Santander UK has today criticised Britain's motor finance redress scheme and said it decided not to publish its third-quarter results as it seeks clarity on the financial regulator's proposals related to the mis-selling scandal.
The UK unit of Spain's Santander said that it did not expect a material impact on its capital or liquidity even in the event of any potential increase to its existing motor finance provision, which was previously estimated at £295m to cover compensation.
Asked if Santander UK would have to set aside more provisions, Santander's chief executive Officer Hector Grisi told a press conference: "For the moment, no, because the FCA report is provisional and still under public consultation."
Other banks including Bank of Ireland, Lloyds and Barclays recently set aside additional charges related to the scheme to compensate consumers who signed unfair car loans between 2007 and 2024.
Many of the loans, which were packaged up by car dealers, stem from discretionary commission agreements, in which lenders allowed the dealerships to earn higher fees by ramping up the interest rates consumers paid on the loans.
In August, Britain's Financial Conduct Authority proposed a redress scheme for consumers with compensation claims following a Supreme Court ruling, estimating the cost at between £9 billion and £18 billion.
Santander UK said today it was reviewing the consultation to understand its potential implications, noting that the FCA's proposed approach differed in important respects from the Supreme Court ruling.
It also said there was uncertainty regarding the final scope, methodology and timing of any redress scheme that may ultimately be implemented.
"We believe that the level of concern in the industry and market is such that material changes to the proposed FCA redress scheme should be an active consideration for the UK Government," Santander's UK Chief Executive Mike Regnier said in a statement.
He also warned that without such change, the unintended consequences for the car finance market, the supply of credit and the resulting negative effect on the automotive industry and its supply chain could significantly hurt jobs, growth and the broader British economy.
"This could also cause significant detriment to the consumer," he added.
Santander Group posts near 8% increase in Q3 net profits
Meanwhile, the Santander Group today reported a 7.8% year-on-year rise in its third-quarter net profit, saying a strong performance in its US business offset lower lending income and some weakness in Brazil.
The net profit of €3.5 billion in the July-September quarter reported by the euro zone's biggest bank came above the €3.39 billion expected by analysts in a Reuters poll and was the sixth consecutive record-high quarterly result.
A rise of 4.3% in fees and of 0.87% in revenues compensated a decline of 1.1% in lending income, the Spanish bank said.
Santander's measure of profitability, tangible-equity ratio (ROTE) after the impact of additional Tier 1 (AT1) capital instruments, remained unchanged at 16.2% compared to the previous quarter. The bank said it was on track to meet its target of around 16.5% for this year and its full-year revenue target of around €62 billion.
Executive Chair Ana Botin said Santander's geographical spread - it operates in 10 core markets in Europe and the Americas - would act as a stabiliser in an uncertain global environment.
"Looking ahead, we are on track to meet all our 2025 targets and, amid continued geopolitical and market uncertainty, we are confident we will continue delivering further profitable growth," Botin said in a statement.
Underlying net profit in the US, its fifth-largest market, rose 64% supported by higher lending income and higher fees from its corporate and investment banking business.
The bank has benefited in the past from higher interest rates, while growth in key Latin American markets has given it an edge over more Europe-dependent rivals.
But it was hit by currency depreciations in some of its emerging markets, such as Brazil, where the real's devaluation drove the underlying net profit down 5.9% in the quarter.
