Santander UK profits plunge after £295m motor finance hit
The high street lender reported pre-tax profits of £143 million for the three months to the end of September, down 65% on the previous quarter.
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Your support makes all the difference.Banking giant Santander UK has revealed profits plummeted in its third quarter as it took a £295 million hit following a major court decision on car finance commission.
The high street lender reported pre-tax profits of £143 million for the three months to the end of September, down nearly 75% on the £558 million notched up a year earlier and also a steep drop on the £413 million posted for the previous three months.
The group said it put aside £295 million as a provision to cover potential payouts as well as legal costs.
But it said there are “significant uncertainties as to the nature, extent and timing of any remediation action if required and the ultimate financial impact could be materially higher or lower than the amount provided”.
The group last month delayed its third quarter results after a Court of Appeal ruling saw the court side with consumers in a row over commission earned by companies selling car finance loans.
The news came as its Spanish owner Banco Santander also announced it was cutting more than 1,400 jobs across its UK business this year amid ongoing efforts to reduce costs.
Santander UK said last month it disagrees with the conclusions reached by the Court of Appeal in its October ruling.
In the case, three people claimed they did not know their dealer was receiving more commission as a result of fixing a higher interest rate on their credit agreement.
The judgment therefore sets a precedent for the wider motor finance industry by ruling that any dealers receiving commission from lenders must ensure their customers are fully informed about the arrangement.
Santander said the ruling “set a higher bar for the disclosure of and consent to the existence, nature, and amount of commission paid to dealers than that required by current FCA rules, or regulatory requirements in force at the time of the cases in question”.
“The lenders involved in the cases subject to the Court of Appeal’s judgment have indicated that they intend to seek permission to appeal that judgment to the Supreme Court,” it added.
The group also revealed in its third quarter figures that mortgage lending had slumped by £5.5 billion since December last year, while customer deposits have reduced by £7.9 billion in the first nine months of 2024 after it cut rates on savings accounts to make them less attractive after forking out more to savers earlier in the year.
Santander said it would “continue to prioritise profitability and our core banking franchise… resulting in lower mortgage lending and customer deposits in 2024”.