Santander said half-year statutory pre-tax profits fell 15 per cent to £903m.
The bank said net interest income fell 6 per cent after being hit by lower mortgage pricing and loss of customers on standard variable rate deals.
It saw net mortgage lending - gross lending less redemptions - growth of £2.3bn in the first half.
Customer deposits fell to £172.6bn from £174.4bn a year earlier.
Nathan Bostock, chief executive of Santander, said: “We have continued to deliver for our customers in a competitive market with strong net mortgage growth to UK homeowners and focused lending growth to trading businesses, driven by an emphasis on customer experience and loyalty.
“The competitive and uncertain operating environment has resulted in profit before tax of £903m, down 15 per cent year-on-year.”
He added: “Cost discipline is a key priority for management.
“We are progressing with our 2018 efficiency initiatives and expect the benefits of our actions to come through in the second half of the year.”