Yorkshire Building Society saw its pre-tax profits fall in the six months to the end of June.
The lender reported a statutory profit before tax of £88.6m compared to £92.3m at the end of June 2017.
But Mike Regnier, chief executive at Yorkshire Building Society, said core operating profit had increased to £86.3m.
He said this growth in underlying profitability was due to cost reductions offsetting reduced interest income as competitive pressure on margins continues.
Mr Regnier said: "Above all we are focused on our ability to deliver high levels of service to our customers and our customer experience measure has remained significantly ahead of industry averages.
"We also saw growth in core profits and total mortgage balances and achieved a number of key milestones in our change plans."
The building society’s overall mortgage balance rose slightly to £35.4bn compared to £35.1bn at the end of last year.
Gross lending for the first six months of this year totalled £4bn, compared to £3.4bn at the end of June 2017.
Net lending, the figure after considering repayments of existing mortgages, at the end of June 2018 was £365m compared to -£2m at the same point in 2017.
But its net interest margin - the difference between the interest generated from mortgages to that paid out on deposits - fell to 1.16 per cent because of competitive pressure on margins.
Mr Regnier said the results supported an aim of making a level of profit to allow growth at a "sensible and healthy rate".
He said: "We have achieved this goal whilst continuing to offer excellent value products and great customer service to our customers. This aligns to our vision 'to be the most trusted provider of financial services in the UK'."
rachel.addison@ft.com
