Chairman out, rumours of sale continue, commission scandal rumbles on
Major lender Santander UK has reported a sharp decline in annual profits, with pre-tax earnings falling by 38% to £1.3 billion for 2024. The drop comes as the bank battles the fallout from an industry-wide car finance mis-selling scandal, alongside challenges in the mortgage market and rising deposit costs.
The UK division of the Spanish banking giant was the only major market in the group where profits declined last year. Total revenues in Britain fell 10% year-on-year to £4.7 billion, while net interest income - the difference between loan interest earned and interest paid on deposits - dropped 7% to £4.3 billion.
A major factor behind Santander UK’s struggles is a £295 million provision set aside to cover potential compensation costs linked to the mis-selling of car loans. The issue, which has affected multiple lenders, has sparked fears of a multi-billion-pound compensation bill for the industry. The Financial Conduct Authority (FCA) has been investigating unfair car finance commission arrangements, adding further regulatory pressure on UK banks.
Signs of recovery in late 2024
Despite the tough year, Santander UK’s CEO Mike Regnier pointed to improving performance towards the end of 2024. Fourth-quarter pre-tax profits rose sharply to £383 million, up from £143 million in the third quarter. Additionally, the bank’s net interest margin - a key measure of profitability - climbed from 2.17% to 2.25%.
“Across the bank, there is a real sense of momentum as we continue to simplify and become more efficient,” Regnier stated.
Speculation over Santander’s UK future
Santander UK’s financial struggles have reignited speculation that its Spanish parent group may reconsider its position in the British market. While Ana Botín, Banco Santander’s executive chairwoman, has denied any plans to exit, industry insiders suggest that a sale could be on the table if the right buyer came forward.
The UK’s regulatory environment has also been a source of frustration for the bank, particularly amid the FCA’s scrutiny over the car finance scandal. The recent announcement that William Vereker, Santander UK’s chairman, will step down later this year has further fuelled uncertainty.
If Santander were to sell its UK business, it would mark a significant shift in Britain’s banking landscape. The bank first entered the UK market in 2004 by acquiring Abbey National for £9 billion, later expanding through the purchases of Alliance & Leicester and Bradford & Bingley during the 2008 financial crisis.
Barclays has been mentioned as a possible buyer, having reportedly made an informal approach for Santander UK last year.
Santander UK has already made significant job cuts, reducing its workforce by over 1,400 roles in recent years. Regnier’s mention of further “simplification” suggests additional cost-cutting measures, which could result in further job losses.
