Santander H1 profits lower on PPI costs
Spanish banking giant Santander has today revealed its first half profits were hit by costs relating to its mis-selling of payment protection insurance (PPI).
The controversial insurance has been a hot topic for some time now and the Financial Services Authority (FSA) introduced a review of the insurance after millions of policies were mis-sold and thousands of complaints were received.
Under a PPI policy, an agreed sum of money is paid out each month to fully cover, or cover a percentage of the payment due on your mortgage or loan if you are unable to work, as a result of becoming unemployed or sick.
Santander has made a provision of €620 million (£548 million) to cover compensation costs.
It has posted pre-tax profits of £1.2 billion for the six months to the end of June for its UK division – 3% lower compared with a year ago.
Santander has a major UK presence after acquiring Abbey for £9.5 billion back in 2004.
In July 2008, it rescued troubled mortgage lender, Alliance & Leicester, and a few months later, it took ownership of Bradford & Bingley’s savings business and branch network.
Meanwhile, its parent company, Banco Santander, reported a first-half net profit of €3.5 billion – 21% lower when compared with the same period a year ago.
The news of Santander’s provisions comes shortly after Lloyds Banking Group was forced to set aside a huge sum of money to cover potential costs related to its mis-selling of the insurance.
Lloyds set aside £3.2 billion for contacting its PPI customers and making recompense where necessary.
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