Abbey, the high street bank owned by Santander Central Hispano, accounted for around one in five of all new UK mortgages during the second quarter of 2008, mopping up the market share of dozens of smaller lenders who have struggled to find the funding to write new business.
Publishing its interim results yesterday, Santander said that Abbey accounted for 13 per cent of UK gross mortgage lending over the first six months of the year, though this is estimated to be closer to 20 per cent during the second quarter. The bank accounted for more than a third of all net lending during the three months to the end of June, compared to just 6.6 per cent during the same period last year.
Santander has been one of the few European banks, along with HSBC, to remain financially strong over the past year, allowing it to continue increasing the size of its mortgage book, even as the overall market has been contracting. A year ago, Northern Rock was accounting for around a fifth of all new mortgages, and has now completely withdrawn from the market. While lenders such as Bradford & Bingley and Alliance & Leicester have been forced to cut back their lending levels due to finding constraints.
Santander was quick to head off any suggestion that it may be putting itself at risk by writing such a large share of market volumes, claiming that it expected to be writing a far smaller market share during the second half of the year, as lenders such as Nationwide and Halifax began to step up their lending levels.
In its results, the bank said: "Since September 2006, we have been managing the profitability of our mortgage business, carefully maintaining a balance between the margin of new business, prudent lending criteria and our market share aspirations. We held back our market share during [the first half of] 2007 when margins were low or unprofitable. Since then, as others have withdrawn from the market, we have taken the opportunity to take higher-margin, low loan to value (LTV) business and focused on retaining our existing customers.
"We have not changed our strategy. We are continuing our prudent approach to lending focusing on the quality of our mortgage asset, lower LTV on new business and customer retention."
Overall, Abbey increased its profits by 20 per cent during the first half, to £485m. As well as a strong increase in mortgage business, the bank said it had seen a 50 per cent increase in net deposits over the half, and a 19 per cent increase in current account customers. Credit card sales also more than doubled, following the launch of a no fees card earlier this year.