Santander’s UK profit slumps by over a quarter

By MARTIN FLANAGAN
Published on 26/10/2012 00:00

SANTANDER UK has seen third-quarter profits slide 27 per cent to £372 million, hit by a mixture of funding and regulatory costs squeezing profit margins, and one-off items.

The group, part of Spanish banking major Banco Santander, said yesterday that it had taken a £52m provision for costs relating to its recently derailed takeover of 316 Royal Bank of Scotland branches.

It also put aside £232m to cover potential mis-selling claims, including derivative hedging products to small businesses, interest-only mortgages and credit card protection, as well as money for possible extra regulatory costs.

Ana Botin, Santander UK’s chief executive, said she had pulled the deal to buy the RBS assets as it was going to miss the timeframe agreed.

“The continued uncertainty regarding timing was not in the best interests of customers or staff,” Botin said. Santander UK’s performance was much better in Q3 than its parent, whose profits slumped 94 per cent to €100m (£81m) from €1.8 billion (£1.5bn) as it suffered from Spain’s financial and real estate crisis.

Santander UK’s nine-month performance to end-September was stronger than Q3, with profits up 4 per cent at £1.09bn and a robust balance sheet showing capital reserves equivalent to 12.8 per cent of its loan book.

The division’s lending to small business in the nine-month period rose 20 per cent, but mortgage loans fell to £167.4bn from £172.6bn as it moved away from higher-loan-to-value mortgages.