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Profits at Santander UK more than quadrupled in the three months to the end of September, as the bank benefited from further growth in mortgages and improving economic conditions.
The bank, which is the country’s third largest mortgage lender, reported pre-tax profits of £687m for the third quarter, up 350% from £151m during the same period in 2020.
Earnings were helped by further growth in mortgage lending, which increased by £1.6bn compared with £400m a year earlier, as homeowners continued to reconsider their lifestyles during the coronavirus pandemic and bought larger homes. Consumers were also racing to complete purchases before the stamp duty holiday came to an end in September, resulting in increased demand.
Overall, Santander UK has lent £5.2bn in mortgages since January, on a net basis. Nathan Bostock, its chief executive, celebrated this achievement in light of fierce competition from rivals, which include Lloyds, HSBC and NatWest.
Like most of its banking peers, Santander’s earnings also grew because of the UK’s economic recovery, driven in part by the success of the vaccine rollout, which reduced the likelihood that customers would default on their loans. It prompted the bank to release £100m of the cash it put aside to cover bad debts linked to the pandemic, down from the £171m last year.
Lenders around the world have benefited from weak comparative figures from 2020, when profits were hit by declines in revenues and loan loss provisions during the first months of the pandemic. It has made it easier for banks to report a surge in earnings this year, when reported on an annual basis.
However, Bostock said Santander was still remaining cautious, given the continuing pandemic, and the supply chain disruptions that have been driven in part by a shortage of workers.
“Despite a more positive economic environment, conditions remain uncertain and a number of factors could impact the pace of recovery,” he said. “While the pandemic’s trajectory over the winter remains unclear, I believe we are well positioned to grow and to support our customers over the years ahead, with strong capital and liquidity and proven balance sheet resilience.”
The UK bank’s strong performance contributed to a 20% rise in its Spanish parent company Banco Santander’s pre-profits, which increased to €3.8bn (£3.2bn).