Santander UK profits plummet 44% as TSB takeover nears completion
Santander has seen profits slump in the first quarter after it set aside a further £179million for the motor finance scandal and slashed its outlook for the UK economy.
Pre-tax profits dropped 44 per cent to £202million in the three months to 31 March, down from £358million in the same period a year ago.
It came as the High Street bank increased the provision charge relating to historical car finance payments, after the Financial Conduct Authority revealed details of its car finance compensation scheme last month.
This resulted in an additional charge of £179million, increasing the total provision to £633million at 31 March, at the upper end of Santander's previous forecasts.
The group - owned by Spain's Banco Santander - said it was partly offset by cost-cutting and reiterated plans for further savings over the year 'driven by simplification and automation of our business'.
Santander also flagged a £73million charge for bad debts, up 40 per cent year-on-year, as it slashed its outlook for the UK economy due to the war in Iran.
It now anticipates weaker growth and higher unemployment due to the Iran war.
Santander expects Britain's economy to eke out growth of 0.5 per cent this year in its base case scenario, followed by 1 per cent expansion next year, while the rate of unemployment will reach 5.5 per cent.
Unemployment fell to 4.9 per cent in the three months to February, the Office for National Statistics said this month.
The lender said it expected interest rates stay at 3.75 per cent this year before reducing to 3.25 per cent by the end of 2027.
Chief executive Mahesh Aditya, who took over from Mike Regnier last month, said the business was not yet seeing significant borrower woes from the spike in costs.
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.'
Santander's net interest margin - a key metric for measuring profitability - contracted eight basis points from the first quarter of 2025 to 2.22 per cent. It pointed to the higher cost of deposits, which also led to net interest income decreasing two per cent to £1.1billion.
Operating costs improved seven per cent to £638million as the bank continued with its plan for 'simplification and automation'.
In January, Santander UK said it would close another 44 branches, putting 291 jobs at risk of redundancy, as the bank turns its focus to its digital offer to keep at pace with its fintech competitors.
Aditya said the bank's landmark acquisition of TSB is expected to complete 'imminently'.
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.'
