Some customers are set for payouts
Santander has given an update
Santander UK has seen profits slump by 44% at the start of the year after it set aside nearly another £180 million for the motor finance mis-selling scandal. The high street lending giant reported pre-tax profits of £202 million for the first quarter, down from £358 million a year ago.
Profits were knocked by an extra £179 million provision for motor finance compensation and increased costs in the first quarter, which brings its expected total bill so far for the saga to £633 million. The group – owned by Spain’s Banco Santander – also booked a £73 million charge for bad debts, up 40% year-on-year, as it slashed its outlook for the UK economy due to the Iran war, which it said will likely lead to higher inflation and weaker growth, as well as higher unemployment.
Santander now expects the economy to eke out growth of 0.5% in 2026 in its base case scenario, followed by 1% expansion next year, while the rate of unemployment will reach 5.5%. While it sees inflation rising as a result of higher costs caused by the Middle East conflict, its central forecast is for interest rates to stay at 3.75% this year before being cut to 3.25% by the end of 2027.
New chief executive Mahesh Aditya – who took over from Mike Regnier on March 1 – said the group was so far not seeing significant borrower woes from the Iran war cost spike.
He said: “While we are not yet seeing any significant impact of the current uncertain global economic environment on our customers, we have put measures in place including a proactive outreach programme offering support, in addition to our ongoing commitment to the UK mortgage charter.”
The group said the motor finance scandal impact was partly offset by cost-cutting and it reiterated plans for further savings over the year “driven by simplification and automation of our business”.
Operating costs fell by 7% in the first quarter, with Santander revealing plans earlier this year to shut another 44 branches, putting nearly 300 jobs at risk.
Santander said at the weekend it would not challenge the Financial Conduct Authority’s plans for motor finance redress and would pay compensation for its portion of unfair deals in the scandal.
Payouts are due on about 12.1 million mis-sold deals with hidden commission from an array of lenders at an average of £829 each, the financial watchdog said in March as it unveiled final plans for its redress scheme.
Mr Aditya said the completion of the bank’s £2.65 billion takeover of smaller rival TSB was “expected imminently” after recent regulatory approval.
He said: “The acquisition represents the single-largest inward investment in the UK banking sector for over 15 years and underlines Banco Santander’s commitment to the UK.
“The deal is expected to accelerate Santander UK’s transformation and enhance competition in the UK, benefiting both customers and shareholders.”
