Fears for social housing finance as Banco Santander bids to take over Abbey

HBOS’ decision not to bid for Abbey last week appeared to end the prospect of two of the largest UK lenders merging, thus whittling down the number of lenders.

But Abbey’s remaining suitor, Santander, has not yet released its plans for Abbey’s lending and could sell the bank’s social housing portfolio to another bank that already works in the sector.

It also has the option of maintaining or boosting current lending levels.

Abbey held 13% of the social housing loan market as at March 2003, making it the sector’s second biggest lender.

The Spanish bank has not lent to UK social housing before, but it does offer such loans in other countries, particularly in Latin America.

One UK finance source questioned whether Santander would be interested in lending to UK social housing. He said: “If Santander were that interested, it would be here already.”

A spokesman for Santander said he could not comment on the bank’s plans at this stage of the takeover bid. “In general terms, we will maintain and hopefully extend Abbey’s mortgage lending business but as far as specific segments go, we will have to wait until the [takeover] operation is complete.

If Santander were interested in lending to registered social landlords in the UK, it would be here already

UK finance source

“We will be in expansive mood as far as the [mortgage lending] sector is concerned but … we need to wait for our people to do an evaluation and business plan.”

A spokesman for Abbey said: “We are in a takeover bid situation so I can’t talk about what Santander might or might not do.”

Bob Wilson, head of finance policy at the National Housing Federation, said: “It’s the old situation about four or five lenders having more than 50% of the market.

“That’s not to say there aren’t other players but if we took Abbey out, whether it went to Santander or another big lender, we would be contracting the number of lenders further.

“In terms of our desire to get more lenders in the market, that wouldn’t necessarily be a good thing but there’s no evidence there’s any drying-up of supply.

“If Santander takes over Abbey’s lending book and carries on lending the same as before, we will be in no worse position.”