Santander UK Q1 Profits Fall 44% to £202M on Mis-selling Charge

Santander UK reported a 44 percent drop in first-quarter pretax profits to 202 million pounds for the three months ended March 31, down from 358 million pounds a year earlier, primarily due to an additional 179 million pounds provision for the motor finance mis-selling scandal.

The extra charge brought the bank's total provisions for the issue to 633 million pounds, aligning with the upper end of prior forecasts following the Financial Conduct Authority's disclosure last month of its compensation scheme for historical car finance payments. The scandal involves payouts for about 12.1 million mis-sold deals across lenders, with an average redress of 829 pounds per case. Santander has decided not to challenge the regulator's plans and will cover its share of compensation.

Profits were further pressured by a 73 million pounds charge for bad debts, a 40 percent increase year over year, alongside a contraction in the net interest margin to 2.22 percent and a 2 percent decline in net interest income to 1.1 billion pounds, attributed to higher deposit costs. Operating expenses fell 7 percent to 638 million pounds, helped by ongoing cost-cutting through business simplification and automation.