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

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.