Santander Slammed by $1.7 Billion U.K. Charge -- WSJ
September 26 2019 - 3:02AM
Dow Jones News
By Pietro Lombardi and Patricia Kowsmann
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (September 26, 2019).
Spanish banking giant Banco Santander SA will book a roughly
EUR1.5 billion ($1.7 billion) charge over its U.K. business that
has been hit by Brexit and changes in banking regulation.
The impairment charge comes during a challenging period for
Europe's banks as ultralow interest rates make lending less
profitable. Political turmoil surrounding the U.K.'s exit from the
European Union is adding to the uncertainty, particularly for
lenders like Santander with large U.K. operations. Santander
reported a 18% drop in second-quarter net profit over restructuring
costs at home and a squeeze on U.K. mortgage margins.
The lender said the charge was mostly due to a challenging
regulatory environment, mentioning the negative impact of
"ringfencing" rules, under which U.K. lenders must separate retail
banking from riskier investment-banking operations. By separating
the businesses, many costs have been duplicated.
The rules, which were imposed on banks following the financial
crisis, have also increased competition on mortgage lending in the
U.K. because banks with both retail and investment banking
operations had to stop using retail deposits to spur their business
for corporate clients. As a result, several banks have diverted the
liquidity into mortgage lending. Santander, which also has big
operations in Brazil, is focused on retail banking.
"While ringfencing reforms and Brexit have impacted
profitability in the U.K., it remains a critically important
market, in which the group is investing significantly to service
our customers and to continue to compete," the bank's executive
chairman, Ana Botín, said.
The British economy contracted in the second quarter as
uncertainty over the country's planned departure from the European
Union on Oct. 31 hurt business confidence. Since then, uncertainty
over the U.K.'s relationship with the EU has deepened further.
Santander said the impairment charge will be reported in its
third-quarter results. The bank said its core capital ratio won't
be affected.
Shares of Santander followed the broader banking sector and were
down 2.4% at about noon Wednesday. The impairment charge was
announced after the market closed Tuesday.
The lender will pay the first of two annual dividend payments
starting in November. Shareholders will get EUR0.10 a share in
cash.
Write to Pietro Lombardi at Pietro.Lombardi@dowjones.com and
Patricia Kowsmann at patricia.kowsmann@wsj.com
(END) Dow Jones Newswires
September 26, 2019 02:47 ET (06:47 GMT)
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