Santander UK’s profits take a hit after Carillion collapse

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Santander UK’s exposure to collapsed services giant Carillion has hit the bank’s annual profits, latest figures reveal.

In the last year, Santander UK’s pre-tax profits fell by 5 per cent from £1.9billion to £1.8billion.

The high-street lender reported £203million in ‘impairment’ losses for the year, primarily caused by loans made to outsourcing and construction group Carillion.

Impact: Santander UK's exposure to collapsed services giant Carillion has hit the bank's annual profits

Impact: Santander UK’s exposure to collapsed services giant Carillion has hit the bank’s annual profits

Nathan Bostock, Santander UK’s chief executive, said: ‘Profitability was impacted by the losses incurred on our exposure to Carillion, which offset otherwise strong growth. We are working closely to support customers who have suffered from their collapse.’

After rescue talks with the government and its lenders failed, Carillion went into liquidation on 15 January.  

Carillion’s collapse left a £900million debt pile, a £590million pension deficit and hundreds of millions of pounds in unfinished public contracts.

Santander said its adjusted profits fell 4 per cent to £1.95billion over the period, adding that net interest income, which is the money it makes from lending, grew 6 per cent to £3.8billion.

A string of other banks that lent to Carillion, including RBS and Lloyds, are also expected to take hits when they announce results in the coming weeks.

Looking ahead, Santander UK also flagged rising inflation and a more challenging economic environment in the UK over the next year.

The bank said: ‘For the UK economy, some downside risks could materialise, as a result of higher inflation and low wage growth reducing households’ real earnings.

‘This may restrict consumer spending which, when combined with a potentially more challenging macro environment, adds a degree of caution to our outlook.’ 

Fallout: Carillion's collapse left a £900million debt pile, a £590million pension deficit and hundreds of millions of pounds in unfinished public contracts

Fallout: Carillion's collapse left a £900million debt pile, a £590million pension deficit and hundreds of millions of pounds in unfinished public contracts

Fallout: Carillion’s collapse left a £900million debt pile, a £590million pension deficit and hundreds of millions of pounds in unfinished public contracts

Santander UK said net mortgage lending grew by £600million after it took ‘pricing actions’ in a competitive environment.

It also took a £109million hit to cover claims for payment protection insurance compensation. 

The company’s operating costs increased by 4 per cent, ‘with higher regulatory, risk and control costs offsetting operational and digital efficiencies.’

The lender said its retail customer satisfaction levels were at around 63 per cent, which they claimed is is line with three other key competitors. 

Earlier this week, Santander, which is owned by  the Spanish Santander Group, announced plans to scrap unarranged overdraft fees for customers with paid-for accounts.

At present, Santander UK customers who hold the 123 current account, 123 Lite current account and Select or Private accounts are charged £6 a day for overdrafts that have not been previously agreed, capped at £95 a month.

But from 10 July, the lender is axing the charges on these accounts, all of which charge a monthly fee. 

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