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- Santander UK saw its profit fall sharply in its third quarter
Santander UK’s profits fell sharply in the third quarter as the lender set aside £295m for potential compensation related to car finance charges.
Last month, the bank delayed publishing the results after a Court of Appeal ruling saw the court side with consumers in a dispute over commissions earned by companies selling car finance loans.
Santander said it had set aside £295 million as a provision to cover potential payouts as well as legal costs.
It said there were “significant uncertainties as to the nature, extent and timing of any corrective action if necessary and the ultimate financial impact could be materially more or less than the amount provided”.
As a result, the lender reported pre-tax profits of £143 million for the three months to the end of September, almost 75 per cent less than the £558 million made a year earlier.
The update came as its Spanish owner, Banco Santander, also announced it would cut more than 1,400 jobs across its UK businesses this year in a bid to cut costs.
Car finance dispute hits Santander UK profits
Last month, Santander UK said it disagreed with the conclusions reached by the Court of Appeal in its October ruling.
In the case, three people claimed that they did not know that their dealer was receiving more commissions as a result of setting a higher interest rate on their credit agreement.
The ruling sets a precedent for the broader auto finance industry by ruling that any dealership that receives a commission from lenders must ensure its customers are fully informed about the arrangement.
Santander said the ruling “sets a higher standard for disclosure and consent of the existence, nature and amount of commission paid to dealers than is required by current FCA rules or current regulatory requirements in the time of the cases in question”. .
He added: “Lenders involved in the cases subject to the Court of Appeal ruling have indicated that they intend to seek permission to appeal that ruling to the Supreme Court.”
UK lenders will face £30bn compensation to resolve car finance scandal.
Santander also told shareholders on Wednesday that mortgage lending had fallen by £5.5bn since December last year, while customer deposits had fallen by £7.9bn in the first nine months of 2024 amid rate cuts on savings accounts.
Santander said it would “continue to prioritize profitability and our core banking franchise… resulting in lower mortgage lending and customer deposits in 2024.”
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