate risk taking; and –base salary increases for other employees.
Pension arrangements	–To provide a discrete element of the package to contribute towards retirement.	–EDs receive a cash allowance in lieu of pension aligned to the wider workforce average, of 9% of salary, except in exceptional circumstances such as international mobility.
Other benefits	–To offer a competitive package and to support employee wellbeing.	–Including: private medical insurance for EDs and their dependants, life assurance, health screening, and relocation allowances where relevant. –Access to Santander UK’s share schemes on the same terms as other employees.

Variable pay	Principle and description	Policy
Variable pay plans	–The Variable Pay Plan motivates EDs to achieve and exceed annual internal targets within Santander UK’s Risk Appetite and aligned with our strategy and values. –Multi-year deferral and delivery in Banco Santander SA shares aligns EDs’ interests to the long-term interests of Santander UK. Further long-term performance testing applies for the CEO. –Part of the award is deferred according to the requirements of the PRA Rulebook. –The long-term PagoNxt Incentive Plan recognises the contribution of employees critical to the success of PagoNxt, one of Banco Santander's strategic priorities.	–Bonus awards under the Variable Pay Plan are discretionary and determined by performance against a scorecard of financial and non- financial goals, as well as individual performance. –40% of any bonus awarded is paid upfront after the performance year- ends, and delivered at least half in shares; and –60% of the bonus awarded is deferred and delivered in equal tranches over years three to seven, with each tranche delivered at least half in shares. –For the CEO, the first three of five deferred award tranches are subject to further performance testing which may reduce or increase the payout. –Awards under the PagoNxt Incentive Plan can be made in restricted share units and/or premium priced options of PagoNxt, and vest in line with regulatory requirements. –Shares or share instruments are subject to a minimum one-year retention period following vesting. –Malus and clawback can be applied to variable pay for up to ten years following the grant of an award. –The structure of variable pay awards means EDs acquire a meaningful shareholding in Banco Santander SA which may extend for a significant period post-employment. In addition, the CEO is subject to a Shareholding Policy, which aligns long-term interests with Banco Santander shareholders. The requirement under the policy is set at two times the incumbent’s net salary on appointment. A formal post-employment shareholding requirement is therefore not in place.

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Remuneration policy report continued

Our remuneration policy meets regulatory

requirements. Given that Santander UK is part of

Banco Santander Group which remains subject to

the 2:1 maximum ratio, Santander UK continues to

apply a 2:1 variable to fixed pay cap. This is in line

with approvals granted to Banco Santander SA by

its shareholders. For control function roles, a lower

ratio of 1:1 is normally applied.

Executive remuneration policies

and principles

Our core values of Simple, Personal and Fair drive

our remuneration policy. We focus on delivering a

framework that is easy to understand, tailored to

individual roles, competitive and fair.

The key drivers of our Remuneration Policy

Alignment to culture

–To design policies aligned to our long-term

success, which support the delivery of our

strategy and reinforce our values.

–To base variable pay on a balanced scorecard

of quantitative and qualitative metrics across

Customers, Shareholders and Responsible

Banking. This aligns to Santander UK’s strategic

priorities, with a focus on good customer

outcomes, simplification, improved efficiency

and sustainable growth.

Simplicity

–To ensure our approach to remuneration is

transparent and easily understood.

–To operate clear structures so our employees

can link their contribution to the success of the

organisation.

Risk

–A consistent approach to reward for all our

employees upholds our prudent approach to

Risk Appetite set as part of a Santander UK-

wide framework. Risk adjustment takes place at

an individual and collective level.

–To provide a package that is balanced between

fixed and variable pay, and short-term and long-

term horizons, which promotes prudent risk

management.

–To ensure remuneration complies with

applicable regulations and legislation.

Fairness

–To take into account an assessment of the EDs'

performance against goals set at the start of the

year, which cover financial, non-financial,

quantitative and qualitative criteria.

–To set robust and stretching targets and reward

exceptional performance.

–To attract, retain and motivate employees of the

highest calibre by providing total remuneration

which reflects individual and Company

performance, is competitive, and reflects the

responsibilities of the role.

–To consider wider employee pay and conditions

when determining Executive pay.

Clarity

–The Committee reviews remuneration reporting

on an annual basis against best practice and

developments in corporate governance,

including the Code. Our reporting is designed to

be transparent, whilst reflective of our structure.

Predictability

–The Committee annually reviews variable pay

levels for certain individuals and the basis of the

bonus pool calculation. Due to commercial

sensitivity, bonus opportunities and targets are

not disclosed as per the provisions of the Code.

Directors’ remuneration is within the variable pay

cap as approved by Banco Santander SA

shareholders and set out above.

On recruitment

When appointing a new ED, base salary is set at a

market competitive level appropriate for the role,

taking into consideration a range of factors

including role responsibilities, internal and external

peer groups, and experience.

Unless determined otherwise, new EDs receive a

pension allowance of 9% of salary, aligned to the

wider workforce average. Benefits will typically be

aligned to the wider employee population.

Remuneration will be established in line with the

Remuneration Policy, as set out in the table on the

previous page.

Relocation support and international mobility

benefits may also be given. Relocation support will

normally be a capped amount for a limited time. In

cases of international mobility, the Committee will

have discretion to offer benefits and pension

provisions which reflect home country market

practice and align to relevant legislation.

Buy-out awards

Compensation may be provided to EDs who forfeit

awards on leaving their previous employer. The

Committee retains discretion to make such

compensation as deemed appropriate to secure

the relevant individual’s employment and will

ensure any such payments align with both the

long-term interests of Santander UK and the

regulatory framework.

Such payments will be in line with the awards

foregone on leaving the previous employer taking

into account value, form of awards, vesting dates

and the extent to which performance conditions

applied to the original awards.

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Remuneration policy report continued

Service agreements

The key terms and conditions of employment are

set out in individual contractual agreements. These

agreements include a notice period of six months

from both the ED and the Company.

The agreement reserves a right for the Company

to terminate employment immediately with a

payment in lieu equal to the ED's fixed pay for the

notice period. In the event of termination for gross

misconduct, neither notice nor payment in lieu of

notice is required.

Termination payments

The remuneration impact of an ED leaving the

Company, including treatment of variable pay and/

or any termination payment will reflect the terms of

the service agreement, relevant scheme rules,

regulatory requirements and the Committee’s

policy relevant to the reason for leaving.

Outstanding variable pay awards generally lapse

on termination, other than where an individual is

considered a ‘good leaver’. Where an ED is a good

leaver, eligibility to variable pay awards will

normally subsist until the relevant scheduled

payment dates and will remain subject to

performance where relevant.

The Committee determines whether an ED is a

good leaver. Usual good leaver circumstances

include but are not limited to: injury, ill-health,

disability, redundancy, retirement and death. The

Committee may, at its discretion, determine an ED

a good leaver in any other circumstances.

A framework is in place to guide the Committee to

determine the discretionary circumstances when

good leaver status is appropriate. Other than a

payment in the event of redundancy, there are

generally no payments upon termination of

employment for EDs.

In the event of a change in control, any outstanding

variable pay awards will be treated in line with the

relevant scheme rules, taking into account

applicable regulatory requirements.

Risk and Performance adjustment

We continue to meet the regulatory requirements

in respect of risk and performance adjustment. All

variable remuneration can be adjusted for current

and future risks through our Additional Risk

Adjustment Standard which is linked to our Board

approved Risk Appetite.

The Standard provides a quantitative assessment

against Santander UK’s Risk Appetite and an

additional qualitative risk event assessment that

can reduce the bonus pool or individual awards to

nil at the Committee’s discretion.

Our Individual Remuneration Adjustment Standard

provides a framework for the process, governance

and standards relevant for decisions on individual

performance adjustments following an incident,

including the application of malus and clawback.

Performance adjustments may include, but are not

limited to:

–reducing an award for the current year;

–reducing the amount of any unvested deferred

variable remuneration;

–requiring an award which has not yet been paid

to be forfeited; and

–requiring repayment on demand (on a net basis)

of any cash and share awards received at any

time for a period of up to ten years following the

date of award.

The Committee has full discretion to prevent

vesting of all or part of an amount of deferred

remuneration and/or to freeze an award during an

ongoing investigation in a number of

circumstances, including:

–employee misbehaviour, misconduct or material

error;

–material downturn in the performance of

Santander UK or a relevant business unit; and

–Santander UK or a relevant business unit

suffering a material failure of risk management.

When determining variable pay awards for

individuals performing roles across Santander UK

plc and Santander UK Group Holdings plc, the

Santander UK Group Holdings plc Board

Remuneration Committee will apply any necessary

discretion based on factors related to UK group

entities outside of Santander UK plc. This

discretion is subject to validation by the Santander

UK plc Board Remuneration Committee.

The Committee seeks input from the Chair of the

Board, Chair of the Board Risk Committee, Chair

of the Board Audit Committee, CRO, Chief

Compliance Officer, Chief People Officer and Chief

Internal Auditor when determining whether any

performance or risk adjustments are required.

We have an NYSE-compliant policy in place which

enables variable remuneration to be recovered

from Executive Officers in the case of an

accounting restatement that would have impacted

that remuneration.

Policy for all employees

Our performance and reward approach across the

Company supports our business strategy, rewards

strong performance and reinforces our values

within our risk management framework. The

general principles of the Remuneration Policy

broadly apply across all employees where

appropriate. They are designed to attract, retain,

motivate and drive performance.

The structure of remuneration packages for EDs is

typically aligned with the broader employee

population, comprising salary, benefits, pension

provision and discretionary variable pay dependent

on role and responsibility.

The Committee annually approves the operation of

variable reward schemes (as well as share

schemes) for all our employees to ensure they

reward appropriate behaviour and do not

incentivise activities which are outside risk

appetite.

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Remuneration implementation report

Introduction

This section of the report outlines how our

Remuneration Policy was implemented for 2024.

Variable Pay Plan

The Committee reviews and approves

remuneration governance and frameworks

annually. This ensures continued compliance with

the relevant regulatory rules, including those for

ring-fencing.

To incentivise and reward EDs for achieving

superior and sustained performance, our Directors

participate in an annual variable incentive plan. A

balance of financial and non-financial performance

metrics are selected annually by the Committee

and are aligned with our strategy as measured

over the financial year. Multi-year deferral and

delivery in Banco Santander SA shares ensure

that EDs’ interests are aligned to the long-term

interests of the business. Further long-term

performance testing also applies for the CEO.

Both upfront and deferred awards are made at

least half in shares. The deferred element is

delivered over seven years. For the CEO only, the

first three tranches of deferred awards are subject

to further performance testing against long-term

metrics. Awards delivered in shares are subject to

an additional one-year retention period from the

point of delivery.

The 2024 Variable Pay Plan pool was determined

based on a series of stages as follows:

Quantitative assessment

A quantitative assessment against a balanced

scorecard of financial and non-financial metrics

that are key to our strategy. Performance metrics

are reviewed annually to ensure continued

alignment with strategy and, for 2024 the

scorecard included:

–Customers (Net Promoter Score, Active

Customers and Total Customers)

–Shareholders (RoTE, Capital Generation and

Costs)

–Sustainability and Responsible Banking

(Climate Strategy Transition Plan, Employee

Engagement and Inclusion and ambitions for

gender and ethnicity representation).

A profit underpin applies, requiring Profit after Tax

to remain positive in order to pay any award, with a

reduced pool should profit reduce substantially

from the prior year.

Qualitative assessment

A qualitative assessment adds context to the

quantitative assessment and ensures a balanced

view of performance is taken. Performance is

assessed across compliance, risk management,

network collaboration and responsible banking.

Additionally, a relative performance modifier is

applied.

Banco Santander Group Multiplier

The Committee has the discretion to adjust the

pool upwards or downwards to reflect overall

Banco Santander performance, if appropriate.

Regional Adjustment

A Regional Adjustment reflects the UK's

contribution to performance of the Banco

Santander group's European Region.

Exceptional Adjustment

Exceptional adjustments allow for unexpected

factors or additional internal targets not covered by

the quantitative or qualitative assessments to be

reflected in variable pay outcomes.

UK-focused risk adjustment

This provides both a formula-based assessment

against our Risk Appetite and an additional

qualitative overlay. Consideration is given to risk

appetite breaches including, but not limited to:

customers, conduct, operational, reputational and

financial crime risk. This can result in downward

adjustment of up to 100% of the pool or individual

awards at the discretion of the Committee.

Individual assessment

The allocation of the pool is based on an

individual's performance, taking into account a

range of factors. Performance is assessed against

the delivery of priorities (the 'What'), the behaviours

shown in delivering those priorities (the 'How'), and

also Risk.

Deferred long-term awards

Performance testing applies to a portion of the

deferred awards for the CEO. This applies to the

first three deferred tranches of the 2024 award

(36% of the total award) which are payable in

2028, 2029 and 2030. Performance is measured

over a three-year period 2025 to 2027.

The performance measures for 2024 awards are

relative TSR, ROTE and ESG metrics. Following

the performance assessment, the level of awards

will be adjusted accordingly. The assessment could

reduce or increase the overall value of the deferred

awards.

PagoNxt Incentive Plan

The PagoNxt Incentive, a multi-year plan, rewards

those employees across the Banco Santander

Group whose contribution is considered crucial to

the development and success of PagoNxt, one of

the three strategic priorities of the Group. 

Awards are granted in share options and/or

restricted share units (RSUs) in PagoNxt, S.L.. UK-

specific performance conditions apply. Awards will

vest in accordance with regulatory requirements.

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Remuneration implementation report continued

2024 Business Performance and Impact

on Remuneration

During 2024 the progress made against our

strategic priorities was reflected in improved

business performance as the year evolved. For

the benefit of our customers, the bank leveraged

the expertise of Banco Santander facilitating

continued simplification and efficiency. Whilst

the rising costs of customer deposits, and the

impact of the charge for historical motor finance

commission payments impacted profit, active and

prudent price management resulted in a Banking

NIM that improved in the second half of the year

versus the first half. A continued focus on customer

service ensured our NPS, a key measure of

customer experience, improved over the year.

The Committee acknowledged this performance,

against both financial and non-financial metrics, in

an environment which remains challenging. In

determining remuneration outcomes for the 2024

performance year, the Committee ensured due

consideration was given to the experiences of our

customers, employees and communities.

Context for decision making

The Committee ensures that pay policies and

practices for employees across Santander UK are

taken into account when setting policy for

executive remuneration. The Committee reviews

trends across Santander UK group, including the

outcome of any pay negotiations with our

recognised trade unions. It considers the

relationship between executive remuneration and

that of other Santander UK group employees, as

well as remuneration in the wider UK market, when

making decisions on executive pay.

The Committee oversees broader workforce

remuneration policies and practices, the

implementation of remuneration and related

employment policies across Santander UK and the

salary and variable pay awards for all Material Risk

Takers. It also approves the design of any material

performance-related pay plans.

As part of the monitoring of pay, the following is

considered:

–Santander UK’s engagement with its recognised

trade unions on pay and benefits matters for all

employees;

–Annual pay reviews for the general employee

population;

–Santander UK group-wide pension and other

benefit provisions;

–The design of and overall spend on variable

incentive arrangements; and

–An assessment of conduct across the business.

The Committee is focused on ensuring that

employees are not subject to undue pressures or

inappropriately incentivised. This is monitored

using existing employee engagement indicators

including engagement surveys.

The Committee always considers the broader

stakeholder environment when setting policy or

reaching decisions on executive pay.

Executive Directors' remuneration

Total remuneration of each ED for the year ended 31 December 2024

	Mike Regnier		Angel Santodomingo (4)
	2024	2023	2024	2023
	£000	£000	£000	£000
Salary and fees	1,575	1,500	951	—
Taxable benefits (1)	12	3	233	—
Pension	142	135	123	—
Total fixed pay	1,729	1,638	1,307	—
Bonus (paid and deferred) (2)	1,432	1,003	1,440	—
Long-term incentive plan (3)	—	669	—	—
Total variable pay	1,432	1,672	1,440	—
Total remuneration	3,161	3,310	2,747	—

(1)	Taxable benefits for the Executive Directors comprise a range of benefits including, but not limited to, private health care and living expenses for expatriates.
(2)	36% of the Chief Executive Officer's Variable Pay Plan award is subject to long-term performance metrics assessed over three years, which can increase the value of this element by up to 125% or decrease the award to 0%. No other executive will be subject to long-term performance metrics. The value of the current Chief Executive Officer's 2024 Variable Pay Plan awards not subject to performance conditions, i.e. 64%, is disclosed above. The value subject to further performance conditions, 2024: £805,282 (2023: £563,967) will be disclosed at the close of the performance period upon vesting.
(3)	The Long Term Incentive Plan value represents the value of awards made under the Transformation Incentive Plan, following the testing of the Plan's performance conditions. The value of awards made in share-linked instruments has been calculated with reference to Banco Santander’s share price over the final three months of the 2023 year. Nathan Bostock, former Chief Executive Officer, received an award with a value of £553,545.
(4)	Angel Santodomingo was appointed to the Board as an Executive Director on 5th March 2024 and the figures above reflect remuneration received whilst serving as a Board Director. The pension and benefit provisions reflect his expatriate status and allow maintenance of home country pension and living arrangements.  All other elements of remuneration align with UK based colleagues.

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Remuneration implementation report continued

Stakeholder views

During 2024, Santander UK continued to engage

with key stakeholders on remuneration related

matters including its main regulators, the PRA

and FCA.

Regular engagement takes place with our

shareholder to align remuneration across the

Banco Santander group, while meeting all local

regulatory requirements. The outcome of these

discussions drives our bonus pool construct.

Frequent employee pulse surveys were conducted

throughout 2024. The 'Your Voice' function has

enabled employees to share thoughts and ideas

frequently and anonymously all year round, giving

an immediate gauge of employee sentiment.

Additionally, we discuss business performance and

reward matters with union representatives during

the annual pay review cycle and on a frequent

basis throughout the year.

CEO pay ratio

Santander UK is committed to delivering fair pay

which attracts, retains and motivates employees of

the highest calibre across all grades. In line with

this commitment, the Committee has oversight of

compensation across the organisation, including

pay ratios, and considers this when determining

reward outcomes. We continue to voluntarily

disclose the ratio of the CEO’s total remuneration

to that of employees.

The CEO's pay mix is weighted more heavily

towards variable pay to incentivise the

achievement of stretching internal targets and

long-term value creation. This can lead to greater

variability in total remuneration. In contrast, the

typical pay mix of our less senior employees

places more emphasis on fixed pay, to offer

security and certainty, and to meet our

commitment to employees' financial wellbeing.

The ratio has decreased from 75:1 in 2023 to 69:1

in 2024. The reduction in pay ratio has been

influenced by an increase in average total

remuneration amongst all employees. In assessing

the pay ratio, the Committee is confident that the

Company's policy on remuneration is fair and

consistent with our all-employee pay policies.

Advice and support provided to the

Committee

As permitted by its Terms of Reference, the

Committee has engaged the advice and support

of Deloitte LLP (Deloitte) as independent

remuneration consultants at the expense of the

Company. Total fees (excluding VAT) for advice

and support provided to the Committee in 2024

were £74,600 (2023: £121,150). Deloitte was

initially appointed as Adviser to the Committee

following a formal tender process conducted in

2015 and was reappointed after a further tender

process in 2022.

In 2024, Deloitte also provided unrelated tax,

advisory, risk, assurance and consulting

services to Santander UK.

Deloitte's independence and effectiveness as

the Committee adviser is reviewed annually.

The Committee is satisfied that the Deloitte

engagement partner and team that provides

remuneration advice to the Committee do not

have connections with Santander UK that may

impair their independence. Deloitte is a

founding member of the Remuneration

Consultants Group and voluntarily operates

under the Code of Conduct in relation to

executive remuneration consulting in the UK.

By Committee invitation, the Chair, CEO and

designated representatives from business

functions attend meetings as appropriate to

advise on HR, Risk, Legal and Regulatory matters

in support of the Committee's work. Attendees

included the Chief People Officer, Head of

Performance & Reward, CRO and

Company Secretary.

CEO pay ratio
	Methodology (1)	25th percentile	Median	75th percentile
2024 CEO pay ratio (5)	Option A	99:1	69:1	40:1
2023 CEO pay ratio (4)	Option A	106:1	75:1	45:1
2022 CEO pay ratio	Option A	119:1	84:1	48:1
2021 CEO pay ratio	Option A	140:1	96:1	54:1
2020 CEO pay ratio	Option A	88:1	64:1	37:1
	CEO remuneration (3)	25th percentile (2)	Median (2)	75th percentile (2)
2024 CEO pay ratio	£	£	£	£
Total salary	£1,575,000	£26,359	£36,553	£56,604
Total remuneration	£3,160,709	£32,087	£46,108	£78,352

(1)	Employee pay is calculated based on the 'Option A' methodology. We chose Option A as it gives the most reliable and accurate result by calculating a comparable single figure for each employee.
(2)	Employee pay data is based on full time equivalent pay for Santander UK plc employees. This excludes a small number of employees in the rest of the Santander UK group. Including those employees results in a ratio consistent with the above. For each employee, total remuneration is calculated based on fixed pay accrued in the 2024 financial year, and variable pay is either based on actual bonuses in respect of the 2024 year (where these are available) or modelled target bonuses where actuals are not yet available.
(3)	The CEO's total remuneration is aligned to that disclosed in the Executive Directors' remuneration table on the previous page.
(4)	The 2023 ratios are re-stated above. These were originally calculated based on fixed pay accrued within the 2023 year, in addition to target bonuses for eligible employees. The 2023 ratios have now been recalculated using 2023 fixed pay and bonuses paid in 2024 in respect of 2023 for all employees.
(5)	The values used for the CEO's 2024 Variable Pay Plan awards are the same as those stated in the Executive Directors’ remuneration table i.e. the component which is not subject to performance conditions is used for the CEO pay ratio calculation above. The calculation also includes the vesting value of Transformation Incentive Plan awards made to the CEO, as shown in the Executive Directors' remuneration table.

Relative importance of spend on pay
	2024	2023	Change
	£m	£m	%
Profit before tax	1,330	2,149	(38)
Total employee costs	1,300	1,264	3

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Remuneration implementation report continued

Chair and Non-Executive Director

remuneration

The Chair’s fee is reviewed and approved by the

Committee. The fees paid to NEDs are reviewed

and approved by the CEO and the Chair. Fees are

reviewed annually taking into account the market

rate and time commitment for the role. The Chair is

paid an all-inclusive base fee. NEDs are paid a

base fee, with a supplement for serving on or

chairing a Board Committee, except for the Board

Nomination & Governance Committee.

All NEDs and the Chair serve under letters of

appointment. In respect of the NEDs appointed

prior to 2021, either party can terminate the

appointment by giving three months’ written notice.

From 2021, we increased the notice period for

NEDs to six months to support orderly succession

planning. For the Chair, 12 months’ written notice is

required.

Neither the Chair nor the NEDs have the right to

compensation on the early termination of their

appointment beyond payments in lieu of notice at

the discretion of Santander UK. In addition, neither

the Chair nor the NEDs are eligible for pension

scheme membership or to participate in any

variable incentive arrangements.

Chair and Board Committee member fees
	2024	2023 (2)
	£000	£000
Chair (inclusive of membership fee)	725	725
Board member	100	100
Additional responsibilities
Senior Independent Director	45	45
Chair of Board Risk Committee	70	70
Chair of Board Audit Committee	70	70
Chair of Board Responsible Banking Committee	60	60
Chair of Board Remuneration Committee	60	60
Membership of Board Risk Committee	35	35
Membership of Board Audit Committee	30	30
Membership of Board Responsible Banking Committee	30	30
Membership of Board Remuneration Committee	30	30
Chair of Board Special Projects Committee (1)	30	15
Membership of Board Special Projects Committee (1)	15	-
Consumer Duty Champion	8	8
Designated NED to represent views of the workforce	8	8

(1)With effect from 1 December 2024, the Litigation and Contentious Regulatory Board Sub-Committee was renamed and is now known as the Board Special Projects Committee. In addition, the Chair fee

increased from £15,000 to £30,000 and a membership fee of £15,000 was introduced.

(2)Fees shown were with effect from 1 April 2023.

	2024 Fees	2023 Fees	2024 Expense s  (8)	2023 Expenses	2024 Benefits	2023 Benefits	2024 Total	2023 Total
Non-Executive Directors	£000	£000	£000	£000	£000	£000	£000	£000
Chair
William Vereker (1)	725	712	—	—	2	2	727	714
Independent Non-Executive Directors
Lisa Fretwell	224	204	—	—	—	—	224	204
Ed Giera	299	299	—	—	—	—	299	299
David Gledhill (2)	65	—	—	—	—	—	65	—
Michelle Hinchliffe (3)	229	124	—	—	—	—	229	124
Mark Lewis (9,10)	257	—	—	—	—	—	257	—
Nicky Morgan (10)	241	—	—	—	—	—	241	—
David Oldfield (4)	18	—	—	—	—	—	18	—
Jose Maria Roldan (5)	188	97	—	—	5	—	193	97
Banco Santander Group nominated Non-Executive Directors (6)
Pedro Castro e Almeida (7)	—	—	—	—	—	—	—	—
Dirk Marzluf (10)	—	—	—	—	—	—	—	—
Pamela Walkden	109	132	—	—	—	—	109	132

(1)William Vereker's taxable benefit relates to private health care.

(2)David Gledhill was appointed on 1 September 2024. Fees are in respect of services from that date.

(3)Michelle Hinchliffe was appointed on 1 June 2023. Fees received are in respect of services from that date.

(4) David Oldfield was appointed on 1 December 2024. Fees received are in respect of services from that date.

(5)José María Roldan was appointed on 1 June 2023. Fees received are in respect of services from that date. Taxable benefits relate to professional tax advice.

(6)With the exception of Pamela Walkden, none of the Banco Santander nominated Non-Executive Directors received any fees or expenses.

(7)Pedro Castro E Ameida was appointed on 1 September 2023. Fees are in respect of services from that date.

(8)Only true business expenses have been incurred in the course of Non-Executive Directors’ duties. In prior years, these expenses were processed via payroll and as such attracted tax and were declared.

(9)Mark Lewis' fees include £10,000 in relation to his services as a Non-Executive Director of Santander Consumer (UK) plc.

(10)Mark Lewis, Nicky Morgan and Dirk Marzluf were appointed to the Board of Santander Group Holdings plc on 1 January 2024. 

Annual Report 2024 Santander UK Group Holdings plc 72

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Directors’ report

Introduction

The Directors submit their report together with the

financial statements for the year ended 31

December 2024. The information in the Directors’

Report is unaudited, except where indicated.

Corporate structure, Subsidiaries and

Branches

The Company (incorporated on 23 September

2013) is a subsidiary of Banco Santander SA, a

Spanish retail and commercial bank with a market

share in ten core countries in Europe and the

Americas.

Santander UK was formed from two former

building societies, Abbey National and Alliance &

Leicester, together with the branch network and

savings business of Bradford & Bingley, and has

operated under a single brand since 2010.

All of Santander UK Group Holdings plc's ordinary

shares are unlisted and held directly and indirectly

by Banco Santander SA. Santander UK plc's

preference shares are listed on the London Stock

Exchange and both the Company and Santander

UK plc have other equity instruments in the form of

AT1 securities listed on various securities

exchange markets, including the London Stock

Exchange.

In addition, the Company and Santander UK plc

are subject to US Securities Exchange Act

reporting requirements as they have debt

securities listed on the New York Stock Exchange.

The Santander UK group consists of a parent

company, Santander UK Group Holdings plc,

incorporated in England and Wales, and a number

of directly and indirectly held subsidiaries and

associates. The Company directly or indirectly

holds 100% of the issued ordinary share capital of

its principal subsidiaries. All companies operate

principally in their country of incorporation or

registration.

In line with the ring-fencing requirements set out in

the Financial Services (Banking Reform) Act 2013,

Santander UK plc and its subsidiaries consist of

only entities whose business is permitted under the

Act as a ring-fenced bank. Other entities, including

Santander Financial Services plc (SFS) which is

incorporated in England and Wales, are directly or

indirectly owned by the Company, and SFS has

branch offices in the Isle of Man and in Jersey. For

more information, see Note 18.

Results and dividends

For details of the results for the year, see the

Income Statement in the Consolidated Financial

Statements. For more on dividends, see Note 10.

Details of Santander UK’s activities and business

performance in 2024, together with an indication of

the outlook, are set out in the Strategic report.

Events after the balance sheet date

There have been no material post balance sheet

events, except as set out in Note 41.

Directors

A list of the Directors that served in the year can be

found in the Board and Board Committee

Attendance table in the Chair's report on Corporate

Governance. Details of their emoluments and

interests in shares are set out in the Remuneration

implementation report. For more on changes to the

composition of the Board, see the Chair’s report on

Corporate Governance and the Board Nomination

& Governance Committee Chair's report.

Between 31 December 2024 and 7 March 2025,

the following was noted:

–Following regulatory approval, Enrique Labiano

was appointed as an Executive Director on the

Board on 12 February 2025.

–On 28 January 2025, William Vereker

announced his intention to step down as Chair

of the Board once a thorough appointment

process and handover has been completed.

Appointment and retirement of Directors

All Directors are appointed and retire in

accordance with the Company’s Articles of

Association, the UK Companies Act 2006 and the

UK Group Framework. The Directors are required

to retire each year at the Annual General Meeting

and may offer themselves for re-election.

Directors’ indemnities

Directors’ and Officers’ liability insurance cover was

in place throughout the year, in addition to a deed

of indemnity to provide cover to the Directors for

liabilities to the maximum extent permitted by law.

These remain in force for the Directors’ period of

office from the date of appointment until such time

as any limitation periods for bringing claims against

the Directors have expired. The Directors,

including former Directors who resigned in the

year, benefit from these deeds of indemnity which

constitute qualifying third party indemnity

provisions for the purposes of the Companies Act

2006. Deeds for existing Directors are available for

inspection at the Company’s registered office.

The Company has also granted an indemnity

which constitutes ‘qualifying third party indemnity

provisions’ to the Directors of its subsidiary and

affiliated companies, including former Directors

who resigned in the year and since the year-end.

Qualifying pension scheme indemnities were also

granted to the Trustees of the Santander UK

group’s pension schemes.

Employees

We continue to ensure that Santander UK’s

remuneration policies are consistent with its

strategic objectives and are designed with its long-

term success in mind.

Communication

Santander UK aims to involve and inform

employees on matters that affect them. The

intranet is a focal point for communications and the

‘AskHR’ website connects employees to all the

information they need about working for Santander

UK. We also use face-to-face communication,

such as team meetings and roadshows for

updates.

Santander UK regularly considers employees’

opinions and asks for their views on a range of

issues through regular engagement and surveys.

For more on colleague engagement and initiatives,

see the Strategic report and the Board

Responsible Banking Committee Chair's report.

Consultation with Employees

Santander UK has a successful history of

working in partnership with its recognised trade

unions, Advance and the Communication

Workers Union (CWU), who collectively

negotiate on behalf of approximately 99.5% of

our UK workforce. Both trade unions are

affiliated to the Trades Union Congress. We

consult Advance and the CWU on significant

proposals including those relating to change

across the business at both national and local

levels.

Employee share ownership

Santander UK continues to operate two all-

employee, HMRC approved share schemes: a

Save-As-You-Earn (Sharesave) Scheme and a

Share Incentive Plan (SIP). Those employees

who are designated as Material Risk Takers

receive part of their annual bonus awards in

Banco Santander SA shares/share linked

instruments. Details of the plans and the

related costs and obligations can be found in

the Share-based payments and compensation

sections in Notes 1 and 35.

Inclusive culture

Information on our diversity and inclusion policies,

as required by UK regulation, can be found in the

Chair's report on Corporate Governance and the

Sustainability section of this Annual Report.

Disability

Santander UK is committed to equality of

employment, access and quality of service for

disabled people and complies with the UK Equality

Act 2010 throughout its business operations. We

have processes in place to help train, develop,

retain and promote employees with disabilities,

and we are a Disability Confident Employer

achieving the 'Leader' level. We are committed to

giving full and fair consideration to employment

applications by disabled people, having regard to

their particular aptitudes and abilities, and for

continuing the employment of employees who

have become disabled by arranging appropriate

training and making reasonable adjustments in the

workplace.

Engagement with stakeholders and

employees

Santander UK recognises the importance of

fostering relationships with its principal

stakeholders and that this is key to the long-term

success of our business. We understand the

importance of acting fairly and responsibly and

actively engage with our stakeholders and

employees. For more, see the Stakeholder voice

section in the Strategic Report and the Board

Responsible Banking Committee Chair's report.

Annual Report 2024 Santander UK Group Holdings plc 73

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Directors’ report continued

Streamlined Energy & Carbon Reporting

(SECR)

For details on our energy use, carbon emissions

and efficiency measures implemented in 2024,

including Scope 1, 2 and 3 data, see the SECR

section in the Sustainability review.

Political contributions

In 2024 and 2023, no contributions were made for

political purposes and no political expenditure was

incurred by the Company.

Share capital

Details about the structure of the Company’s

capital can be found in Note 31.

For details of employee share schemes and how

rights are exercisable, see Note 35.

The powers of the Directors in relation to share

capital are set out in the Company’s Articles of

Association. These are available for inspection on

request.

Financial instruments

The financial risk management objectives and

policies of Santander UK and the policy for

hedging, along with details of Santander UK's

exposure to credit risk, market risk and liquidity risk

are set out in the Risk review.

Research and development

Santander UK has a comprehensive product

approval process and policy. New products,

campaigns and business initiatives are reviewed

by Santander UK’s Proposition Approval Forum.

Supervision and regulation

Some of Santander UK’s subsidiaries and joint

venture companies are authorised by the FCA and

the PRA (dual regulated) or the PRA or the FCA

(solo regulated).

While Santander UK operates primarily in the UK,

it is also subject to the laws and regulations of

other jurisdictions in which it operates or has listed

debt securities such as the US.

Internal controls

Risk management and internal controls

The Board and its Committees are responsible for

reviewing and ensuring the effectiveness of

management’s system of risk management and

internal controls.

We carried out a robust assessment of the

principal and emerging risks facing Santander UK

including those that would threaten its business

model, future performance, solvency or liquidity.

Details of our principal risks, our procedures to

identify emerging risks, and how these are being

managed or mitigated are set out in the Risk

review. A summary of our Top and Emerging Risks

is also set out in the Strategic report.

Management’s report on internal control over

financial reporting

Internal control over financial reporting is a

component of an overall system of internal control.

Santander UK’s internal control over financial

reporting is designed to provide reasonable

assurance regarding the reliability of financial

reporting and the preparation of financial

statements for external purposes in accordance

with UK-adopted international accounting

standards (IAS) and International Financial

Reporting Standards (IFRS) as issued by the

International Accounting Standards Board (IASB).

Santander UK’s internal control over financial

reporting includes:

–Policies and procedures that pertain to the

maintenance of records that in reasonable detail

accurately and fairly reflect the transactions and

dispositions of assets.

–Controls providing reasonable assurance that

transactions are recorded as necessary to permit

the preparation of financial statements in

accordance with UK-adopted IAS and IFRS, and

that receipts and expenditures are being made

only in accordance with authorisations of

management.

–Controls providing reasonable assurance

regarding prevention or timely detection of

unauthorised acquisition, use or disposition of

assets that could have a material effect on the

financial statements.

Because of its inherent limitations, internal control

over financial reporting may not prevent or detect

misstatements. In addition, projections of any

evaluation of effectiveness to future periods are

subject to the risk that controls may become

inadequate because of changes in conditions, or

because the degree of compliance with policies or

procedures may deteriorate.

Management is responsible for establishing and

maintaining adequate internal control over the

financial reporting of Santander UK. Management

assessed the effectiveness of Santander UK’s

internal control over financial reporting at 31

December 2024 based on the criteria established

in the Internal Control – Integrated Framework

issued by the Committee of Sponsoring

Organisations of the Treadway Commission

(COSO) in May 2013.As a registrant under the US

Securities Exchange Act of 1934, Santander UK's

management is responsible for establishing and

maintaining an adequate system of internal control

over financial reporting in order to ensure the

accuracy and reliability of Santander UK's

Financial Statements and the Form 20-F submitted

to the SEC.

In line with COSO and SEC requirements, controls

recognised as Sarbanes-Oxley applicable are

subject to annual testing and certification by

management including an attestation by the CEO

and the CFO that they are operating effectively and

that the internal control over financial reporting can

be relied on.

All Sarbanes-Oxley control weaknesses identified

are captured, assessed and included in the year-

end assessment of the reliability of the Internal

Control environment. They are reported on an

ongoing basis to the Board Audit Committee to

ensure the control environment is continuously

improved.

Based on this assessment, management

concluded that, at 31 December 2024, Santander

UK’s internal control over financial reporting was

effective.

Disclosure controls and procedures over

financial reporting

Santander UK’s management has evaluated, with

the participation of its CEO and CFO, the

effectiveness of its disclosure controls at 31

December 2024. There are inherent limitations to

the effectiveness of any system of disclosure

controls and procedures, including the possibility of

human error, and the circumvention or overriding

of the controls and procedures. Accordingly, even

effective disclosure controls and procedures can

only provide reasonable assurance of achieving

their control objectives.

Based upon this evaluation, the CEO and the CFO

concluded that, at 31 December 2024, Santander

UK’s disclosure controls and procedures were

effective to provide reasonable assurance that

information required to be disclosed by Santander

UK in the reports that it files and submits under the

US Securities Exchange Act of 1934 is recorded,

processed, summarised and reported within the

time periods specified in the applicable rules and

forms, and that it is accumulated and

communicated to Santander UK’s management,

including the CEO and CFO, as appropriate, to

allow timely decisions regarding disclosure.

Changes in internal control over financial

reporting

There were no changes to our internal control over

financial reporting during the period covered by this

report that have materially affected, or are

reasonably likely to materially affect, our internal

control over financial reporting.

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Directors’ report continued

Statements of Compliance

The UK Corporate Governance Code 2018 (the

Code)

Santander UK complies with the Code wherever

applicable in order to achieve the best standards of

corporate governance. The Code applied to the

financial year ended 31 December 2024 and the

Board confirms that it applied the principles and

complied with those provisions of the Code

throughout the year, except as follows:

–Provision 5: The Company has not appointed a

NED to represent the views of the workforce, as

this entity does not have a workforce. The views

of the workforce are instead addressed at

Santander UK plc where there is a NED

appointed to represent the views of the

workforce on their board. The Board does

however, receive regular updates on the culture

of the business and the views of employees from

engagement survey feedback. These provide

the Board with an understanding of the wider

workforce, within the group, and provide

meaningful dialogue at Board meetings on

workforce matters. For further details, see

'Culture and hearing the views of the workforce

at the Board' in the Chair's Report in the

Corporate Governance Section.

–Provision 10: For 2024, there were no

circumstances which were likely to impair an

INED's independence. Ed Giera, who has

served on the Board for more than 9 years

(appointed on 19 August 2015) will step down in

March 2025, following an orderly hand over to

his successor. We are confident that Ed has the

strength of character and integrity to ensure his

independence has not been affected by the

length of his tenure.

–Provision 25: The Board Risk Committee (BRC)

was not composed of only INEDs for the period

between 1 January to 1 April 2024 as Pamela

Walkden, a GNED, was a member. We

assessed the implications and believed that the

approach followed was appropriate given our

size and ownership structure and the experience

and expertise that Pamela brought to the BRC.

Pamela resigned from the BRC on 1 April, and

we have since been fully compliant with this

provision.

–Provision 36: Our pension contribution rates for

EDs align with those available to the workforce,

except in exceptional circumstances such as

expatriate arrangements. This is to ensure that

expatriates can continue to maintain home

country pension arrangements.

–Provision 36: The Board Remuneration

Committee has not developed a policy for post-

employment shareholding requirements.

However, the structure of variable pay for EDs

and other senior executives ensures that they

acquire a meaningful shareholding in Banco

Santander SA which extends for a significant

period post employment. For details, see the

Remuneration policy report.

–Provisions 40 and 41: Due to commercial

sensitivity, we opted not to provide all of the

disclosures required by Provision 41. The details

not provided relate to (1) the extent to which

discretion has been applied to remuneration

outcomes and the reasons why and (2) a

description, with examples, of how the Board

Remuneration Committee has addressed the

factors in Provision 40 (specifically predictability

as we do not provide the range of possible

values of rewards to individual directors).

Specific engagement does not take place with

the workforce to explain how executive

remuneration aligns with wider company pay

policy. However, an explanation is available for

employees in the Directors’ Remuneration

report. Details of the structure of our

remuneration arrangements and key

considerations of the Board Remuneration

Committee in the year are included in the Board

Remuneration Committee Chair's Report and,

Remuneration policy and Remuneration

implementation reports.

UK Finance Disclosure Code for Financial

Reporting

Santander UK’s financial statements for the year

ended 31 December 2024 have been prepared in

compliance with the principles of the UK Finance

Disclosure Code for Financial Reporting.

Going concern

The going concern of Santander UK is reliant on

preserving a sufficient level of capital and

adequately funding the balance sheet. In making

their going concern assessment in connection with

preparing the financial statements, the Directors

considered a wide range of information including

Santander UK’s business and strategic plans, top

and emerging risks, including those associated

with climate change, capital position and liquidity

and funding profile, stress scenarios, and

contingent liabilities, and the reasonably possible

changes in trading performance arising from

potential economic, market and product

developments. The Directors' assessment included

consideration of the potential impacts arising from

mixed signals about the UK's recent economic

performance.

Having assessed this information and the principal

risks and uncertainties, the Directors are satisfied

that the Santander UK group has adequate

resources to continue operations for a period of at

least 12 months from the date the financial

statements were authorised for issue and therefore

consider it appropriate to adopt the going concern

basis of accounting in preparing the financial

statements.

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Directors’ report continued

Code of Conduct

Santander UK is committed to ensuring we hold

ourselves to high ethical standards. This means

adhering to laws, regulations, policies including our

Code of Conduct (which was refreshed in October

2023) and also carrying out business in a

responsible way. High standards of professional

and personal conduct help Santander identify,

manage and respond to risks, create a positive,

collaborative working environment and ensure

positive customer interactions and outcomes.

The Santander Way determines how we deliver on

our purpose, to help people and businesses

prosper. How we deliver that purpose is as

important as the end result. Our conduct and our

culture matters. Our aim is to be the best open

financial services platform by acting responsibly

and earning the lasting loyalty of our colleagues,

customers and communities.

How we do business is intrinsically linked to our

behaviours and values and supports our aim.

Santander UK’s Code of Conduct sets the

standards expected of all colleagues and forms

part of the terms and conditions of employment.

It makes clear our corporate values, our

expectations regarding corporate behaviours and

general principles and standards we expect with

regard to customers, colleagues, conflicts of

interest, data, media and our approach to

sustainability.

There are numerous policies and processes, as

well as support and guidance, that help colleagues

meet these expectations and do the right thing to

ensure Santander UK remains a Simple, Personal

and Fair bank for its colleagues, customers,

shareholders and the communities it serves.

The Code of Conduct applies to all colleagues

including permanent and temporary colleagues as

well as EDs and NEDs. The SEC requires

companies to disclose whether they have a code

of ethics that applies to the CEO and senior

financial officers which promotes honest and

ethical conduct, full, fair, accurate, timely and

understandable disclosures, compliance with

applicable governmental laws, rules and

regulations, prompt internal reporting of violations,

and accountability for adherence to a code of

ethics.

Santander UK meets these requirements through

its Code of Conduct and supporting policies,

including but not limited to the Anti-Bribery and

Corruption Policy, the Whistleblowing Policy, the

FCA’s Principles for Businesses, and the FCA’s

Statements of Principle and Code of Practice for

Approved Persons, with which the CEO and senior

financial officers comply. The Company has not

granted any waivers to its principle executives,

financial or accounting officers.

Copies of these documents are available on

application to Santander UK Group Holdings plc, 2

Triton Square, Regent’s Place, London NW1 3AN

The Code of Conduct can be found on our website

at santander.co.uk.

Annual Report 2024 Santander UK Group Holdings plc 76

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Directors’ report continued

Disclosure of information to Auditors

Each of the Directors at the date of approval of this

report confirms that:

–So far as the Director is aware, there is no

relevant audit information of which Santander

UK’s auditor is unaware

–The Director has taken all steps that they ought

to have taken as a Director to make themselves

aware of any relevant audit information and to

establish that Santander UK’s auditor is aware of

that information.

This confirmation is given and should be

interpreted in accordance with the provisions of

Section 418 of the UK Companies Act 2006.

Auditor

PricewaterhouseCoopers LLP will continue in the

office of auditor. A resolution to reappoint them will

be proposed at the Company’s forthcoming Annual

General Meeting.

By Order of the Board

Roz Rule

Company Secretary

7 March 2025

2 Triton Square, Regent’s Place,

London NW1 3AN

Annual Report 2024 Santander UK Group Holdings plc 77

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Risk review

In this section
Risk governance	78
Credit risk	84
Liquidity risk	128
Capital risk	136
Market risk	141
Pension risk	144
Strategic and business risk	146
Reputational risk	147
Non-Financial Risks:
Operational risk	148
Financial crime risk	152
Model risk	153
Conduct and regulatory risk	154

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Risk governance

INTRODUCTION

The Risk review consists of unaudited financial information unless otherwise stated. The audited financial information is an integral part of our Consolidated

Financial Statements.

We aim to continually enhance our disclosures and their usefulness to readers in the light of developing market practice and areas of focus. As a result, our

disclosures go beyond the minimum required by accounting standards and other regulatory requirements.

Santander UK Group Holdings plc is the immediate parent company of Santander UK plc. The two companies operate on the basis of a unified business strategy

with some overlap in membership, albeit the principal business activities of the Santander UK group are carried out by Santander UK plc and its subsidiaries

(the Santander UK plc group). The Company’s Risk Frameworks have been adopted by its subsidiaries to ensure consistent application.

As a financial services provider, managing risk is a core part of our day-to-day activities. To be able to manage our business effectively, it is critical that we

understand and control risk in everything we do. We aim to use a prudent approach, underpinned by advanced risk management techniques to help us deliver

robust financial performance, withstand stresses, and build sustainable value for our stakeholders. We aim to keep a predictable medium-low risk profile,

consistent with our business model. This is key to achieving our strategic objectives.

RISK FRAMEWORK

How we define risk

Risk is any uncertainty about us being able to achieve our business objectives. It covers both financial and non-financial risks (NFRs). NFR is a broad term usually

defined by exclusion, i.e. any risks other than the traditional financial risks of Credit, Liquidity, Capital, Market and Pension, Strategic and business, and

Reputational. Risk can be split into a set of risk types, each of which could affect our results and our financial resources. Enterprise risk is the aggregate view of all

the risk types.

Our Risk Framework sets out how we define, manage and control risk.

Risk types

Risk types	Description
Credit	The risk of financial loss due to the default or credit quality deterioration of a customer or counterparty to which we have provided credit, or for whom we have assumed a financial obligation.
Liquidity	The risk that we do not have sufficient liquid financial resources available to meet our obligations as they fall due, or we can only secure such resources at excessive cost.
Capital	The risk that we do not have an adequate amount or quality of capital to meet our internal business objectives, regulatory requirements and market expectations.
Market	Non-traded market risk – the risk of loss of income, economic or market value due to changes to interest rates in the non-trading book or to changes in other market risk factors (e.g. credit spread and inflation risk), where such changes would affect our net worth through a change to revenues, assets, liabilities and off-balance sheet exposures in the non-trading book. Traded market risk – the risk of changes in market factors that affect the value of positions in the trading book.
Pension	The risk caused by our statutory, contractual or other liabilities with respect to a pension scheme (whether set up for our employees or those of a related company or otherwise). It also refers to the risk that we will need to make payments or other contributions with respect to a pension scheme due to an agreed Recovery Plan or for some other reason.
Strategic and business	The risk of loss or underperformance against planned objectives; damage from strategic decisions or their poor implementation that impact the long-term interests of our key stakeholders or from an inability to adapt to external developments.
Reputational	The risk of damage to the way our reputation and brand are perceived by the public, clients, government, colleagues, investors or any other interested party.
Non-Financial Risks:
Operational	The risk of loss or adverse impact due to inadequate or failed internal processes, people and systems, or external events. We give a particular focus to Cybersecurity, Fraud, IT, People and Third Party risks, which we mitigate through our management of operational risk.
Financial crime	The risk that we are used to further financial crime, including money laundering, sanctions evasion, terrorist financing, facilitation of tax evasion, bribery and corruption. Failure to meet our legal and regulatory obligations could result in criminal or civil penalties against Santander UK or individuals, as well as affecting our customers and the communities we serve.
Model	The risk that the predictions of our models may be inaccurate, causing us to make sub-optimal decisions, or that a model may be used inappropriately.
Conduct and regulatory	Conduct risk – the risk that our decisions and behaviours lead to detriment or poor outcomes for our customers and clients and/or fail to uphold and maintain high standards of market integrity. Regulatory risk – the risk of non-compliance with applicable regulatory requirements, including supervisory expectations, which may result in regulatory sanctions.

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Top and emerging risks

Several of our risk types also have Top risks associated with them. We regularly review the Top risks that could impact our business, customers and shareholders,

and they are monitored at each meeting of the Executive Risk Control Committee (ERCC) and Board Risk Committee (BRC). The Top risks we actively monitored

in 2024 are set out in the relevant section of this Risk review and summarised in the 'Top risks' section of the Risk management overview in the Strategic report.

We made further changes to our Top Risks by replacing Inflationary and Supply Chain Pressures with Margin Compression, given that UK headline inflation fell

and markets implied a peak in the Bank Rate. We introduced three more top risks: Resiliency, Payments Transformation, and AI/Machine Learning. In addition, we

removed Ring-Fencing and People risk from Top risks, although we continued to closely monitor human resource impacts as part of Strategic Transformation.

We also regularly review emerging risks that could impact our business, customers and shareholders, with challenge and discussion at the ERCC and BRC.

The identification of emerging risks is co-ordinated by the Risk Division. A key part of the process is continual scanning of the external environment, focusing on

emerging risk drivers such as: Uncertain Regulatory Agenda, Uncertain Macro-economic and Geopolitical Environment, Markets, Competition and Technology,

and Environmental and Social. The emerging risks we actively monitored in 2024 are set out in the relevant section of this Risk review and summarised in the

‘Emerging risks’ section of the Risk management overview in the Strategic report.

Our risk culture and principles

The complexity and importance of the financial services industry demands a strong risk culture. We have systems, controls and safeguards in place to manage,

control and oversee the risks we face, but it is also crucial that everyone takes personal responsibility for managing risk. Our risk culture plays a key role in our aim

to be the best bank for our customers, shareholders, people and communities by acting responsibly. It is vital that all our people understand this. To achieve this,

our people have a strong, shared understanding of what risk is, and what their role is in helping to control it. We express this in our Risk Culture Statement:

Risk Culture Statement

Santander UK places good customer outcomes at the heart of our decision-making and our people take personal responsibility for doing the right thing. We are

thoughtful about taking risks, meaning we only take risks that we understand, we balance risk and reward when making decisions and are proportionate in our

approach.

The Board reviews and approves our Risk Culture Statement every year. Senior executives are responsible for promoting our risk culture from the top. They drive

cultural change and increased accountability across the business. We reinforce our Risk Culture Statement and embed our risk culture in all our business units

through our Risk Framework, Risk Certifications and other initiatives. This includes highlighting that:

–It is everyone’s personal responsibility to play their part in managing risk

–We must Identify, Assess, Manage and Report risk quickly and accurately

–We make risk part of how we assess our people’s performance and how we recruit, develop and reward them

–Our internal control system is essential to ensure we manage and control risk in line with our principles, standards, Risk Appetite and policies.

As a tangible sign, personal responsibility is such a key part of our risk culture. We use Risk Certifications to confirm how we manage and control risks in line with

our Risk Framework and within our Risk Appetite. As an example, every year, each member of our Executive Committee confirms that they have managed risks

effectively in line with the Risk Framework in the part of the business for which they are responsible. Their certification lists any exceptions and the agreed actions

to be taken to correct them.

Our risk culture programme

We have well established and understood risk management systems and processes, which our people are personally responsible for to identify, assess, manage

and report risk (I AM Risk).

In 2024, as a supplement to our established risk processes, we evolved our approach to risk culture by defining, communicating and ensuring our people are clear

on the Risk behaviours we expect them to adopt. This is defined as RiskPro, which has been adopted across the Santander UK group and aims to support staff in

making risk-based decisions focusing on what is best for our customers and supports our strategy.

We continued to ensure that a mandatory risk objective is part of performance management for everyone. We also ensured that RiskPro and risk behaviours are a

key part of our risk policies, frameworks and processes. In recruitment, we focus on how people behave and think about risk, not just whether they are able to

follow risk processes.

We developed a risk culture maturity self-assessment to support all our people to assess their risk behaviours and to define key solutions where there is a need to

mature. Plans to continue maturing our risk culture will continue into 2025.

Our risk governance structure

We are committed to the highest standards of corporate governance in every part of our business, including risk management. For details of our governance,

including the Board and its Committees, see the ‘Governance’ section of this Annual Report. The Board delegates certain responsibilities to Board Level

Committees as needed and where appropriate. Our risk governance structure strengthens our ability to identify, assess, manage and report risks, as follows:

–Committees: A number of Board and Executive committees are responsible for specific parts of our Risk Framework

–Key senior management roles: A number of senior roles have specific responsibilities for risk management

–Risk organisational structure: We have the ‘three lines of defence’ model built into the way we run our business.

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Committees

The Board and Board Level Committee responsibilities for risk are:

Board Level Committee	Main risk responsibilities
The Board (including the Santander UK plc Board)	–Has overall responsibility for business execution and for managing risk
	–Reviews and approves the Risk Framework and Risk Appetite
Board Risk Committee (BRC)	–Assesses the Risk Framework and recommends it to the Board for approval
	–Advises the Board on our overall Risk Appetite, tolerance and strategy
	–Oversees our exposure to risk and our strategy and advises the Board on both
	–Reviews the effectiveness of our risk management systems and internal controls
	–Reviews reports from the Chief Compliance Officer (CCO) on the adequacy and effectiveness of the compliance function
	–Responsible for oversight of cybersecurity risks and receives regular updates on cybersecurity risk position including cybersecurity incidents
	–Receives regular updates on economic crime compliance and risks including money laundering, bribery and corruption and sanctions compliance, and monitors KPIs in line with approved Board risk appetite
Board Responsible Banking Committee	–Responsible for culture and operational risk from conduct, compliance, competition & legal matters
	–Ensures that adequate and effective control processes are in place to identify and manage reputational risks
	–Oversees our Sustainability and Responsible Banking programme and how it impacts on employees, communities, the environment including sustainability and climate change, reputation, brand and market positioning
	–Reviews updates on key risk issues, customer, reputational and conduct matters
Board Audit Committee	–Monitors and reviews the financial statements integrity, and any formal announcements on financial performance
	–Reviews the adequacy and effectiveness of the internal financial controls and whistleblowing arrangements
	–Monitors and reviews the effectiveness of the internal audit function
	–Receives regular updates from the internal audit function, including on its reviews of cybersecurity risk and controls
	–Oversees the independence and performance of the external auditors
Board Remuneration Committee	–Oversees implementation of remuneration policies, ensuring they promote sound and effective risk management
Board Special Projects Committee	–Formed in 2024 and focuses on special projects and transformation matters
	–Oversees the Financial Crime Remediation Programme

The Executive Level Committee responsibilities for risk are:

Executive Level Committee	Main risk responsibilities
Executive Committee (ExCo)	–Reviews business plans in line with our Risk Framework and Risk Appetite before they are sent to the Board to approve
	–Receives updates on key risk issues managed by CEO-level committees and monitors the actions taken
Senior Management Committee	–Focuses on the responsibilities of the Executive Committee Senior Management Function holders and how they are discharged
	–Reviews updates on key risk issues, customer, reputational and conduct matters
Executive Risk Control Committee (ERCC)	–Reviews Risk Appetite proposals before they are sent to the BRC and the Board to approve
	–Ensures that we comply with our Risk Framework, Risk Appetite and risk policies
	–Reviews and monitors our risk exposures and approves any corrective steps we need to take
Asset and Liability Committee (ALCO)	–Reviews liquidity risk appetite (LRA) proposals
	–Ensures we measure and control structural balance sheet risks, including capital, funding and liquidity, in line with the policies, strategies and plans set by the Board
	–Reviews and monitors key asset and liability management activities to ensure we keep our exposures within our Risk Appetite
Capital Committee	–Puts in place reporting systems and risk control processes to make sure capital risks are managed within our Risk Framework
	–Reviews capital adequacy and capital plans, including the ICAAP, before they are sent to the Board to approve
Incident Accountability Committee	–Considers, calibrates, challenges and agrees any appropriate individual remuneration adjustments
	–Presents recommendations to the Board Remuneration Committee
Credit Approval Committee	–Approves corporate and wholesale credit transactions which exceed levels delegated to lower level forums or individuals
Economic Crime Committee	–Ensures due reporting, consideration, oversight and informed decision making regarding compliance with financial crime laws and regulations, fraud, and best industry practice aligned to our Risk Appetite

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Key senior management roles

Senior roles with specific responsibilities for risk management are:

Role	Main risk responsibilities
Chief Executive Officer (CEO)	The Board delegates responsibility for our business activities and managing risk on a day-to-day basis to the CEO. The CEO proposes our strategy and business plan, puts them into practice and manages the risks involved. The CEO must also ensure we have a suitable system of controls to manage risks and report to the Board on them.
Chief Risk Officer (CRO)	Oversees and challenges risk activities, and ensures that the business activity is conducted within our risk appetite. Responsible for control and oversight of all risk types with regulatory responsibility to report on these risk types to Executive and Board Committees.
Chief Financial Officer (CFO)	Responsible for developing strategy, leadership and management of the CFO Division. The CFO is responsible for managing interest rate, liquidity, pension and capital risks. The CFO also aims to maximise the return on Regulatory and Economic Capital.
Chief Internal Auditor (CIA)	Designs and uses an audit system that identifies the main risks and evaluates controls. The CIA also develops an audit plan to assess existing risks that involve producing audit, assurance and monitoring reports.
Chief Compliance Officer (CCO)	Responsible to the CRO for control and oversight of conduct & regulatory, reputational and economic crime risk, but has direct responsibility to report on conduct & regulatory and reputational risk to Executive and Board Committees and the regulator.
Money Laundering Reporting Officer (MLRO)	Responsible to the CCO for control and oversight of economic crime risk but has regulatory responsibility to report on this risk type to Executive and Board Committees and the regulator.

Risk organisational structure

We use the ‘three lines of defence’ model to manage risk. This model is widely used in the banking industry and has a clear set of principles to put in place a

cohesive operating model across an organisation. It does this by separating risk management, risk control and risk assurance. The reporting lines to the Board

(including the Santander UK plc Board) with respect to risk are as follows:

Line 1: Risk management

Business Units and Business Support Units identify, assess and manage the risks which originate and exist in their area, within our Risk Appetite. It is under the executive responsibility of the CEO.

Business & Business Support Units

Board Risk Committee

Line 2: Risk control & oversight

Risk Unit

Risk Control Units are independent monitoring, control and functions. They make sure Business Units and Business Support Units manage risks effectively and within our Risk Appetite. The Risk Control units are: Risk – responsible for credit, liquidity, capital, market, pension, strategic and business, operational, model and enterprise risks; Economic Crime; and Compliance, responsible for reputational and conduct and regulatory risks. It is under the executive responsibility of the CEO, but responsible to the CRO for overseeing the first line of defence.

Board Responsible Banking Committee

Board

Economic Crime Unit

MLRO

CRO

CEO

CCO

Board Special Projects Committee

Compliance Unit

Line 3: Risk assurance

Board Audit Committee

Internal Audit is an independent corporate function. It gives assurance on the design and effectiveness of our risk management and control processes. It is responsible to the CIA.

Internal Audit

CIA

Internal control system

Our Risk Framework is an overarching view of our internal control system that helps us manage risk across the business. It sets out at a high level the principles,

standards, roles and responsibilities, and governance for internal control. Our Risk Framework covers the categories below:

Category	Description
Risk Frameworks	Set out how we should manage and control risk across the business, our risk types and our risk activities.
Risk Management Responsibilities	Set out the Line 1 risk management responsibilities for Business Units and Business Support Units.
Strategic Commercial Plans	Plans produced by business areas, at least annually, which describe the forecasted objectives, volumes and risk profile of new and existing business, within the limits defined in our Risk Appetite.
Risk Appetite	See our Risk Appetite section that follows.
Delegated Authorities/Mandates	Define who can do what under the authority delegated to the CEO by the Board.
Risk Certifications	Business Units, Business Support Units or Risk Control Units set out each year how they managed/controlled risks in line with our risk frameworks and Risk Appetite, and explain any action to be taken. This helps drive personal accountability.

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RISK APPETITE

How we control the risks we are prepared to take

When our Board sets our strategic objectives, it is important that we are clear about the risks we are prepared to take to achieve them. We express this through

our Risk Appetite Statement, which defines the amount and kind of risk we are willing to take. Our Risk Appetite and strategy are closely linked, and our strategy

must be achievable within the limits set out in our Risk Appetite. Our Risk Appetite Statement establishes principles that we use to set our Risk Appetite and

defines our overall approach to risk management.

How we describe the limits in our Risk Appetite

Our Risk Appetite sets out detailed limits across all types of risk, using metrics and qualitative statements.

Metrics

We use metrics to set limits across most risk types including a set of metrics focused on losses, capital, liquidity and concentration. We set:

–Limits for losses for our most important risks, including credit, market, operational and conduct risk

–Capital limits, reflecting both the capital that regulators expect us to hold (regulatory capital) and our own internal measure economic capital (EC)

–Liquidity limits according to a range of plausible stress scenarios for our business

–Concentration limits, to determine the maximum concentration level that we are willing to accept.

These limits apply in normal business conditions, but also when we might be experiencing a far more difficult economic environment. We refer to conditions like

this as being under stress. For more on EC and stress scenarios, see the Stress Testing section that follows.

Qualitative statements

For some types of risk, we also use qualitative statements that describe in words the appetite we want to set. We also use them to prohibit or restrict exposure to

certain sectors, types of customer and activities.

How we set our Risk Appetite, and stay within it

We control our Risk Appetite through our Risk Appetite Framework. Our Board approves and oversees our Risk Appetite Statement every year. This

ensures it is consistent with our strategy and reflects changes in the markets and economic environment in which we operate. Our ERCC is responsible for

ensuring that our risk profile (the level of risk we are prepared to accept) is consistent with our Risk Appetite Statement. To do this, they monitor our

performance against our Risk Appetite, business plans and budgets.

We also use stress testing to review how our business plan performs against our Risk Appetite Statement. This shows us if we would stay within our Risk Appetite

under stress conditions. It also helps us to identify any adverse trends or inconsistencies.

We embed our Risk Appetite by setting more detailed risk limits for each business unit and key portfolios. These are set in a way so that if we stay within each

detailed limit, we will stay within our overall Risk Appetite. When we use qualitative statements to describe our appetite for a risk, we link them to lower-level risk

indicators, so that we can monitor and report our performance against them.

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STRESS TESTING

Stress testing helps us understand how different events and economic conditions could affect our business plan, earnings and risk profile. This helps us plan and

manage our business.

Scenarios for stress testing

To see how we might cope with difficult conditions, we regularly develop challenging scenarios that we might face. We consult a broad range of internal

stakeholders, including Board members, when we design and choose our most important scenarios. The scenarios cover a wide range of outcomes, risk factors,

time horizons and market conditions. They are designed to test:

–The impact of shocks affecting the economy as a whole or the markets we operate in

–Key potential vulnerabilities of our business model, and the processes and systems which support it

–Potential impacts on specific risk types.

We describe each scenario using a narrative setting out how events might unfold, as well as a market and/or economic context. For example, the key economic

factors we reflect in our ICAAP scenarios include house prices, interest rates, unemployment levels, inflation, and the size of the UK economy. We also explore

sensitivities around several macro variables where there may be concerns or levels of uncertainty.

In 2024, we developed the capability to perform long-horizon climate risk assessments through our Climate Internal Scenario Assessment (CISA) programme.

Using these bespoke models, we explored Baseline and Disorderly Transitional scenarios, as detailed in the Task Force on Climate-related Financial Disclosures

(TCFD) section. In addition, the Bank of England (BoE) cancelled the Annual Cyclical Scenario and ran an internal stress test exercise instead. The purpose of

this exercise was to explore a 'tail risk' scenario designed to be severe and broad enough to assess the resilience of the UK banks to a range of adverse shocks.

Uses of stress testing

We use stress testing to estimate the effect of these scenarios on our business and financial performance, including:

–Our business plan, and its assessment against our Risk Appetite

–Our capital strength, through our ICAAP

–Our liquidity position, through our ILAAP

–Our long term impacts of climate change, through regulatory exercises and CISA

–Impacts on other risk types.

We use a wide range of models, approaches and assumptions supported by robust governance. These help us interpret the links between factors in markets and

the economy, and our financial performance. For example, one model looks at how changes to key macroeconomic variables like unemployment rates might

affect the number of customers who might fall into arrears on their mortgage or other loans.

Our stress testing models are subject to a formal review, independent validation and approval process. We highlight the key weaknesses and related model

assumptions in the approval process for each stress test. In some cases, we overlay expert judgement onto the results of our models. Where this is material to the

outcome of the stress test, the approving governance committee reviews it. We take a multi-layered approach to stress testing to capture risks at various levels.

This ranges from sensitivity analysis of a single factor to a portfolio, to wider exercises that cover all risks across our entire business. We use stress test outputs to

design business plans that aim to mitigate potential impacts of possible stress scenarios.

We also conduct reverse stress tests. These are tests in which we identify and assess scenarios that are most likely to cause our business model to fail.

Board oversight of stress testing

The ERCC reviews the design of the scenarios in our ICAAP, ILAAP and CISA. The BRC reviews the scenarios and stress test assumptions and approves the

stress testing framework. The Board reviews stress test outputs as part of the approval processes for the ICAAP, ILAAP, Bank Recovery and Resolution Directive

(BRRD), Risk Appetite and regulatory stress tests.

Regulatory stress tests

We take part in a number of external stress testing exercises. These can include stress tests of the UK banking system conducted by the PRA and the BoE. We

also contribute to stress tests of Banco Santander conducted by the European Banking Authority (EBA).

For more on capital and liquidity stress testing, see the ‘Capital risk’ and ‘Liquidity risk’ sections.

HOW RISK IS DISTRIBUTED ACROSS OUR BUSINESS

Economic capital

As well as assessing how much regulatory capital we need to hold, we use an internal EC model to measure our risk. We use EC to get a consistent measure

across different risk types. EC also takes account of how concentrated our portfolios are, and how much diversification there is between our various businesses

and risk types. As a consequence, we can use EC for a range of risk management activities. For example, we can use it to help us compare requirements in our

ICAAP or to get a risk-adjusted comparison of income from different activities.

Regulatory capital – risk-weighted assets

We hold regulatory capital against our credit, market and operational risks. In 2024, over half of our total risk-weighted assets accounted for credit risk in Retail &

Business Banking. This reflects our business strategy and balance sheet.

For more on this, see ‘Risk-weighted assets’ in the ‘Capital risk’ section.

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Credit risk

Overview Credit risk is the risk of financial loss due to the default or credit quality deterioration of a customer or counterparty to which we provided credit, or for whom we have assumed a financial obligation. In this section, we describe our key credit risks, including our exposures in each of our business segments, and how we manage credit risk across the credit risk lifecycle. We discuss our ECL approach and the key inputs to our ECL model. We then analyse our key metrics, credit performance and forbearance. Key metrics Stage 3 ratio of 1.40% (2023: 1.49%). Loss allowances of £870m (2023: £994m). Balance weighted average LTV of 64% (2023: 66%) on new mortgage lending.

OUR KEY CREDIT RISKS

Exposures (audited)

Exposures to credit risk arise in our business segments from:

Retail & Business Banking	Consumer Finance	Corporate & Commercial Banking	Corporate Centre
In Mortgages: –Residential mortgages for customers with good credit quality (prime lending). –We provide these mostly for owner- occupiers, with buy-to-let mortgages for non-professional landlords. In Everyday Banking: –Unsecured lending to individuals, such as loans, credit cards and overdrafts. –Unsecured lending to businesses with annual turnover up to £6.5m and simpler borrowing needs such as loans, credit cards and overdrafts.	–Financing for cars, vans, motorbikes and leisure vehicles through Santander Consumer (UK) plc (SCUK). –Through our joint ventures, Hyundai Capital UK Ltd and Volvo Car Financial Services UK Limited, we provide retail point of sale customer finance and wholesale finance facilities (stock finance).	–Loans, overdrafts, treasury services, invoice finance, trade and supplier finance. –We provide these to SMEs and mid- sized corporates typically with annual turnover up to £500m, Commercial Real Estate and Social Housing customers.	–Asset and liability management of our balance sheet. –Exposures include financial institutions (derivatives and other treasury products), structured products, and sovereign and supranational assets chosen for diversification and liquidity. –Crown Dependencies – mainly residential mortgages to individuals in Jersey and the Isle of Man.

CREDIT RISK MANAGEMENT

Our approach to credit risk

We manage our portfolios across the credit risk lifecycle, from formulating our risk strategy and planning, through assessment and origination, monitoring, arrears

management and debt recovery. We make sure the actual risk profile of our exposures stays in line with our business plans and within our Risk Appetite. We tailor

the way we manage risk to the type of product and regularly review our approach and refine it when we need to.

1. Risk strategy and planning (audited)

Relevant areas of the business work together to create our business plans. We consider our strategy, goals, and financial and technical resources alongside our

Risk Appetite. This involves focusing on economic and market conditions and forecasts, regulations, conduct matters, profitability, returns and market share.

2. Assessment and origination (audited)

Managing credit risk begins with lending responsibly. That means only lending to customers who are committed to paying us back and can afford to, even if their

circumstances change. We take proportionate steps to assess whether a customer will be able to repay the money borrowed. We do this by a series of initial

affordability and credit risk assessments. When a customer applies, we assess the data they provide, plus data from credit reference agencies (for Retail &

Business Banking and Consumer Finance) and performance on their other Santander UK accounts (if they have any) against our Credit Policy.

Retail & Business Banking

In Mortgages, we assess affordability by reviewing the customer’s income and spending, their other credit commitments, and what would happen if interest

rates went up. Many of our decisions are automated as we use data available to us. We tailor our process and application assessment based on the product.

More complex transactions often need greater manual assessment using our credit underwriters’ skill and experience.

In Everyday Banking and Business Banking, many of our decisions are automated. We assess affordability by reviewing the customer’s income and spending,

including other credit commitments and adjusting for future inflation and expected interest rates.

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Credit risk mitigation

The types of credit risk mitigation, including collateral, across each of our portfolios are:

Portfolio	Description
Residential mortgages	Collateral is in the form of a first legal charge over the property. Before we grant a mortgage, the property is valued either by a surveyor or using automated valuation methodologies where our confidence in the accuracy of this method is high.
Unsecured lending	There is no collateral or security tied to the loan that can be used to mitigate any potential loss if the customer does not pay us back.
Business banking services	Business banking lending is unsecured. When lending to incorporated businesses, we typically obtain personal guarantees from each director, but we do not treat these as collateral. We consider the UK Government guarantee under its Coronavirus Loan Schemes as collateral, covering 100% of losses for the Bounce Back Loan Scheme (BBLS) and 80% for Coronavirus Business Interruption Loan Scheme (CBILS).

Consumer Finance

In Consumer Finance, similar to Retail & Business Banking, many decisions are automated and we tailor the process to the product. Residual value risk is one of

our top risks and these exposures are set using forward looking market data, at the level of vehicle derivative by age and anticipated mileage. This data is

obtained from a third party.

Credit risk mitigation

The type of credit risk mitigation, including collateral, is:

Portfolio

Description

Consumer (auto) finance

Collateral is in the form of legal ownership of the vehicle for most loans, with the customer being the registered keeper. Only a very small proportion of business is underwritten as a personal loan. In these cases, there is no collateral or security tied to the loan. We use a leading vehicle valuation company to assess the LTV at the proposal stage to ensure the value of the vehicle is appropriate.

Corporate & Commercial Banking

We assign each customer a credit rating, using our internal rating scale (see ‘Credit quality’ in ‘Santander UK group level – credit risk review’ section). To do this,

we look at the customer’s financial history and trends in the economy, backed up by the expert judgement of a risk analyst. We review our internal ratings on a

dynamic basis and at least once a year for those clients that are rated. We also assess the underlying risk of the transaction, taking account of any mitigating

factors (see the tables below) and how it fits with our risk policies, limits and Risk Appetite.

Responsible lending, including climate change and the transition to a low carbon economy

As part of the Banco Santander group, we comply with the Equator Principles to factor social, ethical and environmental impacts into our risk analysis and

decision making for qualifying financial transactions. We aim to support clients and economies in their transition to a low carbon economy, providing financial

products and/or services to business activities that are environmentally and socially responsible. Our Environmental, Social and Climate Change (ESCC) policy

sets out how we identify, assess, monitor and manage environmental and social risks and other climate change related activities in the Oil and Gas, Power

Generation and Mining and Metals sectors and those arising from businesses engaged in soft commodities. Our ESCC policy prohibits project-related financing

for new coal-fired power plants (CFPP) worldwide and we will only work with new clients with CFPPs to provide specific financing for renewable energy projects.

In line with Banco Santander's aim, by 2030 we will aim to eliminate all exposure to thermal coal mining and stop providing financial services to power generation

clients with more than 10% of revenue from thermal coal. For more on our approach to responsible lending, see the Sustainability section.

Credit risk mitigation

The types of credit risk mitigation, including collateral, across each of our portfolios are as follows. In addition, from time to time, at a portfolio level we execute

significant risk transfer transactions, which typically reduce RWAs.

Portfolio	Description
SME and mid corporate	Includes secured and unsecured lending. We can take mortgage debentures or a first charge on commercial property as collateral. Before agreeing the loan, we obtain an independent professional valuation of the property. Loan agreements typically allow us to obtain revaluations during the term of the loan. We can also take guarantees, but we do not treat them as collateral unless they are supported by a tangible asset charged to us. We also lend against assets (like vehicles and equipment) and invoices for some customers. We value assets before we lend. For invoices, we review the customers' ledgers regularly and lend against debtors who meet agreed criteria.
Commercial Real Estate (CRE)	We take a first charge on commercial property as collateral. The loan is subject to criteria such as the property condition, age and location, tenant quality, lease terms and length, and the sponsor’s experience and creditworthiness. Before advancing the loan and where appropriate, a bank representative visits the property. We also obtain an independent professional valuation which typically includes a site visit. Loan agreements typically allow us to obtain revaluations during the term of the loan.
Social Housing	We take a first charge on portfolios of residential real estate owned and let by UK Housing Associations as collateral, in most cases. We revalue this every three to five years (in line with industry practice), using the standard methods for property used for Social Housing.

Corporate Centre

Credit risk mitigation

The types of credit risk mitigation, including collateral, across each of our portfolios are as follows. In addition, from time to time, at a portfolio level we execute

significant risk transfer transactions, which typically reduce RWAs.

Portfolio	Description
Sovereign and Supranational	In line with market practice, there is no collateral against these assets.
Structured Products	These are our High Quality Liquid Assets (HQLA) in our Eligible Liquidity Pool. They are mainly Asset Backed Securities (ABS) and covered bonds, which hold senior positions in the creditor hierarchy. Their credit rating reflects over-collateralisation in the structure and the assets that underpin their cash flows.
Financial Institutions	We use standard legal agreements to reduce credit risk via netting and collateralisation on derivatives, repos and reverse repos, and stock borrowing/lending. We also reduce risk by clearing trades through central counterparties (CCPs) where possible.
Crown Dependencies	We manage the risk on this portfolio in a similar way as for mortgages in Retail & Business Banking.

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3. Monitoring (audited)

We measure and monitor changes in our credit risk profile on a regular and systematic basis against our budgets, limits and benchmarks.

Credit concentrations

A core part of our monitoring and management is a focus on credit concentrations, such as the proportion of our lending that goes to specific borrowers, groups or

industries. We set and monitor concentration limits in line with our Risk Appetite and review them on a regular basis.

–Geographical concentrations: We set exposure limits to countries and geographies, with reference to the country limits set by Banco Santander and our own

Risk Appetite. For more geographical information, see ‘Country risk exposures’.

–Industry concentrations: We also set exposure limits by industry sector. We set these limits based on the industry outlook, our strategic aims and desired level

of concentration, and relevant limits set by Banco Santander. We analyse committed exposures in the ‘Credit risk review’ section that follows.

Retail & Business Banking

We use IT systems and data available to us to monitor accounts. The main parts are:

–Behavioural scoring: we use statistical models that help predict whether a customer will have problems repaying, based on how they use their accounts

–Credit reference agencies: we often use data from agencies on how the borrower is handling credit from other lenders in our behaviour scoring models

–Other Santander UK accounts: each month, we also look at how the customer uses their other accounts with us, so we can identify problems early.

Our day-to-day retail credit risk monitoring relies on a mix of performance measures as described above. However, changes in the wider UK economy also impact

our Mortgages and Everyday Banking portfolios. As part of our day-to-day risk monitoring, we use a Retail Risk Playbook tolerance tool that monitors the most

relevant macroeconomic variables to retail portfolio performance against our forecasts. If the economy deviates materially from our forecasts, such as due to the

effects of the cost of living crisis or high inflation, we review our retail risk management policy and strategy.

We also ensure that portfolio quality remains within our Risk Appetite by measuring against trigger values for key risk profile and performance metrics.

For secured lending, our monitoring also takes account of changes in property prices. We estimate the property’s value every three months. In most cases, we

use statistical models based on recent sales prices and valuations in that local area. Use of this model is subject to Model Risk Governance. Where a lack of data

means the model’s valuation is not available, we use the original surveyor valuation with a House Price Index (HPI) adjustment as needed.

For unsecured personal lending like credit cards and overdrafts, monitoring might lead us to raise or lower credit limits. For business banking services, we review

revolving credit facilities each year to ensure they remain appropriate for the customer's financial situation.

Consumer Finance

In Consumer Finance, customer accounts are monitored via IT systems and data. The Retail Risk framework ensures that our portfolio keeps within agreed

thresholds. Residual value risk is regularly checked, enabling us to spot any change in market trends.

Corporate & Commercial Banking and Corporate Centre

We regularly monitor and report our credit risk by portfolio, segment, industry, location and customer. We monitor detailed analyses of our credit exposures and

risk trends each month. We also report our larger exposures and risks to the BRC each month.

Our Watchlist

We also use a Watchlist for exposures subject to annual reviews to help identify potential problem debt early. Just because a customer is on our Watchlist does

not mean they have defaulted. It just means that their probability of default has increased, such as they have breached a covenant or lost a major contract.

We classify Watchlist cases as:

–Enhanced monitoring: for less urgent cases. We monitor these cases more often and where appropriate may consider more collateral.

–Proactive management: for more urgent or serious cases. We may take steps to restructure debt including extending the term, taking more collateral, agreeing

a lower credit limit, or seeking repayment of the loan through refinancing or other means.

We assess Watchlist cases for impairment as set out in the ‘Significant Increase in Credit Risk (SICR)’ section. When a customer is in enhanced monitoring, we

do not consider it has suffered a SICR for ECL purposes, so it remains in Stage 1 for our loss allowance calculations. When a customer is in proactive

management, we consider it has suffered a SICR, so we transfer it to Stage 2 and apply a lifetime ECL for our loss allowance calculations. We consider any

forbearance we offer. This includes any extra security, guarantees or equity available and the potential to enhance value by asset management.

In Corporate & Commercial Banking, as part of our annual reviews, for loans nearing maturity, we look at the prospect of refinancing the loan on current market

terms and applicable credit policy. If this is unlikely, we put the case on our Watchlist. We manage exposures not subject to annual reviews, mainly high volume

and low value cases, using early warning indicators including credit reference agency data, supported by teams of expert analysts.

In Corporate Centre, we typically monitor the credit quality of our exposures daily. We use internal and third-party data to detect any potential credit deterioration.

In addition, we manage the credit quality of our Crown Dependencies mortgages in a similar way as for mortgages in Retail & Business Banking.

4. Arrears management (audited)

Retail & Business Banking and Consumer Finance

We have several strategies to manage arrears that we can use as early as the day after a missed payment. We also reach out to up-to-date customers who may

be at risk of going into arrears where we believe they may benefit from some support. We assess the financial difficulties a customer is having in order to offer

them the right support to manage their agreement whilst in arrears. The strategies we use depend on the risk and the customer’s unique circumstances with

tailored support being provided.

Corporate & Commercial Banking and Corporate Centre

We identify problem debt by close monitoring, supported by our Watchlist process for exposures subject to annual review. We aim to identify warning signs early

by monitoring customers’ financial and trading data, checking to see they do not breach covenants, and having regular dialogue with them. We tailor our strategy

to the type of customer, their circumstances and the level of risk. We try to help our customers find their own way out of financial difficulty and agree on a plan

that works for both of us. We engage our Restructuring & Recoveries team as needed on Watchlist cases and we may hand over more serious cases to them. For

exposures not subject to annual review, we have strategies to manage arrears that we can use as early as the day of the missed payment. If a case becomes

more urgent or needs specialist attention, and if it transfers to Stage 3, we transfer it to our Restructuring & Recoveries team.

For more, see the Forbearance section.

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5. Debt recovery (audited)

Sometimes, even when we have taken all reasonable and responsible steps to manage arrears in our Financial Support area, they are not effective. If this

happens, we may choose to end our agreement with the customer and try to recover the outstanding balance (with recourse to any associated collateral), or as

much of it as we can.

Retail & Business Banking

In Mortgages and Everyday Banking, we may use a debt collection agency, sell the debt, or take the customer to court. For residential mortgages, we may

repossess the property as a last resort or to protect it from damage or third-party claims. We make sure our estimated losses from repossessed properties are

realistic by getting two independent valuations and the estimated selling costs, and using them in our loss allowances calculations. Where we repossess a

property, we do not take ownership. We use agents to realise the value and settle the debt. Any surplus funds are returned to the borrower or dealt with in line with

insolvency rules.

Consumer Finance

In Consumer Finance, we usually have an asset by way of a motor vehicle secured to the agreement. We will seek to recover this asset if we are unable to

rehabilitate the customer, or they remain in arrears with no contact. Like Retail & Business Banking, we may also use a debt collection agency or a specialist law

firm to recover any subsequent balance outstanding. We may also consider the sale of debt where all avenues have been explored.

Corporate & Commercial Banking and Corporate Centre

Where we look for an exit, we aim to do this, if we can, by agreeing with the borrower that they will sell some or all their assets on a voluntary basis or agreeing

to give them time to refinance their debt with another lender. Where we cannot reach an agreement, we consider recovery options. This can be through an

insolvency proceeding, enforcing over any collateral or selling debt on the secondary market. We may also consider other legal action to recover what we are

owed. If there is a shortfall, we write it off against our loss allowances. In very rare cases, we may act as mortgagee in possession of assets held as collateral

against non-performing commercial lending. In such cases, we carry the assets on our balance sheet and classify them in line with our accounting policies.

Loan modifications (audited)

We sometimes change the terms of a loan when a customer gets into financial difficulty (this is known as forbearance), or for other commercial reasons.

Forbearance (audited)

We can change the terms of a customer's loan, temporarily or permanently, to help them through temporary periods of difficulty so they can get back on to

sustainable terms. We assess what we offer to make sure the customer can afford it. Forbearance improves our customer relationships and we review our

approach regularly to make sure it is still effective. We try to offer forbearance before a customer defaults and we only foreclose or repossess as a last resort.

The main types of forbearance we offer are:

Action	Description
Term extension	We can extend the loan term, making each monthly payment smaller. We may offer this if the customer is up to date with payments but shows signs of financial difficulties. We may also offer this if the loan is about to mature and refinancing is not possible on market terms. In selected instances, we may offer term extensions for interest only loans that are past the point of product maturity. This will typically be where no viable repayment solution has been identified for the outstanding capital balance, and legal enforcement activity is not deemed to be appropriate to the customer's circumstances.
Interest-only	Historical interest-only payments due to financial difficulties are classed as forborne.                                                                                                                                                                                                                                                                                                                      For corporate customers, interest-only concessions are considered on a case by case basis. Concessions are only granted if the nature of the financial difficulties is assessed to be temporary. Counterparties are expected to recover in full and resume making full capital and interest payments once they are in a stronger financial position.
Other payment rescheduling, including capitalisation	For retail mortgage customers, we may add the arrears to the mortgage balance (this is known as capitalisation) if they cannot afford to increase their monthly payment to pay off their arrears in a reasonable time but have been making their monthly payments, usually for at least six months. We can also capitalise property charges due to a landlord. We pay them for the customer to avoid the lease being forfeited. We may combine this help with term extensions and, in the past, interest-only concessions. In certain cases, we may offer interest rate concessions. We may agree an arrangement to pay less than the Contractual Monthly Payment (including zero) for a short period of time where they are experiencing temporary financial difficulties. For credit card and bank account customers, we may agree to suspend fees and/or interest for a short period of time where they are experiencing temporary financial difficulties. A refinance of a personal loan over a longer term to reduce the contractual monthly payment may be agreed, where a customer is showing signs of financial difficulties. The interest rate remains the same, or the closest lower rate available. For corporate customers, we may lower or stop their payments until they have time to recover. We may reschedule payments to better match the customer’s cash flow – for example if the business is seasonal - or provide a temporary increase in facilities to cover peak demand ahead of their trading improving. We might do this by arrears capitalisation or drawing from an overdraft. We may also offer to provide new facilities, interest rate concessions and interest roll-up. In rare cases, we agree to forgive or reduce part of the debt.

When we agree forbearance, we consider the account has suffered a SICR, as we explain in the ‘Significant Increase in Credit Risk (SICR)’ section later on, and

we classify it as Stage 2 or 3. A non-performing forborne account is one that has forbearance carried out in Stage 3, and a performing forborne account is one that

has forbearance carried out in Stage 2. If an account is already in Stage 2, we keep it in Stage 2 unless the account is deemed unlikely to pay, involves forgiving

fees and interest or debt, or is being granted multiple forbearances. In these cases, we move it into Stage 3. If an account is already in Stage 3, we keep it in

Stage 3. A loan moves out of forbearance once the exit criteria below are met. We monitor the performance of all forborne loans.

We signed up to the HM Treasury Mortgage Charter published in June 2023, that aims to provide more support for customers who may be struggling to maintain

their mortgage repayments. We made more customer support solutions available from July 2023, allowing customers who are up-to-date with their payments to

make interest-only payments for six months or extend their mortgage term to reduce their monthly payments. Volumes of accounts seeking more support were

just over 1% of active mortgage account stock. Mortgage Charter support solutions are not automatically classed as forbearance, unless other forbearance criteria

are met.

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Exit from forbearance criteria

	Exit from	Conditions to be met
Cure	Stage 3 to Stage 2	For an account in Stage 3 to exit non-performing forbearance, all the following conditions must be met:
		If the account was classed as Stage 3 due to being more than 90 days past due, then the account should be 90 days or less past due
		The customer has no other material default debt with us more than 90 days past due
		If the account was classed as Stage 3 due to being unlikely to pay, then the account should no longer be deemed unlikely to pay
		Account has exited its forbearance trigger for 12 consecutive months
		If all the conditions are met, the account is re-classed as Stage 2 forbearance until the Stage 2 forbearance exit conditions set out below are also met
	Stage 2 to Stage 1	For an account in Stage 2 to exit forbearance, all the following conditions must be met:
		The account is no longer in arrears, and the customer has no other material debts with us which are more than 30 days in arrears
		The account no longer triggers SICR
		The account has been classed as Stage 2 for at least two years since the end of the latest forbearance strategy

If a borrower fails to meet the post forbearance contractual obligations during probation, the loan is classified as Stage 3 and the probation period is reset.

Other forms of debt management and modifications

Retail & Business Banking 

In Mortgages, apart from forbearance, we have sometimes changed the contract terms to keep a good relationship with a customer. In Mortgages and Everyday

Banking, we do not classify insolvency solutions for any unsecured retail customers as forbearance. This is in line with industry guidelines.

Consumer Finance

We do not classify insolvency solutions for any unsecured retail customers as forbearance. This is in line with industry guidelines.

Corporate & Commercial Banking and Corporate Centre

When customers are in financial difficulty, we can also manage debt in other ways, depending on the facts of the specific case:

Action	Description
Waiving or changing covenants	If a borrower breaks a covenant, we can either waive it or change it, taking their latest and future financial position into account. We may also add a condition on the use of any surplus cash (after operating costs) to pay down their debt to us.
Asking for more collateral or guarantees	If a borrower has unencumbered assets, we may accept more collateral in return for revised financing terms. We may also take a guarantee from companies in the same group and/or major shareholders. We only do this where we believe the guarantor can meet their commitment.
Asking for more equity	Where a borrower can no longer pay the interest on their debt, we may accept fresh equity capital from new or existing investors to change the capital structure in return for better terms on the existing debt.

Risk measurement and control

We measure and control credit risk at all stages across the credit risk lifecycle. We have a range of tools, processes and approaches.

Retail & Business Banking and Consumer Finance

These businesses involve managing large numbers of accounts, so they produce a significant amount of data. This allows us to take a more analytical and data

intense approach to measuring risk. This is reflected in the wide range of statistical models we use across the credit risk lifecycle. We use:

–Risk strategy and planning: econometric models

–Assessment and origination: application scorecards, and attrition, pricing, loss allowance and capital models

–Monitoring: behavioural scorecards and profitability models

–Arrears management: models to estimate the proportion of cases that will result in possession (known as roll rates)

–Debt recovery: recovery models.

We assess and review our loss allowances regularly. We look at factors such as the cash flow available to service debt. We also use an agency to value any

collateral – mainly mortgages.

Corporate & Commercial Banking and Corporate Centre

We measure the credit risk on treasury products by adding their potential future exposure to market movements over their lives to their fair value. Then we add it

to any other exposure and measure the total against our credit limits for each client. In Corporate Centre, we manage the credit risk on our Crown Dependencies

mortgages in a similar way as for mortgages in Retail & Business Banking. We assess our loss allowances regularly by looking at factors such as the cash flow

available to service debt and the value of collateral based on third-party professional valuations.

Key metrics (audited)

We use a number of key metrics to measure and control credit risk, as follows:

Metric	Description
Expected Credit Loss (ECL)	ECL tells us what credit risk is expected to cost us either over the next 12 months or over the lifetime of the exposure where there is evidence of a SICR since origination. We explain how we calculate ECL below.
Stages 1, 2 and 3	We assess each facility’s credit risk profile to determine which stage to allocate them to, and we monitor where there is a SICR and transfers between the Stages including monitoring of coverage ratios for each stage.
Stage 3 ratio	The Stage 3 ratio is the sum of Stage 3 drawn and Stage 3 undrawn assets divided by the sum of total drawn assets and Stage 3 undrawn assets. The Stage 3 ratio is a key indicator used to monitor underlying asset performance.
Expected Loss (EL)	EL is based on the CRD IV regulatory capital rules and gives us another view of credit risk. It is the product of the probability of default, exposure at default and loss given default, and we include direct and indirect costs. We base it on our risk models and our assessment of each customer’s credit quality. The rest of the Risk review, impairments, losses and loss allowances refer to calculations in accordance with IFRS, unless we specifically say they relate to CRD IV. For our IFRS impairment accounting policy, see Note 1 to the Consolidated Financial Statements.

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We also assess risks from other perspectives, such as geography, business area, product and process to identify areas to focus on. We also use stress testing to

establish vulnerabilities to economic deterioration. Our business segments tailor their approach to credit risk to their customers, as we explain later on.

Key differences between regulatory EL and IFRS 9 ECL models

There are differences between the regulatory EL and IFRS 9 ECL approaches. Although our IFRS 9 models use the existing Basel advanced IRB risk

components, we adjust to ensure the outcome is in line with IFRS 9, i.e. the financial reporting standard we use, as follows.

	Basel advanced IRB EL	IFRS 9 ECL
Rating philosophy	Mix of point-in-time, through-the-cycle or hybrid	Point-in-time, forward-looking. Considers a range of economic scenarios
Parameters calibration	Contains regulatory floors and downturn calibration	Unbiased estimate, based on conditions known at the balance sheet date
Calculation timing	Considers aggregation of possible default events in the next 12 months	Considers monthly calculation of parameters, for all possible future default dates. First 12 months are used for Stage 1, full lifetime for Stages 2 and 3
Probability of Default (PD)	PD in the next 12 months	Includes forward-looking economic data and removes conservatism. PD in next 12 months for Stage 1, lifetime for Stages 2 and 3
Loss Given Default (LGD)	Lifetime LGD for defaults in the next 12 months	Modelled without regulatory floors and exclusion of indirect costs
Exposure at Default (EAD)	Exposure at the point of default if the customer defaults in the next 12 months	Recognises ability for exposure to reduce from balance sheet date to default date
SICR	Does not include SICR concept	Includes SICR concept
Discounting applied	At weighted average cost of capital to the default date	At the effective interest rate (EIR) to the balance sheet date

Recognising ECL (audited)

The ECL approach estimates the credit losses arising from defaults in the next 12 months on qualifying exposures, or defaults over the lifetime of the exposure

where there is evidence of a SICR since the origination date. Our ECL approach for portfolio assessments uses models that consider forward-looking data on

economic scenarios, including a range of possible outcomes, which are unbiased and probability-weighted to reflect the risk of a loss being incurred even when it

is unlikely. In some cases, we need to apply Judgemental Adjustments to our model outputs. We use internal credit ratings for corporate borrowers and individually

assess corporate Stage 3 exposures.

Critical judgements and accounting estimates applied in calculating ECL (audited)

The application of the ECL impairment methodology for calculating credit impairment allowances is susceptible to change from period to period. The methodology

requires management to make judgemental assumptions in determining the estimates.

For more on our approach to making critical judgements and accounting estimates applied in calculating ECL see 'Critical judgements and accounting estimates'

Note 1 to the Consolidated Financial Statements.

Multiple economic scenarios and probability weights (audited)

For all our portfolios, we use forward-looking economic scenarios. During 2024, we reduced the forward looking economic scenarios to four by removing the

stubborn inflation scenario as inflation has returned to more normalised levels. They now consist of a central base case, one upside scenario and two downside

scenarios. We use these scenarios to reflect a wide range of possible outcomes for the UK economy.

Our forecasting approach

We derive our scenarios in part by using a set of parameters in GDP fan charts published by the Office for Budget Responsibility (OBR). These fan charts reflect

the probability distribution of a deviation from the OBR’s central forecast to show the uncertainty about the outcome of a variable, in this case GDP.

Once we have established the GDP paths for each scenario, we run them through the Oxford Global Economic Model (OGEM) to derive the other

macroeconomic variables, such as unemployment and house prices. These variables are the product of the GDP growth paths we have forecast and the output of

the OGEM for these growth paths. We then review them to ensure consistency with the narrative of each scenario and so changes to the variables may be

needed in some cases.

We then impose a Bank Rate profile for each scenario using expert judgement with the base case as the starting point and then adjusting this for each of the other

scenarios based on the narratives. We produce a range of Bank Rate profiles to reflect a range of possible outcomes the Bank of England may follow depending

on how it sees the trade-off between growth and inflation evolving over the forecast period. For example, this might consist of higher rates initially in response to

inflationary concerns followed by lower rates as inflation falls towards target, and that this may be sharper in the event of a deep recession.

We update the baseline in our economic scenarios at least twice a year in line with our annual budgeting and three-year planning processes, or sooner if there is a

material change in current or expected economic conditions. We refresh all our economic scenarios quarterly to reflect the latest data and OBR fan charts if these

changed, which are then reviewed and approved by the Credit Risk Provisions Forum (CRPF). The CRPF also assesses the probability weights at least once a

quarter.

We do not use consensus forecasts as inputs to our models, but we do compare the outputs of our models against consensus views for the base case, to make

sure that we understand any significant differences and address them where needed. At 31 December 2024, there were no significant differences between our

base case forecasts and the consensus views.

In 2024, we undertook a further peer benchmarking analysis of the economic scenarios, which for Q424 included the mean weighted analysis for a selection of

economic variables, including GDP, unemployment rate and HPI. This meant that we could compare our weighted scenarios against the average of our peers to

understand what differences there may be. The conclusion of this analysis demonstrated that our economic scenarios were in line with our peers.

In 2024, we also considered any likely impact from climate risk on our forecasting approach and concluded that no adjustment to the multiple economic

scenarios for climate risk was required. This is because climate change effects are generally regarded to be relevant over a longer timeframe than our forecast

period of five years.

Our use of four different scenarios is designed to reflect different possible outcomes to the base case, highlighting the upside and downside risks associated with

the central scenario.

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Our forecasting period for GDP is five years and we use the OGEM 25 year model for the outer years, post five year forecast. This is a change to the methodology

from 2023 and it was adopted in Q124. As part of this, we set a floor on the unemployment rate at 4% to ensure that the long-term view is near to the Non-

Accelerating Inflation Rate of Unemployment set out by the Bank of England in its annual supply side review.

Key changes to our forecasting approach in 2024

In 2024, we made two changes to our forecasting approach. We moved from five to four scenarios which saw the removal of the stubborn inflation scenario due to

inflation becoming more stable as it reaches target, negating the need for a specific scenario. We also moved from using mean reversion for the forecasts beyond

five years to using the 25 year OGEM output. This removes the need to make any assumptions regarding the length of time to mean revert.

Base case

We review the scenarios and associated weights every quarter to ensure they appropriately reflect the current economic circumstances and UK Government

policy which is subject to change.

In summary, the outlook for the UK economy in 2025 shows an economy that is growing with the stimulus from the October 2024 Budget helping to boost GDP.

There is above target inflation due to this stimulus and other government measures, but Bank Rate continues to fall gradually, supporting businesses and

households. However, downside risks to the outlook remain particularly around geopolitical tensions and potential productivity gains.

Base case key macroeconomic assumptions

GDP: The UK economy slowed in Q324 with growth of 0.1% quarter-on-quarter. It was always likely that a slow-down from the above average quarterly growth rates of H124 would

happen, but with weak PMIs as well there is a concern that the economy will stagnate in Q424. However, Q324 GDP did see rising consumer spending and strong gains for business

investment as such we would expect that post-Budget growth will pick up, although some underlying weakness means the economy growing at levels similar to those experienced pre-

pandemic, rather than the stronger growth needed to help repair the UK’s finances. For 2025 we would expect to see stronger growth caused by the increase in government spending

given the measures announced in the October 2024 Budget, although this may crowd out some business investment and with a higher tax burden this may impact both investment

and private consumption. Over the longer term the key issue for growth remains productivity and without a boost to this growth will remain at the average pre-pandemic levels of 1.4%.

Bank Rate: The Monetary Policy Committee (MPC) lowered rates twice in 2024 to 4.75%. Our base case assumes a further 100bps of cuts which takes Bank Rate to

3.75% by the end of 2025, with further reductions into the medium term leaving the terminal rate at 3.25% in Q127. This is slightly higher than our previous forecast due

to the increased inflation expected as a result of the October 2024 Budget.

House price growth: House prices grew in 2024, helped in part, by falling mortgage rates. However, the outlook for 2025 is likely to see a slow-down in house price

growth due to higher swap rates which has pushed up mortgage rates in Q424. As always, the key to house price growth is the supply of housing which continues to be

weak. This along with the steady fall in interest rates should ensure steady house price growth over the forecast period. We forecast a c.3% year-on-year growth in

house prices by the end of 2025 and remaining at this growth rate for the rest of the forecast period.

Unemployment rate: Recent data for unemployment indicates that there is a slow loosening of the labour market. However, caution needs to be taken as the

unemployment data is still subject to problems with the ONS Labour Force Survey data. In terms of the forecast the peak in unemployment comes in 2025, with the

possibility of more redundancies as firms face higher employment costs as a result of the National Insurance Contributions (NIC) increase for employers. The rate then

drops back to 4.2% (current Bank of England prediction for the natural rate of unemployment) in 2026. This accords with the better growth outlook, but also reflects the

fact that the structure of the UK labour market changed with a large drop in the number of working age people looking for work, thus reducing supply. Although progress

may be made in reducing medical waiting lists over the forecast period to boost supply.

CRE price growth: After falling for seven quarters in a row, CRE prices stabilised in Q224 and rose by 0.3% quarter-on-quarter in Q324 in a sign of the sector turning

around after two years of falling prices. Cuts in Bank Rate boosted prices and this looks set to continue in Q424 following the November 2024 bank rate cut. In addition,

with more workers return to the office this may help boost the flagging office sector. We expect prices to continue to rise throughout the forecast period as Bank Rate is

reduced before growth stabilises around the 2% year-on-year mark.

In the medium-term, the projections assume that current demographic and productivity trends will continue, causing a reduction in the UK’s growth potential. For

instance, it is likely that the reduction in the UK workforce will continue and this will have a knock-on impact for the economy, particularly if there are shortages of

skilled workers in particular sectors. This is reflected in an average annual growth expectation of 1.6%, in line with the OBR’s latest estimate of the UK’s long run

average growth rate.

