Banking has been a controversial topic in the UK for several years now, with many people blaming many of the big chains for the recession in the first place. While this may not necessarily be true, as there were a lot of factors that ushered Britain into a period of economic downturn, the public’s trust in the banking system has been knocked, and issues such as poor customer service and the Libor scandal have done nothing to improve relations between the two parties.
However, it appears that Santander UK have taken a huge step towards attracting customers back to their branches, offering good deals on current and savings accounts that have allowed the chain to return to profitability.
In the nine months to October, Santander UK attracted a net £5.6 billion in bank deposits from consumers keen to switch to their high interest Isa and 123 current accounts. This compares very favourably to the same period last year, when the chain saw net outflows of £2.1 billion.
This year so far has seen 200,000 new customers choosing to bank with Santander UK, and current account balances growing by 20 per cent or £2.4 billion. Of course, much of this success is being attributed to the 123 current account, which allows the account holder to receive cash back on household bills as well as interest of up to 3 per cent on credit balances. As this account only costs £2 per month, tightly squeezed households can see an instant return on their outgoings without having to worry about high banking fees.
The account has proven to be hugely popular, with more than 600,000 new and existing customers opening one since its launch in March. Additionally, the 123 credit card has proved to be almost as popular, with around 600,000 customers choosing to pay a small fee in return for cash back on spending in supermarkets, department stores and petrol stations.
Santander UK also managed to boost Isa savings by almost £9 billion, partly due to the publicity drive for the two year fixed rate Major Isa in association with golfer Rory McIlroy. The Isa paid four per cent in interest to customers, but the bank promised that, should McIlroy win one of the four major 2012 tournaments, they would add a further 0.1 per cent in interest to the account.
McIlroy went on to win the US PGA Championship in August, much to the joy of Santander’s customers.
As a result of Santander UK’s recent popularity, the banking chain were able to post profits of £1.1 billion at the end of the third quarter – an increase of four per cent on the same nine months to October a year ago.
Unfortunately, parent company Banco Santander did not share in its UK arm’s success, with a number of factors contributing to a drop in profits of two thirds in the nine months to 30th September. Net profits fell to £1.4 billion, largely due to the continuing impact of the Eurozone crisis and troubles in the banking group’s country of origin, Spain.
The number of customers defaulting on loans in Spain hit record highs in August, while the unemployment figures continued to climb, hitting 25 per cent in early September. Of course, this is bad news for the banking chain, as loan defaults and customer savings will surely take a turn for the worse as people attempt to keep themselves out of severe debt.
Meanwhile, net profit in Brazil, another market in which Banco Santander is included as a major player, dropped 14 per cent, further adding to the worries of the Spanish banking giants.
Do you think the international issues at Santander are a result of a falling confidence in the banking sector as a whole, with more and more consumers leaving large high street chains in favour of building societies or smaller groups? Will banks such as Santander manage to pull themselves back up once the international economic crisis is resolved, in your opinion, or will new competitors step in to take their places, perhaps along the line of the Marks & Spencer bank?
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