Santander UK warns over Brexit challenges despite 9% rise in profits

PUBLISHED: 09:49 26 October 2016 | UPDATED: 09:49 26 October 2016

Santander UK. Picture: Laura Lean/PA Wire

Santander UK. Picture: Laura Lean/PA Wire

Santander UK has reported a rise in quarterly profit, but again warned that earnings could take a hit as a result of Brexit.

The Spanish lender’s British branch said profit before tax jumped 9% to £1.6 billion over the nine months to September 30 compared with a year earlier, but said that figure slowed on a quarterly basis.

In the three months to September 30, pre-tax profit fell to £477 million, down from £496 million during the same period in 2015. It also marks a slowdown from the £546 million reported in the second quarter.

The bank said Brexit could end up denting earnings.

In its latest trading update, Santander UK said Britain’s decision to leave the EU has resulted in economic uncertainty and market volatility, which is expected to continue.

Chief executive Nathan Bostock said: “Although we have not seen a material impact on our business in the short period since the EU referendum, we do expect a more challenging macroeconomic environment ahead.

“This increased caution has prompted us to revise our 2018 return on tangible equity, cost-to-income and NPL ratio targets, as disclosed at the 2016 Banco Santander strategy update in late September.”

In the near term, the bank said it expects consumer confidence to drop and economic growth to slow, and cautioned that higher oil prices and a weaker pound were likely to result in higher inflation.

Sterling has fallen nearly 20% against the US dollar since the EU referendum.

Results also showed a pension hit following the Brexit vote, and comes as company schemes are hammered by falling bond yields.

Santander UK said the defined benefit pension scheme had fallen into a £258m deficit, compared with a surplus of £483m a year earlier.

The bank has also put aside an additional £30m to cover costs related to the mis-selling of payment protection insurance, bringing its total provisions over the past nine months to £397m.

The UK banking industry’s PPI bill is already colossal, at more than £30bn so far.

If you value what this story gives you, please consider supporting the Eastern Daily Press. Click the link in the orange box below for details.

Become a supporter

This newspaper has been a central part of community life for many years, through good times and bad, serving as your advocate and trusted source of local information. Our industry is facing testing times, which is why I’m asking for your support. Every single contribution will help us continue to produce award-winning local journalism that makes a measurable difference to our community.

Thank you.

Most Read

Most Read

Latest from the Eastern Daily Press