Price war on mortgages hits profits at Santander
First-half profits at Santander's UK business plunged by more than a third as the mortgage price war dragged down its income.
The Spanish-owned lender saw its profits continue to be weighed down by intense pressure in the UK mortgage market, which saw it post a 35% profit slump in the first quarter.
The UK business was also pressurised by restructuring costs after the group announced earlier this year that it is to axe 140 branches across the UK. It has shut branches in Belfast, Ballymoney and Antrim.
UK pre-tax profits fell by 36% to £575m in the half-year to June as intense competition over mortgages pulled down income for the period. Income slipped by 8.4% to £2.1bn during the half-year.
It said that, assuming the UK has an orderly exit from the EU, its forecasts remain unchanged, although it said it has continued no-deal Brexit preparations as that potential outcome becomes more likely. Santander spent £113m on its UK restructuring programme in the year to date, and said it expects to spend around £400m on strategy changes by the end of 2021.
The bank's global business saw earnings fall by 18% in the second quarter, due to the impact of restructuring surrounding its acquisition of troubled lender Banco Popular and the muted performance in the UK. Ahead of the looming August deadline for PPI claims, Santander said it had a remaining provision of £248m to redress PPI-related costs.
Nathan Bostock, chief executive, said: "The results for the first half of the year reflect the start of a multi-year investment in our strategic transformation programme, a number of external factors and our prudent approach to risk.
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"Our business remains strong, with the further enhancement of our mortgage franchise and increases in our retail and corporate deposits, both important customer loyalty drivers.
"These are uncertain times, and our profitability has been impacted by a fall in income due to the highly competitive UK mortgage market."