Santander’s UK banking arm has signalled that it is preparing to hand out £45m in compensation following its fine last year for giving unsuitable investment advice to customers.
The UK arm of the Spanish bank included the £45m in a list of provisions in its results for 2014, which also showed the payment protection mis-selling scandal cost £95m during the year. It also spent £50m closing 100 branches as it shut Abbey National, Bradford & Bingley and Alliance & Leicester branches that were side-by-side on high streets.
The Financial Conduct Authority fined Santander last March after finding problems in the way retail investments were sold in the two years to December 2012.
But the UK business, a self-styled “scale-challenger” to the big four high street banks, was bolstered by customers switching their current accounts to its 1|2|3 account which charges £2 a month but pays out 3% interest on balances up to £20,000.
Following the introduction of a seven day current account switching service in September 2013, Nathan Bostock, the former Royal Bank of Scotland banker who now runs the UK operations, said that one in four bank customers who had moved their current account had taken it to Santander – 276,000 customers moved to the bank.
The big four banks – HSBC, Barclays, and bailed-out RBS and Lloyds Banking Group – hope the switching service will prove there is competition on the high street, which is already being subjected to an investigation by the Competition and Markets Authority.
Bostock took over from Ana Botín, who has returned to Spain to run the overall Santander bank following the death of her father in September.
Bostock said the UK business would miss its aim of bolstering its lending to corporates to 20% of all its lending, because the bank did not want to take on too much risk.
He alluded to concerns about the introduction of rules requiring a ringfence to be erected between high street operations and investment banking units, but was not specific when asked about the bank’s preparations for the rules. He said there was a “lot of work” to do.
A flotation of the UK business has been a topic of discussion for the last four years. Bostock said: “It remains a medium-term objective for the organisation. We’re not under any pressure ... so we’re building a business that at the right time is fit for an IPO”.
Profits of the UK business were 26% higher at £1.4bn in 2014, while group profits were up 32% at £7.3bn.
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