Santander warns profits to fall for next two years

Spanish banking giant Santander has warned investors profits at the bank are likely to fall in 2012 and 2013 as the bank pumps millions into improving customer service levels.

Speaking at an investor presentation, UK chief executive Ana Botin, said returns were expected to fall after she committed the group to invest almost £500m on improving customer service levels, the Telegraph reported.

Ms Botín, who has led the business since last December, warned Santander UK, which has delayed plans to list its shares on the London Stock Exchange, would be forced to contend with "a combination of strong headwinds", with low GDP growth and regulatory costs also hurting margins.

Speaking at the investor day, she was quoted as saying: "We believe the cumulative effect of a liquidity buffer, FSCS [Financial Services Compensation Scheme] and the bank levy, plus the costs of structural reforms, will increase ten-fold from where we were in 2008 to what we expect to see in 2013, impacting our profit before tax.

"That's a challenging backdrop for our business but Santander UK has an enormous opportunity in the UK and we have accomplished a lot so far."