(Bloomberg) -- Banco Santander SA is setting aside £295 million ($375 million) to cushion against potential legal costs and payments, after authorities in the UK ordered a broad probe into the suspected mis-selling of car loans.
The amount is an estimate of “operational and legal costs and potential awards,” Santander UK said in a regulatory filing on Wednesday. Given uncertainties, “the ultimate financial impact could be materially higher or lower than the amount provided,” it said.
Santander previously delayed the publication of third-quarter earnings at its UK unit to assess the impact of the probe. That followed a recent court ruling that said lenders hadn’t been transparent enough to customers taking out car loans.
Profit before tax at the UK unit declined to £143 million in the third quarter from, £413 million in the previous period as a result of the provision.
Spain’s biggest bank said that lenders involved in this case “intend to seek permission to appeal” the Supreme Court decision.
Santander had previously said the impact will not be material for the group, meaning that it would be lower than €600 million ($634 million).
“Our targets for this year are not going to be much affected” Santander Chief Financial Officer Jose Garcia Cantera said in October. “We will meet the targets that we’ve communicated to the market for the whole year” he added.
Analysts at RBC Capital Markets had previously estimated a higher potential impact of 1.1 billion for Santander UK from motor finance probe.
(Updates with context from fourth paragraph)
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