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Britain’s Santander banking division has reported a substantial 38% drop in annual profits, intensifying speculation about its Spanish parent company’s commitment to the UK market. The high street lender saw its pre-tax profits plummet to £1.3 billion, while revenues declined by 10 percent to £4.7 billion in a challenging year marked by industry-wide scandals.
The bank’s performance was significantly impacted by a £295 million provision set aside for potential compensation related to mis-sold motor finance products. This industry-wide scandal has cast a shadow over numerous UK lenders, with estimates suggesting the sector could face compensation bills reaching tens of billions of pounds.
Mike Regnier, chief executive of Santander UK, maintained an optimistic outlook despite the downturn, highlighting an “improved business performance” as the year progressed. The fourth quarter showed signs of recovery, with pre-tax profits rising to £383 million from £143 million in the previous quarter, while the net interest margin improved to 2.25 percent from 2.17 percent.
The UK operation’s struggles stand in stark contrast to Santander’s global performance, as Britain emerged as the only major market where the banking group experienced a profit decline. This disparity has fuelled speculation about a potential exit from the UK market, despite executive chairwoman Ana Botín’s insistence that Britain remains a “core market” for the group.
Recent developments, including the unexpected departure of UK chairman William Vereker and a significant reduction in the bank’s workforce – with over 1,400 jobs cut in recent years – have intensified market speculation about Santander’s long-term commitment to British retail banking. Reports of Barclays making a tentative approach for Santander’s UK operations last year have added further intrigue to the situation.
The bank’s deposit base contracted by £10.2 billion to £183.4 billion by year-end, while its loan book decreased to £197.9 billion from £206.7 billion. These figures reflect the challenging operating environment faced by UK retail banks amidst regulatory pressures and changing market dynamics.
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