Santander UK has reported pre-tax profits slumped during the first half of 2011 after making a £731 million provision for payment protection insurance (PPI) claims.

Pre-tax profits slumped to £549 milllion in the first six months of the year, compared with the £1.2 billion reported during the same period for 2010.

Trading profit before tax - excluding customer remediation provision - was reported as £1.1 billion, compared with £1.2 billion and was impacted by new UK regulatory liquidity requirements and higher costs of term funding.

Ana Botin, chief executive of Santander UK, said the nank aimed to become more customer-driven, improve customer satisfaction and service quality, and to become the “SME Bank of Choice”.

The bank is to launch its own regional development funds and develop a mentoring programme in its drive to become the small & medium enterprise (SME) bank of choice.

Ana Botin, chief executive of Santander UK, said despite weaker demand in key markets it had increased mortgage and SME lending balances.

The bank completed £9.7 billion in gross mortgage lending in the first half of the year, equating to a share of the mortgage market of more than 15 per cent, highlighting its focus on low loan-to-value and prime customer segments. The UK bank also opened 409,000 new bank accounts and 274,000 credit cards.

Botin said, ‘Competition in the deposit acquisition market has intensified and margins are at very low levels as a result.

‘We continue to offer a mix of best-buy products and special offers targeted at existing customers but have restricted our exposure to negative margin deposit acquisition, preferring instead to reward our customers for doing more business with us.’

Botin said the strategy had resulted in ‘slightly negative’ net deposit flows during the first half, but had seen a rise in commercial deposits.

To receive more relevant articles like this one, why not sign up to our weekly newsletters, click here