New business for Santander UK’s car finance lending totalled £940m in the first quarter of 2018, up 8.3% year-on-year.

Santander Consumer Finance’s portfolio was £6.9bn as of March, in line with the whole 2017.

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In the wider retail banking division, slower mortgage business impacted results. Operating income fell 2% to £947m, while pre-tax profits decreased 9% to £411m.

Credit quality improved, with retail non-performing loans 5.4% to £2.1bn. As a result, NPL ratio decreased slightly to 1.25%.

The bank said: “Lower inflation and a strong UK labour market with nominal wage growth has started to materialise, and be reflected in improved real earnings.

“Nonetheless, for the UK economy, some downside risks could materialise, which might result in higher than predicted inflation and therefore reduce households’ real earnings again.

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“This may restrict consumer spending which, when combined with a potentially more challenging macro environment, adds a degree of caution to our outlook.”

Nathan Bostock, chief executive of Santander UK, said: ” “Our first quarter results have been impacted by ongoing competitive pressures in the UK. However, we have continued to make progress across key areas of the bank.

“We have maintained our investment in business transformation and growth initiatives even though regulatory, risk and control costs stepped up, given a number of major projects are due to be implemented during 2018.

“Cost discipline remains an area of particular focus for management, with targeted actions expected to reduce the cost run rate over the year and deliver operational efficiencies.”