Key changes to our base case in 2024

For our base case, we no longer expect a short recession given that the economy has been more resilient than previously expected in 2023. For the other macro-

economic variables, the changes made to the base case compared to 2023 included stronger house price inflation for 2024 reflecting the better economic

conditions and slightly lower unemployment for 2024. However, risks to the base case remain with potential for rising geopolitical risks affecting the UK economy.

Our base case scenario incorporates stronger economic growth in 2025, from increased government spending and four Bank Rate cuts of 25bps over the year. It

was updated to reflect the latest market data and to broadly align with the latest consensus estimates. The most notable change was to HPI with expected house

price increases stronger than predicted in 2024.

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Other scenarios

Based on this revised base case, we reviewed our suite of scenarios to ensure that they capture the wide range of potential outcomes for the UK economy. These

include; (i) a slower recovery that is more akin to the ‘U’ shape of past recessions; (ii) labour market frictions due to skills mismatches and a shrinking workforce

as some discouraged workers leave altogether (for example longer-term sickness levels remaining above pre-pandemic levels); (iii) fragmentation of the global

economy in particular changes and additional frictions to supply chains; and (iv) the global economy recovering more swiftly from higher inflation.

To reflect these potential outcomes, we use the base case and three additional scenarios, which we consider sufficient to reflect all the above potential outcomes.

As with the base case, the scenarios are forecast over a five-year period with the OEGM 25 year model used to determine the forecasts after this period with a

floor on unemployment set at 4%.

The other scenarios are:

One upside scenario

This scenario has a quicker recovery in growth than the Baseline and is a bull case to the base forecasts. It assumes that inflation falls slightly below target at the

start of the forecast period helped by lower wage growth, however it does rise back to 2% over the period. This allows the Bank of England to cut rates faster than

the base case, bringing them back towards what might be considered the neutral rate earlier. This results in higher consumer and business confidence enabling

higher levels of spending and investment, with savings rates returning to levels consistent with economic growth as real earnings growth returns. In this scenario

GDP remains stronger than the base case along with house price growth. Unemployment falls to 4% slightly below the base case and inflation dips below target in

2026 before ending the forecast period at target.

Two downside scenarios

The downside scenarios capture the impact of weaker investment, the increasing risk from geopolitical events and the ongoing significant mismatch between job

vacancies and skills, as well as a smaller labour force.

Downside 1 – In this scenario, the economy contracts and although the recession is small and short lived, the recovery is weak and below potential. The measures

announced in the Budget, in particular the increase in NICs for employers means growth is tempered and employment shrinks as businesses restructure to deal

with the extra cost along with increased minimum wage and changes to workers' rights. Consumers opt to save more rather than spend which affects the recovery

path, as consumer confidence is low in part due to concerns about the unstable geopolitical environment and the increase in lay-offs as businesses restructure.

The global economy is affected by a combination of factors, such as commodity prices becoming increasingly volatile due to geopolitical events and the potential

impact of additional tariffs. This affects global inflation which negatively impacts UK trade and hinders a return to growth.

Downside 2 – This scenario shows a marked fall in GDP, with rising unemployment and falling house prices reflecting the ongoing issues of a higher interest rate

environment. There is a longer lagged effect from monetary policy tightening and lower growth and productivity, which feeds across the whole economy. It also

reflects the increase in geopolitical risk which affects market sentiment and causes further fragmentation of the global economy. It also assumes that major risk

events continue to occur, exposing the vulnerability of countries' fiscal positions and the means to respond to such events. Unemployment peaks at 8.5% and,

although, there are some inflationary pressures from changing trade patterns, the sharp fall in demand means inflation falls below target and allows the MPC to

cut rates sharply from Q125 to stabilise demand. With inflation falling below target and lower interest rates this eases some of the pressures on the UK economy

and growth picks up in the medium-term.

Key changes to our alternative scenarios in 2024

In 2024, we removed the Stubborn inflation scenario (Downside 3) from the suite of scenarios we run. This was because inflation fell significantly and the risks of

inflation increasing above 3% and remaining at levels above this was no longer considered to need a separate scenario. The scenario was not replaced as we

already have two downside scenarios reflecting the risks to the UK economy including inflation being above target and with higher interest rates compared to base

case. It was not deemed necessary to have a further upside scenario given the limited upside risk to the UK economy. In addition, the use of four scenarios is in

line with many of our peers.

Despite mixed signals about the UK's recent economic performance, which may impact the path of the Bank Rate, our scenarios continue to capture a broad

range of forecasts.

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Our macroeconomic assumptions and their evolution throughout the forecast period

Our macroeconomic assumptions and their evolution throughout the forecast period for each of the scenarios at 31 December 2024 were:

		Upside	Base case	Downside 1	Downside 2	Weighted
		%	%	%	%	%
GDP(1)	2023 (actual)	0.3	0.3	0.3	0.3	0.3
	2024	0.9	0.9	0.8	0.4	0.8
	2025	2.0	1.4	(0.4)	(3.4)	0.6
	2026	2.5	1.6	0.3	(0.9)	1.2
	2027	2.5	1.4	0.9	1.3	1.4
	2028	2.5	1.4	1.0	2.8	1.6
	2029	2.5	1.4	1.1	2.8	1.6
	5-year average increase/decrease(2)	2.4	1.5	0.6	0.3	n/a
	Start to trough(3)	n/a	n/a	(0.7)	(5.2)	n/a
Bank Rate(1)	2023 (actual)	5.25	5.25	5.25	5.25	5.25
	2024	4.75	4.75	4.75	4.75	4.75
	2025	3.25	3.75	4.50	2.25	3.71
	2026	3.00	3.50	3.25	1.50	3.16
	2027	3.00	3.25	3.00	2.50	3.08
	2028	3.00	3.25	3.00	2.75	3.10
	2029	3.00	3.25	3.00	3.00	3.13
	5-year end period	3.00	3.25	3.00	3.00	n/a
	5-year peak	4.75	4.75	4.75	4.75	4.75
HPI(1)	2023 (actual)	(0.7)	(0.7)	(0.7)	(0.7)	(0.7)
	2024	4.8	4.5	2.0	1.3	3.6
	2025	4.3	3.0	(5.8)	(20.1)	(1.2)
	2026	4.7	3.0	(3.7)	(14.7)	0.3
	2027	4.6	3.0	2.9	5.8	3.4
	2028	4.5	3.0	4.4	9.6	4.0
	2029	4.6	3.0	4.6	7.7	4.0
	5-year average increase/decrease(2)	4.7	3.2	—	(3.7)	n/a
	Start to trough(3)	n/a	n/a	(10.1)	(33.0)	(0.8)
Unemployment(1)	2023 (actual)	3.8	3.8	3.8	3.8	3.8
	2024	4.4	4.3	4.4	4.4	4.4
	2025	4.1	4.4	5.2	8.3	4.9
	2026	4.0	4.2	5.5	8.2	4.9
	2027	4.0	4.2	5.5	7.6	4.8
	2028	4.0	4.2	5.5	7.0	4.8
	2029	4.0	4.2	5.5	6.4	4.7
	5-year end period	4.0	4.2	5.5	6.4	n/a
	5-year peak	4.4	4.4	5.5	8.5	4.9
CRE price growth(1)	2023 (actual)	(5.6)	(5.6)	(5.6)	(5.6)	(5.6)
	2024	0.4	(0.1)	(2.3)	(2.7)	(0.9)
	2025	5.7	2.5	(5.5)	(14.9)	(0.7)
	2026	5.2	2.8	1.7	(8.5)	2.0
	2027	2.9	2.5	2.0	4.4	2.6
	2028	3.3	2.2	1.8	3.8	2.4
	2029	3.0	2.1	2.4	3.4	2.4
	5-year average increase/decrease(2)	4.0	2.3	(0.1)	(3.3)	n/a
	Start to trough(3)	n/a	n/a	(7.4)	(24.7)	(1.2)

(1)GDP is the calendar year annual growth rate, HPI and CRE price growth rate is Q4 annual growth rate and all other data points are at 31 December in the year indicated.

(2)      This is the compound annual growth rate (CAGR) based on a 5 year period which represents an average annualised growth rate.

(3)      GDP, HPI and CRE start is taken from level at Q324.

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The table below sets out our macroeconomic assumptions and their evolution throughout the forecast period for each of the scenarios at 31 December 2023:

		Upside	Base case	Downside 1	Stubborn Inflation	Downside 2	Weighted
		%	%	%	%	%	%
GDP(1)	2022 (actual)	4.3	4.3	4.3	4.3	4.3	4.3
	2023	0.6	0.5	0.5	0.5	0.3	0.5
	2024	1.0	0.4	(0.1)	(1.8)	(3.3)	(0.4)
	2025	2.1	1.3	0.2	(0.9)	(1.4)	0.6
	2026	2.4	1.5	0.5	0.4	0.6	1.1
	2027	2.4	1.4	0.3	0.7	2.2	1.4
	2028	2.4	1.4	0.3	0.8	2.6	1.4
	5-year average increase/decrease	2.1	1.2	0.3	(0.2)	0.1	n/a
	Peak/(trough) at(2)	—	—	(0.2)	(2.8)	(5.1)	(1.1)
Bank Rate(1)	2022 (actual)	3.50	3.50	3.50	3.50	3.50	3.50
	2023	5.25	5.25	5.25	5.25	5.25	5.25
	2024	4.25	4.50	5.25	6.50	3.75	4.88
	2025	3.25	3.50	4.00	5.00	2.00	3.68
	2026	2.75	3.25	3.25	3.75	2.00	3.18
	2027	2.75	3.00	3.00	3.00	2.50	2.93
	2028	2.75	3.00	3.00	3.00	2.50	2.93
	5-year end period	2.75	3.00	3.00	3.00	2.50	n/a
	Peak/(trough) at	5.25	5.25	5.75	6.50	5.25	5.55
HPI(1)	2022 (actual)	5.0	5.0	5.0	5.0	5.0	5.0
	2023	(1.7)	(2.2)	(4.7)	(6.3)	(7.8)	(3.8)
	2024	2.0	(1.0)	(11.7)	(18.8)	(25.8)	(7.8)
	2025	6.5	2.5	3.4	3.6	3.6	3.3
	2026	5.1	3.0	2.1	1.6	1.6	2.7
	2027	4.0	3.0	3.0	1.6	1.6	2.7
	2028	3.6	3.0	3.1	1.8	1.8	2.7
	5-year average increase/decrease	4.3	2.0	(0.8)	(3.3)	(5.4)	n/a
	Peak/(trough) at(2)	(3.7)	(6.5)	(17.5)	(25.5)	(33.0)	(13.8)
Unemployment(1)	2022 (actual)	3.7	3.7	3.7	3.7	3.7	3.7
	2023	4.3	4.3	4.3	4.3	4.4	4.3
	2024	4.3	4.8	4.8	5.6	8.5	5.3
	2025	3.7	4.4	4.9	5.9	8.0	5.1
	2026	3.4	4.3	5.2	6.2	7.4	5.0
	2027	3.0	4.3	5.4	6.1	6.8	4.9
	2028	3.0	4.2	5.3	5.8	6.2	4.7
	5-year end period	3.0	4.2	5.3	5.8	6.2	n/a
	Peak/(trough) at	4.5	4.8	5.5	6.2	8.5	5.5

(1)GDP is the calendar year annual growth rate, HPI is Q4 annual growth rate and all other data points are at 31 December in the year indicated.

(2)GDP peak taken from GDP level at Q2-23 and HPI peak taken from HPI level at Q3-22.

The forecast growth rates for the GDP assumptions we use for scenario modelling

The forecast growth rates for the GDP assumptions we used for scenario modelling were:

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Scenario weights

Each quarter, we review the scenario weights we apply. We consider the weights of the economic scenarios as a whole, while ensuring that the scenarios capture

the non-linear distribution of losses across a reasonable range. To support our initial assessment of the weight of a scenario, we undertake a Monte Carlo analysis

to estimate the likelihood of a five-year average GDP forecast growth rate occurring based on the long-run historically observed average. We then create a

standard distribution bell curve around this long run average. This allows us to estimate the probability of a given GDP scenario occurring based on past

experience and therefore assign a weight to that scenario. We also consider the UK economic and political environment when applying weights.

The scenario weights we applied for 2024 and 2023 were:

	Upside	Base case	Downside 1	Stubborn Inflation	Downside 2	Weighted
Scenario weights	%	%	%	%	%	%
2024	15	50	25	n/a	10	100
2023	10	50	10	20	10	100

2024 compared to 2023

In 2024, we removed the Stubborn Inflation scenario and re-weighted the remaining scenarios as inflation returned to more normalised levels. We remain of the

view that the risks to UK growth are still biased to the downside and include: further geopolitical events creating more challenges for economies both the UK and

abroad; the potential for further upside inflation surprises causing inflation to stay above target for longer, raising the cost of living and so reducing consumer

demand; continuing weak investment reflecting the uncertain nature of the economic environment; and a continuing and significant mismatch between vacancies

and skills along with a smaller labour force, which may bring disruption to any recovery in the latter years of the forecast.

Definition of default (Credit impaired) (audited)

We define a financial instrument as in default (i.e. credit impaired) for the purpose of calculating ECL if it is more than three months past due, or if we have data

that suggests the customer is unlikely to pay. The data we have on customers varies across our business segments. It typically includes where:

Retail & Business Banking and Consumer Finance

–They have been reported bankrupt or insolvent and are in arrears

–Their loan term has ended, but they still owe us money more than three months later

–They have had forbearance while in default and have failed to perform under the new arrangement terms, or have had multiple forbearance. Performing forborne

accounts while not in default are reported in Stage 2

–We have suspended their fees and interest because they are in financial difficulties

–We have repossessed the property or the asset.

Corporate & Commercial Banking and Corporate Centre

–They have had a winding up notice issued, or something happens that is likely to trigger insolvency – such as another lender calls in a loan

–Something happens that makes them less likely to be able to pay us – such as they lose an important client or contract

–They have regularly missed or delayed payments, even though they have not gone over the three-month limit for default

–Their loan is unlikely to be refinanced or repaid in full on maturity

–Their loan has an excessive LTV that is unlikely to be resolved, such as by a change in planning policy, pay-downs, or increase in market value

–Loans restructured under financial difficulties, classified as forborne transactions, in last 12 months.

Where we use the advanced internal ratings-based basis for a portfolio in our capital calculations, there are differences with the default definitions for ECL

purposes. The main differences are as follows:

–Performing forborne accounts while not in default are in Stage 2 until they cure their forbearance status (measured as 12 consecutive months of successful

payments).

–Performing non-forborne accounts, which under our internal rating-based basis are subject to a 3-month cure period. For accounting purposes, we classify them

in Stage 2 until they cure all SICR triggers.

Significant Increase in Credit Risk (SICR) (audited)

Loans which have suffered a SICR since origination are subject to a lifetime ECL assessment which extends to a maximum of the contractual term of the loan, or

the behavioural term for a revolving facility. Loans which have not experienced a SICR are subject to 12-month ECL. We assess the credit risk profile of each

facility to determine which of three stages to allocate them to:

–Stage 1: when there has been no SICR since initial recognition. We apply a loss allowance equal to a 12-month ECL i.e. the proportion of lifetime expected

losses that relate to that default event expected in the next 12 months

–Stage 2: when there has been a SICR since initial recognition, but the exposure is not considered credit impaired. We apply a loss allowance equal to the

lifetime ECL i.e. the expected loss resulting from all possible defaults throughout the residual life of a facility

–Stage 3: when the exposure is considered credit impaired. We apply a loss allowance equal to the lifetime ECL. Objective evidence of credit impairment is

needed. For more, see the section ‘Definition of default (Credit impaired)’ above.

We use quantitative, qualitative and backstop criteria to identify exposures that suffer a SICR. The Credit Risk Provisions Forum (CRPF) reviews and approves

our SICR thresholds periodically. The Board Audit Committee reviews and challenges their appropriateness each year, or more often if we change them.

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Key changes in 2024

In 2024, alongside our new ECL models, we updated our SICR criteria to enhance and improve consistency across portfolios. As a result, we now treat the

following accounts as Stage 2:

Quantitative:

–Accounts with a 12-month PD between 30bps (0.3%) and 2000bps (20%) where the annualised lifetime PD has doubled from origination.

–PD threshold: Accounts where the annualised lifetime PD has increased above 2000bps (20%).

–Low Credit Risk Exemption (LCRE): we introduced an LCRE where, if the 12-month PD is less than 30bps, we retain the account in Stage 1, unless

the qualitative or backstop criteria are met.

These changes increased the number of accounts in Stage 2 for Credit Cards and Overdrafts mainly due to the lower absolute PD thresholds, with no material

increase in ECL.

Qualitative:

–For mortgages, over-indebted customers and Interest-only accounts 24 months pre-maturity.

–For CCB, customers operating in a high-risk sector.

These enhancements enabled us to retire related JAs.

Quantitative criteria

We use quantitative criteria to identify where an exposure has increased in credit risk. We base our criteria on whether any increase in the lifetime PD since

origination exceeds a threshold in relative and absolute terms. We base the value anticipated at origination on similar assumptions and data to the ones we use at

the reporting date, adjusted to reflect the account surviving to that date. The comparison uses either an annualised lifetime PD, where the lifetime PD is divided by

the forecast period, or the absolute change in lifetime PD since origination.

The criteria for 2024 and 2023 were: accounts above the lower absolute PD thresholds below, where the PD has doubled since origination, are treated as Stage

2. Any account above the upper threshold (i.e. 20%) is also treated as Stage 2:

	Retail & Business Banking				Consumer Finance(2)	Corporate & Commercial Banking	Corporate Centre
	Mortgages	Everyday Banking(1)
		Personal loans	Credit cards	Overdrafts
2024	30bps	30bps	30bps	30bps	300bps	30bps	Internal rating method
2023	30bps	30bps	340bps	260bps	300bps	30bps	Internal rating method

(1)For larger business banking customers, we apply the same criteria as we use for CCB. Credit cards and Overdrafts lower PD thresholds aligned with the rest of Everyday Banking for consistency.

(2)Consumer Finance use the comparison of lifetime PDs to determine Stage allocation, unlike other products which first turn the lifetime PD into an average yearly PD (annualised) and then do the comparison. In

addition, Consumer Finance does not apply the upper absolute PD threshold criteria.

Qualitative criteria

We also use qualitative criteria to identify where an exposure has increased in credit risk, independent of changes in PD. The criteria for 2024 and 2023 were:

Retail & Business Banking				Consumer Finance	Corporate & Commercial Banking	Corporate Centre
Mortgages	Everyday Banking(1)
	Personal loans	Credit cards	Overdrafts
– In forbearance – Default in last 24m – 30 Days Past Due (DPD) in last 12m – Bankrupt – £100+ arrears New in 2024: – Over-indebted customers – Interest Only accounts 24m pre-maturity	– In Collections – Default in last 12m – £50+ arrears	– In forbearance – Default in last 12m – In Collections – £100+ arrears – Behaviour score indicators	– Fees suspended – Default in last 12m – Debit dormant >35 days – Any excess in month	– In forbearance – Deceased or Insolvent – Court ‘Return of goods’ order or Police watchlist – Agreement terminated – Payment holiday – Cash Collection	– In forbearance – Default in last 12m – Watchlist: proactive management – Default at proxy origination New in 2024: – Customers in a high-risk sector	– Watchlist: proactive management

(1)For larger business banking customers, we apply the same criteria that we use for Corporate & Commercial Banking.

If needed, we apply additional qualitative assessments as part of JAs in response to situations where known or expected risk factors and data are not considered

in the modelling process. See 'Judgemental Adjustments (JAs)' below for more on this.

Backstop criteria

As a backstop, we classify all exposures more than 30 or 90 DPD in at least Stage 2 or in Stage 3, respectively. This means that we do not rebut the backstop

presumptions in IFRS 9 (i.e. credit risk has significantly increased if contractual payments are more than 30 DPD) relating to either a SICR or default.

Improvement in credit risk or cure

We transfer Stage 3 exposures to Stage 2 or Stage 1 when we no longer consider them to be credit impaired. We transfer Stage 2 exposures to Stage 1 when we

no longer consider them to have suffered a SICR. Where we identified a SICR using quantitative criteria, we transfer the exposures to Stage 1 when they no

longer meet the original PD-based transfer criteria. Where we identified a SICR using qualitative criteria, the issues that led to the transfer must be cured before

we transfer the exposure to Stage 1. For a loan to exit forbearance, it must meet the conditions set out in the section ‘Forbearance’ in the 'Credit risk' section of the

Risk review.

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Judgemental Adjustments (JAs) (audited)

We use a range of methods to identify whether we need a JA. These include regular reviews of model monitoring tools, changes in the period, trend analysis,

comparisons against forecasts, and inputs from expert teams who manage key portfolio risks. We only recognise a JA if its expected impact is over £1m and keep

it in place until we no longer need it. This is usually when we build it into our core credit model or the conditions that led to raising the JA no longer exist.

Our Risk Provisions & Forecasting team calculate JAs to ensure they are incremental to the core credit model and to ensure the calculation is performed in a

consistent and controlled manner. We apply standard end-user computing controls to JAs expected to be in place for more than six months. The CRPF reviews

and approves all JAs on a quarterly basis.

	Retail & Business Banking
	Mortgages	Everyday Banking		Consumer Finance	Corporate & Commercial Banking	Corporate Centre	Total
		Credit Cards	Other
2024	£m	£m	£m	£m	£m	£m	£m
Modelled ECL	128	149	122	69	142	—	610
Individually assessed	6	—	—	—	162	—	168
ECL before JAs	134	149	122	69	304	—	778
JAs (excluding Affordability and Cost of Living JAs)
Unsecured PD adjustments	—	—	2	—	—	—	2
Mortgages LGD	27	—	—	—	—	—	27
Corporate single large exposure	—	—	—	—	24	—	24
Other	1	1	6	—	—	—	8
Total JAs (excluding Affordability and Cost of Living JAs)	28	1	8	—	24	—	61
Affordability and Cost of Living JAs
Corporate lending to segments affected by supply chain pressures	—	—	—	—	14	—	14
Mortgage refinancing risk	11	—	—	—	—	—	11
SME debt burden	—	—	6	—	—	—	6
Total Affordability and Cost of Living JAs	11	—	6	—	14	—	31
Total JAs	39	1	14	—	38	—	92
Total ECL	173	150	136	69	342	—	870
Total JAs as a percentage of Total ECL (%)							11
2023	£m	£m	£m	£m	£m	£m	£m
Modelled ECL	134	123	123	62	240	—	682
Individually assessed	4	—	—	—	124	—	128
ECL before JAs	138	123	123	62	364	—	810
JAs (excluding Affordability and Cost of Living JAs)
Long-term indeterminate arrears	16	—	—	—	—	—	16
12+ months in arrears	14	—	—	—	—	—	14
UPL loss floor	—	—	6	—	—	—	6
Model underestimation	36	—	—	—	—	—	36
Corporate single large exposure	—	—	—	—	23	—	23
Other	12	1	3	4	(31)	—	(11)
Total JAs (excluding Affordability and Cost of Living JAs)	78	1	9	4	(8)	—	84
Affordability and Cost of Living JAs
Corporate lending to segments affected by supply chain pressures	—	—	—	—	24	—	24
Secured affordability	9	—	—	4	—	—	13
Unsecured affordability	—	16	22	—	—	—	38
Mortgage refinancing risk	19	—	—	—	—	—	19
SME debt burden	—	—	6	—	—	—	6
Total Affordability and Cost of Living JAs	28	16	28	4	24	—	100
Total JAs	106	17	37	8	16	—	184
Total ECL	244	140	160	70	380	—	994
Total JAs as a percentage of Total ECL (%)							19

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JAs (excluding Affordability and Cost of Living JAs)

–Unsecured PD Adjustments: In 2024, we replaced the UPL Loss floor JA with the Unsecured PD Adjustments JA to widen the scope of the JA. We use this

JA to address the perceived macroeconomic insensitivity in our Unsecured Personal Loans (UPL) model and the over sensitivity in our Overdrafts model.

–UPL – This arises where analysis of historical losses shows a larger correlation to the International Labour Organisation (ILO) unemployment forecast than the

model gives. The JA uplifts the lifetime losses expected in each of the macroeconomic scenarios in the model to align with the expected losses the historical

analysis predicts.

–Overdrafts – This arises where the ECL model is overly sensitive to Bank Rate changes, leading it to predict extremely high PDs in the early years. The JA

reduces the lifetime losses expected in each of the macroeconomic scenarios in the model to align with the expected losses the historical analysis predicts.

–Mortgages LGD: We introduced this JA in 2024. It uplifts the modelled parameters that capture the risk of failed recovery strategies of stage 3 accounts in

default and stage 1 and stage 2 accounts not in default targeting the LGD underestimation flagged by model monitoring, as well as the lower level of coverage

compared to peers in this segment.

–Corporate single large exposure: This JA safeguards against individual large exposures defaulting over a short period. We currently use the JA to safeguard

against two historically observed single name large losses in CCB. This JA was used in 2024 for 2 cases. This JA was also replenished in 2024 as it is still

needed as UK corporate insolvencies rose to a 30-year high. In the current economic environment, the risk of single name defaults, which incur high losses, is

considered greater than before as government support schemes ceased. We continue to assess the risk over the medium term based on actual experience

and refine the estimate based on changes in our portfolio credit quality and loan size mix.

–Other: This includes Mortgages and Retail Unsecured and generally consists of small portfolios where the ECL calculation is held outside of the main models.

Affordability and Cost of Living JAs

–Corporate lending to segments affected by supply chain pressures: This JA reflects the corporate lending risks to those sectors susceptible to high

inflation and energy prices, higher input costs, potential for lower consumer and business demand and exposure to supply chain pressures. This JA calculates

ECL by stressing PD levels for customers in Stage 2 according to each customer's risk profile.

–Mortgage refinancing risk: The JA considers the risk of mortgage customers being unable to afford their new mortgage instalment after re-mortgaging at

higher interest rates. The JA assesses the likely mortgage payment against the stressed interest rate that customers had been assessed against at the point of

application. Customers that are likely to secure rates above their stress levels are considered at risk of not being able to afford their new mortgage. We uplift

their PDs to account for the elevated levels of defaults observed for the most recent cohorts of refinanced mortgages. The JA was designed using some profiling

characteristics of customers that used the Mortgage Charter government scheme as some of those accounts are considered to be at higher risk of arrears.

–SME debt burden: This JA takes account of the potential debt burden risk of unsecured lending to our SME customers who also took a BBL. This does not

incorporate the credit risk on BBLs as these are government guaranteed, but considers the possible impact on repayment of other lending with us.

2024 compared to 2023

In 2024, we implemented new impairment models for Mortgages and Corporate & Commercial Banking, which now embed many of the JAs in place at the end of

2023. In response to the improved economic data, specifically inflation, we reassessed the need for cost of living JAs and retired the Secured and Unsecured

Affordability JAs.

In 2024, we introduced a new Mortgage LGD JA which uplifts the modelled parameters that capture the risk of failed recovery strategies, for default and non-

default accounts.

Climate change

In 2024 and 2023, we assessed the risks to asset valuations in the customer loan book from both transitional and physical risks associated with climate change. At

31 December 2024 and 2023, we did not consider it appropriate to recognise a climate risk related JA for the following reasons:

–The behavioural life of the loan book is less than five years. Any material transitional risks are generally regarded to be relevant over a longer timeframe than

five years and, as such, the risk predominantly relates to assets yet to be written;

–There have been no observed default events or SICRs due to climate change for any part of the loan book;

–The absolute exposure to fossil fuel industries is not material. On an individually assessed basis, clients in these industries are highly rated and their markets

remain highly liquid;

–The residual value of automotive vehicles might be impacted by diesel obsolescence and the transition to electric vehicles. The residual value risk is already set

at the more cautious end of the acceptable range to capture the inherent risk of diesel obsolescence and measurement uncertainty of electric vehicles; 

–ECL calculations are based on multiple forward-looking economic scenarios developed by management covering a period of five years, during which timeframe

climate change risks may crystallise;

–The proportion of mortgage loans subject to flood and subsidence risk is not material. The terms of our mortgage lending also require homeowners to have an

active flood protection at any point of the contract. This assessment relies upon availability of risk cover from private insurers and FloodRe, respectively. The

potential risk may increase over time if flooding due to climate change increases and/or insurance market circumstances change. 

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Internal credit risk rating for corporate borrowers (audited)

We assign each corporate borrower an internal credit rating based on our internal rating scale. To do this, we look at the customer’s financial history and trends in

the economy backed up by the expert judgement of a risk analyst. We review our internal ratings on a dynamic basis and at least once a year. The internal risk

rating is used to determine the Probability of Default for a client.

Individually assessed corporate Stage 3 exposures (audited)

We assess the ECL requirement for single name corporate exposures on an individual basis when they meet our definition of default and are transferred into

Stage 3. This assessment uses the latest specific data about the counterparty's estimated future cash flows, and collateral valuations, to determine a probability

weighted ECL based on a best, worst and mid case outcome. For these individually assessed loans, the ECL allowance was £162m at 31 December 2024 (2023:

£124m). Had management assumed the best or worst outcome for loss estimates, the ECL allowance could have been within a range of £63m to £291m.

Sensitivity of ECL allowance to economic scenarios and weights (audited)

The ECL allowance is sensitive to the methods, assumptions and estimates underlying its calculation. For example, management could have applied different

probability weights to the economic scenarios. In addition, the ECL allowance for residential mortgages is significantly affected by the HPI assumptions which

determine the valuation of collateral used in the calculations.

Had management used different assumptions on probability weights and HPI, a larger or smaller ECL charge would have resulted that may have had a material

impact on the ECL allowance and profit before tax.

Scenario sensitivity

The tables below show the ECL allowances that would have arisen had management applied a 100% weight to each economic scenario. The allowances were

calculated using a stage allocation appropriate to each scenario and differs from the probability-weighted stage allocation used to determine the ECL allowance

shown above. For exposures subject to individual assessment, the distribution of ECLs which could reasonably be expected has also been considered, assuming

no change in the number of cases subject to individual assessment, and within the context of a potential best to worst case outcome.

	Upside	Base case	Downside 1	Downside 2	Weighted
2024	£m	£m	£m	£m	£m
Exposure	290,484	290,484	290,484	290,484	290,484
Retail & Business Banking	198,747	198,747	198,747	198,747	198,747
– Mortgages	178,041	178,041	178,041	178,041	178,041
– EDB - Credit Cards	13,642	13,642	13,642	13,642	13,642
– EDB - Other	7,064	7,064	7,064	7,064	7,064
Consumer Finance	4,759	4,759	4,759	4,759	4,759
Corporate & Commercial Banking	26,307	26,307	26,307	26,307	26,307
Corporate Centre	60,671	60,671	60,671	60,671	60,671
ECL	742	775	922	1,525	870
Retail & Business Banking	381	404	518	1,052	459
– Mortgages	113	129	219	706	173
– EDB - Credit Cards	142	148	154	159	150
– EDB - Other	126	127	145	187	136
Consumer Finance	67	68	69	70	69
Corporate & Commercial Banking	294	303	335	403	342
Corporate Centre	—	—	—	—	—
	%	%	%	%	%
Proportion of assets in Stage 2	7	7	8	13	8
Retail & Business Banking	8	8	9	15	9
– Mortgages	9	9	10	16	9
– EDB - Credit Cards	3	3	3	3	3
– EDB - Other	5	5	7	10	6
Consumer Finance	7	7	7	7	7
Corporate & Commercial Banking	7	7	9	15	8
Corporate Centre	—	—	—	—	—
	%	%	%	%	%
Proportion of assets in Stage 3	1	1	1	1	1
Retail & Business Banking	1	1	1	1	1
– Mortgages	1	1	1	1	1
– EDB - Credit Cards	—	—	—	—	—
– EDB - Other	2	2	2	2	2
Consumer Finance	1	1	1	1	1
Corporate & Commercial Banking	2	2	2	2	2
Corporate Centre	—	—	—	—	—

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	Upside	Base case	Downside 1	Stubborn Inflation	Downside 2	Weighted
2023	£m	£m	£m	£m	£m	£m
Exposure	300,969	300,969	300,969	300,969	300,969	300,969
Retail & Business Banking	204,357	204,357	204,357	204,357	204,357	204,357
– Mortgages	183,568	183,568	183,568	183,568	183,568	183,568
– EDB - Credit Cards	13,116	13,116	13,116	13,116	13,116	13,116
– EDB - Other	7,673	7,673	7,673	7,673	7,673	7,673
Consumer Finance	5,228	5,228	5,228	5,228	5,228	5,228
Corporate & Commercial Banking	27,277	27,277	27,277	27,277	27,277	27,277
Corporate Centre	64,107	64,107	64,107	64,107	64,107	64,107
ECL	834	898	993	1,179	1,412	994
Retail & Business Banking	420	467	538	692	891	544
– Mortgages	143	176	236	365	564	244
– EDB - Credit Cards	132	138	142	150	150	140
– EDB - Other	145	153	160	177	177	160
Consumer Finance	68	69	70	72	72	70
Corporate & Commercial Banking	346	362	385	415	449	380
Corporate Centre	—	—	—	—	—	—
	%	%	%	%	%	%
Proportion of assets in Stage 2	6	6	6	7	12	8
Retail & Business Banking	6	7	7	8	15	9
– Mortgages	7	7	7	8	17	10
– EDB - Credit Cards	2	3	3	3	3	3
– EDB - Other	7	8	8	9	9	8
Consumer Finance	6	6	6	6	6	6
Corporate & Commercial Banking	13	14	14	17	20	13
Corporate Centre	—	—	—	—	—	—
	%	%	%	%	%	%
Proportion of assets in Stage 3	1	1	1	1	1	1
Retail & Business Banking	1	1	1	1	1	1
– Mortgages	1	1	1	1	1	1
– EDB - Credit Cards	—	—	—	—	—	—
– EDB - Other	2	2	2	2	2	2
Consumer Finance	—	—	—	—	—	—
Corporate & Commercial Banking	3	3	3	3	3	3
Corporate Centre	—	—	—	—	—	—

2024 compared to 2023

ECL reduced by £124m, driven by deleveraging of the balance sheet and the improved economic outlook resulting in ECL model releases. The ECL on Credit

Cards increased in the year due to the updated SICR rules. The value of JAs decreased in 2024 due to the implementation of new impairment models for

Mortgages and Corporate & Commercial Banking, as well as the releases of the affordability JAs in EDB.

HPI sensitivity

Given the relative size of our residential mortgage portfolio, management considers that changes in HPI assumptions used to calculate the modelled ECL

allowance for residential mortgages would have the most significant impact on the modelled ECL allowance. The table below shows the modelled ECL impact on

the profit before tax of applying an immediate and permanent house price increase/decrease to our unweighted base case scenario, and assumes no changes to

the stage allocation of exposures.

	Increase/decrease in house prices
	+20%	+10%	-10%	-20%
Increase/(decrease) in profit before tax	£m	£m	£m	£m
2024	34	21	(38)	(112)
2023	70	38	(54)	(155)

2024 compared to 2023

The decrease in modelled ECL sensitivity reflects the new Retail Mortgages impairment model we introduced in 2024, which shows different economic

sensitivities, as well as portfolio deleveraging. The impairment model assumes a similar loss for low LTV accounts, given the distribution of LTV in the portfolio,

and increases in the HPI exhibit shows less impact on modelled ECL than decreases in HPI.

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Measuring ECL (audited)

For our mortgages and CCB portfolios, where accounts are not in default at the reporting date, we estimate a quarterly ECL for each exposure and for each

quarter over the forecast period. The lifetime ECL is the sum of the quarterly ECLs over the forecast period, while the 12-month ECL is limited to the first four

quarters. We calculate each quarterly ECL as the discounted value for the relevant forecast month of the product of the following factors:

Factor	Description
Survival rate (SR)	The probability that the exposure has not closed or defaulted since the reporting date.
Probability of default (PD)	The likelihood of a borrower defaulting in the following quarter, assuming it has not closed or defaulted since the reporting date. For each quarter in the forecast period, we estimate the quarterly PD from a range of factors. These include key risk drivers for the exposure, as well as the expected evolution of the account risk with maturity and factors for changing economics. We support this with historical data analysis.
Exposure at default (EAD)	The amount we expect to be owed if a default, or sale in the case of retail mortgages, event occurs. We determine EAD for each quarter of the forecast period by the expected payment profile, which varies by product. For amortising products, we base it on the borrower’s contractual repayments over the forecast period. We adjust this for any expected overpayments on Stage 1 accounts that the borrower may make and for any arrears we expect if the account was to default. For revolving products, or amortising products with an off-balance sheet element, we determine EAD using the balance at default and the contractual exposure limit. We vary these assumptions by product and base them on analysis of recent default data.
Loss given default (LGD)	Our expected loss if a default event were to occur. We express it as a percentage and calculate it based on factors that we have observed to affect the likelihood and/or value of any subsequent write-offs, which vary according to whether the product is secured or unsecured. If the product is secured, we consider collateral values as well as the historical discounts to market/book values due to forced sales type.

We use the original effective interest rate as the discount rate. For accounts in default, we use the EAD as the reporting date balance. We also calculate an LGD

to reflect the default status of the account, considering the current DPD and loan-to-value. PD and SR are not required for accounts in default.

Forecast period

We base the forecast period for amortising facilities on the remaining contract term. For revolving facilities, we base it on the behavioural, rather than contractual,

characteristics of the facility type.

Forward-looking information

Our assessments of a SICR and the calculation of ECL allowances incorporate forward-looking data. We perform historical analysis and identify the key economic

variables that impact credit risk and ECL allowances for each portfolio. These can include house price growth, GDP, unemployment rate and BoE Bank Rate.

Where applicable, we incorporate these economic variables and their associated impacts into our models.

Economic forecasts have the most impact on ECL measurement for residential mortgages and, to a lesser extent, corporate loans. This is due to the long

behavioural lives and large size of these portfolios. Economic forecasts have less impact on ECL for other portfolios due to their shorter lives and smaller size.

Grouping of instruments for losses measured on a collective basis

We measure ECL at the individual financial instrument level. However, where we have used internal capital or similar models as the basis for our ECL models, this

typically results in a large number of relatively small homogenous groups. We typically group instruments where they share risk characteristics using statistical

models and assess them for impairment collectively. We use this approach for all our Retail & Business Banking and Consumer Finance portfolios and SME

customers in Corporate & Commercial Banking.

We calculate separate collective provisions for instruments in Stages 1, 2 and 3 where the instrument is not individually assessed.

For all our portfolios (whether we assess them for impairment individually or collectively) we use four forward-looking economic scenarios.

Governance around ECL impairment allowances (audited)

Our Risk Methodology team developed our ECL models (except for the external models we use, such as OGEM which we described earlier in ‘Our forecasting

approach’), and our Independent Validations team reviews all material models. As model owners, our Risk Provisioning & Forecasting team run the models to

calculate our ECL each month. The models are sensitive to changes in credit conditions and reflect management judgements that give rise to measurement

uncertainty in our ECL, as set out above. The following committees and forums review the provision drivers and ensure that the ECL remains appropriate:

–Model Risk Control Forum (MRCF) reviews and approves new models and model changes. It also reviews the use of OGEM as a reliable model on which

to base our other forecast macroeconomic variables. We use it across all stress testing and planning so it is subject to model risk criteria.

–ALCO reviews and approves the base case used in the economic scenarios we use to calculate forward-looking scenarios.

–CRPF reviews and approves the economic scenarios and probability weights we use to calculate forward-looking scenarios. It also reviews management

judgements and approves ECL impairment allowances.

–Board Audit Committee reviews and challenges the appropriateness of the estimates and judgements made by management.

For more on the governance around specific elements of the ECL impairment allowances, including the frequency of, and thresholds for, reviews, including by

these committees and forums, see the detailed sections above.

How we assess the performance of our ECL estimation process

We assess the reasonableness of our ECL provisions and the results of our Staging analysis using a range of methods. These include:

–Benchmarking: we compare our coverage levels with our peers

–Stand-back testing: we monitor the level of our coverage against actual write-offs

–Back-testing: we compare key drivers periodically as part of model monitoring practices

–Monitoring trends: we track ECL and Staged assets over time and against our internal budgets and forecasts, with triggers set accordingly.

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SANTANDER UK GROUP LEVEL – CREDIT RISK REVIEW

The credit risk balances  in these credit risk review sections include interest we have charged to the customer’s account, but not accrued interest that we have not

charged to the account yet, unless otherwise stated.

Our maximum and net exposure to credit risk (audited)

The tables below show the main differences between our maximum and net exposure to credit risk. They show the effects of collateral, netting, and risk transfer to

mitigate our exposure. The tables only show the financial assets that credit risk affects and to which the impairment requirements in IFRS 9 are applied.

For balance sheet assets, the maximum exposure to credit risk is the carrying value after impairment loss allowances. Off-balance sheet exposures are mortgage

offers, guarantees, formal standby facilities, credit lines and other commitments. For off-balance sheet guarantees, the maximum exposure is the maximum

amount that we would have to pay if the guarantees were called on. For formal standby facilities, credit lines and other commitments that are irrevocable over the

life of the facility, the maximum exposure is the total amount of the commitment.

	Maximum exposure
	Balance sheet asset			Off-balance sheet			Collateral(1)
	Gross amounts	Loss allowance	Net amounts	Gross amounts	Loss allowance	Net amounts	Cash	Non-cash	Netting(2)	Net exposure
2024	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn
Cash and balances at central banks	33.1	—	33.1	—	—	—	—	—	—	33.1
Financial assets at amortised cost:
–Loans and advances to customers:⁽³⁾
–Residential Mortgages(4)	168.6	(0.2)	168.4	10.8	—	10.8	—	(171.4)	—	7.8
–Corporate loans	18.7	(0.3)	18.4	7.8	—	7.8	—	(14.9)	—	11.3
–Finance leases	4.2	(0.1)	4.1	—	—	—	—	—	—	4.1
–Accrued interest and other adjustments	0.8	—	0.8	0.4	—	0.4	—	—	—	1.2
–Other unsecured loans	6.6	(0.2)	6.4	14.2	(0.1)	14.1	—	—	—	20.5
–Amounts due from fellow Banco Santander group subsidiaries and JVs	4.8	—	4.8	—	—	—	—	—	—	4.8
Total loans and advances to customers	203.7	(0.8)	202.9	33.2	(0.1)	33.1	—	(186.3)	—	49.7
–Loans and advances to banks	1.1	—	1.1	0.5	—	0.5	—	—	—	1.6
–Reverse repurchase agreements – non trading	10.3	—	10.3	2.0	—	2.0	—	(10.3)	(0.1)	1.9
–Other financial assets at amortised cost	3.4	—	3.4	—	—	—	—	—	—	3.4
Total financial assets at amortised cost	218.5	(0.8)	217.7	35.7	(0.1)	35.6	—	(196.6)	(0.1)	56.6
Financial assets at fair value at FVOCI:
–Loans and advances to customers	—	—	—	—	—	—	—	—	—	—
–Debt securities	9.0	—	9.0	—	—	—	—	—	—	9.0
Total financial assets at FVOCI	9.0	—	9.0	—	—	—	—	—	—	9.0
Total	260.6	(0.8)	259.8	35.7	(0.1)	35.6	—	(196.6)	(0.1)	98.7

2023
Cash and balances at central banks	40.5	—	40.5	—	—	—	—	—	—	40.5
Financial assets at amortised cost:
–Loans and advances to customers:⁽³⁾
–Residential Mortgages	176.5	(0.2)	176.3	8.3	—	8.3	—	(179.1)	—	5.5
–Corporate loans	18.5	(0.3)	18.2	8.9	—	8.9	(0.1)	(15.3)	—	11.7
–Finance leases	4.6	(0.1)	4.5	—	—	—	—	(4.5)	—	—
–Accrued interest and other adjustments	0.9	—	0.9	—	—	—	—	—	—	0.9
–Other unsecured loans	7.1	(0.3)	6.8	13.8	(0.1)	13.7	—	—	—	20.5
–Amounts due from fellow Banco Santander group subsidiaries and JVs	4.5	—	4.5	—	—	—	—	—	—	4.5
Total loans and advances to customers	212.1	(0.9)	211.2	31.0	(0.1)	30.9	(0.1)	(198.9)	—	43.1
–Loans and advances to banks	1.2	—	1.2	0.5	—	0.5	—	—	—	1.7
–Reverse repurchase agreements – non trading	12.5	—	12.5	—	—	—	—	(12.4)	(0.1)	—
–Other financial assets at amortised cost	0.2	—	0.2	—	—	—	—	—	—	0.2
Total financial assets at amortised cost	226.0	(0.9)	225.1	31.5	(0.1)	31.4	(0.1)	(211.3)	(0.1)	45.0
Financial assets at FVOCI:
Loans and advances to customers	—	—	—	—	—	—	—	—	—	—
–Debt securities	8.5	—	8.5	—	—	—	—	—	—	8.5
Total financial assets at FVOCI	8.5	—	8.5	—	—	—	—	—	—	8.5
Total	275.0	(0.9)	274.1	31.5	(0.1)	31.4	(0.1)	(211.3)	(0.1)	94.0

(1)The forms of collateral we take to reduce credit risk include: residential and commercial property; other physical assets, including motor vehicles; liquid securities, including those transferred under reverse

repurchase agreements; cash, including cash used as collateral for derivative transactions; and receivables. Charges on residential property are most of the collateral we take.

(2)We can reduce credit risk exposures by applying netting. We do this mainly for derivative and repurchase transactions with financial institutions. For derivatives and securities finance transactions, we use

standard master netting agreements. For more on this, see ‘Credit risk mitigation’ in the ‘Credit risk - Credit risk management’ section.

(3)Balances include interest we have charged to the customer’s account and accrued interest that we have not charged to the account yet.

(4)The collateral value shown against advances secured on residential property is limited to the balance of each associated individual loan. It does not include the impact of over–collateralisation (where the

collateral has a higher value than the loan balance) and includes collateral we would receive on draw down of certain off–balance sheet commitments.

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The tables below show the main differences between our maximum and net exposure to credit risk on the financial assets that credit risk affects and to which the

impairment requirements in IFRS 9 are not applied.

	Balance sheet asset gross amount	Collateral(1)		Netting(2)	Net exposure
		Cash	Non-cash
2024	£bn	£bn	£bn	£bn	£bn
Financial assets at FVTPL:
–Derivative financial instruments	1.3	(0.7)	—	(0.4)	0.2
–Other financial assets at FVTPL	0.4	—	—	—	0.4
Total	1.7	(0.7)	—	(0.4)	0.6
2023
Financial assets at FVTPL:
–Derivative financial instruments	1.5	(0.8)	—	(0.5)	0.2
–Other financial assets at FVTPL	0.6	—	—	—	0.6
Total	2.1	(0.8)	—	(0.5)	0.8

(1)The forms of collateral we take to reduce credit risk include: liquid securities, including those transferred under reverse repurchase agreements; cash, including cash used as collateral for derivative transactions;

and receivables.

(2)We can reduce credit risk exposures by applying netting. We do this mainly for derivative and repurchase transactions with financial institutions. For derivatives and securities finance transactions, we use

standard master netting agreements. They allow us to set off our credit risk exposure to a counterparty against our obligations to the counterparty in relation to transactions under the master netting agreement in

the event of default. This gives us a lower net credit exposure. They may also reduce settlement exposure. For more on this, see ‘Credit risk mitigation’ in the ‘Credit risk – Credit risk management’ section.

Single credit rating scale

In the table below, we have used a single rating scale to ensure we are consistent across all our credit risk portfolios in how we report the risk of default. It has

eight grades for non–defaulted exposures, from 9 (lowest risk) to 2 (highest risk). We define each grade by an upper and lower PD value and we scale the grades

so that the default risk increases by a factor of ten every time the grade number drops by two steps. For example, grade 9 has an average PD of 0.010%, and

grade 7 has an average PD of 0.100%. We give defaulted exposures a grade 1 and a PD value of 100%. In the final column of the table, we show the

approximate equivalent credit rating grade used by Standard & Poor’s Ratings Services (S&P).

Santander UK risk grade	PD range
	Mid	Lower	Upper	S&P equivalent
	%	%	%
9	0.010	0.000	0.021	AAA to AA+
8	0.032	0.021	0.066	AA to AA-
7	0.100	0.066	0.208	A+ to BBB
6	0.316	0.208	0.658	BBB- to BB
5	1.000	0.658	2.081	BB-
4	3.162	2.081	6.581	B+ to B
3	10.000	6.581	20.811	B-
2	31.623	20.811	99.999	CCC to C
1 (Default)	100.000	100.000	100.000	D

The PDs in the table above are based on Economic Capital (EC) PD mappings, calculated based on the average PD over an economic cycle. This is different to

the IFRS 9 PDs which are calculated at a point in time using forward looking economic scenarios. Where possible, the EC PD values are aligned to the regulatory

capital models; however, any regulatory floors are removed and PDs are defined at every possible rating rather than grouped into rating buckets.

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Rating distribution (audited)

The tables below show the credit rating of our financial assets to which the impairment requirements in IFRS 9 apply. JAs are incorporated in the balances. For

more on the credit rating profiles of key portfolios, see the credit risk review section for each business segment.

	Santander UK risk grade								Loss allowance	Total
	9	8	7	6	5	4	3 to 1	Other(1)(2)
2024	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn
Exposures - On balance sheet
Cash and balances at central banks	33.1	—	—	—	—	—	—	—	—	33.1
–Stage 1	33.1	—	—	—	—	—	—	—	—	33.1
Financial assets at amortised cost:
–Loans and advances to customers(2)	5.8	31.7	82.8	46.8	15.7	6.9	5.4	8.6	(0.8)	202.9
–Stage 1	5.7	31.0	79.0	40.8	12.5	2.9	0.6	8.4	(0.1)	180.8
–Stage 2	0.1	0.7	3.8	6.0	3.2	3.9	2.4	0.1	(0.3)	19.9
–Stage 3	—	—	—	—	—	0.1	2.4	0.1	(0.4)	2.2
Of which mortgages:	5.2	30.3	77.4	41.2	6.6	3.4	3.1	1.4	(0.2)	168.4
–Stage 1	5.1	29.7	73.7	35.4	4.1	0.5	—	1.4	—	149.9
–Stage 2	0.1	0.6	3.7	5.8	2.5	2.9	1.3	—	(0.1)	16.8
–Stage 3	—	—	—	—	—	—	1.8	—	(0.1)	1.7
–Loans and advances to banks	—	—	—	—	—	—	—	1.1	—	1.1
–Stage 1	—	—	—	—	—	—	—	1.1	—	1.1
–Reverse repo agreements – non trading	5.3	1.5	2.6	0.7	0.2	—	—	—	—	10.3
–Stage 1	5.3	1.5	2.6	0.7	0.2	—	—	—	—	10.3
–Other financial assets at amortised cost	3.4	—	—	—	—	—	—	—	—	3.4
–Stage 1	3.4	—	—	—	—	—	—	—	—	3.4
Total financial assets at amortised cost	14.5	33.2	85.4	47.5	15.9	6.9	5.4	9.7	(0.8)	217.7
Financial assets at FVOCI:	3.6	5.0	0.4	—	—	—	—	—	—	9.0
–Stage 1	3.6	5.0	0.4	—	—	—	—	—	—	9.0
Total on balance sheet	51.2	38.2	85.8	47.5	15.9	6.9	5.4	9.7	(0.8)	259.8
Total off–balance sheet	6.9	8.9	9.0	4.2	1.9	0.8	0.7	3.3	(0.1)	35.6
–Stage 1	6.9	8.8	8.8	4.0	1.7	0.5	0.4	3.3	—	34.4
–Stage 2	—	0.1	0.2	0.2	0.2	0.3	0.2	—	(0.1)	1.1
–Stage 3	—	—	—	—	—	—	0.1	—	—	0.1
Total exposures	58.1	47.1	94.8	51.7	17.8	7.7	6.1	13.0	(0.9)	295.4

	Santander UK risk grade								Total	Coverage Ratio
	9	8	7	6	5	4	3 to 1	Other(1)(2)
2024	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn	%
ECL – On balance sheet
Cash and balances at central banks	—	—	—	—	—	—	—	—	—	—
–Stage 1	—	—	—	—	—	—	—	—	—	—
Financial assets at amortised cost:
–Loans and advances to customers(2)	—	—	—	—	0.2	0.1	0.5	—	0.8	0.4
–Stage 1	—	—	—	—	0.1	—	—	—	0.1	0.1
–Stage 2	—	—	—	—	0.1	0.1	0.1	—	0.3	1.5
–Stage 3	—	—	—	—	—	—	0.4	—	0.4	18.2
Of which mortgages:	—	—	—	—	—	0.1	0.1	—	0.2	0.1
–Stage 1	—	—	—	—	—	—	—	—	—	—
–Stage 2	—	—	—	—	—	0.1	—	—	0.1	0.6
–Stage 3	—	—	—	—	—	—	0.1	—	0.1	5.9
–Loans and advances to banks	—	—	—	—	—	—	—	—	—	—
–Stage 1	—	—	—	—	—	—	—	—	—	—
–Reverse repo agreements – non trading	—	—	—	—	—	—	—	—	—	—
–Stage 1	—	—	—	—	—	—	—	—	—	—
–Other financial assets at amortised cost	—	—	—	—	—	—	—	—	—	—
–Stage 1	—	—	—	—	—	—	—	—	—	—
Total financial assets at amortised cost	—	—	—	—	0.2	0.1	0.5	—	0.8	0.4
Financial assets at FVOCI:	—	—	—	—	—	—	—	—	—	—
–Stage 1	—	—	—	—	—	—	—	—	—	—
Total on balance sheet	—	—	—	—	0.2	0.1	0.5	—	0.8	0.3
Total off–balance sheet	—	—	—	—	—	0.1	—	—	0.1	0.3
–Stage 1	—	—	—	—	—	—	—	—	—	—
–Stage 2	—	—	—	—	—	0.1	—	—	0.1	9.1
–Stage 3	—	—	—	—	—	—	—	—	—	—
Total ECL	—	—	—	—	0.2	0.2	0.5	—	0.9	0.3

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	Santander UK risk grade								Loss allowance
	9	8	7	6	5	4	3 to 1	Other(1)(2)		Total
2023	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn
Exposures - On balance sheet
Cash and balances at central banks	40.5	—	—	—	—	—	—	—	—	40.5
–Stage 1	40.5	—	—	—	—	—	—	—	—	40.5
Financial assets at amortised cost:
–Loans and advances to customers(2)	5.3	34.7	85.6	49.3	14.7	8.4	5.5	8.6	(0.9)	211.2
–Stage 1	5.3	33.6	81.5	43.9	10.4	2.8	0.4	8.3	(0.1)	186.1
–Stage 2	—	1.1	4.1	5.4	4.3	5.5	2.4	0.1	(0.4)	22.5
–Stage 3	—	—	—	—	—	0.1	2.7	0.2	(0.4)	2.6
Of which mortgages:	5.2	33.1	81.0	42.0	6.7	3.8	3.4	1.3	(0.2)	176.3
–Stage 1	5.2	32.0	76.9	36.7	3.6	0.5	0.1	1.3	—	156.3
–Stage 2	—	1.1	4.1	5.3	3.1	3.2	1.4	—	(0.1)	18.1
–Stage 3	—	—	—	—	—	0.1	1.9	—	(0.1)	1.9
–Loans and advances to banks	0.1	0.2	—	—	—	—	—	0.9	—	1.2
–Stage 1	0.1	0.2	—	—	—	—	—	0.9	—	1.2
–Reverse repo agreements – non trading	9.6	1.6	0.7	0.6	—	—	—	—	—	12.5
–Stage 1	9.6	1.6	0.7	0.6	—	—	—	—	—	12.5
–Other financial assets at amortised cost	0.2	—	—	—	—	—	—	—	—	0.2
–Stage 1	0.2	—	—	—	—	—	—	—	—	0.2
Total financial assets at amortised cost	15.2	36.5	86.3	49.9	14.7	8.4	5.5	9.5	(0.9)	225.1
Financial assets at FVOCI:	4.2	3.9	0.2	—	—	—	—	0.2	—	8.5
–Stage 1	4.2	3.9	0.2	—	—	—	—	0.2	—	8.5
Total on balance sheet	59.9	40.4	86.5	49.9	14.7	8.4	5.5	9.7	(0.9)	274.1
Total off–balance sheet	—	6.3	7.0	6.8	4.6	1.7	0.4	4.7	(0.1)	31.4
–Stage 1	—	6.3	6.9	6.7	4.4	1.2	0.1	4.7	—	30.3
–Stage 2	—	—	0.1	0.1	0.2	0.5	0.2	—	(0.1)	1.0
–Stage 3	—	—	—	—	—	—	0.1	—	—	0.1
Total exposures	59.9	46.7	93.5	56.7	19.3	10.1	5.9	14.4	(1.0)	305.5

	Santander UK risk grade									Coverage Ratio
	9	8	7	6	5	4	3 to 1	Other(1)(2)	Total
2023	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn	%
ECL - On balance sheet
Cash and balances at central banks	—	—	—	—	—	—	—	—	—	—
–Stage 1	—	—	—	—	—	—	—	—	—	—
Financial assets at amortised cost:
–Loans and advances to customers(2)	—	—	—	—	0.2	0.2	0.5	—	0.9	0.4
–Stage 1	—	—	—	—	0.1	—	—	—	0.1	0.1
–Stage 2	—	—	—	—	0.1	0.2	0.1	—	0.4	1.7
–Stage 3	—	—	—	—	—	—	0.4	—	0.4	13.3
Of which mortgages:	—	—	—	—	—	0.1	0.1	—	0.2	0.1
–Stage 1	—	—	—	—	—	—	—	—	—	—
–Stage 2	—	—	—	—	—	0.1	—	—	0.1	0.5
–Stage 3	—	—	—	—	—	—	0.1	—	0.1	5.0
–Loans and advances to banks	—	—	—	—	—	—	—	—	—	—
–Stage 1	—	—	—	—	—	—	—	—	—	—
–Reverse repo agreements – non trading	—	—	—	—	—	—	—	—	—	—
–Stage 1	—	—	—	—	—	—	—	—	—	—
–Other financial assets at amortised cost	—	—	—	—	—	—	—	—	—	—
–Stage 1	—	—	—	—	—	—	—	—	—	—
Total financial assets at amortised cost	—	—	—	—	0.2	0.2	0.5	—	0.9	0.4
Financial assets at FVOCI:	—	—	—	—	—	—	—	—	—	—
–Stage 1	—	—	—	—	—	—	—	—	—	—
Total on balance sheet	—	—	—	—	0.2	0.2	0.5	—	0.9	0.3
Total off–balance sheet	—	—	—	—	—	0.1	—	—	0.1	0.3
–Stage 1	—	—	—	—	—	—	—	—	—	—
–Stage 2	—	—	—	—	—	0.1	—	—	0.1	9.1
–Stage 3	—	—	—	—	—	—	—	—	—	—
Total ECL	—	—	—	—	0.2	0.3	0.5	—	1.0	0.3

(1)Includes Joint Ventures and Business Banking (including BBLs balances) as well as the Crown Dependencies portfolio. We use scorecards for these items, rather than rating models. .

(2)Includes interest we have charged to the customer’s account and accrued interest we have not charged to the account yet.

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Credit performance (audited)

	Customer Loans							12 month Gross write-offs	Loan Loss Allowance s
	Total	Stage 1		Stage 2		Stage 3(2)
2024	£bn	£bn	%	£bn	%	£bn	%	£m	£m
Retail & Business Banking	173.8	154.0	88.6	17.8	10.2	2.0	1.16	156	422
– Mortgages	167.2	148.5	88.8	16.9	10.1	1.8	1.07	9	173
– EDB - Credit Cards	2.8	2.3	81.9	0.5	16.4	—	2.75	51	135
– EDB - Other(1)	3.8	3.2	84.8	0.4	11.5	0.2	3.84	96	114
Consumer Finance	4.8	4.5	92.2	0.3	7.0	—	0.77	25	69
Corporate & Commercial Banking	18.0	15.2	84.8	2.1	11.6	0.7	3.96	49	294
Corporate Centre	1.3	1.3	99.6	—	0.1	—	0.22	—	—
Total Drawn	197.9	175.0	88.4	20.2	10.2	2.7	1.40	230	785
Retail & Business Banking	25.0	24.3		0.7		—		—	37
– Mortgages	10.8	10.5		0.3		—		—	—
– EDB - Credit Cards	10.9	10.7		0.2		—		—	15
– EDB - Other(1)	3.3	3.1		0.2		—		—	22
Consumer Finance	—	—		—		—		—	—
Corporate & Commercial Banking	8.3	7.7		0.5		0.1		—	48
Corporate Centre(3)	2.4	2.4		—		—		—	—
Total Undrawn	35.7	34.4		1.2		0.1		—	85
Total	233.6	209.4		21.4		2.8		230	870

2023	£bn	£bn	%	£bn	%	£bn	%	£m	£m
Retail & Business Banking	182.3	160.8	88.3	19.2	10.5	2.3	1.27	141	501
– Mortgages	175.2	155.0	88.5	18.2	10.4	2.0	1.16	11	241
– EDB - Credit Cards	2.7	2.3	85.4	0.3	12.9	0.1	2.95	46	130
– EDB - Other(1)	4.4	3.5	80.9	0.7	14.8	0.2	4.38	84	130
Consumer Finance	5.2	4.9	93.1	0.3	6.3	—	0.53	23	70
Corporate & Commercial Banking	17.9	13.8	77.1	3.4	19.1	0.7	4.14	68	345
Corporate Centre	1.3	1.3	99.8	—	0.1	—	0.10	—	—
Total Drawn	206.7	180.8	87.5	22.9	11.1	3.0	1.49	232	916
Retail & Business Banking	22.0	21.5		0.5		—		—	43
– Mortgages	8.3	8.2		0.1		—		—	3
– EDB - Credit Cards	10.4	10.3		0.1		—		—	10
– EDB - Other(1)	3.3	3.0		0.3		—		—	30
Consumer Finance	—	—		—		—		—	—
Corporate & Commercial Banking	9.4	8.8		0.5		0.1		—	35
Corporate Centre	—	—		—		—		—	—
Total Undrawn	31.4	30.3		1.0		0.1		—	78
Total	238.1	211.1		23.9		3.1		232	994

(1)EDB - Other includes £1.2bn of BBLS lending (£1.1bn is BBLS with 100% Government guarantee), £2.1bn unsecured personal loans and £0.5bn overdrafts.(2023: £1.8bn of BBLS lending £1.7bn is BBLS with

100% Government Guarantee), £2.1bn unsecured personal loans and £0.5bn overdrafts.

(2)Stage 3 ratio is the sum of Stage 3 drawn and Stage 3 undrawn assets divided by the sum of total drawn assets and Stage 3 undrawn assets.

(3)    Includes £2.0bn of Reverse repurchasing agreements - Non-trading

Arrears over 90 days past due

	31 December 2024	31 December 2023
	%	%
Mortgages	0.80	0.80
Credit Cards	0.56	0.51
UPL	0.88	0.73
Overdrafts	3.05	2.43
Business Banking	3.89	4.15
Consumer Finance	0.53	0.43
Corporate & Commercial Banking	1.04	1.04

2024 compared to 2023

Our underlying asset quality remained good, supported by the sale of low return mortgage assets. The improvement in the economic outlook helped drive the

reduction in Stage 2 and 3 assets. While we saw loans in Stage 2 and 3 decrease, we saw an increase in early arrears in 2024 as they returned to more

normalised levels. The decrease in CCB Stage 2 assets was driven by an overall improvement in asset quality.

For more on the credit performance of our key portfolios by business segment, see the credit risk review section for each business segment.

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Credit quality (audited)

Total on-balance sheet exposures at 31 December 2024 comprised £197.9bn of customer loans, loans and advances to banks of £1.1 bn, £13.7bn of sovereign

assets measured at amortised cost, £9.0bn of assets measured at FVOCI, and £33.1bn of cash and balances at central banks.

	Stage 1	Stage 2	Stage 3	Total
2024	£m	£m	£m	£m
Exposures
On-balance sheet
Retail & Business Banking	154,000	17,773	1,966	173,739
–Mortgages	148,560	16,890	1,778	167,228
–EDB - Credit Cards	2,271	454	49	2,774
–EDB - Other	3,169	429	139	3,737
Consumer Finance	4,389	334	36	4,759
Corporate & Commercial Banking	15,280	2,098	651	18,029
Corporate Centre	58,282	2	2	58,286
Total on-balance sheet	231,951	20,207	2,655	254,813
Off–balance sheet
Retail & Business Banking(1)	24,211	745	52	25,008
–Mortgages(1)	10,510	285	18	10,813
–EDB - Credit Cards	10,577	263	28	10,868
–EDB - Other	3,124	197	6	3,327
Consumer Finance	—	—	—	—
Corporate & Commercial Banking	7,743	470	65	8,278
Corporate Centre	2,385	—	—	2,385
Total off–balance sheet(2)	34,339	1,215	117	35,671
Total exposures	266,290	21,422	2,772	290,484
ECL
On-balance sheet
Retail & Business Banking	52	223	147	422
–Mortgages	10	84	79	173
–EDB - Credit Cards	18	85	32	135
–EDB - Other	24	54	36	114
Consumer Finance	16	27	26	69
Corporate & Commercial Banking	55	71	168	294
Corporate Centre	—	—	—	—
Total on-balance sheet	123	321	341	785
Off–balance sheet
Retail & Business Banking	12	24	1	37
–Mortgages	—	—	—	—
–EDB - Credit Cards	4	11	—	15
–EDB - Other	8	13	1	22
Consumer Finance	—	—	—	—
Corporate & Commercial Banking	18	14	16	48
Corporate Centre	—	—	—	—
Total off–balance sheet	30	38	17	85
Total ECL	153	359	358	870
Coverage ratio(3)	%	%	%	%
On-balance sheet
Retail & Business Banking	—	1.3	7.4	0.2
–Mortgages	—	0.5	4.4	0.1
–EDB - Credit Cards	0.8	18.7	65.6	4.8
–EDB - Other	0.8	12.5	25.9	3.1
Consumer Finance	0.4	8.2	71.2	1.4
Corporate & Commercial Banking	0.4	3.4	25.9	1.6
Corporate Centre	—	1.6	4.6	—
Total on-balance sheet	0.1	1.6	12.8	0.3
Off–balance sheet
Retail & Business Banking	—	3.2	2.6	0.1
–Mortgages	—	—	—	—
–EDB - Credit Cards	—	4.1	1.6	0.1
–EDB - Other	0.2	6.8	16.8	0.6
Consumer Finance	—	—	—	—
Corporate & Commercial Banking	0.2	3.0	24.2	0.6
Corporate Centre	—	—	—	—
Total off-balance sheet	0.1	3.1	14.6	0.2
Total coverage	0.1	1.7	12.9	0.3

(1)Off-balance sheet exposures include £6.1bn of residential mortgage offers in the pipeline.

(2)Off-balance sheet amounts consist of contingent liabilities and commitments. For more, see Note 30 to the Consolidated Financial Statements.

(3)ECL as a percentage of the related exposure.

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Total on-balance sheet exposures at 31 December 2023 comprised £206.7bn of customer loans, loans and advances to banks of £1.2bn, £12.6bn of sovereign

assets measured at amortised cost, £8.5bn of assets measured at FVOCI, and £40.5bn of cash and balances at central banks.

	Stage 1	Stage 2	Stage 3	Total
2023	£m	£m	£m	£m
Exposures
On-balance sheet
Retail & Business Banking	160,870	19,150	2,247	182,267
–Mortgages	155,063	18,160	2,016	175,239
–EDB - Credit Cards	2,283	345	46	2,674
–EDB - Other	3,524	645	185	4,354
Consumer Finance	4,870	330	28	5,228
Corporate & Commercial Banking	13,822	3,418	699	17,939
Corporate Centre	64,094	1	1	64,096
Total on-balance sheet	243,656	22,899	2,975	269,530
Off–balance sheet
Retail & Business Banking(1)	21,598	433	59	22,090
–Mortgages(1)	8,189	120	20	8,329
–EDB - Credit Cards	10,295	114	33	10,442
–EDB - Other	3,114	199	6	3,319
Consumer Finance	—	—	—	—
Corporate & Commercial Banking	8,745	547	46	9,338
Corporate Centre	11	—	—	11
Total off–balance sheet(2)	30,354	980	105	31,439
Total exposures	274,010	23,879	3,080	300,969
ECL
On-balance sheet
Retail & Business Banking	57	274	170	501
–Mortgages	22	110	109	241
–EDB - Credit Cards	17	87	26	130
–EDB - Other	18	77	35	130
Consumer Finance	21	30	19	70
Corporate & Commercial Banking	64	118	163	345
Corporate Centre	—	—	—	—
Total on-balance sheet	142	422	352	916
Off–balance sheet
Retail & Business Banking	16	26	1	43
–Mortgages	2	1	—	3
–EDB - Credit Cards	4	6	—	10
–EDB - Other	10	19	1	30
Consumer Finance	—	—	—	—
Corporate & Commercial Banking	12	14	9	35
Corporate Centre	—	—	—	—
Total off–balance sheet	28	40	10	78
Total ECL	170	462	362	994
Coverage ratio(3)	%	%	%	%
On-balance sheet
Retail & Business Banking	—	1.4	7.5	0.3
–Mortgages	—	0.6	5.4	0.1
–EDB - Credit Cards	0.8	25.2	57.7	4.9
–EDB - Other	0.5	11.9	18.8	3.0
Consumer Finance	0.4	9.0	68.5	1.3
Corporate & Commercial Banking	0.5	3.5	23.4	1.9
Corporate Centre	—	—	10.0	—
Total on-balance sheet	0.1	1.8	11.8	0.3
Off–balance sheet
Retail & Business Banking	0.1	6.0	2.8	0.2
–Mortgages	—	1.1	0.5	—
–EDB - Credit Cards	—	5.0	1.9	0.1
–EDB - Other	0.3	9.6	18.0	0.9
Consumer Finance	—	—	—	—
Corporate & Commercial Banking	0.1	2.5	20.2	0.4
Corporate Centre	—	—	—	—
Total off-balance sheet	0.1	4.1	10.4	0.2
Total coverage	0.1	1.9	11.8	0.3

(1)Off-balance sheet exposures include £3.3bn of residential mortgage offers in the pipeline.

(2)Off-balance sheet amounts consist of contingent liabilities and commitments. For more, see Note 30 to the Consolidated Financial Statements.

(3)ECL as a percentage of the related exposure.

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2024 compared to 2023

The ECL provision at 31 December 2024 decreased by £124m to £870m (2023: £994m) with a change in our economic assumptions and weights, including the

removal of our Stubborn Inflation scenario and the re-weighting of the remaining scenarios in 2024. Following the fall in inflation in 2024, we also released

judgemental adjustments which were originally made to reflect cost of living pressures on customers.

Gross write-off utilisation of £230m (2023: £232m) largely driven by unsecured retail.

Key movements in exposures and ECL allowance in the year by Stage were:

– Stage 1 exposures reduced, mainly due to lower Mortgage new business. Stage 1 ECL allowance also reduced due to a reduction in Mortgage assets, as well

as the economic assumption and weights updates.

–Stage 2 exposures reduced, driven by Corporate and Commercial Banking assets moving from Stage 1 to Stage 2 following the implementation of new

impairment models and in Mortgages due to the unwinding of the refinance JAs moving customers back into Stage 1. Stage 2 ECL allowance reduced mainly

due to the economic assumption and weights updates in the year.

–Stage 3 exposures and ECL allowance reduced in 2024 mainly in Mortgages due to the improved economic outlook and sale of low return mortgage assets in

Q424.

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Stage 2 analysis (audited)

The following table analyses our Stage 2 exposures and ECL allowance by the reason the exposure is classified as Stage 2.

2024		Backstop	Quantitative		Qualitative		JAs	Total
		30 DPD	PD deterioration	PD threshold	Forbearance(1)	Other(2)	Mortgage Refinancing
Retail & Business Banking - Mortgages	Exposure £m	509	8,946	353	300	4,978	1,804	16,890
	ECL £m	7	49	3	3	11	11	84
	Coverage %	1.4	0.5	0.9	1.0	0.2	0.6	0.5
Retail & Business Banking EDB - Credit Cards	Exposure £m	9	392	19	5	29	—	454
	ECL £m	4	67	7	1	6	—	85
	Coverage %	46.2	17.0	38.0	14.7	20.6	—	18.7
Retail & Business Banking EDB - Other	Exposure £m	79	209	109	5	27	—	429
	ECL £m	9	18	19	1	7	—	54
	Coverage %	11.3	8.7	16.8	16.0	25.9	—	12.6
Consumer Finance	Exposure £m	30	155	—	—	149	—	334
	ECL £m	10	11	—	—	6	—	27
	Coverage %	33.7	7.0	—	—	3.4	—	8.1
Corporate & Commercial Banking	Exposure £m	54	930	61	57	996	—	2,098
	ECL £m	1	38	7	1	24	—	71
	Coverage %	2.5	4.1	10.9	2.4	2.3	—	3.4
Corporate Centre	Exposure £m	2	—	—	—	—	—	2
	ECL £m	—	—	—	—	—	—	—
	Coverage %	—	—	—	—	—	—	—
Total Drawn	Exposure £m	683	10,632	542	367	6,179	1,804	20,207
	ECL £m	31	183	36	6	54	11	321
	Coverage %	4.6	1.7	6.5	1.6	0.8	0.3	1.6
Undrawn	ECL £m	1	23	6	2	6	—	38
Total Reported	Exposure £m	709	11,295	608	436	6,570	1,804	21,422
	ECL £m	32	206	42	8	60	11	359

2023		Backstop	Quantitative	Qualitative		JAs				Total
		30 DPD	PD deterioration	Forbearance(1 )	Other	Secured affordability	Unsecured affordability	Mortgage Refinancing	High risk corporate
Retail & Business Banking - Mortgages	Exposure £m	560	5,877	516	549	2,889	—	7,769	—	18,160
	ECL £m	12	65	2	3	9	—	19	—	110
	Coverage %	2.1	1.1	0.3	0.7	0.3	—	0.2	—	0.6
Retail & Business Banking EDB - Credit Cards	Exposure £m	9	256	—	17	—	63	—	—	345
	ECL £m	4	63	—	5	—	15	—	—	87
	Coverage %	47.1	24.9	27.7	24.5	—	23.7	—	—	25.2
Retail & Business Banking EDB - Other	Exposure £m	169	288	—	19	—	169	—	—	645
	ECL £m	18	36	—	3	—	20	—	—	77
	Coverage %	10.8	12.3	—	16.2	—	11.7	—	—	11.9
Consumer Finance	Exposure £m	25	115	—	126	64	—	—	—	330
	ECL £m	11	10	—	5	4	—	—	—	30
	Coverage %	43.4	8.7	—	4.0	6.3	—	—	—	9.0
Corporate & Commercial Banking	Exposure £m	93	1,809	85	533	—	—	—	898	3,418
	ECL £m	2	75	2	17	—	—	—	22	118
	Coverage %	2.4	4.1	2.5	3.2	—	—	—	2.5	3.5
Corporate Centre	Exposure £m	1	—	—	—	—	—	—	—	1
	ECL £m	—	—	—	—	—	—	—	—	—
	Coverage %	—	—	—	—	—	—	—	—	—
Total Drawn	Exposure £m	857	8,345	601	1,244	2,953	232	7,769	898	22,899
	ECL £m	47	249	4	33	13	35	19	22	422
	Coverage %	5.5	3.0	0.7	2.7	0.4	15.0	0.2	2.5	1.8
Undrawn	ECL £m	3	28	—	4	—	3	—	2	40
Total Reported	Exposure £m	893	9,160	601	1,436	2,889	233	7,769	898	23,879
	ECL £m	50	277	4	37	13	38	19	24	462

(1)Where the values of ECL and/or exposures are not £nil, but round to £nil when presented in £millions, the coverage ratio is still presented in the table.

(2)Mainly consists of Qualitative triggers for Mortgages, over-indebted customers c£2.5bn and Interest-only accounts 24 months pre-maturity c£1.3bn, and for CCB customers operating in a high-risk sector.

Where balances satisfy more than one of the criteria above for determining a SICR, we have assigned the corresponding gross carrying amount and ECL

allowance in order of the categories presented.

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The following table analyses our Stage 2 and Stage 3 exposures and the related ECL allowances by whether or not they are in a cure period at the balance sheet

date:

	2024			2023
	Exposure	ECL	Coverage	Exposure	ECL	Coverage
	£m	£m	%	£m	£m	%
Stage 2
Not in cure period	17,395	306	1.8	12,682	360	2.8
In cure period (for transfer to Stage 1)	4,027	53	1.3	11,197	102	0.9
	21,422	359	1.7	23,879	462	1.9
Stage 3
Not in cure period	2,633	352	13.3	2,712	342	12.6
In cure period (for transfer to Stage 2)	139	6	4.3	368	20	5.4
	2,772	358	12.9	3,080	362	11.8

2024 compared to 2023

Stage 2 accounts in a cure period decreased by £7.2bn, and those not in a cure period increased by £4.7bn, primarily driven by Mortgages due to the

implementation of the SICR updates and the update to the refinance JA in 2024.

Stage 3 exposures and ECLs in a cure period decreased primarily driven by the updates in definition of default relating to CCB forbearance.

Reconciliation of exposures, loss allowance and net carrying amounts (audited)

The table below shows the relationships between disclosures in this Credit risk review section which refer to drawn exposures and the associated ECL allowance,

and the total assets as presented in the Consolidated Balance Sheet. The Credit risk review disclosures exclude Joint ventures, as they carry low credit risk and

therefore have an immaterial ECL, and Other items, mainly accrued interest that we have not yet charged to the customer's account, and cash collateral.

	On-balance sheet			Off-balance sheet
	Exposures	Loss allowance	Net carrying amount	Exposures	Loss allowance
2024	£m	£m	£m	£m	£m
Retail & Business Banking	173,739	422	173,317	25,008	37
–Mortgages(1)	167,228	173	167,055	10,813	—
–EDB - Credit Cards(2)	2,774	135	2,639	10,868	15
–EDB - Other	3,737	114	3,623	3,327	22
Consumer Finance	4,759	69	4,690	—	—
Corporate & Commercial Banking	18,029	294	17,735	8,278	48
Corporate Centre	58,286	—	58,286	2,385	—
Total exposures presented in Credit Quality tables	254,813	785	254,028	35,671	85
Joint ventures			4,813
Other items			1,042
Adjusted net carrying amount			259,883
Assets classified at FVTPL			1,685
Non-financial assets(2)			5,508
Total assets per the Consolidated Balance Sheet			267,076
2023
Retail & Business Banking	182,267	501	181,766	22,090	43
–Mortgages(1)	175,239	241	174,998	8,329	3
–EDB - Credit Cards(2)	2,674	130	2,544	10,442	10
–EDB - Other	4,354	130	4,224	3,319	30
Consumer Finance	5,228	70	5,158	—	—
Corporate & Commercial Banking	17,939	345	17,594	9,338	35
Corporate Centre	64,096	—	64,096	11	—
Total exposures presented in Credit Quality tables	269,530	916	268,614	31,439	78
Joint ventures			4,488
Other items			960
Adjusted net carrying amount			274,062
Assets classified at FVTPL			2,074
Non-financial assets(2)			5,947
Total assets per the Consolidated Balance Sheet			282,083

(1)Off-balance sheet exposures include offers in the pipeline and undrawn flexible mortgage products.

(2)Off-balance sheet exposures include credit cards.

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Movement in total exposures and the corresponding ECL (audited)

The following table shows changes in total on and off-balance sheet exposures, subject to ECL assessment, and the corresponding ECL, in the period. The table

presents total gross carrying amounts and ECLs at a Santander UK group level. We present segmental views in the sections below.

	Stage 1		Stage 2		Stage 3		Total
	Exposures(1)	ECL	Exposures(1)	ECL	Exposures(1)	ECL	Exposures(1)	ECL
	£m	£m	£m	£m	£m	£m	£m	£m
At 1 January 2024	274,010	170	23,879	462	3,080	362	300,969	994
Transfers from Stage 1 to Stage 2(3)	(12,030)	(11)	12,030	11	—	—	—	—
Transfers from Stage 2 to Stage 1(3)	9,543	118	(9,543)	(118)	—	—	—	—
Transfers to Stage 3(3)	(437)	(2)	(848)	(34)	1,285	36	—	—
Transfers from Stage 3(3)	36	2	417	34	(453)	(36)	—	—
Transfers of financial instruments	(2,888)	107	2,056	(107)	832	—	—	—
Net ECL remeasurement on stage transfer(4)	—	(107)	—	96	—	122	—	111
Change in economic scenarios(2)	—	(20)	—	(44)	—	—	—	(64)
Change to ECL models	(2,287)	(5)	2,361	37	(74)	(26)	—	6
New lending and assets purchased(5)	33,906	43	1,170	58	164	40	35,240	141
Redemptions, repayments and assets sold(7)	(37,638)	(44)	(4,672)	(69)	(1,243)	(79)	(43,553)	(192)
Changes in risk parameters and other movements(6)	1,187	9	(3,372)	(74)	355	169	(1,830)	104
Assets written off(7)	—	—	—	—	(342)	(230)	(342)	(230)
At 31 December 2024	266,290	153	21,422	359	2,772	358	290,484	870
Net movement in the period	(7,720)	(17)	(2,457)	(103)	(308)	(4)	(10,485)	(124)
ECL (release)/charge to the Income Statement		(17)		(103)		226		106
Less: Discount unwind		—		—		(24)		(24)
Less: Recoveries net of collection costs		—		—		(12)		(12)
Total ECL (release)/charge to the Income Statement		(17)		(103)		190		70

At 1 January 2023	290,813	171	19,282	516	2,735	320	312,830	1,007
Transfers from Stage 1 to Stage 2(3)	(13,160)	(9)	13,160	9	—	—	—	—
Transfers from Stage 2 to Stage 1(3)	5,974	111	(5,974)	(111)	—	—	—	—
Transfers to Stage 3(3)	(600)	(6)	(924)	(38)	1,524	44	—	—
Transfers from Stage 3(3)	28	1	306	15	(334)	(16)	—	—
Transfers of financial instruments	(7,758)	97	6,568	(125)	1,190	28	—	—
Net ECL remeasurement on stage transfer(4)	—	(111)	—	145	—	130	—	164
Change in economic scenarios(2)	—	29	—	(33)	—	9	—	5
Change to ECL models	—	—	—	—	—	—	—	—
New lending and assets purchased(5)	25,306	28	562	45	59	20	25,927	93
Redemptions, repayments and assets sold(7)	(34,246)	(35)	(3,030)	(53)	(886)	(46)	(38,162)	(134)
Changes in risk parameters and other movements(6)	(105)	(9)	497	(33)	394	133	786	91
Assets written off(7)	—	—	—	—	(412)	(232)	(412)	(232)
At 31 December 2023	274,010	170	23,879	462	3,080	362	300,969	994
Net movement in the period	(16,803)	(1)	4,597	(54)	345	42	(11,861)	(13)
ECL (release)/charge to the Income Statement		(1)		(54)		274		219
Less: Discount unwind		—		—		(21)		(21)
Less: Recoveries net of collection costs		—		—		8		8
Total ECL (release)/charge to the Income Statement		(1)		(54)		261		206

(1)Exposures that have attracted an ECL, and as reported in the Credit Quality table above.

(2)Changes to assumptions in the period. Isolates the impact on ECL from changes to the economic variables for each scenario, the scenarios themselves, and the probability weights from all other movements.

Also includes the impact of quarterly revaluation of collateral. The impact of changes in economics on exposure Stage allocations are shown in Transfers of financial instruments.

(3)Total impact of facilities that moved Stage(s) in the period. This means, for example, that where risk parameter changes (model inputs) or model changes (methodology) result in a facility moving Stage, the full

impact is reflected here (rather than in Other). Stage flow analysis only applies to facilities that existed at both the start and end of the period. Transfers between Stages are based on opening balances and ECL

at the start of the period.

(4)Relates to the revaluation of ECL following the transfer of an exposure from one Stage to another.

(5)Exposures and ECL of facilities that did not exist at the start of the period but did at the end. Amounts in Stage 2 and 3 represent assets which deteriorated in the period after origination in Stage 1.

(6)Residual movements on existing facilities that did not change Stage in the period, and which were not acquired in the period. Includes the net increase or decrease in the period of the mortgage pipeline, cash at

central banks, the impact of changes in risk parameters in the period, unwind of discount rates and increases in ECL requirements of accounts which ultimately were written off in the period.

(7)Exposures and ECL for facilities that existed at the start of the period but not at the end.

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COUNTRY RISK EXPOSURES (audited)

We manage our country risk exposure under our global limits framework. We set our Risk Appetite for each country, considering factors that may affect its risk

profile. These can include political events, macroeconomics and the nature of the risk. We actively manage exposures if we need to.

The tables below show our total exposures, which are the total of balance sheet and off–balance sheet values. We calculate balance sheet values in line with

IFRS (i.e. after netting allowed under IAS 32) except for credit provisions which we add back. Off–balance sheet values are undrawn facilities and letters of credit.

We classify location by country of risk – the country where each client has its main business or assets. That is unless there is a full risk transfer guarantee in place.

If so, we use the guarantor’s country of domicile. If a client has operations in many countries, we use their country of incorporation. The table below excludes

balances with other Banco Santander group members. We show them separately in the section that immediately follows.

	2024						2023
		Financial institutions						Financial institutions
	Government s	Banks(1 )	Other	Retail	Corporat e	Total(2)	Governments	Banks(1)	Other	Retail	Corporat e	Total(2)
	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn
Eurozone
Ireland	—	—	3.3	—	—	3.3	—	—	3.1	—	0.1	3.2
Spain	—	—	—	—	—	—	—	—	—	—	—	—
France	0.1	1.5	2.1	—	—	3.7	0.1	1.7	0.8	—	—	2.6
Belgium	0.2	0.3	—	—	—	0.5	0.2	0.3	—	—	—	0.5
Germany	—	0.2	—	—	—	0.2	—	0.2	0.3	—	—	0.5
Luxembourg	—	—	2.3	—	0.1	2.4	—	—	0.5	—	0.1	0.6
Other	—	—	—	—	—	—	0.1	0.4	—	—	—	0.5
	0.3	2.0	7.7	—	0.1	10.1	0.4	2.6	4.7	—	0.2	7.9
Other countries
UK	37.1	1.6	6.7	202.8	24.3	272.5	40.8	1.7	7.2	208.4	25.0	283.1
Jersey	—	—	0.1	1.0	0.3	1.4	—	—	0.1	0.9	0.2	1.2
US	—	0.9	—	—	—	0.9	—	0.7	—	—	—	0.7
Canada	0.6	0.9	—	—	—	1.5	0.1	0.8	—	—	—	0.9
Japan	2.8	0.1	—	—	—	2.9	2.0	0.9	—	—	—	2.9
Switzerland	0.4	—	—	—	—	0.4	2.1	—	—	—	—	2.1
Other(3)	—	0.5	0.2	0.7	0.4	1.8	—	0.4	0.1	0.4	0.5	1.4
	40.9	4.0	7.0	204.5	25.0	281.4	45.0	4.5	7.4	209.7	25.7	292.3
Total	41.2	6.0	14.7	204.5	25.1	291.5	45.4	7.1	12.1	209.7	25.9	300.2

(1)Excludes balances with central banks.

(2)Excludes cash at hand, interests in other entities, intangible assets, property, plant and equipment, tax assets, retirement benefit assets and other assets.

(3)Mainly includes Isle of Man £0.4bn (2023: :£0.4bn ), Australia £0.3bn (2023:£0.3bn ), Other (Excl OECD)£0.2bn (2023: £0.2bn ), Bermuda £0.1bn (2023: £0.1bn ), China £0.1bn (2023: £0.1bn ), Guernsey

£0.1bn (2023: £0.2bn ), Singapore £0.1bn (2023: £0.0bn ), and Norway £0.1bn (2023:£0.1bn).

Balances with other Banco Santander group members (audited)

We deal with other Banco Santander group members in the ordinary course of business. We do this where we have a particular business advantage or expertise

and where they can offer us commercial opportunities. These transactions also arise where we support the activities of, or with, larger multinational corporate

clients and financial institutions which may deal with other Banco Santander group members. We conduct these activities on the same terms as for similar

transactions with third parties, and in a way that manages the credit risk within limits acceptable to the Board and the PRA.

At 31 December 2024 and 31 December 2023, we had gross balances with other Banco Santander group members as follows:

	2024				2023
	Financial institutions				Financial institutions
	Banks	Other	Corporate	Total	Banks	Other	Corporate	Total
	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn
Assets
Spain	0.6	—	—	0.6	0.9	—	—	0.9
UK	—	4.9	—	4.9	—	4.5	—	4.5
	0.6	4.9	—	5.5	0.9	4.5	—	5.4
Liabilities
Spain	2.1	0.1	—	2.2	2.3	0.1	—	2.4
UK	—	1.7	—	1.7	—	0.9	—	0.9
	2.1	1.8	—	3.9	2.3	1.0	—	3.3

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RETAIL & BUSINESS BANKING – CREDIT RISK REVIEW

We provide detailed credit risk analysis for Retail & Business Banking in separate sections below for Mortgages, our largest portfolio, and our Everyday Banking

portfolio.

Retail & Business Banking: Mortgages - Credit Risk Review

We offer mortgages to people who want to buy a property and offer additional borrowing (known as further advances) to existing mortgage customers. The

property must be in the UK,except for a small number of loans in the Isle of Man and Jersey.

Borrower profile (audited)

	Stock				New business
	2024		2023		2024		2023
	£m	%	£m	%	£m	%	£m	%
Home movers(1)	70,339	42	73,075	42	6,736	45	5,009	41
Remortgagers(2)	45,725	27	49,084	28	4,353	29	3,901	32
First-time buyers	36,233	22	37,495	21	3,262	22	3,015	25
Buy-to-let	14,931	9	15,585	9	567	4	239	2
	167,228	100	175,239	100	14,918	100	12,164	100

	2024	2023
Internal remortgages (£bn)(3)	32.8	31.9
Further advances and flexi drawdowns (£bn)	0.8	0.8
First-time buyers - gross lending (£bn )	3.3	3.0
% of customers retained with a maturing mortgage (unaudited)(4)	77	77

(1)'Home movers’ include both existing customers moving house and taking out a new mortgage with us, and customers who switch their mortgage to us when they move house.

(2)Remortgagers’ are new customers who are taking a new mortgage with us.

(3)Internal remortgages are where we moved our customers with maturing mortgages onto new ones.

(4)Applied to mortgages three months post maturity, and is calculated as a 12-month average of retention rates to September 2024 and December 2023 respectively.

2024 compared to 2023

In 2024, mortgage asset stock decreased across all sectors, with the stock borrower profile unchanged. Although our new business increased year-on-year in all

sectors, a decision to optimise the balance sheet in a competitively priced market has resulted in us not fully replacing the asset balances lost through repayments

and redemptions.

Interest rate profile (audited)

The interest rate profile of our maturing mortgage asset stock was:

	2024		2023
	£m	%	£m	%
Fixed rate	150,310	90	155,363	89
Of which maturing:
–< 12 months	38,143	23	38,419	22
–Later than 1 year but no later than 3 years	85,646	51	66,451	38
–Later than 3 years but no later than 4 years	11,268	7	34,925	20
–Later than 4 years but no later than 5 years	11,831	7	11,126	6
–Later than 5 years	3,422	2	4,442	3
Variable rate	12,252	7	13,923	8
Standard Variable Rate (SVR)	3,029	2	3,942	2
Follow on Rate (FoR)	1,637	1	2,011	1
	167,228	100	175,239	100

2024 compared to 2023

We continued to see customers refinance from reversion to fixed rate products in 2024, influenced by high interest rates. Demand for fixed rate products

increased, particularly with shorter fixed rate terms. 25% of mortgages due to reach the end of their incentive period in the next 12 months (2023: 22%).

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Geographical distribution (audited)

The geographical distribution of our mortgage asset stock and new business was:

	Stock		New business
	2024	2023	2024	2023
Region	£bn	£bn	£bn	£bn
London	43.2	44.6	4.1	2.9
Midlands and East Anglia	23.3	24.6	2.0	1.8
North	21.9	23.2	1.9	1.7
Northern Ireland	2.3	2.6	0.1	0.1
Scotland	6.0	6.4	0.6	0.6
South East excluding London	53.1	55.6	4.6	3.8
South West, Wales and other	17.4	18.2	1.6	1.3
	167.2	175.2	14.9	12.2

2024 compared to 2023

The portfolio's geographical distribution continued to represent a broad footprint across the UK, with a concentration around London and the South East. The loan-

to-income multiple of mortgage lending in the year, based on average earnings of new business at inception was 2.93 (2023: 2.98).

Mortgage loan size (audited)

The split of our mortgage asset by size was:

Mortgage loan size	2024	2023
>£1.0m	2%	2%
£0.5m to £1.0m	10%	10%
£0.25m to £0.5m	31%	31%
<£0.25m	57%	57%
Average loan size (stock) (1)	£193k	£188k
Average loan size (new business)	£246k	£228k

(1) Average initial advance of existing stock.

Loan-to-value analysis (audited)

This table shows the LTV distribution for the gross carrying amount and the related ECL of our total mortgage portfolio and Stage 3 mortgages, and new business.

We also show the collateral value and average LTV. We use our estimate of the property value at the balance sheet date and include fees that have been added

to the loan. For flexible products, we only include the drawn amount, not undrawn limits.

	2024					2023
	Stock		Stage 3		New	Stock		Stage 3		New
	Total	ECL	Total	ECL	Business	Total	ECL	Total	ECL	Business
LTV	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Up to 50%	77,280	34	886	13	3,407	79,949	31	1,110	12	2,616
>50-60%	33,564	21	319	8	2,394	33,402	24	348	10	1,604
>60-70%	29,447	27	256	10	2,311	31,261	40	248	16	1,977
>70-80%	17,200	27	151	12	3,458	18,847	50	139	20	2,736
>80-90%	8,003	19	72	8	2,445	8,917	35	67	15	2,318
>90-100%	1,453	12	38	8	888	2,418	20	39	11	900
>100%	281	33	56	20	15	445	44	65	25	13
	167,228	173	1,778	79	14,918	175,239	244	2,016	109	12,164
Collateral value (1)	167,191		1,767		14,918	175,182		2,005		12,164
	%		%		%	%		%		%
Average LTV - Balance weighted(2)	51		51		64	51		49		66

(1)Collateral value is limited to the balance of each loan and excludes the impact of any over-collateralisation. Includes collateral against loans in negative equity of £244m (2023: £389m).

(2)Balance weighted LTV = (Loan 1 balance x (Loan 1 Balance/Loan 1 latest property valuation) + (Loan 2 balance x (loan 2 balance/Loan 2 latest property valuation) +  ...) /(Loan 1 balance + Loan 2 balance+...).

The balance weighted average LTV of new business in the period in London was 64% (2023: 65%).

2024 compared to 2023

There were no significant changes in collateral quality in 2024. Balanced weighted average LTVs of stock were broadly flat, with a reduction in new business due

to elevated price competition in the market at higher LTVs. We monitor the profile of new lending and act as needed to ensure the LTV mix of completions is in line

with our risk appetite.

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Credit performance (audited)

	2024	2023
	£m	£m
Mortgage loans and advances to customers	167,228	175,239
of which:
– Stage 1	148,560	155,063
– Stage 2	16,890	18,160
– Stage 3	1,778	2,016
Loss allowances(1)	173	244

	%	%
Stage 1 ratio(2)	88.8	88.5
Stage 2 ratio(2)	10.1	10.4
Stage 3 ratio	1.07	1.16

(1)The ECL allowance is for both on and off–balance sheet exposures.

(2)Stage 1/Stage 2 exposures as a percentage of customer loans.

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Movement in total exposures and the corresponding ECL (audited)

The following tables show changes in total on and off-balance sheet exposures and ECL in the period. The footnotes to the Santander UK group level table on

page 111 also apply to these tables.

	Stage 1		Stage 2		Stage 3		Total
	Exposures(1)	ECL	Exposures(1)	ECL	Exposures(1)	ECL	Exposures(1)	ECL
	£m	£m	£m	£m	£m	£m	£m	£m
At 1 January 2024	163,252	24	18,280	111	2,036	109	183,568	244
Transfers from Stage 1 to Stage 2(3)	(9,992)	(1)	9,992	1	—	—	—	—
Transfers from Stage 2 to Stage 1(3)	8,047	20	(8,047)	(20)	—	—	—	—
Transfers to Stage 3(3)	(233)	—	(527)	(8)	760	8	—	—
Transfers from Stage 3(3)	3	—	269	9	(272)	(9)	—	—
Transfers of financial instruments	(2,175)	19	1,687	(18)	488	(1)	—	—
Net ECL remeasurement on stage transfer(4)	—	(20)	—	32	—	15	—	27
Change in economic scenarios(2)	—	(15)	—	(29)	—	1	—	(43)
Change to ECL models	(1,859)	(3)	1,869	21	(10)	(37)	—	(19)
New lending and assets purchased(5)	21,769	4	315	3	33	1	22,117	8
Redemptions, repayments and assets sold(7)	(22,293)	(1)	(3,171)	(14)	(763)	(27)	(26,227)	(42)
Changes in risk parameters and other movements(6)	376	2	(1,805)	(22)	45	27	(1,384)	7
Assets written off(7)	—	—	—	—	(33)	(9)	(33)	(9)
At 31 December 2024	159,070	10	17,175	84	1,796	79	178,041	173
Net movement in the period	(4,182)	(14)	(1,105)	(27)	(240)	(30)	(5,527)	(71)
ECL (release)/charge to the Income Statement		(14)		(27)		(21)		(62)
Less: Discount unwind		—		—		(3)		(3)
Less: Recoveries net of collection costs		—		—		36		36
Total ECL (release)/charge to the Income Statement		(14)		(27)		12		(29)
At 1 January 2023	179,632	26	13,685	132	1,853	95	195,170	253
Transfers from Stage 1 to Stage 2(3)	(11,006)	(3)	11,006	3	—	—	—	—
Transfers from Stage 2 to Stage 1(3)	4,838	30	(4,838)	(30)	—	—	—	—
Transfers to Stage 3(3)	(337)	(3)	(570)	(15)	907	18	—	—
Transfers from Stage 3(3)	14	—	279	9	(293)	(9)	—	—
Transfers of financial instruments	(6,491)	24	5,877	(33)	614	9	—	—
Net ECL remeasurement on stage transfer(4)	—	(28)	—	40	—	22	—	34
Change in economic scenarios(2)	—	—	—	(2)	—	3	—	1
Change to ECL models	—	—	—	—	—	—	—	—
New lending and assets purchased(5)	12,957	4	154	3	5	1	13,116	8
Redemptions, repayments and assets sold(7)	(23,522)	(6)	(1,765)	(12)	(417)	(14)	(25,704)	(32)
Changes in risk parameters and other movements(6)	676	4	329	(17)	35	4	1,040	(9)
Assets written off(7)	—	—	—	—	(54)	(11)	(54)	(11)
At 31 December 2023	163,252	24	18,280	111	2,036	109	183,568	244
Net movement in the period	(16,380)	(2)	4,595	(21)	183	14	(11,602)	(9)
ECL (release)/charge to the Income Statement		(2)		(21)		25		2
Less: Discount unwind		—		—		(3)		(3)
Less: Recoveries net of collection costs		—		—		29		29
Total ECL (release)/charge to the Income Statement		(2)		(21)		51		28

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Loan modifications (audited)

Forbearance(1)

The following table sets out the financial assets that were forborne while they had a loss allowance measured at lifetime ECL.

	2024	2023
	£m	£m
Financial assets modified in the period:
–Amortised cost before modification	563	351
– Net modification loss	2	5
Financial assets modified since initial recognition:
–Gross carrying amount of financial assets for which the loss allowance changed to 12 months ECL in the period	260	79

The balances at 31 December 2024 and 31 December 2023, analysed by their staging and the forbearance we applied, were:

	Capitalisation	Term extension	Interest-only	Concessionary interest rate	Reduced repayment plan	Total	Loss allowances
2024	£m	£m	£m	£m	£m	£m	£m
Stage 2	232	187	202	23	149	793	6
Stage 3	205	142	53	104	158	662	27
	437	329	255	127	307	1,455	33
Proportion of portfolio	0.3%	0.2%	0.2%	0.1%	0.2%	0.9%
2023
Stage 2	327	388	212	11	n/a	938	8
Stage 3	285	150	64	172	n/a	671	30
	612	538	276	183	n/a	1,609	38
Proportion of portfolio	0.3%	0.3%	0.2%	0.1%	n/a	0.9%

(1)We base forbearance type on the first forbearance on the accounts.

At 31 December 2024, the proportion of the mortgage portfolio in forbearance was at 0.9%(2023: 0.9%) and the proportion of accounts in forbearance for more

than six months that had made their last six months’ contractual payments was 83%(2023: 81%). The weighted average LTV of all accounts in forbearance was

45%(2023: 44%) compared to the weighted average portfolio LTV of 51% (2023: 51%).

At 31 December 2024, the carrying value of mortgages classified as multiple forbearance was £9m (2023: £121m).

