Santander scraps results and calls for Government action on motor finance

Santander UK’s boss has called for Government intervention amid fears over the impact of the motor finance compensation scheme as the lender cancelled third quarter results until it can get “greater clarity” on City watchdog proposals.

The Spanish-owned group had been due to post figures on Wednesday, but said it was still reviewing the implications of the Financial Conduct Authority’s proposed redress scheme for itself and the wider industry.

Santander UK chief executive Mike Regnier called on the Government to step in, raising fears that the compensation scheme plans could impact the car finance market and wider motor sector, leading to “significant” job cuts.

The high street banking giant has already put by £295 million to cover compensation for customers unfairly sold a car loan.

It was widely expected that Santander would increase its provision in third quarter figures, following the lead of Lloyds Banking Group and Barclays in their third quarter results last week, which saw them increase cash set aside to £1.95 billion and £325 million respectively.

But Santander said it needs more time to assess the impact on its provisions as it believes there is “uncertainty regarding the final scope, methodology and timing of any redress scheme that may ultimately be implemented”.

The group expects to update further on this in its final results early next year.

Santander stressed that even in a “severe downside scenario”, it does not expect any increase to its existing provision for motor finance redress to have a “material adverse impact on its capital or liquidity positions, operations, financial condition or prospects”.

The Financial Conduct Authority (FCA) published proposals earlier this month for a redress scheme after finding that payouts were due on around 14 million unfair car finance deals, calculating that each payout could average about £700.

Mr Regnier said: “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.

“Without such change, the unintended consequences for the car finance market, the supply of credit and the resulting negative impact on the automotive industry and its supply chain could significantly impact jobs, growth and the broader UK economy.

“This could also cause significant detriment to the consumer.

“What is at stake is the supply of credit that customers need and that supports a very important sector for the economy.”

The FCA said the industry needed to “draw a line” under the motor finance scandal and that the proposed compensation scheme was the fairest way to do this.

An FCA spokesman said: “We believe a compensation scheme is the best way to settle, for both lenders and consumers, liabilities that exist no matter what.

“Alternatives would cost more and take longer.

“It’s vital we draw a line under the issue so a trusted motor finance market can continue to serve millions of families every year.”

Santander’s Spanish owner Banco Santander released results at a group level on Wednesday.

While the UK business normally reports each quarter, it is not required to provide a detailed quarterly breakdown separate to group figures.

Banco Santander said in its results that UK third-quarter pre-tax profits rose 10% to 544 million euros (£479 million) as revenues fell 3.5% year-on-year to 1.3 billion euro (£1.14 billion).