By JANE DENTON
Updated: 20:14 AEDT, 20 November 2024
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Santander UK's profits fell sharply in the third quarter as the lender set aside £295million for potential compensation related to motor finance commissions.
The bank last month delayed the publication of results after a Court of Appeal ruling saw the court side with consumers in a row over commission earned by companies selling car finance loans.
Santander said it put aside £295million as a provision to cover potential payouts as well as legal costs.
It said there were 'significant uncertainties as to the nature, extent and timing of any remediation action if required and the ultimate financial impact could be materially higher or lower than the amount provided'.
The lender reported pre-tax profits of £143million for the three months to the end of September as a result, down nearly 75 per cent on the £558million notched up a year earlier.
The update came as its Spanish owner Banco Santander also announced it was cutting over 1,400 jobs across its UK business this year in a bid to reduce costs.
Motor finance row hit profits at Santander UK
Last month, Santander UK said it disagreed with the conclusions reached by the Court of Appeal in its October ruling.
The case saw three people claim they did not know their dealer was receiving more commission as a result of fixing a higher interest rate on their credit agreement.
The judgment sets a precedent for the wider motor finance industry by ruling that any dealers receiving commission from lenders must ensure their customers are fully informed about the arrangement.
Santander said the ruling 'set a higher bar for the disclosure of and consent to the existence, nature, and amount of commission paid to dealers than that required by current FCA rules, or regulatory requirements in force at the time of the cases in question'.
It added: 'The lenders involved in the cases subject to the Court of Appeal’s judgment have indicated that they intend to seek permission to appeal that judgment to the Supreme Court.'
UK lenders are set to face a £30billion compensation hit to settle the motor finance scandal.
Santander also told shareholders on Wednesday that mortgage lending had fallen by £5.5billion since December last year, while customer deposits have reduced by £7.9billion in the first nine months of 2024 amid rate cuts on savings accounts.
Santander said it would 'continue to prioritise profitability and our core banking franchise… resulting in lower mortgage lending and customer deposits in 2024'.
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