Santander UK increases its reserves following public outrage after branch closures
Shock Wave Hits Santander UK
Santander UK faced a steep fall in profits in Q1 of 2025, with pre-tax profits dropping by 8% to £358 million. This slide is largely attributed to the bank's aggressive branch closure strategy and the consequent costs associated with it.
Hailing from Spain, Santander UK announced plans to shut down 95 branches by June 2025, marking a 20% reduction in its physical presence. This move has left approximately 750 jobs up in the air due to digitalization and automation efforts.
The financial spring cleaning saw Santander UK provisions for liabilities and charges climb a staggering 69%, reaching £140 million. A substantial £42 million of this increase was earmarked for changes in the branch network.
The bank grappled with credit impairment charges amounting to £33 million, reflecting a trend leaning towards pre-pandemic levels after a period of write-offs. Santander UK's non-interest income plummeted by 19% to £77 million.
Despite the setbacks, Santander UK managed a 6% boost to £1.1 billion in its net interest income, amidst the waning economic landscape. The Bank of England's interest rates have taken a nose-dive from a post-financial crisis high of 5.25% last July to 4.5%, forcing lenders to prepare for a hit to their interest income.
Squeezing out growth, Santander UK nudged up its net interest income by 6%, but operating expenses took a one% dip, thanks to cost savings, streamlined business operations, and a leaner headcount.
Santander UK led the pack in reducing mortgage affordability rates last month, enabling customers to borrow more. In Q1 2025, the bank posted higher gross mortgage lending of £5.8 billion compared to £3.1 billion in 2024.
The bank's motor finance arm, plagued by a litigation crisis, was spun off earlier in the month. Santander has allocated £295 million in provisions for the car mis-selling scandal, with the Supreme Court set to cast its judgement in the early summer.
Amidst whispers of a major overhaul, the Spanish giant appears poised to scale back its UK operations. Mike Regnier, Santander UK's CEO, acknowledged the challenges but maintained a positive outlook:
"The positive progress we've made propelled improved business performance in Q1, with increased net interest income and reduced operating expenses. However, charges related to branch network changes resulted in a lower pre-tax profit of £358 million for the quarter. Looking ahead, we aim to build on our momentum and will continue to collaborate with Banco Santander to leverage our global business advantages." (Enrichment Data provided for context and clarity)
- Santander UK's financial business and banking-and-insurance industry faced a challenging Q1 of 2025, with pre-tax profits dropping by 8%.
- The bank's aggressive strategy for branch simplification, which includes the closure of 95 branches, led to a 69% increase in provisions for liabilities and charges.
- Despite the costs associated with branch closures, Santander UK managed a 6% boost to its net interest income, reaching £1.1 billion, and a 1% reduction in operating expenses.
- The bank's motor finance arm, which has been affected by a litigation crisis, is undergoing a significant impairment, with provisions of £295 million allocated for the car mis-selling scandal.
- Amidst plans for a major overhaul and potential scaling back of operations, Santander UK's CEO, Mike Regnier, remains optimistic, focusing on leveraging global business advantages to build on the bank's momentum.
