Santander made a profit before tax of £1.9bn during 2016, according its annual report.
This was an increase of £300m on the previous year, but chief executive Nathan Bostock warned of tough times ahead.
He said: “We expect the slowdown of the UK economy, seen this year to continue as economic uncertainties prevail.
“We expect net interest margin to remain broadly stable, predicated on interest rate not reducing further, with continued competitive pressures on asset margins as well as SVR [standard variable rate] attrition.
“Cost management remains a key focus as we continue to invest and grow, while capturing future operational efficiencies.”
He predicted that Santander’s net mortgage lending would be broadly in line with the market.
During 2016 Santander posted net interest income of £3.58bn – up from £3.57bn in the previous year.
The bank said this was driven by increased lending which offset continued SVR attrition and asset margin pressure.
Operating expenses were broadly flat at £2.4bn while provisions for liabilities decreased by 48 per cent – mainly due to lower PPI provision charges.
Mortgage gross lending was £25.8bn and interest-only mortgage balances decreased £2.8bn to £52.3bn while buy-to-let mortgage balances increased £1.6bn to £6.6bn.
Last month Santander revealed that its net mortgage lending was £1bn lower last year after its decision to compete on customer service rather than price.
During 2016 Santander saw net mortgage lending of £1.5bn compared with the £2.7bn it saw in the previous year.
damian.fantato@ft.com
