Ana Botín, the chief executive of Santander's UK business, has given a severe profits warning as the lender faces rising costs and difficult market conditions.
After an investor presentation in London, analysts believe the bank is likely to lose out on £750m of profits over the next three years. This three-year shortfall compares with a 2010 profit at the UK arm of £1.5bn, the Telegraph reports.
Botín, who has led the business since last December, said returns were likely to fall in 2012 and 2013 as she committed to invest almost £500m to improve the bank's customer service levels.
She 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" including low GDP growth and regulatory costs.
She said: "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."
Santander UK hopes to open three million new current accounts over the next three years and up the number of credit card customers by about 1.5 million.
Cautious, Balanced & Dynamic Growth
Cowardly, boring or sensible
Latest news and analysis
‘Most significant’ upgrade since launch
Changes happening over coming months