2024 compared to 2023

In 2024, the proportion of the mortgage portfolio in forbearance remained flat. We enhanced our definition of forbearance to include reduced repayment plans, but

this was more than offset by reductions in the balances in other categories of forbearance.

Other loan modifications

Santander UK supports the Mortgage Charter which was published in July 2023. There were no modification gains or losses arising from the Charter.

We have made additional customer support solutions available since then, allowing customers who are up-to-date with their payments to make interest-only

payments for six months or extend their mortgage term to reduce their monthly payments. The following table provides information on such loan modifications.

	2024		2023
	Term extension	Interest-only	Term extension	Interest-only
	£m	£m	£m	£m
Stage 1	118	1,283	122	1,186
Stage 2	21	467	31	510
Stage 3	1	23	2	18
	140	1,773	155	1,714

There were no other loan modifications made in 2024 and 2023.

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Portfolios of particular interest - Mortgages

Introduction

We are mainly a residential prime lender and we do not originate sub-prime or second charge mortgages. Despite that, some types of mortgages have higher

risks and others stand out for different reasons. These are:

Product	Description
Interest-only loans	With an interest-only mortgage, the customer pays interest every month, but the principal is only repaid at the end of the mortgage term. Some mortgages have a part that is interest-only, with the rest being a normal repayment mortgage.    We mitigate the risk from new interest-only mortgages by having lower maximum LTVs. For most applicants, the maximum LTV is 50%. For high net worth customers, it can be up to 75%. When a customer plans to repay their mortgage by selling the property, we require a minimum equity buffer of £300k. We also remind customers that they have to arrange to repay the principal at the end of the mortgage. We send them messages with their annual mortgage statements, and we contact them throughout the mortgage term to encourage them to tell us how they plan to repay. We increase the frequency of contact as the loan approaches maturity. If customers know they will not be able to repay their mortgage when it ends, or if their mortgage has already passed the date when it should have ended, we talk to them. If we think it is in their interests and they can afford it, we look at other ways to manage it, such as turning the mortgage into a repayment one and extending it. If the customer is waiting for their way to repay it, such as an investment plan, to mature, we may permit an extension.
Part interest-only, part repayment loans	Customers with part interest-only, part repayment mortgages still have to pay back a lump sum at the end of their mortgage for the interest-only part. This means these loans have a higher credit risk as we depend on the customers to pay back a lump sum. We design new account LTV maximums to mitigate this risk. We also make sure the customer has a plausible repayment plan before we lend to them and stays on track for the loan term.  We mitigate the risk from these loans in similar ways to those we use for interest-only mortgages. The maximum LTV for new loans is 85%. For most applicants, up to 50% of that can be interest-only. For high net worth customers, it can be up to 75%. When a customer plans to repay the interest-only element of their mortgage by selling the property, we require a minimum equity buffer of £300k. We manage communications and extension options in similar ways to those we use for interest-only mortgages.
Flexible loans	Flexible mortgages allow customers to pay more or less than their usual amount each month, or even to take ‘payment holidays’ when they pay nothing at all. There are conditions on when and how much customers can draw down, and they do not have to take or draw down the whole loan all at once. A customer can ask us to raise their credit limit, but that means we will go through our full credit approval process. We can also lower a customer’s credit limit at any time, so it never goes above 90% of the property’s current market value. We no longer offer flexible loans for new mortgages. This is an area of interest if any customers might be using these facilities to self-forbear, such as regularly drawing down small amounts. We reflect signs that the credit risk has significantly increased in our ECL calculations.
Loans with an LTV >100%	In some cases, property prices have fallen, so mortgages we gave in the past with lower LTVs now have LTVs greater than 100%. Where the mortgage balance is more than the property is now worth, we cannot recover the full value of the loan by repossessing and selling the property. This means there is a higher credit risk on these loans, so we monitor them as part of our assessment of ongoing portfolio performance. We design new account LTV maximums to mitigate an increase in accounts with an LTV >100%.
Buy-to-Let (BTL) loans	We have specific policies for BTL and focus on non-professional landlords. We have prudent lending criteria and the maximum LTV is 75%. The first applicant must earn a minimum of £25,000 per year, and we require proof of income in all cases. We also use a BTL affordability rate as part of our lending assessment. This means that the rental income must cover the monthly mortgage interest payments by a prescribed amount when calculated using a stressed interest rate. We regularly review the prescribed amount and adjust it as needed.

Climate change

The value of property collateral for mortgages might be affected by physical risks, such as flood and subsidence risk, as well as transitional risks including evolving

energy performance standards. In 2024, we introduced a new in-house CISA capability to assess these risks, incorporating a range of factors to deliver granular

insights. Our analysis indicated that while climate related risks have the potential to intensify other risk factors, we remain resilient within the context of the

scenarios examined, supported by our stable average LTV ratio and the flood reinsurance scheme.

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Credit performance (audited)

		Of which: Portfolio of particular interest(1)
	Total	Interest-only	Part interest- only, part repayment (2)	Flexible	LTV >100%	Buy-to-let
2024	£m	£m	£m	£m	£m	£m
Mortgage portfolio	167,228	36,414	12,052	4,333	281	14,931
–Stage 1	148,560	29,989	10,270	3,190	75	13,672
–Stage 2	16,890	5,608	1,562	933	150	1,204
–Stage 3	1,778	817	220	210	56	55
Stage 3 ratio	1.07%	2.26%	1.83%	5.25%	20.09%	0.37%
Properties in possession	46	23	8	8	10	2
Balance weighted LTV (indexed)	51%	48%	52%	38%	117%	59%
2023
Mortgage portfolio	175,239	39,104	12,788	5,418	445	15,585
–Stage 1	155,063	32,244	11,077	4,420	276	13,887
–Stage 2	18,160	5,874	1,472	744	104	1,647
–Stage 3	2,016	986	239	254	65	51
Stage 3 ratio	1.16%	2.54%	1.88%	5.01%	14.54%	0.33%
Properties in possession	23	12	3	2	5	1
Balance weighted LTV (indexed)	51%	48%	51%	37%	116%	60%

(1)Where a loan falls into more than one category, we include it in all the categories that apply.

(2)Mortgage balance includes both the interest-only part of £9,182m (2023: £9,684m) and the non-interest-only part of the loan.

2024 compared to 2023

In 2024, the combined total proportion of interest-only loans, part interest-only, part repayment loans and flexible loans decreased to 31.6% (2023: 32.7%).

BTL mortgage balances decreased by £0.7bn to £14.9bn (2023: £15.6bn) driven by our strategy to deleverage our mortgage portfolio and changes in the market

dynamic. In 2024, the balance weighted average LTV of mortgage total new BTL lending was 59% (2023: 58%).

Forbearance(1) (audited)

The balances at 31 December 2024 and 31 December 2023 were:

	Interest-only(2)	Flexible	LTV >100%	Buy-to-Let
2024	£m	£m	£m	£m
Total	275	56	9	18
–Stage 2	117	19	2	8
–Stage 3	158	37	7	10
2023
Total	368	74	12	23
–Stage 2	219	55	3	16
–Stage 3	149	19	9	7

(1)Where a loan falls into more than one category, we have included it in all the categories that apply.

(2)Comprises full interest-only loans and part interest-only, part repayment loans.

2024 compared to 2023

New mortgage forbearance stock reduced, mainly due to portfolio sales, lower interest-only maturities and the improvement of our risk profile.

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Retail & Business Banking: Everyday Banking - Credit Risk Review

Credit performance (audited)

	Business banking	Other unsecured
		Personal loans	Credit cards	Overdrafts	Total other unsecured	Total
2024	£m	£m	£m	£m	£m	£m
Loans and advances to customers	1,212	2,089	2,774	436	5,299	6,511
of which:
–Stage 1	1,042	1,892	2,271	235	4,398	5,440
–Stage 2	85	172	454	172	798	883
–Stage 3	85	25	49	29	103	188
Loss allowances(1)	16	63	150	57	270	286
Stage 3 undrawn exposures	2	—	28	4	32	34
Stage 3 ratio	7.10%	1.20%	2.75%	7.40%	2.52%	3.37%
Gross write-offs (12 months)	10	60	51	26	137	147
2023
Loans and advances to customers	1,819	2,064	2,674	471	5,209	7,028
of which:
–Stage 1	1,574	1,743	2,283	207	4,233	5,807
–Stage 2	115	294	345	236	875	990
–Stage 3	130	27	46	28	101	231
Loss allowances(1)	16	66	140	78	284	300
Stage 3 undrawn exposures	2	—	33	4	37	39
Stage 3 ratio	7.25%	1.32%	2.95%	6.73%	2.65%	3.83%
Gross write-offs (12 months)	11	48	46	25	119	130

(1)The ECL allowance is for both on and off–balance sheet exposures.

	2024	2023
% of credit card customers that repay balance in full each month (unaudited)	56%	55%
UPL average customer balance (£)	6,000	6,000

2024 compared to 2023

Business Banking loans continued to reduce due to the pay down of the BBL portfolio. Other unsecured Stage 2 loans reduced driven by Personal loans and

Overdrafts, due to the release of the cost of living JAs. Credit card balances increased due to the impact of our SICR updates in the year. Other unsecured Stage

3 assets remained stable in 2024. Gross write-offs increased in the year, primarily driven by Personal loans, reflecting the current economic environment.

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Loan modifications (audited)

Forbearance

The following table sets out the financial assets that were forborne while they had a loss allowance measured at lifetime ECL.

	Credit cards	Overdrafts	Total
2024	£m	£m	£m
Financial assets modified in the period:
–Amortised cost before modification	14	9	23
–Net modification loss	18	6	24
Financial assets modified since initial recognition:
–Gross carrying amount of financial assets for which the loss allowance changed to 12m ECL in the period	2	1	3
2023
Financial assets modified in the period:
–Amortised cost before modification	13	8	21
–Net modification loss	14	6	20
Financial assets modified since initial recognition:
–Gross carrying amount of financial assets for which the loss allowance changed to 12m ECL in the period	2	1	3

The balances at 31 December 2024 and 31 December 2023 were:

		Other unsecured
	Business banking	Personal loans	Credit cards	Overdrafts	Total other unsecured	Total
2024	£m	£m	£m	£m	£m	£m
Total	3	2	57	22	81	84
–Stage 2	—	1	11	5	17	17
–Stage 3	3	1	46	17	64	67
2023
Total	3	1	47	19	67	70
–Stage 2	—	1	5	2	8	8
–Stage 3	3	—	42	17	59	62

Other loan modifications

There were no other loan modifications made in 2024 and 2023.

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CONSUMER FINANCE – CREDIT RISK REVIEW

Credit performance (audited)

	2024	2023
	£m	£m
Loans and advances to customers	4,759	5,228
of which:
–Stage 1	4,389	4,870
–Stage 2	334	330
–Stage 3	36	28
Loss allowances(1)	69	70
Stage 3 ratio	0.77%	0.53%
Gross write-offs	25	23

(1)The ECL allowance is for both on and off–balance sheet exposures.

	2024	2023
Consumer (auto) finance new business gross lending (£m)	1,593	2,055
Wholesale loans (stock finance) to car dealerships as approximate % of the Consumer loan book	9.7%	9.9%
% of lending collateralised on the vehicle	95%	87%
Average Consumer (auto) finance loan size (£)	16,045	17,308

2024 compared to 2023

In 2024, we maintained our prudent Consumer (auto) finance underwriting criteria. The product mix was broadly unchanged, with wholesale balances

decreasing slightly.

The risk profile was stable in terms of our credit scoring acceptance policies. The overall risk performance was good with the vast majority of customers paying.

Loan modifications (audited)

Forbearance

At 31 December 2024 the amount of forborne assets net of deferred income was £5.4m (2023: £nil).

Other loan modifications

There were no other loan modifications made in 2024.

The gross carrying amount of financial assets for which the ECL allowance changed to a 12-month measurement at 31 December 2024 was £6m (2023: £30m).

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CORPORATE & COMMERCIAL BANKING – CREDIT RISK REVIEW

Movement in total exposures and the corresponding ECL (audited)

The following tables show changes in total on and off-balance sheet exposures and ECL in the period. The footnotes to the Santander UK group level table on

page 111 also apply to these tables.

	Stage 1		Stage 2		Stage 3		Total
	Exposures(1)	ECL	Exposures(1)	ECL	Exposures(1)	ECL	Exposures(1)	ECL
	£m	£m	£m	£m	£m	£m	£m	£m
At 1 January 2024	22,567	76	3,965	132	745	172	27,277	380
Transfers from Stage 1 to Stage 2(3)	(1,101)	(3)	1,101	3	—	—	—	—
Transfers from Stage 2 to Stage 1(3)	781	13	(781)	(13)	—	—	—	—
Transfers to Stage 3(3)	(84)	(1)	(230)	(12)	314	13	—	—
Transfers from Stage 3(3)	24	1	121	18	(145)	(19)	—	—
Transfers of financial instruments	(380)	10	211	(4)	169	(6)	—	—
Net ECL remeasurement on stage transfer(4)	—	(9)	—	(4)	—	54	—	41
Change in economic scenarios(2)	—	(3)	—	(7)	—	(1)	—	(11)
Change to ECL models	(222)	(2)	286	(11)	(64)	12	—	(1)
New lending and assets purchased(5)	8,485	20	552	21	118	29	9,155	70
Redemptions, repayments and assets sold(7)	(5,203)	(24)	(1,149)	(29)	(254)	(42)	(6,606)	(95)
Changes in risk parameters and other movements(6)	(2,224)	5	(1,297)	(13)	82	15	(3,439)	7
Assets written off (7)	—	—	—	—	(80)	(49)	(80)	(49)
At 31 December 2024	23,023	73	2,568	85	716	184	26,307	342
Net movement in the period	456	(3)	(1,397)	(47)	(29)	12	(970)	(38)
ECL (release)/charge to the Income Statement		(3)		(47)		61		11
Less: Discount unwind		—		—		(12)		(12)
Less: Recoveries net of collection costs		—		—		5		5
Total ECL (release)/charge to the Income Statement		(3)		(47)		54		4

	Stage 1		Stage 2		Stage 3		Total
	Exposures(1)	ECL	Exposures(1)	ECL	Exposures(1)	ECL	Exposures(1)	ECL
	£m	£m	£m	£m	£m	£m	£m	£m
At 1 January 2023	23,838	83	3,888	166	572	145	28,298	394
Transfers from Stage 1 to Stage 2(3)	(1,376)	(1)	1,376	1	—	—	—	—
Transfers from Stage 2 to Stage 1(3)	512	10	(512)	(10)	—	—	—	—
Transfers to Stage 3(3)	(118)	(3)	(258)	(8)	376	11	—	—
Transfers from Stage 3(3)	1	—	9	1	(10)	(1)	—	—
Transfers of financial instruments	(981)	6	615	(16)	366	10	—	—
Net ECL remeasurement on stage transfer(4)	—	(16)	—	29	—	64	—	77
Change in economic scenarios(2)	—	30	—	(30)	—	6	—	6
New lending and assets purchased(5)	7,257	5	132	6	38	10	7,427	21
Redemptions, repayments and assets sold(7)	(6,713)	(13)	(869)	(10)	(193)	(23)	(7,775)	(46)
Changes in risk parameters and other movements(6)	(834)	(19)	199	(13)	137	28	(498)	(4)
Assets written off (7)	—	—	—	—	(175)	(68)	(175)	(68)
At 31 December 2023	22,567	76	3,965	132	745	172	27,277	380
Net movement in the period	(1,271)	(7)	77	(34)	173	27	(1,021)	(14)
ECL (release)/charge to the Income Statement		(7)		(34)		95		54
Less: Discount unwind		—		—		(9)		(9)
Less: Recoveries net of collection costs		—		—		(5)		(5)
Total ECL (release)/charge to the Income Statement		(7)		(34)		81		40

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Committed exposures

Credit risk arises on both on- and off–balance sheet transactions, e.g. guarantees. Therefore, committed exposures are typically higher than asset balances.

Rating distribution (audited)

These tables show our credit risk exposure according to our internal rating scale (see the ‘Santander UK group level – credit risk review’ section) for each portfolio.

On this scale, the higher the rating, the better the quality of the counterparty.

	Santander UK risk grade
	9	8	7	6	5	4	3 to 1	Other	Total(1)
2024	£m	£m	£m	£m	£m	£m	£m	£m	£m
SME and mid corporate	—	253	723	3,170	4,295	3,013	1,589	82	13,125
Commercial Real Estate	—	—	567	1,913	2,460	620	309	—	5,869
Social Housing	13	1,983	5,868	—	—	—	—	—	7,864
	13	2,236	7,158	5,083	6,755	3,633	1,898	82	26,858
Of which:
Stage 1	13	2,236	7,115	4,991	6,159	2,597	382	82	23,575
Stage 2	—	—	43	92	596	1,036	800	—	2,567
Stage 3	—	—	—	—	—	—	716	—	716
2023
SME and mid corporate	—	166	911	2,970	3,497	3,575	1,439	118	12,676
Commercial Real Estate	—	—	360	1,684	2,132	972	209	1	5,358
Social Housing	43	3,032	4,881	—	—	—	—	—	7,956
	43	3,198	6,152	4,654	5,629	4,547	1,648	119	25,990
Of which:
Stage 1	43	3,130	6,152	4,618	4,715	2,363	141	118	21,280
Stage 2	—	68	—	36	914	2,184	762	1	3,965
Stage 3	—	—	—	—	—	—	745	—	745

(1)Credit risk exposures include derivatives exposures. For invoice finance the credit risk exposures represent the full facility limit present on the credit agreement papers, a total limit before consideration of

underlying collaterals and application of prepayment caps for any given point.

Geographical distribution (audited)

We typically classify geographical location according to the counterparty’s country of domicile unless a full risk transfer guarantee is in place, in which case we use

the guarantor’s country of domicile instead. At 31 December 2024 and 31 December 2023 this is mainly focused in the UK.

Credit risk mitigation (audited)

	Gross exposure	Collateral	Net exposure
	Stage 3	Stage 3	Stage 3
2024	£m	£m	£m
SME and mid corporate	639	209	430
Commercial Real Estate	77	71	6
	716	280	436

2023
SME and mid corporate	627	190	437
Commercial Real Estate	118	28	90
	745	218	527

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Credit performance (audited)

We monitor exposures that show potentially higher risk characteristics using our Watchlist process. The table below shows the exposures we monitor, and those

we classify as Stage 3 by portfolio at 31 December 2024 and 31 December 2023.

2024	Committed exposure
		Watchlist
	Fully performing	Enhanced monitoring	Proactive management	Stage 3	Total (1)	Loss allowances
	£m	£m	£m	£m	£m	£m
SME and mid corporate	10,851	570	1,065	639	13,125	315
Commercial Real Estate	5,440	51	301	77	5,869	26
Social Housing	7,440	—	424	—	7,864	1
	23,731	621	1,790	716	26,858	342

2023
SME and mid corporate	10,140	462	1,447	627	12,676	341
Commercial Real Estate	4,734	10	496	118	5,358	39
Social Housing	7,752	—	204	—	7,956	—
	22,626	472	2,147	745	25,990	380

(1)Includes committed facilities and derivatives.

2024 compared to 2023

The watchlist exposures decreased by 7.9%, with a reduction in Proactive management of 16.6%, and an increase in Enhanced Monitoring of 31.6%. The

increase in Enhanced Monitoring was due to a small number of large exposures moving from Proactive management.

Loan modifications (audited)

Forbearance

The following table sets out the financial assets that were forborne while they had a loss allowance measured at lifetime ECL.

	2024	2023
	£m	£m
Financial assets modified in the period:
–Amortised cost before modification	232	189
–Net modification loss	5	10
Financial assets modified since initial recognition:
–Gross carrying amount of financial assets for which the loss allowance changed to 12-month ECL in the period	15	27

We only make forbearance arrangements for lending to customers. The balances at 31 December 2024 and 31 December 2023, analysed by their staging and

the forbearance we applied, were:

	2024	2023
	£m	£m
Stock(1)
–Term extension	102	113
–Interest-only	229	215
–Other payment rescheduling	373	264
	704	592
Of which:
–Stage 1	40	2
–Stage 2	228	159
–Stage 3	436	431
	704	592
Proportion of portfolio	2.6%	2.3%

(1)We base forbearance type on the first forbearance we applied. Tables only show accounts open at the period-end. Amounts are drawn balances and include off balance sheet balances.

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Portfolios of particular interest - Commercial Real Estate

Introduction

Lending to some customers brings higher risk, particularly in the following areas:

Portfolio	Description
Commercial Real Estate	Lending to experienced, professional landlords mainly secured by tenanted UK property. The CRE market has seen regular cyclical downturns, and so is a portfolio of particular interest. We manage and report our CRE portfolio in Corporate & Commercial Banking.

Climate change

As the energy transition unfolds, we expect the dependency on fossil fuel energy sources to start reducing. As a responsible lender, we aim to reallocate financial

flows from fossil fuel consumption, including for electricity generation, to cleaner alternatives as set out in our Environmental, Social and Climate Change Policy.

In order to support our customers in the transition to a more sustainable economy, we monitor our current lending activities and how they contribute towards the

reliance of fossil fuels. We classify lending as a fossil fuel exposure if the counterparty engaged in any of the following activities:

– Oil & Gas: Exploration, extraction, production and treatment including refining, transportation, storage and wholesale distribution

–Mining & Extraction: any coal mining or extraction activities

–Power Generation: clients for who coal-fired generation represents more than 10% of revenues on a consolidated basis.

At 31 December 2024, we had limited exposure to such counterparties, with these activities making up 0.4% of our Corporate & Commercial Banking lending to

non-financial corporates. On an individually assessed basis, clients in these industries were highly rated and their markets remained highly liquid. We will continue

to monitor, disclose and reduce lending which contributes to ongoing fossil fuel use.

Credit performance

The table below shows the main CRE credit performance metrics at 31 December 2024 and 31 December 2023.

	Customer loans	Stage 3	Stage 3 ratio	Gross write–offs	Total loss allowance
	£m	£m	%	£m	£m
2024	5,211	77	1.48	9	26
2023	4,691	118	2.52	—	39

LTV analysis

The table below shows the LTV distribution for our CRE total stock and Stage 3 stock (based on the drawn balance and our latest estimate of the property’s

current value) of the portfolio at 31 December 2024 and 31 December 2023.

	2024				2023
	Stock		Stage 3		Stock		Stage 3
	Total	ECL	Total	ECL	Total	ECL	Total	ECL
LTV	£m	£m	£m	£m	£m	£m	£m	£m
Up to 50%	2,822	6	7	1	2,665	12	22	2
>50-70%	1,653	6	7	—	1,539	13	59	8
>70-100%	42	1	1	—	87	7	16	6
> 100%	63	9	57	9	13	2	7	2
Total with collateral	4,580	22	72	10	4,304	34	104	18
With no collateral	631	4	5	2	387	5	14	3
	5,211	26	77	12	4,691	39	118	21

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Refinancing risk

At 31 December 2024, CRE loans of £725m (2023: £979m) were due to mature within 12 months. Of these, £60m or 8.3% (2023: £26m or 2.6%) had an LTV

ratio higher than is acceptable under our current credit policy, £56m of which were reported as Stage 3 (2023: £21m).

Sector analysis

Sector	2024		2023
	£m	%	£m	%
Office	997	19	1,067	23
Retail	602	12	593	13
Industrial	1,014	19	733	15
Residential	759	15	788	17
Mixed use	617	12	611	13
Student accommodation	166	3	130	3
Hotels and leisure	212	4	193	4
Other (1)	844	16	576	12
	5,211	100	4,691	100

(1)Mainly unsecured real estate and health related sectors.

2024 compared to 2023

The CRE portfolio remained well diversified across sectors, with no significant regional or single name concentration. With £4,475m (2023: £4,204m) at or below

70% LTV, the LTV profile of the portfolio remained conservative. Almost two thirds of the secured CRE portfolio had an LTV below 50%.

We maintained a prudent lending approach with 99% of new business (2023: 100%) written at or below 60% LTV in 2024. The weighted average LTV of the

portfolio was 46% (2023: 43%)).

Drawn exposures subject to enhanced monitoring relative to portfolio size increased to £51m (2023: £10m). Drawn exposures subject to proactive management

decreased by 39% to £301m (2023: £493m). Stage 3 exposures decreased to £77m (2023: £118m).

CORPORATE CENTRE – CREDIT RISK REVIEW

Committed exposures

Rating distribution (audited)

Corporate Centre committed exposures mainly comprise Sovereign exposures and Structured Products (High Quality Liquid Assets, mainly Asset Backed

Securities and covered bonds) managed as part of our Eligible Liquidity Pool. These are low risk, high quality, investment grade exposures with a credit rating of 8

or 9 according to our internal rating scale (see the ‘Santander UK group level – credit risk review’ section).

Geographical distribution (audited)

We typically classify geographical location according to the counterparty’s country of domicile unless a full risk transfer guarantee is in place, in which case we use

the guarantor’s country of domicile instead. At 31 December 2024 and 31 December 2023 this was mainly focused in the UK.

Credit performance (audited)

We monitor exposures that show potentially higher risk characteristics using our Watchlist process. In Corporate Centre, committed exposures were all fully

performing at 31 December 2024 and 31 December 2023.

Loan modifications (audited)

There were no loan modifications made in 2024 and 2023.

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Liquidity risk

Overview Liquidity risk is the risk that we do not have sufficient liquid financial resources available to meet our obligations when they fall due, or we can only secure such resources at excessive cost. In this section, we describe our key liquidity risks, including our sources and uses of liquidity, and how we manage liquidity risk. We also analyse our key liquidity metrics, including our LCRs and our eligible liquidity pools. We then explain our funding strategy and structure and we analyse our wholesale funding. Finally, we analyse how we have encumbered some of our assets to support our funding activities. Key metrics LCR of 156% (2023: 162%) NSFR of 136% (2023: 138%) Wholesale funding with maturity <1 year £19.7bn (2023: £11.9bn) LCR eligible liquidity pool of £47.8bn (2023: £50.9bn)

OUR KEY LIQUIDITY RISKS (audited)

Through our Liquidity Risk Appetite (LRA) framework, we manage our market liquidity risks, funding or structural liquidity risk, contingent liquidity risk, wherever

they arise. This can be in retail and corporate deposit outflows, outflows in wholesale secured and unsecured funding and off-balance sheet activities. Other risks

our framework covers include funding concentrations, intra-day cash flows, intra-group commitments and support, franchise retention and cross currency risk.

Our main sources of liquidity

Customer deposits finance most of our customer lending. Although these funds are mostly callable, in practice they give us a stable and predictable core of

funding. This is due to the nature of retail accounts and the breadth of our retail customer relationships.

We have a strong wholesale funding investor base, diversified across product types and geographies. Through the wholesale markets, we have active

relationships in many sectors including banks, other financial institutions, corporates, pensions and investment funds. We access the wholesale funding markets

through the issuance of capital, senior unsecured debt, covered bonds, structured notes and short-term funding. We also access these markets through

securitisations of certain assets of Santander UK plc and our operating subsidiaries. For more on our programmes, see Notes 14, 25 and 29 to the Consolidated

Financial Statements.

We generate funding on the strength of our own balance sheet, our own profitability and our own network of investors. In addition, we have access to UK

Government funding schemes. We comply with rules set by the PRA, other regulators, and Banco Santander standards. While we consolidate, manage and

monitor liquidity risk centrally, we also manage and monitor it in the business area it comes from.

Our main uses of liquidity

Our main uses of liquidity are to fund our lending, to pay interest and dividends, and to repay debt. Our ability to pay dividends depends on various factors. These

include our regulatory capital needs, the level of our distributable reserves, and our financial performance.

LIQUIDITY RISK MANAGEMENT

We manage liquidity risk on a consolidated basis in our CFO division, which is our centralised function for managing funding, liquidity and capital. We created our

governance, oversight and control frameworks, and our LRA, on the same consolidated basis.

We also monitor and manage liquidity risk for the Santander UK plc group and SFS separately. Under this model, and the PRA’s liquidity rules, Santander UK plc

and its subsidiary Cater Allen Limited form the RFB Domestic Liquidity Sub-group (the RFB DoLSub), which allows them to collectively meet regulatory

requirements to manage liquidity risk. Each member of the RFB DoLSub will support the other by transferring surplus liquidity in times of stress.

We continue to transfer liquidity risks from the securities Santander UK Group Holdings plc issues, or the contracts it executes, into our subsidiaries largely

through back-to-back transactions. We fund any mismatches, if needed, by ordinary share dividends from subsidiaries.

Risk appetite

Separate LRAs are in place for the Santander UK plc group and SFS. These are appropriate to their individual business models and consistent with the strategy

of Santander UK Group Holdings plc.

Our LRA is based on the principles of liquidity management we use to manage our balance sheet. It also supports our need to meet or exceed regulatory rules. In

line with our liquidity management principles, we avoid an over-reliance on funding from a single product, customer or counterparty. We also maintain enough

unencumbered customer assets to support current and future funding and collateral requirements and maintain enough capacity to monetise liquid assets and

other counterbalancing capacity on a timely basis.

Our LRA is proposed to the Risk division and the Board, which is then approved under advice from the Board Risk Committee. Our LRA, in the context of our

overall Risk Appetite, is reviewed and approved by the Board each year, or more often if needed.

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Risk measurement

We use a number of metrics to manage liquidity risk. These include market and internal Early Warning Indicators (EWIs) that include both qualitative and

quantitative measures including outflows in retail and corporate deposits, funding concentration metrics, LCR and LRA metrics. They also include structural

metrics, such as our level of encumbered assets and our Net Stable Funding Ratio (NSFR).

Ongoing business management

Within our framework of prudent funding and liquidity management, we manage our activities to our LRA. We have clear responsibilities for short-term funding,

medium-term funding, encumbrance, collateral and liquid asset management. This ensures we manage liquidity risks as part of our daily operations, strategy and

planning.

Our liquidity management framework is split between short-term and strategic activities. Our short-term activities focus on intra-day collateral management and

maintaining liquid assets to cover unexpected demands on cash in a stress, such as large and unexpected deposit withdrawals by customers and loss of

wholesale funding. Our strategic activities focus on ensuring we are not over reliant on any one source for funding and that we avoid excessive concentrations in

the maturity of our funding.

We regularly test the liquidity of our eligible liquidity pool, in line with PRA rules and Basel guidelines. We do this by realising some of the assets by repurchase or

outright sale to the market. We make sure that over any 12-month period we realise a significant part of our eligible liquidity pool. As well as our eligible liquidity

pool, we always hold a portfolio of unencumbered liquid assets. Our LRA and PRA requirements determine the size and composition of this portfolio. These

assets give us a source of contingent liquidity, as we can realise some of them in a stress to create liquidity by repurchase or outright sale to the market.

Stress testing

Our liquidity stress testing framework is central to our LRA measurement and monitoring. To fit with our Risk Appetite, the liquidity outflows that come from these

stress tests must be fully covered with high-quality liquid assets, other liquid assets and appropriate management actions.

Our Risk division runs a range of stress tests. Our LRA stress test consists of three tests that cover idiosyncratic, market-wide and combined scenarios.

Our other tests consider scenarios such as a global economic slowdown that results in reduced confidence in banks, a slowdown in a major economy or a decline

in access to liquidity. We consider the scenarios on both an acute and protracted basis. We also run severe combined stress tests which look at both a deep and

prolonged UK recession that results in a reduction in wholesale funding availability and an idiosyncratic shock that would lead to retail and commercial outflows.

We also run climate change stresses. These include severe physical risks which result in a reduction in retail deposits, increased use of corporate lending facilities

and an increase in mortgage defaults and a scenario where there is disorderly transition to net zero, resulting in supply shocks and data transparency concerns.

We also run a technological stress, in which disruptions to the traditional banking system due to digital innovations and adverse social media coverage could lead

to a banking crisis leading to outflows of retail and corporate deposits.

We also conduct sensitivity analysis and reverse stress testing for instant liquidity shocks by each key liquidity risk. We do this to understand the impacts they

would have on our LRA and our regulatory liquidity metrics. As part of this, we monitor our LCR and our NSFR to ensure we continue to meet the requirements in

the event of a liquidity stress.

Risk mitigation (audited)

The Board aims to make our balance sheet resilient at all times and for it to be perceived as such by stakeholders. This preserves our short and long-term viability.

The Board recognises that as we are involved in maturity transformation, we cannot hold enough liquidity to cover all possible stress scenarios. The Board

requires us to hold enough liquidity to make sure we will survive three plausible but severe stress scenarios (our LRA stress test, described above). We do this by

maintaining a prudent balance sheet structure and approved liquid resources.

Recovery and Resolution framework

The CFO is the accountable SMF for recovery and resolution and the related work is managed by the CFO division. The work is overseen by the Board Audit

Committee and the Board. We review and refresh our recovery plan each year. It sets out the risks, the indicators we use to monitor those risks, and the actions

that are available to mitigate a capital, liquidity or combined stress event. We are confident that we have sufficient credible and executable options to respond to a

wide range of stresses, be they market-wide or idiosyncratic, in a timely and effective manner. Recovery indicators are both qualitative and quantitative and we

have embedded them into our risk frameworks. We monitor our recovery capacity, headroom to recovery triggers and recovery indicators regularly. If needed, we

would invoke recovery early to mitigate the effects of a stress and restore our financial position and balance sheet strength.

Our resolution capabilities are underpinned by comprehensive governance, testing and assurance arrangements, which seek to ensure that we maintain and

enhance our resolution readiness on an ongoing basis. In August 2024, in line with the BoE’s Resolvability Assessment Framework (RAF), and the PRA

requirement to conduct a self-assessment of resolvability and to publish a summary of that assessment, we published a summary of our preparations in the event

of resolution.

Risk monitoring and reporting (audited)

We monitor liquidity risk daily, weekly and monthly. We do this through different committees and levels of management, including ALCO and the BRC.

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LIQUIDITY RISK REVIEW

Liquidity Coverage Ratio

This table shows our LCR at 31 December 2024 and 31 December 2023.

	2024	2023
LCR	£bn	£bn
Eligible liquidity pool (liquidity value)(1)	47.2	50.4
Net stress outflows	(30.2)	(31.1)
Surplus	17.0	19.3
Eligible liquidity pool as a percentage of anticipated net cash flows	156%	162%

(1)The liquidity value is calculated by applying an applicable haircut to the carrying value.

LCR eligible liquidity pool

This table shows the carrying value of our eligible liquidity pool assets at 31 December 2024 and 31 December 2023. It also shows the weighted average carrying

value in the year.

	Carrying value						Weighted average carrying value in the year
	2024			2023			2024	2023
	Level 1	Level 2	Total	Level 1	Level 2	Total	Total	Total
	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn
Cash and balances at central banks	32.2	—	32.2	38.4	—	38.4	33.6	41.0
Government bonds	10.4	0.9	11.3	9.0	0.3	9.3	14.0	7.1
Supranational bonds and multilateral development banks	0.4	—	0.4	0.3	—	0.3	0.2	0.1
Covered bonds	1.4	1.7	3.1	1.2	1.0	2.2	2.9	1.7
Asset-backed securities	—	0.8	0.8	—	0.7	0.7	0.8	0.4
	44.4	3.4	47.8	48.9	2.0	50.9	51.5	50.3

We hedge term duration in the LCR eligible liquidity pool with swaps. We use swaps to offset mark to market movements due to interest rate changes.

Currency analysis

This table shows the carrying value of our eligible liquidity pool by major currencies at 31 December 2024 and 31 December 2023. The composition of the pool is

consistent with the currency profile of our net liquidity outflows.

	US Dollar	Euro	Sterling	Other	Total
	£bn	£bn	£bn	£bn	£bn
2024	1.2	1.2	44.2	1.2	47.8
2023	2.4	1.1	46.6	0.8	50.9

Net Stable Funding Ratio (NSFR)

	2024	2023
	%	%
NSFR	136	138

2024 compared to 2023

We remain in a strong liquidity position. We hold sufficient liquid resources and have adequate governance and controls in place to manage the liquidity risks

arising from our business and strategy. At 31 December 2024 and 31 December 2023, the LCR and NSFR significantly exceeded regulatory requirements. LCR

reduced following TFSME repayments.

In 2024, Santander UK purchased UK Gilts on a 'Hold-To-Collect-Cash-flows' basis. The notional value at 31 December 2024 was £3.0bn (2023: £nil). This

means that there is an increased allocation of liquid assets to longer-dated UK sovereign bonds to support ongoing HQLA requirements in our LCR eligible

liquidity pool.

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FUNDING RISK MANAGEMENT

Funding strategy

Our funding strategy continues to be based on maintaining a conservatively structured balance sheet and diverse sources of funding to meet the needs of our

business strategy and plans. The CFO Division maintains a funding plan that complies with the LRA and regulatory liquidity and capital requirements.

Most of our funding comes from customer deposits. We source the rest from a mix of secured and unsecured funding in the wholesale markets. Overall, this

means that we do not rely too heavily on wholesale funds. We manage funding requirements by targeting a specific Liquidity Coverage Ratio, we ensure

maturities are prefunded and capital/Minimum Requirements for Eligible Liabilities (MREL) requirements for Santander UK Group Holdings plc and internal MREL

for Santander UK plc are prioritised. We also have controls to limit our asset encumbrance from our secured funding operations.

As part of maintaining a diverse funding base, we raise funding in a number of currencies, including EUR and USD, and convert it into sterling through currency

swaps to fund our commercial assets which are largely sterling denominated.

Our base of stable retail and corporate deposits is a key funding source for us. We leverage our large and diverse customer base to offer products that give us a

long-term sustainable source of funding. We do this by focusing on building long-term relationships. At 31 December 2024, 86% of our total core retail customer

liabilities were covered by the Financial Services Compensation Scheme (the FSCS).

Behavioural maturities

The contractual maturity of our balance sheet assets and liabilities highlights the maturity transformation that underpins the role of banks to lend long term, but to

fund themselves mainly with shorter-term liabilities, like customer deposits. We do this by diversifying our funding operations across a wide customer base, both

in numbers and by type of depositor. In practice, the behavioural profiles of many liabilities show more stability and longer maturity than their contractual maturity.

This is especially true of many retail and corporate deposits that, while they may be repayable on demand or at short notice, have shown good stability even in

times of stress. We model behaviour profiles using our experience of customer behaviour. We use this data to determine the funds transfer pricing rates at which

we reward and charge our business units for sources and uses of funds. We apply this rate until a customer changes to a different product or service offered by us

or by one of our competitors.

We continue to maintain the quality of our retail, commercial and wholesale deposits. We aim to deepen our customer relationships across all customer segments.

We do this to lengthen the contractual and behavioural profile of our liability base.

Deposit funding

We mainly fund our Retail & Business Banking, Consumer Finance and Corporate & Commercial Banking activities by customer deposits. We fund the rest

through wholesale markets.

Wholesale funding

Composition of wholesale funding

We are active in the wholesale markets and we have direct access to both money market and long-term investors through our funding programmes. This makes

our wholesale funding well diversified by product, maturity, geography and currency. This includes currencies available across a range of channels from money

markets, repo markets, senior unsecured, secured, medium-term and capital.

Santander UK plc is our main operating company issuer of senior unsecured debt, structured notes, short-term funding and covered bonds.

Santander UK Group Holdings plc is the issuer of capital and MREL/Total Loss Absorbing Capacity (TLAC) eligible senior unsecured debt. In line with the UK

CRR and the Bank of England Statement of Policy on MREL, resolution entities that are G-SIBs or are part of a G-SIB are required to hold a minimum amount of

loss absorbing and recapitalisation capacity on an ongoing basis. The minimum requirement is the higher of (i) two times the sum of Pillar 1 and Pillar 2A; (ii) 18%

of RWAs; (iii) two times the minimum leverage ratio requirement; or (iv) 6.75% of leverage exposures.

Santander UK plc is subject to internal MREL as it meets the requirements of a material subsidiary of our ultimate parent Banco Santander SA.

We also access the wholesale markets through securitisations of certain assets of our operating subsidiaries. We also have access to UK Government funding

schemes. Eligible collateral for these schemes includes all collateral that is eligible in the Bank of England’s Discount Window Facility. We ensure that enough

collateral is placed and available at the Discount Window.

Issuance model and resolution

Banco Santander is a multiple point of entry resolution group. This means that should it fail, it would be split up into parts. Healthy parts might be sold or be kept as

a residual group without their distressed sister companies. The resolution or recapitalisation of the distressed parts might be affected via ‘bail in’ of bonds that had

been issued to the market by a regional intermediate holding company.

Santander UK is a single point of entry resolution group. This means that resolution would work downwards from the group’s holding company i.e. Santander UK

Group Holdings plc. Losses in subsidiaries would first be transferred up to Santander UK Group Holdings plc. If the holding company is bankrupt as a result, the

group is deemed to be failing or likely to fail, it will be put into resolution. The ‘bail in’ tool is applied to the holding company, with the equity being written off

and bonds written off or converted into equity as needed to recapitalise the group. Those bondholders would become the new owners, and the group would

stay together.

Santander UK Group Holdings plc is the immediate holding company of Santander UK plc but does not guarantee its debts or other obligations. This structure is

a Bank of England recommended configuration which aims to ensure the activities of the operating company are not disrupted as the Santander UK group goes

through resolution, thereby maintaining continuity of services for customers.

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FUNDING RISK REVIEW

Our funding strategy continues to be based on maintaining a conservatively structured balance sheet and diverse sources of funding to meet the needs of our

business strategy and plans. The CFO Division maintains a funding plan that complies with our LRA and regulatory liquidity and capital requirements.

Wholesale funding

Reconciliation of wholesale funding to the balance sheet (audited)

This table reconciles our wholesale funding to our balance sheet at 31 December 2024 and 31 December 2023.

		Balance sheet line item
	Funding analysis	Deposits by banks(1)	Repurchas e agreement s - non trading	Financial liabilities designated at fair value	Debt securities in issue	Subordinated liabilities	Other equity instruments and non- controlling interests(2)
2024	£bn	£bn	£bn	£bn	£bn	£bn	£bn
Deposits by banks	1.4	1.4	—	—	—	—	—
Certificates of deposit and commercial paper	4.5	—	—	—	4.5	—	—
Senior unsecured – public benchmark	11.2	—	—	—	11.2	—	—
–privately placed	1.2	—	—	0.4	0.8	—	—
Covered bonds	17.4	—	—	—	17.4	—	—
Securitisation and structured issuance(3)	5.1	—	—	—	5.1	—	—
TFSME	11.0	11.0	—	—	—	—	—
Subordinated liabilities and equity	4.3	—	—	—	—	2.2	2.1
Total wholesale funding	56.1	12.4	—	0.4	39.0	2.2	2.1
Repos	8.6	—	8.6	—	—	—	—
Foreign exchange and hedge accounting	(0.4)	—	—	—	(0.6)	0.2	—
Other	1.5	1.6	—	0.7	(0.8)	—	—
Balance sheet total	65.8	14.0	8.6	1.1	37.6	2.4	2.1

2023
Deposits by banks	1.1	1.1	—	—	—	—	—
Certificates of deposit and commercial paper	4.3	—	—	—	4.3	—	—
Senior unsecured – public benchmark	12.9	—	—	—	12.9	—	—
–privately placed	0.8	—	—	0.6	0.2	—	—
Covered bonds	14.8	—	—	—	14.8	—	—
Securitisation and structured issuance(3)	2.7	—	—	—	2.7	—	—
TFSME	17.0	17.0	—	—	—	—	—
Subordinated liabilities and equity	4.4	—	—	—	—	2.2	2.2
Total wholesale funding	58.0	18.1	—	0.6	34.9	2.2	2.2
Repos	8.4	—	8.4	—	—	—	—
Foreign exchange and hedge accounting	1.1	—	—	—	0.9	0.2	—
Other	2.6	2.3	—	0.3	—	—	—
Balance sheet total	70.1	20.4	8.4	0.9	35.8	2.4	2.2

(1)Consists of Perpetual Capital Securities (net of issuance costs). See Note 32 to the Consolidated Financial Statements.

(2)Other consists of items in the course of transmission and other deposits. See Note 21 to the Consolidated Financial Statements.

(3)Includes Residential Mortgage-Backed Securities (RMBS) and Asset-Backed Securities (ABS) of £3.9bn (2023: £2.8bn).

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Maturity profile of wholesale funding (audited)

This table shows our main sources of wholesale funding. It does not include securities finance agreements. The table is based on exchange rates at issue and

scheduled repayments and call dates. It does not reflect the final contractual maturity of the funding.

For details of the maturities of financial liabilities and off-balance sheet commitments, see Note 38 to the Consolidated Financial Statements.

	≤ 1 month	>1 and ≤ 3 months	>3 and ≤ 6 months	>6 and ≤ 9 months	>9 and ≤ 12 months	Sub-total ≤ 1 year	>1 and ≤ 2 years	>2 and ≤ 5 years	>5 years	Total
2024	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn
Santander UK Group Holdings plc(1)
Senior unsecured – public benchmark	—	—	0.5	0.7	1.3	2.5	2.0	5.6	0.4	10.5
–privately placed	—	—	—	—	—	—	—	0.1	—	0.1
Subordinated liabilities and equity (incl. AT1)	—	0.5	—	0.3	—	0.8	0.5	1.4	0.9	3.6
	—	0.5	0.5	1.0	1.3	3.3	2.5	7.1	1.3	14.2
Santander UK plc
Deposits by banks	0.8	0.6	—	—	—	1.4	—	—	—	1.4
Certificates of deposit and commercial paper	1.6	2.8	0.1	—	—	4.5	—	—	—	4.5
Senior unsecured – public benchmark	—	0.4	—	—	—	0.4	—	0.3	—	0.7
–privately placed	—	—	—	—	—	—	—	0.3	0.8	1.1
Covered bonds	0.9	—	—	0.2	0.1	1.2	4.0	11.1	1.1	17.4
Securitisation & structured issuance(2)	—	0.5	0.8	—	—	1.3	0.3	3.0	—	4.6
TFSME	—	—	—	—	7.1	7.1	2.5	—	1.4	11.0
Subordinated liabilities	—	—	—	—	—	—	—	0.2	0.5	0.7
	3.3	4.3	0.9	0.2	7.2	15.9	6.8	14.9	3.8	41.4
Other group entities
Securitisation & structured issuance(3)	—	—	0.5	—	—	0.5	—	—	—	0.5
Total at 31 December 2024	3.3	4.8	1.9	1.2	8.5	19.7	9.3	22.0	5.1	56.1
Of which:
–Secured	0.9	0.5	1.3	0.2	7.2	10.1	6.8	14.1	2.5	33.5
–Unsecured	2.4	4.3	0.6	1.0	1.3	9.6	2.5	7.9	2.6	22.6

2023
Total at 31 December 2023	1.4	7.3	1.6	0.5	1.1	11.9	22.4	19.9	3.8	58.0
Of which:
–Secured	0.1	1.0	0.9	0.4	1.1	3.5	18.6	11.3	1.1	34.5
–Unsecured	1.3	6.3	0.7	0.1	—	8.4	3.8	8.6	2.7	23.5

(1)95% of senior unsecured debt issued from Santander UK Group Holdings plc has been downstreamed to Santander UK plc as ‘secondary non-preferential debt’ in line with the guidelines from the Bank of

England for Internal MREL.

(2)Includes funding from mortgage-backed securitisation vehicles where Santander UK plc is the asset originator.

(3)Includes funding from asset-backed securitisation vehicles where entities other than Santander UK plc are the asset originator.

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Currency composition of wholesale funds (audited)

This table shows our wholesale funding by major currency at 31 December 2024 and 31 December 2023.

	2024				2023
	Sterling	US Dollar	Euro	Other	Sterling	US Dollar	Euro	Other
	%	%	%	%	%	%	%	%
Santander UK Group Holdings plc
Senior unsecured – public benchmark	25	62	12	1	24	59	16	1
–privately placed	—	—	—	100	—	—	—	100
Subordinated liabilities and equity (incl. AT1)	89	11	—	—	88	12	—	—
	44	47	9	—	40	47	13	—
Santander UK plc
Deposits by banks	1	97	2	—	1	97	2	—
Certificates of deposit and commercial paper	24	67	8	1	29	70	—	1
Senior unsecured – public benchmark	48	—	52	—	21	56	23	—
–privately placed	100	—	—	—	98	—	2	—
Covered bonds	48	9	40	3	54	5	39	2
Securitisation & structured issuance	100	—	—	—	100	—	—	—
TFSME	100	—	—	—	100	—	—	—
Subordinated liabilities	76	24	—	—	76	24	—	—
	65	15	19	1	71	14	15	—
Other group entities
Securitisation & structured issuance	100	—	—	—	100	—	—	—
Total	60	23	16	1	63	22	14	1

Term issuance (audited)

In 2024, our external term issuance (sterling equivalent) was:

	Sterling	US Dollar	Euro	Other	Total 2024	Total 2023
	£bn	£bn	£bn	£bn	£bn	£bn
Santander UK Group Holdings plc
Senior unsecured – public benchmark	—	0.8	—	—	0.8	1.5
Subordinated debt and equity (inc. AT1)	0.4	—	—	—	0.4	1.1
	0.4	0.8	—	—	1.2	2.6
Santander UK plc
Securitisations and other secured funding	1.2	—	—	—	1.2	1.5
Covered bonds	2.2	0.8	2.6	0.3	5.9	1.8
Senior unsecured – privately placed	0.5	—	—	—	0.5	0.3
	3.9	0.8	2.6	0.3	7.6	3.6
Other group entities
Securitisations	—	—	—	—	—	0.5
Total gross issuances	4.3	1.6	2.6	0.3	8.8	6.7

2024 compared to 2023

Our overall funding strategy remains to develop and sustain a diversified funding base. We also need to fulfil regulatory requirements as well as support our credit

ratings. We have stable and diversified wholesale funding programmes.

In 2024 we issued £8.4bn Sterling equivalent medium-term funding, including Covered bond, Senior unsecured and RMBS issuances. We repaid £6.0bn of

TFSME in 2024 as planned, with an outstanding balance of £11.0bn at 31 December 2024. £7.1bn is due for repayment in October 2025, £2.5bn in 2027, and the

remaining £1.4bn.in 2031. We expect to issue £10-£12bn of medium-term funding in 2025, including £3.7bn equivalent already issued.

At 31 December 2024, 65% (2023: 79%) of wholesale funding had a maturity of greater than one year, with an overall residual duration of 37 months (2023:

35 months).

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Loan to deposit ratio

This table shows our customer loans, customer deposits and loan to deposit ratio (LDR) at 31 December 2024 and 31 December 2023, and the adjustments to

reconcile the data to the balance sheet.

	2024			2023
	Customer loans	Customer deposits	LDR(2)	Customer loans	Customer deposits	LDR(2)
	£bn	£bn	%	£bn	£bn	%
Total customer loans and deposits(1)	197.9	183.4	108%	206.7	193.6	107%
Adjust for fair value loans, impairment loss allowances, accrued interest and other	5.0	2.4		4.5	1.5
Statutory loans and advances to customers and deposits by customers	202.9	185.8	109%	211.2	195.1	108%

(1) The customer loans and customer deposits numbers agree to the customer balances in the Summarised segmental balance sheet in our Financial Overview on the year.

(2) Customer loans (Loans and advances to customers) divided by Customer deposits (Deposits by customers).

2024 compared to 2023

LDR of 109% (2023: 108%) following disciplined pricing actions, with mortgage lending and customer deposits down.

Encumbrance

We encumber an asset if we pledge or transfer it as collateral against a liability. This means it is no longer available to secure funding, meet our collateral needs or

be sold to reduce funding needs. Being able to pledge or transfer assets as collateral is a key part of a bank’s operations. The main ways we encumber assets are

that we: enter into securitisation, covered bonds, and repurchase agreements to access medium and long-term funding; enter into short-term funding transactions

(including repurchase agreements and stock borrowing) as part of our liquidity management; pledge collateral as part of participating in payment and settlement

systems; and post collateral as part of derivatives activity. We control levels of encumbrance by setting a minimum level of unencumbered assets after we factor in

our funding plans, whether we can use our assets for our future collateral needs, the impact of a stress and our current encumbrance level.

Assets classified as readily available for encumbrance include cash and securities in our eligible liquidity pool. All other loans and advances are classified as not

readily available for encumbrance, however, they may still be suitable for use in secured funding structures.

Encumbrance of customer loans and advances

We issued securitised products to a diverse investor base through our prime mortgage-backed and other asset-backed funding programmes. We raised funding

with mortgage-backed notes, both issued to third parties and retained – the latter being central bank eligible collateral for funding purposes in other Bank of

England facilities. We also have a covered bond programme, under which we issue securities to investors secured by a pool of residential mortgages. For more

on these programmes, see Notes 14 and 25 to the Consolidated Financial Statements.

On-balance sheet encumbered assets (audited)

	Encumbered with counterparties other than central banks				Assets positioned at central banks(3)
	Covered bonds	Securitis- ations	Other	Total
2024	£m	£m	£m	£m	£m
Cash and balances at central banks(1)(2)	—	—	1,580	1,580	—
Loans and advances to customers	25,695	7,026	68	32,789	49,888
Loans and advances to banks	—	—	139	139	—
Repurchase agreements – non trading	—	—	—	—	—
Other financial assets at amortised cost	—	—	1,529	1,529	—
Financial assets at fair value through other comprehensive income	—	—	3,920	3,920	584
Total assets	25,695	7,026	7,236	39,957	50,472

2023
Cash and balances at central banks(1)(2)	—	—	1,480	1,480	847
Loans and advances to customers	21,880	5,208	55	27,143	58,489
Loans and advances to banks	—	—	254	254	—
Repurchase agreements – non trading	—	—	—	—	—
Other financial assets at amortised cost	—	—	14	14	—
Financial assets at fair value through other comprehensive income	—	—	5,254	5,254	—
Total assets	21,880	5,208	7,057	34,145	59,336

(1)Encumbered cash and balances at central banks include minimum cash balances we have to hold at central banks for regulatory purposes.

(2)Readily realisable cash and balances at central banks are amounts held at central banks as part of our liquidity management activities.

(3)Comprises pre-positioned assets and encumbered assets.

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Capital risk

Overview Capital risk is the risk that we do not have an adequate amount or quality of capital to meet our business objectives, regulatory requirements and market expectations. In this section, we set out how we are regulated. We explain how we manage capital on a standalone basis as a subsidiary in the Banco Santander group. We then analyse our capital resources and key capital ratios including our leverage and RWAs. Key metrics CET1 capital ratio of 14.8% (2023: 15.2%) Total qualifying regulatory capital of £13.9bn (2023: £14.8bn) UK leverage ratio (T1 capital) of 4.9% (2023: 5.1%)

Regulatory supervision

For capital purposes, we are subject to prudential supervision by the PRA, as a UK banking group, and by the European Central Bank (ECB) as part of the Banco

Santander group. The ECB supervises Banco Santander as part of the Single Supervisory Mechanism (SSM). Although we are part of the Banco Santander

group, we do not have a guarantee from Banco Santander SA and we operate as a standalone subsidiary. As we are part of the UK sub-group regulated by the

PRA, we have to meet the PRA capital requirements on a standalone basis. We also have to show the PRA that we can withstand capital stresses without the

support of our ultimate parent, Banco Santander SA. Reinforcing our corporate governance framework, the PRA exercises oversight through its rules and

regulations on the Board and senior management appointments.

Santander UK Group Holdings plc is the holding company of Santander UK plc and is the head of the Santander UK group for regulatory capital and leverage

purposes. Santander UK plc is the head of the ring-fenced bank sub-group and is subject to regulatory capital and leverage rules in relation to that sub-group. Our

basis of consolidation for our capital disclosures is substantially the same as for our Consolidated Financial Statements.

CAPITAL RISK MANAGEMENT

Risk appetite

The Board is responsible for capital management strategy and policy and ensuring that we monitor and control our capital within regulatory and internal limits. We

manage our funding and maintain capital adequacy on a standalone basis. We operate within the capital risk framework and appetite approved by our Board. This

reflects the environment we operate in, our strategy for each material risk and the potential impact of adverse scenarios or stresses on our capital.

Management of capital requirements (audited)

Our capital risk appetite aims to maintain capital levels appropriate to the level of stress applied, and the expected regulatory response. In:

–An adverse economic stress, which we expect once in 20 years, we should remain profitable and exceed all regulatory capital minimums at all times.

–A very severe economic stress, which we expect once in 100 years, and which has been designed to test any specific weaknesses of our business model, we

should meet all regulatory capital minimums at all times. This is subject to using regulatory buffers designed to absorb losses in such a stress.

Risk measurement

We apply Banco Santander’s approach to capital measurement and risk management for CRD IV. Santander UK Group Holdings plc is classified as a large

subsidiary of Banco Santander SA. For more on the CRD IV risk measurement of our exposures, see Banco Santander’s Pillar 3 report.

Management of capital resources (audited)

We use a mix of regulatory and EC ratios and limits, internal buffers and restrictions to manage our capital resources. We also take account of the costs of

differing capital instruments and capital management techniques. We also use these to shape the best structure for our capital needs. We decide how to allocate

our capital resources as part of our strategic planning process. We base this in part on the relative returns on capital using both EC and regulatory capital

measures. We plan for severe stresses and we set out what action we would take if an extremely severe stress threatened our viability and solvency. This could

include not paying dividends, selling assets, reducing our business and issuing more capital.

Key metrics

The main metrics we use to measure capital risk are CET1 capital ratio, total capital ratio and UK leverage ratio. We continue to be in excess of overall capital

requirements, minimum leverage requirements and minimum requirements for own funds and eligible liabilities (MREL).

Stress testing

Each year we create a capital plan, as part of our ICAAP. We share our ICAAP with the PRA. The PRA then tells us how much capital (Pillar 2A), and of what

quality, it thinks we should hold on top of our Pillar 1 requirements and buffer levels. We also develop a series of economic scenarios to stress test our capital

needs and confirm that we have enough regulatory capital to meet our projected and stressed capital needs and to meet our obligations as they fall due.

Our CISA was developed to understand the impact of climate change on our business. We invested in a strategic solution which delivers the capability to run long-

term horizon multi-scenario assessments which reflect a range of climate outcomes. These outcomes cover shorter and longer-term horizons and reflect physical

and transition risks. The CISA outputs are used in our future ICAAP exercises for climate risk and will help us prioritise our actions for the next five years.

We augment our regulatory minimum capital with internal buffers. We hold buffers to ensure we have enough time to act against unexpected changes.

Risk mitigation

We designed our capital risk framework, policies and procedures to ensure that we operate within our Risk Appetite. We manage capital transferability between

our subsidiaries in line with our business strategy, risk and capital management policies, and UK laws and regulations. There are no legal restrictions on us

moving capital resources promptly, or repaying liabilities, between the Company and its subsidiaries except for loans and distributions between Santander UK

entities in the ring-fenced bank sub-group and Santander UK entities that are not members of the ring-fenced bank sub-group, where the PRA is required to

assess the impact of proposed distribution prior to payment. For details on our Recovery framework in the event of a capital stress, see 'risk mitigation' in the

‘Liquidity risk’ section.

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Capital support arrangements

At 31 December 2024, Santander UK Group Holdings plc and Santander Financial Services plc, the regulated entities, and Santander Equity Investments

Limited were party to a capital support deed dated 3 December 2024 which was effective from 3 December 2024 (the Non-RFB Sub-Group Capital

Support Deed). These parties were permitted by the PRA to form a core UK group as defined in the PRA Rulebook, a permission which expires on 3

December 2027. Exposures of each of the regulated entities to other members of the core UK group are exempt from large exposure limits that would

otherwise apply and these exposures are risk-weighted at 0%. Where applicable this permission also provides for intra-group exposures to be excluded

from the leverage exposure measure. The purpose of the Non-RFB Sub-Group Capital Support Deed is to facilitate the prompt transfer of available capital

resources from, or repayment of liabilities by, the non-regulated entities to any of the regulated entities in the event that one of the regulated entities

breached or was at risk of breaching its capital resources or risk concentrations requirements.

Risk monitoring and reporting

We monitor and report regularly against our capital plan. We do this to identify any change in our business performance that might affect our capital. Each month,

we also review the economic assumptions we use to create and stress test our capital plan. We do this to identify any potential reduction in our capital.

CAPITAL RISK REVIEW

Meeting evolving capital requirements

We target a CET1 management buffer of sufficient size to absorb volatility in CET1 deductions, capital supply and capital demand whilst remaining above the

current and expected future regulatory CET1 requirement. Distribution restrictions would be expected to be applied if we were unable to meet both our minimum

requirement, which consists of the Pillar 1 minimum plus Pillar 2A, the CRD IV buffers consisting of the Capital Conservation Buffer (CCB), the Countercyclical

Capital Buffer (CCyB), and the Other Systemically Important Institutions Buffer (O-SII) at the level of the RFB group.

Impact of IFRS 9 on regulatory capital

Our ECL methodology takes account of forward-looking data and covers a range of possible economic outcomes, and so provision movements may result in

increased pro-cyclicality of risk-based capital and leverage ratios. However, the impact is currently mitigated by our surplus of IRB model regulatory expected

losses over provisions for exposures using the IRB approach. For such exposures (which include residential mortgages) the adverse impact on CET1 capital of

provision increases from reserve movements is offset by the related reduction of the negative CET1 capital adjustment for regulatory expected loss amounts. Also,

the UK CRR transitional rules for the capital impact of IFRS 9 meant that adverse CET1 effects from increases in ECL-based provisions from the level of such

provisions at 1 January 2018 were partly reduced until the end of 2024.

We reflect projections of ECL provisions in our capital position forecasting under base case and stress scenarios for ICAAP and capital management purposes.

We also consider the dynamics of ECL in how we assess and manage capital risk. A period of economic instability, such as that seen in early 2020 due to the

impacts of the Covid-19 pandemic, could significantly impact our results and our financial assets. It could also impact the amount of capital we have to hold. We

consider the volatility of ECL in our capital planning strategy.

Bank of England stress testing

The results of the latest Bank of England stress test were released on 12 July 2023. As a result of the exercise, the Bank of England did not require Santander UK

to undertake any actions. Before management actions, the CET1 capital ratio low-point of 11.3% is well above the hurdle rate of 8.1%. Additionally, the UK

leverage ratio low-point of 4.1% without strategic management actions and 4.5% with strategic management actions is above the hurdle rate of 3.5%. The Bank of

England’s hurdle rate comprises the sum of minimum capital requirements (4.5% of RWA plus Pillar 2A for the CET1 ratio, and 3.25% of leverage exposure for the

UK leverage ratio), applicable systemic buffers, and an adjustment to offset the pro-cyclical impacts of IFRS 9.

Key capital ratios

	2024	2023
	%	%
CET1 capital ratio	14.8	15.2
AT1	3.2	3.2
Tier 2	2.9	3.0
Total capital ratio	20.9	21.4
Total subordination available to Santander UK plc senior unsecured bondholders as a % of RWAs	21.0	21.5
Return on assets - profit after tax divided by average total assets	0.34	0.55

Movement in CET1 capital ratio

	%
1 January 2024	15.2
- Profit	1.4
- Dividends and AT1 coupons	(2.1)
- Expected loss less provisions and pension	(0.2)
- RWA and other	0.5
31 December 2024	14.8

2024 compared to 2023

The CET1 capital ratio decreased 40bps to 14.8% (2023: 15.2%), driven by lower profits and £1.3bn in dividends paid in 2024 (2023: £1.5bn), including £0.8bn

(2023: £750m) of which was a special dividend, slightly offset by a reduction in RWA exposure.

Structural hedge evolution

Our structural hedge position increased to £110bn (2023: £106bn), with a duration of 2.4 years (2023: 2.4 years). We are well positioned for bank rate reductions.

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Regulatory capital resources (audited)

This table shows our qualifying regulatory capital:

	2024	2023
	£m	£m
CET1 capital instruments and reserves:
– Capital instruments	7,060	7,060
- Retained earnings	5,258	6,047
- Accumulated other reserves	(325)	(337)
CET1 capital before regulatory adjustments	11,993	12,770
CET1 regulatory adjustments:
- Additional value adjustments (unaudited)	(14)	(15)
- Goodwill (net of tax)	(1,129)	(1,129)
- Other intangibles	(340)	(349)
– Fair value reserves related to gains or losses on cash flow hedges(1)	311	335
- Negative amounts resulting from the calculation of regulatory expected loss amounts (unaudited)	(658)	(595)
- Gains or losses on liabilities valued at fair value resulting from changes in own credit standing	1	(14)
- Defined benefit pension fund assets	(316)	(520)
- Dividend accrual	(3)	(3)
- IFRS 9 Transitional Adjustment (unaudited)	12	44
CET1 capital	9,857	10,524
AT1 capital instruments:
- Capital instruments	2,100	2,196
AT1 capital	2,100	2,196
Tier 1 capital	11,957	12,720
Tier 2 capital instruments:
- Capital instruments	2,203	2,193
- Amount of qualifying items subject to phase out from Tier 2	182	193
- Regulatory deductions for instruments issued by subsidiary undertakings or subject to CRDIV amortisation and repurchases	(401)	(331)
Tier 2 capital	1,984	2,055
Total capital(2)	13,941	14,775

(1) Amount includes £0.6m (2023: £1.3m) for cashflow hedge reserves at FVOCI.

(2) Capital resources include a transitional IFRS 9 benefit at 31 December 2024 of £12.2m (2023: £43.0m).

Movements in regulatory capital

	CET1 capital	AT1 capital	Tier 2 capital	Total
	£m	£m	£m	£m
At 1 January 2024	10,524	2,196	2,055	14,775
- Retained earnings	(789)	—	—	(789)
- Other reserves	12	—	—	12
- Additional value adjustments (unaudited)	1	—	—	1
- Goodwill (net of tax)	—	—	—	—
- Other intangibles	9	—	—	9
- Fair value reserves related to gains or losses on cashflow hedges	(24)	—	—	(24)
- Negative amounts resulting from the calculation of regulatory expected loss amounts (unaudited)	(63)	—	—	(63)
- Gains or losses on liabilities valued at fair value resulting from changes in own credit standing	15	—	—	15
- Defined benefit pension fund assets	204	—	—	204
- Dividend accrual	—	—	—	—
- IFRS 9 Transitional Adjustment (unaudited)	(32)	—	—	(32)
- Capital instruments	—	(96)	10	(86)
- Amounts of qualifying items subject to phase out from Tier 2	—	—	(11)	(11)
- Regulatory deductions for instruments issued by subsidiary undertakings or subject to CRDIV amortisation and repurchases	—	—	(70)	(70)
At 31 December 2024	9,857	2,100	1,984	13,941

In line with the position of the Basel Committee views following the outbreak of the Covid-19 pandemic, the UK adopted revised IFRS 9 transitional adjustment

rules which apply a higher level of transitional relief to capital following rises in IFRS 9 provisions. The transitional period ended on 31 December 2024.

CET1, AT1 and Tier 2 regulatory adjustments

These are adjustments required by CRD IV.

AT1 capital

All of the Fixed Rate Reset Perpetual AT1 Capital Securities fully meet the CRD IV AT1 capital rules.

Tier 2 capital

These are fully CRD IV eligible Tier 2 instruments under CRD IV.

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MREL recapitalisation

At 31 December 2024, we had outstanding £10.8bn of MREL compliant senior unsecured bonds.

Our forward-looking MREL recapitalisation plan assumes the Pillar 2A requirement remains consistent with our latest Total Capital Requirement (TCR) and

exchange rates at 31 December 2024. Santander UK Group Holdings plc's indicative MREL requirements, including combined buffer requirements, are circa

£19.3bn from 31 December 2024.

In addition to meeting our minimum requirement, we intend to have an MREL recapitalisation management buffer in excess of the value of Santander UK Group

Holdings plc senior unsecured securities that are due to become MREL ineligible over the following six months, plus a buffer for foreign exchange movements.

Headroom of our CET1 capital ratio to our current MDA trigger level at 31 December 2024

At 31 December 2024, the headroom of our CET1 capital ratio of 14.8% to our 7% AT1 permanent write down (PWD) securities trigger was 7.8% of total RWAs or

£5.2bn (2023: 8.2% of total RWAs or £5.7bn).

Regulatory headroom	CET1 capital		UK leverage		Total capital		MREL
	£bn	%	£bn	%	£bn	%	£bn	%
Dec-24 position	9.9	14.8	11.8	4.9	13.9	20.9	24.1	36.3
Minimum requirement	7.5	11.2	10.4	4.3	11.0	16.5	19.3	29.0
Distance to MDA / excess	2.4	3.6	1.4	0.6	2.9	4.4	4.8	7.3
Dec-23 position	10.5	15.2	12.5	5.1	14.8	21.4	26.1	37.8
Minimum requirement	7.8	11.3	10.6	4.3	11.5	16.6	19.8	28.7
Distance to MDA / excess	2.7	3.9	1.9	0.8	3.3	4.8	6.3	9.1

The headroom of our CET1 capital ratio to our current maximum distributable amount (MDA) trigger level at 31 December 2024 was:

Minimum requirement breakdown (%)	31 December 2024				31 December 2023
	CET1 capital	UK leverage	Total capital	MREL	CET1 capital	UK leverage	Total capital	MREL
Pillar 1	4.5	—	8.0	—	4.5	—	8.0	—
Pillar 2A	2.3	—	4.1	—	2.3	—	4.1	—
Capital conservation buffer	2.5	—	2.5	2.5	2.5	—	2.5	2.5
Countercyclical capital buffer	1.9	0.7	1.9	1.9	2.0	0.7	2.0	1.9
Base leverage	—	3.3	—	—	—	3.3	—	—
Leverage (6.75% leverage)	—	—	—	24.6	—	—	—	24.3
Systemic (O-SII requirements for RFB)	—	0.3	—	—	—	0.3	—	—
Minimum requirement	11.2	4.3	16.5	29.0	11.3	4.3	16.6	28.7

Distance to MDA/excess for CET1 capital, total capital and MREL ratios are measured on Santander UK Group Holdings plc requirements and exclude a 1.0%

RFB systemic buffer.

Risk-weighted assets

The tables below are consistent with our regulatory filings for 31 December 2024 and 31 December 2023.

	2024	2023
RWAs by risk	£bn	£bn
Credit risk	57.9	60.2
Counterparty risk	0.6	0.7
Market risk	0.2	0.4
Operational risk	7.9	7.8
	66.6	69.1

	2024	2023
RWAs by segment	£bn	£bn
Retail & Business Banking	42.0	43.2
– Mortgages	31.8	32.8
– Everyday Banking	10.2	10.4
Consumer Finance	7.2	7.4
Corporate & Commercial Banking	13.0	13.6
Corporate Centre	4.4	4.9
	66.6	69.1

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	Credit/ counterparty risk	Market risk	Operational risk	Total
Movements in RWAs by risk	£bn	£bn	£bn	£bn
At 1 January 2024	60.9	0.4	7.8	69.1
Asset size	(0.9)	(0.2)	0.1	(1.0)
Asset quality	1.6	—	—	1.6
Model updates	0.1	—	—	0.1
Methodology and policy	(1.0)	—	—	(1.0)
Other	(2.2)	—	—	(2.2)
At 31 December 2024	58.5	0.2	7.9	66.6

Regulatory leverage

	2024	2023
	£m	£m
Regulatory exposure	242,403	247,214
End-point Tier 1 capital(1)	11,827	12,533
UK leverage ratio	4.9%	5.1%
BBLS lending excluded from leverage exposure	(1,188)	(1,828)

(1)Includes deductions and AT1 adjustment permitted under the recommendation from the Financial Policy Committee on 25 July 2016.

Under the PRA rules, we adjust our total assets per the Consolidated Balance Sheet to calculate our regulatory exposure for leverage purposes. We do

this as follows:

	2024	2023
	£m	£m
Total assets per the Consolidated Balance Sheet	267,076	282,083
Derivatives netting and potential future exposure	(199)	(252)
Securities financing current exposure add-on	624	778
Removal of IFRS netting	672	805
Removal of qualifying central bank claims	(34,255)	(42,351)
Commitments calculated in accordance with Basel Committee Leverage Framework	8,586	7,275
CET1 regulatory adjustments	(101)	(1,124)
	242,403	247,214

The adjustments are:

–Derivatives netting and potential future exposure: where a qualifying netting agreement is in place netting is allowed for leverage purposes. This is partially

offset by including the Potential Future Exposure (PFE) we use to calculate EADs

–Securities financing current exposure add-on: we include an add-on for securities financing transactions to show current exposure for leverage purposes

–Removal of IFRS netting: where netting of assets and liabilities is allowed under IFRS, but not under the Basel rules, we remove it for leverage purposes

–Removal of qualifying central banks claims: permitted under PRA Rulebook.

–Commitments calculated in accordance with Basel Committee Leverage Framework: we add the gross value of off-balance sheet commitments for

leverage purposes after we apply regulatory credit conversion factors

–CET1 regulatory adjustments: where we have deducted assets from CET1, they can be deducted for leverage purposes.

2024 compared to 2023

The UK leverage exposure decreased to £242.4bn (2023: £247.2bn), as a result of active balance sheet management.

Distributable items

Distributable items are equivalent to distributable profits under the UK Companies Act 2006. The distributable items of Santander UK Group Holdings plc under

CRD IV at 31 December 2024 and 31 December 2023, and movements in the period, were as follows:

	2024	2023
	£m	£m
At 1 January	4,315	4,307
Dividends approved:
–AT1 Capital Securities	(139)	(133)
–Tax on above item	26	25
–Ordinary shares	(1,295)	(1,538)
Dividends receivable:
–Investment in AT1 Capital Securities	129	123
–Tax on above item	(24)	(23)
–Investment in ordinary shares of subsidiary	1,317	1,562
Other income statement items (Company)	(9)	(8)
At period end	4,320	4,315

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Market risk

Overview Market risk comprises non-traded market risk and traded market risk. Non-traded market risk is the risk of loss of income, economic or market value due to changes to interest rates in the non-trading book or to changes in other market risk factors (e.g. credit spread and inflation risk), where such changes would affect our net worth through an adjustment to revenues, assets, liabilities, and off-balance sheet exposures in the non-trading book. Traded market risk is the risk of changes in market factors that affect the value of the positions in the trading book. We have no significant traded market risk exposure. In this section, we set out which of our assets and liabilities are exposed to non-traded and traded market risk. Then we explain how we manage these risks and discuss our key market risk metrics. Key metrics Net Interest Income (NII) sensitivity to +100bps was £166m and to ‑100bps was £(200)m (2023: £218m and £(220)m). Economic Value of Equity (EVE) sensitivity to +100bps was £(502)m and to ‑100bps was £429m (2023: £(303)m and £267m).

Balance sheet allocation by market risk classification(audited)

We classify all our assets and liabilities exposed to market risk as non-traded market risk, except for certain portfolios that we must classify as trading books for

regulatory purposes (such as selling derivatives or derivative-based products to clients), of which we must fair value for accounting reasons (such as assets in the

eligible liquidity pool). For accounting purposes, we classify all derivatives as held for trading unless they are designated as being in a hedging relationship. For

more, see Note 11 to the Consolidated Financial Statements.

NON-TRADED MARKET RISK

OUR KEY NON-TRADED MARKET RISKS (audited)

Non-traded market risk mainly comes from providing banking products and services to our customers, as well as our structural balance sheet exposures. It arises

in all our business segments. In Retail & Business Banking, Consumer Finance and Corporate & Commercial Banking, it is a by-product of us writing customer

business and we transfer most of these risks to Corporate Centre to manage. The only types of non-traded market risk that we keep in Retail & Business Banking,

Consumer Finance and Corporate & Commercial Banking are short-term mismatches due to forecasting variances in prepayment and launch risk. This is where

customers repay their loans earlier than their expected maturity date or do not take the expected volume of new products. Corporate Centre also manages our

structural balance sheet exposures, such as foreign exchange and Income Statement volatility risk.

Our non-traded market risk categories are:

Category	Description
Interest rate risk	Interest rate risk mainly consists of yield curve risk, which comes from timing mismatches in repricing fixed and variable rate assets, liabilities and off-balance sheet instruments. It also comes from investing non-rate sensitive liabilities in interest-earning assets.
Spread risk	Spread risk arises when the value of assets or liabilities which are accounted for at fair value (either through Other Comprehensive Income or through profit and loss) are affected by changes in the credit spread. We measure these spreads as the difference between the discount rate we use to value the asset or liability, and an underlying interest rate curve.
Foreign exchange risk	Our banking businesses operate mainly in sterling markets, so we do not create significant foreign exchange exposures. The only exception to this is money we raise in foreign currencies. For more on this, see ‘Wholesale funding’ in the ‘Liquidity risk’ section.
Income statement volatility risk	We measure most of the assets and liabilities in our banking book balance sheet at amortised cost. We sometimes manage their risk profile by using derivatives. As all derivatives are accounted for at fair value, the mismatch in their accounting treatment can lead to volatility in our Income Statement. This happens even if the derivative is an economic hedge of the asset or liability.

NON-TRADED MARKET RISK MANAGEMENT

Risk appetite

Our Structural and Market Risk framework sets out our high-level arrangements and standards to manage, control and oversee non-traded market risk (also

known as structural risk), and is part of our overall Risk Framework. Our Risk Appetite sets the controls, risk limits and key risk metrics for non-traded market risk.

We show risk appetite by the income and value sensitivity limits we set in our Risk Appetite, at both Santander UK and Banco Santander group levels.

Risk measurement 

We mainly measure our exposures with NII and EVE sensitivity analysis. We support this with VaR risk measures and stress testing. We also monitor our interest

rate repricing gap. We regularly review our risk models and metrics including underlying model assumptions to ensure they continue to reflect the risks inherent in

the current rate environment and regulatory expectations.

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NII and EVE sensitivities (audited)

The calculations for NII and EVE sensitivities to interest rate moves involve many assumptions, including expected customer behaviour (such as early repayment

of loans) and the projected evolution and repricing of our balance sheet. These assumptions are a key part of our overall control framework, so we update and

review them regularly. Our NII and EVE sensitivities include the interest rate risk from all our banking book positions. Our banking book positions generate almost

all our reported net interest income.

Net Interest Income (NII) sensitivity

–NII sensitivity is an income-based measure we use to forecast the changes to interest income and interest expense in different scenarios. It gives us a combined impact

on net interest income over a given period – usually 12 or 36 months.

–We calculate NII sensitivity as the change in NII for a defined set of instantaneous parallel and non-parallel shifts in the yield curve.

EVE sensitivity

–We calculate EVE sensitivity as the change in the net present value of all the interest rate sensitive items in the banking book balance sheet for a defined set of

instantaneous parallel and non-parallel shifts in the yield curve.

The limitations of sensitivities

We use sensitivities to measure the impact of standard, instantaneous, parallel shifts in relevant yield curves. The advantage of using standard parallel shifts is

they generally give us a constant measure of the size of our market risk exposure, with a simple and consistent stress. We also run non-parallel stress tests, to

calculate the impact of some plausible non-parallel scenarios, and over various time periods for income stresses, usually one or three years.

Value at Risk (VaR) (audited)

VaR

–VaR indicates possible losses from market changes in non-stressed conditions.

–We run a historical simulation. We use two years of historical daily price moves. We report a 99% confidence level.

The limitations of VaR

VaR is a standard risk measure. It has limitations including:

–It assumes the past is a reliable guide to the possible future.

–It uses end of day positions. It would miss higher risk run only during the day.

–It does not predict the loss on the 1% largest-loss days (outside the 99% confidence interval).

–We use a history of one day price moves. This is reasonable for our business but VaR does not cover positions we could not sell or hedge quickly, or products

whose prices cannot be observed.

Back-testing – comparing VaR estimates with actual profit and loss

To check that our VaR is reasonable, we compare it against our observed profits and losses for the same area. This confirms the VaR model is working. If we

found it were not, we would investigate, and correct it if required.

Stress testing

Stress testing is an essential part of our risk management. It helps us to measure and evaluate the potential impact on portfolio values of more extreme, although

plausible, events or market moves. Limits reflect our risk appetite and are expressed relative to the loss given a stress event, thereby restricting how much risk we

take.

Stress testing scenarios

Simple stress tests (like parallel shifts in relevant curves) give us clear measures of risk and a consistent starting point for setting limits. More complex, multi-factor

and multi-time period stress tests give us information about specific potential events. They can also test outcomes that we might not capture through parallel

stresses or VaR-type measures. We use stress tests to estimate losses in extreme market events beyond the confidence level used in VaR models.

We can adapt our stress tests to reflect concerns such as climate change risk, other macroeconomic and geopolitical events or changing market conditions. We

run individual business area stresses and Santander UK-wide scenarios.

Other ways of measuring risk

As well as using sensitivities and stress tests, we can measure non-traded market risk using net notional positions. This can give us a simple view of our

exposure, although we generally need to combine it with other risk measures to cover all aspects of a risk profile, such as projected changes over time. Other

metrics we can use include Earnings at Risk (EaR). EaR is like VaR but captures changes in income rather than value.

Risk mitigation (audited)

We typically hedge the interest rate risk of the securities we hold for liquidity and investment purposes with interest rate swaps. We retain spread exposures,

and these are the key drivers of the VaR and stress tests we use to assess the risk of the portfolio. We mitigate Income Statement volatility mainly through hedge

accounting. We monitor any hedge accounting ineffectiveness that might lead to Income Statement volatility with a VaR measure and trigger, reported monthly.

For our accounting policies for derivatives and hedge accounting, see Note 1 to the Consolidated Financial Statements.

We hedge our foreign currency funding positions back to sterling, so our foreign exchange positions tend to be residual exposures that remain after hedging.

These exposures could be, for example, to ‘spot’ foreign exchange rates or to cross currency basis. We monitor foreign exchange risk against absolute net

exposures and VaR-based limits and triggers.

For more on this, see ‘Funding strategy‘ and ‘Term issuance’ in the ‘Liquidity risk’ section.

Risk monitoring and reporting (audited)

We monitor our non-traded market risks using NII and EVE sensitivities, VaR and stress tests. We report them against limits and triggers to senior management

daily and to ALCO and ERCC each month. The VaR we report captures all key sources of volatility (including interest rate and spread risks) to fully reflect

potential volatility.

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NON-TRADED MARKET RISK REVIEW

Interest rate risk

Yield curve risk

The table below shows how our net interest income would be affected by a 100bps parallel shift (both up and down) applied instantaneously to the yield curve at

31 December 2024 and 31 December 2023. Sensitivity to parallel shifts represents the amount of risk in a way that we think is both simple and scalable.

	2024		2023
	+100bps	-100bps	+100bps	-100bps
	£m	£m	£m	£m
NII sensitivity (audited)(1)	166	(200)	218	(220)
EVE sensitivity	(502)	429	(303)	267

(1)Based on modelling assumptions of repricing behaviour.

NII Sensitivity is adversely exposed to down-shock scenarios driven by margin compression of core liabilities, partly offset by the structural position. EVE

sensitivity is adversely exposed to rising interest rate scenarios.

EVE sensitivity reflects the potential impact on economic value due to the structural mismatch of assets and liabilities (excluding equity) over the longer term.

The EVE metric excludes equity as a source of non-rate sensitive funding, as equity is invested into the structural position the metric typically reflects an adverse

exposure to rising rate scenarios.

Interest rate repricing gap

The table below shows the interest rate repricing gap of our balance sheet by repricing buckets.

	3 months	1 year	3 years	5 years	>5years	Not sensitive	Total
2024	£m	£m	£m	£m	£m	£m	£m
Assets	97,727	52,118	94,733	22,287	8,417	15,199	290,481
Liabilities	114,318	52,147	53,870	44,665	2,081	24,238	291,319
Off-balance sheet	3,803	2,772	(19,629)	15,797	(1,905)	—	838
Net gap	(12,788)	2,743	21,234	(6,581)	4,431	(9,039)	—

2023
Assets	108,319	49,315	81,018	41,265	5,708	14,738	300,363
Liabilities	120,593	51,186	55,143	46,755	2,558	25,006	301,241
Off-balance sheet	11,389	2,329	(14,678)	(316)	2,154	—	878
Net gap	(885)	458	11,197	(5,806)	5,304	(10,268)	—

Spread risk

The table below shows the risk metrics covering the portfolios of securities we hold for liquidity and investment purposes.

	2024	2023
	£m	£m
VaR	5	5
Worst three month stressed loss	110	86

We regularly review our risk models and metrics including the scenarios and underlying modelling assumptions we use, to ensure they continue to reflect the risks

in the current economic environment, and incorporate regulatory expectations.

2024 compared to 2023

In 2024 NII sensitivity decreased, and EVE sensitivity increased, mainly reflecting the overall increase in the structural hedge position relative to non-rate

sensitive liabilities.

TRADED MARKET RISK

We have no significant traded market risk exposure. The risk we do have is from providing permitted financial services to permitted customers. This is in our main

Ring-Fenced Bank, Santander UK plc.

Traded market risk can reduce our net income. Movements in interest rates, credit spreads, and foreign exchange rates affect the value of products we have.

Santander UK plc has two trading desks. The Link Desk transacts derivatives with our corporate clients. The Structured Products Group (SPG) sells investments

to retail investors, through our UK branches and other channels. Banking Reform legislation requires Santander UK plc to have immaterial market risk. We hedge

risks from customer trades, mostly with Banco Santander SA. We calculate market risk capital using standard rules.

The Internal VaR for exposure to traded market risk at 31 December 2024 was less than £1m (2023: less than £1m).

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Pension risk

Overview Pension risk is the risk caused by our statutory contractual or other liabilities with respect to a pension scheme (whether set up for our employees or those of a related company or otherwise). It also refers to the risk that we will need to make payments or other contributions with respect to a pension scheme due to some other reason. In this section, we explain how we manage pension risk, including our investment and hedging strategies. We also discuss our key metrics and developments in the year. Key metrics Funding Deficit at Risk was £830m (2023: £980m) Funded defined benefit pension scheme accounting surplus was £439m (2023: £723m)

OUR KEY PENSION RISKS

Pension risk is one of our key financial risks. Santander UK plc is the sponsor of the Santander (UK) Group Pension Scheme (the Scheme), a defined benefit

scheme. Our risk is that, over the long-term, the Scheme’s assets are not enough to meet its liabilities as they fall due. If this happens, we could have to (or

choose to) make extra contributions. We might also need to hold more capital to reflect this risk.

The Scheme, risk metrics and regulatory capital can be sensitive to changes in the assumptions of the risk categories shown below.

Categories	Description
Interest rate risk	The risk that a decrease in (long-term) interest rates causes an increase in the value of the Scheme’s liabilities that are not matched by an increase in the value of its assets.
Inflation risk	Annual pension increases are directly linked to RPI or CPI. The risk is that an increase in inflation causes an increase in the value of the Scheme’s liabilities that are not matched by an increase in the value of its assets.
Longevity risk	The Scheme’s liabilities are in respect of current and past employees and are expected to stretch beyond 2080 due to the long-term nature of the obligation. Therefore, the Scheme’s liabilities are also impacted by changes to the life expectancy of Scheme members over time.
Investment risk	The risk that the return on the Scheme’s assets is insufficient to meet the liabilities.

For more on our defined benefit schemes, including sensitivity analysis of our key actuarial assumptions, see Note 28 to the Consolidated Financial Statements.

Defined contribution schemes

We also have defined contribution schemes for some of our employees. These schemes carry far less market risk for us, although we are still exposed to

operational and reputational risks. For more on our defined contribution schemes, see Note 28 to the Consolidated Financial Statements.

The impact of our defined benefit schemes on capital

We take account of the impact of pension risk on our capital as part of our planning and stress testing process, considering measures such as the impact on

CET1 and Pillar 2A, and also where relevant the impact on the related measures such as the leverage ratio.

Our defined benefit pension schemes affect capital in two ways:

–We treat an IAS 19 deficit as a liability on our balance sheet. We recognise deficit movements in Other Comprehensive Income, so this reduces shareholders’

equity and CET1 capital. We treat an IAS 19 surplus as an asset. This increases shareholders’ equity, but it is deducted in determining CET1 capital. An IAS 19

surplus/deficit is partially offset by a deferred tax liability/asset. These may be recognised for calculating CET1 capital depending on our overall tax position.

–The PRA takes pension risk into account in the Pillar 2A capital assessment in the annual ICAAP exercise. Pillar 2A is part of our overall regulatory requirement

for CET1 capital, Tier 1 capital and total capital. For more on our regulatory requirements, see the ‘Capital risk’ section.

PENSION RISK MANAGEMENT

For details of how the Scheme is governed and operates, see Note 28 to the Consolidated Financial Statements.

Risk appetite

Our Risk Appetite is a key consideration in all decisions and risk management activities related to the Scheme. Our pension risk appetite is reviewed by our

Pension Forum at least once a year. It is then sent to the Board for approval. We measure pension risk on both a technical provisions (funding) basis and an

accounting (IAS 19) basis. We manage pension risk on both the accounting and the funding basis. Both bases are inputs into our capital calculations.

Risk measurement

Our key risk metrics include:

Key risk metrics	Description
Funding Deficit at Risk	We use a VaR and a forward-looking stress testing framework to model the Scheme’s assets and liabilities to show the potential deterioration in the funding position.
Sponsor Contributions	We use a VaR and a forward-looking stress testing framework to model the potential contribution that could be payable to the Scheme by a pre-defined fixed date in the future.
Pensions Volatility	We use a VaR and a forward-looking stress testing framework to model the volatility in the pension-related capital deduction.

In addition to investing in liquid debt markets, the Scheme invests in certain assets whose values are not based on market observable data, such as investments

in private equity funds and property. For more on this, see Note 28 to the Consolidated Financial Statements. The risks of these assets are included in the metrics

described above.

We perform stress tests for regulators, including for ICAAPs and PRA stress tests. For more on our stress testing, see the 'Risk governance' section.

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Climate change scenario testing gives us the capacity to simulate risk exposures over an extended time horizon. The Trustee has an ambition to achieve net zero

by 2050, which it factors into its decision making.

Risk mitigation

The key tools we use to maintain the above key risk metrics within appetite are:

Key tools	Description
Investment strategies	The Trustee developed the following investment objectives to reflect their main duty to act in the best interests of Scheme beneficiaries: –To maintain a diversified portfolio of assets of appropriate quality, security, liquidity and profitability to generate income and capital growth to meet, with new contributions from members and employers, the cost of current and future benefits that the Scheme provides –To limit the risk that the assets fail to meet the liabilities –To invest in a manner appropriate to the nature and duration of the expected future retirement benefit payments under the Scheme –To minimise the Scheme's long-term costs by maximising asset returns net of fees and expenses whilst reflecting the objectives above. The investment strategy is regularly reviewed, and its impact on Funding Deficit at Risk is considered.
Hedging strategies	The Trustee employs asset-liability matching arrangements including the use of liability driven investment strategies, and has a hedging strategy to reduce key market risks, mainly interest rate and inflation risk, but also currency and longevity risk. We monitor available collateral and liquidity with the objective of ensuring we have sufficient collateral and/or liquidity available to meet any margin calls.
Environmental, social and governance (ESG)	The Trustee has established a Sustainability Committee which is responsible for overseeing the Scheme’s policies, regulatory obligations and priorities in respect of climate change and wider ESG related matters.

We look at the impact on our risk metrics when determining the appropriateness of the investment and hedging strategies.

Risk monitoring and reporting

We monitor pension risk each month and report on it at the Pension Forum, ERCC and, where thresholds are exceeded (or likely to be), to the Board Risk

Committee and the Board in line with our pension risk appetite. This also includes quarterly monitoring of corporate credit exposures to assess any concentrations

of risk. We discuss any remedial action with the Trustee. In addition, we monitor the performance of third parties who support the valuation of the Scheme’s assets

and liabilities.

PENSION RISK REVIEW

2024 compared to 2023

We made further refinements in 2024 as part of the CISA exercise.

The underlying level of risk in the Scheme reduced in 2024. This was mainly driven by increased interest and inflation hedging in the first half of the year and the

continuing disposals of illiquid assets, including the sale of some private equity assets.

Our main focus is to ensure the Scheme achieves the right balance between risk and reward whilst minimising the impact on our capital and financial position. At

31 December 2024, the Funding Deficit at Risk decreased to £830m (2023: £980m), mainly due to the hedging noted above with the interest rate hedge ratio at

98% (2023: 89%) and the inflation hedge ratio at 99% (2023: 82%) on a funding basis.

The Scheme's collateral and liquidity position continued to be monitored closely in light of the increase in long term gilt yields seen over the second half of 2024.

We also monitor the potential impact from variations in the IAS 19 position of CET1 capital. There was a moderate impact on CET1 capital caused by movements

in the IAS 19 position in the year. For more on the impact of our defined benefit schemes on capital, see the 'Capital Risk' section.

In 2024, we adopted a new version of the model that we use to set the IAS19 discount rate. The updated model is based on an expanded data set which is

expected to improve its stability. We also updated the mortality improvement assumption we use to value the floating leg of the longevity swap following a mortality

basis review carried out by the insurer and the Trustee. We also updated the mortality improvement assumption underlying the liability valuation to reflect latest

data available.

The accounting position deteriorated in 2024. For the section in deficit, this deterioration was more than offset by the deficit contributions paid. The Scheme

sections in surplus had an aggregate surplus of £439m at 31 December 2024 (2023: £723m) while there were no sections which had a deficit at 31 December

2024 (2023: one). The overall funded position was a £439m surplus (2023: £682m surplus). There were also unfunded liabilities of £23m at 31 December 2024

(2023: £25m). The overall deterioration was mainly due to a rise in gilt yields which caused assets to decrease by more than the liabilities, and decreases in the

value of certain illiquid assets. There remains considerable market uncertainty and our position could change materially over a short period.

For more on our pension schemes, including the asset allocation and our accounting assumptions, see Note 28 to the Consolidated Financial Statements.

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Strategic and business risk

Overview

Strategic and business risk is the risk of significant loss or underperformance against planned objectives; damage arising from strategic decisions or their

poor implementation; an inability to adapt to external developments that impact the long-term interests of our key stakeholders.

In this section, we describe our key strategic and business risks and explain how we manage them. We also describe developments in the year.

OUR KEY STRATEGIC AND BUSINESS RISKS

Strategic and business risk could impact our long-term success if it caused our business model to become ineffective, out of date, or inconsistent with our goals.

This could happen if we are unable to identify threats arising from the economy, competitors, regulations, and/or changes in technology and customer

expectations. We could be exposed to this risk if we misjudge our capabilities, or the ability to implement our strategy, or pursue initiatives that do not fit with our

business model or miss opportunities we could benefit from.

STRATEGIC AND BUSINESS RISK MANAGEMENT

Risk management	Description
Risk appetite	We have a low to moderate appetite for strategic and business risk. This limits the risks we are prepared to take to achieve our strategic objectives and is aligned to our balanced, customer-centric business model.
Risk measurement	Our Board and senior management regularly review potential risks in our operations and plans to ensure we stay within risk appetite.
Risk mitigation	We manage strategic and business risk by having a clear and consistent strategy that takes account of external factors and our own capabilities. We have an effective planning process which ensures we adapt our strategy to reflect changes in risks and opportunities.
Risk monitoring and reporting	We closely track our business environment, including long-term trends that might affect us in the future. As part of this, we report a range of indicators. These include our KPIs as set out in the ‘Strategic report’.

STRATEGIC AND BUSINESS RISK REVIEW

2024 compared to 2023

In 2024, we continued to transform ourselves and made changes to serve our customers better by offering them the best products at the best value and with

a frictionless digital experience. To deliver this we focused our transformation on three core pillars:

–Commercial Transformation: creating better propositions,

–Operational Transformation: creating better capabilities, and

–Cultural Transformation: creating an organisation with an even greater focus on high performance and customer focus.

We successfully delivered phase 2 of the Consumer Duty mandate which delivered a sustainable customer-focused operating model, and shifted us to a more

customer outcome-focused culture. We continue to face a demanding regulatory agenda and have multiple ongoing projects to ensure regulatory compliance. We

will continue to work through these requirements in 2025, while keeping good customer outcomes at the heart of everything we do. Regulatory mandates we

delivered include the Payment Systems Regulator's requirement on Confirmation of Payee for all Payment Service Providers and an Authorised Push Payment

mandatory reimbursement regulation, both of which became effective from 7 October 2024.

Our ambition is to be net zero by 2050 and we are supporting our customers to help them to make the green transition in a fair way. In 2024, we identified ways to

help our customers in their journey to transition to a low carbon economy whilst continuing to assess the underlying risks they face. We launched new Green

Finance products as well as strategic partnerships with energy companies such as Octopus Energy and Scottish Power. Our Green Finance taskforce continued

to consolidate ongoing and future Green Finance initiatives enabling us to ensure we deliver on our green finance public ambition.

Competitive pressures continued in 2024 with overall market volumes for assets and deposits resuming growth. The recent consolidation drive by our peers

is creating larger and more diversified competitors, while digital banks continue to build their customer base and expand their product offerings. In 2024, we

protected our core business franchise by deleveraging mortgages and optimising our balance sheet. We launched several new propositions for our customers,

including OneApp, our new business banking app, Edge Home, Edge credit card and our Self Invested Pension Plan. In Corporate and Commercial Banking,

we signed a commercial agreement with Dentsu to expand the Santander Navigator proposition. Santander Navigator is a SaaS platform designed to support

international trade by providing market-leading insights and connecting businesses across the globe. We believe our customer-focused business model and

strategy, and our adaptable and innovative approach, will support our continued success.

We remain focused on supporting customer needs, improving efficiency, and building a responsible and sustainable business, while continuing to progress with

our agenda to tackle climate change. This will enable us to meet the changing needs of our customers and deliver improved returns over the long-term.

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Reputational risk

Overview

Reputational risk is the risk of damage to the way our reputation and brand are perceived by the public, clients, government, colleagues, investors, or any

other interested party.

In this section, we describe our key reputational risks and explain how we manage them. We also describe developments in the year.

OUR KEY REPUTATIONAL RISKS

Reputational risks can arise from internal and external factors. We seek to manage our reputation proactively, underpinned by our aim to be a responsible bank,

and through our reputational risk framework. Reputational risk is not static; today’s decisions may be judged by different standards tomorrow. We build this into our

risk culture, evaluation and sanction procedures.

REPUTATIONAL RISK MANAGEMENT

Risk management	Description
Risk appetite	We have a low appetite for reputational risk, which is agreed by the Board at least each year.
Risk measurement	We assess our exposure to reputational risk daily. We base this on expert judgement and analysis of social, print, and broadcast media, and the views of political and market commentators. We also commission independent third parties to analyse our activities and those of our UK peers to identify reputational events, a decline in our reputation, and sector or thematic issues that impact our business. We also measure the perception of Santander UK by key stakeholders through regular interactions and review staff sentiment each year.
Risk mitigation	Our business units consider reputational risk as part of their operational risk and control assessments. We also consider it as part of our new product reviews. Our Corporate Communications and Responsible Banking, Legal and Compliance and Marketing teams help business units to mitigate the risk and agree action plans as needed, as part of their role to protect our brand and reputation.
Risk monitoring and reporting	We monitor and report reputational risks and issues on a timely basis. Our Reputational Risk Forum reviews and escalates key issues to ERCC, RBC and the Board. We also report regularly to ExCo on Sustainability and Public Affairs policies.

Our Reputational and ESCC risk policies define how we create long-term value while managing those risks. Our ESCC policy covers Oil & Gas, Power

Generation & Transmission, Mining & Metals and Soft Commodities. For example, financing is prohibited for project-related financing for new CFPP projects

worldwide and we will only work with new clients with CFPPs to provide specific financing for renewable energy projects.

REPUTATIONAL RISK REVIEW

2024 compared to 2023

In 2024, key reputational risks related to the uncertain economic environment and continued pressures from increases in the cost of living. Increased mortgage

payments remained a significant issue for our customers. We continued to support the government's Mortgage Charter, and proactively contacted customers to

offer support and help. There was criticism that banks were failing to pass on increases in the Bank of England Bank Rate to savers. To address this, we ran

campaigns and issued direct communications to customers to advise them of our products and rates, several of which were market leading.

In May 2024, we faced significant reputational risks arising from the Banco Santander global data breach, even though the breach had no material effect on

Santander UK. To manage this, we worked closely with colleagues across the Banco Santander group to develop communications for both external and internal

audiences to mitigate risks. In February 2024, we also faced significant reputational risks arising from allegations that companies linked to Iran were using

accounts held with Santander UK to evade US sanctions.

We also monitored developments in relation to historical motor finance commission payments and its potential impact on Reputational risk. For more details, see

Notes 27 and 30 to the Consolidated Financial Statements.

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Operational risk

Overview

Operational risk is the risk of loss or adverse impact due to inadequate or failed internal processes, people and systems, or external events. Operational

resilience is the ability to prevent disruption occurring to the extent practicable; adapt systems and processes to continue to provide services and functions

in the event of an incident; return to normal running promptly when a disruption is over; and learn and evolve from both incidents and near misses.

Operational Resilience is the outcome of executing sound Operational Risk practices.

In this section, we describe our key operational risks and explain how we manage them, with a focus on our top operational risks. We also describe our

operational risk event losses and developments in the year.

OUR KEY OPERATIONAL RISKS

Operational risk is inherent in our business. As a result, we aim to manage it down to as low a level as possible, in line with our Risk Appetite, rather than eliminate

it entirely. Operational risk events can have a financial impact and can also affect our business objectives, customer service and regulatory obligations. These

events can include product misselling, fraud, process failures, system downtime and damage to assets or external events.

