Santander warns of cost-cutting action as profits plunge 44%

High street lender Santander has signalled further possible job cuts and branch closures as it continues to slash costs after seeing profits nearly halve in 2020.

Nathan Bostock, UK chief executive of the Spanish-owned group, told the PA news agency it will continue to review its 564-strong branch network as the pandemic has accelerated the shift towards online banking.

He added that moves to trim more costs under an ongoing overhaul could mean further job cuts among its 21,900 workforce.

He said: “Our transformation programme continues… we could see clearly as a result of that a change in the number of our overall headcount.”

He said the branch network is “always under review”, but stressed there are no immediate plans or targets for closures.

“Should we make any decisions (on branch closures), we would always do it in a way that reflects guidance from the Financial Conduct Authority,” he said.

It came as the group posted a 44% slump in UK pre-tax profits to £552 million for 2020 as it booked a £448 million hit for loan losses due to the pandemic.

The Covid-19 provisions sent total credit impairment losses surging to £645 million for the year.

On an underlying basis, full-year profits fell 45% to £710 million.

Santander set aside another £98 million for expected loan losses in its fourth quarter, but saw underlying profits rise 4% quarter on quarter to £247 million in the final three months of the year.

It marks a more resilient performance for the UK business than from its Spanish owner, Banco Santander, which slumped to the first ever annual loss in its 160-year history.

The wider group swung to a net loss of 8.77 billion euros (£7.7 billion) after hefty writedowns due to the pandemic and restructuring costs taken in the fourth quarter.

In the UK, the group gave a “cautious” outlook for the UK economy, though it expects growth to recover later in the year thanks to the vaccine rollout.

The economic bounce-back is set to help drive down defaults on loans from struggling households, it added.

Santander said it expects mortgage lending to rise by about 2% in 2021, but house prices to fall 2%.

Mr Bostock added: “Although Covid-19 materially impacted our results, the decisive actions we have taken have helped to deliver a very resilient performance despite the difficult environment.”

On the 2021 outlook, he said: “Our view is that the first half remains a difficult one… but we remain optimistic about the second half.”

Santander has already made savings of around £244 million under a restructure that began last year.

Mr Bostock said the group has also invested more than £330 million as it ramps up its technology capability and re-skills staff amid the switch towards more online banking.

The firm’s results show it saw a £4.4 billion surge in net mortgage lending last year as the stamp duty holiday spurred on the housing market.

Customer deposits also rose £13.9 billion to £191.7 billion as households and businesses spent less due to coronavirus lockdowns and restrictions.