(Adds details, background on Santander's U.K. operations.)
By Patricia Kowsmann and Margot Patrick
Of DOW JONES NEWSWIRES
LONDON -(Dow Jones)- Abbey National PLC, the U.K. banking arm of Spain's Banco Santander SA (STD), Wednesday said non-performing loans continued to rise in the third quarter, as the country struggled with its most prolonged recession on record.
Abbey said non-performing loans rose to 1.65% in the quarter ended Sept. 30, compared with 1.54% in the second quarter and 1.25% in the first, in a quarterly trading update that will be closely studied as the U.K.'s other major banks prepare to make their reports for the period in early November.
"A cautious position has been maintained to reflect the lagged unemployment effect, but notwithstanding this, the performance is still favorable compared to expectations," Abbey said.
A rise in lending helped the unit post a net profit for the period of GBP374 million, up from GBP275 million a year ago. The latest figure includes businesses bought last year on a pro forma basis.
Santander added banks Alliance & Leicester and Bradford & Bingley to its U.K. operations at fire sale prices in 2008. It entered into the U.K. market in 2004 with Abbey's acquisition. The three businesses are now under Abbey but are to be rebranded as Santander by the end of next year, when it will have 1,300 U.K. branches.
"The combination of the three U.K. businesses is a powerful one. We now have market shares of about 11% overall across the core retail markets of mortgages, savings and bank accounts," the bank said.
Abbey National said it opened 295,000 new bank accounts in the quarter and is on track to open 1 million this year. It also reported net lending of GBP5.1 billion so far in 2009, putting its market share at 18%.
The bank said it increased lending to small-to-medium sized enterprises by 18% in the first nine months compared with the same period in 2008.
Earlier Wednesday, Santander, Spain's largest bank by assets, reported a flat EUR2.2 billion third-quarter net profit as resilient revenue growth offset a sharp rise in impairments for loan losses, including in Spain.
Santander has more than 90 million customers and over 14,000 branches around the world.
-By Patricia Kowsmann and Margot Patrick, Dow Jones Newswires; +44(0)207-842-9295, patricia.kowsmann@dowjones.com