SANTANDER UK took a £538m hit from mis-selling insurance, the bank revealed in its half-year results yesterday, with profits dented further by stringent UK liquidity requirements.
Overall, the bank said that its pre-tax profits in the UK were down on the first half of 2010, due to rising funding costs. Net profit would have been €4.12bn (£3.6bn), down seven per cent, had it not been whacked by the £538m provision for mis-selling payment protection insurance (PPI), it said.
Although Santander UK was not part of the industry-wide appeal against new rules governing PPI complaints, it said that the recent withdrawal of the appeal and the accompanying media frenzy had led to an uptick in PPI-related complaints.
The bank’s parent company, Banco Santander, also reported a decline in earnings, with net profit at €3.5bn – down 21 per cent on the same period last year. Its UK division accounts for 17 per cent of the group’s earnings.
UK profits were also eroded by the need to comply with Britain’s liquidity rules, which are some of the strictest in the world. The bank said that it had been forced to accrue £30bn in liquid assets over the last 18 months, taking its total to £44bn.
The bank has also brought on new staff to improve on its dire customer service, with its UK headcount rising by 2,731 to 25,574. It recruited 1,100 staff into customer-facing roles and brought its retail call centres back into the UK.