Santander disclosed today that its British operations now account for 20% of the UK mortgage market after expansion since 2008, which saw the Spanish financial group take over Alliance & Leicester and part of Bradford & Bingley.
The Iberian bank, which also took over Abbey in 2004, has 25m customers and 1,300 branches and has been gaining ground on surviving UK mortgage lenders, many of which have been hammered by the financial crisis.
Its British business lifted first-quarter profit by 15% to £426m, while net deposits soared 240% to £3bn year-on-year across retail, corporate and private banking.
Santander predicted that UK economic conditions would remain challenging this year, with interest rates low throughout 2010. It said: "House purchase volumes are higher than a year ago, but remain low relative to the past decade."
But in a further sign that borrowers continue to be under pressure, it has set aside more to cover bad debts – up 8% to £204m compared with a year earlier.
Santander is one of the frontrunners to acquire 318 Royal Bank of Scotland branches, which are being put up for sale to meet antitrust concerns. It is thought to be one of four contenders left in the bidding process, alongside the rival Spanish bank BBVA, Virgin Money and National Bank of Australia.
A Santander spokesman said: "We've seen a continued improvement in our cost-to-income ratio, which is down from 70% when Santander acquired Abbey to around 39% now and well below our competitors' average of around 56%."
Analysts said that the high quality of Santander's UK portfolio, and its reduced exposure to unsecured lending, had put the group in a robust position, given the economic environment.
Santander said that properties where mortgage repayments were three months or more in arrears represented 1.41% of its overall portfolio, compared with an industry average of 2.38%.
The bank predicts that UK unemployment will rise this year to 8.4% and GDP will see modest growth of 1.1%.
