High street banking group Santander UK has reported plunging first quarter profits after booking hefty charges as it braces for soaring loan losses from the coronavirus crisis.
The Spanish-owned group reported a 58% tumble in pre-tax profits to £114 million for the first three months of 2020 following a £122m hit from Covid-19, which saw loan losses more than triple year-on-year to £165m.
Its parent Banco Santander suffered an even greater blow, with first quarter profits crashing 82% to €331m (£288m) after putting by €1.6 billion (£1.4bn) to cover bad debts caused by the coronavirus pandemic.
The figures come as rival HSBC also revealed the impact of an expected surge in customer debt defaults, which nearly halved first quarter profits, alongside a warning that loan loss could rise to €11bn (£8.9bn) over the full year.
Santander UK cautioned that Bank of England action to slash rates to a new historic low of 0.1% to help tackle the coronavirus economic fall-out will further knock already under-pressure mortgage profit margins.
But this will be slightly offset by falling rates on savings products over the second half.
The group said it was too early to guide on the full-year impact of coronavirus, but cautioned that a "more severe economic slowdown than forecast could also increase our credit impairment losses".
As with rivals such as HSBC and Virgin Money, Santander has also slowed its overhaul plans to focus on the Covid-19 response.
It said this would impact planned savings from the cost cutting.
Nathan Bostock, chief executive Officer, said: "Our first quarter results continued to be impacted by lower mortgage margins as well as the Covid-19 crisis.
"It is too early to reliably estimate the financial and business impacts this crisis will have on our 2020 results," he added.
Santander said it was helping 206,000 customers asking for mortgage payment holidays amid the crisis, equal to £32.4bn of loans or 19% of its total mortgage portfolio.
It said it has also approved £186m of emergency government-backed loans for businesses - around 5% of the total.
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