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Santander sets aside £122m for coronavirus loan losses as profits plunge

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  • 28/04/2020
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Santander sets aside £122m for coronavirus loan losses as profits plunge
Lower mortgage margins, fewer people on Standard Variable Rates (SVR) and the impact of the coronavirus have walloped Santander UK's first quarter results.

 

Profit before tax plunged 58 per cent year-on-year to £114m in the three months to the end of March 2020, from £270m in the same period last year.

Loan loss allowances are up by around 14 per cent compared to before the Covid-19 crisis, with a £122m incremental impairment charge set aside for the virus, Santander reported.

More than 206,000 of its customers requested a payment holiday since the coronavirus took hold, equal to around £32.4bn of loans or 19 per cent of its total mortgage portfolio.

In a sobering statement, the lender said it expects income to be further impacted by the lower base rate and “significantly reduced new business related to the lockdown affecting the UK economy”.

However, the bank added its “prudent approach to risk and cautious business growth” provides confidence in its balance sheet.

Santander’s gross net lending for the quarter was £8.2bn.

Coronavirus impact uncertain

Credit impairment losses, including £122m specifically relating to the coronavirus, were reported at £165m from £53m in the same quarter last year.

At the same time, net interest income was down by nine per cent, as a result of lower mortgage margins and £1bn worth of SVR attrition, resulting in a net interest margin of 1.52 per cent, from 1.58 per cent in the same period last year.

Santander said the extent of the impact on the economy from the coronavirus remains highly uncertain.

Nathan Bostock, chief executive officer, said: “The Covid-19 pandemic poses extraordinary challenges for our customers, and our focus has been to support individuals, families and businesses across the UK, by ensuring they are able to access the vital banking services they need across all our platforms.

“We welcome the unprecedented actions taken by the UK Government and the Bank of England to support the country’s economy and we are working with them and regulators to help households and businesses get the support they need.

“We have more to do but I am immensely proud of the huge efforts of all my colleagues and have full confidence that we will be able to do our share and more in the weeks ahead.”

“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.”

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