Santander UK reported a 38 per cent drop in profit for the last year, as it braces itself for mounting motor finance mis-selling provisions and doles out higher interest rates on savings.
The Spanish-owned high street banking giant’s annual pre-tax profit fell to £1.33billion in the UK, as speculation continued to swirl over the future of the lender’s presence in the country.
Santander UK set aside £295million in its third quarter to cover potential payouts as well as legal costs following a major court decision on car finance commissions last autumn.
It said on Wednesday: ‘Provisions for other liabilities and charges were up 110 per cent, driven by the charge for historical motor finance commission payments.’
Spanish owner Banco Santander has sought to quash rumours that the lender is considering pulling out of Britain.
Santander executive chair Ana Botin insisted recently that ‘we love the UK’ and that Britain remained a core market for the bank.
Slump: Santander UK saw its annual profit fall nearly 40% in the last year
But it is understood a sale of the high street bank would still be considered if a buyer came forward with a high enough offer, according to the Financial Times.
On top of the motor finance debacle, the group’s latest results were also affected by the high cost of savings products and a rush of demand earlier in the year, although the group cut rates later in 2024 to make them less attractive.
It also saw fourth quarter profits slip 8 per cent on a year ago to £383million.
Mortgage lending fell 5 per cent to £167.2billion, while customer deposits also slipped 5 per cent to £183.4billion.
However, the group forecast a ‘gradual return’ to growth in mortgage lending over the year ahead as it pencilled in more interest rate cuts. It expects to see the base rate fall to 3.75 per cent by the end of this year.
Santander UK said: ‘We are well positioned for Bank Rate reductions, with reduced sensitivity to interest rate changes due to our enhanced structural hedge position.’
Annual house price growth will ease to 3 per cent from 4.5 per cent in 2024, it added.
In the UK, the group said ‘transformation through simplification and automation of our business’ would drive down costs.
Banco Santander revealed last October that the group was cutting more than 1,400 jobs across its UK business in 2024 in a bid to cut costs.
Mike Regnier, chief executive of Santander UK, said: ‘While challenges remain, and there have been mixed signals about the UK’s recent economic performance, the outlook for our business has improved.
‘We will continue to work with Banco Santander to harness the best of our local and global capabilities.’
The wider Banco Santander group reported a 16 per cent increase in pre-tax profits to £15.83billion as revenues climbed 7.8 per cent.
It unveiled a new plan to buy back £8.32billion worth of shares from 2025 and 2026 earnings.
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