Santander warns over Brexit impact as UK profits rise

Santander UK is promoted by retired Olympic champion Jessica Ennis-Hill. Picture: Thomas Hornall/PA Wire
Santander UK is promoted by retired Olympic champion Jessica Ennis-Hill. Picture: Thomas Hornall/PA Wire
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Santander UK has reported a rise in quarterly profit, but again warned that earnings could take a hit as a result of Brexit.

The Spanish lender’s British operation said pre-tax profits grew 9 per cent to £1.6 billion over the nine months to 30 September, but said growth figure slowed on a quarterly basis.

We expect a more challenging macroeconomic environment ahead

Nathan Bostock

In the three months to the end of September, pre-tax profits fell to £477 million, down from £496m for the same period last year. It also marked a slowdown from the £546m reported in the second quarter.

The bank has also put aside an additional £30m to cover costs related to the mis-selling of payment protection insurance, bringing its total provisions over the past nine months to £397m. The UK banking industry’s PPI bill is already colossal, at more than £30bn so far.

READ MORE: Lloyds sets aside £1bn extra to cover PPI mis-selling

The bank said in its trading update that Brexit could end up denting earnings, as Britain’s decision to leave the European Union had resulted in economic uncertainty and market volatility, which is expected to continue.

Chief executive Nathan Bostock said: “Although we have not seen a material impact on our business in the short period since the EU referendum, we do expect a more challenging macroeconomic environment ahead.

“This increased caution has prompted us to revise our 2018 return on tangible equity, cost-to-income and NPL (non-performing loan) ratio targets, as disclosed at the 2016 Banco Santander strategy update in late September.”

In the near term, the bank said it expects consumer confidence to drop and economic growth to slow, and cautioned that higher oil prices and a weaker pound were likely to result in higher inflation.

Sterling has fallen nearly 20 per cent against the US dollar since the EU referendum.

Results also showed a pension hit following the Brexit vote, and comes as company schemes are hammered by falling bond yields.

Santander UK said the defined benefit pension scheme had fallen into a £258m deficit, compared with a surplus of £483m a year earlier.

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