Santander Mortgage Rate Could Help Profit, Morgan Stanley Says

Santander (SAN) UK Plc, the British unit of Spain’s biggest lender, could see a 12 percent increase in 2013 pretax profit after raising its U.K. mortgage rates, Morgan Stanley analysts led by Chris Manners said.

The increase may help other banks if they follow suit, said Manners. Lloyds Banking Group Plc (LLOY)’s 2013 underlying pretax profit could rise 18 percent because of the size of its mortgage business, although the bank has already raised its rate this year, he said in a note to clients yesterday.

Santander UK’s profit before tax for 2011 fell to 1.26 billion pounds ($2 billion). The bank raises its standard variable rate, the rate customers pay after a cheaper rate expires, by 0.5 percentage points to 4.74 percent in October.

“We note potential negative impacts to the wider economy and confidence if banks continue to raise mortgage rates,” wrote Manners. Fewer house sales and lower disposable income are among the risks, he said.

To contact the reporter on this story: Howard Mustoe in London at hmustoe@bloomberg.net.

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net

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