Santander profits fall 21% amid competitive pressures and Carillion hit
High street banking giant Santander has revealed a 21% slump in profit after taking another hit from failed construction giant Carillion and suffering "competitive pressures".
The Spanish-owned lender said pre-tax profits tumbled to £414 million in the first three months of 2018, from £525 million a year earlier.
It took a £60 million impairment charge, including a further writedown on Carillion as well as another firm, understood to be troubled fellow outsourcer Interserve.
Santander added that it would fail to meet its target for 4.7 million loyal retail customers this year, with current numbers standing at 4 million as it has struggled to attract savings deposits.
Rates on a number of its savings products have not been increased since the rate hike last November, while its everyday and instant deposit accounts remain below the 0.5% base rate.
Chief executive Nathan Bostock said: "Our first-quarter results have been impacted by ongoing competitive pressures in the UK."
"Cost discipline remains an area of particular focus for management, with targeted action s expected to reduce the cost run rate over the year and deliver operational efficiencies," he added.
The lender is continuing to review its branch network, having already announced 21 branch closures in the UK over the first half.
The Carillion charge comes after 2017 results fell 5%, dragged lower by £203 million in impairment losses, primarily made up of loans to Carillion gone bad.
Santander repeated warnings over its net interest margins, which are set to be lower this year as stiff competition continues to weigh on the group, while it is also seeing fewer customers on its standard variable rate (SVR) - with around another £5.5 billion reduction expected in 2018.
Santander said it expects the UK economy to continue growing this year "at a similar pace" to 2017 with strong global expansion and real wages growth in the UK providing a fillip.
But it warned that the inflation outlook could be higher than expected, which would hit real wages again and see consumer spending reined in once more.
It saw mortgage lending increase by £1.9 billion to £156.8 billion, with gross lending standing at £7.6 billion in the first quarter alone.
But savings deposits fell £700 million to £60.1 billion.
The wider Santander group posted a 10% rise in net profit to 2.05 billion euros (£1.8 billion) for the first quarter, which was higher than expected.