Santander sets €620m aside to cover PPI mis-selling
Banking giant takes a hit ahead of anticipated floatation of UK business
By CFOWorld.co.uk | CFO UK | Published 11:21, 27 July 11
Euro zone banking heavyweight Santander said on Wednesday it is setting aside €620 million (£547 million) to cover losses linked to the mis-selling of payment protection insurance policies (PPI) in the UK.
The announcement reflects an effort by the Spanish bank to offer clarity on its financial position ahead of an anticipated floatation of shares in its UK operation. Its first half profits were down 21 percent to €3.5 billion.
British banks, including Lloyds and Barclays, have been forced to write off billions of pounds collectively in recent months after the High Court ruled they must pay compensation to customers that were mis-sold PPI.
Santander was not part of a court case against the claims and had been compensating customers, but it said it had seen a rise in claims since banks lost the case and media coverage of the issue jumped.
The bank’s planned listing of its British arm has been delayed due to dire market conditions, but is expected to go ahead next year as the parent group seeks to raise capital to improve its solvency ratios.
Without the one-off payment to cover PPI compensation, the bank’s net profit would have been down 7 percent, dragged lower by rising funding costs and higher provisions against bad assets in Spain in the wake of a property bust.
In the UK the charge and higher regulation costs dragged Santander to a pre-tax loss of about £270 million in the second quarter.
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