Santander to spin off motor finance division from UK business
Santander is poised to spin off its litigation-hit motor finance division as part of a major overhaul of its UK operations.
The Spanish lender has sought permission from regulators to separate its car loan business, which is facing a near-£300m payout as part of the ongoing motor finance scandal, from the rest of its British subsidiary.
The move, first reported by Bloomberg, forms part of telegraphed push from the bank to unify its divisions across consumer and car financing into a “single model across [its] markets”. They are currently spread out across several countries across Europe and Latin America.
Last year, the bank – Europe’s fourth-largest by total assets – disclosed it had set aside £295m to fund potential payouts from the motor finance scandal that is currently the subject of a Supreme Court hearing.
A £16bn scandal
Banks across the UK are facing a deluge of claims from borrowers claiming they were missold loans for the purchase of a car, after the Court of Appeal ruled in favour of a class action that leaves lenders on the hook for billions of pounds in payouts.
Judges ruled lenders like Santander had acted unlawfully when they paid dealerships to sell their loans to car owners without borrowers’ prior knowledge.
Total compensation for the ruling could exceed £16bn if the Supreme Court, which heard evidence on the case earlier this month after approving an appeal, sides with decision from the lower Court of Appeal in October.
A judgement from the UK’s highest court is expected by the summer.
Santander’s overhaul follows months of speculation over the fate of the bank’s UK division. In February, executive chair Ana Botin was forced to deny rumours that she had put the bank’s British business up for sale in response to its sluggish performance.
She branded the UK a “core market” for her banking group during a session at January’s World Economic Forum in Davos. However, three months later the bank announced plans to shutter 96 of its high street branches, in a move that put 750 jobs at risk.
Santander declined to comment.