Bankinter | Santander UK has adjusted downward its operations in the UK, with a cut of 1.5 Bn€. This writedown is due to a deterioration in business perspectives (generation of future incomes) as a consequence of the severe regulatory environment and uncertainty about Brexit, which obliges it to duplicate certain functions and, therefore, raise costs and reduce the expectations for the generation of profits.
The adjustment to the value will booked in the accounts for Q319, affecting neither the capital base, understood as CET1 (given that the calculation of CET1 excludes good will), nor the future generation of cash flows. The bank reiterates its medium term objectives communicated on 3 March.
Analysis team opinion: Negative impact. We think that, although the accounting impact will not appear explicitly in the books, the market will interpret negatively the measure which means admitting greater difficulties in generating future income and a recognition of the diminution in the asset value, whether or not this adjustment passes through the results and affects the book value per share. As a reference, we estimate that the adjustment represents approximately 0.10% of total assets, such that it is not relevant from this point of view … although it would be if it is set in relation to consolidated ordinary profits, for example (8.064 Bn€ in 2018; it would represent 18.6%).
