Mis-selling of payment protection insurance (PPI) has taken a heavy toll on Spanish bank Santander’s UK business unit’s profit, reducing what would have been an attributable profit of £1.197bn ($1.8 bn) in the first nine months of 2011 by £538m to £659m.
Santander UK joined other UK banks which have been obliged to make substantial provisions to compensate consumers who were mis-sold PPI.
Hardest hit was Lloyds which earlier this year announced that it had made a provision of £3.2bn to compensate aggrieved customers. Barclays has provided for £1bn in compensation to customers.
In total, PPI providers have so far made provision for £7.4bn in compensation to be paid to aggrieved customers.
According to the Financial Services Authority (FSA), in the first six months of 2011 16 companies paid out £215m to redress complaints of PPI mis-selling.
The FSA noted that the pace of payments accelerated markedly in May and June. This followed the High Court’s dismissal of an appeal by the British Bankers’ Association against the retrospective nature of rules to protect consumers against PPI mis-selling introduced by the FSA and Financial Ombudsman Service.
