Santander reviews UK retail banking presence amid broader assessment, source says

(Reuters) -Banco Santander is reviewing its presence in Britain, a person familiar with the matter said, two decades after its acquisition of Abbey National made it a major player on the country's high streets.

Santander's review is part of a regular assessment of its major businesses, the person said speaking on condition of anonymity because they were not authorized to speak publicly.

This could result in different outcomes, including scaling back Santander's business in Britain, the person added.

"The UK is a core market for Santander and this has not changed," Santander said in a statement on Sunday.

Santander competes with banks including Lloyds Banking Group and Barclays in Britain, which is one of 10 markets the Spanish bank considers key, including Mexico, Brazil and its home market in Spain.

Barclays had approached Santander about a possible offer for its UK business but it did not lead to anything, the person and a second person said. The approach last year did not proceed because of a disagreement on price, the second person said.

Reuters could not immediately determine whether Barclays was still interested in the business. Barclays declined to comment

Santander is exploring a number of strategic options, one of which is exiting the British market to focus on bigger growth regions such as the U.S., the Financial Times reported on Saturday, adding that no deal or announcement was imminent and that the review was at an early stage.

Two people familiar with the matter told the FT it was unclear who would be interested in buying the unit, and that Santander could yet decide to keep the business, the FT added.

The bank could also opt to increase its presence in the UK, the person familiar with the matter told Reuters.

The review comes as Santander set aside 295 million pounds ($358.81 million) to cover possible costs related to an industry-wide probe into motor finance commissions.

Santander also reduced its workforce in Britain through a round of 1,400 job cuts in October.

Major financial trade bodies, including U.K. Finance, have longstanding concerns about the higher costs of business borne by banks in Britain compared to international rivals, particularly when in tax, compliance and fraud reimbursement.

Santander executives have also expressed frustrations about doing business in Britain.

In a parliamentary evidence session last March, Santander UK CEO Mike Regnier told lawmakers his unit had to lobby internally for the allocation of capital within the group - a task made more challenging by the competitive nature of the market in Britain and its idiosyncratic tax treatment of banks.

($1 = 0.8222 pounds)

(Reporting by Andres Gonzalez and Sinead Cruise in London, Jesus Aguado in Spain and Disha Mishra in Bengaluru; Editing by Bernadette Baum and Anousha Sakoui)