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Santander UK has watched its earnings tumble by 44% in the beginning of the yr after setting apart almost one other £180 million to cowl the motor finance mis-selling scandal. The high road lending giant posted pre-tax earnings of £202 million for the primary quarter, down sharply from £358 million a yr earlier.

Earnings took a hit from an further £179 million provision for motor finance compensation and rising prices within the first quarter, bringing its anticipated complete invoice for the saga to £633 million up to now. The group – owned by Spain’s Banco Santander – additionally recorded a £73 million charge for dangerous money owed, up 40% year-on-year, because it downgraded its outlook for the UK financial system owing to the Iran battle, which it warned will possible set off larger inflation, weaker growth and elevated unemployment.

Santander now anticipates the financial system will scrape collectively growth of simply 0.5% in 2026 in its base case state of affairs, adopted by 1% enlargement the next yr, whereas the unemployment charge is forecast to climb to five.5%. Although it expects inflation to rise as a consequence of heightened prices stemming from the Middle East battle, its central forecast factors to rates of interest holding regular at 3.75% this yr earlier than being decreased to three.25% by the tip of 2027.

New chief government Mahesh Aditya – who succeeded Mike Regnier on March 1 – mentioned the group had up to now not witnessed important borrower difficulties arising from the Iran battle price surge.

He mentioned: “While we are not yet seeing any significant impact of the current uncertain global economic environment on our customers, we have put measures in place including a proactive outreach programme offering support, in addition to our ongoing commitment to the UK mortgage charter.”

The group acknowledged that the impression of the motor finance scandal was partly counterbalanced by price reductions, reiterating its plans for additional financial savings all year long “driven by simplification and automation of our business”.

Operating prices dropped by 7% within the first quarter, with Santander having introduced plans earlier this yr to close a additional 44 branches, inserting almost 300 jobs at risk.

Santander confirmed on the weekend that it might not contest the Financial Conduct Authority’s proposals for motor finance redress and would pay compensation for its share of unfair offers within the scandal.

Payouts are due on roughly 12.1 million mis-sold offers with hidden commission from a vary of lenders at an average of £829 every, the financial watchdog introduced in March when it unveiled its remaining plans for the redress scheme.

Mr Aditya mentioned completion of the bank’s £2.65 billion acquisition of smaller rival TSB was “expected imminently” following current regulatory approval.

He mentioned: “The acquisition represents the single-largest inward investment in the UK banking sector for over 15 years and underlines Banco Santander’s commitment to the UK.

“The deal is anticipated to speed up Santander UK’s transformation and improve competitors within the UK, benefiting each customers and shareholders.”