Profits at Santander were broadly flat at £1.06bn in the first half of 2017.
The bank saw its retail banking current account balances up by £1.5bn but net mortgage lending fell again, by £200m over the year.
Santander has said this is because of “management pricing actions” which means it will compete on service rather than price.
Last year the bank said the mortgage market is “highly competitive” and it will focus on customer service.
This has resulted in Santander losing market share and becoming the only lender to move down the Council of Mortgage Lenders’ (CML) gross lending rankings recently.
In its quarterly management statement Santander said: “We expect our gross mortgage lending growth to be broadly in line with the market, supported by our continued focus on customer service and retention.
“Mortgage approval volumes so far this year have been higher than in late 2016, and as a result we expect completions to normalise in the coming months.
“The decline in the SVR balance will be lower than the net £7bn reduction in 2016.”
Santander’s net interest margin was 1.53 per cent, which it has said was less than expected because of slower GDP growth.
The bank has admitted that its previous assumption that the Bank of England’s base rate of interest would be 2 per cent by 2018 was “significantly higher” than the current forecast.
Despite this net interest income rose to £1.9bn and its non-performing loan ratio fell to 1.32 per cent.
Nathan Bostock, chief executive of Santander, said: “Santander continues to make strong progress against the backdrop of a changeable operating environment.
“We performed well in the first half of 2017 - with net interest income growth, ongoing cost discipline and good credit quality.
“Our strategy of focusing on developing customer relationships by offering an enhanced range of products, services and access to channels is consistent with our values of being simple, personal and fair.
“Our relentless focus on enhancing customer service and developing innovative solutions for our customers, coupled with our focus on cost efficiency and a prudent approach to lending should ensure we remain resilient in a more uncertain operating environment.”
damian.fantato@ft.com
