SANTANDER UK and Lloyds both posted halfyear results yesterday, showing the impact of rising interest rates on lenders' profits at a time when banks are under pressure to pass on savings rates to customers.

Whilst Santander UK saw profits boom, Lloyds posted less positive results remaining flat on last year with profits dropping nearly a third from last quarter.

In the second quarter, Lloyds recorded a pretax profit of £1.6bn, flat on last year but lower than company-compiled consensus and 29 per cent lower than the last quarter as an increasingly competitive market ate away at the bank's net interest margin.

Santander UK saw rosier results. Its profit was up significantly in the first half of the year, with pretax profit up 18 per cent to £1.2bn from £993m last year. This came thanks to a 10 per cent rise in net interest income as the bank reaped the benefits of rising interest rates.

However, the bank also noted that applications for mortgages had been hit by recent economic volatility.

"We know that the ongoing volatility in the mortgage market and continuing inflationary pressures are creating challenges, and we encourage anyone facing difficulties to get in touch as soon as possible," Mike Regnier, Santander UK's CEO, said.

Lloyds was also hit by mortgage woes as the bank had to set aside more than expected to cope with an expected rise in bad loans.

The results come as politicians and regulators pile pressure onto banks to pass on higher savings rates to customers. Lloyds offers up to 1.8 per cent on their easy access savings account, while Santander UK currently offers 2.5 per cent on its easy access savings account.

(c) 2023 City A.M., source Newspaper