Santander grows earnings but issues dire outlook

The Spanish-owned bank’s chief Nathan Bostock said the rate cut from the Bank of England this month will make it much more difficult for the group to make money on mortgages and savings.

It already dealt a swift blow to more than three million British savers on Monday, when it halved the interest rates on its flagship 123 current account product in response to the central bank’s rate cut.

In the six months to 30 June, Santander’s net interest income fell only marginally, to £1.77bn from £1.78bn a year ago.

Non-interest income improved to £671m from £500m, resulting in an uplift in total operating income to £2.44bn, from £2.28bn.

Profit before tax rose to £1.08bn from £929m.

Group-wide net interest income for the wider Banco Santander organisation fell 8.6% to €7.57bn in the same period.

Santander UK also cautioned in the report that its margins would continue to fall throughout the rest of 2016, and it will continue to keep a tight lid on its costs.

It has closed five branches so far in the UK this year.

“The UK referendum on EU membership on June 23 2016 marked the end of a period of relative stability for the UK banking sector,” Bostock said.

There was a silver lining in the results, however, as Santander confirmed it would not increase its expected bill for the payment protection insurance scandal, unlike its City rivals.

Its total PPI bill currently stands at £1.5bn.