Customers have every reason to be wary of banks with the highest savings rates and lowest mortgages
Will Santander customers in the UK be vulnerable if Spain needs a bailout?
Spain's largest bank says no. It made profits of €8.1bn last year, keeping half in a rainy day fund, to boost its capital. That capital base was strong, at 8.8% in 2010, though that compares to HSBC's 10.5% and Barclays' 10%. It has more than €100bn in liquid funds in the event of a second credit crunch. There is also the Financial Services Compensation Scheme, which protects £85,000 of savings and £50,000 of investments per person, per firm.
Could the bank still be short of cash?
It has been raising cash. In February the bank raised $290m by selling a stake in its Chilean business. In the same month Zurich Financial Services, Switzerland's largest insurer, paid $1.7bn for a 51% stake in Santander's South American insurance operations. It also did a deal last October with the Qatari sovereign wealth fund, which spent $2.7bn on a bond issue that will convert into shares.
Has it bought anything?
Santander is a savvy buyer. Last September it snapped up a 96% stake in Bank Zachodni WBK, a Polish bank, for €4bn from Allied Irish Banks.
Could problems in Spain affect the UK business?
No, says the bank. It is separately capitalised and funds are not used to subsidise other parts of the group. The UK has a tier-one capital ratio of more than 15%. Exposure to Portugal is limited to holdings in government debt of around €2.4bn and its Santander Totta bank, which accounts for 4% of the group's balance sheet.
Why is Santander offering market-leading rates in the UK?
Customers have every reason to be wary of banks with the highest savings rates and lowest mortgages. The Icelandic banks offered high rates until they went bust. Santander says it can offer more because its cost-to-income ratios are the lowest in the industry at below 40%, while the average is above 50%. It can therefore reward customers for its efficiency.