Santander UK warns on mortgage lending

On Thursday, Santander UK – formerly known as Abbey – said it generated £347m in pre-tax profits for the first quarter, down 40pc from the same period last year when the bank made £590m. In a statement, Santander UK said: "We believe the UK economic outlook has stabilised, but we see limited growth in our main market segments. Low interest rates and increased funding costs have been the most significant drivers of lower profits in the first quarter of 2012, and their impact is expected to persist throughout the year. Additional regulatory costs are also expected to affect profits in 2012." Santander UK also had to set aside more capital for losses on loans and other assets. Provisions increased to £179m compared with £129m in the first quarter of 2011. "This reflects increased provisions in the 'old' corporate book, mainly Alliance & Leicester and written before acquisition by Santander in 2008," said Santander UK. Despite the difficult trading conditions, Santander UK said it had increased lending to small and medium-sized businesses by 21pc.