High street lender Santander warned of a “changeable and potentially more challenging” economic outlook amid the fallout from the Brexit-hit pound as it revealed lower first- quarter UK profits.
The pound’s plunge since the Brexit vote left its Spanish owner Banco Santander nursing an 8% fall in UK profits when translated into euros, at s416 million (£354.5m).
In the UK arm, reported profits were 1% lower at £525m for the first three months of 2017 as it took a further £32m charge to cover claims for payment protection insurance (PPI) compensation.
It added that net mortgage lending fell by £400m after withdrawing some of its most competitive rates at the end of last year.
Chief executive Nathan Bostock said the group was bracing itself for a tougher 2017 as Brexit-fuelled inflation from the weak pound hits consumer spending power.
“Looking ahead, we anticipate a changeable and potentially more challenging macro environment,” he said.
The group said it expects UK growth to remain “solid” in 2017, but it added that clouds were beginning to appear after an initially resilient performance since the Brexit vote.
It warned: “Higher inflation, largely from the lower value of sterling, could reduce households’ real earnings growth.
“This, and a potentially more challenging macro environment going forward, adds a degree of caution to our outlook.”
Santander said its extra PPI charge is set to cover costs until the deadline for claims in August 2019, which will draw a line under the industry’s costly mis-selling scandal.
With the PPI charge and £25m of other one-off regulatory costs stripped out, underlying UK profits were 6% higher at £582m.