Santander sees profits rise

Santander sees profits rise

High street bank Santander said the buy-to-let rush ahead of this month's stamp duty increase helped profits rise 13% as it enjoyed a surge in mortgage lending.

The Spanish-owned lender said UK pre-tax profits increased to £532m in the first three months of 2016, up from £470m a year earlier as total lending grew by £7.1bn.

But the group warned lending will not rise at the same pace after the government's stamp duty increase on buy-to-let properties came into effect on 1 April, with the industry set to face "challenges".

It said: "The surge in completions in March may have skewed figures and meant that the first quarter has been top-loaded with lending that would have otherwise taken place throughout the year.

"There are a number of factors that could impact lending throughout 2016 and we recognise the industry as a whole may face some challenges."

The group also cautioned that house price growth would slow this year.

Santander  increased net mortgage lending - total advances less redemptions - by £1.3bn in the quarter to the end of March, which compares with a £400m fall a year ago.

Net lending to new businesses rose 10%.

It also attracted  more current account customers, with its 123 World offering notching up around 131,000 customers in the first quarter and overall current account balances up  by £3.6bn to £56.8bn.

This was partially offset by a £1.4bn fall in savings deposits. 

First quarter figures were boosted by a 75% fall in bad debts, while there were no further PPI provisions put by, against £450m set aside in the previous three months. 

But its  net interest margin came under pressure as the Bank of England base rate  remained at 0.5% and with fewer borrowers on its standard variable  rate.

The bank, which has 852 branches across the UK, said this was expected to fall further as rates are not predicted to rise in 2016 amid a slowdown in the global economy.

Nathan Bostock, chief executive of Santander, said the UK bank made a "solid start" to the year.

He joined rival Barclays, which also reported first quarter figures today, in adding a note of caution ahead of the EU referendum.

He said: "We expect the improving trend in UK lending growth seen in 2015 to continue, but are conscious of  prevailing market volatility from macro-economic and geopolitical factors, uncertain prospects for policy interest  rates, and the upcoming UK referendum on EU membership."

Owner Banco Santander - the biggest bank in the eurozone - suffered a more difficult first quarter as group-wide net profit fell 5% to 1.63 billion euros (£1.26bn) in the first quarter.

It was hit by currency exchange rates and a deepening recession in Brazil, which is its second biggest market.