(Bloomberg) -- Banco Santander SA said a wide-ranging UK probe into practices in the auto lending industry will likely crimp its profit by an amount significantly below €600 million.
“We are quite sure that this is not going to be material for the group,” Chief Financial Officer Jose Garcia Cantera said in an interview with Bloomberg TV on Tuesday. “Materiality is around, lets say 600 million, so we expect an impact that is going to be significantly lower than that” in terms of net income, he said.
The comments come after Santander’s UK unit delayed the publication of its third-quarter earnings, following a recent court ruling that said lenders weren’t transparent enough to customers taking out car loans. The UK banking industry is facing paying billions in extra compensation as a result, analysts have said.
Close Brothers Group Plc said on Friday that it intends to appeal the court decision, which the firm said could result in “significant liabilities” for its business.
“We need time to assess the impact on our UK business,” Cantera said in the interview. “Also, we would expect some guidance from the Supreme Court. The ruling was appealed.”
In a statement after market close on Monday, Santander UK said it disagrees with the conclusions reached by the Court of Appeal last week. It isn’t yet “practicable to reliably estimate” the size of the financial impact, Santander UK said.
Analysts at RBC Capital Markets said in an emailed report that they have included a £1.1 billion ($1.19 billion) impact in their earnings model and “have calculated a plausible downside impact” of £1.8 billion.
Cantera suggested the fallout will be limited.
“Our targets for this year are not going to be much affected,” he said in the Bloomberg TV interview. “We will meet the targets that we’ve communicated to the market for the whole year.”
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