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Santander shrinks UK loan book

By John Collingridge

Banking giant Santander has continued its retreat from riskier parts of the mortgage market but said it had made strides in winning more business customers.

The lender's profits slumped 22% in the first three months of the year to £282m, driven lower by the rising cost of deposits and higher expenses.

The bank shrunk its loan book by £2.3bn during the quarter as its net mortgage lending fell by £2.5bn. But it said that followed a deliberate decision to do less interest-only lending and cover more of its mortgages with customer deposits.

Santander also saw a surge in mortgage arrears, with "non-performing loans" increasing to 1.83% of assets from 1.51% a year earlier following a lending spree between 2007 and 2009. The Spanish-owned bank was an active player in the business banking market during the quarter.

Its corporate loans increased 11% to £20.4bn, including a 15% surge in lending to small and medium-sized enterprises (SMEs).

The bank said its growth will be organic rather than acquisitive, after it pulled out last year from a deal to buy more than 300 branches from Royal Bank of Scotland.

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