Santander owner’s profits tumble 94pc as UK arm suffers

Spanish parent company Banco Santander said net profits slumped to £81m from £1.bn a year earlier after taking a hit on property losses in Spain.

The UK business, which recently pulled out of a deal to buy more than 300 branches from Royal Bank of Scotland, also revealed a sharp fall in the three months to September 30 as it said funding and regulatory costs impacted margins.

While nine month profits rose four per cent to £1.1bn in the UK, it reported a 27 per cent fall to £372m in the third quarter. The figures were also knocked by a £52m bill for costs relating to its aborted takeover of the RBS branches and money put aside to cover potential mis-selling claims.

It made a £232m provision as it anticipates further claims from industry wide reviews of the banking sector, while it also signalled there may be further compensation due for mis-selling of payment protection insurance (PPI).

Yesterday’s figures showed mortgage lending continued to fall in the UK, with Santander reporting negative net mortgage lending of £3.3bn in the third quarter as it moves away from more risky business such as higher loan-to-value and interest only home loans.

Bank account deposits rose by a fifth to £14.4bn in the nine months.

Lending to small businesses rose 20 per cent to £10.2bn in the first nine months. In Yorkshire, the figure increased by 43 per cent to £368m.

Meanwhile, Santander stressed it pulled out of the RBS branch takeover deal as it was not going to be completed within the timeframe agreed, having already been extended from an original aim to transfer the branches in 2011.

Ana Botin, chief executive of Santander UK, said: “The continued uncertainty regarding timing was not in the best interests of customers or staff.”