Santander warning over small firms slowdown as Brexit bites

Santander today said it is braced for a slowdown in the UK economy this year which could hit profits at Britain’s fifth-biggest bank.

The Spanish giant that now controls the former Alliance & Leicester and Bradford & Bingley building societies reported a strong 2016.

But chief executive Nathan Bostock warned that this year will be tougher and that small businesses in particular are turning to caution.

Bostock told the Standard: “I have a lot of confidence in the organisation’s future. But we are seeing a slower trajectory in the economy. The reality is that the SME world are long of cash. They are becoming more conservative.”

The full-year results statement notes “a changeable and more challenging macro environment in 2017”, because of Brexit and wider political turbulence. Bostock added: “There will be some people who are more likely to wait before they make a large investment.”

Santander profits jumped from £1.34 billion to £1.91 billion. That suggests the dividend payments enjoyed by 1.7 million small shareholders are safe for now.

Profits in the UK fell by 15% but that was largely because of the pound’s fall against the euro.

The innovative, if controversial, 123 current account attracted 483,000 new customers in 2016, less than half the million it added the year before. The bank halved the interest rate that 123 pays in November.

Bad debts were steady at £67 million, a low figure, although Bostock conceded that this is in a benign environment given low interest rates. The bad-debt figure is likely to rise this year, say City analysts.

The bank set aside another £114 million for PPI mis-selling.

Santander has been pondering a bid for Williams & Glyn, the 314-branch business Royal Bank of Scotland is selling under EU orders.

Banking sources say this deal has gone quiet. Bostock would only say that although Santander’s focus is on “organic growth” it would look at the right opportunities for deals.