Our key operational risks are divided into 11 categories:

Category	Description
Business disruption	Business Disruption risk is the risk that we are unable to maintain and/or recover our normal day-to-day operation and secure our tangible assets, to support continued delivery of good customer outcomes. In addition, we must ensure that we meet our operational resilience obligations to recover our important business services within our agreed Impact Tolerances in the event of severe operational disruptions to mitigate harm to our customers and wider financial sector.
Cybersecurity and information security	Information Security risk is the potential for unauthorised access, use, disclosure, alteration, destruction, or disruption of information. This covers all types of data whether stored digitally or non-digitally including client data, employee data and organisational proprietary data. Cybersecurity risk is one aspect of Information Security risk and is the risk of a malicious cyber-attack that may result in unauthorised access to (or theft of) sensitive data, loss of data integrity and/or disruption of services. Information Security and Cybersecurity risks may result in material impacts to our customers, business disruption, financial loss, reputational damage, and regulatory censure.
Data	Data risk is the risk that we do not collect, store, organise, maintain, protect, process, use and/or dispose of data effectively and efficiently. Effective data management supports our goals by giving timely, accurate and relevant data for decision making and business operations.
Financial reporting and Tax	Financial Reporting and Tax risk is the risk associated with producing internal and external financial statements, financial regulatory reporting (including liquidity and capital) and tax reporting.
Fraud	Fraud can be committed by first parties (our customers), second parties (people known to our customers or us), third parties (people unknown to our customers or us), and internally by our staff. We are committed to protecting ourselves and our customers from fraud and to mitigating our fraud risk in an ever-evolving external fraud environment.
IT	IT risk is the risk of adverse impact to the availability, continuity and performance of technology systems including hardware, software, networks and data centres. This risk may give rise to poor customer outcomes or experience and business disruption, financial loss, legal claims, reputational damage, regulatory fines or censure.
Legal	Legal risk is the risk of legal deficiencies in contracts and failures in protecting assets, managing legal disputes, interpretation and compliance with existing laws and regulations or implementation and compliance with new ones. Failure to manage legal risk may expose Santander UK to financial loss, litigation costs, fines, higher capital or liquidity requirements, criminal sanctions, regulatory action or censure, customer complaints, and/or reputational damage.
Outsourcing and Third party	Third Party risk is the risk to our operations due to the use of Third Party entities supplying goods or services. The risk can arise from outsourcing and non-outsourcing arrangements.
People	People risk is the risk of loss or adverse impact due to undesired employee behaviours; gaps in employee knowledge and capability; insufficient resources or lack of capacity; inadequate management of occupational health and workplace safety risks; and failure to comply with employment legislation and regulations. This risk may result in poor customer outcomes, failure to deliver our strategy and key business objectives and regulatory, reputational, and financial impacts and personal injury.
Transaction and payments processing	Transaction and Payments Processing risk is the risk that we do not process payment instructions effectively and efficiently. This includes inbound and outbound electronic payments, clearing of cheques and other instruments, deposits/withdrawals of cash and authorisation/ settlement of credit/debit card payments.
Transformatio n and Change	Transformation and Change risk relates to any activity that transforms our business strategy, organisation, products, services, systems and processes. These activities differ from our normal day-to-day activities as they aim to achieve specific outcomes and benefits, with a clear scope, schedule, and budget. The risk covers the strategic and business risks of not investing in the right things, failing to manage an appropriate and complete change portfolio, failing to execute change effectively, and failing to manage risk of change to the business, causing potential adverse consequences.

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OPERATIONAL RISK MANAGEMENT

We manage our operational risks (and other Non-Financial risks (NFRs)) in line with our NFR framework, as follows:

Non-Financial Risk Management

Our NFR framework (formerly known as the Operational Risk and Resilience framework) sets out our high-level arrangements and standards to manage

operational risks, and is part of our overall Risk Framework. Our Risk Appetite sets the risk limits and key risk metrics for non-financial risks.

Risk appetite

We maintain NFR appetite across Santander UK through Board approved Risk Appetite Statements. These are in place for all principal risks and describe the

extent and type of activities that can be undertaken. The Risk Appetite statements consist of qualitative statements of appetite supported by risk limits and triggers

which operate as a defence against excessive risk taking. Risk measures and their associated limits are an integral part of embedding risk appetite in day-to-day

risk management decisions.

We set a clear tolerance in line with business activities, and we also set lower level triggers, parameters and quantitative thresholds across our business areas.

We monitor our risk profile and performance against the risk appetite, and we have processes to identify, assess, manage, and report risks and events. We

incorporate Banco Santander group principles and standards, regulatory requirements, and best practice, where applicable. Coverage across the seven CRD IV

loss event types is comprehensive and aligns to the principal risks approved by ERCC.

Our policies directly support the qualitative aspects of Risk Appetite. They define expectations, guidance and standards and support consistency of permissible

risk taking across the business.

Risk measurement

The key components of the operational risk toolset we use to measure risks under our NFR framework are:

NFR risk toolset	Description
Operational risk and control assessments	Our business units identify and assess their operational risks to ensure they manage and control them within our operational risk appetite, and prioritise actions needed. Every area must identify and record their material risks, assess their controls for adequacy and then accept the risk or plan to address any deficiencies. We perform independent testing of our most important controls to ensure enhanced rigour and challenge of how effectively they are mitigating our largest risks. We also use operational risk assessments and risk rating tools as key parts of change risk management.
Risk scenario analysis	We perform this across business units. It involves a top down assessment of our key operational risks. We update our scenarios each year. The analysis gives us insight into rare but high impact events and allows us to understand potential impacts and address issues. Our Operational risk scenario analysis covers major Operational risks that are extreme but plausible and requires participants across the business to consider and assess the financial and qualitative impacts on Santander UK, in the event these exposures were to materialise. We complete the scenario analysis for risk management and regulatory purposes. We also use it as a business tool for their own stress testing to help understand the largest exposures and agree key actions required to prevent, control or mitigate risks. We review and update our scenarios each year to ensure they still represent our key operational risk exposures.
Key indicators (metrics)	Key indicators and their tolerance levels give us an objective view of risk exposure or the strength of a control at any point in time. They also show trends and give us early warning of potential increasing risk exposures. Our business-wide risk appetite indicators are of primary importance which show adherence to our Risk Appetite statements.
Operational risk event and loss management	Operational risk events occur when our controls do not operate as we planned and this leads to customer impact, financial loss, regulatory impacts and/or damage to our reputation. We use data from these processes to identify and correct any control weaknesses. We also use root cause analysis to identify emerging themes, to prevent or reduce the impacts of recurrence and to support risk and control assessments, scenario analysis and risk reporting. Our operational risk loss appetite sets the level of total operational risk loss (expected and unexpected) in any given year (on a 12-month rolling basis) that we consider to be acceptable. We track actual losses against our appetite, and we escalate as needed.

Risk mitigation

Mitigation Is a critical aspect of ensuring that our risk profile remains within our Risk Appetite. Risk mitigation strategies are discussed and agreed at various Risk

committees within Santander.

When we consider strategies, cost and benefits, we also consider residual risks (those retained) and secondary risks (which may be consequential). Monitoring

and review processes are in place to evaluate results. Early identification and effective management are critical to successful mitigation. We assess the effects of

changes for materiality impact and those assessed as high or medium high impact are managed closely.

Mitigation tools	Description
Training and competence	We train our staff and require them to maintain a suitable level of competence to ensure customers can achieve appropriate outcomes. We invest in all our people to ensure that we achieve our mandatory risk objectives and that everyone acknowledges their personal responsibility to manage risk. We focus on ensuring we train our colleagues to recognise and support customers who may be vulnerable, or who may be experiencing financial stress, financial difficulty or financial abuse. We also have a dedicated Specialist Support Team that offers guidance to colleagues helping customers who may need more tailored solutions.
Action management	Where risk exposures are outside our Risk Appetite, our business units identify, assess, manage and monitor material actions to reduce the exposure back to within appetite.
Event root cause analysis	Where new material and significant events are reported, steps are taken to identify the root cause of the event. This enables a read across and the sharing of lessons learned with appropriate mitigating actions taken to address the root cause and successfully resolve the event, and enhancements made to the control environment to prevent re-occurrence.
Emerging risk monitoring	We monitor key threats, developments, and risks, including consideration of which risk types or Business areas may be impacted or stressed by them.
Risk based insurance	Where appropriate, we use insurance to complement other risk mitigation measures.

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We manage our operational risks in line with our NFR framework, as outlined earlier. In addition, to mitigate specific cybersecurity risks, we have the following

tailored approach:

Category	Risk mitigation
Cybersecurity	Protecting our customers, systems and data remains a top priority for us. We operate a layered information and cybersecurity defence which is aligned to the National Institute of Standards and Technology (NIST).
	We constantly look to adapt our capabilities to the evolving threats. We do this by gathering intelligence on threat actors, motives, and their attack techniques. We protect our most critical people, assets, and data with preventative controls in line with the identified threats. We also assume that breaches will happen in any case, and so we seek to mitigate these by ensuring their timely detection and that appropriate response and recovery activities are in place. We do this by leveraging industry standard threat analysis, identifying specific real-life scenarios, developing detailed response playbooks, and testing them regularly using bank-wide simulation exercises involving up to the CEO. Cybersecurity controls are also thoroughly captured in policies, standards, guidelines and procedures available to all staff.
	Third parties are vital for the functioning and resilience of our business. As such, we operate a dedicated risk and control assessment prior to, and during, the lifecycle of engagements. This ensures the controls operated by the third party are in line with our policies and integrated with our processes as needed. These include, amongst others, business continuity, incident reporting and regulatory compliance.
	We regularly assess the state of our environment by reviewing the maturity of our controls in line with our internal risk management framework. We engage with regulatory authorities through regular oversight meetings and we participate in the CBEST programme. The CBEST programme aims to evaluate the resilience of firms and financial market infrastructures through testing performed by accredited and independent specialist firms. We also have a team of penetration testers in our Internal Audit function, that reviews our cybersecurity risks and controls, and reports the results to the BAC. We participate in industry recognised intelligence sharing groups with other banks (e.g. Cyber Defence Alliance), and we speak regularly to government agencies.
	We campaign to raise awareness and give customers the knowledge they need to avoid becoming victims of cybersecurity incidents. As part of this, we run customer education campaigns and offer advice through our online security operations centre. We also have a cybersecurity insurance policy to give us comprehensive cover to respond to and recover losses and damages from security breaches.
	Our Chief Information Security Officer (CISO) is responsible for the day-to-day running of security operations and the immediate response to information and cybersecurity incidents. The CISO relies on a comprehensive specialist team, supported by cybersecurity controls and capabilities available from the Banco Santander group CISO team in Spain.
	The CISO and most staff who manage cybersecurity risk across all lines of defence are industry specialists with substantial experience in leadership and technical aspects. This experience is gained via previous cybersecurity related roles in top global financial organisations, global multinationals, UK government security agencies, UK regulators, such as the PRA, industry leading cybersecurity risk management suppliers, and relevant university education. Many hold specialist security certifications that are kept relevant by attending dedicated training and specialist conferences.
	The CISO is responsible for cybersecurity risk operations and risk management and falls under the COO SMF accountability framework. The CRO is responsible for overseeing and challenging the risk management activities enacted by the CISO and the COO to ensure they remain within appetite.
	The CISO and the COO report regularly and frequently to the Board, ExCo, BRC and ERCC. They provide detailed commentaries on the threat environment, key incidents across the industry, geopolitical considerations, the overall residual risk, progress on key projects, the control environment position, and appetite going forward. In addition, BRC and ERCC receive monthly cybersecurity updates as part of the standard risk reporting suite.
	The CISO and the COO escalate material cybersecurity incidents affecting us and our suppliers via our internal incident escalation and management procedure with direct notifications to the CRO and other executive management.
	The Board and BRC include members who have substantial experience of technology risk, including Non-Executive Directors and the Chief Operating and Technology Officer. We also provide targeted training for Board members, senior management and other employees to enhance their knowledge per the evolving and emerging threat landscape.

Risk monitoring and reporting

Regulators continue to emphasise the importance of effective risk culture, personal accountability and the adoption and enforcement of risk-based requirements

and adequate internal reporting processes and procedures. Monitoring and Reporting is a key part of how we manage risk. We can identify exposures through our

Non-Financial Risk and control assessments, risk scenario analysis, key indicators, change risk assessments and incidents and events.

Subject matter experts across the business engage across risk management and monitoring activities and support effective communication of policy changes. We

report exposures for each business unit through regular risk and control forums. These include details of the risks, level of exposure and how we plan to mitigate

them. We prioritise and highlight events that have a material impact on our customers, reputation or finance by reporting them to key executives and committees.

We use The Standardised Approach (TSA) to calculate our Pillar 1 operational risk capital. We use an internal model aligned to the CRD IV advanced

measurement approach to validate our Pillar 2 capital needs.

Our crisis management framework covers all levels of the business. It sets out possible triggers and how we will manage a crisis, and we test it at least annually. If

an event occurs, our business continuity plans help us recover as quickly as possible and we undertake post incident reviews to identify learnings.

We closely monitor emerging threats that could affect future operations and performance. We act to mitigate potential risks as and when required. We also carry

out further in depth analysis, including stress testing of exposures.

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OPERATIONAL RISK REVIEW

2024 compared to 2023

Operational risk event losses by Basel category

The table below shows our operational risk losses in 2024 and 2023 for reportable events with an impact over £10,000, by CRD IV loss event types. The data is

presented in line with the Basel 2.5 requirement to aggregate and recognise losses in the year of the first point of recognition, rather than in any subsequent

year(s) in which further costs are recognised under IFRS. Due to the nature of risk events that keep evolving, prior year losses are updated:

	2024		2023
	Value %	Volume %	Value %	Volume %
Internal fraud	1	—	—	—
External fraud	53	87	12	93
Employment practices and workplace safety	1	1	—	1
Clients, products and business practices	36	3	87	1
Damage to physical assets	1	1	—	—
Business disruption and systems failures	1	—	—	—
Execution, delivery, and process management	7	8	1	5
	100	100	100	100

Business disruption

We continued to mature our frameworks and capabilities to support meeting the Operational Resilience requirements by the March 2025 regulatory deadline, with

regular updates provided to our Executive and Board Risk committees throughout the year. We assessed the resilience of our important business services using a

broad range of severe but plausible disruption scenarios. We ran successful cyberattack and loss of third party scenarios, to ensure that our contingency and

recovery strategies were effective in minimising harm to our customers, risk to the safety and soundness of Santander UK, and risk to the orderly functioning or

stability to the UK market. We continued to invest in strategic programmes that will further strengthen our resilience position, in particular across our IT estate.

Cybersecurity

Cybersecurity remains a key focus. In 2024, Banco Santander experienced a reportable data breach that impacted, amongst other group entities, Santander UK.

The impact was limited to Santander UK staff personal information. We also responded to third party incidents affecting our suppliers. We continued to enhance

our threat prevention controls and test our business area recovery plans against a range of scenarios. We continued to see increasing ransomware attacks across

all sectors, driven by compromises in supply chain tools, and we expect this trend to remain. We also invested in skills and resources to manage cybersecurity

risks, and monitor cybersecurity threats, including from the geopolitical environment. Our business strategy and financial results were not significantly affected by

either cybersecurity threats or incidents. However, we cannot give assurance that they will not be significantly affected by such risks and incidents in the future.

Data 

We continued to manage the risk with enhanced governance and investments, focusing on our critical data and processes. We continued to develop, implement,

and enhance new and existing data controls through various initiatives. These initiatives included establishing appropriate processes, prioritising the resolution of

gaps in data controls and data lineage testing, and ensuring that remediation plans are in place as part of our Data Management Programme  to further enhance

data quality and data privacy and protection.

Fraud

Authorised Push Payment fraud remains our largest fraud type. We continued to make progress in mitigating operational risk losses from fraud. This included

implementing new detection controls and coordinated customer awareness campaigns that led to a significant reduction in specific frauds risks for our customers,

especially in terms of onboarding and payment card fraud. We maintained a leading, collaborative role in fraud management with industry partners, through

CIFAS, UK Finance and Stop Scams UK.

IT

We made significant progress in addressing key IT risks through a programme of remediation activities, including continued improvement in reducing IT related

incidents and the ongoing management of technology obsolescence. As a result of the progress made, the FCA recognised our improvement in IT resilience.

Legal

Our legal risk profile remained heightened in 2024. The Court of Appeal judgment in October 2024 in relation to motor finance commission cases involving other

lenders represented a deterioration in our legal risk position and led to a £295m provision. The decision is subject to an appeal to the Supreme Court. The

outcome of that appeal and the appeal to the Court of Appeal of the High Court’s judicial review of a final decision by the Financial Ombudsman against another

lender are expected to influence our legal risk in relation to litigation and complaints relating to historical motor finance commission arrangements and the outcome

of the FCA review.  We continued to evaluate and react to the evolving legal and regulatory environment, including the Consumer Duty, the Financial Services and

Markets Act 2023, the Economic Crime and Corporate Transparency Act 2023, the Digital Markets, Competition and Consumers Act 2024 and reforms to the ring-

fencing regime. We materially completed the alignment of material third party contracts to PRA Supervisory Statement 2/21, and in relation to international data

transfers, to the Schrems II judgment. The in-flow litigated PPI claims reduced and an appeal by a PPI complainant to the Court of Appeal to re-open a settlement

agreement was unsuccessful. However, on-going large scale complex PPI related litigation brought by AXA, and a German criminal and tax investigation relating

to historical dividend tax arbitrage transactions remain. We continue to manage our legal risk in relation to thematic Court actions and FOS complaints related to

fraud, irresponsible lending, mortgages and commissions. For more, see Note 30 to the Consolidated Financial Statements.

Outsourcing & Third Party Supplier

We rely extensively on third parties for a range of goods and services, provided by both Banco Santander and external suppliers. We reviewed our suppliers

against a revised set of controls and implemented new metrics to monitor and manage our risk exposure. We continue to manage risk to our Third Party Supplier

estate.

People

We saw improvements in 2024 with reduced levels of attrition and of aged vacancies. We continue to be alert and respond to any risks that could arise from our

ongoing transformation, including providing ongoing support to enable colleagues to attend the office regularly.

Transformation and change

We continue our transformation to simplify the bank, digitise processes, build smarter solutions, and strengthen our foundations whilst reducing costs, extending

internal capabilities and ensuring a resilient operating model. This includes delivery against a diverse change agenda with a focus on modernising our operations

and building fit for the future technology, transforming customer interactions, growth and productivity. Ensuring change does not result in unacceptable impacts on

our customers and risk profile underpins our strategic decisions and is robustly managed.

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Financial crime risk

Overview

Financial crime risk is the risk that we are used to further financial crime, including money laundering, sanctions evasion, terrorist financing, facilitation of tax

evasion, bribery and corruption. We recognise that financial crime and associated illegal activity poses a threat to the UK's national security, economy and

its institutions and causes serious harm to the customers and communities we serve.

In this section, we describe our key financial crime risks and explain how we manage them. We also describe developments in the year.

OUR KEY FINANCIAL CRIME RISKS

Financial crime is a high priority risk for us, and addressing it is a key priority for senior management. We remain committed to countering it by maintaining robust

systems and controls, and conducting business in line with regulatory and legal requirements. We adopt a risk-based approach in line with UK and international

laws and standards.

Our main financial crime risk categories are:

Category	Description
Money laundering	We are used by criminals to transform the proceeds of crime into seemingly legitimate money or other assets.
Terrorist financing	We are used by terrorists to deposit, distribute or collect funds that are used to fund their activity.
Sanctions	We do not identify payments, customers or entities that are subject to economic or financial sanctions.
Bribery and corruption	We fail to put in place effective controls to prevent or detect bribery and corruption.
Facilitation of tax evasion	We fail to put in place effective systems and controls to prevent the facilitation of tax evasion.

FINANCIAL CRIME RISK MANAGEMENT

We manage our financial crime risks in line with our NFR framework, as outlined earlier. In addition, we have financial crime policies tailored to the key risks and

we maintain a control framework in line with a standalone economic crime risk framework. We continue to partner with public authorities, the Home Office and the

wider financial services industry to pool expertise and data to mitigate specific financial crime risks. We are also involved in partnerships such as the Joint Money

Laundering Intelligence Taskforce (JMLIT) which supports public-private collaboration to tackle financial crime.

FINANCIAL CRIME RISK REVIEW

2024 compared to 2023

We understand the importance of protecting the communities we serve from the social and economic impacts of financial crime. We recognise that the financial

crime landscape is constantly evolving, influenced by regulatory changes, legal requirements, geopolitical factors and changing criminal methods. As a result, we

continue to prioritise and remain vigilant in addressing financial crime risks and actively partner with industry, law enforcement and government to deter, detect and

disrupt financial crime and terrorist financing. In 2024, we:

–Continued to invest in our financial crime systems and controls with a focus on reducing the residual risk and returning to Board Risk Appetite, adequacy of

resources and key deliverables across the remediation plan.

–Adapted our financial crime policies to reflect the latest external requirements, best practice and Banco Santander policy requirements.

–Maintained our focus on providing colleagues with the appropriate skills, knowledge and qualifications to support our efforts to fight financial crime through

enhanced and targeted training. Our Economic Crime Academy provides training modules on high risk Financial Crime areas in line with industry standards,

and these modules are endorsed by the International Compliance Association (ICA).

–Played an active role externally on policy and related strategies and maintained extensive involvement in UK public private partnerships. As part of this, we

worked closely with government, trade bodies, industry, law enforcement and regulators on issues that many impact our Financial Crime Compliance

capabilities.

–Remained a committed member of the JMLIT and other public-private information sharing initiatives with law enforcement and industry, to exchange and

analyse data on high-end money laundering and wider economic threats.

Following changes to the Governance framework in Q424, we transferred oversight for the Financial Crime Remediation Programme to the Special Projects

Committee.

Financial crime risk management remains one of our top risks and a key focus area for senior management and the Board. We continue to enhance our risk

management capabilities with key activity planned in 2025 including:

–Accelerating risk mitigation responses and controls to new or evolving financial crime risk threats.

–Continuing to enhance our sanctions systems and controls in response to internal and external lessons learned from the external sanctions developments in

2024, notably the continued impacts of the Russia sanctions and increased use of OFSI powers.

–Maturing our financial crime operations, including continuing to improve our customer data records to help increase the effectiveness and sustainability of our

efforts to manage financial crime risks.

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Model risk

Overview

Model risk is the risk that the predictions from models may be inaccurate, causing sub-optimal decisions to be made; or that a model may be used

inappropriately. These potential adverse consequences can lead to reputational damage, regulatory non-compliance, a deterioration in our prudential

position, or financial losses.

In this section, we describe our key model risks and explain how we manage them. We also describe developments in the year.

OUR KEY MODEL RISKS

A model is a quantitative repeatable method or system that relies on assumptions to process input data into estimates of uncertain outcomes. Our key model risks

arise from inadequate or flawed design leading to weaknesses and limitations in our models, implementation errors or poor deployment of the models, or the

incorrect or inappropriate use of a model. The most material models we use help us calculate our regulatory capital and credit losses, and perform stress tests.

We are seeing increasing interest in using Artificial Intelligence (AI) which creates new model risks such as explainability - the ability to understand why an

algorithm made a particular prediction.

MODEL RISK MANAGEMENT

We manage our Model risks in line with our NFR framework, as outlined earlier. In addition, to mitigate specific model risks, we have the following tailored policies:

–Model Risk Policy – sets out the action, outcome or standard of behaviour expected to manage and control model risk and remain within risk appetite

–Tiering and Materiality Policy – ensures the consistent methodology in determining the significance of models used across the business

–Change Classification Policy – explains how model changes are managed and controlled

–Changes to IRB Rating Systems Policy – sets the criteria for assessing the materiality of extensions and changes to IRB models

–Validation Policy – sets out the general criteria for internal validation activities, with the aim to provide an objective, unbiased and critical opinion on the

adequacy of models we use.

In line with our risk organisational structure, our first line of defence drives effective management of the risk and fully embeds the framework. In the second line,

the oversight team sets a clear framework, related policies, risk appetite and provides oversight and governance. The independent valuation function reviews new

developments for all models, particularly for capital adequacy, provisions and stress testing, which all have regulatory focus. The third line of defence assesses

periodically the robustness of the model risk management framework, compliance with policies and regulatory requirements, and material changes taking place.

MODEL RISK REVIEW

2024 compared to 2023

In 2024, Model risk remained a significant focus, as we continued to work on the regulatory agenda, focusing on models to reflect the most accurate and recent

data. The PRA’s Model Risk Supervisory Statement (SS1/23) policy has been in effect since May 2024 and we have aligned our framework, policies and

procedures to the new regulation. We are embedding enhancements across our business as a result. We will maintain a strong focus on aligning with supervisory

expectations as we address remediation efforts in the next two years. We continued to recognise model risk as a key risk and maintained a strong management

and oversight framework that is embedded across all three lines of defence.

In 2024, we continued to redevelop key regulatory capital models, and the enhancements to our most material provision models went live. In line with SS1/23 we

embedded a robust post-model adjustment framework, including independent review of adjustments made to the ECL to mitigate against weaknesses and

limitations. We continued to focus on our new climate change stress test models to consider the effects of climate change risk on our portfolios.

We delivered several new machine learning and generative AI solutions in 2024, including Agent Assist, which have helped improve productivity.

We expect industry use of AI to continue to grow and we plan to expand our use of it, allowing our colleagues to focus on the more complex customer cases. We

will continue to build on the progress made in 2024 and will focus on ensuring our models remain accurate and reliable given the momentum of change.

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Conduct and regulatory risk

Overview Conduct risk is the risk where our decisions and behaviours could lead to detriment or poor outcomes for our customers. It also refers to the risk that we fail to maintain high standards of market behaviour and integrity. Regulatory risk is the risk of financial or reputational loss, or imposition of our conditions on regulatory permission, due to failing to comply with applicable codes, regulator’s rules, guidance and regulatory expectations. In this section, we describe where our key conduct and regulatory risks can originate from and set out how we manage them. We also describe developments in the year. Key metrics Customer remediation provision was £348m (2023: £106m) Litigation and other regulatory provision was £126m (2023: £132m)

OUR KEY CONDUCT AND REGULATORY RISKS

We are committed to ensuring Conduct and Regulatory Risk strategy is embedded within our business, as good outcomes for our customers are at the heart

of what we do. Conduct and Regulatory Risk can stem from errors in our product design, sales practices, post-sale servicing, operational processes, complaint

handling, and the failure to supervise, monitor or control the activities of our employees. All of these may result in the risk that we do not deliver better outcomes for

our customers, align to the expectations of our regulators or observe required standards of market behaviour. Understanding the drivers of Conduct and

Regulatory risk enables us to update and ensure our frameworks are robust to mitigate against the risk of causing consumer harm on an on-going basis.

CONDUCT AND REGULATORY RISK MANAGEMENT

We manage our Conduct and regulatory risks in line with our NFR framework, as outlined earlier. In addition, to mitigate specific Conduct and Regulatory risks, we

have the following tailored policies:

Policies	Description
Fair Value policy for regulated products (Retail customers)	Our fair value policy details our approach to assessing whether a regulated product provides fair value to our retail customers, considering all stages of value during the product design phase, and on a regular basis.
Fair treatment of vulnerable customers	Some customers may be impacted financially or personally as a result of their circumstances. Our Vulnerable Customer Policy gives business units a clear and consistent view of what vulnerability can mean and situations when customers may need more support. Our guidelines focus on identifying characteristics of vulnerability, understanding customer needs and the support and flexibility we can give to help. In addition to mandatory training, we train our customer-facing staff using real customer scenarios to enable our people to deal with a wide range of sensitive issues. Our online Vulnerable Customer Support Tool gives our people more guidance and support, and our Specialist Support Team gives guidance for the most complex situations. We also consider vulnerability in every initiative and adapt our technology to the needs of customers with vulnerability characteristics in our design and testing stages. We work with charities, authorities, trade associations and other specialists to develop our understanding of vulnerability.
Conduct & Regulatory risk policy for regulated products (Retail customers)	Our policy sets out the actions that we must take and the standards of behaviour we comply with to deliver good outcomes for retail customers, to comply with applicable regulatory requirements and expectations, and to deliver a strong conduct and compliance culture.

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CONDUCT AND REGULATORY RISK REVIEW

2024 compared to 2023

In 2024, the Conduct and Regulatory environment saw a demanding agenda, and we expect this to continue. To fully consider customer and conduct impacts

across our business, our customers remain at the centre of our culture and purpose. We monitor and regularly review our customers' experiences and act to

address outcomes. As part of this, we:

–Continued to proactively contact customers who may be at risk of experiencing early signs of financial stress, to support them and try to help avoid longer term

financial difficulty. We referred them to internal and external sources of support alongside ongoing customer engagement and support plans.

–Evolved our Financial Support team and SME support, with more investment in people and IT to ensure we continue to drive good outcomes for customers,

including those in pre-arrears, and can provide tailored support relevant to a customer's individual circumstances and needs.

–Continued to review our products and services to ensure our customers receive communications they understand, products and services that meet their needs

and that offer fair value, and the support they need, when they need it, to deliver good customer outcomes.

–Continued to actively participate in schemes to ensure the long-term future of access to cash, including supporting the setup of shared banking hubs and wider

engagement with LINK and industry partners.

–Assessed ongoing and new policy areas in the FCA's 2023/24 Business Plan. Our key focus continued to be on reducing and preventing serious consumer

harm, setting and testing higher standards, and promoting competition and positive change. We continued to address these in our controls, product and service

processes and frameworks, and we continued to adapt in line with the evolution of a digital economy.

Payments services continue to be particularly active, with the recently published National Payments Vision setting out key ways to ensure that the UK's payment

systems deliver for consumers and contribute to growth. This includes the continued development of account-to-account payments, such as Open Banking and

Open Finance, exploration of a Central Bank Digital Currency and the future structure of the payments ecosystem.

We will continue to monitor the regulatory landscape and contribute to debates on regulatory issues. We expect the key areas of regulatory focus in 2025 to

include the ongoing supervision of the FCA’s Consumer Duty (with a focus on customer outcomes), the FCA’s implementation for the Advice Guidance Boundary

review, the outcome of the FCA's review into discretionary commission arrangements for motor finance, and a review of the role of the Financial Ombudsman

Service. We also expect continued focus from the FCA on how firms protect customers from financial crime. We expect the PRA and FCA to work jointly on issues

such as operational resilience and outsourcing, non-financial misconduct, and remuneration reform. We also expect an increased focus on funding and liquidity

management as the Bank of England continues to unwind its balance sheet, and further expectations on managing climate risk. We are waiting for more

information on the review of Pillar 2 capital requirements, following the delayed implementation of Basel 3.1.

Overall, we expect to see an increased focus from UK regulators and the UK Government on policies that will enhance the international competitiveness of the

sector, and contribute to economic growth.

The outlook for the economic environment remains challenging and so conduct risks are likely to rise, as banks deal with households that continue to face

pressures from increases in the cost of living and higher interest rates.

We will maintain a strong focus on robust oversight and control of the customer journey across all our products. We will also ensure our strategy, leadership,

governance arrangements, and approach to managing and rewarding staff do not lead to a detrimental impact on customers, competition, or to market integrity.

For key movements in our financial crime risk profile, see the 'Financial crime risk review' section.

For more on our provisions, see Note 27 to the Consolidated Financial Statements. For more on our contingent liabilities, see Note 30 to the Consolidated

Financial Statements.

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Financial statements

In this section
Report of Independent Registered Public Accounting Firm (PCAOB ID 876)	157
Primary financial statements	166
Consolidated Income Statement	166
Consolidated Statement of Comprehensive Income	167
Consolidated Balance Sheet	168
Consolidated Cash Flow Statement	169
Consolidated Statement of Changes in Equity	170
Notes to the financial statements	171

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Santander UK

Group Holdings plc

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Santander UK Group Holdings plc and its subsidiaries (the “Company”) as of 31 December

2024 and 2023, and the related consolidated income statements, consolidated statements of comprehensive income, consolidated statements of changes in

equity and consolidated cash flow statements for each of the three years in the period ended 31 December 2024, including the related notes (collectively referred

to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of

the Company as of 31 December 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended 31 December

2024 in conformity with i) International Financial Reporting Standards as issued by the International Accounting Standards Board and ii) UK-adopted International

Accounting Standards.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s

consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United

States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules

and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and

perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or

fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are

required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the

Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud,

and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in

the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well

as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated

or required to be communicated to the Board Audit Committee and that (i) relate to accounts or disclosures that are material to the consolidated financial

statements and (ii) involved our especially challenging, subjective, or complex judgements. The communication of critical audit matters does not alter in any way

our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate

opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Credit impairment loss allowance on loans and advances to customers

As described in Notes 1, 13 and 27 to the consolidated financial statements, an expected credit loss (‘ECL’) is recognised for financial assets measured at

amortised cost. The measurement of ECL reflects: a probability weighted amount that is determined by evaluating a range of possible outcomes; the time value of

money; and reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and

forecasts of future economic conditions. Management calculates ECL using the following factors: a survival rate (‘SR’), a probability of default (‘PD’), the exposure

at default (‘EAD’) and a loss given default (‘LGD’). The application of the ECL impairment methodology for calculating credit impairment loss allowances is

susceptible to change from period to period and requires management to make judgemental assumptions in determining the estimates. The key judgements

made by management in applying the ECL impairment methodology for the residential mortgages and Corporate and Commercial Bank (‘CCB’) portfolios are: (i)

the forward looking multiple economic scenarios; (ii) the probability weights assigned to multiple economic scenarios; and (iii) assessing corporate stage 3

exposures individually. The LGD is expressed as a percentage and is calculated based on value of subsequent write-offs and collateral values adjusted for

historical discounts. The ECL allowance was £870 million as of 31 December 2024.

The principal considerations for our determination that performing procedures relating to the credit impairment loss allowance on loans and advances to

customers is a critical audit matter are due to the significant judgements being applied by management in the residential mortgages and Corporate and CCB

portfolios (i) the forward looking economic scenarios; (ii) the probability weights applied to those scenarios; (iii) the key assumptions used in the LGD models

related to subsequent write off and historical discounts applied to collateral values; and (iv) individual corporate stage 3 provisions. This in turn led to a high degree

of auditor judgement, subjectivity and effort in performing procedures and evaluating audit evidence related to the methodology and judgement in assumptions

used to determine the allowance; and the audit effort involved the use of professionals with specialised skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial

statements. These procedures included testing the effectiveness of controls relating to the credit impairment loss allowance on loans and advances to customers.

These procedures also included, among others, testing management’s process for estimating expected credit losses; evaluating the appropriateness of model

methodologies; testing the completeness and accuracy of underlying data used in determining the accounting estimate; evaluating the reasonableness of

management’s assumptions related to (i) forward looking multiple economic scenarios; (ii) the probability weights applied to multiple economic scenarios; (iii) the

subsequent write off and historical discounts applied to collateral values incorporated into the LGD model; and (iv) expected future cash flows and collateral

valuations of individually assessed corporate stage 3 exposures; and evaluating the disclosures made in the consolidated financial statements in relation to the

credit impairment loss allowance on loans and advances to customers. Professionals with specialised skill and knowledge were used to assist in evaluating the

reasonableness of the forward looking economic scenarios, probability weight assumptions, the appropriateness of the key assumptions used in the LGD model

related to subsequent write off and historical discounts applied to collateral values.

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Valuation of defined benefit pension surplus

As described in Notes 1 and 28 to the consolidated financial statements, the Company operates a number of defined benefit pension schemes. The main scheme

is the Santander (UK) Group Pension Scheme (the “Scheme”). The funded defined benefit pension surplus was £416 million as of 31 December 2024. Any

surplus or deficit of scheme assets over liabilities is recognised in the balance sheet as an asset (surplus) or liability (deficit). Management estimates the present

value of the defined benefit obligation by projecting forward the growth in current accrued pension benefits to reflect inflation and salary growth to the date of

pension payment. This is then discounted to present value. In determining the value of scheme liabilities, demographic and financial assumptions are made by

management about the life expectancy of the beneficiaries, inflation and discount rates. The scheme invests in certain assets whose values are not based on

market observable data. These assets include investments in unquoted equities and bonds, as well as property and infrastructure, which are valued by reference

to the latest manager statements provided by the managers, adjusted for any cash movements since the latest valuation, with the exception of property, where the

underlying asset valuations are determined by an independent expert.

The principal considerations for our determination that performing procedures relating to the valuation of the defined benefit pension surplus is a critical audit

matter are the significant judgements made by management in determining (i) the life expectancy of the beneficiaries, inflation and discount rate assumptions; and

(ii) the fair value of the assets with no market observable valuation inputs, including adjustments for any potential fair value movements since the last valuation

date. This, in turn, led to significant auditor judgement, subjectivity and effort in performing procedures and evaluating audit evidence. The audit effort involved the

use of professionals with specialised skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial

statements. These procedures included testing the effectiveness of controls relating to the valuation of the defined benefit pension obligation and the valuation of

assets with no market observable data. These procedures also included, among others, evaluating the defined benefit pension obligation by (1) testing the

completeness, accuracy and relevance of the underlying data; and (2) involving professionals with specialised skill and knowledge to assist in (a) assessing the

appropriateness of the methodologies used by management to determine the inflation rate, the discount rate and life expectancy assumptions; (b) developing an

independent range for these assumptions; and (c) comparing the independent range of assumptions to management's assumptions to evaluate the

reasonableness of management’s assumptions. Procedures over directly held property included, among others (i) the involvement of professionals with

specialised skill and knowledge to assist in assessing the appropriateness of the methodology and reasonableness of the key assumptions used by

management’s expert valuer for property; and (ii) evaluating the reasonableness of the valuation for a sample of properties. For the other assets with no market

observable valuation inputs, the procedures included, among others, (i) obtaining third-party confirmations of the valuation directly from investment managers and

comparing these against management’s reported values; (ii) recalculating management’s valuation calculations and comparing our recalculation to the third-party

confirmations, and, if applicable, testing material capital changes in the period between the valuation and the entity’s balance sheet date, where there was a time

lag; and (iii) assessing other evidence regarding the valuations, such as performing back testing of historical valuations used by management against the audited

fund financial statements as at the equivalent date and reviewing controls reports for the investment managers, where available.

Goodwill impairment assessment - for the personal financial services cash generating unit

As described in Notes 1 and 19 to the consolidated financial statements, the carrying value of goodwill relating to the personal financial services (‘PFS’) cash

generating unit (“CGU”) was £1.2 billion as of December 31, 2024. Management undertakes an annual assessment to evaluate whether the carrying value of

goodwill is impaired, carrying out this assessment more frequently if reviews identify indicators of impairment or when events or changes in circumstances dictate.

Impairment is required where the carrying amount of goodwill exceeds its recoverable amount. The recoverable amount of the CGU was determined based on the

value in use (“VIU”) methodology at each testing date. The VIU is calculated by discounting the cash flow projections for the CGU. The goodwill impairment

assessment is based on key judgements including the testing methodology, planning assumptions and internal capital allocations. The estimation of future cash

flows and the level to which they are discounted is inherently uncertain and requires significant judgement and is subject to potential change over time. Estimates

include forecast cash flows for the CGU, including estimated allocations of regulatory capital, the growth rate for the period beyond the initial cash flow projections

and discount rates which factor in risk-free rates and applicable risk premiums.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment for the personal financial services

cash generating unit is a critical audit matter are due to the significant judgements by management in developing (i) the forecast cash flows and (ii) the discount

rate. This, in turn, led to significant auditor judgement, subjectivity and effort in performing procedures and evaluating audit evidence related to management’s

judgements and assumptions. In addition, the audit effort involved the use of professionals with specialised skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial

statements. These procedures included, among others (i) testing management’s process for determining the carrying value of the CGU, including internal capital

allocations; (ii) evaluating the appropriateness of the methodology used to estimate the VIU; (iii) testing the completeness and accuracy of underlying data used in

the model; (iv) comparing an independent range of assumptions for the discount rate to management’s rate to evaluate the reasonableness of management’s

assumptions; (v) evaluating the reasonableness of the forecasted cash flows, including comparing performance in recent years to the budgets and 3 years-plan

for the equivalent periods and (vi) assessing the appropriateness of the related disclosures. Professionals with specialised skill and knowledge assisted in the

evaluation of the reasonableness of the discount rate and assessing the determination of the carrying value of the PFS CGU.

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Specific customer remediation, litigation and regulatory matters

As described in Notes 1, 27 and 30 to the consolidated financial statements, as of 31 December 2024, the provision for customer remediation, litigation and other

regulatory matters of £474 million includes, among other items, provisions relating to: (i) a legal dispute regarding allocation of responsibility for a specific Payment

Protection Insurance (“PPI”) portfolio of complaints; and (ii) court claim and complaints in respect of historic motor finance broker commissions for Santander

Consumer (UK) plc. There is also an ongoing investigation in relation to the historical involvement of Santander UK plc, Santander Financial Services plc and

Cater Allen International Limited in German dividend tax arbitrage transactions for which management has determined that there are uncertainties that mean it is

not currently possible to make a reliable assessment of the size of any potential liability. Significant judgement may be required when accounting for provisions,

including in determining whether a present obligation exists, determining the likely outcome of future legal decisions and in estimating the probability, timing, nature

and amount of any outflows that may arise from past events. These judgements are based on the specific facts available and often require specialist professional

advice. There can be a wide range of possible outcomes and uncertainties, particularly in relation to legal actions, and regulatory and consumer credit matters.

The principal considerations for our determination that performing procedures relating to the specific litigation and regulatory matters is a critical audit matter are

the significant judgements made by management when estimating the probability, timing, nature and amount of any outflows for the legal dispute for a specific PPI

portfolio of complaints, the motor finance broker commissions court claim and complaints, and the German dividend tax arbitrage investigation. This in turn led to a

high degree of auditor judgement, subjectivity and effort in performing procedures and evaluating audit evidence related to management’s assessment of the

specific litigation and regulatory matters.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial

statements. These procedures included testing the effectiveness of controls relating to management’s assessment of the specific litigation and regulatory matters

against the requirements of IAS 37, Provisions, Contingent Liabilities and Contingent Assets. These procedures also included, among others (i) inquiries of

internal legal counsel on the developments in respect to the significant cases; (ii) obtaining and evaluating letters of audit inquiry from external legal counsel; (iii)

evaluating the reasonableness of management’s assessment regarding the probability of an outflow and the estimated amount of the obligation, where a reliable

estimate can be formed; and (iv) evaluating the sufficiency of the disclosures made in relation to each of these specific matters.

/s/ PricewaterhouseCoopers LLP

London, United Kingdom

7 March 2025

We have served as the Company's auditor since 2016.

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Consolidated Income Statement

For the year ended 31 December

		2024	2023	2022
	Notes	£m	£m	£m
Interest and similar income	3	12,721	11,853	6,822
Interest expense and similar charges	3	(8,395)	(7,186)	(2,350)
Net interest income		4,326	4,667	4,472
Fee and commission income	4	730	801	836
Fee and commission expense	4	(484)	(505)	(512)
Net fee and commission income		246	296	324
Other operating income	5	111	213	210
Total operating income		4,683	5,176	5,006
Operating expenses before credit impairment charges, provisions and charges	6	(2,577)	(2,485)	(2,370)
Credit impairment charges	8	(70)	(206)	(321)
Provisions for other liabilities and charges	8	(706)	(336)	(421)
Total credit impairment charges, provisions and charges		(776)	(542)	(742)
Profit before tax		1,330	2,149	1,894
Tax on profit	9	(380)	(553)	(471)
Profit after tax		950	1,596	1,423
Attributable to:
Equity holders of the parent		950	1,596	1,406
Non-controlling interests		—	—	17
Profit after tax		950	1,596	1,423

The accompanying Notes to the Financial Statements form an integral part of these Consolidated Financial Statements.

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Consolidated Statement of Comprehensive Income

For the year ended 31 December

		2024	2023	2022
	Notes	£m	£m	£m
Profit after tax		950	1,596	1,423
Other comprehensive (expense)/income that may be reclassified to profit or loss subsequently:
Movement in fair value reserve (debt instruments):
- Change in fair value		(20)	89	(278)
- Income statement transfers		5	(105)	247
- Taxation	9	4	5	11
		(11)	(11)	(20)
Cash flow hedges:
- Effective portion of changes in fair value	11	(452)	(147)	436
- Income statement transfers	11	485	1,231	(2,130)
- Taxation		(10)	(302)	468
		23	782	(1,226)
Net other comprehensive income/(expense) that may be reclassified to profit or loss subsequently		12	771	(1,246)
Other comprehensive (expense)/income that will not be reclassified to profit or loss subsequently:
Pension remeasurement:
- Change in fair value	28	(402)	(598)	(723)
- Taxation	9	113	167	267
		(289)	(431)	(456)
Own credit adjustment:
- Change in fair value		(17)	(15)	29
- Taxation	9	5	4	(9)
		(12)	(11)	20
Net other comprehensive (expense) that will not be reclassified to profit or loss subsequently		(301)	(442)	(436)
Total other comprehensive (expense)/income net of tax		(289)	329	(1,682)
Total comprehensive income/(expense)		661	1,925	(259)
Attributable to:
Equity holders of the parent		661	1,925	(276)
Non-controlling interests		—	—	17
Total comprehensive income/(expense)		661	1,925	(259)

The accompanying Notes to the Financial Statements form an integral part of these Consolidated Financial Statements.

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Consolidated Balance Sheet

At 31 December 2024

		2024	2023
	Notes	£m	£m
Assets
Cash and balances at central banks		33,067	40,523
Derivative financial instruments	11	1,264	1,472
Other financial assets at fair value through profit or loss	12	421	602
Loans and advances to banks		1,101	1,216
Loans and advances to customers	13	202,929	211,222
Reverse repurchase agreements - non-trading	16	10,338	12,468
Other financial assets at amortised cost	17	3,408	152
Macro hedge of interest rate risk		(738)	(630)
Financial assets at fair value through other comprehensive income		9,040	8,481
Interests in other entities	18	289	245
Intangible assets	19	1,539	1,548
Property, plant and equipment	20	1,584	1,512
Current tax assets	9	504	507
Retirement benefit assets	28	439	723
Other assets		1,879	2,029
Assets held for sale	40	12	13
Total assets		267,076	282,083
Liabilities
Deposits by banks	21	14,037	20,357
Deposits by customers	22	185,775	195,149
Repurchase agreements - non-trading	23	8,617	8,411
Derivative financial instruments	11	717	891
Other financial liabilities at fair value through profit or loss	24	1,055	899
Debt securities in issue	25	37,569	35,778
Macro hedge of interest rate risk		47	86
Other liabilities	26	1,882	2,501
Provisions	27	627	405
Deferred tax liabilities	9	249	188
Retirement benefit obligations	28	23	66
Subordinated liabilities	29	2,385	2,386
Total liabilities		252,983	267,117
Equity
Share capital	31	7,060	7,060
Other equity instruments	32	2,100	2,196
Other reserves		(325)	(337)
Retained earnings		5,258	6,047
Total equity		14,093	14,966
Total liabilities and equity		267,076	282,083

The accompanying Notes to the Financial Statements form an integral part of these Consolidated Financial Statements.

The Financial Statements were approved and authorised for issue by the Board on7 March 2025 and signed on its behalf by:

Mike Regnier	Angel Santodomingo
Chief Executive Officer	Chief Financial Officer
Company Registered Number: 08700698

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Consolidated Cash Flow Statement

For the year ended 31 December

		2024	2023	2022
	Notes	£m	£m	£m
Cash flows from operating activities
Profit before tax		1,330	2,149	1,894
Adjustments for:
Non-cash items included in profit
– Depreciation and amortisation	6	303	290	297
– Loss from disposal of mortgage portfolio		31	—	—
– Provisions for other liabilities and charges		706	336	421
– Impairment losses		93	196	285
– Other non-cash items		66	(799)	1,363
– Pension charge for defined benefit pension schemes		13	13	28
		1,212	36	2,394
Net change in operating assets and liabilities:
– Cash and balances at central banks		747	(87)	274
– Derivative assets		208	967	(719)
– Other financial assets at fair value through profit or loss		196	27	1,064
– Loans and advances to banks and customers		8,331	12,538	(10,683)
– Reverse repurchase agreements - non-trading		2,130	(5,120)	5,335
– Other assets		114	(144)	(571)
– Deposits by banks and customers		(15,530)	(10,982)	(1,373)
– Repurchase agreements - non-trading		206	429	(3,684)
– Derivative liabilities		(174)	(117)	(11)
– Other financial liabilities at fair value through profit or loss		179	102	(973)
– Debt securities in issue		209	(219)	(1,352)
– Other liabilities		(1,402)	(1)	(41)
		(4,786)	(2,607)	(12,734)
Corporation taxes paid	9	(219)	(539)	(397)
Effects of exchange rate differences		(18)	(616)	2,354
Net cash flows from operating activities		(2,481)	(1,577)	(6,489)
Cash flows from investing activities
Purchase of property, plant and equipment and intangible assets		(533)	(393)	(504)
Proceeds from sale of property, plant and equipment and intangible assets		148	175	159
Purchase of financial assets at amortised cost and financial assets at FVOCI		(10,343)	(10,899)	(2,884)
Proceeds from sale and redemption of financial assets at amortised cost and financial assets at FVOCI		6,183	8,362	3,023
Net cash flows from investing activities		(4,545)	(2,755)	(206)
Cash flows from financing activities
Issue of other equity instruments	33	400	—	750
Issuance costs of other equity instruments
Issue of debt securities and subordinated notes		8,396	6,415	8,683
Issuance costs of debt securities and subordinated notes		(30)	(18)	(16)
Repayment of debt securities and subordinated notes		(6,531)	(6,409)	(4,522)
Disposal of non-controlling interests		—	—	(235)
Repurchase of other equity instruments	33	(500)	—	(750)
Dividends paid on ordinary shares	10	(1,295)	(1,538)	(1,013)
Dividends paid on other equity instruments		(139)	(133)	(143)
Dividends paid on non-controlling interests		—	—	(17)
Principal elements of lease payments	33	(33)	(48)	(26)
Net cash flows from financing activities		268	(1,731)	2,711
Change in cash and cash equivalents		(6,758)	(6,063)	(3,984)
Cash and cash equivalents at beginning of the year		39,210	45,332	49,248
Effects of exchange rate changes on cash and cash equivalents		(15)	(59)	68
Cash and cash equivalents at the end of the year		32,437	39,210	45,332
Cash and cash equivalents consist of:
Cash and balances at central banks		33,067	40,523	46,635
Less: restricted balances		(1,580)	(2,327)	(2,241)
		31,487	38,196	44,394
Other cash equivalents: Loans and advances to banks - Non-trading		950	1,014	938
Cash and cash equivalents at the end of the year		32,437	39,210	45,332

The accompanying Notes to the Financial Statements form an integral part of these Consolidated Financial Statements.

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Consolidated Statement of Changes in Equity

			Other reserves					Non- controllin g interests
	Share capital	Other equity instruments	Fair value	Cash flow hedging	Currency translatio n	Retained earnings
							Total		Total
	£m	£m	£m	£m	£m	£m	£m	£m	£m
At 1 January 2024	7,060	2,196	(5)	(334)	2	6,047	14,966	—	14,966
Profit after tax	—	—	—	—	—	950	950	—	950
Other comprehensive (expense)/income, net of tax:
- Fair value reserve (debt instruments)	—	—	(11)	—	—	—	(11)	—	(11)
- Cash flow hedges	—	—	—	23	—	—	23	—	23
- Pension remeasurement	—	—	—	—	—	(289)	(289)	—	(289)
- Own credit adjustment	—	—	—	—	—	(12)	(12)	—	(12)
Total other comprehensive (expense)/income	—	—	(11)	23	—	(301)	(289)	—	(289)
Total comprehensive (expense)/income	—	—	(11)	23	—	649	661	—	661
Issue of other equity instruments	—	400	—	—	—	—	400	—	400
Repurchase of other equity instruments	—	(496)	—	—	—	(4)	(500)	—	(500)
Dividends on ordinary shares	—	—	—	—	—	(1,295)	(1,295)	—	(1,295)
Dividends on other equity instruments	—	—	—	—	—	(139)	(139)	—	(139)
At 31 December 2024	7,060	2,100	(16)	(311)	2	5,258	14,093	—	14,093
At 1 January 2023	7,060	2,196	6	(1,116)	2	6,563	14,711	—	14,711
Profit after tax	—	—	—	—	—	1,596	1,596	—	1,596
Other comprehensive (expense)/income, net of tax:
- Fair value reserve (debt instruments)	—	—	(11)	—	—	—	(11)	—	(11)
- Cash flow hedges	—	—	—	782	—	—	782	—	782
- Pension remeasurement	—	—	—	—	—	(431)	(431)	—	(431)
- Own credit adjustment	—	—	—	—	—	(11)	(11)	—	(11)
Total other comprehensive (expense)/income	—	—	(11)	782	—	(442)	329	—	329
Total comprehensive (expense)/income	—	—	(11)	782	—	1,154	1,925	—	1,925
Other	—	—	—	—	—	1	1	—	1
Dividends on ordinary shares	—	—	—	—	—	(1,538)	(1,538)	—	(1,538)
Dividends on other equity instruments	—	—	—	—	—	(133)	(133)	—	(133)
At 31 December 2023	7,060	2,196	(5)	(334)	2	6,047	14,966	—	14,966
At 1 January 2022	7,060	2,191	26	110	2	6,754	16,143	235	16,378
Profit after tax	—	—	—	—	—	1,406	1,406	17	1,423
Other comprehensive (expense)/income, net of tax:
- Fair value reserve (debt instruments)	—	—	(20)	—	—	—	(20)	—	(20)
- Cash flow hedges	—	—	—	(1,226)	—	—	(1,226)	—	(1,226)
- Pension remeasurement	—	—	—	—	—	(456)	(456)	—	(456)
- Own credit adjustment	—	—	—	—	—	20	20	—	20
Total other comprehensive expense	—	—	(20)	(1,226)	—	(436)	(1,682)	—	(1,682)
Total comprehensive (expense)/income	—	—	(20)	(1,226)	—	970	(276)	17	(259)
Issue of other equity instruments	—	750	—	—	—	—	750	—	750
Disposal of non-controlling interests	—	—	—	—	—	—	—	(235)	(235)
Repurchase of other equity instruments	—	(745)	—	—	—	(5)	(750)	—	(750)
Dividends on ordinary shares	—	—	—	—	—	(1,013)	(1,013)	—	(1,013)
Dividends on other equity instruments	—	—	—	—	—	(143)	(143)	—	(143)
Dividends on non-controlling interests	—	—	—	—	—	—	—	(17)	(17)
At 31 December 2022	7,060	2,196	6	(1,116)	2	6,563	14,711	—	14,711

The accompanying Notes to the Financial Statements form an integral part of these Consolidated Financial Statements.

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1. ACCOUNTING POLICIES

These financial statements are prepared for Santander UK Group Holdings plc (the Company) and the Santander UK Group Holdings plc group (the Santander

UK group) under the UK Companies Act 2006. The principal activity of the Santander UK group is the provision of a wide range of banking and financial services

to personal, business and corporate customers. Santander UK Group Holdings plc is a public company, limited by shares and incorporated and registered in

England and Wales having a registered office at 2 Triton Square, Regent’s Place, London, NW1 3AN. It is a financial services holding company.

Basis of preparation

These financial statements incorporate the financial statements of the Company and entities it controls (its subsidiaries) made up to 31 December each year. The

consolidated financial statements have been prepared on the going concern basis using the historical cost convention, except for financial assets and liabilities

that have been measured at fair value. An assessment of the appropriateness of the adoption of the going concern basis of accounting is disclosed in the

statement of going concern in the Directors’ report.

Compliance with International Financial Reporting Standards (IFRS)

The consolidated financial statements of the Santander UK group and the separate financial statements of the Company comply with UK-adopted International

Accounting Standards (IAS). The financial statements are also prepared in accordance with IFRS as issued by the International Accounting Standards Board

(IASB), including interpretations issued by the IFRS Interpretations Committee, as there are no applicable differences from IFRS as issued by the IASB for the

periods presented.

Disclosures required by IFRS 7 ‘Financial Instruments: Disclosure’ relating to the nature and extent of risks arising from financial instruments, and IAS 1

‘Presentation of Financial Statements’ relating to objectives, policies and processes for managing capital, have been included in the Risk review section of this

Annual Report. This information forms an integral part of these financial statements by this cross reference, is marked as audited, and is covered by the

Independent auditors' report.

Climate change

Santander UK continues to develop its assessment of the potential impacts that climate change and the transition to a low carbon economy may have on the

assets and liabilities recognised and presented in its financial statements.

Santander UK is mindful of its responsibilities as a responsible lender and is focused on aligning with the objectives of the Paris Agreement on climate change and

to support the UK’s transition to a climate-resilient, net zero economy.

Santander UK's current climate change strategy focuses on three main areas to achieve Banco Santander's ambition to reach net zero emissions by 2050:

1. Managing climate risks by integrating climate considerations into risk management frameworks, screening and stress testing our portfolio for climate related

financial risks, and setting risk appetites to help steer our portfolio in line with the Paris Agreement,

2. Supporting our customers’ transition by developing products and services that promote a reduction in CO2 emissions, and

3. Reducing emissions in our operations and supply chain by focusing on continuous improvement in our operations, and environmental and energy management

systems in accordance with ISO14001 and 15001, promoting responsible procurement practices and employee engagement.

Santander UK's current climate change strategy and its view of the risks associated with climate change and the transition to a low carbon economy are reflected

in its critical judgements and accounting estimates, although climate change risk did not require any material adjustments at 31 December 2024 and 2023,

consistent with management's assessment that climate change and the transition to a low carbon economy are not currently expected to have a meaningful

impact on the viability of the Santander UK group in the medium term.

At 31 December 2024 and 2023, management specifically considered the potential impact of climate change and the transition to a low carbon economy on:

–Loans and advances to customers (see Note 13 and the credit risk section of the Risk review). Some climate change risks arise due to the requirements of

IFRS 9 and others relate to specific portfolios and sectors: 

–ECL calculations are based on multiple forward-looking economic scenarios developed by management covering a period of five years, during which

timeframe climate change risks may crystallise;

–For mortgages in Retail & Business Banking and commercial real estate lending in Corporate & Commercial Banking, the value of property collateral might

be affected by physical impacts related to the frequency and scale of extreme weather events, such as flood and subsidence risk, or changing environmental

performance standards for property.

–For automotive loans in Consumer Finance, the residual value of automotive vehicles might be impacted by diesel obsolescence and the transition to electric

vehicles.

–For corporate lending in Corporate & Commercial Banking, certain sectors give rise to fossil fuel exposures, such as Oil & Gas, Mining & Extraction and

Power Generation.

–Goodwill impairment assessment (see Note 19). Estimates underpinning the determination of whether or not goodwill balances are impaired are partly based

on forecast business performance beyond the time horizon for management's detailed plans.

–Unity Place our new corporate headquarters in Milton Keynes has been built with sustainability at its core. All property assets are evaluated annually for

potential flood damage and are currently considered low risk.

Future changes to Santander UK's climate change strategy may impact Santander UK's critical judgements and accounting estimates and result in material

changes to financial results and the carrying values of certain assets and liabilities in future reporting periods.

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Change in accounting policy

In 2024, Santander UK voluntarily changed its accounting policy to remove reverse repurchase agreements (reverse repos) from being treated as cash

equivalents under IAS 7 for the purposes of the cashflow statement. This change provides reliable and more relevant information to users of the financial

statements where the bank is using reverse repos as an investment instrument to manage net interest income and operational liquidity rather than as cash

equivalents. The change in accounting policy has no effect on any other primary financial statements, income statement metrics, key indicators, liquidity ratios, or

maturity and offsetting disclosures. This change aligns Santander UK's accounting policy on the treatment of reverse repos under IAS 7 with the policy applied by

its ultimate parent, Banco Santander, SA. The impact of the change on prior periods is set out below:

For the year ended 31 December

	Balance before change	(Decrease)/ increase	Balance after change
2023	£m	£m	£m
Cash and cash equivalents at beginning of the year	48,945	(3,613)	45,332
Cash and cash equivalents at the end of the year	44,931	(5,721)	39,210
Effects of exchange rate changes on cash and cash equivalents	(122)	63	(59)
Net change in operating assets and liabilities:
– Reverse repurchase agreements – non trading	(3,224)	(1,896)	(5,120)
– Repurchase agreements – non trading	704	(275)	429
Net cash flows from operating activities	594	(2,171)	(1,577)
2022
Cash and cash equivalents at beginning of the year	51,787	(2,539)	49,248
Cash and cash equivalents at the end of the year	48,945	(3,613)	45,332
Effects of exchange rate changes on cash and cash equivalents	120	(52)	68
Net change in operating assets and liabilities:
– Reverse repurchase agreements – non trading	6,818	(1,483)	5,335
– Repurchase agreements – non trading	(4,145)	461	(3,684)
Net cash flows from operating activities	(5,467)	(1,022)	(6,489)

The value of reverse repo transactions at 31 December 2024 no longer included as cash and cash equivalents was £6,193m.

Future accounting developments

The IASB issued the following new/amended accounting standards which are not yet effective and have not been endorsed for use in the UK:

–Effective 1 January 2026: ‘Amendments to the Classification and Measurement of Financial Instruments’ (Amendments to IFRS 9 ‘Financial Instruments’ and

IFRS 7 ‘Financial Instruments: Disclosures’) - the amendments set out changes to settling financial liabilities using an electronic payment system, assessing

contractual cash flow characteristics of financial assets including those with environmental, social and governance (ESG)-linked features and requiring

additional disclosures for certain financial instruments.

–Effective 1 January 2027: IFRS 18 ‘Presentation and Disclosure in Financial Statements’ – the new standard will replace IAS 1 ‘Presentation of Financial

Statements’ and introduces changes to the categories for classifying income and expenses and subtotals presented in the income statement and new or

amended disclosures in respect of management-defined performance measures and specified expenses by nature.

The Santander UK group is assessing these new/amended accounting standards to determine the potential impacts on the financial statements when they

become effective or if they are otherwise earlier adopted when available.

Comparative information

As required by US public company reporting requirements, these financial statements include two years of comparative information for the consolidated income

statement, consolidated statement of comprehensive income, consolidated statement of changes in equity, consolidated statement of cash flows and related

notes.

Material accounting policy information

The following material accounting policies have been applied in preparing these financial statements. For material accounting policies which involve the

application of judgements or accounting estimates that are determined to be critical to the preparation of these financial statements see 'Critical judgements and

accounting estimates'.

Consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities (including structured entities) controlled by it and its

subsidiaries. The acquisition method of accounting is used to account for the acquisition of subsidiaries which meet the definition of a business.

Business combinations between entities under common control (i.e. fellow subsidiaries of Banco Santander SA, the ultimate parent) are outside the scope of IFRS

3 – ‘Business Combinations’, and there is no other guidance for such transactions under IFRS. The Santander UK group elects to account for business

combinations between entities under common control at their book values in the acquired entity by including the acquired entity’s results from the date of the

business combination and not restating comparatives. Reorganisations of entities within the Santander UK group are also accounted for at their book values.

Credit protection entities established as part of significant risk transfer (SRT) transactions are not consolidated by the Santander UK group in cases where third

party investors have the exposure, or rights, to all of the variability of returns from the performance of the entities.

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Revenue recognition

a) Interest income and expense

Interest and similar income and expense are recognised in the income statement using the effective interest rate method for: all financial instruments measured at

amortised cost; debt instruments measured at FVOCI; and the effective part of any related accounting hedging instruments.

Interest income is calculated by applying the effective interest rate to the gross carrying amount of financial assets, except for financial assets that have

subsequently become credit-impaired (i.e. Stage 3), for which interest revenue is calculated by applying the effective interest rate to their amortised cost (i.e. net of

the ECL provision). For more information on stage allocations of credit risk exposures, see ‘Significant increase in credit risk’ in the ‘Santander UK group level –

credit risk management’ section of the Risk review.

b) Fee and commission income and expense

Fees and commissions that are not an integral part of the effective interest rate are recognised when the service is performed. Most fee and commission income is

recognised at a point in time. Certain commitment, upfront and management fees are recognised over time but are not material. For retail and corporate products,

fee and commission income consists principally of collection services fees, commission on foreign currencies, commission and other fees received from retailers

for processing credit card transactions, fees received from other credit card issuers for providing cash advances for their customers through the Santander UK

group’s branch and ATM networks, annual fees payable by credit card holders and fees for non-banking financial products.

For insurance products, fee and commission income consists principally of commissions and profit share arising from the sale of building and contents insurance

and life protection insurance. Commissions arising from the sale of buildings and contents insurance are recognised over the period of insurance cover, adjusted

to take account of cancelled policies. Profit share income from the sale of buildings and contents insurance which is not subject to any adjustment is recognised

when the profit share income is earned. Commissions and profit share arising from the sale of life protection insurance is subject to adjustment for cancellations of

policies within 3 years from inception.

Fee and commission income which forms an integral part of the effective interest rate of a financial instrument (for example certain loan commitment fees) is

recognised as an adjustment to the effective interest rate and recorded in ‘Interest income’.

c) Other operating income

Other operating income includes all gains and losses from changes in the fair value of financial assets and liabilities held at fair value through profit or loss

(comprising financial assets and liabilities held for trading, trading derivatives and other financial assets and liabilities at fair value through profit or loss), together

with related interest income, expense, dividends, and changes in fair value of any derivatives managed in conjunction with these assets and liabilities. Other

operating income also includes hedge ineffectiveness arising from fair value and cash flow hedging, income from operating lease assets, and profits and losses

arising on the sales of property, plant and equipment and subsidiary undertakings.

Defined benefit pension schemes (see 'Critical judgements and accounting estimates')

A defined benefit scheme is a pension scheme that guarantees an amount of pension benefit to be provided, usually as a function of one or more factors such as

age, years of service or compensation. Pension costs are charged to ‘Administration expenses’, within the line item ‘Operating expenses before impairment

losses, provisions and charges’ with the net interest on the defined benefit asset or liability included within ‘Net interest income’ in the income statement. The asset

or liability recognised in respect of defined benefit pension schemes is the present value of the defined benefit obligation at the balance sheet date, less the fair

value of scheme assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The assets of the

schemes are measured at their fair values at the balance sheet date.

The present value of the defined benefit obligation is estimated by projecting forward the growth in current accrued pension benefits to reflect inflation and salary

growth to the date of pension payment, then discounted to present value using the yield applicable to high-quality AA rated corporate bonds of the same currency

and which have terms to maturity closest to the terms of the scheme liabilities, adjusted where necessary to match those terms. In determining the value of

scheme liabilities, demographic and financial assumptions are made by management about life expectancy, inflation, discount rates, pension increases and

earnings growth, based on past experience and future expectations. Financial assumptions are based on market conditions at the balance sheet date and can

generally be derived objectively.

Demographic assumptions require a greater degree of estimation and judgement to be applied to externally derived data. Any surplus or deficit of scheme assets

over liabilities is recognised in the balance sheet as an asset (surplus) or liability (deficit). An asset is only recognised to the extent that the surplus can be

recovered through reduced contributions in the future or through refunds from the scheme.

Share-based payments

The Santander UK group engages in cash-settled and equity-settled share-based payment transactions in respect of services received from certain of its

employees. Shares of the Santander UK group’s parent, Banco Santander SA are purchased in the open market by the Santander UK group (for the Employee

Sharesave scheme) or are purchased by Banco Santander SA or another Banco Santander subsidiary (including awards granted under the Long-Term Incentive

Plan and the Deferred Shares Bonus Plan) to satisfy share options or awards as they vest.

Options granted under the Employee Sharesave scheme and awards granted under the Transformation Incentive Plan are accounted for as cash-settled share-

based payment transactions. Awards granted under the Long-Term Incentive Plan and Deferred Shares Bonus Plan are accounted for as equity-settled share-

based payment transactions.

The fair value of the options granted under the Employee Sharesave scheme is determined using an option pricing model, which takes into account the exercise

price of the option, the current share price, the risk-free interest rate, the expected volatility of the Banco Santander SA share price over the life of the option and

the dividend growth rate. The fair value of the awards granted for the Long-Term Incentive Plan was determined at the grant date using an option pricing model,

which takes into account the share price at grant date, the risk-free interest rate, the expected volatility of the Banco Santander SA share price over the life of the

award and the dividend growth rate.

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Goodwill and other intangible assets (for goodwill see 'Critical judgements and accounting estimates')

Goodwill represents the excess of the cost of an acquisition, as well as the fair value of any interest previously held, over the fair value of the share of the

identifiable net assets of the acquired subsidiary, or business at the date of acquisition. Goodwill on the acquisition of subsidiaries and businesses is

included in intangible assets. Goodwill is tested for impairment annually, or more frequently when events or changes in circumstances dictate and carried

at cost less accumulated impairment losses. Gains and losses on the disposal of an entity or business include the carrying amount of goodwill relating to

the entity or business sold.

Other intangible assets are recognised if they arise from contractual or other legal rights or if they are capable of being separated or divided from Santander UK

and sold, transferred, licensed, rented or exchanged. The value of such intangible assets, where they are available for use, is amortised on a straight-line basis

generally over a three year useful economic life and the assets are reviewed annually for impairment indicators and tested for impairment where indicators are

present. Other intangible assets that are not yet available for use are tested for impairment annually or more frequently when events or changes in circumstances

dictate.

Software development costs are capitalised when they are direct costs associated with identifiable and unique software products that are expected to provide

future economic benefits, and the cost of those products can be measured reliably. These costs include payroll, materials, services and directly attributable

overheads. Internally developed software meeting these criteria and externally purchased software are classified in intangible assets on the balance sheet and

amortised on a straight-line basis generally over a three year useful life unless the software is an integral part of the related computer hardware, in which case

it is treated as property, plant and equipment as described below. Capitalisation of costs ceases when the software is capable of operating as intended. Costs of

maintaining software are expensed as incurred.

Property, plant and equipment

Property, plant and equipment include owner-occupied properties (including leasehold properties), office fixtures and equipment and computer software. Property,

plant and equipment also includes operating leases where the Santander UK group is the lessor and right-of-use assets where the Santander UK group is the

lessee. Internally developed software meeting the criteria set out in ‘Goodwill and other intangible assets’ above and externally purchased software are classified

in property, plant and equipment where the software is an integral part of the related computer hardware (for example, the operating system of a computer).

Classes of property, plant and equipment are depreciated on a straight-line basis over their useful life, as follows:

Owner-occupied properties	Not exceeding 50 years
Office fixtures and equipment	3 to 35 years
Computer software	Generally 3 years
Right-of-use assets	Shorter of the lease term or the useful life of the underlying asset
Operating lease assets - vehicles	1 to 4 years

Depreciation is not charged on freehold land. Depreciation of operating lease assets where the Santander UK group is the lessor is described in 'Leases' below.

In 2024, the range of useful lives for Office fixtures and equipment expanded to 35 years due to the addition of fixtures and equipment in Unity Place.

Financial instruments (for impairment of debt instrument financial assets see 'Critical judgements and accounting estimates: Credit impairment

losses')

a) Initial recognition and measurement

Financial assets and liabilities are initially recognised when the Santander UK group becomes a party to the contractual terms of the instrument. The Santander

UK group determines the classification of its financial assets and liabilities at initial recognition and measures a financial asset or financial liability at its fair value

plus or minus, in the case of a financial asset or financial liability not at FVTPL, transaction costs that are incremental and directly attributable to the acquisition or

issue of the financial asset or financial liability. Transaction costs of financial assets and financial liabilities carried at FVTPL are expensed in profit or loss.

Immediately after initial recognition, an expected credit loss (ECL) allowance is recognised for financial assets measured at amortised cost and investments in

debt instruments measured at FVOCI.

A regular way purchase or sale is a purchase or sale of a financial asset under a contract whose terms require delivery of the asset within the timeframe

established generally by regulation or convention in the marketplace concerned. Regular way purchases and sales of financial assets measured at amortised cost

are recognised on settlement date; all other regular way purchases and sales of financial assets are recognised on trade date.

b) Financial assets and liabilities

i) Classification and subsequent measurement

The Santander UK group classifies its financial assets in the measurement categories of amortised cost, FVOCI and FVTPL.

Financial assets and financial liabilities are classified as FVTPL where there is a requirement to do so or where they are otherwise designated at FVTPL on initial

recognition. Financial assets and financial liabilities which are required to be held at FVTPL include:

–Financial assets and financial liabilities held for trading.

–Debt instruments that do not have solely payments of principal and interest (SPPI) characteristics. Otherwise, such instruments are measured at amortised cost

or FVOCI, and

–Equity instruments that have not been designated as held at FVOCI.

Financial assets and financial liabilities are classified as held for trading if they are derivatives or if they are acquired or incurred principally for the purpose of

selling or repurchasing in the near-term, or form part of a portfolio of financial instruments that are managed together and for which there is evidence of short-term

profit taking.

In certain circumstances, other financial assets and financial liabilities are designated at FVTPL where this results in more relevant information. This may arise

because it significantly reduces a measurement inconsistency that would otherwise arise from measuring assets or liabilities or recognising the gains or losses on

them on a different basis, where the assets and liabilities are managed and their performance evaluated on a fair value basis or, in the case of financial liabilities,

where it contains one or more embedded derivatives which are not closely related to the host contract.

The classification and measurement requirements for financial asset debt and equity instruments and financial liabilities are set out below.

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Financial assets: debt instruments

Debt instruments are those instruments that meet the definition of a financial liability from the issuer’s perspective, such as loans and debt securities which consist

mainly of government bonds and covered bonds. Classification and subsequent measurement of debt instruments depend on the Santander UK group’s business

model for managing the asset, and the cash flow characteristics of the asset.

Business model

The business model reflects how the Santander UK group manages the assets in order to generate cash flows and, specifically, whether the Santander UK

group’s objective is solely to collect the contractual cash flows from the assets or is to collect both the contractual cash flows and cash flows arising from the sale

of the assets. If neither of these is applicable, such as where the financial assets are held for trading purposes, then the financial assets are classified as part of an

‘other’ business model and measured at FVTPL. Factors considered in determining the business model for a group of assets include past experience on how the

cash flows for these assets were collected, how the assets’ performance is evaluated and reported to key management personnel, and how risks are assessed

and managed.

SPPI

Where the business model is to hold assets to collect contractual cash flows or to collect contractual cash flows and sell, the Santander UK group assesses

whether the assets’ cash flows represent SPPI. In making this assessment, the Santander UK group considers whether the contractual cash flows are consistent

with a basic lending arrangement (i.e. interest includes only consideration for the time value of money, credit risk, other basic lending risks and a profit margin that

is consistent with a basic lending arrangement). Where the contractual terms introduce exposure to risk or volatility that is inconsistent with a basic lending

arrangement, the related asset is classified and measured at FVTPL.

Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are SPPI.

Based on these factors, the Santander UK group classifies its debt instruments into one of the following measurement categories:

–Amortised cost – Financial assets that are held for collection of contractual cash flows where those cash flows represent SPPI, and that are not designated at

FVTPL, are measured at amortised cost. The carrying amount of these assets is adjusted by any ECL recognised and measured as presented in Note 13.

Interest income from these financial assets is included in ‘Interest and similar income’ using the effective interest rate method. When estimates of future cash

flows are revised, the carrying amount of the respective financial assets is adjusted to reflect the new estimate discounted using the original effective interest

rate. Any changes are recognised in the income statement.

–FVOCI – Financial assets that are held for collection of contractual cash flows and for selling the assets, where the assets’ cash flows represent SPPI, and that

are not designated at FVTPL, are measured at FVOCI. Movements in the carrying amount are recognised in OCI, except for the recognition of impairment

gains or losses, interest revenue and foreign exchange gains and losses which are recognised in profit or loss. When the financial asset is derecognised, the

cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in ‘Other operating income’. Interest income from

these financial assets is included in ‘Interest and similar income’ using the effective interest rate method.

–FVTPL – Financial assets that do not meet the criteria for amortised cost or FVOCI are measured at FVTPL. A gain or loss on a debt instrument that is

subsequently measured at FVTPL, including any debt instruments designated at fair value, is recognised in profit or loss and presented in the income statement

in ‘Other operating income’ in the period in which it arises.

The Santander UK group reclassifies financial assets when and only when its business model for managing those assets changes. The reclassification takes

place from the start of the first reporting period following the change. Such changes are expected to be very infrequent.

Financial assets: equity instruments

Equity instruments are instruments that meet the definition of equity from the issuer’s perspective, being instruments that do not contain a contractual obligation to

pay cash and that evidence a residual interest in the issuer’s net assets. All equity investments are subsequently measured at FVTPL; management may elect, at

initial recognition, to irrevocably designate an equity investment at FVOCI but has not currently done so. When this election is used, fair value gains and losses are

recognised in OCI and are not subsequently reclassified to profit or loss, including on disposal. ECLs (and reversal of ECLs) are not reported separately from

other changes in fair value. Dividends, when representing a return on such investments, continue to be recognised in profit or loss as other income when the right

to receive payments is established. Gains and losses on equity investments at FVTPL are included in ‘Other operating income’ in the income statement.

Financial liabilities

Financial liabilities, which include deposits by banks, deposits by customers, debt securities in issue and subordinated liabilities, are classified as subsequently

measured at amortised cost, except for:

–Financial liabilities at FVTPL (see Note 24): this classification is applied to derivatives and other financial liabilities designated as such at initial recognition.

Gains or losses on financial liabilities designated at FVTPL are presented partially in other comprehensive income (the amount of change in the fair value of the

financial liability that is attributable to changes in the credit risk of that liability) and partially in profit or loss (the remaining amount of change in the fair value of

the liability)

–Financial liabilities arising from the transfer of financial assets which did not qualify for derecognition, whereby a financial liability is recognised for the

consideration received for the transfer. In subsequent periods, the Santander UK group recognises any expense incurred on the financial liability, and

–Financial guarantee contracts and loan commitments.

Preference shares which carry a contractual obligation to transfer economic benefits are classified as financial liabilities and are presented in subordinated

liabilities. The coupon on these preference shares is recognised in the income statement as interest expense on an amortised cost basis using the effective

interest method.

Contracts involving the receipt of cash on which customers receive an index-linked return are accounted for as equity index-linked deposits. The principal products

are Capital Guaranteed/Protected Products, which give the customers a limited participation in the upside growth of an equity index. In the event the index falls in

price, a cash principal element is guaranteed/protected. The equity index-linked deposits contain embedded derivatives. These embedded derivatives, in

combination with the principal cash deposit element, are designed to replicate the investment performance profile tailored to the return agreed in the contracts with

customers. The cash principal element is accounted for as deposits by customers at amortised cost. The embedded derivatives are separated from the host

instrument and are separately accounted for as derivatives.

Sale and repurchase agreements (including stock borrowing and lending)

Securities sold subject to a commitment to repurchase them at a predetermined price (repos) under which substantially all the risks and rewards of ownership

are retained by the Santander UK group remain on the balance sheet and a liability is recorded in respect of the consideration received. Securities purchased

under commitments to resell (reverse repos) are not recognised on the balance sheet and the consideration paid is recorded as an asset. The difference between

the sale and repurchase price is treated as trading income in the income statement, except where the repo is not treated as part of the trading book, in which case

the difference is recorded in interest income or expense.

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Securities lending and borrowing transactions are generally secured, with collateral in the form of securities or cash advanced or received. Securities borrowed

are not reflected on the balance sheet. Collateral in the form of cash received or advanced is recorded as a deposit or a loan. Collateral in the form of securities is

not recognised.

Day One profit adjustments

The fair value of a financial instrument on initial recognition is generally its transaction price (that is, the fair value of the consideration given or received). However,

sometimes the fair value will be based on other observable current market transactions in the same instrument, without modification or repackaging, or on a

valuation technique whose variables include only data from observable markets, such as interest rate yield curves, option volatilities and currency rates. When

such evidence exists, the Santander UK group recognises a trading gain or loss at inception (Day One gain or loss), being the difference between the transaction

price and the fair value. When significant unobservable parameters are used, the entire Day One gain or loss is deferred and is recognised in the income

statement over the life of the transaction until the transaction matures, is closed out, the valuation inputs become observable, or an offsetting transaction is entered

into.

ii) Impairment of debt instrument financial assets

The Santander UK group assesses on a forward-looking basis the ECL associated with its debt instrument assets carried at amortised cost and FVOCI and with

the exposure arising from financial guarantee contracts and loan commitments. The Santander UK group recognises a loss allowance for such losses at each

reporting date. The measurement of ECL reflects:

–An unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes.

–The time value of money, and

–Reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts

of future economic conditions.

Grouping of instruments for losses measured on a collective basis

We typically group instruments and assess them for impairment collectively where they share risk characteristics (as described in the Credit risk section of the

Risk review) using one or more statistical models. Where we have used internal capital or similar models as the basis for our ECL models, this typically results in a

large number of relatively small homogenous groups which are determined by the permutations of the underlying characteristics in the statistical models. We

calculate separate collective provisions for instruments in Stages 1, 2 and 3 where the instrument is not individually assessed, as described below.

Individually assessed impairments (IAIs)

We assess significant Stage 3 cases individually. We do this for Corporate & Commercial Banking cases, but not for Business Banking cases in Retail & Business

Banking which we assess collectively. To calculate the estimated loss, we estimate the future cash flows under several scenarios each of which uses case-specific

factors and circumstances. We then probability-weight the net present value of the cash flows under each scenario to arrive at a weighted average provision

requirement. We update our assessment process every quarter and more frequently if there are changes in circumstances that might affect the scenarios, cash

flows or probabilities we apply.

For more on how ECL is calculated, see the Credit risk section of the Risk review.

–Write-off

For secured loans, a write-off is only made when all collection procedures have been exhausted and the security has been sold and/or a claim made on any

mortgage indemnity guarantee or other insurance. In the corporate loan portfolio, there may be occasions where a write-off occurs for other reasons, such as

following a consensual restructure or refinancing of the debt or where the debt is sold for strategic reasons into the secondary market at a value lower than its

face value.

There is no threshold based on past due status beyond which all secured loans are written off as there can be significant variations in the time needed to

enforce possession and sale of the security, especially due to the different legal frameworks that apply in different regions of the UK. For unsecured loans, a

write-off is only made when all internal avenues of collecting the debt have been exhausted. Where appropriate the debt is passed over to external collection

agencies. A past due threshold is applied to unsecured debt where accounts that are 180 days past due are written off unless there is a dispute awaiting

resolution. Contact is made with customers with the aim to achieve a realistic and sustainable repayment arrangement. Litigation and/or enforcement of security

is usually carried out only when the steps described above have been undertaken without success.

All write-offs are assessed / made on a case-by-case basis, taking account of the exposure at the date of write-off, after accounting for the value from any

collateral or insurance held against the loan. The exception to this is in cases where fraud has occurred, where the exposure is written off once investigations

have been completed and the probability of recovery is minimal. The time span between discovery and write-off will be short and may not result in an

impairment loss allowance being raised. The write-off policy is regularly reviewed. Write-offs are charged against previously established loss allowances.

–Recoveries

Recoveries of credit impairment charges are not included in the impairment loss allowance but are taken to income and offset against credit impairment

charges. Recoveries of credit impairment charges are classified in the income statement as ‘Credit impairment charges’.

iii) Modifications of financial assets

The treatment of a renegotiation or modification of the contractual cash flows of a financial asset normally depends upon whether the renegotiation or modification

is due to financial difficulties of the borrower or for other commercial reasons.

–Contractual modifications due to financial difficulties of the borrower: where the Santander UK group modifies the contractual conditions to enable the

borrower to fulfil their payment obligations, the asset is not derecognised. The gross carrying amount of the financial asset is recalculated as the present value

of the renegotiated/modified contractual cash flows that are discounted at the financial asset’s original EIR and any gain or loss arising from the modification is

recognised in the income statement. 

–Contractual modifications for other commercial reasons: an assessment is performed to determine whether the terms of the new agreement are substantially

different from the terms of the existing agreement, after considering changes in the cash flows arising from the modified terms and the overall instrument risk

profile. Where terms are substantially different, such modifications are treated as a new transaction resulting in derecognition of the original financial asset, and

the recognition of a ‘new’ financial asset with any difference between the carrying amount of the derecognised asset and the fair value of the new asset is

recognised in the income statement as a gain or loss on derecognition. Where terms are not substantially different, the carrying value of the financial asset is

adjusted to reflect the present value of modified cash flows discounted at the original EIR with any gain or loss arising from modification recognised immediately

in the income statement.

Any other contractual modifications, such as where a regulatory authority imposes a change in certain contractual terms or due to legal reasons, are assessed on

a case-by-case basis to establish whether or not the financial asset should be derecognised. 

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iv) Derecognition other than on a modification

Financial assets are derecognised when the rights to receive cash flows have expired or the Santander UK group has transferred its contractual right to receive

the cash flows from the assets and either: (1) substantially all the risks and rewards of ownership have been transferred; or (2) the Santander UK group has

neither retained nor transferred substantially all of the risks and rewards but has transferred control.

Financial liabilities are derecognised when extinguished, cancelled or expired.

c) Financial guarantee contracts and loan commitments

Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified

debtor fails to make payments when due, in accordance with the terms of a debt instrument. Such financial guarantees are given to banks, financial institutions

and others on behalf of customers to secure loans, overdrafts and other banking facilities.

Financial guarantee contracts are initially measured at fair value and subsequently measured at the higher of the amount of the loss allowance, and the premium

received on initial recognition less income recognised in accordance with the principles of IFRS 15. Loan commitments are measured as the amount of the loss

allowance (determined in accordance with IFRS 9 as described in Credit risk section of the Risk review). The Santander UK group has not provided any

commitment to provide loans at a below-market interest rate, or that can be settled net in cash or by delivering or issuing another financial instrument.

For financial guarantee contracts and loan commitments, the loss allowance is recognised as a provision and charged to credit impairment charges in the income

statement. The loss allowance in respect of revolving facilities is classified in loans and advances to customers to the extent of any drawn balances. The loss

allowance in respect of undrawn amounts is classified in provisions. When amounts are drawn, any related loss allowance is transferred from provisions to loans

and advances to customers.

Derivative financial instruments (derivatives)

Derivatives are contracts or agreements whose value is derived from one or more underlying indices or asset values inherent in the contract or agreement, which

require no or little initial net investment and are settled at a future date. Transactions are undertaken in interest rate, cross currency, equity, residential property and

other index-related swaps, forwards, caps, floors, swaptions, as well as credit default and total return swaps, equity index contracts and exchange traded interest

rate futures, and equity index options.

Derivatives are held for risk management purposes. Derivatives are classified as held for trading unless they are designated as being in a hedge accounting

relationship. The Santander UK group chooses to designate certain derivatives as in a hedging relationship if they meet specific criteria, as further described in

‘Hedge accounting’ below.

Derivatives are recognised initially (on the date on which a derivative contract is entered into), and are subsequently remeasured, at their fair value. Fair values

of exchange-traded derivatives are obtained from quoted market prices. Fair values of over-the-counter derivatives are estimated using valuation techniques,

including discounted cash flow and option pricing models.

Certain derivatives may be embedded in hybrid contracts. If the hybrid contract contains a host that is a financial asset, then the Santander UK group assesses

the entire contract as described in the financial asset section above for classification and measurement purposes. Otherwise, embedded derivatives are treated as

separate derivatives when their economic characteristics and risks are not closely related to those of the host contract; the terms of the embedded derivative

would meet the definition of a stand-alone derivative if they were contained in a separate contract; and the combined contract is not held for trading or designated

at fair value. These embedded derivatives are measured at fair value with changes in fair value recognised in the income statement. Contracts containing

embedded derivatives are not subsequently reassessed for separation unless either there has been a change in the terms of the contract which significantly

modifies the cash flows (in which case the contract is reassessed at the time of modification) or the contract has been reclassified (in which case the contract is

reassessed at the time of reclassification).

All derivatives are carried as assets when their fair value is positive and as liabilities when their fair value is negative, except where netting is permitted. The

method of recognising fair value gains and losses depends on whether derivatives are held for trading or are designated as hedging instruments and, if the latter,

the nature of the risks being hedged. Gains and losses from changes in the fair value of derivatives held for trading are recognised in the income statement and

included in Other operating income.

Offsetting financial assets and liabilities

Financial assets and liabilities including derivatives are offset and the net amount reported in the balance sheet when there is a legally enforceable right to set off

the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The Santander UK group is

party to a number of arrangements, including master netting arrangements under industry standard agreements which facilitate netting of transactions in

jurisdictions where netting agreements are recognised and have legal force. These netting arrangements do not generally result in an offset of balance sheet

assets and liabilities for accounting purposes, as transactions are usually settled on a gross basis.

Hedge accounting

The Santander UK group applies hedge accounting to represent, to the maximum possible extent permitted under accounting standards, the economic effects of

its risk management strategies. Derivatives are used to hedge exposures to interest rates, inflation, equity prices and exchange rates.

At the time a financial instrument is designated as a hedge (i.e. at the inception of the hedge), the Santander UK group formally documents the relationship

between the hedging instrument(s) and hedged item(s), its risk management objective and strategy for undertaking the hedge. The documentation includes the

identification of each hedging instrument and respective hedged item, the nature of the risk being hedged (including the benchmark interest rate being hedged in a

hedge of interest rate risk) and how the hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s fair value attributable to the

hedged risk is to be assessed. Accordingly, the Santander UK group formally assesses, both at the inception of the hedge and on an ongoing basis, whether the

hedging derivatives have been and will be highly effective in offsetting changes in the fair value attributable to the hedged risk during the period that the hedge is

designated. A hedge is normally regarded as highly effective if, at inception and throughout its life, the Santander UK group can expect, and actual results indicate

that changes in the fair value or cash flow of the hedged items are effectively offset by changes in the fair value or cash flow of the hedging instrument. If at any

point it is concluded that it is no longer highly effective in achieving its documented objective, hedge accounting is discontinued.

Where derivatives are held for risk management purposes, and when transactions meet the required criteria for documentation and hedge effectiveness, the

derivatives may be designated as either: (i) hedges of the change in fair value of recognised assets or liabilities or firm commitments (fair value hedges); (ii)

hedges of the variability in highly probable future cash flows attributable to a recognised asset or liability, or a forecast transaction (cash flow hedges); or (iii) a

hedge of a net investment in a foreign operation (net investment hedges). The Santander UK group applies fair value and cash flow hedge accounting but not

hedging of a net investment in a foreign operation.

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a) Fair value hedge accounting

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement, together with the changes in

the fair value of the hedged asset or liability that are attributable to the hedged risk. Where the hedged item is measured at amortised cost, the fair value changes

due to the hedged risk adjust the carrying amount of the hedged asset or liability. Changes in the fair value of portfolio hedged items are presented separately in

the consolidated balance sheet in macro hedge of interest rate risk and recognised in the income statement. If the hedge no longer meets the criteria for hedge

accounting, changes in the fair value of the hedged item attributable to the hedged risk are no longer recognised in the income statement. For fair value hedges of

interest rate risk, the cumulative adjustment that has been made to the carrying amount of the hedged item is amortised to the income statement using the

effective interest method over the period to maturity. For portfolio hedged items, the cumulative adjustment is amortised to the income statement using the

straight-line method over the period to maturity.

b) Cash flow hedge accounting

The effective portion of changes in the fair value of qualifying cash flow hedges is recognised in other comprehensive income in the cash flow hedging reserve.

The gain or loss relating to the ineffective portion is recognised immediately in the income statement. Amounts accumulated in equity are reclassified to the

income statement in the periods in which the hedged item affects profit or loss. When a hedging instrument expires or is sold, or when a hedge no longer meets

the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised in the income statement when the

forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that

was reported in equity is immediately transferred to the income statement. The Santander UK group is exposed to variability in future cash flows attributable

to i) interest rate and inflation risks on its GBP floating rate assets and liabilities ii) foreign currency risk on debt issuances denominated in foreign currency and

iii) equity price risk from operating the Employee Sharesave scheme. Cash flow hedging is used to hedge the variability in cash flows arising from these risks.

Securitisation transactions

The Santander UK group has entered into arrangements where undertakings have issued mortgage-backed and other asset-backed securities or have entered

into funding arrangements with lenders in order to finance specific loans and advances to customers. The Santander UK group has also entered into synthetic

securitisation arrangements, as part of significant risk transfer (SRT) transactions to reduce its risk-weighted assets, where undertakings have issued credit-linked

notes, and in some cases deposited the funds raised as collateral, for credit protection in respect of specific loans and advances to customers. As the Santander

UK group has retained substantially all the risks and rewards of the underlying assets, such financial instruments continue to be recognised on the balance sheet,

and a liability recognised for the proceeds of the funding transaction, or in the case of SRT transactions, collateral deposited.

Impairment of non-financial assets

At each balance sheet date, or more frequently when events or changes in circumstances dictate, property plant and equipment (including operating lease assets)

and intangible assets (including goodwill) are assessed for indicators of impairment. If indications are present, these assets are subject to an impairment review.

The impairment review comprises a comparison of the carrying value of the asset or cash generating unit with its recoverable amount: the higher of the asset’s or

cash-generating unit’s fair value less costs to sell and its value in use. The cash-generating unit represents the lowest level at which non-financial assets, including

goodwill, are monitored for internal management purposes and is not larger than an operating segment.

The fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the

measurement date. Value in use is calculated by discounting management’s expected future cash flows obtainable as a result of the asset’s continued use (after

making allowance for increases in regulatory capital requirements), including those resulting from its ultimate disposal, at a market-based discount rate on a pre-

tax basis. The recoverable amounts of goodwill have been based on value in use calculations.

For conducting goodwill impairment reviews, cash generating units are the lowest level at which management monitors the return on investment on assets.

Leases (as lessor)

Operating lease assets are recorded at cost and the difference between cost and residual value (RV) is depreciated over the life of the asset. Operating lease

rental income and depreciation is recognised on a straight-line basis over the life of the asset. After initial recognition, residual values are reviewed regularly, and

any changes are recognised prospectively through remaining depreciation charges.

Amounts due from lessees under finance leases and hire purchase contracts are recorded as receivables at the amount of the Santander UK group’s net

investment in the leases. Finance lease income is allocated to accounting periods to reflect a constant periodic rate of return on the Santander UK group’s net

investment outstanding in respect of the leases and hire purchase contracts. A provision is recognised to reflect a reduction in any anticipated unguaranteed RV. A

provision is also recognised for voluntary termination of the contract by the customer, where appropriate.

Income taxes, including deferred taxes

The tax expense represents the sum of the income tax currently payable and deferred income tax.

A current tax liability for the current or prior period is measured at the amount expected to be paid to the tax authorities. Where the amount of the final tax liability is

uncertain or where a position is challenged by a taxation authority, the liability recognised is the most likely outcome. Where a most likely outcome cannot be

determined, a weighted average basis is applied.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled, or the asset is realised based on rates enacted or

substantively enacted at the balance sheet date. Deferred tax is charged or credited in the income statement, except when it relates to items recognised in other

comprehensive income or directly in equity, in which case the deferred tax is also recognised in other comprehensive income or directly in equity.

Deferred and current tax assets and liabilities are only offset when they arise in the same tax reporting group and where there is both the legal right and the

intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

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Cash and cash equivalents

For the purposes of the cash flow statement, cash and cash equivalents comprise balances with not more than three months maturity from the date of acquisition,

including cash and non-restricted balances with central banks and loans and advances to banks. Balances with central banks represent amounts held at the Bank

of England as part of the Santander UK group’s liquidity management activities. It includes reserves collateralised accounts in respect of Santander UK’s

participation in certain payments schemes which are required to be maintained with the Bank of England and are restricted balances.

Provisions and contingent liabilities (see 'Critical judgements and accounting estimates')

Provisions are recognised for present obligations arising as consequences of past events where it is more likely than not that a transfer of economic benefits will

be necessary to settle the obligation, and it can be reliably estimated.

Customer remediation provisions are made for the estimated cost of making redress payments with respect to the past sales of products, using conclusions such

as the number of claims, the number of those that will be upheld, the estimated average settlement per case and other related costs. Provision is made for the

anticipated cost of restructuring, including redundancy costs, when an obligation exists. An obligation exists when the Santander UK group has a detailed formal

plan for restructuring a business, has raised valid expectations in those affected by the restructuring, and has started to implement the plan or announce its

main features.

When a leasehold property ceases to be used in the business, provision is made where the unavoidable costs of the future obligations relating to the lease are

expected to exceed anticipated rental income. The net costs are discounted using market rates of interest to reflect the long-term nature of the cash flows.

Loan commitments are measured as the amount of the loss allowance, determined in line with IFRS 9 as set out in the Credit risk section of the Risk review.

Contingent liabilities are possible obligations whose existence will be confirmed only by certain future events or present obligations where the transfer of economic

benefit is uncertain or cannot be reliably measured. Contingent liabilities are not recognised but are disclosed unless they are remote.

Critical judgements and accounting estimates

The preparation of Santander UK's consolidated financial statements in accordance with IFRS requires management to make judgements and assumptions in

applying the accounting policies that affect the reported amounts of assets, liabilities, income and expenses. Due to the inherent uncertainty in making estimates,

actual results reported in future periods may be based on amounts which differ from those estimates. Estimates, judgements and assumptions are continually

evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the

circumstances. Management has considered the impact of developments in principal risks and uncertainties, as set out in the Risk review, on critical judgements

and accounting estimates.

The significant judgements, apart from those involving estimation, made by management in applying Santander UK's accounting policies in these financial

statements (key judgements) and the key sources of estimation uncertainty that may have a significant risk of causing a material adjustment to the carrying

amount of assets and liabilities within the next financial year (key estimates), which together are considered critical to Santander UK's results and financial

position, are as follows:

a) Credit impairment allowance

The application of the ECL impairment methodology for calculating credit impairment allowances is highly susceptible to change from period to period. The

methodology requires management to make judgmental assumptions in determining the estimates. Any significant difference between the estimated amounts and

actual amounts could have a material impact on the future financial results and financial condition. The impact of the cost of living crisis has increased the

uncertainty around ECL impairment calculations and has required management to make additional judgements and accounting estimates that affect the amount of

assets and liabilities at the reporting date and the amount of income and expenses in the reporting period. The key additional judgements due to the impact of the

cost of living crisis mainly reflect the increased uncertainty around forward-looking economic data and the need for additional judgemental adjustments.

Key judgements	–Establishing the criteria for a significant increase in credit risk (SICR) and, for corporate borrowers, internal credit risk rating
	–Determining the need for any judgemental adjustments
	–Determining an appropriate definition of default
	–Establishing low credit risk exemption (LCRE) criteria to determine that the credit risk did not increase significantly since initial recognition
	–Determining the need to assess corporate Stage 3 exposures individually
Key estimates	–Forward-looking multiple economic scenario assumptions
	–Probability weights assigned to multiple economic scenarios

For more on each of these key judgements and estimates, see 'Critical Judgements and accounting estimates applied in calculating ECL' in the ‘Credit risk –

credit risk management’ section of the Risk review.

Sensitivity of ECL allowance

For detailed disclosures, see 'Sensitivity of ECL allowance' in the ‘Credit risk – credit risk management’ section of the Risk review.

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b) Provisions and contingent liabilities

Key judgements	–Determining whether a present obligation exists
	–Determining the likely outcome of future legal decisions
Key estimates	–Probability, timing, nature and amount of any outflows that may arise from past events

Included in Litigation and other regulatory provisions in Note 27 are amounts in respect of management’s best estimates of liability relating to a legal dispute

regarding allocation of responsibility for a specific PPI portfolio of complaints, a legacy tax issue from 2018, and Plevin related litigation. Note 30 provides

disclosure relating to ongoing factual issues and reviews that could impact the timing and amount of any outflows. It includes disclosure relating to an investigation

in relation to the historical involvement of Santander UK plc, Santander Financial Services plc and Cater Allen International Limited (all subsidiaries of Santander

UK Group Holdings plc) in German dividend tax arbitrage transactions. It also includes disclosure relating to the historical use of discretionary commission

arrangements by Santander Consumer (UK) plc.

These judgements are based on the specific facts available and often require specialist professional advice. There can be a wide range of possible outcomes and

uncertainties, particularly in relation to legal actions, and regulatory and consumer credit matters. As a result, it is often not possible to make reliable estimates of

the likelihood and amount of any potential outflows, or to calculate any resulting sensitivities. For more on each of these key judgements and estimates, see Notes

27 and 30.

c) Retirement benefit plans

The Santander UK group operates a number of defined benefit pension schemes as described in Note 28 and estimates their position as described in the

accounting policy ‘Pensions and other post retirement benefits’.

Key judgements	–Setting the criteria for constructing the corporate bond yield curve used to determine the discount rate
	–Determining the methodology for setting the inflation assumption
Key estimates	–Discount rate applied to future cash flows
	–Rate of price inflation
	–Expected lifetime of the schemes' members
	–Valuation of pension fund assets whose values are not based on market observable data

For more on each of these key judgements and estimates, see Note 28.

Sensitivity of defined benefit pension scheme estimates

For detailed disclosures, see ‘Actuarial assumption sensitivities’ in Note 28.

