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Santander blames tough competition and Carillion collapse for lower first quarter profits

Published: 09:27 24 Apr 2018 BST

Santander
Santander says 'cost discipline remains an area of particular focus'

Santander UK Group Holdings PLC (LON:BNC) posted a 21% drop in first quarter profits, blaming the impact of Carillion’s collapse and tough competition.

The lender, owned by Spain’s Banco Santander, said pre-tax profit fell to £414mln in the first three months of 2018 from £525mln a year, while net interest income dropped to £906mln from £940mln.

Credit impairment losses increased to £60mln from £13mln, in part due to a drawdown by Carillion.

Shares fell 1.05% to 474p in morning trading. 

Carillion demise and competitive pressures

Carillion entered liquidation in January after failing to secure a rescue deal with lenders and the government, following a series of profit warnings and a ballooning debt pile.

READ: Carillion boss tells MPs he's 'truly sorry' for collapse of construction contractor

Santander UK chief executive Nathan Bostock said the first quarter results were also hit by “ongoing competitive pressures” in the UK.

A slowdown in the UK economy and low interest rate environment provided a further drag on results.

In response to tighter regulation and an uncertainty surrounding Brexit’s impact on the economy, the company improved its capital buffers. The common equity tier 1 capital ratio rose 30 basis points to 12.5%.

Santander reigns in costs

“Cost discipline remains an area of particular focus for management, with targeted actions expected to reduce the cost run rate over the year and deliver operational efficiencies,” said Bostock.

He added: "With ongoing investment in business transformation and growth initiatives and our relentless focus on cost management, we expect to achieve stronger results over the course of the year and deliver on the majority of our 2016-18 commitments, as previously guided."

Parent company Banco Santander reported a 10% increase in attributable profit to €2.05bn at actual exchange rates in the first quarter with gross income up 1% to €12.15bn.

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