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Santander posts 38% drop in profit for 2024

Santander posts 38% drop in profit for 2024
Shekina Tuahene
Written By:
Posted:
February 5, 2025
Updated:
February 5, 2025

Santander UK has reported a profit before tax of £1.3bn for 2024, a 38% decrease on the year before.

The bank put this down to the impact of the historical motor finance commission payments of £295m in the third quarter of the year. 

Its net interest income fell by 7% annually to £4.3bn, owing to higher customer deposit costs and a reduction in mortgage loans. 

The lender’s net interest income also contracted from 2.2% in 2023 to 2.14% in 2024. However, it said it expected to benefit from improving mortgage margins this year. 

Its report said: “With more attractive lending margins in the mortgage market, we anticipate a gradual return to net lending growth in 2025.” 

In Q4, the UK arm of the bank reported its profit before tax rose from £143m to £383m quarter-on-quarter. In this period, its net interest margin also improved from 2.17% to 2.25%, and its net interest income rose slightly from £1.1bn to £1.12bn. Santander said the income increased following “active margin management”. 

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A quarter of the mortgages on its book are set to reach the end of their incentive period in the next 12 months. By the end of 2024, the average loan to value (LTV) of its mortgage stock was 51%, flat on the year before. 

The average LTV for new loans fell from 66% to 64%. 

Santander UK said it was “well-positioned” for reductions in the base rate and was less sensitive to changes due to its enhanced structural hedge position. 

Its credit impairment charges also dropped by 66% due to an improved economic outlook. 

Mike Regnier, chief executive of Santander UK, said: “The progress we made against our strategic priorities in 2024 was reflected in improved business performance as the year evolved. Across the bank, there is a real sense of momentum as we continue to simplify and become more efficient, leveraging the strength and expertise of Banco Santander for the benefit of our UK customers. In 2024, we enhanced our digital proposition and product offerings, and delivered focused customer growth. The rising costs of customer deposits, and the impact of the charge for historical motor finance commission payments, meant a lower profit before tax of £1,330m.

“Our active and prudent price management helped us to deliver a banking net interest margin that improved as the year progressed.”

Regnier added: “Looking ahead to 2025, our strategy of disciplined pricing over the last year means we are now well-positioned to benefit from improving mortgage margins and reductions in the cost of funding and deposits. While challenges remain, and there have been mixed signals about the UK’s recent economic performance, the outlook for our business has improved.

“We will continue to work with Banco Santander to harness the best of our local and global capabilities to develop new and innovative products and services for our customers and deliver the benefits of our scale.”