Santander UK’s profits sink as costs rise and lender fails to reach its customer number target
- Pre-tax profits at the UK lender fell by 14 per cent to £1.6bn, latest figures show
- By the end of last year, bank had 4.1m customers, while target was 4.7m
Santander UK saw its pre-tax profits fall by 14 per cent to £1.6billion in the last year, as it battles against ‘continued income and cost pressures.’
By the end of the year, the UK arm of the Spanish-owned bank had 4.1million ‘loyal’ customers, while the target for the year had been set at 4.7million. A loyal customer is classified as one with two or more accounts or products with the lender.
Customer deposits fell to £142.1billion from £143.8billion due to a £3.5billion drop in savings balances.
Net interest income fell by 5 per cent to £3.6billion, with the lender blaming lower new mortgage margins.
Profit: Santander UK saw its pre-tax profits fall by 14 per cent to £1.6billion in the last year
But, the bank said it achieved net mortgage growth of £3.3billion last year, marking its strongest in over three years ‘despite the highly competitive market.’
Earlier this month, Santander revealed it plans to close nearly one in five of its UK branches, putting over 1,000 people at risk of losing their job.
Santander said branch transaction numbers have fallen by 23 per cent over the past three years, while transactions via digital channels almost doubled over the same period.
Looking ahead, Santander said it was preparing for a number of Brexit outcomes in order to minimise the potential impact on customers and the business.
The group said: ‘Our Brexit preparations are comprehensive and we have dedicated significant focus to ensure we can continue to serve our customers whatever the outcome.
‘In particular we have taken account of the nationality and location of our people and customers, contract continuity, financial markets infrastructure such as clearing, access to Euro payment systems as well as third party services and flows of data into and out of the European Economic Area.’
In the last year, Santander made several provisions related to payment protection insurance redress and other conduct issues associated with the sale of interest rate on derivatives.
Closures: , Santander revealed it plans to close nearly one in five of its UK branches
Last month, the bank was fined £32.8million by the City watchdog for ‘serious failings’ in processing deceased customer accounts.
Commenting on today’s results, Santander UK’s chief executive Nathan Bostock said: ‘Our 2018 financial performance reflects our strategy of selective growth, while actively managing costs in the competitive and uncertain operating environment.
‘Our focus remained on earning loyalty through excellent service and compelling products – from bringing new features to our mobile app to launching our new 1I2I3 Business Current Account – and we are encouraged by our customers’ response.
‘Net mortgage lending in 2018 was our strongest in more than three years and we helped over 27,000 first time buyers, up c14 per cent.
‘We have also achieved solid growth in lending to trading businesses and continue to help SMEs grow their businesses internationally through our established trade corridors and unique global expertise.’
In its lending operations, the group said it continued to focus on ‘quality customer service, retention and further support for first-time buyers.’
As it ploughs more cash into its digital operations, the lender said it expects ‘ongoing pressure on costs in the face of a intensifying regulatory change agenda.’
Santander UK’s parent firm, Banco Santander, also posted its global results today.
Banco Santander reported a 34 per cent rise in fourth-quarter net earnings, as strong performances in Latin America and Spain overcame currency headwinds and weakness in the UK caused by an increase in operating costs.