Funding costs hit Santander profits

The owner of Santander has seen its third quarter profits fall by 94 per cent
25 October 2012

The owner of banking giant Santander saw profits plunge by 94% in the third quarter as its UK arm also suffered amid pressure on profit margins.

Spanish parent company Banco Santander said net profits slumped to 100 million euro (£81 million) from 1.8 billion euro (£1.5 billion) 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 4% to £1.1 billion in the UK, it reported a 27% fall to £372 million in the third quarter.

The figures were also knocked by a £52 million 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 £232 million 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).

Santander said it had seen an increase in claims activity this year and was continuing to "monitor" money put aside to cover PPI claims.

Barclays recently fuelled fears of more widespread PPI provisions in the banking sector after it revealed another £700 million to cover claims for the scandal.

The figures also came amid speculation over Santander's decision to withdraw from the RBS branch takeover.

But the group stressed it pulled out as the deal was not going to be completed within the timeframe agreed, having already been extended from an original aim to transfer the branches in 2011.

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