Santander's profits hit by PPI scandal

Mis-sold loan insurance proves costly

by Russell Shackleford, 26th August 2011

The UK branch of the Spanish bank Santander has taken a colossal hit to its profits due to the mis-sold PPI scandal and its fallout, with its profits over the past six months having been halved by the necessity to set aside £731 million in order to ensure that it could compensate customers who were affected by this dire incidence.

It has reported a profit of £549m before tax in the six months leading up to the end of June, while a year ago its profits were in the billions. The compensatory provision for those who were the victim of the bank's Payment Protection Insurance mis-selling was no doubt the cause of the drop in profitability.

Last month, Santander UK announced that it had set aside £548m in potential compensation for those who had been wrongly sold PPI, but the sum has now risen to the current amount of £731m, far beyond the initial estimate.

PPI is a form of loan insurance which is supposed to offer financial security by guaranteeing a borrower the ability to repay their loan even if they should suffer a sudden cashflow issue. The idea is that, at this point, the insurance will pay out and provide the policyholder with sufficient income to tide them over in terms of paying off the loan until they are able to get back on their feet.

However, many who were encouraged to take out a PPI policy later discovered that the exemptions were such that they were never able to claim - while others found that they were already covered for such a situation by other insurance policies, or even that they had had the policy added to their loan amount without their consent.

Santander is not the only bank to have mis-sold PPI. Most other high street banks have currently ringfenced compensation funds in order to ensure that their customers are redressed for their PPI-based misfortune.

If you were one of the victims of this financial scandal, why not reclaim PPI today?

Claims Financial