Profits at Santander's UK operation have been dragged down by the bank's exposure to collapsed construction giant Carillion.
The high street lender booked £203 million in impairment losses in the year to December 31, primarily made up of loans to Carillion gone bad.
It meant that pre-tax profit last year came in at £1.8 billion, down 5% from £1.9 billion in 2016.
Carillion's liquidation earlier this month left a £900 million debt pile, a £590 million pension deficit and hundreds of millions of pounds in unfinished public contracts.
Santander boss Nathan Bostock said: "Profitability was impacted by the losses incurred on our exposure to Carillion, which offset otherwise strong growth.
"We are working closely to support customers who have suffered from their collapse."
A string of other banks that lent to the firm, including RBS and Lloyds, are also expected to take hits when they announce results in the coming weeks.
Santander said adjusted profits fell 4% to £1.95 billion in the period but net interest income, a key metric, grew 6% to £3.8 billion.
However, the lender also flagged rising inflation and a more challenging economic environment in the UK in the year ahead.
"For the UK economy, some downside risks could materialise, as a result of higher inflation and low wage growth reducing households' real earnings.
"This may restrict consumer spending which, when combined with a potentially more challenging macro environment, adds a degree of caution to our outlook."
However, it also noted that the labour market remains strong and low unemployment, easing inflation and "nominal wage growth" could help.
Santander added that net mortgage lending grew by £600 million after it took "pricing actions" in a competitive environment.
It also took a £109 million charge to cover claims for payment protection insurance (PPI) compensation.