Santander warns UK outsourcing under 'stress' after Capita profit warning
Santander’s UK chief has warned Britain’s outsourcing sector is under mounting stress after Capita became the latest public sector supplier to issue a major profit warning this morning.
The high street lender revealed today it lost close to £200m on loans to fellow outsourcing giant Carillion, which went bust under the weight of £15bn in debts earlier this month.
Nathan Bostock, the bank’s UK chief executive, told the Telegraph: “I certainly think the sector is showing signs of stress. If you look at the data on profit warnings, support services has been the leading sector.
“It’s always hard to read across from individual companies, but the sector is showing signs of pressure.”
In full-year results for 2017, Santander UK posted a 5pc drop in pre-tax profits to £1.8bn.
Mr Bostock said the bank would have had "low single-digit growth" in profits if it were not for the hit from Carillion. He said it made up the "vast majority" of £203m-worth of loan impairments.
The chief executive also said he would co-operate with the Financial Conduct Authority (FCA) should he be contacted regarding publication of its report into mistreatment of small business customers by his former employer RBS.
Mr Bostock, who joined Santander UK after five years in senior roles at RBS, was dragged into the growing political storm surrounding the conduct of RBS’s now-defunct turnaround unit Global Restructuring Group (GRG) in Parliament earlier this month.
Liberal Democrat leader Sir Vince Cable said Mr Bostock should bear some responsibility for GRG, as he headed up RBS’s restructuring and risk operations while at the bank.
The FCA said yesterday it would publish its report into GRG in full after RBS chief Ross McEwan and chairman Sir Howard Davies dropped their opposition during a grilling by MPs on the Treasury select committee.
An earlier summary of the report found “widespread inappropriate treatment” of smaller firms, with 92pc mistreated in some way.
The FCA said it would begin contacting individuals named in the report to ask for their consent to publish – a process known as 'Maxwellisation' that could take months to complete.
It is not known whether Mr Bostock is named in the report. He said: “I haven’t seen the report… If the FCA does contact me, I will co-operate.”
Asked whether he felt he should apologise for the actions of GRG, he said: “The FCA investigation into GRG is ongoing and it wouldn’t be appropriate to comment.”
Mr Bostock said Santander UK was committed to helping SME business customers and would “continue to be a challenger in that space”.
He added that Santander’s overall results for 2017 were “solid” and increases to the Bank of England base interest rate would provide a “positive environment for banks”.
However analysts expressed disappointment at Santander’s guidance that its margins would come under pressure this year through intensifying competition in retail banking, particularly in the mortgage market.
Santander also increased its provisioning for payment protection insurance (PPI) mis-selling by £40m after a surge in claims following the FCA’s ad campaign last summer.
Three more ad campaigns are planned and Mr Bostock said the bank would reassess its provisioning again after the next FCA push.
Mortgage lending for 2017 increased £600m, while commercial lending dropped £100m.
Mr Bostock warned of potential risks to the UK economy. “There’s uncertainty ahead so potentially there’s more risk downside than upside in the near term,” he said.
John Cronin, analyst at Goodbody, said the results were “not the most positive update”.
The UK bank's parent company, Banco Santander, posted a 4pc fall in net profits for the fourth quarter to €1.54bn (£1.35bn) due to a €600m hit on its business in the US. But the figure still beat analyst forecasts.
