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Santander sees profits halve after move into property Santander sees profits halve after move into property
(40 minutes later)
The cost of clearing up an over-ambitious expansion into property caused a halving of profits at Santander, the eurozone's biggest bank, which warned that it intended to further reduce its mortgage lending in the UK.The cost of clearing up an over-ambitious expansion into property caused a halving of profits at Santander, the eurozone's biggest bank, which warned that it intended to further reduce its mortgage lending in the UK.
Under instruction from the Spanish authorities to take provisions for property loans which have turned sour, Santander wrote down €3.7bn (£2.89bn) of Spanish property loans to report profits of €1.7bn in the first half.Under instruction from the Spanish authorities to take provisions for property loans which have turned sour, Santander wrote down €3.7bn (£2.89bn) of Spanish property loans to report profits of €1.7bn in the first half.
Under the royal decrees issued by the Spanish government to try to clean up its banking sector, which has received bail out from its eurozone partners, Santander has to put up €8.8bn in provisions and capital, and has now achieved 70% of this total. Under the royal decrees issued by the Spanish government to try to clean up its banking sector, which has received a bailout from its eurozone partners, Santander has to put up €8.8bn in provisions and capital, and has now achieved 70% of this total.
The company's UK business, which has been built out of Abbey National, Alliance & Leicester and the savers of Bradford & Bingley, contributed £466m of profits to the group, 40% more than a year ago when a £731m provision for mis-selling payment protection insurance was included. Some 56 branches are being closed as a result of the overlap of these three networks.The company's UK business, which has been built out of Abbey National, Alliance & Leicester and the savers of Bradford & Bingley, contributed £466m of profits to the group, 40% more than a year ago when a £731m provision for mis-selling payment protection insurance was included. Some 56 branches are being closed as a result of the overlap of these three networks.
Santander has been scaling back its mortgage lending in the UK and in the first half its customers repaid more than it granted in new mortgages, resulting in negative net lending of £2.8bn. "The expectation for the second half is for a further managed reduction in the mortgage stock and a lower market share," Santander said.Santander has been scaling back its mortgage lending in the UK and in the first half its customers repaid more than it granted in new mortgages, resulting in negative net lending of £2.8bn. "The expectation for the second half is for a further managed reduction in the mortgage stock and a lower market share," Santander said.
Unlike Lloyds, Santander did not take an additional hit for PPI mis-selling and reported a pre-tax profit for the first half in the UK of £725m.Unlike Lloyds, Santander did not take an additional hit for PPI mis-selling and reported a pre-tax profit for the first half in the UK of £725m.
"PPI customer remediation claims continued to be handled effectively, despite an increase in claims activity in the first half of 2012 in common with the rest of the market," Santander said."PPI customer remediation claims continued to be handled effectively, despite an increase in claims activity in the first half of 2012 in common with the rest of the market," Santander said.
But the improvement in profits in the UK was largely the result of the absence of the PPI charge and income fell 16% in the low interest rate environment, which makes it difficult for banks to earn profits on customer deposits. This in turn led to an increase in the closely watched cost-income ratio, a measure of efficiency, to 51% from 42%. But the improvement in profits in the UK was largely the result of the absence of the PPI charge, and income fell 16% in the low interest rate environment, which makes it difficult for banks to earn profits on customer deposits. This in turn led to an increase in the closely watched cost-income ratio, a measure of efficiency, to 51% from 42%.
Net retail deposits – which takes account of withdrawals – were £3bn. Some £7bn was paid in through ISAs and £1.3bn through current accounts although there were outflows when the bank did not chase hot rates offered by rivals.Net retail deposits – which takes account of withdrawals – were £3bn. Some £7bn was paid in through ISAs and £1.3bn through current accounts although there were outflows when the bank did not chase hot rates offered by rivals.