Mis-selling costs hit Santander results in UK

Chief executive Ana Botin, daughter of the company’s chief in Spain Emilio Botin, said the £538m charge hit the bank’s financial results in the six months to June, but still hailed its “strong track record of profitability”.

The British arm of the Spanish banking giant saw pre-tax profits dip three per cent to £1.2bn in the six months to June as higher regulatory costs dented earnings. Profits after tax and the payment protection insurance charge were £300m.

The hit came after the High Court decided that new rules on the mis-selling of payment protection insurance could be applied retrospectively and the British Bankers’ Association pulled an appeal against the decision. Santander UK is the latest bank to reveal its payment protection insurance charge after Lloyds Banking Group made a provision of £3.2bn, Royal Bank of Scotland set aside £850m, Barclays £1bn and HSBC earmarked $440m (£270m).

Santander UK said its results had also been hit by Basel III requirements – European rules which require banks to hold more capital to protect themselves against future financial crises.

Gross mortgage lending was down 21 per cent in the period from £12.3bn last year to £9.7bn.

But the group heralded its commitments to small business lending, made under the Project Merlin agreement with the UK Government.

Santander said it had exceeded its Merlin lending targets in the first half, delivering gross lending of £4bn, of which £2.1bn went to small and medium sized enterprises.

Ms Botin said the bank had delivered a robust performance.

She said: “Financial results are, however, being adversely impacted by costs of liquidity, term funding and low interest rates. In line with other UK banks, a further provision for payment protection insurance remediation has also been made.”

The parent company Banco Santander reported a 21 per cent decline in profits of 3.5bn euros (£3.09bn).