Carillion collapse hits profits at Santander

The collapse of construction giant Carillion has dragged down profits by 5 per cent year-on-year at Santander’s UK operation, the lender has revealed.

Results for the high street lender show £203 million in impairment losses in the year to December 31, primarily made up of loans to Carillion.

It meant pre-tax profits last year came in at £1.8 billion, down from £1.9 billion in 2016.

Carillion’s liquidation earlier this month left a £900 million debt pile, a £590 million pension deficit and hundreds of millions of pounds in unfinished public contracts.

Santander said adjusted profits fell 4 per cent to £1.95 billion in the period but net interest income, a key metric, grew 6 per cent to £3.8 billion.

The Santander results are just the first of what is expected to be a series of similar hits to high street banks following Carillion’s demise.

Both Royal Bank of Scotland and Lloyds will announce their affected results in the coming weeks.

Santander UK chief executive Nathan Bostock said: “Profitability was impacted by the losses incurred on our exposure to Carillion, which offset otherwise strong growth.

“We are working closely to support customers who have suffered from their collapse.”

meanwhile, net mortgage lending grew by £600 million after “pricing actions” in a competitive environment.

The lender also flagged rising inflation and a more challenging economy in the UK in the year ahead.

Addressing wider concerns, Mr Bostock added: “For the UK economy, some downside risks could materialise, as a result of higher inflation and low wage growth reducing households’ real earnings.

“This may restrict consumer spending which, when combined with a potentially more challenging macro environment, adds a degree of caution to our outlook.”

However, Santander also noted that low unemployment, easing inflation and “nominal wage growth” could help.