THE UK business of Santander has seen profits tumble by 21 per cent in the first quarter after being caught in the slipstream of the collapse of outsourcing giant Carillion earlier this year.
The Spanish bank’s exposure to the defunct services giant, as well as a further charge relating to another corporate customer, reported to be Interserve, saw it book exceptional costs of £60 million for the three months ended March 31. It sent profits for the quarter down to £414m, compared with £525m in the first quarter of 2015.
The increased charges came as the bank said it faced competitive pressures in the UK market, as well as continuing uncertainty arising from Brexit.
It warned that it would fail to meet its target for 4.7 million loyal retail customers this year, with current numbers standing at four million as it has struggled to attract savings deposits.
Rates on a number of its savings products have not been increased since the rate hike last November, while its everyday and instant deposit accounts remain below the 0.5% base rate.
Chief executive Nathan Bostock said: “Our first-quarter results have been impacted by ongoing competitive pressures in the UK.”
“Cost discipline remains an area of particular focus for management, with targeted actions expected to reduce the cost run rate over the year and deliver operational efficiencies,” he added.
The Carillion charge comes after Santander’s 2017 UK profits fell by 5%, dragged lower by £203m of impairment charges. These were largely made up of loans to Carillion, which went bad.
The bank said net interest income was down 4%, to £906m from £940m in the first quarter of last year as it cited pressure on new mortgage margins. However, it said this was offset by string lending volumes.
The bank grew its mortgage book by £1.9 billion to £156.8bn from the fourth quarter of 2017, with gross lending standing at £7.6bn in the first quarter. Overall customer loans edged up to £201.5bn, up from £200.2bn, however savings deposits fell £700m to £60.1bn.
And it reported that net interest income and banking net interest margin was 1.83% for the period, in line with the fourth quarter of 2017.
It added 180,000 new digital customers over the period, up 10% year on year.
The wider Santander group posted a 10% rise in net profit to €2.05bn for the first quarter, which was higher than expected.
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