Warning of ‘marked slowdown’ in mortgage lending from Santander UK chief as bank’s profit creeps up two per cent
Santander UK’s net mortgage lending climbed higher in 2022, helping to boost profits, but its CEO warned that the bank would have to navigate “a marked slowdown” in mortgage lending in 2023.
The Spanish bank’s net mortgage lending increased to £9.8bn from £7.5bn last year helping pretax profit creep up two per cent. CEO Mark Regnier said the increase in profit was “underpinned by net mortgage lending of £9.8bn.”
Santander also benefited from higher interest rates with net interest margin for 2022 increasing to 2.06 per cent, up from 1.92 per cent last year. In the fourth quarter alone, net interest margin was 2.12 per cent.
The bank forecast that net interest margin in 2023 would remain higher than 2022 reflecting further base rate increases.
A seven per cent decrease in operating expenses also boosted profit. This came after significant restructuring in 2021 and should “improve the efficiency of the business” to help mitigate the impact of inflation.
But Regnier said “the end of 2022 saw a marked slowdown in mortgage lending” and warned of the “uncertain economic outlook for 2023”.
Santander noted inflation has eroded real income. “These challenges for households and businesses are expected to continue into 2023 and could impact credit quality”, it noted.
Credit impairment rose to £321m last year reflecting the deterioration in the economic environment. In 2021 Santander wrote back £233m.
The wider Santander group slightly outperformed the UK division, with pretax profit rising 4.8 per cent in 2022.
The group remained cautious, with loan loss provisions more than doubling in the fourth quarter of 2022 compared to last year.
It said its balance sheet remained robust, however, with the group’s CET1 ratio above 12% at the end of December 2022, in line with its stated target.
