Loan insurance scandal hits banks hard
by Luke Whitmore, 27th July 2011
The Spanish bank Santander has experienced a 21% drop in profits
in the wake of the mis-sold PPI scandal which has rocked the
financial world in recent months.
A £538m provision has been made by the bank to cover the
potential cost of PPI reclaims, which has contributed to the
aforementioned loss of profit for the parent company, as well as
seeing their UK profits dip by 3%.
Santander's UK properties include Abbey, Alliance and Leicester,
and Bradford and Bingley, all of which were known to have mis-sold
PPI to customers who took out loan products.
PPI, or Payment Protection Insurance, is a form of loan
protection which was sold to many borrowers who were not eligible
for cover, or did not want or need the insurance. A judicial review
earlier this year placed the responsibility for refunding customers
directly on the banks' doorsteps, leading to the necessity for
billions of pounds to be set aside throughout the industry to
ensure that wronged consumers could be compensated for their
troubles.
While Santander's £538m liability for mis-sold PPI pales in
comparison to banking groups such as Lloyds, which was obliged to
put together a compensation fund of £3.2bn, it has still crippled
the bank's designs on floating the UK branches of the business on
the London stock markets this year, with analysts predicting that
the parent company is likely to hold off until next year when
profits have recovered and the effects of new regulations on
banking are more obvious.
The chief executive of Santander, Ana Botin, stated that "In
line with other UK banks, a further provision for payment
protection insurance remediation has also been made.
Notwithstanding these factors, Santander UK has delivered profit in
the first six months, maintaining its strong track record of
profitability and strengthening its balance sheet."
If you have been affected by mis-sold PPI, we can help you make a PPI claim today.
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