The Scheme is invested in certain assets whose values are not based on market observable data, such as investments in private equity funds and property. Due

diligence has been conducted to support the values obtained in respect of these assets represent fair value. Given the nature of these investments, we are unable

to prepare sensitivities on how their values could vary as market conditions or other variables change.

d) Goodwill

The carrying amount of goodwill is based on the application of judgements including the basis of goodwill impairment calculation assumptions. Santander UK

undertakes an annual assessment to evaluate whether the carrying amount of goodwill is impaired, carrying out this assessment more frequently if reviews

identify indicators of impairment or when events or changes in circumstances dictate.

Key judgement:	–Determining the basis of goodwill impairment testing methodology, including the need for planning assumptions and internal capital allocations
Key estimates:	–Forecast cash flows for cash generating units
	–Discount rates which factor in risk-free rates and applicable risk premiums
	All of these variables are subject to fluctuations in external market rates and economic conditions beyond management’s control

Santander UK group undertakes an annual assessment to evaluate whether the carrying amount of goodwill is impaired, carrying out this assessment more

frequently if reviews identify indicators of impairment or when events or changes in circumstances dictate.

The estimation of future cash flows and the level to which they are discounted is inherently uncertain and requires significant judgement and is subject to potential

change over time.

For more on each of these key judgements and estimates, see Note 19.

Sensitivity of goodwill

For detailed disclosures, see ‘Sensitivities of key assumptions in calculating 'VIU’ in Note 19.

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2. SEGMENTS

Santander UK’s principal activity is financial services, mainly in the UK. The business is managed and reported on the basis of four segments, which are strategic

business units that offer different products and services, have different customers and require different technology and marketing strategies. Geographical

information is not provided, as substantially all of Santander UK’s activities are in the UK.

–Retail & Business Banking consists of two business units, Mortgages and Everyday Banking. Mortgages provides prime UK mortgage lending to owner

occupiers and buy-to-let landlords with small portfolios. Everyday Banking provides banking services and unsecured lending to individuals and small

businesses as well as wealth management for high-net-worth clients.

–Consumer Finance provides prime auto consumer financing for individuals, businesses, and automotive distribution networks.

–Corporate & Commercial Banking provides banking products and services to SMEs, mid-sized and larger corporates, typically with annual turnovers of

between £2m and £500m as well as to Local Authorities and Housing Associations.

–Corporate Centre provides treasury services for asset and liability management of our balance sheet.

Retail & Business Banking delivers products through our omni-channel presence comprising branches, ATMs, telephony, digital and intermediary channels.

Consumer Finance business is primarily introduced by car dealerships acting as our intermediary along with a small amount of new business introduced via digital

channels. Corporate and Commercial Banking expertise is provided by relationship managers, product specialists and through digital and telephony channels,

and covers clients' needs both in the UK and overseas.

The segmental data is prepared on a statutory basis of accounting, in line with the accounting policies set out in Note 1. Transactions between segments are on

normal commercial terms and conditions. Internal charges and internal UK transfer pricing adjustments are reflected in the results of each segment and eliminate

on consolidation. Revenue sharing agreements are used to allocate external customer revenues to a segment on a reasonable basis. Funds are ordinarily

reallocated between segments, resulting in funding cost transfers disclosed in operating income. Interest charged for these funds is based on Santander UK’s cost

of wholesale funding. Interest income and interest expense have not been reported separately. The majority of segment revenues are interest income in nature

and net interest income is relied on primarily to assess segment performance and to make decisions on the allocation of segment resources.

Results by segment

For the year ended 31 December

	Retail & Business Banking	Consumer Finance	Corporate & Commercial Banking	Corporate Centre	Total
2024	£m	£m	£m	£m	£m
Net interest income	3,435	144	694	53	4,326
Non-interest income/(expense)	117	182	128	(70)	357
Total operating income/(expense)	3,552	326	822	(17)	4,683
Operating expenses before credit impairment charges, provisions and charges	(1,980)	(152)	(417)	(28)	(2,577)
Credit impairment charges	(49)	(17)	(4)	—	(70)
Provisions for other liabilities and charges	(297)	(332)	(50)	(27)	(706)
Total credit impairment charges, provisions and charges	(346)	(349)	(54)	(27)	(776)
Profit/(loss) before tax	1,226	(175)	351	(72)	1,330
Revenue/(expense) from external customers	3,789	754	562	(422)	4,683
Inter-segment (expense)/revenue	(237)	(428)	260	405	—
Total operating income/(expense)	3,552	326	822	(17)	4,683
Revenue/(expense) from external customers includes the following fee and commission income:(1)
–Current account and debit card fees	424	—	50	—	474
–Insurance, protection and investments	48	—	—	—	48
–Credit cards	92	—	—	—	92
–Non-banking and other fees(2)	3	28	73	12	116
Total fee and commission income	567	28	123	12	730
Fee and commission expense	(445)	(7)	(10)	(22)	(484)
Net fee and commission income/(expense)	122	21	113	(10)	246
Customer loans	173,739	4,759	18,029	1,331	197,858
Customer deposits	151,815	—	22,137	9,457	183,409
Average number of full-time equivalent staff	15,993	773	2,494	159	19,419

(1)The disaggregation of fees and commission income as shown above is not included in reports provided to the chief operating decision maker but is provided to show the split by reportable segments.

(2)Non-banking and other fees include mortgages (except mortgage account fees), consumer finance, commitment commission, asset finance, invoice finance and trade finance.

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	Retail & Business Banking	Consumer Finance	Corporate & Commercial Banking	Corporate Centre	Total
2023	£m	£m	£m	£m	£m
Net interest income/(expense)	3,740	156	841	(70)	4,667
Non-interest income	177	192	135	5	509
Total operating income/(expense)	3,917	348	976	(65)	5,176
Operating expenses before credit impairment charges, provisions and charges	(1,816)	(141)	(351)	(177)	(2,485)
Credit impairment charges	(150)	(15)	(40)	(1)	(206)
Provisions for other liabilities and charges	(233)	(18)	(15)	(70)	(336)
Total credit impairment charges, provisions and charges	(383)	(33)	(55)	(71)	(542)
Profit/(loss) before tax	1,718	174	570	(313)	2,149
Revenue from external customers	3,670	663	712	131	5,176
Inter-segment revenue/(expense)	247	(315)	264	(196)	—
Total operating income/(expense)	3,917	348	976	(65)	5,176
Revenue from external customers includes the following fee and commission income:(1)
–Current account and debit card fees	493	—	49	—	542
–Insurance, protection and investments	47	—	—	—	47
–Credit cards	94	—	—	—	94
–Non-banking and other fees(2)	3	25	79	11	118
Total fee and commission income	637	25	128	11	801
Fee and commission expense	(463)	(6)	(11)	(25)	(505)
Net fee and commission income/(expense)	174	19	117	(14)	296
Customer loans	182,267	5,228	17,939	1,256	206,690
Customer deposits	158,329	—	24,066	11,168	193,563
Average number of full-time equivalent staff	16,330	816	2,376	184	19,706

	Retail & Business Banking	Consumer Finance	Corporate & Commercial Banking	Corporate Centre	Total
2022	£m	£m	£m	£m	£m
Net interest income	3,689	180	580	23	4,472
Non-interest income/(expense)	197	195	146	(4)	534
Total operating income	3,886	375	726	19	5,006
Operating expenses before credit impairment charges, provisions and charges	(1,683)	(144)	(342)	(201)	(2,370)
Credit impairment charges	(263)	(27)	(31)	0	(321)
Provisions for other liabilities and charges	(395)	(6)	(8)	(12)	(421)
Total credit impairment charges, provisions and charges	(658)	(33)	(39)	(12)	(742)
Profit/(loss) before tax	1,545	198	345	(194)	1,894
Revenue/(expense) from external customers	4,153	513	732	(392)	5,006
Inter-segment (expense)/revenue	(267)	(138)	(6)	411	—
Total operating income	3,886	375	726	19	5,006
Revenue from external customers includes the following fee and commission income:(1)
–Current account and debit card fees	502	—	60	—	562
–Insurance, protection and investments	78	—	—	—	78
–Credit card fees	95	—	—	—	95
–Non-banking and other fees(2)	2	20	77	2	101
Total fee and commission income	677	20	137	2	836
Fee and commission expense	(483)	(5)	(18)	(6)	(512)
Net fee and commission income/(expense)	194	15	119	(4)	324
Customer loans	194,661	5,384	18,518	1,141	219,704
Customer deposits	161,748	—	24,798	9,930	196,476
Average number of full-time equivalent staff	15,212	531	2,336	194	18,273

(1)The disaggregation of fees and commission income as shown above is not included in reports provided to the chief operating decision maker but is provided to show the split by reportable segments.

(2)Non-banking and other fees include mortgages (except mortgage account fees), consumer finance, commitment commission, asset finance, invoice finance and trade finance.

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The table below shows the relationship between Customer assets and Loans and advances to customers as presented in the Consolidated Balance Sheet.

Customer assets exclude intercompany balances (including joint ventures), as they carry low credit risk and therefore have an immaterial ECL, Accrued interest

that we have not yet charged to the customer's account, and Other items, consisting mainly of cash collateral. It also shows the relationship between Customer

deposits (see above) and Deposits by customers as presented in the Consolidated Balance Sheet.

	Assets		Liabilities
	2024	2023	2024	2023
	£m	£m	£m	£m
Customer balances (gross)	197,858	206,690	183,409	193,563
Loan loss allowance	(785)	(916)	—	—
Customer balances (net)	197,073	205,774	183,409	193,563
Intercompany balances (including joint ventures)	4,813	4,488	1,715	958
Accrued interest	724	747	878	834
Other items	319	213	(227)	(206)
Loans and advances to customers / Deposits by customers	202,929	211,222	185,775	195,149

3. NET INTEREST INCOME

For the year ended 31 December

			Group
	2024	2023	2022
	£m	£m	£m
Interest and similar income:
Loans and advances to customers	9,425	8,888	5,854
Loans and advances to banks	1,668	1,865	651
Reverse repurchase agreements – non-trading	987	625	149
Other	641	475	168
Total interest and similar income(1)	12,721	11,853	6,822
Interest expense and similar charges:
Deposits by customers	(4,411)	(3,283)	(827)
Deposits by banks	(841)	(1,167)	(496)
Repurchase agreements – non-trading	(644)	(538)	(120)
Debt securities in issue	(2,301)	(2,024)	(795)
Subordinated liabilities	(193)	(169)	(108)
Other	(5)	(5)	(4)
Total interest expense and similar charges(2)	(8,395)	(7,186)	(2,350)
Net interest income	4,326	4,667	4,472

(1)Includes £296m (2023: £230m, 2022: £87m) of interest income on financial assets at FVOCI.

(2)Includes £762m (2023: £707m, 2022: £6m) of interest expense on the effective part of derivatives hedging debt issuances and £3m (2023: £3m, 2022: £3m) of interest expense on lease liabilities.

4. NET FEE AND COMMISSION INCOME

For the year ended 31 December

			Group
	2024	2023	2022
	£m	£m	£m
Fee and commission income:
Current account and debit card fees	474	542	562
Insurance, protection and investments	48	47	78
Credit cards	92	94	95
Non-banking and other fees(1)	116	118	101
Total fee and commission income	730	801	836
Total fee and commission expense	(484)	(505)	(512)
Net fee and commission income	246	296	324

(1)    Non-banking and other fees include mortgages (except mortgage account fees), consumer finance, commitment commission, asset finance, invoice finance and trade finance.

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5. OTHER OPERATING INCOME

For the year ended 31 December

			Group
	2024	2023	2022
	£m	£m	£m
Net (losses) on financial instruments designated at fair value through profit or loss(1)	(57)	(33)	(74)
Net gains on financial instruments mandatorily at fair value through profit or loss(2)	25	42	84
Hedge ineffectiveness	22	18	28
Income from operating lease assets	113	118	129
Other	8	68	43
	111	213	210

(1)Net (losses) on financial instruments designated at fair value through profit or loss includes losses of £16m on deposits (2023: £24m losses, 2022 £35m gains), losses of £22m on debt securities 2023: £32m

losses, 2022: £31m gains).

(2)Net gains on financial instruments mandatorily at fair value through profit or loss include gains of £7m on debt securities (2023: £5m gains, 2022: £13m gains).

Net gains on financial instruments mandatorily at FVTPL includes fair value losses of £21m (2023: losses of £12m, 2022: gains of £14m) on embedded

derivatives bifurcated from certain equity index-linked deposits, as described in the derivatives accounting policy in Note 1. The embedded derivatives are

economically hedged, the results of which are also included in this line item and amounted to gains of £21m (2023: gains of £12m, 2022: losses of £14m). As a

result, the net fair value movements recognised on the equity index-linked deposits and the related economic hedges were net gains of £nil (2023: £nil , 2022:

£nil ).

			Group
	2024	2023	2022
	£m	£m	£m
Exchange rate differences in the consolidated income statement on items not at fair value through profit and loss	488	1,215	(2,147)
These are principally offset by related releases from the cash flow hedge reserve	(485)	(1,231)	2,130

In 2024, no subordinated liabilities were repurchased as part of ongoing liability management exercises (2023: profit of £4m).

In 2024, Other includes £8m of losses on the sale of property as part of our transformation (2023:£nil; 2022: £7m).

6. OPERATING EXPENSES BEFORE CREDIT IMPAIRMENT CHARGES, PROVISIONS

AND CHARGES

For the year ended 31 December

			Group
	2024	2023	2022
	£m	£m	£m
Staff costs:
Wages and salaries	882	854	761
Performance-related payments	166	164	173
Social security costs	123	116	112
Pensions costs: – defined contribution plans	79	71	60
–defined benefit plans	13	13	28
Other share-based payments	4	4	1
Other personnel costs	33	42	44
	1,300	1,264	1,179
Other administration expenses	974	931	894
Depreciation, amortisation and impairment	303	290	297
	2,577	2,485	2,370

Staff costs

Performance-related payments include bonuses paid in cash and share awards granted under the arrangements described in Note 35. Included in this are equity-

settled share-based payments, none of which related to option-based schemes. These are disclosed in the table below as ‘Shares awards’. Performance-related

payments above include amounts related to deferred performance awards as follows:

	Costs recognised in 2024			Costs expected to be recognised in 2025 or later
	Arising from awards in current year	Arising from awards in prior year	Total	Arising from awards in current year	Arising from awards in prior year	Total
	£m	£m	£m	£m	£m	£m
Cash	3	5	8	7	7	14
Shares	2	5	7	6	7	13
	5	10	15	13	14	27

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The following table shows the amount of bonus awarded to employees for the performance year 2024. In the case of deferred cash and shares awards, the final

amount paid to an employee is influenced by forfeiture provisions and any performance conditions to which the awards are subject. The deferred shares award

amount is based on the fair value of the awards at the date of grant.

	Expenses charged in the year		Expenses deferred to future periods		Total
	2024	2023	2024	2023	2024	2023
	£m	£m	£m	£m	£m	£m
Cash award – not deferred	142	142	—	—	142	142
–deferred	8	7	14	12	22	19
Shares award – not deferred	9	8	—	—	9	8
–deferred	7	7	13	11	20	18
Total discretionary bonus	166	164	27	23	193	187

Other share-based payments consist of options granted under the Employee Sharesave scheme which comprise the Santander UK group’s cash-settled share-

based payments. For more, see Note 35.

The average number of full-time equivalent staff in the year is set out in Note 2.

Depreciation, amortisation and impairment

In 2024, depreciation, amortisation and impairment included depreciation of £75m (2023: £64m, 2022: £73m) on operating lease assets (where the Santander UK

group is the lessor) with a carrying amount of £574m at 31 December 2024 (2023: £488m, 2022: £577m). It also included depreciation of £19m (2023: £30m,

2022: £19m) on right-of-use assets with a carrying amount of £81m at 31 December 2024 (2023: £93m, 2022: £115m).

Other administration expenses includes £18m (2023: £19m, 2022: £21m) related to short-term leases.

In 2024, depreciation, amortisation and impairment included an impairment charge of £nil (2023: £25m, 2022: £10m) associated with branch and head office site

closures as part of our transformation. For more, see Note 20.

7. AUDIT AND OTHER SERVICES

For the year ended 31 December

			Group
	2024	2023	2022
	£m	£m	£m
Audit fees:
Fees payable to the Company’s auditor and its associates for the audit of the Santander UK group’s annual financial statements	14.9	15.0	12.8
Fees payable to the Company’s auditor and its associates for other services to the Santander UK group:
–Audit of the Santander UK group’s subsidiaries	0.7	0.7	0.8
Total audit fees(1)	15.6	15.7	13.6
Non-audit fees:
Audit-related assurance services	2.2	2.3	1.9
Other assurance services	1.2	0.8	0.8
Other non-audit services	0.9	0.2	0.2
Total non-audit fees	4.3	3.3	2.9

(1)2024 audit fees included £0.1m (2023: £0.7m, 2022: £0.6m) which related to the prior year.

Audit fees payable for the statutory audit of Santander UK Group Holdings plc were £0.7m (2023: £0.6m, 2022: £0.6m).

Audit-related assurance services mainly comprised services performed in connection with review of the financial information of the Company and reporting to the

Company's UK regulators.

Other non-audit services mainly comprised services performed in support of various debt issuance programmes.

Of the total non-audit fees, £1.5m (2023: £1.7m, 2022: £1.5m accords with the definition of 'Audit Fees' per US Securities and Exchange Commission (SEC)

guidance, £2.7m (2023: £1.6m, 2022: £1.4m) accords with the definition of 'Audit related fees' per that guidance and £93,300 (2023: £37,000, 2022: £nil) accords

with the definition of 'All other fees' per that guidance.

In 2024, the Company's auditors earned £1.8m (2023: £1.6m, 2022: £1.6m), in relation to incremental work undertaken in support of the audit of Banco Santander

SA.

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8. CREDIT IMPAIRMENT CHARGES AND PROVISIONS

For the year ended 31 December

			Group
	2024	2023	2022
	£m	£m	£m
Credit impairment charges:
Loans and advances to customers	86	192	249
(Recoveries)/charges of loans and advances, net of collection costs	(23)	10	36
Off-balance sheet credit exposures (See Note 27)	7	4	36
	70	206	321
Provisions for other liabilities and charges (excluding off-balance sheet credit exposures) (See Note 27)	704	335	424
Charge/(release) for residual value and voluntary termination	2	1	(3)
	706	336	421
	776	542	742

In 2024, 2023 and 2022 there were no material credit impairment charges on Loans and advances to banks, Non-trading reverse repurchase agreements, Other

financial assets at amortised cost and Financial assets at FVOCI.

9. TAXATION

For the year ended 31 December

			Group
	2024	2023	2022
	£m	£m	£m
Current tax:
UK corporation tax on profit for the year	194	474	524
Adjustments in respect of prior years	(36)	(23)	(88)
Total current tax	158	451	436
Deferred tax:
Charge/(credit) for the year	190	109	(30)
Adjustments in respect of prior years	32	(7)	65
Total deferred tax	222	102	35
Tax on profit from continuing operations	380	553	471

The standard rate of UK corporation tax was 28% for banking entities and 25% for non-banking entities (2023: 27.75% for banking entities and 23.50% for non-

banking entities; 2022: 27% for banking entities and 19% for non-banking entities) following the introduction of a surcharge on banking companies in 2016.

Taxation for other jurisdictions is calculated at the rates prevailing in the relevant jurisdictions.

The Santander UK group’s effective tax rate for 2024 was 28.6% (2023: 25.7%, 2022: 24.9%). Tax on profit differs from that calculated at the statutory rate

as follows:

For the year ended 31 December

			Group
	2024	2023	2022
	£m	£m	£m
Profit before tax	1,330	2,149	1,894
Tax calculated at the statutory rate of 25% (2023: 23.5%, 2022: 19%)	333	505	360
Bank surcharge on profits	40	84	123
Non-deductible preference dividends paid	9	9	9
Non-deductible UK Bank Levy	12	10	13
Non-deductible conduct remediation, fines and penalties	3	13	48
Other non-deductible costs and non-taxable income	23	(5)	20
Effect of change in tax rate on deferred tax provision	—	2	(28)
Tax relief on dividends in respect of other equity instruments	(37)	(35)	(40)
Adjustment to prior year provisions	(3)	(30)	(34)
Tax on profit	380	553	471

The introduction of the OECD Pillar Two rules which became effective from 1 January 2024 had a small adverse impact on the effective tax rate in the period as

Santander UK's operations in Jersey and the Isle of Man are subject to an additional top-up tax of 5% in addition to each territory's statutory rate of 10%.

Whilst the enactment of similar legislation in Spain on 20 December 2024 would result in this additional tax charge initially being met by Santander UK's parent in

Spain, it is anticipated that such charges will be recharged to Santander UK and the impact is therefore included in the overall tax charge for the period. The

impact for 2024 was not material. It is anticipated that the tax rates applicable to operations in both territories will effectively increase to 15% from 1 January 2025

which should negate the need for any top-up tax from this date.

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Santander UK has also applied the exception to recognising and disclosing information about deferred tax assets and liabilities related to Pillar Two income taxes,

as provided in the amendments to IAS 12 issued in May 2023.

In 2024, a liability totalling £30m was recorded by SFS in relation to a dispute with an overseas tax authority concerning the tax treatment of legacy equity-related

transactions in 2018 within its Santander Corporate and Investment Banking Division (prior to the UK’s ring-fencing regime and when SFS was trading as Abbey

National Treasury Services plc). This was allocated between litigation and other regulatory provisions £14m, and the tax charge £16m (see Note 27).

Current tax assets

Movements in current tax assets during the year were as follows:

		Group
	2024	2023
	£m	£m
Assets	507	484
At 1 January	507	484
Income statement charge (including discontinued operations)	(158)	(451)
Other comprehensive income charge	(47)	(70)
Corporate income tax paid	219	539
Other movements	(17)	5
	504	507
Assets	504	507
At 31 December	504	507

The amount of corporation income tax paid differs from the tax charge for the period as a result of the timing of payments due to the tax authorities, the effects of

movements in deferred tax, adjustments to prior period current tax provisions and current tax recognised directly in other comprehensive income.

Santander UK group engages in discussion, and co-operates, with HM Revenue & Customs (HMRC) in their oversight of the Santander UK group's tax matters.

The accounting policy for recognising provisions for any tax risks identified is described in Note 1. It is not expected that there will be any material movement in

such provisions within the next 12 months.

The Santander UK group consistently applies the UK’s Code of Practice on Taxation for Banks. For more information, see our Taxation Strategy on our website.

Deferred tax

The table below shows the deferred tax balances including the movement in the deferred tax account during the year. Deferred tax balances are presented in the

balance sheet after offsetting assets and liabilities where the Santander UK group has the legal right to offset and intends to settle on a net basis.

						Group
	Fair value of financial instruments	Pension remeasurem ent	Cash flow hedges	Fair value reserve	Accelerated tax depreciation	Other temporary differences	Total
	£m	£m	£m	£m	£m	£m	£m
At 1 January 2024	(8)	(184)	71	3	18	(88)	(188)
Income statement charge	(144)	(46)	—	—	(24)	(8)	(222)
Transfers/reclassifications	—	—	1	—	—	1	2
Credited to other comprehensive income	—	113	37	4	—	5	159
At 31 December 2024	(152)	(117)	109	7	(6)	(90)	(249)
At 1 January 2023	27	(290)	305	(2)	35	(105)	(30)
Income statement (charge)/credit	(35)	(63)	—	—	(17)	13	(102)
Transfers/reclassifications	—	2	(2)	—	—	—	—
Credited/(charged) to other comprehensive income	—	167	(232)	5	—	4	(56)
At 31 December 2023	(8)	(184)	71	3	18	(88)	(188)

The deferred tax assets and liabilities above have been recognised in the Santander UK group on the basis that sufficient future taxable profits are forecast within

the foreseeable future, in excess of the profits arising from the reversal of existing taxable temporary differences, to allow for the utilisation of the assets as they

reverse. Based on the conditions at the balance sheet date, management determined that a reasonably possible change in any of the key assumptions underlying

the estimated future taxable profits in the Santander UK group’s three-year plan (described in Note 19) would not cause a reduction in the deferred tax assets

recognised. In 2024, there were £nil unrecognised deferred tax assets on capital losses carried forward (2023: £nil).

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10. DIVIDENDS ON ORDINARY SHARES

Dividends on ordinary shares declared and paid in the year were as follows:

For the year ended 31 December

			Group			Group
	2024	2023	2022	2024	2023	2022
	Pence per share	Pence per share	Pence per share	£m	£m	£m
In respect of current year – first interim	7.88	5.86	5.62	556	414	397
– second interim	10.47	15.92	8.73	739	1,124	616
	18.35	21.78	14.35	1,295	1,538	1,013

In 2024, an interim dividend of £1,295m (2023: £1,538m, 2022: £1,013m) was paid on the Company's ordinary shares in issue. In 2024, £804m (2023: £750m,

2022: £300m) of the dividends were special dividends. These were paid following review and approval by the Board in line with our dividend policy.

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11. DERIVATIVE FINANCIAL INSTRUMENTS

a) Use of derivatives

Santander UK undertakes derivative activities primarily to provide customers with risk management solutions and to manage and hedge its own risks. These

derivative activities do not give rise to significant open positions in portfolios of derivatives. Any residual position is managed to ensure that it remains within

acceptable risk levels, with matching transactions used to achieve this where necessary. When entering into derivatives, Santander UK employs the same credit

risk management procedures to assess and approve potential credit exposures that are used for traditional lending.

b) Analysis of derivatives

The table below includes the notional amounts of transactions outstanding at the balance sheet date; they do not represent actual exposures.

						Group
	2024			2023
		Fair value			Fair value
	Notional amount	Assets	Liabilities	Notional amount	Assets	Liabilities
	£m	£m	£m	£m	£m	£m
Derivatives held for trading:
Exchange rate contracts	14,570	250	158	13,536	92	241
Interest rate contracts	29,745	300	499	28,806	398	626
Inflation rate contracts
Equity and credit contracts	701	133	23	810	143	25
Total derivatives held for trading	45,016	683	680	43,152	633	892
Derivatives held for hedging
Designated as fair value hedges:
Exchange rate contracts	1,712	42	8	1,145	29	2
Interest rate contracts	146,385	1,056	477	107,753	1,276	843
	148,097	1,098	485	108,898	1,305	845
Designated as cash flow hedges:
Exchange rate contracts	21,535	698	266	21,618	1,008	290
Interest rate contracts	55,811	334	929	51,881	554	911
Inflation rate contracts	1,794	70	—	—	—	—
Equity derivative contracts	62	24	—	59	19	—
	79,202	1,126	1,195	73,558	1,581	1,201
Total derivatives held for hedging	227,299	2,224	1,680	182,456	2,886	2,046
Derivative netting(1)	—	(1,643)	(1,643)	—	(2,047)	(2,047)
Total derivatives	272,315	1,264	717	225,608	1,472	891

(1)Derivative netting excludes the effect of cash collateral, which is offset against the gross derivative position. The amount of cash collateral received that had been offset against the gross derivative assets was

£489m (2023: £472m) and the amount of cash collateral paid that had been offset against the gross derivative liabilities was £32m (2023: £12m).

At 31 December 2024, the fair value of derivative assets included amounts due from Banco Santander group entities of £598m (2023: £802m) and the fair value

of derivative liabilities included amounts due to Banco Santander group entities of £258m (2023: £298m).

For information about the impact of netting arrangements on derivative assets and liabilities in the table above, see Note 39.

The table below analyses the notional and fair values of derivatives by trading and settlement method.

Notional
	Traded over the counter		Asset	Liability
	Settled by central counterpartie s	Not settled by central counterpartie s	Total	Traded over the counter	Traded over the counter
2024	£m	£m	£m	£m	£m
Exchange rate contracts	—	37,817	37,817	990	432
Interest rate contracts	217,159	14,782	231,941	47	262
Inflation rate contracts	1,794	—	1,794	70	—
Equity and credit contracts	—	763	763	157	23
	218,953	53,362	272,315	1,264	717
2023
Exchange rate contracts	—	36,299	36,299	1,129	533
Interest rate contracts	174,460	13,980	188,440	181	333
Equity and credit contracts	—	869	869	162	25
	174,460	51,148	225,608	1,472	891

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c) Analysis of derivatives designated as hedges

Santander UK applies hedge accounting on both a fair value and cash flow basis depending on the nature of the underlying exposure. We establish the hedge

ratio by matching the notional of the derivative with the underlying position being hedged. Only the designated risk is hedged and therefore other risks, such as

credit risk are managed but not hedged. For interest rate hedges, the designated hedged risk is determined with reference to the underlying benchmark rate.

Fair value hedges

Portfolio hedges of interest rate risk

Santander UK holds portfolios of fixed rate assets and liabilities which expose it to changes in fair value due to movements in market interest rates. We manage

these exposures by entering into interest rate swaps. Each portfolio contains assets or liabilities that are similar in nature and share the risk exposure that is

designated as being hedged.

The interest rate risk component is the change in fair value of fixed rate instruments for changes in the designated benchmark rate. Such changes are usually the

largest component of the overall change in fair value. Separate hedges are maintained for each underlying currency. Effectiveness is assessed by comparing

changes in the fair value of the hedged item attributable to changes in the designated benchmark interest rate, with changes in the fair value of the interest rate

swaps.

Micro hedges of interest rate risk and foreign currency risk

Santander UK accesses international markets to obtain funding, to issue fixed rate debt or to invest in fixed rate debt of other issuers as part of maintaining a

portfolio of HQLA (High Quality Liquid Assets) in its functional currency and other currencies. We are therefore exposed to changes in fair value due to changes in

market interest rates and/or foreign exchange rates, principally in USD and EUR, which we mitigate through the use of receive fixed/pay floating rate interest rate

swaps and/or receive fixed/pay floating rate cross currency swaps.

The interest rate risk component is the change in fair value of the fixed rate debt due to changes in the benchmark rate. The foreign exchange component is the

change in the fair value of the fixed rate debt issuance due to changes in foreign exchange rates prevailing from the time of execution. Effectiveness is assessed

by using linear regression techniques to compare changes in the fair value of the debt caused by changes in the benchmark interest rate and foreign exchange

rates, with changes in the fair value of the interest rate swaps and/or cross currency swaps.

Cash flow hedges

Hedges of interest rate risk

Santander UK manages its exposure to the variability in cash flows of floating rate assets and liabilities attributable to movements in market interest rates by

entering into interest rate swaps. The interest rate risk component is determined with reference to the underlying benchmark rate attributable to the floating rates

asset or liability. Designated benchmark rates referenced are currently SONIA or BoE base rate. Effectiveness is assessed by comparing changes in the fair value

of the interest rate swap with changes in the fair value of the hedged item attributable to the hedged risk, applying a hypothetical derivative method using linear

regression techniques.

Hedges of inflation risk

Santander UK has exposure to inflation risk arising on UK inflation-linked gilts, that is hedged by entering into inflation swaps. Cash flow hedging is applied

whereby the inflation swap is hedging variability in cash flows of the inflation-linked gilt due to changes in GBP RPI. Effectiveness is assessed by comparing

changes in the fair value of the inflation swap with changes in the fair value of the hedged item attributable to the hedged risk, applying a hypothetical derivative

method using linear regression techniques.

Hedges of foreign currency risk

As Santander UK obtains funding in international markets, we assume significant foreign currency risk exposure, mainly in USD and EUR. In addition, Santander

UK also holds debt securities for liquidity purposes which assumes foreign currency exposure, principally in JPY and CHF.

Santander UK manages the exposures to the variability in cash flows of foreign currency denominated assets and liabilities to movements in foreign exchange

rates by entering into either foreign exchange contracts (spot, forward and swaps) or cross-currency swaps. These instruments are entered into to match the cash

flow profile and maturity of the estimated interest and principal repayments of the hedged item.

The foreign currency risk component is the change in cash flows of the foreign currency debt arising from changes in the relevant foreign currency forward

exchange rate. Such changes constitute a significant component of the overall changes in cash flows of the instrument. Effectiveness is assessed by comparing

changes in the fair value of the foreign exchange contracts (spot, forward and swaps) or cross currency swaps with changes in the fair value of the hedged debt

attributable to the hedged risk applying a hypothetical derivative method using linear regression techniques.

Equity risk on cash settled share-based transactions

Santander Equity Investments Limited (SEIL) offers employees the chance to buy shares in Banco Santander SA at a discount under Sharesave, or other

incentive schemes. This exposes Santander UK to equity price risk. The equity risk is managed by purchasing share options which allow Santander UK to buy

shares at a fixed price. These instruments are entered into to match the amount of employee share options expected to be exercised.

The equity price risk is the change in cash flows arising from the change in share price over time. Santander UK established the hedge ratio by matching the

notional of the derivative with the notional of the employee share options being hedged. Effectiveness is assessed using the Dollar Offset method by comparing

the actual changes in the intrinsic value of the hedging instruments and the actual changes in the intrinsic value of the hedged item which have resulted from the

actual movements in the Banco Santander share price.

Possible sources of hedge ineffectiveness

For both fair value and cash flow hedges, hedge ineffectiveness can arise from hedging derivatives with a non-zero fair value at the date of initial designation. In

addition, for:

Fair value hedges

Hedge ineffectiveness can also arise due to differences in discounting between the hedged item and the hedging instrument as cash collateralised swaps

discount using Overnight Indexed Swaps discount curves not applied to the hedged item; and where counterparty credit risk impacts the fair value of the derivative

but not the hedged item. For portfolio hedges of interest rate risk, it can also arise due to differences in the expected and actual volume of prepayments.

Cash flow hedges

Hedge ineffectiveness can also arise due to differences in the timing of cash flows between the hedged item and the hedging instrument. For micro hedges of

interest rate risk, it can also arise due to differences in the basis of cash flows between the hedged item and the hedging instrument. For hedges of equity risk on

cash settled share-based transactions, it can also arise due to changes in the expected number of Sharesave options to be exercised.

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Maturity profile and average price/rate of hedging instruments

The following table sets out the maturity profile and average price/rate of the hedging instruments used in the Santander UK group’s hedging strategies:

							Group
2024	Hedging Instruments	≤1 month	>1 and ≤3 months	>3 and ≤12 months	>1 and ≤5 years	>5 years	Total
Fair value hedges:
Interest rate risk	Interest rate contracts - Nominal amount (£m)	4,174	6,301	53,703	77,274	3,409	144,861
	Average fixed interest rate - GBP	3.75%	4.29%	4.50%	3.87%	3.65%
	Average fixed interest rate - EUR	0.20%	(0.35)%	(0.45)%	0.58%	4.37%
	Average fixed interest rate - USD	1.68%	1.53%	1.53%	5.76%	0.45%
Interest rate/FX risk	Exchange rate contracts - Nominal amount (£m)	—	88	128	1,018	478	1,712
	Interest rate contracts - Nominal amount (£m)	—	88	86	872	478	1,524
	Average GBP - EUR exchange rate	—	1.14	1.16	1.16	1.18
	Average GBP - USD exchange rate	—	—	—	1.32	1.28
	Average fixed interest rate - EUR	—	—	1.35%	3.30%	2.94%
	Average fixed interest rate - USD	—	—	—	4.83%	4.38%
Cash flow hedges:
Interest rate risk	Interest rate contracts - Nominal amount (£m)	4,420	3,475	12,354	28,895	3,587	52,731
	Average fixed interest rate - GBP	4.59%	4.07%	4.76%	3.71%	4.35%
FX risk	Exchange rate contracts - Nominal amount (£m)	258	792	4,927	10,976	1,306	18,259
	Interest rate contracts - Nominal amount (£m)	—	—	—	—	958	958
	Average GBP - JPY exchange rate	178.37	179.99	187.64	—	—
	Average GBP - CHF exchange rate	—	—	1.09	1.11	—
	Average GBP - CAD exchange rate	—	—	1.76	—	—
	Average GBP - EUR exchange rate	—	1.20	1.19	1.18	1.16
	Average GBP - USD exchange rate	—	—	1.24	1.3	1.39
Equity risk	Equity derivative contracts - Nominal amount (£m)	—	—	16	45	1	62
Interest rate/FX risk	Exchange rate contracts - Nominal amount (£m)	826	394	534	1104	418	3276
	Interest rate contracts - Nominal amount (£m)	826	—	327	799	170	2122
	Average GBP - EUR exchange rate	1.12	1.37	1.16	1.21	1.18
	Average GBP - USD exchange rate	—	—	1.54	1.32	1.54
	Average fixed interest rate - GBP	1.48%	2.76%	3.20%	2.77%	4.89%
Inflation risk	Inflation derivative contracts - Nominal amount (£m)	—	—	—	—	1794	1794
	Average fixed interest rate - GBP	—	—	—	—	4.98%
2023
Fair value hedges:
Interest rate risk	Interest rate contracts - Nominal amount (£m)	3,612	7,141	32,241	60,803	3,008	106,805
	Average fixed interest rate - GBP	2.38%	3.19%	3.42%	3.89%	3.99%
	Average fixed interest rate - EUR	1.14%	0.18%	0.45%	0.21%	3.92%
	Average fixed interest rate - USD	2.60%	2.46%	4.23%	1.36%	4.91%
Interest rate/FX risk	Exchange rate contracts - Nominal amount (£m)	—	18	—	1,041	86	1,145
	Interest rate contracts - Nominal amount (£m)	—	18	—	844	86	948
	Average GBP - EUR exchange rate	—	1.11	—	1.16	1.15
	Average GBP - USD exchange rate	—	—	—	1.32	—
	Average fixed interest rate - EUR	—	—	—	2.77%	3.48%
	Average fixed interest rate - USD	—	—	—	4.83%	—
Cash flow hedges:
Interest rate risk	Interest rate contracts - Nominal amount (£m)	911	3,083	13,671	27,715	1,219	46,599
	Average fixed interest rate - GBP	5.06%	3.05%	5.38%	3.84%	3.45%
FX risk	Exchange rate contracts - Nominal amount (£m)	927	3,238	2,692	9,447	588	16,892
	Interest rate contracts - Nominal amount (£m)	—	2,199	—	—	942	3,141
	Average GBP - JPY exchange rate	154.14	153.95	167.85	—	—
	Average GBP - CHF exchange rate	1.09	1.09	1.09	1.12	1.12
	Average GBP - EUR exchange rate	—	1.20	1.17	1.18	—
	Average GBP - USD exchange rate	—	1.39	—	1.28	1.39
Equity risk	Equity derivative contracts - Nominal amount (£m)	—	—	7	50	2	59
Interest rate/FX risk	Exchange rate contracts - Nominal amount (£m)	87	785	500	2,896	458	4,726
	Interest rate contracts - Nominal amount (£m)	—	—	—	1,975	166	2,141
	Average GBP - EUR exchange rate	1.18	—	1.25	1.20	1.19
	Average GBP - USD exchange rate	—	0.02	—	0.01	0.02
	Average fixed interest rate - GBP	2.57%	2.54%	2.96%	2.42%	4.81%

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Net gains or losses arising from fair value and cash flow hedges included in other operating income

			Group
	2024	2023	2022
	£m	£m	£m
Fair value hedging:
Gains/(Losses) on hedging instruments	199	(1,878)	2,371
(Losses)/Gains on hedged items attributable to hedged risks	(173)	1,893	(2,307)
Fair value hedging ineffectiveness	26	15	64
Cash flow hedging ineffectiveness	(4)	3	(36)
	22	18	28

Hedge ineffectiveness can be analysed by risk category as follows:

									Group
			2024			2023			2022
	Change in FV of hedging instruments	Change in FV of hedged items	Recognised in income statement	Change in FV of hedging instruments	Change in FV of hedged items	Recognised in income statement	Change in FV of hedging instruments	Change in FV of hedged items	Recognised in income statement
	£m	£m	£m	£m	£m	£m	£m	£m	£m
Fair value hedges:
Interest rate risk	173	(156)	17	(1,864)	1,874	10	2,382	(2,324)	58
Interest rate/FX risk	26	(17)	9	(14)	19	5	(11)	17	6
	199	(173)	26	(1,878)	1,893	15	2,371	(2,307)	64

					Group
		Hedging Instruments		Recognised in income statement	Reclassified from reserves to income
	Income statement line item affected by reclassification	Change in FV	Recognised in OCI
		£m	£m	£m	£m
Cash flow hedges:
2024
Interest rate risk	Net interest income	(769)	766	(3)	(484)
FX risk	Net interest income/other operating income	414	(405)	9	216
Equity risk	Operating expenses	9	(9)	—	11
Interest rate/FX risk	Net interest income/other operating income	(181)	171	(10)	(231)
Inflation Risk	Net Interest Income	71	(71)	—	3
		(456)	452	(4)	(485)
2023
Interest rate risk	Net interest income	449	(447)	2	(464)
FX risk	Net interest income/other operating income	(375)	377	2	(392)
Equity risk	Operating expenses	20	(20)	—	13
Interest rate/FX risk	Net interest income/other operating income	(238)	237	(1)	(388)
		(144)	147	3	(1,231)
2022
Interest rate risk	Net interest income	(1,150)	1,150	—	(96)
FX risk	Net interest income/other operating income	1,602	(1,602)	—	1,691
Equity risk	Operating expenses	2	(2)	—	2
Interest rate/FX risk	Net interest income/other operating income	(54)	18	(36)	533
		400	(436)	(36)	2,130

In 2024, cash flow hedge accounting of £nil (2023: £nil) had to cease due to the hedged cash flows no longer being expected to occur.

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The following table provides a reconciliation by risk category of components of equity and analysis of OCI items (before tax) resulting from hedge accounting.

		Group
	2024	2023
	£m	£m
Balance at 1 January	(477)	(1,561)
Effective portion of changes in fair value:
– Interest rate risk	(766)	447
– Foreign currency risk	405	(377)
– Equity risk	9	20
– Interest rate/foreign currency risk	(171)	(237)
– Inflation risk	71	—
	(452)	(147)
Income statement transfers:
– Interest rate risk	484	464
– Foreign currency risk	(216)	392
– Equity risk	(11)	(13)
– Interest rate/foreign currency risk	231	388
– Inflation risk	(3)	—
	485	1,231
Balance at 31 December	(444)	(477)

Hedged exposures

Santander UK hedges its exposures to various risks, including interest rate risk and foreign currency risk, as set out in the following table.

										Group
					2024					2023
		Accumulated amount of FV hedge adjustments			Change in value to calculate hedge ineffective ness		Accumulated amount of FV hedge adjustments			Change in value to calculate hedge ineffectiven ess
	Carrying value	Hedged item	Portfolio hedge of interest rate risks	Of which Discontinue d hedges		Carrying value	Hedged item	Portfolio hedge of interest rate risks	Of which Discontinued hedges
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Fair value hedges
Interest rate risk:
Loans and advances to customers	62,849	—	(731)	(290)	(156)	73,270	—	(622)	(435)	1,969
Other financial assets at amortised cost	1,667	(45)	(7)	(7)	(44)	152	1	(8)	(8)	5
Reverse repurchase agreements – non trading	6,423	—	(1)	—	(1)	6,186	—	—	—	4
Other financial assets at FVOCI	2,100	(131)	—	(95)	(18)	2,013	(113)	—	(131)	82
Deposits by customers	(20,867)	—	9	1	18	(15,052)	—	(10)	—	(15)
Debt securities in issue	(4,808)	170	(54)	(77)	29	(5,065)	162	(75)	(114)	(170)
Subordinated liabilities	(511)	(12)	(1)	(36)	15	(522)	(27)	(1)	(42)	(1)
Interest rate/FX risk:
Other financial assets at FVOCI	1,503	16	—	—	(30)	989	4	—	—	12
Debt securities in issue	(200)	(10)	—	(14)	14	(214)	(14)	—	(24)	8
Subordinated liabilities	—	—	—	—		—	—	—	—	(1)
	48,156	(12)	(785)	(518)	(173)	61,757	13	(716)	(754)	1,893

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						Group
			2024			2023
	Change in value to calculate hedge ineffectiveness	Cash flow hedge reserve	Balances on cash flow hedge reserve for discontinued hedges	Change in value to calculate hedge ineffectiveness	Cash flow hedge reserve	Balances on cash flow hedge reserve for discontinued hedges
Hedged item balance sheet line item	£m	£m	£m	£m	£m	£m
Cash flow hedges:
Interest rate risk:
Loans and advances to customers	362	(495)	3	(163)	(455)	1
Cash and balances at central banks	468	(193)	(50)	(283)	100	(76)
Deposits by banks	(4)	—	—	(1)	(1)	—
Repurchase agreements - non trading	(60)	52	—	—	—	—
FX risk:
Other financial assets at FVOCI	(487)	1	—	(253)	1	—
Not applicable – highly probable forecast transactions	4	—	—	88	1	—
Deposits by customers	—	—	—	(21)	—	—
Debt securities in issue	78	181	—	605	(9)	—
Repurchase agreements - non trading	—	—	—	(42)	—	—
Equity risk:
Other liabilities	(9)	8	—	(20)	10	—
Interest rate/FX risk:
Debt securities in issue/loans and advances to customers	167	(49)	—	194	(114)	—
Subordinated liabilities/loans and advances to customers	4	(16)	50	43	(10)	52
Inflation risk:
Other financial assets at amortised cost	(70)	66	—	—	—	—
Other financial assets at FVOCI	(1)	1	—	—	—	—
	452	(444)	3	147	(477)	(23)

12. OTHER FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

		Group
	2024	2023
	£m	£m
Loans and advances to customers:
Loans to housing associations	4	8
Other loans	318	347
	322	355
Debt securities	56	168
Other debt instruments	36	49
Equity securities	7	30
	421	602

For the Santander UK group, other financial assets at FVTPL comprised £341m (2023: £317m) of financial assets designated at FVTPL and £80m (2023: £285m)

of financial assets mandatorily held at FVTPL.

Loans and advances to customers principally represent other loans, being a portfolio of roll-up mortgages and deferred consideration. These are managed, and

have their performance evaluated, on a fair value basis in accordance with a documented investment strategy, and information about them is provided on that

basis to management.

The net loss in the year attributable to changes in credit risk for loans and advances at FVTPL was £nil (2023: £nil, 2022: £1m). The cumulative net loss

attributable to changes in credit risk for loans and advances at FVTPL at 31 December 2024 was £3m (2023: £3m,2022: £3m).

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13. LOANS AND ADVANCES TO CUSTOMERS

		Group
	2024	2023
	£m	£m
Loans secured on residential properties	168,561	176,495
Corporate loans	18,741	18,454
Finance leases	4,222	4,530
Other unsecured loans	6,601	7,232
Accrued interest and other adjustments	799	960
Amounts due from fellow Banco Santander subsidiaries and joint ventures	4,813	4,488
Loans and advances to customers	203,737	212,159
Credit impairment loss allowances on loans and advances to customers	(785)	(916)
Residual value and voluntary termination provisions on finance leases	(23)	(21)
Net loans and advances to customers	202,929	211,222

For movements in expected credit losses, see the 'Movement in total exposures and the corresponding ECL' table in the Santander UK group level – Credit risk

review section of the Risk review.

Finance lease and hire purchase contract receivables may be analysed as follows:

	Group
	2024			2023
	Gross investment	Unearned finance income	Net investment	Gross investment	Unearned finance income	Net investment
	£m	£m	£m	£m	£m	£m
No later than one year	1,400	(208)	1,192	1,502	(216)	1,286
Later than one year and not later than two years	1,423	(215)	1,208	1,426	(208)	1,218
Later than two years and not later than three years	1,220	(184)	1,036	1,331	(194)	1,137
Later than three years and not later than four years	721	(109)	612	882	(129)	753
Later than four years and not later than five years	115	(17)	98	99	(14)	85
Later than five years	90	(14)	76	60	(9)	51
	4,969	(747)	4,222	5,300	(770)	4,530

The Santander UK group enters into finance leasing arrangements primarily for the financing of motor vehicles and a range of assets for its corporate customers.

Included in the carrying value of net investment in finance leases and hire purchase contracts is £1,748m (2023: £1,830m) of unguaranteed RV at the end of the

current lease terms, which is expected to be recovered through re-payment, re-financing or sale. Contingent rent income of £nil (2023: £nil, 2022: £nil) was earned

in the year, which was classified in ‘Interest and similar income’. Finance income on the net investment in finance leases was £308m (2023: £266m, 2022:

£230m).

Finance lease receivable balances are secured over the asset leased. The Santander UK group is not permitted to sell or repledge the asset in the absence of

default by the lessee. The Directors consider that the carrying amount of the finance lease receivables approximates to their fair value.

Included within loans and advances to customers are advances assigned to bankruptcy remote structured entities and Abbey Covered Bonds LLP. These loans

provide security to issues of covered bonds and mortgage-backed or other asset-backed securities issued by the Santander UK group. For more, see Note 14.

At 31 December 2024 and 2023, the Santander UK group had contracted with lessees for the following future undiscounted minimum lease payments receivable

under operating leases.

	Group
	2024	2023
	£m	£m
No later than one year	27	29
Later than one year and not later than two years	22	26
Later than two years and not later than three years	17	19
Later than three years and not later than four years	8	14
Later than four years and not later than five years	5	7
Later than five years	12	19
	91	114

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14. SECURITISATIONS AND COVERED BONDS

The information in this Note relates to securitisations and covered bonds for consolidated structured entities, used to obtain funding or collateral. It excludes

structured entities relating to credit protection transactions.

The Santander UK group uses structured entities to securitise some of the mortgage and other loans to customers that it originates. The Santander UK group also

issues covered bonds, which are guaranteed by, and secured against, a pool of the Santander UK group’s mortgage loans transferred to Abbey Covered Bonds

LLP. The Santander UK group issues mortgage-backed securities, other asset-backed securities and covered bonds mainly in order to obtain diverse, low-cost

funding, but also to use as collateral for raising funds via third party bilateral secured funding transactions or for liquidity purposes in the future. The Santander UK

group has successfully used bilateral secured transactions as an additional form of medium-term funding; this has allowed the Santander UK group to further

diversify its medium-term funding investor base.

Loans and advances to customers include portfolios of residential mortgage loans, and receivables derived from credit agreements with retail customers for the

purchases of financed vehicles, which are subject to non-recourse finance arrangements. These loans and receivables have been purchased by, or assigned to,

structured entities or Abbey Covered Bonds LLP, and have been funded primarily through the issue of mortgage-backed securities, other asset-backed securities

or covered bonds. No gain or loss has been recognised as a result of these sales. The structured entities and Abbey Covered Bonds LLP are consolidated as

subsidiary undertakings. The Company and its subsidiaries do not own directly, or indirectly, any of the share capital of any of the structured entities.

a) Securitisations

i) Master trust structures

The Santander UK group makes use of master trust structures, whereby a pool of residential mortgage loans is assigned to a trust company by the asset

originator. A funding entity acquires a beneficial interest in the pool of assets held by the trust company with funds borrowed from qualifying structured entities,

which at the same time issue asset-backed securities to third-party investors or the Santander UK group.

Santander UK plc and its subsidiaries receive payments from the securitisation companies in respect of fees for administering the loans, and payment of deferred

consideration for the sale of the loans. Santander UK plc and its subsidiaries have no right or obligation to repurchase any securitised loan, except if certain

representations and warranties given by Santander UK plc or its subsidiaries at the time of transfer are breached and, in certain cases, if there is a product switch

or further advance, if a securitised loan is in arrears for over two months or if a securitised loan does not comply with regulatory requirements.

ii) Other securitisation structures

The Santander UK group also makes use of auto loan securitisations, whereby a pool of auto loans originated by a member of the Santander UK group is sold to

a special purpose vehicle by the asset originator. The special purpose vehicle funds the purchase of the auto loans by issuing asset-backed securities to third-

party investors. A proportion of the securities are also retained by members of the Santander UK group. Members of the Santander UK group also receive

payments from the special purpose vehicle in respect of fees for administering the auto loans, and payment of deferred consideration for the sale of the auto

loans. The seller has no right or obligation to repurchase any securitised loan, except if certain representations and warranties given by the seller at the time of

transfer are breached and, in certain cases, if there has been a subsequent variation in the terms of the underlying auto loan not permitted under the sale

agreement.

b) Covered bonds

Santander UK plc also issues covered bonds, which are its direct, unsecured and unconditional obligation. The covered bonds benefit from a guarantee from

Abbey Covered Bonds LLP. Santander UK plc makes a term advance to Abbey Covered Bonds LLP equal to the sterling proceeds of each issue of covered

bonds. Abbey Covered Bonds LLP uses the proceeds of the term advance to purchase portfolios of residential mortgage loans and their security from Santander

UK plc. Under the terms of the guarantee, Abbey Covered Bonds LLP has agreed to pay an amount equal to the guaranteed amounts when the same shall

become due for payment, but which would otherwise be unpaid by Santander UK plc.

c) Analysis of securitisations and covered bonds

The Santander UK group’s principal securitisation programmes and covered bond programme, together with the balances of the advances subject to

securitisation (or for the covered bond programme assigned) and the carrying value of the notes in issue at 31 December 2024 and 2023 are listed below. The

gross assets in the Group table below were transferred from the Company to the securitisations and covered bond programme vehicles but do not qualify for

derecognition from the Company.

	Gross assets		External notes in issue		Notes held within the Group
	2024	2023	2024	2023	2024	2023
	£m	£m	£m	£m	£m	£m
Mortgage-backed master trust structures:
–Holmes	5,109	3,242	3,379	2,119	389	300
–Fosse	2,383	2,048	—	100	1,408	1,382
	7,492	5,290	3,379	2,219	1,797	1,682
Other asset-backed securitisation structures:
–Repton	718	757	550	550	—	—
Total securitisation programmes	8,210	6,047	3,929	2,769	1,797	1,682
Covered bond programme:
–Euro 35bn Global Covered Bond Programme	25,695	21,880	17,211	15,000	1,224	—
Total securitisation and covered bond programmes	33,905	27,927	21,140	17,769	3,021	1,682

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The following table sets out the internal and external issuances and redemptions in 2024 and 2023 for each securitisation and covered bond programme.

	Internal issuances		External issuances		Internal redemptions		External redemptions
	2024	2023	2024	2023	2024	2023	2024	2023
	£m	£m	£m	£m	£m	£m	£m	£m
Mortgage-backed master trust structures:
–Holmes	106	241	1,250	1,500	17	121	—	186
–Fosse	894	—	—	—	865	—	100	—
Other asset-backed securitisation structures:
–Motor	—	—	—	—	—	—	—	7
–Repton	—	—	—	550	—	—	—	—
Covered bond programme:
–Euro 35bn Global Covered Bond Programme	—	1,100	5,890	1,844	41	16	3,359	1,897
	1,000	1,341	7,140	3,894	923	137	3,459	2,090

Holmes Funding Ltd has a beneficial interest of £3,735m (2023: £2,396m) in the residential mortgage loans held by Holmes Trustees Ltd. The remaining share of

the beneficial interest in residential mortgage loans held by Holmes Trustees Ltd belongs to Santander UK plc.

Fosse Funding (No.1) Ltd has a beneficial interest of £1,394m (2023: £1,393m) in the residential mortgage loans held by Fosse Trustee (UK) Ltd. The remaining

share of the beneficial interest in residential mortgage loans held by Fosse Trustee (UK) Ltd belongs to Santander UK plc.

The Holmes securitisation companies have cash deposits of £126m (2023: £80m), which have been accumulated to finance the redemption of a number of

securities issued by the Holmes securitisation companies. The share of Holmes Funding Ltd in the trust assets is therefore reduced by this amount.

The Fosse securitisation companies have cash deposits of £48m (2023: £108m), which have been accumulated to finance the redemption of a number of

securities issued by the Fosse securitisation companies. The share of Fosse Funding (No.1) Ltd’s beneficial interest in the assets held by Fosse Trustee (UK) Ltd

is therefore reduced by this amount.

15. TRANSFERS OF FINANCIAL ASSETS NOT QUALIFYING FOR DERECOGNITION

The Santander UK group enters into transactions in the normal course of business by which it transfers recognised financial assets directly to third parties or to

structured entities. These transfers may give rise to the full or partial derecognition of those financial assets. Transferred financial assets that do not qualify for

derecognition consist of (i) securities held by counterparties as collateral under repurchase agreements, (ii) securities lent under securities lending agreements,

and (iii) loans that have been transferred under securitisation or covered bond arrangements by which the Santander UK group retains a continuing involvement in

such transferred assets.

As a result of these sale and repurchase and securities lending transactions, the Santander UK group is unable to use, sell or pledge the transferred assets for the

duration of the transaction. The Santander UK group remains exposed to interest rate risk and credit risk on these pledged instruments. The counterparty’s

recourse is not limited to the transferred assets.

The Santander UK group securitisation and covered bond transfers do not qualify for derecognition.The Santander UK group remains exposed to credit risks

arising from the mortgage loans or credit agreements and has retained control of the transferred assets. Circumstances in which the Santander UK group has

continuing involvement in the transferred assets may include retention of servicing rights over the transferred assets (the servicing fee in respect of which is

dependent on the amount or timing of the cash flows collected from, or the non-performance of, the transferred assets), entering into a derivative transaction with

the securitisation or covered bond vehicle, retaining an interest in the securitisation or covered bond vehicle or providing a cash reserve fund. Where the

Santander UK group has continuing involvement, it continues to recognise the transferred assets to the extent of its continuing involvement and recognises an

associated liability. The net carrying amount of the transferred assets and associated liabilities reflects the rights and obligations that the Santander UK group has

retained.

The carrying amount of the assets transferred under securitisation and covered bond arrangements and associated financial liabilities is set out in Note 14 c). The

following table analyses the carrying amount of other financial assets that did not qualify for derecognition and their associated financial liabilities:

				Group
	2024		2023
	Assets	Liabilities	Assets	Liabilities
Nature of transaction	£m	£m	£m	£m
Sale and repurchase agreements	1,309	(1,335)	14	(14)
Securities lending agreements	3,292	(2,794)	3,136	(2,735)

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16. REVERSE REPURCHASE AGREEMENTS – NON-TRADING

		Group
	2024	2023
	£m	£m
Agreements with banks	1,363	2,397
Agreements with customers	8,975	10,071
	10,338	12,468

17. OTHER FINANCIAL ASSETS AT AMORTISED COST

		Group
	2024	2023
	£m	£m
Debt securities	3,408	152
	3,408	152

A significant portion of the debt securities are held in our eligible liquidity pool and consist mainly of government bonds and covered bonds. In 2024, Santander UK

increased the allocation of liquid assets to longer-dated, duration-hedged UK Gilts to support ongoing HQLA requirements. Detailed disclosures can be found in

the 'Liquidity risk' section of the Risk review.

18. INTERESTS IN OTHER ENTITIES

		Group
	2024	2023
	£m	£m
Joint Ventures	289	245
	289	245

The Santander UK group consists of a parent company, Santander UK Group Holdings plc, incorporated and domiciled in the UK and a number of subsidiaries

and joint ventures held directly and indirectly by it.

a) Interests in subsidiaries

The Company holds directly or indirectly 100% of the issued ordinary share capital of its principal subsidiaries. All companies operate principally in their country of

incorporation or registration. SFS has branch offices in Jersey and the Isle of Man.

Interests in consolidated structured entities

Structured entities are formed by Santander UK to accomplish specific and well-defined objectives. Santander UK consolidated these structured entities when the

substance of the relationship indicates control, as described in Note 1. In addition to the structured entities disclosed in Note 14 which are used for securitisation

and covered bond programmes, the only other structured entities consolidated by Santander UK are described below. All the external assets and liabilities in these

entities are included in the financial statements and in relevant Notes. Other than as set out below, no significant judgements were required with respect to control

or significant influence.

Motor Securities 2018-1 Designated Activity Company (Motor 2018)

Motor 2018 is a credit protection entity, and a Designated Activity Company limited by shares, incorporated in Ireland. It issued a series of credit linked notes

varying in seniority which referenced a portfolio of Santander UK group auto loans. Concurrently, this entity sold credit protection to SCUK in respect of the

referenced loans and, in return for a fee, was liable to make protection payments to SCUK upon the occurrence of a credit event in relation to any of the

referenced loans. Motor 2018 is consolidated as Santander UK held a variable interest by retaining the junior tranche of notes issued by the entity. The

outstanding notes were redeemed and the transaction terminated in 2023.

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b) Interests in joint ventures

Santander UK does not have any individually material interests in joint ventures. In 2024, Santander UK’s share in the profit after tax of its joint ventures was £45m

(2023: £43m) before elimination of transactions between Santander UK and the joint ventures. At 31 December 2024, the carrying amount of Santander UK’s

interest was £289m (2023: £245m). At 31 December 2024 and 2023, the joint ventures had no commitments and contingent liabilities.

c) Interests in unconsolidated structured entities

Structured entities sponsored by the Santander UK group

Santander UK has interests in structured entities which it sponsors but does not control. Santander UK considers itself a sponsor of a structured entity when it

facilitates the establishment of the structured entity. Other than as set out below, no significant judgements were required with respect to control or significant

influence. The structured entities sponsored but not consolidated by Santander UK are as follows:

i) Santander (UK) Common Investment Fund (the Fund)

The Fund is a common investment fund that was established to hold the assets of the Santander (UK) Group Pension Scheme. The Fund is not consolidated by

Santander UK, but its assets of £7,591m (2023: £8,551m) are accounted for as part of the defined benefit assets and obligations recognised on Santander UK’s

balance sheet. For more on the Fund, see Note 28. As the Fund holds the assets of the pension scheme, it is outside the scope of IFRS 10. Santander UK’s

maximum exposure to loss is the carrying amount of the assets held.

ii) Credit protection entities

Santander UK has established five (2023: four) unconsolidated credit protection entities, which are Designated Activity Companies limited by shares, incorporated

in Ireland. Each entity has issued a series of credit linked notes varying in seniority which reference portfolios of Santander UK group loans. Concurrently, these

entities sell credit protection to Santander UK in respect of the referenced loans and, in return for a fee, are liable to make protection payments to Santander UK

upon the occurrence of a credit event in relation to any of the referenced loans.

Credit linked notes, which amounted to £226m (2023: £185m), are all held by third party investors. Funds raised by the sale of the credit linked notes are

deposited with Santander UK as collateral for the credit protection.

Deposits and associated guarantees in respect of the credit linked notes are included in ‘Deposits by customers’ (see Note 22).

The entities are not consolidated by Santander UK because the third-party investors have the exposure, or rights, to all of the variability of returns from the

performance of the entities. No assets are transferred to, or income received from, these entities. Since the credit linked notes are fully cash collateralised,

Santander UK’s maximum exposure to loss is equal to any unamortised fees paid to the entities in connection with the credit protection outlined above.

19. INTANGIBLE ASSETS

a) Goodwill

			Group
	Cost	Accumulated impairment	Carrying amount
	£m	£m	£m
At 1 January 2024 and 31 December 2024	1,285	(86)	1,199

Impairment of goodwill

In 2024 and 2023 for the Santander UK group, no impairment of goodwill was recognised. Goodwill is tested for impairment annually, or more frequently, if

reviews identify an impairment indicator or when events or changes in circumstances dictate. Goodwill is tested for impairment annually at 31 December,

with a review for impairment indicators at 30 June.

The annual review identified that the uncertain macroeconomic and geopolitical environment increases the risk around the UK economic trajectory, and its

potential impact on the carrying value of goodwill as impairment indicators for all cash-generating units (CGUs). As a result, management updated the impairment

test at 31 December 2024 for all CGUs.

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Basis of the recoverable amount

The recoverable amount of all CGUs was determined based on its value in use (VIU) methodology at each testing date. For each CGU, the VIU is calculated by

discounting management’s cash flow projections for the CGU. The cash flow projections also take account of increased internal capital allocations needed to

achieve internal and regulatory capital targets including the leverage ratio. The key assumptions used in the VIU calculation for each CGU are set out below. The

Retail & Business Banking segment consists of the Private Banking CGU and the rest of Retail & Business Banking, known as the Personal Financial Services

CGU.

Carrying amount of Goodwill by CGU and key assumptions in the VIU calculation

	Goodwill		Discount rate		Growth rate beyond initial cash flow projections
	2024	2023	2024	2023	2024	2023
CGU	£m	£m	%	%	%	%
Personal Financial Services	1,169	1,169	12.1	12.2	1.5	1.6
Private Banking	30	30	10.0	9.8	1.5	1.6
	1,199	1,199

The CGUs do not carry on their balance sheets any other intangible assets with indefinite useful lives.

Management’s judgement in estimating the cash flows of a CGU

The cash flow projections for the purpose of impairment testing for each CGU are derived from the latest 3-year plan presented to the Board. The Board

challenges and endorses management’s planning assumptions in light of internal capital allocations needed to support Santander UK’s strategy, current market

conditions and the macroeconomic outlook. For the goodwill impairment tests conducted at 31 December 2024, the determination of the carrying amount of the

Personal Financial Services CGU was based on an allocation of regulatory capital and management’s cash flow projections until the end of 2027. The

assumptions included in the cash flow projections reflect an allocation to the cost of capital to support future growth, as well as the expected impact of recent

events in the UK economic environment on the financial outlook within which the CGUs operate. The cash flow projections are supported by Santander UK’s base

case economic scenario. For more on the base case economic scenario, including our forecasting approach and the assumptions in place at 31 December 2024,

see the Credit risk – Santander UK group level section of the Risk review. The cash flow projections take into account the likely impact of recent changes to the

BoE Bank Rate, inflation and also consider the impact of future climate change.

Cash flow projections for the purpose of impairment testing do not take account of any adverse outcomes arising from contingent liabilities (see Note 30), whose

existence will be confirmed by uncertain future events or where any obligation is not probable or otherwise cannot be measured reliably, nor do they take account

of the benefits arising from Santander UK’s transformation plans that had not yet been implemented or committed at 31 December 2024.

Discount rate

The rate used to discount the cash flows is based on the cost of equity assigned to each CGU, which is derived using a capital asset pricing model (CAPM) and

calculated on a post-tax basis. The CAPM depends on a number of inputs reflecting financial and economic variables, including the risk-free rate and a premium

to reflect the inherent risk of the business being evaluated. These variables are based on the market’s assessment of the economic variables and management’s

judgement. The inputs to the CAPM are observable on a post-tax basis. In determining the discount rate, management has identified the cost of equity associated

with market participants that closely resemble our CGUs and adjusted them for tax to arrive at the pre-tax equivalent rate. The pre-tax equivalent rate applicable to

the Personal Financial Services CGU was 16.5% (2023: 16.7%) and Private Banking CGU was 15.1% (2023: 14.6%). The Private Banking CGU has a different

discount rate compared to the Personal Financial Services CGU because different market participants closely resemble each CGU. 

Growth rate beyond initial cash flow projections

The growth rate for periods beyond the initial cash flow projections is used to extrapolate the cash flows in perpetuity because of the long-term perspective of

CGUs. In line with the accounting requirements, management uses the UK Government’s official estimate of UK long-term average GDP growth rate, as this is

lower than management's estimate of the long-term average growth rate of the business. The estimated UK long-term average GDP growth rate has regard to the

long-term impact of inherent uncertainties, such as elevated wage growth, weak productivity, large government debt burden and fragile business and consumer

confidence.

Goodwill arising on the acquisition of Personal Financial Services and Private Banking

The VIU of each CGU remains higher than the carrying value of the related goodwill. The VIU review at 31 December 2024 did not indicate the need for an

impairment in the Company’s goodwill balances. Management considered the level of headroom and the uncertainty relating to the respective estimates of the

VIU for those CGUs but determined that there was a sufficient basis to conclude that no impairment was required.

Sensitivities of key assumptions in calculating the value in use

At 31 December 2024 and 31 December 2023, the VIU of the Personal Financial Services CGU was sensitive to reasonably possible changes in the key

assumptions supporting the recoverable amount.

The table below presents a summary of the key assumptions underlying the most sensitive inputs to the model for the Personal Financial Services CGU, the main

risks associated with each and details of a reasonably possible change in assumptions, such as a decrease in mortgage new business. The sensitivity analysis

presented below has been prepared on the basis that a change in each key assumption would not have a consequential impact on other assumptions used in the

impairment review. However, due to the interrelationships between some of the assumptions, a change in one of the assumptions might impact one or more of the

other assumptions and could result in a larger or smaller overall impact.

Reasonably possible changes in key assumptions

CGU	Input	Key assumptions	Associated risks	Reasonably possible change
Personal Financial Services	Cash flow projections	–BoE Bank Rate –UK house price growth –UK mortgage loan market growth –UK unemployment rate –Position in the market –Regulatory capital levels.	–Uncertain market outlook –Higher interest rate environment impact on customer affordability –Customer remediation and regulatory action outcomes –Uncertain regulatory capital requirements.	–Cash flow projections decrease by 10% (2023: 10%).
	Discount rate	–Discount rate used is a reasonable estimate of a suitable market rate for the profile of the business.	–Market rates of interest rise.	–Discount rate increases by 100 basis points (2023: increased by 100 basis points).

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At 31 December 2024 and 31 December 2023, a reasonably possible change in the key assumptions in relation to the VIU calculation for the goodwill balance in

the Personal Financial Services CGU would have resulted in a decrease/increase in headroom as follows. 

		Decrease in headroom
		2024	2023
CGU	Reasonably possible change	£m	£m
Personal Financial Services	Cash flow projections decrease by 10% (2023: 10%)	764	818
	Discount rate increases by 100 basis points (2023: increased by 100 basis points)	622	663

Sensitivity of Value in use changes to current assumptions to achieve £nil headroom

Although there was no impairment of goodwill relating to the Personal Financial Services CGU or the Private Banking CGU at 31 December 2024, the test for the

Personal Financial Services CGU remains sensitive to some of the assumptions used, as described above. In addition, the changes in assumptions detailed

below for the discount rate and cash flow projections would eliminate the current headroom. As a result, there is a risk of impairment in the future should business

performance or economic factors diverge from forecasts.

In 2024, there was a decrease in headroom arising from a decline in cash flow forecasts, partially offset by a decrease to RWAs which led to a reduction in the

required CET1 capital requirement.

The sensitivity analysis presented below has been prepared on the basis that a change in each key assumption would not have a consequential impact on other

assumptions used in the impairment review. However, due to the interrelationships between some of the assumptions, a change in one of the assumptions might

impact one or more of the other assumptions and could result in a larger or smaller overall impact.

2024	Carrying value	Value in use	Headroom	Increase in discount rate	Decrease in cash flows
CGU	£m	£m	£m	bps	%
Personal Financial Services	7,294	7,639	345	53	5

2023
Personal Financial Services	7,513	8,178	665	101	8

b) Other intangibles

			Group
	Cost	Accumulated amortisation / impairment	Net book value
	£m	£m	£m
At 1 January 2024	1,350	(1,001)	349
Additions	120	—	120
Disposals	(704)	701	(3)
Charge	—	(126)	(126)
At 31 December 2024	766	(426)	340
At 1 January 2023	1,272	(921)	351
Additions	114	—	114
Disposals	(36)	36	—
Charge	—	(116)	(116)
At 31 December 2023	1,350	(1,001)	349

Other intangibles which consist of computer software, include computer software under development of £99m (2023: £157m), of which £20m is internally

generated (2023: £35m).

The impairment charge of £5m (2023: £nil) relates to computer software no longer expected to yield future economic benefits.

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20. PROPERTY, PLANT AND EQUIPMENT

						Group
	Property	Office fixtures and equipment	Computer software	Operating lease assets	Right-of-use assets	Total(1)
	£m	£m	£m	£m	£m	£m
Cost:
At 1 January 2024	924	890	75	635	268	2,792
Additions	35	47	4	304	21	411
Disposals	(20)	(41)	(60)	(223)	(14)	(358)
Other	8	8	1	—	—	17
At 31 December 2024	947	904	20	716	275	2,862
Accumulated depreciation:
At 1 January 2024	227	662	69	147	175	1,280
Charge for the year	21	62	1	75	19	178
Impairment during the year	(5)	(3)	—	—	—	(8)
Disposals	(12)	(34)	(60)	(80)	—	(186)
Other	7	7	—	—	—	14
At 31 December 2024	238	694	10	142	194	1,278
Carrying amount	709	210	10	574	81	1,584

Cost:
At 1 January 2023	893	831	79	722	272	2,797
Additions	89	88	1	85	31	294
Reclassification from assets held for sale	8	—	—	—	—	8
Disposals	(66)	(29)	(5)	(172)	(35)	(307)
At 31 December 2023	924	890	75	635	268	2,792
Accumulated depreciation:
At 1 January 2023	271	625	73	145	157	1,271
Charge for the year	17	63	1	64	30	175
Impairment during the year	—	—	—	—	(11)	(11)
Reclassification from assets held for sale	—	—	—	—	—	—
Disposals	(61)	(26)	(5)	(62)	(1)	(155)
At 31 December 2023	227	662	69	147	175	1,280
Carrying amount	697	228	6	488	93	1,512

(1)Property, plant and equipment includes investment properties of £16m (2023: £17m).

In 2023, right-of-use assets were impaired as part of our transformation. The impairment relates to leasehold properties within the scope of our branch network

restructuring programme and head office sites which are either closing or consolidating.

21. DEPOSITS BY BANKS

		Group
	2024	2023
	£m	£m
Items in the course of transmission	523	732
Deposits held as collateral	723	888
Other deposits(1)	12,791	18,737
	14,037	20,357

(1)Includes balance drawn from the TFSME of £11bn (2023: £17bn).

22. DEPOSITS BY CUSTOMERS

		Group
	2024	2023
	£m	£m
Demand and time deposits(1)	184,060	194,191
Amounts due to fellow Banco Santander subsidiaries and joint ventures	1,715	958
	185,775	195,149

(1)Includes capital amount guaranteed / protected equity index-linked deposits of £173m (2023: £304m).

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23. REPURCHASE AGREEMENTS – NON-TRADING

		Group
	2024	2023
	£m	£m
Agreements with banks	2,336	551
Agreements with customers	6,281	7,860
	8,617	8,411

24. OTHER FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS

		Group
	2024	2023
	£m	£m
Structured Notes Programmes	355	369
Structured deposits	605	426
Zero Amortising Guaranteed Notes	95	104
	1,055	899

For the Santander UK group all (2023: all) of the other financial liabilities at FVTPL were designated as such.

Gains and losses arising from changes in the credit spread of securities issued by the Santander UK group reverse over the contractual life of the debt, provided

that the debt is not repaid at a premium or a discount. The net loss during the year attributable to changes in the Santander UK group’s own credit risk on the

above securities was £17m (2023: £21m loss, 2022: £25m gain). The cumulative net loss attributable to changes in the Santander UK group’s own credit risk on

the above securities at 31 December 2024 was £4m (2023: £6m loss, 2022: £15m gain).

At 31 December 2024, the amount that would be required to be contractually paid at maturity of the securities above was £76m (2023: £97m) higher than the

carrying value.

25. DEBT SECURITIES IN ISSUE

		Group
	2024	2023
	£m	£m
Medium-term notes:
– US $30bn Euro Medium Term Note Programme	696	744
– Euro €30bn Euro Medium Term Note Programme	4,092	5,619
– US SEC-registered Debt Programme - Santander UK Group Holdings plc	6,730	6,130
- US SEC-registered Debt Programme - Santander UK plc	—	1,031
Medium-term notes	11,518	13,524
Euro €35bn Global Covered Bond Programme	17,211	15,000
US $20bn Commercial Paper Programmes	3,274	2,761
Certificates of deposit	1,196	1,530
Credit linked notes	441	194
Securitisation programmes	3,929	2,769
	37,569	35,778

The funding from the Euro 30bn Euro Medium Term Note Programme and the US SEC-registered Debt Programme in the name of Santander UK Group

Holdings plc has predominantly been downstreamed to our operating company Santander UK plc.

26. OTHER LIABILITIES

		Group
	2024	2023
	£m	£m
Lease liabilities	91	114
Other	1,791	2,387
	1,882	2,501

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27. PROVISIONS

									Group
	Customer remediatio n	Litigation and other regulatory	Regulatory levies and fees	Bank Levy	Property	ECL on undrawn facilities and guarantees	Restructurin g	Other	Total
£m	£m	£m	£m	£m	£m	£m	£m	£m
At 1 January 2024	106	132	—	3	47	78	32	7	405
Additional provisions (See Note 8)	306	43	45	43	2	7	87	185	718
Provisions released (See Note 8)	—	(4)	—	—	(1)	—	—	—	(5)
Utilisation and other	(64)	(45)	(43)	(61)	(20)	—	(101)	(178)	(512)
Recharge (1)	—	—	—	15	—	—	—	—	15
Reclassification from provisions to other assets	—	—	—	6	—	—	—	—	6
At 31 December 2024	348	126	2	6	28	85	18	14	627

(1)Recharge in respect of the UK Bank Levy paid on behalf of other UK entities in the Banco Santander group

Provisions expected to be settled within no more than 12 months after 31 December 2024 were £224m (2023: £220m).

a) Customer remediation

SCUK - Motor Finance Broker Commissions

Following the FCA’s Motor Market review in 2019 which resulted in a change in rules in January 2021, Santander Consumer (UK) plc (SCUK) has received a

number of county court claims and complaints in respect of its historical use of discretionary commission arrangements (DCAs) prior to the 2021 rule changes.

During 2024 the FCA commenced a review of the use of DCAs between lenders and credit brokers (FCA review) which, following an extension, it stated it

anticipated to conclude by May 2025. Pending the conclusion of its review, the FCA first paused DCA related complaints and then extended this to motor finance

commission related complaints which are now paused until 4 December 2025. A claim against SCUK, Santander UK plc and others in the Competition Appeal

Tribunal, which alleges that SCUK’s historical DCAs in respect of used car financing operated in breach of the Competition Act 1998 is currently paused until the

end of July 2025 pending the outcome of the FCA’s review.

The outcome of the FCA’s review may be informed by an appeal to the Supreme Court to be heard in April 2025 of the Court of Appeal’s judgment of October

2024 relating to the use of DCAs by two other lenders, and by an appeal to the Court of Appeal of the High Court’s judicial review of the Financial Ombudsman

Service’s final decision relating to a complaint about the use of a DCA by another lender.

In light of the Court of Appeal’s judgment of October 2024, the Santander UK group recognised a provision of £295m in its financial results for 2024. This includes

estimates for operational and legal costs and potential awards, based on various scenarios using a range of assumptions, including the outcomes of the appeals

above. There continue to be significant uncertainties as to the extent of any misconduct, if any, as well as the perimeter of commission models, and the nature,

extent and timing of any remediation action if required. As such, the ultimate financial impact could be materially higher or lower than the amount provided and it is

not practicable to quantify the extent of any remaining contingent liability.

The table below shows the sensitivity of the provision to changes in the claim rate.

		Increase / (decrease) in provision
		2024
Assumption	Change in assumption	£m
Claim rate	5% increase	47
Claim rate	5% decrease	(47)

The claim rate represents the proportion of customers who make a request for reimbursement and is a critical accounting estimate that could materially change

the ultimate financial impact.

Our best estimate of liability is based on similar experience to PPI claim rates which peaked at up to 50% over the lifetime of the redress programme.

Mortgages

Provisions were also recognised in 2024 for customer remediation relating to our mortgage book. These provisions remain subject to change as additional data

becomes available and remediation boundaries are finalised.

b) Litigation and other regulatory

Litigation and other regulatory provisions principally comprised of amounts in respect of litigation and other regulatory charges, operational loss and operational

risk provisions, and related expenses. A number of uncertainties exist with respect to these provisions given the uncertainties inherent in litigation and other

regulatory matters, that affect the amount and timing of any potential outflows with respect to which provisions have been established. These provisions are

reviewed at least quarterly.

In 2024 there were net charges of £39m for legal provisions.

In 2024, a liability totalling £30m was recorded by SFS in relation to a dispute with an overseas tax authority concerning the tax treatment of legacy equity-related

transactions in 2018 within its Santander Corporate and Investment Banking Division (prior to the UK’s ring-fencing regime and when SFS was trading as Abbey

National Treasury Services plc). This was allocated between litigation and other regulatory provisions £14m, and the tax charge £16m (see Note 9).

The balance also includes an amount in respect of our best estimate of liability relating to a legal dispute regarding allocation of responsibility for a specific PPI

portfolio of complaints, further described in Note 30. No further information on the best estimate is provided on the basis that it would be seriously prejudicial.

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c) Regulatory levies and fees

Regulatory levies and fees are payable to regulatory bodies such as the FCA, PRA and Bank of England in the ordinary course of business. In 2024 there were

charges of £43m relating to the new Bank of England levy.

d) Bank Levy

In 2024, a rate of 0.05% (2023: 0.05%) was charged on long term chargeable equity and liabilities and 0.10% on short-term chargeable liabilities (2023: 0.10%).

e) Property

Property provisions include leasehold vacant property provisions, dilapidation provisions for leased properties within the scope of IFRS 16 and decommissioning

and disposal costs relating to vacant freehold properties. Leasehold vacant property provisions are made by reference to an estimate of any expected sub-let

income, compared to the head rent, and the possibility of disposing of Santander UK’s interest in the lease, taking into account conditions in the property market.

Property provisions include a release of £2m relating to transformation activity in 2024 (2023: charge of £4m). In 2024, these charges consisted of costs relating to

leasehold head office closures, along with decommissioning costs relating to freehold head office sites which are either closing or consolidating.

f) ECL on undrawn facilities and guarantees

Provisions include expected credit losses relating to guarantees given to third parties and undrawn loan commitments.

g) Restructuring

Restructuring provisions relate to severance costs associated with transformation and organisational changes. The provision includes a charge of £82m as part of

our transformation to improve future returns, focused on simplifying, digitising and automating the bank.

h) Other

Other provisions include provisions that do not fit into any of the other categories, such as fraud losses and some categories of operational losses. In 2024, Other

provisions included charges for operational risk provisions of £161m, including fraud losses of £122m.

28. RETIREMENT BENEFIT PLANS

The amounts recognised in the balance sheet were as follows:

	Group
	2024	2023
	£m	£m
Assets/(liabilities)
Funded defined benefit pension scheme - surplus	439	723
Funded defined benefit pension scheme - deficit	—	(41)
Unfunded pension and post-retirement medical benefits	(23)	(25)
Total net assets	416	657

a) Defined contribution pension plans

The majority of employees are members of a defined contribution Master Trust, LifeSight. This is the plan into which eligible employees are enrolled automatically.

The assets of LifeSight are held in separate trustee-administered funds. Funds arising from Additional Voluntary Contributions (AVCs) are largely held within the

main defined benefit scheme operated by the Santander UK group.

An expense of £79m (2023: £71m) was recognised for defined contribution plans in the year and is included in staff costs within operating expenses (see Note 6).

b) Defined benefit pension schemes

The Santander UK group operates a number of defined benefit pension schemes. The main scheme is the Santander (UK) Group Pension Scheme (the

Scheme). It comprises seven legally segregated sections. The Scheme covers 6% (2023: 7%) of the Santander UK group’s current employees and is a funded

defined benefit scheme which is closed to new members. Members accrue final salary benefits for each year of service in the Scheme, according to a salary

definition which varies across the sections.

The corporate trustee of the Scheme is Santander (UK) Group Pension Scheme Trustees Limited (the Trustee), a private limited company incorporated in 1996

and a wholly owned subsidiary of Santander UK Group Holdings plc. The principal duty of the Trustee is to act in the best interests of the members of the Scheme.

The Trustee board comprises six (2023: six) Directors selected by Santander UK Group Holdings plc, plus four (2023: four) member-nominated Directors selected

from eligible members who apply for the role.

The assets of the Scheme are held independently of the Santander UK group’s assets in separate trustee administered funds. Investment strategy across the

sections of the Scheme remains under regular review. Responsibility for investment decisions, policy and strategy rests with the Trustee of the Scheme who is

required under the Pensions Act 2004 to prepare a statement of investment principles. The defined benefit pension schemes expose the Santander UK group to

risks such as investment risk, interest rate risk, longevity risk and inflation risk. The Santander UK group does not hold any insurance policies over the defined

benefit pension schemes and has not entered into any significant transactions with them.

For IAS 19, an accounting valuation of the assets and liabilities of the defined benefits schemes is prepared at each balance sheet date. For funding purposes,

formal actuarial valuations are carried out on at least a triennial basis. Both valuations are carried out by independent professionally qualified actuaries. The

Scheme Trustee is responsible for the funding actuarial valuations and in doing so considers, or relies in part on, a report of a third-party expert. The latest triennial

funding valuation for the Scheme at 31 March 2022 was finalised in November 2022, with an overall scheme deficit of £183m. The next scheduled triennial

funding valuation will be at 31 March 2025. Any funding surpluses can be recovered by Santander UK plc from the Scheme through refunds as the Scheme is run

off over time or could be used to pay for the cost of benefits which are accruing.

The main differences between the assumptions used for assessing the defined benefit liabilities for the funding valuation and those used for IAS 19 are that the

financial and demographic assumptions used for the funding valuation are generally more prudent than those used for the IAS 19 valuation.

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The total amount (credited) / charged to the income statement was as follows:

			Group
	2024	2023	2022
	£m	£m	£m
Net interest income	(34)	(54)	(31)
Current service cost	13	13	30
Past service and GMP costs	—	1	—
Administration costs	9	7	9
	(12)	(33)	8

The amounts recognised in other comprehensive income were as follows:

			Group
	2024	2023	2022
	£m	£m	£m
Return on plan assets (excluding amounts included in net interest expense)	1,217	352	5,531
Actuarial gains arising from changes in demographic assumptions	(113)	(51)	(122)
Actuarial losses arising from experience adjustments	84	91	481
Actuarial (gains)/losses arising from changes in financial assumptions	(786)	206	(5,167)
	402	598	723

Movements in the present value of defined benefit scheme obligations were as follows:

	Group
	2024	2023
	£m	£m
At 1 January	(8,201)	(7,937)
Current service cost paid by Santander UK plc	(13)	(13)
Interest cost	(371)	(379)
Employer salary sacrifice contributions	(4)	(1)
Past service cost	—	(1)
Remeasurement due to actuarial movements arising from:
– Changes in demographic assumptions	113	51
– Experience adjustments	(84)	(91)
– Changes in financial assumptions	786	(206)
Benefits paid	394	372
Derecognition of pension scheme liabilities arising from the wind up of the offshore scheme	—	4
At 31 December	(7,380)	(8,201)

Movements in the fair value of the schemes’ assets were as follows:

	Group
	2024	2023
	£m	£m
At 1 January	8,858	8,963
Interest income	405	433
Contributions paid by employer and scheme members	153	197
Administration costs paid	(9)	(7)
Return on plan assets (excluding amounts included in net interest expense)	(1,217)	(352)
Benefits paid	(394)	(372)
Derecognition of pension scheme assets arising from the wind up of the offshore scheme	—	(4)
At 31 December	7,796	8,858

The composition and fair value of the schemes’ assets by category was:

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							Group
	Quoted prices in active markets		Prices not quoted in active markets		Total		Valuation
2024	£m	%	£m	%	£m	%	technique
Overseas equities	—	—	776	10	776	10	A,C
Corporate bonds	2,511	33	186	2	2,697	35	A,C
Government fixed interest bonds	1,348	17	—	—	1,348	17	A
Government index-linked bonds	4,444	58	—	—	4,444	58	A
Property	—	—	1,073	14	1,073	14	B
Derivatives	—	—	(18)	—	(18)	—	A
Cash	—	—	341	4	341	4	A
Repurchase agreements(1)	—	—	(3,328)	(43)	(3,328)	(43)	A
Infrastructure	—	—	112	1	112	1	B,C
Annuities	—	—	267	3	267	3	D
Longevity swap	—	—	(83)	(1)	(83)	(1)	D
Other	—	—	167	2	167	2	C
	8,303	108	(507)	(8)	7,796	100
2023
Overseas equities	—	—	980	11	980	11	A,C
Corporate bonds	2,284	26	242	3	2,526	29	A,C
Government fixed interest bonds	1,618	18	—	—	1,618	18	A
Government index-linked bonds	4,422	50	—	—	4,422	50	A
Property	—	—	1,080	12	1,080	12	B
Derivatives	—	—	(2)	—	(2)	—	A
Cash	—	—	586	7	586	7	A
Repurchase agreements(1)	—	—	(3,062)	(35)	(3,062)	(35)	A
Infrastructure	—	—	408	5	408	5	B,C
Annuities	—	—	293	3	293	3	D
Longevity swap	—	—	(16)	—	(16)	—	D
Other	—	—	25	—	25	—	C
	8,324	94	534	6	8,858	100

(1)Sale and repurchase agreements net of purchase and resale agreements.

Valuation techniques

The main methods for measuring the fair value of the Scheme’s assets at 31 December 2024 and 2023 are set out below.

A.The asset valuation is provided by the asset manager. The valuation is based on observable market data, and where relevant is typically based on bid price

values, or the single price if only one price is available.

B.The underlying asset valuations are prepared by an independent expert, adjusted for any cash movements where necessary since the latest valuation.

C.Assets are valued by reference to the latest manager statements provided by the managers, adjusted for any cash movements since the latest valuation.

D.Assets relating to insured liabilities are valued by the actuaries based on our year-end accounting assumptions.

The 'Other' category includes cash receivables in 2025 from secondary market sales in 2024.

A number of insurance transactions have been entered into that have been included in the asset valuation under annuities and Longevity swap. The transactions

were as follows:

–In May 2020 a pensioner buy-in was entered into by the Trustee. This transaction insured 100% of the SMA section pensioner liabilities and 50% of the SPI

section pensioner liabilities based on membership in the Scheme at 31 December 2018.

–In March 2021, the Trustee entered into a longevity swap. Approximately 85% of pensioner liabilities were covered by the longevity swap at inception, excluding

pensioners in the SMA and SPI sections.

–In 2022, a pensioner buy-in was entered into by the Trustee covering pensioners in the SMA and SPI sections who were uninsured at 30 June 2021.

–In July 2022, the Trustee entered into a second longevity swap, extending the insurance over uninsured pensioners in the same membership groups covered

by the first swap transacted in March 2021, based on membership in the Scheme at 31 December 2021.

At 31 December 2024 and 2023, as highlighted above, the Scheme was invested in certain assets whose values are not based on market observable data, such

as the investments in unquoted equities and bonds, as well as property and infrastructure. The valuation of these assets relies on unobservable data as these

assets do not have a readily available quoted price in an active market. A large proportion of the property is directly held and valued using a bespoke valuation

method taking both the nature of the properties and the tenancy schedules as inputs to derive the fair value. Where there is a time lag between the net asset value

and the balance sheet date, management adjusts the value of the assets for any cash movements. Due diligence has been conducted to ensure the values

obtained in respect of these assets are appropriate and represent fair value. Given the nature of these investments, we are unable to prepare sensitivities on how

their values could vary as market conditions or other variables change.

A strategy is in place to manage interest rate and inflation risk relating to the liabilities. The Scheme also hedges a proportion of its foreign exchange exposure to

manage currency risk. At 31 December 2024 the currency forwards had a notional value of £709m (2023: £859m). In 2024, we increased our allocation to

corporate bonds, and reduced our investments in infrastructure and private equity.

The Santander UK group’s pension schemes did not directly hold any equity securities of the Company or any of its related parties at 31 December 2024 and

2023. The Santander UK group’s pension scheme assets do not include any property or other assets that are occupied or used by the Santander UK group.

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Funding

In November 2022, in compliance with the Pensions Act 2004, the Trustee and the Santander UK group agreed to a new recovery plan in respect of the Scheme

and a schedule of contributions following the finalisation of the 31 March 2022 actuarial valuation. The funding target for this actuarial valuation is for the Scheme

to have sufficient assets to make payments to members in respect of the accrued benefits as and when they fall due. In accordance with the terms of the Trustee

agreement in place at the time, the Santander UK group contributed £150m in 2024 (2023: £194m) to the Scheme, of which £119m (2023: £164m) was in respect

of agreed deficit repair contributions. The agreed schedule of the Santander UK group’s contributions to the Scheme covers the period up to 31 March 2026, and

comprises contingent contributions which become due if the funding position of any section falls behind the agreed plan. The Santander UK group also meets

Scheme administration expenses. The funding valuation is used to judge the amount of cash contributions the Santander UK group needs to put into the pension

scheme. It will always be different to the IAS 19 accounting position, which is an accounting rule concerning employee benefits and shown on the balance sheet of

our financial statements.

Actuarial assumptions

The principal actuarial assumptions used for the Scheme were:

	Group
	2024	2023	2022
	%	%	%
To determine benefit obligations(1):
– Discount rate for scheme liabilities	5.5	4.6	4.9
– General price inflation	3.1	3.0	3.1
– General salary increase	1.0	1.0	1.0
– Expected rate of pension increase	3.0	3.0	3.0

	Years	Years	Years
Longevity at 60 for current pensioners, on the valuation date:
– Males	26.9	27.0	27.4
– Females	29.8	29.8	30.1
Longevity at 60 for future pensioners currently aged 40, on the valuation date:
– Males	28.5	28.6	28.9
– Females	31.3	31.3	31.6

(1)The discount rate and inflation related assumptions set out in the table above reflect the assumptions calculated based on the Scheme’s duration and cash flow profile as a whole. The actual assumptions used

were determined for each section independently based on each section’s duration and cash flow profile.

The majority of the liability movement in 2024 was due to increased fixed interest gilt yields.

Discount rate for scheme liabilities

The rate used to discount the retirement benefit obligation for accounting purposes is based on the annual yield at the balance sheet date of high-quality corporate

bonds on that date. There are only a limited number of higher quality Sterling-denominated corporate bonds, particularly those that are longer-dated. Therefore, in

order to set a suitable discount rate, we need to construct a corporate bond yield curve. The model which we use to construct the curve uses corporate bond data

but excludes convertible bonds, asset-backed bonds and government related bonds. The curve is then constructed from this data by extrapolating the spot rates

from 30 years to 50 years by holding the spread above nominal gilt spot rates constant. From 50 years onwards, it is assumed that spot rates remain constant.

When considering an appropriate assumption, we project forward the expected cash flows of each section of the Scheme and adopt a single equivalent cash flow

weighted discount rate for each section, subject to management judgement.

In 2024, we adopted a new version of the model that we currently use to set the discount rate. The updated model is based on an expanded data set which

improves the stability of the model.

General price inflation

Consistent with our discount rate methodology, we set the inflation assumption using the expected cash flows for each section of the Scheme, fitting them to an

inflation curve to give a weighted average inflation assumption. We then deduct an inflation risk premium to reflect the compensation holders of fixed rate

instruments expect to receive for taking on the inflation risk. This premium is subject to a cap, to better reflect management’s view of inflation expectations.

General salary increase

From 1 March 2015, a cap on pensionable pay increases of 1% each year was applied to staff in the Scheme.

Expected rate of pension increase

The pension increase assumption methodology uses a stochastic model, which is calibrated to consider both the observed historical volatility term structure and

derivative pricing. The model allows for the likelihood that high or low inflation in one year, feeds into inflation remaining high or low in the next year.

Mortality assumptions

The mortality assumptions are based on an independent analysis of the Scheme’s actual mortality experience, carried out as part of the triennial actuarial

valuation, together with recent evidence from the Continuous Mortality Investigation. An allowance is then made for expected future improvements to life

expectancy based on the Continuous Mortality Investigation Tables. Following this review the S3 Medium all pensioner mortality table was adopted with

appropriate adjustments to reflect the actual mortality experience. At 31 December 2024 the assumption for future improvements was updated and the CMI 2023

projection model adopted, with an initial addition to improvements of 0.25% per annum, and a long-term rate of future improvements to life expectancy of 1.25%

for male and female members.

In 2022, the methodology for setting the demographic assumptions was changed to better represent current expectations, following a review carried out by the

Trustee as part of the 2022 triennial valuation. This review resulted in changes in the assumptions for family statistics, early retirement and the withdrawal

assumption, which were retained at 31 December 2024.

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Actuarial assumption sensitivities

The sensitivity analyses below have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting

period, while holding all other assumptions constant.

		Group
		(Decrease)/increase
		2024	2023
Assumption	Change in pension obligation at period end from	£m	£m
Discount rate	50bps increase	(413)	(507)
General price inflation	50bps increase	316	385
Mortality	Each additional year of longevity assumed	190	223

The 50bps sensitivity to the inflation assumption includes the corresponding impact of changes in future pension increase assumptions before and after

retirement. The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the

changes in assumptions would occur in isolation of one another as some of the assumptions may be correlated. Furthermore, in presenting the sensitivity

analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is

the same method used to calculate the defined benefit obligation recognised in the balance sheet. There were no changes in the methods and assumptions used

in preparing the sensitivity analyses from prior years.

The benefits expected to be paid in each of the next five years, and in the aggregate for the five years thereafter are:

Year ending 31 December	£m
2025	478
2026	405
2027	424
2028	444
2029	463
Five years ending 2034	2,438

The average duration of the defined benefit obligation at 31 December 2024 was 12.7 years (2023: 13.8 years).

Emerging risks

In 2024, we focused on the risks arising from the Scheme’s private market assets, rising interest rates and cybersecurity risk. The Santander UK group

collaborated with the Trustee to identify and monitor such risks to ensure they are adequately managed. The Trustee has an independent cybersecurity advisor to

review the cybersecurity arrangements of its most critical suppliers and provide recommendations on potential improvements.

The Trustee Sustainability Committee is responsible for overseeing the Scheme’s policies, regulatory obligations and priorities in respect of climate change and

wider Environmental, Social and Governance (ESG) related matters. This includes the monitoring of climate related risks and opportunities, scenario analysis and

monitoring of investments from an ESG perspective.

The Santander UK group's employee pension funds recognise the magnitude of the challenges that climate and energy transition pose to governments,

companies and civil society. They are also aware of their impact on the ability to comply with their fiduciary duty providing long-term risk-adjusted returns to

their members. They have an ambition to achieve net zero by 2050, showing their full support for Banco Santander's vision and ambition to be a responsible

and sustainable bank.

29. SUBORDINATED LIABILITIES

	Group
	2024	2023
	£m	£m
£325m Sterling preference shares	343	343
Undated subordinated liabilities	205	205
Dated subordinated liabilities	1,837	1,838
	2,385	2,386

In 2024, no subordinated liabilities were repurchased as part of ongoing liability management exercises (2023: profit of £4m).

The above securities will, in the event of the winding up of the issuer, be subordinated to the claims of depositors and all other creditors of the issuer, other than

creditors whose claims rank equally with, or are junior to, the claims of the holders of the subordinated liabilities. The subordination amongst each of the

subordinated liabilities upon a winding up of the issuer is specified in their respective terms and conditions.

In 2024 and 2023, the Santander UK group had no defaults of principal, interest or other breaches with respect to its subordinated liabilities. No repayment or

purchase by the issuer of the subordinated liabilities may be made prior to their stated maturity without the consent of the PRA.

Each of the subordinated liabilities issued by Santander UK Group Holdings plc has been downstreamed to Santander UK plc by means of Santander UK plc

issuing equivalent subordinated liabilities to Santander UK Group Holdings plc.

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Undated subordinated liabilities

	Group
		2024	2023
	First call date	£m	£m
10.0625% Exchangeable capital securities	n/a	205	205
		205	205

In common with other debt securities issued by Santander UK group companies and notwithstanding the issuer’s first call dates in the table above, in the event of

certain tax changes affecting the treatment of payments of interest on subordinated liabilities in the UK, the 10.0625% Exchangeable capital securities are

redeemable on any interest payment date – each in whole at the option of Santander UK, at their principal amount together with any accrued interest.

The 10.0625% Exchangeable capital securities are exchangeable into fully paid 10.375% non-cumulative non-redeemable sterling preference shares of £1 each,

at the option of Santander UK, on the business day immediately following any interest payment date.

Dated subordinated liabilities

	Group
		2024	2023
	Maturity	£m	£m
4.75% Subordinated notes	2025	332	326
7.95% Subordinated notes	2029	189	193
6.50% Subordinated notes	2030	1	1
5.875% Subordinated notes	2031	7	7
5.625% Subordinated notes	2045	226	222
7.869% Subordinated notes	2033	314	321
8.296% Subordinated notes	2033	768	768
		1,837	1,838

The dated subordinated liabilities are redeemable in whole at the option of Santander UK in the event of certain tax changes affecting the treatment of payments

of interest on the subordinated liabilities in the UK, at their principal amount together with any accrued interest.

30. CONTINGENT LIABILITIES AND COMMITMENTS

		Group
	2024	2023
	£m	£m
Guarantees given to third parties	493	452
Formal standby facilities, credit lines and other commitments	35,178	30,987
Total	35,671	31,439

At 31 December 2024, the Santander UK group had credit impairment loss provisions relating to guarantees given to third parties and undrawn loan

commitments. See Note 27 for more details. Where the items set out below can be reliably estimated, they are disclosed in the table above.

Guarantees given to third parties

Guarantees given to third parties consist primarily of letters of credit, bonds and guarantees granted as part of normal product facilities which are offered to

customers.

Formal standby facilities, credit lines and other commitments

Standby facilities, credit lines and other commitments are also granted as part of normal product facilities which are offered to customers. Retail facilities comprise

undrawn facilities granted on flexible mortgages, bank overdrafts and credit cards. On flexible mortgages, the credit limit is set at the point of granting the loan

through property value and affordability assessments.

Ongoing assessments are made to ensure that credit limits remain appropriate considering any change in the security value or the customer’s financial

circumstances. For unsecured overdraft facilities and credit cards, the facilities are granted based on new business risk assessment and are reviewed more

frequently based on internal, as well as external data. Corporate facilities can comprise standby and revolving facilities which are subject to ongoing compliance

with covenants and may require the provision of agreed security.

