PPI compensation hits Santander profit

Sarah Davidson

July 27, 2011

Overall group profits for the first half of 2011 were EUR 3.501bn, down 21% after setting up the extraordinary fund in the UK for PPI provision.

Santander UK’s profit before tax is £1,150m, down around 3% on the same period last year, impacted by higher liquidity and regulatory costs.

After tax the profit was £839m.

Excluding the impact of higher regulatory costs and the one-off charge, profit would have been up around 17%.

The cost to income ratio is now at 42% though the lender said excluding the impact of higher regulatory costs the cost to income ratio would have been 40% unchanged from H1 2010.

Gross mortgage lending in the UK was £9.7bn, representing an estimated 15.4% market share, which Santander said was well ahead of its stock share at 13.9%.

SME lending increased by 27%.

The bank said it had exceeded its Merlin targets, delivering gross lending of £4bn, of which £2.1bn was for SMEs (the total for the year is £6.7bn of which £4bn is for SMEs).

Customer deposit balances increased by 3% while customer lending grew by 1%, resulting in an improvement in the loan to deposit ratio of 132% (134% H1 2010).

In addition the bank raised £17bn of medium-term funding, which when added to deposits takes the loan to deposit ratio to 106%.

Santander also said it opened over 400,000 current accounts, 274,000 credit card accounts and saw investment sales of £1.5bn.

It said credit quality remains good. Trading provisions reduced by 45%, largely due to improving mortgage and unsecured loan related charges. Provisions for the first half were £235m versus £461m H1 2010.

Santander UK has Core Tier 1 ratio of around 11%.

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