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Santander profits boosted after buy-to-let rush ahead of stamp duty rise

Published 27/04/2016

Santander said UK pre-tax profits increased to £532 million in the first three months of 2016
Santander said UK pre-tax profits increased to £532 million in the first three months of 2016

High street bank Santander said the buy-to-let rush ahead of this month's stamp duty increase helped profits rise 13% as it enjoyed a surge in mortgage lending.

The Spanish-owned lender said UK pre-tax profits increased to £532 million in the first three months of 2016, up from £470 million a year earlier as total lending grew by £7.1 billion.

But the group warned lending will not rise at the same pace after the Government's stamp duty increase on buy-to-let properties came into effect on April 1, with the industry set to face "challenges".

It said: " The surge in completions in March may have skewed figures and meant that the first quarter has been top-loaded with lending that would have otherwise taken place throughout the year.

"There are a number of factors that could impact lending throughout 2016 and we recognise the industry as a whole may face some challenges."

The group also cautioned that house price growth would slow this year.

Santander increased net mortgage lending - total advances less redemptions - by £1.3 billion in the quarter to the end of March, which compares with a £400 million fall a year ago.

Net lending to new businesses rose 10%.

It also attracted more current account customers, with its 1/2/3 World offering notching up around 131,000 customers in the first quarter and overall current account balances up by £3.6 billion to £56.8 billion.

This was partially offset by a £1.4 billion fall in savings deposits.

First quarter figures were boosted by a 75% fall in bad debts, while there were no further PPI provisions put by, against £450 million set aside in the previous three months.

But its net interest margin came under pressure as the Bank of England base rate remained at 0.5% and with fewer borrowers on its standard variable rate.

The bank, which has 852 branches across the UK, said this was expected to fall further as rates are not predicted to rise in 2016 amid a slowdown in the global economy.

Nathan Bostock, chief executive of Santander, said the UK bank made a "solid start" to the year.

He joined rival Barclays, which also reported first quarter figures today, in adding a note of caution ahead of the EU referendum.

He said: "We expect the improving trend in UK lending growth seen in 2015 to continue, but are conscious of prevailing market volatility from macro-economic and geopolitical factors, uncertain prospects for policy interest rates, and the upcoming UK referendum on EU membership."

Owner Banco Santander - the biggest bank in the eurozone - suffered a more difficult first quarter as group-wide net profit fell 5% to 1.63 billion euros (£1.26 billion) in the first quarter.

It was hit by currency exchange rates and a deepening recession in Brazil, which is its second biggest market.

Banco Santander's group chief executive Jose Antonio Alvarez renewed its backing for Britain to remain in the EU.

He said on announcing first-quarter figures that a Brexit vote would have a negative impact on both the pound and the euro in the short term, while growth would likely be affected over the long term across the UK and eurozone.

Santander UK chairwoman Shriti Vadera and Mr Bostock were among 200 industry leaders who signed a high-profile letter to The Times earlier this year warning that a Brexit would damage the UK economy.

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