Banco Santander (LSE:BNC) has made a provision of £295 million for possible motor finance commission compensation claims.
Results from the UK arm of the Spanish bank were delayed after a case on 25 October where the Court of Appeal ruled that motor dealers acting as credit brokers had acted illegally in not disclosing commissions on loans for car sales.
With its results, which were released today, Santander UK said that in light of that Court of Appeal judgment it had taken a charge based on various scenarios using a range of assumptions that includes operational and legal costs and potential awards,
“There are currently significant uncertainties as to the nature, extent and timing of any remediation action if required and the ultimate financial impact could be materially higher or lower than the amount provided.”
Santander UK added that for the quarter its CET1 capital ratio increased to 15.4% despite the impact of this provision, which knocked off 19bps or 0.19%.
Net interest margins in the three months to September rose to 2.17%, up 8 basis points with profits slumping to £195 million from £413 million due to the provision.