Santander UK profit more than halves on Covid-19 charge

Profit at Santander's UK business more than halved in the first quarter as the Covid-19 crisis caused bad debt provisions to triple.

Pretax profit for the three months to the end of March dropped to £114m from £270m a year earlier as operating income fell to £964m from £1.05bn, Santander UK said.

Credit impairment losses jumped to £165m from £53m a year earlier as the bank took a £122m charge for Covid-19 related losses. Results were also affected by intense competition in the UK mortgage market pushing down interest margins, the bank said.

Santander's UK results reflected wider trends at Spain's biggest bank, which reported a 48% fall in first-quarter profit to €1.9bn (£1.7bn) as it took a €1.6bn charge for Covid-19 related credit losses. Excluding that charge underlying attributable profit rose 1% to €1.98bn.

Santander said it expected its UK business to be further affected by lower interest rates and reduced new business related to the lockdown of the UK economy. Credit impairments could also go up further if the economy does worse than expected.

Santander's UK chief executive Nathan Bostock said: "Our first quarter results continued to be impacted by lower mortgage margins as well as the Covid-19 crisis. While it is too early to reliably estimate the financial and business impacts this crisis will have on our 2020 results, we believe that with strong foundations in place, including capital and liquidity, we will continue to be able to support our customers, our colleagues and the wider society."

Santander and HSBC, Europe's two biggest banks, reported results on the same day. HSBC's profit almost halved as it set aside $3bn for credit lossses, up $2.4bn from a year earlier.