FSCS

The FSCS is the UK’s independent statutory compensation fund for customers of authorised financial services firms and pays compensation if a firm is unable to

pay certain claims against it. The FSCS is funded by levies on the industry and recoveries and borrowings where appropriate.

Loan representations and warranties

In connection with the securitisations and covered bond transactions described in Note 14, the Santander UK group entities selling the relevant loans into the

applicable securitisation or covered bond portfolios make representations and warranties with respect to such loans, as of the date of the sale of the loans into the

applicable portfolio. These representations and warranties cover, among other things, the relevant Santander UK group entity's ownership of the loan, the

absence of a material breach or default by the relevant borrower, the loan’s compliance with applicable laws, and absence of material disputes with respect to the

relevant borrower, asset or loan. The specific representations and warranties made by Santander UK group companies which act as sellers of loans in these

securitisations and covered bond transactions depend in each case on the nature of the transaction and the requirements of the transaction structure.

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In the event that there is a material breach of the representations and warranties given by Santander UK plc as seller of loans under the residential mortgage-

backed securitisations or the covered bond programme included in Note 14, or if such representations and warranties prove to be materially untrue at the date

when they were given, Santander UK plc may be required to repurchase the affected mortgage loans (generally) at their outstanding principal balance plus

accrued interest). These securitisations and covered bond programme are collateralised by prime residential mortgage loans. Santander UK plc is principally a

retail prime lender and has no appetite or product offering for any type of sub-prime business.

Similarly, under the auto loan securitisations in Note 14, in the event that there is a breach or inaccuracy in respect of a representation or warranty relating to the

loans, the relevant Santander UK group entity who sold the auto loans into the securitisation portfolio will be required to repurchase such loans from the structure

(also at their outstanding principal balance plus accrued interest). In addition to breaches of representation and warranties, under the auto loan securitisations, the

seller may also have a repurchase obligation if certain portfolio limits are breached (which include, amongst other things, limits as to the size of a loan given to an

individual customer, LTV ratio, average term to maturity and average seasoning).

In the case of a repurchase of a loan from the relevant securitisation or covered bond programmes, the Santander UK group may bear any subsequent credit loss

on such loan. The Santander UK group manages and monitors its securitisation and covered bond activities closely to minimise potential claims.

Other legal, regulatory or tax matters

Santander UK engages in discussion, and co-operates, with the FCA, PRA, CMA and other regulators and government agencies in various jurisdictions in their

supervision and review of Santander UK including reviews exercised under statutory powers, regarding its interaction with past and present customers,

both as part of general thematic work and in relation to specific products, services and activities. During the ordinary course of business, Santander UK

is also subject to complaints and threatened legal proceedings brought by or on behalf of current or former employees, customers, investors or other third parties.

In addition, Santander UK is subject to audits, reviews, challenges and tax, regulatory or law enforcement investigations or proceedings by relevant regulators or

government agencies in various jurisdictions. All such matters are assessed periodically to determine the likelihood of Santander UK incurring a liability.

In those instances where it is concluded that it is not yet probable that a quantifiable payment will be made, for example because the facts are unclear or further

time is required to fully assess the merits of the case or to reasonably quantify the expected payment, no provision is made. In addition, where it is not currently

practicable to estimate the possible financial effect of these matters, no provision is made.

Payment Protection Insurance

AXA France IARD and AXA France Vie (former GE Capital Corporation Group entities (GE Capital), known as Financial Insurance Company Ltd (FICL) and

Financial Assurance Company Ltd (FACL), acquired by AXA SA in 2015) (together, AXA France) have brought a claim for £552m (plus interest) against (i)

Santander Cards UK Limited (former GE Capital entity known as GE Capital Bank Limited (GECB), which was acquired by Banco Santander SA in 2008 and

subsequently transferred to Santander UK plc); and (ii) Santander Insurance Services UK Limited (a Banco Santander SA subsidiary) (together the Santander

Entities). The claim relates to the allocation of liability for compensation and associated costs in respect of a large number of PPI policies distributed by GECB

pre-2005, which were underwritten by FICL and FACL. AXA France reduced their claim from £670m (plus interest) to £552m (plus interest) in their Re-Re-

Amended Particulars of Claim dated 29 June 2023. The Santander Entities strongly refute the claim. Trial has been fixed for six weeks, beginning on 11 March

2025.

There are ongoing factual issues to be resolved which may have legal consequences including in relation to liability. These issues create uncertainties which

mean that it is difficult to reliably predict the outcome or the timing of the resolution of the matter. The litigation and other regulatory provision in Note 27 includes

our best estimate of the Santander Entities’ liability to the specific portfolio. Further information has not been provided on the basis that it would be seriously

prejudicial to the Santander Entities’ interests in connection with the dispute.

In addition, and in relation to PPI more generally, the PPI provision includes an amount relating to legal claims challenging the FCA’s industry guidance on the

treatment of Plevin / recurring non-disclosure assessments. This provision is based on current stock levels, future projected claims, and average redress. There

remains a risk that volumes received in future may be higher than forecast. The provision in Note 27 includes our best estimate of Santander UK’s liability for the

specific issue. The actual cost of customer compensation could differ from the amount provided. It is not currently practicable to provide an estimate of the risk and

amount of any further financial impact.

German dividend tax arbitrage transactions

In June 2018 the Cologne Criminal Prosecution Office and the German Federal Tax Office commenced an investigation in relation to the historical involvement of

Santander UK plc, Santander Financial Services plc and Cater Allen International Limited (all subsidiaries of Santander UK Group Holdings plc) in German

dividend tax arbitrage transactions (known as cum/ex transactions). These transactions allegedly exploited a loophole of a specific German settlement mechanism

through short-selling and complex derivative structuring which resulted in the German government either refunding withholding tax where such tax had not been

paid or refunding it more than once. The German authorities are investigating numerous institutions and individuals in connection with alleged transactions and

practices which may be found to be illegal under German law.

During 2024 we continued to cooperate with the German authorities and, with the assistance of external experts, to progress an internal investigation into the

matters in question. From Santander UK plc’s perspective, the investigation is focused principally on the period 2009-2011 and remains on-going. There remain

factual issues to be resolved which may have legal consequences including potentially material financial penalties. These issues create uncertainties which mean

that it is difficult to predict the resolution of the matter including timing or the significance of the possible impact. These uncertainties mean it is not currently

practicable to make a reliable assessment of the size of any related potential liability. Any potential losses, claims or expenses suffered or incurred by Santander

Financial Services plc in respect of these matters have been fully indemnified by Santander UK plc, as part of the ring-fencing transfer scheme between

Santander UK plc, Santander Financial Services plc and Banco Santander SA.

SCUK - Motor Finance Broker Commissions

As set out in Note 27, Santander UK has recognised a provision for historical motor finance commission payments. There continue to be significant uncertainties

as to the extent of any misconduct, if any, as well as the perimeter of commission models, and the nature, extent and timing of any remediation action if required.

As such, the ultimate financial impact could be materially higher or lower than the amount provided and it is not practicable to quantify the extent of any remaining

contingent liability.

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Other

In 2016, Visa Europe Ltd was sold to Visa Inc. As a member and shareholder of Visa Europe Ltd, Santander UK plc received upfront consideration made up of

cash and convertible preferred stock. Conversion of the preferred stock into Class A Common Stock of Visa Inc. depends on the outcome of litigation against Visa

involving UK & Ireland multilateral interchange fees (UK&I MIFs). Following ring-fencing, all Visa stock is now held by Santander Equity Investments Limited

(SEIL), outside the ring-fenced bank. In valuing the preferred stock, SEIL makes adjustments for illiquidity and the potential for changes in conversion rate due to

litigation costs.

In July 2024, pursuant to the scheduled release assessment, Visa released approximately 62% of the value of the remaining convertible preferred stock. As a

result of this release, SEIL was issued with 1,382 units of Series A Convertible Participating Preferred Stock (Series A Preferred Stock). When sold by SEIL, each

unit of Series A Preferred Stock will automatically convert into 100 shares of Class A Common Stock of Visa Inc.

In October 2024, SEIL sold all 1,382 units of Series A Preferred Stock for £30m.

In addition, Santander UK plc and certain other UK&I banks have agreed to indemnify Visa Inc. in the event that the preferred stock is insufficient to meet the costs

of this litigation. Visa Inc. has recourse to this indemnity once more than €1bn of losses relating to UK&I MIFs have arisen or once the total value of the preferred

stock issued on closing has been reduced to nil. Santander UK plc's liability under this indemnity is capped at €40m. At this stage, it is unclear whether the

litigation will give rise to more than €1bn of losses relating to UK&I MIFs, which means it is difficult to predict whether the indemnity would be called upon, or the

timing or significance of any potential impact.

As part of the sale of subsidiaries, businesses and other entities, and as is normal in such circumstances, entities within the Santander UK group have given

warranties and/or indemnities to the purchasers.

Obligations under stock borrowing and lending agreements

Obligations under stock borrowing and lending agreements represent contractual commitments to return stock borrowed. These obligations are offset by a

contractual right to receive stock under other contractual agreements. See Note 34.

Other off-balance sheet commitments

The Santander UK group has commitments to lend at fixed interest rates which expose us to interest rate risk. For further information, see the Risk review.

Liquidity support arrangement

Under the PRA’s liquidity rules, Santander UK plc and its subsidiary Cater Allen Limited form the RFB Domestic Liquidity Sub-group (the RFB DoLSub), which

allows them to collectively meet regulatory requirements to manage liquidity risk. Each member of the RFB DoLSub will support the other by transferring surplus

liquidity in times of stress.

31. SHARE CAPITAL

		Group
	Ordinary shares of £1 each
Issued and fully paid share capital	No.	£m
At 31 December 2023, 1 January 2024 and 31 December 2024	7,060,000,000	7,060

32. OTHER EQUITY INSTRUMENTS

				Group
	Interest rate		2024	2023
	%	Next call date	£m	£m
AT1 securities:
- £500m Fixed Rate Reset Perpetual AT1 Capital Securities	6.75	June 2024	—	496
- £500m Fixed Rate Reset Perpetual AT1 Capital Securities	6.30	March 2025	500	500
- £450m Fixed Rate Reset Perpetual AT1 Capital Securities	4.25	March 2026	450	450
- £750m Fixed Rate Reset Perpetual AT1 Capital Securities	6.50	June 2027	750	750
- £400m Fixed Rate Reset Perpetual AT1 Capital Securities	8.75	Sept 2029	400	—
			2,100	2,196

AT1 securities

The AT1 securities are perpetual and pay a quarterly distribution. At each distribution payment date, the Company can decide whether to pay the distribution,

which is non-cumulative, in whole or in part. The distribution rate resets every five years. The securities will be automatically written down and the investors will

lose their entire investment in the securities should the CET1 capital ratio of the Santander UK prudential consolidation group fall below 7%.

In May 2024, Santander UK Group Holdings plc issued £400m 8.75% Fixed Rate Reset Perpetual AT1 Capital Securities, which were fully subscribed by the

Company’s immediate parent company, Banco Santander SA, and in June 2024 purchased and redeemed the £500m 6.75% Fixed Rate Reset Perpetual AT1

Capital Securities.

All AT1 securities are redeemable at the option of the Company, and only with the consent of the PRA.

The £450m 4.25% Fixed Rate Reset Perpetual AT1 Capital Securities, the £500m 6.30% Fixed Rate Reset Perpetual AT1 Capital Securities, the £750m 6.50%

Fixed Rate Reset Perpetual AT1 Capital Securities and the £400m 8.75% Fixed Rate Reset Perpetual AT1 Capital Securities were fully subscribed by the

Company's immediate parent company, Banco Santander SA.

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33. NOTES TO CASH FLOWS

Changes in liabilities and equity arising from financing activities

The table below shows the changes in liabilities arising from financing activities. The changes in equity arising from financing activities are set out in the

Consolidated Statement of Changes in Equity.

						Group
	Balance sheet line item
	Debt securities in issue	Subordinated liabilities	Other equity instruments	Lease liabilities	Dividends paid	Total
2024	£m	£m	£m	£m	£m	£m
At 1 January	35,778	2,386	2,196	114	—	40,474
Proceeds from issue of debt securities	8,366	—	—	—	—	8,366
Repayment of debt securities	(6,531)	—	—	—	—	(6,531)
Issue of other equity instruments	—	—	400	—	—	400
Repurchase of other equity instruments	—	—	(500)	—	—	(500)
Principal elements of lease payments	—	—	—	(33)	—	(33)
Dividends paid	—	—	—	—	(1,434)	(1,434)
Liability-related other changes	279	1	—	10	—	290
Non-cash changes:
– Unrealised foreign exchange	(369)	12	—	—	—	(357)
– Other changes	46	(14)	4	—	—	36
At 31 December	37,569	2,385	2,100	91	(1,434)	40,711

2023
At 1 January	36,420	2,332	2,196	129	—	41,077
Proceeds from issue of debt securities	5,347	—	—	—	—	5,347
Repayment of debt securities	(5,438)	—	—	—	—	(5,438)
Proceeds from issue of subordinated liabilities	—	1,050	—	—	—	1,050
Repayment of subordinated liabilities	—	(971)	—	—	—	(971)
Principal elements of lease payments	—	—	—	(48)	—	(48)
Dividends paid	—	—	—	—	(1,671)	(1,671)
Liability-related other changes	(159)	25	—	33	—	(101)
Non-cash changes:
– Unrealised foreign exchange	(750)	(54)	—	—	—	(804)
– Other changes	358	4	—	—	1,671	2,033
At 31 December	35,778	2,386	2,196	114	—	40,474

2022
At 1 January	31,580	2,228	2,191	134	—	36,133
Proceeds from issue of debt securities	8,667	—	—	—	—	8,667
Repayment of debt securities	(4,482)	—	—	—	—	(4,482)
Repayment of subordinated liabilities	—	(40)	—	—	—	(40)
Issue of other equity instruments	—	—	750	—	—	750
Repurchase of other equity instruments	—	—	(750)	—	—	(750)
Principal elements of lease payments	—	—	—	(26)	—	(26)
Dividends paid	—	—	—	—	(1,173)	(1,173)
Liability-related other changes	(1,282)	2	5	21	—	(1,254)
Non-cash changes:
– Unrealised foreign exchange	1,893	190	—	—	—	2,083
– Other changes	44	(47)	—	—	1,173	1,169
At 31 December	36,420	2,332	2,196	129	—	41,077

Footnotes to the consolidated cash flow statement

Net cash flows from operating activities includes interest received of £12,652m (2023: £11,627m, 2022: £6,618m), interest paid of £8,292m (2023: £6,496m, 2022:

£2,107m) and dividends received of £nil (2023: £nil, 2022: £nil).

Total cash outflow for leases was £36m (2023: £50m, 2022: £28m).

Other matters

In 2022, the non-controlling interests were redeemed.

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34. ASSETS CHARGED AS SECURITY FOR LIABILITIES AND

COLLATERAL ACCEPTED AS SECURITY FOR ASSETS

The following transactions are conducted under terms that are usual and customary to collateralised transactions including, where relevant, standard securities

lending and repurchase agreements.

a) Assets charged as security for liabilities

The financial assets below are analysed between those assets accounted for on-balance sheet and off-balance sheet.

	Group
	2024	2023
	£m	£m
On-balance sheet:
Cash and balances at central banks	1,580	1,480
Loans and advances to banks	139	254
Loans and advances to customers - securitisations and covered bonds (See Note 14)	32,721	27,088
Loans and advances to customers - other	14,846	20,703
Other financial assets at amortised cost	1,529	14
Financial assets at fair value through other comprehensive income	4,504	5,253
Total on-balance sheet	55,319	54,792
Total off-balance sheet	9,634	10,184

Santander UK provides assets as collateral in the following areas of the business.

Sale and repurchase agreements

Santander UK also enters into sale and repurchase agreements and similar transactions of debt securities. Upon entering into such transactions, Santander UK

provides collateral in excess of the borrowed amount. The carrying amount of assets that were so provided at 31 December 2024 was £16,987m (2023:

£13,291m), of which £2,472m (2023: £909m) was classified in ‘Loans and advances to customers – securitisations and covered bonds’ in the table above.

Securitisations and covered bonds

As described in Note 14, Santander UK plc and certain of its subsidiaries issue securitisations and covered bonds through or involving structured entities. At 31

December 2024, there were £33,905m (2023: £27,927m) of gross assets in these secured programmes and £1,184m (2023: £839m) of these related to internally

retained issuances that were available for use as collateral for liquidity purposes in the future.

At 31 December 2024, £3,003m (2023: £2,928m) of notes issued under securitisation and covered bond programmes had been retained internally, a proportion of

which had been used as collateral via third party bilateral secured funding transactions, which totalled £1,500m at 31 December 2024 (2023: £1,500m), or for use

as collateral for liquidity purposes in the future.

Stock borrowing and lending agreements

Asset balances under stock borrowing and lending agreements represent stock lent by Santander UK. These balances amounted to £15,930m at 31 December

2024 (2023: £23,713m) and are offset by contractual commitments to return stock borrowed or cash received.

Derivatives and other business

In addition to the arrangements described above, collateral is also provided in the normal course of derivative business to counterparties. At 31 December 2024,

£1,787m (2023: £1,793m) of such collateral in the form of cash had been provided by Santander UK and is included in the table.

b) Collateral accepted as security for assets

The collateral held as security for assets, analysed between those liabilities accounted for on balance sheet and off-balance sheet, was:

	Group
	2024	2023
	£m	£m
On-balance sheet:
Deposits by banks	723	888
Total on-balance sheet	723	888
Total off-balance sheet	14,862	15,652

Purchase and resale agreements

Santander UK also enters into purchase and resale agreements and similar transactions of debt securities. Upon entering into such transactions, Santander UK

receives collateral in excess of the loan amount. The level of collateral held is monitored daily and if required, further calls are made to ensure the market values of

collateral remains at least equal to the loan balance. The subsidiaries are permitted to sell or repledge the collateral held in the absence of default. At 31

December 2024, the fair value of such collateral received was £13,221m (2023: £12,983m). Of the collateral received, almost all was sold or repledged. The

subsidiaries have an obligation to return collateral that they have sold or pledged.

Stock borrowing and lending agreements

Obligations representing contractual commitments to return stock borrowed by the Santander UK group amounted to £1,641m at 31 December 2024 (2023:

£2,669m) and are offset by a contractual right to receive stock lent.

Derivatives business

In addition to the arrangements described, collateral is also received from counterparties in the normal course of derivative business. At 31 December 2024,

£723m (2023: £888m) of such collateral in the form of cash had been received by Santander UK and is included in the table.

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Lending activities

In addition to the collateral held as security for assets, the Santander UK group may obtain a charge over a customer’s property in connection with its lending

activities. Details of these arrangements are set out in the ‘Credit risk’ section of the Risk review.

35. SHARE-BASED COMPENSATION

The Santander UK group operates share schemes and arrangements for eligible employees. The main current schemes are the Sharesave Schemes, the

Deferred Shares Bonus Plan, the Partnership Shares scheme and the Transformation Incentive Plan. All the share options and awards relate to shares in Banco

Santander SA.

The amount charged to the income statement in respect of share-based payment transactions is set out in Note 6.

At 31 December 2024, the carrying amount of liabilities arising from share-based payment transactions, excluding any cash element was £24m (2023: £15m), of

which £1m had vested at 31 December 2024 (2023: £1m).

a) Sharesave Schemes

The Santander UK group launched its sixteenth HM Revenue & Customs approved Sharesave invitation under Banco Santander SA sponsorship in September

2024. Sharesave invitations have been offered since 2008 under broadly similar terms. Under the Sharesave Scheme’s HMRC-approved savings limits, eligible

employees may enter into contracts to save between £5 and £500 per month. For all schemes, at the end of a fixed term of three or five years after the grant date,

the employees can use these savings to buy shares in Banco Santander SA at a discount, calculated in accordance with the rules of the scheme. The option price

is calculated as the average middle market quoted price of Banco Santander SA shares over the first three dealing days prior to invitation and, for schemes up to

and including 2023, discounted by up to 20%. This year, a 10% discount was applied. The vesting of awards under the scheme depends on continued

employment with the Banco Santander group. Participants in the scheme have six months from the date of vesting to exercise the option.

The table below summarises movements in the number of options, and changes in weighted average exercise price over the same period.

		2024		2023
	Number of options	Weighted average exercise price	Number of options	Weighted average exercise price
	‘000	£	‘000	£
Outstanding at 1 January	27,139	2.19	29,988	2.00
Granted	4.991	3.36	7,175	2.78
Exercised	(4.004)	2.29	(5,980)	1.70
Forfeited/expired	(2.437)	2.37	(4,044)	2.53
Outstanding at 31 December	25.689	2.39	27,139	2.19
Exercisable at 31 December	1.115	2.36	868	1.84

The weighted average share price at the date the options were exercised was £3.64 (2023: £3.22).

The following table summarises the range of exercise prices and weighted average remaining contractual life of the options at 31 December 2024 and 2023.

		2024		2023
	Weighted average remaining contractual life	Weighted average exercise price	Weighted average remaining contractual life	Weighted average exercise price
Range of exercise prices	Years	£	Years	£
£1 to £2	2	1.85	3	1.84
£2 to £3	2	2.71	3	2.65
£3 to £4	4	3.36	0	3.46
£4 to £5	0	—	0	—

The fair value of each option at the date of grant is estimated using an analytical model that also reflects the correlation between EUR and GBP. This model uses

assumptions on the share price, the EUR/GBP FX rate, the EUR/GBP risk-free interest rate, dividend yields, the expected volatilities of both the underlying shares

and EUR/GBP for the expected lives of options granted. The weighted average grant-date fair value of options granted during the year was £0.23 (2023: £0.33).

b) Deferred shares bonus plan

Deferred bonus awards are designed to align employee performance with shareholder value and encourage increased retention of senior employees. Those

employees who are designated as Material Risk Takers receive part of their annual bonus as a deferred award comprising 50% in shares and 50% in cash. Either

40% (for any variable pay award of less than £500,000) or 60% (for any variable pay award greater than £500,000) is deferred over a four-, five- or seven- year

period from the anniversary of the initial award. Deferred bonus awards in shares or share options are subject to an additional one-year retention period from the

point of delivery. Any deferred awards are dependent on continued employment and subject to Santander UK's discretion, and the vesting of deferred bonus

awards is subject to potential performance adjustment.

c) Partnership Shares scheme

A Partnership Shares scheme is operated for eligible employees under the Share Incentive Plan (SIP) umbrella. Participants can choose to invest up to £1,800

per tax year (or no more than 10% of an employee’s salary for the tax year) from pre-tax salary to buy Banco Santander SA shares. Shares are held in trust for the

participants. There are no vesting conditions attached to these shares, and no restrictions as to when the shares can be removed from the trust. However, if a

participant chooses to sell the shares before the end of five years, they will be liable for the taxable benefit received when the shares are taken out of the trust. The

shares can be released from trust after five years free of income tax and national insurance contributions. At 31 December 2024, 3,662,718 shares were

outstanding (2023: 3,937,473 shares).

d) Transformation Incentive Plan

Awards under this one-off long-term incentive plan were granted in 2021, 2022 and 2023 with performance assessed over the period 1 January 2021 to 31

December 2023.  Awards for Material Risk Takers were granted half in cash and half in share based awards (linked to the Banco Santander SA share price), and

will vest in accordance with regulatory requirements. The liability arising from share-based payment transactions, excluding any cash element was £5.2m (2023:

£3.8m).

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36. TRANSACTIONS WITH DIRECTORS AND OTHER KEY MANAGEMENT

PERSONNEL

The Directors of Santander UK Group Holdings plc did not receive any remuneration in respect of their services to the Company. The remuneration disclosures in

these financial statements reflect their remuneration in respect of the Santander UK plc group.

a) Remuneration of Directors and Other Key Management Personnel

The remuneration of the Directors and Other Key Management Personnel (KMP) of the Santander UK group is set out in aggregate below.

	2024	2023	2022
Directors’ remuneration	£	£	£
Salaries and fees	4,879,413	4,008,772	4,037,116
Performance-related payments	2,871,476	1,002,607	3,701,569
Other fixed remuneration (pension and other allowances & non-cash benefits)(2)	516,442	222,538	906,201
Expenses	—	—	13,004
Total remuneration	8,267,331	5,233,917	8,657,890

	2024	2023	2022
Directors' and Other Key Management Personnel compensation	£	£	£
Short-term employee benefits	17,250,685	13,235,757	15,641,669
Post-employment benefits	654,824	611,769	740,333
Compensation for loss of office(1)	—	—	1,540,400
Total compensation	17,905,509	13,847,526	17,922,402

(1) During 2024 and 2023, no compensation for loss of office was paid to Directors or Other KMPs (2022: three Other KMPs, £1,540,400).

(2) Included in Other fixed remuneration is an employer pension contribution to a defined contribution scheme of £122,915 (2023: £nil).

In 2024, the remuneration, excluding pension contributions, of the highest paid Director, was £3,160,709 (2023: £2,640,491, 2022: £3,510,441) of which

£1,431,612 (2023: £1,002,607, 2022: £1,900,506) was performance related. In 2024, the accrued defined benefit pension relating to the highest paid director was

£nil (2023: £nil, 2022: £nil for a different individual) per annum.

b) Retirement benefits

Defined benefit pension schemes are provided to certain employees. See Note 28 for details of the schemes and the related costs and obligations. No director

has a deferred pension benefit accruing under a defined benefit scheme. Ex-gratia pensions paid to former Directors of Santander UK plc in 2024, which have

been provided for previously, amounted to £430,904 (2023: £327,462; 2022: £379,945). Since the Company became part of the Banco Santander group, the

Board has not awarded any new ex-gratia pensions.

c) Transactions with Directors, Other Key Management Personnel and each of their connected persons

Directors, Other KMP (defined as the Executive Committee of Santander UK plc who served during the year) and their connected persons have undertaken the

following transactions with the Santander UK group in the ordinary course of business.

		2024		2023
	No.	£000	No.	£000
Secured loans, unsecured loans and overdrafts
At 1 January	6	891	6	647
Net movements	1	(163)	—	244
At 31 December	7	728	6	891
Deposit, bank and instant access accounts and investments
At 1 January	13	1,176	16	2,995
Net movements	3	95	(3)	(1,819)
At 31 December	16	1,271	13	1,176

In 2024 and 2023, no Director held any interest in the shares of any company in the Santander UK group and no Director exercised or was granted any rights to

subscribe for shares in any company in the Santander UK group. In addition, in 2024 and 2023, no Directors exercised share options over shares in Banco

Santander SA, the ultimate parent company of the Company.

Secured loans, unsecured loans and overdrafts are made to Directors, Other KMP and their connected persons, in the ordinary course of business, with terms

prevailing for comparable transactions and on the same terms and conditions as applicable to other employees in the Santander UK group. Such loans do not

involve more than the normal risk of collectability or present any unfavourable features. Amounts deposited by Directors, Other KMP and their connected persons

earn interest at the same rates as those offered to the market or on the same terms and conditions applicable to other employees in the Santander UK group.

Deposits, bank and instant access accounts and investments are entered into by Directors, Other KMP and their connected persons on normal market terms and

conditions, or on the same terms and conditions as applicable to other employees in Santander UK group.

In 2024 two Directors had loans (2023: one Director), with a principal amount of £180,000 outstanding at 31 December 2024 (2023: £312,846). In 2024, one

Other KMP had a loan (2023: five), with a principal amount of £515,100 outstanding at 31 December 2024 (2023: £578,568).

In 2024 and 2023, there were no other transactions, arrangements or agreements with Santander UK in which Directors, Other KMP or their connected persons

had a material interest. In addition, in 2024 and 2023, no Director had a material interest in any contract of significance with Santander UK other than a service

contract or appointment letter, as appropriate.

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37. RELATED PARTY DISCLOSURES

a) Parent undertaking and controlling party

The Company’s immediate and ultimate parent and controlling party is Banco Santander SA, a company incorporated in Spain. The smallest and largest groups

into which the Santander UK group’s results are included are the group accounts of Banco Santander SA , copies of which may be obtained from Shareholder

Relations, 2 Triton Square, Regent’s Place, London NW1 3AN.

b) Transactions with related parties

Transactions with related parties during the year and balances outstanding at the year-end:

										Group
	Interest, fees and other income received			Interest, fees and other expenses paid			Amounts owed by related parties		Amounts owed to related parties
	2024	2023	2022	2024	2023	2022	2024	2023	2024	2023
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Ultimate parent	(65)	(12)	(863)	226	475	47	641	903	(2,087)	(2,250)
Fellow subsidiaries	(33)	(28)	(60)	216	194	171	34	26	(221)	(251)
Joint ventures	(258)	(183)	(77)	84	55	17	4,812	4,486	(1,567)	(781)
	(356)	(223)	(1,000)	526	724	235	5,487	5,415	(3,875)	(3,282)

For more on this, see ‘Balances with other Banco Santander group members’ in the Risk review, Note 13. Loans and advances to customers, Note 22. Deposits

by customers and Note 32. Other Equity Instruments. In addition, transactions with pension schemes operated by the Santander UK group are described in Note

28.

The above transactions were made in the ordinary course of business, on substantially the same terms as for comparable transactions with third party

counterparties, and within limits acceptable to the PRA. Such transactions do not involve more than the normal risk of collectability or present any unfavourable

features.

In November 2022, Santander (UK) Group Pension Scheme Trustees Limited entered into an unsecured committed liquidity facility with Santander UK plc for

£600m for a two year period. On expiry, a new liquidity facility agreement was entered into for £300m with a maturity date of 4 November 2026. This facility

provides an alternate source of short-term liquidity for day-to-day operational needs. At the balance sheet date, no drawings had been made from this facility and

the entire facility remained undrawn.

38. FINANCIAL INSTRUMENTS

a) Fair value measurement and hierarchy

(i) Fair value measurement

The fair value of financial instruments is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market

participants at the measurement date in the principal, or in its absence, the most advantageous market to which Santander UK has access at that date. The fair

value of a liability reflects its non-performance risk.

Financial instruments valued using observable market prices

If a quoted market price in an active market is available for an instrument, the fair value is calculated as the current exit price multiplied by the number of units of

the instrument held.

Financial instruments valued using a valuation technique

In the absence of a quoted market price in an active market, management uses internal models to make its best estimate of the price that the market would set

for that financial instrument. In order to make these estimations, various techniques are employed, including extrapolation from observable market data and

observation of similar financial instruments with similar characteristics. Wherever possible, valuation parameters for each product are based on prices directly

observable in active markets or that can be derived from directly observable market prices. Chosen valuation techniques incorporate all the factors that market

participants would take into account in pricing transactions.

Santander UK manages certain groups of financial assets and liabilities on the basis of its net exposure to either market risks or credit risk. As a result, it has

elected to use the exception under IFRS 13 which permits the fair value measurement of a group of financial assets and financial liabilities on the basis of the price

that would be received to sell a net long position for a particular risk exposure or paid to transfer a net short position for a particular risk exposure in an orderly

transaction between market participants at the measurement date under current market conditions.

(ii) Fair value hierarchy

Santander UK applies the following fair value hierarchy that prioritises the inputs to valuation techniques used in measuring fair value. The hierarchy establishes

three categories for valuing financial instruments, giving the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the

lowest priority to unobservable inputs. The three categories are: quoted prices in active markets (Level 1), internal models based on observable market data

(Level 2) and internal models based on other than observable market data (Level 3). If the inputs used to measure an asset or a liability fall to different levels

within the hierarchy, the classification of the entire asset or liability will be based on the lowest level input that is significant to the overall fair value measurement of

the asset or liability.

Santander UK categorises assets and liabilities measured at fair value within the fair value hierarchy based on the inputs to the valuation techniques as follows:

Level 1Unadjusted quoted prices for identical assets or liabilities in an active market that Santander UK can access at the measurement date. Active markets

are assessed by reference to average daily trading volumes in absolute terms and, where applicable, by reference to market capitalisation for the

instrument.

Level 2Quoted prices in inactive markets, quoted prices for similar assets or liabilities, recent market transactions, inputs other than quoted market prices for

the asset or liability that are observable either directly or indirectly for substantially the full term, and inputs to valuation techniques that are derived

principally from or corroborated by observable market data through correlation or other statistical means for substantially the full term of the asset or

liability.

Level 3Significant inputs to the pricing or valuation techniques are unobservable. These unobservable inputs reflect the assumptions that market participants

would use when pricing assets or liabilities and are considered significant to the overall valuation.

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Changes in the observability of significant valuation inputs during the reporting period may result in a transfer of assets and liabilities within the fair value hierarchy.

The Santander UK group recognises transfers between levels of the fair value hierarchy when there is a significant change in either its principal market or the level

of observability of the inputs to the valuation techniques at the end of the reporting period.

b) Valuation techniques

The main valuation techniques employed in internal models to measure the fair value of the financial instruments at 31 December 2024 and 2023 are set out

below. In substantially all cases, the principal inputs into these models are derived from observable market data. Santander UK did not make any material

changes to the valuation techniques and internal models it used in 2024, 2023 and 2022.

A.In the valuation of financial instruments requiring static hedging (for example interest rate, currency derivatives and property derivatives) and in the valuation

of loans and advances and deposits, the ‘present value’ method is used. Expected future cash flows are discounted using the interest rate curves of the

applicable currencies or forward house price index levels, as well as credit spreads. The interest rate curves are generally observable market data and

reference yield curves derived from quoted interest rates in appropriate time bandings, which match the timings of the cash flows and maturities of the

instruments.

B.In the valuation of equity financial instruments requiring dynamic hedging (principally equity securities, options and other structured instruments), proprietary

local volatility and stochastic volatility models are used. These types of models are widely accepted in the financial services industry. Observable market

inputs used in these models include the bid-offer spread, foreign currency exchange rates, volatility and correlation between indices. In limited circumstances,

other inputs may be used in these models that are based on unobservable market data, such as the Halifax’s UK HPI volatility, HPI forward growth, HPI spot

rate, mortality, mean reversion and contingent litigation risk.

C.In the valuation of financial instruments exposed to interest rate risk that require either static or dynamic hedging (such as interest rate swaps, caps and

floors), the present value method (swaps), and Black’s model (caps/floors) are used. These types of models are widely accepted in the financial services

industry. The significant inputs used in these models are observable market data, including appropriate interest rate curves, volatilities, correlations and

exchange rates. In limited circumstances, other inputs may be used in these models that are based on unobservable market data, such as HPI volatility, HPI

forward growth, HPI spot rate and mortality.

D.In the valuation of linear instruments such as credit risk and fixed-income derivatives, credit risk is measured using dynamic models similar to those used in

the measurement of interest rate risk. In the case of non-linear instruments, if the portfolio is exposed to credit risk such as credit derivatives, the probability

of default is determined using the credit default spread market. The main inputs used to determine the underlying cost of credit of credit derivatives are

quoted credit risk premiums and the correlation between the quoted credit derivatives of various issuers.

The fair values of the financial instruments arising from Santander UK’s internal models take into account, among other things, contract terms and observable

market data, which include such factors as bid-offer spread, interest rates, credit risk, exchange rates, the quoted market price of equity securities, and volatility.

In all cases, when it is not possible to derive a valuation for a particular feature of an instrument, management uses judgement to determine the fair value of

the particular feature. In exercising this judgement, a variety of tools are used including proxy observable data, historical data and extrapolation techniques.

Extrapolation techniques take into account behavioural characteristics of equity markets that have been observed over time, and for which there is a strong case

to support an expectation of a continuing trend in the future. Estimates are calibrated to observable market prices when they become available.

Santander UK believes its valuation methods are appropriate and consistent with other market participants. Nevertheless, the use of different valuation methods

or assumptions, including imprecision in estimating unobservable market inputs, to determine the fair value of certain financial instruments could result in different

estimates of fair value at the reporting date and the amount of gain or loss recorded for a particular instrument. Most of the valuation models are not significantly

subjective, because they can be tested and, if necessary, recalibrated by the internal calculation of and subsequent comparison to market prices of actively traded

securities, where available.

c) Control framework

Fair values are subject to a control framework designed to ensure that they are either determined or validated by a function independent of the risk-taker. To this

end, ultimate responsibility for the determination of fair values lies with the Risk Department. For all financial instruments where fair values are determined by

reference to externally quoted prices or observable pricing inputs to models, independent price determination or verification is utilised. In inactive markets, direct

observation of a traded price may not be possible. In these circumstances, Santander UK will source alternative market information to validate the financial

instrument’s fair value, with greater weight given to information that is considered to be more relevant and reliable.

The factors that are considered in this regard include:

–The extent to which prices may be expected to represent genuine traded or tradeable prices

–The degree of similarity between financial instruments

–The degree of consistency between different sources

–The process followed by the pricing provider to derive the data

–The elapsed time between the date to which the market data relates and the balance sheet date

–The manner in which the data was sourced.

The source of pricing data is considered as part of the process that determines the classification of the level of a financial instrument. Consideration is given to the

quality of the information available that provides the current mark-to-model valuation and estimates of how different these valuations could be on an actual trade,

taking into consideration how active the market is. For spot assets that cannot be sold due to illiquidity, forward estimates are discounted to estimate a realisable

value over time. Adjustments for illiquid positions are regularly reviewed to reflect changing market conditions.

For fair values determined using a valuation model, the control framework may include as applicable, independent development and / or validation of: (i) the logic

within the models; (ii) the inputs to those models; and (iii) any adjustments required outside the models. Internal valuation models are validated independently

within the Risk Department. A validation report is produced for each model-derived valuation that assesses the mathematical assumptions behind the model, the

implementation of the model and its integration within the trading system.

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d) Fair values of financial instruments carried at amortised cost

The following tables analyse the fair value of the financial instruments carried at amortised cost at 31 December 2024 and 2023, including their levels in the fair

value hierarchy - Level 1, Level 2 and Level 3. Cash and balances at central banks, which consist of demand deposits with the Bank of England, together with

cash in tills and ATMs, have been excluded from the table as the carrying amount is deemed an appropriate approximation of fair value.

										Group
	2024					2023
			Fair value	Fair	Carrying			Fair value	Fair	Carrying
	Level 1	Level 2	Level 3	value	value	Level 1	Level 2	Level 3	value	value
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Assets
Loans and advances to customers	—	—	201,864	201,864	202,929	—	—	209,641	209,641	211,222
Loans and advances to banks	—	1,101	—	1,101	1,101	—	1,216	—	1,216	1,216
Reverse repurchase agreements - non- trading	—	10,342	—	10,342	10,338	—	12,470	—	12,470	12,468
Other financial assets at amortised cost	3,190	—	—	3,190	3,408	144	—	—	144	152
	3,190	11,443	201,864	216,497	217,776	144	13,686	209,641	223,471	225,058
Liabilities
Deposits by customers	—	197	185,050	185,247	185,775	—	76	194,831	194,907	195,149
Deposits by banks	—	13,979	38	14,017	14,037	—	20,371	37	20,408	20,357
Repurchase agreements - non-trading	—	8,622	—	8,622	8,617	—	8,413	—	8,413	8,411
Debt securities in issue	31,907	4,034	1,771	37,712	37,569	11,511	22,710	1,154	35,375	35,778
Subordinated liabilities	1,630	10	1,061	2,701	2,385	871	1,669	209	2,749	2,386
	33,537	26,842	187,920	248,299	248,383	12,382	53,239	196,231	261,852	262,081

The carrying value above of any financial assets and liabilities that are designated as hedged items in a portfolio (or macro) fair value hedge relationship excludes

gains and losses attributable to the hedged risk, as this is included as a separate line item on the balance sheet.

Valuation methodology for financial instruments carried at amortised cost

The valuation approach to specific categories of financial instruments is described below.

Assets:

Loans and advances to customers

The approach to estimating the fair value of loans and advances to customers has been determined by discounting expected cash flows to reflect either current

market rates or credit spreads relevant to the specific industry of the borrower. The determination of their fair values is an area of considerable estimation and

uncertainty as there is no observable market and values are significantly affected by customer behaviour.

i) Advances secured on residential property

The fair value of the mortgage portfolio is calculated by discounting contractual cash flows by different spreads for each LTV Band, after taking account of

expected customer prepayment rates. The spread is based on new business interest rates derived from publicly available competitor market information.

ii) Corporate loans

The determination of the fair values of performing loans is calculated by discounting the contractual cash flows and also deducting other costs relating to expected

credit losses, cost of capital, credit risk capital, operational risk capital, cost of funding and operating costs.

iii) Other loans

These consist of unsecured personal loans, credit cards, overdrafts and consumer (auto) finance. The weighted average lives of these portfolios are typically short

and relate to relatively new business. For unsecured personal loans and consumer (auto) finance loans, a small surplus or deficit has been recognised based on

the differential between existing portfolio margins and the current contractual interest rates.

Loans and advances to banks

These comprise secured loans, short-term placements with banks including collateral and unsettled financial transactions. The secured loans have been valued

based on a discounted spread for the term of the loans using valuation technique A as described above. The carrying amount of the other items is deemed a

reasonable approximation of their fair value, as the transactions are very short-term in duration.

Reverse repurchase agreements - non-trading

The fair value of the reverse repurchase agreements - non trading has been estimated using valuation technique A as described above, using a spread

appropriate to the underlying collateral.

Other financial assets at amortised cost

These consist of asset backed securities and debt securities. The asset backed securities can be complex products and in some instances are valued with the

assistance of an independent, specialist valuation firm. These fair values are determined using industry-standard valuation techniques, including discounted

cash flow models. The inputs to these models used in these valuation techniques include quotes from market makers, prices of similar assets, adjustments for

differences in credit spreads, and additional quantitative and qualitative research. The debt security investments consist of a portfolio of government debt

securities. The fair value of this portfolio has been determined using quoted market prices.

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Liabilities:

Deposits by customers

The majority of deposit liabilities are payable on demand and therefore can be deemed short-term in nature with the fair value equal to the carrying value. Certain

of the deposit liabilities are at a fixed rate until maturity. The deficit/surplus of fair value over carrying value of these liabilities has been estimated by reference to

the market rates available at the balance sheet date for similar deposit liabilities of similar maturities. The fair value of such deposit liabilities has been estimated

using valuation technique A as described above.

Deposits by banks

The fair value of deposits by banks, including repos, has been estimated using valuation technique A as described above, discounted at the appropriate credit

spread.

Repurchase agreements - non-trading

The fair value of the repurchase agreements - non trading has been estimated using valuation technique A as described above, discounted at a spread

appropriate to the underlying collateral.

Debt securities in issue and subordinated liabilities

Where reliable prices are available, the fair value of debt securities in issue and subordinated liabilities has been calculated using quoted market prices. Where

reliable prices are not available, internal models have been used to determine fair values, which take into account, among other things, contract terms and

observable market data, which include such factors as interest rates, credit risk and exchange rates. In all cases, when it is not possible to derive a valuation for a

particular feature of an instrument, management uses judgement to determine the fair value of the particular feature. In exercising this judgement, a variety of tools

are used including proxy observable data.

e) Fair values of financial instruments measured at fair value

The following tables summarise the fair values of the financial assets and liabilities accounted for at fair value at 31 December 2024 and 31 December 2023,

analysed by their levels in the fair value hierarchy - Level 1, Level 2 and Level 3.

										Group
		2024				2023
		Level 1	Level 2	Level 3	Total	Level 1	Level 2	Level 3	Total	Valuation
		£m	£m	£m	£m	£m	£m	£m	£m	technique
Assets
Derivative financial instruments	Exchange rate contracts	—	990	—	990	—	1,129	—	1,129	A
	Interest rate contracts	—	1,690	—	1,690	—	2,227	1	2,228	A & C
	Inflation rate contracts	—	70	—	70	—	—	—	—	A
	Equity and credit contracts	—	122	35	157	—	127	35	162	B & D
	Netting	—	(1,643)	—	(1,643)	—	(2,047)	—	(2,047)
		—	1,229	35	1,264	—	1,436	36	1,472
Other financial assets at FVTPL	Loans and advances to customers	—	278	44	322	—	309	46	355	A
	Debt securities	—	56	36	92	—	168	49	217	A, B & D
	Equity securities	—	—	7	7	—	—	30	30	B
		—	334	87	421	—	477	125	602
Financial assets at FVOCI	Debt securities	8,805	201	34	9,040	8,293	188	—	8,481	D
		8,805	201	34	9,040	8,293	188	—	8,481
Total assets at fair value		8,805	1,764	156	10,725	8,293	2,101	161	10,555
Liabilities
Derivative financial instruments	Exchange rate contracts	—	432	—	432	—	533	—	533	A
	Interest rate contracts	—	1,905	—	1,905	—	2,379	1	2,380	A & C
	Equity and credit contracts	—	9	14	23	—	16	9	25	B & D
	Netting	—	(1,643)	—	(1,643)	—	(2,047)	—	(2,047)
		—	703	14	717	—	881	10	891
Other financial liabilities at FVTPL	Debt securities in issue	—	355	—	355	—	369	—	369	A
	Structured deposits	—	605	—	605	—	426	—	426	A
	Zero Amortising Guaranteed Notes	—	95	—	95	—	104	—	104	D
		—	1,055	—	1,055	—	899	—	899
Total liabilities at fair value		—	1,758	14	1,772	—	1,780	10	1,790

Transfers between levels of the fair value hierarchy

In 2024 there were no significant (2023: £22m) transfers of financial instruments between levels of the fair value hierarchy.

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f) Fair value adjustments

The internal models incorporate assumptions that Santander UK believes would be made by a market participant to establish fair value. Fair value adjustments

are adopted when Santander UK considers that there are additional factors that would be considered by a market participant that are not incorporated in the

valuation model.

Santander UK classifies fair value adjustments as either ‘risk-related’ or ‘model-related’. The fair value adjustments form part of the portfolio fair value and are

included in the balance sheet values of the product types to which they have been applied.

The fair value adjustments are set out in the following table:

		Group
	2024	2023
	£m	£m
Risk-related:
- Bid-offer and trade specific adjustments	6	(6)
- Uncertainty	25	29
- Credit risk adjustment	1	(2)
- Funding fair value adjustment	—	1
	32	22
Day One profit	—	(1)
	32	21

Risk-related adjustments

Risk-related adjustments are driven, in part, by the magnitude of Santander UK’s market or credit risk exposure, and by external market factors, such as the size

of market spreads.

(i) Bid-offer and trade specific adjustments

Portfolios are marked at bid or offer, as appropriate. Valuation models will typically generate mid-market values. The bid-offer adjustment reflects the cost

that would be incurred if substantially all residual net portfolio market risks were closed using available hedging instruments or by disposing of or unwinding

the position. For debt securities, the bid-offer spread is based on a market price at an individual security level. For other products, the major risk types are

identified. For each risk type, the net portfolio risks are first classified into buckets, and then a bid-offer spread is applied to each risk bucket based upon the

market bid-offer spread for the relevant hedging instrument.

(ii) Uncertainty

Certain model inputs may be less readily determinable from market data, and/or the choice of model itself may be more subjective. In these circumstances, a

range of possible values exists that the financial instrument or market parameter may assume, and an adjustment may be needed to reflect the likelihood that

in estimating the fair value of the financial instrument, market participants would adopt more conservative values for uncertain parameters and/or model

assumptions than those used in the valuation model.

(iii) Credit risk adjustment

Credit risk adjustments comprise credit and debit valuation adjustments. The credit valuation adjustment (CVA) is an adjustment to the valuation of OTC derivative

contracts to reflect within fair value the possibility that the counterparty may default, and Santander UK may not receive the full market value of the transactions.

The debit valuation adjustment (DVA) is an adjustment to the valuation of the OTC derivative contracts to reflect within the fair value the possibility that Santander

UK may default, and that Santander UK may not pay full market value of the transactions.

Santander UK calculates a separate CVA and DVA for each Santander UK legal entity, and within each entity for each counterparty to which the entity has

exposure. Santander UK calculates the CVA by applying the probability of default of the counterparty to the expected positive exposure to the counterparty, and

multiplying the result by the loss expected in the event of default i.e. LGD. Conversely, Santander UK calculates the DVA by applying the PD of the Santander UK

group, to the expected positive exposure of the counterparty to Santander UK and multiplying the result by the LGD. Both calculations are performed over the life

of the potential exposure.

For most products Santander UK uses a simulation methodology to calculate the expected positive exposure to a counterparty. This incorporates a range of

potential exposures across the portfolio of transactions with the counterparty over the life of the portfolio. The simulation methodology includes credit mitigants

such as counterparty netting agreements and collateral agreements with the counterparty.

(iv) Funding fair value adjustment (FFVA)

The FFVA is an adjustment to the valuation of OTC derivative positions to include the net cost of funding uncollateralised derivative positions. This is calculated by

applying a suitable funding cost to the expected future funding exposure of any uncollateralised component of the OTC derivative portfolio.

Day One profit adjustments

Day One profit adjustments are adopted where the fair value estimated by a valuation model is based on one or more significant unobservable inputs. Day One

profit adjustments are calculated and reported on a portfolio basis.

The timing of recognition of deferred Day One profit and loss is determined individually. It is deferred until either the instrument’s fair value can be determined

using market observable inputs or is realised through settlement. The financial instrument is subsequently measured at fair value, adjusted for the deferred Day

One profit and loss. Subsequent changes in fair value are recognised immediately in the Income Statement without immediate reversal of deferred Day One

profits and losses.

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g) Internal models based on information other than market data (Level 3)

The table below provides an analysis of financial instruments valued using internal models based on information other than market data together with further

details on the valuation techniques used for each type of instrument. Each instrument is initially valued at transaction price:

			Group
			Balance sheet value		Fair value movements recognised in profit/(loss)
			2024	2023	2024	2023	2022
Balance sheet line item	Category	Financial instrument product type	£m	£m	£m	£m	£m
1. Derivative assets	Equity and credit contracts	Reversionary property interests	35	35	6	12	(8)
2. FVTPL assets	Loans and advances to customers	Roll-up mortgage portfolio	22	24	(1)	(2)	(18)
3. FVTPL assets	Loans and advances to customers	Other loans	22	22	—	4	(4)
4. FVTPL assets	Debt securities	Reversionary property securities	36	49	2	(3)	—
5. FVTPL assets	Equity securities	Unlisted equity shares	7	30	(3)	27	(10)
6. FVOCI assets	Debt instruments	Other securities	34	—	—	—	—
			156	160	4	38	(40)
Other Level 3 assets			—	1	—	7	17
Other Level 3 liabilities			(14)	(10)	(5)	(1)	2
Total net assets			142	151
Total (expense)/income					(1)	44	(21)

Valuation techniques

1. Derivative assets – Equity and credit contracts

These are valued using a probability weighted set of HPI forward prices, which are assumed to be a reasonable representation of the increase in value of the

Santander UK group’s reversionary interest portfolio underlying the derivatives. The probability used reflects the likelihood of the homeowner vacating the property

and is calculated from mortality rates and acceleration rates which are a function of age and gender, obtained from the relevant mortality tables. Indexing is felt

to be appropriate due to the size and geographical dispersion of the reversionary interest portfolio. These are determined using HPI Spot Rates adjusted to reflect

estimated forward growth. Non-seasonally adjusted (NSA) national and regional HPI are used in the valuation model to avoid any subjective judgement in the

adjustment process, which is made by Markit, which publishes the Halifax House Price Index.

The inputs used to determine the value of the reversionary property derivatives are HPI spot, HPI forward growth and mortality rates. The principal pricing

parameter is HPI forward growth.

2. FVTPL assets – Loans and advances to customers – roll-up mortgage portfolio

These represent roll-up mortgages (sometimes referred to as lifetime mortgages), which are an equity release scheme under which a property owner takes out a

loan secured against their home. The owner does not have to make any interest payments during their lifetime in which case the fixed interest payments are rolled

up into the mortgage. The loan or mortgage (capital and rolled-up interest) is repaid upon the owner’s vacation of the property and the value of the loan is only

repaid from the value of the property. This is known as a ‘no negative equity guarantee’. Santander UK suffers a loss if the sale proceeds from the property are

insufficient to repay the loan, as it is unable to pursue the homeowner’s estate or beneficiaries for the shortfall.

The value of the mortgage ‘rolls up’ or accretes until the owner vacates the property. In order to value the roll-up mortgages, Santander UK uses a probability-

weighted set of European option prices (puts) determined using the Black-Scholes model, in which the ‘no negative equity guarantee’ are valued as short put

options. The probability weighting applied is calculated from mortality rates and acceleration rates as a function of age and gender, taken from mortality tables.

The inputs used to determine the value of these instruments are HPI spot, HPI forward growth, HPI volatility, mortality rates and repayment rates. The principal

pricing parameter is HPI forward growth. The HPI forward growth rate used is unobservable and is the same as used in the valuation of Instrument 1 above. The

other parameters do not have a significant effect on the value of the instruments.

3. FVTPL assets – Loans and advances to customers – other loans

These relate to loans to transport and education companies. The fair value of these loans is estimated using the ‘present value’ model based on a credit curve

derived from current market spreads. Loan specific credit data is unobservable, so a proxy population is applied based on industry sector and credit rating.

4. FVTPL assets – Debt securities

These consist of reversionary property securities and are an equity release scheme, where the property owner receives an upfront lump sum in return for paying a

fixed percentage of the sales proceeds of the property when the owner vacates the property. These reversionary property securities are valued using a probability-

weighted set of HPI forward prices which are assumed to be a reasonable representation of the increase in value of Santander UK’s reversionary interest portfolio

underlying the derivatives. The probability weighting used reflects the probability of the homeowner vacating the property through death or moving into care and is

calculated from mortality rates and acceleration factors which are a function of age and gender, obtained from the relevant mortality table.

The inputs used to determine the value of these instruments are HPI spot, HPI forward growth and mortality rates. The principal pricing parameter is HPI forward

growth. Discussion of the HPI spot rate, HPI forward growth rate and mortality rates for this financial instrument is the same as Instrument 1 above. An adjustment

is also made to reflect the specific property risk. Specific property risk is from the difference between the specific properties in the portfolio, and the average price

as expressed in the regionally weighted house price index.

5. FVTPL assets - Equity securities

These consist of unquoted equity investments in companies providing infrastructure services to the financial services industry. Observable market inputs to

valuation models used include equity prices and foreign currency exchange rates. The significant unobservable input is contingent litigation costs and related

expenses in respect of convertible preferred stock in Visa Inc, as described in Note 30. This is estimated by reference to best estimates received from third party

legal counsel.

6. FVOCI assets – Debt instruments

These consist of asset-back securities where third-party prices are not available or reliable. The fair value is estimated using market standard cash flow models

with input parameter assumptions which include prepayment speeds, default rates, discount margins derived from comparable securities with similar vintage,

collateral type, and credit ratings.

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Reconciliation of fair value measurement in Level 3 of the fair value hierarchy

The following table sets out the movements in Level 3 financial instruments in 2024 and 2023 :

	Group
	Assets				Liabilities
	Derivatives	Other financial assets at FVTPL	Financial assets at FVOCI	Total	Derivatives	Other financial liabilities at FVTPL	Total
	£m	£m	£m	£m	£m	£m	£m
At 1 January 2024	36	125	—	161	(10)	—	(10)
Total gains/(losses) recognised:
Fair value movements(1)	6	(2)	—	4	(5)	—	(5)
Purchases	—	—	34	34	—	—	—
Settlements	(7)	(36)	—	(43)	1	—	1
At 31 December 2024	35	87	34	156	(14)	—	(14)
Gains/(losses) recognised in profit or loss/other comprehensive income relating to assets and liabilities held at the end of the year(1)	6	(2)	—	4	(5)	—	(5)

At 1 January 2023	54	127	—	181	(12)	(3)	(15)
Total gains/(losses) recognised:
Fair value movements(1)	18	27	—	45	(1)	—	(1)
Foreign exchange and other movements	—	(7)	—	(7)	—	—	—
Purchases	—	1	—	1	—	—	—
Transfers out	(22)	—	—	(22)	—	—	—
Netting(2)	—	(3)	—	(3)	—	—	—
Settlements	(14)	(20)	—	(34)	3	3	6
At 31 December 2023	36	125	—	161	(10)	—	(10)
Gains/(losses) recognised in profit or loss/other comprehensive income relating to assets and liabilities held at the end of the year(1)	18	20	—	38	(1)	—	(1)

(1)This relates to the effect of netting on the fair value of the credit linked notes due to a legal right of set-off between the principal amounts of the senior notes and the associated cash deposits. For more, see

‘ii) Credit protection entities’ in Note 18.

(2)Fair value movements relating to derivatives and other financial assets at FVTPL are recognised in other operating income in the income statement.

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h) Maturities of financial liabilities and off-balance sheet commitments

The table below analyses the maturities of the undiscounted cash flows relating to financial liabilities and off-balance sheet commitments of Santander UK based

on the remaining period to the contractual maturity date at the balance sheet date. Deposits by customers largely consist of retail deposits. This table is not

intended to show the liquidity of Santander UK.

	Group
	On demand	Not later than 3 months	Later than 3 months and not later than 1 year	Later than 1 year and not later than 5 years	Later than 5 years	Total
2024	£m	£m	£m	£m	£m	£m
Financial liabilities
Derivative financial instruments	—	168	136	321	185	810
Other financial liabilities at fair value through profit or loss	10	3	135	556	524	1,228
Deposits by customers	171,951	5,181	5,686	2,947	320	186,085
Deposits by banks	1,396	1,562	7,621	4,463	—	15,042
Repurchase agreements – non-trading	—	7,894	762	—	—	8,656
Debt securities in issue	—	5,930	2,057	28,422	7,773	44,182
Subordinated liabilities	—	27	628	332	1,895	2,882
Lease liabilities	—	—	29	60	19	108
Total financial liabilities	173,357	20,765	17,054	37,101	10,716	258,993
Off-balance sheet commitments given	4,028	19,088	916	8,391	3,248	35,671
2023
Financial liabilities
Derivative financial instruments	1	221	53	480	236	991
Other financial liabilities at fair value through profit or loss	—	8	7	538	520	1,073
Deposits by customers	181,492	4,826	5,987	2,946	286	195,537
Deposits by banks	1,479	806	1,518	18,087	—	21,890
Repurchase agreements – non-trading	—	8,418	8	—	—	8,426
Debt securities in issue	—	7,500	3,835	21,708	8,597	41,640
Subordinated liabilities	—	27	83	876	2,470	3,456
Lease liabilities	—	—	30	73	25	128
Total financial liabilities	182,972	21,806	11,521	44,708	12,134	273,141
Off-balance sheet commitments given	3,805	15,205	1,408	7,399	3,622	31,439

As the above table is based on contractual maturities, no account is taken of call features related to subordinated liabilities. In addition, the repayment terms of

debt securities may be accelerated in line with relevant covenants. Further, no account is taken of the possible early repayment of Santander UK’s mortgage-

backed non-recourse finance which is redeemed by Santander UK as funds become available from redemptions of the residential mortgages. Santander UK has

no control over the timing and amount of redemptions of residential mortgages.

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39. OFFSETTING FINANCIAL ASSETS AND LIABILITIES

The following table shows the impact of netting arrangements on:

–All financial assets and liabilities that are reported net on the balance sheet

–All derivative financial instruments and repurchase agreements and other similar secured lending and borrowing agreements that are subject to enforceable

master netting arrangements or similar agreements, but do not qualify for balance sheet netting.

The table identifies the amounts that have been offset in the balance sheet and those amounts that are covered by enforceable netting arrangements (offsetting

arrangements and financial collateral) but do not qualify for netting under the requirements described above.

For derivative contracts, the ‘Financial instruments’ column identifies financial assets and liabilities that are subject to set off under netting agreements, such as

the ISDA Master Agreement or derivative exchange or clearing counterparty agreements, whereby all outstanding transactions with the same counterparty can

be offset and close-out netting applied across all outstanding transactions covered by the agreements if an event of default or other predetermined events occur.

Financial collateral refers to cash and non-cash collateral obtained, typically daily or weekly, to cover the net exposure between counterparties by enabling the

collateral to be realised in an event of default or if other predetermined events occur. For repurchase and reverse repurchase agreements and other similar

secured lending and borrowing, the ‘Financial instruments’ column identifies financial assets and liabilities that are subject to set off under netting agreements,

such as global master repurchase agreements and global master securities lending agreements, whereby all outstanding transactions with the same counterparty

can be offset and close-out netting applied across all outstanding transactions covered by the agreements if an event of default or other predetermined events

occur. Financial collateral typically comprises highly liquid securities which are legally transferred and can be liquidated if a counterparty defaults.

Santander UK engages in a variety of counterparty credit mitigation strategies in addition to netting and collateral arrangements. Therefore, the net amounts

presented in the tables below do not represent Santander UK’s total credit exposure.

								Group
	Amounts subject to enforceable netting arrangements						Assets not subject to enforceable netting arrangements( 2)
	Effects of offsetting on balance sheet			Related amounts not offset
	Gross amounts	Amounts offset	Net amounts on balance sheet	Financial instruments	Financial collateral(1)	Net amount		Balance sheet total(3)
2024	£m	£m	£m	£m	£m	£m	£m	£m
Assets
Derivative financial assets	2,859	(1,643)	1,216	(421)	(725)	70	48	1,264
Reverse repurchase, securities borrowing & similar agreements:
- Amortised cost	16,175	(5,837)	10,338	(63)	(10,275)	—	—	10,338
Loans and advances to customers and banks(4)	5,604	(635)	4,969	—	(183)	4,786	199,061	204,030
	24,638	(8,115)	16,523	(484)	(11,183)	4,856	199,109	215,632
Liabilities
Derivative financial liabilities	2,340	(1,643)	697	(421)	(129)	147	20	717
Repurchase, securities lending & similar agreements:
- Amortised cost	14,454	(5,837)	8,617	(63)	(8,554)	—	—	8,617
Deposits by customers and banks(4)	635	(635)	—	—	—	—	199,812	199,812
	17,429	(8,115)	9,314	(484)	(8,683)	147	199,832	209,146
2023
Assets
Derivative financial assets	3,469	(2,047)	1,422	(479)	(823)	120	50	1,472
Reverse repurchase, securities borrowing & similar agreements:
- Amortised cost	15,625	(3,157)	12,468	(118)	(12,350)	—	—	12,468
Loans and advances to customers and banks(4)	5,565	(805)	4,760	—	(180)	4,580	207,678	212,438
	24,659	(6,009)	18,650	(597)	(13,353)	4,700	207,728	226,378
Liabilities
Derivative financial liabilities	2,911	(2,047)	864	(479)	(226)	159	27	891
Repurchase, securities lending & similar agreements:
- Amortised cost	11,568	(3,157)	8,411	(118)	(8,293)	—	—	8,411
Deposits by customers and banks(4)	2,370	(805)	1,565	—	—	1,565	213,941	215,506
	16,849	(6,009)	10,840	(597)	(8,519)	1,724	213,968	224,808

(1)Financial collateral is reflected at its fair value but has been limited to the net balance sheet exposure so as not to include any over-collateralisation.

(2)This column includes contractual rights of set-off that are subject to uncertainty under the laws of the relevant jurisdiction.

(3)The balance sheet total is the sum of ‘Net amounts reported on the balance sheet’ that are subject to enforceable netting arrangements and ‘Amounts not subject to enforceable netting arrangements’.

(4)The amounts offset within loans and advances to customers/banks or deposits by customers/banks relate to offset mortgages which are classified as either and that are subject to netting.

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40. ASSETS HELD FOR SALE

Sale of property

Buckingham House, Bletchley, was sold in 2024 with a gain of £1m. The sale of Santander House, Milton Keynes is expected to complete in 2025. As such, the

Santander UK group classified Santander House, which is included in the Corporate Centre segment and carried at the sales price, as held for sale.

At 31 December 2024 and 31 December 2023, assets held for sale comprised:

	2024	2023
	£m	£m
Assets
Property, plant and equipment	12	13
	12	13

41. EVENTS AFTER THE BALANCE SHEET DATE

There have been no significant events between 31 December 2024 and the date of approval of these financial statements which would require a change to or

additional disclosure in the financial statements.

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42. COMPANY FINANCIAL DATA

Company Balance Sheet

At 31 December 2024

		2024	2023
	Notes	£m	£m
Assets
Other financial assets at fair value through profit or loss	4	8,792	9,591
Loans and advances to banks	5	1,845	1,816
Other financial assets at amortised cost	6	1,644	1,633
Interests in other entities	7	13,545	13,640
Current tax assets		4	22
Other assets		2	4
Total assets		25,832	26,706
Liabilities
Other financial liabilities at fair value through profit or loss	8	8,792	9,591
Debt securities in issue	9	1,916	1,911
Subordinated liabilities	10	1,644	1,633
Total liabilities		12,352	13,135
Equity
Share capital	13	7,060	7,060
Other equity instruments	14	2,100	2,196
Retained earnings		4,320	4,315
Total shareholders’ equity		13,480	13,571
Total liabilities and equity		25,832	26,706

The accompanying Notes form an integral part of these Financial Statements.

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Company Cash Flow Statement

For the year ended 31 December

		2024	2023
	Notes	£m	£m
Cash flows from operating activities
Profit before tax		1,435	1,675
Adjustments for:
Non-cash items included in profit		(2)	—
Net change in operating assets and liabilities		932	3,558
Corporation taxes received		22	—
Effects of exchange rate differences		28	(513)
Net cash flows from operating activities		2,415	4,720
Cash flows from investing activities
Purchase of financial assets at amortised cost and financial assets at fair value		(400)	(2,394)
Proceeds from sale and redemption of financial assets at amortised cost and financial assets at fair value		500	—
Net cash flows from investing activities		100	(2,394)
Cash flows from financing activities
Issue of other equity instruments		400	—
Issue of debt securities and subordinated notes		770	2,582
Repayment of debt securities and subordinated liabilities		(1,741)	(3,230)
Repurchase of other equity instruments		(500)	—
Issuance costs of debt securities and subordinated notes		(2)	(4)
Dividends paid on ordinary shares	3	(1,295)	(1,538)
Dividends paid on other equity instruments		(139)	(133)
Net cash flow from financing activities		(2,507)	(2,323)
Change in cash and cash equivalents		8	3
Cash and cash equivalents at beginning of the year		44	41
Cash and cash equivalents at the end of the year		52	44

The accompanying Notes form an integral part of these Financial Statements.

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Company Statement of Changes in Equity

For the year ended 31 December

	Share capital	Other equity instruments	Retained earnings	Total
	£m	£m	£m	£m
At 1 January 2024	7,060	2,196	4,315	13,571
Total comprehensive income:(1)	—	—	1,439	1,439
Issue of other equity instruments	—	400	—	400
Repurchase of other equity instruments	—	(496)	—	(496)
Dividends on ordinary shares	—	—	(1,295)	(1,295)
Dividends on other equity instruments	—	—	(139)	(139)
At 31 December 2024	7,060	2,100	4,320	13,480
At 1 January 2023	7,060	2,196	4,307	13,563
Total comprehensive income:(1)	—	—	1,679	1,679
Dividends on ordinary shares	—	—	(1,538)	(1,538)
Dividends on other equity instruments	—	—	(133)	(133)
At 31 December 2023	7,060	2,196	4,315	13,571

(1)Total comprehensive income comprises only the profit for the year; no statement of comprehensive income has been shown for the Company, as permitted by Section 408 of the UK Companies Act 2006.

The accompanying Notes form an integral part of these Financial Statements.

Company Income Statement

For the year ended 31 December

		2024	2023	2022
	Notes	£m	£m	£m
Interest and similar income		176	176	192
Interest expense and similar charges		(180)	(179)	(196)
Net interest expense		(4)	(3)	(4)
Dividend income		1,446	1,685	1,212
Total operating income		1,442	1,682	1,208
Operating expenses before credit impairment charges, provisions and charges	2	(7)	(7)	(6)
Profit before tax		1,435	1,675	1,202
Tax on profit		4	4	4
Profit after tax		1,439	1,679	1,206

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42.1. ACCOUNTING POLICIES

These financial statements are prepared for Santander UK Group Holdings plc (the Company) under the Companies Act 2006. The principal activity of the

Company is a financial services holding company. Santander UK Group Holdings plc is a public limited company incorporated in England and Wales having a

registered office in England.

Basis of preparation

The accounting policies of the Company are the same as those of the Santander UK Group Holdings plc group which are set out in Note 1 to the Consolidated

Financial Statements, to the extent that the Company has similar transactions to the Santander UK Group Holdings plc group, except as set out below. The

financial statements have been prepared on the going concern basis using the historical cost convention. An assessment of the appropriateness of the adoption of

the going concern basis of accounting is disclosed in the Directors’ statement of going concern set out in the Directors’ Report.

Compliance with International Financial Reporting Standards

The Company’s financial statements comply with UK-adopted international accounting standards. The financial statements are also prepared in accordance with

International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board (IASB), including interpretations issued by the

IFRS Interpretations Committee, as there are no applicable differences from IFRSs as issued by the IASB for the periods presented.

Climate change

Management specifically also considered the potential impact of climate change and the transition to a low carbon economy on its Investment in Santander UK

plc. Estimates underpinning the determination of whether or not the cost of the investment is impaired are partly based on forecast business performance beyond

the time horizon for management's detailed plans.

Critical judgements and accounting estimates

The preparation of the financial statements requires management to make judgements and accounting estimates that affect the reported amount of assets and

liabilities at the date of the financial statements and the reported amount of income and expenses during the reporting period. Management evaluates its

judgements and accounting estimates, which are based on historical experience and on various other factors that are believed to be reasonable under the

circumstances, on an ongoing basis. Actual results may differ from these accounting estimates under different assumptions or conditions. In preparing the financial

statements, no significant judgements have been made in the process of applying the accounting policies, other than those involving estimations about interests in

other entities.

Interests in other entities - Investment in subsidiaries

The carrying amount of investments in subsidiaries is based on the application of judgements including the basis of the cost of investment impairment calculation

assumptions. Santander UK undertakes an annual assessment to evaluate whether the carrying amount of investments in subsidiaries is impaired, carrying out

this assessment more frequently if reviews identify indicators of impairment or when events or changes in circumstances dictate.

Key judgements:	–Determining the basis of investment impairment testing methodology, including the need for planning assumptions and internal capital allocations
Key estimates:	–Forecast cash flows for investments
	–Discount rates which factor in risk-free rates and applicable risk premiums
	All of these variables are subject to fluctuations in external market rates and economic conditions beyond management’s control

The estimation of future cash flows and the level to which they are discounted is inherently uncertain and requires significant judgement and is subject to potential

change over time. For more on these assumptions, including changes in the assumptions that would trigger an impairment, see Note 42.7.

42.2. OPERATING EXPENSES BEFORE CREDIT IMPAIRMENT CHARGES,

PROVISIONS AND CHARGES

These comprise wages and salaries of £7m (2023: £7m) recharged by the operating company, Santander UK plc. In 2024 and 2023, the Company had no full-

time staff as they are all employed by Santander UK plc.

42.3. DIVIDENDS ON ORDINARY SHARES

Dividends on ordinary shares declared and paid during the year are set out in Note 10 to the Consolidated Financial Statements.

42.4. OTHER FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

	2024	2023
	£m	£m
Debt securities	8,792	9,591
	8,792	9,591

In 2024 and 2023) all other financial assets were mandatorily held at FVTPL. In 2024, as part of MREL requirements, the Company issued £799m (2023:

£1,481m) debt securities, which were subsequently downstreamed to Santander UK plc.

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42.5. LOANS AND ADVANCES TO BANKS

Loans and advances to banks comprise mainly amounts due from Santander UK group undertakings. The fair values of loans and advances to banks

approximates their carrying amounts. In 2024 and 2023, there were no material expected credit losses. All of our senior debt issued out of Santander UK Group

Holdings plc is downstreamed to our principal operating company Santander UK plc.

42.6. OTHER FINANCIAL ASSETS AT AMORTISED COST

These consist of £1,644m (2023: £1,633m) of investments in subordinated notes, of which £557m (2023: £nil) are expected to mature no more than 12 months

after 31 December 2024.

42.7. INTERESTS IN OTHER ENTITIES

	2024	2023
	£m	£m
Interests in ordinary shares of subsidiaries	11,635	11,635
£500m Fixed Rate Reset Perpetual AT1 Capital Securities	—	495
£750m Fixed Rate Reset Perpetual AT1 Capital Securities	750	750
£500m Fixed Rate Reset Perpetual AT1 Capital Securities	210	210
£500m Fixed Rate Reset Perpetual AT1 Capital Securities	500	500
£450m Fixed Rate Reset Perpetual AT1 Capital Securities	50	50
£400m Fixed Rate Reset Perpetual AT1 Capital Securities	400	—
	13,545	13,640

Details of subsidiaries and joint ventures are set out in the Shareholder information section. For information on AT1 Capital Securities, see Note 32 to the

Consolidated Financial Statements. The Company has no interests in joint ventures or associates.

Interests in other entities mainly relate to investments in 100% of the ordinary share capital of Santander UK plc, Santander Financial Services plc and Santander

Equity Investments Limited, as well as holdings of AT1 Capital Securities issued by Santander UK plc.

Interests in subsidiaries are held at cost subject to impairment.

The Company’s interests in subsidiaries were as follows:

	Cost	Impairment	Carrying amount
	£m	£m	£m
At 31 December 2024	11,645	(10)	11,635
At 31 December 2023	11,645	(10)	11,635

Impairment testing

Interests in other entities are tested for impairment annually at 31 December. Interests in other entities are otherwise tested for impairment if reviews identify

an indicator of impairment or when events or changes in circumstances dictate. Impairment is required where the carrying value of an investment exceeds its

recoverable amount.

Basis of the recoverable amount

The recoverable amount of all interests in other entities was determined based on a value in use (VIU) methodology at each testing date. For each investment, the

VIU is calculated by discounting management’s cash flow projections for the investment. The cash flow projections also take account of increased internal capital

allocations needed to achieve internal and regulatory capital targets including the leverage ratio. The key assumptions used in the VIU calculation for each

investment are set out below.

Carrying amount of investments and key assumptions in the VIU calculation

	Carrying amount  of investment		Discount rate		Growth rate beyond initial cash flow projections
	2024	2023	2024	2023	2024	2023
Investment	£m	£m	%	%	%	%
Santander UK plc	11,268	11,268	12.1	12.2	1.5	1.6
Santander Financial Services plc	337	337	12.1	12.2	1.5	1.6
Other	30	30
	11,635	11,635

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Management’s judgement in estimating the cash flows of an investment

The VIU calculation uses cash flow projections derived from the latest 3-year plan presented to the Board. For more details, see Note 19 to the Consolidated

Financial Statements.

Cash flow projections for the purpose of impairment testing do not take account of any adverse outcomes arising from contingent liabilities (see Note 30 to the

Consolidated Financial Statements), whose existence will be confirmed by uncertain future events or where any obligation is not probable or otherwise cannot be

measured reliably, nor do they take account of the benefits arising from Santander UK’s transformation plans that had not yet been implemented or committed at

31 December 2024.

Discount rate

The rate used to discount the cash flows is based on the cost of equity assigned to each investment, which is derived using a CAPM. The CAPM depends on a

number of inputs reflecting financial and economic variables, including the risk-free rate and a premium to reflect the inherent risk of the investment being

evaluated. These variables are based on the market’s assessment of the economic variables and management’s judgement. In determining the discount rate,

management have identified the cost of equity associated with market participants that closely resemble our investments and adjusted them for tax to arrive at the

pre-tax equivalent rate. The pre-tax equivalent rate applicable to Santander UK plc was 16.8% (2023: 16.7%) and Santander Financial Services plc was 18.1%

(2023: 17.9%).

Growth rate beyond initial cash flow projections

The growth rate for periods beyond the initial cash flow projections is used to extrapolate the cash flows in perpetuity because of the long-term perspective of the

business. In line with the accounting requirements, management uses the UK Government’s official estimate of the UK long-term average GDP growth rate, as

this is lower than management's estimate of the long-term average growth rate of the business.

Investments in Santander UK plc and Santander Financial Services plc

The VIU of each investment remains higher than the carrying value of the investment. The VIU review at 31 December 2024 did not indicate the need for an

impairment in the Company’s investments in Santander UK plc and Santander Financial Services plc. Management considered the reduction in headroom and

the uncertainty relating to the respective estimates of the VIU for those investments, but determined that there was a sufficient basis to conclude that no

impairment was required.

Sensitivities of key assumptions in calculating the VIU of the investment in Santander UK plc

At 31 December 2024 and 2023, the VIU was sensitive to reasonably possible changes in the key assumptions similar to those applied in determining the

recoverable amount of goodwill recognised in the Santander UK plc group (see Note 19 to the Consolidated Financial Statements).

At 31 December 2024 and 2023, a reasonably possible change in the following key assumptions in relation to the VIU calculation for the Company’s investment

in Santander UK plc would have resulted in a decrease/increase in headroom, as shown in the table below. The sensitivity analysis presented below has been

prepared on the basis that a change in each key assumption would not have a consequential impact on other assumptions used in the impairment review.

However, due to the interrelationships between some of the assumptions, a change in one of the assumptions might impact one or more of the other assumptions

and could result in a larger or smaller overall impact.

		Decrease in headroom
		2024	2023
Subsidiary	Reasonably possible change	£m	£m
Santander UK plc	Cash flow projections decrease by 10% (2023: 10%)	1,168	1,261
	Discount rate increases by 100 basis points (2023: increased by 100 basis points)	910	1,026

The decrease in cash flow projections in the table above includes the impact of holding back the required capital to support the growth of the business. Under

current regulatory capital regulations as they apply to Santander UK plc, the calculation is not sensitive overall to the UK long-term average GDP growth rate

assumption as the increased profit after tax generated by growth of the business is mostly offset by the need to retain more profit to meet increased regulatory

capital requirements driven by the growth in assets.

Sensitivity of VIU changes to current assumptions to achieve £nil headroom

Although there was no impairment of the Company's investment in Santander UK plc at 31 December 2024 and 2023, the test remains sensitive to some of the

assumptions used, as described above. In addition, the changes in assumptions detailed below for the discount rate and cash flow projections would eliminate the

current headroom. As a result, there is a risk of impairment in the future should business performance or economic factors diverge from forecasts.

The sensitivity analysis presented below has been prepared on the basis that a change in each key assumption would not have a consequential impact on other

assumptions used in the impairment review. However, due to the interrelationships between some of the assumptions, a change in one of the assumptions might

impact one or more of the other assumptions and could result in a larger or smaller overall impact.

2024	Carrying value	Value in use	Headroom	Increase in discount rate	Decrease in cash flows
Subsidiary	£m	£m	£m	bps	%
Santander UK plc	11,268	11,683	415	43	4

2023
Santander UK plc	11,268	12,610	1,342	135	11

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Sensitivities of key assumptions in calculating the VIU of the investment in Santander Financial Services plc

At 31 December 2024 and 2023, the VIU was sensitive to reasonably possible changes in the key assumptions for the discount rate and cash flows similar to

those applied in determining the recoverable amount of goodwill recognised in the Santander UK plc group (see Note 19 to the Consolidated Financial

Statements). In line with the position for Santander UK plc, the VIU is not sensitive to the UK long-term average GDP growth rate assumption overall as the

increased profit after tax generated by growth of the business is mostly offset by the need to retain more profit to meet increased regulatory capital requirements

driven by the growth in assets.

At 31 December 2024 and 2023, a reasonably possible change in the following key assumptions in relation to the VIU calculation for the Company’s investment in

Santander Financial Services plc would have resulted in a decrease/increase in headroom, as shown in the table below. The sensitivity analysis presented below

has been prepared on the basis that a change in each key assumption would not have a consequential impact on other assumptions used in the impairment

review. However, due to the interrelationships between some of the assumptions, a change in one of the assumptions might impact one or more of the other

assumptions and could result in a larger or smaller overall impact.

		Decrease in headroom
		2024	2023
Subsidiary	Reasonably possible change	£m	£m
Santander Financial Services plc	Cash flow projections decrease by 10% (2023: 10%)	46	50
	Discount rate increases by 100 basis points (2023: increased by 100 basis points)	30	34

The decrease in cash flow projections in the table above includes the impact of holding back the required capital to support the growth of the business.

Sensitivity of VIU changes to current assumptions to achieve £nil headroom

Although there was no impairment of the Company's investment in Santander Financial Services plc at 31 December 2024 and 2023, the test remains sensitive to 

some of the assumptions used, as described above. In addition, the changes in assumptions detailed below for the discount rate and cash flow projections would

eliminate the current headroom. As a result, there is a risk of impairment in the future should business performance or economic factors diverge from forecasts.

The sensitivity analysis presented below has been prepared on the basis that a change in each key assumption would not have a consequential impact on other

assumptions used in the impairment review. However, due to the interrelationships between some of the assumptions, a change in one of the assumptions might

impact one or more of the other assumptions and could result in a larger or smaller overall impact.

2024	Carrying value	Value in use	Headroom	Increase in discount rate	Decrease in cash flows
Subsidiary	£m	£m	£m	bps	%
Santander Financial Services plc	337	461	124	580	27

2023
Santander Financial Services plc	337	497	160	720	32

42.8. OTHER FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS

	2024	2023
	£m	£m
Medium-term notes	8,792	9,591
	8,792	9,591

In 2024 and 2023 all other financial liabilities were designated at FVTPL. In 2024, as part of MREL requirements, the Company issued £799m (2023: £1,481m) of

debt securities, which were then downstreamed to Santander UK plc. See Note 42.4.

Gains and losses arising from changes in the credit spread of securities issued by the Santander UK group reverse over the contractual life of the debt, provided

that the debt is not repaid at a premium or a discount. The cumulative net gain or loss at 31 December 2024, and net gain or loss for the year attributable to

changes in the Santander UK group’s own credit risk on the above securities was £nil (2023: £nil) and has been included in profit and loss to offset credit risk on

internal MREL assets held which are required to be recorded at FVTPL in accordance with IFRS 9. 

At 31 December 2024, the amount that would be required to be contractually paid at maturity of the securities above was £68m higher (2023: £197m higher) than

the carrying value.

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42.9. DEBT SECURITIES IN ISSUE

The Company issues notes in the US from time to time pursuant to a shelf registration statement on Form F-3 filed with the SEC in 2024.

	2024	2023
	£m	£m
Medium-term notes:
– Euro €30bn Euro Medium Term Note Programme	1,114	1,123
– US SEC-registered Debt Programme – Santander UK Group Holdings plc	802	788
	1,916	1,911

The funding from the Euro €30bn Euro Medium Term Note Programme and the US SEC-registered Debt Programme in the name of Santander UK Group

Holdings plc has predominantly been downstreamed to our operating company Santander UK plc.

Debt securities in issue did not include any amounts due from Santander UK group undertakings.

42.10. SUBORDINATED LIABILITIES

		2024	2023
Dated subordinated liabilities	Maturity	£m	£m
4.75% Subordinated notes	2025	332	326
5.625% Subordinated notes	2045	226	222
8.296% Subordinated notes	2033	768	767
7.869% Subordinated notes	2033	318	318
		1,644	1,633

42.11. NOTES TO CASH FLOWS

Changes in liabilities and equity arising from financing activities

In addition to the changes in equity arising from financing activities, as set out in the Company Statement of Changes in Equity, the table below shows the

changes in liabilities arising from financing activities.

	2024						2023
	Balance sheet line item						Balance sheet line item
	Debt securitie s in issue	Other liabilities at FVTPL(1)	Subordinate d liabilities	Other equity instruments	Dividend s paid	Total	Debt securitie s in issue	Other liabilities at FVTPL(1)	Subordinated liabilities	Other equity instruments	Dividends paid	Total
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
At 1 January	1,911	9,591	1,633	2,196	—	15,331	4,898	7,888	942	2,196	—	15,924
Proceeds from issue of debt securities	—	768	—	—	—	768	—	1,528	—	—	—	1,528
Repayment of debt securities	—	(1,741)	—	—	—	(1,741)	(2,870)	—	—	—	—	(2,870)
Proceeds from issue of subordinated liabilities	—	—	—	—	—	—	—	—	1,050	—	—	1,050
Repayment of subordinated liabilities	—	—	—	—	—	—	—	—	(360)	—	—	(360)
Issue of other equity instruments	—	—	—	400	—	400	—	—	—	—	—	—
Repurchase of other equity instruments	—	—	—	(500)	—	(500)	—	—	—	—	—	—
Dividends paid	—	—	—	—	(1,434)	(1,434)	—	—	—	—	(1,671)	(1,671)
Liability-related other changes	3	114	2	—	—	119	(23)	558	30	—	—	565
Non-cash changes:
– Unrealised foreign	4	46	9	—	—	59	(99)	(383)	(32)	—	—	(514)
– Other changes	(2)	14	—	4	—	16	5	—	3	—	1,671	1,679
At 31 December	1,916	8,792	1,644	2,100	(1,434)	13,018	1,911	9,591	1,633	2,196	—	15,331

(1)Liability-related other changes for Other liabilities at FVTPL are not part of the changes in liability arising from financing activities.

Footnotes to the cash flow statement

Net cash flows from operating activities includes interest received of £175m (2023: £197m), interest paid of £169m (2023: £130m) and dividends received of

£1,446m (2023: £1,685m).

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42.12. CONTINGENT LIABILITIES AND COMMITMENTS

Capital support arrangements

At 31 December 2024, Santander UK Group Holdings plc and Santander Financial Services plc, the regulated entities, and Santander Equity Investments Limited

were party to a capital support deed dated 3 December 2024 which was effective from 3 December 2024 (the Non-RFB Sub-Group Capital Support Deed). These

parties were permitted by the PRA to form a core UK group as defined in the PRA Rulebook, a permission which expires on 3 December 2027. Exposures of each

of the regulated entities to other members of the core UK group are exempt from large exposure limits that would otherwise apply and these exposures are risk-

weighted at 0%. Where applicable this permission also provides for intra-group exposures to be excluded from the leverage exposure measure. The purpose of

the Non-RFB Sub-Group Capital Support Deed is to facilitate the prompt transfer of available capital resources from, or repayment of liabilities by, the non-

regulated entities to any of the regulated entities in the event that one of the regulated entities breached or was at risk of breaching its capital resources or risk

concentrations requirements.

42.13. SHARE CAPITAL

Details of the Company’s share capital are set out in Note 31 to the Consolidated Financial Statements.

42.14. OTHER EQUITY INSTRUMENTS

Details of the Company’s other equity instruments are set out in Note 32 to the Consolidated Financial Statements.

42.15. TRANSACTIONS WITH DIRECTORS AND OTHER KEY MANAGEMENT

PERSONNEL

The Directors of Santander UK Group Holdings plc did not receive any remuneration in respect of their services to the Company. The remuneration disclosures in

respect of the Santander UK group are set out in Note 36 to the Consolidated Financial Statements.

42.16. RELATED PARTY TRANSACTIONS

The Company’s transactions with related parties during the year and balances outstanding at the year-end:

	Interest, fees and other income received			Interest, fees and other expenses paid			Amounts owed by related parties		Amounts owed to related parties
	2024	2023	2022	2024	2023	2022	2024	2023	2024	2023
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Ultimate parent	—	—	—	86	36	—	—	—	(1,089)	(1,092)
Subsidiaries	(641)	(990)	(192)	7	7	656	5,349	15,004	—	—
	(641)	(990)	(192)	93	43	656	5,349	15,004	(1,089)	(1,092)

–Dividend income from subsidiaries of £1,446m (2023: £1,685m, 2022: £1,212m),

–Dividends on ordinary shares declared and paid during the year are set out in Note 10 to the Consolidated Financial Statements.

–Loans and advances to banks include £1,793m (2023: £1,772m) due from Santander UK group undertakings,

–Other financial assets at amortised cost, see Note 17 to the Consolidated Financial Statements, all of which are securities issued by Santander UK plc,

–Other financial liabilities at fair value through profit or loss, see Note 24 to the Consolidated Financial Statements, all of which are securities subscribed for by

Santander UK plc,

–Debt securities, see Note 42.9.

42.17. FINANCIAL INSTRUMENTS

a) Fair value measurement and hierarchy

The fair value measurements and hierarchy of financial instruments in the Company are the same as those of the Santander UK Group Holdings plc group which

are set out in Note 38 to the Consolidated Financial Statements, to the extent that the Company has similar transactions to the Santander UK Group Holdings plc

group.

b) Valuation techniques

The main valuation techniques employed in internal models to measure the fair value of the financial instruments at 31 December 2024 and 2023 in the Company

are the same as those of the Santander UK Group Holdings plc group which are set out in Note 38 to the Consolidated Financial Statements, to the extent that the

Company has similar transactions to the Santander UK Group Holdings plc group.

c) Control framework

The Control framework applied to the Company is consistent with the approach applied to the Santander UK Group Holdings plc group as set out in Note 38 to the

Consolidated Financial Statements.

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d) Fair values of financial instruments carried at amortised cost

The following tables analyse the fair value of the financial instruments carried at amortised cost at 31 December 2024 and 2023, including their levels in the fair

value hierarchy - Level 1, Level 2 and Level 3. Cash and balances at central banks, which consist of demand deposits with the Bank of England, together with

cash in tills and ATMs, have been excluded from the table as the carrying amount is deemed an appropriate approximation of fair value.

				2024					2023
			Fair value	Fair value	Carrying			Fair value	Fair value	Carrying
	Level 1	Level 2	Level 3	Total	value	Level 1	Level 2	Level 3	Total	value
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Assets
Loans and advances to banks	—	1,825	21	1,846	1,845	—	1,796	20	1,816	1,816
Other financial assets at amortised cost	—	1,644	—	1,644	1,644	—	1,633	—	1,633	1,633
0	—	3,469	21	3,490	3,489	—	3,429	20	3,449	3,449
Liabilities
Deposits by banks	—	—	—	—	—	—	—	—	—	—
Debt securities in issue	—	1,877	—	1,877	1,916	—	1,797	—	1,797	1,911
Subordinated liabilities	501	—	1,083	1,584	1,644	870	765	—	1,635	1,633
1	501	1,877	1,083	3,461	3,560	870	2,562	—	3,432	3,544

The carrying value above of any financial assets and liabilities that are designated as hedged items in a portfolio (or macro) fair value hedge relationship excludes

gains and losses attributable to the hedged risk, as this is included as a separate line item on the balance sheet.

Valuation methodology for financial instruments carried at amortised cost

The valuation approach to specific categories of financial instruments is the same as those of the Santander UK Group Holdings plc group which are set

out in Note 38 to the Consolidated Financial Statements.

e) Fair values of financial instruments measured at fair value

The following tables summarise the fair values of the financial assets and liabilities accounted for at fair value at 31 December 2024 and 31 December 2023,

analysed by their levels in the fair value hierarchy - Level 1, Level 2 and Level 3.

					2024					2023
		Level 1	Level 2	Level 3	Total	Level 1	Level 2	Level 3	Total	Valuation
		£m	£m	£m	£m	£m	£m	£m	£m	technique
Assets
Other financial assets at FVTPL	Debt Securities	—	8,792	—	8,792	—	9,591	—	9,591	A, B & D
Total assets at fair value		—	8,792	—	8,792	—	9,591	—	9,591	—
Liabilities
Other financial liabilities at FVTPL	Medium Term Notes	8,792	—	—	8,792	9,591	—	—	9,591	A
Total liabilities at fair value		8,792	—	—	8,792	9,591	—	—	9,591	—

Transfers between levels of the fair value hierarchy

In 2024, there were no (2023: no) significant transfers of financial instruments between levels of the fair value hierarchy.

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f) Maturities of financial liabilities and off-balance sheet commitments

The table below analyses the maturities of the undiscounted cash flows relating to financial liabilities and off-balance sheet commitments of Santander UK Group

Holdings based on the remaining period to the contractual maturity date at the balance sheet date. Deposits by customers largely consist of retail deposits. This

table is not intended to show the liquidity of Santander UK Group Holdings.

	On demand	Not later than 3 months	Later than 3 months and not later than 1 year	Later than 1 year and not later than 5 years	Later than 5 years	Total
2024	£m	£m	£m	£m	£m	£m
Financial liabilities
Other financial liabilities at fair value through profit or loss	—	—	—	8,604	1,540	10,144
Debt securities in issue	—	20	84	2,091	—	2,195
Subordinated liabilities	—	37	554	689	1,329	2,609
Total financial liabilities	—	57	638	11,384	2,869	14,948
Off-balance sheet commitments given	—	—	—	—	—	—
2023
Financial liabilities
Other financial liabilities at fair value through profit or loss	—	1,097	—	6,207	3,873	11,177
Debt securities in issue	—	18	76	2,077	—	2,171
Subordinated liabilities	—	37	254	1,009	1,411	2,711
Total financial liabilities	—	1,152	330	9,293	5,284	16,059
Off-balance sheet commitments given	—	—	—	—	—	—

As the above table is based on contractual maturities, no account is taken of call features related to subordinated liabilities. In addition, the repayment terms of

debt securities may be accelerated in line with relevant covenants.

42.18. EVENTS AFTER THE BALANCE SHEET DATE

See Note 41 to the Consolidated Financial Statements.

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Shareholder information

In this section
Subsidiaries and related undertakings	239
Forward-looking statements	242
Calculations	243
Risk factors	245
Regulation of the Santander UK group	260
Articles of Association	262
Board of Directors	263
New York Stock Exchange (NYSE) Corporate Governance	267
Additional balance sheet and cash flow analysis	268
Other information	276
Glossary of financial services industry terms	278
Iran Threat Reduction and Syria Human Rights Act (ITRA)	284
Cross-reference to Form 20-F	285

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Subsidiaries and related undertakings

In accordance with Section 409 of the Companies Act 2006, details of the Company’s subsidiaries and related undertakings at 31 December 2024 are set out

below.

Subsidiaries

All subsidiaries are owned 100% and consolidated by Santander UK.

Incorporated and registered in England and Wales:

	Registered office(1)	Direct/Indirect ownership	Share class through which ownership is held	Proportion of ownership interest
Name of subsidiary				%
2 & 3 Triton Limited	A	Indirect	Ordinary £1	—
A & L CF June (2) Limited (In Liquidation)	E	Indirect	Ordinary £1	—
A & L CF June (3) Limited (In Liquidation)	E	Indirect	Ordinary £1	—
A & L CF March (5) Limited (In Liquidation)	E	Indirect	Ordinary £1	—
A & L CF September (4) Limited (In Liquidation)	E	Indirect	Ordinary £1	—
Abbey National Beta Investments Limited (In Liquidation)	E	Indirect	Ordinary £1	—
Abbey National Business Office Equipment Leasing Limited	A	Indirect	Ordinary £1	—
Abbey National Nominees Limited	A	Indirect	Ordinary £1	—
Abbey National PLP (UK) Limited	A	Indirect	Ordinary £1	—
Abbey National Property Investments	A	Indirect	Ordinary £1	—
Abbey National Treasury Services Investments Limited (In Liquidation)	E	Indirect	Ordinary £1	—
Abbey National Treasury Services Overseas Holdings	A	Indirect	Ordinary £1	—
Abbey National UK Investments (In Liquidation)	E	Indirect	Ordinary €0.1524	—
			Ordinary £1	—
Abbey Stockbrokers (Nominees) Limited	A	Indirect	Ordinary £1	—
Abbey Stockbrokers Limited	A	Indirect	Ordinary £1	—
Alliance & Leicester Cash Solutions Limited	A	Indirect	Ordinary £1	—
Alliance & Leicester Commercial Bank Limited (In Liquidation)	E	Indirect	Ordinary £1	—
Alliance & Leicester Investments (Derivatives) Limited (In Liquidation)	E	Indirect	Ordinary £1	—
Alliance & Leicester Investments (No.2) Limited	A	Indirect	Ordinary £1	—
Alliance & Leicester Investments Limited (In Liquidation)	E	Indirect	Ordinary £1	—
Alliance & Leicester Limited	F	Indirect	Ordinary £0.50	—
Alliance & Leicester Personal Finance Limited	A	Indirect	Ordinary £1	—
AN (123) Limited	A	Indirect	Ordinary £0.10	—
ANITCO Limited	A	Indirect	Ordinary £1	—
Athena Corporation Limited (In Liquidation)	E	Indirect	Ordinary £1	—
Cater Allen Holdings Limited	A	Indirect	Ordinary £1	—
Cater Allen International Limited	A	Indirect	Ordinary £1	—
Cater Allen Limited	A	Indirect	Ordinary £1	—
Cater Allen Lloyd's Holdings Limited (In Liquidation)	E	Indirect	Ordinary £1	—
Cater Allen Syndicate Management Limited	A	Indirect	Ordinary £1	—
First National Motor plc	A	Indirect	Ordinary £1	—
First National Tricity Finance Limited	A	Indirect	Ordinary £1	—
Insurance Funding Solutions Limited	A	Indirect	Ordinary £1	—
Liquidity Limited (In Liquidation)	E	Indirect	Ordinary A £0.10	—

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	Registered office(1)	Direct/Indirect ownership	Share class through which ownership is held	Proportion of ownership interest
Name of subsidiary				%
Santander (CF Trustee Property Nominee) Limited	A	Trust relationship	Ordinary £1	—
Santander (CF Trustee) Limited	A	Trust relationship	Ordinary £1	—
Santander (UK) Group Pension Scheme Trustees Limited	A	Direct	Ordinary £1	100
Santander Asset Finance (December) Limited	A	Indirect	Ordinary £1	—
Santander Asset Finance plc	A	Indirect	Ordinary £0.10	—
Santander Cards Limited	A	Indirect	Ordinary £1	—
Santander Cards UK Limited	A	Indirect	Ordinary £1	—
Santander Consumer (UK) plc	B	Indirect	Ordinary £1	—
Santander Consumer Credit Services Limited	A	Indirect	Ordinary £1	—
Santander Equity Investments Limited	A	Direct	Ordinary £1	100
Santander Estates Limited	F	Indirect	Ordinary £1	—
Santander Financial Services plc	A	Direct	Ordinary £1	100
Santander Global Consumer Finance Limited	A	Indirect	Ordinary £0.0001	—
Santander Guarantee Company	A	Indirect	Ordinary £1	—
Santander Lending Limited	A	Indirect	Ordinary £1	—
Santander Mortgage Holdings Limited	A	Indirect	Ordinary £1	—
Santander Private Banking UK Limited	A	Indirect	Ordinary £1	—
Santander Secretariat Services Limited	A	Direct	A Ordinary US$0.01	100
Santander UK Operations Limited	A	Indirect	Ordinary £1	—
Santander UK (Structured Solutions) Limited	A	Indirect	Ordinary £0.01	—
			Preference £0.01	—
Santander UK plc	A	Direct	Ordinary £0.10	100
Santander UK Technology Limited	A	Indirect	Ordinary £1	—
Sheppards Moneybrokers Limited	A	Indirect	Ordinary £1	—
SCF Eastside Locks GP Limited	A	Trust relationship	Ordinary £1	—
The Alliance & Leicester Corporation Limited (In Liquidation)	E	Indirect	Ordinary £1	—
Time Retail Finance Limited (In Liquidation)	E	Indirect	Ordinary £1	—
			Ordinary £0.0001	—

(1) Refer to the key at the end of this section for the registered office address.

Incorporated and registered outside England and Wales:

	Registered office(1)	Direct/Indirect ownership	Share class through which ownership is held	Proportion of ownership interest
Name of subsidiary				%
A & L CF (Guernsey) Limited	M	Indirect	Ordinary £1	—
Santander Cards Ireland Limited	H	Indirect	Ordinary €1	—
			Ordinary €1.27	—
Santander ISA Managers Limited	G	Indirect	Ordinary £1	—
Sovereign Spirit Limited	L	Indirect	Ordinary BMD 1	—

(1) Refer to the key at the end of this section for the registered office address, including the country.

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Other subsidiary undertakings

All entities are registered in England and Wales except for Motor Securities 2018-1 Designated Activity Company which is registered in Ireland.

The Company and its subsidiaries do not own directly, or indirectly, any of the share capital of any of the entities, however they are consolidated by the Santander

UK group because the substance of the relationship indicates control, as described in Note 1 to the Consolidated Financial Statements.

	Registered	Name of entity	Registered
Name of entity	office(1)		office(1)
Abbey Covered Bonds (Holdings) Limited	D	Holmes Master Issuer plc	A
Abbey Covered Bonds (LM) Limited	D	Holmes Trustees Limited	A
Abbey Covered Bonds LLP	A	MAC No.1 Limited	A
Fosse (Master Issuer) Holdings Limited	C	Motor 2016-1 Holdings Limited	C
Fosse Funding (No.1) Limited	C	Motor Securities 2018-1 Designated Activity Company (in liquidation)	J
Fosse Master Issuer plc	C	Repton 2023-1 Limited	C
Fosse Trustee (UK) Limited	A
Holmes Funding Limited	A
Holmes Holdings Limited	A

(1) Refer to the key at the end of this section for the registered office address.

Related undertakings

All of these entities, which are registered in England and Wales, are accounted for by the equity method of accounting, with 50% ownership being held.

	Registered office(1)	Direct/Indirect ownership	Share class through which ownership is held	Proportion of ownership interest
Name of entity				%
Hyundai Capital UK Limited	I	Indirect	Ordinary £1	—
Volvo Car Financial Services UK Limited	K	Indirect	Ordinary £1	—

(1) Refer to the key at the end of this section for the registered office address.

