The Spanish group posted a 28% surge in UK pre-tax profits, quarter-on-quarter, in the three months to the end of September as Help to Buy boosted its mortgage business and Funding for Lending brought down wholesale funding costs, sending its net interest income 9% higher.
Gross mortgage lending rose to £12.9 billion in the first nine months of the year, up from £11.2bn a year earlier, thanks to strong demand as the property market enjoys a revival after Help to Buy and as mortgage rates have eased.
This came despite Santander's plans to reduce its mortgage book as it focuses on other areas of banking, such as current accounts and small business banking. But the group is now halting any further decreases in its mortgage book, with aims for £25bn of new gross lending next year to maintain its share of the market at around 12.4%.
Nine-month figures show the impact of higher funding costs and expensive retail savings deals earlier this year, with pre-tax profits falling to £891 million from £1.04bn a year earlier.
Santander said it was beginning to benefit as many costly ISA savings deals launched to lure in depositors had come to an end, which coupled with the lower wholesale funding costs, should further help its net interest income in the fourth quarter.
It said small business net lending - gross lending less repayments - increased by 11% in the first nine months of 2013 to £10.6bn.