Global Banking Profits Fall Due To PPI Payouts

As a result of Payment Protection Insurance (PPI) claims being lodged against the United Kingdom arm of Santander. Europe's largest bank has announced that they will be setting a side, six hundred and twenty million euro's to cover current and expected claims being lodged against Santander UK. The result of this will be a drop in first half profits for the Spanish Banking Giant.

PPI is an assurance system often attached to financial products such as loans, credit cards, and especially home mortgages. When a consumer is unable to make payments on a lending product due to an illness, injury or unemployment, PPI plans are supposed to provide relief. Widespread marketing of these plans in the UK at the beginning of the 21st century contributed to their popularity.

Retail financial advisors in Britain were keen to sell PPI to mortgage applicants. PPI policies were sold under different names such as Accident, Sickness and Unemployment cover (ASU), Mortgage Payment Protection Insurance, and many others. While PPI policies make good sense, especially to consumers who are taking out large loan amounts, investigations by the UK's Financial Services Authority have revealed certain irregularities.

Over the last few years, hundreds of thousands of British consumers have filed formal complaints against banks such as Santander for alleged misrepresentations of PPI. According to some of the complaints, borrowers were told on certain occasions that PPI was compulsory instead of optional. On other occasions, consumers may have not fully understood the cost of PPI, or were altogether exempt from it. For example, civil servants who are entitled to full pay when they are sick and absent from their workplace are exempt from PPI. Exemptions should also apply in the case of retirees or full-time students.

Santander is just one of the banks in the UK affected by PPI complaints. Other banks such as RBS, Lloyds and Barclays have set aside funds in order to deal with ongoing and future PPI claims. The Financial Services Authority has directed these banks to look into their loan portfolios and identify customers who may have been improperly sold PPI policies. These banks have also been ordered to contact their affected customers. Billions of pounds have been set aside by the banks for potential compensatory efforts. The one-time mis sold PPI charge incurred by Santader UK is seen as pre-emptive and opportune by analysts.

Shares of Santander fell by 4 percent immediately after the announcement of the PPI charge-off. While the bank is still well-positioned in the Euro zone, investors are rightfully concerned about the bank's exposure to Spain's economic woes. Santander UK's operations reported a sharp drop in profits due to increasing regulatory charges. Losses from the bank's operations in Brazil were mostly due to an increase in bad loans, a problem the bank is also seeing in the UK. Santander maintains a strong foothold in Latin America, where operating expenses have increased due to inflation in the region.

Santander UK has been planning to debut an initial public offering (IPO) for its British operations, but the plans keep getting postponed due to volatile market conditions. Similar plans for an Argentinean IPO have also been placed in the back burner.

Mis-sold Mortgages, were conducted at the same time and in conjunction, if you were mis-sold a mortgage then it is more than likely you may have a PPI Claim.