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LONDON - Santander UK reported a 5% decline in profit before tax to £764 million for the first half of 2025, despite higher net interest income, as the bank increased spending on transformation initiatives.
The UK arm of the Spanish banking giant saw its net interest income rise 5% to £2.22 billion, driven by lower deposit costs and supported by its structural hedge position. Banking net interest margin improved to 2.26% from 2.08% in the same period last year.
Operating expenses decreased 2% due to simplification and automation efforts, including a reduction of over 2,000 staff positions over the past 12 months. However, provisions for other liabilities and charges surged 74% to £249 million, primarily due to higher transformation-related expenses, including £42 million in charges related to branch network changes.
The bank’s mortgage lending remained flat at £167.2 billion, though gross mortgage lending increased to £10.6 billion in the first half, up from £7.4 billion a year earlier. Customer deposits rose slightly by £0.8 billion to £184.2 billion.
"In the first six months of 2025 we continued to build momentum in our strategy to become the best bank for customers in the UK by investing in technology and service, and improving our processes and efficiency," said Mike Regnier, Chief Executive Officer of Santander UK.
Regnier highlighted that Banco Santander (BME:SAN)’s recent agreement to acquire TSB from Sabadell would accelerate the bank’s transformation. The £2.65 billion all-cash transaction, announced on July 1, is expected to complete in the first quarter of 2026, subject to regulatory approvals.
Credit impairment charges increased by £45 million as they trend toward pre-pandemic levels, with the cost of risk rising to 6 basis points from 3 basis points in December 2024.
The bank maintained strong capital ratios with a CET1 capital ratio of 14.9%, up slightly from 14.8% at the end of 2024, and a UK leverage ratio of 4.9%.
For the remainder of 2025, Santander UK anticipates a gradual return to net lending growth with a stabilization of banking net interest margin in the second half of the year.
The information was provided in Santander UK’s quarterly management statement.
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