SANTANDER UK revealed in a fourth quarter update that profits and income had fallen, but said it had produced a "solid performance in a challenging market".

The group, which has its commercial banking base in Bootle, said profit after tax was more than 40% below 2010 due to provisions for payment protection insurance (PPI) payouts.

Trading profit after tax was 6% lower than 2010, reflecting limited loan volume growth and competition for deposits.

Trading income was down 5%, due to higher regulatory costs, higher funding costs and the low interest rate.

Today's update said: "Santander UK has delivered a solid performance in 2011 despite challenging market conditions, maintaining the strong underlying track record of its business while strengthening the balance sheet.

"Overall profitability declined, albeit trading profit after tax excluding regulatory impacts increased by 9% compared to 2010.

"The result demonstrated the robust nature of our business, with strong growth in SME (small, medium-sized enterprises) lending and maintaining our established market positions in mortgages and savings.

"Our results also benefited from a good credit performance, built around our prime UK mortgage book."

It added: "In 2012, and in reaction to the greater challenges emerging in the economy, our strategic focus will move towards balance sheet strength and stability.

"We will be focused on maintaining the high quality of our lending, improving further our capital base and tightly managing the liquidity and funding positions."