Santander UK is set to pay compensation for approximately 12.1 million mis-sold deals, averaging £829 each, amid a significant profit slump.
The bank’s profits have dropped by 44% in the first quarter of the year. Santander reported pre-tax profits of £202 million, down from £358 million a year earlier. It has set aside nearly £180 million for the motor finance mis-selling scandal, with an anticipated total bill of £633 million.
Santander confirmed it would not contest the Financial Conduct Authority’s proposals for motor finance redress. This decision comes as the bank plans to close an additional 44 branches, risking nearly 300 jobs. Operating expenses fell by 7% in the first quarter.
Mahesh Aditya, a spokesperson for Santander, stated, “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.” The UK economy faces challenges as interest rates are expected to remain at 3.75% this year before potentially reducing to 3.25% by the end of 2027.
The bank’s acquisition of TSB for £2.65 billion is expected to be completed imminently. Aditya emphasized that this acquisition represents the single-largest inward investment in the UK banking sector for over 15 years.
The situation poses uncertainties for many customers affected by the mis-sold deals. The unemployment rate is forecasted to hit 5.5%, adding pressure on consumers and businesses alike.
