In a significant development for consumers seeking redress, Barclays has dramatically increased its financial provisions for the ongoing motor finance mis-selling scandal. The banking giant has more than tripled its cash fund, setting aside an additional £235 million to handle anticipated compensation claims.
Substantial Financial Commitment from Barclays
This substantial boost comes as Barclays, which operates numerous branches across Birmingham and the wider UK, announced robust annual financial results. The bank revealed a pre-tax profit of £9.1 billion for 2025, marking a notable 13% increase from the £8.1 billion recorded in the previous year.
Income growth was observed across all divisions, with total group income rising by 9% year-on-year. Particularly strong performances were noted in the corporate bank, where income soared by 16%, and the investment bank, which saw an 11% increase driven by heightened activity in global financial markets.
Shareholder Returns Amid Compensation Pressures
Despite these significant compensation provisions, Barclays has outlined ambitious plans to return capital to shareholders. The institution intends to distribute more than £15 billion between 2026 and 2028 through a combination of dividends and share buyback programmes.
Santander Follows Similar Path with Increased Provisions
This announcement follows closely on the heels of similar actions by another major banking player. Santander UK recently disclosed that it has allocated an additional £183 million to cover costs associated with the same motor finance mis-selling scandal.
The Spanish-owned lending giant reported a 14% rise in pre-tax profits to £1.51 billion for 2025, despite these substantial compensation provisions. This latest allocation comes on top of £295 million already set aside in 2024 for the ongoing saga.
Uncertainty Surrounding Final Compensation Figures
Santander has expressed caution regarding the ultimate financial impact of the compensation scheme. The bank noted in its statements that "there continue to be significant uncertainties as to the nature, extent and timing of redress payments."
Further clarifying this position, Santander added that "the ultimate financial impact could be materially higher or lower than the amount provided." This uncertainty led the bank to cancel its third-quarter results last year to properly assess the implications of the Financial Conduct Authority's redress scheme.
Cost-Cutting Measures Accompany Compensation Provisions
Alongside these compensation announcements, Santander has signalled further operational changes. The bank has indicated expectations for additional cost efficiencies in 2026, driven primarily by business simplification and increased automation.
This follows the recent revelation of plans to close another 44 branches, putting nearly 300 jobs at risk. These measures reflect the challenging balancing act facing major financial institutions as they navigate compensation obligations while maintaining profitability and operational efficiency.
The coordinated actions by these banking giants highlight the significant financial implications of the motor finance mis-selling scandal. As compensation funds continue to grow, affected motorists may see increased prospects for successful claims, though the exact timing and amounts remain subject to ongoing regulatory processes and individual case assessments.
