Santander postpones full UK results as it assesses impact of car finance ruling

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Santander postponed the release of its full UK results due to a court ruling on car loans while also disclosing the latest slump in segment profits as one of the bank's most important markets emerged as a trouble spot.

The Spanish group said on Tuesday that UK revenue in the three months to the end of September fell 18.5% from a year ago to $346 million in a highly competitive lending market. This follows a 23% decline in the previous quarter.

The lender said it was already streamlining its UK operations and had reduced its workforce from 468 to 21,812 this year through redundancies and not replacing staff who quit or retired.

The night before publishing its global results, Santander said it would not release detailed figures for the UK as it sought to quantify the possible cost of a UK court decision that found some fees the bank paid to car dealerships were unlawful.

The ruling, which comes as the UK financial regulator investigates possible mis-selling of car finance, mirrors the relief measures imposed by the Financial Conduct Authority over the payment protection insurance scandal, setting up a costly rescue plan for lenders. Increased the likelihood of implementation.

Regulators are investigating the past use by brokers and lenders of so-called discretionary commission agreements on auto loans, a practice that will be banned in 2021. Lenders, including Santander, are bracing for the possibility of being ordered to pay large compensation amounts to consumers. Analysts said the sector could take a hit of up to $16 billion in rescue costs.

Santander said it did not expect any material impact across the group, but had to postpone the UK results because the results could have significant implications at a national level.

Chief Financial Officer Jos Garca Cantera told Bloomberg TV: [for the group] Assuming it's around 600 million, that's expected to have an impact. [on net income] It will be much lower than that.

Benjamin Toms, an analyst at the Royal Bank of Canada, estimates that Santander could be fined as much as $1 billion. Lloyds Banking Group, which owns the largest car finance provider, has already set aside $450 million in provisions to cover potential compensation costs.

Citibank analyst Marta Sanchez Romero said despite the decline in UK profits, British companies performed better than market expectations. But she said Britain's victory could be overshadowed by car loan risks and delayed results.

Santander shares fell 3.2% to 4.48 in morning trading after the earnings release.

The regulatory threat comes amid fierce competition in the UK lending market, particularly for mortgage customers. Santander's decline in UK profits comes as the company resists pressure to lower interest rates as much as some of its rivals, with national revenues falling by almost 10%.

UK house prices and mortgage activity are rising as falling interest rates boost buyer confidence. But lenders including Santander have pulled back on some of the cheapest mortgage deals in recent weeks amid stronger economic data from Britain and concerns about the government's borrowing plans ahead of this week. The budget has put upward pressure on swap rates, which are key to pricing. Mortgage.

The bank said the profit decline partly reflected the fact that it received a one-off windfall of $46 million from the sale of its Euroclear stake in the same quarter of 2023. However, net interest income and net commission income also decreased compared to the same period last year.

Mexico was the only other large market where Santander's profits fell 2% to $394 million. While profits increased modestly in the United States and Brazil, the best performance was in our home market of Spain, where profits increased 50%.

Overall, the bank reported quarterly profit of $3.25 billion, up 12% from a year ago.

Santanders Chairman Ana Botn said: “We are growing both net interest income and net fee income, our credit quality is strong and our transformation continues to generate positive operating leverage.

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