Santander UK has reported a dramatic 44% drop in first-quarter profits, as the banking giant allocates nearly £180 million more to cover the motor finance mis-selling scandal. The high street lender posted pre-tax profits of just £202 million, down from £358 million in the same period last year. This additional provision brings Santander's total bill for the motor finance saga to a staggering £633 million.
Key Financial Details
The bank also recorded a £73 million charge for bad debts, a 40% increase year-on-year, reflecting a downgraded outlook for the UK economy amid the ongoing Iran war. Santander now expects the economy to grow by only 0.5% in 2026, with unemployment projected to reach 5.5%.
New chief executive Mahesh Aditya commented: "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."
Cost-Cutting Measures
Santander is fighting back with cost-cutting initiatives, including plans to close 44 more branches and put nearly 300 jobs at risk. Operating expenses fell 7% in the first quarter as the bank pushes ahead with "simplification and automation" efforts.
Motor Finance Compensation
Santander confirmed it will not contest the Financial Conduct Authority's motor finance redress proposals and will pay compensation for its share of unfair deals. Approximately 12.1 million customers are due compensation, averaging £829 each. The scheme is expected to commence soon, providing much-needed relief to affected consumers.
TSB Takeover Update
Meanwhile, Santander's £2.65 billion takeover of rival TSB is "expected imminently" following regulatory approval. This acquisition is part of Santander's broader strategy to strengthen its market position despite the challenging economic environment.
