SANTANDER UK has reported a 29 per cent slump in profit as the boost from higher interest rates fades and a fiercely competitive mortgage market forces it to offer better deals to customers.

The UK arm of Spain's largest bank posted a pretax profit of £391m for the first three months of 2024, down from £547m during the same period last year.

Europe's banks reached a peak in profitability last year on the back of interest rate hikes, but this tailwind has died down as policymakers hold borrowing costs and are expected to start lowering them in the coming months.

Santander UK, one of the country's largest home loan providers, and its rivals have lowered their mortgage rates this year as they compete for business in a smaller market and price in future interest rate cuts.

The bank's mortgage lending fell £2.5bn to £172.7bn during the quarter, which it explained was a result of a "decision to optimise balance sheet returns".

Shares closed down 4.31 per cent.

(c) 2024 City A.M., source Newspaper