The nationalized lender announced today that it made a pre-tax profit of £896m in the first half of 2010, having made a loss of £160m a year earlier.

B&B, which is closed to new business, attributed the improvement in its earnings to cost cutting and a reduction in mortgage arrears. The bank’s operating costs fell to £59m in H1 2010 from £65m in H1 2009, while arrears fell by 18% in the first half of this year.

In 2008, Santander bought B&B’s retail branches and savings accounts, while the rest of the company’s business, including its mortgage book, was taken into public ownership by the government.