SANTANDER increased its small business lending in Scotland by 43% year-on-year in the past quarter, more than twice the rate of the rest of the United Kingdom, and having almost tripled the size of its corporate banking team north of the Border.

The Spanish-based group also revealed it has written off £52 million of costs after withdrawing from a deal to buy a 316-branch portfolio from Royal Bank of Scotland.

Santander said it had made £115 million of new lending to small businesses in Scotland over the past 12 months to the end of September.

While its lending to small and medium-sized enterprises (SMEs) across the UK increased by 20% year-on-year in its third quarter to September 30, it rose at more than double this rate in Scotland.

The company has recruited heavily north of the Border, increasing headcount at its corporate banking division in Scotland from 20 in August 2011 to 57 currently.

At the end of last year it opened a corporate banking centre in Edinburgh to add to the one it already had in Glasgow.

Its expansion comes at a time when Scotland's dominant lenders, RBS and Lloyds Banking Group (owner of Bank of Scotland), have sought to slim down their balance sheets.

Santander UK chief executive Ana Botin said: "We have consistently supported small businesses in the UK and over the past three years our lending to SMEs has grown by an average of more than 20% per annum."

But the bank slashed its mortgage lending, providing just £2.7 billion of gross home lending between July and September. That compares to £7.1bn in the same period of 2011.

The bank's share of the new mortgage market plunged from 18% to 7.3%.

The lower lending was due to a tightening of its criteria on higher loan to value and interest-only mortgages, the bank said.

Santander UK posted a £372m pre-tax profit for the quarter, down 27.2% on the same quarter last year, thanks in large part to increased loan impairments.

This was still ahead of the group as a whole, which saw its third-quarter net profits plunged 94% against the same period last year to €100m (£80m) after writing down more soured property loans.

In the UK, Santander has succeeded in attracting more current account customers, increasing current account balances by £2.4bn in the year to date, a rise of 20%.

It said that this year it had added 200,000 customers who now hold their primary account with the bank.

This month the bank pulled out of a £1.7bn deal to buy a 316-branch portfolio, including six NatWest branches in Scotland, from RBS which could have massively increased its reach.

Ms Botin said the withdrawal "was due to the ongoing delays and our concern that the continued uncertainty regarding timing was not in the best interests of customers or staff".

Gary Greenwood, analyst at Shore Capital, said: "Our key observation is that Santander UK had a relatively good credit crisis versus its domestic UK banking peers, but that its operating performance has come under more pressure of late due to a falling net interest margin and rising impairments."