Santander UK faces financial crisis as profits plummet
- Santander UK reported a significant 38% decline in pre-tax profits, totaling £1.33 billion for 2024.
- The profit drop is influenced by provisions for potential motor finance mis-selling and high costs of savings products.
- Speculation regarding the potential sale of the UK arm continues, despite assurances from leadership about its importance.
In February 2025, Santander, a Spanish-owned bank, revealed a significant decline in its UK profits, reporting a 38% drop in pre-tax profits for the year 2024, amounting to £1.33 billion. This downturn was primarily attributed to higher savings rates and financial provisions related to potential mis-selling of motor finance products. The situation has raised concerns regarding the future viability of the UK banking operations as speculation of a potential sale emerged, despite assurance from executive chair Ana Botín that the UK remains a core market for the bank. Throughout 2024, Santander had put aside £295 million in anticipation of payouts and legal fees linked to a court ruling on car finance commissions. This financial strain, coupled with high costs associated with savings products, contributed to the profit decline and a further 8% drop in profits for the fourth quarter, which amounted to £383 million. The challenges were compounded by a 5% reduction in mortgage lending and customer deposits, which further indicated the bank's troubled position in the UK financial landscape. Despite these challenges, Mike Regnier, the chief executive of Santander UK, noted improvements in the business outlook, hinting at a gradual return to growth in mortgage lending driven by anticipated interest rate reductions. The bank expects the base rate to decrease to 3.75% by the end of 2025, which could foster a more favorable lending environment. However, ongoing concerns about the UK economic performance create uncertainty in the market. Banco Santander’s broader group has shown growth, with a 16% rise in pre-tax profits to 19.03 billion euros and a commitment to buy back shares in the coming years. Nevertheless, the UK arm’s challenges have prompted speculation about its future, with the possibility of selling the division if the right offer emerges, as indicated in reports from the Financial Times. As Santander navigates these tumultuous waters, it will continue to strategize and realign its business model to maintain its competitive edge in the UK banking sector.