Building society Nationwide has hailed a 17% rise in half-year profits but warned UK prospects for the next 18 months looked to be "very challenging".
The mutual achieved growth across all of its product lines, including a 48% increase in mortgage advances to £8.9 billion, as underlying profits rose to £172 million in the six months to September 30.
Chief executive Graham Beale added that the group's balance sheet was amongst the strongest in the industry, with a capital ratio of 12.7%.
However he warned that Europe's debt crisis was forcing up the cost of industry funding and fuelling greater competition for savings deposits at a time when the market is growing slowly.
Mr Beale continues to expect the UK recovery to be maintained - at a modest pace - but said a return to recession in 2012 cannot be ruled out. He added: "The outlook for the UK economy has weakened over the last six months and prospects for the remainder of 2011/12 and 2012/13 are very challenging."
Nationwide's funding requirements were met with a 250% increase in the level of savings to £1.4 billion in the half year, making it the second largest savings provider in the UK.
As a "challenger" to the established banks, Nationwide reported a 24% rise in the combined sales of its current accounts, credit cards and personal loans.
And with Bank of England interest rates still at a record low of 0.5%, customers who remained on the group's base mortgage rate (BMR) cost Nationwide around £350 million in the six months.
The benefit, which equates to more than £1,000 for each account per year, stems from the society's pledge that its BMR would never be more than 2% above the Bank of England base rate.
The group has swallowed up a number of smaller rivals since the onset of the financial crisis, merging with the Derbyshire and Cheshire building societies and taking over ailing Dunfermline's savings assets.