Overseas branches

The Company has no overseas branches. Santander Financial Services plc, a subsidiary, has branch offices in Jersey and the Isle of Man.

Key of registered office addresses

A	2 Triton Square, Regent’s Place, London NW1 3AN
B	Santander House, 86 Station Road, Redhill RH1 1SR
C	1 Bartholomew Lane, London EC2V 2AX
D	Wilmington Trust SP Services (London) Limited, 1 Kings Arms Yard, London EC2R 7AF
E	Griffins Tavistock House North, Tavistock Square, London, WC1H 9HR
F	Carlton Park, Narborough, Leicester LE19 0AL
G	287 St. Vincent Street, Glasgow, Scotland G2 5NB
H	3 Dublin Landings, North Wall Quay, Dublin 1, Ireland
I	London Court, 39 London Road, Reigate RH2 9AQ
J	Trinity House, Charleston Road, Ranelagh, Dublin 6, Dublin, Ireland
K	Scandinavia House, Norreys Drive, Maidenhead, Berkshire SL6 4FL
L	Clarendon House, 2 Church Street, Hamilton HM11, Bermuda
M	Suite 1 North, 1st Floor, Albert House, St. Peter Port, Guernsey GY1 1AJ

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Forward-looking statements

The Company and its subsidiaries (together Santander UK) may from time to time make written or oral forward-looking statements. The Company makes written

forward-looking statements in this Annual Report and may also make forward-looking statements in its periodic reports to the SEC on Forms 20-F and 6-K, in its

offering circulars and prospectuses, in press releases and other written materials and in oral statements made by its officers, directors or employees to third

parties. Examples of such forward-looking statements include, but are not limited to:

–projections or expectations of revenues, costs, profit or (loss), earnings or (loss) per share, dividends, capital structure or other financial items or ratios

–statements of plans, objectives or goals of Santander UK or its management, including those related to products or services

–statements of future economic performance, and

–statements of assumptions underlying such statements

Words such as ‘believes’, ‘anticipates’, ‘expects’, ‘intends’, ‘aims’, ‘plans’, ‘targets’ and similar expressions are intended to identify forward-looking statements, but

are not the exclusive means of identifying such statements.

By their very nature, forward-looking statements are not statements of historical or current facts; they cannot be objectively verified, are speculative and involve

inherent risks and uncertainties, both general and specific, and risks exist that the predictions, forecasts, projections and other forward-looking statements will not

be achieved. Santander UK cautions readers that a number of important factors could cause actual results to differ materially from the plans, objectives,

expectations, estimates and intentions expressed in such forward-looking statements made by Santander UK or on its behalf. Some of these factors, which could

affect Santander UK’s business, financial condition and/or results of operations, are considered in detail in the Risk review, and include:

–the effects of geopolitical tensions, regional conflicts and wars

–the effects of UK economic conditions and disruptions in the global economy and global financial markets

–the effects of the UK’s withdrawal from the European Union

–the effects of climate change

–the effects of competition from other financial institutions, including new entrants into the financial services sector

–Santander UK’s ability to maintain its competitive position depending, in part, on competition from new entrants and other financial institutions in the sector, the

success of new products and services Santander UK offers its customers and its ability to continue offering products and services from third parties

–the extent to which Santander UK’s loan portfolio is subject to risk of prepayment

–the risk of damage to Santander UK's reputation

–the risk that Santander UK is unable to manage the growth of its operations

–the extent to which regulatory capital, liquidity and leverage requirements, and any changes to these requirements may affect Santander UK

–liquidity constraints and Santander UK’s ability to access funding on acceptable financial terms

–the effects of an adverse movement in external credit ratings assigned to Santander UK or any of its debt securities

–the effects of any changes in the pension liabilities and obligations of Santander UK

–the effects of fluctuations in interest rates and other market risks

–the extent to which Santander UK may be required to record negative changes in positions recorded at fair value for its financial assets due to changes in

market conditions

–Santander UK’s ability to control the level of non-performing or poor credit quality loans and whether Santander UK’s loan loss reserves are sufficient to cover

loan losses

–the risk that the value of the collateral, including real estate, securing Santander UK’s loans may not be sufficient and that Santander UK may be unable to

realise the full value of the collateral securing its loan portfolio

–the effects of the financial services laws, regulations, government oversight, administrative actions and policies and any changes thereto in each location or

market in which Santander UK operates

–the risk that Santander UK may become subject to the provisions of the Banking Act 2009, including the bail-in and write-down powers thereunder

–the effects of any failure to comply with laws and regulations relating to anti-money laundering, anti-terrorism, anti-bribery and corruption, sanctions and

preventing the facilitation of tax evasion, or the risk of any failure to prevent, detect or deter any illegal or improper activities

–the effects of taxation (and any changes to tax) in each location in which Santander UK operates

–Santander UK’s exposure to any risk of loss and damage from civil litigation and/or criminal legal and regulatory proceedings

–the risk of failing to successfully apply or to improve Santander UK’s credit risk management systems

–the risk that Santander UK’s data management policies and procedures are not sufficiently robust

–the effect of cybersecurity on Santander UK’s business

–the risks related to the developing fields of artificial intelligence and machine learning

–the risks arising from any non-compliance with Santander UK’s regulations, policies, from any employee misconduct, human error, negligence and deliberate

acts of harm or dishonesty, including fraud

–the risk of failing to effectively manage changes in Santander UK’s information technology infrastructure and management information systems in a timely

manner

–Santander UK’s exposure to unidentified or unanticipated risks despite its risk management policies, procedures and methods and Santander UK’s exposure to

risks related to errors in its risk modelling

–the risks arising from Santander UK’s reliance on third parties for important infrastructure support, products and services

–the ability of Santander UK to recruit, retain and develop appropriate senior management and skilled personnel

–the effects of any inaccuracy within the judgements and accounting estimates which underpin aspects of the financial statements, and the consequent risk of

any material misstatement of Santander UK’s financial results

–the effect of any change in accounting standards

Please refer to our latest filings with the SEC (including, without limitation, the Risk Factors section in this Annual Report on Form 20-F for the year ended 31

December 2024) for a discussion of certain risk factors and forward-looking statements. Undue reliance should not be placed on forward-looking statements when

making decisions with respect to any Santander UK member and/or its securities. Investors and others should take into account the inherent risks and

uncertainties of forward-looking statements and should carefully consider the foregoing non-exhaustive list of important factors. Forward-looking statements speak

only as of the date on which they are made and are based on the knowledge, information available and views taken on the date on which they are made; such

knowledge, information and views may change at any time. Santander UK does not undertake any obligation to update or revise any forward-looking statement,

whether as a result of new information, future events or otherwise.

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Calculations

Measure	Description and calculation
Banking NIM	Annualised net interest income divided by average customer loans for the period. (2024: £201,968m; 2023: £212,086m).
Cost of risk	Sum of credit impairment (charges) or write-backs for the last 12-month period as a percentage of average customer loans for the last 12 months. (2024: £201,968m; 2023: £212,086m).
Cost-to-income ratio	Total operating expenses before credit impairment (charges) or write-backs, provisions and charges as a percentage of the total of net interest income and non-interest income.
RoTE	Profit after tax attributable to equity holders of the parent, divided by average shareholders' equity less average AT1 securities and average goodwill and other intangible assets.
Non-interest income	Net fee and commission income plus other operating income.
Stage 1 ratio	Sum of Stage 1 drawn assets divided by the sum of total drawn assets.
Stage 2 ratio	Sum of Stage 2 drawn assets divided by the sum of total drawn assets.
Stage 3 ratio	Sum of Stage 3 drawn and undrawn assets divided by the sum of total drawn assets and Stage 3 undrawn assets.
Wholesale funding	Deposits by customers reported in Corporate Centre, debt securities in issue, subordinated debt, AT1 issuance and Central Bank facilities, TFSME and indexed-long term repos used for funding.

Detailed RoTE calculation

Calculated as annualised adjusted profit after tax attributable to equity holders of the parent, divided by average shareholders’ equity less non-controlling interests,

other equity instruments, and average goodwill and other intangible assets.

RoTE Calculation (£m)	2024	2023
	£m	£m
Profit after tax	950	1,596
Profit due to equity holders of the parent (A)	950	1,596

	2024	2023
	£m	£m
Average shareholders' equity	14,530	14,839
Less average AT1 securities	(2,148)	(2,196)
Average ordinary shareholders' equity	12,382	12,643
Average goodwill and intangible assets	(1,544)	(1,549)
Average tangible equity (B)	10,838	11,094
RoTE (A/B)	8.8%	14.4%

Net Promoter Scores

Retail NPS: NPS ranked 5th for Retail

Our customer experience research was subject to independent third party review. We measured the main banking NPS of 17,140 consumers on a six month

basis using a 11-point scale (%Top 2 – %Bottom 7). The reported data is based on the six months ended 31 December 2024, and the competitor set included in

the ranking analysis is Barclays, Halifax, HSBC, Lloyds Bank, Nationwide, NatWest Group (NatWest & RBS) and TSB.

Dec-24: NPS ranked 5th for Retail, we note a margin of error which impacts those from 2nd to 6th and makes their rank statistically equivalent.

Dec-23: NPS ranked 5th for Retail, we note a margin of error which impacts those from 3rd to 5th and makes their rank statistically equivalent.

Corporate NPS: NPS ranked 4th for Corporate

Corporate NPS is measured by the MarketVue Business Banking from Savanta. This is an ongoing telephone based survey designed to monitor usage and

attitude of UK businesses towards banks. 14,500 structured telephone interviews are conducted each year among businesses of all sizes from new start-ups to

large corporates. The data is based upon 2,567 interviews made in twelve months ended 13 December 2024 with businesses turning over from £2.1m - £500m

per annum and are weighted by region and turnover to be representative of businesses in Great Britain. NPS recommendation score is based on an 11-point

scale (%Top 2 - %Bottom 7). The competitor set included in this analysis is Barclays, HSBC, Lloyds Banking Group and NatWest Group.

Dec-24: NPS ranked 4th for Corporate.

Dec-23: NPS ranked 2nd for Corporate.

Business NPS: NPS ranked 1st for Business

Business NPS is measured by the MarketVue Business Banking from Savanta. This is an ongoing telephone based survey designed to monitor usage and

attitude of UK businesses towards banks. 14,500 structured telephone interviews are conducted each year among businesses of all sizes from new start-ups to

large corporates. The data is based upon 6,183 interviews made in twelve months ended 13 December 2024 with businesses turning over from £0 - £2m per

annum and are weighted by region and turnover to be representative of businesses in Great Britain. NPS recommendation score is based on an 11-point scale

(%Top 2 - %Bottom 7). The competitor set included in this analysis is Barclays, RBS, HSBC, Lloyds Bank and NatWest.

Dec-24: NPS ranked 1st for Business.

Dec-23: NPS ranked 1st for Business.

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Annual Report 2024 Santander UK Group Holdings plc 245

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Risk factors

An investment in Santander UK Group Holdings plc (the Company) and its subsidiaries (us, we or Santander UK) involves a number of risks, the material ones of

which are set out below.

Geopolitical and macroeconomic risks

Santander UK’s operations, financial condition and prospects are materially impacted by economic conditions in the UK and disruptions in the

global economy and global financial markets

Santander UK’s business activities are concentrated in the UK, where it offers a range of banking and financial products and services to UK retail and corporate

customers. As a consequence, Santander UK’s operations, financial condition and prospects are significantly affected by general economic and political conditions

in the UK.

The UK economy had a strong start to 2024 with quarterly growth above pre-pandemic levels for the first and second quarters. However, growth slowed in the

second half of 2024 due, in part, to uncertainty around the UK Government’s Autumn Budget which reduced confidence. As such, there remains a risk that the UK

economy will see lower growth in 2025 with interest rates falling less quickly than expected, Brexit continuing to impact exports and geopolitical events disrupting

markets and lowering business and household confidence. Interest rates have risen sharply since 2022 and although interest rates have started to decrease,

there remains a risk that increases will be needed in the future. In particular there remains a risk that increases will be needed if rising inflation returns. This would

put further pressure on household finances for some of Santander UK's customers due to a sharp rise of the costs, or a continuation of higher costs for refinancing

their mortgage or a continuation of these higher costs and significantly higher costs of borrowing overall. Continued higher mortgage rates could also dampen

demand in the housing market, leading to further drops in new business or steeper falls in house prices, reducing the value of the collateral Santander UK holds

against mortgages. These risks could create further downward pressure on the economy; for example: a large surge in business failures with knock-on effects for

the labour market resulting in high rates of unemployment that affect the ability of customers to pay their debts, which could also contribute to negative multiplier

effects through delayed investment and spending; and a stronger push towards protectionism as governments look to protect home industries. This could also

lead to a longer-term turn in the credit cycle with a broader contraction of credit as lenders attempt to protect themselves from increased losses. In addition, the

UK economy and banking sector are impacted by the political environment and related government policy. For example, there will be increased business cost as a

result of increased employer's National Insurance, which will impact Santander UK's customers and the wider economy.

In particular, Santander UK faces, among others, the following risks in any period of economic uncertainty (including the effect of those risks on gross domestic

product, inflation, unemployment and house prices):

–Reduced demand for Santander UK’s products and services - particularly the potential for reduced mortgage market volumes.

–Inability of Santander UK’s borrowers to make payments on their loans in full or on time.

–The degree of uncertainty concerning economic conditions may adversely affect the accuracy of Santander UK’s estimates, which may, in turn, impact the

reliability of the IFRS 9 model and process to determine the sufficiency of Santander UK’s loan loss allowances.

–Lower house or other asset prices, reducing the value of collateral Santander UK holds on mortgage and other lending.

–Higher and more persistent inflation, reducing Santander UK’s profitability and increasing the cost of living for Santander UK's borrowers.

–The value and liquidity of the portfolio of investment securities that Santander UK holds may be adversely affected.

Santander UK is also exposed to:

–Broader geopolitical issues, which remain heightened with the potential for a further pushback against globalism. Further moves towards unilateralism may also

cause increased tension and/or hostilities between nations, which could negatively impact the global economy and financial markets;

–The continuation or escalation of conflicts between Russia and Ukraine, and in Israel and the Middle East, including the spread of these conflicts to other

countries in these regions, and/or the emergence of future regional conflicts and wars with global impact, which could lead to further increases in energy prices

(in particular, gas prices, if supplies to Europe remain interrupted) and heightened inflationary pressure;

–US political risks and possible impacts of the new administration, including increased deregulation, leading to increased investor focus on UK banking sector

profitability and increased competitive pressures on non-US banks such as Santander UK;

–Climate change risks which could result in material damage to Santander UK's customers’ property or businesses or have a material impact on Santander UK's

customers' business models under a transition to a low carbon economy; and

–Social unrest as a result of severe economic disruption.

Adverse changes in the credit quality of Santander UK’s borrowers or counterparties or a general deterioration in UK economic conditions could reduce the

recoverability and value of Santander UK’s assets and require an increase in its level of provisions for expected credit losses. There can be no assurance that

Santander UK will not have to increase its provisions for loan losses in the future as a result of increases in non-performing loans or for other reasons beyond its

control. Material increases in Santander UK’s provision for loan losses and write-off or charge-offs have had and could again have a material adverse effect on its

operations, financial condition and prospects. Any significant reduction in the demand for Santander UK products and services, a sustained downturn in the UK

economy or changes in central bank interest rates could have a material adverse effect on Santander UK’s operations, financial condition and prospects.

Economic instability and downturns beyond the UK may also impact the UK economy as a whole. Europe’s manufacturing base is heavily dependent upon natural

gas, and any further restriction in supply and significantly increased costs are expected to have a material adverse impact on the Eurozone economy, which could

lead to disruption and volatility in the global financial markets, as a result of debt sustainability concerns.  This could have a material adverse impact on Santander

UK, including Santander UK’s ability to access capital and liquidity on financial terms acceptable to Santander UK, which could have a material adverse effect on

Santander UK’s operations, financial condition and prospects.

A recessionary economic environment could also lead to rating downgrades affecting the UK, Santander UK or its customers, investments and/or instruments,

causing capital impacts due to increased RWAs, an increase in the volatility of wholesale markets and the cost of funding.

The UK’s withdrawal from the European Union (Brexit) could continue to have a material adverse effect on Santander UK’s operations, financial

condition and prospects

The UK ceased to be a member of the EU in 2020 and a limited trade deal was agreed between the UK and the EU with the relevant new regulations coming into

force on 1 January 2021. The trade deal, however, did not include agreements on certain areas such as financial services and data adequacy.

The Financial Services and Markets Act 2023 (FSMA 2023) established a framework for HM Treasury (HMT) to revoke EU-derived financial services legislation

and for it to be replaced by Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) rules. This process of revoking and replacing retained

EU law may result in material changes to the UK regulatory regime and the impact of these regulatory developments and changes on Santander UK is difficult to

predict.

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In 2021, the EU Commission adopted an adequacy decision for the UK, allowing for the continued flow of personal data between the EU and the UK without

additional safeguards or permissions. However, this decision came with an expiry date of 27 June 2025, if not renewed. If the EU Commission’s adequacy

decision for the UK is not renewed, this could impact personal data flows from entities in the EU to Santander UK in the UK. In the event this occurs, it may result

in additional costs to Santander UK in order to facilitate those data flows, to the extent those data flows are impacted, with the UK being subject to EU transfer

rules as a non-adequate jurisdiction.

The continuing impact of Brexit on the wider UK economy may have a material adverse effect on Santander UK’s customers and counterparties and have a

material adverse effect on Santander UK’s operations, financial condition and prospects.

Santander UK faces risks from the impact of climate change, which could materially affect Santander UK’s business operations, reputation, clients

and customers, as well as the creditworthiness of its counterparties

Climate risk is a risk that manifests through other principal risks. Climate change could expose Santander UK to financial risk either through its physical or

transitional effects. Transition risks could be further accelerated by the occurrence of changes in the physical climate.

Physical risks from climate change arise from climate and weather-related events, such as heatwaves, droughts, floods, landslides, storms, sea level rise, coastal

erosion and subsidence. These risks could impact Santander UK's customers in the form of lower revenues due to transport problems, supply chain disruption

and other impacts that strain production and lower revenues and higher costs for its customers owing to workers' health, safety, absenteeism and other workforce-

related problems. These risks could also lead to damage to Santander UK's customers’ property or operations, which could impair asset values and the

creditworthiness of customers leading to increased default rates, delinquencies, write-offs and impairment charges in Santander UK’s portfolios. In addition,

Santander UK’s premises and resilience may also suffer physical damage due to weather-related events leading to increased costs for Santander UK.

Transition risks arise from the process of adjustment towards a low-carbon economy. Santander UK may face significant and rapid developments in stakeholder

expectations, policy, law and regulation which could impact the lending activities Santander UK undertakes, as well as the risks associated with its lending

portfolios, and the value of Santander UK’s financial assets. Reputation risk could arise from a failure to meet changing societal, investor or regulatory demands,

including contagion risk from the wider Banco Santander SA Group. In particular, the last few years have seen an increase in upcoming climate-related disclosure

requirements that Santander UK and Banco Santander SA (as the ultimate parent of Santander UK) will need to comply with (for example, the IFRS Sustainability

Disclosure Standards as developed by the International Sustainability Standards Board (ISSB), the European Banking Authority's (EBA) Environmental, Social,

and Governance (ESG) Pillar 3 disclosures rules and the EU Corporate Sustainability Reporting Directive (CSRD) and the FCA’s Sustainability Disclosure

Requirements regime.

Banco Santander SA has an ambition to become a net zero bank by 2050. As such, Santander UK Group Holdings plc is implementing and reporting at a group

level (including Santander UK plc) against the TCFD recommendations and has disclosed targets to manage climate-related risks and opportunities. Santander

UK continues to enhance its disclosures to meet future requirements such as the IFRS Sustainability Disclosure Standards. Santander UK continues to embed

climate considerations into its strategy, business model, the products and services it provides to customers and its financial and non-financial risk management

processes (including processes to measure and manage the various financial and non-financial risks Santander UK faces as a result of climate change).

Santander UK does this primarily through its internal transition plan, which is aligned to the UK Government's Transition Plan Taskforce guidelines. Within this

Santander UK assesses the internal and external factors that will impact the alignment of its lending portfolios to the UN Paris Agreement, including the

acceleration of the UK Government’s clean power 2030 action plan. Failure to adequately embed risks associated with climate change into its risk framework to

appropriately measure, manage and disclose the various financial and operational risks it faces as a result of climate change, or failure to adapt Santander UK’s

strategy and business model to the changing regulatory requirements and market expectations on a timely basis, may have a material and adverse impact on

Santander UK’s level of business growth, competitiveness, profitability, capital requirements, cost of funding, and financial condition. Achieving Santander UK’s

climate-related ambitions will also depend on a number of factors outside its control, including (among other things) availability of data to measure and assess the

climate impact on Santander UK’s customers, advancements of low-carbon transition technologies and public policies to support the energy transition in the

markets where Santander UK operates. Santander UK continues to assess this as part of its transition planning process. If these external factors and other

changes do not occur, or do not occur on a timely basis, Santander UK may fail to achieve its climate-related ambitions and this could have a material adverse

effect on Santander UK’s business growth, competitiveness, profitability, financial condition and reputation.

For further details on Santander UK’s approach to climate change see “Sustainability – Taskforce on Climate-related Financial Disclosures (TCFD)" in the

Santander UK Group Holdings plc Annual Report on Form 20-F.

Business model risks

Santander UK is exposed to competition from other financial institutions, including new entrants into the financial services sector

The markets for UK financial services are very competitive and Santander UK has seen strong competition from banks, building societies and other established

financial service providers. In addition, Santander UK faces competition from a number of new entrants, non-banks and other providers, including technology

companies and large retail companies with strong brand recognition, particularly in payments.

The UK Government and regulators are actively supporting the emergence of new entrants into the UK financial services market. In addition, the UK Government

is mandating new developments in Open Banking (as described below) which is a data sharing initiative making certain customer account balance and transaction

data available to third parties through use of application programming interfaces and is expected to mandate other developments in the payments landscape via

the “National Payments Vision”. The internet and mobile technologies are also changing customer behaviour and the competitive environment. There has been a

steep rise in customer use of mobile banking in recent years and the Covid-19 pandemic accelerated the strong trends towards customer digital adoption,

commercial and customer uptake of Open Banking, and regulatory and industry initiatives to develop commercial variable recurring payments, Open Finance

which extends the Open Banking ecosystem to enable data sharing related to additional financial services products and services and Smart Data which will

establish data sharing initiatives in various sectors outside of financial services, are likely to significantly change the technological and competitive landscape.

Commercial propositions based upon Open Banking are now beginning to gain traction. The UK Government has confirmed, through the publication of its

National Payments Vision, that it is committed to developing the necessary regulatory framework and infrastructure needed to develop these new ecosystems.

Due to Santander UK’s concentration in mortgages, it has a structural balance sheet disadvantage compared to larger peers with more diversified assets and

lower costs of deposits. This results in a lower NIM and fee income for Santander UK. However, Santander UK has an ambitious plan to transform its business

and deliver structural profitability throughout the lending cycle. In particular, Santander UK is investing in a multi-year transformation, which includes targets to

diversify its revenue streams, digitalise product channels and automate physical channels, to meet customer preferences and protect its competitive position.

However, Santander UK's asset mix will continue to remain weighted towards mortgages and as a result its NIM is expected to be lower than that of its larger

peers. Santander UK has made inroads in its transformation, and management expects to consider other ways to accelerate the shift in its business mix, including

acquisitions and partnership opportunities. However, there can be no assurance that the transformation will deliver the benefits sought from it or that the

transformation will progress on the timescale and trajectory currently anticipated. Management expects competition to remain strong, with larger peers investing

heavily in growth, diversification (including bolt-on acquisitions) and efficiency programmes, and with smaller players looking to build scale through acquisitions.

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The recent consolidation drive via acquisitions is creating larger and more diversified competitors and further exacerbates competitive threats. Furthermore, digital

banks continue to build their customer base and expand product offerings, diversifying and increasing the competitiveness within the banking sector. Any of these

competition-related factors or a combination thereof could result in a significant reduction in the profit of Santander UK. Santander UK gives consideration to the

competitive position in its management actions, such as pricing, product decisions and its business model. Increasing competition could mean that Santander UK

increases rates offered on deposits or lowers the rates it charges on loans, or changes its cost base, any of which could have a material adverse effect on its

operations, financial condition and prospects.

The changing interest rate environment and higher cost of living may result in competitors reacting quite differently in relation to, amongst other factors, loan

pricing, availability, deposit pricing and investment decisions. This has already had, and will continue to have, an impact on the competitive environment and future

decisions of Santander UK.

Santander UK’s ability to maintain its competitive position depends, in part, on the success of new products and services it offers its customers

and its ability to continue offering products and services from third parties

The success of Santander UK’s operations and its profitability depends, in part, on the success of new products and services it offers to customers and the way in

which it offers and provides its existing products and services. The increasing availability of a wide range of digital/online products and services for customers

within the market, requires banks like Santander UK to enhance their offerings in order to both retain and attract new customers. However, Santander UK cannot

guarantee that its products and services or the way in which it offers or provides its products and services, will continue to meet the needs or preferences of

customers as these may change over time.

Santander UK may not develop new products, or amend the key features of existing products, in a way that meet its customers’ changing needs in a timely

manner. As Santander UK expands the range of its products and services, some of which may be at an early stage of development in the UK market, it will be

exposed to known, new and potentially increasingly complex risks, including conduct, reputational and operational risk as well as development costs. Equally,

Santander UK may not take appropriate action to change or withdraw products when they become obsolete, outdated or unattractive reducing their

competitiveness and potentially increasing risks in relation to legacy customer journeys and systems.

The use of third parties by Santander UK to offer products or services or to support part of the customer journey presents additional risks to its business,

particularly in terms of data management and security. However, if Santander UK were not to engage with third parties to offer specialist services in this way,

strategic and competitive opportunities and advantages may be missed.

Any or all of the above factors, individually or collectively, could have a material adverse effect on Santander UK’s operations, financial condition and prospects.

Santander UK’s loan portfolio is subject to risk of prepayment

Santander UK’s loan portfolio is subject to prepayment risk resulting from the ability of a borrower or issuer to prepay a debt obligation prior to maturity. As a

result, Santander UK could be required to amortise net premiums into income over a shorter period of time, thereby reducing the corresponding asset yield and

net interest income and there is a risk that Santander UK is not able to accurately forecast amortisation schedules for these purposes which may affect its

profitability. Prepayment risk also has a significant adverse impact on credit card and mortgage loans, since prepayments could shorten the weighted average life

of these assets, which may result in a mismatch with Santander UK’s funding obligations and reinvestment at lower yields. The risk of prepayment and its impact

on Santander UK's ability to accurately forecast amortisation schedules is inherent in Santander UK’s commercial activity and an increase in prepayments or a

failure to accurately forecast amortisation schedules could have a material adverse effect on Santander UK’s operations, financial condition and prospects.

Damage to Santander UK’s reputation could cause harm to its business prospects

Maintaining a positive reputation is critical to attracting and retaining customers, investors and employees and conducting business transactions with

counterparties. Damage to Santander UK’s reputation could materially and adversely affect Santander UK’s perception among current and potential clients,

investors, vendors, partners, regulators and other third parties, which in turn could have a material adverse effect on Santander UK’s operating results, financial

condition, and prospects as well as damage Santander UK’s customers' and investors' confidence and the market price of Santander UK’s securities. Damage to

the reputation of Santander UK or Banco Santander SA (as the ultimate parent of Santander UK), the reputation of affiliates operating under the ‘Santander’ brand

or any of its other brands could therefore cause significant harm to Santander UK’s business and prospects. Harm to Santander UK’s reputation can arise directly

or indirectly from numerous sources, including, among others, employee misconduct (including the possibility of employee fraud), litigation, regulatory

interventions and enforcement action, negative political coverage, failure to deliver minimum standards of service and quality, loss or compromise of customer

data, disruption to service due to a cyberattack, wider IT failures, compliance failures, third-party fraud, financial crime, breach of legal or regulatory requirements,

unethical behaviour (including adopting inappropriate sales and trading practices), and the activities of customers, suppliers and counterparties and the perception

of the financial services industry as a whole. Further, negative publicity regarding Santander UK, whether true or not, may result in harm to Santander UK’s

operations, financial condition and prospects. Santander UK’s reputation could also suffer if Santander UK is the subject of negative coverage in the media or from

political stakeholders, whether it has merit or not.

If Santander UK is unable to manage the growth of its operations, this could have a material adverse impact on its profitability

Santander UK allocates management and planning resources to develop strategic plans for organic growth, and to identify possible acquisitions and disposals

and areas for restructuring its businesses when necessary. From time to time, Santander UK evaluates acquisition, disposal, and partnership opportunities that it

believes could offer additional value to its shareholders and customers and are consistent with its business strategy. However, Santander UK may not be able to

identify suitable acquisition targets or partnerships and may not be able to execute transactions or form partnerships on favourable terms, or at all. Furthermore,

participating in those that do not complete can be disruptive. Santander UK bases its assessment of potential acquisitions and partnerships on limited and

potentially inexact information and on assumptions with respect to future performance, valuation, operations, profitability and other matters that may prove to be

incorrect. Santander UK’s ability to benefit from any such acquisitions and partnerships will depend in part on its successful integration of those businesses. Such

integration entails significant risks such as challenges in retaining the customers and employees of the acquired businesses, unforeseen difficulties in integrating

operations and systems and unexpected liabilities or contingencies relating to the acquired businesses, including legal claims and regulatory investigations.

Moreover, the success of the acquisition or venture will at least in part be subject to a number of political, economic and other factors that are beyond Santander

UK’s control. Santander UK can give no assurances that its expectations with regard to integration and synergies will materialise.

Santander UK cannot provide assurance that it will, in all cases, be able to manage its growth effectively or to implement its strategic growth decisions, including

its ability to:

–Manage efficiently the operations and employees of the businesses

–Maintain or grow its existing customer base

–Successfully execute its strategic priorities (i.e. deliver on time in full)

–Carry out due diligence and assess the value, strengths and weaknesses of investment or acquisition candidates

–Finance strategic opportunities, investments or acquisitions

–Fully integrate strategic investments, or newly-established entities or acquisitions, in line with its strategy

–Align its current information technology systems adequately with those of an enlarged group

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–Apply its risk management policy effectively to an enlarged group

–Pursue opportunities due to capital constraints at the Santander UK Group level, which may limit opportunities to deploy capital to Santander UK, and the

current returns of Santander UK’s business

Any or all of these factors, individually or collectively, could have a material adverse effect on Santander UK’s operations, financial condition and prospects.

Capital and liquidity risk

Santander UK is subject to regulatory capital, liquidity and leverage requirements that could limit its operations, and changes to these

requirements may further limit and could have a material adverse effect on Santander UK’s operations, financial condition and prospects

Capital Requirements Regulation and Capital Requirements Directive IV

Santander UK is subject to capital adequacy requirements applicable to banks and banking groups under assimilated (retained EU) law and is supervised in this

respect by the PRA. Santander UK is required to maintain a minimum ratio of Common Equity Tier 1 (CET1) capital to risk-weighted assets, Tier 1 capital to risk-

weighted assets, total capital to risk-weighted assets and Tier 1 capital (leverage) to total adjusted assets for leverage purposes. Any failure by Santander UK to

maintain such ratios above prescribed regulatory minimum levels may result in administrative actions or sanctions. These could potentially include requirements

on Santander UK to cease all or certain lines of new business, to raise new capital resources or, in certain circumstances, a requirement for Santander UK's

existing capital instruments (potentially including Santander UK’s debt securities) to be subjected to bail-in or write-down (for more information, see the risk factor

entitled ‘Santander UK may become subject to the provisions of the Banking Act 2009 (the Banking Act), including bail-in and write-down powers’).

The EU Capital Requirements Directive IV (CRD IV Directive) and the Capital Requirements Regulation (the CRR and together with the CRD IV Directive, CRD

IV) implemented changes proposed by the Basel Committee on Banking Supervision (the Basel Committee) to the capital adequacy framework, known as ‘Basel

III’ in the EU. The CRR has been amended through a series of EU regulations, including the Capital Requirements Regulation 2 (CRR 2) and the CRD IV

Directive has been amended by the Capital Requirements Directive V (CRD V Directive). The European Union (Withdrawal) Act 2018 converted the directly

applicable elements of CRD IV into UK law on 31 December 2020 and preserved existing UK law implementing the CRD IV directive. Certain elements of the

CRR which were ‘onshored’ in this way have now been transposed into the PRA rules.

In implementing CRD IV and the revised versions of CRD IV, the PRA has required the capital resources of UK banks to be maintained at levels which exceed the

base capital requirements prescribed by CRD IV and to cover relevant risks in their business. In addition, a series of capital buffers have been established under

CRD IV and PRA rules to ensure a bank can withstand a period of stress. As a result of Bank of England (BoE) stress testing exercises and as part of its exercise

of UK macro-prudential capital regulation tools, or through supervisory actions by the PRA, Santander UK could be required to increase its capital resources

further, which could have a material adverse effect on Santander UK’s operations, financial condition and prospects.

Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR)

The LCR is intended to ensure that a bank maintains an adequate level of unencumbered, high quality liquid assets which can be used to offset the net cash

outflows the bank could encounter under a short-term significant liquidity stress scenario. The current minimum requirement for LCR is set at 100%. Santander

UK is also required to maintain available stable funding equal to at least 100% of its required stable funding under the NSFR. Santander UK’s current liquidity

position is in excess of the minimum requirements set by the PRA, but there can be no assurance that future changes to the applicable liquidity requirements

would not have an adverse effect on Santander UK’s financial performance.

Leverage ratios

The Financial Services Act 2012 provides the Financial Policy Committee (FPC) of the BoE with certain macro-prudential tools for the management of systemic

risk including quarterly setting of the countercyclical capital buffer rate and powers of direction relating to leverage ratios. All major UK banks and banking

groups (including Santander UK) are required to hold enough Tier 1 capital (75% of which must be CET1 capital) to satisfy a minimum leverage ratio requirement

of 3.25% and enough CET1 capital to satisfy a countercyclical leverage ratio buffer of 35% of each bank’s institution-specific countercyclical capital buffer rate.

The PRA requires UK globally systemically important banks (G-SIBs) and Ring Fenced Bodies (as defined in the Financial Services and Markets Act 2000

(FSMA)) to hold enough CET1 capital to meet an Additional Leverage Ratio Buffer (ALRB) of 35% of the institution-specific G-SIB buffer rate or Other

Systemically Important Institutions (O-SII) buffer rate following the implementation of the CRD V Directive on 28 December 2020 (previously the Systemic Risk

Buffer rate) and for consolidated groups which include a Ring Fenced Body to hold enough CET1 capital to meet the ALRB. The FPC can also direct the PRA to

adjust capital requirements in relation to particular sectors through the imposition of sectoral capital requirements. Action taken in the future by the FPC in exercise

of any of its powers could result in the regulatory capital requirements applied to Santander UK being further increased, which could have a material adverse

effect on Santander UK’s operations, financial condition and prospects.

Further regulatory changes

Regulators in the UK and worldwide have proposed that additional loss absorbency requirements should be applied to systemically important institutions to ensure

that there is sufficient loss absorbing and recapitalisation capacity available in resolution. The BoE is required to set the Minimum Requirement for Eligible

Liabilities (MREL) for all institutions. The BoE required most major banks, since 1 January 2022, to comply with end-state MREL requirements, including

Santander UK plc and Santander UK Group Holdings plc.

Regulators and legislators in the UK have produced a range of proposals for future legislative and regulatory reform which could force Santander UK to comply

with certain operational restrictions or take steps to raise further capital or increase Santander UK’s expenses and could therefore have a material adverse effect

on Santander UK’s operations, financial condition and prospects. These changes, which could affect Santander UK as a whole, include the UK's implementation

of the remaining Basel III standards. The Basel Committee on Banking Supervision has approved a series of significant changes to the Basel regulatory capital

framework subsequent to Basel III from 7 December 2017, colloquially known as Basel IV or Basel 3.1 which revise the process for determining capital

requirements. On 30 November 2022, the PRA published a consultation paper (CP 16/22) on the implementation of the Basel 3.1 standards in the UK, which was

followed in December 2023 and September 2024 by two policy statements (PS17/23 and PS9/24 respectively) containing near-final rules. On 17 January 2025,

the PRA announced that it was delaying the implementation of the Basel 3.1 rules by a year until 1 January 2027, with the transitional period reduced from four to

three years so that it will continue to end on 31 December 2029. CRD IV requirements adopted in the UK may change further and there may be changes to the

way in which the PRA continues to interpret and apply these requirements to UK banks (including with regard to individual model approvals or otherwise).

There is a risk that changes to the UK’s capital adequacy regime (including any increase to minimum leverage ratios and/or as a result of the PRA’s Basel 3.1

reforms) may result in increased minimum capital requirements, which could reduce available capital for new business purposes and adversely affect Santander

UK’s cost of funding, profitability and ability to pay dividends, or other discretionary payments on its capital instruments, continued organic growth (including

increased lending), or pursue acquisitions or other strategic opportunities. Santander UK could be required to restructure its balance sheet to reduce capital

charges incurred pursuant to the PRA’s rules or raise additional capital, but at increased cost and subject to prevailing market conditions. In addition, any changes

to the eligibility criteria for Tier 1 and Tier 2 capital may affect Santander UK’s ability to raise Tier 1 and Tier 2 capital and impact the recognition of existing Tier 1

and Tier 2 capital resources in the calculation of Santander UK’s capital position. Furthermore, increased capital requirements may negatively affect Santander

UK’s return on equity and other financial performance indicators.

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Santander UK’s business could be affected if its capital is not managed effectively or if these measures limit Santander UK’s ability to manage its balance sheet

and capital resources effectively or to access funding on commercially acceptable terms. Effective management of Santander UK’s capital position is important to

Santander UK’s ability to operate its business, to continue to grow organically and to pursue its business strategy. There is a risk that implementing and

maintaining existing and new liquidity requirements, such as through enhanced liquidity risk management systems, may incur significant costs, and more stringent

requirements to hold liquid assets may materially affect Santander UK’s lending business as more funds may be required to acquire or maintain a liquidity buffer,

thereby reducing future profitability. This could in turn adversely impact Santander UK’s operations, financial condition and prospects.

Liquidity and funding risks are inherent in Santander UK’s business and could have a material adverse effect on Santander UK’s operations,

financial condition and prospects

Liquidity risk is the risk that Santander UK either does not have available sufficient financial resources to meet its obligations as they fall due or can secure them

only at excessive cost. This risk is inherent in any retail and commercial banking business and can be heightened by a number of factors such as over-reliance on

a particular source of funding, changes in credit ratings or market-wide phenomena such as market dislocation. Santander UK performs comprehensive internal

stress testing in order to ensure that it maintains funding profiles and holds a liquid asset buffer in order to manage this risk. However, unforeseen systemic market

factors like those experienced during the last financial crisis make it difficult to eliminate these risks completely. There can be no assurance that such

circumstances will not reoccur or that they will occur in the same way, but past experience and comprehensive stress testing regimes help Santander UK to

consider and manage the potential impacts on its liquidity position. Liquidity constraints may affect Santander UK’s operations and its ability to meet regulatory

liquidity requirements or may limit growth possibilities. Disruption and volatility in the global financial markets could have a material adverse effect on Santander

UK’s ability to access capital and liquidity on financial terms acceptable to it and in addition to increased funding costs, may result in a shortening in the term of

funding it raises.

Santander UK’s cost of funding is related to prevailing interest rates and to its credit spreads. Increases in interest rates and Santander UK’s credit spreads can

significantly increase the cost of its funding. Changes in Santander UK’s credit spreads can be market-driven or idiosyncratic in nature and may be influenced by

perceptions of its creditworthiness rather than any underlying change in Santander UK’s financial position. Changes to interest rates and Santander UK’s credit

spreads occur continuously and may be unpredictable and highly volatile. Market predictions of future central bank policy rate paths may impact Santander UK’s

cost of funding, even if central bank actions do not ultimately follow market predictions.

If wholesale markets financing ceases to be available, or becomes excessively expensive, Santander UK may be forced to raise the rates it pays on deposits, with

a view to attracting more customers and/or to sell assets, potentially at depressed prices or to reduce growth plans. Santander UK’s cost of funding might also be

impacted by increased competition for retail and corporate deposits.

In response to the Covid-19 pandemic, the BoE introduced the Term Funding Scheme with additional incentives for Small and Medium-Sized Enterprises

(TFSME). Santander UK is continuing to repay drawings ahead of contractual maturities in 2025, 2027 and 2031 and as at 31 December 2024, Santander UK

had £11bn of drawings outstanding (£7.1bn in 2025, £2.5bn in 2027 and subject to approval by the BoE, £1.4bn in 2031), having repaid £6bn in 2024. (£8.0bn in

2023, £6.9bn in 2022). Santander UK will have to replace these remaining drawings via wholesale market issuance, other BoE liquidity facilities or through

management of the customer funding gap.

Each of the factors described above could have a material adverse effect on Santander UK, including its ability to access capital and liquidity on financial terms

acceptable to it and, more generally, on its operations, financial condition and prospects.

Further, Santander UK aims for a funding structure that is consistent with its assets, avoids excessive reliance on short-term wholesale funding, attracts enduring

retail and commercial deposits and provides diversification in products and tenor. Santander UK therefore relies, and will continue to rely, on retail and commercial

deposits to fund a significant proportion of lending activities. The on-going availability of this type of funding is sensitive to a variety of factors outside Santander

UK’s control, such as general economic conditions and the confidence of depositors in the economy and in the financial services industry in general, confidence in

Santander UK specifically, Santander UK’s credit rating and the availability and extent of deposit guarantees, as well as competition between banks for deposits or

competition with other products, such as mutual funds or, if launched, central bank digital currency. A change in any of these factors could significantly increase the

amount of commercial deposit withdrawals in a short period of time, thereby reducing its ability to access deposit funding on appropriate terms, or at all, in the

future, and therefore have a material adverse effect on Santander UK’s operations, financial condition and prospects.

Santander UK’s liquidity planning assumes that customers will continue to make a volume of deposits with Santander UK (particularly demand deposits and short-

term time deposits), and Santander UK intends to maintain its emphasis on the use of deposits as a source of funds. The short-term nature of some deposits

could cause liquidity problems for Santander UK in the future if deposits are not made in the volumes anticipated or are withdrawn at short notice or are not

renewed. If a substantial number of depositors withdraw their demand deposits or do not roll over their time deposits upon maturity, there may be a material

adverse effect on Santander UK’s operations, financial condition and prospects. This might increase Santander UK’s requirements for wholesale funding or

require the execution of contingent options to raise additional liquidity, including the potential curtailing of growth plans.

An adverse movement in Santander UK’s external credit rating would likely increase its cost of funding, require Santander UK to post additional

collateral or take other actions under some of its derivative contracts and adversely affect Santander UK’s operations, financial condition and

prospects

Credit ratings affect the cost and other terms upon which Santander UK is able to obtain funding. Credit rating agencies regularly evaluate Santander UK, and

their credit ratings of Santander UK and Santander UK’s issued debt are based on a number of factors, including Santander UK’s financial strength, the strength of

the UK economy and conditions affecting the financial services industry generally.

Any downgrade in the external credit ratings assigned to Santander UK or any of Santander UK’s debt securities could have an adverse impact on Santander UK.

In particular, a downgrade in Santander UK’s credit ratings could increase its borrowing costs and could require it to post additional collateral or take other actions

under some of its derivatives, loan facilities or other financial contracts, and could limit its access to capital markets and have a material adverse effect on its

operations, financial condition and prospects. For example, a credit rating downgrade could have a material adverse effect on Santander UK’s ability to sell or

market certain products, engage in certain longer-term or derivatives transactions and retain its customers or investors, particularly those who need a minimum

rating threshold in order to transact or invest.

Any of these effects of a credit rating downgrade could, in turn, result in outflows and reduce Santander UK’s liquidity and have an adverse effect on Santander

UK, including its operations, financial condition and prospects. For example, Santander UK estimates that at 31 December 2024, if Fitch, Moody’s and Standard &

Poor’s were concurrently to downgrade the long-term credit ratings of Santander UK plc by one notch, and thereby trigger a short-term credit rating downgrade,

this could result in an outflow of £2.4bn of cash and collateral. A hypothetical two notch downgrade would result in a further outflow of £0.7bn of cash and collateral

at 31 December 2024. Under the LCR Santander UK holds sufficient liquidity to cover these potential outflows. However, while certain potential impacts are

contractual and quantifiable, the full consequences of a credit rating downgrade are inherently uncertain, as they depend upon numerous dynamic, complex and

inter-related factors and assumptions, including market conditions at the time of any downgrade, whether any downgrade of a firm’s long-term credit rating

precipitates downgrades to its short-term credit rating, whether any downgrade precipitates changes to the way that the financial institutions sector is rated, and

assumptions about the ratings of other financial institutions and the potential behaviours of various customers, investors and counterparties. Actual outflows will

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also depend upon certain other factors including any management or restructuring actions that could be taken to reduce cash outflows and the potential liquidity

impact from a loss of unsecured funding (such as from money market funds) or loss of secured funding capacity.

There can be no assurance that the credit rating agencies will maintain Santander UK’s current credit ratings or outlooks. A failure to maintain favourable credit

ratings or outlooks could increase Santander UK’s cost of funding, adversely affect Santander UK’s interest margins, and reduce its ability to secure both long-

term and short-term funding. If a downgrade of a Santander UK member’s long-term credit ratings were to occur, it could also impact the short-term credit ratings

of other members of Santander UK. The occurrence of any of these events could have a material adverse effect on Santander UK’s operations, financial condition

and prospects.

Negative changes to the UK sovereign credit rating, or the perception that further negative changes may occur, could have a material adverse effect on Santander

UK’s operations, financial condition, prospects and the marketability and trading value of its securities. This might also have an impact on Santander UK’s own

credit rating, borrowing costs and ability to secure funding. Negative changes to the UK sovereign credit rating, or the perception that further negative changes

may occur, could also have a material effect in depressing consumer confidence, restricting the availability, and increasing the cost, of funding for individuals and

companies, further depressing economic activity, increasing unemployment and reducing asset prices, which could in turn have a material adverse effect on

Santander UK’s operations, financial condition and prospects.

Changes in Santander UK’s pension liabilities and obligations could have a materially adverse effect on Santander UK’s operations, financial

condition and prospects

The majority of current employees are provided with pension benefits through defined contribution arrangements. Under these arrangements Santander UK’s

obligation is limited to the cash contributions paid. Santander UK provides retirement benefits for many of its former and current employees in the UK through a

defined benefit pension scheme established under trust. Santander UK plc is the principal employer under this scheme, but it has only limited control over the rate

at which it pays into the scheme. Under the UK statutory pension funding requirements employers are usually required to contribute to the schemes at the rate

they agree with the scheme trustees although, if they cannot agree, the rate can be set by the Pensions Regulator. The scheme trustees may, in the course of

discussions about future valuations, seek higher employer contributions. The scheme trustees’ power in relation to the payment of pension contributions depends

on the terms of the trust deed and rules governing the scheme, but, in some cases, the trustees may have the unilateral right to set the employer’s relevant

contribution.

The Pensions Regulator has the power to issue a financial support direction to companies within a group in respect of the liability of employers participating in UK

defined benefit pension schemes where, amongst other things, that employer is ‘insufficiently resourced’ (as defined for the purposes of the relevant legislation).

Such a financial support direction could require the companies to guarantee or provide security for the pension liabilities of those employers or could require

additional amounts to be paid into the relevant pension schemes in respect of them.

The Pensions Regulator can also issue contribution notices if it is of the opinion that an employer has taken actions, or failed to take actions, deliberately designed

to avoid meeting its pension promises or which are materially detrimental to the scheme’s ability to meet its pension promises. A contribution notice can be issued

to any company or individual that is connected with or an associate of such employer in circumstances where the Pensions Regulator considers it reasonable to

issue it and multiple notices could be issued to connected companies or individuals for the full amount of the debt. The risk of a contribution notice being imposed

may inhibit Santander UK’s freedom to restructure or to undertake certain corporate activities. There is a risk that Santander UK could incur an obligation to make

a contribution to the scheme by virtue of section 75 or 75A of the Pensions Act 1995 as a result of a reorganisation or disposal of Santander UK’s businesses.

Should the value of assets to liabilities in respect of the defined benefit schemes operated by Santander UK record a deficit or an increased deficit (as

appropriate), due to either a reduction in the value of the pension scheme assets (depending on the performance of financial markets) not matched by a fall in the

pension scheme liabilities and/or an increase in the pension scheme liabilities (for example due to changes in legislation, mortality assumptions, discount rate

assumptions, inflation, or other factors) not matched by an increase in the pension scheme assets, this could result in Santander UK having to make increased

contributions to reduce or satisfy the deficits which would divert resources from other areas of Santander UK's business and reduce its capital resources. Changes

in inflation and interest rates in particular pose significant risks to the pension scheme as liabilities would be adversely impacted by an increase in long-term

inflation or reduction in interest rates, and it is inherently problematic to find assets that exactly match inflation and interest rate movements in the liabilities. The

pension scheme assets are also invested in illiquid assets consisting primarily of unlisted credit, private equity and property. The value of these investments can

only be known when they are realised. The value in the accounts is an estimate of the fair value of these investments but the final realised value could be

materially different. Although the trustee of the scheme is obliged to consult with Santander UK before changing the pension scheme's investment strategy, the

trustee has the final say and the ultimate responsibility for investment strategy rests with the trustee. A change in the actual or perceived strength of the employer’s

covenant could also result in Santander UK having to make increased contributions to the scheme. While Santander UK can control a number of the above

factors, there are some over which Santander UK has no or limited control.

Changes in UK legislation and regulation may also affect Santander UK’s position, Specific areas where concerns have been raised are levels of dividends where

there is a pension scheme with a deficit and the length of time taken to address deficits. Changes in legislation or regulation could result in Santander UK having

to make increased contributions to reduce or satisfy the deficits which would divert resources from use in other areas of its business and reduce its capital

resources.

Any increase in Santander UK’s pension liabilities and obligations as a result of the foregoing factors could have a material adverse effect on Santander UK’s

operations, financial conditions and prospects. There is also a risk of reputational damage if the scheme fails to comply with legislation or if there are any issues

with members or the trustee being dissatisfied.

Market risks

Santander UK is subject to fluctuations in interest rates and other market risks, which could have a material adverse effect on Santander UK’s

operations, financial condition and prospects

Market risk refers to the probability of variations in Santander UK’s net interest income or in the market value of its assets and liabilities due to volatility of interest

rates, credit spreads, exchange rates or equity prices.

Changes in interest rates would affect the following areas, among others, of Santander UK’s business:

–Net interest income

–The value of Santander UK’s derivatives transactions

–The value of Santander UK’s securities holdings

–The value of Santander UK’s loans and deposits

–The volume of loans originated

Interest rates are highly sensitive to many factors beyond Santander UK’s control, including increased regulation of the financial sector, inflation, monetary policies,

domestic and international economic and political conditions. For example, the UK’s Monetary Policy Committee has been selling assets to unwind quantitative

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easing; as this balance sheet ’normalisation’ unfolds, there could be unintended consequences for markets and financial stability. Variations in interest rates could

affect the interest earned on Santander UK’s assets and the interest paid on its borrowings, thereby affecting its net interest income, which comprises the majority

of its revenue, reducing its growth rate and profitability and potentially resulting in losses. In addition, costs Santander UK incurs putting into place strategies to

reduce interest rate exposure could increase in the future, which could have a material adverse effect on Santander UK’s operations, financial condition and

prospects.

Increases in interest rates may reduce the volume of loans originated by Santander UK. Sustained high interest rates have historically discouraged customers

from borrowing and have resulted in increased delinquencies in outstanding loans and deterioration in the quality of assets.

Reductions in interest rates could lead to margin compression if such changes are passed on to customer liabilities to a lesser extent than they are passed on to

customer assets.  Changes in interest rates may also affect the ability of Santander UK’s customers to prepay or refinance fixed-rate loans, affect the value of its

financial assets and reduce gains or require Santander UK to record losses on sales of Santander UK’s loans or securities, which could have a material adverse

effect on Santander UK’s operations, financial condition and prospects.

In addition, although Santander UK is a UK-centric bank, it has a direct link to the Eurozone through its parent company, which exposes Santander UK to

Eurozone sovereign debt risks, as market concerns over sovereign debt sustainability could drive changes in interest rates and credit spreads. Any significant

impact on interest rates could have a material adverse effect on Santander UK’s operations, financial condition and prospects.

Negative changes in positions recorded at fair value could have a material adverse effect on Santander UK’s operations, financial condition and

prospects

Santander UK has material exposures to securities, derivatives and other investments that are recorded at fair value and are therefore exposed to potential

negative market changes. A widening of market credit spreads, reflecting the prevailing market conditions would negatively impact asset valuations in future

periods and may result in negative changes in the fair values of Santander UK's financial assets. A tightening of Santander UK’s own credit spreads would

increase the magnitude of liabilities, thereby reducing net assets.

In addition, the value ultimately realised by Santander UK on disposal of assets and liabilities recorded at fair value may be lower than their current fair value; for

example, during the last global financial crisis, financial markets were subject to periods of significant stress resulting in steep falls in perceived or actual financial

asset values, particularly due to volatility in global financial markets and the resulting widening of credit spreads.

Santander UK is also exposed to changes in the market value of credit and funding spreads for the valuation of certain derivative contracts, the estimated value of

which is negatively exposed to increases in the Credit Valuation Adjustment (CVA) spread and the Funding Fair Valuation Adjustment (FVA) spread over the

lifetime of the transaction.

Any of these factors could require Santander UK to record negative changes in fair value which could have a material adverse effect on its operations, financial

condition and prospects.

Santander UK is also exposed to changes in UK residential house price index levels, future index growth assumptions and house price index volatility. These

impact the valuations of the portfolios of home reversion plans, lifetime mortgages and associated hedges held by Santander UK. In addition, the home reversion

assets and mortgages are exposed to any changes in underlying mortality assumptions as maturity dates on these are not fixed and are driven by the vacation of

the underlying property on a permanent basis by the plan holder. Specific property risk exists for each individual asset versus the indexed growth assumption at

the point of maturity. Lifetime mortgages additionally have prepayment risk which is managed via a FVA based on historic data.

In addition, to the extent that fair values are determined using financial valuation models, such values may be inaccurate or subject to change, as the data used by

such models may not be available or may become unavailable due to changes in market conditions, particularly for illiquid assets and in times of economic

instability. In such circumstances, Santander UK’s valuation methodologies require it to make assumptions, judgements and estimates in order to establish fair

value.

Reliable assumptions are difficult to make and are inherently uncertain. Moreover, valuation models are complex, making them inherently imperfect predictors of

actual results. Any consequential impairments or write-downs could have a material adverse effect on Santander UK’s operations, financial condition and

prospects.

Santander UK invests in debt securities of the UK Government largely for liquidity management purposes. At 31 December 2024, approximately 7% of Santander

UK’s total assets and 33% of Santander UK’s securities portfolio comprised debt securities issued by the UK Government. Any failure by the UK Government to

make timely payments under the terms of these securities, or a significant decrease in their market value, could have a material adverse effect on Santander UK’s

operations, financial condition and prospects.

Credit risks

If the level of non-performing loans increases or the credit quality of Santander UK’s loans deteriorates in the future, or if Santander UK’s loan loss

reserves are insufficient to cover loan losses, this could have a material adverse effect on Santander UK’s operations, financial condition and

prospects

Risks arising from changes in credit quality and the recoverability of loans and amounts due from counterparties are inherent in a wide range of Santander UK’s

businesses. Non-performing or low credit quality loans have in the past, had and could continue to have a material adverse effect on Santander UK’s operations,

financial condition and prospects.

In particular, the amount of Santander UK’s reported non-performing loans may increase in the future as a result of growth in Santander UK’s total loan portfolio,

including as a result of loan portfolios that Santander UK may acquire in the future (the credit quality of which may turn out to be worse than Santander UK had

anticipated), or factors beyond Santander UK’s control, such as adverse changes in the credit quality of Santander UK’s borrowers and counterparties, a general

deterioration in the UK or global economic conditions, the impact of political events, events affecting certain industries or events affecting financial markets and

global economies. Broader inflationary pressures or higher interest rates that impact a customer's ability to service debt payments could also lead to increased

arrears in both unsecured and secured products.

There can be no assurance that Santander UK will be able to effectively control the level of impaired loans in, or the credit quality of, its total loan portfolio, which

could have a material adverse effect on Santander UK’s operations, financial condition and prospects.

Interest rates payable on a significant portion of Santander UK’s outstanding mortgage loan products fluctuate over time due to, among other factors, changes in

the BoE base rate. As a result, borrowers with variable interest rate mortgage loans are exposed to increased monthly payments when the related mortgage

interest rate adjusts upward. Similarly, borrowers of mortgage loans with fixed or introductory rates adjusting to new interest rates after an initial period are

exposed to the risk of increased monthly payments at the end of this period. Between 2021 and 2023, interest rates attached to both variable and fixed rate

mortgages increased from historic lows and they remain higher than 2020 levels. Customers with variable rates or those whose fixed rate terms ended during this

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time period have faced increased monthly payments. These events, alone or in combination, may contribute to higher delinquency rates and losses for Santander

UK, which could have a material adverse effect on Santander UK’s operations, financial condition and prospects.

Santander UK’s current loan loss reserves may not be adequate to cover an increase in the amount of non-performing loans or any future deterioration in the

overall credit quality of Santander UK’s total loan portfolio. Santander UK’s loan loss reserves are based on Santander UK’s current assessment of various factors

affecting the quality of its loan portfolio, including its borrowers’ financial condition, repayment abilities, the realisable value of any collateral, the prospects for

support from any guarantor, government macroeconomic policies, interest rates and the legal and regulatory environment. Many of these factors are beyond

Santander UK’s control. As a result, there is no precise method for predicting loan and credit losses, and no assurance can be provided that Santander UK’s

current or future loan loss reserves will be sufficient to cover actual losses.

If Santander UK’s assessment of and expectations concerning the above-mentioned factors differ from actual developments Santander UK may need to increase

its loan loss reserves, which may adversely affect Santander UK’s operations, financial condition and prospects. Additionally, in calculating its loan loss reserves,

Santander UK employs qualitative tools and statistical models which may not be reliable in all circumstances, and which are dependent upon data that may not be

complete. If Santander UK is unable to control or reduce the level of its non-performing or poor credit quality loans, this could have a material adverse effect on

Santander UK’s operations, financial condition and prospects.

The value of the collateral, including real estate, securing Santander UK’s loans may not be sufficient, and Santander UK may be unable to realise

the full value of the collateral securing Santander UK’s loan portfolio

The value of the collateral securing Santander UK’s loan portfolio may significantly fluctuate or decline due to factors beyond Santander UK’s control, including

macroeconomic factors affecting the UK’s economy. Santander UK’s residential mortgage loan portfolio is one of its principal assets, comprising 84% of

Santander UK’s loan portfolio at 31 December 2024. As a result, Santander UK is highly exposed to developments in the residential property market in the UK.

Following the peak in aggregate UK house prices in 2022, these fell slightly in 2023 but recovered in 2024. Continued growth in house prices is expected in 2025.

The value of the collateral securing Santander UK’s loan portfolio may also be adversely affected by force majeure events such as natural disasters like floods or

landslides exacerbated by climate change trends. Any force majeure event may cause widespread damage and could have an adverse impact on the economy of

the affected region and may therefore impair the asset quality of Santander UK’s loan portfolio in that area.

Santander UK may also not have sufficiently up-to-date information on the value of collateral, which may result in an inaccurate assessment for impairment losses

on loans secured by such collateral.

If any of the above events were to occur, Santander UK may need to make additional provisions to cover actual impairment losses of its loans, which could have a

material adverse effect on Santander UK’s operations, financial condition and prospects.

Legal and regulatory risks

Santander UK is subject to substantial and evolving regulation and governmental oversight

As a financial services group, Santander UK is subject to extensive financial services laws, regulations, administrative actions and policies in the UK, and in each

other location in which Santander UK operates. For a discussion of the principal laws and regulations to which Santander UK is subject, see 'Regulation of the

Santander UK group'. The sector continues to face unprecedented levels of government and regulatory intervention and scrutiny, and changes to the regulations

governing financial institutions and the conduct of business. In addition, regulatory and governmental authorities have continued to consider further enhanced or

new legal or regulatory requirements intended to reduce the probability and impact of future crises (or otherwise assure the stability and operational resilience of

institutions under their supervision), enhance consumer protection, address climate change risks, the risk of greenwashing and environmental, social and

governance risks generally, and improve controls in relation to financial crime-related risks. Santander UK expects regulatory and government intervention in the

banking sector to remain high for the foreseeable future. An intensive approach to supervision is maintained in the UK by the BoE as resolution authority, the PRA,

the FCA, the Competition and Markets Authority (CMA), the Payment Systems Regulator (PSR), the Information Commissioner’s Office (ICO) and the Serious

Fraud Office (SFO).

As well as being subject to UK regulation, as part of the Banco Santander group, Santander UK is also affected by other regulators such as the Banco de España

(the Bank of Spain) and the European Central Bank (ECB), as well as various legal and regulatory regimes (including the US) that have extra-territorial effect.

Extensive legislation and implementing regulations affecting the financial services industry have recently been adopted in regions that directly or indirectly affect

Santander UK’s business, including Spain, the US, the EU and other jurisdictions. Because Santander UK is subject to oversight by multiple regulators or

government bodies related to the same conduct or activity, this can increase business uncertainty and the amount of resources needed to ensure Santander UK’s

compliance with the different legal and regulatory regimes.

The manner in which financial services laws, regulations and policies are applied to the operations of financial institutions has gone through great change which is

still being implemented and reviewed. Recent proposals and measures taken by governmental, tax and regulatory authorities and further future changes in

supervision and regulation (in particular in the UK), are beyond Santander UK’s control and could materially affect Santander UK’s business.

Changes in UK legislation and regulation applicable to the financial sector may also affect Santander UK’s competitive position, particularly if such changes are

implemented before international consensus is reached on key issues affecting the industry. There has been a recognition from the UK government that changes

need to be made to the UK’s regulatory architecture in order to ensure that the sector remains internationally competitive and is able to grow. This has resulted in

each of the financial services regulators setting out how they plan to improve growth in the sector. For example, the UK has delayed the implementation of Basel

3.1 in order to assess how it is implemented internationally.  HMT also issued a call for evidence in November 2024 on a new “Financial Services Growth &

Competitiveness Strategy” that could result in changes to UK regulation.

Further, Santander UK may face higher compliance costs and the need to carefully manage capacity to readily respond to multiple regulatory or government

policy changes simultaneously. Any legislative or regulatory actions and any required changes to Santander UK’s business operations resulting from such laws,

regulations and policies as well as any deficiencies in Santander UK’s compliance with them could result in significant loss of revenue, could have an impact on

Santander UK’s strategy, limit its ability to pursue business opportunities in which Santander UK might otherwise consider engaging, limit Santander UK’s ability to

provide certain products and services and/or result in enforcement action (including the imposition of financial and other penalties). They may also affect the value

of assets that Santander UK holds, requiring Santander UK to increase its prices thereby reducing demand for Santander UK’s products or otherwise have a

material adverse effect on its operations, financial condition and prospects. Accordingly, there can be no assurance that future changes in laws, regulations and

policies or in their interpretation or application by Santander UK or by regulatory authorities will not adversely affect Santander UK.

Specific examples of areas where regulatory changes and increased regulatory scrutiny could have a material adverse effect on Santander UK’s operations,

financial condition and prospects include, but are not limited to, the following:

–Banking Reform: In accordance with the provisions of the Financial Services (Banking Reform) Act 2013 UK banking groups that hold significant retail

deposits (originally more than £25 billion of “core deposits”), including Santander UK, were required to separate or ‘ring-fence’ their retail banking activities from

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their wholesale banking activities by 1 January 2019. Santander UK completed its ring-fencing plans in advance of the legislative deadline of 1 January 2019.

However, given the complexity of the ring-fencing regulatory regime and the material impact on the way Santander UK conducts its business operations in the

UK, there is a risk that Santander UK and/or Santander UK plc may be found to be in breach of one or more ring-fencing requirements. This might occur, for

example, if prohibited business activities are found to be taking place within the ring-fence, mandated retail banking activities are found being carried on in a UK

entity outside the ring-fenced part of the group or Santander UK breached a PRA ring-fencing rule. If Santander UK were found to be in breach of any of the

ring-fencing requirements placed upon it under the ring-fencing regime, it could be subject to supervisory or enforcement action by the PRA, the consequences

of which might include substantial financial penalties, imposition of a suspension or restriction on Santander UK’s UK activities or, in the most serious of cases,

the forced restructuring of the UK group, entitling the PRA (subject to the consent of the UK Government) to require the sale of a Santander ring-fenced bank or

other parts of the UK group. Following the publication of the final report of the Independent Panel on Ring-Fencing and Proprietary Trading on 15 March 2022,

HMT announced its intention to implement certain limited reforms to the ring-fencing regime, including (i) increasing the ring-fencing core deposit threshold from

£25 billion to £35 billion, (ii) adding a new secondary ‘trading assets’ condition (exempting from the regime banks with trading assets which do not exceed 10%

of Tier 1 capital), (iii) introducing a de minimis threshold to allow ring-fenced banks to incur an exposure to relevant financial institutions (RFIs) of up to £100,000

per RFI at any one time, and (iv) allowing ring-fenced banks to establish operations outside of the UK or the European Economic Area, have exposure to RFIs

that qualify as small and medium sized enterprises (SMEs) and undertake a wider range of activities such as market standard trade finance activities or inflation

swaps. These reforms entered into force on 4 February 2025 and may lead to further review or amendment of Santander UK’s operational and compliance

arrangements in relation to the regime.

–Competition: Competition authorities (which in the UK include the CMA, the FCA and the PSR) can run reviews and investigations into any aspect of

Santander UK’s operations or the functioning of any markets in which Santander UK operates, which could lead to Santander UK being required to change the

markets in which it operates. In addition, the CMA’s widening focus on market outcomes may also result in increased reviews by the CMA of the markets in

which Santander UK operates. The recently passed Digital Markets, Competition and Consumers Bill (DMCC) will introduce significant reforms to the powers of

competition authorities in relation to the aforementioned investigations, including substantial new fining powers. The DMCC also introduces other wide-ranging

reforms to the UK’s competition, consumer protection and digital markets regulatory landscape some of which could impact Santander UK’s business. For

instance, the DMCC grants the CMA the power to directly determine whether certain consumer protection laws have been infringed without needing to go

through the courts.

–Payments: Santander UK has been required to make systems changes and update processes to comply with a number of new payment regulations. Within

the UK, the PSR has mandated Santander UK to work on the extension of Confirmation of Payee for all payment service providers (PSPs) in the UK and has

introduced a new APP mandatory reimbursement requirement which aims to reduce the level of customer fraud. Under these standards, Santander UK

assumes responsibility for certain categories of customer losses and any inherent failings in system design may lead to fines from regulators and/or

compensation being paid to customers. Santander UK also expects to see significant developments in the key UK payment systems architecture, with a

systems update of the high value Clearing House Automated Payment System (CHAPS) through the Real Time Gross Settlement (RTGS), BACS, the potential

development of a UK central bank digital currency or similar system, and the development of Open Banking payments and other lower value retail payment

schemes. In November 2024, the UK Government published its report on the “National Payments Vision”, which sets out its ambitions for the payments sector

and is expected to generate a wider industry review of the UK payments landscape in 2025. As demonstrated by other payments initiatives, such as Open

Banking and the second Payment Services Directive (PSD2), reforms in this space have the potential to exacerbate a number of existing risks including data

loss/data protection, cybersecurity, fraud and wider financial crime risk, which in turn could give rise to increased costs, litigation risk and risk of regulatory

investigation and enforcement activity.

–Data Privacy: In connection with its processing of personal data, Santander UK is subject to data protection laws and regulations – in particular, the

UK GDPR (as defined and interpreted in accordance with the Data Protection Act 2018) and the Data Protection Act 2018 (DPA). In the event

Santander UK breaches any such data protection laws, it could face significant enforcement action and/or financial penalties as well as reputational

damage, which could ultimately have a material adverse effect on Santander UK’s operations, financial condition and prospects.

–Cybersecurity: Santander UK is subject to cybersecurity regulations and cybersecurity incident reporting requirements. Cybersecurity incident

reporting often require short timeframes and there is a risk that Santander UK will fail to meet the reporting deadlines for any given cybersecurity

incident. There will be legal, reputational and regulatory risks in the event Santander UK, or the third-party providers Santander UK works with, are

found to be out of compliance with these regulations and reporting requirements.

–Consumer Duty: The FCA’s rules and guidance on a broad consumer duty that firms undertaking regulated activities with retail clients must observe

(the Consumer Duty) have been in force for open products and services since 31 July 2023 and for closed products and services since 31 July 2024.

The Consumer Duty has three elements: (i) a "Consumer Principle", which reflects the overall standards of behaviour the FCA expects from firms (a

firm must act to deliver good outcomes for retail customers), (ii) three cross-cutting rules that articulate the standards of conduct expected under the

Consumer Principle (firms must act in good faith towards retail customers, avoid causing foreseeable harm to retail customers and enable and

support retail customers to pursue their financial objectives), and (iii) four outcomes that build on the Consumer Principle and cross-cutting rules,

comprising a suite of rules and guidance setting more detailed expectations for a firm's conduct in four areas that represent the key elements of the

firm-consumer relationship (product design and governance, price and value, consumer understanding and consumer support). The Consumer Duty

requires firms to end unfair charges and fees, make it as easy to switch or cancel products as it was to take them out in the first place, provide helpful

and accessible customer support, act quickly to respond to customer queries, provide timely, clear and easily understandable information to

customers regarding products and services, provide products and services that are appropriate for their customers, and focus on the real and diverse

needs of their customers, including those in vulnerable circumstances, at every stage and in each interaction. The Consumer Duty also requires firms

to monitor, evidence and report against many of the requirements. Santander UK has fully implemented the Consumer Duty, which required a review

of, and changes to, Santander UK’s products, services, policies, systems and procedures against the FCA requirements. The Consumer Duty affects

elements of Santander UK’s business model and strategy, the products and services it offers and the pricing or costs of those products and services,

which may in turn affect the revenue and profits that Santander UK is able to generate. It may result in an increase in claims to the Financial

Ombudsman Service (FOS) by customers alleging a breach of the standards of the Consumer Duty or in regulatory action by the FCA.

–Consumer redress: The FOS is the statutory body responsible for handling complaints by retail customers against regulated financial services firms.

The FOS is not bound to follow law or regulation when issuing decisions but rather must decide each complaint based on what is ‘fair and

reasonable’ in the circumstances. As a result, there can be a lack of clarity as to how the FOS will rule on a particular complaint, even where a firm

believes that it has been operating within legal and regulatory requirements. Further, while the FOS is not formally a precedent-setting body, in

practice its decisions can set a precedent, requiring firms to apply the reasoning given in one complaint to similar historic and future complaints. This

means that the ramifications of a particular complaint can extend well beyond the circumstances of the original complainant. However, the FOS will

rule on a particular case, even where the bank believes that it is operating within the legal and regulatory requirements. The FOS is not bound by its

past decisions and has the ability to change its approach to cases, which can make it harder for firms to consistently address complaints. Together,

these factors mean that Santander faces legal and regulatory risk and uncertainty as a result of FOS decisions. The UK Government has

acknowledged that there is a need to review the UK’s redress system particularly with respect to so-called ‘mass redress events’ where there are

large numbers of complaints about the same issue and the FCA and FOS launched a joint call for input to this effect in November 2024.

–Outsourcing and Third-Party Risk Management: In March 2021, the PRA published Supervisory Statement 2/21 on outsourcing and third-party

risk management (SS2/21). SS2/21 is the primary source of reference for Santander UK when interpreting and complying with its requirements on

outsourcing and third-party risk management, although it should be read alongside the EBA guidelines on outsourcing arrangements, and PRA and

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FCA rules and guidance on outsourcing. The scope of contracts required to meet the PRA requirements on outsourcing and third-party risk

management extends beyond that set out in the EBA guidelines on outsourcing and also captures material non-outsourcing. SS2/21 also requires

that intragroup outsourcing be subject to the same requirements and expectations as external outsourcing and should not be treated as being

inherently less risky. If Santander UK is unable to meet the PRA or FCA requirements on outsourcing and third-party risk management, it may face

supervisory measures, which could in turn have a material adverse effect on Santander UK’s operations, financial condition and prospects. In

November 2024, the PRA and FCA published a joint Policy Statement setting out their final rules for critical third parties. While Santander UK is not

captured by the regime, Santander UK does outsource services to companies that will be captured which may have an impact on Santander UK’s

operations and financial condition.

–Operational Resilience: In March 2021, the PRA and the FCA published Supervisory Statement 1/21 (SS1/21) and Policy Statement 21/3 (PS21/3),

which set out their final rules and guidance intended to strengthen operational resilience in the financial services sector. The operational resilience

rules require Santander UK to identify its ‘important business services’, being those services which, if disrupted, could cause intolerable harm to

clients or pose a risk to that firm’s safety and soundness or to the stability of the UK financial system. Once Santander UK has identified these, it

must set impact tolerances for all important business services and ensure it is able to remain within these tolerances in severe but plausible

disruption scenarios. Santander UK must comply with these requirements by no later than the end of a three-year transitional period on 31 March

2025. If Santander UK is unable to meet the PRA and FCA requirements relating to operational resilience, it may face supervisory measures, which

could in turn have a material adverse effect on Santander UK’s operations, financial condition and prospects.

–Climate Change: The UK Government has announced its intention to roll out new sustainability disclosure requirements, which will expand on those

required under the TCFD framework, including transition plans to align to net-zero, as well as a new UK green taxonomy. Santander UK Group

Holdings plc is implementing the recommendations of TCFD on a group level: further reporting will require additional gathering of data and

digitalisation of reporting and there will be legal, reputational and regulatory risks should Santander UK Group Holdings plc fail to adequately report,

or to demonstrate appropriate capabilities to transition and support its customers to transition to a low carbon economy. 

–Access to Cash: FSMA 2023 grants the BoE supervisory powers to regulate the UK wholesale cash distribution market, including powers to impose

fines and empowers HMT to designate firms to be subject to FCA oversight for the purpose of ensuring the reasonable provision of cash access

(including free cash access). Santander UK has been designated by HMT for these purposes and accordingly has been subject to the FCA’s access

to cash rules since September 2024. The access to cash regime is likely to have ongoing implications for Santander UK's business decisions and

strategy, in particular in relation to Santander UK's branch network and Santander UK's participation in the wholesale cash distribution market

generally. In the event that the BoE imposes any fines with respect to Santander UK’s participation in the wholesale cash distribution market or the

FCA were to take enforcement action against Santander UK in relation to retail cash access, this could result in reputational damage and have a

material adverse effect on Santander UK’s operations, financial condition and prospects.

–Financial Crime: The UK financial crime legislative framework has evolved significantly in recent years and is subject to regular change. As such,

Santander UK may face higher compliance costs and must carefully manage its capacity to respond to multiple regulatory changes simultaneously.

Any deficiencies in Santander UK’s compliance with such regulatory changes could result in enforcement action including the imposition of financial

or other penalties. Recent changes to the UK financial crime legislative framework include the introduction of the Economic Crime (Transparency and

Enforcement) Act 2022 (ECTEA), The Economic Crime and Corporate Transparency Act 2023 (ECCTA) and the Money Laundering and Terrorist

Financing (Amendment) Regulations 2023. Further changes to the UK financial crime legal and regulatory framework are anticipated during 2025,

following multiple consultations in 2024, including HMT's consultation on improving the effectiveness of the Money Laundering, Terrorist Financing

and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs) and the FCA’s consultation on updates to its guidance on politically

exposed persons (PEPs). Responses to both consultations may follow in 2025. Other changes have already entered into force. For instance, in

November 2024, the FCA updated its Financial Crime Guide, aiming to provide clearer expectations for firms’ financial crime controls and updated

guidance on emerging risks such as sanctions compliance, proliferation finance and transaction monitoring. Further changes to the UK financial crime

framework may include potential revisions to account closure rules, and the introduction of new information sharing powers for the Department for

Work and Pensions which may impose additional operational demands. On 23 January 2025, the Fraud, Error and Recovery Bill was also introduced

to Parliament, with the Department for Work and Pensions expected to consult with the financial services industry on a Code of Practice to support

understanding of any new regulatory expectations. More changes may arrive as a result of UK Government strategic initiatives such as the Economic

Crime Plan 2 and the Fraud Strategy. There may also be a new anti-corruption strategy published by the UK government in 2025. Any expansion of

civil or criminal liability under UK financial crime reforms brings with it financial risk in the form of penalties and reputational risk, while continued

compliance with the changing UK financial crime framework may expose Santander UK to increased operational and compliance costs, each of

which could in turn have a material adverse effect on Santander UK’s operations, financial condition and prospects.

–Challenge to commission-based lending: Santander UK is monitoring the FCA’s review which was announced in January 2024 of discretionary

commission arrangements (DCAs) in the motor finance market and other related developments, in particular the Court of Appeal decision and

Supreme Court appeal hearing listed for April 2025, in relation to three motor finance commission cases (Hopcraft v Close Brothers, Wrench v

FirstRand Bank Limited and Johnson v FirstRand Bank Limited). The FCA’s review may also be informed by the outcome of a judicial review of a final

decision by the FOS against another lender that was heard in October 2024. Judgment in this case was handed down in December 2024 and

permission for leave to appeal to the Court of Appeal has been granted. There is significant uncertainty with regard to the implications of these

judicial proceedings, the FCA review and the nature, extent and timing of any subsequent regulatory interventions regarding commissions paid in the

motor finance market. As such, the ultimate financial impact could be materially higher or lower than the amount that Santander UK has recognised

as a provision. It is also possible that the principles articulated in relation to the motor finance market could have a broader application extending to

other types of commission-based lending, although the scope and extent of any exposure or required changes to commission-based lending

arrangements is unclear. The impact cannot be accurately assessed in full until the FCA’s approach is known and the legal cases in relation to motor

finance commission disclosure are resolved. As a result, Santander UK is subject to the risk of ongoing legal and regulatory uncertainty in relation to

all commission-based lending, which may have a material adverse effect on Santander UK’s operations and financial condition.

Santander UK may become subject to the provisions of the Banking Act, including bail-in and write-down powers

The special resolution regime set out in the Banking Act provides HMT, the BoE, the PRA and the FCA with a variety of powers for dealing with UK deposit

taking institutions (and, in certain circumstances, their holding companies) that are failing or likely to fail, including: (i) to take a bank or bank holding company

into temporary public ownership; (ii) to transfer all or part of the business of a bank to a private sector purchaser; or (iii) to transfer all or part of the business of a

bank to a ‘bridge bank’. The special resolution regime also comprises a separate insolvency procedure and administration procedure each of which is of specific

application to banks. These insolvency and administration measures may be invoked prior to the point at which an application for insolvency proceedings with

respect to a relevant institution could be made.

If an instrument or order were made under the Banking Act in respect of an entity in Santander UK, such instrument or order (as the case may be) may, among

other things: (i) result in a compulsory transfer of shares or other securities or property of such entity; (ii) have an impact on the rights of the holders of shares or

other securities issued by Santander UK or such entity or result in the nullification or modification of the terms and conditions of such shares or securities; or (iii)

result in the de-listing of the shares and/or other securities of such entity. In addition, such an order may affect matters in respect of Santander UK or such entity

and/or other aspects of the shares or other securities of Santander UK or such entity, which may negatively affect the ability of Santander UK or such entity to

meet its obligations in respect of such shares or securities.

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Further, amendments to the Insolvency Act 1986 and secondary legislation have introduced changes to the treatment and ranking of certain debts with the result

that certain eligible deposits will rank in priority to the claims of ordinary (i.e. non-preferred) unsecured creditors in the event of an insolvency. This may negatively

affect the ability of unsecured creditors to recover sums due to them in an insolvency scenario.

If a ‘bail-in’ order were made under the Banking Act as amended by The Financial Services (Banking Reform) Act 2013 (see further ‘Regulation of Santander UK -

The Banking Act 2009’), such an order would be based on the principle that any creditors affected by the 'bail-in' order should receive no less favourable treatment

than they would have received had the bank entered into insolvency immediately before the coming into effect of the bail-in power. The bail-in power includes the

power to cancel or write-down (in whole or in part) certain liabilities or to modify the terms of certain contracts for the purposes of reducing or deferring the liabilities

of a bank under resolution and the power to convert certain liabilities into shares (or other instruments of ownership) of the bank. The bail-in power under the

Banking Act may potentially be exercised in respect of any unsecured debt securities issued by a bank under resolution or an entity in Santander UK, regardless

of when they were issued. Accordingly, the bail-in power under the Banking Act could be exercised in respect of Santander UK’s debt securities. Public financial

support would only be used as a last resort, if at all, after having assessed and utilised, to the maximum extent practicable, the resolution tools including the bail-in

tool and the occurrence of circumstances in which bail-in powers would need to be exercised in respect of Santander UK or any entity in Santander UK would

have a material adverse effect on Santander UK’s operations, financial condition and prospects.

The PRA also has the power to make rules requiring a parent undertaking of a bank to make arrangements to facilitate the exercise of resolution powers, including

a power to require a member of a banking group to issue debt instruments. The exercise of such powers could have an impact on the liquidity of Santander UK’s

debt instruments and could materially increase Santander UK’s cost of funding.

In addition, the resolution authorities have the power to require institutions and groups to make structural changes to ensure legal and operational separation of

‘critical functions’ from other functions where necessary, or to require institutions to limit or cease existing or proposed activities in certain circumstances. As a

result, Santander UK is required to identify such ‘critical functions’ as part of its resolution and recovery planning. If used in respect of Santander UK, these ex ante

powers could have a material adverse effect on Santander UK’s operations, financial condition and prospects.

Santander UK must comply with laws and regulations relating to anti-money laundering, anti-terrorism, anti-bribery and corruption, sanctions and

preventing the facilitation of tax evasion. Failure to prevent, detect or deter any illegal or improper activities could have a material adverse effect

on Santander UK’s operations, financial condition or prospects

Santander UK is required to comply with applicable laws and regulations relating to anti-money laundering (AML), counter-terrorism financing (CTF), anti-bribery

and corruption, sanctions, preventing the facilitation of tax evasion and other laws and regulations in the jurisdictions in which Santander UK operates. These laws

and regulations require Santander UK, among other things, to conduct customer due diligence (including in respect of sanctions and politically-exposed person

screening), to ensure customer and transaction information is appropriately recorded, monitored and kept up to date and to implement effective financial crime

policies and procedures detailing what is required from those responsible in order to counter financial crime risks with the aim to prevent the facilitation of bribery,

tax evasion and fraud by its employees or associated persons. Santander UK's staff are obligated to report suspicious transactions and activity to appropriate law

enforcement. The policies and procedures require the implementation and embedding of effective controls and monitoring within the businesses of Santander UK,

which in turn requires ongoing changes to systems, technology and operational activities.

Santander UK is also required to conduct financial crime training for its staff. Comprehensive and risk based financial crime training at a group-wide and business

unit level is a key element of effective controls, with the FCA providing guidance on expectations within its Financial Crime Guide and the Joint Money Laundering

Steering Group (JMLSG) providing guidance on the practical interpretation of UK AML and CTF legislation. Financial crime is continually evolving, and this

requires proactive and adaptable responses from Santander UK so that it is able to deter, detect and disrupt threats and criminality effectively. Even known threats

can never be fully eliminated, and there may be instances where Santander UK could be used by other parties to engage in money laundering and other illegal or

improper activities. Santander UK’s staff, whom Santander UK rely heavily upon to identify such activities and report them, have varying degrees of experience in

recognising criminal tactics, making effective, bank-wide mandatory and specialist training provided by the Santander UK Economic Crime Academy more

pertinent.

Where Santander UK outsources any of its customer due diligence or anti-financial crime operations, it remains responsible and accountable for full compliance

and any breaches. If Santander UK is unable to apply the necessary scrutiny and oversight, or if such oversight proves insufficient to detect illegal or improper

activities, there remains a risk of regulatory breach and this could have a material adverse effect on Santander UK's operations, financial condition and prospects.

Over the last decade, laws and regulations relating to financial crime have become, and may continue to become, increasingly complex and detailed.

Consequently, financial crime risk has become the subject of enhanced regulatory scrutiny and supervision by regulators globally which continues to intensify. To

manage regulatory scrutiny, Santander UK continues to improve its systems, adopt more sophisticated monitoring and enhance the skill set of its compliance

personnel. Navigating the increasing complexity of financial crime regulation is a significant challenge, involving overlapping requirements between different

legislation, and, in some instances, conflicts of laws. The divergence of policy approaches between the EU, UK and US in the area of economic sanctions and the

evolving financial and trade sanctions imposed on Russia and Belarus due to the war in Ukraine, require additional immediate and longer-term sanctions risk

management and compliance efforts for Santander UK. The scale of these sanctions is unprecedented, complex and poses operational and compliance risks to

Santander UK. The EU, UK and US are expected to continue to use sanctions to pursue their foreign policy interests and objectives, and the imposition of new,

additional, and/or enhanced sanctions is and will remain unpredictable. Current sanctions and other measures, any new, additional, and/or enhanced sanctions,

as well as the existing and potential further responses from Russia or other countries to such sanctions, tensions and military actions, have resulted in, and could

continue to result in, an increasingly fragmented macroeconomic, trade and regulatory environment. The heightened regulatory, political and media focus on

Santander UK's response to this crisis, the Israel-Hamas armed conflict or any other future regional conflicts and wars that have a global impact may also increase

Santander UK's exposure to conduct and reputational risks.

UK AML and CTF legislation continues to evolve, including implementation of the ECCTA in 2024 which has initiated reforms to Companies House, targeting

misuse of UK corporate structures, extending corporate criminal liability and introducing a new “failure to prevent” fraud offence. The Money Laundering and

Terrorist Financing (High-Risk Countries) (Amendment) Regulations 2024 have resulted in direct alignment of the UK’s list of High Risk Third Countries with the

“Jurisdictions subject to a Call for Action” and the “Jurisdictions under Increased Monitoring” lists published by the Financial Action Task Force (FATF). While

legislative changes can offer opportunities to increase effectiveness and efficiency in the overall anti-financial crime system, there are also risks of divergence from

Banco Santander group, and imposition of additional legislative and regulatory requirements via Banco Santander SA and the EU. Significant change could

adversely impact Santander UK’s business by increasing its operational and compliance costs and reducing the value of its assets and operations, which would in

turn have a material adverse effect on Santander UK’s operations, financial condition and prospects.

If Santander UK is unable to fully comply with applicable laws, regulations and expectations, its regulators and relevant law enforcement agencies have the ability

and authority to pursue civil and criminal proceedings against it, to impose significant fines and other penalties on it, including requiring a complete review of

Santander UK’s business systems, day-to-day supervision by external consultants, imposing restrictions on the conduct of Santander UK’s business and

operations and ultimately the revocation of Santander UK’s banking licence. The reputational damage to its business and brand could be severe if Santander UK

was found to have materially breached AML, CTF, anti-bribery and corruption, anti-tax evasion or sanctions requirements. Santander UK’s reputation could also

suffer if it were unable to protect its customers or its business from being used by criminals for illegal or improper purposes. Criminal penalties could be imposed

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upon individuals employed by Santander UK. Any of these outcomes could have a material adverse effect on Santander UK’s operations, financial condition and

prospects.

Santander UK has been, and may in the future be, subject to negative coverage in the media about Santander UK or Santander UK's clients, including with

respect to alleged conduct such as failure to detect and/or prevent any financial crime activities or comply with financial crime compliance regulations. Negative

media coverage of this type about Santander UK, whether it has merit or not, could materially and adversely affect Santander UK’s reputation and perception

among current and potential clients, investors, vendors, partners, regulators and other third parties, which in turn could have a material adverse effect on

Santander UK’s operating results, financial condition and prospects as well as damage its customers’ and investors’ confidence and the market price of Santander

UK’s  securities.

At an operational level, geopolitical, economic, social and technological changes can provide opportunities to financial criminals and alter the risks posed to banks.

For example, war, bribery and corruption can be linked. Military resources can be illegally appropriated and sold, increasing illicit finance flows, and as a result

those benefiting from conflict may use bribery, corruption and coercion to gain access to the financial system. Effective intelligence and monitoring systems within

strengthened public/private partnerships supported by improved national capabilities to share knowledge on emerging risks and information pre-suspicion are

required to help manage these risks. However, there can be no guarantee that any intelligence shared by public authorities or other financial institutions will be

accurate or effective in helping Santander UK to combat financial crime, and if, despite such efforts, Santander UK fails to combat financial crime effectively then

this could have a material adverse effect on Santander UK’s operations, financial condition and prospects.

In addition, while Santander UK reviews its relevant counterparties’ internal policies and procedures (for example, under its correspondent banking relationships)

with respect to such matters, Santander UK, to a large degree, requires relevant counterparties to maintain and properly apply their own appropriate anti-financial

crime procedures to reduce the risk of being used as a conduit for money laundering without its knowledge. There are also risks that other third parties, such as

suppliers and those considered ‘associated parties’ under the UK Bribery Act, could be involved in financial crime. If Santander UK is associated with, or even

accused of being associated with, financial crime (or a business involved in financial crime), then its reputation could suffer and it could become subject to civil or

criminal proceedings that could result in penalties, sanctions and legal enforcement (including being added to 'black lists' that would prohibit certain parties from

engaging in transactions with it), any one of which could have a material adverse effect on Santander UK’s operations, financial condition and prospects.

Santander UK is subject to tax-related risks

Santander UK is subject to the substance and interpretation of tax laws and is subject to routine review and audit by tax authorities in relation thereto. Santander

UK’s interpretation or application of these tax laws may differ from those of the relevant tax authorities. While Santander UK provides for potential tax liabilities that

may arise on the basis of the amounts expected to be paid to the tax authorities, the amounts ultimately paid may differ materially from the amounts provided

depending on the ultimate resolution of such matters. In general, changes to tax laws and tax rates, including as a result of policy changes by governments and/or

regulators, and penalties for failing to comply with such changes, could have a material adverse effect on Santander UK’s operations, financial condition and

prospects. Some of these changes may be specific to the banking/financial services sectors and therefore result in Santander UK incurring an additional tax

burden when compared to other industry sectors.

Santander UK is exposed to risk of loss and damage from civil litigation and/or criminal legal and regulatory proceedings

Santander UK faces various legal and regulatory issues that have given rise and may give rise to civil or criminal litigation, arbitration, and/or criminal, tax,

administrative and/or regulatory investigations, inquiries or proceedings. Failure to adequately manage the risks arising in connection with legal and regulatory

issues, including Santander UK’s obligations under existing applicable laws and regulations or its contractual obligations, including arrangements with its

customers and suppliers, or failure to properly implement applicable laws and regulations could result in significant loss or damage including reputational damage,

all of which could have a material adverse effect on Santander UK’s operations, financial condition and prospects.

Additionally, the current regulatory environment, with the continuing heightened supervisory focus, combined with the forthcoming regulatory change initiatives, will

lead to material operational and compliance costs. Relevant risks include:

–Regulators, agencies and authorities with jurisdiction over Santander UK, including the BoE, the PRA and the FCA, HMT, HM Revenue & Customs

(HMRC), the CMA, the Information Commissioner’s Office, the FOS, the PSR, the SFO, the National Crime Agency (NCA), the Office of Financial

Sanctions Implementation (OFSI) or the courts, may determine that certain aspects of Santander UK’s business have not been or are not being

conducted in compliance with applicable laws or regulations (or that policies and procedures are inadequate to ensure compliance), or, in the case of

the FOS, with what is fair and reasonable in the FOS’s opinion. Changes in policy, laws and regulations including in relation to SME dispute

resolution and liability for APP fraud and unauthorised payment fraud, may have significant consequences and lead to material implementation,

operational and compliance costs.

–An adverse finding by a regulator, agency or authority could result in the need for extensive changes in systems and controls, business policies, and

practices coupled with suspension of sales, restrictions on conduct of business and operations, withdrawal of services, customer redress, fines and

reputational damage.

–The increased focus on competition law in financial services and concurrent competition enforcement powers for the FCA and PSR may increase the

likelihood of competition law related inquiries or investigations initiated by either the CMA or these authorities. Santander UK may be liable for

damages to third parties harmed by Santander UK’s conduct of business. For competition law, there are efforts by governments across Europe to

promote private enforcement as a means of obtaining redress for harm suffered as a result of competition law breaches. Under the Consumer Rights

Act 2015, there is scope for class actions to be used to allow the claims of a whole class of claimants to be heard in a single action in both follow-on

and standalone competition cases. The UK has seen a sharp increase in recent years in the number of class action claims being issued in the

Competition Appeals Tribunal on this basis. The tribunal has granted certification for every case that has reached the certification hearing stage to

date, including cases that have presented novel competition law theories of harm.

–The alleged historical or current misselling of, or misconduct in relation to, financial products, including the alleged misselling of Payment Protection

Insurance (PPI), the alleged overcharging of interest, the alleged inappropriate sale of interest-only mortgages, the alleged unfair use of the standard

variable rate in connection with mortgages, or alleged misconduct as a result of having sales practices and/or rewards structures that are deemed to

have been inappropriate, has given rise to and may in the future give rise to a risk of complaints to FOS and/or civil litigation (including claims

management company driven legal or complaints campaigns)(see Note 30 to the Consolidated Financial Statements for legal actions and regulatory

matters). For example, a recent judgment of the Court of Appeal of England and Wales (to which Santander UK was not a party) found that car

dealers, when acting as credit brokers, owe certain legal duties to their customers which were breached if the dealer received commission from motor

finance lenders without the informed consent of customers. Whilst the judgment is being appealed to the Supreme Court of England and Wales, and

it remains unclear what impact the judgment will have on the FCA’s ongoing investigation into auto-finance commission structures, in the interim there

is an increased risk of complaints to FOS and / or civil litigation. Such matters have given rise to and may in the future give rise to the risk of

regulatory enforcement action requiring Santander UK to amend sales processes, withdraw products or provide restitution to affected customers, any

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of which may require additional provisions to be recorded in Santander UK’s financial statements and could adversely impact future revenues from

affected products.

–Santander UK may have held and may continue to hold bank accounts for entities or have relationships with entities such as third parties that might

be or are subject to scrutiny from various regulators and authorities, including the SFO, the NCA and regulators in the US and elsewhere, which has

led and could in the future lead to Santander UK’s conduct being reviewed as part of any such scrutiny.

–Santander UK is (and will continue from time to time to be) subject to certain legal or regulatory investigations, inquiries and proceedings, both civil

and criminal including in connection with Santander UK’s lending and payment activities, treatment of customers, relationships with Santander UK’s

employees, financial crime, and other commercial or tax matters (see Note 30 to the Consolidated Financial Statements for legal actions and

regulatory matters). These may be brought against Santander UK under UK legal or regulatory processes, or under legal or regulatory processes in

other jurisdictions, such as the EU and the US, in circumstances where overseas regulators and authorities may have jurisdiction by virtue of its

activities or operations.

–In view of the inherent difficulty of predicting the outcome of legal or regulatory proceedings, particularly where opportunistic claimants seek very

large or indeterminate damages, cases present novel legal theories, involve a large number of parties or are in the early stages of discovery, or

where the approaches of regulators or authorities to legal or regulatory issues and sanctions applied are subject to change, Santander UK cannot

state with confidence what the eventual outcome of any pending matters will be and any such pending matters are not disclosed by name because

they are under assessment. Santander UK’s provisions in respect of any pending legal or regulatory proceedings are made in accordance with

relevant accounting requirements. These provisions are reviewed periodically. However, in light of the uncertainties involved in such legal or

regulatory proceedings, there can be no assurance that the ultimate resolution of these matters will not exceed the provisions currently accrued by

Santander UK. As a result, the outcome of a particular matter (whether currently provided or otherwise) could have a material adverse effect on

Santander UK’s operations, financial condition and prospects.

–The developing legal and regulatory regime in which Santander UK operates requires it to be compliant across all aspects of its business, including

the training, authorisation and supervision of personnel and the development of systems, processes and documentation. If Santander UK fails to be

compliant with relevant law or regulation, there is a risk of an adverse impact on its business from more proactive regulatory intervention (including by

any overseas regulator which establishes jurisdiction), investigation and enforcement activity leading to sanctions, fines, civil or criminal penalties, or

other action imposed by or agreed with the regulatory authorities, as well as increased costs associated with responding to regulatory inquiries and

defending regulatory actions. Customers of financial services institutions, including Santander UK’s customers, may seek redress if they consider that

they have suffered loss for example as a result of the misselling of a particular product, or through incorrect application or enforcement of the terms

and conditions of a particular product or in connection with a competition law infringement and Santander UK’s rights under a contract with its

customers may in certain circumstances be unenforceable or otherwise impaired.

–The Financial Services and Markets Act 2000 (Designated Consumer Bodies) Order 2013 (the Designated Consumer Bodies Order) was made on 16

December 2013 and came into force on 1 January 2014. The Designated Consumer Bodies Order designates the National Association of Citizens

Advice Bureaux, the Consumers’ Association, the General Consumer Council for Northern Ireland and the National Federation of Self Employed and

Small Businesses as consumer bodies that may submit a ‘super-complaint’ to the FCA. A ‘super-complaint’ is a complaint made by any of these

designated consumer bodies to the FCA on behalf of consumers of financial services where it considers that a feature, or a combination of features,

of the market for financial services in the UK is seriously damaging the interests of these customers. Complaints about damage to the interests of

individual consumers will continue to be dealt with by the FOS. If a ‘super-complaint’ were to be made against a Santander UK entity by a designated

consumer body under the Designated Consumer Bodies Order, any response published, or action taken by the FCA could have a material adverse

effect on Santander UK’s operations, financial condition and prospects.

Given the: (i) requirement for compliance with an increasing volume of relevant laws and regulations; (ii) more proactive regulatory intervention and enforcement

and more punitive sanctions and penalties for infringement; (iii) inherent unpredictability of litigation; (iv) evolution of the jurisdiction of FOS and CMA and related

impacts; (v) potential for the development of a voluntary dispute resolution service to oversee the resolution of complaints from SMEs that are outside the FOS’

jurisdiction; (vi) introduction of a voluntary code to enhance protection for customers who are victims of APP fraud; and (vii) high volume of new regulations or

policy changes from multiple regulators and authorities which Santander UK is mandated to implement within compressed timescales; it is possible that related

costs or liabilities could have a material adverse effect on Santander UK’s operations, financial condition and prospects.

Operational risks

Failure to successfully apply or to improve Santander UK’s credit risk management systems could have a material adverse effect on Santander

UK’s operations, financial condition and prospects

As a commercial banking group, one of the main types of risks inherent in Santander UK’s business is credit risk. For example, an important feature of Santander

UK’s credit risk management system is to employ Santander UK’s own credit rating system to assess the particular risk profile of a customer. This system is

primarily generated internally, but, in the case of counterparties with a global presence, also builds off the credit assessment assigned by other Banco Santander

group members. As this process involves detailed analysis of the customer or credit risk, taking into account both quantitative and qualitative factors, it is subject to

human and IT systems errors. Where exercising their judgement on current or future credit risk behaviour of Santander UK’s customers, Santander UK’s

employees may not always be able to assign a correct credit rating, which may result in a larger exposure to higher credit risks than indicated by Santander UK’s

risk rating system. Santander UK may not be able to detect all possible risks before they occur, or its employees may not be able to effectively apply its credit

policies and guidelines due to limited tools available to Santander UK, which may increase its credit risk.

Any failure to effectively apply, consistently monitor and refine Santander UK’s credit risk management systems may result in an increase in the level of non-

performing loans and higher losses than expected, which could have a material adverse effect on Santander UK’s operations, financial condition and prospects.

Santander UK‘s business is subject to risks related to data and adverse impacts on operations if data management policies and procedures are

not sufficiently robust

Santander UK's operations rely on the effective use of data to manage and grow its business and deliver the overall strategy. Santander UK uses data to serve its

customers, satisfy its regulatory requirements and run its operations. If Santander UK's data is not accurate and timely, this could impact its ability to serve

customers, operate with resiliency or meet regulatory requirements. From a business perspective, accurate and detailed customer data is critical for delivering

customer expectations in terms of new and improved products and services. Lack of good quality data could also result in competitive disadvantages by

increasing costs in terms of manual interventions, adjustments, and reconciliations. Investment is being made in data tools and in maturing a strong data culture

across the organisation to address some of the data challenges and prepare a strong foundation for the future. Any such failure to effectively use data or maintain

effective data management policy and procedures could have a material adverse effect on Santander UK’s operations, financial condition and prospects.

Santander UK’s business is subject to risks related to cybersecurity

Santander UK’s systems, software and networks may be vulnerable to unauthorised access, misuse, computer viruses or other malicious code and other events

that could have a security impact. The interception, misuse or mishandling of personal, confidential or proprietary information sent to or received from a client,

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vendor, service provider, counterparty or third party could result in legal liability, regulatory action and reputational harm, and therefore have a material adverse

impact on Santander UK’s operations, financial condition and prospects.

In particular, in recent years the computer systems of companies and organisations have been targeted by cyber criminals, activists and nation-state-sponsored

groups. Like other financial institutions, Santander UK manages and holds confidential personal information of customers in the conduct of its banking operations,

as well as a large number of assets. Consequently, Santander UK has been, and continues to be, subject to a range of cybersecurity threats, such as

ransomware, malware via the supply chain, phishing and denial of service.

Cybersecurity incidents could result in the loss of significant amounts of customer data and other sensitive information, as well as significant levels of liquid assets

(including cash). In addition, cybersecurity incidents could give rise to the disablement of Santander UK’s digital systems used to service its customers. Any

material disruption or degradation of Santander UK’s systems, software or networks could cause information, including data related to customer requests, to be

lost or to be delivered to Santander UK’s clients with delays or errors, which could reduce demand for Santander UK’s services and products. As attempted

attacks continue to evolve in both scope and sophistication, Santander UK may incur significant costs to modify or enhance its protective measures against such

attacks, or to investigate or remediate any vulnerability or resulting breach, or in communicating any cybersecurity incidents to its customers. If Santander UK fails

to effectively manage its cybersecurity risk, by, for example, failing to adhere to its cybersecurity policies, procedures or controls, the impact could be significant

and may include harm to Santander UK reputation and make Santander UK liable for the payment of customer compensation, regulatory penalties and fines.

Factors such as failing to apply critical security patches from its technology providers, to manage out obsolete technology or to update Santander UK’s processes

in response to new threats could also give rise to these consequences, which, if they occur, could have a material adverse effect on Santander UK’s operations,

financial condition and prospects. This might also include significant increases in the premiums paid on cyber insurance policies or changes to policy limits and

cover.

In addition, Santander UK may also be affected by cybersecurity incidents against national critical infrastructures in the UK or elsewhere, for example, the

telecommunications network or cloud computing service providers used by Santander UK. In common with other financial institutions Santander UK is dependent

on such networks to provide digital banking services to its customers, connect its systems to suppliers and counterparties, and allow its staff to work remotely. Any

cybersecurity incidents against these networks could negatively affect its ability to service its customers. As Santander UK does not operate these networks it has

limited ability to protect Santander UK’s business from the adverse effects of cybersecurity incidents against it or against its counterparties and key national and

financial market infrastructure. Further, the domestic and global financial services industry, including key financial market infrastructure, may be the target of

cybersecurity disruption and attack by cyber criminals, activists or geopolitical activists looking to cause economic instability.

Further, the risk of cyberattacks on companies and institutions could increase as a result of geopolitical turmoil. For example, Santander UK has faced a

heightened risk of cyberattacks as a result of Russia’s military action against Ukraine; the Israel-Hamas armed conflict and/or other future regional conflicts and

wars that have a global impact serve to further heighten such risk. Such attacks could adversely affect Santander UK's ability to maintain or enhance its

cybersecurity and data protection measures. Santander UK continues to see increasing ransomware attacks across sectors driven by supply chain tool

compromises, among other factors, and expect this trend to continue. We continue to actively monitor the situations in Ukraine, the Middle East and globally and

assess their potential impacts on its business.

Santander UK’s business is subject to risks related to the developing fields of artificial intelligence and machine learning

Artificial intelligence (AI) developments in the banking industry will test Santander UK's preparedness to safely manage and respond to the evolution of AI and

machine learning given the velocity, pace and scale of change. This includes the identification of potential use cases for responsible adoption of AI and machine

learning in Santander UK’s own operations, as well as managing the threats that third party use of AI may pose. The risks caused by AI include, among others,

data poisoning, potential bias, discrimination, misuse and increased exposure to cybersecurity, legal liability and fraud risk. Santander UK has a planned phase

approach to AI over a three-year period and, to support that, it is improving data quality to enable model development. However, any failure to evaluate, actively

manage and closely monitor risk during all phases of the development and implementation of AI into Santander UK’s operations could introduce new

vulnerabilities and security flaws and have a material adverse effect on Santander UK’s operations, financial condition and prospects.

Santander UK is exposed to risk from potential non-compliance with regulations, policies, employee misconduct, human error, negligence and

deliberate acts of harm or dishonesty, including fraud

Santander UK is exposed to risk from potential non-compliance with policies, employee misconduct, human error, negligence and deliberate acts of harm or

dishonesty, including fraud. It is not always possible to deter or prevent employee misconduct or non-compliance with policies and such errors, acts, omissions

and failures and the precautions Santander UK takes to detect and prevent this activity may not always be effective due to employee misconduct and

circumvention of controls. Any instances could result in regulatory sanctions and cause reputational or financial harm, and therefore have a material adverse effect

on Santander UK’s operations, financial condition and prospects.

Any failure to effectively manage changes in Santander UK’s information technology infrastructure and management information systems in a

timely manner could have a material adverse effect on Santander UK’s operations, financial condition and prospects

Santander UK’s businesses and its ability to remain competitive depends to a significant extent upon the functionality of its information technology systems,

software and networks and on its ability to upgrade, evolve and expand the capacity of its information technology infrastructure on a timely and cost-effective

basis. The proper functioning of Santander UK’s financial control, risk management, credit analysis and reporting, accounting, customer service, financial crime,

conduct and compliance and other information technology systems, as well as the communication networks between branches and main data processing centres,

are critical to its customers, businesses and its ability to compete. Investments and improvements in Santander UK’s information technology infrastructure are

regularly reviewed with a view to retain competitive advantage and to ensure that resilience remains within acceptable levels. Conversely any failure to effectively

improve, evolve, expand or upgrade its information technology systems, software infrastructure and networks or information technology infrastructure in a timely

manner could have a material adverse effect on Santander UK’s operations, financial condition and prospects, and could cause reputational damage to Santander

UK.

From time-to-time Santander UK is required to migrate information relating to its customers to new information technology systems. Any failure to manage such

migration effectively and efficiently could have a negative impact on Santander UK’s ability to provide services to its customers and could cause financial and

reputational damage to Santander UK, along with regulatory scrutiny and potential enforcement action.

Santander UK expects changes to its programmes of systems to have an impact on its risk profile, from a technology, environmental, social and corporate

governance and regulatory perspective. Whether it is the opportunities from adoption of cloud technology, systems to support important regulatory initiatives, or

the desire to identify, prioritise and remove obsolete systems from operations, the operational risk associated with changes to programmes of systems is likely to

increase and this will therefore remain an area of key focus in Santander UK’s risk management. While internal controls aim to reduce the risk to acceptable

levels, there can be no assurance that Santander UK will not suffer material losses from such operational risks in the future, which could have a material adverse

impact on Santander UK’s operations, financial condition and prospects.

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Santander UK may be exposed to unidentified or unanticipated risks despite its risk management policies, procedures and methods and may be

exposed to risk related to errors in Santander UK’s risk modelling

The management of risk is an integral part of Santander UK’s activities. Santander UK seeks to monitor and manage its risk exposure through a variety of risk

reporting systems. For a further description of Santander UK's risk management framework see the ‘Risk review’. While Santander UK employs a broad and

diversified set of risk monitoring and risk mitigation techniques and strategies, they may not be fully effective in mitigating Santander UK’s risk exposure in all

economic market environments or against all types of risk, including risks that Santander UK fails to identify or anticipate.

Some of Santander UK’s tools and metrics for managing risk are based upon its use of observed historical market behaviour. Santander UK applies statistical and

other tools to these observations to arrive at quantifications of its risk exposures. These tools and metrics may fail to predict future risk exposures. These risk

exposures could, for example, arise from factors Santander UK did not anticipate or correctly evaluate in its statistical models. This would limit its ability to manage

its risks. Santander UK’s losses thus could be significantly greater than the historical measures indicate. In addition, Santander UK’s quantified modelling does not

take all risks into account. Santander UK’s more qualitative approach to managing those risks could prove insufficient, exposing it to material, unanticipated

losses. Santander UK could face adverse consequences as a result of decisions, which may lead to actions by management, based on models that include errors

or are otherwise inadequately developed, implemented or used, or as a result of the modelled outcome being misunderstood. If existing or potential customers or

counterparties believe its risk management is inadequate, they could take their business elsewhere or seek to limit their transactions with Santander UK. These

occurrences could have a material adverse effect on Santander UK’s operations, financial condition and prospects.

Santander UK relies on third parties for important infrastructure support, products and services

Third-party providers provide key components of Santander UK’s business infrastructure such as loan and deposit servicing systems, back office and business

process support, information technology production and support, internet connections and network access. Relying on these third-party providers is a source of

operational risk, including with respect to security breaches affecting Santander UK's third parties and other parties that interact with these providers. As the use

and depth of Santander UK’s relationship with third parties increases, including the use of AI and cloud-based services, Santander UK increasingly faces the risk

of operational failure with respect to its systems. Santander UK may be required to take steps to protect the integrity of its operational systems, thereby increasing

its operational costs. In addition, any problems caused by these third parties, including as a result of them not providing Santander UK their services for any

reason, or performing their services poorly, could adversely affect Santander UK’s ability to deliver products and services to customers and otherwise conduct its

business, which could lead to reputational damage, litigation and regulatory investigations and intervention. Replacing these third-party vendors or affiliates could

also entail significant delays and expense. Further, the operational and regulatory risk Santander UK faces as a result of these arrangements may be increased to

the extent that it restructures such arrangements. Any restructuring could involve significant expense to Santander UK and entail significant delivery and execution

risk which could have a material adverse effect on Santander UK’s operations, financial condition and prospects.

Santander UK relies on recruiting, retaining and developing appropriate senior management and skilled personnel

Santander UK’s continued success depends in part on the continued service of key members of its senior executive team and other key employees. The ability to

continue to attract, develop, train, motivate and retain highly qualified and talented professionals is a key element of Santander UK’s strategy. The successful

implementation of Santander UK’s strategy depends on the availability of skilled and appropriate management, both at Santander UK’s head office and in each of

its business units. There is also an increasing demand for Santander UK to hire individuals with STEM skills. Such individuals are very sought after by all

organisations, not just the banking industry, and thus Santander UK’s ability to attract and hire this talent will determine how quickly the bank is able to respond to

technological change. In light of a shortage of skills currently being seen across the UK, it is increasingly challenging to recruit and retain talent for all roles, with

subject matter expert and technology roles offering the biggest challenges.

If Santander UK fails to staff its operations appropriately or loses one or more of its key senior executives or other key employees and fails to replace them in a

satisfactory and timely manner, it could have a material adverse effect on Santander UK’s operations, financial condition and prospects.

In addition, the financial services industry has and may continue to experience more stringent regulation of employee compensation, which could have an adverse

effect on Santander UK’s ability to hire or retain the most qualified employees. If Santander UK fails or is unable to attract and appropriately develop, motivate and

retain qualified professionals, it could have a material adverse effect on Santander UK’s operations, financial condition and prospects.

Financial reporting risk

Santander UK’s financial statements are based in part on judgements and accounting estimates which, if inaccurate, could cause material

misstatement of Santander UK’s future financial results and financial condition

The preparation of Santander UK's consolidated financial statements in accordance with IFRS requires management to make judgements, estimates and

assumptions in applying the accounting policies that affect the reported amounts of assets, liabilities, income and expenses. Due to the inherent uncertainty in

making estimates, actual results reported in future periods may be based on amounts which differ from those estimates. Estimates, judgements and assumptions

are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable

under the circumstances. Management has considered the impact of developments in principal risks and uncertainties, as set out in the Risk review, on critical

judgements and accounting estimates.

The significant judgements, apart from those involving estimation, made by management in applying Santander UK's accounting policies in these financial

statements (key judgements) and the key sources of estimation uncertainty that may have a significant risk of causing a material adjustment to the carrying

amount of assets and liabilities within the next financial year (key estimates), which together are considered critical to Santander UK's results and financial

position, are set out in Note 1 to the Consolidated Financial Statements in 'Critical judgements and accounting estimates'. Any material differences between

estimates and actual results reported in any given financial period, or any material adjustments to the carrying amount of assets and liabilities, could result in

reputational damage to Santander UK and could have a material adverse effect on its future financial results and financial condition.

Changes in accounting standards could affect reported earnings

The accounting standard setters and other regulatory bodies periodically change the financial accounting and reporting standards that govern the preparation of

Santander UK’s Consolidated Financial Statements. These changes can materially affect how Santander UK records and reports its financial condition and

financial results. In some cases, Santander UK could be required to apply a new or revised standard retroactively, resulting in the restatement of prior period

financial statements. Any change in reported earnings as a result of the foregoing could have a material adverse effect on Santander UK’s future financial results

and financial condition.

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Regulation of the Santander UK group

As a financial services group, Santander UK is subject to extensive financial services laws, regulations, administrative actions and policies in the UK and in each

other location in which Santander UK operates. This intensive approach to supervision is maintained in the UK by the PRA and the FCA. As well as being subject

to UK regulation, as a result of forming part of the Banco Santander group, Santander UK is also affected by other regulators, such as the Banco de España and

the ECB, as well as various legal and regulatory regimes (including in the US) that have extra-territorial effect. Extensive legislation and implementing regulations

affecting the financial services industry have recently been adopted in regions that directly or indirectly affect Santander UK’s business, including Spain, the US,

the EU and other jurisdictions. In the UK and elsewhere, there is continuing political, competitive and regulatory scrutiny of the banking industry. Political

involvement in the regulatory process, in the behaviour and governance of the UK banking sector and in the major financial institutions in which the UK

government has a direct financial interest is likely to continue.

Approach of the FCA

As per FSMA, the FCA's strategic objective is to ensure that the relevant markets function well. In support of this, the FCA has three operational objectives: to

secure an appropriate degree of protection for consumers, to protect and enhance the integrity of the UK financial system and to promote effective competition in

the interests of consumers. Following the entry into force of FSMA 2023, the FCA also has a secondary competitiveness and growth objective, to facilitate the

international competitiveness and medium- to long-term growth of the UK economy.

The FCA Handbook sets out rules and guidance across a range of issues with which financial institutions are required to comply including high level principles of

business and detailed conduct of business standards and reporting standards.

Approach of the PRA

As per FSMA, the PRA's general objective is to promote the safety and soundness of the firms which it regulates (with respect to insurers, the PRA also has a

second objective of contributing to the securing of an appropriate degree of protection for policyholders). The PRA also has a secondary objective to facilitate

effective competition in the markets for services provided by PRA authorised firms and, following the entry into force of FSMA 2023, is subject to the same

secondary competitiveness and growth objective as the FCA.

The PRA Rulebook includes rules relating to capital adequacy and liquidity, among several other things.

US regulation

Within the Dodd-Frank Act, the so-called Volcker Rule, prohibits ‘banking entities’, including the Santander UK group, from engaging in certain forms of proprietary

trading or from sponsoring or investing in certain covered funds, in each case subject to certain exemptions, including exemptions permitting foreign banking

entities to engage in trading and fund activities that take place solely outside of the US. The Volcker Rule also contains exclusions and certain exemptions for

market-making, hedging, underwriting, trading in US government and agency obligations as well as certain foreign government obligations and also permits

ownership interests in certain types of funds to be retained. The Santander UK group has policies, procedures and controls in place designed to achieve

compliance with the Volcker Rule.

The Banking Act 2009

The special resolution regime set out in the Banking Act 2009 provides HMT, the BoE, the PRA and the FCA with a variety of powers for dealing with UK deposit

taking institutions (and, in certain circumstances, their holding companies) that are failing or likely to fail, including: (i) to take a bank or bank holding company into

temporary public ownership; (ii) to transfer all or part of the business of a bank to a private sector purchaser; or (iii) to transfer all or part of the business of a bank

to a bridge bank. The special resolution regime also comprises a separate insolvency procedure and administration procedure each of which is of specific

application to banks. These insolvency and administration measures may be invoked prior to the point at which an application for insolvency proceedings with

respect to a relevant institution could be made.

The Financial Services (Banking Reform) Act 2013 further amended the Banking Act 2009 to introduce a UK ‘bail-in power’ to implement the EU’s Bank Recovery

and Resolution Directive (BRRD), which contains a bail-in power similar to that contained in the Banking Act and requires EU Member States to provide resolution

authorities with the power to write-down the claims of unsecured creditors of a failing institution and to convert unsecured claims to equity (subject to certain

parameters). The UK bail-in power is an additional power available to the UK resolution authorities under the special resolution regime provided for in the Banking

Act 2009. This enables them to recapitalise a failing institution by allocating losses to such institution’s shareholders and unsecured creditors, subject to the rights

of such shareholders and unsecured creditors to be compensated under a bail-in compensation order.

Competition

The CMA is the UK’s main competition authority responsible for ensuring that competition and markets work well for consumers. In addition, under the Banking

Reform Act, as of 1 April 2015, the FCA has the power to enforce against breaches of the Competition Act 1998 and to refer markets to the CMA for in-depth

investigation in the areas of financial services in the UK. As of 1 April 2015, the PSR also has an objective and powers equivalent to those of the FCA to promote

competition in the payments industry.

Payments

Santander UK has been required to make systems changes and update processes to comply with a number of new payment regulations. As of 7 October 2024,

the Payment Services Regulator (PSR) has mandated that Santander UK works on the extension of Confirmation of Payee for all payment service providers in

the UK and has introduced a mandatory authorised push payment (APP) reimbursement requirement which aims to reduce the level of customer fraud. Under

these standards, Santander UK assumes responsibility for certain categories of customer losses and any inherent failings in system design may lead to fines from

regulators and/or compensation being paid to customers.

Santander UK also expects to see significant developments in the key UK payment systems architecture, with a systems update of the high value Clearing House

Automated Payment System (CHAPS) through the Real Time Gross Settlement (RTGS), BACS, the potential development of a UK central bank digital currency

or similar system, and the development of Open Banking payments and other lower value retail payment schemes. On 14 November 2024 the UK Government

published its “National Payments Vision”, which sets out its ambitions for the payments sector and is expected to generate a wider industry review of the UK

payments landscape in 2025.

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Financial crime

Santander UK is subject to UK anti-money laundering (AML)/counter-terrorism financing (CTF) legal and regulatory obligations. While the UK is no longer obliged

to follow EU AML/CTF regulations following Britain’s exit from the EU, as a wholly owned subsidiary of an EU headquartered bank, Santander UK is subject to

Santander Group policies which incorporate EU AML legal and regulatory obligations.

In the UK, Santander UK is subject to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs)(as

amended), which implement the Fourth Money Laundering Directive (EU) 2015/849 (MLD4) and the Fifth Money Laundering Directive (EU) 2018/843 (MLD5),

into UK law. The Money Laundering and Terrorist Financing (High-Risk Countries) (Amendment) Regulations 2024 repealed the UK's list of high-risk third

countries (HRTCs) and replaced it with a definition that implements, and is updated automatically with reference to, two lists published by FATF being the “High-

Risk Jurisdictions subject to a Call for Action” and the “Jurisdictions under Increased Monitoring”.

Aligned with the aim of reducing money laundering as set out in the Economic Crime Plan 2023-26, HM Treasury launched a consultation in March 2024 on

improving the effectiveness of the MLRs which closed on 9 June 2024. The consultation focused on four core themes, making customer due diligence more

proportionate and effective; strengthening system coordination; providing clarity on scope of the MLRs; and reforming registration requirements for the trust

register service.  However, it is currently unclear whether and when any consequential amendments to the MLRs will be made following the consultation.

Further legal and regulatory changes related to financial crime took place during 2024. For example, the Economic Crime and Corporate Transparency Act

(ECCTA) has initiated reforms to Companies House to combat misuse of UK corporate structures. The ECCTA will also extend corporate criminal liability by

introducing a "failure to prevent fraud" offence, which will enter into force on 1 September 2025. This offence has extra-territorial reach, similar to the existing

"failure to prevent" offences such as "failure to prevent bribery", introduced by the Bribery Act 2010, and "failure to prevent tax evasion", introduced by the Criminal

Finances Act 2017 (both of which continue to be key areas of focus for the UK government). The new offence carries an unlimited fine. To avoid liability,

organisations within scope will need to ensure they have in place ‘reasonable prevention procedures’ to prevent fraud. Government guidance indicates that

reasonable fraud prevention procedures should be informed by six principles, including senior-level responsibility, risk assessment and due diligence.

On 18 July 2024, the FCA released a consultation on updates to their guidance on the treatment of Politically Exposed Persons (PEPs) (GC24/4), seeking to

clarify the PEP definition and enhance due diligence obligations and approval requirements. The consultation closed on 18 October 2024 and, whilst the FCA

concluded that their guidance remains appropriate, they plan to publish final amendments to the text for the purposes of providing further clarity to firms. Further,

on 29 November 2024, the FCA published a policy statement on updates to its Financial Crime Guide (FCG) in the FCA Handbook, aiming to clarify its

expectations for firms’ financial crime controls (such as firms ensuring consistency with their Consumer Duty obligations) and to provide updated guidance on

emerging risks including in relation to sanctions compliance, proliferation finance and transaction monitoring. 

Consumer Duty

The FCA’s Consumer Duty has been fully in force for all products and services since 31 July 2024. The Consumer Duty aims to enhance and improve consumer

protections, requiring firms to deliver good outcomes for customers and to consider the needs, characteristics and objectives of the customer and how they

behave at every stage of the customer journey in order to deliver good outcomes. Given the Consumer Duty is a relatively new obligation, firms need to consider

and navigate updated guidance and expectations as the FCA continues to gain insights on firms' implementation of the Consumer Duty.

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Articles of Association

The following is a summary of the Articles of Association (the Articles) of the Company.

Santander UK Group Holdings plc is a public limited company incorporated and registered in England and Wales under the Companies Act 2006, with registered

number 8700698. The Articles do not specifically state or limit the objects of the Company which are therefore unrestricted.

A Director shall not vote on, or be counted in the quorum in relation to, any resolution of the Directors in respect of any contract in which he has an interest, except

if no conflict of interest could reasonably be expected to arise from that interest, or any resolution of the Directors concerning his own appointment, or the

settlement or variation of the terms or the termination of his or her appointment. Directors are entitled to such remuneration as the directors determine for their

services to the Company as directors and for any other service which they undertake for the Company. Directors may delegate to a person or committee the

determination of any fee, remuneration or other benefit which may be paid or provided to any Director. No Director is required to retire by reason of his or her age,

nor do any special formalities apply to the appointment or re-election of any Director who is over any age limit. No shareholding qualification for Directors is

required.

The Company may issue shares with such rights or restrictions as may be determined by ordinary resolution or, if no such resolution has been passed or so far as

the resolution does not make specific provision, as the Directors may decide. The Company may by ordinary resolution declare dividends, and the Directors may

decide to declare or pay interim dividends. No dividend may be declared or paid unless it is in accordance with shareholders’ respective rights. If dividends are

unclaimed for twelve years, the right to the dividend ceases. All dividends or other sums which are payable in respect of shares, and unclaimed after having been

declared or become payable, may be invested or otherwise made use of by the Directors for the benefit of the Company until claimed.

Ordinary shares are transferable. Holders of ordinary shares are entitled to receive notice of and to attend any general meeting of the Company. Subject to any

special terms as to voting upon which any shares may be issued or may for the time being be held, or any suspension or any abrogation of special rights, as set

out in the Articles of Association, on a show of hands every member who is present in person at a general meeting of the Company shall have one vote and every

proxy present who has been duly appointed by a member shall have one vote. On a poll every member who is present in person or by proxy shall have one vote

for every share of which he is the holder.

The Company pays dividends on its ordinary shares only out of its distributable profits and not out of share capital. Dividends are determined by the Board.

The Company’s Articles of Association authorise it to issue redeemable shares, but the Company’s ordinary shares are not redeemable. There are no sinking fund

provisions. Where the shares are partly paid, the Board may make further calls upon the holders in respect of any sum whether in respect of nominal value or

premium that is unpaid on their shares. There are no provisions discriminating against any existing or prospective shareholder as a result of such shareholder

owning a substantial number of shares of any class. If the Company’s share capital is split into different classes of shares, subject to the provisions of the UK

Companies Act 2006, all or any of the rights attached to any class of shares (whether or not the Company is being wound up) may be varied with the consent in

writing of the holders of not less than three-quarters in nominal value of the issued shares of that class or with the sanction of a special resolution passed at a

separate general meeting of the holders of those shares. Additional quorum and voting requirements apply to such meeting.

General meetings shall be called by at least 14 clear days’ notice (that is, excluding the day of the general meeting and the day on which the notice is given). A

general meeting may be called by shorter notice if it is so agreed, in the case of an annual general meeting, by all the shareholders having a right to attend and

vote, or in other cases, by a majority in number of the shareholders having a right to attend and vote, being a majority together holding not less than 95% in

nominal value of the shares giving the right. The notice shall specify the date, time and place of the meeting and the general nature of the business to be

transacted.

There are no restrictions on the rights to own securities for either resident or non-resident shareholders, other than those to which they may be subject as a result

of laws and regulations in their home jurisdiction.

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Board of Directors

1 William Vereker

Chair

Appointed on 1 November 2020 (Board Chair), previously Independent Non-Executive Director from 1 October 2020.

Skills and experience

William is an experienced and well-respected Banker, previously having served as Global Head of Investment Banking for UBS (2013 – 2018), and prior to that

holding a number of leadership roles at Nomura, Lehman Brothers and Morgan Stanley. From 2018 to 2019, he served as the Prime Minister’s Business Envoy.

He was a Vice Chairman at JP Morgan until October 2020.

Other principal appointments

Chair of the Board of Santander UK plc*. Non-Executive Director of the London Stock Exchange Group Plc (Chair of its Remuneration Committee). Member and

Special Advisor of the Investment Committee at Delancey Credit and Income Fund GP. William sits on the Advisory Board of Celonis GmbH and also chairs the

Advisory Board of Gonville & Caius College, Cambridge.

Board Committee memberships

Board Nomination & Governance Committee (Chair).

2 Mike Regnier

Executive Director and Chief Executive Officer

Appointed Chief Executive Officer on 1 April 2022.

Skills and experience

Mike joined Santander UK from Yorkshire Building Society (YBS), where he was a Board member since 2014 and Chief Executive since 2017. He previously held

the posts of Chief Commercial Officer and Chief Customer Officer, having joined YBS in 2014.

Mike began his career in strategic management consulting with a focus on Retail and Retail Financial Services. After management positions at Asda, he joined the

banking sector and held a number of senior positions at Lloyds Banking Group, including Personal Current Accounts, Credit Cards Director, and Products and

Marketing Director for TSB. He has served as a Board Director of Visa UK, and Chairman of the merchant acquirer LTSB Cardnet. He was also Chair of the

Building Societies Association from 2019 – 2021. In December 2023, Mike became a member of the British Infrastructure Council, representing Santander UK.

Other principal appointments

Chief Executive Officer and Executive Director of Santander UK plc*.

3 Angel Santodomingo

Executive Director and Chief Financial Officer

Appointed Chief Financial Officer on 5 March 2024.

Skills and experience

Angel joined Banco Santander group in 2005 as Head of International Development and Asset Management and subsequently became Head of Investor

Relations. In 2014, he moved to Brazil and became CFO and Investor Relations Officer of Banco Santander Brazil, a role he held for nine years as well as Board

Director. In 2023, Angel returned to Spain, becoming Group Head of Strategy and Chief of Staff to the Executive Chair, working directly for the Santander Group

Executive Chair. He has also been Board Director of several companies, CFA Spain President and author of a series of books and articles about Markets, Finance

Analysis and Equity Valuation.

Angel is an experienced Board Director, having held positions as a Board Director of a number of commercial entities, including Credito de la Casa, PSA Banque

Brazil (Chairman) and Getnet Brazil. He has a Bachelor’s degree in Economics & Finance and is a Chartered Financial Analyst (CFA).

Other principal appointments

Chief Financial Officer and Executive Director of Santander UK plc*.

4 Enrique Alvarez Labiano

Executive Director and CEO, Retail & Business Banking

Appointed on 12 February 2025.

Skills and experience

Enrique began his Banco Santander group career in 2015 as Group Head of Strategy and Head of the Group Chairman’s office. He moved to the UK in 2019 as

Head of Strategy and Corporate Development, before he took up the role of Chief People Officer in 2020 and was subsequently appointed Head of Everyday

Banking in 2021. He’s been CEO of Retail & Business Banking since 2023.

Before joining Santander, Enrique was a Partner at McKinsey & Company (2007-2015) leading strategic programmes and client relationships for financial

institutions in Europe, Americas and Africa. He holds a degree in Engineering from ICAI, Pontificia Comillas University, and an MBA from INSEAD.

Other principal appointments

Executive Director of Santander UK plc*

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5 Pedro Castro e Almeida

Banco Santander Nominated Non-Executive Director

Appointed on 1 September 2023.

Skills and experience

Pedro joined Santander Portugal in 1993, holding senior roles in various areas. From 2007 to 2009, he was a member of the boards of Banco Santander Totta

and Banco Santander de Negócios Portugal. Since 2009, Pedro has sat on the Santander Portugal’s Executive Committee and has been a member of its Board

since 2010. In January 2019, he was appointed CEO of Santander Portugal and Vice Chairman of the Board. He assumed the role of Regional Head of Europe

for Santander on 1 September 2023. In November 2023, Pedro was also appointed as a Non-Executive director of PagoNxt.

Pedro holds a degree in Business Management from ISEG and has studied at business schools in Europe and the US, namely INSEAD, Harvard Business

School and Kellogg School of Management.

Other principal appointments

Non-Executive Director of Santander UK plc*. Director of PagoNxt SL*.

6 Lisa Fretwell

Independent Non-Executive Director

Appointed Independent Non-Executive Director on 1 January 2022.

Skills and experience

Lisa has 25 years’ experience within the financial services, technology, retail, and manufacturing industries in both business and consulting roles. She holds a first-

class honours degree in Chemical engineering from the University of Birmingham and an MBA from Cranfield Business School. She was awarded Business

Leader of the Year by Women in Credit in 2020.

Lisa joined Santander from Experian, where she was Managing Director of Experian UK’s Data Business from 2019 - 2021. Prior to this, she held various senior

roles at Cisco for over 10 years, including Vice President of Software and Operations and Managing Director of Consulting Services and Internet Business

Solutions. Lisa also held roles at Capgemini and Procter & Gamble before joining Cisco.

Other principal appointments

Independent Non-Executive Director of Santander UK plc*. Non-Executive Director at Restore plc since 20 April 2022 (and Chair of its Board Risk Committee,

ESG Committee and Remuneration Committee, and member of its Audit Committee and Nomination Committee). Member of the Council at the University of

Birmingham (and member of its Audit Committee), Senior Advisor at Tresmares Capital and a board advisor at Haysto Limited.

Board Committee memberships

Board Audit Committee, Board Responsible Banking Committee, and Board Remuneration Committee.

7 Ed Giera

Independent Non-Executive Director

Appointed Independent Non-Executive Director on 19 August 2015. He was the Senior Independent Non-Executive Director from 15 October 2020 to 20 February

2025.

Skills and experience

Ed Giera is an experienced Non-Executive Director, having held a number of Board roles following his career with JP Morgan Securities, the investment banking

affiliate of JP Morgan Chase & Co., where he held positions as Global Head of Pension Advisory, Head of Capital Markets for the EMEA region, and other senior

roles. He provided corporate finance advisory and fiduciary services as Principal of EJ Giera LLC and was formerly a Non-Executive Director of NovaTech LLC

and the Life and Longevity Markets Association. Ed was also previously a director of Pension Insurance Corporation Holdings Ltd, where he chaired the Board

Audit & Risk Committee.

Other principal appointments

Independent Non-Executive Director of Santander UK plc*. Non-Executive Director (and Chair of the Risk Committee, member of the Audit Committee, and

member of the Nomination Committee) of Rothesay Life Plc. Director of Rothesay Limited. Partner of Boscobel Place Capital LLC and Founder and Principal of

E.J. Giera LLC.

Board Committee memberships

Board Audit Committee, Board Nomination & Governance Committee, Board Risk Committee (Chair), and Board Remuneration Committee.

8 David Gledhill

Independent Non-Executive Director

Appointed on 1 September 2024.

Skills and experience

David has significant experience in the financial services industry, in retail banking and digital transformation. He has held various senior leadership roles, including

Group Chief Information Officer and Head of Technology and Operations at DBS Bank in Singapore, spending over a decade in that role.

Other principal appointments

Independent Non-Executive Director of Santander UK plc*. Non-Executive Director of Singapore Airlines and the Institute of Systems Science, National University

of Singapore.

Board Committee memberships

Board Responsible Banking Committee, Board Audit Committee and Board Remuneration Committee.

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9 Michelle Hinchliffe

Independent Non-Executive Director and Whistleblowers' Champion

Appointed on 1 June 2023.

Skills and experience

Michelle has over 30 years’ experience in financial services audit both in the UK and internationally, with a particular focus on Banking and Capital Markets. Until

2022, she was Lead Partner at KPMG with responsibilities for a range of financial institution clients, reporting under both IFRS and US GAAP. Over the course of

her career, she has been Lead Partner for Barclays, ANZ, Standard Chartered Bank, HSBC Investment Banking & Markets, and Citigroup UK. Michelle qualifies

as the Board Audit Committee financial expert as defined in item 16A of Form 20-F.

Other principal appointments

Independent Non-Executive Director of Santander UK plc*. Independent Non-Executive Director of BHP Group Limited, Macquarie Group Limited and Macquarie

Bank Limited. Member of the Institute of Chartered Accountants in England and Wales Australasia Strategic Advisory group.

Board Committee memberships

Board Audit Committee (Chair), Board Risk Committee, and Board Nomination & Governance Committee.

10 Mark Lewis

Independent Non-Executive Director

Appointed on 1 January 2024.

Skills and experience

Mark brings a track record of digital transformation and growth across multiple consumer businesses and sectors. He was CEO of Moneysupermarket Group plc,

operating regulated marketplaces across financial services, travel and home services.

Prior to this, Mark sat on the John Lewis Management Board as Retail Director, responsible for sales and operations across 48 UK department stores and online

channels serving 37 countries. He previously served as Managing Director of eBay UK and CEO of Collect+.

Other principal appointments

Independent Non-Executive Director of Santander UK plc*. Mark is Group Chairman of Iamproperty, Independent Non-Executive Director of Direct Line Insurance

Group plc, Non-Executive Director of Sambla Group, and Non-Executive Director of Santander Consumer (UK) plc*.

Board Committee memberships

Board Remuneration Committee (Chair), Board Responsible Banking Committee, Board Risk Committee, and Board Nomination & Governance Committee.

11 Dirk Marzluf

Banco Santander Nominated Non-Executive Director

Appointed on 1 January 2024.

Skills and experience

Dirk joined Banco Santander as Group Chief Operating and Technology Officer (COTO) in September 2018. He joined Banco Santander from AXA Group, where

he served as Group Chief Information Officer (CIO) since 2013, leading the insurance group’s technology and information security transformation, its overall

project portfolio and as co-sponsor of its digital strategy. His global technology leadership roles include previous work at Accenture, Daimler Chrysler and

Winterthur Group.

As Banco Santander Group Head of Technology and Operations, Dirk Marzluf is responsible for leading the information technology and operations function and its

strategic development.

Other principal appointments

Independent Non-Executive Director of Santander UK plc*. Chairman of Santander Global Technology and Operations SL*, Director of Getnet Payments, S.L.*,

Director of PagoNxt Payments, S.L.*, Director of Ebury Partners Limited*, Director of Elevate Tech Platforms, S.L. Unipersonal* and Santander Consumer Holding

GmbH*, and Director of Gravity Cloud Technology Sl*.

12 The Rt Hon. the Baroness Morgan of Cotes (Nicola (Nicky) Morgan)

Independent Non-Executive Director and Senior Independent Director

Appointed on 1 January 2024. She was appointed Senior Independent Director on 20 February 2025.

Skills and experience

Nicky is a former MP, Cabinet Minister and Chair of the House of Commons Treasury Committee and is now a member of the House of Lords. She is a qualified

solicitor by background and before being elected to Parliament spent 16 years with City law firms, focused on mergers and acquisitions and advisory work. Nicky

possesses significant experience as a senior leader of high-profile large organisations, responsible for setting and overseeing implementation of strategy and

communicating the organisation’s narrative and capabilities. She brings a wealth of experience from both a public and private perspective of the financial services

sector, communications and media, and digital & technology.

Other principal appointments

Independent Non-Executive Director of Santander UK plc*. Non-Executive Director of the Financial Services Compensation Scheme, Chair of the Careers &

Enterprise Company, and Chair of the Council of the Advertising Standards Authority (ASA) Limited.

Board Committee memberships

Board Responsible Banking Committee (Chair), Board Risk Committee, and Board Nomination & Governance Committee.

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13 David Oldfield

Independent Non-Executive Director

Appointed on 1 December 2024.

Skills and experience

David retired from Lloyds Banking Group in 2023 after nearly 40 years with them, having joined on the graduate training scheme. He brings a diverse set of retail

banking, commercial banking and operational / technology leadership experiences. In the period 2014 to 2023, as a member of LBG's Group Executive

Committee, David was CEO Retail Banking & Consumer Finance, CEO Commercial Banking and then most latterly Group Chief Operating Officer responsible for

technology, data, strategic transformation, IT security and 3rd party procurement and supplier management.

Prior to these David had a variety of leadership roles across all areas of Lloyds Banking Group including in Technology, Procurement, Strategy, programme and

integration delivery, SME & Mid Markets Banking and Offshore banking. Over the years David chaired multiple legal entities for Lloyds Banking Group both in the

UK and internationally and, outside of the Group, was a Non Executive Director for Motability Operations Group Plc, Chair Cardnet Merchant Services Limited,

and Chair of the Wellbeing leadership team for Business in The Community (BiTC). As LBG's Executive sponsor for disability for 14 years David was awarded a

lifetime achievement award in 2023 from the Business Disability Forum, a leading business membership organisation in disability inclusion. He received an OBE

in His Majesty's New Year Honours list in 2025 for services to workplace mental health and wellbeing, as well as services to disability.

Other principal appointments

Independent Non-Executive Director of Santander UK plc*.

Board Committee memberships

Board Risk Committee, Board Audit Committee, and Board Remuneration Committee.

14 José María Roldán

Independent Non-Executive Director

Appointed on 1 June 2023.

Skills and experience

José María has extensive depth of knowledge and expertise in banking supervision, financial stability and public policy. He was Chairman and CEO of the

Spanish Banking Association (2014-2022) and spent 13 years as Director-General at the Banking Regulation and Financial Stability department of the Bank of

Spain, and member of its Executive Board. During his tenure in office at the Bank of Spain, he was part of the Basel Committee on Banking Supervision. He also

previously served as Board Member and Vice President of the European Banking Federation.

José María founded and Chaired the Committee of European Banking Supervisors (CEBS) (the forerunner of the European Banking Authority (EBA)); was

President of the Financial Action Task Force on Money Laundering (FATF) and chaired the former Banking Advisory Committee (BAC) of the EU. He brings an in-

depth knowledge and expertise in banking supervision and public policy, as well as over 25 years’ experience in the financial sector in Europe.

Other principal appointments

Independent Non-Executive Director of Santander UK plc*. Non-Executive Director and Chair of Cater Allen Limited*. Independent Non-Executive Director of EBN

Banco de Negocios SA*.

Board Committee memberships

Board Risk Committee, Board Remuneration Committee and Board Responsible Banking Committee.

15 Pamela Walkden

Banco Santander Nominated Non-Executive Director

Appointed on 1 October 2021.

Skills and experience

Pamela is currently Independent Director of Banco Santander, S.A. (since 2019) where she is the Risk Supervision, Regulation and Compliance Committee Chair.

She is also a member of the Advisory Board at JD Haspel Limited.

Previously, Pamela has served in a number of senior management positions predominantly at Standard Chartered Bank, including as Group Head of Human

Resources, Chief Risk Officer, Group Treasurer, Group Head of Asset and Liability Management and Regional Markets, Group Head of Internal Audit, Group

Head of Corporate Affairs and Group Manager of Investor Relations. In addition, she served as an independent member of the UK Prudential Regulation Authority

(PRA) Regulatory Reform Panel and as a member of the European Banking Authority Stakeholder Group.

Other principal appointments

Non-Executive Director of Santander UK plc*. Independent Non-Executive Director and Chair of the Risk Supervision, Regulation and Compliance Committee in

Banco Santander SA*.

Board Committee memberships

Board Nomination & Governance Committee.

* Part of the Banco Santander group.

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New York Stock Exchange (NYSE) Corporate Governance –

differences in UK and NYSE corporate governance practice

The Company issues notes in the US from time to time pursuant to a shelf registration statement filed with the SEC. As these notes are listed on the NYSE, the

Company is required to comply with NYSE corporate governance standards. Under the NYSE corporate governance standards, the Company must disclose any

significant ways in which its corporate governance practices differ from those followed by US companies under the NYSE corporate governance standards. We

believe the following to be the significant differences between our current corporate governance practices and those applicable to US companies under the NYSE

corporate governance standards.

Under the NYSE corporate governance standards, independent Directors must comprise a majority of the Board. As at 31 December 2024, our Board was

comprised of a Chair (who is also a Non-Executive Director), two Executive Directors and eleven Non-Executive Directors. The Chair, William Vereker, and eight

of the other Non-Executive Directors, (Lisa Fretwell, Ed Giera, Michelle Hinchliffe, Mark Lewis, Nicky Morgan, José María Roldán, David Gledhill and David

Oldfield), were independent as defined in the NYSE corporate governance standards. The other three Non-Executive Directors (Pedro Castro e Almeida, Dirk

Marzluf and Pamela Walkden) were not independent according to NYSE corporate governance standards as they are representatives of the ultimate parent

company, Banco Santander SA. Angel Santodomingo was appointed as an Executive Director on 5 March 2024. David Gledhill and David Oldfield were

appointed as independent Non-Executive Directors on 1 September 2024 and 1 December 2024 respectively.

The NYSE corporate governance standards require that listed US companies have a nominating or corporate governance committee composed entirely of

independent Directors and with a written charter addressing certain corporate governance matters. Applicable UK rules do not require companies without equity

shares listed on the London Stock Exchange, such as the Company, to have a nominating committee. However, the Company has a Board Nomination &

Governance Committee, which leads the process for Board appointments. This Committee has written Terms of Reference setting out its role to identify and

nominate candidates for Board and Board Committee appointments. As at 31 December 2024, the following Directors made up the Board Nomination &

Governance Committee: William Vereker (Chair), Ed Giera, Michelle Hinchliffe, Nicky Morgan, Mark Lewis and Pamela Walkden. Five of the Directors were

independent according to NYSE corporate governance standards. The other Director (Pamela Walkden) was not independent according to NYSE corporate

governance standards as she is a representative of the ultimate parent company, Banco Santander SA.

In addition, the Board is responsible for monitoring the effectiveness of the Company’s governance practices and making changes as needed to ensure the

alignment of the Company’s governance system with current best practices. The Board monitors and manages potential conflicts of interest of management,

Board members, shareholders, external advisers and other service providers, including misuse of corporate assets and abuse in related party transactions.

The NYSE corporate governance standards require that listed US companies have a compensation committee composed entirely of independent directors and

with a written charter addressing certain corporate governance matters. Under its written Terms of Reference, the Company’s Board Remuneration Committee is

primarily responsible for overseeing and supervising Santander UK’s policies and frameworks covering remuneration and reward. As at 31 December 2024, the

following Directors were on the Board Remuneration Committee: Mark Lewis (Chair), Lisa Fretwell, Ed Giera, José María Roldán, David Gledhill and David

Oldfield. All Directors were independent according to NYSE corporate governance standards.

The NYSE corporate governance standards require that listed US companies have an audit committee that satisfies the requirements of Rule 10A-3 under the US

Securities Exchange Act of 1934, as amended (Rule 10A-3), with a written charter addressing certain corporate governance matters, and having a minimum of

three members who are all independent as defined in Rule 10A-3. As a wholly-owned subsidiary of a parent that satisfies the requirements of Rule 10A-3(c)(2),

the Company is exempt from the requirements of Rule 10A-3. However, the Company does have a Board Audit Committee. As at 31 December 2024, the Board

Audit Committee was made up of five Non-Executive Directors: Michelle Hinchliffe (Chair), Lisa Fretwell, Ed Giera, David Gledhill and David Oldfield. All members

were independent in 2024 as defined in Rule 10A-3.

The scope of the Board Audit Committee’s Terms of Reference as well as the duties and responsibilities of such committee are more limited than that required of

audit committees under the NYSE corporate governance standards. For example, the Board Audit Committee does not provide an audit committee report as

required by the NYSE corporate governance standards to be included in the Company’s annual proxy statement.

The NYSE corporate governance standards require that listed US companies adopt and disclose corporate governance guidelines, including with respect to the

qualification, training and evaluation of their Directors. The NYSE corporate governance standards also require that the Board conducts a self-evaluation at least

annually to determine whether it and its committees are functioning effectively. The Board has undertaken regular reviews of Board effectiveness primarily through

an internal process led by the Chair. During the year the Board conducted an external evaluation with the provider, Boardroom Review, and considered their

feedback, which concluded that the performance of the Board and its Committees continues to be effective.

A CEO of a US company listed on the NYSE must annually certify that he or she is not aware of any violation by the company of NYSE corporate government

standards. In accordance with NYSE corporate governance standards applicable to foreign private issuers, our CEO is not required to provide the NYSE with

such an annual compliance certification.

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Additional balance sheet and cash flow analysis

SECURITIES

Securities are classified in the consolidated balance sheet as other financial assets at fair value through profit or loss, other financial assets at amortised cost and

financial assets at fair value through other comprehensive income.

Debt securities at amortised cost - Yields

The following table shows the weighted average yields for debt securities not held at fair value at 31 December 2024.

	Not later than one year	Later than one year and not later than five years	Later than five years and not later than ten years	Later than ten years	Total
	%	%	%	%	%
Weighted average yield
– Debt securities at amortised cost	—	—	4.25	1.33	2.25

Weighted average yield is calculated using Total clean price x yield for each maturity bucket / Total clean price for each maturity bucket.

LOANS AND ADVANCES TO BANKS

Loans and advances to banks in the following tables include loans and advances to banks classified as reverse repurchase agreements – non trading.

Reconciliation to classifications in the consolidated balance sheet

		2024	2023
	Note	£m	£m
–Loans and advances to banks		1,101	1,216
–Reverse repurchase agreements - non trading	16	1,363	2,397
		2,464	3,613

Maturity analysis

The following table shows loans and advances to banks by maturity at 31 December 2024.

	Not later than one year	Later than one year and not later than five years	Later than five years and not later than fifteen years	Later than fifteen years	Total
	£m	£m	£m	£m	£m
Fixed interest rate	1,809	—	—	—	1,809
Variable interest rate	643	3	9	—	655
	2,452	3	9	—	2,464

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LOANS AND ADVANCES TO CUSTOMERS

Loans and advances to customers are classified in the consolidated balance sheet as other financial assets at fair value through profit or loss, loans and advances

to customers and reverse repurchase agreements – non trading. Reverse repurchase agreements represent business with professional non-bank customers as

part of the liquidity risk management function. The balance sheet reconciliation below shows Loans and advances to customers net of impairment loss allowances

and Residual Value and Voluntary Termination provisions.

Reconciliation to classifications in the consolidated balance sheet

		2024	2023
	Note	£m	£m
Other financial assets at fair value through profit or loss	12	322	355
Loans and advances to customers	13	202,929	211,222
Reverse repurchase agreements – non trading	16	8,975	10,071
		212,226	221,648

Maturity analysis

The following table shows loans and advances to customers by maturity at 31 December 2024. Overdrafts are included as ‘on-demand’. Loans and advances are

included at their contractual maturity; no account is taken of a customer’s ability to repay early where it exists.

	Not later than one year	Later than one year and not later than five years	Later than five years and not later than fifteen years	Later than fifteen years	Total
	£m	£m	£m	£m	£m
Loans secured on residential properties	11,197	36,302	67,250	53,812	168,561
Corporate loans	8,041	9,007	1,626	67	18,741
Finance leases	1,193	2,955	74	—	4,222
Other unsecured advances	4,485	2,003	107	6	6,601
Accrued interest and other adjustments	79	191	296	233	799
Amounts due from fellow subsidiaries and joint ventures	2,432	—	—	2,381	4,813
Loans and advances to customers	27,427	50,458	69,353	56,499	203,737

We manage our balance sheet on a behavioural basis, rather than on the basis of contractual maturity. Many loans are repaid before their legal maturity,

particularly advances secured on residential property.

Interest rate sensitivity

The following table shows the interest rate sensitivity of loans and advances to customers due after one year at 31 December 2024.

	Fixed rate	Variable rate	Total
	£m	£m	£m
Loans secured on residential properties	152,077	16,484	168,561
Corporate loans	1,900	16,841	18,741
Finance leases	4,222	—	4,222
Other unsecured advances	3,897	2,704	6,601
Accrued interest and other adjustments	652	147	799
Amounts due from fellow subsidiaries and joint ventures	4,813	—	4,813
Loans and advances to customers	167,561	36,176	203,737

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SUMMARY OF LOAN LOSS EXPERIENCE

Loans accounted for on a non-accrual basis are credit impaired loans. We define a loan as in default (i.e. credit impaired) for purposes of calculating ECL if it is

more than three months past due, or if we have data to make us doubt they can keep up with their payments i.e. they are unlikely to pay. We classify credit

impaired loans as Stage 3. For details of loans classified as Stage 3, see the ‘Credit risk’ section of the Risk review. Interest income on financial assets that have

become credit-impaired (or Stage 3) is calculated by applying the effective interest rate to their amortised cost (i.e. net of the ECL provision).

In 2024, 2023 and 2022 there were no material credit impairment charges on Loans and advances to banks, Non-trading reverse repurchase agreements, Other

financial assets at amortised cost and Financial assets at FVOCI. As a result, the following tables present Loans and advances to customers only.

The following tables show additional ratios and the components used in their calculation for the years ended 31 December 2024, 2023, and 2022.

	2024	2023
	£m	£m
Allowance for credit losses to total loans	0.41%	0.45%
Allowance for credit losses	808	937
Total loans outstanding	197,858	206,700
Non-accrual loans to total loans	1.36%	1.45%
Non-accrual loans outstanding	2,700	3,000
Total loans outstanding	197,858	206,700
Allowance for credit losses to non-accrual loans	29.93%	31.23%
Allowance for credit losses	808	937
Non-accrual loans outstanding	2,700	3,000

	2024	2023	2022
	£m	£m	£m
Loans secured on residential properties	0.01%	0.01%	—%
Net charge-off during the period	9	11	3
Average amount outstanding	172,863	181,586	185,303
Corporate loans	0.32%	0.36%	0.13%
Net charge-off during the period	59	68	24
Average amount outstanding	18,598	18,756	19,170
Finance leases	0.57%	0.50%	0.44%
Net charge-off during the period	25	23	19
Average amount outstanding	4,364	4,612	4,281
Other unsecured advances	1.98%	1.74%	1.28%
Net charge-off during the period	137	130	110
Average amount outstanding	6,934	7,452	8,574
Amounts due from immediate parent	—%	—%	—%
Net charge-off during the period	—	—	—
Average amount outstanding	—	—	780
Amounts due from fellow subsidiaries and joint ventures	—%	—%	—%
Net charge-off during the period	—	—	—
Average amount outstanding	4,651	4,327	3,623
Loans and advances to customers	0.11%	0.11%	0.07%
Net charge-off during the period	230	232	156
Average amount outstanding	207,410	216,733	221,731

Discussion of the factors driving material changes in the ratios above or their components

The factors driving significant changes are discussed as follows:

–Allowance for credit losses, exposures, expected credit losses, Stage 3 exposures and related ratios at a consolidated Santander UK group level can be found

in the commentary sections in 'Credit performance', 'Credit quality' 'Stage 2 analysis' in 'Santander UK group level - credit risk review' in the Risk review

–More detailed discussion by business segment can be found in the 'Retail & Business Banking: Mortgages - credit risk review', 'Retail & Business Banking:

Everyday Banking - credit risk review', 'Corporate & Commercial Banking - credit risk review' and 'Corporate Centre - credit risk review' sections of the Risk

review.

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DEPOSITS BY CUSTOMERS

The following table shows the average balances and interest rates for deposits by customers by product for the years ended 31 December 2024, 2023, and 2022.

	2024		2023		2022
	Average Balance	Average Interest Rate(1)	Average Balance	Average Interest Rate(1)	Average Balance	Average Interest Rate(1)
	£m	%	£m	%	£m	%
Demand deposits (including savings and current accounts)	158,652	1.95	166,834	1.44	175,918	0.37
Time deposits	30,013	4.39	24,210	3.66	12,816	1.37
Other deposits	11,628	4.15	12,136	3.91	12,543	1.01
Total average balance(1)	200,293	2.45	203,180	1.85	201,277	0.47

(1)Calculated using monthly data.

Some deposits by customers are covered by depositor guarantee arrangements, as follows:

Scheme	Definition
Financial Services Compensation Scheme (FSCS)	The FSCS is the UK’s independent statutory compensation fund for customers of PRA authorised financial services firms and pays compensation, up to certain limits, if a firm is unable, or likely to be unable to pay claims against it, for example by depositors. The FSCS is funded by levies on the industry, and recoveries and borrowings where appropriate.
Isle of Man and Jersey Bank Depositor Compensation Schemes (DCSs)	The Isle of Man branch of Santander Financial Services plc is a participant in the Isle of Man Depositors’ Compensation Scheme and the Jersey branch of Santander Financial Services plc is a participant in the Jersey Bank Depositors Compensation Scheme. These DCSs are independent statutory compensation funds for customers of Isle of Man and Jersey banks and pay compensation, up to certain limits, if a bank is unable to pay claims against it. The DCSs are funded, if and when required, by contributions from covered banks in the Isle of Man or Jersey that are participants in the DCSs.

The following table shows the amounts of insured and uninsured total deposits and time deposits excluding intercompany deposits at 31 December 2024 and

2023. The table also shows the amount of time deposits that are uninsured, either because they exceed depositor guarantee scheme compensation limits or

because they are otherwise uninsured.

	2024	2023
	£m	£m
Insured deposits	124,268	131,307
Uninsured deposits	59,792	62,884
Total deposits	184,060	194,191
of which:
Insured time deposits	20,950	18,536
Uninsured time deposits	10,769	11,116
– Excess over guaranteed limit	5,775	5,328
– Otherwise uninsured	4,994	5,788
Total time deposits	31,719	29,652

For the proportion of Retail & Business Banking customer deposits covered by the FSCS, see the Funding risk management section of the Risk review.

The following table shows the maturity of uninsured time deposits at 31 December 2024.

	Under 3 months	3 to 6 months	6 to 12 months	Over 12 months	Total
	£m	£m	£m	£m	£m
Deposits by customers	5,476	2,354	1,655	1,284	10,769

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DEPOSITS BY BANKS

Deposits by banks include repurchase agreements – non-trading.

Reconciliation to classifications in the consolidated balance sheet

		2024	2023
	Note	£m	£m
Deposits by banks	21	14,037	20,357
Repurchase agreements - non trading	23	2,336	551
		16,373	20,908

The following table shows the average balances of and interest rates for deposits by banks for the years ended 31 December 2024, 2023, and 2022.

	2024		2023			2022
	Average Balance	Average Interest Rate(1)	Average Balance	Average Interest Rate(1)	Average Balance	Average Interest Rate(1)
	£m	%	£m	%	£m	%
Deposits by banks	20,928	4.97	27,906	4.43	35,098	1.44

(1)Calculated using monthly data.

At 31 December 2024, deposits by foreign banks were £2,130m (2023: £2,039m, 2022: £2,211m).

All bank deposits are uninsured, as depositor guarantee arrangements do not cover deposits by financial institutions.

The following table shows the maturity of uninsured deposits by banks at 31 December 2024.

	Under 3 months	3 to 6 months	6 to 12 months	Over 12 months	Total
	£m	£m	£m	£m	£m
Deposits by banks	4,440	779	7,207	3,947	16,373

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INTEREST RATE SENSITIVITY

Interest rate sensitivity is the relationship between interest rates and net interest income caused by the periodic repricing of assets and liabilities. Our largest

administered rate items are residential mortgages and retail deposits, many of which bear interest at variable rates.

We mitigate the impact of interest rate movements on net interest income by repricing our variable rate mortgages and variable rate retail deposits separately,

subject to competitive pressures. We also offer fixed-rate mortgages and savings products on which the interest rate is fixed for an agreed period at the start of the

contract. We manage the margin on fixed-rate products by using derivatives matching the fixed-rate profiles. We reduce the risk of prepayment by imposing early

termination charges if the customers end their contracts early.

We manage the risks from movements in interest rates as part of our overall non-trading position. We do this within limits as set out in the Risk review.

Changes in net interest income – volume and rate analysis

The following table shows changes in interest income, interest expense and net interest income, and is presented using asset and liability classifications in the

Consolidated Balance Sheet. It allocates the effects between changes in volume and changes in rate. Volume and rate changes have been calculated on the

movement in the average balances and the change in the interest rates on average interest-earning assets and average interest-bearing liabilities. The changes

caused by movements in both volume and rate have been allocated to rate changes.

			2024 / 2023			2023 / 2022
		Changes due to increase/(decrease) in			Changes due to increase/(decrease) in
	Total change	Volume	Rate	Total change	Volume	Rate
	£m	£m	£m	£m	£m	£m
Interest income
Loans and advances to customers	805	(212)	1,017	3,419	(54)	3,473
of which reverse repurchase agreements	268	192	76	385	48	337
Loans and advances to banks	(103)	(283)	180	1,305	(37)	1,342
of which reverse repurchase agreements	94	46	48	91	17	74
Debt securities and other interest earning assets	166	123	43	307	29	278
Total interest income	868	(372)	1,240	5,031	(62)	5,093
Interest expense
Deposits by customers - demand	694	(118)	812	1,745	(34)	1,779
Deposits by customers - time	431	212	219	711	156	555
Deposits by customers - other	9	(26)	35	351	(4)	355
of which repurchase agreements	6	(52)	58	351	28	323
Deposits by banks	(226)	(318)	92	738	(104)	842
of which repurchase agreements	100	89	11	67	—	67
Debt securities	199	13	186	1,092	64	1,028
Commercial paper	78	39	39	137	(13)	150
Subordinated liabilities	24	30	(6)	61	2	59
Other interest-bearing financial liabilities	—	—	—	1	—	1
Total interest expense	1,209	(168)	1,377	4,836	67	4,769
Net interest income	(341)	(204)	(137)	195	(129)	324

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AVERAGE BALANCE SHEET

Year-end balances may not reflect activity throughout the year, so we present Average balance sheets below, using asset and liability classifications from the

Consolidated Balance Sheet. They show averages for our significant categories of assets and liabilities, and the related interest income and expense.

			2024			2023			2022
	Average balance(1)	Interest	Average rate	Average balance(1)	Interest	Average rate	Average balance(1)	Interest	Average rate
	£m	£m	%	£m	£m	%	£m	£m	%
Assets
Loans and advances to customers(2)	223,061	10,220	4.58	228,203	9,415	4.13	230,289	5,996	2.60
of which reverse repurchase agreements	15,651	795	5.08	11,470	527	4.59	8,558	142	1.66
Loans and advances to banks	39,028	1,860	4.77	45,599	1,963	4.30	48,321	658	1.36
of which reverse repurchase agreements	4,070	192	4.72	2,763	98	3.55	816	7	0.86
Debt securities and other interest earning assets	10,807	641	5.93	8,590	475	5.53	7,314	168	2.30
Total average interest-earning assets, interest income	272,896	12,721	4.66	282,392	11,853	4.20	285,924	6,822	2.39
Credit impairment loss allowances and RV &VT	(990)	—	—	(1,091)	—	—	(1,057)	—	—
Derivatives and other non-interest-earning assets	7,793	—	—	7,686	—	—	8,509	—	—
Other financial assets at FVTPL	521	—	—	585	—	—	549	—	—
Total average assets	280,220	—	—	289,572	—	—	293,925	—	—
Liabilities
Deposits by customers - demand	(158,652)	(3,090)	1.95	(166,834)	(2,396)	1.44	(175,918)	(651)	0.37
Deposits by customers - time	(30,013)	(1,317)	4.39	(24,210)	(886)	3.66	(12,816)	(175)	1.37
Deposits by customers - other	(11,112)	(481)	4.33	(11,754)	(472)	4.02	(12,192)	(121)	0.99
of which repurchase agreements	(9,408)	(477)	5.07	(10,567)	(471)	4.46	(8,568)	(120)	1.40
Deposits by banks	(20,284)	(1,008)	4.97	(27,336)	(1,234)	4.51	(34,561)	(496)	1.44
of which repurchase agreements	(3,365)	(167)	4.96	(1,445)	(67)	4.64	(5)	—	—
Debt securities	(32,080)	(2,004)	6.25	(31,843)	(1,805)	5.67	(29,201)	(713)	2.44
Commercial paper	(5,076)	(297)	5.85	(4,312)	(219)	5.08	(5,121)	(82)	1.60
Subordinated liabilities	(2,383)	(193)	8.10	(2,022)	(169)	8.36	(1,991)	(108)	5.42
Other interest-bearing liabilities	(135)	(5)	3.70	(133)	(5)	3.76	(143)	(4)	2.80
Total average interest-bearing liabilities, interest expense	(259,735)	(8,395)	3.23	(268,444)	(7,186)	2.68	(271,943)	(2,350)	0.86
Derivatives and other non interest-bearing liabilities	(4,700)	—	—	(4,672)	—	—	(4,701)	—	—
Other financial liabilities at FVTPL	(983)	—	—	(854)	—	—	(833)	—	—
Equity	(14,802)	—	—	(15,602)	—	—	(16,448)	—	—
Total average liabilities and equity	(280,220)	—	—	(289,572)	—	—	(293,925)	—	—

(1) Average balances are based on monthly data.

(2) Loans and advances to customers include Stage 3 assets. See the ‘Credit risk’ section of the Risk review.

Margin and average spread

	2024	2023	2022
	%	%	%
Interest spread(1)	1.43	1.52	1.53
Net interest margin(2)	1.59	1.65	1.56
Average spread(3)	105	105	105

(1) Interest spread is the difference between the rate of interest earned on average interest-earning assets and the rate of interest paid on average interest-bearing liabilities.

(2) NIM is calculated as net interest income divided by average interest earning assets

(3) Average spread is the ratio of average interest-earning assets to interest-bearing liabilities

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SUMMARISED CONSOLIDATED CASH FLOW STATEMENT

	2024	2023
	£m	£m
Net cash flows from operating activities	(2,481)	(1,577)
Net cash flows from investing activities	(4,545)	(2,755)
Net cash flows from financing activities	268	(1,731)
Change in cash and cash equivalents	(6,758)	(6,063)

A more detailed Consolidated Cash Flow Statement is contained in the Consolidated Financial Statements.

The major activities and transactions that affected cash flows in 2024 and 2023 were as follows:

In 2024, the net cash outflows from operating activities of £2,481m resulted from outflows generated from a decrease in deposits by banks and customers partially

offset by a decrease in loans and advances to banks and customers and reverse repurchase agreements and an increase in debt securities and repurchase

agreements. The net cash outflows from investing activities of £4,545m mainly reflected the net purchase of certain asset backed securities and debt securities as

part of normal liquid asset portfolio management. The net cash inflows from financing activities mainly reflected net cash flows relating to active capital

management and the ongoing repayment of TFSME. These resulted in cash and cash equivalents decreasing by £6,758m in the year.

In 2023, the net cash outflows from operating activities of £1,577m resulted from outflows generated from an decrease in loans and advances to banks and

customers, partially offset by cash outflows from a decrease in deposits by banks and customers and an increase in reverse repurchase agreements. The net

cash outflows from investing activities of £2,755m mainly reflected the net purchase of certain asset backed securities and debt securities as part of normal liquid

asset portfolio management. The net cash inflows from financing activities mainly reflected net cash flows relating to debt securities in issue. These resulted in

cash and cash equivalents decreasing by £6,063m in the year.

Cash flow requirements

For details of our cash flow requirements over the next 12 months and in the longer term and how we plan to meet them, see the Liquidity risk section of the Risk

review.

Material cash requirements

Our material commitments under commercial contracts at 31 December 2024 were as follows:

–For cash flows and maturities relating to Derivatives, Deposits by customers, Deposits by banks, Debt securities in issue, Subordinated liabilities and Lease

obligations, see Note 39 to the Consolidated Financial Statements. The maturities of financial liabilities and off-balance sheet commitments table analyses the

maturities of the cash flows based on the remaining period to the contractual maturity date at the balance sheet date. In practice, the behavioural profiles of

many liabilities show more stability and longer maturity than their contractual maturity. This is especially true of many types of retail and corporate deposits that,

while they may be repayable on demand or at short notice, have shown good stability even in times of stress. For further details, see the Liquidity risk section of

the Risk review.

–For details of cash flows and maturities relating to Retirement benefit obligations including employer contributions and funding, see Note 28 to the Consolidated

Financial Statements.

–Purchase obligations: We have entered into outsourcing contracts where, in some cases, there is no minimum specified spending requirement. In these cases,

anticipated spending volumes have been included in purchase obligations. Total purchase obligations, all of which are due within 1 year, were £379m.

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Other information

Major shareholders

At 31 December 2024, the Company was a subsidiary of Banco Santander SA and Santusa Holding SL. On 23 September 2013, the Company was incorporated

with the issuance of two ordinary shares of £1 each which formed the initial share capital of the Company and were held by Banco Santander SA from 11

December 2013. On 10 January 2014, pursuant to a Board resolution dated 10 January 2014, the Company issued 11,267,503,000 ordinary shares of £1 each to

Banco Santander SA and Santusa Holding SL in exchange for acquiring all of the ordinary shares of Santander UK plc. On 24 March 2015, the Company

cancelled and extinguished 4,207,503,002 ordinary shares. On 25 March 2015, the Company became a public limited company and changed its name from

Santander UK Group Holdings Limited to Santander UK Group Holdings plc.

Legal proceedings

We are party to various legal proceedings in the ordinary course of business. See Notes 27 and 30 to the Consolidated Financial Statements.

Share capital

See Note 31 to the Consolidated Financial Statements.

Material contracts

We are party to various contracts in the ordinary course of business. For the two years immediately preceding publication of this annual report, there have been no

material contracts entered into outside the ordinary course of business.

Exchange controls

There are no UK laws, decrees or regulations that restrict our export or import of capital, including the availability of cash and cash equivalents for use by us, or

that affect the remittance of dividends or other shareholder payments to non-UK holders of Company shares, except as outlined in the section on Taxation for US

Investors below.

Taxation for US investors

The following is a summary, under current law, of the main UK tax considerations relating to the beneficial ownership by a US taxpayer of the shares of the

Company. This summary is provided for general guidance and does not address investors that are subject to special rules or that do not hold the shares as capital

assets. US residents should consult their local tax advisers, particularly in connection with any potential liability to pay US taxes on disposal, lifetime gift or bequest

of their shares.

UK taxation on dividends

Under UK law, income tax is not withheld from dividends paid by UK companies. Shareholders, whether resident in the UK or not, receive the full amount of the

dividend actually declared.

UK taxation on capital gains

Under UK law, when you sell shares you may be liable to pay either capital gains tax or corporation tax on chargeable gains. However, if you are either (i) an

individual who is not resident in the UK or (ii) a company which is not resident in the UK, you will not be liable to UK tax on any capital gains made on disposal of

your shares. The exception is if the shares are held in connection with a trade or business that is conducted in the UK through a branch or agency (for capital

gains tax purposes) or a permanent establishment (for corporation tax purposes).

UK inheritance tax

Under the current estate and gift tax convention between the US and the UK, shares held by an individual shareholder who is domiciled for the purposes of the

convention in the US and is not for the purposes of the convention a national of the UK will not be subject to UK inheritance tax on:

–The individual’s death or

–On a gift of the shares during the individual’s lifetime.

The exception is if the shares are part of the business property of a permanent establishment of the individual in the UK or, in the case of a shareholder who

performs independent personal services, pertain to a fixed base situated in the UK.

Designated agent

The designated agent for service of process on Santander UK in the United States is C T Corporation System, 111 Eighth Avenue, New York, New York.

Trustee/paying agent

The names and addresses of the Trustee/paying agent for each class of security registered with the US Securities and Exchange Commission (the SEC) are:

–Senior: Citibank NA, 388 Greenwich Street, New York, New York 10013, United States

–Subordinated: Citibank NA, 388 Greenwich Street, New York, New York 10013, United States

–Capital: Bank of New York Mellon, 240 Greenwich Street, Floor 7E, New York, New York 10286, United States

Documents on display

The Company is subject to the information requirements of the US Securities Exchange Act of 1934. In accordance with these requirements, the Company files its

Annual Report and other related documents with the SEC, and which may be accessed at the SEC's website. Information on the operation of the public reference

rooms can be obtained by calling the SEC on +1-202-551-8090 or by looking at the SEC’s website. The SEC maintains an internet site that contains reports,

proxy and information statements, and other information regarding issuers that file electronically with it.

None of the websites referred to in this Annual Report on Form 20-F for the year ended 31 December 2024 (the Form 20-F), including where a link is provided,

nor any of the information contained on such websites is incorporated by reference in the Form 20-F.

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Audit fees

See Note 7 to the Consolidated Financial Statements.

Insider trading policies

The Company has adopted insider trading policies and procedures governing the purchase, sale, and other dispositions of its securities by Directors, Senior

Management and employees that are designed to promote compliance with insider trading laws, rules and regulations, and listing standards applicable to

Santander UK. These policies and procedures are set out in the Santander UK Policy on Market Abuse and Inside Information which is filed as Exhibit 11.1 to this

annual report on Form 20-F.

Santander UK monitors inside information as defined under the EU Market Abuse Regulation 2014/596 (EU MAR) as on shored into UK law on 31 December

2020 by the EU (Withdrawal) Act 2018. Changes to EU MAR were made by the Market Abuse Exit Regulations 2019. Santander UK, as part of its disclosure

controls and procedures, imposes restrictions on trading in its own securities when it has undisclosed inside information and also generally refrains from trading in

its own securities during its regular closed periods.

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Glossary of financial services industry terms

Term	Definition
Active customers	Active customers are defined as those having an open account, with more than a set minimum balance along with certain specified transactions in the prior month.
Alternative performance measures (APMs)	A financial measure of historical or future financial performance, financial position or cashflows, other than a financial measure defined or specified under International Financial Reporting Standards.
Anti-Money Laundering (AML)	A set of policies and practices to ensure that financial institutions and other regulated entities prevent, detect, and report financial crime and especially money laundering activities.
Arrears	Customers are said to be in arrears when they are behind in fulfilling their obligations with the result that an outstanding loan is unpaid or overdue. Such a customer is also said to be in a state of delinquency. When a customer is in arrears, his entire outstanding balance is said to be delinquent, meaning that delinquent balances are the total outstanding loans on which payments are overdue.
Asset Backed Securities (ABS)	Securities that represent an interest in an underlying pool of referenced assets. The referenced pool can comprise any assets which attract a set of associated cash flows but are commonly pools of residential or commercial mortgages but could also include leases, credit card receivables, motor vehicles or student loans.
Balance weighted Loan to Value (LTV) ratio	(Loan 1 balance x (Loan 1 Balance/Loan 1 latest property valuation) + (Loan 2 balance x (loan 2 balance/Loan 2 latest property valuation) + ...) / (Loan 1 balance + Loan 2 balance+...)
UK Bank Levy	The government levy that applies to certain UK banks, UK building societies and the UK operations of foreign banks from 1 January 2011. The levy is payable based on a percentage of the chargeable equity and liabilities of the bank at the balance sheet date.
Banking NIM	Banking net interest margin. Net interest income divided by average gross customer assets.
Basis point (bps)	One hundredth of a per cent (i.e. 0.01%), so 100 basis points is 1%. Used in quoting movements in interest rates or yields on securities.
Brexit	The withdrawal of the United Kingdom from the European Union.
Business Banking	Division, managed under Retail & Business Banking, serving enterprises with a turnover of up to £6.5m per annum.
Colleague engagement	Colleague engagement is measured on annual basis in the Group Engagement Survey (GES), conducted by Mercer for Banco Santander. Results are benchmarked against other firms in the UK financial sector and other high performing firms.
Commercial Paper	An unsecured promissory note issued to finance short-term credit needs. It specifies the face amount paid to investors on the maturity date. Commercial paper can be issued as an unsecured obligation of Santander UK and is usually issued for periods ranging from one week up to nine months. However, the depth and reliability of some CP markets means that issuers can repeatedly roll over CP issuance and effectively achieve longer term funding. CP can be issued in a range of denominations and can be discounted or interest-bearing.
Commercial Real Estate (CRE)	Lending to UK customers, primarily on tenanted property assets, with a focus on the office, retail, industrial and residential sectors.
Common Equity Tier 1 (CET1) capital	The called-up share capital and eligible reserves less deductions calculated in accordance with the CRD IV implementation rules as per the PRA Policy Statement PS7/13.
CET1 capital ratio	CET1 capital as a percentage of risk weighted assets.
Consumer Finance	Provides prime auto consumer financing for individuals, businesses, and automotive distribution networks.
Contractual maturity	The final payment date of a loan or other financial instrument, at which point all the remaining outstanding principal will be repaid and interest is due to be paid.
Corporate Centre	Provides treasury services for asset and liability management of our balance sheet, as well as management of non-core and legacy portfolios.
Corporate & Commercial Banking (CCB)	Provides banking products and services to SMEs, mid-sized and larger corporates, typically with annual turnovers of between £2m and £500m, as well as to Local Authorities and Housing Associations.
Cost to income ratio	Total operating expenses before credit impairment losses and provisions for other liabilities and charges as a percentage of total operating income.
Cost of risk	Cost of risk is credit impairment charge for the 12 month period as a percentage of average gross customer loans. This is a useful measure of the relationship between the size of the credit impairment charge and the book size which investors use as a proxy to compare relative credit risk.
Countercyclical capital buffer	A capital buffer required under Basel III to ensure that capital requirements take account of the macro-financial environment in which banks operate.
Counterparty credit risk	The risk that the counterparty to a transaction may default before completing the satisfactory settlement of the transaction.
Covered bonds	Debt securities backed by a portfolio of mortgages that is segregated from the issuer’s other assets solely for the benefit of the holders of the covered bonds. The Santander UK group issues covered bonds as part of its funding activities.
Credit spread	The yield spread between securities with the same coupon rate and maturity structure but with different associated credit risks, with the yield spread rising as the credit rating worsens. It is the premium over the benchmark or risk-free rate required by the market to accept a lower credit quality.

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Term	Definition
Credit Valuation Adjustment (CVA)	Adjustments to the fair values of derivative assets to reflect the creditworthiness of the counterparty.
Currency swap	An arrangement in which two parties exchange specific principal amounts of different currencies at inception and subsequently interest payments on the principal amounts. Often, one party will pay a fixed interest rate, while the other will pay a floating exchange rate (though there are also fixed-fixed and floating-floating arrangements). At the maturity of the swap, the principal amounts are usually re-exchanged.
Customer funding gap	Customer loans less customer deposits.
Debt securities	Transferable instruments creating or acknowledging indebtedness. They include debentures, bonds, certificates of deposit, notes and commercial paper. The holder of a debt security is typically entitled to the payment of principal and interest, together with other contractual rights under the terms of the issue, such as the right to receive certain information. Debt securities are generally issued for a fixed term and redeemable by the issuer at the end of that term. Debt securities can be secured or unsecured.
Debt securities in issue	Transferable certificates of indebtedness of the Santander UK group to the bearer of the certificates. These are liabilities of the Santander UK group and include commercial paper, certificates of deposit, bonds, and medium-term notes.
Default	Financial assets in default represent those that are at least 90 days past due in respect of principal or interest and/or where the assets are otherwise considered to be unlikely to pay, including those that are credit impaired.
Default at proxy origination	IFRS 9 requires us to compare lifetime probability of default at origination with our view of lifetime probability of default now. If we do not have data at origination, then a proxy origination is defined.
Defined benefit obligation	The present value of expected future payments required to settle the obligations of a defined benefit plan resulting from employee service.
Defined benefit plan	A pension plan that defines an amount of pension benefit to be provided, usually as a function of one or more factors such as age, years of service or compensation. The employer's obligation can be more or less than its contributions to the fund.
Defined contribution plan	A pension plan under which the Santander UK group pays fixed contributions as they fall due into a separate entity (a fund) and will have no legal or constructive obligations to pay further contributions, i.e. the employer's obligation is limited to its contributions to the fund.
Derivative	A contract or agreement whose value changes with changes in an underlying index such as interest rates, foreign exchange rates, share prices or indices and which requires no initial investment or an initial investment that is smaller than would be required for other types of contracts with a similar response to market factors. The principal types of derivatives are: swaps, forwards, futures and options.
Digital customers	Digital customers reflect the number of customers who have logged onto Retail or Business online banking or mobile app(s) (Retail Mobile includes SanWallet & OnePayFX) at least once in the month.
Digital sales	Percentage of new contracts executed through digital channels during the period. Digital sales as % of total sales.
Distributable items	Equivalent to distributable profits under the Companies Act 2006.
Economic capital	An internal measure of the minimum equity and preference capital required for the Santander UK group to maintain its credit rating based upon its risk profile.
Effective tax rate	The tax on profit/(losses) on ordinary activities as a percentage of profit/(loss) on ordinary activities before taxation.
Energy performance certificate (EPC)	A scheme to summarise the energy efficiency of buildings and apply a rating between A – G.
Expected credit loss (ECL)	Represents what the credit risk is likely to cost us either over the next 12 months on qualifying exposures, or defaults over the lifetime of the exposure where there is evidence of a significant increase in credit risk since origination.
Expected loss (EL)	The product of the probability of default, exposure at default and loss given default. We calculate each factor in accordance with CRD IV and include direct and indirect costs. We base them on our risk models and our assessment of each customer’s credit quality.
Exposure at default (EAD)	The maximum loss that a financial institution might suffer if a borrower, counterparty or group defaults on their obligations or assets and off- balance sheet positions have to be realised.

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Term	Definition
Fair value adjustment	An adjustment to the fair value of a financial instrument which is determined using a valuation technique (level 2 and level 3) to include additional factors that would be considered by a market participant that are not incorporated within the valuation model.
Financial Conduct Authority (FCA)	The Financial Conduct Authority is a financial regulatory body in the United Kingdom.
Financial Services Compensation Scheme (FSCS)	The Financial Services Compensation Scheme is the UK's statutory deposit insurance and investors compensation scheme for customers of authorised financial services firms.
Financially empowered people	The number of people we are supporting who are unbanked, underbanked or in a situation of vulnerability to get access to the financial system, receive tailored finance and increase their knowledge and resilience through financial education.
First / Second Charge	First charge (also known as first lien): debt that places its holder first in line to collect compensation from the sale of the underlying collateral in the event of a default on the loan. Second charge (also known as second lien): debt that is issued against the same collateral as a higher charge debt but that is subordinate to it. In the case of default, compensation for this debt will only be received after the first charge has been repaid and thus represents a riskier investment than the first charge.
Follow-on Rate (FoR)	A mortgage product that tracks and is directly linked to the Bank of England base rate.
Forbearance	Forbearance takes place when a concession is made on the contractual terms of a loan in response to an obligor’s financial difficulties.
Full time equivalent	Full time equivalent employee units are the on-job hours paid for employee services divided by the number of ordinary-time hours normally paid for a full-time staff member when on the job (or contract employee where applicable).
Green Finance	In line with our internal classification system to define what investments can be considered green finance. This includes financing raised and facilitated to renewable energy and other green energy financing; mortgages on properties with A- or B-rated EPC; and financing for electric vehicles, hybrid, and plug-in hybrid electric vehicles (PHEV) with emissions below 50g CO2 /km
Impairment loss allowance (Loan loss allowance)	An impairment loss allowance held on the balance sheet as a result of the raising of a charge against profit for an expected credit loss in the lending book. An impairment loss allowance may be either individual or collective.
Individually assessed loan impairment provisions	Impairment is measured individually for assets that are individually significant. For these assets, the Santander UK group measures the amount of the impairment loss as the difference between the carrying amount of the asset or group of assets and the present value of the estimated future cash flows from the asset or group of assets discounted at the original effective interest rate of the asset.
Internal Capital Adequacy Assessment Process (ICAAP)	The Santander UK group’s own assessment of its regulatory capital requirements, as part of CRD IV. It takes into account the regulatory and commercial environment in which the Santander UK group operates, the Santander UK group’s Risk Appetite, the management strategy for each of the Santander UK group’s material risks and the impact of appropriate adverse scenarios and stresses on the Santander UK group’s capital requirements.
Internal Liquidity Adequacy Assessment Process (ILAAP)	The Santander UK group’s own assessment of the prudent level of liquidity that is consistent with the Santander UK group’s LRA. It documents and demonstrates the Santander UK group’s overall liquidity adequacy – an appropriate level of liquid resources, a prudent funding profile and comprehensive management and control of liquidity and funding risks.
Internal ratings-based approach (IRB)	The Santander UK group's method, under the CRD IV framework, for calculating credit risk capital requirements using the Santander UK group’s internal models
International Financial Reporting Standards (IFRS)	A set of international accounting standards developed and issued by the International Accounting Standards Board, consisting of principles- based guidance.
Investment grade	A debt security, treasury bill or similar instrument with a credit rating measured by external agencies of AAA to BBB.
ISDA Master agreement	Standardised contract developed by ISDA (International Swaps and Derivatives Association) used as an umbrella under which bilateral derivatives contracts are entered into.
Judgemental Adjustments	Adjustments made to the ECL estimate outside of the ECL models to reflect management judgements.

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Term	Definition
Level 1	The fair value of these financial instruments is based on unadjusted quoted prices for identical assets or liabilities in an active market that the Santander UK group has the ability to access at the measurement date.
Level 2	The fair value of these financial instruments is based on quoted prices in markets that are not active or quoted prices for similar assets or liabilities, recent market transactions, inputs other than quoted market prices for the asset or liability that are observable either directly or indirectly for substantially the full term, and inputs to valuation techniques that are derived principally from or corroborated by observable market data through correlation or other statistical means for substantially the full term of the asset or liability.
Level 3	The fair value of these financial instruments is based on inputs to the pricing or valuation techniques that are significant to the overall fair value measurement of the asset or liability are unobservable.
Liquidity Coverage Ratio (LCR)	The LCR is intended to ensure that a bank maintains an adequate level of unencumbered, high quality liquid assets which can be used to offset the net cash outflows the bank could encounter under a short-term significant liquidity stress scenario.
LCR eligible liquidity pool	Assets eligible for inclusion in the LCR as high-quality liquid assets. The LCR eligible liquidity pool also covers both Pillar 1 and Pillar 2 risks.
Loan to value ratio (LTV)	The amount of a first mortgage charge as a percentage of the total appraised value of real property. The LTV ratio is used in determining the appropriate level of risk for the loan and therefore the price of the loan to the borrower. LTV ratios may be expressed in a number of ways, including origination LTV and indexed LTV.
Loss Given Default (LGD)	The fraction of Exposure at Default that will not be recovered following default. LGD comprises the actual loss (the part that is not recovered), together with the economic costs associated with the recovery process. It is calculated as the expected loss divided by EAD for each month of the forecast period. We base LGD on factors that impact the likelihood and value of any subsequent write-offs, which vary according to whether the product is secured or unsecured. If the product is secured, we take into account collateral values as well as the historical discounts to market/ book values due to forced sales type.
Master netting agreement	An industry standard agreement which facilitates netting of transactions (such as financial assets and liabilities including derivatives) in jurisdictions where netting agreements are recognised and have legal force. The netting arrangements do not generally result in an offset of balance sheet assets and liabilities for accounting purposes, as transactions are usually settled on a gross basis.
Maximum Distributable Amount (MDA)	The maximum distributions which a bank can make to investors when it has insufficient capital to meet its buffer requirements.
Medium-Term Funding (MTF)	Shown at a sterling equivalent value. Consists of senior debt issuance, asset-backed issuance (including securitisation and covered bond issuance) and structured issuance (including firm financing repurchase agreements).
Medium-Term Notes (MTNs)	Corporate notes (or debt securities) continuously offered by a company to investors through a dealer. Investors can choose from differing maturities, ranging from nine months to 30 years. They can be issued on a fixed or floating coupon basis or with an exotic coupon; with a fixed maturity date (non-callable) or with embedded call or put options or early repayment triggers. MTNs are most generally issued as senior, unsecured debt.
Minimum requirement for own funds and eligible liabilities (MREL)	A requirement under the Bank Recovery and Resolution Directive for EU resolution authorities to set a minimum requirement for own funds and eligible liabilities for banks, implementing the Financial Stability Board’s Total Loss Absorbing Capacity (TLAC) standard. The purpose of MREL is to help ensure that when banks, building societies and investment firms fail, that failure can be managed in an orderly way while minimising risks to financial stability, disruption to critical economic functions, and risks to public funds.
Mortgages	Refers to residential and buy to let retail mortgages only and excludes social housing and commercial mortgage properties.
Net fee and commission income	Fee and commission income minus other fees paid that are not an integral part of the effective interest rate. For retail and corporate products, fee and commission income consists principally of collection services fees, commission on foreign currencies, commission and other fees received from retailers for processing credit card transactions, fees received from other credit card issuers for providing cash advances for their customers through the Santander UK group’s branch and ATM networks, annual fees payable by credit card holders and fees for non-banking financial products.
Net interest income	The difference between interest received on assets and interest paid on liabilities.
Net Interest Margin (NIM)	Net interest income as a percentage of average interest-earning assets.
Net Promoter Score - Business	Measured by the MarketVue Business Banking from Savanta. This is an ongoing telephone based survey designed to monitor usage and attitude of UK businesses towards banks. Structured telephone interviews are conducted each year among businesses with an annual turn over from £0m and £2.0m weighted by region and turnover to be representative of businesses in Great Britain.
Net Promoter Score - Corporate	Measured by the MarketVue Business Banking from Savanta. This is an ongoing telephone based survey designed to monitor usage and attitude of UK businesses towards banks. Structured telephone interviews are conducted each year among businesses with an annual turn over between £2.1m and £500m weighted by region and turnover to be representative of businesses in Great Britain.
Net Promoter Score – Retail	The Financial Research Survey (FRS) is a monthly personal finance survey of around 5,000 consumers prepared by the independent market research agency, IPSOS MORI based on mortgages, savings, main current accounts, home insurance, UPLs and credit cards.
Net Stable Funding Ratio (NSFR)	The ratio of available stable funding resources to stable funding requirements over a one year time horizon, assuming a stressed scenario. The Basel III rules require this ratio to be over 100%.
Over the counter (OTC) derivatives	Contracts that are traded (and privately negotiated) directly between two parties, without going through an exchange or other intermediary. They offer flexibility because, unlike standardised exchange-traded products, they can be tailored to fit specific needs.

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Term	Definition
Own credit	The effect of the Santander UK group’s own credit standing on the fair value of financial liabilities.
Past due	A financial asset such as a loan is past due when the counterparty has failed to make a payment when contractually due.
Payment holiday	A period in which a customer has relief from making repayments on a loan. Also known as a payment deferral.
Pillar 1	The first pillar of the Basel III approach which provides the approach to the calculation of the minimum capital requirements.
Pillar 2	The part of the CRD IV Accord which sets out the process by which a bank should review its overall capital adequacy and the processes under which the supervisors evaluate how well financial institutions are assessing their risks and take appropriate actions in response to the assessments.
Pillar 3	The part of the CRD IV Accord which sets out the disclosure requirements for firms to publish details of their risks, capital and risk management. The aims are greater transparency and strengthening market discipline.
Prime / prime mortgage loans	A description for mortgages granted to the most creditworthy category of borrowers.
Probability of default (PD)	The likelihood of a borrower defaulting in the following year, assuming it has not closed or defaulted since the reporting date. For each month in the forecast period, we estimate the monthly PD from a range of factors. These include the current risk grade for the exposure, which becomes less relevant further into the forecast period, as well as the expected evolution of the account risk with maturity and factors for changing economics. We support this with historical data analysis.
Prudential Regulation Authority (PRA)	The UK financial services regulator formed as one of the successors to the FSA. The PRA is part of the Bank of England and is responsible for the prudential regulation and supervision of banks, building societies, credit unions, insurers and major investment firms. It sets standards and supervises financial institutions at the level of the individual firm.
Regulatory capital	The amount of capital that the Santander UK group holds, determined in accordance with rules established by the UK PRA for the consolidated Santander UK group and by local regulators for individual Santander UK group companies.
Repurchase agreement (Repo)	In a sale and repurchase agreement one party, the seller, sells a financial asset to another party, the buyer, under commitments to reacquire the asset at a later date. The buyer at the same time agrees to resell the asset at the same later date. From the seller's perspective such agreements are securities sold under repurchase agreements (repos) and from the buyer's securities purchased under commitments to resell (reverse repos).
Residential Mortgage-Backed Securities (RMBS)	Securities that represent interests in a group of residential mortgages. Investors in these securities have the right to cash received from future mortgage payments (interest and / or principal).
Retail & Business Banking (RBB)	Provides UK mortgage lending and banking services and unsecured lending to individuals and small businesses.
Risk Appetite	The level of risk (types and quantum) that the Santander UK group is willing to accept (or not accept) to safeguard the interests of shareholders whilst achieving business objectives.
Risk-weighted assets (RWA)	A measure of a bank’s assets adjusted for their associated risks. Risk weightings are established in accordance with the Basel Capital Accord as implemented by the PRA.
RoTE	Profit after tax attributable to equity holders of the parent divided by average shareholders’ equity less non-controlling interests, other equity instruments and average goodwill and intangible assets.
Securitisation	A process by which a group of assets, usually loans, are aggregated into a pool, which is used to back the issuance of new securities. A company sells assets to a structured entity which then issues securities backed by the assets, based on their value. This allows the credit quality of the assets to be separated from the credit rating of the original company and transfers risk to external investors. Assets used in securitisations include mortgages to create mortgage-backed securities. Santander UK has established securitisation structures as part of its funding and capital management activities.

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Term	Definition
Significant increase in credit risk (SICR)	Assessed by comparing the risk of default of an exposure at the reporting date to the risk of default at origination (after considering the passage of time).
Sovereign exposures	Exposures to local and central governments, and government guaranteed counterparties.
Stage 1	Assets have not experienced a significant increase in credit risk since origination. A loss allowance equal to a 12-month ECL is applied.
Stage 2	Assets have experienced a significant increase in credit risk since origination, but no credit impairment has materialised. A loss allowance equal to the lifetime ECL is applied.
Stage 3	Assets that are in default and considered credit impaired. A loss allowance equal to the lifetime ECL is applied. Objective evidence of credit impairment is required.
Standardised approach	In relation to credit risk, a method for calculating credit risk capital requirements under CRD IV, using External Credit Assessment Institutions ratings and supervisory risk weights. The Standardised approach is less risk-sensitive than IRB (see 'IRB' above). In relation to operational risk, a method of calculating the operational capital requirement under CRD IV, by the application of a supervisory defined percentage charge to the gross income of eight specified business lines.
Stress testing	Stress testing is a management tool that facilitates a forward-looking perspective on risk management, strategic planning, capital, and liquidity and funding planning.
Structured entity	An entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when any voting rights relate to administrative tasks only and the relevant activities are directed by means of contractual arrangements.
Structured finance/notes	A structured note is an instrument which pays a return linked to the value or level of a specified asset or index and sometimes offers capital protection if the value declines. Structured notes can be linked to a range of underlying assets, including equities, interest rates, funds, commodities and foreign currency.
Subordinated liabilities	Liabilities which, in the event of insolvency or liquidation of the issuer, are subordinated to the claims of depositors and other creditors of the issuer.
Sub-prime	Loans to borrowers typically having weakened credit histories that include payment delinquencies and potentially more severe problems such as court judgements and bankruptcies. They may also display reduced repayment capacity as measured by credit scores, high debt-to-income ratios, or other criteria indicating heightened risk of default.
Supranational	An international organisation where member states transcend national boundaries or interests to share in decision-making and vote on issues relating to the organisation’s geographical focus.
Standard Variable Rate (SVR)	A mortgage product managed by Santander and not directly linked to the Bank of England base rate.
Term Funding Scheme with additional incentives fort SMEs (TFSME)	The TFSME allows eligible banks and building societies to access four-year funding at rates very close to Bank Rate.
Tier 1 capital	A measure of a bank's financial strength defined by the PRA. It captures Common Equity Tier 1 capital plus other Tier 1 securities in issue but is subject to a deduction in respect of material holdings in financial companies.
Tier 2 capital	Defined by the PRA. Broadly, it includes qualifying subordinated debt and other Tier 2 securities in issue, eligible collective impairment allowances, the excess of regulatory impairment allowance over expected loss and deduction of material holdings in financial companies.
Total loss absorbing capacity (TLAC)	An international standard for TLAC issued by the Financial Stability Board, which requires global systemically important banks (G-SIBs) to have sufficient loss-absorbing and recapitalisation capacity available in resolution, to minimise impacts on financial stability, maintain the continuity of critical functions and avoid requiring taxpayer support.
Total customers	Defined as those having an open account.
Total wholesale funding	Comprises the sum of all outstanding debt securities, structured issuance (including firm financing repurchase agreements), subordinated debt and capital issuance, TFS and noncustomer deposits. Total wholesale funding excludes any collateral received as part of the FLS.
Trading book	Positions in financial instruments held either with trading intent or in order to hedge other elements of the trading book, which must be free of restrictive covenants on their tradability or ability to be hedged.
Unencumbered assets	Assets on our balance sheet not used to secure liabilities or otherwise pledged.
UK leverage ratio	CRD IV end-point Tier 1 capital divided by exposures as defined by the PRA rulebook. This is a key prudential regulatory measure which provides useful information to investors.
Value at Risk (VaR)	An estimate of the potential loss which might arise from market movements under normal market conditions, if the current positions were to be held unchanged for one business day, measured to a confidence level.
Write-down	After an advance has been identified as impaired and is subject to an impairment allowance, the stage may be reached whereby it is concluded that there is no realistic prospect of further recovery. Write-downs will occur when, and to the extent that, the whole or part of a debt is considered irrecoverable.

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Disclosure pursuant to Section 219 of the Iran Threat Reduction and

Syria Human Rights Act

Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012, which added Section 13(r) to the Securities Exchange Act of 1934, as

amended (the Exchange Act), an issuer is required to disclose in its annual or quarterly reports, as applicable, whether it or any of its affiliates knowingly engaged

in certain activities, transactions or dealings relating to Iran or with individuals or entities designated pursuant to certain Executive Orders. Disclosure is generally

required even where the activities, transactions or dealings were conducted in compliance with applicable law.

The following activities are disclosed in response to Section 13(r) with respect to the Santander UK group and its affiliates in the Banco Santander group. During

the period covered by this report:

(a)  Santander UK holds ten blocked accounts for seven customers that are currently designated by the US under the Specially Designated Global Terrorist

(SDGT) sanctions programme. Revenues and profits generated by Santander UK on these accounts in the year ended 31 December 2024 were negligible

relative to the overall profits of Banco Santander SA.

(b)  Santander Consumer Finance, SA holds through its Belgian branch seven blocked correspondent accounts for an Iranian bank that is currently designated by

the US under the SDGT sanctions programme. The accounts have been blocked since 2008. No revenues or profits were generated by the Belgian branch

on these accounts in the year ended 31 December 2024.

(c)  Santander Brasil holds three blocked accounts for three customers with domicile in Brazil designated by the US under the SDGT sanctions programme.

Revenues and profits generated by Santander Brasil on these accounts in the year ended 31 December 2024 were negligible relative to the overall profits of

Banco Santander SA.

(d)  The Banco Santander group also has certain legacy performance guarantees for the benefit of an Iranian bank that is currently designated by the US under

the SDGT sanctions programme (stand-by letters of credit to guarantee the obligations – either under tender documents or under contracting agreements of

contractors who participated in public bids in Iran) that were in place prior to 27 April 2007.

In the aggregate, all of the transactions described above resulted in gross revenues and net profits in the year ended 31 December 2024 which were negligible

relative to the overall revenues and profits of the Banco Santander group. The Banco Santander group has undertaken significant steps to withdraw from the

Iranian market such as closing its representative office in Iran and ceasing all banking activities therein, including correspondent relationships, deposit taking from

Iranian entities and issuing export letters of credit, except for the legacy transactions described above. The Banco Santander group is not contractually permitted

to cancel these arrangements without either (i) paying the guaranteed amount (in the case of the performance guarantees), or (ii) forfeiting the outstanding

amounts due to it (in the case of the export credits). As such, Banco Santander group intends to continue to provide the guarantees and hold these assets in

accordance with company policy and applicable laws.

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Cross-reference to Form 20-F

Form 20-F Item Number and Caption			Page
PART I
1	Identity of Directors, Senior Management and Advisers		*
2	Offer Statistics and Expected Timetable		*
3	Key Information	Capitalisation and indebtedness	*
		Reasons for the offer and use of proceeds	*
		Risk factors	245 - 259
4	Information on the Company	History and development of the company	1, 72, 169, 171-180, 226, 276
		Business overview	10-11, 16, 20-21, 62, 73, 112, 118, 128, 131, 154-155, 181-183, 212, 252-254, 260-261, 269
		Organisational structure	72, 132, 231-233, 239-241
		Property, plant and equipment	168, 174, 202
4A	Unresolved Staff Comments		Not applicable
5	Operating and Financial Review and Prospects	Operating results	8, 13-14, 142, 145, 166, 190, 245-259
		Liquidity and capital resources	60, 74,128-143, 169, 190, 275
		Research and development, patents and licenses, etc.	73
		Trend information	6, 8-9, 15-21
		Critical accounting estimates	179-180
6	Directors, Senior Management and Employees	Directors and senior management	44-50, 163-266
		Compensation	63-71, 168, 173, 205-209, 215, 216
		Board practices	44-50, 57-61, 63-67, 216, 263-267
		Employees	5, 72, 181-183
		Share ownership	72, 215, 216
		Disclosure of a registrant’s action to recover erroneously awarded compensation	Not applicable
7	Major Shareholders and Related Party Transactions	Major shareholders	276
		Related party transactions	112, 216, 217
		Interests of experts and counsel	*
8	Financial Information	Consolidated Statements and Other Financial Information	157-159, 166-170,  204-205, 210-212, 262, 276
		Significant Changes	72, 226
9	The Offer and Listing		*
10	Additional Information	Share capital	*
		Memorandum and articles of association	262
		Material contracts	276
		Exchange controls	276
		Taxation	276
		Dividends and paying agents	*
		Statements by experts	*
		Documents on display	276
		Subsidiary Information	*
		Annual Report to Security Holders	Not applicable
11	Quantitative and Qualitative Disclosures about Market Risk		141-143
12	Description of Securities Other Than Equity Securities		Exhibit 2.1
PART II
13	Defaults, Dividend Arrearages and Delinquencies		Not applicable
14	Material Modifications to the Rights of Security Holders and Use of Proceeds		Not applicable
15	Controls and Procedures		73
16A	Audit Committee financial expert		49, 61, 267
16B	Code of Ethics		75
16C	Principal Accountant Fees and Services		57, 185, 277
16D	Exemptions from the Listing Standards for Audit Committees		Not applicable
16E	Purchases of Equity Securities by the Issuer and Affiliated Purchasers		Not applicable
16F	Change in Registrant’s Certifying Accountant		Not applicable
16G	Corporate Governance		42, 267
16H	Mine Safety Disclosure		Not applicable
16I	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections		Not applicable
16J	Insider Trading Policies		277
16K	Cybersecurity		16, 79, 149-151, 257
PART III
17	Financial Statements		Not applicable
18	Financial Statements		166-170
19	Exhibits		Filed with SEC
* Not required for an Annual Report.

EXHIBIT INDEX

Exhibits1
1.1	Articles of Association of Santander UK Group Holdings plc (incorporated by reference to Exhibit 1.1 to Santander UK Group Holdings plc's Form 20F filed with the Securities and Exchange Commission on 5 March 2024)
2.1	Description of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934
8.1	List of Subsidiaries - the list of subsidiaries that are consolidated can be found in ‘Subsidiaries and related undertakings’ in the Shareholder information section of the Form 20-F. Details of subsidiaries that are not consolidated can be found in Note 18 ‘Interests in other entities’ in the Financial Statements section of the Form 20-F.
11.1	Policy on Market Abuse and Inside Information
12.1	CEO Certificate pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
12.2	CFO Certificate pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
13.1	Certificate pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
15.1	Consent of Independent Registered Public Accounting Firm
97.1	Policy for the Recovery of Erroneously Awarded Compensation of Santander UK Group Holdings plc (incorporated by reference to Exhibit 97.1 to Santander UK Group Holdings plc's Form 20F filed with the Securities and Exchange Commission on 5 March 2024)
101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document

1Documents concerning Santander UK Group Holdings plc referred to in the 2024 Annual Report on Form 20-F may be inspected at 2 Triton Square, Regent’s Place, London NW1 3AN, its principal executive

offices and registered address.

SIGNATURE

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this

annual report on its behalf.

SANTANDER UK GROUP HOLDINGS plc

By:	/s/ Mike Regnier
	Mike Regnier
	Chief Executive Officer

Dated: 7 March, 2025